XOS Q1 2025 Earnings Call Transcript

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May 14, 2025

There are 6 speakers on the call.

Operator

Good day and welcome to the Exos Inc. First Quarter of twenty twenty five Earnings Call. All participants will be in a listen only mode for the duration of the call. And should you need any assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

Operator

To ask a question, you may press star then one on your touch tone phone. Please also note that this event is being recorded today. I would now like to turn the conference over to David Zlachu, General Counsel. Please go ahead.

Speaker 1

Thank you, everyone, for joining us today. Hosting the call with me are Exos' Chief Executive Officer, Decoder Semler Exos' Chief Operating Officer, Giordano Sorboni and Exos' Acting Chief Financial Officer, Liana Pobosian. Today, after the close of regular trading, Exos issued its first quarter twenty twenty five earnings press release. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results as well as commentary on the quarter ended 03/31/2025. Management's statements today reflect management's views as of today, 05/14/2025 only and will include forward looking statements, including statements regarding our fiscal year 2025, management's expectations for future financial and operational performance and other statements regarding our plans, prospects and expectations.

Speaker 1

These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results. Additional information about important factors that could cause actual results to differ materially include, but are not limited to, Excess' ability to access capital when needed and continue as a going concern and potential supply chain disruptions, including as a result of changes to or uncertainty around trade policies and tariffs. These are included in today's press release and in our filings with the SEC, including our most recent annual report on Form 10 ks as well as subsequent filings. We undertake no obligation to update forward looking statements except as required by law. You should not put undue reliance on forward looking statements.

Speaker 1

Further, today's presentation includes references to non GAAP financial measures and performance metrics. Additional information about these non GAAP measures, including reconciliations of non GAAP measures to the comparable GAAP measures, is included in the press release we issued today. Our press release and SEC filings are available on the Investor Relations section of our website at www.exostrucks.com/investoroverview. With that, I now turn it over to our CEO, Dakota.

Speaker 2

Thanks, David, and thank you everyone for joining us on the call. Q one was the start of a really important year for Exos. Over the last few years, we have worked hard to bring our costs down and make the business more profitable, while also strengthening our relationships with current customers and building new ones to drive growth. This year, our focus is pretty simple. Keep growing, protect margins, and manage liquidity with discipline.

Speaker 2

And while we are dealing with a lot of moving pieces, including new emissions rules, new tariffs, and a tough interest rate environment, we feel confident. Our customers trust us, our trucks continue to perform reliably in the field, and we've never been more focused on running a tight, durable business. In Q1, we brought in $5,900,000 in revenue and delivered 29 units. We actually shipped 60 units, but due to revenue recognition rules, we couldn't recognize revenue on everything right away. Some of that will land in future quarters.

Speaker 2

What's encouraging is that customer demand has stayed consistent. We are still seeing growing interest from national fleets, and while smaller regional operators are feeling the pinch from interest rates, they're also jumping on strong state incentive programs in places like California, Washington, New Jersey, New York, Massachusetts, and Texas. We continue to win new customers and grow the order book with existing customers. Now, let's talk about tariffs. We recently raised prices to help offset some of the costs of increases tied to the new tariff structures.

Speaker 2

Behind the scenes, we've done a deep dive into every part and commodity that's impacted, and we've mapped out exactly where we are most exposed. While there will be some increases in our cost of goods sold, anywhere from 10% to 30% depending upon the product, the majority of our vehicle value is still sourced and built in The USA. Over the next couple of years, we see a clear path to reduce that exposure even more through reshoring or resourcing. We're not waiting for this to become a problem. We're already planning and executing.

Speaker 2

The same goes for our Powered by Exos business. Some of the components in our powertrain kits are affected by tariffs, but we're working closely with our OEM partners to help shield their customers from those increases. Even with those headwinds, we expect that business to stay on track. One of the most exciting things we've done this quarter is launch the MD XT, our new medium duty chassis cab. This has been a long time coming.

