UNITED STATES
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CURRENT REPORT
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Item 2.02 Results of Operations and Financial Condition.
On November 11, 2021, Archer Aviation Inc. (“Archer” or the “Company”) held a conference call regarding its financial results for the quarter ended September 30, 2021. Archer also issued a letter to its stockholders announcing its financial results for the quarter ended September 30, 2021 (the “Shareholder Letter”). Copies of the Shareholder Letter and conference call transcript are furnished herewith as Exhibit 99.1 and 99.2, respectively, to this Current Report on Form 8-K.
Archer makes reference to non-GAAP financial information in both the Shareholder Letter and the conference call. A reconciliation of GAAP to non-GAAP results is provided in the Shareholder Letter, as attached to this Current Report on Form 8-K.
The information furnished with this Item 2.02, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that section, nor shall it be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Number |
Description | |
99.1 | Letter to Shareholders, dated November 11, 2021 | |
99.2 | Transcript of Archer’s Conference Call, dated November 11, 2021 | |
104 | Cover Page Interactive Data File (formatted in the Inline XBRL and contained in Exhibit 101) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ARCHER AVIATION INC. |
Date: November 12, 2021
By: | /s/ Andy Missan | |
Name: | Andy Missan | |
Title: | Chief Legal Officer |
Exhibit 99.1
SHAREHOLDER LETTER Q3 2021 THE FLIGHT OF A LIFETIME, EVERY DAY. The Flight of a Lifetime, Every DaySM |
KEY FINANCIAL HIGHLIGHTS Q3 2021 (GAAP) Q3 2021 (NON-GAAP)1 OPERATING EXPENSE Added more engineering talent with experience across multiple industries and disciplines. Invested in Maker aircraft ahead of its frst fight test. These expenses were ofset by lower marketing spend and legal costs. $176M $29M Excludes $103M of stock-based compensation and $45M of non-cash warrant expense NET LOSS Operating expense of $176M plus interest expense resulted in a net loss in the quarter. $(177M) NA ADJUSTED EBITDA Continued investments into headcount and development programs, ofset by lower marketing spend and legal costs. NA $(28M) CAPITAL EXPENDITURES Capex spend was for Maker aircraft and ofce facilities to support an increasing headcount. $1.1M NA CASH AND CASH EQUIVALENTS Successful completion of business combination generated net cash proceeds of $802M. $796M NA 1 A reconciliation of non-GAAP fnancial measures to the most comparable GAAP measures is provided below in the section titled “Q3 2021 GAAP to non-GAAP Reconciliation.” SHAREHOLDER LETTER Q3 2021 2 |
OUR VISION OF URBAN AIR MOBILITY Archer Shareholders, After debuting as a public company earlier this year, we are pleased to share with you our Q3 2021 fnancial results for Archer Aviation Inc. (“Archer”). In addition to this letter, we will be conducting our earnings conference call at 4:30 p.m. ET. A live webcast of this call can be accessed on the Archer investor relations website or using the webcast details in the fnancial results and guidance section of this letter. In this inaugural letter, in addition to our Q3 fnancials, we would also like to share with you our future vision for Archer, our perspective on the size of our addressable market, our key accomplishments in 2021, and our fnancial and business outlook. OUR VISION Every day in the U.S., on average, there are more than 1.1 billion trips covering 11 billion miles, with 87 percent of these daily trips taking place in personal vehicles(2). While stuck in crowded trafc, individual travelers contribute to air pollution and waste approximately 1 hour per day(2) behind the wheel. This means that each year an average person in the U.S. spends about two weeks on the roads(3), with all these drivers totaling approximately 3.5 trillion miles, and contributing to over a trillion tons of carbon dioxide released into the atmosphere(2)(4). Despite what many believe, this is not a required reality. People often take for granted that many of the historic inventions in the transportation industry - the train, plane, and automobile - only became widely used over the last 170 years. Prior to these inventions, horses and buggies were a dominant mode of much of the world’s long-distance travel. However, just 22 years after the sale of the frst Model-T in 1908, 23 million cars were on the road in the U.S., and more than half of all American families owned a car(5). The value proposition of a car - speed, safety, and comfort - was unignorable. From our perspective, it is rare that a product emerges that betters the daily life of an average person so signifcantly that it becomes “unignorable” - that it becomes the new baseline. But often these products have one thing in common: no one expects them. For instance, if you had explained an iPhone to an average person in 2000, they might have thought you were delusional. Products that put the customer value proposition frst, providing a reality that customers previously perceived to be impossible at a cost that is accessible to the masses - that is when adoption often becomes inevitable. Over the last 10 years, there have been tremendous advancements in electric power systems. This has enabled us to begin building a new type of transportation service, which we refer to as Urban Air Mobility (“UAM”). We believe UAM will provide the same level of transportation advancement in the 21st century that the mass commercialization of the automobile brought to the 20th century. Morgan Stanley believes that UAM will be a $1 trillion market by 2040 and $9 trillion by 2050(6). 6 Morgan Stanley Research, “eVTOL/Urban Air Mobility TAM Update: A Slow Take-Off,But Sky's the Limit”, 5/6/21. 5 National Museum of American History, “Cars Everywhere?”. 4 Estimate based on survey data cited in Footnote #2 and carbon emissions per mile from the U.S. Environmental Protection Agency, “Greenhouse Gas Emissions from a Typical Passenger Vehicle”, 3/18. 3 Based on survey data cited in Footnote #2, but extrapolates out 55 minutes per day of driving over 365 days. 2 United States Department of Transportation, “National Household Travel Survey Daily Travel Quick Facts”, 5/31/17. SHAREHOLDER LETTER Q3 2021 3 |
OUR VISION OF URBAN AIR MOBILITY Imagine a future world in which UAM is a leading mode of transportation. Instead of driving your car or taking the train 45 minutes each morning to your ofce, what if you could fy there in less than 10 minutes? You are no longer limited to two dimensional ground movement. You now travel in the 3rd dimension, where road congestion and pollution have been replaced by the expansiveness of the sky and carbon-free fight. What would you do with all the time you save? Where would you choose to travel next if roads were irrelevant? You could explore the mountain tops, the deserts, the previously inaccessible - and be home before dinner. Welcome to the future of transportation where people will travel every day in the 3rd dimension. Welcome to the era of micro-exploration. We envision a future world in which the UAM service we plan to operate will replace a large portion of today’s urban automotive transportation. A world in which the adoption of electric vertical take-of and landing (eVTOL) aircrafts becomes inevitable. OUR ADDRESSABLE MARKET As we look to help people understand the size and scope of our addressable market, we start with one of our key market categories: existing daily travel. In the greater Los Angeles area (“L.A.”), one of the major markets in the U.S. in which we plan to initially operate our UAM ecosystem, a graph of cumulative trips on an average weekday in 2019 demonstrates the urgent need for a better mode of short-distance travel. As you look at the histogram below, it shows approximately 60 million daily trips in L.A.(7), but travel exceeding 50+ miles is virtually nonexistent. Furthermore, about 5 million of those approximately 60 million daily trips take more than an hour(8). Aggregate Trips in the Greater L.A. Area on an Average Weekday in 2019(7) 8 Reflects door-to-door commute time. 7 Reflects trip behavior on an average individual weekday in the greater Los Angeles area in 2019 from the Southern California Association of Governments 2020 RTP/SCS Activity Based Travel Demand Model, which incorporates all modes of personal transportation. Greater L.A. area includes Los Angeles, Orange, Ventura, Riverside, and San Bernardino counties. SHAREHOLDER LETTER Q3 2021 4 |
