Good afternoon, and thank you for attending today's Archer Aviation Second Quarter 2022 Conference Call. My name is Daniel, and I will be your moderator for today's call. [Operator Instructions]. I would now like to pass the conference over to our host, Andy Missan, Chief Legal Officer. Please proceed.

Thank you, operator. Good afternoon, everyone, and thank you for joining us today to review Archer's second quarter 2022 financial results. My name is Andy Missan, the Chief Legal Officer of Archer Aviation, Inc. With us on the call today are Adam Goldstein, our CEO; Mark Mesler, our CFO; and Tom Muniz, our COO. We posted a shareholder letter detailing our Q2 2022 financial results and business overview to our IR website. This call is being recorded, and an archive will be available on our IR website. Before we begin, I would like to remind everyone that during today's call, we will be making forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual events or actual future results to differ materially from those expressed or implied in the forward-looking statements. These risks and uncertainties are described in the Risk Factors section of our annual report on Form 10-K, our 10-Q for the quarterly period ended March 31, 2022, and other filings with the Securities and Exchange Commission available on the SEC's website and on our Investor Relations website. Except as required by law, Archer disclaims any obligation to update or make revisions to such forward-looking statements as a result of new information or future events. Also please note, on this call, certain financial measures are presented on a non-GAAP basis. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in our shareholder letter posted on our Investor Relations website. We will begin with commentary and then we'll open up the call to questions. And with that, I'd like to turn the call over to Adam Goldstein. Adam?

Thanks, Andy. We are excited to share with you all today the continued progress that we have made. We are now at an inflection point in the company where we are advancing our commercialization efforts. This includes the development and certification of our production aircraft, building out the supply chain and manufacturing infrastructure needed to produce the aircraft and kicking off efforts to prepare for our initial launch markets and routes for commercial operations. The proof point and the confidence of our development can also be seen by the actions of our partners. As we announced earlier today, we have received a $10 million pre-delivery payment from United Airlines on 100 aircrafts as part of their purchase agreement for up to 200 aircrafts. We believe this is the first such pre-delivery payment of its kind in the eVTOL space, and it reflects the maturity of our aircraft development program and the confidence United Airlines has in our commercialization efforts. The technical progress of the Maker aircraft has been outstanding. It is an important aircraft for us because it has validated many of the key capabilities of our 12 tilt 6 configuration, software, flight control and other key design decisions. The advancements we have made with Maker have proven we have chosen the right aircraft configuration that can balance performance against complexity. Archer's goal has always been to develop an aircraft that can perform rapid back-to-back 10 to 50 mile flights while maintaining the lowest level of complexity possible to ensure the vehicle can be certified, mass manufactured and operated in a cost-efficient manner. Its performance since its first hover flight in the summer of last year has demonstrated the engineering excellence of our team. I believe the progress we have made with Maker has been nothing short of incredible and…

Thanks, Adam. I'm very excited about Archer's progress in the second quarter and more recently with the successful completion of our PDR, we truly are at an inflection point. Our strategy from the outset has been to take the most capital and time efficient path to developing our production aircraft and launching commercial operations. Maker was a key element of the strategy and has provided invaluable technical data and has served as a reference design point for establishing our production aircraft certification requirements. We knew from day 1 that it was better to start by building a demonstrator aircraft, Maker, in parallel with our work with FAA to set the certification requirements for our production aircraft. This is because it has allowed us to have greater certainty on the certification requirements before getting too far along the development of the production aircraft when changes to design due to certification requirements become more challenging and costly. Our production aircraft, Midnight, has been designed and optimized around certification and our planned commercial operations. Midnight is designed for high throughput urban air mobility flights. Midnight is designed to be able to complete back-to-back missions with minimal time charging on the ground, while passengers load and unload between flights. This is a key driver to the bottom line of our operating model. As Adam mentioned, our team successfully completed our PDR for Midnight earlier this week. This is a major milestone in any development program, and I'd like to share some of the key performance metrics from Midnight that came out of the PDR and why they're important for commercialization of our aircraft. One of the most critical metrics we track is payload, the weight of the pilot, passengers and baggage that the aircraft can carry. For an eVTOL, payload is the hardest performance…

