Q4 2022 Joby Aviation Inc Earnings Call

Greetings welcome to Dolby Aviation fourth quarter 2022 conference call. At this time all participants are in a listen only mode. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.

Now my pleasure to introduce your host Teresa Silversea. Thank you you may begin.

Hi, everyone and welcome to Jody Aviation fourth quarter and fiscal year 2022 financial results Conference call. I'm curious if there are deals jobin head of Investor relations on the call today, we have jobin beverage founder and Chief Executive Officer, Paul Shearer Executive Chairman DBA Papadopoulos head of aircraft OEM and that feels chi.

<unk> financial officer.

After managements prepared remarks, we will open up the call for questions. Please.

Please note that our discussion today will include statements regarding future events and financial performance as well as statements of belief expectation and intent.

These forward looking statements are based on management's current expectations and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied.

For a more detailed discussion of these risks and uncertainties. Please refer to our filings with the SEC and the safe Harbor disclaimer contained in today's shareholder letter.

The forward looking statements included in this call are made only as of the date of this call and the company does not assume any obligation to update or revise them.

Also during the call, we'll refer both to GAAP and non-GAAP financial measures a reconciliation of non-GAAP to GAAP measures is included in our Q4 FY 'twenty two shareholder letter, which you can find on our Investor Relations website, along with a replay of this call.

With all of that said I'll now turn the call over to Joe Bae.

Thank you Teresa and thank you everyone for joining us today.

2023 is going to be a pivotal year not just for <unk>, but for our industry as a whole. It is time to transition from planning to delivery and that's exactly what we're doing.

We're delivering on the things that really matter.

<unk> on manufacturing on preparing for our commercial operations.

Already in the first few weeks of this year, we've demonstrated that the <unk> approach works, let me give you some examples.

Last year, we worked hard to become the first EV toll company to complete stage one of the type certification process by having our G. One certification basis published in the Federal Register.

And already in 2023, we'd become the first company to complete stage two of the process.

Last year, we worked hard to complete our pilot manufacturing facility in Marina, California and already in 2023, we have become the first EV toll company to start final assembly of accompanying conforming aircraft.

Last year, we worked hard to build in house testing capacity, including powering up our integrated test lab and already in 2023, we're running developmental tests in that facility.

That same pattern of delivery of planning and then executing is present across all of our work streams and it goes to show that our approach is working.

It also means that 2023 is going to be a very exciting year.

We expect to see the first aircraft roll off our pilot manufacturing wine and fly within the first half of the year.

We plan to fly with a pilot onboard before the end of the year.

We expect to have all 13 of our area specific certification plan submitted to the MAA in the first half of the year.

And we plan to start conforming test across the majority of our system areas before the end of the year.

We're on track to announce the location of our phase one manufacturing facility in the first half of the year.

And we're laying the groundwork to ensure we'll be ready to start on base operations with the department of defense in 2024.

As we move into this period of execution, our team is delivering like never before.

Knocking down industry first one by one.

Their commitment is a sight to be hold in a few weeks back we invited our team members to bring their families along with them to Marina to show them, what we've been working on we.

We had nearly 2000 people turn up which I think is not only a sign of the pride and dedication of our team, but it's also the largest crowd that has ever seen any VTOL aircrafts fly in real life.

I witnessed that same level of commitment and energy when I visited Toyota in Japan, a couple of weeks ago and met face to face with some of their incredible engineers supporting our manufacturing.

And as we move into the execution phase and manufacturing. We're also making the same transition in our certification and testing work.

<unk> will talk more about this in a minute.

Having a clear path to certification is essential to moving into the execution phase of this certification process, where we focus on testing.

At the end of January we were honored to host Billy Nolan the acting administrator of the FAA along with members of his team, including Larry I'll Lu Executive director of the Fas Aircrafts certification service and Paul Fontaine acting assistant administrator for Nexgen.

We had a range of positive in depth discussions about our certification journey and our shift into the testing phase.

They also toured our manufacturing facilities stopping to look at the first aircraft to be produced on our pilot manufacturing line and seeing the parts for multiple subsequent aircrafts being made.

And we were able to watch one of our regular test flights.

Watching people see and hear our aircraft fly for the first time is still one of the most amazing things that happens at our Marina facility and it was a proud moment for our team.

Administrator Nolan and his team are really leaning in on this technology and the opportunity it presents and they remain committed to delivering the <unk> in 2024.

