JOBY - NYSE

Greetings, and welcome to Joby Aviation's First Quarter 2024 Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Teresa Thuruthiyil, Joby's Head of Investor Relations. Please go ahead.

Thank you. Good afternoon and evening, everyone. Welcome to the Joby Aviation conference call to discuss the company's financial results for the first quarter of 2024. We announced our results earlier today, both our Q1 2024 shareholder letter and a webcast of this call are available online at the Investor Relations page of our website at ir.jobyaviation.com. 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. Please note that today's call will include results reported on a non-GAAP basis. Our Q1 2024 shareholder letter provides a reconciliation between GAAP and non-GAAP measures. On the call today, we have JoeBen Bevirt, Founder and Chief Executive Officer; Paul Sciarra, Executive Chairman; Didier Papadopoulos, President of Aircraft OEM; Matt Field, Chief Financial Officer; and also joining us today is Bonny Simi, President of Operations. After management's prepared remarks, we will open the call for questions. And with all of that said, I'll turn the call over to JoeBen.

Thank you, Teresa, and thank you all for joining us this afternoon. I'm pleased to say that we had a remarkable first quarter of 2024, packed with sector-leading progress across all 3 of our focus areas: certification, manufacturing and commercialization, keeping us on track to start commercial operations next year. I hope those who follow our results are starting to see a pattern. The Joby team and the Joby approach continued to deliver quarter-over-quarter, year-over-year with dependable results and credible time lines. Didier is going to unpack our progress on certification in a minute, but I'd like to draw particular attention to the fact that we've started submitting our first system-level test plans. These are a key part of the fourth stage of the type certification process and demonstrate the maturity of our certification program. Joby was the first air taxi company to complete the first, the second and the third stages of the FAA type certification process. And this quarter, we became the first and so far only air taxi company to have our final airworthiness criteria or G1 certification basis published in the Federal Register. The progress we've made, particularly in completing Stage 3 is central to allowing us to proceed with full confidence in our design and approach. Supporting our certification program is a tremendous amount of testing as thousands of individual parts, subsystems and full assemblies are put through their paces. At Joby, the vast majority of this takes place in-house. As Didier will explain, this approach allows us to move with significant pace and agility, particularly through the fourth stage of certification, which is focused on testing. Our engineers are able to get real-time feedback on the performance of the parts they're working on by literally walking up to their colleagues and chatting with them face-to-face instead of relying on distant third parties. We have developed these testing facilities over several years and believe they are central to achieving our goal of starting commercial operations next year. Our flight test campaign also plays an important role in achieving those goals, and I'm pleased to say that after more than 4 years of flying full-scale preproduction aircraft, we've accomplished everything we set out to do with these aircraft and more. As our focus shifts to flying our production prototype aircraft, our second preproduction aircraft will now transition over to its next life as an R&D asset, having flown more than 25,000 miles across more than 750 flights, including more than 100 with a pilot on board. It was the first air taxi to fly in New York City and at completing testing that has benefited the wider industry, including precision landing tests with the FAA and acoustic testing with NASA. I'm incredibly proud of the team that looked after and flew our 2 preproduction aircraft, and we look forward to focusing our resources on our increasing fleet of production prototype aircraft. As we continue to make sector-leading progress on certification, we're matching it with equal progress on manufacturing. Our second production prototype aircraft rolled off the line last week and will now enter our test program. And by the time of our second quarter call, we expect yet another aircraft will have rolled off the line, meaning we'll have 4 full-scale aircraft in our test fleet. To support our ramp-up in production, we acquired an existing facility in Dayton, Ohio and broke ground on the expansion of our pilot production line in Marina, California. The new building in Marina will more than double our existing footprint, providing the space for us to deliver up to 25 aircraft per year. The facility in Ohio will initially support our operations in Marina and is the first step on our journey to develop facilities capable of delivering up to 500 aircraft per year. We believe this stepwise approach to expansion is the smartest way to deploy capital, and we're grateful for the continued support of Toyota as we plan our approach to scale manufacturing. As well as working side by side with the Toyota team on a daily basis, we were pleased to welcome a number of executive level visits from Toyota during the quarter, including