ACHR - NYSE

Good afternoon. Thank you for attending today's Archer Aviation Company Third Quarter 2025 Financial Results Conference Call. My name is Victoria, and I'll be your moderator today. [Operator Instructions] I would now like to pass the conference over to our host, Katie Kiewel, Head of IR. Katie, please proceed.

Welcome to Archer's Q3 2025 earnings. This is Kate Kiewel, Archer's Head of Investor Relations. Today, we will be making forward-looking statements that are based on assumptions as of today and we don't undertake any obligation to update them as a result of new information or future events. Risks and uncertainties may cause our actual results to differ materially from those contemplated by these statements. For more information about these risks and uncertainties, review the risk factors in our SEC filings. We will also be discussing both GAAP and non-GAAP financial measures today. A reconciliation of those measures is included in our shareholder letter and earnings release from today. Now I'll turn it over to Adam. Adam?

Thanks, Kate. Last quarter, I spoke about the growing support our sector is receiving from the highest levels of the U.S. government and how the Olympics mandate has become a global stage for us to showcase air taxis as we work to commercialize and drive global scale. This quarter, we made meaningful progress on every front worldwide from L.A. to Abu Dhabi to Seoul. With multiple White House executive orders now establishing a presidential imperative to begin air taxi deployments in America as early as next year, the eVTOL Integration Pilot Program has enabled Archer to shift decisively from vision to execution, scaling commercial air taxi operations across the UAE, America and in select other cities globally. We're especially focused on winning Los Angeles because if we can prove electric air taxis work in one of the world's most congested, complex and highly regulated cities, I believe we can subsequently scale the product across the U.S. and the world. Today, I'll start by sharing a strategic development that gives us a unique ability to launch and scale in L.A., a one-of-a-kind opportunity to acquire control of Hawthorne Airport, one of L.A.'s most strategically located airfields and use it as our anchor hub for air taxis ahead of the LA28 Olympic Games and beyond as well as a testbed for our AI technologies under development. After that, I'll discuss key recent highlights from across the company, including breakthroughs in technology and certification, momentum in global partnerships and the maturation of Archer Defense. We announced earlier today that we have signed definitive agreements to acquire control of Hawthorne Airport, a rare asset located less than 3 miles from LAX and the closest airport to Downtown L.A., The Forum, Intuit Dome and SoFi Stadium, a site of the 2028 Olympic opening ceremony. The team and I are actually holding today's call from Hawthorne this afternoon. Hawthorne is an 80-acre airport with an approximate 5,000-foot runway capable of supporting some of the largest aircraft used in private aviation, such as a Gulfstream G650 and benefits from 24/7 operating authority and has the capacity to handle significantly more movements than it does today. The site features hangar space, office and terminal space and significant expansion opportunities with the ability to more than double the existing hangar footprint. It is a profitable enterprise with a long-term master lease in place through 2055. Establishing Hawthorne as a key pillar of the Archer network in L.A. gives us a structural advantage, a generational opportunity to control a key airport and build the first purpose-built eVTOL hub at the center of a world-class aviation corridor. But Hawthorne is more than an airport. It's a landmark of American aerospace history. The city built this airfield in the 1920s to attract Jack Northrop to Hawthorne. Northrop went on to create some of the most innovative aircraft of the 20th century here, including the flying wing and the T-38 Talon pushing the boundaries of flight. During World War II, this airfield became a symbol of American innovation and resilience. Thousands of workers, including the women who inspired Rosie the Riveter, powered the nation's aerospace transformation. Hawthorne's motto at the time said it all, more jobs than people. The same tarmac that once launched Northrop's breakthroughs later became home to SpaceX's L.A. operations and served as a proving ground for the Boeing Company's first test tunnel. Archer plans to now carry that legacy forward, ushering in the next chapter of advanced aviation right here in the heart of Los Angeles. Today, Hawthorne Airport is already a profitable enterprise. For Archer, it will become even more, the blueprint for a new class of urban aviation hubs around the world. We envision Hawthorne as L.A.'s Grand Central Station for air taxis, the centerpiece of our Southern California network where passengers will one day seamlessly fly above L.A. congestion on predictable 5- to 15-minute routes between key destinations, including Hollywood, Downtown and Orange County. It will also serve as Archer's innovation testbed for next-generation aviation technologies, including AI-driven air traffic control and operations management, seamless passenger identification and security and more. Alongside this acquisition, we're announcing that we've raised $650 million of new equity capital, reinforcing Archer's sector-leading balance sheet with over $2 billion in liquidity. To make this vision real, we continue to focus on scaling manufacturing to support both certification and early commercial deployments. Our near-term goals remain to ramp production up to 50 aircraft per year across our roughly 700,000 square feet of manufacturing and test facilities across California and Georgia. As I discussed last quarter, we're assembling our initial fleet of Midnight aircraft. These aircraft will move directly into testing or early commercial use. We're now nearing completion of the piloted CTOL flight regime, validating operational performance across distance, speed, time and altitude. Our test pilots have expanded both speed and duration profiles to reflect real-world commercial missions. Recent exciting milestones include 55 miles of range, over 30 minutes of flight time and flying at altitudes up to 10,000 feet at speeds exceeding 150 miles per hour. The consistency between simulator and the real-world performance continues to validate our engineering approach and reinforces our readiness. Tom will share more shortly, but I'm proud to say that this quarter, Midnight took center stage at urban flight demonstrations around the world. At the California International Air Show, tens of thousands watched and barely heard Midnight fly. In the UAE, we initiated commercial deployment with our Launch Edition partner, Abu Dhabi Aviation, one of the region's leading operators. This quarter, we expanded our flight test program with our first international flight in the heart of Abu Dhabi against the backdrop of the Sheikh

