Q3 2022 Eve Holding Inc Earnings Call

Speaker 2: [music]

Operator: Greetings. Welcome to the Eve Air Mobility's 3rd Quarter 2022 Earnings Call.

Multiple speakers: At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to Lucio Aldworth, Head of Investor Relations. Thank you, you may begin. Thank you, operator. Good morning, everyone. This is Lucio Aldworth, the Director of Investor Relations at Eve, and I wanted to welcome everyone to our third quarter 2022 earnings conference call. I've got here with me, co-CEOs Gerry DeMuro and Andre Stein, as well as our CFO, Eduardo Couto. After the initial remarks, we're going to open the call for questions. We prepared that back with a few slides and additional information. This is available at our investor relations website at ir.eveairmobility.com, so please download it for your reference.

Speaker 5: to Lucio Aldworth, Head of Investor Relations. Thank you, you may begin. Thank you, operator. Good morning, everyone. This is Lucio Aldworth, the Director of Investor Relations at Eve, and I wanted to welcome everyone to our third quarter 2022 earnings conference call. I've got here with me, co-CEOs Jerry DeMuro and Andre Stein, as well as our CFO, Eduardo Couto. After the initial remarks, we're going to open the call for questions. We prepared that back with a few slides and additional information. This is available at our investor relations website at ir.eveairmobility.com, so please download it for your reference.

Speaker 6: Jerry DeMuro and Andre Stein, as well as our CFO, Eduardo Couto. After the initial remarks, we're going to open the call for questions. We prepared that back with a few slides and additional information. This is available at our investor relations website at ir.eveairmobility.com, so please download it for your reference.

Speaker 7: so please download it for your reference.

Lucio Aldworth: Now, let me first start by mentioning that this presentation includes forward-looking statements or statements about events or circumstances that have not yet occurred. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business and future financial performance. These forward looking statements are subject to risks, uncertainties, and assumptions, including, among other things, generic economic, political and business conditions, both in Brazil and in their markets.

Speaker 9: performance. These forward looking statements are subject to risks, uncertainties, and assumptions, including , among other things, generic economic, political and business conditions, both in Brazil and in their markets.

Speaker 10: , among other things, generic economic, political and business conditions, both in Brazil and in their markets.

Lucio Aldworth: The words believe, may, will, estimate, continues, anticipate, intends, expects, and similar words are intended to identify forward-looking statements.

Lucio Aldworth: We undertake no obligations to update publicly or revise any forward-looking statements because of new information, future events or other factors.

Lucio Aldworth: In light of these risks and uncertainties, the forward looking statements and circumstances discussed in this presentation might not occur. Our actual results could differ substantially from those anticipated in our forward looking statements. With that, I will now turn the presentation over to Jerry.

Lucio Aldworth: Gerry?

Gerard DeMuro: Thank you, Lucio, and thanks to all of you for joining us on the call today. We've had an eventful quarter and have a number of significant events which we will talk about this morning.

Gerard DeMuro: They include things like major additions to our partnerships, a very successful simulation in Chicago, continued growth of our backlog, and progress in our product development.

Gerard DeMuro: Importantly, we've also reached agreement with the Brazilian National Development Bank to significantly enhance our balance sheet and we're doing that through a financing vehicle that is completely aligned with a foundational reason and the core values of this business: reducing carbon emissions, and sustainable, environmentally-friendly transportation. Edo Couto, our CFO , will discuss the terms in more detail in just a bit.

Speaker 18: reducing carbon emissions, and sustainable, environmentally-friendly transportation. Edo Couto, our CFO , will discuss the terms in more detail in just a bit.

Gerard DeMuro: First, I'd like to talk about a new partnership which we announced with United Airlines on September 8th.

Gerard DeMuro: United is one of the largest and most recognized global carriers in the world.

Gerard DeMuro: They are also a long-term client of Embraer, and this will be a strategically important partnership for Eve. It adds to our partnerships with fixed wing and helicopter carriers, ride share platforms, propulsion and battery management companies, as well as technology providers and infrastructure inverter port operators.

Speaker 22: and infrastructure inverter port operators.

Gerard DeMuro: This will help Eve scale the UAM ecosystem on a global basis. United has invested $15 million which will go directly to help fund the development of this UAM ecosystem.

Gerard DeMuro: United is now our largest client with a potential for 400 orders and this gives us an important foothold among one of the main U.S. and global carriers.

Speaker 25: and this gives us an important foothold among one of the main U.S. and global carriers.

Gerard DeMuro: It will also be strategically important as United's standing in the entire flight and aviation arena will help us build out the UAM ecosystem.

Gerard DeMuro: Andre Stein will talk a little bit later about our Chicago CONOPS in which United participated. Next slide, please.

Gerard DeMuro: Next, I mentioned earlier that we had grown our backlog significantly. As you can see from this slide, we now have letters of intent for almost 2,800 vehicles and a backlog that would equate to over $8 billion, certainly well over our first four years of projected production.

Gerard DeMuro: In addition to United, Eve has signed with Blade India, Flybiz and an undisclosed customer for another 700 new aircraft.

Gerard DeMuro: We have also added strategic partners to help us develop our UATM platform and have signed LOIs with Halo, Flyblade in India, Blue Nest in Europe and Volatas in the United States. So, you can see we're also moving out on a global basis with our UATM - that's Urban Air Traffic Management software platform.

Speaker 31: and have signed LOIs with Halo, Flyblade in India, Blue Nest in Europe , and Volatas in the United States. So you can see we're also moving out on a global basis with our UATM - that's Urban Air Traffic Management software platform.

