NASDAQ:REE REE Automotive Q2 2023 Earnings Report $2.76 -0.08 (-2.82%) Closing price 04:00 PM EasternExtended Trading$2.76 0.00 (0.00%) As of 04:05 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast REE Automotive EPS ResultsActual EPS-$2.10Consensus EPS -$2.40Beat/MissBeat by +$0.30One Year Ago EPS-$3.00REE Automotive Revenue ResultsActual Revenue$0.94 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AREE Automotive Announcement DetailsQuarterQ2 2023Date8/29/2023TimeBefore Market OpensConference Call DateTuesday, August 29, 2023Conference Call Time8:30AM ETUpcoming EarningsREE Automotive's Q4 2024 earnings is scheduled for Thursday, May 29, 2025Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Earnings HistoryCompany ProfilePowered by REE Automotive Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 29, 2023 ShareLink copied to clipboard.There are 10 speakers on the call. Operator00:00:00Good day, and thank you for standing by. Welcome to the Rii Automotive Q2 2023 Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kamal Hamid, Vice President of Investor Relations. Operator00:00:40Please go ahead. Speaker 100:00:42Thank you, operator, and thank you all for joining our Q2 2023 conference call. We hope that you have seen our press release and shareholder letter issued earlier this morning at investors. Re. Auto. If you haven't, I encourage you to review it as it has additional insights into the topics I would like to remind you that today's call may include forward looking statements. Speaker 100:01:06Any 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 anticipated by such forward looking statements for a variety of reasons, many of which are beyond our Please refer to the company's Form 20 F filed on March 28, 2023 with the Securities and Exchange Commission, which identifies principal risks and uncertainties that could affect our business, prospects and future results. We assume no obligation to publicly update any forward looking statements except as required by law. At this point, I'll turn the call over to Daniel Borrell, our CEO and Co Founder. Speaker 200:01:54Thank you, Kamal. Hello, everybody, and thank you for joining us today. Halfway through 2023, we continue to make steady progress and we remain disciplined, both operationally and financially, as we focus on our execution of our P7 program. This morning, we announced that we have achieved one of our most important technology to date following months of testing. We confirm that it is feasible for our X by Wire system to pass The required FMV Assess Certification, a key step in our roadmap to delivering certified vehicles. Speaker 200:02:33Being the first to market with full x by wire system sets a high bar. So in order to prove feasibility, we contracted Horiba Maira, A world leader in testing to perform internal tests, modeling certain FMVSS certification requirements. We have already started to build our certification intent P7 fleet and are on track to initiate the next phase of the full certification process of P-seventy. We have progressed with the certification plan and are targeting delivery of our first Our confidence in our vehicles, combined with our discussions with dealers and fleet customers, make us confident in our business plan, which claims to reach cumulative sales of $1,000,000,000 over 2024 to 2026 by executing on our production plan and shared in our section of the letter. As we continue to build out our dealer network, which now covers the entire U. Speaker 200:03:45S. And our recent expansion into Canada. We see demand for our commercial electric trucks coming from both incentivized and non incentivized states, as charging infrastructures continues to become more accessible to fleet owners. In addition, in commercial trucking industry, after sales service is key and we also see demand growth from our ability to simplify service with our quick Recorner swap, with fleet and dealers only having to keep a single Service part in their inventory, the Recorner, which intends to increase uptime of our trucks And lower the cost of customers' inventory and its costs of management. As a customer centric company, We listened to our current and potential customers to expand our P7 offering with full vehicle solutions, including boxes, service bodies and platform bodies. Speaker 200:04:43Therefore, as we shared yesterday, we are growing our collaboration with market leading work truck body manufacturers Such as Nephi's, Morgan Truckbody and others, all planned to be available in 2024. We have already delivered our first P7S prototype to one of our existing U. S. Fleet customers for their initial internal Close track test with the help of our on-site and remote support team as we jointly develop a complete electric road truck that will pave the way for potential future purchases. The P7 lineup uses software based x by wire system, which will use over the air capabilities that allow for continuous vehicle improvements and update, continuous rolling out of new features and options and remote diagnostics, often negating the need to return to a service center to future improve off time. Speaker 200:05:43Our system architecture, coupled with data as a service capabilities, is intended to allow customers to manage fleet performance, gather any data required for incentive compliance and forecast and predict maintenance. We ended the Q2 with liquidity of $105,000,000 comprised of cash, cash equivalents and short term investments. As part of our efforts to secure 2024 capital need in advance, after the end of Q2, We have established a $35,000,000 ATM program and secured a bank facility of $15,000,000 Before we open it up for questions, I want to stress that we are aware of the market condition in general And the EV Industry in particular. We see strong demand for electric truck driven by both organic demand as well as the federal state incentive throughout the U. S. Speaker 200:06:42And we understand our customers and the market expect us to deliver. We are laser focused on bringing the best commercial EV to the market, and we have the right team and technology. We believe our stakeholders, customers and investors will see long term value creation because of our unique technology, IP, Operational Focus and Disciplined Approach. Operator, please open the line for questions. And I'm going to be joined by our Chief Financial Officer, Jeroen Zatzmann our Chief Business Officer, Tali Millen And Josh Steck, our Chief Operating