Q1 2023 Archer Aviation Inc Earnings Call
Speaker 1: to operations with scalable manufacturing.
Speaker 1: Today, I'll share some exciting updates on our joint efforts to stand up those manufacturing capabilities, including progress on our manufacturing facilities in San Jose, California, and in Covington, Georgia.
Speaker 1: Our collaboration with the Lantis goes back to 2020 and is built on our shared goal of developing a sustainable urban mobility industry supported by high volume manufacturing with the focus on quality, efficiency, profitability, and above all else safety.
Speaker 1: Stellantis initially became an investor in Archer in 2021. As part of the recent expansion of our strategic relationship, in addition to our manufacturing partnership, they have committed up to an additional $150 million in equity capital for Archer to draw upon at our option between now and the end of 2024.
Speaker 1: This is a once in a generation opportunity to redefine urban transportation for both archer and Solanta.
Speaker 1: For Archer, our relationship with Delantis helps us ensure that we have a robust, scalable manufacturing infrastructure in place at the time of certification.
Speaker 1: And by leveraging Stellantis' expertise in advanced volume manufacturing, it enables us to do it in a cost-effective and capital-efficient way. For Stellantis, this partnership helps them continue to push the boundaries to provide sustainable freedom of mobility, whether traveling by road or sky.
Speaker 1: Choosing Archer as a partner for this new market speaks to their belief that we have the right team and technology to drive the UAM transformation.
Speaker 1: We believe our strategic relationship with Stellantis is by far the deepest commitment to date by a partner across the eVTOL industry.
Speaker 1: Our high-volume Covington manufacturing facility is slated to come online in 2024. The first phase of development at Covington spans a 96-acre site adjacent to the Covington Municipal Airport, where we will have the ability to produce up to 650 aircraft per year.
Speaker 1: The second phase would give us the ability to produce up to 2300 aircraft per year.
Speaker 1: The end result would be a massive manufacturing operation that makes the archer and stlontist team the largest aerospace manufacturer in the world by number of planes produced annually.
Speaker 1: Until our Covington facility is online, we're leveraging our integrated test lab and manufacturing facility located right here in San Jose, just around the corner from our headquarters, to build our conforming aircraft.
Speaker 1: This facility can manufacture tens of planes per year. In the short term, we will use this facility to produce the conforming aircraft needed for certification purposes, and in the future it can be used for incremental manufacturing capacity as we are ramping up Covington.
Speaker 1: All of this early work on manufacturing infrastructure is geared towards supporting a robust commercial launch in 2025.
Speaker 1: Commercialization has been and continues to be the North Star for everything we've done and are doing across our focus areas, technology, certification, manufacturing, and commercial operations.
Speaker 1: Alongside all of the great work our teams are doing on the manufacturing front, we continue to mature our commercial operations build-out.
Speaker 1: This quarter, we announced our plans to launch UAM operations in another city, a key milestone in our go-to-market strategy.
Speaker 1: The announcement was in close coordination with the City of Chicago, the Chicago Department of Aviation, the State of Illinois, and ComEd, the utility in Chicago, which is indicative of their view that this is an incredible step forward for Chicago and will be a showcase for the future of sustainable travel. We are seeing high levels of interest from other municipalities all over the country for UAM solutions that can address both traffic issues and sustainability commitments. The Chicago announcement continues the expansion of our existing partnership with United following our announcement of a Manhattan to Newark route last year.
Speaker 1: These two routes represent important steps in building out our trunk and branch strategy as we enter our foundational markets, meaning that we start with the highest traffic, highest demand routes, and will expand our UAM network outward over time.
Speaker 1: The great news is that our approach aligns nicely to the UAM concept of operations 2.0 the FAA and NASA announced last week.
Speaker 1: As we've talked about commercialization over the past several quarters, we've focused on the civilian use cases for our Midnight aircraft, but we've also been working closely with the Department of Defense on several programs and have been in talks about significantly expanding our relationship. As our Midnight aircraft progresses towards commercialization, we've also been working
Speaker 1: These six highly decorated and distinguished military leaders represent the United States Air Force, Navy, and Army. We are extremely fortunate to have this significant level of leadership and experience onboard in supporting Archer. This advisory board will further build on our expertise and perspectives of U.S. federal government programs and procurement strategies to allow us to more fully engage with U.S. agencies to explore additional opportunities to commercialize eVTOL aircraft.