Thanks, Adam. From day 1, our focus has been consistent, finding the most efficient path to making urban air mobility a reality. We have been disciplined in our engineering approach and deliberate in the decisions around aircraft design, manufacturing readiness, certification strategy and flight test operations. That approach continues to cement us as one of the leaders in this sector. Let's start with flight testing. Over the past few months, our Midnight program has consistently delivered strong results. We are now routinely flying longer, faster and higher as we expand the aircraft's operational envelope. Recent flights have exceeded 55 miles, more than 30 minutes of flight time, altitudes up to our 10,000-foot service ceiling and speeds in excess of 150 miles per hour. These missions are providing valuable certification data and importantly, they closely mirror the majority of mission profiles we expect in early urban deployment environments. This quarter, we were thrilled to fly as part of the California International Air Show at our home airport in Salinas, where tens of thousands of spectators saw Midnight fly. The consistent feedback we got at the event was how remarkably quiet our aircraft is. It really is a special experience to see the aircraft fly by at well over 100 miles per hour and barely be audible above the ambient noise. It was also a special moment for our team, many of which got to bring their families to see the aircraft fly. The exciting news is that we are nearing completion of Midnight's piloted CTOL test campaign and the consistency we are seeing across repeated mission profiles continues to solidify our confidence in our path to certifying Midnight, both in the UAE and the U.S. Our next flight test phase with Midnight will be piloted VTOL, including full transition flights with our type certification intent 4-blade aft propellers. Unlike the CTOL envelope that we are now close to completing testing on, the VTOL and transition flight regimes are not new for Midnight, as we have previously completed an extensive flight test campaign with Midnight without a pilot on board. As always, our focus remains the same: disciplined execution, safety and readiness for commercial operations. The momentum continues to build and the team continues to deliver. As Adam mentioned, we are continuing to build our initial fleet of piloted Midnight aircraft across our facilities in Silicon Valley and Georgia. The next piloted Midnight aircraft is just wrapping up manufacturing and will move into ground testing shortly and flight testing as soon as it's ready. This aircraft is equipped with the 4-blade aft propellers that are part of our type cert design and will be used for piloted VTOL and transition flight testing. We continue to build out the capabilities needed to support a rate of 50 aircraft per year across nearly 0.75 million square feet of our manufacturing and test facilities. Our golden manufacturing line in Silicon Valley remains the foundation of our manufacturing ramp. As a reminder, this is where our engineering and manufacturing teams refine build processes, tooling and quality controls to ensure repeatability and efficiency. The lessons and tools established on that line are feeding into our high-volume production ramp. Across all our locations, we remain focused on building a production system that is reliable, scalable and ready for certification. The progress we are making in parallel on manufacturing and flight testing gives us high confidence in our ability to transition Midnight from development into commercial service smoothly and with the discipline this industry requires. On the certification front, we have obviously all been impacted by the government shutdown and are hopeful that this will be resolved soon. On the positive side, part of the FAA has continued working our program despite the shutdown and we have continued with certification efforts in several areas, including continued [ soy ] audits as well as continued work with FAA policy team to close the remaining industry-wide policy topics related to flight test. Finally, I want to touch on our progress on the defense side. Over the past quarter, we've focused heavily on integrating the technologies, capabilities and teams we acquired from Overair and mission-critical composites. Bringing that talent and technology into our program is key to accelerating our development cycle. We now have in-house composite structures manufacturing capability, giving us expanded rapid prototyping capacity, which is key for the new aircraft we are developing. We also continued maturing our hybrid electric VTOL aircraft program. While the specifics remain confidential, our work here is centered on delivering a clean sheet next-generation aircraft designed to incorporate the best of Archer and Overair's technology, meeting the needs of operators who face demanding and complex missions. Momentum across the defense platform remains strong and we are encouraged by the deep engagement from allied countries worldwide. We look forward to sharing additional updates as and when we can. Also, this quarter, we completed our acquisition of Lilium's patent portfolio. This was one of the most significant technology portfolios in electric aviation, particularly in ducted fan propulsion, high-voltage systems and advanced flight controls. Integrating this IP strengthens our long-term leadership position and expands our design space for future hybrid and electric platforms. It also positions us well against emerging opportunities unlocked by the MOSAIC rule, which enables a more flexible path to field innovative aircraft across both light sport and regional mobility categories. We view this as a strategic advantage for both our defense road map and potential future commercial variants. And now I'll turn it over to Priya to talk about the financials for the quarter.

