REE Automotive Ltd. (REE) on Q1 2022 Results - Earnings Call Transcript
Operator: Greetings, and welcome to the REE Automotive First Quarter 2022 Earnings Conference Call. 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.
Limor Gruber: Thank you, Operator. And thank you all for joining our first quarter 2022 conference call. We're going to move now to Slide 2 and 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 March 28, 2022, 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. 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 a 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 and give an operations update; and our CFO, David Goldberg, who will be -- who will continue with a discussion on our financial results and outlook. At this point, I will turn the call over to Daniel. Daniel, please.
Daniel Barel: Thank you, Limor. Good morning, and welcome to our first quarter 2022 update call. Let's go to Slide 3. I will begin the call with an update on the significant strong progress we are making towards commercial production in 2023 as we focus on converting our pipeline into backlog and establishing the production capacity to fulfill orders. Let me start by saying we are delivering on our commitments. We are preparing for full vehicle customer evaluation this summer and we've demonstrated our robotic assembly capability. This is a very excited time for REE as we continue the disciplined execution of our funded P7 commercialization and achieve the milestones we have been communicating to the market as we have advanced towards firm orders and commercial production. Moving to Slide 4. We show a track record of execution and continue on pace to deliver. This has been a significant year for us already and let me touch briefly on the strong foundation we've built. We spent 2019 building our core engineering capabilities and 2020 establishing supply chain capacity and validating our technology. Last year, we focused on building out the comprehensive ecosystem needed to enable commercial vehicle electrification, broke ground on our production facilities, and established a strong plan towards commercialization of our products. This include establishing our X-By-Wire homologation path and securing funding for P7 commercialization. This year, we've made significant progress validating our P7 platform at our U.K. engineering center and advance our manufacturing readiness demonstrating robotic assembly capability for our highly automated integration center that is expected to become operational this year. We are also presenting for the first time a full vehicle for customer's validation this summer. Following the completion of prototype validation by our customers on private roads, we expect to receive firm orders towards the end of the year. After that, we expect to validate advanced prototypes on public roads and obtain purchase orders. Moving forward, I will detail our recent progress to bring our P7 product to market and a step forward in manufacturing readiness to achieve our 2023 commercial production plan. Let's go to Slide 5. Commercialization of our P7 platform also continues on track. The product allows customers across many segments such as delivery, logistic, retail, and passenger, unique benefits, efficiencies, and flexibility enabled by the REEcorners and they're fully independent X-By-Wire control system. It is suited for application including commercial trucks, school buses, walk-in-vans, and recreational vehicles. It is also designed to significantly reduce development times of electric commercial models. Fully flat from end-to-end, the P7 platform is intended to power Class 3 to 5 vehicles with payloads up to 8,880 pounds range of up to 370 miles and all-wheel steering and drive. As we shared before, in some of our P7 programs, REE is the manufacturer of records, MOR, responsible for the homologation and registration of the electric platform. Their homologation activities are progressing on track on both the component and system level. Additionally, core control system software and functional safety development, a key element of the development of mission-specific variation enabled by REEcorner are progressing according to plan. We have a number of ongoing P7 programs with several counterparties in addition of bringing full vehicle to market for fleets, including a leading logistic company. OEMs remain an important part of our go-to-market strategy. As we have previously shared, we have a joint development agreement with a major commercial vehicle OEM to develop electric vehicles from Class 3 to Class 5 for North America and we continue to progress in this joint development phase. REE displayed the P7 platform for the first time in the U.S. at NTEA's Work Truck Week, where we showed our REEcorner technology and platform to dozens of existing and new potential customers across fleet owners, technology companies, OEMs, upfitters, and auto manufacturers. We also hosted several customers at our engineering center in the U.K. to experience and evaluate the P7 platform on the track and this has our advancements on build, verification and validation activities. The short clip from our platform testing is available in the presentation on our website. We are very encouraged by our customers' feedback from our own track demonstration in Israel and in the U.K. and feel confident in our previously communicated timeline. Let's move to Slide 6. Earlier today, we announced the major