Q3 2021 Lilium Earnings Call
Good afternoon, and good morning to everyone. Welcome to lithium Q3 2021 business update conference call. My name is John Chime in R&D head of Investor Relations at lithium.
Before we start let me just go through a couple of housekeeping items.
This is a virtual conference call and for the moment all participants are in a listen only mode.
<unk> will first provide an update on our business progress.
The third quarter of 2021.
Brief question answer session Denver, followed the formal presentation.
Schedule to call for approximately 45 minutes, including Q&A time. Please note that this conference call is being recorded.
A recording will be posted on lithium investor relations page soon after the event.
As a reminder.
After yesterday's market closing, we posted on our website, our shareholder letter and a third in our series of blocks, which explains the key milestones on the way to aircraft specification.
We warmly invite you to read these communications.
Handing over to our CFO, Jeff Richardson, Let me just give a reminder of the safe Harbor language and other cautionary statements.
Govern today's presentation and are described in more detail on the first two slides of today's presentation.
Basically I want to remind you all that all presentation will include forward looking statements and any forward looking statements or comments, we make about <unk> future expectations beliefs plans objectives financial condition assumption performance projections forecast.
As a characterization of future events.
<unk> stances that are subject to risks uncertainties and other factors that could cause <unk> actual results to differ materially from such statements.
For more information on these risks uncertainties and other factors. Please refer to the cautionary statements in our shareholder letter and the risk factors discussed in our filings with the U S Securities and Exchange Commission.
All forward looking statements that we make during this call are qualified by this cautionary statement.
Should not place undue reliance on forward looking statements, which speak only as of today and which we assume.
No responsibility to update.
With this now let me turn over to Jeff our CFO to begin the presentation deck.
Thank you Pierre and good morning, everyone. We appreciate you joining us today.
With me on this call today are our co founder and CEO, Daniel <unk>, Chief operating Officer, <unk>, <unk>, and Chief Technology Officer, Alastair Mcintosh, Let me remind you first of our overall mission that Liam.
We're aiming to offer a sustainable and accessible mode of high speed transport with Williams unique all electric technology, we are working to Decarbonize regional Air Transportation and mid September. This year, we took a big step on this journey.
With your support we completed the business combination with <unk> and related private placement financing and the listing on NASDAQ. This sets the cornerstones sort of development of the lithium chat an all electric vertical takeoff and landing aircraft offering leaving capacity to move people and things.
Low noise and high performance with zero operating emissions.
Many people contributed to this accomplishment in particular I would like to thank Baillie Gifford Tencent Blackrock Pimco LGBT, Tom Mcgough, Honeywell talented are for <unk> and <unk> II Institute for their support.
Gross proceeds to the company from the transaction amounted to $584 million.
On October 27, 2021, our registration statement on form F, one, which registers the shares pursuant to the pipe.
By financing was declared effective by the SEC research analysts from three investment banks have already initiated coverage Piper Sandler Oppenheimer and Barclays and further coverage as expected looking now at our company's financials in terms of cash utilization we are on.
Track to achieve our communicated budget target for fiscal year 2021.
Operational spending for the year through September 30 was on budget at $141 $5 million operational spending for Q3 2021 amounted to $56 6 million.
As of September 30, we had approximately $529 million of cash on hand, and the coming fiscal quarter. We expect cash spending will increase as we progress through preliminary design review.
Milestone, our engineering and flight testing activities accelerate and we ramp up activities with our aerospace suppliers.
We expect the total cash spend to be in line with our previously communicated estimate of $221 million for fiscal year 2021.
At this time, we are finalizing our 2022 budget, we are closely monitoring the COVID-19 situation supply chain disruption and broader inflationary environment, which could put pressure on our unit costs in the future as well as a nonrecurring payments to our supply chain for tooling and engineering services.
Looking on the commercial side, our aircraft and the prospect of emission free regional aviation continued to advance and Florida Liam's networks network plans recently received a further boost with Palm Beach counties decision to approve the development of a versus B.
Built by Ferrovial at Palm Beach International Airport for the exclusive use of lithium.
To our knowledge. This is the first permitted versus poor by a local government in the United States lithium and Ferrovial continue to expand the partnership outside of Florida.
<unk>, a lithium investor and global leader in the development and operation of Transportation infrastructure recently announced plans to deploy a network of 25 Verder ports in the United Kingdom and more than 20, <unk> ports across Spain, Ferrovial intense design. These further ports.
