Joby Aviation, Inc.

Greetings and welcome to the Joby Aviation's first quarter 2023 conference call and webcast. At this time, all participants are in listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Teresa Thurwithio. Thank you. You may begin.

Thank you. Welcome to Jovi Aviation's First Quarter 2023 Financial Results Conference Call and Webcast. I'm Theresa Fairfield, Jovi's Head of Investor Relations. On the call today, we have Jovan Bezbert, Founder and Chief Executive Officer, Paul Sciarra, Executive Chairman, Didier Papadopoulos, Head of Aircraft OEM, and Matt Field, Chief Financial Officer. After management's prepared remarks, we will open up the call for questions. Please note that our discussion today will include statements regarding future events and financial performance, as well as 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 our 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. Also, during the call, we will refer both to GAAP and non-GAAP financial measures. The reconciliation of non-GAAP to GAAP measures is included in our Q1 2023 shareholder letter. which you can find on our investor relations website, along with the replay of this call. With all of that said, I'll now turn the call over to Joe Benz.

Thank you, Teresa, and thank you, everyone, for joining us today. I'm pleased to report that we had a very successful quarter, and we remain on track to deliver on the goals we highlighted in our last call. Before we get into the details and our recent news announcements, I wanted to give you a sense of the remarkable energy there is at Joby right now. For example, at our site in Marina, California, on one side of the airport, the team at our pilot production line is knocking it out of the park as we prepare our first company-conforming aircraft to be rolled out as planned in the first half of this year. While on the other side of the airport, we have members of the United States Marine Corps working with our flight test team today assessing how our aircraft might be used for logistics and personnel movement. This is on top of the incredible work being done by our manufacturing team, also at Marina, who are delivering parts for the next aircraft on our production line. In other words, we've started 2023 as we promised we would, with energy, with pace, and most importantly, with delivery. And that delivery is really at the heart of one of the most exciting announcements of this quarter. our extended partnership with the Department of Defense. Our relationship with the DoD stems back to 2016, and at several points along the way, we've had the opportunity to extend our relationship based on our track record of delivery. What began as a $970,000 project award from the Defense Innovation Unit in 2017 has, over the course of six years, turned into a range of contracts and extensions across multiple government agencies worth more than $150 million in total, including, of course, our most recent announcement, which added an additional $55 million to a contract with Agility Prime that is now worth up to $131 million in total. The DOD's early interest in Joby and our ability to deliver on their goals has played a key role in advancing electric flight, With access to government testing facilities, we were able to conduct more than 1,000 test flights across multiple subscale and full-scale prototypes. In many ways, that was an incubation phase in which the DOD supported us as we rapidly validated our design and tested our aircraft. And in return, they got a front-row seat to the development of our technology. But now, today, we're moving beyond research and development into delivery and execution. That's why the Marines are here this week with us studying how to use the aircraft. And it's why we had the Air Force pilots here a few weeks ago becoming the first non-JOVI pilot ever to fly an EVTOL aircraft remotely as sole pilot in command through a full flight profile, including the transition from vertical to wingboard flight. This is about real aircraft in real-life environments. As part of the contract extension, we'll be delivering and operating up to nine aircraft, the first two of which are set to be stationed at Edwards Air Force Base in California by early 2024. Those aircraft will not only be the first of our aircraft to go into service, but we expect them also to be the first eVTOL aircraft to be operated for a customer anywhere in the world. They'll be the first eVTOL aircraft to be stationed at a U.S. military base, and we believe they will become the first eVTOL aircraft to generate revenue in the U.S. and perhaps the world. With these and subsequent aircraft, we aim to provide the Air Force and other federal agencies with firsthand experience of our technology and its potential application, opening the door to it being used in a wide range of missions. And while the aircraft will be performing DOD operations, those operations will also provide the opportunity for us to generate invaluable learning for our future commercial service. Just as the Department of Defense has been leaning in, so too have the U.S. government policymakers. In March, the White House issued its National Aeronautics Science and Technologies Priorities Document, which outlines activities it recommends to, quote, maintain the nation's edge in the global aeronautics industry. That's a vision we can absolutely get behind, and it was humbling to see that of the three priorities identified by the White House in this document, two of them relate directly to the work we're doing. Achieving sustainable aviation through a 2050 net zero commitment and the integration of modern and emerging technologies, including advanced air mobility aircraft into the national airspace system. Congress has also been playing its part in pushing positive messaging around AAM, including during a recent session of the House Transportation and Infrastructure Subcommittee on Aviation, at which I was honored to testify. The hearing happened at a pivotal moment with the committee focused on the FAA reauthorization bill, which will play a key role in the future of the FAA and how it integrates AAM. The session was focused on ensuring U.S. leadership in AAM And throughout the hearing, we heard many examples of bipartisan collaboration, especially from House Aviation Subcommittee Chairman Garrett Graves and Ranking Member Rick Larson. I also had the opportunity to thank the committee for ensuring the passage of the Advanced Aviation Infrastructure Modernization Act, which authorizes planning grants to facilitate investment in AAM infrastructure. In addition to the progress we are seeing on the policy front, we were honored to host Secretary of Transportation Pete Buttigieg at our offices in Washington, D.C. last month. As well as speaking with our board members, the Secretary had the opportunity to fly the Jobe simulator and experience what it might be like to fly with us. The positivity we're seeing in Washington isn't unique, though. Over the last quarter, I've experienced firsthand the wave of belief in our technology that is building at the city and state level across the U.S. and in cities worldwide. That belief is driving a lot of exciting conversations around infrastructure. And during the quarter, I was able to visit New York, where we're working hand-in-hand with Delta to identify exactly where and how we will deliver our service. I would like to think that belief also played a role in Michael Guerta's decision to join the Jobe board. As a current Delta board member and a former FAA administrator, he brings a wealth of experience and insight to the table, and we're honored to have him on our team. That belief was further underscored by the announcement we made earlier today that Bailey Gifford, who first invested in Jobe more than three years ago, has agreed to lead an additional equity investment of approximately $180 million. Bailey is known for their track record of investing early in high-impact technology companies and has a reputation of being a patient, long-term investor with a vision for sustainable transportation that matches ours. The additional funds will allow us to steepen the curve on early production, enabling us to capitalize on opportunities like the DOD contract extension without impacting the runway we already have available to see us through the certification process. It's a great vote of confidence in what our team is delivering day in and day out. And we're excited to maintain that momentum and build on that belief as we look ahead to starting commercial operations in 2025. I'll now hand it over to Didier to talk in more detail about the progress we've made and what comes next. Didier?

