Q2 2024 Earnings Summary
- Strong Strategic Partnership with Stellantis reducing capital needs and accelerating production: Archer has strengthened its relationship with Stellantis, which will invest up to nearly $400 million in labor and CapEx, covering labor costs through 2030, to help Archer scale Midnight manufacturing up to 650 aircraft annually. This partnership significantly reduces Archer's capital needs and increases the odds of successful commercialization. ,
- Robust order book and early revenue potential through direct sales: Archer has a nearly $6 billion indicative order book, including a planned purchase of 116 aircraft from Future Flight Global. The direct sales model allows for early cash flow, with initial down payments of 1%-2% and up to 50% in pre-delivery payments as delivery approaches, particularly in supportive markets like the UAE. , ,
- Progress towards profitability and commercial operations: Archer targets a production volume of 250 units, aiming for a 40%-50% gross margin at an average selling price of $5 million per aircraft, which would make the company cash flow positive. The company plans to produce 10 aircraft in 2025 and 50 in 2026, and the FAA is making good progress on regulations, which supports Archer's path to commercialization. , ,
- The company anticipates achieving positive operating margins at a production volume of 250 units, targeting a 40% to 50% gross margin , but plans to produce only several dozens of aircraft in the first few years. This modest initial production may delay reaching profitability and cash flow positive status, posing financial risks.
- The company relies on regulatory approvals and the issuance of the FAA's SFAR to finalize pilot training requirements. Until the SFAR is published, details of pilot training remain uncertain, which could potentially delay commercial operations.
- Pre-delivery payments, which can be up to 50% of the aircraft's price, are tied to the company's progress with regulatory certifications in different markets. Delays in certification processes may hinder cash inflows from these payments, affecting the company's liquidity.
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Capital Raise and Stellantis Partnership
Q: Who are the capital raise participants and future capital needs?
A: Archer raised capital from institutional investors and strategic partners, including Stellantis and United Airlines. Stellantis will cover manufacturing labor costs and CapEx to scale production, reducing cash burn and helping Archer reach 40%-50% gross margin at 250 aircraft volume, becoming cash flow positive. -
Manufacturing Ramp and Cash Flow
Q: How are you thinking about manufacturing ramp and cash flow?
A: Archer plans to start modestly with a few aircraft, ramping to several dozens over the first couple of years, then scaling up. At 250 aircraft volume with a $5 million ASP and 50% gross margin, Archer expects to be cash flow positive. The cost structure should not materially increase unless a new aircraft program starts. -
UAE Market Entry and Certification
Q: Will UAE be the first market and how's certification there?
A: Archer sees an opportunity to launch in the UAE, supported by the Abu Dhabi Investment Office and the GCAA. They are working with local partners to deploy a large number of Midnight aircraft, electrify infrastructure in Abu Dhabi and Dubai, and expedite deployment under the same airworthiness criteria as the FAA. -
Relationship with Stellantis and Equity Stake
Q: How comfortable is Stellantis increasing its equity stake?
A: Stellantis is enhancing its partnership with Archer to help bring the aircraft to market efficiently. By covering manufacturing labor costs and CapEx, they increase the likelihood of reaching production levels and profitability. This partnership reduces Archer's cash burn and provides a clear path to market. -
Order Book and Deposits
Q: How many deposits will be paid this year and ramp up ahead?
A: Archer structures sales with an initial 1%-2% down payment and aims to collect up to 50% in pre-delivery payments as delivery approaches. The timing depends on market certification progress. In markets like the UAE, pre-delivery payments are expected to pick up as launch dates near. -
Flight Testing Progress and Piloted Flights
Q: What's needed before piloted flights? Any modifications?
A: No modifications are needed. Archer is integrating and bringing up the aircraft for piloted flights, doing system integration and functional testing. They've completed expanding the transition envelope with Midnight and are focusing on flight controls and operational learnings to support certification and commercial operations. -
Los Angeles Operations and 2028 Olympics
Q: Expected aircraft scale in LA by 2028 Olympics?
A: Archer aims to contribute to the FAA's Innovate 2028 goal of mass eVTOL use at the LA Olympics, potentially deploying hundreds of aircraft. They plan to establish operations, engage local communities, and showcase America's aviation leadership during major events like the Olympics, World Cup, and Super Bowl. -
Accounting of Labor and CapEx with Stellantis
Q: How will labor and CapEx costs flow through financials?
A: Stellantis will pay for labor and CapEx to scale production; Archer will reimburse Stellantis with stock over time as expenses are incurred. This arrangement reduces Archer's cash burn and increases production success odds. The accounting treatment is being determined with accounting partners. -
For-Credit Testing and Certification
Q: Details on for-credit testing and system-level plans?
A: Archer is conducting for-credit testing on system components from suppliers with approved certification plans. By partnering with companies like Safran, Garmin, and Honeywell, they aim to keep the aircraft simple and low risk. The goal is to begin for-credit flight testing next year with piloted aircraft currently in production. -
Pilot Training Framework
Q: How is pilot training certification framework developing?
A: The FAA's progress on the SFAR will define training requirements. Archer's airline team is developing the training syllabus and simulator hardware to support the program. Details depend on the SFAR's release. -
Noise Levels of Midnight Aircraft
Q: What are the decibel levels of Midnight aircraft?
A: Acoustic testing shows results in line with predictions; Midnight is expected to be significantly quieter than helicopters. In cruise, the aircraft is practically silent, and data shows low noise in takeoff and landing as well. -
Order Book vs. Production Schedule
Q: What percentage of production is open for new customers?
A: Archer's direct sales model provides early cash flow and helps build a global platform. They plan to introduce aircraft in multiple countries at low levels initially, then scale up. This strategy allows for a faster ramp-up by gaining experience across markets and forming partnerships, particularly in regions like the UAE and GCC.