Q3 2023 Archer Aviation Inc Earnings Call

Good afternoon. Thank you for attending today's Archer Aviation Q3, 2023 financial results Conference call. My name is cole and I'll be the moderator for todays call all lines will be muted during the presentation portion of the call with an opportunity for questions and answers.

At the end if you'd like to ask a question. Please press star one on your telephone keypad.

I would now like to turn the conference over to our host Andy Missan.

Please go ahead.

Thank you operator, good afternoon, everyone and thank you for joining us today to review, our third quarter 2023, operating and financial results.

My name is Andy Messing, Chief legal officer of Archer.

On the call today are Adam Goldstein, our founder and CEO, Mark Messner, our CFO and Tom unit.

Sure.

During today's call, we will be making forward looking statements.

These statements involve risks and uncertainties that may cause actual results to differ materially from those contemplated by the forward looking statements.

For more information about these risks and uncertainties. Please refer to our SEC filings under the caption risk factors.

Any forward looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events.

During this call we will discuss both GAAP and non-GAAP financial measures a.

A reconciliation of certain GAAP to non-GAAP measures is included in our shareholder letter posted on our IR website.

Now I'd like to turn the call over to Adam.

Thanks, Andy.

Founded Archer just over five years ago. This month, our team completed the maiden flight of our third generation VTOL aircrafts.

People, often ask how we've been able to make such rapid progress.

My goal from day, one was to find the most efficient path to commercializing VTOL.

We've been able to get to this point only because of our relentless focus on that goal.

Launching any new industry was difficult mainly because there is no playbook to do cell and bringing to market. The first electric aircraft incrementally harder.

The forefront of the industry, meaning we often are setting the standard for the first time.

Archer was the first <unk> aircraft company to announce that was going public the first to launch a significant partnership with a major combined and I believe the first company to build an electric aircraft specifically around a tailored business model.

The playbook for the urban air mobility industry.

Today I want to talk about the latest chapters in that playbook, including the progress we've made on our aircraft as well as the pieces of our commercialization plan, we unveiled this quarter and plan to continue to mature during the fourth quarter and the next year.

On the engineering front Archer has built and now flown what we believe to be the world's most advanced <unk>.

Delicately balances performance and costs designed for certification manufacture ability and scaled operations from the outset.

To date, we have logged flights over four years across three generations of aircrafts, including two years of full scale flight testing with Baker.

We incorporated the years of learnings from test winemaker into the midnight program.

And we're now able to see the benefits of those efforts take to the sky.

This quarter, we continued rapidly advancing our flight test program and beginning to fly our production designed aircraft at midnight.

Midnight aircraft to our knowledge is the largest all electric VTOL and the world wane over 6000 pounds substantially larger competitors aircrafts, which are closer to 4000 pounds or less.

This is important because we continue to believe the only way to achieve 1000 pounds of payload to fly a 6000 pounds of greater aircraft. We believe that our competitors will eventually need to scale up the next side.

Several redesign cycle in order to support a comparable period.

The archway team design midnight of that weight under the leadership of our COO and head of engineering Tommy.

And our chief engineer Jeff.

Tom and Jeff have designed built flow 70 different BD teams understand firsthand the complexity of EBITA tradeoffs the requirements necessary to carry a total payload for passengers in the pilot.

When midnight took off earlier this month, our COO, Tom emails remarked upon Christine seven EDI talk first flights. The midnight first flight was by far the best first flight you've never seen before.

I'll hear from Tom in a moment and he'll tell you more about why it was the best first flight.

How we got to this point.

We're working hand in hand, with the FAA to ensure timely certification of midnight. So we can begin commercial service in 2025.

To enable certification we are ramping up to produce a fleet of six midnight aircrafts to use an hour for credit testing with the FAA.

With our rapid progress on the aircraft development front, we're seeing significant demand for midnight, both domestically and abroad.

In the U S. Our teams are focused on building out launch networks across a number of America's largest city.

We remain on path to make New York City, our first launch market in partnership with the city of New York, The economic development Counsel Merritt Adams office, and the Port Authority of New Jersey, and New York.

Our aim remains to begin this New York City service with United Airlines.

Nevertheless, placed and up to $1 billion order for up to 200 aircrafts.

<unk> has already made a $10 million pre delivery payment against the first half of disorder and it's the only airline in the world to make it a positive beside.

