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XI

Xos, Inc. (XOS)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $16.5M on 130 units (140 shipped; 10 chassis revenue to be recognized later), GAAP gross margin expanded to 15.3% (from 8.8% in Q2), and free cash flow was +$3.1M; GAAP net income was $2.1M, aided by a $9.4M gain from a Mesa lease termination .
  • Mix broadened beyond trucks: 18 powertrain systems were delivered to Blue Bird in Q3 and ~75 additional powertrain orders were received post quarter, while Xos Hub interest accelerated; management highlighted tariff mitigation via supplier and customer actions, including a price adjustment with UPS .
  • Liquidity improved: cash rose to $14.1M (from $8.8M in Q2), ATM proceeds of $2.4M, convertible note amortized through 2028, and the Mesa lease termination is expected to save ~$20.7M cash through 2033 (offset by ~$2.8M of payments over 18 months) .
  • 2025 guidance maintained: revenue $50.2–$65.8M, unit deliveries 320–420, non‑GAAP operating loss $26.9–$24.4M (previously revised in Q2); Street consensus (S&P Global) for Q3 was unavailable, so no vs‑consensus comparison is provided .

What Went Well and What Went Wrong

  • What Went Well

    • Sequential margin and cash gains: GAAP gross margin rose to 15.3% (from 8.8% in Q2) and free cash flow was positive for a second straight quarter (+$3.1M) .
    • Commercial traction beyond trucks: 18 powertrains shipped to Blue Bird with ~75 incremental orders post quarter; Hub deployments/demos accelerated with strong interest from utilities and AV fleets .
    • Tariff mitigation and pricing: management renegotiated pricing with UPS to account for tariffs and is pursuing supplier reshoring/dual‑sourcing to reduce volatility .

  • What Went Wrong

    • QoQ revenue decline and YoY margin pressure: revenue fell to $16.5M (from $18.4M in Q2) and GAAP gross margin was below prior‑year (15.3% vs 18.1%) due to product mix and tariff impacts .
    • GAAP profitability benefited from a non‑operating gain: Q3 net income of $2.1M was driven by a $9.4M gain on the Mesa lease termination, while operating loss remained ($7.0M GAAP; $4.8M non‑GAAP) .
    • Operating expenses ticked up sequentially (+9% vs Q2), and UPS deliveries carry longer payment terms (though collections were strong) .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Revenue ($MM)$15.8 $18.4 $16.5
Gross Profit ($MM)$2.9 $1.6 $2.5
Gross Margin (%)18.1% 8.8% 15.3%
Loss from Operations ($MM)$(9.7) $(7.1) $(7.0)
Net Income (Loss) ($MM)$(10.5) $(7.5) $2.1
Diluted EPS ($)$(1.32) $(0.91) $0.22
Non‑GAAP Operating Loss ($MM)$(6.6) $(6.9) $(4.8)
Non‑GAAP Gross Profit ($MM)$3.7 $0.27 $2.63
Free Cash Flow ($MM)$(11.67) $4.65 $3.08

KPIs and Operating Metrics

KPIQ3 2024Q2 2025Q3 2025
Units Delivered (incl. leases)94 135 130
Units Shipped (for rev timing context)——140 (includes 10 strip chassis to upfitter)
Net Cash from Operating Activities ($MM)$(11.52) $4.65 $3.08

Notes:

  • Management indicated non‑GAAP gross margin of 16% in Q3 (vs 1.4% in Q2), reflecting inventory reserve add‑backs and mix; see reconciliations in the 8‑K and CFO commentary .
  • Xos does not disclose a formal segment revenue split; mix included trucks, powertrains, and hubs .

Guidance Changes

MetricPeriodPrevious Guidance (Q2 2025)Current Guidance (Q3 2025)Change
RevenueFY 2025$50.2–$65.8M $50.2–$65.8M Maintained
Non‑GAAP Operating LossFY 2025$26.9–$24.4M (revised up in Q2) $26.9–$24.4M Maintained
Unit DeliveriesFY 2025320–420 units 320–420 units Maintained

Context:

  • The non‑GAAP operating loss range was revised in Q2 from $17.2–$14.0M to $26.9–$24.4M due to mix and tariffs, and was reaffirmed in Q3 .

