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 $230.4 million in cash and cash equivalents.
Workhorse Group Inc.
Condensed Consolidated Statements of Operations
|Three Months Ended September 30,||Nine Months Ended September 30,|
|Sales, net of returns and allowances||$||(576,602||)||$||564,707||$||1,147,334||$||740,949|
|Cost of sales||11,549,187||2,815,242||32,570,616||6,074,577|
|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||)||–|