Greetings, and welcome to the Eve Air Mobility Second Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Lucio Aldworth, Director of Investor Relations.

Thank you, operator. Good morning, everyone. This is Lucio Aldworth, the Director of Investor Relations at Eve, and I wanted to welcome everyone to our second quarter 2023 earnings conference call. I have here with me co-CEOs, Jerry DeMuro and Andre Stein, as well as Eduardo Couto. After their initial remarks, we are going to open the call for questions. We have a deck with a few slides and additional information that is available on our website at ir.evemobility.com. Please feel free to download it and follow through the presentation. Let me first say that this presentation includes forward-looking statements or statements about events or circumstances that have not yet occurred. We base these statements largely on our current expectations and projections about future events and financial trends affecting our business and future financial performance. These statements are subject to risks, uncertainties, and assumptions, including, among other things, general economic, political, and business conditions both in Brazil and in our markets. Words such as believes, may, will, estimates, continues, anticipates, intends, expects, and similar words are intended to identify forward-looking statements. We undertake no obligation to update publicly or revise any statements because of new information, future events, or other factors. In light of these risks and uncertainties, the future events 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?

Thanks, Lucio, and good morning, and thank you to all for joining the call today. Over the past few months, we have continued to make meaningful progress on our eVTOL development and the other aspects of our overall business plan. As announced at the Paris Air Show, we progressed to the point in our optimization work that we have now defined what we consider to be the final aircraft configuration, which is depicted here. I will discuss a little more about the details of that configuration on the next slide. We have reached this point in our development program by applying the findings most recently from the wind tunnel testing and a suite of test rigs, which provide actual performance data to validate our simulations and predictive modeling. Stein will talk a little bit more about these tools that we have used in our development process later. Importantly, we have now identified suppliers as well for several long-lead aircraft subsystems. They include the electric motors, the energy and storage management systems, and the propellers. We plan to select and announce the providers for avionics, actuators, and flight control systems in the next few weeks. We also have some late-breaking news, which we would like to talk about, and that is that the FAA has agreed to recognize the primary certification and a certificate process through ANAC, which will allow us to do the dual validation, which is so critical to our development program. We still expect that our certification basis will be approved by ANAC in this calendar year. I would now like to discuss a little bit more about the final design configuration as shown here on Slide 3. It includes a new empennage fixed to the center booms that are then attached to the wings, providing a more robust physical structure. It also includes one pusher with dual motors or redundant motors and eight lifters, which benefits both weight and safety of the vehicle. The DNA of our simple lift and cruise design remains unchanged. It is designed for efficient and safe travel and targeting 99% of urban missions. The cabin will continue to house up to four passengers and a pilot. We continue to refine the cabin structure based on the mockup we unveiled to investors earlier this year and have taken on a worldwide tour to get customer and user feedback. Based on that feedback, we have made various enhancements, including the baggage compartment, which we believe continues to be the best in class and is particularly adapted for airport downtown shuttle services. With our main suppliers known and specifications for those components defined, we can now start to assemble parts for our full-scale production prototype. We will begin assembly of that prototype by the end of the year and, in fact, have already started to cut components, and then we will begin the test campaign sometime next year. Now moving to the next slide. We announced at the Paris Air Show the selection of several of our main suppliers, BAE for the energy management and energy storage systems, Duc for the propellers for both the pusher and the Lifter, and Nidec Aerospace, which is a joint venture between Nidec Corporation and Embraer for the electric motors, which will be bespoke for both the lifters and the pusher. As you may recall, selecting suppliers was one of the main milestones we established for 2023, and we continue to be on track with that milestone. As I mentioned earlier, achieving this will allow us to start building our first prototype. Recently, we received tooling and began cutting material for the wings, which you will see on the next slide. Last and certainly not least, I want to mention the announcement made last week regarding Johann Bordais joining Eve as our CEO effective September 1. Johann currently serves as the President and CEO of Embraer Services and Support, having built that organization from the ground up into a $1.3 billion global enterprise, which is one of Embraer’s most successful businesses. Johann is a well-known quantity and a perfect fit for this role. Eve's vision is to not only design and develop a groundbreaking aviation product as well as a global support network but also to develop a sustainable urban air mobility ecosystem that will literally transform urban transportation on a global basis. Achieving these ambitions will require an incredible amount of talent and innovation. Having accomplished our initial goals of establishing Eve as a public enterprise and bringing that enterprise into practice, we are now going to focus on the immense challenge in the next phase and have added a very talented and seasoned executive to complement the existing team. This addition will also allow Stein, who will remain with Eve as our Chief Strategy Officer, to increase leadership and focus on the diverse elements of operations, infrastructure, and regulation that are absolutely essential if we are to make UAM a reality. I will remain with the team through the end of October to support Johann’s transition. In parallel, Ken Ricky has announced his intention to resign from the Board in October, and it is intended that I would replace him at that time. I would note that this change in leadership is actually taking place now versus later in the year so that we can ensure a seamless transition of responsibilities and there is absolutely no rush moving forward. Now I would like to ask Stein to provide you more details on other important developments in the last quarter.