Thanks, Tom. This is an exciting time for Archer. As both Adam and Tom just outlined, the successful exit of our PDR moves Archer into its next phase of development on our production aircraft and advances our commercialization efforts. PDR provided us confidence that Midnight can achieve the key operating assumptions associated with our business model. This is important as we mature our go-to-market strategy. I'd like to briefly share with you how our confidence in 3 of those metrics for our Midnight aircraft: Range, turnaround time and aircraft costs, enable our business plan from a top line and cost standpoint. Let's start with the top line. As we have discussed in the past, our revenue model has 2 primary drivers: One, the direct sale of our aircraft operators like the contract we have with United, which we just received a $10 million pre-delivery payment on 100 aircraft. And two, the operation of a UAM network in the top cities in the U.S. and around the world with target mission profiles in the 10 to 50 mile range. As Tom discussed, based on our PDR, our data supports Midnight's payload will be greater than a 1,000 pounds. This is an extremely important metric for us as well as the industry. We believe that commercial feasibility in both of our revenue models is predicated on having the ability to transport up to 4 passengers. The PDR process has provided us greater confidence that Midnight will be able to transport 4 passengers plus a pilot. And given that, we believe strongly that Midnight aircraft can support these 2 revenue models. Tom also discussed the validation of an approximate 10-minute charge time for Midnight following a 20-mile flight. Given our target missions are in the 10 to 50 mile range, that is also…

[Operator Instructions]. The first question comes from Edison Yu of Deutsche Bank.

Congratulations on the recent milestones. I have 2 questions. First on the United prepayments. I was wondering if you could provide some sort of roadmap in terms of future pre-delivery payments and also what kind of milestones will be associated with that.

Hey, Edison, this is Adam. Thanks for the questions. And so United gave us $10 million deposit for 100 aircraft. And they did this really because of the confidence that they have in eVTOL as an industry, the team that we've been building and really just the maturity of our technology platform that you've seen since PDR. But I think the other thing that was really important here is that they're securing their spot here in 2025. And so there's going to be extremely limited supply in the early years of the eVTOL market. So it's really my belief that Archer will be one of, if not the only company in 2025 to have aircraft that you can actually buy and operate in that year. And so given Archer will also be operating aircraft, it's going to be limited in terms of number of supply. So the first 100 aircraft, I think, are going to be really important for the go-to-market strategy. Now we are also evaluating different launch markets, different launch scenarios, different routes. So we have formed in -- back in April, the joint eVTOL Advisory Committee, where we were working on operational matters and maintenance matters. And this has allowed us to really start to map out some of those early concepts here of our go-to-market strategy. So as that starts to mature further, you will hear more updates and announcements around the different areas we will launch into and ultimately additional planes that will come online. So I think more to come on that. I'll turn it over to Mark to talk about payments and how the deposits work.

Hey, Edison. I think you can look at the deposits and any future payment milestones sort of on traditional aerospace payment terms. We haven't disclosed those publicly, but you could assume that they'd probably be aligned with manufacturing and then ultimately deploying of the aircraft. So I think it's probably going to be pretty typical of what you see in the market.

Understood. Second question, I wanted to ask about kind of key learnings you've been doing, obviously, ramping up on test flights. Do you have any sort of takeaways that you can maybe share potential improvements or upgrades based on either the test like and also post PDR?

Hey, Edison. This is Tom. Thanks for your question. Just kind of answering that in context, right, Maker has always been part of our broader strategy to learn as early as possible about some of the key decisions that we've made with regard to the aircraft that we're carrying forward into the product. So the biggest thing there is the aircraft configuration itself with 12 tilt 6 per pellet configuration. We've been doing a lot of flight testing with Maker over the past couple of months, as Adam said, flying many times per week. And each of those tests is really specifically designed to get us data that we can use to validate key elements of the system. So flight control laws for the vehicle, the broader flight control system as well as the aerodynamic model and other features. All of that data has given us great confidence moving forward with maturing the Midnight design. And as you said, we completed our PDR very recently. And essentially, all of those lessons learned have been incorporated. And now we have high confidence that we'll be able to get through our certification and commercialization with as low risk as possible.

