XOS Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 13, 2025

Key Takeaways

  • Positive Sentiment: Exos delivered a record 135 vehicles in Q2, generating $18.4 million in revenue, the highest quarterly figures in company history.
  • Positive Sentiment: Operating loss fell to $7.1 million in Q2, the lowest since going public, driven by stringent cost controls and prioritized investments.
  • Negative Sentiment: GAAP gross margin dropped to 8.8% in Q2 (from 20.6% in Q1) due to higher-volume national account orders with structured pricing and unexpected tariff costs.
  • Positive Sentiment: Cash and cash equivalents rose to $8.8 million and the company generated $4.6 million in positive free cash flow, the strongest quarterly cash flow on record.
  • Positive Sentiment: Exos is expanding its product mix with higher-margin powertrain systems, the EXOS Hub charging solution, and the upcoming MDXT chassis-cab platform to diversify revenue streams.
AI Generated. May Contain Errors.
Earnings Conference Call
XOS Q2 2025
00:00 / 00:00

There are 5 speakers on the call.

Operator

Good day, and welcome to Exos Inc. Second quarter twenty twenty five earnings conference call. All participants will be in the listen only mode. Should you need assistance, please signal a conference specialist by pressing the star keys followed by 0. After today's presentation, there will be an opportunity to ask questions.

Operator

To ask a question, you may press star then 1 on your touch tone phone. To withdraw your questions, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to David Slachew, general counsel. Please go ahead.

Speaker 1

Thank you, everyone, for joining us today. Hosting the call with me are Exos' Chief Executive Officer, Dakota Semler Exos' Chief Operating Officer, Giordano Sordoni and Exos' Chief Financial Officer, Liana Pogosian. Today, after the close of regular trading, Exos issued its second quarter twenty twenty five earnings press release. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results as well as commentary of the quarter and six months ended 06/30/2025. Management's statements today reflect management's views as of today, 08/13/2025 only, and will include forward looking statements, including statements regarding our fiscal year 2025, management's expectations for future financial and operational performance, and other statements regarding our plans, prospects, and expectations.

Speaker 1

These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results. Additional information about important factors that could cause actual results to differ materially, including but not limited to, Excess' ability to access capital when needed and continue as a going concern and potential supply chain disruption, including as a result of changes to or uncertainty around trade policies and tariffs, is included in today's press release and in our filings with the SEC, including our most recent annual report on Form 10 ks and subsequent filings. We undertake no obligation to update forward looking statements except as required by law. You should not put undue reliance on forward looking statements. Further, today's presentation includes references to non GAAP financial measures and performance metrics.

Speaker 1

Additional information about these non GAAP measures, including reconciliations of historical non GAAP measures to the comparable GAAP measures, is included in the press release we issued today. Our press release and SEC filings are available on the Investor Relations section of our website at www.exostrucks.com/investoroverview. With that, I now turn it over to our CEO, Dakota.

Speaker 2

Good afternoon, everyone. Thank you for joining us. Our primary focus continues to be disciplined growth, improving gross margins, and ensuring liquidity. These pillars guide our day to day decision making and our long term strategy. In the 2025, we made meaningful progress on each of these fronts.

Speaker 2

We delivered 135 vehicles in the second quarter, generating $18,400,000 in revenue, making it the highest quarterly revenue and unit deliveries in Exos' history. A significant portion of these deliveries went to UPS and FedEx ISP customers, underscoring the confidence that national carriers are placing in our products. In parallel, we reaffirmed our commitment to our existing customers by shipping additional units under previously announced agreements. During the quarter, we also began fulfilling a 200 plus unit order for a single customer, which is the largest order in our history and reflects the increasing scale of our customer relationships. Our GAAP gross margin for Q2 was 8.8%.

Speaker 2

This decline reflects a mix of higher units delivered to national account customers with long term structured pricing, as well as the impact of tariffs that were not expected when such pricing was initially structured. While these large orders offer lower margins in the near term, they create repeat business and provide the volume that underpins future profitability. We remain confident that gross margins will improve as we continue to define our costs refine our cost structure, realize economies of scale and deliver higher margin products. Liana will provide additional detail on the quarter to quarter margin dynamics in her remarks. We also delivered these record results while achieving our lowest operating loss since going public, approximately $7,100,000 This progress is the result of obsessive cost control and prioritizing expenditures that directly support revenue growth and or product differentiation.

