Q3 2025 Xos Inc Earnings Call
Speaker #1: Good day. And welcome to the Xos, Inc. Q3 2025 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the STAR key followed by zero.
Speaker #1: 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.
Speaker #1: To withdraw your question, please press star, then two. Please note that today's event is being recorded. I would now like to send the conference over to David Zlotchew, General Counsel.
Speaker #1: Please go
Speaker #1: ahead. Thank you.
Speaker #2: Everyone, for joining us today. Hosting the call with me are Xos' Chief Executive Officer, Dakota Semler, Xos' Chief Operating Officer, Giordano Sordoni, and Xos' Chief Financial Officer.
Speaker #2: Liana close of regular trading, Xos issued its third quarter Pogosyan. 2025 earnings press release, 10Q for the periods ended Today, after the September 30, and filed its quarterly report on Form conference call, we encourage you to have 2025.
Speaker #2: our press release and quarterly report in front of you. Including our As you listen to today's financial results, as well as commentary on the quarter and nine months ended September 30, 2025.
Speaker #2: Management statements today reflect management's views as of today, November 13, include forward-looking 2025 only, and will statements. Including statements regarding our fiscal year 2025, management's expectations for future financial and statements regarding our plans, prospects, and goals.
Speaker #2: guarantees and are subject to These statements are not promises or operational performance, and other them to differ materially from actual important factors that could cause results.
Speaker #2: actual results to differ materially including, but not limited to, Xos' ability to access capital when needed and continue as a going concern, Xos' ability to implement business plans and identify and realize additional Additional information about opportunities, and a potential supply chain disruptions, including as a result of tariffs, is included in today's press release and in our filings with the around trade policies and report on Form 10K SEC, including our most recent annual and subsequent filings.
Speaker #2: We undertake no obligation to update forward-looking statements, except as required by law. You should not put undue—excuse me—you should not place undue reliance on forward-looking measures and performance metrics.
Speaker #2: This includes references to non-GAAP financial measures. Additional information about these statements, as well as reconciliations of historical non-GAAP measures to the comparable GAAP measures, is included in the press release we issued today.
Speaker #2: Our press release and SEC filings are of our website, at With that, I now turn it over to our CEO, www.xostrucks.com/investor-overview. Dakota. available on the Investor Relations section
Speaker #3: Everyone, at Xos, we are building something that did not exist before. And doing it under constraints that might break most companies. And yet, quarter scales.
Speaker #3: It creates Good afternoon, after quarter, we've shown that momentum. It compounds. And in Q3 we shipped 130 million dollars in revenue. We vehicles, generating 16.5 actually shipped 140 vehicles, including 10 strip chassis already be recognized in the coming quarters.
Speaker #3: But the signal is clear. Demand is real. Customers are growing. Much of this volume went to unmistakable. ISPs. Organizations that do not forgive unreliability, that do not returning.
Speaker #3: earned, not inherited. We continue fulfilling the largest single 200-plus unit order order in our company's history: a future for Xos. Deeper relationships, larger programs, repeatable volume.
Speaker #3: 15.3%. This margin reflects a complex reality. A diverse mix of And scale is Our GAAP gross margin was customers, long-term structured pricing with national accounts, and yes, tariffs that were not contemplated when some of these large programs were originally priced.
Speaker #3: These largely agreements make impressive margins in the near term, but they're the business. They create the volume and the foundation of a durable industrial credibility needed to expand margins in the future.
Speaker #3: And while we ship the highest units in our history, we also drove our went public of $7 accident. It happened because we question million.
Speaker #3: Every expense, every process, and every outdated assumption about the lowest operating loss since the business, how vehicle OEMs represents the ninth consecutive quarter of positive non-GAAP. That did not happen by gross margins.
Speaker #3: Many companies talk about discipline, we have lived inside it, and it shows. We've also strengthened our liquidity This quarter opportunities that are expanding around us.
Speaker #3: I want to personally acknowledge the Algermae Automotive Company, who support of Xos has while continuing to invest in the seen our progress up close, and they've seen the technology, the execution, and the market shift towards reliability and total cost of ownership.
