Q3 2024 Archer Aviation Inc Earnings Call
I'll walk through our priority launch markets today and show how this playbook is driving our strategy.
In these priority markets, we're set to begin deployment as soon as next year.
Our goal is to gain real-world operational insights from the outset with a three-step plan that puts Midnight into action.
Step 1. Execute piloted demonstration flights in-market. Step 2. Fly piloted market survey trips with midnight carrying passengers on our first air taxi routes. Step 3. Following certification, launch in-market commercial operations.
We believe this pre-certification, early deployment approach will help us build the operational expertise we need to develop each market and help ensure we're able to safely scale alongside the communities we serve as demand grows.
In the U.S., we are focused on our initial launch markets, New York, Los Angeles, the San Francisco Bay Area, and Miami.
We believe our airline partners will help us drive demand for the initial routes planned in these markets, like airport transfers, help us integrate into these busy hubs, and are key to helping secure aircraft financing, as with United's planned purchase of up to $1.5 billion of midnight aircraft.
As we work to complete the final phases of FAA certification, our engineering and operations teams are concentrating on advancing us to flight testing for credit with both Archer and FAA pilots flying midnight at our Salinas, California facility.
Simultaneously, we plan to conduct public in-market piloted demonstration flights and market survey trips with our partners, introducing Midnight to the cities we plan to serve.
We are seeing true commitment from our airline partners to this electric air taxi vision, investing both capital and leadership resources through teams embedded with us as we lay the groundwork for future scaled air taxi services across America.
These early steps are essential for building safe, efficient operations for our future customers.
Internationally, we've been drawing on the expertise of partners and customers with decades of aviation and regulatory experience across key markets.
We're seeing strong interest from governments and partners eager to be among the first to demonstrate and commercialize electric air taxis, and we've grown our indicative order book to over $6 billion, which includes planned pre-delivery payments.
Our certification and flight operations teams are working closely with regulators in our priority international launch markets to formulate and advance the strategy where we demonstrate piloted midnight flights in market as soon as possible, then transition to commercial operations once both ARCHER and the jurisdictions are confident in the safety of our aircraft and operations.
This approach opens the door for early international deployments, potentially even ahead of what we have planned for the U.S.
The UAE continues to lead the way in this regard. We've established a consortium led by the Abu Dhabi Investment Office to launch commercial air taxi services in the UAE as early as Q4 2025.
Together, we have made significant progress in establishing the regulatory pathway with the GCAA, as well as the infrastructure and flight operation plans necessary to enable our market entry.
We are continuing to work closely with our key partners in the region on this initiative, such as Etihad and Falcon Aviation.
This is all under the vision of the Abu Dhabi leadership. We're all working to rapidly advance what was contemplated by the framework agreement signed last year with the Abu Dhabi Investment Office.
Audio continues to demonstrate their commitment to invest hundreds of millions of dollars to accelerate our commercialization in the country, including support for early operations, critical infrastructure, and crucially, a regulatory pathway to launch commercially as early as the end of 2025.
To bring this vision to life, our teams are coordinating with dozens of stakeholders across the Emirates on numerous work streams.
We've used our in-house data platform, along with local insights, to map out air taxi network and design routes tailored to expected demand.
We plan to launch in the nation's capital, Abu Dhabi, which covers roughly 85% of the UAE. With plans to expand our operations to connect with Dubai and other emirates as we scale.
Abu Dhabi has five commercial airports and approximately 50 certified helipads at major destinations such as Emirates Palace, allowing us to enter the market by working directly with these entities to electrify and upgrade existing operational infrastructure instead of building new vertiports from scratch.
We're partnering with Falcon Aviation, founded by the UAE Royal Family, and Etihad to recruit and train our first pilots, establish maintenance protocols, and schedule our initial regional piloted flight exhibitions, which we anticipate launching in 2025.
I'm also very excited about today's announcement of our latest planned international market entry. In September, we signed an agreement with Japan Airlines and Sumitomo Corporation's newly formed JV, Soracle, to bring eVTOL to market in Japan, with plans to order up to $500 million of our midnight aircraft.
We've already received the initial pre-delivery payment against the agreement, underscoring the J.B.'s commitment to this venture.
We'll be working closely with Sorkel and the Japan Civil Aviation Bureau to demonstrate Midnight in market as we prepare for commercial flights in some of the country's most congested cities, including Tokyo, where the journey by car from Narita Airport to the city center can take two hours or more.
In addition to Japan, we also continue to advance our partnerships in India and Korea, and we will share more progress there in the coming quarters.
As we move towards commercialization in each priority market, we'll work closely with our key public and private partners to collaboratively teach and learn eVTOL operations.
By deploying aircraft in these early operations, we can gather essential insights and operational experience to scale responsibly. This measured approach allows us to refine our processes while fostering strong foundational relationships with the communities we plan to serve.
We see this as more than just building an air mobility network. It's about creating a shared journey towards a cleaner, quieter, and more connected future.
To support our commercialization plans, I'm proud to share that we are set to open our manufacturing facility in Covington, Georgia in the coming weeks.
Our team has delivered this facility on time and on budget, at a cost of approximately $65 million. At scale, this facility will be capable of producing up to 650 aircraft per year, setting a powerful foundation for us to scale our production alongside our operations.
Now that we have substantially completed construction, we're on track to begin loading in the manufacturing line equipment by year end, with our first line set to become operational early next year. From there, we plan to ramp up to a production rate of two aircraft per month by year's end.
Solanus continues to be a deeply committed partner on this journey to help us achieve scaled manufacturing.
