Xos, Inc. — Form 10-Q Summary
Business context and reporting period
Xos designs and manufactures Class 5–8 battery-electric commercial vehicles and offers charging infrastructure, fleet-management software and related services. This unaudited filing covers the three and nine months ended September 30, 2023; comparisons are with the same 2022 periods.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $16.7 million | $11.0 million | $26.1 million | $27.8 million |
| Gross profit (loss) | $2.0 million | $(10.8) million | $(2.6) million | $(22.1) million |
| Gross margin | 11.9% | (97.7)% | (10.0)% | (79.3)% |
| Operating expenses | $14.6 million | $20.4 million | $50.5 million | $63.4 million |
| Loss from operations | $(12.6) million | $(31.1) million | $(53.1) million | $(85.4) million |
| Net loss | $(14.1) million | $(20.0) million | $(62.0) million | $(53.6) million |
| Basic net loss per share | $(0.08) | $(0.12) | $(0.36) | $(0.33) |
- Q3 revenue growth reflected higher vehicle unit sales and average selling price; the company sold 104 stepvans and one powertrain, versus 84 stepvans and four powertrains in Q3 2022. Nine-month deliveries were 171 vehicles and three powertrains, down from 211 and six, respectively.
- Nine-month operating loss improved as operating expenses and cost of goods sold declined, but net loss increased, principally reflecting higher net other expense and substantially smaller gains from fair-value changes in derivatives and earn-out liabilities.
- At September 30, cash and cash equivalents were $22.6 million, restricted cash was $0.8 million, and current liabilities were $27.2 million. Current assets totaled $91.5 million, including $48.9 million of inventory; marketable debt securities were fully liquidated.
- Nine-month operating cash use was $38.7 million, compared with $105.6 million in 2022. Investing activities provided $50.9 million, primarily from securities maturities and sales; financing activities used $27.5 million. Cash, cash equivalents and restricted cash declined $15.3 million to $23.4 million.
- Debt included $9.0 million of Yorkville convertible debenture principal and $20.0 million of Aljomaih convertible note principal outstanding. The Yorkville debentures mature February 11, 2024; the Aljomaih note matures August 11, 2025. Balance-sheet carrying amounts differ from principal amounts because of discounts and issuance costs.
Material changes, outlook and risks
- Management states substantial doubt exists about the company’s ability to continue as a going concern for 12 months from issuance of the financial statements. Additional funding is necessary; management could not conclude its financing plans were probable of successful implementation.
- The amended Yorkville SEPA had $119.5 million of stated remaining commitment at quarter-end, but access depends on conditions including trading volume, share price and registration availability. While debentures remain outstanding, SEPA proceeds are subject to additional restrictions and may be applied to debt redemption.
- The company repaid $23.8 million of debenture principal during the first nine months, plus $1.2 million in redemption premiums and $1.4 million of accrued interest. Subsequent to quarter-end, it made further $3.2 million prepayments on October 4 and November 6 after the share VWAP remained below the $0.59 floor price for five consecutive trading days.
- No formal financial guidance is provided in the filing. Management cited charging-infrastructure and supply-chain delays as reasons for lower year-to-date sales. Component shortages, including power electronics, harnesses, battery cells, chips, vehicle bodies and aluminum, may continue to constrain production and delivery.
- In October 2023, Xos announced a workforce reduction of approximately 17%, intended to reduce costs and focus resources on strategic priorities and unit deliveries. Management expected G&A, R&D and sales and marketing expenses to decline following the reduction.
- Customer concentration is significant: one customer represented 70% of Q3 2023 revenue; three customers represented 75% of nine-month revenue. Three customers accounted for 57% of accounts receivable at quarter-end.
- Nasdaq granted a bid-price compliance extension through December 26, 2023, after the company transferred to the Nasdaq Capital Market. Xos said it planned a reverse stock split to regain compliance; failure could result in delisting proceedings.
- The company reported that its inventory-control material weakness was remediated as of June 30, 2023, and management concluded internal controls over financial reporting were effective at September 30, 2023. No legal proceedings were identified as reasonably expected to have a material adverse effect.
Important facts for investors to verify
- Near-term cash needs, cash burn and the feasibility and timing of financing, including actual access to the SEPA and any additional funding.
- Yorkville debenture repayment requirements, floor-price triggers and the February 2024 maturity, as well as potential dilution from convertible securities.
- Vehicle deliveries, production costs, gross-margin sustainability and progress resolving supply and charging-infrastructure delays.
- Customer concentration, receivable collection and inventory valuation and quality-control execution.
- Completion and effectiveness of any reverse stock split and continued Nasdaq listing compliance.