Beta Technologies Inc Class A Aktie

Hello, everyone. Thank you for joining us, and welcome to the BETA Technologies First Quarter 2026 Financial and Operating Results. [Operator Instructions] I will now hand the call over to Devon Rothman, Head of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining us for Beta Technologies First Quarter 2026 Earnings Call.

Joining me today are Kyle Clark, our Founder and Chief Executive Officer; and Herman Cueto, our Chief Financial Officer. Following their prepared remarks, we will open the call for Q&A, where Kristen Costello, our Head of Government and Regulatory Affairs, will also join us.

Earlier today, we issued a press release announcing our first quarter 2026 financial results as well as an investor presentation, which are both available on the Investor Relations section of our website. Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements. These statements are based on our current expectations and assumptions and involve risks and uncertainties that could cause actual results to differ materially. Please refer to our filings with the SEC for a discussion of these risks. We will also reference certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in our earnings materials.

With that, I'll turn the call over to Kyle.

Thanks, Devon, and good morning, everyone. Thanks for joining us. We're excited to share with you the progress we've made since our last earnings call. In two months, we progressed our commercial goals, adding $375 million to our aircraft backlog, advanced our long-term strategy and continue to fly with our customers in New Zealand and Norway, and we recently added Japan to the list. BETA is demonstrating real-world operations and training operators and maintainers. We've continued to expand our charging network with new state partnerships and customer orders, including a large expansion in Florida. We've advanced all of our certification programs.

Our production facilities are running well with FAA conforming engine and airframe builds directly supporting certification testing. We are on track to hit our year-end production capacity target. The most significant commercial update since we last spoke was BETA's selection for the eVTOL Integration Pilot Program, or eIPP for short. This program is led by the FAA and the U.S. Department of Transportation to accelerate the safe deployment of electric and vertical flight in the U.S. and will allow for early commercial operations of electric aircraft.

BETA was awarded 7 out of the 8 possible eIPP selections by the DOT and the FAA more than any other aircraft developer. This is an important achievement that reflects our leadership in the industry. Our eIPP selections outpaced all other OEMs, and we attribute this outperformance to the maturity and readiness of our aircraft to be deployed. Our selections span 26 states, and we plan to approach this effort in the same stepwise approach that we've taken to both our certification and our go-to-market strategies. That means beginning with cargo and medical operations and then transitioning to passenger transport. It also will mean that we're starting with CTOL and following with VTOL missions.

This strategy directly aligns with the safe integration of these new technologies into the national airspace and the objectives of our customers, who will be the primary operators of the BETA aircraft during the eIPP. These selections are both a testament to BETA's safe and reliable operations and an accelerator of our ability to show up in markets across the country. The awards will pull forward our commercialization efforts, advancing our commercial readiness by more than a year. In partnership with multiple states, we expect to deploy aircraft in communities nationwide while also expanding the use of BETA's charging network.

This requires some near-term investment in the business, which we believe will have a meaningful return in the long run. We made the decision to buy the materials and organize the labor to build the eIPP aircraft ahead of finalization of contracting through the OTA or Other Transactional Authority. Herman will touch on this a little bit more. Alongside of that, we're also investing in service and support structure that will enable the successful deployment of our aircraft across these 7 selections.

Our recognition in the eIPP is the result of years of technical progress and the operational readiness we've built across aircraft, infrastructure and training. In addition to the eIPP, we secured an aircraft order from Surf Air Mobility, and we continued our work alongside Loganair and the Royal Mail in Scotland in coordination with the U.K. CAA. In Japan, we flew with Sojas and Yamato. Finally, in partnership with Air New Zealand, we wrapped up a multi-month demonstration.

I now want to move to our long-term product strategy by highlighting the work we've accomplished with some of our partners in recent months as well as the progress we're making in defense. Since our last call, we entered into a contract for a new program with General Dynamics. This was after the successful completion of Phase 1 in support of DARPA on a program focused on developing advanced propulsion technology for undersea vehicles.

Our MV250 program, which we shared on the last call, was accelerated by 6 months due to growing demand signals for unmanned attritable aircraft continues to advance. The key element of this autonomous vehicle aircraft is the hybrid propulsion systems we're developing with GE Aerospace as a part of our strategic partnership and joint technology development program. Together, we recently completed our preliminary design review for the hybrid turbo generator, which further reinforced the concept and demonstrated how the combination of our technical expertise accelerates the program.

The January 2026 executive order, prioritizing the war fighter in defense contracting is an urgent directive to defense primes to identify and engage with advanced agile American companies with proven ability like BETA. The demand signal is clear. The military needs low-cost, flexible unmanned assets that can be produced and scaled rapidly. The MV250 is purpose-built for that mission because all of our aircraft were designed from the beginning with acute self-awareness and fly-by-wire systems that can natively receive control inputs from a computer. Nothing needs to be redesigned or fundamentally altered to operate autonomously. That's a key differentiator.

Combined with our partnership and advancement with GE Aerospace and the hybrid propulsion system and military funded development of autonomy and hybridization technologies through DEVCOM, we continue to believe we are well positioned to meet the nation's defense needs. Now I'd like to give you an update on our key performance indicators, which represent the measurement framework we established to hold ourselves accountable in a consistent and transparent way. This framework lets our stakeholders know how we're tracking against what we said we would do.

In the first quarter, measurable progress has been made across every dimension of our enterprise. Starting with the backlog. On our fourth quarter call, we shared the target of reaching a $4 billion commercial aircraft backlog by year-end 2026, up from a $3.5 billion backlog at the end of last year. This backlog consisted of 891 aircraft in firm and option orders backed by financial commitments. Since then, we've announced a significant order from Surf Air Mobility, which helped grow our total commercial aircraft backlog to $3.9 billion and 991 aircraft.

We are confident that Surf Air's operations in Hawaii and in California are a natural fit for ALIA. They have an existing network and high cadence routes where electric aircraft can be deployed efficiently and at a low cost. This partnership also expands our MRO footprint, which strengthens the long-term economics for both companies. Next, I want to highlight nautical miles flown. And through May 10, we have now crossed over 139,000 nautical miles with a full year goal of 250,000. It's important to note that every one of those miles is intentional. It's flown with purpose and with a perfect safety record.

Often, we're flying with current or prospective customers or as a part of our flight test programs. These flights generate meaningful data that we're delivering to regulators as the fleet grows, as eIPP operations come online and as more customer deployments ramp through the year, you're going to see even more miles.

Turning to our charging network, where we're also the leader in our industry. We've added 16 charging sites since our last call, bringing our total to 123. Since the beginning, we followed a strategy of investing in BETA-funded chargers between customer-funded sites, and this growth has enabled the early deployment of electric aircraft. The development of every site goes through a process, which includes site selection, permitting, installation and commissioning. This process has become an area of expertise for BETA such that other OEMs come to us to identify priority charging locations for their own proposed missions, which only reinforces the value of what we've built.

Additionally, our participation in eIPP should accelerate the growth of our charging network. Last month, we added the Florida Department of Transportation to our list of charging customers. They signed a contract with BETA for 34 chargers plus thermal management systems to enable eIPP operations in their state. This is real network growth and infrastructure revenue being pulled forward by the program that's demonstrating to governments at every level that electric aviation needs charging infrastructure today, something that may sound familiar when you look at BETA's early entrants into this space.

We see more of these opportunities with states developing, and I expect this will be a growing theme in future calls. And now let's discuss MAX's demonstrated production rate. We are focused on building manufacturing capability and inventory of long-lead materials as we prepare our production areas for a higher rate than our current rate of half an aircraft per month. Right now, the highest value work we can do on the production side is securing materials and staging these lines so that as we ramp, we can do it efficiently and without disruption. This is a great example of our deliberate stepwise approach in action.

Finally, we continue to make progress on our three certification programs. The 11 conforming electric engines we spoke about last call have proven instrumental in enabling multiple certification test activities to run in parallel. Four credit lightning tests were completed and another key icing and ingestion test was completed, and this is being presented to the FAA. We've completed requirements-based software testing on all 2,100 engine software requirements, and we are now just positioning for an end of the month target of 100% completion of this major software milestone. This progress may sound routine, but it represents a tremendous amount of trailbreaking engineering work.

Each test requires engineering innovation and detailed technical negotiations with the FAA to figure out how to test an electric motor against requirements fundamentally developed for combustion engines, an entirely different technology. One of the reasons we chose to certify the electric engine first is that this new technology has the highest technical risk and the highest burden of new rule-making and trailbreaking work with the regulators. We are exposing and resolving technical and regulatory matters today, well ahead of our aircraft type certification.

The H500A is the foundational technology from which future electric engine and hybrid variants will be derived and is a pathfinder to establishing the regulatory pathway to certify electric engines, a milestone that no one has ever hit with the FAA. As a first mover, we've had to take the regulations originally written for conventional propulsion systems and work with the FAA to address the areas that this advanced technology does not cleanly fit within. What this provides us with is the ability to be at the table as the path is being developed and have our voice heard.

Since we first spoke with you, we've always said we value transparency. We have identified some areas that we believe will require more time than we originally expected to complete negotiations with the FAA on the test procedures. Specifically, we expect endurance and containment testing to extend past our original target of completing all certification activities and closing the type certification in the first half of this year. We also expect negotiations with the FAA on the compliance approach for continued rotation to extend past June.

Rather than providing a new date today, we want to advance our conversations with the FAA to understand how our certification schedule will be impacted, but we are confident that we will arrive at a mutually beneficial resolution as we have in the past. When we started the certification program three years ago, the rules didn't exist. And as recently as two months ago, we were still attempting to agree on what containment meant in an electric motor versus a turbine blade. That is clear now. We know how to work through these types of issues. We're down to one issue around continued rotation. It stems from the fact we simply are having a hard time consistently creating the failure that we have to contain.

We've tried all kinds of induced failures, but we simply can't reasonably induce the condition that we are being asked to create. This is likely a policy interpretation issue. I want to emphasize that the H500A is performing well in all the testing so far. It is normal in a Pathfinder project to learn things along the way that require adjustment and replanning, and we are trying to be transparent and proactive in making these adjustments. Importantly, we don't expect any of these schedule changes to impact our market entry strategy, which includes the type certification of the CX300 aircraft or the launch of the aircraft into the eIPP program.

We've also made measurable progress in our CTOL program. We've agreed with the FAA on all means of compliance and are in the final stage of updating our documentation to reflect these agreements. We are making excellent progress in the compliance planning phase, having submitted 17 of the 19 certification plans, 8 of which the FAA has already accepted. In March, we completed the build of the first aircraft that will perform company flight testing, and we are in the process of building the airframes that we use for aircraft structural test.