OUR VISION OF URBAN AIR MOBILITY The opportunity in L.A. is clear: there is a need for a new mode of transportation that can move people distances less than 50 miles more rapidly and efciently. This is one critical market category for which we are designing our eVTOL aircraft and UAM ecosystem: regular trips of short duration (i.e., approximately 10-40 miles), saving travelers substantial time, at a price point accessible to the masses. As mentioned above, it is important to note this ‘existing daily travel’ market is only one category of what we believe UAM will address. A second market that we intend to address, the ‘micro-explorer’, is what we refer to as “induced demand”, meaning people aren’t taking these trips today because they are inaccessible or take too long via today’s ground transportation methods. This market category is comparable to how much travel increased once people could use cars to move around rather than horses and buggies. We believe over time this is likely to be another material market category for Archer. In summary, we believe our addressable market is large. The L.A. data above only refects one market for potential UAM demand in one launch city. Increasing our planned UAM infrastructure in a particular city, and serving more cities, would allow us to dramatically expand our customer base and revenue potential. SHAREHOLDER LETTER Q3 2021 5 |
MEET MAKER Maker is our full-scale electric vertical takeof and landing (eVTOL) aircraft used to help us accelerate our design, development, and certifcation of our production aircraft. Maker was unveiled in June 2021 and most recently relocated from our development lab to our fight test facility. The aircraft is electric powered with six independent battery packs and 12 electric motors. Maker will cruise at 2,000 feet above ground level and be nearly silent to people on the ground. |
OUR KEY ACCOMPLISHMENTS IN 2021 FAA G-1 CERTIFICATION BASIS SIGNED: This is one of our most important accomplishments of 2021. We have found that policy makers in the U.S. are willing to embrace the electrifcation of our skies (see FAA video). We started our path to certifcation in 2020 when our project was accepted by the Federal Aviation Administration (“FAA”) intake board. In September of this year (less than 12 months from intake), we reached agreement with the FAA on a certifcation basis of our eVTOL aircraft through a signed G-1 Issue Paper. This G-1 Certifcation Basis milestone helps validate our strategy of designing for certifcation from day one. We believe we are now one of only two companies in the world to achieve this milestone with the FAA. With our aircraft certifcation requirements now established, we are focused on fnalizing our G-2 Issue Paper with the FAA, which will set forth in detail how we will comply with the certifcation requirements established in the G-1 Issue Paper. We have been working on the Means of Compliance (“MoC”) for the G-2 Issue Paper with the FAA since earlier this year. See the section title “Outlook to Commercialization” for more information about our certifcation process. G-1 Certifcation Basis Announcement Video Hyperlink SHAREHOLDER LETTER Q3 2021 7 |
OUR KEY ACCOMPLISHMENTS IN 2021 CLOSING OF OUR BUSINESS COMBINATION: In September, we began our journey as a public company with the closing of our business combination, and our stock began to trade on the NYSE under the ticker “ACHR”. The business combination generated approximately $858 million in gross proceeds, including $600 million of proceeds from the PIPE portion of the fnancing. The PIPE included investors such as United Airlines, Stellantis and the venture arm of Exor, Baron Capital Group, the Federated Hermes Kaufmann Funds, Mubadala Capital, Putnam Investments and Access Industries. In addition, we (Brett and Adam) personally invested in the PIPE, as did our early investor, Marc Lore. Archer Team Celebrates Public Listing on NYSE SHAREHOLDER LETTER Q3 2021 8 |
OUR KEY ACCOMPLISHMENTS IN 2021 EXPERIENCED BOARD OF DIRECTORS ASSEMBLED & EXPANSION OF OUTSTANDING LEADERSHIP TEAM: As part of our journey to become a public company, we added members to our board of directors with signifcant expertise and experience from across a variety of relevant sectors: Deborah Diaz, former CTO and CIO of NASA; Fred Diaz, former CEO of Mitsubishi NA; Oscar Munoz, former CEO of United Airlines; Maria Pinelli, former Global Vice Chair of Ernst & Young; and Michael Spellacy, former CEO of Atlas Crest Investment Corp. We continue to believe one of our core strategic advantages is the leading talent we have brought together here at Archer. During Q3 alone, we have signifcantly bolstered our engineering team adding key hires in important disciplines, such as Aerodynamics, Systems & Safety Engineering, Battery Systems, Electric Motor, Structures, and Flight Control Systems. You can sign up for Archer news updates through our website to receive the latest information about our key hires. BRETT ADCOCK Co-Founder, Co-CEO Previously Co-Founder of Vettery ADAM GOLDSTEIN Co-Founder, Co-CEO Previously Co-Founder of Vettery OSCAR MUNOZ Former CEO & Chairman of United Airlines DEBORAH DIAZ Former CTO at NASA FRED DIAZ Former CEO & Chairman of Mitsubishi NA MARIA PINELLI Former Global Vice Chair of EY MICHAEL SPELLACY Former CEO of Atlas Crest SHAREHOLDER LETTER Q3 2021 9 |
OUR KEY ACCOMPLISHMENTS IN 2021 MAKER AIRCRAFT ASSEMBLED, INTEGRATED, AND PREPARING FOR FLIGHT: In June 2021, we unveiled our full-scale demonstrator eVTOL aircraft, Maker, to the world. That unveiling video, which can be found on our YouTube channel, has already captured the attention of over 40 million viewers. From Maker, we will gather data and information that will help us accelerate our design, development, and certifcation of our production aircraft. We are pleased to announce that we have relocated Maker from our design and development facility to the hangar facility from which we will conduct our Maker test fights. The aircraft is currently undergoing preparations for its frst hover fight, which we anticipate will take place later this year. A group of our engineers are working on site to integrate Maker’s mechanical and software systems for its upcoming test fights. Signifcantly, the FAA recently issued a Certifcate of Authorization (“CoA”) and the Aircraft Limitations covering Maker. The CoA and the Aircraft Limitations are key components of a Special Airworthiness Certifcate, which would be the FAA basis that permits the Maker aircraft to start test fights. The period from Maker’s initial design to its anticipated frst fight date is only two years. We believe we were able to move this efciently because of the quality of our experienced team. Archer has built seven generations of subscale eVTOL aircraft of various designs and has fown over one thousand subscale test fights. Our team has worked tirelessly to get us here. Lastly, we are beginning to assemble a second, duplicate version of Maker to allow us to conduct additional test fights. Archer Team Prepares Maker For Flight SHAREHOLDER LETTER Q3 2021 10 |
OUR KEY ACCOMPLISHMENTS IN 2021 PRODUCTION AIRCRAFT UPDATE: We intend to unveil the frst generation of our production aircraft in 2023. It will be a piloted aircraft that can carry up to 4 passengers. In October 2021, we completed our conceptual design review of this aircraft, and we are currently in the preliminary design stage of the aircraft’s development. Throughout the program, we intend to continue to work closely with the FAA in an efort to achieve certifcation as efciently as possible. MANUFACTURING SITE SELECTION: We began our manufacturing site selection process several months ago. We received signifcant interest from locations across the U.S. with over 200 sites submitting responses to our request for information. We evaluated these sites based on several criteria, including airport access, weather, talent availability, accessibility, airspace congestion, population density, available incentives, and cost. Our manufacturing site selection process is now in its fnal stages. ANNOUNCED INITIAL LAUNCH CITIES: In February 2021, we announced that we plan to initially operate our UAM ecosystem in select major U.S. cities, with Los Angeles and Miami topping the list. With support from the mayor's ofce in each of those cities, we are thrilled to have taken this step towards initial launch planning within these cities. Our city selection process remains ongoing as it is a rigorous process involving our evaluation of the ever-changing landscape of trip behaviors, congestion, weather, altitude, and local regulatory landscape. Archer Illustrative City Vertiport(9) 9 This vertiport image is a computer generated simulation. SHAREHOLDER LETTER Q3 2021 11 |
