Q3 2023 Xos Inc Earnings Call
Greetings and welcome to <unk> third quarter boutique twenty-three 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.
Today's prepared comments. Please note this conference is being recorded.
If you require operator assistance. Please press Star then zero.
At this time I would like to turn the conference over to the general counsel of XO.
Christian Romero. Thank you you may begin.
Thank you everyone for joining us today hosting the call with me today are Chief Executive Officer of Dakota, similar Chief operating Officer, Giordano, Sordoni and acting Chief Financial Officer, Leon up negotiating ahead of this call excess issued its third 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 that excess trucks dot 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 ex those trucks dotcom.
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.
He has referenced.
Information contained in the company's third quarter 2023 earnings press release for Definitional information and reconciliations of historical non-GAAP measures is the comparable GAAP financial measures participants should be cautioned not to put undue reliance on any forward looking statements with that I'll turn it over to you to close.
Thanks, Christian and thank you everyone for joining us to review access is the most profitable and highest revenue quarter yet on.
On today's call I will cover highlights from the quarter during which we delivered 105 units and achieved positive GAAP gross margins next our C. O O Giordano slow down he will provide an update on our manufacturing efforts.
Include our acting CFO Liana for goes and well share the company's third quarter financial performance.
We are excited to report that deliveries were up 175% over last quarter.
Importantly, we demonstrated our ability to scale unit volumes and simultaneously expand margins.
Importantly, our cost reduction efforts and investment in process improvements over the past 12 months paid off.
We attained a GAAP gross margin a positive 11, 9% and unit gross margins of up to 20%.
This positive performance gives us the headroom to achieve margins in line with best in class commercial truck Oems much.
Much of our ability to deliver more vehicles than ever aim for.
From the improved manufacturer ability of the 2023 step and such.
Such gains and manufacturing efficiency will continue to support delivery volumes in the fourth quarter and beyond.
Our diverse customer mix for the quarter underscores the continued demand we see for T O competitive EV trucks.
The majority of our deliveries this quarter went to large fleets like Loomis Aramark and Canada Post where trust was built over months of operating extra step vans.
Suites, typically follow a more regimented vehicle replacement cadence and smaller fleets, which translates into more predictable volumes for ex us.
Deliveries to small fleets were more impacted by macroeconomic concerns and contracted slightly this quarter.
However, this was more than compensated for by the large increase in deliveries to national fleets.
We anticipate that our strong delivery numbers this quarter will translate to a strong fourth quarter Boeing partly to the more consistent demand and charging infrastructure readiness of larger fleets.
We also had commercial victories in the public sector, where the California state government selected excess as an approved vendor.
This enables government fleet statewide to freely purchase access vehicles being normal procurement processes and limits the ability of our competitors to serve the same market.
Beyond step vans, we achieved an important milestone with the excess hub, our mobile charging solution.
We want approval for the core incentives from the California Air Resources Board or carb that covers up to $160000 for off highway vehicle charging applications.
Immediately following approval, we saw an uptick in customer interest for deployment to construction sites ports and other eligible sites.
Our powertrain business also saw an uptick in interest from school bus and RV Oems were established manufacturers are looking for a dependable EV powertrain solution.
In particular, a number of new parties came to the table following the per care of bankruptcy, which provided an opportunity for their customers to consider a more cost competitive alternative.
Turning now to positive momentum in the regulatory environment.
It's October California's Secretary of state.
The final version of the advanced clean fleets or ACF rule with an effective date of January 1st 2024.
ACF requires fleets in California, either purchase only zero emission vehicles going forward or adopt a series of zero emission milestones for their fleets.
The regulation applies to any fleet, operator, with either more than $50 million and global annual revenues of more than 50 medium or heavy duty vehicles in operation.
This includes the vast majority of the excess is California customers will be required to either purchase only zero emission vehicles. After January one 2024 or meet the first milestone of 10% in zero emission vehicles by January 1st 2025.
We anticipate that most of our customers will opt for the milestones, which will allow fleets to comply by purchasing increasing numbers of easy step vans.
We expect that to step up purchase requirements will stimulate significant commercial EV demand.
The first milestone in 2025 requires 10% ownership of zero emission vehicles by existing California step vans fleets and will require thousands of new EV vehicles in California alone.
I was one of the only option for EV step and access is well positioned to capitalize on this near term demand.
