Waystar Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 4, 2024

There are 11 speakers on the call.

Operator

Good day, and welcome to the Eve Air Mobility Third Quarter 20 24 Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Lucio Alworth, Head of Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Good morning, everyone. This is Lucio Alworth, the Director of Investor Relations at Yield, and I wanted to welcome everyone to our Q3 2024 earnings conference call. Our CEO, Johan Borde and CFO, Eduardo Cote, are joining me on the call today. And after their prepared remarks, we will open the call for questions, at which point Luis Valentini, our Chief Technical Officer, will also join us for more technical questions.

Speaker 1

We have a deck with a few slides and additional features that show our achievements in the quarter as well as the testing phase of our full scale prototype. The deck is on our site at ir. Eairmobility.com, so please feel free to download it and follow along. Let me just start by saying that this presentation includes forward looking statements or statements about events or circumstances that have not yet occurred. These are largely based on our current expectations and projections about future events and financial trends affecting our business and our future financial performance.

Speaker 1

These statements are subject to risks, uncertainties and assumptions, including, among other things, generic 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, and we undertake no obligation to update publicly or revise any forward looking statements because of new information, future events or other factors. With that, future events and circumstances discussed in this presentation may not occur, and actual results could differ substantially from those anticipated in our forward looking statements. With that, I will now turn the presentation over to Johan, our CEO. Johan?

Speaker 2

Thanks, Lucio. Good morning, everyone, and thank you for joining the call today. We had an eventful Q3. We continue to advance to the development of our program and reach important milestones. As a reminder, we completed the assembly of the prototype and rolled it out of the hangar for the first time back in July this year, and we have started to test the vehicle ever since.

Speaker 2

This is a full scale engineering prototype with no cabin and cockpit. It's made of composite material that will be piloted remotely in the command and truck and control truck. This prototype will be used to validate and improve the accuracy of previous subscale and computer models and also will serve to build on the several rigs that we have for different individual components. We have installed the batteries and already performed various tests, which we'll be talking about later on in this presentation. And we're now prepping up for the prototype to start the flight campaign.

Speaker 2

We expect to start receiving the lift motors by next month in December, so the flight test can start early next year. We will initially perform hover flights tied up to the ground and gradually increase power and height. Then we'll move to the partial transition. This is when we engage the pusher without fully disengaging the lifters to continue controlling the aircraft till recently and only then we will move to the full transition flight. Another important milestone was publishing on the base of certification by ANAC, SIL Civil Aviation Agency, which establishes the standard EBITDA requirements we will have to respect in order to fly commercially.

Speaker 2

In Royal Mail, the FAA published the SFAR in the United States, which we view as supportive to the industry. And because we're working closely with both flying agencies, we continue working on the constructive path to certification. Now on the services side, we launched the EveTechCare, which is a fully integrated portfolio that includes all services for maintenance, logistics of spare parts, flight hour program to pilot and mechanics training and the customer support. Last but not least, we conducted the successful 5 day simulation of Vector, our air traffic coordination software in Sao Paulo with a very positive feedback from Rivo, our partner and customer. Rivo also indicated interest in the use of Vector flight operation for both the eVTOLs, but also their fleet of helicopters.

Speaker 2

Now on to the next slide, we're advancing with several tests in our engineering prototype. These are listed here. We completed the battery installation and because of our prototype as removable carbon fiber panels, this is an easy process. The panels are easily detachable to give engineering access to whatever part needed for the maintenance or any services. And of course, the panels then can be easily readjusted, reinstalled.

Speaker 2

So with the battery on, we conducted high and low voltages test to make sure that there is no leakage in the system. We also executed successfully the thermal runaway containment test in our energy pack. And the goal here was to demonstrate the containment, of a thermal thermal thermal thermal event. As I mentioned before, we expect to receive the LFTR motors in December. They are currently being assembled and tested to include the motors themselves and the electronics components that will control each other's motors thrust.

Speaker 2

Moreover, we are conducting auxiliary load test in the tool boom section with different blade configuration and different shapes to maximize the performance equation that is the thrust versus the energy consumption and vibration and also the noise emission. We have also integrated the multiple system of the eVTOL to make sure that all operate among each other smoothly. And lastly, we integrated also the command and control truck to the aircraft. The truck will house the pilots and the team of engineers who will measure and monitor several operating metrics during the flight. The truck is designed to track the EV tolls during the test flight and is equipped with several sensors and cameras strategically placed throughout the fuselage for real time flight performance data, full visual and diagnostic.

