Workhorse Group Inc. (WKHS) Q1 2022 Earnings Call Transcript

Workhorse Group Inc.  (NASDAQ: WKHS) Q1 2022 earnings call dated May. 10, 2022

Corporate Participants:

Stan March — Vice President, Corporate Development & Communications

Robert Ginnan — Chief Financial Officer

Richard Dauch — Chief Executive Officer

Analysts:

Colin Rusch — Oppenheimer & Co. Inc. — Analyst

Jeffrey Osborne — Cowen Inc. — Analyst

Craig Irwin — ROTH Capital Partners, LLC — Analyst

Greg Lewis — BTIG, LLC — Analyst

Michael Shlisky — D. A. Davidson & Co. — Analyst

Presentation:

Operator

Ladies and gentlemen, greetings and welcome to the Workhorse Group’s First Quarter 2022 Investor Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host, Workhorse Group’s Vice President of Corporate Development and Communications, Stan March. Sir, you may begin.

Stan March — Vice President, Corporate Development & Communications

Thank you, Doug. Good morning and welcome all of you joining us on today’s first quarter 2022 results call. Before we begin, I’d like to note that we have posted our results for the first quarter ending March 31, 2022, as well as an accompanying press release and presentation on the Investor Relations section of our website. We’ve also released our 10-Q this morning and we’ll be tracking with posted presentation during the call today. So please follow on either from the link in the press release or through our website directly.

And with that, let’s get started. Turning to Slide 2. Joining us on today’s call are Rick Dauch, our CEO and Bob Ginnan, our CFO.

Moving to Slide 3. We have a straightforward agenda today. Following my brief opening remarks, I’ll hand it over to Rick, who will give you an update on the progress we’ve made and our strategic and financial priorities for our first quarter of this year. Bob will then walk us through our financial results for the quarter and touch on our 2022 guidance. We’ll then take your questions.

Moving to some housekeeping items and our disclaimer on Slide 4. Some of the comments we make today are forward-looking and therefore are subject to certain provisions and subject to the risks and uncertainties. You can find the full disclaimer statement in our Form 10-Q and other periodic filings with the SEC, as well as on today’s press release.

I’ll now turn the call over to Rick Dauch. Rick?

Robert Ginnan — Chief Financial Officer

Thanks, Stan, and good morning everyone. We appreciate you taking the time to join us today.

Turning to Slide 5. Our first quarter was exactly what we expected it would be. A lot of hard work, we put our heads down, executed on our plans and accomplished what we set out to do, owing to a rock solid foundation, based on our stabilized fix and grow business model. In football terms, it is all about blocking and tackling. The key to our progress is turning to successfully find the right people to strengthen our organization. We further build out our highly experienced leadership team, as well as simply enhanced our engineering resources and technical expertise. We consolidated and relocated our headquarters in Sharonville, Ohio. The transformation Union City is tracking to plan.

Operationally, we met every milestone on the new product development roadmap we laid out last quarter. We also strengthened our financial position. As a result, we are right on track in executing our revised strategic plan to deliver a family of Class 3 to 6 electric vehicle last-mile delivery products, both on the ground and in the air.

Moving to on Slide 6. We continue to make progress on our initiatives across what we call our six Ps, people, product, processes, partners, politics and profits. And that a balance in these areas is critical to establish a strong foundation to achieve our vision to be a pioneer in the transition of zero emission commercial vehicles. Our team is incredibly detail oriented, as relentlessly focused day in and day out on strengthening the building blocks of our foundation. We are confident with the plans we have laid out and the progress we’re making on these initiatives will enable us on — will enable our transition from a technology startup into a big [Phonetic] commercial vehicle OEM. We also believe in all the industry trends and therefore, we will continue to benefit from strong industry fundamentals and trend is driving transition from ICE to EV power vehicles in our sector.

Let me now give you some important details about the progress we made during the quarter. Turning to Slide 7, let me go through the key steps we took in delivering on our strategic priorities and building a strong foundation for growth. First, this quarter we further build out our experienced and talented leadership team. We hired a new CIO who have more than 30 years of supply chain and IT leadership experience across the automotive industry at both OEMs and Tier 1 suppliers. He has also led IT team in the government sector as well. We have added a new attorney, as Corporate Counsel, brings five-plus years of business and commercial experience to the team. We also have the search well underway to hire a VP of Sales and Marketing, with significant commercial vehicle and transportation industry experience.

Operational, we have hired a Director of Quality, with more than 35 years of quality systems experience at large OEM, including powertrain and final vehicle assembly and supply quality development. Lastly, we have hired a Director of Production Control Logistics, who has 20 plus years of supply chain and LEAN systems experience at major Tier 1 auto suppliers. Additionally, we have rounded out our principal engineering ranks. We call them subject matter experts, and now have them in place for chassis, electronics, controls and body design work, known for the benefit of each of their unique perspectives and insights as we execute on our product roadmap.