And if I could just sneak in one more, a very high-level question. Do you worry at all about consumer adoption. I think this sort of UAM world that we're all sort of kind of looking at, what concern that we've heard among investors is, look, this is a -- you're going to need some big changes in kind of the infrastructure, the way we kind of operate. How do you think about just that at a high level?

This is Adam. So I think there's 2 kind of perspectives to look at. And the first one is, will consumers want to take the vehicles? And then the second one is kind of the infrastructure that's going to be necessary put in place in order to do that. So what's interesting is that I think one of the early go-to-market strategies is going to be flying from airport to city centers, and those are what we call trunk routes. And so we already know that there is demand for people to take these routes as we've seen the ride share. So the lifts of the world are showing substantial amounts of demand for these routes. We also know there's a willingness to pay for the same example of using lift. And so I think the demand will be there. And I think the cool factor of these vehicles on top of the convenience that product gives will have a lot of early adopters to be attracted to the market. If you take that and then you add a brand like United to the vehicle itself, which stands for safety, I think, you have a high degree of confidence that there will be a lot of users that want to adopt the products pretty early. The second phase of kind of the question really relates to infrastructure. And so I think what we've seen really over time is demand of products drives the use case of products. And so yes, infrastructure is certainly going to be very challenging. I think that's definitely going to be one of the tricks. We recently just hired a gentleman named Bryan Bernhard, who was previously the Head of Global Development at WeWork for the past nine years. He obviously had to battle through an incredible amount of challenges to stand up as much real estate as WeWork has in the most recent history. And so I am very optimistic that with the right team and with the right amount of demand that we'll see for the product that we will be able to get out there and really start to stand up infrastructure. My last comment on it is, the early infrastructure that likely gets stood up will be around airports. And so having a partner like United, where when you walk in to talk to the airport and you walk in with a big customer like United, it's a different dynamic. It's a different conversation than if you walk in by yourself. And so I think that gives us a really unique advantage to get to market here.

Thank you. The next question comes from Savi Syth of Raymond James.

Hey, good afternoon. On the supplier side, as you see clear these suppliers, I was curious what type of agreements you're putting in place? And I'm trying to understand what your commitments are to them and vice versa?

Yes, hello, Savi, this is Tom. So the way we think about the supplier agreements is in the context of securing our first several years of supply essentially. So we're negotiating long-term agreements that support production up to the rates that we've published in some of our previous guidance material. Strategically, we're focused on partnering with aerospace companies to have proven track records of delivering successful certified hardware because that's part of our broader strategy to minimize risk going to market. As part of that, we do have some commitments to fund nonrecurring engineering for the development of materials to support us. But what we found is great partners in the supply base who are willing to really partner with us and drive to get these products and ultimately our aircraft to market on the time lines that we're tracking to. So we've been very pleased with the progress on supply chain.

And Adam if I might ask -- I know on the last earnings call, you talked about kind of things of the joint advisory committee is looking at, and you mentioned being able to maybe talk about in the future calls about the maybe locations that you're targeting. But -- while it's still early days, I was wondering if you have those conversations and you've gained more confidence with the Midnight, what Midnight can do. Have you had any kind of new learnings in terms of maintenance operations that are different from your earlier thinking?

This is Adam. So we have -- the relationship with United, I think, it's pretty special. They're not just an investor or a group that's buying planes. They've dedicated a lot of time to helping us think through different operational matters and go-to-market strategies and maintenance strategies. So I would say somebody at Archer has probably taught myself included, is probably talking to United on if not weekly basis, every other day basis. And so we're pretty deeply integrated with them. They've been very helpful in doing that. So it's an iterative process. It's not like necessarily a big aha moment that you have, but there's a lot of conversations. So we each bring something different to the conversation. United obviously operated and serviced vehicles for many, many years, and so they can kind of guide us in some of our decisions that we're making, but also thinking about the way the world is going to work in the future and kind of different strategies allows Archer to help bring something unique to the conversation. So the discussions in -- with United have really led to the identification of locations and routes for our go-to-market strategies. And so we are -- the deposits that we announced relating to 100 aircraft are around the high-level conversations we're starting to have against very specific routes. And so those vehicles are being considered against very specific routes and, I think, very attractive go-to-market specific cities. And so we are maturing that strategy with United. And as we continue to mature that, we'll start to give more details here on that.