Earnings Call Themes & Trends

TopicQ1 2025 (Prior-2)Q2 2025 (Prior-1)Q3 2025 (Current)Trend
Tariffs / pricing mitigationIdentified tariff headwinds; mitigation strategies in place for 2H’25 and planning for 2026+ “Plan to minimize 2025+ tariff impacts” via supplier actions Multi‑step mitigation: reshoring, supplier cost‑sharing, and customer pricing adjustments (incl. UPS renegotiation) Improving clarity/mitigation
Product mix shift (higher‑margin lines)Trucks‑centric; set up for UPS deliveries later in year Powertrains and hubs gaining meaningful traction 18 powertrains delivered; ~75 follow‑on orders; Hub demand/uses expanding (AV fleets, utilities) Mix broadening
Working capital & cash flowPlanned inventory build; negative CFO Record positive CFO/FCF Positive CFO/FCF again; inventory and AR down; liquidity improved Sustained progress
UPS/FedEx relationshipsUPS order support (193 units; Q1 shipped to upfitter) UPS a substantial Q2 driver Continued UPS program; FedEx ISP activity; seasonal Q4 constraint for parcel fleets Stable/seasonal
Energy infrastructure (Xos Hub)Not a focal point in Q1 releaseTraction building Deployments/demos accelerated; CORE approval drives sub‑$100k pricing; broader resilience use cases Accelerating
Incentives / regulatoryState incentives active; federal uncertainty —HVIP reopened for CA fleets (Class 6: $85k–$160k per truck) Supportive backdrop

Management Commentary

  • CEO (prepared remarks): “This quarter, we shipped 130 vehicles, generating $16.5 million in revenue… We actually shipped 140 vehicles… Much of this volume went to UPS and FedEx ISPs… Our GAAP gross margin was 15.3%… While we shipped the highest units in our history, we also drove our lowest operating loss since the business went public, $7 million.”
  • CEO (on mix and margins): “Large fleet agreements may compress margins in the near term, but they’re the foundation of a durable industrial business… we are deliberately expanding into higher‑margin, lower‑concentration categories, including powertrains and energy infrastructure.”
  • CFO: “GAAP gross margin was 15.3%… Non‑GAAP gross margin was 16% this quarter, up from 1.4% in Q2… Operating expenses were $9.5 million… Operating loss…$7 million… Non‑GAAP operating loss…$4.8 million… We ended the quarter with $14.1 million in cash… we generated positive free cash flow of $3.1 million in the third quarter.”
  • Press release (CEO): “We followed our strongest quarter ever with another period of disciplined execution, positive free cash flow, and sustained profitability progress.”
  • Press release (CFO): “We delivered another quarter of positive gross margins and positive cash flow from operating activities… tighter control over inventory, faster receivables collection… also… $2.4 million in net proceeds [from the ATM].”

Q&A Highlights

  • Hubs total addressable market broadening: Demand from AV fleets (e.g., Waymo), utilities, and state agencies; backup power/energy‑resiliency functions launch next year; expectation of sustained double‑digit growth in the EV charging segment and higher margin profile for Hubs .
  • Blue Bird powertrains: 18 shipped in Q3; ~75 additional orders post quarter; Xos to be Blue Bird’s first LFP option; multiple new variants in development for range/capacity; bulk of the 75 to ship in 2026 .
  • Tariff mitigation and pricing: Multistep approach (reshoring, supplier sharing, customer pricing clarity); specific renegotiation with UPS on tariffs .
  • 2026 margin outlook: Mix shift to higher‑margin hubs/powertrains and reduced tariff drag supports the view of noticeable margin improvement in 2026 versus 2025 (no specific guidance provided) .
  • Lease termination payments: ~$2.8M over 18 months (≈$450k–$470k per quarter) following Mesa lease termination .

Estimates Context

  • S&P Global consensus estimates for Q3 2025 (revenue, EPS, EBITDA) were unavailable at the time of this analysis; therefore, a vs‑consensus comparison cannot be presented. Company reported results and guidance are used throughout [GetEstimates returned no data].

Key Takeaways for Investors

  • Sequential execution: Despite a QoQ revenue dip, Xos expanded GAAP gross margin (15.3% vs 8.8%) and produced positive FCF again; operating loss improved to the lowest level since going public .
  • Quality of earnings: Q3 GAAP net income was driven by a $9.4M non‑operating gain from the Mesa lease termination; underlying operations remain loss‑making on both GAAP and non‑GAAP bases, though trending better .
  • Mix evolution as a structural driver: Growing powertrain orders (Blue Bird) and Hub demand (CORE incentive underpins sub‑$100k pricing) should support the higher‑margin mix targeted by management .
  • Tariff risk being actively mitigated: Supplier diversification/reshoring and customer pricing adjustments (incl. UPS renegotiation) reduced volatility and supported Q3 sequential margin gains .
  • Liquidity runway improved: Higher cash ($14.1M), ATM proceeds ($2.4M), extended amortization of the $20M convert to 2028, and lease savings (~$20.7M through 2033) bolster flexibility into 2026 (with ~$2.8M remaining settlement payments) .
  • Seasonal Q4 delivery dynamics: Management flagged typical parcel‑season constraints at key customers in Q4, with deliveries expected to re‑accelerate into Q1/Q2 2026 .
  • Regulatory tailwinds: HVIP’s reopening (CA) supports truck demand; CORE approval materially reduces Hub net pricing, aiding infrastructure deployments .