Earnings Call Transcript - ACHR Q1 2023

Operator, Operator

Good afternoon. Thank you for joining the Archer Aviation Q1 2023 Quarterly Results Call. My name is Matt, and I will be your moderator today. All lines will be muted during the presentation, with a chance for questions and answers at the end. I would now like to hand the conference over to our host, Andy Missan, Chief Legal Officer of Archer. Please proceed.

Andy Missan, Chief Legal Officer

Thank you. Good afternoon, and welcome to Archer's first quarter 2023 conference call. Joining me today are Adam Goldstein, our Founder and CEO; Tom Muniz, our COO; and Mark Mesler, our CFO. Please note that during today's call, we will be making forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially from those contemplated by the forward-looking statements. For more information about these risks and uncertainties, please refer to our SEC filings, including the risk factors discussed in our most recently filed annual report on Form 10-K. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this call, we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our shareholder letter posted on our IR website. And now, I'd like to turn the call over to Adam.

Adam Goldstein, Founder and CEO

Thanks, Andy. 2023 is a landmark year for the leaders in our industry. Efforts are shifting to building the conforming aircraft that will be used as part of certification testing in advance of commercialization in 2025. I want to reiterate Archer's strategy: build an aircraft with the most efficient path to certification and manufacturing at scale. Our aircraft design has focused on optimizing for the UAM business case, a safe, sustainable, quiet aircraft that can perform rapid, short distance, back-to-back trips for four passengers plus a pilot. We believe that UAM will initially be the largest market segment for electric aircraft. Our execution has and continues to focus on leveraging our team's industry-leading expertise to make simultaneous progress across all work streams: technology, certification, manufacturing, and commercial operations. The substantial progress we've made to date gives us high confidence that we will be in a position to begin commercial operations in 2025 with the ability to rapidly scale. Last quarter, I spoke in detail about our recently announced manufacturing partnership with Stellantis, one of the world's largest automakers whose iconic brands include Jeep, Ram, and Maserati. Remember, that agreement with Stellantis involves us joining forces to build our Midnight aircraft, as well as Stellantis providing additional capital to Archer to help ensure we get through to commercial operations with scalable manufacturing. Today, I'll share some exciting updates on our joint efforts to stand up those manufacturing capabilities, including progress on our manufacturing facilities in San Jose, California and in Covington, Georgia. Our collaboration with Stellantis goes back to 2020, and it's built on our shared goal of developing a sustainable urban air mobility industry supported by high volume manufacturing with a focus on quality, efficiency, profitability, and above all else, safety. Stellantis initially became an investor in Archer in 2021. And as part of the recent expansion of our strategic relationship, in addition to our manufacturing partnership, they have committed up to an additional $150 million in equity capital for Archer to draw upon at our option between now and the end of 2024. This is a once-in-a-generation opportunity to redefine urban transportation for both Archer and Stellantis. For Archer, our relationship with Stellantis helps us ensure that we have a robust scalable manufacturing infrastructure in place at the time of certification. By leveraging Stellantis' expertise in advance to volume manufacturing, it enables us to do it in a cost effective and capital-efficient way. For Stellantis, this partnership helps them continue to push the boundaries to provide sustainable freedom of mobility, whether traveling by road or sky. Choosing Archer as their partner for this new market speaks to their belief that we have the right team and technology to drive the UAM transformation. We believe our strategic relationship with Stellantis is by far the deepest commitment to date by a partner across the eVTOL industry. Our high volume Covington manufacturing facility is slated to come online in 2024. The first phase of development at Covington spans a 96-acre site adjacent to the Covington Municipal Airport where we will have the ability to produce up to 650 aircraft