We have the clear path, we need to move forward and we're very grateful for the hard work and dedication of the teams at the FAA.

The U S is the first place a flight.

It's home to the largest aerospace companies in the world and it's home to the FAA, who have set the gold standard on certification throughout the modern era of flight.

With our World class team are committed partners and a clear path to certification, we look forward to continuing to set the bar for the rest of the world DDA over to you.

Thank you Julien.

I'd like to add my appreciation for the FAA team too.

Every document we submit and with every percentage point of progress, we make dedicated and talented professionals at the FAA or putting in the hard work of reviewing refining and improving those documents.

So all of Joey's recent successes like the publication of our view on <unk> basis, and the completion of our means of compliance are also really successes for the FAA team and for the retail industry as a whole.

We're grateful for the highest safety bar that the FAA and the constructive way in which they are engaging with our new industry.

As we do every quarter today, we published a chart in our shareholder letter that outlines our progress towards achieving type certification.

With the publication of our G. One third basis last year, we formally completed the first of five stages.

And as Joe Bob mentioned earlier, we recently announced that we now consider the second stage to be complete as well.

In this stage, we identified the means of compliance.

We will do to demonstrate compliance with the requirements. We said in the first stage of the process.

You will see in the chart that we are at 97% completion on the job side and 94% completion on the FAA side in this category.

It is not uncommon for a small portion of the means of compliance to remain open for a bit longer in order to allow for further collaboration on minor design changes and improvements that can happen down the road.

We don't expect those numbers to move substantially at this point and so our focus has now largely transitioned onto the latter three stages.

Page three is really about how we are going to show compliance to the FAA. In this stage, we took a big step forward. We doubled the number of area specific certification plan submitted from four in the last quarter to eight to date and we now have five of those start plans accepted by the FAA.

We.

Also successfully completed the second of four system review stages with the FAA experts in attendance.

This is an important step as it demonstrates to the FAA that our development process is on track to satisfy their safety objectives.

These achievements contributed to our overall progress in stage III moving from 37% accepted to 53% accepted.

As we made good progress through stage three our focus increasingly shifts to stage for testing and analysis.

Each acceptance of a certification plan unlocks the ability to engage with testing and analysis for this specific area.

In this stage, we develop and execute on detailed plans across every aspect of our aircraft design and systems.

Testing is already well underway and we continue to develop and submit additional deaths plans to the FAA during the quarter. We had further plans acceptance, including some covering adhesive bonding for our structural system test building on prior work on composite materials test and now enabling us to begin additional four kind of test.

In this area.

As we look ahead to beginning formal FAA testing and more system areas, we continue to expand our in house testing.

During the quarter, we successfully ran structural wing test battery vibration test prepared a bird strike this.

Actuation system testing and much more.

To support our testing work. We've also designed and built a significant amount of in house testing capabilities and.

In particular I want to highlight the integrated test lab at our production facility and Marina in this lab, we replicate all of the hardware and software systems that the real aircrafts users, but it's designed to never leave the ground.

That means we can perform development and FAA for credit testing as well as any other testing we want to perform at minimum risk faster base and without requiring the costs associated with flying an aircraft.

We recently began conducting tests in this facility and we are excited to expand our integrated functional desk campaign progressively towards flight FAA certification.

That are further details and images of the facility in our letter to shareholders published on our website today.

While we were able to complete the vast majority of testing in house, we Couldnt turn down the invitation to desktop propeller system in the world's largest wind tunnel facility.

Beth just down the road at the NASA Ames Research Center, the National full scale aerodynamic complex or N fact is widely considered to be the gold standard for aircrafts aerodynamics and performance analysis.

And played an instrumental role in the development of a range of iconic vehicles, including the space Shuttle. The V 22, Osprey. The F 35 joint strike fighter and a number of next generation helicopters.

Over the next few months, we'll have a rare opportunity together a range of high fidelity data out to support our certification program.

It's a genuine privilege to extend our partnership with the U S Air Force and NASA again, as we deliver the next generation of aircraft that will change the world. We're very grateful for their continued support.

Moving on to manufacturing the biggest news for the quarter was the progress we made with the first aircraft to be manufactured on our pilot production line.

With all the main structure is complete and at least one of every key part now manufactured we're beginning final assembly.

