Q4 2021 Archer Aviation Inc Earnings Call

We are clearly pleased to begin 2022 with the recent news that the U S. Attorney's office decided not to continuous investigation and not to bring charges against our team member doctors Youre way, that's part of the Boeing joint venture whisks allegations against the Archer.

This claim with central to whisk allegations.

It's not unusual for technology companies to make trade secret claims against others and attempt to stifle competition, a slow new product introductions that said, we believe this outcome continues to support our assumptions from the very beginning that whisks claims lack any factual evidence we hope to put this issue behind us as we look forward to trial.

In January 2023.

As I look at 2022, I've established some overarching goals for our current and potential investors in Archer to consider.

While our tiers currently well capitalized my focus is to ensure that we continue to remain well capitalized as we mature our business model and execute our business outlook.

As we transition from our R&D centric business focus to manufacturing and commercialization of our business model, we will create an operating rhythm to archer, establishing a successful operating rhythm will ensure that our internal cadence of infrastructure for product development supply chain procurement manufacturing operations and airline service levels.

Our what we need to meet market demand as we transition to commercialization.

In terms of Investor sentiment, we recognized that the urban air mobility sector is challenging for investors to get their arms around and understand what success means.

We believe that ambiguity is keeping many interested investors on the sidelines not only from Archer, but the urban air mobility space in general.

The wide range in valuations that we see in this sector supports this thesis.

For example, as of March nine 2026 revenue multiples for publicly traded companies in this sector range from zero point Forex to one <unk>.

This is a pretty wide range given that to the best of our knowledge only two of US in this sector have achieved a <unk> certification basis I note that we are at the lower end of that valuation range.

Given this dynamic over the course of the next year I want to provide transparency to investors on how we are creating value and tracking towards our business outlook through education on how we define success going forward across critical elements such as the FAA certification process.

The operating physics of flight for EV, <unk> technology, and how that impacts choice of design in form factor Chi engineering and operational milestones our business model that we will execute upon commercialization.

Our unit level economics, and any other relevant items that are on investors minds.

This won't be a big Bang data down but over the course of the next year. So we will begin providing information to help investors better understand this space and how we believe Archer will excel in it.

Finally, coming back to the near term, let's look at our Q1 'twenty two outlook estimates.

We anticipate total GAAP operating expense of $58 million of $64 million and total non-GAAP operating expense of $33 million to $39 million.

This reflects expected stock based compensation and warrant expense of approximately $25 million.

In summary, my observations from my first month at Archer, our that we have the right strategy the right team and right capitalization to deliver on our business outlook and achieve certification and commence commercialization of our technology.

Im excited to be a part of this mission and I look forward to helping continue to build this great company.

With that operator, let's open it up for questions.

Certainly if you would like to ask a question. Please press star followed by one on your telephone keypad.

Any reason you would like to remove that question. Please press star followed by two again to ask a question Press Star one as a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered.

The first question is from the line of Andre Shepherd with Cantor Fitzgerald you May proceed.

Hey, good afternoon, guys and congrats on the quarter can you hear me okay.

Okay.

Great. Thanks, guys quick.

Quick question I'm, just wondering if you could maybe provide a little more color on the timeframe and the ramp up regarding the first cruise test flight. So you've mentioned you expect to conduct it in second half of the year any chance of maybe doing it beforehand and separately once the first cruise.

Light is complete can you talk about the next steps can you give us a sense of maybe how many test flights you expect to conduct shortly after or in the year.

Yeah.

Yes sure.

I understand the media it's Brett.

So the first flight as you mentioned in December we had for makers first hover went as planned and we were really pleased with the results we got.

A lot of information and data that we're using to advance the development.

Of a production aircraft and accelerate that timeline to market.

Overall, we're taking a very measured strategic and thoughtful briefly.

Briefly really disciplined approach to our flight testing to make sure. We go through the proper steps from hover all the way through the transition flight envelope.

But one thing that might be helpful. As I have Tom units archers, Chief operating officer on the call.

Tom has over a decade of Vitol experience and figured Tom could talk a little bit more about our timing as it relates to the transition envelope expansion and then further flight some here.

Yeah. Thanks, Brett Andrew This is Tom.

