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Operator: Greetings and welcome to the REE Automotive Fourth Quarter 2022 Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the call over to Kamal Hamid, Vice President of Investor Relations. Thank you. You may begin.

Kamal Hamid: Thank you, operator and thank you all for joining our fourth quarter 2022 conference call. We hope that you have seen our press release and shareholder letter issued earlier this morning at investors.ree.auto. I would like to remind you that today’s call may contain 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 maybe 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 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. In addition, we will be discussing or providing certain non-GAAP financial measures today, including non-GAAP net loss and non-GAAP operating expenses. Please see our shareholder letter for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. Joining me today is our Co-Founder and CEO, Daniel Barel; Tali Miller, our Chief Business Officer; Josh Tech, our Chief Operating Officer; and Yaron Zaltsman, our Incoming CFO, who will join the Q&A session. At this point, I would like to turn the call over to Daniel.

Daniel Barel: Hi, everybody. Thank you for joining us today. We are excited about the opportunities ahead of us. As we look to 2023 and beyond, we have further important milestones to achieve, including the completion of certification activities, the deliveries of initial vehicles and the successful completion of the test fleet phase, which we expect will lead to receipt of additional orders. We continue to see a growing demand for our P7 product line from fleet dealers and OEMs as we are selectively growing our customer base. We are prioritizing customers with significant market share in the U.S. and that are pioneering the transition to electric vehicles. Since November 2022, we quadrupled our customer base from 2 to 8 in different industries, such as vehicle rental and leasing, shipping and logistics and dealers.

In addition to their initial orders, we believe those customers have the potential to order significant volumes of vehicles. We are working closely with those customers who require a testing phase in order to optimize this important process and advance to fleet orders. Let me share some highlights with you. We achieved key development milestones in 2022, with total GAAP operating expenses of $127 million and non-GAAP operating expenses of $101 million on-time and in line with budget. In addition, we delivered two different prototypes to a leading OEM for testing and validation. One of those vehicles is our P7-B, which is undergoing testing and customer evaluation and the other is related to a long-term project. These efforts are being supported by our talented and dedicated tech team, led by Ahishay Sardes, our Co-Founder and CTO.

As you have seen, we are expanding our go-to-market strategy. We now have direct sales to fleet and have begun building out a dealer network. We already have 5 authorized dealers in the U.S. who are accepting orders. I would like to thank Tali, our Chief Business Officer and her team for their tireless efforts to build our order book and expand our go-to-market channel. With that, I would like to hand over the call to Tali. Tali?

Tali Miller: Thank you, Daniel. Interest in our EV solutions continues to be robust that fits both large and small, seek to lower their carbon footprint, and increase efficiency. We continue to conduct additional customer evaluations with prospective fleets, delivery, logistics and e-commerce companies as well as dealers in North America and other major markets around the world. Subsequent to the end of the fourth quarter of 2022, we started establishing a dealership network across the U.S. We have initially entered into an agreement with 5 authorized dealers: Pritchard EV, Tom’s Truck Center, Industrial Power & Truck Equipment, New England Truck Solutions and FMI Truck Sales & Services. Each of these dealers have placed initial orders which are included in our current order book.

We will offer training to authorized dealers to certify technicians to provide service on REE vehicles facilitating the adoption by fleet. Existing orders include both the Class 3/4 P7-B and Class 5 Proxima powered by REE. Orders for the P7-B are for chassis configurations, while orders for Proxima Powered by REE are for strip chassis and a full vehicle via our partnership with body app feature, JB Poindexter & Co. Both the P7-B and Proxima Powered by REE leverage our P7 platform, which features full x-by-wire architecture supporting all-wheel steer and drive adaptive regenerative braking and torque vectoring as standard as well as over-the-air updates. Our vehicles set a new standard in commercial EVs offering the greatest interior space on a given footprint, optimize driver ergonomics and ease of maneuverability.

As we seek to further expand our dealer network in the U.S., we can now offer financing solutions to our dealers through an agreement with Mitsubishi Hitachi Capital America, to provide financing solutions to dealers in the REE network. The agreement is designed to streamline the process of obtaining the financing required for the purchase of REE vehicles. We expect to continue to deliver test fleets in 2024 as well as to start converting these test fleets into scale orders in 2024 onwards, subject to successful testing and certification. By bolstering direct sales activities to large fleet owners while also growing our network of dealers, REE now covers the channels through which medium-duty commercial vehicles are acquired. With that, let me turn the call over to Josh.

Josh?

Josh Tech: Having reached a production-intent level, much of the intensive R&D and engineering spending is now complete, in part contributing to the significant decrease in planned cash spending from 2022 to 2023. We are now in the production and certification execution phase and are focused on passing the required testing of our x-by-wire technology. Additionally, we are accumulating durability and validation miles according to plan to support this certification, which is expected to be completed in the second half of 2023. Reaching the production intent phase is an important step in our product maturity. As we continue our validation and verification protocols, we have ordered components for 25 P7 vehicles and submitted production forecasts with our suppliers for our main components through 2024.