Speaker 2

The goal is to guarantee that all systems are working perfectly among each other. On the following slide, it shows some cameras that we just talked about and also the outside view of the truck. I believe on our earning calls, which we published this morning, we're also showing the interior of the truck. Now moving to the next slide, we're glad to see the certification environment is taking shape as well. The Brazilian Civil Aviation Authority, ANAG, just published the basis of certification for eVTOL in the country.

Speaker 2

This is an important milestone for the eVTOL industry and we will and this will allow us to progress towards the ANAC TAP certification and seek validation with FAA in the U. S. In parallel, the FAA issued a special federal air regulation, the SBAR, that details the final rules of advanced air mobility and covers also the EBITDA. In general, we view that this announcement are supportive of the industry and we're still analyzing the 8 80 pages technical document to evaluate the impact on our aircraft development and also operations. Enag basis of certification establishes the 1st set of airworthiness criteria for eVTOL in Brazil and follows Eve's application for TC back in 2022.

Speaker 2

It is a standard process for developing a new certification basis and an important milestone in the project. Eve has progressed in eVTOL development so far in 2024, the modification of certification basis by the Brazilian Aviation Authority in October as an important milestone to establish the essential guidelines for the RA veto certification activities in the coming years. Yves can now advance the definition of the means of compliance by the Brazilian authorities and validation strategy with the FAA that will guide further detailing the vehicle and the flight test campaign. Our current path to certification includes the first flight of our engineering prototype in early 2025, followed by several flight tests for knowledge gains and initiate the assembly of our conforming vehicles next year. With the first conforming prototypes ready, we expect to start our final development and certification flight test campaign in 2026, which will normally take 12 to 18 months to be completed, leading to an expected tax certificate issuance in 2027.

Speaker 2

We believe that this is a realistic and achievable timeline based on our experience from previous programs. Now moving to the next slide, we show here some of the highlights of our recent announcement on the customer services part of the business. We especially announced Eve Tech Care, an all inclusive portfolio of services and support to our customers to aim to increase the EBITDAU availability and also reduce operating costs. Tech Care includes services such as health monitoring run productive maintenance and schedule EV toll downtime and maintenance schedule, which will allow to optimize the inventory management of components. The system integrates operators, suppliers and also services centers for an easy use interface.

Speaker 2

We are also going to offer an advanced training for pilots, maintenance, crew and also ground handling personnel that will be powered by the JV, the joint venture between Embraer and NCA Training Services called ECTS. This is a long standing and successful partnership with excellence in training for global operations since 2007. I believe that TechCare and Vector showcases our holistic view of the UAN market since the beginning and how it adds values to our customers as the industry scales. And I have no doubt that this is one of the Eats most distinguished differentiators. We look at UEM as a complete way.

Speaker 2

On the next slide, were some additional details of our latest vector simulation in Sao Paulo. We run a 5 day real life exercise in one of the busiest helicopter market in the world with our partner and customer, Rebo. We use the vector to shadow and monitor the total of 45 helicopters flight that carries 100 paying passengers and that average is 8 to 10 minutes. This is precisely the U. N.

Speaker 2

Market that we're targeting. The exercise included operations and various scenarios including delays or parts on departure or on destination, airspace weather constraint, the in flight deviation to alternate landing location and more. And the goal was to validate the algorithm and protocols that are necessary for the EBITDA to conduct a safe and reliable operations in high utilization use case. This is the second exercise that we're doing. The first one was in UK about a year ago.

Speaker 2

Now on to the Slide 10, our traditional total pre order backlog visibility, where we stand now with approximately 2,900 aircraft for the total value of $14,400,000,000 based on the list price. These are the non binding letters of intent for 30 different customers spread over 13 countries and different businesses. We also have LOIs for Vector from 16 customers and secure contracts with 15 different customers for our Tech Care suite of aftermarket product and services. This could bring up to $1,600,000,000 in revenues to EVE over the 1st few years of operation. Now I'd like to invite our CFO, Edu, to go over our financial along with the milestone checklist.

Speaker 3

Thanks, Johan. Now move to Slide 9. I want to start with our most recent liquidity events. We have been very successful to attract new capital at EVE to continue to fund our development. In total, we raised $236,000,000 since July in a mix of debt and equity.

Speaker 3

We believe that this balanced capital structure will maximize value for our shareholders. Our pro form a liquidity of $445,000,000 in the Q3 2024, including the industrialization and bank loans is equivalent to 3 years of Yves' current cash consumption, which is above our peers and gives us confidence to advance the program to certification. Now at Slide 10, Yves is a pre operational company with our current financials reflecting mostly the costs associated with our program development. That said, I want to highlight some of our numbers. Yves invested $32,000,000 during the Q3 in our program development as R and D activities continue to speed up with more headcounts and high engagement from suppliers.

