REE Automotive Q4 2024 Earnings Call Transcript

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Provided by Quartr
May 15, 2025

There are 5 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to the RE Automotive's Fourth Quarter and Full Year twenty twenty four Financial Results Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

I will now hand the call over to the company. Please go ahead.

Speaker 1

Good morning, and thank you for joining us on today's conference call to discuss RE Automotive's fourth quarter and full year twenty twenty four results. During the course of this call, management will make, express, and imply forward looking statements within the Private Securities Litigation Reform Act of 1995 and other US federal securities laws. These forward looking statements include, but are not limited to, those statements regarding the company's financial condition, including the impact that it will have on Reed's future business and plan, its ability to implement its current business, including as impacted by the going concern, Its plan to address its going concern, including through a significant reduction in operational expenses, which includes a reduction in force. Its need to obtain significant additional financing. The growing demand for Reeves products and technology from OEMs and technology companies as reflected in expanding customer reservation and deepening engagement with OEMs, The ability to generate revenue from ReAI Cloud, the implementation of the next phase of our mission, Re's ability to generate software based revenues both in the near term and long term, Re's software based business being less capital intensive, Re's ability to license its technology and its broader transition toward a subscription based revenue model, its plans regarding production of its p seven lineup, feasibility to integrate our software alongside existing products from OEMs and technology companies, delivery of initial trucks to its North American customers and the timing thereof, its ability to improve its operational efficiencies, impact of US tariffs and trade policies on its business in 2025, addressing our supply chain and reassessment of production, including to tariff uncertainty, and our Q1 twenty twenty five expected cash.

Speaker 1

Such forward looking statements and their implications involve known and unknown risks, uncertainties, and other factors that may cause actual results or performance to differ materially from those projected. The forward looking statements during the course of this call are subject to other risks and uncertainties, including those discussed in the Risk Factors section and elsewhere in REE's annual report on Form 20 F for the year ended 12/31/2024, filed with the Securities and Exchange Commission and elsewhere in subsequent filings with the Securities and Exchange Commission. Today's call is hosted by Daniel Burrell, Reed's cofounder and CEO, and Hai Aviv, Reed's chief financial officer. I will now turn the call over to Daniel Burrell.

Speaker 2

Welcome everyone and thank you for joining us today. We are pleased with our performance in 2024. We began this journey over a decade ago and I'm encouraged by the progress we made this year. The milestones achieved have laid a solid foundation for RE as a differentiated technology company in the automotive industry. I'd like to take some time to recap our 2024 and provide you with some recent updates.

Speaker 2

We saw demand increase significantly for our technology and we reached several critical technology milestones, reinforcing our position as a leader in the SDV space. Notably, we received the first federal motor vehicle safety standard certification for a full by wire vehicle in The US. Also, Airbus, in collaboration with us, completed the first autonomous drive on an active runway using our SDV technology. We launched ReAI Cloud in collaboration with Geotab, introducing vehicle services and advanced data analytics that provide predictive maintenance and optimise operations, opening up a path for what we see as a new software revenue opportunity. 2024 was a breakthrough year for Our achievements point to one thing: our vision for Re is coming to life.

Speaker 2

Our technology has been tested on the road, under real world condition and within a commercial framework. This is a critical time in the industry as we see it converge of electric, autonomous and connected vehicles, all of which we see as an opportunity to tap into through our scalable software driven platform. With that said, while we enter 2025 with this positive momentum, we have recently experienced unprecedented and unpredictable challenges. The current US tariffs and trade policy has significantly impacted our supply chain, similar to many in the global automotive industry. More specifically, over 2024 and beginning of twenty twenty five we have tirelessly worked and deployed our raised capital towards hitting the key milestones needed to work out weight towards putting vehicles on the road.

Speaker 2

We achieved the first FMVSS certification for a full biviral vehicle in The US, Advanced production of certain vehicles worked to prepare US facility for scale manufacturing, including product tooling, solidified our order book and signed a significantly large non binding MOU to integrate our technology into a customer's autonomous shuttles. Unfortunately, The US tariffs and trade policy created an environment that makes it significantly challenging to continue to move our original plan forward for the time being. As such, we have made a difficult but prudent decision to temporarily pause, not stop, production until the situation stabilises. Until we see the uncertainty around the broader tariff environment settle, we are focusing on what's in our control. Once the tariffs and trade situation stabilises, we would look to address our supply chain accordingly and reassess our post production.

