Q3 2021 Ree Automotive Holding Inc Earnings Call

November 16, 2021

[music].

Greetings and welcome to the re automotive third quarter 2021 earnings conference call. At this time, all participants are in a listen only mode.

Operator: Greetings, and welcome to the REE Automotive Q3 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 Limor Gruber, Vice President of Investor Relations. Thank you. You may begin.

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.

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 Investor <unk> Dot to me that Oh, Joe I would like to remind you that today's call may include forward looking statements any statement, describing our beliefs goals plans.

Limor Gruber: Thank you, operator, and thank you all for joining our Q3 2021 conference call. We hope you have seen our press release issued earlier this morning at investors.ree.auto. 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.

Strategies expectations projections forecasts and assumptions our forward looking statements.

Please note that the company's actual results may differ from those anticipated in 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.

Pets 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 an adjusted EBITDA non-GAAP net loss and EPS. Please see our recent filings alright, we continuation of these non-GAAP measures to their most directly comparable.

Limor Gruber: Please see our release and filings for a reconciliation of these non-GAAP measures to their most directly comparable GAAP measures. Joining me today is our co-founder and CEO, Daniel Barel, who will provide an overview of our business and give an 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.

GAAP measures.

Joining me today is our cofounder and CEO, Daniel Brown, who will provide an overview of our business and given operations update as well as our CFO high Aviva, who will continue with a discussion of our financial results and outlook before we open up the call for your question at this point I will turn the call over to Daniel.

Daniel Please.

Thank you anymore.

Daniel Barel: Thank you, Limor. Good morning, and welcome to our Q3 2021 earnings 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, Hai, will follow with a recap of the financials 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 the Leopard. All of these accomplishments are coming ahead of our schedule, and we continue to make strong progress.

Good morning, and welcome to our third quarter 2021, earning call.

I'll begin the call with an update on the company's progress on many strategic initiatives.

And milestones we've achieved in the last few months.

Then our CFO, hi will follow with a recap of the financial of the fourth quarter and our outlook.

After that we'll 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 that.

And I'm feeling a very significant product milestones after fully autonomous last mile delivery concept vehicle.

All of these accomplishments are coming ahead of our schedule and we continued to make strong progress.

You know first quarter as a public company, we outlined several of our targets to advanced production readiness as we move towards commercial production in late 2023.

Daniel Barel: In our Q1 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 a significant customer validation milestones with Navya, as we successfully completed the REE Platform validation. This is part of an ongoing validation process with Navya, a French-based company that is leading autonomous vehicle systems development. This is the first of a few prototypes we presented recently to customers for 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.

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 a significant customer validation milestones with Nokia as we successfully completed the re platform validation. This is part of an ongoing validation process with Nokia a French based company that is leading autonomous vehicle systems.

This is the first of a few prototypes, we presented recently to customers in evaluation.

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.

They also demonstrate how we will advance our strategic alliance ahead of schedule and getting us closer to production and revenue.

Daniel Barel: This also demonstrate 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 US-based delivery van program in strategic collaboration with J.B. 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 braking 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.

I think an important step towards commercialization is securing supply chain.

As part of our initial integration focus on the U S based delivery van program.

Strategic collaboration with J B Poindexter, we've extended supply chain capacity to support our growth.

So at this point, we started nominating didn't keep suppliers.

This includes American axle for high performance electric drive units and Brenda for a braking system.

The nation not only support our progress, but also provides validation for the supply side.

These are critically important steps.

We are not just buying components or implementing third party technology. We are jointly developing key capabilities. Together. In addition, those suppliers could be to volume, allowing us to progress towards the commercialization even during these challenging supply chain times.

These partnerships are critical steps in the ongoing effort to build out our secured global Vectored vendors network are Vivian.

Daniel Barel: These partnerships are critical steps in the ongoing effort to build out our secured global vetted vendors network, our VVN. Yesterday, we introduced Leopard, our first fully autonomous last-mile delivery vehicle concept. Leopard's design and specifications are the result of collaborations with multiple global delivery and technology companies to demonstrate one potential design application enabled by our groundbreaking modular technology. Leopard is an industry vision for efficient and reliable delivery solution aimed to meet the increased demand coming from e-commerce. The REE-powered 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 REE technology up close and in action.

Yesterday, we introduced that put our first fully autonomous last mile delivery vehicle concept.

That puts design and specifications are the result of collaborations with multiple global delivery and technology companies to demonstrate one potential design application on <unk>.

By a groundbreaking ultra light technology.

Let Ted is an industry vision for efficient and reliable delivery solution aimed to meet the increased demand coming from E Commerce.

The powered by re let Ted utilizes the highest volumetric efficiency and range to optimize multiple business cases.

We look forward to showing the sponsored vehicles in January at CES in Las Vegas, where attendees will be able to see this and other example of REIT technology up close any action.

From a facility infrastructure perspective during the quarter, we continued to expand our U K engineering sector to launch integration Center.

Daniel Barel: From a facility infrastructure perspective, during the quarter, we continued to expand our UK engineering center to launch integration center, 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 in 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 REE's 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.

It's smart robotics factory that will serve as a blueprint for all future integration of incentives and meet the expected European customer man.

We were also awarded $17 million in funding from the U K 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.

That really is differentiated modular easy platforms reduce time to market for EV manufacturers. We believe this is yet another.

That supports our ability to grow significantly in the coming years.

However, one constant that has not changed any of the auto industry.

Daniel Barel: 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, REEcorner 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.

Is the basic manufacturing process of vehicles.

Whether they are powered by internal combustion engine are all electric motors.

