Xos, Inc. — FY2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022; filed March 31, 2023. This is an annual report, not a standalone Q4 report. Xos designs and manufactures medium- and heavy-duty electric commercial vehicles and also offers powertrains, charging infrastructure, fleet software and related services.
Key financial results
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $36.4 million | $5.0 million |
| Gross loss | $30.0 million | $2.4 million |
| Gross margin | Approximately -82.5% | Approximately -46.8% |
| Operating expenses | $81.3 million | $50.8 million |
| Loss from operations | $111.3 million | $53.2 million |
| Net income (loss) | $(73.3) million | $23.4 million |
| Net cash used in operating activities | $(128.0) million | $(88.9) million |
Revenue comprised $31.8 million from stepvans and vehicle incentives, $2.2 million from powertrains, $0.6 million from Fleet-as-a-Service and $1.7 million of ancillary revenue. Xos reported 275 deliveries (257 stepvans and 18 powertrains), versus 44 units in FY2021. One customer represented 42% of FY2022 revenue.
Gross loss included $5.7 million of inventory reserves/write-downs and $7.9 million of unfavorable physical-inventory and other adjustments. The net loss reflected substantial noncash gains from fair-value changes: $28.7 million on contingent earn-out shares and $14.2 million on derivative instruments. These gains reduced the reported net loss but did not eliminate the operating loss.
Liquidity, debt and balance sheet
- At December 31, 2022, cash and cash equivalents were $35.6 million, restricted cash was $3.0 million, and short-term available-for-sale debt securities were $50.6 million. Management cited $86.3 million of cash and investments, excluding restricted cash, as principal liquidity.
- Total assets were $189.9 million; total liabilities were $77.9 million; stockholders’ equity was $112.1 million. Inventory was $57.5 million, up from $30.9 million a year earlier.
- The filing states total indebtedness of approximately $56.2 million, including convertible notes, equipment notes, finance leases and insurance financing. Yorkville convertible debentures had $33.0 million principal outstanding and Aljomaih’s convertible note had $20.0 million outstanding at year-end.
- Operating cash outflow increased to $128.0 million. Financing provided $64.7 million, principally from convertible debt, equipment financing and SEPA share sales. Investing activities provided $82.7 million, largely because of net sales and maturities of marketable securities; capital expenditures were $14.1 million.
- Management said existing cash resources were sufficient for planned operations for the next 12 months, subject to execution of cost, pricing and manufacturing initiatives and access to financing. The $120.7 million remaining SEPA commitment was subject to restrictions, including Nasdaq share-issuance limits and Yorkville consent provisions.
Material changes, outlook and significant items
- Revenue grew sharply with increased stepvan deliveries, but gross loss and operating loss widened as production and operating costs rose. The company attributed lower-than-anticipated delivery performance to battery-production delays and an assembly-line backlog.
- Management’s stated operational focus was achieving positive unit-level gross margins by mid-2023 through price increases, operational optimization, lower direct material costs and delivery scale. This is a target, not a guarantee.
- Xos launched its Class 7–8 heavy-duty chassis in May 2022. It expected Xos Hub mobile charging production to begin scaling in Q3 2023 and introduced a next-generation 2023 Stepvan intended to reduce unit costs and improve total cost of ownership.
- Management expected operating and capital expenditures to remain significant, while also stating that G&A, R&D and sales and marketing expenses were expected to decrease following workforce reductions. The filing provides no quantified forward revenue or earnings guidance.
- After year-end, Xos made Yorkville debenture prepayments of $3.7 million and $3.2 million in January 2023 and received notice of a further $3.5 million payment due March 31, 2023. Further monthly prepayments could be required under the debenture terms.
- Xos restated its unaudited financial statements for Q1, Q2 and Q3 2022 due to inventory-count and inventory-recording errors. Management identified a material weakness in inventory-management controls and concluded disclosure controls and internal control over financial reporting were ineffective at year-end; remediation was underway. The auditor’s opinion on the FY2022 financial statements was unqualified, but the auditor did not audit or opine on internal-control effectiveness.
- Nasdaq notified Xos in December 2022 that its share price had failed the $1 minimum bid-price requirement. The filing stated a compliance deadline of June 26, 2023 and noted that a reverse stock split could be considered.
- Key risks include continued cash burn and financing needs; customer and supplier concentration; battery-cell, semiconductor and other supply constraints; charging-infrastructure delays; unproven high-volume manufacturing; product warranty, recall and battery-safety exposure; and dependence on government incentives and regulatory approvals. The filing also reports that no material legal proceedings were pending at year-end.
Most important facts for investors to verify
- Subsequent cash, debt and prepayment developments, including the effect of Yorkville’s monthly payment provisions and the practical availability of SEPA funding.
- Whether the company delivered on its mid-2023 unit gross-margin target, improved gross margins and reduced inventory write-downs and unfavorable adjustments.
- Production capacity, battery supply, customer delivery timing and conversion of customer commitments into completed sales; check dependence on the customer contributing 42% of FY2022 revenue.
- Progress in remediating the inventory-control material weakness and any further restatements or reporting issues.
- Nasdaq listing compliance and any dilution from convertible-debt conversions, SEPA issuances or other equity financing.