As I discussed last quarter, we have an agreement in principle with Stellantis for them to contribute up to an additional approximately $400 million of capital to help scale the manufacturing of our midnight aircraft at this facility. Earlier this week, we announced that we are now seeking shareholder approval of that deal and aim to finalize it by the end of the year.
The goal of the structure with Stellantis is to secure future capital for manufacturing growth without taking any unnecessary dilution of a large capital infusion today.
We'll continue to manufacture our powertrain and a select number of test aircraft at our California low-rate production facilities, ensuring continuity for our R&D and test needs. We're confident this strategy will support a reliable and scalable production flow as we prepare for commercial operations.
Our engineering and certification teams made significant strides this quarter, advancing FAA-type certification and preparing for our first piloted flights with our Midnight aircraft.
With the SVAR in place, our teams are fully engaged in the final phases of our certification program, collaborating closely with the FAA on a day-to-day basis to ensure compliance across all aspects of the program.
Speaker Change: With the type design mature and our high volume manufacturing facility in Georgia coming online we are ready to enter a period of tangible operation and scalable growth billion, Tom will outline. The road ahead as we work to execute our path to certification and launch of commercial operations.
With the type design mature and our high volume manufacturing facility in Georgia coming online, we are ready to enter a period of tangible operations and scalable growth. Billy and Tom will outline the road ahead as we work to execute our path to certification and launch of commercial operations.
Speaker Change: The department of Defense continues to actively engage the industry with increasing momentum.
Speaker Change: Our contracts with the Dod, which we understand to be the largest in the industry have grown to a maximum value of $148 million.
Speaker Change: Just last quarter, we recently delivered our first midnight aircraft to the United States Air Force under those contracts a milestone that paved the way for exploring expanded defense applications ranging from contested logistics missions to critical medical rescue operations.
Speaker Change: Over the next six to nine months, we anticipate meaningfully growing this area of our business as we showcase the strategic benefits of <unk>, the government partners, including other branches as well as our allies overseas to spearhead. These efforts. We are pleased to announce a recent new hire to the Archer team. The addition of Joe Pantalone as our head of advanced programs.
Speaker Change: A seasoned leader with nearly 30 years at Lockheed Martin Joe brings invaluable expertise as a protege of Ken Rosen one of the greatest aircraft engineering leaders of all time.
Speaker Change: Ken has over 50 years of experience in aviation served as VP of engineering at Sikorsky, where he was responsible for building the original black Hawk in the seventies and subsequent variance.
Speaker Change: Finally, turning to our capital position as I mentioned, we're fortunate to have strong backing of scientists whose commitment to Archer has continued to expand there.
Their investment now stands at nearly $300 million to date with an agreement in principle to commit up to nearly $400 million of additional capital to support our manufacturing ramp.
Speaker Change: This deep support allows us to execute our vision with greater speed and efficiency than would otherwise be possible.
Speaker Change: Combined with our cash reserves, which total over $500 million at the quarter end Archer remains a formidable liquidity position to aggressively pursue our entry into commercial service.
Speaker Change: As we close out this quarter I couldnt be prouder of the significant strides our team has made in laying the foundation for our future. We have flown hundreds of test flights with midnight year to date, demonstrating our commitment to rigorous testing and validation are palleted midnight aircraft is nearing readiness for flight or high volume manufacturing facility in Georgia is set to open in.
Speaker Change: We are seeing increasingly clear regulatory pathways, both domestically and internationally. Additionally, our growing network of strategic partners is helping paved the way for our vision and with that I will turn it over to Billy Nolan.
Billy Nolan: Thanks, Adam.
Billy Nolan: This type of progress is what drew me to Archer.
Billy Nolan: The opportunity to work with the teams who are dedicated to making this vision a reality is incredibly motivated.
Billy Nolan: Every day I had the opportunity to see firsthand, the passion and drive that fuels our progress.
Speaker Change: They are right 10 years FAA administrator, we sell forth an ambitious vision to commercialize EBITA in American cities by 2025.
Billy Nolan: With a goal to reach meaningful scale by the L. A Olympics.
Billy Nolan: <unk>.
Billy Nolan: It was a privilege to stand alongside my successor, My Whitaker is he signed into law, the flyer or powered lift as far paving the way for the commercial large electric air taxes in the United States.
Speaker Change: This moment was especially gratifying as we work tirelessly during my time at the FAA to ensure that the strategic innovation like this where champion by the FAA.
Speaker Change: Maintaining America's role as the global leader in aviation.
Speaker Change: I want to commend the entire <unk> team for their exceptional work in establishing these new rules on schedule and at record speed.
Speaker Change: This achievement underscores the faa's dedication to safe for bringing these aircraft to market through a collaborative approach with the industry.
Speaker Change: For instance, we developed a pirate lift as far to address unique aspects of <unk> technology, including pilot training and urban aerospace integration.
Speaker Change: This effort required coordination across multiple agencies, culminating in a regulatory framework that ensures the SAP integration of EBIT all operations into our national airspace.
Speaker Change: I also want to emphasize the broader significance of this achievement.
Speaker Change: The FAA is efforts to create a new aircraft category for the first time at 80 years reflects a historic moment.
Speaker Change: Not just for Archer, but for the future of urban mobility globally.
Speaker Change: It is a demonstration of how we as a nation can lead and pioneering technology that has the potential to revolutionize how people live and move in urban spaces.
Speaker Change: What are you successfully shown that when government and industry work hand in hand, we can advance innovation set global standards and keep the U S. At the forefront of aerospace development.
