Workhorse Group - Earnings Call - Q3 2025

Executive Summary

• Q3 2025 revenue of $2.385M and EPS of $-0.50; EPS beat consensus ($-1.45*) materially while revenue was a modest miss vs $2.50M* (actuals) [Q3 2025 consensus via S&P Global*].
• Delivered 15 trucks in the quarter; continued progress on W56 platform, with Aeromaster body availability and reported 97% uptime across operating fleets.
• Capital structure actions and merger with Motiv: sale-leaseback ($20M) and $5M convertible note executed; closing expected in Q4 2025 with up to $20M post-close debt financing; warrants/legacy senior debt to be repaid/cancelled at close.
• Near-term catalysts: shareholder vote (Nov 12) and anticipated Q4 close of Motiv transaction; stronger liquidity runway and simplified balance sheet positioned to improve order conversion and dealer momentum.

What Went Well and What Went Wrong

What Went Well

• 15 trucks sold with expanding customer interest; W56 uptime at 97% in daily last-mile operations, reinforcing product reliability and TCO advantages.
• Product portfolio expanded: Utilimaster Aeromaster body now available on W56, improving flexibility and familiarity for fleet operators.
• Liquidity/structure improved: $20M Union City sale-leaseback and $5M convertible from Motiv affiliate; path to repay/cancel senior lender obligations at merger close; CFO emphasized extended runway and cash discipline.
• Quote: “We continue to make important progress on our product roadmap… This exciting new offering will enable us to deliver the performance and reliability of our step van in the traditional form factor…” – CEO Rick Dauch.

What Went Wrong

• Gross loss widened with higher cost of sales driven by inventory excess/obsolescence reserve (+$3.3M YoY); gross margin deeply negative in Q3.
• SG&A flat YoY ($7.8M vs $7.7M), with $3.6M higher consulting/legal tied to Motiv merger offset by lower compensation and other expenses.
• Revenue down slightly YoY ($2.4M vs $2.5M) as fewer trucks delivered; shipments below Q2 record levels (32 trucks).
• Analyst concern: scaling to cost parity with ICE requires volume and BOM/labor cost reductions; management highlighted 2026 production ramp and de-escalators in supplier contracts but acknowledged timeline risk.

Transcript

Operator (participant)

Welcome to the Workhorse Group Q3 2025 earnings conference call and webcast. At this time, all participants are in listen-only mode. A question and answer session will follow the full presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad, and we ask that you please ask one question, one follow-up, and return to the queue. If anyone should require operator assistance, please press star zero. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Stan March. Please go ahead, Stan.

Stan March (VP Corporate Development and Communciations)

Stan, thank you. Good morning to all of you, and I'd like to welcome you to Workhorse's 2025 third quarter results call. Before we begin, I'd like to note that we posted our results for the third quarter, which ended on September 30th, 2025, via press release and filed the associated 10Q with the SEC last evening after the market closed. This morning, we posted the accompanying presentation, so you can find the release and the accompanying presentation in the investor relations section of our website. We'll be tracking along with the presentation during this call. Joining me on today's call are Rick Dauch, our CEO, and Bob Ginnan, our CFO. For today's agenda, you can find that on slide three in the presentation.

Following my brief opening remarks, I'll hand it over to Rick, who will give you an update on our Q3 performance and business operations, as well as our proposed transaction with Motiv. Bob will then walk us through the financial results for the quarter, and Rick will then follow, wrapping it up, and then go to questions. On today's call, you can find in our presentation our disclaimers found on page four and five. Some of the comments that are going to be made today are forward-looking and are subject to various provisions, risks, and uncertainties. You can find that full disclaimer in our 10Q and in today's press release. On slide five, you can also find references about the proposed transaction with Motiv, where you can find additional information related to that proposed transaction. With that brief introduction, I'll now turn the call over to Rick. Rick?

