Release Date: September 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- REE Automotive Ltd (REE, Financial) has achieved significant milestones, including securing sufficient production capital and a strong funding position.
- The strategic supply chain management agreement with Motherson Group is expected to derisk the ramp-up to mass production and improve unit costs.
- Second quarter net loss narrowed by 57% quarter-over-quarter and by 59% year-over-year, indicating improved financial performance.
- The order book increased by 15% quarter-over-quarter, reflecting strong demand for REE's products.
- REE has expanded its dealer and service network to 78 locations across North America, enhancing customer support and service capabilities.
Negative Points
- The ongoing military conflict in Israel poses a risk to REE Automotive Ltd (REE)'s business prospects and future results.
- The commercial vehicle fleet globally is not electrifying as quickly as fleet owners would like, which could impact demand for REE's products.
- The company had to undergo approximately $153 million in redemptions during its SPAC transaction, starting its public life with less cash than expected.
- The revised production plan, while beneficial, will take time to develop and finalize, potentially delaying deliveries.
- Despite the strong funding position, there is still a need to manage and integrate operational activities with Motherson, which could pose challenges.
Q & A Highlights
Q: Can you provide details on the Roush contract manufacturing agreement and the status of U.S. production?
A: We started working with Roush earlier in the year and kicked off the contract in Q2. Roush will handle full vehicle assembly for our Powered by REE vehicles, building to our specifications. We are currently in the preparatory phase and plan to start production in Q4, with first deliveries expected in 2025. (Joshua Tech, COO)
Q: Will there be incremental expenses as you progress towards customer deliveries in 2025?
A: Our cash burn is expected to continue decreasing as R&D expenses, which were the major cost, are now winding down. While SG&A might slightly increase due to our U.S. expansion, overall cash burn will not rise. The collaboration with Motherson and Roush will help us lower costs and drive faster profitability. (Yaron Zaltsman, CFO)
Q: How will you prioritize customer deliveries in 2025?
A: We have a clear decision matrix that includes order size, price, fleet electrification readiness, and future potential. This helps us score and prioritize production slots accordingly. (Daniel Barel, CEO; Tali Miller, CBO)
Q: Can you provide more color on the three OEMs interested in your technology?
A: These are different customers from those previously mentioned. They are interested in our software-defined technology for by-wire vehicles, which opens up opportunities for software licensing revenue. This allows our technology to be implemented in various vehicle classes beyond just commercial ones. (Daniel Barel, CEO)
Q: Are the regulatory incentives for purchasing electric trucks still in place?
A: Yes, the incentives remain in place at both state and federal levels. We recently became eligible for incentives in Massachusetts, among other states. (Tali Miller, CBO)
Q: Is the $60 million order book for full vehicles or just REEcorners?
A: The approximate $60 million order book value is for full vehicles and chassis. (Daniel Barel, CEO)
Q: What is the process flow for manufacturing with Roush and Coventry?
A: Corners will be manufactured in Coventry, UK, while Roush will handle the final assembly of the full vehicle in the U.S. We will source chassis and cabin parts locally in the U.S. to bring down costs and improve logistics. (Joshua Tech, COO)
Q: When do you expect to deliver vehicles for revenue?
A: We plan to start production in Q4 and deliver the first vehicles in 2025. We are currently updating our production plan to optimize it for larger follow-on orders from fleets and OEMs. (Joshua Tech, COO)
Q: What is the maximum capacity of the Michigan facility from Roush?
A: The facility can scale up to 5,000 vehicles on two shifts. We are working on the production plan for the next few years. (Joshua Tech, COO)
Q: Will you update the production plan and financial metrics by the next call?
A: We are working hard to update the plan and will share it as soon as it is finalized. This will include new guidance on production, cost savings, and financial metrics. (Daniel Barel, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
