Q4 2023 Eve Holding Inc Earnings Call

Participants

Lucio Aldsworth; Director of Investor Relations; Eve Holding Inc

Johann Bordais; Chief Executive Officer; Eve Holding Inc

Eduardo Siffert Couto; Chief Financial Officer; Eve Holding Inc

Luiz Valentini; Chief Technology Officer; Eve Holding Inc

Savi Syth; Analyst; Raymond James

Cai von Rumohr; Analyst; TD Cowen

Sheila Kahyaoglu; Analyst; Jefferies

Austin Moeller; Analyst; Canaccord Genuity

Andres Sheppard; Analyst; Cantor Fitzgerald

Presentation

Operator

Greetings and welcome to the eve Holding Inc. Fourth Quarter 2020 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Lucio Aldworth, Director of Investor Relations for each holding 50, you may begin bigger operator.

Lucio Aldsworth

Good morning, everyone. This is no longer a Director of Investor Relations.
Ladies and I wanted to welcome everyone to our fourth quarter 2023 and full year earnings conference call. I have here with me our CEO, Johan body CFO, Eduardo Couto, and our Chief Technology Officer, Louis Valentin. After their initial remarks, we're going to open the call for questions. We have a back with a few slides and additional information on our website at IR dot Yves air mobility.com. So please feel free to download it and tag along.
Let me first start this presentation. Ic&d includes forward-looking statements or statements about events or circumstances that have not yet occurred. These are largely based on our current expectations and projections about future events and financial trends affecting our business and our future financial performance. These statements are subject to risks, uncertainties and assumptions, including, among other things, general economic, political and business conditions, both in Brazil and in our market. The words believe, may, will, estimates, continues, anticipates, intends, expects, and similar words are intended to identify these forward-looking statements, and we undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or other factors that future events and circumstances discussed in this presentation may not occur and actual results could differ substantially from those anticipated in our forward-looking statements or that, I wanted to turn the presentation over to Johan. Johan.