I am grateful to our counterpart, Mike left in and that United We truly pioneered strategic relationship between traditional airlines on EV tall OEM.

How to continue working with him as he takes on his new role EVP and Chief Financial Officer.

Congratulations Mike.

Over the coming weeks and months you can expect to hear more about how New York City are embracing this new form of transportation and will share more details about how we're working across the other major U S cities to bring <unk> to market.

Earlier this year, we announced alongside Governor JV, Pritzker, and the Chicago Mayor's office, but Archer will help the state of Illinois and city of Chicago achieve its goal of 100% clean energy usage over the coming years.

Miami I first met mere suarez over two years ago, and I remain incredibly excited about what all electric their taxes will look like in South Florida partnership with him in the state.

And Georgia, where we are bringing up our high volume manufacturing facility with our partners to want this we have an unparalleled opportunity top decongest Atlanta, one of the biggest metros in the country.

And we just spent several days in north, Texas with Governor, Greg Abbott, Ross Perot Junior and former President George W. Bush to discuss how urban air mobility will fundamentally evolve the fabric of cities like Dallas, Houston and Fort worth.

Finally, right here at home and grateful for the leadership of Governor Newsome and legislators who have now signed SB 800 into law, establishing the advanced air mobility and aviation electrification committee to assess among other things pathways for feasible implementation of electrification goals.

With mediation to understand.

This is critical to enable us to reach our goal of launching our service in 2025, we deem available across the San Francisco Bay area, and Los Angeles by the L. A Olympics in 2028.

Internationally I'm seeing strong demand for archers aircraft all across the globe from heads of state Civil aviation authorities in economic development agencies there.

There are several factors we look at when we think about working with a new region.

We want to focus on markets that are large and growing where we can help attack a fundamental problem with congestion and time savings in that country.

We look for top level governance, and regulatory support to align stakeholders all levels efficiently.

When you're looking for support from Likeminded commercial partners in the region that can help them navigate the right way to do business in the country.

Last month I had the honor.

Of announcing our first international market, which meets all these criteria and more the UAE home to the burgeoning cities in Dubai, and Abu Dhabi and more importantly, our steadfast commitment to innovation, including transportation.

We of course have been deeply familiar with the yearly for years starting with.

Bob.

Or would that be sovereign wealth fund.

Since we went public in 2020.

A few weeks ago, we deepened our collaboration with the UAE as we announced with the Abu Dhabi investment office audio a government entity responsible for economic development across the country plans for audio to provide incentives for us to launch electric air taxis and build out an international hub in the country.

I had the pleasure of traveling to Abu Dhabi to sign this agreement with his Excellency BARDA, Alabama Audios Director General alongside the cleanest should come down then bahamut invited.

Some of the UAE, most prominent innovators across multiple transportation sectors.

This planned strategic initiatives and multifaceted and includes plans to launch air taxi serves the crop Dubai and Abu Dhabi as well as an opportunity to bring R&D to the country.

We recently hosted UAE Civil Aviation authority.

General Civil Aviation Authority <unk> Karen Keller.

So they were able to see midnight and our manufacturing facilities.

We are proud to have their strong support certified midnight alongside the FAA to enable commercial entry as soon as possible as well as the partnership of Falcon Aviation one of the country's leading rotorcraft operators from Gal Amrok and MRO leader across the country, both of whom we announced Mou.

Sure.

The celebration of the strategic initiative to bring <unk> to the UAE. We have worked with our longtime investor Blue bomber Abu Dhabi Sovereign wealth fund to showcase our midnight aircraft to the region for the first time at next week's Dubai Air show as well as the conference on aviation and alternative fuels posted by the GPA.

The following week in Dubai.

Yield of the UAE initiatives I am excited about our announcement earlier today of Archer and integrated enterprise.

Foremost air travel and hospitality conglomerate.

Plans to launch an electric air taxes surface together cross India in 2026.

Earlier this week, the new Delhi My team held a signing ceremony with the software back yet the group managing director of inter globe to announce our plans to work with integral to bring safe sustainable and low noise electric their taxi services. Some of the most highly populated cities in the world.

As part of the initiative, we will work with them to grow up to set up an entity and will work with select in country business partners to operate or just aircraft enhancing build for the port infrastructure and training pilots and other personnel needed for these operations.

Integral and Archer also anticipate the purchase of up to 200 of our midnight aircraft.

As we bring up operation.

