Xos, Inc. ($XOS)

Good day, and welcome to the Xos Inc. First Quarter 2026 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to David Zlotchew, General Counsel. Please go ahead.

Thank you, everyone, for joining us today. Hosting the call with me are Xos' Chief Executive Officer, Dakota Semler; Xos' Chief Operating Officer, Giordano Sordoni; and Xos' Chief Financial Officer, Liana Pogosyan. Today, after the close of regular trading, Xos issued its first quarter 2026 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 March 31, 2026. Management's statements today reflect management's views as of today, May 14, 2026, only, and will include forward-looking statements, including statements regarding our fiscal year 2026, management's expectations for future financial and operational performance and other statements regarding our plans, prospects and expectations. 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, including, but not limited to Xos' ability to access capital when needed and continue as a going concern, Xos' ability to implement business plans and identify and realize opportunities, potential supply chain disruptions and/or economic downturns as a result of trade policies and tariffs or war in Iran and shortages of access to oil, energy or other key industrial inputs is included in today's press release and in our filings with the SEC, including our most recently filed annual report on Form 10-K and 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. Further, today's presentation includes references to non-GAAP financial measures and performance metrics. Additional information about these non-GAAP measures, including reconciliations of historical 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.xostrucks.com/investor-overview. With that, I'll now turn it over to our CEO, Dakota.

