Xos, Inc.

Good day, and welcome to the EXOS, Inc. Fourth Quarter and Full Year 2025 Earnings Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the call over to David Slaciu, General Counsel. Please go ahead.

Thank you, everyone, for joining us today. Hosting the call with me are Exos' Chief Executive Officer, Dakota Semler, Exos' Chief Operating Officer, Giordano Sorgoni, and Exos' Chief Financial Officer, Diana Pogosian. Today, After the close of regular trading, Exos issued its fourth quarter and full year 2025 earnings press release. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results, as well as commentary on the quarter and year ended December 31, 2025. Management statements today reflect management's views as of today, March 26, 2026 only, and will include forward-looking statements, including statements regarding our fiscal year 2026, management's expectations for future financial and operational performance, and other statements regarding our plans, prospects, and goals. These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results. Additional information about important factors that could cause actual results to differ materially, including, but not limited to, access to the ability to access capital when needed and continue as a going concern, access to the ability to implement business plans and identify and realize opportunities, potential supply chain disruptions and or economic downturns as a result of trade policies and tariffs or war in Iran and shortages of access to oil, energy, and other key industrial inputs is included in today's press release. And then our filings with the SEC, including our most recently filed annual report in Form 10-K, and subsequent filings. We undertake no obligation to update forward-looking statements except as required by law. You should not put undue reliance on forward-looking statements. Further, today's presentation includes references to non-GAAP financial measures and performance metrics. Additional information about these non-GAAP measures, including reconciliations of historical non-GAAP measures to the comparable GAAP measures, is included in the press release we issued today. Our press release and SEC filings are available on the investor relations section of our website at www.exotrucks.com slash investor dash overview. With that, I now turn it over to our CEO, Dakota Semler.

Good afternoon, everyone.

