Eve Holding, Inc. (EVEX) Q3 2022 Earnings Report, Transcript and Summary

Greetings. Welcome to Eve Air Mobility Third Quarter 2022 Earnings Call. At this time, all participants are in listen only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to Lucio Aldworth, Head of Investor Relations. Thank you. You may begin.

Thank you, operator. Good afternoon everyone. This is Lucio Aldworth, the Director of Investor Relations at Eve. And I wanted to welcome everyone to the third quarter of 2022 earnings conference call. I've got here with me, Co-CEOs Jerry DeMuro, and Andre Stein, as well as our CFO, Eduardo Couto. After the initial remarks, we're going to open the call for questions. We have prepared the deck with a few slides and additional information. And this is available at our Investor Relations website at ir.eveairmobility.com. So please download it for your reference. Now 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 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, continuous, anticipates, intends, expects and similar words are intended to identify forward-looking statements. We take no obligations 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?

Thank you, Lucio. And thanks to all of you for joining us on the call today. We've had an eventful quarter, and have a number of significant events, which we will talk about this morning. They include things like major additions to our partnerships, a very successful simulation in Chicago, continued growth of our backlog, and progress in our product development. Importantly, we've also reached agreement with the Brazilian National Development Bank to significantly enhance our balance sheet. And we're doing that through a financing vehicle that is completely aligned with a foundational reason and the core values of this business, reducing carbon emissions and sustainable environmentally-friendly transportation. Edu Couto, our CFO will discuss the terms in more detail in just a bit. First, I'd like to talk about new partnership, which we announced with United Airlines on September 8. United is one of the largest and most recognized global carriers in the world. They are also a long-term client of Embraer, and this will be a strategically important or important partnership for Eve. It adds to our partnerships with fixed wing and helicopter carriers, rideshare platforms, propulsion and battery management companies, as well as technology providers, and infrastructure Vertiport operators. This will help Eve scale the UAM ecosystem on a global basis. United has invested $15 million, which will go directly to help fund the development of this UAM ecosystem. United is now our largest client with the potential for 400 orders. And this gives us an important foothold among one of the main U.S. global carriers. It will also be strategically important as United standing in the entire flight and aviation arena will help us build out the UAM ecosystem. And Stein will talk a little bit later about our Chicago CONOPS in which, United participated. Next slide, please. Next, I mentioned earlier that we had grown our backlog significantly. As you can see from this slide, we now have letters of intent for almost 2,800 vehicles and a backlog that would equate to over $8 billion, certainly well over our first four years of projected production. In addition to United, Eve has signed with Blade India FlyBlades, an undisclosed customer for another 700 new aircraft. We have also added strategic partners to help us develop our UATM platform and have signed LOIs with Halo, FlyBlade in India, Skyway Technologies here in the Americas, Bluenest in Europe, and Volatus in the United States. So you can see we're also moving out on a global basis with our UATM, that's Urban Air Traffic Management software platform. We continue to take a holistic approach. And with our simple design and Embraer backing, we now have the largest order book in the industry, as I said, with almost 2,800 LOIs for vehicles. Some of our clients are also investors in need. So their interests are completely aligned with UAM development, and we have a long-term relationship. We also have the most diversified order book, not only a number of clients now well over 25, with United being the largest. No single client represents greater than 15% of our backlog. We crossed all sorts of industry types as I mentioned before. We have helicopter operators, fixed wing operators, lessors, ride sharing platforms, and even a defense alliance with BAE Systems. Regionally, we have the largest exposure in the United States with a little bit less than 50% coming from North America. But we have global distribution, and we touch just about all of the populated continents around the globe. Now, as I mentioned earlier, we announced today a new source of liquidity for our aircraft development and certification with a Brazilian Development Bank. I will ask Edu Couto to our CFO to provide some detail. Edu?

