Workhorse Group Inc.
Q4 2020 Earnings Call Transcript

Published: 1 Mar 2021

[Operator:]

Ladies and gentlemen, greetings, and welcome to Workhorse Group’s Fourth Quarter and Full Year 2020 Investor Conference Call. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Workhorse’s Chief Operating Officer, Dr. Rob Willison. Thank you. Dr. Willison, you may begin.

[Dr. Rob Willison:]

Thank you, operator, and good morning, everyone. We appreciate you taking the time to join us for our call. Before the market opened, we issued a press release with all our results for the fourth quarter and for the year ended December 31, 2020, a copy of which is in the Investor Relations section of our website. We also released our Form 10-K this morning.

[Steve Schrader:]

Thanks, Rob. And thank you to all who are joining us for today’s call. This morning, we issued a press release which discusses the results of our operations for the quarter. Additionally, as Rob just mentioned, our form 10-K was also filed today. I recommend going through both materials to get more color on some of the information being discussed today. Now to our financial results for the fourth quarter, and full year ended December 31, 2020. Sales for the fourth quarter of 2020 were recorded at $652,000 compared with $3,000 in the fourth quarter of 2019. For the full-year, sales were $1.4 million compared to $377,000 in 2019. The increase in sales for both the quarter and the year was due to our higher volume of trucks produced and delivered. Cost of goods sold increased to $7 million from $2.1 million in the fourth quarter of 2019. The full year cost of goods sold was $13.1 million compared to $5.8 million in 2019. The increase was primarily due to a higher volume of trucks produced as well as increased production payroll and warranty expenses. Selling, general and administrative expenses increased to $4.7 million from $3.6 million in the same period last year. Increase is attributable to higher incentive stock compensation and consulting costs. For the full-year SG&A expenses were $20.2 million, compared to $10.2 million in 2019. Increase in SG&A expenses is attributable to higher consulting costs and employee compensation. Research and development expenses were $4 million, which was consistent from $4 million in the same period last year. For the full year, R&D expenses were $9.2 million, compared to $8.2 million in 2019. The increase in R&D expenses for the full year was due to contract labor increases and prototype development expenses.

[Duane Hughes:]

Thanks, Steve, and good morning to everyone on the call.

[Operator:]

Thank you. Our first question comes from the line of Greg Lewis with BTIG.

[Greg Lewis:]

Steve, thank you for -- and Duane, thank you for some of the comments. I was hoping you could kind of dive in a little bit more around production. It sounds like Q1 is going to look a lot like Q4 or close to it. If you could kind of walk through how we should be thinking about maybe the next few months and realizing that Belcan has been there, but I believe that’s wrapping up. How should we be thinking about production as we kind of move forward here over the next few months or few -- and few quarters?

[Steve Schrader:]

Yes. Greg, thanks for the question. I think from a production standpoint, I think you’re kind of right on with what you just said. From a standpoint of -- and part of it is trying to do two things at one time, Greg. We’re trying to actually get trucks out the door right now, but also set up the systems long term, like you mentioned with our partners, Hitachi and Belcan that we can fulfill our backlog of orders going forward. So, having said that, I think the expectations should be, we’re trying to get to a target of three a day, sometime here at this month. And then also, we kind of will continue to keep out our 10 a day by the end of sometime in June or by the end of the second quarter. So, that’s kind of our goal. I think from a standpoint of where we’re at right now, we’re -- we’ve already got some -- we’ve got some trucks out the door, and we’ll get more out here in March. That’s where we’re staying with structure.

[Duane Hughes:]

Greg, I would add to that -- what Steve said is, the real key here is making sure that as we head forward that we have all the appropriate production systems in place as well as equipment, but primarily the systems and processes that allow us to make jumps from 3 to 10 and 10 and more going into the future, again, as Steve said, to complete our current backlog and our growing backlog as we move forward. So, when we had our slowdown, I’ll say, in the fourth quarter due to COVID, we looked at what can we do beyond just sitting here waiting for employees to be able to come back to work. So, we kind of picked up the pace of what we’re doing with the Hitachi team in developing the systems in the processes, so that we can more quickly grow our per day units than perhaps we would have had, we’ve just been using that brute force method of getting trucks out the door.