Future milestones of 25 per cent Evs by 2028, 50% Evs by 2031, and 75% <unk> by 2033, and 100 per cent Evs by 2035.
We will support the industry for more than a decade.
The ACF rule includes a shortlist of exemptions available on a case by case basis to account for charging infrastructure delays and vehicle availability concerns.
Such exemptions include time allowances for delays and charger installations and utility got upgrades as well as the exemptions for vehicles with range and power requirements not yet met I E D's.
Charging delay extensions will likely spread some of the 2025 milestone demand over a longer period of time, but will also encourage fleets to prioritize charging investments.
Approval for an ACF extension requires an in progress charging plan and documented evidence of slowdowns from contractors utilities and or equipment suppliers.
Importantly, the vast majority of the step van market, we serve will not be eligible for Acs vehicle availability exemption as our long range step and satisfies the vast majority of operational routes.
Further no exemptions are available to fleets that havent already met the 10% milestone.
In summary, <unk> is positioned for success.
As the leader in our sector, we have delivered more class five and six easy step vans than anyone else.
He's a lofty gross margin goals and reinforce our strong backlog and customer pipeline.
Combined with a robust regulatory regime. We believe access is that a positive inflection point and on the horizon of a bright future.
With that I will turn the call over to our CLO DSO Downey, who will share an operational update.
Thanks Dakota this.
This quarter, we achieved a new milestone in the Tennessee factory.
Maybe by customer demand.
Continuous improvement and a dedicated team we sustained build rate in excess of 700 step turns per year.
The team maintained this production rate for over a month underscoring our ability to deliver substantially higher volumes without additional capex investments.
We expect to regularly achieve and beat this production rate so progressively longer periods over the coming quarters.
Improvements in factory efficiency, such as simplified vehicle assembly processes and reduce shipping costs also contributed to our positive gross margins.
We channeled lessons from five years of building step and into our 2023 design.
Our team implemented important changes that resulted in a simplified build process and better shielded us from supply chain variability.
Increased use of sub assemblies reduce congestion on the production line and minimize the impact of part availability disruptions by allowing more components of the step down.
Ambled synchronously.
Implementing these processes required close collaboration from our manufacturing engineering and supply chain teams throughout the design validation and launch phases of our gross margin positive step it.
I'm proud to share that team's accomplishments and their positive impact on our overall delivery efforts.
To take advantage of our new sub assembly driven production line, we invested in the systems training and the tools used by our manufacturing team.
Better integrated our product lifecycle management tools with our manufacturing execution systems.
Vehicles on the Assembly line are being built with digital work instructions and quality check stations built directly into the process.
A slow builds conducted with our engineering and manufacturing teams allowed us to unlock additional efficiencies in the design and on the factory floor.
Improvements to our work order systems and assembly instructions reduce downtime decreased quality issues.
Additionally, as a result of a complete transition to in house manufacturing.
We reduced labor cost per vehicle and better leverage our in house metal fabrication capabilities.
Building more parts in house, we eliminated supplier margins and freight costs and accelerated implementation of design updates.
Finally, I'd like to provide an update on our supply chain.
We believe that things have settled into the new normal.
Some disruptions remained for capacity constrained vendors, but for the most part concerns have shifted from part availability pricing and managing inflationary pressures.
Wiring harnesses remain challenging for the entire industry and occasionally disrupted perhaps slides. However, most vendors are meeting our volume expectations and our supply chain team has turned their focus to improvements in purchasing terms to reduce.
The working capital health of inventory.
I'll now turn the call over to our acting CFO Anastasia.
And he will cover our financial results for the quarter.
Oh, yeah, well the third quarter, our revenue increased to $16 7 million sounds quaint 8 million in the second quarter of 'twenty 'twenty thing.
Cost of goods sold during the quarter increased to $14 7 million compared to $8 5 million in the second quarter of Tony's fine with me.
Largely as a result of our includes celebrate.
GAAP gross margin during the quarter was a profit of 2 million compared to a loss of $3 7 million last quarter.
Margin improvement was driven by higher average selling price from the 23 model years, but not at the level in the current quarter.
Additionally, the company achieved a quarter over quarter reduction in direct material direct labor and overhead costs on a per unit basis.
What are the realization of previous investments in R&D and continued focus on cost reduction through strategic sourcing.
But this write downs from physical inventory counts as well as in the lease up of inventory reserves related to solve units also contributed to our in person.
