Workhorse reports significant Q2 growth with 32 trucks shipped, eyes future as merger with Motive aims to strengthen market position.

Stan March - Moderator - (00:02:19)

Greetings and welcome to the Workhorse Group and Motive Joint Conference call. At this time all participants are in a listen only mode. If anyone should require operator assistance, please press Star zero on your telephone keypad. A question and answer session will follow the formal presentation and you may be placed into question queue at any time by pressing Star1 on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host Stan March for Motive Joint Conference. Please go ahead Stan. Thank you.

Kevin - (00:02:49)

Kevin Good morning and welcome to this joint Workhorse Motive conference call. Before we begin, I'd like to note that we posted our financial results for the quarter ended June 30, 2025 by a press release as well as filed its associated 10Q with the SEC last Friday, August 15th. We also released the news of Workhorse Motive entering into a definitive agreement via the press release and SEC Form 8K. Likewise on the 15th, you can find all these documents as well as the presentation that will form the basis of today's conversation in the Investor Relations section of our website. We'll track along with that presentation during this call. On slide 2 you can find our legal legend as some of the comments that will be made today are forward looking and are subject to certain provisions and subject to risks and uncertainties as well. Given that we will also be filing a proxy in the near future. Other notices are likewise described in this Legend. On slide 3 you can see the call participants today driving the call are Rick Dauch, our CEO, Bob Kanan, our cfo, and Scott Griffith, CEO of Motive. And on slide four you'll find our agenda for today's call. Following my opening remarks, I'll hand it over to Rick who'll give you an Update on our Q2 performance as well as a business update. Bob will then walk us through our Q2 financial results. Rick will then provide an initial merger overview and following those comments, Scott will discuss the rationale and drivers to create a leading North American medium duty electric truck oem. Rick will then close the conversation by reviewing the near term priorities for the companies before we open the call up to questions. And with that brief introduction, I'll turn the call over to Rick.

Rick Dauch - CEO - (00:04:39)

Thanks Stan and thanks everyone for joining us on the call this morning. We are excited to dive deeper into our recently announced strategic combination with Motive as well as discuss our strong second quarter earnings results. I'm pleased to have Scott Griffith, the CEO of Motive, here with us today who will help unpack some details about the strategic transaction and share more about what this holds for the future of both Workhorse and Motive. First, we'll start with Workhorse's second quarter 2025 results let's look at slide 5. In the second quarter we secured 36 purchase orders for our W56 step vans, shipping a record 32 trucks in the quarter. These record results are testament to the hard work and dedication of the Workhorse team and were driven by the proven operating performance of our W5.6 line of vehicles and overwhelmingly positive customer feedback on these vehicles from the field. We believe the growing demand we see for our W56 further demonstrates the critical role Workhorse plays in the emerging transition to EV technology in the commercial vehicle space and last mile delivery space as well as the market's recognition of the quality, value, dependability and durability of our vehicles. The capability and reputation of our vehicles are being validated every day in the field and will continue to accelerate as more of our vehicles hit the road. There are currently more than 60 W56 vehicles operating customer and partner fleets across the country along diverse real world routes. Additionally, we continue to advance our product plans to broaden the W56 application options. This work included the completion of final durability testing on the 140 kilowatt design with a range of 100 miles which is slated to go into production in early 2026. It also included development and integration efforts to install the Utilimaster Aeromaster Walk in van body on the W56 chassis now available for order. This familiar time tested body design adds flexibility to the all electric W56 chassis platform, delivering its proven performance in the traditional step van form and configurations that many fleet operators know and trust. We continue to operate efficiently, extending the company's financial Runway enabling us to reach our strategic transaction with Motive last week. This is reflected in a decrease in operating expenses by $7 million year over year while shipping a record number of vehicles in the quarter. Our near term liquidity was further bolstered by the interim funding from Motives Controlling investor totaling approximately 25 million through the sale, leaseback and a secured convertible note financing transaction that we closed on last week. This funding will be partially utilized to pay down debt owed to Workhorse's existing senior secured lender and to finance operations to the close of the transaction. With that, I'd like to turn it over to Bob to provide additional color on our financial performance for the second quarter. Thanks Rick.

