Q1 2024 Archer Aviation Inc Earnings Call
Cole: Good afternoon. Thank you for attending today's Archer Aviation Q1-24 financial results conference call. My name is Cole, and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I'd now like to pass the call over to our host, Eric Lentil. Please go ahead.
Good afternoon. Thank you for attending today's Archer Aviation in Q1 24 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.
Cole: I'd now like to pass it over to our host Eric Lentil. Please go ahead.
Eric Lempel: Thank you, operator. Good afternoon, everyone, and thank you for joining us today to review Archer's first quarter operating and financial results. My name is Eric Lempel, Archer's General Counsel.
Eric Lentil: Thank you operator.
Eric Lentil: Good afternoon, everyone and thank you for joining us today to review, our first quarter operating and financial results.
Eric Lempel: My name is Eric Lin Pal.
Eric Lempel: <unk> General counsel on.
Eric Lempel: On the call with me today are Adam Goldstein, our founder and CEO, Mark Mesler, our CFO, and Tom Yunez, our CTO. 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 OLDC Statement. For more information about these risks and uncertainties, please refer to our SEC filings under the Caption Risks Factor. 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 reconciliation of certain GAAP to non-GAAP measures is included in our shareholder letter posted on our Investor Relations website.
Eric Lempel: On the call with me today are Adam Goldstein, our founder and CEO, Mark Mesler, our CFO and Tom.
Eric Lempel: Yes.
Eric Lempel: On today's call, we will be making forward looking statements.
Eric Lempel: These statements involve risks and uncertainties that may cause actual results to differ materially from those contemplated by the board.
Eric Lempel: 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.
Eric Lempel: Make no obligation to update these statements as a result of new information or future events.
Eric Lempel: During this call we will discuss both GAAP and non-GAAP financial measures a reconciliation of certain GAAP non-GAAP measures is included in our shareholder letter posted on our Investor Relations website.
Eric Lempel: And now, I'll turn the call over to Adam. Okay?
Adam D. Goldstein: And now I'll turn the call over to Adam.
Adam D. Goldstein: Eric. At Archer, we remain steadfast in our focus on commercializing our midnight air. We've designed Midnight in pursuit of bringing to market an electric aircraft with world-class design and cutting-edge performance capabilities that will make it the desired air taxi globally. When I think back to 2019, when I first sat down with Tom Muniz and Jeff Bauer to sketch out a vision for what became Midnight, we were aligned on one single goal: design an aircraft that would capture market potential as soon as possible, meaning one that is both certifiable and manufacturable at scale, all while being purpose built to address the congested 20 to 50-mile automobile commute corridors that gridlock our cities today. We decided a 12-tilt-6 vehicle was optimal for this mission, and so we built a full-scale 3,500-pound max gross weight, 40-foot wingspan aircraft called MAKO.
Adam D. Goldstein: Thanks, Eric at Archer, we remain steadfast in our focus on commercializing our midnight aircraft.
Adam D. Goldstein: We've designed midnight in pursuit of bringing to market and electric aircraft with World class design and cutting edge performance capabilities that will make it a desired air taxi globally.
Adam D. Goldstein: When I think back to 2019, when I first sat down with Tom E&S, Jeff Bower to sketch out a vision for what became midnight. We were aligned on one single design and aircrafts that would capture the market potential as soon as possible, meaning one that is both certifiable and manufacturable at scale, all while being purpose.
Adam D. Goldstein: Built to addressing the congested 20 to 50 mile automobile key corridors that grid lock our cities today.
Adam D. Goldstein: We decided a 12 six vehicle what's optimal for the submission and then we built a full scale 3500 pound Max gross weight 40 foot wingspan aircrafts called maker.
Adam D. Goldstein: We shepherded that aircraft in 2022 and 2023 through the full flight envelope, including transition and high-speed flight, and then used those lessons to inform the design of the next evolution, our production aircraft, Midnight. Today, we are flying Midnight nearly every day and benefiting tremendously from all the lessons we learned from it. In Q1, our flight test team logged over 100 flights, putting us on pace to exceed our goal of 400 flights.
Adam D. Goldstein: We separated that aircraft in 2022, and 2023 grew with a full flight envelope, including transition and high speed flight and then use those lessons to inform the design of the next evolution our production aircrafts midnight.
Adam D. Goldstein: Today, we are flying midnight, nearly everyday and benefiting tremendously from all the lessons we learned from Baker.
Adam D. Goldstein: In Q1, our flight testing logged over 100 flights, putting us on pace to exceed our goal of 400 flights this year.
Adam D. Goldstein: And we continue to be focused on accelerating the velocity of our flight test, aiming for reaching 10 to 15 flights a day to mimic the commercial industry. As we continue to expand the flight envelope, I couldn't be more excited to see the aircraft transition in the near future. Midnight has a 6,500 pound max growth weight and a 47 foot wingspan, making it what we believe to be the largest UVTOL aircraft in the industry. We intentionally designed Midnight at this size to maximize payload and provide necessary comforts such as air conditioning.
Adam D. Goldstein: And we continue to be focused on accelerating the velocity of our flight test data.
Adam D. Goldstein: <unk> for reaching 10% to 15 flights a day to mimic commercial endurance.
Adam D. Goldstein: As we continue to expand the flight envelope I couldnt be more excited to see the aircraft transition in the near future mid.
Adam D. Goldstein: Midnight has a 6500 pound Max gross weight and a 47 foot wingspan making it what we believe to be the largest VTOL aircrafts in the industry.
Adam D. Goldstein: We intentionally designed midnight at besides maximize payload and provide necessary comfort such as air conditioning.
Adam D. Goldstein: I believe that our choice to build a higher payload vehicle will prove to be a differentiator as we commercialize this industry. We are on a path to build six conforming midnight aircraft to be used as part of our FAA certification program. The first of those is in final assembly now and on track to begin piloted flights later this year. Yesterday, we published a comprehensive video tour of our integrated test lab and production facility in California.
Adam D. Goldstein: I believe that our choice to build a higher payload vehicle will prove to be a differentiator as we commercialize this industry.
Adam D. Goldstein: We are on a path to build six conforming midnight aircraft to be used as part of our FAA certification program.
Adam D. Goldstein: The first of those is in final assembly now and on track to begin piloting flights later this year.
Adam D. Goldstein: Yesterday, we published a comprehensive video tour of our integrated test lab and production facility in California.
Adam D. Goldstein: Given our progress in engineering the aircraft and in our certification and flight test program, we decided to move forward with installing our high-scale, automated battery-packed manufacturing line earlier this year. This line is capable of producing enough battery packs to support our planned production ramp in Georgia.
Adam D. Goldstein: Given our progress in engineering, the aircraft and on our certification and flight test programs, we decided to move forward with installing our high scale automated battery pack manufacturing line earlier this year.
Adam D. Goldstein: This line is capable of producing enough battery packs to support our planned production ramp in Georgia I.
Adam D. Goldstein: I am confident that we are leading the way in the industry with this capability and that our investment there will pay off for years to come. We have also made similar investments across our supply chain, having spent over $50 million with our suppliers to ensure they are able to achieve our timeline and the production throughput we will need to support our aircraft manufacturing. As these capital expenditures and upfront non-recurring costs roll off, I expect we will naturally reduce our burn and cash needs meaningfully as we shift into preparing for commercial launch heading into next year.
Adam D. Goldstein: I am confident that we are leading the way in the industry with the capability and that our investment there will pay off for years to come.
Adam D. Goldstein: We have also made similar investments across our supply chain, having spent over $50 million with our suppliers to ensure they are able to achieve our timelines and the production throughput we will need to support our aircrafts manufacturing ramp.
Adam D. Goldstein: As these capital expenditures and upfront nonrecurring costs roll off I expect we will naturally reduce our burn and cash needs meaningfully as we shift into preparing for commercial launch heading into next year.
Adam D. Goldstein: One key piece of the strategy has been our partnership with, As we have indicated, we are evolving our relationship to positions them to be our contract manufacturing partner, so that we can take advantage of their proven ability to produce vehicles at scale, which will, in turn, reduce Archer's cash outlay necessary to purchase materials and equipment as we start to scale production of our aircraft. We believe this capital-light strategy will put us in a unique position to rapidly scale production while minimizing capital.
Adam D. Goldstein: One key piece of the strategy has been our partnership with <unk> as we have indicated we are evolving our relationship to position stock has to be our contract manufacturing partner.
Adam D. Goldstein: So that we can take advantage of their proven ability to produce vehicles at scale, which will in turn reduce archers cash outlay necessary purchase materials and equipment as we start to scale production of our aircraft. We believe this capital light strategy will put us in a unique position to rapidly scale production, while minimizing cash requirements.
Adam D. Goldstein: I'm very pleased with how we have managed liquidity through this period, where we have made what should be our most substantial CapEx in non-recurring investments. Our liquidity and cash position is nearly flat to where it was one year ago.
Adam D. Goldstein: I'm very pleased with how we have managed liquidity through this period, where we have made what should be our most substantial capex and nonrecurring investments.
Adam D. Goldstein: Our liquidity and cash position with nearly flat to where it was one year ago.
Adam D. Goldstein: As the founder, CEO, and the company's largest shareholder, I am sensitive to when and how much capital we take in as we balance our need and desire to grow with potential dilution. From the beginning, we have chosen a partner-first approach with some of the world's greatest companies and investors, like Stellantis, United Airlines, Abu Dhabi, and MOLUS, who believe in the value of what we are doing and are willing and able to help us ensure we get the capital we need when we need it.
Adam D. Goldstein: As the founder and CEO and the company's largest shareholder I am sensitive to when and how much capital we've taken as we balance our need and desire to grow with potential dilution.
Adam D. Goldstein: From the beginning we've chosen a partner first approach with some of the world greatest companies and investors like Sanchez, United Airlines, Abu Dhabi, and Moelis, who believe in the value of what we are doing and are willing and able to help us ensure we get the capital we need when we need it.
Adam D. Goldstein: I continue to believe we are massively undervalued relative to the proprietary step change in technology we are creating and will remain opportunistic about how and when we take in capital on our journey to commercialization. I'm lucky to experience the day in and day out progress of making electric aviation a reality. But nothing tops getting to see the emotional reaction people have when they first experience our aircraft, no matter where we are in the world. I'm incredibly excited about turning those moments into an everyday reality.
Adam D. Goldstein: I continue to believe we are massively undervalued relative to the proprietary that change in technology, we are creating and will remain opportunistic about how and when we've taken capital on our journey to commercialization.
Adam D. Goldstein: I am Lucky to experience the day in day out progress of making electric aviation a reality, but nothing tops getting to see the emotional reaction people have when they first experience our aircraft no matter, where we are in the world.
Adam D. Goldstein: I'm incredibly excited about turning those moments into an everyday reality.
Adam D. Goldstein: Just last week, I was in D.C. to celebrate the opening of our D.C. office with Billy Nolan, who, prior to coming to Archer, was the acting FAA Administrator and has now transitioned to be our Chief Regulatory Affairs Officer, overseeing a team of industry and government veterans who are working on the important policy and regulatory issues our industry is facing. While in D.C., I had the pleasure of meeting with lawmakers, FAA Administrator Mike Whitaker and his leadership team, and senior administration officials at the White House to update them on our progress and to discuss the importance of the FAA Reauthorization Bill and the upcoming SBAR.
Adam D. Goldstein: Just last week I was in D. C to celebrate the opening of our DC office with Billy Nolan, who prior to coming to Archer was the acting FAA administrator and has now transitioned to be our chief regulatory Affairs officer, overseeing a team of industry and government veterans, who are working on important policy and regulatory issues our industry is facing.
Adam D. Goldstein: While in D. C. I had the pleasure of meeting with lawmakers the FAA administrator, Michael Whitaker and his leadership team and senior administration officials at the White house to update them on our progress and to discuss the importance of the FAA reauthorization, bill and the upcoming thus far.
Adam D. Goldstein: I'm grateful to Administrator Whitaker and the leadership team for all the progress our two teams have made together over the last several months to advance Midnight towards commercial adoption. Tom will provide more detail on our certification progress, which we've also highlighted in our shareholder letter. I want to now shift gears and take a moment to touch on the momentum we are seeing from commercializing flying cars all over the globe. There has been a noticeable shift over the past 12 months.
Adam D. Goldstein: Grateful to administrator Whitaker and his leadership team for all of the progress. Our two teams have made together over the last several months to advance midnight towards commercialization.
Adam D. Goldstein: Tom will provide more detail on our certification progress, which we've also highlighted in our shareholder letter.