2025 was the year Exos proved something that many doubted was possible, that a young electric vehicle company operating with discipline under real constraints and without the luxury of unlimited capital could deliver a full year of positive free cash flow, grow its customer base, diversify its product portfolio, and emerge stronger on the other side. That is exactly what happened, and it did not happen by accident. For the full year, Exos generated 46 million in revenue on 328 units delivered, more units than any year in our history. Our GAAP gross margin was 5.9%, marking our second consecutive full year of positive GAAP and non-GAAP gross margins. Full year operating loss narrowed 28% to 33.1 million, the lowest since we went public. And our adjusted EBITDA loss was improved 33% to $23.5 million. But the number that I'm most proud of is this. We generated $5.4 million of positive free cash flow for the year compared to negative $49.1 million in 2024. That is a $54 million swing. And in Q4, we delivered our third consecutive quarter of positive free cash flow the fourth time we have achieved that milestone since going public. Those are not just numbers. They are proof that our model works. In Q4 specifically, we shipped strip chassis already on their way to upfitters for a major customer program. Revenue recognized in the quarter was 5.2 million on 34 units, with the balance to be recognized in coming quarters as vehicles are completed and delivered. The signal is clear. Demand is real, customers are returning, and scale is growing. Let me step back and put this year in context because I think the arc of 2025 tells the real story of where this company is headed. We entered 2025 with a clear mandate, grow the business, protect margins, and manage liquidity with discipline. Every quarter, we executed on that mandate, and every quarter, the results compounded. Even amidst a tumultuous environment with frequent tariff changes and complex macroeconomic factors, we prevailed. In Q1, we set the foundation. We continued growing hub production at our Tennessee plant. At the same time, we strengthened our balance sheet and sharpened our cost structure. Q2 was a breakthrough. Revenue hit $18.4 million, the highest quarterly revenue in our history. We delivered 135 units, secured the orders for the largest production program in company history at over 200 units, and proved that national fleets are not experimenting with Exos anymore. They're committing to us at scale. Q3 sustained that momentum. Revenue held strong at $16.5 million on 130 units. Our operating loss dropped to $7 million, the lowest since the company went public, and we achieved our second consecutive quarter of positive free cash flow, demonstrating that this was not a one-time event, but a structural shift in how the business operates. And Q4 capped the year with continued execution. While Q4 is seasonally our lightest quarter, the team kept delivering, fulfilling our 200-plus unit program, scaling Bluebird powertrain production, and preparing the hub platform for its next chapter. Each quarter built on the last. That is what momentum looks like when it is earned, not inherited. Much of our 2025 volume went to organizations like UPS and FedEx ISPs, fleets that do not forgive unreliability, that do not tolerate downtime, and that do not adopt new technology unless they have deep confidence in the engineering and provider's ability to deliver at scale. Their confidence in Exos is earned. It is validated by millions of miles on the road with several customers now exceeding one million miles across their Exos vehicles and evidenced by repeat orders that have grown in size. Our 200 plus unit program represents the shape of the future for Exos. Deeper relationships, larger programs, repeatable volume. These large fleet agreements may compress margins in the near term, but they are the foundation of a durable industrial business. They create the volume and the credibility needed to expand margins over time. I want to personally acknowledge the Algema Automotive Company, whose support of Exos has been unwavering. Together, we amended the repayment structure of the convertible note, moving from a single August 2025 maturity to quarterly installments through February, 2028. This is not just a restructuring. It is a strategic alignment that allows us to operate from a position of focus rather than constraint. Algeme is now our largest shareholder, a strong signal of their conviction in our long-term trajectory. Our collections execution was exceptional this year. Accounts receivable came down from 26.9 million to 6 million, driven by $14 million and Q4 collections alone, including the $9.9 million from UPS. Liana will walk you through the full liquidity picture, but the takeaway is this. We ended the year with $14 million in cash, up from $11 million, while simultaneously paying down obligations and investing in growth. Even as the step van continues to drive substantial revenue, our strategy has never been limited to a single product. In 2025, we deliberately expanded into higher margin, less competitive categories, and that strategy is now delivering real results. Our powertrain business had a breakout year. We delivered 15 powertrain systems to Bluebird Corporation in Q4 alone. And since Q2, we've received nearly 100 additional orders. School districts are electrifying, and our technology, which is modular, reliable, and highly serviceable, is becoming the backbone they trust. Gio and I attended the Bluebird dealer meeting last year, and the engagement from dealers and districts is exciting, and we believe it will translate to a robust pipeline that we expect to convert over the next one to three years. And finally, 2025 saw the emergence of our flagship Exos Hub product line, which we are expanding in 2026. Grid constraints are not a theory. They're the single largest friction point in North American fleet electrification. The hub addresses this head-on. It is not a prototype. It is deployed, it is working, and its impact is expanding far beyond transportation. In 2025, we deployed hubs to utilities, fleet operators, and industrial users. We showcased the hub at RE+, the largest renewable energy conference in North America, where it drew significant attention from energy developers and utilities looking for mobile power, resilience, and peak shaving solutions. The response confirmed what we already knew. The hub addresses a problem almost no one else in the market is addressing effectively. We are now preparing the 2026 hub update offered in three size configurations ranging from 210 to 630 kilowatt hours, delivering greater power resilience, energy cost optimization, and advanced load balancing capabilities. This is not just a charging product. It's a mobile energy platform capable of serving industrial users who require temporary power, peak shaving, and resilience where grid infrastructure is delayed or non-existent. That dramatically widens our total addressable market and positions Exos as an energy company, not just an electric vehicle company. As we look to 2026, The opportunities in front of us are expanding. Order sizes are increasing as customers experience the real-world cost advantages of our trucks and our charging solutions. Our product pipeline, the upgraded hub, our powertrain expansion with Bluebird, and the continued growth of our step-van business align with secular markets that will grow regardless of political cycles, incentives, or noise. I believe 2025 was the year Exos proved it could build a durable industrial business. 2026 will be the year we scale it, and while some may perceive a pullback in the U.S. EV market, Exos keeps pulling forward. We're not just enabling cleaner delivery vans carrying packages. Exos also provides cleaner and more efficient transportation of schoolchildren through Bluebirds powertrains, enables the unloading of cargo vessels and ports with Wiggins, and charges fleets of autonomous rideshare vehicles. There's even an Exos ice cream truck in Sacramento. The breadth and variety of our deployments underscore the foundational strength of our technology and the enormous opportunity that lies ahead. With that, I'll turn it over to Gio to walk through the operational highlights of the quarter and the full year.