Shiga-san EVP of production engineering and manufacturing at Toyota North America; Kaita-san, president of the Advanced Engineering Development Center at TMC; Uehara-san, president, Powertrain Company at TMC; and [ Kamata-san ], president, Commercial Vehicle Company at TMC. And what I'd love about these visits is that they really speak to the spirit of the Toyota team. Toyota is a company led by engineers who want to be out on the production line, looking at every detail, every process and every part just like us. I'm incredibly grateful for their support. And as we grow our production, the value of our relationship will only increase. Turning to our third area of focus, commercialization. We again made great progress in the quarter. On the domestic side, we continue to work on securing infrastructure in our key target markets of Los Angeles and New York, while on the international side, we signed a multilateral agreement with 3 Abu Dhabi government departments, the Department of Municipalities and Transport, the Department of Economic Development and the Department of Culture and Tourism. This agreement identifies government support for establishing and scaling air taxi service in the Emirate and builds on last quarter's announcement that we have secured the exclusive right to operate air taxi services across the Emirate of Dubai for 6 years. The agreement also opens the door to inter Emirate services and flights across the wider UAE. We also widened our partnership with the U.S. Air Force, announcing that we plan to deliver 2 aircraft to MacDill Air Force Base in 2025 as part of our $131 million contract with AFWERX. McDill is home to the U.S. Special Operations Command, U.S. Central Command and units from the Air Mobility Command and this deployment will mark our first opportunity to work directly with operational units from the DoD. Our work with the DoD is just 1 of 3 distinct pillars that make up our go-to-market strategy alongside our work with Delta in the U.S. market and with a range of partners in international markets, including Dubai. As I said at the outset, the Joby team continues to deliver sector-leading progress across certification, manufacturing and commercialization. There is another important piece of the puzzle, however, that hasn't received much attention to date and where Joby is also leading the way. That's the work we're doing to prepare for operations. To put it bluntly, you can certify an aircraft and you can build a production line for the aircraft. But without the backbone of the operations work, you won't be able to operate your aircraft effectively, if at all. And to be clear, this is work that has to be done, whether you intend to operate the aircraft yourself or sell it to a third party. We've been working on this topic for several years now from writing a pilot training curriculum and running a Part 135 operation to maturing the software stack we brought across from Uber Elevate when we acquired that division and welcomed their incredible team. And I'm glad Bonny is joining us today to highlight some of that work. Bonny has a remarkable amount of experience in airline operations and has been working with Joby since 2017, first as an investor and more recently as our President of Operations. And like Didier and Matt, she is the longest-standing executive in her position across all of the publicly traded companies in the sector, which speaks volumes about the strength of our team and our commitment to delivery. Last quarter, we set out our goals for 2024, and I'm pleased to say we're on track to deliver them. It's Joby's unique vertically integrated approach that ensures we continue to deliver on these goals at pace. There is a trend amongst the companies intersector to highlight how they're taking risk off the table by relying on the traditional aerospace supply chain. But at Joby, we believe the opposite is true. We don't outsource 80% of our parts. We don't outsource the majority of our testing. We don't rely on others to build an operational software stack. We do these things ourselves, not because we're perfectionists, but because we're pragmatists. If you outsource 80% of your supply chain, you give up control of 80% of your product, you can only be as fast as your slowest supplier and your product is only as reliable as your least reliable supplier. As we see other traditional aerospace companies, reintegrating suppliers to address current issues, it's clear that in a new sector like ours, where the certification basis has only just come together where we're building aircraft that has never existed before using parts that have never been combined before. We need a level of responsiveness of agility of responsibility that you just cannot get when you outsource everything. That approach won't be cheaper. It won't be faster, and it won't be better. It obscures risks and results in evolutionary change instead of the revolutionary change we're looking for. At Joby, we're building a different sort of aviation company, one where we're in control of the quality and speed of manufacturing where we benefit from shared learnings amongst our team and we're able to prioritize the best possible performance and best possible experience for our customers. We are building a next-generation aviation company and to talk more about our progress on that front, I'm going to hand it over to Didier.