Brent had a lot of the high points, but just to reiterate we had a really successful first flight in December .

First of all it's never easy, but the team did a great job site went off as planned.

It speaks to what Brent mentioned earlier, which is the approach we're taking just a very methodical step by step.

<unk> tested the very incremental process right you expand the flight envelope in small steps to make sure. It looks good for you keep progressing so.

To answer your question.

Maybe in a bit of a roundabout way.

We're on track to get through our first transition flight on maker this year, but we're going to take the data as it comes right and react to it everything that we've seen so far looks really good validating our aero models.

Elevating our flight control lines.

Happy with we see what we've seen so far so looking forward to continuing to progress through that and both extinction.

Got it no that's great and very helpful. Thanks, guys, maybe one last one if I may.

Any sense of the timing regarding the selection of the manufacturing facility I'm. Just wondering if we could maybe quantify that a bit further or is overseeing now that its expected later this year.

Andrew This is Brett.

Yes ill talk a little bit more here, we put some stuff in our Q4 shareholder letter.

Again, our manufacturing site selection process.

Several months ago, and we've down selected from over 200 possible sites.

Currently in lease negotiation with a few locations to make a final selection.

We remain on track to formally announce our both the manufacturing site and beginning construction.

This year, it's not.

Something we can disclose here on the call, but we're getting very close and.

We're to plan as of today.

Got it I appreciate that that's awesome. Thanks, guys. Congrats again on the quarter I'll pass it on.

Thank you Mr Shepherd.

The next question is from the line of David <unk> with Barclays. You May proceed.

Hey, guys. Congrats on the first flight and thanks for taking the question.

Just to clarify on the.

Final question.

Yes.

You have not made a nice success of flights, but it sounds like Youre really.

Able to leverage the data you gave on that flight.

Incorporated into models and really using that to develop plans on future flights is that what I'm understanding.

Yeah, Hey, David it's Brett.

Our process for flight testing is really going to follow the same concept of operations that we're going to do in real life operations.

When we get to market so.

Flight perspective flight planning perspective.

We do a lot of.

Integration and ground testing work.

We then move into other flights.

From there, we really worked to expand the flight envelope from hover to full crews wider.

Full reborn flight on the wing.

Our real focus.

As of today is really get into full wind-borne flight.

The whole team and energy around the flight testing group is focused on fully explained in the flight envelope here now we expect to do that.

This year in full flight envelope expansion is an important engineering milestone for us to get to as we gather more data about how the how the aircraft's behavior and full full transition slide four crews flight environment and again, we're just using all of this through maker to help advance our timeline as it relates to our production aircrafts make.

Engineering decisions make better decisions around certification and so far we have gotten a tremendous amount of lessons learned throughout the entire engineering design process, where maker as well as all the flight testing work that we've done and we'll continue to do this year.

Okay. Thanks, Brett.

Just extending that was reported out.

The question the battery capabilities of one of your competitors.

You guys have put out I think the most battery information of any one of the industry.

Can you maybe discuss.

Any differences that you are expecting in the production aircraft battery from what you'd put out about maker.

Maybe any changes that you've made as a result of.

Your dialogue with the FAA or as part of the.

Preliminary design review.

Yes, certainly spread again, David so.

Yes, I think I think first is we're not going to be able to comment on other people's technologies and battery areas, but I can say a few things here.

<unk>.

As Archer Serbian market for urban Air mobility, we're not doing these longer distance regional transport trips. So we're really focused around in and around cities. We think it is.

Long term multi trillion dollar industry and we get really excited about helping to fix the traffic problems that exist today and move passengers around the.

Second and as you mentioned this since day, one we've worked to design an aircraft using today's technologies.

With aircraft design being one of our we call it key enabling technologies, we have a really.

Quite large and sophisticated flight sciences and aerodynamics team internally.

It's important to note that as it relates to the aircraft design process, we're not taking any bets today on technology advancements, it's not something we're interested in doing it at all and even when the business started I even went as far as publishing the physics of maker on our website, which shows our assumptions for range and aircraft performance, we tried to be as visible as possible.

This map.

Third Archer's designed our aircraft around readily available battery technologies that we have today. They are in our labs and we've gone through thousands of sales cycles to verify this we're verifying this for the adequate amount of power and energy needs that we'll need in our nominal mission and we're also validating this from us.