The specifications of the lithium jet and for use by Williams future operating partners and customers. The expanded partnership and development is expected to give a lithium access to two additional key European markets, representing millions of additional potential customers.
Meanwhile, LOE Liam's planned German <unk> network continues to grow with Stuttgart Airport announcing plans to this October to join the planned Southern German network. The recent collaboration announcement with ABB on charging infrastructure as well as the planned 1 billion dollar commercial agreement announced.
Earlier with the dual Brazilian airlines for the sale of 220 of our Jets and the establishment of a co branded network in Brazil further confirm our strong business case and global reach the lithium jet is now entering into an important development phase with PBR underway.
Let me hand, now over to Ian <unk>, who can tell you about that.
Thank you, Jeff and thank you all for joining us here.
Since 2017 lithium has been in dialogue with regulators at the European Aviation Safety Agency, Piazza and the Federal Aviation Authority.
To ensure that the program the lines, we certification requirements.
We started a formal outcrop newbuild program in 2019 and that means applying rigorous aerospace programs development plan.
Medium is one of a handful of companies that has received the certification basis.
Zero, one which was granted to us by <unk> in 2020.
These certification basis lays out the Wilson has requirements to which the lithium jet must comply to be valuable for commercial operation.
As Jeff highlighted this November we unveiled the new design review phase PDR.
During this stage, we seek to gain sufficient confidence that the aircraft architecture will need.
Wilson this requirement will deliver performance and operational requirements, which are derived from our business cases and that it will be produced at the right.
We are forming a rigorous <unk> enables us to identify at an early stage in the development program.
<unk> areas, which might require fill their preliminary design work.
And <unk> participate in the BR.
So what comes next.
Completion of PDR will give the green light for our engineering teams.
To launch detailed design activities.
For our procurement teams to engage significant amounts of financial commitments.
Indeed, we will accelerate the selection and contracting of suppliers.
Where the placebo with established tier one aerospace suppliers.
Order to further reduce the program risk.
Since each sub system, we need to meet aerospace credit stand up.
So completing PDR is a meaningful milestone in the aircraft program development.
The second milestone on the road to simplifications.
<unk> in detail in the development block that we recently put on published on our Investor Relations website, which I invite you to consult keeps your interest.
Okay.
So regarding our suppliers.
In recent months, we have ramped up to contracting of suppliers for the regional jet program.
And we have already secured and a contract with a number of critical components.
In Korea of Uniques and flight controls with Honeywell.
And weeks with <unk>.
And Kelvin <unk> Suisse Tori.
We are working actively to mitigate supply chain description inflation, which we are seeing in several areas industry apply chain, including raw materials and electronic components.
The post Covid disruption in the supply chain is a major challenge for the whole aerospace industry.
As it puts pressure on prices and lead times and we have therefore.
Reinforced our procurement teams.
As announced in July we have signed an agreement with German based custom sales for the production of lithium ion batteries.
Preparations for our series produced rent book already progressing.
We expect delivery of the cells battery sales from custom sales series production line next year to support the development program.
In developing our battery system safety remains our top priority.
We are therefore, performing a number of test at sales and module level.
Meanwhile, we are preparing to introduce its state of the Yelp digital solutions for key activities of the program.
Our close collaboration with volunteer enables us to develop powerful and dedicated data analytics solutions, which will contribute to enable our derisked the development and traditional volume chip.
For example, our flight this campaign has become more efficient.
Tighter feedback loops by leveraging balance yield enterprises braking system foundry.
My colleague and CTO Alistair can tell you more about how they demonstrate a flight test outgoing.
Thanks, Steve.
Thank you to everyone for joining us today on the webcast.
Fifth generation technology demonstrator continues to progress in its test campaign.
Firstly actually took place in July.
This year in aircraft is since completely ruined 25 fleets.
We are really really happy with the performance of the aircraft and has proven to be extremely reliable technology demonstrates the stage and pace.
To the engineering and the quality of work that has gone in.
Flying thus far has covered multiple aspects of the flicked envelope.
This has included full explanation of the GPS position controlled holding blue Green speed of 19 kilometers an hour and forward real words and lateral a sideways fleet.
We have also stepwise expanded the SPD envelope up to 74 kilometers an hour with few maneuverability demonstrated.
