Archer Aviation Inc. Q3 FY2022 Earnings Call

Good afternoon. Thank you for attending today's Archer Aviation Inc. Q3 2022 Financial Results Conference Call. My name is Bethany, and I will be your moderator for today's call. I would now like to pass the conference over to our host, Andy Missan, with Archer Aviation. Please proceed.

Thank you, operator. Good afternoon, everyone, and thank you for joining us today to review Archer's third 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 Q3 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, 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 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 open the call to questions. With that, I'd like to turn the call over to Adam Goldstein.

From day one, Archer's strategy has always been about finding the most efficient path to commercializing eVTOL aircraft. That translates to one, designing for certification, which is why we are confident that we do not have any design gaps, and we believe that we have a clear path to certifying Midnight in late 2024. Two, building an aircraft that fits our business case. That means 1000 pounds of payload to enable a pilot plus four passenger aircraft, low direct operating cost, and the ability to conduct rapid back-to-back 20-mile trips. And three, focusing our in-house development on only the key enabling technologies that cannot be sourced from the existing aerospace supply base. Under this approach, we rely on partners to supply components that are already being used on certified aircraft today, dramatically reducing our certification risk as well as our development timeline and cost. We believe this strategy and our team's ability to execute on it has allowed us to establish our leadership position in the market, and it's why we are confident we will be the first company to certify an eVTOL aircraft in the US with the FAA. We've seen the success of our execution in our Maker flight test program and our progress on Midnight. Over the coming months, you can expect to hear about further advancements on our path to commercialization. We believe these achievements will further solidify our leadership position. Earlier in the year, we announced three goals that we aim to achieve in 2022. One, Maker transition flight; two, FAA acceptance of our means of compliance; and three, selecting our site for manufacturing. As we sit here in November, we are on the doorstep of achieving all three goals. First, Maker transition flight. Transition is the phase of flight between hover and cruise where the aircraft transitions from lift generated by the propellers to lift generated by the wing, which is called wingborne flight. I'm happy to announce that on November 2nd, we conducted Maker's first wingborne flight. Over the coming weeks, we expect to conduct a full transition flight where the tilt propellers will be locked in their cruise position. Second, FAA acceptance of our means of compliance. Archer has submitted its means of compliance, and the completion of this goal by the end of the year will depend on the FAA's ability to review and accept them. We believe we are very close. Third, selecting our manufacturing site. We have selected our site and are finalizing the agreements with the state and local governments involved. We expect to make an announcement on this in the very near term. Next, I will highlight the key areas of progress we made last quarter on our go-to-market efforts, our aircraft technology, and certification. In terms of our go-to-market efforts, we believe we must start planning now for the launch of our UAM network in 2025. This is an effort that spans across many stakeholders, including our business partners and federal, state, and local government authorities. As you saw from our announcement this morning, we've identified our first point-to-point route that we will operate with United between the downtown Manhattan Heliport, one of the world's most advanced and well-known heliports, and Newark Liberty International Airport, one of United's largest hubs. In the lead-up to this announcement, our team spent a lot of time talking to the relevant constituents, including members of Congress from both New York and New Jersey, the Port Authority, and Mayor Adams, who I spoke with at length. One of my biggest takeaways from those conversations was excitement. Excitement for what this new form of safe, sustainable, low-noise transportation can mean for the tri-state area. It's this type of validation that makes all the hard work worth it. Recall that we announced on our last earnings call that we received a $10 million pre-delivery payment from United, representing a deposit on the first 100 aircraft we've agreed to deliver as part of their 