Thanks, Dakota. 2025 was a year defined by focused execution, operational discipline, and continued progress towards scalable production. I'll walk through our fourth quarter performance, and then zoom out to highlight our full-year operational achievements across manufacturing, engineering, and the supply chain. In the fourth quarter, we continue to demonstrate consistent production execution across our core product lines at the factory in Tennessee, while also executing on the launch of new powertrain kit variants for Bluebird and preparing for the launch of new mobile charging hub variants. At our Birdstown, Tennessee facility, The team continued building and delivering against our over 200-unit UPS program, maintaining a steady production cadence and reinforcing our ability to execute on large fleet commitments. We expanded our manufacturing capabilities by adding a dedicated production line within our facility for Bluebird kit development, which began producing kits in the second quarter of last year. This expansion of our kit production line marks an important step in scaling our powertrain systems business and supporting external OEM partners like Bluebird. We also initiated the development of a more robust production line for the next generation of our mobile charging hub. We're now offering it in three size configurations ranging from 210 kilowatt hours all the way up to 630 kilowatt hours. This new line layout allows for skilled production at the higher volumes in 2026 while producing several variants on the same production line. From an engineering perspective, our team was focused on developing new powertrain kit variants for Bluebird, as well as improved versions of our charging hubs and improvements on our chassis. At the same time, our supply chain organization remained focused on navigating tariff dynamics while continuing to drive direct material cost impacts where possible. We've resourced some components, localized others, and negotiated with our supply base to share in the costs of the new tariff impacts that we saw in 2025. Stepping back to the full year, 2025 marked a meaningful step in building a more efficient, scalable, and margin-focused operating platform. Our engineering, supply chain, and manufacturing groups worked together to build and deliver over 328 units while reducing operational and direct material costs throughout the year. We also engineered and launched new product variants while improving on existing products and all the while contributing to reductions in overall operating expenses of 28% that Dakota mentioned. In 2025, the engineering team enhanced our vehicle product offering, introduced improvements like galvanized frame rails, which improved long-term corrosion resistance and durability for our fleet customers. These types of targeted upgrades reflect our focus on delivering higher quality, longer life vehicles. The engineering and supply chain groups collaborated to reduce the bill of material costs of the strip chassis by making changes to our design and sourcing strategy. We expanded our engineering and product capabilities, including the development of five distinct powertrain kits to support Bluebird school buses. This work further establishes EXOS as a flexible electrification partner for OEMs looking to benefit from battle-tested powertrains that have driven millions of real-world miles by our fleet customers. At the plant in Tennessee, Our manufacturing team established a production line for powertrain kits and expanded our hub production line. The team built vehicles more efficiently than ever before, reducing the labor hours for a vehicle while building at a rate of three units per day at certain points throughout the year. Building at these volumes for UPS is evidence of Exos' ability to ramp up our supply chain and manufacturing capability to meet high volumes for large national fleet customers. We were also able to negotiate the termination of the Mesa, Arizona lease that we inherited from our merger with Electra Mechanica, which resulted in a total cash savings of $20.7 million. From a supply chain perspective, 2025 was defined by disciplined execution in a volatile environment. The team successfully navigated tariff uncertainty through a combination of strategic stockpiling, cost restructuring, and proactive planning. while also implementing shared risk supplier agreements to help absorb tariff impacts and protect margins. At the same time, we strengthen our battery sourcing strategy by onboarding a top tier global supplier for our hub programs and locking in pre-tariff pricing through 25 and 26. This approach gives us both cost stability and supply continuity as we scale production. We also made meaningful progress in how we manage working capital inventory. The team introduced a more robust annual procurement and inventory planning process, improving forecast accuracy and better aligning spend with our production needs without compromising supply reliability. In parallel, we advanced our supplier strategy by expanding dual sourcing and geographic diversification across critical components, reducing dependency risks while increasing supplier competitiveness and flexibility across the supply base. Importantly, these initiatives translated directly into financial performance. The supply chain team delivered meaningful material cost reductions across key components, contributing to the company achieving positive gross margins. During the year, we were able to maintain or reduce direct material costs despite headwinds from tariffs. And at the same time, we maintained strong supply continuity despite variability in customer schedules and ongoing supplier constraints. proactively managing lead times, inventory levels, and delivery commitments to keep production running smoothly. Overall, 2025 was a year where we improved our product, strengthened our cost structure, and laid the foundation for a scalable growth across trucks, powertrains, and our hub platform. We maintained positive gross margins despite changes in product mix, reserves, and write-downs in 2025. We achieved a 28% cost reduction in operating expenses. We improved our cash position with faster inventory turns. As we look ahead, our focus remains on continuing to drive cost discipline and seek margin expansion. Scaling efficient production across our core multiple product lines and preparing our operations to support increased demand in 2026 and beyond.

With that, I'll turn it over to Liana to walk through the financial results.