During the fourth quarter of 2022, we commenced the build of the first batch of P7 production intent vehicles, which were completed subsequent to the quarter. As previously reported, we finalized the build-out of our integration center in the third quarter of 2022. All major equipment is in place and we have established a production capacity for 10,000 vehicle sets annually. During the fourth quarter of 2022, we validated the assembly process and drive cycle our modular production line comprised of 13 highly automated manufacturing cells. Also, our supply chain is now built out, including the recent announcement of Microvast as our battery supplier. We expect to begin deliveries to customers in the fourth quarter of 2023. We are targeting COGS breakeven in the low hundreds of vehicles.

We are also targeting adjusted EBITDA breakeven in the low thousands of equals. In order to achieve that, we are working with our suppliers to optimize production tooling and bill of materials to further reduce the production cost required. We currently believe reaching these margin targets will require tooling investments which we will be able to invest as our business cycle and customer feedback evolves. With that, let me hand the call back to Daniel who will take you through the financial and commercial outlook. Daniel?

Daniel Barel: Thanks, Josh. We ended 2022 with liquidity of $154 million and anticipated non-GAAP operating expenses of $70 million to $75 million in 2023 as we execute on a disciplined approach and CapEx-light model. We achieved key development milestone in 2022 on time and in line with budget with total non-GAAP operating expenses of $101 million, total GAAP operating expenses of $127 million. GAAP net loss was $27.3 million in the fourth quarter of 2022 compared to $33.5 million in the third quarter of 2022 and $46.7 million in the fourth quarter of 2021. The decrease in GAAP net loss compared to the third quarter of 2022 is mainly driven by lower operating expenses, including transaction costs. The year-over-year decrease in GAAP net loss is mainly attributed to lower income from remeasurement of warrant and lower share-based compensation expense.

Non-GAAP net loss was $21.5 million in the fourth quarter of 2022 compared to $27.3 million in the third quarter of 2022 and $26 million in the fourth quarter of 2021. The decrease in non-GAAP net loss versus the third quarter of 2022 is mainly attributed to the decreased operating expenses, including transaction costs. The year-over-year decrease in non-GAAP net loss is primarily related to the decrease of operating expense as the company shifts from ramping up its capabilities and market penetration for its commercial production into certification and testing. As of December 31, 2022, the company had $153.6 million of liquidity, comprised of cash, cash equivalents and short-term investments and no debt. The company anticipates it has sufficient liquidity to achieve initial production of its P7 platform and continue to advance other commercial activities set forth above.

The P7 program is fully funded into commercialization. Our CapEx-light model is designed to support COGS breakeven in the low hundreds of vehicles and adjusted EBITDA breakeven in the low thousands of vehicles. We carefully watch market conditions and explore options of raising debt or equity capital in the right form and time based on the progress in our business cycle and needs. Before we open the call up for questions, I’d like to thank David Goldberg for his contribution in helping building out our finance team, and to Hans Thomas for his dedication, support and belief in our mission. I want to extend a very warm welcome to our Yaron Zaltsman, who we are all excited to work with and to our two new Board members, who will bring vast industry experience to REE.

Operator, please open up the call for questions.

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Operator: Thank you. We will now take the first question. It comes from the line of Mike Shlisky from D.A. Davidson. Please go ahead. Your line is open.

Mike Shlisky: Yes. Hi, good morning, and thanks for taking my question. Or good afternoon, if you are in Tel Aviv. I guess I wanted to ask about the orders that were in the release and in your comments today. You mentioned 35 vehicles were ordered. Is that irrespective of €“ I guess two things. One, is it just the dealers that have ordered those vehicles? Or are there other customers that awarded them? And secondly, does that reflect the orders that your dealers are taking for the vehicles from the end user, or just what they’re asking for you for either demo or inventory reasons? I guess I expect a dealer ought to be ordering in the hundreds, if not thousands of vehicles, based on what other EVs have been getting from their initial dealer orders business. Just to €“ kind of clarity on what’s going on, what are some of the ins and outs of the order book, whether it’s yours or from the dealers directly. Thank you.

Daniel Barel: Hi, thank you. Good morning. I’ll start by answering your first questions about the orders. So right, as we said, we €“ since November 2022, we grew our order book from 3 to 35 firm per orders. Those orders are coming from eight customers. And that’s compared to two that we had in November. Now these overall numbers represent a substantial growth, right? There’s a much bigger and more important message here, where each of those carefully chosen fleet, logistics and dealers customers has potential to are very large numbers of units for many years. So assuming we receive certification and our platform perform to spec, which we believe it will, then it isn’t a leap to see that how these customers can contribute to very robust order book in the near future. And that’s, of course, as we expect to sign even more customers.