Speaker #3: Together, we amended the repayment structure of the been unwavering. convertible note, moving from a They have maturity to quarterly installments for November 2028. This is not just a 2025 through February restructuring.
Speaker #3: It's a strategic alignment. It allows us to operate from a position of focus rather than constraint. Interest 2025, making Algermae our largest shareholder. equity, debt, or hybrid trajectory.
Speaker #3: Even as a step-in continues to drive substantial revenue, our strategy has never been limited to a single their conviction and our long-term expanding into higher margin, lower concentration categories, including powertrains and energy product.
Speaker #3: infrastructure. This quarter, that strategy became real. We delivered 18 powertrain systems to Bluebird Corporation this We will continue to quarter, and since quarter-end, we've received nearly 80 additional powertrain orders.
Speaker #3: infrastructure. This quarter, that strategy became real. We delivered 18 powertrain systems to Bluebird Corporation this We will continue to quarter, and since quarter-end, we've received nearly 80 additional powertrain We are deliberately School districts are electrifying faster than anyone expected, and our technology, which and highly serviceable, is becoming is modular, reliable, the backbone they trust.
Speaker #3: And speaking of school districts, we are actively selling into that market right now. Gio and I are in Austin this week for the Bluebird Annual Dealer Meeting, demonstrating firsthand why Xos powertrains outperform on reliability, serviceability, and total cost of ownership.
Speaker #3: Our presence here is already opening doors and we expect this engagement to translate into significant commercial opportunities over the our pipeline in the massive school bus next one to three years, as we expand market.
Speaker #3: And then there's the Xos Hub. Grid point in North American fleet constraints are not a electrification. The hub addresses this head-on. It's not a prototype.
Speaker #3: It's deployed. It's working, and it's impact is expanding far beyond and demonstrations accelerated, and interest in the hub broadened theory. meaningfully. We also showcased They are the single largest friction the largest renewable energy conference in transportation.
Speaker #3: industrial users looking for mobile power, resilience, and peak the hub at RE+, shaving solutions. The response confirmed what we already knew. The hub addresses a problem that preparing the 2026 hub energy developers, and update.
Speaker #3: almost no one else in the market is addressing effectively. We're now optimization, and advanced load balancing capabilities. This isn't just a charging product. It's Capable of serving industrial users who require temporary power, peak In Q3, deployments Which will deliver greater infrastructure is either delayed power resilience, energy cost or non-existent.
Speaker #3: This dramatically widens our total addressable market and positions Xos as an energy systems company, not just an electric truck company, resilient in environments where grid and mobile energy platforms are concerned.
Speaker #3: All in, Q3 2025 was a milestone quarter. We achieved record deliveries, maintained revenue momentum, substantially improved operating performance, and further validated that our cost discipline and product strategy can not only maintain operations, but accelerate it.
Speaker #3: As we look ahead, the opportunities in front of us are expanding, not contracting. Order sizes are increasing as customers experience the real-world cost advantages of our trucks and our charging solutions.
Speaker #3: And our product pipeline, including the upgraded hub and our foray into power resiliency solutions, aligns with secular markets that will grow regardless of political cycles, incentives, or noise.
Speaker #3: I believe we are experiencing what durable industry companies go through in their formative years. Pressure, discipline, breakthroughs, and the unmistakable feeling that the work is beginning to gain traction.
Speaker #3: With that, I'll turn it over to Gio to walk through the operational highlights of the quarter.
Speaker #2: Thanks, Dakota. And good afternoon, everyone. Q3 was another quarter of steady execution, disciplined operations, and forward momentum as we continue to deliver for customers and position Xos for sustained long-term growth.
Speaker #2: Our Tennessee plant remained the cornerstone of our success this quarter. Running efficiently and producing at a consistent cadence for our major fleet customers. We continue delivering on our UPS order, demonstrating our ability to maintain quality at scale for one of the world's largest and most demanding fleet operators.