Thanks, Jovan. As you mentioned at the top of the call, the progress we've made with our company-conforming aircraft has been a real highlight this quarter. If you take a look at the photos in our shareholder letter, you will see that we now have the three main aerostructures, the fuselage, tail, and wing, painted and assembled. The vast majority of the flight electronics have also been installed in the aircraft. The landing gear is ready to be installed, and we have completed all the components for our six electronic propulsion units and a full set of battery modules built and in testing. All the while, we're making great progress in our integrated test lab, where we're now completing full system verification testing on our software, electronics, and powertrain systems ahead of flight testing. In other words, we're right on track. At this point, I'd like to say a big thank you to the Joby team and also to the Toyota team for helping us maintain this awesome momentum. We're working as one synchronized team, and I'm really pleased with the speed at which we're making progress together. While our strategic relationship with Toyota has been in place for many years, it continues to grow organically. In April, we signed a long-term supply agreement with them that covers key powertrain and actuator components for our aircraft. These components, designed by Joby, leverage Toyota's deep manufacturing knowledge and expertise in delivering reliable, high-quality vehicles at high volume. It also means that we're now integrating Toyota manufactured parts into an aircraft that's assembled in a pilot production line that Toyota helped us design. We're incredibly grateful for their support and look forward to celebrating the rollout of this aircraft together. Part of our success in developing the Joby aircraft has been about making the right decision between making a part and buying a part. In some instances, like the flight deck we used from Garmin, it's clear that there are items on the market that can fit our needs. But very often, buying generic components which are designed to fit many different aircraft means accepting critical tradeoffs in capability or mass or maybe both. That's why we've invested our time and effort in developing a range of critical parts, either with partners like Toyota or in-house. And we continue to see the strategy paying off. A great example is our flight electronics. By designing, building, and testing our flight electronics and our wiring systems in-house, we have been able to reduce mass while increasing redundancy and integrating multiple functions into fewer devices. This has helped improve the performance of our aircraft while reducing the assembly time and maintenance profile of our system with fewer parts to install. Our network switch, for example, is now smaller than a standard sheet of paper, even though it integrates additional functionality that would typically require an entirely separate device. This in-house network switch design and system architecture has allowed us to benefit from kilograms of mass savings compared to alternative options. It is the same story with our flight computer. The flight computer receives pilot inputs and sensor data from around the aircraft, translating it into instructions for the propulsion unit and control surfaces. We've been able to integrate all this functionality into a robust device that weighs less than an iPhone. By developing systems ourselves, we also benefit from having a common software architecture. With all of our hardware sharing common interfaces, meaning there are no layers of conversion or translation required in each connection. We will also be able to verify and deploy software updates more easily over the life of the fleet, thanks to owning the majority of the tech stack. Here are just a couple of examples of incredible work the Joby team has done to optimize our aircraft, and we expect these efforts to pay dividends as we enter high-rate manufacturing and commercial service. Turning now to our progress on certification, I'm pleased to say that we've made great progress across the quarter. On our last call, we highlighted that we had effectively completed the second of five stages required to achieve type certification. I'm pleased to report that we have now completed the vast majority of the work required on the JOBE side of stage three, having submitted a further three area-specific certification plans to the FAA during this quarter. taking our total from 8 to 11, with only two largely completed plans remaining to be submitted. These documents describe the tests we need to perform to certify our aircraft, and with 11 of 13 submitted, we are on track to complete our stated goal of having all AFCPs for the agreed to means of compliance submitted within the first half of this year. We have also had a further two AFTPs accepted by the FAA, bringing the total accepted to seven and moving the percentage progress on the FAA side of stage three forward significantly from 53% to 63%, marking an important step towards completing the third stage. The majority of our team is now heads down, focused on stage four, where we design, develop, and draw around the testing we described in stage three. ahead of entering into formal for credit testing with the FAA. This preparation work is absolutely critical to achieving a smooth certification process. And while it means we may not see the bars on our certification chart move as dramatically as they have recently, our team will be working as hard as ever. As one example of the progress we're making in stage four, in areas like our flight computer, we're already at the point where we're simulating FAA inspection visits with a team member playing the role of an FAA inspector. We may not necessarily give ourselves full credit for that on our certification tracker, but it's incredibly important work that will ensure we are able to move forward as fast as possible when we're ready to begin for credit testing. Stage four has by far the highest number of elements to it of any stage, but it's much more black and white than the earlier stages. To put it in a different way, we've moved from talking about how we would do something to actually executing on it. And while we're on the topic of the FAA, I'd like to reiterate my thanks for their hard work. They also do a huge amount of work in the background to support applications like ours, spending hundreds if not thousands of hours reviewing the documents and plans we create, And we're grateful as ever for their commitment to making sure the right environment exists for advanced air mobility companies like ours to thrive. Turning to the operations front, I am pleased to report on behalf of our operations and safety team that we also successfully completed an SBAO audit during the quarter. The audit performed by the International Business Aviation Council is part of a voluntary standards program that includes hundreds of audit points. and it confirmed that we're able to operate at the same high level of safety required for business aviation operations. This is an important step towards developing our operational muscle, and I'd like to say a big congratulations to our teams who were involved in this process. I'd also like to thank the FAA and Acting Administrator Nolan for their proactive approach to integrating new types of aircraft into the national airspace both in the near term and at scale as evidenced by today's announcement. I'll now pass it over to Matt to provide an update on our financials.