milestones of commencing customer validation on private roads this summer of a full electric vehicle powered by REE. We are very excited by the opportunity to bring the two market, the industry's first fully drive-by-wire commercial vehicle to our pipeline customers in the U.S. with our new Class 5 walk-in van prototype, developed in partnership with EAVX, the EV business unit of JB Poindexter. This new electric commercial van is the first in many ways. It is the first one to use EAVX's new body design that was developed from the ground up to first be showcased on our new P7 platform. In addition, this is the industry's first full vehicle that is powered by REE in our novel REEcorner technology. It is a true game-changer in so many ways, and most importantly, we are on track to deliver a commercial EV powered by REE less than 12 months after announcing our partnership with EAVX. I'm very proud of both our teams and our joint commitment to electrification and carbon neutrality. Customer evaluations on the new electric van will take place this summer over the course of several weeks in Michigan. The pre-booked event will allow EAVX and REE's pipeline customers across retail, delivery, and logistics segments to experience the vehicles, discuss their unique requirements and secure production capacity for 2023 deliveries. Our strategic go-to-market partnership with EAVX leverages JB Poindexter's distribution network of large fleet operators and backed by a proven history of creating excellent work truck and commercial vehicle bodies and subsidiaries through their business unit Morgan Olson. As a reminder, Morgan Olson is the largest producer of walk-in van bodies in North America, and its decades of legacy experience enabling last-mile deliveries of a wide range of parcels and goods for retail, Internet, and service companies. We are excited for our customers to experience firsthand the unique benefits of the first X-By-Wire vehicle build with the best-in-class Morgan Olson body and powered by REE. REE is horizontally integrated business and through our collaboration with leading partners such as EAVX, we are well-positioned on the demand side to deliver full vehicles to customers, while remaining focused on our core business of corners and platforms. Agreements with OEMs and body manufacturers allows us to tap into their existing customer base of these automotive leaders. Now onto Slide 7. Accordingly, we are building out our production capabilities in advance of anticipated customer demand. We recently announced the commissioning of our highly robotic integration centers for North America and Europe. As we shared yesterday, we are very happy to update that our core robotic assembly process is on schedule to be implemented into first highly automated integration center in the U.K., as you can see on Slide 7. This is an important milestone on our path to commercial production next year. The robotic assembly and use of autonomous guided vehicles in the 13 manufacturing cells at the heart of our modular production line that will be operational this year. The novel cloud-based robotic manufacturing approach will provide REE significant efficiency, savings, and scalability as they will enable us to continuously fine-tune our assembly procedures and rapidly deploy them to other sites. We have established key strategic supplier agreements to support our manufacturing readiness ahead of commercial production next year. REE has nominated Expert Technologies Group, a leading manufacturer of industrial automation systems, automated assembly, special-purpose machinery, and single and multi-robotics cells, including robotic assembly. For the integration of its robotic and automated manufacturing technologies. We also adopted Rockwell Automation's Plex Manufacturing Execution System or MES to support REE's highly digitized manufacturing across integration centers. The MES system provide us cloud capabilities which will serve as a digital backbone for REE's global operation and future assembly line. Not only does MES enable local scale flexibility to manage our customer-specific manufacturing operation, but it also allows us to quickly share and scale best practices globally. The interconnectedness of our operation will allow us to rapidly deploy changes to assembly procedures to assembly lines globally. You can think of it as a command center for which our global operation will be managed. You can watch a short clip on our core robotic assembly on our website. Our teams are doing tremendous work towards production readiness and I'm happy to update that the European integration center in the U.K. is on schedule to come online in the second half of this year with initial capacity of 10,000 vehicles set. Our North American integration center in Austin, Texas, is also on track to come online next year within additional capacity of 10,000 vehicles set. I'm excited that Josh Tech recently joined REE, as our Chief Operating Officer to lead the design and build-out of our integration centers. Josh served on Tesla's operations leadership team and brings over 23 years of experience to REE in complex product development and launch, industrialization, infrastructure development, engineering, supply chain, quality, and operations management. I have the utmost confidence in Josh and the entire operations team. REE's CapEx-light production approach is based on leveraging its global network of Tier 1 partners' manufacturing