Speaker 2

MD XT takes everything we have learned from building over 1,000 step bands, including the high voltage architecture, the software, and the supply chain, and brings it into a more flexible platform that can serve a wider range of use cases. We showed it off for the first time at the ACT Expo in Anaheim recently, and the response blew us away. Fleet owners say they love the design, they love the packaging, and most importantly, they see how it fits their needs today, not five years from now. There's a real market here. The total addressable market for medium duty chassis cabs in The US is up to 100,000 units per year.

Speaker 2

We picked this segment because it's a natural extension of what we already do. The core vehicle architecture is familiar. The range, battery sizes, and daily duty cycles are almost identical to our step vans. Our team knows how to build it. Our suppliers already support it, and most of our customers already operate vehicles in this category.

Speaker 2

It's also a market that's been ignored. Most of the legacy players are pricing their electric chassis cabs over $300,000 which has kept sales volumes low. Fleets are still looking for a more affordable, reliable option. And importantly, MDXD is designed to work with the charging infrastructure that fleets already have in place, whether it's level two charging or low power DC fast charging. Based on our experience, charging has been consistently been the biggest bottleneck to deploying EVs, and we continue to see that as a headwind in the Class eight space.

Speaker 2

But the Class six chassis cab market doesn't face the same constraints. These vehicles don't require massive battery packs or long ranges, so the infrastructure burden is far lower. That makes adoption faster and more scalable. There's a lot of attention on Class eight right now, but not folks are focused on making medium duty electric trucks work, and that's where we see an opportunity. Right after the quarter closed, we started a national road tour with the MDXT.

Speaker 2

We kicked things off in California, and I have personally driven nearly 1,000 miles in the MDXT just this week, delivering a hub to a customer in Fresno and towing another hub for demos all across Southern California. As someone who has been a fleet owner and a discerning truck user for years, I can honestly say this truck has blown me away. The ride quality, powertrain efficiency, and overall performance are on a completely different level compared to anything else in this space. Over the next few months, we will continue taking the MDXT on the road to meet more customers face to face with stops planned in New Jersey, New York, Tennessee, Texas, and Washington. We are gathering feedback, logging miles, and getting real world validation of just how versatile and capable this platform is.

Speaker 2

Early interest has been great. And while the MDXT is still moving through safety certifications and final validation, we're targeting a production ramp by q three of twenty twenty six. Looking forward, our focus as a company really comes down to three things. First, growth. We're committed to growing sales and delivering quarter over quarter.

Speaker 2

Second, liquidity. We've become incredibly disciplined about how we manage cash, and we expect to continue strengthening our liquidity position moving forward. Third, margins. We know how critical they are. As the cost impacts from tariffs become more clear and with the pricing adjustments we've made and our visibility into the unit economics of every vehicle, we are confident we can keep improving margin performance over the full year.

Speaker 2

These three pillars, growth, liquidity and margins, will continue to guide how we execute as we scale the business. Gio will now take you through some of the operational highlights from the quarter.

Speaker 3

Thanks, Dakota, and good afternoon, everyone. Our manufacturing, supply chain and engineering teams made significant strides in Q1, advancing our truck, mobile charging and powertrain product lines. The factory remained busy in the first quarter, while we kicked off builds for UPS and began delivering chassis to our body upfitter for that program, demonstrating our ability to ramp production in partnership with a marquee customer. Simultaneously, we initiated production of our electrification kits for Bluebird school buses, putting us on track to support safe, reliable electric transportation for school districts nationwide. I'm especially proud of the progress on our medium duty chassis cab offering, the MDXT, which came to life this quarter at our plant in Tennessee.

Speaker 3

This new product, which we recently showed off at the ACT Expo in Anaheim, leverages much of the same technology and components as our step van, and we plan to build it in our Tennessee plant on the same production line as our step van chassis. Bringing this product from design to demo so quickly is a testament to our team's agility and deep expertise across mechanical, electrical, and software integration. We plan to continue to test and validate this new offering as we work to bring it closer to production. For these reasons, we expect the MDxQT program launch and ramp up to be extremely capital efficient. On the cost and supply chain fronts, our teams continue to navigate an evolving tariff environment with a two pronged approach.

