Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Archer Aviation Inc (ACHR, Financial) successfully completed Midnight's first transition flight, marking a significant milestone in the development of their eVTOL aircraft.
- The company has reached two key regulatory milestones with the FAA, including the finalization of Midnight's airworthiness criteria and obtaining a Part 135 certificate.
- Archer Aviation Inc (ACHR) announced an additional equity capital raise, bringing the total raised since the end of Q2 to $230 million, maintaining a strong capital position.
- The partnership with Stellantis is expanding, with Stellantis agreeing to fund up to $400 million in labor and CapEx to scale Midnight manufacturing.
- Archer Aviation Inc (ACHR) has a nearly $6 billion indicative order book, including a planned purchase of 116 aircraft from Future Flight Global, representing potential revenue of over $0.5 billion.
Negative Points
- The company faces significant risks and uncertainties that may cause actual results to differ materially from forward-looking statements.
- Archer Aviation Inc (ACHR) reported GAAP operating expenses of $121.2 million for Q2, which included substantial non-cash equity-related expenses.
- Non-GAAP operating expenses were slightly above estimates, due to the timing of materials received for building conforming aircraft.
- The company anticipates a slight uptick in spending for Q3 '24, with non-GAAP operating expenses expected to be between $90 million to $100 million.
- Archer Aviation Inc (ACHR) is still working through the accounting for the new contract manufacturing terms with Stellantis, indicating potential complexities in financial reporting.
Q & A Highlights
Q: Could you talk about how many flights you've done with the Midnight aircraft and what you're learning from these flights?
A: Most of our recent flights have been with Midnight, and we've conducted several hundred flights across both Maker and Midnight. The main goals are to gather data for upcoming piloted flights and to learn about the aircraft's handling qualities and operational aspects. For example, today we completed six flights with Midnight, focusing on ramping up operational cadence to demonstrate commercial-like operations.
Q: Can you provide more details about the recent capital raise and how it impacts your capital needs over the next few years?
A: The capital raise involved institutional investors and strategic partners like Stellantis and United Airlines. Our core expense base is around $75 million to $80 million per quarter, excluding one-time expenses. The relationship with Stellantis is designed to cover manufacturing labor costs and CapEx, helping us manage cash flow efficiently. At a production volume of 250 units, we aim for a 40% to 50% gross margin, which should make us cash flow positive.
Q: How does the certification process in the UAE compare to the FAA, and do you still see the UAE as a potential first market?
A: We see a strong opportunity in the UAE, supported by the national government and local partners. The UAE's aviation regulator, GCAA, is working with us on an expedited deployment path using the FAA's airworthiness criteria. Our strategy involves partnering with local leaders to electrify existing infrastructure and deploy Midnight aircraft.
Q: Can you explain how the Stellantis funding for labor and CapEx will work operationally?
A: Stellantis will help pay for labor and CapEx as we ramp up production. Archer will reimburse Stellantis with stock over time for these expenses. This relationship reduces our cash burn and increases the likelihood of reaching target production levels. Stellantis employees are already integrated into our team, focusing on manufacturing and scaling efforts.
Q: With the announced orders, how are you managing deposits and production slots for new customers?
A: We've structured aircraft sales with an initial 1% to 2% down payment and aim to collect up to 50% in pre-delivery payments as delivery approaches. The timing of these payments depends on market-specific certification processes. As we gain clarity on launch dates, especially in markets like the UAE, we expect pre-delivery payments to increase.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