Speaker 2

We are keenly aware of the importance of liquidity and continue to manage working capital carefully. During q one, management emphasized that the company has maintained seven consecutive quarters positive non GAAP gross margins. We've continued that track record for an eighth quarter in Q2, demonstrating our focus on building a financially sustainable product portfolio. Before I wrap up on liquidity, I want to take a moment to express our deep appreciation to Aljamet Automotive Company and their principals. They have been a critical strategic supporter of Exos for many years.

Speaker 2

We believe they share our optimism in the long term vision and future of Exos, our various product lines, and the commercial progress we've made over the last few years. Aljamet and Exos have agreed to amend the repayment structure for the convertible note, allowing us to repay the principal and quarterly installments from November 2025 through February 2028, rather than being due all at once on 08/11/2025. This approach frees up capital to focus on sustainable growth and further strengthening liquidity as demand for our products and services continues to grow. The interest accrued on the convertible note through its original maturity date will be paid in shares of common stock, as it would have been had the term not been extended, making Algerme our largest shareholder. We still intend to pursue various strategies to obtain the required funding for future operations, which may include capital raising strategies such as debt or equity financing.

Speaker 2

While our Step Van platform continues to represent a significant portion of revenue, our broader product strategy is designed to enhance margins and reduce customer concentration. Our powertrain systems and charging infrastructure products are higher margin offerings with limited alternatives in the market. In q two, we are building upon this strategy with additional deliveries to Bluebird Corporation for electric school buses. Since the quarter ended, we've received orders for nearly 20 powertrain units from Bluebird, and we expect continued momentum as school districts rapidly pursue electrification in their fleets. Beyond powertrains, the EXOS Hub addresses a critical bottleneck for fleet electrification and access to power.

Speaker 2

As noted on our last call, the Hub has attracted interest not only from fleet customers, but also from industries facing grid constraints. In q two, we expanded deployments and demonstrations of the Hub and are preparing a product update for 2026 that will offer greater power resilience, energy cost optimization, and load balancing. We believe these innovations unlock opportunities beyond electric fleet charging. For example, supporting industrial users who need temporary power or peak shaving capabilities. This vision aligns with our long term goal of having a diversified product portfolio with low customer concentrations, low market concentration, and our focus on secular industries less disrupted by political factors or the macroeconomic cycle.

Speaker 2

In summary, the 2025 was a milestone quarter for Exos. We achieved record deliveries, positioned ourselves to diversify our revenue through higher margin products, and demonstrated that our cost discipline initiatives are working. As we look ahead, we will remain focused on managing growth responsibly, improving gross margins, and maintaining liquidity. We expect average order sizes to increase as customers experience the total cost of ownership benefits of our trucks and charging solutions. Finally, our product development pipeline, including enhancements to our Hub product and expansions into power resiliency solutions, positions Exos to capitalize on the broader backup power and energy management market.

Speaker 2

Gio will now take you through some of the operational highlights from the quarter.

Speaker 3

Thanks, Dakota, and good afternoon, everyone. Q2 was a quarter of strong execution, customer delivery and continued innovation for XSOS. Our Tennessee plant ran efficiently and at high utilization, producing a substantial number of chassis for UPS, demonstrating our ability to deliver consistent quality at scale for one of the world's largest and most demanding fleets. This repeatable production cadence is a clear proof point of our operational maturity and ability to scale to meet customer demand. We also advanced our powertrain business, building more electrification kits for OEM customers such as Bluebird.

Speaker 3

OEMs are choosing Exos as a powertrain partner to take advantage of the many years and millions of miles of on road use that the Exos powertrain has withstood. We plan to continue deepening our partnerships with OEMs who trust EXOS technology to power their next generation of vehicles. Meanwhile, our engineering teams kept the momentum up on the demonstration and validation of the MDXT platform, the new medium duty chassis cab. Designed to leverage the same proven components and production lines or step down, the MDXT is on track to be one of the most capital efficient product launches in Exos history. On the supply chain front, we stayed ahead of potential headwinds by actively monitoring tariff developments, working closely with our suppliers, and executing targeted cost reduction initiatives.