Speaker #2: With a small, highly capable production team, we achieved rates of three chassis per day, underscoring our ability to efficiently scale into higher volumes. Our engineering supply chain and production teams also responded quickly to customer requests during the quarter, designing and deploying product improvements that enhance reliability, serviceability, and customer satisfaction across our chassis line.
Speaker #2: Production of our innovative mobile charging system, the Xos Hub, also continued in Q3. The hub remains one of our most differentiated offerings in the market, providing fleets of fast, flexible, and cost-effective ways to deploy electric vehicles without waiting for fixed infrastructure.
Speaker #2: The hub allows these fleets to speed up the time it takes to deploy fast charging by skipping lengthy permitting, utility power upgrades, and construction processes.
Speaker #2: Customers are now using the hub across a broad range of segments and unique charging use cases, including electric trucks, school buses, light-duty electric vehicles, and even autonomous vehicle fleets.
Speaker #2: The hub engineering team has been hard at work developing new variants aimed at further expanding the product's addressable market and enabling new use cases.
Speaker #2: Q3 also marked the expansion of our powertrain production capabilities, as we advanced new powertrain variants for the Bluebird school bus company. These efforts further validate the versatility and maturity of the Xos powertrain platform and strengthen our position as a trusted electrification partner for vehicle manufacturers seeking proven, road-tested solutions.
Speaker #2: As we close out the year, our focus has shifted towards setting the stage for 2026. Across our trucks, powertrains, and hubs, we're preparing for continued growth that we expect will bring higher volumes and a broader customer base.
Speaker #2: In Tennessee, we've begun expanding the hub and powertrain assembly areas within our factory in anticipation of 2026 demand. These improvements will allow us to scale efficiently without production increases, without significant increases in capital expenditure, while maintaining flexibility across product lines.
Speaker #2: Q3 reinforced what makes Xos unique. Reliable execution, engineering innovation, and operational discipline. We continued delivering for our major customers like UPS, built new hubs, advanced powertrain programs with OEM partners, and invested in the foundation to support our next phase of growth.
Speaker #2: As we look ahead, our team is focused on finishing the year strong and carrying this momentum into 2026, where we see significant opportunities across all three pillars of our business: trucks, powertrains, and charging infrastructure.
Speaker #2: With that, I'll hand it over to Liana Pogosyan for the financial review.
Speaker #3: Thank you, Gio. Third quarter 2025 revenue was $16.5 million on 130 units, down from $18.4 million on 135 units last quarter, and $15.8 million on 94 units a year ago, reflecting strong execution of our delivery plan and major shipments to customers like UPS, Bluebird, and FedEx ISPs.
Speaker #3: While we recognize revenue for $130 units this quarter, as Dakota mentioned, we actually shipped a total of $140 units. For the first three quarters of 2025, revenue totaled $40.8 million on $294 units compared to $44.5 million on $246 units in the same period last year.
Speaker #3: 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 modest decline in total revenue.
Speaker #3: The gap gross margin was 15.3% in the third quarter compared to 8.8% in the second quarter this year, and 18.1% in the third quarter of 2024.
Speaker #3: The sequential increase was mainly driven by changes in product mix discussed earlier, including more powertrain units sold, which generally have a higher margin than strip chassis and step-downs.
Speaker #3: In addition, we had a higher ASP from the sale of UPS strip chassis this quarter due to a negotiated rate to include the impact of tariffs.
Speaker #3: Non-GAAP gross margin was 16% this quarter, up from 1.4% in Q2, mainly because inventory-specific reserves, which increased this quarter, are added back in the non-GAAP number.
Speaker #3: This marks our ninth consecutive quarter of positive non-gap gross margin. For the first three quarters of 2025, non-gap gross margin was 9.3% compared to 16.6% in the same period last year.
Speaker #3: We remain confident in our ability to improve margins over time as we scale production and execute on cost reduction initiatives. Turning to expenses, operating expenses were 9.5 million in the third quarter, up 0.8 million or 9% from the second quarter this year, and down 3 million or 24% from the third quarter of 2024.
Speaker #3: For the first three quarters of 2025, operating expenses totaled $20.28.7 million, a 10.3 million or 26% improvement from $39 million in the same period last year.