Speaker 1: Before I turn it over to Tom to give more detailed updates on our technology and certification progress, I'd like to note that Archer will be participating prominently in the Paris Air Show in June as the featured EBTOL aircraft manufacturer.
Speaker 1: The Paris Air Show is the premier global aviation event of the year, featuring the world's most impressive aircraft while serving as a platform for the aviation industry to come together and provide thought leadership on the direction of the industry.
Speaker 1: As such, our midnight aircraft will be making its European debut and several of our executives will be speaking on panels that are focused on sharing our vision for the commercialization of our industry.
Speaker 1: If you're coming to the Paris Air Show, I want to invite you to stop by Archer's location to meet our team and see midnight for yourself. It's truly a memorable experience.
Speaker 1: As we've discussed before, our team of leading engineers have been hard at work over the past couple of years developing Midnite's proprietary electric propulsion system. We believe that the advanced performance and safety of Midnite's batteries and electric engines, coupled with its design for high-rate manufacturing, is a key differentiator and advantage for Archer. Our strategy of realistic innovation led us to optimize the design of our batteries and electric engines to facilitate a more streamlined certification process and support our plan to ramp up manufacturing to allow us to deliver hundreds of aircraft per year shortly after getting to certification.
Speaker 1: The past few months have seen this strategy deliver dividends as the team has made great strides on the engineering, certification, and manufacturing of these key systems.
Speaker 1: Let's drill down on the battery front. We've now completed critical testing of midnight batteries at the cell and pack level. Our proprietary battery packs are built with industry standard cylindrical cells, which we believe have the highest levels of safety and reliability across the industry.
Speaker 1: Their safety and reliability has been validated through hundreds of thousands of hours of extensive testing by the team over the past few months in preparation for midnight flight testing.
Speaker 1: So, Lundrical cells have key safety advantages over alternative form factors like pouch cells, such as built-in current interrupt devices and dedicated vent paths which facilitate the design of safe, efficient, and lightweight battery packs which meet the most stringent aerospace safety requirements.
Speaker 1: For these reasons, we believe that currently cylindrical cells are the best technology for aerospace applications.
Speaker 1: At the pack level, our battery packs have also completed environmental testing, including shock and vibration testing, required by the FAA for certification.
Speaker 1: The data from these tests gives us high confidence as we move forward towards four credit testing with FAA.
Speaker 1: The validation data also gives us confidence to proceed with preparations for manufacturing scale-up of midnight's battery packs at our San Jose manufacturing facility.
Speaker 1: This progress on battery testing and manufacturing also maps to the progress we are making on the certification front.
Speaker 1: The detailed testing and data that I just mentioned has facilitated lots of progress and collaboration with FAAI.
Speaker 1: Over just the past couple of months, our battery team has had several in-person meetings with the FAA technical team in both Washington, D.C. and on-site at our facilities.
Speaker 1: In these meetings, the combined team has reviewed detailed design and validation data in preparation for finalizing our subject's specific certification plan for this area, which has now been formally submitted to the FAA for approval.
Speaker 1: Batteries are just one example of many where we continue to make progress with the FAA certification.
Speaker 1: We have now submitted 15 of our 18 subject-specific certification plans to the FAA. As a reminder, SFCPs provide precise detail on each of the specific tests and analyses that will be completed during the implementation phase of the project, in which we will demonstrate to the FAA that Midnight meets all relevant FAA requirements necessary to receive type certification.
Speaker 1: performing for-credit testing with our conforming aircraft next year.
Speaker 1: Let's now shift to our manufacturing buildout, an area where we continue to lead the industry. It's a very exciting time for the team as our San Jose manufacturing and lab facility is now coming online and we are underway with the construction of our high volume facility in Georgia.
Speaker 1: Our San Jose, California facility has three main components, test labs, powertrain manufacturing, and aircraft final assembly.
