Q3 2023 Eve Holding Inc Earnings Call

Greetings and welcome to the Eve Air Mobility third quarter 2023 earnings Conference call.

At this time all participants are in a listen only mode.

A brief question and answer session will follow the formal presentation.

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As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Lucio Aldworth director of Investor Relations. Thank you Sir you may begin.

Thank you operator, good morning, everyone. This is Lucio Aldworth director of Investor Relations, Eddie and I wanted to welcome everyone to our third quarter 2023 earnings Conference call I have here with me are our newly appointed Board member Jerry Tomorrow, our new CEO.

Johan <unk>, our CFO Eduardo Couto as well as our chief engineer Luis Volentine. After their initial remarks were going to open the call for questions and that we do have a deck with a few additional slides and more information on our website at IR Dot Ive air mobility.

<unk> com so please feel free to download and follow along.

Let me just start by saying that this presentation includes forward looking statements or statements about events or circumstances that have not yet occurred. These are largely based on their current expectations and projections about future events and financial trends affecting our business and our future future financial performance.

These statements and.

They are subject to risks and so.

It's disease and assumptions, including among other things.

General economic political and business conditions, both in Brazil and in our markets.

The words believes May will estimates continues anticipates intends expects.

Or any other similar words are intended to identify forward looking statements and we undertake no obligation to update publicly or revise any of those forward looking statements.

Because of new information future events or other factors in light of these risks and uncertainties the future events and circumstances discussed in this presentation may not occur our actual results could differ substantially from those anticipated in our forward looking statements with that I will now.

I'll turn the presentation over to Gerry Gerry.

Thanks, Lucy L and good morning to everyone.

Before we dive into the third quarter results I want to say that it has been a distinct privilege to have worked with the incredible <unk> team for the past two years.

On the deal with an eye towards listing on the New York Stock Exchange and are critical startup phase with our structure and operating model with our partner Embraer well established the program is now progressing at pace and we have created irreversible momentum. It is the right time to step aside for someone who.

He was so well prepared and uniquely qualified to lead eve through its next phase.

Lucio mentioned I will be moving to the board of directors and our great Stein and myself have passed the baton to Johan Board days Yeah.

Johan is a proven senior executive with an incredible record of success building and operating multibillion dollar global businesses within the aviation sector with.

With his proven track record and direct experience with our major partner Embraer Johan will be a tremendous asset and leader for Eve.

With that I will now turn it over to our new leader Johann Board as Johan welcomes.

Thanks, Jerry after being on the job for 60 days, let me start by saying, how happy I am Ost dispersed, earning conference call and shared this moment with set an accomplished team.

I'm proud and impressed by all of what they have achieved and I know that it is much more to go. This is a reason why haven't you to carry the torch and ensure each branch the market. The best in class aircraft, but also services to transform the urban mobility on a global scale.

Having said that we continue to make progress in the development of our suite of products and services for the UAE market.

Last quarter, we announced that the definition of our aircraft architecture and since then we have taken important steps in the development of our project.

We started to build several components of our first full scale prototype such as the wing and it's many structural parts the harness to integrate sensors and systems.

And this was a laugh.

We also launched what we call the joint definition phase at G. D. P J.

This is important because this is when our engineers interact closely with their counterparts from suppliers.

We have selected obviously and we go over the details of how each component will work and interact with each other with a seamless and integrated system. Ultimately we're developing a lift includes aircraft that will be simple to fly and maintain and this is one of our main differentiator in this market have no doubt about this.

Going to slide three it shows to you some of the component I just mentioned before we started then come together I'm really thrilled, but I mean it shows you know the recent wind tunnel tests, we conducted with the powered waters that.

That we used to validate the flight simulator, the fidelity of our silica computer models and assimilation as well expected to look at the envelope of the aircrafts.

Going to slide four.

Well, we have previously selected need that to supply our electric motor the E. Four emergency management and you gave me four propellers, and we continue to down select other suppliers for other critical components of our aircraft Embraer will supply to each by control computer the FCC and <unk>.

<unk> with its fly by wire capabilities and brand will also assist in designing developing and manufacturing also all fly control hardware and system and provide the support for the certification.

You will notice there's gardening that we selected to supply the flight deck and high resolution displays to integrate the aircraft medicine and flight control system.

