Xos, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Unaudited consolidated results. Xos designs and manufactures Class 5–8 battery-electric commercial vehicles and provides charging infrastructure, fleet software, and related services.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $4.8 million | $9.8 million | $9.5 million | $16.8 million |
| Gross loss / margin | $(3.7) million / (78.3)% | $(5.3) million / (54.3)% | $(4.6) million / (48.7)% | $(11.3) million / (67.3)% |
| Operating expenses | $16.8 million | $22.7 million | $35.9 million | $43.0 million |
| Operating loss | $(20.5) million | $(28.0) million | $(40.5) million | $(54.3) million |
| Net loss | $(23.6) million | $(9.6) million | $(47.9) million | $(33.7) million |
| Loss per share, diluted | $(0.14) | $(0.06) | $(0.28) | $(0.21) |
Revenue fell 51% in Q2 and 44% in the first half, primarily reflecting lower unit sales, partly offset by higher average selling prices. Xos delivered 37 vehicles and one powertrain in Q2, versus 71 vehicles and two powertrains a year earlier; first-half deliveries were 67 vehicles and two powertrains, versus 127 and two. Management attributed lower sales performance to charging-infrastructure and supply-chain delays. First-half revenue was principally vehicle and powertrain sales ($8.8 million); Fleet-as-a-Service contributed $0.3 million.
Operating expenses declined year over year, including lower general and administrative, research and development, and sales and marketing costs. Despite lower gross losses and operating losses, net loss increased: the prior-year comparison benefited from substantially larger noncash gains on earn-out and derivative fair-value changes, while 2023 included higher debt-related interest and discount amortization.
Cash, liquidity, and debt
- At June 30, cash and cash equivalents were $27.8 million and available-for-sale marketable debt securities were $13.3 million, together $41.1 million. Total current assets were $110.8 million and current liabilities $34.5 million.
- Six-month operating cash outflow was $30.0 million, compared with $75.8 million in 2022. Investing activities provided $36.6 million, mainly from investment sales and maturities; financing activities used $17.4 million, mainly for debt prepayments. Cash, cash equivalents, and restricted cash declined $10.9 million to $27.8 million.
- Convertible debt carrying value was $35.9 million on the balance sheet; disclosed principal outstanding was $17.8 million on Yorkville debentures and $20.0 million on the Aljomaih note. The Yorkville debentures’ maturity was extended in July 2023 to February 11, 2024; the Aljomaih note matures August 11, 2025.
- The Yorkville SEPA had $119.8 million of remaining commitment at June 30, subject to conditions; access depends in part on trading volume and share price. Management stated substantial doubt exists about the company’s ability to continue as a going concern for 12 months from issuance of the financial statements.
Material changes, outlook, and risks
- In June, Xos reduced its workforce by approximately 16% to cut costs, streamline operations, and refocus resources. Management expected G&A, R&D, and sales and marketing expenses to decrease in the foreseeable future.
- Management described a target of achieving positive gross margins at the unit level by mid-2023, through pricing, operating improvements, lower material costs, and increased deliveries. The filing provides no updated numerical revenue or earnings guidance.
- Supply constraints remain a risk, including semiconductor chips, battery cells, vehicle bodies, and aluminum. The company also cited possible production delays, cost pressure, and dependence on suppliers, many of which are single-source.
- After the stock remained below Nasdaq’s $1 minimum bid price, Xos transferred to the Nasdaq Capital Market and received an additional compliance period through December 26, 2023. The company told Nasdaq it would implement a reverse stock split to seek compliance; failure to regain compliance could lead to delisting.
- When the stock’s daily VWAP fell below the debenture floor price for five consecutive trading days, Xos made Yorkville prepayments of $2.8 million on July 4 and $3.2 million on August 4, 2023. The floor price was $0.59 as of the report date.
- Potential dilution includes SEPA share sales, convertible debt, warrants, and outstanding restricted stock units. Common shares outstanding were 174.8 million at June 30 and 176.0 million as of August 8, 2023.
- Xos reported that its previously identified inventory-control material weakness had been remediated as of June 30 after testing; management nevertheless noted that internal controls provide reasonable, not absolute, assurance.
Most important facts for investors to verify
- Whether available financing—including practical access to the SEPA—can fund operations and debt obligations, given the going-concern warning and continued cash burn.
- Whether deliveries, revenue, and unit economics improve enough to achieve positive unit gross margins; also track charging-infrastructure and supply-chain constraints.
- The terms, timing, and share-price impact of Yorkville prepayments and conversions, SEPA advances, and any further debt financing or equity issuance.
- Whether Xos regains Nasdaq’s minimum bid-price compliance by December 26, 2023, including the status and effect of the proposed reverse stock split.
- Whether the inventory-control remediation remains effective and whether warranty, inventory, or other operating estimates require material revisions.