Adam D. Goldstein: I want to now shift gears and take a moment to touch on the momentum we are seeing from commercializing flying cars all over the globe.
Adam D. Goldstein: There has been a noticeable shift over the past 12 months recently I spent time abroad at the invitation of international regulators and partners, New and perspective, and I can say what I've witnessed firsthand is that never before has the excitement and demand for urban air transportation and higher than it is today.
Adam D. Goldstein: Recently, I spent time abroad at the invitation of international regulators and partners, new and prospective, and I can say what I witnessed firsthand is that never before has the excitement and demand for urban air transportation been higher than it is today. The world's cities are growing increasingly congested, while alternative transportation options remain challenging to develop and implement, and world leaders have taken note of the potential impact our industry can have on their cities.
Adam D. Goldstein: The world cities are growing increasingly congested, while alternative transportation options remain challenging to develop and implement and world leaders have taken note of the potential impact our industry can have on their cities.
Adam D. Goldstein: I'm humbled by the opportunity that Archer and our industry have to contribute to making a difference by ushering in this new era of electric aviation. Just last month, Midnight made its debut in Abu Dhabi for the inaugural Abu Dhabi Mobility Week, where the UAE government ratified what I believe to be the world's largest unified governmental sign of support for our industry outside of the United States. As part of that, we signed a landmark framework agreement with the Abu Dhabi Investment Office, ADEO, that sets out their plan to provide us with an unprecedented investment of several hundreds of millions of dollars to accelerate our launch of air taxis in the region.
Speaker Change: Humbled by the opportunity at the Archer and our industry.
Adam D. Goldstein: To contribute to making a difference by ushering in this new era of electric aviation.
Adam D. Goldstein: Just last month midnight made its debut in Abu Dhabi for the inaugural Abu Dhabi mobility.
Adam D. Goldstein: The UAE government ratify what I believe to be the world's largest unified governmental sign of support for our industry outside of the United States.
Adam D. Goldstein: As part of that we signed a landmark framework agreement with the Abu Dhabi investment office audio that desktop their plan to provide us with an unprecedented investments of several hundreds of millions of dollars to accelerate our launch of air taxes in the region.
Adam D. Goldstein: Our team is proud to be partnering directly with the Director General of ADEO, His Excellency Bader Al-Olama, with whom we've worked closely over the last year to get to this point, under the leadership of His Highness Sheikh Hamdan, who we were proud to host last month in the country's capital city. Aviation in the UAE, like most other countries, is regulated federally, and we are working in close coordination with the GCAA, the General Civil Aviation Authority, to plan for the safe integration of our aircraft into the airspace across Abu Dhabi, Dubai, and the Seven Emirates.
Adam D. Goldstein: Our team is proud to be partnering directly with the director General of audio Excellency butter, a little Rama with whom we've worked closely over the last year to get to this point under the leadership of his Highness Sheikh comes on who we were proud to host last month in the country's capital city.
Adam D. Goldstein: Aviation in the UAE like most other countries is regulated federally. So we are working in close coordination with the GC that general Civil Aviation authority to plan towards a safe integration of our aircraft into the aerospace across Abu Dhabi, Dubai and seven Emirates.
Adam D. Goldstein: I want to offer more insight into what these early operations are shaping up to look like. There are existing skilled operators there who have meaningful experience operating aircraft within the complex UAE airspace. Rather than building a new operator to directly compete with local incumbents, we've chosen to take a more pragmatic approach to launching this market by working with commercial leaders there, like Falcon Aviation and Airshaft. Falcon, under the leadership of His Highness, Dr. Sheikh Sultan of the UAE royal family, has decades of experience transporting passengers within and across Dubai and Abu Dhabi via helicopter.
Adam D. Goldstein: I want to offer more insight into what these early operations are shaping up to look like.
Adam D. Goldstein: There are existing skilled operators, there who have meaningful experience operating aircraft within the complex UAE airspace, rather than building a new operator to directly compete with local incumbents, we've chosen to take a more pragmatic approach to launching this market through working with commercial leaders there Microsoft in aviation and Air Chateaux.
Adam D. Goldstein: Falcon under the leadership of the Chinas, Dr. <unk> of the UAE Royal family has decades of experience transporting passengers within and across Dubai, and Abu Dhabi helicopters and air Chateau is one of the country's newest and most forward leaning helicopter operators located at the newly announced <unk> International Airport the future.
Adam D. Goldstein: And Air Chateau is one of the country's newest and most forward-leaning helicopter operators, located at the newly announced Al Maktoum International Airport, the future home of Emirates Airlines and soon to be the largest airport in the world.
Adam D. Goldstein: Home of Emirates Airlines and soon to be the largest airport in the world.
Adam D. Goldstein: We remain focused on executing on a partner-first approach, and we look forward to continuing to work with the DCAA, ADEO, and the Department of Municipalities and Transport to enable commercial operations of our air taxis in the country as soon as late 2025. I recently spent time in India and am more convinced than ever that India could become the largest urban air mobility market in the world, just as it has already become one of the fastest growing electric vehicle markets.
Adam D. Goldstein: We remain focused on executing on a partner first approach and we look forward to continuing to work with the DCA audio and the department of municipalities and transport to enable commercial operations of our air taxis in the country as soon as late 2025.
Adam D. Goldstein: I recently also spent time in India, and I'm more convinced than ever that India could become the largest urban air mobility market in the world just as it has already become one of the fastest growing electric vehicle market. We're proud to be partnered with Buffalo back to you one of Aviation's greatest pioneers in this company integral.
Adam D. Goldstein: We're proud to be partnering with Rahul Bhatia, one of aviation's greatest pioneers, and his company, Interglow. Through InterGlobe, Global founded and helmed the third largest airline in the world, Indigo, a nearly $20 billion juggernaut, holding two-thirds of the domestic Indian market, with extensive in-country and global influence and respect for its innovative approach to customer and operational. In our sector, we are leading the way with maturing our plans and partners in what I'm sure can be one of the largest markets for EVTOL aircraft on Earth
Adam D. Goldstein: Through integral well founded and helped the third largest airline in the world Indigo, a nearly $20 billion juggernaut holding two thirds of the domestic Indian market with an extensive in country and global influence and respect for its innovative approach to customer and operational excellence.
Adam D. Goldstein: In our sector, we are leading the way with maturing our plan and partners and what I am sure. It can be one of the largest markets for E VTOL aircrafts under.
Adam D. Goldstein: I'm very happy with the work our team is doing there.
Adam D. Goldstein: So I'm very happy with the work our team is doing. But I want to be clear that our partnership with InterGlobe is intended to extend far beyond a co-marketing arrangement or simple airport trip. Beyond the airline, Interglobe is also the country's third largest hospitality player with an extensive real estate portfolio, as well as UPF's JV partner in the region.
Adam D. Goldstein: I want to be clear that our partnership with integral is intended to extend far beyond a co marketing arrangement, where simple airport trips.
Adam D. Goldstein: Beyond the airline integral is also the country's third largest hospitality player with extensive real estate portfolio as well as Ups's JV partner in the region.
Adam D. Goldstein: As such, this year we are working to finalize a comprehensive JV with Interglobe, which is contemplated to not only purchase an initial fleet of up to 200 midnight aircraft to begin operations in Delhi, Mumbai, and Bengaluru, but also to build out an extensive network of vertiports and services across the country to include fleet operations, maintenance, and pilot recruitment and training. As you can imagine, InterGlobe also has a deep working relationship with India's Directorate General of Civil Aviation, the DGCA, and our team has spent time planning our approach with the regulators, the Director General, Mr. Vikram Dev Dutt, as well as his broader leadership team, to make sure we have a regulatory pathway to launch in India. UAE and India are just the first of our announced international markets. So look for us to continue sharing advancements here as we near commercialization. Also, as I mentioned, the global demand for midnight.
Adam D. Goldstein: Such this year, we are working to finalize a comprehensive JV with <unk>, which is contemplated to not only purchase an initial fleet of up to 200 million of aircrafts to begin operations in Delhi, Mumbai and think of Lulu, but also to build out an extensive network of for the ports and service across the country to include fleet operations maintenance and.
Adam D. Goldstein: But recruitment and training.
Adam D. Goldstein: As you can imagine integral also has a deep working relationship with India's director General of Civil Aviation with <unk> and our team has spent time planning our approach with the regulators director General Mr. Vikram Deb debt as well as his broader leadership team to make sure we have a regulatory pathway to launch in India.
Adam D. Goldstein: UAE and India are just the first of our announced international markets. So look for us to continue sharing advancements here as we near commercialization.
Adam D. Goldstein: So as I mentioned, the global demand for midnight, it's clear and I'm excited for us to share more advancements on the international front here soon.
Adam D. Goldstein: And I'm excited for us to share more advancements on the international front here. Of course, a go-to-market strategy is only as good as a, and I'm excited for Tom to share a deeper update on the next. Tom has more experience leading an eVTOL aircraft program than just about anyone in the world. Midnight is the eighth full-scale eVTOL aircraft he has worked on. Those aircraft have flown over 2,000 flights combined. Now that we have over 750 employees at Archer and given the progress with Stellantis and the contract manufacturing relationship that we're developing, we have elevated Tom to the role of Chief Technology Officer, with 500 engineers as consultants.
Adam D. Goldstein: Of course, our go to market strategy is only as good of a product and I'm excited for Tom to share a deeper update on the next progression Tom.
Adam D. Goldstein: Tom has more experience, leading <unk> aircraft program than just about anywhere in the world.
Adam D. Goldstein: Midnight is the eighth full scale E. VTOL aircrafts. He has worked on those aircraft have flown over 2000 flights combined now.
Adam D. Goldstein: Now that we have over 750 employees at Archer and given the progress with <unk> and the contract manufacturing relationship that we're developing we have elevated Tom to the role of Chief Technology Officer, with 500 Engineers under Tom's organization.
Adam D. Goldstein: As part of that, we have recently shifted the manufacturing, supply chain, and quality departments to fall under a new production leader, Tony Aguilera. Having spent 23 years at Apple in leadership roles, Tony has deep experience across complex hardware programs. These fingerprints span nearly every major Apple product, from the iPhone to the iPad to the Vision Pro, from R&D, prototyping, and contract manufacturing with Apple's many CM products.
Adam D. Goldstein: As part of that we have recently shifted the manufacturing supply chain and quality departments to fall under a new production leader Tony <unk> having.
Adam D. Goldstein: Having spent 23 years at Apple and leadership rules, Tony has deep experience across complex hardware programs. These fingerprint spanned nearly every major apple product from the iPhone. The iPad to the vision pro from R&D prototyping contract manufacturing with Apple Many cm partners I Couldnt imagine a better deal and the combination of housing.
Adam D. Goldstein: I couldn't imagine a better duo than the combination of having Tom running engineering and Tony running production to see our program through commercial. With that, I want to step back and reflect on all the progress we've made. Electrification of aviation continues to increasingly emerge from the mainstream every day, which only further motivates my team here at Archer and underscores our collective commitment to pioneering advancements in transportation. However, our evaluation today only captures a small fraction of the incredible ambition we have to make sustainable aviation an everyday reality. We stand at the forefront of a transformative era where imagination meets innovation and dreams take flight. With that, I'll turn it over to Tom. Thanks, Adam.
Adam D. Goldstein: Tom running engineering, and Tony running production to see our program through commercialization.
Adam D. Goldstein: With that I want to step back and reflect on all the progress we've made to the electrification of aviation continues to increasingly emerge into the mainstream everyday which only further motivates my team here at Archer and underscores our collective commitment to pioneering advancements in transportation our.
Tom: Our valuation today only captured a small fraction of the incredible ambition, we have to make sustainable aviation and everyday reality.
Tom: We stand at the forefront of a transformative era, where imagination innovation and dreams breakpoint.
Adam D. Goldstein: That I will turn it over to Tom.
Thomas Paul Muniz: This past quarter, my team has successfully achieved an ambitious series of milestones across aircraft testing, FAA certification, and manufacturing. From the outset, I've been clear that our strategy has been to keep the design for Midnight as simple as possible while delivering industry-leading performance balanced with safety. As you know, we decided to do this by partnering with what we believe to be the best suppliers in the aerospace industry rather than take on the cost and risk of vertically integrating every aspect of a novel aircraft program.
Tom: Thanks, Adam this past quarter. My team has successfully achieved an ambitious series of milestones across aircraft testing FAA certification and manufacturing from the outset I've been clear that our strategy has been to keep the designed for midnight as simple as possible, while delivering industry, leading performance balanced with safety.
