Good afternoon and welcome to Xos’ First Quarter 2022 Earnings Conference Call. Today’s call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I would like to turn the conference over to Xos’ General Counsel, Christen Romero. Thank you. You may begin.

Thank you, operator, and thank you, everyone, for joining us today. Hosting the call with me today are Xos’ Chief Executive Officer, Dakota Semler; Chief Operating Officer, Giordano Sordoni; and Chief Financial Officer, Kingsley Afemikhe. Ahead of this call, Xos issued its first quarter 2022 earnings press release, which we will reference today. This can be found on the Investor Relations section of our website at investors.xostrucks.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.xostrucks.com. 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. Please refer to the information contained in the company’s first quarter 2022 earnings press release for definitional information and reconciliations of historical non-GAAP measures to the comparable GAAP financial measures. Participants should be cautioned not to put undue reliance on forward-looking statements. With that, let me turn it over to Dakota.

Thanks Christen, and thank you everyone for joining us. Today, we are proud to announce our financial results and an excellent quarter. Despite continued disruption to supply chain and logistics, we grew unit deliveries and revenues and also improved unit margins. I am proud of our team’s ability to navigate the ever-changing landscape and meet or exceed the targets we set out for the first quarter. Our mission remains focused on transitioning fleets in targeted high-growth markets from internal combustion engines to electric commercial vehicles with industry-leading technology, and in the process, de-carbonizing commercial transportation. I’ll cover some of the exciting updates and highlights we had over the quarter. Gio will update you on our sourcing and manufacturing progress, and Kingsley will conclude with a detailed review of our first quarter results and outlook. During the first quarter we continued to make steady progress scaling the business. First, we ramped production and delivered 56 units to customers across the US. We also broadened our distribution and service footprint with key customers and partners. Our commercial traction in the first quarter is underpinned by our expansion into growth-focused last mile markets. In the current environment of elevated diesel prices, Xos’ industry-leading total cost of ownership and value proposition to our customers is stronger than ever. With trucks on the road since 2018, we are able to showcase our trucks' real-world experience in our customers' hands. We are seeing an acceleration in our sales cycle quarter-on-quarter, with more purchase orders and more units per purchase order. Over the first quarter, we received purchase orders for over 350 trucks from a range of customers and use cases. In particular, we continue to secure orders from keystone customers such as FedEx Ground Operators, with outstanding purchase orders currently standing at over 550 trucks across a range of states. Subsequent to quarter end, we announced delivery of 15 fully-electric stepvans to five different FedEx Ground Operators in Southern California. These vehicles were the first deliveries in 2022 under purchase orders signed last year, and we are excited to continue rolling out our products to this leading nationwide fleet. We also continue to have great traction in the beverage, linen, and refrigerated trucks, such as the partnership we have announced with ThermoKing. We secured a purchase order from uniform and workwear leader, UniFirst, and announced three deliveries to UniFirst's Southern California location during the first quarter. This delivery was part of an initial rollout of vehicles, and we expect additional deliveries to a UniFirst location in Boston, Massachusetts in the second half of the year. We are excited to help our long-term partner UniFirst reduce their environmental impact and transition their fleet from diesel to electric vehicles. Finally, we are proud of the distribution and service network we have built. In the first quarter, we announced our partnership with Murphy-Hoffman Company, one of the largest commercial vehicle dealerships in the country. We continue to take strategic steps to tackle the current supply chain crisis, which Gio will talk about in detail. It is early days, but we believe some of the strategic steps we have taken are beginning to bear fruit. In summary, we continue to make significant progress scaling the business, and I am proud of the team's accomplishments this quarter. The opportunity for clean fleet and logistics solutions in both the public and private sector remains immense, and we expect to continue to benefit from the secular shift to a net-zero carbon economy. I will now turn it over to Gio.