Thanks, Jerry. These new finance from the Brazilian Development Bank includes two credit lines in a total of $92.5 million. It fits very well to our cash flow profile, and discipline capital strategy with 12-year maturity, grace period, and a favorable interest rate. The first line comes from the BNDES Climate Fund, which is a finance line dedicated to projects and companies that mitigate climate change and reduce CO2 emissions. The second line is an innovation finance, which is a long-term funding for disruptive projects with social benefits. Urban Mobility is one of them. This new funding has an ideal fit for our project, considering its conditions in the BNDES's mission for a cleaner mode of transportation. It also puts Eve with a stronger balance sheet in a more efficient capital structure that translates into long term value to our shareholders. Now with the BNDES line, we're even stronger from a cash perspective with Eve's total liquidity above $400 million, which compared to our cash burn around $100 million to $150 million per year gives us enough cash for multiple years of our eVTOL development. Now I would like to invite our co-CEO Andre Stein to give us a bit more color on the development program and the benefits of our concept of operations. Stein? ,

Thanks, Edu. This quarter, we continue running simulations with conventional helicopters to validate and stress test our concept of operations for eVTOLs in a real urban-air environment and create awareness of what is to come. The most recent experience was in Chicago last December, where we connected a Vertiport in downtown to two Vertiports in the suburbs. The trip took an average of 15 minutes versus an estimate one to one and a half hour by car depending on traffic conditions, about an hour by train. This demonstrated the potential for urban mobility in large metropolitan regions, such as Chicago, the second most congested city in the West. With maybe Chicago and surrounding regions will require approximately 240 eVTOLs by the time the market matures in 2035. And that market will demand 20 Vertiports in over 150 different routes. We are very excited and happy about what it has achieved and to do it with important partners. This was the first urban air mobility simulation in west and it was powered by Blades with a total of 86 flights and 245 different partners to help us collect information to better understand the needs of those flying our partners and the communities when it comes to the use of eVTOLs for urban mobility. As an example, the simulation gave us a glimpse of the most popular routes and times for commuters, and should help operators optimize their fight schedule. On top of that, it gather important information about the entire passenger journey, from experience of purchasing tickets to flying, so there are lessons to be learned for an entire ecosystem that helping to define our eVTOL, our service and software portfolio. Now on to the next slide. As a reminder, we quick start the certification process of our eVTOLs wit Brazil's Aviation Authority, ANAC back in February, and now together with ANAC, have initiated the validation process for type certification with the FAA, which expect to be accepted shortly. At the same time, we're in discussions with EASA in Europe and other certification authorities. And it's important to highlight that you have the primary focus of ANAC, while the certification authorities in the U.S. and Europe will be addressing multiple programs simultaneously. As we noted before, ANAC has a long history of collaboration through bilateral agreements with the FAA, whereby the FAA accepts and validates the work done by ANAC, requiring validation and minimal additional effort by the FAA. We're validating now that this will also be the case with our eVTOL, and that is a major milestone for our certification strategy. We believe this puts Eve on a clear path to certification in multiple domains, especially when combined with our single design or fixed wing, and lift-plus cruise configuration. Lastly, Embraer's support is going to be vital in this regard as well. Embraer brings quite a bit off the table by having certified over 30 aircraft just in the last 25 years. They too, for example, received the simultaneous certification approval in Brazil, the U.S. and Europe, on schedule, we're seeing spikes in budget. Now onto the aircraft itself. We continue to make advancements in our design, and the program as it matures. We continue to follow our proven development practices, and into that, proof of concepts and other types of mechanisms. Validating subsystems to various test methodologies, progressing towards the commercial vehicle. By validating subsystems and airframe features incrementally that are able to ensure rigorous and meaningful testing in each phase optimizing costs and reducing the cost of delay of major chains in later phase of the program. This is a very flexible approach that reduce the development costs of the entire design progress. We can vary components or update their design and configurations as our engineers in that fight alternative solutions. And new solutions on this side that can be incorporated without a major redesign of the entire aircraft. In this approach, we are performing a myriad of tasks and our proof of concepts into the models, rigs, flight simulators and mock-ups. And DNA is to drive for economic solution with the most affordable operation and maintenance profile, which you believe will be achieved through our simple lift-plus cruise design. We have also targeted some partners that are compatible with the highest industry standards at the same thresholds we applied for larger jets, which is to say that there are designer aircraft to meet the highest possible safety standards. Likely, we concluded Phase 1 of our urban air traffic management software package and deployed it to support our Chicago simulation in September. As Jerry mentioned earlier, Eve has now signed LOI for urban air traffic management of several clients. And this business may precede our aircraft deliver revenues, because it will be agnostic solution for the entire airspace. Now on Slide 7, we can see our industrialization strategy is also maturing. As mentioned previously, we partnered with Porsche Consulting to help optimize our eVTOL supply chain, global manufacturing and logistical strategy. We are combining our [indiscernible] and automotive expertise to define an implementation plan that considers all aspects of industrial operations, logistics supply chain, and part distribution to optimize efficiency and productivity. The study addressed scalability and distributed production to meet demand. As the urban air mobility market evolves, it can help us validate that the first production site will be in Brazil. This will help us maximize synergies with Embraer and also maximize the manufacturing learning curve of eVTOL. Is it possible to add subsequent production facilities in other parts of the world to maximize efficiency and logistics? Now, I will turn it back over to Edu to talk a bit about our financial position. Edu?