Thomas Paul Muniz: As you know we decided to do this by partnering with what we believe to be the best suppliers in the aerospace industry, rather than take on the cost and risk of vertically integrating every aspect of a novel aircraft program.
Thomas Paul Muniz: This pivotal decision continues to pay dividends that are more clear today than ever, as we continue to make rapid progress towards commercializing the Our team continues to accelerate the pace at which we are flying, and as Adam mentioned, I'm incredibly proud that we flew over 100 flights in Q1 and remain on track to exceed our goal of completing over 400 flights this year.
Thomas Paul Muniz: This pivotal decisions continues to pay dividends that are more clear today than ever as we continue to make rapid progress towards commercializing mid day.
Thomas Paul Muniz: This is most evident when you look at the strides we have made with our flight test program.
Thomas Paul Muniz: Our team continues to accelerate the cadence at which we are flying and as Adam mentioned I'm incredibly proud that we flew over 100 flights in Q1 and remain on track to exceed our goal of completing over 400 flights this year.
Thomas Paul Muniz: Most importantly, we've safely and steadily advanced Midnight through the envelope expansion phase of its flight test program, and we have now entered the transition portion of the flight test campaign. As a reminder, transition is the flight regime between hover and cruise, where the aircraft is flying forward with some lift being generated by both the wing and the propeller.
Thomas Paul Muniz: Most importantly, we've safely and steadily advanced midnight through the envelope expansion phase of its flight test program and we have now entered the transition portion of the flight test campaign.
Thomas Paul Muniz: As a reminder, transition as the fight regime between hovering crews, where the aircraft is flying forward with some lift being generated by both the wing and the propel us.
Thomas Paul Muniz: As you recall, our team completed the full transition of maker a couple years ago, generating invaluable data to support the midnight aircraft we're flying now. Over the coming weeks, we will continue to fly at midnight at incrementally faster airspeeds until we reach the full transition to cruise flight. We are on track to accomplish this seminal milestone in the near future.
Thomas Paul Muniz: As you recall our team completed the full transition of maker a couple of years ago generating invaluable data to support the midnight aircraft were flying now.
Thomas Paul Muniz: Over the coming weeks, we will continue to slide the night at incrementally faster speeds until we reach the full transition decreased flight.
Thomas Paul Muniz: We are on track to accomplish the seminal milestone in the near future.
Thomas Paul Muniz: In parallel, our flight test team is starting to ramp up test planning and preparations for us to commence piloted flight testing, which we are on track to begin later this year. On the testing and certification front, this past quarter, we significantly ramped up our testing efforts to drive both safety of flight readiness for upcoming piloted flight tests later this year, as well as our ongoing certification program with the FAA. This past quarter has seen extensive testing across many different aspects of the aircraft. I'll take a few minutes to highlight some of the key initiatives to illustrate the type of work we're doing and the progress we're making.
Thomas Paul Muniz: In parallel our flight deck team is starting to ramp up test planning and preparations for us to commence piloted flight testing, which we are on track to begin later this year.
Thomas Paul Muniz: On the testing and certification front this past quarter, we significantly ramped up our testing efforts to drive both safety of flight readiness for our upcoming piloted flight test later this year as well as our ongoing certification program with the FAA.
Thomas Paul Muniz: This past quarter has seen extensive testing across many different facets of the aircrafts.
Thomas Paul Muniz: I'll take a few minutes to highlight some of the key initiatives to illustrate the type of work, we're doing and the progress we're making.
Thomas Paul Muniz: Starting with materials testing, as of this past quarter, we have now completed more than 60% of the FAA for credit testing for composite structural materials. We have also recently completed several structural component level tests to validate our structural analysis method. This data supports not just our safety of flight efforts for upcoming piloted flight testing but also our aircraft structure certification efforts. This past quarter, we also successfully completed structural proof load testing of the fuselage for the piloted midnight aircraft, ensuring that the structure can safely withstand the loads we expect it to see in flight.
Thomas Paul Muniz: Starting with materials testing.
Thomas Paul Muniz: As of this past quarter, we have now completed more than 60% of the FAA for credit testing for composite structural materials.
Thomas Paul Muniz: We also recently completed several structural component level tests.
Thomas Paul Muniz: To validate our structural analysis methods.
Thomas Paul Muniz: This data supports not just our safety of flight efforts for our upcoming pilot and flight testing, but also our aircraft structures certification effort.
Thomas Paul Muniz: Past quarter. We also successfully completed structural proof load testing of the fuselage for the pilot at midnight aircrafts, ensuring that the structure can safely withstand the loads, we expect it to see in flight.
Thomas Paul Muniz: Moving on to landing gear, the Midnight Aircraft has the unique and highly beneficial capability of landing both vertically like a helicopter and conventionally like an airplane. This gives Midnight a distinct operational and safety advantage over other eVTOL aircraft that can only take off and land vertically.
Thomas Paul Muniz: Moving onto landing gear, the midnight aircrafts has the unique and highly beneficial capability of lending both vertically like a helicopter and conventionally like an airplane.
Thomas Paul Muniz: This gives midnight of distinct operational and safety advantage over other E. VTOL aircrafts that can only take off and land vertical <unk>.
Thomas Paul Muniz: This ability provides additional use cases, increased safety of our operations, and increased redundancy to the aircraft platform. With our partner, MCAIR, we recently completed a multi-week test campaign where we functionally tested the landing gear to verify the design can withstand any possible landing scenario anticipated, even for the harshest of imperfect landings. These harsh landing conditions were, in part, defined as limit loads, which are loads that are extremely unlikely from a probabilistic standpoint but possible by a conservative definition.
Thomas Paul Muniz: Disability provides additional use cases increased safety of our operations and increased redundancy to the aircraft platform.
Thomas Paul Muniz: With our partner Macaire, we recently completed a multi week test campaign, where we functionally tested the landing gear to verify the design can withstand any possible lending scenario anticipated even for the harshest of imperfect landings.
Thomas Paul Muniz: These harsh lending conditions in part was defined us limit loads with our loads that are extremely unlikely from a probabilistic standpoint, but possible by conservative definition.
Thomas Paul Muniz: Additionally, because Archer is meeting the certification criteria for both helicopter and normal aircraft category landings, Part 27 and Part 23, respectively, we tested each landing configuration twice, once with representative tire spin for conventional landing and once with a static tire for vertical landing. While we performed this testing to support the safety of flight for the first pilot at midnight, the test procedures were reviewed and supported by both NICAIR and FAA designated engineering representatives, or DER.
Thomas Paul Muniz: Additionally, because archer is meeting the certification criteria for both helicopter and normal aircraft category landings part 27, and part 23, respectively. We tested each lending configuration twice once with representative tire spin for conventional lending and once with a static tire for vertical lens.
Thomas Paul Muniz: While we performed this testing to support safety of flight for the first pilot at midnight. The test procedures will reviewed and supported by both Macaire and FAA designated engineering Representatives or <unk>.
Thomas Paul Muniz: NICARE has established itself as an expert in this area through successful strategic partnerships with many other major aircraft OEMs that supply sophisticated, certified products in the airspace and defense sector. The data reviewed indicates that the landing gear met or exceeded the design targets in all cases. Additionally, because this test campaign directly mirrored the testing that will be done for certification credit, there is now a high degree of certainty that Midnite's landing gear will pass the certification testing process. Another capability of Midnite that we believe will be a differentiator is the high-performance environmental cooling system from Honeywell that we are capable of integrating into Midnite thanks to its size and payload capability.
Thomas Paul Muniz: <unk> has established itself as an expert in this area through successful strategic partnerships with many other major aircraft Oems that supply sophisticated certified products in the aerospace and defense sector.
Thomas Paul Muniz: The data reviewed indicates that the landing gear met or exceeded the design targets in all cases.
Thomas Paul Muniz: Additionally, because of this test campaign directly neared the testing that will be done for certification credits. There is now a high degree of certainty that midnight landing gear will pass the certification testing process.
Thomas Paul Muniz: Another capability of midnight that we believe will be a differentiator is the high performance environmental cooling system from Honeywell that we're capable of integrating into midnight, thanks to its size and power capability.
Thomas Paul Muniz: We're making great progress on the tests and certification of this system, benefiting greatly from Honeywell's deep certification experience. Testing is progressing well, and Honeywell is working on safety of flight declaration letters for several system components, indicating that they are safe to fly on the piloted aircraft. Certification test plans are being completed now with FAA DERs engaged in every step, so all these releases are likely to be final and can be used in our for-credit testing for certification later this year.
Thomas Paul Muniz: We're making great progress on the test and certification of the system benefiting greatly from Honeywell deep certification experience.
Thomas Paul Muniz: Testing is progressing well and Honeywell is working on safety of flight Declaration letters for several system components, indicating that they are safe to fly on the piloted aircrafts.
Thomas Paul Muniz: <unk> test plans are being completed now with FAA Ddr's engaged in every step. So all of these releases are likely to be final and can be used in our four credit testing for certification later this year.
Thomas Paul Muniz: We have tested several environmental control system components in our system integration lab here in California, and we expect to kick off testing of the entire system connected to the rest of the aircraft systems in our IronBird lab in the coming weeks. Moving on to batteries, one of the most challenging tests our aircraft will face as part of its FAA type certification program is the battery pack drop test. For this test, we dropped Midnight's battery packs multiple times from 50 feet at up to 100% state of charge to simulate extreme impact scenarios. Not only did the batteries pass the test, but they remarkably still functioned after each drop.
Thomas Paul Muniz: We have tested several environmental control system components, and our system integration lab here in California, and we expect to kick off testing of the entire system connected to the rest of the aircraft systems and our iron Bird lab in the coming years.
Thomas Paul Muniz: Moving onto batteries one of the most challenging tests, our aircrafts will face as part of its FAA type certification program is the battery pack dropdown.
Thomas Paul Muniz: For this test we dropped midnight battery packs multiple times from 50 feet and up to 100% sort of charge accumulate extreme impact scenarios.
Thomas Paul Muniz: Not only did the battery pack passed the test, but they remarkably still function after each drop this.
Thomas Paul Muniz: This is a testament to the safety and durability of Archer's proprietary pack design and our choice to use cylindrical cells over more novel cell designs that could have introduced risks into our program. As a reminder, we announced earlier this year our SpaceX agreement with NASA to collaborate on battery cell safety testing, and we'll provide an update on this collaboration in the quarters to come. Lastly, we've made significant progress on environmental and functional testing for many elements of our avionics and flight control system.
Thomas Paul Muniz: As a testament to the safety and durability of archers proprietary pack design and our choice to use cylindrical cells over more novel cell designs that could've introduced risks into our program.
Thomas Paul Muniz: As a reminder, we announced earlier this year our space Act agreement with NASA to collaborate on battery cell safety testing and we will provide an update on this collaboration in the quarters to come.
Thomas Paul Muniz: Lastly, we have made significant progress on environmental and functional testing for many elements of our avionics and flight control system.
Thomas Paul Muniz: As a reminder, Midnight is a fly-by-wire aircraft, meaning that the pilot's inputs go to a computer, where software processes these inputs along with other aircraft information to decide what the engines and actuators should do to achieve the pilot's intent.
Thomas Paul Muniz: As a reminder, midnight as a fly by wire aircrafts, meaning that the pilot inputs go to a computer where software processes. These inputs on with other aircraft information to decide what the engines and actuators should do to achieve the pilots intent.
Thomas Paul Muniz: This makes our aircraft easier to fly and safer for passengers. This system features components that are sourced from several leading suppliers, including side sticks sourced from Crusay. These, as with several other components, have deep certification heritage as they feature a design that is derived from what is found on the Airbus A220. We've now successfully completed environmental qualification testing on the side sticks, flight guidance panel, display controller, Wi-Fi and LTE data link, audio processor, navigation systems, transponder, and radio options.
Thomas Paul Muniz: This makes our aircrafts easier to fly and safer for passengers.
Thomas Paul Muniz: This system features components that are sourced from several leading suppliers, including <unk> sourced from Crusade.
Thomas Paul Muniz: This as with several other components have deep certification heritage as they feature a design that is derived from what is found on the Airbus <unk> hundred 20.
Thomas Paul Muniz: We've now successfully completed environmental qualification testing on the <unk> site guidance panel display controller, Wi Fi and LTE data link audio processor navigation systems transponder and radio Optometer.