Both of these builds are key gateways to entering type inspection authorization flight testing. We have four more flight test vehicles in various stages of the build process that will be used to complete the remainder of the company and TIA flight testing. We have and continue to host the FAA flight test and human factors team for familiarization and TIA planning, which is also progressing our readiness for TIA. Our methodical step-wise approach allows our VTOL program to benefit from our CTOL program. This transferability is enabled by the deep commonality in our family of aircraft, enabling streamlined manufacturing processes and operational efficiency in addition to certification progression.

Every milestone achieved in our CTOL aircraft directly flows through to the VTOL. Our engineering flight test program for the VTOL continues in parallel, including recent breakthroughs in the blade efficiency, which our regular testing has demonstrated reduced noise and has reduced energy required for transition. As we close out the requirements definition phase for CX300, A250 will apply the FAA accepted means of compliance from the CX300 on all of the common systems. The work we are doing is setting a course for this industry. And while it's thrilling, it requires persistence.

Our focus on simplifying even the most complex matters helps us drive our commitment to safety and positions us to exceed expectations as we execute to the highest standards. Herman, over to you.

Thank you, Kyle, and good morning, everyone. When we last spoke, I described one of the most constructive policy and regulatory environments our sector has seen in decades. What was a policy environment two months ago is now an operational one. The eIPP selections have been announced. And as Kyle mentioned, BETA was included in 7 of the 8 awards more than any other OEM. BETA was represented in all awards that will include piloted aircraft operations across 26 states. State governments are not waiting.

Recently, the Florida Department of Transportation facilitated the purchase of 17 BETA charge cubes, 17 thermal management systems and 17 of our smaller chargers. Infrastructure revenue is being pulled forward by this program already, and we're still in the early stages. To reiterate Kyle's point, our ability to move forward quickly is the result of years of deliberate technical progress, operational readiness and strategic investments. The customer trust we've built comes only from actual flying on four continents in real-world conditions before anyone required us to.

We are also benefiting from a macroeconomic and policy backdrop that continues to reinforce our strategy. The administration's emphasis on domestic manufacturing and next-generation defense technologies is creating opportunities that align directly with our aircraft, propulsion systems and infrastructure network. With the current tariff landscape, BETA enjoys a significant relative advantage compared to the uncertainties other companies face as a result of their globally distributed supply chains. BETA's position is fundamentally different.

We manufacture in Burlington, Vermont. Our supply chain is predominantly domestic. What others are managing as a risk, we experience as a tailwind. We are hearing from both commercial and defense customers that a smooth, reliable, domestic supply source is becoming a requirement, not just a preference. For a company that has always built in America with American labor, this is a structural advantage that is now showing up in customer conversations.

Additionally, last month, we completed the tuck-in acquisition of an AI company specializing in software validation for highly regulated applications, which we have already seen a benefit from and which I will share more about in just a bit.

Looking at our results for the quarter. Q1 revenue was $10.1 million, which represented 6% growth year-over-year, exceeding the top end of the $7 million to $10 million Q1 guidance range we provided. This organic revenue reflects continued progress across our merchant supply business, including propulsion system deliveries and the associated engineering services as well as infrastructure and charge system orders. We are still early, but the revenue we are generating today is not incidental. Rather, it is the front end of relationships and programs that we expect to scale.

Going forward, we intend to continue executing against those commitments, confident in the strategy, structure and team we have in place to do so. Our operating expenses in the quarter were $138.8 million, including R&D expenses of $91.7 million, reflecting investments in certification, engineering for key programs like the MV250 and VTOL, along with investments that support production readiness. General and administrative expense for the quarter was $47.1 million.

Regarding R&D costs associated with certification, I want to clarify how we define strategic costing. For example, every dollar invested in CTOL certification is not a single-use expenditure. The compliance plans, test methodologies, FAA engagement frameworks and data packages transfer directly to our VTOL certification program. When we calculate the true cost of CTOL certification, it simultaneously retires the risk and reduces the cost on VTOL. That is what strategic costing means. It's not about spending less, but about ensuring that every dollar we spend does more.

Adjusted EBITDA for Q1 was negative $97.2 million, ahead of our expectations. We ended Q1 with $1.59 billion in cash and short-term investments. CapEx in the quarter was $24.2 million. CapEx is expected to accelerate through the balance of the year as we execute on our vertical integration pull forward and infrastructure build-out.

Our balance sheet remains a source of high liquidity, complemented by a trade environment that is rewarding domestic manufacturing and supply chain certainty.

Turning to our full year outlook. Our 2026 revenue guidance remains unchanged at $39 million to $43 million. We continue to expect revenue to be back half weighted and Q1's performance gives us confidence in our trajectory. On adjusted EBITDA, I want to be clear on one change to our guidance. When we spoke in March, our adjusted EBITDA guidance of negative $305 million to negative $395 million did not include any eIPP-related investment.

At the time, the award selections had not yet been announced, and we could not size that investment with confidence. Although we are now still in active OTA negotiations, we have made the decision to invest in both the incremental labor and material required to build eIPP aircraft this year and support operations in the states we were selected in. As a result, we are updating our full year 2026 adjusted EBITDA guidance to incorporate the eIPP investment.

Our updated full year adjusted EBITDA guidance is now negative $355 million to negative $445 million, reflecting the incremental eIPP investment of approximately $50 million at the midpoint of the guidance we have provided. As those agreements are finalized, we may further narrow that range. Pulling the eIPP aircraft in and placing them on the heels of conforming aircraft matures the supply chain sooner, which allows us to drive to higher volumes and to provide continuity to our supply chain as we scale.

The eIPP is a structured pathway to revenue across three streams: charging infrastructure, training and maintenance and aircraft monetization. To enable this, we are investing with discipline but also to win. We are also updating our capital expenditure outlook from the prior range of $175 million to $225 million to a new range of $150 million to $200 million. The change primarily reflects updated timing expectations for long lead tooling and equipment receipts as well as timing of facilities investments.

Efficiency gains in software validation and data verification driven by the tuck-in AI acquisition I mentioned earlier are anticipated and have resulted in our forecasted cost of labor and associated facilities investments to decrease. We expect these savings to repeat across other areas of the business as well. To help with modeling, in Q2, we expect revenue to be in a range of $8 million to $11 million, reflecting the ramp of component deliveries and continued program milestones. Adjusted EBITDA for the quarter is expected to be in the range of negative $100 million to negative $120 million, inclusive of eIPP investments.

Thank you. With that, let me turn it back to the operator to open the call for questions.

[Operator Instructions] Your first question comes from the line of Kristine Liwag from Morgan Stanley.

Kyle, thank you for your transparency on the H500A engine certification time line. On the endurance and containment testing that you called out in your prepared remarks, can you provide more color on what the issue is? What's technical versus administrative and how you think this could be resolved?

Yes, for sure. So on containment specifically, the legacy rule comes from the blade disk route at -- on turbines separating and releasing a blade. But the physics of an electric motor rotor are completely different where you have the periphery of the rotor being the magnets and there are, in our case, titanium bands and tension. So the amount of energy of a 20,000-plus RPM turbine blade that is connected at the root versus some magnets that are turning at 1/10 the speed in omega square matters here, it then becomes an energy containment question that we had to answer with the FAA, which what does containment of "a rotor burst mean."

And that's one of the examples where it was really hard to work through these things, but we ended up in in-person meetings with the FAA. We got to common agreement and understanding and that risk is largely retired. We now have to go execute against that, but it took longer than expected to get there. We aren't yet there on something called continued rotation, where the FAA requires that after an engine is shut down, the engine continues to rotate without any hazard effects on the aircraft. And one of those effects, for example, is fire. And we're having a really hard time creating a fire to show that we can contain the fire.

So once the engine is shut down, it continues to windmill at the prop, we've compromised the coils mechanically with nails, with chemicals, trying to create a situation to create this fire, and it's extremely hard to create consistent heat in this test. So this comes down to a policy interpretation issue of how the FAA is applying kind of a rule written for legacy turbine certification programs to an electric motor where you don't have -- in a PC-6, you have 2.3 gallons of oil sitting in there. That's all flamable. You just don't have that in an electric motor.

And so we are confident we have a safe and reliable design. And this is a matter of getting to agreement with the FAA on this. And I appreciate you recognizing the transparency because this is one of those things where we don't have a fundamental technical issue. We haven't had test failures. But what we have is we have to come up with something that allows the specialist at the FAA to apply the rule the way that they're interpreting it against our motor such that we can mutually find compliance with the system.

So that just takes time back and forth, a ton of data. We're running a lot, a lot of different tests to help validate the argument. But the fundamental truth is that an electric motor doesn't have fuel, it doesn't have oil. It's much harder to catch on fire. And we have to catch it on fire then show that containment of no uncontrolled fire, no hazardous effects to the airplane. So that's, I guess, a little more detail on that. Ingestion was a different one where our motor is at the back of the airplane. It has 3% of the air coming through it as compared to a turbine. Just the frontal area exposure of the engine to icing conditions is different. But we elected to pretend as if the engine is right on the front of the airplane.

We sent it over to Europe. Did all the ingestion and testing to validate the icing analysis that we've done internally. And that's another one that we've largely retired because we completed those tests successfully after we felt like we were at an impasse, but a lot of good negotiations. And that's one where our friends at GE, who are an ODA stepped in, and they gave us a ton of support in working through the technical nuances of icing and ingestion on an electric motor.

And I'll take that opportunity to remind everybody that we are building an all-weather IFR airplane. That lightning test, really important for that, icing ingestion, really important to that. So we know how to get through these issues. We have some left, mostly the continued rotation, which is the no hazard effects after a fire.

I guess it's very encouraging to hear that it's hard to start to fire an electric motor. It seems like a good problem to have. And as a follow-up, you touched on this with your GE partnership. Can you expand more about what that partnership is now? And how are you working together? And any more details you could provide?

Yes. It's going to be harder for me to find how we're not working together because it feels to me like this partnership, we've done more in the 6 months that we've been formally working together than I would say any engagement that I could ever imagine. It started with a single program, a joint technology development agreement on the publicly available turbo generator. We moved on to a larger program, and then we have a third program that we've engaged. But the undertone of the whole engagement has been very, very high levels of mutual support between BETA to GE and for us, very importantly, GE to BETA.