Officer. Operator00:07:24Thank you. We will now take the first question from the line of Michael Slitsky from D. A. Davidson and Company. Please go ahead. Speaker 300:08:00Good morning and thanks for taking my question. Can you hear me okay? Speaker 200:08:09Yes, we can. Speaker 300:08:11Are you there? Speaker 400:08:12Yes, we can hear you fine, Mike. Speaker 300:08:15Great. Thank you. Speaker 500:08:17Can you maybe take Speaker 300:08:18us behind the scenes of the external testing that you did To get to the point where the external firm said that you're ready for FMBSS. I guess I would like to know if that was a long process. Was it very Ritu, did you just send in the chassis and you got back a nice report card? I'm curious to see whether that was very expensive and very long process or Speaker 200:08:48I'm not sure I heard the full question. Sorry, Martin, the bad the line is a little bit can you repeat, please? Yes. Speaker 300:09:00Is that a little bit better? Sorry about that. I guess I was wondering if you could take us behind the scenes of the external testing to get The P7 chassis to the FMVSS, kind of the external third party approval. I guess I'm curious whether that was an iterative process that took a very long time, Along with unexpected or did you just kind of sit in a chassis and get back a pretty clean report card from a very early stage? Speaker 200:09:29Sure. Josh, do you want to take this? Speaker 400:09:31Yes. I guess, Meeve, I'll take that one. So basically to sum it up, so the P7 lineup is going to be the 1st BioWire commercial truck out there and our X BioWire technology is what makes us unique Therefore, we've been testing these core systems for months, okay. As we shared today, we've also contracted a third party to do the tests. So the FMBSS standards are generally they're design neutral. Speaker 400:09:54So different vehicle and vehicle technology designs can be certified if those minimum requirements are met. But some of those standards have test procedures that are written with a traditional vehicle mindset in mind. So the certification feasibility testing showed that the RE Architecture could be tested according to the applicable FMBSS standards. So for example, we have the FMBSS 105 sets performance requirements Our ReCorner comprehensive architecture goes beyond Those requirements and includes multiple redundancies that allow for sale operations. So for example, if brakes on the wheel fails, The other corners will allow you to continue to drive safe drive the P7 vehicle safely. Speaker 400:10:39So these feasibility testing also provided a lot of other data that we refine and As we tune our calibrations ahead of what we expect our full certification by the end of the year. Speaker 300:10:49Okay. Okay, great. I want to also ask you didn't mention in your prepared remarks, Daniel, but some of the things that were in the press release about your sales outlook for, I think it was 2024 to 2026. Obviously, there's some ramp up in there, obviously, between 2024 and 2026. But could you maybe kind of give us some kind of breakdown of the cadence On the $1,000,000,000 you plan to sit down on the road there in sales, how much might be In the early stages in 2024 at the very least? Speaker 400:11:26I guess, David, I can take that one too as well. So to answer the question, for Phase 1, we plan to produce from the UK The minimum number of pilot vehicles that we require to get customers feedback before we begin mass production in the States. This is intentional from our side because the cost reduction towards breakeven gross margin per unit level is expected to start only after we have our production tooling in place. So as we build confidence through the positive feedback from the customers over the next few months, we initiated our $15,000,000 production tooling purchase program in July of 2023. So This was earlier than we planned. Speaker 400:12:01We believe this will allow us to shorten our Phase 1 and enter Phase 2 by Q4 of 2024. So Phase 2 is currently planned to commence in Q4 of 2024, which is expected to be a total production plan of up to 300 vehicles During that calendar year, ramping up to a low 1,000 in 2025 and then mid 1,000 in 2026. For chassis manufacturing and final vehicle builds in Phase 2, we plan to use a contract manufacturer located in the States and we'll give you guys more information on that once we have Selected, that said contract manufacturer. Speaker 300:12:36Just to be clear then, the 2024 vehicles that are coming out are going to be For the TiO4 is still low volume and they'll be and all of them will be in the UK shipped over here, Speaker 400:12:49Correct. The first half to first three quarters, yes, those will be what we said, those will be the pilot vehicles. And then by Q4, we will start the ramp up the remaining, as we said, up to 300 from the U. S. Speaker 300:13:04Okay. Okay. I'll give everyone a chance. Thanks so much for the time. Thank you. Operator00:13:11Thank you. We will now take the next question from the line of Jeff Osborne from TD Cowen. Please go ahead. Your line is open. Speaker 600:13:34Great. Thank you. Thanks for all the detail in the letter. Maybe just a few follow-up questions on some of the points raised. Daniel, I was wondering if you could walk us through the $50,000,000 Investment that was flagged. Speaker 600:13:48I think Josh just mentioned that you had a $50,000,000 tooling purchase in July last month. Was that Part of the $50,000,000 or is the $50,000,000 still to come more next year? I'm just trying to Speaker 500:13:59get a sense of the Speaker 600:14:00cadence and associated cash burn. Speaker 200:14:04Yes. So these are 2 different things, I think, if I heard you right. So we initiated Pastel, the $15,000,000 tooling program ahead of schedule, because we are we have higher confidence Ahead of plan. So I think all in all good news there and that would allow us to kick off the tooling program. We're expected, as Joss said, to enter Phase 2, which is production tooling and Scale in the second half of next year as we prepare the ramp up for that. Speaker 200:14:50On burner, I can probably Aron can add more. Speaker 500:14:53So most of the $50,000,000 have not been spent yet, But it's part of our business plan and we share information about the amount of cash that we have right now and the amount of cash that we need The next 2 years, we can include in there. We secured $50,000,000 loan from an Israeli bank that this