Speaker 32: Skyway Technologies here in the Americas, Blue Nest in Europe , and Volotis in the United States. So you can see we're also moving out on a global basis with our UATM.

Blue Nest in Europe , and Volatas in the United States. So you can see we're also moving out on a global basis with our UATM - that's Urban Air Traffic Management software platform.

Urban Air Traffic Management software platform.

Gerard DeMuro: We continue to take a holistic approach and with our simple design and Embraer backing, we now have the largest order book in the industry, as I said, with almost 2,800 LOIs for vehicles.

and with our simple design and Embraer backing, we now have the largest order book in the industry, as I said, with almost 2,800 LOIs for vehicles.

we now have the largest order book in the industry, as I said, with almost 2,800 LOIs for vehicles.

Gerard DeMuro: Some of our clients as you know are also investors in Eve, so their interests are completely aligned with UAM development and we have a long-term relationship.

so their interests are completely aligned with UAM development and we have a long-term relationship.

and we have a long-term relationship.

We also have the most diversified order book, not only in number of clients, now well over 25, with United being the largest.

No single client represents greater than 15% of our backlog.

We cross all sorts of industry types as I mentioned before. We have helicopter operators, fixed wing operators, lessors, ride sharing platforms, and even a defense alliance with BAE Systems.

Regionally, we have the largest exposure in the United States with a little bit less than 50% coming from North America, but we have global distribution and we touch just about all of the populated continents around the globe.

Now, as I mentioned earlier, we announced today a new source of liquidity for our aircraft development and certification with the Brazilian Development Bank.

I will ask Edu Couto, our CFO , to provide some detail. Edu?

Eduardo Couto: Thanks, Jerry. This new finance from the Brazilian Development Bank includes two credit lines in a total of $92.5 million. It fits very well to our cash flow profile and disciplined capital strategy with 12 year maturity, grace period and a favorable interest rate.

The first line comes from the BMDS Climate Fund, which is a finance line dedicated to projects and companies that mitigate climate change and reduce CO2 emissions.

Climate Fund, which is a finance line dedicated to projects and companies that mitigate climate change and reduce CO2 emissions.

The second line is an innovation finance, which is a long-term funding for disruptive projects with social benefits. Urban mobility is one of them.

This new funding has an ideal fit for our project, considering its conditions and the BMDS mission for a cleaner mode of transportation.

It also puts Eve with a stronger balance sheet and a more efficient capital structure that translates into long-term value to our shareholders. Now with the BNDS line, we are even stronger from a cash perspective with Eve's total liquidity above $400 million, which compared to our cash burn around $100 to $150 million per year, gives us enough cash for multiple years of our EBITAL development.

which compared to our cash burn around $100 to $150 million per year, gives us enough cash for multiple years of our EBITAL development.

Now, I would like to invite our co-CEO, Andre Stein, to give us a bit more color on the development program and the benefits of our concept of operations.

Stein?

Andre Stein: Thanks, Edu.

This quarter, we continued running simulations with conventional helicopters to validate and stress test our concept of operations for eVTOLs in a real urban area environment and create awareness of what is to come.

The most recent experience was in Chicago last September where it connected a vert port in downtown to two vert ports in the suburbs. The trip took an average of 15 minutes versus an estimated 1 to 1.5 hour by car depending on traffic conditions and about an hour by train.

This demonstrated the potential for urban air mobility in large metropolitan regions such as Chicago, the second most congested city in the U.S.

It's estimated that Chicago and surrounding regions will require approximately 240 eVTOLs by the time the market matures in 2035, and that market will demand 20 vert ports and over 150 different routes.

We are very excited and happy about what we have achieved and to do it with important partners.

This was the first urban air mobility simulation in U.S. and it was powered by Blade with a total of 86 flights and 245 different passengers to help us collect information to better understand the needs of those flying, our partners, and the community when it comes to the use of eVTOL for urban mobility.

to help us collect information to better understand the needs of those flying, our partners, and the community when it comes to the use of eVTOL for urban mobility.

As an example, this simulation gave us a glimpse of the most popular routes and times for commuters and should help the graders optimize their flight schedules.

On top of that, you gather important information about the entire passenger journey, from the experience of purchasing tickets to flying.

So, there are lessons to be learned for an entire ecosystem that is helping to define our eVTAL, our service and software portfolio.

Now, onto the next slide.

As a reminder, we quick-started the certification process of our eVTAL with Brazil's aviation authority, ANAC, back in February and now, together with ANAC, we have initiated the validation process for tight certification with the FAA, which we expect to be accepted shortly.

At the same time, we are in discussion with [inaudible] in Europe and other certification authorities.

It is important to highlight that you have the primary focus of ANAC, while the certification authorities in the U.S. and Europe will be addressing multiple programs [inaudible].

As we noted before, ANAC has a long history of collaboration through bilateral agreements with the FAA, whereby the FAA assesses and validates the work done by ANAC, requiring validation in minimal additional effort by the FAA.

We are validating now that this will also be the case with our eVTOL, and that is a major milestone for our certification strategy.

We believe this puts Eve on a clear path to certification in multiple domains, especially when combined with our simple design of fixed wings and lift plus cruise configuration.

especially when combined with our simple design of fixed wings and lift plus cruise configuration.

Lastly, Embraer's support is going to be vital in this regard as well. Embraer brings quite a bit to the table by having certified over 30 aircraft just in the last 25 years.

They too, for example, received simultaneous certification approval in Brazil, the U.S., and Europe on schedule with the same specs and budget.