Thanks, Gio. Before getting into the details, I want to take a moment to highlight the meaningful progress we made in 2025. This was a year of execution and important milestones across the business, from achieving positive free cash flow for the full year and improving liquidity to driving substantial reductions in operating losses and expenses. At the same time, we took decisive action to strengthen our balance sheet, optimize working capital, and positioned the company for more sustainable long-term growth. For the full year of 2025, revenue totaled $46 million on 328 units compared to $56 million on 297 units last year. We delivered more units year over year, reflecting strong demand, though the shift in product mix driven largely by our strip chassis product and powertrains, resulted in a lower average selling price and a decline in total revenues. For the fourth quarter 2025, revenue was $5.2 million on 34 units, down from $16.5 million on 130 units last quarter and $11.5 million on 51 units a year ago. Revenue is down as a result of our reduced deliveries during the slower time of the year as the company began shifting focus and allocating resources to powertrain and hub production. This quarter's deliveries were mainly driven by our hub and powertrain product lines, including Bluebird powertrain kits, which have generated orders for over 100 units between the second quarter of 2025 and the first quarter of 2026. Turning to gross margin, we continue to make meaningful progress in building a more sustainable and scalable business. For the full year, GAAP gross margin was $2.7 million or 5.9% compared to $4 million or 7.1% in 2024. Performance for the year reflects product mix, including a higher volume of low-margin strip chassis units under the UPS order, as well as certain inventory write-downs associated with our commercialization strategy. Tariffs reflected in cost of goods sold were a meaningful headwind to margins this year. Non-GAAP gross margin for the year was $4.1 million or 8.8% compared to $10 million or 18% in the prior year, driven by the same mixed dynamics and normalization of inventory-related adjustments. Importantly, this marks our second consecutive full year of positive GAAP and non-GAAP gross margins, underscoring the structural progress we've made in our clear path towards margin expansion over time. For the fourth quarter, GAAP gross margin was a loss of $2.6 million, primarily driven by discrete items, including additional inventory reserves and write-offs, due to a shift in the commercialization strategy and warranty reserve updates. Excluding these items, non-GAAP gross margin was a profit of $0.3 million, or 5.2%. While down sequentially, this marks our 10th consecutive quarter of positive non-GAAP gross margin. reinforcing the consistency of our underlying performance and the strength of our margin foundation as we continue to scale. Turning to expenses, our full year 2025 operating expenses were $35.8 million, down $14 million or 28% from $49.8 million last year. These sustained reductions reflect the structural impact of actions we've taken and underscore our disciplined approach to managing the business. Fourth quarter operating expenses were $7.1 million, representing a $2.4 million or 25% reduction from prior quarter and a $3.8 million or 35% decrease from the fourth quarter of last year. Fourth quarter operating expenses benefited from $1.7 million of non-recurring favorable adjustments, related to the settlement of finance, equipment leases, and certain vendor payables. Excluding these items, operating expenses would have been $8.8 million, reflecting continuous sequential improvement from the third quarter and a more normalized run rate. We made strong progress on operating performance in 2025, with operating loss narrowing by approximately 28% to $33.1 million from $45.9 million last year. Non-GAAP operating loss improved by approximately 24% to $24.3 million, reflecting continued momentum toward profitability. Operating loss for the quarter was $9.7 million, higher than the third quarter, mainly due to discrete items mentioned, but significantly improved from $14.6 million in the fourth quarter of 2024. Non-GAAP operating loss improved to $4.6 million compared to $4.8 million in the third quarter and $6.4 million in the fourth quarter of last year. Our full year EBITDA loss was cut by more than half, improving to a loss of $21 million from $42.2 million in 2024. Adjusted EBITDA improved to a loss of $23.5 million from $34.8 million, a 33% improvement reflecting the compounding benefits of cost discipline and operational efficiency. As we've said, our focus this year has been on execution, financial discipline, and strengthening the foundation for sustained growth. And in 2025, we made meaningful progress across each of these areas. We took a series of strategic actions to strengthen our balance sheet and extend our financial runway, ending the year with $14 million in cash and cash equivalents, up from $11 million at the end of last year. This improvement in liquidity was driven by several key factors. First, accounts receivable declined significantly to $6 million at year end from $26.9 million last year. This was driven by another year of very strong collections, approximately $66 million of collections from customers and state grant program administrators. Second, we successfully launched our ATM program during 2025, generating $2.4 million in net cash proceeds during the year. Third, we continued to execute on strategic inventory management with inventory declining to $25 million from $36.6 million last year. This reflects strong unit sales outpacing production as we moved more units from existing inventory while positioning ourselves to support upcoming deliveries. Fourth, we amended our $20 million convertible loan note, extending principal payments to begin quarterly in Q4 2025 through Q1 2028, enhancing liquidity and providing greater financial flexibility. Lastly, In Q3 2025, we reached an agreement to terminate our MESA facility lease, which we had assumed as part of the EMB acquisition. This action is expected to generate approximately $21 million in cash savings through 2023. While the agreement requires 18 monthly payments through March 2027, totaling about $2.8 million, it significantly reduces our long-term obligations. As part of the termination, we also recognize a $9.9 million gain in non-operating income, along with related GAAP adjustments, including the removal of the associated operating lease liabilities. We continue to actively manage our liquidity position throughout the fourth quarter, while advancing additional opportunities to further strengthen it. Together, these actions reflect our disciplined approach to capital management and reinforce our commitment to enhancing financial flexibility and positioning EXOs for long-term stability and growth. Beyond the balance sheet, we continued to execute well operationally. We generated positive free cash flow of $5.4 million for the year, a significant improvement from negative $49.1 million last year. Fourth quarter free cash flow was $2.4 million compared to $3.1 million last quarter and $3.3 million in the same period last year. This marks our third consecutive quarter of positive free cash flow and the fourth time we've achieved positive free cash flow since going public. This consistent performance highlights the strength of our execution and the durability of our operating model. We are building a business that is increasingly self-sustaining with disciplined capital deployment and a clear path to continued improvement in cash generation. Finally, turning to the guidance for 2026. We anticipate revenue to fall within the range of $40 to $50 million, unit deliveries to be within the range of $350 and $500, and non-GAAP operating loss to be in the range of $11.9 to $13.3 million.

With that, I'll turn the call back over to Dakota. Thank you, Liana.

To close, I want to step back to what 2025 really represented for Exos. A year ago, the question many had was whether a company like ours could sustain itself, whether we could grow, manage costs, and generate cash in a market that was still sorting itself out. The answer is in the results. Positive free cash flow for the year, our lowest full-year operating loss since going public, Our second consecutive year of positive gross margins, a product portfolio that is broader, stronger, and more relevant than at any point in our history. None of this happened by accident. It happened because this team questioned assumptions, executed with discipline, and refused to accept that building an industrial company from scratch required cutting corners on quality, on service, or on the ambition of what Exos can become. Stepping into 2026, our priorities remain clear. Accelerate growth, reinforce liquidity, and continue expanding margins. The foundation is built. Now it is the time to scale.