Mike Shlisky: Well, I guess I wanted to clarify, the 35 orders you have so far reflect what you expect to ship for the year? Maybe that question. Or are there more that might come better on €“ over the coming months that will also be shipped in 2023?

Daniel Barel: Can you repeat the question? I’m not sure I understood it.

Mike Shlisky: Yes. I just I’m curious whether the orders you’ve received, that you mentioned, the 35, are reflective of your volume expectations for the full year. Or might more orders come in over the next few months that will also ship this year?

Daniel Barel: Yes. So €“ no, that’s a good question. What we’re doing now is we’re very, very carefully selecting our customer base. We’re doing this on the basis of their market potential and of course their readiness to electrify, if they are fleets, the readiness to accept electric vehicles and if they are dealers, their ability and readiness to sell this to their customers. Because we’re ramping up on production, it’s very important for us to prioritize how many orders and to which we’re delivering first batches. So we would most likely be interested in prioritizing significantly the first batches to certain customers that we believe have the highest potential of growing the business significantly. And we will be ramping up the capacity as we move forward.

Mike Shlisky: Okay, okay. I can follow-up with that separately. Also, you didn’t mention it. You €“ as far as your liquidity goes, you haven’t filed your 10-K or 20-F for the year, but do you anticipate that document having a going concern causing it? Or do you think, with your orders, you’ve got a good outlook for ample liquidity to fund the business throughout the entire 2023 year?

Daniel Barel: Yes. So listen, we had $154 million on the balance sheet at the end of 2022, and we have no debt. So as we mentioned, like you just said on the shareholder, we’re targeting a non-GAAP operating expense of between $70 million to $75 million for 2023, right? So that’s quite straightforward and if you keep in mind that our model is very capital-light. So once we begin SOP, we believe that the vast majority of capital-intensive cash burn is over for the foreseeable future. So therefore, as for additional capital, we carefully watch the market condition explore the option for raising debt or equity capital in the right phone and time. But that’s based on the progress of our business cycle and need.

Mike Shlisky: Got it. And maybe last one for me, we had the NTEA Show last week, booth looked great, looked pretty crowded in the booth. Could you maybe give us a sense as to how that might have gone, in your view and your fleets coming in with some interesting interest there or any other use cases that came about as folks came in and out of your booth over at that show last week? Thank you.

Daniel Barel: Yes. It has been €“ the thing quite a show, it will be very busy, as you just mentioned. We have seen a lot of interest in EV in general, and in our products in particular. We see interest from large fleets, logistic companies and e-commerce as well as from dealers and also OEMs. So at €“ in the risk of repeating myself, I would say that it is extremely important for us to deliver those first deliveries spot on, right, and to make sure that our deliveries are successful on-time, on-target, on-TCO, to those customers and prioritizing those who ordered and are waiting for the vehicles as we grow our ordering book more and more. We take very seriously our commitment to deliver vehicles to our customers.

Mike Shlisky: Fair enough. Thanks a lot. Thank you.

Operator: Thank you. We will now take the next question. It comes from the line of Andres Sheppard from Cantor Fitzgerald. Please go ahead. Your line is open.

Andres Sheppard: Hi. Good morning everyone or good afternoon. Congrats on the quarter. Thanks for taking our question. Wanted to maybe start off by just following up on that question about liquidity, right? So, $154 million funded through or into commercialization. I am wondering, how are you thinking about your capital needs following that, right, particularly as you begin to ramp up orders and ramp up production. How are you thinking about future capital need plans after entering commercialization? Thank you.

Daniel Barel: Yes. Hi. Good morning. Right. Again, so like you said, there is $154 million on the balance sheet at the end of 2022, and we don’t have debt. So, yes, we think we have sufficient liquidity to take the P7 platform into commercialization and continue to advance the other commercial projects. We would be looking, I mean in the market, and we would be exploring opportunities and options for raising debt and equity capital. But it needs to be in the right form and time. And that’s, again, we are going to base this on the business cycle and needs. As we go further into the year, we will have more visibility into the order group, the production ramp-up, etcetera?

Andres Sheppard: Got it. Okay. Thank you, Daniel. And maybe as a follow-up, was just wondering, this is a bit more of a macro question. Curious if you can maybe comment on what you are seeing from a supply chain disruptions obviously that’s been persistent in the industry over the last year or so, if not more? What kind of €“ what trends are you seeing in that supply chain? Do you expect those disruptions to continue, if so, to what extent? And what can kind of be put in place to try to mitigate some of those disruptions? Thank you.