Now, onto the aircraft itself. We continue to make advancements in our design and the program as it matures. We continue to follow the improvement development practices, adding to that proof of concept and other types of mechanisms, validating subsystems through various test methodologies, progressing towards the commercial vehicle.

validating subsystems through various test methodologies, progressing towards the commercial vehicle.

By validating subsystems and airframe features incrementally, we are able to ensure rigorous and meaningful testing in each phase, optimizing costs and reducing the cost of delay of major change in later phases of the program.

This is a very flexible approach that reduces the development costs of the entire design progress.

We can vary components or update their design and configuration as our engineers identify alternative solutions.

As new solutions are identified they can be incorporated.

We saw a major redesign of the entire aircraft.

In this approach, we are performing a myriad of tests on our proof of concepts, wind tunnel models, rigs, flight simulators, and mockups.

The DNA is to drive for economic solutions with the most affordable operation and maintenance profile which you believe will be achieved through our simple, liftoff, cruise design.

We have also targeted the same standards that are compatible with the high industry standards at the same thresholds we applied for larger jets, which is to say that we are designing our craft to meet the highest possible standards.

which is to say that we are designing our craft to meet the highest possible standards.

And lastly, we concluded phase one of our urban air traffic management software package and deployed it to support our Chicago simulation [inaudible]. As Jerry mentioned earlier, it has now signed LOIs for urban air traffic management of several clients, and this business may precede our aircraft delivery revenues because it will be an [inaudible] solution for the entire aerospace.

and this business may precede our aircraft delivery revenues because it will be an [inaudible] solution for the entire aerospace.

because it will be an [inaudible] solution for the entire aerospace.

Now, on slide 7, we can see our industrialization strategy is also maturing.

As mentioned previously, we partner with Porsche Consulting to help optimize our eVTOL supply chain, global manufacturing and logistics strategy.

We are combining our knowledge and automotive expertise to define an implementation plan that considers all aspects of industrial operation, logistics, supply chain and parts distribution to optimize efficiency and productivity.

to optimize efficiency and productivity.

The study addressed scalability and distributed production to meet demand. As the urban air mobility market evolves it helped us validate that the first production site will be in Brazil.

it helped us validate that the first production site will be in Brazil.

This will help us maximize synergies with Embraer and also maximize the manufacturing learning curve of the eVTOL but it is possible to add subsequent production facilities in other parts of the world to maximize efficiency and logistics.

Now, I will turn it back over to Edu to talk a bit about our financial position.

Eduardo Couto: Thanks, Stein. Before talking our third quarter results, I just want to explain why we are reporting so late our numbers.

Eve had to restate our previous numbers for 2021 and first half 2022 to properly account for non-cash costs associated with warrants issued to some strategic investors during the business combination with ZANI. Some warrants were not properly expensed at the time of our listing on the New York Stock Exchange, and we read to recognize additional non-cash costs of $87 million related to those warrants.

at the time of our listing on the New York Stock Exchange, and we read to recognize additional non-cash costs of $87 million related to those warrants.

Even also recognize some due closing costs that were previously allocated at Embraer.

Eve also recognizes some due closing costs that were previously allocated at Embraer. It's important to say that all those impacts didn't affect our cash and liquidity that is now even stronger with today's announcement of the BNDS Finance Line highlighted in the beginning of the call.

to say that all those impacts didn't affect our cash and liquidity that is now even stronger with today's announcement of the BNDS Finance Line highlighted in the beginning of the call.

Turning now to our quarter financials, I would like to start with the income statement highlights.

We invested $14 million during the third quarter 2022 and almost $34 million in the first nine months of 2022 on R&D. The bulk was invested in our eVTOL development and a portion was used for the development of our service and support solutions and the development of our Urban Air Traffic Management System.

and a portion was used for the development of our service and support solutions and the development of our Urban Air Traffic Management System.

We are the only eVTOL company with a complete solution, including the vehicle, service and support, and air traffic control.

In addition to the R&D expenses, we also had $6.8 million in SG&A during the quarter. Including R&D, SG&A had $17 million in non-cash warrant expenses related to the United during the quarter, we reported a net loss of $36.7 million in the third quarter 2022, and $154 million in the first nine months of the year.

had $6.8 million in SG&A during the quarter. Including R&D, SG&A had

$17 million in non-cash warrant expenses related to the United during the quarter, we reported a net loss of $36.7 million in the third quarter 2022, and $154 million in the first nine months of the year.

I would like to take the opportunity and call attention to some of our competitive cost advantages.

First, our full access to Embraer's engineers on a first priority basis is only as needed.

That means we don't need to bring hundreds of engineers to our P&L, which makes our development more cost efficient. Second, our ability to use Embraer's intellectual property on a royalty-free basis. That's another important source of cost savings.

And third, access to Embraer facilities with minor investments and only sharing of facility fees. That also saves us significantly restricted CAPEX at this stage.

and only sharing of facility fees. That also saves us significantly restricted CAPEX at busy stage.

Now moving to cash flow, our operations consume $17 million in the quarter and $39 million in the nine months until September. We ended the third quarter with $330 million in total liquidity. This was relatively flat over the previous quarter as our cash consumption was mostly compensated by the $15 million investment by United announced in September. Considering our current cash position and the lines of credit from the Brazilian Development Bank that we can access, we have total liquidity of approximately $400 million.

as our cash consumption was mostly compensated by the $15 million investment by United announced in September. Considering our current cash position and the lines of credit from the Brazilian Development Bank that we can access, we have total liquidity of approximately $400 million.