Speaker 3

These efforts position us to scale with confidence while protecting margins. We continue to monitor the ever evolving tariff landscape to ensure a robust and cost efficient supply chain. Overall, q two shows that we can grow, innovate, and deliver for our customers, all while running lean. As we enter the back half of the year, we are focused on capital efficient production and expanding the reach of our hub product line with new features and continuing the validation of the MDXG product. With that, I'll turn it over to Liana for the financial review.

Speaker 4

Thanks, Gio. Second quarter revenue reached a record 18,400,000.0 on 135 units, our highest quarterly revenue and deliveries ever. That's up from 5,900,000 on 29 units last quarter and 15,500,000.0 on 90 units a year ago, reflecting strong execution of our delivery plan and major shipments to customers like UPS and FedEx ISPs. For the 2025, revenues totaled $24,300,000 compared to $28,700,000 in the same period last year. We delivered more units year over year, reflecting strong demand, though the shift in product mix, driven largely by our strip chassis product, resulted in a lower average selling price and a modest decline in total revenue.

Speaker 4

Turning to margins. GAAP gross margin was 8.8% in the second quarter compared to 20.6% in the first quarter and 13.1% in the 2024. The sequential decline was mainly driven by changes in product mix discussed earlier and the impact of additional tariff costs. Non GAAP gross margin was 1.4% in the second quarter, down from 15% in the first quarter, reflecting a favorable change in our inventory reserves driven by better inventory management processes and overall lower inventory balance. This quarter marks our eighth consecutive quarter of positive non GAAP gross margin performance.

Speaker 4

For the 2025, non GAAP gross margin was 4.7% compared to 12.9% in the same period last year. We remain confident in our ability to improve margins over time as we scale production and execute on cost reduction initiatives. On the expense side, operating expenses were $8,700,000 in the second quarter, down $1,800,000 or 17% from last quarter and $4,700,000 or 35 percent from the 2024. The sequential decline reflects a 1,900,000.0 finance lease expense recorded in the first quarter with no comparable expense this quarter. For the 2025, operating expenses totaled 19,200,000.0, a 7,200,000.0 or 27% improvement from 26,400,000.0 in the same period last year.

Speaker 4

These reductions highlight the lasting benefits of last year's cost actions and our ongoing commitment to operational discipline. Operating loss for the quarter was $7,100,000 our lowest since going public, improving from $9,300,000 in the first quarter and 11.4% in the 2024. Non GAAP operating loss also hit a record low at $6,900,000 compared to $8,100,000 in the first quarter and $9,700,000 in the 2024. For the 2025, operating loss totaled $16,400,000 down from $21,600,000 in the same period last year, while non GAAP operating loss improved to $14,900,000 from $19,100,000 in the same period last year. Now turning to the balance sheet.

Speaker 4

We ended the quarter with $8,800,000 in cash and cash equivalents, up from $4,800,000 at the end of last quarter. Inventory declined to $31,000,000 from $38,000,000 last quarter, driven by strong unit sales outpacing production as we moved more units from existing inventory, reflecting our ongoing strategic inventory management to support upcoming deliveries. Accounts receivable decreased to 18,100,000 from $22,200,000 last quarter. We delivered strong accounts receivable collections of 22,800,000.0 this quarter from customers and organizations administrating state grant programs. And while late quarter deliveries resulted in higher new receivables, these position us well for continued collections in the coming quarter.

Speaker 4

We are continuing to manage our liquidity position and actively exploring options for enhancing our liquidity. We achieved positive free cash flow of 4,600,000.0 this quarter, the highest in the company history and the second time we reported positive free cash flow. Represents a significant improvement compared to negative 4,800,000.0 in the 2025 and negative 26,100,000.0 in the 2024, fueled by record deliveries and strong working capital management. Finally, turning to our guidance, we are reaffirming our full year 2025 guidance for revenue and unit delivery. Revenue between $50,200,000 and $65,800,000 and unit deliveries between three twenty and four twenty units.