Can I clarify Adam, is the plan for Archer to do the maintenance support or is that something that you would get some of your partners to do?

So we're evaluating different strategies there. And so we have spoken with several different parties there, but I think it's a little bit early to give the kind of full understanding of that.

The next question is from David Zazula of Barclays. Please proceed.

You turned out some really helpful operating metrics that you're planning on for Midnight ultimately, can you confirm that the 100-mile range is with all of these planned flight systems on board as well as the 1,000 pounds. And similarly, for the 10-minute charge time, is that at the end of battery life. Some numbers get thrown around in this industry. So I just want to make sure we're specific in talking the same language.

This is Adam. I'll give you an open and I'll turn it over to Tom. So going through PDR, we really have to start getting really specific about the design of the vehicle. So it's not theoretical, it's not just drilling. We're actually starting to sign up suppliers. And so the level of fidelity that goes into the engineering is very high. And so we have a very good understanding of where we think the speed range and payload of the vehicle is going to be. And so the main goal that Archer always talks about is our core nominal mission, which is a 20- to 30-mile rapid back-to-back mission where we can carry a pilot plus 4 passengers. And that's what we've been designing around. And so the target payload that we have with that mission is around 1,000 pounds. But that 1,000 pounds also comes with a degree of margin that we built into it. We do expect the vehicle to grow as we go through the certification effort. So that 1,000 pounds has an additional several hundred pounds of margin that we put on top of that. So we feel very comfortable that we will land with a certified vehicle that has 1,000 pounds of payload. I also believe that's going to be industry-leading. And so the reason why that's been so important to us is if you look back in history, payload when it comes to aviation is one of the critical drivers of economic viability. And so we do think the ability to carry at least 3 passengers is core to establishing a profitable long-term business. As it relates to range, the kind of the numbers that we've always really thought about have been really focused on how many back-to-back missions can you do. And…

I think you summarized it well. We don't think of maximum range as really a design target for the vehicle as much as the direct operating cost and the real-world use case that I've just described. So putting the numbers into context, right? While it's true the vehicle could fly up to 100 miles with a brand-new battery, in reality, what we care more about is this fast turnaround time, charge time between flights that lets us do tens of flights per day, up to that theoretical maximum amount, mention of 45 flights per day. That's really the driver there. The way we make money is by selling tickets to put as many people as we can in the vehicle and then get the vehicle flying as many times as it can per day. All of that really boils down into our direct operating costs, which we touched on earlier, we're actually coming in better than our internal targets. And that's why we have high confidence we'll be able to go to market with ticket prices that are comparable to existing ride shares, right, in that few bucks per passenger model.

Tom, can you discuss a little bit the testing program as it's come so far and why you're comfortable being able to talk about range assumptions without having a transition to forward flight yet?

Sure, Absolutely. So as Adam touched on earlier, we completed on Maker the second phase of our flight test campaign. So in that series of tests, we validated the robustness of the design to essentially cross-win landing capabilities because that's another, again, important piece of high utilization and uptime. So we've demonstrated that the vehicle is robust, up to very high crosswind limits. We've been flying sideways backwards up to 15 knots. So that really validates the flight control system as well as the configuration of the aircraft that were coming forward into Midnight. When it comes to validating range though, that's not a primary driver on Maker. We will gather more validation data to support our aerodynamic model, which goes into estimating the drag of the vehicle, et cetera. But really where we get a lot of our confidence for the Midnight aircraft is in ground tests, both on the battery in terms of very extensive cell testing as well as wind-tunnel testing. So we've completed some wind tunnel testing already. We are currently building our final high-fidelity models to launch our final wind-tunnel test campaign in the coming months. All of that data will come together to give us even more validation in our performance estimates. But all in all, where we are in the maturity of the design, we're looking really good.