Speaker 1: For testing, the facility contains roughly a dozen specially designed laboratories to conduct specific component and system testing to support both engineering validation and for credit certification testing of all the systems on the night gear craft. This facility also has a significant amount of space allocated to powertrain manufacturing.
Speaker 1: with partially automated assembly lines for our proprietary battery packs and electric engines. As we speak, lab and manufacturing equipment such as robots for our battery pack production line are being installed and commissioned. Lastly, there's an aircraft final assembly area that can support the production of tens of aircraft per year. This is where we will assemble the initial fleet of conforming the night aircraft later this year that will be used in four credit certification testing next year. In parallel, our team has been hard at work alongside a large, bare experience.
Speaker 1: team from Stellantis on the production system development for our high volume facility in Georgia.
Speaker 1: If you walk around the Archer office here in San Jose, you'll see many Solantis employees with invaluable experience from their brands like Jeep, working side by side with the Archer team.
Speaker 1: The material flow and layout of that facility, along with the detailed building, mechanical, electrical, and plumbing design, is now mature and construction is on track for occupancy in 2024 and on track to support our production ramp for commercialization in 2025.
Speaker 1: When it comes to manufacturing, we are confident that we are the most advanced eVTEL company in the world, due in large part to our strategy to focus not just on design for certification, but also on designing for mass manufacturing.
Speaker 1: No other EVTL company has even announced that they've selected a site for a high volume facility.
Speaker 1: I just want to take a moment to thank the tremendous effort both our team and the Columbus team has put in. There is no replacement for hard work and the teams continue to step up every day as you ready for commercialization.
Speaker 1: And with that, I'll hand it over to Mark to discuss the financials for the quarter.
Speaker 1: to discuss the financials for the quarter. Thanks, Tom.
Speaker 1: While Adam and Tom highlighted the great progress we are making on our efforts to commercialize our programs in 2020-25, it is important to note that we are doing so in a financially
Speaker 1: To visualize this industry in any meaningful way, we must not only receive pipes certification of our aircraft, but also having mature supply base and manufacturing capabilities that will allow us to launch this industry and capture the forecasted demand for sustainable urban air mobility.
Speaker 1: I would like to recognize the tremendous work and support we are getting from our foundational suppliers. They are moving and innovating at a pace that is allowing us to track to our commercialization efforts in 2025.
Speaker 1: We cannot achieve that goal without their hard work and commitment to this new industry in Archer.
Speaker 1: As we continue to progress our manufacturing operations and mature our commercialization efforts, we also remain focused on maintaining a healthy cash runway.
Speaker 1: We get questions every quarter about the liquidity necessary to get to commercialization.
Speaker 1: And we've been very consistent with communicating our comfort around being sufficiently capitalized to get there.
Speaker 1: We ended Q123 with $450 million dollars of cash and short-term investments on our balance sheet.
Speaker 1: Additionally, as we discussed in detail last quarter, Stellantis has committed $150 million of equity capital that we can draw upon between now and the end of 2024 in three tranches as we need it based on us achieving certain milestones.
Speaker 1: Sonobis, our banking partner in Georgia to finance our factory build in Covington, Georgia and the equipment that we will deploy there.
Speaker 1: Our intent is that we will enter into a financing facility with Sonoma's later this year that will cover nearly all the costs of construction of the coming to facility, minimizing the near-term impact to our cash.
Speaker 2: You'll keep you posted as that progresses.
Speaker 2: As you can see, we are being very thoughtful about how we manage our liquidity and potential shareholder dilution.
Speaker 2: Recall that we also have a 200 unit aircraft purchase agreement with United with an option for them to take another 100 aircraft.
Speaker 2: To date, they have provided a $10 million pre-delivery payment to the first 100 aircraft.
Speaker 2: As we progress further through the aircraft certification program, we expect that we will agree upon and receive additional pre-delivery payments from United.
Speaker 2: Beyond these previously announced arrangements, Solantis and United remain committed to helping Archer get to commercial operations in 2025.
Speaker 2: We are very fortunate to have the continued support of these two strategic partners and investors. As I have discussed in the past, we have taken and continue to take proactive measures to manage our cash flow and optimize our expenses to achieve our program milestones and company goals. Through our rigorous budgeting and forecasting process, we are constantly reviewing our financial requirements and our financial needs.