Thanks, David, and thank you, everyone, for joining us on the call. Q1 2026 was, by many measures, the strongest opening to a year in Xos' history and a clear signal of what this business is becoming. For a long time, we've described Xos as a commercial electric truck manufacturer. That description has become too narrow. Xos today is broader than that. We build trucks, we manufacture and operate mobile energy infrastructure with the Xos Hub, and we power vehicles for other OEMs through our Powered by Xos powertrain business. In Q1, two of those three product lines drove the majority of our deliveries, and the result was a quarter that looked different and performed differently than any we have reported before. We delivered 95 units in the quarter, including 63 powertrain systems for Blue Bird, 10 strip chassis supporting our partnership with UPS alongside record volumes of hub units shipped to customers across our commercial and municipal pipeline. Revenue came in at $11.2 million, nearly double the same quarter last year. Most importantly, gross margins reached the highest level in Xos' history. Liana will walk you through the financial picture in detail. The headline I want to give you is this. This is what the business looks like when execution, mix and discipline come together. Several things drove the margin performance in the quarter, and a few of them are worth calling out from a strategic standpoint. First is mix. The quarter shifted heavily towards hub deliveries and powertrain sales. These are higher-margin product categories than our truck business has historically been, and they're tied to the secular demand drivers, power, infrastructure and electrification. As we continue to diversify away from being a single product company and into a broader power and infrastructure-driven business, we anticipate maintaining a higher overall margin profile across our product portfolio. Second is cost discipline. We've continued to rein in costs in every product we sell and the structural improvements we've made over the last 2 years are now compounding. I want to be measured here. We do not expect margins to hold at this level quarter after quarter. Mix will move around. Some quarters will be heavier on trucks, some heavier on hubs and powertrains. But on a full year basis, we expect 2026 gross margins to be meaningfully better than 2025. And the structural drivers behind that improvement are durable. Cash management remained a high priority focus across the company in Q1. We delivered a substantial number of units while continuing to bring inventory down and managing collections with the same discipline we have applied for several quarters. That worked combined with the mix shift is what allows us to scale this business without scaling our cash needs. Now let me turn to the hub because it was the story of the quarter. We've made the decision to invest more aggressively in hub production capacity and hub engineering, and we believe you will see that show up in our results over the coming quarters. We have new iterations of the hub in development that meaningfully expand the products capabilities, and we'll be sharing more on that road map over the next quarter or two. Customer demand has been strong enough that we are leaning into this product, not waiting on it. Subsequent to quarter end, we've continued delivering hubs to a number of new customers including a Q2 deployment with MacAllister-Caterpillar. That hub will be deployed on a large data center construction project for a hyperscaler customer, exactly the kind of application we built the hub for. Power-constrained sites fast deployment, no permitting overhead and customers who need uptime more than they need theory. We're also preparing to begin shipping hubs to Europe later this year and are actively standing up the service partnerships needed to meet customer SLAs as we expand internationally. I want to spend a moment on the demand environment because the noise in the regulatory landscape sometimes obscures what is happening on the ground. The federal climate has shifted. The EPA's removal of California's CARB waiver and its challenge to the Endangerment Finding have softened the regulatory tailwinds that supported zero-emissions adoption over the past few years. We have not been counting on these tailwinds. What we are seeing instead is a renewal of interest driven by economics. The fuel and energy crisis has reset how fleets think about total cost of ownership. Diesel in California is averaging roughly $7.50 per gallon as of this week. And the average price of regular gasoline in California is now above $6 per gallon. Meanwhile, our heavy-duty hub and vehicle customers in California are paying between $0.15 and $0.35 per kilowatt hour for electricity. A heavy-duty electric vehicle uses about 1.75 kilowatt hours per mile, a medium-duty vehicle uses about 1 kilowatt hour per mile. The math becomes very straightforward. In heavy-duty applications, fleets are seeing, per mile, fuel cost savings of more than 60%. Those savings are real, they are robust, and they are what is driving renewed conversations across our pipeline regardless of where federal policy lands. A related proof point in the quarter, we delivered our first units to customers redeeming CORE vouchers, the California Off-Road Equipment (sic) [ Clean Off-Road Equipment ] program that incentivizes the use of zero-emissions off-highway equipment, including hubs. We applied for the program last year, were awarded in a number of allocations, and Q1 2026 marked the start of those deliveries. CORE opens up a meaningful new vertical for the hub, and we're seeing that vertical begin to hold momentum. The other significant shift this quarter, one that I want investors to internalize, is municipal and federal traction. Historically, Xos has been a private fleet business. The launch and growth of the hub has changed that. Today, we are working with a growing set of municipal, state and federal customers, and the product mix is a natural fit for their needs. Earlier this month, we announced that Xos was selected as one of only 17 finalists in the U.S. Air Force Global Strike Command commercial capabilities showcase, where we are demonstrating the hub this week as a mobile, deployable, charging and power solution for the Air Force. In April, we participated in the ACT Expo in Las Vegas, where we engage with powertrain customers, truck fleet customers and a meaningful number of municipal accounts. And in mid-April, we participated in TEVCON in San Diego, a defense-focused conference aligned with the Office of the Secretary of War, U.S. Army FUZE, the Defense Innovation Unit and other defense and energy agencies focused on accelerating procurement for the modern battlefield. The last point deserves a comment. One of the most significant operational shifts inside today's military is the electrification of the battlefield. This is not just about vehicles. It's about unmanned aerial systems, counter-UAS systems for drone tracking and mitigation, distributed computing at the forward operating bases, expanded telecommunications, and the broader load growth that all of that creates. Reliable, quiet, deployable power generation and storage are becoming as critical as the systems they support. The hub is built exactly for that environment. As a reminder, the Xos Hub is already on the GSA Schedule through our Fedharmony partnership, which provides federal agencies with a streamlined procurement pathway. Between the AFGSC showcase, TEVCON, ACT Expo and a ride and drive we conducted in San Diego with CALSTART, the demand signal coming out of the public sector is the strongest we have ever seen. Stepping back, Q1 was a strong start to the year. But more importantly, it was a clear data point on where the business is going. We are diversifying away from being a single-product company and into a broader commercial vehicle and power infrastructure manufacturer. The mix, the margins and the customer set all moved in the right direction this quarter. We do not expect every quarter to look like Q1, but we do expect the trajectory to continue. With that, I'll turn it over to Gio to walk through the operational highlights of the quarter.