Speaker Change: Now to help us put this into perspective for our certification journey I want to hand, it over to Tom <unk>, who will walk us through how the S. Far in our ongoing partnership with the FAA have allowed us to make substantial progress toward type certification and how each phase of the faa's process aligns with our strong.
Speaker Change: <unk> are bringing <unk> to market Tom over to you.
Tom: Thanks, Billy with.
With the clarity we now have a following the final release of the powered lift as far as well as the compliance planning progress we have made with the FAA since our <unk> criteria final rule was published this may we are now able to share our certification progress and a more quantifiable manner.
Tom: We believe the best way to do so is by comparing midnight that certification progress to the FAA is four phases that lead up to type certification as defined in the SaaS model of the type certification process in order 80 110 foresee.
Tom: The first phase and the FAA type certification process is called conceptual design, where the FAA has familiarized with the aircraft design and early discussions are held culminating in an application for type certification as you know we finished this phase several years ago.
Tom: The second phase of the Faa's process as requirements definition, which is where the FAA airworthiness criteria or certification basis, essentially the safety requirements for the aircraft.
Tom: We formally finished this phase this past spring when the FAA published our final air Worthiness criteria in the Federal Register.
Tom: As you know we are one of only two companies in the world that have reached that milestone with the FAA.
Tom: The third phase is called compliance planning, where the means and methods of compliance are set and documented and issue papers detailed design standards and certification plans.
Tom: These documents at the detailed requirements that will be used to show that the aircraft complies with the rules in the <unk> criteria.
Tom: Arch has completed nearly all of this work and the FAA has now approved our accepted the substantial majority of the material we've submitted.
Tom: It's worth noting that with respect to phase III. The industry has one main open industry issue paper relating to rule 20, 105 G in the Earth's criteria.
Tom: Which will define how all E VTOL aircrafts must handle controlled emergency landing.
Tom: This is not unique to archer as this issue paper will apply to all E. VTOL applicants working towards a powered lift type certification.
Tom: With the publication of the operating rules and the as far the FAA is now able to finalize the 21 <unk> requirements.
Speaker Change: Based on discussions with the FAA, we believe that our existing design will be compliant. So we don't anticipate needing any design changes to address this.
Speaker Change: We expect to close this topic with the FAA in the near future.
Speaker Change: The fourth and final phase leading up to type certification is called implementation. This phase is where we perform the tests and analyses identified in phase III and provide the data to the FAA for them to verify and make compliance findings.
Speaker Change: Once the FAA has completed all compliance findings in this phase they issued the type certificate.
Speaker Change: At this point, we have FAA approval for 12% of the total compliance verification documents in this final phase before type certification with much of that progress attributed to our work in materials and process software avionics and electrical systems.
Speaker Change: In parallel with our FAA certification efforts, we are actively working with several international regulators towards bringing our aircraft to market outside of the United States.
Speaker Change: Including with the GC AA in the UAE as Adam mentioned earlier.
Speaker Change: We also continue to make great progress in our aircraft flight testing efforts back in August we reached our year end goal of flying over 400 times, which was four months ahead of schedule and we continued to fly a benign on a regular basis.
Speaker Change: Gained a lot of key learnings from our flight test program, including valuable insights into how our in house developed powertrain performs on the aircraft.
Speaker Change: For the past year, we've been flying or a sample electric engines and battery packs on midnight.
Speaker Change: A sample is an automotive term for early hardware that is functional but has limitations and is usually produced with more manual processes.
Speaker Change: We now have hundreds of flights and thousands of hours of lab and ground testing on this hardware.
Speaker Change: Data gathered through this testing informed the design refinements that we've incorporated into our B sample powertrain hardware.
Speaker Change: B sample means the components are fully functional and design representative but not necessarily produced on the final production lines and tooling.
Speaker Change: In the <unk> sample electric engines, we improved the rotor design to use an innovative magnet retention and assembly design that supports both our maximum performance requirements and is optimized for manufacture ability.
Speaker Change: We also implemented forged aluminum housings instead of housings machine from a billet to align to the material properties and manufacturing processes that will be used in mass production.
Speaker Change: And our B sample battery packs, we updated our battery management hardware and software to the type design that we are working to certify.
Speaker Change: And made some design refinements to the thermal plastic enclosure for improved manufacture ability.
Speaker Change: We made the conscious decision to wait to BN are piloted test flights for this <unk> sample hardware because we believe this will allow us to move faster during the flight test for credit phase.
Speaker Change: I want to make it clear that we are focused on building and testing our piloted type design aircraft.
Speaker Change: This is the aircraft we are working to certify and ramp into early production next year. It is not merely a developmental prototype.
Speaker Change: These aircraft will only be capable of being flown with the pilot onboard as they are using the hardware and software that we are working to certify.
Speaker Change: With the type design now matured its ideal timing to bring up our factory in Georgia.
Speaker Change: Our plan is to start building aircraft in that facility in January with the initial units planned to be used for piloted demonstration and market survey flights with passengers next year.
Speaker Change: We already have parts on order for the aircraft fleet plan to produce in 2025 and our goal is to exit 2025 at a production rate of two aircraft per month in Georgia with a planned ramp beyond that in 2026.
Speaker Change: With that I'll turn it over to Korea.
Speaker Change: Thanks, Tom and good afternoon, everyone. As you May remember Mark Mesler is currently on temporary medical leave on behalf of the entire team I want to take a moment to extend our best wishes to him for a smoother recovery.
Its leadership and guidance have been invaluable to the organization and we wish him well.
Speaker Change: This time I have the privilege of stepping in as interim CFO.
Speaker Change: I've worked with Mark for over 10 years across various public companies and have now been with <unk> for over two years, leading the corporate finance team.
