Xos' Q3 2025 Earnings Call: Contradictions Emerge on Hub Growth, Tariff Strategies, and Margin Outlook

Date of Call: November 13, 2025

Financials Results

• Revenue: $16.5M on 130 units, down from $18.4M on 135 units sequentially; up from $15.8M on 94 units YOY
• Gross Margin: GAAP 15.3% in Q3 2025 vs 8.8% in Q2 2025 and 18.1% in Q3 2024; non-GAAP 16.0% (up from 1.4% in Q2)
• Operating Margin: Operating loss $7.0M in Q3 2025, improved from $7.1M in Q2 2025 and $9.7M in Q3 2024

Guidance:

• Revenue FY2025 expected $50.2M–$65.8M
• Non-GAAP operating loss FY2025 expected $24.4M–$26.9M
• Unit deliveries FY2025 expected 320–420 units

Business Commentary:

* Revenue and Unit Deliveries: - Xos reported revenue of $16.5 million for Q3 2025, shipping 130 vehicles, with expectations of 320 to 420 units for the year. - The decline in revenue compared to the prior quarter was due to a shift in product mix, with more powertrain units and stripped chassis reducing the average selling price. - The company continues to experience strong demand from customers like UPS and FedEx.

• Gross Margin Improvement:
• Xos achieved a GAAP gross margin of 15.3% in Q3, up from 8.8% in the previous quarter.

• The improvement was driven by changes in product mix, including more powertrain units and higher ASP from UPS deliveries, despite challenges from tariffs.

• Operational and Financial Discipline:
• The company reported a record low operating loss of $7 million, a significant improvement from the previous quarter and year-over-year.

• This was achieved through cost-cutting actions, disciplined operations, and strategic inventory management, reflecting strong execution and financial discipline.

• Powertrain and Hub Growth:

• Xos delivered 18 powertrain systems to Blue Bird Corporation in Q3 and received nearly 80 additional orders since then.
• The growth is attributed to increased electrification in school bus fleets and Xos' modular, reliable powertrain systems.

Sentiment Analysis:

Overall Tone: Positive

• "momentum was unmistakable," record deliveries and "lowest operating loss since the business went public of $7 million," positive free cash flow of $3.1M, strengthened cash to $14.1M, and management "reaffirming our full year 2025 guidance for revenue and unit deliveries."

Q&A:

• Question from Andrew Scutt (ROTH Capital): How should we think of the expanded opportunity for the Hub platform now, including autonomous and backup power use cases?
  Response: Expect double-digit growth for Hub charging next year; power-resiliency/backup features launching next year and represent a larger, higher-margin opportunity beyond EV charging; no specific volume guidance yet.

• Question from Andrew Scutt (ROTH Capital): Can you talk about customer feedback and what's driving the accelerated chassis/powertrain orders from Blue Bird (mentioned ~80 orders post-quarter)?
  Response: Blue Bird partnership is gaining traction—~75 follow-on powertrain orders post-quarter; Xos supplied new LFP and short-wheelbase variants that customers value; significant school-bus growth expected into 2026.

• Question from Andrew Scutt (ROTH Capital): You reiterated 320–420 unit guide—what are the puts and takes reaching the high and low end of that guide?
  Response: Q4 is seasonally lighter for parcel customers (peak operations), but powertrain and Hub deliveries should help the company remain within the 320–420 unit range.

• Question from Edward Jackson (Northland Securities): On tariffs—have you been able to price adjust across your product offering or will impacts continue?
  Response: Using a multistep mitigation: reshoring/domestic content, supplier cost-sharing and negotiated customer cost-sharing to reduce exposure rather than full pass-through.

• Question from Edward Jackson (Northland Securities): You shipped 18 powertrains—did any Hubs ship during the quarter?
  Response: Yes, incremental Hubs were delivered in the quarter, but the company does not disclose a detailed breakout between powertrains and Hubs.

• Question from Edward Jackson (Northland Securities): Will the ~75 follow-on powertrain orders ship in 2026?
  Response: Yes—the bulk of the follow-on Blue Bird powertrain orders are expected to ship in 2026.

• Question from Edward Jackson (Northland Securities): What margin improvement do you expect in 2026 given mix shift and tariff mitigation?
  Response: No formal 2026 guidance, but management expects mix shift to higher-margin products to improve margins; trucks range from low-teens to mid-20s% gross margin, powertrains/Hubs broadly ~15–35% (Hub at higher end).

• Question from Edward Jackson (Northland Securities): Clarify the Mesa lease termination payments and outlook for working capital improvements (DSOs, inventory)?
  Response: Termination requires $2.8M payable over 18 months; management expects continued working-capital improvement and shorter DSOs driven by mix shift away from incentive/grant-funded sales and stronger collections.

• Question from Edward Jackson (Northland Securities): Competitor (Harbinger/FedEx) raised large capital—does this change your view of FedEx relationship or competitive dynamics?
  Response: Sees competitor financing as validation of the market and capital availability; FedEx remains a strategic customer, fleets use multiple suppliers, so additional competitors validate demand rather than threaten the relationship.