With that, I'll hand it back over to the operator for questions.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you were using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Our first question comes from Craig Irwin with Roth Capital. Please go ahead.

Hey guys, it's Andrew on for Craig. Congrats on the progress and Thanks for taking my questions. The first one for me is on the new hub products you guys announced that you'll start developing in 2026. Can you kind of talk about the opportunities, especially these larger products have with customers, you know, outside of the typical EV charging opportunity?

Yeah, thanks for the question, Andrew, and appreciate you joining. I think there's a little bit of background noise coming from your line. So if it's possible, maybe just a mute, that would be helpful. But in regards to the question on the hub, we really have been focusing on listening to customers over the last year and a half to two years since we rolled out our first units. And what we learned is that there are a variety of different use cases that people have been using them as. Some have been using them as a direct replacement for large DC charging infrastructure sites like our autonomous Car fleet, they charge sometimes up to 80 vehicles a day with a single hub unit. So very high throughput power discharge and charge applications. Some folks have been using them for remote power. One of our utility customers, a big water utility in Southern California, utilizes it for when they do pipeline shutdowns. They'll roll out a hub and all of their EV equipment can charge out in the field when they have a few-day pipeline shutdown. And then we've got other utilities using them for disaster preparedness. When hurricanes come or storms come, they'll roll one out into the field for customers, and it dramatically expands their existing DC charging infrastructure when people are looking to evacuate a specific zone within their territory. So a ton of different use cases, different sizes of vehicles being charged, and different kinds of applications where some are remaining plugged into the grid, some are completely off-grid, some are using mobile gensets to power them. And so the next iteration was really designed to address those different use cases. The first element that we've incorporated is these new energy storage capacities. So we started with a slightly smaller energy storage capacity for really light-duty Class I, Class II pickup trucks, fleets that aren't going to see a ton of throughput on a hub, to be able to offer a more competitive price point. And that product can really be used in lieu of traditional DC fast chargers. We have a lot of customers that are deploying them in fixed applications because it's much more cost-effective than deploying conventional DC fast chargers with their energy storage systems. We have our new kind of mid-tier, what we're going to be calling our flagship variant, which is our 420 kilowatt-hour version. And that's going to replace the last version, which was 280 kilowatt-hours. Competitively priced in the same territory as our previous unit, but you're getting basically another 30, almost 40 percent additional energy storage capacity on that unit. And you're still able to keep that unit sub 10,000 pounds. So you don't need a CDL to drive it around. It can be rapidly deployed with a pickup truck. Just basically building better capabilities, more energy capacity for our customers, but doing it at the same price point. And then that third largest variant, the 630 kilowatt hour configuration, is really designed for our larger battery capacity operators customers that are running medium-duty or heavy-duty trucks that need rapid power deployment. And that's really going to be for your medium-duty trucks, Class 5, 6 trucks like ours, as well as getting into Class 7 and 8 electric zero-emissions vehicles and off-highway products. We actually have a customer now building a large data center in Indiana, and they've inquired about some of their zero-emissions construction products utilizing this larger capacity unit. So it's a perfect application for both on-highway traditional applications that we've been serving for the last year and a half or so, but also a lot of new off-highway construction agricultural type applications too. And that's just the first variant and first kind of product launch that we announced earlier this year. We've got several more announcements and several more upgrades to the hub product configuration that we're going to be talking about probably in Q2 and Q3 that are really exciting about the capabilities and the end-user markets that these new versions will address, which are going to be potentially even larger than the markets that we're serving today.

Great. Well, I appreciate the detail. I'm looking forward to those announcements later in the year. Second one from me, kind of a similar question, but you were talking about, you know, exploring new designs for your powertrain product. Can you kind of just talk about how that may expand the opportunity set as a You know, you ramp that business unit.

Yeah, and specifically in regards to the powertrain products?

Talking about looking at new designs for the powertrain products.

Yeah, so one of the things we've been able to do over the years is taking all the learnings from deploying thousands of our own vehicles on the road and applying that to our other segments, including the hub product and the powertrain products. So we're not starting from scratch. We're building upon a foundation of engineering that we've invested in over the last 10 years. And now those variations that we're selling are being sold into a wider variety of products. So we've talked a lot about our school bus partnership and relationship. We're developing several configurations there addressing the traditional type C school buses, which is the largest part of the market and represents anywhere from 70 to 85% of the market on an annual basis. But we are also developing a rear engine configuration that we're in construction or in production with now for a traditional type D bus, which is in use in places like California and some other markets. And we've really done a lot to focus on commonizing our platforms to drive reliability and service performance in the aftermarket. These buses and trucks are expected to run 10, 15 years in most cases. but also driving cost competitiveness. And that's a key attribute that our customers are interested in. They don't want another premium product that's entirely dependent upon incentives. Everybody wants to be able to scale without being reliant on incentives and subsidies. And so the focus is driving a cost competitiveness to eventually achieve parity with diesel. And by commonizing components, commonizing parts, building supply chain synergies across our product portfolios, we're able to achieve scale even in segments that might be considered niche. So a lot of work has been done by our engineering team to achieve that, and particularly our supply chain team to realize those synergies. And that work is continuing this year. We've got a couple new variants that we're working on that will hopefully ship into production by probably Q4, and I'm sure will continue into subsequent years too.

