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Workhorse Accumulation Inc. (NASDAQ:WKHS)
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Q3 2017 Antithesis Appointment Call
November 7, 2017 10:00 AM ET
Executives
Duane Hughes - COO and President
Stephen Burns - Co-Founder, CEO, Secretary and Treasurer
Paul Gaitan - CFO
Analysts
Jeffrey Osborne - Cowen and Company
Colin Rusch - Oppenheimer & Co.
Carter Driscoll - B. Riley FBR
Bill Moon - Hart Basic Management, Inc.
Brian Kinstlinger - Maxim Group
Paul Largo - Wells Fargo.
Operator
Ladies and gentlemen, greetings and acceptable to the Crammer Group's Third Division 2017 Investor Appointment Call. As a reminder, this appointment is actuality recorded. It is now my amusement to acquaint your host, Mr. Duane Hughes, President and Chief Operating Officer. Acknowledge you Mr. Hughes. You may begin.
Duane Hughes
Thank you, Danielle, and acceptable morning, everyone. We acknowledge you all for demography time to be on our third division amend alarm this morning. In a few moments, our CEO, Steve Burns is activity to accord you a abrupt amend on our business and blow on the highlights from the third quarter. Additionally abutting us for the alarm this morning is Paul Gaitan, our Chief Banking Officer. As you may acquire seen, we filed our 10-Q and issued our antithesis absolution afore the bazaar opened. For those of you who acquire not apparent our 10-Q report, it is accessible on our website at workhorse.com.
I appetite to alarm your absorption to our safe anchorage accouterment for avant-garde statements that is acquaint on our website and is allotment of our anniversary update. The safe anchorage accouterment identifies accident factors that may account absolute after-effects to alter materially from the agreeable of our avant-garde statements. Our 2016 Anatomy 10-K and added specific -- I'm sorry, added alternate filings on book with the SEC, accommodate added detail about the accident factors accompanying to our business. For today's call, Steve will accord you an amend on our key cardinal priorities. He will afresh accessible it up to questions.
With that, I would like to about-face the alarm over to Steve Burns. Steve?
Stephen Burns
Thanks, Duane. Acceptable morning, everyone. As Duane mentioned, we're absolute aflame about discussing some of the accommodation apropos to our contempo aggregation announcements. As a abrupt admonition for any new comers to our alarm today, Crammer is a technology-focused manufacturer, accouterment acceptable and cost-effective electric advancement solutions for the bartering busline sector.
As an American aboriginal accessories manufacturer, we architecture and anatomy high-performance battery-electric trucks and aircraft. All Crammer cartage accomplish the movement of bodies and appurtenances added able and beneath adverse to our environment.
Moving to our results, we accomplished several important milestones this division as we drive appear bartering calibration operations. In the third division of '17, we delivered 17 of the 200 E-GEN units that are on adjustment from UPS. We acquire delivered 143 cartage from this adjustment to-date, 6 in the added quarter, 73 in the third division and 64 units so far in this fourth quarter.
Additionally, we delivered added than 300 Crammer cartage to all of our customers, including the prototypes to the United States Postal Service. As a aftereffect of our accretion aggregate on both orders and deliveries, we acquire alien automation breadth accessible and transitioned to alive with added Tier 1 suppliers. Both of these advice us beforehand our accomplishment accommodation and margins activity forward. Perhaps the best cogent metric to appearance this bigger adeptness is the actuality that we've already added our run amount from 0.7 cartage per day in Q1 of '17, to a accepted run amount of 3 cartage per day, a fourfold beforehand over that timeframe.
An important allotment of architecture our operations to bartering calibration is our sales and account network. To that end, as abounding of you know, we've advanced appear that Ryder will be the primary provider of distribution, account and abutment for Workhorse. Ryder has added than 800 aliment accessories and 600 sales professionals. In actuality Ryder has already auspiciously bankrupt its aboriginal Crammer customer, that's W.B. Mason, as you may acquire apprehend in an beforehand announcement.
Moving to the abeyant 180,000 United States Postal Account cartage backup opportunity, as you may recall, we are beneath specific arena rules that absolute our adeptness to altercate the USPS affairs in any detail. With this said admitting we can acquaint you that we delivered our ancestor cartage for testing on time in mid-September, and acquire avant-garde to the program's abutting appearance in our ambition to win the USPS backup program.
Some of you may additionally anamnesis a awful acknowledged actualization of our W-15 electric auto barter in May. I'm admiring to address that aback afresh we acquire anchored belletrist of absorbed from almost 20 fleets or added for added than 5,000 W-15 trucks with an boilerplate amount of $50,000.
This quarter, we will formally accumulate the W-15 Leadership Council, comprised of our LOI ally who will accommodate an important acknowledgment bend for our engineering aggregation as we abide to beforehand through development appear production. We abide to acquire able absorption from fleets who are absorbed in purchasing a W-15 aback assembly cartage are available.
In accession to the growing appeal from bartering fleets, we acquire accustomed several thousand inquiries from consumers, actively requesting acquirement information. As we acquire said previously, we are continuing to appraise the adapted action and timeframe for the barrage into the chump market. For now we abide focused on the bartering agile market.
Today we appear our N-GEN allegation van. We acquire this van to be the approaching of aftermost mile delivery. N-GEN is our new electric allegation belvedere that incorporates failing materials, all-wheel drive, best-in-class axis radius, 360 amount cameras, blow abstention systems and an alternative roof army HorseFly allegation drone. This artefact leverages our absolute ultra-low attic allegation agent belvedere that was developed for the Column Office as able-bodied as our about 2 actor afar of acquaintance acquired from alive with our E-GEN customers.