Thanks, Jerry. We are excited to announce that we have just celebrated the completion of the first carbon fiber laminate material for our first eVTOL prototype as we plan to start assembling it now in the second half of the year. We continue to make important advancements in our development process. We continue to work in our dedicated rigs to test different modern propeller configurations under various conditions. This also uses to stress test and measure vibration in the entire system, sound profile, and other metrics. We have also built and are running a truck mountain rig designed to travel down the runway and simulate the vibration and aerodynamic drag of the rotors under real-life conditions, which is used to validate and refine our modeling of rotor performance. Lastly, we are employing a series of additional rigs for batteries, motors, and thermal management tasks that permit extensive independent testing of discrete subsystems. Again, this part of our testing protocol involves testing different components separately, allowing for a quick and relatively inexpensive development process. We can easily swap parts and change component configurations to find our optimal solution. This would not have been possible had we already committed to a prototype plan. Now on to Slide 6. Perhaps as importantly, we selected a few weeks ago our initial factory, which will be in Brazil. We announced last year, after extensive studies, our intention to optimize our industrialization strategy, which has led us to the month of our initial facility in Brazil. We have now defined the site in Taubate, in the state of São Paulo. We are going to expand one of Embraer’s units, and the image shows the existing building highlighted in red. The site is strategically important, with easy access to major highways and a railway. It is also close to Embraer and Eve’s headquarters in São José dos Campos, facilitating the development and sustainability of new production processes and reinforcing our agility and competitiveness. On top of that, this will be a cost-efficient way to maximize synergies with product development and experience and resources from Embraer. Slide 7 shows that we currently have what we believe to be the largest and most diversified backlog, by number of customers and regions, in the industry today. We have announced LOIs for 850 aircraft from 28 different customers spread over 14 countries and cover various business sectors, from mainlines to regional airlines, helicopter operators, ride-sharing platforms, and leasing companies. We also have LOIs to offer our Uber air traffic management systems from nine customers, not to mention our portfolio of services, which is an integral part of Urban Mobility solutions and our discussions with customers. We believe this reflects the state-of-the-art value proposition we bring to our partners and their clients. There is more to come on that front. We believe this pipeline offers strong long-term revenue visibility, helping to smooth cash flow consumption in the years to come as we start converting the existing letters of intent into firm orders and collecting pre-delivery payments, known as PDPs. Beyond that, we are developing a strong network of partners in areas such as infrastructure and energy to address one of the largest challenges ahead of urban mobility, which is to create a whole new ecosystem beyond simply developing an aircraft. As part of this effort, we have started to announce together with our customers, our focus cities where we will be accelerating these efforts: San Francisco with Airlines in the U.S. and Rio with Helisul in Brazil. More to come on that front as well. Now I would like to invite Edu to discuss our financials and next milestones.