Rick Dauch (CEO)

Thanks, Stan. Hello, and thank you for joining us on the call this morning, everyone. We're excited to be here with you today to discuss our third quarter results and provide an update on our proposed strategic transaction with Motiv. Let's start with our Q3 results on slide six. During the quarter, we made good progress executing on our product roadmap, scaling sales to targeted fleets with new orders and deployments, and expanding our product portfolio. We completed the sale of 15 trucks in a combination of Class 4 and 5-6 versions. These results reflect the hard work and resilience of the Workhorse team in a challenging commercial electric vehicle environment and reinforce a strong operating performance and positive customer feedback of our W56 platform in the field.

Growing customer demand for our W56 step van continues to advance our position as a segment leader in the EV Class 5-6 transition. We're building reliable, safe, and capable trucks, proving their performance, winning business, and earning customers' trust every day. During the quarter, we also maintained our financial discipline, taking continued decisive actions to reduce both operating and overhead costs and strengthening our near-term financial position. Despite continued challenging market conditions, we continue to make meaningful progress here at Workhorse, and our focus on finishing 2025 on strong footing. We are actively engaging with logistics providers and service fleets to build additional order interest through our national dealer network. We announced the availability of the UtilityMaster AeroMaster body on our all-electric W56 strip chassis.

This new offering expands and brings new flexibility to the W56 platform, combining the trusted durability of the industry-standard UtilityMaster step van body with the benefits of Workhorse's proven electric chassis. The W56 also remains fully eligible for the California Hybrid and Zero Emission Truck and Bus Voucher Incentive Program, or HVIP vouchers, of $85,000 per truck and higher for medium-duty class 6 vehicles. At the same time, we maintained our ongoing financial discipline, prioritizing cash conservation and expense reduction. In the third quarter, our operating expenses decreased $1.2 million on a year-over-year basis through disciplined cost management, with even more impressive results year to date. I'm also excited to share that we showcased our W56 step van at the FedEx Forward Service Provider Summit in Orlando, Florida, in September, marking Workhorse's third year participating in the event.

Our W56 step vans and service with FedEx Express and FedEx Express independent service providers have collectively logged tens of thousands of miles on daily deliveries routes nationwide and are operating at a 97% or greater uptime availability. Lastly, we, of course, announced our proposed transaction with Motiv during the third quarter. Now let's turn to slide seven to touch on the proposed transaction. In August, we announced a definitive agreement to combine Workhorse with Motiv electric trucks, bringing together two veteran EV innovators to create a stronger force in North America's medium-duty electric truck market. This combination positions us to accelerate growth, expand our product lineup, and capture a greater share of the commercial EV space. For our shareholders, it represents a chance to participate in the upside of a unified, well-capitalized company built for long-term success.

In addition, we also completed two transactions with entities affiliated with Motiv's controlling investor, including the sale leaseback transaction of our Union City facility for $20 million and a secured convertible note financing for $5 million. These transactions have strengthened our near-term financial position and continue to support Workhorse's operations. Looking ahead, and as part of this transaction, the combined company is expected to be able to access up to $20 million in additional debt financing post-close to defend our go forward strategic execution. The transaction is expected to close in the fourth quarter of 2025, subject to Workhorse shareholder approval and other customary closing conditions, including the debt financing commitment. With our shareholders' approval at our annual meeting tomorrow, November 12th, we will be positioned to drive sustainable growth and create long-term shareholder value.

I'll turn it over to Bob to discuss our financial results and recent steps we have taken to strengthen our near and long-term financial position. Bob?

Bob Ginnan (CFO)

Thanks, Rick. Turning now to slide eight for the highlights from the quarter. As a reminder, our financial statements have been adjusted to reflect the March 2025 one to 12.5 reverse stock split. Sales, net of returns and allowances for the three months ended September 30th, 2025 and 2024, were $2.4 million and $2.5 million, respectively. The decrease in sales of $100,000 was primarily due to lower sales of approximately $2.3 million related to the delivery of fewer trucks in 2025 compared to the same period in 2024, offset by an increase of $2.2 million related to the recognition of seven vehicles from deferred revenue. Cost of sales for the three months ended September 30th, 2025 and 2024 were $10.1 million and $6.6 million, respectively.