Thanks, Didier. As of the end of the first quarter, we have $978 million in cash and short-term marketable securities, providing a solid foundation for our operations. This strong balance sheet will be further strengthened by the investment we announced today, led by Bailey Gifford, totaling approximately $180 million, which we expect to close within the coming days. Before jumping into this quarter's financial results, I'd just like to quickly touch on this investment. As we have said in prior calls, we are very comfortable with the robustness of our balance sheet, and we were not looking to raise capital at this time. However, when Bailey Gifford, an existing long-term investor in Joby since 2020, reached out, looking to increase their investment on behalf of their clients, We agreed that further strengthening our balance sheet was the right thing to do with an investor that is so closely aligned with our mission and shares our long-term perspective. Turning now to our financial results for the first quarter of 2023, we incurred a net loss of $113 million, reflecting a loss from operations of nearly $100 million and negative underincome of about $14 million. Other income from the quarter primarily reflected the $22 million unfavorable revaluation from our derivative liabilities as the price of our shares and warrants rose during the quarter, partly offset by net interest income of $8 million. Adjusted EBITDA was a loss of $75 million. This was about $6 million higher than the first quarter of 2022, reflecting increased staffing and cost to support certification, partly offset by increased payments from government contract deliverables. Our adjusted EBITDA loss was $2 million less than the fourth quarter, reflecting primarily increased contract deliverables completed in the first quarter. Our global staffing at about 1,460 employees continues to grow to support our company's certification in manufacturing efforts. Cash used in operating activities and purchases of property and equipment totaled $87 million in the first quarter of 2023, and we remain on track with our full year target of between 360 to 389. This concludes our prepared remarks. Operator, would you please instruct participants on how to ask questions?

