This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk06: And thank you all for joining our first quarter 2022 conference call. We're going to move now to slide two. And we hope that you have seen our press release and investor presentation issued earlier this morning at investor.re.oto. We will be referring to the presentation during the webcast today. 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 be different from other anticipated by such forward-looking statements for a variety of reasons, many of which are beyond our control. Please refer to the company's Form 20F filed on March 28, 2022, with the Securities and Exchange Commission, which identifies 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 except as required by law. In addition, we will be discussing or providing certain non-GAAP financial measures today, including adjusted EBITDA, non-GAAP net loss, and non-GAAP EPS. Please see our earnings release for reconciliation of these non-GAAP measures to their most directly comparable GAAP measures. Joining me today is our co-founder and CEO, Daniel Barrell, who will provide an overview of our business and given operations update, and our CFO, David Goldberg, who will continue with the discussion on our financial results and outlook. At this point, I will turn the call over to Daniel. Daniel, please.
spk09: Thank you, Limor. Good morning and welcome to our first quarter 2022 update call. Let's go to slide three. I will begin the call with an update on the significant strong progress we are making towards commercial production in 2023 as we focus on converting our pipeline into backlog and establishing the production capacity to fulfill orders. Let me start by saying we are delivering on our commitments. We are preparing for full vehicle customer evaluation this summer, and we've demonstrated our robotic assembly capabilities. This is a very exciting time for us as we continue the disciplined execution of our funded P7 commercialization and achieve the milestones we have been communicating to the market as we advance towards firm orders and commercial production. Moving to slide four. We show a track record of execution and continue on pace to deliver. This has been a significant year for us already. And let me touch briefly on the strong foundation we've built. We spent 2019 building our core engineering capabilities and 2020 establishing supply chain capacity and validating our technology. Last year, we focused on building out the comprehensive ecosystem needed to enable commercial vehicle electrification, broke ground on our production facilities, and established a strong plan towards commercialization of our products. This includes establishing our X-by-wire homologation path and securing funding for P7 commercialization. This year, we've made significant progress validating our P7 platform at our UK engineering center and advance our manufacturing readiness, demonstrating robotic assembly capabilities for our highly automated integration center that is expected to become operational this year. We are also presenting, for the first time, a full vehicle for customer validation this summer. Following the completion of prototype validation by our customers on private roads, we expect to receive firm orders towards the end of the year. After that, we expect to validate advanced prototypes on public roads and obtain purchase orders. Moving forward, I will detail our recent progress to bring our P7 product to market and a step forward in manufacturing readiness to achieve our 2023 commercial production plan. Let's go to slide five. Commercialization of our P7 platform also continues on track. The product allows customers across many segments, such as delivery, logistics, retail, and passenger, unique benefits, efficiencies, and flexibility, enabled by the re-corners and their fully independent X-by-wire control system. It is suited for application including commercial trucks, school buses, walk-in vans, and recreational vehicles. It is also designed to significantly reduce development times of electric commercial models. Fully flat from end to end, the P7 platform is intended to power Class III to V vehicles with payloads up to 8,800 pounds, range of up to 370 miles, and all-wheel steering and drive. As we shared before, in some of our P7 programs, REE is the manufacturer of record, MOR, responsible for the homologation and registration of the electric platform. The homologation activities are progressing on track on both the component and system level. Additionally, core control system software and functional safety development, a key element of the development of mission-specific variation enabled by ReConners, are progressing according to plan. We have a number of ongoing P7 programs with several counterparties. In addition of bringing full vehicle to market for fleets, including a leading logistic company, OEMs remain an important part of our go-to-market strategy. As we have previously shared, we have a joint development agreement with a major commercial vehicle OEM to develop electric vehicles from Class III to Class V for North America, and we continue the progress in this joint development phase. We displayed the P7 platform for the first time in the U.S. at NITA's Work Track Week, where we showed our re-corner technology and platform to dozens of existing and new potential customers across fleet owners, technology companies, OEMs, upfitters, and auto manufacturers. We also hosted several customers at our engineering center in the U.K., to experience and evaluate the P7 platform on the track and discuss our