Eve Holding, Inc. (NYSE:EVEX) Q4 2022 Earnings Call Transcript

Eve Holding, Inc. (NYSE:EVEX) Q4 2022 Earnings Call Transcript March 16, 2023

Operator: Greetings. Welcome to the Eve Air Mobility Fourth Quarter 2022 Earnings Call. . I will now turn the conference over to your host, Lucio Aldworth. You may begin.

Lucio Aldworth: Thank you, operator. Good morning, everyone. This is Lucio Aldworth, the Director of Investor Relations at Eve, and I wanted to welcome everyone to our fourth quarter 2022 earnings conference call. I have here with me co-CEOs, Gerard DeMuro and André Stein as well as our CFO, Eduardo Couto. After their initial remarks, we’re going to open the call for questions. We have prepared a deck with a few slides and additional information, and this is available at our Investor Relations website at ir.eveairmobility.com. So feel free to download it. Let me first start by mentioning that this presentation includes forward-looking statements or statements about events and circumstances that have not yet occurred. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business and our future financial performance.

These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things, general economic, political and business conditions, both in Brazil and in our market. The words believe, may, will, estimate, continues, anticipates, intends, expects and similar words are intended to identify these forward-looking statements. We undertake no obligation to update publicly or revise any statement because of new information, future events or other factors. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this presentation might not occur. Our actual results could differ substantially from those anticipated in our forward-looking statements. With that, I will now turn the presentation over to Jerry.

Jerry?

Gerard DeMuro: Thanks, Lucio. Good morning, and thank you to those joining the call today as well. We had a very eventful 2022, accomplishing a number of milestones for the program and for the company. We, as many of you know, are actually a product of Embraer’s technology accelerator, EmbraerX, and the first eVTOL concept was actually introduced in and being developed in EmbraerX in 2018. And we were then spun out and eventually, we merged with Zanite and went public in May of last year. Going public, Eve now has the autonomy and agility of a start-up, yet the resources and experience and the backing of Embraer, so that we feel we can be a major player in the OEM market. We listed on the New York Stock Exchange under the symbol EVEX last May, and we listed with net proceeds of about $355 million from the de-SPAC that included investments from our PIPE investors as well as United, which came along later in September.

Later in the year, we secured almost another $100 million worth of credit lines with the Brazilian National Development Bank. So that gives us a total liquidity of over $400 million. We believe this is enough to fund our major R&D efforts as well as our sales and support activities well into 2025. You will recall that operating with our critical mass, mostly in Brazil, gives us tremendous OpEx and CapEx advantages. Thus, we think we’ll be well set through the R&D program again through 2025. And our eVTOL program has matured significantly over the last year. We have been testing systems and subsystems to validate our design through sophisticated model-based engineering and very high fidelity simulations. We’re refining the final design, not only through the use of these advanced engineering tools, but we’re also using subscale models and advancing to full-scale commercially representative prototypes eventually in 2024.

This flexible approach allows us to thoroughly test and validate components separately. We are following an effective and efficient process proven over many years by Embraer, which has certified more aircraft in the last 25 years than any other aviation OEM. Our goal, of course, is a safe and reliable eVTOL with the lowest total cost of ownership, and that’s what drove us to a Lift + Cruise configuration that is truly optimized for the urban air mission. 2022 also saw us introduce our cabin mock-up at our customer advisory board last spring. We had great reviews, and it will also be available at our investor event this April in Melbourne, Florida. We also initiated our Type Certification process in 2022, which will be done through ANAC, the Brazilian Aviation Authority.

While the Type Certification will be done through ANAC in Brazil, it will also be followed by FAA to a bilateral agreement that ANAC and FAA have had for many years. And typically, this allows a much more efficient process with only limited additional testing and final endorsement of the certification process by FAA. We also began dialogue with EASA, and we intend to follow a similar approach there. But we think we have a significant advantage by being first in line with ANAC and using ANAC as our primary certification authority versus, for instance, multiple applicants at the FAA, all with unique configuration. Our plan remains to enter into service sometime in 2026. In 2022, we also ran a number of simulations with helicopters in Rio, in Chicago and most recently in India.

The goal of these simulations was to gather critical intelligence to help us scale the global UAM ecosystem. We also tested use cases of the eVTOL in actual congested urban areas. Now to the next slide, I’d like to call my Co-CEO, Andre Stein, to talk a little bit more about the program advancements in the last quarter.

