Greeting. Welcome to Joby Aviation Fourth Quarter 2022 Conference Call. At this time, all participants are in listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Teresa Thuruthiyil. Thank you. You may begin.

Hi, everyone, and welcome to Joby Aviation's fourth quarter and fiscal year 2022 financial results conference call. I'm Teresa Thuruthiyil, Joby’s Head of Investor Relations. On the call today, we have JoeBen Bevirt, Founder and Chief Executive Officer; Paul Sciarra, Executive Chairman; Didier Papadopoulos, Head of Aircraft OEM and Matt Field, Chief Financial Officer. After management's prepared remarks, we will open up the call for questions. Please note that our discussion today will include statements regarding future events and financial performance, as well as statements of belief and expectation and intent. These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For a more detailed discussion of these risks and uncertainties, please refer to our filings with the SEC and a Safe Harbor disclaimer contained in today's shareholder letter. The forward-looking statements included in this call are made only as of the date of this call, and the company does not assume any obligation to update or revise them. Also, during the call, we'll refer both to GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in our Q4 FY ‘22 shareholder letter, which you can find on our Investor Relations website along with the replay of this call. With all of that said, I'll now turn the call over to JoeBen.

Thank you, Teresa, and thank you everyone for joining us today. 2023 is going to be a pivotal year, not just for Joby, but for our industry as a whole. It is time to transition from planning to delivery and that's exactly what we're doing. We're delivering on the things that really matter. On certification, on manufacturing, on preparing for commercial operations. Already in the first few weeks of this year, we've demonstrated that the Joby approach works. Let me give you some examples. Last year, we worked hard to become the first eVTOL company to complete Stage 1 of the type sort of process by having our G1 certification basis published in the Federal Register. And already in 2023, we've become the first eVTOL company to complete Stage 2 of the process. Last year, we worked hard to complete our pilot manufacturing facility in Marina, California. And already in 2023, we've become the first eVTOL company to start final assembly of a company conforming aircraft. Last year, we worked hard to build in-house testing capacity, including powering up our integrated test lab and already in 2023, we're running developmental tests in that facility. That same pattern of delivery, of planning and then executing is present across all of our work streams and it goes to show that our approach is working. It also means that 2023 is going to be a very exciting year. We expect to see the first aircraft roll off our pilot manufacturing line and fly within the first half of the year. We plan to fly with a pilot onboard before the end of the year. We expect to have all 13 of our area specific certification plans submitted to the FAA in the first half of the year, and we plan to start conforming…

Thank you, JoeBen. I'd like to add my appreciation for the FAA team too. For every document we submit and with every percentage point of progress we make, dedicated and talented professionals at the FAA are putting in the hard work of reviewing, refining and approving those documents. So all of Joby’s recent successes like the publication of our G1 served basis and the completion of our Means of Compliance are also really successes for the FAA team and for the eVTOL industry as a whole. We're grateful for the high safety bar that the FAA sets and the constructive way at which they're engaging with our new industry. As we do every quarter, today we published a chart in our shareholder letter that outlines our progress towards achieving tax certification. With the publication of our G-1 Certification Basis last year, we formally completed the first of five stages. And as JoeBen mentioned earlier, we recently announced that we now consider the second stage to be complete as well. In this stage, we've identified the means of compliance, but what we will do to demonstrate compliance with the requirements we set in the first stage of the process. You will see in the chart that we are at 97% completion on the Joby side and 94% completion on the FAA side in this category. It is not uncommon for a small portion of the Means to Compliance to remain open for a bit longer in order to allow for further collaboration on minor design changes and improvements that can happen down the road. We don't expect those numbers to move substantially at this point, and so our focus has now largely transitioned onto the latter three stages. Stage 3 is really about how we are going to show compliance to…

