Archer Aviation Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Archer is developing electric vertical takeoff and landing (eVTOL) aircraft and has not generated revenue from its planned businesses. Its Midnight aircraft remains in development and certification.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $67.8 million | $47.0 million | $196.9 million | $112.3 million |
| General and administrative expense | $(21.6) million | $40.8 million | $140.6 million | $121.0 million |
| Net loss | $(51.6) million | $(91.0) million | $(348.8) million | $(221.9) million |
| Net loss per share, diluted | $(0.19) | $(0.38) | $(1.35) | $(0.93) |
| Cash used in operating activities | Not separately presented | Not separately presented | $(187.6) million | $(133.2) million |
At September 30, cash and cash equivalents were $461.4 million, restricted cash was $7.3 million, and current assets were $475.7 million. Current liabilities were $117.0 million. Notes payable were $2.3 million, all current; operating lease liabilities totaled $16.4 million. Stockholders’ equity was $364.5 million. The filing reports no revenue, so operating margins are not meaningful.
Management said existing cash and cash equivalents were expected to fund its current operating plan for at least 12 months from issuance of the financial statements. The company had an accumulated deficit of $1,039.7 million and cautioned that further financing may be needed if its plans or timing change.
Changes and notable items
- Q3 research and development expense rose 44% year over year, reflecting higher personnel, professional services, tools and materials costs, and Stellantis warrant expense. Nine-month R&D rose 75%.
- Q3 G&A was a net credit, primarily because Archer reversed $59.1 million of previously recognized stock-compensation expense after forfeiture of a former co-CEO’s unvested founder awards. For the nine months, G&A included a $75.3 million non-cash Wisk-related technology and dispute-resolution charge; the $49.0 million contingent portion may never be realized.
- Nine-month net loss increased 57% year over year. The change included higher operating expenses and a $25.8 million loss from changes in warrant fair value, compared with a $14.4 million gain in the prior-year period. These items are non-cash; net loss also includes other non-cash charges and stock-compensation effects.
- Cash and cash equivalents increased from $69.4 million at year-end 2022, primarily reflecting $465.0 million of maturities from short-term investments, financing proceeds, and operating cash use. Investing cash flow was $429.7 million, including $35.3 million of property and equipment purchases. Financing cash flow was $154.3 million.
- August’s private placement raised approximately $139.0 million net through issuance of 26.2 million shares. Archer also issued $25.0 million of stock to Stellantis in June. After quarter-end, it issued additional shares to Stellantis for approximately $70.0 million gross proceeds.
Outlook, risks, and contingencies
- Archer was targeting commercial service in 2025, subject to FAA certification and other government approvals. It said it did not expect significant revenue until aircraft design, development, certification, and manufacturing readiness are achieved; certification timing and costs are uncertain.
- Archer expects R&D spending to increase significantly as it pursues certification and manufacturing. It entered an October 3 design-build agreement for its Georgia manufacturing facility with a guaranteed maximum price of approximately $54.4 million, subject to adjustments.
- An October 5 credit agreement allows Archer to request up to $65.0 million of delayed term loans for the facility, at SOFR plus 2.00%, secured by specified assets and guaranteed by domestic subsidiaries. The facility is a financing capacity, not a statement that all proceeds were drawn.
- The Wisk/Boeing agreements resolved litigation and included an autonomous-technology collaboration and a warrant for up to 13.2 million shares at $0.01 per share, subject in part to vesting criteria. Wisk-related charges include a contingent component that may not vest.
- Archer disclosed that its disclosure controls and procedures were ineffective at September 30 because of material weaknesses in its control environment, risk assessment, accounting processes, and IT general controls. Remediation was ongoing; management said the financial statements fairly presented the company’s position and results.
- Other risks include reliance on successful FAA certification, manufacturing scale-up, future financing, and the execution of customer and collaboration arrangements. United’s conditional aircraft order remains subject to conditions, including certification and agreement on certain material terms; Archer had recognized no revenue under it.
Important facts for investors to verify
- Progress against the 2025 commercial-service target, FAA certification milestones, and the schedule and cost of manufacturing readiness.
- Cash burn and liquidity runway as R&D, capital expenditures, and facility construction advance; distinguish available credit from loans actually drawn.
- Terms, vesting, and potential dilution from the Wisk, Stellantis, United, and other warrants, as well as equity financing and stock-based compensation.
- Whether customer arrangements, including United’s conditional purchase order, become binding deliveries and ultimately produce recognized revenue.
- Progress in remediating the disclosed material weaknesses and whether controls are later determined effective.