Thanks, Tom. With our team continuing to deliver significant advancements across the key priorities you and Adam have discussed, our core focus from a financial perspective is ensuring we are operating from a position of strength. The key to that is maintaining a strong balance sheet. We closed Q3 '25 with $1.64 billion in cash, cash equivalents and short-term investments and today, announced an additional equity raise of $650 million. As Adam and I have discussed previously, our goal is always to be opportunistic with our fundraising activity and that's exactly what occurred here. As we considered options to finance the Hawthorne transaction, we received substantial inbound interest that led us to do the offering announced today, which had a very strong outcome with the round being well oversubscribed. We view our ability to raise capital as a core strategic advantage that helps power our ability to seize on key opportunities. We often hear from government, commercial and other strategic partners that liquidity is a key driver to their decisions of who to partner with. They understand the capital-intensive nature of our industry and want to work with partners who will be around for decades to come. Some examples of this include LA28's decision to select Archer and us winning the Lilium IP bid process over our competitors. With our total liquidity now over $2 billion, we intend to continue to use this as a tool to win future strategic opportunities across the business. But it's not good enough just to have a strong balance sheet. We must remain focused on ensuring every capital allocation decision directly supports long-term value creation for our shareholders. As we've consistently emphasized, we take a very disciplined approach to how we invest that capital. Our Q3 spending reflects our continued investment in our key priority areas: aircraft and AI technology development, certification, manufacturing ramp and commercial operations infrastructure to support all our planned line of business in civil and defense, both domestically and abroad. Our continued emphasis on execution is what has led us to land our financial results within our guided range and this quarter was no different. Our net loss for Q3 '25 was $130 million. This was a $76 million reduction from Q2 '25, primarily due to the noncash impact of warrant revaluation. Our GAAP operating expenses for Q3 '25 were $175 million and stayed essentially flat quarter-over-quarter, as increased people-related costs were more than offset by the timing of material and supply-related spend. Our GAAP operating expenses for the quarter included approximately $53 million of noncash stock-based compensation-related expenses, which reflects the cost associated with stock issued to our employees, non-employees and vendors. Our adjusted EBITDA for Q3 was a loss of $116 million, landing within our guidance range of $110 million to $130 million. Our Q3 adjusted EBITDA loss represents an approximately $3 million decrease from the previous quarter due to the reasons we have discussed earlier. With regards to cash burn, our cash used in operations and in purchase of property, equipment and intangibles for Q3 '25 was $126 million, which was essentially flat quarter-over-quarter. For Q3, our cash used in purchase of property and equipment was $20 million, generally in line with the guidance I provided during our last call and represents a slight decrease of $4 million over the previous quarter, which included our strategic acquisitions of composite manufacturing assets and over our patent portfolio. Looking ahead for the upcoming quarter, we estimate our adjusted EBITDA loss to be between $110 million to $140 million. We expect our core capital investments to increase in Q4 as we continue to build aircraft and expand investments in our manufacturing capabilities. These estimates do not include the costs associated with the Lilium and Hawthorne acquisitions. As we announced today, we closed the Lilium acquisition for approximately $21 million earlier in Q4 and we expect the initial closing of the Hawthorne acquisition to occur by year-end, which will entail us funding the $126 million purchase price in cash. What's clear is that now is the time to ensure we solidify our position as a market leader across electric air taxis, the future of vertical lift for defense and cargo and the AI-based technologies that will be used for decades to come. This is how we can deliver enduring outsized value to shareholders. With that, I'll turn it back over to Adam for Q&A.