per year. The second phase would give us the ability to produce up to 2,300 aircraft per year. The end result would be a massive manufacturing operation that makes the Archer and Stellantis team the largest aerospace manufacturer in the world by number of planes produced annually. Until our Covington facility is online, we're leveraging our integrated test lab and manufacturing facility located right here in San Jose, just around the corner from our headquarters, to build our conforming aircraft. This facility can manufacture tens of planes per year. In the short term, we will use this facility to produce the conforming aircraft needed for certification purposes. In the future, it can be used for incremental manufacturing capacity as we ramp up Covington. All of this early work on manufacturing infrastructure is geared towards supporting a robust commercial launch in 2025. Commercialization has been and continues to be the North Star for everything we've done and are doing across our focus areas: technology, certification, manufacturing, and commercial operations. Alongside all of the great work our teams are doing on the manufacturing front, we continue to mature our commercial operations build-out. This quarter, we announced our plans to launch UAM operations in another city, a key milestone in our go-to-market strategy. We announced the City of Chicago as our next airport to city center route, and we saw huge enthusiasm and support across the board. The announcement was in close coordination with the City of Chicago, the Chicago Department of Aviation, the State of Illinois, and ComEd, the utility in Chicago, which is indicative of their view that this is an incredible step forward for Chicago and will be a showcase for the future of sustainable travel. We are seeing high levels of interest from other municipalities all over the country for UAM solutions that can address both traffic issues and sustainability commitments. The Chicago announcement continues the expansion of our existing partnership with United, following our announcement of a Manhattan to Newark route last year. These two routes represent important steps in building out our trunk and branch strategy as we enter our foundational markets, meaning that we start with the highest traffic, highest demand routes and will expand our UAM network outward over time. The great news is that our approach aligns nicely with the UAM Concept of Operations 2.0 the FAA and NASA announced last week. As we've talked about commercialization over the past several quarters, we focused on the civilian use cases for our Midnight aircraft. But we've also been working closely with the Department of Defense on several programs and have been in talks about significantly expanding our relationship. As our Midnight aircraft progresses towards commercialization, based on its performance specifications, including its payload, the Department of Defense has expressed strong interest in using the aircraft for non-kinetic use cases, such as rescue operations and for supply chain logistics. In support of these efforts, just yesterday, we announced the formation of a Government Services Advisory Board with six appointees. These six highly-decorated and distinguished military leaders represent the United States Air Force, Navy, and Army. We are extremely fortunate to have this significant level of leadership and experience onboard and supporting Archer. This advisory board will further build on our expertise and perspectives of U.S. Federal Government programs and procurement strategies to allow us to more fully engage with U.S. government agencies to explore additional opportunities to commercialize eVTOL aircraft. Before I turn it over to Tom to give more detailed updates on our technology and certification progress, I'd like to note that Archer will be participating prominently in the Paris Air Show in June as the featured eVTOL aircraft manufacturer. The Paris Air Show is the premier global aviation event of the year, featuring the world's most impressive aircraft, while serving as a platform for the aviation industry to come together and provide thought leadership on the direction of the industry. As such, our Midnight aircraft will be making its European debut, and several of our executives will be speaking on panels that are focused on sharing our vision for the commercialization of our industry. If you're coming to the Paris Air Show, I want to invite you to stop by Archer's location to meet our team and see Midnight for yourself; it's truly a memorable experience. I'll now turn it over to Tom.

