Xos, Inc. Earnings Call Signals Cash-Flow Turnaround

Xos, Inc. ((XOS)) has held its Q4 earnings call. Read on for the main highlights of the call.

Xos, Inc.’s latest earnings call struck a cautiously upbeat tone, emphasizing a tangible operational turnaround despite softer top-line figures. Executives pointed to record vehicle deliveries, improving profitability, and a move to positive free cash flow, while acknowledging revenue pressure from lower pricing, tariffs, and customer concentration risks.

Record Deliveries but Mixed Revenue Picture

Xos delivered a record 328 units in 2025, up about 10% from 297 in 2024, generating $46 million in revenue. Management highlighted expanding customer programs, including a 200‑plus unit initiative with UPS, and stressed rising repeat orders from national fleets as a key validation of product-market fit.

Free Cash Flow Swings Sharply Into the Black

The standout metric was free cash flow, which improved by roughly $54.5 million year over year to a positive $5.4 million. Q4 alone generated $2.4 million of free cash flow, marking the third consecutive positive quarter and signaling that Xos’s business model is becoming more self-funding.

Operating Losses Narrow on Cost Discipline

Profitability metrics showed solid progress, with the full-year operating loss shrinking 28% to $33.1 million and adjusted EBITDA loss improving 33% to $23.5 million. Operating expenses fell 28% to $35.8 million, as the company tightened spending while still supporting growth in new product lines.

Gross Margins Stay Positive but Under Pressure

Xos posted a second straight year of positive gross margin, with GAAP gross margin at 5.9% and non‑GAAP at 8.8% in 2025. The company also logged its tenth consecutive quarter of positive non‑GAAP gross margin, but management cautioned that mix shifts and tariffs weighed on profitability versus the prior year.

Working Capital Unlocks Strengthen the Balance Sheet

The balance sheet showed clear improvement as cash rose to $14 million from $11 million and accounts receivable dropped to $6 million from $26.9 million. Inventory declined to $25 million from $36.6 million, reflecting better collections, including a major UPS payment, and a concerted effort to convert stock into cash.

Financing Moves and Lease Exit Bolster Liquidity

Xos reworked the repayment schedule on a $20 million convertible note into quarterly installments through early 2028, easing near-term cash strain. The company also terminated its Mesa lease, unlocking an estimated $20.7 million in future cash savings and booking a sizable nonoperating gain, while an ATM program added $2.4 million in 2025.

Hubs and Powertrains Expand the Product Set

Management underscored diversification beyond step vans with growing hubs and powertrain businesses, including deployments to utilities and fleets. New hub configurations ranging from 210 to 630 kWh are coming, with a 420 kWh version shipping in early 2026, while powertrain kits for Blue Bird and new V2G features broaden Xos’s addressable market.

Manufacturing and Supply Chain Execution Improves

The Tennessee plant was expanded to accommodate a dedicated Blue Bird kit line and hub production, achieving throughput of up to roughly three units per day at times. Supply chain actions such as localization, dual sourcing, and pre‑tariff battery purchases helped lower direct material costs and maintain continuity despite global disruptions.

Revenue Decline Highlights Pricing and Mix Challenges

Despite record unit deliveries, revenue slipped to $46 million from $56 million, a drop of around 18% year on year. The decline was driven mainly by lower average selling prices tied to a greater mix of strip chassis and powertrain or hub products, underscoring the trade-off between volume and pricing.

Margin Hit from Inventory and Tariff Headwinds

Overall GAAP gross margin eased from 7.1% to 5.9%, while non‑GAAP gross margin fell from 18% to 8.8%, partly due to inventory actions and tariffs. In Q4, a $2.6 million GAAP gross margin loss reflected additional inventory reserves, write-offs tied to commercialization decisions, warranty updates, and tariff-related cost pressure.

Seasonal Q4 Slump and Timing Effects

Fourth-quarter revenue dropped sharply to $5.2 million on 34 units, down more than two-thirds from Q3 and over half year on year. Management said some strip chassis shipments are still in transit to upfitters, delaying revenue recognition and adding quarter-to-quarter volatility that may not reflect underlying demand.

Tariff Uncertainty and Supply Risk Persist

Tariff volatility remained a notable drag on margins in 2025 and could continue to cloud cost visibility. Xos is attempting to blunt these headwinds through stockpiling, long-term supplier deals, and greater localization, but acknowledged tariffs as an ongoing risk to future profitability.

Customer Concentration Cuts Both Ways

The company’s reliance on large customers and programs, including UPS, FedEx ISPs, and Blue Bird, is a double-edged sword that supports scale and credibility but raises concentration risk. Any slowdown or change in these programs could pressure revenue and orders, making diversification of the customer base an important strategic priority.

One-Off Items Complicate Comparisons

Management cautioned that several discrete items, such as favorable operating expense adjustments and gains from the lease termination, distort quarter-to-quarter comparisons. Investors were encouraged to focus on underlying trends in unit deliveries, recurring gross margin performance, and cash generation instead of headline GAAP swings.

Liquidity Still Modest and Inventory Heavy

While cash and working capital metrics improved, the company’s $14 million year-end cash balance remains relatively thin. With $25 million still tied up in inventory, Xos emphasized the importance of boosting inventory turns and continuing operational improvements to convert assets into cash.

Large Fleet Deals Bring Near-Term Margin Pressure

High-volume fleet programs, particularly those centered on lower-margin strip chassis, are expected to weigh on near-term margins even as they support scale and factory utilization. Management believes margin expansion will follow over time as costs fall and pricing improves, but warned that progress may not be linear.

Guidance Points to Growth and Narrowing Losses

For 2026, Xos guided to revenue of $40 million to $50 million and unit deliveries of 350 to 500, implying modest volume growth at the midpoints. The company expects a non‑GAAP operating loss of $11.9 million to $13.3 million, a substantial improvement from 2025, with hub and powertrain businesses projected to grow at high double‑digit to potentially triple‑digit rates.

Xos’s earnings call painted the picture of a company moving from survival to execution, with improving cash flow, cost control, and diversified products offsetting revenue and margin noise. For investors, the key watch items will be sustained free cash flow, the ramp of hubs and powertrains, and how Xos manages tariffs and big-customer concentration while pushing toward more durable profitability.