Xos, Inc. — 2021 Form 10-K Summary
Business context and reporting period
For the fiscal year ended December 31, 2021, Xos was an early-stage manufacturer of Class 5–8 battery-electric commercial vehicles, powertrains and battery systems, with Fleet-as-a-Service offerings under development. The August 20, 2021 SPAC business combination was accounted for as a reverse recapitalization; historical comparisons are those of Legacy Xos.
Key financial metrics
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $5.0 million | $2.6 million |
| Gross profit (loss) | $(2.4) million; approximately (46.8)% margin | $0.3 million; approximately 11.4% margin |
| Operating expenses | $50.8 million | $12.2 million |
| Operating loss | $(53.2) million | $(11.9) million |
| Net income (loss) | $23.4 million | $(16.7) million |
| Net cash used in operating activities | $(88.9) million | $(12.3) million |
- Revenue was mainly vehicle sales: $4.9 million of product revenue and $0.2 million of ancillary revenue. The company reported 22 vehicles and 22 powertrains sold in 2021, versus 17 combined units in 2020.
- 2021 net income did not reflect operating profitability: it included a $72.5 million gain from remeasurement of the earn-out liability and an $18.5 million gain from derivative fair-value changes, partly offset by a $14.1 million debt-extinguishment loss. Adjusted EBITDA was a loss of $65.2 million, compared with a loss of $11.6 million in 2020.
- At year-end, cash and cash equivalents were $16.1 million, restricted cash was $3.0 million, and marketable debt securities were $149.5 million. Management cited $165.7 million of cash and investments, excluding restricted cash, as principal liquidity resources.
- Equipment loans totaled approximately $2.1 million. Total liabilities were $54.3 million, including $29.2 million of earn-out liability and $7.5 million of warrant liability; these are not equivalent to funded debt.
- The company received approximately $216.7 million of net cash from the business combination. Net cash provided by financing activities was $252.9 million; investing activities used $155.1 million, including $150.2 million net purchases of marketable securities.
Material changes versus the prior comparable period
- Revenue rose 91%, but cost of goods sold rose 217%, moving gross margin from positive to negative. The company cited a $1.1 million inventory reserve and higher materials, labor and manufacturing overhead.
- Operating expenses increased to $50.8 million from $12.2 million, including higher headcount, engineering and product development, public-company costs, insurance and business-combination-related expenses.
- Operating cash use increased substantially, including $39.5 million of working-capital outflows, primarily inventory build-up and prepayments.
- Year-end inventory increased to $30.9 million from $1.9 million. The company also reported $17.9 million of prepaid expenses and other current assets.
Outlook, commentary and risks
- No formal revenue or earnings guidance is provided. Management stated that existing financial resources were expected to support planned operations for at least 12 months after issuance of the financial statements.
- Management said widespread deliveries were expected to begin in the first half of 2022, but could be delayed. Battery-production delays had already created a vehicle-assembly backlog; the two Flex facilities were tooled for approximately 2,000 vehicles annually in total, assuming supply constraints could be mitigated.
- Critical risks include shortages and higher costs for battery cells, semiconductors, vehicle bodies and aluminum; reliance on contract manufacturers and certain limited-source suppliers; lack of high-volume manufacturing experience; and dependence on a small number of customers. Three customers represented 10%, 38% and 46% of 2021 revenue.
- Fleet-as-a-Service was under development and had limited customer adoption. The company also highlighted execution, product quality and battery safety, charging infrastructure, competition, hiring, financing and COVID-19-related risks.
- On March 23, 2022, Xos entered a standby equity purchase agreement allowing it, subject to conditions, to sell up to $125 million of common stock over 36 months. Use of the facility could dilute shareholders.
- Management did not assess internal control over financial reporting for 2021, citing the recent business combination and transition. Disclosure controls and procedures were concluded to be effective; the auditor expressed no opinion on internal-control effectiveness.
- The filing reports no material pending legal proceedings. It discloses related-party arrangements, including forgiveness of a $364,000 executive promissory note plus accrued interest and related tax gross-up compensation.
Investor verification priorities
- Confirm current delivery, production and backlog data, and whether battery and component constraints have eased.
- Assess whether customer agreements and stated demand are binding, cancellable, or non-binding, and monitor customer concentration.
- Track gross margins, inventory quality and turnover, cash burn, and the pace of operating-cost growth.
- Review available cash and investment balances, restrictions or maturities, and any actual draws under the $125 million equity facility and resulting dilution.
- Monitor Fleet-as-a-Service commercialization, warranty exposure, internal-control assessment progress, and related-party transactions.