Xos, Inc. (XOS) Earnings Call Transcript & Summary

Thanks for being with us today. On the line are Dakota Semler, our Chief Executive Officer at Xos; Giordano Sordoni, who serves as Xos' Chief Operating Officer; and Liana Pogosyan, Xos' Chief Financial Officer. Today, once the regular trading session had ended, Xos issued the earnings press release for the third quarter of 2026. As you follow this conference call, we'd suggest having that press release handy, because it includes our financial results as well as commentary covering the quarter that closed on September 30, 2026. Xos additionally submitted its quarterly report on Form 10-Q after the market closed today. What management says on this call reflects only their views as of today, November 12, 2026, and it will contain forward-looking statements — among them statements about our fiscal year 2026, what management expects for financial and operational performance going forward, and other statements about our plans, prospects, and expectations. Such statements aren't promises or guarantees, and they carry risks and uncertainties that could make them differ materially from actual results. For a fuller discussion of the important factors that could make actual results differ materially from forward-looking statements, please see today's press release and our filings with the SEC, including the annual report on Form 10-K we filed most recently and subsequent filings. These are among the elements involved, though the list isn't exhaustive: Xos' capacity to obtain capital as required and to keep operating as a going concern; Xos' capacity to carry out business plans and to spot and capitalize on opportunities; possible interruptions to supply chains and/or economic contractions stemming from trade policies, tariffs, international conflicts and tensions, and/or constrained availability of oil, energy, and other essential industrial inputs. Aside from what the law mandates, we assume no duty to refresh forward-looking statements. Forward-looking statements should not be relied upon excessively. In addition, references to non-GAAP financial measures and performance metrics appear in today's presentation. Details regarding these non-GAAP measures, including reconciliations of historical non-GAAP measures to the comparable GAAP measures, can be found in the press release we issued today. You can find our press release and SEC filings in the Investor Relations area of our site, www.xostrucks.com/investor-overview. With that, I'll hand things over to Dakota, our CEO.

Thanks, David, and thanks to all of you for being on the call. A decade back, Gio and I founded Xos with the goal of making better trucks for fleets. Those trucks remain, and the fleets remain as well. At some point along the way, the product we created to charge those trucks turned into something customers wanted for its own sake; during the third quarter, the Xos Hub went from a supplemental product line capable of speeding up a fleet's readiness to accept delivery of EV trucks to a diverse product line whose applications show substantial demand outside the EV market. That is the quarter's headline, and we think it will be the headline for the year to come. I'll start by walking through our results. In Q3 we shipped 33 units and generated $5.5 million of revenue, which is up 17% from the prior quarter. On a GAAP basis gross margin came in at 15.3%, and on a non-GAAP basis it was 34.4% — that makes 13 quarters in a row with positive non-GAAP gross margin. Deliveries of Hubs and powertrains across the last nine months made up about 72% of revenue, which is the largest share non-vehicle products have ever represented for us. What gets me excited about the Hub's adoption potential across many different applications is the field data behind it. One Xos Hub went past one gigawatt hour of energy delivered in September. That's one unit alone—over 33,000 charging sessions, averaging close to two megawatt hours daily through Arizona summers starting in early 2025. Altogether, our connected fleet has seen Hubs deliver upwards of 5 GWh. If a data center contractor, a utility, or a school district wants to know whether this platform can take daily wear and tear, we don't answer with a spec sheet anymore. The meter is our answer. That evidence is converting into customers faster than we've ever witnessed, and in more segments than we've ever handled at once. Take the public sector first: in August, the U.S. government gave Xos a prototype Other Transaction Agreement. We're going to build and hand over a ruggedized, deployable charging system for electrified support equipment for the Air Force, and that work will be done out of Byrdstown through 2027. That's our first defense contract, and we won it through a competitive showcase against a national field, and it opens up a procurement path that wasn't available to Xos six months ago. Utilities are expanding rather than piloting. Xcel Energy started with two Hubs in Colorado in 2024 and has placed multiple follow-on orders this year, including units going to service territories where Xcel has never put a Hub before. Duke Energy has units in the field. Orlando Utilities Commission and other Florida