Q2 2022 REE Automotive Holding Inc Earnings Call

August 16, 2022

The conference will begin shortly to raise your hand during Q&A you can dial star one.

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Yeah.

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Operator 2: Greetings, and welcome to the REE Automotive Q2 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automatic message advising your hand is raised. 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.

Operator: Greetings, and welcome to the REE Automotive Q2 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automatic message advising your hand is raised. 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.

Greetings and welcome to the re automotive second quarter 'twenty to 'twenty two earnings conference call at this time all participants.

A question and answer session will follow the formal presentation.

To ask a question during the session you will need to press star one on your telephone you would've done here, an automated message flashing Johan this race.

As a reminder, this conference is being recorded I would now.

Like to turn the call over to Lee Cooper.

Preston Oaks Investor Relations. Thank you you may begin.

Limor Gruber: Thank you, operator, and thank you all for joining our Q2 2022 conference call. We hope that you have seen our press release and investor presentation issued earlier this morning at investors.ree.auto. We will be referring to the presentation during the webcast today. I would like to remind you that today's call may include forward-looking statements. Any statements describing our beliefs, goals, plans, strategies, expectations, projections, forecasts, and assumptions are forward-looking statements. Please note that the company's actual results may be different from other anticipated by such forward-looking statements for a variety of reasons, many of which are beyond our control. Please refer to the company's Form 20-F filed on 28 March 2022 with the Securities and Exchange Commission, which identifies the principal risks and uncertainties that could affect our business prospects and future results.

Limor Gruber: Thank you, operator, and thank you all for joining our Q2 2022 conference call. We hope that you have seen our press release and investor presentation issued earlier this morning at investors.ree.auto. We will be referring to the presentation during the webcast today. I would like to remind you that today's call may include forward-looking statements. Any statements describing our beliefs, goals, plans, strategies, expectations, projections, forecasts, and assumptions are forward-looking statements. Please note that the company's actual results may be different from other anticipated by such forward-looking statements for a variety of reasons, many of which are beyond our control. Please refer to the company's Form 20-F, filed on 28 March 2022 with the Securities and Exchange Commission, which identifies the principal risks and uncertainties that could affect our business prospects and future results.

Thank you operator, and thank you all for joining our second quarter Conference call. We hope that you have seen our press release and Investor presentation issued earlier this morning at investors Das read that.

We will be referring to the presentation. During the webcast today I would like to remind you that today's call may include forward looking.

Statements.

Any statements, describing our beliefs goals plans and strategies expectations projections forecast and assumptions our forward looking statements. Please note that the company's actual results may be different from other anticipated by such forward looking statements for a variety of reasons many of which are beyond.

Our control please refer to the company's form 20-F filed on March 28.

With the Securities and Exchange Commission, which identifies the principal risks and uncertainties that could affect our business prospects and future results. We assume no obligation to update publicly any forward looking statements, except as required by law.

Limor Gruber: We assume no obligation to update publicly any forward-looking statements except as required by law. In addition, we will be discussing or providing certain non-GAAP financial measures today, including adjusted EBITDA, non-GAAP net loss, and non-GAAP EPS. Please see our earnings release for reconciliation of these non-GAAP measures to their most directly comparable GAAP measures. Joining me today is our co-founder and CEO, Daniel Barel, who will provide an overview of our business. Josh Tech, our COO, will then provide you with an operations update. Our CFO, David Goldberg, will continue with a discussion on our financial results and outlook. After that, we will open up the call for Q&A. At this point, I will turn the call over to Daniel. Daniel, please.

In addition, we will be discussing or providing certain non-GAAP financial measures today, including adjusted EBITDA non-GAAP net loss and non-GAAP EPS. Please see our earnings release for reconciliation of these non-GAAP measures to their most do.

Directly comparable GAAP measures.

Joining me today is our co founder and CEO Daniele Burrell, who will provide an overview of our business Josh Peck our C O O.

Then provide you with an operations update our CFO , David Goldberg will continue with a discussion on our financial results and outlook. After that we will open up the call for Q&A.

At this point I will turn the call over to Danielle Danielle Please.

Daniel Barel: Thank you, Limor. Good morning and welcome to our Q2 2022 earnings call. I will begin the call by providing you with an update on the progress we are making towards commercialization of two separate P7 products. As we focus on converting our pipeline into backlog. Moving to slide 4. I would like to begin by saying that we had a strong Q2, during which we continued to execute our business plan in a disciplined manner. REE had two main goals for the quarter. The first was to receive customer input on the P7 product line. The feedback we have received from leading commercial fleet operators and owners in North America and Europe has been very positive.

Daniel Barel: Thank you, Limor. Good morning and welcome to our Q2 2022 earnings call. I will begin the call by providing you with an update on the progress we are making towards commercialization of two separate P7 products. As we focus on converting our pipeline into backlog. Moving to slide four. I would like to begin by saying that we had a strong Q2, during which we continued to execute our business plan in a disciplined manner. REE had two main goals for the quarter. The first was to receive customer input on the P7 product line. The feedback we have received from leading commercial fleet operators and owners in North America and Europe has been very positive.

Thank you Tamara good morning, and welcome to our second quarter 2022 earnings call I.

I will begin the call by providing you with an update on the progress we are making towards commercialization.

Two separate seven product.

We focus on converting our pipeline and tobacco.

Moving to slide four I would like to begin by saying that we had a strong second quarter during which we continued to execute our business plan in a disciplined manner.

We have two main goals for the quarter. The first was to receive customer input on the <unk> product line.

Feedback we have received from leading commercial fleet operators and owners in North America, and Europe has been very positive.

Daniel Barel: As customer evaluation progresses, we are seeing strong interest in electric vehicles Powered by REE, and we expect to receive firm orders in the next few months, and to start delivering test fleets to our customers. Delivering test fleets to customers is a critical milestone on the path to scaled adoption of Powered by REE vehicles. Commercial owners and operators are highly sensitive to vehicle uptime, durability, and efficiency. Introducing new vehicles into fleets must make sense from a business and operational perspective, and the only way to reach scaled adoption of a new vehicle is by introducing a test fleet and having this test fleet operate as well or better than current options. This is the path to firm follow-on orders in significant quantities. We will only announce firm orders going forward.

As customary valuation progress, we're seeing strong interest in electric vehicles powered by rate and we expect to receive firm orders in the next few months.

And to start delivering to our customers.

Delivering tests linked to customers is a critical milestones on the path to scale the adaptation of powered by a REIT vehicle.

Commercial owners and operators are highly sensitive to vehicle uptime.

<unk> and efficiency.

Introducing new vehicles into fleet must make sense from a business and operational perspective.

And the only way to reach scale adoption of a new vehicle is by introducing a test fleet and having this test fleet operate as well.

Then current options.

This is the path to.

Follow on orders in significant quantities.

We will only unknowns firm orders going forward.

Daniel Barel: In addition to pounding the ground and deploying test fleets powered by REE, regulatory tailwinds, such as the recent Inflation Reduction Act, are supporting the shift of major commercial fleets to electric vehicles. We are actively assessing the potential benefits of the IRA to our business. The second goal was to continue the development of our production capacity. We have made great strides in building out our initial integration center, as Josh will describe shortly, as we progress toward the initial capacity of 10,000 vehicle sets this year. The launch of our second integration center is also progressing. When complete, this facility will double our production capacity to 20,000 vehicle sets annually. Development of both integration centers are on track and on budget. Moving to slide five.

Daniel Barel: In addition to pounding the ground and deploying test fleets powered by REE, regulatory tailwinds, such as the recent Inflation Reduction Act, are supporting the shift of major commercial fleets to electric vehicles. We are actively assessing the potential benefits of the IRA to our business. The second goal was to continue the development of our production capacity. We have made great strides in building out our initial integration center, as Josh will describe shortly, as we progress toward the initial capacity of 10,000 vehicle sets this year. The launch of our second integration center is also progressing. When complete this facility will double our production capacity to 20,000 vehicle sets annually. Development of both integration centers are on track and on budget. Moving to slide five.