Other than the swap out of ice for an electric motor most vehicles have changed a 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 re is fundamentally changing the approach to easy design and manufacturing.

Specifically, our budding proposition includes.

One re corner patented technology that integrates critical vehicle components, such as steering braking suspension powertrain and control into a single compact module.

Our fully flat easy platforms are geared to serve as the underpinning on top of which easy and AZ will be built.

They are designed to provide greater interior space and volume of chicken features C. It's compared to vehicles from legacy architectures.

Daniel Barel: They are designed to provide greater interior space and volumetric efficiency as compared to vehicles from legacy architectures. RE's 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 savings, 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 application. EVs and AVs that are powered by RE 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 freedom, basically commonality across corners.

Reis modular EV platforms with single X by wire are capable of carrying more passengers more cargo and being in service longer translating into major cost savings lower cost of ownership and we believe ultimately higher revenue to our customers.

Because of this approach, we believe that our technology essentially future proof. It can be used for building vehicles to serve virtually any application evs and avs that are powered by Reed R. Agnostic to vehicle size shape power source and driving mode. They can.

<unk> operates using either batteries fuel cells and be either human driven autonomous all while affording complete design for them.

Basically commonality across corners.

The red corner 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 to one.

Daniel Barel: The REEcorner and REEboard 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 tier ones. 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, REE wins. We are laser-focused on growing our effective market share while expanding various vehicle types that are powered by REE. In that pursuit, we have signed multiple strategic collaborations with major OEMs and leaders across the automotive and mobility sectors.

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 Datacenters future vehicles powered by Reed are intended to power easy in all shapes sizes.

And they mentioned.

Given our unique technology and manufacturing approach where they.

E V technology win win.

When.

We are laser focused on growing our effective market share while expanding various vehicle types that are powered by Ria.

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 E D.

Daniel Barel: Our business plan calls for us to complement, 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 5 to 8 years and $1 to 2 billion of investment. With REE's 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, J.B.

Moreover.

The traditional approach to vehicle manufacturing, introducing a new platform to the market requires five to eight years and want to 2 billion.

That's one.

With roots platforms, we believe that time to market and be reduced to 18 to 24 months and a fraction of the cost.

We are excited at major corporations, such as he now so you ought to truck on Magna.

J D point of Dexter.

Daniel Barel: J.B. Poindexter & Co., a global logistics company, and Navya, which are all facing the challenges of offering or using best-in-class electric vehicles as soon as possible, are choosing our platforms and technology, and we are actively working to build their future vehicles powered by REE. 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 REE. As we continue to set REE apart from others in the industry, we have already started to reach many positive milestones and hit targets consistently as we continue to advance for commercial production in 2023.

Global logistic company, and nausea, which are all facing the challenges of offering or using best in class electric vehicles as soon as possible are choosing our platforms and technology.

And we are actively working to build their future vehicles with future vehicles powered by Ria.

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 and electric vehicles powered by me.

As we continue to see re apart from others in the industry.

I've already started to reach many positive milestones and targets consistently as we continued to advance for commercial production in 2023.

Recently in a world of rising challenges and cost we believe that the fact that we can provide a solution for so many in the industry.

Daniel Barel: 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. With that, I will turn the call to Hai.

Starting to be realized.

With that I will turn the call too high.

Thank you Daniel.

Hai Aviv: Thank you, Daniel. I will address our financials for Q3, along with some of the milestones we reached. 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.

I will address our financials for the third quarter, along with some of the milestones were reached.

But sort of consistent with our last call I would like to spend a moment to connect the notes for many of our milestones achieved so far.

Financial performance overtime.

In our commercial agreement, we won't win collaborations with customers to assist them to market and determined.

The five year outlook with focused with volume.

You mentioned, a commercial partner with the leaders in the field and these assumptions are based on the current market share and the expected switched from ice to electric vehicle.

Additionally, and consistent with the sector as we move forward with the program the level of contractual commitment from the customer increases.

The next milestone is customer evaluation or put the types or nonpublic cold.

The acceptance of our first prototype it would not be a part of the testing process was ahead. It will fall in third quarter 2022 expectation.

Hai Aviv: The acceptance of our first prototype with Navya as part of the testing process was ahead of our Q3 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 successful 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 towards entering commercial production in late 2023.

After successfully completing the testing of the prototype we extend the customer to place the same unit owner.

Once we have the commitment we would've been developing gene meeting being for the public co testing, which will be very close to the final production.

Usually we expect to see the level of customer commitment increase as well as our spending including and material.

Following a successful public quotes testing process, we expect to receive purchase orders from the customers.

This will lead to commercial production and revenue generation.

We continue to scale our activities toward entering commercial production in late 2022.

By the end of the third quarter, how head count reached 231 million growing by 50 employees over the over the course of the third quarter with most policeman's hiring across the company coming in are going to be in engineering.

Hai Aviv: By the end of Q3, our headcount reached 231 employees, growing by 50 employees over the course of Q3, 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 Q3 financial results. As part of our achieving specific milestones with Navya, we have received payments from Navya, which were recorded as deferred revenues in accordance with U.S. GAAP and are expected to be recognized in future periods.

We expect having approximately planted and 70 full time employees by the end of 2021.

Now turning to our third quarter financial level.

In spite of all achieving specific milestones that we've not yet we have received payments will have an idea which was recorded as deferred revenues in accordance with U S. GAAP.

And I would expect it to be recognized in future periods.

And it really continues to accompany investing to beat our GAAP net loss for the third quarter was mainly related to funding of $10 million for noncash stock based compensation, which we discussed in the form 20-F filed in July of this year.

