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spk07: Greetings and welcome to the RE Automotive third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Lamar Gruber, Vice President of Investor Relations. Thank you. You may begin.
spk02: Thank you, operator, and thank you all for joining our third quarter 2021 conference call. We hope you have seen our press release issued earlier this morning at investors.we.oto. I would like to remind you that today's call may include forward-looking statements. Any statements describing our beliefs, goals, plans, strategies, expectations, projections, forecasts, and assumptions are forward-looking statements. Please note that the company's actual results may differ from those anticipated by such forward-looking statements for a variety of reasons, many of which are beyond our control. Please see our recent filings with the Securities and Exchange Commission, which identify the principal risks and uncertainties that could affect our business, prospects, and future results. We assume no obligation to update publicly any forward-looking statements. In addition, we will be discussing or providing certain non-GAAP financial measures today, including adjusted EBITDA, non-GAAP net loss, and EPS. Please see our release and filings for reconciliation of these non-GAAP measures to their most directly comparable GAAP measures. Joining me today is our co-founder and CEO, Daniel Barrel, who will provide an overview of our business and given operations update, as well as our CFO, Hai Aviv, who will continue with the discussion of our financial results and outlook before we open up the call for your questions. At this point, I will turn the call over to Daniel. Daniel, please.
spk04: Thank you, Limor. Good morning and welcome to our third quarter 2021 earning call. I will begin the call with an update on the company's progress on our many strategic initiatives and milestones we've achieved in the last few months. Then our CFO, Haim, will follow with a recap of the financial of the third quarter and our outlook. After that, we will be happy to take your questions. We have made great progress in our efforts to reach commercialization over the last quarter to date. To this point, we have made many accomplishments to share, including securing customer validation for our first prototype, building out our supply chain, assembling our infrastructure, strengthening the team, and unveiling a very significant product milestone of a fully autonomous last mile delivery concept vehicle. All of these accomplishments are coming ahead of our schedule, and we continue to make strong progress. In our first quarter as a public company, we outlined several of our targets to advance production readiness as we move towards commercial production in late 2023. Referring to that, I'm proud that our team has already achieved multiple milestones, thanks to the additional investment in our engineering and commercial capabilities. First, I'm excited that we reached significant customer validation milestones with Navia. As we successfully completed the re-platform validation, this is part of an ongoing validation process with Navia, a French-based company that is leading autonomous vehicle systems development. This is the first of a few prototypes we presented recently to customers by evaluation, which we will be happy to share with you in the future. This is an example of a typical process we will go through with each of our customers that will result in us reaching commercialization in the coming years. This also demonstrates how we will advance our strategic alliance ahead of schedule, getting us closer to production and revenues. A second and important step towards commercialization is securing supply chain. As part of our initial integration focus on a U.S.-based delivery van program in strategic collaboration with JB Poindexter, we have extended supply chain capacity to support our growth. To this point, we started nominating key suppliers. This includes American Axle for high-performance electric drive units and Brembo, for a breaking system. These nominations not only support our progress, but also provide validation for the supply side. These are critically important steps as we are not just buying components or implementing third-party technology. We are jointly developing key capabilities together. In addition, those suppliers commit to volume, allowing us to progress towards commercialization even during these challenging supply chain times these partnerships are critical steps in the ongoing effort to build out our secured global veteran vendors network our vvm yesterday we introduced leopard our first fully autonomous last mile delivery vehicle concept leopards design and specifications are the results of collaborations with multiple global delivery and technology companies to demonstrate one potential design application enabled by a groundbreaking modular technology. Leopard is an industry vision for efficient and reliable delivery solutions aimed to meet the increased demand coming from e-commerce. The powered by real Leopard utilizes the highest volumetric efficiency and range to optimize