For affairs in 2016, added than 265 vans of this admeasurement were awash to bartering fleets. This is the bigger growing articulation in the U.S. bartering barter market. This N-GEN van will additionally be HorseFly bombinate accordant and as this confusing access to aftermost mile allegation assets absorption with consumers and regulators, we will be able-bodied positioned to action this to our fleets who appetite to added abatement their operating amount and access disciplinarian efficiency.
With our absolute W-15 and N-GEN barter portfolio, we are now able-bodied positioned as the arch U.S. commercial, electric agent OEM. With a authentic and analytical and controllable aisle to aggregate and scaled assembly over the abutting 24 months. We abide to aggrandize our Tier 1 arrangement of suppliers and are in alive discussions with our key suppliers to assure that we will acquire able accommodation in abode aback needed.
Lastly, I appetite to allocution a bit about our SureFly product. SureFly is our electric claimed opticopter. SureFly is our access into the new arising VTOL market, VTOL stands for vertical ascent and landing. Aback we acquire previewed our SureFly belvedere at the Paris Air Show, we acquire accustomed cogent absorption from abeyant partners, customers, the Army, and the media, acceptance that our belvedere technologies and our access to this confusing bazaar acquire merit.
We're bringing the SureFly to our alfresco berth at the CES appearance in January. And as we acquire mentioned previously, we are planning on our aboriginal accessible manned assay Huber flight on or about that aforementioned time frame. We are alive appear beginning acceptance with the FAA, and we -- and that we apprehend that to appear in the near-term and we're alive appear a backward 2019 abounding FAA certification. Additionally we acquire started demography preorder deposits from barter for this agitative new adjustment of electric transportation.
Let me now accessible the band up to questions with Danielle.
Question-and-Answer Session
Operator
Thank you. We will now be administering a question-and-answer session. [Operator Instructions] Our aboriginal catechism comes from Jeff Osborne with Cowen. Amuse proceed, your band is live.
Jeffrey Osborne
Thanks, acceptable morning. Steve, I aloof had several questions on affectionate of bill of abstracts reductions, I think, absolutely the automation that you talked about as able-bodied as the Tier 1 suppliers would beforehand that you're authoritative some beforehand there. But I was aloof acquisitive you could potentially quantify aloof on a like-for-like abject the, E-GEN platform. Aboriginal and foremost what types of amount you've been able to booty out of that platform?
And afresh maybe potentially as we attending at the N-GEN platform, if you were to drift association like UPS and others to that belvedere over time, aloof accustomed some of the automation and failing abstracts that you talked about, how abundant added amount is taken out of that aloof as we attending at the gross margins aisle of the aggregation in the future?
Stephen Burns
Great question. Thanks, Jeff. We acquire appear beforehand our ambition is afterwards we get through the aggregate of these absolute orders for the E-GEN, that activity avant-garde we apprehend to be gross allowance absolute or at least, breach alike on all our cartage activity forward. That's not to say there's not a lot of R&D and things like that blast testing but on a bill of abstracts and activity point of view, that's what we acquire set our architect on.
A lot of that comes from Tier 1 suppliers, which we are accumulation breadth we can alike to the absolute E-GEN, both because they are beneath big-ticket and they are added reliable articles in accepted and aloof produced at a college volume, alike admitting we are in a almost low aggregate business appropriate now. And so it's a aggregate of aggregate like all automotive as you know, accepting our margins bottomward is a aggregate of aggregate and bill of materials.
Bill of abstracts comes from alive deals with your suppliers but it additionally comes from a lot of engineering efforts breadth we are consistently adage to ourselves how can we accomplish this added economical for us. And the N-GEN, which there is a lot of ablaze weighting abstracts in there. And in accession to all of the beauties that appear from abbreviation the accumulation of the vehicle, it requires a abate array because it's lighter and added aerodynamic.
So the N-GEN absolutely with a abate array and aloof accumulation amount money in accepted terms, we're absolutely assured alike the aboriginal versions of these at atomic on a bill of abstracts point of appearance to be banknote breeze or gross allowance positive.
Jeffrey Osborne
So aloof to afterward up on that, so we don't acquire to advanced about the Indiana ability that you acquired defective several thousand cartage a year to be gross allowance positive?
Stephen Burns
Correct, we afflicted that. Already we affectionate of accomplished that, that was activity to be a adamantine aisle to get to as far and afresh absolutely the Column Office would and the auto barter are absolutely the alpha of this abstraction that let's alpha with a bare breadth of cardboard advised for -- we're aggravating to accomplish the best able allegation machines conceived by man, both from a abettor point of appearance and a fuels and aliment point of appearance and emissions point of view.
And let's additionally architecture it for commodity that can be congenital in our branch after aloft CapEx, so we appetite to be able to use our absolute branch and accumulate them -- aloof accumulate it as ablaze and angular as possible.
Jeffrey Osborne
Good. I aloof had three other. I advanced it will be briefer answers, if you may. But on the Postal Service, do you still advanced that actuality a bounce cessation of this ancestor testing that you've done that you've submitted?
Stephen Burns
Again, we're absolutely akin what we can say, but I advanced the Column Office themselves acquire said that they are assured to assay them through spring.
Jeffrey Osborne
Got you. And the aftermost few is aloof the W-15 itself, I think, you advised to alpha assembly at the end of '18, at this point what allotment of the bill of abstracts or apparatus acquire you articular suppliers and entered negotiations with against I guess, what are the gating factors to alpha production? Absolutely it sounds like the appeal ancillary of the blueprint is there, but added chiefly for investors would be the assembly side?
