Q3 2022 Archer Aviation Inc Earnings Call
I mean, 22 financial results and business overview to our IR website.
This call is being recorded and an archive will be available on our IR website.
Before we begin I'd like to remind everyone that during today's call, we'll be making forward looking statements.
These forward looking statements are subject to risks and uncertainties that could cause actual events or actual future results to differ materially from those expressed or implied in the forward looking statements. These risks and uncertainties are described in the risk factors section of our annual report on Form 10-K, our forms 10-Q for the quarterly period ending.
March 31, and other filings with the Securities and Exchange Commission and available on the SEC's website and on our Investor Relations website.
Stepped as required by law Archer disclaims any obligation to update or make revisions to such forward looking statements as a result of new information or future events.
Also please note on this call certain financial measures are presented on a non-GAAP basis reconciliations.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in our shareholder letter posted on our Investor Relations website will begin with a commentary and then we'll open up the call to questions and with that I'd like to turn the call over to Adam Goldstein.
From day, one our <unk> strategy has always been about finding the most efficient path to commercializing <unk> aircrafts that translates to one designing for certification, which is why we are confident that we do not have any design gaps and we believe that we have a clear path to certifying midnight in late 2024 Q building in <unk>.
Aircraft that fits our business case that means 1000 pounds of payload to enable a pilot plus four passenger aircraft low direct operating cost and the ability to conduct rapid back to back 20 mile trips and three <unk>.
Focusing our in house development on only the key enabling technologies that cannot be sourced from the existing aerospace supply base under this approach we rely on partners to supply components that are already being used on certified aircraft today dramatically, reducing our certification risk as well as our development timeline and cost.
We believe this strategy and our team's ability to execute on it has allowed us to establish our leadership position in the market and it's why we are confident we will be the first company to certify an E VTOL aircrafts in the U S with the FAA.
The success of our execution and our maker flight test program and our progress on midnight.
Over the coming months, you can expect to hear about further advancements on our path to commercialization. We strongly believe that these achievements will further solidify our leadership position.
Earlier in the year, we announced three goals that we aim to achieve in 2022.
<unk> maker transition flight.
<unk>.
Acceptance of our means of complaints and three selecting our site for manufacturing.
As we sit here in November we are on the doorstep of achieving all three goals first maker transition flight.
Transition is the phase of flight between Hubbert and crews where the aircraft transitions from lyft generated by the propellers to lyft generated by the wing, which is called Wind-borne flight I'm happy to announce that on November <unk>, we conducted makers first wind-borne flight over the coming weeks, we expect to conduct a full transition flight where the propel.
<unk> will be locked in their crews position.
Second FAA acceptance of our means of compliance.
Archer has submitted its means of compliance and the completion of this goal by the end of the year will depend on the FAA the ability to review and accept them. We believe we are very close.
Third selecting our manufacturing site.
We have selected our site and are finalizing the agreements with the state and local governments involved we expect to make an announcement on this in the very near term.
Next I will highlight the key areas of progress we made last quarter on our go to market efforts, our aircraft technology and certification.
In terms of our go to market efforts. We believe we must start planning now for the launch of our Uhm network in 2025.
This is an effort that spans across many stakeholders, including our business partners and federal state and local government authorities.
As you saw from our announcement. This morning, we've identified our first point to point route that we will operate with United between the downtown Manhattan Heliport, one of the world's most advanced and well known teleports and Newark Liberty International Airport, one of United's largest hubs.
In the lead up to this announcement our teams spend a lot of time talking to the relevant constituents, including members of Congress from both New York and New Jersey, The Port Authority and Mayor Adams, who I spoke with at length.
One of my biggest takeaways from those conversations with excitement.
Segment for what this new form of safe sustainable low noise transportation can mean for the Tri state area.
It's this type of validation that makes all the hard work force it.
Recall that we announced on our last earnings call that we received a $10 million pre delivery payment from United representing a deposit on the first 100 aircraft. We've agreed to deliver as part of their 200 aircraft order, we anticipate that they will deploy some of those aircraft on this first route.
We will continue to announce additional routes supported by our proprietary data modeling platform Prime radiant, which is helping us determine the optimal takeoff and landing locations for these routes.
We expect more exciting announcements in the weeks and months ahead.
Next I want to highlight our progress on our aircraft technology.
On November 2nd maker fluids first Wimborne flight, it's blue above the stall speed generating lift from the win we believe we are one of a very small group that has done this with the vector thrust EV talk integration.
And we did this with impressive speed and execution, having started makers flight test campaign less than one year ago.
I believe the reason, we continued to execute well against our goals that we have the best team in the industry. Today, we have almost 500 employees with a vast majority working exclusively on the development certification and commercialization of midnight.