multiple business cases. We look forward to showing this concept vehicle in January at CES in Las Vegas, where attendees will be able to see this and other examples of re-technology up close and in action. From a facility infrastructure perspective, during the quarter, we continue to expand our UK Engineering Center to launch integration centers. a smart robotic factory that will serve as a blueprint for all future integration centers and meet expected European customer demand. We were also awarded $17 million in funding from the UK government to support our expansion efforts. We are now finalizing our site selection for our first integration center and our headquarters in Austin, Texas, and remain on track to break ground as the details are finalized. We have an extremely appealing value proposition for the growing commercial vehicle market, given that RIS differentiated modular EV platforms reduce time to market for EV manufacturers. We believe this is yet another driver that supports our ability to grow significantly in the coming years. However, one constant that has not changed in the auto industry is the basic manufacturing process of vehicles, whether they are powered by internal combustion engine or electric motors. Other than the swap out of ice for an electric motor, most vehicle systems have changed little, with the mechanical control components and drive, steer, and brake functions remaining between the wheels and constraining modularity and functionality. We believe that new mobility requires a new approach to design, manufacturing, and serviceability, which is why REE is fundamentally changing the approach to EV design and manufacturing. Specifically, our value proposition includes one REE Corner patented technology that integrates critical vehicle components such as steering, braking, suspension, powertrain, and control into a single, Compact module. Our fully flat EV platforms are geared to serve as the underpinning on top of which EV and AVs will be built. They are designed to provide greater interior space and volumetric efficiency as compared to vehicles on legacy architectures. RIS modular EV platforms with single wheel X by wire are capable of carrying more passengers, more cargo, and being in service longer translating into major cost saving lower cost of ownership and we believe ultimately higher revenue to our customers because of this approach we believe that our technology is essentially future-proof it can be used for building vehicles to serve virtually any applications evs and avs that are powered by rain are agnostic to vehicle size shape power source, and driving mode. They can operate using either batteries or fuel cells and be either human-driven or autonomous, all while affording complete design for them, basically commonality across corners. The ReCorner and ReBoard are designed to be manufactured via multiple production lines across the world that feed our global network of integration centers in partnerships with the world's leading T1s. The result is faster time to market, significantly lower capital investment, and the security of supply chain capacity that provides quality control. I've said it many times, like Intel Inside powers everything from laptops to data centers, future vehicles powered by REE are intended to power EVs in all shapes, sizes, weight, and dimensions. Given our unique technology and manufacturing approach, whatever EV technology wins, RE wins. We are laser focused on growing our effective market share while expanding various vehicle types that are powered by RE. In that pursuit, we have signed multiple strategic collaborations with major OEMs and leaders across the automotive and mobility sectors. Our business plan calls for us to complete, not compete with OEMs by providing the crucial EV platforms on top of which they can build any type of EV. Moreover, with the traditional approach to vehicle manufacturing, introducing a new platform to the market requires five to eight years and one to two billion dollars of investment. With these platforms, we believe that time to market can be reduced to 18 to 24 months and a fraction of the cost. We are excited that major corporations such as Hino, Toyota's truck arm, Magna, JB Poindexter, a global logistic company, and Navia, which are all facing the challenges of offering or using best-in-class electric vehicles as soon as possible, are choosing our platforms and technologies and we are actively working to build their future vehicles with future vehicles powered by Ring. Through our strategic alliances with major industry players, we gain access to their extensive customer base and sales of hundreds of thousands of vehicles, which today are traditional ICE vehicles, but in the future will be best-in-class electric vehicles powered by Ring. As we continue to set Ring apart, from others in the industry. We have already started to reach many positive milestones and targets consistently as we continue to advance for commercial production in 2023. Additionally, in a world of rising challenges and costs, we believe that the fact that we can provide a solution for so many in the industry is starting to be realized.