OUR KEY ACCOMPLISHMENTS IN 2021 INDUSTRY LEADING PARTNERS: We have worked hard to build foundational relationships with top-tier organizations that we see as key strategic partners: UNITED AIRLINES: United Airlines is a core strategic partner to us and a sizable shareholder. United Airlines has placed an order, subject to us meeting certain of its business and operating requirements, for $1 billion of our aircraft, with an option for an additional $500 million of aircraft. In addition, United Airlines has already begun supporting us on our design process, pilot and maintenance crew training, and helping us as we develop our go-to-market strategy for city launches. “We partnered with Archer because we believe they have the right plan to bring a new form of sustainable transportation to market. During 2021, Archer made tremendous progress, and we are excited to continue to work with them on network design and aircraft operations.” – MICHAEL LESKINEN, PRESIDENT, UNITED AIRLINE VENTURES STELLANTIS: Stellantis, one of the largest automotive manufacturers in the world, is also a core strategic partner of ours and an important shareholder. We are well underway on our multi-year collaboration we agreed to as part of our Collaboration and Manufacturing Consulting Agreements with Stellantis. We are collaborating with Stellantis in several strategic areas, including high-volume composite manufacturing, access to low-cost automotive grade supply chain, manufacturing consulting for site selection and operations. UNITED STATES AIR FORCE: We have agreed to share certain of our eVTOL aircraft fight testing information with the United States Air Force (USAF) to allow the AFWERX Agility Prime Ofce to better assess the transformational vertical fight market and eVTOL technologies. This is a critical relationship for us as we look to further understand the potential use cases for our aircraft. We look forward to continued collaboration with the USAF. REEF TECHNOLOGIES: In August 2021, we started working with REEF Technology Inc. (“REEF”), the largest mobility hub operator in North America, as we look to gain access to thousands of sites in dense urban areas potentially suitable for our vertiports. REEF’s network of over 4,800 parking garages that cover 70% of North America’s urban population. We continue to work with REEF on our strategy for vertiport design and operations. Scott Kirby (left), United Airlines CEO, Meets with Archer Co-founders Brett Adcock (center) and Adam Goldstein (right) SHAREHOLDER LETTER Q3 2021 12 |
OUR KEY ACCOMPLISHMENTS IN 2021 UPDATE ON WISK LITIGATION: We are very pleased with the progress of the Wisk litigation. Signifcantly, after extensive discovery as part of Wisk’s motion for a preliminary injunction, Wisk provided no evidence—not a single document, not a single witness—that we ever received or used any Wisk trade secret. Accordingly, on August 24, 2021 the Court issued an order denying Wisk’s motion for a preliminary injunction, concluding as follows: ● “Wisk mischaracterizes—really, invents—the evidence.” ● “Despite getting robust early discovery, including access to engineering documents, Wisk was not able to demonstrate that any of its particular asserted trade secrets was misappropriated.” The Court’s opinion reinforces what we have been saying all along—that Wisk's claims are without merit and nothing more than an attempt to stife competition. We are also very pleased with the Court’s order on September 14, 2021 denying Wisk’s motion to dismiss our counterclaims for tortious interference, defamation, and unfair business practices. In denying Wisk’s motion, the Court found that “Archer has presented sufcient evidence that it has a reasonable prospect of succeeding on the merits.” We believe that these two Court rulings and the underlying evidence put us in a very favorable position in the litigation. We look forward to proceeding in Court both to defend ourselves against Wisk’s claims and to hold Wisk accountable for its actions described in our counterclaims. SHAREHOLDER LETTER Q3 2021 13 |
FINANCIAL RESULTS & GUIDANCE Q3 2021 FINANCIAL REVIEW We successfully completed our business combination in September and received $802M in net cash proceeds. This paves the way for us to design, manufacture, and certify our eVTOL aircraft and achieve our vision of sustainable urban air mobility. We exited the quarter with $796 million in cash and cash equivalents. Our third quarter capital expenditures were $1.1 million. Our third quarter GAAP operating expense was $176 million, which included stock-based compensation expense of $103 million refecting the one-time vesting of the frst tranche of restricted stock units granted to our founders, resulting from the achievement of the frst performance milestone. These grants were structured as part of the business combination to align with maximizing shareholder interests through signifcant stock price appreciation or achieving certain other performance milestones. Going forward, the stock-based compensation expense for these founder grants will be based on the likelihood of the vesting of the remaining three tranches. In the quarter, we recorded a non-cash warrant expense of $39 million related to the vesting of the second tranche of the United Airlines warrants. The remaining two tranches in these warrants will be expensed as we receive our Type Certifcation and deliver our aircraft to United. We also recorded a non-cash warrant expense in the third quarter of nearly $6M relating to the vesting of certain tranches of the warrants granted to Stellantis. The remaining tranches in these warrants will be expensed as we meet the remaining performance and time-based vesting criteria that underlie these warrants. GAAP operating expense of $176 million plus interest expense related to our SVB loan resulted in a third quarter GAAP net loss of $177 million. Our third quarter non-GAAP operating expense was $29M, driven by investments across our engineering team and in our Maker aircraft, ofset by lower marketing and legal costs(10). This resulted in an adjusted EBITDA loss of $28M(10). 10 A reconciliation of non-GAAP fnancial measures to the most comparable GAAP measures is provided below in the section titled “Q3 2021 GAAP to non-GAAP Reconciliation.” SHAREHOLDER LETTER Q3 2021 14 |
FINANCIAL RESULTS & GUIDANCE Q4 2021 FINANCIAL OUTLOOK In terms of our fourth quarter outlook, we anticipate total GAAP operating expense of $65 - 70 million and non-GAAP operating expense of $35 - 40 million. This refects expected stock-based compensation and warrant expense of approximately $30 million as we record a one-time larger-than-normal stock-based compensation expense in the fourth quarter to refect restricted stock units and stock options that could not be granted to existing employees until we have an efective registration statement covering such equity grants, which we expect to occur in the fourth quarter. The projected sequential increase in our fourth quarter non-GAAP operating expense is largely due to continued increases in headcount across multiple engineering disciplines, as we continue to add engineering talent from eVTOL, traditional aerospace, and electric battery industries. We intend to remain vigilant and prudent in managing our cash spend as we design, develop, test, and certify our eVTOL aircraft for commercial launch in the coming years. We have not reconciled our non-GAAP operating expense guidance because certain items that impact non-GAAP operating expense are uncertain or out of our control and cannot be reasonably predicted. In particular, stock-based compensation expense is impacted by the future fair market value of our common stock and other factors, all of which are difcult to predict, subject to frequent change, or not within our control. The actual amount of these expenses during 2021 will have a signifcant impact on our future GAAP fnancial results. Accordingly, a reconciliation of non-GAAP operating expense is not available without unreasonable efort. Q3 2021 EARNINGS WEBCAST We will host a live audio webcast of our conference call at 4:30 p.m. ET on November 11, 2021 to discuss the results. The webcast is accessible from our investor relations website (http://investors.archer.com). An archive of the webcast will be available on that same website shortly after the call. SHAREHOLDER LETTER Q3 2021 15 |
OUTLOOK TO COMMERCIALIZATION BUSINESS OUTLOOK While we’ve accomplished a lot so far in 2021, we recognize that we still have key challenges and critical milestones ahead on our path to commercialization of our aircraft and UAM ecosystem. Top of mind for us right now is conducting Maker’s frst test fight, which is planned to be a hover fight occurring later this year. Following that frst test fight, our fight testing plan for Maker (and the additional Maker aircraft we are currently building) includes performing progressively more advanced test fights throughout 2022, with the goal of Maker conducting its frst full transition and cruise fight in 2H 2022. As discussed earlier, we continue to make strong progress on our path to Type Certifcation of our production aircraft. We agreed upon a G-1 Certifcation Basis with the FAA in September and have been working on the Means of Compliance (MoC) for the G-2 Issue Paper with the FAA since earlier this year, as well as the necessary testing and methods required to demonstrate safety and compliance of our aircraft. Once the MoC steps are complete, our production aircraft design will be evaluated and measured to the certifcation requirements established by the G-1 Issue Paper. We continue to work towards our goal of receiving our G-2 Issue Paper in 2022 and our Type Certifcation of our production aircraft before the end of 2024. In addition to our work on Maker, we have been quietly designing our production aircraft and working with the FAA on the certifcation process for this aircraft. As mentioned above, we intend to unveil this aircraft in 2023. Also as mentioned above, we are currently in the fnal stages of choosing our manufacturing site. We plan to begin construction on this manufacturing facility in 2022 and target having construction completed in 2023. In terms of key operational milestones, we intend to launch and begin initial testing of our mobile booking application in 2023 to optimize a seamless experience for our customers. We further anticipate receiving our Part 135 Certifcation, a critical certifcate which is required for the commercial operations of our aircraft, in 2024. We continue to dedicate signifcant engineering resources towards further advancing the key technologies that enable our aircraft. This includes areas such as electric aircraft design, powertrain development (electric motors and battery systems), avionics and fight control software, system simulation, and manufacturing. We have made considerable progress in building our battery and electric motor teams for our production aircraft, and we are targeting full validation of our electric powertrain systems, which includes our Battery Systems and Electric Motors, in 2023. SHAREHOLDER LETTER Q3 2021 16 |