Thanks, Stein. Now moving to Slide 8. It is a preoperational company, and our financial results reflect mostly the costs associated with the development of our eVTOL. Starting with income statement highlights, we invested almost $22 million during the second quarter of 2023 in our program development versus $10 million a year ago. The majority was invested to develop our eVTOL and a portion in Service and Support Solutions and the Urban Air traffic management system. In addition to development expenses, we also deployed $7 million in SG&A this quarter compared to $16 million last year. Importantly, last year, we had several IPOs and other nonrecurring expenses. Excluding those, our SG&A expenses are actually growing as we increase our corporate structure together with the program development. Eve also reported around $7 million in non-cash expenses related to the mark-to-market of our warrants as our shares increased during the quarter, and we also had $4 million in financial revenues during the second quarter, mostly due to the financial return of invested cash as interest rates are higher. We have a very conservative financial policy, keeping our money invested in short-term deposits with major banks. With that, we reported a net loss of $31 million in the second quarter of 2023. Now moving to cash flow. Our operations consumed $28 million in the quarter versus $20 million last year, mostly driven by the higher R&D expenses in the agreement with Embraer for eVTOL development. In total, our cash consumption in the first six months of the year was $48 million. This is more than twice the $22 million from the first semester of 2022. This increase was already expected and shows higher R&D efforts. With that, we ended the second quarter with $269 million in cash, and when we consider the standby credit line from the Brazilian development bank of around $100 million, which we plan to start accessing now in September, our total liquidity exceeds $370 million, and it is enough to fund our operations into 2025. Finally, Slide 9 summarizes our short-term milestones, and we want to reaffirm our commitment. As mentioned before, we concluded the first two milestones, selecting primary suppliers for critical components of our aircraft and freezing the configuration of our eVTOL. We have also started manufacturing some of the individual components of our first prototype and should begin assembling these individual parts later this year. With that, we plan to initiate the test campaign next year. We also continue to work on the trial software of our urban air traffic management system. Lastly, we reaffirmed our total cash consumption between $130 million and $150 million in 2023, which is a result of all our development efforts.

Our first question comes from the line of Savanthi Syth from Raymond James.

This is Matt filling in for Savanthi. First, congrats to Stein and Jerry alike. I’m leaving the company thus far in the new roles. And Jerry, I believe this will be your last call, if my calendar is correct. So thank you for all the knowledge on the way, and we have really enjoyed speaking with you. That being said, for my questions, with the aircraft configuration now set, do you have any early thoughts on what the aircraft performance specifications and production or operating costs will look like, or is that more of the event after you finalize more of the suppliers?

Good question, Matt. First, thank you for that on behalf of Stein as well, and I will turn it over to him. We are still targeting the same high-level numbers that we have been advertising since inception, roughly the 100-kilometer range, etc. I will pass it over to Stein for a little more detail, if you like.

Absolutely. That is the message. We are on track now with more confidence that the goal set for the aircraft is feasible. We are targeting 100 miles of maximum range. We are discussing a pilot with four passengers and their carry-on on board. So that’s all in good place, and we are moving forward with that. There was no change. The configuration is closed now. We have been working with it for a while. We just opened and closed as we selected the motors. That also gives us more comfort to talk about it with an actual supplier in place. That makes a lot of difference, both for the motors and for the batteries. So we keep moving with confidence that we are on the right track.

And then maybe for Edu or whoever may want to take it. Now with more of the main suppliers selected, are you able to discuss at a high level how those agreements are set up and when we could expect certain deliverables and payment timing to it?

Yes, as you mentioned, right, Matthew, we signed the primary suppliers, right? We are finalizing some other key components in the short term. Those are, of course, long negotiations, right? They may require some payments from the lead side. But those payments are highly connected with the eVTOL development, right? We pay part of the development from some suppliers, and this payment is connected to different phases of development, right? The more we progress, the more we advance, we make those payments. All of that is already included in our short-term forecast. We feel comfortable with the cash level we have planned, along with cash projections for, I would say, well into 2025.

So basically, no real non-recurring cost timing or lumpiness? Should we consider it more as you progress?

Yes. Matt, I think just to highlight what Edu said, if you look at our cash burn in the first half versus the second half, you will notice an increase in the second half, and that is directly attributable in a major way to stepping up the development program with the vendors and supplier payments. The product deliveries really won’t be until well into next year. So that is one of the main reasons for the increase in cash consumption from the second half over the first half. The second issue, which we are working very aggressively to manage cash, is the beginning of the industrialization of the Taubate site, as Stein alluded to. So those are the main drivers there; however, payments related to product will be more in next year than this year. We are still developing.