utilities are running Hubs. The kinds of organizations that spend years testing equipment before making it standard are returning to buy additional units. Our school bus segment has turned into one of the verticals moving fastest. Twin Rivers Unified School District, which runs one of the most electrified school fleets nationwide, is charging its buses on Xos Hubs. Highland Electric Fleets — a firm that provides financing and operation of electric school buses on behalf of districts — now has Hubs deployed and operating. First Student, whose school bus fleet runs into the tens of thousands, likewise runs our Hubs. What changed during the last quarter is the character of the discussion. School systems that first approached us about charging are now asking whether the Power Hub could serve as backup power for their buildings—so if a wildfire or storm leads a utility to cut service, classrooms stay lit, food stays cold, and residents have a place to go. That's not a charging transaction; it's resilience infrastructure, and those districts are the ones buying it. The rest of the pipeline is wider than I'd have predicted twelve months ago. Transit agencies—we spent a week with them at APTA in Chicago this month—and convenience store operators, whom we met at the NACS show in Las Vegas, weren't inquiring about charging at all. Their goal was backup power capable of keeping a store open and pumps operating during an outage. Programs run by states—the Texas Backup Power Package Program among them—are now channeling substantial funding toward exactly that need. Rental car and ride-hailing fleets, whose vehicles cycle through depots that the grid was never built to handle. Autonomous fleets, where a top operator this summer placed a follow-on order for 12 units and brought our first Hubs into Europe. In agriculture, a John Deere electric tractor is now charging from an Xos Hub amid the pecan harvest, and growers are starting to see the Hub as construction crews already do—equipment that enables the rest of their electrical gear to function. Next, data center construction is the market that prompted the June launch of the Power Hub. During the quarter, we collaborated straight with general contractors erecting hyperscale facilities, and in October, we were the sole equipment supplier asked, together with several of those contractors, to attend a major summit on data center sustainability. Those overseeing such projects no longer ask if a Hub is capable of keeping construction equipment charged; instead, they ask whether a Power Hub can handle live data center loads together with generators and grid power. Yes, it can. You'll find us in rooms we've never entered before. This month we'll be at RE+ — North America's biggest solar and energy storage trade show — and we're showing up as a power company, not a truck company with a charger on display. Then in January we'll be at POWERGEN, the event where the folks who build and operate generation assets come to buy. The developers, EPC contractors, utilities, and power producers in that crowd measure everything in megawatts and megawatt-hours, and that's exactly the scale our 3.1 MWh Power Hub is built for. And through all of it, we kept grinding on the less exciting side of the business. Last August, our whole Hub lineup — from the 210 kWh entry point up through the 630 kWh flagship — earned UL 2202 certification. That certification is exactly what lets a customer authorize, insure, and designate the Hub in regions where listed equipment is required, and it shortens deployment schedules by several weeks. Gio will cover the certification and production details more thoroughly, because the capacity he has built in Byrdstown is precisely what makes next year's plan attainable. We're also hiring carefully. Interest coming in across these segments has been larger than our sales and business development teams can handle, so we're adding people there—in the roles that turn demand into purchase orders—while holding the rest of the cost structure exactly where we worked so hard to get it. We want every new hire to pay for itself through orders. The vehicle side of our business continues to be important, and I don’t want the energy narrative to overshadow it. During the quarter, work continued on step vans and deliveries to FedEx ISPs. Powertrain kits featuring vehicle-to-grid capability are being shipped to Blue Bird, and those trucks are still the core reason fleet operators first put their confidence in us for energy solutions. For many years ahead, vehicles and EV charging will remain a significant piece of Xos. There is one point I want investors to understand without ambiguity. With the orders we currently have, the pipeline, and the wide range of segments that are now purchasing, we anticipate that our power business, with the Power Hub at its head, will expand more quickly in 2027 than any product we have ever introduced, and will turn into the biggest portion of Xos—bigger than trucks and bigger than EV charging; put simply, 2027 will be the year when Xos' productivity gets measured in megawatt-hours as much as in units. Having said that, I'll pass it to Gio, who will go over the operational highlights for the quarter.

