Earnings Call Transcript - EVEX Q3 2022

Operator, Operator

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

Lucio Aldworth, Director of Investor Relations

Thank you, operator. Good afternoon everyone. This is Lucio Aldworth, the Director of Investor Relations at Eve. And I wanted to welcome everyone to the third quarter of 2022 earnings conference call. I've got here with me, Co-CEOs Jerry DeMuro, and Andre Stein, as well as our CFO, Eduardo Couto. After the initial remarks, we're going to open the call for questions. We have prepared the deck with a few slides and additional information. And this is available at our Investor Relations website at ir.eveairmobility.com. So please download it for your reference. Now let me first start by mentioning that this presentation includes forward-looking statements, or statements about events or circumstances that have not yet occurred. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business and our future financial performance. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things, general economic, political, and business conditions, both in Brazil and in our market. The words believe, may, will, estimate, continue, anticipate, intend, expect and similar words are intended to identify forward-looking statements. We take no obligations to update publicly or revise any forward-looking statements because of new information, future events, or other factors. In light of these risks and uncertainties, the forward-looking statements and circumstances discussed in this presentation might not occur. Our actual results could differ substantially from those anticipated in our forward-looking statements. With that, I will now turn the presentation over to Jerry. Jerry?

Jerry DeMuro, Co-CEO

Thank you, Lucio. And thanks to all of you for joining us on the call today. We've had an eventful quarter and have a number of significant events which we will talk about this morning. They include things like major additions to our partnerships, a very successful simulation in Chicago, continued growth of our backlog, and progress in our product development. Importantly, we've also reached an agreement with the Brazilian National Development Bank to significantly enhance our balance sheet. We're doing that through a financing vehicle that is completely aligned with a foundational reason and the core values of this business, reducing carbon emissions and sustainable environmentally-friendly transportation. Edu Couto, our CFO will discuss the terms in more detail in just a bit. First, I'd like to talk about a new partnership, which we announced with United Airlines on September 8. United is one of the largest and most recognized global carriers in the world. They are also a long-term client of Embraer, and this will be a strategically important partnership for Eve. It adds to our partnerships with fixed wing and helicopter carriers, rideshare platforms, propulsion and battery management companies, as well as technology providers and infrastructure Vertiport operators. This will help Eve scale the UAM ecosystem on a global basis. United has invested $15 million, which will go directly to help fund the development of this UAM ecosystem. United is now our largest client with the potential for 400 orders. This gives us an important foothold among one of the main U.S. global carriers. It will also be strategically important as United's standing in the entire flight and aviation arena will help us build out the UAM ecosystem. Andre will talk a little bit later about our Chicago CONOPS in which United participated. Next, I mentioned earlier that we had grown our backlog significantly. As you can see from this slide, we now have letters of intent for almost 2,800 vehicles and a backlog that would equate to over $8 billion, certainly well over our first four years of projected production. In addition to United, Eve has signed with Blade India FlyBlades, an undisclosed customer for another 700 new aircraft. We have also added strategic partners to help us develop our UATM platform and have signed LOIs with Halo, FlyBlade in India, Skyway Technologies here in the Americas, Bluenest in Europe, and Volatus in the United States. So you can see we're also moving out on a global basis with our UATM, that's Urban Air Traffic Management software platform. We continue to take a holistic approach. And with our simple design and Embraer backing, we now have the largest order book in the industry, as I said, with almost 2,800 LOIs for vehicles. Some of our clients are also investors in us, so their interests are completely aligned with UAM development, and we have a long-term relationship. We also have the most diversified order book, with now well over 25 clients, with United being the largest. No single client represents greater than 15% of our backlog. We cover all sorts of industry types as I mentioned before. We have helicopter operators, fixed-wing operators, lessors, ride-sharing platforms, and even a defense alliance with BAE Systems. Regionally, we have the largest exposure in the United States with a little less than 50% coming from North America. But we have global distribution and we touch just about all of the populated continents around the globe. Now, as I mentioned earlier, we announced today a new source of liquidity for our aircraft development and certification with the Brazilian Development Bank. I will ask Edu Couto, our CFO, to provide some detail. Edu?

Eduardo Couto, CFO

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

Andre Stein, Co-CEO

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

Eduardo Couto, CFO

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

Operator, Operator

Thank you. Do we have any questions that were emailed in?

