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| Statement |
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| These accomplishments required immense dedication from our entire team and provide me confidence that we will continue to deliver on our aggressive targets in 2024 and beyond |
| Compared with 2022, we grew revenue by 22%, improved our annual gross margins to near breakeven at negative 2.9% from negative 83% and reduced our quarterly operating expenses by 27% |
| On today's call, I will cover highlights from 2023 during which we generated revenues of $44.5 million, delivered 283 units and achieved positive gross margins in both the third and fourth quarters |
| In both the third and fourth quarters, we were able to demonstrate for periods of time, build rates in excess of 700 chassis per year |
| Our strong customer pipeline built on the past 6 years of direct sales propelled us to success with significant delivery volumes to establish customers like Loomis and UniFirst as well as new customers, including UPS and Canada Post |
| So when we talk about model mix, as you know, the Stepvans have seen significantly improved gross margin starting in 2023 and will further improve into 2024, are powered by Xos margins because of the associated engineering costs and the setup costs of building out those customers and that customer pipeline, the margin profiles are generally even higher in the 20% to 30% range, sometimes higher, but ultimately depends a lot on the customer circumstances |
| We also demonstrated that commercial EVs can be built profitably with the release of our gross margin positive Stepvan, making Xos a leader in positive EV economics |
| Our new Stepvan platform also contributed directly to our improved financial results, showcasing that Xos' commercial EVs can deliver attractive gross margins without the massive scale and capital requirements cited by many |
| These milestones remain rare accomplishments in the commercial EV industry |
| Our updated Stepvan platform delivers higher payload and range performance to our customers, while simultaneously enabling us to achieve our gross margin targets |
| We launched a new higher-performance Stepvan platform, delivered positive gross margins and sustained higher vehicle build rates than ever before |
| Our growing scale and reputation as a leader in the industry is starting to pay dividends and supplier relationships |
| Those changes, together with improvements to our gross margins, propell Xos towards our next company goal, positive free cash flow |
| Our steady march towards positive free cash flow is bolstered by our expected acquisition of ElectraMeccanica |
| So we do anticipate that it will have a pretty significant positive impact for us being able to stay within that range and hopefully stay at the high end of that range |
| Our anticipated acquisition of ElectraMeccanica further underscores Xos' unique position as a leader in fleet electrification |
| And the profitability of all the vehicles we'll deliver in this year will continue to improve as well |
| That will drive a little bit of improvement and then as we represented that model mix will continue to improve, and we anticipate selling a substantial portion of those higher-margin kind of vehicle configurations within the year that will ultimately lead to that improved gross margin performance in the year ahead |
| And then the second point around your question around new models, which is our 2024 model year Stepvan, we will continue to make improvements every year on the product both for improved customer experience, improved efficiency and durability and reliability |
| The team accomplished all of this while significantly reducing operating expenses over the year, which is a testament to our ability to deliver results in the capital constrained environment |
| Lastly, the revised Stepvan platform is translating into stronger powertrain sales |
| Our customers clearly demonstrated their growing demand for electrification, leading to our back-to-back record quarters in the second half of 2023 |
| In all, while the hub won't eliminate charging-related delays for our customers, we believe it will meaningfully improve the predictability of our Stepvan deliveries |
| We continue to believe that deliveries will be weighted to the second half of the year as customers race to install charging infrastructure supported by our sales team, who've gotten a strong start to the year |
| As a result of redesigned Stepvan and updated Xos Hub, we expect Xos to deliver positive gross margin in each quarter of 2024 |
| I firmly believe that Xos has selected the ideal entry point to the commercial EV market with our Stepvan and further believe the Xos will parlay Stepvan's success into other sectors as customer demand and infrastructure readiness grows |
| This reflects both Xos' improved cost structure from reductions made in 2023 and as well as increased deliveries of gross margin positive units |
| Xos sustained build rates underscore the Tennessee factory's future production capabilities and reflects the agility with which our team can quickly pivot and satisfy production demands without risking unhealthy inventory build-up |
| And we anticipate that with our continued delivery of 2023 and 2024 model year vehicles, our margin profiles will continue to improve, thereby reducing that number |
| Launching our gross margin positive Stepvan, growing unit deliveries and securing meaningful capital via our expected acquisition of ElectraMeccanica have prepared Xos to deliver strong results in the coming years |
| Statement |
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| Infrastructure continues to be the biggest issue that we and other OEMs experience in terms of delivering vehicles, growing deliveries period-over-period |
| And that was primarily driven the lower margins this quarter as well |
| So delivering to those customers at that time period is very difficult |
| Second, regulatory pressure, combined with customer incentives available in at least 10 states will continue to motivate new and existing customers to adopt EVs |
| Operationally, we pursued a series of difficult and aggressive cost-cutting efforts in 2023 that instilled financial discipline and rigor across the company |
| So I'm curious if we can kind of just isolate if there was something -- my impression is that kind of on an apples-to-apples basis, gross margins may have come down a little bit Q3 to Q4 |
| As noted last quarter, GAAP gross margin for our vehicle OEM is impacted by a range of reserves that combined with changes in the sales mix between dealer, direct and prior model inventory sales introduced higher levels of volatility in quarterly results |
| But I would say the majority of the delays that we experienced in that range are going to be attributable to infrastructure delays with projects that customers are deploying |
| So they came down a little bit this quarter |
| The challenge in that segment is that we don't always control the volume deliveries because we are a powertrain supplier providing a component to a final vehicle manufacturer or an OEM |
| But we -- it doesn't mean we have certainty around all of those dates as projects can experience construction delays, utility delays, building permit delays that can slow these projects down |
| Xos continues to be an outlier in the industry and a critical part of the electrification of commercial vehicles |
| But beyond that, we don't believe that the hub is going to solve all of our infrastructure challenges |
| Full year non-GAAP operating loss was $58.1 million and for the fourth quarter, $10.9 million |
| Correct me if I'm wrong on that |
| That continues to be the single biggest bottleneck or hurdle in terms of increasing deliveries |
| So there is still a little bit of variability |
| The positive impact of the acquisition is hard to overstate |
| With regard to the legacy units in Q2, we'll have less than 10 of those units to deliver |
| We do anticipate there will be growing volumes, although the mix, I would say, relative to our overall core Stepvan business is still relatively low |
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