This is a real moment of celebration for us and not just because we get to see the aircraft come together, it's the way in which we built this aircraft that separates it from any aircraft with built previously in three key dimensions.

We developed our quality management system that complies with FAA part of 'twenty, One 135, and <unk> 45 regulations and forms the foundation of the quality system that will be required to achieve our production certificate.

We locked and released our design and manufacturing drawings and we build this aircraft on our production lines. According to those designs.

These three pillars mean that for the first time, we're seeing a company conforming E VTOL aircrafts and final Assembly.

And we're already assembling major structures for the next aircraft and parts for multiple aircraft after that.

We expect to build multiple campaign conforming aircraft before we're ready to build our first FAA conforming aircraft for each one will apply the right level of development and inspection process.

Defined under our quality management system to match the purpose of the aircraft, allowing us to iterate quickly and incorporates the earnings. These are major achievements for the jewelry team.

Building this aircrafts lays the groundwork for us achieving flight with a pilot on board by the end of the year and it allows us to exercise our current quality management system ahead of time certification and subsequent production certification.

I couldnt be more excited for the progress that lies ahead.

I'll now hand, it over to Matt to talk about our financial results.

Thanks, <unk> good afternoon, everyone and thanks for joining US today, our 2020 to financial results for the fourth quarter and full year reflect our disciplined and methodical approach to spending and resource prioritization.

This approach and the support of our World Class partners continues to serve US well and then this resulted in a strong balance sheet with $1 1 billion of cash and short term marketable securities at the end of 2022.

The progress that Joe ban in DDA highlighted reflects the hard work by the <unk> team, which now numbers more than 1400 globally.

Over the course of last year, we grew our team approximately 30% with 90% of this hiring directly supporting engineering and manufacturing initiatives.

Turning to our financial results in the fourth quarter of 2022, we incurred a net loss of $66 9 million or <unk> 11 per share, reflecting a loss from operations of $101 4 million, partly offset by other income of $34 5 million.

Our operating expenses included stock based compensation expense of $17 2 million and depreciation and amortization of $6 6 million.

Other income included the revaluation of our derivative liabilities was $25 9 million in interest and other income, which rose to $8 1 million.

Our net loss in the quarter was $72 million below our net income in the fourth quarter of 2021, largely reflecting higher operating expenses of $24 million, a lower favorable revaluation on derivative liabilities of $35 million and the non recurrence of a onetime tax revaluation last year of almost 11.

Million.

Our net loss compared with the third quarter of 2022 was 12 million lower reflecting higher operating expenses of $4 million more than offset by the favorable revaluation of our derivative liabilities totaling $13 million and higher interest income.

Our fourth quarter, adjusted EBITDA, which as a reminder is a non-GAAP financial measures that we reconciled to net income in our shareholder letter was negative $77 6 million.

This was $12 4 million greater than the fourth quarter of 2021, reflecting higher operating expenses outlined earlier and nearly flat compared with Q3 of 2022, reflecting the continued growth in personnel and R&D expenses to support our operations offset by the higher grant payments referenced earlier.

We are well capitalized with $1 1 billion in cash and short term marketable securities at the end of the fourth quarter. This.

This includes delta as equity investment of 60 million received in October .

Cash used in operating activities and purchases of property and equipment totaled $83 6 million for the quarter spar.

Spending increased compared with the third quarter, reflecting higher capital expenditures, which included the acquisition of property and facilities in Santa Cruz to support <unk> long term growth for $25 5 million.

In the fourth quarter. We also received the final disbursement from summer bio our equity investment that discontinued operations last year.

For full year 2022, our net cash used in operating activities and purchase of property and equipment totaled $298 million.

In last quarter's call, we highlighted that we expected our operating cash outflow to be under the low end of our spending guidance.

Our reduced spending reflected the payment from summer buyout earlier than expected payments from the department of defense for contracted lover of balls and lower spending across our operations.

As we've explained in past quarters, our cash flow as referenced in our shareholder letter and which will be included in our 10-K excludes cash held in our short term investments.

In the first quarter, we invested a substantial sum of the proceeds from our merger with the Rainbow technology partners. Therefore, our statement of cash flow shows a more sizeable cash outflow, reflecting this investment.

As you have heard we expect 2023 to be an exciting year as we shift from the definition phase to the implementation phase of type certification, including producing our company conforming aircraft and flying with a pilot onboard.