Speaker 3

We also deployed $9,000,000 in SG and A during the quarter and that reflects a bigger workforce. We have been controlling corporate expenses to focus our resources on the EBITDA development. Higher development expenses in the Q3 were partially offset by interest revenues of our invested cash with Tier 1 banks and the mark to market gains of our warrants, resulting in a net loss of $36,000,000 in the Q3 2024. Moving to cash flow. Our operations consumed $34,000,000 in the quarter and $101,000,000 in the 1st 9 months of 2024 that is in line with our guidance.

Speaker 3

It's important to highlight that we drew half of our cash consumption or around $50,000,000 from our pre approved credit line with the Brazilian Development Bank, significantly preserving our cash position. We ended up 3rd quarter with $280,000,000 in cash, which is $73,000,000 more than the previous quarter due to the new equity raised in July. We still have approximately $25,000,000 available from our R and D standby loan resulting on a total liquidity of $305,000,000 which adding with both the new industrialization finance and the bank lower recently announced in October would increase our total current resources to $445,000,000 At Slide 11, we remain on track to deliver our milestones for 2024. We presented our assembled eVTOL in July and started several tests ahead of our first flight. In parallel, ANAC published the basis of certification as Johan already described, and we secured the manufacturing finance for our Brazilian factory in October.

Speaker 3

We have consumed $101,000,000 so far this year and expect to reach our guidance of $130,000,000 to $170,000,000 in cash in 2024. The higher Brazilian currency versus the U. S. Dollar has been helping us to stay at the low end of our guidance as we have a lot of development expenses in Brazilian currency. With that, we conclude our remarks, and I would like to open the call for questions.

Speaker 3

Operator, please proceed.

Operator

We will now begin the question and answer session. The first question comes from Savi Syth with Raymond James. Please go ahead.

Speaker 4

Hey, good morning, everyone. I appreciate all the kind of the color on what's been accomplished so far. And it looks like maybe kind of the updated outlook in terms of type certification may have slipped a very little bit into maybe from the end of 'twenty six to 2027. But I was curious what was driving that? And then just any implications for the timing of some of the revenue that could come in like TDP and other revenue sources that could come in before type certification?

Speaker 2

Right. Savia, thank you so much for your question. Johan speaking here. Yes, as we mentioned in the presentation, I mean, we made some significant progress in the EBITDA development this year, including the steady progress of the full scale prototype. As we showed several pictures, several design advances with the critical suppliers.

Speaker 2

We're just also coming out of a phase, which is joint definition phase with our suppliers that sees and test each of the component, but also the integration of those components together. We went through a multiple wind tunnel test and always a challenging technology as we know. And And at the end of the day, we want to bring the best value for our customers. So, our goal is not to be we're not focused to be the first one. For the last 13 months that I've been on the job, what I keep saying.

Speaker 2

I mean, we're not focused on to be the first one. We're focused to be the right choice for our customers. And the goal is to introduce a mature and reliable product that will be capable of meeting and exceeding also the expectation from the customer. So giving all that, the path to certification includes the 1st flight of our engineering prototype that we've been mentioning since we've rolled out last year this year, sorry, in July in Farnborough. And of course, we'll have to go for the first flight.

Speaker 2

But it's not to get ready for the first flight only. It will be good for everyone. That's what we want. But we want to be ready also for all the test flight campaign, right? And with this, it will be in early 2025, it will be the first flight of the engineering prototype.

Speaker 2

And then, of course, we want to gain the knowledge and we're going to start also to assemble the initial conforming vehicle. Once we have the conforming prototype ready, then we will start the flight test campaign of the conforming prototype in 2026, which we know by experience that we've done this at the Embraer many, many times. It takes about 12 to 18 months to be completed and this will lead us to certification in 2027. So as you can see, personally, I don't I see as a normal update of a very innovative and challenging program, given that now we have also a better visibility with the next steps.

Speaker 3

In terms of the PDPs, Sabi, as I mentioned, it's Edu here. We are super engaged with our customers. They remain super supportive of EVE. They're excited, right, because we are advancing. We are bringing them also for the developing, we are making sure that we are making the right vehicle, right, that the customers really want to operate.