Thank you, Dakota, and good afternoon, everyone. Over the course of the first quarter, our teams continue to execute across all three of our core product lines, delivering trucks, mobile charging hubs and powertrain systems to customers while maintaining a strong focus on operational efficiency and disciplined cost management. The work we've done over the past several quarters to streamline operations, improve manufacturing execution and optimize our supply chain showed up clearly in our results this quarter as we achieved the highest GAAP gross margins in the company's history. Just as importantly, we remain focused on continuing to find ways to engineer, source and build our products more efficiently as we scale. Within engineering, the team continues to make strong progress on the next generation of our hub platform. This new version is being designed to expand the hub's opportunity set and broaden the range of customer segments and applications that we can address. We believe this evolution of the products will further strengthen the flexibility and the competitiveness of our charging solutions and we look forward to sharing more details in the future. In parallel, the engineering team also spent significant time during the quarter, supporting the testing, validation and certification of several new products and product configurations as we continue to expand our platform capabilities. On the supply chain side, our team remains highly engaged in managing sourcing strategy with an evolving tariff environment. We continue to work closely with our supplier base to identify opportunities for cost reduction, improve resiliency and localized portions of the supply chain where it makes operational and economic sense. Our focus remains on maintaining flexibility while driving continued improvements in product costs and supply stability. In manufacturing, the investments we made to expand the hub and powertrain production areas at our Byrdstown, Tennessee facility, supported efficient production as volumes increased during the quarter. The production team also successfully launched a new higher capacity hub configuration with our standard hub platform now increasing from 280-kilowatt hours to 420-kilowatt hours. This expanded capability allows us to better serve a broader set of fleet and infrastructure applications. We also continue to benefit from the flexibility of our production organization. Most technicians within the plant are trained to work across multiple product lines, allowing us to operate efficiently with a lean team while dynamically adjusting production mix across trucks, hubs, and powertrain systems as customer demand evolves. That flexibility continues to be an important operational advantage for us as we scale the business thoughtfully and efficiently. With those updates, I'll turn the call over to Liana for an in-depth look at our financial performance.