In addition, we are actively discussing potential locations for our phase one manufacturing plant with multiple states.

We expect to conclude these discussions in the first half of the year.

As mentioned last quarter. We are also negotiating with the department of defense on our next contract which is anticipated to include on base operations.

We expect to be able to share more once we wrap up these discussions in the coming months.

This is a key step forward for our initial operations expected in 2024, and it presents an opportunity to build operational experience in areas like training maintenance and scheduling that are critical to our future success.

At <unk>, we're committed to maximizing the effectiveness of every dollar we spend that's been our mantra since the early days of the business and it's served US well a great example of that approach is how we're timing our spending on manufacturing.

We started with a low investment pilot line working with Toyota to develop and prove out scalable processes, where effectively stress testing and refining our aircraft manufacturing before we scale and invest for higher volume production.

It's the smart way to do things and that methodical rational approach can be seen in each area of our operations and allows us to derisk, our business model and keep each area of our business aligned so we're only spending and we need to.

In each case, we iterate test and learn on a smaller scale with minimal investment prior to incurring more sizeable cash outlays.

In 2023, our key priorities continue to be progressing certification ramping manufacturing and delivering on our commitments to our partners, including the department of defense and Delta as examples.

To support these efforts, we expect our net cash used in operations and capital expenditure to fall between $360 million to $380 million.

This projection reflects our assumptions for continued hiring in priority areas.

Higher R&D expenditures, including material to support certification on manufacturing and increase in D. O D related deliverables related to R&D activities lower capital expenditures as well as the non recurrence of the cash payments from summer bye.

We look forward to sharing our progress with you all as you've heard today, we have a lot happening this year and talk about this.

This concludes our prepared remarks, operator would you. Please instruct the participants how to ask questions.

Yes. Thank you we will now be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the Q4.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please for repo for a question.

Our first question is from Andres Sheppard with Cantor Fitzgerald. Please proceed.

Hi, good afternoon, everyone and congrats on another strong quarter.

I guess quick question I have is in terms of the our relationship with the the D. O D. Right. We know from prior releases that that relationship has been enhanced to now north of a $75 million.

You said today, you reiterated that you expect to monetize that relationship in 2024, which will be prior to certification and commercialization which is great.

Can you give us a sense of like how shall we be thinking about in terms of quantifying it right as we look for into 2024.

Any visibility or any guidance that you might be able to give us just to get a sense of how exactly you will be monetizing it in and what that could potentially translate to in terms of some revenues. Thanks.

So thanks, a lot for the question Andreas This is Paul.

We've obviously been very excited about having two paths to revenue, which I think sets <unk> apart from any of the other companies in this space.

One is the focus on moving through FAA certification Kabbalah consumer launch, but the second is you notice that we have opportunities to begin to put aircraft into service with the Dod and we've always expected that that has an opportunity to happen well ahead of FAA certification.

So.

The the path on on working on that EOD work is ongoing right now.

Been able to execute a large number of test flights under the existing contracts over the course of the last few quarters.

And the conversations with our Vod partners that has both the air force and the Marines about what potential service would look like are happening right. Now I think it's probably premature to provide any guidance around exactly what that's going to look like.

But I can say that we have been very.

Optimistic about both the content and the pace of those conversations so that's something that you may hear about.

More shortly.

Got it fair enough, Thanks, Paul and maybe a quick follow up for for Matt.

So I just want to understand this correctly right. So in the current liquidity number in Q4 that includes the 60 million equity investment from Delta.

Is that cash that can now be utilized for whatever you might deem necessary or is that cash restricted given that it is an equity investment and perhaps can only be utilized in some areas any color there. Thanks.

Yes, Hi, Andrew Thanks for the question so.

So the Delta investment is reflected in our financing activities on the statement of cash flows. It's excluded from the operating metric I, usually site, which really just focuses on net cash from operations and our capital expenditure.

That cash is unrestricted so its a direct equity investment into the company. So that $60 million is reflected in the $1 1 billion in available for us to use for operating expenses as we need.

Got it very clear thanks, Matt I'm, sorry, maybe one last one if I could squeeze it in.

Just want to make sure I got this correctly so the expectation is to begin.

Piloted test flights of the conforming aircraft in the first half of this year is that correct and has that already started.

And just to clarify so what we said in the in the call was the pilot and test flight in the company conforming aircraft would be by year end.