Thanks, Dakota. The Xos production system can be bucketed into four core activities which I’ll cover separately. First, we flow quality parts to the assembly line; next, we assemble chassis at Flex 1 in Tennessee and Flex 2 in Mexico; third, we assemble the Lyra battery system; and lastly, we work with our partners to install bodies on our X-Platform chassis. While the overall supply chain environment remains challenging and uncertain, we have seen modest improvement in our ability to procure and land some key components like wire harnesses; we have also secured near-term allocations of other commodities like battery cells. The team has done a great job in helping to strengthen our supply chain by multi-sourcing components to mitigate risks and securing more of our supply from North America to mitigate shipping cost increases and delays from overseas vendors. While modest, these improvements give us confidence in being able to continue growing deliveries each quarter. Despite the challenges in sourcing and landing parts, we have increased production and deliveries from our chassis assembly plants Flex1 and Flex2. While outpaced by chassis production, we are making steady progress in ramping up battery production. We remain on track to further improve our production yield with the addition of a more automated battery assembly line at Flex 1 in Tennessee later this year. We are excited to share we have begun the build-out of this line and are on track to begin producing batteries later in the year. As we look to the current year and our key objectives, we can expect to see the continued ramp-up of our X-Platform production, as well as the introduction of new vehicle products and software offerings. We’ve been hard at work and are excited to showcase some of these developments at our product reveal event at Xos Fleet Week on May 10. I will now pass it over to our CFO, Kingsley Afemikhe.

Thanks Gio, and good afternoon to you all. Xos had a great quarter in the midst of a very challenging business environment. We are making selective decisions to invest in our business and are excited by the opportunity for growth this year. Our revenue in the first quarter increased to $7 million, versus $0.8 million in the same period in the prior year. This was above our guidance and is a sequential increase of 113% from the fourth quarter of 2021. This is driven by an increase in units delivered to 56 compared to 4 units in the same period in the prior year and 32 units last quarter. As expected, our average selling price will vary quarter-on-quarter; however, we saw higher average selling prices this quarter and continue to expect ASPs to be higher this year overall compared to 2021. We continue to see strong demand for our zero-emission products, as the total cost of ownership strength is proven out and diesel prices remain elevated. Our cost of goods sold for the quarter was $10.2 million compared to $0.7 million in the same period in the prior year. We made good progress on gross margin this quarter, with a gross margin of minus 45% this quarter, versus minus 74% in Q4 last year. This is testament to the hard work of the entire team and the benefits we are beginning to reap as we scale production. Nevertheless, we remain cautious on the current supply chain picture with the likelihood of increased material and logistics costs, particularly from our suppliers in Asia. We are taking price action to cover more of our costs where we can, including applying raw material surcharges. We expect gross margin to improve as we ramp volumes and benefit from the addition of the new expanded automated battery line at our Tennessee facility. With these and other strategic steps, we believe we have a clear line of sight to being gross margin positive. Turning over to expenses, our first quarter operating expenses were $20.3 million compared to $5.7 million in the same period last year and $23.0 million in the fourth quarter. Operating expenses decreased 12% from last quarter, primarily due to a reduction in R&D expenses. We are focused on the user experience and are making exciting progress in a range of new products, which we look forward to telling you more about next week at Fleet Week. We expect to continue to increase investment in new product development, but as detailed before, we expect that R&D expense relative to revenue will be lower this year overall compared to 2021. Overall, non-GAAP operating losses, which excludes stock-based compensation expenses, were $22.1 million, within our previous guidance. This compared to $5.5 million in the same period last year and $23.8 million in the fourth quarter of 2021. We continue to see strong customer interest, and are investing in our sales and marketing efforts. Sales and marketing expenses were $2 million in the first quarter, compared to $0.3 million in the same period last year and $1.3 million in the fourth quarter of 2021. Finally, general and administrative expenses for the quarter were $11.3 million compared to $2.4 million in the same period in the prior year, primarily driven by an increase in headcount. Turning now to the balance sheet, at the end of the first quarter our cash and equivalents and investments amounted to $132.7 million; this includes $3 million of restricted cash. In addition, we have added flexibility from our $125 million standby equity purchase agreement. Inventories were at $40.3 million at the end of the quarter, about $18.6 million of which was in work in progress. Our inventory position continues to reflect some of the steps we are taking to ensure sufficient supply of key components. Overall, net cash used in operating activities and cash paid for capital expenditures totaled $34.3 million. Finally, wrapping up with our business outlook, we continue to be focused on delivering sequential growth in revenue and deliveries over the year. Due to the continued uncertainty in the supply chain at this point in time, we are providing guidance for the second quarter of 2022. As we gain more clarity on the supply chain, we will expand that window. For Q2, we expect deliveries to be in the range of 70 to 90 units, delivering revenues to be in the range of $8 million to $11 million and non-GAAP operating loss in the range of $23 million to $28 million. Thank you. I’ll now pass it back to Dakota.