Speaker #3: These sustained reductions demonstrate the structural impact of our prior cost-cutting actions and reinforce our disciplined approach to managing the business. Operating loss for a quarter hit a record low since going public at $7 million.
Speaker #3: Down from $7.1 million in the second quarter of this year and down from $9.7 million in the third quarter of 2024. Non-gap operating loss since the business went public also hit a record low at $4.8 million, compared to $6.9 million in the second quarter of this year and $6.6 million in the third quarter of 2024.
Speaker #3: For the first three quarters of 2025, operating loss was $23.3 million, improving from $31.3 million in the same period last year. While non-GAAP operating loss also improved to $19.7 million, from $25.7 million in the period last year.
Speaker #3: Moving to the balance sheet, we ended the quarter with $14.1 million in cash and cash equivalents, up from $8.8 million at the end of last quarter.
Speaker #3: Our improvement in liquidity this quarter was boosted by three main factors. First, successful launch of our ETM program, which generated $2.4 million in net cash proceeds this quarter.
Speaker #3: Second, strategic inventory management. Inventory declined to $25.2 million from $31 million last quarter, driven by strong unit sales outpacing production as we moved more units from existing inventory, reflecting our ongoing inventory management to support upcoming deliveries.
Speaker #3: Third, accounts receivable came down to $15.4 million at the end of the quarter from $18.1 million at the end of June. We had very strong collections this quarter, about $18.7 million, from customers as well as state grant program administrators.
Speaker #3: While our UPS deliveries carry longer payment terms, which increase new receivables in the quarter, we feel well-positioned for continued solid collections going into the next quarter.
Speaker #3: Our focus this quarter has been on execution financial discipline and strengthening the foundation for sustained growth. During the quarter, we took strategic actions to strengthen our balance sheet and extend our financial runway.
Speaker #3: We amended our $20 million convertible note, extending principal payments quarterly starting in Q4 2025 through early 2028 to enhance liquidity and provide greater flexibility.
Speaker #3: We also reached an agreement to terminate our Mesa facility lease that we acquired as part of the EMB acquisition during the first quarter of 2024, which is expected to generate approximately $20.7 million in cash savings through 2033.
Speaker #3: Although we're no longer responsible for rent on the Mesa facility, the termination agreement does require us to make 18 monthly payments, totaling about $2.8 million.
Speaker #3: As part of the termination, we also recognize a $9.4 million gain in non-operating income along with other required gap adjustments such as the removal of the related operating lease liabilities.
Speaker #3: We continue to actively manage our liquidity position, and are exploring additional opportunities to further enhance it. Together, these actions demonstrate our disciplined approach to capital management and our ongoing commitment to positioning exos for long-term stability and growth.
Speaker #3: Beyond the balance sheet actions, we continue to execute well operationally. We generated positive cash, positive free cash flow of $3.1 million in the third quarter, marking the third time we've been free cash flow positive since going public.
Speaker #3: This is down slightly from $4.6 million in the second quarter, but is a major improvement from negative $11.7 million we reported a year ago.
Speaker #3: That progress reflects strong deliveries and continued discipline in managing working capital. Finally, turning to guidance, we are reaffirming our full year 2025 guidance for revenue and unit deliveries and previously revised non-gap operating loss guidance.
Speaker #3: Revenue between $50.2 million and $65.8 million, non-gap operating loss between $24.4 to $26.9 million, and unit deliveries between $320 and $420 units. With that, our I'll turn the call back over to
Speaker #3: Dakota.
Speaker #2: Thank you,
Speaker #2: Liana. Stepping into 2026, momentum behind exos is unmistakable. Our priorities are clear: accelerate growth, reinforce liquidity, and continue expanding margins with precision and discipline.
Speaker #2: Over the last 12 months, we've shown that a company can be both lean and innovative. That you can run efficiently without sacrificing the strength or competitiveness of your product portfolio.
Speaker #2: We've built a deep and diversified sales pipeline, even while navigating global supply chain disruptions that caught much of the industry off guard. Our ability to adapt quickly to absorb unexpected shocks and to keep delivering for customers is one of our defining capabilities.
