Yahoo Finance Lilium N.V. (NASDAQ:LILM) Q1 2024 Earnings Call Transcript
Lilium N.V. (NASDAQ:LILM) Q1 2024 Earnings Call Transcript June 11, 2024
Operator: Good day and thank you for standing by. Welcome to Lilium's Q1 2024 Business Update Conference Call. At this time, all participants are in listen only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I’d now like to hand the conference over to your first speaker today. Please go ahead.
Rama Bondada: Good afternoon and good morning, everyone. My name is Rama Bondada, I am Lilium’s Global Head of Investor Relations. Welcome to our first quarter 2024 business update. With us today for the presentation, we have our Chief Executive Officer, Klaus Roewe; and our Chief Financial Officer, Johan Malmqvist. Our Chief Commercial Officer, Sebastien Borel, and our Co-Founder and Chief Engineer for Innovation, Daniel Wiegand, will also be with us to answer questions after the presentation. Please note that a recording of the conference call will be posted on Lilium’s Investor Relations page soon after this event. As a reminder, this morning we posted our Q1 2024 shareholder letter on our website and we invite you to take a look.
Before handing over to our first speaker, let me just point out that our presentation will include forward-looking statements within the meaning of the United States Federal Securities Law that are subject to risks, uncertainties, and other factors that could cause Lilium’s actual results to differ materially from such statements. Please refer to the cautionary statement in our shareholder letter and the risk factors discussed in our filings with the U.S. Securities and Exchange Commission for more information on these risks. So without further ado, let me hand it over to Klaus. Klaus?
Klaus Roewe: Thank you, Rama. Great to join you all on this call today. Coming back from recent air shows in Geneva and Berlin and the many meetings there with customers, suppliers, and other industry players, and in particular highest ranking politicians from different countries, it's clear we have a product that really stands out. A product that fascinates and draws in the crowds. What's maybe less understood are the very unique qualities of Lilium as a company, our approach, our business model, and our core technologies. I see five main differentiators that set us apart from the rest of the eVTOL industry. First, we have a management team that has previously been involved in the design, development, certification, production, entry into service, and in-service support of the safest and the most successful aircraft in modern aviation history.
The majority of our employees are engineers. We are an aerospace engineering and aerospace technology company. Number two, we believe we are the only company that is resolving regional air mobility. Our mission and sweet spot where we expect to have a clear industry superiority is on flights greater than 25 miles and up to 200 miles and more. Our jet is designed with the largest cabin and seating capacity in the sector. We have the longest projected operating range in the sector. And at an estimated $3 per passenger mile, we assume a meaningful margin for the operator. We expect to be one of the cheapest options for eVTOL passengers, if not the cheapest, even the flights below 25 miles. Our third differentiator is our core technology built around our high-performance battery, our redundant electrical management system that our electric architecture optimized for efficient flight.
We have the IP and proprietary rights on this technology. This is what drives our industry leading product range and speed. And this is why we will be the only regional air mobility option in the sector. Fourth, our aircraft is one of the very few in our industry that is on track for certification to the very highest certification standards in commercial aviation. And safety to this standard is not something we will compromise on. This is high-level safety standard is also what we expect will support our market entry in multiple jurisdictions throughout the world. Fifth, our business model targets the most profitable portions of commercial aviation, the OEM, and aftermarket business. At launch, we aim to capture the premium segment on existing market that we believe our jet is uniquely positioned for.
Our research suggests that about 20% of business jets flights are under 155 miles, and in the executive helicopter market, about 80% of flights are under 155 miles. As we ramp up the business we will focus primarily on airline customers with robust aftermarket service activity. Lilium already has orders an MOU agreements from premium and airline customers. Ladies and gentlemen, I think it is important to take note of these five differentiating factors that set Lilium apart. And I would like to highlight the significant strides we have taken these past few months. The momentum continues. Our first test aircraft are well advancing. Our order pipeline is growing and we've made significant funding progress. We have our next key milestones, first piloted flight, firmly on our sights.
Let me take you through the highlights. First, we have made significant advances in the production of our first Lilium jets. At the end of 2023, the Lilium jet program hit an historic milestone with the delivery to the company's production facilities outside Munich of the first Lilium jet fuselage. Soon after, Lilium completed the first join of fuselage wing and canards. During the first quarter of 2024, major aircraft structures and systems continued to arrive at Lilium from our suppliers, enabling Lilium to advance aircraft build and verify quality and interfaces for the first set of Lilium jets. In January, MA Group of Italy delivered the first landing gear. In March, Saint-Gobain delivered the first set of Lilium cockpit and cabin windows.