Hai Aviv: As we continue to ramp and invest in the business, our GAAP net loss for Q3 were 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 Tenneco. This non-cash expense was partially offset by income of revaluation of warrants of $17.3 million. As a result, the total GAAP loss was $450 million compared to a GAAP net loss of $18.8 million in Q3 of 2020.

Resulting from previously performance based options, which are invested at the time of the closure of the merger with Phoenix.

This noncash expense was partially offset by income also have elevation of core until $17 3 million.

As a result, the total GAAP loss was $450 million compared to a GAAP net loss of $18 $8 million.

Third quarters of 'twenty 'twenty.

Non-GAAP net loss for the third quarter was $19 5 million compared to $4 $12 million in the third.

Hai Aviv: Non-GAAP net loss for Q3 was $19.5 million compared to $4.4 million in Q3 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 Q3 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 collaborations, 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.

Third quarter of 2020.

As we make progress with our commercial programs nominating supply them 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 billion going to compete.

Third to $44 7 million at the end of 2020.

We expect our cash balance will fund our accelerated development.

Both further strategic collaboration and position us to achieve this cloud of commercial production in late 2023.

Looking ahead, we expect our total annual operating and capital expenditure on a non-GAAP basis in 2020, one not to exceed $75 million.

We expect total expenditures will continue to ramp.

Hai Aviv: 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 REE's programs, including the delivery of additional prototypes for non-public road tests. Expanding industry penetration through additional partnerships and expansion of variety of EV types powered by REE. 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 US integration centers. 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.

Had towards commercial launch in 2023.

Additional targets on the commercial side include <unk>.

Ongoing execution on the visa program, including the delivery of additional prototypes for nonpublic code stuff.

Expanding industry penetration through additional partnerships and expansion of the variety of types powered by Ria.

Established North American maintenance and support network.

On the production capability fired our target include.

Expanding supply chain capacity by executing additional collaborations with leading supply growing our global acute 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.

Thank you we will now be conducting a question and answer session.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two 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. Our first questions come from the line of Mike Shlisky with D.A. Davidson. Please proceed with your questions.

I'd like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue ebay.

You May press Star two 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.

Our first questions come from the line of Mike Slutzky with D. A Davidson. Please proceed with your questions.

Hey, guys good morning, and good afternoon to you.

Mike Shlisky: Hey, guys. Good morning and good afternoon to you. I wanted to ask.

Michael Shlisky: Hey, guys. Good morning and good afternoon to you. I wanted to ask.

I wanted to ask for any money left.

Good morning.

Hai Aviv: Good morning, Mike.

Mike Shlisky: 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? Or is this something that you could actually potentially even sell under your own brand at some point in the future?

Michael Shlisky: 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? Or is this something that you could actually potentially even sell under your own brand at some point in the future?

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.

Or is this something new.

They actually potentially even still under your own brand at some point in the future.

Yeah, Hi, good morning, Mike.

Daniel Barel: Yeah. Hi, yeah, good morning, Mike. It's Daniel. So regarding Leopard, yes, first of all, we're very excited, of course, to present it as a, you know, full autonomous vehicle, that I think is best in class at this point. This is a concept of how we see the industry. It's part of a very deep discussions 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. 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 regarding Left-eyed, yes, we first of all we're very excited of course to present it as a full autonomous vehicle.

What 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.

Deep discussions.

With a few companies in the industry.

They see that.

Industry going forward these companies coming from.

Logistics companies and tech companies.

I see the global leaders in their field and when we sat down together and trying to understand how they see the Tau pet as we as I'm sure. You remember we've said that <unk> is a is the platform provider to be powered by region. So we can naturally when you can assume we are having quite a lot of.

Daniel Barel: 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. 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. 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. It has been quite a long time in the making.

A 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 be able 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 the first fruit of those efforts.

Efforts in a way of articulating what we think the right sized shouldn't be collectively what we think that the right approach would be the.

The volumes should be there.

Volume and of course, the relevant price points. So.

It has been quite longtime into making.

Yeah.

But is the is the vehicle itself something that can go on the road today. It was just a concept where you're showing what it could look like today it is functional or just.

Mike Shlisky: Is the vehicle itself something that can go on the road today, or it's just a concept where you're showing what it could look like today? Is it functional or just a, you know, a non-functioning product at the moment?

Michael Shlisky: Is the vehicle itself something that can go on the road today, or it's just a concept where you're showing what it could look like today? Is it functional or just a, you know, a non-functioning product at the moment?

You know nonfunctioning.

Talk about the at the moment.

Oh, no it drive definitely drive.

Daniel Barel: Oh, no, it drives. It definitely drives. We'll be sharing far more than just driving it, you know. I think even later on today. I just don't wanna steal the thunder for somebody in marketing today. Quite excited about that. No, it's definitely driving, but it's not intended going specifically with this body to the market. Each of our players have different views on having the body. I'll just give you 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.

And we'll be sharing far more than just you know.

Driving it.

I think even later on today, just don't want to steal the Thunder for somebody in marketing today.

Sorry about that.

But.

No no its definitely agree.

Driving but it's nothing.

Specifically with this brought it to the market each of our players have different views on having the the body and so I'll just give you. An example, right you can have comport compartments, who can have it heated or cooled you can have it built a little bit differently or access differently.

Daniel Barel: 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 Top Hat and 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 REEboard. We just presented to the world just another new platform with brand new REEcorners, and brand new platform architecture that is gonna be the basis of those kind of vehicles for the future to come. That's for us very, very exciting because it opens a really large market opportunity for us.

It's basically this specific vehicle is build for nonpublic road.

Tests as we test you know are different.

Hum.