Johann Bordais

Thank you, lose your Good morning to all, and thank you for joining us for this call today. We had a very busy 2023 year with several important achievement. And among the milestone last year, I would like to highlight the one that most directly influence our program starting with the selection of our suppliers and the signing of the binding contracts was defined technically and all the specification for each of the component as well as all commercial aspects with the volume and the unit price, including, by the way aftermarket support conditions. We defined the architecture of all these details in June of last year with the definition of the flight critical component like the electrical motors, the energy management system, the propellers, especially when it comes to the dimension and the requirements for the subsystem of each of these parts, this enabled us to start the building process of our first full-scale nonconforming prototype. As a reminder, I would actually I cannot say that we have a unique approach that was generated by employing a proven methodology. We test the system and the components independently. And only then we incorporate them in the design once we find an optimal configuration. This allows us to quickly to the equator and efficiently involved with the design and reduce the program development schedule, but also the costs. So up until the initial assembly of the prototype, we already had tested individual system with the rigs under different condition and configuration. And we also started this September's the clone definition phase. We've also called internally the JDP. This is one. Our engineer interact closely with their export department, the suppliers we have selected to go over all the details on how each component will work and interact with each other for a seamless and integrated system. And I'm going to give you an example here. I think it's a little bit more concrete during the GDP. with the team will define the multiple sensors and which will feed the air speed data temperature relative humidity into the avionics and how the flight control system will enterprise the data in order to control the flight surface after the pilot comments. This, of course, will be supported by the fly-by-wire system that we are putting in place. So as you can see, it is a very complex task that involves several different processes impacting each other with a lot of moving parts and interaction. So the focus here is to design the systems to work seamlessly and safely.
Going to slide 3 it shows us the latest development and includes the five day exercise that we conducted in the UK to test the urban air traffic management. The ATM is ATM software with the partner of Flexjet.
Hello. It was used to validate and refine the software. We deployed it in parallel with the incumbent software that they already have and are in operation right now. And their operation with to simulate our typical function, the air traffic management operation. We successfully won some tests under normal conditions, but also under different conditions, which is not such as the delay, the bad weather, and it was a very concrete operation and we could learn from it and obviously just to make the software better afterwards. So we are quite excited about this.
Now moving to the next slide, couple of slides. We have we're bringing here several pictures that we just took from the test facility in Memphis, Soto in Brazil in state of Sao Paulo state, where you can see the process of our full-scale prototype, as you can see, the harness, which which are the electrical electrical and electronic connectors that we will place soon inside the wind. And the openness of these also carry all the information in the coming back and forth between the flight computers, sensors and actuators. You can also see the early stage of the structure and the fuselage to win the detail of the vertical stabilizer of the implementation.
If you go to the next slide here, which show you the prototype is getting really the final stage. We have positioned the wing and the urbanize, and that was the last we call it internally and not the Junction, but also even pick it up in a nice way. We call it a marriage, a marriage between the fuselage and the underweight. And we have now still have to install the actuators, the control surfaces on the wings on the OpenEdge into the composite for the skin of the beetle, which we expect to be concluded in the next few weeks. And once we receive the electrical motors also in the second semester will outperform the necessary ground test, and we plan to start the test flight campaign later on this year.
Going to slide number six, this is showing you here the latest additions to our component suppliers list, which we will start to use for the first of our five conforming further that since the third quarter of '23, we have announced several suppliers. We have selected the AFSCC. to provide the control service and organized. I'd like to read the Spanish provider for the ways Crouzet for the power control of the code. Also, it does stick and that will also have signed deal with Talus for the sensors and Honeywell for guidance and navigation and lastly, Ricardo, for the seats, the new suppliers or actually joining the select group of the industry leaders of our Vitol, really point to highlight here that we have the best of breed approach to bring suppliers whether expansion addition and certification. And importantly, we will support us in the certification campaign and throughout the Visa lifecycle, not only for the certification and delivery but also in the lifecycle of profits.
Lastly, these contracts will have to find a place to quantity schedule with the skill function with reduction of the unit price as we reach the higher EV toll volumes out of our production sites, which will reduce the unit price of production, right? As we call economies of scales, there's little suppliers join the deck to supply, the electrical motors, the VA that we already informed early on in 2023 for the energy management and difficulties for the propellers. And we had also signed the embryo for the East flight control computer, the SEC and systems, and with this fly-by-wire capabilities. And Ray will also assist us in designing, developing and manufacturing all flight control, hardware systems and provide support for certification. Garmin will supply all the flight deck with the high resolution display of the flight deck and integrate the aircraft management with the flight control system.
We also selected lever for the flight control actuators and inter Galactic to provide us the thermal management system for the equipment. We still have few suppliers to select, but as they're not that critical for the aircraft performance like the transparencies, the cabin interior, we expect to conclude the selection process very soon.
Okay. Looking at the list, which is obviously increasing, were not up to 90%. I'm very confident that the level of safety and the certify ability and performance of our VEVTO.
Moving on to the Slide 7, it shows that we are in the entire now where we are in the entire master development phase. As I mentioned before, we are currently in a joint definition phase to detail all the interface to link the different system and make sure that they integrate altogether. This phase also include the system of our manufacturing process as well. As a reminder, we have already selected our manufacturing site a few months ago. The site is currently being used by Embry Air, but it will we will start soon to customize it to our own need later on this year at the current pace. And judging by the progress of the Assembly Row for the cycle, we're in really good shape. This received the certification, but that certification and make the Phase first delivery in still in 2026.
Moving on to the Slide number eight, it shows that currently what we have, we believe is to be the largest and the most diversified backlog by number of customers, but also by region, biodiversity and the whole industry. Today in total, we have announced and wise for 2,850 aircraft from 29 different customers spread over 13 countries and different businesses from the main lines to the regional airlines to helicopter operators, ridesharing platform, the leasing company as you can see it's very complete. We'll also have utilized to offer our urban air traffic management system for 14 different kind of customers. And we're also we believe that this reflects the market-leading value proposition that we bring to our customers and our partners. Beyond this, we are developing a strong network of partners in the area such as the infrastructure energy to address one of the main challenge that we have in the industry in the air mobility, it will create a whole new ecosystem beside the simple development of aircraft and important and I think more important than the vehicle. And obviously to me, it's a real deal. It's also we're securing the contract for with 10 different customers for the maintenance repair overhaul for service and support that will bring about it least $660 million in revenues for EVE over the course of the next five years on actually progress from the delivery the first delivery in 2026. Importantly, these customers that placed allies and they represent 985 aircraft, okay, which is about 35% of our order book so we can potentially expand this business within this customer base that had been mentioned about the 2,850 aircraft, I mean, because those are agnostic also amazed that we potentially we can service the EV, deliver a competitor's service revenues could proceed, actually enterprise sales. We believe that our pipeline is the services and for the vehicle, but also service and support contracts offer a strong long-term revenue visibility, and it will help to smooth the cash flow consumption in the years to come as we start converting the existing letters of intent into orders and collect the pre delivery payment known as PDPs.
Now I'd like to invite you to go over our financial now the next milestones.