Thanks, Kingsley. Before we open it up for questions, I want to thank our team for their contributions to our success as well as our partners, customers and shareholders for their continuous support. We remain optimistic about our future based on market growth, our technology platform, and the exceptional people we have here at Xos. Now we’ll open up the line for questions.

The first question comes from Mike Shlisky with DA Davidson. Please go ahead.

Hello, guys. Good afternoon.

Good afternoon, Mike.

Thank you. I wanted to start off just by looking at the purchase orders outstanding. Looking at what you’ve written and what you said, your orders from FedEx, but you also got other orders throughout the quarter. Can you give us a number as of quarter end or as of today, like how many purchase orders you actually have outstanding in total for all customers?

We didn’t share that information about total orders for all customers outstanding, but it continues to grow quarter-over-quarter, with Q1 representing one of the strongest quarters yet. And that continues to increase particularly as $100 oil prices spike and fleets begin to see the benefits of the total cost of ownership reductions that our fleet vehicles are offering for them. The other thing we’ve also seen is that customers such as early customers like Loomis and others have placed follow-on orders to really reap the benefits of electric Xos vehicles across their fleet, as they started to deploy their early vehicles.

Okay, super. Also, could you maybe give us some commentary on how the recent HVIP allocations went? How you guys did? Did you feel like you’ve got all you could? Did you get more than you were able to last time, etc.? Just looking at your commentary around how that’s going.

We definitely participated in this year’s HVIP opening of their program. And we were really successful this year. Don’t have exact numbers on issuances, but we did exceed our last award period and had the opportunity to get more trucks into California. But just a reminder, these trucks are being sold all across the country. So really, we’re focusing on getting that acquisition price as close to a diesel competitive vehicle as possible. So that the TCO savings that fleets will see from the reduced maintenance costs and the reduced fueling costs are relevant in any market and not just California. And so now most of our deliveries are actually taking place outside of California, in states that don’t have the same favorable incentives.

Okay. I also wanted to ask about the deal you announced today with ThermoKing, is that the big launch you’ve got going on or is that something separate? Can you elaborate on how that works? Is that a full-scale vehicle or are you just powering the actual reefer unit? I wasn’t quite sure exactly what’s going on there.

Yeah, happy to talk more about the relationship and partnership with ThermoKing. We’ve been working with them for quite some time to integrate ThermoKing’s zero emissions technology onto some of our vehicles, starting in the medium-duty realm by taking their transport refrigeration units and installing them on vehicles with boxes and bodies that will service refrigerated fleets in the beverage sector, and several other grocery delivery and food delivery sectors. So that’s the first aspect of the partnership and something we’ve already started working on, and are really excited to deliver those products to customers that already operate reefer fleets. The second area is ThermoKing is also assisting us with some of our thermal management technology that we’ll be incorporating into our Xos hub. As you probably remember, the Xos hub is our modular and mobile energy storage device and charging infrastructure to allow fleets to manage the delay between permanent charging infrastructure and when their trucks get delivered. So we’re working with ThermoKing to install some of their zero emissions thermal management units onto our production Xos hubs as well, leveraging a lot of their cooling technology that they’ve brought to the industry, some of the first that’s in the industry for zero emissions applications. And then you also alluded to our product launch event next week, which is Fleet Week. So in Long Beach, California, on next Tuesday, May 10, we will actually be hosting a product launch event where we’re going to be announcing some really exciting upcoming products that we’ll be able to continue to deliver to fleet customers and are really excited about showing and demonstrating this new technology to those customers, some of which may actually have some of those reefers on them eventually.

Okay. Well, definitely looking forward to that event for sure. But today’s announcement is not the product that you’re launching, is that true? It is something different.

That’s correct. Today’s announcement is not the product that we’re launching on Tuesday.

Okay, great. I have got more, but I’m going to give somebody else a chance. I appreciate the help, guys.

Thanks, Mike.

The next question comes from Jerry Revich with Goldman Sachs. Please go ahead.

Yes. Hi. Good afternoon.