Thank you, Stein. Before talking our third quarter results, I just want to explain why we're reporting so late our numbers. Eve had to restate our previous numbers for 2021 in first half 2022 to properly account for non-cash costs associated with warrants issued to some strategic investors during the business combination with Zanite. Some warrants were not properly expensed at the time of our listing on the New York Stock Exchange, and we read to recognize additional non-cash costs of $87 million related to those warrants. Even [indiscernible] also recognized some due closing costs that were previously allocated at Embraer. It's important to say that all those impacts didn't affect our cash and liquidity that is now even stronger with today's announcement of the BNDES's finance line highlighted in the beginning of the call. Turning now to our quarter financials, I would like to start with the income statement highlights. We invested $14 million during the third quarter 2022 and almost $34 million in the first nine months of 2022 on R&D. The bulk was invested in our eVTOL development, and a portion was used for the development of our service and support solutions and the development of our urban air traffic management system. We're the only eVTOL company with a complete solution, including the vehicle, service and support and air traffic control. In addition to the R&D expenses, we also had $6.8 million in SG&A during the quarter. Including R&D, SG&A [technical difficulty] in non-cash warrant expenses related to the United during the quarter, we reported a net loss of $36.7 million in the third quarter 2022 and $154 million in the first nine months of the year. I would like to take the opportunity and call attention to some of our competitive cost advantages. First, our full access to Embraer's engineers on a first priority basis as only as needed. That means we don't need to bring hundreds of engineers to our P&L which makes our development more cost-efficient. Second, our ability to use Embraer's intellectual property on a royalty-free basis, that's another important source of cost savings. And third, access to Embraer facilities with minor investments and only sharing of facility fees. That also saves a significant infrastructure CapEx at this stage. Now moving to cash flow. Our operations consumed $17 million in the quarter and $39 million in the nine months until September. We ended the third quarter with $330 million in total liquidity. This was relatively flat over the previous quarter as our non -- our cash consumption was mostly compensated by the $15 million investment by United announced this September. Considering our current cash position, and the lines of credit from the Brazilian Development Bank that we can access, we have total liquidity of approximately $400 million. We feel very comfortable with the current liquidity, as it would be enough to cover a good amount of our development and certification costs for the years ahead. With that I conclude our financial highlights. And now we would like to open for questions. Operator, please go ahead.

Thank you. [Operator Instructions] Do we have any questions that were emailed in?

Yes, Sherry. Thanks. We do have a couple of questions from Lucas Stella [ph] from Santander. The first one is about certification and I think Andre Stein is better equipped to answer this one. Lucas is asking for updates on the certification process with ANAC and the expected timeline? And the second question relates to the BNDES credit Line. And I think this is directed to Edu. Lucas is asking for the length of the amortization, grace period. And sharing after, we do have these questions answered, please feel free to roll over to the question from other participants in the call.