Safety perspective, but to sell reliability side.

We really want.

As a requirement for ours to make sure were designing our aircraft with batteries that exist today in technologies that exist today, we don't want to take any technology bets.

And then lastly here I think it's important to call out this is a very capital intensive space.

We feel very well capitalized for the journey, we're on and our track for commercialization, but I hope that's helpful.

Definitely helpful. If I could just squeeze one more in we've seen.

And I know it just seems a long way off and we've seen commodity costs expand significantly since you guys had put out your initial estimates on what you thought it was going to take to get up to production.

Is that calling into question.

<unk> put out as far as production or still too far off to say.

Hi, This is Tom I can take that one.

We are still in the supplier selection process working towards our production aircrafts. So.

Thing is.

We have time to negotiate these contracts time to kind of make our way through the current supply chain challenges that we're seeing.

Youre right commodity costs have been coming up but honestly, we haven't seen that too strongly in the contracts that we've been working so far we remain really optimistic and on track to hit our overall.

Business targets.

And including the overall.

Sort of operating economic model of the business, even with all the data we have today around supply chain.

That makes sense.

Thanks, Sean.

Thank you Mr. David Miller.

Once again to ask a question press star one.

The next question is from the line of Josh Sullivan with the Benchmark Company you May proceed.

Hey, good afternoon.

How should we think about cash use cadence through the year can you hold onto your title here with lowest burn in this sector throughout the year, maybe where are you on engineers or total employee head count at this point, maybe where would you be at year end and the timing of any other cash needs certain large cash needs through the year.

Hey, Josh this is mark thanks for the question good to hear from you.

We're going to we've agreed to provide <unk>.

Orderly guidance.

Going forward, but I think you can think about the pace of growth quarter over quarter consistent with what you saw probably from Q4 to Q1 just to give you a ballpark of.

How are you.

How you could potentially model it.

We have clearly there may be some lumpier type expenses with respective.

Engineering materials et cetera in any given quarter, but I think on average that's how you can think about the pace of spending throughout the year.

That's helpful got it yeah that's helpful.

And then just as far as G to progress with the FAA given you plan to be one of the first UV Tulsa received.

The designation how is the G to structure evolved with the FAA is is it a static process at this point or have the FAA changed any of your expectations over the last couple of months.

Yes, Hey, Brett it's a good question so from the outset, we've gone through a pretty structured process lots several years with the FAA, we've gotten through that.

<unk> board process several years ago with the FAA staffed the Archer project and we've gone through now the full <unk> certification basis, which the FAA approved for us.

Back in September .

Now since been working through the due to a means of compliance work.

None of that process has.

Has changed whatsoever assume status quo. We're working every day every week with FAA given supporting tissue papers in the documents set up for that process and we fully expect to get through the <unk> certification.

So it means the compliance work.

In 2022, so everything for US is on track we've had incredible dialogue with the FAA. It's one of our core focus is here at the company is to design around certification. So we really need to listen to the FAA, which is designed around as many existing federal.

Guidelines as possible and we're not trained again same with the battery comment earlier, we're not taking these big bets.

Here, we're trying to design under many guidelines as possible and we have been working tirelessly with FAA here to make sure aircrafts conforms as much of the existing regulatory.

Parts as possible.

Thank you Mr. Sullivan.

There are no additional questions waiting in queue at this time, so I'll turn it back the call back to Brad <unk> for any closing remarks.

Hey, this is Adam Goldstein.

Like to really just end the call today by reiterating a couple of our key points.

One is that.

We do what we say we're going to do we've accomplished everything that we said, we're going to do in 2021, including getting RG, one certification basis and having the first automaker on too is we're well capitalized and we have strong financial discipline and we have significant cash on our balance sheet. We have a disciplined financial plans that we're going to use to invest against our operational.

Roadmap and Thats really going help us get to market in.

In 2024 and beyond and then finally, we have significant momentum in 2022, we are well on our way to achieve our 2022 goals and our operational roadmap. Thank.

Thank you for joining us today, and we look forward to hearing from you soon.

That concludes today's call. Thank you for your participation you may now disconnect your lines.

Okay.