Thank you, JoeBen. It is such a pleasure to be part of building this next-generation aviation company. In my 15 years at Garmin, I saw repeatedly how vertical integration leads to superior products and a durable advantage in the market. But joining Joby 3 years ago, completely blew me away. The amount of cross-functional design, manufacturing and testing that we're completing under one roof is truly unique, not just in aerospace, but to all hardware, software, development and production. Every day, I see our approach paying off, saving us kilograms of weight, weeks of schedule and thousands of dollars on our bill of material. I truly believe there is no other aviation company on the planet with as much depth and breadth of in-house engineering knowledge and capabilities as we have here at Joby. And that's an investment that we believe will have compounding returns over time. This is no coincidence. It is a result of carefully weighing the decision to in-source or outsource each component across the aircraft. We do have a number of strategic supplier partners, including Garmin, Toray and Toyota, where we're able to identify partners with the right values and long-term view, we have invested in deep relationships that are key to our success, but we won't compromise on agility, cost, performance or quality. And our approach continues to result in a leadership position across our industry. As JoeBen mentioned, this quarter, we became the first and remain the only electric air taxi manufacturer with finalized airworthiness criteria from the FAA. As we stated last quarter, the final G1 resulted in no design changes and allows us to move ahead in Stage 4 with confidence. It's also the foundation of the progress we're making for all 3 of our path to market, commercial launch in the U.S., deployment with the DoD and launch in Dubai, where we're working with the UAE's General Civil Aviation Authority to leverage the documentation and testing we're doing for the FAA. Having our finalized airworthiness criteria is a really fundamental step. As we said before, it does mean that both we and the FAA have additional paperwork to do as we work through refinements to our means of compliance and certification plans. We believe we are on track to close all these by next quarter and expect our progress in Stage 4 to accelerate in the back half of this year. While we complete that work, this quarter we continued to progress at pace on Stage 4, building on the learnings from our Pathfinder testing and test plan submittals at the end of last year. We submitted to the FAA equipment level test plans covering the control surface actuators, pilot inceptors, mission display computer and vehicle navigation computer plus many structural elements of the aircraft. We're now preparing to perform for-credit testing on many of these test articles. Also part of Stage 4, we submitted 2 qualification plans related to the aircraft's energy storage, covering the charge port and pump and battery control and distribution. And in a huge win for the team, we continue to move up the aircraft testing pyramid tiers with a submittal of our first system-level test plan. As a reminder, we conduct testing at every level of the aircraft from individual components to full vehicle, and we're making progress at multiple levels of the pyramid simultaneously. This test plan covers the functions of our unique low workload flight controls and vector thrust propulsion system, and it's a perfect example of why vertical integration is key to our success. With the design and development of the software and hardware for both flight controls and propulsion completed in-house, we've been able to optimize and efficiently manage all of this as one integrated system, making progress much faster than an integrator between a whole host of partners. This has proven to be true across our entire aircraft. The more pieces of the puzzle we have direct control over, the faster we can identify elements of our hardware or software that need improvement, and we can deploy solutions that are optimized for our needs. That's precisely why this quarter, we completed several upgrades to our in-house testing capabilities that are critical to our certification campaign. We developed and installed new tilt, variable pitch and control surface actuation load test stands in support of test plans covering our actuators as well as our integrated flight and propulsion system. In support of the battery qualification plan submitted this quarter, we brought online a state-of-the-art battery test building that can safely house routine thermal runaway testing for showing FAA compliance. And in the next few weeks, we expect to submit our second system level test plan, covering the endurance of our propulsion system, which is why we have upgraded our propulsion system test stand or Whirly, a remarkable test asset unique to Joby that you can see in action in our shareholder letter. We've enhanced Whirly to operate at higher speeds and test across a wider spectrum of the flight envelope, thereby recording even more data for use with the FAA. Testing is a muscle, much like manufacturing and operations, and it's a critical part of the safe development and certification of new aviation technology. It is the only way to completely understand all safety and performance parameters of a design. And by doing the majority of our testing in-house, we're not only able to provide faster feedback to our design and manufacturing teams, but also have perfected our testing facilities and processes alongside our aircraft. I am proud of the team for delivering on these mature test assets that we know will accurately and efficiently give us the data we need to demonstrate the safety and performance of our aircraft, including for FAA credit. Of course, the ultimate test for any aircraft program is flight testing with a full-scale representative aircraft. This quarter, we successfully completed our pre-production prototype flight test campaign after logging more than 1,500 flights and 33,000 miles with our 2 aircraft. I want to provide a little more details on what we've learned from our 4 years of constant flight on full-scale representative aircraft because this comprehensive flight testing uniquely positions us for success across certification, manufacturing and preparing for operations. First, we have developed a world-class flight test team. Our pilots, flight test engineers and maintainers are now highly experienced at safely and efficiently executing the different types of flight tests that will be needed for certification. This is critical as we move to the next phase of our program, where we will use our production prototypes to dry run all of the flight testing we will then perform for FAA credit. Second, we have validated our design, including elements such as human factors and handling characteristics by flying at high speeds and altitude, different states of charge and a range of weather conditions. We collected all these learnings into our models, components and systems. The resulting improvements have already been designed into the parts we're producing now. Third, we gathered extensive testing data that informs the Stage 4 test plans we are writing and submitting to the FAA, which we believe sets us up to have those documents accepted in short order. Fourth, we have fed learnings into our operations and maintenance program, both for test certification requirements like manuals and to inform our airline operations that Bonny will speak to more in a moment. 10 pilots have flown a Joby aircraft through transition, including the 4 U.S. Air Force pilots who trained with us in Marina last year. We have fine-tuned our pilot training course to safely prepare commercial pilots to fly the Joby aircraft in about 6 weeks. We're developing tools that continuously monitor the health of the aircraft systems based on operational flight data, which will be key to efficient operations at scale. And finally, we've been able to uniquely contribute to and shape the formation of our industry by providing regulators with real, practical data on aircraft characteristics like outwash and precision landing that would inform standards being developed for the broader industry on infrastructure and operations. I want to thank and congratulate the entire team on 4 years of incredibly successful flight. In closing, I want to touch on the remarkable progress our team continues to make on ramping up our manufacturing capacity. We've always taken a pragmatic approach to scaling manufacturing, and that approach is already paying off. Last week, we rolled our second production prototype of the line in Marina, and we have 2 more aircraft close behind in final assembly. As we go through each build cycle, we're learning and improving many parts of our manufacturing processes to shorten build time, improve quality and reduce waste. These are key ingredients for successful economical production at scale, and we're building them into our processes now rather than when we have already made much more significant capital investments. We are on track to achieve an annual production rate of 12 airplanes worth of components by the end of this year. To reiterate, some of these will be complete aircraft and others will be parts used for development and certification testing, which requires us to shake, bake and break many parts as we demonstrate they meet their requirements. To get to the next step, we've begun work on a significant facility expansion in Marina. The new building will more than double our manufacturing space at the airport, allowing us to target 25 aircraft per year as we continue to develop facilities in Dayton, Ohio that will support us in our goal of producing up to 500 airplanes a year. At the same time, we're expanding our conforming production to support for-credit testing. In addition to ramping production of conforming fight electronics, this quarter, we began assembly of our first FAA conforming tail, which will be used as a structural test asset in for-credit testing later this year. This progress is underpinned by the maturity of our quality management system, which continues to evolve towards meeting all FAA requirements for us to receive a production certificate. From testing to certification and manufacturing, the Joby team continues to knock it out of the park, and I am so, so proud to be part of the team that's doing the hard work to bring to market the right aircraft for our mission. I'll now hand it off to Bonny to discuss how we're preparing for what comes next.