Okay got it thanks, Matt I'll pass it along to underwrite to get congrats on the quarter.

Our next question is from Cristina <unk> with Morgan Stanley . Please proceed.

Hey, good afternoon guys.

Hi, Christine.

Hey.

Maybe a question for you I mean, when you look at the by the way. Thank you for all the color that you've given regarding the progress on type certification and when we look at this timeline here I mean, you've finished your certification basis, you've done means of compliance and your first stage III for where you guys are accurate 93% already.

You know it looks like things are progressing pretty well and on pace. So I just wanted to get an understanding of your decision to delay or.

Commercial service to 2025 that you announced last quarter instead of 2024 in hindsight was that decision more.

To have a buffer of prudence because it seems like based on your pace here like 2024 seems possible Phil.

Interesting. Thank you for the questions really appreciate it and yeah really excited about all the progress that.

The team in FAA support in achieving the progress to date with stage, one two behind us and really focusing on stages three and four really the focus right now for us is to deliver on our plan this year too.

Work through the build out of <unk>.

The other thing we've talked about progressively getting it into the flight test at first and then they are pilot onboard.

Towards the end of the year. This is really going to allow us.

To truly deliver and.

Sort of meet the timelines we set here.

<unk>.

We're generally continuing to feel positive about what we've shared in the last quarter and remained committed to that.

I see so is it still possible about how quick could you see commercial service in 2024, then DBA or is it really 2025.

I think the factors that we shared in the previous quarter remain.

Consistent at this point, whether it'd be the.

Progress so we're looking at.

Two would be as far with the FAA that remains an important factor.

So we will need to wait and see on that one.

Great, Thanks, and Matt on free cash flow.

It seems like your cost cutting and the timing of payment got you to below your 2022 usage, but now when we think about 2023 and beyond.

Should 2023 be the peak in free cash flow usage, because now you have the land in place your manufacturing facility can you give us an idea of the puts and takes in 2023 and how we should think about cadence of free cash flow beyond 2023.

Sure. So 2003, when we got into is $3 63, $80 million and really that reflects a couple of things one is.

The recruiting we made this year hiring 30% more than the prior year that will flow through and that's the biggest contributor to our cash flow increase in 23 versus 2022. We did have you know non recurrence of a couple of one timers.

Puts and takes there on both sides for weather and summer by or the purchase of the Santa Cruz facility.

The other thing you will see as we ramp production as we will be spending more to build more planes. So as we ramp up and build more then we'll spend more as well.

So that's kind of the constituent factors behind the 'twenty two 'twenty three as you look beyond 2023.

We will have.

Continued growth in our cash flow simply because we will then need to build out the commercialization side of the business, we will be looking to add on our capacity. We're talking about phase one manufacturing that really won't affect 2023 in any meaningful way, but certainly we will start adding into those those out years and then lastly, the building of planes.

Now the offset to those theres a number of opportunities we're leaning into one and they kind of come in the relevant buckets. If you think of it. So one on the manufacturing side, it's state incentives and government support through things like titled 17 presents significant opportunities to help us defray that capital expenditure.

On the aircraft side, it's building out those those tools and mechanisms that would basically equate to the aircraft leasing structure in the broader industry. If that's an opportunity that comes together and then evaluating other alternatives for the other parts of the business as they shape up and then lastly, I would add our go to market.

Approaches may vary whether that's things like the Vod, which present not only early revenue opportunities, but long term opportunities.

And as we've talked about before foreign affiliates, where as we put vehicles in market that will pull ahead, the cash because there'll be sales to those markets, whether they're a joint venture or.

Another one company by our partner and so forth. So there are a lot of levers we will be looking to pull as we go forward into the business.

Great. Thanks, Matt. Thank you for the color and if I could squeeze a third one I'm not sure. If it's a good question for Paul or DDA.

You know in November we saw the FAA proposal rule that they'll update the air carrier definition, so that they could add powered lift operations through the same regulation is covered by the commercial airlines charters in tourism and things like that.

This change in role make it easier for Jovi aircraft to operate once it goes into service since its you know technically would be powered.

Like how do we think about that rule for operational performance and is it different.

Sure Jeremy had stayed as like a fixed wing.

Certification I guess I'm, just trying to understand on the operation side is this rule positive or negative for your operations going forward.

So I would say broadly probably some of these areas are positive and I think indicative of what J P was alluding to at the front of the call.