OUTLOOK TO COMMERCIALIZATION We detail key elements of our forecasted operational outlook in the chart below: Summary of Business Outlook In summary, while we are very proud of our achievements to date, we recognize that we still face tough challenges ahead on our path to commercialization. However, we believe that if we continue our journey with purpose, talent, and relentlessness, we will accomplish our mission and lead the world into the age of Urban Air Mobility. We thank our shareholders, employees, business partners, advisors, and our board of directors for all their contributions and support so far. We are grateful to be part of such an incredible team. BRETT ADCOCK Co-Founder and co-CEO ADAM GOLDSTEIN Co-Founder and co-CEO SHAREHOLDER LETTER Q3 2021 17 |
FORWARD-LOOKING STATEMENTS This shareholder letter includes forward-looking statements, which are statements other than statements of historical facts and statements in the future tense. These statements include, but are not limited to, statements regarding our future performance and our market opportunity, including expected fnancial results for the fourth quarter of fscal year 2021, our business strategy and plans, including the pace at which we intend to design, develop, certify and bring to market our planned eVTOL aircraft and the potential market opportunity for our eVTOL aircraft and planned UAM ecosystem. Forward-looking statements are based upon various estimates and assumptions, as well as information known to us as of the date hereof, and are subject to risks and uncertainties. Accordingly, actual results could difer materially due to a variety of factors, including: the early stage nature of our business and our past and projected future losses; our ability to design, develop, certify, manufacture and commercialize our aircraft and UAM ecosystem; our dependence on United Airlines for our current aircraft orders, which are subject to conditions, further negotiation and reaching mutual agreement on certain material terms, and the risk that United Airlines cancels those orders; our ability to remediate material weaknesses in internal control over fnancial reporting and ability to maintain an efective system of internal control; the efectiveness of our marketing and growth strategies, including our ability to efectively market electric air transportation as a substitute for conventional methods of transportation; our ability to compete in the urban air mobility and eVTOL industries; our ability to obtain any required certifcations, licenses, approvals, or authorizations from governmental authorities; our ability to achieve our business milestones and launch products and services on anticipated timelines; our dependence on suppliers for the parts and components in our aircraft; our ability to develop commercial-scale manufacturing capabilities; regulatory requirements and other obstacles outside of our control that slow market adoption of electric aircraft, such as the inability to obtain and maintain adequate vertiport infrastructure; our ability to hire, train and retain qualifed personnel; risks related to our UAM ecosystem operating in densely populated metropolitan areas and heavily regulated airports; adverse publicity from accidents involving electric aircraft or lithium-ion battery cells; the impact of labor and union activities on our workforce; losses resulting from indexed price escalation clauses in purchase orders; regulatory risks related to evolving laws and regulations in our industry; the impact of natural disasters, outbreaks and pandemics, including the COVID-19 pandemic, on our business and the global economy; our need for and the availability of additional capital; cybersecurity risks; and risks and costs associated with our ongoing litigation with Wisk Aero LLC. Additional risks and uncertainties that could afect our fnancial results and business are included under the caption “Risk Factors” in our proxy statement/prospectus fled with the Securities and Exchange Commission (the “SEC”) pursuant to Rule 424(b)(3) under the Securities Act of 1933, as amended, on August 11, 2021, our Quarterly Report on Form 10-Q relating to our third quarter 2021 results to be fled with the SEC, and our other SEC flings, which are available on investor relations website at http://investors.archer.com and on the SEC website at www.sec.gov. All forward-looking statements contained herein are based on information available to us as of the date hereof and you should not rely upon forward-looking statements as predictions of future events. The events and circumstances refected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations refected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this shareholder letter or to conform these statements to actual results or revised expectations, except as required by law. Undue reliance should not be placed on forward-looking statements. SHAREHOLDER LETTER Q3 2021 18 |
Q3 2021 FINANCIAL STATEMENTS ARCHER AVIATION INC. CONSOLIDATED CONDENSED BALANCE SHEETS (In millions, except share and per share data; unaudited) SHAREHOLDER LETTER Q3 2021 19 |
Q3 2021 FINANCIAL STATEMENTS ARCHER AVIATION INC. CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS (In millions, except share and per share data; unaudited) SHAREHOLDER LETTER Q3 2021 20 |
Q3 2021 FINANCIAL STATEMENTS ARCHER AVIATION INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In millions; unaudited) SHAREHOLDER LETTER Q3 2021 21 |
Q3 2021 FINANCIAL STATEMENTS Q3 2021 GAAP TO NON-GAAP RECONCILIATION: A reconciliation of operating expenses to non-GAAP operating expenses for the three and nine months ended September 30, 2021 and September 30, 2020, respectively, are set forth below. ARCHER AVIATION INC. RECONCILIATION OF OPERATING EXPENSE (In millions; unaudited) SHAREHOLDER LETTER Q3 2021 22 |
Q3 2021 FINANCIAL STATEMENTS A reconciliation of net loss to adjusted EBITDA for the three and nine months ended September 30, 2021 and September 30, 2020, respectively, are set forth below. ARCHER AVIATION INC. RECONCILIATION OF ADJUSTED EBITDA (In millions; unaudited) SHAREHOLDER LETTER Q3 2021 23 |
Q3 2021 FINANCIAL STATEMENTS NON-GAAP FINANCIAL MEASURES To supplement our condensed consolidated fnancial results prepared in accordance with GAAP, we use a number of non-GAAP fnancial measures to help us in analyzing and assessing our overall business performance, for making operating decisions and for forecasting and planning future periods. We consider the use of non-GAAP fnancial measures helpful in assessing our current fnancial performance, ongoing operations and prospects for the future as well as understanding fnancial and business trends relating to our fnancial condition and results of operations. While we use non-GAAP fnancial measures as a tool to enhance our understanding of certain aspects of our fnancial performance and to provide incremental insight into the underlying factors and trends afecting our performance, we do not consider these measures to be a substitute for, or superior to, the information provided by GAAP fnancial measures. Consistent with this approach, we believe that disclosing non-GAAP fnancial measures to the readers of our fnancial statements provides useful supplemental data that, while not a substitute for GAAP fnancial measures, can ofer insight in the review of our fnancial and operational performance and enables investors to more fully understand trends in our current and future performance. In assessing our business during the quarter ended September 30, 2021, we excluded items in the following general categories from one or more of our non-GAAP fnancial measures, certain of which are described below: STOCK-BASED COMPENSATION EXPENSE. We believe that providing non-GAAP measures excluding stock-based compensation expense, in addition to the GAAP measures, allows for better comparability of our fnancial results from period to period. We