All told him most integration this different autonomous technology integration and different.

Tau pet and of course, yes.

The usual stuff we do.

But what I think is very important to understand about that the vehicles. They're leopard is that it's actually built on a brand new re board.

So we just presented to the world just another new platform with brand new corners rig 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 up a really large.

The market opportunity for us.

Got it.

Mike Shlisky: Got it. I also wanted to ask about the customers that you're targeting for 2023 launches. In the last call, six months or so, have they changed at all what they're looking for from REE as far as the size or what kind of vehicles are gonna be putting out there? There's been a lot of talk about shipments getting heavier. Last mile needs are getting larger with more weight. Have you had any, you know, kind of, you know, last-minute changes here? 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?

Michael Shlisky: Got it. I also wanted to ask about the customers that you're targeting for 2023 launches. In the last call, six months or so, have they changed at all what they're looking for from REE as far as the size or what kind of vehicles are gonna be putting out there? There's been a lot of talk about shipments getting heavier. Last mile needs are getting larger with more weight. Have you had any, you know, kind of, you know, last-minute changes here? 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?

I also wanted to ask about the customers that you're targeting for targeting for 'twenty when it launches.

In the last call it six months or so how have they changed at all what they're looking for from from me as far as the size or what kind of deal they're going to be putting out there there's not a lot of talk about <unk>.

Shipments are getting heavier final mile in either getting larger with more weight.

Have you had any kind of.

Last name changes here and do you think that the platform that you're working on can handle most any non non heavy duty long haul cargo here.

Well that's a good one.

Daniel Barel: Wow, that's a good one. Yes. The answer is yes. With two of those programs, we've seen a demand for higher payloads. Some of them are actually targeting Class 5s at this point, initially starting from Class 4s. We're going up the volume and up the payload, on those. 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. For us, this is exactly what we're built for. When they came in and say, "We need higher, heavier loads and slightly more volume," the answer was, "Of course.

Yes.

The answer is yes.

With.

With two of those programs, we've seen higher demand for higher payload.

Some of them are actually targeting class fives at this point.

Initially starting from Klas scores.

So we're going up the volume and the payload.

On those and I think that that's a good question because it shows how modular.

Our technology is for everybody else it would have been either impossible over 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 Johnson was of course.

So basically you're on it you you have no issues when someone has a change like that could change the class vehicle entirely that's not a major issue for me at all at this point.

Mike Shlisky: Basically, you're on it. You have no issues when someone has a change, like, that could change the class of the vehicle entirely, that's not a major issue for REE at all at this point.

Michael Shlisky: Basically, you're on it. You have no issues when someone has a change, like, that could change the class of the vehicle entirely, that's not a major issue for REE at all at this point.

It's never a black and white.

Daniel Barel: 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 build for. There's sometimes, you know, 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. It might be a little bit more not straightforward in terms of time to market and design. 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.

So many factors what does it require.

<unk>.

Conceptually the answer is yes, I mean this is what we build for the summer.

Sometimes you know physical physics limitations.

Sometimes as to sizes on brakes, you'll have to go from from I don't know hidrotic breaking to air brake system et cetera, so it might be.

Be a little bit more not straightforward in terms of time to market and design, but conceptually.

It's a very clear case to ideal for our ability to be modular the commonality of corners, we can take the same corners.

Food different choices and different bodies on it and that's exactly what we're happy to do it and we've seen actually a.

Daniel Barel: 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 evolved. We are very proud of this ability to you know answer those challenges quite straightforward and easily.

Spike in demand of customer coming with different asks and changes recently with how the market evolves since the market is doable and we are very proud of the ability to to answer those challenges quite straight forward and isn't it.

Gotcha.

Mike Shlisky: Gotcha. If I can just throw one last one out here to Yitzhak. Do you have an ending share count we can run with at the end of the quarter?

Michael Shlisky: Gotcha. If I can just throw one last one out here to Yitzhak. Do you have an ending share count we can run with at the end of the quarter?

Throw one last one out here there is for high.

Do you have an ending share count because we.

We can run with at the end of the quarter.

Yeah. So as we mentioned in the PR, our head count for EPS calculation was blunted and 64 million shares.

Hai Aviv: Yeah. As we mentioned in the PR, our share count for EPS calculation was 264 million shares for the end of Q3.

For the end of Q3.

Got it that's not the average I just want make sure.

Mike Shlisky: Got it. That's the end, not the average, right? Just wanna make sure.

Michael Shlisky: Got it. That's the end, not the average, right? Just wanna make sure.

Yes.

Hai Aviv: Yeah, that's the average.

Okay. That's average number for the EPS calculation.

Mike Shlisky: Okay.

Michael Shlisky: Okay.

Hai Aviv: That's the average number for the EPS calculation.

Outstanding Okay, but that's the average is there a is there a September 30th.

Mike Shlisky: Outstanding. I'll pass. That, that's the average. Is there a 30 September share count at the end of the quarter we can go with? Because obviously you had a mid-quarter major change there.

Michael Shlisky: Outstanding. I'll pass. That, that's the average. Is there a 30 September share count at the end of the quarter we can go with? Because obviously you had a mid-quarter major change there.

Share count at the end of the quarter. We can go with because obviously you had a myth.

Mid quarter major change there.

Yes, so for the EPS calculation. This is the number where we chose to prevent that.

Hai Aviv: Yes. For the EPS calculation, this is the number which represents the calculation.

The calculation.

Okay, I guess, all we can tell if any to our offline on that I will pass it along guys. Thanks so much.

Mike Shlisky: Okay. We can follow up if we need to offline on that. I will pass you along, guys. Thanks so much.