In addition to pounding the ground and deploying test fleet powered by re <unk>.

Golar to repel wins, such as the recent inflation reduction.

Our supporting the shift.

A major commercial fleets to electric vehicles.

We are actively assessing the potential benefits of the IRI.

Business.

The second goal was to continue the development of our production capacity.

We have made great strides in building out our initial integration center.

As Josh will describe shortly.

As we progressed towards the initial capacity of 10000 vehicles this year.

The launch of our second integration Center is also progressing.

When complete this.

This facility will double our production capacity to 20000 vehicles.

Ali.

Development on the development of both integration centers are on track and on budget.

Daniel Barel: As you may recall, our P7 platform, which we revealed at the beginning of this year, is a modular platform designed to accommodate commercial vehicles from Class 3-5. Since that reveal, we have debuted two full vehicles, both powered by our P7 platform. As many of our listeners today are aware, we hosted an investor event two weeks ago, during which we showcased the Proxima Powered by REE, a Class 5 walk-in van and the industry's first fully by-wire commercial vehicle. This event followed a series of evaluations by prospective fleet customers with leading positions across delivery, logistics, and retail segments. In addition, we have been testing and showcasing the P7-B, a Class 3 box truck, at our UK engineering center for several months now.

Daniel Barel: As you may recall, our P7 platform, which we revealed at the beginning of this year, is a modular platform designed to accommodate commercial vehicles from Class 3 to 5. Since that reveal, we have debuted two full vehicles, both powered by our P7 platform. As many of our listeners today are aware, we hosted an investor event two weeks ago, during which we showcased the Proxima Powered by REE, a Class 5 walk-in van and the industry's first fully by-wire commercial vehicle. This event followed a series of evaluations by prospective fleet customers with leading positions across delivery, logistics, and retail segments. In addition, we have been testing and showcasing the P7-B, a Class 3 box truck, at our UK engineering center for several months now.

Moving to slide five as you may recall, our P. Seven platform, which we revealed at the beginning of this year is a modular platform designed to accommodate commercial vehicles from class III to file.

Since that Brazil, we debuted two full vehicle both powered by our <unk> platform.

Many of our listeners today are aware.

Hosted an investor event, two weeks ago during which we showcased the proxy powered by re classify walk in van and the industry's first fully by wire commercial vehicle.

This event, followed a serious of evaluations by prospective fleet customers with leading positions across delivery logistics and retail segments.

In addition, we have been testing and showcasing the peak seven beat the clock.

Three box truck.

UK Engineering center for several months now.

Daniel Barel: For those of you who might have missed it, recent announcement and the investor event, I'll take a moment to describe some of those 2 EVs benefits. On slide 6, Proxima Powered by REE is the most advanced walk-in van in existence. The body is designed by EAVX and built by Morgan Olson, both subsidiaries of JB Poindexter, a company with significant market share and a multi-decade track record in upfitting commercial vehicles. REE, the manufacturer of record, provides the backbone of the vehicle. The technical benefits of our chassis, coupled with the commercial domain expertise and state-of-the-art body by Morgan Olson, deliver what customers and their drivers are looking for, efficient and durable electrified vehicle that can be optimized for specific use cases, resulting in attractive economies. Proxima Powered by REE has many technical attributes that provide real-world benefits to fleet owners.

Daniel Barel: For those of you who might have missed it, recent announcement and the investor event, I'll take a moment to describe some of those two EVs benefits. On slide six, Proxima Powered by REE is the most advanced walk-in van in existence. The body is designed by EAVX and built by Morgan Olson, both subsidiaries of JB Poindexter, a company with significant market share and a multi-decade track record in upfitting commercial vehicles. REE, the manufacturer of record, provides the backbone of the vehicle. The technical benefits of our chassis, coupled with the commercial domain expertise and state-of-the-art body by Morgan Olson, deliver what customers and their drivers are looking for, efficient and durable electrified vehicle that can be optimized for specific use cases, resulting in attractive economies. Proxima Powered by REE has many technical attributes that provide real-world benefits to fleet owners.

For those of you who.

Might have missed it recent announcements.

And the Investor event.

I'll take a moment to describe some of those to evs benefit.

On slide six.

Proxima followed by REIT.

Is the most advanced walk in van in existence.

The body is designed by AVX.

And built by Morgan Olson, both subsidiaries of JV point.

A company with significant market share in a multi decade track record and up 15 commercial vehicles.

The manufacturer of record provides the backbone of the vehicle.

The technical benefits of our chassis, coupled with the commercial domain expertise and state of the art body by Morgan Awesome deliver what customers and their drivers are looking for.

Efficient and durable electrified vehicle that can be optimized for specific use cases.

<unk> an attractive economies.

Proximal powered by re has many.

Technical it attributes that provide real world benefits to fleet on it.

Daniel Barel: During evaluations, we heard from potential customers that they appreciate this game-changing advantage that include enhanced maneuverability, and safety with all-wheel steer and all-wheel drive, low stepping height for efficient delivery cycle times, and ergonomics that reduce driver distraction, providing fleet efficiencies and driver win. Proxima Powered by REE has many other amazing features, and I encourage you to watch the replay of the investor event on our website if you have not done so. Moving to slide 7. On the back of the customer evaluation of Proxima Powered by REE, we expect to receive firm orders for test fleets from multiple customers, and we look forward to sharing more with you soon. These test fleets will be used for real-world evaluation by our customers.

Daniel Barel: During evaluations, we heard from potential customers that they appreciate this game-changing advantage that include enhanced maneuverability, and safety with all-wheel steer and all-wheel drive, low stepping height for efficient delivery cycle times, and ergonomics that reduce driver distraction, providing fleet efficiencies and driver win. Proxima Powered by REE has many other amazing features, and I encourage you to watch the replay of the investor event on our website if you have not done so. Moving to slide seven. On the back of the customer evaluation of Proxima Powered by REE, we expect to receive firm orders for test fleets from multiple customers, and we look forward to sharing more with you soon. These test fleets will be used for real-world evaluation by our customers.

During evaluations, we heard from potential customers that they appreciate these game changing advantage.

That include enhancement with mobility and safety with all wheel steer and all wheel drive.

Low stepping high for efficient delivery cycle times, and agronomics that reduced driver distraction, providing fleet efficiencies and driver wins.

Proxima powered by Reed as many other amazing features and I encourage you to watch the replay of the Investor event on our website. If you have not done so.

Moving to slide seven.

Yeah.

On the back of the customer evaluation of proxy about power diary.

Back to received firm orders for test fleets for multiple customers.

And we look forward to sharing more with you soon.

This test fleets will be used for real world evaluation by our customers.

Daniel Barel: Some of our prospective customers have very large fleet that will not be electrified all at once, and without significant testing. We believe orders for test fleets will mark the beginning of multiple long-term relationships, and that we will receive larger orders after customers collect validating data and positive driver feedback. We're obviously not the only company competing in this area, but we believe our product is the best in class, and that our go-to market partnership for the Proxima body and the P7 chassis is a real competitive advantage. Proxima Powered by REE went from concept to product design from the ground up in just one year, a very short time by industry vehicle development standards. I am very proud of both our teams for their accomplishment and for our joint commitment to electrification and carbon neutrality. Moving to slide eight.

Some of our prospective customers have very large fleet that will not be electrified August one and without significant testing.

We believe orders for test fleets will mark the beginning of multiple long term relationships.

And that really will receive larger orders after a customer's collect validating data and positive driver feedback.

We're obviously not the only company competing in this area.

But we believe our product is the best in class and that our go to market partnership.

The proximal body and the peak seven chassis is a real competitive advantage.

Proxima powered by re went from concept to product design.

From the ground up in just one year in very short time by industry vehicle development targets.

I'm very proud of both our teams for their accomplishment and for our joint commitment to electrification and carbon neutrality.