The device will feature intuitive touch screen tailored to reduce pilot workload and we'll have a full suite of yandex capability with integrated flight management system radio plus border Algeo management and other application like the checklist charged some detailed maps that pilots want to see that.

We also selected Levered for the accelerators of the fly control that we have the fifth generation fly by wire capabilities.

We all know that labor is a well known or manufacturing.

Manufacturing precision gears and these actuators will enter the high performance and ease of maintenance, which is always in the center of our project.

The last one is indoor Gallup tick they won't provide the thermal management system, which will maintain enough general transport churn range for equipment, including batteries and other electronic components.

System will also help to ensure the comparables temperature inside the cabin of the aircrafts. So as we move along with the program. We also are in an advanced stage of selecting supplier for the sensor and computer together critical data such as the air speed the altitude and environmental conditions.

Sample will be then relate to the pilots on the Garmin flight display I, just talked about to ensure the safe and efficient flight under different weather conditions and this is a great example of the importance of the J D. P that joined the finishing phase I just we just announced this is when we our solutions data provider.

And Garden me, we'll have to work together to make sure that all interface works seamlessly. So that the pilots has the correct bleeding on their screen.

This type of relationship will be replicated among all of the other suppliers that I just mentioned to optimize how different system work together.

Moving on slide five.

Besides working on the aircraft itself, we continue to study the impact on the urban environment, and just completed a visual and sound perception study.

The goal is really to learn how people respond to the Ito operations to optimize the aircraft design and flight operation and minimize also the impact on the communities.

In parallel we held their what we call the H M. IV German mentioned machine interface to make to collect customer feedback it was here in Bridgeville and <unk>.

The answer to this campus and the feedback on the flight deck environment on all the interfaces.

We also have around 20 partners represented therefore from the fixed waynesville, what's already Wang said, the grown operators and discuss the topics that range from fly control the avionics electrical system propulsion, but also around the interior design.

H M. I summit that we just had provided a great way to share. He's approach. So it's really one way, but also the other way, which is the valuable feedback from experienced pilots.

Whether they're like copter or fixed wing like I said, though even drones.

And rest of the feedback on the interfaces all the economics that capability is being designed into the Eve aircrafts. So this is one of the many events that we've been hosting.

For many years now so we get the feedback from both customers and partners to get better understanding of many components of the U N ecosystem. Because this is what we're talking about here not only in aircrafts so ecosystem on the global scale.

Now going to slide six as we've mentioned before I mean, we we were replicating elements of the <unk> proven business model as we will design manufacture and sell the aircraft, but on top of this and I think this is very important we also will leverage the amboy with global presence.

To offer local solution to our customers and provide the after sales Ito services other than the loss agnostic basis.

So far as you can see we have secured a contract with different seven customers for the maintenance repair overhaul, what we commonly called MRO and this could bring up to for about $540 million in revenue used to eve over a course of five years.

Importantly, this customers that place LOI for 825 aircrafts, meaning that we can potentially expand this business within our customer base and because of this being agnostic.

We believe that we could potentially service easy to all of our competitors services revenues could that way Christine the aircraft sales.

On slide seven it shows you that we currently have what we believe to be the largest and most diversified backlog.

Well diversified by the number of customers the region and the whole industry. In total we have announced L. O I's fourth 2850 aircrafts from 28 different customers spread over 14 countries and different businesses from a mainline two region not only aligned to all the costs are off where it is.

Ridesharing platform and the leasing company. We also have a low is to offer our urban air traffic management system from 11 customers. We believe with us that better reflects the market leading value proposition that we bring to our partners and also our clients.

We also believe that this pipeline offer a strong long term revenue visibility and will help ease to smooth cash flow consumption in the years to come as we start to convert the existing letters of intent into firm orders and collect will be called the P. D piece of pre delivery payments.

Beyond that we are developing a strong network of partners and they only ask yourselves.

And energy to address one of the largest challenge I had four urban air mobility, which is to create the whole ecosystem oops pardon me, saying this many times here, but this is the key because besides the simple than simply developing an aircraft. We believe that together with our customers. We can began.

Can't begin to announced no do you focus cities and we've been doing this.

We've been accelerating our efforts, especially in San Francisco with United Airlines, and United States of America, and also in Rio I wish I knew.

