Ladies and gentlemen, greetings and welcome to the Workhorse Group's first quarter 2022 investor conference call. As a reminder, this conference call is being recorded. 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.
Thank you, Doug. Good morning and welcome to 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 in the investor relations section of our website. We've also released our 10-Q this morning, and we'll be tracking with the posted presentation during the call today. Please follow along either from the link in the press release or through our website directly. With that, let's get started. Turning to slide two. Joining me on today's call are Rick Dauch, our CEO, and Bob Ginnan, our CFO. Moving to slide three. 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 in 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 four. Some of the comments that 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.
Thanks, Stan, and good morning, everyone. We appreciate you taking the time to join us today. Turning to slide five. 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, building a rock-solid foundation based on our stabilized fix and grow business model. In football terms, it's all about blocking and tackling. A key element of our progress is continuing to successfully find the right people to strengthen our organization. We further built out our highly experienced leadership team, as well as significantly enhanced our engineering resources and technical expertise. We consolidated and relocated our headquarters in Sharonville, Ohio. The transformation of 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 three-six electric vehicle last mile delivery products both on the ground and in the air. Moving on to slide six. We continue to make progress on our initiatives across what we call our six Ps, people, products, processes, partners, politics, and profits. Investing in a balanced fashion in these areas is critical to establishing a strong foundation to achieve our vision to be a pioneer in the transition to zero emission commercial vehicles. Our team is incredibly detail-oriented and is relentlessly focused day in and day out on strengthening the building blocks of our foundation.
We are confident the plans we have laid out and the progress we are making on these initiatives will enable our transition from a technology startup into an efficient commercial vehicle OEM. We also believe, and all the industry trends support, that we will continue to benefit from strong industry fundamentals and tailwinds driving the transition from ICE to EV powered vehicles in our sector. Let me now give you some important details about the progress we made during the quarter. Turning to slide seven, let me go through the key steps we took in delivering on our strategic priorities and building a strong foundation to grow. First, this quarter, we further built out our experience and talent leadership team.
We have hired a new CIO, who has more than 30 years of supply chain and IT leadership experience across the automotive industry at both leading OEMs and Tier One suppliers. He has also led IT teams in the government sector as well. We have added a new attorney as corporate counsel, who brings 5+ years of business and commercial law experience to the team. We also have a search well underway to hire a VP of sales and marketing with significant commercial vehicle and transportation industry experience. Operationally, we have hired a director of quality with more than 35 years of quality systems experience at large OEMs, including in powertrain and final vehicle assembly and supplier quality development. Lastly, we have hired a director of production control logistics, who has 20+ years of supply chain and lean systems experience at major Tier One automotive 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. Look forward to benefit from each of their unique perspectives and insights as we execute on our product roadmap. Moving to slide eight. I want to talk a bit about the readiness of our facilities. Last quarter, we opened our new vehicle design and testing technical center in Wixom, Michigan, to expand and enhance our design, engineering, and testing capabilities. This center has been a very fruitful investment for Workhorse. We have greatly expanded the breadth and depth of our engineering talent, which has already begun to enhance our designs, and we still have in the budget 15 open personnel requisitions for engineers.
Test equipment will be installed in Wixom by fourth quarter this year, bringing the site to a fully functional level 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 eight in the image in the middle of the left-hand side of the slide, the manufacturing plant is relit, repairs and rehabilitation are on track and near completion. The end of line dynamometer is expected to be installed and the facility will be 100% ready for production in Q3 of 2022. We are often asked how we can get to volume production with only a $15 million-$20 million range investment levels we have been discussing. The short answer is because we did not start with a blank piece of paper.
We already have a well-built 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 are in the EV 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 next year. We will carefully evaluate these opportunities and we'll update you when there's more information to share.