200 aircraft order. We anticipate that they will deploy some of those aircraft on this first route. We'll continue to announce additional routes supported by our proprietary data modeling platform, Prime Radiant, which is helping us determine the optimal takeoff and landing locations for these routes. Expect more exciting route announcements in the weeks and months ahead. Next, I want to highlight our progress on our aircraft technology. On November 2nd, Maker flew its first wingborne flight. It flew above the stall speed generating lift from the wing. We believe we are one of a very small group that has done this with a vector thrust eVTOL configuration, and we did this with impressive speed and execution, having started Maker's flight test campaign less than one year ago. I believe the reason we continue to execute well against our goals is that we have the best team in the industry. Today, we have almost 500 employees, with the vast majority working exclusively on the development, certification, and commercialization of Midnight. We believe we have the most experienced engineering leadership in the industry. For example, Tom Muniz, our COO, has played a major role in leading the design and development of eight full-scale eVTOL aircraft since 2010. He has been instrumental in implementing our design for certification approach and Dr. Geoff Bower, our Chief Engineer, has also played a major role in leading the design and engineering of eight full-scale eVTOL aircraft over the past decade. It is incredible to see what these two and the rest of the team accomplish on a daily basis. We will highlight more of our team's impressive experience at our upcoming Open House event. As to certification, Tom will cover that in depth during his remarks, but I do want to highlight another key leader on the team that is making a huge impact as we work towards certification. Dr. Michael Romanowski, our new Head of Government Relations, joined us in August after 14 years at the FAA. Dr. Romanowski served most recently as the FAA Aircraft Certification Director of Policy and Innovation. It's not an exaggeration to say that Dr. Romanowski has been the go-to person within the FAA on eVTOL over the past several years. Now let's transition to our upcoming Open House. While we originally planned to unveil our production aircraft Midnight in 2023, we were able to pull it forward to 2022 given our confidence in the program. On November 16th, we will show a live audience the amazing progress we have been making, and on the 17th, we'll be making it available to the public. We will start with a flight test in the morning where we will show Maker flying a high-speed wingborne flight. The analysts, investors, and partners will get to witness firsthand the performance capabilities of the aircraft and how quiet it is. As Archer Board member and former United CEO and Chairman, Oscar Munoz always says, proof, not promise. I can't wait to share the test flight experience with many of our great suppliers, investors, business partners, and other supporters that will be in attendance. After the flight test, we will take attendees through a series of presentations covering our commercialization strategy, our proprietary powertrain development, and a detailed look at our certification progress. The powertrain segment will be especially exciting as we will be showing off sample hardware and explaining how it has enabled our 1000 pounds of payload. To cap off the day, we will take attendees to a hangar where we will unveil Midnight. I also want to highlight the continued work we are doing with our strategic partner Stellantis. Stellantis is one of the largest global auto OEMs with brands including Jeep, Ram, and Maserati, and they played a critical role in our manufacturing journey to date. Building millions of cars annually, Stellantis has a core competency in high-volume manufacturing. We have been working with Stellantis since 2019 across different engineering projects, and we continue to leverage their deep manufacturing and design expertise. Importantly, Stellantis is fully committed to electrification and are investing tens of billions to advance electrification across its portfolio. We look forward to maturing our relationship as we transition into production. In summary, we have made great progress in 2022 and look forward to sharing our 2023 goals in more detail on our next call. We believe the hard work we're doing now to advance our go-to-market efforts, our aircraft technology, and certification will put us in a position to be first to market and win substantial market share once we get there. I am confident we have the plan, the tools, and most importantly the team to do that. Now I'll turn it over to Tom Muniz.