And Matt, if I may complement your question, I didn’t mention the operational costs that you also asked. So the performance, the selection of the suppliers and the configuration helps us be comfortable with how much it is going to cost to operate the aircraft. Our internal analysis shows that we have a clear advantage against competitors, at least double-digit advantage concerning cash operational costs. And again, with the suppliers, the performance, and even the cost of goods sold becoming more mature, we believe we are on the right track in this area as well.

And our next question comes from the line of Cai von Rumohr with TD Cowen & Co.

Jerry and Stein, great work. In air transport programs, it is not unusual to have pay-to-play provisions for the suppliers contributing to the development, and sometimes they get paid after the articles are actually delivered to end customers. I know you are not going to talk about individual agreements. But can you philosophically give us a little more color on how those agreements are structured and what they imply in terms of cash contributions from suppliers and cash flows?

I will give a very high level, Cai. The typical launch assistance, we are staying away from that. But these agreements are comprehensive. They cover the development phase, the production phase. To date, each of them addresses the aftermarket and how we will manage the support to the aircraft and customers after that. Other than that, though, the development and production are set up pretty traditionally, as you might expect in any product manufacturing, with little, if any, real, what I would call, launch assistance. Stein, do you want to expand on that at all?

You touched the main points, but the rationale here is not to get any surprises in the aftermarket. We are really cautious about how we are set in that deal. To deliver back to my previous questions, we aim to produce an aircraft that is a leader in the market in terms of cash operational costs. There is always a trade-off there, and we are very savvy about it. Given our own experiences from previous programs, it is something that we bring from the development team.

And I think you mentioned, Stein, that you believe you have an operating cash operating cost advantage versus competitors. Can you expand on that a little bit regarding what the range of magnitude might be?

Sure. The rationale behind it is our simple design; there is a reason we decided to go so compact, avoiding complexities that increase maintenance costs. Our performance being tailored towards urban mobility—there's no freelancing. When you add this simplicity of design, there’s a performance base we reside on that is designed explicitly for a given mission. You add our understanding of design for maintainability and manufacturing, and we are taking quality steps with suppliers to ensure that we have a competitive aircraft. Our internal analysis shows that we are on the right track to create that differentiation. It may vary from operator to operator—maybe in some cases around 10%, in some cases 15%, and in others a bit less—but there is a clear advantage there, based on simplicity of design, designated for operation, and maintaining a reliable aircraft, which helps with increased utilization and reduces operational costs while keeping the user experience in mind. That’s how we are reaching that.

And one other question. With Johann joining, you get additional support expertise. I think your initial IPO plans called for roughly 45% of revenues to come from service and support. Can you provide insight into how you intend to build up the support effort? I assume that is going to be the earliest revenues you will recognize.

Cai, I will probably turn this over to Stein. I’m not sure we accept your characterization that we will be substantially behind others. There is quite a bit to be accomplished, as you know, to get these products through certification and then into operations. Without mentioning a specific competitor, when you look at their business plans, they aim to deliver a handful of these products in the first couple of years. So I’m not sure that material difference is going to exist. Having said that, I think you are exactly right that this team with the experience supporting aircraft around the world is focused on that part of the role. Stein has been highly involved with the teams. He mentioned the launch cities, and quite a bit of planning is going into that. And that is also one of the reasons we’re bringing the expertise level that we are. Stein?

I completely agree that the perception that we are coming after our competitors is not accurate. Our ramp-up plan is sound. It is not extreme that we are going to deliver thousands of aircraft in the first year. We are planning to deliver enough aircraft to create a solid market position. In terms of service and operational solutions, beyond the experience and assets we have with existing infrastructure, we are combining that with the discussions of initial cities where we can develop an existing infrastructure pre-existing from Embraer’s networks. This helps us achieve our network without requiring an incredible amount of CapEx initially. This is a clear advantage, and we hold many lessons learned on how to deliver effectively. Johann has been running that organization since its inception. His expertise will be tremendously valuable.