Tom Muniz, COO

Thanks, Adam. These last couple of months have been very exciting for the team as we've hit some key milestones on our path to bringing Midnight into service in 2025. Most importantly, I'm very excited to announce that production of our first Midnight aircraft is now complete. Just last week, the aircraft was delivered to our flight test facility in Salinas and reassembled. You can see a picture of the aircraft in Salinas on the cover of our shareholder letter. This is right on schedule and means we are on track to begin flight testing of this aircraft this summer once it completes all its necessary ground tests. This is a huge milestone for us and the industry. We plan to fly this Midnight aircraft extensively throughout the second half of this year, paving the way for piloted flight testing of the fleet of conforming Midnight aircraft we are building to support 'for credit' flight testing with the FAA. We remain on track to begin pilot operations in early 2024. As we've discussed before, our team of leading engineers have been hard at work over the past couple of years developing Midnight's proprietary electric propulsion system. We believe that the advanced performance and safety of Midnight's batteries and electric engines, coupled with its design for high rate manufacturing, is a key differentiator and advantage for Archer. Our strategy of realistic innovation led us to optimize the design of our batteries and electric engines to facilitate a more streamlined certification process and support our plan to ramp up manufacturing to allow us to deliver hundreds of aircraft per year shortly after getting to certification. The past few months have seen this strategy deliver dividends as the team has made great strides on the engineering certification and manufacturing of these key systems. Let's drill down on the battery front. We've now completed critical testing of Midnight's batteries at the cell and pack level. Our proprietary battery packs are built with industry standard cylindrical cells, which we believe have the highest levels of safety and reliability across the industry. Their safety and reliability have been validated through hundreds of thousands of hours of extensive testing by the team over the past few months in preparation for Midnight flight testing. Cylindrical cells have key safety advantages over alternative form factors like pouch cells, such as built-in current interrupt devices and dedicated vent pads, which facilitate the design of safe, efficient, and lightweight battery packs, which meet the most stringent aerospace safety requirements. For these reasons, we believe that currently, cylindrical cells are the best technology for aerospace applications. At the pack level, our battery packs have also completed environmental testing, including shock and vibration testing required by the FAA for certification. The data from these tests gives us high confidence as we move forward towards 'for credit' testing with the FAA. The validation data also gives us confidence to proceed with preparations for manufacturing scale-up of Midnight's battery packs at our San Jose manufacturing facility. This progress on battery testing and manufacturing also maps to the progress we are making on the certification front. The detailed testing and data that I just mentioned has facilitated lots of progress in collaboration with the FAA. Over just the past couple of months, our battery team has had several in-person meetings with the FAA technical team in both Washington, DC and on-site at our facilities. In these meetings, the combined team has reviewed detailed design and validation data in preparation for finalizing our subject-specific certification plan for this area, which has now been formally submitted to the FAA for approval. Batteries are just one example of many where we continue to make progress with the FAA on certification. We have now submitted 15 of our 18 subject-specific certification plans to the FAA. As a reminder, SSCPs provide precise detail on each of the specific tests and analyses that will be completed during the implementation phase of the project, in which we will demonstrate to the FAA that Midnight meets all relevant FAA requirements necessary to receive type certification. We have also submitted our project-specific certification plan, or PSCP. This is the overall guiding document for the entire project that leverages all SSCPs to provide complete coverage for all global certification requirements. We remain focused on ensuring our progress with the FAA supports our timeline of performing 'for credit' testing with our conforming aircraft next year. Let's now shift to our manufacturing build-out, an area where we continue to lead the industry. It's a very exciting time for the team as our San Jose manufacturing and lab facility is now coming online, and we are underway with the construction of our high volume facility in Georgia. Our San Jose, California facility has three main components: test labs, powertrain manufacturing, and aircraft final assembly. For testing, the facility contains roughly a dozen specially designed laboratories to conduct specific component and system testing to support both engineering validation and 'for credit' certification testing of all the systems on the Midnight aircraft. This facility also has a significant amount of space allocated to powertrain manufacturing with partially automated assembly lines for our proprietary battery packs and electric engines. As we speak, lab and manufacturing equipment such as robots for our battery pack production line are being installed and commissioned. Lastly, there's an aircraft final assembly area that can support the production of tens of aircraft per year. This is where we will assemble the initial fleet of conforming Midnight aircraft later this year that will be used in 'for credit' certification testing next year. In parallel, our team has been hard at work alongside a large, very experienced team from Stellantis on the production system development for our high volume facility in Georgia. If you walk around to the Archer office here in San Jose, you'll see many Stellantis employees with invaluable experience from their brands like Jeep, working side by side with the Archer team. The material flow and layout of that facility, along with the detailed building, mechanical, electrical, and plumbing design, is now mature, and construction is on track for occupancy in 2024, supporting our production ramp for commercialization in 2025. When it comes to manufacturing, we are confident that we are the most advanced eVTOL company in the world, due in large part to our strategy to focus not just on design for certification, but also on designing for mass manufacturing. No other eVTOL company has even announced that they've selected a site for a high volume facility. I just want to take a moment to thank the tremendous effort both our team and the Stellantis team has put in. There is no replacement for hardware, and the teams continue to step up every day as we're ready for commercialization. And with that, I'll hand it over to Mark to discuss the financials for the quarter.