Speaker 3

And of course, as we advance on those conversations and those negotiations, we expect to start to firm the LOIs, right? We have almost 3,000 LOIs. We have a lot of customers engaged. We believe we're going to start to firm the LOIs very soon. And once we firm the orders, of course, there will be bigger down payments.

Speaker 3

There is a PDP schedule. So anything it's all normal, nothing has changed. We remain excited and we are moving forward.

Speaker 4

Appreciate the color. And if I might, just on the $80,000,000 to $90,000,000 in the production facility, how should we think about like the timing of that CapEx flowing through? I recognize that you had the financing for it, so that's not a concern. But just curious about the timing of that and what that means for I know in the past you said cash burn steps up next year, but not a big step up. So I was kind of curious if you have any early thoughts into kind of that cash burn as well into 2026?

Speaker 3

Yes. We secured the finance, right, for our Brazilian facility. It's around $90,000,000 right? It's a very long term finance. We're talking about 16 years.

Speaker 3

There is a 4 year grace period where we don't pay any interest and no amortizations. So that's really the type of finance that fits very well with our company and our profile. The peak of the investments on the facility, they are going to happen in 2026. There will be investments next year, so probably something around $20,000,000 but the peak is 2026. As we get closer to certification entry into service.

Speaker 3

So that's kind of the profile, Savi.

Speaker 4

Okay. And so we should kind of expect like a similar maybe and a little bit more step up on maybe R and D as well for next year. So those are the 2 things that will drive the step up?

Speaker 3

Yes. This year, as I mentioned, we are burning around 130, 140. Next year, it may go up a little. 26,000,000 kind of flat versus 25,000,000 and that's pretty much where we may end up.

Speaker 4

Very helpful. Thank you.

Operator

The next question comes from Marcelo Malta with JPMorgan. Please go ahead.

Speaker 5

Hi, everyone. Good morning. Two questions on our side as well. Just to follow-up on the Tolbatap plant. You comment on the release, you have had some module, 1 module, 2 modules.

Speaker 5

When we think about the CapEx that you guys comment about $80,000,000 to $90,000,000 This is like what size exactly is the $120,000,000 or can you go up to the EUR 480,000,000? And then for the additional models, if that is the case, what is the additional CapEx there? And then finally, second question on liquidity. I mean, of course, you have a comfortable position for the next 3 years. But just wondering, given what happened to some peers in the industry, if you think about strength even more your liquidity in the short term, just to have a bigger cushion of cash if necessary?

Speaker 5

Or how are you guys thinking about new credit facilities? Or how should we think about that? Thank you.

Speaker 3

Thanks, Marcelo. First regarding Talbotay, right, our EBITDA facility, it's this $80,000,000 to $90,000,000 that we got, it's most of the investment that we're going to be doing that with this $80,000,000 to $90,000,000 we can get probably half of the capacity, dollars 2.40 eVTOLs. To get that $480,000,000 right, which would be the full capacity, we may indeed I think we need to add an extra shift and also put some tool in extra machines. There may be another €30,000,000 or €40,000,000 but the bulk of the investment and half of the capacity €240,000,000 we already get with the finance we have. That gives us a lot of comfort, right?

Speaker 3

So as we said since the beginning, we have this project together with Embraer that's very efficient in terms of capital investment, right? We hired the engineers from Embraer. We only pay for them when they are working for us. Once the work is done, they go back to the Embraer pool. On the industrialization, we are using existing facility of Embraer.

Speaker 3

We're just buying the tooling, the machines. It's very efficient, right? So that's the reason we spent $80,000,000 $90,000,000 and some of the competitors are spending 100 of 1,000,000 only on the industrialization. In terms of the liquidity, we are feeling super good, right? As I mentioned in my presentation, we closed the quarter with $450,000,000 in liquidity.

Speaker 3

It's our highest liquidity ever, right? Eve never had so much cash on its hands. As I said, we control costs very seriously, right? And we really focus our resources on the development. That gives us these 3 years, almost 3 years of runaway, which is the longest runway in terms of cash consumption in the market among all peers.

Speaker 3

So we're feeling good. We have money for the years ahead. We're not planning new capital raises, but we are always evaluating. But at this point, nothing is on the table. We're not looking new funding in the short term.

Speaker 3

Okay?

Speaker 5

Perfect. Thank you very much.

Operator

The next question comes from Andre Sheppard with Cantor Fitzgerald. Please go ahead.

Speaker 6

Hey, good morning, everyone. Congratulations on the quarter and thanks for taking our question. I wanted to maybe touch on the SFAR regulations. So you mentioned that obviously this is supportive. I'm curious, what did you see as the number 1 or number 2 most supportive regulation as it pertains to EVE or the eVTOL industry?