Thank you.

Yes. Thank you, Lucio for the question. So to answer that it's on track with our interim target [ph] 2026. The latest milestones exactly what I mentioned in our deck, which was joint understanding of the requirements between ANAC, FAA. What that means, that has always been our strategy to validate certification, our primary certification organization, Brazil and FAA, as have done with previous aircrafts. And here for a new type of aircraft, that has been the goal. And now we are achieving that. We are validating that it will be the way that will happen for eVTOLs also as well. So that's great news, not only for the primary certification, but also for the FAA certification.

Maybe you're talking about the BNDES line, Lucio? I think it's a good question from Lucas. These lines, it financed from the Brazilian Development Bank. It is perfect for [technical difficulty]. It really fits our business profile, because it's long-term, it's a 12-year term. And on top of that, we also have three and four years of grace periods. It depends there are two lines, one is three-year grace period, the other one is four year. But it means that, we don't have to pay a motivation from three years or four years, depending on the line. And we only start to amortize these loan in the fourth or fifth year, which is very good. We're going to need the next three years to certify our vehicle and enter to service as Stein just highlighted. And then when we started to amortize our debt is exactly when the -- we're going to be generating revenue delivering eVTOLs. So as I said, it's a great support from the Brazilian Development Bank, almost $100 million, very long-term, and it creates a lot of value for our shareholders, then combined very well, with the $400 million we raised in equity in our IPO in May.

Are we ready to move on to the phone questions?

We have further questions, operator.

Okay, great. Our first question is from Savanthi Syth with Raymond James. Please proceed.

Hey, good morning, everyone. If I might ask, you mentioned the $100 million and $150 million cash burn annually. Could you just talk a little bit about 2023, and if that's going to lower upper end of that? And maybe some of the major milestones expected in 2023?

Yeah. For 2023, we expect to be in this range right between $100 million to $150 million in cash burn. So considering our cash position, as I mentioned north of 400. We have multiple years, right, of liquidity to address our eVTOL development. Regarding the milestones for 2023, maybe Stein can give you more color.

Sure. We're considering to our airports, not only on the big developments advancing in [indiscernible] on our interim service, maturing the vehicle entering more and more into [indiscernible] manufacture, the supplier selection [indiscernible] for the final, finally into service. On top of that, we are working to release the whole ecosystem. We have partners for sure that the bank we are developing fits vehicles as a vice versa. So that's like a big part of these as well.

That makes sense that that appreciate that. Thanks, Stein. And then on the production facility. When do you expect to kind of select the sites and then start building that facility, kind of relative to the other timeline?

Stein, you want me to take that one?

Yes.

Yeah, your line's breaking up. So --

Go ahead, Jerry then.

So, Savy, thanks for the question. As you -- as was mentioned earlier, we've done an extensive amount of work with our partner pores not only looking at the site, but also the global supply chain. And the delivery mechanism, which given the likely adoption of this on a global basis will be equally important. To answer your question specifically, by the end of this year, we expect -- I'm sorry, by the end of '23, we expect to be through all of the permitting processes, and have begun the initial development of the facility, which at this point looks like it will be co-located with -- in one of the Embraer facilities specifically. But that permitting will take a little bit of time. And then the major construction reorganization of those activities will occur in 2024. Notably, we're going to build the facility in a modular basis, which will allow us to scale very, very economically. And we can talk a little bit more or Stein can talk a little bit more about that. But we're going to build into this production rate gradually. And, we're going to plan for a base case and have an opportunity by building additional workstations, et cetera, and then ultimately, additional shifts into the production rates of say, 300-300 plus a year. But initially, modules -- manufacturing modules that will be at a lower rate. Stein, do you want to add anything to that?

Sure. So that strategy they are doing it in a modular basis, allow us to really grow together with the market. We've felt excessive investment in CapEx in the early years. So that has been one of the premise, and that has been part of the output of the work we've done with Porsche.