It should be noted that GAAP gross margin for a vehicle I am I am passing by a range of reserve that's combined with changes in sales mix to think the rack and prior model inventory health introduce higher levels of volatility and quarterly results for this reason we continue to chair our consistent non-GAAP gross margin and you can find in today.
<unk> earnings press release.
Turning to expenses, our third quarter operating expenses decreased to $14 6 million.
$16 8 million in the prior quarter driven in part I think Jones Lang without selling bauxite.
non-GAAP operating loss for the third quarter was not.
I think I'll go quite out with cash and cash equivalents of 22.
I'm carrying about 27.8 million at the end of the second quarter.
In addition to cash using operating activities, we used $10 1 million during the third quarter in financing activities, primarily related to payments on our convertible debentures with yourself.
P M S. T R I scheduled to conclude in the fourth quarter.
We continue to evaluate financial and strategic alternatives to provide additional liquidity and fund the business plan.
Inventory drop to $48 9 million in the third quarter from $55 5 million last quarter.
A combination of password sharing and sell down of our Romanian prior generations, but that is I'm sorry.
We anticipate inventory levels will continue to decrease next quarter.
Operating cash flow less capex or free cash flow of negative eight 5 million for the quarter was significantly more than negative.
$10 8 million last quarter. This change reflects the meaningful reduction in our run rate in prior quarters, and we continue to see reductions in cash burn on a month over month basis.
Coming off our solid quarter, thus far we are reaffirming our full year 'twenty two 'twenty three guidance of 50 to 50 again, it's deliberate.
Revenue to be in the range of 36 three.
The four 7 million and a non-GAAP operating loss of between 55 to 61 million.
Our priority remains getting to free cash flow generation as soon as possible.
This quarter was an important step in that direction and reflects the Brian delivery volumes.
On the margin and to inventory management.
Now turning to call back over to the product.
Thanks Liana.
To wrap up <unk> is that an exciting inflection point, we are a leader in EV commercial trucks with over 450 deliveries to date.
We are a leader in EV economics with top tier gross margins.
We are well positioned for future success due in part to regulatory developments, requiring the adoption of commercial Evs, we see significant upside potential for our shareholders as we continue to deliver quality vehicles at competitive prices and the inevitable transition to medium duty EV.
<unk> quickens.
Finally, we would like to thank all veterans and their families for their service and sacrifices made to protect our country and our freedoms.
Your bravery and dedication in times of piece is particularly appreciate it.
But in difficult times like we are going through globally. Your sacrifices are truly heroic.
We wish to thank all past veterans and those serving today, who have done so much for this incredible country well.
With that let's open the line 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 speaker phone please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Jerry Revich with Goldman Sachs. Please go ahead.
Hi, This is Adam on for Jerry today. Thanks for taking my question. It looks like Cogs per unit came down around 35% sequentially quarter over quarter can you just unpack some of the moving pieces driving the sequential improvement and help us understand the level of fixed cost in cost of goods sold number just.
Thinking about how we should think about the unit profitability trajectory from here, if you're able to continue to ramp up deliveries sequentially.
Yeah, absolutely and thanks, Adam for the question, so really quite a few things that contributed to that improved gross margin.
The first of which being the launch of our Pelican program, which is our 2023 step van.
That vehicle is the result of over a year of engineering work and supply chain work that helped improve our overall direct material cost that helped reduce the amount of time it takes to assemble a vehicle, reducing labor allocations and overheads.
And we've also made it a more reliable more durable vehicle.
So most of the changes came because our product mix started shifting to that 2023 model year vehicle.
That we've been shipping to key customers in the quarter.
The other thing that's contributed to improved gross margins as our continued focus on adjusting pricing for the market.
So we've seen several factors, including inflation rising which has had an impact on all commercial vehicles.
And in the last several years, we've continued to update our pricing to ensure that it's in line with the market.
While still being competitive and enabling fleets to achieve that T. C. O savings so price action that we've taken at the beginning of 2023 as well as a price change that we made in midway through 2023 helped us contribute to higher than average asps across the vehicles that were delivered but.
I'll, let liana out a little bit more color too on the specifics.
I'm, sorry, how big could provide additional context.
GAAP gross margins as we noted in our prepared remarks is also impacted by various GAAP reserves and.
Over the last year, we've made significant improvements in our overall inventory management process and as a result of that we've seen the impact in our financial performance reduced inventory reserves this quarter.