capacity. With highly automated component assembly and testing to take place in REE's integration centers. This means not only faster time to market, but also secure supply chain capacity and quality control. Our first highly automated integration center is both the starting point and the backbone of REE's future global manufacturing capacity. We are highly engaged with pipeline customers and since the paramount importance of offering them a full solution for electrification. From financing of infrastructure and vehicles through modular advanced electric vehicles to global maintenance and data and battery as a service. We are able to offer such a comprehensive set of capabilities based on our global ecosystem of partners for a full turnkey solution that will enable and expedite a smooth and scalable transition for our customers from ICE to EV fleets. As I've said before, our efforts are primarily focused on the nearest-term commercial opportunities. Although I have devoted the majority of my time today to the P7 platform and our collaboration with EAVX, we continue to make progress with Hino Motors, a global leader in heavy and medium-duty trucks as we jointly develop the FlatFormer, which we showcased at CES in January with a global -- with the goal to deliver a functional platform prototype for evaluation and testing by the end of this year. The FlatFormer is capable of carrying a customized mobility service module that can carry passengers, goods, and deliver services. The mobility service module can be easily detached from the EV platform and once detached can serve as an independent standalone unit leaving the platform to be operated separately and continue on its next mission. We are very confident with the potential of this program and the demand for it in the market. We are actively exploring multiple business cases relevant for such a novel and future-looking solution with the REECorner technology at its core. As I've mentioned, our platform is indifferent to vehicle side, shape, power source, and level of autonomy. So the potential application is broad and future proof and can be deployed across fleets of varying vehicle classes. We have other exciting programs in various stages of development, including concepts for autonomous vehicles and we will share updates about this when we are able to. I would like to commend the REE teams across the world for their phenomenal work and dedication to making this a more sustainable carbon-neutral world as we move faster towards fully electric vehicle future. With that, I will hand the call over to David Goldberg, REE's CFO, to discuss our financial results. David?
David Goldberg: Thank you, Daniel, and good morning. Moving to Slide 9, I'll start with a review of our first quarter 2022 results. The company reported a GAAP net loss of $23 million in the first quarter of 2020 compared to a net loss of $46.7 million in the fourth quarter of 2021. The decrease in GAAP net loss is mainly attributed to non-cash income from warrants remeasurement this quarter compared to a loss recorded in the previous quarter. Non-GAAP net loss of $29.9 million in the first quarter of 2022 increased compared to $26 million in the fourth quarter of 2021, primarily due to higher R&D sales and marketing expenses as the company executed its business plan. Non-GAAP results exclude share-based compensation expenses of $8.5 million and income of $15.3 million related to the impact of the warrant valuation. As of March 31, 2022, our cash balance was $239 million. We remain disciplined and continue to have sufficient funding to execute the programs that Daniel described. As communicated during our Q4 2021 earnings call, we have budgeted a range of $130 million to $150 million in cash spending, inclusive of both capital and operating expenses for fiscal year 2022. This range is presented on a cash basis and is tied to the execution of current programs. Accordingly, expenses are dependent on the timing and achievement of milestones related to the company's commercial program, which will not be linear throughout 2022. The company is on track to invest approximately $30 million during 2022 primarily related to the establishment of our initial production capacity. This portion of the budget is effectively committed and will mostly be incurred in the second half of 2022. I note that some of these expenses related to the establishment of initial production capacity may not be capitalized. Our OpEx plan is mostly comprised of technical and engineering spends required to execute our programs according to the timeline we have communicated. We remain focused on executing our current P7 and FlatFormer programs. While we believe a significant opportunity exists beyond our current program, the majority of our budget has been allocated towards executing these programs. Before I conclude, it's important to remember that our costs will mirror the execution of our product homologation. For example, if MOUs and other pipeline opportunities convert to firm commitments or existing programs expand in scope, our spending may accelerate. The company may require additional liquidity to deliver those opportunities. The cadence of our spending plan will be indicative of our progress and we will continue to update our shareholders on budget expectations as the year unfolds. With that, let's move to the final slide, and I'll turn the call back to the operator to open the line for Q&A. Operator?
