Eve Holding, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Eve is a development-stage aerospace company developing eVTOL aircraft and related services and urban air traffic management solutions. It reported no revenue in the quarter. The 2022 comparison includes carve-out financial information, so year-over-year comparisons may not be fully comparable.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $21.5 million | $9.1 million |
| Selling, general and administrative expense | $6.2 million | $1.3 million |
| Operating loss | $27.7 million | $10.4 million |
| Net loss | $25.8 million | $10.0 million |
| Basic and diluted loss per share | $0.09 | $0.05 |
| Operating cash used | $19.9 million | $1.9 million |
Financial investment income was $3.3 million, compared with $0.1 million a year earlier; other financial gain was $1.0 million. A $2.2 million increase in the fair value of private placement warrant liabilities was recorded as a loss. No meaningful revenue or profit margin is available because Eve has not begun generating revenue.
At March 31, 2023, total assets were $296.3 million and total liabilities were $33.8 million. Cash and cash equivalents were $11.8 million; financial investments were $199.1 million; and a loan receivable from majority stockholder Embraer Aircraft Holding (EAH) was $83.6 million. Management cited total liquidity of $294.6 million from these three balances and said it expected this to fund its current operating plan for at least 12 months. The filing reports no outstanding debt on the balance sheet.
Cash used in investing activities was $17.5 million, primarily reflecting purchases of investment securities; cash declined by $37.3 million overall during the quarter, ending at $11.8 million. Shareholders’ equity was $262.5 million. The company had 269.1 million common shares issued and outstanding at quarter-end; weighted-average shares for EPS were 275.5 million, including penny warrants.
Changes, outlook and risks
- Net loss increased by $15.8 million year over year. R&D rose $12.4 million, mainly due to additional personnel, engineering and prototype-related supplies and development spending. SG&A increased $4.8 million as the company expanded its team and consulting, marketing and public-company costs.
- Management anticipates service-and-support commercialization beginning in 2025 and initial eVTOL sales revenue beginning in 2026. These are expectations, not guaranteed outcomes. Eve expects continued losses and negative operating cash flow while it develops its products.
- On January 23, 2023, Eve Brazil entered into BNDES credit agreements totaling R$490 million (approximately $96 million at quarter-end exchange rates). The facilities had not been drawn by March 31. Availability and borrowing are subject to funding, guarantees, legal, environmental and other conditions; proceeds must be used within 36 months. A one-time fee of approximately $0.4 million is payable whether or not funds are drawn.
- The $83.6 million related-party loan receivable from EAH bears 4.89% interest and was scheduled to mature August 1, 2023, with extension possible by mutual agreement. The filing identifies related-party balances and reliance on long-term services agreements with Embraer and affiliates.
- Key risks include the need for further financing, uncertain UAM demand and competition, obtaining aviation certifications on schedule, development and production costs, reliance on strategic partners, and Brazilian currency, interest-rate and political or economic conditions. The company states that existing funds may not cover all development and commercialization needs; future financing could dilute shareholders or may not be available on favorable terms.
- Disclosure controls were deemed ineffective at March 31, 2023 because previously reported material weaknesses in financial reporting controls remained unremediated. Management reported engaging outside consultants and continuing remediation. The company reported no legal proceedings believed likely to have a material adverse effect.
Investor verification priorities
- Confirm the EAH loan’s repayment or extension status and assess counterparty and related-party concentration.
- Verify BNDES facility availability, satisfaction of draw conditions, actual borrowing and the all-in rate and fees.
- Track cash burn, investment maturities and whether management’s stated liquidity covers the evolving development plan.
- Assess progress against certification, prototype, service-launch and aircraft-sales timelines, including the assumptions behind the 2025 and 2026 expectations.
- Review remediation of internal-control material weaknesses and the effect of any future share or warrant issuance on dilution.