Eve Holding, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Eve is a pre-revenue aerospace company developing electric vertical take-off and landing aircraft (eVTOL), urban air traffic management (UATM), and related services. The May 9, 2022 Zanite business combination was accounted for as a reverse recapitalization.
Financial performance and liquidity
| Metric | Q2 2022 | Six months 2022 | Comparable 2021 |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Research and development expense | $9.84 million | $18.95 million | $1.94 million / $3.83 million |
| Selling, general and administrative expense | $6.48 million | $7.28 million | $0.43 million / $0.76 million |
| Operating loss | $16.35 million | $26.27 million | $2.37 million / $4.59 million |
| Net loss | $11.78 million | $21.28 million | $2.41 million / $4.63 million |
| Basic and diluted loss per share | $0.05 | $0.09 | $0.01 / $0.02 |
| Operating cash used | Not separately provided | $13.18 million | $5.06 million |
Comparable-period amounts in the table are Q2 2021 / six months 2021, respectively. Margins are not meaningful because the company had no revenue. Q2 net loss included a $4.13 million gain from the change in fair value of derivative liabilities, partly offsetting operating losses. The related private-placement warrant liability was $7.27 million at June 30 and is remeasured using Level 3 inputs.
At June 30, cash and cash equivalents were $176.32 million and financial investments were $154.46 million, for combined cash and investments of approximately $330.78 million. Total liabilities were $20.42 million; the filing reported no outstanding debt. Current liabilities were $19.88 million, including $9.56 million payable to related parties. Stockholders’ equity was $310.78 million. Management said business-combination and PIPE proceeds were expected to fund the current operating plan for at least 12 months.
For the six months, financing activities provided $329.12 million, principally from the business combination and PIPE investment; investing activities used $154.00 million to purchase securities. Cash increased by $161.94 million. Operating cash use rose from $5.06 million in 2021, with the filing citing settlement of amounts payable to Embraer and increased R&D spending.
Changes, outlook, and risks
- Year-over-year six-month operating loss increased to $26.27 million from $4.59 million, reflecting higher R&D, staffing, engineering and outsourced development costs, along with higher public-company, marketing and administrative costs. R&D spending was primarily for eVTOL and UATM development, including the Proof of Concept 1 vehicle.
- Eve expects service-and-support commercialization to begin in 2023, fleet operations, service and support, and UATM to contribute projected revenue in 2024–2025, and eVTOL production to begin in 2025, with aircraft sales revenue expected from 2026. These are forward-looking expectations, not guaranteed outcomes.
- The company reported nonbinding letters of intent for more than 1,910 eVTOLs. These are not firm orders. Certification plans include ANAC, the FAA and EASA; certification timing and market adoption remain uncertain.
- Eve expects substantial ongoing investment and losses before commercial operations, and may need additional financing. Risks include development and certification delays, uncertain UAM demand and aircraft economics, competition, supply and production challenges, COVID-19 impacts, and Brazilian currency and economic volatility.
- Embraer-related MSAs and the shared services agreement have initial 15-year terms. Eve incurred $15.96 million in costs with Embraer and Atech during the first half of 2022. The filing cautions that historical allocations and costs may not represent future standalone expenses.
- After quarter-end, Eve’s subsidiary agreed to lend majority stockholder Embraer Aircraft Holding up to $81 million at 4.89% annual interest, due August 1, 2023, subject to extension. Eve may request repayment at any time; the transaction was approved by independent directors.
- Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting. Eve reported no legal proceeding it believed would be material.
Important facts for investors to verify
- Whether the stated commercialization and certification milestones remain achievable, and whether nonbinding LOIs convert into binding orders.
- Cash burn, investment liquidity and the assumptions underlying management’s estimate that funds cover at least 12 months of the current plan.
- The terms, outstanding balance and repayment status of the post-quarter $81 million related-party loan, and the company’s concentration of cash and investments with financial institutions.
- Future charges under Embraer/Atech service agreements, related-party payables, and the extent to which reported costs reflect a standalone public company.
- Potential dilution from public, private and strategic warrants, stock awards and any future fundraising; common shares outstanding were 264,332,132 at August 3, 2022.
- Changes in the Level 3 warrant valuation and the sensitivity of results to foreign exchange movements, interest rates and development-cost estimates.