Operator: And the first question comes from the line of Mike Shlisky from D.A. Davidson. Please go ahead.
Mike Shlisky: Good morning. Yes, I guess I'll start off by following up on your last comment, David, about the 2022 cash budget. Can you give any thoughts as to the 2023 cash budget at this point? Anything we should be -- any kind of goalpost we should be looking at there?
David Goldberg: So the way we think about 2022 and 2023 is that we're really focused on -- executing on P7, where we think we have enough money inclusive of -- including both '22 and '23. Thus, the engineering spend, for P7, we expect to peak in this year and then should come down next year, and that brings us to production.
Mike Shlisky: Great. Is that just a P7 comment or other expenses involving the platform or elsewhere?
David Goldberg: Yes. So the majority of our expenses are tied to P7. So that really speaks to, again, the majority of our budget and how we think about cash.
Mike Shlisky: Great. If I could just turn to batteries secondly here, have any of your customers or your potential partners, give you any indication that they've got enough or not enough either direction batteries for whenever they and you agree to launch the on-road products?
Daniel Barel: I'm not sure, Mike, I fully understand the question. You're asking if there has been communicated shortage on batteries from our -- in our program?
Mike Shlisky: Yes, I was asking whether -- either you or any of your partners have gotten your sights on the appropriate number of batteries that you need to launch, for example, 10,000 a year product and whether there's been any issues with obtaining commitments to many cell suppliers or battery pack suppliers either from you -- your end or from your partners end to meet any upcoming demand here?
Daniel Barel: Yes. We don't see shortage in battery capabilities currently with the forecast that we look at for the programs. We have multiple sources of batteries. We use multiple types of batteries in some of our programs, we bring the batteries in some of our programs. As you mentioned, our partners bring the batteries and they take care of all that. Keep in mind that in the commercial vehicle space, the 0 to 60 rate is less important, therefore, we can use different -- larger -- different kinds of battery chemistry as the configuration that's not necessarily would be the highest power density in that manner, but would be far more than adequate to what we need in the commercial vehicle space.
Mike Shlisky: Okay. Great. That's a great color. And if I can just throw in one more question here, and that is on the EAVX walk-in van that you've been talking about today. Any thoughts -- could you tell us a little bit about some of the capabilities of this van, maybe the turning radius of the van compared to existing ICE and EV walk-in van models? And maybe secondly, the cargo capacity compared to current ICE and EV walk-in-van models?
Daniel Barel: Yes, sure. So to begin with, I don't want to steal EAVX's thunder on the environment because it's -- honestly, it's amazing. It's a very revolutionary design that is designed from the ground up for EVs and it's -- I think it's a revolutionary design. And REE is the first company to utilize it, it's been built for the P7 initially. And we're very, very excited about that. Naturally, due to the usage of the P7 and the powered by REE Technology, the turning radius will be very tight, and we will -- we'd expect to have more volumetric efficiency than others. But on the specifics -- I mean, I think it will be best to give the guys at the EAVX the stage for that very, very shortly.
Operator: Thank you. Next question comes from the line of Jeff Osborne from Cowen and Co. Please go ahead.
Jeff Osborne: Thank you and good afternoon. Just a couple of questions on my end, Daniel. I was wondering, we talked a lot about the P7 and EAVX and the detail is incredibly helpful in seeing the progress there. Can you just touch on how much of the investment that you've made so far around functional safety and the technology development relative to the application engineering for that particular platform is transferable to other platforms that would use the REEcorner. So basically, what I'm getting at is, should we anticipate the same level of expenses for P7 for subsequent platforms? Or is there a knowledge level that's gained that is applicable to others?