Great. Adam, the line is open.

Thank you, operator. We're going to open the call up to Q&A. First, we'll start with the analyst community and then we will move into the retail folks at the end. Operator?

[Operator Instructions] Our first question will come from the line of Edison Yu with Deutsche Bank.

I want to ask about the big news on the airport. What kind of advantages do you think you will gain by taking ownership of it? And does this signal kind of some intention on what you might do from a software standpoint on air traffic control on autonomy?

So this was a very unique opportunity. Airports don't really change hands very often, sometimes not at all. If you look back over the past 5 years, there are only a handful of assets that have traded in the entire U.S. So opportunities like this are, I think, very rare. Now you know our big strategy has been focused around Los Angeles, especially with the Olympics coming up. And so as we've been building out the infrastructure, Hawthorne was a real opportunity to not only just be a major hub, but also to be a point where we can go test, roll out, do all of our [indiscernible], all of our MRO at. And so our vision is to create this Grand Central like opportunity for the Hawthorne Airport. We looked at it as you can go out and buy a hangar. We would have had to pay somewhere between $50 million to $100 million to buy a large hangar. And so the opportunity to actually get control of the airport plus the FBO, plus all the different growth opportunities was something that we couldn't pass up. But I think most unique is the opportunity to actually go roll out our software in an airport that's in the middle of a large city. So the Hawthorne Airport operates in Class D airspace, not in the Class B airspace, where big LAX planes are operating. There is an FAA contracted tower here. And so it gives us a really unique opportunity to really roll this stuff out. It's more than just looking at it from a revenue or EBITDA perspective. It is structurally advantageous for us to have this right in the middle of L.A. It also happens to be less than 3 miles from both LAX and SoFi Stadium. It also happens to be located all in the different Elon Musk company territories like the Boeing Company. The Boring Company has tunnels that run underneath the airport. And so lots of interesting creative opportunity potential in the future.

Understood. Understood. And then I know you mentioned that it's already quite profitable. Any way to kind of mention the contribution financially from them going forward?

The revenue has the opportunity to be in the tens of millions and it is EBITDA positive. But we don't really think about it like that because there's some decisions that we have to think about. So one is do we sell hangars? Do we build new hangars? Do we lease new hangars? Or do we consume them ourselves? And so there's a bunch of decisions that have to get made in terms of how we will utilize the airport, but we look at it mostly from a strategic standpoint. I think if we wanted to, we could carve out the airport and make money, but that's certainly not the goal. The goal is really to take it as a strategic asset and use it to have a structural advantage in the industry.

Got you. And just on the raise, I know you're using some of it to -- for the deal, but it seems like the deal is fairly small in size. So you actually raised quite a bit more. Any insight as to, I guess, what that -- what the extra was for?

Yes. It was opportunistic. We weren't looking to go out there and raise capital. There was a very large reverse inquiry from very high-quality investors. So that was, I think, unique for this period of time. I'm guessing a lot of that came off the back of the beta IPO because there's a lot of interest in the industry and I view that as just a very positive signal. So I think that was one thing. The strategic asset was also a really unique thing that came up as well to go do that. So the viewpoint was we have been looking at both the civil and the defense side of the business. As the civil side of the business starts to approach getting close to market and the defense side of the business starting to ramp up, we thought it would be prudent to add a little bit of extra cushion to the balance sheet. And then finally, from an offense perspective, we have found that the capital has been a real weapon in terms of going out and being able to do things that we might not have been able to do. For example, the Lilium portfolio. We were actually the lowest bid when it came to the different bids that were out there, but there was a lot of confidence in our ability to close and we ended up winning that because there have been previously some issues that the bankruptcy group had been through before. Also going to customers like the big defense partners, when we show up with a large balance sheet, they take us a lot more seriously because the programs that we're looking at are so large, they look at us and say, if we're going to go get you guys involved in a many tens of billions of dollar sized program that's going to last for, they call them generational programs, you need to go deliver against that. And so it puts us in a position of strength to do that. So while this was opportunistic, I think we are done raising capital for a while for now.

