Earnings call transcript Q4 2022

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Operator

Greetings and welcome to Xos Inc.'s Fourth Quarter and Full Year 2022 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded.

At this time, I would like to turn the conference over to General Counsel of Xos, Christen Romero. Thank you, you may begin.

Christen Romero

thank for and us operator, you, you joining everyone today. Thank Kingsley are call Giordano Officer, Officer, Head with the Zion. Chief Engineering, Sordoni; and Scott of me Financial Officer, Hosting Operating today Executive our Chief Dakota Chief Afemikhe; Semler;

issued call, of we year on which fourth quarter reference the be our found during investors.xostrucks.com. this Investor Ahead XXXX Xos and press section earnings website of at its this can Relations release, will full call. This

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definitional historical includes the the Participants references to forward-looking and and GAAP metrics. earnings measures on performance to year fourth be release financial should of to not financial and any non-GAAP statements. refer XXXX press for also undue cautioned the reconciliations reliance full contained Please quarter non-GAAP in information put measures presentation company's measures. information comparable Today's to

I'll that, Dakota. turn With it over to

Dakota Semler

forward. today our growth XXXX Christen significant better discuss Thanks and Xos and that to initiatives call strategic XXXX to key position milestones in afternoon joining everyone successes going the and the and of good for

gross positive are offer insights taking units Sordoni, later On the to the into will year. call, steps our this Gio we margin deliver COO,

Followed Engineering, financial provide XXXX. and company's CFO, on quarter Scott the fourth by of cost van. Kingsley performance the of an Head for and reduction update XXXX who Afemikhe, share will step our will Next, performance upgrades the Zion, expectations

an as as detail progress infrastructure. commercial we over our projected in update are the on traction upcoming customers of provide seeing will well an milestones deployment of overview and will with charging on the I year the field the

We grow products; have to on first, deliveries fund third, the created a build These demand of are; a strongly strategy is to core improve are high three maintain and to tenants growth gross tenants scale positioned margins; capital our and ensure based access business. second, enterprise. healthy to and and we sustain that

I vehicles commercial for and that factors by drive customers grow. update primary replacement for supportive interest solutions. products sharing set broad levels; will three three, one, begin demand environments. are what and with Xos a of demand an continues from regulatory we number Number electric two, seeing on the are customers; the to as There strong number fleet

the in vehicle fleet replacement over we First, and Industry-wide supply past replacement fleet many discuss will delayed unable chain cycles. being maintain three to production years fleets resulted constraints levels. their normal

there result, purchase targets. as a for is customers have pent such allocations new As yet fulfill up designated vehicle many vehicles to with potential demand

newer emissions to Older fleet thresholds typical places commercial and are in for with vehicles. regulations or cases maintenance remain fleets vehicles operators certain beyond non-compliant this new operation incentive further for in acquire

set Second, diversification appeal line industries. the including of large wide as of customers we strong of the multiple a our a across experiencing are of to demand product many diverse result national customers,

of well with fleets two step serve serving top four as parcel Xos also country. of associated service largest world, we vans delivery rental companies most While in delivery, of the uniform the largest the as in beverage two of independent are providers US-based now the the fleets with parcel

Xos' value products. see their in segments in the customers respective This adoption rate amongst the leaders underscores

opportunities delivery, delivery, services. and food beverage ancillary We transport, uniform armored with rental, are customers fleet also additional new seeing in

XX-unit a step another large signed XXX backlog, Loomis, US. with from year including rental provider provider from across end, service order we of the scale over added we customer order a Subsequent XXXX, transport received orders our XXX-unit uniform multinational In to Alsco. van hundreds to locations

recently with mid-XXXX. van These have step of wide market delivery line year secured seasonal and capture take better We the cycles. as of for multiple time place appeal customers will orders application and to the of Xos set orders points the market over to model proof us and and end our unveiled more product XXXX the serve diversification manage allow

chargers for our van, infrastructure Energy location Boston. infrastructure works charging step in with charging our installation the demand for Solutions, Loomis installation strong our at across of services. operators up we're location and seeing With and We demand California comprehensive a their suite Xos our States. Ground infrastructure for wrapped for growing with Currently, solutions our team energy projects in United FedEx UniFirst an Montebello, multiple the chargers for recently has

Fortune is first have delivery the of first one our serving in we Relatedly, an milestone achieved use hub and XXX reliability our real-world Xos in already it where The delivered a usage DC rapidly deployable to mobile solution. customers data. quarter incredible charging is of collecting XXXX hub prototype partial Xos fleet and our and fast

capable single vehicles up no to five A is to minimal of in to charging upgrades and requires the charging site. hub one Xos location

customers. certain alleviate hear We are we confident delays our it infrastructure will from

as the to for will charger likely the hub's to cycle the in the begin builds the charging We discharging perform test underway as durability that a plan harsh currently endure. mobile environments a hub reliably mounted test where is and comprehensive well system ability and validate we to trailer have engineering

flexible role in believe and We will expect the this the scaling play that fleet accelerating a third continue to production the by to charging key hub hub begin year like mobile of electrification. methods of quarter

vehicles. Fleet role the in coming Last a to rapidly driving demand for a need passed Advanced Third, year, of electric of landscape significant commercial regulations in commercial examples are many changing fleets one playing that adapt Clean regulatory California the will years. rule, to

vehicles customers fleet the their of zero end our rule, Beginning will by lives useful of California-based medium XXX% emissions their the Advanced their of be to combustion XXXX. heavy-duty and from internal under several all required in at California XXXX, and replace remove units Fleet vehicles with Clean

will increase Additionally, to XXXX the commercial vehicle ownership on type. EV between XXXX depending and XXX% requirements

