Archer Aviation (ACHR) - 2023 Q4 - Annual Results

Operational and Business Highlights Archer achieved significant milestones in Q4 and FY 2023, including strong liquidity, a growing order book, advanced certification and manufacturing progress, and successful flight testing Key Advantages & Recent Highlights Archer highlights significant progress in Q4 and FY 2023, emphasizing a de-risked certification path with 80% of Midnight's components having certification heritage. The company is constructing three conforming aircraft, is on track to complete its high-volume manufacturing facility in 2024, and ended the year with a strong liquidity position of approximately $625 million. The indicative order book has grown to $3.5 billion - Ended FY'23 with a strong liquidity position of approximately $625 million, with cash balances increasing quarter-over-quarter[2] - The indicative order book has reached a potential value of up to $3.5 billion, based on an indicative price of $5 million per aircraft[2][3] - Key operational milestones include having three conforming aircraft under construction, making rapid progress in the flight test program with a goal of 400 flights in 2024, and nearing completion of the Georgia manufacturing facility[2] Certification and Manufacturing Progress The company is in the final "Implementation Phase" of FAA Type Certification, with approximately 80% of its subsystems and components sourced from established aerospace suppliers, significantly de-risking the process. Construction of three conforming Midnight aircraft is underway for FAA "for credit" testing. Concurrently, the high-volume manufacturing facility in Georgia, a joint effort with Stellantis, is on track for completion in 2024 and is designed to produce up to 650 aircraft annually - Approximately 80% of Midnight's subsystems and components are sourced from leading aerospace suppliers with existing certification heritage, reducing certification risk[4] - Three conforming Midnight aircraft are currently under construction, with a total of six planned for use in piloted "for credit" testing with the FAA[8][10] - The high-volume manufacturing facility in Georgia is set for completion in 2024. This initial phase of ~350,000 sq. ft. is designed to support the production of up to 650 aircraft per year[11] De-risked Certification Path Archer's certification path is de-risked by strategically sourcing critical systems from leading aerospace suppliers with existing certification heritage - Strategic sourcing from leading aerospace suppliers like Safran, Honeywell, Garmin, and Hexcel for critical systems (Flight Control, Avionics, Airframe) provides a de-risked path to certification[4][5] Final Certification Phase Archer is in the FAA's "Implementation Phase" for Type Certification, focusing on compliance data generation and "for credit" testing - Archer is now in the FAA's "Implementation Phase" for Type Certification, focusing on compliance data generation, "for credit" testing, and submitting test reports for FAA review and approval[6][7] Conforming Aircraft Construction The company has completed and commenced testing of its "Iron Bird" lab model, a crucial step before final assembly of conforming Midnight aircraft - The company has completed the build-out and commenced testing of its "Iron Bird," a full-scale lab model of the Midnight aircraft used to test and integrate components, software, and hardware before final assembly[8][9] Volume Manufacturing Facility Archer is collaborating with Stellantis on a phased approach for contract manufacturing, aiming to complete its high-volume facility in Georgia by 2024 - Archer is working with Stellantis on a phased approach for them to become the contract manufacturer, which would involve Stellantis absorbing capital requirements for the manufacturing ramp and working capital for future production[11] Flight Test Program The Midnight aircraft's flight test program has made significant strides, completing Phase 1 in just three months. This included progressively complex maneuvers and a collaborative downwash/outwash test campaign with the FAA and NASA. Following a battery system upgrade in January, the program is advancing towards full wing-borne transition flight, keeping Archer on track to achieve its goal of 400 test flights in 2024 - The Midnight aircraft successfully completed Phase 1 of its flight test program in only three months[12] - Collaborated with the FAA and NASA on a downwash and outwash flight test campaign, providing valuable data for accessing aviation infrastructure[12] - The company remains on track to complete its goal of 400 test flights in 2024, with the program advancing toward full wing-borne transition[13] Commercial Progress and Order Book Archer's indicative order book has grown to a potential $3.5 billion, covering up to 700 aircraft. The company is pursuing a dual business model of direct-to-consumer ride-sharing and aircraft sales to operators. Key customers include United Airlines for domestic launches, and significant orders are in place for the UAE and India. Additionally, the U.S. Air Force has made payments totaling approximately $2 million under existing contracts Indicative Order Book Summary | CUSTOMER | REGION | BASE | of AIRCRAFT OPTIONS | TOTAL | ORDER VALUE* UP TO | | :------- | :----- | :--- | :-------------------- | :---- | :----------------- | | UNITED | USA | 200 | 100 | 300 | $1.5B | | INTERGLOBE | INDIA | 200 | - | 200 | $1.0B | | (Partners) | UAE | 100 | 100 | 200 | $1.0B | | TOTAL | | 500 | 200 | 700 | $3.5B | - The company intends to