Joby Aviation, Inc.

Good afternoon and thank you for holding. My name is Joe and I will be your conference operator today. Welcome to Joby Aviation's third quarter 2022 conference call. At this time, all participants are in a listen-only mode. As a reminder, today's call is being recorded and a replay of the call will be available on the investor relations section of the company's website. Please note that some of the company's discussion today will include statements regarding future events and financial performance and statements of belief, expectation, and intent. These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For a more detailed discussion of these risks and uncertainties, please refer to the company's filings with the SEC and the safe harbor disclaimer contained in today's shareholder letter. The forward-looking statements included in this call are made only as of the date of this call, and the company does not assume any obligation to update or revise them. This call will also include references to the company's adjusted EBITDA, which is a non-GAAP financial measure. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure is included in today's shareholder letter, which is posted in the investor relations section of the company's website. On the call for management today are Joe Ben Bevert, Founder and Chief Executive Officer, Paul Sciarra, Executive Chairman, Didier Papadopoulos, Head of Aircraft OEM, and Matt Field, Chief Financial Officer. After the prepared remarks, we will open up the call up for questions. I will now hand the call over to Mr. Provert.

Good afternoon, and thank you for joining us. It's already been a full year since we started reporting our financial results, and I'm grateful for your continued dedication to learning about our progress. In that first call, we talked about our intention to deliver on transparency for our shareholders. And I believe we've lived up to that goal over the past 12 months, providing you with deep insight into each area of our business. And for the first time last quarter, providing a detailed stage-by-stage look at our progress on certification, which we've updated in today's shareholder letter. During this quarter, and consistent with that goal, We opened up the doors to our marina production facility as part of our inaugural field trip, which I'll talk more about later. A couple of days before that event, we unveiled our living lab terminal, which guests were able to experience at the field trip. The lab was developed in partnership with Skyports and is going to serve as a base for us to design the experience our customers will have when they arrive for one of our flights. This was just one of several steps we took this quarter to lay the foundation for our future commercial service. We also expanded our longstanding partnership with Uber. Back in 2020, we announced a groundbreaking deal to integrate our service into each other's apps in the U.S. We've now taken that agreement global, and with more than 100 million passengers traveling with Uber each year, we've opened the door to delivering seamless, multimodal journeys in international markets around the world. In October, we applied to the Japanese authorities for the validation of our FAA certification, building on a similar path we are taking in the UK. As with the UK, we can take advantage of the same certification work we will do with the FAA to streamline our certification in Japan. This marks another important step toward the international rollout of our commercial service. We also announced a groundbreaking partnership with Delta. We're incredibly excited to be working with the world's leading airline to deliver a service like no other. Alongside our standard airport to city operation, we'll be working with Delta to develop an elevated and seamless home to seat experience for their customers, fully integrated into the Delta ticket buying platform. Tens of millions of Delta customers fly through markets we're targeting each year. From New York and L.A. to the San Francisco Bay Area, South Florida, and London, our partnership presents a unique opportunity to anchor our service in those markets and grow out aerial ride-sharing networks from those cornerstone city to airport routes. We also see a great opportunity to work together on delivering the infrastructure required to bring our service to life. We share a vision of delivering a service where the distance from our aircraft to a Delta aircraft can be measured in steps rather than miles. And we're looking forward to bringing that to life by building on the incredible investments Delta has made in their airport terminals over the past few years. For example, in LAX, JFK, and LaGuardia, as well as by leveraging the deep relationships they maintain with local stakeholders. But sitting behind that service is of course our aircraft. So let me turn to the progress we're making on certification and manufacturing. These are really our core areas of focus right now and will continue to be for some time. As I mentioned at the top of the call, you can find the latest version of our type certification progress chart in our shareholder letter. But in brief, on stage two of the process, that means of compliance, We moved from 74% accepted by the FAA to 84%, which puts us in a strong position to be substantially complete with Stage 2 by the end of the year. In Stage 3, we submitted one additional area-specific certification plan during the quarter, bringing the total number to four. We also submitted our first equipment-level qualification test plan to the FAA during the quarter. This was a really significant moment for us and I'm pleased to say the plan has been accepted by the FAA. The qualification plan covers the flight control computer and serves as a blueprint for all of the other electronic componentry that will go through this process in due course. The acceptance of the plan contributed to the progress you can see on stage four and enables us to proceed with four credit qualification testing. I'm genuinely thrilled with the progress we're making and the momentum our team has on certification. But I don't want to understate the amount of work ahead of us and the impact of the changes the FAA announced earlier