Andre Stein: Thanks, Jerry. We made some real progress this quarter and intensify our supplier engagement. We shortlisted potential suppliers of critical systems, such as motors and batteries, and now have more detailed visibility as to the certifications of these components. With that, we can fine-tune our development, refine our flight-control laws, performance envelope, fly-by-wire systems and so on. It also gives us a much better sense of controllability of our aircraft and expected performance under different conditions. In parallel, we have been employing dedicated motor-propeller rigs to test under different conditions and other rigs for batteries and other components and systems. This part of our approach were test systems and components independently and incorporate them in our design, optimizing the configuration.

This allows us to quickly and efficiently evolve the design and reduce program development costs. All the steps mean that we are reaching a critical point in the maturity of our aircraft. I’m going to talk about this in a few moments. But besides having defined that the first production site to be in Brazil, which we announced late last year, we have concluded our manufacturing strategy with the support of Porsche to define model size, flow management and other logistics related specifically to the manufacturing process. Lastly, we defined the system requirement for the Urban Air Traffic Management software and successfully deployed an earlier version in our Chicago simulation last September. Our goal is to enable the safe management of aircraft flow within controlled aerospace and improve efficiency in operations and in vertiports by reducing waiting times and aircraft overall energy consumption.

We can achieve these by optimizing flight plans and integrating flight paths of different aircraft for a cohesive system. Now on to Slide 4. In the end, our strengths translate into the largest and most diversified backlog by number of customers and regions in the industry today. In total, we have nonbinding LOIs, that these are letters of intent, for 2,770 aircraft from 26 different customers spread over 12 countries and different business from to regional airlines to helicopter operators, ridesharing platforms and leasing companies. We believe this pipeline offers strong long-term revenue visibility, and it will help Eve to smooth cash flow consumption in the years to come as we start to convert the existing letters of intention into firm orders and collect predelivery payments, known as PDPs. Beyond that, we are developing a strong network of partners in areas, such as infrastructure and energy, addressing one of the largest challenges ahead of Urban Air Mobility, which is creating a whole new ecosystem beyond simply developing aircraft.

Now let me call Edu to talk about our financials. Edu?

Eduardo Couto: Thanks, Stein. At Slide 5, Eve is a pre-operational company formed to develop its eVTOL in the Urban Air Mobility ecosystem. We expect to start to generate material revenues outside of predelivery payments once we start to deliver our eVTOLs, currently estimated for 2026. So our financial results for now reflect mostly the costs associated with our program development. I would like to start with the income statement highlights. We invested $18 million during the fourth quarter 2022 in our program development and $52 million in the full year. The majority was invested to develop our eVTOL and a portion for our service and support solutions and the development of our Urban Air Traffic Management System. We are the only eVTOL company with a complete solution, including the aircraft, maintenance and air traffic control.

In addition to R&D, we also deployed $9 million in SG&A during the quarter and $33 million in the year. Keep in mind that the Eve and Embraer teams dedicated to the eVTOL development have been growing as the program matures. Including R&D and SG&A, we reported a net loss of $20 million in the quarter and $174 million in the year. It’s important to highlight that our 2022 results include noncash and nonrecurring costs related to warrants issued to partners as well as some listing expenses of our IPO in 2022. This nonrecurring, noncash expenses were $111 million, so recurring loss for the full year of 2022 was $63 million. Now moving to cash flow. Our operations consumed $21 million in the quarter and a total of $60 million in the year. We ended the fourth quarter with $311 million in total liquidity, down from $330 million in the third quarter of 2022 without considering the recent long-term funding from the Brazilian Development Bank.

Now moving to Slide 6. Considering our current cash position, investments, including with Embraer and the credit lines from the Brazilian Development Bank currently signing, we have total liquidity of more than $400 million. Again, we feel comfortable that this is enough to carry our operations, development and certification efforts through 2025. I also want to call your attention to some of our cost competitive advantages. We have full access to 1,500 identified and skilled engineers from Embraer on a first priority and as-needed basis. This means we don’t need to bring hundreds of engineers into our P&L, which helps reduce our development costs. On top of that, most of our team is located in Brazil, where we have specialized engineers and more favorable cost rate.

