Q3 2022 Lilium NV Earnings Call
Speaker 1: and great to join you all on this call. Ladies and gentlemen, I'm really excited to share with you our latest achievements. Firstly, we signed our first commercial contract with pre-delivery deposits.
Speaker 2: The UK operator Evolari has secured deliveries of 10 aircraft with the option to purchase another 10. Evolari will serve the Greater London area with it. As part of the agreement, Evolari will make a pre-delivery payment to Lilium to secure aircraft delivery slots. The deal coincides with the formal launch of the Lilium Pioneer Edition. Sebastian will give you the details about it in a moment. Secondly, we signed our first major commercial agreement in the Middle East with Saudi Arabia.
Speaker 3: Saudi will have the option to purchase up to 100 million jets and will establish an e-motor network in Saudi Arabia. With this we have a total order pipeline of 603 aircraft. We will continue to convert MOUs into binding aircraft purchase agreements in 2023.
Speaker 4: Third, we successfully completed our fundraising on November 22nd. Thanks to further investment from existing shareholders, new investors and strategic partners, we completed a capital raise of $119 million.
Speaker 5: We also made significant progress towards certification. We have now submitted about 80% of our certification plans to EASA up from 38% in September . Next week we will conduct our third design organization approval audit.
Speaker 6: Lastly, our flight test campaign is advancing. Flight tests have continued, including ground effects, dowel wash measurements, and further high-speed testing up to 120 knots, which is about 222 km per hour. Our second demonstrator aircraft is ready to join the campaign in early 2023.
Speaker 7: Let me now hand you over to Sebastien Bovell, Senior Vice President Commercial, for a more detailed update on our commercial achievements. I would like to use that.
Speaker 8: Thank you, Klaus. Earlier this year we have...
Speaker 9: We clearly outlined our commercial strategy with a two-phase approach. A first phase addressing the premium segment including general and business aviation, and a second phase to address the scheduled regional services for the mass market.
Speaker 10: To support the first phase, Lilium launched a limited series to address sales to private individuals, the Lilium Pioneer Edition.
Speaker 11: This limited edition comes with a compelling service, tailored support, training packages, as well as exclusive cabin customization.
Speaker 12: The Lydian Pioneer Edition is limited to a total of 50 aircraft, all of which we expect to sell by the end of 2023. All of them with pre-delivery payments of at least 50% of the purchase price prior to delivery.
Speaker 13: As Klaus mentioned earlier and in conjunction with a launch of our Pioneer Edition, Lilliam has received its first binding contract with pre-delivery payments from eVolare, a subsidiary of Volare Aviation, one of the UK's largest helicopter and private jet operator.
Speaker 14: With its base in Oxford, eVolare provides access to prime locations around the UK, including the greater London area.
Speaker 15: This partnership includes a firm commitment for 10 Lillium Pioneer Edition jets, including pre-delivery payments, with an option to purchase an additional 10.
Speaker 16: Best is to hear from Goran Rehabilitation directly.
Speaker 17: My name is Dustin Dryden, I am the founder and chairman of Velare Aviation. Velare chose to partner with Lilium after looking at several of the other manufacturers in this sector. We felt that having looked at the Lilium jet, it offered the best combination of beautiful looks, incredibly clever design, a lovely cabin and a...
Speaker 18: so much redundancy that safety is better than anything that we currently produce or operate. From a sales perspective, the Lilium jet presents incredible opportunities. It is something that will be attractive to people that own helicopters, because it can do everything a helicopter can do, but in a quieter environment, it is going to be attractive to people that like supercars.
Speaker 19: industry disruptor, something that I've enjoyed doing throughout my career. The teams working together in Germany and the UK have come up with an absolutely fabulous product that our customers are going to love. That really is a solution to the future.
Speaker 20: Going back to October , LENUM announced a MOU with Saudi with the intent to purchase up to 100 LENUM jets and to deploy a high-speed eVTOL network in the kingdom.
Speaker 21: We believe that this partnership is the first of its kind in the Middle East and totally aligned with Lilium's premium lounge positioning.
Speaker 22: As part of the partnership, Saudia will support Lilium with local regulatory approvals.
Speaker 23: These two agreements, Ivolare and Saudia, bring the total order pipeline to 603 aircraft.
