As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Stan March, Vice President, Corporate Development and Communications. Thank you, Stan. You may begin.
Thank you, Alicia, and good evening. I'd like to welcome all of you to Workhorse's Q3 twenty twenty four results call. Before we begin, I'd like to note that we've posted our results for the Q3 , ended 30th of September , twenty twenty-four via press release after the close of the market today. We've also filed our Q3 10-Q. You can find the release and an accompanying presentation in the Investor Relations section of our website, and we'll be tracking along with the presentation on this call. Joining me on the call today are Rick Dauch, our CEO, and Bob Ginnan, our CFO. For today's agenda, if you turn to slide three in the presentation, following my remarks, I'll hand the microphone over to Rick, who will give you an update on the successes we've made in our strategic, operational, and fiscal actions during the Q3 .
And then Bob will walk us through the financial results for the quarter. Then Rick will discuss our near-term priorities and wrap us up before we open the call for questions. Our disclaimer can be found on slide four, as some of the comments today are forward-looking and subject to certain provisions and are subject to risks and uncertainties as well. You can find the full disclaimer statement in our periodic filings with the SEC, as well as the earnings press release itself today. With that behind us, I'll now turn the call over to Rick Dauch. Rick?
Thanks, Stan. Hello, everybody. Thank you all for taking the time to join us today. During the Q3 , we've made important progress along several fronts here at Workhorse. Let's turn to slide five and jump right into the presentation. Commercially, we achieved a critical validating milestone in July, securing a three-year master framework agreement with FedEx. This is absolutely a game-changing accomplishment for us here at Workhorse. Let me put this accomplishment in a little bit of perspective. This new relationship, like most in business, has been established over an extended period of time. More than two years ago, we met with the FedEx EV team in Memphis. A year ago, the FedEx executive leadership team came to our plant up in Union City and met our operating commercial teams and drove our trucks.
A few of them even visited our Stables operation, where we test our trucks and operate them as actual FedEx Ground contractors outside of Cincinnati. This led to a W56 step van demo undertaken down in Memphis in Q2 of this year, which was fully successful. Our truck got one of the highest ratings that FedEx team had ever given to an EV company. This led to negotiations and the signing of a framework agreement for a three-year master supply and service agreement, which was followed immediately by the initial purchase order for 15 W56 step vans that we delivered for upfit in Q3. It's hard to overstate the importance of this agreement for an emerging commercial EV company like ours to become one of FedEx's approved commercial vehicle suppliers in the EV segment.
FedEx has publicly committed to convert their greater than 150,000-unit last-mile delivery fleet and ground support fleet to EV vehicles by 2040. A large percentage of those vehicles are what are referred to as P1000 cargo step vans across the industry, exactly the segment that we designed our W56 step vans to replace over the next one to two decades. So we've broken through. We got our first PO, and we hope to be growing. In October, we were selected as a Presidential Level exhibitor at the twenty twenty-four FedEx Forward Service Provider Summit in Orlando. We had a W56 van for the ride and drive. So rather than ship the truck down, we drove it to Florida. The trip was approximately 1,000 miles from our plant, and the truck demonstrated its robust capabilities driving through the remnants of Hurricane Helene across the Appalachian Mountains and through heavy Atlanta rush hour traffic.
Three unique and challenging tests for any vehicle, not just EVs. This showcase event has led to 75 new quote inquiries to date from FedEx Ground contractors across the country. As we announced a few weeks ago, we now have three firm purchase orders from ISPs for the delivery of seven vehicles in Q4, and we're working on converting some of those inquiries to additional orders in the near future. Our progress with FedEx, both at the corporation and with the FedEx Ground contractors, confirms that our product strategy centered around providing reliable, capable, and well-built products tailored for the Class 5 and 6 commercial market, coupled with our engineering, design, supply chain, and manufacturing capabilities, could produce a market-leading EV step van that would meet the needs of highly demanding and selective customers like FedEx.
We have done just that, and now we look forward to earning even a larger FedEx order in twenty twenty-five. In addition to our breakthrough commercial win at FedEx, we are also seeing increased activity in government-funded fleet opportunities. Just last week, we were awarded a GSA contract following a successful site visit to Union City, where the GSA audited and validated our production capabilities, our quality systems, as well as our product testing and inspection processes. This award was many, many months in the making, and now we have achieved a milestone that allows federal government agencies to streamline the procurement process for the W56. It opens up yet another important door for our go-to-market capabilities.
Obviously, we are closely monitoring how the recent Presidential election may influence or change the mandate to electrify the federal fleet in the coming months, and we'll keep you up to date as we learn more. At the state level, the Sourcewell contract for procurement in the category of Class 4 to 8 chassis and cabs with related equipment, accessories, and services for our W4CC chassis has resulted in a meaningful uptick in quoting activity. In the past 90 days, there are now five pending bids out for more than 300 Class 4 units at the moment, and our dealer network is pursuing 21 city and county quotes for a total of additional 44 truck orders. We were also approved by the Florida Sheriffs Association Cooperative Purchasing Program for local government and education entities in the South.