Moving to Slide 8. I want to talk a bit about the readiness of our facilities. Last quarter, we opened our new vehicle design and testing technical center at Wixom, Michigan to expand, enhance our design engineering and testing capabilities. This enhancement is very fruitful for Workhorse. We have greatly expanded the breadth and depth of our engineering talent, which has already begun to enhance our designs and we have also added 50 [Phonetic] personal requisition for engineers. Test track to be built by fourth quarter of this year, bringing the site to a fully functional mode by the end of the year.

We continue to make significant progress in transforming and expanding our Union City, Indiana plant into a world-class manufacturing complex. As you can see on Slide 8, in the image in the middle of the left hand side of the slide, the manufacturing plant re-lift, repaired, rehabilitation are on track and near completion. The in-line dynamometer is expected to be installed in the facility and will be ready for production in Q3 of 2022.

We are often asked, how we can get to volume production with only a $15 million to $20 million range of best level we have been discussing? Short answer is, because we did not start with a blank piece of paper. We already have a well-build plant, coupled with a rich history of manufacturing. We also reached an agreement in the quarter to take over two additional factories on our property, further expanding our manufacturing floor space and footprint. As an indication of how important these types of assets and capability of R&D space, we have been approached by several firms to possibly undertake contract manufacturing for them at our Workhorse Ranch as early as this fall, and in the next year. We will carefully evaluate these opportunities and we’ll update you when there is more information this year.

As I mentioned our call in March, we look forward to hosting many of you at our Investor and Analyst Day event at Union City in the fourth quarter. So you see first hand that we are now part of the Workhorse Ranch and also get a chance to drive our new generation of vans and trucks. We are also pleased that we completed the consolidation and relocation of our headquarters to get us our advanced technology in a new facility at Sharonville, Ohio. We are already realizing improved efficiencies and teamwork across the organization. The new prototype shop outlet location is under construction and we expect it to begin in Q3 of this year. Finally, we’re in the process of the relocating our aerospace team into a larger space in Ohio and we plan to start production in 2023. In summary, we have a materially repositioned and significantly upgrading our infrastructure in the last nine months.

Moving to Slide 9. Let me now provide an update on the progress on our revised product portfolio roadmap to deliver a family electrical — electric-powered commercial vehicle across the Class 3 and Class 6 segments. We accomplished exactly what we set out to do during the first quarter. As we previously communicated, our new product portfolio roadmap includes giving existing C1000 repaired and back on the road before building out and retiring them out. In parallel, we are boasting our engineering team’s efforts on developing two new truck chassis platforms in ’22 to ’24, while also work with GreenPower on a third vehicle to bridge product gap created by decision to limit future C1000 production. I would also like to highlight that we have recently signed a referral agreement with ChargePoint to support our customers on electrification journey as they transition to electric last-mile delivery vehicles. This partnership connects Workhorse staffers with North America’s largest charging network.

Turning to Slide 10. Let me walk you through the current status of our major product platforms. Last quarter, we completed FMVSS testing for the C1000 and noted that several corrective actions are required to complete the full vehicle certification. We also fully addressed the E-powertrain liability, structural durability in the payload capacity of C1000 and identified several necessary corrective actions required to provide a safe, reliable vehicle to our customers. During the first quarter, we acted on these corrective actions and all the FMVSS changes have been finalized and released by our engineering team. The structural design and vehicle bill-of-material releases are now complete.

Even with a bit of supply chain exposure in Shanghai, we are on track to return vehicle to service, starting in August of this year and repair all 161 currently manufactured vehicles by year-end. We plan to manufacture 50 to 75 additional C1000 by the end of the year from the inventory currently on hand. We are working closely with a few customers to sell 100% of the vehicles in 2022. Accordingly, we’ll provide service and repair fror our support after retiring the model later this year.

Turning to the future is W750 and W4CC, which will serve to7 bridge the gap between the C1000 product and future production of the W56 and W34 platforms. Workhorse and GreenPower finalized certain enhancements to the base vehicle and production of the first unit is already scheduled. I believe our strategy to fill supply chain early for these vehicles is paying off for us. We plan on taking delivery of up to 1,500 chassis of GreenPower, completing the manufacturing process and delivery of cab chassis. the W4CC and finished step vans W750 to customers in the United States and Canada, beginning as early as the third quarter of 2022 and throughout 2023.