The increase in cost of sales of $3.5 million was primarily a result of an increase in inventory excess and obsolescence reserve of $3.3 million. Selling, general, and administrative expenses for the three months ended September 30th, 2025 and 2024 were $7.8 million and $7.7 million, respectively. The increase in SG&A of $100,000 was primarily driven by a $3.6 million increase in consulting and legal expenses due to the proposed Motiv merger, offset by a $2.9 million decrease in employee compensation-related expenses, a decrease of $200,000 in marketing and trade show-related expenses, and a decrease of $300,000 in IT-related expenses. Research and development expenses for the three months ended September 30th, 2025 and 2024 were $1.1 million and $2.3 million, respectively.

The decrease in R&D expense of $1.2 million was primarily driven by a $300,000 decrease in employee compensation and related expenses due to a lower headcount, a $500,000 decrease in prototype part expense, and a $300,000 decrease in consulting and professional services expense. During the third quarter, we took additional steps to reduce costs and conserve cash, which resulted in operating expenses that decreased by $1.2 million year-over-year compared to the same time last year. We reduced operating expenses by $17.5 million. Net interest expense for the third quarter of 2025 was $200,000 compared to $3 million for the three months ended September 30th, 2024. The difference was primarily driven by higher financing fees related to the 2024 notes recognized in the prior year period compared to the current period. Net loss was $7.8 million compared to $25.1 million in the same period last year.

I also want to point out during the third quarter, the company recognized a gain on the sale of assets of $13.8 million, primarily related to the sale leaseback of our Union City, Indiana facility. Additionally, we recognized a gain of $4.8 million related to deferred revenue upon termination of the Tropos Assembly Services Agreement. Slide nine, balance sheet highlights. Now turning to slide nine to discuss our balance sheet as of September 30th, 2025, the company had $38.2 million in cash and cash equivalents, as well as restricted cash compared to $4.6 million in the same period last year. Primarily increased due to the benefits from funding totaling approximately $25 million from Motiv's controlling investor, including a $20 million sale leaseback transaction and a $5 million secured convertible note financing, both of which were completed at the execution of the merger agreement.

As a reminder, at the closing of the merger, all remaining indebtedness and other obligations to Workhorse's existing senior secured lender, including all warrants currently held by that lender, will be repaid and/or canceled, with only remaining secured indebtedness of the combined companies being the $5 million secured convertible note held by Motiv's controlling investor, which may convert to equity in connection with the post-closing financing. We will continue to strengthen our financial position by generating additional purchase orders and revenue from customers, as well as maintaining our financial discipline. Looking ahead, we are focused on executing on our product roadmap and completing our transaction with Motiv, and we are confident in our ability to continue to deliver value to our shareholders. With that, let me turn it back over to Rick.

Rick Dauch (CEO)

Thanks, Bob. Let me take a moment to outline our near-term priorities shown on slide 10. A top priority for Workhorse, as we've emphasized on this call, is completing the proposed transaction with Motiv. Over the past few months, both teams have been working diligently to plan for and ensure the combined company's position to grow and succeed. The proposed transaction remains subject to shareholder approval. In parallel, we continue to focus on strengthening our financial position and driving greater operational efficiencies, including growing purchase orders and customer demand, prioritizing cash conversion, and reducing our operating costs. We are also continuing to expand and enhance our product portfolio, including finalizing our plans for the W56 140 kW production launch in 2026. This new vehicle has a range of around 120 mi and has about a 10% lower acquisition price.

Looking ahead, the combination with Motiv will further broaden our product lineup and accelerate our shared product roadmap. We're currently developing the plans to integrate our portfolios and R&D technology to deliver even greater value and a broader portfolio of vehicles to our customers over the next two to three years. Before we wrap up, we'd like to remind you that our 2025 annual general shareholder meeting is tomorrow, November 12th. In order for Workhorse to complete the proposed transaction with Motiv and for our shareholders to participate in the potential upside of the combined companies, we need Workhorse shareholders to vote for the transaction, in addition to the other eight proposals up for vote in connection with the meeting. We look forward to our future with Motiv and remain confident in our ability to deliver meaningful value to shareholders.