Michael Shlisky: Okay. We can follow up if we need to offline on that. I will pass you along, guys. Thanks so much.

Okay sure sure.

Hai Aviv: Okay. Sure, sure.

Thanks, Mike.

Daniel Barel: Thanks, Mike.

Thank you our next questions come from the line of Jeff Osborne with Cowen. Please proceed with your questions.

Operator: Thank you. Our next question comes from the line of Jeffrey Osborne with Cowen. Please proceed with your questions.

Yeah. Good afternoon, guys. A couple questions on my end I was wondering on the the.

Jeffrey Osborne: Yeah, good afternoon, guys. A couple questions on my end. I was wondering on the braking and actual partners that you have with Brembo and American Axle, how we should think about the number of strategic suppliers that you're gonna have per program. Is this, you know, 2 of 5? 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.

Breaking in actual partners that you have with Brembo and American axle, how we should think about the number of strategic.

Suppliers that youre 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.

Context.

Yes sure absolutely.

Daniel Barel: Yeah, sure. Absolutely. 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. I assume the question is around our strategic suppliers who are, you know, working together with us on the core of our technology-

So naturally when you nominate suppliers to a specific program.

Divides two strategic suppliers, which are dedicated specifically for those programs in general suppliers, which are coming in a few programs, which are usually four parts, which are not the core technology.

And I assume the question is around strategic suppliers, who are you know.

Working together with us on the yeah on.

The core of our established at the corner of exactly yeah.

Jeffrey Osborne: Exactly.

Daniel Barel: The corners.

Jeffrey Osborne: Exactly.

Daniel Barel: Yeah. You should expect around a handful, maybe a little bit more key suppliers with a healthy diet of redundancy between suppliers. We are very much partnering with them in a sense that I think what makes us very unique is that we're not buying tier one technology or putting off-the-shelf product 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 in the market. Of course, this is only ours to use. With that joint development, I think American Axle and Brembo are amazing examples for that because they're the best in what they do.

So you should expect a around a handful maybe a little bit more key suppliers.

The healthy.

With a healthy diet of redundancy between supplies, but.

We are very much.

Hum partnering with them in a sense that I think what what what.

Makes us very unique is that we're not buying to one technology or putting off the shelf product into our core.

That's not the way it works we design, we developed together, we make sure that we bring the best minds into that and create some thing that nobody else would have.

And the market and of course this is only ours to use.

And we've done joint development I think American excellent bramble are amazing examples for that because they are the best in what they do they they represent the top tier of you know our easy to use and braking technology in the world.

Daniel Barel: They represent the top tier of, you know, EDUs and braking technology in the world. It's a great privilege to work together with them in developing things and then having them produce that at the, you know, 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 looking forward to programs, having the ability to make sure that we have ample capacity, for the demand that we see.

And it's a it's a great privilege to work together with them in developing things and then having them produce that and the you know and the quality and efficiency that they can.

The nomination of the supplier also guarantees us production capacity, which in these days, we understand how critical that is forward.

Two program ability to make sure that we have ample capacity.

For the demand that we see.

Got it no that's helpful. Daniel.

Jeffrey Osborne: Got it. That's helpful, Daniel. Another question I had is there any update on, you know, 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 Navya, just given the progress there. Anything to report on those other two key customers, peers or partners?

Another question I had is is there any update on where things stand with Hino in Magna you mentioned them as strategic customers, but obviously a lot of the commentary on the call was associated with Navient, just given the progress there and anything to report on those other two key key customer spirits or partners.

Yeah sure so first of all.

Daniel Barel: Yeah, sure. You know, first of all, naturally we can't share everything that's going behind the scene. We're trying our best, you know, to be as transparent as we can with all the, you know, 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 wanna make sure that once it get to the market, it's done properly. Having said that, to your question, we shared Navya because we didn't share, if you remember, that we are about to do something. We shared what we've did. We shared the result. The same with American Axle and Brembo.

Naturally we can share everything that's going on behind the scene.

And we're trying our best to.

B M.

As transparent as we can with all the.

They can things into account in terms of development. Some of those programs are are quite secretive because of the nature of what we're developing together and we want to make sure that once you get to the market is down properly having said that to your question.

We should not forget because we didnt share. If you remember that we are about to do something we shared what we did we shared the result.

The same with American axon Brembo.

Daniel Barel: I think looking forward, this is what you guys should expect, where we would wanna 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 Magna is amazing, and we're making strong progress there as well. You know, 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. You can see that advancement from all around what we do.

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 on the things that we've done actually bid that's one.

Does not mean that we're not doing quite a lot of other things.

Behind the scenes, we've made tons of progress with the with you know and our partnership with Magna is amazing and we're making strong progress there as well.

The.

You know 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.

So you can see that advancements from all around what we do where we're ahead of program. We are ahead of time and many of the programs that we currently run including those that you've mentioned.

Daniel Barel: We're ahead of program. We're ahead of time in many of the programs that we currently run, including those that you've mentioned.

That's great to hear that's all I had thank you.

Jeffrey Osborne: That's great to hear. That's all I had. Thank you.

Sure.

Daniel Barel: Sure. Pleasure.

Yeah.

Thank you. Our next question is come from the line of Igor Levi with <unk> proceed with your questions.

Operator: Thank you. Our next questions come from the line of Igor Levi with BTIG. Please proceed with your questions.

Good morning, guys.

Igor Levi: Good morning, guys.

Good morning.

Daniel Barel: Good morning.

So the supplier selection and now are nonpublic world testing for first customer.