Speaker 2

In the meantime, we remain in active dialogue with our suppliers and customers and we are looking at solutions to elevate the pressure that we and the entire auto industry are experiencing currently. We are also in discussion with technology companies on new autonomous programmes and are restructuring our technology teams to focus on software programmes. We are encouraged with the accelerated progress that our software business has made, which we now view as mature and gaining traction in the market as we are actively engaging with OEMs that are interested in our software. Our view is that SDV is the cornerstone of the technology, which we find to be incredibly important for the future of mobility. It's not just about the EV itself, but rather about intelligent vehicles and the intelligence they can bring to both passenger and commercial marketplace.

Speaker 2

We are focused on generating revenue across both the near term and long term for our software business. In the near term, we are working closely with OEMs and technology companies to integrate our software alongside their existing product, ensuring a seamless fit within their platform and accelerating adoption. Looking further ahead, we're advancing our strategy to license our technology as part of our broader transition for the subscription based revenue model. This dual approach not only meets what we see as current market demand, but also positions us for sustained recurring revenue. In addition to pausing production and accelerating the prioritization of our SDV business, we will be laser focused on cost reduction.

Speaker 2

We intend to significantly reduce our monthly burn by reduction of operating costs and adjustment of headcount and leadership structure. As you can see, while the broader macro environment has negatively impacted our business plan and all the excellent work and progress we made in 2024, we remain nimble and are exploring paths to deliver for our shareholders while working in parallel to accelerate our software offering, which we'll go into more details about later in the course. I'd like to turn the call over to Chaim to discuss our financial milestones and a review of our financial results.

Speaker 3

Thank you, Daniel, and hello everyone. In 2024, we strengthened our financial position. Our liquidity improved to $72,000,000 inclusive of $18,000,000 credit facility at the end of the year, reflecting the impact of two successful registered securities offerings. These offerings raised approximately $60,000,000 in gross proceeds, including $45,000,000 from M and G and Mothersen Group in September 2024, and an additional $50,000,000 earlier in 2024 from M and G. In the first quarter of twenty twenty five, we raised an additional $36,500,000 in gross proceeds through two more registered offerings, each led by M and G and Mothersen Group.

Speaker 3

During the last twelve months, we have spent approximately $75,000,000 on production readiness and R and D completion. Looking ahead, we will continue to prioritize enhancing our capital position, with plans to expand financing options that will enable us to accelerate our technology driven strategy. Now turning to the P and L. For the full year, our GAAP net loss was $111,800,000 a slight improvement from $114,200,000 net loss in 2023. This was primarily driven by lower engineering and R and D expenses as we completed substantial portion of the P7 program R and D phase, along with operational efficiencies that helped to reduce overall operating costs.

Speaker 3

However, we were impacted by non cash losses related to the re measurement of warrants and derivative liabilities. On a non GAAP basis, our net loss improved to $70,300,000 from $98,300,000 in 2023. This improvement was driven by reduction in engineering and R and D expenses and operating efficiencies as mentioned earlier. In Q4 twenty twenty four, our GAAP net loss was $37,300,000 compared to $38,500,000 in Q3 twenty twenty four and $35,200,000 in Q4 twenty twenty three. The quarter over quarter improvement was primarily driven by lower non cash losses related to re measurement of warrants and derivative liabilities partially offset by higher cost of revenues associated with the production of the P7 vehicle.

Speaker 3

The year over year increase in net loss was primarily driven by non cash losses from the re measurement of warrants and derivative liabilities, partially offset by increased non recurring engineering development costs in Q4 twenty twenty three. Our non GAAP net loss in Q4 was $19,800,000 compared to $16,800,000 in Q3 twenty twenty four and $32,200,000 in Q4 twenty twenty three. The quarter over quarter increase was largely driven by the higher cost of revenues associated with the production of P7 vehicles. The year over year improvement was mainly attributed to higher non recurring engineering development costs in Q4 twenty twenty three compared to Q4 twenty twenty four. A reconciliation of GAAP to non GAAP measures have been provided in the financial statements tables included in our earnings press release.