prepare and maintain our budgets and forecasts for future periods on a basis consistent with this non-GAAP fnancial measure. Further, companies use a variety of types of equity awards as well as a variety of methodologies, assumptions and estimates to determine stock-based compensation expense. We believe that excluding stock-based compensation expense enhances our ability and the ability of investors to understand the impact of non-cash stock-based compensation on our operating results and to compare our results against the results of other companies. WARRANT EXPENSE. Expense from our common stock warrants issued to United Airlines, FCA US LLC (now known as Stellantis) and FCA Italy S.p.A. which is recurring (but non-cash) and will be refected in our fnancial results for the foreseeable future. We exclude warrant expense for similar reasons to our stock-based compensation expense. Each of the non-GAAP fnancial measures presented in this letter to shareholders should not be considered in isolation from, or as a substitute for, a measure of fnancial performance prepared in accordance with GAAP and are presented for supplemental informational purposes only. Further, investors are cautioned that there are inherent limitations associated with the use of each of these non-GAAP fnancial measures as an analytical tool. In particular, these non-GAAP fnancial measures have no standardized meaning prescribed by GAAP and are not based on a comprehensive set of accounting rules or principles and many of the adjustments to the GAAP fnancial measures refect the exclusion of items that are recurring and may be refected in our fnancial results for the foreseeable future. In addition, the non-GAAP measures we use may be diferent from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes. We compensate for these limitations by providing specifc information in the reconciliation included in this letter to shareholders regarding the GAAP amounts excluded from the non-GAAP fnancial measures. In addition, as noted above, we evaluate the non-GAAP fnancial measures together with the most directly comparable GAAP fnancial information. Investors are encouraged to review the reconciliations of these non-GAAP measures to their most directly comparable GAAP fnancial measures included in this letter to shareholders. SHAREHOLDER LETTER Q3 2021 24 |
Exhibit 99.2
11-Nov-2021
Archer Aviation, Inc. (ACHR)
Q3 2021 Earnings Call
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Archer Aviation, Inc. (ACHR) | |
Q3 2021 Earnings Call | 11-Nov-2021 |
CORPORATE PARTICIPANTS
Andy Missan | Adam Goldstein | |
Chief Legal Officer, Archer Aviation, Inc. | Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc. | |
Brett Adcock | ||
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc. | Ben Lu | |
Chief Financial Officer, Archer Aviation, Inc. |
OTHER PARTICIPANTS
Josh Sullivan | Andres Sheppard | |
Analyst, The Benchmark Co. LLC | Analyst, Credit Suisse Securities (USA) LLC | |
David Zazula | Ronald J. Epstein | |
Analyst, Barclays Capital, Inc. | Analyst, BofA Securities, Inc. |
MANAGEMENT DISCUSSION SECTION
Operator: Hello and welcome to the Archer's Third Quarter 2021 Earnings Call. My name is Breta and I'll be today's call operator. Following the presentation today, we will have a Q&A session. [Operator Instructions]
I will now turn the call over to Archer's Chief Legal Officer, Andy Missan. So, Andy, please go ahead.
Andy Missan
Chief Legal Officer, Archer Aviation, Inc.
Hello, everyone, and welcome to Archer's third quarter 2021 financial results conference call. I'm Andy Missan, Archer's Chief Legal Officer. Joining me on today's call are Archer's Co-Founders and Co-CEOs, Brett Adcock and Adam Goldstein, as well as our CFO, Ben Lu. We posted a Shareholder Letter detailing our Q3 financial results and business overview on 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 make forward-looking statements. These forward-looking statements is 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 filings with the Securities and Exchange Commission, including in our proxy statement/prospectus filed with the SEC pursuant to Rule 424(b)(3) under the Securities Act of 1933 on October 26, 2021. Except as required by law, Archer disclaims any obligation to update or make revisions to such forward-looking statements.
Also, please note that 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 IR website. We will begin with commentary and then we'll open up the call to questions.
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And with that, I'd like to turn over the call to Brett Adcock. Brett?
Brett Adcock
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
Thanks, Andy. We are pleased to be speaking with you today during our first earnings call as a public company. Earlier today, we released a Shareholder Letter that provides a more detailed update on Archer, including our vision and market, our 2021 milestones so far, our 3Q financials, our financial outlook for 4Q, and our business outlook for the coming years. We encourage everyone to review this letter. Our goal was to be highly specific with our accomplishments and future plans, and we will use this Shareholder Letter as a vehicle for getting this information out to the world. We will not repeat the entirety of the Shareholder Letter on this call, but we will summarize some of the key highlights.
When we started this company, we wanted to tackle two important problems. The first is helping the world move to a sustainable form of transportation. Over the next several decades, a majority of all transportation will move to electric, which we hope to be a contributor to. The second is a way to reduce traffic congestion inside of cities where today half of the world lives.
Every day in the US, there are more than a billion trips that are contributing to air pollution and people spend approximately one hour per day behind the wheel. In order to help this traffic problem, you have to use the Z-axis, meaning you have to either travel above or below the ground. We believe a 3D aerial transportation service above ground is the answer. Archer has developed plans that demonstrate the technology is here today to make this work, and we believe we'll be one of the first eVTOL manufacturers to achieve FAA type certification.
Archer's near-term focus is on designing, certifying and manufacturing an eVTOL aircraft. That aircraft will unlock a diversified business model across both consumer and commercial categories. Our core focus is to design an incredible transportation service for the masses. We will operate these aircrafts ourselves over on Archer network to move people quickly and safely in and around cities.
On the commercial side, we have Archer Direct, where we will sell aircraft directly to large operators. Archer Direct will help accelerate our mission of advancing the benefits of sustainable air mobility and provide diversity to our revenue and timing of cash flows.
With that, I'll pass it over to Adam to talk about some of our major accomplishments this year. Adam?
Adam Goldstein
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
Thanks, Brett. Archer has had an exciting year so far with a lot of accomplishments. We closed our SPAC transaction, raising $858 million in gross proceeds and began trading as a public company on the New York Stock Exchange. We received our signed FAA G-1 Certification Basis, the first major step in the FAA certification process.
Our progress with the FAA is going well. We believe this positions Archer for being one of the first to market in the US. We assembled an outstanding board of directors and continue to hire some of the most talented people in the world for our industry. We secured and strengthened excellent relationships with global leaders and innovators, such as United Airlines, Stellantis, REEF, and the United States Air Force.
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On the partnership front earlier this year, we announced our agreement with United Airlines, who placed an order for $1 billion of our aircraft with an option for an additional $500 million of aircraft. In addition, United Airlines has already begun supporting us on our design process, pilot and maintenance crew training and helping us as we develop our go-to-market strategy for city launches.
Stellantis, another major partner, has played a critical role in Archer's progress in 2021. We are working to identify key commodities in our supply chain that Archer can access through this partnership, which we believe will be critical in our process to scale manufacturing. Stellantis is also playing a crucial role in helping us select and stand up our manufacturing plant.
In June of 2021, we unveiled to the world Maker, our full-scale eVTOL aircraft. We are pleased to announce that we have relocated Maker from our design and development facility to the hangar facility from which we will conduct our Maker test flights. The aircraft is currently undergoing preparations for its hover flight, which we anticipate will take place by the end of this year.