And they're bringing their full ODA to bear to review all of our compliance planning, our test plans and all the things that we negotiate with the FAA. And we've learned a ton. There's a general recognition by GE that we have very, very high levels of safety and technology, but sometimes it's the sound that makes the music in the way in which we present these plans and procedures. So it's really been a great relationship with GE. And of course, we're getting introduced to things that I never anticipated because of the relationships at the highest level of GE.

On the other side, they recognize that we have a particular operating philosophy. In the case of the motor, for example, we elected to take the hardest nut off the wheel first. If you can't get that one off, you don't get the wheel off the car. And they appreciate this because they are learning a ton from the groundbreaking kind of trailbreaking exercises we're doing with the FAA. And that bidirectional trade of kind of intellectual institutional knowledge is valuable to both of us. And that's how that type of resonance continues. So all in, I don't know how to say enough about the goodness of that relationship and the people there.

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

Kyle, congrats on all the great progress. I wanted to maybe touch on eIPP. So BETA obviously selected for 7 out of the 8 projects, highest in the industry thus far. Just curious how you're thinking about each of those projects starting up, whether one at a time, all at the same time? Kind of how do you anticipate, I guess, ramping up through those projects?

Yes. So I mean, I think one of the important differentiators is that we are ramping into real-world operations as opposed to demonstration. So how we're ramping into those projects is we are recalling our fleet, our international fleet of airplanes. We're immediately applying them to the near-term applications. And as Herman outlined, we have -- we have ramped our building of the aircraft, first with our supply chain, then with our tooling and our labor and now with the construction of the aircraft. And as far as the operations go, Kristen, do you want to talk a little bit about that?

Yes, that's a great point. The -- you did ask the question, are we thinking of launching these all at the same time? The answer is yes. I think that the intent is once the OTAs are signed, we are uniquely positioned to put these out into the market today. We are ready to meet the call from a fleet readiness perspective and operational readiness perspective. So we're really excited to partner with our operators and get these out.

Andres, it's Herman. And maybe just a little color that I could share. I think one of the things that Kristen has really been focused on is what we're describing internally as a frictionless customer experience. And what we mean by that is that the whole ecosystem is working together. So not only do we have a great aircraft, but we have great charging that goes along with it, great maintenance that goes along with it, great training that goes along with it. And we're flying every day with customers like Bristow and we're learning.

And it's giving us this opportunity to, as Kyle said, step away from demonstrations and really get into operational support. So when we talk about repositioning aircraft, we're ready to go. As soon as the OTAs are negotiated, we will be ready to go immediately. And some of the costs that you're seeing as we took the guide up is really to support things like repositioning those aircraft and getting them ready to do missions immediately when everything is negotiated and we're ready to go.

Excellent. That's very reassuring and very great to hear. Maybe as a quick follow-up, maybe a quick 2-part question. First one being, I think one area that maybe we aren't talking a lot about is the charging opportunity for the eIPP program since BETA will be providing that. So maybe help us understand or maybe help us quantify kind of how you're thinking about the charging opportunity specifically for the eIPP. And then lastly, just remind us where you are in the -- or what are the next milestones for the piloted VTOL flight test program?

Sure. I'm going to hit the top of the waves on the charging. Back when the eIPP was clarified in September, our team went and proactively started securing permits, both at the airports, the local jurisdictional level and the FAA and interconnection with the local utilities. It takes time to work through those interconnection agreements and of course, the FAA permitting. Those are now turning into prebuild and engineering. And by the time the eIPP stuff is launched, we will have those chargers in the ground.

So from a clarity on strategy perspective, eIPP has been absolutely wonderful. And then you see places like Florida and another large state is following in quick succession is these active procurements of charging networks within their state at state-owned airports, municipal airports, and connecting these things together for not just BETA to use, but for Archer and Joby and others to use specifically in Florida, where there also, I believe, on the eIPP selection.

And this isn't something that you just can say and immediately do. We had to become experts in the deployment of infrastructure in order to do this. And we have a team that's put in a ton of different grid tied power electronics for a variety of different applications, and they're very good at doing this efficiently and cost efficiently. And then your other question, and then maybe Herman or others can go back to the charging is the VTOL, we don't talk about it a lot, but we are testing every day of the VTOL.

I mentioned in the prepared remarks, and this is really an important takeaway, we had a 6% reduction in power required for the aircraft, and that was a function of some really advanced blade design that we did for our vertical takeoff and landing aircraft. And that, of course, resulted in lower noise and lower energy of transition. And back to the four principles, it was carry a lot of energy, make your airplane slippery, build it light, but most importantly, convert that precious energy in the battery into propulsion efficiently.

And that's one of our expertise here. So we're testing regularly on it. I've flown the aircraft. It is smooth. It's beautiful. It is really a nice transitioning aircraft. And I don't want to go out making claims, but we've flown now 3 different designs of VTOL aircraft. The latter 2 through transition in both directions with all azimuth wins with multiple different angles of attack, multiple different aggressive stopping and starting profiles.

And this is something that like it just takes time to execute on the campaign and we're doing it. And if you want to chalk up the milestone of doing full piloted bidirectional transitions, you can put us down for 4 across multiple different types of aircraft.

Andres, it's Herman. Just one point I want to make on the charging opportunity that we described. So we didn't take the revenue guide up. As Kyle pointed to, when you go and put these things in the ground, there's permitting, there's contracting, there's a whole bunch of coordination that has to go on with the airports and the FAA. So we have to go and do that work before we could see the timing of when we'll actually recognize the revenue. So stay tuned on that. I'm sure that's a natural question that you may have been thinking about. Kristen, I don't know...

Yes. I just wanted to say on that note because we do talk a lot about the installation process and what goes into it on the FAA side. And we've been working hand-in-hand with them since our first installation in 2020. And it's really a testament to the strong working relationship that we have with the agency and the proactive approach that BETA takes. We recently actually hosted an FAA webinar where the team educated about 300 people from the FAA about our infrastructure and just a way to reduce the friction on those future proposals. So we are being very proactive and looking at that deployment schedule now.

Your next question comes from the line of Ron Epstein with Bank of America.

Maybe Kyle, I'll start off with a question for you, following up on Kristine's question, and maybe, Kristen too. When you're working with the FAA on a set of rules that was made for a fundamentally different machine, culturally, how do you navigate that, right? Like I mean, in some sense, they're asking you to light a rock on fire, your rock doesn't burn. It almost seems noncentricle. So I think culturally, how do you navigate that so you can get to the place where you want to be?

Yes. It's a great question. I mean without getting deep into the strategy, Ron, I can tell you that we spent a lot of time with the frontline specialists, and they kind of put their hands up and say, "Hey, look, this is the policy we have to work with. We get it. We get that you have a safe and reliable motor, but this is the policy that we have to work with". And then, of course, at the upper levels of the FAA, they are guided by the executive order, the intent of the President and what we're trying to do as a nation with advanced air mobility.

And it's not ever to compromise safety, but there needs to be policy that is attainable. So at both ends of the FAA, we have champions that believe in what we're doing, understand it. And really, the strategy comes down to making sure the folks that are then asked to provide clarity to the frontline inspectors are looking at this holistically and understanding the technology in the context of the rules. So just like we did a subset of us, we went down to Washington when we got into a similar situation with Lightning, and we met with everybody at all levels in a true partnership way, and we were able to get that resolved.

And of course, Lightning manifests itself differently in an electric airplane with a giant transorb called a battery in a fly-by-wire aircraft that has secondary effects on all of the flight computers than it does in a fuel-powered aircraft where the risks are very different. So we had to get to a common understanding and move forward. So really, it takes time. It takes partnerships. It takes mutual respect, but most importantly, it takes a deep technical understanding of the product that we're certifying. And you're absolutely right. We are struggling to make that equivalency to a turbine engine. But I believe we're going to get there in a pretty efficient way.

We have the attention of the FAA. They've committed the resources. And the strategy is a ton of data, really good relationships and partnerships and a forcing of the deep understanding of the fundamental physics of the problem we're solving.

Got it. And then you made some comments about the VTOL aircraft. So that 6% energy you save doing vertical, does that just convert right to more range in forward flight?

Yes, it does. And it's obviously nonlinear because the amount of power that you're using during vertical flight, which then the integration becomes the energy we've used across that time of transition is significantly higher. So if we reduce the transition energy by 6%, for example, or the hover power in this case for 6%, which roughly equates to that transition energy, you get more than that in return because you can add thrust and you can get through it quicker, which means you spend significantly less time in transition.

It's 40, 50 seconds in transition down to 30 to 40 seconds in transition. And that's a big difference in the transition energy and the consumption and your erosion of your thermal margin during that period of flight. But the thing that I've observed the most, both in the plane and out of the plane, is that the noise goes way down. And I want to clarify one thing I said. When I said shock us up to 4 to the last question, I didn't mean 4 transition. I meant 4 different types of vehicles doing those transitions and hundreds and hundreds of flight tests.

Yes. And then have you said what you expect the range of VTOL to be?

We have with customers, and typically, we talk about a planning range that's sub-100 miles. And that's because you need to have reserves and you need to account for weather conditions. But again, that's a starting point. We already have batteries in hand that are 55% higher energy density than the ones we're flying with now. But we go through all of those long-term characterization, testing and safety testing before we incorporate them in the aircraft.

So it's really like the first aircraft is not our best aircraft, and that's a totally new paradigm for aerospace. The other thing is just IFR versus VFR reserves. Our customers for medical, cargo, logistics operations, we're always talking in IFR planned flight ranges.

Got it. Got it. Got it. And maybe one quick question for Herman. In the quarter, the service revenue outpaced product. Can you give us a little color on that?

Yes. So we had a program with a partner that we recognized this month. And if you go back and look, it was similar to last year as well. We've seen that. So right now, our service revenue is higher. We expect that to transition to product revenue when we get into the future. Programs like GD as an example.

Your next question comes from the line of Billy Healey with Jefferies.

I am on for Sheila today. Can you just speak about the potential revenue and margin profile of the defense business with the GE contract and how the GE partnership on MV-250 could scale over time?

Yes. I think when you think about military, you should model that business with a higher gross profit margin because we will be investing in R&D to get that off the ground. We will have the ability to recoup some of the margin later in the future. So the margins with military will tend to be a little bit higher than the commercial aircraft because of that R&D mix.

Great. And then just following up on R&D, stepping up to $92 million in the quarter. How much of this is driven by certifications versus eIPP versus the turbo generator with GE? And what should we expect going forward?

Yes. So inside of the quarter, less about eIPP and more about certification, the programs like MV-250 investing behind that, the VTOL. And then, of course, we're spending a lot of time and energy right now with the motor certification and also the CTOL certification.