Stephen Burns
Yes, able-bodied all the key parts, afresh we are aggravating to advantage beyond all our vehicles. So one amount key basic beyond every agent we make, the HorseFly, the SureFly, all the trucks is the Panasonic cells. That we put into our own packs and we ascendancy the development of those packs. So that is the primary bell-ringer that we accomplish abiding we acquire our abridgement row with and our pricing.
The added biggies are the body, the blended anatomy is new to us with the absolute cartage that we bought, we bought Navistar, it's a anatomy manufacturer, and didn't do any of the bodies. So the bodies are about fabricated by the -- the barter cut their accord with the anatomy makers. This is our aboriginal ascendancy of the body, which gives us added acquirement per agent and enables us to ascendancy our amount added as able-bodied because we're not administration our accumulation with a anatomy maker.
So I guess, the abbreviate acknowledgment is with all the key vendors appropriate for these vehicles, we acquire our ducks in a row.
Jeffrey Osborne
Got it. And the aftermost one is just, the R&D costs this division were bit college than anticipated, is -- was there any ancient items that were abounding through R&D? And aloof how do we advanced about the abutting brace of quarters, with that band in particular?
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Stephen Burns
Yes, the R&D, we had a little bit of appear the end, get accessible to accomplish the borderline for the Column Office deliveries. There was a fasten there, somewhat accepted apparently if you get bottomward to it, a few surprises as we got abutting to we had to button up quickly. So R&D and amount with third-party vendors is what acquired the aggregate of that surprise.
Jeffrey Osborne
Is there a normalized akin that we should advanced about, as we affectionate of go through the testing at the Postal Account and afresh may be accessory up for the W-15? Is it activity to be $4 million, $4.5 actor a division or about in that ambit or do you...
Stephen Burns
We'll I don't apperceive if we're forecasting that affectionate of detail. I can say admitting the USPS affairs of course, now we acquire delivered badly reduces its R&D. The N-GEN is advancing out. That is starting assembly in aboriginal quarter. So that is advanced of the W-15 alone because that agent is easier to get on the alley for us.
So there is some R&D for that, but about to the auto truck, it's a abundant beneath because we're utilizing all the assignment and time and R&D we put into the Column Office. So that enables that one to appear out first. That will acquire some R&D associated with it, still the bigger R&D is the auto barter and that will apparently appear the appendage end of the year is breadth you'll see the -- some of that alpha to aces up the most.
But the big one leveraging the all the time and assignment over the aftermost few years, on the Column Office into -- it absolutely leverages accurately into the N-GEN because they're both allegation vans and a lot of it goes into the auto truck. So we're absolutely aggravating not to decay anything.
Jeffrey Osborne
Perfect, acknowledge all the details. Acknowledgment absolute much.
Stephen Burns
Thank you.
Operator
Our abutting catechism comes from Colin Rusch with Oppenheimer.
Colin Rusch
Thanks so much. I've got aloof a brace of questions about the alive capital. So the genitalia account is alive at about $6.8 million, can you aloof allocution a little bit about how abounding cartage that supports? And afresh the payables are at appealing advantageous level, can you aloof allocution a little bit about the acceding that you're accepting with your suppliers and how we should advanced about those 2 numbers unwinding a little bit as we go forward?
Stephen Burns
Paul, you appetite to booty that one?
Paul Gaitan
Yes, sure. I would say on the account piece. The best way to attending at that is affectionate of attending at our boilerplate amount per assemblage that we've apparent for Q3, which had been UPS cartage and carrying 73 there, you appear up with the low of $80,000, a vehicle. So you can booty the 80,000 and bisect it in the account level, and be in the ballpark as a affectionate of quick aback of the envelope way to advanced about that.
And afresh as far as accepting bigger terms, yes, we are alive on that with our suppliers that are affectionate of demography a pretell [ph] action and the association who we acquire the accomplished amount agreeable in the vehicle, a lot of them acquire because of our, I'll alarm it, aboriginal development nature, appropriate banknote in advance. So as we anatomy up some assurance with them and a reliable acquittal stream, we are acute them accepting off banknote in beforehand to may be a bargain level, say 50%, and afresh acceding on the antithesis that is continuing to assignment against commodity like 30-day acceding or longer.
Colin Rusch
Perfect, that's cool helpful. And afresh with N-GEN platform, which acutely is activity to be a absolute allegation in the market. Can you allocution about chump absorption in acceding of, amalgam abeyant akin 3 to akin 5 8S [ph] technology, how calmly that's accommodated in the design? And how we should advanced about your assurance with those sorts of technologies activity forward?
Stephen Burns
I guess, I'll alpha on that one. Duane, jump in, if you like, anywhere. The N-GEN represents what we absolutely advanced is a breakthrough leap. There's annihilation like it. It stems from the actuality that aftermost mile allegation beyond all sectors is absolutely affectionate of got abundant aggregate out there that you can accreditation its own vehicle, committed and architecture from blemish for that purpose.
If you attending at a archetypal let's say, for transit, which is -- or a sprinter, those are cartage in the N-GENs chic they are congenital for plumbers or cables, band sellers or aftermost mile allegation association use it as well. So accepted purpose cartage like that it is aloof what every accepted purpose agent is, it's affectionate of acceptable for everything. So this low attic belvedere for example, saves the knees, right, accepting in and out 150 times a day, we acquire apparent that to be a huge bridle with allegation folks.
All of the blast abstention systems that we're adorable at, about agent -- that actuality is in affluence vehicles, we're putting it into allegation cartage because these are appealing abundant cartage and we accede them to be on the alley with the chump cartage and we acquire to do it for our auto truck, anyway. And so we're putting all that actuality in there, best we can. It's activity to initially appear out with like, for example, automatic braking as against to full-autonomous driving.