will fully cover the 2 d spend. Speaker 600:15:18So the cumulative cash burn CapEx is less than $105,000,000 over the next 2 years. That what you're trying to say? And then if you add the ATM and the $15,000,000 Speaker 500:15:29What I'm trying to say that the $105,000,000 that we have right now Last additional ATM and the loan security is well enough for the next year. We still need to cover year 20 25 due to working capital. Therefore, we need to raise another $50,000,000 for year 20 25. Speaker 600:15:52Got it. And then the I apologize for following up on Mike's questions with Josh, but You mentioned pilot vehicles. So I'm just trying to get a sense of the map of the dealers is impressive. You have pilot vehicles being produced and then at some point in time Late next year up to 300 vehicles. At what point in time will there be vehicles for revenue? Speaker 600:16:15Is that Q4 of next year? Or will there be revenue associated with any pilot vehicles before that? Speaker 200:16:23I think, yes, Yaron will add more color, Jeff, on that. But I think The quick answer for that is all of our vehicles are for revenue depends on where we recognize them, right? But we're being paid for each of those vehicles that we deliver. The difference between the reason we call them, like Josh said, Pilot vehicles is because they're intended to gather customer feedback in order for us to, if needed, make the relevant Changes before we initiate production tooling because of the cost naturally and time that it takes to change production tooling. And once we are very comfortable with this, we'll kick off the production tooling and go to, Like we said, about 300 by the end of next year and then mid the low 1000s and mid 1000s. Speaker 200:17:18Josh and Yaron, if you want to add. Speaker 500:17:20So we are starting delivering the pilot vehicle by the end of this year. Most of the vehicles that we provide are not pilot vehicles, of course, right. And therefore, all of them will be recognized as revenues. Small amount only on the first part of the year, probably Q1, we still see it as a pilot vehicle. And therefore, We are I think we already gave some guidance about revenue recognition guidance about this specific amount of makeup, but it's really small amount Only for this year and only for Q1 exit. Speaker 600:17:57Sorry for the fall, but so Q4, Q1 you'll have modest Revenue for pilots and then there'll be a lull in Q2, Q3 and then it ramps back up in Q4? Speaker 300:18:05Yes, correct. Speaker 400:18:07And just maybe to add a little color, that's very strategic what we did because why we're calling those pilot vehicles is basically to make sure that our dealer network Has the units they need to get customers and seats and test the vehicle. And that way we're using those feedback before we start the ramp. And as we said, we kicked off the tooling. Key for the ramp isn't just to build trucks, it's to get them where we can start driving towards material margin parity, right. So we want to get the parts down at a lower cost. Speaker 400:18:34So as we start ramping, We're actually coming to bond parity and then driving positive material margin as we ramp, right. So it's very strategic what we did there. Speaker 600:18:44Great. Thank you. Appreciate the detail. Operator00:18:48Thank you. We will now take the next question from the line of Colin Langan from Wells Fargo. Please go ahead. Speaker 700:19:01Great. Thanks for taking my questions. Just to follow-up on the cash flow needs, so I understand. So You have enough cash to get through the end of 2024, but you will need another $50,000,000 is for 2025. And one is that correct, but or you need the cash, but you still have to use the ATM program, so because there's $35,000,000 I think you only used less than $1,000,000 of it. Speaker 700:19:29So does that mean more dilution will be coming as you use that program Through 'twenty five, that will give you $35,000,000 And then on top of that, you go some part before 2025, you need To raise another $50,000,000 So there's 2 pieces. There's $50,000,000 for $25,000,000 and then $35,000,000 Are 34 left on the ATM in terms of sort of dilutive impact? Speaker 500:19:59So I think we published last time that we'll need to raise between $80,000,000 to $100,000,000 in equity or in debt For year 2 2024, year 2 2025. So what we are trying right now is actually to give much more color on that. We are trying to give breakdown between year 2 2024 to year 2 2025. We are saying for year 2 2025, we will need $50,000,000 Which means that for year 2024, the need is less than $50,000,000 It's probably between around $35,000,000 We are going to take this $35,000,000 We can take it by bank loans or by using the ATM. So we have both options. Speaker 500:20:40And this is still what we are doing right now. So already $15,000,000 out of that already been secured. And based on that, we will not need to use the full ATM of $35,000,000 It's our decision based on the stock price how much do you do. Okay. Speaker 700:20:57But still you still will have So the ATM has not been really used yet at this point? Correct. Okay. And then you have 100 and So the 155 orders that so how does that compare to the 300 orders? So it's just the 155 are initial orders that are locked in and then the 300 is The target, once they get the first, you're hoping to get the second. Speaker 700:21:22Is that the logic? Sorry, make sure I'm comparing apples to apples. Speaker 800:21:28Yes, sure. So again, as we are reporting the shareholders letter, the production planning targets is $1,000,000,000 for the years 2024, 2005 and 2006. And the plan is expected to reach production of up to 100 vehicles in 2024 and then low 2025 and mid1000 in 2026. Now we continue to grow our authorized dealers network. We disclosed that we had 1 dealer at the end of last year and now it has grown to 12 dealers currently covering the U. Speaker 800:22:02S. And Canada. In the previous earnings call, although we don't have formal numbers, conversations held with our dealers Exadata, we sold over 50,000 vehicles a year. We generated over $1,000,000,000 and therefore we feel confident in our ability to execute this business plan of ours. Now and this is in addition to the previously announced 3 large fleet customers. Speaker 800:22:28These dealers and fleets, they are committed to electrification and they've already placed these orders of 155 vehicles or P7 vehicles. And this initial order book is similar to the number of