We believe we have the most experienced engineering leadership in the industry. For example, Tom units. Our COO has played a major role in leading the design and development of eight full scale <unk> aircrafts. Since 2010. He has been instrumental in implementing our design for certification approach and Dr. Jeff <unk>, our chief engineer.
<unk> has also played a major role in leading the design and engineering eight full scale <unk> aircraft over the past decade, plus it is incredible to see what these two and the rest of the team accomplish on a daily basis.
We will highlight more of our team's impressive experience in our upcoming open house event.
After certification Tom will cover that in depth during his remarks, but I do want to highlight another key leader on the team that is making a huge impact as we work towards certification.
Dr. Michael <unk>, our new head of government relations joined US in August after 14 years at the FAA.
Dr <unk>.
Most recently as the FAA aircrafts certification director of policy and innovation, it's not an exaggeration to say that Dr. <unk> has been the go to person within the FAA on <unk> over the past several years.
Yes.
Now, let's transition to our upcoming open house, while we originally plan to unveil our production aircraft midnight in 2023, we were able to pull it forward to 2022, given our confidence in the program on November 16th we will show a live audience. The amazing progress, we have been making and on the 17th we will be making it available.
Well to the public we will start with a flight test in the morning, where we will show maker flying a high speed Wind-borne flight.
The analysts investors and partners, we will get to witness firsthand the performance capabilities of the aircraft and how quiet it is.
As part of our board member and former United CEO , and Chairman Oscar <unk> always says proof not promise.
I can't wait to share the test flight experience with many of our great suppliers investors business partners and other supporters archers that will be in attendance.
After a flight test, we will take attendee through a series of presentations covering our commercialization strategy.
A primary powertrain development and a detailed look at our certification progress the powertrain segment will be especially exciting as we will be showing off sample hardware and explaining how it has enabled our thousand pound payload to cap off the day, we will take attendees to our hangar, where we will unveil midnight.
I also want to highlight the continued work we are doing with our strategic partners to Lantus.
Atlanta is one of the largest global auto Oems with brands, including Jeep Ram modern routing and they've played a critical role in our manufacturing journey to date building millions of cars annually Atlantis as a core competency in high volume manufacturing.
We have been working with Atlanta since 2019 across different engineering projects, and we continue to leverage the deep manufacturing and design expertise.
Importantly, Atlantis is fully committed to EV and are investing tens of billions to advanced electrification across its portfolio. We look forward to maturing our relationship as we transition into production.
In summary, we've made great progress in 2022 and look forward to sharing our 2023 goals in more detail on our next call. We believe the hard work, we're doing now to advance our go to market efforts, our aircraft technology and certification will put us in a position to be first to market and win substantial market share once we get there.
I am confident we have the plan the tools and most importantly, the team to do that now I'll turn it over to Tom units.
Thanks, Adam it's an exciting time to be in Archer, our momentum continues to build today and specifically going to talk in detail about our aircraft technology development and certification progress.
On the aircraft technology development front, we are really excited about the progress on makers flight test campaign that Adam highlighted earlier, one of our critical milestones for 2022 is to achieve our first full transition flight with maker. We are close to that goal and recently achieved wind-borne flight on maker with aircraft flying at speeds, where the vast majority of the lift required for <unk>.
Light is generated by the wing.
This ongoing testing as part of our transition envelope expansion test campaign, where the aircraft transitions from lyft generated by the propellers at low speeds to lyft generated by the win at higher speeds.
We're on track to complete our full transition milestone on schedule before the end of the year, where the <unk> will be locked in the crease position.
It is important to remember that the reason we chose our tilt propeller aircraft configuration is because of the substantial benefits. It offers in the form of energy efficiency and longer range first aircrafts that have separate lift and cruise propulsion systems.
Aircrafts this outer wing that use propellers to generate lift in all phases of flight.
The data we have gathered from filing maker is a critical advantage and has resulted in a major derisking for the midnight program.
It is important to emphasize the relationship between maker at midnight.
Our strategy from the beginning was to validate key aspects of our aircraft configuration, including the aerodynamics flight controls until propeller system on maker first then leverage these lessons learned and the development of midnight.
And that has the same aircraft configurations maker, but it's slightly larger in order to support the 1000 plus pounds of payload and carrier pilots with four passengers. We are confident this is a winning strategy. The invaluable technical data from maker has given us confidence in the aircraft configuration and our ability to execute the midnight program to plan, which is in.
Exactly what we've done with maker.
As Adam outlined earlier, our strategy from day, one has been to take the most capital and time efficient path to developing certifying in commercializing our <unk> aircraft.