Speaker 24: Lillian will continue to convert further its existing commercial use into binding aircraft agreement, Shell agreement in 2023.
Speaker 25: William also views pre-dealer repayments as an integral component of our future capital structure and with this more from Jeff on our finances now over to you Jeff
Speaker 26: Thank you, Sam.
Speaker 27: This November , we announced the successful closing of a $119 million capital raise from existing shareholders, new investors, and strategic partners.
Speaker 28: Participants included Acetori and Honeywell.
Speaker 29: as well as LGT and its affiliated impact investor Lightrock.
Speaker 30: as LGT and its affiliated impact investor LightRock, Tencent and B.Reilly Securities.
Speaker 31: Williams CEO , Klaus Riva, as well as three board members.
Speaker 32: Barry Engel, David Wallerstein, and Nicholas Zentstrom also participated in the capital raise. We are pleased to have such a high quality group of supporters in a challenging macro environment.
These proceeds will strengthen our balance sheet and allow us to proceed with the assembly and testing of our type conforming aircraft, as well as reaching final agreement with EASA on our means of compliance.
As we progress on our development, we are in active discussions to secure additional non-dilutive funding sources to finance our operations until type certification of the Lilliam Chat.
These include grants and subsidies from governmental authorities as well as pre-delivery payments.
discussed earlier on this call.
Additionally, we terminated the equity line of credit facility in November . Overall, Lilliam received proceeds of approximately $12.6 million from the ELOC.
Let's take a look now at the Q3 financial results.
Our total cash spend was 69 million euros in Q3.
The increase in cash spent compared to the previous quarter of Q2, 63 million euros, was driven by a ramp-up in one-time supplier payments.
which included the e-motor development and battery industrialization of approximately 7 million euros.
This is in line with our target budget of 250 million euros.
in 2022. Our liquidity as of the end of Q3 and prior to the recently completed investment round
stood at 160 million euros. At the end of Q2, it was 229 million euros.
Looking ahead.
Given the macro environment, inflationary effects, and market uncertainties, we've initiated significant cost conservation measures at Lilly.
We are currently finalizing our budget for 2023 and expect it to be consistent with our 2022 budget. I'll hand it over to Klaus for the latest program updates.
Yeah, thanks Jeff. As I mentioned before, our certification program is making significant progress. Since our last update, we have submitted to IASA several more of our proposed certification plans, bringing the percentage of requirements covered to about 80% at the end of November .
up to 38% in September . Lilium's remaining certification plans are largely drafted and ready for submission. 72% of the means of compliance are already agreed with EASA and for the remainder Lilium submitted its proposals for EASA earlier this year.
ETA discussions with the ASSA over the past month have led to significant progress on the remaining needs of compliance. Based on those discussions, we anticipate that the ASSA will accept our needs of compliance in the first half of 2020.
next year. In parallel with the type certification program, Millennium is working towards design organization approval with EASA. The DOA is a necessary prerequisite for any aerospace company to obtain a type certification of its aircraft.
Lilium's third EOA audit is scheduled to take place next week and the fourth and final audit is targeted for the first half of 2023.
On to our industrialization.
With our first pipe conforming aircraft due to go into assembly next year, our detailed design and collaboration with suppliers is accelerating.
Strong partnership with Tier 1 aerospace suppliers are fundamental to our path towards certification and industrialization.
All the key subsystems of the aircraft need to meet the rigorous aerospace quality standards.
Lillium has agreements in place for air structures, avionics, battery cells, energy management systems, e-motors, propulsion systems, aircraft interior and landing gears, amongst others. In total, we have now selected or contracted about 75% of the total expected aircraft bill of material cost. For more information, visit www.lillium.com
Right now we are in the process of onboarding additional suppliers for the engine fans and the Inceptors, the side sticks used for the new brings a lithium jet.
Turning now to our flight test activities. Our flight testing continues with a current focus on high speed maneuvers, ground effects and downwash measurements.
Downwash measurements relate to downward flow of the air from the aircraft are important to validate vertical operations.
Let's have a quick look at some highlights since our last call in a little video.
demonstrating that the airplane can take the operating circumstances but decide when your landing ground effect high speed flight or failure phase two.
We also train multiple pilots recently to fly the aircraft so we can speed up our testing as we bring our second demonstrator into the test campaign.