Claiming descent at rates of 30 feet per minute SFC Bank degree bank angles acceleration and deceleration of being incorporated.
Also within these fleets with fluent with combined inputs and what I mean by that is.
The combinations of claim with acceleration and the cell defense wells performing bank tons. So we've used a number of different piloting techniques and indeed, we've also used a number of different pilots.
I really strongly recommend if you haven't done so already to take the time and look at our demonstrator fleet videos, which you'll find on the lithium news page all on our Youtube channel.
So next we plan to take the taste campaign to spin this will permit us to expand the fleet.
And more reliable weather conditions.
And test higher cruising speeds and also allow us to fly from proof transition from vertical to horizontal case.
We expect to receive the permit to fly in Spain, and Italy to mid 2022.
With that I'll now hand over to our CEO, Daniel vegan to Daniel's Google to you.
Thank you Alistair and good morning, everyone.
It's a pleasure and very exciting for me to speak to you today on our first earnings call as a public company.
We have made great progress on all of the key areas of our business and our company is advancing in line with these developments as.
As part of our organizational evolution.
<unk>, who is on the call today has been appointed Chief operating officer overseeing program management procurement.
Light chain and manufacturing.
<unk> brings to the role a wealth of experience. He spent 16 years at Atlas, where he most recently was head of quality for the successful Airbus <unk> hundred 50 program.
And senior Vice President of procurement and Airbus Defence and space.
The new CEO organization will further integrate important activities, which are necessary to drive the development certification and industrialization of our first lithium jet aircraft.
The procurement organization has been further enhanced with the appointments of Martin Shubin <unk>, our SVP procurement in the past Martin led procurement organizations, both at BMW group as well as Airbus helicopters.
Alex our Sealy, an early investor in lithium and previously Chief strategy Officer was appointed Vice chairman overseeing commercialization marketing culture and organizational design in this expanded role Alex will further leverage his expertise as an entrepreneur and founder.
There are several successful hardware tech companies, including Tech pioneer Jawbone and women's health technology innovator Aldi.
We have also strengthened our supporting functions where necessary to advance to the requirements of a listed company.
Within our finance organization for example, controlling and accounting functions has been strengthened in particular with the appointment of Oliver for Vegas, as SVP finance and controlling all the members. Most recently S&P controlling for the Airbus <unk> hundred 20 program.
And in addition, our catheter market orientation has been enhanced with the appointment of gun shy as our head of Investor Relations and capital markets.
We have already had a chance to meet here on the call John brings a wealth of capital markets entrepreneurial and ESG experience to this role having led to the Investor relations function of Daimler AG during their multiple stages of transformation.
As of today. The company has a workforce of around 750 people of which roughly two thirds are working on areas directly related to aircraft design development and certification. So we are entirely focused on the first airplane.
We are now approaching the point where.
Where we have the required head count and competencies, especially in aerospace experience within our organization to deliver on our game changing program.
Having received tens of thousands of applications in the first three quarters of 2021.
We attracted and recruited more than 150 employees. Many for key roles over this timeframe. We are pleased with the development of our organization and will begin to accelerate head count growth next year as we move towards around 950 employees.
Nevertheless, we will continue to target world class talent of aerospace automotive and technology.
Now, let me summarize some of our key achievements of the last quarter. We have progressed our aircraft development program S plans into the preliminary design review, our fifth generation technology demonstrator has performed extremely well in flight testing, while consistently extending its flight envelope.
The ecosystem of our top tier partners and suppliers such as Honeywell talent here and Ferrovial has grown from strength to strength with global infrastructure.
<unk> recently stepping on board.
Our commercial network plans have been boosted in Europe, and Florida with infrastructure partner stepping up to advance our rollout and we have announced plans for a 1 billion dollar commercial deal with the Brazilian airline as a whole for 220 of our lithium jets.
All these achievements were only possible thanks to our incredible team here at Lilien, who with their passion skill and extremely hard work move us one step closer every day to make our vision of sustainable regional aviation for everyone a reality.
In 2022, we will be entering an exciting next phase in our program as we progress into the detailed design of the lithium jet intensifying their collaboration with aerospace appliance and commercial partner skills further and flying hour demonstrator in transition to horizontal wind gone flight.
In the weeks and months ahead, we will continue to inform you of our progress.