As and a purchase a short long-term. increase the and demand we in volumes anticipate result, in sustainable

commercial California. Regulatory including adoption New Massachusetts, incentives and are for amongst several Xos vehicles Colorado, markets, expand encouraging New incentive Pennsylvania, electric beyond York, approved attractive fleets vehicle Texas. programs in other Jersey,

nation We and customers are dollars the millions receive for already across incentives. state-level in seeing of qualify

of Reduction Inflation for electric or of up vehicles. IRA eligible the tax vehicle the are models passed in commercial offers late the companies all credit. federal-level, current the tax of IRA, the purchase On $XX,XXX Under for credit a XXXX, Act to Xos' regulations,

We customers supportive believe can the customer drive proudly regulatory attractive continued relationships, and the products that strong our for serve. company we and combined growth with tailwinds,

That perspective, our customers February members products. January business month over I spent of development the on vehicle team. and our the road one-on-one truest said, is conversations with and this industry our of from our by the of served visiting prospective the with pulse year current customers XX

future. our drive mix, the customers regulations Our demand expectations fleet critical needs, that to customer confirmed foreseeable for replacement a continue EV-friendly and will new diversified

translated through Now, I into to walk how would for growth deliveries demand and that XXXX. like

delivered we XXX half units to During the of second customers. XXXX,

resulted to new volumes, support delivery transitioning While in van and short forecasted orders model, Xos step guidance. ample our had our falling the demand parcel delays, seasonality infrastructure to of delivery in

increase for second year vehicle topline revenue units In $XX.X achieved revenue Xos in meet in unit did Xos projections in with XXX% $XX.X deliveries million the half. and total, and of revenue a million a substantial deliveries in of XXXX. However, increase full XXX from revenue, XXX%

and lines vehicle Our of underscores our positive generalized growing sales the rather of as growth services in diversification product revenue the alone an revenue indicator of importance revenue success. continued our than

COO, Sordoni, update. now over who will to With the our like that, Gio operational share turn I would call to an

Giordano Sordoni

the taken systems. steps this parts, Xos' manufacturing, areas the as ourselves focus we've remains second management, our Dakota. target near achieve gross reduction Thanks and infrastructure, year a the positive our cost such chain begin dedicated end and on task over achieving quarter. force goal Xos, Through margin procurement past the units operational charging supply in at to shipping of of multiple position to

our we facility. mentioned call, third during and our we've Tennessee our at Byrdstown, manufacturing focused production operations As quarter streamlined the

eliminate to our management with business. provides The we've freight inventory manufacturing practices. Byrdstown also been As to meet us our strengthen grow unnecessary capacity our needs continue customer result, a costs the and facility to able and

includes step chemistry. labor savings these of come in material introduced These Next-Generation XXXX will Scott several strategy by Step per cost recently van changes from diversified design battery production phosphate the reduce future. design $XX,XXX plan the Our shortly. focused and planned improvements our that reductions about lithium-ion the van, with detail to includes in potential more greater will direct costs have Part will cell that and describe more

developed into in vehicle. invest management the which integrate to continue We control our in-house and battery battery systems, the

I software and forward to nimbly continue teams cost as battery to we us battery a house and quarters efforts. more help rapidly our market. platform react look in coming details the our Our saving over scale sharing evolving

with of the and logistics vendors for on procurement As engineers to tandem efforts chain, our work in parts reduction continued and key supply and cost we've our as product.

become wiring parts, as delays the to We're the are Our with as logistics such these That terms also seeing of stronger high-voltage costs said, sourcing we growing us has container brand and partners achieve cost moving and past from scale in suppliers. low-voltage are we better benefiting over year. helping lower from harnesses. North some America fallen sharply certain still cables as China of the

delays unit of vehicle that XXXX, prevented of significantly charge taking Dakota deliveries customers encountered volume mentioned. in in from previously increased we additional infrastructure deployment deliveries as the With the

the remains industry. for a Infrastructure challenge

pleased infrastructure vehicle municipalities we're regulators, overcome to However, OEMs, investment and this and to attention see increased hurdle. from

operators seeing value management demand charger level are capture, incentive support the charging expertise when planning a growing in services. permitting, Fleet our upgrades. and hardware utility and and At Xos, for project layouts, OEM recognizing uptake of we're

State-level will in role. the likely market, charging constrain the will continue factors business improve and infrastructure to play our large will we the a over impact year. enacted that incentives for Though expect infrastructure to EV XXXX coming are federal commercial

or for X% tax item can the included $XXX,XXX credit with offer in to per Reduction Currently, Act. of credits XX states stacked charger tax equipment structure, installations which rebates for of charging a up new be Inflationary