That also contributed to improved margins.
Great. Thanks, that's helpful. And then I think your guidance implies something like a 125 units delivered next quarter at the midpoint. So a nice little step up from here, how much visibility and comfort do you.
Half on that ramp and any early thoughts on the trajectory for 2024 deliveries.
Yeah. So specifically in regards to this quarter, we're reiterating guidance and expect to remain within that range I think it's gonna be a a strong end of year quarter.
And we look to build momentum with each quarter and builds upon successive growth.
So that's what we're expecting for the remainder of this year into 'twenty 'twenty four is as we discussed in our comments about the incentives. We believe that market will continue to be strong with our national account customers.
There is always a seasonal impact that comes as a result of the holidays, which slows down a kind of towards the end of Q4, beginning of Q1, but that ramps pretty pretty quickly, particularly in areas like in parcel delivery, where folks are getting ready to build up their fleet over.
The summer months and spring prior to peak season for next year.
The other factor that you really considering in building into our volumes for next year is growth in our powertrain business, we're expecting significant growth in that area.
To come from some other specialty vehicle industries adjacent to last mile delivery vehicles or our current step van vehicles that we're building so.
Continue to see growth in that segment.
Although we haven't issued full guidance for 2020 for Ya.
Great and then last one for me can you just update us on how youre thinking about financing needs.
Kia and different.
Financing options that you can take in the current rate environment to bolster your liquidity.
Absolutely. So one of the things that getting to positive gross margin a positive GAAP gross margins enables us to do is seek more traditional debt financing options out. So we've been having some really positive dialogues with various types of non dilutive capital providers.
Although the interest rates and rates and these kinds of markets are still high.
As we continue to grow and ramp volumes it will be essential to have access to that sort of capital for.
Working capital and funding growth of inventory to support our backlog.
The other thing we've been doing in considering and evaluating other strategic opportunities that exist in the market.
Whether that be equity capital opportunities or other strategic collaborations that bolster up the balance sheet or minimize our cash use and so we're looking to any kind of transaction that would help.
Create synergies for the business and build up a better cash liquidity balances.
Great. Thanks, so much.
The next question comes from Mike Slutsky with D. A Davidson. Please go ahead.
Oh Hello, good afternoon. Thanks for taking my questions I guess I wanted to start off I've asked this question before but now that's upon us the ACF, who will start on January 1st.
I guess, maybe a two part question you know at this point are there any other providers of the step van types that did you make that could possibly do.
Liver the vehicles and the quantities that are needed for next year.
Yes.
That's out there that could compete.
On the forest.
The adoption for for next year and then maybe secondly have you started thinking at this point now they were just you don't want to have two months away.
Elevated <unk>.
Coming phone calls, where we have to get these things like vans or at least the OS for for prevent they used to have to either get them. This year or at least show that we're trying to get them.
Applied for exemptions just kind of curious as to what the customer voice has been recently on that.
Yeah, absolutely so Mike in response to your question I believe Theres, one other company that might be able to create a solution that would be compliant with the ACF rule and the step van market.
But we don't we don't work with them and don't know if they are capable of producing the volumes that are necessary for the market.
So that obviously still remains to be seen I think when you look at the customer list and customers that we've worked with in the past and are now working with and some of our new deliveries that will take place in Q4, including two leading parcel delivery companies in this space.
I think it speaks to us having the most reliable durable product for their operations.
So we're excited about it and it amounts to thousands of units that.
That will need to be on the road by the end of 2024.
As we've shared previously and in other earnings calls big part of that is gonna be infrastructure and getting the trucks delivered before the end of the year. So we're starting that process with several of our customers even as they're taking.
Taking delivery of trucks.
[noise] excuse me.
Even though they're taking delivery of trucks now planning out infrastructure for next year.
Okay, I guess I was trying to get a sense of the tens of urgency among those customers today is it getting a little more stronger.
I guess I'm trying to figure out how serious are they about complying with the rules are really all trying to find exemptions at this point.
Yeah, I would say there's been some dialogue coming from industry trade groups around challenging the rules and not complying. Although carb has shown in the past that even with those kinds of challenges they've still issued citations and have issued notices to comply to large fleets that haven't met the rule.
So when it comes to large national accounts and large fleet customers in California.
They are known to work within carbs rules and comply with them. It's generally the smaller fleets that.