Speaker 6

What was it that you thought was most significant there? Thank you.

Speaker 7

Yes. Good morning, Andres. This is Luis Valentini. Thank you for the question. I think first of all, it's important for us to have the rules clear, right?

Speaker 7

So we were with the draft of the SFAR for around a year and it's very hard to develop the project and it's the same for us as is the for the rest of the industry. It's very hard to move ahead at the pace that we are going without having clarity on what the rules would be. So having the final document out is really good for us to really have the rules on hand and be able to discuss with the authorities as well as setting up our operation, our vehicle operation with the operators that will have them. Specifically, I can mention, for example, the issue about the training that in the original draft of the SFAR was mentioned that would be required to have flight hours with an instructor on board and that would require the vehicles to have 2 command positions that an instructor could be occupying at the same time that the pilot that is in training was occupying. And that would be for our vehicle as for others in the industry, a necessity of creating a specific vehicle for training since our vehicle has only one command post for pilot.

Speaker 7

On the newer version, on the final version of the SFAR, it stated still that you need flight hours for training, but those are not required to be made in dual controlled aircraft. The pilot can be trained in the simulator and then can go to the vehicle with an observer onboard, but this observer does not necessarily have to have the controls. And so that was a simplification that was made. We believe that it was a correct move. This was something that the industry asked the FAA to evolve to.

Speaker 7

So we were specifically satisfied with this one. It's now a matter of creating a training program together with the simulation devices that will allow for the proficiency of the pilot, but we believe this is a better path than what is on the draft of the document.

Speaker 6

Got it. That's very helpful. I appreciate all that context. And maybe just as a quick follow-up, with certification now expected in 2027, just trying to understand what is driving that move into 2027? Understanding that the test flights will ramp up in 12 to 18 months, but from the regulatory perspective, what are you seeing from ANIC and from the FAA that makes it seem like the certification is more realistic in 2027?

Speaker 6

Thank you.

Speaker 7

Yes. So as Johan mentioned earlier, we believe that this is a timeline that fits our development. This together with the publishing of the certification basis last week by AMAC and the flight test program as Johan mentioned, so the first slide of the engineering prototype in the beginning of next year and then our conforming prototypes in 2026. We believe that that's a robust timeline that we can follow considering all the challenges and the novelties that there are in this project, right. So Johan mentioned, we build very much on the experience of Embraer in creating these timelines and creating the process for development of the vehicle.

Speaker 7

But we also have new technology that's being brought in, new requirements we just mentioned, right, the SFAR in addition to the certification basis. So all of these together make for this timeline that we just published a more realistic timeline in our view.

Speaker 6

Got it. Thanks again. Congrats on the quarter. I'll pass it on. Thank you.

Speaker 2

Thank you. Thanks, Andre.

Operator

The next question comes from Sheila Kahyaoglu with Jefferies. Please go ahead.

Speaker 8

Hi, how are you? Congrats on the quarter guys. And just maybe just wanted to fine tune this a little bit because there's been a lot thrown out there and appreciate the additional funding. When we think about the flight test program and the final development kicking off in 2026, does that mean with another 12 to 18 months to complete it, does that mean EIS has pushed out about a year and a half? Is that fair to say?

Speaker 8

And that's what's driving the additional funding?

Speaker 2

Sheila, thank you. Thank you for the question, the comment. But no, no, it's not 12 months, no push out. No, it's really from 26 to 27. We're not giving any a quarter at this stage, but we have to count the 27 and it's not again, it's up to 12 months, right, pushback, right?

Speaker 2

That's what we're looking at.

Speaker 8

Okay. And then just on the LOIs, obviously, we don't expect that to really move until you get closer to EIS, but they're flat from last quarter at 2,900 aircraft, but services revenue is picking up, up 30% Q over Q to $1,600,000,000 in the backlog. So maybe if you could just talk about how you're selling that to your customers and how we should reflect think about that shift in customer conversations as you build lifetime revenue model?

Speaker 2

Sheila, sorry. We had just a little problem. I'm communicating here just to cut up for 10 seconds.

Speaker 8

So can you just give me some

Speaker 2

more of the questions? Sure.

Speaker 8

LOIs are basically flat at 2,900 aircraft in the backlog or 14,000,000,000 dollars but you've seen revenue momentum in the services side of the business of 30% Q over Q. Just curious how you're selling that. Are you going to or should we see services backlog start picking up more so?

Speaker 2

Yes. Okay. Thank you. Sorry. Okay.