Moving to slide eight.

Daniel Barel: The second vehicle we unveiled, the P7-B, has undergone months of positive and encouraging customer evaluation at our engineering center in the UK, and is on track for 2023 production. The P7-B is built on a Class 3 P7 chassis, the same platform underlying Proxima Powered by REE. That means it delivers many of the same fleet and driver benefits, which we believe will deliver lower TCO, total cost of ownership. The P7-B is targeted at the important and growing mid- and last-mile delivery segment. The on-track testing of the P7-B and extensive potential customer evaluation is a crucial step on the road to commercialization. Feedback from prospective customers has been that this is the truck they have been looking for, one that drives like a sedan and is built to deliver under the harshest commercial duty cycle.

The second vehicle, we unveiled the <unk> b has undergone month of positive and encouraging customary evaluation at our engineering center in the UK.

And is on track for 2023 production.

The <unk> is built on the class III <unk> chassis.

Same platform underlying proxima powered by Ria.

That means it delivers many of the same fleet and drive a benefit which we believe will deliver lower <unk> total cost of ownership.

The <unk> is targeted at the important and growing mid and last mile delivery segment.

They are on track testing of the <unk>.

Extensive potential customer evaluation is a crucial step on the road to commercialization.

Feedback from prospective customers has been that this is the truck that has been looking for.

One that drives like a sedan.

Bill to deliver under the harshest commercial duty cycle.

Daniel Barel: They also appreciate the flexibility of the P7, as it can be configured to best suit customer needs. We expect real-world trials with customers to commence next year. Moving to slide 9. As we have demonstrated, because of its modularity, we are able to quickly deploy our technology for a variety of applications. This allows us to access distinct go-to-market channels, including designing and building our own vehicles for direct sales to fleet customers, as in the case of the P7-B, and through partnerships with upfitters. As we shared before, REE is the manufacturer of record for Proxima and P7-B, making us responsible for the homologation and certification of the electric platform. The homologation and certification activities are progressing on track at both the component and system level.

They also appreciate the flexibility of the <unk> seven as it can be configured to best suit customer needs.

We expect real world trials with customers to commence next year.

Moving to slide nine.

As we have demonstrated because of its modularity were able to quickly deploy our technology for a variety of applications.

This allows us to access.

<unk> go to market channels, including designing and building our own vehicles for direct sales to three customers.

In the case of the P 70.

And through partnerships with operators.

Yeah.

As we shared before <unk> is the manufacturer of record for proxy and <unk>, making us responsible for the Homologation and certification of the electric platform.

The obligation and certification activities are progressing on track and both the component and system level.

Daniel Barel: Additionally, core control systems, software and functionality, safety development, and key elements of the development of mission-specific variation enabled by REEcorners are progressing according to plan. While our main focus is commercialization of P7, we have other projects in various stages of development, and we will share updates about these as appropriate. With this, I would like to pass it on to Josh for an update on our operational progress. Josh?

Additionally.

Core control system software and functionality safety development.

Elements of the development of mission specific variation enabled by re corners are progressing according to plan.

While our main focus is the commercialization of <unk> seven.

We have other projects in various stages of development and we will share updates about these.

Great.

With this I would like to pass it on to Josh for an update on our operational progress Josh.

Josh Tech: Thank you, Daniel, and good morning. While I met many of you at our recent IR event, this is my first earnings call at REE. I am very proud to be here today and share with you some updates on our operational progress. Moving to slide 11. We remain on schedule with commercialization both operationally and financially. Operationally, our core UK engineering team is now substantially built out. All key engineering functions are now in-house, and process management and infrastructure is in place. Our engineering test fleet in the UK is accumulating durability miles, progressing through verification and validation activities in preparation for production of design intent builds later in Q4. We are on track to hit the production capacity targets we have previously communicated.

Josh Tech: Thank you Daniel, and good morning. While I met many of you at our recent IR event, this is my first earnings call at REE. I am very proud to be here today and share with you some updates on our operational progress. Moving to slide 11. We remain on schedule with commercialization both operationally and financially. Operationally, our core UK engineering team is now substantially built out. All key engineering functions are now in-house, and process management and infrastructure is in place. Our engineering test fleet in the UK is accumulating durability miles, progressing through verification and validation activities in preparation for production of design intent builds later in Q4. We are on track to hit the production capacity targets we have previously communicated.

Josh.

Thank you Daniel and good morning, while I met many of you at our recent IR event. This is my first earnings call at <unk> am.

I am very happy to be here today and share with you some updates on our operational progress.

Moving to slide 11, we remain on.

Unscheduled with commercialization, both operationally and financially.

Operationally, our core U K engineering team is now substantially built out all key engineering functions are now in house and process management and infrastructure is in place.

Our engine test fleet in the U K is accumulating durability miles progressing through verification and validation activities in preparation for production of design intent builds later in the fourth quarter we.

We are on track to hit the production capacity targets. We have previously communicated our first assembly line will soon be installed in our country UK integration Center, which is our launch factory in blueprint for all future integration centers it.

Josh Tech: Our first assembly line will soon be installed in our Coventry, UK integration center, which is our launch factory and blueprint for all future integration centers. It is expected to have a capacity of 10,000 vehicle sets by the end of this year. The Austin, Texas integration center is also underway with the shell being stood up and complete. I would add that our first integration center is nearly complete, and we have the capability to accelerate the development of our second integration center if needed by replicating the template of the first integration center. Moving to slide 12. Now I would like to give you more color on our integration centers, which will use robotic assembly cells, end-of-line electrical tests, and auto boxing stations. An assembly cell is an alternate strategy used in manufacturing that can provide much greater flexibility and scalability than a traditional production line.

It is expect to have a capacity of 10000 vehicles that by the end of this year. The Austin, Texas integration Center is also underway with the shelf being stood up and complete.

I would add that our first integration center is nearly complete and we have the ability to accelerate the development of our second integration centers needed by representing the first integration center.

Moving to slide 12.

Now I would like to give you more color on our integration centers, which will use robotic assembly dose and a minor electrical costs and auto boxing stations.

And assembly cell as an alternate strategy used in manufacturing that can provide much greater flexibility and scalability than a traditional production line details.

Josh Tech: These cells will make up our REEcorner production lines, where automated guided vehicles will move the work in process product between stations for both automated and manual assembly, as well as sub-assemblies to the lines. There are several advantages to this approach. First, it provides the ability to validate all assembly cells quickly by testing and optimizing one cell and then implementing those best practices across all others, which will reduce the time to design and develop additional assembly lines. Second, the modular production line is also highly automated and flexible, meaning that we can scale up or down depending on future variants and demand. Finally, assembly cells and production lines can be efficiently lifted and installed at future integration centers, as well as we apply one global standard using the plug-and-play format. We are working with top supply partners on the assembly line and line-side controls.

T cells will make up our <unk> production lines were automated guided vehicles will move the work in process product between stations for both automated and manual assembly as well as federal assemblies to the lines.

There are several advantages advantages to this approach first it provides the ability to validate ultimately close quickly by testing and optimizing one cell and then implementing those best practices across all others, which reduces the time to design and develop additional assembly lines.

Second the module production line is also highly automated and flexible meaning that we can scale up or down depending on future variance in demand.

Finally, if somebody sells and production lines can be officially lifted install their future integration centers as well as we apply one global standard using the plug and play format.

We are working with top supply partners on the Assembly line in line with tight controls. This allows us to use cloud based solutions, giving us complete visibility into all production operations and enabling us to scale manufacturing, both locally and globally across all integration centers. These integration centers will be linked to our control center, where we can achieve an overarching view and build perspective, along with full traceability of.

Josh Tech: This allows us to use cloud-based solutions, giving us complete visibility into all production operations and enabling us to scale manufacturing both locally and globally across all integration centers. These integration centers will be linked to our control center, where we can achieve an overarching view and build perspective along with full traceability of our REE solutions. With that, I'll hand over to David Goldberg, REE CFO, to discuss our financial results. David?