Thanks for taking my questions, and I'll jump back into you.

Our next question comes from Ted Jackson with Northland Securities. Please go ahead.

Hey, thanks for taking my questions. First thing, just out of curiosity, are you going to file your K today? We are. Okay, good. Oh, sorry, sorry, not the K. We filed the 8K.

The K is going to be filed likely on Monday.

Okay, so there's no, I won't have a cash flow statement from you until Monday.

No, you'll be able to reconcile it on Monday, yeah.

Okay. And then there's a bunch of data in there that, you know, obviously is not available, but I want to get into maybe dance around it unless you want to tell me because I want to bring it forth into 26. So, you know, typically you break out kind of, you know, the revenue within or units within kind of StepBank and Powertrain and others. Can you talk about with regards to what that mix was in the fourth quarter. And then when we think about that mix in 26, how would we think about it? I would assume that there's going to be a shift, if you would, to a greater number of units coming from powertrains and hubs, given what's going on with Bluebird and all the effort you're making with hubs, but maybe a little discussion about how you see your unit mix

evolving from what we've seen you know the fourth quarter and you know really I guess all 25 that's my first question thanks uh thanks for the question uh the unit mix will be disclosed the details of the unit mix will be disclosed in our 10k that we're planning to file on Monday but I would say directionally for 2025 the majority of the units were predominantly step bands and hubs and powertrains made up the remainder of the mix for the full year For the fourth quarter, powertrain and hubs drove the significant volumes with step months being less significant.

And then when we think about 26, given the focus of the company, we should expect to see a pronounced shift to more powertrains and hubs relative to that.

Yeah, I appreciate the question, Ted. And when we're talking about 26, we don't guide specifically to the ranges. However, the rate of growth that we're seeing in both the hub business and the powertrain business is high double digits and could easily exceed, you know, triple digits this year. And so the relative rate of growth is increasing significantly as compared to StepMans. We still anticipate StepMans will grow and sustain a lot of our core customers. But overall, we expect the other two to grow proportionately. to grow increasingly. So I think for, we don't want to put a too rough of a number on it, but I think there's a general consensus that we're seeing a lot of demand, particularly with the new variants of the hub that we've released. And then also a lot of demand with the school bus powertrains that we're building today.

And then those are, you were talking about this last quarter too, Nicole, that those are your higher margin products. And you did kind of allude in terms of a, your discussion of that last quarter that you are making strides, you will do this to kind of share some of the tariff costs with your customers. You know, I mean, you know, you know, on those higher margin products, you won't be able to show up per se, you know, like 100% through to you. But can you talk a little bit about know like how you would see you know i mean because you look at like say your gross margin this quarter and i'm only going to talk uh gap because that's what i have in front of me but you know your gross margin for the year was down i mean would we see a pronounced improvement with regards to gross margin because of the mix i mean could you get yourself north of what you did in 24 or is that too rich yeah so that's a great question so we did have

one-time impacts to gross margins that hit last year that we don't anticipate will be recurring. In regards to gross margins across the portfolio, I would say the hub is probably the strong gross margin one. The powertrains are comparable to what we see in the step-in realm. And the reason for that is there is a lot of engineering effort and investment that goes into development for those new platforms. A lot of that gets amortized over the the overall revenue that we generate from that segment. But comparable to stepvans, hubs definitely and powertrains and stepvans, we do an annual pricing exercise where we try to realign pricing with all of the factors from the previous year taken into consideration. And I don't want to communicate what is going to happen with tariff strategy or tariff policy in the next 12 months, But I think things have slowed down and have become a bit more stable in terms of tariff volatility and tariff changes. And so we anticipate that our 2026 pricing, which factored in a lot of the tariff impacts that we were aware of from last year, will allow us to achieve those target margin ranges without having to go back to the customer and have them make concessions or share in any additional tariff exposure. The way we see it, we're very transparent with these customers around the tariff exposure and the tariff cost structure because it's not benefiting either of us, right? It's increasing your cost basis for the products that we're both building together. And so a high degree of transparency is shared with those customers, and I think that level of transparency creates appreciation for them in order to be able to share in some of those exposure and that cost. But our 2026 pricing does have it factored in.

Shifting over to the UPS program, so the 200-unit program, you know, you've been putting units out to it. Can you give us some kind of sense in terms of, you know, of that program, like how many units have you shipped and how many are left in the timeframe form?

Yeah, the vast majority of them have shipped. There's only a few units that will hit this quarter. that we'll be recognizing revenue for, which they've actually already been delivered, but we still have to meet all of the other revenue recognition criteria. And most of those units are on the road, operating every day, delivering packages. You probably can't tell that they're an excess truck. There's no markings or logos on them. But if it says electric vehicle on the side, very high likelihood that it is an excess truck. And they're running you know, in California and Texas, Pennsylvania, New York, New Jersey, all over the place. And so you probably very likely that if you're in one of those major states or cities, you'll see them on the roads.