We are currently here in the California at ACT Expo in Long Beach, where the Workhorse team has introduced the W750 step van and Ride & Drive with a fully loaded downtown W4CC cab chassis vehicle. It will be the first time since our March 1st announcement that we will have demo vehicles for customers to ride and review. We are already excited to have our first purchase orders for this vehicle family, with both offering having successfully achieved California HVIP approval. We expect to realize further sales activities now that customers can see drive and fully review the vehicles. If you haven’t been already to the show, please stop by the booth and take a look or take a ride. We look forward to continuing to collaborate with GreenPower and deliver the first trucks in the Union City plant later this year.

Turning to the W56, which we introduced last quarter as the first new Workhorse polydesign chassis platform. The W56 will serve in Class 5 and Class 6 delivery step vans and truck market segments. They build on Workhorse on experienced chassis for these Class 6 vehicles. The W56 is the shortest path to a homegrown designed, tested and economically viable platform. It will come in three build out space sizes, the TAN can estimate to be approximately $1.7 billion per year. We continue to be all timing requirement, milestones from the beginning of production of the vehicles in Q3 of 2023. Our engineering design teams have made significant progress with the W56 design, sourcing decisions and contract commitments with proven commercial vehicle industry Tier 1 suppliers are already in place with more than 50% of the platform bill of materials. We expect to finalize design intent with supplier partners, a lot of critical, the last component, chassis, suspensions of our sourcing decision by the end of Q2.

This quarter we have a production intent vehicles ready for testing in Q4 of this year and additionally, we have complete testing and start full production on time in Q3 of 2023. Design, testing and producing the W56 is the number one program prior year at Workhorse. I manage those programs reviews myself on a monthly basis. We look forward to continuing to update you on our progress on this critical program every quarter.

Now in terms of W34, which as we mentioned on our last call, is the new Class 3 and Class 4 chassis that is built on the key technologies introduced by the E-Gen and the C1000 vehicle designs. This vehicle features low [Phonetic] platform with improved ride hailing, visual lightweight systems and advanced driver technology. We estimate the addressable TAM for this segment of the commercial vehicle industry to be about $10.4 billion per year. We continue to expect to beginning the production in 2024, which mean we will benefit from tailwinds as new standards and emission standards take effect for commercial trucks in some regions of the country. The bottom line is that we have all the program on time and on budget, while adding skills that ensure we continue to hit our aggressive milestones.

Turning to Slide 11. We are continuing to invest in our aerospace business and drone technologies. We achieved several important milestones that we reached during the quarter and a very important year ahead of us in terms of product development. Last quarter we announced that the Federal Aviation Administration provided us with approval to pursue type certification for the HorseFly delivery drone in 2022-23. We continue to apply the Federal certification. We are in the final development and testing phase for our vehicle launched drones with industry leading payload, range and sales delivery capabilities. Building on the success we had last quarter, the tenants are gradually as a part of our culture, we are all pursuing additional contract and grants from the USDA to provide monitoring, data procurement and analytics as part of demonstration projects.

Through a dedicated development effort, we also designed a market-leading package delivery winch in our continued extensive field testing. We are currently firing in North Dakota and Mississippi to support government programs. On the staffing front, we continue to add engineers and pilots to team to ensure we can deliver on our — for our customers. We’re excited about the potential for market expansion. We are experiencing our drone operations and are exploring additional projects with both federal and state government, as well as larger retailers.

With that, I’ll now turn the call over to Bob to discuss our financial results for the quarter. Thanks, Rick. Let’s turn to Slide 12. Our results illustrate the progress our team continues to make to strengthen our financial position and drive greater operating efficiencies, which will allow us to execute our product portfolio plans to deliver value for customers and shareholders. Sales net of returns and allowances for the first quarter 2022 recorded a $14,000 compared to $521,000 in the first quarter of 2021. The decrease in sales was primarily related to the decrease in volume of truck sales of next to previous recall our C1000 vehicle. Cost of sales decreased to $3.9 million from $6.2 million in the same period last year. The decrease in cost of sales is primarily due to decreased volume of truck sales and costs associated with initial production of the C-Series vehicle platform. Selling, general and administrative expenses increased to $11.9 million from $6.9 million in the same period last year. The increase in SG&A expense was primarily driven by an increase of $2.9 million in employee-related expenses, including equity compensation from increased head count and the appointment of our new executive leadership team. Additionally, there was $2.1 million increase in professional services related to legal expenses. The increases were partially offset by $1.4 million decrease in consulting fees due to the Company’s initiative to reduce reliance on external resources by hiring internal resources. R&D expenses were nearly unchanged at $4 million compared to 43.9 million in the same period last year. Net interest expense was $2.2 million compared to $14.9 million income in the same period last year. The decrease in interest expense was primarily driven by $0.4 million increase in fair value of our convertible notes in Q1 compared to $15.5 million decrease in fair value of the prior year. Additionally, we recognized the gain on the forgiveness for PPP Term Note during the three months ended March 31, 2021, which is non-recurring during the current period. Other loss increased to no loss compared to $136 million in the same period last year. Decrease in other losses related to unfavorable changes in fair value of our prior investment in Lordstown Motors Corp, which was sold entirely in Q3 of 2021. Net Loss was $22 million compared to a net loss of $120 million in the same period last year. Loss from operations in the first quarter of $19 million compared to $16 million in the same period last year. Turning to Slide 13, as of March 31, 2022 the company had approximately $160 million in cash and cash equivalents. On April 6, 2022 the company entered into an agreement with High Trail Capital to exchange outstanding 4% senior secured convertible notes as for approximately $29.7 million of the company’s common stock. This transaction eliminated the remaining debt in Workhorse balance sheet and we’re really excited about what we’ve accomplished on this front. Strengthening our financial position has been a key priority. The deleveraging complete, we now have additional time, possibilities and diligence to focus on our full financial resources on key investments in our people and in the business, so we can execute our plan. Our capital spending plans for 2022 remain unchanged of $25 million and $35 million. Slide 14 covers our ’22 guidance which we are reaffirming. We — as we continue our planned progressive ramp in manufacturing, assuming current supply chain visibility remains unchanged, continue to expect to manufacture and sell at least 250 vehicles to generate at least $25 million revenue our guidance. Our value is few years also backwards, so we are still not expecting to produce any vehicles in the first half of 2022. I’ll now turn the call back to Rick to wrap up the call.