I think the other from a research development and kind of product development strategy perspective, each of these programs like the General Dynamics, the GE program, the [ Embraer ] program that are adding to our service revenue. It's kind of a funny thing to say service in this case because it's -- in many cases, somebody is paying us to integrate our products into their vehicles or products. So what's really important to note is that, that growing high-margin revenue has a long-term tail on it that's meaningful.

And as I mentioned in our prepared remarks, the program we did in Phase 1 last year, growing into a Phase II on that and other programs is exactly the trajectory that we want to be on. And I think on our last earnings call, I identified that each of those programs ironically is about one order of magnitude greater. It goes from about $3 million to $30 million and potential $300 million on a per contract basis for these programs.

And really, as you would expect, the early days "service revenue" of these programs is we see the technology that you have BETA, make it work in our vehicle, and it grows to low rate initial production and then, of course, production.

Your next question comes from the line of John Godyn with Citigroup.

Kyle, I wanted to revisit the charging network sort of bigger picture because you described this is a growing theme in future calls, and I think a lot of people can kind of appreciate that and agree with it. As you -- as the charging network continues to grow and take shape, can you just sort of remind us and maybe revisit the economics of the business at large? There's a big chunk of it that was customer funded initially. There are other parts that you're funding. Maybe in the future, there are different funding sources.

And then there was this toll road dynamic that my recollection is we didn't quite have a very granular sense of how the economics work. So maybe this is a good opportunity just to kind of revisit the economics of it, how you plan on the economics kind of evolving as the scale takes shape.

Yes. I mean, starting at the highest level, the charging network is extremely strategically important to the advancement of Vance Air Mobility, period for us and everybody else. We don't have a business unless we have a charging network that's fit for our customers. Some people can play that with vertiports, but the airplanes still have to get there. They need to be serviced, maintained, people need to train on them. And from our perspective, the right entry point is cargo Medical and logistics using regional airports and hospitals to serve this. That's why you see the initial deployment of our charging network.

When we say customer funded, it's really important to understand the nuance of that. In many cases, in fact, in most cases, to my accounting, that customer-funded means the customer pays a priority access fee that's roughly equivalent to the cost of our deployment in order to get access to that with proper reservations, let's say, 24 hours in advance to use those chargers. But we still own them, and we get to sell the capacity adjacent to the nonreserved -- or the reserve times in the nonreserved times of the network.

So revenue model number one is sell a priority access fee. Obviously, in medical, that becomes really important. The other one is sell the chargers themselves. And we've done that, specifically a lot of the small chargers where people are going to have them in their own facilities and not at public use airports. And then, of course, there are other customers like DOT backing from the state of Florida, the Department of Transportation import, I should say, more specifically or accurately, backing the procurement of these chargers because they want to enable electric aviation and Vance Air Mobility in their state.

So those are all revenue streams. There is a trickling of revenue coming in. I think I reported we had maybe 30,000 charging sessions last year on our chargers that just doesn't really, I'd say, meaningfully hit the books right now. But as this grows, the asset value of having these chargers that allows us to kind of turn the knob on the profit strategy, it's all a part of BETA's network. No matter who buys them, one of the things that we demand or we require in that purchase is that it remains a part of the network. And that is extremely valuable to our aircraft customers.

John, it's Herman. Let me jump in for a minute. BETA has taken a full stack approach to designing an aircraft. I would say from the beginning, we believed electric aviation would only scale if the entire ecosystem worked together. As I said earlier, building a great aircraft wasn't enough. Customers needed confidence that the infrastructure, charging and operational support would all be there and working functionally and reliably together.

So early on, we saw that as a risk that the industry could end up waiting on different parts of the ecosystem to develop independently. And aircraft manufacturers would be waiting for infrastructure, infrastructure providers to be waiting for aircraft adoption, and it's really the customer who ends up getting stuck in the middle.

So the forward thinking that went into really designing in this example, the charge network was all about this frictionless customer experience that we're trying to provide our operators with.

That's great. Appreciate it. And if I could just double-click on supply chain. Clearly, it's on your mind. Clearly, you guys are preparing to ramp production, et cetera. We are in an environment where a lot of OEMs are ramping production. And of course, they have a different type of engine than you do. So there isn't as much overlap. But can you just talk about and maybe just spend an extra second on supply chain in light of tightness across the industry and a lot of different players trying to ramp at the same time. What are the pitfalls? What are the things on your mind and any kind of any sort of orange flags, if you will, that are on your mind for managing?

Yes. I mean, look, we are acutely aware of the broader supply chain issues. We are highly vertically integrated, which really negates a lot of the challenges that other folks historically have had. We have no major forgings. We have had a strategy from securing in advance. We've got a great liquidity position. So we're able to really stock the inventory for our planned builds. And then we've advanced some things to negate our internal supply chain, which I think are quite insightful with rapid prototyping of tooling for production units, for example, where we have full stack machine shop printing and coding capabilities that allow us to kind of not be in that cycle of sending things off for outside processing or being waiting on tooling suppliers, which is the secondary kind of limit in supply chain management.

Ironically, BETA has had very little problem with hiring people. We have a very, very large and healthy stack of applicants. And so we marry that kind of foresight with tooling development and internal vertical integration. And for some reason, people actually really want to work here. And we proved that in the first quarter of this year. On demand, we were able to add, I think, how many people? 300 people in 75 days, I think it was, of high-quality, really, really dedicated technicians and execute a training regimen with them. And that's all part of the supply chain.

We have reached the end of the Q&A session. I will now turn the call back to Kyle Clark for closing remarks.

Excellent. Thank you very much. I guess just to wrap things up, I'd like to just kind of thank everybody. I appreciate the questions, everybody and the analysts. But as I've said for the past couple of quarters, and I'll say it again, we're continuing to position ourselves just to win in the market. And the eIPP, these partnerships, the work we're doing with GE and General Dynamics, I think all of these things are just reinforcing this stepwise methodical, dedicated persistent approach to bringing a new product to market. It's -- we're not looking for the flash bang. We're not looking for the quick turn sugar high.

And I hope you see that in the way we're thinking about the long-term strategy of the charging network, our stepwise approach to certification and really our long-term -- and long-term collaboration with the FAA. And these things aren't easy, but we're getting through them. We have a track record of resolving really hard issues of developing new rules of working with the people at the FAA to get this done. And we're fortunate to be in a position where we have political tailwinds, we have regulatory tailwinds. And it doesn't mean that it's free, but we get through this stuff step by step.

And I think the last thing I want to say is that the energy at BETA right now is just awesome. The drive to deliver is high. People are -- the enthusiasm is like top-notch. People are thinking creatively. They're working through hard problems on facilities, growth, collaboration. And like every day, when I walk into the facilities and see this team, just driving to do the right thing, to do the right thing when no one is looking, to focus on quality, focus on safety is just motivating, and they're driving our strategy forward. So I also want to say thank you to all the folks that have trusted us to do good things with your investment, and thanks for joining us today, and we'll look forward to catching up with you, I think, in August, Devon.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to the BETA Technologies Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions]

I will now hand the call over to Devon Rothman, Head of Investor Relations. Please go ahead.

Thank you, Warren, and good morning, everyone. Thank you for joining us for BETA Technologies Fourth Quarter and Full Year 2025 Earnings Call. Joining me today are Kyle Clark, our Founder and Chief Executive Officer; and Herman Cueto, our Chief Financial Officer. Following their prepared remarks, we will open the call for Q&A, where Kristen Costello, our Head of Government and Regulatory Affairs, will also join us.

Earlier today, we issued a press release announcing our fourth quarter and full year 2025 financial results as well as our outlook for 2026. We also published our investor presentation, which is available on the Investor Relations section of our website.

Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements. These statements are based on our current expectations and assumptions and involve risks and uncertainties that could cause actual results to differ materially. Please refer to our filings with the SEC for a discussion of these risks. We will also reference certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in our earnings materials.

With that, I'll turn the call over to Kyle.

Thanks, Devon, and good morning, everyone. The fourth quarter was a strong finish to a defining year for BETA. In 2025, we showed up in the air and with our customers and regulators and in the capital markets. And we did so in a way that reflects the discipline and pragmatism that defined this company. We achieved several milestones in 2025 that materially advanced certification, commercialization and defense.

We made meaningful progress across our certification programs with 3 notable achievements. We earned a Part 35 type certification for our propeller in partnership with Hartzell. We closed our G1 certification basis on the A250 vertical takeoff and landing aircraft, and we began 4 credit testing on our Part 33 motor.

We advanced our commercial efforts with successful customer deployments both domestically and internationally. We flew our aircraft across Europe, and we opened the Paris Air Show. We flew at Oshkosh. We set multiple world records, and we won the Pulitzer Air race. We flew the first all-electric passenger flight in and out of JFK Airport. We completed our Phase 1 contract with General Dynamics, and our defense programs continue to grow. We also launched our strategic partnership and joint technology development program with GE.

In 2025 and continuing to 2026, we are seeing significant regulatory tailwinds. In December, Department of Transportation released the AAM National Strategy, which is very much aligned with BETA strategy.

Congress continues to invest in our future recently through the introduction of the bipartisan legislation titled the Aviation Innovation and Global Competitiveness Act, which will bring increased transparency to the FAA's policy and guidance development and certification programs, which is most important for AAM technologies. This outlines a partnership between the FAA and industry that improves the predictability of their deliverables, helping with our planning while preserving the agency's gold standard for safety and oversight.

Looking ahead to 2026, we are awaiting the announcement of the eVTOL Integration Pilot Program, or eIPP, which is being led by the FAA and U.S. Department of Transportation. Following an executive order issued in June of 2025, this program will likely allow for early commercial operations of electric aircraft. This has the potential to be a huge opportunity for BETA by advancing our entire business model by more than a year. Already, the proposal process has highlighted excitement for electric aviation across the country with commercial operators, local governments and in rural communities.

We expect selection announcements very shortly. This program presents a different opportunity to each company. Uniquely for BETA, it's not only the airplane deployments, but also the charge network, which will significantly expand over the next 3 years. We have submitted applications touching 41 states for different types of use cases, including cargo, medical and passenger in both our CTOL and VTOL aircraft.

BETA is uniquely positioned to capitalize on this opportunity for a few reasons. First, the FAA will prioritize safety through system and aircraft maturity. We have more real-world operational experience flying electric aircraft with customers than the rest of the industry combined. Our aircraft have flown nationwide, supporting cargo, medical and passenger missions in busy airspace and in all weather, backed by a complete ecosystem of pilot training, maintenance, safety and the reliability required for commercial operations.