And now let me hand over again to chess, who will open the floor for your questions.
Thank you Danielle scenario have time to take your questions. Please introduce yourself with your name and company as a reminder to ask a question. During this session. Please press star one on your telephone if youre watching the webcast in parallel please mute the sound of your laptop, while you're asking your question.
We will now begin the Q&A session.
Our first question is from.
Alex Potter Piper.
Great Hey, guys can you hear me yes.
Yes.
Perfect.
Yes, Alex Potter Piper Sandler.
Okay. So.
It's encouraging to hear about the development in the U K.
In Spain, the first time I've heard you speak specifically about those markets.
How far along would you say you are in the planning process relative to the work that you've already done in Germany in Florida.
I guess do you have specific locations route.
And what's the go to market approach will it be your own network similar to what Youre doing in Florida and in Germany.
Great question Alex.
Yes.
With those markets as you know Ferrovial takes the lead on the infrastructure side sort of what we do.
His work with them on looking at density of route.
And.
And use their experience together with ours and predicting what would be the best one.
For those markets I think were earlier in the planning stage, we have identified the routes and Ferrovial has identified the location. So the next step in that.
As for them to begin their permitting process in terms of our network.
Versus leasing about.
We're open to both but I think the early.
Foster likely network.
Next.
Does that answer your question Alex.
Yes, perfect. Thanks, Jeff.
Next question is from Colin Rusch.
At Oppenheimer.
Thanks, so much guys.
It is great to see the the video of the test flight and I'm curious about.
Some of the dynamics around optimizing the powertrain and the power system for incremental thrust and incremental payload. So obviously you guys are working towards.
Locking in the design here, but I'm curious about that.
The rapid pace of innovation around some of those technologies and how quickly and how it actually might be able to integrate them into.
And of the designs, notably looking at some of the power electronics and the batteries that were set up fairly quickly here.
Okay.
And I've got one for you Alistair.
Alright, thank you.
So currently at this stage in the program.
And as alluded to earlier, we're going through a preliminary design review phase, which is really locking down our architecture for our forces and our go to market aircrafts.
We're making good progress in that field. So we have a good architecture around the battery system.
Electronics.
The positive as it was in the design.
We're looking out here.
We have great access to video gradually upgrade the batteries.
As and when they become available.
So we're keeping very close to battery technology.
Can a driving it's actually been part of the leaders in this we are driving through the demand. So as these developments come online.
Should be relatively straightforward news photos.
Future point in time and to be able to bring them in as upgrades.
Once we've done that.
The relevant certification activity.
Yes.
Perfect. Thanks, so much guys.
Next question is from David <unk> at Barclays.
Hey, this is David <unk> Barclays Hey.
Exciting to read about the different pieces of the blog post you guys made up I guess I'm wondering.
About the flexibility you have inherent in this design review phase.
Are there any components.
To be at risk of <unk>.
Redesign or do you feel like you have the major components relatively locked out I guess, you talked a little bit about it, but maybe touch a little bit upon that and.
Whether you think this design phase and moving to the critical design review is tethered to kind of Finalization of the MLC SUV Tal.
Yes.
I'll start then Colin Terrace also.
Thank you.
A question at this point in the program.
If you if you refer to the globe as well.
Preliminary design review in the context of the overall program.
<unk> is a very intensive very intensive period.
Similarly, we have a.
Our review team that come in and really for us through our paces.
Independently as an as an internal team, but also answer with the external aerospace exports.
And essentially lose is to do them gain confidence in the architecture that we currently have and moving forward in that.
Clearly like any program.
We findings and issues that come out.
The typical of my past experience in gas turbines and equally with eve on the.
Aircrafts site. So we would expect to have some sort of findings in some sort of issues is really then us back into the design team and we just keep working those through.
The overall program. So that's kind of where we are not alone.
A little bit too early at this stage in time given that we are meant PDR process would be it wouldn't be prudent for me to second guess what the independent.
Dependent review team will find but I think the engineering team that we have are well positioned to pick up in those and run them to grow quite quickly.
Great. Thanks Alastair.
Next question is from Adam from Foresight.
Yeah.
Hi, there I haven't <unk> from Longbow Research and two questions. If I may 1st one just almost following on a bit from the last one and then also can given the comments on the supply chain in the shareholders letter I Wonder if you can say yet what type of merger Youre using and in particular, if it's a permanent magnet synchronous mature and if it is what's your.