Richard Dauch — Chief Executive Officer

Thanks, Bob. I want to briefly discuss our Q2 priorities on Slide 15. We intend to complete the critical executive level staffing here in Workhorse, focused on commercial, engineering, supply chain and IT systems, following the significant hires that we have made in past nine months. We will execute on our product roadmap timelines. We will continue the expansion and the renovations at the Workhorse Ranch in order to launch products in Q3 of this year. The team will begin to both acquire, transfer and install test and validation of equipment at the both, Michigan and Ohio centers. We also expect to complete the first phase of Common System deployment, the total production, LEAN systems, ERP and HRM systems and we finally expect to secure customer commitments for our new products, W750, W4CC and the limited number of C1000 vans we expect to prepare and build this year.

Before we turn the call to Q&A, I want to reemphasize the strong performance from our call today on Slide 16. First, we are doing exactly what we said we would do to build a strong foundation at the company and that always starts with people and a strong balance sheet. We have highly experienced, capable executives in critical positions, strengthening our operational, supply chain, and technical capabilities and we feel good about our finances by removing all debt from our balance sheet.

Second, our strategic product roadmap plan is on track and we made important progress during the quarter. We will be the pioneers in the transition to zero emission commercial vehicles targeting specific class vehicles in the last-mile delivery segment. And third, based on direct feedback, we remain confident in the opportunities ahead to deliver electric vehicle, so our customers get what they want, and in turn will deliver long-term shareholder value.

That concludes our prepared remarks. Thank you again for your time this morning. We look forward to continuing to update you on our progress and we’re now ready to open the call for your questions. Doug, please provide the appropriate instructions.

Operator, you still there?

Questions and Answers:

Operator

Yes, I am sorry. I was on mute. [Operator Instructions]

Our first question comes from the line of Colin Rusch with Oppenheimer and Company. Please proceed with your question.

Colin Rusch — Oppenheimer & Co. Inc. — Analyst

Thanks so much guys. Could you talk a little bit about the customer dynamics, now that you’ve got a broader portfolio of trucks? You’ve shown some evidence that you can be able to deliver on these things. Just talk about how much leverage being with those customers and the depth of demand that you’re starting to see with those folks as you move forward with those relationships?

Richard Dauch — Chief Executive Officer

Are you asking about the customer dynamics?

Colin Rusch — Oppenheimer & Co. Inc. — Analyst

Yeah. The customer dynamics. Yeah, the relationships and how broadly they are accepting the range of range of vehicles.

Richard Dauch — Chief Executive Officer

We’ve had several days with our customers, from the original customers, we had the C1000. We were able to bring them in the Union City, as you remember to demonstrate the W4CC vehicle. They gave us positive feedback, that actually gave us rapt input on how well we think we can sell the chassis version of the W750. So that gives us very good confidence. We had a meeting with one of those customers as recently as last Thursday in the Midwest. They are looking forward buy several hundred millions worth of vehicle. This week, we have, first — the first time we’ve demonstrated the W750. We showed it to our Board of Directors last Tuesday in Ohio. We shifted out of California up over the weekend. For display, we have lot of traffic already as we open the show at 4 o’clock.