Eduardo Siffert Couto

Thank you, Johan. Now moving to Slide 9 is a preoperational company developing its EBITDA in the ecosystem around it. Currently, our financials reflect mostly the costs associated with our program development. With that in mind, I want to highlight some of our 2023 financials. EBIT invested $34 million during the fourth quarter 2023 in our program development and $106 million in the full year, the majority was invested to develop our EVTOL and a smaller portion went to our service and support solutions in the urban air traffic management. We are the only retail company with a complete solution that includes design, development, manufacturing and sale of an aircraft as well as maintenance services and air traffic control sites. We also deployed $5 million in SG&A during the quarter and $23 million in the year, including R&D and SG&A. We reported a net loss of $39 million in the quarter and $127 million in the year.
Now moving to cash flow. Our operations consumed $25 million in the quarter and a total of $95 million in the year. We ended the fourth quarter with $241 million in cash, down just $15 million from the third quarter 2023, as we also drew around $50 million from the preapproved credit line with the Brazilian Development Bank. We still have around $75 million available from this line that we expect to access still in 2020. Yves is highly comfortable with its total liquidity of $360 million as of the end of 2023 and believe our current liquidity would be enough to sustain our operations into the end of 2025. It's important to say that we anticipate an increase in our cash consumption in 2024 as we intensify our development with different rigs to test systems and components. We internal tests to validate our models. And now we are assembly our first full-scale prototype and have selected most of our suppliers, which involves higher payments going forward.
Now moving to Slide 10. We have a checklist of our previously announced milestones. I'm happy to say that we have either met or exceeded our milestones for 2023 we selected the primary suppliers for critical components of our aircraft and froze the configuration of our all around the first semester of last year. And as Johan showed a few slides ago, we are advanced in the assembly of our first prototype. We hope we have also successfully conducted a trial run of our UATM. software under real-life conditions in the UK late last year. And lastly, we invested $95 million in our program during 2023, which is lower than anticipated in our guidance of $130 million to $150 million range given the three main factors. First, our continued discipline on cost control as a preoperational company. Second, we managed to extract savings from synergies with Embraer. And third, we move some of supplier payments from 2023. So the years last slide, please, the upcoming milestones for 2024. That includes the conclusion of our full-scale prototype and initial tests. In parallel, we expect to conclude the basis of certification and ease of compliance with the Brazilian certification of parts. It's important to remind we have Brazil as our primary certification authority that we work in alignment with the FDA to achieve the dual type certificate in Brazil and in the U.S. in 2020, we'll also start working in preparation for our first EBIT-R manufacturing plant in an existing site of Embraer in Brazil. We are also working to secure the necessary funding through a long-term financing to this site Finally, for 2024, we expect all of our efforts to consume between $130 million and $170 million in cash this year. With that, we conclude our remarks, and I would like to open the call for questions. Operator, please proceed.

Question and Answer Session

Operator

Kim, if you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue, you may press star two if you'd like to remove your question from the queue For participants using speaker equipment it may be necessary to pick up your handset before pressing the star key.
Our first question comes from the line of Savi Smith with Raymond James. Please proceed with your question.

Savi Syth

Hey, good morning, everyone. I wonder if I can on the cash burn outlook here. If you can give a little bit of color around the timing throughout the year, that steps up and what what component of that might be CapEx a high share high side because you know here?

Eduardo Siffert Couto

So basically this cash consumption will be mostly on the development, right, which includes the payment of suppliers as well. There is a component for the manufacturing of our facility, right? We have selected the existing bridge facility in Sao Paulo. We're going to start to buy some machinery and tooling for our first site. But I would say, you know, maybe around $20 million will go to this first facility. The remaining of the cash consumption will be really focused on the development that is really moving at full speed

Savi Syth

and that steps through the year or is it fairly steady?

Eduardo Siffert Couto

Generally we burn more in the second half than in the first, but I believe probably will be like up 40%, 35%, 40% in the first half and 60%, 65% in this half.

