Archer Aviation - Earnings Call - Q3 2025

Executive Summary

• Archer reinforced liquidity with a $650M registered direct equity offering (81.25M shares at $8.00), taking total liquidity to “over $2B”; $171M of proceeds earmarked for the Hawthorne Airport acquisition/redevelopment, with the balance for general corporate purposes.
• Q3 2025 financials: GAAP operating expenses $174.8M, GAAP net loss $129.9M, GAAP diluted EPS −$0.20, Adjusted EBITDA −$116.1M; quarter-end cash, cash equivalents and short-term investments $1.641B.
• Against S&P Global consensus, EPS was a beat on “Primary EPS” (consensus −$0.200 vs actual −$0.116*), while revenue missed (consensus $0.4M* vs reported $0) as Archer remains pre‑revenue; note GAAP diluted EPS was −$0.20, indicating definitional differences versus S&P’s Primary EPS.
• Strategic catalysts: signed definitive agreements to acquire control of Hawthorne Airport for $126M cash to anchor LA air taxi hub and AI testbed; record Midnight flight test milestones; closed Lilium patent portfolio acquisition (€18M/~$21M) to expand IP leadership; UAE Launch Edition initial payments began; APAC demand strengthened (Korean Air exclusive partnership; Osaka/Tokyo selections).

What Went Well and What Went Wrong

What Went Well

• Liquidity and capital access: “over $2B” liquidity following a well‑oversubscribed $650M raise; management cites balance sheet strength as a strategic advantage to win opportunities (e.g., Lilium IP, defense programs).
• Strategic asset control: definitive agreements to acquire Hawthorne Airport (80 acres, ~5,000 ft runway) as LA hub and AI operations testbed; proximity to LAX and major venues positions Archer for LA28.
• Flight test progress: Midnight achieved 55‑mile range, 10,000‑ft altitude, >150 mph speeds, 31‑minute flight; showcased quiet operations at California International Airshow.

Quote: “The era of advanced aviation has arrived—not as a distant vision, but as a tangible reality… we are not waiting for the future; we are building it” — Adam Goldstein.

What Went Wrong

• Revenue still pre‑commercial: reported Q3 revenue $0, while S&P consensus expected ~$0.4M*, leading to a revenue miss; Archer reiterated revenue recognition in UAE begins as program milestones evolve (expect beginning in 2026).
• Certification friction: FAA progress partially constrained by government shutdown; remaining policy items must be resolved before final flight‑performance TIA blocks can proceed.
• Continued heavy burn: GAAP operating expenses $174.8M; Adjusted EBITDA loss −$116.1M, reflecting ongoing investment in engineering, certification, manufacturing ramp, and go‑to‑market.

Transcript

Operator (participant)

Good afternoon. Thank you for attending today's Archer Aviation Company Third Quarter 2025 Financial Results Conference Call. My name is Victoria, and I'll be your moderator today. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I would now like to pass the conference over to our host, Katie Kiewel, Head of IR. Katie, please proceed.

Kate Kiewel (Head of Investor Relations)

Welcome to Archer's Q3 2025 earnings. This is Katie Kiewel, Archer's Head of Investor Relations. Today, we will be making forward-looking statements that are based on assumptions as of today, and we don't undertake any obligation to update them as a result of new information or future events. Risks and uncertainties may cause our actual results to differ materially from those contemplated by these statements. For more information about these risks and uncertainties, review the risk factors in our SEC filings. We will also be discussing both GAAP and non-GAAP financial measures today. A reconciliation of those measures is included in our shareholder letter and earnings release from today. Now, I'll turn it over to Adam. Adam.

Adam Goldstein (Founder and CEO)

Thanks, Kate. Last quarter, I spoke about the growing support our sector is receiving from the highest levels of the U.S. government and how the Olympics mandate has become a global stage for us to showcase air taxis as we work to commercialize and drive global scale. This quarter, we made meaningful progress on every front worldwide, from L.A. to Abu Dhabi to Seoul. With multiple White House executive orders now establishing a presidential imperative to begin air taxi deployments in America as early as next year, the eVTOL integration pilot program has enabled Archer to shift decisively from vision to execution, scaling commercial air taxi operations across the UAE, America, and in select other cities globally.

We're especially focused on winning Los Angeles because if we can prove electric air taxis work in one of the world's most congested, complex, and highly regulated cities, I believe we can subsequently scale the product across the U.S. and the world. Today, I'll start by sharing a strategic development that gives us a unique ability to launch and scale in L.A.: a one-of-a-kind opportunity to acquire control of Hawthorne Airport, one of L.A.'s most strategically located airfields, and use it as our anchor hub for air taxis ahead of the LA 2028 Olympic Games and beyond, as well as a test bed for our AI technologies under development. After that, I'll discuss key recent highlights from across the company, including breakthroughs in technology and certification, momentum in global partnerships, and the maturation of Archer Defense.

We announced earlier today that we have signed definitive agreements to acquire control of Hawthorne Airport, a rare asset located less than three miles from LAX and the closest airport to downtown L.A., the Forum, Intuit Dome, and SoFi Stadium, the site of the 2028 Olympic opening ceremony. The team and I are actually holding today's call from Hawthorne this afternoon. Hawthorne is an 80-acre airport with an approximate 5,000-foot runway capable of supporting some of the largest aircraft used in private aviation, such as a Gulfstream G650, and benefits from 24/7 operating authority and has the capacity to handle significantly more movements than it does today. The site features hangar space, office and terminal space, and significant expansion opportunities with the ability to more than double the existing hangar footprint. It is a profitable enterprise with a long-term master lease in place through 2055.