So we have — after the show, in this week, we have a plan, four, five weeks, we’re going to take the vehicles around California into a couple of areas of the country to show the customers, they are going to experience to drive. So I think, give me about 45 days on the outside I’ll tell you know a lot more, but pretty much would be that we have our focus in the right areas, Class 5, Class 6, Class 3-4, last mile delivery. It’s the second that is not too crowded to be quite and you know we have a setback back on the C1000. We think we can still be one of the first to market in that segment.

Colin Rusch — Oppenheimer & Co. Inc. — Analyst

Okay. That’s super helpful. And then just in terms of the people investment that you’re making right now, certainly what we’ve seen is an awful lot of leverage from software, it’s operating system level for the vehicles. I’m just curious how much investment you’re making in software engineers and how you’re approaching that challenge of getting the operating software for this vehicles really tuned out as you start going in the market?

Richard Dauch — Chief Executive Officer

Great question. I think one of the secrets is not just the hardware on these vehicles, as an extra driver, I understand how important the software roadmap vehicle. We are lucky. One of the good things we had on both the E-Gen and the C1000, we have the Metron system where we get the feedback about every 10 seconds for every vehicle that we have on the road. I think some of the E-Gen is on the road now since 2017-18 and we still continue their feedback. Pretty reliable system we have out there. So I think we’ve doubled our investment in software engineers. I got here, I know. We have aerospace and I think it is almost quadruple in aerospace and we’ve almost doubled on the software side. So we understand that is an important and that’s one of our key areas where we the battle in the fight for talent, especially in the software side now is really hard and we have to make sure that we get our fair share qualified people.

Colin Rusch — Oppenheimer & Co. Inc. — Analyst

Okay. Thanks so much guys.

Richard Dauch — Chief Executive Officer

Welcome.

Operator

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

Jeffrey Osborne — Cowen Inc. — Analyst

Good morning, thanks for taking the questions. Just a couple on my end. I was wondering how do we think about the financial ramifications of the remediation of the 161 trucks in the second half of the year. That in addition to what you intend to produce the 50 to 75. How should we think about modeling that?

Robert Ginnan — Chief Financial Officer

Well, this is Bob, Jeff, The — first of all with the write-down of inventory that we took in the fourth quarter, we basically — any of those trucks that were built, we had a write down to fair value, which is basically, when we look at right fair value and in the cost and then we’ve also said that we’ve got some cost to goods to fix those as we move through the quarters here. So I think modeling those — the reality is the revenue will be there, but the cost will probably approximate the revenue. So on the C1000, I wouldn’t expect much contribution there from a P&L perspective. However, obviously from cash perspective they are very accretive. That is only that I had to add.

Jeffrey Osborne — Cowen Inc. — Analyst

And just to be cleared, but that’s the 161, 50 to 75?

Robert Ginnan — Chief Financial Officer

Correct.

Jeffrey Osborne — Cowen Inc. — Analyst

And then the 50 to 75, I assume those would be negative gross margin to start, and then as we move into ’23 and volumes ramp up, the gross margins would turn neutral to positive or how do we think about the mid-term trajectory on that front?

Robert Ginnan — Chief Financial Officer

Well, I think this thing 75, C1000, I think see is a very similar story. The parts on hand are obviously written down, spend some more. So it might be a little bit as you said, but it shouldn’t be the matter.

Jeffrey Osborne — Cowen Inc. — Analyst

I got it and then is that you’ve had — go ahead.

Robert Ginnan — Chief Financial Officer

Jeff, C1000…

Jeffrey Osborne — Cowen Inc. — Analyst

I’m sorry.

Robert Ginnan — Chief Financial Officer

Should be fully built out behind us by the end of the year and you will see transition here in the third quarter. We will start producing and shipping the W4CC and then in the fourth quarter we will start shipping the W750 as we’ve got to finalize — got the design finalized now, resources all done with W750. We started our production in early fourth quarter. So those are positive, the gross margin side vehicles.

Jeffrey Osborne — Cowen Inc. — Analyst

That’s great to hear. Maybe just a last modeling question is on the opex front. You’ve certainly added a lot of people and had a lot of shuffling around. Would you — if this were a baseball game are we in the seventh, eighth inning of that and is the current sort of run rate, but maybe some modest growth in the second half, how we should think about it, or what’s the opex trajectory?