operate two complementary lines of business: a direct-to-consumer aerial ride-share service and the sale of aircraft to other operators[14] - Received approximately $2 million in payments from the U.S. Air Force under contracts worth up to $142 million. Deliverables included a mobile flight simulator and sharing of test reports[16] Recent Announcements and Events From November 2023 to February 2024, Archer announced significant milestones including a planned purchase of up to 100 aircraft by Air Chateau International, an agreement with NASA for technology collaboration, the successful completion of Phase 1 flight testing, and receiving Part 145 Certification from the FAA. The company also has a schedule of upcoming investor and industry conferences in February and March 2024 - Announced a planned purchase of up to 100 Midnight Aircraft by Air Chateau International, valued at up to $500 million (11/16/23)[18] - Signed a Space Act Agreement with NASA to collaborate on mission-critical eVTOL aircraft technologies (1/22/24)[21] - Received Part 145 Certification from the Federal Aviation Administration (2/8/24), enabling the company to operate a repair and maintenance station[22] Q4 & FY 2023 Financial Review Archer's financial review for Q4 and FY 2023 details increased net losses and operating expenses due to development investments, while maintaining a strong liquidity position Financial Performance Summary Archer reported a GAAP net loss of $109.1 million for Q4 2023 and $457.9 million for the full year 2023, a significant increase from the $317.3 million loss in 2022. Non-GAAP operating expenses were $87.5 million for the quarter and $311.8 million for the year. The company maintained a strong liquidity position, ending the year with $464.6 million in cash, cash equivalents, and short-term investments Q4 & FY 2023 Financial Summary (in millions) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :-------------------------------- | :-------- | :-------- | :-------- | :-------- | | Total GAAP Operating Expenses | $107.3 | $108.1 | $446.9 | $347.4 | | Net Loss | $(109.1) | $(95.4) | $(457.9) | $(317.3) | | Non-GAAP Total Operating Expenses | $87.5 | $76.8 | $311.8 | $227.5 | | Adjusted EBITDA | $(85.2) | $(76.0) | $(305.3) | $(224.4) | | Cash, Cash Equivalents and Short-Term Investments | $464.6 | $531.2 | $464.6 | $531.2 | Operating Expenses Analysis Total GAAP operating expenses for FY 2023 were $446.9 million, up from $347.4 million in FY 2022, driven by investments in the Midnight aircraft program, supply chain development, and scaling infrastructure. Non-GAAP operating expenses for FY 2023 were $311.8 million, an increase of $84.3 million over 2022, reflecting continued investment in aircraft development, FAA certification efforts, and manufacturing capabilities - Q4 2023 GAAP operating expenses were $107.3 million. The sequential increase from Q3 2023 was primarily due to a one-time non-cash credit of $59.1 million in Q3 related to an equity award forfeiture[27] - FY 2023 GAAP operating expenses increased by $99.5 million YoY to $446.9 million, due to investments in technology development and scaling infrastructure[27] - Q4 2023 non-GAAP operating expenses were $87.5 million, a sequential increase of $20.6 million from Q3 2023, mainly due to the timing of supplier services and spending on manufacturing capabilities[29] Profitability Analysis (Net Loss & Adjusted EBITDA) The company's net loss widened in 2023, with a full-year net loss of $457.9 million compared to $317.3 million in 2022. The increase was primarily driven by higher operating expenses and changes in the fair value of warrant liabilities. The Adjusted EBITDA loss for FY 2023 was $305.3 million, an increase from the $224.4 million loss in the prior year, reflecting increased non-GAAP operating expenses for the Midnight program - FY 2023 net loss was $457.9 million, an increase of $140.6 million from FY 2022, driven by higher operating expenses and the change in fair value of warrant liability[30] - Q4 2023 net loss was $109.1 million, increasing sequentially from $51.6 million in Q3 2023, mainly due to a one-time non-cash credit in the third quarter[30] - FY 2023 Adjusted EBITDA loss increased by $80.9 million to $305.3 million compared to FY 2022, as the company scaled investments in its aircraft program[31] Liquidity and Cash Flow Archer ended Q4 2023 with a cash and cash equivalents balance of $464.6 million, a slight increase of $3.2 million from Q3 2023, aided by $94.0 million in net financing activities. For the full year, cash used in operations and for property/equipment purchases totaled $314.1 million, which was partially offset by $248.3 million from debt and equity financing activities - Exited Q4 2023 with $464.6 million in cash and cash equivalents, an increase of $3.2 million from Q3 2023[32] - In Q4, cash used for operations and PP&E was $91.2 million, offset by $94.0 million in net debt and equity financing[32] - For the full year 2023, cash used in operations and for PP&E was $314.1 million, offset by $248.3 million from financing activities[32] Q1 2024 Financial Outlook For the first quarter of 2024, Archer projects total GAAP operating expenses to be in the range of $100 million to $120 million. The company expects total non-GAAP operating expenses to be between $75 million and $95 million for the same period Q1 2024 Financial Estimates | Metric | Q1 2024 Estimate | | :------------------------------ | :---------------- | | Total GAAP Operating Expenses | $100M - $120M | | Total Non-GAAP Operating Expenses | $75M - $95M | | Expected Non-Cash Charges | ~$25M | Consolidated Financial Statements The consolidated financial statements for 2023 show a decrease in total assets, an increase in liabilities, and a widening net loss, alongside significant cash flow changes Consolidated Balance Sheets As of December 31, 2023, Archer reported total assets of $554.3 million, a slight decrease from $573.8 million at year-end 2022. Total liabilities increased to $187.2 million from $80.5 million, primarily due to higher accrued expenses and warrant liabilities. Total stockholders' equity decreased to $367.1 million from $493.3 million over the same period Balance Sheet Highlights (in millions) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--------------------- | :----------- | :----------- | | Cash and cash equivalents | $464.6 | $69.4 | | Short-term investments | $0.0 | $461.8 | | Total Assets | $554.3 | $573.8 | | Total Liabilities | $187.2 | $80.5 | | Total Stockholders' Equity | $367.1 | $493.3 | Consolidated Statement of Operations For the year ended December 31, 2023, Archer's total operating expenses increased to $446.9 million from $347.4 million in 2022. The net loss for 2023 was $457.9 million, or ($1.69) per share, compared to a net loss of $317.3 million, or ($1.32) per share, in the prior year. The increase in loss was driven by higher research and development and general and administrative expenses Statement of Operations Highlights (in millions, except per share data) | Account | FY 2023 | FY 2022 | | :------------------------- | :---------- | :---------- | | Research and development | $276.4 | $171.5 | | General and administrative | $168.4 | $165.1 | | Total operating expenses | $446.9 | $347.4 | | Net loss | $(457.9) | $(317.3) | | Net loss per share | $(1.69) | $(1.32) | Consolidated Statement of Cash Flows For the full year 2023, net cash used in operating activities was $269.8 million, an increase from $200.4 million in 2022. Net cash provided by investing activities was $420.7 million, largely due to the maturity of short-term investments. Net cash provided by financing activities was $248.3 million, primarily from the issuance of common stock. The company's cash, cash equivalents, and restricted cash balance increased to $471.5 million at year-end Cash Flow Summary (in millions) | Cash Flow Activity | FY 2023 | FY 2022 | | :--------------------------------------- | :---------- | :---------- | | Net cash used in operating activities | $(269.8) | $(200.4) | | Net cash provided by (used in) investing activities | $420.7 | $(464.3) | | Net cash provided by financing activities | $248.3 | $(9.9) | | Cash, cash equivalents, and restricted cash, end of period | $471.5 | $72.3 | GAAP to Non-GAAP Reconciliation This section reconciles GAAP to non-GAAP financial measures, explaining adjustments for non-cash items to provide clearer insights into operational performance Reconciliation of Operating Expenses and Adjusted EBITDA The company provides reconciliations from GAAP to non-GAAP metrics to exclude non-cash items like stock-based compensation, warrant expenses, and charges related to the Boeing Wisk agreements. For FY 2023, GAAP operating expenses of $446.9 million were reconciled to non-GAAP operating expenses of $311.8 million. Similarly, the GAAP net loss of $457.9 million was reconciled to an Adjusted EBITDA loss of $305.3 million FY 2023 GAAP to Non-GAAP Reconciliation (in millions) | Metric | GAAP | Adjustments | Non-GAAP / Adjusted EBITDA | | :-------------------------- | :-------- | :---------- | :------------------------- | | Total Operating Expenses | $446.9 | $(135.1) | $311.8 | | Net Loss / Adjusted EBITDA | $(457.9) | $152.6 | $(305.3) | Explanation of Non-GAAP Financial Measures Archer uses non-GAAP financial measures to supplement its GAAP results, helping to analyze business performance and make operating decisions. The company excludes items such as stock-based compensation, warrant expenses, and non-cash charges from technology and dispute resolution agreements. Management believes these non-GAAP measures provide better comparability and insight into underlying operational trends - The company uses non-GAAP measures to assess financial performance, make operating decisions, and forecast future periods[48] - Key exclusions from GAAP measures include stock-based compensation expense, warrant expense and revaluation gains/losses, and non-cash charges related to the Boeing Wisk Agreements[49][50][51] Forward-Looking Statements This section outlines forward-looking statements and disclaimers, highlighting inherent risks related to the company's early-stage nature, certification, manufacturing, and capital needs Risk Factors and Disclaimers This section contains standard forward-looking statements and disclaimers. It cautions investors that statements regarding future performance, certification timelines, manufacturing, and commercialization are subject to numerous risks and uncertainties. Key risks cited include the early-stage nature of the business, dependence on customer orders, ability to achieve certification and scale manufacturing, regulatory hurdles, and the need for additional capital - The letter contains forward-looking statements about future performance, business strategy, aircraft certification, manufacturing timelines, and commercialization plans[54] - Key risks include the company's early-stage nature, dependence on a limited number of customer orders, ability to obtain FAA certification, scaling manufacturing, regulatory requirements, and the need for additional capital[54]