Re solutions.

With that I'll hand over to David Goldberg <unk> CFO to discuss our financial results David Thank you, Josh and good morning.

David Goldberg: Thank you, Josh, and good morning. Before opening the call to Q&A, I'd like to discuss the company's results for Q2, then reiterate our expectations for 2022. The company reported a GAAP net loss of $25.2 million in Q2 of 2022, compared to a net loss of $21.5 million in Q1. The increase is mainly related to lower income from warrants remeasurement, partially offset by lower operating expenses. The non-GAAP net loss of $21.3 million in Q2 of 2022 decreased compared to $28.3 million in Q1 of 2022, primarily due to the timing of expense recognition related to development and production capacity costs.

David Goldberg: Thank you Josh, and good morning. Before opening the call to Q&A, I'd like to discuss the company's results for Q2, then reiterate our expectations for 2022. The company reported a GAAP net loss of $25.2 million in Q2 of 2022, compared to a net loss of $21.5 million in Q1. The increase is mainly related to lower income from warrants remeasurement, partially offset by lower operating expenses. The non-GAAP net loss of $21.3 million in Q2 of 2022 decreased compared to $28.3 million in Q1 of 2022, primarily due to the timing of expense recognition related to development and production capacity costs.

Before opening the call to Q&A I'd like to discuss the company's results for the second quarter, then reiterate our expectations for 2022.

The company reported a GAAP net loss of $25 2 million in the second quarter of 2022 compared to a net loss of $21 5 million in the first quarter the.

The increase is mainly related to lower income from warrants remeasurement.

Offset by lower operating expenses.

The non-GAAP net loss of $21 3 million in the second quarter of 2020 to decrease compared to $28 3 million in the first quarter of 2022, primarily due to the timing of expense recognition related to development and production capacity cost.

David Goldberg: We remain on track to meet our guidance for cash spending in 2022 at a range of $130 to 150 million, inclusive of both capital and operating expenses. This range is presented on a cash basis and is tied to the execution of our business plan. Accordingly, expenses are dependent in part on the timing and achievement of certain milestones related to the company's commercial programs and projects, and may not be linear throughout the year. Our operating expenses are mostly comprised of technical and engineering spend required to execute according to the timelines we've communicated. It is important to note that we expect engineering expenses tied to P7 to peak this year. Our budget includes investments of approximately $30 million in 2022. These investments are mainly related to establishing our integration centers.

We remain on track to meet our guidance for cash spending in 2022 at a range of $130 million to $150 million inclusive for both capital and operating expenses.

This range is presented on a cash basis and is tied to the execution of our business plan.

Accordingly expected are dependent in part on the timing and achievement of certain milestones related to the company's commercial programs and projects.

It may not be linear throughout the year.

Our operating expenses are mostly comprised of technical and engineering spend required to execute according to the timelines we've communicated.

It is important to note that we expect engineering expenses tied to be seven to peak this year.

Our budget includes investments of approximately $30 million in 2022.

These investments are mainly related to establishing our integration centers.

David Goldberg: This portion of the budget is effectively committed and will continue to be incurred through H2 2022. I note that some of the expenses related to the establishment of initial production capacity may not be capitalized and will be recorded as operating expenses. As of 30 June, we had approximately $207 million of liquidity, comprised of cash and short-term investments and no debt. We continue to have sufficient funding to execute the programs Daniel described and to advance other commercial activities. As you may have seen, earlier today, the company filed a shelf registration statement. We intend to allocate up to $75 million of the shelf registration to the sale of REE's Class A ordinary shares in an at-the-market program, once the registration statement is declared effective.

This portion of the budget is effectively committed and will continue to be incurred through the second half of 2022.

I note that some of the expenses related to the establishment of initial production capacity may not be capitalized.

It will be recorded as operating expenses.

As of June 30, we had approximately $207 million of liquidity comprised of cash and short term investments and no gap.

Continue to have sufficient funding to execute the programs described Daniel described and to advance other commercial activities.

As you may have seen earlier today, the company filed a shelf registration statement.

We intend to allocate up to $75 million of the shelf registration to the sale of <unk> class a ordinary shares in an aftermarket program. Once the registration statement is declared effective.

David Goldberg: The registration statement has not yet been declared effective, and no sales may be offered or sold under the shelf registration until it becomes effective. We do not currently plan to issue shares under the program. As a reminder, we have a CapEx-light business model. Because of this model, each of our integration centers require capital in the $10s of millions, significantly less than the $100s of millions or billions required to build a large factory typical of other OEMs. We remain focused on executing our business plan. While we believe a significant opportunity exists beyond P7, the vast majority of our budget has been allocated towards execution and commercialization of this platform in the US and Europe. The cadence of our spending will be indicative of our progress, and we will continue to update our shareholders on budget expectations as the year unfolds.

The registration statement has not yet been declared effective and no sales may be offered or sold under the shelf registration until it becomes effective.

We do not currently plan to issue shares under the program.

As a reminder, we have a capex light business model because of this model each of our integration centers require capital in the tens of millions of dollars.

Significantly less in the hundreds of millions or billions of dollars required to build a large factory typical of other Oems.

We remain focused on executing our business plan, while we believe a significant opportunity exists beyond pizza oven.

Vast majority of our budget to allocate towards execution and commercialization of this platform in the U S and Europe .

The cadence of our spending will be indicative of our progress and we will continue to update our shareholders on budget expectations as the year unfolds.

David Goldberg: With that, we would like to open the call to questions. Operator?

With that we would like to open the call to questions.

Operator 2: Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. Please stand by while we compile a Q&A roster. We will now take the next question. The first question comes from the line of Michael Shlisky from D.A. Davidson & Co. Please go ahead. Your line is open.

Operator: Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. Please stand by while we compile a Q&A roster. We will now take the next question. The first question comes from the line of Michael Shlisky from D.A. Davidson & Co. Please go ahead. Your line is open.

Operator.

Thank you.

A reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced.

Please standby, while we compile the Q&A roster.

We will now take the next question.

On the first question comes from the line of Michael <unk> from D. A Davidson and company. Please go ahead. Your line is open.

Michael Shlisky: Good morning or good afternoon, and thank you. Wanted to touch quickly first on the P7-B. I guess a couple of questions there, 'cause it seems somewhat different than what was communicated in the past, as far as the method in which you'll be approaching the market. Do you have to basically create an internal sales force to sell this vehicle? Is your intention instead to get dealerships or to use someone like an EAVX to be the kind of point of sale to the customer? Just some sense as to how you're gonna actually, you know, truly go to market with this vehicle.

Good morning, or good afternoon, and thank you.

Wanted to touch quickly first on the <unk>.

I guess a couple of questions there because it seems somewhat different then.

What was communicated in the past as far as the method in which will be approaching the market do you have to basically.

Great.

The internal sales force to sell this vehicle is your intention.

Ships to use someone like any avs.

The kind of point of sale to the customer.

Just some sense as to how you're going to actually.

Truly go to market with this with this vehicle.

Daniel Barel: Yeah, absolutely. Thanks for the questions. It's an important one. We've always said that we are first to market, and we've always said that we have direct approach to go to the market by ourselves. However, that approach is dependent on the structure of the market in different classes. When you look at Class 5s and when you look at walk-in vans, it is customary for the chassis to be purchased separately from the body and of course, for the upfitters and the chassis builders to work together to supply a full vehicle to the fleet. This is the way it works traditionally, and this is how we work with EAVX and Morgan Olson, which are great partners with a great track record.

Yeah, absolutely. Thanks for the question, it's an important one.

We've always said that we are first to money and we've always said that we have direct.

Our approach to go through the market by ourselves. However, the approach is dependent on the.

The structure of the market in different classes. So when you look at class five and when you look at welcome that.

It is customary for the charter to be.

Purchased separately from the body and of course for their Outfitter, then and the chance to build those to work together to supply a full vehicle to the fleet but.