Thank you. Ladies and gentlemen, at this time, we'll be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Christine Leweg with Morgan Stanley. Please proceed with your question.

Hey, good afternoon, guys. Hi, Christine. Yeah, so, Matt, you know, you highlighted you've got $978 million of cash in short-term investments on the balance sheet. When I look at the stock price today, it's still closer to historical lows versus historical highs. So why raise capital now? And why not wait until more certification milestones are achieved and potentially, you know, your stock could be at a higher place when you don't need liquidity today?

Hi, Christine. This is Paul Sciarra. Happy to answer your question. As both JB and I think Matt stated in the sort of opening comments, We did, even prior to this investment, felt really good about our cash position and our ability to continue to forward invest to get ourselves to and through certification. However, today's announcement is importantly related to the announcement that we made last week about the next phases of our work with the Department of Defense. The folks at Bailey Gifford, who we've already said we've known for quite a while and were investors in the company, both as a private company and in our GoPublic transaction, came to us a few weeks ago and said they wanted to build their position. They could do that either through open market investments or directly onto our balance sheet through the shelf that we had outstanding. In light of what we think is a growing opportunity to deliver aircraft and potentially generate revenue with the DoD, we felt it prudent to add to our already strong balance sheet through this investment. This gives us an opportunity to scale pilot production sooner, build more aircraft, deliver those to this first set of customers, And we thought that, and to do that without necessarily sacrificing the revenue that we need to get to and through certification. So we felt like it was the right call to make with an investor that knows us and has a track record of investing for the long term.

Thanks, Paul. And, you know, it's really encouraging to see that there is progress with your relationship with the Department of Defense and seeing the AFWERX program bear fruit for you is really encouraging. But historically, when you look at other defense programs, generally the DOD would give funding to companies and help with working capital requirements. Is that an option through this contract, or would you have to fund all that growth for the Department of Defense using internal cash?

This is Paul again, Christine. So through earlier iterations of this contract, we've had an opportunity to offset significant amounts of R&D already. I think what this phase of the contract is about is about shifting gears from research and development and observation to actually putting these aircraft directly into the service with the customer. And that's an important shift for both us as a company and we think for the industry as a whole. This may be the first set of aircraft that are delivered to a customer, certainly here in the U.S., and the first set of aircraft that can potentially generate revenue over the long term. Now, one of the things that distinguishes the way that we've approached our defense contracts and maybe others is that, as you may know, there's a real push inside of the DoD to shift to dual-use technology, technology that's developed for the consumer sector but has application in the defense department. Our work with the DoD is firmly under that lens. So we have an opportunity to commercialize earlier through this alternative means, but the relationship looks different. When we think about this contract, it's about, there's really three pieces. One is an activation fee on delivery of aircraft. The second is an annual lease fee. And the third is a cost per flight hour. So that's the way that we've structured our relationship. And we think it's a win-win both for us as a company and for our customers at the Department of Defense.