Afternoon, Jerry.

Hi. I’m wondering if you could just talk about the planned deliveries that you folks have in the second quarter. Are all of these stepvans and chassis? Can you talk about how many different configurations you’re planning to deliver? And on that same token, the bookings, the 350 purchase orders you highlighted this quarter, can you just comment on how many different vehicle types that represents?

Yeah, happy to provide more context and clarity on those deliveries for the upcoming quarter. The vast majority of those vehicles will be our medium-duty Stepvan platform, going to some existing customers, or our MDX platform. And we’ll also be going to some new customers that are going to be taking delivery of their first vehicles. There’ll also be a small portion of those deliveries that will be our powertrain systems, for some of our customers that are acquiring the technology, like the battery systems and powertrain technology that we’ve developed.

Super. And then can I just ask unit profitability at this point? Obviously, we’ll see at what pace the supply chain allows us to ramp production but, Kingsley, how should we be thinking about incremental margins for every additional truck that we might be able to produce? If you folks are able to deliver, let’s say, 100 trucks this quarter, what’s the incremental contribution we should be thinking about per truck at the gross profit line?

It's a complex supply chain, making it challenging to provide specific guidance. However, I can share how we approach it. Firstly, we've implemented price increases in the first quarter, which will continue into the second quarter. We're optimistic about this as our customers are eager to purchase our trucks due to the clear advantages they offer. Our pricing adjustments are in response to commodity price fluctuations. Secondly, in terms of direct costs, we are collaborating closely with our engineering and supply chain teams to reduce those costs while maintaining visibility. Some of these initiatives may take longer to yield results, so the most noticeable impact will be later this year or next year. We are excited about the scale and cost absorption of both our direct and indirect expenses, and we're starting to see the positive effects this quarter, with expectations for continued improvements next quarter. While we are cautiously optimistic, we recognize the uncertainties in the supply chain, which is why we haven't provided a specific timeline for achieving positive gross margins. Nonetheless, we have a clear understanding of our ongoing efforts.

Okay, thank you. And Dakota, you folks have had a steady stream of new distribution agreements every couple of months here. Can you just talk about what’s that pipeline look like for you? And, if we fast forward 12 months from now, how many additional states are you targeting to have representation in?

Yeah, absolutely happy to provide more context. So just to catch up on what we’ve currently announced, we have relationships with several groups across the country, the most recent announcement being our partnership with MHC, or the Murphy-Hoffman Companies, which is one of the leading commercial vehicle distribution and dealership networks in the country. And we’re working with them in seven different states, and multiple locations within those states as well, to provide coverage to areas that we don’t already have existing support and distribution services in. We have a pipeline on several additional locations in the coming quarters; we haven’t provided specific clarity on which states and which regions, but as those regions do become available, we’ll certainly share those more publicly. Strong focus areas for us in terms of regional focus for fleet distribution are in the Northeast, Northwest, and also some additional regions throughout the Midwest. So those are areas where we’re continuing to see further growth, and some of that is going to be through distribution partners and dealers like MHC, but some of it will also be through our own access distribution services, which actually is our own direct sale application where we’re distributing vehicles directly to fleet customers.

Terrific. Thanks.

Thanks, Jerry.

The next question comes from Donovan Schaefer with Northland Capital Markets. Please go ahead.

Hey, guys. Congratulations on the quarter, looks great. I want to start off with looking at gross margins. And, yeah, I know you’re a young company and there’s all kinds of supply chain stuff going on, and maybe as investors and being on the sell side where it’s tempting to become a little impatient, for lack of a better word on my part, not accusing — not saying anything towards you guys, but if you look at the gross margins and it’s just hard not to see and go like, oh, we really want to know when that’ll change or when something will happen. So I’m wondering, can you give any kind of a ballpark because, of course, commodity — there are two factors: one is the price environment, and you don’t have control over that, you can pass things through to customers at the surcharges and such, but it’s hard to say ahead of it and you don’t know what’s going to happen in a month with steel prices or batteries, or whatever. But the other one is just sort of scale and I think that’s probably one of the most important levers for you guys. Do you have a sense — I know you’re not going to give a timeline for when you could see yourself being — with a line of sight to positive gross margins, but is there like a volume level where you feel you could get there? Even if you could give rough numbers, I mean, is it safe to say that you’d be gross margin positive at a run rate of 1000 units a year, or a run rate of 500 units per year? Just wondering if you have anything that kind of gives us a hook there?

