Lordstown Motors pays millions in license fees
Workhorse bullish on truck maker’s future
LORDSTOWN — Lordstown Motors Corp. paid $12.2 million in licensing fees to its minority partner Workhorse Group to use the Cincinnati-area company’s technology to launch the Endurance pickup truck.
The payment is part of an agreement the electric vehicle manufacturers struck in November that gives, in part, Workhorse an initial 10 percent stake in Lordstown Motors in exchange for certain intellectual property.
Workhorse announced the amount Tuesday during its fourth-quarter and full-year 2019 financial results, during which its CEO was bullish on Lordstown Motors and the assembly plant it acquired from General Motors as it relates to Workhorse’s future.
“This complex and the workforce experience provides Workhorse with many options for contract manufacturing, assembly and engineering services for future Workhorse vehicle platforms,” CEO Duane Hughes said. “We are now envisioning LMC’s production volumes may further help decrease Workhorse component costs and engineering costs on our Workhorse specific platforms.
“Having an affiliated company with this level of automotive-production capacity, engineering expertise and supply-chain depth gives Workhorse an engineering capability and manufacturing footprint unrivaled in the commercial electric delivery truck manufacturing business,” Hughes said.
The three-year exclusive license agreement gives Lordstown Motors access to certain intellectual property for 10 percent of Lordstown Motors that is anti-dilutive for two years.
The intellectual property relates to Workhorse’s W-15 pickup truck — 6,000 preorders of which, according to the agreement, have been transferred to Lordstown Motors. Workhorse will receive a 4 percent commission of the gross sales price of each truck sold of the 6,000.
The deal also gives Workhorse a 1 percent license fee equal to the gross sale price of each Lordstown Motors truck sold for the first 200,000 units.
Lordstown Motors agreed to pre-pay a portion of the license fee equal to 1 percent of the aggregate debt and equity commitments LMC intends to raise. Once the prepayment is amortized over actual sales, Lordstown Motors will pay on a per-unit-shipped basis up to the 200,000 vehicle cap.
“This transition has tremendous value to Workhorse,” Hughes said. “We benefited by eliminating the need to raise and spend hundreds of millions of dollars to bring the aforementioned W-15 to market, which would have diluted our shareholders.”
The company reported fourth-quarter sales of $3,000, down from $21,000 in the fourth quarter of 2018, primarily due to lower volume. For the year, sales were $377,000, down from $763,000 the previous year.
It reported other income for the quarter and year of $15.8 million — the $12.2 million it received from Lordstown Motors and $3.6 million from divesting SureFly, an electric helicopter.
Workhorse had a net income of $655,000 for the quarter compared to a net loss of $17.7 million in the fourth quarter of 2018. For the full year, it reported a net loss of $37.2 million, up from $36.5 million in 2018.
Lordstown Motors continues to ready the 6.2 million-square-foot assembly plant to produce the Endurance with the goal of launching it by the end of the year. It plans to reveal the truck to the public in June at the North American International Auto Show in Detroit.