this year. We now anticipate starting commercial passenger service in 2025, following the publication of the final SFAR regulations by the FAA in late 2024. And in parallel, we're striving to complete type certification to support this timeline. I'd like to spend a few moments unpacking this new date. At a high level, you can think about it in two buckets, external and internal. Starting with the external, we originally believed we would certify our aircraft with the FAA under Part 2117A. That path would not have required any new or modified rulemaking on the operational side, rules which are known as SFARs, or Special Federal Aviation Regulation. But as we have discussed in previous calls, the FAA has advised the sector that we will be certifying our aircraft under the 2117B path instead. This means that to operate our aircraft, we will need SFARs in place, and the FAA has advised that they don't expect these to be finalized until late 2024. We therefore don't expect commercial passenger service to start until 2025. We're very grateful for the FAA's leadership in this nascent sector, and we're in close contact with them on the process for drafting and finalizing the SBAR requirements. We have good visibility on it, and we're preparing to quickly incorporate any new requirements that come out of it into the aircraft. There are also internal reasons for the shift. First, there's the challenge of having the right team in the right place at the right time. We've done a lot of work to anticipate the growth required in our team, adding a number of key members and groups as necessary. For example, adding the avionics team earlier this year, which gave us the additional velocity on software verification. But there are still areas where we have gaps to fill. Another critical part of the certification is translating prototype designs into certifiable parts. We've made significant investments in this capability in terms of people, equipment, and processes, which many of you got a chance to see firsthand at our field trip. While these have been critical investments that are producing great results, the learning curve on manufacturing processes has been steeper than originally anticipated. Certifying novel technologies like ours is a complex process, and we're under no illusion that these will be the last challenges we face. But I do believe that Joby is uniquely positioned to navigate these challenges, whether internal or external. We're now on the firmest foundation we've ever had, and we understand the certification path with the FAA more clearly than ever. We have the right teams in the right places, as well as plans to fill remaining gaps, particularly as we move into a busy testing phase. And we're working through the design to production growing pains that every manufacturing business experiences. Also, it's important to note that we are in active discussions to begin initial service operations in 2024 with the Department of Defense. We see that work as an important opportunity to learn about operations, maintenance, and the performance of our aircraft in a real-world environment. We also think that operating on base will play an important role in building public awareness of and acceptance for commercial passenger operations. Last, but by no means least, it has the potential to provide a significant revenue stream in its own right ahead of FAA type certification. And on that note, our flight test campaign, which supports our work with the Agility Prime program, has been making great strides this quarter, regularly flying several times a day, In September, we flew more hours and more miles than in any previous month, only to break that record again in October. We've now flown more than 10,000 nautical miles with pre-production prototype aircraft since 2019. The flight data generated from these tests is critical to tuning our test facilities and ensuring our production aircraft is well placed to meet those certification and program goals. Some of you had the chance to see our aircraft in action as part of our inaugural field trip last month. It was a real pleasure to open our doors for the first time in this way and let people visit our pilot production plant. Attendees were able to see the progress we've made across all the major aerostructures for our first production intent aircraft, as well as the additional composite structures we've made that will be used for our second and third production intent aircraft, as well as for testing. Attendees also witnessed the low noise profile of our aircraft compared to the helicopter and chase plane that accompanied it. During the tours, guests were able to see numerous production intent actuation, energy management, and flight electronics assemblies that have been built at our San Carlos facility, including a complete integrated propulsion system. Many of these assemblies are now undergoing testing as we prepare to integrate them into our production intent aircraft later this year. And although it wasn't on display, we also built and tested our first landing gear assembly for our production intent aircraft during the third quarter. Apart from the experience of hearing our aircraft, which is also highlighted in many of the videos we have posted, the message we wanted people to take away from that event was the remarkable benefit we see from vertical integration. It really is Joby's superpower. From our composite structures to propulsion and actuation system, we've developed the vast majority of our aircraft in-house. By owning the design, manufacture, and testing of these systems and structures, we're able to prototype much more rapidly and continually increase our technology lead. It also allows us to engage in systems-level optimization of our aircraft in a way that is not possible when each system comes from a different supplier and is designed to the lowest common denominator across multiple customers. It's fair to assume that there are times when this approach is harder work, when it requires longer hours and a greater investment, but we're confident that the hard miles are worth it for the more performant aircraft, a better customer experience, and over the long arc, a more durable competitive advantage. And on that note, Matt, over to you.