Thomas Paul Muniz: On the process side of certification, this past quarter, we finalized additional issue papers with the FAA covering needs for compliance for our battery, as well as occupant protection, enabling us to finalize our methods of compliance and test. Last week, we had a productive face-to-face meeting with the FAA administrator and aviation safety leadership in Washington, D.C. They reiterated their support for certifying and implementing new advanced air mobility aircraft like ours and shared that the FSAR, which contains the operational rules for all of the industry, remains on track to be published as a final rule later this year.
Thomas Paul Muniz: On the process side of certification this past quarter, we finalized additional issue papers with the FAA covering means of compliance for our battery as well as occupant protection, enabling us to finalize our methods of compliance and test plans.
Thomas Paul Muniz: Last week, we had a productive face to face meeting with the FAA administrator and aviation safety leadership in Washington DC.
Thomas Paul Muniz: Reiterated their support for certifying and implemented new advanced mobility aircrafts like ours and shared that the as far which contains the operational rules for all of the industry remains on track to be published a final rule later this year.
Thomas Paul Muniz: This is great news as this effort remains right on schedule based on the target the FAA set about two years ago. The SAA team also reiterated that our airworthiness criteria is on track to be published this month in the Federal Register.
Thomas Paul Muniz: This is great news as this effort remains right on schedule based on the target the faa's that about two years ago.
Thomas Paul Muniz: The FAA team also reiterated that our air within its criteria is on track to be published this month in the Federal Register.
Thomas Paul Muniz: On the manufacturing side, we are advancing the integration of the first midnight aircraft that will be used for piloted testing at our integrated test lab and manufacturing facility here in California. Primary structural parts and assemblies for the next two flight test aircraft are in production across our supply base, along with many other system components. This past quarter, we also issued purchase orders for some long-lead items for our first production aircraft to be built in 2025, which signals our confidence in our design maturity and manufacturing readiness.
Thomas Paul Muniz: On the manufacturing side, we are advancing the integration of the FERC midnight aircrafts that will be used for pilot testing at our integrated test lab and manufacturing facility here in California.
Thomas Paul Muniz: Primary structural parts and assemblies for the next two flight test aircraft are in production across our supply base along with many other system components.
Thomas Paul Muniz: This past quarter, we also issued purchase orders for some long lead items for our first production aircrafts to be built in 2025.
Thomas Paul Muniz: Which signals our confidence in our design maturity and manufacturing readiness.
Thomas Paul Muniz: As we announced earlier this week, our battery pilot line has been completed at our California lab and manufacturing facility. This state-of-the-art line is where we will build the batteries for the pilot test aircraft we will use for certification testing and where we will build battery packs for the first several years of production. This high volume manufacturing line will be capable of ramping up to 15,000 battery packs per year.
Thomas Paul Muniz: As we announced earlier this week our battery pilot line has been completed at our California lab and manufacturing facility.
Thomas Paul Muniz: This state of the Art line is where we will build the batteries for the pilot test aircrafts, we will use for certification testing and where we will build battery packs for the first several years of production.
Thomas Paul Muniz: High volume manufacturing line will be capable of ramping up to 15000 battery packs per year.
Thomas Paul Muniz: This is a great example of how our strategy to choose simple, robust designs optimized for safety and manufacturability is setting us up to have a scalable product and business. We also remain on track to complete construction of our high volume manufacturing facility in Georgia later this year. We have now completed two of the most challenging phases of construction, rating the fight and pouring the foundation. Because of the topography of the site, we had to move roughly 450,000 cubic yards of dirt to balance the site. This required our team to navigate through large deposits of rocks that were carved black.
Thomas Paul Muniz: This is a great example of how our strategy to choose a simple robust designs optimized for safety and manufacture ability is setting us up to have a scalable product and business.
Thomas Paul Muniz: We also remain on track to complete construction of our high volume manufacturing facility in Georgia later this year.
Thomas Paul Muniz: We have now completed two of the most challenging phases of construction.
Thomas Paul Muniz: <unk> of the site and pouring the foundations.
Thomas Paul Muniz: Because of the topography of the sites, we had to move roughly 450000 cubic yards of dirt to balance the site.
Thomas Paul Muniz: This required our team to navigate through large deposits of rock that required Blackstone.
Thomas Paul Muniz: Now that the foundations are complete, our team is focused on standing up the exterior walls, which are on track to be completed in June. We shared some photos of this latest progress in our shareholder letter today. Construction is scheduled to wrap up this fall, and we expect to receive our occupancy permits and start assembly of the first midnight aircraft in the facility before the end of the year. As you can see, all of the building blocks that we've been working on for the past few years are coming together. Flight Testing to Certification to Manufacturing, all in support of our North Star goal of getting to commercialization as quickly and efficiently as possible.
Thomas Paul Muniz: Now that the foundations are complete our team is focused on standing up the exterior walls, which are on track to be completed in June we shared some photos of this latest progress in our shareholder letter today.
Thomas Paul Muniz: Construction is scheduled to wrap up this fall and we expect to receive our occupancy permit and start assembly of the first midnight aircrafts in the facility before the end of the year.
Thomas Paul Muniz: As you can see all of the building blocks that we've been working on for the past few years are coming together.
Thomas Paul Muniz: From flight testing to certification to manufacturing all in support of our Northstar goal of getting to commercialization as quickly and efficiently as possible.
Speaker Change: Thanks, Tom.
Mark Mesler: As you can see from what Adam and Tom discussed and what we have disclosed in our shareholder letter, we are making tremendous progress across all the key areas. I previously discussed in detail how our operating expense structure during this phase of the commercialization process includes non-recurring investments by key suppliers to enable the development and manufacturing setup of many of our midnight components. We have also discussed that approximately 80% of our parts will be sourced from the existing aerospace supply chain.
Thomas Paul Muniz: As you can see from what Adam and Tom discussed and what we have disclosed in our shareholder letter, we are making tremendous progress across all the key areas.
Mark Mesler: I previously discussed in detail, how our operating expense structure. During this phase of the commercialization process include nonrecurring investments with key suppliers to enable the development and manufacturing setup of many of our midnight components.
Mark Mesler: We have also discussed at approximately 80% of our parts are sourced from existing aerospace supply base.
Mark Mesler: Recall that this strategy allows us to execute our product development process with lower operating costs by allowing us to avoid the ongoing structural spending that would be necessary to develop those other technologies ourselves. Additionally, once we transition into the commercial manufacturing phase of our program, we will not have to build out manufacturing capability, capacity, and headcount to manufacture at scale the components that we are sourcing from our mature aerospace supply base.
Mark Mesler: Recall that we believe that strategy allows us to execute our product development process with lower operating cost, while allowing us to avoid the ongoing structural spending that would be necessary to develop those other technologies ourselves.
Mark Mesler: Additionally, once we transition into the commercial manufacturing phase of our program, we will not have to build out manufacturing capability capacity and head count to manufacture at scale. The components, we are sourcing from our mature aerospace supply base.
Mark Mesler: And that capital light strategy is further supported by our joint goal with Stellantis for them to be our contract manufacturing partner for our midnight aircraft. If you're working through this period of significant supply chain build out and test aircraft manufacturing,
Mark Mesler: And that capital light strategy is further supported by our joint goal, what's the losses for them to be our contract manufacturing partner for a midnight aircrafts.
Mark Mesler: If you are working through this period of significant supply chain build out and test the aircraft manufacturing I wanted to provide an update and some transparency on how to be thinking about our quarterly spending profile.
Mark Mesler: I wanted to provide an update and some transparency on how we are thinking about our quarterly spending profile. Recall that our current quarterly spending profile is made up of our core expenses for ongoing operations, in addition to non-recurring investments with suppliers to establish a midnight supply base and materials expenses to build our first six-conforming midnight test aircraft. Our total non-GAAP operating expenses for Q1 of 24 were approximately $89 million. About $17 million of that amount is made up of non-recurring investments with suppliers and material expenses for Midnight Air. Stacking out those non-recurring and mature expense amounts.
Mark Mesler: Recall that our current quarterly spending profile is made up of our core expenses for ongoing operations. In addition to nonrecurring investments with suppliers to establish a nice supply base and materials expenses to build our first 16, forming midnight test aircraft.
Mark Mesler: Our total non-GAAP operating expenses for Q1 of 'twenty four were approximately $89 million.
Mark Mesler: About $17 million of that amount is made up of nonrecurring investments with suppliers and material expenses for midnight aircrafts.
Mark Mesler: Backing out those nonrecurring and material expense amount.
Mark Mesler: Yields about 70 to 75 million in normalized quarterly run rate core expenses to operate the business, or about $280 million to $300 million annualized run rate spend. That level of spending is our core structural operating spending that will persist through 2024 and into 2025. As we complete the build out of our supply chain and finalize the manufacture of our sixth test aircraft, we expect to see non-returning investments and mature expenses start to tail off in late 2025.
Mark Mesler: You talked about 70% to $75 million, a normalized quarterly run rate core expenses to operate the business for about $280 million to $300 million annualized run rate spending.
Mark Mesler: That level of spending as our core structural operating spending that will persist through 2024 and into 2025.
Mark Mesler: As we complete the build out of our supply chain and finalize the manufacture of our <unk> test aircraft, we expect to see nonrecurring investments in mature expenses start to tail off in late 2024.
Mark Mesler: Within that context, we're always remaining highly disciplined with our spending to get commercialization in the most capital efficient way possible. We ended Q1'24 with approximately $523 million of liquidity, which included $406 million of cash and cash equivalents on our balance sheet, combined with the remaining approximately $117 million of debt and equity proceeds available under various capital arrangements. We also have another $6.7 million restricted. Specifically, quarter over quarter, cash decreased by $59 million, from $465 million to $406 million.
Mark Mesler: Within that context, we're always remaining highly disciplined with our spending to get the commercialization and the most capital efficient way possible.
Mark Mesler: We ended Q1, 'twenty four with approximately $523 million of liquidity, which included $406 million of cash and cash equivalents on our balance sheet combined with the remaining approximately $117 million of debt and equity proceeds available under various capital arrangements.
Mark Mesler: We also have another $6 $7 million of restricted cash.
Mark Mesler: Specifically quarter over quarter cash decreased by $59 million from $465 million.
Mark Mesler: To $406 million.
Mark Mesler: Switching to expenses, on a gap basis, total operating expenses for Q124 were $142.2 million, which included approximately $48.3 million of non-cash equity-related expenses, including $40.7 million of stock-based compensation and $7.6 million of warranty. Non GAAP operating expenses, which are a proxy for cash expenses, they don't include non-cash equity-related expenses of $89.1 million. And within our estimates range of $75 million to As I outlined earlier, we incurred approximately $17 million of non-recurring costs and material expenses with our suppliers during the quarter as we continue to build out our supply chain for Midnight and procure parts for the manufacture of our six conforming Midnight aircraft that we will use for FAA full credit flights. Within that context, for Q2 2024, we anticipate total non-GAAP operating expenses of $80 million to $95 million. One final note.
Mark Mesler: Switching to expenses on a GAAP basis total operating expenses for Q1, 'twenty four were $142 2 million, which.
Mark Mesler: Which included approximately $48 3 million of non cash equity related expenses, including $47 million of stock based compensation and $7 $6 million of warrant expenses non-GAAP operating expenses, which are a proxy for cash expenses that they don't include non cash equity related expenses.
Mark Mesler: The $9 1 million.
Mark Mesler: And within our estimate range of $75 million to $95 million.
Mark Mesler: As I outlined earlier, we incurred approximately $17 million of nonrecurring costs and material expenses with our suppliers during the quarter as we continue to build out our supply chain through midnight and procure parts for the manufacture of our six confirming the night aircrafts.
Mark Mesler: We use for FAA for credit flight testing.
Mark Mesler: Within that context for Q2 2024, we anticipate total non-GAAP operating expenses of 80 million to $95 million.
Mark Mesler: Okay.
Mark Mesler: One final note.
Mark Mesler: Capitalization and liquidity have always been and continue to be a top priority for us. The strength of our liquidity is driven by a number of factors, including... One, our capital-light approach to commercialization. For example, we are leveraging the existing aerospace supply base for the development and manufacture of 80% of our parts, allowing us not to have to invest in R&D resources, people, and capital to manufacture all those components. The impact of this strategy is also manifesting itself in the construction of our high volume manufacturing facility in Georgia, where we are only investing $65 million in the construction of the factory that will enable a capacity of up to 650 aircraft per year.
Mark Mesler: <unk> and liquidity have always been and continue to be a top priority for us.
Mark Mesler: The strength of our liquidity is driven for a number of factors including.
Mark Mesler: One our capital light approach to commercialization for example, we're leveraging the existing aerospace supply base for the development and manufacture of 80% of our parts.