Speaker 3

First, we're working closely with customers, advisors and suppliers to identify alternative sourcing strategies to reduce the impact of these tariffs. Second, our engineering and procurement functions continue to execute multiple direct material cost reduction projects to help offset any potential tariff related increase as we grow and scale. We remain committed to building and growing our company at our flagship and our flagship truck and mobile charging production facility in Tennessee. Looking ahead, we remain laser focused on operational excellence. The team is focused on scaling our chassis and kit production lines, accelerating supplier diversification and pursuing further bill of material improvements.

Speaker 3

These initiatives are designed not only to cushion us against external headwinds, but also give us but also to drive long term margin expansion as we enter the busy delivery season. With those updates, I'll turn the call over to Liana for an in-depth look at our financial performance.

Speaker 4

Thanks, Gio. For Q1 twenty twenty five, our revenue was $5,900,000 or 29 units, down from $11,500,000 or 51 units in Q4 twenty twenty four and $13,200,000 or 62 units in Q1 twenty twenty four. While EXOS only recognized revenue for 29 units this quarter, as Dakota mentioned, we actually shipped a total of 60 units, including 31 additional strip chassis sent to our upfitter. These were part of our previously announced 193 vehicle order from UPS, and we expect to deliver them to the customer and recognize the revenue in accordance with GAAP standards in the coming quarters of 2025. Our cost of goods sold during the quarter decreased to $4,700,000 compared to $15,200,000 in Q4 twenty twenty four and $10,400,000 in Q1 twenty twenty four.

Speaker 4

GAAP gross margin during the quarter was a profit of $1,200,000 or 20.6 percent compared to a loss of $3,700,000 or negative 32.4% in Q4 twenty twenty four and compared to a profit of $2,800,000 or 21.2% in Q1 twenty twenty four. As a reminder, GAAP gross margin during Q4 twenty twenty four was significantly impacted by changes in our inventory reserves and write offs of inventory from our annual physical inventory count as well as obsolete parts. Non GAAP gross margin during the quarter was a profit of approximately $900,000 or 15% compared to a profit of $2,700,000 or 23.2% in the prior quarter and a profit of $1,700,000 or 12.8% in Q1 twenty twenty four. This quarter marks our seventh consecutive quarter of positive non GAAP gross margin performance. We remain committed to sustaining positive GAAP gross margin despite ongoing tariff headwinds.

Speaker 4

We've gained increased visibility into our near term tariff exposure and had implemented mitigation strategies we expect to take effect in the second half of the year, as Gio and Dakota discussed. Turning to expenses. Our Q1 twenty twenty five operating expenses were $10,500,000 compared to $10,900,000 last quarter and $13,000,000 in Q1 twenty twenty four. The 19.6% drop from Q1 twenty twenty four reflects the impact of our strong operational discipline in managing our costs while continuing to support key growth initiatives. Our operating profitability continued to follow a promising trajectory with an operating loss for Q1 twenty twenty five of $9,300,000 compared to a loss of $14,600,000 in Q4 twenty twenty four and ten point two million dollars in Q1 twenty twenty four.

Speaker 4

This was driven by ongoing cost discipline and several cost cutting measures taken last quarter, which included a reduction in our total workforce in October and temporary salary reduction for certain of our senior executives and was partially offset by lower volume, creating the decrease in top line revenue and gross profit discussed earlier. Turning to the balance sheet. We closed Q1 twenty twenty five with cash and cash equivalents totaling $4,800,000 Operating cash flow less CapEx or free cash flow was negative 4,800,000 this quarter compared to a positive $3,300,000 in Q4 twenty twenty four and negative $14,600,000 in Q1 twenty twenty four. Free cash flow this quarter was impacted by our inventory purchases to support upcoming deliveries later this year. Encouragingly, this was offset by positive working capital trends, particularly continued progress in accounts receivable collections.

Speaker 4

Inventory increased to $38,000,000 this quarter from $36,600,000 at the end of both Q4 twenty twenty four and Q1 twenty twenty four. Inventory increased due to our strategic purchasing to support upcoming deliveries. We are continuing to manage our liquidity position and expect it to improve in the subsequent quarters as we deliver vehicles in support of UPS and other customer orders, continue to improve accounts receivable collections and actively explore options for enhancing our liquidity. In the past few quarters, we have made great progress in collecting receivables from customers and from organizations helping to administer state grant programs by collecting a combined $10,200,000 during the quarter, dollars 20,900,000.0 during Q4 twenty twenty four, and $9,600,000 during Q3 twenty twenty four. Now turning to our outlook, we are reaffirming our full year 2025 guidance of revenue to fall in the range of $50,200,000 to $65,800,000 unit deliveries to be within the range of three twenty to four twenty units and non GAAP operating loss to be in the range of $17,200,000 to $14,000,000 With that, I'll turn the call back over to Dakota.