And David, this is Adam. Just kind of chiming in here. I think the way that the industry will ultimately be judged will be the economic viability of these vehicles. And I think that's going to be a mix of speed range and payload, meaning how many people can you move, how fast and how much is it going to cost to do that. And so that's ultimately what we're solving for. And that's what we're so excited about here, and that's what the results of the PDR have been so exciting. So that's why we felt very comfortable thinking about the advancement of our commercialization. I think that's what got United very excited about and now to the point where they said, okay, the maturity of this program warrants a deposit, a cash deposit, a significant cash deposit. And so that's kind of the way we think about this. It's not so much just about can you build the fastest, highest flying, farthest flying plane, can you build a vehicle for the mission? And then how do you make that economically viable?

I guess for Mark, just a tidy clean up on that, based on the extension of your agreement with United, you've disclosed in existing filings about United stake in Archer is unchanged?

I missed the last part. This is Mark. Could you repeat that?

United's stake in Archer is unchanged from what you've previously disclosed, their ownership?

Yes, that's correct.

The next question comes from Andres Sheppard of Cantor Fitzgerald.

Congrats on the quarter. I wanted to maybe get a little more clarity on the $10 million announcement that you've made today with United. I guess I'm just trying to understand. So will this eventually be recognized as revenue? And I guess, why now? Why not closer to commercialization or FAA certification? And sorry, maybe the third part of that is where do you anticipate using this additional capital? Is it to fund CapEx, R&D, manufacturing? Just maybe give us some sense as to what the strategy is there and the timing.

Andres, this is Adam. I'll start with the why now, and then I'll turn it over to Mark. So I think this really has to do just back to some of my earlier comments with the confidence that United really has around eVTOL the category, but also Archer specifically. And so I think those are 2 of the really big drivers of this. But then the third kind of big driver is we have limited supply. And so if you go back to our stated manufacturing levels, we said we would build 250 planes in 2025, and that's what we're on track to do still. And so Archer is going to be operating vehicles, and then we also have United. There also have been a lot of excitement around orders in the industry. We've seen lots of announcements out there, and Archer has been engaged with many other different groups. And so I think there is this interesting balance here where Archer has matured the program, you could see it in the Maker-flight test, you could see it across PDR. And then you can see it in a lot of the work that we're doing with United, we're starting to think about the specific routes and concept of operations. And so it made sense for them to commit here to lock in their spot to make sure they will get access to planes in 2025. And as a strong corporate sponsor to Archer as well. And so I think it's a big signal of them doing that now. So I'll turn it over to Mark.

So again, I think you should look at this and because it is what it is, is a standard commercial arrangement. So this is a prepayment or a cash deposit that will hang up on our balance sheet as a cash deposit. And yes, to your question, this would eventually turn to revenue upon delivery of the planes, right? So that's the most simplistic way to think about it. That's how the contract is structured. In terms of cash use, I mean, this is going to be for general corporate purposes, which for us is R&D and all of the things we've been talking about for commercialization. It will go towards the advancement of Midnight or go towards CapEx on new factory, et cetera, et cetera.

Maybe for my follow-up question for Adam. There's been a lot of macro conversations in the industry about -- in regards to certification and the possibility of the FAA's certification somewhat consolidating or mirroring the certification process in Europe, which as you're better aware than we are, is delivered more stringent. I think they have the 10 to the negative 9 degree of safety requirements. I'm wondering -- I would love to get your thoughts. Do you see that consolidation taking place? And if so, what impact, if any, might that have on your certification timeline?

So we are speaking with the FAA at the engineering level on a daily or almost daily basis. And then we're speaking with the FAA at the highest levels as well. And so I have had conversations all the way up to the top with the active administrator and have been reassured the confidence that the FAA will take a leading position in bringing eVTOL to market. And so I don't see anything that tells me today that the FAA is going to back away from their existing stance on bringing eVTOL to market, and I do not see them adopting on behalf of standards. But I'll let Tom chime in as well.