Mark Mesler: Not to have to invest in R&D resources in people and capital to manufacture all of those components.
Mark Mesler: The impact of this strategy is also manifesting itself in the construction of our high volume manufacturing facility in Georgia, where.
Mark Mesler: While we are only investing $65 million and the construction of the factory that will enable capacity of up to 650 aircraft per year.
Mark Mesler: As a reminder that $55 million is being financed for a factory loan with federal commercial terms with our Georgia Banking Partners, Sonoma. Two, our business model, where we will be selling aircraft from our approximate $3.5 billion backlog, allowing us to get periodic pre-delivery payments to help fund working capital for inventory purchases. As we get closer to commercial production of the aircraft, similar to the $10 million PDP that we received from United on the first 100 aircraft last year.
Mark Mesler: As a reminder, that $65 million is being financed refractory along with favorable commercial terms with our Georgia banking partner Synovus.
Mark Mesler: Two our business model, where we will be selling aircrafts from our approximately $3 $5 billion backlog, allowing us to get periodic pre delivery payments helped fund working capital for inventory purchases as we get closer to commercial production of aircraft similar to the $10 million PDP that we received from United.
Mark Mesler: On this first 100 aircraft last year.
Mark Mesler: We fully expect to announce further PDPs as we continue to mature our commercial arrangements with operators. And finally, three, on the strong partnerships we have forged with well-established companies, especially Stellar. Stellantis has and continues to be a great operating partner. We also believe there are other partners with manufacturing, commercial, and other strategic interests that have similar capabilities to support Archer on our journey to leading the sector in commercialization. In summary, it is these factors that put us in a position to continue to opportunistically and favorably capitalize the company as and when we need to. And with that, Operator, we will now open it up to questions.
Mark Mesler: We expect to announce further PDP as we continue to mature our commercial arrangements with operators and.
Mark Mesler: And finally, three by the strong partnerships, we have forged with well established companies, especially with stone office.
Mark Mesler: August has and continues to be a great operating partner.
Mark Mesler: I believe there are other partners with manufacturing commercial and other strategic interests that have similar capabilities to support Archer on our journey to reading this sector in the commercialization.
Mark Mesler: In summary, it is these factors that put us in a position to continue to opportunistically and favorably capitalize the company as and when we need to.
Mark Mesler: And with that operator, we will now open it up for questions.
Operator: If you'd like to queue for a question, you can do so by pressing star 1 on your telephone keypad. If, for any reason, you'd like to remove your question, you can press star 2. Again, to join the question queue, please press star one. It has been asked that you limit yourself to one question with one follow-up question. We will pause here briefly as questions are registered. Our first question is from Edison Yu with Deutsche Bank. Your line is now open.
Mark Mesler: If you'd like to queue for a question you can do so by pressing star one on your telephone keypad.
Edison Yu: If for any reason you'd like to remove your question you compress star two.
Edison Yu: Again to join the question queue. Please press star one.
Edison Yu: Theres been ask that you hold yourself to one question with one follow up question.
Edison Yu: We will pause briefly ask questions are registered.
Operator: Yes.
Edison Yu: Our first question is from Edison <unk> with Deutsche Bank. Your line is now open.
Edison Yu: Hey, good afternoon. Thank you for taking our question. The international opportunities are clearly gaining a lot of momentum. Can you give us a sense of how we should think about the business model economics for places such as the UAE or India, and what would you say is a realistic range for the amount of aircraft you can place there in the early years?
Edison Yu: Hey, good afternoon, Thank you for taking our questions.
Edison Yu: The international opportunities are clearly getting a lot of momentum can.
Edison Yu: Can you give us a sense, how we should think about the business model economics for places such as UAE or India.
Edison Yu: And what would you say is a realistic range for the amount of aircrafts you can place their R&D in the early years.
Adam D. Goldstein: Hey Edison, this is Adam. So yes, I think you are correct.
Edison Yu: Hey, Edison this is Adam.
Edison Yu: So yes, I think you are correct. We are very excited about the international opportunities and even the entire GCC or the middle East.
Adam D. Goldstein: They are very excited about the international opportunities and even the entire GCC or the Middle East. We haven't given any specific guidance on specific fleet sizes, but maybe this is a way for you to think about it.
Adam D. Goldstein: We haven't.
Adam D. Goldstein: Given any specific guidance on specific fleet sizes, but maybe here's a way for you to think about it.
Adam D. Goldstein: One is that the region is very much locked in. And so I have increasing confidence that the GCC will be one of the first places that we deploy aircraft in the world. And we've talked a lot about the UAE specifically on that note. As you look across the entire GCC, we actually believe that the market will be much bigger than people think. You can see this happening in the airline industry.
Adam: One is the region is very leaned in and so I have increasing confidence that the GCC will be one of the first places that we deploy aircraft in the world and we've talked a lot about the UAE specifically.
Adam D. Goldstein: On that note.
Adam D. Goldstein: As you look across the entire GCC.
Adam D. Goldstein: We believe that the market will be much bigger than people think.
Adam D. Goldstein: You can see this happening in the airline industry. So the region built three of the largest and most revered airlines Emirates, Qatar and Etihad.
Adam D. Goldstein: So the region has built three of the largest and most revered airlines in the region, Emirates, Qatar, and Etihad. But where I really get excited about the volumes is more on the India side. And so I continue to believe that India has the potential to be one of the largest eVTOL markets in the world. And so we're working with Interglobe to set up all those operations. So we'll start producing aircraft out of the factories in Georgia as soon as next year, but there are definitely opportunities to build local facilities. And there's a lot of excitement for us to do that there as well.
Adam D. Goldstein: But where I really get excited about excited about the volumes is more on the India side and so I continue to believe that India has the potential to be one of the largest <unk> markets in the world and so we're working with <unk> to set up all those operations. So we will start producing aircraft out of the factories in Georgia as soon as next year, but there's definitely.
Adam D. Goldstein: The opportunity is also to build local facilities.
Adam D. Goldstein: And Theres a lot of excitement for us to do that there as well.
Adam D. Goldstein: Thanks. And just to follow up on that, I know you mentioned hundreds of millions of support from the UAE. Can you give us a sense of what that might look like, in terms of is that you need to do something to make that happen? Is it milestone-based? And how or when would that start flowing through?
Adam D. Goldstein: Thanks.
Speaker Change: Just a follow up to that I know you mentioned.
Adam D. Goldstein: Hundreds of major support from from the UAE can you give us a sense of what that might look like.
Adam D. Goldstein: In terms of is that.
Adam D. Goldstein: Do you need to do something to make that happen is there is it milestone base.
Adam D. Goldstein: How or when that when that would start flowing through.
Adam D. Goldstein: Yeah, so I'll share some more specific details on that in the coming months.
Speaker Change: Yeah, So I'll share some more specific details on that in the coming months.
Adam D. Goldstein: but it's a multi-year agreement, and it's focused on us reaching scale in the region and with our base being in Abu Dhabi. It's a comprehensive framework agreement, and it's intended
Adam D. Goldstein: But it's a multiyear agreement and it's focused on us reaching scale in the region and with our base being in Abu Dhabi.
Adam D. Goldstein: It's a it's a comprehensive framework agreement and it's intended to make this move of ours very economically attractive and for us to accelerate things like.
Adam D. Goldstein: to make this move of ours very economically attractive and for us to accelerate things like
Adam D. Goldstein: very economically attractive, and for us to accelerate things like, you know, subsidizing aircraft and operations and really enticing us to bring engineering to the region. The timing of investments specifically will be tied to our ramp-up of activity there.
Adam D. Goldstein: Subsidizing aircraft and operations and really enticing us to bring engineering to the region.
Adam D. Goldstein: Timing of the investments specifically will be tied to a ramp up activity there.
Adam D. Goldstein: Yes.
Speaker Change: Great. Thank you.
Adam D. Goldstein: Okay.
Speaker Change: Thanks, Jonathan.
Operator: Our next question is from Andres Sheppard with Kantor Fitzgerald. Your line is now open.
Adam D. Goldstein: Our next question is from Andreas Shepherd with Cantor Fitzgerald. Your line is now open.
Andres Juan Sheppard: Hey guys, good afternoon, and congratulations on the quarter. And thanks for taking our questions.
Andres Juan Sheppard: Hey, guys good afternoon, and congratulations on the quarter and I. Thank you for taking our questions.
Andres Juan Sheppard: Adam I wanted maybe.
Andres Juan Sheppard: Build on that UAE and India market question.
Andres Juan Sheppard: I'm curious as to your vision.
Adam D. Goldstein: Adam, I want to maybe build on that UAE and India markets question. I'm curious as to your vision for entry into these markets. Maybe I'm less interested, obviously, the potential there is massive given the infrastructure and the market, but just more curious about kind of how you see the potential to enter those markets, you know, in the near term. And I guess is there an opportunity to enter either of these markets without a TC? Would that be something that would be feasible? Just trying to understand. Thank you.
Andres Juan Sheppard: Entry into these markets, maybe I'm less interested obviously.
Adam D. Goldstein: We see the potential there is massive given the infrastructure in the market, but just more curious on kind of how you see the.
Adam D. Goldstein: The potential to enter those markets and the <unk>.
Adam D. Goldstein: Near term and I guess is there an opportunity to enter either of these markets without a tc.
Adam D. Goldstein: That would be something that will be feasible just trying to understand thank you.
Adam D. Goldstein: Yeah, so I'll start, and then I'll hand it over to Tom to talk about on the certification side. And I'll start with the UAE. So first, we've done a lot of analysis with our partners and with the government of the UAE to identify, you know, dozens of routes which make a lot of sense for us to commercialize the region. And so our plan right now is to launch with initial intra-city routes in Abu Dhabi as early as next year, and then quickly expand to flights between Abu Dhabi and Dubai, and then expand from there.
Adam: Yes, so I'll start and then I'll hand, it over to Tom to talk about on the certification side and I'll start with the UAE.
Tom: So first as we've done a lot of analysis.
Adam D. Goldstein: With our partners and with the government on the UAE to identify.
Adam D. Goldstein: Dozens of routes, which make a lot of sense for us to commercialize the region and so our plan right now is to launch with initial intra city routes in Abu Dhabi as early as next year and then quickly expand.
Adam D. Goldstein: Flights between Abu Dhabi, and Dubai, and then expand from there and of course looking at across all seven Emirates as well. So there are several factors that we look at one is the ecosystem. There. It's been incredibly supportive. So we are not going to go compete with local operators there who are well established established we are going to <unk>.
Adam D. Goldstein: And of course, looking at, you know, across all seven Emirates as well. So there's several kinds of factors that we looked at. One is the ecosystem there. It's been incredibly supportive. So we are not going to compete with local operators there who are well established; we are going to partner with them. And so we've announced several of those partnerships, one with Falcon Aviation and the other with Air Chateau, both of which have placed orders for midnight aircraft.
Adam D. Goldstein: Partnering with them and so we've announced several of those partnerships one with Falcon aviation and the other ones are chateau.
Adam D. Goldstein: Both which have placed orders for midnight aircrafts.
Adam D. Goldstein: With Falcon, they've also announced, you know, their first bird reports. One is in Dubai at the Atlantis Hotel in Palm Jumeirah. And the other is in Abu Dhabi on the Corniche. And both have operational helipads today. So it's not like there's a huge gap of time that it would take to launch there.
Adam D. Goldstein: With Falcon.
Adam D. Goldstein: <unk> also announced.
Adam D. Goldstein: Their first <unk> one is in Dubai at the Atlantis Hotel in Palm Jumeirah and the other is in Abu Dhabi Corniche and both have operational helipads today. So it's not like there is.
Adam D. Goldstein: There's a huge gap of time that would take took to launch there and so this obviously unlock the intra city routes.
Adam D. Goldstein: And so this obviously unlocks the intra-city routes, but it also helps unlock the service between the Emirates as well. And we'll be sharing more on those specific routes too.
Adam D. Goldstein: But it also helps unlock the service between the Emirates, as well and we'll be sharing more on those specific routes too.
Adam D. Goldstein: The next category to think about is really on the investment side. So we've had great support from investors as well. So the Abu Dhabi Sovereign Wealth Fund, Mubadda, has been an early Archer investor, and we've seen big support from them, but also support from other sovereign wealth funds within the region. And the Abu Dhabi Investment Office, Adio, as well. We are, you know, we announced that agreement, the landmark framework agreement that covers hundreds of millions of dollars of investment to accelerate our plans in the UAE.