Thanks, Adam. It's an exciting time to be at Archer as our momentum continues to build. Today I'm specifically going to talk in detail about our aircraft technology development and certification progress. On the aircraft technology development front, we are really excited about the progress on Maker's flight test campaign that Adam highlighted earlier. One of our critical milestones for 2022 is to achieve our first full transition flight with Maker. We are close to that goal and recently achieved wingborne flight on Maker with aircraft flying at speeds where the vast majority of the lift required for flight is generated by the wing. This ongoing testing is part of our transition envelope expansion test campaign where the aircraft transitions from lift generated by the propellers at low speeds to lift generated by the wing at higher speeds. We are on track to complete our full transition milestone on schedule before the end of the year, where the tilt propellers will be locked in the cruise position. It's important to remember that the reason we chose our tilt propeller aircraft configuration is because of the substantial benefits it offers in the form of energy efficiency and longer range compared to aircraft that have separate lift and cruise propulsion systems or aircraft without a wing that use propellers to generate lift in all phases of flight. The data we have gathered from flying Maker is a critical advantage and has resulted in a major derisking for the Midnight program. I think it's important to emphasize the relationship between Maker and Midnight. Our strategy from the beginning was to validate key aspects of our aircraft configuration, including aerodynamics, flight controls, and the tilt propeller system on Maker first, then leverage these lessons learned in the development of Midnight. Midnight has the same aircraft configuration as Maker, but it's slightly larger in order to support the 1000 plus pounds of payload and carry a pilot with four passengers. We are confident this is a winning strategy. The invaluable technical data for Maker has given us confidence in the aircraft configuration and our ability to execute the Midnight program to plan, which is exactly what we've done with Maker. As Adam outlined earlier, our strategy from day one has been to take the most capital and time-efficient path to developing, certifying, and commercializing our eVTOL aircraft. The key aspect of this strategy has been to focus our internal development efforts on the key technical enablers like the batteries, motors, and flight control software. For those areas that aren't differentiating technologies, we leverage the existing aerospace supply base to provide us with components that are already being used in certified aircraft today. This has enabled us to further derisk the program, but it's not impacted our ability to maintain the 1000 plus pounds of payload necessary for our business model. At this stage, we've selected suppliers for approximately 64% of the bill of materials for Midnight, and we look forward to announcing several other major key supplier partners over the next few weeks. Another key element of our strategy has been to sync the design of Midnight with our certification efforts. Our design for certification approach is based on understanding the detailed regulatory requirements for our aircraft early enough in the program so that the aircraft is designed to be FAA compliant from the start. We believe this is translating to a more efficient certification timeline. Because of this process, we currently don't see any certification gaps in the Midnight design. As we discussed last quarter, the FAA has changed the certification process for eVTOL aircraft under its special class process in part 2117 B. For us, this has proven to be largely administrative. Since our last quarterly update, the FAA has added certain new requirements to our certification basis as a result of this change, including one change addressing the robustness of our aircraft to bird strikes and another change covering the safety features of our aircraft related to complete loss of propulsive power in flight. Both of these new regulatory requirements are already addressed in Midnight's design, and thus we don't anticipate they will have any impact on Midnight's development or timeline for certification. As a reminder of how the aircraft certification process works, the first step is agreeing to the G1 certification basis where the airworthiness criteria are set. The second step is then to agree on the means of compliance, which is the detailed list of design analysis and testing standards that will be used to demonstrate that the aircraft is safe and complies with all of the airworthiness criteria. We have been told by the FAA that the airworthiness criteria from our amended part 2117 B G1 certification basis will be published in the Federal Register in the coming weeks. We submitted a comprehensive proposal for Midnight's means of compliance to the FAA back in December of 2021. We've made significant progress discussing the means of compliance topics with the technical experts at the FAA over the past year. Because of the shift to 2117 B, the FAA decided to review again all of the previously accepted means of compliance to ensure that they remain applicable to the updated G1 certification basis. With an amended and accepted G1, this unlocks the FAA to formally accept the means of compliance that we've been discussing over the past year. Just like we saw with the G1, we anticipate the reacceptance of the means of compliance to be largely administrative. In parallel with efforts around our means of compliance, our team has been hard at work on our subject-specific certification plans or SSCPs. The SSCPs provide precise detail on the tests and analyses that will be completed during the implementation phase of the project, which will require that we demonstrate to the FAA that Midnight meets all relevant FAA requirements necessary to receive type certification. We expect to have approximately 18 SSCPs, each of which we plan to submit to the FAA for review and acceptance over the coming months. We recently submitted our first SSCP to the FAA, and our goal is for the FAA to accept all of our SSCPs by the time of our next program development milestone for Midnight, the Critical Design Review, which is scheduled to occur during the first half of next year. We remain highly engaged working in partnership with the FAA at all levels, from the administrator and head of aviation safety down to our day-to-day contacts throughout the administration. We are working to progress on certification as efficiently as possible, and the dialogue to date has been highly constructive. Our goal continues to be achieving type certification by the end of 2024, putting us on track for our first aircraft deliveries in early 2025. With that, I'll turn it over to Mark to discuss the financials for the quarter.