initial deliveries by market leaders. And these numbers reflect initial orders and they support the growing pipeline. So we believe that these dealers and fleets could purchase 100 and thousands of units per year and we also continue to see strong demand for the entire P7 product line. Speaker 700:23:06And the 155 orders you have, you get paid when you deliver or do you get paid when they actually deliver it on to a customer since they're Dealers. Speaker 500:23:16They're getting paid when they are delivered. Speaker 700:23:19To the dealership, not to the customer. So they're taking Correct. Speaker 600:23:23Yes. Okay. All right. Speaker 700:23:27Thanks for taking my questions. Operator00:23:30Thank you. We will now take the next question from the line of Andre Sheppard from Cantor Fitzgerald. Please go ahead. Speaker 400:23:45Hi, good morning, everyone. Good afternoon. Congrats on Speaker 900:23:48the quarter and thanks for taking our questions. I was wondering if you could maybe remind us Where ASPs stands, just curious with the inflation and the rise in interest rates, Whether you may have whether you may now expect some differences in your selling prices? Thank you. Speaker 200:24:19Sorry, probably our line. Can you repeat? Sorry, Andreas. Hi, Ben. Speaker 900:24:25Yes, no problem. The question is if you can maybe remind us where you expect the average Selling prices of either the corners or the platforms to be, just wondering if those may have changed given the inflationary environment? Thank you. Speaker 500:24:47So I think we cannot share the exact price that we are selling to the dealers. The only thing that we can share is that we do believe That we can have a better vehicle compared to the others. And therefore, over time, we can increase prices and get Better prices may be addressed, but this is over time. Speaker 200:25:10I'll add on that Our business model take into let's put differently, our business model does not take into consideration Evergreen IRA or any other incentive plan in place, meaning the business plan, prices And margins are built from the bottom up where we believe we have competitive market pricing that are sustainable and also acceptable by the industry also without incentives. And naturally, It's supported by the fact that we see demand for our vehicles both from incentivized and non incentivized So definitely, don't get me wrong way, Ed, the incentives help a lot. But I look at them more as a fire started and not continuous support. Speaker 900:26:09Okay. Thank you. And maybe a different way of asking is, can you give us a sense of What kind of gross margins we might expect for next year or between 2024 In 2026, as we look at that new sales guidance that you've mentioned, just wondering when we Could see positive gross margin. Is that something that you expect from the production of the 300 vehicles in 2024 or perhaps is that more likely in 2025? Thank you. Speaker 500:26:49So we mentioned that we will get to breakeven BOMCOs by the end of next year when we have the 300 vehicles. Going forward from that, when we are having higher production, of course, we have a positive gross margin. And we also mentioned that we'll go to positive EBITDA In year 20 25. So therefore, the gross margin should reflect also the all of the costs that we have in the company. We'll share more information about that And next year. Speaker 900:27:20Got it. Okay. Thank you. And maybe the last question is, can you just remind us Where you stand with all of the integration centers, you've mentioned the U. K, but just Remind us maybe the future plans and kind of where those stand. Speaker 900:27:37Thank you. Speaker 200:27:43Josh, do you want to take this one? Speaker 400:27:45Yes, yes, I got it. Yes. So basically right now, as you said, we're going to Our intention is always to manufacture the corners and then work with partners for platform and full vehicle integration. So and of course the corner is our core competency around the corner. So that's the value add. Speaker 400:28:14So as we launch the contract manufactured in the U. S, That's we'll do that second half of next year. We have the option. So we'll continue to build at the beginning. We'll continue to build the corners In UK for at least the beginning of Phase 2. Speaker 400:28:29And then as we ramp, we have the option, of course, we have already secured the Austin facility To start that up at any time when it makes sense. Obviously, we don't want to over invest until we need that part. So we'll make sure that we're not Really dropping excessive amount of capital before it's needed. So we'll basically keep that flexibility. Speaker 900:28:52Okay. Thank you. Operator00:28:56Thank you. I would now like to turn the conference back To Daniel Barrell for closing remarks. Speaker 200:29:09Thank you. So I would like to thank and acknowledge Our teams around the world for their devotion and dedication to bring our P7 lineup to market. We're getting closer every day, and I'm confident that we have what it takes to deliver the best electric trucks available on the market. So thank you everybody for taking the time today to listen to our call. Have a good day. Operator00:29:36This concludes today's conference call. Thank you for participating. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallREE Automotive Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K) REE Automotive Earnings HeadlinesREE Automotive Ltd. (NASDAQ:REE) Short Interest Up 20.0% in AprilMay 5 at 3:59 AM | americanbankingnews.comIntegral Metals Reports Preliminary Geomicrobial Results from Burntwood Project, Highlights Biological Pathfinder Potential for REE ExplorationApril 30, 2025 | globenewswire.comURGENT: Someone's Moving Gold Out of London...People who don’t understand the gold market are about to lose a lot of money. Unfortunately, most so-called “gold analysts” have it all wrong… They tell you to invest in gold ETFs - because the popular mining ETFs will someday catch fire and close the price gap with spot gold. May 6, 2025 | Golden Portfolio (Ad)REE Automotive Ltd.: REE Automotive Provides 2024 Business Update; Reschedules Date for its Fourth-Quarter and Fiscal Year 2024 Earnings ResultsApril 28, 2025 | finanznachrichten.deREE Automotive Q4 2024 Earnings PreviewApril 28, 2025 | msn.comREE Automotive Provides 2024 Business Update; Reschedules Date for its Fourth-Quarter and Fiscal Year 2024 Earnings ResultsApril 28, 2025 | globenewswire.comSee More REE