Archer Aviation Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Archer is developing electric vertical takeoff and landing (eVTOL) aircraft and planned urban air mobility services. It had not generated revenue from its planned business lines.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 / prior period |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $65.8 million | $27.5 million |
| General and administrative expense | $44.1 million | $37.8 million |
| Total operating expenses | $112.0 million | $65.3 million |
| Operating loss | $112.0 million | $65.3 million |
| Net loss | $113.1 million | $59.2 million |
| Net loss per share, basic and diluted | $0.46 | $0.25 |
| Cash used in operating activities | $63.7 million | $36.8 million |
Gross margin and other revenue-based margins are not applicable because Archer reported no revenue. At March 31, 2023, cash and cash equivalents were $299.2 million, short-term investments were $150.7 million, and restricted cash was $7.2 million. Current assets totaled $465.9 million against current liabilities of $64.0 million. Management said available cash and cash equivalents and investments were expected to fund the current operating plan for at least 12 months from issuance of the statements.
Total liabilities were $95.8 million. Notes payable were $7.0 million, all current, with $7.5 million in remaining 2023 principal maturities before unamortized discount and issuance costs. Operating lease liabilities had a reported present value of $11.9 million; the MD&A describes $4.7 million of current and $22.1 million of long-term lease obligations. Property and equipment, net, increased to $24.7 million from $11.5 million, including $17.8 million of construction in progress.
Changes and notable items
- Net loss increased by $53.9 million year over year. R&D rose $38.3 million, primarily from increased professional services, tools and materials, staffing, and Stellantis-related warrant expense. G&A rose $6.3 million, mainly due to professional-service costs, including legal fees.
- Operating cash use increased by $26.9 million year over year. Investing cash flow was positive $302.6 million, largely reflecting $314.0 million of maturities of short-term investments, offset in part by $11.4 million of property and equipment purchases. This portfolio activity drove the $234.1 million increase in cash, cash equivalents, and restricted cash during the quarter; it was not operating cash generation.
- Stock-based compensation was $25.7 million, including $19.0 million in G&A. The company reported a $5.0 million loss related to changes in warrant fair value and $2.1 million of United warrant expense.
- In January 2023, Archer entered a manufacturing collaboration with Stellantis and issued warrants for up to 15 million Class A shares at $0.01 per share, subject to vesting conditions. Archer may elect to sell Stellantis up to $150 million of Class A stock after specified milestones; this is not a committed financing obligation.
Outlook, risks, and contingencies
Management’s stated target was FAA certification of Midnight in late 2024 and commercial service in 2025; these are forward-looking plans, not guarantees. Archer expects R&D expense to increase significantly as it pursues certification and manufacturing, and anticipates higher G&A costs as it scales. The filing provides no quantified revenue or earnings guidance.
Key risks include development, certification, manufacturing scale-up, additional capital needs, and the possibility that delays could increase funding requirements. Archer said further financing may be needed over the longer term and that it may have to alter or scale back programs if financing is unavailable. It had not accrued a loss for the Wisk Aero litigation because a loss or range was not considered probable or reasonably estimable; an adverse outcome could materially affect its financial position and operations. Wisk’s trial was scheduled to begin August 14, 2023. The filing also disclosed that disclosure controls and procedures were ineffective as of March 31, 2023 because of material weaknesses in internal control over financial reporting; remediation was ongoing and had not yet been demonstrated effective.
United’s conditional purchase agreement covers up to 200 aircraft, with an option for another 100, subject to FAA certification and agreement on certain material terms. No related revenue had been recognized as of quarter-end.
Important facts for investors to verify
- Whether cash burn and capital spending remain consistent with management’s stated 12-month funding outlook, and whether additional financing becomes necessary.
- Progress against Midnight certification, manufacturing-readiness, and commercialization targets, including the late-2024 and 2025 timelines.
- Whether United’s conditional order advances toward binding purchases and what terms or milestones apply.
- Developments in the Wisk litigation and any resulting financial exposure.
- Whether Archer remediates its disclosed material weaknesses and establishes effective financial reporting controls.
- Potential dilution and compensation costs from equity awards and low-exercise-price warrants, including the Stellantis warrants and the large unrecognized RSU compensation balance.