Xos, Inc.

Greetings, and welcome to EXOS, Inc.' 's third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star then zero on your telephone keypad. As a reminder, this conference is being recorded. At this time, I would like to turn the conference over to General Counsel of EXOS, Kristen Romero. Thank you. You may begin.

Thank you, operator, and thank you, everyone, for joining us today. Hosting the call with me today are Chief Executive Officer Dakota Simler, Chief Operating Officer Giordano Sordoni, and Chief Financial Officer Kingsley Efimiki. Ahead of this call, EXOS issued its third quarter 2022 earnings press release and a presentation, which we will reference during this call. This can be found on the investor relations section of our website at investors.exostrucks.com. On this call, management will be making forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect because of factors discussed in today's earnings news release during this conference call or in our latest reports and filings with the Securities and Exchange Commission. These documents can be found on our website at investors.exostrucks.com. We do not undertake any duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures and performance metrics. Please refer to the information contained in the company's third quarter 2022 earnings press release for definitional information and reconciliations of historical non-GAAP measures to the comparable GAAP financial measures. Participants should be cautioned not to put undue reliance on forward-looking statements. With that, I'll turn it over to Dakota.

Thanks, Kristen. And thank you everyone for joining us today for our third quarter 2022 earnings call. We appreciate everyone joining the call and are excited to share with you the progress made and challenges faced during the quarter. We will also discuss steps made to evolve our organization to respond to the dynamic external environment. During our call today, I'll cover deliberate decisions we made as a team to set up EXOS for success in the coming quarters. I will then review quarterly business highlights, our new charging infrastructure solutions, and other updates since the end of the quarter. GEO will provide an update on the manufacturing operation and our supply chain. And to wrap up, Kingsley will provide a detailed review of our third quarter financial results and our outlook for the second half of 2022. In this uncertain environment, we've dedicated considerable time understanding customer demand, our delivery capabilities, the constantly evolving supply chain, and the economic environment. We have worked diligently over the past two quarters to align our internal plan with these external realities. This has led to several deliberate decisions to set the company on a trajectory for future growth and success. These decisions focus on three key metrics, demand, margins, and liquidity. We continue to see demand and sales growing triple-digit percentages year over year and will capitalize on this growth with our revised plans, which I'll share with you now. First, we've received several repeat orders from large national accounts. Customer feedback is positive, and our breadth of customers and backlog has increased substantially. However, the timeline for customer deliveries has increased due to delays in installing charging infrastructure. We've implemented an internal project to accelerate the delivery of infrastructure to customers which I will cover in further detail. We have right-sized the organization to reduce operational expenses. Part of this initiative is focusing R&D in the near term on products such as the StepVan and Exos Hub that we believe will help drive profitability next year and in subsequent years. We have simplified our manufacturing operations and supply chain, focusing efforts on our flex manufacturing site in Tennessee. These cost-saving measures will also reduce the number of days in process inventory and benefit working capital in the future. We have launched an internal project to align the organization on achieving gross margin positivity by the end of the first half of 2023. We believe that we will achieve this goal through a combination of pricing action, lower product costs, and lower overhead costs. Finally, We continue to have access to capital as we close two convertible notes with investors during the third quarter, and we expect to access additional debt financing via an ABL and receivables financing in the near future. These decisions better position us to continue growing deliveries, achieve positive gross margins, and access capital to scale the business. We are building a robust sales and customer support organization and we're seeing continued strong demand for our products, as our revenue for the third quarter of 2022 was $11 million, up 12% compared to the second quarter of 2022. During third quarter of 2022, we continued our North American expansion with 88 units delivered across 15 North American cities during the period. These vehicles went to existing customers, such as Merchant's Fleet, and FedEx ground operators across four states, as well as new commercial EV customers. The demand for excess vehicles in last mile delivery applications has not slowed, although regular seasonality in the last mile delivery sector during the peak holiday shipment season is expected. However, we are reaffirming our half-year guidance, which anticipated fourth quarter seasonality. We also announced the expansion of Exos Energy Solutions with a suite of five new types of Exos DC fast chargers that are compatible with both Exos and other commercial electric vehicles, enabling a wide range of charging applications. Charging infrastructure deployment is the largest hurdle slowing our pace of deliveries. We have expanded the Exos Energy Solutions team, which now uses a robust managed process to help customers secure charging infrastructure as quickly as possible. This team provides turnkey infrastructure, starting with site evaluations, site engineering and design, permitting, planning, construction, installation, and commissioning of fleet charging infrastructure. Several customers have made use of these services, including Loomis and Unifirst, which have deployed charging infrastructure at multiple sites across the country. These services are helping improve the pace of customer deliveries and will also improve our margins. In addition to our infrastructure solutions, I'd like to cover other highlights over the last few months. We announced a strategic partnership to expand our leasing and distribution network with National Lease, one of the largest full-service truck leasing organizations in North America with over 900 locations and over 165,000 vehicles in its fleet. With this partnership, Exos' vehicles and services will be listed as part of the offerings from National Lease. Additionally, we also named WW Williams as a pilot service provider to support Exos customers with world-class service and maintenance. Subsequent to the end of the third quarter, we introduced an extended service contract offering in partnership with National Truck Protection Co. Inc., the leading aftermarket truck extended service provider in the U.S. and Canada for Class 2 through 8 commercial vehicles. This extended service contract is expected to help decrease the total cost of ownership, or TCO, for our step vans and create an enhanced overall ownership experience for our customers. Additionally, we are making several changes to the step van platform. focused on improving both fleets' total cost of ownership and Exos' gross margins. This past quarter, Exos unveiled new features for our Advanced Driver Assistance System, commonly known as ADAS, to all of our stepfans. Such features will become standard in Exos vehicles going forward and will help fleets save on insurance, repair, and driver safety costs. In an effort to further reduce direct material costs, We began work in early 2022 to integrate more cost-effective battery cells into our vehicles. This includes making use of more affordable chemistries, such as lithium iron phosphates, for less weight-sensitive commercial vocations, such as parcel delivery. This has been part of our ongoing development plans for some time, and we expect to launch multiple new battery configurations in 2023. We will continue producing our Lyra battery line for powertrains weight-sensitive vocations, and service parts. In addition to increased battery options, we've conducted value analysis and value engineering activities that have managed to reduce material usage and assembly steps significantly. In some high-cost components like high-voltage harnesses, this has led to savings of roughly 50% on direct material costs. We are making great strides to help our customers improve safety and consequently lower the total cost of ownership while also reducing direct material costs. With that, I will now turn the call over to Gio.