Thanks, Joven. Good afternoon, everyone, and thanks for joining us today. I'd like to take the opportunity to share our general approach to financial and resource planning at Joby. Our plan has always been built to be adaptable, something that we have talked about consistently over the past year. We adjust our pace and phasing of initiatives to optimize our spending across the organization. This is one of the many benefits of our vertical integration, as we can modify our spending and resource plans dynamically because we have a full understanding of all elements of our business and how they fit together. Our early investments, much like our approach to aircraft development, remain modest as we iterate rapidly and incorporate learnings before accelerating. Visitors to our first ever field trip saw our pilot production plant, for instance, where we are building a production line at low volume to validate and certify our manufacturing processes in partnership with the experts at Toyota. This lower investment approach enables us to prove out scalable technologies prior to the sizable investments required for higher volume production. We take this approach in all parts of our business, enabling us to make timely and appropriately sequenced progress towards our goals across certification, manufacturing, and commercialization. We are well capitalized with $1.1 billion in cash and short-term marketable securities at the end of the third quarter. This cash balance excludes the upfront investment of $60 million from Delta, which was received on October 7th through the issuance of common stock. The Delta partnership is unique in the industry not only for the depth and quality of the operating engagement, but also for the financial arrangements, which are outlined in our filed 8K, whereby Delta has the opportunity to invest further, up to $140 million through warrants, tied to meaningful operating milestones and with exercise prices that reflect the value we aim to create together for our customers and, in turn, our shareholders. This arrangement provides us the opportunity to further strengthen our balance sheet in the future. In addition to our business progress, I should also mention that we were pleased to see the Advanced Air Mobility Coordination and Leadership Act signed by the White House this quarter. We have been working with key congressional leaders and other aviation stakeholders to bring this law to life. It supports the expansion of commercial eVTOL service by establishing a broad government group to take learnings from early operations and use them to proactively identify opportunities to accelerate future growth. And it's another great demonstration of the U.S. government leaning in on this new technology. This support, in combination with the support of the Department of Defense, gives us the right foundation for the U.S. to continue to lead in this sector. Turning to our results in the third quarter of 2022, We incurred a net loss of $79.2 million, or 14 cents per share, reflecting a loss from operations of $97.1 million, offset by other income of $17.9 million. The loss from operations was below the second quarter, reflecting a lower stock-based compensation expense of $13 million and higher payments from the Department of Defense as part of our Agility Prime contract. The favorable results in other income reflected the revaluation of our derivative liabilities worth $12.6 million and interest in other income, which rose to $5.4 million, reflecting increased interest income on our invested funds. Total other income was also below the prior quarter, primarily reflecting the smaller favorable revaluation of our derivative liabilities. Adjusted EBITDA, which as a reminder is a non-GAAP financial measure that we've reconciled to net income in our shareholder letter, was negative 77.7 million. This was 21.8 million higher than the third quarter of 2021 and 3.6 million above the prior quarter, primarily reflecting the continued growth in personnel to support our operations and R&D costs associated with building parts both for our testing and for our production intent aircraft. As of September 30, we had nearly 1,400 employees globally. Cash used in operating activities and purchases of property and equipment totaled $73.7 million for the quarter. Spending increased compared with the prior quarter, reflecting the additional pay period in September and increased staffing, partly offset by the non-recurrence of purchasing avionics in May. For the first nine months of 2022, our net cash used in operating activities and purchase of property and equipment totaled $207.2 million. As a reminder from the last quarter, our cash flow for the nine months, as referenced in our shareholder letter and will also be included in our 10-Q, excludes cash held in short-term investments. In the first quarter, we invested a substantial sum of the proceeds from our merger with reInvent Technology Partners. Therefore, our statement of cash flow will show a more sizable cash outflow reflecting this investment. As I mentioned at the outset, we remain disciplined in our use of cash. Our key priorities are certification, early manufacturing operations, and initial service operations, including supporting our Department of Defense partners. We continue to manage the pace and timing of our efforts to judiciously manage our cash outflow and we will continue to pursue opportunities where we may receive payments for work performed. For example, we are working with the DoD to put our aircraft into service prior to receiving FAA-type certification. This not only provides cash to our business, but it allows us to build operational experience in areas like training, maintenance, and scheduling that are critical to our future success and would be impossible to test otherwise. This concludes our prepared remarks, and I'm pleased to say that I'm also joined here by Paul Sciarra, our executive chairman, and Didier Papadopoulos, our head of aircraft OEM, to also address any questions you may have. Operator, would you please instruct participants on how to ask questions?