Thanks, Gio. For Q1 2026, our revenue was $11.2 million on 95 units, up from $5.9 million on 29 units in Q1 2025, and up sequentially from $5.2 million on 34 units in Q4 2025. This substantial increase in unit deliveries and total revenue is driven by our sales efforts and strategic shift to focus on powertrain and hub units. Revenue growth during the quarter was impacted by the lower average selling price associated with higher mix of powertrain unit sales. This quarter, we achieved our highest GAAP gross margin in the company's history, with a profit of $4.3 million or 38.6% compared to $1.2 million or 20.6% in Q1 2025, and up sequentially from a loss of $2.6 million or negative 50.5% in Q4 2025. This was driven by our continued cost discipline, savings achieved through optimized inventory management and sourcing strategies, and favorable margin impact from our evolving commercialization strategy, including a greater mix of higher-margin hub and powertrain unit deliveries during the quarter. As a reminder, GAAP gross margin last quarter was significantly impacted by discrete items, including additional inventory reserves and write-offs due to a shift in the commercialization strategy and warranty reserve updates. Non-GAAP gross profit during the quarter was approximately $4.2 million or 37.8% compared to $0.9 million or 15% in Q1 2025, and up sequentially from $0.3 million or 5.2% in the prior quarter. This quarter marks our 11th consecutive quarter of positive non-GAAP gross margin performance, reflecting our operational refinement and the sustained momentum driving our path towards profitability. Turning to expenses. Our Q1 2026 operating expenses were $9 million compared to $10.5 million in Q1 2025 and up sequentially from $7.1 million in the prior quarter. The 14% drop from Q1 2025 reflects the impact of our strong operational discipline in managing our costs while continuing to invest in our multiple product offerings. As a reminder, Q4 2025 expenses benefited from $1.7 million of non-recurring favorable adjustments related to a settlement of finance equipment leases and certain vendor payables. We delivered the lowest quarterly operating loss since going public, with operating loss improving to $4.7 million compared to $9.3 million in Q1 2025 and $9.7 million in Q4 2025. Non-GAAP operating loss for the quarter was $2.6 million, also our lowest since going public, compared to $8.1 million in Q1 2025 and $4.6 million last quarter, reflecting continued momentum towards profitability driven by improved operating efficiency and cost discipline. Our quarterly EBITDA loss was cut by more than half, improving to a loss of $4.1 million from a loss of $8.8 million in Q1 2025 and from a loss of $8.5 million in Q4 2025. Adjusted EBITDA was a loss of $2 million this quarter, representing an improvement of over 70% compared to both Q1 2025 and Q4 2025. Turning to the balance sheet. We closed Q1 2026 with cash and cash equivalents totaling $9.8 million. Operating cash flow less CapEx or free cash flow was negative $1.6 million this quarter, reflecting a significant year-over-year reduction in cash usage compared to negative $4.8 million in Q1 2025. Sequentially, free cash flow declined from positive $2.4 million in Q4 2025, primarily due to higher accounts receivable balances from customer deliveries late in the quarter, as well as the timing of payments related to accounts payable and other accrued liabilities. Inventory declined to $23.7 million at the end of Q1 2026 from $25 million at the end of Q4 2025 and $38 million at the end of Q1 2025, reflecting continued progress from our inventory management initiatives and broader operational discipline. On May 8, 2026, we amended the convertible notes with our long-term investor Aljomaih Automotive Company, reducing the conversion price from $71.451 to $12 per share, and adding a mandatory conversion feature that allows us to require conversion if our stock trades above $16 per share for 20 out of 30 consecutive trading days. Importantly, the amendment has no impact on our financial statements. More broadly, our results reflect structural improvements across sourcing, inventory management, and cost control, not onetime actions. As we look ahead, we remain focused on sustaining this momentum and scaling efficiently. We opened the year with a continued focus on active liquidity management, disciplined capital allocation, and continued improvement in accounts receivable collection alongside our structural cost improvements and a record-breaking gross margins. Over the past several quarters, we have made meaningful progress strengthening collections from customers and organizations administering state grant programs, collecting $9.8 million during the quarter, following $14 million in Q4 2025 and $18.7 million in Q3 2025. This continued discipline remains a key pillar in our path towards building a more self-sustaining business with a stronger foundation for long-term stability. Now, turning to our outlook. We are reaffirming our full year 2026 guidance of revenue to fall within the range of $40 million to $50 million, unit deliveries to be within the range of 350 to 500 units, and non-GAAP operating loss to be in the range of $11.9 million to $13.3 million. With that, I'll turn the call back over to Dakota.

Thank you, Liana. As we close out Q1 and look at the rest of 2026, the picture is becoming clear. The three pillars guiding us, growth, liquidity, and margins are no longer just an aspiration, they're showing up in the results. We delivered our highest ever gross margin quarter, our lowest operating loss since going public, and meaningful progress on liquidity, all while shifting the product mix towards the higher-margin secular categories that define the next chapter of this company. The work we have done over the past 2 years to reduce cost, simplify operations, and bring discipline to every part of the business is now compounding, and the demand environment, despite all of the regulatory noise, is moving in our direction. Customers are choosing Xos because the economics work, the products work, and the team behind them shows up. We do not take any of this for granted. The road ahead has its own set of challenges, tariffs, regulatory shifts, capital markets, and we will continue to navigate them with the same discipline that brought us here. But our confidence is only growing. We're building Xos to be a resilient, broadly capable commercial electric vehicle and power infrastructure company, and Q1 was another proof point that the work is gaining traction. With that, I'll hand it back over to the operator for questions.

[Operator Instructions] Our first question comes from Ted Jackson of Northland Securities.

Dakota, Gio, Liana, congratulations on all the progress you made. I mean it, really, is impressive, everything you've done in the last year or 2, and you've really showed it up in this quarter. And then, Liana, also, I want to thank you for the timely release of the Q, I saw it came out while the call started, and it will certainly help with me getting things turned around. So I appreciate that as well. My first question, just kind of jumping in. The Q came, I haven't gone through and looked at it, but you commented Dakota that you had 63 powertrains, 10 strip chassis. And so by inference, would I -- does that mean that you had 22 hubs go out the door during the first quarter?