Next, we intend to unveil the first generation of our production aircraft in 2023. It will be a piloted aircraft that can carry up to four passengers. We recently completed our conceptual design review of this aircraft, and we're currently in the preliminary design stage of the aircraft development. Throughout the program, we will continue to work closely with the FAA in an effort to achieve certification as efficiently as possible. While we are very proud of our achievements to date, we recognize that we still face tough challenges ahead on our path to commercialization. However, we believe that if we continue our journey with this pace, purpose, talent and relentlessness, we will accomplish our mission and lead the world into the age of urban air mobility. We thank our shareholders, employees, business partners, advisors and our board of directors for all their contributions and support so far. In our Shareholder Letter, we have provided additional details on these updates and more, including forward-looking business guidance.
With that, I want to pass it over to Andy Missan, our Chief Legal Officer, for an update on the Wisk litigation.
Andy Missan
Chief Legal Officer, Archer Aviation, Inc.
Prior to joining Archer, I was the general counsel of Fitbit. During my tenure there, l led the litigation efforts in connection with Jawbone's trade secret litigation, which has a lot of similarities to what we're seeing in the Wisk litigation. We are very pleased with the progress of the Wisk litigation, significantly after extensive discovery as part of Wisk's motion for a preliminary injunction, Wisk has provided no evidence – not a single document, not a single witness – that we ever received or used any of Wisk's trade secrets.
Accordingly, on August 24, 2021, the court issued an order denying Wisk's motion for a preliminary injunction, concluding as follows: "Wisk mischaracterizes – really, invents – the evidence." And in another quote, the judge said, "Despite getting robust early discovery, including access to engineering documents, Wisk was not able to demonstrate that any of its particular trade secrets was misappropriated." The court's opinion reinforces what we've been saying all along that Wisk's claims are without merit and nothing more than an attempt to stifle competition.
We were also very pleased with the court's order on September 14, 2021 denying Wisk motion to dismiss our counterclaims for tortious interference, defamation, and unfair business practices. In denying Wisk's motion, the court found that, "Archer has presented sufficient evidence that it has a reasonable prospect of succeeding on the merits." We believe that these two court rulings on the underlying evidence put us in a very favorable position in litigation. We look forward to proceeding in court, both to defend ourselves against Wisk's claims and to hold Wisk accountable for its actions described in our counterclaims.
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With that, I will pass it over to Ben for an update on our Q3 financial results.
Ben Lu
Chief Financial Officer, Archer Aviation, Inc.
Thanks, Andy. I want to thank everyone for joining and listening to our first earnings call as a public company. As you've heard from Brett and Adam earlier, we are very excited about what we're building here and our ability to execute on that vision. We exited the quarter with $796 million in cash and cash equivalents. Our third quarter of capital expenditures were $1.1 million.
Our third quarter non-GAAP operating expense was $29 million, driven by investments across our engineering team and in our Maker aircraft, offset by lower marketing and legal costs. This resulted in an adjusted EBITDA loss of $28 million. Our third quarter GAAP operating expense was $176 million, which included stock-based compensation of $103 million reflecting the one-time investing of the first tranche of the founder grants resulting from the achievement of our first performance milestone. These grants are structured to align with maximizing shareholder interests through a significant stock price appreciation or achieving certain performance milestones.
Going forward, the stock-based compensation expense for these grants will be based on the likelihood of the vesting of the remaining three tranches. In the quarter, we recorded a non-cash warrant expense of $39 million related to the vesting of the second tranche of the United warrants. Recall that in our first quarter of 2021, we recorded a $78 million non-cash warrant expense [ph] type of (00:10:37) vesting of the first tranche of the United warrants. The remaining two tranches will be expensed as we receive the remaining milestones. We also recorded a non-cash warrant expense in the third quarter of nearly $6 million related to the vesting of certain tranches of the Stellantis warrants. The remaining tranches in these warrants will be expensed as we meet the remaining performance and time-based vesting criteria that underlie these warrants.
Now, in terms of our fourth quarter outlook, we anticipate total GAAP operating expense of $65 million to $70 million and non-GAAP operating expense of $35 million to $40 million. This reflects expected stock-based compensation and warrant expense of approximately $30 million as we record a larger than normal stock-based compensation expense in the fourth quarter to reflect restricted stock units and stock options that could only be granted to existing employees under an effective registration statement, which we expect to occur in the fourth quarter.
Now in summary, we're very excited about where we are and how far we have come along. There will be challenges ahead and we look forward to addressing them as we execute on our vision to bring sustainable urban air mobility to the masses. And with that, we're ready to begin the Q&A portion of today's call. Operator, please open up the line for questions.
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QUESTION AND ANSWER SECTION
Operator: Thank you. The question-and-answer session is now open. [Operator Instructions] The first question we have on the phone lines comes from Josh Sullivan of The Benchmark Company. So, Josh, please go ahead when you're ready.
Josh Sullivan | Q |
Analyst, The Benchmark Co. LLC
Good evening. Can you hear me?
Adam Goldstein | A |
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
Hello. Yes.
Josh Sullivan | Q |
Analyst, The Benchmark Co. LLC
Just a question on the overall design thought process, with the G-1 Issue Paper established and now that you're in the process of finalizing the G-2 Paper with the FAA, how are you approaching the assembly of the second Maker? Is it an exact duplicate or has the G-2 process enhanced your design thoughts, I guess either on Maker or the preliminary thoughts on the four-passenger aircraft as well?
Brett Adcock | A |
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
Yeah. Hey, this is Brett. Thanks for the answer, Josh, the question here. So as we look at our roadmap, [indiscernible] (00:12:59) kind of start it from the beginning to where we're headed. We've now have built [ph] seventh (00:13:04) generation subscale aircraft that have flown over 1,000 test hours.
We then developed Maker that we unveiled in June that just got shipped to our flight test facility last month. Maker is a full-scale electric vertical takeoff and landing demonstrator vehicle. We intend to use the vehicle to help accelerate our path of our production aircraft into market. So this aircraft is important as we're thinking about key underlying technologies that we're developing, the system architectures, and other related certification efforts.
As you mentioned, we're building two aircraft for Maker. And then in parallel to that over the last year, we've been designing our production aircraft. So this production aircraft is a piloted four-passenger aircraft that we intend to certify with the FAA and bring to market. The updates as it relates to the FAA progress, so the intake board process that we started early last year that we got through and the G-1 Certification and even the G-2 Means of Compliance work we're doing now are all for the production aircraft. So the Maker aircraft will stay in the same form it is now. I think we made a lot of the right decisions on that aircraft. We've learned a lot of great things that will help us influence and accelerate our production aircraft development plan and flight testing.
We plan for our production aircraft to get through the G-2 Certification Basis in 2022 this coming year. We plan to unveil that aircraft in 2023. The G-1 and G-2 process are fundamental here, as were our core thesis here at Archer is designing for certification and manufacturing. It's really important to get those steps right, so we're designing the right vehicle for the market with the FAA.
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Josh Sullivan | Q |
Analyst, The Benchmark Co. LLC
Got it. Thanks for the detail there. Maybe a question on the demand side. The mobile booking system you guys are going to be launching in 2023. What are your current thoughts on the needed internal Archer fleet size to get to a critical scale just to make that booking system successful initially?
Brett Adcock | A |
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
Yeah, it's a great question. At a very high level, this is what we get really excited about waking up every day. We get a chance to invent [indiscernible] (00:15:24) transform the way people fly every single day. We're going to do this under a FAA Part 135. As you mentioned, we plan to operate our own aircraft here. We're vertically integrating some of that traditional OEM work and some of those key technologies to build a really enhanced aircraft for our consumers.