India is an incredibly important market for EBITA and it has the potential to be one of the largest in the world with Delhi and.

In Mumbai in our initial focus where congestion cost cities over $22 billion annually.

And the city traffic congestion contributes to 20% to 25% of the outdoor pollution and I hope that <unk> can be a part of reducing that over the next decade.

I founded Archer to help give back time to millions of people and to make cities smarter better cleaner more efficient places to live now.

Now I'll, let momentous flying and we are.

Well along the pathway to commercialization.

Clear that major cities around the world are the same goals as our chip that we're excited to work with them to bring electric air taxes to market with that I will hand, it over to Tom talk about the latest progress with <unk>. Thanks.

Thanks, Adam.

And I was thrilled to see midnight take to the skies for the first time, a few weeks ago.

This was the seventh full scale <unk> site that I've helped lead and I can confidently say that it was the most special one yet for several reasons.

And that is the only site program, which the team and I are intentionally designed to certify and bring to market.

After spending almost 15 years of my career in this space.

All of those focused purely on R&D I'm proud to say that we are now closer than ever convenient certified aircraft to market.

And that is the largest EBITA for which I have a lot of program with a Max gross rate of over 6000 pounds and in wingspan of almost 50 feet.

And lastly, our team did an exceptional job at pulling together to make it happen and they delivered safe and as flawlessly executed right.

Midnight first flight was important milestone and it was just one of many big wins, we have had recently as we continue executing our design certification and commercialization strategy building on almost two years of flight testing experience and data from our mix of aircraft.

Our strategic plan peacemaker as a technical and certification Testbed continues to pay dividends.

Pensionary designed to midnight to share the same configuration of sneaker, so that we benefit directly from all of the previous aircraft performance learnings and data.

This enables us to model and simulate midnight slight behavior or accurately.

Given that foresight, we have been able to apply a tremendous amount of efficiencies from makers flight test program directly to midnight. This intern truncates and actually accelerates our feedback loops as we advance midnight through its flight test program.

Over the coming months, we will drive midnight through the full flight envelope first without a pilot on board and then we expect to begin pilot and flight testing mid next year.

Our suppliers continue to accelerate manufacturing parts for a piloted conforming midnight aircraft will.

We'll begin the final assembly and integration of the piloted aircraft early next year. So that we can start flight testing in the middle of the year.

Planned to have the majority of the systems on the first piloted aircraft as well as the urban and its shape.

<unk> to the type design.

We continue to be on path to building a fleet of six aircrafts that we can use in company testing and most importantly for credit testing with the FAA.

When I started our R&D program for maker and midnight, we made an incredibly important product decision to partner with leading suppliers to provide many of the key systems and components on our aircraft rather than vertically integrate everything.

This decision based on 15 years of experience across seven details with a strong belief that this path of leveraging the best partners and the industry will significantly reduce our certification scope in turn provide the fastest path to market, but also provides an aircraft with exceptional performance and operating excellence.

By leveraging key products with certification heritage from companies such as Honeywell permanent Catherine we take advantage of many years of prior where our partners.

And also leverage the decades of experience their teams can collaborate to bring midnight to market.

Because of this unique strategy my team at Archrock and maintained a laser focus on system integration testing and certification.

It also means that on the manufacturing side, our supplier partners to deliver turnkey conforming hardware directly to our final assembly facilities and certification test stops again, this dramatically reduce the scope and costs and simplifies our certification tests.

As we have discussed before the one area, we did intentionally choose to develop in house as our powertrain.

Past quarter, we have continued to progress the maturation of our design and production capabilities.

We are beginning to transition from prototype style manufacturing to pilot production and the team is working tirelessly to commission equipment to support our battery and in June production.

In the same vein of partnering for faster lower risk path to market.

We announced a first of its kind partnership with data to accelerate an interoperable charging system across the electric aviation industry.

The goal of this collaboration is to spur the widespread rollout of an interoperable electric charging network.

As the standards outlined by Gander and supports the broad electrification of vehicles.

Notably with Gamma endorsed standards is harmonized with lips standard Okay EV 308.

These charging systems are already in use at 14 locations across the eastern U S and development work is underway to install them at another 55 locations, along the east and west coasts as well as the ultra supply test facilities in California.

Artificial front I'm excited to share that earlier this week, we met with a broad group at the FAA to review the latest airworthiness criteria in our certification basis.

This discussion was the culmination of the Faa's work to finalize our proposed everything thats criteria.

