Xos, Inc. Q3 FY2024 earnings call

• Delivered 94 units in Q3 2024 with growing customer and product diversity.
• Shipped nearly 12 units of the Hub product, showing rising demand for the mobile charging solution.
• In the StepVan business, increased strip chassis deliveries to improve working capital turnover.
• Delivered the first powertrain product to a Blue Bird school bus.
• Reached low volume series production with the Hub product, delivering to top-tier companies like Waymo, ABM, etc.
• Secured several million dollars in new incentives but faced challenges in incentive collection with over $25 million in backlogged incentive receivables.
• Improved inventory carrying costs through dealer partnerships.
• Reduced operational expenses, including facility-based expenses and headcount reduction to move towards positive free cash flow.
• Gio detailed efforts in reducing facility-based operational expenses.

In the third quarter of 2024, Xos generated $15.8 million in revenue, delivered 94 units, and achieved a gross margin of 18.1%. For the StepVan business, there was an increase in strip chassis deliveries relative to completed vehicle deliveries, which drives improvements in working capital turnover. The Hub product saw significant volume with nearly 12 units shipped by the end of the quarter, underscoring rising demand for the rapid deployment mobile charging solution. The Powertrain business delivered its first product to be utilized in a Blue Bird school bus. Revenue increased by 1.6% compared to the second quarter, and unit deliveries increased by 4.4%. The Hub product's revenue contribution isn't provided as a percentage, but its shipping is a key highlight, and the Powertrain and StepVan segments contribute to overall performance.

• Updated revenue outlook for the rest of 2024 to a range of $54.1 million to $67.6 million and unit deliveries to a range of 320 units to 400 units.
• Reduced the non-GAAP operating loss range to $42.2 million to $33.7 million, reflecting challenges like infrastructure and customer delays but also higher average selling price and improved margins.
• Expect Q4 to be active in delivering within the guidance ranges.

• Tariff risks from potential increases on imported components, with monitoring and alternative sourcing strategies in place.
• Delays from charging infrastructure and customer-related delays impacting business operations.
• Challenges in incentive collection with over $25 million in backlogged receivables.

Q: Can you talk about the opportunity on the drivetrain side?

A: The powertrain business has immense opportunity, leveraging Xos' intellectual property. There are beachhead markets like vocational vehicles, school buses (supported by EPA funding), and off-highway vehicles. Anticipate the powertrain to contribute 10%-25% of the top line revenue.

Q: Clarify inventory portion and parts commonality?

A: Raw materials account for about 70% of total inventory, WIP is around 21%, and finished goods is around 9%. The powertrain, StepVan, and Hub platforms share approximately 90% commonality in components.

Q: Opportunity in inventory liquidation?

A: Most inventory is relevant and applicable for current products. Steps like delivering strip chassis and common components help in working through inventory in the ordinary course.

Q: Tariffs impact on battery costs?

A: Actively sourcing components in North America, multi-sourcing to mitigate, and anticipating continued efforts to address tariff impacts.

Q: Working capital improvement on inventory and receivables?

A: Inventory turns are expected to step down with cost-out efforts and reshoring. Receivables from incentives are expected to see a significant dent in Q4 with the remaining collected in the first half of 2025.

Q: Convertible note maturity?

A: The convertible note with Aljomaih matures in the third quarter of next year, moved to current liabilities, and in conversations with Aljomaih for solutions.

Q: Energy credits activity?

A: This was the first time transacting credits, and anticipate periodic transactions in the future to improve margins and be cash accretive.