Eve Holding, Inc. Q2 FY2025 earnings call

• Unveiled full-scale mockup at Paris Air Show with new propeller configuration.
• Announced first firm order and additional LOIs, including a $250 million contract with Revo for 50 aircraft and TechCare services.
• Brought Beta Company as a supplier for distributed propulsion, adding flexibility to the program.
• Redesigned wing for aerodynamic efficiency and introduced taxing wheel version for ground operation.
• Full-scale engineering prototype undergoing final tests, scheduled to start flight campaign soon.
• Secured contracts for Eve TechCare aftermarket services, with orders for around 1,100 aircraft.
• On track for TAP certification and entry into service in 2027.

• Full-year cash consumption guidance $200 million to $250 million, likely closer to the lower end.
• First full-scale prototype expected to start initial flights by end of 2025.
• Certification campaign expected to begin after compliance means are published by end of 2025.

• Forward-looking statements involve risks and uncertainties that could affect financial results. Detailed risks outlined in SEC filings.

Q: Just on the cash consumption, Edu, you're progressing well right now, especially maybe tracking below that $200 million, $250 million. And you also do have the grants that you got recently. Is it fair to assume that you'll be close to the lower end and maybe below and you consider the grants as well?

A: Savi, we continue to monitor, right, our expenses very closely. We are very diligent where we spend our money, and we make sure we leverage, right, all the resources that we have from Embraer so that we don't need to duplicate costs. With that, we have been able to optimize our expenses, right. In the first half, we burned around $85 million, a little less than $85 million. Second half should be a little more. So that's the reason we are guiding towards the end of -- the low end of the range, right, maybe $200 million, maybe slightly below. But there's a lot of investments on the development. We're going to continue to advance. We're going to be doing a lot of tests. So we're excited. But yes, I believe we are leveraging more from Embraer. And because of that, we have been able to optimize our cash consumption.

Q: Regarding the test flight campaign, maybe a different way of asking is, can you just maybe give us a sense of kind of how you're envisioning this ramping up, starting with hover flights, and then kind of what are the plans to kind of ramp up the test flight campaign? And is the plan still to deploy 5 prototypes for conforming test flights? And if so, kind of what's the timeline for that?

A: Yes. Thanks, Andres. So the plan is still the same. So starting from the end of your question, we're still planning the 5 prototypes. There's still some discussion on the amount of the test points that will be on each one and if we should bring in another 6 prototypes. So that's still something that may change in the future, but we're still planning to go with the 5 prototypes and the timeline we had previously. With respect to the steps on the flight test campaign, we are still very much in line with the concept of building maturity on the building blocks we have for the vehicle. So we will definitely spend some time focusing on the hover flight of the vehicle since this is one of the building blocks on which we don't have as much previous experience in comparison to others such as cruise flight, right, where we bring the experience of Embraer in previous projects, right? So we will spend some time focusing on hover flight, and that relates to the controllability of the vehicle, the power needed, the management of the systems, temperatures, power, things like that. And then transition between hover and cruise is also an important phase. It's a very short one for the vehicle, but it's very important that it is executed smoothly, both in terms of, let's say, technical aspects, but also for the comfort and the user experience of the passengers. And then finally, after that, move to cruise, where, again, we believe we have more maturity based on previous experience of other projects.

Q: Just regarding the order book, curious on kind of how you're thinking about it? Is the plan to continue to build up the order book? Is it to begin converting some of those LOIs into binding orders? Should we expect any PDPs from the order book? Just any granularity there or thoughts would be helpful.

A: Johann speaking, Andre. Thank you for your comment about the unveiling of the mock up at the Paris Air Show. Well, the order book is definitely what we've been working at the beginning. We work on this order book with the LOI because we wanted to put the customer and the operator at the center of what we do. And I've been saying this before, I mean, this really -- it proves the solution that we're giving to the operators, not only the aircraft, but also the service and support, make sure they can operate reliably. They can also make sure that they fly, they keep flying on a regular basis and have the most optimal operating cost. And also UATM is around the corner, we'll have to -- we can begin with what we have today in the traffic management, but eventually putting thousands of vehicles in the air and the low altitude airspace will need this. So I think customers understand this, and they want to engage. That's why it starts with LOI. Basically, it says that we're working together. We're defining the solution together. They participate in SteerCo with us, where we give them regular feedback and how the product development and also the service and support solutions that we're developing for them. And naturally, as you go forward and you get closer to the certification date, then we start converting. It's exactly what happened with Revo. I think it is important for them to prepare the infront service. And this is why we're 2 years away from the infront service. The ecosystem needs to be ready. And with this contract, they can go back to the different stakeholders and say, okay, now this is real. This is happening, my first PDPs and Eve is developing this vehicle, and we need to be ready. So we're not looking to add necessarily. We add only when it makes sense when we have the right partner with the right mission, okay? And this is what we've been working on. And then, of course, once we start converting the first one, we'll also have and if you pay attention to the press release we did at the Paris Air Show, it says São Paulo area, right? The [indiscernible] customer for São Paulo, you can imagine that we're already working with other customers in Brazil, but also United States to convert other LOI.