You don't see as much compliance with and that's that's because they have a lot of risk if it's a large parcel delivery or a uniform rental company can't operate within the state of California. It's one of the largest markets for most of these fleets are they need to be able to have continuing operations and they'll they'll pay to comply and make sure they can legally.
Operator.
Yeah.
Got it.
Hmm.
I want to switch over to gross margins and maybe even tie margins really quickly.
I'm trying to just trying to do some you know during the ballrooms the wall math here, but it sounds like maybe given the fixed cost you've got there that would be coming down a bit you could turn EBITDA positive that maybe a thousand units a year.
Am I on the right track, there or excuse me up here when do you think might be able to start showing some sort of breakeven EBITDA or or some free cash flow.
Yeah. That's a great question. So I think as we shared about a year ago in our previous earnings call. We had a calculated plan to reduce direct material costs reduced fixed cost of operating the business in other opex.
And improve our trajectory to getting the business to gross margin positive and the next thing. We shared was that the next step on our roadmap is getting to generating positive free cash flow. So.
So we haven't guided to a specific date, but I think we've made some incredible accomplishments in the last year to achieve these goals and to get there in the very near future first and foremost we've got unit gross margins.
<unk> anywhere from the low teens percentage, all the way up to a low twenties percentage points.
Second we've cut operational expenses significantly nearly 50% year over year, which demonstrates that we can continue to operate our model scale sales and scale growth of our products into the field.
While maintaining our lean operational structure that supports the ongoing needs of the business, including engineering supply chain and our service requirements to keep our vehicles supported in the field.
And then the third thing.
As we continue to increase volumes quarter over quarter, and so our focus as we increase volumes as to get to that point, where we're generating positive EBITDA and eventually positive free cash flow.
In the near term future.
Got it maybe one last one for me.
And it goes back to your last question and your last answer there you got a bunch of vehicles now they've been on the road for well over a year or two or more than that.
Do you guys sense that in in 'twenty 'twenty four that parts and service will start to be a bigger part of the of the revenue should we start to actually Melanie any actual numbers, there and I guess I was kind of a related note can you give you share with us what your trust.
Customers are scared about uptime of your vehicles compared to other I smiles are even though the reviews. It cause he may have out there.
Sure both of those answers thank you.
Yeah, It's a it's a great question. So we've had vehicles on the road all the way since 2018, but a substantial portion of vehicles have been put on the road and in the last couple of years.
We are continuing to see our service needs grow and the field from unplanned maintenance events.
And we do have a small amount of service revenue coming in through parts sales as well as service labor.
To help repair those vehicles out in the field and when we say unplanned maintenance events, we're talking about things like breaking a mere off or a tire or wheel systems that arent failing because of the reliability of the vehicle and maybe because of an operator error or other kind of issue.
So we are seeing some parts revenue on that front and expect that will continue to grow as more vehicles are out there in the field and more powertrains are out there in the field.
The other component, which as you know start as we start to see vehicles age into the field it'll be a few years before we see significant replacement costs on things like battery or powertrain components and just because of the expected lifespan of a lot of those components is far longer than these vehicles have been out there in the field.
Hmm.
As you probably remember Mike we have a hybrid model of how we sit her service and support customers in the field.
We have a team of excess technicians across the country from California, all the way to the east coast, and covering Midwest and Texas and other areas.
And for those technicians are conducting repairs and diagnostics on vehicles, that's where we'll sell a direct part but then we also have certain markets, where we work with strong dealer partners to sell our parts and utilize their service teams to support our vehicles and.
So in that case.
Arjun on parts revenue is a little bit lower but it is still coming in as we get more vehicles out into those markets.
Great I appreciate the discussion and I'll pass it along thank you.
The next question comes from Donovan Schafer with Northland Capital markets. Please go ahead.
Hey, guys congratulations on the quarter.
And.
There's little to Great did you guys have been sticking to things and you're kind of putting up some numbers from the initiatives you've been working on.
I want to start by I dialed in late so its possible I missed it if it was in the prepared remarks, but EV charging has been such a bad headache. Yeah. Historically, so can we get an update on that is it something that you feel like at this point is actually.
Kind of you are behind us or is it still touching go enough.
We could get quarters.
Run into those issues, yeah, some big change, where that's kind of in the rearview mirror or were not quite a quite out of the woods yet per se.
Yeah.
Clarification on that.