In today's call I will go over our liquidity profile.
Speaker Change: Actual results for Q3 24, our estimates for Q4, 24, and a high level seen for understanding our 2025 spent.
Speaker Change: With regards to liquidity, we continue to be one of the best capitalized companies in the industry.
Speaker Change: At the end of Q3, 'twenty four <unk> had $501 7 million of cash and cash equivalents on the balance sheet.
Speaker Change: This puts us at the strongest cash position, we have been at over the last 18 months.
Speaker Change: And this doesn't include any of the up to 400 million of additional capital Atlantis has agreed in principal to commit to help scale the manufacturing of our midnight aircraft.
Speaker Change: As you may have seen us announced earlier. This week, we are now seeking shareholder approval of that deal. So we can finalize the commitment.
Speaker Change: Furthermore, we have nearly completed the build out of our large scale manufacturing facility that will support our production ramp for years to come.
Speaker Change: All of which have been financed through highly favorable terms.
Speaker Change: As we look ahead towards the manufacturing and commercial operations ramp. We expect next year, we feel very confident that we will have access to sufficient capital to deliver.
Speaker Change: With regards to our spending this quarter, we continued to invest in the development certification and testing midnight at Kraft and then the ramp up for manufacturing and testing capabilities as we build additional midnight aircraft and their associated powertrain.
Speaker Change: As a result, our non-GAAP operating expenses for Q3, 24, or $96 8 million that is within our guided range of $90 million to $100 million and relatively flat quarter over quarter.
Speaker Change: Our total operating expenses on a GAAP basis for Q3, 24, $122 1 million, which is also relatively flat to the prior quarter.
Speaker Change: Our GAAP operating expenses included approximately $25 3 million of non cash or one time expenses, primarily driven by the 21 4 million of stock based compensation.
Speaker Change: Within the $96 8 million of non-GAAP operating expenses, we incurred approximately $19 million of nonrecurring engineering and material costs with our suppliers during the quarter.
Speaker Change: Can you to invest in the maturation of our supply chain for midnight and procure part what are the manufacturer of our midnight aircraft.
Speaker Change: As you look ahead to Q4 'twenty four we anticipate total non-GAAP operating expenses of $95 million to $110 million.
Speaker Change: This range represents an uptick in spending as we planned for an increase in our non recurring engineering costs with our suppliers to enable our manufacturing ramp.
Speaker Change: As well as an increase in labor and material spend tied to our planned ramp of manufacturing activity.
Speaker Change: As we finalize our contract manufacturing arrangement with still aren't if going into 2025, we expect the majority of these manufacturing labor and capex costs to be covered under that construct for the foreseeable future.
Speaker Change: For 2025, I'll discuss the framework for how you should think about our spend.
Speaker Change: For 2025 aligns to five bucket.
Speaker Change: First our core expenses for engineering and SG&A.
Speaker Change: Second supplier nonrecurring engineering cost in actual capex.
Speaker Change: Could labour costs for manufacturing.
Speaker Change: Sports direct material cost with our suppliers to support our aircraft built.
Speaker Change: And lastly, the commercial flight operation and MRO costs necessary to support our commercialization effort.
Speaker Change: In the first bucket, our core run rate expenses for engineering and SG&A on a non-GAAP basis has been in the range of $75 million to $80 million per quarter. This year.
Speaker Change: And we expect this core spend rate to be flat to down next year.
Speaker Change: The second bucket, we expect to spend on supplier nonrecurring engineering cost and onshore capex to be down in 2025 since in 2024, we have invested heavily in this area.
Speaker Change: As mentioned earlier with respect to the third bucket, we are working to finalize our contract manufacturing agreement, but still on test and starting next year. We expect that arrangement will cover the majority of our labor and additional capex cost for producing aircraft in 2025.
Speaker Change: While in a fourth bucket, we anticipate higher direct material spend without suppliers as he planned to build more aircraft next year.
Speaker Change: Gold is to finance that material extent through various mechanisms.
Speaker Change: Our goal is to enter into customer arrangement that will offset.
Speaker Change: If not all of these costs over time.
Speaker Change: And the last bucket as they engage in commercial deployment, we expect the support needed for flight operations MRO and market development effort to also be largely covered by customer arrangements.
Speaker Change: In summary, we continue to be focused on finding the most efficient path to achieving a sustainable business model and we are well positioned financially to execute against our commercial launch plans.
Speaker Change: And with that operator, we can now open the line for questions.
Speaker Change: Of course, we will now begin the question and answer session in the interest of time, we ask that everyone limit themselves to one question and then one follow up question if you'd like to ask a question. Please press star followed by one on your telephone keypad if for any reason you'd like to remove that question. Please press star followed by Tim.
Speaker Change: Again to ask a question press star one.
Speaker Change: As a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking your question. We will pause briefly ask questions are registered.
Speaker Change: Our first question comes from the line of Andres Sheppard with Cantor Fitzgerald.
Speaker Change: Your line is now open.
Speaker Change: Okay.
Hi, Good afternoon. This is a non on behalf of Andreas Congrats on the quarter and thanks for taking our questions. So it seems that some of your peers are focusing more on building a prototype aircrafts, while youre focusing more on building a conforming aircraft I was wondering if you could describe what you see as the key advantages.
Speaker Change: Your strategy here and elaborate a little bit on that.
Speaker Change: Yes, absolutely. This is Tom happy to answer so I think this is really a reflection of our strategy from the very beginning to design an aircraft. That's optimized for certification on manufacturing and take a really methodical step by step approach to bring that aircraft market.
