REE Automotive Ltd. (NASDAQ:REE) This autumn 2022 Earnings Name Transcript March 16, 2023

Operator: Greetings and welcome to the REE Automotive Fourth Quarter 2022 Earnings Convention Name. As a reminder, this convention is being recorded. I’d now like to show the decision over to Kamal Hamid, Vice President of Investor Relations. Thanks. You could start.

Kamal Hamid: Thanks, operator and thanks all for becoming a member of our fourth quarter 2022 convention name. We hope that you’ve got seen our press launch and shareholder letter issued earlier this morning at traders.ree.auto. I wish to remind you that right this moment’s name could include forward-looking statements. Any statements describing our beliefs, targets, plans, methods, expectations, projections, forecasts and assumptions are forward-looking statements. Please be aware that the corporate’s precise outcomes perhaps totally different from different anticipated by such forward-looking statements for quite a lot of causes, a lot of that are past our management. Please discuss with the corporate’s Type 20-F filed on March 28, 2022 with the Securities Change Fee, which identifies principal dangers and uncertainties that might have an effect on our enterprise, prospects and future outcomes.

We assume no obligation to publicly replace any forward-looking statements, besides as required by legislation. As well as, we shall be discussing or offering sure non-GAAP monetary measures right this moment, together with non-GAAP web loss and non-GAAP working bills. Please see our shareholder letter for a reconciliation of those non-GAAP measures to essentially the most immediately comparable GAAP measures. Becoming a member of me right this moment is our Co-Founder and CEO, Daniel Barel; Tali Miller, our Chief Enterprise Officer; Josh Tech, our Chief Working Officer; and Yaron Zaltsman, our Incoming CFO, who will be a part of the Q&A session. At this level, I wish to flip the decision over to Daniel.

Daniel Barel: Hello, everyone. Thanks for becoming a member of us right this moment. We’re excited in regards to the alternatives forward of us. As we glance to 2023 and past, we now have additional essential milestones to realize, together with the completion of certification actions, the deliveries of preliminary automobiles and the profitable completion of the take a look at fleet part, which we anticipate will result in receipt of further orders. We proceed to see a rising demand for our P7 product line from fleet sellers and OEMs as we’re selectively rising our buyer base. We’re prioritizing prospects with important market share within the U.S. and which might be pioneering the transition to electrical automobiles. Since November 2022, we quadrupled our buyer base from 2 to eight in numerous industries, similar to automobile rental and leasing, delivery and logistics and sellers.

Along with their preliminary orders, we consider these prospects have the potential to order important volumes of automobiles. We’re working intently with these prospects who require a testing part with a purpose to optimize this essential course of and advance to fleet orders. Let me share some highlights with you. We achieved key growth milestones in 2022, with whole GAAP working bills of $127 million and non-GAAP working bills of $101 million on-time and in step with price range. As well as, we delivered two totally different prototypes to a number one OEM for testing and validation. A type of automobiles is our P7-B, which is present process testing and buyer analysis and the opposite is expounded to a long-term venture. These efforts are being supported by our gifted and devoted tech workforce, led by Ahishay Sardes, our Co-Founder and CTO.

As you could have seen, we’re increasing our go-to-market technique. We now have direct gross sales to fleet and have begun constructing out a supplier community. We have already got 5 licensed sellers within the U.S. who’re accepting orders. I wish to thank Tali, our Chief Enterprise Officer and her workforce for his or her tireless efforts to construct our order e-book and increase our go-to-market channel. With that, I wish to hand over the decision to Tali. Tali?

Tali Miller: Thanks, Daniel. Curiosity in our EV options continues to be strong that matches each giant and small, search to decrease their carbon footprint, and enhance effectivity. We proceed to conduct further buyer evaluations with potential fleets, supply, logistics and e-commerce corporations in addition to sellers in North America and different main markets world wide. Subsequent to the top of the fourth quarter of 2022, we began establishing a dealership community throughout the U.S. We’ve initially entered into an settlement with 5 licensed sellers: Pritchard EV, Tom’s Truck Heart, Industrial Energy & Truck Gear, New England Truck Options and FMI Truck Gross sales & Providers. Every of those sellers have positioned preliminary orders that are included in our present order e-book.

We’ll supply coaching to licensed sellers to certify technicians to supply service on REE automobiles facilitating the adoption by fleet. Present orders embrace each the Class 3/4 P7-B and Class 5 Proxima powered by REE. Orders for the P7-B are for chassis configurations, whereas orders for Proxima Powered by REE are for strip chassis and a full automobile by way of our partnership with physique app function, JB Poindexter & Co. Each the P7-B and Proxima Powered by REE leverage our P7 platform, which options full x-by-wire structure supporting all-wheel steer and drive adaptive regenerative braking and torque vectoring as customary in addition to over-the-air updates. Our automobiles set a brand new customary in business EVs providing the best inside house on a given footprint, optimize driver ergonomics and ease of maneuverability.

