Eve Holding, Inc. (NYSE:EVEX) Q1 2023 Earnings Call Transcript May 14, 2023

Operator: Good morning, and welcome to the Eve Air Mobility First Quarter 2023 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, today’s conference is being recorded. I will now turn the call over to Lucio Aldworth, Head of Investor Relations. Please go ahead, sir.

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 first quarter 2023 earnings conference call. I have here with me, Co-CEO, Gerard DeMuro, 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 the deck with a few slides and additional information. This is available at our Investor Relations website at ir.eveairmobility.com. So please feel free to download it. Let me first start by mentioning that this presentation includes forward-looking statements or statements about events or circumstances that have not yet occurred. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business and their future financial performance.

The 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, estimates, continues, anticipates intends, expects and similar words are intended to identify forward-looking statements. We take no obligation to update publicly or revise any forward-looking statements because of new information, future events or other factors. In light of these risks and uncertainties, the forward-looking statements and circumstances discussed in this presentation might not occur. Our actual results could differ substantially from those anticipated in our forward-looking statements. With that, I will now turn the presentation over to Jerry.

Jerry?

Gerard J. DeMuro: Thanks, Lucio. Good morning and thank you to those joining in the call today. Today is actually a special day for us. It’s the first anniversary of our listing on the New York Stock Exchange. We’ve come a long way in the past year and are progressing well with our business plan, but we know there’s quite a bit more to do. And I’m certain we have the right group of people to achieve our goals and become a major player in the UAM market. Over the last quarter, we’ve made significant progress on the development of our aircraft as well as in other areas of our business plan related to the UAM ecosystem. As you can see on Slide 2 here, we advanced to the next step in the certification process by proposing our basis of certification to ANAC and we expect approval by the end of the year.

We progressed negotiations with our suppliers on both technical and commercial terms and our expectation is to close with suppliers of critical subsystems by the end of this quarter. We continued the extensive testing program with wind tunnel tests of different configurations and components. And in our design, we are now incorporating a best-in-class baggage compartment that Stein will talk a bit more about a little later as well as how user feedback is enhancing and influencing our design. Moving to Slide 3. This illustrates our progress on the technical aspects of the program. I mentioned our wind tunnel testing, which was a three week long exercise at RUAG in Switzerland. We are also testing different motor and propeller configurations through dedicated rigs that allow us to test under different load and weather conditions.

Interestingly, we have developed a truck mounted rig to validate our modeling of rotor performance during transition and forward flight. In addition, we’re also employing a series of additional rigs for battery and motor as well as thermal management tests all of these will permit extensive independent testing of discrete subsystems, and this is an important aspect of our flexible approach which allows us to test systems separately and incorporate refinements into the design once we have reached a target solution. In essence, it allows for quick and efficient product development. In short, we continue to mature the aircraft within the milestones we established and forecasted earlier this year and Edu will have a little more to say on the topic later.

Now I would like to ask Stein to talk about several features of our aircraft that we’re very excited about.

André Duarte Stein: Thanks, Jerry. We are very proud about our focus on user experience. And the result of that is to have been shortlisted for the Crystal Cabin Award this year. Being the shortlist for such prestigious award, it’s a major achievement in itself and reflects all the hard work from our user experience and design teams and it’s a continuous effort. We had many events and conversations with users, customers, and partners to have a more human centric, accessible and cost effective cabin, improving at the same time the user experience and economics for the operator. On that note, I’d like to highlight a few points about our cabin. And several of you might have been able to see it for yourselves, either in Melbourne last month at South by Southwest or in the Last Air Show.

One of them, it’s an extra wide passenger door and specially designed seats for enhanced accessibility in and out of the cabin. We also focus on multiple sensory involvement including different solutions to address different user needs. Besides that, we are using sustainable yet certifiable materials extensively in our cabin like cork, natural wool, and recyclable materials to minimize our impact on environment. As a reminder, sustainability is one of the pillars of our company, and that extends to cabin materials. Not only you will have a zero emission aircraft, but you are minimizing carbon emissions throughout the entire cycle of the aircraft. So our material choices are critical. Last, but not least, we have the best-in-class baggage capacity.

Our eVTOL can fit one carry on suitcase per passenger and you can even fit larger checking luggage or even a wheelchair. We believe this adds to our passenger experience and accessibility drivers, provide capacity for ancillary revenue, as operators can charge for additional baggage, items or cargo and strengthen our offer, particular for the airport shuttle market. On to Slide 5 now. We also hosted our infrastructure summit in our Melbourne offices in April with 25 partners from operators to infrastructure and technology providers to seat representatives. This was one of the many events we sponsored throughout the last few years to integrate partners in the entire Urban Air Mobility ecosystem and help develop and scale its many components.

We had four tracks of that event, sound implications for community, energy, ground service and passenger flow for a seamless experience. This type of event helped us and our partners diagnose potential pain points and yields findings for us to come up with solutions. In this experience specifically among other discussions with simulated passenger flow from boarding to the boarding using our cabin mock up. This gave participants a glimpse of what is necessary to its passenger flow and improved the overall experience. This is unique to Eve, as we do believe that beyond developing manufacturing our aircraft, it is necessary to look at all pieces in the entire ecosystem and the engagement partnership co-created. In that sense, it is uniquely positioned in the Urban Air Mobility market.