Speaker 2

No, in fact, right, we're 2,900 aircraft under the LOI. This is a strategy that we've been having for the last 4 years is really going around in the world and showing our solution. Our solution is not only in system very big and we said this is not only the vehicle, but we know that guaranteeing the availability of the aircraft, but also the most optimized operating cost will be the key of success, especially at the beginning, right? We really want to focus on incremental service, few cities, make it work, make it work for the operator and then we can replicate as much as possible. And then, of course, for our portfolio that we're creating, that we've been creating is the biggest one when it comes to and again, there's LOI, of course, but the customers are telling us, look, you got a good solution.

Speaker 2

I know you're not thinking only about the thinking about only the vehicle, but also the service support, which is very it's paramount for the customers. They understand it's a new aircraft, it's a new ecosystem that we're working on, and they want to make sure they're backed up by not any service provider, but

Speaker 1

definitely by the OEM, who's got what we call the skin in the game.

Speaker 2

They really want everyone to by the OEM who's got what we call the skin in the game. They really want everyone wants to make sure that the operation will be working. So yes, LOI and plus the service and support is a big component of our solution and this is the reason why. Now one thing that we've been working hard is the we announced recently the launch of the TechCare, which is really the all in one services platform, which exactly the customer have been asking us for, strongly based on the Embraer experience. 1, flat hour program or whatever is going to be designed, but with a la carte services that fits the operation of the customers.

Speaker 2

And also we keep working hard just on the ecosystem side and we launched Vector as you know our UHEM and last week we were in Sao Paulo with Rivo and we were shadowing their operation with the helicopter more than 45 flight that we've done in couple of days And the intent was to demonstrate that our software made for the operator, not only for the EBITDA, but also the helicopter operation, will allow to save the organizational time, be more optimized, weather condition can impact the operation and how you anticipate as much as possible. So this is going to be also very important for the operation of the EV Tillam when we launched them.

Speaker 8

Thank you.

Operator

The next question comes from Cai von Rumohr with TD Cowen. Please go ahead.

Speaker 9

Yes. Thank you so much. And so congratulations on the SBAR. So I've read the thing. Can you go through the diversion requirements, flight diversion requirements, whether those are totally in line because they looked a little confusing?

Speaker 9

And any vertiport requirements that are spelled out there?

Speaker 7

Yes. Good morning, Cai. So on the energy reserves, we believe that it's clear a path that the FAA has been putting out, which is to be very in line with what is in operation today. So we see the FAA very careful on building what is today valid and what's working, of course adapting where it's necessary for the eVTOLs, but very much trying to build on the basis that is operational today. And I mentioned this because it specifically says that if the eVTOLs can land vertically at any moment during the route, then they can use the reserves that are today and use for helicopters.

Speaker 7

So 20 minutes for our VFR flights and 30 minutes for IFR. It also states that if you have the operators has a 135 permit, then you can have they can have approved routes and not necessarily use the 20 minutes, but use whatever is necessary to land at the predetermined landing zones on that specifically approved route. So we believe that this was a good arrangement in the sense that it builds on something that already exists and it works today in aviation, but also leaves a door open for operators to not use the general 20 minute rule and use something specific if they have the approved route. So that's what we believe that is the best way to go. So you don't have to have excess energy left in the battery for the general 20 minutes reserve.

Speaker 7

You can really have a more tailored and more adjusted reserve for the roads that you'll be operating. So this

Speaker 1

is something that the operators will have

Speaker 7

to do. Of course, we can support them in approving the roads and we have the experience of Embraer in doing that, but this is going to be something that they can do and again that will make them more fit in terms of their energy used to the routes where they would be operating. With respect to the Vortiports, I don't see any major points in the SFAR at this moment that changes our point of view in the infrastructure on the ground. So we believe that this energy reserve as it stated will work with the type of reports that we are expecting to see.

Speaker 9

Terrific. And then on the issue of service, at one point you were going to make available service to eVTOLs of your competitors, particularly I believe Archer. So where are you in that process? And secondly, as you think about the service opportunity,

Speaker 1

who

Speaker 9

are the people who you view as potential competitors, if any?

Speaker 2

Hi. Thanks for the question. Yes, indeed, we've been discussing with other eVTOL, but through the customers. Really, the focus here is to make sure that we have the first operation going with our customers and working on the inter to service. We also understand that a particular customer can elect various OEM, right, for their operation to be complementary, right, depending on the performance of the eVTOL.