Robert Ginnan — Chief Financial Officer

Executive levels would directly report to me. We need a good sales commercial leader here, that first leg of the higher, the regional team you can take a look at the country that needs to be some on the West Coast up and down the I-5 quarter. An easy Summit in the New England regions in New York City, up and down the I-95 quarter, and then we’ll take a look at what we need within the Midwest or the Southeast-Southwest region, but that could come later. So that’s the eighth inning. I think the engineering rates were so high in the third, fourth inning. We’ve got the F&Gs on board now. First of all, we got the CTO and our Head of Vehicle Design within 90 days will be joining the company. We have found the SMEs, several them have retired some of the OEMs. We had a way for them to get through the first quarter. So, now on the Board, they are out doing their recruiting for the next layer down, and then we got a pretty solid team. Right. So I think we’re early there. Supply chain team, we’ve got to continue to build that up as we continue to ramp up our production and then we got some work to do in the back offices in the HR, IT. We’re probably still early third, fourth inning in those areas. So…

Jeffrey Osborne — Cowen Inc. — Analyst

Got it. And the last one I had was just on the competitive front. You mentioned that with the C1000, the Class 3 that you’re early, but there’s a lot of new entrants that you see on the show floor at ACT last night that are much better capitalized than you folks and so there’s certainly lot of people coming in ’23 and ’24. And so I’m just curious how you view the competitive front, as you ramp up?

Richard Dauch — Chief Executive Officer

Yeah, I think we are just over nine months, I got to go to my first ACT show last year. And when I left that show last year, my thoughts were, half the Companies here are not real companies. They don’t know what it means to build a factory, they don’t know what it means to source parts, test and design vehicles and I did a quick walk into the show last year. There is some potential, real strong players here who have deep pockets or big sponsors. They are going to merge. They’re competing in lower space than we are now. They may come into our space down the road, but they saw us launching Class 3 vehicle or the Class 2 vehicles. There are still several companies out here who are in what I’ll call the conversion vote with a 100% rely on an outside team for chassis. And as you know in the industry chassis supply is constrained, as the big OEMs are using the the die for the parts for more profitable vehicles, I’ll say. So I feel very comfortable that we execute on our plans and I’m confident we have given out so that we can be still first in market in our segment and we’ll see how the chips lay. All right.

Talking about building a factory or building multiple factories in short period versus actually having a factory in renovating is a huge differentiator for us here at Workhorse. It might not look key to our plan, it doesn’t happen in six months, but you don’t build five to six plants in 18 months. You got to build plants minimally. Here in North America, 18 to 24 months by the land, put the infrastructure and and over the way hire the people. One of our competitors, they have a beautiful. They only have eight hourly people in that factory right now, although they launched in the fourth quarter of this year, you tell me.

Jeffrey Osborne — Cowen Inc. — Analyst

Thanks for the poetic response. I appreciate it. Thanks, Rick.

Richard Dauch — Chief Executive Officer

Thanks.

Operator

Our next question comes from the line of Craig Irwin with ROTH Capital Partners. Please proceed with your question.

Craig Irwin — ROTH Capital Partners, LLC — Analyst

Hi, good morning and thank you for taking my questions. So, Rick, the progress since we met last ACT Expo is really been impressive. And I would say the capital structure is the one thing that I would call out as as the most visible progress that you’ve made so far. So I just want to commend the progress of the company. So as you talk to people yesterday, the first day of the show, was there anything new that you’re hearing from your customers? Anything people were saying specifically about the the vehicle on the floor or the the future offering that you are presenting in collaboration with GreenPower? What can you share with us to help us with visibility on customer uptake?

Richard Dauch — Chief Executive Officer

Good question. I wanted to say that I went there for 2.5 hours. One of the largest last-mile delivery guys came by with all of our vehicles. This is exactly what we need. Can you also build a larger version? So, the version that we have on the floor frame of W750. That customer said he definitely needs a 1,000 QSD [Phonetic] and up to 1200 that’s absolutely in our product roadmap for the W56. The main issue, I think we heard right now is, there is a strong demand, strong that we expected when we started this journey for the cap chassis version. There are people in this industry, as you know, the commercial vehicle are upgraded. While we are originally focused on last-mile delivery, it looks like we will sell some electrified cap chassis vehicles and then go to update is being, but when they were sort of re-front or a box or a flatbed and I think we’re learning as we come into this industry, just how complex the upgraded portion of the business is. That’s one.

Two, I think one thing that is common from last year to this year is that the infrastructure have to be in-place and we saw the infrastructure bill that came out last year of about $15 billion towards instructive over EV vehicles and off of our buses. So we hope to participate in some of that. And recently we’ve seen some of the initiatives, by Department Energy put forward, investments in low cost loans for battery manufacturers here in North America. So I think the two risk for the industry, our infrastructure and battery supplier. I don’t think batteries — battery costs are coming down as fast as people projected. I have one customer, asked why I can’t get ordered out of the kilowatt hours and I offered him that you go lot the for me and I’ll give you $100 kilowatt hour batteries. And he could do that right now. Only [Indecipherable] can do that right now with the vehicles.