Automotive Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like REE Automotive? Sign up for Earnings360's daily newsletter to receive timely earnings updates on REE Automotive and other key companies, straight to your email. Email Address About REE AutomotiveREE Automotive (NASDAQ:REE) operates as an automotive technology company in France, the United Kingdom, the United States, and internationally. The company offers REEcorner, a compact module that integrates critical vehicle drive components comprising as steering, braking, suspension, powertrain, and control between the chassis and the wheel; and REEplatform that allows for the addition of a modular and customizable top hat/cabin design based on customer specifications, without requiring modification to the platform. It also provides P7-S Strip Chassis for commercial delivery vehicles and walk-in vans; P7-C Chassis Cab and Cutway Chassis, a class 4 chassis cab fully electric commercial truck for delivery and a range of vocational applications; and P7-B Box Truck, a class 3 box truck built on a P7 cab chassis with its all-wheel drive and all-wheel steer for vehicle control for better handling and safety in adverse conditions. It serves original equipment manufacturer, delivery and logistic fleets, dealers, e-commerce retailers, new mobility players, mobility-as-a-service providers, and autonomous drive companies. The company is headquartered in Herzliya, Israel.View REE Automotive ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Palantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's EarningsAmazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousRocket Lab Braces for Q1 Earnings Amid Soaring ExpectationsMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2 Upcoming Earnings ARM (5/7/2025)AppLovin (5/7/2025)Fortinet (5/7/2025)MercadoLibre (5/7/2025)Cencora (5/7/2025)Carvana (5/7/2025)Walt Disney (5/7/2025)Emerson Electric (5/7/2025)Johnson Controls International (5/7/2025)Lloyds Banking Group (5/7/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 10 speakers on the call. Operator00:00:00Good day, and thank you for standing by. Welcome to the Rii Automotive Q2 2023 Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kamal Hamid, Vice President of Investor Relations. Operator00:00:40Please go ahead. Speaker 100:00:42Thank you, operator, and thank you all for joining our Q2 2023 conference call. We hope that you have seen our press release and shareholder letter issued earlier this morning at investors. Re. Auto. If you haven't, I encourage you to review it as it has additional insights into the topics I would like to remind you that today's call may include forward looking statements. Speaker 100:01:06Any 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 anticipated by such forward looking statements for a variety of reasons, many of which are beyond our Please refer to the company's Form 20 F filed on March 28, 2023 with the Securities and Exchange Commission, which identifies principal risks and uncertainties that could affect our business, prospects and future results. We assume no obligation to publicly update any forward looking statements except as required by law. At this point, I'll turn the call over to Daniel Borrell, our CEO and Co Founder. Speaker 200:01:54Thank you, Kamal. Hello, everybody, and thank you for joining us today. Halfway through 2023, we continue to make steady progress and we remain disciplined, both operationally and financially, as we focus on our execution of our P7 program. This morning, we announced that we have achieved one of our most important technology to date following months of testing. We confirm that it is feasible for our X by Wire system to pass The required FMV Assess Certification, a key step in our roadmap to delivering certified vehicles. Speaker 200:02:33Being the first to market with full x by wire system sets a high bar. So in order to prove feasibility, we contracted Horiba Maira, A world leader in testing to perform internal tests, modeling certain FMVSS certification requirements. We have already started to build our certification intent P7 fleet and are on track to initiate the next phase of the full certification process of P-seventy. We have progressed with the certification plan and are targeting delivery of our first Our confidence in our vehicles, combined with our discussions with dealers and fleet customers, make us confident in our business plan, which claims to reach cumulative sales of $1,000,000,000 over 2024 to 2026 by executing on our production plan and shared in our section of the letter. As we continue to build out our dealer network, which now covers the entire U. Speaker 200:03:45S. And our recent expansion into Canada. We see demand for our commercial electric trucks coming from both incentivized and non incentivized states, as charging infrastructures continues to become more accessible to fleet owners. In addition, in commercial trucking industry, after sales service is key and we also see demand growth from our ability to simplify service with our quick Recorner swap, with fleet and dealers only having to keep a single Service part in their inventory, the Recorner, which intends to increase uptime of our trucks And lower the cost of customers' inventory and its costs of management. As a customer centric company, We listened to our current and potential customers to expand our P7 offering with full vehicle solutions, including boxes, service bodies and platform bodies. Speaker 200:04:43Therefore, as we shared yesterday, we are growing our collaboration with market leading work truck body manufacturers Such as Nephi's, Morgan Truckbody and others, all planned to be available in 2024. We have already delivered our first P7S prototype to one of our existing U. S. Fleet customers for their initial internal Close track test with the help of our on-site and remote support team as we jointly develop a complete electric road truck that will pave the way for potential future purchases. The P7 lineup uses software based x by wire system, which will use over the air capabilities that allow for continuous vehicle improvements and update, continuous rolling out of new features and options and remote diagnostics, often negating the need to return to a service center to future improve off time. Speaker 200:05:43Our system architecture, coupled with data as a service capabilities, is intended to allow customers to manage fleet performance, gather any data required for incentive