Q: I just wanted to touch on some of the changes in the competitive landscape. Joby and Blade announced that Joby would acquire Blade's passenger business earlier this week. How do you think about how that impacts your competitive dynamic and your positioning, especially given Blade had been part of your 2,800 LOIs? And that combined with your partnership with Beta, how do you envision the ecosystem developing from here?

A: Ellen, we welcome very much this news about Joby investing in Blade. I think this is exactly proving our point what we've been saying since the beginning, there is this transition happening in the electrification of the vertical flights from the helicopter to eVTOL, and this is a proof of it. So我们're excited. We think it's a good news because this is what we've been preaching, it's just getting together, there's room for everyone. Joby going and getting a platform -- ridesharing platform is positive for all the eVTOL manufacturers. We don't see -- and there's a special point. I mean we don't see that it's going to take out our backlog with the 200 vehicles that we have. We have a good relationship with Blade. And it's a ridesharing platform, remember. I mean it's like -- and I'm going to make a joke a little bit here, but it's like Uber asking their drivers to drive only Toyotas, right? I mean it's just -- you need all the OEMs. You need various OEMs for the right mission. Each of the eVTOL has its mission, and same thing for the helicopter. They're multi-OEM today. And so we don't see it as an issue today for us.

Q: What is the difference in performance between the motor that's being acquired from Beta and the one that you were using in testing previously? And are you still sourcing a battery pack from BAE? Or is that going to change?

A: Austin, so with respect to the battery, nothing changes there. We're still developing with BAE and still in the same requirements, same products, same line we were before. On the differences between the motors from Nidec and from Beta, there are mainly differences with respect to cooling system, for example, there is a little bit on the architecture of the motor. So the size of the motor is a little bit different between the two solutions. The control is different. And there are some differences on the way that it integrates into the vehicle. And so how it communicates and how some of the protections are made. Basically, these are differences that we believe that warrant us a phase of testing. So we can, with these differences, find what is best for the vehicle as a whole. So we optimize the global solution based on these differences that the systems bring to us. And so by doing this step, we are looking for a solution that is best for the vehicle overall, and that's why we believe this phase of testing will increase our maturity moving forward for the flight test campaign.

Q: Just one is regarding capital needs. You mentioned that you feel very comfortable until the end of '26. And as you mentioned in previous calls, you have been exploring the options for '27. You guys have this shelf registration that was filed during the quarter to raise money. The sector has been doing pretty well. So just wondering if you can comment anything about that or how you see the current state of the sector? And what else do you think could improve? Or what are the current risk? And what type of derisk would you be expecting to be more optimistic about the outlook for eVTOL?

A: Thanks, Motta, for the question. It's Edu here. We continue to feel very good, right, in terms of cash. Only the cash we have in hand gives us more than around 18 months, right? So we have plenty of cash to get at the end of 2026. If you add the standby facilities we have already signed, the recent grant that we raised, that gives us probably we're talking about almost $400 million, which gives us 2 full years, right, so probably until, I would say, mid-2027. So the position is good. We still need some resources, right? You mentioned the S-3, the shelf registration we have. But we also have interesting discussions in terms of long-term loans, right, similar facilities to what we already have been drawing from BNDES and also from Citibank. So I think different from some other players, right, given the strength of the group, right, being part of the Embraer Group, we have, I would say, more options in terms of funding, and we are analyzing. We are not in a hurry, but we need to assess the best option and execute at the right time.

Q: Quick one on the eVTOL landscape. I mean we've seen a number of partnerships between eVTOL names and defense contractors emerge for the development of defense use cases. Could we see Eve pursuing similar partnerships?

A: Andre, yes, this is Johann. Sorry, I mixed up with the microphone here. Well, since the beginning of Eve, it's a matter of focus, and we're really working on the UAM, it's the 100 to 150-kilometer market. And by the way, we released our market outlook at the Paris Air Show, and we were the first OEM to put our experience out there and all the discussions that we've been having with all the stakeholders, and we do confirm that we believe that the UAM will go for urban dense area, and this is also -- we're always confirming what we're saying. So it's a matter of focus. At the same time, we always look, and this is also one of the advantage of having Embraer that can bring the technology development, analysis and all the bandwidth to look at different technologies. And we're looking at the possibility of getting into a hybrid solution for the vehicle, not changing the core structure of the vehicle and for specific markets. Defense could be one of them. But to remind you that we do have an LOI with BAE System and which also looking at different markets as defense, whether it's in the U.S. or U.K. And so yes, we are looking into this, but the focus is still to be certifying the vehicle that we're offering fully electrical.