Speaker 3

We continue to narrow our free cash flow burn year over year, thanks to the operational efficiencies and the completion of significant R and D efforts. As part of our ongoing financial review, due to the recent changes in the macroeconomic environment and tariff situation negatively affecting our ability to bring our P7 to the market as planned and affecting our ability to raise debt, which directly impacts our revenue forecast. Management has determined that there is substantial doubt about our ability to continue as a going concern for the next twelve months. Our plans to alleviate these going concerns include temporarily pausing production and significantly reducing costs, adjusting headcount with a view to optimize the corporate structure to become more flexible in the face of industry uncertainty. We will announce details of this in the near future, but for now investors should expect significant reduction in operational expenses alongside the production pod.

Speaker 3

We'll be announcing Q1 results promptly, but our expected Q1 twenty twenty five cash and cash equivalents balance is approximately $79,600,000 including credit facility of $80,000,000 and we remain committed to providing OEMs with differentiated technologies that we have custom built over the years. I'll now turn it back over to Daniel for his closing comments before going to Q and A.

Speaker 2

As you've heard today, we made meaningful progress in 2024 technologically, commercially and financially. Re is and has always been a technology company. Our mission from day one has been to create a scalable, technology driven mobility platform built on both software and hardware. We were never focused on becoming a traditional OEM. Today, we are accelerating the next phase of that mission, enabling the future of mobility by partnering with OEMs, technology companies, and others to bring vehicles built on our proprietary SDV technology to market faster, with better performance and with more efficient manufacturing.

Speaker 2

The critical question for RE in recent years has been identifying the most effective business model to bring our technology to the customer who needs it most. We are seeing the answer through a path of developing our technology through less capital intensive means, including licensing and partnership models. We embarked on a journey towards mass production in order to demonstrate our technology and its capabilities, and while this remains important, it is not the only path forward. Given the hindered uncertainty and risk in today's production environment, we've made a strategic decision to focus on our software technology. This decision is rooted in a commitment to being good stewards of capital.

Speaker 2

Preserving cash today allows us to preserve flexibility for tomorrow, ensuring we can adapt as market conditions evolve. Importantly, we are not resting on our laurels. Our technology can be deployed through less capital intensive means, including licensing and partnership models. We are actively advancing several commercial opportunities along these lines and we remain confident in our ability to pursue potential long term profitable growth, even in the face of broader industry and trade headwinds. Our future lies in providing the software and intelligence that will drive tomorrow's vehicles.

Speaker 2

We envision that through recurring revenue and margin expansion, which is increasingly important in today's market. Through our software first approach, OEMs and technology companies can leverage our modular SDV technology to design and develop vehicles more quickly and cost effectively without the need for costly hardware design. We are gaining traction in the market, illustrating to OEMs and technology companies that we are here to be a solution for them, not another competitor. The growing interest in our SDV technology reflected in the expanding customer reservation and deepening engagement with OEM underscores the market validation of RISD strategy. We believe that these collaborations strengthen our credibility and position us as a reliable enabler of SDV innovation, giving OEMs and mobility technology providers the confidence that RE can support their growing demand and requirement for the next generation of vehicles.

Speaker 2

The future of mobility is evolving and so much the way vehicles are built. RIIIA's role is to support OEMs and suppliers with a flexible platform that enables better performance, faster adaptability and more efficient manufacturing. By doing so, is helping others succeed while also building a more sustainable, scalable and profitable business model for ourselves. We believe that this approach will allow Re to move faster to market and be more profitable, an essential advantage in today's economic climate. We believe our technology is matured and the customer demand is strong, and we are advancing into a more scalable and profitable phase of our growth, guided by our technology first model and commitment to supporting the industry's transition to software defined mobility.

Speaker 2

With that, operator, please open the line for questions. Thank you.

Operator

Thank We will now take the first question from the line of Paul Fratt from AGP Alliance Global Partners. Please go ahead.

Speaker 4

Yeah. Good afternoon, Daniel. Good afternoon. Hi. The first question I had was, can you talk about the conversion of the MOU to a definitive agreement?

Speaker 4

And do these changes potentially push out the timing of that finalization or have any impact on the MOU as you see it right now?