Yeah. Hey, Donovan. Look, it’s a very fair question. And we absolutely believe that this is a high gross margin business and that is a target that we as an entire company are working towards. We really think about it in a couple of ways. So I’ll start again with pricing action there. We’re trying to be proactive there as well, where we can. What’s helpful is that being the cost of ICE vehicles are also going up, and so we haven’t seen any slowdown at all in demand in the areas where we’ve been taking price action, which is exciting for us. The second thing is when we think about the direct material costs, it isn’t necessarily just the volumes game, right, and the scale game; it’s also we’re making continuous engineering additions to the vehicle, we’re also thinking about ways that we can restructure things and so on. I think that’s one of the strengths of having — being a manufacturing company and having that engineering ability for the projects that we’re working on there. You’re absolutely right, when it comes to other costs and other fixed costs amortizing now over the number of units, and even though it’s early days, we are beginning to see the benefits of that. So I can’t give you an exact number and say when we get to this cumulative number of vehicles, you’ll see the inflection into positive gross margin. But the message we’ve said and the guidance have given is that we expect gross margins to improve over time this year and that’s our focus.

Following up just quickly on that, I think — correct me if I’m wrong, but I believe Dakota said in the prepared remarks that there would be a — that at least your beliefs and your expectation as a company is that you will have sequential improvement in the unit volumes from quarter to quarter to quarter through this year. And so I’m wondering if we talk about these — the two factors here of commodity costs versus scale, being one of the factors, although it doesn’t apply to every cost input, but if the scale is expected to increase sequentially, should we be expecting steady sequential gross margin improvement, or could changes on the pricing side overcome that? If steel prices move — if some costs moves aggressively, and it takes a month delay or a two-month delay to pass that through to customers, would that undercut that kind of thinking?

Yeah, look, absolutely. We are in an extraordinary time when it comes to supply chain, and we’ve done a relatively good job — we’ve done a good job as a team to manage that. So making commitments on margins is going to be — we’re not going to do that at this time. What we’re clear about is that we’re focused on improving margins over time and we believe strongly that this is a positive margin business.

Okay. And now is it is the last question, and I’ll get back into the queue or I’ll save them for later. But in terms of the supply chain and commodity, well, clearly you have the purchase orders, and that’s really great, and so clearly the demand is there. So it’s more of a supply constrained environment. And so, what are the kind of gating key supply inputs? Is it just sort of everything? Yeah, I know there are companies that every day, the floor — the line workers come into the factory, and there’s something on a whiteboard that says, well, now we’re out of this item, and now we’re out of that item, and it’s just 100 different parts. And it’s just constant kind of hand to mouth in terms of — or are there things that are more specific, like, could it be — does it come down to port congestion, where it is inbound product coming into the Port of Los Angeles, outbound coming out of ports in China with the shutdowns there? Does it come down to specific — certain specific items more often than other ones, chips, cells; you mentioned wire harnesses this time, which I think has come out for the first time, but that you’ve resolved that, but just curious what the major things are right now that cause you to be sort of supply constrained?

Yeah, Donovan. This is Gio. I appreciate your question. Thank you. It’s a little bit of all the above in terms of port delays and delays in China with shutdowns. As far as components, it changes over time, so it’d be a little misleading or disingenuous for me to say it’s this component because that might be true this week, and it’ll be a different component next week. I think what you picked up on in our prepared remarks is that we did mention some improvements in wire harnesses and being able to land those and get those to the plant more quickly than in the last quarter, and then also having better near-term visibility on our cell allocations, so those are both positive trends that we’re talking about this time around. But yeah, you’re right; it is a situation where we are tracking, we call them red flags, or an orange flag, or no flags, depending on how dire it is. But those change from week to week and day to day, and there are daily meetings going through each of those issues at each plant. As you know, you can’t build a truck without 100% of the parts and so we were making sure to get all those in. We’d had to start builds in some cases without all the parts in warehouse and had to add them on later on in the process and move load products over the line. But that’s the decision we made to be able to continue to keep the lines moving and continue delivering trucks and growing our deliveries each quarter.

