Revenue Recognition
Disaggregated revenues by major source for the years ended December 31, 2024 and 2023 consisted of the following (in thousands):
| | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2024 | | 2023 |
| Product and service revenue | | | | |
Stepvans & vehicle incentives(1) | | $ | 42,808 | | | $ | 39,911 | |
Powertrains & hubs(1) | | 8,740 | | | 1,170 | |
| Sales-type lease revenue | | 708 | | | 1,528 | |
Other product revenue | | 1,778 | | | 831 | |
Total product and service revenue | | 54,034 | | | 43,440 | |
| Ancillary revenue | | 1,927 | | | 1,083 | |
| Total revenues | | $ | 55,961 | | | $ | 44,523 | |
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(1) Amounts are net of returns and allowances. Stepvans & vehicle incentives and powertrains & hubs include revenue generated from operating leases.
The Company leases stepvans and hubs to customers under operating leases with terms ranging from 24 to 36 months. At the end of the lease term, customers are required to return the vehicles to Xos. During the years ended December 31, 2024 and December 31, 2023, the Company recorded operating lease revenue of $35,000 and $37,000, respectively, on a straight-line basis over the contractual terms of the respective leases as part of Stepvans & vehicle incentives, above. During the years ended December 31, 2024 and December 31, 2023, the Company recorded operating lease revenue of $29,000 and $0, respectively, on a straight-line basis over the contractual terms of the respective leases as part of Powertrains & hubs, above.
The Company also leases stepvans and Hubs to customers under sales-type leases, as stipulated by ASC 842. Arrangements under these leases have terms of 60 months for stepvans and 24 months for Hub units. Depending on the specific lease arrangement, customers may or may not have a right to return the unit to Xos at the end of the lease term. If the customer does not have a right to return, the customer will take title to the unit at the end of the lease term after making all contractual payments. Under the programs for which there is a right to return, the purchase option is reasonably certain to be exercised by the lessee and the Company therefore expects the customer to take title to the unit at the end of the lease term after making all contractual payments. The Company recognizes all revenue and costs associated with the sales-type lease within “Sales-type lease revenue”, above, and cost of goods sold, respectively, upon delivery of the vehicle to the customer. Interest income based on the implicit rate in the lease is recorded over time as customers are invoiced on a monthly basis. For the year ended December 31, 2024, the Company recognized $0.7 million of sales-type leasing revenue and $0.2 million of sales-type leasing costs. For the year ended December 31, 2023, the company recognized $1.5 million of sales-type leasing revenue and $1.3 million of sales-type leasing costs. Sales-type leasing costs are recorded in cost of goods sold within the accompanying consolidated statements of operations and comprehensive loss.
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.