A key aspect of this strategy has been to focus our internal development efforts on the key technical enablers like batteries Motors and fly control software for those areas that arent differentiating technologies, we leverage the existing aerospace supply base to provide us with components that are already being used in certified aircraft today.
This has enabled us to further de risk the program, but it has not impacted our ability to maintain the 1000 plus pounds of payload necessary for our business model.
At this stage, we've selected suppliers for approximately 64% of the bill of materials for midnight and we look forward to announcing several other of our major key supplier partners over the next few weeks.
Another key element of our strategy has been to sync the design of midnight with our certification efforts.
Our design for certification approach is based on understanding the detailed regulatory requirements for our aircraft early enough in the program. So that the aircraft is designed to be FAA compliant from the start.
We believe this is translating to a more efficient certification timeline.
Because of this process. We currently don't see any certification gaps in the midnight design.
As we discussed last quarter, the Fas change to certify E VTOL aircrafts under a special class process in part 21 17.
As for us proven to be largely administrative.
Since our last quarterly update the FAA has added certain new requirements towards certification basis as a result of the change, including one change addressing the robustness of our aircraft to bird strikes and another change covering a safety features of our aircraft related to complete loss of propulsive power in flight.
Both of these new regulatory requirements are already addressed and midnight to design and thus we don't anticipate they will have any impact on minutes development or timeline for certification.
As a reminder of how the aircraft certification process works. The first step is agreeing to the <unk> certification basis, where the airworthiness criteria are set.
The second step is then to agree on the media compliance, which is the detailed list of design analysis and testing standards that will be used to demonstrate that the aircraft is safe and complies with all of the airworthiness criteria.
We have been told by the FAA airworthiness criteria from our amended part 'twenty 117, B G. One certification basis will be published in the Federal Register in the coming weeks.
We submitted a comprehensive proposal for midnight into compliance to the FAA back in December of 2021, we've made lots of progress discussing means compliance topics with the technical experts at the FAA over the past year.
Does the shift to 'twenty 117, B that we just discussed.
The FAA decided to review again all of the previously accepted meets compliance to ensure that they remain applicable to the updated Q1 certification basis.
With an amended an accepted G. One this unlocks the FAA to formally accepted in these complaints that we've been discussing over the past year.
Just like we saw with the G. One we anticipate the <unk> compliance to be largely administrative.
In parallel with efforts around our music compliance our team has been hard at work on our subject specific certification plans or <unk>.
<unk> provide precise detail on the tests and analysis that will be completed during the implementation phase of the project, which will require that we demonstrate to the FAA that midnight meets all relevant FAA requirements necessary to receive type certification.
We expect to have approximately 18 <unk> each of which we plan to submit to the FAA for review and acceptance over the coming months.
We recently submitted our first Sse's CPU to the FAA and our goal is for the FAA to accept all of our <unk> by the time of our next program development milestone for midnight. The critical design review, which is scheduled to occur during the first half of next year.
We remain highly engaged working in partnership with the FAA at all levels from the administrator and head of aviation safety down to our day to day contacts throughout the administration.
We are working to progress on certification as efficiently as possible and the dialogue to date, it's been highly constructive our goal continues to be achieving type certification by the end of 2020 for putting us on track for our first aircraft deliveries in early 2025.
With that I'll turn it over to mark to discuss the financials for the quarter.
Thanks, Tom.
Q3, 22 was clearly a significant quarter for US is our world class team continues to execute on the milestones we've laid out.
Last quarter, we discussed extensively how much of the company's focus is on our efforts to commercialize our business.
And to be clear commercialization means generating revenue.
The rapid advances we have made in such a short time validate our capital efficient approach to developing proprietary technology or refocus on key differentiating technologies like batteries in propulsion and leverage our supplier partners to augment our technology with their world class products.
This capital efficient approach has allowed us to develop our proprietary 12 tilt fixed aircraft configuration and other key enabling technologies in an expeditious manner. Thanks to strong supplier relationships, but with a relatively modest amount of personnel.
We have almost 500, Ftes currently which is less than half of the head count of others in our industry.
We continue to focus on investing our capital in a very disciplined manner across all aspects of the business head count.
Research and development expenses capital expenditures and other discretionary spending and the forecasting and planning systems that we have instituted help ensure we have the infrastructure to support that financial discipline.
Given we just announced our first urban Air Mobility Route in New York City I wanted to provide some further details on how our payload impacts are uhm unit level economics and is a key enabler of our UAS business model.
Let's take a sample uhm route like the one we just announced.
This is approximately a 15 mile route that our modeling shows could support 25 trips per aircraft per day.
From a topline standpoint, assuming indicative pricing similar to current ride sharing services.
Revenue would be $90 per seat per trip.
That is roughly $6 per seat mile.
Revenue clearly scales as the aircraft capacity has filled from $90 for one seat to $360 for four seats.
