Archer Aviation Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Archer is developing electric vertical takeoff and landing (eVTOL) aircraft and planned urban air mobility services. It had not begun generating revenue.
Financial performance and position
| Metric | Q2 2022 | Six months 2022 | Comparable 2021 |
|---|---|---|---|
| Revenue | None | None | None |
| Research and development expense | $37.8 million | $65.3 million | $11.4 million / $21.5 million |
| General and administrative expense | $42.4 million | $80.2 million | $22.4 million / $29.0 million |
| Net loss | $71.7 million | $130.9 million | $32.9 million / $127.8 million |
| Operating cash used | Not separately stated | $82.4 million | $28.8 million |
At June 30, cash and cash equivalents were $654.8 million, restricted cash was $2.9 million, and total assets were $691.2 million. Total liabilities were $73.0 million; notes payable were $14.1 million net of discount, including $9.4 million current. Stockholders’ equity was $618.2 million. Six-month investing cash outflow was $2.1 million and financing cash outflow was $4.7 million, including $5.0 million of debt repayment. The filing reports no revenue or operating margin; margins are not meaningful for this pre-revenue business.
Changes versus the prior comparable period
- Q2 operating expenses increased 137% to $80.2 million, and net loss widened to $71.7 million from $32.9 million.
- Six-month operating expenses rose 13% to $145.5 million, while net loss increased 2% to $130.9 million. The comparison includes $78.2 million of non-cash United warrant expense in first-half 2021, with no comparable 2022 expense.
- Higher R&D reflected increased staffing, development materials and services. G&A growth included founder award stock compensation, higher staffing, and $3.4 million of one-time severance expense related to the former co-CEO.
- Cash and cash equivalents declined from $746.6 million at year-end 2021 to $654.8 million. The six-month operating cash outflow increased from $28.8 million to $82.4 million.
Outlook, risks and unusual items
- Management expected existing cash to fund its current operating plan for at least 12 months from issuance of the financial statements. Archer expects continued losses and higher expenses, and says R&D expense is expected to increase significantly. It does not expect significant revenue until aircraft design, development, certification and manufacturing readiness are achieved.
- Archer’s planned operations and aircraft sales depend on FAA certification and other government approvals. Delays could delay revenue and require additional capital; management cautions that financing may not be available on acceptable terms.
- The company has a conditional United purchase order for up to 200 aircraft, with an option for 100 more, subject to certification and other conditions. No related revenue had been recognized. On August 9, 2022, Archer amended United warrant milestone conditions, potentially vesting and making exercisable warrants for 4,422,529 shares upon alternate conditions.
- Wisk Aero’s trade-secret and patent litigation remained pending; trial was scheduled for August 2023. Archer had not accrued a loss because an amount or range was not considered probable or reasonably estimable. Archer stated an adverse outcome could materially affect its financial position and operations. A related federal investigation was discontinued without charges, according to the filing.
- Disclosure controls were deemed ineffective due to material weaknesses in the control environment, risk assessment, accounting policies and procedures, and IT controls. Remediation was ongoing; management said it could not yet conclude the weaknesses were fully remediated.
- Q2 other income included an $8.3 million non-cash gain from changes in warrant-liability fair value. Six-month stock-based compensation was $50.1 million, including $32.2 million related to founder grants.
Investor facts to verify
- Certification and manufacturing milestones, related spending, and whether the stated cash runway remains adequate as development costs rise.
- United order conditions and the financial and dilution effects of the amended warrant terms.
- Progress and potential exposure in the Wisk litigation.
- Remediation of internal-control material weaknesses and the impact of stock-based compensation on reported losses and share count.