spk03: With that, I will turn the call to Hai. Thank you, Daniel. I will address our financials for the third quarter along with some of the milestones we reached. But first, consistent with our last call, I would like to spend a moment to connect the dots from many of our milestones achieved so far to the drivers of our financial performance over time. In our commercial agreements, we work in collaborations with customers to assess the market and determine a potential five-year outlook with forecasted volume. As Daniel mentioned, Our commercial partners are leaders in their field, and these assumptions are based on the current market share and the expected switch from ICE vehicles to electric vehicles. Additionally, and consistent with the sector as we move forward in the program, the level of contractual commitment from the customer side increases. The next milestone is customer evaluation of our prototypes on non-public roads. The acceptance of our first prototype with Navya as part of the testing process was ahead of our third quarter 2022 expectation. After successfully completing the testing process of the prototype, we expect the customer to place a firm unit order. Once we have the commitment, we will then develop the engineering builds for the public road testing, which will be very close to the final production intent. Here is where we expect to see the level of customer commitment increase as well as our spending in tooling and materials. Following a successfully public road testing process, we expect to receive purchase orders from the customer. This will lead to commercial production and revenue generation. We continue to scale our activities toward entering commercial production in late 2023. By the end of the third quarter, our headcount reached 231 employees, growing by 50 employees over the course of the third quarter, with most recent hiring across the company coming in R&D and engineering. We expect having approximately 270 full-time employees by the end of 2021. Now, turning to our third quarter financial results. As part of our achieving specific milestones with Navya, we have received payments from Navia, which were recorded as deferred revenues in accordance with U.S. GAAP and are expected to be recognized in future periods. As we continue to ramp and invest in the business, our GAAP net loss for the third quarter was mainly related to $410 million for non-cash stock-based compensation, which we discussed in the Form 20-F we filed in July of this year. resulting from previously performance-based options, which were vested at the time of the closure of the merger with Tenex. This non-cash expense was partially offset by income of a revalidation of warrants of $17.3 million. As a result, the total gap loss was $450 million compared to a gap net loss of $18.8 million in the third quarters of 2020. Non-GAAP net loss for the third quarter was $19.5 million compared to $4.4 million in the third quarter of 2020, as we make progress with our commercial programs, nominating suppliers, and continuing to advance our technological and engineering capabilities with increased investment in R&D. We finished the third quarter of 2021 with cash and cash equivalents of $294.5 million compared to $44.7 million at the end of 2020. We expect our cash balance will fund our accelerated development, support further strategic collaboration, and position us to achieve the start of commercial production in late 2023. Looking ahead, We expect our total annual operating and capital expenditures on a non-GAAP basis in 2021 not to exceed $75 million. We expect total expenditures will continue to ramp as we head towards commercial launch in 2023. Additional targets on the commercial side include ongoing execution on RIS programs, including the delivery of additional prototypes for non-public road tests. Expanding industry penetration through additional partnership and expansion of variety of EV types powered by RISC. Establish North American maintenance and support network. On the production capability side, our target includes expanding supply chain capacity by executing additional collaboration with leading suppliers growing our global secured vendor network, and breaking ground on our U.S. integration centers. And with that, we thank you again for joining us. We will now move to the Q&A session. Okay, and now, operator, we can open the line for questions, please.
spk01: Thank you.
spk07: We will now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions.
spk01: Our first questions come from the line of Mike Schliske with DA Davidson.
spk07: Please proceed with your questions.
spk09: Hey, guys. Good morning and good afternoon to you. I wanted to ask... Good morning, Mike. Good morning. I wanted to ask first about the Leopard product. Could you tell us... Is this for a specific customer that's been designed that's allowed you to display this? And is this something that you can actually potentially even sell under your own brand at some point in the future?
spk04: Yeah. Hi. Good morning, Mike. It's Daniel. So regarding Lefthead, yes, first of all, we're very excited, of course, to present it as a full autonomous vehicle. That I think is best in class at this point. But this is a concept of how we see the industry. And it's part of a very deep discussion with a few companies in the industry as how they see that industry going forward. These companies coming from logistic companies and tech companies. actually global leaders in their field. And when we sat down together and trying to understand how they see the top hat, as I'm sure you remember, we've said that REE is the platform provider to be powered by REE. So naturally, you can assume we're having quite a lot of discussion with quite a few players in the market in different fields as to what is it exactly that they want and what we should build together. And it's not just, you know, we're doing the platform and then doing the top hat and then it just goes. It's a joint work. And what you see here is a first fruit of those efforts in a way of articulating what we think the right size should be, collectively what we think that the right approach should be, The volume should be the volume and, of course, the relevant price point. So it has been quite a long time in the making.
spk09: But is the vehicle itself something that can go on the road today, or is this a concept where you're showing what it could look like today? Is it functional or just a non-functioning product at the moment?