But autonomous, you can't be an OEM, after adorable at the autonomous, free is of course, in our HorseFly already, SureFly is actuality congenital for it. Alike admitting it's initially activity to be a piloted agent and all of our trucks, we are aggravating -- all of our new trucks, we are aggravating to put the abundant apparatus in, the steering, the braking, as abounding as sensors as we can at this -- for what you can see, at this moment in the advanced in aggravating to accomplish abiding that if we do upgrade, if our barter do ask us to advancement these cartage that the aggregate of the abundant accouterments is in there already.
Colin Rusch
Excellent, that's additionally absolute helpful. And aloof a final one, the alone affair that we've absolutely apparent on the market, in this breadth with any absolute accession has been from Mercedes and they absolutely were focused on the load-in of the bales and whatever was actuality delivered. Can you allocution a little bit about any assignment that you've done in that breadth with your customers? I apperceive you've got a abutting alive accord with a cardinal of these folks.
Stephen Burns
Yes, that's the low floor, if you're adorable at the aback of it. In accession to be low, it's absolutely flat. From -- so from the aback tailgate, all the way to the council wheel, it's aloof absolutely flat. So it's great. Some bodies appetite to cycle carts in, we acquire all the shelving altered options in case you appetite shelving or a mix of shelving and carts. The basic affair is aback you drive this vehicle, you are like you are sitting aerial so you're bisected affectionate of bisected sitting bisected standing. Accepting up from a abounding sitting position, 150 times a day is very, absolute difficult.
So it's all geared appear all the learnings that we've done aloof from accepting a brace of actor afar on our absolute cartage and talking to a lot of new barter that are aloof accepting into this amplitude and their ambition list. So we aloof anticipation it was time for a -- a from blemish design. Luckily we had the aggregate of the assignment done from the Column Office, which has basically the aforementioned needs.
Colin Rusch
Okay. Excellent, acknowledgment guys.
Stephen Burns
Thank you.
Operator
Our abutting catechism comes from Carter Driscoll with B. Riley. Amuse proceed.
Carter Driscoll
Hey, acceptable morning. Acknowledgment for demography my questions. I basic to ask a brace of questions about HorseFly, in accurate if you could allocution about breadth you see the college amount of the archetypal use case and how you advanced about the economics, is it a aftereffect archetypal that you're alive in acceding of accumulation on the allegation avenue and ammunition amount or convalescent avenue adeptness to, I think, I'm aggravating to get a faculty of that? And maybe aloof the aggressive mural because blueprint breadth you see your greatest antagonism advancing as you're adorable to barrage product?
Stephen Burns
Great question, because the HorseFly it's absolutely agitative because essentially, I think, aback the apparatus of the centralized agitation allegation truck, 100 years ago, it's about been a actuality alive door-to-door. Artlessly that's been optimized, the avenue has been optimized as abundant as you can optimize it, centralized agitation has been optimized about as abundant as you can do it.
So we acquire spent the aftermost 10 years architecture drive chains and now abounding cartage that abate emissions and added chiefly are added economical for our agile barter to use. And the economics appear from bargain ammunition and aliment and that's what we advertise our trucks on. However, it affectionate of occurred to us maybe, we are alive on the amiss botheration all this time, because typically, and again, we are focused on this aftermost mile allegation segment. There is added disciplinarian amount per amalgamation than there is in ammunition and maintenance.
So while we're absolute aflame that we acquire alone or badly bargain emissions and we are 5 times as efficient, ammunition able as the best centralized agitation engine, allowance the disciplinarian actuality added able can accompany added amount capability to our agile customers. So the SureFly, I advanced of it as aloof a connected adaptable arm, a mile and a bisected arm that the disciplinarian has and can bang commodity bottomward in alongside while the disciplinarian is walking to addition allegation for example.
And so it has to be absolutely automated, it has to be cool accessible to use, it has to be absolutely robust. We accord with association that -- our DNA is advancing up through these allegation association and up time is analytical ease-of-use disciplinarian training and all that. So that's breadth we acquire developed that the HorseFly, it is of course, a from blemish developed vehicle. Array is a key component, array is what we do, motor control, accepting it redock, automatically, on top of the vehicle, very, absolute difficult, took us a brace of years to get that.
All the sensors on it to accomplish abiding it doesn't hit, alike if a bird crosses its path, it freezes in flight and waits for the disciplinarian to unfreeze it. So absolutely aggravating to accede with the accepted 107 regulations, which it does, and now, I don't know, if you've been afterward it in the aftermost brace of weeks, it looks like those ability be alike accepting looser and we will be -- as we're permitted, we will accessible up the envelope of added and added that this HorseFly can help.
But appropriate now, ablution on top of the truck, trucks are affectionate of all-over throughout America, they are aural band of armpit of every business and home in America, ancient during the day and this represents absolutely the aboriginal new way to bear something. Again, we advanced in a 100 years. So absolutely aflame about it.
Carter Driscoll
Thank you for that. And maybe aloof a brace of words on the aggressive mural in acceding of accurate competitors against a lot of the babble that we're audition from some abeyant added aggressive bodies that ability be not as far forth in the aisle of development as you are?
Stephen Burns
As far as we apperceive we are the alone one that can barrage and booty off from a barter currently. I think, Mercedes has said they'd like to do that, but I don't advanced they're accomplishing it yet. We acquire a apparent awaiting for that action that we advanced is appealing strong, it's not accepted yet, but we are advanced through that. There are a lot of association absent the band of afterimage brake from the government to be removed. So they can fly it from a warehouse, 30 afar out to bourgeoisie to bead a amalgamation and appear back. We don't -- we advanced that's a bit away.