Mark Mesler, CFO

Thanks, Tom. While Adam and Tom highlighted the great progress we are making on our efforts to commercialize in 2025, it's important to note that we are doing so in a financially disciplined manner. To commercialize this industry in any meaningful way, we must not only receive type certification of our aircraft but also have a mature supply base and manufacturing capabilities that will allow us to launch this industry and capture the forecast of demand for sustainable urban air mobility. I would like to recognize the tremendous work and support we are getting from our foundational suppliers. They are moving and innovating at a pace that is allowing us to track to our commercialization efforts in 2025. We cannot achieve that goal without their hard work and commitment to this new industry and Archer. As we continue to progress our manufacturing operations and mature our commercialization efforts, we also remain focused on maintaining a healthy cash runway. We get questions every quarter about the liquidity necessary to get to commercialization, and we've been very consistent with communicating our comfort around being sufficiently capitalized to get there. We ended Q1 '23 with $450 million of cash and short-term investments on our balance sheet. Additionally, as we discussed in detail last quarter, Stellantis has committed $150 million of equity capital that we can draw upon between now and the end of 2024 in three tranches as we need it based on us achieving certain milestones, giving us a total of around $600 million. We structured that agreement in order to give us flexibility as to when we take the investment in an effort to minimize potential dilution to our shareholder base. It's also worth revisiting the fact that we previously announced an LOI with Synovus, our banking partner in Georgia, to finance our factory build in Covington, Georgia, and the equipment that we will deploy there. Our intent is that we will enter into a finance facility with Synovus later this year; it will cover nearly all the cost of construction of the Covington facility, minimizing the near-term impact to our cash. We'll keep you posted as that progresses. As you can see, we are being very thoughtful about how we manage our liquidity and potential shareholder dilution. Recall that we also have a 200-unit aircraft purchase agreement with United with an option for them to take another 100 aircraft. To date, they have provided a $10 million pre-delivery payment for the first 100 aircraft. As we progress further through the aircraft certification program, we expect that we will agree upon and receive additional pre-delivery payments from United. Beyond these previously announced arrangements, Stellantis and United remained committed to helping Archer get to commercial operations in 2025. We are very fortunate to have the continued support of these two strategic partners and investors. As I have discussed in the past, we have taken and continue to take proactive measures to manage our cash flow and optimize our expenses to achieve our program milestones and company goals. Through our rigorous budgeting and forecasting process, we are constantly reviewing our financial requirements to support our path to commercialization and making necessary adjustments to ensure that we are maximizing our resources and operating efficiently. We are committed to delivering on the promise of bringing UAM to market at scale in a thoughtful, financially disciplined manner. We are confident we have the right strategy to do so. Now, on to our financial performance for Q1 '23. Our non-GAAP total operating expenses were $80 million, right at the midpoint of our estimates range. This led to an adjusted EBITDA loss of $79 million. The preponderance of our operating expenses continued to be investments in headcount and engineering development expenses to build and test our Midnight aircraft. We are also making investments in non-recurring expenses at vendors for the buildout of our supply base to manufacture conforming components from Midnight over the long term, as well as investing in the parts for our development testing and six conforming aircraft that we will begin building later this year and will be used for 'for credit' testing with the FAA as part of our certification program. The investments in non-recurring costs and parts were approximately $16 million for the quarter. As I've discussed last quarter, these costs generally should not persist beyond 2023. On a GAAP basis, total operating expenses for Q1 '23 were $112 million, which included $25.7 million of stock-based compensation and $6.3 million of warrant expenses for our warrants issued to United and Stellantis. These results were slightly below the midpoint of our estimates range of $115 million. We exited the quarter with $450 million of cash, cash equivalents, and short-term investments on our balance sheet. We used $77 million in cash for the quarter, primarily to invest in the $80 million of non-GAAP operating expenses and $11.4 million of capital expenses, partially offset by working capital timing. The investments we are making now are laying the foundation necessary to yield long-term value for Archer's shareholders, including continued development of Midnight, establishing our long-term supply base for conforming parts for Midnight, parts for our six conforming aircraft that we will use in 'for credit' testing with the FAA, our San Jose, California integrated test lab and manufacturing facility, and our Covington, Georgia facility. Our ending cash balance coupled with the potential $150 million in equity capital from Stellantis I previously discussed, provides us with potential liquidity of $600 million to get through to commercialization in 2025. Finally, let's take a look at our Q2 '23 estimates for spending, which are consistent with our Q1 '23 levels. We anticipate total GAAP operating expense of $110 million to $120 million, which includes expected stock-based compensation and warrant expense of approximately $35 million. Total non-GAAP operating expenses will be between $75 million and $85 million. We had a very active investor outreach calendar in Q1 '23, attending events in both the U.S. and Europe. We will continue our outreach in Q2 '23 and will be participating in many conferences and non-deal roadshows with the financial community, educating investors on our sector and Archer's strategy. We've provided a detailed calendar on our IR website and our shareholder letter. And with that, operator, we'll open it up for questions.

