Q4 2023 Eve Holding Inc Earnings Call

<unk> Center. The next available comfort specialist will be with you momentarily.

Yeah.

Yes.

[music].

Cooper et cetera major any please.

Yeah.

Yeah.

And as you are with IRA.

I'm, sorry, which companies conference.

<unk> holding alright, I'll place you linked through they already started hold on please.

Now, we're going to the right direction and we'll know more by then.

Valentini.

Sure.

Thank you.

Hi, good to talk to you again, so complementing what Ellen said.

We we have we feel that we have good traction with aynak with the publication of of our certification basis, where public comment both in the sense that it gives maturity to the requirements that we have set with them, but also that it allows us to go as Johan mentioned in this direction of aligning we're not St Harman.

Foundation in the sense that they would not necessarily be exactly the same but that it helps us to align both with the FAA.

Basis, and also with AI as a business in which we have more visibility to rates. So the the publication of the Derby basis yesterday is still not final, but you know another publication helps us to make sure that we are indeed, following this path of alignment and.

Makes us confident as we have mentioned before that with the availability of a Mac to work on this project that we will be able to maintain the timelines as we have established.

Terrific and then my last one so talking recently with one of your competitors. They were talking about a market a potential retail market by which they mean.

No.

A guy flies to a regional airport. He maybe has as home 40 miles away, but he takes his EV toll to fly from the regional airport to his home and back or to his business.

So that there might be you know sort of a shorter range biz jet type of application have you put any thought into that kind of use or any of your you know your customers looking at that as a potential market.

Thanks Guy.

When you say, it's the only detail you mean that it will buy us on the beetle and flies on Ito Theres like you've done with cars is that what you're referring to yes, yes, because we get exactly exactly exactly exactly.

Yeah, No no no no. We don't we don't see this we do see the air taxi or what we call them, commonly called the first mile last mile type of service right and the airline would operate exactly the model that we're working on with the Republic, Oh for Orlando, where you know the premium customer will be Oh, where they will go through the there how so.

Very close to the house, but it will be a virtual board, but but added at the very beginning and we don't see this happening I mean anytime got it and then let's not forget the autonomous functionality and we don't want other people in our people were just driving cars driving since flying EBITA and no no no.

Oh, okay.

Yeah, just one more point I think that it's important to understand that that wouldn't at least from what the authorities have published so far that wouldn't change significantly the certification bases in terms of the safety level and things like that guy because we would still be considered at least if it's around the urban mobility era.

<unk> D D urban centers, it will still be a flight over in densely populated areas, which is being considered by the authorities as one of the triggers to to meet higher safety levels right. So I think that it's just important to understand that in terms of the certification and consequently the design.

<unk> I don't see that changing the vehicles, so much and so they wouldn't have so much of an effect on the certification path.

Okay, great. Thanks, so much.

Thanks Bye.

Thank you. Our next question comes from the line of Sheila <unk> with Jefferies. Please proceed with your question.

Okay.

Hi, good morning, guys.

You know just to want US all of these questions you mentioned five additional prototypes this year with testing to begin in the second half. So just kind of how do we think about the build out and what's the capex need to support that.

Hello.

You go first on the yes, we can Hello Ocean.

And can he can elaborate on the on the first prototype in the orders to come and then I can comment on the on the Capex.

Sure. So the first prototype the one we will start testing. This year is the one that you have described as being a known nonconforming prototype, which means that it doesn't have exactly the final configuration that the commercial vehicle will have.

So it will allow us to bring technical knowledge to validate some of the solutions that we are currently developing with some anticipation with respect to the time when we have to make the commitments for the commercial vehicle the tests of the prototypes and the commercial vehicle will not start until next year and so.

Then for for those prototypes we have.

A different set of specifications product specification then they connect to the suppliers that Johan describe in the presentation.

And those will be the ones that will be used for the certification campaign and then two to reach the types of difference. So that the investment then on these prototypes will come later on and then I think you do conventional.

And then in terms of investment are when we mention about the 150 million per year rate expected for this year. It does include the vast men on the development itself right on the on the engineers and the whole development program and it also does include the prototypes right. This year.

We are assembly.

We have already started with samba, we're going to conclude the assembly and started as of the first prototype of me also start to receive.

Some parts for the for the other prototypes, but all of that is already included on the guidance to consume 150 medium and heavy might we still have 75 million available from the long term finance from the NDS. So the actual burn and cash will be only half off of these one safety.

Okay, great. Thank you and then maybe if I could ask about the suppliers that you guys brought on how is that relationship working with the suppliers.

Well.

Thanks, Sheila for the question Yeah. The religions Airbus is great well as you can see most of them is actually suppliers that we've known from the Embraer time also right. There are partners of Embraer some of them or not but we do have throughout and very well proven methodology to engage us.

And like I said, the negotiation is not only about the the prototypical pouring toward the top end of production per Se reason and it's also the customer support and services. So those are very detailed discussion and negotiation that we do for the whole lifetime cycle.

And then and then we automatically engaged in a J D. P. We started on the Alaska 20 to September and we engage in all of the engineering. So it's a physical presence and sources of this comp was between the engineering of Eve of Embraer.