As our part uncover where and they the customers team helping have a matter focused Energy no live. of them, fit best in-house credits to available on we Xos' dedicated incentives Solutions,

internal and our of our advance to steps to responsibly. business systems take to improve continued our data accuracy the help we've scale Finally,

for new designs Specifically, planning. production better tools we releasing in management, and manufacture, and have invested processes to inventory

the over to secular year. continue shift fleet we logistics in to remains with sector of clean solutions to Overall, and team expect both immense private we're has for accomplish net-zero what and a The been carbon from the public opportunity and proud able benefit the last economy.

of areas development, Now, I'll to new which Head of validation, over Zion, include testing, Scott to his engineering provide it lines. and an product on oversight, Engineering turn update product

Scott Zion

Gio. Thanks

As latest cost introduced upgrades mentioned. mentioned GEO important earlier, the and XXXX Van, Next-Generation that design which reductions to proud cost we deliver Van manufacturing already will recently vehicle; generation for our technology XXXX our improvements the year of includes major Step that particularly optimization the Step model

from battery production. and distribution Savings will improvements come come optimizations mainly additional cable continue with to design sourcing system, simplified high-voltage scale our as equipment, we routing and in to

of were optimization payload the a efforts pleased connectivity, longer capacity. band also with van the step release Beyond generation to range, we this team, and greater of cost higher

generation, customers the cost to vehicle, service and we also to Van manufacture provide a prior reducing XXXX higher expect while it. the to Step the performance Compared with

software enhanced an real-world diagnostics capabilities. and Regarding performance provides insight into advanced the the features with connectivity, subscription better Van with telematics The of an and over-the-air Xosphere updated customers enables our module remote service telematics engineering our Step teams for and module vehicles. XXXX

updates of software reduce software our vehicle and visits service the The addition rolling while over-the-year out features will of updates. and by customers, cost downtime new the reducing experienced the also important

to to updates forward, our a new without remotely van requiring step all be center. visit team to able service Going will service push a software

for specifications and When applications customers routes serving Van looking cost-efficient the to the larger a XXX-mile it two the routes. operating shorter the Step option for and range, XXX-mile launched for comes range option most XXXX usable battery options,

our The range expanding a include comparable beverage of mix transit, the cash-in offers more a EV. uniform In to Van the long step van linen previous XXXX customer configuration, XXX-mile and food that range and its in best usable is vehicles. commercial routes fleets service among Step available rentals, beyond our range and already the

for capacity models. support XXXX order the from pounds, larger in to In our payload a option rated of previous are battery gross weight XXX-mile the vehicle for sacrificing of step all customers, XX,XXX XX,XXX without vans pounds up

the the curb enabling creating were vehicle, weight chassis In a addition, several of efficient to to made reduce changes more the greater structural payloads and vehicle.

high-voltage frame within the vehicle. our [ph] coolant improving all lines have safety the standard We of rails, the packaged on and batteries

the with compact for body revised high-voltage range We to allows electronics power chassis a factor also the more the packaging of wider that into a form of configuration. be used

and centralized partnerships and develop also thermal to with suppliers our system. We the one critical deepened management system validate our of that

for step to not that pack, the able van These even longer improvements that range from vehicles weight with will mean battery in handle the be payload be larger, reduced. will increased

we In provide very recent made technology improvements more vehicles customers. are to and our to conclusion, about continue as high-quality to advancements efficient, to excited we our the we've we make look

Afemikhe. I'll now Kingsley pass CFO, to our this over

Kingsley Afemikhe

afternoon Thank Scott, everyone. and good you,

end -- whilst becoming ensuring As gross at making path products previously the the demand in margin for second our quarter XXXX, the the noted, quarter unit positive solutions. we're we our great by meet and also to strong level, second of the strides

financial I'll the our and XXXX. for year quarter performance now the for full review

to in $X year, full higher our and million revenue the For average prices prior grew Revenue of supported the step vans. $XX.X by deliveries year. was significantly selling from million both

price We which close our XX% took changes the fourth by average mix and the channel to we the units reflects year. quarter, increased selling in step van effects of last our the price over of actions

backlog as into deliveries. We them have expect add ASP into our continue we units to this trend higher slowed

Non-GAAP $X.X to $X.X million, was margin our for margin was million XXXX. of million $X.X to XXXX, For Gross compared sold cost in the in a million up XXXX loss in loss loss was million $XX.X XXXX. XXXX. gross of goods $XX $XX.X of year from compared a during million

in expectations third due last-mile our holiday busy and with the the million the we our compared Looking revenue call the was delivery specifically, line noted to in quarter million reflects quarter fourth at for $X.X was in sector. quarter, season our seasonality $XX the to which

quarter compared third the quarter. of during decreased compared loss during to to sold Gross million of $X goods quarter million $XX.X was of quarter. the $XX.X margin $XX.X cost in the Our previous million million in to the loss a a

achieve As continue including company optimization to by cost positive unit working a a the bespoke devoted to on this. gross across team, we a steps, basis team margin led strive for

first, The vehicle. as team's address we are efforts primarily areas; to the implemented building a inflation focusing mentioned ongoing of earlier, action pricing three and strategic have cost

as materials, costs, sharply and tariff Over increases two batteries in to costs due higher assemble years, risen costs labor past the vehicles. our to and have raw logistics, as well