Lucio Aldworth, Director of Investor Relations

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

Operator, Operator

Thank you.

Andre Stein, Co-CEO

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

Eduardo Couto, CFO

Maybe you're talking about the BNDES line, Lucio? I think it's a good question from Lucas. These lines financed from the Brazilian Development Bank are perfect for our structure. It really fits our business profile because it's long-term; it's a 12-year term. Additionally, we have three and four years of grace periods. It depends on the line; one is a three-year grace period, the other is four. It means we don't have to pay an amortization for three or four years, depending on the line. We only start to amortize these loans in the fourth or fifth year, which is very good. We will need the next three years to certify our vehicle and enter service, and then when we start to amortize our debt is exactly when we will be generating revenue delivering eVTOLs. So this is a significant support from the Brazilian Development Bank, almost $100 million, very long-term, and it creates immense value for our shareholders, combined very well with the $400 million we raised in equity during our IPO in May.

Operator, Operator

Are we ready to move on to the phone questions?

Eduardo Couto, CFO

We have further questions, operator.

Operator, Operator

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

Savanthi Syth, Analyst

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

Jerry DeMuro, Co-CEO

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

Andre Stein, Co-CEO

Sure. We are considering working towards our airports, advancing in our operations, maturing the vehicle entering more into manufacturing, and finalizing supplier selections as we anticipate going into service. Additionally, we are working to release the entire ecosystem. We have partners that develop the vehicles as well, and it's a significant aspect of our strategy.

Savanthi Syth, Analyst

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

Jerry DeMuro, Co-CEO

Yeah, your line's breaking up. So - Stein, you want me to take that one?

Andre Stein, Co-CEO

Yes.

Jerry DeMuro, Co-CEO

So, Savy, thanks for the question. As mentioned earlier, we've done an extensive amount of work with our partner Porsche, not only looking at the site but also the global supply chain and the delivery mechanism, which will be equally important, given the likely adoption of this on a global basis. To answer your question specifically, by the end of this year, we expect to be through all of the permitting processes, and have begun the initial development of the facility, which will likely be co-located with one of the Embraer facilities specifically. But that permitting will take a little bit of time. The major construction and reorganization of those activities will occur in 2024. Notably, we're going to build the facility on a modular basis, which will allow us to scale very economically. We can discuss more about that later.

Andre Stein, Co-CEO

Certainly. So that strategy of building on a modular basis allows us to grow together with the market without excessive CapEx investments in the early years. This has been one of our key premises and part of the work we've done with Porsche.

Savanthi Syth, Analyst

That all makes sense. Thank you very much.

Operator, Operator

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

Ellen Page, Analyst

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

Jerry DeMuro, Co-CEO

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

Andre Stein, Co-CEO

Absolutely. As part of our efforts to understand the market, we have been modeling and developing tools in collaboration with MIT for several years, even before we spun off from the main company during the incubation period to analyze the market in different ways. The conception of operations validates points such as time for passengers, not only the flying time but the entire passenger journey, which helps us reassess the market and add that to the equation. What was different from Chicago and Rio was the use case we're looking at which included shuttle routes. In Chicago, we expanded our route opportunities to include commuting routes from downtown to two different suburban Vertiports, focusing on infrastructure levels.

Andrew Stein, Co-CEO

Among other things, we also looked at different levels of infrastructure. So we're flying for an average port with a high level of existing infrastructure with an SBO, while in others, where the setup might just be a slab of concrete. While conducting this, we are not verticalizing vertiports; that's not the point. This understanding helps us analyze not just air operations but also ground operations. We also integrated medical facilities into the simulation by partnering with drone manufacturers to operate out of the same Vertiport, utilizing our air traffic management software to enhance operations for both eVTOLs and drones.

Ellen Page, Analyst

That's helpful, Thank you. Can you also discuss a bit about your LOI with Bluenest for the UATM? What are the key opportunities there?

Jerry DeMuro, Co-CEO

I'm sorry, could you repeat the name of the customer?

Andre Stein, Co-CEO

LOI with the UATM, Jerry.

Ellen Page, Analyst

Yeah, the Bluenest?

Jerry DeMuro, Co-CEO

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

Andre Stein, Co-CEO

Yes. So we are developing the infrastructure for urban air traffic management. This infrastructure is applicable for the regulatory authorities, but also for operators and Vertiport operators, allowing us to deconflict airspace at the vertiport level, enabling us to assure efficient ecosystem development.