And our next question is from Jonathan Koutras with JPMorgan.

Jerry, Stein, Lucio. Now that we have primary suppliers named and the test campaign will begin early next year, when should we expect the LOIs that constitute a significant backlog to be converted into firm orders? Is this something we can expect once the prototype is completed, mid to late next year? Or am I thinking about it wrong?

If I may, Jerry. The two things are not directly related. The definition is more related to us maturing the development of aircraft, something we said from the beginning. We are doing the things in the right order concerning prototypes and so on, not flying too early just to show to the market. When it comes to that confirmation, it is exactly the work we are doing now on really getting this backlog we have and working for our customers to better understand their business cases, where the craft will be deployed, what type of infrastructure needs to be there, and what they need from our program as well. The confirmation we have now on supplier selection is a very key milestone because that allows us to have the right visibility in terms of both performance and costs, as mentioned before. So these are the key drivers for us to start converting this backlog into real orders. Jerry, not sure if you want to comment anything else there?

No, I think you are exactly right. While the two are not necessarily contingent on each other, the time frame you mentioned is probably realistic. The priority, as Stein said, will be first with our launch cities and launch customers to convert them, and then we will move through the balance of the backlog. We are working right now to fill the first two-year production slots. They will be the priorities as we move through the first half of next year. By that point, I think you will see some of those early ones converted, and then we will move through the balance.

And our next question is from Sheila Kahyaoglu with Jefferies.

Congratulations, guys. I wanted to talk about suppliers again and just the configuration of the Eve call. As you pointed out on Slide 3, you have made some finalizations and refinements. Can you point out the most significant change? And what is left, if anything, on the configuration, or is this final?

Good question, Sheila. We have with us today our Chief Technology Officer, and I think Stein can probably give you a high level. We expect some further refinements, though, as we go along. We still have another set of wind tunnel tests on the horizon, as well as those test rigs. There may be some minor tweaks of the wing, etc. Stein, would you like to speak to that?

Sure. The configuration of where the posture is, what you see, is what is defined. We have been working towards that for a while now. What we disclosed in Paris was timed together with the selection of the particular motors. So we could ensure there is a real offer for us to move ahead. We don’t expect anything visually different. However, we are fine-tuning the shape of the wing and the shape of the blades of the propellers, the interactions of the systems, the noise profile of the aircraft to achieve a sound profile to optimize the battery consumption. That is an ongoing process. This level of refinement, along with our suppliers on board, is part of this phase of the project. The configuration as a whole is set. That was part of finalizing the current phase of the development.

Got it. And then on the suppliers, were they all competitive wins that you guys put out RFPs for? Did they already have these products on other eVTOL?

Absolutely. They were all completed. There was a robust funnel and an eventual down-selection process to the final vendors. Frankly, I think as you found in speaking with other eVTOL manufacturers, virtually every one of these solutions is bespoke to that particular aircraft, its configurations, and its performance requirements. Stein, do you want to add anything to that?

No, no, I think you said it all. We are on the right track with that, too.

And your next question is from Austin Moeller with Canaccord.

So regarding issues that other eVTOL OEMs will have when maintaining their aircraft once delivered to customers relative to Eve, which has access to Embraer’s global MRO shops and supply chain?

So Jerry, may I start? There are many issues related to logistics to manage the initial provisions and leasing of materials, for example, the parts, having the CapEx in place even for the physical locations where we have earlier access. The existing infrastructure and experience in understanding what comes first are vital. Logistics is one examples, particularly in a market like this, as operations will occur at the city level. We need to establish how to manage these efficiently. Therefore, working with our customers is critical. Many customers also have their own capabilities. For instance, in Paris, we also announced progress in discussions with Helisul in Brazil to delve into how the operational solutions will work there. It applies similarly for other operators. It is a combination of physical infrastructure, process know-how, and logistics that we bring from our experience in the industry.

And do you expect to collect PDPs after the first test sites are complete or closer to ANAC and FAA certification?

No, I think we both will say the same thing. It will depend on the conversion of the LOIs into firm agreements. But generally, the PDPs will start about 18 months before roughly 18 months prior to the delivery of the aircraft. As we hit milestones through certification, progress payments will increase.