Yes, approximately 22. I should be adding this up in my head as we speak, but it was around that many.

Okay. Well, I mean, that's very impressive. So secondly is kind of taking that and spinning it forward. You've got a pretty widespread in terms of the unit guidance. Given the -- I mean, the strength you're seeing in hub and powertrains, how would we think about the mix of your shipments for the remainder of the year. And recognizing that you're seeing some renewed engagement outside of your typical -- I mean, outside of those channels because of the fuel costs and such.

Yes. It's early to tell what the mix looks like for the rest of the year. The one thing I think we can reiterate is that with the various products, the hubs generally have -- tend to have a higher ASP and higher margin profile, and the powertrains tend to have a lower ASP and a lower margin profile. So the wide range of unit volumes is actually because we still are waiting on some of our pipeline to be firmed up for the second half of the year. And with some of those lower ASP powertrain units, we still might have higher volumes, but the revenue contribution from them isn't as high as the hub. So that's kind of what you're seeing in that broad range of unit guidance.

And then when you think about -- I mean, let's step away from '26, I mean, the hub is -- it's just a fabulous product, and it needs so many different needs. Would you see the hub over, say, the next 2, 3, I don't know, 5 years, whatever time frame you want to put forward, being more a primary driver of growth for Xos vis-a-vis kind of your other products?

Yes, this quarter and the demand that we're seeing in our current pipeline is any indication, then your -- the answer to your question is absolutely. There's a tremendous amount of interest. The demand is not coming just from the existing vehicle fleets that we work with. It's coming from an entirely new segment of customers that we haven't serviced before. So the DC charger hub that we've been delivering and shipping to customers, entirely new set of customers. We've got several new variations that we're really excited to talk about in another quarter or two, which will expand that market even further. And it's going to really address some of the major challenges that we're experiencing in the U.S. right now, which are grid resiliency, power reliability, and getting power based upon all of the demands that are coming from so many different industries, including data centers. So we expect that to continue to be the primary growth engine and growth driver. But we obviously still have a lot of work to do in terms of getting that pipeline established and getting the project -- getting the product out there in front of customers to be completely aware of it.

Okay. I mean it's exciting. I actually have more questions, but I want to be polite so I'm going to step out and then I'll get back in queue if there aren't anyone else, either to get in after other people ask questions or -- I just want to make sure that I don't get disconnected. I have more questions in case no one else has any. But I'm going to step out of line to make sure the other people can ask them.

Our next question comes from Craig Irwin of ROTH Capital Partners.

It's Andrew on for Craig. Congrats on the strong results. First I want to touch on the really impressive gross margins here. I understand how mix can have an impact in the quarter. You touched on that earlier in the prepared remarks. But can you just kind of talk about the structural cost changes you've made to allow you to set you up to post a quarter with gross margins so strong?

Craig, thanks for the question. So just a couple of things. In addition to what Dakota and I mentioned in our remarks, with the mix of the products being more favorable, but that was also as a result of the last several quarters, various initiatives we've made to reduce our overall direct material and overhead and direct labor costs that are directly contributing to our gross margins. Additionally, over the past several quarters has also significantly improved our inventory management processes, which have reduced other GAAP reserves. So all in all, all of those factors contributed to the impressive gross margin results this quarter.

Great. Appreciate the detail there. And just piggybacking off the questions on the hub. You guys now have over a gigawatt of hours of energy charge across your units. Can you guys just kind of talk about what you've learned from the early deployments that have helped you develop these different variants and as you've prepared to launch these products and reaching out to different end markets?