That all makes sense. Thank you very much.

Our next question is from Ellen Page with Jefferies. Please proceed.

Hi, guys. Thanks for the question. Just on the Chicago CONOPS, how did the results of your evaluation and the assessment of 240 aircraft in the city compared to your prior expectations and your 10 assumptions that you've put out in the past? And can you discuss the differences between the Chicago CONOPS, the previous one you did in Rio?

Go ahead, Stein. We can talk about the model that we co=developed with MIT and its application here.

Absolutely. So what I've done and that's part of the way we are trying to understand the market, that's the new market. And then it will have been modeling and have developed this tool together with MIT for quite a couple of years, even before we were spinoff from the main company during the incubation period, should look in the market in different ways and to get all the potential KPIs all the econometric models, data from cell phones to understand the orientation from passengers and their value of time to come up with the sizing. And when you apply a concept of operations, it is to validate points like the time, the passenger goes from door-to-door, not only the flying time, but the whole aspect that help us to look again on the same market and add that to the whole equation. What was different from Chicago and Rio? Really the use case we're looking at what there are shuttle. So we're flying from the east side of town to the airport in Rio. In Chicago, we expand in terms of number of routes. We're flying two routes, and both of them are commuting routes from Chicago downtown Chicago Vertiport, to two different Vertiports in the suburbs. Among other things, we look at different levels of infrastructure. So we're flying for on average port with a very high level of infrastructure existing Vertiports with an SBO [ph] and then are refined to one where you add a container to be our reception or for passengers. And the third one is pretty much nothing but a slab of concrete. While you are doing that, we are not verticalized in vertiports, that's not the point. But that help us to understand how the eVTOL operation on ground will be as much as on air. The other aspect have done there as well was to look at medical facilities. We partnered with some drone manufacturers to fly out of the same Vertiport, so we could integrate the air traffic management software that help us to grow there too, to make sure we are -- we have a solution that combined the different aspects of the ecosystem.

That's helpful, Thank you. And can you discuss a little bit, your LOI with Bluenest for the UATM? What are the key -- what's the key opportunity there?

I'm sorry, could you repeat the - which customer?

LOI with the UATM, Jerry.

Yeah, the Bluenest?

Yeah, for Bluenest. Okay, got it. Stein?

Yes. So we're going to developing the infrastructure for urban air traffic management. It's applicable for the regulatory authorities, but also for operators and vertiport operators. So we can deconflict airspace at the vertiport level. That's exactly the case there. So this help us to access the market, to create this market also vertiport operators as potential customers, but also to assure that you have efficient ecosystem. We learned a lot on this, just going back to the point of the concept of operations when it comes to the airspace management, how we can make it more efficient. And that's not only to increase the total number of potential eVTOLs, that could operate from one given vertiport or one give given city, but also to make the routing systems more efficient, the flight path for example, to streamline that. And that's -- it is of the utmost interest of the vertiport as well. And we do believe in creating our solutions together with the customers. That's why -- one of the reasons why we're bringing customers for the software platform now. So we assuring that you are developing something that has value for our customers.

And I would also add that the Bluenest is in Europe. So again, we're trying to look at a global footprint. You see Blade. We have some North American operations, we'll be announcing some others in the not too distant future around the globe. So Bluenest also brings us a European presence and an understanding of unique features of those markets as well.

Very helpful. Thanks for the color. I'll hop back in the queue.

Our next question is from David Zazula, with Barclays. Please proceed.

Thanks for taking my question. And thanks, again for presenting at our conference last month. If I could try a little bit about the United relationship, I guess first, is the investment reflected on the 3Q balance sheet right now, or is there still more to come from an initial cash perspective? Two, can you just discuss and I think you have sense a little bit before but the milestones by which you'll be evaluated to kind of have the orders with the United become more firm? And then also within United being so significantly International you just discussed, whether they're evaluating using those aircraft internationally, or is it just kind of domestically for now? Thanks.