Speaker Change: And so aircrafts that were building right now are the aircrafts were planning to test with the FAA for credit and then it's that same design type design.
Speaker Change: We're planning to ramp into production next year. She has her early commercial operations. So.
Speaker Change: Again, just like we made the pragmatic decision to not vertically integrate everywhere and focus on something that we think is pragmatic and achievable youre just seeing that same strategy flow through to the entire business.
Speaker Change: Got you.
Speaker Change: Appreciate the color and with regards to the recent Japan announcement I was wondering if youre able to give us a little bit more of a timeline as to when you expect to begin deliveries in the area.
Speaker Change: This is Adam thanks for the question.
Speaker Change: So if you could go back to the chart that we put out last quarter. We can start to see the manufacturing volumes, we can get a sense for how the production may ramp so youll see.
Speaker Change: 10 aircrafts in 2025, and then it ramps up from there. So there are opportunities for early deployment and we've talked a lot about the UAE, where some aircraft that will go.
Speaker Change: We'll obviously use some aircrafts in our test capacities and then we also think there's some opportunities to deploy some aircraft even with some of the western customers as well So Japan is.
Speaker Change: Really great opportunity and we are starting to really work hard to develop all the infrastructure and pathway to launch there and so as that starts to mature we will provide more detailed information.
Speaker Change: Got you I appreciate it and lastly, as you just mentioned with the UAE. If you could remind us your plans on how you plan to commercialize there and how you plan to enter this market and how you see it ramping up.
Speaker Change: So as we always say our goal has been defined the most efficient path to commercialization and so that really means stabilizing the final design, which we've done and building that aircraft testing at which we're doing and then once we do all of that safely deploy it and if you look at the <unk>.
Speaker Change: We have a lot of really good relationships there so Bob the sovereign wealth fund Abu Dhabi is a long time investor in Archer.
Speaker Change: Engage entire Abu Dhabi ecosystem, and that's largely been coordinated through the Abu Dhabi and office.
Speaker Change: <unk> shown that can put together includes some of our partners like Etihad and Falcon aviation so the regulatory pathway.
Speaker Change: Now I will become a much more clear that enabled us to be able to launch as soon as fourth quarter next year, and so I'll turn it over to Tom to walk through some of the process, but hopefully that gives you a sense for all of the different.
Parts of it are coming together.
Speaker Change: Yeah, and just to add onto that I think it is.
Speaker Change: Again, the same strategy is taking a very pragmatic approach to launching the business. So our strategy in UAE is to partner with great operators out there to leverage existing infrastructure, it's to leverage a lot of the same data that we're already generating for the FAA to support the aircraft entering service there so.
Speaker Change: Just clicking into some details there with respect to the aircraft certification. We're leveraging the same plan same data that we're already working to develop.
Speaker Change: I just spent a week in the UAE with my <unk> team and we worked through a lot of the details on that.
Speaker Change: Yes.
Speaker Change: Other trips I've flown on helicopters operated by Falcon Aviation, our operating partner out there and so. Another example is we don't have to build our own Aoc. We can just fly on Falcons and this is a company that was.
Speaker Change: Owned by the growth family out there so super experienced group and those flights are all using existing infrastructure. So we don't need.
Speaker Change: Take the risk expense and time to stand that up so I think what you should look for for US for next year is starting to operate initial flights out in the UAE and making step by step progress towards commercial service there.
Speaker Change: Got it wonderful I appreciate the color and congrats again on the quarter I'll pass it on.
Speaker Change: Thank you for your questions.
Speaker Change: Our next question comes from the line of Edison, you with Deutsche Bank.
Speaker Change: Your line is now open.
Speaker Change: Okay.
Great. Thank you for taking our question this is <unk>.
Speaker Change: Always first off do we have any updated timing or thinking on.
Speaker Change: Conducting the first pilot effect.
Tom: Hey, listen this is Tom.
Speaker Change: Well I just want to make it clear that we're working towards our first pilot and flight of our type design aircraft. So this is the same aircraft that we're talking about doing the certification testing with the FAA and ramping up production next year for early commercial watch in the UAE and other places and I think we're the only ones in the industry really.
Speaker Change: Looking on that.
I don't want to give a specific timeline for the first pilot and flight as this is really a safety decision for us, but I don't want to put undue pressure on the team.
Speaker Change: What I can say is that we're getting really close to that milestone.
Speaker Change: Understood understood and then to your point on this is the this is the production version. This is the real.
Speaker Change: No real version and I just wanted to confirm that.
Speaker Change: This is capable still capable of carrying.
Speaker Change: The payload into the payload the distance.
Speaker Change: Thats metrics those are.
Speaker Change: Reiterating all of those things for the for this aircraft.
Speaker Change: Correct. So this is the aircraft design that we're planning to take into production into commercial launch pilot.
Speaker Change: Pilot plus for passengers.
Speaker Change: Understood understood and just lastly on the I know you mentioned the pre delivery payments.
Speaker Change: For the new debt.
Speaker Change: In Japan, or do we have a central hub.
Speaker Change: Big.
Speaker Change: I realize you maybe can't provide exact numbers, but.
Speaker Change: Maybe relative to other ones.
Speaker Change: Hey, Jonathan this is Adam.
Speaker Change: So we have collected pdp's from <unk>.
Speaker Change: Several of our customers, we havent broken that out.
Speaker Change: Retail the PDP from.
Speaker Change: The joint venture from Airlines and Sumitomo, the first payment was a $1 million down.
Speaker Change: Yes, we haven't broken out all of the additional payments going forward.
Speaker Change: Great.
Speaker Change: Okay. Thank you very much.
