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spk08: Thank you, operator, and thank you all for joining our fourth quarter 2022 conference call. We hope that you have seen our press release and shareholder letter issued earlier this morning at investors.ree.auto. I would like to remind you that today's call may contain 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 Exchange Commission, which identifies principal risks and uncertainties that could affect our business, prospects, and future results. We assume no obligation to publicly update any forward-looking statements except as required by law. In addition, we will be discussing or providing certain non-GAAP financial measures today, including non-GAAP net loss and non-GAAP operating expenses. Please see our shareholder letter for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. Joining me today is our co-founder and CEO, Daniel Burrell, Tally Miller, our Chief Business Officer, Josh Tett, our Chief Operating Officer, and Yaron Zaltzman, our incoming CFO, who will join the Q&A session. At this point, I would like to turn the call over to Daniel.
spk05: Hi, everybody. Thank you for joining us today. We're excited about the opportunities ahead of us. As we look to 2023 and beyond, we have further important milestones to achieve, including the completion of certification activities. the deliveries of initial vehicles, and the successful completion of the test fleet phase, which we expect will lead to receipt of additional orders. We continue to see a growing demand for our P7 product line from fleet, dealers, and OEMs as we are selectively growing our customer base. We are prioritizing customers who have significant market share in the U.S. and that are pioneering the transition to electric vehicles. Since November 2022, we quadrupled our customer base from two to eight, in different industries such as vehicle rental and leasing, shipping and logistics, and dealers. In addition to their initial orders, we believe those customers have the potential to order significant volumes of vehicles. We are working closely with those customers who require a testing phase in order to optimize this important process and advance to fleet orders. Let me share some highlights with you. We achieved key development milestones in 2022, with total gap operating expenses of 127 million and non-gap operating expenses of 101 million on time and in line with budget. In addition, we delivered two different prototypes to a leading OEM for testing and validation. One of those vehicles is our P7B, which is undergoing testing and customer evaluation, and the other is related to a long-term project. These efforts are being supported by our talented and dedicated tech team led by Achishai Sardes, our co-founder and CTO. As you have seen, we are expanding our go-to-market strategy. We now have direct sales to fleet and have begun building out a dealer network. We already have five authorized dealers in the U.S. who are accepting orders. I would like to thank Tali, our Chief Business Officer, and her team for the tireless efforts to build our order book and expand our go-to-market channel. With that, I would like to hand over the call to Tali. Tali.
spk01: Thank you, Daniel. Interest in our EV solutions continues to be robust as fleets, both large and small, seek to lower their carbon footprint and increase efficiency. We continue to conduct additional customer evaluations with prospective fleets delivery, logistics, and e-commerce companies, as well as dealers in North America and other major markets around the world. Subsequent to the end of the fourth quarter of 2022, we started establishing a dealership network across the U.S. We have initially entered into an agreement with five authorized dealers, Preacher TV, Thumbs Truck Center, Industrial Power and Trap Equipment, New England Truck Solutions, and FMI Truck Sales and Services. Each of these dealers has placed initial orders, which are included in our current order book. We will offer training to authorized dealers to certify technicians to provide service on REE vehicles facilitating the adoption by fleet. Existing orders include both the Class 3-4 P7B and Class 5 Proxima powered by REE. Orders for the P7B are for cab chassis configurations, while orders for Proxima powered by REE are for strip chassis and a full vehicle via our partnership with Body App Feature, JB Point Dexter & Co. Both the P7B and Proxima powered by REE leverage our P7 platform, which features full X-by-wire architecture, supporting all-wheel steer and drive, adaptive regenerative braking, and torque vectoring as standard, as well as over-the-air updates. Our vehicle sets a new standard in commercial EVs, offering the greatest interior space on a given footprint, optimized driver ergonomics, and ease of maneuverability. As we seek to further expand our dealer network in the U.S., we can now offer financing solutions to our dealers through an agreement with Mitsubishi Hitachi Capital America, to provide financing solutions to dealers in the RE network. The agreement is designed to streamline the process of obtaining the financing required for the purchase of RE vehicles. We expect to continue to deliver TIS test fleets in 2024, as well as to start converting these test fleets into scale orders in 2024 onwards, subject to successful testing and certifications. By bolstering direct sales activities to large fleet owners while also growing our network of dealers, REE now covers the channels through which medium-duty commercial vehicles are acquired. With that, let me turn the call over to Josh. Josh.