Finally, we have had successful vehicle demonstrations for two additional major last-mile fleets during the quarter. You would recognize their names. One in the industrial linen business and the other supporting package deliveries outside the United States. Despite the need to proactively conserve cash and reduce costs across the organization, which Bob will touch on later, we have managed to continue to expand our product line and grow to meet our customer needs and call on more customers. A lot of the engineering being completed is being driven by direct customer feedback after multi-week and multi-application field demos with our customers. And the customers like the fact that we're very responsive and we give them real support. Let me shift to slide six. Last quarter, I spent a fair amount of time outlining the commercial EV backdrop, corporate EV commitments, California regulatory dynamics, and the like.
The recent election has understandably focused attention on the clean tech space in general and the EV market in particular. So I thought I would spend a few moments discussing why we believe that integrating EVs into commercial last-mile delivery fleets is not a political issue where sides need to be taken. We know the political landscape around energy is shifting. Policies and incentives will continue to change. But the commercial EV sector, especially in the Class 4 to 6 space, has staying power in terms of shifting to EVs. We believe that in all the above approach to addressing the future energy needs in our country will prove to be not only pragmatic, but also the optimal way to address the multifaceted requirements of commercial last-mile businesses around sustainability goals, capital returns, operating cost reduction, and improved operating efficiency.
Unlike consumer EVs, commercial EVs don't rely on household budgets or access to public charging. They run predictable routes. They return to duty stations every night. There are measurable benefits from an operating cost, and they keep delivering value even if fuel market costs or EV incentive programs change. Route distances are known. Almost all of them are below 150 miles, with 85% of all last-mile routes operating between 50-100 miles, meaning the return to station dwell times for recharging are predictable and allow for the use of cost-effective Level 2 charging systems. We have proven this business model out ourselves at stables like Workhorse over the past 12-18 months as a FedEx Ground contractor. The reduction in operating cost is honestly a no-brainer. With miles per gallon equivalents for EVs running about five times higher than traditional internal combustion engine results.
Older trucks are five to six miles per gallon. EVs are running somewhere between 27 to 31 miles per gallon, depending on the route and the payload they carry. So they also are experiencing greatly reduced maintenance costs. You just don't have as many moving parts in an EV. And we see the savings in total cost of ownership generating a payback of between four to five years without incentives. Typically, these commercial trucks have a lifespan of 15 to 20 years. So four to five-year payback is not too bad. In states like California and New York, which have higher fuel costs and strong incentive programs, the payback period drops to less than two to three years, and in some unique situations, under one year. Financially astute fleet owners and business leaders understand that kind of financial math. Incentives are a welcome push.
They're not the only reason to adopt EVs. The facts are clear. EVs are cleaner and cost less to operate. Lower maintenance and fuel costs are real advantages that keep fleets running smoothly and improve overall uptime. And our electric trucks make the driver's day better too, with smooth performance, quiet, responsive handling, and vastly improved visibility both during the day and at night. And they meet both corporate sustainability and communities benefit from zero tailpipe emissions. Our trucks are built to last and perform, to be assets that companies can rely on, whatever the political or economic landscape. In short, the commercial EV sector is inherently more adaptable, delivering tangible benefits to businesses that want to control costs and reduce emissions no matter how the external or political landscape shifts. Moving to slide seven and turning to our commercial vehicle programs.
We have a track record now of on-time and on-budget product launches, and I chalk that up to having great people, great process discipline, and disciplined execution. We have an experienced team of automotive engineers, supply chain, and manufacturing professionals who know how to get things done, again, on time and on budget. We now have six products currently in production, with four new models being added next year, and a cab chassis version scheduled to start production in twenty twenty-six or twenty twenty-seven. We have complete coverage of the Class 4 to 6 step van vehicle market and have more than 30 upfit options available in the Class 4 to 6 space through our upfitting partners, such as SureFitters and Shade, who offer a turnkey solution to commercial EV customers.
The partnership launched with 13 pre-configured upfit packages available at Workhorse dealers, specialized for last-mile delivery and vocational trays for the W56 and W550 step vans. Additionally, full-body packages from Toughlight, CM Truck Beds, and Rugby are included for the W4CC cab chassis, with additional upfit packages to be added throughout the remainder of twenty twenty-four and into twenty twenty-five. Turning to slide eight, building on the success of the 178-inch wheelbase W56, we expect to begin delivering a 200-inch wheelbase version of the truck in Q4 of this year. We have already secured orders for the 208 step vans from customers in both the industrial linen and package delivery segments, who were impressed by the technical superiority of the W56 platform when they had their demos, but need a larger cargo capacity to meet their specific business needs.