As I mentioned on our call in March, we look forward to hosting many of you at our Investor and Analyst Day event in Union City in the fourth quarter, so you can see firsthand what we are now calling the Workhorse Ranch and also get a chance to drive our new generation of electric vans and trucks. We are also pleased that we completed the consolidation and relocation of our headquarters together with our advanced technology team in a new facility in Sharonville, Ohio. We are already realizing improved efficiencies and teamwork across the organization. The new prototype shop at that location is under construction, and we expect occupancy to begin in Q3 of this year. Finally, we're in the process of relocating our aerospace team into a larger space in Mason, Ohio, where we plan to start production in 2023.
In summary, we have materially repositioned and significantly upgraded our infrastructure in the last nine months. Moving to slide nine. Let me now provide an update on the progress on our revised product portfolio roadmap to deliver a family of electric-powered commercial vehicles across the Class three- Class six segments. We accomplished exactly what we set out to do during the first quarter. As we previously communicated, our new product portfolio roadmap includes getting existing C1000s repaired and back on the road before building out and retiring the model. In parallel, we are focusing our engineering team's efforts on developing two new truck chassis platforms in 2022-2024, while also partnering with GreenPower on a third vehicle to bridge the product gap created by the 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 their electrification journey as they transition to electric last mile delivery vehicles. This partnership connects Workhorse customers 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 were required to complete the full vehicle certification. We also fully tested the e-powertrain reliability, structural durability, and the payload capacity of the C1000 and identified several necessary corrective actions required to provide a safe, reliable vehicle to our customers. During the first quarter, we executed on these corrective actions, and all FMVSS changes have been finalized and released by our engineering team. Front suspension design and vehicle build materials releases are now complete.
Even with a bit of supply chain exposure in Shanghai, we are on track to return vehicles to service starting in August of this year and repair all 161 currently manufactured vehicles by year-end. We plan to manufacture 50-75 additional C1000s by the end of the year from inventory currently on hand. We are working closely with a few customers to sell 100% of the vehicles in 2022. Of course, we will provide service and repair part support after we retire the model later this year. Turning to the future and the W750 and W4CC, which will serve to bridge the gap between the C1000 product and future production of the W56 and W34 platforms. Workhorse and GreenPower have finalized several enhancements to the base vehicle, and production of the first units 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 from GreenPower, completing the manufacturing process and delivering both cab chassis, the W4CC, and finished step vans, the 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 California at the ACT Expo in Long Beach, where the Workhorse team is introducing the W750 step van and providing ride and drives with a fully loaded 5,000-pound W4 cab chassis vehicle. It'll be the first time since our March one announcement that we will have demo vehicles for customers to ride in and review.
We are already excited to have our first purchase orders for this vehicle family, all of which have successfully achieved California HVIP approval. We expect to realize further sales activities now that customers can see, drive, and fully review the vehicle. If you happen to be out here at 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 delivering the first trucks from our Union City plant later this year. Turning to the W56, which we introduced last quarter as the first new Workhorse fully designed chassis platform. The W56 will serve the Class five and six delivery step van and truck market segments, and it builds on Workhorse's experience building chassis systems for these classes of vehicles. The W56 has our shortest path to a homegrown design, tested and economically viable BEV platform.
It will come in three wheelbase sizes, addressing a TAM we estimate to be approximately $1.7 billion per year. We continue to meet all timing requirements and milestones from the beginning of production to the vehicles in Q3 of 2023. Our engineering and design teams have made significant progress in the W56 design, sourcing decisions and contract commitments with proven commercial vehicle industry Tier one suppliers are already in place for more than 50% of the platform bill of materials. We expect to finalize design intent with supplier partners, along with our critical electrical component, chassis and suspension part sourcing decisions by the end of Q2. This will ensure we have a production intent vehicles ready for testing in Q4 of this year and be in a position to complete testing and start full production on time in Q3 of 2023.
Designing, testing, and producing the W56 is the number one program priority here at Workhorse. I manage those program reviews myself on a monthly basis. We look forward to continuing to update you on our progress on this critical program every quarter. Now turning to the W34, which was, as we mentioned in our last call, is a new Class three and four chassis that builds on the key technologies introduced by the E-GEN and the C-1000 vehicle designs. This vehicle will feature accessible low floor platform with improved ride and handling, efficient 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 the beginning of production in 2024, which means we'll benefit from industry tailwinds as new mileage standards and emission standards take effect for commercial trucks in several regions of the country. The bottom line is that we have kept all the programs on time and on budget while adding skilled staff to 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 have 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 2022-2023. We continue to fly under Part 107 certification.