Thanks, Dakota. In the prior quarter, I discussed the testing and certification efforts taking place throughout our Hub portfolio. During the third quarter, those efforts began to deliver results, and Q3 turned into a period of transitioning products out of development and into the field. The key milestone was UL certification for the Charger Hub; in August, the Charger Hub achieved certification under UL 2202 and UL 2231. That matters greatly for customers requiring certified charging equipment capable of safe, reliable deployment at their locations. We're also continuing to push forward the UL 9540 program covering the wider Power Hub and Charger Hub product family. It's a significant program involving several parallel work streams, among them system-level safety testing and a factory audit of our Tennessee plant. Customers across rental, industrial, and infrastructure markets are increasingly requesting UL 9540 certification, and we're progressing steadily toward that milestone; on the product front, our AC export Power Hub transitioned from prototype to production. Our team built and tested the initial units during the third quarter, and the 420 kWh Power Hub is now being produced. Over the quarter, we also raised the power output of our Power Hub systems and carried on design and analysis work on further Hub variants, making engineering enhancements as we went. We also brought the Power Hub before our customers. During the quarter, we showcased our Hub products with two blue-chip customers, including an extended field trial, and finished several demonstrations in defense applications, where mobile power that deploys rapidly and operates quietly without a grid connection fits well. We demonstrated integration with customer generators, with the Hub automatically starting and stopping the generator when needed. That capability is important for customers seeking to reduce generator run hours, fuel consumption, and maintenance without altering how they work on site; on the vehicle side, we kept delivering Xos trucks and powertrains, and we're running tests to optimize truck performance for the 2027 model year. That effort draws on lessons from vehicles already operating in our customers' fleets and is intended to deliver greater value to the fleets that depend on our trucks daily; on the production side, we devoted considerable time in the third quarter to planning for 2027. We created a detailed capacity and labor plan for our Byrdstown facility to support a larger Hub program spanning production line layout, staffing, and flexibility should demand outpace production. We also kept enhancing our service operations. During the quarter, we accelerated how fast we get parts to the field, and we continued working to resolve customer issues more quickly; in supply chain, we kept expanding our in-house fabrication capabilities to give us greater control over cost and schedule. We carried on our reshoring efforts as part of our wider cost-down strategy, and we view them as a key lever for margins and supply resilience going forward. Looking ahead to the close of this year and on into 2027, the things we're focused on are clear. We'll keep ramping up Hub production, finish UL 9540 certification for the Power Hub and Charger Hub products, and launch our Hub variants. We'll also continue building a manufacturing operation that's flexible and capital-efficient, one that can scale as demand grows. With that, I'll hand things over to Liana.

Thanks, Gio. Before I take you through the quarter, I want to frame up the first nine months of 2026, because three things got better at the same time. On every measure, our operating results improved sequentially, from revenue and gross margin through to operating loss and adjusted EBITDA. Our cost base continued to come down versus a year ago, and the balance sheet got leaner, with debt lower and less inventory than we carried at the beginning of the year. With that as background, let me walk you through the details, including what drove the revised outlook. Revenue for the first nine months of 2026 totaled $21.5 million on 158 units, compared with $40.8 million on 294 units in the same period last year. The decline stems from significantly fewer step-van units than a year earlier, a stretch that included 195 units from the UPS order booked across Q2 and Q3 2025, along with orders that slipped into later quarters as customers moved toward readiness and acceptance. In Q3 2026, we posted $5.5 million of revenue on 33 units, versus $16.5 million on 130 units in Q3 2025, though that was up sequentially from $4.7 million on 30 units in Q2 2026. Shipments in the quarter came mostly from our Hub and powertrain product lines. GAAP gross profit for the first nine months of 2026 was $5.8 million, a 26.9% gross margin, compared with $5.4 million, or 13.3%, in the same period last year. That works out to an improvement of more than 13 percentage points and the highest nine-month GAAP gross margin in our history. Non-GAAP gross profit climbed to $6.5 million, or 30.4%, versus $3.8 million, or 9.4%, in the prior-year period, an improvement of more than 20 percentage points. The year-over-year gain reflects a favorable shift in product mix toward higher-margin Hub and powertrain deliveries, the absence of UPS step van deliveries that weighed on the prior-year period, and continued benefits from optimized inventory management and sourcing strategies. GAAP gross profit in the third quarter of 2026 was $0.9 million, or 15.3%, versus $2.6 million, or 15.5%, in Q3 2025, and $0.6 million, or 12.1%, in Q2 2026. Non-GAAP gross profit was $1.9 million, which is 34.4%, compared with $2.7 million, or 16.1%, in the same quarter a year ago, and $0.3 million, or 7.2%, in Q2 2026. The quarter-over-quarter improvement in GAAP gross profit comes from a higher average selling price driven by product mix. This marks our 13th consecutive quarter of positive non-GAAP gross margin. On expenses: operating expenses for the first nine months of 2026 totaled $25.8 million, compared with $28.7 million in the same period a year earlier. That reduction of roughly 10% reflects our ongoing cost discipline even as we keep investing in future growth. Operating expenses for the third quarter of 2026 were $8.3 million, and that number includes a $0.5 million one-time gain from resolving a software-related vendor contract, bringing the total benefit to $14.5 million. To give you a comparison, operating