At 25 trips per aircraft per day operating 365 days per year, a 1000 pound payload aircrafts capable of carrying four passengers would generate approximately $3 $2 million of revenue per year.
That is 50% more potential revenue only smaller payload to seat aircrafts.
This is approximately $1 $6 million more potential revenue per aircraft.
From a cost standpoint, the direct operating costs between two passenger or for passenger capacity are directionally about the same because their weight and ancillary fixed costs are very similar.
Given that simply put we believe payload unlocks the potential for greater profitability.
Given the density of these routes are modeling confirms that high load factors are expected on this particular route and the aircrafts would likely operate at or near capacity.
We will share more specific details around the unit level economics of our urban air mobility networks in the future.
We wanted to provide an example to indicate why payload matters so much.
Now, let's turn to our financial performance for the quarter.
We ended the quarter with $606 million of cash cash equivalents and short term investments on our balance sheet.
We added $54 $2 million of cash payments in the quarter.
For the nine months ended September 32022, our cash used in operations and the purchase of <unk> was $136 8 million.
We continue to be one of the most well capitalized companies in this sector.
non-GAAP total operating expenses, which exclude stock based compensation and warrant expenses were $61 $1 million, which was below the lower end of our estimates range due to the timing of certain nonrecurring supplier costs and spending for materials related to our R&D efforts non.
non-GAAP operating expenses increased sequentially by $11 1 million as expected as we hired more people to staff, our engineering programs and build out the other areas necessary to support the growth of the business we.
We also invested in parts and materials for both our maker demonstrator aircraft and our midnight production aircraft program.
We incurred a loss on adjusted EBITDA of $60 1 million to.
The sequential expansion of that loss by $10 9 million relative to Q2 'twenty two was primarily driven by our increase in non-GAAP operating expenses for the reasons I just mentioned.
On a GAAP basis total operating expenses for Q3, 22 were $93 8 million, which.
Which included $26 2 million of stock based compensation and $6 $5 million of warrant expenses.
These results were below the low end of our Q3 'twenty two estimates of $95 million due to the timing of certain nonrecurring supplier costs and spending for materials related R&D.
Finally, let's look at our Q4 'twenty two estimates for spending.
Recall that we compete our preliminary design review for midnight last quarter and as a result, we will continue to see a temporary uptick in spending to support nonrecurring engineering costs related to the bring up of midnight suppliers and increased spending on parts and materials for our midnight aircrafts per our plan.
Some of that planned spending in Q3 'twenty two is shifted into Q4 'twenty two.
We anticipate total GAAP operating expenses of $100 million to $110 million and total non-GAAP operating expenses of $70 million $80 million.
This reflects expected stock based compensation and warrant expense of approximately $30 million.
We had a very active investor outreach calendar in Q3, 22, and we will continue that into Q4 'twenty two.
We will be participating in a number of conferences meeting with investors and engaging with the financial community to discuss this sector and arches leadership in it.
We've provided a detailed calendar on our website and in our shareholder letter.
Finally, we look forward to seeing many of you next week at our open house.
In summary, Archer continues to be laser focused on doing what we say, we're going to do with respect to our operating and financial goals.
As you can see from the progress that we achieved in Q3, our capital efficient approach to advancing our go to market efforts aircraft technology and certification is progressing according to plan and I am excited with how our team is executing well.
With that operator, let's open it up for questions.
Thank you.
We will now begin the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad. If for any reason you would like to ask question. Please press star followed by team again to ask a question. Please press star one.
As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question. We will pause here briefly ask questions are registered.
The first question is from the line of <unk>.
<unk> fits with Raymond James Please go ahead.
Hey, good morning, and good afternoon, everyone.
Mike.
If you get a little greedy here, but you talked about 2024, our cash burn can you talk about as we head into 2023 and that kind of progress youre thinking about.
You know what the puts and takes might be.
Our cash burn rate.
Yes.
So when we think about capitalization savvy nothing materially changed from our last conversation on it with.
We continue to invest in and head count.
As well as parts and parts for our.
Our programs, our engineering programs as well as a big a big chunk that you see.
Impacting this quarter is the NRC are nonrecurring costs with our our foundational vendors those are those are cost too.
To standup certain operations around our subsystems tooling et cetera, So youll see those.
To be fairly lumpy.
If you look at our our progress from Q2 to Q3, our non-GAAP operating expenses went from 50 to $61 2 million a portion of that was for some NRC and parts materials, we will see that expand more in the guidance I just gave.
And the $70 million to $80 million.
In general Youll see a steady uptick in our in our head counts for a modest uptick and Youll see some lumpiness in our NRC and parts as weak as we start to build build the first.
Midnight.