In the end, our R&D dollars last longer in Brazil compared to U.S. and Europe, where our competitors are located. Lastly, we also have access to Embraer’s facilities, reducing investments related to infrastructure and CapEx in general. As Stein mentioned, our R&D efforts are intensifying. This will require an increase in our structure to support the expected development growth in the years ahead. For 2023, we expect Eve’s total cash consumption to be between $130 million and $150 million, which, considering our total liquidity above $400 million gives us good comfort to keep our eVTOL development in the years to come. With that, I conclude our financial highlights, and I would like to call Stein to talk about our development milestones.

Andre Stein: Thanks, Edu. During 2022, one of our focus was to put the necessary structures in place, engage the right people and fund the development and certification program for our aircraft as well as other products for the Urban Air Mobility market. With funding now secured, we are accelerating our program as planned with the milestones you see on Slide 7. The first, as I alluded to earlier, is the selection of the primary suppliers of the most critical components of our aircraft, such as propulsion systems and batteries, which will be completed in the first half of 2023. Also defined the suppliers, we continue to refine and validate our estimates for aircraft production, performance envelope and operating costs. The selection will also result in much more detailed specifications of these components, such as dimensions, weight, power output and the systems interface.

This is critical for us to define the final aircraft architecture at a complete system level, which we plan to also accomplish in the first semester of this year. With the final design established, we expect to begin fabrication of our prototype as planned in 2023. Last but not least, we plan to deploy the most recent version of our Urban Air Traffic Management in the second half to start testing in field trials with potential customers. With that, we conclude our prepared remarks, and we’d like to open for the call for questions. Operator?

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Q&A Session

Operator: . Our first question comes from the line of Andres Sheppard with Cantor Fitzgerald.

Andres Sheppard: Congratulations on the quarter. I was wondering if maybe you can give us a little bit more color in terms of the flight — the test flights and particularly as the prototype is expected in the second half of this year. Can you give us a sense of how and when you expect to begin ramping up test flights?

Gerard DeMuro: Yes. Stein, do you want to take that one?

Andre Stein: Sure, sure. As you know, we came from a strong aviation background. As any aviation company, we do not disclose beforehand dates for first flights. There are a few reasons for that. One, it’s to assure that safety, it is the ultimate goal. So we don’t want to put additional pressure through the dates disclosure to the market. And the second is that our goal is and will continue to be the end goal to certify, develop and deliver the aircraft. So we are not disclosing first dates or first flights, but what I can say that we are on track according to the plan. We will start the assembly and manufacturing of the prototype this year, as we mentioned. And we will start by when at the right time, again, following our plan to assure the — our entry to the service and entry to the market are sure our final goal.

We believe a lot and having been done that in several previous programs to develop the things in right order, not necessarily not bring forward some of the most visible aspects of the development, but to really assure that we’re always maturing and moving ahead with the parts of the problem, the different parts of the problem.

Gerard DeMuro: Yes. Andre, if I could add one thing. This is Jerry DeMuro. A couple of thoughts to that. Our goal — we are using the term or you’ve heard the term commercially represented a prototype. We’re flying subscale models, doing a lot of model simulation, proof of concepts. And as we select, as Stein had said, as we select our vendors here, we can refine our models. And actually, when we fly, “what you’re defining as a prototype,” it will be as close to representative of the vehicle we intend to take into certification as we can possibly make it. That’s kind of our process. Subscale models, proof of concept vehicles and then something that we think is fairly representative of what we’re going to take forward. So that’s why the progression through the second half of this year after we define our critical suppliers, as Stein alluded to, we’ll make — we’ll refine that design, and that’s what we intend to fly — begin assembling at the end of the year and fly next.

Andres Sheppard: Understood. That’s very helpful and very comprehensive. I appreciate that. Maybe one last quick follow-up. On the liquidity side, right, so now $310.6 million as of Q4, including the lines of credit, total liquidity north of $400 million. Is the expectation — I know you’ve mentioned today that you believe that, that current liquidity is sufficient to fund operations designs and certifications into 2025. So I just wanted to clarify, does that include then — is the expectation is that, is that sufficient to fund certification with ANAC, the and EASA?