This As a follow-on passed we customer build loyalty. includes elected honoring with growing customer our company, to and goodwill in customer to on by pricing helped drive being XXXX. minimal orders material customers decision our surcharges

have to enable ensure goals, that whilst the loyalty margin our to price sales action our taken maintain us our gross of to We reach prices since customers. continuing

our the the of number Scott improvements units. brings XXXX a as and that meaningfully of cost the Secondly, manufacturing outlined, reduce step will launch material of costs the van design direct

step of reductions, bulk efforts which in early into R&D XXXX. will over as the over are first rest a deliver There XXXX XXXX cost material These XXXX. of and further the we $XX per have our optimizations constituted van over step spending immediate of cost

in Finally, costs centralizing production throughout freight, year the steps year. These last reduce in this our Tennessee will as we overhead we labor, took ramp costs materially supplies. include indirect taxes, manufacturing

competitive to -- our centrally-located to Over we in up XXXX, plants and highly-operationally roughly of goods and cost XX% Tennessee. refocus reduce sold costs expect our on of these made these East manufacturing cost

engineering, and to success in going management, and expanding on this strong rapidly ability our sales industry. and innovate believe Xos' to forward chain laser-focus achieve margins position We in growing put will continued expanding demonstrates us supply across unique a

to maximize we XXXX as expect second deliveries of of part, release due to of the our our to weighted effects towards half to new the step In be van, the steps.

Turning to now expenses.

million expenses $X.X quarter Our of third fourth expenses third $XX.X offset in million million and by million partially fell expenses marketing quarter These R&D quarter. the to and administrative to million. driven compared higher $XX.X of general third a $X.X and the by quarter is to million to sales lower in in $X.X from reduction and were operating $X.X million versus expenses compared our million this lower $XX.X in the expenses $X.X

operating loss the range. the near half which non-GAAP the of million, second bottom year is for end guidance of Our $XX.X our was

have to expenditure and reducing year. over strong further the to We over see expect continue XXXX expenses very discipline operating

the to of quarter million increased has closed XXXX, We quarter net recorded for the cash, a versus and and with equivalents, securities Compared sale we $X end and cash million, restricted cash. marketable of available $XX.X of $XX.X debt of the million includes $XX.X fourth XXXX. inventory at million position of inventories which

basis, $XX the the inventories third quarter-by-quarter from quarter at during of a quarter. declined On end the million

or We to remain first the expect ease. quarters at inventory supply we continue and for the below levels see disruptions second chain to current as level

expected, improved As versus for operating quarter third $XX.X million scale activities, ample CapEx We our cash, user million in cash liquidity total the operations. used plus to quarter. $XX.X to in closed with the the quarter

volumes and to are get We options we additional as gross we'll grow to positive have confident margins, capital. raise

with Finally, for business up XXXX. wrapping our outlook

XXX deliver We to between expect units. and XXX

expect $XX to year. loss revenue, forecast $XX.X $XX.X and for operating million and we between of an generate We $XX million the and million between million in

I'll back Thank to that, you. now Dakota turn With to wrap-up. call the

Dakota Semler

Thanks Kingsley.

focus their operations. accomplished, success continue for commercial been remain seamlessly on as to helping track on has EVs much continue deploy we While long-term fleets to we across

strategic our customer pricing supportive goal growth a ourselves of level our step relationships, drive streamlining operations As I van. with with growth launching by taking unit regulatory earlier, manufacturing sustainable Xos. achieving gross continued mentioned actions to becoming for next-generation at for expected We continue are positioned tailwinds, strong our positive combined our margin to and parallel in

focus We to commercial our fiscally commercial to objective, will development electrifying we singular translate and mission responsible our success. fleets. continued company, dedication a product As believe focused on remain a

Fleets market product their with that is because long-term. are the a Xos they building to service for we customer-oriented Xos dedicated differentiator. and creating critical understand most needs work see to They on the company a the

like questions. the Operator? With now for that, line we'd open to

Kingsley Afemikhe

here, Hello, apologies. million I Thank was it's cash, CapEx earlier on Kingsley you. activities, operating plus misspoke the that quarter. over use in wanted note $XX.X a I total used of cash

Operator

begin [Operator Instructions] session. now will We the question-and-answer

Davidson. question our Mike of And go first from come D.A. ahead. Shlisky will Please

Michael Shlisky

here question. the first as thanks Good in deliveries if we're operating give quarter, cetera? and revenues, in to in spare can two first Anything start-off, et end Maybe went maybe the to how taking now be business here, days. for quarter here my drama the going we're just afternoon try would expenses, to -- us to to the quarter appreciated. And us you basically that

Dakota Semler

Mike, Certainly, context a Yes. joining little absolutely and for we you can today. of give call thank bit the

some As we've deliveries, continued customers. but have through in getting out quarter the that hurdles infrastructure trucks and played delivering quarter, in still made progress customers to have vehicles the pushed continued our we we've back of has face larger that to some

of delivery that Alsco quarter. actually which to the our Some additional as well like deliveries as spoke place during took publicly some we've about

see to, for to year, the is backend alluded as Kingsley the we What weighted. deliveries be are going

quarters and for first the the increasing to we ultimately growth be should progress see XXXX. continuing So, less with as quarter half than to year, in second products. demand like we saw of second much continuing make in the first backlog, shared and the -- the But