We feel very comfortable with the current liquidity as it would be enough to cover a good amount of our development and certification costs for the years ahead.

With that, I conclude our financial highlights and now we would like to open for questions.

Operator, please go ahead.

Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate the line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

We will pause for a brief moment to pull for questions.

Do we have any questions that were emailed in?

Lucio Aldworth: Yes, Sherry. Thanks. We do have a couple of questions from Lucas Stasitz from [inaudible]. The first one is about certification and I think Andre Stein is better equipped to answer this one. Lucas is asking for updates on the certification process with AMAC and the expected timeline. And the second question relates to the BNDS credit line and I think this is directed to Edu. Lucas is asking for the length of the amortization grace period. Sherry, after we do have these questions answered, please feel free to roll them over to the questions from other participants in the call.

and the expected timeline. And the second question relates to the BNDS credit line and I think this is directed to Edu. Lucas is asking for the length of the amortization grace period. Sherry, after we do have these questions answered, please feel free to roll them over to the questions from other participants in the call.

Multiple speakers: Thank you. Thank you, Lucio. So answering the question-. Yes. Thank you Lucio for the question. So to answer that, it's on track for our entrance service 2026.

Eduardo Couto: The latest milestone is exactly what you mentioned in our deck which was a joint understanding of the requirements between AMAC and FAA.

which was a joint understanding of the requirements between AMAC and FAA.

What that means, that has always been our strategy to validate our primary certification organization in Brazil in FAA as well, as we've done with previous aircrafts and here for a new type of aircraft, that has been the goal. And now we are achieving that. We are validating that that will be the way that it will happen for eVTOLs as well. So that's great news not only for the primary certification but also for the FAA certification.

to validate our primary certification organization in Brazil

in FAA as well. As we've done with previous aircrafts...

And here for a new type of aircraft, that has been the goal. And now we are achieving that. We are validating that.

will be the way that it will happen for eVTOLs as well. So that's great news not only for the primary certification but also for the FAA certification.

Maybe talking about the BMDS line, Lucio, I think it's a good question from Lucas. This line is financed from the Brazilian Development Bank. It's perfect for each - it really fits our business profile because it's long term, it's a 12 year term. And on top of that, we also have three and four years of grace period. It depends, there are two lines, one is three year grace period, the other one is four year. But it means that we don't have to pay amortization from three years of grace period or four years depending on the line and we only start to amortize this loan in the fourth or fifth year which is very good, right? We're going to need the next three years to certify our vehicle and enter into service, as Stein just highlighted, and then when we start to amortize our debt is exactly when we're going to be generating revenues that we bring EVTOLs. So as I said, it's a great support from the Brazilian Development Bank, almost $100 million, very long term and it creates a lot of value for our shareholders and combines very well with the 400 million we raised in equity in our IPO.

- it really fits our business profile because it's long term, it's a 12 year term. And on top of that, we also have three and four years of grace period. It depends, there are two lines, one is three year grace period, the other one is four year. But it means that we don't have to pay amortization from three years of grace period or four years depending on the line and we only start to amortize this loan in the fourth or fifth year which is very good, right? We're going to need the next three years to certify our vehicle and enter into service, as Stein just highlighted, and then when we start to amortize our debt is exactly when we're going to be generating revenues that we bring EVTOLs. So as I said, it's a great support from the Brazilian Development Bank, almost $100 million, very long term and it creates a lot of value for our shareholders and combines very well with the 400 million we raised in equity in our IPO.

or four years depending on the line and we only start to amortize this loan in the fourth or fifth year which is very good, right? We're going to need the next three years to certify our vehicle and enter into service as Stein just highlighted.

And then when we start to amortize our debt is exactly when we're going to be generating revenues that we bring EVTOLs. So as I said it's a great support from the Brazilian Development Bank almost $100 million.

very long term and it creates a lot of value for our shareholders and combines very well with the 400 million we raised in equity in our IPO.

Multiple speakers: Are we ready to move on to the phone question? We have no further questions, Operator. Okay, great. Our first question is from Savi Syth with Raymond James. Please proceed.

Savi Syth: Hey. Good morning, everyone. If I might ask, you mentioned $150 million cash burn annually. Could you just talk a little bit about 2023 and if that's going to lower or upper end of that, maybe some of the major milestones expected in 2023?

Eduardo Couto: For 2023 we expect to be in this range between $100 to $150 million in cash burn. So considering our cash position as I mentioned more of $400,000 we have multiple years of liquidity to address our eVTOL development. Regarding the milestones for 2023, maybe Stein can give you more color. Stein?

our eVTOL development. Regarding the milestones for 2023, maybe Stein can give you more color. Stein?

Andre Stein: Sure. So, we're continuing to allow for not only the big development, but also advancing and pretty focused on our end-to-end service[inaudible]. On top of that, we are having 14 [inaudible]. So that's quite a big part of things as well.

advancing and pretty focused on our end-to-end service. during the vehicle, entering more and more into the day on a whole season. and they had somebody who RIGHT test the sign and let him know I'm wrong I can see that you have linked everything I put that file happen We liked to get our Xavier yeah and I the I have told them. Thank you. So that's what's in a good track for the final service.

during the vehicle, entering more and more into the day on a whole season. and they had somebody who RIGHT test the sign and let him know I'm wrong I can see that you have linked everything I put that file happen We liked to get our Xavier yeah and I the I have told them. Thank you. So that's what's in a good track for the final service.

and they had somebody who RIGHT test the sign and let him know I'm wrong I can see that you have linked everything I put that file happen We liked to get our Xavier yeah and I the I have told them. Thank you. So that's what's in a good track for the final service.