[Greg Lewis:]

Okay, great. And then, another question I wanted to pivot a little bit around incentives. And I believe some of your customers are kind of waiting for some of these incentive structures to kind of take hold in some of these states like California, where I believe some of your customers are looking to take some first deliveries of some of their vehicles. Could you talk a little bit about how some of these state incentive structures are looking? And when we think about them potentially being funded, so that as production starts to ramp up here over the next, call, a couple of quarters, how we should think about where we are in the process from the states in terms of being able to actually fund some of these incentives?

[Duane Hughes:]

Yes. A few questions here, Greg. And this is Duane. I would tell you, first and foremost, our plan going forward, particularly through our sales channels partners, not just Hitachi and Pride and Pritchard but beyond, right, is the ability to provide a price point at these trucks that they actually ROI very quickly in three years or less and then provide that significant total cost of ownership savings, giving us the opportunity, right, to sell more trucks without requiring voucher programs. But to your point, in states that have voucher programs, I mentioned during the talk that California and the C-1000 as much as $45,000, where we can take advantage of that and increase the number of units we’re delivering in California in this case. I’m sure there will be fleets who want to take advantage of that. To me and from what I understand is, that program will be or is anticipated to be funding in the second half of this year. So, we’re doing -- we’re making concerted efforts at using our sales channels partners to find those customers that aren’t necessarily in a voucher state where we can deliver these vehicles without requiring that voucher program, which is what you’re seeing in the 8,000 backlog now and what you’ll see in the future is we continue to add new customers. I should say this, right? One of the things that you’ve seen over the last few months is our expansion of the customer base. Rather than relying on 1 or 2 or maybe 3 of the largest logistics, last-mile companies out there is, we are now working through channels that allow us to reach, let’s call them, some of the smaller fleets, but also the largest fleets across multiple countries. So, we’re really paying attention to how this voucher money is coming about, how it’s being competed for against the COVID pandemic, the things that are slowing it down and how we can address that market without requiring a voucher.

[Operator:]

Our next question comes from the line of Colin Rusch with Oppenheimer.

[Colin Rusch:]

Could we just get a little bit more detail about some of the elements in the supply chain that are proving cumbersome for you guys? I wanted to get a sense of how much of a bottleneck that might be on a go-forward basis?

[Duane Hughes:]

Yes. I think -- and what I said during my talking points where we were talking about the external supply chain-related issues. One is a very common what we’ve known about -- that’s affected all other OEMs right, being the microchip piece, right? That’s impacted a couple of segments, whether it’s steering racks or body control modules, things like obviously, the components that need microchips. Now, we’ve done a good job now of finding additional sources to alleviate or overcome those shortages. But then I also talked about those internal hurdles. And those internal hurdles, I already spoke about, relate back to putting systems and processes in place in the plant to allow us to, I’ll say, speed up our ability to move to larger number of units per day. And so, while there’s components out there, and in some cases, not much visibility in those components, some of the ones that you know about, again, like the micro and so on, have impacted us. But again, because of our limited volumes today, right, we can continue to get trucks out. We don’t have to shut everything down. But, we’re looking for the ability that once we have the systems and processes in place the more quickly adjust to the ability to build trucks without dealing with -- without having to deal with supply chain-related issues.

[Colin Rusch:]

Excellent. And then, just in terms of the sales process, obviously, there has been a handful of announcements from some larger OEMs moving into the delivery van space. But, can you talk a little bit about some of the sales dynamics in terms of time to actually contracting volumes, some of the discussions around pricing, now that there’s just a bit more competition in the space?

[Duane Hughes:]

Yes. I think -- that’s a great question, Colin. And I would tell you, multiple things happening. You heard me talk about -- or I’m going to call it our Purpose Built National Tour that starting in February with the Super Bowl is scheduled to roll through 20 different cities with our partner, Pritchard, who are taking 2 Workhorse C-1000 to these cities and doing different campaigns throughout those cities, everywhere from -- I think they’re in Charlotte right now. They’ll be in Minneapolis later this week. They moved to Cincinnati, DC, California and so on, right? That is one way we’re able to get the message out with a demonstrable proof-of-performance concept, actually delivering product, delivering products from partners that if you go back and see a few of the videos that were out there, you’ll see how that campaign is able to, I’ll say, bring the Workhorse name more awareness, what we do in this last-mile delivery segment. The other piece is, the differentiators of the vehicles themselves, which really help sell the vehicle to, in our case, last-mile delivery fleets. And those differentiators, you’ve heard me talk about a bunch of times, whether it’s the low floor, the performance of the vehicle itself, the mileage. But as importantly is the HorseFly delivery drone, right? The ability for us to further reduce the total cost of ownership by augmenting the electric vehicle with an electric delivery drone that allows these fleets to, A, differentiate themselves; reduce their cost; and ultimately, give them an opportunity to grow their market share because they’re expanding upon the technology tools that are available to them to meet the ever-demanding need that consumers want, which is product more quickly delivered to them and a more carbon-friendly and reduced cost capability.

