Joby Aviation, Inc.

Moat: 2/5

Understandability: 3/5

Balance Sheet Health: 3/5

Joby Aviation is a company pioneering the development and manufacturing of electric vertical takeoff and landing (eVTOL) aircraft for urban air mobility, specifically aerial ride-sharing.

Investor Relations Previous Earnings Calls

The moat, understandability, and balance sheet health scores reflect a conservative evaluation to ensure a margin of safety in any assessment.

Business Overview: Joby Aviation is betting big on the future of urban air mobility, aiming to disrupt traditional transportation with its electric aircraft.

Revenue Model: As of right now Joby is not generating any significant revenue as they’re in the development/certification stage. Their primary revenue stream will be through passenger operations- specifically commercial air transportation. While they do not yet have any revenue from commercial operations, they generate a certain amount of funding through government contracts and from their partners.
Industry Trends: The urban air mobility market is nascent but has high growth potential due to urbanization and traffic congestion. The company’s success hinges on gaining certification for their eVTOL aircraft and setting up a functioning infrastructure in major cities. However, the industry is still in very early stages and will require substantial investment to take the market to maturity. The regulatory environment is also extremely unclear which makes the market risky and hard to predict.
Margins: Given that their operations are not yet generating revenue, the margin is zero. They do not currently report a gross margin but rather an overall operating profit (or losses). Once they start their operations, we can expect that they’ll have high profit margins due to lower cost of electricity and low ongoing costs for operations and maintenance.
Competitive Landscape: Several players are vying for dominance in the eVTOL market, from large aerospace companies to innovative startups. Companies include Archer Aviation, Beta Technologies, and Vertical Aerospace. The competitive edge will come from performance of the aircraft, cost, scale, safety, certification, and ability to develop infrastructure.
Differentiation: Joby’s differentiation comes from having a purpose-built aircraft for urban air mobility, with a long-range target, focus on safety and low operating costs. They have also positioned themselves to go for FAA certification. Joby’s aircraft has a very unique wing-rotor design (which is what makes the aircraft capable of vertical takeoff and landing) and its focus is on air taxi services rather than simply selling an aircraft. The company is developing most of its technology in-house including the entire electric powertrain and their production facilities are meant for high efficiency.

Financials in Detail Joby’s financials are still relatively immature as the company is pre-revenue. Here’s a summary:

Revenues: As of now the company is mainly reliant on government contracts and partnerships. The total revenue in 2022 was $1 million and for the nine months ending Sept 2023 it generated $4 million. While they do not generate a major revenue stream, the company is using its massive cash reserve to fund its operations.
Operating Expenses: The company is currently loss-making due to its heavy expenses that it is undertaking for its research, development, infrastructure, and certification. In 2022 they posted an operating loss of -$579 million and for the first nine months of 2023 they reported an operating loss of -$353.
Free Cash Flow: Due to its high capital expenses, Joby is generating a very low free cash flow. The company’s free cash flow in the nine months ending September 2023 was at approximately -$436 million.
Cash and cash equivalents: Joby has a strong cash balance which is mainly a result of their IPO and private funding. As of the end of September 2023 the company has $1.1B in cash and cash equivalents, which gives the company sufficient resources to fund its operations for the coming years.
Shareholder equity: For the nine months ended September 2023, the company had $1.5B in shareholders’ equity. Their shareholder equity is mainly a result of raising capital and from their share based compensation plan.
Debt: The company had very little debt (less than $100 million). Which makes them less vulnerable to bankruptcy risk due to high interest rates.
Capital Expenses: Joby continues to invest heavily in property, plant, and equipment, to support their manufacturing and operations capabilities.
Guidance and Strategy Joby has stated their goals of achieving commercial certification by 2025 and is focusing on testing and further improvement in operations.

Moat Assessment Joby’s moat is still developing, and not yet solidified.

Intangible Assets: The company’s brand is still nascent as they’re still in the development stage. However, the company has many patents and is working with regulatory agencies for certifications which makes barriers to entry for smaller companies.
Switching Costs: These are relatively low as of today since the company is pre revenue, but with high operating costs for airlines, the switching costs should be high for competing airlines.
Network Effects: There is currently no network effect present as the company is developing its technology.
Cost Advantages: The company does not have any cost advantages as of today. If they get to scale, then the manufacturing cost may become their moat.

Based on this, Joby currently has a narrow moat rating. There are strong signs the company may be able to widen its moat by utilizing its regulatory connections, its expertise in developing novel technologies, and its manufacturing capabilities, but it remains to be seen. The risk of competition and the huge investment they’d require in infrastructure makes the business much riskier. Their rating can go up as they get closer to their goals.

Legitimate Risks Several risks could hinder Joby’s moat and overall success.

Regulatory Hurdles: The FAA certification process is still long and complex, and any unexpected difficulties during this process can severely delay or jeopardize their goals. FAA has only recently made concrete steps toward its plans for certification, which adds uncertainty in the timeline.
Technology Risk: Developing and certifying brand new eVTOL technology is complex, and the company needs to ensure safety, reliability, and efficiency of the aircraft before launching their operations. Delays to this may cause other entrants to take the lead in the market.
Competition: As described before, the competition in this industry is fierce and multiple companies are vying to become the pioneer in the industry. Many of these companies have significantly higher resources or already have some experience in air travel industry.
Financial Risk: Given the pre-revenue state, Joby requires significant financial backing to maintain its operations. They rely on outside funding to fuel operations and delays in achieving certification or scaling its production can cause problems.
Infrastructure and Logistics: Development of charging infrastructure, flight paths, maintenance facilities, etc, all adds to the difficulty for the company to achieve its goals, and may be very expensive.
Macroeconomic Risk: High interest rate environments can cause liquidity issues. Economic crisis and decrease in discretionary spending can lead to a sharp decline in revenue.
Demand: The success of aerial ride-sharing in cities depends on its widespread acceptance among customers. There is also the issue of how the consumers will adopt to a new mode of transport and will be comfortable using it.

Business Resilience Joby is still a startup and a growth company, which makes them less resilient to unexpected circumstances. However, since they are trying to make air transportation faster, safer and cheaper than their competition, they will likely provide an advantage to consumers and hence have great potential. Their high financial reserves will also help them withstand many potential pitfalls.

Understandability Rating: I would give Joby a 3/5 in terms of understandability.

The concept of their business is fairly simple, a flying taxi service that makes transportation within cities more efficient.
However, the company’s cutting-edge technology, various regulatory issues, complex certification process, and long timeline before profitability makes them somewhat hard to understand for a layperson.

Balance Sheet Health Rating: I’d rate Joby’s balance sheet health at a 3/5. * The company has very high cash reserves which they’ll rely on. * However, they have been consistently posting big losses and free cash flow is severely negative. They are also reliant on outside funding for the coming years. They need to start their operations soon in order to offset the negative cash flows and to solidify their revenue streams.

They also don’t have many assets to show for the market cap, which makes it risky. They are also burning cash at a very fast pace.

Recent Concerns/Controversies: Based on their latest earnings call, the company’s guidance has focused on the completion of their certification and their manufacturing facility. There have also been multiple concerns about further delays in their FAA certification, but the management seems confident in achieving their goals. They have also talked about establishing several manufacturing facilities and infrastructure and hiring more people to ensure a smooth production process. They have also stated an intention to lower their costs and to increase the revenue in the upcoming years. Their last earnings call also mentions their collaboration with Toyota to achieve high quality production.