Xos, Inc. — Q1 2023 Form 10-Q Summary
Reporting period: Three months ended March 31, 2023. Xos designs and manufactures Class 5–8 battery-electric commercial vehicles and offers charging infrastructure, fleet software, and Fleet-as-a-Service solutions. Financial statements are unaudited.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $4.7 million | $7.0 million | Down 33% |
| Gross loss | $0.9 million | $6.0 million | Improved $5.1 million |
| Gross margin | (18.7%) | (85.3%) | Improved |
| Operating expenses | $19.2 million | $20.3 million | Down 6% |
| Operating loss | $20.0 million | $26.3 million | Improved $6.3 million |
| Net loss | $24.3 million | $24.0 million | Loss widened $0.3 million |
| Net loss per share | $0.14 | $0.15 | Per-share loss narrowed |
| Cash used in operating activities | $15.3 million | $31.3 million | Use decreased |
At March 31, cash and cash equivalents were $36.5 million, with no restricted cash, and marketable debt securities were $27.5 million. Together these principal liquid resources totaled approximately $64.0 million, down from $86.3 million at year-end 2022. Current assets were $136.5 million and current liabilities $40.8 million; stockholders’ equity was $89.8 million.
Convertible debt had $44.0 million in aggregate principal outstanding: $24.0 million under Yorkville debentures and $20.0 million under the Aljomaih note. The debentures mature in November 2023, subject to a possible extension, and the note matures in August 2025. The company paid $9.0 million of debenture principal during the quarter, plus premiums and interest. Management said existing cash resources were sufficient for planned operations for the next 12 months, while also noting that future capital access is not assured.
Material changes and management commentary
- Vehicle sales fell to 30 from 56; Xos also sold one powertrain. Management attributed lower sales to charging-infrastructure delays.
- Revenue was primarily vehicle and powertrain related. Fleet-as-a-Service revenue was $0.2 million, versus $0.1 million a year earlier.
- Gross loss narrowed substantially as cost of goods sold fell 57%, reflecting lower sales volume and lower inventory reserves, inventory adjustments, and return reserves. Gross margin nevertheless remained negative.
- Other expense was $4.2 million versus $0.1 million of other income, mainly due to higher interest and debt-cost amortization, a $0.5 million debenture prepayment premium, and a $1.0 million impairment loss on assets held for sale. The prior-year period included a $2.6 million earn-out liability fair-value gain; the current period recorded a $0.1 million loss.
- Cash used in operations improved year over year. Investing cash inflow largely reflected $23.1 million of proceeds from sales and maturities of marketable securities, rather than operating cash generation.
- Management’s stated operating focus was to achieve positive gross margins at the unit level by mid-2023 through price increases, cost optimization, lower direct material costs, and increased deliveries. This is an operating objective, not formal quantified company-wide financial guidance.
Risks, contingencies, and unusual items
- Funding and dilution: The $125 million Standby Equity Purchase Agreement had $120.7 million of remaining commitment, but advances were restricted absent mutual consent while Yorkville retained conversion rights. Nasdaq share-issuance limits also constrained use of the SEPA and conversion of debentures; the company sought stockholder approval to exceed applicable limits.
- Subsequent debt payment: After quarter-end, a five-trading-day share-price trigger required a $3.1 million Yorkville prepayment, paid May 4, 2023. The reported debenture floor price was $0.59.
- Listing: Nasdaq had notified Xos that its bid price was below $1.00. The stated 180-day compliance period ended June 26, 2023; a reverse split or transfer to the Nasdaq Capital Market could be relevant if requirements were not met.
- Customer concentration: One customer represented 82% of Q1 2023 revenue. Two customers represented 59% and 15% of accounts receivable at quarter-end.
- Operations: The company cited continuing shortages and supply disruption involving semiconductor chips, battery cells, vehicle bodies, and aluminum. Many suppliers are single-source. Delayed charging infrastructure also affected sales.
- Controls: Management concluded disclosure controls and internal control over financial reporting were ineffective due to a material weakness in inventory-management controls. Remediation was underway, with management expecting to address the weakness during 2023; it was not yet considered remediated.
- Other matters: The filing reported no legal proceedings expected to have a material adverse effect and no material changes to the risk factors in the 2022 Form 10-K. Minimum purchase commitments were $8.3 million; operating and finance lease payments totaled $13.4 million, including $3.3 million due during the remainder of 2023.
Important facts for investors to verify
- Whether vehicle deliveries and charging infrastructure delays improve, and whether Xos achieves its mid-2023 unit-level gross-margin objective.
- Cash runway after operating cash use, required debenture prepayments, debt maturities, and any new financing.
- Potential dilution and the terms and practical availability of Yorkville conversions and SEPA advances, including the outcome of stockholder approval and Nasdaq share limits.
- Nasdaq bid-price compliance and any resulting listing action.
- Progress in remediating inventory-control weaknesses and the potential effects of concentrated revenue and receivables.