Xos, Inc.

Greetings and welcome to EXOS Inc's second quarter 2023 earnings call. At this time, all participant lines are in a listen-only mode. For those of you participating in the conference call, there will be an opportunity for your questions at the end of today's prepared remarks. Please note this conference is being recorded. At this time, I would like to turn the conference over to General Counsel of EXOS, Christian Romero. Thank you. you may begin.

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 Acting Chief Financial Officer Liana Boghossian. Ahead of this call, Exos issued its second quarter 2023 earnings press release, which we will reference during this call. This can be found on the investor relations section of our website at investors.XSTrucks.com. On this call, management will be making forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. For 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 second quarter 2023 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 for our second quarter 2023 earnings call. On today's call, I will cover the quarterly business highlights, provide an update on our vehicles and energy solutions deliveries, and share the latest on the regulatory tailwinds supporting the industry. Then, our COO, Giordano Sordoni, will provide an update on our manufacturing efforts. To wrap up, our acting CFO, Liana Pagosian, will share the company's second quarter financial performance. I will begin by discussing our deliveries and the growing demand we are seeing for our vehicles. During the second quarter, we delivered a total of 38 units, modestly higher than the first quarter. Deliveries in the quarter were negatively impacted by customer charging infrastructure delays that pushed some planned second quarter deliveries into the second half of this year and into 2024. In light of our deliveries in the first half of the year, we have elected to revise our full year 2023 guidance to 250 to 350 units delivered and associated revenue and non-GAAP operating loss expectations, which Liana will cover later. The updated ranges reflect both slower than anticipated deliveries and higher than expected ASPs. driven largely by customer uptake of the long-range 200-mile step van variant. Our success in generating follow-on orders from large national accounts gives us confidence in achieving these targets. We're seeing the benefits of our sales approach focused on long-term customer relationships with orders like the 30 units for Unifirst that we announced last week as part of a 200-unit memorandum of understanding we signed in 2021. We also expect to deliver between 120 and 150 vehicles to repeat customer Loomis in the second half of this year. Additionally, we are seeing more customers bringing charging infrastructure online, spurred on by the Inflation Reduction Act and advanced clean fleets rules, many of our customers began investing in charging infrastructure at the beginning of 2023, and we expect these chargers to come online over the next 12 months. Turning back to the second quarter, we successfully produced and shipped our first gross margin positive units. These units are the first 2023 Stepvans shipped to customers, and we expect our financial performance to continue to improve as we scale production. This is an exciting milestone for both Exos and the industry as we are among the first OEMs to demonstrate that commercial EV trucks can be produced profitably. We do still have a number of previous generation trucks in inventory and on their way to customers that will have a negative impact on company gross margin performance through the rest of this year, even as we expect to deliver gross margin positive units throughout the second half of 2023. Moving now to excess energy solutions and charging infrastructure. As a company, we underestimated the challenges for the EV truck industry in installing new charging infrastructure. However, the outlook is improving for last mile fleets we serve, both in growing demand for our suite of comprehensive charging services and in growing infrastructure investments by customers at the time of vehicle purchase. Though charging infrastructure will remain a constraint on EV truck adoption, we anticipate improvement through 2024 will be motivated by incentive capture and emissions mandate compliance. In addition to our permanent charging infrastructure projects, we are also seeing growing interest in the second-generation EXOS hub. As you may recall, the hub is capable of charging five vehicles at the same time from a single power connection. enabling fleet operators to transition to EVs before installing permanent infrastructure. These capabilities are bringing a diverse set of customers to the table, from fleet operators to utilities and construction companies looking for off-grid power solutions. Shifting to the regulatory environment, recent changes are driving demand for Exos' vehicles. In California, the Advanced Clean Fleets, or ACF, rule requires medium duty fleets, including step vans, to transition to zero emissions vehicles. By 2025, large fleet operators in California will be required to have 10% of their fleet be zero emissions vehicles. This means that thousands of step vans over the next two years will be required in order to comply in California alone. Outside of California, 14 other states have signed a pledge for 30% zero emissions fleets by 2030. The ACF rule is administered by the California Air Resources Board, or CARB, which has a history of setting aggressive targets and strictly enforcing them. California fleets experienced a similar event in 2008 with the passage of CARB's California Statewide Truck and Bus Rule. At the time, the rule required all new trucks to comply with lower particulate emission standards and eventually required the phase out or retrofit of older engines. While most fleets anticipated this landmark legislation to be challenged or delayed, the implementation proceeded as planned, with the final phase out of older diesel engines having occurred in 2022. We expect CARB to enforce the ACF rule with the same rigor, including fines for noncompliance. Our conversations with customers reflect the seriousness of the new zero emissions mandates. We have received orders and are delivering vehicles that will bring a number of California fleets into compliance. Where step van fleets are not yet on track to comply, the limiting factor is typically charging infrastructure. which is why Exos Energy Solutions remains such a focus for us. On the incentive front, we are seeing a strong uptake of the $40,000 IRA tax credit and additional incentives available in 11 states covering 42% of the U.S. population. In some cases, the stackable federal and state incentives bring the cost of an Exos step van meaningfully below the purchase price of a diesel alternative. providing a total cost of ownership advantage on day one. I would like to stress, however, that we do not need to and are not relying on these incentives to support customer purchasing decisions. Our vehicles already offer a compelling TCO advantage on an unsubsidized basis. Finally, before I wrap up, I would like to discuss our focus on cost efficiency. During the quarter, we set aggressive operational expenditure reduction targets. and have made meaningful changes in order to achieve them. First, we reduced our spend on a range of overhead costs, including subscription software, insurance, and professional services. Second, we made the difficult decision to reduce our headcount during the quarter. We remain committed to building a sustainable business with the appropriately sized workforce. This is never an easy decision to make, And I would like to thank every Exos employee for their support in achieving our mission. Finally, heading into the third quarter, we prepared to bring our manufacturing in-house, which Gio will cover shortly. We are confident that these actions have placed Exos on the right path to profitability without sacrificing our growth targets. With that, I would now like to turn the call over to our COO, Gio Sordone, who will share an operational update.