compliance and forecast and predict maintenance. We ended the Q2 with liquidity of $105,000,000 comprised of cash, cash equivalents and short term investments. As part of our efforts to secure 2024 capital need in advance, after the end of Q2, We have established a $35,000,000 ATM program and secured a bank facility of $15,000,000 Before we open it up for questions, I want to stress that we are aware of the market condition in general And the EV Industry in particular. We see strong demand for electric truck driven by both organic demand as well as the federal state incentive throughout the U. S. Speaker 200:06:42And we understand our customers and the market expect us to deliver. We are laser focused on bringing the best commercial EV to the market, and we have the right team and technology. We believe our stakeholders, customers and investors will see long term value creation because of our unique technology, IP, Operational Focus and Disciplined Approach. Operator, please open the line for questions. And I'm going to be joined by our Chief Financial Officer, Jeroen Zatzmann our Chief Business Officer, Tali Millen And Josh Steck, our Chief Operating Officer. Operator00:07:24Thank you. We will now take the first question from the line of Michael Slitsky from D. A. Davidson and Company. Please go ahead. Speaker 300:08:00Good morning and thanks for taking my question. Can you hear me okay? Speaker 200:08:09Yes, we can. Speaker 300:08:11Are you there? Speaker 400:08:12Yes, we can hear you fine, Mike. Speaker 300:08:15Great. Thank you. Speaker 500:08:17Can you maybe take Speaker 300:08:18us behind the scenes of the external testing that you did To get to the point where the external firm said that you're ready for FMBSS. I guess I would like to know if that was a long process. Was it very Ritu, did you just send in the chassis and you got back a nice report card? I'm curious to see whether that was very expensive and very long process or Speaker 200:08:48I'm not sure I heard the full question. Sorry, Martin, the bad the line is a little bit can you repeat, please? Yes. Speaker 300:09:00Is that a little bit better? Sorry about that. I guess I was wondering if you could take us behind the scenes of the external testing to get The P7 chassis to the FMVSS, kind of the external third party approval. I guess I'm curious whether that was an iterative process that took a very long time, Along with unexpected or did you just kind of sit in a chassis and get back a pretty clean report card from a very early stage? Speaker 200:09:29Sure. Josh, do you want to take this? Speaker 400:09:31Yes. I guess, Meeve, I'll take that one. So basically to sum it up, so the P7 lineup is going to be the 1st BioWire commercial truck out there and our X BioWire technology is what makes us unique Therefore, we've been testing these core systems for months, okay. As we shared today, we've also contracted a third party to do the tests. So the FMBSS standards are generally they're design neutral. Speaker 400:09:54So different vehicle and vehicle technology designs can be certified if those minimum requirements are met. But some of those standards have test procedures that are written with a traditional vehicle mindset in mind. So the certification feasibility testing showed that the RE Architecture could be tested according to the applicable FMBSS standards. So for example, we have the FMBSS 105 sets performance requirements Our ReCorner comprehensive architecture goes beyond Those requirements and includes multiple redundancies that allow for sale operations. So for example, if brakes on the wheel fails, The other corners will allow you to continue to drive safe drive the P7 vehicle safely. Speaker 400:10:39So these feasibility testing also provided a lot of other data that we refine and As we tune our calibrations ahead of what we expect our full certification by the end of the year. Speaker 300:10:49Okay. Okay, great. I want to also ask you didn't mention in your prepared remarks, Daniel, but some of the things that were in the press release about your sales outlook for, I think it was 2024 to 2026. Obviously, there's some ramp up in there, obviously, between 2024 and 2026. But could you maybe kind of give us some kind of breakdown of the cadence On the $1,000,000,000 you plan to sit down on the road there in sales, how much might be In the early stages in 2024 at the very least? Speaker 400:11:26I guess, David, I can take that one too as well. So to answer the question, for Phase 1, we plan to produce from the UK The minimum number of pilot vehicles that we require to get customers feedback before we begin mass production in the States. This is intentional from our side because the cost reduction towards breakeven gross margin per unit level is expected to start only after we have our production tooling in place. So as we build confidence through the positive feedback from the customers over the next few months, we initiated our $15,000,000 production tooling purchase program in July of 2023. So This was earlier than we planned. Speaker 400:12:01We believe this will allow us to shorten our Phase 1 and enter Phase 2 by Q4 of 2024. So Phase 2 is currently planned to commence in Q4 of 2024, which is expected to be a total production plan of up to 300 vehicles During that calendar year, ramping up to a low 1,000 in 2025 and then mid 1,000 in 2026. For chassis manufacturing and final vehicle builds in Phase 2, we plan to use a contract manufacturer located in the States and we'll give you guys more information on that once we have Selected, that said contract manufacturer. Speaker 300:12:36Just to be clear then, the 2024 vehicles that are coming out are going to be For the TiO4 is still low volume and they'll be and all of them will be in the UK shipped over here, Speaker 400:12:49Correct. The first half to first three quarters, yes, those will be what we said, those will be the pilot vehicles. And then by Q4, we will start the ramp up the remaining, as we said, up to 300 from the U. S. Speaker 300:13:04Okay. Okay. I'll give everyone a chance. Thanks so much for the time. Thank you. Operator00:13:11Thank you. We will now take the next question from the line of Jeff Osborne from TD Cowen. Please go ahead. Your line is open. Speaker 600:13:34Great. Thank you. Thanks for all the detail in the letter. Maybe just a few follow-up questions on some of the points raised. Daniel, I was wondering if you could walk us through the $50,000,000 