Again, sometimes the trucks cube out before they weigh out, and this added 200 cubic feet helps some of the linen companies and some of the industrial supply companies. The extended wheelbase version of the W56 is seen in this slide with a custom version of a Workhorse's next-generation step van body with a side door. It spans 22 feet with a cargo volume of 1,200 cubic feet. I have mentioned before, but it's worth reinforcing, fleet customers are indicating that the product mix could be greater than 25% for the 1,200 cubic feet step vans, which will be built across and on the same assembly line and paint systems that we currently use for the 178-inch wheelbase, 1,000 cubic version of the W56. Moving to slide nine, we continue to be strategic in our approach to establishing and developing an optimum dealer and service provider network.
We are very selective in how we select dealers and match them with customers in EV-mandated geographical regions. We are working to ensure that our customers can take advantage of a wide array of available incentives, which vary by state and, in some cases, by city or even economic zones within a state like California or New York. We had a target to reach a total number of twenty twenty-five dealers in twenty twenty-four. We're going to tap the brakes on this numerical goal and focus rather on the best fit for our product portfolio, dealer skill match, and local market dynamics. In this market, quote-to-PO conversion effectiveness is more important than the number of dealer partners.
We have six to eight of our current 13 dealers who are really starting to understand how to sell into and provide the necessary services, file the proper paperwork required to win and secure orders in the commercial EV segment. California, by far, remains the most critical and commercially ready market for all of our trucks, as the W56, the W750, and the W4CC all qualify for incentives offered by HVIP and ISEF programs. Through HVIP, vehicle purchasers and participating dealers are eligible to apply for a base voucher of $85,000 per W56 purchase. If the vehicle is based in an ISEF zone, fleet owners can get additional incentive vouchers. In some cases, a fleet owner can get enough incentive money to generate a payback of less than three to six months on their EV investment.
With that, let me turn the call over to Bob to discuss our financial result and the recent steps we have taken to strengthen our financial position.
Thanks, Rick. Let's turn to slide 10. Before jumping into the financial details of the quarter, I want to briefly review all of the measures we have taken in twenty twenty-four to conserve cash and reduce costs across the organization. As painful as it's been for the entire organization, we have taken significant headcount measures and other cost reduction activities, with the company now operating at about 50% reduction in staff since the start of the year. We continue to take steps to extend our operational runway and manage our cash flow efficiently.
As previously disclosed, we also undertook other cost savings initiatives into the Q3 , delayed the W56 cab chassis launch, and completed the divestiture of the company's aero business along with other cost savings measures. To put a finer point on the impact of these actions and other reductions, we have reduced the cash burn rate, which is now about $3.5 million per month. We had additional successful financing this quarter and continue our discussions with the parties related to the sale-leaseback transaction for our Union City facility. Recent activity reinforces our optimism about our ability to drive additional purchase orders this year and grow our revenues. Importantly, we continue to have significant capacity remaining in our financing facility.
Turning now to highlights from the quarter on slide 11, sales, net of returns and allowances for the three months ended 30th of September , twenty twenty-four and twenty twenty-three, were $2.5 and 3 million, respectively. The decrease in sales was primarily due to the non-recurrence of a $2.3 million sales allowance reversal related to W4CC vehicle sales recognized in the prior period of twenty twenty-three and an increase in W4CC and W56 truck sales in the current period of $1.8 million. If you might recall, in the Q2 of twenty twenty-three, we recorded a $2.3 million reserve, and then we were able to reverse it in the Q3 of twenty twenty-three. Without the reversal last year, twenty twenty-three Q3 revenue would have been $700,000.
While we do not allow the return of trucks in general, we did agree to return eight W4CCs in the Q3 that required us to adjust our accounting policies. As a result, five of the W56 we sold and delivered in the quarter did not record net revenue and now have a full return allowance recorded until they are delivered to an end customer or the upfit process is initiated. Future sales will be evaluated similarly, and we established a reasonable history of sales and no returns. You can actually see the $1.1 million reserve in note 6 on 10-Q we filed today. We expect this reserve to be converted to revenue as the trucks are sold to end users. Cost of sales was $6.6 million in the Q3 compared to the same amount in the same period last year.
Cost of sales were primarily flat as increased costs related to direct materials to higher truck sales were offset by lower inventory reserves and lower direct and indirect labor costs of $1.1 million, primarily due to lower headcount as a result of employee furloughs during the period. Selling, general and administrative expenses decreased to $7.7 million in the Q3 compared to $11.8 million in the same period last year. The decrease was primarily driven by a $1.8 million reduction in employee compensation and related expenses due to lower headcount. A decrease of $1.1 million in consulting expenses and a $300,000 decrease in legal and professional expenses and lower corporate insurance of $300,000. Research and development expenses decreased to $2.3 million in the Q3 compared to $5.8 million in the same period last year.
