Eve Holding, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2022. Filed December 23, 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 business combination with Zanite was accounted for as a reverse recapitalization.
Financial results and position
| Metric | Three months ended September 30, 2022 | Nine months ended September 30, 2022 |
|---|---|---|
| Revenue | No revenue | No revenue |
| Research and development expense | $14.3 million | $33.8 million |
| Selling, general and administrative expense | $6.8 million | $23.9 million |
| New warrant expense | $17.4 million | $104.8 million |
| Operating loss | $38.6 million | $162.5 million |
| Net loss | $36.7 million | $154.0 million |
| Basic and diluted loss per share | $0.14 | $0.62 |
| Operating cash used | Not presented for the quarter | $38.7 million |
At September 30, 2022, Eve reported cash and cash equivalents of $77.9 million, financial investments of $170.4 million, and a related-party loan receivable of $81.6 million, against total current liabilities of $28.0 million. Total assets were $333.5 million, stockholders’ equity was $304.7 million, and the company reported no outstanding debt. The $81.6 million receivable is from majority stockholder Embraer Aircraft Holding, Inc. (EAH); the loan bears 4.89% interest and is due August 1, 2023, subject to possible extension.
For the nine months, investing cash outflow was $250.4 million, principally purchases of investment securities and the related-party loan. Financing cash inflow was $352.7 million, primarily from the business combination and PIPE investment, net of costs. Cash increased by $63.6 million. Profit margins are not meaningful because the company has not begun generating revenue.
Changes versus the prior comparable period
Compared with the restated 2021 periods, nine-month R&D expense increased from $6.6 million to $33.8 million, and SG&A increased from $3.3 million to $23.9 million. Management attributed the increases primarily to higher staffing, engineering and supplier costs, development of the Proof of Concept 1 vehicle and UATM, public-company costs, and transaction-related expenses. The 2022 nine-month loss also included $104.8 million of New Warrant expense, a major driver of the reported loss; the filing describes these warrants as equity-classified, with no subsequent remeasurement while classification remains unchanged.
The 2021 comparative financial statements were restated to record certain transaction costs paid by Embraer and EAH that should have been reflected in Eve’s statements. The restatement added $0.4 million of expense for the 2021 third quarter and $2.0 million for the first nine months of 2021. Prior-period figures in this filing are marked as restated.
Outlook, risks and unusual items
- Management said business-combination proceeds were expected to fund its current operating plan for at least the next 12 months. Eve nevertheless expects continuing losses and negative operating cash flow and may need additional equity or debt financing; further funding may be unavailable or dilutive.
- Management anticipated service-and-support commercialization beginning in 2023, projected fleet operations, service-and-support and UATM revenue in 2024–2025, and initial eVTOL sales revenue beginning in 2026. These are forward-looking expectations, not assurances.
- Key execution risks include eVTOL development, production costs and ramp-up, regulatory certification and timing, market adoption, competition, infrastructure readiness, aircraft safety and utilization, and reliance on Embraer-related service arrangements. Brazil-related currency, interest-rate and political-economic risks, as well as COVID-19 effects, are also discussed.
- In September, United Airlines Ventures invested $15 million for 2,039,353 shares at $7.36 per share and received warrants subject to agreement terms and milestones. United exercised 2,722,536 warrants for shares on October 6, 2022.
- In December 2022, Eve announced support from Brazil’s BNDES for two proposed credit lines totaling approximately $92.5 million. Funding remained subject to conditions and execution of definitive agreements.
- Disclosure controls were ineffective as of September 30, 2022 because of material weaknesses in accounting for complex and unusual transactions, financial instruments, stock-based compensation, transaction costs, accruals and financial-statement presentation. Management was developing remediation plans. The filing reports no legal proceeding believed likely to have a material adverse effect.
Investor verification checklist
- Confirm the restated comparative figures and the nature, timing and future accounting impact of New Warrants.
- Review liquidity assumptions, expected cash use and financing needs against the stated commercialization timelines; distinguish announced BNDES support from completed financing.
- Assess the terms, collectability and related-party governance of the $81.6 million EAH loan, including its maturity and extension provisions.
- Track progress toward certification, prototypes, production readiness and conversion of non-binding aircraft letters of intent into binding orders.
- Monitor remediation of the disclosed material weaknesses and whether disclosure controls become effective.