Speaker 3: to do so.
Speaker 2: Now, under our financial performance for Q123.
Speaker 2: Our non-GAAP total operating expenses were $80 million, right at the midpoint of our estimates range. The total operating expenses were $80 million, right at the midpoint of our estimates range
Speaker 2: This led to an adjusted EBITDA loss of $79 million.
Speaker 2: The preponderance of our operating expenses continue to be investments in headcount and engineering development expenses to build and test our midnight aircraft. We are also making investments in non-recurring expenses at vendors for the build-out of our supply base to manufacture conforming components for midnight over the long term, as well as testing the parts for our development, testing, and six conforming aircrafts.
Speaker 2: On a GAAP basis, total operating expenses for Q123 were $112 million, which included $25.7 million of stock-based compensation and $6.3 million of warrant expenses for our warrants issued to United and Solantis.
Speaker 2: These results were slightly below the midpoint of our estimates range of $115 million.
Speaker 2: We exited the quarter with $450 million dollars of cash, cash equivalents, and short-term investments on our balance sheet.
Speaker 2: We used $77 million in cash for the quarter, primarily to invest in the $80 million of non-GAAP operating expenses and $11.4 million of capital expenses.
Speaker 2: We use $77 million in cash for the quarter, primarily to invest in the $80 million of non-gap operating expenses and 11.4 million of capital expenses, partially offset by working capital timing.
Speaker 2: The investments we are making now are laying the foundation necessary to yield long-term value for archers' shareholders, including continued development of Midnight, establishing our long-term supply base for conforming parts for Midnight, parts for our six conforming aircraft that we will use in four credit testing with the FAA, our San Jose California Integrated Test Lab and Manufacturing Facility, and our Covington Georgia Facility.
Speaker 2: Our ending cash balance, coupled with the potential $150 million in equity capital from Solantis I previously discussed, provides us with potential liquidity of $600 million to get through to commercialization in 2025. Finally, let's take a look at our Q2-23 estimates for spending.
Speaker 2: Total non-gap operating expenses will be between $75 million and $85 million.
Speaker 2: We had a very active investor outreach calendar in Q1 23 attending events in both the US and Europe .
Speaker 2: We will continue our outreach in Q223 and will be participating in many conferences and non-deal roadshows with the financial community, educating investors on our sector and Archer's strategy. Throughout this entire spend analyze and send its commentary purchases.
Speaker 2: We have provided a detailed calendar on our IR website and our shareholder letter. With that operator, we will open it up for questions.
Speaker 4: If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like to remove that question, please press star followed by two. Again, to ask a question press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. You will pause here briefly as questions are registered. The first question.
Speaker 2: When you're building high volume in Georgia, I know in the past you talked about maybe 50-50 split between aircraft, so the network.
Speaker 2: How can we how should we be thinking about the additional government opportunities within that mix and especially in the context that maybe building network may You know may take longer You know just given lack of infrastructure and obviously awareness and things like that just trying to figure out how to think about the go to market.
Speaker 2: Thanks Bill, this is Adam. So we've been working with the DOD for several years. I'm just trying to put it on context for you. We've been working them across several different programs ranging from acoustics to autonomy. And as we've gotten deeper in with the DOD and really expanded.
Speaker 1: you know, our relationship. We've also seen the DoD really expand the relationship across the whole industry. And so there's been a lot of discussion around use cases and how can we use these vehicles within the DoD. And one of the things that's I think been attractive and that we've heard a lot of comments on has been Archer's payload capabilities. And so that has really increased the volume of conversations that we've been having.
Speaker 1: And so that's really what's been driving a lot of this, you know, this kind of deepening activity that Archer has put out there. So we decided to form this government advisory board where we have a range of who's who from the different branches.
Speaker 1: you know, really deep experience, folks that have worked deep into the budget process, to the strategy side, across all the different branches. And, you know, we're now kind of figuring out the best strategy on how to go and really, you know, pursue the different DoD opportunities.
Speaker 1: As it relates to our ability to deliver vehicles, one of the things that was super critical to archer from the very beginning was building a platform that was manufacturable and scalable from day one. And so we've built a facility that gives us the ability to flex up our production volumes. So in the first phase we can build up the 650 planes and...