Savi Syth

That's helpful. And if I just might on the vendor's loan and if I can have your thoughts on like how much of the $75 million you might kind of tap into in 2024.
And just to clarify, that's not in the cash burn guidance, Ray, that's that that should lower the cash, Brent, that's correct.

Eduardo Siffert Couto

When we say that we were going to burn $130 million to $170 million, around $150 million , right for the full year. That means our cash. We will only go down half of that, right? Because the other half $75 million we're going to access from. We're going to withdraw from the BNDES line. That's a big advantage, right? We have this line that we are accessing since last year, we already took $25 million that hold our cash position pretty pretty well in the fourth quarter, and this is going to continue in all the upcoming quarters of this year. So our cash will go down very little, right around $75 million . If you do the simple math, right, $150 million , $75 million has been?
Yes, the other $75 million comes from our current cash. That's how it should work.

Savi Syth

Perfect.

Operator

Thank you.
Thank you. Our next question comes from the line of Cai von Rumohr with TT Cowen. Please proceed with your question.

Cai von Rumohr

Yes, thanks so much. Could you maybe update us on the certification environment and why what I mean by that is you probably read that the FDA basically has harmonized with the answer regarding what they're going to require Joe B to do which looks like good news. And yet if you look at some of the major aircraft G. 700. I mean, everything seems to take longer and longer and you know, so maybe tell us about the environment and particularly with respect to ENaC and the fact, but you're you basically are going to be the certifying there. Thank you.

Johann Bordais

Hello, Chi. Johan speaking. Thank you. Thank you for your question. This is obviously an important topic there that we're following closely and also will continue will be responding in more details. But, you know, as you remember, well, I mean the primary certification that will be with ENaC and this is, you know, really what the other three that we are discussing the very recently end of last year, the open for public, the consultation, and we'll see exactly the actually extended that period at the end of this month. And we expect to have a lot of feedback, but also alignment as we going to have a inputs including well, probably from DARPA and other association Airline Association. So we're quite confident that we're going to the right direction and we'll know we'll know more by then Valentini.

Luiz Valentini

Sure, some. Thank you, Carrie. And good to talk to you again and also complementing what Johan said. We we have we feel that we have good traction with Amec with the publication of our certification basis for public comment and both in the sense that it gives maturity to the requirements that we have set with them, but also that it allows us to go, as Johan mentioned in this direction of aligning. We're not seeing harmonization in the sense that they would not necessarily be exactly the same, but that it helps us to align both with the FA bases and also with a as a business in which we have more visibility to rate so that the publication of the JV basis yesterday still not final, but you know, another publication helps us to make sure that we are indeed following this path of alignment and makes us confident, as we have mentioned before, that with the availability of a MAC to work on this project that we will be able to maintain the time lines as we have established.

Cai von Rumohr

Terrific. And then my last one. So talking recently with one of your competitors they were talking about a market, a potential retail market by which they mean, you know, a guy flies to a regional airport. He maybe has his home 40 miles away, but it takes his EV toll to fly from the regional airport to his home and back or to his business so that there might be sort of a shorter range biz jet type of application. Have you put any thought into that kind of use or any of your your customers are looking at that as a potential market?

Johann Bordais

Thanks, guys. Just a question there would you say is only retail you mean that they will buy is on retail and flies on EBITDA, just like you're doing with cars? Is that what you're referring to yes, because we do not.

Cai von Rumohr

Exactly accurate. Exactly.

Johann Bordais

No, no, no, we don't we don't see this. We do see the air taxi or what we call it commonly called in on the first mile last mile type of service variety and the airline would operate is exactly the model that we're working on with a Republic, you know, for Orlando where you know the premium customer will be up and they will go through the through their house. So we're very close to the house, but it would be overt supported. But but others at the very beginning. And we don't see this happening, I mean in time charter and unless not against the autonomous functionality and we don't want to be putting in our people are just driving cars driving some slight EBITDA loss?
No, no, no, allogeneic.

Cai von Rumohr

Okay.

Luiz Valentini

And just one more point. I think it's important to understand that that wouldn't at least from what the authorities have published so far that wouldn't change significantly the certification bases in terms of the safety level and things like that because we would still be considering at least if it's around the urban mobility areas, the or the urban centers, it will still be a flight over a densely populated areas, which is being considered by the authorities as one of the triggers just to to meet higher safety levels, right? So I think that it's just important to understand that in terms of the certification and consequently the design, I don't see that changing the vehicles so much. And so they wouldn't have so much of an effect on the certification path.