So, those are two big list as I see, but the tailwinds based on everything we see the demand by investors for ESG type companies and the commitments by some of the largest fleets in the world, especially here in North America to be carbon-neutral by 2035 or 2040 are real and so that means we have to be able to have the right vehicles and then we had got to have the right chassis. That’s part of our recent goals with ChargePoint.I got there into two other facilities out in California, earlier in the quarter, very impressive, not just hardware and the software as well and so fleets have to figure have to figure how to make this transition too.

Craig Irwin — ROTH Capital Partners, LLC — Analyst

Thank you for that. So I was hoping you might be able to give us a little bit more color on the the trucks you are making in partnership with GreenPower. I know you’re the kind that doesn’t make announcement, doesn’t make commitments like this lightly, and there is an understanding that there was a down payment made to GreenPower. Can you talk about your confidence in the customer demand? You obviously do see something that you consider very, very real. But the cash down to make the vehicles and then what are you learning about this partnership? I mean how is this something that could potentially grow that capability to Workhorse longer term?

Richard Dauch — Chief Executive Officer

Bob, you want to comment about the down payment we know are ordered and I’ll come back about this.

Robert Ginnan — Chief Financial Officer

Sure. Yeah. So when you look at our existing partnership, there is a kind of one-time down payment we made. And then there is a deposit that we make on each chassis that we order. And so that one time occurred in the first quarter. So that was $34.5 [Phonetic] million cash that we used, $6.4 million was for the down payment and then that will be recovered over time as we actually receive and pay for the chassis. So that would be picture of our cash flow for the quarter.

Craig Irwin — ROTH Capital Partners, LLC — Analyst

Understood, understood. And actually, since we were talking about the cash flow, it seems the SG&A had a fairly heavy contribution of non-cash items. Can you help us sort of unpack the $11.9 million down to to a cash number.

Robert Ginnan — Chief Financial Officer

Yeah.

Craig Irwin — ROTH Capital Partners, LLC — Analyst

I know stock comps are part of it. So we had $11.9 million of SG&A and which about $2.3 million was non-cash stock comp as we’ve been building out the management team and then that being in the P&L side, but obviously on the cash side and then you’ve got a little bit of depreciation there, but it is kind of a rounding error but really stock comp that gets us down to probably a more cash equivalents, even though it on the side of about $9.2 million. Excellent. Thank you for taking the questions. I’ll hop back in the queue.

Richard Dauch — Chief Executive Officer

Hey, Craig. I will make a couple of comments here. So, in terms of GreenPower, I’m really happy with the progress we’ve made. It took us most of the fourth —- first quarter to iron out the agreement from a legal standpoint. We have like a 58 or 68 page agreement with GreenPower, pretty detailed. We initiated weekly program of the Presidential level. That’s happening. Then we do monthly program at my level. To give you an example, on the W4CC we’re able to have some of the modifications we want for the North American market actually install a GreenPower’s factory in Asia, which saves us some of the market transfer of that. The box install for the W750 that’s all source to a local supplier here in North America, that’s what we have here to show, and we’re working very closely to follow all their sourcing. I think they have done over 300 parts, they’ve got to source themselves and then we’re working with that supplier to make sure we build our manufacturing plants plants at Union City.

We’re starting to out the inventory flow about the cap chassis and we are waiting the the confirmation from California. How much we’re going to have on the ground new city. What our production time is. We already got the TAM times there and then how much we’re going to have in our finish pool versus how much is going to go right to our customers. So we’re doing a lot of detailed work. It’s what I’ll call mid numbing engineering mathematical work both from the supply chain and engineering standpoint, but we’re confident we get there and we will grab our price points we expect to sell the market based on our customer feedback and get the margin we are looking for. Hope that gives you some color on the upcoming launch of the W750, W4CC.

Operator

Our next question comes from the line of Greg Lewis with BTIG. Please proceed with your question.

Greg Lewis — BTIG, LLC — Analyst

Yeah, hi. Thank you. Thank you and good morning. Just one question from me. Rick, you kind of mentioned it in your prepared remarks about the potential to the kind of expand that around Union and had contract manufacturing. Realizing that the focus now is on getting your trucks out the door over, I don’t know in the next 12-24 months. Can you talk a little bit how you sit and you see the potential move into contract manufacturing playing out for Workhorse?

Richard Dauch — Chief Executive Officer

Great. Great. I think we — when I got there. I don’t think we planned on doing contract manufacturing, but the fact that a lot of unique companies don’t even have factories. A lot of are new install build type situations. I think we are quite pleasantly surprised by inquires we had. We have multiple inquiries right now. The challenge we have is, okay, can we handle everything we’re doing ourselves which is lot between C1000, W750, W4CC, W56, W34. Can we not distract the organization by taking on contract manufacturing.

