Archer Aviation Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Archer is developing electric vertical takeoff and landing (eVTOL) aircraft and planned urban air mobility services. It had not generated revenue. The financial statements are unaudited.
Key financial metrics
| Metric | Q2 2023 | Six months 2023 | Comparable 2022 period |
|---|---|---|---|
| Revenue | None | None | None |
| Research and development expense | $63.3 million | $129.1 million | $37.8 million / $65.3 million |
| General and administrative expense | $118.1 million | $162.2 million | $42.4 million / $80.2 million |
| Operating loss | $181.4 million | $293.4 million | $80.2 million / $145.5 million |
| Net loss | $184.1 million | $297.2 million | $71.7 million / $130.9 million |
| Net loss per share, diluted | $0.73 | $1.19 | $0.30 / $0.55 |
| Net cash used in operating activities | Not separately provided | $120.8 million | $82.4 million |
At June 30, cash and cash equivalents were $407.6 million, restricted cash was $7.2 million, and short-term investments were zero. Total assets were $481.5 million; total liabilities were $205.2 million; stockholders’ equity was $276.3 million. Notes payable were $4.6 million, all current, with $5.0 million of principal scheduled to mature in the remainder of 2023. Operating lease obligations had a $16.9 million present value.
Six-month investing cash inflow was $445.5 million, primarily from maturities of short-term investments, partly offset by $19.5 million in property and equipment purchases. Financing provided $17.8 million. The filing does not report meaningful operating margins because Archer had no revenue.
Changes versus comparable periods
- Q2 operating expenses rose 126% and net loss widened 157% year over year. For the first half, operating expenses more than doubled and net loss increased 127%.
- R&D expense increased with higher personnel, professional services, tools, and materials as development activity expanded.
- Q2 G&A included a $73.0 million non-cash charge tied to the Wisk/Boeing technology and dispute-resolution arrangements: $25.0 million for an initially vested warrant tranche and $48.0 million for a contingent tranche that may not vest.
- Other expense included warrant-liability fair-value losses of $10.6 million in Q2 and $15.6 million for the first half. This contributed to the year-over-year deterioration in other income/expense.
- Cash and cash equivalents increased from $69.4 million at December 31, 2022, while short-term investments fell from $461.8 million to zero as securities matured. The company raised $25.0 million from Stellantis in June.
Outlook, commentary, risks and unusual items
- Archer said existing cash and cash equivalents were expected to fund its current operating plan for at least 12 months from the financial-statement issuance date. It expects continued losses and higher operating expenses, with funding needs affected by aircraft development, certification, manufacturing investment, and timing of approvals.
- Management’s target was FAA certification of its Midnight aircraft in late 2024 and commercial service in 2025. Midnight is designed for four passengers plus a pilot and is optimized for short trips; these are plans, not assured outcomes.
- After quarter-end, on August 10, 2023, Archer agreed to a private placement of 26,173,286 Class A shares for approximately $145 million gross proceeds. It also elected to draw down $70 million under its Stellantis agreement; issuance remained subject to customary closing conditions, including an HSR filing.
- On August 10, Archer, Boeing and Wisk entered agreements providing for Boeing investment, an autonomy collaboration, Wisk warrants and resolution of their litigation. The filing recorded the $73.0 million non-cash charge in Q2; $48.0 million relates to a contingent warrant portion. Separately, a former co-founder’s 15.0 million unvested shares were forfeited on July 13, with a $59.1 million stock-compensation reversal reported as a subsequent event.
- Commercial customer commitments are conditional. United’s aircraft purchase obligation depends on FAA certification and agreement on material terms; Archer had recognized no revenue under the United arrangement. U.S. Air Force funding is also tied to accepted deliverables.
- Archer disclosed ineffective disclosure controls and material weaknesses in internal control over financial reporting, including staffing and segregation-of-duties limitations, risk assessment, accounting procedures, and IT controls. Remediation was ongoing; management stated it could not yet conclude the weaknesses were fully remediated.
- Key risks include obtaining FAA and other approvals, development and manufacturing execution, further financing and potential dilution, uncertain demand, and execution or cancellation of conditional customer arrangements. The company also had $6.2 million of standby letters of credit outstanding, secured by restricted cash.
Important facts for investors to verify
- Progress against the FAA certification and 2025 commercial-service targets, and the funding and schedule needed to reach them.
- Closing and proceeds from the $145 million private placement and the $70 million Stellantis drawdown, including resulting share dilution.
- Cash burn and runway, especially as manufacturing investment and R&D spending increase.
- The accounting, vesting and potential dilution associated with Wisk, Boeing, Stellantis, United and other warrants; also confirm the timing and effect of the $59.1 million founder-award expense reversal.
- Whether internal-control material weaknesses are remediated and whether future filings or auditor attestations identify additional issues.
- Any changes to United or U.S. Air Force conditional arrangements, and any material developments in the Wisk litigation resolution and technology collaboration.