We are in the final development and testing phase for our vehicle launch drones with industry-leading payload, range, and safe delivery capabilities. Building on the success we had last quarter, obtaining several grants from the U.S. Department of Agriculture, we are also pursuing additional contracts and grants with the USDA to provide monitoring, data procurement and analytics as part of the demonstration projects. Through a dedicated development effort, we also designed a market-leading package delivery winch and are continuing extensive field testing. We are currently flying in North Dakota and Mississippi to support government programs. On the staffing front, we continue to add engineers and pilots to the team to ensure we can deliver on our for our customers.
We're excited about the potential for market expansion we are experiencing in our drone operations, and are exploring additional projects with both federal and state governments as well as larger retailers. With that, I'll now turn the call over to Bob Ginnan 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 of 2022 were recorded at $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 in connection with the previous recall of our C-1000 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 was primarily due to the decrease in volume of truck sales and costs associated with the 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 and related expenses, including equity compensation from increased headcount and the appointments of our new executive leadership team. Additionally, there was $2.1 million increase in professional services related to legal expenses. The increases are partially offset by a $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 $3.9 million in the same period last year. Net interest expense was $2.2 million compared to a $14.9 million income in the same period last year. The decrease in interest expense was primarily driven by a $0.4 million increase in fair value of our convertible notes in Q1 as compared to a $15.5 million decrease in the fair value in the prior year. Additionally, we recognized the gain on the forgiveness of our PPP term note during the three months ended March 31, 2021, which is non-recurring during the current period. Other loss decreased to no loss compared to a $136 million in the same period last year.
Decrease in other loss was 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 was $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 B. Riley Principal Capital to exchange certain outstanding 4% senior secured convertible notes for approximately $29.7 million of the company's common stock. This transaction eliminates the remaining debt from Workhorse's balance sheet, and we're really excited about what we've accomplished on this front.
Strengthening our financial position has been a key priority. With the de-leveraging complete, we now have additional time, flexibility, and ability to focus our full financial resources on key investments in our people and the business so we can execute our plan. Our capital spending plans for 2022 remain unchanged at between $25 million and $35 million. Slide 14 covers our 2022 guidance, which we are reaffirming. As we continue our planned progressive ramp in manufacturing, assuming supply chain visibility remains unchanged, we continue to expect to manufacture and sell at least 250 vehicles and generate at least $25 million in revenue. Our guidance for the year is also backloaded, so we're 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.
Thanks, Bob. I want to briefly discuss our Q2 priorities on slide 15. We intend to complete the critical executive level staffing here at Workhorse, focused on commercial, engineering, supply chain, and IT systems following the significant hires we've made over the 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, install, test, and validation equipment at both Michigan and Ohio technical centers. We also expect to complete the first phase of common system deployment in terms of production, lean systems, ERP, and HRM systems. Finally, we expect to secure customer orders commitments for our new products, W750, W4CC, and for the limited number of C-1000 vans we expect to repair and build this year.
Before we turn the call to Q&A, I wanna reemphasize 3 important points from our call today on slide 16. First, we are doing exactly what we said we would do to build a rock-solid foundation for the company, and that always starts with people and a strong balance sheet. We have hired experienced, capable executives from critical positions, strengthening our operational, supply chain, and technical capabilities, and we solidified our financial position 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 classes of vehicles in the last mile delivery segment.
Third, based on direct feedback, we remain confident in the opportunity ahead to deliver electric vehicles to our customers that 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?
Yes, I am. Sorry, I was on mute. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, you may press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Colin Rusch with Oppenheimer & Co. Please proceed with your question.
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're gonna be able to deliver on these things. Just talk about how much leverage you're getting with those customers and the depth of demand that you're starting to see with those folks as you move forward with those relationships.
Colin, you said about the customer dynamics?
Yeah, the customer dynamics. Yeah, the relationships and how broadly they're accepting the range of vehicles.