[Operator:]

Our next question comes from the line of Craig Irwin with Roth Capital Partners.

[Craig Irwin:]

So, President Biden’s been pretty straightforward out there about his priorities, particularly in having the federal fleet convert over to our electric vehicles over the next several years. Most of the federal agencies have to go through OMB when they have big capital programs or big policies that are up for regular reinstatement published -- publishing in the federal register. It seems the Postmaster general has a slightly different situation where he -- not really accountable to the President the way that others are in the other federal agencies, given that Post Office has to file a 10-K and he answers to a board. Can you maybe talk a little bit about the line of accountability in the Post Office, as far as following federal rules? And the line of accountability, as far as following presidential priorities, any comments there would be really helpful.

[Duane Hughes:]

I’m not -- I probably can’t speak as deeply as others can to this. But to your point, the Postmaster General reports to a Board of Governors. And that Board of Governors today, I believe, at least 3 of which were appointed by President Trump -- or former President Trump, and just in the recent news yesterday, I think I read that Biden had appointed 3 new people to that Board of Governors, which will fill it out to, I believe, all 9 seats. So clearly, in my opinion, due to the award and the decision being made to go basically combustion engine vehicles in the fleet at the Post Office, and Biden having signed his executive order to take the 645,000 fleet of government vehicles all electric, I think what we’re seeing is a speed up in what President Biden is doing to put the Board of Governors together in such a way to support his plan going forward. So, again, I don’t -- I’m probably getting the news just like you are, directly from the public as well as the things that we’re doing to follow-up with the current situation ourselves and how we’re getting educated. But you’re right. The Postmaster General does not take orders from directly from the President. It comes from a Board of Governors. However, that Board of Governors can be affected by the President and how he seats people on that Board.

[Craig Irwin:]

So, my next question is, DeJoy gave testimony in the last couple of weeks where he seemed a little confused. He said that electric vehicles don’t really have a maintenance benefit over combustion engine vehicles, which seems somewhat ludicrous, in my view, most truck -- EV truck platforms are looking at somewhere between 50% and 75% reduction in maintenance costs, typically around two-thirds. Where do you think DeJoy is getting his information from? And do you think he’s at all accurate?

[Duane Hughes:]

Let me -- and good question, Craig. I appreciate that. I’ll give you my two cents worth, which is really coming directly from our customers. The comparison from a fuel and maintenance perspective of an EV or an Electric Workhorse truck as compared to its combustion engine counterpart is absolutely not comparable at all. The EV wins the race by miles upon miles, right? And so -- but that said, what I heard Mr. DeJoy say during his time in front of the Congress or in front of the subcommittee, was that if you take into account infrastructure that’s required to be put in place in order to charge those vehicles at night, then it comes down to a draw. I would argue that also that that’s not comparable either. Yes, it adds to the cost. But it does not, one, impact the comparison of the total cost of ownership from an EV to its guest engine counterpart; the other part is, if you plan to, if I own my own fleet, and the idea was, I was buying tens of thousands of these vehicles, but they plan to convert them down the road to electric and I would tell you that that offsets the cost of the infrastructure already. So, I don’t believe it was -- I’m going to say, well thought-out answer. It was more of a how do I respond to this? And I don’t -- and I also recognize -- I don’t know if they were talking about a 10-year total cost of ownership, a 15-year or 20-year. But what we know is, the length of time -- and I think this was public is that we were designing a vehicle over the last more than 20 years. So, the total cost of ownership at 20 years is where the comparison would need to be made.

[Craig Irwin:]

Excellent. No, that’s good to hear. Good luck on your challenge of this curious award that was made by the Post Office. So, I also wanted to ask a little bit about the new customer opportunity. So, you’ve had some pretty nice traction out there with different names. I would assume that now that some of the vehicles have been on the road for -- C-1000 vehicles, I should say, have been on the road for several months, there’s potential for others to interact with those original operators to learn from them and really see the economics validated. Can you maybe frame out for us how the front end of your pipeline, the funnel of potential customer interactions is looking, what do you feel about the potential tempo of orders for the C-1000 over the course of the next several quarters?