Well, that's exciting. I won't see them up here in Minnesota, but maybe someday. How about on powertrain? So, you know, you shipped 15 to Bluebird, you said this quarter, I think it was 10 last quarter. You had a orders of 100 since second quarter. So is it fair to assume that three quarters of the volume that you've gotten from Bluebird is on the column, if you will?

Yeah, that's a good question. We do a lot of close work with their production planning team in coordinating and organizing to ensure that we're meeting their demand forecast. but they're also selling a number of other buses and their alt fuel powertrains. So it does vary and fluctuate quarter to quarter, and it really comes down to their bills schedule. We do anticipate that business will grow, as I was saying before, probably double digits, if not triple digits in terms of percentage this year. And we've already started to see that demand come in with that order of an additional hundred units since our last queue. And the great thing about that business is there's still very, very strong interest in that market. School buses are an ideal application to go electric. They do very short routes, generally driving twice a day, even for some of the longer range vehicles. They're doing field trips and other activities that are not long range vehicles. And we also announced in Q1, actually, an accomplishment that the newer vehicles will actually have V to G capability on them, which is becoming critical for achieving or obtaining funding and public incentive funding for procuring or acquiring these vehicles for school districts. So really for us, we see that application continuing to grow over time and we've been very fortunate to have such an incredible partner like Bluebird that has invested in us, continued to grow with us and continues to share in several of these opportunities because I think they see the reliability, the durability that our platform has brought to them, and they see the cost competitiveness versus some of the other solutions that are out there in the market.

So you provided a good segue into my next question, but I'm going to make it my next question, which is on the two-way charging capabilities that you announced in the quarter. Given that a battery system has so many cycles of charge and de-charge, when you put something like that in place, I'd assume it would change the lifespan, if you would, of that infrastructure. Is there much of an impact for that, and is there any kind of resistance because of it?

Yeah, that's a great question. Any use of the battery or any component in the powertrain is going to have an impact on the overall lifespan. In the context of V to G, the discharge rate for most V to G chargers and V to G vehicles is not nearly the most intense use of the battery pack. The most intense use is often fast charging. So if you're doing 1C charging on the vehicle, that's 1C or 2C charging depending on the battery system. So when you're doing V to G charging, for instance, A typical bus battery for us might be around 200 kilowatt hours. Typical V to G power connection is usually only about 60 kilowatts. So it's equivalent to like a 0.3C charge rate. And without getting too much into the technical specifics, it's a much lower charge demand. So it still does create some degradation, and it's like utilizing the pack, but it's not a very intense use case like... like you have with fast charging. And all of that is factored into our long-term warranties. So we warrant on usage as well as on duration of when the vehicle is deployed. So we have warranty programs, depending upon what the customer wants and what our suppliers want, that will extend that. And we've done a ton of work in qualifying the batteries and characterizing them to make sure that we can hit those warranty periods And really that's largely in part due to the newer battery chemistry that we've been using for the past four years or so, which is our lithium iron phosphate battery packs that enable us to achieve those higher extended life cycles.

Is there an ability for you to retrofit any of your installed base with that capability? I'd imagine you'd be interested in it if you could.

Yeah. So for some of our later generation vehicles that we've recently delivered, We have explored the potential to install the V2G capability. It's a pretty simple hardware change and a software change. We haven't determined whether it's a big enough opportunity to pursue and commercialize and offer it to customers. But from a technical feasibility standpoint, it is something that we've evaluated and feel that we could do that.

I'm going to ask one more, and then I'll get out of line. But I do have more behind in case there's no more. I'm going to cycle back in. But my next question is, just going back into Bluebird and the hub, when you think about the opportunity that you have with Bluebird and the strategic nature of it, it's going to be a big fleet of exos technology, let's just call it. Are they interested in the hub? Is there any chance that you have them as a distribution partner for you for the hub, or do they bring you in for sales and such, because it seems like a logical place for the hub to go?

Yeah, it's a great question. So Bluebird itself have obviously been very interested in the product, but they have an incredibly robust dealer network that they partner with, which is crucial in their distribution of their products. And we've actually already started building relationships with several of their dealers who've been delivering the buses with excess power trains in them. And those folks have been a great touch point to socialize the product for the end school district fleets. So we've already had several of those conversations. We do think there's a tremendous opportunity in those school bus fleets. Oftentimes they don't have the adequate power in their yards because they haven't had EVs in their fleet before, just like most of our customers. So the hub is a perfect application and generally, A lot of these sales, average sale of a school bus transaction, it's not in the 50 to 100 or 200 units. It's very low volumes. It can be single digit units. So the hub really is a perfect partner, a perfect product to be able to support those smaller deployments that don't currently have infrastructure in place. And we're looking to expand that distribution kind of segment with our existing hubs commercial team.