Yeah charging infrastructure is a really important aspect of our customer deliveries Donovan I think thank you for asking the question.
As we've delivered more vehicles into the field and as our orders have shifted to be supporting more national accounts, and small and medium sized regional fleets.
The infrastructure problems and challenges have lessened, but they are still very much there.
As we've shared in previous calls we anticipate that these infrastructure challenges will be there for years to come.
I shared earlier in the call that there are different phase in milestone requirements in California for instance, the first one is 10% of high priority fleets by the end of next year.
Next iteration is 25% so the infrastructure that will need to be deployed over the coming years will continually increase each year.
And with that we anticipate challenges, particularly for some of these large deployment sites, where there might be a 100 or 200 vehicles parked out.
But that being said our deliveries in the quarter were actually trending much more towards large national accounts, and we anticipate that continuing in the next 12 months or so.
Because that's where we're seeing our strongest recurring order base right now.
So with those customers infrastructure problems generally lesson or more proactive about creating long term infrastructure plans generally they have more sites to deploy their vehicles across and so it's not always constrained to a single or a few locations.
And it gives us more flexibility to work with those customers on a long term planning so to answer your question, Yes, we anticipate it being a problem, although the shifting customer mix will help somewhat and alleviating customer deliveries going forward.
Okay. That's helpful.
And then turning to you know when you talked about the off road.
I think it's $160000.
For unit, California try to you mentioned marine or poor appetite.
And then you also talked about the powertrain business.
Doing well and I'm looking at.
Strong or growth opportunities, there, which of course. It makes me think of Wiggins power lift which has been one of the powertrain customers before so.
So I'm curious how much do you see.
The I think in California, there's a new law driving lower emissions at the ports.
Then if you have these different.
Those would be of course.
Applications that are not on roads, and so you could use the $106000 credit.
And all that stuff. So how much are kind of those multiple regulations that would come into play in a port marine type environment.
Much of a driver in potential is there in that area. If you can give any color on that that'd be great.
Yeah happy to so as a category of topline are powered by access and our excess energy solutions business still represent less than 10% of our overall revenues, but we anticipate them growing at an even faster rate next year.
Than vehicle sales.
Part of that is accelerated by those regulations that you've touched on requiring all vehicles operating in and around airports and ocean ports and the state of California to go to zero emissions over the next few years.
We also anticipate a lot of the environments, they're needing additional charging infrastructure, that's flexible to be able to support the needs of various types of equipment from forklifts to reach dockers two yard sputters and all of the other associated port material handling equipment.
While we can't provide specific color and haven't guided two to that market yet.
I think you will continue to see more growth in that segment as well as other on highway segments from the powertrain business that will will show really fruitfully for us in 2024, and a strong gross margin unit sales as.
As well as more infrastructure sales.
One anecdotal point that I'll share is as we've launched the hub product into the market. We've had a whole array of new customers. Both in the ports and airports, but also in other industrial sectors that need charging infrastructure, that's rapidly deployable, including smaller lighter.
D class, one and class two vehicle fleets that are looking for rapidly deployable charging infrastructure, but we anticipate that products like our hub will continue to see growth in other ancillary markets that are facing similar regulations to the ones our customer fleets are facing.
Okay, that's very interesting and then just.
Just as a clarifying question because loomis.
It has been a it's a big and kind of repeat customer consistent customer for you guys.
When you get orders or when we're talking about Loomis armored trucks.
Or and when you're talking about powered by excess like it did the armored trucks fall under you treat that as a powered by excess or has it been.
Or is it more of like the 2003 stop N type chassis with armored car body and so you you treat it.
Yeah.
Thinking about will give color and commentary about yeah. This is doing well we should grow too we expected up there. When you were talking about yeah, what bucket do you put the armored trucks into.
Yeah. The armored vehicles are still on the 2023 step van chassis. So it's still our okay conventional vehicle business.
When we think about powered by excess we're not building. The overall chassis, we provide powertrain components things like battery systems Motors high voltage distribution all the software other auxiliary components, but generally not the driveline the chassis the vehicle frame of those those vehicles.
Okay. That's helpful. Okay, great. Thanks, guys I'll take the rest of my questions offline.
Thanks, gentlemen.
This concludes the conference call and the Q&A, ladies and gentlemen, Thank you for your participation. This concludes today's teleconference. You may disconnect your lines and have a wonderful day.
Okay.
Yeah.
Yeah.
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