advancements on build, verification, and validation activities. The short clip from our platform testing is available in the presentation on our website. We are very encouraged by our customer feedback from our on-track demonstration in Israel and in the UK and feel confident in our previously communicated timeline. Let's move to slide six. Earlier today, we announced the major milestones of commencing customer validation on private roads this summer of a full electric vehicle powered by REE. We are very excited by the opportunity to bring to market the industry's first fully drive-by-wire commercial vehicle to our pipeline customers in the U.S. with our new Class 5 walk-in van prototype developed in partnership with EAVX. the EV business unit of JB Poindexter. This new electric commercial van is the first in many ways. It is the first one to use EAVX's new body design that will develop from the ground up to first be showcased on our new P7 platform. In addition, this is the industry's first full vehicle that is powered by REE and our novel REE Corner technology. It is a true game changer in so many ways, and most importantly, we are on track to deliver a commercial EV powered by REE less than 12 months after announcing our partnerships with EAVX. I am very proud of both our teams and our joint commitment to electrification and carbon neutrality. Customer evaluations on the new electric van will take place this summer over the course of several weeks in Michigan. The pre-booked event will allow EAVX and REIT's pipeline customers across retail, delivery, and logistics segments to experience the vehicles, discuss their unique requirements, and secure production capacity for 2023 deliveries. Our strategic go-to-market partnership with EAVX leverages J.P. Poindexter's distribution network of large fleet operators and backed by a proven history of creating excellent work truck and commercial vehicle bodies and accessories through their business unit, Morgan Olson. As a reminder, Morgan Olson is the largest producer of walk-in van bodies in North America and has decades of legacy experience enabling last-mile deliveries of a wide range of parcels and goods for retail, Internet, and service companies. We are excited for our customers to experience firsthand the unique benefits of the first X-by-wire vehicle built with a best-in-class Morgan Olson body and powered by RE. RE is a horizontally integrated business, and through our collaboration with leading partners such as EAVX, we are well positioned on the demand side to deliver full vehicles to customers while remaining focused on our core business of corners and platforms. Agreements with OEMs and body manufacturers allows us to tap into their existing customer base of these automotive leaders. Now, onto slide seven. Accordingly, we are building out our production capabilities in advance of anticipated customer demand. We recently announced the commissioning of our highly robotic integration centers for North America and Europe. As we shared yesterday, we are very happy to update that our core robotic assembly process is on schedule to be implemented into first highly automated integration center in the UK, as you can see on slide seven. This is an important milestone on our path to commercial production next year. The robotic assembly and use of autonomous guided vehicles in the 30 manufacturing cells are the heart of our modular production line that will be operational this year. The novel cloud-based robotic manufacturing approach will provide significant efficiency, saving, and scalability as they will enable us to continuously fine-tune our assembly procedures and rapidly deploy them to other sites. We have established key strategic supplier agreements to support our manufacturing readiness ahead of commercial production next year. REE has nominated Expert Technology Group, a leading manufacturer of industrial automation system, automated assembly, special purpose machinery, and single and multi-robotic cell, including robotic assembly. for the integration of its robotic and automated manufacturing technologies. We also adopted Rockwell Automation's Plex Manufacturing Execution System, or MAS, to support RIS highly digitized manufacturing across integration centers. The Plex system provide us cloud capabilities, which will serve as a digital backbone for RIS global operation and future assembly lines. Not only does MESS enable local scale flexibility to manage a customer's specific manufacturing operation, but it also allows us to quickly share and scale best practices globally. The interconnectedness of our operation will allow us to rapidly deploy changes to assembly procedures to assembly lines globally. You can think of it as a command center from which our global operations will be managed. You can watch a short clip on our core robotic assembly on our website. Our teams are doing tremendous work towards production readiness and I'm happy to update that the European Integration Center in the UK is on schedule to come online in the second half of this year with initial capacity of 10,000 vehicles. Our North American Integration Center in Austin, Texas is also on track to come online next year with an additional capacity of 10,000 vehicle sets. I am excited that Josh Tech recently joined REE as our chief operating officer to lead the design and build out of our integration centers. Josh served on Tesla's operations leadership team and brings over 23 years of experience to REE in complex product development and launch, industrialization, infrastructure development, engineering, supply