Speaker Change: Thank you for your time.
Speaker Change: Thank you for your question.
Speaker Change: Our next question comes from the line of Savi <unk> with Raymond James.
Speaker Change: Your line is now open.
Speaker Change: Hey, good afternoon.
Speaker Change: Chris if I might follow up on that.
Speaker Change: Helpful comments that you provided for us to think through 2025.
Speaker Change: Am I to understand like your comments around buckets tree through three through five bar that you have I know you have cash coming in to cover those costs.
Speaker Change: With the you know the.
Speaker Change: Labor cost manufacturing cost that still Lantus financing I was curious if the other financing comes with.
Speaker Change: It's like an equity component or a debt component or how we should think about that and then just.
Speaker Change: Following up on the Atlantis as well just given the news over there was kind of curious as to.
Speaker Change: You know what that commitment is with this.
Contract manufacturing agreement.
Speaker Change: Oh, Thanks, Tom for the question I think I'll lead off with answering your question.
Speaker Change: How are we thinking about financing for materials, but let me just again, maybe I think the thing works so between 25.
Speaker Change: We're looking at having essentially another core expenses for engineered.
Speaker Change: As he said, we're going to target keeping.
Speaker Change: That's flat to down.
Speaker Change: And.
Speaker Change: When you talk about the Atlantis relationship for neighboring topic manufacturing.
Speaker Change: The board the material portion and our goal is to finance that through the traditional financing mechanisms working capital inventory financing and.
Speaker Change: Conversations with most of that you'll see what's the best with favorable terms there.
Speaker Change: And I think with regards to the longest relationship.
Speaker Change: We're going after the shareholder who are right now and it's all in.
Speaker Change: Neil.
Neil: On the vehicle.
Neil: What that would look like.
Neil: Yeah.
Neil: Got it.
Neil: <unk>.
Neil: And then if I might on the AD certification aircrafts on.
Neil: It was very helpful to understand kind of what you were waiting for on going forward with that just how much of that is built.
Neil: And in terms of it sounds like if youre getting very close, but it's fairly bill, but I was kind of curious.
Speaker Change: Yes, how much of that has been built and as you've built the two midnight now any kind of learnings on on how you can kind of scale production.
Speaker Change: Yeah, absolutely so the aircraft.
Speaker Change: First type design aircraft that we're getting ready to fly that.
Speaker Change: That aircraft is almost complete so we are in.
Speaker Change: System integration testing.
Speaker Change: Phase.
Speaker Change: Really the last step that will do before you send the aircraft's flight test so still some work to do there, but again getting really close in terms of learnings on manufacturing.
Speaker Change: Again, the broader context curious we are with that aircraft and the other two test aircraft that are in production right now learning all the lessons on the exact design, we plan to certify and so <unk> been lots of lessons learned lots of that then informs how we're laying out.
Speaker Change: Initial line in Georgia.
Speaker Change: And then beyond that in parallel.
Speaker Change: <unk> lab testing going on along with the hardware. So I mentioned some of the powertrain learnings that we've gotten from flight testing lab test basically taking all that data together using that to develop the manufacturing plants that we're going to start executing against next year.
Speaker Change: Hey, Savi. This is Adam I appreciate it the aircraft that we're building that Tom mentioned are.
Speaker Change: Aircraft that will not only just be piloted but because their production aircraft. They will also ultimately carry other people as well so the safety standard of what we're doing is at the very highest level. So I know other groups are producing or I'll call. It rapidly producing still prototype aircrafts that looks like they don't carry people, but these are.
Speaker Change: Sure.
Speaker Change: The aircraft that will carry people. So safety standard here is very high and we're making sure that.
Speaker Change: Regarding every single line crosses every single key because we won't be going to market with these aircraft.
Understood I'll hope we'll call it.
Speaker Change: Thank you.
Speaker Change: Thank you for your questions.
Speaker Change: Our next question comes from the line of Bill Peterson with Jpmorgan.
Speaker Change: Your line is now open.
Speaker Change: Hi, This is Mike <unk> on for Bill.
Speaker Change: It was nice to see that the FAA has begun to accept and improve some of your certification plans.
Speaker Change: Do you have a sense of kind of the pace and the cadence with which the FAA will continue to do this over the next couple of quarters.
Speaker Change: Any expectation around when.
Speaker Change: Except 100% of your combined fabrication plants.
Speaker Change: Yeah. So I think the right way to answer that is to point you back at the chart that we put in our shareholder letter, which lays out the four phases that the FAA define type certification. So the first two.
Speaker Change: We're finished when our air within its criteria was published earlier this year and so what we've been able to do over the last.
Speaker Change: Four months or so four to six months is essentially go and finalize a bunch of the means and methods of compliance. So these are things like the atmos sees the detailed design standards. The certification plans that all enable the Ford credit at work.
Speaker Change: And then the other thing we showed for the first time is within that kind of final phase.
Speaker Change: We're showing the data and then the FAA uses that to verify and actually find compliance.
Speaker Change: Completed or <unk>.
I should say has approved about 12% of that total.
Speaker Change: Sort of documentation package and so.
Speaker Change: The one remaining open item that we highlighted is this topic around emergency landing and Thats a topic that the FAA is finalizing for the entire industry. So.
Speaker Change: It's a little bit in the weeds, but theres basically one issue paper on that topic for the industry.
Speaker Change: And now that the as far as out and we know the operational context. The FAA is working to finalize means and methods of compliance around that topic.
Speaker Change: And that topic is related to things in a handful of served plants. So it's basically those things that are still open at this point.