Second, we own and operate the only UL-certified aircraft charging network. eIPP represents a major opportunity to accelerate the expansion of this network. Additionally, as the only existing charge network, we're partnering with other OEMs to identify priority charging sites required to support their proposed future eIPP missions as well. This advances our strategy to maintain ownership of the network that controls the flow of energy into electric aviation.

Third, communities across the country have identified how our aircraft can meet their transportation needs today. We are honored to have our aircraft named in more applications than any other company in the industry, and we look forward to continuing to deliver for our nation, our partners and our investors.

When we last spoke in December, I laid out 5 key performance indicators that we believe are the most effective and transparent way to track our progress. Starting with our backlog. 2025 was a commercial win for BETA for aircraft, but more uniquely in the sale of motors and other technologies to partners like Embraer Eve and General Dynamics. Over the course of the year, we added over $1 billion to our commercial aircraft backlog and separately, an additional $1 billion to our backlog of enabling technologies.

Our current aircraft backlog sits at 891 aircraft in firm and option orders backed by a financial commitment. By the end of the year, we expect our commercial aircraft backlog to top $4 billion and to steadily increase our enabling technologies backlog.

Next, we topped 125,000 nautical miles flown, a significant increase since last time we spoke. These miles are a demonstration of the safety and reliability of our CTOL and our VTOL aircraft. We believe this simple metric of airplanes doing what they are designed to do to fly will continue to differentiate BETA within AAM. For 2026, our goal is to hit 0.25 million nautical miles flown.

Third, for our charge network, we've activated 2 new sites since we last spoke and focused the permit applications for additional sites in preparation for our eIPP and customer-driven network growth. Our goal for 2026 is to reach 150 total charge sites. Fourth, on production, we are focused on building conforming articles for the first half of this year before ramping to 4.5 aircraft per month by the end of the year. These conforming articles directly support certification, which takes us to our next KPI.

We made meaningful progress across our 3 certification programs, particularly on our H500A electric engine. When we last spoke, we had completed the build and FAA conformity inspection of 2 electric engines. By the end of 2025, we completed the build and FAA conformity inspection on 11 propulsion systems. resulting in a complete set of test assets plus spares.

Consistent with our certification strategy, we've started with the highest risk and longest duration test first and have completed one of the most demanding and long-duration tests, the durability test, which involved 1,000 hours of run time through a variety of environments and intermediate inspections. Endurance testing, which similarly places sustained stress on the engine is well underway. We're continuing to make progress across the remaining certification test areas as well.

Additionally, something less talked about, but critical to achieving type certification is software testing. We are 85% complete requirements-based software testing with a projected completion date of these tests by the end of April.

In our CTOL program, we are now substantially complete with our means of compliance and the requirements definition phase of the project. We have completed 98% of the regs covered in the DDS collector. All but 2 issue papers are closed, and those remaining have been agreed to and are in the final stage of documenting the closed position. We've also made strides in the compliance planning, having submitted 17 of 20 total certification plans with 9 already accepted, enabling the start of early test activities and solidifying the plan for the road to TIA and type certification.

Planning for certification test activities has also started with the FAA accepting 6 structural test plans and 12 flight test plans. Preliminary safety assessments have been reviewed with the FAA as part of our preparation for type inspection authorization or TIA.

Our VTOL program is benefiting from our CTOL program work on means of compliance and certification plans, all of which we plan to reuse at a significant level. This transferability is enabled by the commonality of our CTOL and VTOL aircraft. We don't mark our progress until our partners at the FAA have accepted and approved our work.

Our A250 engineering flight test program is continuing out of our Plattsburg, New York facility. We are making steady progress and collecting an immense amount of data on the performance of our lift propulsion systems that support our certification efforts.

Shifting to defense. The January 2026 executive order, prioritizing the war fighter in defense contracting is an urgent directive to defense primes to identify and engage with advanced agile American companies that have proven ability. We have been approached by 3 prime defense contractors and are evaluating these opportunities.

We have completed Phase 1 of our programs both with General Electric and with General Dynamics, and we hit our deliverables with Army DEVCOM. These programs were an excellent demonstration of BETA's capabilities. We are working towards the next phases, which present significantly higher revenue opportunities.

Additionally, in response to growing demand signals for low-cost, flexible unmanned assets, we have accelerated our MV250 program by 6 months. Our partnership with GE and our ability to scale production rapidly puts us in the position to meet the nation's defense needs. The military is supporting this effort and has funded our development of autonomy and hybridization technology of the contract from the U.S. Army Combat Capabilities Development Command, known as DEVCOM.

Each of our aircraft have been designed with acute self-awareness and a set of capabilities to unlock autonomous operations. The fly-by-wire system, which our beta-developed flight controllers are the foundation of, can natively receive control inputs from a computer instead of a human. This is a key differentiator from other autonomous aircraft because nothing needs to be redesigned or fundamentally altered to be flown without anyone at the controls.

We delivered a full shipset plus spares of lift and pusher electric engines to Eve, allowing them to successfully fly their VTOL aircraft. We have been working closely with the amazing team at Eve and have mutually benefited from this relationship.

This year will be defined by conforming aircraft, earning the first FAA type certification for our propulsion systems, more defense work, ramping production and deploying aircraft and charge systems into commercial operations. We don't expect any of this to be easy, but the team here at BETA has the grit to do the hard work and a clear vision.

Herman, you're up.

Thanks, Kyle, and good morning, everyone. Before turning to our results, I want to begin with a broader industry perspective. We are operating in one of the most constructive policy and regulatory environments our sector has seen in decades. The current administration has placed significant emphasis on domestic manufacturing, advanced air mobility and next-generation defense technologies. That focus is accelerating regulatory engagement, unlocking public-private collaboration and reinforcing the strategic importance of advanced technologies manufactured in the U.S.

Within advanced air mobility, in particular, we are seeing meaningful federal alignment around certification, infrastructure development and early deployment frameworks. eIPP is a tangible example of that momentum. Here at BETA, consistent execution remains our foundation, and we continue to deploy capital with discipline and focus.

Throughout 2025, the team demonstrated its ability to capitalize on opportunities with some of the most defining players in aerospace and defense, including GE, General Dynamics and Embraer Eve. Each of these relationships carry significant long-term potential, and we are already realizing financial results. Eve is a great example of that. What began as the delivery of several motors to support their flight test campaign evolved into an order worth up to $1 billion.

Some of the demand we saw for our defense propulsion technologies came in the form of our selection as a partner for next-generation undersea vehicle applications. Our consistent execution and performance have strengthened our credibility and positioned us for additional work with favorable margins and durable long-term revenue. I am pleased to report full year revenue of $35.6 million for 2025, exceeding expectations and driven by stronger-than-expected component sales. This represents more than double our 2024 revenue of $15.1 million.

Operating expenses in 2025 totaled $398 million compared to $283 million in 2024. This included $260 million in research and development and $138 million in general and administrative expense. Adjusted EBITDA for 2025 was negative $304 million, ahead of expectations and reinforcing our track record of disciplined expense management while advancing critical certification and commercialization milestones.

For reference, 2024 adjusted EBITDA was negative $243 million. We ended the year with approximately $1.7 billion in cash, providing us with one of the strongest balance sheets in our industry and supporting our certification and commercialization road map. We invested $45.4 million in CapEx in 2025 versus $73.5 million in 2024. Investments were primarily in support of certification and production readiness, reflecting our continued progress in manufacturing maturity and vertical integration. One consistent observation from analysts and investors visiting our manufacturing facility is the maturity of our production lines. We are producing both CTOL and VTOL aircraft on 2 common lines in a facility designed to build up to 300 aircraft per year. This reflects the substantial investment already completed and positions us to scale efficiently as certification milestones are achieved.

Looking ahead to 2026, we remain focused on disciplined capital allocation. We expect revenues between $39 million and $43 million, driven by the continued ramp of long-term strategic partnerships established in 2025. We expect adjusted EBITDA in the range of negative $305 million to negative $395 million as we advance certification, expand production capability and support early commercial deployments.

Given our strong balance sheet, we are accelerating elements of our vertical integration strategy into 2026. This primarily reflects a pull forward of planned investments to bring key manufacturing capabilities in-house earlier and improve long-term margin profile. With that acceleration, we expect total CapEx in 2026 to be in the range of $175 million to $225 million.

To provide additional context for modeling, we expect first quarter revenue to be in the range of $7 million to $10 million, reflecting the early stage ramp of several programs that we expect to accelerate as the year progresses. We have been procuring long lead materials. We expect the first quarter adjusted EBITDA to be outsized and in the range of negative $95 million to negative $110 million. This investment supports the build and the advancement of our MV250 hybrid VTOL aircraft, our VTOL and conforming CTOL aircraft.

With respect to the eIPP, award selections have not yet been announced and the associated agreements will need to be negotiated. Since we do not have award visibility and negotiations are dependent on each award, we have not included any eIPP-related investments in our 2026 guidance. Should we be selected as an eIPP award recipient, we would update our guidance to reflect the associated capital deployment. Our balance sheet positions us to execute rapidly should those awards materialize. But until formal notification and contractual clarity are achieved, our outlook remains independent of eIPP.

With that, operator, we are ready to open the call for questions.

Your first question comes from Kristine Liwag with Morgan Stanley.

Kyle, [ this is Liwag ] in San Francisco. I was wondering, with the IPO proceeds, you were able to raise more than double the capital you initially thought you would. Can you talk about how much the incremental capital changed your plan and your business model?

Sure. I mean, fundamentally, it did not change our business model at all. It allowed us to advance a few things, though. We've increased our investment in vertical integration, specifically around things that we did not previously call core enabling technologies, but have become clear that we need to be world-class at. So in the past, fully vertically integrated on the motors, the propulsion systems, the batteries, the controls, the software. And we've extended that outward to have full vertical integration on the structures and other big bone elements of the aircraft. So that's one big investment in vertical integration.

And the second thing is really pulling in our MV250 -- with the proceeds were, I think, partially a product of these large engagements we've had with General Electric and General Dynamics and Embraer. And those not only created the proceeds, but they also created really, really clear and valuable partnerships. In the turbo generator with GE, having clarity and confidence of the propulsion systems for the MV250, coupled that with the structure and a large reuse of the A250 components allowed us to pull that in. So the financial investment in pulling in the MV250 fundamentally advances that portion of our business model as compared to what we outlined in the IPO, which is a direct result of the proceeds.

Herman, do you have anything on that?