Aero was an issue in Brazil, and I can tell you theres more to come well in front of US now I would like to invite you to go over our financial and the next milestone.

Thanks you.

Now moving to slide eight ive as a pre operational company and our financial results reflect mostly the costs associated with the development of our EV Tal and our solutions to the urban air mobility market, starting with income statement highlights we invested 28.6 million during the third quarter.

'twenty three in our program development versus 40 million a year ago. The majority was invested to develop our EBITA and a portion in services and support solutions and the urban air traffic management system.

On top of development expenses. We also spent 5 million in SG&A this quarter compared to 7 million last year, but keep in mind that we incurred several nonrecurring expenses last year and windows are excluded SG&A is actually growing as we now have a bigger corporate structure and a more mature develop.

<unk> program.

<unk> also reported 4 million financial income during the third quarter twice as much as last year, mostly due to higher interest rates, we have a very conservative financial policy and invest our cash in short term deposit as we first grade banks with that we reported a net loss.

As of 31 million in the third quarter of 2023.

Now moving to cash flow, our operations consumed $22 4 million in the quarter versus $16 8 million last year attributed.

Attributed mostly to higher R&D expenses.

It is important to say that we are intensifying our tests with different rigs to test systems and components wind tunnel tests to validate our models for eye aerodynamic drag and efficiency.

Now our assembling our first full scale prototype, which involves supplier payments. So it's natural our cash consumption increase.

Finally, our cash consumption in the first nine months of the year.

It was 70 million. This is almost twice the cash consuming the same period last year.

With that we ended the second quarter with 256 million in cash and despite the greater intensity of our operations cash position drop just 12.6 million in the quarter as we started to withdraw from the credit lines made available through the Brazilian development Bank lately.

Last year.

During the third quarter, we've through 12 million, leaving 86 million remaining available to us with that our total liquidity position now stands at 343 million and remains sufficient to fund our operations well into 2025.

Intend to continue drawing.

These credit lines through 2024, and we use these resources to fund all of our engineering development agreement with Embraer. So this is going to be an important tool for us to manage and retain a solid cash position in 2024.

Finally, slide nine summarizes our milestones and we want to reaffirm our commitments as mentioned before we conclude the first three milestones selecting primary suppliers for critical components of our aircraft and freezing the configuration of our EBITA.

We have also started to manufacture some of the individual components of our first prototype and have begun to assembly. This into a full scale with Vitol. We've that we plan to initiate the test campaign. Once we complete the assembly next year in parallel we also continue to work on the trial was softer.

Our urban a T M system and plan on having a trial run this quarter.

As mentioned before we expect cash consumption to continue accelerating as we intensify.

Our investments in the program, having said that we have a strong focus on cost control and we also enjoy important synergies we've embraer.

And lastly, our focus on cash preservation may shift from supply may shift some supplier payments to the right from the fourth quarter of 23 to the first quarter of 'twenty four onwards.

So we anticipate our 2023 total cash consumption should be closer to the low end of the expected range of 130 to 150 meter.

With that we conclude our remarks and I would like to open the call for questions. Operator. Please proceed.

Thank you we will now be conducting a question and answer session if.

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Thank you. Our first question comes from the line of Savi <unk> with Raymond James. Please proceed with your question.

Hey, good morning, everyone and.

And and and and maybe a first question for you on here.

And you know that the team is clearly executing on the plan and I was just kind of curious if liquor can I leadership, you know what when do you see as your priorities.

Oh, well, thanks, Savi, Yeah, 60 days on the job and I can clearly see that the team is passionate about what they are doing and then we're really with a big mission of the re imagine the urban mobility and it takes you know are a big Knowhow and I think it's not only about the and I've been mentioning this is not about the vehicles.

But it's also about the whole ecosystem the service and support and I think this is what I'm gonna be coming in and were at the time, where we need to execute the plan and are definitely on the short term Ah I Wonder you know where the team continued to develop the focus on the development of E V. Til for certification and also preparing to introduce service, which we're planning for 'twenty six.

Will work also with the U N ecosystem as I mentioned early on.

Because it's all about making the operators of success right now not only ive by sort of buying and delivering those aircraft and the solution, but also who's going to be starting a taking deliveries and operate the retail. So I think we need to continue to understand what's going to be our priority and the first operators for 2026.