Also the engineering of the suppliers. So we can really and I explained this in the end.

In my presentation, where there's this big interaction and how it one system intact. The other so I think that's really good and then it's been improving.

Quite efficient.

Great if I may add Johan.

The suppliers Sheila so just just to reinforce how they believe in our program right are we have a long term contract right. We're talking about more than 10 15 year contracts with those suppliers, it's not only for the development, but the contracts we sign it they go throughout the whole.

A series of delivers right. This is one big difference that we have and also in terms of payments. We're gonna have payments that will happen really a down the road. So the I would say pretty much all suppliers. They accepted that we spread the payments to them over several years I think it shows the confidence.

Right that they they they have on eve on Embraer and our ability to succeed in this program and the contracts, we signed with them, it's fully reflect that which which is different from some other contracts we have seen out there.

Okay. Thank you.

Thank you Kevin.

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

Hi, good morning, Johan and email.

Just my first question here do you have any plans right now just thermally condition, the battery either using cooling or cooling the charging system itself to enable high volume high throughput flight activity during the day.

Thanks Al and thank you for the question that this is getting deeper and I forgot you know we have our CTO with us. So you can really get you know walk you to the answer that go ahead.

But ideally.

Sure. Thank you. Thank you Austin for the question. So so the cooling of the battery in the thermal management in general is a very big part of how the VITAS work right. So we are considering that we will need cooling, especially in the cases in which we are seeking shorter turnaround times on.

The ground between flights.

And faster charging so for those cases, we are definitely considering having a cooling system that will allow us to condition. The battery before starting to charge. It because that makes a big difference on the lifecycle of the batteries. So.

Postpones.

The degradation or it slows the degradation of the battery as we charge it and discharge it which then in turn results in a reduction of our operational costs. So we do have both inside the vehicle a cooling system that will enable us to do that and we are working with the charging infrastructure.

The restructure and the charging equipment to provide that coolant and that there are more exchange for us to keep the temperature of the battery why are we charge.

Great and then should we expect manned flight testing of the first prototype or would that be on the follow ons and should we think about NAND flight testing is more of a 2025 accent items.

Yeah. So we will start the testing with an uncoiled vehicle piloting it remotely from a ground station in the Embraer test facility and Gavea impish photo here in so Paulo in Brazil.

And the whole testing of this first prototype that we described will be made without a person onboard so only on crude vehicle. The prototypes that we mentioned that will be used for certification then those will be piloted in so the test campaign with those will have a pilot.

On board, but this first prototype has only on crude vehicle.

Great. Thanks for all the color.

Mhm.

Thanks Austin.

Thank you.

As a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad. Our next question comes from the line of Andre Shepard with Kenneth Cantor Fitzgerald. Please proceed with your question.

Hi, good morning, everyone. Congratulations on the quarter and thanks for taking our questions.

I wanted to touch on your service and supports our revenue stream.

You know.

This is obviously an area that you're placing a large emphasis on or at least have mentioned in the past.

I'm curious you know what are the kind of development. There you know, particularly at some of your peers might be targeting are entering into service in 2025, So what what might we expect from the service and support.

Revenue stream.

Just year end onwards, and what are the latest developments there. Thank you.

Thanks, Andreas Great question, obviously, it's dear to my heart when it comes to service and support so I will take this one.

As you can see I mean, we're up to 600 does it in million dollar worth of out of service and support that we pre sold dates it's really linked to the operation and we need to have the certified airplane aircraft and then into the service. So we can really kicking with those services, there's one with revenues to frame that.

Could happen before it would be.

ATM software that we are developing and it is agnostic. So yes, but that's part of the same concept, where you know we want to make sure that we have the vehicle, but also the operation very smooth and we believe there is one way to do it is to be with our customers on ground boots on the ground and the metrics that you know they have all the support.

To to operate and guaranteed availability because that's the ultimate goal availabilities that we demonstrate the segments. The aircraft operation reliability and then obviously the customer can make money with a with a with a with a vehicle. So well. This is very important and then we can replicate.

So we are really looking at the full spectrum exactly you know what has been done and this is another advantage that we have from Embraer engineering manufacturing, but service and support we learn all those years and we're gonna be applying all of those are lessons learned let's say right away with our pool totaled.

It's a very much Ala Carte service there are operators that have their own MRO. They wanted to train their mechanics, they wanted to be able to.

Perform the maintenance and that's fine you know and then they want to go for a fly by hour program are.

Having the engineering support having to spare parts to support having Dia also you know the the whole package I think what differs in a little bit from the traditional market of service and support as the battery into something and this is exactly the model that we're studying right now and has it had to be the you know the support than in the charge.

<unk> and <unk>.

The recycling also what's going to happen with the battery.

We are going to be changing it every year or are we going to get to the 80% of them.

Uh huh.

Power and remaining so we'll have to look at what are we going to be doing so right. Now we're really focusing on this the rest is very traditional model and it depends on what the customer towards some other or very much executive jet type of support that's turnkey solution.