Contradiction Point 1

Hub Platform Growth and Market Expansion

It reflects differing perspectives on the growth trajectory and market opportunities for the Hub platform, which is a critical aspect of the company's business strategy.

How should we assess the expanded opportunity for the Hub platform given increased activity in autonomous vehicles and backup power applications? - Andrew Scutt (ROTH Capital)

20251114-2025 Q3: The Hub opportunity remains in double-digit growth, supported by fleet customers and customers beyond Xos trucks like Waymo and Caltrans. Power resiliency and backup power functions are upcoming, offering a significant growth market beyond EV charging due to rising power costs and limited commercial energy storage adoption. - Dakota Semler(CEO)

How should we view the expanded opportunity for the Hub platform in autonomous vehicles and backup power applications? - Andrew Scutt (ROTH Capital Partners, LLC)

2025Q3: The Hub opportunity continues to grow in the EV charging segment, supported by fleet customers. The power resiliency and backup power functions are expected to launch next year, providing significant growth opportunities beyond EV charging. - Dakota Semler(CEO)

Contradiction Point 2

Tariff Impact and Management Strategy

It highlights inconsistencies in the company's approach to managing tariff impacts and its potential effects on operations and customer relationships.

Have you fully adjusted pricing for tariffs across your product line, or is an impact still expected? - Edward Jackson (Northland Securities)

20251114-2025 Q3: A multi-step approach includes reshoring, sharing tariff exposure with suppliers and customers, and working towards long-term pricing stability. Direct price adjustments are part of the strategy, and efforts are focused on reducing the impact of tariff volatility on operations and customer relationships. - Dakota Semler(CEO), Giordano Sordoni(COO)

Have you adjusted pricing to offset tariff impacts, and what steps are you taking? - Edward Jackson (Northland Capital Markets)

2025Q3: A multistep approach is being taken, including reshoring domestic content, sharing cost volatility with suppliers and customers, and working together to share tariff exposure. The aim is to reduce acquisition costs and achieve near price parity with diesel vehicles. - Dakota Semler(CEO)

Contradiction Point 3

Margin Improvement and Product Mix

It involves differences in the company's expectations for margin improvement through shifts in product mix, which is crucial for financial performance.

How will recent tariff changes impact your margins this year and next year? - Edward Jackson (Northland Securities)

20251114-2025 Q3: The margin mix will shift towards higher-margin products like powertrains and Hubs starting in 2026. This shift is expected to improve margins, with some specifics not provided but indicating a noticeable improvement in 2026 compared to 2025. - Dakota Semler(CEO)

Will the 75 new powertrains ship in 2026, and how will this impact 2026 margin improvements? - Edward Jackson (Northland Capital Markets)

2025Q3: Approximately 75 incremental powertrain orders since the quarter close, all expected to ship in 2026. The mix shift towards higher-margin products like powertrains and Hubs will likely improve margins in 2026. - Dakota Semler(CEO)

Contradiction Point 4

Tariff Impact and Mitigation Strategy

It involves the company's approach to dealing with tariffs, which can significantly impact operating costs and profitability, affecting investor sentiment.

Have you fully adjusted pricing for tariffs across all products, or is an impact still expected? - Edward Jackson (Northland Securities)

20251114-2025 Q3: A multi-step approach includes reshoring, sharing tariff exposure with suppliers and customers, and working towards long-term pricing stability. Direct price adjustments are part of the strategy, and efforts are focused on reducing the impact of tariff volatility on operations and customer relationships. - Dakota Semler(CEO), Giordano Sordoni(COO)

How much of a headwind were tariffs for Xos? - Craig Irwin (ROTH Capital Partners, LLC, Research Division)

2025Q2: The tariff impact varies by product and customer. At the lowest end, it's about 5% of ASPs, and at the highest, it can be up to 15%. Xos shares the direct cost of tariffs with customers, demonstrating a fair and responsible approach. The company actively monitors the tariff situation and works closely with customers to mitigate exposure. - Dakota Semler(Co-Founder, CEO & Chairman)

Contradiction Point 5

Margin Improvement and Product Mix

It relates to the company's financial performance expectations, specifically around margin improvement, which is crucial for investors to anticipate future profitability.

What is the impact of recent tariff changes on margins and how you expect them to affect next year? - Edward Jackson (Northland Securities)

20251114-2025 Q3: The margin mix will shift towards higher-margin products like powertrains and Hubs starting in 2026. This shift is expected to improve margins, with some specifics not provided but indicating a noticeable improvement in 2026 compared to 2025. - Dakota Semler(CEO)

Will Blackwell's Q4 revenue be additive, and what is the expected exit rate for gross margins? - Stacy Rasgon (Bernstein Research)

2025Q2: Gross margins for Q3 are expected around 75%, with full-year guidance in the mid-70s. - Colette M. Kress(CFO)