Gerard DeMuro: Sure. I’ll turn over the liquidity question in total to Edu. But the last part of your question, I think I can answer. We expect ANAC and FAA to be virtually simultaneous with — through the process that we described. FAA validating essentially the program that we’re working with ANAC because they will have a significant input into that program. EASA will follow sometime subsequent to that. So I would expect that EASA might be after the 2025 time frame. But the R&D efforts through 2025, we should have sufficient funding to get through that. Edu, do you want to add anything?

Eduardo Couto: No. Just to say that in terms of liquidity, we are feeling very good, right? We have more than $400 million in liquidity. And as we mentioned, we expect to consume this year between $130 million to $150 million. So that gives us multiple years of development, right? We already have the cash. So we are not concerned at all about the liquidity, and we feel very good.

Gerard DeMuro: Yes, Andre, one thing I would add to that. We have not yet begun to calculate into those liquidity figures, predelivery payments or progress payments, if you will, as we work through the definitization of the LOIs that Stein referred to. That will add to the cash balance. And — so again, we feel pretty good about getting through the first steps of certification. EASA will probably follow the first two.

Andres Sheppard: Wonderful. Congrats again on the quarter and all the accomplishments in 2022. I look forward to speaking again soon.

Operator: Our next question comes from the line of Savi Syth with Raymond James.

Savi Syth: Just a bit of more of a follow-up to the earlier question that Andres had. How long do you think the testing campaign with the kind of the close to commercial prototype will last before you’re ready to kind of assemble the kind of certification compliant model? I’m just kind of curious what — given that you’ve done so much kind of testing ahead of time with the subscale prototypes, if that might be faster than what we’ve seen at other competitors?

Gerard DeMuro: Good morning, Savi. Stein, do you want to get that one?

Andre Stein: Sure. So if you look at our previous programs, typically, it’s around 18 months for certification flight test campaign.

Savi Syth: Okay. Is that’s with this kind of prototype and then also then creating the final version that qualifies for certification, is that right? Or is this kind of prototype that you’re building will be qualified for certification testing?

Andre Stein: So I was referring to our previous experience, right, so from previous programs that typically what you see. In this case, as Jerry mentioned, we are doing more. So we have been trying proof-of-concept, we have been doing a subscale models, and we brought the flight-control laws, flight stimulator earlier on in the process. So there are different steps there, but that’s what we’ve seen in other programs. There are some additional steps here.

Savi Syth: Makes sense. Okay. And then just on the PDP collection front, or even kind of what — where do you need to be in the testing campaign, but before you can start firming the LOIs? And then how long after that do you think you can start collecting PDPs, like relation — in relation to all your milestones, I’m trying to figure out when we can see some of the firming and the actual PDPs coming in?

Andre Stein: Sure. So on that, I think one of — one very expressive milestone is actually the selection of the suppliers that we intend to do this year. That’s when we will have a more clear view on the actual costs, actual cost of the aircraft, and that will put us in a much better position to start firming orders. That is the big milestone.

Savi Syth: That’s very helpful.

Gerard DeMuro: So Savi, just to complement what Stein has said, as we move through this year, we will be identifying not only in refining the final configuration now that we have supplier data — the final supplier data, but we will also be working with some of our partners and identifying the launch customers. So we would expect some of that revenue to start to flow in the ’24 time frame. And then naturally, as you progress through the certification milestones, there would be additional payments prior to delivery.

Andre Stein: Yes. And one more point just to complement on that last line, Jerry. That’s an important aspect. I mean we have this big portfolio of customers, and we are working very closely with them to refine how the operation will be, what will be the necessary aspects of the operation, necessary infrastructure, and so on. So that allow us to be very assertive on that future deployment.

Savi Syth: Makes sense. And can I clarify in terms of headcount. How does that progress through that 2025 time frame? Are we at like peak headcount because you have that flexibility in the MSA to kind of switch out the type of engineering, kind of know-how and knowledge you need to get you through this?

Andre Stein: So I’ll give a first answer on that. We are not expecting to see a big increase in headcount with as we are, as you know, using Embraer for the majority of the development. So that’s where we are increasing the headcount. Typically, we’d expect to have around 800 people altogether at peaks.

Savi Syth: Got it. Perfect. I appreciate it.

Gerard DeMuro: Thank you, Savi.

Andre Stein: Thank you, Savi.

Operator: Our next question comes from the line of Sheila Kahyaoglu with Jefferies.