[Duane Hughes:]

Yes. I appreciate that. I think, what we’re seeing already in terms of the pipeline, in terms of the sales pipeline is movement ahead of where we are today. I can’t speak -- I haven’t said anything publicly about this. I want to be a little guarded here. But for example, I keep talking about this 20-city purpose-built national tour that we’re doing with our partner, Pritchard, right, where they’re taking two vehicles to these cities and doing real-life deliverables and performance and having ride-alongs and the things that go along with, again, demonstrating proof of performance. That’s a big deal. But again, with our Hitachi relationship who has dealers across the country. And if you take just the five states alone, where they did a 100-dealer survey in terms of EVs and what they were looking for, Workhorse scored, if I’m not talking on a turn, like highest on the chart in terms of most proof of performance, right, the most number of vehicles that are currently out on the road in this space. And the most number of electric delivery vehicles that were out prior to the C-Series as well. So, we have a deep bench, if you will, of data that allows us to further demonstrate that proof of performance added to through our differentiators that I just spoke about with I think Colin before. I think what we’re going to see is that continued increase in these orders as we make production match our ability to keep up with those orders. So, we’re very excited about the pipeline that we’re seeing, how it’s being able to be built upon and primarily through those sales channels that I keep talking about.

[Steve Schrader:]

And if I can add to that, Craig, is I would say too is, I think we’ve said this to you and others before, our goal is to make money on selling the truck. But there’s a lot of after-sale opportunities with infrastructure and financing and service. And I think that’s why you see the top quality companies out there that understand that there’s money to be made there. And they see that we have a product out there that customers like and are ahead of the field by a couple of years. And that’s why we aligned -- that’s why Hitachi and Ryder and Pritchard and Pride and Duke are all kind of aligning ourselves with us. So, I think we’ll certainly anticipate more orders this year.

[Craig Irwin:]

Okay, excellent, excellent. Last question is actually a question I’ve had from a couple of clients. So, let me just frame it out, right? So, everybody has been pretty much shocked by the Oshkosh award, and I’m guessing your customers are, too. Can you comment maybe whether or not this is impacting your customer relationships, or what are your customers saying about this award with the Post Office? Does this really impact you guys from a competitiveness standpoint on the C-1000 core offering going forward?

[Duane Hughes:]

What I would tell you, Craig, is -- and I appreciate that question because what we’re hearing from our customers is a lot of the frustration that you’re hearing from the public as well as the democratic senators, and that boils down to much more -- even more support for Workhorse, right? We’ve got our customers coming back saying, keep your head high, you’ve got the best product out there, right? We’re with you all the way, right? And this -- and in some cases, it’s -- we’re even -- now we’re even more motivated to make the point that the EV strategy and the Workhorse EV strategy, in particular, is the way to go. And that’s not just from one customer. That’s for multiple customers along the way. If anything, I always felt like two things

[Craig Irwin:]

Okay. And then, last question is really just the confirmation. Do we know for a fact, in black and white, somewhere maybe that there was no other EV or hybrid submitted in the entire RFP, RFQ process for this procurement at the Post Office and then for a fact that the addition was last minute from Oshkosh?

[Duane Hughes:]

Look, all I could speak to is that, because we are still technically under NDA with the Post Offices. We do know through reporting like Trucks.com, the FreightWaves, all the other media, and the attention they got is, yes, there was -- the Oshkosh, Morgan Olson hybrid, right? And then, there was the Oshkosh combustion engine Ford transit, and then there was our vehicle. So, we are not aware of any other vehicle that went through -- that were of the finalists that went through the durability testing process. But I cannot speak to what RFPs were delivered. I’m not aware of any other RFPs being delivered to the Post Office, nor am I aware of what the competitors’ RFPs said that they would deliver. But I can tell you that our RFP stuck to our strides and what we sit through durability testing, sure we may enhance it a little from those learnings and/or from the newer technology that’s even available to us today. But, we stuck to our strides, we gave them an RFP that was based upon the six prototype vehicles that we delivered to them back in January -- I’m sorry, back in ‘16, ‘17 time frame.

[Craig Irwin:]

Great. Well, thank you. Good luck with your meetings this week. I’m sure our representatives are going to work hard to do the right thing here. So, thanks.

[Duane Hughes:]

I appreciate that, Craig. Thank you.

[Operator:]

Our next question comes from the line of Mike Shlisky with Colliers Securities.