spk04: Oh, no, it drives. It definitely drives. And we'll be sharing far more than just driving it, I think, even later on today. I just don't want to steal the thunder for somebody in marketing today. I'm quite excited about that. But, no, no, it's definitely driving, but it's not intended specifically with this body to the market. Each of our players have different views on having the body inside. I'll just give an example, right? You can have compartments. You can have it heated or cooled. You can have it built a little bit differently or accessed differently. It's basically this specific vehicle is built for non-public road tests as we test, you know, different autonomous integration, different autonomous technology integration and different tow patterns, of course, the usual stuff we do. But what I think is very important to understand about that vehicle, the Leopard, is that it's actually built on a brand new reboard. So we just presented to the world just another new platform with brand new corners, re-corners, and brand new platform architecture that is going to be the basis of those kind of vehicles for the future to come. And that's, for us, very, very exciting because it opens a really large market opportunity for us.
spk09: Got it. I also wanted to ask about the customers that you're targeting for 2023 launches. In the last, call it six months or so, have they changed at all what they're looking for from Rhee as far as the size or what kind of people they're going to be putting out there? There's been a lot of talk about shipments are getting heavier. Final maladies are getting larger with more weight. Have you had any kind of you know, last-minute changes here? And do you think that the platform that you're working on can handle most any, you know, non-heavy-duty, you know, long-haul cargo here?
spk04: Well, that's a good one. Yes. The answer is yes. With two of those programs, we've seen higher demand for higher payloads. Some of them are actually targeting class fives at this point, initially starting from class fours. So we're going up the volume and up the payload on those. And I think that's a good question because it shows how modular our technology is. For everybody else, it would have been either impossible or a complete redesign probably, traditionally. And for us, this is exactly what we're built for. So when they came in and say we need higher, heavier loads and slightly more volume, the answer was, of course.
spk09: So basically you're on it, you have no issues. When someone has a change like that could change the class of equal entirely, that's not a major issue for me at all at this point.
spk04: You know, it's never black and white. It depends on many factors. What does it require? Conceptually, the answer is yes. I mean, this is what we built for. There's sometimes, you know, physical, physics limitations, you know, sometimes sizes of brakes, you have to go from, I don't know, hydraulic braking to air brake system, et cetera. So it might be a little bit more not straightforward in terms of time to market and design, but conceptually, It's a very clear case study of our ability to be modular, the commonality of corners. We can take the same corners and put different chassis and different bodies on it. And that's exactly what we're happy to do. And we've seen actually a spike in demand of customer coming with different asks and changes recently with how the market evolves since the market is evolving. And we are very proud of this ability to, you know, answer those challenges quite straightforward and easily.
spk09: Gotcha. If I could just throw one last one out here to reach for high. Do you have an ending share count we could run with at the end of the quarter?
spk03: Yeah. So, as we mentioned in the PR, our headcount for EPS calculation was 264 million shares for the end of Q3.
spk09: Got it. That's the end, not the average, right? Just want to make sure. Yeah, that's the average number for the EPS calculation. Outstanding. That's the average. Is there a September 30th share count at the end of the quarter we can go with? Because obviously you had a mid-quarter major change there.
spk03: Yes. So for the EPS calculation, this is the number which represents the calculation.
spk09: Okay. We can follow if we need to offline on that. I will pass it along, guys. Thanks so much.
spk04: Okay. Sure, sure. Thanks, Mike.
spk07: Thank you. Our next questions come from the line of Jeff Osborne with Cowan. Please proceed with your questions.
spk08: Yeah, good afternoon, guys. A couple questions on my end. I was wondering on the breaking and axle partners that you have with Brembo and American Axle, how we should think about the number of strategic suppliers that you're going to have per program. Is this, you know, two of five? If you could just sort of rattle off what the key components are that you accept or expect to name awarded suppliers, that would be helpful to put the two announcements thus far in context.