Thanks, Didier. Good afternoon, everyone, and thanks for joining us today. Our 2022 financial results for the fourth quarter and full-year reflect our disciplined and methodical approach to spending and resource prioritization. This approach and the support of our world class partners continues to serve us well and it has resulted in a strong balance sheet with $1.1 billion of cash and short-term marketable securities at the end of 2022. The progress that JoeBen and Didier highlighted reflects the hard work by the Joby team, which now numbers more than 1,400 globally. Over the course of last year, we grew our team approximately 30% with 90% of this hiring directly supporting engineering and manufacturing initiatives. Turning to our financial results in the fourth quarter of 2022, we incurred a net loss of $66.9 million or $0.11 per share, reflecting a loss from operations of $101.4 million partly offset by other income of $34.5 million. Our operating expenses included stock-based compensation expense of $17.2 million and depreciation and amortization of $6.6 million. Other income included the revaluation of our derivative liabilities worth $25.9 million and interest and other income, which rose to $8.1 million. Our net loss in the quarter was $72 million below our net income in the fourth quarter of 2021, largely reflecting higher operating expenses of $24 million, a lower favorable revaluation on derivative liabilities of $35 million and the non-recurrence of a one-time tax revaluation last year of almost $11 million. Our net loss compared with the third quarter of 2022 was $12 million lower reflecting higher operating expenses of $4 million more than offset by the favorable revaluation of our derivative liabilities totaling $13 million and higher interest income. Our fourth quarter adjusted EBITDA, which as a reminder, is a non-GAAP financial measure that we reconcile…

Yes. Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Andres Sheppard with Cantor Fitzgerald. Please proceed.

Hi. Good afternoon, everyone, and congrats on another strong quarter. I guess, quick question I have is, in terms of the relationship with the DoD, right? We know from prior releases that relationship has been enhanced to now north of $75 million you said today, you reiterated that you expect to monetize that relationship in 2024, which will be prior to certification and commercialization, which is great. Can you give us a sense of like how should we be thinking about in terms of quantifying it, right? As we look for into 2024, any visibility or any guidance that you might be able to give us just to get sense of how exactly you'll be monetizing it? And what that could potentially translate to in terms of some revenues? Thanks.

So thanks a lot for the question, Andres. This is Paul Sciarra. We've obviously been very excited about having two paths to revenue, which I think sets Joby apart from many of the other companies in the space. One, is the focus on moving through FAA certification to broader consumer launch. But the second, as you noted is that we have opportunities to begin to put aircraft into service with the DoD and we've always expected that, that has an opportunity to happen well ahead of FAA certification. So the path on working on that DoD work is ongoing right now. We've been able to execute a large number of test flights under the existing contracts over the last few quarters. And the conversations with our DoD partners, that is both the Air Force and the Marines about what potential service would look like are happening right now. I think it's probably premature to provide any guidance around exactly what that's going to look like. But I can say that we have been very optimistic about both the content in the pace of those conversations. So that's something that you may hear about more shortly.

Got it. Fair enough. Thanks, Paul. And maybe a quick follow-up for Matt. So I just want to understand this correctly, right? So in the current liquidity number in Q4, that includes the $60 million equity investment from Delta. Is that cash that can now be utilized for whatever you might deem necessary? Or is that cash restricted given that it is an equity investment and perhaps can only be utilized in some areas. Any color there, Matt? Thanks.

Yes. Hi, Andres. Thanks for the question. So the Delta investment is reflected in our financing activities on the statement of cash flows. It's excluded from the operating metric, I usually cite, which really just focuses on net cash and operations and our capital expenditure. That cash is unrestricted, so it's a direct equity investment into the company. So the $60 million is reflected in the $1.1 billion and available for us to use for operating expenses as we need.

Got it. Very clear. Thanks, Matt. And sorry, maybe one last one if I could squeeze it in. I just want to make sure I got this correctly. So the expectation is to begin piloted test flights of the conforming aircraft in the first-half of this year. Is that correct? And has that already started?

Just to clarify, so what we said in the call was the pilot and test flight in the company conforming aircraft would be by year-end.

Okay, got it. Thanks Matt. I'll pass it on. Congrats on the quarter.

Thanks, Andres.

Our next question is from Kristine Liwag with Morgan Stanley. Please proceed.

Hey, good afternoon, guys.

Hi, Kristine.