We plan to operate this across basically a few core principles. The first is just making sure we can operate the aircraft really safely every day for consumers. These are a new type of electric aircraft. It's going to be really important for the folks maintaining them and operating that know how these aircraft function and how that need to be safe. We think we can build a great service for customers by doing this and ultimately we think we can build a really profitable business long term, and I think this is a very large business to be in.
We're going to build our own applications as it relates to the booking and check-in process for users to really make sure it's a really seamless experience for users and think through all the different underlying things around checking in and luggage and multi-modality of different trips of getting to and from where you're going.
We plan to release our mobile booking application app in 2023, and we plan to receive our Part 135 certificate as it relates to running these operations in 2024. We're putting out guidance in the near term that we will be targeting roughly 50% of our aircraft fleet through our Archer Direct platform, like partners such as United Airlines that we announced a commercial agreement with earlier this year. We plan to operate the other 50% in our own network in cities that we've announced, such as Los Angeles and Miami.
Josh Sullivan | Q |
Analyst, The Benchmark Co. LLC
Got it. And then maybe just one final one for me, as far as expanding the head count to meet milestones, engineering certification, et cetera, do you think you're ahead of schedule or is the tight market just with the inflationary issues out here causing any hurdles for you?
Brett Adcock | A |
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
It's definitely a really competitive market across areas such as [ph] all of the (00:17:25) traditional eVTOL development, commercial aerospace and even like the automotive or electrification side of things, it's a big push for us overall. One of the things that we're most proud about here as a team we've assembled, we've literally put together some of the best folks in the world, folks like Jeff Greenwood, which is the Chief Flight Test Pilot here at Archer, previously the Chief Test Pilot at Bell Helicopter. Our motor team is led by a group of folks that are ex-Lucid Motor leads or ex-Tesla Inverter leads. We have put together some of the best people in the world, and I think it really speaks to the attractiveness of the opportunity here at Archer.
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We have a chance to come in to a really interesting electrification design process to build a new type of transportation for folks that people get really excited about the overall mission of what we're doing. We're capitalized really well. We have good partners like United behind us, Stellantis and REEF, and we're making incredible progress on both our technology front in developing the right technologies, which we think are important to make this product work. And we're leading a lot of the – as of today, a lot of the certification work with the FAA, which is really important to get through that process to bring a product to market.
Josh Sullivan | Q |
Analyst, The Benchmark Co. LLC
Great. Thanks for the time.
Operator: Thank you. The next question on the phone lines comes from David Zazula of Barclays. So, David, please go ahead.
David Zazula | Q |
Analyst, Barclays Capital, Inc.
Hey, Brett, Adam, thanks for my questions. I guess first one up as far as the method of compliance and G-2 Certification that you guys are anticipating. I guess my understanding is it's difficult to, at least at this point, show kind of tangible progress towards that. But maybe talk a little bit about what you think about in terms of anything you might be able to share in the upcoming year as far as milestones. I think we run into investors that just can't believe that you guys, being relatively newer to the market, are able to achieve that certification so quickly. So I guess what should we be monitoring as we are looking at compliance in the upcoming year?
Adam Goldstein | A |
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
Yeah. Thanks, David. This is Adam. That's a really great question. I think I'll echo some of the points that Brett made as well on the team front. So Eric Wright, who's leading our certification effort, has a long history of certifying vehicles of a similar nature, and we have high confidence in our strategy as it relates to quickly moving through the certification process. As we have mentioned before, one of our core strategies here at Archer is really all about designing and really certifying and manufacturing an eVTOL aircraft. And so that's really been our philosophy from the very beginning.
And so our team really worked very tirelessly to achieve the G-1 Certification Basis. And we believe, to the best of our knowledge, we're one of only two companies in the world to have achieved this. And now that we have the aircraft certification requirements established, we've focused a lot of our efforts on this G-2 paper. And so, we are working on our Means of Compliance for the G-2 with the FAA, and we've been doing that really since earlier in this year. There're obviously some other steps that will come after that as it relates to compliance, ground testing and flight testing that we'll need to help achieve our type certificate in late 2024. But we're making considerable progress there.
I think the main reason we've been able to move so quickly here through the certification process has been we established really a core business model. We have designed a vehicle around that business model, so these 25 mile nominal mission trips that the vehicle can do back to back all throughout the day with minimal charging time on the ground and then we've reduced risk everywhere else possible across the aircraft. And that has enabled us to really just move super quickly through that. And I think throughout this year, you'll see evidence of that with some of our additional accomplishments that we have as it relates to the certification process.
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David Zazula | Q |
Analyst, Barclays Capital, Inc.
Got it. And I guess, can you talk a little bit about how you think the design of your aircraft and keeping it more conceptual at this stage puts you in a good position to react and partner with the FAA during the certification process?
Adam Goldstein | A |
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
Yeah. So one of the things that we did was we really tried to focus on making sure we design from the very beginning a vehicle that could go through the FAA's process as smoothly as possible. So it's very tempting when you're building a new age tech company to add features that could be very value-enhancing, but also could add a significant amount of risk to the platform.
So, for example, a lot of groups asked us why we didn't put retractable landing gear onto the plane. We didn't do that because we felt it didn't buy its way onto the vehicle. That's a totally new system that would have to be put onto the vehicle and certified in a challenging – and we didn't feel like it helped increase our business case significantly enough to do that. So we reduced risk there.
One of the biggest struggles across the whole industry is going to be across weight and the weight of the aircraft. And so it's very tempting to go and use new types of materials out of manufacturing that can help reduce weight or that can help scale parts very, very quickly. But that's a new process that doesn't have a lot of history in making its way through the certification process. So we simplified our material selection and have really stuck with kind of core technologies that we know can be certified that we've high confidence can get through the process. And I think that's really helped just lead to our speed.
David Zazula | Q |
Analyst, Barclays Capital, Inc.
Okay. If I could just squeeze one last one in for Ben, it seems like expenses are coming up a little bit in the fourth quarter relative to the third quarter. Can you maybe talk about what you're expecting to get, what new capabilities or expense line items that you're thinking about building out as you're maybe looking at facilities or other things to support the design of the aircraft? Thanks.
Ben Lu | A |
Chief Financial Officer, Archer Aviation, Inc.
Yeah. Great. Thanks, David. So you saw that we are guiding our non-GAAP OpEx next quarter $35 million to $40 million. That is up from the $29 million this past quarter. We're obviously building and scaling a very big company and we're going to grow very quickly. So a lot of investments that we're making is across all the engineering, talent and the hiring across multiple disciplines from eVTOL, traditional aerospace as well as electric battery.
And I think Brett had named some of the key hires. And we'll continue to make some really important, strong additions to the team. We're also going to invest in obviously our vehicle into our R&D investment. So we're going to be basically scaling a business and a company that will be able to develop and design and commercialize an eVTOL aircraft.
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David Zazula | Q |
Analyst, Barclays Capital, Inc.
Great. Thanks. Congrats on the first quarter.
Ben Lu | A |
Chief Financial Officer, Archer Aviation, Inc.
Thanks, David.
Operator: Thank you, David. We now have Andres Sheppard of Cantor Fitzgerald. So, Andres, your line is open.
Andres Sheppard | Q |
Analyst, Credit Suisse Securities (USA) LLC
Hey. Good afternoon, everyone.
Brett Adcock | A |
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
Good afternoon.
Andres Sheppard | Q |
Analyst, Credit Suisse Securities (USA) LLC
Hey, congrats again on the first quarter. A lot of my questions have been answered, but maybe a couple of quick clarification questions, I just want to be sure I'm getting this right. So you are hoping or expecting to receive the G-2 Issue Paper in 2022 and then the type certification that's before the end of the year in 2024, correct?
Adam Goldstein | A |
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
That's correct.