chain, quality, and operations management. I have the utmost confidence in Josh and the entire operations team. RIS CapEx slide production approach is based on leveraging its global network of tier one partners manufacturing capacity with highly automated component assembly and testing to take place in RIS integration centers. This means not only faster time to market, but also secure supply chain capacity and quality control. Our first highly automated integration center is both the starting point and the backbone of RIS's future global manufacturing capacity. We are highly engaged with pipeline customers and see the paramount importance of offering them a full solution for electrification, from financing of infrastructure and vehicles through modular advanced electric vehicles to global maintenance and data and battery service. We are able to offer such a comprehensive set of capabilities based on our global ecosystem of partners for a full turnkey solution that will enable and expedite a smooth and scalable transition for our customers from ICE to EV fleets. As I have said before, our efforts are primarily focused on the nearest term commercial opportunities. Although I have devoted the majority of my time today to the P7 platform and our collaboration with EAVX, we continue to make progress with Hino Motors, a global leader in heavy and medium-duty trucks, as we jointly develop the platformer, which we showcased at CES in January, with a goal to deliver a functional platform prototype for evaluation and testing by the end of this year. The platformer is capable of carrying a customized mobility service module that can carry passengers, goods, and deliver services. The mobility service module can be easily detached from the EV platform and, once detached, can serve as an independent, standalone unit, leaving the platform to be operated separately and continue on its next mission. We are very confident with the potential of this program and the demand for it in the market. We are actively exploring multiple business cases relevant for such a novel and future-looking solution with the ReCorner technology at its core. As I've mentioned, our platform is indifferent to vehicle size, shape, power source, and level of autonomy. So the potential application is broad and future-proof. and can be deployed across fleets of varying vehicle classes. We have other exciting programs in various stages of development, including concepts for autonomous vehicles, and we will share updates about these when we are able to. I would like to commend the retines across the world for their phenomenal work and dedication to making this a more sustainable, carbon neutral world as we move faster for fully electric vehicles future. With that, I will hand the call over to David Goldberg, CFO, to discuss our financial results.
spk03: David. Thank you, Daniel, and good morning. Moving to slide nine, I'll start with a review of our first quarter 2022 results. The company reported a gap net loss of $23 million in the first quarter of 2022 compared to a net loss of $46.7 million in the fourth quarter of 2021. The decrease in GAAP net loss is mainly attributed to non-cash income from war remeasurement this quarter compared to a loss recorded in the previous quarter. Non-GAAP net loss of $29.9 million in the first quarter of 2022 increased compared to $26 million in the fourth quarter of 2021, primarily due to higher RMD sales and marketing expenses as the company executed its business plan. Non-GAAP results exclude share-based compensation expenses of $8.5 million and income of $15.3 million related to the impact of the warrant evaluation. As of March 31st, 2022, our cash balance was $239 million. We remain disciplined and continue to have sufficient funding to execute the programs Daniel described. As communicated during our Q4 2021 earnings call, we have budgeted a range of $130 to $150 million in cash spending, inclusive of both capital and operating for fiscal year 2022. This range is presented on a cash basis and is tied to the execution of current programs. Accordingly, expenses are dependent on the timing and achievement milestones related to the company's commercial programs, which will not be linear throughout 2022. The company is on track to invest approximately $30 million during 2022, primarily related to the establishment of our initial production capacity. This portion of the budget is effectively committed and will mostly be incurred in the second half of 2022. I note that some of the expenses related to the establishment of initial production capacity may not be counted a lot. Our OpEx plan is mostly comprised of technical and engineering spend required to execute our programs according to the timeline we have communicated. We remain focused on executing our current P7 and platformer programs. While we believe a significant opportunity exists beyond our current program, the majority of our budget has been allocated towards executing these programs. Before I conclude, it's important to remember that our costs will mirror the execution of our product milestones. For example, if MOUs and other pipeline opportunities convert to firm commitments or existing programs expand in scope, our spending may accelerate. The company may require additional liquidity to deliver those opportunities. The cadence of our spending plan will be indicative of our progress, and we will continue to update our shareholders on budget expectations as the year unfolds. With that, let's move to the final slide, and I'll turn the call back to the operator to open the line for Q&A. Operator?