spk04: Yeah, sure, absolutely. So naturally, when you nominate suppliers to a specific program, it divides to strategic suppliers, which are dedicated specifically for those programs, and general suppliers, which are common in a few programs, which are usually for parts which are not the core technology. And I assume the question is around our strategic suppliers who are, you know, working together with us on the on the core of our technology the corners exactly yeah so you should expect around a handful maybe a little bit more key suppliers with the healthy with a healthy diet of redundancy between suppliers but we are very much partnering with them in a sense that I think what what what makes us very unique is that we're not buying T1 technology or putting off-the-shelf products into our core technology. That's not the way it works. We design, we develop together. We make sure that we bring the best minds into that and create something that nobody else has had. and the market and of course, this is only ours to use. And with that joint development, I think American Axle and Brembo are amazing examples for that because they're the best in what they do. They represent the top tier of EDUs and braking technology in the world. And it's a great privilege to work together with them in developing things and then having them produce that at the quality, and efficiency that they can. The nomination of those suppliers also guarantees us production capacity, which in these days we understand how critical that is forward to programs, having the ability to make sure that we have ample capacity for the demand that we see.
spk08: Got it. That's helpful, Daniel. Another question I had is, is there any update on where things stand with Hino and Magna? You mentioned them as strategic customers, but obviously a lot of the commentary on the call was associated with Navia, just given the progress there. Anything to report on those other two key customers of yours or partners?
spk04: Yeah, sure. So, first of all, naturally we can't share everything that's going behind the scenes. And we're trying our best to be as transparent as we can with all the taking things into account in terms of development. Some of those programs are quite secretive because of the nature of what we're developing together. And we want to make sure that once it gets to the market, it's done properly. Having said that, to your question, We shared Navia because we didn't share, if you remember, that we are about to do something. We shared what we did. We shared the result. The same with American AXA and Brembo. And I think looking forward, this is what you guys should expect, where we would want to share with you as many things as we can, but on the things that we've done, actually did. That's one. It does not mean that we're not doing quite a lot of other things. behind the scenes. We've made tons of progress with Hino and our partnership with Magne is amazing and we're making strong progress there as well. The logistic company that we've mentioned a few months ago that we've signed with, as you see the program is maturing and we're nominating suppliers to it. So you can see that advancement from all around what we do. We're ahead of time in many of the programs that we currently run, including those that you've mentioned.
spk08: That's great to hear. That's all I had. Thank you.
spk00: Sure. Pleasure.
spk01: Thank you.
spk07: Our next questions come from the line of Igor Levi with BTIG. Please proceed with your questions.
spk05: Good morning, guys. Good morning. So the supplier selection and now non-public role testing for first customer completed significantly ahead of schedule. I think I believe you originally were targeting Q3 of next year for non-public role testing according to your presentation. And On the call, you talked about the next steps to reaching public road testing, including engineering the final build. So, for your audience that does not have an engineering background, what is the difference between the non-public build, you know, the one that you've tested successfully, and the final version, and what is the process to get from one to the other?
spk04: Yeah, sure. So, first of all, thank you for noticing that we are significantly ahead of time on that milestone. And I think that's a result of, if you guys remember in the previous earning call, we said we're gonna grow our expense on engineering in order to address the growing
spk01: Apologies.
spk07: Unfortunately, we can't hear you coming through the speaker line anymore. Could you check if you self-muted? Sorry, once again, we can't hear you coming through the speaker line. Could you please check if you self-muted?
spk01: Ladies and gentlemen, please stand by while we get the speaker line back online. Okay, we do have the speaker line back in. Are we back? Speaker line is back in. Are we live? Are we on?
spk07: You are live, yes.
spk04: hi everybody sorry uh call was disconnected um apologies and go um i don't know when until when did you hear the the upset so let me know if you want me to uh start it again yes i mean it was about 10 seconds uh in or so we said thank you for noticing the worst thing being the head of schedule and then about five seconds after that they cut off oh so so you got the important part no i'm joking uh so let's do this uh from the beginning so you asked what's the difference between the uh public road and non-public one and public road testing and what needs to happen in between am i correct yes okay so again as you mentioned before and thank you for that again is that we've done this significantly ahead of time and that's uh mainly due to the fact that we increased our spending on engineering and our ability to go to the market faster to address the growth in demand that we see. When we do private road tests, it means that those vehicles are not yet homologated. They're still expected to be changes. There are differences in vehicle levels, right, in A build, B build, and Seabuild. But you expect those vehicles to have minor to significant changes as the program develops. And therefore, you keep on doing that on private roads. That does not mean they don't go through durability or safety or any other test that you can think of. It just means it's a closed environment. Once we understood that this is what the customer is looking for and this is why customer validation is so important and this is why we set up that milestone in our deck and Navi is the first of them meaning that the customer validates the prototype on a private road test and then just to make sure we understand it's not a singular event in time it's a process there are a few tests that are being done with a few builds on private road tests. And then once this is done, we expect the customer to provide firm orders to that program. With that firm orders, we then build the capacity fully. And the first production unit of that line are then being tested on the road. So the public road tests are tests that are done as the PPAP, pre-production series, which are production intent and not design intent. And therefore, they come off tooling, off process, with almost everything relevant for the full vehicle. I hope that answers your question.
