Xos, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Xos manufactures Class 5–8 battery-electric commercial vehicles and offers fleet-related services. The company reported 56 vehicle sales, compared with 3 stepvans and 1 powertrain in Q1 2021. Amounts below are in U.S. dollars; financial statement figures are in millions unless noted.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $7.03 | $0.79; up 787% |
| Gross profit (loss) / margin | ($3.16) / approximately (44.9%) | $0.12 / approximately 15.3% |
| Operating expenses | $20.30 | $5.67 |
| Operating loss | ($23.45) | ($5.54) |
| Net loss | ($21.19) | ($13.85) |
| Operating cash flow | ($31.30) | ($8.78) |
| Capital expenditures | $3.00 | $0.20 |
Revenue was primarily from stepvans and vehicle incentives ($6.86 million); Fleet-as-a-Service revenue was $95,000. Higher vehicle volume drove revenue growth, but cost of goods sold rose to $10.19 million, including a $1.25 million inventory reserve and higher materials, labor and manufacturing overhead. Operating expenses increased with staffing and public-company costs, engineering investment, and sales and marketing.
At March 31, cash and cash equivalents were $11.81 million, restricted cash $3.03 million, and available-for-sale marketable debt securities $117.89 million, for $129.70 million of cash and investments excluding restricted cash. Current assets were $169.39 million and current liabilities $19.80 million. Inventory increased to $40.30 million from $30.88 million. Total liabilities were $62.56 million; the filing reports no conventional borrowings on the balance sheet, but lease liabilities totaled $9.85 million. Warrant and earn-out liabilities totaled $34.87 million and are not presented as debt.
Changes, outlook and risks
- Operating cash use increased year over year, reflecting the larger net loss and working-capital investment, including $10.67 million of inventory build. Investing cash flow was positive $27.15 million, mainly from $30.15 million of investment maturities and sales, partly offset by capital expenditures. Cash, cash equivalents and restricted cash declined $4.33 million during the quarter.
- Management said existing financial resources were sufficient for planned operations for at least 12 months after the financial statements’ issuance. No specific revenue, delivery or profitability guidance was provided. The company expects capital and operating expenses to increase as it scales production, R&D, service operations and sales.
- The March 2022 Standby Equity Purchase Agreement gives Xos the option, subject to conditions, to sell up to $125 million of common stock to Yorkville over 36 months. It is not committed cash already received and could dilute shareholders.
- Two contract-manufacturing facilities were tooled for approximately 2,000 vehicles annually in total, assuming supply constraints can be mitigated. Management cited shortages and cost pressures involving semiconductors, battery cells, vehicle bodies and aluminum; the Russia-Ukraine conflict could worsen disruptions. COVID-19 and broader economic conditions also remain uncertain.
- Other notable items: a $2.62 million gain from the remeasurement of the earn-out liability partly offset other losses; the liability was $26.94 million at quarter-end. The company recorded $1.21 million of unrealized losses on marketable securities in other comprehensive loss. It adopted ASC 842 on January 1, 2022, recognizing operating lease assets and liabilities of about $7.7 million. No material legal proceedings were reported.
- Management concluded disclosure controls were effective as of quarter-end, while also describing ongoing work to establish and improve internal controls over financial reporting. The filing identifies related-party leases and manufacturing relationships, including rent expense paid to entities connected to the CEO and a stockholder.
Important facts for investors to verify
- Whether vehicle deliveries and production scale as planned despite supply constraints, and whether unit economics improve from the quarter’s negative gross margin.
- How quickly operating cash burn and inventory investment evolve relative to the $129.7 million of cash and marketable securities; confirm the assumptions behind management’s 12-month liquidity assessment.
- The conditions, pricing mechanics and potential dilution associated with any use of the Yorkville equity facility.
- Whether customer demand converts into recurring Fleet-as-a-Service revenue, which was still small in Q1.
- Potential cost exposure from inventory reserves, product warranties, leases, related-party arrangements and valuation changes in earn-out and warrant liabilities.