Workhorse Group Inc. — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing; it does not provide a separate, clear set of fourth-quarter results.
Business context
Workhorse designs and manufactures electric commercial delivery vehicles, primarily Class 4–6 trucks, and provides drone services. In 2023, it launched production of the W750 and W56 and continued W4 CC sales. The WNext platform is expected to enter production in late 2025 or 2026. In February 2024, the company decided to stop drone design and manufacturing and focus Aero on Drones as a Service.
Financial performance and liquidity
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Revenue | $13.1 million | $5.0 million |
| Gross loss | $25.3 million | $32.6 million |
| Operating expenses | $80.0 million | $96.4 million |
| Operating loss | $105.3 million | $129.1 million |
| Net loss | $123.9 million | $117.3 million |
| Cash used in operating activities | $123.0 million | $93.8 million |
Revenue rose about 161%, mainly from higher W4 CC volumes, with contributions from W750, W56, Stables and drone services. Gross loss narrowed, while net loss increased, reflecting higher interest expense and a $10.0 million impairment of the Tropos investment. SG&A fell by $17.6 million, principally because prior-year litigation-related expenses were higher.
At year-end, cash and cash equivalents were $25.8 million and restricted cash was $10.0 million; working capital was $40.5 million. Inventory was $45.4 million, up from $8.9 million. Total liabilities were $58.6 million, including $20.2 million fair value of convertible notes classified as current and $8.8 million of lease liabilities. Accumulated deficit was $751.6 million. The company raised approximately $62.2 million net through its ATM in 2023 and received $17.5 million before fees from a $20.0 million face-value convertible note.
Material changes, outlook and risks
- Going concern: Management and the auditor state that substantial doubt exists about the company’s ability to continue as a going concern for the year following issuance. The company reported recurring losses and expects to need additional financing; failure to secure funding could force substantial operational reductions or a bankruptcy filing.
- Financing and dilution: The December 2023 secured convertible note carried a 12.5% original issue discount, was convertible at $0.5178 per share, and included redemption and restrictive covenant terms. By February 29, 2024, the company had reduced its principal balance to $2.5 million and exchanged the warrant for 8.5 million shares. A further financing under negotiation was expected to carry materially higher costs and potentially substantial dilution; its availability and terms were uncertain.
- Cost actions and cash needs: In the first quarter of 2024, Workhorse was reducing its workforce by about 20% excluding direct labor, deferring about 20% of executive cash compensation, and reducing spending. Planned 2024 capital expenditures were $5–$10 million. Management cautioned that cost cuts may not meet liquidity needs and could affect operations.
- Other liquidity measures: A proposed sale-leaseback of the Union City facility for approximately $34.5 million, followed by a 20-year triple-net lease with initial annual rent of about $3.4 million and 3% annual increases, remained subject to closing conditions. The filing does not establish that the transaction closed.
- Market and execution risks: Management cited slower-than-expected EV adoption, limited incentives and charging infrastructure, volatile input costs and inflation. Results also depend on production ramp-up, product quality, supplier availability, customer demand and government incentives. No specific revenue or profitability guidance is provided.
- Nasdaq and controls: The company was below Nasdaq’s $1.00 minimum bid-price requirement and planned a reverse split, subject to stockholder approval. Management found disclosure controls and internal control over financial reporting ineffective due to a material weakness in review of third-party valuations of convertible debt and warrant liabilities.
- Contingencies and unusual items: A securities class-action settlement involved $15.0 million cash and $20.0 million in shares; 25.4 million shares were issued in 2023. The Tropos investment was fully impaired for $10.0 million. The audited financial statements received an unmodified opinion, with going-concern uncertainty highlighted.
Important facts for investors to verify
- Whether the company obtained adequate financing, and the terms, timing and dilution associated with any new funding.
- Actual unrestricted cash, cash burn, and the status and proceeds of the proposed Union City sale-leaseback.
- Whether W56 and other vehicle production, deliveries, customer demand and incentive eligibility meet management’s expectations.
- Progress toward Nasdaq listing compliance and remediation of the internal-control material weakness.
- The ATM’s remaining capacity: the filing gives inconsistent year-end figures in different sections ($85.6 million and $96.9 million).