Hey, so maybe Didier, a question for you. I mean, when you look at the -- by the way, thank you for all the color that you're giving regarding the -- your progress and type certification. And when we look at this timeline here, I mean, you've finished your certification basis, you've done Means of Compliance and you're for Stage 3 for where you guys are at, you're at 93% already. It looks like things are progressing pretty well and on pace. So I just wanted to get an understanding of your decision to delay your commercial service to 2025 that you announced last quarter instead of 2024. In hindsight, was that decision more to have a buffer or prudence? Because it seems like based on your pace here, like 2024 seems possible still?

Hey, Kristine, thank you for the question. Really appreciate it, and yes, really excited about all the progress that the team and FAA support in achieving the progress to-date with Stage 1, 2 behind us and really focusing on Stage 3 and 4. Really the focus right now for us is to deliver on our plan this year to work through the build out of the airplane we've talked about progressively getting into the flight test at first and then the pilot onboard towards the end of the year. This is really going to allow us to truly deliver and sort of meet the timelines we set here. We're generally continuing to feel positive about what we've shared in the quarter and remain committed to that.

I see. So is it still possible about -- could you see commercial service in 2024, then Didier or is it really 2025?

I think the factors that we shared in the previous quarter remain consistent at this point, whether it be the progress that we're looking into the -- as far with the FAA that remains an important factor. So we will need to wait and see on that one.

Great, thanks. And Matt, on free cash flow, I mean, it seems like your cost cutting and the timing of payment got you to below your 2022 usage. But now when we think about 2023 and beyond, should 2023 be the peak in free cash flow usage, because now you have the land in place, your manufacturing facility. Can you give us an idea of the puts and takes in 2023 and how we should think about cadence of free cash flow beyond 2023?

Yes. So 2023 what we guided to is $360 million to $380 million and really that reflects a couple of things. One, is the recruiting we made this year, hiring 30% more than the prior year, that will flow through and that's the biggest contributor to our cash flow increasing ‘23 versus 2022. We did have non-recurrence of a couple of one-timers, puts and takes there on both sides, so whether in Summer Bio or the purchase of the Santa Cruz facility. The other thing you will see as we ramp production is we will be spending more to build more planes. So as we ramp up and build more, then we'll spend more as well. So that's kind of the constituent factors behind the ’22 to ’23. As you look beyond 2023, we will have continued growth in our cash flow simply, because we will then need to build out the commercialization side of the business. We'll be looking to add on capacity, we're talking about Phase 1 manufacturing that really won't affect 2023 in any meaningful way. But certainly, we'll start adding into those out years. And then lastly the building of planes. Now the offsets to those, there's a number of opportunities we're leaning into. One, and they kind of come in the relevant buckets, if you think of it. So, one on the manufacturing side, its state incentives and government support through things like Title 17 present significant opportunities to help us defray that capital expenditure. On the aircraft side, it's building out those tools and mechanisms that would basically equate to the aircraft leasing structure in the broader industry, if that's an opportunity that comes together. And then evaluating other alternatives for the other parts of the businesses they shape up. And then lastly, I would add, our go-to-market approaches may vary whether that's things like the DoD, which present not only early revenue opportunities, but long-term opportunities. And as we talked about before, foreign affiliates, where as we put vehicles in market that will pull ahead the cash, because there will be sales to those markets whether they're a joint venture or another own company by a partner and so forth. So, there are a lot of levers we will be looking to pull as we go forward into the business.

Great. Thanks, Matt. Thank you for the color. If I could squeeze a third one, I'm not sure if it's a good question for Paul or Didier. In November, we saw the FAA propose a rule that they'll update the air carrier definition, so that they could add powered lift operations through the same regulations covered by the commercial airlines, charters and tours and things like that? Does this change in rule make it easier for Joby aircraft to operate once it goes into service, since it’s -- you know technically would be powered lift. Like how do we think about that rule for operational performance? And is it different, should Joby had stayed as like a fixed wing certification? I guess, I'm just trying to understand on operations side, is this rule positive or negative for your operations going forward?

