REE Automotive Ltd. Q3 FY2021 Earnings Call

Greetings and welcome to the REE Automotive Third Quarter 2021 Earnings 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.

Thank you, operator, and thank you all for joining our third quarter 2021 conference call. We hope you've seen our press release issued earlier this morning at investors.ree.auto. 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 differ from what is anticipated by such forward-looking statements for a variety of reasons, many of which are beyond our control. Please see our recent filing 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. In addition, we will be discussing or providing certain non-GAAP financial measures today, including adjusted EBITDA, non-GAAP net loss, and EPS. Please see our release and filings for a reconciliation of these non-GAAP measures to their most directly comparable GAAP measures. Joining me today is our Co-Founder and Chief Executive Officer, Daniel Barel, who will provide an overview of our business and give an operations update, as well as our CFO, Hai Aviv, who will continue with the discussion of our financial results and outlook, before we open up the call for your questions. At this point, I will turn the call over to Daniel. Daniel, please.

Thank you, Limor. Good morning and welcome to our third quarter 2021 earnings call. I will begin the call with an update on the company's progress on our many strategic initiatives and milestones we’ve achieved in the last few months. Then our CFO, Hai, will follow with a recap of the financials for the third quarter and our outlook. After that, we will be happy to take your questions. We have made great progress in our efforts to reach commercialization over the last quarter-to-date. To this point, we have accomplished many things to share, including securing customer validation for our first prototype, building out our supply chain, assembling our infrastructure, strengthening the team, and unveiling a significant product milestone of a fully autonomous last mile delivery concept vehicle. All of these accomplishments are coming ahead of our schedule, and we continue to make strong progress. In our first quarter as a public company, we outlined several of our targets to advance production readiness as we move towards commercial production in late 2023. Referring to that, I'm proud that our team has already achieved multiple milestones, thanks to the additional investment in our engineering and commercial capabilities. First, I'm excited that we reached significant customer validation milestones with Navya. As we successfully completed the re-platform validation, this is part of an ongoing validation process with Navya, a French-based company that is leading autonomous vehicle systems development. This is the first of a few prototypes we presented recently to customers while in evaluation, which we will be happy to share with you in the future. This is an example of a typical process we will go through with each of our customers that will result in us reaching commercialization in the coming years. This also demonstrates how we will advance our strategic alliances ahead of schedule, getting us closer to production and revenues. A second and important step towards commercialization is securing our supply chain. As part of our initial integration focus on the U.S.-based delivery van program, in strategic collaboration with JB Poindexter, we have extended supply chain capacity to support our growth. To this point, we started nominating key suppliers. This includes American Axle for high performance electric drive units and Brembo for a braking system. These nominations not only support our progress, but also provide validation for the supply side. These are critically important steps as we are not just buying components or implementing third-party technology. We are jointly developing key capabilities together. In addition, those suppliers commit to volume, allowing us to progress towards commercialization even during these challenging supply chain times. These partnerships are critical steps in the ongoing effort to build out our secured global vetted vendors' network. Yesterday, we introduced Leopard, our first fully autonomous last mile delivery vehicle concept. Leopard's design and specifications are the result of collaborations with multiple global delivery and technology companies to demonstrate one potential design application enabled by groundbreaking modular technology. Leopard is an industry vision for efficient and reliable delivery solutions aimed to meet the increased demand coming from e-commerce. The powered by REE Leopard utilizes the highest volumetric efficiency and range to optimize multiple business cases. We look forward to showing this concept vehicle in January at CES in Las Vegas, where attendees will be able to see this and other examples of REE technology up close and in action. From our facility infrastructure perspective, during the quarter, we continued to expand our U.K. Engineering Center to launch the Integration Center, a smart robotic factory that will serve as a blueprint for all future integration centers and meet expected European customer demand. We were also awarded $17 million in funding from the U.K. government to support our expansion efforts. We are now finalizing our site selection for our first integration center in our headquarters in Austin, Texas, and remain on track to break ground as the details are finalized. We have an extremely appealing value proposition for the growing commercial vehicle market, given that REE's differentiated modular EV platforms reduce the time to market for EV manufacturers. We believe this is yet another opportunity that supports our ability to grow significantly in the coming years. However, one constant that has not changed in the auto industry is the basic manufacturing process of vehicles, whether they are powered by internal combustion engines or electric motors. Other than the swap out of the ICE for an electric motor, most vehicle systems have changed little, with the mechanical control components and drive steer and brake functions remaining between the wheels and constraining modularity and functionality. We believe that new mobility requires a new approach to design, manufacturing, and serviceability, which is why REE is fundamentally changing our approach to EV design and manufacturing. Specifically, our value proposition includes REEcorner patented technology that integrates critical vehicle components such as steering, braking, suspension, powertrain, and control into a single compact module. Our fully flat EV platforms are geared to serve as the underpinning on top of which EVs and AVs will be built. They are designed to provide greater interior space and volumetric efficiency as compared to vehicles on legacy architectures. REE's modular EV platforms with state-of-the-art x-by-wire technology are capable of carrying more passengers, more cargo, and being in service longer, translating into major cost savings and lower cost of ownership, which we believe will ultimately result in higher revenue for our customers. Because of this approach, we believe that our technology is future-proof. It can be used for building vehicles to serve virtually any applications. EVs and AVs that are powered by REE are agnostic to vehicle size, shape, power source, and driving mode. They can operate using either batteries or fuel cells and be either human-driven or autonomous, all while affording complete design commonality across corners. The REEcorner and REEboard are designed to be manufactured via multiple production lines across the world that feed our global network of integration centers in collaboration with the world's leading Tier 1 suppliers. The result is a faster time to market, significantly lower capital investment, and the security of supply chain capacity that provides quality control. I've said it many times; just like Intel Inside powers everything from laptops to data centers, future vehicles powered by REE are intended to power EVs in all shapes, sizes, weights, and dimensions. Given our unique technology and manufacturing approach, whatever EV technology wins, REE wins. We are laser-focused on growing our effective market share while expanding various vehicle types that are powered by REE. In that pursuit, we have signed multiple strategic collaborations with major OEMs and leaders across the automotive and mobility sectors. Our business plan calls for us to complete— not compete with OEMs—by providing the crucial EV platforms on top of which they can build any type of EV. Moreover, with the traditional approach to vehicle manufacturing, introducing a new platform to the market requires 5 to 8 years and $1 billion to $2 billion of investment. With REE's platform, we believe that time to market can be reduced to 18 to 24 months and a fraction of the cost. We are excited that major corporations such as Hino, Toyota's truck arm, Magna, JB Poindexter, and Navya, which are all facing the challenges of offering or using best-in-class electric vehicles as soon as possible, are choosing our platforms and technology. And we are actively working to build their future vehicles powered by REE. Through our strategic alliances with major industry players, we gain access to the extensive customer base and sales of hundreds of thousands of vehicles, which today are traditional vehicles, but in the future will be best-in-class electric vehicles powered by REE. As we continue to set REE apart from others in the industry, we have already started to reach many positive milestones and targets consistently as we continue to advance toward commercial production in 2023. Additionally, in a world of rising challenges and costs, we believe that the fact that we can provide solutions for so many in the industry is starting to be realized. With that, I will turn the call to Hai.