Speaker 2

Hey, good morning. Sorry. Thanks for the question. Regarding the MOU, currently, we don't see any change in the timeline that we've indicated. We have already started to receive payments from that MOU on services that we've been delivering.

Speaker 2

Currently, we believe that we are on track as to what we previously announced in terms of timeline.

Speaker 4

Great. And, Hai, could you repeat the first quarter cash balance and ignore the credit facility? What is the actual cash that you had on the balance sheet at the end of the quarter? The first

Speaker 3

Thanks, for the question. So it's $61,000,000 excluding the credit facility for the end of the

Speaker 4

just if I may, if I could ask about I know you want to you don't have you're going to release details on the restructuring and your plan going forward. None of these potential changes impacted your run rate in the first quarter, am I correct? Correct. And secondly, can you talk about your cash burn, if you will, the starting point from which you're going to start to cut costs? Can you is it roughly 18,000,000 to $20,000,000 of cash burn in the first quarter that you're going to look to narrow?

Speaker 4

Can you talk about headcount at the end of the quarter? And maybe give us a little flavor you talked about restructuring the leadership team. Can you talk about how that might shape or how that might change leadership structure?

Speaker 3

Sure. So as we said, we are taking immediate actions to reduce our cash burn, including part of our production, discussions with our suppliers, and of course, reduction in our operating costs. We previously communicated that the anticipated operating expenses will be between 5,000,000 to $6,000,000 a month. We ended, as we said, the quarter with $61,000,000 And going forward, we plan to reduce the operating expenses over time and to reach an operating expenses of between 3,000,000 to $4,000,000 by the end of the year.

Speaker 4

Great. Thanks, Ed. Thank you so much. That's helpful.

Operator

Thank please press 11 on your telephone. That's 11 if you wish to ask a question. We will now take the next question from the line of Paul Fratt from AGP Allianz Global Partners. Your line is open.

Speaker 4

Yes, sorry. Daniel, can you talk about your the reservations and whether these changes potentially change the reservation book. They're non binding reservations to begin with, but have you seen any cancellations or do you anticipate any cancellations? And then can you just talk about the path to first to first revenue or the ramp in revenue? Can you just sort of highlight how much that might have shifted out into the future?

Speaker 2

Sure. Regarding reservation, of course, we're working with our customers, you know, to assess the current production situation and it's basically, you know, affecting everybody here in the industry. And we believe it's important to remain in open dialogue, in active dialogue, and work collaboratively to finding solutions for that. The good news is, you know, our customers are telling us that their interest in our product has increased given our SDV, our software defined vehicle, and not just because it's an EV with great, of course, characteristics and offering, but the strongest sell point that we hear from our customers is the software defined vehicle technology that we have. Now, believe that the close to $1,000,000,000 in reservation, which of course includes binding orders and capacity reservations, such as the previous dimension, and we are not, prove that there is a strong demand for our technology.

Speaker 2

Know, due to the fact that we're temporarily pausing production, it's a little bit too early to say when we're going to be resuming production and therefore to assess when we're going to be ramping up deliveries and generating revenue from deliveries. With that being said, you know, we've always said that we are a tech company and technology is in our core. And we are very excited by the fact that, you know, we currently believe that our technology is mature and we have demand for our software defined technology, the software itself, and that actually allows us to move our focus in the interim as we evaluate the macroeconomic conditions and tariffs. We will be focusing more and more on our software business. And it's worth mentioning also regarding the MOU that there is a good portion there that is also related to that.

Speaker 2

And we believe that we would be having great products to the market around our software in the meantime, where our goal is to to generate revenue from software and software related business in the interim as we continue to assess.

Speaker 4

Great. Thank you.

Operator

Thank you. I would now like to turn the conference back to Daniel Barrel for closing remarks.

Speaker 2

Thank you. And thank you everybody, for taking the time today. I think we're seeing, as we said, some challenging times in the industry, and, I'm very, proud of Team RE, and their accomplishment not only in 2024, but the way they have and are handling the current situation in 2025. I see an amazing team of people that gives me a lot of confidence that they're able to, you know, manage the current situation well and to generate strong and significant value for our shareholders. And with that, I want to thank everybody again for the time today.

Speaker 2

Thank you.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

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REE Automotive Q4 2024
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