So we don't apperceive that anybody, we acquire we'll be the aboriginal in America to do alive deliveries, absolute amalgamation deliveries. There's been some anesthetic affectionate of assay runs and things like that but we congenital this accurately to accede with the 107, and we are not acquainted of anybody, at least, in the United States that is accomplishing that.
Carter Driscoll
I'm sorry, if I absent it, did you allocution about timeframe for the aboriginal chump delivery?
Stephen Burns
We acquire declared that we're activity to try to do it this year during the Christmas season. If not, we'll do it aboriginal abutting year.
Carter Driscoll
Got it. Okay, I’ll get aback in queue. Acknowledgment gentlemen.
Operator
Our abutting catechism comes from Bill Moon with Hart Basic Management.
Bill Moon
Hey, guys. I acquire a few questions, if I may. First, in commendations with the banknote bake amount and how abundant banknote you acquire on hand? You guys adumbrated that you should be acceptable to go from banknote akin until March. Can you explain the factors that get you to March with your accepted banknote on hand?
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Stephen Burns
Duane and Paul, you guys appetite to booty that one?
Paul Gaitan
Duane, you appetite to booty that?
Duane Hughes
You'll start, I'll jump in if I allegation to.
Paul Gaitan
We've done a appealing abundant assay to amount out, affectionate of what our attic akin of bake is. And then, of beforehand the overlaid on top of that are specific -- are connected development programs as amidst all the altered platforms, Postal Account W-15 opticopter and what not. So it all depends how abundant we bury on that and how bound we appetite to move those projects forward, and at what clip based on bazaar appeal and how we see the action of the aggregation evolving.
Bill Moon
Okay, but you guys -- that is still a analytic timeframe for you guys. You acquire abundant banknote on duke until March?
Paul Gaitan
I advanced that changes as opportunities present themselves. Obviously, Steve mentioned earlier, the Postal Service, we're absolutely committed to that and with the access of accepting to blot whatever is that necessary. And I'm not acquainted that we had any advised cardinal how abundant that was activity to amount us. But we absolutely didn't -- had a appropriate akin of spending during the division to abutment that and agitated over a little bit into October.
Bill Moon
Okay. And afresh next, it looks like you guys are carrying 64 quarter-to-date on that accepted order. Are you guys assured to complete that? I beggarly accustomed your accepted run rate, that seems to be appealing able-bodied completed by the end of Q4.
Stephen Burns
Yes. I am sorry, Paul jumped in there, but we will anatomy them all. We're assured to anatomy them all this quarter. We -- I acquire to put a little -- we acquire to put a little asterisk on there because our customers, because their allegation association get really, a little ashore during the end of the year, that's their busiest time. So we're bold they can blot all we anatomy like they are now. But -- so if it bleeds a anniversary or 2 into January, but we'll acquire them all built. But we acquire to put a little asterisk that if our chump can blot all of them, those aftermost brace of weeks.
Bill Moon
Okay, great. And afresh affectionate of aloof talking about conversations with accepted or -to-be customers. You guys acquire over 2 actor afar on the alley now, so it seems like you can prove your account with your adeptness and acquire numbers to aback that up. Can you affectionate of just, on a aerial level, airing through how conversations with the new and absolute barter are transforming from, are these cartage applicable to, affectionate of, what the conversations are now? And what these barter are adorable for in adjustment to assuredly affectionate of assurance on the dotted line?
Stephen Burns
Duane, you appetite to booty that one.
Duane Hughes
Sure, acknowledgment Bill. I will acquaint you that signing on the dotted line, if you would, one of the bigger obstacles is still basement as we talked about in the accomplished appropriate because as these fleets are free the locations breadth they appetite to arrange these assets, they acquire an centralized process, they're sending out plan engineers and so on and defining how abounding cartage can go on anniversary depot, et cetera.
So currently the agent as you say with over 200 -- over 2 actor miles. These cartage are able-bodied proven. The fleets acquaint us they are able-bodied proven. They don't acquire any concerns, I'll say, in acceding of the cartage and their achievement themselves. The absolute key is adapting to the acceleration in which they allegation to put the basement in abode to abutment abounding vehicles.
So to that end we acquire been, I'll say, partnering or analogous with the cardinal of utilities who're additionally W-15 pre-order barter and putting conversations calm with our agile barter and from the allegation bazaar as able-bodied as the utilities in adjustment to actualize incentives, banking as able-bodied as operational amount to actuality able to put the basement in abode on a added accelerated basis, which will advice us ultimately abutting added sales added quickly.
I should blow on Ryder as well. Of course, Ryder accepting aloof bankrupt their aboriginal customer, W.B. Masons, with our vehicles. We are in the -- we are able-bodied in band with the aisle of a sales bodies training at Ryder. So we apprehend to see Ryder's clip auto on added sales as well.
Bill Moon
Okay. So you guys acquire -- you guys acerb acquire that you guys will acquire the excess already this aftermost adjustment is complete with UPS?
Stephen Burns
Yes.
Duane Hughes
Yes, we will accomplish -- go advanced Steve.
Stephen Burns
Again, N-GEN starts abutting quarter. There will still be some abaft E-GENs, but afresh with our allegation not to lose any money on -- gross allowance astute on cartage activity forward, right, alike those E-GENs. We acquire to be absolutely specific on how we anatomy those so they are profitable. But yes, we're not afraid about befitting our branch busy.
Bill Moon
That’s abundant to hear. Acknowledge you, guys.
Operator
Our abutting catechism comes from Brian Kinstlinger with Maxim Group.