Speaker Change: As I mentioned earlier, we don't see any risk today on any of that and it's much more of kind of an administrative clean up process. Just like you saw on the certification basis. So what I think you should be expecting from us is to see an increase in that compliance.
Speaker Change: <unk> a final phase as we stop towards the T C.
Speaker Change: Hey, Matt This is Adam just reiterating one of the points Tom made.
Speaker Change: During the prepared remarks.
Speaker Change: 105 G issue paper, if not unique archer that is an industry wide issue paper.
Speaker Change: And then when you look at the kind of phase four implementation phase to 12% is actually quite advanced and it.
Speaker Change: It's hard to understand how all the different groups do it.
Speaker Change: We may actually end up being.
Speaker Change: Leading the industry in terms of certification progress because that is.
Speaker Change: A pretty high number, especially compared to the way some of the other groups break it out.
Speaker Change: Okay. Thank you that's really helpful color.
Speaker Change: Second question I appreciate that you can't really touch on specific timing as part of the Detroit and UAE.
Speaker Change: But do you have a sense of how many aircrafts from there for testing and then.
Speaker Change: And potentially how long that could take before entry into service.
Speaker Change: Yes, well, we have a plan to be in commercial service in the UAE before the end of next year and that's a challenging plan, but it's one that we are executing against and is certainly doable.
Speaker Change: The aircraft that we are starting to produce in Georgia in the coming months are the aircraft that we will be deploying to the UAE.
Speaker Change: Adam and the team gave some general guidance on aircraft production over the next couple of years. So the way to think about it is we're currently producing the remaining conforming aircraft. We will use for FAA flight testing. Then also this additional batch of aircraft the same design, but intended to be deployed for these early commercial.
Ratios, whether they be in the UAE or or other places.
Speaker Change: And I think the.
Speaker Change: What's compelling is we have a lot of support from the GCI, which is the local regulator and the UAE.
Speaker Change: These aircraft will be piloted from day, one so I think it actually makes some of the certification process a bit more clear, where we're not switching back and forth from different types of aircraft. So we have a pretty straight line and how to get there and now we have to go through the hard work to get it done.
Speaker Change: Okay. Thanks, so much and I'll hop back in the queue.
Speaker Change: Thank you for your questions.
Speaker Change: Our next question comes from the line of Josh Sullivan with the benchmark company.
Speaker Change: Your line is now.
Speaker Change: <unk>.
Good evening.
Speaker Change: Just looking at you're looking at the order this morning, as well as others that might be out there and I've got a couple of these.
Speaker Change: <unk> orders at this point.
Speaker Change: I know you referenced the chart there from last quarter as far as how you can ramp.
Speaker Change: But I assume to order 100 aircrafts are so there is some pricing advantage versus just a single unit buy.
Speaker Change: Our customers ordering rates two production slots or specific deliveries in batches, just generally trying to get a feel for how the market for new orders is shaping up in these deals.
Speaker Change: Yeah. Thanks, Josh this is Adam.
Speaker Change: So when we engage with customers from around the World I think it's become increasingly clear that Archer is one of if not the company that's going to get to market.
Speaker Change: Early or first and so we have had great success in finding.
Speaker Change: Really great strategic partners all around the globe and some of the biggest countries biggest cities and so with some of the best companies out there.
Speaker Change: And so that has enabled us to sort of pick and choose the different groups.
Speaker Change: I think what will be interesting in terms of the rollout is a lot of the customers want access to the aircrafts as soon as possible because it's not really for them immediately about revenue generation were about.
Speaker Change: Flying the aircraft's passengers it's about learning how this all of these aircrafts. So let's say for example, you wanted to go deploy a fleet of aircraft at Newark, Liberty International and the U S. All of a sudden you have to go start learning all of the operational capabilities you have to learn how charging is going to work helped me, it's because it's going to work at pilots and Paul So we've seen.
Speaker Change: A lot of interest from pretty much all of the customers around the world want aircrafts as early as possible.
Speaker Change: So what we've done is we've said what.
Speaker Change: The new customers, we're talking to we said we would like there to be pre delivery payments currently meeting or some dollar commitment to show how serious they are.
Speaker Change: Nonrefundable purely pre delivery payments second is we'll start to look at delivering aircraft doing in market demonstration flights followed by market survey flights and then ultimately launching there and so as we roll that out that process out all over the world Youll start to see a handful of aircraft in each of these countries each of these.
Speaker Change: Cities and then ultimately <unk>.
Speaker Change: Flying on those for market survey flights and then ultimately wash there. So hopefully that gives you a sense for how this is.
Speaker Change: How this is starting to shape out.
Speaker Change: As it relates specifically to Japan, Japan is a great market big market has the potential for at least 100 aircraft.
Speaker Change: Look at some of the trips.
Speaker Change: The airport to City Center, we're talking about you know very long.
Speaker Change: Right and so we're very excited about the Japan order, but there are many like that that we've engaged with.
Speaker Change: That are that are to come.
Speaker Change: Okay.
Speaker Change: Got it.
Speaker Change: And then maybe just as you look at the US far do you or your partners have an early sense just of the lifecycle of.
Speaker Change: Pilot training or does the acquisition and any early thoughts there.
Speaker Change: Okay.
Speaker Change: Well I would say in general on the as far we were Super pleased with the outcome. It was honestly better than what we thought it was going to be.
And.
Speaker Change: The main things and they were paying attention to where our pilot training like you mentioned and so it was great to see the added the flexibility to be able to leverage simulators for big chunks counselor training, which is.
Speaker Change: What we had been planning and we think it's the right thing to do in addition to rules around energy reserves switch.