Sorry about that this is the way it works.

And this is how we work with <unk> in Morgan Olson.

Which are great great partners.

Daniel Barel: However, when you look at, for example, Class 3s and you look at cab chassis and box trucks, it is customary that the manufacturer of record, in that example us, to manufacture the entire cab chassis and sell it directly to the fleet on which they will later on put on a box, which they will purchase from any box manufacturer, such as, for example, Morgan and others. There's not been any change in our strategy, just different vehicle categories.

Great track record.

However, when you look at for example, a class three and you look at.

Cab chassis and box truck it.

It is customary.

Manufacturer of Brexit in that example, up to manufacture the entire cab chassis and sell it directly to the fleets on which they will later on put on a box, which they will purchase from any box manufacturers touch for example, Morgan.

So there is no there has not been any change in our strategy just different vehicle category.

Michael Shlisky: Okay. Can you discuss the margin profile differences between the P7-B and the Proxima Class 5? Do you anticipate a different cash cadence from each of these two?

Okay.

Can you maybe discuss the margin profile differences between the <unk> and <unk>.

From a class five.

We anticipate.

A different cash cadence from each of these two.

David Goldberg: Sorry. When you say, I mean, on margin, I think the margin profile, or at least the economics are gonna be similar across both vehicles.

Sorry, when you say I mean.

And I think that the margin profile.

I think the economics are going to be similar across both vehicles.

Michael Shlisky: Okay. All right. You know, a question I've gotten recently was, you know, just some thought as to how the Proxima event went a few weeks ago from a fleet or dealer perspective, those who were test driving from the industry. You've been mentioning that you have mostly positive feedback there, but were there any learnings you got from there that are gonna have you going back to the, you know, drawing board to redo parts of the vehicle? Or did most people think that the vehicle as presented was gonna generally meet their needs?

Okay.

Alright.

A question I've gotten recently was just some thoughts.

How the customer event went a few weeks ago.

From a fleet or dealer perspective, those who are test driving from the industry.

You have mentioned that you have.

Mostly positive feedback there.

Are there any learnings you've gotten there that.

Okay have you going back to the drawing board to redo parts of the vehicle that most people think that <unk> presented.

Joey and meet their needs.

Daniel Barel: Yeah. The event that we've had with the Proxima, of course, you know, it was really exciting, and we had really strong feedback from, but to many of those customers and leading fleets that attended, it was not entirely new because they were part of that development cycle, and they were part of that design. We've been listening to the voice of the customer from them for a very long period of time, and we've implemented significant inputs for them. I'm very happy today and also being there to hear their feedback that this was the truck that they've been looking for.

Yes.

<unk>.

Okay.

The event that we've had with approximate.

Of course.

It was really exciting and we had really strong feedback from.

But to many of those.

Customer then leading fleets that attended.

It was not entirely new because they were part of that development cycle in there what part of that design and we've been listening to the voice of the customer from them for a very long period of time, and we've implemented significant inputs for them. So I'm very happy.

Today, and also been there to to to hear their feedback that this was the truck that they've been looking for.

Daniel Barel: Naturally, there's always, you know, a feedback for things that they would love to improve on many fronts from, you know, interior alignment of screens to others, right? In general, I think that we are very, very encouraged by the feedback that we've got and by the level of acceptance we've seen from those fleets.

That's really there's always.

Feedback for things that they would love to improve on on many fronts from.

Interior alignment of screens to draw this right, but in general I think that we are very very encouraged by the feedback that we've got and by the level of.

Acceptance, we've seen from those fleets.

Michael Shlisky: Okay. Maybe one last one from me, about pricing for the P7 Proxima. The feedback I've been hearing from some people who drove the vehicle were, "This is a great vehicle, but what's this gonna cost me?" I know, I don't know if you can give us a pinpoint number for what you think this, that truck's gonna sell for, but maybe at least some sense as to, the percentage increase above the comparable ICE vehicle would be appreciated.

Okay.

Maybe one last one for me about pricing for the <unk> process.

I think that having anything some people who drove the vehicle where this is a great vehicle, but what's the kind of cost me.

I don't know if you can give us a pinpoint number for what do you think that's true.

Asking yourself or maybe at least some sense as to the percentage increase above the knee.

Daniel Barel: Sure. So naturally, since we are literally in the midst of negotiating with quite a few fleets, I would not go into the economics of everything here. Having said that, I think we have a very appealing offering and very competitive market positioning on both vehicles, actually. Remember that we are able to price current costs as we're moving to the market. It allows us to see a very good path to attractive economics. One of the reason that we're able to be that attractive is because of the CapEx-light model that helps us to reduce significant costs that are inherent in traditional OEM, other than us, of course.

The ice vehicles will be appreciated.

Sure.

So.

Naturally since we are literally in the midst of negotiating.

Quite a few fleets I would not go into the economics of everything here.

But having said that I think we have a very.

Yeah.

Appealing offering and very competitive market positioning.

On the on both vehicles actually.

Remember that.

We were able to cost we are able to price corn costs.

We're moving to the <unk>.

To the market.

And.

It allows us to see a very good path to attractive economics.

And one of the reason that we're able to be that attractive is because of the capex site model of that.

It helps us to reduce significant cost that are inherent in traditional OEM.

Daniel Barel: I think we've also received very strong positive feedback on initial pricing and long-term pricing of both P7-B and Proxima.

Other than of course.

And I think we.

We've also received very strong positive feedback on.

Initial pricing and.

Long term pricing of both <unk> and proximity.

Michael Shlisky: Okay. I'll leave it there. Thank you so much.

Okay.

Daniel Barel: Thank you.

I'll leave it there. Thank you so much.

Operator 2: Thank you. We will now take the next question. The next question comes from the line of Andres Sheppard from Cantor Fitzgerald. Please go ahead. Your line is open.

Operator: Thank you. We will now take the next question. The next question comes from the line of Andres Sheppard from Cantor Fitzgerald. Please go ahead. Your line is open.

Thank you.

We will now take the next question.

And the next question comes from the line of Andrew <unk> from Cantor Fitzgerald. Please go ahead. Your line is open.

Andres Sheppard: Hey, guys. Congrats on the quarter, and thanks for taking my question. David, maybe one for you. Can you give us just a little more details on the shelf registration that was filed? You know, I see that there's no intentions to issue shares under the ATM facility. I'm just wondering, maybe give us some details. You know, obviously, this is a tough environment to raise additional capital. I guess, just how do you plan on using the, you know, and any timing that you could provide around that?

Hey, guys congrats on the quarter and thanks for taking my question.

David maybe one for you.

Can you give us just a little more details on the shelf registration.

Files.

But theres no.

Intention to.

To issue shares under the ATM facility I'm, just wondering maybe give us. Some details. Obviously this is a tough environment to raise additional capital.

And so I guess, just how do you plan on using the.

And any timing that you could provide around that.

David Goldberg: Yeah. No, happy to. Really, the shelf and the ATM is good housekeeping. You know, we've been a public company now for just over a year. As we said in the release, or in the script, no intention to use the ATM today. I'll remind you that, you know, from a P7 perspective, we're fully funded.

Yeah happy to so really the shelf and the ATM is good housekeeping.

Been a public company now for just over a year.

As we said in the release.

No intention to use the ATM today.

And remind remind you that from a from a <unk> perspective, we are fully funded.

Andres Sheppard: Got it. Okay. That's helpful. Thank you. Maybe as a follow-up, you know, with the integration centers becoming operational first in the UK and then the one in the US next year, are there any risks to the 10,000 platforms per year capacity, just given the continued supply chain disruptions? I'm wondering if you see any potential hiccups there. Thank you.

Got it Okay. That's helpful. Thank you and then maybe as a follow up.

With the integration centers, becoming operational person in the U K and then the one in.

The U S next year.

Are there any.

Risks.

10000.

Platforms per year capacity, just given the continued supply chain disruptions I'm wondering if there's.