Cai von Rumohr

Okay, great. Thanks so much.

Operator

And I think in our next question comes from the line of Sheila Kahyaoglu with Jefferies. Please proceed with your question.

Sheila Kahyaoglu

Hi, good morning, guys. Two one is obvious questions. You mentioned five additional prototypes this year with testing to begin in the second half. So just kind of how do we think about the build-out and what's the CapEx need to support that?

Johann Bordais

Let me go first on the yes, we can have ocean Burlington, you can elaborate on the on the first prototype and the others to come. And then I can comment on the on the OpEx.

Luiz Valentini

Sure. So the first prototype. The one we will start testing this year is the one that Johan described as being not put nonconforming prototype, which means that it doesn't have exactly the final configuration that the commercial vehicle will have. And so it will allow us to bring technical knowledge to validate some of the solutions that we are currently developing with some anticipation with respect to the time when we have to make the commitments for the commercial vehicle, the test of the prototypes of the commercial vehicle will not start until next year. And so then for for those prototypes. We have a different set of specifications, product specifications and they connect to the suppliers that Johan described in the presentation.

Johann Bordais

And those will be the one that will be used for the certification campaign and then to reach that type certificates so that that the investment then on these prototypes will come later on than I think, into conventional and in terms of investment, when we mention about the $150 million per year right expected for this year, it does include the investment on the development itself, right on the on the engineers and the whole development program. And it also does include the prototypes right? This year, we are assembly. We have our head start to assemble. We're going to conclude the assembly in started, thus the first prototype. We may also start to receive some parts for the for the other prototypes, but all of that is already included on the guidance to consume $150 million. And then having made, we still have $75 million available from the long-term finance from BNDES. So the actual burn in cash, it will be only half of this market.

Sheila Kahyaoglu

Okay, great. Thank you. And then maybe if I could ask about the suppliers that you guys brought on. How is that relationship working with the suppliers?

Johann Bordais

Well, thanks, Sheila, for your question. Yes, the relationship is great. Well, as you can see, most of them is actually suppliers that we've known from the Embry Air time also right? There are partners of Embry Air, some of no, not. But we do have a throughout and very well proven methodology to engage. And like I said, the negotiation is not only about the the put the conforming prototype and the production, the per Series, and it's also the customer support and services. So those are very detailed discussion and negotiation that we do for the whole lifetime cycle. And then we automatically engage in a GDP. We started on the last 20th of September, and we engage into all the engineering. So it's a physical presence in San Francisco was between engineering of eve of Embraer's, but also the engineering of the suppliers. So we can really and I explained this in an in my presentation where there's this big interaction and how it one system impact the other. So I think it's really good and it's been proving quite efficient.

Sheila Kahyaoglu

Great.

Eduardo Siffert Couto

If I may add Johan, regarding the suppliers, Sheila, so just just to reinforce how they believe in our program, right. We have a long-term contract, right? We're talking about more than 10 15-year contracts with those suppliers not only for the development, but the contracts we signed, they go throughout the whole series of deliveries, right? This is one big difference that we have and also in terms of payments, we are going to have payments that will happen really down the road. So the and I would say pretty much all suppliers they accepted that we spread the payments to them over several years. I think it shows the confidence right that they they have on eve on Embraer's in our ability to succeed in this program and the contracts we signed with them. It fully reflects that, which is different from some other contracts we have seen out there.

Sheila Kahyaoglu

Okay. Thank you.

Johann Bordais

Thank you, Phil, and thank you.

Operator

Our next question comes from the line of Austin Moldow with Canaccord Genuity. Please proceed with your question.

Austin Moeller

Hi, good morning, Johann, and I do just my first question here. Do you have any plans right now to thermally condition the battery either using cooling or cooling the charging system itself to enable high volume, high throughput flight activity during the day. If not then Thank you.

Johann Bordais

For the question that this is going deep into that because we have our CTO with us. So you can really I get to walk you through the answer to that go ahead, relatively sure.

Luiz Valentini

And thank you, and thank you, Jonathan, for the question. So so the cooling of the battery in the thermal management in general is a very big part of how the tolls work, right? So we are considering that we will need cooling, especially in the cases in which we are seeking shorter turnaround times on the ground between flights and faster charging. So for those cases, we are definitely considering having a cooling system that will allow us to condition the battery and before starting to charge it because that makes a big difference on the life cycle of the battery. So it postpones the degradation or it slows the degradation of the battery as we charge it and discharge it, which then in turn results in a reduction of our operational costs. So we do have both inside the vehicle, a cooling system that will enable us to do that. And we are working with the charging infrastructure and the charging equipment to provide that coolant in that thermal exchange for us to keep that the temperature of the battery wire we charge.