It was published in the Federal Register last year.

This is a pivotal moment as we and our partners at the FAA now have a clear blueprint for the finalized everything thats criteria that we will utilize in order to get our type certificates for midnight.

As a reminder, we are one of only two retail companies fulfilling the FAA has published draft airworthiness criteria in the Federal Register.

And my understanding is that the FAA is now on the cusp of publishing our final rule.

While we have made tremendous progress collaborating with the FAA in many areas of our needs of compliance and certification plans over the past year.

Each of the progress has been provisional pending a final rule publication in the Federal Register this.

This is why we have not giving precise numbers for the exact status and the percentage of Mlps are show kinds accepted as we feel that it doesn't accurately and transparently reflect the status.

Our team is carefully analyzed the updated areas and its criteria and I'm happy to report that so far we don't anticipate any changes, which would require a change to the midnight design in order to comply.

I want to give a special thanks to the policy team at the FAA for working tirelessly through this complex process to get us to this point as a notable example of our other recent progress with the FAA.

We recently completed a critical requirement for credit review with the FAA of all aspects of our software certification.

The plan for certification for our <unk>.

Flight control software.

Past this formal audit with flying colors.

Findings across all of the data.

Lastly, we're thrilled that the Senate has confirmed a new permanent FAA administrator, Michael Whittaker, who comes from the EV industry.

While there are many critical priorities for him to address we were pleased to see his public comments supporting the prior administration's goal of getting initial EBITA aircraft into service in 2025.

And now I'll turn it over to Mark.

Thanks, Tom.

As we advance toward our goal of beginning commercial operations in 2025, not only am I excited about the technical and commercial progress archery was making.

I am pleased to see proof points that our overarching strategy of creating the most efficient and capital light path to market taking shape.

Two concrete examples that our strategy is working manifest themselves in the construction of our high volume factory in Covington, Georgia, and our operating expense structure compared to the industry.

Let me provide further color on each of these three points.

Recall that we are building our high volume manufacturing facility on approximately 100 acres in Covington, Georgia.

As part of our capital light path to market and as Tom discussed we are leveraging the mature aerospace industry supplier base to develop and build most of our components from midnight.

Only developing key differentiating technologies in house, primarily our powertrain.

We will essentially be performing final assembly and test work at our Georgia factory similar to the automotive industry manufacturing process.

Phase one of the factory when completed next summer will be roughly a 302000 square foot factory with a capacity to assemble and test up to 660 aircraft per year.

Our construction costs for this phase of the factory will be about $65 million.

As we announced manufacturing plants in the industry. We believe that we have the highest factory unit output in a smaller factory footprint than others.

Further.

Our factory construction cost is a fraction of others that have been announced.

This data validates our capital light development and manufacturing strategy.

Last quarter I discussed in detail, how our current operating expense structure includes quarterly nonrecurring investments alongside from key suppliers to support the development and manufacturing setup of many of our midnight components.

That framework allows us to execute a lower operating cost developed model by avoiding the ongoing structural spending of head count to develop those other individual technologies.

Further we do not have to build out manufacturing capability capacity and headcount to manufacture the components, we are sourcing from mature aerospace supply base.

<unk> metrics that we are achieving with construction cost side and output of our Georgia factory are an outcome of that strategy.

Finally, we believe this strategy also derisked, our certification efforts and time to market should we develop those technologies internally.

Our quarterly 2023 spending profile is made up of our core expenses for ongoing operations. In addition to nonrecurring investments with vendors to establish our supply base.

Our total non-GAAP operating expenses for the first three quarters of 2023 were approximately $225 million.

And those expenses for about $45 million of nonrecurring investments and spending it vendors.

Backing this nonrecurring amounts out youll see about $180 million of normalized core expenses to operate the business.

On average about a $60 million per quarter run rate.

That level of spending as our core structural operating spending that will persist into 2024, and we will see nonrecurring investments start to tail off in 2024.

Taking stock of everything Archer has achieved over the past five years across technology development.

Culminating in the midnight flight test campaign.

Our certification progress that has put us in a leadership position in the industry and building our factory in Georgia.

We are achieving this with a lower expense structure than other leaders in the industry.

Now, let's get to our financial performance for Q3 of 'twenty three.

On a GAAP basis total operating expenses for Q3 dollars 23 were $46 2 million, which were at the middle of our Q3 dollars 23 estimates.