spk01: Thank you. We will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Once again, please press star 1 if you wish to ask a question. And the first question comes from the line of Mike Shilsky from DA Davidson. Please go ahead.
spk08: Yes, hello. Good morning and good afternoon, guys. I guess I'll start off Good morning. Yes, I guess I'll start off by following up on your last comment, David, about the 2022 cash budget. Have you given any thought as to the 2023 cash budget at this point? Anything we should be, any kind of goalposts we should be looking at there?
spk03: So, the way we think about 2022 and 2023 is that we're really focused on executing on P7, where we think we have enough money, including both 2022 and 2023. The engineering spend for P7 we expect to peak in this year and then should come down next year. And that brings us to production.
spk08: Great. Is that just a P7 comment or other expenses involving the platform or Mahindra elsewhere?
spk03: Yeah. So the majority of our expenses are tied to P7. So that really speaks to, again, the majority of our budget and how we think about cash.
spk08: Great. I think I'll just turn to batteries secondly here. Have any of your customers or potential partners given you any indication that they've got enough or not enough either direction batteries for whenever they and you agree to launch the on-road products?
spk09: I'm not sure, Mike, I fully understand the question. You're asking if there has been... communicated shortage on batteries in our program?
spk08: Yes, I was asking whether either you or any of your partners have gotten your sights on the appropriate number of batteries that you need to launch, for example, a 10,000-a-year product, and whether there's been any issues with obtaining commitments from any cell suppliers or battery pack suppliers, either from your end or from your partner's end, to meet any upcoming demand here.
spk09: Yeah, we don't see a shortage in battery capabilities currently with the forecast that we look at for the programs. We have multiple sources of batteries. We use multiple types of batteries. In some of our programs, we bring the batteries. In some of our programs, as you mentioned, our partners bring the batteries, and they take care of all that. Keep in mind that in the commercial vehicle space, the 0 to 60 rate is less important. Therefore, we can use different, quite larger, different kinds of battery chemistry in the configuration that not necessarily would be the highest power density in that manner, but would be far more than adequate to what we need in the commercial vehicle space.
spk08: Okay, great. That's great, Keller. If I could just throw in one more question here, and that is on the EAVX walk-in van you've been talking about today. Any thoughts? Can you tell us a little bit about some of the capabilities of this van, maybe the turning radius of the van compared to existing ICE and EV walk-in van models, and maybe secondly, the cargo capacity compared to current ICE and EV walk-in van models?
spk09: Yeah, sure. To begin with, I don't want to steal EAVX thunder on the unveilment because, honestly, it's amazing. It's a very revolutionary design that is designed from the ground up for EVs. And I think it's the best of its kind. And Rii is the first company to utilize it. It's been built for the P7 initially. And we're very, very excited. Naturally, due to the usage of the P7 and the Power by Reed technology, the turning radius will be very tight, and we would expect to have more volumetric efficiency than others. But on the specifics, I mean, I think it would be best to give the guys at the AVX the stage for that very, very shortly.
spk08: Okay. I look forward to it. I appreciate it. Thank you.
spk09: Absolutely. Thanks.
spk01: Thank you. Next question comes from the line of Jeff Osborne from Carbon & Co. Please go ahead.
spk04: Great. Thank you, and good afternoon. Just a couple questions on my end, Daniel. I was wondering, we talked a lot about the P7 and EAVX, and the detail is incredibly helpful in seeing the progress there. Can you just touch on how much of the investment that you've made so far around functional safety and the technology development relative to the application engineering for that particular platform is transferable to other platforms that would use the ReCorner. So basically what I'm getting at is should we anticipate the same level of expenses for P7 for subsequent platforms, or is there a knowledge level that's gained that is applicable to others?