Jerry DeMuro, Co-CEO

I would also add that Bluenest is in Europe. We're trying to look at a global footprint. You see Blade; we have some North American operations, and we will be announcing more in the near future around the globe. So Bluenest also provides us a European presence and an understanding of unique features of those markets as well.

Ellen Page, Analyst

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

Operator, Operator

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

David Zazula, Analyst

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

Jerry DeMuro, Co-CEO

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

Eduardo Couto, CFO

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

Jerry DeMuro, Co-CEO

Thanks for the question, David.

David Zazula, Analyst

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

Jerry DeMuro, Co-CEO

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

Andre Stein, Co-CEO

No, Jerry, I think you covered it.

David Zazula, Analyst

Thank you very much, guys. Happy holidays.

Jerry DeMuro, Co-CEO

You as well.

Operator, Operator

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

Marcelo Motta, Analyst

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

Jerry DeMuro, Co-CEO

Marcelo, thanks for the question. I'll turn it over to Edu. We will come up with a more precise forecast, but as I mentioned in response to David's question, I expect our cash burn next quarter to be roughly double from where it is today. Edu?

Eduardo Couto, CFO

No, you're right, Jerry. I was just going to say that these investments are mostly for the eVTOL development. Of course, eVTOL service and support and urban air traffic management incur minor costs related to the facility manufacturing facility itself. Next year, those investments will be minor.

Jerry DeMuro, Co-CEO

Yeah. The investment in production facilities will be very modest next year, with a significant uptick expected in 2024 as we begin to address those needs. With respect to the commercial campaign, there's a number of initiatives happening. We are quite fortunate that there's considerable demand right now for signing on an LOI basis. However, we will focus on strategic customers and locations, similar to United, that bring the same leverage and capability globally.

Andre Stein, Co-CEO

You got it right, Jerry. We are getting closer to defining our strategic industry engagements. We have a clearer view on the amount of production we need for the early years. We have been working with different partners and through this concept of operations to better understand the needs of each site and city. That is our main focus—ensuring that our first years of production are all planned out, including customer designation, infrastructure requirements, and partnership support.

Marcelo Motta, Analyst

Perfect, thank you very much.

Jerry DeMuro, Co-CEO

Thank you, Marcelo.

Operator, Operator

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

Marvin Fong, Analyst

Good morning. Thanks for taking my questions and congratulations on all the progress in the past few quarters. A couple of questions at a high level, domestically with the FAA; I think we've seen updates and changes to their certification process for eVTOL. I'm curious if you could comment on ANAC and how your discussions with them are going? Are they more consistent with their view on certification? Additionally, could you touch on the development milestones or certification milestones expected for 2023? Do you expect to get your G-1 paper in 2023, and the outlook you provide would be great.

Jerry DeMuro, Co-CEO

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

Andre Stein, Co-CEO

Sure. Mode of information G-1 is expected for 2023. We have been working with ANAC on several things, discussing with FAA how we can develop a validation process, which has been our strategy from the beginning. Now we need to formalize that, and that’s what we are doing with both organizations. We have been in constant meetings to define consistent requirements expected between the two. We are expected to submit our formal application by the end of the year now, and we are looking for an answer from FAA pretty soon. This is putting us on the right track. Next year, we will closer to FAA and find a clear path to following certification authorities, which is important too given the global market.

Marvin Fong, Analyst

Terrific. Thank you for that update. Just one other quick question if I may. Just the update: I understand most of your incremental cash burn will be on development and R&D. So, should we consider the SG&A line of about $7 million as a good run-rate going forward? And should we consider that the additional expenses will primarily be R&D-related?

Jerry DeMuro, Co-CEO

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

Marvin Fong, Analyst

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

Jerry DeMuro, Co-CEO

You as well.

Operator, Operator

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

Lucio Aldworth, Director of Investor Relations

All right. Thanks, Jerry. And thank you, everyone, for joining us today. We look forward to updating you on continued progress throughout the year. Please don't hesitate to reach out if you have any additional questions; you can reach out directly to me. For those celebrating Christmas, Merry Christmas and a Happy 2023 to everyone. Thanks, and have a good day.

Operator, Operator

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