Speaker #2: And customers notice, in a marketplace that changes by the week, resilience and reliability are currency. And they are becoming core reasons fleets are choosing Xos as a long-term partner.
Speaker #2: As we move toward what we expect to be our largest and most transformative year, our confidence is only growing. We believe we're positioned to confront challenges head-on and to continue building the most durable, dependable business in our sector.
Speaker #2: With that, I'll hand it back over to the operator for questions.
Speaker #3: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad.
Speaker #3: If a question has already been addressed and you'd like to remove yourself from queue, please press star then two. At this time, we'll pause momentarily to assemble our roster.
Speaker #3: And today's first question comes from Craig Irwin with Roth Capital. Please go
Speaker #3: And today's first question comes from Craig Irwin with Roth Capital. Please go ahead. Hey, guys.
Speaker #4: It's Andrew on for Craig. Congrats on the continued progress, and thanks for taking my questions. First one for me is on the hub. I mean, the use case for fleets is pretty obvious, but I think we're seeing an increased activity here in the autonomous vehicle space.
Speaker #4: And you guys have talked about increasing demand for uses such as backup power applications. So kind of how should we think of the expanded opportunity for the hub platform now?
Speaker #5: Yeah, Andrew, thanks for the question. With the hub opportunity, I think there will continue to be in the realm of double-digit growth in the next year, for that EV charging segment, which is supported by a lot of our fleet customers, but also customers beyond the customers of exos trucks.
Speaker #5: So one of our larger customers that we've talked about is Waymo, the self-driving car company. They've been continuing to grow their purchases with us.
Speaker #5: We also have several utilities and state transportation agencies like Caltrans who bought quite a few units. So we continue to see that market growing at a very stable clip.
Speaker #5: But our power resiliency and backup power functions are going to be launched next year. And that's another exciting opportunity that we believe far exceeds the growth potential of the EV charging market.
Speaker #5: As you may know, the power cost in the US in the last five years has risen anywhere from 20% to 50%, depending upon where you are in the states and what utility you're in.
Speaker #5: And that incremental cost is borne by consumers and borne by businesses. And while a lot of that market has been addressed by the consumer market, has been addressed by residential energy storage, there hasn't been a large influx of commercial and industrial buildings adopting energy storage.
Speaker #5: And so we view significant opportunities in that market to participate in wholesale power markets, to do demand response programs, and to ultimately help businesses with reducing their total energy cost.
Speaker #5: So that's really where our focus on growth is going to be for the hub in the years to come. We haven't provided specific guidance around how we're quantifying that growth and volume, but we expect it will follow similar trajectories to the launch of the hub charging system.
Speaker #5: And also continue to be a higher margin product that's really more of a unique product in a segment that hasn't been widely addressed by other suppliers in the
Speaker #5: space. Great.
Speaker #4: Well, it seems like in an exciting opportunity. And thanks for the details. Second one for me here is on your chassis deliveries to Bluebird.
Speaker #4: You guys said you believe you seem like you're accelerating. 80 more orders following quarter-end. You touched on it in the prior remarks, but can you just talk about customer feedback, what you're seeing, and what's kind of driving this accelerated growth?
Speaker #5: Yeah, absolutely. It's been an exciting partnership with them. And we've continued to build this over the last couple of years, and it's finally starting to take hold.
Speaker #5: We've delivered those first 20 or so units, and they're actually operating with a customer up in the Northeast right now. One of the exciting things for us is that Bluebird has been selling electric vehicles for many years now.
Speaker #5: Working with other powertrain providers, and their powertrain options, I would say, are more limited than what we can provide. So one of the first projects we helped them bring to market was a shorter wheelbase powertrain configuration that hadn't been an option before.
Speaker #5: For some of these short wheelbase school buses that are used in city environments. And so we packaged that first powertrain with them over a year ago.
Speaker #5: Went through the full durability and validation process. And now that's in market with customers. And if there's anything we've learned this week from being in the at the Bluebird dealer meeting in Austin, it's that there's a lot of interest in that product beyond the initial launch customer.