Daniel Barel: Yes, that's a great question. So our corner technology is divided actually into two parts. The inboard part, the part that is in console within the chassis in the P7 platform is where the core technology lies. This is where the -- all the by-wire technology systems reside and this is core engineering. And that does not change across corner variations and corner generation. The application engineering, the ability to adjust and change different vehicle characteristics like suspension side, like wheel size, et cetera, of course, this is application engineering, and this is done on the outbound side, which is mainly off-the-shelf of componentry and therefore requires significantly less investment. So to answer your question, the vast majority of the investment in the by-wire technology and the core engineering has already been made.
Jeff Osborne: Got it. That's helpful. And then on the -- you highlighted the Class 3 through 5 market for P7, do you see or anticipate more demand as the EAVX team sells that in the Class 3 space or 4 and 5? Just very different sizes of the market there. So I'm just trying to understand what the crystal ball is showing there in terms of end market demand and configuration, recognizing that you're flexible and somewhat agnostic on the tech itself.
Daniel Barel: Yes. So we see quite more demand on Class 5 than we started with. We see a lot of the demand for Class 4 is moving into Class 5. And of course, there is a lot of demand in the Class 3 that we already saw before. So the P7 platform is designed, of course, for Classes 3 to 5, but mainly, if you're going to serve Classes 3 and 5, and the -- I mean EAVX and Morgan Olson are fully capable and day in and day out in building different bodies on top of that. And I think one of the most exciting things about this partnership and what's coming and I cover it for you guys to say is the ability of that to take different sizes and shapes. And this is key and this is predominantly why this partnership makes so much sense. The ability to have a very, very modular product, both on the platform level and on the body level to address the majority of the market.
Jeff Osborne: Got it. And two other quick ones. Will the testing for the P7 with the EAVX in Detroit is that done at Mcity or some other location? Whereabouts will that actually be held on the private roads that you referenced?
Daniel Barel: Yes, Mcity is one location. There's going to be more than one, just because I mean, timing slots, et cetera. It's going to be predominantly all around in multiple locations in Michigan, but Mcity is one of them. And that's for the North American variation, of course.
Jeff Osborne: Got it. And then you focused a lot on EAVX and the Hino update, which is great. Can you just spend a few seconds on the Navya program as well as anything you can share on developments with Magna?
Daniel Barel: Yes. So we have a lot of active dialogue with numbers of parties. Some of them, as you mentioned, we've communicated in the past when we've reached certain milestones and we will continue to update you guys on the progress specifically when they become impactful. Currently, those programs that I mentioned and the specific one that you've mentioned are going well and according to plan.
Operator: Thank you. Next question comes from the line of Andres Sheppard from Cantor Fitzgerald. Please go ahead.
Andres Sheppard: Quick question, Daniel. I'm curious, can you give us an update on the customer agreements that you had highlighted in the past, those 20 agreements, so I'm just wondering if there were any changes to that?
Daniel Barel: Yes. So the way we've communicated in the past, we have signed agreements that have either minimum quantities in them or future allocation of quantities. What we're doing now is, and I think that's apparent from the recent announcement, we're making a lot of progress on getting this -- these vehicles on the market and advancing the readiness of the product. And all in all, we see very big significant demand for commercial EVs in general. And what we've communicated before is that once those customers are going to be able to evaluate, to experience, to test, to drive those vehicles, which we expect to happen very, very short in the summer in the U.S. together with the EAVX, those will -- we would expect them to convert into orders. So we're totally focused and I think it shows in doing two major things here, right. Building more vehicles and continue to advanced core product offering of the P7 alongside the ability to scale production and build our integration center capabilities and the proven robotic core capability that we've demonstrated a couple of days ago in order to support those conversion of pipeline into orders.
Andres Sheppard: Got it. Thanks, Daniel. Maybe a quick follow-up. I'm wondering, with the inflationary pressures, are there any changes or any expectations to maybe change the 25,000 ASP for the platforms?