Austin Moeller

Great. And then should we expect manned flight testing of the first prototype or would that be on the follow-ons? And should we think about manned flight testing as more of a 2025 action item?

Luiz Valentini

Yes. So we will start the testing with an on crude vehicle pilot team remotely from a ground station in the embryo test facility and got the Olympics shortly here in Sao Paulo in Brazil. And the whole testing of this first prototype that we described will be made out without a person onboard. So on only an unaccrued vehicle, the prototypes that we mentioned that will be used for certification, and those will be piloted. And so the test campaign with those will have a pilot on board. But this first prototype is only on unproven vehicle.

Austin Moeller

Great. Thanks for all the color group and talking thinking things.

Operator

As a reminder, if you'd like to join the question queue, please press star one on your telephone keypad.
And our next question comes from the line of Andres Sheppard with Cantor Cantor Fitzgerald. Please proceed with your question.

Andres Sheppard

Hi, good morning, everyone. Congratulations on the quarter and thanks for taking our questions. And I wanted to touch on your service and support revenue stream. I this is obviously an area that you're placing a large emphasis on or at least have mentioned in the past. I'm curious what are the kind of developments there, particularly as some of your peers might be targeting entering into service in 2025? So what might we expect from the service and support revenue stream maybe next year and onwards? And what are the latest developments there? Thank you.

Johann Bordais

Thanks, Andreas. Great question. Obviously, it's dear to my heart when it comes to service and support. So I will take this one. As you could see, I mean, we're up to $616 million worth of bidding of service and support that we presold dates. It's really linked to the operation and we need to have the certified airplane aircraft and then enter into service. So we can really taking with those services, there's one risk revenue stream that could happen before it with the ATM software that we are developing and it is Ignacio. So yes, but that's part of the same concept where you know, we want to make sure that we have the vehicle, but also the operation there is smooth, and we believe there's one way to do it. Is to be with our customers on ground boots on the ground and make sure that, you know, they have all the support have to operate and guaranteed availability. That's the ultimate goal availability availabilities. We demonstrate the segments, the aircraft operation, reliability, and then obviously the customer can make money with the with the with the vehicle. So well, this is very important that we can replicate. And so we are really looking at the full spectrum exactly what has been done. And this is another page that we have from Embry Air engineering manufacturing but service and support. We've learn all those years and we're going to be applying all those lessons learned, let's say, right away with a full total package, a very much ala carte service. There are operators that have their own MRO. They want to train their mechanics. They want to be able to perform the maintenance, and that's fine, you know, and then they want to go for applied by our program of having the engineering support, having the spare parts support having DSL. So I don't have the whole package. I think what differs in a little bit from the traditional market of service and support as the battery into something. And this is exactly the model that we're studying right now and has it had to be the up in the support and the charging. And with the recycling also what's going to happen with the battery as we're going to be changing. And every year, we're going to get to the 80% kind of of power and remaining. So we'll have to look at what we're going to be doing.
So right now, we're really focusing on this. The rest is very traditional model and it depends on what you know, the customer choice, some other or very much executive jets that will support its turnkey solution. And then others are way more independent and then we'll support, you know the way that they want us to.

Andres Sheppard

Got it. Got it. That's super helpful. I appreciate all that context. And then maybe one quick follow up question for Fred, do you so within your cash consumption guidance of one $130 million to $170 million, I'm wondering if we can maybe get a little more color on how much of that you expect will translate into CapEx, particularly as you're building some of these units. Now, how should we think about CapEx for this year? And also maybe what's the best way to think about OpEx for the for this year as well? Thank you.

Eduardo Siffert Couto

The majority of the development rate that includes, as I said, the engineers and the prototype may spend around of $20 million to $30 million on the prototype. And you know that the would say the majority is with the development of the upcoming vehicles, right? This is important to mention, right. We we are, of course, focusing on the first prototype that is coming, but we are also at full speed on the development of the additional five that will come in 2025 despite the full flight test campaign. So there is a lot of money that we are putting on that. It's not it's not only these this upcoming vehicle and we may spend some money on the manufacturing facility, right? Our first plant in Brazil, but that doesn't it shouldn't be that much in 2024. So it should be more in 25. But there will be some investments on CapEx on the facility as well. But let's say that the majority of the investments are still engineering development for the multiple vehicles that we bring for the flight DESCAP.