Then afterwards, we can replicate this model to other cities around the world.

Right that makes sense and and if I might on on the.

The services and operations deals that are that got set up with seven customers.

Could you talk a little bit about how those are set up and you know what what the drivers are kind of like power by the hour you know what what's that kind of the length of the contract in any kind of high level.

Yes.

Clarity on what those deals look like.

Sharon.

He was really suggesting an end and delivering a product that will be at eye level of operation, we're not talking to all the only about substituting helicopters sightseeing obviously it could be one of the application, but what we're looking for also is the commuting is the inter urban.

A subtle and that requires a very high mature operation and it takes both operators and the Oems and also the rest of the ecosystem, whether it's steel energy provider, whether it's you know the the virtual part that will be setting up and I think customers are starting to understand this.

When they start to look at what could be the first routes that they will operate and their feet on the ground and then we make sure they have their feet on the ground also to say look we're going to be using the existing.

Ecosystem the existing infrastructure, but also will have to scale up we'll have to come up with vert support where today there was none and when do you understand this you want to make sure that the.

That the operation is well backed up and this is exactly what we're doing based on the Android and model and I've been having the pleasure to lead for the last 20 years, there's two things to that the operators will always ask eve is the availability of the aircraft and the optimized operating cost those are the two guarantees.

Is that the operator once beautiful aircraft reliable you know that will be delivered on time, you know for the Internet service, yes, but afterwards it needs to be available and also with the operating cost and this exactly what the solution that we've been working on and developing in the base and I agree with you you mentioned in your lithium power by the hour total support.

Packaged food executives cater program whenever we got the name it it needs to be guaranteeing the availability and the operating costs and that's what the operators will want just to ensure that it also make money right at the end of the day that's important.

So to clarify then so that that that's what the deals offer is just some level of kind of guarantee and then supports that kind of get to scalability. Yeah full solution, yes full solution on MRO and spare parts solution also Oh exchange program on the spare parts.

Unexpendable the training a turnkey solution, we want to take it to the next level I firmly believe that ive she'll be an urban solution a turnkey. It's it's it's urban solution.

As a service right as you go you pay as you use right and and I think this is where we're going and strong from the experience of Embraer and by the way on all the segments, whether its executive segment Aviation segment, if it's commercial or you know even defense. Eventually you know, they're all looking for this availability and the a.

Operating cost control. So all of our solution are based on this not even though you are talking about the predictive solution that we've been delivering delivering of embraer for so many years predict the unpredictable. So that's also a solution and the you know the suppliers that we just announced such as Garmin and and all the avionics will have.

This ability to also predict you know what's coming up in Mexico again that operation is is that the at the maximum at the top.

Interesting alright, thank you.

Thanks, Thanks Debbie.

Our next question comes from the line of Conor Walters with Jefferies. Please proceed with your question.

Hi, guys. Thanks for taking my question, having completed the final design configuration in Q2 and initiated the prototype build in Q3 can you just walk us through the next steps on the road towards the I S and maybe what you see with your largest hurdle. It are moving towards the initial test campaign next year.

Well thanks for the question the as.

As you said I mean, we're really focused now on getting the full scale without prototype where we started as you can see the pictures and the first parts and pieces that come together. That's one part of the full scale prototype, although we're building up in parallel what we've done and we're still doing is selecting down their suppliers. So we have the what we call the <unk>.

The tier one group the GTO in the three G III that will come along.

So both for the prototypes, but also mainly and more important for the theory a vehicle and then yes, we will have this.

Full scale prototype are being assembled and it's happening now.

And we can start early next year or during the course of next year, We'll we'll do the best thing Okay.

Got it that's very clear and maybe on a similar note what is the path forward for the ATM software development look like between now and the beginning of customer trials, maybe just what should we be watching a better understand your progress here.

Well. This is you know based on strong from the experience that we have on the AD Tech part of our company as a part of Embraer Group. We've had you know a long history. The a T. M system in Brazil is is based in and is using the software that the AD Tech and the Embraer group has been developing strong from.

This and also with the operators and talents that we've hired at the Eve, we've been coming up with a few released so we're at the second released now that we've been as a matter of fact next week, we will be starting some test with the operators, Okay and and then next year, we'll go for a third and the fourth release and hopefully we'll be able.