[Mike Shlisky:]

I want to follow-up quickly on the postal service contract. I mean, Oshkosh has made an investment in an EV battery supplier, Oshkosh is working with Ford, which is going to be introducing the 40 transit in the couple of months. I guess, if USPS does ask for this whole in to go EV or mostly EV in the future, do you think Oshkosh can deliver an EV, if they were asked to do so?

[Duane Hughes:]

I can’t speak to what Oshkosh’s capabilities are. I would just say, as a defense contractor and a business that they do, they’re good at what they do, right? But I would turn it the other way and say, but I know right now that we are, without a doubt in my mind, right, the most confident EV maker in the last-mile delivery space. First of all, the last-mile delivery space, as we all know, is not like putting any other vehicle out on the road. When you have a vehicle that’s going to go anywhere from 18 miles a day to 300 miles a day, let’s call it, and it’s going to stop many, many, many hundreds of times throughout that duty cycle. That puts a lot of different demands on a vehicle van does, perhaps a military vehicle and/or even a fire truck and ambulance other things. So, we know that our many years of experience working with the blue-chip customers we work with, we have substantial amounts of learnings that have allowed -- that has allowed us to design last-mile delivery vehicles that not just outperform anybody else we’ve seen to date, right, but also are built for the future, meaning our vehicles adapt to the future as the future changes. So, whether it’s with the idea of autonomous drive, we started autonomous by adding a drone, an autonomous delivery drone to the top, right? It’s crawl, walk, run. So, we feel like we are the best solution for anybody who wants to take a fleet, all electric, particularly in the last-mile delivery space.

[Mike Shlisky:]

Okay, great. And then, I wanted to ask secondly about the California program that’s out there, it’s a pretty fixed pie. There’s a fixed amount of fund that they want to put out there that a fixed amount that you can get. So eventually, deposits run out. And there’s been some more competitors in the EV space. And it seems like adoption is kind of rolling up here and doing a lot better, but the same pie. So, I’m curious, do you have any feel for how much -- what amount they might fund the HVIP program for this year and for next? And will they be increasing it with a number of our competitors that are currently in the EV market?

[Duane Hughes:]

I don’t -- this is Duane, again. Thanks again for the question. I don’t have an idea of what the fund will be. I guess, if you look back historically, you can probably use that as a judgment call. However, we do know that the COVID pandemic has impacted these programs because money is going for other purposes. The same as you see things like the stack up of parts that -- ports right now because it’s more important that COVID pandemic things get put on those ships and brought over here then the necessary -- than necessarily components like microchips and so on. But, I guess, what I’m saying to that is I don’t know the amount they’re going to fund, but I do know they have altered the program. So, rather than having 100 units dedicated to a fleet, they’re only going to have 30 units dedicated per fleet. And that’s why our focus is on not requiring a voucher to make it -- make sense, pencil out, right, provide the right ROI and the substantial total cost of ownership savings. Again, however, whenever money is available, that we are able to garner on behalf of our fleet customers or they can actually garner for themselves. We will use it and take advantage of that, but we are building a business plan that does not require the voucher.

[Mike Shlisky:]

Got it. And maybe just one last one from me. Between Pride and Pritchard, the 6,820 units still that have been ordered. Can you give us a sense as to the most recent quarter and the sell through? I mean, what’s -- what amount has been actually ordered by end users of that number? And what’s your time frame for getting those delivered to people?

[Steve Schrader:]

Sure, certainly you want first quarter deliveries, and we’ll get first quarter deliveries. Certainly, we’ll talk about the first quarter results on the second -- in May when we have our next earnings release. Pride is really -- don’t want any until July. And then it’s just kind of an initial order, about 20 total, 10 each of the 650 and the C-1000 for like the last six months. They are stepping in their 6,320 order. They want 600 the following year, 2022 and 2023 each year and then the 5,000 for the last three years. Pride is also looking at -- part of their staging it out is getting the infrastructure in Canada in place from their standpoint, too, and making sure that the demand is there as well. So, I hope that answers your question, Mike.

[Duane Hughes:]

Well, I would add...

[Mike Shlisky:]

Well, actually I was asking whether they were spoken for yet by end users.