Operator, Operator

The first question is from Bill Peterson with J.P. Morgan. Your line is now open.

Bill Peterson, Analyst

Yes. Good afternoon, and thank you for taking the questions. There has been nice progress in the quarter. My question relates to government opportunities, specifically within the Department of Defense and potentially other government organizations. It seems that the San Jose site has limited capacity for unit production, whereas the Georgia site can handle higher volumes. I recall in the past you mentioned a potential 50-50 split between aircraft sales and network. How should we approach the additional government opportunities within that framework, particularly considering that building the network might take longer due to infrastructure challenges and general awareness? I am trying to understand how to think about the go-to-market strategy.

Adam Goldstein, Founder and CEO

Thanks, Bill. This is Adam. So, we've been working with the DoD for several years. I’m just trying to put it in context for you. We've been working with them across several different programs, ranging from acoustics to autonomy. And as we've gotten deeper with the DoD and really expanded our relationship, we've also seen the DoD really expand their relationship across the whole industry. And so, there's been a lot of discussion around use cases and how can we use these vehicles within the DoD. One of the things that's, I think, been attractive and that we've heard a lot of comments on has been Archer's payload capabilities. That has really increased the volume of conversations that we've been having. And so, that's really what's been driving a lot of this kind of deepening activity that Archer has put out there. So, we decided to form this government advisory board where we have a range of some of the who's who from the different branches, really deep experience, folks that have worked deep into the budget process to the strategy side, across all the different branches. And we're now kind of figuring out the best strategy on how to go and really pursue the different DoD opportunities. As it relates to our ability to deliver vehicles, one of the things that was super critical to Archer from the very beginning was building a platform that was manufacturable and scalable from day one. And so, we've built a facility that gives us the ability to flex up our production volumes. So, in the first phase, we can build up to 650 planes. And there is a second phase to the Georgia Covington facility that will enable us to build up to 2,300 planes per year. We have plenty of capacity that we can deliver if the demand is there. So, I think for now what we should do is we're going through our work; we've put this advisory board together, we're working closely with the DoD, and as the opportunities start to materialize, I think it will become a lot more clear on the size and timing around them.

Bill Peterson, Analyst

Thank you for that. The next question is for Mark. I understand your perspective today regarding cash and the $150 million from Stellantis. However, could you provide some specific numbers? Looking beyond this quarter, what should we expect for the OpEx and CapEx trends for the year? You mentioned a few one-time items rolling off this year. Does this indicate that OpEx will likely decrease in absolute terms next year as these one-time expenses will not repeat? I'm trying to gain more clarity on your cash burn.

