Archer Aviation Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Archer is developing electric vertical takeoff and landing (eVTOL) aircraft and plans to operate urban air mobility services and selectively sell aircraft. It had not generated revenue from either planned business.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 / prior period |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $27.5 million | $10.1 million |
| General and administrative expense | $37.8 million | $6.6 million |
| Operating expenses | $65.3 million | $94.9 million |
| Net loss | $59.2 million | $94.9 million |
| Net loss per share, basic and diluted | $0.25 | $1.70 |
| Net cash used in operating activities | $36.8 million | $12.0 million |
At March 31, 2022, cash and cash equivalents were $704.2 million; restricted cash was $2.9 million. Total assets were $737.9 million, total liabilities $74.2 million, and stockholders’ equity $663.7 million. Debt was $16.5 million net of discounts and issuance costs, including $9.5 million current and $7.0 million long-term. Management said existing cash should fund its current operating plan for at least 12 months from issuance of the financial statements.
Operating cash use increased despite the lower net loss, reflecting the prior-year non-cash warrant expense and current-period operating needs. Investing cash use was $0.6 million; financing cash use was $2.4 million, primarily repayment of term loans. Q1 cash, cash equivalents, and restricted cash declined $39.8 million to $707.1 million.
Material changes and notable items
- R&D expense rose $17.4 million, or 172%, primarily due to increased personnel and stock-based compensation as Archer expanded development efforts.
- G&A expense rose $31.2 million, or 473%, including $16.0 million of expense for founder restricted stock awards, higher professional-service costs, and increased staffing.
- Net loss narrowed by $35.7 million, mainly because Q1 2021 included $78.2 million of non-cash United warrant expense. Q1 2022 included $6.5 million of other income, primarily a $6.6 million gain from remeasurement of warrant liabilities.
- Stock-based compensation totaled $24.5 million, versus $0.9 million in Q1 2021. This was a significant non-cash component of current-period expenses.
- Archer entered a San Jose headquarters sublease and signed a lease for planned lab and initial-production space. The latter had not commenced by quarter-end; base rent is expected to total approximately $15.0 million over its term. Reported future operating-lease payments were $15.4 million before imputed interest.
Outlook, risks, and contingencies
- Archer expects R&D expense to increase significantly as it pursues aircraft development, certification, and manufacturing readiness; it also expects G&A to rise as it scales and meets public-company requirements. It did not provide numerical earnings or revenue guidance.
- Timing and cost of aircraft development, FAA certification, manufacturing readiness, and other government approvals are uncertain. Delays could defer revenue and increase financing needs. Archer said significant revenue is not expected until design, development, certification, and manufacturing preparation are completed.
- The United purchase arrangement is conditional on, among other matters, FAA certification and agreement on material terms. No related revenue had been recognized because performance obligations were unmet.
- Wisk’s trade-secret and patent litigation remained unresolved; Archer said any potential loss was not probable or reasonably estimable and recorded no accrual. A trial was scheduled for April 2023. The U.S. Attorney’s Office told Archer in January 2022 it would not bring charges against a former employee and did not intend to continue its investigation.
- Management concluded disclosure controls were not effective at March 31, 2022 because of material weaknesses in the control environment, risk assessment, accounting processes, and IT general controls. Remediation was ongoing; management nevertheless concluded the reported financial statements fairly presented the periods shown.
- After quarter-end, Archer announced a transition to a sole CEO, appointing Adam Goldstein effective April 2022. Brett Adcock’s departure included severance and equity provisions; he later resigned as a director effective May 9, 2022.
- Other disclosed risks include inflation and higher labor, component, manufacturing, and shipping costs; reliance on key personnel; and concentrated voting power under the dual-class share structure.
Most important facts for investors to verify
- Progress and timing of FAA certification, aircraft development, and production readiness—and whether plans or spending assumptions have changed.
- Cash burn, remaining liquidity runway, and potential need for additional financing as development and facility costs increase.
- Status and potential financial impact of Wisk litigation and any subsequent legal developments.
- Progress in remediating the disclosed material weaknesses and whether controls are independently shown to be effective.
- Conditions, timing, and commercial terms of the United aircraft purchase arrangement, and the eventual balance between aircraft sales and Archer-operated services.