Michael Shlisky

Okay.

follow-up on there that just you maybe made then a comment just And backlog Okay. Dakota.

today? backlog good that already I XXXX, that us given cooperates, here announced at You what chain are in first Can you number already? of feel in tell part be And units least -- you might during backlog have to maybe the number a backlogs the guess XXX assuming supply XXXX what you publicly of what units about XXXX. do added the the of

Dakota Semler

Yes.

backlog the are won't to as the clarify, we've products. for I'll added our those be that So, delivering as year well. do vans. units exclusively -- just grow on that year demanding step are backlog -- for We We other to continued the this and well that those products XXX those we products wanting vehicles customers last have

it don't we to backlog, don't overall continue and sales but that demand metric, this to about guide that year-over-year year. products quarter-over-quarter we talk down we slow have the and for we to really grow seen and When anticipate

say we're van about of are lot rule, one that taking step I several Advanced providing product in just the be these the like seeing regarding operators some that's few the will in one of California responding place you're The thousands a that Fleet percentage electric customers thresholds state. of going the the spoke critical, thing fleets to is step hitting Clean and of the when those to trucks needs that van so regulations is have I meet those will fleet that an of particularly suppliers

Michael Shlisky

point for the question in outlook And Great. little same guess appreciated. the it's any any And firstly, that that about mix that to here have products, be HDXT follow-up And in products. quarter? how outlook? us MDXT the is XXXX business, non-step the on last the just of any MDH about of is a fourth van was going XXXX? -- the of sales the would you part in mix tell I and is That part the for the powertrain with there

Dakota Semler

Yes.

other into we've orders and our revenue that XXXX. this outlook previously into we We factored have for discussed do products full are that in the when talk year So, are like factored the guidance for powertrains, those MD backlog call. and about HDXT the not

then units. And directly to we're QX, two I'll speak let back looking as Kingsley to business to those

Kingsley Afemikhe

look Hey are that it forecast our vast at this step the in majority is vans. for and of you? a Primarily how includes of you hubs. -- powertrains, when step number units the vans, year, So, numbers also Mike, number

is number so net and net number In had year, deliveries of over of a on year. addition, addition, net also the that cancellations backlog additions backlog last we a that the --

Dakota Semler

more add Just wanted point. one to

we're contribution for margin the focus margin reduction the we business. make on to platform, of positive also vehicles point cost actually of we've that are a want most gross delivering year we're generating and As sure our where to continued at this

and anticipate profitable continuing QX, even those look in the on when so with at we're come. and there further in improvement we improvement detail that back direct of the call material were And see a some shared quarters vehicles the to we to we basis in at

Michael Shlisky

it. a back, taking one me for Maybe Dakota. big Got one just and last step maybe

suggest comments you at Some that certain in with prepared testing already of this made that of you're beyond customers, your kind point, here the phase. comments, the

In gone other it's words, two you've units, top haven't units truck are you've that XX gone test unit you head through official tests, supplier now don't then second the are of saying coming think through space. the EV in an and I off heard XX ever. anywhere in I customers of the our company. my else

a So, you of what convert program to a get number feel can calling for are you now fund are at and those to many you point? you customers and XXXX? just comment how in And just experiment a a customers that not considering supplier this or as that test might

Dakota Semler

commercial that of Yes, head and the large low equipment a and process in nail scales the have to small one tens scales then fleets with and procuring national demonstration, very absolutely. you a up slightly larger units. starts the on hit to hundreds fleets of to that and Mike, units risk-diverse a

or into on customers that that Loomis units hundreds exactly the of they're other the of of either think about several But to low the publicly into order coming we we first their the that have and phase second one can over order. talk is few relationship following past that's where they're and really are that examples years. planning I done

customers We there, many sophisticated to them. operations are that don't businesses recognizable thousands Fortune vehicles specific guide of the in but fleet them have of with that number are of

one about would proof that's of I we've value talked creating for as customers. points that our say So,

on reliability promise, show in them a fleet deliver to economics vehicles these is that every start ultimately unit to need and small across deliver promise, TCO we're the We day. operations test ultimately, then it scale and their on which doing they why a scale

Michael Shlisky

along. Okay. That's I'll you. great color. pass Thank

Dakota Semler

Mike. Thanks

Operator

of next go comes question from Our ahead. Sachs. Jerry Goldman Please Revich

Adam Bubes

Jerry Adam today. Hi. for This on Bubes is

Dakota Semler

Hi there Adam.