Great. Thank you. Thank you very much, guys.

Our next question comes from the line of Andre Shepard with Cantor Fitzgerald. Please proceed with your question.

Hey, good afternoon, everyone. Congratulations on the quarter, and thanks for taking our questions. I wanted just maybe to start a follow-up with Christine's first question. You know, I agree. The timing of the equity offering seems a bit peculiar since we're getting closer and closer to certification and commercialization, and those could be meaningful catalysts that would bring the stock price up and therefore could have been a better opportunity. I'm just wondering, is I'm trying to ask this question maybe a little bit differently. Is there a thought process that perhaps the certification or the commercialization might be more expensive or perhaps lengthier than initially anticipated and hence the equity offering? I'm just, again, just trying to better understand the timing here. Thanks.

Hi, Andreas. This is Paul again. As I mentioned in the answer to the last question, we really think about this equity raise as an opportunistic one in light of what we think is a growing opportunity with the DOD. We wanted to make sure that we added to our already strong balance sheet so that we would have the ability to steepen early production ramp, build more aircraft sooner, and deliver those to first customers sooner without sacrificing the revenue, the runway that we need to get to and through sort of broader commercialization. I think our approach, and this is true for the company going way back, we can't predict market dynamics. We can't predict timing for that. What we want to make sure that we do is we make the right prudent decisions for the opportunity set that presents itself. This isn't about the short term. This is about maximizing our ability to execute over the long term.

Got it. Thanks, Paul. And maybe as a follow-up, wanted to get a sense of, in regards to the contract with the DOD that was extended, when might you have a sense of how to, I guess, quantify that in terms of what it'll mean in terms of revenue? I realize there'd be different use cases for it, and it's an ongoing relationship, Any sense of when you might be able to have a better idea of what it will translate to in terms of revenue, particularly since you're looking to monetize this relationship prior to certification? Thank you.

Hey, Andres. Thanks for joining this afternoon. It's Matt. So when we look at the DOD contract, we extended it to a $55 million extension over roughly three years. We expect, as we said on the call, the first two aircraft to go into service in early 2024. We're still going through the contract with the accountants, and so we'll determine exactly how much of that would flow into revenue versus, like, contra R&D, which is where you see it today. And as we get closer to that time, we should be able to provide more explicit guidance, and then certainly as it comes together, you know, how that materializes. As Paul mentioned, there's an upfront piece, a fixed piece, and a variable piece. And so as that comes together for 2024, we'll try to give it more guidance about that.

Got it. Okay. Thanks, Matt. Thanks, Paul. Congrats again on the quarter. I'll pass it on. Thank you.

Our next question comes from the line of Bill Peterson with JP Morgan. Please proceed with your question.

Yeah. Hi. Thanks for taking my questions. Pardon me. It's a little bit loud here at the airport. I always seem to be at an airport when I have these calls with you guys. Sorry to come back to the question about the capital raise now. I think you said you're on target still for 360 to 380 this year. You know, you're close to a billion on your balance sheet prior to this capital raise. Are you trying to signal that there's a big step up in spend next year? And you kind of alluded to, I guess, you know, maybe accelerating some programs. Can you give us some sort of idea how we should think about use of cash as we think about 2024?

Yeah, hey Bill. Sorry to always catch you at an airport. So there's really a couple of pieces behind this investment. Paul put it well. This investment gives us more options that we wouldn't have had otherwise with the capital stack that we have in place. And so we felt it was the right time to take the investment from a high quality investor with a very straightforward structure, right? It's a very simple capital fundraise with a long-term investor. So it really gives us greater degrees of freedom than we may have had otherwise. So there's really nothing we're signaling for 24 around the capital raise. And as you think about 24, and we said this, I think we said this on the last call, you look at tailwinds like the DOD contract and some of the engagements there, and then additional headwinds from as we grow our business, build more planes, and start moving into more volume manufacturing, but also early, early stage commercialization. singularly focused on certification, manufacturing, and DOD, and that will continue in 2024 as well.