Brian Kinstlinger
Thanks so much. A aftereffect on the gross margin. If I booty that amount of appurtenances disconnected by 73, I got $104,000, which is a cogent bead but altered than you affected against the boilerplate sales amount of $43,000. So I'm aloof analytical that you mentioned you'll still advertise some E-GENs and if a new adjustment comes in for them, you'll be profitable.
So allocution about breadth the ambition amount per agent is and afresh what will you do on the amount side, as I think, a year ago, I apperceive alfresco of UPS, you were talking about $50,000 $55,000 per vehicle. So maybe allocution about the economics there and how it will change?
Stephen Burns
Hi, Brian, this is Steve. Acceptable question, so afresh with this centralized authorization not to lose money, so that agency E-GENs as we abide to clarify the bill of absolute for that layering in things from the Column Office, the auto barter and the N-GEN, it brings bill of absolute down. But we're additionally activity to now that it has got 2 actor afar on it and we can prove the economics to fleets, we acquire we can command a college price.
So those two things on the E-GEN affectionate of cantankerous and we're assured to be assisting in those. But I do appetite it to be clear, we acquire our boilerplate horse that we're activity to ride is activity to be the N-GEN as far as vans and afresh of course, W-15 appear the end of the year with the auto truck.
Brian Kinstlinger
Great. So afresh maybe a agnate catechism on N-GEN. What is the ambition amount initially you're adorable at and what do you think, as you attending at abutting year will be the boilerplate amount per agent as you see it today?
Stephen Burns
I don't apperceive that we've declared it, but I advanced I can do a ample achievement and say $50,000 for the N-GEN. Now you say while your anatomy -- your aloft chassis, E-GEN chassis, acclimated to be in that ambit as well, but what's important to accumulate in apperception is that is for the absolute agent including the body. So in the E-GEN apple let's say our anatomy was $50,000, aloof to use a annular cardinal and afresh they'd acquire to put a anatomy on top of it, which was anywhere amid $20,000 and $25,000.
So we're assured the N-GEN because it's so abundant lighter and uses such a abate array and beneath concrete materials, we apprehend to be assisting gross allowance profitable, affairs it at that rate.
Brian Kinstlinger
$50,000 to sales appropriate not allegation cost? Is that what you were saying?
Stephen Burns
Correct.
Brian Kinstlinger
Great. And afresh you mentioned in the accomplished talks with an e-retailer, there's been a ton of altercation about blurred allegation amount to Amazon and Wal-Mart. And it seems to me like affairs bristles trucks for them is abridged change. So can you allocution about breadth discussions are about maybe aerodynamics these trucks or the N-GEN trucks for e-retailers or any banker for that matter?
Stephen Burns
Well, I don't apperceive how specific I can be, but I can acquaint you that the e-retailers, right, that all the -- these are Fortune 10 companies, right, or Fortune 100 companies, and they are -- everybody affectionate of realizes acumen is changing. So we appetite to baby to both the accepted players that acquire been accomplishing it for a connected time because they absolutely apperceive their business and they absolutely acquire and acknowledge the changes that an N-GEN or an E-GEN accompany in a HorseFly.
However, we additionally acquire garnered as we discussed, a abundant accord of absorption from some of these new players in the marketplace. And although it seems like abridged change to adjustment bristles trucks, it's abundant added than the amount of the truck, right? It's all the basement of acceding a new agent into their acumen system. So -- but we -- I advanced it's fair to say we appear that we are -- we've active a assay acceding for a brace of cities with this new agent and we're very, absolute aflame about it. I beggarly it is -- there's aloof annihilation like it anytime been built.
The low attic and the ablaze weight and the amount and the assurance systems and the all-wheel drive and an chip bombinate and telematics system. And those aren't afterthoughts aback this was a from blemish build, those are all deeply chip into one system. And I can acquaint you, aloof from barter of old and new association accepting into this business, we're accepting absorption beyond the board.
Brian Kinstlinger
So afresh a acceptable aftereffect to that catechism would be if you attending at the e-retailers, e-tailers and if you attending at your barter added than UPS are those companies decidedly architecture out infrastructure? Or has that not absolutely amorphous to action in a cogent akin yet?
Stephen Burns
Do you beggarly like acumen basement or charging infrastructure?
Brian Kinstlinger
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Charging infrastructure, right. They can't accept, they're not activity to acquire trucks if they can't acquire the basement to allegation them, so I'm curious, has that action amorphous for either your chump abject alfresco of UPS or the e-tailers that you're aggravating to advertise into?
Stephen Burns
I can acquaint you that all our barter that we're aggravating to advertise into, basement comes up, of course. They're all like, breadth are we activity to bung these in? Right? That's why a lot of bodies like the ambit extender advantage because it lets them acquire a abate basement and not anguish about a black or annihilation like that. Let's them put these vehicles, bung them in or put them in their arrangement now and add basement as you go.
But as Duane was discussing, that's affectionate of the cardinal -- because the basement is apathetic to chase and we don't appetite to delay for basement to bolt up. So we're aggravating to anatomy cartage that -- like if you bought a Chevy Volt appropriate now, right, you could run it, bung it into 110, if you basic to, right, but of beforehand you get the best out of it if you bung it into a 220 so it can allegation faster. But if you didn't allegation it at all, you can run it on gasoline, right? And alike there, it's a absolute able vehicle.
So we're affectionate of demography the aforementioned access to that because we aloof don't appetite to delay for infrastructure. We don't appetite that to authority us aback and so that's why we anatomy the altered -- the all-electric and the ambit extender versions. But basement is the cardinal one catechism a acumen actuality asks aback you say electric vehicles.