Now moving to Slide 6. I’d like to mention that right after our infrastructure summit, we also hosted an Investor Day in our Melbourne offices and Florida. We hosted around 50 participants from partners to analysts and investors. We had a full afternoon of presentations by our team leaders. These are the people in charge of every aspect of the development of our program, design, engineering, and Urban Air Traffic Management, business development and customer experience. They offer some insights in their specific areas. We also opened in our U.S. offices that event. At the end of the day, we unveiled our cabin mock up should investment community over a more informal setting with our entire team. Slide 7 shows that you currently have what we believe to be the largest and most diversified backlog by number of customers and regions in the industry today.

In total, we have announced LOIs for 2,770 aircraft from 26 different customers spread over to our countries and different business from main lines to regional airlines to helicopter operators, ride sharing platforms, and leasing companies. We also have LOIs to offer our Urban Air Traffic Management System in eight different markets. We believe this reflects the state of the art value proposition we bring to our partners and their clients. And there is more to come on that front. We believe that this pipeline offers strong term revenue visibility and will help Eve to smooth cash flow consumption in the years to come as we start to convert existing letters of intention into firm orders and collect pre-delivery payments known as PDPs. Beyond that, we are developing a strong network of partners in areas such as infrastructure and energy to address one of the largest challenge ahead of Urban Air Mobility, which is to create a whole new ecosystem besides simply developing our aircraft.

Now, I’d like to invite Edu to talk about our financials and next milestones.

Eduardo Couto: Thank you, Stein. Now moving to Slide 8, Eve is a pre operational company and our financial results for now reflect mostly the costs associated with the development of our EBITDA program. I would like to start with the income statement highlights. We invested almost $22 million during the first quarter 2023 in our program development versus $9 million a year ago. 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. In addition to the development expenses, we also deployed $6 million in SG&A during the quarter versus $1 million last year. Keep in mind that the [indiscernible] dedicated to the eVTOL development have been growing as the program evolves.

Eve also reported around $4 million in financial revenues during the first quarter, mostly due to the return of our cash investments. We have a very conservative financial policy keeping our money vested in short term deposits with big banks. With that, we reported a net loss of $26 million in the first quarter of 2023. Now moving to cash flow, our operations consumed $20 million in the quarter driven by higher R&D expenses and an increase in direct indirect headcount to our master service agreement with Embraer. We had a positive impact on our cash flow coming from accounts payable that increased $6 million during the quarter. Most of this is related to the service agreement with Embraer which is typically paid after 45 days of service being rendered.

With that, we ended the first quarter with around $295 million in cash but when we consider the standby credit line from the Brazilian development bank of almost $100 million that will start to access this year. Our total liquidity exceeds $390 million and it’s enough to fund our operations into 2025. Finally, Slide 9 summarizes our milestones for 2023. And I wanted to reaffirm our commitments to this year’s goals. We plan on defining the primary suppliers of some of the most critical components like motors, batteries and propellers. Once we define these suppliers, in detail of the specifications of each component like weight, power, size, required subsystems, we can freeze the design details. We also will start building our first full scale prototype, which we plan to start testing next year.

We also plan on launching a trial software on our Urban Air Traffic Management System by the end of the year and we estimate a total cash consumption in 2023 between $130 million and $150 million. With that, we conclude our remarks and I would like to open the call for questions. Operator?

Q&A Session

Operator: Thank you. [Operator Instructions]. The first question comes from Savi Syth of Raymond James. Please go ahead.

Operator: Thank you. The next question comes from Cai von Rumohr of Cowen. Please go ahead.

Operator: Thank you. The next question comes from Sheila Kahyaoglu of Jefferies. Please go ahead.

Operator: Thank you. [Operator Instructions]. Our next question comes from Andres Sheppard of Cantor Fitzgerald. Please go ahead.

Operator: Thank you. [Operator Instructions] The next question is a follow-up from Savi Syth of Raymond James. Please go ahead.

Operator: Thank you. The next question comes from the line of [Marcelo Mata] (ph) of JPMorgan. Please go ahead.

Operator: Thank you. Our next question comes from Marvin Fong of BTIG. Please go ahead.

Operator: Thank you. That was an end of our questions. I’ll turn the callback over to our speakers for any closing remarks.

Gerard J. DeMuro: All right. Well, thank you all for attending. And as always, you can reach out to Lucio Aldworth, he’ll be available for any follow-up questions you may have or any detailed information you may require. And we look forward to talking to you again in the not too distant future.

Operator: Thank you. This does conclude the conference.

André Duarte Stein: That’s alright. Thank you. Just to say goodbye then. But thanks for joining us today.

Operator: Thank you. This does conclude the conference for today. We thank you for your participation and ask that you please disconnect your lines. Thank you, and have a good day.