Joby Aviation, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Joby is developing electric vertical takeoff and landing aircraft and plans to operate an air transportation service. It reported no revenue for the periods presented.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Research and development expense | $100.6 million | $73.9 million | $264.9 million | $220.1 million |
| Selling, general and administrative expense | $27.6 million | $23.3 million | $78.9 million | $70.7 million |
| Operating loss | $128.2 million | $97.1 million | $343.9 million | $290.8 million |
| Net income (loss) | $1.5 million | $(79.2) million | $(397.9) million | $(191.1) million |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $(230.5) million | $(182.8) million |
- Q3 net income reflected a $116.1 million gain from remeasurement of warrant and earnout liabilities, plus $13.6 million of interest and other income. These items offset the operating loss; the reported profit does not indicate operating profitability.
- At September 30, cash, cash equivalents and short-term investments totaled $1.113 billion. Total assets were $1.350 billion; total liabilities were $240.3 million and stockholders’ equity was $1.109 billion. The filing reports no conventional borrowings; liabilities include $64.7 million of warrant liabilities and $94.6 million of earnout-share liability.
- Cash, cash equivalents and restricted cash increased by $331.1 million over the first nine months, including $280.0 million net proceeds from common-stock financings. Capital spending on property and equipment was $22.7 million. Management said available cash and investments should fund working capital and capital requirements for at least 12 months.
- Margins are not meaningful because the filing reports no revenue. Accumulated deficit was $1.133 billion. Common shares outstanding were 694.7 million at September 30, versus 622.6 million at December 31, 2022; 696.3 million were outstanding October 31.
Changes versus comparable periods
- For Q3, operating expenses rose 32% year over year, principally from increased engineering, software development, manufacturing-process and certification staffing and prototype materials. The Q3 net result improved from a loss to slight income, mainly because the fair-value gain on warrants and earnout shares was much larger.
- For the first nine months, operating expenses increased 18% and operating cash used increased by $47.7 million year over year. Net loss more than doubled, reflecting an $86.7 million fair-value loss on warrants and earnout shares versus a $72.1 million gain in 2022, and the absence of $19.0 million of prior-year SummerBio equity-method income. Higher interest income partly offset these items.
- Cash and short-term investments combined were $1.113 billion, up from $1.057 billion at December 31, 2022. The increase includes proceeds from 2023 equity offerings: $180.2 million net from a registered direct offering and $99.9 million net from an investment by SK Telecom.
Outlook, risks and unusual items
- Joby delivered its first aircraft for initial U.S. Department of Defense service operations in Q3 2023. Management’s goal is to begin commercial passenger operations in 2025; it expects initial government operations to precede service in selected metropolitan areas.
- The company says cash should support expansion of initial service operations in 2024, but expects continuing losses and negative operating cash flow until sustainable commercial operations. It may need additional equity or debt financing; equity financing could dilute shareholders.
- FAA certification and regulatory timing remain key uncertainties. The FAA was expected to finalize eVTOL operational regulations in late 2024; delays, changes to certification requirements, or delays in other approvals could postpone commercial launch.
- Other risks include uncertain demand for urban air mobility, competition, manufacturing scale-up and costs, supplier and talent availability, and aircraft utilization. Government contracts may be modified, curtailed or terminated. Agility Prime and related U.S. government contracts had potential value exceeding $131 million through 2026.
- Joby reported $13 million of unconditional purchase obligations with remaining terms over one year, primarily for aircraft parts through 2028. It reported no material legal proceedings as of September 30, 2023.
- Disclosure controls and procedures were deemed ineffective because a previously reported material weakness had not been fully remediated. The remaining issue concerned insufficient accounting resources with deep technical-accounting expertise; remediation still required validation and testing over sustained reporting cycles.
Important facts for investors to verify
- Progress against FAA aircraft certification and operational-rule timelines, including any updates to the targeted 2025 commercial launch.
- Whether aircraft production, certification, infrastructure and operating costs stay within available liquidity, and the timing and terms of any further financing.
- Underlying cash burn and operating progress apart from noncash fair-value changes in warrants and earnout liabilities.
- Service readiness and economics, including government-contract performance, expected aircraft utilization, customer demand and the path to revenue.
- Remediation and independent validation of the material weakness in internal controls, along with the potential dilution from outstanding awards, warrants and future equity issuance.