Speaker 2: we're working closely with the DoD and as the opportunities start to materialize, I think we'll become a lot more clear on the size and timing around them. Thanks for that. Maybe the next question is for Mark. I appreciate that you think, as in how you look at it today, the cash is taking into account the 150 million from Stellantis.
Speaker 2: Just hoping you can kind of just put some numbers around this, you know, beyond this quarter You actually think about the opex and capex trajectory for this year And I believe you know you talked about a few one-time items in this year rolling off Does that basically mean that? OpEx should directionally go down a massive basis next year as some of these one-time expenses don't
Speaker 2: don't occur, just try to get more comfort around your cash burn. That's for Bill. So if you look at Q1 and how we got to Q2, we landed at the midpoint of our guidance for Q1. Q2, we provide the same guidance on the midpoint of our guidance for Q1. Q2, we provide the same guidance on the midpoint of our guidance for Q1.
Speaker 2: of non-GAAP expenses and GAAP expenses. And we did provide that there was roughly $16 million of non-recurring costs within Q1. As I said on last quarter, that is a number that's fairly consistent quarter to quarter in our current outlook.
Speaker 2: So yes, as I said, when you go into 2024, those non-recurring costs will not persist. There will be a small uptick in base level spending as we continue to build out the team, et cetera. But you can't expect these non-recurring costs to roll off.
Speaker 2: So, you know, the numbers that I've given you are probably, are fairly directionally correct quarter to quarter. I don't see a, we're not giving forward annual guidance. I don't see us materially changing, you know, spending increasing quarter over quarter.
Speaker 4: Okay, thanks. That's a good call. Thanks. Thank you for your question. Next question is from the line of Andre Shepherd with Cantor Fitzgerald. Your line is now open.
Speaker 2: Hey, good afternoon, everyone. Congratulations on the quarter and all the announcements, and thanks for taking our question. Adam, I just wanted to maybe follow up on Bill's first question regarding the relationship with the DoD. I think congrats on that expansion. I was just wondering if maybe you can give us a little color on kind of how that relationship...
Speaker 5: what is perhaps expected to now be done. Thanks.
Speaker 2: Yeah, sure. As we've always stated from the beginning, Archer's goal has been to find the most efficient path to market. That's what we've always been focused on. We've tried to have a very clear line of sight with the smallest amount of distractions possible.
Speaker 2: And so we've been working to commercialize the civilian passenger market. We think it's the biggest market and the market that we're kind of corely focused on. There have been opportunities along the way to partner with the DoD on lots of different areas. Autonomy, we've done several different programs on autonomy and acoustics as an example.
Speaker 1: And so it's been helpful as it's progressed some of the capabilities within the aircraft, but it's also really enabled the DOD's ability to just see broadly or broader into our overall program. So we've been maturing the design now on the commercial side and we feel very comfortable with where we're at.
Speaker 2: we feel comfortable with our certification timeline, we feel comfortable with our ability to manufacture the vehicles. So from our perspective, it became interesting to start looking at ways to dual track our path to market. And so we've become more open to having those conversations. And then there were several key kind of technical benefits to our.
Speaker 2: related to our ability to scale manufacturing and then ship the vehicles all over the world because obviously they fly very short distances so we wouldn't necessarily fly them to their final destination. So when you took all these things together it really has enabled us to just increase the conversations and the seriousness of the conversations.
Speaker 2: And so it's become a much more interesting market for us because of the phase that we're in in the program and because we've become so comfortable with the design and engineering phase with the midnight vehicle. Got it. Okay. No, that's super helpful.
Speaker 5: if at all might that take on certification. Thanks.
Speaker 1: Sure, so, you know, first, you know, we're very thankful for the time that Billy Nolan has given and for his service at the FAA and for his leadership there. So, we think, you know, with Billy Nolan, you know, stepping down, there's obviously a period of time now where a new person will come into play. But the good news is...
Speaker 1: that AAM is a top three priority. So, I mean, there are several companies that continue to make significant traction with the FAA and, you know, Archer is now really heading into this testing phase as a lot of the rulemaking part is, you know, kind of nearing the back half of that process. So.