OTO types, and then inflect into actually building out the <unk>.
<unk>.
The first test vehicles for <unk>.
Per the certification program.
That's super helpful and.
You had all that kind of clarity.
Color on the certification side.
So kind of confusing a little bit.
Jeff.
You pointed out that.
They added a couple more requirements there.
<unk>.
What happens if the FAA kind of conversions. He asked that does that stretch out the timeline more is it seemed like through these kind of recent updates.
Lot of it is already built in and Tim at night.
Hey, Savi this is Tom happy to answer that.
The way, we see it it's actually.
Maybe the other way from what Youre, stating today, it's looking like most of the leading E. VTOL companies are here in the states and where the groups that are highest capitalized farthest along.
We think it's much more likely that global regulators standardized on <unk> position with regard to these vehicles.
But circling back to your point earlier, we feel like our strip basis is super stable I mean, we have a signed updated G. One under $20 17, DSO are just ready to keep executing to our program and that's how we're thinking about it.
That's helpful. Thank you.
Thank you.
Our next question comes from the line of Bill Peterson.
J P. Morgan. Please go ahead.
Apologies.
Looks like his line has shrunk our next question.
The line on.
James Shepherd with Cantor Fitzgerald. Please go ahead.
Hello, everyone. Good afternoon, and thank you for taking my question and congrats on the quarter.
Maybe in regards to the first announced route.
I'm just wondering maybe can you give us a little more color as to kind of how this came about I know in the past you had mentioned that you.
You were targeting Florida, and California, as the first target market. So just kind of curious how this new York route.
Came to take place thanks.
Thanks Andreas.
So when we look at the different markets that we can launch into there's definitely several considerations that we are.
That will be considered.
Looking for cities that have heavy congestion cities that are tech forward cities that have the local municipalities want feed services.
And especially with our partner United.
New York became a very attractive market to look at it as a market that is very densely traveled.
And when you think about the go to market strategy, we've laid out the airport to Citycenter route what we call our trunk routes.
It's probably one of the most dense route den traveling the country.
Tween.
J F K Laguardia and Newark, I think it's something around 27% to 8 million people per year are taking that trip I went to New York for almost 20 years and I've sat through that traffic. So I know thats, a Google 90 minutes that you typically spend going 15 20 miles.
So we know there is willingness to pay because rideshare is taking these trips every day. We know there is no demand and so we worked with United with the Port authority with the mayor and.
And we saw a lot of excitement specifically around this route and so we saw a really clear path to make it happen.
And so.
Not a route that we have to like forced in it's something that we're now working together with all of those constituents to actually make it happened and we think it's going to be the first route that <unk>.
Tal probably sees globally.
Got it thanks, Adam no Thats very helpful.
Maybe just a quick question just in regards to certification so if I'm understanding correctly.
We are reaffirming your expectation to get that full certification in the second half of 2024, and so if thats the case unless I'm missing something youll be the first EV toll company to get certification with the FAA. So I guess my question is how important do you expect that to be particularly in terms of kind of quickly capturing market share.
Thanks.
Okay.
Well I think it is important but.
When we think about it it's really a result of the strategy that we've laid out from the beginning which was to hire.
Hire people with the most experienced and aligned with our strategy of simplicity in order to get to market.
First to market faster market right and that was all about bringing Tom units on.
Dr Bodhran as well on the aircraft side. The second one is to build a vehicle that was certified from day. One. So we didnt just build an aircraft and bring it to the FAA and say here's certified this we designed the aircraft's alongside of the FAA and really match that design progress along with the certification process and now you can really see it in our <unk>.
Trajectory and our pace of progress.
And across the technology and certification side, so nobody thought we'd be transitioning maker in less than a year, but here we are.
So I think really the.
Kind of all of this coming together is it really just the plan we've laid out and you can even see it on the FAA side I mean earlier. This week now Johnson the director of aircraft certification at the FAA at the European Rotors Conference in Germany. He said that there are other projects, assuming you're referring to tobey that are identical or nearly identical spot that the.
It's in process.
And.
You know that there is space to referring to Archer right and so he's basically saying.
It's effectively indicated we're at very similar spots and we've done this in a really short period of time.
He also went on to say that simultaneously they plan to disposition comments.
To both of them.
Our air Worthiness criteria. So here, we are neck and neck.
And the certification process, we've done it with.
I think really in a pretty quick and efficient manner and we're doing it.
And exactly how we laid it out.
Got it thank you and maybe if I could just squeeze one last one quick question for Mark.
In the quarter you it looks like you shifted about $488 million of your unrestricted cash into short term investments. So just.
What was the reason here just help me understand.
Yes, that's just prudent capital management Andres.
The rate environment clearly.