If you see any potential hiccups there. Thank you.

Daniel Barel: No, actually. We are on track with everything coming online, and we don't expect any hiccups to get to 10,000 vehicle sets by the end of the year and double that next year. We reaffirm everything we said on production.

No actually we are on track.

With everything coming online and we don't expect any hiccups.

To get to 10000 vehicles by the end of the year.

Double that next year.

We reaffirm the.

We said on production.

Andres Sheppard: Wonderful. Okay. Thank you very much, Daniel. Congrats again on the quarter. I'll pass it on. Thank you.

Wonderful Okay. Thank you very much Daniel Congrats again on the quarter I'll pass it on thank you. Thank you so much.

Daniel Barel: Thank you so much.

Operator 2: Thank you. We will now take the next question. Please stand by. It comes from the line of Tyler DiMatteo, BTIG. Please go ahead. Your line is open.

Operator: Thank you. We will now take the next question. Please stand by. It comes from the line of Tyler DiMatteo, BTIG. Please go ahead. Your line is open.

Thank you.

We will now take the next question.

And it comes from the line of Tyler <unk>.

Please go ahead your line is open.

Tyler DiMatteo: Hi, everybody, and good afternoon. Thanks for taking the question. I just have a bigger picture macro question here. We have this two-pronged approach, right? Where we're supplying the chassis to Morgan Olson, and then we have the P7, which is our own integrated vehicle. Can you just kind of compare and contrast those strategies and how you see them really evolving and working together over the next couple of years, trying to get a sense of what that really is gonna look like?

Tyler DiMatteo: Hi everybody, and good afternoon. Thanks for taking the question. I just have a bigger picture macro question here. We have this two-pronged approach, right? Where we're supplying the chassis to Morgan Olson, and then we have the P7, which is our own integrated vehicle. Can you just kind of compare and contrast those strategies and how you see them really evolving and working together over the next couple of years, trying to get a sense of what that really is gonna look like?

Hi, everybody and good afternoon. Thanks for taking the question. So I just have a bigger picture macro question here. So we have this two pronged approach right, where we're supplying the SaaS system Morgan Olson.

The <unk> seven which is our own integrated vehicle can you just kind of compare and contrast, those strategies and how you see them really evolving and working together over the next couple of years trying to get a sense of what that really is going to look like.

Daniel Barel: Sure. Let me try answer that. In general, we're targeting the two largest segments in commercial vehicles, right? Class 3 and Class 5. The difference in those vehicles is quite major because they're not only built differently, they serve different needs. Some of our customers might have a mix of them, but they're using it differently. I think looking at it in a holistic way and a more macro way is the right way to look at it in a sense that, you know, there's a path to bring a product to the market. You know, we've talked about the event in Detroit a couple of weeks ago, and you know, where we've done customer demos with leading fleets that have been very positive, right?

Sure.

Let me try to answer that.

In General you were targeting the two largest.

Segments in commercial vehicles, right class III and class five.

The.

The difference in those vehicles.

Quite major because they're not only build differently they serve different needs and some of our key.

Customers might have a mix of them, but they're using a differently.

And I think looking at in a holistic way and a more microwave.

Is the right way to look at it in a sense that.

There is a path to bring a product to the market.

So we've talked about the event in Detroit, a couple of weeks ago and.

Where we've done customer demo with leading fleets that have been very positive and those customers are spending time and money on testing our vehicle.

Daniel Barel: Those customers are spending time and money on testing our vehicles. You know, some of them, as some of you saw, actually shared publicly what they think about those trials and the relationships, and we've been working with them for a while. Now, as I mentioned earlier, some of those fleets and other companies and owners have been part of the development and design stages, which is very important when you create a brand-new vehicle, taking their needs and voice of the customers. I think this is what one of the key factors that we've managed to get that positive reaction from the event. Now, the next phase in bringing products to the market, in most cases after that demos, is deploying test fleets.

And.

Some of them.

As some of you saw actually share it publicly.

While they think about those trials in the relationship.

<unk>.

And we've been working with them for a while now.

As I mentioned earlier some of those fleets.

And.

And now the company that have.

<unk> had been part of the development and design stages, which is very important when you create a brand new vehicle, taking their needs and voice of the customer.

And I think this is what one of the key factors that.

We've managed to get that positive reactions from David.

The next phase in bringing products to the market.

In most cases after that demo.

Is deploying test fleets.

Daniel Barel: Since we're working with, you know, literally the largest fleets in North America and Europe, the timing of the testing phase is customer dependent. However, once testing phase is complete, we will become an approved supplier and participate in the electrification of their fleet and benefit from significant recurring revenue. This is relevant for both Proxima and P7-B. Now, if you look at Class 3 and Class 5, we see around 750,000 commercial trucks in Class 3 and 5 that are relevant for P7, and they all need to electrify. You know, although we're not the only one in this race, from speaking to customers, there is a lot of white space.

And since we're working with.

Literally the largest fleets in North America, and Europe , the timing of the testing phase is customer dependent.

However, once testing phase is complete.

We will become an approved supplier and participate in.

In the electrification of their fleet.

And benefit from significant recurring revenue.

And this is relevant for both Proxima MP 17.

Now if you look at class III and class five we see around 750000 commercial trucks and class III and <unk> that are relevant for piece of it and they all need to electrify.

And although we're not the only one.

And in this race.

From speaking to customers there is a lot of white space.

Daniel Barel: I think, you know, the path that we're laying towards getting those both Proxima Powered by REE and P7-B to market and to customers is really, I mean, detailed and straightforward.

No.

I think.

The path that we're laying.

Towards getting those both proxima powered by <unk> and <unk> to market and to cross.

Really detailed and straightforward.

Tyler DiMatteo: Okay, great. Daniel, just one follow-up. When you say the 750,000 for Class 3 and 5, that's Europe and North America, correct?

Tyler DiMatteo: Okay great. Daniel, just one follow-up. When you say the 750,000 for Class 3 and 5, that's Europe and North America, correct?

Okay, Great and then just one follow up when you say 750 <unk>.

For class III, and <unk>, Europe , and North America correct, yes.

Daniel Barel: Yes, correct.

Tyler DiMatteo: Okay, perfect. If I could just get one more in here. This may be a question for Josh. As we think about the integration centers coming online, I know you said in the past it's kind of a template model once one's up and running and you work out the kinks. But I'm trying to get a sense of just how much more quickly can we accelerate the development of one of these facilities and kind of get it up and running in terms of bringing capacity online?

Yes, correct.

Okay perfect.

And then if I could just get one more in here so and this maybe a question for Josh as we think about the integration that is coming online I know you said in the past, it's kind of a template model. Once one is up and running and you work out the kinks, but I'm trying to get a sense of just how more quickly can we accelerate that.

One of these facilities and kind of get it up and running in terms of bringing capacity online.

Josh Tech: Yeah, it's a good question. Realistically, we say sub 12 months, you know, 10 to 12 months we can do it. The real advantage is not only because the robotic cells that we have done are constantly being updated and changed from lessons learned. You know, basically it becomes for us almost an off-the-shelf product because we validated it and we just order more and scale those accordingly. The more important part is because we have the CapEx light model, the equipment itself, you know, in terms of its industrialized equipment, of course, robots, you know, and all the safety guarding and things like that, but it's not large equipment like presses and things like that, where we have to do custom infrastructure. For example, we don't have to do pits or things like that on the floor.

Yes, it's a good question so.

Realistically, we say sub 12 months 10 to 12 months you can do it the real advantage is not only because the robotic cells that we have done are constantly being updated and changed from lessons learned.

It becomes for us almost an off the shelf product because we validated it and we just order more and scale those accordingly.

The more important part is because we have a capex light model the equipment itself in terms of its industrial equipment of course robots.

And all the safety guarding and things like that but it's not large equipment like presses and things like that where we have to do custom infrastructure. For example, we don't have to do picks are things like on the floor. So we.