We are now validating also our models and control software in these safety critical areas. We then use the validated models for certification of the production aircraft. And for the moment you will see us proceeding with high speed flights up to one of the influential models.
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An accomplishment of these latest miles, don't the aircraft continue to perform precisely as predicted by our computer-aided flight models.
The Phoenix 2 demonstrator enables us to verify in a real world environment the flight physics underpinning our serious aircraft, the Lilium Z, and supports our certification program.
An additional demonstrator aircraft called Phoenix 3 is in the final stages of integration testing and due to end-of-flight testing in Q1 next year. Having two demonstrator aircraft at our disposal will give us additional support for testing and learning before the first flight of our type-conforming production aircraft.
So, let me please conclude with the following summary and outlook. We've made significant progress advancing our commercialization efforts in the third quarter with the signing of our first binding aircraft order including pre-delivery deposits and a breakthrough in the Middle East with the Saudi MOU.
Having successfully completed the latest fundraise, our teams are fully focused on achieving the development and certification of the Lilium jet and building out our manufacturing and supply chain capabilities.
We are confident we have the right technology and the right team to bring this transformational product to the market.
In 2023 we will be working full steam towards signing binding agreements with deposits, securing government loans and subsidies, starting assembly of our type-conforming aircraft, building and testing our first battery packs.
further flight testing with both technology demonstrators, receiving the design organization approval, agreeing the full certification plan and means of compliance with the EASA and class, preparing the manned first flight in 2024 of our type confirming aircraft.
And now let me hand you over again to Jeff who will open the floor for your Q&A. Thank you, Map.
Thank you, Glass. So now we have some time to take your questions.
As a reminder, to ask a question during a session, please press star 1 1 on your telephone. If you're watching the webcast in parallel, please move the sound on your laptop while you're asking the questions. We will now begin the Q&A session.
Thank you very much.
The first question comes from Colin Rush from Oppenheimer. Please ask your question.
Thanks so much guys. Moving from having LOIs into actual deposits with customers is a pretty important step and I'm curious about the conversation with those customers. What's been a key levers? Are you looking at the subsystem testing? Is it around the redundancy like they mentioned in the video?
How are you seeing folks evaluate the product and decide to get over the hump and start spending some actual cash here?
Séb, you want to take that, please? Yeah, absolutely. We've announced very early on this year our partnership with Netjet, and we have engaged with a number of customers, some of which we announced during Fonbroke, and it became very apparent that some of the unique features...
of our aircraft became a unique setting point. And we are the only one having a full wing and 30 engines. So yes, the redundancy in the safety aspect is absolutely a major component compared to conventional helicopters.
And so as we progress also through our own program in engineering and the confidence by which we can really provide everything you need to put into an agreement which we know is performance related and warranties and as we're also progressing with our supply chain, we were absolutely able to
transform all of the work we've done this year with the first phase segment, which is really right now the general and business aviation segment, into a contract with deposits having binding terms on both ends.
if that hopefully answers your question.
Jeff, as you look at funding this business, obviously augmenting the balance sheet was an important step here. Could you talk a little bit about the key spend areas that you see over the next two years to really get ready for full commercialization and demonstration of the platform?
as you look through some of these non-dilutive opportunities. Obviously project finance is one element in the customer deposits, but just trying to get a sense of the overall magnitude of the capital that you're looking for and where that would go from a business development perspective. Yeah, great question, Colin. I think the...
The headcount is stable so that we don't really need to add additional headcount. I think both the main spend that we'll be looking to add is really related to ramping up the supplier base and moving towards assembling.
the type conforming aircraft for the flight campaign, and then the working capital ultimately that will need to assemble the aircraft. And so if you look at CapEx, you look at manufacturing, you look at green jobs.
and you look at producing a product that customers want, that's why we're really focused on the subsidies and non-dilutive pieces from the pre-delivery payments that Seth and his team have been working on to government loans and subsidies.
And capital allows you to potentially add leverage as well. So the contracts are also quite important column as we look to that. And so next year we're...
We're really trying to hold the budget consistent with what we did this year with taking money out in the corporate but also focusing a bit on ramping up the supplier base with non-recurring costs to get the supplier base going, Colin.