I have told them. Thank you. So that's what's in a good track for the final service.

Thank you. So that's what's in a good track for the final service.

So that's what's in a good track for the final service.

On top of that, we are having 14... literally their whole together with partners, ensuring that the fake we are developing. It cycles. vice versa. So that's the... It's quite a big part of the page as well.

literally their whole together with partners, ensuring that the fake we are developing. It cycles. vice versa. So that's the... It's quite a big part of the page as well.

together with partners, ensuring that the fake we are developing. It cycles. vice versa. So that's the... It's quite a big part of the page as well.

It cycles. vice versa. So that's the... It's quite a big part of the page as well.

vice versa. So that's the... It's quite a big part of the page as well.

So that's the... It's quite a big part of the page as well.

It's quite a big part of the page as well.

Savi Syth: That makes sense. I appreciate that. Thanks, [inaudible].

The production facility, when do you expect to select the site and then start building that facility relative to the other timeline?

Gerard DeMuro: Do you want me to take that one?

Andre Stein: Yeah, I think that's fine.

Gerard DeMuro: Yeah, your line's breaking up, so...

Andre Stein: Go ahead, everybody.

Gerard DeMuro: So, Savi, thanks for the question. As was mentioned earlier, we've done an extensive amount of work with our partner, Porsche, not only looking at the site, but also the global supply chain and the delivery mechanism, which given the likely adoption of this on a global basis will be equally important.

To answer your question specifically, by the end of this year, we expect, I'm sorry, by the end of '23, we expect to be through all of the permitting processes and have begun the initial development of the facility, which at this point looks like it will be co-located with, in one of the Embraer facilities specifically, but that permitting will take a little bit of time, and then the major construction reorganization of those activities will occur in 2024. Notably, we're going to build the facility in a modular basis, which will allow us to scale very, very economically, and Stein can talk a little bit more about that.

and have begun the initial development of the facility, which at this point looks like it will be co-located with, in one of the Embraer facilities specifically, but that permitting will take a little bit of time, and then the major construction reorganization of those activities will occur in 2024. Notably, we're going to build the facility in a modular basis, which will allow us to scale very, very economically, and Stein can talk a little bit more about that.

reorganization of those activities will occur in 2024. Notably, we're going to build the facility in a modular basis, which will allow us to scale very, very economically, and Stein can talk a little bit more about that.

We're going to build into this production rate gradually and we're going to plan for a base case and have an opportunity by building additional workstations, etc. and then ultimately additional shifts into the production rates of say 300, 300 plus a year. But initially, manufacturing modules, it'll be at a lower rate.

into the production rates of say 300, 300 plus a year. But initially, manufacturing modules, it'll be at a lower rate.

Lucio Aldworth: Stein, do you want to add anything to that?

Andre Stein: Sure, so that strategy, the idea of doing it in modular basis allow us to really grow together with the market without excessive investment in CapEx in the early years.

So that has been one of the premise and that has been part of the output of the work we've done with Porsche.

Savi Syth: That all makes sense. Thank you very much.

Multiple speakers: Our next question is from Ellen Page with Jeffries. Please proceed.

Ellen Page: Hi, guys. Thanks for the question.

Just on the Chicago ConOps, how did the results of your evaluation and the assessment of 240 aircraft in the city compare to your prior expectations and your TAM assumptions that you've put out in the past? And can you discuss the differences between the Chicago ConOps and the previous one you did in Rio?

in the city compare to your prior expectations and your TAM assumptions that you've put out in the past? And can you discuss the differences between the Chicago ConOps and the previous one you did in Rio?

compare to your prior expectations and your TAM assumptions that you've put out in the past? And can you discuss the differences between the Chicago ConOps and the previous one you did in Rio?

Gerard DeMuro: Excellent question, Ellen. Go ahead, Stein. We can talk about the model that we co-developed with MIT and its application here.

Andre Stein: Absolutely. So what I've done and that's part of the way you are trying to understand the market, that's a new market, and then we have been modelling and have developed this tool together with MIT for quite a couple of years, even before we were spin off from the main company during the incubation period, to look at the market in different ways and to get all the potential KPIs, all the economic models, data from cell phones to understand the origin destination from passengers and their value of time to come up with this sizing.

and then we have been modelling and have developed this tool together with MIT for quite a couple of years, even before we were spin off from the main company during the incubation period, to look at the market in different ways and to get all the potential KPIs, all the economic models, data from cell phones to understand the origin destination from passengers and their value of time to come up with this sizing.

data from cell phones to understand the origin destination from passengers and their value of time to come up with this sizing.

And when you apply a concept of operations, it is to validate points like the time the passenger goes from door to door, not only the flying time, but the whole aspect. That helps us to look again on the same market and add that to the whole equation.

What was different from Chicago and Rio? Rio the use case we're looking at was the airport shuttle. So we were flying from the east side of town to the airport in Rio. In Chicago we expanded in terms of number of routes. We were flying two routes and both of them were commuting routes from Chicago downtown Chicago vertport to a different vertport in the suburbs.

to a different vertport in the suburbs.

Among other things, we look at different levels of infrastructure. So we're flying from a vertport with a very high level of infrastructure, existing vertport with an FBO, and then we're flying to one where you add a container to be our reception area for passengers and the third one is pretty much nothing but a slab of concrete. Why you are doing that? We are not verticalizing vert ports. That's not the point. But that helps us to understand how the eVTOL operation on ground will be as much as on air.

and the third one is pretty much nothing but a slab of concrete. Why you are doing that? We are not verticalizing vert ports. That's not the point. But that helps us to understand how the eVTOL operation on ground will be as much as on air.