We've had several meetings with our customers, some of the original customers we had for the C1000. We were able to bring them into Union City, as you remember, to demonstrate the W4 CC, and they drove the vehicle. They gave us positive feedback. That actually gave us direct input on how well we think we can sell the cab chassis version of the W750. That gave us very good confidence. We had a meeting with one of those customers as recently as last Thursday in the Midwest. They're looking forward to buy several hundred of those vehicles, I'll say. This week, just the first time we've demonstrated the W750. We showed it to our board of directors last Tuesday in Ohio. We shipped it out to California and cleaned it up over the weekend. It's on display.
We had a lot of traffic already as we opened the show up last night at 4:00 P.M. After the show ends this week, we have a planned four or five weeks where we're gonna take the vehicles around California and then to a couple other areas in the country to show the customers. They can experience and drive them. I think give me about 45 days, I'll be able to tell you a lot more. Pretty much the feedback we have is that we're focused in the right areas, class five, six, class three, four, last mile delivery. It's a segment that's not too crowded, to be quite honest. Even though we had a setback on the C-1000, we think we can still be one of the first to market in that segment.
Okay. That's super helpful. Just in terms of the people investment that you're making right now, you know, certainly what we've seen is an awful lot of leverage from software at the operating system level for the vehicles. I'm just curious.
You know, how much investment you're making in, you know, software engineers or in how you're approaching the challenge of getting the operating software for these vehicles really tuned up, as you start to bring them to market.
That's a great question. I think one of the secrets is not just the hardware on these vehicles. As an ex-Tesla driver, I understand how important that software is in that vehicle. We are lucky. One of the good things we had on both the E-GEN and the C1000, we had the Metron system where we get feedback about every 10 seconds on every vehicle we have on the road. I think some of the E-GENs that are on the road now from 2017, 2018, we still continue to get that feedback. Pretty reliable system we have out there. I think we've doubled our investment in software engineers since I got here. I know we have for sure on aerospace. I think we almost quadrupled on aerospace, and we've almost doubled on the software side of the house as well.
We understand that's an important. That's one of our key areas where we have some open recs. The battle and the fight for talent, especially in the software side of the house, is really hard, and we got to go out and make sure we get our fair share of the good qualified people.
Okay. Thanks so much, guys.
Thanks, Colin.
Our next question comes from the line of Jeff Osborne with Cowen and Company. Please proceed with your question.
Yeah, 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? You know, that in addition to what you intend to produce, the 50-75, how should we think about modeling that?
Well, I think, this is Bob, Jeff. You know, first of all, with the write down of inventory that we took in the fourth quarter, we basically, you know, any of those trucks that were built, you know, we had to write down a fair value, which is basically when we look at the sale price and fair value and then the cost to fix. We, we've also said that we've got some costs to go ahead and fix those as we move through the quarters here. I think, you know, modeling those is reality, the revenue will be there, but the cost will probably approximate the revenue. On the C-1000, you know, I wouldn't expect much contribution there from a P&L perspective, however.
Obviously, from a cash perspective, they're very accretive. That's how we look at it.
Just to be clear, Bob, that's the 161, not the 50-75?
Correct.
The 50-75, I assume those would be negative gross margin to start, and then as we move into 2023 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?
Well, I think the 50-75 C-1000, I think it's a very similar story. The parts on hand are obviously written down. We'll have to spend some more, so it might be a little bit negative, as you said, but it shouldn't be dramatic.
I got it. As you know, you've had. Go ahead.
Jeff, the C1000
Oh, sorry.
It should be fully built out and behind us by the end of the year. As we transition here in the third quarter, we'll start producing and shipping the W4CCs, and then in the fourth quarter, we'll start shipping the W750s since we've got the designs finalized now and the sourcing is all done for the 750. We start that production in early fourth quarter. Those are positive gross margin type vehicles for us.
That's great to hear. Maybe just the last modeling question is on the OpEx front. You certainly added a lot of people and had a lot of shuffling around. Would you know, if this were a baseball game, are we in the seventh, eighth inning of that? Is the current sort of run rate with maybe some modest growth in the second half, how we should think about it? Or what's the OpEx trajectory?