Daniel Barel: Yes. And I think is one. Listen, macro is always a factor, right. In fact, it’s possible that if the macro was different, REE and basically the whole EV system would have seen a much faster, steeper growth. And that being said, based on our conversation with large customers, for example, we see obviously nothing that will derail the electrification of global delivery fleets. Luckily for us, our capital-light strategy and modular approach will allow us to flex our production quickly as adoption accelerates. And importantly, I mean we believe our modest cash burn compared to some of our other competitors will allow us to be one of the beneficiaries of this huge multi-decade trend. On the supply side, as we said, we have a steady supply chain where we are monitoring the disturbance within the supply chain, we are having multiple suppliers where it makes sense to make sure that we have ample supply to what we need.

We currently do not see a significant disturbance that we cannot change in that supply chain. But I think maybe, Josh, you want to add something on that?

Josh Tech: Yes. Thanks Daniel. Yes. I mean let’s look at it like this. I mean in the end, we are starting to build the first delivery vehicles, and we said we have ordered 25, set to 25 for this year, right. Obviously, those are small numbers in the grand scheme of things, so and as we ramp through the hundreds and thousands. So, we €“ in the near future, we see no issues at all with the supply. I mean €“ and hopefully, as we ramp through the thousands that the concerns alleviate even more from the industry.

Andres Sheppard: Wonderful. Thank you both. Congrats again on the quarter. I will pass it on. Thank you.

Daniel Barel: Thanks.

Operator: We will now take the next question. It comes from the line of Jeff Osborne from Cowen & Company. Please go ahead. Your line is open.

Jeff Osborne: Yes. Good morning Daniel. A couple of quick questions on my side. I was wondering if you could give us an update on the homologation progress of the Proxima and the P7-B, what you accomplished this quarter and what the outlook looks like over the next quarter or two quarters as you start deliveries in Q4?

Daniel Barel: Sure. I think Josh, do you want to take this, maybe and I will complete.

Josh Tech: Yes, sure. So, we are on track for homologation activities. As we said, we are looking to build our winter test vehicles and ship them up immediately, that’s happening soon, and then complete first our x-by-wire validation, and then completed by the rest of the vehicle. So, that’s slated for the second half of the year. So, we see no roadblocks doing that at the moment at all.

Jeff Osborne: And Josh, is that separately for the P7-B and the Proxima, or are you doing those concurrently?

Josh Tech: Well, the €“ if you think about it, the x-by-wire, it’s the same system, so we will do those concurrently. And then we do each chassis separately. So €“ but they are relatively on the same timeline. Both are set for the second half of the year to be completed.

Jeff Osborne: Got it. And then the comment, Josh, that you made about the 25 unit order for the parts and components for the second half of the year. What is the lead time for that? Like if there was demand for 50, could you do that within three months to four months, or do you have to give your supply base six months lead time, just given the little volume and probably more manual involvement, I am just curious on that front?

Josh Tech: Yes. We have that planned out based on the lead times. There is no issue there at all. I mean if you think about it, those orders are going to cover the vehicles we need for homologation and testing for both the Proxima and the P7 platform, the P7-B and then of course, the first vehicles to be delivered. So, the planned supply chain, as there is no issue with what we are planning versus the build plan at the moment.

Jeff Osborne: Got it. And if I could just squeeze in two more, if Tali had to pick one variable that’s leading to the demand, in your pitch, you highlighted 10 to 15 different reasons why you think your solution is better than the incumbent. But whether it’s turning radius, payload, etcetera, what would be the one variable that is exciting people to want to deal with you folks?

Tali Miller: Yes. I think the most important element that customers are looking for is the TCO, if I need to pick one, total cost of ownership.

Jeff Osborne: Got it. And then the last question I had is just at the show last week that you folks were at. There was a lot of, I would say, anxiety around charging and infrastructure availability, are you starting to work with the A customers on what their solutions are and ensuring that, that’s on time in terms of charging capacity so that they can take delivery of these vehicles, or are you letting them do that separately with outside of your involvement?

Daniel Barel: Yes. As we said before, we have partnered with Hitachi America on that to provide, among others, charging infrastructure for our partners, those who need some. Some come with other requirements and some we provide. But you are touching on the right point, right, because in order to transition the fleet to an EV, there is a lot of infrastructure that’s needed. And it’s not only, by the way, it’s just the charging, it’s also if you have enough power, that you can draw in terms of the need of the fleet. But we are working closely to optimize those.

Jeff Osborne: Got it. Appreciate it Daniel. Thanks so much.

Daniel Barel: Sure.

Operator: Thank you. There are no further questions at this time. I would like to hand back over to the speakers for final remarks.

Daniel Barel: Yes. So, I want to thank the REE team for doing a really good job in 2022 in accomplishing a lot of things that are very difficult to do. And we are all very, very proud of them, so I want to say thank you to all of them. And thank you all for joining our call today.

Operator: That does conclude our conference for today. Thank you for participating. You may all disconnect.

Daniel Barel: Thank you.