Our next question comes from the line of Andres Sheppard with Cantor Fitzgerald.

Andres here. Congrats on the quarter. Adam, I was wondering if you could maybe help us flush out your latest vision for commercialization in the UAE and through your Launch Edition. Just wondering if you can maybe remind us timing or expectations there? Are you looking to sell aircraft in the region? Just a little more color on your vision there for commercialization.

So we kicked off our Launch Edition program in the UAE this summer and we delivered an aircraft and began test flights in Abu Dhabi and we did that in partnership with our partner out there, Abu Dhabi Aviation. And as a reminder, each of the Launch Edition programs carry a multiyear commercial value in the tens of millions of dollars to Archer. And so we've already started receiving initial cash payments in the 7-figure range tied to operational milestones. And then beginning in 2026, we expect to recognize payments as revenue under the accounting treatment for the program takes place. And then just this week, we saw the Director General of the UAE's National Aviation Regulator reaffirm publicly that they remain on track for certification as early as Q3 '26. So that would enable our partner, Abu Dhabi Aviation to begin commercial passenger service in the country once that takes place. But as a reminder, we sell aircraft. As we sell aircraft, we start to recognize revenue and collect cash. So we have the ability to do that really all over the world, as you've seen with our Launch Edition partners. So right now what we're doing is balancing the volume of aircraft we're building against testing in the U.S., the eIPP program and the Launch Edition customers. So there's certainly lots of opportunities to do all 3.

Got it. That's super helpful. I appreciate that color. And revenues next year, that's exciting. Maybe as a follow-up, I was wondering if you could -- either you or Tom can maybe expand a little bit further on the defense side and maybe on the hybrid propulsion. What kind of opportunities there are you able to share with us that you might be pursuing, whether it's with Anduril or other partners there? Just another maybe update on the defense side.

Sure. So we are deep in the process of product development with Anduril and we've been working closely with the customer on building for specific missions. What's become very clear as we've gone through this process is that you cannot just take a hybrid powertrain and put it onto an existing eVTOL platform. The defense industry is not interested in that as a product. There are specific missions that need to be filled. And so we're building a platform that is reusing as many of our systems, subsystems, manufacturing processes as possible. And if we're selected for that program, I think it will change the game for vertical lift warfare. And so when we have something to show, we will -- we'll show everybody. But if you look at the size of past rotorcraft programs, they are absolutely massive and they last for decades. So we continue to be very excited, engaged in that. We continue to be very positive that good opportunities will come. And so that's largely where the defense opportunity, we think, sits.

Our next question comes from the line of Savi Syth with Raymond James.

Adam, I wonder if you could talk a little bit more about the kind of the eIPP program. Just curious what the thinking or the strategy is behind it for the DOT and how you think it's going to work.

Sure. So there's been a lot of speculation about the eIPP and it really is still forming. But the purpose of the eIPP is not really about generating revenue. It's actually about introducing aircraft into urban environments and gaining the trust of the flying public, gaining the trust of municipalities and regulators. And so the program will roll out conservatively, simple point-to-point routes in good weather, VFR conditions. And the goal is really to prove the safety and capability of the aircraft. We all know the type certification process is sort of an all or nothing type process. And while I understand the purpose of that, I believe the way that autonomous cars or Waymos have been rolled out makes actually a lot of sense. You start in a small area, you gain the trust of the public and then you start to expand. And I think by having a process like this, it will release the certification pressure valve and it should accelerate the path towards certification and commercialization.

That's helpful. And if I can just follow up briefly on the -- I think in the 8-K release, it was kind of called out that $171 million for Hawthorne. It seems like the purchase price is $126 million. I'm kind of curious what the spend -- the near-term spend you see at Hawthorne and kind of what that incremental spend there is and just kind of how you think about spend over the next kind of year or 2?