Thank you, Didier. It's a pleasure to be here to introduce our work on operations. As JoeBen said at the outset, there's a significant amount of work that needs to be completed before anyone can operate this new type of aircraft. You can achieve type certification and build a fleet of aircraft. But without items like FAA certified full-motion simulators, FAA maintenance and operating certificates, FAA approved pilot training programs and safety management systems. You won't be able to run a commercial aviation service. Some of those items like maintenance procedures and manuals are actually a prerequisite for type certification. And to be clear, these requirements don't go away if you intend to sell the aircraft. Any operator will need every one of these systems in place in order to launch even a basic operation. In 2020, when I joined Joby full time, we sat down and mapped out the full set of requirements to start operations, and we've been working on them ever since because we realized that many of them like simulators have a long lead time, more like pilot training programs could not be bought off the shelf. Now that we have a clear line of sight to start of commercial operations, we thought it would be valuable to touch on the work that we've already completed and the milestones that lie ahead. Next month, we plan to host a teach-in session, where we will cover this topic in more detail. But for now, I'd like to introduce the broad themes. Our work to repair for early operations can be divided into 3 categories: FAA authorizations, infrastructure and software, with safety as a common thread underpinning all 3. When we say infrastructure, we mean the development of standards for landing sites and the landing sites themselves, the development of charging solutions, of ground handling processes and decisions about aircraft storage and shipping as well as the location and build-out of maintenance and simulator facilities. And by software, we mean scheduling tools, the pilot flight planning tools, the customer interface, the maintenance tracking, the data links to the aircraft and so much more. Just like for Didier on the certification side of the business, for operations, the long pole in the tent is FAA approvals and certifications, and this is where we are focused in the near term. By pulling ahead our work on operations, we're able to derisk our go-to-market strategy and ensure we have the right foundation in place to scale. In order to fly an aircraft for commercial passenger use, there's an extensive list of requirements and federal certifications that you need, including a Part 135 operating certificate that allows you to carry passengers for revenue, a Part 145 maintenance certificate that allows you to efficiently maintain and repair the aircraft as approved under its type certificate. Simulators that are certified under Part 60 to be used to train pilots for commercial operation and FAA approved pilot and maintenance training programs. These are all in-depth processes that require years of work to get across the line, and we've made excellent progress on each. In May of 2022, we were awarded our Part 135 operating certificate, enabling us to use conventional aircraft to simulate, test and iterate on our future airline service even before we have the Joby aircraft ready to take passengers. We received our Part 145 maintenance certificate earlier this year. Another item we've been able to tick off the list in advance. We've been working for years with our partner, CAE, which we announced in March of 2022 to develop Part 60 full-motion simulators, and we're developing the certification plan to submit to the FAA. As Didier mentioned, we're developing our pilot training program and testing it with the U.S. Air Force. This will form the foundation of our commercial pilot training program. With both our 135 and 145 certificates as well as the simulators in place, we'll be able to get the Joby aircraft into service more quickly. Last but certainly not least, safety is at the core of everything we do at Joby. Just last month, the FAA announced a requirement for safety management systems, or SMS, for all 135 operators, and our SMS has already been accepted by the FAA into their voluntary SMS program. We're also the first and only in our industry to pass the Stage 1 International Standard for Business Aircraft Operators IS-BAO audit, an important external validation of the preparation we've done to operate safely. While these FAA authorizations may seem like a number soup, I hope that you'll take away is the significant amount of work that's well underway at Joby to ensure that we're ready for operations on day 1. Last week's announcement regarding the expansion of our operations in Marina is also a key part of this work. As this building will host our expanded pilot training and flight simulation center as well as aircraft maintenance facilities that are designed to support the scaling of Joby's commercial operations. We're always looking ahead and making sure that we're taking the most efficient route to starting commercial operations while putting safety at the center of everything we do. The work done by our operations team is central to this and is another area where Joby is leading in the sector. All of these preparations are well underway as we target operations in Dubai in late 2025. I look forward to unpacking these topics next month in more detail at our teach-in session on operations. And now I'll hand it over to Matt to cover financials.