Yes. Just obviously agree with what Adam said, the thing that I could add to is, even since this 2117 A to B change, that is reiterated, we should expect no changes to error administer requirements than I can say over the last few months, that's what we've seen, just reconfirmation of what we had been already designing to. So we don't expect anything to change even they have to make an administrative change to our G1 issue paper, essentially just pointing at 2117 B. And so in that document, we have seen no changes. So just further confirmation that we're on the right path.

[Operator Instructions]. The next question comes from the line of Bill Peterson of JPMorgan.

This is Mahima Kakani on for Bill Peterson. Just talking on the United deposit again. As you look ahead to your production, does this put United at the head of the line and potentially ahead of Archer's plan network operations? And then can you also elaborate on your latest thinking on the mix between direct sales as well as the passenger network?

This is Adam. So Archer has always said, the goal is to build a long-term UAM network. And the path to do that is going to require capital and selling planes is a good way to help fund the long-term business. And so as we've said to date, we think 50% of our production, our base case will be sold and 50% of our production will be used. And so United is a great go-to-market launch partner. And so we're evaluating different scenarios in terms of working together on these markets. But I think the real goal here has to do with finding the best way to get eVTOL to market set up with infrastructure at the core trunk routes from airports to city centers and get all this operational in 2025. We understand that there is a big lift to get there. But again, doing this with large partners, I think, helps make that considerably easier. So the sort of the theme and like kind of the feeling that we've had over the past quarter is this advancement of commercialization is really been exciting. And I think that's what everybody is feeling. And it's not just internally at Archer, it's not just at United either, but it's also with some of the local municipalities that we're starting to talk to with some of the strategies around our airports that we've been speaking with. And so there's this kind of momentum that we're all starting to feel. And I think that's what's gotten everybody excited with where we are at today.

Maybe I'll just touch on batteries in terms of certification. We heard from the air current that there's a difference between pouch and cylindrical batteries. So can you share a little bit more on the details on the types of batteries that Archer is using today and then the ones you plan to certify with? And then as you see it today, what are the key risks and challenges as well as areas you all need to convince the regulators that on that the batteries are safe?

This is Tom. I'll be happy to answer that. So for competitive reasons, we don't want to disclose exactly what batteries we're using. But what I can say is that they're commercially available off-the-shelf cells manufactured by well-established companies. So cells that come with extremely high reliability and the data to back that up. So our approach has been essentially lower performance in terms of range and energy, but much higher reliability, much higher safety and ease of certification and commercialization. That's the strategy we're taking there. In terms of risks, similarly we way we think about this, the FAA has well-established certification requirements for batteries, right? DO-311A is an accepted needs compliance to get these systems certified, and we've designed to meet that standard. So essentially, we're doing our best to make this as easy as possible for the FAA and just make it not one of the main things that we're worried about are trying to push the envelope on. And the nice thing is we can do that and still achieve all of our commercial targets with the aircraft because that's really what it's all about in of the day.

And if I can add on there, this is Adam, since the beginning, what we've always said as our goal is to find an efficient path to getting to market. Archer has always been about commercialization. And what we did was design an aircraft around a business case, which is these 20 to 30 mile rapid back-to-back missions where we can do multiple of these trips per day. And then from there is just reduce the risk everywhere, reduce the risk to certification and reduce the risk to mass manufacturing. We've made a lot of decisions around that, and you can see that across a lot of our announcements. So I think that message will be consistent across all parts of the aircraft.

Thank you. There are currently no additional questions registered at this time. So I will pass the conference back over to Adam Goldstein, CEO, for closing remarks.

Thanks for attending our second quarter call. We are really excited about the progress in advancing our commercialization efforts. The success of Maker flight test campaign, the results of the Midnight PDR and the United Airlines deposits are really strong proof points that we're on track to realize our commercial vision. This is really a generational opportunity. And it's -- now you get to see why I'm so excited, why the team is so excited, come to work every day. Midnight does have the opportunity to transform the world. I can't wait to share more details with everyone over the coming months. Thank you.