Sure. So there is the core price, which is the $126 million for the airport, there are development rights and then there's the FBO and that adds up to the $171 million. There's decisions that we can make in terms of how much to spend, but there's not some like big giant number that we're going to go deploy into the -- that's expected for us to go deploy into the airport in the near term. And so we'll look at that in terms of the value that can be created, the operations that we need to scale L.A. and scale into the Olympics. But those are still decisions to be made, but I would not expect some giant dollar number. I also would not expect us to go try to replicate this all over the country or over the world. These opportunities don't even really exist. This is like an end of one asset. And so it is pretty unique from that standpoint.

Our next question comes from the line of Bill Peterson with JPMorgan.

This is Mahima on for Bill. I was hoping to follow up a little bit on certification. Would you be able to share your latest expectations around when you expect to begin TIA testing and when you also expect to be testing Midnight with FAA pilots on board for credit?

This is Tom. I'll answer that. So we're actually getting pretty close to starting our first TIA campaign with the FAA and that could happen as soon as the end of this year. Just to kind of level set everybody, as I said in the past, the TIA process, at least for us, will be broken into many phases on the order of, say, 10 different TIAs, each one targeting compliance for a very specific system or aspect of the aircraft. So the first one of those, again, we plan to start around the end of the year. And the way you could think about the evolution here is as we continue to deliver or finish manufacturing of these aircraft, each one will be built with systems and aspects that conform in order to support further TIA testing, ultimately building up to a final fully FAA-conformed aircraft doing kind of the final F&R function reliability testing for the aircraft. I think one thing that's important to know is that right now, as we said before, we still do have a couple of policy items open with the FAA. And so us or anybody in the industry can't do that final TIA for the purposes of flight performance until a couple of those items are resolved. And we're still optimistic that that will happen very shortly. Otherwise, progress is looking really good.

Awesome. And then as you kind of ramp up your manufacturing capacity here, I think you mentioned up to 50 aircrafts in the coming months. Do you think that that's sufficient to support all the demand that you see in the next year between the test aircraft, the eIPP defense and then some of your international Launch Edition programs?

This is Adam. The demand far exceeds what we can build. And so we're really in the phase where we kind of broke this out into chunks. We said we built that first chunk of, call it, single digit aircrafts and then we're looking at that next chunk, which is in the 50-aircraft range. And so we're looking at from the standpoint of making sure we can have enough aircraft to support the different opportunities we have coming, whether that's the Launch Edition programs or looking ahead and supporting the Olympics and really trying to think about where the near-term opportunities will be. But if we theoretically had hundreds of airplanes, I think we could deploy them, sell them, put them out there. But I also think we are learning how to build. And so there's different chunks that we're going through as we scale that up. And we're also, of course, finishing up and getting through the certification process in the U.S. and then, of course, internationally as well. So it's a balance amongst all of those, but I think it really starts with there's a high-level demand for the product and then it's us being able to deliver against that from a manufacturing and then ultimately certification.

Our next question comes from the line of Austin Moeller with Canaccord.

So I just wanted to ask about the Lilium asset acquisition. Is Lilium silicon-dominant anode battery or the ducted fan technology more important to you? And when might this be incorporated into one of your aircraft platforms?

So we've been following Lilium closely for several years and we have a lot of respect for the engineering ambition that Daniel and his team brought to the sector. And they built very impressive technology with world-class European talent and they invested $1.5 billion behind it. And so our consolidation of the innovation by winning that bid for us was, I think, actually quite positive and that there were a number of foundational eVTOL technologies around ducted fan, propeller systems, high-voltage systems and many others that we were able to accumulate patents on. So it adds around 300 patents -- patent assets to the Archer portfolio, bringing our portfolio to more than 1,000 patent assets globally. But much of the technology that was being developed there, we believe was still a little bit ahead of its time, but it holds meaningful potential as the industry matures. And so the depth of the ducted fan IP, we think, is quite compelling. We're laser-focused on Midnight, but that technology one day could support new architectures, including some of the smaller format or light sport concepts, as the regulatory pathways from MOSAIC unlocks innovation in those adjacent segments. So we view this as a very important long-term enabler and just another example of us consolidating the technology foundation of the industry.

Okay. And just on the purchase of the Hawthorne Airport, I think when we were in your office, we discussed the importance of real estate at airports for eVTOL. So are you planning to transfer any of the space at those airports either to FBOs or airline customers to be able to use? Or how are you thinking about using that valuable real estate?

