An Electric Vehicle company, Workhorse Group has reported its third-quarter earnings on Tuesday, 9 November 2021. It includes negative sales and the shares fell a little in premarket trading because the stock already has been badly beaten up.
The revenue from sales, for the third quarter of 2021 is around in loss of $0.6 million, which was $0.6 million for the last prior quarter of 2020. Wall Street was looking for sales of about $900,000, but it’s very far from the expectations. The decrease in sales was primarily related to a $1.1 million refund liability recorded during the third quarter of 2021 related to the recall of the Company’s C-1000 vehicles.
The increment of cost of sales is $11.5 million compared to the last third quarter of 2020, which was $2.8 million. The surge in cost of sales was primarily due to inventory on hand that has a higher cost than its net value, an increase in warranty reserves due to recalling of the company’s C-100 vans.
In September, however, Workhorse recalled 41 vans in its C-1000 line and suspended deliveries, which sent the stock plummeting. In a regulatory filing on Monday, the company said new leadership “determined that additional testing and modifications to existing vehicles are required to bring the C-1000 vehicles into full compliance with Federal Motor Vehicle Safety Standards.”
Workhorse CEO Rick Dauch admitted on Tuesday that, aside from federal safety issues, the C-1000 just might not be up to the task of heavy-duty deliveries. The company is performing additional testing of the current truck design, which Dauch said is present “not robust nor is it profitable.”
Selling, general, and administrative (“SG&A”) expenses were also higher by over 60 per cent. They are $10.6 million compared to last prior quarter $6 million. The increase in SG&A expenses was primarily driven by higher compensation-related costs due to stock-based compensation, legal costs, and insurance costs.
Research and Development (“R&D”) expenses also increased by around 55 percent from $1.6 million to $2.8 million in the same respective quarter for 2020 and 2021.
The Loss of operations is more than doubled. It increases from a loss of $9.8 million to $25 million in this third quarter of 2020 and 2021 respectively.
Net interest income was $18.6 million compared to $74.3 million in interest expense in the same period last year. The decrease in interest expense was primarily driven by an $88.5 million decrease in expense related to fair value adjustments and losses on conversion of the Company’s convertible notes and a $4.7 million decrease in losses recognized on redemption of Series B Preferred Stock, offset by a $0.8 million increase in contractual interest expense related to the Company’s convertible notes.
Net loss was $81.1 million, compared to a net loss of $84.1 million in the same period last year. Loss from operations for the third quarter was $25.5 million compared to $9.8 million in the same period last year.
As of September 30, the Company had approximately $230.4 million in cash and cash equivalents.
Financial Statement:
Workhorse Group Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Sales, net of returns and allowances | $ | (576,602 | ) | $ | 564,707 | $ | 1,147,334 | $ | 740,949 | |||||||
| Cost of sales | 11,549,187 | 2,815,242 | 32,570,616 | 6,074,577 | ||||||||||||
| Gross loss | (12,125,789 | ) | (2,250,535 | ) | (31,423,282 | ) | (5,333,628 | ) | ||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative | 10,579,586 | 5,950,058 | 24,470,953 | 15,464,926 | ||||||||||||
| Research and development | 2,801,394 | 1,614,485 | 8,788,969 | 5,133,325 | ||||||||||||
| Total operating expenses | 13,380,980 | 7,564,543 | 33,259,922 | 20,598,251 | ||||||||||||
| Loss from operations | (25,506,769 | ) | (9,815,078 | ) | (64,683,204 | ) | (25,931,879 | ) | ||||||||
| Interest (income) expense, net | (18,599,130 | ) | 74,315,644 | (23,040,886 | ) | 185,638,961 | ||||||||||
| Other loss (income) | 77,127,266 | – | 225,432,884 | (864,900 | ) | |||||||||||
| Loss before benefit for income taxes | (84,034,905 | ) | (84,130,722 | ) | (267,075,202 | ) | (210,705,940 | ) | ||||||||
| Benefit for income taxes | (2,919,491 | ) | – | (21,833,930 | ) | – | ||||||||||
| Net loss | $ | (81,115,414 | ) | $ | (84,130,722 | ) | $ | (245,241,272 | ) | $ | (210,705,940 | ) | ||||