Executive levels, the people who directly report to me, well, I'd say we're in the eighth inning. We need a good sales commercial leader here. That person will then get to hire the regional team. You can take a look at the country. There needs to be someone on the West Coast up and down the I-five corridor. There needs to be someone in the New England region from New York City up and down the I-95 corridor, and then we'll take a look at what we need in the Midwest or the Southeast, Southwest region, but that can come later. Executive ranks, eighth inning. I think in the engineering ranks, we're still probably in the third or fourth inning. We've got the SMEs on board now.
First of all, we got the CTO and our head of vehicle design within 90 days of me joining the company. They've gone out and found the SMEs. Several of them had been retired for some of the OEMs. We had to wait for them to get through the first quarter. They're now on board, and they're out doing their recruiting for the next layer down. We've got a pretty solid team, right? 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. We got some work to do in the back offices in the HR, IT, and the finance space. We're probably still early third or fourth inning in those areas.
Got it. The last one I had was just on the competitive front. You mentioned that, you know, with the C-1000, the Class three, that you're early, but there's a lot of new entrants that you see on the show floor at ACT last night that, you know, are much better capitalized than you folks. There's certainly a lot of people coming in 2023 and 2024. I'm just curious, you know, how you view the competitive front as you ramp up.
Yeah. I've been here now just a little over nine months. I got to go to my first ACT show last year. 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. I did a quick walk through the show last year. There's some potential real strong players here who have deep pockets or big sponsors. They're gonna emerge. They're competing in a lower space than we are now.
They may come into our space down the road, but they still have their hands full launching their Class three vehicles or Class two vehicles. There's still several companies out here who are in what I'll call a conversion mode, where they're 100% reliant on outside people for chassis. As you know, in the industry now, chassis supply is constrained as the big OEMs are using their valuable parts for more profitable vehicles, I'll say. I feel very comfortable that if we execute on our plans, and I'm confident we have the tools and know-how to do so, that we can be still first to market in our segment, and we'll see how the chips fall. All right?
Talking about building a factory or building multiple factories in a short period versus actually having a factory and retrofitting is a huge differentiator for us here at Workhorse. In my career, I've probably built 12 or 14 plants. It doesn't happen in six months. You don't build five or six plants in 18 months. You got to build plants, takes minimally here in North America, 18 months-24 months to buy the land, put the infrastructure in, and oh, by the way, you have to hire the people. One of our competitors I know has a beautiful factory. They only have 8 hourly people in that factory right now. How the hell are they gonna launch in the fourth quarter this year? You tell me.
Thanks for the pointed response. I appreciate it. Thanks, Rick.
Thanks.
Our next question comes from the line of Craig Irwin with Roth Capital Partners. Please proceed with your question.
All right. Good morning and thank you for taking my question. Rick, the progress since we met last ACT Expo has really been impressive. I would say the capital structure is the one thing that I would call out as the most visible progress that you've made so far. I just wanna commend the progress of the company. You know, as you talk to people yesterday, the first day of the show, was there anything new that you were hearing from your customers? Anything people were saying specifically about the vehicle on the floor or the future offering that you're presenting in collaboration with GreenPower? You know, what can you share with us to help us with visibility on customer uptake?
Good question. I was on the floor last night for only an hour and a half, two hours. One of the largest last mile delivery guys came by. They're all over our vehicle, said, "This is exactly what we need. Can you also build a larger version?" The version we have on the floor today was 750. That customer said he definitely needs 1,000 cubic feet and up to 1,200. That's absolutely in our product roadmap for the W56. The big issue I think we heard right now is there's a strong demand, stronger than we expected when we started this journey for the cab chassis version. There are people in this industry, as you know, in the commercial vehicle, there's a lot of upfitters.