Establishing Hawthorne as a key pillar of the Archer network in L.A. gives us a structural advantage, a generational opportunity to control a key airport and build the first purpose-built eVTOL hub at the center of a world-class aviation corridor. Hawthorne is more than an airport. It is a landmark of American aerospace history. The city built this airfield in the 1920s to attract Jack Northrop to Hawthorne. Northrop went on to create some of the most innovative aircraft of the 20th century here, including the Flying Wing and the T-38 Talon, pushing the boundaries of flight. During World War II, this airfield became a symbol of American innovation and resilience. Thousands of workers, including the women who inspired Rosie the Riveter, powered the nation's aerospace transformation.

Hawthorne's motto at the time said it all: "More jobs than people." The same tarmac that once launched Northrop's breakthroughs later became home to SpaceX's L.A. operations and served as a proving ground for the Boeing Company's first test tunnel. Archer plans to now carry that legacy forward, ushering in the next chapter of advanced aviation right here in the heart of Los Angeles. Today, Hawthorne Airport is already a profitable enterprise. For Archer, it will become even more, the blueprint for a new class of urban aviation hubs around the world. We envision Hawthorne as L.A.'s grand central station for air taxis, the centerpiece of our Southern California network, where passengers will one day seamlessly fly above L.A. congestion on predictable 5- to 15-minute routes between key destinations, including Hollywood, downtown, and Orange County.

It will also serve as Archer's innovation test bed for next-generation aviation technologies, including AI-driven air traffic control and operations management. Seamless passenger identification and security, and more. Alongside this acquisition, we're announcing that we've raised $650 million of new equity capital, reinforcing Archer's sector-leading balance sheet with over $2 billion in liquidity. To make this vision real, we continue to focus on scaling manufacturing to support both certification and early commercial deployments. Our near-term goals remain to ramp production up to 50 aircraft per year across our roughly 700,000 sq ft of manufacturing and test facilities across California and Georgia. As I discussed last quarter, we're assembling our initial fleet of Midnight aircraft. These aircraft will move directly into testing or early commercial use. We're now nearing completion of the piloted CTOL flight regime, validating operational performance across distance, speed, time, and altitude.

Our test pilots have expanded both speed and duration profiles to reflect real-world commercial missions. Recent exciting milestones include 55 miles of range, over 30 minutes of flight time, and flying at altitudes up to 10,000 ft at speeds exceeding 150 miles per hour. The consistency between simulator and the real-world performance continues to validate our engineering approach and reinforces our readiness. Tom will share more shortly, but I'm proud to say that this quarter, Midnight took center stage at urban flight demonstrations around the world. At the California International Air Show, tens of thousands watched and barely heard Midnight fly. In the UAE, we initiated commercial deployment with our launch edition partner, Abu Dhabi Aviation, one of the region's leading operators.

This quarter, we expanded our flight test program with our first international flight in the heart of Abu Dhabi against the backdrop of the Sheikh Zayed Grand Mosque, one of the nation's most iconic landmarks. We've since continued to progress our flight testing as we look to validate the aircraft's performance in the region's extreme heat and humidity and advance regulatory approvals with the GCAA towards passenger-carrying operations. Excitingly, we've now begun receiving initial payments for these commercial operations under our launch edition program. Momentum has been particularly strong in Asia-Pacific, where we recently solidified relationships with the national airline carriers of Japan and Korea. A few weeks ago in Seoul, we announced a partnership with Korean Air, which selected Archer as its exclusive air taxi partner in the country following a rigorous evaluation process with plans to purchase up to 100 Midnight aircraft.

As Korean Air moves towards completing its acquisition of Asiana, it will become the nation's largest airline, and we're proud to partner in shaping Korea's adoption of next-generation VTOL technology. In Japan, our consortium with Japan Airlines, Sumitomo, and Soraco continues to make meaningful progress. Earlier this quarter, Osaka officially selected Japan Airlines and Sumitomo's joint venture, Soraco, using Archer's Midnight aircraft as its air mobility partner. That makes Archer the first U.S. eVTOL manufacturer positioned to play a central role in establishing commercial air taxis in Osaka. Just yesterday, Tokyo followed suit, selecting our consortium led by Japan Airlines as one of two groups that will lead eVTOL commercialization. I recently hosted Japan's Minister of Land, Infrastructure, Transport, and Tourism at our headquarters, a milestone that reflects Japan's commitment to leading in advanced air mobility and its confidence in Archer as a key partner in that effort.

These advancements across the Middle East and Asia position Archer at the center of the two most advanced aviation regions outside the U.S. You can expect to see us continue to mature our operational plans with the world's top governments and airlines. Our international growth continues to attract increasing interest from defense opportunities worldwide, including our ongoing collaboration with Anduril. Last quarter, I shared details of two strategic acquisitions that advanced our defense platform: key technology from OVAIR, a carom aircraft spinoff, and composite manufacturing capabilities at a facility in Southern California. These advancements position Archer at the intersection of America's commercial, defense, and regulatory momentum, building the foundation for the next era of flight. Sitting here today, watching aircraft take off and land as I deliver this update couldn't be more energizing. The era of advanced aviation has arrived, not as a distant vision, but as a tangible reality.

At Archer, we are not waiting for the future. We are building it. The time to seize this transformative opportunity is now. Over to Tom.