spk09: Yeah, that's a great question. So our Corners technology is divided actually into two parts. The inboard part, the part that is encapsulated within the chassis in the P7 platform, is where the core technology lies. This is where all the bi-wire technology systems reside. And this is core engineering. And that does not change across corner variations and corner generation. The application engineering, the ability adjust and change different vehicle characteristics, like suspension size, like wheel size, et cetera. Of course, this is application engineering, and this is done on the outbound side, which is mainly off-the-shelf componentry and therefore requires significantly less investment. So to answer your question, vast majority of the investment in the bi-wire technology and the core engineering has already been made.
spk04: Got it. That's helpful. And then you highlighted the Class III through V market for P7. Do you see or anticipate more demand as the EAVX team sells that in the Class III space or IV and V? Just very different sizes of the market there, so I'm just trying to understand what the crystal ball is showing there in terms of in-market demand and configuration, recognizing that you're flexible and somewhat agnostic on the tech itself.
spk09: Yeah. So we see quite more demand on Class 5 than we started with. We see a lot of the demand for Class 4 is moving into Class 5. And, of course, there's a lot of demand in the Class 3s that we already saw before. So the P7 platform is designed, of course, for Classes 3 to 5, but mainly it's going to serve Classes 3 and 5. And the, I mean, EAVX and Morgan Olson are, you know, fully capable and do it day in and day out in, you know, building systems different bodies on top of that. And I think one of the most exciting things about this partnership and what's coming, and I can't wait for you guys to see it, is the ability of it to take different sizes and shapes. And this is key, and this is predominantly why this partnership makes so much sense, the ability to have a very, very modular product both on the platform level and on the body level to address the majority of the market.
spk04: Got it. And two other quick ones. Will the testing for the P7 with the AVX in Detroit, is that done at M-City or some other location? Whereabouts will that actually be held on the private roads that you referenced?
spk09: Yeah, M-City is one location. There's going to be more than one just because, you know, timing slots, et cetera. It's going to be predominantly all around in multiple locations in Michigan, but MCD is one of them. And that's for the North American variation, of course.
spk04: Got it. And then you focused a lot on EAVX and the HINO update, which is great. Can you just spend a few seconds on the NAVYA program as well as anything you can share on developments with MAGNA?
spk09: Yeah, so, you know, we have a lot of active dialogue with numbers of parties. Some of them, as you mentioned, we've communicated in the past when we've reached certain milestones, and we will continue to update you guys on the progress, specifically when they become impactful. Currently, those programs that I mentioned and the specific one that you've mentioned are going well and according to plan.
spk04: Got it. Thank you. Appreciate it. Pleasure.
spk01: Thank you. Next question comes from the line of Andres Shepard from Cantor Futural. Please go ahead.
spk07: Hey, guys. Good morning. Good afternoon. Congrats on the quarter.
spk09: Thank you. Good morning.
spk07: Quick question, Daniel. I'm curious, can you give us an update on the customer agreements that you had highlighted in the past, those 20 agreements? I'm just wondering if there are any changes to that.
spk09: Yeah. So the way we've communicated in the past, we have signed agreements that have either minimum quantities in them or future allocation of quantities. What we're doing now is, and I think that's quite apparent from the recent announcement, we're making a lot of progress on getting these vehicles on the market and advancing the readiness of the product. All in all, we see very big significant demand for commercial EVs in general. What we've communicated before is that once those customers are going to be able to evaluate, to experience, to test, to drive those vehicles, which we expect to happen very, very shortly in the summer in the U.S. to get with the EVX, we would expect them to convert into orders. So we're totally focused, and I think it shows in doing two major things here, right? Building more vehicles and continue the advanced core product offering of the P7 alongside the ability to scale production and build our integration center capabilities and the proven robotic core capabilities that we've demonstrated a couple days ago. in order to support those conversion of pipeline into others.