Thank you, Daniel. I will address our financials for the third quarter, along with some of the milestones we reached. But first, consistent with our last call, I would like to spend a moment to connect the dots for many of our milestones achieved so far to the drivers of our financial performance over time. In our commercial agreement, we work in collaboration with customers to assess the market and determine a potential 5-year outlook with focus on volume. As Daniel mentioned, our commercial partners are leaders in the field, and these assumptions are based on the current market share and the expected switch from ICE vehicles to electric vehicles. Additionally, and consistent with the sector, as we move forward in the program, the level of contractual commitment from the customer side increases. The next milestone is customer evaluation of our prototypes, or nonpublic code. The acceptance of our first prototype with Navya, as part of the testing process, was ahead of our third quarter 2022 expectation. After successfully completing the testing process of the prototype, we expect the customer to place a firm unit order. Once we have the commitment, we will then develop the engineering bid for the public code testing, which will be very close to the final production intent. Here is where we expect to see the level of customer commitment increase, as well as our spending in tooling and materials. Following a successful public code testing process, we expect to receive purchase orders from the customer. This will lead to commercial production in revenue generation. We continue to scale our activities towards entering commercial production in late 2023. By the end of the third quarter, our headcount reached 231 employees, growing by 60 employees over the course of the third quarter with the most recent hiring across the company coming in R&D and engineering. We expect to have approximately 270 full-time employees by the end of 2021. Now turning to our third quarter financial results. As part of our choosing specific milestones with Navya, we have received payments from Navya, which were recorded as deferred revenues in accordance with U.S. GAAP and are expected to be recognized in future periods. As we continue to ramp and invest in the business, our GAAP net loss for the third quarter was primarily related to $410 million for noncash stock-based compensation, which we discussed in the Form 20-F we filed in July of this year, resulting from previously performance-based options that vested at the time of the closure of the merger with 10X. This noncash expense was partially offset by income from the evaluation of warrants of $17.3 million. As a result, the total GAAP loss was $450 million, compared to a GAAP net loss of $18.8 million in the third quarter of 2020. The non-GAAP net loss for the third quarter was $19.5 million, compared to $4.4 million in the third quarter of 2020, as we make progress with our commercial programs, nominating suppliers and continuing to advance our technological and engineering capabilities with increased investment in R&D. We finished the third quarter of 2021 with cash and cash equivalents of $294.5 million compared to $44.7 million at the end of 2020. We expect our cash balance will fund our accelerated development, support further strategic collaborations, and position us to achieve the start of commercial production in late 2023. Looking ahead, we expect our total annual operating and capital expenditures on a non-GAAP basis in 2021 not to exceed $75 million. We expect total expenditures will continue to ramp as we head towards commercial launch in 2023. Additional targets on the commercial side include ongoing execution on REE's program, including the delivery of additional prototypes for nonpublic code testing, expanding industry penetration through additional partnerships and expansion of a variety of EV types powered by REE, and establishing a North American maintenance and support network. On the production capability side, our targets include expanding supply chain capacity by executing additional collaborations with leading suppliers, growing our global secured vendor network, and breaking ground on our U.S. integration centers. And with that, we thank you again for joining us. We will now move to the Q&A session.