[Duane Hughes:]

I would tell you, we don’t know all of the end users in the group, but they have identified specific end users, and we’ve actually delivered a few that we can’t name those end users because they have plans in the upcoming months to make big splashes in their marketplaces and so on as to what they’re doing EV-wise. And I mentioned one of those in the script earlier, an international retailer, blah, blah, blah. But they do have -- they have identified their initial fleets to begin deliveries with. But, it’s not something we can talk about on today’s call.

[Operator:]

Our next question comes from the line of Jeff Osborne with Cowen and Company.

[Jeff Osborne:]

Most of the questions have been answered. Just a couple of housekeeping questions on my end. One, can you disclose what the deliveries were for Q4 in aggregate?

[Steve Schrader:]

Yes. We had I believe seven deliveries in Q4.

[Jeff Osborne:]

Got it. And then, with everything going on at the factory operationally that you talked about, which was helpful in the detail, Steve, can you give us a sense of what the CapEx budget is for the year?

[Steve Schrader:]

Yes. The CapEx budget is not huge. I think, we probably have a budget about $6 million for the year. I think, what you need to consider more, though, from a standpoint of the working capital requirements have gone up from last year quite a bit. One, we doubled the labor force; two, we’re doing a lot of prepays because of our kind of low revenue situation, a lot of vendors want prepays; and three, we’re building up the inventory. So, I think, the cash requirements are going to be a lot higher this year than they were in the past.

[Jeff Osborne:]

Got it. And then, you touched on the gross margin trajectory being negative sort of in the near to intermediate term. Can you give us a sense of how many vehicles would need to be sold a quarter to be gross margin breakeven with the current staffing anticipated and the cost point…?

[Steve Schrader:]

Sure, Jeff. I think, it’s a good question. I’m answering this from a standpoint of where we’re delivering in small volumes right now. So, I want you to keep that in mind. But, I anticipate to get to our gross margin, maybe 300 to 400 per month, that we feel we can kind of maybe get to our gross margin targets at that point in time.

[Jeff Osborne:]

That’s to the target, which is what 15%? But, I was talking about breakeven. So if you could just confirm that...

[Steve Schrader:]

Breakeven?

[Jeff Osborne:]

And the target.

[Steve Schrader:]

Yes. That’s probably closer to 200 per month. We’re going to go through just like any other manufacturing company, we’re going to go through -- we’re going to struggle this year to get that gross margin even positive and don’t anticipate going positive this year. So, it’s we’re doing it like every other manufacturing company when you go from R&D or selling equipment to actually putting out the product.

[Jeff Osborne:]

Got it. And my last question, not sure if you can touch on this, but you were helpful with Craig as it relates to the Post Office and some of the dynamics there. You alluded to in the script of exploring all avenues. Can you just talk about what those avenues are above and beyond the meeting and the third?

[Duane Hughes:]

Probably can’t get into too much detail. This is Duane. Jeff, I appreciate the question. But, we’re talking to different entities and groups out there and really getting our -- let’s say, we’re going to get information inflow, right? So, we know what available options that we have, and the way to approach, not just the Post Office, but whomever else we have to approach, never understand how we might go about having a constructive conversation that leads to something more positive down the road.

[Operator:]

Our next question comes from the line of Craig Shere with Tuohy Brothers.

[Craig Shere:]

Do you see any linkage between additional material commercial traction and progress towards filling orders already in hand? I mean, are basically customers saying, let’s see what you can do with what you’ve got because if I give you a 5,000-unit order in the next three years, what good is it if you’re not ramping production and proving you can get it out the door?

[Steve Schrader:]

Craig, it’s funny. I think, it’s just the opposite situation. I think customers are looking and saying -- they know for the most part this year, the orders, if we get 1,800 that spoken for. So, they’re looking at, can I get in your 2022 production schedule? Can I get in your 2023 production schedule? So, if anything, I think it’s a selling point. So yes, I don’t think we’re finding any hesitancy of orders from that standpoint, because I think they like the truck, they like the price point on it. And again, like we have said, I think, we anticipate more orders this year for sure.

[Duane Hughes:]

And some of it, Craig, I would tell you is, the infrastructure play, right? Infrastructure has always been like the largest barrier to entry here. So, now what we’re starting to see from these customers, when they’re talking about 2022, 2023, is -- and can you help us understand what we need to do or who we need to be talking to. So, like our partnership, not just with Hitachi, but with Duke’s newly created eTransEnergy service, right? That allows us to help find ways to provide the infrastructure required for these fleets. It really gives us a more well-rounded approach in conversation with these fleets who want to go electric, but aren’t quite far as far along as other fleets are today.