Thanks, Tom. Q3, 2022 was clearly a significant quarter for us, as our world-class team continues to execute on the milestones we've laid out. Last quarter, we discussed extensively how much of the company's focus is on our efforts to commercialize our business. And to be clear, commercialization means generating revenue. The rapid advances we have made in such a short time validate our capital-efficient approach to developing proprietary technology where we focus on key differentiating technologies like batteries and propulsion, and leverage our supplier partners to augment our technology with their world-class products. This capital-efficient approach has allowed us to develop our proprietary 12 tilt six aircraft configuration and other key enabling technologies in an expeditious manner, thanks to strong supplier relationships, but with a relatively modest amount of personnel. We have almost 500 FTEs currently, which is less than half of the headcount of others in our industry. We continue to focus on investing our capital in a very disciplined manner across all aspects of the business: headcount, research and development expenses, capital expenditures, and other discretionary spending, and the forecasting and planning systems that we have instituted help ensure we have the infrastructure to support that financial discipline. Given we just announced our first urban air mobility route in New York City, I wanted to provide some further details on how our payload impacts our UAM unit level economics and is a key enabler of our UAM business model. Let's take a sample UAM route, like the one we just announced. This is approximately a 15-mile route that our modeling shows could support 25 trips per aircraft per day. From a top-line standpoint, assuming indicative pricing similar to current ride-sharing services, revenue would be $90 per seat per trip. That is roughly $6 per seat mile. Revenue clearly scales as the aircraft capacity is filled from $90 for one seat to $360 for four seats. At 25 trips per aircraft per day operating 365 days per year, a 1000-pound payload aircraft capable of carrying four passengers would generate approximately $3.2 million of revenue per year. That is 50% more potential revenue than smaller payload two-seat aircraft. This is approximately $1.6 million more potential revenue per aircraft. From a cost standpoint, the direct operating costs between two-passenger or four-passenger capacity are directionally about the same because their weight and ancillary fixed costs are very similar. Given the density of these routes, our modeling confirms that high load factors are expected on this particular route and the aircraft would likely operate at or near capacity. We will share more specific details around the unit level economics of our urban air mobility networks in the future, but we wanted to provide an example to indicate why payload matters so much. Now let's turn to our financial performance for the quarter. We ended the quarter with $600.6 million in cash, cash equivalents, and short-term investments on our balance sheet. We netted $54.2 million in cash payments in the quarter. For the nine months ended September 30th, 2022, our cash used in operations and the purchase of PP&E was $136.8 million. We continue to be one of the most well-capitalized companies in the sector. Non-GAAP total operating expenses, which exclude stock-based compensation and warrant expenses, were $61.1 million, which was below the lower end of our estimates range due to the timing of certain non-recurring supplier costs and spending for materials related to our R&D efforts. Non-GAAP operating expenses increased sequentially by $11.1 million as expected, as we hired more people to staff our engineering programs and build out the other areas necessary to support the growth of the business. We also invested in parts and materials for both our Maker demonstrated aircraft and our Midnight production aircraft program. We incurred a loss on adjusted EBITDA of $60.1 million. The sequential expansion of that loss by $10.9 million relative to Q2, 2022 was primarily driven by our increase in non-GAAP operating expenses for the reasons I just mentioned. On a GAAP basis, total operating expenses for Q3, 2022 were $93.8 million, which included $26.2 million in stock-based compensation and $6.5 million in warrant expenses. These results were below the low end of our Q3, 2022 estimates of $95 million due to the timing of certain non-recurring supplier costs and spending for materials related to R&D. Finally, let's look at our Q4, 2022 estimates for spending. Recall that we completed our preliminary design review for Midnight last quarter, and as a result, we will continue to see a temporary uptick in spending to support non-recurring engineering costs related to the setup of Midnight suppliers and increased spending on parts materials for our Midnight aircraft, per our plan. Some of that planned spending in Q3, 2022 has shifted into Q4, 2022. We anticipate total GAAP operating expenses of $100 million to $110 million, and total non-GAAP operating expenses of $70 million to $80 million. This reflects expected stock-based compensation and warrant expense of approximately $30 million. We have a very active investor outreach calendar in Q3, 2022, and we will continue that into Q4, 2022. We will be participating in a number of conferences, meeting with investors, and engaging with the financial community to discuss this sector and Archer's leadership in it. We've provided a detailed calendar on our website and in our shareholder letter. Finally, we look forward to seeing many of you next week at our Open House. In summary, Archer continues to be laser-focused on doing what we say we are going to do with respect to our operating and financial goals. As you can see from the progress that we achieved in Q3, our capital-efficient approach to advancing our go-to-market efforts, aircraft technology, and certification is progressing according to plan, and I am excited about how our team is executing. With that operator, let's open it up for questions.