Thanks, Bonny, and good afternoon, everybody. As you've heard from the team today, we continue to lead the industry across all elements of our business: certification, manufacturing and commercialization. We also continue to lead the industry in having the strongest balance sheet. We ended the first quarter of 2024 with cash and short-term investments totaling $924 million, right in line with the guidance we shared for the year. This represents a use of cash totaling $108 million, reflecting our measured pace of growth and investments. Also as a reminder, we had an extra pay period in Q1, which results in a higher cash outlay for the quarter. We incurred a Q1 net loss of $95 million, reflecting a loss from operations of about $146 million, offset by interest and other income of $51 million. Our net loss was lower by $21 million compared to the prior quarter, reflecting a higher favorable revaluation of our warrants and earn-out shares, partly offset by a higher net loss from operations. Increased operating expenses in the first quarter reflected a continued measured pace of investment in our certification and manufacturing personnel and operations, lower sequential payments from government contract deliverables and higher stock-based compensation expenses at the start of the fiscal year. In terms of revenue, we mentioned last quarter that we would expect it to be somewhat lumpy as our work gets underway with the DoD, and we expect revenue to grow along with our flight hours throughout the year, especially as we look ahead to the delivery of our second aircraft to Edwards Air Force Base. Adjusted EBITDA, a non-GAAP metric that we reconciled to our net income in our shareholder letter was a loss of $110 million in the first quarter. This was about $14 million higher than in the prior quarter, reflecting the higher operating expenses mentioned earlier. Our adjusted EBITDA loss was $35 million higher than in the same period last year, reflecting the growth in our organization, expenses to support manufacturing and certification, lower DoD contract deliverables and higher production volumes as we ramp up manufacturing on our way to an equivalent of 12 aircraft per year as we exit 2024. As mentioned at the outset, we ended the quarter with $924 million in cash, cash equivalents and short-term investments. Our primary use of cash in the quarter was to support our operations, where we continue to invest in our certification efforts, manufacturing and early go-to-market initiatives, which Bonny highlighted. We spent about $7 million on property and equipment, which includes investments in test equipment assets that Didier mentioned earlier and the acquisition of our facility in Ohio. We continue to maintain a disciplined approach to our spending and to the growth of our company as we supplement our certification work with measured go-to-market initiatives in advance of commercialization next year. As always, you can expect us to continue to align our investments with the growth of the business. Accordingly, we remain on track with our full year cash spending outlook of $440 million to $470 million. This concludes our prepared remarks, and we look forward to having you join us for the teach-in on operational requirements with Bonny in June. Operator, would you please instruct participants on how to ask questions.