Speaker 2

And so that's something that we entertain and that we are always willing to discuss. That's what we've been doing indeed with Archer. But we've been also doing on requested by our customers with other customers, but with other OEM. We fully understand that we're creating an industry. This is the novelty.

Speaker 2

So we understand also that the market there will be big enough so that we have several OEM and we want to create this industry and especially on the charging base for example. We're very in favor or having a common standard when it comes to recharging a device, for example, and just to give as much as capillarity of our power grid and the possibility to really get the eVTOL launch and ramp up as much as possible. So this is something that we're looking at and we keep having discussion with other OEMs indeed.

Speaker 1

And lastly, I mean, are

Speaker 9

you the only guy kind of with this major focus on service? Obviously, other guys are going to support their own vehicles. But are you the only one who is sort of taking this broader approach toward looking at servicing competitor vehicles?

Speaker 2

I think we're the only one that's been talking about it since the very beginning. As the whole industry is moving forward and eventually we'll get the certification that we pass that hype about the prototype flying around, I think it's natural. And now customers are the one also asking, well, how is the readiness of the ecosystem? So more and more, the industry market or anyone involved in the AAM is thinking about what's going to be look the enter into service. And this is why we're ready.

Speaker 2

We're at the back of obviously of Embraer and all the customer support and services experience for the last 55 years. So I mean it got to the point where we also have agreements with our suppliers, which is not only for the production prototype or the component prototype or the production, but it's also to ensure that we have the service and support operation ready. So this is something that we believe it's on our DNA. One thing is to talk about it. The other is to get ready for it and know what it takes to really have a reliable operation on a day to day.

Speaker 2

So I understand that Eve has the DNA for the customer support and services and it's going to make a difference very soon, very soon at the end of the service.

Speaker 9

Terrific. Thank you very much.

Speaker 2

Thank you, Guy. Thank you, Guy. Thank you.

Operator

The next question comes from Austin Moeller with Canaccord. Please go ahead.

Speaker 10

Hi, good morning, Johan and Itu. Just my first question here on the SVAR. Does the 20 minutes of battery reserve for flight required by the FAA, which was less than the 30 minutes expected, benefit the TAM and potential routes for your aircraft in the U. S?

Speaker 7

So this is Luis Valentini. So about the 20 minutes, it's first, it's only applicable in the U. S, right? So other authorities, for example, EASA and even ANAC in Brazil are looking at different requirements. But we believe that for the urban mobility mission, which is our focus, the 20 minutes are not necessary.

Speaker 7

I think that the 20 minutes, my opinion and our opinion here at Eve is that the 20 minutes and the concept of having a general number of time for reserves is more applicable when you have, let's say, a less structured operation when you're flying in distant areas, for example, where you don't know where landing sites will be available. In our case, with the urban mobility missions or sightseeing missions, for example, that we are prioritizing, you will have a more well known environment where you'll be flying. And that's why I mentioned the possibility of approving routes, the operators doing that, which then will make you use predetermined landing zones and not use the 20 minutes. So you don't have to keep that much energy on the battery. So for you to have a reference, our whole missions today are expected to last approximately 20 minutes, right.

Speaker 7

So it's not necessary to have another full mission of energy and the battery, you can use these predetermined areas. And I'm giving just a reference of the time, the duration of each mission, right. So of course, each one will have a different duration, but just to have a feel for how much 20 minutes means. And so that's why we think that again for the urban mobility mission, which is our focus, it's more reasonable to use the pre approved routes and the predetermined landing zones than the 20 minutes. We think that makes more sense.

Speaker 10

Great. And just a follow-up, have you had any new conversations with potential customers in the last couple of weeks about their orders coming over to your book now that there's been a recent shakeout among competitors?

Speaker 2

Good. Thanks, Austin. We're always discussing we have we're flushing out our pipeline on a regular basis. We announced also the arrival of a new CCO and she's coming with a lot of energy and definitely eager to talk to our old customer base, which we've been doing with our team of BDs. This has been a natural.

Speaker 2

I mean, it would be weird for a BD, the team of hunters, as I call them, not just going after every single opportunity and being in touch with the customer base, the broader one and even the one that is closed for OEM, other OEM for the moment, the EV toll. So I can tell you that, yes, we're on a hunting base. We do talk to all of the EV toll, let's say, prospects, right, including the one of OEM that, yes, that might not be in the market for long or just happen to go bankrupt. So or file for insolvency. So, yes, this is part of the DNA.

Speaker 2

We want to be present, especially on the urban mobility, right? This is what we're focusing on, on the shuttle, from point to point sightseeing and this is what the team has been doing definitely.