Thank you. We will now begin the question-and-answer session. The first question is from Savi Syth with Raymond James. Please go ahead.

Hey, good morning. Good afternoon, everyone. Mark, I don't mean to get a little greedy here, but you talked about 2024 cash burn. Could you talk about, as we head into 2023, kind of the progress you're thinking about regarding what the puts and takes might be in terms of cash burn rates?

Yeah. So, when we think about capitalization, Savi, nothing's materially changed from our last conversation on it. We continue to invest in headcount, as well as parts and materials for our programs, our engineering programs, as well as a big chunk that you see impacting this quarter is the NRC or non-recurring costs with our foundational vendors. Those are costs to establish certain operations around our subsystems, tooling, etc. So, you'll see those to be fairly lumpy. So, if you look at our progress from Q2 to Q3, our non-GAAP operating expenses went from $50 to $61.2 million. A portion of that was for some NRC and parts and materials. We'll see that expand more in the guidance that I just gave in the $70 million to $80 million. But in general, you'll see a steady uptick in our headcount, a steady modest uptick, and you'll see some lumpiness in our NRC and parts as we start to build the first Midnight prototypes and inflect into actually building out the first test vehicles for the certification program.

That's super helpful. And I appreciate all the clarity or a little bit more color on the certification side since it's been confusing a little bit. Just you pointed out that FAA added a couple more requirements there. What happens if the FAA kind of converges to ESA? Does that stretch out the timeline more, or is it similar to these kind of recent updates? A lot of it is already built into Midnight.

Yeah. Hey, Savi, this is Tom. I'm glad to answer that. We actually see it a bit differently from how you described. Currently, most of the leading eVTOL companies are based in the United States, and we are among the groups with the most capital and the most progress. We believe it’s more likely that global regulators will align with the FAA’s stance on these vehicles. To address your earlier point, we feel very confident about our Archer foundation. We have a signed updated G1 2117 B, so we are set to continue executing our program, and that's our perspective on it.

Thank you. Our next question comes from the line of Bill Peterson with JP Morgan. Please go ahead.

Hi, good afternoon. I hope you can hear me well this time. I wanted to revisit the topic of certification. Can you provide any details on what still needs to be accepted regarding the means of compliance? I'm not sure if it's appropriate to quantify this in terms of completion percentage or if it would be better to focus on specific areas that you are still discussing with the FAA that need to be finalized.

Yeah. Hey, Bill. This is Tom. It's a good question. So, the way to think about it is, back when we were certifying under part 23, we had submitted basically a complete set of proposed means of compliance. Over the last year, we've been working with the FAA kind of step by step through all those topics. Getting into the areas that have been interesting that we've been focusing on, the reality is about two-thirds of the means of compliance are pretty standard, dental stuff that under part 23, the FAA just kind of blanket accepts. So if we focus on the remaining one-third, which are more interesting, they're all in the new and novel areas. So, you're talking about batteries and electric engines, that sort of stuff. The vast majority of our discussions with FAA have been focused on exactly those areas. Today, we feel like we've got really good alignment with all of the experts at the FAA, but just to be really transparent, as part of this 2117 B process, the formal signoff or acceptance of those is something that we're now just kind of going back through, and that's been unlocked by this final agreement of our 2117 B G1. So, hopefully, that answers your questions.

Thank you. Our next question goes to the line of Andres Sheppard with Cantor Fitzgerald. Please go ahead.

Hello, everyone. Good afternoon, and thank you for taking our question. Congrats on the quarter. Maybe in regards to the first announced route, I'm just wondering, Adam, can you give us a little more color as to how this came about? I know in the past you had mentioned that you were targeting Florida and California as the first target market. So, just curious how this New York route came to take place. Thanks.

Thanks, Andres. So, when we look at the different markets that we can launch into, there are several considerations that we considered. We're looking for cities that have heavy congestion, cities that are tech forward, cities where the local municipalities want these services. And especially with our partner United, New York became a very attractive market to look at. It's a market that is very densely traveled. When you think about the go-to-market strategy laid out, the airport to city center route, what we call our trunk routes, it's probably one of the most dense routes in the country. I mean, between JFK, LaGuardia, and Newark, I think it's something around 27, 28 million people per year are taking that trip. I lived in New York for almost 20 years, and I've sat through that traffic, so I know that's a brutal 90 minutes that you typically spend going 15, 20 miles. So, we know there's a willingness to pay because rideshare is taking these trips every day. We know there's demand. So, we worked with United, the Port Authority, and the mayor, and we saw a lot of excitement, specifically around this route. We saw a really clear path to make it happen. This is not a route we have to force; it's something we are working together with all those constituents to actually make it happen. We think it will be the first route that eVTOL probably sees globally.

Got it. Thanks, Adam. No, that's very helpful. Maybe a quick question just regarding certification. So if I'm understanding correctly, you are reaffirming your expectation to get complete certification in the second half of 2024. If that's the case, unless I'm missing something, you'll be the first eVTOL company to get FAA certification. So, I guess my question is, how important do you expect that to be in terms of quickly capturing market share? Thanks.