[Operator Instructions] And our first question comes from the line of Andres Sheppard with Cantor Fitzgerald.

Congratulations on the quarter. JoeBen, I want to maybe start with the UAE. Obviously, a lot of movement and partnerships there. Curious to get your thoughts, it almost seems fundamentally that the industry is perhaps moving more and more to ramp up commercialization there faster than in the U.S. Now obviously, this is still contingent on certification. But just curious, your thoughts on how you see the marketing developing and particularly in the near term. I get the sense that it's becoming maybe more and more scalable faster. Just curious to get your thoughts.

Thank you, Andres. Great to hear from you. So we are seeing fantastic lean in from all the different government agencies in the UAE, and we're very grateful for the support across the regulatory side, the infrastructure side and yes, very excited about the momentum. I would say that all of the work that we're doing there is built upon the foundation of the work we've been doing for the last 6 years plus with the FAA and leverages everything that we're doing on Stage 4 of the certification basis. So this is really a box plus 1 opportunity for us. In addition to the fantastic work we're doing with the DoD as we prepare to take 2 aircraft to MacDill Air Force Base in Florida.

Maybe just a quick follow-up. Curious if we have a time line as to when you would expect to roll out the -- maybe the first conforming aircraft and how close are we to transitioning that conforming aircraft with a pilot on board?

Andres, thanks for the question. On that front, aligned with what we communicated in the previous quarter in terms of our road map on that front, maybe I reiterate, there are 3 key things that are required to make progress on conformity. One, making sure that we have our design released and submitted and accepted by the FAA. 2, is developing our conforming manufacturing line so that we can build to those designs. And then 3, progressing towards Stage 4, where you actually have the test plans against what you're going to execute with your test assets. As a reminder, there's no way around those 3 things. And that's been our focus. And as you can see, we've been able to make progress on all these fronts and pretty happy with that. Now on you execute on these in 3 tiers, right? One, if we think about the pyramid we've talked about before, the components, the systems and then you move into the aircraft. We've talked about a lot of the component development and execution last year and how we're building on that this year, having submitted additional test plans on more components. But also now we're moving into the system level tier of that pyramid and again, making progress on that. So you should expect us to see -- continue to progress along that tier towards the tip of the pyramid, which is the aircraft in short order. We're well on track that we discussed in our road map last year.

And our next question comes from the line of Kristine Liwag with Morgan Stanley.

So look, it sounds like from your prepared remarks, things are progressing towards commercialization. Thank you for all the details you provided regarding your progress with the UAE. So I guess, for your first commercial mission, is this going to be an international route or with a country like the UAE? Or is this going to be U.S. based? Any color on that would be helpful.

Kristine, yes, we do see -- we do continue to see 2 really exciting paths forward, both here in the U.S., in New York and L.A. in partnership with Delta, as well as the path in the UAE and the really significant lean in from the GCAA to bring the opportunity for us to begin commercial service next year. So very excited about that. And again, on the DoD front, very pleased with the progress on that third pillar as well.

And then when we look at other routes like I'm sure as the aircraft is nearing certification, you're studying some of these routes a little closer. Do you have any updated view regarding price that you're going to charge for some of these routes? And then as you're evaluating U.S. and international opportunities, like what city pairs or within which cities and stops are you really looking at? What are the economics of that? Any additional detail about actual operations would be helpful.

Thanks a lot for the question, Kristine. This is Paul. We're obviously very much deep in the evaluation of routes to understand price elasticity and understand demand across them. And that goes for the geographies that we're looking at here in the U.S. and now more recently, both in Dubai and then more broadly across the UAE given the recent announcement. We don't have any updates to our broad thinking around economics, except to say both in the U.S. as we think about New York and L.A. And obviously, as we think about Dubai and the broader UAE, all of those are areas that have relatively high propensity to pay. They've got difficult, in many cases, very difficult infrastructure to navigate on the ground. So they're really sort of tailor-made locations as we think about the first few locations for launch. I mean, I think we're very much deep on the UAE side. So there are 14 million tourists there. There is a large number of sites across the various Emirates that are not so easy to access. And I think that, that demand profile is going to look very favorable, but we're not yet at a point where we're going to kind of talk about the specifics around what that's going to look like, although the work is ongoing, and we hope to have updates on that soon.

And the next question comes from the line of Savi Syth with Raymond James.

Just on the flight campaign. Can you talk about the type of flying that's been done on the preproduction aircraft versus the production aircraft including what are the differences between the 2, any notable differences between the 2 as you operate them?

Yes. Savi thanks for the great question. So the campaign that we just completed on the earlier airplane was obviously extremely successful, right, 1,500 flights, 33,000 miles, and it covered a lot of aspects in terms of aircraft performance, maintainability and so on that we talked about earlier. And one of the key things that it identified is that the fundamental design of the airplane is solid and it delivers on the mission that it has. The difference between that aircraft and the aircraft that we're producing right now from the manufacturing line, is that the airplanes coming out of the line right now are effectively being built under our production manufacturing line, following our quality management system, which really drives us and progresses us towards the production certificate, right? So as a reminder, we need a type certificate, a production certificate and operational certificates, right, that Bonny talked about. That production certificate element is one of the unique things and really exciting things to be exercising right now with the airplanes that are rolling out the line right now.