Yes. Kristine, just maybe 2 points I would want to emphasize. So when we were together in September of 2025, and we were going through the analyst model, we had CapEx in 2026 for about $70 million and in 2027, about $130 million. So the $200 million at the midpoint that we're talking about is really just a pull-in of the 2027. So none of this is new spend. It's all contemplated spend. It's just pulling it in by about a year. And as we had talked about, the strong balance sheet puts us in the perfect position to do this.

And following up, Kyle, in your prepared remarks, you mentioned that the eIPP program pretty much brings forward the business model 1 year. Can you talk about what would be the most desired outcome out of eIPP? I mean how many flights -- what could this look like this summer? And what could it look like in 3 years?

Sure. I mean just a couple of points on that. The eIPP program isn't just about aircraft for us. It starts with the revenue and the clarity that we're already getting on the charging system deployments and the engagement with our customers. Remember, BETA's model is to sell the airplane directly to customers. So that really accelerated the engagement of those customers on things that are maybe a little less obvious like service maintenance, training and all-weather operations and getting the cadence with the aircraft earlier than we expect.

But on the business model itself, which was really interesting is that our baseline business model had completion of type certification and then all of those materials would go to our operator partners that would then apply for a 135 certificate or similar. And that would take ConOps development and a whole lot of other systems, and then there would be a ramp into operation or entry into service.

The eIPP system allows us to pull all of that forward and concurrently develop with our partners in the 135s, all of the ConOps suspects while we ramp our production and ramping the production, anybody who's been in production for a long time knows you don't go from 0 to 100 on 1 day. That is an engineering effort as well. It's a development effort, supply chain maturity, quality systems, supplier quality, all of those things have to mature.

And what eIPP does, it allows us to take that ramp and again, overlay it with the aircraft type certification program, the 135 development and the ramp into production. So it really has a very nonlinear effect of taking things out of series, but also overlapping things and advancing the time. So I think it's a conservative estimate to say it advances our business by a year. It could be more than that.

Your next question comes from Ronald Epstein with Bank of America.

How should we think about the potential investment that would be required if things end up being very successful with eIPP, just to give folks a sense of kind of maybe how to model that if indeed BETA is successful, which we all hope and expect.

Yes. Ron, I'm anxiously awaiting to see where the ultimate awards come in. But if we were very successful in the eIPP, you could see an investment somewhere between -- I'm going to give a wide range, $75 million to $125 million, something like that.

Yes. The -- and expanding on that, Herman said it earlier, that investment isn't a new investment. It's an advancing investment that we would have been making at a later point in time. And just like the ramping of production, the cost-out curve of early rate, low-rate initial production aircraft to full rate production aircraft will happen faster as well. So a lot of that investment, again, would have happened anyway. And now we get to advance that and build those aircraft while we're working through type certification.

Got it. Got it. Super clear. And Kyle, you mentioned this on the call that engineering effort needed to ramp. Can you maybe peel back that in on that a little bit just to give folks a feel for some of the you're working through to get production system where you need it to be sort of when you think it will need to be there?

Yes, for sure. So I think one of the insights that Sean Donovan, our Chief of Operations, brought to BETA from Tesla was that we needed to expose the issues in production early. So our strategy is to set up a production line, take, for example, our battery line or our wing line, run it at full rate for a period of time.

So if we had the battery line running for 5 days at full rate, then stopped for 5 weeks, we allow ourselves to expose the pinch points in the line. And then you apply the engineering resources, typically production or manufacturing engineering resources, sometimes design, but mostly production and manufacturing, where we find those pinch points in the line, whether it's data processing, actual assembly time, inspection, robotics, any of those things, and we address them. And that takes engineering. So if we have a laser welder that needs a cool downtime, we expose that very early. And then we apply -- we apply automation in the right places.

Just recently on our battery line, for example, a plasma surface preparation system was fully automated because it was found to be a pinch point unexpectedly. So that required manufacturing production engineering to balance that line. That also reaches way back to kitting and supply chain and inventory management, where we use a highly visual manufacturing system where we design tools so that when screws, bolts and nuts show up on the line, they are in a way that the assembly technician is going to use them. It helps with our quality, it helps with our speed.

And then the last thing that has been a big focus of engineering and production, Ron, has been the automated -- the use of automated tools for inspection documentation. So utilizing Wi-Fi connected screw drivers effectively to map the angle, the torque and the position of every screw that we put in drastically minimizes the human check boxes that have to happen. So those are the types of engineering investments we're making in manufacturing.

Your next question comes from Sheila Kahyaoglu with Jefferies.

Maybe just on 2 questions. First, I'll start off with the backlog. You called out a backlog greater than $4 billion by the end of '26. Can you talk about some of the drivers of this and line of sight to that and how defense plays into it as well, please?

Sure. I mean, look, we -- like real time during this meeting are getting extreme line of sight. There's a series of docs on my desk right now of deals that are ready to be executed. But we are in the fortunate position to make sure the terms of those deals are favorable and aligned with BETA's rollout strategy. And I just saw as we were getting ready for this call this morning, that our counterparts executed an agreement that takes a good bite out of that backlog goal for this year for aircraft.

So we have very good line of sight. When we're preparing the materials, we had a little less. Now it's even better. So that is with commercial operators that have found applications for the electric aircraft in places that we believe that are going to have very successful entry into service. High cadence, low cost, relatively short range, starting with cargo, medical and logistics. And that's the type of operators that we're partnering with.

Yes. Sheila, I just want to reemphasize Kyle's last point. We set a very high bar on what goes into our backlog. We're very selective with our customers. We want good launch partners, and we want partners who are going to come with large orders and deposits. So it's a very high bar. And as Kyle said, we were excited to see some documents get signed early this morning that, again, will take a big chunk towards that $4 billion backlog, and we'll be announcing that shortly.

Got it. And then can I ask on EBITDA, just a wide range from $305 million to $395 million, how do we think about that? What changes post Q1? Is it G&A, R&D? How do we think about the EBITDA range and the cadence?

Yes. What I would say is -- so in the first quarter, we're certainly going to be investing more just like we did in the fourth quarter, where we're buying long lead time materials. So you'll see that continue into Q1, and then it will settle out as we get into the second quarter and the back half of the year. The wide range is -- it's a fast-moving business, and we really do not want to ever be in a position where we have to slow things down. And there are always investments that come up, and we just put that wide range in there just to make sure we have the flexibility to run the business the way we want.

Your next question comes from Andre Madrid with BTIG.

Can you maybe just -- do you have a sense of what the revenue contribution per IPC bid could be? I mean what could it look like if you want on the charger side or the aircraft side or both? Just any color as to how material it will be?

Yes. Andre, it's Herman. I'll start and then maybe Kyle could jump in. I don't think we're in a position where we will talk about revenue numbers right now. The OTAs certainly need to be negotiated and we'll get more clarity. But the way to think about it is there could be potentially 3 revenue streams. One would be through charge. The second would be through training and maintenance. And then the third would be aircraft monetization.

So whether the aircraft was rented or leased or ultimately bought, that's sort of how I would think about the revenue streams. And one important point is the operators who we partnered with for eIPP are actually our customers in the backlog. So I think that's an important call out. I don't know if...

That's a great point. I mean, look, if a customer has a 25 or 50-unit order and we're putting 3 or 5 aircraft into their eIPP program, if we get a lease payment over the course of the 36 months of the program, that's great. But the real objective here is much more than short-term revenue. Just like in the General Dynamics, the Textron, the GE, the Embraer jobs, we're planting the seeds that will germinate into much larger orders in the future. Herman mentioned it a few minutes ago. You have to think about the eIPP the same way. We'll make good revenue on that.

And by the way, on a per unit basis, on a margin per unit basis, the propulsion systems that we've been selling, they're very profitable on a per unit basis. But that's not why we're doing it. We're doing it because they grow into something much bigger. Getting these aircraft out in the world, there's a lot more to operating aircraft than just the aircraft, of course. I think everybody knows that. And big ones are like the service, the training, the maintenance, the continuous high cadence operations and the trust we have to build with the industry and the market that electric aircraft do indeed achieve the economic benefits that we outlined. So yes, I think that we should look at the revenue because it's real money, but it is not the exclusive focus here.

Got it. Got it. That's really helpful. And then if I could pivot back to the backlog. From my understanding, that build that you're targeting for '26 is mainly focused on the aircraft. But can you maybe just talk about what growth you have earmarked for merchant supplier work and how that could -- what that backlog looks like and what it could grow to by the end of the year -- yes, go ahead.

No, your read of how we define the backlog is correct. We are reporting the KPI and aircraft backlog. That's the prime mover of the business, and we expect that to grow with high certainty now to $4 billion and beyond. On the merchant supply itself, one of the cool things about the way this has materialized, as Herman said, we developed a couple of prototypes. We delivered them to a customer. That resulted in a large order. That order is made up of a couple of parts.

Between now and type certification, we, of course, deliver a bunch more propulsion systems and the research development documentation and other engineering assets and artifacts to support those programs. So that grows. And each of these things, one of them that is classified, we can't talk much about the details of it. But from a revenue perspective, each of the phases is about 10x bigger than the prior phase.

And like we're not just -- we're not a job shop. We're not taking this work for the short-term revenue. We're taking it because it steps up in that order. Our revenue as a company has doubled year-over-year. The valuation of our company across the 4 rounds from 1 to 2 and all the way up to 8 effectively doubles in each round. And that's how we're thinking about the merchant supply as well. We're planting the seeds now. We're delivering a handful of motors, 8, 10 motors, whatever the customer needs and they select us for the subsequent phases on the merits of the technology, the reliability and the performance, first and foremost, and of course, on BETA's ability to deliver.

Your next question comes from Andres Sheppard with Cantor Fitzgerald.

Congratulations on all the great achievements last year and so far this year. I think a lot of our questions have been asked by now. But maybe coming back to the eIPP. Kyle, I'm just curious if you can maybe share how do you see the program unfolding? Once the programs have been announced, once the participants have been announced, you foresee all projects starting at the same time, maybe one at a time? Do you foresee multiple OEMs participating in each project simultaneously? Just curious how you're thinking about it as we get closer and closer to those projects being announced.

Yes. Great question. So I think it's really important to define the difference between a demonstration and an operation. So when we entered into this, we focused on operations. We did not want to go out with 1 aircraft and go to 5 different states. We wanted to provide 5 aircraft to 1 state and 3 aircraft to another state and 2 aircraft to another state and 5 aircraft to another state so that those aircraft can get into high cadence operations every single day in all weather.

However, that doesn't happen on day 1. No, to answer your very specific questions, are all OEMs going at the same time? Of course, not. BETA right now has had more real-world flying experience with customers than any other company in this industry. I had to sign an attestation to the Department of Transportation that within 90 days of the negotiation of these OTA contracts, we could be in service.