Speaker 2: We feel confident that it will have little to no disruption in terms of our progress. And so we feel comfortable with where that's all at. Got it. Very helpful again. Congrats on the quarter. I'll pass it on. Thank you.
Speaker 4: Thank you for your question.
Speaker 4: The next question is from the line of Edison Yu at Deutsche Bank. Your line is now open.
Speaker 2: Hey, thanks, guys. Crowd progress. One follow-up on the defense opportunity. Is there any potential chance that you'll get some contra R&D or something before deliveries occur with the DOD? Something along those lines?
Speaker 1: Hey, Edison, this is Adam. Yeah, that is certainly a possibility. So the accounting nature of the different opportunities that we're looking at, I think, differ in terms of the different programs that we're considering. So there certainly is possibility for that. But there also is possibility for early revenue opportunities as well.
Speaker 1: And so we look at it as a way to diversify the path to commercialization. And so we think it's a good opportunity, but we'll give more color as those details start to emerge.
Speaker 2: And then on Stellantis, I'm curious if you could share perhaps some of the early learnings you discovered. Obviously, they've been doing this for a very long time at a very high scale. Are there things that you guys have encountered that said, oh, we wouldn't have known this without Stellantis? I'm curious if you could share perhaps some of the early learnings you discovered that
Speaker 6: Any key takeaways you got there.
Hey Edison, this is Tom. It's a great question. I would say the reality is we're both learning from each other. So to set the broad context here, Stellantis is really interested in this becoming a big part of their business long term. So as much as we're benefiting from their experience in industrial engineering and automation, they're also learning about the right solutions that make sense.
for the problems we're trying to solve today. And as we said before, we're taking a very phased approach here where early days we're using traditional processes, we're being very thoughtful with where we're deploying capital and automation, trying to balance getting to market, using our resources most effectively. So I don't know if I have any super great example for you, but hopefully that.
sort of overall description is helpful.
Sure. And if I could sneak one more in, as part of the relationship with the launches, I believe you guys have stated in the original release that they will be looking to make open market purchases of the stock. I'm curious, is that still in your view there in pension? And what's the outlook there if you have any? Hey, Edison, this is Mark. James Sch
So we can't comment specifically on any potential activities of Stalantis. However, I will draw attention to the fact that they did file a 13D form 13D with the SEC two days ago where they actually indicated their intention or reiterated their intention to make open market purchases of our stock.
So, you know, that is a document that is required for them to even be able to do that.
All right, great. Thanks for the call out. Thank you for your question.
The next question is from the line of Savicy with Raymond James. Why is that open?
Just on the certification front, I was curious, looking at kind of based on the comments from other companies and stakeholders made in the kind of the notice of error business criteria that was in the public register, what are some of the main areas of concern or contention depend?
that were published last fall after we got our stage 4-D1. So these are the high-level rules. Yeah, so as you said there was about a, you know, six week, two months public comment period. FAA got
The FAA team has been working through those and everything that we've heard so far is that we shouldn't really expect significant changes. If you think back to about a year ago, you know our original G1 from 2117A to 2017B is kind of a similar time frame here and...
We saw very few changes. An example was they added a bird strike requirement, but we had already been designing for that. So wasn't any substantive impact for us. So all the data we have so far is that we shouldn't expect much change, but we haven't gotten the official documents. We expect them soon.
We'll happily share more once we have the data. That's helpful. Just to follow up on that part of it, with the subject-specific certification plans that you've submitted, have any of those been accepted by the FAA? 1st
No, none of them have been accepted so far, but there are a handful that are pretty close to being accepted.
them have been accepted so far but there are a handful that are pretty close to them, and
Overall, I would say really the thing that matters for us is driving down the risk through the conversations and working sessions with the FAA. And from that perspective, what we've seen so far is a lot of alignment and I would say benefit from the simplified approaches that we're taking.
that's getting us into rooms with these FA subject matter experts that are saying quite quickly, oh, okay, we understand what you guys are doing. We've seen this before. This is easy to understand and the trend is that that's paving the way for us to have an efficient path forward here. So hopefully that's good color. Yeah, that's very helpful. Thanks, Tom. And maybe Mark just.
question on the liquidity front. Is there a certain liquidity level that you're kind of comfortable maintaining, especially, you know, other potential avenues of funding you might consider in case certification slips?