Speaker 2

Thank you, Liana. As we look ahead to the rest of 2025, we remain obsessively focused on delivering growth, improving liquidity and increasing margins. Over the past year, we've demonstrated our ability to run a lean organization while still maintaining a competitive product portfolio. We've also managed to build a robust sales pipeline and sort through unexpected events in the international supply chain. This adaptiveness and resiliency in the face of challenge is one of our strongest skills, And we believe our customers see this resilience as essential in this dynamic marketplace, driving long term customer loyalty.

Speaker 2

As we prepare for our biggest year yet, we remain confident in our ability to overcome challenges to build the most robust commercial electric vehicle manufacturer in our industry. With that, I'll hand it back over to the operator for questions.

Operator

We will now begin the question and answer session. To ask a question, you may press star, then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, you may press star, then 2. And our first question here will come from Craig Irwin with ROTH Capital Partners.

Operator

Please go ahead with your question.

Speaker 5

Good evening and thank you for taking my questions. So Dakota, I wanted to ask about the MDxT. It's nice to see the broadening of platform and obviously a lot of thought has gone into the investment here. Can you maybe speak a little bit about the parts commonality between your step vans and the MDX T and any potential incremental investment that has to happen in Tennessee before you launch production later on next year?

Speaker 2

Yeah. Happy to talk about the parts commonality, and thanks for the question, Craig. So first and foremost, we wanted to use as much content from our existing vehicle platforms really to drive the same reliability and the same durability out of this platform as we bring it to market. And that way customers have the same level of confidence that they do in their existing trucks when they're deploying this newer product. In addition to that, there's a lot of synergies that come from being able to tap into existing components that we're already purchasing the hundreds of units per year.

Speaker 2

We've already cost reduced them. We've done a lot of the validation work for federal motor vehicle safety standards or for other certification requirements that we have to meet. So it actually cuts out considerable cost, not just from the direct material cost of the vehicle, but also in the R and D and development process and bringing that vehicle to market. If you include the cab as a part of the assembly as compared to our strip chassis, the MDXT, from a value standpoint, shares over 90% of the same commodity components, meaning 90% of the cost of goods that go into that product are the same as what they are in the STEP van. And that's incredibly valuable for us.

Speaker 2

It means we have to carry fewer parts in inventory for service and aftermarket parts. It means our customer is already familiar with the platform. And it even means fewer hours of training in the aftermarket field with our service technicians and our dealer partners to make sure they know how to support these vehicles. So there's a lot of synergies there. And to address the second part of your question, which really speaks to the ramping cost, this is also the benefit of utilizing so much of our existing product portfolio.

Speaker 2

We have very little incremental investment to make in Tennessee. We anticipate that it will be less than 7 figures or even in the very low 7 figures range to bring this product to market, so not a significant amount of incremental CapEx. And most of the R and D work has actually already been done to bring these prototypes to the stage where they're at today, is going through those certification and testing procedures.

Speaker 5

Thank you for that. So obviously, you wouldn't have developed this product unless you had substantive customer conversations and indications of interest for the product, Customers that want that flexibility of a vehicle that's maybe easier to charge and eligible for local subsidies and other incentives that make it a credible product. Can you maybe describe for us the market development around this? What are potential customers saying? And what do you think a fair timeline is for us to expect news of initial orders?

Speaker 2

Yeah, absolutely. So I'll start and just address the actual market size. When you look at our strip chassis product, that market segment can sell up to about 25,000 units in strong year. So it's a relatively niche market in the overall 800,000 to 900,000 commercial vehicles sold every year in The United States. Obviously, it's a very concentrated market with a lot of those large fleet customers like UPS and FedEx that already buy our products, but it is still a niche market.