Railroad sourcing strategy.
And then second question, just just pulling tranches comments on the next stage of testing for the transition and I'm wondering in terms of pilot training are you are you going to be looking at candidates with the fixed wing background or with more with the rotary backgrounds and how do you see the issues of training for the transition.
Is that really the area, where you need ultimately automation too.
Deal with issues around that.
Why don't we do Alistair for the first question and Daniel for the second question.
I was going to suggest that.
Fair enough.
So perhaps it is only on the supply chain side of things.
I think it was too early yet to comment on the supply.
Perhaps on the on the transition.
What I would say is more.
The extensive experience we've been flying transition on our previous generations of technology demonstrators.
We're just now going through the phase of bringing the fifth.
Demonstrated two lot level.
We have great simulation models, we have.
Arun simulators in house, as well, which we have developed including actual hunting out E ons with pilots.
Coming in and experiencing goes on as well so there's a lot of training actually going on and one of the activities that we've been doing with the fleet demonstrates that.
They're using it also to train pilots. So we've kind of between seven pilots and we'll continue that process.
So as we get through to the point of actually flying transition. We're confident that will be it will be should be relatively straightforward, we will experience before actually doing it and reallocate it in real life through the flight test program.
Yeah, Adam Thanks for joining and good question on the pilot science.
We have announced a partnership with Lufthansa here in Germany, our biggest airline in Germany.
About the pilot training. They have started this year to establish a pilot training program for us. So we can train the pilots into type ratings.
For these pilots so they can actually fly our airplanes, we have focused on fixed wing pilots and in this case, the aircrafts and behaves like a fixed wing airplane. It is.
Joel allocation like a fixed wing aircraft and to your question for the transition of side you had the airplane has to meet for certification purposes.
The same handling quality requirements as it does in crews right.
So fixed wing pilots will feel at home in this design.
And the reason is very much.
Obviously, the market is much bigger for fixed wing pilots.
Okay.
Next.
Next question is from Tristan at XL.
Yeah.
Yes, good morning, everyone. Thanks for taking my question.
I have two the first one is the human resources question, you've increased your workforce by about 25% of them over the past three months.
Can you indicate as quickly.
Where it goes or would you use these people fall where do you want to go in terms of.
Additional recruitment for the next 12 to 18 months.
All those people in Europe are complaining about difficulty to access skilled labor in aerospace Juicy constraints today in <unk>.
So that you're required to complete the development and production.
And the second question is on the PR from previous chart that you communicated it looks like your target was to complete <unk>, maybe in the 'twenty one 'twenty two before moving towards until competent design.
It's Sheila.
Yeah.
The right ambition all these leasing it can could be achieved because they do until 'twenty two.
Thanks.
Great questions Daniel.
You take the Org design question and he will take the question on PBR.
Yes, happy to and thanks for joining.
I want to correct, maybe that the 150 people who joined.
And not just in the last three months, but over the entire year 2021. So the 25% growth is not just in two or three months.
Most of the growth going forward between the 750 people, where we are right now and towards the 909 hundred 50 people next year will go into the aircraft program. There will still be a lot of engineering quality management and supply chain roles that we're gonna be filling at.
At the moment.
We're not concerned on filling these roles and I mean, there is a general.
Of course competition on great talent, but we've been extremely successful in the last 12 months and we're seeing no.
No changes on the recruitment numbers on the incoming.
Interest in applicants on there on the talent side at the moment.
Okay. Thank you Tristan regarding the question on PR.
I think it's.
I'd go back to where that is true and we are we have until the PDL phase in November.
It's a very overall.
Review process much need first enrolling engineering and then.
These reviews feeding into program. So at this stage early and premature to draw conclusions because there hasnt that access to the reports from the technical.
Activities. However.
It is not unusual at this stage of the program to find this shoe system that require further work.
Going to <unk>.
<unk> as behind these issues.
And.
Moving on to the.
The next stage is going to be on our way to see Dr. Where he is going to be a progression of design work and also contracting this light chain. So that's correct from and that's going to be the bulk of the activities of 2020.
So and we have great teams in place to do that now.
That's clear many thanks.
I think that was the last question so with that I think we've come to the end of our Q3 business update. Thank you once again for joining US we look forward to speaking again shortly.
Yes.