The cabin windows, significantly larger than conventional aircraft windows, are a key differentiating feature of the Lilium jet and are expected to play an integral role in the outstanding in-flight experience that sets apart the Lilium jet. Match-up of fuselage, windows and windshields conducted at the Lilium aerostructure facility confirms the precision fit of the structural interfaces. Also in March, a team of experts from aircraft interior supplier Deal Aviation conducted a successful trial fitting of floor panels on the first Lilium jet ahead of delivery of the first production ship set. The similar trial fitting was conducted in April with a prototype pilot seat built by Lilium supplier explicit based in Paris, France. Parts delivered have shown impressive mastery of complex and demanding interfaces such as wing and landing gear to fuselage and cockpit windshield to fuselage.
The successful assembly of these major aircraft sections confirms Lilium’s supply chain philosophy of leveraging the expertise of established aerospace suppliers capable of building paths to the exact specifications and in compliance with aviation quality standards. The high-voltage electrical harness is a system of cables that distribute power from the aircraft batteries to the propulsion units have been successfully installed into the wings and canards for the first Lilium jet, marking an important achievement in the aircraft production process. The harness system is being specifically designed and built for the Lilium jet in cooperation with GKN, Lilium's partner for electrical wiring integration. The system is essential for the Lilium jet's safety-critical power distribution architecture, combining redundancy, low weight, and optimized utilization of space.
Production of aerostructures of the next Lilium jet is already well advanced, with Lilium's partner Aciturri successfully assembling the fuselage of Lilium jet number two and Aernnova its wings and canards. The fuselage of aircraft number two was delivered to Lilium in May. On the Battery 2 we made important progress, which takes me to our next highlight. Number two, we began production of our aviation grade battery packs. In April this year, Lilium started production of our advanced aviation grade battery packs. The start of battery production represents a landmark in the development of the Lilium jet. It follows extensive testing of battery pack subcomponents from individual cell to stack level with a focus on performance, safety and regulatory conformity.
Lilium's battery packs are being designed to meet the EASA’s stringent aircraft safety requirements regarding shock resistance, heat resistance, containment, and redundancy. They are also being designed to deliver outstanding power and energy density to support a business model focused on regional air mobility. Lilium’s unique pioneering battery pack is comprised of lithium iron cells with silicon dominant anodes that will allow for higher energy power and faster charging capabilities in graphite anode cells. Each Lilium jet aircraft will be equipped with 10 independently functioning battery packs that are designed to enable safe flight and landing, even in case of failure of any single battery pack. Lilium has secured comprehensive intellectual property rights for its unique battery technology.
Lilium jet battery packs are being assembled at Lilium’s purpose built battery facility located at company headquarters outside Munich. We are currently looking at locations in France for high-volume facilities to be brought online to support the production ramp up. Lilium has been supported in the design of the initial assembly line and production ramp up by suppliers with extensive experience in battery industrialization, especially in the automotive sector. Amongst suppliers supporting us on the battery are Baumann Automation and EDAG, both based in Germany. Lilium's battery facility is equipped with new generation digital tools that enable process control, efficient data collection and traceability. The first units of the battery assembly are being used for industrial verification testing.
Further production on the Lilium battery assembly facility this year will be used for performance and safety testing and for equipping the first aircraft for the start of piloted flight testing, which brings me to our next highlight. Third, we are testing towards first flight and certification. With entry into service targeted for 2026, Lilium remains on track for type certification of the Lilium jet with the EU Aviation Safety Agency, EASA, Lilium’s primary airworthiness authority. EASA has been a pioneer of eVTOL standards, being the first aviation safety agency worldwide to develop a comprehensive rule set for eVTOL aircraft, the so-called SC-VTOL, published already in 2019 after extensive industry consultation. Lilium received EASA Design Organization approval in 2023, becoming the first company to be approved to be a type certificate holder for aircraft certified under EASA's SC-VTOL rules.
In April this year, as part of the standard DOA surveillance, EASA conducted its first regular audit of Lilium’s Design Organization compliance with applicable requirements. In its concluding report, the EASA delegation confirmed that Lilium’s DOA was found properly working within its defined scope of approval, noting in particular the highly professional atmosphere in which the audit was conducted and the high level of competence in all matters showed by attendees. With the first piloted flight targeted for the end of this year, Lilium’s test activities are focused on obtaining the required permit to fly the prototype Lilium jet. Lilium remains in continuous dialogue with the EASA in order to converge on the safety requirements of the flight test aircraft and appropriate verification methods prior to first flight.