Okay. I read that as directional increases, Mr. Cash. But my second question, related to Toyota, in the press release last week and some of the commentators, they're involved with powertrain actuators to help you design the pilot facility. How should we think about their involvement looking ahead? Specifically, are there additional areas you'd be looking to leverage their manufacturing expertise or maybe even potentially capital?

Okay, so I... Yeah, thanks for the question. This is DJ. I'm really excited about the Toyota partnership for sure. As you mentioned, the Toyota partnership started a while back initially on the partnership and investment front and throughout the past... what really been a great engagement on the manufacturing front across all of our manufacturing organization, not just on the powertrain and actuation, but also on the airframe side, all of our sites here. It's really helped us optimize how we're manufacturing this aircraft. And we're seeing here with the first informing aircraft soon to be rolling out of the line. They also have been helping us through our design. So this is just to reiterate, it's a Joby design, soup to nuts, if I may say, but really helping us understand design for manufacturability. And as we were doing that with them, we saw an opportunity for Toyota to also participate in supplying some of the critical components for these two products. Obviously, Toyota is very knowledgeable in producing high-quality products at high manufacturing rates. And we hope to continue to get their support as we talk about how we scale into the future with our production wrap-up. Okay, so ongoing discussion.

Okay, thanks, all. I'll pass it on. Thank you.

As a reminder, it is Star 1 to ask a question. Our next question comes from the line of Edison Yu with Deutsche Bank. Please proceed with your question.

Hey, good afternoon. Thanks for taking the questions. I hate to come back to the cap raise, but wanted to maybe phrase it even a different way. Should we interpret sort of the $180 million as something incrementally more that you need to kind of win, or not win, but to follow through on the DOD contract, or how should we think about those comments in terms of having to spend more because in the context of having almost a billion, I would have thought you would have been spending a pretty decent amount anyway. Is there any way to reconcile those numbers or it's just not the right way to think about it?

This is Paul. I'm happy to try to take a stab at this one. When we think about the opportunity that we think is in front of us with the Department Look, we have to ramp production, build aircraft, and then we have opportunities to generate revenue from those aircrafts. So as we think about kind of steepening that earlier production curve, building more aircraft than we might otherwise, delivering those to the new customer, when it comes to the sort of cash flow, we felt like it made sense to ensure that we had a little bit more buffer so that we had an opportunity to really capitalize on what we think is a big opportunity there. This gives us the flexibility to do some of that forward investment sooner than we might otherwise so that we can seize the opportunity that we think is in front of us in terms of both this version of the contract that we announced this week and subsequent extensions either with the Air Force or other branches over time.

Does that help? Yeah. Thanks for the color. And then on the Toyota agreement, I'm curious. Was this something that you had sort of decided already a while back because you've been working with Toyota for so long and you're just sort of announcing it? Or have you been looking at various other suppliers considering doing house and you sort of arrived at this decision? I'm just curious sort of the process in which this agreement kind of emerged.

Yeah, yeah, listen, thanks for the question. Maybe stepping back here, I think what's important to think is we continue to be consistent in our strategy on focusing our effort on sourcing the parts that exist out there whenever they meet our needs to allow us to focus in areas where through vertical integration benefits us in ensuring that we have the best product out there. Strategy with Toyota really developed organically as they continue to grow their engagement across all of our development, all of our manufacturing, and all of our design. And that was really a natural fit throughout the design reviews that we were doing with them. We continue to look at opportunities to leverage that strategy, and wherever we find the best partner and supplier, we will definitely do that.

Understood. Thank you.

Our next question comes from the line of Matt Roberts with Raymond James. Please proceed with your question.

Hey, good afternoon, everyone, and thank you for the time. Maybe transitioning over to the aircraft itself, you know, you discussed that with the coming and forming aircraft, a lot of the major aero structures have already been assembled. So, maybe you just provide a little color on how these different or how these differ from the current S-4 aircraft that you're flight testing, in terms of specification, dimensions, or weight. And then for the initial aircraft deliveries to the DoD in 2024, is that the current iteration, or will that be more akin to the type-conforming aircraft?