The decrease in R&D expenses was primarily driven by a $2.1 million decrease in employee compensation and related expenses due to lower headcount and an $800,000 reduction in consulting expenses. So you can see in the Q3 , we had a full quarter of the cost savings as total operating expenses were down $7.5 million versus the Q3 of twenty twenty-three. Net interest for the three months ended 30th of September , twenty twenty-four, was $8.3 million compared to net interest income of $4 million for the three months ended 30th of September , twenty twenty-three. The increase is primarily due to $2.9 million in financing fees, $5 million in fair value adjustments, and this is offset by an increase of $400,000 in actual interest income in the previous period. Net loss is $25.1 million compared to $30.6 million in the same period last year.
Turning to slide 12 to discuss our balance sheet, as of 30th of September , twenty twenty-four, the company had $3.2 million in cash and cash equivalents, total receivables of $3.7 million, net inventory of $43.2 million, and accounts payable of $10.5 million. So far this year, we have invested $3.9 million in capital expenditures, primarily for the Union City plant. Note that there was $3 million in other receivables at 9:30 that converted into cash the next day on 1st of October . As we mentioned, we are taking diligent steps to strengthen our balance sheet and liquidity position so that we can execute on a product roadmap and deliver for our customers. Looking ahead, we are confident in our ability to generate additional purchase orders and revenue from our customers while strengthening our financial position. With that, let me turn it back over to Rick. Thanks, Bob.
Let me briefly discuss our near-term priorities, which are outlined on slide 13. Simply put, our key strategic priorities remain as follows. One, securing new orders, two, delivering world-class products and services to more customers, and three, advancing our product roadmap and expanding our product portfolio. To do that, we need to continue to find ways to effectively and efficiently finance the company until we can reach volumes that allow us to achieve break-even free cash flow in the future. We do believe that at least one or two larger national last-mile fleets are fully committed and have board-approved CapEx plans to move forward on their EV transition plans, specifically in California and along the I-5 Corridor up to Seattle in twenty twenty-four and twenty twenty-five. We are in contact with those customers, and we understand their plan, and we intend to earn their business.
In addition, we believe that government-funded fleets in California, the Pacific Northwest, and select cities in the Northeast are looking to place orders yet this year or in early twenty twenty-five for their first tranche of Class 4 to 6 commercial EV trucks. Finally, we continue to have meaningful discussions with federal government agencies on both product demonstrations and pilot purchase orders. Securing the GSA registration will help move these discussions towards purchase orders sooner rather than later, we hope. As I have said before, to generate revenue and establish a viable business here at Workhorse, we need fleet customers, whether they're commercial, private, or government, to buy trucks, and we are making progress in this pursuit.
We continue to see increased interest in the W56 and the W4CC as more and more of our vehicles are hitting the road, demonstrating in real-world environments to new and existing customers the value and reliability of Workhorse products, how they compare to earlier versions of EV products from other startups and even established OEMs that have disappointed early EV customers. The W56 is a true workhorse, no pun intended, designed to withstand the workload placed on them over a 15-20-year lifespan. Our near-term challenge is convincing and converting potential customers' interests into tangible, firm purchase orders. As we navigate the current market environment, we are focused on extending our financial runway in order to emerge as a leader in the Class 4-6 segment.
ATW has been an excellent financial partner for us as we work through our extended startup period and as we work through the slower-than-expected but eventual transition ramp-up in future EV commercial demand. With the recent Presidential and congressional elections now behind us and with expected clarity around both federal and state-level EV mandates in the near future, we can and we will adjust both our business and operating plans accordingly. Stay tuned. As we look ahead to the remainder of the year, we will continue to advance our EV product roadmap and work diligently to gain momentum on the revenue side of the business. We look forward to providing updates as we make progress on the sales side of our business.
Being a pioneer in the commercial EV space is hard work, and we need both industry and government leaders to live up to their public commitments on energy policy and fleet transition to clean technologies. We firmly believe that EVs are going to be part of all of the above environmental and greenhouse gas emissions and energy policy options as we look ahead. The sooner large last-mile fleets make the hard yet financially smart decision to start their transition to EV commercial vehicles, the better. Now we'll open up the call for questions. Operator?
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star 2 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 keys. One moment, please, while we pull for questions. As a reminder to ask a question, please press Star 1 on your telephone keypad. All right. There are no further questions at this time. I'd like to pass the call back over to management for any closing remarks.
Sounds like all the investment bankers are already at home, so we'll talk to them next time. Thanks for your interest in Workhorse, and we'll talk to you in the future. Bye.