spk06: Having reached a production intent level, much of the intensive R&D and engineering spending is now complete. in part contributing to the significant decrease in planned cash spending from 2022 to 2023. We are now in the production and certification execution phase and are focused on passing the required testing of our X-by-wire technology. Additionally, we are accumulating durability and validation miles according to plan to support this certification, which is expected to be completed in the second half of 2023. Reaching the production intent phase is an important step in our product maturity. As we continue our validation and verification protocols, we have ordered components for 25 P7 vehicles and submitted production forecasts with our suppliers for our main components through 2024. During the fourth quarter of 2022, we commenced the build of the first batch of P7 production intent vehicles, which were completed subsequent to the quarter. As previously reported, we finalized the build out of our integration center in the third quarter of 2022. All major equipment is in place, and we have established a production capacity for 10,000 vehicle sets annually. During the fourth quarter of 2022, we validated the assembly process and dry cycled our modular production line comprised of 13 highly automated manufacturing cells. Also, our supply chain is now built out, including the recent announcement of MicroVast as our battery We expect to begin deliveries to customers in the fourth quarter of 2023. We are targeting COGS breakeven in the low hundreds of vehicles. We are also targeting adjusted EBITDA breakeven in the low thousands of vehicles. In order to achieve that, we are working with our suppliers to optimize production tooling and build materials to further reduce the production cost required. We currently believe reaching these margin targets will require tooling investments, which we'll be able to invest as our business cycle and customer feedback evolve. With that, let me hand the call back to Daniel, who will take you through the financial and commercial outlook. Daniel.
spk05: Thanks, Josh. We ended 2022 with liquidity of $154 million and anticipated non-GAAP operating expenses of $70 to $75 million in 2023, as we execute on a disciplined approach and CapEx life model. We achieved key development milestones in 2022 on time and in line with budget, with total non-GAAP operating expenses of 101 million, total GAAP operating expenses of 127 million. GAAP net loss was 27.3 million in the fourth quarter of 2022, compared to 33.5 million in the third quarter of 2022, and 46.7 million in the fourth quarter of 2021. The decrease in GAAP net loss compared to the third quarter of 2022 is mainly driven by low operating expenses, including transaction costs. The year-over-year decrease in GAAP net loss is mainly attributed to lower income from measurement of warrant and lower share-based compensation expense. Non-GAAP net loss was 21.5 million in the fourth quarter of 2022 compared to 27.3 million in the third quarter of 2022 and 26 million in the fourth quarter of 2021. The decrease in non-GAAP net loss versus the third quarter of 2022 is mainly attributed to the decreased operating expenses including transaction costs. The year-over-year decrease in non-GAAP net loss is primarily related to decrease of operating expense as the company shifts from ramping up its capabilities and market penetration towards commercial production into certification and testing. As of December 31st, 2022, the company had 153.6 million of liquidity comprised of cash, cash equivalent, and short-term investment, and no debt. The company anticipated has sufficient liquidity to achieve initial production of its P7 platform and continue to advance other commercial activities set forth above. The P7 program is fully funded into commercialization. Our CapExlight model is designed to support COGS break-even in the low hundreds of vehicles and adjusted EBITDA break-even in the low thousands of vehicles. We carefully watch market conditions and explore options of raising debt or equity capital in the right form and time based on the progress in our business cycle and needs. Before we open the call out for questions, I'd like to thank David Goldberg for his contribution in helping building out our finance team, and to Hans Thomas for his dedication, support, and belief in our mission. I want to extend a very warm welcome to Yaron Zaltman, who we're all excited to work with, and to our two new board members, Hisham and Itamar Givaton, who bring vast industry experience to RIT. Operator, please open up the call for questions.
spk03: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. Do we hear your question? Please press star 1 1 again. Please stand by while we compile the Q&A roster.
spk02: We will now take the first question.
spk03: It comes from the line of Mike Schliske from DA Davidson. Please go ahead. Your line is open.
spk10: Yes. Hi. Good morning, and thanks for taking my question, or good afternoon if you're a Tel Aviv. I guess I wanted to ask about the orders that were in the release and in your comments today. You mentioned 35 vehicles were ordered. Is that reflective of I guess two things. One, is it just the dealers that have ordered those vehicles or are there other customers that have ordered them? And secondly, does that reflect the orders that your dealers are taking from the vehicles from the end users or just what they're asking for you for either demo or inventory reasons? I guess I expect a dealer to be ordering in the hundreds if not thousands of vehicles based on what other EVs have been getting from their initial dealer orders. Just to kind of clarity on what's going on, what are some of the ins and outs of the order book, whether it's yours or from the dealers directly. Thank you.