And then others are way more independent and then we'll support you know the way that they want us to be supported.

Got it that's super helpful. I appreciate all that context, maybe one quick follow up question for offer I do.

Within your cash consumption guidance of $1 $30 million to $170 million on <unk>.

Wondering if we could maybe get a little more color on you know how how much of that do you expect will translate into capex, particularly as you're building. Some of these units now are you know how should we be thinking about capex for this year and also maybe what's the best way to think about Opex for this year as well. Thank you.

Mhm.

The majority of the development rights that includes as I said, the the engineers and and a prototype.

May spend around.

You know 2030 meter on the prototype and you know that.

I would say the majority is really the development of the upcoming vehicles right. This is important to mention right. We we are.

Of course focus on the on the first prototype that is coming but we are also at full speed on the development of the additional five that.

That will come in 2025 to start with the full flight test campaign. So theres a lot of money that we are putting on that.

So not only are these these upcoming vehicle.

And we may spend some money on the manufacturing facility right our first plant in Brazil.

That that doesn't it shouldnt be that much in 2024, so it shouldn't be more than 25, but there'll be some investments on capex on the facility as well, but let's say that the majority of the investments are still.

Engineering development for the multiple vehicles that we're bringing for the flight test campaign.

Okay. Great. That's helpful. Thank you very much congrats again and I'll I'll pass it on thank you.

Thank you Andreas.

Hugh.

Thank you. Our next question is a follow up from the line of Savi <unk> with Raymond James. Please proceed with your question.

Hi, just a clarification on that the PDP is there kind of a certain milestone is that you know when the first prototype is kind of flying or.

Perhaps next year when you find the other five prototypes.

What's it going to go and.

Solidify those LOI or even you know you know what might contribute to that first PDP flows.

Thanks, Savi, Yeah, we haven't.

Well go ahead and do good now you're starting to start right now.

Yeah. Okay. I was just gonna see savvy D. You know we have multiple campaigns in discussion right. We have multiple customers as you can see by by the largest.

Back logging to in the industry.

The focus as you start to convert those L O I's into firm orders, which also translates into deposits right and in pre delivery payments as you referred to so this is going to start to come right. This year and <unk> 26, we're going to receive a lot of downpayments and pre delivery payments.

But the most I would say Johan Ken can add but I think the most important thing is really the engagement with those customers make sure they're comfortable with.

The number you have it all these lots man that youre going to be taking those vehicles, and where theyre going to be deploying them.

But you know the cash is going to come to the BT PS into deferred orders are going to come in the D C area and in the upcoming years.

Absolutely I do I think that's really important and while we want to have and convert them into some of those LOI in to the first.

Purchase agreement is just to make sure that we have our customers engaged tonight. The whole ecosystem. It takes time. It takes you know our people resources and it's not so much because of the customer but it is because of the whole ecosystem. It is not a traditional and all that.

The aircraft and are you, adding to their fleet and it's really it's more than does so well and I think you know we've been discussing very much with our customers on this end and when you say engaged get done when we called the skin in the game from all the stakeholders and this is what the T. A S.

It's about them and they are the one asking for them.

So it's not like we have to sign those persons agreement this year afterward from gas.

<unk> perspective, but definitely from an engagement.

Very helpful. Thank you.

Thank you.

Thank you. Our next question is a follow up from the line of Cai von <unk> with TD Cowen. Please proceed with your question.

Yes. Thanks, so much so all the 660 million kind of service contracts how much of that is with your competitors are with customers of your competitors.

Non guy none its all that you know on the EV tall, and what we're offering of course in this to be able to go for agnostic.

But but it's really all the LOI is that based on the on the aircraft that otherwise, okay, uh-huh, but given that you know so jobin.

Toby and Archer indicate they hope to be certified you know ahead of your.

Are you doing in your efforts to kind of sell services either to them or to their ultimate customer given that you have a long history of service capability and they don't.

Yes, we do have common operators, where customers have been asking and I'm sure. Many of you know.

That does make sense from an operator standpoint of view when it comes to customer support and services you want to have one point of contact you don't want to multiply you know, but you got to get the contracts of.

Same nature, if you will for MRO, then you know you might as well just to have one provider for the different vehicle. That's a concept that you know it does exist today, we're doing independent MRO or or when you have a agnostic MRO that can offer this type of service. So we're we're open we've been having.

Two conversation that through United as matter of fact that is one example, where they've been asking us to do to sit down with our with the other EBIT, all OEM and and start talking about you know how it's going to look like when the service and support and you're right. We do have the expertise.

Now when it comes to toys and supports it would be natural that would take the lead on this but nothing more concrete at this stage.

Great. Thank you.

Thank you. Thank you bye.

Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Albert <unk> for any final comments.

Thank you Melisa and I want to thank everyone, who joined the call today as you can see we accomplished several important milestones. This past year that were fully engaged and of course, there is much more to come. So we deal with forward, we're going to continue to update you on our progress throughout the next few quarters and of course look forward to you.

To meeting all of you in the upcoming events, we're going to let them as always if you have any questions don't hesitate to reach out and have a good day. Thank you.

Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.