David Goldberg: Yes. So I mean, I think that number was guidance from the past. If you think about our supplier relationships for the biggest components of the we have really -- they're really strategic relationships. And so while we're watching the supply chain, we feel like we're in a good place in terms of BOM cost, but ultimately, the ability to pass through some increases to the customer where it's warranted.
Andres Sheppard: Okay. Got it. Maybe one last one, if I could. You touched on supply chain disruptions, which has been a bit of a theme, again, this year for most industries. Now you guys have the CapEx-light model through the assembling rather than the manufacturing. But I'm wondering, do you anticipate any delays in any of the assembly process? Or anything that would maybe affect the capacity for the 10,000 platforms per year? Or do you anticipate that to go unchanged? Thank you.
David Goldberg: No. So unchanged is the short answer. I mean it's something we're watching. But just as an example, as we're building test fleets and prototype vehicles with our suppliers, there's no change to the timeline there. So I appreciate that's a much smaller volume than when will be producing. But so far, so good, is the short answer.
Operator: Thank you. Next question comes from the line of Greg Lewis from BTIG. Please go ahead.
Greg Lewis: Thank you, and good afternoon. I just did have a follow-up question on the budget. As we think about the progression of this year, clearly, we're going to move towards production next year, building out the team. As we think about this over the next few quarters, is it the right way to think about this that the R&D should start to fade as the operations in SG&A side of the business accelerates. Is that kind of how we should think about the balancing? And really, any kind of color around the trajectory of R&D here over the next couple of quarters?
David Goldberg: So I would say that sort of logic applies, but over the next, call it eight or seven quarters, right, that takes you through the end of next year. So I think through the rest of this year based on the guidance that we've given, I think R&D stays pretty steady. I mean you'll see that our numbers are obviously in line with what we communicated earlier this year and we're being very disciplined to keep them in that spot through the remainder of the year. But it's really not until next year where you'll see the R&D spend start to come down and sort of being now offset by a ramp-up on the operation.
Greg Lewis: Okay. Great. Thank you for that. And then I just was hoping for a little bit of an update on Austin, and really how we should be thinking about that over the next few quarters? Obviously, that's going to be a big accomplishment when that's up and running.
Daniel Barel: Yes. So Austin is on schedule, is on track. What we're doing is -- the fully automated robotic core technology that we've demonstrated is cloud-based. So that basically allows us to duplicate the processes and the QA and the testing that we're doing in each of those integration centers to other integration centers. So the first integration centers will be in Europe, in the U.K., and it will have 10,000 vehicle sets capacity. And very, very shortly after, Austin is going to be up and running in the first half of next year, adding another 10,000 vehicle sets in capacity. And that's merely a -- if you think about it, fitting the plant with the relevant AGVs and robots and just flashing them from a cloud-based most recent version and they're up and running. And that's the whole beauty of it. Those lines are really smart. They are capable of vision detecting and identifying different corner configurations and there is and almost minimal setup times in between different corners of configuration and that is really impactful on the efficiency.
Greg Lewis: Okay. Great. And then just following up on that, is there any way to think about the spend ramp up in Austin as it, I guess, filters in, in '22 and '23, like on a percentage basis maybe?
David Goldberg: Yes, so spend on Austin in 2022 is really back-end loaded. I mean, we signed a lease and actually the building is still being completed. So the actual cash outflows for us really don't happen until much later this year. So short answer is not a big hit, or not a big expense in 2022.
Operator: Thank you. Next question comes from the line of Colin Langan from Wells Fargo. Please go ahead.
Colin Langan: Thanks for taking my questions. Just wanted to clarify the JB Poindexter announcement, is that an expansion of your relationship or just another progress point towards bringing that vehicle to market?