So, I would say broadly some of these areas are positive and I think indicative of what JB was alluding to at the front of the call. We felt really good about the sort of lenient across the FAA and that includes not just the certification effort that Didier was referencing when he talked about the progress, sort of, momentum that we're continuing to build on the trade-off of documentation, but that also relates to areas like pilot training and operations. So, we think that it's getting the right attention from the right folks at FAA. And they're making the progress that they need to be making. And it's going to be incumbent upon us to just continue to make the progress that we need to make along the way.

Great. Thanks guys.

Thanks, Kristine.

[Operator Instructions] Our next question comes from Savi Syth with Raymond James. Please proceed.

Hey, good afternoon, everyone. Just a clarification on the prior question just on the 2023 cash burn guide. Does that if you many kind of, contributions from like Agility Prime type partnerships? Or could that be kind of upside to that cash burn view?

Thanks, Savi. That does factor in our projections for the Agility Prime contracts.

Got it. And then just on the building this -- assembling the company conforming aircraft, I was kind of curious if there were any kind of notable surprises as you went through that process and as you, kind of, consider when expanding the production process?

Thank you for the question. This is Didier. In general, I've been really, really, really positive about the progress to-date. This is really the combination of many years of development and testing happening in-house on each of the components, the subsystems and systems and now seeing all this come together. Generally speaking, I'd say it's been exciting to see all this, no surprises that we hadn't really accounted for or planned for most of the changes are minors in nature. And they were all sort of planned from the beginning for us to be able to accommodate these. That's really part of the development process that we're going through here, and yes remain really positive about the progress to-date here.

That's good to hear. And if I -- just a clarification on just the testing process, just because Joby is doing more, kind of, internally built, kind of, parts that obviously has a clear advantage. Does that create more testing requirements than using off the shelf? Or does that not really, kind of, factor into the testing process?

Effectively the testing when you think about it from aircraft system and equipment, it really is all the same. It's really about who's actually executing the testing, whether it be Joby the OEM or suppliers. In this case, we will be executing the vast majority of the testing, but we’d also scale appropriately for that. So, you really have to think about it big picture, not just the aircraft manufacturer, but also all the supporting infrastructures and so on. But it does give an advantage in a lot of ways in that the development, the testing, the manufacturing is all in-house. We're all co-located here and we're able to adapt, make changes and address any of the findings really quickly here. So, I do think this is a really, really, really positive thing. And we're seeing that now as we're building this aircraft and it's coming through the final integration. Any of the feedback, we're getting is quickly feeding back to the work instructions, to the design, to the testing team and adapting these very quickly for the next series of airplanes, which we're already building here on the manufacturing line.

Got it. Thanks, Didier.

Our next question is from Bill Peterson with JPMorgan. Please proceed.

Hi, good afternoon. This is Mahima Kakani on for Bill. Just wondering, how is the process of selecting a production site in the U.S. going so far? And how capital intensive could it be to get this site up and running? And is there a chance that this could be jointly funded with a partner?

Hi, Mahima and thanks for joining today. So our process is going really well. We're in discussions with a number of states. As we think about site selection, we're really looking for -- starts off with the basic requirements. So on airport days, ability flying [five days] (ph). Then we really look at like labor availability, which is critical for any manufacturing decision, not unique obviously to aviation. And then what you hit on there, next is in incentives and how those packages compare across states, but also how do you think about the total cost of those sites, whether it be labor rates and so forth. We've been really encouraged by the engagement in each state in terms of the incentive packages that are available and the support in terms of our capital expenditures and so forth. So we're looking to work through this process with -- I don't have any specifics to announce today. But to reduce the overall total cost of our manufacturing facility. We're not providing any guidance on the specific capital outlays of what our future factory would cost. But once we have more to announce later this year, we'll be happy to talk more about it.

Got it. Thank you. And then can you also elaborate on what production certification looks like from here? Like can any of the legwork be done in conjunction with types of it or ahead of it?

Yes. Thank you. This is Didier again. So really the way we're doing this is effectively trying to work it in conjunction on purpose so that we can have our production certificate really right after we got our tax certificate. And you can see that with some of the things we've communicated recently. So for example, having completed development of our first quality system. And so that's really an opportunity for us to actually use that and exercise it through the first build, second build and third build, so that we're always fine tuning it and optimizing it. So that when we get the PC, then we can get the PC, the production certificate right after.