These expenses included $59 $1 million as a noncash credit for certain RQ grants that were forfeited.

Estimates for the quarter.

That noncash credit was partially offset by 31 7 million of stock based compensation expense.

$4 4 million of foreign expenses for our warrants issued to spelunker.

We achieved a net loss of $51 $6 million for the quarter.

non-GAAP operating expenses for the quarter were $66 9 million, which were below the lower end of our estimates range of $75 million $85 million due to the timing of vendor related expense.

With $66 $9 million included approximately $10 million of nonrecurring vendor spending.

We incurred an adjusted EBITDA loss of $64 8 million, a non-GAAP measure, which is outlined and reconciled in our shareholder letter.

Our operating expenses continue to be primarily driven by investments in head count aircraft parts and materials growing testing and other nonrecurring supplier cost and supporting infrastructure required to scale. Our business, we have approximately $600 million of available liquidity in the business now.

That liquidity is made up of 461 $4 million of cash and cash equivalents and $7 3 million of restricted cash on our balance sheet at the end of the quarter. So largest is $70 million investment, which we received on October 16th and the remaining $55 million from the <unk> equity option previously discussed.

Recall that we have other opportunities for non dilutive cash receipts in the form of pre delivery payments from United and other potential future orders from our Vod contract for which we received our first approximately $1 million payment in Q3 of 'twenty three.

Finally for Q4 'twenty three we anticipate total GAAP operating expenses of $100 million to $110 million total non-GAAP operating expenses for Q4, 'twenty three are anticipated to be between $75 million to $85 million.

Including $10 million to $15 million of nonrecurring spending it vendors.

For 2023, this yields $300 million to $310 million of non-GAAP operating expenses, which includes $55 million to $65 million of nonrecurring spending it vendors.

Operator, we will now open the call up for questions.

Thank you we will now begin the Q&A session, if you'd 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 queue for a question. Please press star one we'll pause briefly as questions are registered.

Our first question is from Bill Peterson with Jpmorgan. Your line is now open.

Yes, hi, good afternoon, and thanks for providing all the details.

Noticed in the shareholder letter it looks like you have.

The aircraft is no.

We're going to be completed in the fourth quarter, and then slight looks like it's been pushed also by a quarter or so can you provide some more information on this delay and potentially any implication on the certification Panama.

Hey, Bill this is Tom happy to answer that.

So you are referring to the first conforming piloted aircraft that we talked about on the call and talked about in the past.

I think what we've said before we're still on track to fly that aircraft early to mid next year with delivery to bypass kind of on the earlier side next year still on track to that so really no substantive change from our end there.

Yeah.

Yeah.

Okay.

Just comparing the second quarter to third quarter.

Uh huh.

So it just it does look like its about a quarter delay on both sides.

In any case.

I wanted to ask about.

The Air Force I think last quarter again, we're expecting to deliver an aircraft towards the end of this year early next year.

I might have missed it but what is what is the latest expectations delivering aircraft to the U S Air Force.

Hey, Bill this is Adam.

So we started to execute on the Air Force contract.

We received our first payment of nearly $1 million.

In this quarter, which was relating to an advanced simulator that we're building and so we're still working hard on that delivery and our goal is still to deliver that aircraft here in the coming months, but I don't have anything new to update you on that.

Okay.

If I can sneak in one more so you talked about the advantages of working with third third parties.

You know like Honeywell and other ones you mentioned.

Basically it seems like all of these guys have gone to resume search so I guess as a.

I guess, what percentage of the bill of materials or some other metric.

How many of these third party has actually gone through certification I'm, just trying to get a feel for the risks of dealing with third parties versus doing more of this on your own.

Sure. So the bulk of the suppliers, we work with that you're referring to here are the.

The best of the best commercial aerospace suppliers. So like I said earlier on the call companies like Honeywell Safran environment. These are groups that have hardware flying an aircraft for all.

Large commercial airliners bye bye today so.

Super confident in their ability to deliver and our strategy, there and putting it in a little more broader context.

Does for US is let us focus on the system and aircraft level work with them delivering components that come with all the circ heritage.

Our test data et cetera.

Thank you.

Our next question is from Savi <unk> with Raymond James Your line is now open.

Hey, guys good afternoon.

I know you've chosen CIT can occur with betas charging solution as you announced recently I was curious what your view is of the pros and cons of data system.

Versus what Jody announced recently and also how difficult it might be the switch between the two.