Investment that was flagged. Speaker 600:13:48I think Josh just mentioned that you had a $50,000,000 tooling purchase in July last month. Was that Part of the $50,000,000 or is the $50,000,000 still to come more next year? I'm just trying to Speaker 500:13:59get a sense of the Speaker 600:14:00cadence and associated cash burn. Speaker 200:14:04Yes. So these are 2 different things, I think, if I heard you right. So we initiated Pastel, the $15,000,000 tooling program ahead of schedule, because we are we have higher confidence Ahead of plan. So I think all in all good news there and that would allow us to kick off the tooling program. We're expected, as Joss said, to enter Phase 2, which is production tooling and Scale in the second half of next year as we prepare the ramp up for that. Speaker 200:14:50On burner, I can probably Aron can add more. Speaker 500:14:53So most of the $50,000,000 have not been spent yet, But it's part of our business plan and we share information about the amount of cash that we have right now and the amount of cash that we need The next 2 years, we can include in there. We secured $50,000,000 loan from an Israeli bank that this will fully cover the 2 d spend. Speaker 600:15:18So the cumulative cash burn CapEx is less than $105,000,000 over the next 2 years. That what you're trying to say? And then if you add the ATM and the $15,000,000 Speaker 500:15:29What I'm trying to say that the $105,000,000 that we have right now Last additional ATM and the loan security is well enough for the next year. We still need to cover year 20 25 due to working capital. Therefore, we need to raise another $50,000,000 for year 20 25. Speaker 600:15:52Got it. And then the I apologize for following up on Mike's questions with Josh, but You mentioned pilot vehicles. So I'm just trying to get a sense of the map of the dealers is impressive. You have pilot vehicles being produced and then at some point in time Late next year up to 300 vehicles. At what point in time will there be vehicles for revenue? Speaker 600:16:15Is that Q4 of next year? Or will there be revenue associated with any pilot vehicles before that? Speaker 200:16:23I think, yes, Yaron will add more color, Jeff, on that. But I think The quick answer for that is all of our vehicles are for revenue depends on where we recognize them, right? But we're being paid for each of those vehicles that we deliver. The difference between the reason we call them, like Josh said, Pilot vehicles is because they're intended to gather customer feedback in order for us to, if needed, make the relevant Changes before we initiate production tooling because of the cost naturally and time that it takes to change production tooling. And once we are very comfortable with this, we'll kick off the production tooling and go to, Like we said, about 300 by the end of next year and then mid the low 1000s and mid 1000s. Speaker 200:17:18Josh and Yaron, if you want to add. Speaker 500:17:20So we are starting delivering the pilot vehicle by the end of this year. Most of the vehicles that we provide are not pilot vehicles, of course, right. And therefore, all of them will be recognized as revenues. Small amount only on the first part of the year, probably Q1, we still see it as a pilot vehicle. And therefore, We are I think we already gave some guidance about revenue recognition guidance about this specific amount of makeup, but it's really small amount Only for this year and only for Q1 exit. Speaker 600:17:57Sorry for the fall, but so Q4, Q1 you'll have modest Revenue for pilots and then there'll be a lull in Q2, Q3 and then it ramps back up in Q4? Speaker 300:18:05Yes, correct. Speaker 400:18:07And just maybe to add a little color, that's very strategic what we did because why we're calling those pilot vehicles is basically to make sure that our dealer network Has the units they need to get customers and seats and test the vehicle. And that way we're using those feedback before we start the ramp. And as we said, we kicked off the tooling. Key for the ramp isn't just to build trucks, it's to get them where we can start driving towards material margin parity, right. So we want to get the parts down at a lower cost. Speaker 400:18:34So as we start ramping, We're actually coming to bond parity and then driving positive material margin as we ramp, right. So it's very strategic what we did there. Speaker 600:18:44Great. Thank you. Appreciate the detail. Operator00:18:48Thank you. We will now take the next question from the line of Colin Langan from Wells Fargo. Please go ahead. Speaker 700:19:01Great. Thanks for taking my questions. Just to follow-up on the cash flow needs, so I understand. So You have enough cash to get through the end of 2024, but you will need another $50,000,000 is for 2025. And one is that correct, but or you need the cash, but you still have to use the ATM program, so because there's $35,000,000 I think you only used less than $1,000,000 of it. Speaker 700:19:29So does that mean more dilution will be coming as you use that program Through 'twenty five, that will give you $35,000,000 And then on top of that, you go some part before 2025, you need To raise another $50,000,000 So there's 2 pieces. There's $50,000,000 for $25,000,000 and then $35,000,000 Are 34 left on the ATM in terms of sort of dilutive impact? Speaker 500:19:59So I think we published last time that we'll need to raise between $80,000,000 to $100,000,000 in equity or in debt For year 2 2024, year 2 2025. So what we are trying right now is actually to give much more color on that. We are trying to give breakdown between year 2 2024 to year 2 2025. We are saying for year 2 2025, we will need $50,000,000 Which means that for year 2024, the need is less than $50,000,000 It's probably between around $35,000,000 We are going to take this $35,000,000 We can take it by bank loans or by using the ATM. So we have both options. Speaker 500:20:40And this is still what we are doing right now. So already $15,000,000 out of that already been secured. And based on that, we will not need to use the full ATM of $35,000,000 It's our decision based on the stock price how much do you do. Okay. Speaker 700:20:57But still you still will have So the ATM has not been really used yet at this point? Correct. Okay. And then you have 100 and So the 155 orders that so how does that compare to the 300 orders? So it's just the 155 are initial orders that are locked in and then the 300 is The target, once they get the