Sheila Kahyaoglu: I wanted to ask about your cash usage. You’ve targeted $130 million to $150 million of cash use in 2023. Following $50 million in ’22, how much of that is related to R&D? And should we still think about past usage being in the $100 million to $150 million on a per annum basis?

Andre Stein: Yes, I can take that, Sheila. The big jump is really on R&D, right, or the increase is the majority in R&D from the $130 million to $150 million this year, around $100 million should be fully dedicated to R&D. Of course, we have the Eve structure and the development team in some other areas that the remaining $30 million to $40 million. But the big jump and the big chunk by far is R&D in the problem .

Sheila Kahyaoglu: Okay. And then I wanted to sort of understand where you guys are with your supplier base. How you think about what percentage of suppliers have already been selected? And how much of that may be — what you’re — who you’re targeting to select in 2023 or what parts? And how much of that overlaps with Embraer’s base?

Gerard DeMuro: All right. Well, I’ll turn it over to Stein in a moment. I’m not sure what you — I would ask a little clarification about the overlap with Embraer. This is a unique vehicle. Our major suppliers will be unique. Given that you’re dealing with aviation, you may have typical suppliers, as you’ve seen in our partner list, partners like technology partners like Thales and Rolls-Royce and even BAE. They are typical suppliers in aviation, but the equipment here would be unique. And we are in the down select right now for the major suppliers, we call and Stein has been intricately involved in that on a daily basis, and that includes things like the power management, battery systems, the motors, the propellers and then moving to avionics. Stein, do you want to expand on that?

Andre Stein: No, I think you mentioned it. So there is no direct overlap. That said, of course, you can leverage a lot of existing Embraer relations. Also, there are newcomers to the market when you’re talking about electrification and so on. So there are new players in this aerospace market, it’s great, but creates more of a level field. And we — throughout the year, we are selecting the majors, as Jerry said, but also we are moving on with the selection of other aspects, like flight-controls, like even interiors, everything that needs to be in place this year so we can have a very, very significant portion of both the cost of the product as well as all the technical aspects over.

Sheila Kahyaoglu: Okay. That’s helpful. I just wanted to get an understanding of who some of the suppliers are and how comfortable you are with them and where you are in the process with them.

Operator: Our next question comes from the line of Marcelo Motta with JPMorgan.

Marcelo Motta: First question is related to the sales campaign. So just wondering you guys already have a very sizable book of orders, intention of purchase. So just wondering if there is still more to come. If you guys are like actively marketing the product as you reach the new milestone, we should see new orders going through the book. And also, I mean, related to that question is, who do you think are the, let’s say, the easiest clients to get the eVTOL, just to think about the ramp-up that you have forecasted on your — let’s say, on your IPO. I mean could this be anticipated if there is more demand? I mean this is related to supply chain bottlenecks, or what will need to happen for us to maybe see a faster delivery or faster ramp-up of production? So those are the 2 questions.

Andre Stein: Sure. I’ll start on that. So to your point, yes, we are continuing with our sales campaign. Also, we are strongly engaged with the existing customers we have on our backlog to really deep dive on understanding how the concept of operations will be. All this exercise will be done related to concept of operations, simulations and so on, to help us to understand the needs. So we can bring not only the customers, but the infrastructure partners and energy providers to the table and to the discussion to assure that we are — from the market perspective, we can have that deployment. So the market being ready to receive these airplanes. So we have these 2 tracks. Yes, we are continuing to talk of diverse portfolio of the customers beyond the ones we already acquired, but there is also a strong focus on engaging with existing customers and developing this plan.

On top of that, as you know, last year, we’ve worked together with Porsche to understand the requirements for manufacturing, how we can ramp up the production, how we can do that in a rational way as well. So I think it’s fair to say that we are in good shape for that ramp up that we are — that you saw there on our IPO. There is an optimum there, how much you want to ramp up and still be able to support and serve these aircrafts in a very professional, very complete way. We leverage the existing infrastructure for . So we don’t need to reinvest from scratch on existing infrastructure, and we’re being present in over 80 countries around the globe. That helps a lot for that earlier operation. But we don’t want to overly ramp up and or overpromise that ramp-up beyond what you believe will be sensible.

Operator: Our next question comes from the line of David Zazula with Barclays.

David Zazula: Just I guess a clarification on some of the questions we’ve had earlier on testing. For those of you are less familiar with the ANAC process, the prototype you’re building now and the components — are you planning to do any credit testing for that? Or is that going to come from prototypes that you’d be building?