spk07: Got it. Thanks, Daniel. Maybe a quick follow-up. I'm wondering, with the inflationary pressures, are there any changes or any expectations to maybe change the 25,000 ASB for the platforms? Yes.
spk03: Yeah, so I mean I think that number was sort of guidance from the past. If you think about our supplier relationships for the biggest components of the BOM, they're really strategic relationships. And so while we're watching the supply chain, we feel like we're in a good place in terms of BOM costs, but ultimately the ability to pass through some increases to the customer where it's warranted.
spk07: Okay, got it. Maybe one last one, if I could. You touched on supply chain disruptions, which has been a bit of a theme, again, this year for most industries. Now, you guys have the CapEx Lite model through the assembling rather than the manufacturing, but I'm wondering, do you anticipate any delays in any of the assembly process or anything that would maybe – affect the capacity for the 10,000 platforms per year? Or do you anticipate that to maybe go unchanged? Thank you.
spk03: No, so unchanged is the short answer. I mean, it's something we're watching. But, you know, just as an example, as we're building sort of test fleets and prototype vehicles with our suppliers, there's no change to the timeline there. So I appreciate that's, you know, much smaller volume than when we'll be producing. But so far, so good is the short answer.
spk07: Wonderful. Thanks again. Congrats on the quarter. I'll pass it on.
spk09: Thank you. Thank you.
spk01: Thank you. Next question comes from the line of Greg Lewis from VTIG. Please go ahead.
spk02: Yeah, I thank you and good afternoon. You know, I just did have a follow-up question on the budget. You know, as we think about the progression of this year, you know, clearly we're going to move towards production next year, building out the team. As we think about this over the next few quarters, is the right way to think about this that R&D should start to fade as the operations, that's G&A's side of the business, accelerates? Is that kind of how we should think about the balancing and really any kind of color around the trajectory of R&D here over the next couple quarters?
spk03: I would say that sort of logic applies, but over the next, you know, call it eight or seven quarters, right, that takes you through the end of next year. So I think through the rest of this year, based on the guidance that we've given, I think R&D stays pretty steady. I mean, you'll see that our numbers are obviously in line with what we communicated earlier this year, and we're being very disciplined to keep them in that spot through the remainder of the year. But it's really not until next year where you'll see the R&D
spk02: spend start to come down and sort of being now offset by ramped up on on the operation okay okay great thank you for that and then i just was hoping for um you know a little bit of an update on on on austin um you know and and really how we should be thinking about that over the next few quarters obviously that's you know going to be you know a big accomplishment when that's up and running
spk09: Yeah, so Austin is on schedule, is on track. What we're doing is the fully automatic robotic core technology that we've demonstrated is cloud-based. So that basically allows us to duplicate the processes and the QA and the testing that we're doing in each of those integration centers to other integration centers. So the first Integration centers will be in Europe, in the U.K., and it will have 10,000 vehicle sets capacity. And very, very shortly after, Austin is going to be up and running in the first half of next year, adding another 10,000 vehicle sets in capacity. And that's merely a – if you think about it, you know – fitting the plants with the relevant AGVs and robots and just flashing them from the most recent version and they're up and running. And that's the whole beauty of it. Those lines are really smart. They're capable of vision detecting and identifying different corner configurations and there is almost minimal setup times in between different corners assembly configuration and that is really impactful on
spk02: efficiency okay great and then just following up on that is there any way to think about the the spend ramp up in austin um as it as it um i guess sculptures in in 22 and 23 like on a percentage basis maybe yeah so um spend on austin in 2022 is really back back and loaded i mean we signed a lease uh and actually the building is still being completed so the actual cash
spk03: outflows for us really don't happen until much later this year. So short answer, it's not a big hit or not a big expense in 2022.
spk02: Okay, perfect. All right, thank you very much.
spk03: Pleasure.
spk01: Thank you. Next question comes from the line of Colin Langin from Wells Fargo. Please go ahead.
spk05: Oh, thanks for taking my questions. I just want to clarify the JB Poindexter announcement. Is that an expansion of your relationship or just another progress point in terms of bringing that vehicle to market?