spk04: Hi, thank you. Good morning. I'll start by answering your first questions about the orders. As we said, since November 2022, we grow our order book from 3 to 35 firm orders. Those orders are coming from eight customers, and that's compared to two that we had in November. Now, these overall numbers represent a substantial growth, right? There's a much bigger, more important message here where, you know, each of those carefully chosen fleet, logistics, and dealers, customers, has potential to has the potential to order very large numbers of units for many years. So assuming we receive certification and a platform performed to spec, which we believe it will, then it is in the leap to see how these customers can contribute to very robust order book in the near future. And that, of course, as we expect to sign even more customers.
spk10: Well, I guess I wanted to clarify, the 35 orders you have so far reflect what you expect to shift for the year. Maybe I have to skip the question. Or are there more that might come later on over the coming months that will also be shipped in 2023?
spk04: Can you repeat the question? I'm not sure I understood it.
spk10: Yeah, I just am curious whether the orders you've received that you mentioned, the 35, are reflective of your volume expectations for the full year, or might more orders come in over the next few months that will also ship this year?
spk04: Yeah, so that's a good question. What we're doing now is we're very, very carefully selecting our customer base. We're doing this on the basis of their market potential and, of course, their readiness to electrify. If there are fleets, their readiness to accept electric vehicles, and if there are dealers, their ability and readiness to sell this to their customers. Because we're ramping up on production, it's very important for us to prioritize how many orders and to which we're delivering first batches. So we would most likely be interested in prioritizing significantly the first batches to certain customers that we believe have the highest potential of
spk10: growing the business significantly and we will be ramping up the uh capacity as we move forward okay okay i can follow up with that separately um also you didn't mention it uh i you uh as far as liquidity goes you haven't filed your 10k or 20 ftf for the year but you anticipate that document having a quote-unquote going concern clause in it, or do you think with your orders you've got a good outlook for ample liquidity to fund the business throughout the entire 2023 year?
spk04: Yeah, so listen, we had $154 million on the balance sheet at the end of 2022, and we have no debt. So as we mentioned, you know, like you just said on the shareholder, we're targeting a non-GAAP operating space of between 70 to 75 million for 2023, right? So that's quite straightforward. And if you keep in mind that our model is very capitalized, so once we begin SOP, we believe that the vast majority of capital-intensive cash burn is over for the foreseeable future. So therefore, you know... As for additional capital, we carefully watch the market condition and exploration for raising debt or equity capital in the right form and time. But that's based on the progress of our business cycle and needs.
spk10: Got it. Maybe the last one for me, we had the NTEA show last week. Booth looked great, looked pretty crowded in the booth. Could you give us a sense as to how that might have gone in your view? Any new fleets coming in with some interesting interest there or any other use cases that came about as folks came in and out of your booth over at that show last week? Thank you.
spk04: Yeah, it has been quite a show. It has been very busy, as you just mentioned. We've seen a lot of interest in EV in general. and in our products in particular. We see interest from large fleets, logistic companies and e-commerce as well as from dealers and also OEMs. In the risk of repeating myself, I'll say that it is extremely important for us to deliver those first deliveries spot on, right, and to make sure that our deliveries are successful on time, on target, on TCO to those customers, and prioritizing those who ordered and are waiting for their vehicles as we grow our ordering book more and more. We take very seriously our commitment to deliver vehicles to our customers.
spk10: Okay. Fair enough. I'll pass it along. Thank you.
spk03: Thank you. We will now take the next question. It comes from the line of Andres Shepard from Cantor Futurals. Please go ahead. Your line is open.
spk07: Hi. Good morning, everyone, or good afternoon. Congrats on the quarter. Thanks for taking our question. I wanted to maybe start off by just following up on that question about liquidity. So $154 million funded through or into commercialization. I'm wondering how are you thinking about your capital needs following that, particularly as you begin to ramp up orders and ramp up production?
spk04: know how are you thinking about future capital need plans after uh entering commercialization thank you yeah so first of all hi good morning um right again so like you said there's a 154 uh on the balance sheet at the end of 2022 and we we don't have that so Yes, we think we have sufficient liquidity to take the P7 platform into commercialization and continue to advance the other commercial projects. We would be looking, I mean, in the market, and we would be exploring opportunities and options for raising debt and equity capital, but it needs to be in the right form and time. And that's, again, we're going to base this on the business cycle and needs as we um go further into the uh the year will have more visibility into you know the order book the production and ramp up etc um yeah guy okay thank you daniel um and maybe as a follow-up i was just wondering this is a bit more of a macro uh question
spk07: I'm curious if you can maybe comment on what you're seeing from supply chain disruptions. You know, obviously that's been persistent in the industry, you know, over the last year or so, if not more. What kind of, you know, what trends are you seeing in that supply chain? Do you expect those disruptions to continue? If so, to what extent? And what can kind of be put in place to try to mitigate some of those disruptions? Thank you.