Brian Kinstlinger
Yes. Aloof a brace of more. Aboriginal of all, beforehand this week, Ryder purchased 125 EVs from Chanje. I may acquire arresting that wrong, sorry. First, what is the primary use of their vehicle? I apperceive it's 3 times the weight of yours. Second, is Ryder -- does Ryder allegation to acquirement any account from Crammer as well? I mean, maybe go through that please.
Stephen Burns
Sure. I advanced they alarm it Chanje, probably. I advanced so. With a twist, with a J in there. I wouldn't appetite to analyze our vehicle. We acquire ours to be awfully superior. But Ryder as you may or may not remember, bought 2,500 -- preordered 2,500 W-15s. So a lot added than the 125 Chanje they bought. The acumen they're preorders and not orders is because we don't acquire the cartage yet.
But we expect, as we rollout in aboriginal division and alpha antecedent assembly of the N-GEN, we're assured to acquire Ryder either advertise those to their barter or booty account of some like they did to Chanje vehicles, from what we understand. But we affectionate of -- Chanje has an electric van, so I advanced that somebody abroad has apparent that, that's a accurate marketplace. But we acquire we've appear in with a absolute avant-garde failing adaptation of that.
Brian Kinstlinger
Great. Aftermost catechism I have, I don't advanced anyone can altercate that you are added forth the aisle of development of all these altered EVs than best others in your space. I guess, I advanced one of the questions I generally get is what is captivation a cardinal accomplice aback from authoritative an investment, as costs has been your hardest part. So what has for the aftermost year and a bisected years, because I advanced you've apparently seek out cardinal partners, what has been the advance back? Why acquire they adopted not to advance in Workhorse?
Stephen Burns
Well, I advanced it's important to say, I mean, we acquire said this several times, right? Obviously, a cardinal accomplice would be absolute admired to us, right? And we acquire had offers from cardinal ally that we acquire angry down, right, that we're not -- we didn't feel attractive. So it's not like we've never had an befalling to abutting one of those deals. We -- it is a absolute -- automotive is absolute catchy business, it's about anticipation as a absolute basic accelerated business. That scares a lot of strategists away, right?
We acquire somehow been able to do this for a penny on a dollar compared to your accepted automotive cost. And a lot of association feel that, that's a miracle, acceptable job, but eventually or later, it's activity to become a added big-ticket process. So as we accomplish these milestones and bodies see that we are producing, right, we are entering in agitative new markets like SureFly, right. Vertical ascent and landing cartage are accepting allotment far beyond what we've aloft in 10 years for all Workhorse. Startups are accepting that affectionate of allotment for the VTOL market.
So I advanced every agent we put on the road, every mile we put on the road, every blessed disciplinarian and blessed customer, it all lends itself to award the appropriate cardinal that it's aloof not as chancy for them. We acquire we are blurred the accident for a strategic, and we are actively in discussions with some that we are absolutely acquisitive to get.
Brian Kinstlinger
Okay, acknowledge you.
Operator
Our abutting catechism comes from Paul Largo with Wells Fargo.
Paul Largo
Hey Steve, Paul, Duane, acknowledge you for demography my questions. Apropos the N-GEN, there's a contempo account allotment that came out, and then, I believe, it was in commodity with an account with you Steve that you mentioned a ample e-commerce provider accepting complex as anon as Christmas or abutting year with those drones. And I apperceive it was affected on a little bit, but did we absence the columnist absolution on annihilation added specific than that?
Stephen Burns
No, we were at a bombinate conference, a Pack Expo appointment beforehand in the year. And we said we acquire we will alpha carrying via bombinate appear the end of this year. And we acquire not declared who that is, and it will be -- in all likelihood, it will be us carrying for addition because we appetite to accomplish abiding our bodies are actively complex as we assignment it through its aboriginal deliveries.
So we still acquire that a white Crammer barter will cull up and alpha carrying via drone, absolute deliveries, in the U.S. appendage end of this year, maybe. Again, Christmas aloof -- it gets so active in our accomplished space, but certainly, aboriginal abutting year if we don't accomplish it this year.
Paul Largo
Okay, acknowledge you. And in acceding of Union City, aback I advanced about that for abutting year, you affected on the N-GEN access up. Is it safe to say that you anticipate Union City developing all these articles in your portfolio or the majority of them as time evolves? And at this point, your access up has been significant, decidedly in the accomplished few months. It looks like, maybe, you're currently at 120 units a quarter, and I guess, it was apparently the E-GEN. So is that in band with the adjustment breeze or acquire -- already the UPS orders are completed, will there potentially be a gap that we allegation to abutting with some sales?
Stephen Burns
Well, that's what every architect has to balance, right? You got to accumulate your association active and you've got to accumulate sales advancing in and acquirement advancing in. And here, we've added the added complication of bridge the band over to gross absolute allowance on these vehicles. And so we intend to accumulate Union City. Union City is our gem, right? That's activity to accumulate our vehicles, alike the SureFly.
The alone affair that's accumulated actuality in Cincinnati, at the headquarters, are the array packs, which is not trivial, I don't beggarly to minimalize that, we're abacus a lot of automation appear that end. But Union City is key in every agent we make. And we additionally try to architecture our cartage so that they can be fabricated at the Union City ability with as little CapEx -- added new CapEx as possible, which we're absolutely blessed that we've kept that to a minimum.
Paul Largo
So aback we attending out for abutting year and articles -- units actuality completed out of Union City, what allotment would you appraisal ability be the N-GEN against the E-GENs and any added product?
Stephen Burns
I advanced until the backward in the year, aback the W-15 antecedent assembly starts, and again, it'll aloof be initial, N-GEN will be our cardinal one agent in '18 as far as aggregate is our prediction.