Yes, absolutely. We've had some very demanding initial customers with this product, including some autonomous vehicle companies that have charged almost up to 100 vehicles per day on a single hub unit. We've had hubs that have charged nearly 2-megawatt hours in a 24-hour period. So they're really being put through their paces and this is in extreme cold weather environments, extreme heat in Phoenix in the middle of the summer. And we've had several other partners and one major OEM, off-highway OEM, test the product at their proving ground here in the U.S. and put it through its paces for off-highway use, too. So there's been a tremendous amount of learning that came from that. I think the product actually probably performed even better than we had anticipated or expected. That's not to say that there aren't preventative maintenance items and wear and tear items like charge cables and trailer components that we don't intend to repair in the field or don't have parts to repair as people -- as our customers continue to use them aggressively. But overall, the core architecture of the system, the energy storage system, the DC fast chargers, the AC power conversion, the software and controls have performed incredibly well. I think now we've tested on over 50 different vehicles interoperability. So that ranges everything from small Chevy Bolt all the way up to a fully electric Caterpillar front loader and pretty much every type of vehicle in between. So we're getting a wide range of different use cases, and that's contributed to future iterations that we're working on and developing, and we'll be able to bring to market pretty soon. But I'll let Gio add some additional context, too.

The other thing I would say is that these mobile charging units and our energy platforms benefit from the years and years and hundreds of vehicles that we have on the road with very similar systems. So the architecture of the hub does share some power electronics, software and some battery DNA with our trucks, which were designed for on-road use and the mobile charging hubs are designed with that same team that has extensive on-road vehicle experience as well. So from a durability perspective, this is not just a stationary battery and a stationary chargers slapped onto a trailer. This is a product that was very intentionally designed for this use case from the ground up, and that's why we're seeing it performing so well in so many different applications.

Great. Really appreciate the color. And last from me, congrats on, you said, the tripled -- the delivery of powertrains to Blue Bird versus last year. Can you just kind of talk about how you see how the relationship has really evolved in the past and maybe talk to ways you might be able to deepen the relationship with Blue Bird, may it be like additional product lines or other vehicle configurations?

Yes, absolutely. We've been very fortunate to have built a great partnership with Blue Bird. They're an incredible organization from their engineering team to their sourcing and supply chain team, all the way up to their leadership team. They're very disciplined in their execution and approach, and they've -- that's the reason they've been around for over 100 years. But they're also, I think, important to call out, they're the leader in alternative fuel powertrains, delivering more propane and more alt fuel electric buses than any other bus manufacturer in the U.S. And so for them to evaluate and select Xos as a part of their electric powertrain is a pretty big accomplishment for us and I think a very big testament to our engineering team. We're excited. The first buses we've delivered last year are on the road working customer fleets. We're delivering that next batch pretty soon. And I think one of the things that's critically important for these customers is to see the reliability. And when they're performing in the field and they're going out day after day, not having maintenance issues, not having service issues, that gives Blue Bird the confidence to be able to continue to grow this partnership with us. And I think the other thing that Gio pointed out with the hub is that our years of selling thousands of electric vehicles to our customers and other powertrain customers has built a tremendous amount of supply chain synergies in. And so a lot of those cost savings that accrue to our bottom line on truck sales and vehicle sales and hub sales now are benefiting our powertrain customers as we're buying in some of those larger volumes and have historical supply chain relationships with suppliers that have products that support the step van and our powertrain division. So we're very privileged and feel fortunate to have that opportunity. And I do anticipate that, that opportunity will continue to grow over time. And we're working right now on expanding that pipeline beyond just them and other off-highway OEM customers that we have, but also into other on-highway operators and OEMs that could potentially use our powertrain and don't have their own powertrain technology in-house.

Great. Congrats on the continued progress.

Our next question comes from Ted Jackson of Northland Securities.

So Dakota, my next question was on the MacAllister-Caterpillar relationship. I wanted you to kind of walk through it a little bit. I was taking notes, but I don't think I got it all down straight. Like exactly, how the hub is being deployed? You said it was a data center hyperscaler? Are there more opportunities behind it? Is it being sold as a Caterpillar product? Or is it going as an Xos product? And when I say -- let me step back. When I say more opportunities, I mean I would think there would be two, and one would be maybe other opportunities with MacAllister-Caterpillar. But I mean, all those guys know each other. Most people when they see someone having success with a product, they'll start selling it, too. Do you see that as an opportunity to provide a lead into other Caterpillar distributors? That's my first round of questions. I have another one.