Now that's so that BETA can lead the deployment into these states and applications. This is because of the maturity of the aircraft, our charging network and the fact that we're starting with cargo and medical first and then moving to passenger. And we're engaged with customers that have safe and reliable operations. That's different than other folks who have applied for this application.

So like the states selected this. The state selected the aircraft and we start with Part 91, we go and we do route validation, then we move to 135. And if everything goes well, we will then start revenue-producing applications for cargo, medical and logistics, then we'll move to the VTOL and then we'll move to passenger thereafter. BETA is fundamentally different than other folks because of the real-world opportunities that we've uncorked internationally and domestically, and we continue -- and we intend to continue to do that.

Wonderful. That's super helpful. I really appreciate all that color. Maybe the last one, one for Herman. Can you give us a sense perhaps on cash use for this year, how you're thinking about that? I realize you guided or are targeting a CapEx number for the year. Just wondering if you can maybe help us complete the picture, how should we think about cash use, particularly as you begin to ramp up production of your aircraft and get to 4.5 per month by year-end?

Yes. Thanks for the question, Andres. I would say right now, with this guide, excluding eIPP, the cash use will be about $500 million. So if you were to look at about $200 million for CapEx at the midpoint and if you take the EBITDA range at the midpoint of $350 million, we'll have some interest income that will kind of offset some of that. But when you put those 3 pieces together, you probably get to about $500 million before an eIPP investment.

Your next question comes from Chris Pierce with Needham.

If I look at the deck and the VTOL certification slide, I just want to get a sense of what that should look like over this year. I know that you sort of hit on in the remarks. We shouldn't expect -- I just want to confirm, we shouldn't expect movement here, but we should expect movement on the CTOL side. And that, in turn, allows the VTOL side to move faster when it begins to move. Is that the right way to think about it?

Yes. I'd say it a little bit differently, but conceptually, that is exactly the right way to think about it. Let me give you an example. On the CTOL, if we were tracking the progress of the propulsion system contained within those bars, then of course, the bars move much quicker because we built -- I believe we're the only company in the industry that's built conforming hardware that's gone into credit testing. We've done that pervasively across a large number of units in the motor.

In fact, just this morning, I got a report out from the team that we've completed the durability test with over 1,300 flight cycles for credit in a bunch of different environments. That is not -- that is exclusively shown on the H500A engine certification test bars. It is not shown on the CTOL. And by way of extension, on the VTOL bars, there's a small delta, about 15% of requirements planning and a little bit larger delta on the implementation when we move from CTOL to VTOL.

So those bars are separated to give absolute transparency to all of you on the things that need to happen for each of these certification programs. But the things that need to happen are contained to the deltas between the prior validation verification or certification activities and the subsequent ones. So you should see -- expect to see movement on the A250 certification program this year. We have done a ton of vertical flying, a lot of different experimentation.

I believe we're the first company to actually get delegation for our lift props with a DER. We've gotten additional delegations across the CX300. I think we achieved somewhere near 80 delegations in the last month. So these are really important, I would say, nondirectly measured elements of progress that result in measured elements of progress as well. But fundamentally to your question, you will see movement on all fronts, and the movement is representing the delta required between the propulsion to the airplane, the airplane to the aircraft.

Okay. Perfect. And then did I hear you correctly that on eIPP, you might fly CTOL and VTOL aircrafts? Or I guess my thinking was it would mostly be CTOL, but is there a possibility for VTOL flying in this program as well this year?

Yes. In fact, every single one of the applications we put in have both CTOL and VTOL aircraft. I apologize if I focused on CTOL because that's what we're launching first with. We directly go into VTOL thereafter. It's how our entire business model is designed. And the beauty of that is that our customers get exposure to training an electric aircraft, charging, managing batteries, flying with a fly-by-wire system, which is, of course, universal to all our aircraft and then they step into VTOL.

In fact, our training team, and I think I mentioned this to you or another analyst earlier, has developed the full training curriculum for the VTOL aircraft. It has 5 modules. The first 3 of 5 modules are the CTOL aircraft, where the systems, the fly-by-wire system, all of the things associated with flying the ALIA aircraft are learned in those 3 modules.

And then there's 2 additional modules for vertical takeoff and landing variants. So for our customers, that gives them a very easy pathway. Of course, the charging is the same and the maintenance is about the same. So yes, we do -- we will be flying eVTOL aircraft should we be selected for the eVTOL integration pilot program.

And just to put a finer point on that, I think there's huge advantages with this program, especially for the VTOL market here where it's going to be advantageous for us for our customers to be able to do all the things that Kyle talked about there in one of the previous questions and pulling in those training time lines and whatnot ahead of full type certification to get these into service earlier. So it has tremendous benefits to us, to the customers and the industry as a whole.

Thank you for your questions. I will now turn the call over to Kyle Clark for closing remarks.

Yes. Thank you, everybody. I appreciate you guys sticking around on this call. I think just as kind of closing remarks, what is awesome to us here at BETA is that the pieces are falling into place. And our strategy of a stepwise approach into the market is being respected and mirrored with the ATC modernization efforts, the Department of Transportation, the FAA. I mean, we've got great leadership there with Duffy and Rocheleau and Bedford and Edwards, all stepping up, doing what they said they're going to do and giving us a platform and a canvas to deploy advanced air mobility.

I think we've positioned ourselves to win on the eIPP. Our manufacturing is in place. Our training is there. Our service and support is ready to go, and we have a track record of safe and reliable flight operations. And that's all, of course, positioned us for cert, but it's positioned us to deploy these aircraft early.

And I think the insight of our business model is becoming clear. There's an energy here at BETA that is like you can feel it. You can feel it when you walk into the facilities. We are focused on getting through this H500A certification, and it's not without challenges, but we are driving right through all of those challenges on a day-to-day basis.

And the seeds that we planted over the last several years with customers are maturing right now, and these second phase and third phase programs are in our line of sight. And we're just excited about executing on them and seeing our revenue grow, seeing our products mature and, of course, getting through the certification. So I'm jazzed, and I really appreciate all you all are doing for us and with us and asking the questions and critiquing our business, because I think you all will come to the same realization as time goes by.

This concludes today's call. Thank you for attending...

Welcome to the Beta Technologies Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Devon Rothman, Head of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. My name is Devon Rothman, and I lead Investor Relations here at BETA Technologies. We appreciate you joining us for our third quarter 2025 earnings call. Joining me today are Kyle Clark, our Founder and Chief Executive Officer; and Herman Cueto, our Chief Financial Officer. Following their prepared remarks, we will open the call for Q&A.

Before we begin, I'd like to remind everyone that earlier this morning, we issued a press release announcing our third quarter financial results. We also published our Q3 investor presentation. You may access this information on the Investor Relations section of beta.team. Additionally, please note that today's discussion of our business, operations and financial performance will include forward-looking statements under federal securities law. These statements are based on our current expectations and assumptions and involve risks and uncertainties that may cause actual results to differ materially. For a detailed discussion of these risks and uncertainties, please refer to our filings with the SEC, including our IPO prospectus dated November 3, 2025, and our Form 10-Q for the third quarter that will be filed later this morning. We do not undertake any obligation to update our forward-looking statements.

During the call, we will reference both GAAP and non-GAAP financial measures. Reconciliations between historical non-GAAP and the nearest GAAP measure can be found in our earnings materials posted on our Investor Relations website. Our slide deck for today's call is also available on the site for those who wish to follow along.

With that, let me turn the call over to Kyle.

Thanks, Devon. Good morning, everyone. First, I'd like to say thank you to the folks that helped us through a successful IPO. Fidelity has been with us from the very first round, along with Amazon, Chuck Davis, John Abele, TPG in our Series B and more recently, Larry Culp and the entire GE Aerospace team, and of course, the overwhelming support from all of you throughout the IPO process. This support has made it possible for us to enter the public markets with a uniquely aligned and world-class group of investors.

Since this is our first earnings call, before we dive into our quarterly numbers and updates on our aircraft, our charge network progress, GE Aerospace and GE programs and new orders from Embraer Eve, I'd like to take a few minutes to introduce myself and our company, our mission and specifically how we think about redefining aviation and why this team has earned the credibility it has and is uniquely capable of changing the way people fly.

My name is Kyle Clark. I'm an engineer, a pilot and the founder of BETA. BETA began as my senior thesis in college more than 20 years ago and has shaped my life's work ever since. I still spend as much time as possible designing, flying and building airplanes. It's all I've ever wanted to do. Prior to BETA, many of the team members here and I spent our professional careers designing and building high reliability power electronics and control systems for organizations like the National Nuclear Labs, Raytheon, Tesla and many others, helping them to electrify and control things that once seemed impossible, like the Patriot missile system. In every case, we created systems that were far superior to what they replaced.

Throughout those years, I kept refining the idea that would become BETA, thinking about how electric aviation could serve the industry in a practical and impactful way. When I met Martine Rothblatt of United Therapeutics in 2017, I felt like 2 missions were aligning. We shared the belief that electric aviation could reshape the future of flight and even more importantly, save lives by enabling large-scale transport of organs. Martine became our first customer, helping define early focus on cargo, medical and logistics. For the first time, the work we had been doing with others converged with a mission of our own, one that had the potential to make a real difference.

The electrification of aviation is inevitable. The electric aircraft that we are certifying are safer than their traditionally fueled counterparts. Electric aircraft are less expensive to operate, quieter, more sustainable and have a higher reliability and dispatch rates than complex legacy aircraft. But these advantages and others aren't just things that come for free because the aircraft are electric. They come from a disciplined engineering approach, a product philosophy rooted in simplicity, reliability and pragmatism. Our dedication to simplicity through design and first-principle physics is the foundation of our entire business and the reason electric aviation will deliver on its full promise.

Here are the guiding principles of BETA's business. BETA owns and controls the enabling technologies for electric aviation. This includes the batteries, motors, flight controllers and chargers. We work extremely close with the customers and the regulators. We have earned their respect and they have earned ours. We offer a full stack solution to our customers, everything they need to operate from the aircraft to the batteries to the data systems to the training to a global charging network. Our aircraft and designs are a platform for new technologies such as advanced batteries, fuel cells, hybrid and autonomy. We have put all the hooks and the flexibility into our aircraft to adopt these improvements.