Gerard DeMuro: Stein? The short answer is no. But Stein can expand on the process.

Andre Stein: I’m not sure if I got the whole question. If you wouldn’t mind to repeat it?

David Zazula: Just about the amount of — I guess, when do you expect to be able to start credit testing that ANAC will give you credit for certification?

Andre Stein: Okay. There is, as I said before, in terms of dates for flight test campaign, we don’t disclose that ahead of time for all the reasons I’ve explained. What I can tell you that we’ve already engaged with ANAC to start the formal process with ANAC earlier this year. Sorry? So I was saying that to — go ahead.

David Zazula: And then can I just ask about the Urban Air Traffic Management development, just how that’s progressing, and if there’s any expenses going to be related to that in 2023?

Andre Stein: Yes, that’s a good question. Yes, the development expenses are included on the cost on the guidance that Eduardo said. Edu, if you want to comment a bit more on that? But as we’ve said as well, we are planning to deploy earlier versions this year with potential customers, and we actually have around 6 customers already today for the software. So we can have this — the series of interactions to keep it on the software development. We’ve deployed earlier version last year in September during our trials in Chicago, again, to fine-tune the software development. But it’s going as planned. We like what we’re doing with the aircraft to where we are using a lot of the Embraer resources. With the software development, we are using and engaging with ATAC, which is part of the Embraer Group that has been developed that type of software not only for the Brazilian aerospace, so that they basically develop the whole software here for the Brazilian aerospace, but as well for other countries.

So it’s going as planned. And yes, it is included in our predicted expense for this year. Edu, not sure, if you’re going to comment on the last bit.

Eduardo Couto: I think that’s it. It’s part of the $100 million. We have an R&D. It’s a small portion. The focus — the biggest chunk is the .

Operator: Our next question comes from the line of Josh Milberg with Morgan Stanley.

Joshua Milberg: You guys made the comfortable nature of your liquidity position crystal clear. But in spite of that and the PDP collection, I just wanted to ask if you are contemplating at all the possibility of additional equity investments by either your existing shareholders, like United or new ones? And then my second question is just on the broader eVTOL environment. You talked about the advantage, your advantage on the certification process relative to the multiple applicants at the FAA. And I wondered if you could elaborate on that point and also just provide some additional perspective on how you see the industry having evolved in recent months with respect not only to the whole issue of certification, but also in terms of design, maybe proof of concept and manufacturing strategies.

Obviously, in terms of higher interest rates and some other respects, the environment has gotten somewhat more challenging. I’m not sure how much you can say on your competitors individually. Thank you very much.

Gerard DeMuro: All right. Let me kick it off, and then we’ll turn it over to the team. On the first question about, do we contemplate additional equity investments? That’s certainly an option that we have available to us. We have a number of strategic partners, as you know. That’s pretty much all that was included in the PIPE. There are potentials there. We will wait and see what is the most advantageous course of action for us. As you know, when we came out of our listing, we had a very, very clean balance sheet, and we’re able to be opportunistic and look at the most cost-effective ways to get the capital that is required. So that is an option that we will consider. And again, we have the luxury of significant time and allow the situations to mature and be opportunistic.

With respect to the FAA, the comment really is that whether it’s ANAC or FAA, they have to develop or combine existing requirements from different parts of the regulations today and that will take some time. The comment that we make about being really the singular focus of ANAC is a bit advantageous because we’re all resource-limited, right? There’s only a certain number of expert in these areas, whether they be an FAA or ANAC. And as you have multiple applicants, they may find that there’s a resource constraint in processing. That’s really what we were alluding to there. In terms of the industry maturing, you have early phases as you do in any industry where some are better capitalized than others. Some designs will be more effective than others, and I think you’re just seeing a natural evolution in that regard.

I’ll turn it over to Edu and Stein to see if they want to pick up on any of those topics any further.

Andre Stein: Just one comment on the things overall. I think you are passing beyond the stage of hype. And realistically, there was a point in this industry, there was a lot of hype. We are beyond that or passing through that point of the curve already. So now it’s when you are really seeing the potential future consolidations and so on. And we are seeing a smaller number of this way. At a certain point, you were talking about 200 different projects for eVTOLs and so on. Now it’s all about a handful already, and that’s when we are starting to see the final results, right? But I do believe we are moving beyond the hype curve already.