The other aspect we've done there as well was to look at medical facilities. We've partnered with some drone manufacturers to fly out of the same vert port so we could integrate the aircraft management software. That helps us to grow there too, to make sure we have a solution that combines the different aspects of the ecosystem.

to grow there too, to make sure we have a solution that combines the different aspects of the ecosystem.

Ellen Page: That's helpful. Thank you. And can you discuss a little bit your LOI with BlueNest for the UAPM? What are the key-. What's the key opportunity there?

The key.

what's the key opportunity there?

Gerard DeMuro: I'm sorry, could you repeat the customer?

Multiple speakers: Yellow-eyed [inaudible] ATM, Gerry. How do they work? Yeah, for Blue Nest. Yep.

Gerard DeMuro: For Blue Nest. Okay, got it. Stein?

Andre Stein: Yes, so when are developing the software for urban attract management,

it's applicable for the regulatory authorities, but also for operators and virtual operators. So we can deconflict the airspace at the virtual port level. That's exactly the case there.

So this helps us to access the market, to create this. We learned a lot on this, just going back to the point of the concept of operations when it comes to the aerospace management. how we can make it more efficient. And that's not only to increase the total number of potential EVTOLs that could operate from one given bird port or one given city, but also to make the routing systems more efficient, the flight path, for example, to streamline that. and that's it is of the ultimate interest of the diverse ports as well. And we do believe in creating our solutions together with the customers.

This market also referred to operators as potential customers.

but also to assure that you have efficient ecosystems.

We learned a lot on this, just going back to the point of the concept of operations when it comes to the aerospace management.

how we can make it more efficient. And that's not only to increase the total number of potential EVTOLs that could operate from one given bird port or one given city, but also to make the routing systems more efficient, the flight path, for example, to streamline that. and that's it is of the ultimate interest of the diverse ports as well. And we do believe in creating our solutions together with the customers.

and that's it is of the ultimate interest of the diverse ports as well. And we do believe in creating our solutions together with the customers.

That's one of the reasons why we're bringing customers for the software platform now. So we are ensuring that you are developing something that has value for our customers.

I would also add that the Blue Nest is in Europe , so again we're trying to look at a global footprint. You see Blade, we have some North American operations, we'll be announcing some others in the not too distant future around the globe. So Blue Nest also brings us a European presence and an understanding of the world. unique features of those markets as well.

unique features of those markets as well.

Ellen Page: Very helpful. Thanks for the color. I'll hop back in the queue.

Yep.

Operator: Our next question is from David Fazula with Barclays. Please proceed.

David Fazula: Thanks for taking my question and thanks again for presenting at our conference last month.

If I could pry a little bit about the United relationship, I guess first is the investment reflected on the 3Q balance sheet right now or is there still more to come from an initial cash perspective?

Two, can you just discuss, and I think you have discussed it a little bit before, but the milestones by which you'll be evaluated to kind of have the orders with United become more firm. And then also, with United being so significantly international, you just discussed whether they are evaluating using those aircrafts internationally, or is it just kind of domestically for now? Thanks.

you'll be evaluated to kind of have the orders with United become more firm. And then also with United being so significantly international, you just discussed whether they are evaluating using those aircrafts internationally, or is it just kind of domestically for now. Thanks.

Gerard DeMuro: So let me take the general scope of this thing. United is looking at the application of these all the way from, they're trying to create a user experience from home to destination and back.

So I don't think in our discussions with them they're limiting the application of that or of the product offering. In fact, Stein and I participated just a couple of weeks ago with a number of the senior executives from the various functional departments at United, really looking at where are the best opportunities for launch cities, how do we get this all of the way integrated into even the United app. They're really looking at a holistic experience and not limiting to North America or Europe.

Obviously, the certification of the aircraft will have something to do with that. In terms of

the milestones, they're fairly typical milestones in the LOI's, right? As we start through the certification process, we will actually, prior to the certification process, be defeyitizing the United LOI, just like everyone else's LOI, and as we mature through that process they will have to have an increasing commitment of progress payments against final delivery. This year will be very interesting as we work through with our many customers around the globe the actual delivery slots and then begin going from there. So, this is a very important year in terms of sitting and working with key customers on where are the launch cities and who starts to get those initial slots. It's not too early to be planning in that regard.

slots and then begin going from there. So, this is a very important year in terms of sitting and working with key customers on where are the launch cities and who starts to get those initial slots. It's not too early to be planning in that regard.

With respect to the balance sheet, I'll turn it over to Edu, but I believe he did talk to the $15 million cash infusion, essentially offsetting the expenses for R&D and SG&A through the quarter.

Edu, do you want to add anything to that?

Eduardo Couto: No, that's correct, Gerry. The $15 million from United came in the third quarter. It offset our cash burn, so we were basically flat in terms of cash in the third quarter.

So, we have $330 million in cash, and now we are bringing this additional finance from BNDS that moves us north of $400 million in liquidity which is multiple years of cash compared to our projected investments in the EBITDA result.

of cash compared to our projected investments in the EBITDA result.

Gerard DeMuro: Thanks for the question, David.

David Fazula: If I could just squeeze another one in. The R&D expense line accelerated a little bit through the year. Just discuss the pace at which you're using the Embraer engineers, and then kind of drilling a little bit into Savi's question, the expected use of those engineers in 2023.

the expected use of those engineers in 2023.