Tom Muniz (CTO)

Thanks, Adam. From day one, our focus has been consistent: finding the most efficient path to making urban air mobility a reality. We have been disciplined in our engineering approach and deliberate in the decisions around aircraft design, manufacturing readiness, certification strategy, and flight test operations. That approach continues to cement us as one of the leaders in this sector. Let's start with flight testing. Over the past few months, our Midnight program has consistently delivered strong results. We are now routinely flying longer, faster, and higher as we expand the aircraft's operational envelope. Recent flights have exceeded 55 miles, more than 30 minutes of flight time, altitudes up to our 10,000 ft service ceiling, and speeds in excess of 150 miles per hour. These missions are providing valuable certification data, and importantly, they closely mirror the majority of mission profiles we expect in early urban deployment environments.

This quarter, we were thrilled to fly as part of the California International Air Show at our home airport in Salinas, where tens of thousands of spectators saw Midnight fly. The consistent feedback we got at the event was how remarkably quiet our aircraft is. It really is a special experience to see the aircraft fly by at well over 100 miles per hour and barely be audible above the ambient noise. It was also a special moment for our team, many of whom got to bring their families to see the aircraft fly. The exciting news is that we are nearing completion of Midnight's piloted CTOL test campaign, and the consistency we are seeing across repeated mission profiles continues to solidify our confidence in our path to certifying Midnight, both in the UAE and the U.S.

Our next flight test phase with Midnight will be piloted VTOL, including full transition flights with our type certification intent for blade aft propellers. Unlike the CTOL envelope that we are now close to completing testing on, the VTOL and transition flight regimes are not new for Midnight, as we have previously completed an extensive flight test campaign with Midnight without a pilot on board. As always, our focus remains the same: disciplined execution, safety, and readiness for commercial operations. The momentum continues to build, and the team continues to deliver. As Adam mentioned, we are continuing to build our initial fleet of piloted Midnight aircraft across our facilities in Silicon Valley and Georgia. The next piloted Midnight aircraft is just wrapping up manufacturing and will move into ground testing shortly and flight testing as soon as it's ready.

This aircraft is equipped with the four Blade aft propellers that are part of our type cert design and will be used for piloted VTOL and transition flight testing. We continue to build out the capabilities needed to support a rate of 50 aircraft per year across nearly three-quarters of a million sq ft of our manufacturing and test facilities. Our golden manufacturing line in Silicon Valley remains the foundation of our manufacturing ramp. As a reminder, this is where our engineering and manufacturing teams refine build processes, tooling, and quality controls to ensure repeatability and efficiency. The lessons and tools established on that line are feeding into our high-volume production ramp. Across all our locations, we remain focused on building a production system that is reliable, scalable, and ready for certification.

The progress we are making in parallel on manufacturing and flight testing gives us high confidence in our ability to transition Midnight from development into commercial service smoothly and with the discipline this industry requires. On the certification front, we have obviously all been impacted by the government shutdown and are hopeful that this will be resolved soon. On the positive side, part of the FAA has continued working our program despite the shutdown, and we have continued with certification efforts in several areas, including continued SOI audits, as well as continued work with the FAA policy team to close the remaining industry-wide policy topics related to flight test. Finally, I want to touch on our progress on the defense side. Over the past quarter, we've focused heavily on integrating the technologies, capabilities, and teams we acquired from OVAIR and mission-critical composites.

Bringing that talent and technology into our program is key to accelerating our development cycle. We now have in-house composite structures manufacturing capability, giving us expanded rapid prototyping capacity, which is key for the new aircraft we are developing. We also continued maturing our hybrid electric VTOL aircraft program. While the specifics remain confidential, our work here is centered on delivering a clean-sheet next-generation aircraft designed to incorporate the best of Archer and OVAIR's technology, meeting the needs of operators who face demanding and complex missions. Momentum across the defense platform remains strong, and we are encouraged by the deep engagement from allied countries worldwide. We look forward to sharing additional updates as and when we can. Also, this quarter, we completed our acquisition of Lilium's patent portfolio.

This was one of the most significant technology portfolios in electric aviation, particularly in ducted fan propulsion, high-voltage systems, and advanced flight controls. Integrating this IP strengthens our long-term leadership position and expands our design space for future hybrid and electric platforms. It also positions us well against emerging opportunities unlocked by the Mosaic Rule, which enables a more flexible path to field innovative aircraft across both light sport and regional mobility categories. We view this as a strategic advantage for both our defense roadmap and potential future commercial variants. Now, I'll turn it over to Priya to talk about the financials for the quarter.

Priya Gupta (CFO)

Thanks, Tom. With our team continuing to deliver significant advancements across the key priorities you and Adam have discussed, our core focus from a financial perspective is ensuring we are operating from a position of strength. The key to that is maintaining a strong balance sheet. We closed Q3 2025 with $1.64 billion in cash, cash equivalents, and short-term investments, and today announced an additional equity raise of $650 million. As Adam and I have discussed previously, our goal is always to be opportunistic with our fundraising activity, and that's exactly what occurred here. As we considered options to finance the Hawthorne transaction, we received substantial inbound interest that led us to do the offering announced today, which had a very strong outcome with the round being well oversubscribed.