We hope you share our excitement for what lies ahead as we combine our strengths to capture new opportunities and lead in the commercial EV transition. That said, this call is to discuss our earnings results for the third quarter, so we will not be taking questions on the Motiv transaction at this time. Thank you all for joining today's call. Now I will open it up for questions, and Kevin, I will turn it back over to you.

Operator (participant)

Certainly. We would now be conducting a question and answer session. If you would like to be placed into the question queue, please press star one at this time. A confirmation tone will indicate your line is in the question queue. One moment, please, while we pull up for questions. Our first question is coming from Ben Sommers from BTIG. Your line is now live.

Ben Sommers (Equity Research Associate)

Hey, how's it going? Good morning. Thank you for taking my question. Kind of on the W56 step van and kind of being eligible for those state-level incentives in California, kind of curious just more broader market outlook, how you're seeing state-level incentives across the U.S., kind of panning out in different states and what you think the opportunities are beyond California for the step van. Thank you.

Rick Dauch (CEO)

Great question. We worked with the Car Group and a couple other people in the EV space to make sure the HVIP vouchers are competitive out in California. That was successful, and we saw immediate pickup in orders from the FedEx Ground guys out there. Right now, about every truck we're building between now and the new year has already got a purchase order and an HVIP voucher tied to it. We are seeing some good movement in the state of Washington and the state of New York in terms of vouchers, and we have turned our efforts to those two areas, those two states for sure. I'd like to say too is that we talked about having our truck down the last three years at the FedEx conference for the ground operators.

We have one site in California now that's operating more than 20 W56 step vans. Once we get a truck in the hands of a ground operator and they see the reliability of our truck and averaging 97%-98% of the time, we're seeing repeat orders from multiple FedEx ground operators.

Ben Sommers (Equity Research Associate)

Awesome. Thank you for the color there. Just kind of curious on cost as we ramp closer towards production of this vehicle. How should we be thinking about that trending in 2026 as we get prepared for the production launch there?

Rick Dauch (CEO)

I'm going to ask Bob to answer that question.

Bob Ginnan (CFO)

Okay. I think if you look at the cost from two elements, there's obviously the bill of material cost, which we continue to focus on bringing that down through engineering and supply chain. Also, as the production increases, you'll see an improvement in the labor cost as we get into a regular cadence on the lines there. We look to see improvements in both areas as we go forward.

Rick Dauch (CEO)

Yeah. We're starting to see obviously, we haven't had a lot of volume so far. To get the manufacturing right, we've built three or four trucks now perfectly. We had no post-production touch-ups and some of that. Our guys are starting to get a handle on how to build the chassis, more importantly, the cab and body. That's a pretty complex assembly operation there. We also have de-escalators in our purchase contracts when we hit certain volumes down the road. We're far from those volumes now, but they're built into the contracts, and that will lower the bill of material costs. We know we have to move closer and closer to be almost on parity with ICE. That's going to take a couple of years, and it's going to require us to get to certain levels of volumes, especially on batteries, to lower the cost.

Ben Sommers (Equity Research Associate)

Awesome. Thank you, guys, for the color. Thank you for the update.

Rick Dauch (CEO)

Yeah. One thing I'll say too is that once we do get trucks in the field, based on the data we're having right now, both at FedEx and Ground, we're seeing somewhere between a 55-65% total cost of operation reduction. No fuel costs, obviously, new trucks, no spare parts, and uptime, again, 98%. So we think that's a good selling point when we're out there talking to fleets.

Ben Sommers (Equity Research Associate)

Great. Thank you, guys, for taking my questions.

Rick Dauch (CEO)

Great questions.

Operator (participant)

Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to Rick for any further closing comments.

Rick Dauch (CEO)

Appreciate your patience with us. It's been a tough four years in the electric vehicle transition market. Those things we can control, and we're doing our best to do that. We think the merger with Motiv gives us even a bigger opportunity to lower the operating costs of the company, expand the product portfolio, give us a better opportunity to be successful long-term, and we think it's the right thing for shareholders. We appreciate your support, and have a great day. Thank you.

Operator (participant)

Thank you. That does conclude today's teleconference and webcast. Please disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Rick Dauch (CEO)

Thanks, Kevin.

Operator (participant)

Take care, everyone.