So the airport is quite large. It's 80 acres. And so we have partners in the industry like Beta, who come and electrify airports. And there's groups out there that we partner with that I think could also find value in the airport. So there's lots of ways to think about it. One is we can build a centralized hub that everybody can use. And so it could be a way to help bring the industry together and create a main point of interest for us all to use to really help unlock a city like Los Angeles. And so I think that's one really attractive way to look at it. Another one is as the industry matures, it gives us a real central hub for all the maintenance, for all the [indiscernible] of aircraft in the middle of the city. So when you think about like launching operations, you don't really want to fly your aircraft in 30 minutes, 45 minutes from somewhere significantly outside the city. So this was just super unique from that standpoint that we could use that. But I think it's an opportunity to really help the industry propel forward in a complicated city. And then this other side of it is it gives us an incredible opportunity to go out and test out all the software, the AI capabilities that we've been building from air traffic management to all the other capabilities we mentioned. The industry is going to need to evolve to support the large advanced air mobility expectations. And so that's not just on manufacturing. That also has to come from the software side as well. And so we plan to use this airport as a testbed to deploy that, partnering with the regulators to really showcase a lot of these technologies.

Our next question comes from the line of Amit Dayal with H.C. Wainwright.

Congrats on all the progress. I apologize if you already discussed this, but any color on the burn rate for 2026?

Yes. Amit, this is Priya. So when we think about 2026, the biggest expense will continue to be our Midnight program. So next year, we'll be producing and deploying additional aircraft. As we've talked about earlier, we'll balance where we deploy these aircraft between UAE, eIPP, flight test and other opportunities. Some of those opportunities will be generating cash and they'll net these expenses we've talked about. But when we think about beyond this core program, we expect to invest in our defense and software development as well. So first, for the defense program, we do plan to leverage a large portion of the existing resources we have as well as the test infrastructure. But we do expect to invest incrementally to support the program, which again locks a lot of the value and big defense contracts that Adam has talked about. For software, we'll be, again, investing to build the product, which could generate revenues in the future. Timing of that is still to be determined and we'll talk about it closer to the time when we get there. And then, of course, finally, we talked about the Hawthorne acquisition today. We'll be integrating that into our business next year, which is, again, generating revenues and will be generating margins. So we'll be incorporating that into our financial results for next year. So again, hopefully, that gives you again a framework as and how we think about next year and we'll get into official guidance when we get to that point in time next quarter. So hopefully, that helps.

That's helpful. And then just a clarification on the number of aircrafts you may need to get through certification and commitments in UAE, et cetera. Like are we targeting around 10 aircrafts over the next 6 to 9 months?

Yes. So there's 6 aircraft in production now with parts on order for many more than that. But as Priya mentioned, we're sort of trying to judge or be opportunistic with where to use those aircrafts. So certainly, there's a planned portion of those at least that will be used for FAA certification testing. But others, we want to send to eIPP locations in order to support that testing as well as our activities in the UAE. So until all those things start to materialize, we have optionality for kind of how many to send to which location.

Understood. And just last question, Adam. This is an interesting acquisition of this airport, strategic asset for you guys. Do you think this sort of triggers a little bit of a land grab in terms of other sort of players or even direct participants trying to get involved in taking ownership of such assets, given they are limited in number and some of these could be in critical locations that could support expansion efforts in the long term? Like how should we think about some of these types of assets that are adjacent to the story that now kind of comes to the fore after this deal that you've undertaken?

I think that some of the competitors would be interested in doing that. I just don't think there are opportunities to do that. These assets just change hands so rarely and sometimes never because they're owned by municipalities. So they're very unique in nature when they come up. Again, we plan to use this asset as a hub for Los Angeles and to really build around it and we welcome the competitors to actually use it and to kind of unify more as an industry to together help operationalize an incredible city of Los Angeles, which can have a huge opportunity and there will be plenty of room for us all to help change the urban landscape here.

Our next question comes from the line of David

I guess, first, on the Launch Edition aircraft, I know you're -- there's not that much you can say, but is there -- are there any modifications that you anticipate to be able to use the currently flying Launch Edition aircraft as the conforming aircraft forecasting with [indiscernible]?