There is an attractive environment to put your money to work for us So we invested.
<unk> of our cash and investment management or bank were earning.
You can see on.
Earning an average of just over three 2% or so on that money. We invested fairly early on in the markets are a little different the regional different now, but that's that was the purpose behind doing that just really good cap.
Prudent capital management.
Got it fair enough. Okay. Thank you very much congrats on the quarter I will pass it on.
Thanks Andre.
In Q.
Our next question comes from the line of Bill Peterson with Jpmorgan. Please go ahead.
Okay.
Hi, Good afternoon, hopefully you can hear me okay. This time.
Wanted to come back to certification I guess.
Is there any color you can provide a lot of amazing the accepted in terms of music compliance I'm not sure if it's appropriate to quantify in terms of percentage of completion or maybe even better at just like specific areas that you're still working with the FAA and it needs to be agreed upon.
Yeah, Hey, Bill this is Tom it's a good question.
So the way to think about it is back when we are certifying under part 23.
Had submitted basically a complete set of proposed meets compliance and over the last year, we've been working with the FAA kind of step by step through all of those topics.
And to the areas that have been interesting that we've been focusing on kind of giving you some more context there.
It's about two thirds of the meets compliance are pretty standard stuff that under part 23, the FAA just kind of blanket access so if we focus on.
The remaining one third which are more interesting. They are all in the new and novel areas. So youre talking about batteries talked about electric engines that sort of stuff.
The vast majority of our discussions with the FAA has been focused on exactly those areas.
Today, we feel like we've got really good alignment with all of the experts at the FAA, but just again to be really transparent as part of the 21 2017 be process.
The formal sign off our acceptance of those is something that earn out just kind of going back through and thats been unlocked by this.
Final agreement of our 21 17 B G. One so hopefully that answers your question.
Yes, thanks for providing that color.
On an agreement just to follow up on the Andrea's question.
You mentioned that the hookup already Hello Port already exists in Manhattan, I'm not sure what's on the Newark side, but I guess.
How are you guys thinking about that.
A particular site.
The exclusive will that'd be open to the public somewhere two presumably the heliport and Manhattan would be.
And in both cases, how do you how would you expect archer's involvement.
In terms of I don't know.
Charging equipment or capex or things like that.
And then really maybe more importantly, like what else remains to be done in both sites in terms of approvals permitting readiness and I'm asking this because it seems like this could be a blueprint for other city airport to city routes. There's other Hello portion of the New York area and what you can kind of run from this too I guess cookie cutter throughout the rest of the area perhaps in another.
Cities.
Yeah.
Thanks, Bill this is Adam.
So the first step really was taking a look at routes that we think can be viable.
That made sense to both Archer and United and we identified the trough specifically because it met so much of our criteria.
On the Newark side, I think obviously United is the largest customer at Newark.
We had conversations with the Newark Airport and so it is a important part.
<unk> strategy to help bring sustainable forms of aviation to market and so that's really what we're working towards and launching this route. So theres certainly is a lot of work that will need to get done to <unk>.
Rectify.
The router parts and basically bring the basic infrastructure that's needed to get this done.
But to start there are already existing.
A couple of routes.
So in there already.
There is no demand for <unk> from.
New York City go into to Newark Liberty International.
So there is definitely work can be done there, but we agree. This we think this can become one of the blueprints for.
Other cities and it's certainly one that we're going to work out together. That's why we started so far in advance right.
That in my remarks in order to launch the throughout 2025, we were going to start in 2022.
To get the start so I think more to come.
On that.
Okay. Thanks.
Thank you.
Our next question comes from the line of Edison you with Deutsche Bank. Please go ahead.
Yeah.
Hey, Thanks for taking the questions first you mentioned in the.
Leather that you source about 64% Bob can you just remind us what are the key remaining parts left to do.
And then Tom sure happy to do it.
So the 64% that we've already done as most of the big things So <unk>.
Lots of materials coming from XL, we announced.
Ownership with Honeywell or are they going to be supplying actuators a lot of big systems things like that landing gear, we announced recently with Macaire excited about that so the remaining areas are mostly smaller components. So a couple of areas. One is avionics, so think sensors and things like that and then the other big chunk is in our powertrain.
Jane area. So these are mechanical parts metallic parts things that go into electric engines and some of the battery system components.
Still got outstanding working on over the next few months.
Hey, curious have you have you already decided on some of the battery cells and so does that open decided upon or are you still in the still looking around.
Yes, so we haven't we haven't announced our battery supplier is yet, but we're feeling very confident and in a good place with the supply essentially secured we will be announcing a lot more of the details around this at our open house, which is coming up next week, we will do a deep dive in there on our powertrain technology.
<unk> motors and batteries. So I hope you can make it we'll share a lot more demand.