Thanks so much, guys.
Thank you. We will take our next question.
The next question comes from Alex Potter from Riper-Sandler. Please ask your question.
Great, thanks very much. So Jeff, just to put a finer point on that, you mentioned you want to keep the budget consistent in 2022. It was a cash spend budget of 250M euros and you're targeting the same number in 2023. Did I understand that correctly?
That's it.
We're in the process of finalizing column, sorry Alex, but I guess I would say is we're looking at cost savings on the company and we're looking at the supplier side so that it's consistent, that's a good assumption for now, the exact number.
We'll give you guidance in our next call, but we're kind of looking at cost savings versus the supplier side right now.
Okay, very good. All right, so then wanted to get an update on in-house battery testing. I believe that you're in the process of establishing maybe some of your own facilities to conduct those battery tests in-house, but
My understanding is that it takes a while to get things like that permitted in Germany. So just wondering how long it will take until those facilities are completed and then once they are.
How is your battery testing going to change versus what you're currently doing with third-party labs?
Hi Alex, good to talk to you again, Klaus Bicking. So it's not that we have limitations here in Germany to do those testings, not at all. We have our own test lab that we are using, by the way, since a couple of years and we are using it to test out new battery recipes.
it internally but we are also using external labs like energy assurance which is I think a renowned lab in the US and you can can see the results of our battery block which confirms that we have the energy density but also the power density that we need for our missions
And secondly, we have also started external testing of our batteries with another laboratory, the Idaho National, which is a very renowned laboratory also in the US, doing basically the same. We want to have two independent sources of test wife for sure.
We are conducting our internal tests and also iron blocks which you probably know as Zenlabs for sure and Zenlabs are also conducting tests.
Okay, great.
So another question that I had, you mentioned that you've got your second test aircraft coming, Phoenix 3. How is Phoenix 3 going to differ from Phoenix 2 in terms of its capabilities? I'm just trying to understand if you're going to be able to do different kinds of tests with Phoenix 3, or is it more or less a carbon copy of Phoenix?
And there was no need to change Phoenix 3 compared to Phoenix 2 because Phoenix 2 is already capable of basically performing all maneuvers that we would want to perform with such an aircraft, be it high speed testing, transition flights, downwash, ground effects, what you saw on the video.
And Phoenix3 is basically giving us additional capacity. So we also have additional flight crews so that we can intensify the testing in 2023.
Okay, great. Then maybe one last one, then I'll turn it on. I'll pass it on. You mentioned that
You've got your third AIA audit coming up here next week.
I'm interested in knowing the extent to which that upcoming audit is going to differ from the previous two or the final one. Is there one out of these four audits that's more stringent or more difficult than any of the others? Are they all more or less the same in terms of... If you want to know the extent to which that upcoming audit is going to differ from the previous two or the final one. Is there one out of these four audits that's more stringent or more difficult than any of the others? Is there one out of these four audits that's more stringent or more difficult than any of the others?
hurdles that you're trying to clear. Just anything you can say about that upcoming audit would be helpful.
Yeah, thank you. That's a great question. No, they are building upon each other and so it's kind of continuous journey. Basically, the third audit will attest that we really have the capabilities to design an aircraft and the fourth audit but...
You get the DOA only with a false and conclusive audit. That is basically related more to things that you need to be able to do when you're in service period. So content-wise we are done to a large extent for the development part with a third audit. The fourth audit will be more for post-CIS activity.
Thank you.
We will take our next question.
The next question comes from Bill Peterson from JP Morgan, please ask your question
Yeah, hi, good afternoon, thanks for taking my question. I'd like to follow up on batteries.
Just to clarify, I might have missed it. So is the battery chemistry fixed, or are you still doing more process optimization? And if so, what is the timing for fixing the process? I guess secondarily, the types of tests you're doing, whether internally or externally, what is the status of, I guess, your process?
performance, repeatability, thermal characteristics, charging speed, thermal runway, cycle life, especially cycle life, what kind of levels are you able to achieve now.
Yeah, also a great question. Thank you for that. So, yes, I would say we are in the process of fine-tuning our battery recipe. We have confirmed internally but also externally. We have the energy density which is…
essential for getting the range of the aircraft, the power density that we need to lift up and land the aircraft. We also have got confirmation that we get enough battery cycle life to achieve our, I would say, extraordinary good cost position that we will have when flying the aircraft.
program which is going to be completed in early next year. From what we see from the first 25 percent of the test programs they are absolutely coherent with what we have seen internally and also with the energy assurance lab.