We view our ability to raise capital as a core strategic advantage that helps power our ability to seize on key opportunities. We often hear from government, commercial, and other strategic partners that liquidity is a key driver to their decisions of who to partner with. They understand the capital-intensive nature of our industry and want to work with partners who will be around for decades to come. Some examples of this include LA28's decision to select Archer and us winning the Lilium IP bid process over our competitors. With our total liquidity now over $2 billion, we intend to continue to use this as a tool to win future strategic opportunities across the business. It is not good enough just to have a strong balance sheet. We must remain focused on ensuring every capital allocation decision directly supports long-term value creation for our shareholders.

As we've consistently emphasized, we take a very disciplined approach to how we invest that capital. Our Q3 spending reflects our continued investment in our key priority areas: aircraft and AI technology development, certification, manufacturing ramp, and commercial operations infrastructure to support all our planned line of business in civil and defense, both domestically and abroad. Our continued emphasis on execution is what has led us to land our financial results within our guided range, and this quarter was no different. Our net loss for Q3 2025 was $130 million. This was a $76 million reduction from Q2 2025, primarily due to the non-cash impact of warranty valuation. Our GAAP operating expenses for Q3 2025 were $175 million and stayed essentially flat quarter over quarter as increased people-related costs were more than offset by the timing of material and supply-related spend.

Our GAAP operating expenses for the quarter included approximately $53 million of non-cash stock-based compensation-related expenses, which reflects the cost associated with stock issued to our employees, non-employees, and vendors. Our adjusted EBITDA for Q3 was a loss of $116 million, landing within our guidance range of $110-$130 million. Our Q3 adjusted EBITDA loss represents an approximately $3 million decrease from the previous quarter due to the reasons we have discussed earlier. With regards to cash burn, our cash used in operations and in purchase of property, equipment, and intangibles for Q3 2025 was $126 million, which was essentially flat quarter over quarter.

For Q3, our cash used in purchase of property and equipment was $20 million, generally in line with the guidance I provided during our last call, and represents a slight decrease of $4 million over the previous quarter, which included our strategic acquisitions of composite manufacturing assets and OVAIR patent portfolio. Looking ahead for the upcoming quarter, we estimate our adjusted EBITDA loss to be between $110-$140 million. We expect our core capital investments to increase in Q4 as we continue to build aircraft and expand investments in our manufacturing capabilities. These estimates do not include the costs associated with the Lilium and Hawthorne acquisitions. As we announced today, we closed the Lilium acquisition for approximately $21 million earlier in Q4, and we expect the initial closing of the Hawthorne acquisition to occur by year-end, which will entail us funding the $126 million purchase price in cash.

What's clear is that now is the time to ensure we solidify our position as a market leader across electric air taxis, the future of vertical lift for defense and cargo, and the AI-based technologies that will be used for decades to come. This is how we can deliver enduring outsized value to shareholders. With that, I'll turn it back over to Adam for Q&A.

Operator (participant)

Great, Adam. The line is open.

Adam Goldstein (Founder and CEO)

Thank you, Operator. We're going to open the call up to Q&A. First, we'll start with the analyst community, and then we will move into the retail folks at the end. Operator?

Operator (participant)

Of course. We will now begin the question-and-answer session. If you'd like to ask a question, please press Star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press Star followed by 2. Again, to ask a question, press Star 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. Our first question will come from the line of Edison Yu with Deutsche Bank. Your line is now open, Edison.

Edison Yu (Global Space and Aerial Mobility Analyst)

Thank you. Good afternoon, everyone. I want to ask about the big news on the airport. What kind of advantages do you think you will gain by taking ownership of it? Does this signal kind of some intention on what you might do from a software standpoint on air traffic control, on autonomy?

Adam Goldstein (Founder and CEO)

Thanks, Edison. This was a very unique opportunity. Airports do not really change hands very often. Sometimes not at all. If you look back over the past five years, there are only a handful of assets that have traded in the entire U.S. Opportunities like this are, I think, very rare. You know our big strategy has been focused around Los Angeles, especially with the Olympics coming up. As we have been building out the infrastructure, Hawthorne was a really good opportunity to not only just be a major hub, but also to be a point where we can go test, roll out, do all of our depoting, all of our MRO at. Our vision is to create this grand central opportunity for the Hawthorne Airport. We looked at it as you can go out and buy a hangar.

We would have had to pay somewhere between $50-$100 million to buy a large hangar. The opportunity to actually get control of the airport, plus the FBO, plus all the different growth opportunities was something that we could not pass up. I think most unique is the opportunity to actually go roll out our software in an airport that is in the middle of a large city. The Hawthorne Airport operates in Class D airspace, not in the Class B airspace where big LAX planes are operating. There is an FAA contracted tower here. It gives us a really unique opportunity to really roll all this stuff out. It is more than just looking at it from a revenue or EBITDA perspective. It is structurally advantageous for us to have this right in the middle of LA.

It also happens to be less than three miles from both LAX and SoFi Stadium. It also happens to be located all in the different Elon Musk companies' territories like The Boring Company. The Boring Company has tunnels that run underneath the airport. Lots of interesting creative opportunity potential in the future.

Edison Yu (Global Space and Aerial Mobility Analyst)

Understood. Understood. I know you mentioned that it's already quite profitable. Any way to dimension the contribution financially from them going forward?

Adam Goldstein (Founder and CEO)

The revenue has the opportunity to be in the tens of millions, and it is EBITDA positive. We do not really think about it like that because there are some decisions that we have to think about. One is, do we sell hangars? Do we build new hangars? Do we lease new hangars? Or do we consume them ourselves? There are a bunch of decisions that have to get made in terms of how we will utilize the airport. We look at it mostly from a strategic standpoint. I think if we wanted to, we could carve out the airport and make money, but that is certainly not the goal. The goal is really to take it as a strategic asset and use it to have a structural advantage in the industry.