Speaker 4

We are revising our non GAAP operating loss guidance to a range of 24,400,000.0 to 26,900,000.0. This update reflects changes in the expected product mix for the second half of the year as well as increased costs tied to new tariff structure on parts and commodities, the full impact of which was not known when we provided the original guidance. With that, I'll turn the call back over to Dakota.

Speaker 2

I will now turn it over to the operator to open up for questions.

Operator

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your questions, please press star then 2.

Operator

At this time, we will pause momentarily to assemble our roster. The first question comes from the line of Craig Irwin with Roth Capital Partners. Please go ahead.

Speaker 2

Good evening and congratulations on the strong progress this quarter. So Dakota, there's so many things that I start with, but I'm kind of worried that we might lose the forest for the trees. You are outperforming all of your competitors, big and small. If we look from Rivian to Workhorse, everybody else is floundering, having a difficult time with deliveries, having a difficult time with cost structure. And you just put up a record quarter with positive gross margins, more than 130 units and clearly doing things different.

Speaker 2

Can you maybe give us a little bit of color or frame out the approach that you're taking that it's allowing you to give us divergent performance versus the rest of the industry? Yeah, thank you for the question, Craig. I think, and for the congrats. I think there's several factors that drive our ability to achieve kind of outsized performance. The first of which is our team.

Speaker 2

We have an incredible team, and I don't think we could do anything that we've delivered on without having an incredibly sound operations team able to manufacture and produce vehicles the way they do, our supply chain team who is able to respond rapidly to this incredibly rapidly evolving environment where tariffs are continually disrupting our supply chain flows, every aspect of the organization, our business development team, our legal and finance team, they've all been critical in helping us to achieve this goal. So that's the first thing I would start with. And I think we're very, very fortunate to have a really seasoned team, but also a team that works incredibly hard to achieve these goals. The second factor is one that has been really ten years in the making, or almost nine years in the making since we started the business, which is building up customer trust. And I think that is really starting to take hold with several large key customers.

Speaker 2

We've demonstrated that the product over five, six, seven plus years with some of these customers, that the product is reliable, that the product in the field is durable, and ultimately that it saves them on their total cost of ownership. And when they have multiple years of operating history and a track record that they can see in their own operations and not just what we tell them, that builds confidence in them and their ability to go order more trucks and expand their EXOs fleet. So that's the second thing. I really believe we owe incredible debt to our customers because they are the ones that keep us here. They're the ones that continue to order vehicles, hub products, and powertrain products from us.

Speaker 2

And then the third thing is, I think, a skill set internally that has been cultivated as a part of our management team as well as a part of the corporate culture at Exos, which is that we are adaptive. The business has to change and has to respond. And this quarter and Q1 were probably one of the greatest examples of Exos being an adaptive organization. We responded to an unprecedented set of tariffs and supply chain changes that had the potential to dramatically disrupt our ability to build and sell profitable vehicles. But working together, our supply chain team, our commercial team, our operations and manufacturing team, we were able to manage through that, work closely with our customers, and still deliver a profitable quarter with record unit volumes and record revenue.

Speaker 2

And I think that adaptability is very hard to cultivate in any organization, but particularly in an organization where you're building manufactured products, where the supply chain is so complex and the time to build your trucks is several months. So those are kind of the three buckets that I would ascribe a lot of that to. Understood. That makes a lot of sense and it actually dovetails to my second question pretty well. So I remember in Anaheim you explaining to me that the MDXT is a truck that you introduced because you were listening to your customers.

Speaker 2

This is something that people want to purchase, that there's a need in the market. Can you maybe share an update with investors on the status of that vehicle, the customer feedback from your different showcase events across the country? Is there a potential order book or other metrics that you can share with us to help us understand sort of the trajectory here? Yeah, absolutely. We don't provide specific backlog guidance for any of the products, but we continue to see a lot of customer interest coming from national fleets as well as from small regional fleets.