Adam D. Goldstein: The next category to think about it it's really on the investment side and so we've had big support from the investors as well so Abu Dhabi Sovereign wealth fund, where Bob has been an early Archer investor and we've seen big support from them, but also support from other sovereign wealth funds within the region.
Adam D. Goldstein: And I will be there will be investment August audio as well.
Adam D. Goldstein: And I believe we're the only ones in the sector to announce a deal like that. And that comes with actual capital from the government to help us, you know, become operational. Now, the other side is really on...
Adam D. Goldstein: We announced that agreement the landmark framework agreement that covers hundreds of millions of dollars of investment to accelerate our plans in the UAE I believe we're the only ones in the sector to announce a deal like that.
Adam D. Goldstein: And that comes with actual capital from the government to help us become operational.
Adam D. Goldstein: The other side is really on the government commitment. So in the UAE, we've had the opportunity to show midnight to his Highness should come down then Mohammad bin Ziad.
Adam D. Goldstein: On the U. A. E., we've had the opportunity to show midnight to his Highness. She comes on, then Mohammed bin Zayed of the Abu Dhabi rural family, and his Highness. She comes on.
Adam D. Goldstein: Abu Dhabi Royal family and his Highness Sheikh comes on bid Mohamed Al Maktoum, the Crown Prince of Dubai, and another a number of other members there and the ruling family.
Adam D. Goldstein: Bin Mohamed Al Maktoum, the Crown Prince of Dubai, and a number of other members there in the ruling family. So we've seen, you know, a huge amount of support from, you know, really from the entire government there, you know, as well. I'll have Tom, you know, just answer some of the certification timeline. Yeah, absolutely.
Adam D. Goldstein: And so we've seen.
Adam D. Goldstein: A huge amount of support from.
Adam D. Goldstein: Really from the entire government there as well.
Adam D. Goldstein: Tom just answer some certification timeline questions.
Thomas Paul Muniz: So one thing to keep in mind is that the state of design for the aircraft is the US, right? That's the country where we're based. And the framework that we're using to certify has been put together by the FAA. So, as Adam said, even with that being the case, we're seeing interest across the globe from different regulators, and the GCAA and the UAE are one of those. So we've been engaged with them, and we're still engaging to talk about where we are in the certification process.
Tom: Absolutely. So one thing one thing to keep in mind is that the state of design for the aircraft is the U S. Right. That's the country, where we are based and the framework that we're using to certify hasnt put together by the FAA.
Thomas Paul Muniz: So as Adam said.
Thomas Paul Muniz: Even with that being the case, we're seeing interest really across the globe from different regulators and the TCA and UAE is one of those so we've been engaged with them and we're still engaging to talk about where we are in the certification process.
Thomas Paul Muniz: Our North Star is that we'll only put a safe airplane into the market, and we're very aligned with the UAE GCA on this, and honestly, wherever in the world, we're aligned on that. We think the process that we're marching down with the FAA is really clear, and we're continuing to execute on that. So I can't tell you exactly when we'll be on the market in the UAE or US or any other country, but what I can tell you is that we'll be ready to bring a safe aircraft to market as soon as next year.
Thomas Paul Muniz: Our North Star is that we'll only put a safe airplane into market and were very aligned with UAE GSA on this and honestly wherever in the world, where we're aligned on that.
Thomas Paul Muniz: We think the process, we're marching down with the FAA is really clear, we're continuing to execute on that.
Thomas Paul Muniz: Not tell you exactly when we'll be to market in UAE or U S or any other country, but what I can tell you is that will be ready to bring safe aircraft market as soon as next year.
Andres Juan Sheppard: Got it. Thanks, guys. That's super helpful and detailed. Tom, maybe just to follow up on that, but I guess, would you see a situation where you could enter and operate in these markets without a type certificate? Not that you wouldn't obviously get that just in the event of a.
Speaker Change: Got it thanks, guys. That's super helpful and detailed Tom maybe just a follow up on that I guess would you see a situation where you could enter and operate in these markets without a type certificate not that you wouldn't obviously you get that just in the event of a.
Thomas Paul Muniz: Possible delay in that process. Could there be a possibility to enter these markets without yet having that type of equipment?
Andres Juan Sheppard: Yeah.
Tom: Potential delay in that process could there be a possibility to enter these markets without yet having that type certificate.
Thomas Paul Muniz: Sure. But obviously, I can't speak for the regulators that are in charge of that. But what I can say is, you know, we continue to execute the CERT program that the FAA and us are working towards. And, you know, as other regulators push to bring aircraft like ours into their ecosystems, into their countries, they can leverage the data that we are gathering for that CERT effort. So, you know, certainly there will come a point where we feel our craft is safe and ready to launch. And you know, there will be a time when the FAA agrees and they've reviewed the data. So other regulators kind of need to determine their own mechanisms for making the same conclusion.
Tom: Sure. So obviously I can't speak for the regulators that are in charge of that.
Thomas Paul Muniz: But what I can say is we continue to execute the serve program.
Thomas Paul Muniz: And are working towards.
Thomas Paul Muniz: And.
Thomas Paul Muniz: As other regulators push to bring aircraft like ours into the into their ecosystems into their countries.
Thomas Paul Muniz: They can leverage the data that we're gathering or that sort of effort. So certainly there'll come a point, where we feel aircraft are safe and ready to launch.
Thomas Paul Muniz: There'll be a time that the FAA agrees and they've reviewed the data and so other regulators kind of need to determine their own mechanisms for for making the same conclusion.
Andres Juan Sheppard: Got it. Okay. No, that's super helpful. I appreciate that. Maybe just one last one for Mark.
Speaker Change: Got it okay no that's super helpful. I appreciate that.
Andres Juan Sheppard: Maybe just one last one for Mark.
Mark Mesler: So you incurred, I think you mentioned the stock-based comp and a one-time expense. Should we consider that in future quarters as well, or in other words, should we be thinking about that? Is that resolved, or are there any other expenses that you could incur, I guess, throughout the year? Thank you.
Speaker Change: So you you incurred.
Speaker Change: You mentioned, the stock based comp and a onetime expense.
Mark Mesler: We consider that into future quarters, as well or another.
Mark Mesler: In other words should should we be thinking about that is that resolved or is there any other.
Mark Mesler: Expenses that you could incur I guess throughout the year. Thank you.
Mark Mesler: With respect to stock-based comp, Andres, our typical run rate is in that $25 to $35 million range, so I think that's the range you could consider going forward.
Speaker Change: Yeah with respect to stock based comp.
Mark Mesler: Andres our typical run rates in that 25% to $35 million range. So I think thats. The range you could you could consider going forward.
Andres Juan Sheppard: Okay, wonderful. Thanks, guys. Congratulations on the quarter again, and I'll pass it. Thanks, Andres. Our next question is from Savi Seif with Raymond James.
Speaker Change: Okay wonderful thanks, guys, congratulations on the quarter again, and I'll pass it on.
Savanthi Nipunika Prelis: Thanks Andreas.
Operator: Our next question is from Savi Seif with Raymond James. Your line is now open. Hey, good afternoon, everyone. I was just kind of curious as you're building these aircrafts and, you know, any insights and learnings as you build the kind of next one.
Savanthi Nipunika Prelis: Our next question is from Savi <unk> with Raymond James Your line is now open.
Operator: Sure.
Savanthi Nipunika Prelis: Hey, good afternoon, everyone.
Savanthi Nipunika Prelis: I was just kind of curious as you're building these aircrafts.
Savanthi Nipunika Prelis: Any insights and learnings as you build the kind of the next.
Savanthi Nipunika Prelis: Certification aircraft versus your first Smith Nigel.
Savanthi Nipunika Prelis: Yeah, it's a great question. Hey, Savi, this is Tom.
Operator: Yes, Great question, Hey, Savi this is Tom.
Tom: Yes, we're learning a ton building. These first confirming aircrafts. So I think it's really two categories of things. The first is putting the aircraft together and learning about essentially the design and assembly process of the aircraft. So if you remember because of the strategy, we've taken our manufacturing outside of batteries in electric engines.
Tom: It's really just final assembly.
Savanthi Nipunika Prelis: Integrating all of the.
Savanthi Nipunika Prelis: LR use we get from suppliers.
Thomas Paul Muniz: Yeah, we're learning a ton building these first conforming aircraft. So I think it's really two categories of things. The first is putting the aircraft together and learning about, essentially, the design and assembly process of the aircraft. So if you remember, because of the strategy we've taken, our manufacturing outside of batteries and electric engines is really just final assembly, integrating all of the LRUs we get from suppliers, and figuring out these companies we always talk about. So certainly there's some learnings there, but those are just kind of the usual type things.
Thomas Paul Muniz: So, you know, this is like the eight different aircraft I've gone through the integration process for, and, you know, here at Archer, we get better and better at that every time. But one thing that I think is important to keep in mind is we're not just building one aircraft here. Building this fleet is really teaching us how to set up a scalable manufacturing process and overall production system. So a lot of learnings are also coming from that side.
Savanthi Nipunika Prelis: Thank you Ross. These companies you always talk about so certainly there are some learnings there those are just kind of the usual type things. So this is like the eighth.
Thomas Paul Muniz: Syringe aircrafts are gone through.
Thomas Paul Muniz: The integration process score and here it actually get better and better at that every time, but one thing that I think is important to keep in mind is we're not just building.
Thomas Paul Muniz: One aircraft here this.
Thomas Paul Muniz: Building. This fleet is really teaching us how to setup, a scalable manufacturing process and overall production system.
Thomas Paul Muniz: So things like setting up our manufacturing execution system that collects data as we build this aircraft and how that ties in with and implements all of our safety processes and our quality manual. So all these things are really critical to both put us in a position to scale manufacturing and get our production certificate with the FAA to enable us to ramp up here in the coming years.
Thomas Paul Muniz: A lot of learnings are also coming from that side, so things like setting up our manufacturing execution system collects data as we build this aircraft how that ties in implement all of our safety processes and our quality manual. So all these things are really critical to both put us in a position to scale manufacturing and get our production through.
Thomas Paul Muniz: Typically with the FAA to enable us to ramp up here and there.
Thomas Paul Muniz: Coming years.
Speaker Change: That's helpful color. Thank you, Tom and then maybe Mark just.
Thomas Paul Muniz: The b and Boeing with kind of adjustment this quarter.
Thomas Paul Muniz: Hmm.
Speaker Change: Could you kind of give a little color on what that was in and give me.
Thomas Paul Muniz: Is that kind of fully settled do we expect kind of more going forward.
Mark Mesler: Yeah, that's, that's fully settled. I always recall that that was a series of agreements that we had with them for the technology resolution. There was a final true-up mark-to-market adjustment that we had to make as that period ended in February, so you won't see any more of that. That was the last adjustment we had to make.
Thomas Paul Muniz: Yes.
Thomas Paul Muniz: That's where we sell it's always recall that it was.
Mark Mesler: Series of agreements that we have.
Mark Mesler: Had with them for the technology resolution.
Mark Mesler: Originally we had with them there was a final true up mark to market adjustment that we had to make is that that.
Mark Mesler: Period ended in February so.
Mark Mesler: You won't see any more of that.
Mark Mesler: That's the last adjustment we had to make.
Speaker Change: Got it thank you.
Operator: Our next question is from Austin Moeller with Canaccord. Your line is now open.
Mark Mesler: Our next question is from Austin Moeller with Canaccord. Your line is now open.
Austin Nathan Moeller: Hi, good evening, Adam and Mark. Just my first question here: how much cash do you expect to use on building the additional midnight prototypes needed for certification? And how does that compare to the $520 million of existing liquidity?
Austin Nathan Moeller: Hi, good evening out of and Mark.
Austin Nathan Moeller: Just my first question here, how much cash you expect to use on building the additional midnight prototypes needed for certification and how does that compare to the $520 million of existing liquidity.
Austin Nathan Moeller: Yeah.
Mark Mesler: Hey, hey, Austin, this is Mark. So we haven't disclosed what the cost of each of those aircraft is. I mean, they're early, they're early, essentially prototype builds. However, the cost of those is fully contemplated within the $520 million equity going forward. So we're pretty comfortable there.
Austin Nathan Moeller: Hey, Austin this is mark so we haven't disclosed.
Mark Mesler: The cost of each of those aircraft are in their early they're early essentially prototype builds however, the cost of those is fully contemplated within the $520 million of liquidity going forward. So we're pretty comfortable there.
Austin Nathan Moeller: And just to follow up on the certification process, how many flights do you think you'll need to conduct from now through 2025 to generate the data either needed for type certification or for FAA pilots to feel comfortable with getting on board and doing their own flight?