Yes sure.
And then a financial question I know you've got the deposit from from United How do we think about Patriot deposits what milestones should we be.
Where should we be on the lookout for.
Hey, Allison this is mark.
Yes typical commercial milestones.
Clearly the deposit is one the next one depending on the counterparty you're negotiating with could be.
Anywhere from three to six months from shipment.
And then shipment is clearly where the preponderance of the.
The payments.
Milestones would come in and oftentimes there is a little.
A small 5% or so thats held until they.
The aircraft are delivered but that's what we can see how you can think about it.
That's how we're going to market with.
Talking to customers.
And those would be more typical milestone.
Great.
Got it.
I could sneak in one more.
<unk> have you thought about the interface in terms of what the consumer sees as it's going to be.
Your own App, it is going to be integrated with the United App, which I got to say they haven't picked up on any thoughts there.
Hey, Allison this is Adam.
So we have thought a lot about this and we are actually working on this on our end.
It is our expectation that we will develop our own app, but we also will integrate with some of our partners. So I would expect there to be an ability to book.
Flight on and auction aircraft through an archer apt as well as the ability to book through our United App as well.
Gulfport.
Taking the questions.
Yeah. Thanks Edison.
Thank you.
Our next question comes from the line of Josh Sullivan with the Benchmark Company. Please go ahead.
Hey, good afternoon.
Hey, Josh.
Michael from an esky, joining archer fairly interesting.
And having been there for a couple of months now at this point how has that contributed to your approach to certification in so far.
Hey, Josh this is Adam.
So Dr. <unk> has played a pretty large role at the FAA.
And helping develop frameworks that E. VTOL aircrafts will go through the certification process.
And so.
He has been really helpful. On our end as we really ramp up our government relations.
Group, So we have been much more involved and engaged with.
Different congressman.
And <unk>.
Different other officials that are very supportive of the vitol and other regulators that we think will help bring the entire ecosystem to market. So I think it does go beyond just looking at the FAA.
But.
As we get closer to its certification timeline. It is important for us to ramp up the government affairs, because we will have to bring together.
Parties across the infrastructure across the airline side and.
And across the.
The aircraft manufacturing side.
And then just a follow up question on the relationship with suppliers how has that changed as you get closer to certification or are they more willing to financially support you as you hit milestones.
Yes, it's a good question. This is Tom so we've actually found really strong engagement from the supply base kind of throughout our development program here.
We also choose to partner with suppliers, who are excited about the space and the big opportunity I think a lot of them have seen.
Kind of missed the boat I would say in some other opportunities and they really see archer and our strategy resonates with them right since for everything that we're doing is focused on commercialization and go to market.
So having said that we're focused on building long term relationships with these groups getting long term supply agreements in place such that we can be successful on our programming and our suppliers can be successful too.
And then just one last one just following up on the announced with United In New York, Obviously, a dense valuable route but how are you addressing or how you're thinking about colder climates with regard to operational scope and then do you think archer has any advantages in colder climates other even touched on at this point.
<unk>.
So we are building on the vehicle to be able to fly into all conditions outside of known icing and so thats. The one condition that we are considered Avalon looking at.
One of the big conditions, we look at when considering different geographies.
We certainly will be open to looking at colder climates and I do think it is it is helpful. In fact, there are some big advantages. So you can imagine in New York City.
Its nose and then the next day.
The city is a mess and there is no everywhere and it's very difficult to get around yet acted conditions about cleared. So we actually think it can be really valuable motive transportation.
Cold weather, but it does come with some limitations.
Thank you for the time.
Thanks, Josh.
Thank you.
Again to ask a question. Please press star followed by one of your telephone keypad.
Our next question comes from the line of David <unk> with Barclays. Please go ahead.
Hey, good afternoon, and thanks for taking my question.
Wanted to see if I can get a little more color on this subject.
Specific certification plans.
Kind of what you think the pace of submit it will be next year. What do you think the critical areas are because it seems like that might end up being the next real high level.
The item that we do.
Do you want the tracking.
Yeah, absolutely Hey, David This is Tom.
So the way to think about it is we've got 18 subjects specific certain plans that will need to agree with the FAA on for a project.
As we grow in our shareholder letter we've submitted the first one we're looking at that now the 17, others are completely drafted and we're essentially just.
Waiting for the FAA to be ready to review them.
If you kind of go back and think about it in context right. We had made all this progress on certain basis back in 2021 and that means compliance this year, but again because of this 217 be reset the FAA has kind of gone back through this administrative staff of checking the box.
So <unk>.
These are and what's next and that's what the team has really been focused on for the next few months.