As an EASA Design Organization Approval Holder, Lilium is approved to undertake conformity of test articles and testing to demonstrate compliance against the applicable certification basis. Going forward, thanks to considerable investment in Lilium’s test facilities, Lilium is also able to perform many such tasks independently of the EASA with an agreed level of involvement. In recent months, Lilium has significantly expanded its on-site testing capabilities. In May, we began the commissioning of the first two propulsion test facilities located on site within Lilium’s headquarter campus. The two facilities, formerly used as hangars for performing engine checks of fighter aircraft, are being modified for the requirements of Lilium electrical jet top design.
We will be using them for aerodynamic and electrical performance evaluation of single and double propulsion units, as well as a complete multi-engine array that represents a full Lilium jet canard. The first facilities currently in the conditioning phase already has test equipment installed at the double propulsion unit on the test vent. The propulsion facilities currently have their own 650 kilowatt DC electrical power supply and an extension is being installed to provide up to 1.3 megawatt. The Lilium jet E-Motor has been designed to deliver an industry-leading power density of over 100 kilowatt with a weight of just over 4 kilogram. In April this year, Lilium successfully completed the final full-body wing tunnel testing at German-Dutch wind tunnel test facilities in Magnus, the Netherlands, Europe's largest wind tunnel facility.
The last testing of the Lilium jet aerodynamic behavior at the transition and high-speed cruise was working engines and step actuators complements the previous wind tunnel campaign conducted in 2023, which was primarily focused on hover and low-speed flight. The obtained data provides further verification of the Lilium jet flight simulation modeling that will support Lilium’s safety of flight and certification campaign. Lilium’s avionics system integration test rig, developed and built by Honeywell, is now successfully running at the Lilium headquarters campus. The test rig, one of the main assets of Lilium system integration testing, combines all avionic units and software required for delivering the Lilium jet's core avionics functions, communication, navigation, autopilot, maintenance, flight recording and indication.
Lilium has also successfully performed preliminary integration of the Lilium jet's flight control system. In addition, Lilium has started construction of an advanced test facility for integration and certification testing of Lilium jet. Designed in partnership with global engineering group SEGULA Technologies and located at Lilium's headquarters, the facility is due to become operational in late summer 2024. The test site will house a full-size aircraft and will be used for testing of the Lilium jet's flight controls, propulsion system, and electrical power system. As part of the Lilium jet certification campaign, the facility will be used to simulate flight and verify the performance of the aircraft throughout multiple flight profiles. Alongside the building of the first test Lilium jet, the construction of the test site represents an important step on Lilium’s path towards first flight and type certification of the Lilium jet.
Covering a total area of 26,000 square feet, the test facility will comprise an aircraft mounting frame for measuring loads at moments, an airflow management system to enable representative flight conditions, and charging and cooling equipment for the aircraft's batteries. Aerodynamic testing will be supported by a powerful 1.2 megawatt blower supplied by international engineering company VIRO that can simulate across tailwinds of up to 40 miles per hour. While Lilium’s testing activity is primarily focused on compliance and verification of the serial aircraft, the two Phoenix demonstrator aircraft operated at our flight test center in South of Spain continue to provide a comprehensive data for exploring for example, Lilium’s flight physics.
Going forward, Lilium also intends to use the Phoenix demonstrators for testing under specific stress conditions. Ongoing testing builds confidence in the Lilium jet projected performance, which supports our sales campaign. And this brings me to our next highlight. Number four, we are growing our order book. On the commercial front, the Lilium jet order pipeline continues to grow increasingly with firm orders that include pre-delivery payments. In total, Lilium now has an order pipeline of over 780 Lilium jets, including binding orders and MOU agreements from operators inside the United States, South America, Europe, Asia, and the Middle East. Customers love the look of the aircraft, the superior spacious cabin, as well as the estimated range and unit economics.
Visibly provided by EASA on applicable safety standards and the Lilium jet’s path to certification are also supporting our global sales effort. At the recent EBACE Airshow, eVolare, a subsidiary of Volare Aviation, one of the United Kingdom's largest helicopter and private jet operators, announced the signing of binding sale and purchase agreements for the acquisition of four Lilium jets. The purchase agreements include delivery schedules, guarantees, warranties, along with deposits and pre-delivery payments. Together with eVolare, we have also agreed on terms for the reservation of up to an additional 12 Lilium jets production slots for eVolare and its customers. Based in Oxford, UK, eVolare plans to operate Lilium jets in the London area connecting London with other cities and the coastal areas of England.
