Dakota Semler: Yes, absolutely. Thanks for the question, Mike, and thanks for joining. With regard to the legacy units in Q2, we’ll have less than 10 of those units to deliver. So with most of the net realizable value accruals already having hit our P&L in the previous year, we don’t expect the margin trail to really impact us in full year 2024. So again, the single-digit units for the remainder of the year. And then the second point around your question around new models, which is our 2024 model year Stepvan, we will continue to make improvements every year on the product both for improved customer experience, improved efficiency and durability and reliability. But one of the other side effects or benefits of making those engineering changes is, as you pointed out, the improvement of our cost of goods sold.
So we do anticipate some improvement in our cost of goods sold, not as drastic of an improvement from our legacy inventory to the 2023 Stepvan, but still incremental margin performance improvement within the year because of some of those engineering changes and particularly because of some of the supply chain changes and improvements that we’ve negotiated with our key vendors and suppliers that make up the cost to that vehicle.
Michael Shlisky: Okay. Great. And then I guess I was curious, you had mentioned that almost all of your sales were through the direct channel and the dealer network was providing most of the service piece of it. Do you anticipate more of the 2024 sales of new equipment to be in the dealer channel? Or would you still think it will be mostly national or direct accounts?
Dakota Semler: Yes, it’s a great question. So as we mentioned in the call, 90% of our sales came through the direct channel. I believe that number will actually continue to go up, and we’ll see even higher than 90% of our sales go through our direct channel. And just one quick clarification on the service perspective. Most of the service work is still done by our traveling technicians and our mobile maintenance Xos service team which are Xos employees, but we do work with those third-party dealer vendors and mobile maintenance companies to help supplement in markets where we may not have a concentrated population of vehicles. And so we do anticipate that our service footprint will continue to grow as we deliver vehicles across new territories throughout the Central United States and other locations where we don’t already have trucks, but we also anticipate that we’ll continue to do a majority of the service work on those vehicles.
Michael Shlisky: Got it. And then thirdly, can you discuss some of the non-Stepvan sales you’ve got? I guess maybe can you — are you able to say what happened in the fourth quarter? Could you provide a breakdown of the vehicles versus the powertrains, whether that even matters at this point for your margins? And then looking ahead, I’d be curious just some more detail just what that might look like in 2024. Particularly on the school bus side, there’s only a few players where you’d be providing one of the large players with bus powertrains and significant [ph] replacements to prior model? Or will these spoke to be bringing out an entirely new EV school bus model in 2024?
Dakota Semler: Yes, so it’s a great question. So when we talk about model mix, as you know, the Stepvans have seen significantly improved gross margin starting in 2023 and will further improve into 2024, are powered by Xos margins because of the associated engineering costs and the setup costs of building out those customers and that customer pipeline, the margin profiles are generally even higher in the 20% to 30% range, sometimes higher, but ultimately depends a lot on the customer circumstances. The challenge in that segment is that we don’t always control the volume deliveries because we are a powertrain supplier providing a component to a final vehicle manufacturer or an OEM. With regard to our specific customers in that space and the school bus and recreational vehicle products, these are new products that they would be launching with our powertrain technology.
So incremental business that they’re not already currently supporting and servicing today. We do anticipate there will be growing volumes, although the mix, I would say, relative to our overall core Stepvan business is still relatively low. It’s a minority percentage of our overall vehicle deliveries and revenue.
Michael Shlisky: And I thought, Dakota, just to make sure the bus that this customer will be launching, do you know if it will be eligible for some of the large subsidies from the EPA and various states that are currently underway. There’s pretty large programs, and I’m curious to make sure that Xos powered buses will be able to receive those types of subsidies.
Dakota Semler: That’s a great question. We do believe it will be eligible under the program because it’s not in production yet. We haven’t gotten final confirmation. But as you know, Mike, the EPA released was expected to release about $500 million in subsidies in our last grant release in early January, and they announced a $1 billion pool of funding. So it’s a fast-growing market and continues to see lots of demand in that space, and we expect our vehicle to be — our powertrain to be one of the vehicles that will be eligible for those EPA incentives and potentially other state-driven incentive programs.
Michael Shlisky: Great. I appreciate the discussion. I’ll pass it along.
Operator: The next question comes from Daniel Ives with WedBush. Please go ahead.
Steven Wahrhaftig: This is Steven Wahrhaftig on for Daniel Ives. I just had two quick questions. You mentioned on the call that the cash consumption that you guys had in the back half of 2023 was somewhere between $2.2 million and $8.5 million, if I heard that correctly. Do you expect this to continue throughout the first quarter and into 2024? And then also, you mentioned that the deliveries for this year would be a little bit more back half weighted. Should it be similar to what we saw in 2023? And if not, then how should we really expect that going forward?