To get one of our operators adopt it and the cops are our customers that could start to operated even before the Oh the VTOL comes in.

And I don't know maybe ill.

The leontine, if you want to add something.

Sure. So good morning. So as you have mentioned the next steps that I think everyone can look for us.

Further integration with potential operators of this system and so we are working together with them to make sure that the solutions that are developed will be valuable to them and helps solve problems that are you know actually faced by them.

At this time with their current systems.

Another point is that the system is comprised of several modules. For example, some that are more specifically towards the infrastructure underground others that are more directed to operators function. So we will see also these individual functions be adopted separately if they are valuable to customers.

So this is also something that can be looked for the future.

Got it that's very helpful. Thank you for taking my question.

Our next question comes from the line of Cai von rumor with TD Cowen. Please proceed with your question.

Yes. Thank you so much and Johan welcome.

So first question I guess for four years.

Lewis.

You know as you know the FAA is proposing side by side pilot training for in flight training, which is really at this point incompatible with your pilot set up and the same for Archer and Joe and.

And Joe B and they also are acquiring relative calling for at least at this point relatively stiff diversion requirements 30, 30 minutes for VFR. What is the position as you understand that <unk> is taking and what kind of resolution do you see coming.

Out of this issue.

Hey, good morning, guys. So this is a very important topic of discussion with the authorities both with the FAA, but also with a man because you mentioned so a Mac is the primary authority for the Eve development that is in terms of the certification of the vehicle but.

Then in terms of the operation the vehicles, followed local operational rules right. So for the vehicles for operating in the U S. They will follow what is today published as the S. Four.

But then that will be turned into future into opera news operational part with requirements from the FAA. What <unk> is doing is trying as much as they can both in terms of certification requirement, but also in terms of operation to be aligned with the FAA and also with the assay in Europe. So.

We can have similar requirements.

Again, both for certification and operation for all of the vehicles not only the one that we ive is developing here in Brazil, and B will be operated worldwide, but also vehicles developed in other countries that will be operated in Brazil.

Both.

The examples you gave in terms of pilot training and today the need for a flight hours and pilot training, but also the reserves the requirement they weren't very question.

And in the process of publishing their requirements made by the FAA. So this is something that I feel is very much under discussion.

Today, you know currently the FAA is in the process of reviewing the industry's comments.

In publishing the final rule, which is expected in the case of D. S firm by at the end of next year right. So we expect to see evolution on these requirements and we also see that both <unk> and a as a half contributions to make that are different with respect to what's published by the FAA and the S. Four.

For public commentary, so Kai I believe that there will be significant evolution on these topics that you mentioned and that the end result will be similar or at least as aligned as the authorities can make them. Once they are finalized and published its final rule.

Terrific. Thank you very much and Johan on the service.

Well both.

Are you an archer have United as a customer I think it's your biggest customer and then talking with Archer. They have said you know that they might have you do the maintenance of their of their vehicles could you give us some color on this 540 million men and seven customer that six or seven customers.

Basically.

Where is that business coming from what are your what are your key targets is it basically servicing United.

Is that the biggest one or give us some color in terms of where that business is and who are the key customers we should be looking at.

Oh. Thanks, Thanks for the question Oh, Yeah. The fact that United has been asking also you know arch or to get in touch with us. That's it it really proves that United sees how important and all the other customers as I was mentioning early on.

The operation is as much as important as the vehicles that you're developing and and and you know well we understand that we have a competitive advantage when it comes to the knowledge also the footprint that we will have right away. We will have the backup of Embraer and using also the business model that are they have been developing and it will allow us.

Do you have multiple introduced service.

Around the world and and we've been in talks, yes, with with ARX or nothing to mention here you know in more details, but up but I think again, you know the whole industry understand that it takes more than there are two T. As an addition of a new tap certificate of aircrafts. It takes way morning, This and and I think this is you know what everybody is.

Is it has really come to a consensus let's say, so and we position <unk> position ourselves as one of the leader and the one that understand very well what would get you know against AR and in those coming years. When it comes to Internet service is gonna be a challenge and we're up for it and yes the market understand.

Yeah.

Yeah.

Thank you very much.

Thank you Kai.

Our next question comes from the line of Andre Shepard with Cantor Fitzgerald. Please proceed with your question.