Okay, yeah, thanks for the question. So I think it's important to think about this aircraft as an evolution of the one that's currently flying in that we learned a lot of lessons throughout the multitude of flights, and we continue to be flying on a regular basis with the existing aircraft. And across the pyramid of the aircraft, and when I talk about pyramid, I'm thinking about components, subsystems, systems, and all the way up to the aircraft. We've had a lot of lessons learned with the existing aircraft. primarily all of those fall into, or the majority of these fall into the categories of optimization. So as you saw, for example, in one of the videos that we launched recently, we learned that we can develop an equally performing Ethernet switch that's half the size, half the weight, and architect the system to where we can increase, benefit from that to increase the performance of the various systems within the aircraft. Overall, from an aerodynamic standpoint, not a lot of changes on that front, so we feel that we've proven the performance of the aircraft, and that's been solid and committed to from the very beginning. The real changes will be evolutionary from within the inside of the aircraft. I see.

Thank you.

I wanted to make sure that I got your... The second question, which I think was about whether or not these are the same aircraft that we're going to be producing for DOD, and the answer is yes. One of the things that's really important to understand is that DOD has a process called military airworthiness, which is related to but importantly different from FAA-type certification. You can think about it as a sort of subset for which FAA-type certification is a sort of superstructure. So the work that we're doing to progress increasingly certifiable components, just increasingly certifiable aircraft, we can use the aircraft that we are building now and essentially delivering to DOD to really continue to improve and get closer and closer to what we need to for both type certification and production certification on the FAA side. Does that make sense?

Yes, certainly. Appreciate the added color there, both of you. Appreciate it.

Our next question comes from the line of David Zazula with Barclays. Please proceed with your question.

Hey, thanks for taking the time. I apologize for the background. I'm also in an airport like Bill, although I can report that I'm in a Delta lounge. So helping out the team at least a little bit there. I guess first on the aircraft question, you talked about important work that you're doing with the company-conforming aircraft. Can you maybe just expand on that a little bit? I guess I'm interested in the amount of data that comes from the testing that you're doing on the company-conforming aircraft and how that would be interpreted by the FAA. Like, is it something that is more internal or is it something where they're going to review, understand the results, kind of do some work on those tests, and then just, you know, the subsequent, you know, fully FAA-conforming aircraft would be more just, you know, checking that the aircraft performance is expected based on the earlier tests.

Yeah, thanks for the question, David. And I hope next time you call us in the future, we'll be about to pick up an S-4 from an airport to an airport to answer your question. I think what's best is to put, you know, the perspective here is to put this aircraft and testing we're doing in the sense of going back to the five stages of certification. So we talked about stage one, two, and three, where really those conclude with the area-specific cert plans. Stage four is really a lot about or all about the testing. The testing really is at all levels or layers of the aircraft, from the smallest component to the subsystems and subsystems all the way up to the airplane. So when you develop all your test plans, Each of these test plans will really be targeted towards one of these levels and then towards specific functions on these levels. This aircraft will effectively serve the test plans that are intended for an airplane, and they will be used as a dry run before we actually have the FAA-conforming airplane where we run, hopefully, those same test plans for credits with the FAA getting us into and then the tax justification.

That's very helpful. And then as a follow up, I mean, a number of us that went on a field trip heard a lot about the avionics acquisition and what they're doing with you. But just in the context of having recently raised equity and having obviously acquired equity in avionics, I think it might be helpful if you you know, try to discuss the, you know, dividends that that acquisition is paying in any quantification you can provide in terms of, you know, why it was the right move to go ahead and put that on your balance sheet.

Okay, so I'll talk to the avionics acquisition here. The avionics acquisition is really important and unique in the sense that software verification is very prescriptive and is a very unique skill set in the aviation industry. It takes a good amount to get up to speed on that. And avionics brings a lot of history in pedigree serving the avionics and aviation industry for many years now on many fronts. And we did that on purpose to time it with this stage of the development where we're really going through the verification activities that I just described earlier, right? We talk about the layers. Layers start with software, electronics, equipment, and all the way up to the aircraft. We've been exercising that muscle with them prior to the acquisition, saw some amazing results from them, and then we continue to grow that here in a timely manner in order to support us going into FAA conforming tests.