Andres Sheppard

Okay, great. That's helpful. Thank you very much and congrats again and I'll pass it on. Thank you.

Johann Bordais

Thank you. Andreas.

Eduardo Siffert Couto

Thank you.

Operator

Thank you. And our next question is a follow-up from the line of Savi Syth with Raymond James. Please proceed with your question.

Savi Syth

Hi. Just a clarification on the PDPs, is there kind of a certain milestone? Is it, you know, when the first prototype is kind of flying or perhaps next year and you'll find the other five prototypes that you see that you'll be able to kind of go and and solidify those LOIs or even you know what might contribute to kind of first PBT fell? Thanks.

Johann Bordais

Savi. We haven't spoke, I had to do good like you start, you start to add those? No. Okay.

Eduardo Siffert Couto

No, I was just going to see, Savi, the you know, we have multiple campaigns in discussion, right? We have multiple customers, as you can see, Mike, by the largest backlog in the in the industry, the focus is you start to convert those LOIs into firm orders which also translates into deposits, right? And pre-delivery payments, as you referred to. So this is going to start to come right that this year and '26 are going to receive a lot of downpayments and pre-delivery payments. But the most I would say, Johan can can can add. But I think the most important thing is really engagement with those customers make sure they're comfortable with the number. You have all these lots when they are going to be taking those vehicles and where they are going to be deploying them. But you know that the cash is going to come, the PDPs and the deferred orders are going to come in this year and in the upcoming years?

Johann Bordais

Absolutely. I do. I think this was really important. And what we want to have and convert some of those aligned to the first purchase agreement is just to make sure that we have our customers engaged the whole ecosystem. It takes time. It takes, you know what people resources and it's not so much because of the customer, but it is because of the whole ecosystem. It is not a traditional And I had a aircraft you're adding to the fleet. And it's really it's more than this so well. And I think, you know, we've been discussing very much with the customers with the ambition and when to engage, get done probably called the skin in the game from all the stakeholders. And this is what the PPA is about and they are the one asking for that's my assistant. So it's not like we have to sign those precedent agreement this year effort from a cash needs perspective, but definitely from an engagement

Savi Syth

very helpful.Thank you.

Operator

Thank you for taking our next question is a follow-up from the line of Cai von Rumohr with T. Cowen. Please proceed with your question.

Cai von Rumohr

Yes, thanks. So much. So of the $660 million kind of service contracts, how much of that is with your competitors or with customers of your competitors non guys?

Johann Bordais

None. It's all in all on the EV toll and mobile offering, of course, in this to be able to go for agnostic. But it's really all the analyses based on the on the current aircraft data-wise. Okay.

Cai von Rumohr

But given the Deno, so like Joe B in Archer indicate they hope to be certified, you know, ahead of you or how are you doing in your efforts to kind of sell services either to them or to their ultimate customer, given that you have a long history of service capability and they don't.

Johann Bordais

Yes, we do have a common operators where customers have been asking. And I'm sure that it does make sense from an operator standpoint of view when it comes to customer support and services, you want to have one point of contact. You don't want to multiply, you know, the age of the contracts of the same nature, if you will, for MRO, then you might as well just have one provider for the different vehicle. That's a concept in our it does exist today where there are independent MRO or or or what do you have a agnostic MRO that can offer at this type of service. So we're open. We've been having a conversation that through a united. As a matter of fact, that's one example where they've been asking us to you know, to sit down with them with other EV, dollar-yen Minda and start talking about, you know how it's going to look like when the service and support. And you're right we do have the expertise when it comes to service and support that will be natural that would take the lead on this, but nothing more concrete at this stage.

Cai von Rumohr

Great.

Johann Bordais

Thank you, Andrew, and thank you, ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Albath for any final comments.

Lucio Aldsworth

Thank you, Melissa, and I want to thank everyone who joined the call today. As you can see, we accomplished several important milestones this past year that were fully engaged. And of course, there is much more to come. So we do look forward. We're going to continue to update you on our progress throughout the next few quarters. And of course, look forward to meeting all of you in the upcoming events we're going to attend. As always, if you have any questions, don't hesitate to reach out. Thanks and have a good day.

Operator

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.