Hi, Good morning, everyone. Thank you for taking our question and Johan welcome aboard excited to work with you all right.

Maybe just as our first question was hoping to get maybe a little more detail regarding the test flight campaign beginning in 2024 curious if you could maybe give us a little more detail S kind of how you expect that to ramp up and particularly as you continue to ramp up into a pilot.

Test flights just curious if you could maybe give us.

A little more granularity there. Thank you.

Okay, well, if you don't mind, I know Andrea well I will pass on the O to O volentine.

Cause I, you know I'm sure I'm going to give you. The same information that I gave you and that you're looking for a little bit more insight. So [laughter] silver 19, who will give you a more detailed there.

Sure. So so the vehicle is an unmanned vehicles. So we will not progress to a manned flights with this vehicle and its a vehicle that has some simplifications with respect to the systems when it's compared to what we will put out as the commercial vehicle.

So with these two characteristics it will help us to speed up what we think.

<unk> test is a test campaign that helps us understand.

The flight characteristics of this vehicle the noise characteristics of the vehicle in flight and also the transition from hover two crews and then of course from cruise to hover wage rates. So these characteristics. We can explore with simplified systems again since the vehicles of full scale vehicle.

And is representative in terms of the configuration.

Simplifying the flight test campaign with the affected we don't have.

First one on board, which again requires us to have more chair as we progressed the flight test campaign and.

And also we have a simpler vehicle in terms of systems, we can progress that more.

Flights more easily so the idea is that this does flight test campaign will contribute to the development of flight control laws to us understanding flight dynamics.

And contribute that with the maturity of the vehicle as it goes into flight test campaign with the commercial representative prototypes in 2025.

Got it that's super helpful. I appreciate that.

And maybe just as a quick follow up you know in the past you've talked about.

Ramping up the service and support revenue stream, maybe prior to certification I'm. Just curious you know with E. Hanks a certification in China and some of the other Oems.

Oems targeting 2025, what are kind of some of the efforts or.

Or are things being put in place to ramp up the service and support revenue stream is that something that continues to be a priority and a way to potentially produce some revenues prior to certification just curious on any updates on that front. Thank you.

Thanks Andre.

Yes, well the priority is definitely just to get the prototype you know our next year and getting the test ground as <unk> been.

Talking about and get the entry into service in 2026.

Yeah, it's the possibility, especially on the U T M.

Could be up Gnostic. That's that's also a possibility I think we will do it opportunistically based and not just going after it.

Because of the bandwidth because of the resources and we really want to make sure that our solution is the one might not be the first one but it would be the right. One. So I you know I think well. It was mentioned before you know there's other E V tall Oems are looking and getting in touch with US also when it comes to serve and support.

But as you could see the $540 million you know we put it aside because we understand that this will be and it's representing seven customers within you know all the customers that we have it it is an opportunity that customers want big enough stick for the moment.

No opportunities we're focused on our solution.

Wonderful. Thanks again I appreciate you taking my question I'll pass it on thank you. Thanks Andre Thank you Chi.

As a reminder, if you would like to ask a question press star one on your telephone keypad.

Our next question comes from the line of Austin Muller with Canaccord Genuity. Please proceed with your question.

Hi, good morning.

Good morning.

Good morning, Ken.

Can you discuss the safety rating that you're certifying to both with ANAC. The FAA I know the FAA has specifically gone with a 10 to the negative seven safety rating N E. Asa in the Civil Aviation authority are going with.

With 10 of the negative nine like other commercial aircrafts. So how do you expect the safety certification for your aircraft to impact the portability of it as an asset internationally with both airlines and the aircraft lessors.

Thanks, Austin I'll defer to welcome Anthony.

Sure. So what we have in mind that the vehicle will be operated worldwide. So we have to be able to certify.

All of the certification authorities, where the vehicle will be operated and we would like to have as much as possible a vehicle that is chromone within all of the certification authorities. So we.

Just making that more clear we want to avoid having a version that is for operating <unk> operation in the U S. And then another version that is for operation in Europe and other version of it.

Somewhere else and so the idea is that as much as we can we are making one vehicle that will be certified and operate it in all these places so weak.

The safety level as an example, we are designing a vehicle that we will be able to operate and certified before that in all of the certification authorities. So we are following what <unk> is is putting out.