Awesome. Thanks very much.

Thank you. Our last question is a follow-up question from the line of Andres Shepard with Cantor Fitzgerald. Please proceed with your question.

Hey, guys. Sorry. Thanks for taking our question again. Just two quick housekeeping for us. Matt, sorry if I missed this, but in regards to the CapEx spend for this year, I think in the past you had mentioned you'd expect it to be slightly below last year. I just wanted to confirm is that still the case? And then finally, how are things progressing with the piloted test flights? Is that still on track for, I guess, it should be any time now soon, I guess. So just any color there would be great. Thanks.

Sure. So for CapEx, what we got was less than last year. Recall last year we acquired the building here in Santa Cruz that serves as an R&D and office location. That was $25.5 million So we do expect our CAPEX to be less than 2022. We are on track. So what we announced on our last call was that we plan to complete our bill and roll out this first aircraft off the line in the first half of the year. And I think, as we said on the call, that that's on track and that we would have a flight with pilot on board by the end of the year and on track for that as well. So remain on track with all of our four-year goals.

Wonderful. Thank you so much again, and again, congrats on the quarter. Thank you.

We have one last question from Matt Roberts with Raymond James. Please proceed with your question.

Hey, thanks for getting me in here again. You know, we talked a lot about capital in the aircraft itself, but maybe around some of the work that you've done in terms of operations as well as developments there. You know, first, maybe... What were some of the early learnings and the training exercises that you went through with military pilots and how you envision that for commercial operations? And then the FAA today came out with the new Skylanes for air taxis. So what impact do you think that has? I'm sure a positive in the early stages, but any incremental color you could provide there would be great. Thanks.

Thanks, Matt. This is Joe Ben. Really appreciate your question. So I bucket that in a couple of different areas. First, you touched on with the military pilot training. That was an incredibly successful few weeks. We took four of the Air Force pilots, and we took them through our full training regiment. And they came out of that having been sole pilot in command on multiple flights. each of them, and they were glowing. They were so excited about the training program. They were excited about our simulator and how accurately our simulator matched with the actual flight of the aircraft and the unified control and how intuitive it is to fly the aircraft. So basically our training team and our government team just really knocked out of the park. Some of those pilots will be flying the aircraft when they're on base at Edwards. Again, the DOD partnership is doing so much to accelerate our commercial operation. And so huge wins on that front. Second, you mentioned the FAA. The announcement this morning is a fantastic showcase for how the FAA is leaning in to deliver not just our day one operation as we launch the commercial service, but also a plan for how to scale that to something that's going to have a dramatic impact on huge numbers of people's daily lives. And then third, I'd really touch on Delta and what a game-changing partnership that is with us. As I noted in my prepared remarks, we have the opportunity to spend time with the Delta infrastructure team in New York. And Delta has invested billions of dollars into the terminals at LaGuardia and JFK, as well as other terminals around the country. And our partnership with them is... Just going to be absolutely spectacular. We're going to deliver on that elevated customer experience that both Delta and Jovi are so committed to. And just to close, we remain confident in our ability to deliver our commercial operation in 2025. And thank you again very much for your question.

Thank you, Jim. I appreciate it.

There are no further questions in the queue. I'd like to hand the call back to Joe Van Bevert for closing remarks.

Yeah, thank you so much. Really, really appreciate everybody joining. One piece that I wanted to touch on, we didn't have a lot of questions on certification, but I just would like to highlight how critically important this is. We're into this really exciting stage four, which is testing. It is going – it's a mountain of hard work, but I think as many of you have seen when you've come and visited our facility, we've really invested heavily in in-house testing infrastructure, and we are going to be doubling down on that work and that team as we work our way through Stage 4 and prove out the – remarkable capabilities that we built into every component on this aircraft that Didier spoke about. And just in closing, I'm more optimistic than I've ever been before about the prospects that lie before us. And I'm very grateful to all of our partners, whether that's Toyota, Delta, the DoD, and our investors. And we're really, really excited about the future. Thank you all so much for taking the time to join us all today.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.