While we were originally focused on last mile delivery, it looks like we can sell some electrified cab chassis vehicles that can then go to upfitters, and they can put whether they wanna put a reefer on it or a box or a flatbed. I think we're learning as we come into this industry and just how complex the upfitting portion of the business is. Okay, that's one. Two, I think one thing that's common from last year to this year is the infrastructure has to be in place. We saw the, you know, the infrastructure bill that came out last year was about, what, $15 billion towards infrastructure, both for EV vehicles and also for buses. We hope to participate in some of that.
Recently, we've seen some of the initiatives by Department of Energy to put forward investments in low cost loans for battery manufacturers here in North America. I think the two risks for the industry are infrastructure and battery supply. I don't think battery costs are coming down as fast as people projected. I had one customer ask me why I can't get to $100/kWh, and I offered him. I said, "You go buy the batteries for me and I'll give you $100/kWh batteries." He couldn't do that right now. Only Tesla can do that right now because they're building only two vehicles. Those are the two big linchpins I see.
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. That means we gotta be able to have the right vehicles, and then we have to have the right infrastructure to do it. That's part of our reasoning to go work with ChargePoint. I got to go out there and tour their facilities out in California earlier in the quarter. Very impressive. Good array of not just hardware, but software as well. Fleets have to figure out how to make this transition too.
Thank you for that. I was hoping you might be able to give us a little bit more color on the trucks you're making in partnership with GreenPower. You know, I know you're the kind of guy that just doesn't make announcements, doesn't make commitments like this lightly. 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 real to put that cash down to make the vehicles. What are you learning about this partnership? I mean, how is this something that could potentially grow the capabilities of Workhorse longer term?
Bob, do you wanna comment about the down payment we made this quarter?
Sure.
I'll come back about the rest. Yeah. When you look at our... There's two parts. There's a kind of a one-time down payment we made, and then there's a deposit we make on each chassis order. That one time occurred in the first quarter. Of our $34.5 million cash that we used, $6.4 million was for that down payment. That'll be recovered over time as we actually receive and pay for the chassis. That was just a big chunk of our cash flow for the quarter.
Understood. Actually, since we're talking about cash flow, it seems that SG&A had a fairly heavy contribution of non-cash items. Can you help us sort of unpack the $11.9 down to an adjusted cash number?
Yeah.
I know stock comps are part of it, but.
Yeah, we had $11.9 million of SG&A, of which about $2.3 million was non-cash stock comp, as we've been building out the management team and that hitting the P&L side, but obviously not the cash side. Then you've got a little bit of depreciation there, but it's kind of a rounding error. Really it's the stock comp that gets us down to probably a more cash equivalent, even though it's on the P&L side of about $9.2 million.
Excellent. Look, thank you. I think that questions. I'll hop back in the queue.
Hey, Craig, let me just. I'll make a couple of comments here. In terms of GreenPower, I'm really happy with the progress we've made. You know, it took us most of the first quarter to iron out the agreement from a legal standpoint. We have, like, a 58 or 68 page legal agreement between us and GreenPower. Pretty detailed. We initiated weekly program reviews at the presidential level. That's happening. We do a monthly program review 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 installed at GreenPower's factory in Asia, which saves us some of the mod, the transfer of that.
The box install for the W750, that's all been sourced to a local supplier here in North America. That's what we have here at the show, and we're working very closely to follow all their sourcing. I think they have got over 300 parts they've got to source themselves. We're working with that supplier to make sure we build our manufacturing plans at Union City. We're starting to lay out the inventory flow of both the cab chassis that come from Asia through California, how much we're gonna have on the ground in Union City, what our production time is. We've already got the takt times there. How much we're gonna have in our finished pool versus how much is gonna go right to our customers. We're doing a lot of detailed work.
It's what I'll call mind-numbing engineering, mathematical work, both from a supply chain and engineering standpoint. We're confident we get there, and we're at our price points we expect to sell in the market based on our customer feedback and the margins we think we're gonna be at. Hopefully, that gives you some color on the upcoming launch of the W750, W4CC.
Our next question comes from the line of Greg Lewis with BTIG. Please proceed with your question.