spk05: Great. Thank you. So could we see public road testing completed in the first half of next year based on where we are?
spk04: You would definitely want to see public road tests prior to us starting commercial production by 2023, that's for sure. I think that with the multiple programs that we currently run, we should be able to do public road tests on time, as we are saying on the deck on the website. It is very important, though, to understand that the private road tests, the way we see it, the private road tests are the more complicated, if you'd like, milestones, because this is where the changes occur. The rest of the milestones are mainly around bringing the product to market. production intent and ramp up, which I think that we all believe that according to our integration center strategy, our strong partnership with top tier manufacturers, production is something that we believe we can very successfully address.
spk05: Great. And just recently you mentioned that some customers are asking for heavier payloads. For example, a customer that was targeting Class 4 now asking you to do Class 5. How quickly are you guys able to adapt to such a change since you mentioned that as a competitive advantage? Like if midway through the process they say, well, we also want half the vehicles to be Class 5 vehicles and they're changing the design, is that something like how quickly can you adjust to that and then still have production on schedule?
spk04: I'll try to answer because I'm afraid the answer is a little bit more complicated than I think we have time for that because it depends where the change resides. If it's only a payload function and it's within the commonality of the corners, meaning those corners can support up to that and more, then it's very, very straightforward. We would have to design a new chassis which because there is nothing residing on that chassis because everything is in the corner it's quite straightforward and that would take a few months to do so so fairly fairly quickly if there are vehicle dynamics restrictions such as I don't know you have to work move from coil dampers and springs to earth suspension and therefore packaging is different or you have to move from a single wheel to double wheel and so on and so forth then it depends to where we have have we ever done this before or not you can probably imagine that we have quite a few players we're speaking on the market as I'm sure you guys are speaking to quite a few and they all want different things, so most likely we've been working on that prior to that, so the path to that should be straightforward. Currently, we have not delayed any program due to a change in requests.
spk05: Great. That's extremely helpful. Thank you for the answers. I'll turn it back.
spk01: Pleasure.
spk07: Thank you. Our next questions come from the line of Adam Jonas with Morgan Stanley. Please proceed with your questions.
spk06: Guys, how many of your prototypes are in the hands of potential customers being tested right now? And I guess in that definition, it would either be platforms or, um, corners, you know, of a, of a significant content that are being tested.
spk04: Yeah. Um, usually when we, thanks for the question, Adam, usually when we send, uh, for, uh, our product for customer evaluation, we would prefer sending a full platform, just easier to test it like that. It shortens the testing time. Um, So we've already, I think, earlier today communicated that a few of those have been tested around the world. If you followed, you know, I think a few months ago, weeks ago on my LinkedIn account, I think we already showed when we shipped the first one. They are in different types, stages, of course, and configurations. and they're still being tested by multiple companies in several fields, mainly being delivery and shuttles, as well as autonomy. Okay.
spk06: Thanks, Daniel. And maybe for Hai, this is a... A clarification, I think Mike asked the question earlier, just so we're not bugging you after the call. What is the fully diluted shares outstanding, not the average for EPS, but for valuing the company either at the end of the quarter or in real time that you have calculated for valuation purposes? Fully diluted shares outstanding. One second, Adam. One second. Get back to you. If you need more time, we can, you know, before the call ends, that would be great. I don't, we don't need to wait while you're doing it, but an important question, obviously, again, given the amount of FBC activity during the quarter. I just, I will get back to you on that, Adam, in a minute. Okay. And just a final one. What would be a run rate? Obviously 3Q was extraordinary due to the true up, but, what would be a suggested run rate of SBC? Um, let's say in the fourth quarter or, you know, maybe early next year that we could work with, if you could give a range, I know that's dependent on, on stock price factors too, but I didn't know if there was a range you could provide that. That's all the questions I have.