Speaker Change: Great and just a follow up on the certification process. How many flights do you think you'll need to conduct from now through 2025 to generate the data either needed for type certification or for the FAA pilots to feel comfortable with getting on board and getting there.
Austin Nathan Moeller: On flight tests.
Thomas Paul Muniz: Yeah, absolutely. So, as you referenced, there's kind of two categories of flights there. So there's the company testing. That's what we do ourselves to gather data to prove to ourselves that the design is safe. And then there's FAA pilots or designees flying a post-TIA aircraft, so TIA is an acronym that stands for Type Inspection Authorization, that's basically the gate that enables the FAA to start flying on the aircraft. I don't have an exact number of flights or hours for you, but what I can say is that for this fleet of six aircraft that we're building, each one has a very specific set of test objectives to go gather, and they're sequenced, you know, quite logically into bins of objectives and things. In terms of orders of magnitude, we're talking about hundreds of hours of testing here, if not, you know, something like a thousand hours of testing across these activities.
Speaker Change: Yeah, absolutely so.
Speaker Change: As you referenced there's kind of two categories of flights. There. So there is a company testing.
Thomas Paul Muniz: Until we do ourselves to gather data to prove.
Thomas Paul Muniz: But the design of safe and then there's FAA pilots or designees flying a post TIAA TIAA is acronym stands for type inspection authorization. That's basically the gate that enables the FAA to start flying on aircraft.
Thomas Paul Muniz: I don't have an exact number.
Thomas Paul Muniz: Pfizer hours for you, but what I can say is for the suite of six aircrafts that were building. Each one has a very specific set of test objectives to go gather and their sequence logically into bins of objectives and things.
Thomas Paul Muniz: In terms of orders of magnitude, we're talking about like hundreds of hours of testing here if not.
Thomas Paul Muniz: Something like 1000 hours of testing across these activities.
Austin Nathan Moeller: Awesome. That's a very helpful thing. Our next question is from Josh Sullivan with Benchmark. Your line is now open.
Speaker Change: Awesome, that's very helpful. Thanks.
Austin Nathan Moeller: Yes.
Operator: Our next question is from Josh Sullivan with Benchmark.
Austin Nathan Moeller: Our next question is from Josh Sullivan with benchmark. Your line is now open.
Joshua Ward Sullivan: Hey, good evening.
Joshua Ward Sullivan: Just Josh you'll follow up on that just to follow up on the cash question there.
Joshua Ward Sullivan: What are the large tent poles left for the cash needed.
Operator: Certification.
Joshua Ward Sullivan: You gave some corridor is there during during the comments, but when do you think Kashi is peaks.
Joshua Ward Sullivan: What was the last part of that, Josh? Just when do you think the cash outlays will peak heading into certification? As you recall, I mean, consistent with what we discussed in the past, the big buckets through this period are the non-recurring costs with our vendor base, the materials to build out the aircraft, and some of the capital expenditure that has gone into building out our production facility here in California, as well as the Covington, Georgia facility.
Joshua Ward Sullivan: What was the last part of that Josh.
Joshua Ward Sullivan: When do you think the cash outlays peak heading into certification.
Joshua Ward Sullivan: If you recall.
Joshua Ward Sullivan: Consistent with what we've discussed in the past the big buckets through this period are are the nonrecurring costs with our vendor base materials to build out the aircraft and some of the Capex.
Josh: It has gone into building out our our production facility here in California, as well as the Covington, Georgia facilities. I think you can think about it is these these quarters that we're in right now are the or the peak spending.
Joshua Ward Sullivan: I think you can think about it as these, these quarters that we're in right now are the peak spending quarters with respect to building out that functionality and those capabilities. So, you know, the guidance that I provided in the $80 to $95 million range, as we sit here today and our models show that we are sort of at our peak spending rates right now, given the current construct of the company and where we are, I think that answers, I think it maturely answers what you're asking.
Joshua Ward Sullivan: <unk> with respect to.
Joshua Ward Sullivan: Building out those that functionality in those capabilities. So the guidance that I provided in the $80 million to $95 million range as we sit here today and our model show that.
Joshua Ward Sullivan: We are we are.
Joshua Ward Sullivan: Our peak spending rates right now we've given given the current construct of the company and where we are.
Joshua Ward Sullivan: I think that answers I think material answers, which are what youre asking.
Joshua Ward Sullivan: Yes.
Joshua Ward Sullivan: And then just as far as the cadence of recognizing the C. F works related contracts when should we see kind of that revenue really ramp.
Joshua Ward Sullivan: Okay.
Mark Mesler: Hey Josh, so um... Over the course of this year, there are, you know, a lot of programs that we have slated to recognize; they range from anywhere from flight tests to training work to simulator work. And so, you know, we are receiving different payments for a long time. Last, I think, the fourth quarter, we received, you know, a few million dollars. And I think this year we've already received some additional cash, you know, as well. And so it'll be lumpy that'll come through there. But, you know, in order of magnitude, I think it'll start to increase as we go forward through to the end of the year.
Speaker Change: Hey, Josh so.
Joshua Ward Sullivan: Over the over the course of this year there are a lot of programs that we have slated to <unk>.
Mark Mesler: To recognize they range from anywhere from flight test training work to stimulate a work.
Mark Mesler: So we.
Mark Mesler: We are we are.
Mark Mesler: Receiving different payments a longtime last I think fourth quarter, we received.
Mark Mesler: A few million dollars and I think this year, we've already received some additional cash as.
Mark Mesler: As well and so it'll be lumpy that will come through there, but in order of magnitude.
Mark Mesler: I think it will start to increase as we go forward through to the end of the year.
Josh: Great. Thank you Vincent.
Joshua Ward Sullivan: We have a question from Bill Peterson with J.P. Morgan. Your line is now open.
Mark Mesler: We have a question from Bill Peterson with Jpmorgan. Your line is now open.
William Chapman Peterson: Yeah, hi. Good afternoon. And thanks for taking the questions.
William Chapman Peterson: Yes, hi, good afternoon, and thanks for taking the questions I would like to ask what remains to be achieved before the full transition and I guess, what does near future mean does that mean.
William Chapman Peterson: This within the current quarter, the third quarter and then on pilots of flight testing. It does appear at least relative to maybe this time last year. Your you are delayed relative to our prior expectations.
William Chapman Peterson: It's supposed to be even in early 'twenty four or maybe first half notes. Later later this year. So I guess what has led to the delays and what gives you confidence you'll be able to do powder testing before the end of the year.
William Chapman Peterson: What are you doing to train pilots and get ready for that.
William Chapman Peterson: I'd like to ask what remains to be achieved before the full transition, and I guess what the near future means. Does that mean you expect this within the current quarter, the third quarter? And then on piloted flight testing, it does appear, at least relative to maybe this time last year, that you are delayed relative to prior expectations. It's supposed to be even in early 24 or maybe first half this year. But it's later later this year.
William Chapman Peterson: Yeah, Absolutely Hey, Bill. This is Tom So first part of your question with regard to transitioning the first midnight aircraft just to give you some context for set the stage on that.
William Chapman Peterson: We transitioned to maker for the first time, a couple of years ago and it took us a little under 12 months to get through that which I would super happy with I think the team did great.
William Chapman Peterson: Midnight, we started flying in October.
William Chapman Peterson: Six or seven months ago, and you are asking for a little more precision on the date, we're getting pretty close to transition. So I'm confident it will happen in the coming.
William Chapman Peterson: A couple of months here.
William Chapman Peterson: So really excited about the progress they're learning a lot.
William Chapman Peterson: So I guess what has led to the delays and what gives you confidence you'll be able to do pilot or testing before the end of the year? What are you doing to train pilots and get ready for that?
William Chapman Peterson: Ramping up flight testing in general.
William Chapman Peterson: Regarding pilot flight testing.
William Chapman Peterson: So basically safety comes first and we are taking thoughtful methodical steps here working towards that milestone.
William Chapman Peterson: The engineering team that we have 500 or so folks the vast majority are all working towards that goal and so if you look at our shareholder letter you can see the aircrafts coming together you can see pictures of the iron bird or getting deep into testing talked about getting safety of flight declaration letters from suppliers.
William Chapman Peterson: Our own testing so everything is coming together to make that happen. This year, what I would like it to be faster absolutely, but do I think we're doing a great job I think.
William Chapman Peterson: We're doing awesome so.
William Chapman Peterson: We will fly when it is safe to 500 already but feel super good about the progress Hey, Bill. This is Adam just to add a little color on there.
Thomas Paul Muniz: Yeah, absolutely. Hey, Bill, this is Tom.
Thomas Paul Muniz: So the first part of your question with regard to transitioning the first midnight aircraft. Just to give you some context or set the stage on that, you know, we transitioned to maker for the first time a couple years ago, and it took us a little under 12 months to get through that, which I was super happy with. I think the team did great.
Tom: This is the progress of starting a flight test campaign going through the full.
Thomas Paul Muniz: Midnight, we started flying in October, you know, six or seven months ago. And You know, you're asking for a little more precision on the date. We're getting pretty close to transition. So I'm confident it will happen in the coming couple of months here. So really excited about the progress there, learning a lot, ramping up flight testing in general. Your question regarding piloted flight testing. So basically, safety comes first.
Thomas Paul Muniz: A full flight envelope, including transition is.
Thomas Paul Muniz: All of the aviation companies have to go through this is not a unique thing to Archer and so I know it gets talked a lot about with Archer.
Thomas Paul Muniz: Because the difference between maker and midnight data physically look different even though they're both a 12 six configuration, we use the <unk> model, we use largely the same flight control schemes. So everyone's going through the same the same thing.
Thomas Paul Muniz: And we're taking, you know, thoughtful, methodical steps here working towards that milestone. Of the engineering team that we have 500 or so folks, the vast majority are all working towards that goal. And if you look at our shareholder letter, you can see the aircraft coming together. You can see pictures of the Iron Bird, we're getting deep into testing, talking about getting safety of flight declaration letters from suppliers, and, you know, doing our own testing. So everything's coming together to make that happen this year. Would I like it to be faster?
Thomas Paul Muniz: So I actually believe the progress we have has been quite incredible transitioning maker within less than a year and we will transition midnight, even even faster than that and so on.
Thomas Paul Muniz: No thats not as necessarily it's easy to understand with some of the programs. We just happen to be very transparent about it and so we are you should expect to see.
Thomas Paul Muniz: Absolutely. But do I think we're doing a great job? I think we're doing awesome. So, you know, we'll fly when it's safe to fly when we're ready, but feel super good about the progress. Hey, Bill, this is Adam, just to add a little.
Adam D. Goldstein: This is the process of, you know, starting a flight test campaign and going through the full flight envelope, including transition, is something all of the aviation companies have to go through. This is not a unique thing to Archer.
Adam D. Goldstein: And so I know it gets talked about a lot with Archer, you know, because the difference between Maker and Midnight is that they physically look different, even though they're both a 12-tilt-6 configuration. We use the same aerial model. We use largely the same flight control schemes, so everyone's going through the same thing. And so I actually believe the progress we've made has been quite incredible, transitioning maker within less than a year, and we'll, you know, transition midnight even faster than that.
Adam D. Goldstein: And so I know that's not necessarily as easy to understand with some of the programs. We just happen to be very transparent about it. And so, you know, you should expect to see a lot of flight test content, and we're really excited about where that program is today.
Adam D. Goldstein: A lot of test content and.
Adam D. Goldstein: We're really excited about where that where that program is today.
Adam D. Goldstein: Okay.
William Chapman Peterson: Okay, thanks for that. And, you know, knowing you have a lot of go-to market opportunities and overseas opportunities. Now, it does feel, at least at a glance, that some of your DoD efforts appear to be either de-emphasized, or in any case, it'd be good to get an update on the $142 million program. I think in the second quarter last year, you'd expect them to deliver an actual aircraft to the Department. Are you still planning that? I guess, can you just update us on the milestones of the DoD? And how should we think about the opportunities with the DoD this year and maybe next year?
Speaker Change: Okay. Thanks for that.
Adam D. Goldstein: No. When you have a lot of go to market opportunities in overseas opportunities now.
William Chapman Peterson: It does feel at least at a glance at some of your Dod.
William Chapman Peterson: Appear to be either de emphasize in any case it would be good to get an update on the $142 million program I think in the second quarter of last year, you would expect them to deliver a actual aircrafts into D. O D are you still planning that.
William Chapman Peterson: Can you just update us on milestones of Vod, how should we think about the opportunities with the Dod This year and maybe next year.