So you would be going into that distribution network with the blessing that Bluebird would not be like OEN or reselling your product into it themselves? That's correct. Okay. I have a couple more questions, but I feel like I've been hogging time, so I'm going to step out and if no one else comes back in, I'll be back in and ask a couple more.

I think in the queue, nobody's asking right now, so I think you can keep going.

Okay, then a couple more for you. Just again, going back in on the new hubs, you were – in your release, you said that they would start becoming available in April, which is next month. Is that still on track?

Yeah. Actually, the first 400-kilowatt-hour variant shipped this quarter, so we have a couple units that are going out, and everything after this will be all of the new options.

Well, that's exciting. Thanks.

that i said i said um and this is a working capital question i mean and you know it's a negative question but i mean honestly it's a negative question because you've had so much positive um you know the the um the improvement in working capital that you guys have done in 2025 is unbelievable it's amazing um but you know and it's been a huge source of your operating cash flow but if i look at you know the balance sheet in the fourth quarter and i see where kind of receivables and everything are I mean, I'm hard-pressed to see that there's much more improvement that you can get. I mean, you know, when you think about 2026 and, you know, your ability to generate cash, is there more cash that you think you can get off the balance sheet, or is it going to be more based on, you know, access at the ATM and, you know, let's call it revenue growth and margin improvement?

Yeah, that's a great question. It's a great question. So the first thing I would start with is on the working capital utilization standpoint, we still have about $25 million in inventory. And not all of that, a very small portion of that is finished goods. But that usable inventory is the primary means of generating more cash for working capital in the year. And we're continuing to focus on the longest segments of our inventory conversion process. to optimize and cut those down to make sure that we can turn that inventory. And we want to be really, really lean. We want to get to multiple inventory cycles per year, which we still have yet to do. So I think the first thing that we're working on is optimizing that inventory, turning it over quicker, building to order, delivering products faster, delivering more strip chassis as opposed to step vans, and delivering more hubs, which is a complete assembly that we build. Same with powertrains, it's a completed assembly, so we recognize revenue as soon as it's delivered. So the product mix will favor that and help that, as well as just our improved processes internally to order spec and get vehicles delivered. We do hope to be able to utilize the ATM in the year ahead. We're going to, you know, figure out when that, when there's an optimal time to be able to do that. But that's why we have that facility outstanding. We are going to be selective about it and we don't want to overly dilute the cap table and impact investors and particularly where the stock is today. And then I think there's other things that we can continue to do and improve. We've taken a pretty hard look at OPEX and we don't believe OPEX is going to be restructured that heavily in 2026. But there are some expenses that will continue to reduce and burn down through the year. which will be favorable for working capital. And then I would say lastly is growth in new segments, like having products such as the hub and the power trains that we don't ever have to deliver a partially assembled vehicle where it's sitting in somebody else's hands, which could be for months on end, will dramatically enable us to reduce that inventory count, that inventory value over time and and speed up our inventory turns. That's a good point.

Then just jumping back over in the hub, and I think I have one more after this, but I think it was the last score you talked about, or in the press release maybe, going into some new avenues with the hub, like power and resiliency. You mentioned that you'd be able to provide some more color on that. Maybe a little update on what's going on. It's a pretty exciting market.

know what's going on with regards to your your efforts to position the hub for that and you know kind of penetrate it yeah it's actually a big area of focus for the engineering team as well as our sales and business development team right now we think that there is a niche that isn't being serviced right now in the power reliability and power resiliency markets not just for mobile applications but also for fixed applications And I can talk about it at a high level, but with the influx of data center demand creating huge demands on the grid for power, every industrial power user is now competing with the likes of those customers, which are willing to pay premiums for power delivery, and they're willing to pay premiums for power reliability and resiliency. And so now folks that operated a 3PL warehouse or a cold storage facility or any other kind of industrial power consumer, they're going to be competing with the likes of Google and Facebook and many of these other larger companies that are incredibly well capitalized, looking to buy power, or even establish behind the meter infrastructure. So our focus is on solving really the niche segment, which is going to be power reliability, power resiliency, and being able to provide those industrial power users that are focused on keeping their operations going and continuing to grow. Data centers is one application, but we believe that's one segment of many that will need power reliability in this kind of current industrial grid environment that we're in today.

Okay. And then my last one is just more for clarity thing for me, and I should know this. You know, when we talk about powertrains, it's almost interchangeable powertrain business and Bluebird. You know, you talked last quarter about 10 shipments to Bluebird, this quarter 15. Is there other customers other than Bluebird that are taking powertrains? Or is Bluebird right now kind of the only thing and it's something you want to build off of?

There are a few other customers. The customer diversity is not nearly what it is in the vehicles business. but it is something that we are working on diversifying and building up new customers there. And I think with our latest powertrain platforms that we've been developing, we should have a lot more interest coming from some other off-highway customers and other segments that we haven't really gotten the best penetration in previous years.

Okay. All right. That's it for me. Thanks for all the time. I appreciate it. Thanks, Ted. Yeah, I appreciate all the questions. This concludes our question and answer session.

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