As requirements, but also discussing the other aspects of the safety level in general one of them is as you mentioned is the probability of failures for catastrophic events, but there are many other aspect.

Aspects about the architecture, the similarities redundancies and things like that that we are working together with the authority to make sure that whatever we design and we certify and having a man because primary certification authorities will also be accepted by other authorities in the world.

Okay. That's helpful do.

Do you expect a 60 mile range on your EV told to be sufficient to meet most urban air mobility use cases, despite the FAA battery reserve requirements of 30 minutes.

So yes, Okay had mentioned about the reserves requirement. This is something that is still under discussion. So we don't have today a final rule on what will be even though the S. Four are currently states are the same regulation for the part 23 airplane rates. So.

Mm 135 airplanes operation by 'twenty 135.

We at the same time that we've discussed the regulation. We are also studying what the missions will be for the urban air mobility. We believe that typically the missions will be much shorter. So we don't expect to be executing the 60 mile missions all the time.

And we expect to be mostly around the 30 mile distance mission that we think covers the urban air mobility.

Function that our vehicle is being designed to and that our business cases based on rates. So we we are designing the vehicle very much for this mission and making all of the technical decisions that are directed towards this urban mobility mission, which again is comprised mostly of the <unk>.

Your emissions than we were for example target regional air mobility or something like that so we believe that the longer missions will be possible, but again the actual reserve requirements is still under discussion with the authorities.

Great. Thanks for all the details.

Thanks Austin.

Our next question comes from the line of Marvin Fong with B P. I G. Please proceed with your question.

Hi, good morning, Thanks for taking my questions and.

Welcome Johan.

Just one from me and I apologize I missed the prepared remarks, but I did want them all up again on the.

$540 million a solution.

Central solution revenue.

Uh huh.

So my question was.

No.

Could you just kind of felt so shall we expect the margin profile or the revenue to be kind of similar to the maintenance and service revenue that embraer is able.

To generate or could you just kind of speak to the economics of that and just sort of like what the contractual terms are like are these multiyear agreements or how long how long do they run well. Thanks so much.

Yeah. Thanks, Marvin for the question.

Do you want to answer it and when it comes to the margin side.

Yes sure.

Marvin Yeah in General you know as you said right our service and support business they tend to have better profitability higher margins.

The agreements that we have been closing with all these suppliers that we announced recently they are also going that direction right Ive is going to be the face to the customer. So we're gonna be providing service and support we're going to be providing the parts and our expectations of course, we are still a few years from mainstream to service.

But given these binding agreements right. We were closing long term binding agreements with suppliers, which sometimes there's a little bit different from some other players that have more short term agreements or our agreements are really long term. We those contracts are they indicate that we're going to have good profitability on the on the service and support side and and <unk>.

Believe that our profitability is going to be.

Similar to what we've shown on Embraer for me seems a reasonable assumption at this point.

Okay.

Yes. Thank you very much. Thanks, you do for this.

Yeah.

And yeah, and then the way those contracts obviously their condition and the fact that we will have to deliver and certified and deliver also you know the.

Behavioral, but definitely looks at the Internet service. So that's what we struck with them. They focus on the extra support at the beginning and the ramp up of experience on the operation.

And then afterwards it gets you know really focused on depending on what the operators got also his own in house capabilities. So we have this flexibility to adapt its almost a la carte okay.

Usually base you know what would be a spare parts. That's the backbone of the of the support and service that we offer just to guarantee the availability of the parts are along with the suppliers and I think you do a really spot on when he mentioned that the contract that we're signing with.

With the suppliers include a lifetime cycle of the of the operation not only just the prototype development ore until the first entry into service, it's really about the whole operation.

And yes. This is what the customers have been looking at it and seeing a lot of value on this right and this is why the customers are engaging right away.

Thanks, so much guys.

Great.

Okay.

Okay.

We have no further questions at this time I would like to turn the floor back over to management for closing comments.

Thank you Christine and I wanted to thank everyone, who joined the call today and for your questions. We look forward to updating you all on our upcoming milestones in the upcoming quarters and in the meantime, if you do have any questions. Please don't hesitate to reach out that email or phone and we'd be more than glad to.

So talk to all of you. Thank you so much have a good day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.