Hey, Savi, this is Adam. So maybe let me just take a crack at that.
I'm the largest shareholder. So I think about it a lot as well and I think we are in a pretty unique position here, right? We have the flexibility from Stellantis We have a large order with United or they've already given us some pre-delivery payments with the potential for additional pre-delivery payments.
Plus we raised a lot of capital. So, we're just gonna be strategic about how we think about capital. We don't need capital today, but we do have optionality here built in. So I think about dilution versus capital as well on a regular basis. And I think we are just in a fortunate position to be able to manage that over a pretty significant period of time.
Thank you. Thank you for your question. The next question is from the line of David Zazir, Will a Bart Quiz. You know I was not open.
Thanks for taking my question.
I want to come back to, and I think others have as well, Bill's original question and just hit on another angle. My original understanding of kind of the mission and intent of Archer was to produce aircraft in order to become
you know, the greatest and largest operator of, you know, urban air mobility aircraft. And just as I heard, Adam, you described the mission.
Maybe I'm just passing words too much, but it sounded like you were focusing a little bit more on the production side and less on the Archer Air side. So I guess is that. Hope I get this fairly.
evolution you're thinking? Are there other opportunities that are you're looking at that are you know better than you had originally thought or is it same as it ever was? Thanks David for the question. So from the beginning we've always said we've looked at you know kind of have a dual strategy of selling some aircraft through ArcherDirect and also operating some aircraft through the UAM business and so...
given our ability to flex up the manufacturing capabilities that we have, we'll certainly take advantage of that. So, you know, I think we'll reserve the right to sell more vehicles if we find an interesting opportunity to do that. So I would say at this point, we're not changing our outlook from saying, you know, kind of 50-50 split. And the reason we've always said 50-50 split is we think this will be a good opportunity to do that.
Capital intensive business where we will generate cash flow on the manufacturing side to help pay for the way for the long term view of building the UAM vision. And so, you know, maybe there's an opportunity to help finance that through broader sales. That's certainly a potential, but I think today will kind of keep that same framework in place of a 50 50 split.
Thanks, that's very helpful. And then maybe for Tom.
Noticing that there is one planned nonconforming aircraft, not that I'm wishing ill upon it, but certainly if there were any testes or complications with that aircraft, you wouldn't be the first in the industry to see those. Are there contingency plans or what would the impact be?
if something happened to that aircraft through the testing process, how would that ultimately impact your certification timeline? Yeah, hi David, happy to answer that. So, the first midnight aircraft that's entering flight test here in the next couple months, the strategy with that vehicle is to reduce risk and accelerate our path to market with piloted conforming aircraft.
So we see it as this great opportunity to gather data, do the type of testing we're going to need to do for credit later, as early as possible, to learn and reduce risk. So we take a very rigorous approach to flight testing.
Today we don't talk about it much but we still fly Maker on a very regular basis with our very professional flight test team and that's the same team that's going to be executing flight tests with with Midnight going forward. So it's all part of this broader strategy to get to pilot flight early next year.
I guess as I hear that.
It's important, but there are other avenues to perform the test that you're planning.
So this first non-conforming plane is only months ahead of the production planes that are also getting built. So we're in the process where we're spooling that factory up right now. So I mean, even in the ultimate worst case scenario, there's a factory that can build planes like that is building planes right behind that. So we don't really, we're obviously taking a very rigorous approach to flight testing, but I think from the very negative framing of the question, you know, there still is a factory there that's ready to produce, that is producing or will be producing vehicles right after the non-conforming aircraft rolls off the line. Thanks, much appreciated.
Thank you for your question. There are no additional questions waiting at this time, so I'll turn the call back over to Adam Goldstein, CEO and founder of Archer for closing remarks. Thank you everyone for joining us today on the call. 2023 is really going to be an amazing year and there are so many catalysts to come. This is one of the most exciting times to be building an aerospace and we thank you very much for your participation. That concludes the conference call. Thank you for your participation. You may now disconnect your lines.