Gerard DeMuro: On the liquidity side, we are not anticipating any new equity.

Operator: And our next question comes from the line of Marvin Fong with BTIG.

Marvin Fong: Just a couple for me, kind of building on previous questions. So first one, just Edu, if you could discuss in terms of PDP payments, do we have any more visibility? Do you think that, that might come in, in 2024? Or should — is that more of a 2025, even 2026 event? And then a question just on the overall environment. I think you added about 700 orders to your book in the last 6 months. Just wondering if you could kind of characterize the current demand environment. Do you expect the ability to bring in new orders to be as active as it was in 2022, or do a lot of the potential players, have they already made their orders, and we should sort of think about the order activity kind of slowing down?

Eduardo Couto: Okay. Thanks, Marvin. In terms of the PDPs, of course, we are highly engaged with all our customers’ rights to define define the potential skyline of deliveries and refine all these orders. We believe it’s difficult to know exactly when we’re going to start to collect higher PDPs. We may start to see something in 2024,, definitely going higher in ’25 and ’26. But we are fully engaged with our partners, right, our customers, and we believe that could be an interesting cash inflow to the company that today we are not considering .

Gerard DeMuro: Well, on the second piece, Marvin, yes, we expect to add some strategic customers, but if you look at our backlog and our business plan, we really have enough coverage there in the LOIs for the first several years of production. So the issue isn’t so much for us in building backlog at this particular time. It’s what are the right regions and strategic customers to add. And as Stein talked about, we want to be able to support and service not only the aircraft, but support operations on a global basis, and we’re recognizing, again, that there’s likely to be dispersed implementation and adoption and that has to be resourced properly. So simply adding backlog is not our focus right now. It’s about strategy and now defining, as Stein talked about, launch customers, launch cities, and what is the total plan to support launch in those cities. Stein, do you want to add anything to that?

Andre Stein: No, I think you covered it. Yes, we might expect to see additional customers, but our main focus is — we are in a comfortable position in terms of pipeline and backlog that we can put a lot of focus on assuring how the deployment will be.

Operator: The next question we have is coming from the line of Savi Syth with Raymond James.

Savi Syth: Just a quick clarification on the UATM side of things. As that develops and when do you expect that, that could start generating revenue? Like when can that segment get stood up?

Gerard DeMuro: Stein, do you want to talk about the 6 customers we have and the plan for implementation?

Andre Stein: Yes, there are a few points there. One, that we’re already doing actually, it is even on consulting about Management and the concept of operations. So we are actually generating some revenue already on that, even before the actual software development. That’s already an outcome on all the — it’s small — really still at this point, really small revenue, but it’s already there. But that’s already an outcome of the work we’ve done in developing, creating this blueprint in terms of concept of operations. We can expect that to increase in the years to come, to have — continues to do that work together with partners in terms of developing the Air Traffic Management ecosystem as a whole. And with the software itself a few years down the road before, but even before the entry into service of the aircraft, keep in mind that the software is agnostic.

So it’s not — we don’t need to wait our entry into service necessarily for to start having revenue from this software. It’s not at the same scale as particularly the aircraft service and aircraft sales, but it is very strategic, and that’s how you’re seeing it. It’s more about being a strategic part of the puzzle that would allow the eVTOL to fly more efficiently and at scale.

Savi Syth: When do you think that, that could be meaningful in terms of revenue? Does that depend on like when the industry gets some certified eVTOL?

Andre Stein: Yes, yes. It is — again, it is agnostic. It applicable even before eVTOLs are in place because there’s a red — some form of urban going on with helicopters. So it doesn’t need to wait. But in terms of scale, yes, it’s really when the industry starts to grow, that could expect more sizable revenue out of it.

Operator: And we have reached the end of the question-and-answer session. And I’ll now turn the call back over to Lucio Aldworth for closing remarks.

Lucio Aldworth: Thank you, Shamali, and thanks, everyone, who joined the call today. We look forward to updating you on our continued progress throughout the next few quarters as we achieve the operating milestones we just talked about. And we also look forward to meeting you in the upcoming events we’re going to attend. If you have any questions, as always, please don’t hesitate to reach out to us. And thanks, and have a good day.

Operator: And this concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.