Yeah. Hi. Thank you, and good morning. Just one question for me. You know, Rick, you kinda mentioned it in your prepared remarks about the potential to kind of expand around Union and add contract manufacturing. You know, realizing that the focus now is on getting your trucks out the door, you know, over, I don't know, the next 12, 24 months, can you talk a little bit how you see the potential, you know, move into contract manufacturing playing out for Workhorse?
Well, it's great. I think when I got here, I didn't think we planned on doing contract manufacturing, but the fact that a lot of the EV companies don't even have factories, a lot of them are doing small build type situations. I think we're quite pleasantly surprised by the inquiries we had. We have multiple inquiries right now. The challenge we have is, okay, can we handle everything we're doing ourselves, which is a hell of a 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 the bandwidth right now to take on some of the quoting activity with our finance team. We have at least one quote out there right now.
We'll find out whether we're selected to be that contract manufacturer here in the next 90 days. We are entertaining another one right now, which is another electric vehicle in a different class of vehicles. It goes back to our vision of being pioneers in the transition to zero-emission commercial vehicles. I think we can do it. I think we have the floor space. We'll have to add some talent, specifically supply chain and program management, and we can get the hourly people for sure at Union City. It's a hungry location where we used to employ well over 800 people in its heyday, and now we're only doing about 100. The community wants us to be successful, and we wanna win up in Union City.
Okay, great. Hey, thank you for that.
Thanks, Greg.
Our next question comes from the line of Mike Shlisky with D.A. Davidson. Please proceed with your question.
Yes. Hello, guys. Good morning. I wanted to maybe touch first briefly on the OpEx outlook and the OpEx in the last quarter here. I want to confirm, was the $2.1 million increase in professional services on legal one-time in nature? That's my first part of the question. The other part was, when you consolidated into Sharonville, did that result in any cost savings on, you know, overhead, real estate, et cetera?
Sure. This is Bob. The legal and professional I would characterize as maybe not permanent, but I can't call it one time either. I think with you know, all the different things that we've got going on and trying to advance the business, I think we'll be in that run rate for a little while here. It's probably not permanent. As far as the OpEx savings on the move, we will save one facility, but I wouldn't from a modeling perspective factor in net savings. I think you know, it'll be a little bit more expense actually once we get done with everything. The other facility that we're consolidating out of, we actually own.
I wouldn't build anything from a savings perspective in your model for that consolidation.
Mike, you can't model in if you don't have enough parking spots for your people. You know, parking in the grass or parking on the neighbor's parking lot. The facilities we had were, I'd say, minor league at best. How's that? To recruit people in, now we have a world-class place, well-lit, well-equipped, enough parking, big prototype area. We can actually fly drones indoors when we finish the prototype center. It's got high roofs. I'm proud to be sitting there now, versus before I used to be embarrassed to bring some people in to get interviewed here. How's that?
Can't put a number on that.
I would say, you know, especially as a finance person, it's hard to put any kind of numbers on this, but just having people in the same room, the collaboration's already improved just in a short time and can't value that, but it's definitely been powerful.
Sure. That makes sense. Can I turn to the orders for the W750? You've got your first purchase order. Can you maybe share a little bit of detail there? Is it more for a previous C1000 customer? Someone totally new? Can you share if it's the van or just the chassis cab?
Actually, it's not with a previous customer. It's with two different customers. We're not publishing, I don't think yet right now, who those customers are. We had a dinner 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 is 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 us their plan between now and 2025 is to convert 50% of their vehicles to EV powered systems. We're pretty encouraged by those opportunities right now.
Great. I also wanna ask about the split between the W750 and the chassis cab model. Are there any different impacts, financially? I mean, if you're not doing the upfit yourself, you know, there's probably a few thousand EBITDA that you're not going to be getting. But from a margin perspective, is it similar? If there's any kind of changes there between the two models.
You know, as you pointed out, obviously the revenue and the margin's a little bit less on the shift, and 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-$1.5 million range.
You mean overall?
Overall.
You said $1 million-$1.5 million. Okay.
Yeah.
All right. Well, great. Sorry, you were saying?
Thanks, Mike.
Yeah. Thanks so much, guys. Appreciate it.
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.