Speaker #5: So we mentioned that we've got those additional follow-on orders. Subsequent to the quarter close, and we are actively working on additional variants with increased capacity and range that will ultimately start marketing to the Bluebird dealer body as well as many of their national accounts.
Speaker #5: What's really exciting about that is there's a significant growth opportunity in school bus. We're still seeing high rates of electrification, Bluebird being the leading alternative powertrain provider in the school bus industry.
Speaker #5: And we are going to be their first LFP battery option and powertrain option. Which will, I think, significantly help with their customers in adopting these vehicles just because it's going to increase the reliability and the resiliency of these battery packs.
Speaker #5: For school bus fleets, which obviously reliability and durability and longevity for their fleet is top of mind. It's probably one of the single most important evaluating criteria when they're making a determination of which partner they work with.
Speaker #5: So we will expect that to continue to grow into 2026 pretty substantially. And hopefully we'll be able to talk about that more by next quarter.
Speaker #5: And give a little bit more detail on those orders beyond the additional
Speaker #5: 80. Great.
Speaker #4: Well, I appreciate the call. And the last one for me, if I may, you guys had another solid quarter of unit deliveries, I believe you're at 294 for the year.
Speaker #4: You reiterated your guide of 320 to 420 for the year. Can you just kind of talk about the puts and takes reaching kind of the high and low end of the guide
Speaker #5: Yeah, as
Speaker #5: we've talked about in the there? past, we always have seasonal delays in delivering through Q4. And that's attributed to the industries that we serve.
Speaker #5: We work with a largest parcel delivery companies in the world. And many of them are operating during their peak season in Q4. Meaning once the Thanksgiving holiday starts, their network volumes can often double.
Speaker #5: And they're dealing with a lot of other additional growth and package volume than they normally do. So it's generally a lighter quarter from our key customers in Q4.
Speaker #5: So we expect a little bit of that impact to hit us in Q4. We still expect to remain within that guidance range. But there'll be other deliveries in Q4, such as powertrain deliveries and some other customers and hub deliveries.
Speaker #5: That will continue to round out the year. And then we expect that to continue to grow back in Q1 and Q2 of next
Speaker #4: Great. Well, I appreciate the call and congrats on the strong results.
Speaker #5: Thank
Speaker #5: you. Thank you.
Speaker #1: And once again, if you have a question, please press star then one. All right, next question comes from Ted Jackson at Northland Securities. Please go ahead.
Speaker #6: Thank you very much. I would also like to echo congratulations on a great quarter. It went well across the board.
Speaker #6: board. Let's start with
Speaker #5: Thanks,
Speaker #5: Ted.
Speaker #6: tariffs, Dakota. I mean, so one of the comments that you made in your prepared remarks was that you were able to do some renegotiation with UPS with regards to tariffs.
Speaker #6: So I guess the first question around tariffs is have you been able to price adjust that across
Speaker #1: All to come to bear . As we roll through . Going forward .
Speaker #2: happy to start Yeah , I'm and I'll pass it over to follow on . to Gio But I think we're taking a multi-step to insulate ourselves from the volatility that we've experienced this year from regime changes tariff and uncertainty in that environment .
Speaker #2: The first of which tariff is on focusing reshoring or getting as much domestic content as possible to make sure that we we kind of volatility in the don't come .
Speaker #2: The second is working with our suppliers and sharing that cost and helping us to realize cost better improvements or cost down efforts that understand they help them their grow sales with us obviously will .
Speaker #2: sharing But pipeline that in some of has been , exposure I think , the second most impactful . third and the last just , again , an to effort work not just increase prices to area is to to give them around the with our have impacted us .
Speaker #2: And then figure clarity out how we tariff that tariff exposure share in. And we want to build long, durable relationships with our customers.
Speaker #2: These aren't customers . Some of the sophisticated fleets in the night fly by just not pass to everything along to most but to them , that we're demonstrate to them willing to work together to share in that cost , exposure still trying reduce to the acquisition our while vehicles them so can be cost of ownership competitive from a they for and standpoint ultimately get these vehicles total near price parity with to diesel term vehicles .