Okay, yeah. Well, thank you guys for answering the questions. It’s great. And I got to say, being here in Southern California also seems, prices are almost $7 a gallon. I have to admit, when I saw the FedEx mountainous announcement for the 15 vehicles in Southern California, I just thought that just seems like a no-brainer. $7 a gallon.

Yeah. It’s making the TCO equation even better. And yeah, given that you’re here, hope to see you Fleet Week on Tuesday.

Absolutely. I’ll see you there.

The next question comes from Dan Ives with Wedbush Securities. Please go ahead.

Sure, could you explain how the FedEx situation affects discussions with other potential customers, especially considering the challenging environment?

Yeah, happy to provide some additional context there, Dan. So working with large fleets like FedEx is incredibly helpful to build value for fleet operating customers. They see the diligence that these fleets have done in evaluating our vehicles and getting the infrastructure installed to support the vehicles. It provides them with the peace of mind that Xos is not only building great truck products for fleets but also supporting those products in the field. And I think that’s a testament to our customer service and customer support team that helps maintain and service these vehicles across the country. So we’re actually servicing and supporting through our CX team, tracking and maintaining all of those vehicles that we deploy, and then making sure that each of those fleets that have trucks in them are getting those parts. And it’s that kind of brand behind us that is really helpful when it comes to smaller or medium-sized fleet operators in making the decision around which electric truck manufacturer they’re going to work with.

Great. And then Kingsley, can you just hit on like from a cost perspective outside through the supply chain and just everything you’re seeing, like, what — have you instituted just different procedures now, just to make sure, as much as possible, that you could kind of just get guardrails around what’s going on in the supply chain?

Absolutely. So a little bit of context here, we’ve had trucks on the road since 2018. So we’ve been building out our supply chain over that time in a high level of detail. Clearly as we are scaling and so we are in this extraordinary supply chain environment, there are a number of steps that we are taking all the way through. So first is we’ve done a lot of work in reassuring our supply chain and diversifying our suppliers and really entering into those agreements where we can get larger volumes and have more certainty of supply. So that’s been very, very helpful when we’re doing our long-term planning for this year. In addition, when we work through on the cost of the vehicle, we work through with the particular components and have the choice of different suppliers for the components and we’re spending a lot of time on managing freight. As you know, we manufacture our trucks here in the US and also in Mexico; there’s a large amount of logistics required in our trucks, and those come through in COGS. So we’re being really thoughtful and managing that, making sure that we have the supplies for deliveries, and making sure we do that in a way that’s cost-conscious. Mike Chaffins and team, he joined us late last year, being really critical in helping us to manage costs, and manage them and go through the whole process in manufacturing, which is the other point about manufacturing as well. So we work through to make sure that our direct and indirect costs are really managed by us. So we are in an extraordinary situation all the way through different costs and different components. We’re watching and monitoring all the costs, we are taking price action where we can, and I think that you can see there are improvements in the margin, and it’s our focus to keep on going on that journey.

Yeah, look, I think relative to industry, and the challenge is you guys are doing a great job. Okay, thanks.

Thanks Dan.

The next question comes from Mike Ward with Benchmark. Please go ahead.

Thanks. Good afternoon, everyone. Can you guys quantify the change in the total cost of ownership? I mean, since these fuel prices have doubled, can you quantify that all? And then also, I don’t know, maybe talk about how that’s affected your negotiations with your different clients or potential clients, as you look at the entire market going up?

Yeah, absolutely. It’s a great question, Mike, and one of the most important factors that fleet owners face when they’re deciding around acquiring new vehicles what to purchase. So in general, when we’re talking about last mile or regional haul vehicles, fuel costs can make up anywhere from about 20% all the way up to 40% of your total cost of ownership. In some applications and Class 8, they can even get higher than that. So if you factor in some of the fuel price increases that we’ve seen, certainly here in California and other locations where we have our manufacturing facilities in Tennessee, the fuel prices have nearly doubled over the course of several months. And that means that that total cost of ownership, if these prices hold, could also double and it becomes the single most expensive component of operating a commercial vehicle fleet, even more costly than the driver or the operator of the vehicle itself. So it’s a significant factor that’s been driving up the demand for these vehicles. So even whilst we’re going through this supply chain challenging environment where commodity costs have increased, in some cases 10% or 20%, the fuel costs increase has greatly surpassed any COGS increase that we’ve seen, making the total cost of ownership much more beneficial for Xos’ electric vehicles than an alternative diesel or internal combustion engine vehicle.