spk04: Yeah, another good one. Listen, macro is always a factor, right? In fact, it's possible that if the macro was different, and basically the whole EV ecosystem would have seen a much faster, steeper growth. And that being said, based on our conversation with large customers, for example, we see obviously nothing that will derail the electrification of global delivery fleets. Luckily for us, our capitalized strategy and model approach will allow us to flex our production quickly as adoption accelerates. Importantly, we believe our model's cash burn, compared to some of our other competitors, will allow us to be one of the beneficiaries of this huge multi-decade trend. On the supply side, as we said, we have a steady supply chain where we are monitoring the disturbance within the supply chain. We're having multiple suppliers where it makes sense to make sure that we have ample supply to what we need. We currently do not see significant disturbance that we cannot
spk06: change in in that supply chain but i think maybe josh want to add something on that yeah thanks daniel yeah i mean i mean guys let's let's look at it like this i mean in the end uh we're starting to build the first delivery vehicles and and we said we've ordered 25 sets for 25 for this year right um obviously those are those are small numbers in the grand scheme of things so and as we ramp through the hundreds and thousands so we in the near future we see no issues um at all with with the supply i mean And hopefully, as we ramp through the thousands, that the concerns alleviate even more from the industry.
spk07: Wonderful. Thank you both. Congrats again on the quarter. I'll pass it on. Thank you.
spk03: Thanks. Thank you. As a reminder, if you wish to ask a question, please press star 1 and 1 on your telephone. That's star 1 and 1 if you wish to ask a question. We will now take the next question. It comes from the line of Jeff Osborne from Coven and Company. Please go ahead. Your line is open.
spk09: Good morning, Daniel. A couple quick questions on my side. I was wondering if you could give us an update on the homologation progress of the Proxima and the P7B, what you accomplished this quarter and what the outlook looks like over the next quarter or two as you start deliveries in Q4.
spk04: Sure. I think – Joe, do you want to take this maybe and I'll complete?
spk06: Yeah, sure. So, we are on track for homologation activities. Like we said, we're looking to build our winter test vehicles and ship them up immediately. That's happening soon. And then complete first our X by wire validation and then complete it by the rest of the vehicle. So, that's slated for the second half of the year. So we see no roadblocks doing that at the moment at all.
spk09: Josh, is that separately for the P7B and the Proxima, or are you doing those concurrently?
spk06: Well, if you think about it, the X-by-wire is the same system, so we'll do those concurrently. And then we do each chassis separately. But they're relatively on the same timeline. Both are set for the second half of the year to be completed.
spk09: Got it. And then the comment, Josh, that you made about the 25 unit order for the parts and components for the second half of the year, what is the lead time for that? Like if there was demand for 50, could you do that within three to four months? Or do you have to give your supply base six months lead time just given the low volume and probably more manual involvement? I'm just curious on that front.
spk06: Yeah, we have that planned out based on the lead times. There's no issue there at all. I mean, if you think about it, those orders are going to cover the vehicles we need for homologation and testing for both the Proxima and the P7 platform, the P7B, and then, of course, the first vehicles to be delivered. So, the plan supply chain is there's no issue with what we're planning versus the build plan at the moment.
spk09: Got it. And if I could just squeeze in two more. If Tali had to pick one that's leading to the demand? In your pitch, you highlight 10 to 15 different reasons why you think your solution is better than the incumbent. But whether it's turning radius, payload, et cetera, what would be the one variable that is exciting people to want to deal with you folks?
spk00: Yeah, hi. I think the most important element that customers are looking for is the CCO, if I need to pick one. to the cost of ownership.
spk09: Got it. And then the last question I had is just at the show last week that you folks were at, there was a lot of, I would say, anxiety around charging and infrastructure availability. Are you starting to work with the eight customers on what their solutions are and ensuring that that's on time in terms of charging capacity so that they can take delivery of these vehicles, or are you letting them do that separately outside of your involvement?
spk04: Yeah. As we said before, we've partnered with Hitachi America on that to provide, among others, charging infrastructure for our partners, those who need some. Some come with other requirements and some we provide. But you're touching on the right point, right? In order to transition a fleet to an EV, there is a lot of infrastructure that is needed. And it's not only, by the way, it's just the charging. It's also if you have enough power near you that you can draw in terms of the needs of the fleet. But we're working closely to optimize those.
spk09: Got it. I appreciate it, Daniel. Thanks so much. Sure.
spk03: Thank you. There are no further questions at this time. I would like to hand back over to the speakers for final remarks.
spk04: Yeah. So I want to thank the RE team for doing a really good job in 2022 in accomplishing a lot, a lot of things that are very difficult to do. And we are all very, very proud of them. So I want to say thank you to all of them. And thank you all for joining our call today.
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