Okay. And now operator, we can open the line for questions, please.

Our first question is coming from the line of Mike Shlisky with D.A. Davidson. Please proceed with your questions.

Hey, guys. Good morning, and good afternoon to you. I wanted to ask …

Good morning, Mike.

Good morning. I wanted to ask first about the Leopard product. Could you tell us if it is designed for a specific customer that allows you to display this? Or is it something that you could potentially sell under your own brand in the future?

Yes, good morning, Mike. It's Daniel. We're very excited to present Leopard as a fully autonomous vehicle that we believe is currently best-in-class. This represents our vision for the industry and involves extensive discussions with several leading companies from logistics and technology sectors about the future of the industry. We are collaborating with these companies to understand their needs as they relate to the platform enabled by REE. This involves detailed discussions with various market players about what they want and what we should develop together. It is a collaborative effort rather than just us building the platform independently. What you see here reflects the initial results of those collaborative efforts, showcasing what we collectively believe is the appropriate size, approach, volume, and pricing. It has taken significant time to reach this point.

But is the vehicle itself something that can go on the road today? Or is it just a concept where you're showing what it could look like today? Just functional or just a nonfunctioning product at the moment?

Oh, it drives. It definitely drives. And we'll be sharing far more than just driving it. I think even later on today. I just don't want to steal the thunder from somebody in marketing today. But no, no, it's definitely driving. However, it's not intended specifically with this body to go to market. Each of our players has different views on the design of the bodies. I'll just give an example, right. You can have compartments, you can have it heated or cooled, you can have it built a little bit differently, or access differently. Basically, this specific vehicle is built for nonpublic road tests, as we test different autonomous technology integration and different top hats, as well as the usual stuff we do. But why I think it's very important to understand about that vehicle, the Leopard, is that it's actually built on a brand new REEboard. So we just presented to the world just another new platform with brand new corners, REEcorners and brand new platform architecture. That is going to be the basis of those kinds of vehicles for the future to come. And that's for us very, very exciting because it opens a really large market opportunity for us.

Got it. I also wanted to ask about the customer that you're targeting for 2023 launches. In the last call six months or so, have they changed at all what they're looking for from REE in terms of size or what kind of products they will be putting out there? There has been a lot of talk about shipments getting heavier; are you facing any last-minute changes here? Do you think that the platform you’re working on can handle most any non-heavy duty, long haul cargo here?

Oh, that's a good one. Yes, the answer is yes. With two of those programs, we've seen higher demand for higher payloads. Some of them are actually targeting Class 5s at this point, initially starting from Class 4s. So we were going up the volume and up the payload on those. I think that's a good question because it shows how modular our technology is. For everybody else, it would have been either impossible or a complete redesign. Traditionally, for us, this is exactly what we're built for. So when they come in and say they need higher, heavier loads, and slightly more volume, the answer is, of course.