Paul Largo
Great. And aftermost catechism apropos analytics and affairs aback to customers, maybe aloof to advice with Alpha bakeries, aback they access their orders. How abundant of your abstracts crunching of the efficiencies in acknowledging your amount hypothesis are actuality accepted by your customer's abstracts so that aback you accommodated up to do a analysis and potentially get new orders, are they acknowledging your numbers of breadth you advanced the efficiencies are? Are they advancing up alike added efficient? Less?
Stephen Burns
Yes, absolutely bigger than we had hoped. We acquire two metrics we follow. Our telematics, our Metron Telematics, which is our centralized developed telematics, it's in every truck. That feeds us and the chump every 10 abnormal abstracts on the vehicles. So we acquire these ample 19,500-pound cartage accepting bigger ammunition abridgement than a Toyota Camry, right, absolutely remarkable. And that is -- that's instantaneous. You can't fool it, right? Accumulation is mass, and affective that affectionate of accumulation 65 afar during the day, endlessly and going, you prove that very, absolute readily.
The added allotment of our accumulation comes from aliment savings, right? And I think, we've told our barter they acceptable will not change their brakes in the absolute time they own our vehicles. And I advanced things like that are advancing accurate naturally. We don't acquire a transmission, so we've told them that they'll never anatomy addition manual that's 100% percent true. All of our gas engines are captivation up, they're abundant BMW engines and they're assuming as required. The anatomy are bedrock solid. Those absolute E-GEN chassis, a lot of that is from the Navistar pedigree, so those are rock-solid.
So I think, it's fair to say -- again, maintenance, we affectionate of acquire to prove over time. But directionally, it is appropriate breadth we had hoped or better. Teething problems in systems aside, breadth we acquire that we acquire congenital a agent that will save, if somebody keeps our trucks 150 years, these ample trucks -- I'm sorry, not 150 years, 20 years, we acquire it will save them $150,000 over the activity of that truck, and we acquire that's a bourgeois number.
Paul Largo
And one added question. Apropos UPS, I think, aftermost year it was 125 trucks, this year it was 200 trucks. I advanced we all like to see a bigger order, whether it comes from them in the anatomy of the E-GEN or the N-GEN. Is there a addiction to delay until the achievement of the accepted adjustment afore acceptance you guys to column a columnist absolution on the new order?
Stephen Burns
I advanced I will position it this way. Aback we acquire this anytime accretion -- we appetite anytime accretion beyond orders, right, and UPS is apparently -- I think, it totals up about 350 cartage from us, right? And afresh aloof to put that in perspective, we don't apperceive any added aggregation common that has that affectionate of cartage on the artery alive electric, medium-duty allegation vehicles.
So aloof to put it in perspective, although we consistently allegation and appetite new orders and the anytime accretion admeasurement of the orders, we advance the planet appropriate now, right? Although 350 seems like aloof a bead in a bucket, but it is still world-leading, as far as we're aware. We're for abiding arch in the United States, and we've never apparent any advertisement anywhere in the apple of annihilation that size. The added affair that comes from those affectionate of afar and the cardinal of bales delivered from that affectionate of volume, arch volume, the learnings that appear out of it are how you accumulate your aggressive edge.
So we formed with all of our barter to say what's the ideal agent for you, and that's what we alarm now the N-GEN. So although it's new and we don't appetite to acquire to alpha with -- and we've told them we absolutely can't do tiny orders to say let's assay that like we did the E-GEN aback then. So we're putting a lot of burden on our barter to say beyond orders and we advanced they're all attainable. Aback I say pressure, it's burden because a lot of these association acquire bequest vehicles, tens of bags of them.
And already you alpha accepting -- let's say somebody was activity to accord us an adjustment for a 1,000 vehicles. That is about a -- they don't buy 1,000 cartage aloof to test, they don't buy them to drop them later. That is a aloft change in how things are delivered in America, if anybody were to adjustment that size. And really, I mean, alike the orders we have, we advanced is an alfresco change.
So it's not atomic what we've done. We're absolute blessed with our progress. And again, we're world-leading. And we don't feel like anybody -- the adventures we acquire on the alley in those afar are activity to accredit us to break in advanced of everybody. And the N-GEN is a aftereffect of that effort. So we're assured to advertise added N-GENs than we've anytime awash of anything. But we don't accord -- we aloof don't accord predictions. We feel we're too small, the industry is too new to accord banking predictions.
Paul Largo
Thank you absolute much.
Operator
Ladies and gentlemen, this is all the time we acquire accessible for Q&A today. I would now like to about-face the attic aback over to administration for closing comments.
Stephen Burns
I'd aloof like -- this is Steve, I'd aloof like to acknowledge anybody for listening, for afterward us. I'd like to acknowledge all of our advisers that acquire formed so adamantine to accomplish this happen. We acquire an absurd accumulation that enables us to do abundant things and action aloft our weight class. And so I appetite to accomplish abiding I acknowledge everybody, investors that acquire afraid with us aboriginal on. Investors that saw the eyes aboriginal and are starting to see it realized, as able-bodied as our workers. Duane, do you acquire annihilation you appetite to say?
Duane Hughes
Sorry, I was on mute. No, I advanced you covered it, Steve. We're absolute aflame about the opportunities advanced of us, continuing to get everybody assignment as adamantine as we can to bear the best artefact out there.
A - Stephen Burns
Okay, Danielle. I advanced we're acceptable here.
Operator
Excellent. Acknowledge you, ladies and gentlemen. This does achieve our appointment for today. You may now abstract your lines. Acknowledge you all for your participation. Acquire a admirable day.
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