Igor Levi: The supplier selection and now on non-public road testing for first customer completed significantly ahead of schedule. I think, I believe you originally were targeting Q3 of next year for non-public road testing according to your presentation. On the call, you talked about the next steps to reaching public road testing, including engineering the final build. 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?

Completed significantly ahead of schedule I think I believe you originally were targeting a Q3 of next year for Nonpublic road 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 nonpublic Bill.

The one that you've tested it successfully and the final version and what is the process to get from one to the other.

Yeah sure. So first of all thank you for noticing that.

Daniel Barel: Yeah, sure. First of all, thank you for noticing that, we’re significantly ahead of time on that milestone. I think that’s a result of, if you guys remember in the previous earnings call, we said we’re gonna grow our expense on engineering in order to address the growing-

We're significantly ahead of time.

On that milestone and I think that's a result of a if you guys remember in the previous earnings call. We said we go now.

Grow our expense on engineering.

In order to address the growing.

Our apologies Unfortunately, we can't hear you coming through the Speaker line anymore could you check if yourself muted.

Operator: Apologies. 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? Ladies and gentlemen, please stand by while we get the speaker line back online. Okay, we do have the speaker line back in.

Alright, once again, we can't hear you coming through the Speaker line could you. Please check if Hugh.

South muted.

Okay.

Ladies and gentlemen, please standby, while we get the speaker line back online.

Okay, we do have the speaker line back in.

Daniel Barel: Are we back?

Okay.

When we back.

Your line is back.

Operator: Speaker line is back.

So I.

Daniel Barel: Are we live? Are we on?

I would lie on your own.

Daniel Barel: Are we live? Are we on?

You are live yes.

Igor Levi: You are live. Yes.

Hi, everybody sorry coal are disconnected.

Daniel Barel: Hi, everybody. Sorry. Call was disconnected. Apologies. I don't know until when did you hear the outset, so let me know if you want me to start it again.

Yes.

I don't know until when did you hear that the outset so.

Let me know if you want me to start it again.

Yes, I mean, it was about 10 seconds.

Igor Levi: Yes. I mean, it was about 10 seconds in or so, where you said, "Thank you for noticing the words, significantly ahead of schedule," and then about 5 seconds after that, they cut off.

In her so reset thank you for noticing the worst nicknamed ahead of schedule and then about five seconds after that they cut off.

So you said you got the important part.

Daniel Barel: Oh, so you got the important part? No, I'm joking. Let's do this from the beginning. You asked what's the difference between the public road, non-public road, and public road testing and what needs to happen in between. Am I correct?

Uh huh.

From the beginning so you asked what's the difference between the.

Public road in Nonpublic, Ryan and public road testing and what needs to happen in between Am I correct.

Yes.

Igor Levi: Yes.

Okay.

Daniel Barel: Okay. Again, as you mentioned before, and thank you for that again, is that we've done this significantly ahead of time, and that's 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, where there are still expected to be changes. There are difference in vehicle levels, right, in A build, B build, and C build. 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 tests that you can think of.

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 the.

Mainly due to the fact that we increased our spending on engineering and.

And our ability to go to the market faster to address the gross.

In demand that we see.

When we do.

But both tests.

It means that those vehicles are not yet homologate it.

Where there are still expected to be changes that difference in vehicle.

Alright, and a build be billed and CBO.

But you expect those vehicles to have minor two significant changes as the program develops.

And therefore, you keep on doing that on a private roads that does not mean, they don't go through durability or safety or any other tests that you can think of it just means it's a closed environment.

Daniel Barel: 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 that is the first of them, meaning that the customer validates the prototype on a private road test. 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. 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.

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 in our deck and not be the first of them, meaning that the customer validates the prototypes of a.

Private road test and then just to make sure we understand it's a singular event in time, it's a process there are a few.

That are being done.

With a few bills.

Private Rota.

And then what.

Is that we expect the customer to provide a firm orders to a dot program with upstream orders. We then build the capacity.

Got it.

And the first production units of that line.

Daniel Barel: The first production unit of that line are then being tested on the road. The public road tests are tests that are done at 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.

Then being tested on the road so that they are.

Public Road test.

Our tests that are done and the.

Paypal Preproduction Sirius is which are.

Production intent and not design intent and therefore, they come off tooling off process with almost everything relevant for the full vehicle.

So I hope that answers your question.

Great.

Igor Levi: Great. Thank you. Could we see public road testing completed in H1 of next year based on where we are?

Thank you so could we see public road testing completed in the first half of.

Next year based on where we are.

You would definitely want to see public road tests prior to us filing commercial production by 2023, that's for sure.

Daniel Barel: You would definitely wanna 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, at any rate, are the more complicated, if you'd like, milestones, because this is where the changes occur.

I think that with them.

Multiple programs that we currently Iran.

We should be able to do.

A public road test.

Long time, as we are saying on the.

On the on the deck on the website. It is very important though to understand that.

The private road tests the way, we see it at a rate the private road test.

The.

More complicated if you'd like.

Millstones, because this is where the changes occur the rest of the milestones are mainly around bringing the products to a production intent and ramp up which I think that we all believe that according to our integration center our strategy, our strong partnership with top tier manufacturers production.

Daniel Barel: The rest of the milestones are mainly around bringing the product to production intent and ramp up, which I think that we all believe that according to our innovation center strategy and our strong partnership with top-tier manufacturers, production is something that we believe we can very successfully address.

Is.

Is something that we believe we can.

Very successfully addressed.

Great and just recently you mentioned that some customers are asking for heavier payloads.

Igor Levi: Great. 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, you know, 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?

For example, a customer that was targeting class four now asking you to do class five.