Absolutely. So the product is going to support some of their electric construction equipment that they're deploying at one of these big data center sites. It's all zero-emissions equipment that they're going to be charging with it. So it's -- when you start to look at these hyperscalers, they are concerned about their environmental footprint and the impact that they're having on not just power generation, but also the construction of building all of these sites. So they're deploying some zero-emissions equipment, and the hub is what's being used to charge that equipment. I think the opportunity exists beyond just MacAllister. There's several Caterpillar dealerships that have been investors in Xos since we were a private company. And we've been reigniting several of those relationships and evaluating multiple opportunities right now, specifically addressed at the data center segment and short-term and temporary power for data center ramp up in construction. But also long-term buffering. We touched on it briefly, but right now, the demands on the grid are beyond anything we have ever seen before, and the demand for reliable grid utility scale power can be years out from traditional IOUs or municipal utilities. So what you see happening is a lot of behind-the-meter installations with gas turbines, with reciprocating generators and more conventional power generation and small-scale power generation solutions, and some of the announcements we've got coming out are going to be addressed specifically at that market opportunity that we believe will continue to grow at least for the next 5 years, but probably well beyond that. So there's an immense opportunity that exists there that is currently pretty underserved. And when you look at even doing behind the meter installations for something like a gas turbine plant, your lead times on equipment for a gas turbine plant is probably in the 5- to 7-year range right now, depending if you're working with GE or solar or other suppliers. So some of the quickest solutions to market are reciprocating generators. And those need battery energy storage systems to be able to manage these loads and not damage the equipment that they're powering. So there really is an immense opportunity that we're focused on attacking right now, and we think the hub is incredibly well positioned with the existing architecture that we've developed. It's not really a lot of new technology we have to develop. It's an opportunity that leverages our core power electronics into a much, much bigger market.

Sounds exciting. So my next and kind of last topic and question, which ties into this is, you're seeing great uptake with the hub. You're seeing solid growth with the powertrains. I mean there's a chance that we could see -- what's the word? I'd be looking for like a renewed interest with regards to kind of the strip chassis in and of themselves. The company has hardly put any CapEx down in the last couple of years. At what point if like, for instance, the opportunity with the hub, which, to me, seems tremendous and right in front of you? If it really takes off, at what point do you need to spend -- like how much capacity do you have to be able to produce? Is there a spend that has to happen to fully utilize the capacity that you have? Do you see [indiscernible] all this. And then kind of as things ramp -- I will stop at that right now. That would be my next one. I wanted to kind of get into, like, how it all tie back to where you start generating some free cash flow, which you've proven you can do also.

Yes, it's a fair question. Really, the nice thing about all of our product segments is they are utilizing the core components and technology, the same core components of technology across all of those business units. So when we pivot to a new vertical or a new segment with a new product like the hub, we're really leveraging a lot of the same supply chain, a lot of the same assembly tools. That's not to say that we can't improve the line efficiency and build better -- more capacity with our existing line configuration. So I will -- I do think there's going to be some nominal CapEx, but low hundreds of thousands of dollars to low single-digit millions of dollars. But the reality is, because we're using so much of that same architecture, we're not having to invest in novel manufacturing CapEx or tooling or lift systems or facilities to support the ramp-up of that product. Now obviously, there is an upper limit, but we've demonstrated in previous quarters our run rate for vehicles can get up to 150 units per month. So we could easily parlay that working staff and the team that works on the truck line and a lot of the tooling that's utilized for the truck line to be able to build hubs at that same run rate. So we think there's a pretty significant opportunity just with the existing infrastructure and equipment and CapEx investments that we've already made to date.

Okay. I think actually that does answer everything for me because, obviously, if you don't need to make those kinds of significant investments to grow and you can get -- you have that kind of demand to drive up there, the kind of the cash generation will take care of itself.

This concludes today's conference call and the Q&A session. You may disconnect your lines. Thank you for participating, and have a pleasant day.