XOS (XOS) Q3 2025: Powertrain Orders Jump by 75, Margin Mix Shifts Toward Higher Value
Exos delivered a record quarter marked by surging powertrain demand and a decisive pivot toward higher-margin product lines. The company’s evolving mix, including the expansion of its hub energy platform and school bus electrification, signals a strategic shift to more resilient, diversified revenue streams. With margin tailwinds from product mix and cost discipline, management is positioning Exos to capitalize on secular electrification trends and operational leverage into 2026.
Summary
- Powertrain and Hub Momentum: Significant post-quarter powertrain orders and broadening hub use cases accelerate margin expansion potential.
- Margin Mix Shift: Product mix is tilting toward higher-margin segments, with cost controls and tariff strategies supporting future gains.
- 2026 Setup: Expanded pipeline and operational discipline set the stage for volume and profitability inflection next year.
Performance Analysis
XOS reported $16.5 million in revenue on 130 units, as the company maintained delivery momentum with major fleet customers like UPS, Bluebird, and FedEx ISPs. Year-to-date, unit deliveries rose to 294, outpacing last year’s comparable period, though total revenue saw a modest decline due to lower average selling prices from product mix changes. The company’s GAAP gross margin improved sequentially to 15.3%, reflecting a greater contribution from higher-margin powertrain sales and successful tariff renegotiations on key programs. Non-GAAP gross margin reached 16%, marking the ninth consecutive positive quarter on this metric.
Operating discipline continues to drive structural improvement: operating expenses dropped 24% year-over-year, and quarterly operating loss hit its lowest level since going public. Free cash flow turned positive for the third time since IPO, supported by inventory drawdown and stronger receivables collection. Liquidity improved to $14.1 million, aided by a $2.4 million ATM program and strategic inventory management. The recent amendment of the company’s convertible note, extending maturities through 2028, further reinforces financial flexibility.
- Product Mix Drives Margin Rebound: Higher-margin powertrain and hub sales offset lower ASPs in core truck deliveries.
- Cost Structure Reset: Sustained opex reductions and working capital improvements underpin cash flow gains.
- Liquidity Actions Extend Runway: Convertible note restructuring and facility lease termination increase balance sheet resilience.
Exos is now positioned to benefit from a mix shift toward higher-value products, with near-term visibility into improved profitability as scale and operational leverage build into 2026.
Executive Commentary
"This quarter, we shipped 130 vehicles, generating $16.5 million in revenue. We actually shipped 140 vehicles, including 10 stripped chassis, already on their way to upfitters for a major customer program. That revenue will be recognized in the coming quarters. But the signal is clear. Demand is real, customers are returning, and scale is growing."
Dakota Semler, Chief Executive Officer
"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. 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."
Diana Pagosian, Chief Financial Officer
Strategic Positioning
1. Diversification Beyond Trucks
Exos is deliberately expanding its business model beyond traditional electric trucks into powertrains and energy infrastructure. The powertrain partnership with Bluebird Corporation, school bus manufacturer, is gaining traction: 18 powertrain systems delivered in Q3 with nearly 80 new orders post-quarter. This provides access to the accelerating school bus electrification market, where Exos’s modular, serviceable technology is a differentiator for reliability-focused customers.
2. Hub Platform as Energy Systems Play
The Exos hub, mobile charging and energy resilience system, is emerging as a strategic wedge into broader commercial and industrial energy markets. The platform’s use cases now span fleets, utilities, autonomous vehicles, and temporary power for grid-constrained environments. Upcoming 2026 upgrades will enhance power resilience and load balancing, aiming to address a total addressable market well beyond transportation electrification.
3. Margin Expansion Through Mix and Cost Discipline
Management is targeting a margin mix shift toward higher-value segments, with powertrain and hub products generally delivering gross margins in the 15–35% range, compared to low- to mid-teens for truck programs. Tariff renegotiations and supplier cost-sharing further insulate margins, while structural opex reductions and inventory management support cash flow improvements.
4. Capital Structure and Liquidity Management
Exos executed a convertible note restructuring and facility lease termination to extend its financial runway and reduce cash burn. The company’s largest shareholder, Algema Automotive, has increased its stake, signaling long-term alignment and confidence in the business trajectory.
5. Scaling Operationally for 2026 Demand
The Tennessee facility is being reconfigured to expand hub and powertrain assembly, enabling volume growth without significant incremental capex. This operational flexibility is a key lever as the company prepares for rising demand across all business lines in 2026.
Key Considerations
Exos’s third quarter underscores a business in strategic transition, with clear signals that margin and mix improvements are foundational to its next phase.
Key Considerations:
- Product Mix Evolution: Powertrain and hub products are gaining revenue share, improving margin resilience and reducing customer concentration risk.
- Tariff and Supply Chain Adaptation: Multi-pronged approach to tariff volatility—reshoring, supplier cost-sharing, and customer renegotiations—mitigates future shocks.
- Operational Leverage: Cost structure reset and capacity expansion position Exos to scale efficiently as demand accelerates.
- Balance Sheet Flexibility: Convertible note extension and lease exit create room to invest in growth without near-term capital constraints.
- School Bus Electrification Tailwind: Bluebird partnership and new powertrain variants open a fast-growing market with high reliability requirements.
Risks
Tariff regime changes and supply chain disruptions remain material risks, with potential to impact input costs and delivery schedules. Customer concentration in large fleet programs exposes Exos to volume and pricing pressure, particularly if major partners shift procurement strategies. The company’s ability to sustain liquidity and access capital markets is critical, especially as it ramps investments in new segments.
Forward Outlook
For Q4 2025, Exos guided to:
- Unit deliveries within the 320–420 range for the full year
- Revenue between $50.2 million and $65.8 million for the full year
- Non-GAAP operating loss between $24.4 million and $26.9 million
Management reaffirmed guidance and highlighted:
- Seasonal softness in Q4 due to major fleet customer peak periods
- Ongoing growth in powertrain and hub deliveries to offset truck seasonality
Takeaways
Exos is executing a strategic pivot toward higher-margin, diversified revenue streams, with clear signs of operational discipline and demand momentum in new segments.
- Powertrain and Hub Demand: Post-quarter orders and expanded use cases validate the company’s diversification strategy and margin upside.
- Margin Inflection Setup: Mix shift, cost controls, and tariff strategies support a path to improved profitability in 2026.
- Watch School Bus and Energy Systems: Continued traction in school bus electrification and hub deployments will be critical for sustaining growth and margin expansion next year.
Conclusion
Exos’s Q3 results showcase a business gaining operational and strategic momentum, with margin tailwinds from product mix and disciplined execution. The company’s positioning in school bus electrification and commercial energy systems offers a credible path to higher value and lower volatility as it enters 2026.
Industry Read-Through
Exos’s margin rebound and powertrain traction signal broadening electrification demand, especially in school bus and commercial fleet markets. The company’s hub platform highlights the growing importance of mobile and resilient charging infrastructure as grid constraints intensify. For peers, the ability to diversify product offerings and insulate margins from tariff and supply chain shocks will be a key determinant of long-term viability. Investor focus should shift toward companies with proven operational discipline and credible pathways to higher-margin, scalable segments within the electrification ecosystem.