With regards to the certification in UAE, which was with the GCAA, as I've talked about in past calls, we've got a very detailed kind of step-by-step plan for delivering data to them to support the kind of phased integration of the aircraft and ultimately getting to passenger service in that country. A lot of that is leveraging testing we've already done or already doing with the FAA. And from there, it kind of tees into the discussion we had earlier around TIA. And so I would just go back to our framework there of each aircraft we're building is really targeted to generate specific data to provide to regulators, both in the UAE and the U.S. in order to show compliance. So again, that kind of merged with trying to, let's say, balance where we put our priorities as far as allocating aircrafts. We've got essentially like a lot of past, but they all lead to really exciting things for next year.

Very helpful. And then Tom, could you maybe give a little more color on any impact that the shutdown has had on the certification time line and the ability to progress towards the confirming aircraft in the U.S.?

Yes, absolutely. I touched on it briefly earlier on the call, but we are still engaging with the FAA despite the shutdown. So on our program, some resources continue to work, which is fantastic. Others are unfortunately not available. So hopefully, that situation gets resolved soon. But in several areas, we're sort of unconstrained just continuing to execute all the areas that have approved cert plans and we're just in execution mode.

Our next question comes from the line of Chris Pierce with Needham.

Apologies if this came up earlier, but with the acquisition of Hawthorne, given its much different geographic footprint versus Salinas, do you have kind of carte blanche to fly test flights in that area? Or do you need to talk to the regulators further, given the higher population density or just broadly kind of going into basically a city?

So you can break this down in a couple of different ways. So this will not be used as our core test flight facility. We will still be using Salinas as our core test flights facility. Once you get kind of certain hours maturity on the aircraft, you can start to fly and get permissions to fly in and around urban environments. eIPP, as an example, is a way to help accelerate some of these paths. And so the eIPP is expected to have -- the cities get announced in the first quarter of next year. It's expected there'll be 5 and then for flights to take place starting in the summer. And so we're hopeful that Hawthorne gets picked and that's one of the places that we can operate out of. It would make sense. It's right in the middle of all these operations that we're working on. But we'll see what happens. And nonetheless, we'll be still using the airport as building up the different assets here as we build into just commercializing and ultimately into the Olympics.

And did you feel like you needed to make this acquisition because maybe partners within the L.A. area weren't moving as fast as you like? Or is that kind of just some of the conjecture? Or I just kind of want to get a sense of what drove you to pull the trigger beyond just these assets don't come up for sale very often.

It's just very unique, Chris. It's not -- it's something like if we didn't do it now, it may never come up ever again or at least in my lifetime for us to go do something like that. And so need, I think the answer is no. Super opportunistic, I think the answer is definitely. And so in the aviation world, I think this is viewed as like a absolutely treasured asset right in the middle of the city. And this airport is 3 miles from LAX. So if you think about all the complexities that are at LAX, which we will not have to deal with. And so if you can connect this airport to LAX, it could end up being a massive terminal that is used to shuttle not just even hundreds of people, but potentially even thousands of people to the airport because you're out of a complex airspace where there's a jet landing at LAX every 90 seconds. So just the opportunities here are quite incredible and it was just something that we couldn't pass up. And so it was viewed as something that was sort of a once-in-a-company kind of opportunity.

That will conclude our analyst question-and-answer session. I would now like to pass the call back over to Adam.

Thanks. So I'm going to go -- I know we're running -- I'm still going to go through at least one of the retail questions that was just asked. And so the question was, with the recent deal with Korean Air, are you pursuing further eVTOL deals and agreements with other major Asian aviation conglomerates? So yes, I am personally spending a lot of time in the second half of this year abroad and I've been with customers, senior government leaders and particularly in the Middle East and in Asia and the reception has been very strong and incredibly validating. And so our model is certainly resonating. The progress that we're making in the UAE, both in flight testing and on the regulatory development has driven a lot of inbound interest across the region and especially at countries that are looking to fast track commercial service with proven partners. So we're seeing that same momentum in Asia and in Europe, as governments are looking to integrate urban air mobility into the national transportation strategies. So you've seen it in Korea and Japan, where we were selected as the air taxi partners for both of the national flag carriers. And I think there's going to be a lot more coming. A lot of these conversations will converge at the Dubai Air Show. And so we look forward to sharing a lot more when the time is right. So with that, I think I will wrap up the call. So I want to thank everybody for joining. This is a very meaningful time for our industry and we are building thoughtfully and steadily towards our vision. I want to thank the team, the partners for all their work and commitment and we look forward to sharing more progress next quarter. Thanks.