Mark Mesler, CFO

Certainly, Bill. Looking at Q1 and our Q2 guidance, we reached the midpoint for Q1. For Q2, we maintained the same guidance for both non-GAAP and GAAP expenses. I mentioned that Q1 included around $16 million in non-recurring costs. As I noted last quarter, this figure tends to be stable quarter-to-quarter based on our current outlook. As we progress into 2024, these non-recurring costs are expected to diminish. There might be a slight increase in base-level spending as we expand our team, but you can anticipate a reduction in these non-recurring costs. Therefore, the figures I provided should be fairly accurate quarter-to-quarter. While we're not issuing forward annual guidance, I don't foresee any significant changes in our spending from quarter to quarter.

Bill Peterson, Analyst

Okay. Thanks. That's good color. Thanks.

Andres Sheppard, Analyst

Hey, good afternoon, everyone. Congratulations on the quarter and all the announcements, and thanks for taking our question. Adam, I just wanted to maybe follow up on Bill's first question regarding the relation with the DoD. I think congrats on that expansion. I was just wondering if maybe you can give us a little color on kind of how that relationship has materialized in the last few years? Maybe a little more color on kind of what's been done and what is perhaps expected to now be done? Thanks.

Adam Goldstein, Founder and CEO

Yes, certainly. From the outset, Archer's objective has been to chart the most efficient route to market. We've consistently aimed to maintain a clear focus with minimal distractions. Our efforts have centered on commercializing the civilian passenger market, which we believe is the largest and most important market for us. Along the way, we have had opportunities to collaborate with the Department of Defense in various areas, including autonomy, where we have engaged in several programs related to that and acoustics. This collaboration has not only enhanced our aircraft capabilities but also allowed the DoD to have a broader view of our overall program. We have been advancing our design for the commercial sector and feel confident about our current position, certification timeline, and our manufacturing capabilities. Consequently, we are now open to exploring dual-track strategies for our market approach. The DoD has shown interest in several technical advantages of our vehicle, such as payload and logistical mobility. Some existing military vehicles are more challenging to move, and we have carefully considered these factors as they relate to our ability to scale production and distribute vehicles globally, especially since they typically cover short distances and wouldn’t be flown to their final destinations. All these elements have facilitated deeper and more serious discussions, making this market increasingly appealing as we progress through the program and gain confidence in the design and engineering of the Midnight vehicle.

Andres Sheppard, Analyst

Got it. Okay. No, that's super helpful. Follow-up question, a bit of a curveball. I'm wondering if we can maybe get your thoughts on the announcement of Billy Nolen retiring from the FAA. What impact, if at all, might that take on certification? Thanks.

Adam Goldstein, Founder and CEO

Sure. So first, we're very thankful for the time that Billy Nolen has given and for his service at the FAA and for his leadership there. So we think with Billy Nolen stepping down, there's obviously a period of time now where a new person will come into play. But the good news is that we've seen very widespread support on the regulatory side. It's not even just in the FAA. We've had recently Secretary Buttigieg spin out to see many of the different eVTOL OEM players. We've seen very broad support on Capitol Hill. The FAA has stated that AAM is a top three priority. Several companies are continuing to make significant traction with the FAA, and Archer is now really heading into this testing phase as a lot of the rulemaking part is kind of nearing the back half of that process. We feel confident that it will have little to no disruption in terms of our progress, and we feel comfortable with where that's all at.

Andres Sheppard, Analyst

Got it. Very helpful again. Congrats on the quarter. I'll pass it on. Thank you.

Edison Yu, Analyst

Hey, thanks guys. Congrats on the progress. One follow-up on the defense opportunity. Is there any potential chance that you'll get some contra R&D or something before deliveries occur with the DoD, something along those lines?