Okay, thanks for that, Keller. When do they get the latest thinking from Lilium on, I guess, its own network, the Lilium network? It seems like, obviously, you've gotten a lot of preorders, 600 MOUs.
Is this still, I guess, critical to the business? And if so, what should we think in terms of timing? Will this be two, three years after initial sales? Or how is the team thinking about this?
Yeah, it's certainly not off the table. So we intend to pursue this, but our first intention and all our energy is being put together today in getting our aircraft certified. And then for the first one to two years for sure we are largely serving the premium segment.
We want to then honor our MOUs and agreements we have with more kind of general aviation type of customers like Saudiya. And afterwards, difficult to give a timeline, but I would say not in the first three years. We also think about opening our own network, but still the plan, but it has been really pushed behind the other two.
And if I may add on this one, I think what's important to understand is that the premium Actually segment is helping us tremendously As we are, you know talking to authorities as we're looking at the landing sites for all of those premium customers It's actually helping us as well paving the way for the network. So it's definitely something want to do
But it's actually good to start with another segment which helps us developing it Okay, thanks that call if I can speak one more and What can we haven't heard of recently is related to what what William is doing in terms of infrastructure development? You know, I think in the past you talked about Ferro Vial
What are you doing with your commercial partners in terms of infrastructure? And I guess you have a lot of agreements with private individuals. Will these use existing airports or heliports, like any specific infrastructure requirements for these applications?
Excellent question, thank you. We are still actively working with our partners on the infrastructure. We're actually looking at a few others in different regions of the world to accelerate. But this is exactly what we just discussed. If you look at Florida and places where we like to have a scheduled service with a higher network.
you know you it takes some times to get some of the permitting to get some of the You know land agreement in place. So we're actually be working with them However, as you just mentioned as well for the private individuals much easier. Are you looking at private estates? You're looking at a luxury resorts golf clubs
We are actually in talks with many many I would say, you know tourism industry and luxury industry players that have existing helipads where we can upgrade them into a vertical really with a charging station.
on top and looking at some of the other ground side, but it's it's much easier to go from a private general Segment that it is to go from a commercial aviation segment. So yes, it's absolutely right We will work with them and they have without sharing their location with us and we're working on it
Thanks for that. Thanks for the call.
Thank you. We will take our next question.
Next question comes from Adam Forsythe from Longsborough Capital. Please ask your question.
Good morning. Just on the Pioneer Limited Edition, great to see that launched obviously, in terms of sales going forward are we likely to see these as a single aircraft sales or are we going to see something more similar to the Bellari deal, you know numbers of aircraft being filled through a kind of dealership type structure.
important for us is we have the right ecosystem around our end customer to make sure they have the maintenance that they have people to fly the aircraft etc etc so you always have you know most of the time you always have someone helping us out with the end customer but we do have interest going directly to us
Okay, and just a slightly technical one, you mentioned ground effect issues in terms of the testing that's been going on with Spectrid's throttle.
have been an issue around ground effect and I wondered if him has any particular advantages in that area within your design.
Well, on the aircraft side, first of all we have what's called a D value, which is the diameter of the aircraft really.
of 14 meters so we can actually use most of what's called a T loft so most of the helipads in Europe have at least 14 meters of of a diameter and so we can use them now then we have to look at the the ground effect and the downwash and there are ways for us to actually look from a trajectory perspective
to look at how we can accommodate this with its specific terrain. So we're doing a lot of analysis right now on some of the, you know, verticals or helipad upgrades to feed our aircraft. It's something which we can manage, like I said, from a trajectory perspective and that we're not too concerned about.
Great, great. Thanks. Thanks very much.
Thank you. Thank you. As a reminder, if you do wish to ask a question, please press star 1 and 1.
The next question comes from the line of David, a reader from Harvard. Any questions?
our proposals. They are at the EASA and we are discussing them. It's basically working through the pile of documents. So I'm not foreseeing any technical, I would say, surprise or uncertainty. It's just getting the work done. And as you can see, we have also progressed significantly on the certification plans.