And then the type of flying is just kind of progressing the same way as you did with the first one?

Absolutely. Very similar type of flying between all these airplanes.

I was just wondering, we've gone from starving last year to feast this year on pilot availability for the mainline and cargo airlines. But generally, I think pilot supply is going to kind of remain tight over a longer period of time. So I don't know, Bonny, do you have any thoughts if Joby can be the solution for the Part 121 operators? And also just as you look to stand up operations, just how long before you launch operations, do you need to start building your own pilot supply?

Thank you, and it's great to be joining the team here on the call, and thank you for the question. This is definitely right down my alley. I was a pilot for 30 years, I know that the shortage has been a factor off and on for years. And -- but we're not concerned because for us, in the early years of operations, we're going to utilize what we call an initial cadre of experienced pilots that draw from a demand of 2 focus areas. One, there's a group of pilots, initial cadre who enjoy being part of new aircraft introductions. And so we -- even now, we constantly get outreach from pilots who want to be part of something new. And these are very experienced pilots. And then as a pilot of myself and as a mother, I know a significant number of pilots who really favor solutions of being home every night. Military pilots tired of being away from home and mothers and fathers trying to raise a kid. And so this is a solution for them. So there are many female pilots in particular, who opted out of -- they got their commercial pilots' license, and then they decided that it just wasn't going to work for them. So bringing them back into the fold. And then behind that group of several hundred pilots for our initial cadre, we're already building a pipeline of pilots. So we've got a Joby Aviation Academy, where we're building out a Part 141 program. We're starting with our employees and then ramping that up, so that will sync in time for us to scale the service. And yes, we actually look at, as our solution, as a piece of the solution for the broader 121 because pilots will spend a couple of years with us and some may move on to the airlines and some actually will find the lifestyle very favorable for them.

And the next question comes from the line of David

First one is for Didier, if I can just get a little more color on the electric storage qualification plans that you've submitted. Any feedback you've gotten from the FAA on that and what the plan is to progress along electric storage and propulsion certification kind of in the near term?

Yes. So in general, the electrical system distribution system has multiple test plans that we submit to the FAA. Some of them are associated with qualification and relating to the environment, for example, others are operational in terms of being able to manage the state of charge of the aircraft. So they vary in multiple areas. I think one thing that's really important relating to your question about the feedback is most of these have been in work with the FAA for multiple years, right? So for the most part, those are not things that we're dropping on the FAA for the first time here. They've been going back and forth with the FDA on multiple occasions. They are the result of not only discussions with the FAA but also more importantly, the result of actual flights that we've executed on the 2 airplanes over the past 4 years. So the results are really -- exchanges already positive with the FAA. In fact, just before this call, we were on a call with FAA discussing that as well as a visit. They're coming to Joby to discuss some of the remaining items. So overall, very, very positive. Maybe one last item on that. And that's what really gives us the ability and the commitment to go and invest in testing facilities like we've talked about a few minutes ago. The investments we have in our battery facilities are really a testament to the confidence we have with those test plans.

And if I could just follow up on an earlier question. Specific to the exclusivity in the UAE agreement, can you just give a little more on the level of exclusivity that you're expecting to see there out of the agreement? And then how that would play into the inter Emirate travel that I think you mentioned in the letter?

Yes. So again, we have a 6-year exclusive for providing air taxi service in the Emirate of Dubai. And that is granted to us by the RTA, which is the authority that has been given the purview to regulate air taxis. And so this is a partnership that we've been working on since 2018 -- 2017, 2018, and it's fantastic to seeing it coming to fruition and very grateful for Bonny and the operations team for leaning in on preparing for operations there. And also very grateful for Didier and the certification team on the work they're doing with the GCAA*8 to begin laying the groundwork for type certification. So again, we're very pleased with the progress in the UAE as we are very pleased with the progress that we're making here in the U.S. with the FAA and the excitement that we're seeing from countries around the world for this really important new technology.

And the next question comes from the line of Edison Yu with Deutsche Bank.

First one on [ SRT ]. I'm wondering if we have some sort of scenario analysis we can maybe share in terms of what kind of time line FAA may be on? I know it's a tough question to respond to, but it just seems things are definitely delayed and moving slower. So could you maybe share kind of some scenarios you could see on maybe when we could get to the finish line? And what would be the gating factors?