Thomas Paul Muniz: Sure. So we submitted all the paperwork necessary to begin the delivery.
Speaker Change: Sure. So we submitted all the paperwork necessary to begin the delivery process to the Dod and expect to have our military airworthiness in June and then delivery afterwards, but that being said we are balancing the priorities of the entire program and in the near term we actually.
unknown: [inaudible]
unknown: Believe will receive more cash from Dod programs that are not flight tests related.
Speaker Change: So for example, there is $5 million to $10 million of payments that we can receive from the Dod that are related to other items to testing items to training items simulator work.
unknown: that are related to other items, to testing items, to training items, and simulator work. So we'll kind of take it as it comes, but I think those are the... We're really trying to prioritize where a lot of the dollars will go.
unknown: So.
unknown: What kind of take it as it comes but I think those are the we're really trying to prioritize where a lot of the a lot of the dollars will come from a lot of them are coming from some of those other items.
unknown: A lot of the dollars will come from, and a lot of them are coming from, you know, some of those other items.
William Chapman Peterson: Okay, thanks. If I can just sneak in one more,
Speaker Change: Okay. Thanks, and if I can just sneak in one more one of your peers talked about having a kind of full scale testing capability I guess in terms of your testing for four credit do you have the tooling you need or do you see your suppliers to your parts and systems to have the test capability.
unknown: One of your peers talked about having a kind of full-scale testing capability. I guess, in terms of your testing for credit, do you have the tooling you need? Or do your suppliers for your parts and systems have the test capability? Or do you need to access third parties just trying to get a sense of your test capabilities, whether it be in-house or through partners to you know, for your credit testing programs?
unknown: Need to access third parties, just trying to get a sense on your.
unknown: Your test capabilities, whether it be in house or through partners too.
unknown: For your full credit testing programs.
unknown: No, we have everything we need. Obviously, a nice advantage we have is that we've got this broad range of suppliers and all the capabilities and relationships they have. So we're leveraging all of those, but today we're executing nothing specific; we have no needs.
Speaker Change: No we have everything we need obviously nice advantage. We have is that we've got this broad range of suppliers. So all of the capabilities and relationships they have.
unknown: Leveraging all of those but today, we're executing now.
unknown: Nothing specific needs. So let me give you it's Adam I'll give you just a little bit of color. So.
Adam D. Goldstein: Adam, I'll give you just a little bit of color. So, you know, an example that Tom talked about was the Inceptors, right? The side sticks. Those are, you know, made by a company called Kruzet, which builds side sticks for some of the large aviation programs. Our side sticks are very similar to the side sticks used on the A220.
Adam D. Goldstein: Ample that Tom talked about what the sector trying to sidestep.
Adam D. Goldstein: Those are made.
Adam D. Goldstein: Made by a company called <unk>.
Adam D. Goldstein: Which build slide six for some of the large aviation programs. Our sides verdicts are very similar to the slide six used on the 8% to 20. So crews that has 4000 people that work. There. So you think about if we were to do that in house. We would have I don't know if people 10 people that did that so we get to leverage a company like Chris that that is 4000.
Adam D. Goldstein: So Kruzet has 4,000 people that work there. So you think about if we were to do that in-house, we would have, I don't know, five people, 10 people that would do that. So we get to leverage a company like Kruzet that has 4,000 people to go help do this. So we have everything in place that we need in-house, as well as partnerships with our investors, with our partners on the supply base. You can see the progress as we show in the shareholder letter.
Adam D. Goldstein: People to go help to do that so we have everything in place that we need in house as well as partnership with our with our investors our with our partners on the supply base you can see the progress as we are do we show in the shareholder letter the buckets keep increasing where we're showing you things in progress and the stuff that's moving really fast.
Adam D. Goldstein: You know, the buckets keep increasing where we're showing you things in progress. And the stuff that's moving really fast and going really well, especially, you know, comes from the stuff that our partners are doing because they have been through this process many, many times with very similar parts over many programs, over many decades. And so hopefully, that gives you a sense for where this is at. I actually think this is the part of the program where we are most.
Adam D. Goldstein: Going really well.
Adam D. Goldstein: Especially it comes from the stuff that our partners are doing because they have been through this process. Many many times with very similar parts over many programs over many decades.
Adam D. Goldstein: So hopefully that gives you a sense for so for where this is that actually think this is the part of the program, where we are most excited where we will accelerate.
Adam D. Goldstein: And.
Adam D. Goldstein: Maybe I'll be the first one to actually get through it. Yeah, no, thanks for that.
Adam D. Goldstein: Who knows maybe be the first one is actually get through it.
William Chapman Peterson: Yeah, no, thanks for that. Share on the inside. Leave it there.
Speaker Change: Yeah, no. Thanks for that sure on the insights you.
William Chapman Peterson: Leave it there.
Speaker Change: Thanks Bill.
Operator: We have a question from David Zazula with Barclays. Your line is now open.
William Chapman Peterson: We have a question from David Zulu with Barclays. Your line is now open.
David Zazula: Hey afternoon. Thanks for taking my question. Tom, I just wanted to dig in a little bit into the battery drop testing, whether there was anything unexpected or anything particularly learned during the battery drop testing, any feedback you've gotten from the FAA on the test, and then when you expect to transition to for-credit testing on that one.
David Zazula: Afternoon, Thanks for taking my question.
David Zazula: Hey, Tom I, just wanted to dig in a little bit into the battery dropped testing, whether there was anything unexpected or anything particular learned during the battery dropped testing.
David Zazula: Feedback you've gotten from the FAA on the tests and then when do you expect the transition to four credit testing on that one.
Thomas Paul Muniz: Yeah, absolutely. As we talked about in the shareholder letter and earlier in the script, battery drop testing went really well. So just to, you know, paint the picture, we take our whole battery pack, it's like a 300 pound assembly, drop it from a crane, it's actually at 55 feet because we have to account for drag and the kind of rigging that guides the aircraft down, and it has to impact concrete on the ground and, you know, not have anything catastrophically fail.
Tom: Yeah, absolutely so as we talked about.
Thomas Paul Muniz: In the shareholder letter in early in the script.
Thomas Paul Muniz: Battery dropped testing went really well so just.
Thomas Paul Muniz: Paint the picture, we take our whole battery pack, it's like a 300 pound.
Thomas Paul Muniz: Assembly drop it from a crane, it's actually at 55 feet, because we have to account for dragging the kind of <unk>.
Thomas Paul Muniz: Reading the guidance aircraft down.
Thomas Paul Muniz: At the impact.
Thomas Paul Muniz: Concrete.
Thomas Paul Muniz: On the ground and.
Thomas Paul Muniz: I don't have anything cash optically found so we did several drops after each drop the battery pack.
Thomas Paul Muniz: And so we did several drops. After each drop, the battery pack, we were really surprised to continue to function, meaning we could log on, get data, it was still working. A huge confidence booster for our team.
Thomas Paul Muniz: We're really spreads continue to function, meaning we can log on and get data. It was it was still working so huge confidence booster for our team.
Thomas Paul Muniz: That was one of the harder tests for us to pass, so really great risk reduction for us getting through that. To be clear, that was for our own testing, so now we have all the data that we need to do it for credit testing. As I mentioned earlier, we've advanced some of the issue papers around this topic, and we are sort of teed up quite well to do the for credit testing with a lot of confidence that we'll be able to get through it here in the coming weeks.
Thomas Paul Muniz: That was one of the harder task for us to apps, so really great risk production for us getting through that.
Thomas Paul Muniz: To be clear that was for our own testing. So now we have all the data.
Thomas Paul Muniz: That we need to do it for four credit testing so as I mentioned earlier and we've advanced some of the issue papers around this topic and toured keyed up quite well to do the four credit testing with a lot of confidence that we'll be able to get through it here in the coming months.
David Zazula: I know we're up against time, but maybe quickly on the battery production. My simple math is that that's enough for 23 batteries per year for everything coming out of Carvington. So is that the plan to be able to support additional facilities on your part? Could you potentially be a battery outsourcer? What's the need to have that level of capacity for the battery facility?
Speaker Change: But I know, we're up against time, but maybe quickly.
David Zazula: On the battery production.
David Zazula: Simple math is that that's enough for 'twenty three batteries per year for everything coming out of conflict and so as that.
David Zazula: Plan to be able to support.
David Zazula: Additional facilities on your part could you potentially be a battery outsourcer.
David Zazula: What's the need to have that level of capacity from a battery facilities.
Thomas Paul Muniz: Yeah, that's a great question. So, several thoughts. The first thing is:
Thomas Paul Muniz: Yeah, that's a great question. So, several thoughts.
Speaker Change: Yes, that's a great question so several thoughts.
Speaker Change: First thing is a lot of the automation that you see there is really driven by safety and quality.
Thomas Paul Muniz: Versus production volume so that production line is really similar to what you'd see in a state of the our automotive plant supporting automotive levels of production, but we need that robustness and quality control to be set up for building safe batteries for safe aircrafts.
Thomas Paul Muniz: The first thing is that a lot of the automation that you see there is really driven by safety and quality versus production volume. So that production line is really similar to what you'd see in a state-of-the-art automotive plant, you know, supporting automotive levels of production. But we need that robustness and quality control to be set up for building safe batteries for safe aircraft and to get our production certificate so that we can build these things ourselves.
Thomas Paul Muniz: And to get our production certificate.
Thomas Paul Muniz: To be able to build these things ourselves. So we need repeatability, we need all that traceability and thats what that system gives us also gives us the ability to scale absolutely. So one thing to keep in mind is when we're in production, we don't need battery packs just for new aircraft coming off the production line, but also.
Thomas Paul Muniz: So we need repeatability, we need all that traceability, and that's what that system gives us. It also gives us the ability to scale. Absolutely. So one thing to keep in mind is when we're in production, we don't need battery packs just for new aircraft coming off the production line but also for the fleet that's going to be out there in service needing battery replacements, you know, once, maybe twice a year. So that's the reason why, you know, if you do that math, it looks like more battery packs than 650 aircraft per year. Hopefully, that makes sense.
Thomas Paul Muniz: The fleet, that's going to be out there in service meeting battery replacements.
Thomas Paul Muniz: Once maybe twice a year. So that's the reason why if you do that math it looks like more battery packs than 650 aircraft per year.
Speaker Change: That makes sense.
Speaker Change: Thanks, Tom.
Operator: We are out of time for questions, so I will pass it back to Adam Goldstein for closing remarks.
Thomas Paul Muniz: We are out of time for questions. So I will pass it back to Adam Goldstein for closing remarks.
Adam D. Goldstein: In closing, our strategy is paying off. From the outset, we've been clear that our approach is to keep the design of Midnight as simple as possible while delivering industry-leading performance balanced with safety. We're accomplishing this by partnering with what we believe to be the best suppliers in the aerospace industry. This capital light strategy continues to pay dividends that are more clear today than ever as we continue to make rapid progress towards commercializing electric aviation. I want to take a moment to step back and appreciate not only the progress we at Archer are making but all the progress across the entire industry. Our partner Beta recently
Adam D. Goldstein: In closing our strategy is paying off from the outset, we've been clear that our approach is to keep the design of midnight as simple as possible, while delivering industry, leading performance balanced with safety. We're accomplishing this by partnering with what we believe to be supplier the best suppliers in the aerospace industry.
Adam D. Goldstein: This capital light strategy continues to pay dividends that are more clear today than ever as we continue to make rapid progress towards commercializing electric aviation.
Adam D. Goldstein: I wanted to take a moment to step back and appreciate not only the progress we had archer, making but all of the progress across the entire industry. Our partner Beta recently demonstrated a piloted transition flight in Vermont, our neighbors Jobete recently announced their final air worthiness criteria with the FAA as we expect to also do here do so shortly.
Adam D. Goldstein: Demonstrated a piloted transition flight in Vermont. Our neighbors, Joby, recently announced their final
Adam D. Goldstein: The final Airworthiness Criteria with the FAA, as we expect to also do so shortly. The electrification of aviation continues.
Adam D. Goldstein: The electrification of aviation continues to increasingly emerge into the mainstream every day. Thank you for joining us.
Adam D. Goldstein: Electrification of aviation continues to increasingly emerged into the mainstream every day. Thank you for joining us.
Operator: That concludes today's call. Thank you all for your participation. You may now disconnect your line.
Speaker Change: That concludes today's call. Thank you all for your participation you may now disconnect your lines.
Adam D. Goldstein: every day. Thank you for joining us.
Operator: Every day, thank you for joining us.