Xos, Inc.

Greetings and welcome to Exos Inc. fourth quarter and full year 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 comments. Please note this conference is being recorded. At this time, I would like to turn the conference over to the 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 Pagosian. Ahead of this call, Exos issued its fourth quarter 2023 earnings press release, which we will reference during the 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 fourth 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 now turn it over to our CEO, Dakota.

Thanks, Kristen, and thank you, everyone, for joining us to review EXIS's best year to date. On today's call, I will cover highlights from 2023, during which we generated revenues of $44.5 million, delivered 283 units, and achieved positive gross margins in both the third and fourth quarters. Before handing it off to Gio and Liana for operational and financial updates, I will discuss our anticipated acquisition of Electromechanica and the outlook for 2024. Last year, we delivered quarter-over-quarter growth and set new delivery records in each of the third and fourth quarters following the release of the redesigned StepVan platform. As is common practice in our industry, most of our customers build confidence in Exos vehicles by starting with an initial order of 10 or fewer trucks and putting these vehicles through their paces in the real world. Customers then return with larger order sizes that make Exos part of their ongoing vehicle replacement schedule. The initial orders all involve important decisions about the vehicle's use case, total cost of ownership, charging infrastructure, and driver training that differ from the traditional commercial vehicle sales process, making a robust sales program a strategic focus of Exos. Our strong customer pipeline built on the past six years of direct sales propelled us to success with significant delivery volumes to establish customers like Loomis and UniFirst, as well as new customers, including UPS and Canada Post. Direct sales comprise over 90% of our 2023 sales and remain a critical tool in growing our market share. Following the sale, we rely heavily on our dealer partners to service and support Exos vehicles, delivering a high-quality customer experience that directly translates into larger follow-on orders, In 2023, we saw order sizes grow with many of our customers, including Loomis' purchase of 150 vehicles announced in the first quarter, and we expect that our established relationships with globally recognized fleets will continue to differentiate Exos. Our new StepBand platform also contributed directly to our improved financial results. showcasing that Exos' commercial EVs can deliver attractive gross margins without the massive scale and capital requirements cited by many. The new Exos Stepvans exhibit unit gross margins in the range of 6 to 23 percent, in line or exceeding the gross margins of many legacy OEMs. We expect these results will continue to improve the concerted efforts of our engineering and supply chain teams which Gio will describe momentarily. The new step van was also a step forward for our customers, combining longer range with improved payloads and reliability. Over the second half of the year, we delivered over 170 units of the new step van to customers alongside a small population of prior generation inventory. It is a vehicle platform that we plan to leverage for many years, both in the step van market and our powertrain and hub products. Operationally, we pursued a series of difficult and aggressive cost-cutting efforts in 2023 that instilled financial discipline and rigor across the company. By the fourth quarter, we reduced operating expenses by 43% from their peak in the fourth quarter of 2021. Those changes, together with improvements to our gross margins, propel Exos towards our next company goal, positive free cash flow. Our steady march towards positive free cash flow is bolstered by our expected acquisition of Electromechanica. In 2023, we explored multiple options to address Exos' need for growth and working capital. We found a unique opportunity with Electromechanica. Following the discontinuation of their solo EV, Electromechanica conducted an extensive review of all options to deploy their capital and determined Exos offered the best long-term opportunity. Our anticipated acquisition of Electromechanica further underscores Exos' unique position as a leader in fleet electrification. Yesterday, the transaction was approved by shareholders of both Exos and Electromechanica and we currently anticipate to close this upcoming Monday, March 25th. The deal is expected to provide EXOS with over $45 million in additional capital that will provide a secure financial base for many quarters. For reference, EXOS quarterly cash consumption ranged between $2.2 million and $8.5 million in the second half of 2023, excluding our now-completed repayments to Yorkville. The positive impact of the acquisition is hard to overstate, and I thank all of the Electromechanica shareholders for their support in ensuring that Exos remains a leader in commercial EVs for years to come. Following the anticipated close of the transaction next week and the resultant influx of capital to Exos, Exos will continue to make judicious capital allocations in those areas where we anticipate short and midterm gains in our bottom line. We will remain open to outside funding opportunities where it unlocks significant value for both customers and shareholders. However, we do not foresee a need for additional capital to deliver growing volumes of our core products. Turning now to our commercial prospects for 2024. I firmly believe that EXOS has selected the ideal entry point to the commercial EV market with our step van. and further believe that Exos will parlay StepBand's success into other sectors as customer demand and infrastructure readiness grows. For now, we remain wholly committed to the StepBand market and our related powertrain products. That continued focus is reflected in our CapEx and R&D budgets, which remain unchanged following the acquisition. We believe concentrated attention on increased StepBand deliveries is the key to reaching our financial goals. In 2024, our delivery volumes will be bolstered by three major factors. First, we anticipate our established customers will continue to increase their order sizes and make EXOS a part of their routine vehicle procurement cycles. We continue to believe that deliveries will be weighted to the second half of the year as customers race to install charging infrastructure supported by our sales team who have gotten a strong start to the year. Relative to 2023, we expect to see substantially stronger first and second quarters. Second, regulatory pressure combined with customer incentives available in at least 10 states will continue to motivate new and existing customers to adopt EVs. Lastly, the revised StepVan platform is translating into stronger powertrain sales. We have powertrain deliveries planned for Winnebago and a nationally recognized school bus manufacturer in 2024. In addition to bolstered vehicle sales, we have high expectations for the updated Exos Hub. The Hub serves as both a sales enablement tool for step vans and as a high margin product in its own right. We are seeing surging interest and purchase orders from a range of customers, including Xcel Energy and Duke Energy, who have signed sales orders and are beginning to take delivery. Our hub leverages existing power infrastructure at customer sites to provide stopgap EV charging, remote and rescue charging, and low-cost DC charging infrastructure. Each unit can charge up to four vehicles at one time from a single power connection, which many locations already have on site. The hub can also be mounted to a trailer to provide mobile power storage and charging capabilities. By allowing users to forego expensive and time-consuming electrical upgrades, our fleet customers can put newly purchased stepvans into service before permanent charging infrastructure is complete. In many cases, fleets can entirely avoid the uncertain infrastructure installation timelines that have impacted EXOS vehicle delivery schedules. An additional support for hub sales are the recent incentives from the California Air Resources Board Core Incentive Project, which provide up to $160,000 per unit for certain hub purchases. In all, while the hub won't eliminate charging-related delays for our customers, we believe it will meaningfully improve the predictability of our step-van deliveries. I'll now hand it over to our COO, Gio, for an operational update.