Bob Kanan - Chief Financial Officer - (00:07:39)

In the second quarter, Workhorse saw significant year over year improvement across almost every operating metric. Let me start by comparing some straightforward Numbers Truck shipments in the second quarter of 2024 we shipped one truck compared to this year's second quarter when we shipped 32, an increase of 31 trucks. In fact, in the first half of 2025 we have shipped 35 trucks, which is more trucks than we did in all of 2024, which is 29. This shipment unit difference was driven almost exclusively by customer demand for the W56 step van. Turning to Slide 6, sales net of returns and allowances for the second quarter of 2025 were 5.7 million compared to 800,000 in the same period a year ago. 4.8 million increase was due to higher W56 shipments in the current period partially offset by the loss of revenue due to the arrow divestiture and higher W4CC sales in the prior year. Cost of sales for the second quarter of 2025 was 13.1 million, an increase of 5.8 million compared to 7.3 million the prior year. The cost of sales increase was primarily driven by unit cost increase from higher sales volume and an increase in inventory excess and obsolescence reserves of 1.8 million, which was partially offset by lower production expenses of 1.2 million and lower direct and indirect labor costs of 200,000 primarily due to lower headcount. Selling general and administrative expense in the second quarter of 2025 were 5.8 million, a decrease of 6.3 million compared to 12.1 million in the prior year. The decrease in SG&A expense is primarily driven by a 3.1 million decrease in employee compensation related expenses primarily due to lower equity compensation and lower headcount, a decrease in legal and professional expenses of 1.1 million, a decrease in IT related expense of 400,000, lower corporate insurance of 500,000 and a $200,000 decrease in depreciation amortization expense due to the arrow divestiture. Research and development expenses during the second quarter of 2025 were 1.2 million, a decrease of 700,000 compared to 2 million in the prior year. The decrease in R and D expense was Primarily driven by $100,000 decrease in employee compensation related expenses due to lower headcount, a $300,000 decrease in prototype part expenses and a 300,000 decrease in rent expenses as well as depreciation and amortization expense. Looking at these same key parameters for revenue and operating Costs for the first half of 2024 and 2025, sales net of returns and allowances for the first half of 25 and 2024 were 6.3 million and 2.2 million respectively for the six months into June 30, 2025. The increase in sales of 4.1 million is primarily due to the increased delivery of W56 trucks. Cost of sales for the first half of 2025 and 2024 were 18.2 million and 14.7 million respectively. The increase of cost of sales of 3.5 million was driven due to the increase in sales volume as well as a 1.3 million increase in warranty reserve expenses which was offset by 1.6 million decrease in direct and indirect labor costs and a 1.3 million reversal of infrastructure expenses. Previously accrued SGA expenses during the first six months of 2025 and 2024 were 12.6 million and 26.2 million respectively. The decrease in SGA of 13.6 million was primarily driven by a 7.2 million decrease in employment, employee compensation and related expenses due to lower headcount and equity compensation, a decrease of 1.8 million in consulting related expenses, a decrease in legal and professional expenses of 1.9 million, a decrease of 1.1 million in insurance expense, a decrease in IT related expenses of 900,000 and a $300,000 decrease in depreciation amortization expense due to the arrow divestiture. Research and development expense during the first six months of 2025 and 2024 were 2.8 million and 5 million respectively. The decrease in R&D expense of 2.7 million was primarily driven by successful completion of the W56 initial design and production of the W56 and the W56 208 inch wheelbase truck program in the prior year. So to summarize year over year revenue and operating costs for a six month period, revenues up 4.1 million operating expenses were down 16.3 million. Turning back to Q2 interest expense net for the second quarter of 2025 was 600,000 compared to 2 million in the prior year. The decrease was primarily driven by higher financing fees related to the 2024 notes in the prior year. As of June 30, 2025, the estimated fair value of the 2024 notes totaled 39.5 million during the three months end of June 30, 2025, the institutional investor converted 13.5 million principal into common stock and the company recorded a 5.4 million fair value net gain on conversion. In the consolidated statements of operations during the three months ended June 30, 2025 and 2024 we recorded a $1.6 million fair value net loss and a 3.1 million fair value net loss respectively in the consolidated financial statements. As of June 30, 2025, the estimated fair value of outstanding warrants totaled 3.1 million. During the three months for the second quarter, the company recorded 1.9 million fair value gain in a $600,000 fair value loss respectively relating to outstanding warrants. Overall net loss for six months into June 30, 2025 has improved from 55.5 million in 2024 to 35.4 million in 2025. If you factor out the interest and fair value adjustments, the net loss from operations improved from 44.2 million to 27.3 million. Turning to our balance sheet on slide 7, as of June 30, 2025 the company had 2.2 million of cash and cash equivalents and 22.5 million in restricted cash accounts receivable of 2.4 million, other receivables of $100,000, inventory net of reserves of 32.8 million and accounts payable of 10.8 million. Connection with the Pro with the proposed transaction with Motive, Workhorse completed two transactions with entities affiliated with Motive's controlling investor, including a $20 million sale leaseback for Workhorses Union City, Indiana manufacturing facility as well as a secured convertible Note financing for $5 million each of which were consummate at the time of the execution of the merger agreement. With that, I'd like to turn it back over to Rick to discuss the mode of transaction, how we arrived here and how the combined company be well positioned to build on our progress.