The current agreement follows a collaboration between eVolare and Lilium on network vertiport and operational planning subsequent to the initial firm agreement between Lilium and eVolare in 2022. In May, we want a firm order of 20 Lilium jets plus options for an additional 20 with UrbanLink, the advanced aviation operator recently launched for South Florida by the U.S. airline veteran Ed Weigel. Ed has founded, designed, and built some amazing airlines including JetBlue and Global Crossing. UrbanLink's selection of the Lilium jet reflects the customer's preference for the Lilium jet's expected superior cabin design, range capacity and cost effectiveness in the regional mission. UrbanLink plans to use its Lilium jet to link major cities such as Miami, West Palm Beach, Boca Raton, and Fort Lauderdale with services launched out for 2026.
UrbanLink plans to operate from the network of Florida vertiports Lilium and its partners have been working on collaborating for the first five years. The UrbanLink order thus also demonstrates the important of addressing issues around infrastructure and operations. Customer appreciate having the confidence that the Lilium jet will integrate seamlessly into the existing infrastructure and operations. Let's look at that in more detail with our next highlight. Highlight number five, we successfully expanded the Lilium support network in key markets. Earlier this year, we launched our aftermarket service business called Lilium POWER-ON, integrating multiple services with partnerships already in place in several areas such as spare parts management, fast charging infrastructure and pilot training.
We have continued to expand Lilium’s aftermarket service offering its geographical reach. In May, we announced an expansion of our existing partnership with Luxaviation Group, one of the largest business aircraft and helicopter operators worldwide. The expanded partnership will leverage Luxaviation Group's ExecuJet network of 141 fixed-based operations to create electrified ground infrastructure for the Lilium jet in its key markets across Europe initially, with further sites in the Middle East plant. ExecuJet is an industry leader in ground handling and provides first class facilities for business aircraft, passengers and crew across the world. ExecuJet extensive network will serve as a key foundation for the Lilium jet's intended network across the EMEA region, including France.
As part of our plans to bring Lilium jet flights to the South of France starting in 2026, Lilium has also teamed up with Aéroports de la Côte d’Azur and UrbanV, a designer and developer of advanced air mobility networks. Building upon strong local ecosystem and support in the region, Lilium plans to enable a network to connect the French Riviera with key destinations throughout Southern France, including Monaco, Nice, Cannes, St. Tropez, Toulon, Aix-en-Provence, and Marseille. The partnership with ACA and UrbanV, the first of its kind in the region, aims to establish and operate vertiports at the Nice Côte d'Azur, France's second largest airport, together with Cannes Mandelieu and Golfe de Saint Tropez, with further locations under consideration.
Lilium is currently in advanced discussions with further local partners to create vertiports in Monaco, Sophia Antipolis, Toulon, and Marseille, which are expected to be concluded before the end of the year. Edeis, a leading French engineering and construction firm, has agreed to connect Aix-en-Provence with a vertiport at Aix les Milles. The French Riviera, also known as the Côte d’Azur, combines some of the world's most attractive holiday and business event destinations. The Côte d’Azur serves as a vital transportation hub attracting over 11 million tourists annually. As part of its U.S. network expansion, Lilium teamed up with Atlantic Aviation, the leading provider of aviation services and infrastructure. Based on the MOU, Atlantic Aviation and Lilium will work together to prepare North American airport sites for the Lilium jet.
Atlantic Aviation operates at over 100 locations across the U.S., including more than 30 airports within Lilium’s planned launch market of Florida, Southern California, the Northeast Corridor, and Texas. As part of the collaboration, Lilium and Atlantic will focus on infrastructure deployment and operations including passenger experience, aircraft flight paths, charging capabilities, passenger facilities, operating forecasting, and more. Before handing over for Lilium’s finance highlights, let me briefly introduce the newest member of our leadership team, Lilium’s new CFO, Johan Malmqvist. Many of you already know Johan from his previous role as CFO of a premium electrical vehicle manufacturer, Polestar. Johan played a pivotal role in successfully navigating Polestar through its U.S. public listing and spearheading the company's capital formation activities.