Daniel Barel: I'm not sure I followed. I'll try to answer it, but if I go wrong, please correct me. Poindexter, the Poindexter group, right, EAVX, and Morgan, Morgan Olson are the biggest body upfitters in North America, they've been doing this for decades. And the ability to partner with them and have the best platform in the world to power those vehicles with the best body in the world, to do that is I think, key for our customers. They understand the value, they understand that it's built the right way, they understand the capability that, that brings, and wealth of experience and knowledge that they have in commercial vehicle markets, walk-in van and et cetera. So I think we've communicated to you guys about a year ago, about that relationship and what we're going to do together. And I think in less than a year, we are announcing that we're going to show you a vehicle, a full vehicle. And I want to emphasize something about that vehicle that maybe we didn't say, but this is the first ever full drive-by-wire, brake-by-wire, steer-by-wire electric vehicle out there, especially in the commercial field. And this is a very, very different thing, it's a game changer.
Colin Langan: Got it. So it's sort of further step forward in that relationship. Going back to the original question on cash burn, you burned $38 million in the quarter. That rate, you have about year and a half, maybe two years left. And CapEx is supposed to increase through the rest of the year, actually, because I think you only did $1 million and I think the guide is $30 million. So do you see any that you might need to raise capital? And if not, how is cash going to turn positive that quickly?
David Goldberg: Well, I guess a few things, right. The $38 million includes investment in working capital, right, so our -- I mean, when you -- again, we've given guidance for the year in terms of what the cash burn or cash expense is going to be. Beyond that, the -- as I said earlier, the spending on the program on P7 comes down, right. So we have now the cash that we need to execute and to produce next year.
Colin Langan: Okay. But wouldn't there be new programs? After that, they're going to require R&D expense and such as you grow?
David Goldberg: Well, I mean I guess let's kind of be clear about the program, right. When we talk about a program, it's a P7 platform, right. And so there's obviously a big addressable market tied to that platform. In my point, when you say different programs, right, whether it's what we call P4 for Class 2 vehicle or Leopard, which is for sort of an autonomous delivery Van, those would be different programs. And obviously, we need to think about how to accelerate those. Those are not -- we're not spending tons of cash today in our existing budget.
Daniel Barel: I'll add to that, and I'll say we're -- I don't know what's beyond laser-focused on executing the plan and we're laser-focused on P7 and getting it to the market. Because P7 is addressing the vast majority of the market, right, everything in Class 3 to 5 and we see demand very, very significant demand for those. So we're focusing on those. And as we said, there are different programs, some of them we share with you, and they're going to mature over time. But REE's main focus in the coming quarters, as David mentioned, is the P7 and its application across different market segments, different vehicle classes and the commonality of the core engineering that we just mentioned earlier on all of those. So this is what we're bringing to the market.
Colin Langan: And just lastly, you highlighted a large North America commercial vehicle partner. Just any color on the status of that relationship? Have you delivered them prototypes? Are you -- is there a timeline of when those go into production?
Daniel Barel: You mean in North America?
Colin Langan: Yes, I think -- yes, the undisclosed commercial vehicle OEM that you highlighted on. Just kind of where, in Slide 4, you highlighted it, undisclosed leading commercial vehicle OEM. I think in your comments, you said it was North America. Just wondering, is that a -- are prototypes delivered to them? Is production as a model spend to go into production at some point? Any color there?
Daniel Barel: Yes. So we are on track there. Then the idea is to start building the testing fleets in the next few quarters because we believe it's a very different game where you do one of a kind and where you work in a fleet model and this is where you can see how we shine and how a drive-by-wire vehicle is far superior to traditional approaches. And I think that as this program progresses and we unveiled to you guys, what is it that we're doing and with whom, you can have a much better picture as to the progress that we have made that we are extremely excited by this partnership, and it is on track.
Operator: Thank you. There are no more questions at this time. I would like to hand back over to REE Automotive for final remarks.
Limor Gruber: Thank you, Sandra. Thank you everyone for joining us today on the call and on the webcast. And we were looking forward to touch base soon. Have a good day.
Operator: That does conclude our conference for today. Thank you for participating. You may all disconnect.