Speaker 10

Fantastic. Thanks for all the details.

Operator

The next question comes from Amit Dayal with H. C. Wainwright. Please go ahead.

Speaker 7

Thank you. Good morning, everyone. Good to see the liquidity position continue to be strengthened. I just want to touch on the TechCare offering again. I know you've already provided some color on it, but what is the significance of launching this offering almost 3 years ahead?

Speaker 7

Is there any monetization that we can expect to take place? If you could just lay out what are the milestones for the TechCare offering are from here over the next 2, 3 years as you get ready for operational launch, it would be helpful to just understand what you're trying to achieve with this today? Thank you.

Speaker 2

Great. Thank you so much. Thank you. I think it's super important. It's all about the ecosystem, right?

Speaker 2

And one important part of this ecosystem is definitely the support and services. What will make this eVTOL operation work? As I mentioned before, it's to make sure that we have the availability, the reliability. This is what we've been building, which is what we're developing, making sure that's the right aircraft for our customers, right? So and I think building on this, the Internet service, preparing the entry into service to be a success is the key.

Speaker 2

And you don't do this, whether it's the ecosystem, but also part of the customer support and services, you don't do this the day before. You don't even do this. On the normal entry into service for an air model aircraft, you do a 12 month prior the first arrival of the aircraft at the operator's base. So you can imagine that the EV Tahoe, we're going to be ready now to engage the customer, to engage the stakeholders. And that's why we've been launching this platform to tell the customers that we are preparing the operation.

Speaker 2

This is all about the EAST Take Care is the whole solution. It's the customer support. You want to make sure you have your train and your technicians around the world. So at least you know at the first operation with a startup team, when the operator will start operation, whether it's going to be in Brazil, it's going to be the U. S, you want to have deployed your team.

Speaker 2

You want to make sure you have the technical solution. This is not trivial, but you need to have a 24 hour customer care center. I mean, with trained people, with a process, IT system that works. I know it sounds obvious, but it's not. When you're going to be 24 hours and you're going to be flying those vehicle, 1,000 hours a year.

Speaker 2

This is what we're looking at. We're going to be flying some 4,600 fly cycle a year. This will work, eVTOL will work and we believe it will work with a high utilization vehicle. And high utilization makes sure that you have the reliable aircraft. You need to have the material, the battery solution, right?

Speaker 2

The MRO also, it's going to be low maintenance obviously, but still you need to have your technician, the fly off solution. And last and not, the least is definitely the training services. And this is exactly why we announced this contract on the services. You want to make sure that you have your simulators and all linked. And this is why Valentini just explained how important it is to have the S-four is taking us to the next step.

Speaker 2

And we know now where to go, but and this is why we just announced on the 31st October the contract with ECTS, the Embraer CAE, a training services, which is really is going

Speaker 1

to be also planning for

Speaker 2

the training of the pilots, aircraft pilots, but also the maintenance technician and the ground handling personnel. I mean, this is something that you need to be ready now. Otherwise, we are running the risk and then we say we as the industry running the risk just to work on our certification, focus only on a certification and by the time that you would get the insurance service, you're absolutely not ready for the operation. And this is the worst thing that could happen. Then you deliver those dozens of the hundreds of EV tolls in the 1st year and then you're going to be grounded because you don't have the right technician and the right material or distribution, which is by the way, it's way more capillarity than an aircraft operation.

Speaker 2

You can fly your aircraft across a continent or multiple states in the U. S. To get your maintenance done. That's not the case for EBITDA. So this is something that we're preparing right now.

Speaker 2

Customers understood this. That's just why they want to buy from us, but there is the service and support. And this is why also we wanted to give a name to this suite of solution, which is the TechCare.

Speaker 7

That makes a lot of sense. Good to see you thinking so far ahead. My other questions have been asked. I'll step off the queue and follow-up offline. Thank you so much.

Speaker 2

Thank you. Excellent. Thank you, Arthur.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Lucio Alworth for any closing remarks.

Speaker 1

Thanks, Lacy, and I wanted to thank everyone who joined the call today. As you can see, we accomplished several important milestones this past quarter. We're fully engaged and we continue to progress on our suite of products and services for the UAN market and there is a whole lot more to come in the next few quarters. So we're going to continue updating you on our progress throughout the next few quarters and we look forward to meeting all of you in the upcoming events we're going to participate in the next few months. As always, if you have any questions, don't hesitate to reach out to our team.

Speaker 1

Thanks, and have a good day.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Waystar Q3 2024
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