Speaker Change: It came out.
Speaker Change: Other than we expected in a way that supports our intended commercial operation so.
Speaker Change: There's a lot of work to do with the individual operators in the individual countries as that as far as just a domestic document, but really positive sign I'd say for the whole industry.
Speaker Change: Okay.
Speaker Change: Great. Thank you for the time.
Speaker Change: Yes.
Speaker Change: Thank you for your question.
Speaker Change: Our next question comes from the line of David <unk> with Barclays.
Speaker Change: Your line is now open.
Speaker Change: Hey, good afternoon, and thanks for getting me in.
Speaker Change: But Tom just following up on that I know you said the reserve requirement within the S far came in better than expected.
Speaker Change: Yes.
Speaker Change: Specifically can you talk to any restrictions that you would have on the operations as a result of that it was a requirement.
Speaker Change: Within the context of the urban air mobility.
Speaker Change: Yeah, absolutely so the.
Speaker Change: FAA in the S. Four are prescribed.
Speaker Change: <unk> for defining the amount of energy, we need to keep on the airplane and so just the first principle is the fact there is they are defining how much fuel if you will our energy needs to be left in the battery and then the flight so that sets a maximum range missions. So they did that in two ways. The first was.
Based position essentially aligning with the way helicopters or phone today, so keeping a minimum 20 minute endurance of energy and so for our aircraft with that requirement, we're able to satisfy essentially all of the commercial missions that were interested in flying essentially all of the markets. We're looking at today.
Speaker Change: But then if I want a step further and added provisions for.
Speaker Change: Alternate means of meeting a similar safety standards. So for example, if you wanted to fly a long range mission that perhaps couldnt give us 20 minutes or is there a endurance.
Speaker Change: We can propose ways to mitigate.
That by having landing sites that are like along the way to essentially give us backup option. So you talked about better than expected.
Speaker Change: Things like that with definitely worked in which are super practical.
Speaker Change: <unk>.
Speaker Change: Maintain a high level of safety, but gives you flexibility for this early industry to kind of take hold and learn and grow.
Speaker Change: That's really good color.
Speaker Change: Our affiliates taking questions, but it did mentioned in the prepared remarks.
Speaker Change: What have been worked out as far as our aerospace the integration.
Speaker Change: It only takes minutes left in the call. So shall we don't have any time to go into detail, but maybe can we get a preview of what youre thinking the challenges are for urban aerospace integration.
And ways of working with the FAA to just to try to solve the soldiers.
Speaker Change: Hey, David Unfortunately ability is traveling start actually on the Q&A portion today why.
Speaker Change: Why don't you give us a call and go into test.
Speaker Change: All of that.
Speaker Change: Okay Super helpful. Thanks, I'll get back in the queue.
Speaker Change: Thank you for your question.
Speaker Change: Our next question comes from the line of <unk> with HC Wainwright.
Speaker Change: Your line is now open.
Speaker Change: Thank you good afternoon Dan.
Speaker Change: Good to see.
Speaker Change: All of these derisking steps coming to fruition.
Speaker Change: It looks like the UAE commercialization strategy.
Matt: The nice thing Matt.
Matt: Is that going to.
Speaker Change: Plans for the U S market you mentioned in a few cities.
Speaker Change: You are targeting.
Speaker Change: How much of the burden financially and operationally will you need to sort of.
Speaker Change: Take long to bring some of these sites in cities.
Speaker Change: Into readiness I guess.
Speaker Change: Again operations in the U S.
Speaker Change: Hey, this is Adam so when we're looking at deploying the fleet that we're building there is a couple of different ways that we're thinking about it. The first is looking at the UE, which we've talked a lot about and I think there are.
Theres a great pathway to go do that and there is a pathway to do that to generate revenue.
Speaker Change: And so I don't think there will be necessarily a financial burden because were selling aircraft.
Speaker Change: Other side is there's a lot of existing infrastructure that's already been created there. So there are.
Speaker Change: <unk> Hello pads.
Speaker Change: Of the dozens of times that exist with Dolby.
Speaker Change: And so there was existing operators existing pilots existing routes and so theres a lot that we are going to be partnering with.
Speaker Change: To allow us to launch right away to get off the ground with minimal additional investment.
Speaker Change: In the U S. As it relates to bringing aircraft to some of our early customers as well. The first use case is really all about learning about the aircraft and learning how to deploy and how to scale. So for example, you can't just go drop a fleet of aircraft.
Speaker Change: At Newark, Liberty International and say Thank you see you later, there's a lot of planning that needs to go into that whereas the charging infrastructure is going to go how are the pilots going to interact with us how at the airport itself going to work, whereas parking going to peak and so a lot of the customers want to engage early to try to stand up the operations and that may be a year or multiyear process to do that because we.
Many customers all over the world there is an opportunity to really start engaging these different groups that want early access none of that really requires a heavy capital investment to do that so I do believe there is an opportunity to generate revenue potentially even generate positive cash flow with minimal investment.
Speaker Change: To go into the early operations.
Speaker Change: Understood. Thank you for that color Adam.
Speaker Change: All I have I'll take my other questions offline. Thank you.
Speaker Change: Thanks.
Speaker Change: Thank you for your question.
Speaker Change: Okay.
Speaker Change: At this time I would now like to pass the conference back to Adam Goldstein, founder and CEO of Archer for his closing remarks.
Adam Goldstein: Thank you very much for listening to our quarterly call. There was another great quarter and look forward to speaking with you again soon.
Speaker Change: That concludes today's call. Thank you for your participation and enjoy the rest of your day.
Speaker Change: Yeah.