Speaker #2: let a little But I'll context to . Yeah , I think Gio add Dakota hit the nail on the head . bit more really It's .
Speaker #3: it's kept our supply chain with Been starting earlier in the We've seen some continued , you know , at least talk of changes .
Speaker #3: So we are options open , working changes supply base tariff , establishing backup supply keeping our in critical parts where needed on the it's really cost been front , team busy conversation .
Speaker #3: . And
Speaker #3: And there's been willingness to some of the share in increases ourselves , our between suppliers and our customers . And we're doing everything an open we can to to make sure we guarantee supply can going forward without blowing up costs .
Speaker #1: Okay . Next question . First . So you shipped to Bluebird during the third quarter . you had 80 orders that
Speaker #2: , approximately . I Yeah think it
Speaker #2: closer to 75 incremental orders
Speaker #2: . But yeah , exactly substantial follow on since we made deliveries .
Speaker #2: in the
Speaker #1: yet . And then It's more of hadn't looked at a part the Q of the where I'm going with it . But if you question .
Speaker #1: in front of don't have it you , it's not that big of a deal . So then and then so .
Speaker #4: actually we did have incremental . While we hubs don't
Speaker #4: disclose the breakout between powertrains and Yeah , That's we did have hubs deliveries as well . This quarter .
Speaker #1: do break actually you in the Q it out anyway . So then with the 75 new powertrains , those will will those be are those the bulk of those will So usually ship shift in 2026 .
Speaker #2: That's Yeah correct . .
Speaker #1: So then then when I think about that growing . You fast powertrains is growing hub is . Your bringing the cost of tariffs more line in .
Speaker #1: So you know so as you you're going to have a mix shift towards your higher product margin go forward In 26 along with , you know , on drag on of a less tariffs .
Speaker #1: What can we think about when we I mean , it's more of a general concept , but what kind of margin improvement do you think you could get ?
Speaker #1: You in 26 vis a vis 25 with all those , those , you know , tailwinds , if you would ?
Speaker #2: Yeah . Well , we haven't provided specific guidance next year . I think at the around margin profile of our core truck when we look products , it's really variable customer profile .
Speaker #2: depending upon our can be , as low as the low teens you know , to the mid 20% gross margin based upon product configurations , specifications , customer pricing details , range bulk purchases , things of that nature .
Speaker #2: When we look at our other product lines , like the powertrain and the hub , those are business generally , I would say in the kind of 15 to 35% range with the hub representing that higher end of that range and the powertrain configurations representing kind of the lower to the middle portion of that range .
Speaker #2: So you're right in that the assuming margin mix shift will towards higher end of our margin spectrum . And that's something that , as we work with our our partners and our customers we can , I think continue to mitigate and minimise the exposure and disruption from tariffs to further improve that in a way that benefits both of us and hopefully improves margin on our kits powertrain well as , as on their end user products that they're selling to their customers .
Speaker #1: is it fair But I mean , to conceptually that the chances are that you'll have , you know , a noticeable improvement with regards to your margins in 26 versus 25 because of how the mix of your business is changing ?
Speaker #2: Yeah , I think that's a very fair assumption .
Speaker #1: Okay . And then I can I touch over on the lease . So you're you have a 2.8 million to 2.8 million that you're going to be paying over the next 18 months .
Speaker #1: Is that what you said ?
Speaker #2: That's correct .
Speaker #1: Yeah . So then . So basically then it's like , what is it like 450 a quarter , 470 a quarter . And then you'll be done in , you know , like , you know , as you exit 26 , for the most part into 27 .
Speaker #1: And then and then . You know , and then with regards to working capital , you know , you've made tremendous progress with regards to your working capital .
Speaker #1: And the last couple of quarters , can we see expect to continued improvement on that ? Can we go into in the fourth quarter and then beyond ?
Speaker #2: Yeah , that's a deliberate part of our focus . I have to beg Gio to make any payments and to release any , any payments that are going out to our vendors .