So let me take the general scope of this thing. United is looking at the application of these all the way from they're trying to create a user experience from home to destination and back. So I don't think in our discussions with them, they're limiting the application of that, or of the product offering. In fact, Stein and I participated just a couple of weeks ago with a number of the senior executives from the various functional departments at United, really looking at where are the best opportunities for launch cities? How do we get this all the way integrated into even the United app? So they're really looking at a holistic experience and not limiting to North America or Europe. Obviously, the certification of the aircraft will have something to do with that. In terms of the milestones. There are fairly typical milestones in the LOIs, right. As we start through the certification process, we will actually prior to the certification process be definitizing the United LOI, just like everyone else's LOI. And as we mature through that process, they will have to have an increasing commitments of progress payments against final delivery. This year will be very interesting as we work through with many customers around the globe, the actual delivery slots, and then began going from there. So this is very important year in terms of sitting and working with key customers on where are the launch cities and who starts to get those initial slots. It's not too early to be planning in that regard. With respect to the balance sheet, I'll turn it over to Edu, but I believe he did talk to the $15 million cash infusion, essentially offsetting the expenses for R&D and SG&A through the quarter. Edu, do you want to add anything to that?

That's correct, Jerry. The $15 million from United came in the third quarter. It offset our cash burn. So we're basically flat in terms of cash in the third quarter. So we have $330 million in cash. And now we are bringing these additional finance company BNDES that gives us north of $400 million in liquidity, which is multiple years of off cash compared to our projected investments in the eVTOL development.

Thanks for the question, David.

Okay. If I squeeze another one in. The R&D expense line accelerated a little bit through the year. Just discuss the pace at which you're using the Embraer engineers. And then kind of drilling a little bit into Savy's question, expected use of those engineers in 2023?

Yeah. In rough count, we're probably using a little bit north of 300 today. And that will probably ramp to almost double that next year in the -- when we come back with the full year report. In that call, we'll be making some projections, more specifically on the cash burn. But we expect that number to roughly double. And so, you'll see a rough doubling we think of our quarterly cash burn. And it's almost directly correlated with the development of not only the product, but also all of the other key pillars that we've talked about, the service and support elements, training program, as well as UATM. Stein, you want to add anything to that.

No Jerry, I think you covered it.

They very much, guys. Happy holiday.

You as well.

Our next question is from Marcelo Motta with JPMorgan. Please proceed.

Hi, everyone. Thank you very much for taking my questions. Two quick questions, the first regarding with the $100 million to $150 million in cash burn for the coming year. When we look at these, approval permitting of the facility in Brazil, I mean, what percentage of -- what amount of these $100 million or $150 million is related to that? If you guys can open that. And the second question is regarding the commercial campaigns. I mean, we continue to see a lot of good news on that term. The company has the largest backlog in the industry. I mean, are the containers still going on? Do you think that the pace of new announcement or growth in backlog could stabilize a little bit now until we see, more milestones on certification? Those are the two questions. Thank you.

Marcelo, thanks for the question. I'll turn it over to Edu. But as I was suggesting, we will be coming out with a more precise forecast. As I just mentioned in the answer to David have our cash burn next quarter, but we expect it to roughly double per quarter from where it is today. So I think it'll be closer to the 150. Edu, do you want to add anything to that?

No, you're right. Jerry. I was just going to say that these investment right is mostly for the eVTOL development. Of course, eVTOL service and support and urban air traffic management, it does not relate for the facility manufacturing facility itself. As Jerry mentioned, next year, there are some permits and some work done, but it's still minor. So the number for next year is really for the eVTOL development.

