$REE REE Automotive Q3 2024 Earnings Conference Call

Welcome everyone, and thank you for joining us today. We are pleased to report Q3 2024 is yet another strong quarter across the board, with accelerating demand for REE's product line and technology from fleets and OEMs, along with the start of production of our flagship P7 truck. This milestone is supported by our strategic production partner, Motherson, and is backed by improved liquidity and strong confidence from top-tier commercial banks. Having more than doubled our reservation value from $60 million to almost $140 million in one quarter, while improving our liquidity by 47%, is a testament to our continued devotion to delivering strong results in a fiscally disciplined manner. Before we dive in, I would like to share what we are seeing in the market and how it affects REE. We are seeing more and more fleets solving critical charging challenges as they shift towards reserving significant production capacity for mature and scalable EV solutions that they believe have significant technological advantages, capable of addressing their operational needs while offering an attractive total cost of ownership. Our successful demo program enabled fleets to experience firsthand the benefits of the P7 lineup and X-by-wire technology. Now, with our collaboration with Motherson underway, we believe those fleets feel more confident in our ability to support their future growth demand. Amidst fierce competition between legacy auto manufacturers and new Chinese OEMs, we're seeing more legacy OEMs looking to expedite their transition to software-defined vehicles (SDV) architectures. Collaborating with software-defined vehicle technology pioneers allows these automakers to protect and regain market share by offering customers more technologically advanced vehicles with better total cost of ownership and performance, while being able to offer lucrative software services. REE's philosophy of 'complete, not compete' allows legacy OEMs to access our leading SDV technology, which they can integrate into their current and future product lines across multiple vehicle categories. We are seeing growing interest from OEMs that are interested in evaluating REE's SDV technology, with some actively evaluating our REEcorner and X-by-wire technology and our software-as-a-service offering. I believe this will pave the path for REE to generate software-related revenue and improved margins in the mid and long term. In recent years, we have also witnessed an automotive evolution via a renewed focus on autonomous driving. The commercial vehicle market is suffering from severe driver shortage, and autonomy is a compelling solution for fleets and operators. However, fleets and operators lack a safe, mature, and reliable vehicle architecture to support autonomous driving. Our successful experience with leading AD programs such as Airbus underscores our high standards for safety and performance. We believe this positions us as a leader in self-driving technology at a transformational time for REE's X-by-wire technology, with growing interest from leading AD partners. On the operational side, I am very proud of Team REE having officially reached the start of production for our P7 vehicles on time. We are on track to start selling Power by REE vehicles in North America in the first half of next year. This gives us confidence in reaffirming our bill of material break-even target in the second half of 2025 with a production of a few hundred vehicles. This is an important goal rarely achieved in the auto industry, and we believe our advantaged technology and business model will allow us to meet it. We had a strong quarter, and we stand today stronger than ever, ready to deliver what we believe is the best product offering in the commercial vehicle space as we face growing demand for our technology, with production on the way and sufficient capital secured to execute on our business plan. With that, I'll be turning the call over to Josh for operations, Tali for business, and of course, Kai for financials. Josh?

Thank you, Kai. It's really great to have you back. We had another very strong quarter during which we achieved major milestones, from accelerating demand and improved liquidity to the start of production. We are getting closer to generating meaningful revenue, and we see a path towards software-based revenue from OEMs and autonomous driving programs. Before opening it up to Q&A, I want to thank the entire REE team for their devotion and dedication. Together, we have accomplished so much during the past few quarters. Finally, I would like to thank our long-term investors who continue to show their support and belief in what we do, providing the resources that enable us to lead this industry. With 2025 just around the corner, we are excited to start this new chapter in the REE story. We feel highly optimistic heading into the new year. With that, operator, please open the line for questions.

Sure, and of course, good morning, and thank you for the question. This is Daniel. So yeah, I agree with what you said in part. We see a very big surge in reservations, and I think one, it's like you mentioned, it's linked to the fact that now with our announced partnership with Motherson and Roush, as we said earlier, customers are feeling more secure and comfortable placing significant reservations with us. And I think this is one of the things we're seeing now. And it's also important to mention that a significant scale-up of more than 200% was done in one quarter. So to your question, yes, naturally, we're speaking to current customers and prospective customers about additional orders and securing production capacity going forward. Currently, in terms of how the reservation book looks like, we're talking about 30 different customers, among which we've shared some of those names that people already know and are in the public domain, leaders in the industry, including very large fleets. And I believe we will continue to see more reservations piling up as we move forward.

I think it's a great question for Josh. Josh?

Yeah, I think we've seen very strong support from the financial side, both when raising equity and recently with the credit facilities that we've secured. And I think it's a very good testament to the belief and confidence that the financial sector has in our business model, technology, and generally in us. And I think it's important to recognize it because it's not been straightforward in the past few years to be able to do things like that, especially for technology companies that are kicking off production. So we're very, very happy with that. Going forward, in terms of burn, I think Kai can give some more detail.

Thank you.

Yes, that is correct. So basically, the way we look at it is what we're seeing now with the surge in reservations, we're seeing fleets and other customers trying to compete on securing priority capacity as they move forward and look at their electrification plans and want to secure enough capacity. So we're seeing competition over priority slots. And naturally, as we touched maybe earlier, and also this point segues to that, is the fact that this is happening now is because one, our ability to deliver products at scale and at quality because of our partnership with Motherson, but not less importantly, what you just mentioned, our ability to service them post-sale. So REE's service network, which is a dealer-based, is one of the largest in North America with 80 locations that customers can actually service their vehicles, and they also serve as selling points for dealers to increase the reservations.

Yeah, we've been getting that question recently, naturally quite a bit. And we think there is going to be minimal impact, if any, because of our product offers great TCO for our fleets, right, total cost of ownership, as well as our leading software-defined vehicle (SDV) technology, which is very appealing to fleets and other OEMs and generates significant operational efficiency. So we think that we have a really good, strong product in the market. So that's one. I think to add to that, we're also seeing that tax incentives play less of a role than the overall market demand, especially in commercial vehicles, where incentives are very different than the private vehicle incentives, both in size, structures, and origin. But I think that I don't want to speculate any further on legislation that has not yet been finalized.

We started production, so we're producing trucks. So we're past that point. We're now with Motherson, we're naturally looking to optimize and improve on all factors, but maybe Josh can add some more color on that.

Thank you so much. Thank you.

Thank you, operator, and thank you everybody for joining us today. We're really, really excited about this quarter, and I'm sure, like we said before, you can hear it in our voices. And we are very optimistic heading into the new year. So we're looking forward to more updates that we'll be able to give. And thank you again, and have a great day.