Adam Bubes

total about excluding When profit that year? hey. can talk maybe gross tracking And mid-XXXX you that unit-level wondering in you positive for as Just profit on we number? the just exit expect company be a clarify, profitability -- you could then positive, mean are in gross gross to the turning be or you does how wondering overhead

Kingsley Afemikhe

I can take Yes, absolutely. that.

the me talk to what so, we're battery bodies, chassis, of indirect cost of also the on costs direct there systems costs, are is as including a Let there, about on and the the basis, well unit we also that's the units. linked material labor all and the cost the the have the direct cost that

rent, taxes, the out expect. you flushing you freight, What will basically depreciation, all through. So, that inventory

that, about reserve, above financial see other for a and accounting are your there reserve adjustments, an in you Over or including a there NRV reserves E&O when unit-level, a are also which number you reasons, often of particular on an statements. then basis recognized GAAP

on a mentioned. the by of basis what quarter being gross those costs indirect the unit end to guided of on is a second positive we've so I inclusive And that

Following in talking we QX. were trending how that, up just a little about on bit

bake-in we've in that labor identified, units really And there's the today, direct the $XX,XXX over breakeven steps as -- material mentioned, mentioned of were the delivered van are direct when a to we XXXX. the Dakota improvements costs pure into As material XXXX you in QX. those we've the and of units look expect we the time on direct course labor about costs, step cost costs we and manufacturing first step number that as in other at that well the

company a it cash margin coming as we gross the where being journey is focus to our the on years. in is And positive flow achieving about think so is station a positive, which

Adam Bubes

So, Great. about can in wondering a for second? position helpful. you're flow Thanks. capital to cash your cash XXXX That's bearing And thinking shift through we how today?

Kingsley Afemikhe

the as we and When lags, operations costs, this the and costs absolutely. -- that costs, mentioned, there look action really direct at I material No, we've our overhead at taken. year, three I Yes. with look are the when there's also pricing

that our year. towards to well being we're as overall we really operating to. and come as margin this capital guided on expenditures, expenditures we operations fund XXXX really, the ample journey we've that down expect XXXX in being positive feel pleased significantly as will disciplined have as liquidity We operating We scaling into gross go our

Adam Bubes

much. so Thanks

Dakota Semler

Adam. Thanks

Operator

next Michael from Ward Please ahead. question The comes of go Benchmark.

Michael Ward

Thanks. dig I more. could numbers a production into Thank you. the afternoon if I wonder everyone. Good bit little just

with significant on is, step curious I the entered the And shifted about think XXXX one I'm is XXXX to next-generation a vans backlog backlog. the entirely thing model? to current you the

Dakota Semler

to entire they've move that increasingly afternoon. the great The over it. Good interested Mike. to new customers question. Yes, has shifted started not to been but we've backlog That's in a model, as model,

So, we those we're I performance vehicle would similar performance. better go that a to that's and maintenance better say customers, them a with ASP giving when

so most price, but when it more better to them money for customer, to performance driving offering something are the And ultimately, actual turning a and real-world save of going range, down. them and you not go same them

Michael Ward

Okay.

Giordano Sordoni

thing XXX-mile step And is add offering sorry some -- This of with excited. I'd also interrupt gotten that's Mike, range to Gio. to this the only is version a The the here. version XXXX we're and really new of model, the is van, that van this customers

that something like The and something ranges who that's for mix longer van really of more us enables or just we're new and interested excited folks on typically van are customer step step We be services in that's require to looking kilowatt-hours only industries do duty might diversified heavier uniform about. version XXX board, that away this folks delivery might in other the miles. parcel from

Michael Ward

switching think production the as ramp, the had XXXX look the do to issue? had off in release fall fourth you it an supply at Or production with somewhat sharp you quarter. a you And that you. additional version? And over was there that in mentioned I Thank

And it's Because it away. there's and as XXXX level sounds the of are reasons going to are the so QX XXXX in have accelerate at exit both quarter. like in we that pull limiting substantial customers so things going that the and looking are as you're and saw fourth What like the to in those production -- always is we a you delivery? that a backlog it risk -- -- maybe a sounds that you're deliveries QX similar

what to accelerate do wondering just going I'm accelerate productions, you're to So, deliveries?

Dakota Semler

that, happy Yes, to Mike. address

logistics is season one the So, across last-mile that peak say it QX that is year. I common with the the would is entire industry thing in

of some to million for packages million XX week following packages week. Thanksgiving like they'll FedEx go the our Ground, customers XX moving before So, the

an such delivered vehicles, becomes their like really a do onboarding they to uptick on getting with packages in training vehicles, in really new to anything on focused customers. it difficult those operations, drivers else so And the are business new

we can deliveries try is delivered at we to when get quarter weeks the becomes to six seven that, weeks of So, customers. that, or QX it to first After to busy where make six incredibly to and customers. look really eight the those vehicles

or of which all either traveling office. the with the are days, Along of out folks holiday

makes it So, vehicles delivered. it get difficult to of same number the

always seasonal during that's hits factor that So, QX. one

-- And mix, by having a a able diverse we are customer that. more to actually diverse mitigate

or peak customers aren't uniform mobile see same they seasonal going fleet rental in maintenance QX. company, like Some to that

builds ramp, vacancy. do anticipate continue. for vehicle that It to smoother body gives but -- builds try will bit a seasonal give a really us little we slot those will we trend And the that into always that it us and of customers a so

The to vehicles reason second deliver factor difficult charging similar about also is it's in charging see The same obstacles infrastructure getting delivered. in infrastructure. I'd we QX, talk

for for So, for offices and utility are studies, shut construction. ultimately, approvals, down permit interconnect

quarter through generally when infrastructure working for so commissioning People talk about charging are and there. just turning our customers, on less we and we see that less

a and one time So, QX seasonal of on lag obstacles a bit face of that little there's that the that was impact. into goes we

in QX. where it So, we that's see

Ultimately, cancellations. is make aren't seeing and to We're quarters. seeing sales QX growth those QX, but many through was continuing the we sales growing and really backlog through --

also need reducing transition vehicles because to still their environment emissions the their overall regulatory maintenance costs and of of seeing to a zero and incentives zero how energy it's costs. they're emission fleet and Folks the overall operating

Michael Ward

Okay.

that some that that year as be place because big the the next growing won't are of pains, So, an assume year charging after industry that of or issue? structures I the in

Dakota Semler

Absolutely.