Yeah. The investment in facility production facilities will be very modest next year. And we'll see a significant uptick in that in 2024 as we begin -- as we're looking at it, the realignment of some Embraer facilities and refitting for our purposes. With respect to the campaign, there's a number of them going on. I mean, we're very fortunate. And that there's quite a bit of demand right now to sign up on an LOI basis. But we're more focused on strategic customers, locations, the kinds of customers similar to United that bring us the same kind of leverage and capability around the globe and internationally. Having said that, as I talked about before, the team will really start to focus on now key customers, launch customers, launch sites, and begin to try and align since there's such high demand in those first couple of years the slots will be precious item. So we're trying to figure out how we're going to allocate those slots. I think you'll see as much focus on that as continuing to build the backlog where it'll be a little bit more strategic. Stein, would you want to comment on that?

Absolutely. We you are on the -- you got it right, Jerry. So we are getting closer and closer to our engine service of define our industry strategist. So now we have a very clear view, on the amount of production we have on the first few years to come. We have been working with the different partners, and through this concept of appropriations and more, to have a better understanding of the needs of each different site and each different city. So we can really address that in a much more mature and structured way. And that's the main focus now, right, really assure that our first years of productions are all planned for, including where the aircraft will go, who will be that customer, the infrastructure that needs to be there in place to start operation, the partners that can support this infrastructure as well. That's why we have been mentioning this holistic approach, this overall looking in the ecosystem, everything that can assure a smooth engine service, and make this incredible, and really large market really become a reality.

Perfect, thank you very much.

Thank you, Marcelo.

Our next question is from Marvin Fong with BTIG. Please proceed.

Good morning. Thanks for taking my questions and congratulations on all the progress the past few quarters. So a couple of questions for me. Just at a high level, I suppose. Domestically with the FAA, I think we've seen some updates and changes to their certification process for eVTOL. I was just curious if you could maybe comment on ANAC and how was your discussions with them are going? Are they been more consistent with their view on how to certify? And if you could also just maybe touch on the development milestones or the certification milestones that you're kind of expecting for 2023? Do you expect to get your G-1 paper in 2023 and the outlook that you could provide would be great.

All good questions, Marvin. You will note that the FAA has actually put out for comment its certification basis for Joby and we in other manufacturers and OEMs and members of GAMA have submitted our comments there. But for the details, I'll turn it over to Stein in terms of what we have been doing in detail with ANAC and some other milestones. Stein?

Sure. Mode of information G-1 that is expected for 2023, just to transfer direct to that. We have been working on ANAC a number of things to together discuss with FAA, how we can move away a validation process, as we refer to, which has been the strategy since the beginning. But now it's the point in time where we need to really formalize that. And that's what we are doing for both organizations. We have been in constant meetings with both of them to define how the -- how this consistence in terms of requirements, between the two of them are to be expected. And as I said, with the formal application of that -- end of the year now. And we are expecting an answer from FAA pretty soon. That's really put us on the right track. Next year, we are getting even closer to FAA and as well as finding a clear path to the follow on certification authorities. That's important, too. That's the global market. I think these are the main points. We are targeting in 2026, as I said before, the best engagement and more continuous meetings, more frequent meetings are expected to happen as well. As we are building the model out together.

Terrific. Thank you for that update. Just one other quick question, if I may. Just the update. I understand, it sounds like most of your incremental cash burn is going to be on development and R&D. So should we just put a finer point on the modeling? So the SG&A line should almost $7 million is probably a good run-rate going forward, and we should just think about the additional expenses being R&D related?

Yeah, I think that's a fair assessment, Marvin. Will have a more precise forecast for you, as I said, next quarter. But yeah, we're just about leveled off where we will see growth is as we build out our service and support platform. Some of that will provide a nominal increase on the SG&A side. But by the end of this year, we'll be pretty close to where we want to be in terms of headcount on that side.

Got it? Okay, great. Thanks, everyone, and happy holidays.

You as well.

In the interest of time, that will be all that we have for our Q&A session, I would like to turn the conference back over to management for closing comments.

All right. Thanks, Jerry. And thank you, everyone for joining us today. We look forward for updating you on continued progress throughout the year. And please don't hesitate to reach out if you have any additional questions, you can just reach out directly to me. And for those who celebrate Christmas, Merry Christmas and a Happy '23 for everyone. Thanks and have a good day.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. And thank you for your participation.