Edison Yu (Global Space and Aerial Mobility Analyst)

Gotcha. Just on the raise, I know you're using some of it for the deal, but it seems like the deal is fairly small in size. You actually raised quite a bit more. Any insight as to, I guess, what the extra was for?

Adam Goldstein (Founder and CEO)

Yeah. It was opportunistic. We were not looking to go out there and raise capital. There was very large reverse inquiry from very high-quality investors. That was, I think, unique for this period of time. I'm guessing a lot of that came off the back of the Beta IPO because there is a lot of interest in the industry, and I view that as just a very positive signal. I think that was one thing. The strategic asset was also a really unique thing that came up as well to go do that. The viewpoint was, we have been looking at both the civil and the defense side of the business.

As the civil side of the business starts to approach getting close to market and the defense side of the business starting to ramp up, we thought it would be prudent to add a little bit of extra cushion to the balance sheet. Finally, from an offense perspective, we have found that the capital has been a real weapon in terms of going out and being able to do things that we might not have been able to do. For example, the Lilium portfolio, we were actually the lowest bid when it came to the different bids that were out there, but there was a lot of confidence in our ability to close, and we ended up winning that because there had been previously some issues that the bankruptcy group had been through before.

Also, going to customers like the big defense partners, when we show up with a large balance sheet, they take us a lot more seriously because the programs that we're looking at are so large. They look at us and say, "If we're going to go get you guys involved in a many tens of billions of dollars sized program that's going to last for, they call them, generational programs, you need to go deliver against that." It puts us in a position of strength to do that. While this was opportunistic, I think we are done raising capital for a while for now.

Edison Yu (Global Space and Aerial Mobility Analyst)

Great. Thank you.

Operator (participant)

Thank you for your questions. Our next question comes from a line of Andrea Sheppard with Cantor Fitzgerald. Your line is now open.

Andres Sheppard (Lead Equity Research Technology Analyst)

Hey, guys. Good afternoon. Andres here. Congrats on the quarter. Hey, Adam. I was wondering if you could maybe help us flush out your latest vision for commercialization in the UAE and through your launch edition. Just wondering if you could maybe remind us, timing or expectations there? Are you looking to sell aircraft in the region? Just a little more color on your vision there for commercialization. Thank you.

Adam Goldstein (Founder and CEO)

Thanks, Andre. We kicked off our launch edition program in the UAE this summer, and we delivered an aircraft and began test flights in Abu Dhabi. We did that in partnership with our partner out there, Abu Dhabi Aviation. As a reminder, each of the launch edition programs carry a multi-year commercial value in the tens of millions of dollars to Archer. We have already started receiving initial cash payments in the seven-figure range tied to operational milestones. Beginning in 2026, we expect to recognize payments as revenue under the accounting treatment for the program as it takes place. Just this week, we saw the director general of the UAE's national aviation regulator reaffirm publicly that they remain on track for certification as early as Q3 2026.

That would enable our partner, Abu Dhabi Aviation, to begin commercial passenger service in the country once that takes place. As a reminder, we sell aircraft. As we sell aircraft, we start to recognize revenue and collect cash. We have the ability to do that really all over the world, as you have seen with our launch edition partners. Right now, what we are doing is balancing the volume of aircraft we are building against testing in the U.S., the EIPP program, and the launch edition customers. There are certainly lots of opportunities to do all three.

Andres Sheppard (Lead Equity Research Technology Analyst)

Got it. That's super helpful. I appreciate that color and revenues next year. That's exciting. Maybe as a follow-up, I was wondering if either you or Tom can maybe expand a little bit further on the defense side and maybe on the hybrid propulsion. What kind of opportunities there are you able to share with us that you might be pursuing, whether it's with Anduril or other partners there? Just another maybe update on the defense side. Thank you.

Adam Goldstein (Founder and CEO)

Sure. We are deep in the process of product development with Anduril, and we've been working closely with a customer on building for specific missions. What's become very clear as we've gone through this process is that you cannot just take a hybrid powertrain and put it onto an existing eVTOL platform. The defense industry is not interested in that as a product. There are specific missions that need to be filled, and we are building a platform that is reusing as many of our systems, subsystems, manufacturing processes as possible. If we are selected for that program, I think it will change the game for vertical lift warfare. When we have something to show, we will show everybody. If you look at the size of past rotorcraft programs, they are absolutely massive, and they last for decades. We continue to be very excited, engaged in that.

We continue to be very positive that good opportunities will come. That is largely where the defense opportunity, we think, sits.

Andres Sheppard (Lead Equity Research Technology Analyst)

Wonderful. Thank you so much, and congrats again. I'll pass it on.

Adam Goldstein (Founder and CEO)

Thanks.

Operator (participant)

Thank you for your questions. Our next question comes from a line of Savinthi Syth with Raymond James. Your line is now open.

Savinthi Syth (Airlines Analyst)

Hey, good afternoon. I wonder if you could talk a little bit more about the kind of the EIPP program. Just curious what the thinking or the strategy is behind it for the DOT and how you think it's going to work.