[Craig Shere:]

Understood. Turnkey offering should be very powerful?

[Duane Hughes:]

Right.

[Craig Shere:]

Can you speak to the timing of filling UPS orders? And are there any early indications? I know we may not be able to sell it for 12 to 18 months. But, any early indications of potential HorseFly orders, both in conjunction with the EV truck, but also on a standalone basis?

[Duane Hughes:]

I would answer that with -- by saying yes, there’s potential on all of those fronts. As I mentioned in my remarks, we’ve done -- well, for example, at the Verizon keynote, right, as the CEO is giving his keynote speech, what you saw in the background was a Workhorse electric vehicle with a Workhorse electric drone, leaving the truck, doing a delivery coming back and focusing on the 5G network for Verizon, their partner, UPS in the delivery space, right? And we, the Workhorse technology behind the scenes, bringing that to fruition, if you will, both by using 5G wireless capability with our drone as well as what we do for UPS. So yes, I would anticipate seeing more business to be had. Of course, there’s relationships and there’s contracts and things that have to be done. But we are working towards, making sure we can fulfill our technology with many different customers and fleets. To that point, the drone, while a key differentiator for our truck side of the business is the truck launch and landing capability, our drone is designed to not require a truck. It can go from a parking lot, a rooftop or virtually any setting, right, that would require deliveries to be made. In the past, we’ve done things from the CVSs of the world, parking lots and so on as test environments, right? We do these things. What we did in Virginia, right, in April of last year to -- as the pandemic was announced. So, yes, we feel that we have a very strong business case for the drone, not only to help us sell more trucks, but to be its own standalone business as well.

[Craig Shere:]

I guess, I was looking for a couple of things. One is, if I’m not mistaken, of those actually produced and delivered in the third quarter, none one to UPS. I’m trying to get a sense of when the UPS deliveries will start ramping. And I’m also trying to get a sense of your expectation. I know, this is kind of in the future of, say, the percentage of your C-1000s that would likely be taking the integrated HorseFly once it’s fully approved, and if you’ve gotten any kind of body language from potential customers about the potential size of standalone orders.

[Steve Schrader:]

Let me ask -- let me answer the second question first, Craig. I would say, there are three major customers. You’ve all heard of out there that are definitely interested in the integrated truck drone product, okay? So, we certainly anticipate that something will come out of that down the road. UPS, it’s a combination, obviously, we haven’t got production now, but also is when and where UPS would love to take their vehicles first. They have a depot in California and San Diego that’s already with infrastructure. They love to get the voucher program too. So ideally, I think their first trucks would ideally go to California. Now, somewhat, we’re already talking about the HVIP program and how -- when that will get funded. So, it’s somewhat dependent. I assume, we assume, for the most part, if that is not funded or they can’t get vouchers, but we have production and trucks ready to deliver them, we anticipate they would want to take them in as well.

[Craig Shere:]

Okay, great. And any quick updates about your refrigerated truck R&D effort?

[Dr. Rob Willison:]

Yes. This is Rob Willison. We’re beginning a build of a test mule. We have the board of advisors that are helping us coach through the configurations and innovations. It’s no small task to make a refrigerated vehicle with the diesel. It’s even more daunting to make it electric. But I think, we have a good path forward. So, we’re beginning a mule build on that. We’re beginning to take it through some testing throughout this year. And that’s on track as well. I do want to make a comment about infrastructure, though. Our vehicles, especially for fleet, can be charged on level 2. And what you’ve heard from other fleet manufacturers about fast charge and the cost of fast charge infrastructure, very expensive as far as the chargers as well as the amount of electricity needed, because of the nature of our vehicles being lightweight and very efficient, we can charge overnight on a level 2 charger, which is much more economical than what some others have done. So, what’s been said, our technology -- Workhorse is a technology company. We are, in far away, ahead of others, all the way from the drones, to the motors to the batteries, to all of our experience. And so, I hope that helps you answer that question.

[Operator:]

At this time, this concludes the Company’s question-and-answer session. If your question was not taken, you may contact Workhorse’s Investor Relations team at [e-mail]. I’d now like to turn the call back over to Mr. Hughes for his closing remarks.

[Duane Hughes:]

Well, thank you again for joining us on our call today. I especially want to thank our employees, our partners, our investors and all of our support folks behind us. We appreciate your continued interest in Workhorse, and we look forward to updating you on our next call. Thank you, operator.

[Operator:]

Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.