Gerard DeMuro: Yeah, in rough count, we're probably using a little bit north of 300 today, and that will probably ramp to almost double that next year in the- when we come back with the full year report in that call we'll be making some projections more specifically on the cash burn. But, we expect that number to roughly double and so, you know, you'll see a rough doubling we think of our quarterly cash burn and it's almost directly correlated with the development of not only the product but also all of the other key pillars that we've talked about, right? The service and support elements, training program, as well as UATM.

the full year report in that call we'll be making some projections more specifically on the cash burn. But, we expect that number to roughly double and so, you know, you'll see a rough doubling we think of our quarterly cash burn and it's

almost directly correlated with the development of not only the product but also all of the other key pillars that we've talked about, right? The service and support elements, training program, as well as UATM.

Stein, do want to add anything to that?

Andre Stein: No, Gerry, I think we covered it.

David Fazula: Thanks very much, guys. Have a happy holiday.

Gerard DeMuro: You as well.

Operator: Our next question is from Marcelo Molta with JP Morgan. Please proceed.

Marcelo Molta: Hi, everyone. Thank you very much for taking my questions. Two quick questions, the first regarding these $100 to $160 million in cash burn for the coming time.

When we look at this approval permitting of the facility in Brazil, what percentage- of what amount of this $100-$150 is related to that? If you guys can open that. And the second question is regarding the commercial campaigns. We continue to see a lot of good news on on that front. The company has the largest backlog in the industry. I mean, are the campaigns still going on? Do you think that the pace of new announcements or growth in backlog could stabilize a little bit now until we see more milestones on certification? Those are the two questions. Thank you.

on that front. The company has the largest backlog in the industry. I mean, are the campaigns still going on? Do you think that the pace of new announcements or growth in backlog could stabilize a little bit now until we see more milestones on certification? Those are the two questions. Thank you.

Gerard DeMuro: So Marcelo, thanks for the question.

I'll turn it over to Edu, but as I was suggesting we will be coming out with a more precise forecast as I just mentioned in the answer to David of our cash burn next quarter, but we expect it to roughly double per quarter from where it is today. So, I think it'll be closer to the $150. Edu, do you want to add anything to that?

But we expect it to roughly double per quarter from where it is today, so I think it'll be closer to the 150. Ido, do you want to add anything to that?

Eduardo Couto: You are right, Ger. I was just going to say that this investment is mostly for the eVTOL development. Of course, EVTOL serves as support in urban air traffic management. It does not relate to the manufacturing facility itself.

As Gerry mentioned, next year there are some permits and some work done, but it's still minor. So, the number for next year is really for the eVTOL development.

Gerard DeMuro: Yes, the investment in production facilities will be very modest next year. We'll see a significant uptick in that in 2024 as we begin, as we're looking at it, the realignment of some Embraer facilities and refitting for our purposes.

With respect to the campaigns, there's a number of them going on. I mean, we're very fortunate in that there's quite a bit of demand right now to sign up on an LOI basis, but we're more focused on strategic customers, locations, the kinds of customers similar to United that bring us the same kind of leverage and capability around the globe and internationally.

But we're more focused on strategic customers, locations, the kinds of customers similar to United that bring us the same kind of leverage and capability around the globe and internationally.

Having said that, as I talked about before, the team will really start to focus on now key customers, launch customers, launch sites, and begin to try and align, since there's such high demand, in those first couple of years, the slots will be a precious item.

So, we're trying to figure out how we're going to allocate those slots. So, I think you'll see as much focus on that end as continuing to build the backlog where it'll be a little bit more strategic. Stein, would you want to comment on that?

Andre Stein: No, absolutely. You are on the- you got it right Jerry. So, we are getting closer and closer to our entry service. We've defined our industry strategy so now we have a very clear view on the amount of production we have on the first years to come. We have been working with the different partners and through this concept of appropriations and more to have a better understanding of the needs of each different site and in each different city, so we can really address that in a much more mature and structured way.

you got it right Jerry. So, we are getting closer and closer to our entry service. We've defined our industry strategy so now we have a very clear view on the amount of production we have on the first years to come. We have been working with the different partners and through this concept of appropriations and more to have a better understanding of the needs of each different site and in each different city, so we can really address that in a much more mature and structured way.

to come. We have been working with the different partners and through this concept of appropriations and more to have a better understanding of the needs of each different site and in each different city, so we can really address that in a much more mature and structured way.

And that's the main focus now, right? Really assure that our first years of production are all planned for, including where the aircraft will go, who will be that customer, the infrastructure that needs to be there in place to start operation, the partners that can support this infrastructure as well. That's why we have been mentioning this holistic approach, this overall looking in the ecosystem, everything that can assure a smooth entrance service and make this incredible and really large market really became a reality.

the partners that can support this infrastructure as well. That's why we have been mentioning this holistic approach, this overall looking in the ecosystem, everything that can assure a smooth entrance service and make this incredible and really large market really became a reality.

and make this incredible and really large market really became a reality.

Marcelo Molta: Perfect. Thank you very much.

Gerard DeMuro: Thank you, Marcel.

Operator: Our next question is from Marvin Fong with BTIJ. Please proceed.