Adam Goldstein (Founder and CEO)

Sure. Thanks, Savi. There has been a lot of speculation about the EIPP, and it really is still forming. The purpose of the EIPP is not really about generating revenue. It is actually about introducing aircraft into urban environments and gaining the trust of the flying public, gaining the trust of the municipalities and the regulators. The program will roll out conservatively, simple point-to-point routes in good weather, VFR conditions. The goal is really to prove the safety and capability of the aircraft. We all know the type certification process is sort of an all-or-nothing type process. While I understand the purpose of that, I believe the way that autonomous cars or Waymos have been rolled out makes actually a lot of sense. You start in a small area, you gain the trust of the public, and then you start to expand.

I think by having a process like this, it will release the certification pressure valve, and it should accelerate the path towards certification and commercialization.

Savinthi Syth (Airlines Analyst)

That's helpful. If I can just follow up briefly on the, I think in the 8-K release, it was kind of called out that $171 million for Hawthorne. And it seems like the purchase price is $126 million. I'm kind of curious what the near-term spend you see at Hawthorne and kind of what that incremental spend there is and just kind of how you think about spend over the next kind of year or two.

Adam Goldstein (Founder and CEO)

Sure. So there's the core price, which is the $126 million for the airport. There are development rights, and then there's the FBO. And that adds up to the $171 million. There's decisions that we can make in terms of how much to spend, but there's not some big giant number that we're going to go deploy into the airport in the near term. We'll look at that in terms of the value that can be created, the operations that we need to scale LA and scale into the Olympics. Those are still decisions to be made, but I would not expect some giant dollar number. I also would not expect us to go try to replicate this all over the country or all over the world. These opportunities do not even really exist.

This is like an end-of-one asset. It is pretty unique from that standpoint.

Savinthi Syth (Airlines Analyst)

Makes sense. Thank you.

Operator (participant)

Thank you for your questions. Our next question comes from a line of Bill Peterson with JPMorgan. Your line is now open.

Min Moon (Managing Director and Equity Analyst)

Hi, good afternoon. This is Min Moon for Bill. I was hoping to follow up a little bit on certification. Would you be able to share your latest expectations around when you expect to begin TIA testing? And when you also expect to be testing Midnight with FAA pilots on board for credit?

Tom Muniz (CTO)

Yeah. Hey, Mihimon. This is Tom. I'll answer that. We're actually getting pretty close to starting our first TIA campaign with the FAA, and that could happen as soon as the end of this year. Just to kind of level set everybody, as I've said in the past, the TIA process, at least for us, will be broken into many phases on the order of, say, 10 different TIAs, each one targeting compliance for a very specific system or aspect of the aircraft. The first one of those, again, we plan to start around the end of the year. The way you could think about the evolution here is, as we continue to deliver or finish manufacturing of these aircraft, each one will be built with systems and aspects that conform in order to support further TIA testing, ultimately building up to a final.

Fully FAA-conformed aircraft, doing kind of the final FNR or function reliability testing for the aircraft. I think one thing that's kind of important to know is that right now, as we said before, we still do have a couple of policy items open with the FAA. Us or anybody in the industry can't do that final TIA for the purposes of flight performance until a couple of those items are resolved. We're still optimistic that that'll happen very shortly. Otherwise, progress is looking really good.

Min Moon (Managing Director and Equity Analyst)

Awesome. Thank you so much for the color. Thank you so much for the color. As you kind of ramp up your manufacturing capacity here, I think you mentioned up to 50 aircraft in the coming months. Do you think that that's sufficient to support all the demand that you see in the next year between the test aircraft, the EIPP, defense, and then some of your international launch edition programs?

Adam Goldstein (Founder and CEO)

Hey, Mihimon. This is Adam. The demand far exceeds what we can build. We are really in the phase where we kind of broke this out into chunks. We said we've built that first chunk of called single-digit aircraft, and then we're looking at that next chunk, which is in the 50 aircraft range. We are looking at it from the standpoint of making sure we can have enough aircraft to support the different opportunities we have coming, whether that's the launch edition programs or looking ahead and supporting the Olympics, and really trying to think about where the near-term opportunities will be. If we theoretically had hundreds of airplanes, I think we could deploy them, sell them, put them out there. I also think we are learning how to build, and there are different chunks that we're going through as we scale that up.

We're also, of course, finishing up and getting through the certification process in the U.S. and then, of course, internationally as well. It's a balance amongst all of those. I think it really starts with there's a high-level demand for the product, and then it's us being able to deliver against that from a manufacturing and then ultimately certification.

Min Moon (Managing Director and Equity Analyst)

That's super helpful. Thank you.

Operator (participant)

Thank you for your questions. Our next question comes from a line of Austin Moeller with Canaccord. Your line is now open.

Austin Moeller (Credit Analyst)

Hi, good evening. I just wanted to ask about the Lilium asset acquisition. Is Lilium's silicon-dominant anode battery or the ducted fan technology more important to you, and when might this be incorporated into one of your aircraft platforms?

Adam Goldstein (Founder and CEO)

Thanks for the question, Austin. We've been following Lilium closely for several years, and we have a lot of respect for the engineering ambition that Daniel and his team brought to the sector. They built very impressive technology with world-class European talent, and they invested $1.5 billion behind it. Our consolidation of the innovation by winning that bid for us was, I think, actually quite positive in that there were a number of foundational eVTOL technologies around ducted fan, propeller systems, high-voltage systems, and many others that we were able to accumulate patents on. It adds around 300 patent assets to the Archer portfolio, bringing our portfolio to more than 1,000 patent assets globally.