first, you're hoping to get the second. Speaker 700:21:22Is that the logic? Sorry, make sure I'm comparing apples to apples. Speaker 800:21:28Yes, sure. So again, as we are reporting the shareholders letter, the production planning targets is $1,000,000,000 for the years 2024, 2005 and 2006. And the plan is expected to reach production of up to 100 vehicles in 2024 and then low 2025 and mid1000 in 2026. Now we continue to grow our authorized dealers network. We disclosed that we had 1 dealer at the end of last year and now it has grown to 12 dealers currently covering the U. Speaker 800:22:02S. And Canada. In the previous earnings call, although we don't have formal numbers, conversations held with our dealers Exadata, we sold over 50,000 vehicles a year. We generated over $1,000,000,000 and therefore we feel confident in our ability to execute this business plan of ours. Now and this is in addition to the previously announced 3 large fleet customers. Speaker 800:22:28These dealers and fleets, they are committed to electrification and they've already placed these orders of 155 vehicles or P7 vehicles. And this initial order book is similar to the number of initial deliveries by market leaders. And these numbers reflect initial orders and they support the growing pipeline. So we believe that these dealers and fleets could purchase 100 and thousands of units per year and we also continue to see strong demand for the entire P7 product line. Speaker 700:23:06And the 155 orders you have, you get paid when you deliver or do you get paid when they actually deliver it on to a customer since they're Dealers. Speaker 500:23:16They're getting paid when they are delivered. Speaker 700:23:19To the dealership, not to the customer. So they're taking Correct. Speaker 600:23:23Yes. Okay. All right. Speaker 700:23:27Thanks for taking my questions. Operator00:23:30Thank you. We will now take the next question from the line of Andre Sheppard from Cantor Fitzgerald. Please go ahead. Speaker 400:23:45Hi, good morning, everyone. Good afternoon. Congrats on Speaker 900:23:48the quarter and thanks for taking our questions. I was wondering if you could maybe remind us Where ASPs stands, just curious with the inflation and the rise in interest rates, Whether you may have whether you may now expect some differences in your selling prices? Thank you. Speaker 200:24:19Sorry, probably our line. Can you repeat? Sorry, Andreas. Hi, Ben. Speaker 900:24:25Yes, no problem. The question is if you can maybe remind us where you expect the average Selling prices of either the corners or the platforms to be, just wondering if those may have changed given the inflationary environment? Thank you. Speaker 500:24:47So I think we cannot share the exact price that we are selling to the dealers. The only thing that we can share is that we do believe That we can have a better vehicle compared to the others. And therefore, over time, we can increase prices and get Better prices may be addressed, but this is over time. Speaker 200:25:10I'll add on that Our business model take into let's put differently, our business model does not take into consideration Evergreen IRA or any other incentive plan in place, meaning the business plan, prices And margins are built from the bottom up where we believe we have competitive market pricing that are sustainable and also acceptable by the industry also without incentives. And naturally, It's supported by the fact that we see demand for our vehicles both from incentivized and non incentivized So definitely, don't get me wrong way, Ed, the incentives help a lot. But I look at them more as a fire started and not continuous support. Speaker 900:26:09Okay. Thank you. And maybe a different way of asking is, can you give us a sense of What kind of gross margins we might expect for next year or between 2024 In 2026, as we look at that new sales guidance that you've mentioned, just wondering when we Could see positive gross margin. Is that something that you expect from the production of the 300 vehicles in 2024 or perhaps is that more likely in 2025? Thank you. Speaker 500:26:49So we mentioned that we will get to breakeven BOMCOs by the end of next year when we have the 300 vehicles. Going forward from that, when we are having higher production, of course, we have a positive gross margin. And we also mentioned that we'll go to positive EBITDA In year 20 25. So therefore, the gross margin should reflect also the all of the costs that we have in the company. We'll share more information about that And next year. Speaker 900:27:20Got it. Okay. Thank you. And maybe the last question is, can you just remind us Where you stand with all of the integration centers, you've mentioned the U. K, but just Remind us maybe the future plans and kind of where those stand. Speaker 900:27:37Thank you. Speaker 200:27:43Josh, do you want to take this one? Speaker 400:27:45Yes, yes, I got it. Yes. So basically right now, as you said, we're going to Our intention is always to manufacture the corners and then work with partners for platform and full vehicle integration. So and of course the corner is our core competency around the corner. So that's the value add. Speaker 400:28:14So as we launch the contract manufactured in the U. S, That's we'll do that second half of next year. We have the option. So we'll continue to build at the beginning. We'll continue to build the corners In UK for at least the beginning of Phase 2. Speaker 400:28:29And then as we ramp, we have the option, of course, we have already secured the Austin facility To start that up at any time when it makes sense. Obviously, we don't want to over invest until we need that part. So we'll make sure that we're not Really dropping excessive amount of capital before it's needed. So we'll basically keep that flexibility. Speaker 900:28:52Okay. Thank you. Operator00:28:56Thank you. I would now like to turn the conference back To Daniel Barrell for closing remarks. Speaker 200:29:09Thank you. So I would like to thank and acknowledge Our teams around the world for their devotion and dedication to bring our P7 lineup to market. We're getting closer every day, and I'm confident that we have what it takes to deliver the best electric trucks available on the market. So thank you everybody for taking the time today to listen to our call. Have a good day. Operator00:29:36This concludes today's conference call. Thank you for participating. 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