So basically, you're on it, and you have no issues if someone has to change; like that could change the class of vehicle entirely, but just not a major issue for REE at all at this point?

It's never black and white; it depends on many factors. What does it require? Conceptually, the answer is yes. I mean, this is what we build for. Sometimes physical limitations— sometimes sizes of brakes you have to go from, I don't know, hydraulic braking to air brake system, etc. So it might be a little bit more complicated in terms of time to market and design. But conceptually, it’s a very clear case study of our ability to be modular. The commonality of corners allows us to take the same corners and put different chassis and different bodies on them. That's exactly what we're happy to do. We've seen actually a spike in demand from customers coming with different asks and changes recently as the market evolves, and we are very proud of our ability to answer those challenges quite straightforward and easily.

Got you. I hope you don’t mind if I ask just one last question out here to reach for Hai. Do you have an ending share count we could run with at the end of the quarter?

Yes. So, as we mentioned in the press release, our headcount for EPS calculation was 264 million shares at the end of Q3.

Got it. That's just the average, right? Just want to make sure.

Yes, that's the average. And that's the average number for the EPS calculation.

Outstanding. I'll pass, but that's the average. Is there a September 30 share count at the end of the quarter we can go with because obviously, you had a mid-quarter major change there?

Yes. So for the EPS calculation, this is the number that represents the calculation.

Okay. We can follow up if we need to offline on that. I will pass it along, guys. Thanks so much.

Okay. Sure.

Sure.

Thanks, Mike.

Thank you. Our next question comes from the line of Jeff Osborne with Cowen. Please proceed with your questions.

Yes, good afternoon, guys. A couple of questions on my end. I was wondering about the braking and axle partners you have with Brembo and American Axle. How should we think about the number of strategic suppliers that you're going to have per program? Is this two or five? If you could just sort of rattle off what the key components are that you expect to name as awarded suppliers, that would be helpful to put the two announcements thus far in context?

Yes. Sure, absolutely. Naturally, when you nominate suppliers to a specific program, it divides between strategic suppliers, which are dedicated specifically for those programs, and general suppliers, which are common in a few programs, typically for parts that are not the core technology. I assume the question is around our strategic suppliers who are working together with us on the core of our technology, the corners.

Exactly.

Yes. So you should expect around a handful, maybe a little bit more of key suppliers, with a healthy amount of redundancy between suppliers. We are very much partnering with them in a sense that I think what makes us very unique is that we're not just buying Tier 1 technology or putting off-the-shelf products into our core technology. That's not the way it works. We design and develop together. We make sure that we bring the best minds into that and create something that nobody else has had in the market. And of course, this is only ours to use. With that joint development, I think American Axle and Brembo are amazing examples for that because they represent the top tier of ADUs and braking technology in the world. It’s a privilege to work together with them in developing things, and then to have them produce at the quality and efficiency that they can. The nomination of those suppliers also guarantees us production capacity, which in these times is critical to our program; ensuring we have ample capacity for the demand that we see.

Got it. That's helpful, Daniel. Another question I had is, is there any update on where things stand with Hino and Magna? You mentioned them as strategic customers. Obviously, a lot of the commentary on the call was associated with Navya just given the progress there. Anything to report on those other two key customers or partners?

Yes, sure. First of all, naturally, we can't share everything that's going on behind the scenes. We're trying our best to be as transparent as we can, taking everything into account in terms of development. Some of these programs are quite secretive because of the nature of what we're developing together, and we want to make sure that once we get to the market, it's done properly. Having said that, to your question, we shared Navya because we didn't share, if you remember, that we are about to do something. We shared what we did, we shared the result. The same with American Axle and Brembo. I think looking forward, this is what you guys should expect; we want to share with you as many things as we can regarding what we've done—what we've actually done. That doesn't mean we aren't making quite a lot of other things behind the scenes. We've made tons of progress with Hino, and our partnership with Magna is incredible, and we're making strong progress there as well. The logistics company we mentioned a few months ago that we've signed with— the program is maturing, and we're nominating suppliers to it. You can see advancements from all around what we do. We're ahead of program; we are ahead of time in many of the programs that we currently run, including those that you've mentioned.

That's great to hear. That's all I had. Thank you.

Sure. Pleasure.

Thank you. Our next question comes from the line of Igor Levi with BTIG. Please proceed with your questions.

Good morning, guys.

Good morning.