Adam Goldstein, Founder and CEO

Yeah. Hey, Edison. This is Adam. Yeah, that is certainly a possibility. So, the accounting nature of the different opportunities that we're looking at, I think, differ in terms of the different programs that we're considering. So, there's certainly a possibility for that. There also is the possibility for early revenue opportunities as well. We look at it as a way to diversify the path to commercialization. It's a good opportunity, but we'll give more color as details start to emerge.

Edison Yu, Analyst

Understood. I'm interested in hearing about some of the early insights you've gained from Stellantis. Clearly, they have significant experience in this field. Have you encountered any lessons or key takeaways that you wouldn't have discovered without their involvement?

Tom Muniz, COO

Hey, Edison. This is Tom. It's a great question. I would say the reality is we're both learning from each other. To set the broad context here, Stellantis is really interested and becoming a big part of their business long term. So, as much as we're benefiting from their experience in industrial engineering and automation, they're also learning about the right solutions that make sense for the problems we're trying to solve today. As we said before, we're taking a very phased approach here. We're early days. We're using traditional processes. We're being very thoughtful with where we're deploying capital and automation, trying to balance getting to market while using our resources most effectively. So, I don't know if I have any super great examples for you, but hopefully that sort of overall description is helpful.

Edison Yu, Analyst

Sure. And if I could sneak one more in. As part of the relationship with Stellantis, I believe you guys have stated in the original release that they will be looking to make open market purchases of the stock. I'm curious, is that still, in your view, their intention? And what's the outlook there, if you have any?

Mark Mesler, CFO

Hey, Edison. This is Mark. We can't comment specifically on any potential activities of Stellantis. However, I will draw attention to the fact that they did file a Form 13D with the SEC two days ago where they indicated their intention or reiterated their intention to make open market purchases of our stock. That is a document that is required for them to even be able to do that.

Savi Syth, Analyst

Hey, good afternoon, everyone. Just on the certification front, I was curious looking at kind of based on the comments from other companies and stakeholders made in the kind of notice of airworthiness criteria that was in the public register. What are some of the main areas of concern or contention with the FAA certification process of standards and kind of how do you expect that to impact your process?

Tom Muniz, COO

Yes. Hi, Savi. This is Tom. I'm glad to address that. To provide some context, you're talking about the airworthiness criteria that were published last fall after we received our G-1 approval. These are the overarching rules. As you mentioned, there was a public comment period of about six weeks to two months during which the FAA received numerous comments. Over the past several months, the FAA team has been reviewing those comments. What we've learned so far suggests that we shouldn't anticipate significant changes. If we think back to about a year ago, our original G-1 from 2117A and 2117B was in a similar timeframe, and we saw very few modifications. For instance, they included a bird strike requirement, but we were already designing for that, so it didn't have a substantial impact on us. All the information we have at this time indicates that we shouldn't expect much alteration, but we have yet to receive the official documents. We expect them soon, and we'll be happy to share more once we have the data.

Savi Syth, Analyst

That's helpful. And just to follow-up on that part of it. With the subject-specific certification plans that you've submitted, have any of those been accepted by the FAA?

Tom Muniz, COO

No. None of them have been accepted so far, but there are a handful that are pretty close to being accepted. Overall, I would say, really the thing that matters for us is driving down the risk through the conversations and working sessions with the FAA. From that perspective, what we've seen so far is a lot of alignment and, I would say, benefit from the simplified approaches that we're taking that's getting us into rooms with these FAA subject matter experts that are saying quite quickly, 'Oh, okay, we understand what you guys are doing. We've seen this before. This is easy to understand.' The trend is that that's paving the way for us to have an efficient path forward here. So hopefully that's good color.

Savi Syth, Analyst

Yes, that's very helpful. Thanks. And maybe Mark, could you share your thoughts on liquidity? Is there a certain level of liquidity you're comfortable maintaining, especially with other potential funding options you might consider if certification delays occur?