Yes. Thanks for the question, Edison. We remain very excited about the engagement on the FAA side and the progress that we're making on all fronts. Like we said earlier, a lot of our focus primarily this quarter has been in 3 key areas as it relates to FAA. One, we're really excited about the G1 being signed and published in the Federal Register. But as we said in the last quarter, this G1 came in with more prescriptive details on the showing compliance elements, which led to additional updates that were needed to the means of compliances and the area specific certification plans. So the FAA had to work with us to support some of these refreshes and we spent quite a bit of time making great progress on that front. Number 2, we continue to make progress on submitting test plans that I talked about earlier, which now covers a broader range of types of test plans we're submitting such as equipment and system level test plans. But third and probably most importantly for me, a lot of the work has been going on, on really upgrading a lot of the test assets that we have here, which is really, really essential. When you think about the level of vertical integration at JOBY, which is really unique to our success story and then our plans and ability to deliver and execute on these in the second half with Stage 4. Those were some amazing achievements and effectively where we spent a lot of our time purposefully this quarter.

A follow-up on Middle East and actually just one international. I know we're not giving any specifics on the assumptions or the economics. But in terms of the go-to-market or the business model at a high level, is this something -- are you planning to, for example, in the Middle East to operate it, to sell it direct? How do we think about just how the go-to-market will look like or the business model will look like?

Thanks a lot, Edison. This is Paul. So with respect to our planned operations in Dubai, we're going to be doing a lot of the work with respect to both operating those aircraft. That's in line with the agreements that we've made with RTA, and we expect that to extend across the Emirates as we think about expanding that service. So that's going to look really similar to how we think about commercial operations here in the U.S. Now all that said -- and there may have been some sort of misinformation or sort of misconstrual from some folks on this. We've always been very flexible as we think about what is the right way to commercialize. So when we think about customers like the DoD, for example, that is very much going to look like over a long arc something like a sale of aircraft with sort of ongoing maintenance and support that's sort of recurring on the back end. So Joby has 2 different ways that we're thinking about going after the market, some cases where we're likely to be very vertically integrated, we're actually doing the operations ourselves and a set of customers and potentially geographies where our commercialization looks a lot more like aircraft sale. And you've already seen that really play out in the way that we're thinking about, say, the UAE market and in turn, the DoD as a customer, and we're going to maintain that flexibility as we think about continuing to expand our modes of commercialization over the next 12 to 18 months.

And our last question will come from the line of Austin Moeller with Canaccord Genuity.

Just my first question here. Can you differentiate the key hardware differences between your previous viable prototypes and the current production series aircraft that are rolling off the line of Marina now?

Yes. Austin, this is Didier. Great question. So the differences between some of the electronics components, for example, or the actuation systems are primarily, I would say, evolutions between the previous aircraft and the ones coming out of the manufacturing line. The vast majority of these fit in primarily, I would say, 2 categories. One is expanding, for example, the environment or the flight envelope for these pieces of the equipment. So think about temperatures, for example, vibration and so on. And the other set is really associated with learnings that we've collected over time relating to expanding, for example, the reliability aspects of these equipments. So the changes are, again, an evolution based on the 4 years of collected data from those 2 airplanes.

And any updates on your relationship with Toyota and if or how they might become the contract manufacturer over time, while you're running flight operations.

Yes. So as I mentioned -- this is JoeBen. As I mentioned, the partnership with Toyota has been incredibly valuable for us. They've had team members on site with us here in California since 2019, and as well as an incredible team working alongside us back in Japan. And I think, as many of you know, Toyota is one of the most incredible companies in the world when it comes to manufacturing very complex systems at very large scale with just spectacular quality. And so having them working shoulder to shoulder with us as we're -- we planned our manufacturing expansion in Marina as we're looking to the layout of our Phase 1 manufacturing facility and planning for that. And then even looking beyond that, they are the best partner that I could ever imagine. And it was, as I mentioned, incredible to have Shiga-san as well as Kaita-san and Uehara-san, all join us and visit us this last quarter. We couldn't be more pleased with the support that we're receiving and optimistic about the path in the future alongside Toyota as we shift to -- from a development phase into a scaling phase. And I think -- is that our final question? Should I -- so I think just as we -- in closing, I would like to talk about what an incredible opportunity that we see in front of us as a company. We are so proud of the team we're building and the way that we're approaching building this new industry. We think that our vertical integration is our superpower. And that the -- I think of this very into the early days of automotive in the late 1890s and where we were making cars in very small volumes. And I see the decades that lie ahead of us as incredibly exciting as we take to the air as a civilization. And so I'm really, really pleased with the team we're building, the culture we're building and the technologies we've developed and really look forward to talking to you all again next quarter. Thank you all so much.