I think it's important, but when we think about it, it's really a result of the strategy that we've laid out from the beginning, which was to hire people with the most experience that aligned with our strategy of simplicity in order to get to market, first to market, fast to market. And that was all about bringing Tom Muniz on and Dr. Bower on as well from the aircraft side. The second was to build a vehicle that was certifiable from day one. So, we didn't just build an aircraft and bring it to the FAA and say, here, certify this. We designed the aircraft alongside of the FAA and really matched that design progress along with the certification process. And now you can really see it in our trajectory, in our pace of progress, and across the technology and certification side. Nobody thought we'd be transitioning Maker in less than a year, but here we are. So, I think really the kind of all this is coming together is exactly what we've laid out. You can even see it on the FAA side. Earlier this week, Mel Johnson, the Director of Aircraft Certification at the FAA, at the European Rotors Conference in Germany, said that there were other projects, assuming you're referring to JOB, that are at identical or nearly identical spots in the certification process. And he's referring to Archer, right? He's basically saying the FAA has effectively indicated we're at very similar spots, and we've done this in a short period of time. So, he also went on to say that simultaneously they planned to disposition the comments to both of our airworthiness criteria. So, here we are neck and neck in the certification process, and we've achieved it quite efficiently.

Got it. Thank you. If I could just squeeze one last quick question for Mark. In the quarter, you shifted about $488 million of your unrestricted cash into short-term investments. What was the reason here? Just help me understand. Thanks.

That's just prudent capital management, Andres. The rate environment is clearly an attractive environment to put your money to work for us. So, we invested a preponderance of our cash in an investment management account with our bank. We're earning, I think, an average of just over 3.2% on that money. We invested fairly early.

Got it. Fair enough. Thank you very much. Congrats on the quarter. I'll pass it on.

Thanks, Andres.

Thank you. Our next question comes from the line of Bill Peterson with JP Morgan. Please go ahead.

I wanted to ask about any current engagements you might have with the DOD or Agility Prime. And I guess I'm asking in the context of suppose there's further delays in the FAA that have nothing to do with you, but just if it's not launching early 2025 at some time later. Do you have the opportunity to work with them, or is there other applications you could work on, like cargo or something else that would allow for some revenue in the 2025 timeframe, even if the passenger business did not start on time?

Hey, Bill. This is Adam. So, the answer to that is yes, we have opportunities with the DOD, and we have been working with the DOD through Agility Prime, looking at several different larger programs that have come out. This is certainly an opportunity that we're dual tracking. But I do want to add that working with the DOD is very resource-heavy. We need to evaluate each of those opportunities and be selective. There are heavy systems requirements that must be met in place. There are personnel limitations, and it will likely be a pretty low-margin business because they're all competitively bid. So, there are opportunities, and we are assessing those. It could provide an interesting off-ramp, but we want to stay very focused on our ability to get to market with our commercial vehicle with the FAA.

Well understood. Thank you for the color there.

Thank you. Our next question is a follow-up from the line of Savi Syth with Raymond James. Please go ahead.

Hey, thanks for the follow-up. Just a quick question. I know last quarter you talked about potentially adding some partners. You have this strong relationship with United. I was curious what aspects you would want from a new partner? Like what could they fulfill that's different from the United partnership?

Hey, Savi. This is Adam. So, I think there are a couple of ways we think about partners. On the airline side, United has done an incredible job in helping us think about operationalizing a lot of the work we're doing on the OEM side. A lot of the conversations we are having are mostly through more sales potentials rather than partnership potentials. That's how we've thought of it. But on the OEM side, we have been working with Stellantis on the manufacturing side. I think there are opportunities for other partners, but I think on the airline side, we've mostly been engaged with other folks more as traditional customers rather than partners in the same way we work with United.

Thank you. There are no additional questions waiting at this time. I would like to pass the conference back to Adam Goldstein, Founder and CEO, for any closing remarks.

The advancements that we've achieved across our aircraft technology with Maker's wingborne flight, our certification traction, which was reinforced by the FAA's public comments earlier this week, and our go-to-market efforts visible with our joint announcement with United, the first-ever eVTOL route, have really increased my conviction that we have the right strategy. We have the best team that will allow Archer to get to market. Thanks for joining us.

That concludes the Archer Aviation Inc. Q3 2022 financial results conference call. I hope you all enjoy the rest of your day. You may now disconnect your lines.