How quickly are you guys able to adapt to such a change since you mentioned that as a competitive advantage like mid way through the process. They say well we also won.

Half the vehicles to be class five vehicles and they are changing the design.

Is that something like how quickly can you adjust to that and then still have <unk>.

Production on schedule.

I'll try to answer because I'm afraid downsize a little bit more complicated than I think we have time for that because it depends where they are.

Daniel Barel: I'll try to answer because I'm afraid the answer is a little bit more complicated than I think we have time for, 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. That would take a few months to do so, fairly quickly.

Where the change reside if its only its 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 do.

Design, a new chassis, which because theres nothing residing on that chassis because everything is in the corner is quite straightforward.

And that.

That would take a few months.

To do so so fairly fairly quickly if they are.

Daniel Barel: If there are vehicle dynamics restrictions such as, I don't know, you have to move from coil dampers and spring to air 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 on whether we have ever done this before or not. You can probably imagine that we have quite a few players we're speaking to 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.

Vehicle dynamics restrictions such as.

I don't know you have to work move from a coil.

The answer is in screening.

Our suspension and therefore packaging is different or you have to go from.

A single wheel to double we'll install support then.

It depends too.

Where we have we ever done this before you can probably imagine that we have quite a few players were speaking on the market.

As I'm sure you guys are speaking required here.

And.

They all want different things so most likely we have.

We've been working on that.

Prior to that so their pass through that should be straightforward.

Currently.

We have not.

Delayed any program due to a change in request.

Great. That's extremely helpful. Thank you for the answers I'll turn it back.

Igor Levi: Great. That's extremely helpful. Thank you for the answers. I'll turn it back.

Pleasure.

Daniel Barel: Pleasure.

Thank you. Our next question comes from the line of Adam Jonas with Morgan Stanley. Please proceed with your questions.

Operator: Thank you. Our next question has come from the line of Adam Jonas with Morgan Stanley. Please proceed with your questions.

Okay.

Hum.

Adam Jonas: Guys, how many of your prototypes are in the hands of potential customers being tested right now? I guess in that definition it would either be platforms or corners, you know, of a significant content that are being tested.

<unk> Wen how many of your prototypes are in the hands of potential.

Potential customers being tested right now and I guess in that definition it would be there be platforms.

Four.

Corners of our significant.

Content that are being tested.

Yeah, usually wing, we thanks for the question Adam usually when we send out.

Daniel Barel: Thanks for the question, Adam. Usually when we send our product for customer evaluation, we would prefer sending a full platform. Just easier to test it like that. It shortens the testing time.

For our product for customer evaluation, we would prefer sending a full platform just easier to test it like that the children's day testing.

Adam Jonas: Yeah.

Daniel Barel: 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, about that. 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.

We've already I think earlier today communicated up a few of those.

Been tested around the world.

If you followed the you know I think a few months ago weeks ago on my lengthy Nick I don't think we already showed when we shipped.

The first one.

Okay.

They are indifferent.

Types stay due course and configuration.

And.

They are being tested in by multiple.

Companies.

In.

Several fields, mainly being.

Delivery.

And.

Shuttles.

As well as.

Autonomy.

Okay, Thanks, Daniel and maybe for high this day.

Adam Jonas: Okay. Thanks, Daniel. Maybe for Hai, just 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.

A clarification I think Mike asked the question earlier, just just sure 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 on a real time that you that you have calculated for valuation purposes fully diluted shares outstanding.

One second.

Daniel Barel: One second, Adam. I'll get back, and we'll get back.

Get back.

If you need more time, we can.

Adam Jonas: If you need more time, we can, you know, before the call ends, that would be great. We don't need to wait while you're doing it, but an important question obviously, again, given the amount of SBC activity during the quarter. I just want-

Before the call and 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 SBC activity during the quarter.

I just just Charlie.

Daniel Barel: Sure. Hai will get back to you on that, Adam, in a minute.

I will get back to you on that Adam no matter, Okay, and just a final one what would be a run rate. Obviously <unk> was extraordinary due to the true up but what would be a suggested run rate of SBC.

Adam Jonas: Okay. Just a final one. What would be a run rate? Obviously, Q3 is extraordinary due to the true up, but what would be a suggested run rate of SBC, let's say in Q4 or, you know, maybe early next year that we could work with, if you could give a range. I know that's dependent on stock price factors too, but I didn't know if there was a range you could provide. That's all the questions I have. Thank you.

Let's say in the fourth quarter or maybe early next year that we could work with but if you could give a range and I know that dependent on stock price factors too, but I didn't know if there was like a range you can provide that that's all the questions I have thank you sure.

Hai Aviv: As you can see, the magnitude for Q3 of stock-based compensation was higher than expected than what we usually had. In Q4, we expect that the magnitude would be significantly lower in the range of between $14 to 16 million for Q3. For Q4, sorry.

So as you can see the magnitude for Q3 also based compensation was higher.

Than expected than what we usually had in Q4, we expect that the magnitude would be significantly lower in the ranges are ranges Oh teams between 40 million to 50 million got it.

For Q3.

For Q4, okay. Thank.

Adam Jonas: Okay. Thank you. Understand. Okay. Appreciate that.

Thank you understand.

Okay.

Appreciate that.

Yes.

Hai Aviv: Yeah.

Okay.

Adam Jonas: Thanks.

Daniel Barel: Okay. Yeah, Adam.

And Adam on your question on the fully diluted share.

Adam Jonas: Thank you.

Hai Aviv: On your question on the fully diluted shares. As of the end of Q3, we had 364 million shares on a fully diluted basis.

So as of the end of Q3, we had 364 million shares on a fully diluted basis.