Sure. It's a great question. So we've been working with a broad group of other <unk> companies on that for the last many months and the way we thought about it is it's going to be really important to have an infrastructure system that works for all groups and something thats very standard because.

That's what's going to get the investments to really deploy across airport express country around the world.

We chose to go with.

Well established standard in Tcf's first spoke prop.

Process, because thats really what we think the whole industry makes sense, including our partnership with gamma and all the groups there as I mentioned on the call. It's also what.

European Group has proposed in their Uricase Stanford.

We think that makes a lot of sense.

It did take a quick look at what <unk> had proposed from our first look at that it looks to be essentially optimized for their particular aircrafts and architecture for something thats more generally useful applicable. So we're super happy with our path and where it can be make the right decision on that.

I appreciate that and then.

Just on the certification I realized just unfair DSA can accept that they won a lot of it Mike.

B L.

Conditional, but I was curious on on arches franchise, where you are in terms of submitting some of your plans.

Sure. So yes like you hinted at the right way to think about this is that it is.

Largely dependent on everything thats criteria being finalized.

And so we're one of two companies for which draft ever.

Everyone's criteria have been published.

But our own and try believe nobody else's had been finalized so until that is complete there are parts of our <unk> and certain plans that we just can't agreed to with the FAA because that higher level framework needs to be in place.

Again this is true for everybody in the industry as we said before we actually submitted all of our surplus I think that was one or two quarters ago, but in terms of getting those finalized and where we are we don't think it makes sense to share specific percentages.

Actually it can be somewhat misleading again, because all of this is contingent on getting those final or within its criteria published.

So good news there is as I mentioned earlier, we expect the FAA to published those final rules soon.

That really unlocks our path forward to finalizing mlps in certain plants over the coming months.

I appreciate that thank you.

Our next question is from Andreas Shepard with Cantor Fitzgerald. Your line is now open.

Hey, guys. Good afternoon, thanks for taking my questions and congratulations on the quarter.

I wanted to maybe just touch on the India announcements.

That looks like to be pretty significant.

It looks like it includes in order to finance that.

200 aircrafts.

And then it looks like you're also exploring some other use cases for it I think you mentioned logistics cargo with couple of them.

Curious to get your thoughts there just trying to better understand kind of how youre approaching that relationship and particularly that market and obviously, that's a huge market there and our.

Are you intending to maybe use the archer direct business model here as opposed to the U M. Just trying to get a better feel for how you're thinking about it. Thank you.

Yes, Andreas this is Adam.

So yes, we are very excited about the partnership that we announced with <unk> and into growth.

Integral <unk> is India's largest travel conglomerates and its largest largest owner of indigo, which is the market leading airlines in India and I believe the ninth largest airline in the world by passenger volume.

Fun fact.

<unk> our group CEO of Indigo.

Globe is actually Mike Whitaker, the new FAA administrator.

So I thought that was interesting.

<unk> is it's a conglomerate though that has.

Leadership in aviation real estate hospitality. So they really are an ideal partner for us.

When we look at these markets, we're really thinking about.

Markets that have the potential for a very large business a market where there is <unk>.

<unk> support and markets that have in country partners and the potential for also in country financial support and so India has that and we have that were found integral specifically and so we thought that was.

Especially compelling if.

If you look at how.

Other large companies have operated internationally. There are some interesting parallels that I think that we can draw. So for example, <unk>.

Internationally, we will likely share in the ownership of.

Of the operations as well so integral to has a business partnership with Vps where into growth is the operator in country and so I can imagine a similar type of relationship where hartshorne indigo entre and integral to have a partnership and their shared operations in country.

Got it.

That's super helpful and thanks for that fund fact that did not know that myself.

Maybe as a follow up question for you or maybe Tom.

Regarding the piloted test flights. So it looks like we're targeting mid 2020 forward to begin those I'm curious you know how do you anticipate that.

Test flight program kind of ramping up.

How long would you anticipate that to take until you feel confident enough to enter into service and I'm trying to get a sense of.

How long will the pilot test blade has to run through until.

Until that Youre confident enough to enter into service is that something that will take weeks months, just trying to get a better feel for that thanks again.

Yes, absolutely.

So the first thing to keep in mind, there is when we need to prove the aircraft is safe to ourselves and so we will do that through.

An extensive campaign of company flight testing on not just with that first aircraft, but with this fleet of six aircrafts that were building.