spk09: I'm not sure how I'll try to answer it, but if I go wrong, please correct me. Poindexter, the Poindexter group, right, EAVX and Morgan, Morgan Olsen. are the biggest body upfitters in North America. They've been doing this for decades. And the ability to partner with them and have the best platform in the world to power those vehicles with the best body in the world to do that is, I think, key for our customers. They understand the value. They understand that it's built the right way. They understand the capability that that brings and the wealth of experience and knowledge and experience. you know, that they have in commercial vehicle markets, walking van, et cetera. So I think we've communicated to you guys about a year ago about that relationship and what we're going to do together. And I think in less than a year we are announcing that we're going to show you a vehicle, a full vehicle. And, guys, I want to emphasize something about that vehicle that maybe we didn't say, but that This is the first ever full drive-by-wire, break-by-wire, steer-by-wire electric vehicle out there, especially in the commercial field. And this is a very, very different thing. It's a game changer.
spk05: Got it. So it's sort of further step forward in that relationship. Going back to the original question on cash burn, you burned $38 million in the quarter last At that rate, you have about a year and a half, maybe two years left. And CapEx is supposed to increase through the rest of the year, actually, because I think you only did $1 million, and I think the guide is $30. So do you see a need that you might need to raise capital? And if not, how is cash going to turn positive that quickly?
spk03: Well, I guess a few things, right? The $38 includes investment in working capital. Again, we've given guidance for the year in terms of what the cash burn or cash expense is going to be. Beyond that, as I said earlier, the spending on the program on P7 comes down. So we have now the cash that we need to execute and to produce next year.
spk05: Okay, but wouldn't there be new programs after that that are going to require R&D expense and such as you grow?
spk03: Well, so, I mean, I guess let's kind of be clear about the program, right? When we talk about a program, it's the P7 platform, right? And so there's obviously a big addressable market tied to that platform. In my mind, when you say different programs, right, whether it's what we call P4 for a Class 2 vehicle or Leopard, which is for sort of an autonomous delivery, but those would be different programs. And obviously we need to think about how to accelerate those. We're not spending tons of cash today in our existing budget.
spk09: I'll add to that, and I'll say, guys, we're, I don't know what to be on, laser-focused on executing the plan. And we're laser-focused on P7 and getting it to the market, because P7 is addressing the vast majority of the market, right, everything in Class 3 to 5. And we see demand, very, very significant amount for those. So we're focusing on those. And as we said, there are different programs, some of them we share with you, and they're going to mature over time. But READ's main focus in the coming quarters, as David mentioned, is the P7 and its application across different market segments, different vehicle classes, and the commonality of the core engineering that we just mentioned earlier. on all of those. So this is what we're bringing to the market.
spk05: And just lastly, you know, you highlight a large North America commercial vehicle partner. Just any color on the status of that relationship? Have you delivered them prototypes? Is there a timeline of when those go into production?
spk09: You mean in North America?
spk05: Yeah, I think, yeah, the undisclosed commercial vehicle OEM that you highlighted on? Just kind of a slide for you to highlight. Is it undisclosed leading commercial vehicle OEM? I think in your comments you said it was North America. Just wondering, are prototypes delivered to them? Is a model supposed to go into production at some point? Any comment there?
spk09: Yeah, so we are... We're on track there, and the idea is to start building the testing fleets in the next few quarters because we believe it's a very different game where you do one-of-a-kind and where you work in a fleet model. And this is where you can see how we shine and how a bi-wire vehicle is far superior to traditional approaches. And I think that as this program progresses and we unveil to you guys what is it that we're doing and with whom, you can have a much better picture as to the progress that we have made. But we are extremely excited by this partnership and it is on track.
spk05: Okay. All right. Thanks for taking my questions.
spk09: Pleasure.
spk01: Thank you. There are no more questions at this time. I would like to hand back over to Rio Tomotis for final remarks.
spk06: Thank you, Sandra. Thank you, everyone, for joining us today on the call and on the webcast. And we're looking forward to touch base soon. Have a good day.
Disclaimer