Josh Tech: We can use standard distribution type buildings. Even if there's no brownfield space available, even a greenfield tilt-up building can be done very quickly, right? It's like, as you can see, we're doing in Austin, the building is already complete. That whole advantage of keeping it CapEx light not only helps with the entire supply chain, but it also helps with the ability to bring up the infrastructure extremely quickly if we need to.

Can use standard distribution type buildings. So even if it's if there is no brownfield space available even a greenfield tilt up building can be done very quickly right. So as you can.

We are doing in Austin and the building is already complete.

So that whole advantage of keeping it capex light not only helps with the entire supply chain.

It helps with the ability to bring up the infrastructure extremely quickly we need to.

David Goldberg: Okay, great. Thanks guys. Really appreciate the time. I'll turn it back to the queue here.

Okay. Great. Thanks, guys really appreciate the time I'll turn it back to the queue.

Daniel Barel: Thank you.

Operator 2: Thank you. We will now take the next question. It comes from the line of Jeff Osborne from Cowen and Company. Please go ahead. Your line is open.

Operator: Thank you. We will now take the next question. It comes from the line of Jeff Osborne from Cowen and Company. Please go ahead. Your line is open.

Thank you.

We will now take the next question.

And it comes from the line of Jeff Osborne from Cowen and company. Please go ahead. Your line is open.

Jeff Osborne: Yeah, good afternoon, Daniel. A couple questions on my end. I was wondering if you could give us a sense of perspective of how many test units for class 3 and 5 you'll be producing in H2 that people will be having out on the roads late this year and early next year.

Jeffrey Osborne: Yeah, good afternoon, Daniel. A couple questions on my end. I was wondering if you could give us a sense of perspective of how many test units for class 3 and 5 you'll be producing in H2 that people will be having out on the roads late this year and early next year.

Yeah. Good afternoon, Daniela couple of questions on my end I was wondering if you could give us a sense of perspective of how many test units for class III and five you'll be producing in the second half of the year that people will be having out on the roads late this year and early next year.

Daniel Barel: Yeah. We are currently running a fleet of P7-Bs. We intend to deploy test fleets, I think in the next few months for multiple customers. Each customer test fleet is naturally customer dependent. Some of them are larger than the others. The reason is that the idea is not to only test the vehicle itself, but to actually test how vehicles powered by REE fit into the fleet itself, fit into the infrastructure, what's the feedback from drivers on day-to-day routines, et cetera. The size of those fleets is mainly customer dependent. The goal for each of those fleets, however, is the same, which is proving the advantages and capabilities of those vehicles in order to allow for scale adaptation later on.

Yes, we are.

Our currently running a fleet.

<unk>.

And we intend.

Sure.

To deploy test fleet.

I think.

In the next few months.

For multiple customers.

The.

Each.

Each customer test fleet is naturally customer dependent and some of them.

Our larger than.

And this is.

And the reason is that the idea is not only test the vehicle.

Itself better actually.

How can vehicles powered by re fit into the fleet itself fit into the infrastructure.

What's the feedback from drivers on day to day routines et cetera, and the size of those fleets.

Mainly customer dependent.

For each of those fleets. However is the same which is proving.

The advantages and capabilities of those vehicles in order to allow for scale adaptation at all.

Jeff Osborne: That makes sense. Just in perspective, in aggregate, would you say that's maybe 20, 30 vehicles in total, or are we talking single digits? Is there any perspective you can put it in just total, not on a per fleet basis?

Jeffrey Osborne: That makes sense. Just in perspective, in aggregate, would you say that's maybe 20, 30 vehicles in total, or are we talking single digits? Is there any perspective you can put it in just total, not on a per fleet basis?

That makes sense just perspective in aggregate would you say, that's maybe 2030 vehicles in total or are we talking single digits is there any perspective, you can put in just.

Total not.

Not on a per fleet basis.

Daniel Barel: We have the capacity to manufacture more than that. It's a matter of the acceptance level of the fleet. In terms of capacity, we can do hundreds and more. The important part is how many a fleet can absorb. Keep in mind that it's not just the vehicle that matters, right? Somebody needs to put the infrastructure to charge it, to maintain it, et cetera. It's more than just providing the vehicles and then having the seat idle without use, which of course beats the sense of doing so.

We have the capacity to manufacture more than that.

It's a matter of the.

The acceptance level of the fleet.

In terms of capacity, we can we can do a 100 and more.

The important part is how many fleets can absorb keep in mind that it's not just the reason I'm, saying that it's not just a vehicle that math is right somebody needs to put the infrastructure to charge it to.

To maintain it et cetera, it's more than just providing the vehicles and then having that sit idle without used which of course.

Daniel Barel: It's more of how fast we can set up those test fleets with customers that they actually can put drivers in it and actually deliver and go out there and do the work and generate revenue for them, and then they can see how well they behave.

The central thing so so.

It's more of how fast we can set up those.

Test fleets with customers that the accident can put.

Driver, then it and actually deliver and go out there and do the work and generate revenue for them and then they can see how well they've yet.

Jeff Osborne: Got it. For David, I just wanted to maybe a multipart question on the cash. I get it that P7 is fully funded and that spending peaks this year. You know, without getting the specifics on a monthly burn rate, what can you give us a sense of, you know, which quarter or have we already reached the peak of development expenses for P7? It sort of gets back to the question I was trying to ask Daniel, is if you're gonna sink a bunch of capital into developing 40, 50, 100 vehicles to be out, you know, tested without revenue. I'm just trying to get a sense of what the cadence is of OpEx and CapEx for H2 of the year.

Jeffrey Osborne: Got it. For David, I just wanted to maybe a multipart question on the cash. I get it that P7 is fully funded and that spending peaks this year. You know, without getting the specifics on a monthly burn rate, what can you give us a sense of, you know, which quarter or have we already reached the peak of development expenses for P7? It sort of gets back to the question I was trying to ask Daniel, is if you're gonna sink a bunch of capital into developing 40, 50, 100 vehicles to be out, you know, tested without revenue. I'm just trying to get a sense of what the cadence is of OpEx and CapEx for H2 of the year.

Got it and then for David I, just wanted to maybe a multi part question on the cash so I get it that piece of it is fully funded and debt.

Spending peaks this year.

Without getting specifics on a monthly burn rate.

Can you give us a sense of which quarter.

We already reached the peak of development expenses for <unk>, 7% sort of gets back to the question I was trying to ask Daniel is if youre going to see a bunch of capital into developing $40 50 to 100 vehicles to be.

Tested without revenue I'm, just trying to get a sense of what the cadence of Opex and Capex for the second half of the year.

David Goldberg: Got it. You know, right, we remain disciplined. When you think about the guidance that we gave to the market earlier this year, we're still very much on track in that regard, and that includes the testing activities that Daniel mentioned. You know, I don't think we're giving quarterly guidance. I think that I mean, again, I think we're just really on track for that total number for the end of the year. I think that's the best way to answer the question.

Got it so so.

We remain disciplined and so when you think about the guidance that we gave to the market earlier. This year, we're still very much on track in that regard and that includes.

The the testing activities Daniel.

I've mentioned.

I don't think we're giving quarterly guidance I think thats fair.

I mean again I think we're just really on track for that that total number for the end of the year.

I think thats the best way to answer the question.

Jeff Osborne: Got it. That's all I had. Thank you.

Jeffrey Osborne: Got it. That's all I had. Thank you.

Got it that's all I had thank you.

Daniel Barel: Thank you.

Operator 2: Thank you. We will now take the next question. Please stand by. The next question comes from the line of Colin Langan from Wells Fargo. Please go ahead. Your line is open.

Operator: Thank you. We will now take the next question. Please stand by. The next question comes from the line of Colin Langan from Wells Fargo. Please go ahead. Your line is open.

Thank you.

We will now take the next question.

Please standby.

And the next question comes from the line of Colin Langan from Wells Fargo. Please go ahead. Your line is open.