XXX% things today not will about hub. solutions issue believe today. their the to build readily XX to into so infrastructure and One But like years. they're charging is next we fleet that we solving never XXX% today infrastructure and fleets The being of is we're even the the this up that five going and of reason expand talk of convert continue introducing an problem

it solutions more trucks up get really to mobile to hub build but more gap the always going plans. we We be their delay, original the like year-over-year. we'll incrementally smooth that adaptable there expect They're some the delivered flexible, offer, can able and per be to

Michael Ward

had of for any in capital. you those? And of release raising you discuss you. range a the Can you options Thank that Kingsley, mentioned

Kingsley Afemikhe

absolutely. Sure,

in If and and as in you look also business like investing we're on our we're assets receivables. scaling, our our inventory operations

debt grow assets. We are of scale. get right us we by range and make as discussions a that with we the We partner we sure in underpinned want providers to for those

which access. Over that, purchase still line of agreements we Yorkville, above equity has we have capital an is our access to untapped. with that It can and largely

positive and and capital capital to the focused stewards of also really there grow. So, we're really, growing getting margin, gross operationally, is we on are deliveries, sure making the

Dakota Semler

I thing that cases, customers customers in that customers generally take customers. on only several we many strategic product already add bringing building, some have who the on Mike, expense might to be we that large ask configurations or when those are to board. would is we of specifications share those in And and the not new we

to It's equity of initial into. commercial some enable us that those new asset-backed platforms. so those help And and an helps. conversations kind accelerate that financing it any also tap the line does into the costs not contribution certainly of that But offset engineering goes will nearly or

Michael Ward

Thank very much. you

Operator

Schafer Markets. of Donovan from go Capital Please ahead. comes Northland question next The

Donovan Schafer

renovations is first now, prior questions kind saw van some of any maybe model, like, having going my the it question, on was but approach But taking -- if And centralized this system. or battery, for for so of I We've just right for the thanks that. -- about the well, cooling reversal wrong I'm mentions noise. talking the step curious, guys, with a of I kind you're new and where on I'm want Hey liquid the here's hammering the something of okay, either ask background assuming got there's I'm cooling else. the to apologize I

cooling there something or engine the that. like for was liquid always maybe, So,

to reversal a liquid, So, I there? the is point guess, on a side starting air it -- just from kind as of battery from

Scott Zion

Hi, Yes. Scott. this is

are on the batteries. transitioning all are of have our Historically, liquid vehicle. cooled cooling We for the electronics to power step vans did liquid bands that

So, separate we basically three cooling loops. have

Now, cooling cooling then we have heating of -- the loop, heating electronic battery cooling and the and cabin. the loop, our loop we and also have

So, that our big previous transition is a from models.

Donovan Schafer

doing part Okay. realizing FedEx Gio of I And the I parcel XXX-mile it things think have a which was a before acceleration kind about the -- range now so then cycle vehicle, aggressive like light, UPS comment and as the air made the understand of cooling. is and and cooling on duty battery quite of you you or have delivery liquid do made was didn't not that, to what Ground, other appropriate it because deceleration

the duty I leading on you older models? liquid were weren't question that's to their those on is as cycle in step out with it and cooling them much there anything life of maybe you about is of of change prior batteries? using performance getting seeing my the generation guess is, or So, vans the cooling kind Or

Giordano Sordoni

Yes. Donovan. context, Happy a more to provide bit

and to systems deliver they well the and the vehicles powertrain as of really modules, cooling case on use parcel delivery that with did forced air continue cooling air So, batteries service actually design. those we quite well as

achieve One to to did out performance that actually the liquid-cooled volume of of air the cells and performance the metric cooling order a options. in was our gave lower design we some things spaced relative us the that

ultimately vehicle a overall -- sorry, of mount the improve does onto vehicle, battery and the to the broader this enable way system what performance that with somebody the liquid gravimetric volumetric performance can system on we do if deliver shift, to the they because a now, now enables range platform -- So, more has us vehicle performance of run is gravimetric cases. a the get higher a offers. packaging to more cooling But the now use on that want dual

Donovan Schafer

was that's in that and you on be was included part in And something That's website. on their being the see it that have on website. like the great. Okay, I -- the for vehicles actually catalog must New helpful. Program VIP it Thanks. Program. looking to I where paperwork everything the up not the That's HVIP And then MSRPs the included involved of program interesting in California into you Jersey think

that Just ZIP website leave want to take is if can there clarification Or by Program there's where does MSRPs markup just apply I astray a vary their check from state New there going any the kind kind to of more capturing there? -- curious if So, I -- double MSRP there if of myself am there's are Jersey from of incentive of you're half a -- whatever broadly? you kind the maybe give and and here, me something the is? I