Much of the technology that was being developed there, we believe, was still a little bit ahead of its time, but it holds meaningful potential as the industry matures. The depth of the ducted fan IP, we think, is quite compelling. We're laser-focused on Midnight, but that technology one day could support new architectures, including some of the smaller format or light sport concepts as the regulatory pathways from Mosaic unlocks innovation in those adjacent segments. We view this as a very important long-term enabler and just another example of us consolidating the technology foundation of the industry.

Austin Moeller (Credit Analyst)

Okay. Just on the purchase of the Hawthorne Airport. I think when we were in your office, we discussed the importance of real estate at airports for eVTOL. Are you planning to transfer any of the space at those airports either to FBOs or airline customers to be able to use, or how are you thinking about using that valuable real estate?

Adam Goldstein (Founder and CEO)

The airport is quite large. It's 80 acres. We have partners in the industry like Beta who come and electrify airports. There are groups out there that we partner with that I think could also find value in the airport. There are lots of ways to think about it. One is we can build a centralized hub that everybody can use. It could be a way to help bring the industry together and create a main point of interest for us all to use to really help unlock a city like Los Angeles. I think that's one really attractive way to look at it. Another one is, as the industry matures, it gives us a real central hub for all the maintenance, for all the depoting of aircraft in the middle of the city.

When you think about launching operations, you do not really want to fly your aircraft in 30 minutes, 45 minutes from somewhere significantly outside the city. This was just super unique from that standpoint that we could use that. I think it is an opportunity to really help the industry propel forward in a complicated city. The other side of it is it gives us an incredible opportunity to go out and test out all of the software, the AI capabilities that we have been building, from air traffic management to all the other capabilities we mentioned. The industry is going to need to evolve to support the large advanced air mobility expectations. That is not just on manufacturing. That also has to come from the software side as well.

We plan to use this airport as a test bed to deploy that, partnering with the regulators to really showcase a lot of these technologies.

Austin Moeller (Credit Analyst)

Great. Thanks for all the details. I'll pass it back.

Adam Goldstein (Founder and CEO)

Thank you.

Operator (participant)

Thank you for your questions. Our next question comes from a line of Amit Dake with HC Wainwright. Your line is now open.

Amit Dayal (Analyst)

Thank you. Good afternoon, everyone. Congrats on all the progress. Apologies if you already discussed this, but any color on the burn rate for 2026?

Priya Gupta (CFO)

Hey, Amit. This is Priya. Thanks for the question. When we think about 2026, the biggest expense will continue to be our Midnight program. Next year, we'll be producing and deploying additional aircraft. As we've talked about earlier, we'll balance where we deploy these aircraft between UAE, EIPP, flight test, and other opportunities. Some of those opportunities will be generating cash, and they'll net these expenses we've talked about. When we think about beyond the scope program, we expect to invest in our defense and software development as well. First, for the defense program, we do plan to leverage a large portion of the existing resources we have, as well as the test infrastructure. We do expect to invest incrementally to support the program, which, again, locks a lot of the value and big defense contracts that Adam's talked about.

For software, we'll be, again, investing to build the product, which could generate revenues in the future. Timing of that is still to be determined, and we'll talk about it closer to the time when we get there. Of course, finally, we talked about the Hawthorne acquisition today. We'll be integrating that into our business next year, which is, again, generating revenues and will be generating margin. We'll be incorporating that into our financial results for next year. Hopefully, that gives you, again, a framework as in how we think about next year. We'll get into official guidance when we get to that point in time next quarter. Hopefully, that helps.

Amit Dayal (Analyst)

Yeah. Thank you. That's helpful. And just clarification on the number of aircraft. You may need to get through certification and commitments in UAE, etc. Are we targeting around 10 aircraft over the next six to nine months?

Adam Goldstein (Founder and CEO)

Yeah. So there are six aircraft in production now with parts on order for many more than that. As Priya mentioned, we're sort of trying to judge or be opportunistic with where to use those aircraft. Certainly, there's a planned portion of those, at least, that will be used for FAA certification testing. Others, we want to send to EIPP locations in order to support that testing as well as our activities in the UAE. Until all those things start to materialize, we have optionality for kind of how many to send to which location.

Amit Dayal (Analyst)

Understood. Just last question, Adam. This is an interesting acquisition, this airport strategic asset for you guys. Do you think this sort of triggers a little bit of a land grab in terms of other sort of players or even direct participants trying to get involved in taking ownership of such assets, given they are limited in number, and some of these could be in critical locations that could support expansion efforts in the long term? How should we think about some of these types of assets that are adjacent to the story that now kind of comes to the fore after this deal that you've undertaken?

Adam Goldstein (Founder and CEO)

I think that some of the competitors would be interested in doing that. I just don't think there are opportunities to do that. These assets just change hands so rarely and sometimes never because they're owned by the municipalities. They are very unique in nature when they come up. Again, we plan to use this asset as a hub for Los Angeles and to really build around it. We welcome the competitors to actually use it and to kind of unify more as an industry to together help operationalize an incredible city of Los Angeles, which can have a huge opportunity, and there will be plenty of room for us all to help change the urban landscape here.

Amit Dayal (Analyst)

Understood. Thank you for that. That's all I have, guys. Thank you.

Adam Goldstein (Founder and CEO)

Thank you.

Operator (participant)

Thank you for your questions. Our next question comes from a line of David Zazula with Barclays. Your line is now open.