So the supply selection and now nonpublic road testing for the first customer completed significantly ahead of schedule. I think I believe you originally were targeting Q3 of next year for nonpublic road testing according to your presentation. On the call, you talked about the next steps to reaching public road testing, including engineering the final build. For your audience that does not have an engineering background, what is the difference between the nonpublic build, the one that you've tested successfully, and the final version? And what is the process to get from one to the other?

Yes, sure. First of all, thank you for noticing that. We are significantly ahead of time on that milestone. I think that's a result of, if you guys remember in the previous earnings call, we said we're going to grow our expense on engineering to address the growing demand.

Apologies. Unfortunately, we can't hear you coming through the speaker line anymore. Could you check if you self-muted? Sorry, once again, we can't hear you coming through the speaker line. Could you please check if you self-muted? Ladies and gentlemen, please stand by while we get the speaker line back online. Okay, we do have the speaker line back in.

Are we back?

The speaker line is back.

Hi, everybody. Sorry, the call was disconnected. Apologies, Igor. I’m not sure how much of the answer you heard. Let me know if you'd like me to start over.

Yes, I mean, it was about 10 seconds in or so; reset. Thank you for noticing the words significantly ahead of schedule. And then about 5 seconds after that, they cut off.

So you've got the important part. No, I'm joking. Let's do this from the beginning. So you asked what the difference is between the public road and nonpublic build and public road testing, and what needs to happen in between? Am I correct?

Yes.

Okay. So again, as you mentioned before, and thank you for that, we've done this significantly ahead of time. That's mainly due to the fact that we increased our spending on engineering and our ability to go to the market faster to address the growth and demand that we see. When we do private road tests, it means that those vehicles are not yet homologated, or there are still expected changes. There are differences at the vehicle level, right, in A build, B build, and C build. You expect those vehicles to have minor to significant changes as the program develops. Therefore, you keep on doing that on private roads. That does not mean they don't go through durability or safety or any other test that you can think of; it just means it's a closed environment. Once we understood that this is what the customer is looking for, this is why customer validation is so important, and this is why we set up that milestone in our deck. Navya is the first of them, meaning that the customer validates the prototype on a private road test. Just to make sure we understand it's not a singular event in time; it's a process. There are a few tests being done with a few builds on a private road test, and then once this is done, we expect the customer to provide firm orders to that program. Without firm orders, we then build the capacity fully and the first production units of that line are tested on the road. The public road tests are tests done at the pre-production services, which are production-intent and not design-intent. Therefore, they come off tooling of the process with almost everything relevant for the full vehicle. I hope that answers your question.

Great. Thank you. Could we see public road testing completed in the first half of next year based on where we are?

You would definitely want to see public road tests prior to us starting commercial production by 2023, that’s for sure. I think with the multiple programs we currently run, we should be able to do a public road test on time, as we are saying in the deck on the website. It is very important, though, to understand that the private road tests we see are the more complicated, if you'd like milestones because this is where the changes occur. The rest of the milestones are mainly around bringing the product to production intent and ramp-up. We all believe, according to our integration center strategy and our strong partnership with top-tier manufacturers, production is something we believe we can very successfully address.

Great. And just recently, you mentioned that some customers are asking for heavier payloads. For example, a customer that was targeting Class 4 is now asking you to do Class 5. How quickly are you guys able to adapt to such change since you mentioned that as a competitive advantage? If midway through the process, they say, well, we also want half the vehicles to be Class 5 vehicles and this changes the design. Is that something—how quickly can you adjust to that and then still keep production on schedule?

I will try to answer because I'm afraid the answer is a little bit more complicated than I think we have time for. It depends on where the change resides. If it's only a payload function and it's within the commonality of the corners, that means those corners can support that and more. Then it’s straightforward; we wouldn't have to design a new chassis, because there is nothing residing on that chassis since everything is in the corner. It would take a few months to do, so fairly quickly. If there are vehicle dynamics restrictions— such as, I don't know, moving from coil dampers and springs to air suspension, etc.— then it depends on whether we have already done this or not. You can probably imagine that we have quite a few players we're speaking with on the market. Most likely, we've been working on that prior. So the path to that should be straightforward. Currently, we have not delayed any program due to a change in requests.

Great. That's extremely helpful. Thank you for the answers. I will turn it back.

Pleasure.

Thank you. Our next question comes from the line of Adam Jonas with Morgan Stanley. Please proceed with your questions.

Guys, when—how many of your prototypes are in the hands of potential customers being tested right now? I guess in that definition, there would be platforms or corners of significant content that are being tested.