Thank you very much.

Adam Jonas: Thank you very much.

Sure.

Hai Aviv: Sure.

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.

Operator: 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.

Thank you.

Limor Gruber: Thank you, operator. I know that there are no more questions, but as part of our effort to strengthen transparency, 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. We will review a couple of questions that basically got the highest number of votes. The first one is on execution. 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?

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 no communicating and interacting with our various investment banks.

This quarter, we started.

Using a dedicated Q&A platform, which allows investors to asking the question.

So we will.

With you a couple of questions.

Well, that's basically got the highest number of votes.

So the first one.

Execution.

And I'll I'll read the question Daniel.

Can you please comment on any potential hurdles to executing production plans, including.

Microchip and microsemi shortages staffing needs are changing customer expectations.

Yes.

Daniel Barel: Yeah. On that, what I can say is that, you know, supply chain is always challenging, and it's very important to solidify that starting very, very early. We start working on our supply chain since 2018. And we've been doing that by securing our global vendor network with leaders of the global tier one players, like we've nominated recently, American Axle and Brembo, but we should not forget Musashi, 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.

On that what I can say is that you know.

Supply chain is always challenging.

And there.

It is very important to solidify that.

Starting very very early and we've done well.

Start working on our supply chain since 2018.

And we've been doing that by securing our global vendor network with leaders of the tier one global tier one says.

Like we've nominated recently American Act on Bravo, but we should not forget that in SaaS. She maxion pay why be in quite a few orders.

We're developing we're collaborating on development and manufacturing of those subsystems.

At which they will.

So they will manufacturing we will integrate into our.

Corners and boards platforms.

The fact that our VPN are vetted.

Daniel Barel: 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 redundancy in terms of any shortages as we move forward towards production and after SOP. We are very actually proud of the partners that we've made in the supply side. I think that the fact that we're working together is a great news for our customers, since they'll be getting naturally the best components out there at the best quality and on time.

And the network is large allows us.

Or the flexibility.

We chose the perfect partner for each of those programs.

Allowing for redundancy.

Andy.

Shortages as we move forward towards production and after S. Okay.

We are very actually problems by the partners that we've made in the <unk>.

And the supply side and I think that.

The fact that we're working together as a great great.

News for our customers and they'll be getting naturally the bet.

The components of that.

Best quality and on time.

Thanks, Danielle I'll, just maybe add.

Limor Gruber: Thanks, Daniel.

Daniel Barel: I'll just maybe add one more thing, Limor, is that in addition to 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. We are on target to hitting the 270 employee target by the end of the year. With that, we also have additional capabilities of producing and executing on our plan.

Thanks.

Is that in addition to do that and I think you've seen this before we also.

Tripled our head count.

Which is mostly with experienced developers and engineers.

And in the past few months and we will we are on target to hitting the $2 70.

Target targeted by the end of the year. So with that we also have an additional.

Capabilities, though.

Reducing and executing on our plan.

Great. So one more question a question we know we could guide.

Limor Gruber: Great. One more question. It regards the economics of the product. The total cost does look appealing for the final user, but isn't there a risk that your strategic partners will lose in terms of revenue if they're working with REE? Why is it advantages for OEMs to work with REE?

Uh huh.

I will make some of.

Of the product.

The total cost does look appealing for the final user but isn't there at least.

Yes.

Thank you Dave.

Okay.

In terms of revenue if they're working with me why these advantages for Orient to what we see.

Yes.

Daniel Barel: Yeah, that's a good point. First of all, we don't compete, so I don't think anybody who works with us loses anything. They only have things to gain. Many of those cases, it's not about making revenue, it's actually about making profit. 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 wanna usually focus on the battery technology, on the autonomy and connectivity for fronts. 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. It's exactly the same chain.

That's a good point so first of all we complete we don't compete so I don't think anybody who works closely with anything they only have things to gain.

And many of those cases, you're talking about making revenue, it's actually up about making profit and since we can.

Develop those platforms modularity and address the changing market faster significantly faster than perhaps some of the costs.

If many times, there's no brain Mets or Oems to decide to work with us since day, one it usually focus on the.

Battery technology on the autonomy and connectivity for France and Deb.

Most of them have.

Non developed chassis then in drivetrain et cetera for many many years I think there'll be an outsource to tier ones, which we worked with exactly the same thing.

In addition to that people should also take into account that.

Daniel Barel: 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 for is a very, very expensive thing to have. Therefore, us being able to bring those OEMs to the market faster and then dealing with the changes in market preferences is very compelling for OEMs. 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.

One of the key factors for oriented disappointed time to market seems the market is changing so rapidly having a program for 10 years.

Developing a vehicle and then coming out at the end of the line with a product that the market has already changed its preference for us.

Very very very expensive.

Thank you.

And therefore being able to bring those audience with the market prospect in dealing with the changes in market preferences is very compelling for our OEM then we've been working with quite a few of them.

Where were 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.

Daniel Barel: We're very much excited by our partnerships with the world-leading OEMs. I think that's the question we have.

The world leading Oems.

Thank you. That's the question we have yes. Thank you everyone. Thank you for joining us today, and we do look forward to touch base a very good day. Thank you all take care.

Limor Gruber: Yes. Thank you, everyone. Thank you for joining us today, and we do look forward to touch base very soon. Good day.

Daniel Barel: Thank you all.

Hai Aviv: Thank you.

Daniel Barel: Take care.

This does conclude today's teleconference. We appreciate your participation you may disconnect your lines at this time.

Operator: This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Have a great day.

Have a great day.

[music].

Q3 2021 Ree Automotive Holding Inc Earnings Call

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