David Zazula (Equity Research Analyst)

Hey, good afternoon. Thanks for taking my question. Yeah. I guess first. A launch-to-distant aircraft. I know you're. There's not that much you can say, but I guess. Are there any modifications that you anticipate to be able to use the currently flying launch-to-distant aircraft as the conforming aircraft for testing with the GCAA?

Tom Muniz (CTO)

With regards to the certification in UAE, which is with the GCAA, as I've talked about in past calls, we've got a very detailed kind of step-by-step plan for delivering data to them to support. The kind of phased integration of the aircraft and ultimately getting to passenger service in that country. A lot of that is leveraging testing we've already done or are already doing with the FAA. From there, it kind of tees into the discussion we had earlier around FAA. I would just go back to our framework there of each aircraft that we're building is really targeted to generate specific data to provide to regulators, both in the UAE and the US, in order to show compliance. Again, that kind of merged with trying to, let's say, balance where we put our priorities as far as allocating aircraft.

We've got essentially a lot of paths, but they all lead to really exciting things for next year.

David Zazula (Equity Research Analyst)

Very helpful. Tom, could you maybe give a little more color on any impact that the shutdown has had on the certification timeline and the ability to progress towards the conforming aircraft in the U.S.? Thanks.

Tom Muniz (CTO)

Yeah, absolutely. I touched on it briefly early on in the call, but we are still engaging with the FAA despite the shutdown. On our program, some resources continue to work, which is fantastic. Others are, unfortunately, not available. Hopefully, that situation gets resolved soon. In several areas, we're sort of unconstrained to just continuing to execute all the areas that have approved CERT plans, and we're just in execution mode.

David Zazula (Equity Research Analyst)

Thanks, Tom. Appreciate it.

Priya Gupta (CFO)

Thank you for your questions. Our next question comes from a line of Chris Pierce with Needham & Company. Your line is now open.

Chris Pierce (Internet Research Analyst)

Hey, good afternoon. Apologies if this came up earlier, but with the acquisition of Hawthorne, given its much different geographic footprint versus Salinas, do you have kind of carte blanche to fly test flights in that area, or do you need to talk to the regulators further given the higher population density or just broadly kind of going into basically a city?

Tom Muniz (CTO)

You can break this down in a couple of different ways. This will not be used as our core test flight facility. We will still be using Salinas as our core test flight facility. Once you get kind of certain hours of maturity on the aircraft, you can start to fly and get permissions to fly in and around urban environments. EIPP, as an example, is a way to help accelerate some of these paths. The EIPP is expected to have the cities get announced in the first quarter of next year. It is expected there will be five, and then for flights to take place starting in the summer. We are hopeful that Hawthorne gets picked, and that is one of the places that we can operate out of. It would make sense. It is right in the middle of all these operations that we are working on.

We'll see what happens. Nonetheless, we'll be still using the airport as building up the different assets here as we build into just commercializing and ultimately into the Olympics.

Chris Pierce (Internet Research Analyst)

Okay. Did you feel like you needed to make this acquisition because maybe partners within the LA area were not moving as fast as you like, or is that kind of just silly conjecture? I just kind of want to get a sense of what drove you to pull the trigger beyond just these assets do not come up for sale very often.

Tom Muniz (CTO)

It's just very unique, Chris. It's something like if we didn't do it now, it may never come up ever again, or at least in my lifetime for us to go do something like that. Need, I think the answer is no. Super opportunistic, I think the answer is definitely. In the aviation world, I think this is viewed as an absolutely treasured asset right in the middle of the city. This airport is three miles from LAX. If you think about all the complexities that are at LAX, which we will not have to deal with.

If you can connect this airport to LAX, it could end up being a massive terminal that is used to shuttle not just even hundreds of people, but potentially even thousands of people to the airport because you are out of the complex airspace where there is a jet landing at LAX every 90 seconds. The opportunities here are quite incredible. It was just something that we could not pass up. It was viewed as something that was sort of a once-in-a-company kind of opportunity.

Chris Pierce (Internet Research Analyst)

Okay. Thank you.

Operator (participant)

Thank you for your questions, Chris. That will conclude our analyst question and answer session. I would now like to pass the call back over to Adam.

Adam Goldstein (Founder and CEO)

Thanks. I'm going to—I know we're running—I'm still going to go through at least one of the retail questions that was just asked. The question was, with the recent deal with Korean Air, are you pursuing further eVTOL deals and agreements with other major Asian aviation conglomerates? Yes, I am personally spending a lot of time in the second half of this year abroad, and I've been with customers, senior government leaders, and particularly in the Middle East and in Asia. The reception has been very strong and incredibly validating. Our model is certainly resonating. The progress that we're making in the UAE, both in flight testing and on the regulatory development, has driven a lot of inbound interest across the region, especially at countries that are looking to fast-track commercial service with proven partners.

We're seeing that same momentum in Asia and in Europe as governments are looking to integrate urban air mobility into the national transportation strategies. You've seen it in Korea and Japan, where we were selected as the air taxi partners for both of the national flag carriers. I think there's going to be a lot more coming. A lot of these conversations will converge at the Dubai Air Show. We look forward to sharing a lot more when the time is right. With that, I think I will wrap up the call. I want to thank everybody for joining. This is a very meaningful time for our industry, and we are building thoughtfully and steadily towards our vision. I want to thank the team, the partners for all their work and commitment, and we look forward to sharing more progress next quarter. Thanks.

Priya Gupta (CFO)

That concludes today's call. Thank you for your participation and enjoy the rest of your day.