The good news is, we hired a VP of Manufacturing Services in late first quarter. He has a bandwidth right now to take on some of the quoting activity with our finance team and so we have at least one quarter out there right now. We’ll find out whether we are selected to be that contract manufacturer here in the next 90 days and we are entertaining another one right now, which is another electric vehicle, faster vehicles. So it goes back to our vision of being pioneers in transition to zero emission commercial vehicles. So I think we can do it. I think we have the floor space. We’ll have to add for talent specifically, supply chain program management and we can get the people, for sure, you can see is a hungry relocation where we used to employ lower rate. The people wanted to work, the communities wanted to be successful and we wanted to build up Union City.

Greg Lewis — BTIG, LLC — Analyst

Okay, great. Thank you for that.

Richard Dauch — Chief Executive Officer

Thanks, Greg.

Operator

Our next question comes from the line of Mike Shlisky with DA Davidson. Please proceed with your question.

Michael Shlisky — D. A. Davidson & Co. — Analyst

Yes. Hello, guys. Good morning. I wanted to maybe touch first briefly on the opex outlook, on the OpEx in the last quarter here. I want to confirm it was the $2.1 million increase in professional services on legal. Was that one-time in nature and that’s my first part of the question. The other part was when you consolidate into Sharonville, did that result in any cost savings on overhead state, etc?

Robert Ginnan — Chief Financial Officer

So, this is Bob. So the legal and professional, I would characterize as maybe not permanent, but I can’t call one-time either. I think with all the other things that we’ve got going on and then trying to advance the business I think we’ll be in that run rate for a little while here but it’s probably not permanent. It is part of the opex savings on the move we did. We will save one facility, but I wouldn’t —- from a modeling perspective, I wouldn’t factor in net savings. I think it will be a little bit more expense actually, as we once we get done with everything. The other facility that we’re consolidating out of, we actually own, so I wouldn’t build anything from a sales perspective in your model for that consolidation.

But, Mike you can’t model. And if you don’t have the parking spots for your people, you are parking on the ground, you are parking at the neighbors parking lot, the facility we had were, I’d say minorly the best. How is that? To recruit people in, now we have a world-class, place well let, well equipped, no Parkey, big prototype area we actually fly drones indoors when we finish the current type centers, got high roofs and so I’m proud to sitting there now versus before I would embarrassed to bring you here every year. How’s that?

Careful number of that and I’m sitting here moments high numbers on this, but just having people in the same room, the collaboration has already improved just in the short time and can value that, but it’s definitely been powerful.

Michael Shlisky — D. A. Davidson & Co. — Analyst

Sure. Sure. That makes sense. That makes sense. Can I turn to the the orders for the W750. You’ve got your first purchase order. Can you maybe share a lot of detail there? Is it more for a previous C1000 customer? Someone told me new and can you share if it’s the van or just the chassis cab?

Richard Dauch — Chief Executive Officer

Actually it’s not with a previous customer, its with two different customers. We are not publishing things yet right now who those customers are. We were with one of those customers last night. They explained how big their fleet is in North America and the opportunity to move from ICE powered vehicles to EV powered vehicles significant. Also, in that meeting we had last night with one of the largest commercial vehicle operators in all of North America and they told their plan, between now and 2025, they are going to convert 50% of the vehicles to EV powered systems. And so we’re very — we’re pretty encouraged by those opportunities right now.

Michael Shlisky — D. A. Davidson & Co. — Analyst

Great. I also wanted to ask about the split between the W750 and the chassis cab model? Are there any impacts differently financially? I mean, if you’re not doing the after yourselves, there’s probably a few thousand EBITDA that you’re not going to get it. But from a margin perspective is it similar? Is there any kind of changes to that model?

Richard Dauch — Chief Executive Officer

Yeah. So as you pointed out, obviously the revenue and the margins is little bit less in the shift. We’ve shifted quite a bit to the cab chassis. However, I would say that the EBITDA impact is not huge. Probably in the $1 million to $1.5 million range.

Michael Shlisky — D. A. Davidson & Co. — Analyst

You mean overall?

Richard Dauch — Chief Executive Officer

Overall.

Michael Shlisky — D. A. Davidson & Co. — Analyst

You see $1 million to $1.5 million.

Richard Dauch — Chief Executive Officer

Yeah.

Michael Shlisky — D. A. Davidson & Co. — Analyst

Okay.

Richard Dauch — Chief Executive Officer

Yeah.

Michael Shlisky — D. A. Davidson & Co. — Analyst

All right. Great.

Richard Dauch — Chief Executive Officer

Thanks, Mike.

Michael Shlisky — D. A. Davidson & Co. — Analyst

Yeah. Thanks so much guys. Appreciate it.

Operator

[Operator Closing Remarks]