Marvin Fong: Good morning. Thanks for taking my questions and congratulations on all the progress the past few quarters. So, a couple of questions from me. Just at a high level, I suppose, you know, domestically with the FAA, I think we've seen some updates and changes to their certification process for eVTOLs. Just curious if you could maybe comment on ANAC and how your discussions with them been going? Have they been more consistent with their view on how to certify? And if you could also just maybe touch on, you know, the development milestones or the certification milestones that you're kind of expecting for 2023. Do you expect to, you know, get your G1 paper in 2023? And the update or outlook you could provide there would be great.

some updates and changes to their certification process for eVTOLs. Just curious if you could maybe comment on ANAC and how your discussions with them been going? Have they been more consistent with their view on how to certify? And if you could also just maybe touch on, you know, the development milestones or the certification milestones that you're kind of expecting for 2023. Do you expect to, you know, get your G1 paper in 2023? And the update or outlook you could provide there would be great.

your discussions with them been going? Have they been more consistent with their view on how to certify? And if you could also just maybe touch on, you know, the development milestones or the certification milestones that you're kind of expecting for 2023. Do you expect to, you know, get your G1 paper in 2023? And the update or outlook you could provide there would be great.

Gerard DeMuro: All good questions, Marvin, You will note that the FAA has actually put out for comment its certification basis for JOBE. We and other manufacturers, OEMs and members of GAMA have submitted our comments there, but for the details, I'll turn it over to Stein in terms of what we have been doing in detail with ANAC and some of the milestones. Stein?

Andre Stein: Sure. Among other things you mentioned, the G1, that is expected for 2023, just to answer direct to that.

Among other things you mentioned, the G1, that is expected for 2023, just to answer direct to that. Yes, that is correct, correct.

We have been working on ANAC and other things to together discuss with FAA how we can move with a validation process as we refer to, which has been the strategy since the beginning, but now it's the point in time where we need to really formalize that, and that's what we are doing with both organizations.

We have been in constant meetings with both of them to define how the- how this consistency in terms of requirement between the two of them are to be expected. And as I said, with the formal application of that end of the year now, and we're expecting an answer from FAA pretty soon, that really puts us on the right track.

to define how the

how this consistency in terms of requirement between the two of them are to be expected. And as I said, with the formal application of that end of the year now, and we're expecting an answer from FAA pretty soon, that really puts us on the right track.

Then next year, we are getting even closer to FAA and as well as defining a clear path to the follow-on certification authorities.

We are getting even closer to FAA and as well as defining a clear path to the follow-on certification authorities.

That's important too. That's the global market.

I think these are the main points. We are targeting [inaudible] 2026, as we've said before. The best engagement and more continuous meetings, more frequent meetings are expected to happen as well, as we are building the knowledge together.

meetings, more frequent meetings are expected to happen as well. As we are building the no-lodge together.

Marvin Fong: Terrific. Thank you for that update. Just one other quick question, if I may, just an update. So I understand it sounds like most of your incremental cash burn is going to be on development in R&D. So should we, just to put a finer point on the modeling, so the SG&A line should just- almost $7 million is probably a good run rate going forward and we should just not be additional expenses being R&D related?

almost $7 million is probably a good run rate going forward and we should just not be additional expenses being R&D related?

R&D related.

Gerard DeMuro: Yeah, I think that's a fair assessment, Marvin. We'll have a more precise forecast for you as I said next quarter, but yeah, we're just about levelled off. Where we will see growth is as we build out our service and support platform. Some of that will provide a nominal increase on the SG&A side, but by the end of this year, we'll be pretty close to where we want to be in terms of headcount on that side.

a nominal increase on the SG&A side, but by the end of this year, we'll be pretty close to where we want to be in terms of headcount on that side.

Marvin Fong: Got it. Okay, great. Thanks everyone, and happy holidays.

Gerard DeMuro: You as well.

Operator: In the interest of time, that will be all that we have for our Q&A session. I would like to turn the conference back over to management for closing comments.

Lucio Aldworth: Thanks, [inaudible], and thank you everyone for joining us today. We look forward to updating you on continued progress throughout the year, and please don't hesitate to reach out if you have any additional questions. You just reach out directly to me. And for those who celebrate Christmas, please have a Merry Christmas and a happy 2023 to everyone. Thanks and have a good day.

and just reach out directly to me. And for those who celebrate Christmas, please have a Merry Christmas and a happy 23 to everyone. Thanks and have a good day.

Operator: This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

More more it.

The Qu.

And can you discuss a little bit your LOI with Blue Nest for the UATM? What are the key, what's the key opportunity there? I'm sorry, could you repeat the customer? The LOI for the UATM, how do they work? Yeah, for Blue Nest. Yep, for Blue Nest, okay, got it. Time? Yes, so when you're developing the software for urban attract management, it's applicable for the regulatory authorities, but also for operators and virtual operators. So we can deconflict the airspace at the virtual port level. That's exactly the case there. So this helps us to access the market, to create this market, also with virtual operators as potential customers, but also to assure that you have efficient ecosystem. We learned a lot on this, just going back to the point of the concept of operations when it comes to the airspace management, how we can make it more efficient. And that's not only to increase the total number of potential EVTOLs that could operate from one given vert port or one given city, but also to make the routing systems more efficient, the flight path, for example, to streamline that. And that's, it is of the ultimate interest of the vert ports as well. And we do believe in creating our solutions together with the customers. That's why, one of the reasons why we're bringing customers for the software platform now. So we are ensuring that you are developing something that has value for our customers. I would also add that the Blue Nest is in Europe . So again, we're trying to look at a global footprint. You see Blade, we have some North American operations. We'll be announcing some others in the not too distant future around the globe. So Blue Nest also brings us a European presence and an understanding of unique features of those markets as well. Very helpful. Thanks for the color. I'll hop back in the queue. Our next question is from David Fazula with Barclays. Please proceed. Thanks for taking my question and thanks again for presenting at our conference last month. If I could cry a little bit about the United relationship. I guess first, is the investment reflected on the three-tube balance sheet?