Auto, parts, industry

Auto, elements, trade

Picture by Julian Hochgesang on Unsplash

As we search to additional increase our supplier community within the U.S., we will now supply financing options to our sellers by means of an settlement with Mitsubishi Hitachi Capital America, to supply financing options to sellers within the REE community. The settlement is designed to streamline the method of acquiring the financing required for the acquisition of REE automobiles. We anticipate to proceed to ship take a look at fleets in 2024 in addition to to begin changing these take a look at fleets into scale orders in 2024 onwards, topic to profitable testing and certification. By bolstering direct gross sales actions to giant fleet homeowners whereas additionally rising our community of sellers, REE now covers the channels by means of which medium-duty business automobiles are acquired. With that, let me flip the decision over to Josh.

Josh?

Josh Tech: Having reached a production-intent stage, a lot of the intensive R&D and engineering spending is now full, partly contributing to the numerous lower in deliberate money spending from 2022 to 2023. We at the moment are within the manufacturing and certification execution part and are targeted on passing the required testing of our x-by-wire know-how. Moreover, we’re accumulating sturdiness and validation miles based on plan to assist this certification, which is predicted to be accomplished within the second half of 2023. Reaching the manufacturing intent part is a vital step in our product maturity. As we proceed our validation and verification protocols, we now have ordered elements for 25 P7 automobiles and submitted manufacturing forecasts with our suppliers for our primary elements by means of 2024.

In the course of the fourth quarter of 2022, we commenced the construct of the primary batch of P7 manufacturing intent automobiles, which had been accomplished subsequent to the quarter. As beforehand reported, we finalized the build-out of our integration middle within the third quarter of 2022. All main tools is in place and we now have established a manufacturing capability for 10,000 automobile units yearly. In the course of the fourth quarter of 2022, we validated the meeting course of and drive cycle our modular manufacturing line comprised of 13 extremely automated manufacturing cells. Additionally, our provide chain is now constructed out, together with the latest announcement of Microvast as our battery provider. We anticipate to start deliveries to prospects within the fourth quarter of 2023. We’re focusing on COGS breakeven within the low tons of of automobiles.

We’re additionally focusing on adjusted EBITDA breakeven within the low hundreds of equals. With a view to obtain that, we’re working with our suppliers to optimize manufacturing tooling and invoice of supplies to additional scale back the manufacturing price required. We at the moment consider reaching these margin targets would require tooling investments which we can make investments as our enterprise cycle and buyer suggestions evolves. With that, let me hand the decision again to Daniel who will take you thru the monetary and business outlook. Daniel?

Daniel Barel: Thanks, Josh. We ended 2022 with liquidity of $154 million and anticipated non-GAAP working bills of $70 million to $75 million in 2023 as we execute on a disciplined method and CapEx-light mannequin. We achieved key growth milestone in 2022 on time and in step with price range with whole non-GAAP working bills of $101 million, whole GAAP working bills of $127 million. GAAP web loss was $27.3 million within the fourth quarter of 2022 in comparison with $33.5 million within the third quarter of 2022 and $46.7 million within the fourth quarter of 2021. The lower in GAAP web loss in comparison with the third quarter of 2022 is principally pushed by decrease working bills, together with transaction prices. The year-over-year lower in GAAP web loss is principally attributed to decrease revenue from remeasurement of warrant and decrease share-based compensation expense.

Non-GAAP web loss was $21.5 million within the fourth quarter of 2022 in comparison with $27.3 million within the third quarter of 2022 and $26 million within the fourth quarter of 2021. The lower in non-GAAP web loss versus the third quarter of 2022 is principally attributed to the decreased working bills, together with transaction prices. The year-over-year lower in non-GAAP web loss is primarily associated to the lower of working expense as the corporate shifts from ramping up its capabilities and market penetration for its business manufacturing into certification and testing. As of December 31, 2022, the corporate had $153.6 million of liquidity, comprised of money, money equivalents and short-term investments and no debt. The corporate anticipates it has adequate liquidity to realize preliminary manufacturing of its P7 platform and proceed to advance different business actions set forth above.

The P7 program is absolutely funded into commercialization. Our CapEx-light mannequin is designed to assist COGS breakeven within the low tons of of automobiles and adjusted EBITDA breakeven within the low hundreds of automobiles. We fastidiously watch market situations and discover choices of elevating debt or fairness capital in the best type and time primarily based on the progress in our enterprise cycle and desires. Earlier than we open the decision up for questions, I might wish to thank David Goldberg for his contribution in serving to constructing out our finance workforce, and to Hans Thomas for his dedication, assist and perception in our mission. I need to prolong a really heat welcome to our Yaron Zaltsman, who we’re all excited to work with and to our two new Board members, who will convey huge trade expertise to REE.

Operator, please open up the decision for questions.

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