And that will take months to go through that testing.

But then back to the fleet of six confirming aircrafts that we mentioned.

<unk> is not an arbitrary number there thats essentially designed based on our detailed certification flight test campaign, where we go through and plan exactly what happens when these new aircrafts that were used for those tests and essentially mirror.

The specific configuration, and which systems are confirmed on which aircrafts to achieve the goals in that test campaign, so hard to pin down exactly how long that will take but we have a pretty detailed plan and.

Our filing with the pilot next year.

Yeah.

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

Our next question is from Edison you with Deutsche Bank. Your line is now open.

Thanks for taking our questions just wanted to come back on the mid six aircrafts could you give a sense of how much time, you need to actually build these things.

And also.

You need to have 611.

Go up and it went flying you build another one just how to sequence the six aircrafts and the and the timeline.

So we've got parts in production for these first aircraft across our supply base today and not just for the very first one but in some cases parts for the second and third.

Those aircrafts then those parts arrive at our facility here in San Jose <unk>.

<unk> assembled together and that process, obviously takes time, so there will be some parallel manufacturing of those aircrafts.

Where we're doing the assembly of first and second second and third at the same time et cetera.

Tying it again back to the flight test plan. The aircraft had very specific objectives until were mirroring the and think of it as maturity or essentially which systems are conformed on each of those aircraft to mirror, what we need to accomplish those goals. So it won't take us.

The majority of next year to produce those six aircraft, we don't need them all at once but theyre staggered essentially at the optimal way to support our flight test campaign.

Understood.

And then unrelated to that more of.

A financial question.

I know you got the first Vod payment can you give us a sense of how that ramps up.

It's essentially theres, a big payment with the delivery.

And how that stream kind of comes in.

Okay.

Yes. So this is mark.

So we are.

We are still in the process of working out the specific accounting with some advisors around the accounting treatment, then and where that actually lands in the P&L geography, but we do anticipate deliverables throughout 2024 and actually in the rest of the 'twenty three 2023 and receiving payment for those deliveries a lot of it was outlined.

Our shareholder letter around with the bulk of the work will be focused on.

With respect to two.

<unk> 2024, which will be focusing on work with the air Force on training pilots, specifically using the mobile flight simulator.

We've just received our first payment for.

Assessing flight controls and then improving really improving the air force and the personnel to understanding of the operational capabilities of the aircraft for future use.

So all of that will be delivered or most of that will be delivered largely next year some of it.

That will be delivered later this year as well so it will be the revenue or I should say the cash received for those will be.

Somewhat prorated you could think about over the course of the next.

Four to five quarters.

Great. Thank you.

Our next question is from David Zulu with Barclays. Your line is now open.

Hey, good afternoon, and thanks for taking my question.

I guess.

Can I ask if you could give any color that you have on the terms of the agreement with beta.

Specifically is there any revenue stream that would be flowing towards autonomous part of using the charging infrastructure.

I just associated with that with a multimodal solution do you feel like Youre, giving up anything in the way of you recharge time and capability with something Thats more broadly able or do you feel like you are still at the same ballpark of that.

The numbers you put together two years ago.

Yes, sure happy to talk about that so in terms of the last part of your question our operational capabilities.

To be Super clear.

We've chosen aligning with beta and gamma in the rest of the industry absolutely supports our operational goals of turnaround time pass charging et cetera with regard to the first part of your question and specific partnership with data we have purchased some equipment for them specifically around the charging and cooling.

Equipment their team has done a phenomenal job they've made a bunch of great investments in that space and really buy it by partnering with them and the rest of the industry.

We're positioned really well to help us scale and distribute this aircrafts that always locations around the country around the world That's really the driving force behind it that makes sense.

Yeah, Thanks very much.

And then I guess.

A broader one maybe I'm not sure how much you can talk about it but there's certainly been a lot of news about people that are in the electric vehicle business kind of ramping down expectations.

The difficulty with supply chains, having.

Having difficulty with the IRS, just a general slowing of that business.

Any of that impacting you in your supply chain or any of the materials that you need to be able to ramp up the ultra aircrafts from the timeline you've specified.

Hey, David This is Adam so no we have not seen an impact from the broader EV market slowdown impacting the EV supply chain.

I think thats, probably because of the volumes that we are working with are much smaller and we use different suppliers. So for example, I don't believe anybody like community spaces, using Honeywell or encore Garmin as examples.