spk03: Thank you. Sure. So, so as you can see the magnitude for Q3 of subways compensation, uh, was higher, uh, than expected than what we usually had. In Q4, we expect that the magnitude would be significantly lower in the ranges of between $14 million to $16 million for Q3. For Q4, sorry. Okay. Thank you.
spk06: I understand. Okay. Appreciate that. Yeah.
spk01: Okay.
spk03: Yeah, and Adam, on your question on the fully diluted chairs, so as of the end of Q3, we had 364 million chairs on a fully diluted basis.
spk01: Thank you very much. Sure.
spk07: Thank you. There are no further questions at this time. I would like to hand the call back over to management for any closing comments.
spk02: Thank you, operator. I know that there are no more questions, but as part of our effort to strengthen transparency and accessibility and the importance we see in communicating and interacting with our various investor types, this quarter we started using a dedicated Q&A platform which allows investors to ask and upvote questions. So we will review a couple of questions that basically got the highest number of votes. So the first one is on execution. And I'll read the question, Daniel will answer. Can you please comment on any potential hurdles to executing production plans, including the microchip shortages, testing needs, or changing customers' expectations?
spk04: Yeah. On that, what I can say is that, you know, supply chain is always challenging, and it's very important to solicit it starting very, very early. And we've done – we started working on our supply chain since 2018 – And we've been doing that by securing our global vendor network with leaders of the global T1 players, like we've nominated recently American Axe and Brambo, but we should not forget Misashi, Maxion, KYB, and quite a few others. We're collaborating on development and manufacturing of those subsystems, which they will manufacture and we will integrate. into our corners and boards, platforms. The fact that our VVN, our Vetted Vendor Network, is large allows us for the flexibility to choose the perfect partner for each of those programs and allowing us the redundancy in terms of any shortages as we move forward towards production and after SOP. we are very actually proud by the partners that we've made in the supply side. And I think that the fact that we're working together is great news for our customers since they'll be getting naturally the best components out there at the best quality and on time.
spk02: Thanks, Daniel.
spk04: I'll just maybe add one more thing. No worries. is that in addition to do that, and I think you've seen this before, we also tripled our headcount, which is mostly with experienced, you know, developers and engineers in the past few months. And we are on target to hitting the 270 target, 270 employee target by the end of the year. So with that, we also have an additional capabilities of... producing and executing on our plan.
spk02: Great. So one more question. Now it regards the economics of the product. So the total cost does look appealing for the final user, but isn't there a risk that your strategic partner will lose in terms of revenue if they're working with REIT, why is it advantageous for ORIENT to work with REIT?
spk04: That's a good point. So first of all, we compete, we don't compete. So I don't think anybody who works without losses anything, they only have things to gain. And in many of those cases, it's not about making revenue, it's actually about making profit. And since we can develop those platforms modularly, and address the changing market needs faster, significantly faster, and fraction of the cost. It's many times a no-brainer for OEMs to decide to work with us since they want to usually focus on the battery technology, on the autonomy and connectivity fronts, and most of them have not developed chassis and drivetrain, et cetera, for many, many years. It's all been outsourced to tier ones, which we work with. So it's exactly the same chain. In addition to that, people should also take into account that one of the key factors for OEM at this point is time to market. Since the market is changing so rapidly, having a program for 10 years into developing a vehicle and then coming out at the end of the line with a product that the market has already changed its preference towards, is a very, very expensive thing to have. And therefore, us being able to bring those OEMs to the market faster and dealing with the changes in market preferences is very compelling for OEMs. And we've been working with quite a few of them. We're working with quite a few OEMs across the world at this point, and we've seen this all around. So we're very much excited by our partnership with OEMs. the world-leading OEMs. I think that's the question we have.
spk02: Yes. Thank you, everyone. Thank you for joining us today, and we do look forward to touch base very soon. Good day.
spk01: Thank you all. Take care.
spk07: This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Have a great day.
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