Adam Goldstein, Founder and CEO

Hey, Savi. This is Adam. So maybe let me just take a crack at that. I'm the largest shareholder, so I think about it a lot as well. I think we are in a pretty unique position here, right? We have the flexibility from Stellantis. We have a large order with United. They've already given us some pre-delivery payments with the potential for additional pre-delivery payments, plus we raised a lot of capital. So, we're just going to be strategic about how we think about capital. We don't need capital today, but we do have optionality built in. I think about dilution versus capital as well on a regular basis and I think we are just in a fortunate position to be able to manage that over a pretty significant period of time.

David Zazula, Analyst

Thank you for taking my question. I want to revisit Bill's original inquiry from another perspective. My initial understanding of Archer's mission was to manufacture aircraft to become the largest operator of urban air mobility vehicles. However, Adam, in your description of the current mission, it seemed you were more focused on production rather than the air operations. Is this a shift in your strategy? Are there new opportunities you're considering that may be more promising than previously thought, or is the approach still consistent with what it has always been?

Adam Goldstein, Founder and CEO

Thanks, David, for the question. From the beginning, we've always said we've looked at kind of have a dual strategy of selling some aircraft through Archer Direct and also operating some aircraft through the UAM business. We've kind of put out a high-level target there of 50-50 from that standpoint. So nothing has changed from that, and maybe it's parsing words too much. But what I think the DoD opportunity represents is just more potential upside in the Direct side of things. It gives us the ability to sell into the DoD. If there are great opportunities that we can take advantage of, given our ability to flex up the manufacturing capabilities that we have, we'll certainly take advantage of that. At this point, we're not changing our outlook from saying kind of a 50-50 split. The reason we've always said 50-50 split is we think this will be a capital-intensive business where we will generate cash flow on the manufacturing side to help pave for the way for the long-term view of building the UAM vision. So maybe there's an opportunity to help finance that through broader sales; that's certainly a potential. But today we'll kind of keep that same framework in place of a 50-50 split.

David Zazula, Analyst

Thanks. That's very helpful. And then maybe for Tom, noticing that there is one plant non-conforming aircraft, not that I'm wishing ill upon it, but certainly, if there were any casualties or complications with that aircraft, you wouldn't be the first in the industry to see those. So I guess, are there contingency plans or what would the impact be if something happened to that aircraft through the testing process? How would that ultimately impact your certification timeline?

Tom Muniz, COO

Yes. Hi, David. Happy to answer that. The first Midnight aircraft that's entering flight testing here in the next couple of months, the strategy with that vehicle is to reduce risk and accelerate our path to market with piloted conforming aircraft. We see it as this great opportunity to gather data and do the type of testing we're going to need to do 'for credit' later as early as possible to learn and reduce risk. We take a very rigorous approach to flight testing. Today, we don't talk about it much, but we still fly Maker on a very regular basis with our very professional flight test team, and that's the same team that's going to be executing flight tests with Midnight going forward. This is all part of this broader strategy to get to piloted flight early next year, which we remain on track to do, and then get into the 'for credit' testing working towards our TC. So, that's how that fits into the overall arc. Yes, we're basically just executing into the strategy.

Adam Goldstein, Founder and CEO

Hey, David. This is Adam. Here's how to think about it. The factory in San Jose is currently coming online. It has the capacity to build several planes. The first non-conforming plane is only a few months ahead of the production plans that are in progress. We are in the process of ramping up that factory now. Even in a worst-case scenario, we have a factory that can build planes and will start producing vehicles right after the non-conforming aircraft is completed. We are taking a very thorough approach to flight testing, but even from a pessimistic standpoint, there is still a factory ready to produce.

Operator, Operator

Thank you for your question. There are no additional questions waiting at this time. So, I'll turn the call back over to Adam Goldstein, CEO and Founder of Archer, for closing remarks.

Adam Goldstein, Founder and CEO

Thank you everyone for joining us today on the call. 2023 is really going to be an amazing year, and there are so many catalysts to come. This is one of the most exciting times to be building an aerospace. We thank you very much for your participation.

Operator, Operator

That concludes the conference call. Thank you for your participation. You may now disconnect your lines.