expenses were $9.5 million in Q3 of 2025 and $8.5 million in Q2 of 2026. If you set aside that settlement, operating expenses rose by about $0.3 million from one quarter to the next, with the increase coming from greater research and development spending. Over the first nine months of 2026, our operating loss shrank to $20 million, down from $23.3 million a year earlier — a reduction of roughly 14%. Non-GAAP operating loss for the first nine months of 2026 was $12.9 million, an improvement from the $19.6 million loss in the same period last year, a reduction of roughly 34%. That improvement shows continued progress toward profitability, helped by better margins, greater operating efficiencies, and disciplined cost management. Operating loss in the third quarter of 2026 improved sequentially to $7.5 million from $7.9 million in the second quarter of 2026, driven by higher gross profit and lower operating expenses; that compares with an operating loss of $7 million in the third quarter of 2025. As I said earlier, Q3 2026 included a $0.5 million one-time gain tied to settling a vendor contract for software, and without that gain our operating loss would have been roughly in line with the prior quarter. Non-GAAP operating loss declined to $4.1 million, versus $6.2 million in Q2 2026 and $4.7 million in Q3 2025. EBITDA loss for the first nine months of 2026 came to $18.3 million, against a $12.4 million loss in the same stretch last year, largely because of a $9.4 million gain on operating lease termination recorded in the prior-year period. Adjusted EBITDA — which excludes that gain along with certain other items — was a $12 million loss across the first nine months of 2026, roughly a 27% improvement over the $16.5 million loss in the equivalent stretch last year, and it reflects the ongoing payoff from keeping costs tight, running more efficiently, and seeing margins strengthen. Turning to Q3 2026, EBITDA was a $6.9 million loss, better than the prior quarter's $7.4 million loss; in Q3 2025, by contrast, EBITDA was positive at $2.9 million, a figure that included the lease termination gain. Adjusted EBITDA for Q3 2026 was a $4.6 million loss, a 15.6% sequential gain from the $5.5 million loss posted in Q2 2026, versus a $4.3 million loss in Q3 2025. Moving on to the balance sheet: we ended Q3 2026 with cash and cash equivalents of $12.1 million, versus $13.2 million at the close of Q2 2026. During the quarter, our ATM program brought in $2.8 million net of offering costs, and we repaid $1.5 million of principal on the convertible note, which brought outstanding convertible debt to $14 million — a reduction of $4.5 million since the end of 2025, with $14.5 million remaining available under the program. During the first nine months of 2026, free cash flow — which we define as operating cash flow minus CapEx — came in at -$7 million, versus +$3 million for the same stretch a year ago. The main driver of that swing is a much larger working capital release in the prior-year period, when cuts to inventory and accounts receivable generated $24.4 million in cash, compared with $6.3 million in the current-year period. Inventory ended the quarter at $21.8 million, lower than $23.5 million at the close of last quarter and $25 million at the end of 2025, reflecting ongoing progress on our inventory management initiatives as well as broader operational discipline. Net accounts receivable rose modestly, hitting $4.6 million at quarter's end against $4.5 million at the end of last quarter. Across the last four quarters, we've collected more than $36 million from customers and from the organizations that run state grant programs, including $5.5 million in Q3 of 2026. That sort of discipline is still vital to building a business that stands on its own more fully, giving us a sturdier foundation for long-term stability. Looking forward, our priorities haven't changed: we'll grow efficiently, actively manage liquidity, pursue strategic opportunities to raise capital, deploy capital with discipline, and keep our focus on collecting accounts receivable. On outlook, some customer orders we had expected to deliver in Q4 have moved into later periods, largely because of customer readiness and delivery timing. Those are deferrals, not cancellations. Also factoring in shifts in the anticipated product mix, we're revising our guidance for the full year 2026. We now expect revenue of $25 million to $35 million, 185 to 250 units delivered, and a non-GAAP operating loss of $17.2 million to $20.5 million. On that note, I'll hand the call back to Dakota.

Thanks, Liana. On this call twelve months ago, the Hub was just a charging accessory tied to a truck company. Now it charges aircraft, provides backup for schools, keeps utility crews operating during outages, and is under evaluation for carrying data center loads. The product itself hasn't shifted nearly as much as the world surrounding it has. Power became scarce, and Xos was already building the very thing that delivers power. Growth, margins, and liquidity stay our top three priorities as we run the business. Growth today is arriving from more segments than marketing alone can serve, which explains why so much of this year went into certifications, production, flexibility, and partners. Margins track the mix, and that mix is shifting toward the Hub. And liquidity, as Liana outlined, is being handled so that customers and lenders fund growth before shareholders do. Ten years in, this team has built a company that earns money on the most complex products in the power industry and now aims at the biggest problem in physical infrastructure, load growth across the grid. With that, I'll turn it back to the operator for questions.

Hi there, good evening, and thanks for having me on to ask a few things. First off, I'd like to congratulate you on how genuinely well you've reshaped the market opportunity for the Hub, and on those steady positive gross margins. Dakota, when you look at the wider opportunity for the Hub going forward, how would you order the markets you're going after — first by near-term potential, then by the medium and longer horizon? You've already notched up successful sales to military customers, to utility customers, to EV producers, plus commercial sales into building sites, and to some of the Level 4 autonomous and Level 3 autonomous companies. That's a lot happening at once. What's your process for choosing which market gets the resources?