Giordano Sordoni

Absolutely.

advantage of just cost factors So, there standard multiple aren't the that folks so are of the fees, on price go fees, ASPs of not that terms there vehicle, the to delivery there to vehicle. may want acquisition level are of they And incentive more a in competitive most different have but cost that factors discounts into the think these taking also in programs, tax a about price the fees, them as vehicle, large the price program. we level. all offer where we of competitive customers our servicing ultimately are end get But

say best quarterly or that the to when ASP when the ASPs would provide the reporting. actual rely guidance I information it is to on comes we

getting action and think land took. you where guidance went performance a full where indicator net So, to provided I back price price the up along saw year will And the to with vehicles as significantly up the customer. good we of QX, you at end for because look that's we a ASP if they XXXX for the

Donovan Schafer

line? overhaul about That's you Okay. kind of the do the where and some then facility hub kind helpful. in that like version doing the And you step Tennessee van and batches it also of you in new doing maybe something trailers, do Xos -- is more with of production and talking the then

I that the to can some version XX version like that chassis we so structural lines of the something that around having going did say, step XX may in way, way, mean, this rails, or training equipment involve run how everything's new between imagine kind van, even you old the and the the simultaneously? for from to we're this to done? going is I other Or vehicles now the okay, do switch moving it's over laborers changes, do

leads And the things to then and you Just kind conceptually or costs kind manage days how few over? impact like a think is there different of to switching lines? maybe product trying economics as switching of production that through does reduced you're of

Giordano Sordoni

is This Gio Yes. here.

the goes, the far and some the the XXX-mile van the are can platforms. batteries actually run the board, has van, extra really step different same on on step as versions XXX-mile in options so line. As just XXX-mile similar The those

the spec biggest vehicle, We do but to the week to batch much build Then of we build we that as having try switch a try the same something cost throughout that's week, we isn't can. in given all handle. can to

Tennessee. the a built as hub that but different design also separately. built and separately, quite far in It's goes, As that's

Donovan Schafer

how if just all market are and through Okay. that of one the question get the anything. to there's finance trying just understand the there's last could that and stuff turmoil would -- and to people I then and credit people flow because tightening And

vans, there's financing and purchase step primary mean, aren't kind I them I of step everything, on just these certain financing sitting your involved of is what just products customer step most to balances assume or base van curious your vans? of I I'm with account And amount checking in So, something? imagine selling a and large purchases?

those And or of rates asset-backed that? who securitizations kind seen facilitate I -- help changes, have the like main then turned do in a mean into any flow we lenders vehicle in And that through are space? something commercial interest get

Kingsley Afemikhe

thoughtful question, really really, Donovan. a And Yes.

different into two So, ways. it I'll break

customers. financing way is first The to offered is our

financing amongst Rabobank, As to part ago, which [ph] with we DLL of backed one announced to work a our couple largest years we offer financers, of customers. the of others asset is

also other as of work range a providers well. with We

that's our most for fleets a seen the increase rates financing, But a structured of of critical their acquiring an their of We part assets. very their have charged. right? slight part the the with they're fleet, customers very of acquiring transportation a It's financing, in critical asset who are

rates As the that execute in percent increases evidenced, there couple to going purchase. are of a there's of

of I In many about finance to raw sheet, a We in finished potential it cases, is of we was separate about talked talking financing materials slight on balance went our which kind in that, the that. get include what our backlog public. with fee goods. And assets the the some to components

there, as to get are And want right? funds as sure institutions work for non-banking right partner bank we well partners that that find the discussions we different play So, best been make space. a in to that We there institutions some using that number of us. there have in

that XXXX, at look of are couple really a things you clear. really, when Ultimately,

relative reduce to so Definitely was seeing inventory and XXXX all, us year. so a for in use that going fall. chain significant to this a of challenges of we're supply ease over levels and the we quarters, next revenue First of very capital lot expect to couple that's

and cost there guided these we've addition, on the expenditure as in we you levels well, quarter, come at expect In are look when being laser-focused well. we already operating to as down

Donovan Schafer

Okay.

Dakota Semler

year. When about have we the national customers you to we're this would I manufacturing. delivery add businesses about of with fleet large many for that are their own as one is products their thing service as financing, that Donovan, them just that their consider talk a customer talk utilize mix fleets, of seeing diversifying we

dollar their that credit equipment or the have through fleets. lines are their smaller and lines medium available sized own multi-multi-billion facilities capital credit companies to below publicly well access Many are of of either own to them that

focus And banks many or with management place on such or structures large facilities Fargo. have companies them FMCs Wells as of specifically in fleet financing or that equipment

it customers issues some sheet. their own off where in either these will those so credit have credit even below And cases, many customers finance can't And rarely they already to of market. that's access balance access

to larger issue continue it's those as customers diversify an to So, our not national accounts.

Donovan Schafer

rest very my take questions the offline. Okay. I'll Thank you. That's helpful. of

Dakota Semler

you. Thank

Operator

today. and teleconference. today's Ladies Those your are that questions we conclude for does you all thank participation. This have the gentlemen,

your You and day. wonderful have may lines disconnect a

Xos (XOS) 29 Mar 232022 Q4 Earnings call transcript