We felt really good about the sort of Louisiana across the FAA and that includes not just the certification effort that video was referencing when he talks about the progress sort of momentum that we're continuing to build on the tradeoff of documentation, but that also relates to areas like pilot training and operations.

We think that it's getting the right attention from the right folks that FAA and theyre, making the progress that they need to be making and it's going to be incumbent upon us to just continue to make the progress that we need to make along the way.

Great. Thanks, guys.

Thanks Christian.

As a reminder, the star one on your telephone keypad, if he would like to ask a question. Our next question comes from Savi <unk> with Raymond James. Please proceed.

Hey, good afternoon, everyone.

Just a clarification on the final question just on that 2023 cash burn guide does that assume any kind of contribution from liquids related prime types and partnerships or could that be kind of upside to that cash runway.

Hi, Savi that does factor in our projections for the agility of the firm contracts.

Got it.

And that's it from me.

In building this suddenly the accompanying conforming aircraft that was kind of curious if there were any kind of notable surprises as you went through that or lessons learned as you went through that process and as you kind of consider expanding the production process.

Thank you for the question. This is DBA in general I've been really really really positive about the progress to date. This is.

Really the culmination of many.

Many years of development and testing happening in house on each of the.

The sub systems and systems and now see all this come together generally speaking I'd say, it's been exciting to see all this no surprises.

That we hadn't really accounted for or planned for most of the changes are miners.

In nature and they were all sort of planned from the beginning for us to be able to accommodate because that's really part of the development process that we're going through here and.

Yes, I remain really positive about the progress to date here.

That's good to hear and if I just a clarification on just the testing process.

Just because you at least do a more kind of internally built a kind of parts that that obviously has a clear advantage does that create more testing requirements and then using off the shelf or or does that not really kind of factor into the testing process.

Effectively the testing when you think about it from an aircraft system and equipment. It really is all the same.

It's really about who's actually executing the testing whether it would be.

Joe BD OEM or suppliers in this case, we will be executing the vast majority of the testing, but we'd also scaled appropriately for that so you really have to think about it big picture not just the aircraft manufacturer, but also all the supporting infrastructure and so on but it does give an advantage in a lot of ways and that.

The development that testing that manufacturing is all in house. We're all co located here and we were able to adapt <unk> changes and address any of the findings are pretty quickly here. So I do think this is a really really really positive thing and we're seeing that now as we're building this aircraft and its coming through the final integration.

Any of the feedback we're getting is quickly getting back to the work instructions to the design to the testing team and adapting to these very quickly for the next series of airplanes, which were already building here on the manufacturing line.

Got it thanks again.

Our next question is from Bill Peterson with Jpmorgan. Please proceed.

Hi, Good afternoon. This is he might kutani on for Bill.

Just wondering how is the process of selecting a production site in the U S going so far and how capital intensive could it be to get the site up and running and you know is there a chance that this could be jointly funded with a partner.

Hi, and thanks for joining today.

So our process is going really well.

For discussions with a number of states as.

As we think about site selection, what we're really looking for starts off with the basic requirement. So on airport.

Ability to fly fiber days.

Then we really look at like labor availability, which is critical for any manufacturing decision not unique obviously the aviation and then what you hit on there next is incentives and how do those packages compare across states, but also how do you think about the total cost of those sites, whether it be labor rates and so forth we've been really encouraged by the engagement.

In each state.

In terms of the incentive packages that are available and the support.

In terms of our capital expenditures and so forth. So we're looking to work through this process.

I don't have any specifics to announce today, but to reduce the overall total cost of our manufacturing facility, we're not providing any guidance on the specific capital outlays of what our future vacuum in cost but.

Once we have more more to announce later this year, we'll be happy to talk more about it.

Got it. Thank you and then can you also elaborate on what production certification looks like from here like can any of the legwork to be done in conjunction with types are at or ahead of it.

Yeah. Thank you just did it again.

So really the way we're doing this is effectively trying to work it in conjunction on purpose. So that we can have our production certificate really right. After we got our type certificate and you can see that with some of the things. We've communicated recently so for example, having completed development.

And our of our first quality.

Our system.

And so that's really an opportunity for us to actually use that.

And exercise that through this first builds second build and third builds so that we're always fine tuning it and optimizing it so that when we get the TC then we can get the PC the production certificate right after.

Okay. Thank you so much.