Okay. It’s likely to be a substantial number. The fleet operates under the same dynamics as other last mile delivery services.

It's a bit challenging to grasp, but I believe you're inquiring about the size of the vehicle and whether the total cost of ownership savings align with other similar situations.

Are the dynamics of the reefer fleet more like last mile or are they more long haul?

It’s a great question. So there are some long-haul reefer fleets but, as you know, anything that operates in a reefer vehicle, you would purchase in your refrigerated section of the grocery aisle, a convenience store, a produce market, that all has to go on a refrigerated truck. So we’re working with them looking to address those markets, those last mile regional haul markets. We’re starting with the medium-duty vehicles and focusing on box trucks that are frequently used for meat or produce or seafood delivery. We have several grocer customers or grocery customers that are going to be utilizing refrigerated vehicles within their fleet, and then eventually will expand into larger vehicles with transport refrigeration units that are mounted to trailers, and some of the Class 8 applications but the focus today is really on that last mile distribution fleet that operates refrigerated trucks.

And is ThermoKing, are they the biggest?

I believe they are the biggest in the industry and they’ve got an incredible portfolio of zero emissions products that they have been working on for several years now that we’re going to be integrating into the vehicle, so none of those products that we’re putting on our trucks are going to be utilizing any diesel fuel or any gaseous liquid fuel to power the reefer unit.

Well, it’s a big win. Are you exclusive with them or can they deal with other electrified trucking companies?

It’s not an exclusive relationship. And really, we wanted to think about keeping an open mind in terms of what the customer wants. We’re going to have several customers of ours that are ThermoKing customers; we have customers that will also request other options. But we’re excited about this partnership because they’ve been a leader when it comes to building zero-emission solutions that are more energy efficient for zero-emission vehicles like ours, so they don’t impact the overall range of the vehicle as significantly.

Welcome, congrats. It’s a big one. Thank you.

Thank you. Yeah, thank you.

The next question comes from Sharif Elkhaldy with Bank of America. Please go ahead.

Hi. Good afternoon. So I just wanted to ask about the free cash flow. We saw cash from operations — the cash flow from operations accelerated a bit year-on-year and we haven’t yet seen a lot of the CapEx that was guided flow through yet. So thinking about the guidance for next quarter, as a benchmark, it seems like we could expect something similar for cash from operations in Q2 versus Q1. And when you combine that with expected CapEx spend, it seems like we could end up with about another $57 million of cash burn or so. So I wanted to ask if that’s the correct way to think about it. And within that context, how do you think about the equity purchase agreement?

No, I think there are some uncertainties. Generally, the guidance for capital investments pertains to the entire year. Regarding cash use this quarter, we haven't provided exact figures but expect it to be similar to prior periods. Our inventory position, which is $14 million and $18.6 million, is being finalized with components waiting to be completed for our customers, so the numbers may be more flexible. Concerning the equity purchase, we have strong confidence in our company's equity and see significant potential. If we consider any equity issuance, it would be done strategically and opportunistically. Our business is capital-light, allowing us considerable flexibility.

Understood. Thank you. I’ll pass it along.

Those are all the questions that we have today. I will now turn the conference back over to Dakota for closing remarks.

Thank you. Thanks, everybody, for joining. And thank you to all our analysts for asking some incredibly insightful questions. We believe that the investment case for Xos is clear, as you consider the current environment we are in, with diesel prices highly volatile and trending upwards, our total cost of ownership advantage is even more compelling and clear as can be seen by our commercial traction. We’re excited about next week and our product launch event, the Xos Fleet Week on Tuesday, May 10, which will be in Long Beach, California and will also be live-streamed on our website xostrucks.com. We’re hoping that everybody listening to the call today will be able to tune into that event and really keep up to date with our new exciting products. We are building a business tailored to the needs of our customers and focused on delivering for them and our announcements at Xos Fleet Week will only continue to demonstrate our commitment to those fleet customers. Thank you, everybody. Have a great day.

This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.