And our next question is from Andres Sheppard with Cantor Fitzgerald.

And congrats to Jerry and Andre. I saw you in Paris at the air show. A lot of our questions have been asked, but perhaps I can ask one qualitative and one quantitative. On the qualitative side, I was curious about your thoughts on the recent FAA implementation guide published in late July. There is a lot of information there, just wondering what your preliminary thoughts are around that.

Stein?

Yes, we had a deep dive on that, and we have been talking with the FAA and our peers as an industry to discuss our understanding. Even in discussions with them, that was quite preliminary. Very similar to what you see in our current operations today with combustion engine aircraft, we need to demonstrate compliance with safety standards. We believe there are different ways to show that we comply with this required level of safety. For instance, in structural operations—since we take off knowing exactly where we need to go—we also know where our alternates are, unlike flying in an ad hoc manner where you need to decide on a safe landing location. The structural nature of operations means we have a different profile of operations. We need to apply the latest technology developments to ensure that pilots are adequately trained to be effective in operating our eVTOL. We believe there are alternative ways to assure the same safety level through various training methods and technology use that reduce pilot workload. This reflects the industry’s expectations. Our engagement within the timeline is in line with the public comment period, which is approaching.

And one last quick question for Edu. With the $370 million in total liquidity, which includes lines of credit, you are funded into 2025. You have said before that the certification process is expected to cost between $500 million and $600 million, which obviously you are well underway. I'm curious, how are you thinking about capital raising opportunities? There will be a point where, once you begin manufacturing and testing, and as you go through certification, I would expect you to consider some form of capital raising at that point. I'm interested in your thoughts.

Thanks, Andres, for the question. We are very well capitalized. We have this $370 million in liquidity. We have been working to start accessing this $100 million long-term standby facility from the Brazilian development bank starting in September. We are in very good shape. That will be beneficial as we control our cash consumption. However, with this line, our cash consumption should reduce further, since a good amount of our expenses for the second half of this year and 2024 will be financed through this long-term R&D line. Regarding CapEx, we are also discussing some forms of long-term finance. Overall, we are in strong shape. We do not plan any capital raising in the short term due to our high liquidity. We still have to draw from those finance lines, and we are going to start that process now. We feel comfortable.

Got it. Congrats on the quarter again, and I will pass it on.

And our next question is from Marvin Fong with BTIG.

Congratulations, and good luck on your next moves, Jerry and Stein. My question is a follow-up to what others have been asking. Now that you have selected several of your suppliers and have visibility on some of the others, are you still confident in your earlier estimates on what it would cost to build the eVTOL? Could you comment on what percentage of operating costs you have now secured since you have selected suppliers, especially since I believe propulsion is your largest operating cost?

Sure. To your point, it is indeed reassuring that key suppliers help us a lot to understand our future costs. More than the proportion assigned to it, actually the battery is critical in terms of its relevance to operational costs. Having a supplier in place means that we will not just use R&D partnerships. We've secured a contract, which gives us much more confidence in understanding our future numbers. We will not comment on the exact percentage that represents of our operational costs, but I can tell you it will also vary from country to country, depending on pilot salaries, mechanic salaries, and so forth. Battery representation is significant, akin to what fuel represented in internal combustion engines in earlier periods. Thus, securing these relationships empowers us to assess operational costs accurately.

We haven’t identified anything that would change our basic estimate regarding the cost of building the aircraft. Some costs may be a little higher, while others might be a little lower. It will depend significantly on volume, but we are not modifying the original forecast.

There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Thank you, Kamilla. We look forward to updating you on our progress throughout the next few quarters as we achieve our operating milestones and medium in the upcoming events we are scheduled to attend. As always, if you have any questions, please don’t hesitate to reach out to our team. Last but certainly not least, I wanted to thank Jerry and Stein personally for their friendship and contributions over the last few years. I’m positive we are only in the position we are in right now because of their leadership. So thanks to both of you, and best of luck. To everyone else, thank you for participating in today’s conference call, and have a good day. Thank you.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.