So, it's the two which we are working through for the moment and we have decided together with the ASHA to keep this pace. We are in permanent exchange with them and by the way also with the FAA. So, it's just getting the work done and balancing out the completion of the MOCs and of the certification plans. Thanks, everybody.
to convert to maybe a little bit more of range testing in 2023.
We haven't done a lot of range testing and Phoenix, both Phoenix's are demonstrator aircraft. They don't have the batteries that we are using now on our test facility than we are going to use in Pegasus. So we would not be able to make a one-hour flight with them.
But it's also technically kind of meaningless to do it because you don't learn anything by flying straight away. We are rather spending our time on making manoeuvres like the ground effect, which as people from vertical tech or landing business know, it's a very delicate business.
We could be flying some 15 to 20 minutes with this aircraft, given the batteries with giant styles. We may do it at one point in time, but we feel from a technical learning perspective it gives us nothing. Whilst what we are doing now, tuning our flight control laws and the likes what you have seen on the video for us is much more fruitful, so we have preferred to do this. Thank you, mate.
do longer and we may also do much faster flights in next year when we have the second aircraft available so that we have more capacity and bandwidth.
And then for Jeff, you did disclose in your most recent filing.
on the significant capital and appreciate the discussion on how you plan to fill it. I guess I'm wondering why you would choose to terminate the ELOC though, given that that was an option, what the thinking was behind that.
Yeah, I think I...
Given the size of this offering, we wanted to let the market settle and send a message that we weren't planning on utilizing that. So that's one. We also found that an ELOC is something that you...
put in place before your season issuer. So some of the mechanics were a bit suboptimal. So we then get out of it as much as we could from a mechanical perspective, but we really want to let the market.
given the most recent deal is the main reason.
Thanks, much appreciated.
Thank you. We will take our next question.
And the question comes from the line of 7 C-COM, please ask your question. Thank you, good afternoon. Can you talk a little bit about the PDPs, like how it's applied on your jets, just the, you know, at least 50% of the timing of those, when you expect those to?
start flowing in or how the agreements will be done.
how the agreements will be done.
Yeah, I mean there are—
Pretty much in line with industry standard whereby we have the first deposit and then a schedule until delivery of the aircraft. You can imagine the kind of milestones we're going to have in between the time of delivery and the first deposit. So it's a spread PDP schedule based on some of the milestones and like I said earlier here.
we're going to be getting more than 50% of the aircraft purchase price prior to delivery.
Does that mean you'll be seeing some kind of PDPs coming in 2023 or is that more of a 2024 event? You're right.
There are different deposits coming in 3D3, correct.
I thought the service support and training package being included was interesting with the Pioneer JED. I was wondering if you could provide a little bit more color on how that set up in terms of are you doing a lot of that in-house or if you're going to partner with others and what Navy??
has a comprehensive service package to make sure that we can take care of everything A to Z type of solution, right? So it's talking about maintenance, we're talking about flight training and so on. We do have like, I would say, two different packages depending on the type of partner we're gonna have. If there are.
certified for maintenance and flight operations, obviously they can do things on their own. Going back to flight training, we do have an agreement with Lufthansa Aviation Training and we have an MOU with Flight Safety International. I'm not able to comment more on this, but we do have partner working on the flight training side so we can provide...
trainings to the crew but also to the mechanics and so on. So it's really, you know, the Pioneer Edition comes with training package, tailored services and maintenance services along with, you know, of course cabin, you know, quite of an exclusive cabin and customizations options.
That's helpful. If I might just ask a quick follow-up question. Jeff, when you talk about the cost savings that you're looking to do, could you describe a little bit more about where that's coming from? Jeff, when you talk about the cost savings that you're looking to do, could you describe a little bit more about where that's coming from?
Call savings for the company. I think we reviewed all external spend, reviewed all necessary activities. So I think a lot of it is really as the program has progressed really defining what really needs to be happening and eliminating.
That's where I could describe it.
Thank you everyone.
Thank you. At the moment there are no more questions on the line, therefore I give back to Jeff.
With that, I think we've come to the end of our Q3 2022 business update. Thank you once again for joining us. We look forward to speaking with you again next year. Everyone have a great break and a great start to the new year. Cheers.