Speaker 2

When you start to look into conventional chassis cab products like the MDXT, that market can sell up to 100,000 units per year in just classes five and six, and so it's a much larger market to start with. There are not as many concentrated fleets that have populations of tens of thousands of vehicles like the FedEx's and UPS's, but there are still some very sizable fleets, several of which we've already announced as customers in the past, including Southern Wine and Spirits, R and D. C, and many others that run thousands of box trucks in their fleets every day in The U. S. We'll talk about more customers as we continue our demo schedule and get this vehicle out there on the road, but we anticipate that it will take some time to bring this pipeline and ramp it to the level of size that the Step Van is at today, but we do believe that eventually it could actually surpass the volumes of the Step Van as it's a much more broadly applicable product and much more versatile in the types of vocations and use cases that the product can can service and cater to.

Speaker 5

Thank you. My next question is about the 31 units for UPS that were shipped but not recognized as revenue. Right? The strip chassis for delivered to the bodybuilder and then to UPS. As we as we look at this, how do we approximate the the revenue for XOS?

Speaker 5

What would you suggest we pay attention to? I know there's pricing changes and that you're proactively managing your expenses here. But the ASPs this last quarter, I'm sure, were impacted by charge hubs and other shipments. So how should we think about the relative contribution? And is this something that we should expect to be evenly spread in the second through fourth quarters?

Speaker 5

Or is it possibly lumpy? Any additional color on the revenue recognition here?

Speaker 2

Yes, absolutely. So as we've shared in previous calls, with our large national customers that continue to place recurring orders in high volumes of tens or hundreds of units, we really afford them the most favorable pricing structures and agreements. And those are at the lower end of our margin guidance range. And in some cases, we'll even go down into single digit margins because we really value the relationship opportunity and the ability to work with some of the most discerning fleets in this industry that have thousands of vehicles to convert ultimately over to electric vehicles. So we're really working to earn that business.

Speaker 2

We don't provide specific margin level guidance or detail around certain customers, but as we endeavor to deliver some of these large volume orders, you can expect that margin profile to reduce quite a bit. But a lot of that will be offset by other products in the portfolio, whether that's our mobile charging products, some of our other step in configurations, specialty configurations. And I think as we look at delivering some of these large orders, there's going be a heavy concentration in Q2 and Q3. And then Q4 will round out with more of those smaller orders that are generally at the higher range of our margin guidance range.

Speaker 5

Understood. My last question is about the ChargeHub specifically. So you had it prominently displayed at ACT Expo, and I saw a number of interesting customers come over and talk to your salespeople at different points in the show. Can you maybe update us on the tempo of activity around the ChargeHub? You had talked about a production schedule that was pretty impressive.

Speaker 5

Is this product tracking with expectations at this point? I know it solves a bottleneck or problem for a lot of the other electric vehicle OEMs out there and the eager customers that many of them have. Any update on ChargeHub for us to help understand the contribution?

Speaker 3

Yeah, thanks for the question. This is Gio. We are really excited about the progress on the hub and I think we've mentioned this on previous calls, but we were kind of delightfully surprised that we've had a lot of interest and even orders for the hub outside of just our own truck customers. Of course, we built it to solve the charging problem that a lot of our customers experience where they want to buy trucks but struggle to get chargers installed, whether it's permitting issues or site related issues. And the hub really solves that by adding four DC fast chargers with very minimal impact to the grid or very minimal impact requirements.

Speaker 3

So it acts like a buffer between our trucks and and grid power. So a lot of interest in orders outside of just excess customers. We've not only have we continued delivering hubs, but we are also doing demos that could lead to larger orders later on this year and into next year. So we're still going full speed ahead with the hub and and things are going well. We're also looking at taking feedback from customers about other features they'd wanna see in the hub going forward.

Speaker 3

And we're starting to architect what a version two of the hub could be or what an additional or modified version of the hub could be that would allow to appeal to a larger an even larger audience than what we've already experienced with access truck customers, utilities, transit authorities and government fleets, even autonomous car fleets around the country.

Speaker 5

Excellent. Well, thank you for the update and congratulations on the commercial progress.

Speaker 3

Thanks so much.

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