Andres Sheppard | Q |
Analyst, Credit Suisse Securities (USA) LLC
Okay, great. And then any sense – I see you noted you're in the final stages, but any sense on when you might finalize the manufacturing site?
Adam Goldstein | A |
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
Yeah. We haven't publicly guided to when we're going to put that out. What we have said is that we'll select the site and begin construction of the manufacturing facility in 2022. I will say that we've had considerable progress this year. We've also been working with Stellantis, one of our big OEM and supply chain partners, who has been assisting us in the manufacturing [indiscernible] (00:25:57) process that we've started in in basically every state here in the US. We're in the finishing stages of this whole entire plan. But we're making great progress. There's a lot of good areas that we've looked at kind of across the US, and we feel very comfortable in being able to hit this milestone next year.
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Andres Sheppard | Q |
Analyst, Credit Suisse Securities (USA) LLC
Awesome. That's very helpful. And maybe one more for me and I realize I don't think you've disclosed this either so totally understand if you're not able to share, but any rough timeline on when you expect the second Maker to be kind of assembled and ready for test flights?
Adam Goldstein | A |
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
Yeah. It's a good question. We've started the assembly work on Maker 2, and we expect that to be rotated into flight testing in 2022. Maker 1, we'll continue to do flight tests starting here end of the year and all throughout 2022 as well. So we'll have two vehicles in operation able to do flight testing next year.
Andres Sheppard | Q |
Analyst, Credit Suisse Securities (USA) LLC
Awesome. Thanks very much, guys, and again congrats on the quarter.
Adam Goldstein | A |
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
Thanks.
Operator: Thank you. We now have [ph] Jacqueline Wu from Deutsche Bank. So, Jacqueline (00:27:13), please go ahead when you're ready.
Q |
Hello. Can you hear me?
Adam Goldstein | A |
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
Yes, we can.
Q |
Hello? Okay. Thanks. Good morning or [ph] good evening (00:27:23), everybody. So, this is [ph] Jacqueline Wu (00:27:25) from Deutsche Bank speaking on behalf of Edison Yu. So my question is, could you go over how much vertical integration you feel it's necessary to achieve the economic scale. Thank you.
Adam Goldstein | A |
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
Yes. Great question. So this really hits on some of our key enabling technologies that we're developing in-house, and I'll name a few here that we're spending a lot of time on that we think are really important to build a really viable aircraft and business here. The first is across the electric powertrain. So this encompasses electric motors and battery systems. The second is flight control software. The third is system simulation. The fourth is aircraft design, or eVTOL aircraft design to be specific, and lastly is manufacturing.
We think those areas here are really important to get right across this new type of aircraft that we bring to market. We've made considerable progress on these areas with the Maker aircraft that will begin the first hover test flights before end of year and then full cruise flights next year. And we're really spending a lot of time and money internally on getting these areas right.
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Archer Aviation, Inc. (ACHR) | |
Q3 2021 Earnings Call | 11-Nov-2021 |
I touched a little bit on some of our electric powertrain work around battery systems, electric motors. We're making considerable progress here. There are no battery systems and motors today that you can purchase that are fully certified. We have very different requirements definition in automotive. So it's really important here to get these areas right as it relates to the performance the aircraft needs, to hopefully we build a really great business and low cost business for consumers, but also making sure we hit at the requirements that the FAA are imposing on us to bring a safe aircraft to market. Being able to get our G-1 Certification Basis approved this year really paves the work here for requirement setting. So we can build battery systems and motors to the right requirements the FAA has imposed on us. So we can bring a really safe aircraft to market.
Q |
Thank you. That's pretty helpful. Congrats on the [indiscernible] (00:29:33). Thank you.
Operator: Thank you. We now have a question from [ph] Carl Summers of Glacier Capital. So (00:29:43), please go ahead.
Q |
Hey, guys. Congrats on the business combination as well as continuing to build the team. Adam, I think you may have already touched on this, but my question is for the planes you plan to operate, I was hoping you could touch on what the range of your typical flight will be on a daily basis and how many times per day you think you can achieve that and then, more importantly, how these assumptions sort of led to your vehicle design. Thanks.
Brett Adcock | A |
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
Thanks, [ph] Carl (00:30:22). So when we took a step back and we looked at this industry, there's our belief that the bulk of the demand will be centered around urban air mobility missions and those are missions that are in and around cities where consumers, people are spending time on the ground typically 60 minutes, 75 minutes, 90 minutes. And we want to be able to replace those with missions that we can fly in 5 minutes, 10 minutes, 15 minutes. And we think that's where there's going to be a considerable amount of time.
And so when we looked at really the market, the bulk of that traffic that sits there today really is within 50 miles. And so we think the typical nominal mission that will be flying is around 25 miles. And so what we did was design a vehicle that could fly that mission, a typical 25 mile mission, back to back with minimum time on the ground, minimum time in charging so we could generate as many miles flown per day with as many passengers as possible.
And so that was really the key in terms of us designing our aircraft, picking the configuration we did, picking the payload that we did because we think that's where the bulk of the market's going to be. Again it's always very tempting to looking at going further and having the ability to travel far. But when you look at the demand, we think it really sits in that urban air mobility mission and that's where we really focused our efforts.
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Archer Aviation, Inc. (ACHR) | |
Q3 2021 Earnings Call | 11-Nov-2021 |
Q |
Thanks.
Operator: Thank you, [ph] Carl (00:31:55). We now have the final question on the phone lines from Ron Epstein of Bank of America. So, Ron, please go ahead when you're ready.
Ronald J. Epstein | Q |
Analyst, BofA Securities, Inc.
Hey. Good afternoon, guys. Just wanted to maybe follow up on some of the supply chain stuff, have you guys made any announcement yet on who are going to be some of your outside suppliers, more specifically, the one you know I'm thinking about is how you're going to take care of flight control and flight control software? Given what the aircraft's going to do, the transition from vertical flight to horizontal flight, that can be a tricky thing. So I'm just wondering how you guys are thinking about that.
Brett Adcock | A |
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
Hey, Ron. It's Brett. No, it's a great question. It's something we think long and hard about internally. It's like what are the things that we need to be doing internally and what are the things that we can partner with great suppliers out there that do this really well here in our space today. We have numerous partners we've selected now for the aircraft across certain avionics and different systems that we'll continue to announce over the next couple of years.
We will also have the numerous areas that we feel like are really important, as discussed earlier, that require us to make investments in internally to do really well, areas like electric powertrain, some software system simulation aircraft design. On the flight control software itself, as you're right, it's one of the harder areas here to certify a fly-by-wire system. We have, we think, a really good grasp on what to do here. We haven't fully guided to exactly how we're going to do that.
Some of this is really, from a competitive perspective, really important for us to keep here in-house. The person leading our flight control system work is a person named Sergio Ferreira that recently ran this for Gulfstream's fly-by-wire program, the G650 most notably. So we have a really strong team here and we've been building the house to help lead this area of our certification and development items. And it's certainly going to be a really important focus item for us.
When we take a step back, we think some of the flight control system work and battery systems and electric motor side are some of the really important areas to really get right for this new type of aircraft to bring to market. And we're steadfast in making sure that we're highly disciplined and working with the right groups and doing the things right internally to bring an aircraft to market as soon as possible that hits our safety and costs and noise considerations.
Ronald J. Epstein | Q |
Analyst, BofA Securities, Inc.
Great. Cool. Thank you very much.
Brett Adcock | A |
Co-Founder, Co-Chairman & Co-Chief Executive Officer, Archer Aviation, Inc.
Thank you, Ron.
13 | |
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Archer Aviation, Inc. (ACHR) | |
Q3 2021 Earnings Call | 11-Nov-2021 |
Operator: Thank you. As we have no further questions in the line, I will conclude today's call. Thank you all for joining. You may now disconnect your lines.
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