Colin Langan: Oh, great. Thanks for taking my questions. Just following up on the last question. The full year guidance, I think is $130 million to $150 million. I believe you're trending below that. I think it's like $55 million year to date. That would imply, though, a step up in the H2 and what would be driving that? Is that the more prototypes are expected?

Oh, great. Thanks for taking my questions.

Just following up on the last question. So the full year guidance I think it's 130 to 150, I believe youre trending below that if things like $55 million year to date.

That would imply though a step up in the second half and what would be driving that is that the more prototypes are expected.

David Goldberg: Yeah. Okay. I mean, it does. Yeah, the math does imply a bit of a step-up. Again, I think I wanna stress that we're, you know, very much on track. It's gonna be, you know, again. We're not giving specific guidance within the range, but I would say closer to the midpoint. Yes, like, if you think about it, we've already started some of the spending to build the test fleets. That hasn't hit the P&L, but some of the cash has already gone out the door. Remember that as, you know, as we're engaging with customers, some of those test fleets will actually generate revenue as well.

Yes, okay. So there would be.

It does yes, it does imply a bit of a step up but again I think I want to stress that we are.

Very much on track so it's going to be again, we're not giving specific guidance within the range.

But.

I would take closer to the midpoint.

And then yes like if you think about it we've already started some of the spending.

To build the cast fleets that hasnt hit the P&L, but some of the cash is already gone out the door.

And then also remember that as you know.

As we're engaging with customers some of those testing to actually generate revenue as well.

Colin Langan: Okay. How should we think about it? You just demoed the vehicles, so you should get in the next three months or so orders for prototypes for test fleets, and then in six months, we would get like firm orders. Would that be the sorta cadence we should be expecting in terms of how this would come in?

Okay.

How should we think about it you just have other vehicles. So you should get in the next three months or so.

Orders for prototypes for test fleets and then.

In six months, we would get like firm orders would that be.

Sort of cadence, we should be expecting in terms of how this would come in.

Daniel Barel: Yeah, I mean, roughly it sounds reasonable. The idea is this, right? There's been very positive reactions. Some of you have been there and seen some. There's been very positive reaction from customers and fleet. Now what we need to do is, you know, negotiate commercial agreements and deploy test fleets. Like David said, we expect to generate revenue from those test fleets because it's part of the adaptation of commercial vehicles, right? We don't do it for free. Having said that, I think what's important to emphasize, and I think I said it on the Investor Day and also on the PR. We reiterate that on the PR, we intend to announce only firm orders. We've done this before and looking forward as well.

Yes.

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I did this right there has been very positive reactions.

Yes.

Been there in <unk>.

It's been a very positive reaction from customers and fleet.

Now what we need to do is.

Negotiate.

Commercial agreements and deploy.

Testing.

And like David said, we expect to generate revenue from those tax rates because it's part of the adaptation of commercial vehicles.

We don't do it for free having said that.

I think what's important to emphasis and I think I've said it in the Investor day and also in the.

Reiterate that on the PR.

We intend to announce one.

The firm orders.

We've done this before and looking forward as well.

Daniel Barel: Basically, orders that we intend to manufacture in the foreseen or you know short future, immediate future and not you know general increase or general plans that might not be firm. I think the cadence is very straightforward. We negotiate terms. We deploy test fleets. Those fleets test those vehicles for different durations of time, depends on who they are. Some test them for a few weeks, some test them for a few months. We move on to adaptation, right, and become an approved supplier and generate recurring revenue from recurring purchase orders.

So basically.

Or things that we intend to manufacture.

Foreseen.

Okay.

Short future.

Future and not.

General and create a general plan that might be.

Sure.

So I think the cadence is very straightforward.

Negotiate terms.

Deploy.

Test States those fleet test those vehicles for different durations of time it depends on who they are test them for.

Few weeks some testing for a few months.

And then we move on to the patient and become.

An approved supplier and generate recurring revenue from recurring purchase hold them.

Colin Langan: When you said you announced firm orders, that would include like an order for prototypes and test fleet, right? Or

Colin Langan: When you said you announced firm orders, that would include like an order for prototypes and test fleet, right? Or.

Okay.

And when you said you announced firm orders that would include like order for prototypes and tests fleet right.

Daniel Barel: Yeah. Orders means things that we've been paid for and we go and produce now.

Yes.

Are those things that we are being paid for and we go and produce now.

Colin Langan: You mentioned, It's not only buying the vans, it's also you need to actually set up the infrastructure. Who actually would take care of putting in the charging stations? You know, have you announced the partners to do the servicing once these vehicles are in operation?

And you mentioned.

You need.

Not only buying the vans itself that you need to actually set up the infrastructure, so who actually would take care of putting in the charging stations and then.

Have you announced the partners to do the servicing once these vehicles are in operation.

Daniel Barel: Yeah, that's a really good question, so thank you for it. Unfortunately, the answer, it depends on the customer. For some of the customers, we provide a full turnkey solution. We can provide everything from charging infrastructure. Also, we have partners for financing, for that charging infrastructure and so on and so forth, and of course, vehicles and nationwide service locations and so on and so forth. For other fleets or other customers, they like to do everything in-house themselves. They have their own suppliers for charging infrastructure maintenance, where we will give them the training and of course, REEcorners and spare parts, but they'll do the maintenance for that themselves. We're able to provide both. We've seen a mix, a healthy mix of some that want one way and some that want the other.

Yes, that's a really good question. Thanks for.

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Unfortunately, it depends on the customer so for some of the customers. We provide a full turnkey solution. We can provide everything from charging also we we have partners for financing for the charging infrastructure and so forth and of course vehicle, then and nationwide service locations and so forth.

For other fleets or are the customers they like to do everything in house themselves. So they have their own suppliers for charging infrastructure maintenance, where we will give them the training and of course, Corning and spare parts, but they will do their maintenance for example themselves. So.

We are able to provide both.

And we've seen a mix a healthy mix of bundled one one way and from that one.

Colin Langan: The partner, are you gonna build servicing stations or you have a strategic partner that would take care of that for you?

And the partner or you're going to build servicing stations or you have a strategic partner that would take care of that for you.

Daniel Barel: We have partnered with a few household names that have given us access to thousands of service locations across Europe and the US.

We have partnered with a few.

Household names that.

Have given us access to thousands of service locations across Europe , and the U S.

Colin Langan: Okay. All right. Thanks for taking my questions.

Okay, all right. Thanks for taking my questions.

Daniel Barel: Absolutely. Thank you.

Okay. Thank you.

Operator 2: Thank you. There are no more questions at this time. I would like to hand back over to management for final remarks.

Operator: Thank you. There are no more questions at this time. I would like to hand back over to management for final remarks.

Yes.

Thank you.

There are no more questions at this time I would like to hand back over to management for final remarks.

Okay.

Daniel Barel: Great. Thank you all for joining us today. We're always available to answer any question you might have, and we'll keep you posted of events, when you can experience our game-changing vehicles for yourself. Lastly, I would like to take this opportunity and thank team REE for dedication and focused execution, which allows us to keep meeting our targets even in the current volatile macro environment as we advance forward a more sustainable carbon-neutral world, including a fully electric vehicle future. Thank you all so much.

Great. So thank you all for joining us today.

It is available to answer any question you might have and we will keep you posted of events.

When you can experience our game changing vehicles put yourself lastly, I would like to take this opportunity and thank Tim Murray for dedication and focused execution, which allows us to keep meeting our targets even in the current volatile macro environment as we advance forward and more sustainable carbon neutral would including.

Fully electric vehicle future. Thank you all so much.

Operator 2: That does conclude our conference for today. Thank you for participating. You may all disconnect.

Operator: That does conclude our conference for today. Thank you for participating. You may all disconnect.

That does conclude our conference for today. Thank you for participating you may own disconnect.

Operator 1: Shortly. To raise your hand during Q&A, you can dial star one one.

Sure.

Raise your hand during Q&A you can dial one one.

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