Speaker 2

And we discussed this a little bit in our last earnings call, but we actually continued following our last earnings call to take this truck around the country, demo it for customers, let them drive the vehicle, get them in the seat, because that's ultimately what sells the product. And so we've wrapped up thousands of miles driving the truck itself, not actually towing it, to customer sites so that they could see the real world performance of this vehicle in their own operations and in their own environment. And actually, as we speak today, the truck is on a trip coming back from Phoenix, Arizona. We had some work out it to do out there. And so it's going to be coming back to California.

Speaker 2

We're going to continue. We've got demos scheduled for Southern California next week. So the commercial interest has not slowed down. While we're not in production on that product yet, I think we have a good amount of lead time to build up a significant order backlog that will allow us to launch that vehicle into production and have a solid backlog to build for probably at least the first year as we bring that to production. There's several different use cases for that truck that, as you know, with the step van, it services mostly last mile delivery, uniform rentals, food and beverage delivery.

Speaker 2

But when we deal with a conventional chassis cab truck, there are so many different alternative vocational applications that exist. Just this week, we were recording a new customer that's looking to put dump bodies on that vehicle. So a lot of different interest across the fleet sector and we're seeing a lot of municipal interest in that product too, which is really important because that vehicle is actually already approved as a part of the California Department of General Services schedule and will likely be on some JPA or Joint Procurement Authority schedules soon too. So we have some immense opportunities with municipalities, but also a lot of large private national account fleets that have expressed strong interest in the product, several of which have already signed sales orders and will likely be taking delivery of some of our first customers off the line. Excellent.

Speaker 2

Then last question, if I may. You mentioned tariffs a couple of times. If you want to be conservative here, I completely understand it. But there's a trend out there. A lot of companies are sharing the headwind in the quarter and approximate impact on net income.

Speaker 2

I know you were better than 20% ahead of the consensus numbers out there. So, you're doing a lot of things right. But can you maybe quantify for us how much of a headwind this was for Exos? Yeah. It's highly product specific and also highly customer specific as that drives the average selling prices.

Speaker 2

But at the lowest end of our product range, the tariff impact can be about 5% of our ASPs, and at the highest end it can go up to about 15% of our ASPs. And the reason that varies is we have different battery sizes, different components coming from different locations, And as you know, the landscape has changed all the way up through this month. We recently had a tariff change with some components that we sourced in India that took place earlier this month. And so we are constantly monitoring that situation and making sure that we can stay ahead of it. We've been very fortunate in that with our customers.

Speaker 2

We've shared the direct costs of all of these tariffs, and we've gone back to several of our customers and indicated that we've provided them with preferential pricing, and in order to continue to build our relationship together, we'll share in some of the tariff exposure. So we're not just taking all of that cost and passing it on to the customers, we're sharing it with them, which we believe is the responsible and the fair thing to do, and I think our customers have responded well to that and have also been willing to mitigate that exposure by bearing some of the burden and the cost of these tariffs. Great. Well, congratulations on the progress here. I'll go

Speaker 3

ahead and hop back in the queue. Thanks, Greg.

Operator

Thank you. This concludes our question and answer session. I would like to turn the conference back over to Dakota Semler for closing remarks.

Speaker 2

Thank you. As we close out Q2, we are proud to share that this has been our largest quarter in company history. This milestone reflects not only the dedication and hard work of our team, but also the trust and loyalty of our customers. To our customers, thank you for believing in us, challenging us to innovate and partnering with us on this journey. Your commitment fuels our growth and inspires us to keep raising the bar.

Speaker 2

Looking ahead to the 2025, we remain highly focused on delivering growth, improving liquidity, and expanding margins. Over the past year, we've proven our ability to operate as a lean, agile organization while maintaining a competitive and diverse product portfolio. We've built a strong sales pipeline, navigated unpredictable global supply chain challenges, and adapted quickly to change, all while staying true to our mission. This adaptability and resilience are among our greatest strengths, and we believe our customers recognize and value these qualities in a dynamic marketplace. As momentum builds, we are confident that 2025 will be our biggest year yet, and we remain committed to becoming the most robust and trusted commercial electric vehicle manufacturer in the industry.

Speaker 2

With that, we will end the call here. You may disconnect.

Operator

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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