Okay. Thank you so much.

And our final question comes from Edison Yu with Deutsche Bank. Please proceed.

Hey, thanks for taking our questions. Wanted to follow-up on the company conforming aircraft. Can you provide any sort of differences or any changes that you make or you've made relative to the demonstrator and then potentially as you move to the fully conforming aircraft. And also, should we interpret your comments about the pilot flight in second half, meaning that after you do that, you'll have a fully conforming aircraft let's say, by the first quarter of next year?

Thanks for the question. Let me -- a lot of questions over here. Let me step back here and maybe talk through how we group this. So in terms of build to conformity, really, we can think about the airplanes we're going to manufacture in two groups. One is a series of company conforming airplanes, and the next one is the FAA conforming airplanes. The purpose of the first part is really to build the airplane to contended design and under a applicable level of our quality management system. We do that in order to effectively dry around the testing that we will eventually rerun again and demonstrate with the second group of airplanes, which is the FAA conforming. Each one of the airplanes in the company conforming group is stage to progressively build on the previous one. Each of one of these is focused on a specific set of features. And generally speaking, we tend to look at some of the more essential and critical features in the first airplane and progressively build on that as we continue to build out. So there may be things like interior lighting or environmental control systems that may not be as critical to address in the first aircraft and we'll work through these in the follow-on builds. But for all intended purposes, our design is firmed up here and it's really about building against that design and starting to execute on our testing from here on.

And then in terms of the fully conforming version, do you have a sense or do you have a target of when that will be ready?

We're not communicating updates on that front, really the focuses here is to build and deliver on the pilot to flight or I should say the pilot onboard flight, of course, all of our airplanes have been piloted. This is about having the pilot be onboard.

Understood. And then separate question on just the battery strategy, I think a few of the competitors out there have come up pretty publicly using cylindrical, I think two of them are using [Indiscernible] cell. Do you have any updates on kind of what you're planning to do or what you're doing and how that has evolved?

Thanks, Edison. This is JoeBen. So on the battery, we continue to be very pleased with the performance of our battery systems, including the safety features around our battery system and the remarkable performance that we've been able to deliver with it. And again, I'd like to highlight how important we think the lifecycle of the batteries is to the operating economics of our service and the environmental impact of replacing the battery pack. And as we've stated previously, we've demonstrated more than 10,000 representative flight cycles in the lab. And during the flight tests of our prototype aircraft, we've also seen really fantastic life out of them. And then just to go back to the heart of your question on safety again. Safety is our number one priority and it's inherent in everything that we've done to design our battery system.

Got it. And if I could sneak just one more in. I know you effectively got the MOC. Just wondering on that remaining small piece. Is that just officially a 100% tied up later next year, what do -- how do we think about just timing wise? When does that become 100%? I know it's a small piece, but just curious.

Yes. Thank you. So our expectation is that we will get to the -- very close to 100% if not 100% this year. Like I mentioned earlier, those are -- there's a small percentage here and there that may evolve over time. But for the most part, this is really inconsequential really what matters is that we've been able to proceed into the certification plans and the test plans. So the fact that those have been unlocked is really critical here in moving the program forward.

Got you. Thanks for taking the questions.

Thank you.

Thank you. I would now like to turn the floor back over to Joby's CEO, JoeBen Bevirt for closing comments.

Well, thank you all. And I again really want to emphasize what a incredible year. We're looking forward to as a company in 2023. We've demonstrated incredible momentum and the team is very pleased with the performance that we're seeing out of each of the systems on the aircraft and the aircraft as a whole. And we're so excited to see the conforming aircraft coming across the line. And as Didier talked about moving that aircraft into flight test in the first-half of the year and then into a pilot onboard flight later in the year. I think the metric that is going to be the most important to look at as a gauge for this year is our progress on testing. And are the investments we made in our in-house testing capability are really paying dividends. It's another example of the strength of our vertically integrated strategy. And we could not be more thrilled with where we stand as a company, the momentum we have. And we're very grateful for all of you taking the time this evening to listen to our call and can't wait to touch base again shortly.

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