Speaker #2: But no, in all honesty, I think it's a team effort across the company on how we can manage focused cash flow and how we can improve receivables collection.
Speaker #2: We've had some very supportive customers that have been willing to work with us on the terms that we offer them, ensuring that they're adhering to those terms and paying in a more timely manner.
Speaker #2: And one of the most significant drivers of this is that increased product mix away from trucks and direct sales of trucks will reflect lower , you know , proportion of those sales being driven by incentives .
Speaker #2: And so that'll shorten our receivables time dramatically . If we don't have to collect from those incentive agencies or government agencies . .
Speaker #1: And so , so we should we should then expect to see , you know , just generally speaking , as we go forward and improvement in dsos .
Speaker #1: And I mean , I tend to look at inventory on a daily basis too , but in a continued improvement , there relative to the you mean the progress that you've made ?
Speaker #1: In the second and the third quarter ? We'll see even more improvement as we march forward over the next several quarters .
Speaker #2: Definitely .
Speaker #1: my And then last one is kind of a question and kind of more just asking for some commentary . There was a it was I just saw it in the journal So the today .
Speaker #1: timing was just kind of apropos , perfect . But one of your peers , harbinger , did a raise of . It was like 150 , $160 million with Fedex .
Speaker #1: it's the And lead and , you know , and then Fedex , they say that , Fedex is basically going to take a lot of their product , and they're spewing out that they're going to ship 3000 units .
Speaker #1: year . Next I mean , how do you think about that that ? Is give you any kind of pause as it relates to your relationship with Fedex or you also could the fact that they're look at it , raise that able to kind of money , that it says it's a it's also an obviously , you know , what I'm saying ?
Speaker #1: A , a vote , if you would of of confidence in your end markets and the opportunity that you yourself face . I mean , how about a little discussion about that ?
Speaker #2: Yeah , I think from I'll kind of segment the question , but I think from a capital markets standpoint , it's an incredible validation .
Speaker #2: And proof point that there's still interest from in investors investing into the transportation business . And into commercial electric vehicles , which we see as a very positive indicator because in the last couple of years , it has been different we saw in what from the fundraising environment in the preceding few so years .
Speaker #2: I think And that's a great indicator for our industry as a whole . And for our ongoing access to capital . Secondly , I think pertaining to the commercial opportunity they exist .
Speaker #2: We view Fedex as a critical customer of ours and a key customer , and we want to continue to work with them . We've built an incredible relationship with the express team in Memphis and also the former ground team in Pittsburgh that is now a part of Fedex corporate .
Speaker #2: And I think that relationship will continue to extend. Actually, message them and congratulate them this morning on the announcement. I think we see them as a strategic partner.
Speaker #2: And one thing I'll mention , which I think is really important and relevant , is these large parcel delivery companies and large fleets .
Speaker #2: They don't sole source with any of their products and any of their technology and their fleets . They're always going to have generally 2 to 3 , sometimes even four primary suppliers .
Speaker #2: They work with to maintain some competitive tension , to make sure they don't have too much exposure to a single company . And we see a another company in this space as a validation that the industry is still growing .
Speaker #2: They're still opportunity , and there still really strong customers that are willing to make investments and grow in this segment . I think for us , Fedex is one of many customers that we have , but we're still excited , very excited about working with them .
Speaker #2: And continuing to work with them. And to this point, it's not referred to as FedEx Ground, their contractor business; we are the largest electric vehicle vendor, with more electric vehicles than anybody deployed across their network.
Speaker #2: And so I think we're we expect that to trend , to continue . And we'll keep working with the contractors as well as with their their fleet management , their centralized fleet management for their corporate owned fleet .
Speaker #2: So I think it bodes actually well for the industry and for us as a company .
Speaker #1: Great . So again , it's on the quarter . I mean , literally you just you just moved the ball . That's wife says you move the chains and you did it on every front in your business .
Speaker #1: So congrats .
Speaker #2: Thank you . Thanks , Todd . Appreciate you calling in .
Speaker #5: Thank you . And that concludes our question and answer session . And today's conference call . We thank you all for attending today's presentation .