Yes. Usually, when we send our product for customer evaluation, we prefer sending a full platform because it's easier to test; it shortens the testing time. So we've already, I think, earlier today communicated that a few of those have been tested around the world. If you've followed, I think a few months ago on my LinkedIn account, I already showed when we shipped the first one of that. They’re in different types and configurations, and they’re still being tested by multiple companies in several fields, mainly being delivery and shuttles as well as autonomy.

Okay. Thanks, Daniel. And maybe for Hai, just a clarification. I think Mike asked the question earlier just—to clarify further what is the fully diluted share count—not the average for EPS, but for valuing the company, either at the end of the quarter or in real-time that you have calculated for valuation purposes, fully diluted shares outstanding?

One second. One second, I will get back. If you need more time, we can—before the call ends that would be great. I don't mind waiting for you.

Sure. Hai will get back to you on that, Adam, in a minute.

Okay. And just a final one, what would be a run rate for SBC? Obviously, Q3 was extraordinary due to the true-up. But what would be a suggested run rate of SBC, let's say in Q4, or maybe early next year that we could work with? If you could give a range. I know that's dependent on stock price factors too. But I didn't know if there was a range you could provide. That's all the questions I have. Thank you.

Yes, sure. As you can see, the magnitude of stock-based compensation for Q3 was higher than we expected than what we usually had. In Q4, we expect the magnitude to be significantly lower in the ranges of $14 million to $16 million for Q4.

Okay. Thank you. Understand.

Yes, and Adam, on your question about fully diluted shares, as of the end of Q3, we had 364 million shares on a fully diluted basis.

Thank you very much.

Sure.

Thank you. There are no further questions at this time. I would like to hand the call back over to management for any closing comments.

Thank you, operator. I know that there are no more questions. But as part of our efforts to strengthen transparency and accessibility and the importance we see in communicating and interacting with our various investor types, this quarter we started using a dedicated Q&A platform, which allows investors to ask and upvote questions. We will read and review a couple of questions that received the highest number of votes. So the first one is on execution, and I'll read the question. Daniel will answer. Can you please comment on any potential hurdles to executing production plans, including microchip shortages, testing needs, or changing customer expectations?

Yes, on that. What I can say is that the supply chain is always challenging. It is very important to solidify that starting very, very early, and we've been doing that since 2018. We're securing our global vendor network with leaders of the Tier 1 global players, like we've recently nominated American Axle and Brembo, but we should not forget Musashi, Maxion, KYB, and quite a few others. We're developing and collaborating on the development and manufacturing of those subsystems, which they will manufacture, and we will integrate into our corners and boards platforms. The fact that our vetted vendor network is large allows us to have the flexibility to choose the perfect partner for each of those programs and allows us redundancy in terms of any shortages as we move forward towards production and after SOP. We are very proud of the partners we've made in the supply side. I think that the fact that we're working together is great news for our customers, since they will naturally be getting the best components out there at the best quality and on time.

Thanks, Daniel.

I'll just maybe add one thing is that, in addition to that, we've tripled our headcount, which is mostly with experienced developers and engineers in the past few months. We are on target to hit the 270 target for employee count by the end of the year. So with that, we also have additional capabilities of producing and executing our plan.

Great. So one more question regarding the economics of the product. The total cost does look appealing for the final user. But isn't there a risk that your specific partners will lose in terms of revenue if they're working with REE? Why is it advantageous for OEMs to work with REE?

Yes, that's a good point. First of all, we complete—we don’t compete. So I don’t think anybody who works with us loses anything; they only have things to gain. In many cases, it's not about making revenue but rather about making profit. Since we can develop those platforms modularly and address the changing market faster—significantly faster—in a fraction of the cost, in many cases there's no brainer for OEMs to decide to work with us since day one. Usually, they focus on battery technology, autonomy, and connectivity. Most of them have not developed chassis and drive trains for many years. It's all been outsourced to Tier 1s, with whom we work. It's the same chain. In addition to that, people should also take into account that a key factor for OEMs now is time to market, since the market is changing so rapidly. Having a program for 10 years and developing a vehicle, and then coming out at the end with a product that the market has changed preference for, is very expensive. Therefore, us being able to bring those products to market faster and deal with the changes in market preferences is very compelling for OEMs. We're very excited about our partnerships with world leading OEMs. I think that's the question we have.

Yes. Thank you, everyone. Thank you for joining us today, and we do look forward to touching base very soon. Good day.

Thank you, all. Thank you. Take care.

This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Have a great day.