And our final question comes from Edison Chu with Deutsche Bank. Please proceed.

Hey, Thanks for taking our questions I wanted to follow up on the company conforming aircraft.

Can you provide any sort of differences or any changes that you make sure you've made relative to the demonstrator and then potentially as you move to the fully conforming aircraft and also should we interpret your comments about the pilot flight in second half, meaning that after you do that you'll have.

A fully conforming aircraft, let's say buy it by the first quarter of next year.

Hi.

Thanks for the question, let me a lot of questions over to you, let me step back here and maybe talk through how.

How will regroup this so in terms of.

Build to confirm it that really we can think about the airplanes, we're going to manufacture into groups. One is a series of company confirming our brands and then the next one is the FAA conforming airplanes.

The purpose of the first part is really too.

Building airplanes to the intended design.

And under a applicable level of our quality management system.

We do that in order to effectively drive around the testing that we will eventually a rerun again and demonstrates with the second group of airplanes, which is the FAA can month consultancy.

Each one of the airplanes in the company conformity group at stage two progressive rebuild on the previous one.

Each of one of these is focus on a specific set of features and generally speaking we tend to look at some of the more essential and critical features in the first airplane and progressively build on that.

We continue to build out so there may be things like interior lighting or.

Environmental control systems that may not be as critical to address in the first aircraft and we will work through these and the follow on builds but for all intensive purposes are.

Design is firmed up here and it's really about building against that design and starting to execute on our testing from here on.

And then in terms of the fully conforming version do you have a sense or do you have a target of when that will be ready.

We're not communicating updates on that front really the focus this year is to build and deliver on the pilots and flight or I should say the pilot on board flight of course, all of our airplanes have been piloted.

This is about having defined to be on board.

Understood.

Then separate question on just the.

The battery strategy.

A few of the competitors out there have had come out pretty publicly using cylindrical I think two of them are using wireless al do you have any updates on kind of what are you planning to do or what you're doing and how that has evolved.

Thanks Edison.

This is Joe so on the battery we continue to be.

Very pleased with.

The performance of our of our battery systems, including.

It's a D a.

Features around our battery system.

The remarkable performance that we've been able to deliver with it.

And again I'd like to highlight how.

Important we think.

The the lifecycle of the batteries is to the operating economics of our service and the environmental impact.

Of replacement.

Replacing the battery pack and and as we've stated previously.

We've demonstrated more than 10000 represented a flight cycles in the lab and.

In.

During the flight tests of our of our prototype aircraft. We've also seen.

Really fantastic life out of them.

And then just to go back to the heart of your question on safety again safety is our.

Number one priority and its inherent and everything that we've done to design or battery system.

Got it and if I could sneak just one more and I know you effectively got the E. M. O C. J just wondering on that remaining small piece is that officially a 100% tied up.

Lee.

Later next year, what do you how do we think about just timing.

Timing wise when does that become 100%.

I know, it's a small piece, but just curious.

Yeah. Thank you so our expectation is that we will.

Get to the very.

Very close to 100% if not 100% this year like I mentioned earlier.

Those are.

Small percentage here and there that may evolve over time, but for the most part this is really inconsequential.

What matters is that we've been able to proceed into the certification plans under desk plan. So the fact that those have been unlocked is really what's critical here in moving the program forward.

Got you.

Thanks for taking the questions.

Thank you.

Thank you I would now like to turn the floor back over to Darryl D. C O Jobin Denver for closing comments.

Well, thank you all again.

Really want to emphasize what a incredible year, we're looking forward to as.

As a company in 2023.

Demonstrated.

Accretable momentum and.

The team is very pleased with the performance that we're seeing out of each of the systems on the aircraft.

And.

The aircraft as a whole.

And.

We're.

So excited to see the conforming aircraft.

Coming across the line and then.

You talked about moving that aircraft into.

Flight test in the first half of the year and then.

<unk>.

Pilot onboard flight later in the year.

I think the metric that is going to be the most important to look at as.

As a gauge for this year is our is our progress on testing.

And.

Are the investments we've made in our in house testing capability are really paying dividends. It's another example of the strength of our vertical vertically integrated strategy.

And we.

We could not be more thrilled with.

Where we stand as a company the momentum we have.

And we're very grateful for all of you taking the time this evening to to listen to our call and can't wait to touch base again shortly.

Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

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Yes.