Johan brings more than 25-years international experience across multiple sectors. Prior to Polestar, Johan held the position of CFO of Dole Food Company where he played a critical role in the company's successful merger with total products and its successful IPO. At Lilium, we take a lot of pride in having seasoned and experienced leader and Johan continues that tradition with his experience as a public company CFO both in the U.S. and Europe and his experience in fundraising and capital formation. We are delighted to have Johan with us now at Lilium where his experience of leading financial teams is a valuable addition to the company. Johan will walk you through some more highlights and details on our successful fundraise and update on our cash guidance.
Johan, please.
Johan Malmqvist: Thank you, Klaus. And let me first just add, for me, the major reason for joining Lilium was to play a leading role in advanced air mobility and the electrification of aviation. I genuinely believe Lilium is in pole position within the industry with the best aircraft design, adherence to the highest safety standard and clearest path to certification. I want to be part of this exciting development and help Lilium realize the vision of sustainable flight. So now to our funding and finance highlights. During the past couple of months, we have made significant progress on our fundraising efforts, primarily on three fronts. First, we recently concluded a $114 million gross proceeds capital raise backed by both new and existing investors.
Our largest shareholder Tencent continues to be supportive and participated in the latest round. Second, we have made a significant advance in our funding discussions with our home state of Bavaria and the German government. They have commissioned the German State Bank, KFW, to conduct a diligence on Lilium as part of the customary investment process. Once the diligence is completed, Lilium expects to receive state guarantees as security for a loan from the German State Bank, most likely in the form of a convertible note. We expect the funding amount of around EUR100 million and that the diligence will take around six to eight weeks to complete. Finally, we advanced discussions with President Macron's administration towards a French government guarantee-backed loan, which would be non-dilutive.
We estimate the overall funding support will be around EUR200 million with disbursements over several years. We plan to use the funding to build high-volume production facilities in France, including final assembly line, battery pack assembly line, and maintenance facilities. This planned capacity expansion is already taking into consideration in our business plan. Lilium is currently discussing potential locations for the facilities with French regional governments. Lilium’s headquarters, initial production line, R&D center, and propulsion center will remain at the current location near Munich. Given the visibility on potential government-backed capital sources, along with our recent capital raise, we believe we have a liquidity roadmap for our first piloted flight later this year.
Furthermore, we believe that customary pre-delivery payments will provide an additional support around our longer-term funding plan. Lilium continues to engage in active dialogue with sovereign entities, strategic partners, prospective customers, and stakeholders for further funding initiatives. Let me now turn to our current liquidity and cash spend. We disclosed our end of Q1 cash and cash usage in our May 23 6-K filing. Our cash and cash equivalence balance at the end of the first quarter was EUR102 million or $110 million. Note that this does not include any of the proceeds we announced with our latest fund raise. Our adjusted cash spend in the first quarter was EUR94.7 million. We estimate the adjusted cash spend for the first-half of this year to be between EUR185 million and EUR195 million.
In other words, we expect adjusted cash spend to be about EUR100 million in the second quarter of this year. Looking ahead to the remainder of 2024, we expect second-half adjusted cash spend to be slightly higher than the first-half, and we will provide more detail in our next quarterly call. The trend is driven primarily by higher spending within our supply chain, as we begin taking receipt of the various systems and components needed for assembly of our first Lilium jet aircraft that are now on the production line. We remain focused on both cost and cash containment, particularly in non-engineering and non-certification areas, while maintaining our pace activities to achieve key milestones, in particular, the first manned flight late this year.
And with that, I'll hand it back to you, Klaus.
Klaus Roewe: Thank you, Johan. As you can see, we continue to deliver our key milestones as we progress to our manned first flight target to occur in late 2024 and entry into service targeted for 2026. We are well into our assembly of our first Lilium jet and will be keeping the market abreast on the program over the course of the year. On the commercial front, the superior expected performance unit, economics and comfort provided by the Lilium jet has resulted in a firm 56 orders and we continue to convert MOUs into firm orders with pre-delivery payments. We hope to show you further progress on our ongoing discussions with airlines on feet orders in the coming months. On the financing front we have already begun receiving customary collection of pre-delivery payments in connection with pre-orders.
We are continuing through these final processes with the German and French governments and are also in discussions in other regions and countries on funding options. And most important to us on the financing front is that continued long-term support of our largest shareholders and suppliers as we progress to entry into service. So I will conclude my comments here and operator, can you please open the call to questions? Thank you.
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