Archer Aviation - Q3'26 Financial Results Conference Call - ARCHER AVIATION INC

Explicit Guidance:

• Q4 2026 Revenue: Expected to be between $5 million and $6 million (excluding impact of pending Boeing acquisitions).
• Q4 2026 Adjusted EBITDA: Expected loss between $185 million and $205 million.
• Full Year 2026: Adjusted EBITDA expected to be within the previously guided range of $170 million to $200 million.
• Liquidity: $1.4 billion in cash, cash equivalents, and short-term investments as of Q3 2026.
• Net Cash Burn: Post-acquisition close, net cash burn is expected to remain relatively flat from current levels through 2027.

Business-Segment Outlook:

• Archer Midnight (Commercial eVTOL):
  • 2026: Begin "No Roads Tour" operations in Los Angeles (Hawthorne Airport) within weeks; progress from piloted CTOL to VTOL operations, then pilot-plus-passenger operations; close acquisition of Boeing assets (Wisk, SkyGrid, InSitu).
  • 2027: Commence passenger-carrying operations under Market Survey Special Airworthiness Certificate; launch of "Omen" program testing with Anduril; potential expansion of flight testing to Texas, Florida, and New York.
  • 2028: Serve as the official air taxi provider for the LA-28 Olympic Games; achieve Type Certification (TC) for routine urban air mobility operations at scale.
  • Halo Platform (Defense): Begin full-scale flight testing in 2027; ramping production of nine Midnight aircraft and multiple Halo aircraft for flight tests and EIPP.
  • InSitu (Unmanned Aircraft Systems): Target to rapidly grow annual revenue base (historically >$200M) post-close to offset Midnight development spend; leverage existing global footprint of 35 countries and 2 million flight hours.
  • SkyGrid & Z: Expect to share details on commercializing Air Traffic Management (ATM) platforms and foundation models (Z) near future; current product suite includes common operating picture, flight plan validation, and surveillance.
• Revenue Mix: Shift toward diversified revenue streams from civil (Air Taxi) and defense (InSitu, Halo) applications post-acquisition; near-term revenue growth driven by InSitu's established programmatic revenue base and early defense/aftermarket sales (engines, batteries).

Market and Competitive Outlook:

• Launch Markets: Strategic rollout focused on Los Angeles (launch city), followed by networks in Texas (Dallas, Houston, Austin), New York, Bay Area, and Miami; ETA Airways partnership targets Italian/European major cities.
• Partnerships & Events: Multi-year partnership with Formula One to provide air taxi services at Grand Prix weekends globally; in-flight operations expected to integrate with F1 hospitality and ticketing.
• Operational Model: Near-term focus on OEM sales (aircraft) rather than operator-led air taxi services; expected to "earn the right" to operate fleet post-certification while maintaining a small proprietary fleet for data learning.
• Infrastructure: Expect partners (e.g., Beta, Signature, Atlantic) to lead infrastructure financing; Archer's ACES charging consortium (with Beta/Macquarie) aims to provide low-cost, interoperable charging.

Macro / Industry Outlook:

• Regulatory Environment: FAA Type Certification process is in the fourth phase (implementation); EASA coordination ongoing for European operations; belief in aligned FAA/EASA frameworks for global certification.
• Technology Readiness: Transitioning from pilot-only to pilot-passenger operations; software verification for piloted transition campaign completed; expecting to build 50 hours of stable flight data for VTOL market survey.
• Economic Conditions: Management expresses confidence in the sector, citing "world's excitement" and positioning Archer as a diversified next-gen A&D company.

Strategic Initiatives:

• Acquisition of Boeing Assets (Wisk, SkyGrid, InSitu):
  • Timeline: Anticipated to close by end of 2026 (one regulatory approval remaining); HSR waiting period expired.
  • Integration Strategy: Harden Wisk's autonomy technology in the Halo platform first; utilize InSitu's revenue to offset Midnight development costs; retain Boeing as largest shareholder via stock and warrants.
• Anduril Partnership:
  • Omen: Delivered initial battery packs and electric engines; testing turboshaft engine for Group 5 hybrid electric autonomous aircraft; on track for full-scale flight testing in 2027.
  • Technology Transfer: Turbo generator technology extends Midnight powertrain to new range, speed, and payload classes.
• Infrastructure Expansion:
  • Hawthorne Airport: Upgraded terminal, installed electric charging, and constructing 11 new hangars; establishing as the central LA hub.
  • Vertiport Network: Assembling network connecting SoFi Stadium, USC, LA Live (with AEG), and regional FBOs in LA; announced networks in Texas with 11 vertiports.

Risks and Headwinds to Outlook:

• Regulatory Certification: Type Certification process described as the "most rigorous stretch"; progress is contingent on closing compliance findings and completing flight test milestones.
• Operational Execution: Transitioning from CTOL to VTOL passenger operations requires new flight test campaigns (pilot transition) and data transparency with the FAA.
• Integration Execution: Post-close integration of InSitu, Wisk, and SkyGrid carries risks regarding realizing expected synergies and maintaining cash flow discipline.
• Market Adoption: Future air taxi operations depend on "earning" the right to operate the fleet and successful integration into complex urban airspace; OEM sales remain the primary near-term driver.
• Forward-Looking Uncertainty: Actual results may differ materially from assumptions regarding acquisition closing timing, revenue generation from new platforms, and certification timelines.

Management Tone on the Future:

• Sentiment: Highly confident ("I've never been more confident"); describes current state as a "position of financial strength."
• Progress: Emphasizes "meaningful progress quarter over quarter" and "record quarter" for flight testing (118 flights, up to 16/week).
• Strategic Shift: Frames the company as transitioning from a concept to a diversified aerospace and defense entity with immediate revenue streams from defense (InSitu/Anduril) and a clear path to commercial scale via LA-28 and global partnerships.
• Hedging: Maintains guidance on a standalone basis (excluding acquisitions) for Q4; anticipates "step change" in revenue and cash flow profile post-acquisition.

Miscellaneous:

• Market Survey Certificate: Archer received FAA Market Survey Special Airworthiness Certificate for CTOL aircraft; this is a precursor to VTOL market survey and passenger operations, not a standalone commercial product to be sold as CTOL-only.
• Financial Metrics: Q3 2026 revenue was $5.1 million (beat consensus); Q3 Adjusted EBITDA loss was $178.5 million (lower end of guided range, beat consensus).
• Specific Milestones: "No Roads Tour" launched in Northern California; Midnight aircraft currently at Hawthorne Airport in LA; Super Bowl (Feb 2026) and LA-28 Games (June 2028) are key operational timelines.
• Capital Structure: Boeing to become largest shareholder; $55 million forward equity purchase agreement available but not automatic.