In terms of getting them <unk> with FAA to your question of which are the most interesting are harder ones. They are probably pretty obvious right. It's again around the new and novel technologies. So propulsion integration on aircrafts. That's an interesting one the engine certification plans those are interesting.
They are based on existing ASTM standards, but it's still a newer for the FAA than some of the more I will say the super straightforward ones like material process stops right.
More simple flight controls things like that so if you come to our open house, so which will be due next week. We will cover this in detail on the deep dive got a whole chart.
Surplus and exactly what they are what areas they cover and thoughts on each one hopefully that's some good color for you.
Definitely helpful. And then if I could just follow up on <unk> question earlier, I think it fell out a little bit but the.
Our route out of Newark, It sounds from the description like it is going to be a combination of the Archer Uhm network.
And some are to direct that is going to United I mean does that said does that kind of a plan.
Considering that.
Hey, David This is Adam yes that is the plan I mean, the way we've thought about it is United is more than just a customer.
There have been more than just an investor they have really been a true partner with us and this throughout this whole journey.
In a way if you think back to when we first went public.
It was a big part of that announcement, which sort of unlocked. The first company that first EBITA coming I did announce we were going to be going public, which step which led to several other companies announcing they were going public. So that is really United has really been there with us sensitive.
The beginning of that announcement and we've been working through these different chat.
Challenges and opportunities to be able to build these route to get them to market and so we think about it as we'd be operating and going to market like together.
But one follow up on that on that too is we do think it's important that other groups get to market as well and so I do think there are going to be opportunities for other groups to share and utilize some of its infrastructure because.
As we've been saying for a long time now we think collaboration and the industry is critical and we want there to be a big supply base, we want there'd be collaboration around certification standards.
Ultimately, we want there to be collaboration around infrastructure as well.
Great. Thanks, Adam appreciate it.
Thanks, David Thank you.
Our next question is a follow up from the line of Bill Peterson with Jpmorgan. Please go ahead.
Yes, thanks for taking the follow up.
Wanted to ask about any any turn engagements you might have with the Dod or jewelry.
Agility Prime and I guess I'm asking in the context as suppose there's further delays in the FAA has nothing to do with you, but just similar to maybe its not launched in early 'twenty five at some time later do you have the opportunity to work with them or is there. Other applications you could work on my cargo or something else like that would not limit you from.
I guess would allow for some revenue in the 2500 units to passenger business did not startup time.
Hey, Bill this is Adam so the answer to that is yes, we have opportunities with the Dod and we have been working with the Doj through agility prime and looking at several different larger programs that have come out and so that is certainly an opportunity that we are dual tracking.
But I do want to add that working with the Dod is very resource heavy and so we do have to evaluate each one of those opportunities.
Would be very selective.
There are very heavy systems requirements that you have to put in place there's personnel limitations and in the end, it's likely pretty low margin business, because theyre all competitively bid.
So there are opportunities and we are.
Nothing those.
And it could provide an interesting.
But we do want to stay very focused very focused on our ability to get to market with our commercial vehicle.
With the FAA and so Thats, where we really have really stayed laser focused and have put a majority of our efforts.
So well understood yes, thanks for the color there.
Thank you.
Our next question is a follow up from the line.
Bobby <unk> with Raymond James Please go ahead.
Hey, thanks for the follow up.
A quick question I know last quarter, you talked about potentially adding some partners.
You have the strong relationship with United I was curious.
What aspects would you want from a new partner like what could they fill in where maybe that's different than the United partnership.
Decided this is Adam so I think Theres a couple ways that we think about partners on the airline side.
United has done an incredible job in helping us think about operationalize ing and a lot of the work we're doing on the OEM side.
And so at this time a lot of the conversations that we have.
Our I would say through more sales potentials, rather than partnership potentials, that's how we've thought a lot about it.
But on the OEM side, we have been working with Atlanta in terms of on the manufacturing side.
And so I do think there are opportunities for other other partners, but I think on the on the airline side, we've mostly been engaged with other folks more traditional customers rather than partners in the same way we work with United.
So this would be for their operation if somebody wanted to kind of buy aircraft and operate them.
That's correct.
Hi, Thanks.
Thank you.
There are no additional questions waiting at this time I would like to pass the conference back to Adam Goldstein, founder and CEO for any closing remarks.
The advancements that we've achieved across our aircraft technology with makers Wind-borne flight, our certification traction which was reinforced by the FAA public comments earlier this week and our go to market. Our go to market efforts visible with our joint announcement with United for the first ever E. Vitol Ralph has really.
Kris My conviction that we have the right strategy, we have the best team that will allow us to get to market. Thanks for joining us.
That concludes the Archer Aviation, Inc, Q3, 'twenty financial results Conference call I Hope you all enjoy the rest of your day you may now disconnect your lines.