So we have not seen any impact from that.

Great and then if I could just squeeze one more in a little you had talked about air worthiness and progress. There is there anything you can talk about specifically in terms of the battery certification plan I understand your batteries, maybe a lower risk of certification than some other designs that are out there.

But any color you can provide on the battery certification process.

Sure, we're still Super happy with our choice to use cylindrical cells, we think that.

Basically provides both a more robust economic oil system as well as a safer system. So super happy with that can't give you any updates on the battery certification details, but that's still a work area for us.

Thanks, Tom Good luck in the queue.

Our next question is from Austin Moeller with Canaccord. Your line is now open.

Hi, good evening.

Hey, Austin.

So just my first question here with the with the announcement of the India agreement.

Does that essentially bring your backlog if you include United to around 500 aircraft and should.

Should we expect at some point that youll be able to draw some pre delivery payments off those off that backlog to generate some cash.

Hey, Austin this is Adam.

So we don't quote a backlog.

From the different agreements that we have really the strategy that we've put in place for especially the international side has been to partner with some of the largest <unk>.

Providers.

The government the regulators that will allow us to launch these networks.

There is certainly is the potential for additional pre delivery payments that come forward, but a lot of the market is still developing and so we focus very heavily on the partnership side to develop those relationships. So we can figure out the most efficient way to.

Really just deploy the vehicles as they come off the manufacturing lines as we continue to mature those relationships, we will certainly provide updates and.

Keep you up to date.

Okay, Great. That's helpful and then just if.

If we if we think about the regulatory side of the equation. What is the latest that you've heard in your conversations with the with FAA officials on the.

The number of pilots that will be required to be able to.

To operate the aircraft and pilot training relative to whats already permitted with helicopters. Thank you.

And so we haven't heard any updates on the progress of the as far as I think you're referring to the content in there that referenced.

Potential need to have a dual flight controls for some aircraft just to make sure.

The right context there.

Not around the commercial operation of these aircrafts as much as the training capability for pilots, so and we shared our position all along with gamma in the rest of the industry on that.

It is now in the rulemaking process for that so no uptick Sharon obviously, you can't speak on that.

Okay, great. Thank you for the detail.

Our next question is from Josh Sullivan with benchmark. Your line is now open.

Hey, good evening.

Just on the leasing at our global shared model.

<unk> exited the interval a shared model how should we think about that flowing through archers revenue model and I think I mentioned financing for 200 aircraft, but it sounds like there is a.

Shared service aspect to it.

A color on how that how that might flow through our <unk> model once executed.

So there is a we've talked about are our overall operating model, where we have the ability to sell planes and then we have the ability to.

Operate claims ourselves in the international markets, it will likely be a mix.

The mix of shared operations as well as selling claims so it will be integral relationship. There is still early and we don't have any additional color right. There, but there certainly is an opportunity for.

For the ability for us to share in the operations there.

And really work with that standardized.

The entire air Taxi Division.

Maybe one for Mark just on the non reoccurring costs that you're expecting to tail off in 2024.

What should we expect the cadence of that to look like and maybe the magnitude as well.

Yes, we talked about it previously.

And the cadence is generally after the.

First half of the year, we'll see that start dropping off at the beginning of the year and then tail off such that at.

We said as the current pace is that they will drop off by the end of the year.

Really that's dependent on on timing of execution with our supply chain and partners et cetera.

Got.

I'd also like to <unk>.

Highlight that as those drop off.

We will be investing in other areas of the business clearly as we're ramping up manufacturing and quality will be investing into the six <unk>.

For materials and of the six conforming aircraft.

Other areas of the business.

I.

Thanks for the time.

Thank you Josh there are no further questions at this time, so I'll turn the call back to Adam Goldstein for closing remarks.

Thank you everyone, who has joined the call today as well as the entire Archer team for their relentless execution in what has been another great quarter.

Our production designed aircraft midnight took flight for the first time and we're on track to rapidly advance to full wind-borne flagged over the coming months paving the way for us to begin for credit testing with the FAA or.

Our commercial team is now in full swing, both domestically and abroad from our U S launch cities with United Airlines to our newly announced international launch markets of India, and UAE to our industry, leading contract with the U S. Air Force, we ended the quarter with nearly $600 million in liquidity and I couldnt be more excited about the quarter ahead. Thank you again to our.

Team and everyone on the call today.

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