Rick Dauch - CEO - (00:14:32)

Thanks Bob. As Bob mentioned on slide 8, I'm going to touch on our transaction with Motive and then turn it over to Scott for his perspective on the future prospects of our combined companies. Let me start by taking a moment to reflect back on our journey and highlight how far we've come since I first joined this commercial startup company about four years ago. At the time, Workhorse's path forward was far from clear. Our Union City plant and equipment were old and outdated. Our newly designed Class 4 five step van was failing both on the test track and in the field. Since then we have rebuilt the company from the ground up and into a streamlined, process driven organization with market segment leading products with a reputation for reliability, durability and significantly lower TCO cost in comparable ICE vehicles. We accomplished this by advancing our technology roadmap, iterating designs based on direct customer feedback from the field and continuing to invest to expand our product portfolio. As a result our W56 step van has become the flagship of our portfolio with consistent positive customer feedback while offering two wheelbase options, two EV powertrain options and now three body configurations. We partner with proven and technically capable commercial vehicle component suppliers who continue to support our efforts here at Workhorse. At the same time, we built a strong dealer network across the country and built strong relations with operators of the largest medium duty fleets who now know and view the Workhorse brand to be associated with high quality, reliability and integrity. A far cry from 2021. We also invested heavily into our Union City manufacturing facility, turning it into the jewel of the commercial electric vehicle manufacturing segment here in the United States. That said, while we remain optimistic about the long term transition to commercial EV vehicles, it's true that factors largely outside of our control, like a shifting political landscape and changing government regulations and incentives, have led to delayed fleet customer adoption rates. Gaining momentum on the revenue side of the equation has taken far longer than expected or forecasted by any oem, automotive or Wall street industry analysts. In light of these market conditions and with the support of our financial stakeholders, our Board of Directors and management team evaluated numerous strategic opportunities that best position Workhorse for both the near and long term future of the company and our stakeholders. Our transaction with Motive was a result of this strategic guidance from our Board. By combining with Motive, we are creating a broader commercial truck product portfolio, strengthening our near and long term financial positions and providing Workhorse shareholders the opportunity to participate in the upside of a leader in the medium duty EV commercial vehicle market. The transaction itself has a few pieces, so I want to use this opportunity to break it down starting with our transaction that merges Motive and Workhorse. Under the terms of the transaction at closing, Motive will be merged with a newly created subsidiary of Workhorse in exchange for newly issued shares of Workhorse common stock. We have also taken steps that provide near term liquidity to Workhorse and simplify our capital structure. First, we have completed two transactions with entities affiliated with Motive's Controlling Investor a sale leaseback for Workhorse's Union City, Indiana manufacturing facility for $20 million as well as a 5 million convertible note secured note financing. These transactions are expected to provide near term liquidity support Workhorse's operations through closing. They also provide us with a capital paydown debt owed to Workhorse's existing senior secured lender in connection with signing. We entered into an agreement with our senior lender to permit the sale leaseback and convertible note and to provide additional structure around our repayment of obligations. As a result of the agreement at Closing the merger, all remaining indebtedness owed to such lender, including all warrants currently held by the lender, will be repaid and or canceled. In addition, the lender will receive rights to acquire shares of Workhorse common stock at the close of the transaction on a fully diluted basis. Motives Control Investor initially will own approximately 62.5% of the combined company. Workhorse's existing senior secured lender will have rights to receive common stock that represent approximately 11% and workhorse shareholders will own approximately 26.5% of the company. All these ownership stakes are subject to certain potential adjustments and additional future dilution. Looking ahead, we intend to seek additional new finances to fuel Go Forward plans as part of the merger agreement and as a condition of closing. At the completion of the transaction, the Combined Company is expected to obtain access to up to $20 million in debt financing provided by entities affiliated with Motives Controlling Investor. This includes approximately 10 million expected to be available in a revolving credit facility and an additional 10 million expected to be available to fund manufacturing costs associated with confirmed purchase orders of the Combined Company in an ABL facility. In addition, the Combined Company will seek to raise additional funding financing to fund its Go Forward strategic execution plans in 2026 and beyond. The transaction expected to close in the fourth quarter of 2025, subject to workhorse shareholder approval and other customary closing conditions, including the debt financing commitment. Turning now to why we believe our shareholders will be poised to benefit from the upside potential of the Combined Company from a strategic perspective, we believe that Motive is the right partner for Workhorse. Together, we are a compelling and complementary fit. The combination of Motive's diverse product portfolio and top fleet relationships with Workhorse's proven vehicles, manufacturing capabilities and national geographies.