We understand and respect physics. This has enabled us to hold every meaningful world record in electric aviation, range, payload and both speed records. We're a show not tell business that's focused on keeping our promises and hitting our milestones. We let our accomplishments speak for themselves. We focus on safety, performance and reliability through simplicity. At the very core of BETA are the people. We are a team of scientists, engineers, aviators and builders. We fly what we build. We expose the issues early. We believe in data, integrity and honesty. We are intensely connected to the mission. And the financial success of this business and the economic benefits to our customers are directly aligned with our mission of creating a sustainable aviation future.

Now that we've established who we are, let's talk about what we do here at BETA. We design and build both electric conventional takeoff and landing airplanes and vertical takeoff and landing powered-lift aircraft. We also sell high-performance systems that power them, the motors, batteries, flight computers and sensor systems. We manufacture, sell and install thermal management and charging infrastructure. We're the only OEM with a certified charger and a nationwide interoperable and multimodal charging network. And now we're expanding that footprint internationally. The mature propulsion and charging products are producing positive contribution margin today, and these technologies are sought after by the most respected aerospace and defense companies in the world.

We fly what we build. Our family of electric aircraft has logged more than 100,000 nautical miles across 3 continents in 10 countries landing over more than 380 airports. We've flown in the rain, the sleet, the snow, the fog, dust in every class of airspace from class Golf to busy class Bravo airspace across a wide range of payloads. And we've done it with more than 10x as many different pilots in the left seat than any other company in our sector. Nobody has as much real-world data as we do, not even close.

When we go out and fly, I typically close our briefs by saying, let's go expose the issues. The data produced in these flights is critical feedback to our engineers, our manufacturing teams and for training our AI models. We've executed real-life flight missions on our aircraft with United Therapeutics, UPS, Bristow, Air New Zealand and many others, including the U.S. Military. This real-world flying with executives and chief pilots from these companies has resulted in a deposit-backed commercial aircraft backlog of $3.5 billion and a component backlog that just crossed $1 billion, mostly due to a major deal with Embraer Eve Air Mobility. This aircraft backlog doesn't include the post-sale services and aftermarket components, which makes the total backlog about 4x higher.

We sell aircraft at a good margin, but that isn't the insight to our business. The beautiful thing here is that BETA gets both the aircraft sale and high-margin recurring revenue from battery and aftermarket sales. This is highly unique for airframers, even among electric aircraft developers. All the while, our customers get a lower cost of operation and ever-increasing performance. This model is an entirely new paradigm for aviation.

The philosophy of simplicity and pragmatism is clearly reflected in our certification strategy. We've taken a strategic stepwise buildup approach to certification, which is also unique within our industry and rooted in a deep understanding of how the FAA works and the current regulatory readiness to certify new and novel technologies.

It started with the propeller in partnership with Hartzell, which we achieved a full type certification last summer. In parallel, but phase shifted, we went on to the electric aircraft engine, the H500A, then the CX-300, which is being certified as a Part 23 FAA airplane. We presently are building conforming articles for this program. And again, in parallel, but phase shifted, the A250 vertical takeoff and landing aircraft, which has a closed G1 certification basis. Each of these steps are done so that the success and certification of one builds directly into the next.

Another piece of our strategy is shown at the bottom of this slide, where the propeller and engine are ported directly into the CX-300 airplane. And then the designs, conformities and requirements of the CX-300 airplane, they complete over 80% of the A250 powered-lift aircraft. The commonality between these models streamlines not only certification through the reuse of artifacts, but also production systems and pilot and maintenance training. Our dedication to simplicity and first-principle physics has positioned us to be the leading voice in the industry, especially when it comes to working closely with the regulators.

In addition to leading BETA, I chaired the Gamma Electric Propulsion and Innovation Committee, an industry group comprises of top subject matter experts in new technologies, specifically around electric propulsion and autonomy. This position has given BETA the unique opportunity to work directly with the FAA as well as international authorities as we develop policy for our industry. Through our work with the FAA, I've seen firsthand their focus, commitment and a renewed prioritization of safely bringing electric aviation into the national airspace. Major thematic shifts led by this administration have resulted in the Powered-Lift type certification advisory circular being published this past summer and a transformative executive order, American Drone Dominance, which mandates the implementation of an eVTOL integration pilot program, or EIPP. This will allow us to launch commercial operations next summer.

Our industry has seen remarkable political, regulatory and commercial tailwinds recently. I believe it's a product of the flying we're doing all over the world, demonstrating that electric aviation is fundamentally better. The world now recognizes that the United States is leading the AAM industry, and maintaining that leadership is essential to realizing the full benefits to our GDP, our national security and our planet. The current administration through the Department of Transportation and ultimately, the FAA has cleared the path for near-term operations domestically.

Here at BETA, we put a high value on the transparency and intellectual honesty. I want to spend a moment outlining 5 key performance indicators that we'll be using on a regular basis to share with you our progress. The first KPI is our backlog. You should expect this to steadily increase as exposure to the company and the aircraft grows. Today, the combined number of orders stands at 891 aircraft with hundreds more in active negotiation. These are deposit-backed orders.

The second KPI is real-world flying. We measure nautical miles flown by our BETA electric aircraft. Our aircraft are out flying every day on 3 continents. These miles don't just represent a number. They represent exposure, experience, safety and reliability and produce extremely valuable data for our engineering certification and service efforts. I don't believe anyone in the industry has even flown half as many miles. And yes, the units are nautical miles.

Our third major KPI is our charging network. It's large and growing. It covers the majority of the East Coast into the Southeast, has nodes out West, and we're actively filling in those gaps. Note that these are sites. Some of these sites have multiple chargers on site. They are multimodal, which means you can charge cars, trucks and vans and interoperable, which means it's usable by anyone flying. We also track charging cycles, which exercises our mobile applications, billing, data management and customer experience. We have over 62,000 so far this year.

The fourth KPI we acutely track is the production readiness of all of our facilities, both at our primary manufacturing facilities, making composites, metallics, welding, paints and coatings as well as our final assembly facility like this one I'm in now, the 188,000 square foot production facility. We exercise these lines intermittently at max rate to ensure that we expose the issues of rate production early. Our KPI for production readiness will be defined as our maximum demonstrated aircraft output on a monthly basis. We plan to provide guidance for 2026 rate in our year-end call.

And fifth is arguably our most important metric to track as a new OEM, our certification progress and the completion steps to our primary product. We are in the last stages of certification now for the H500A, and we just hit another first this quarter when we became the first OEM to begin for credit testing with the FAA on an electric engine certification project. I believe we're on track to be the first electric engine certified stand-alone in the United States.

On the CX-300, which is the Part 23 airplane, we're building conforming articles now, and we're working in partnership with the FAA, who has a great team deployed to support this. And the ALIA A250 aircraft, which has a clean and clear certification basis. We will add to these KPIs in future years as production ramps and our industry matures.

Now on to the quarterly update. It's been a big quarter, and we have big goals. And the pace we set for ourselves to deliver on these goals plus the drive that meets or exceeds it is what makes this team different. We've had several key accomplishments this quarter that position us to successfully deliver on those KPIs we discussed in this coming year. In addition to our successful financing and the certification milestones I mentioned, we've proven our aircraft in demanding real-world operations that position us to lead the deployment of aircraft into the eVTOL integration pilot program. We now have 10 BETA-supported state applications in play for DOT review and BETA chargers have been specified in applications that has the potential to add 57 charge sites.

We are conducting demos with Republic Airways in the Midwest and other major operators in the Pacific Northwest. We're carrying cargo with Bristow in Norway and operating with Air New Zealand down under. Over the summer, one of the Air New Zealand pilots was the first pilot to earn their FAA commercial license in any advanced air mobility aircraft. And of course, it was in BETA's ALIA. After comprehensive flight test campaigns on multiple prototypes in the past years, this quarter, we've been flight testing our first ALIA VTOL aircraft built in our production facility and on our production tooling. I've personally flown this aircraft model many times in New York and Vermont and it flies beautifully. The team here at BETA never ceases to amaze me with their ability to keep promises.

We delivered our first products to General Dynamics this quarter. The undersea propulsion work we're doing with General Dynamics in support of DARPA is indeed classified, but it serves as a powerful validation of our core technologies. The simplicity and performance of our systems are being trusted for some of the most demanding applications and missions in the world. Our vision is to deploy charging to every suitable airport and vertiport in the world and own the flow of energy into the future of aviation.

This quarter, on the charge network development, in addition to commissioning several chargers and thermal management systems in Michigan, we also won the contract to electrify the Abu Dhabi airports, and we recently installed, commissioned and tested the first aircraft chargers in the UAE. Like our certification, our market entry strategy is stepwise. I believe that deploying chargers in Abu Dhabi will lead to an airport-to-airport electric cargo and medical flights before urban air mobility really takes hold. With our recent order from e-Smart Logistics in the UAE, a leading provider to global cargo airlines, BETA will be the one to provide these steps.

This quarter, our relationship and technical work with the GE Aerospace team grew once again. GE Aerospace continues to be a mentor and a supporter of our certification work and a great partner to BETA. This relationship is rooted in complementary technical expertise and a strategic alignment to field hybrid electric power systems. We completed Phase 1 of our joint development CT7-based turbo generator program, and we even increased our scope of work. Beyond the technical and specific program work, the financial relationship has grown as well. And GE Aerospace participated in both our Series C private placement investment round and again in the IPO.

This past quarter, we delivered all the motors necessary for Eve to enter their next phase of flight test campaign. I've spent significant time in Brazil this past year, and I can attest to the fact that Eve has amazing people and a great development process. I'm confident they will deliver with their thorough, methodical and comprehensive approach. Embraer is a world-class company, and Eve's genetics are closely tied. However, they don't do propulsion. They come to us for this, and we're proud to partner with Eve.

Although this production supply deal is in the works for the last year, we said little about the total scope and positive impact to BETA. Earning this production contract for motors and aftermarket services is worth more than $1 billion in revenue over the next 10 years alone. This wasn't included in our financial model shared with the sell-side analysts and represents a transformative upside to our backlog. I believe this is a testament to our industry-leading motor designs for safety-critical applications vetted by the most respected airframers in the world.

The motor we're selling to Eve is the H500B, which we're testing now and proving a significant increase in power and power density. You see the data point occupies the top right corner of this comparative chart. We're excited to begin this next phase of our business as a public company and humbled by the support we've received in the process. By drastically lowering the cost of aviation through electrification, the growth potential in the TAM expands and is nearly unbounded. There's a ton of work ahead of us, but we love what we do, and we're excited for the work. This is a team that thrives on engineering a vision into reality, solving challenges and delivering results.

Lastly, I just want to say thank you again to our existing investors, and thank you to our new investors who joined us in the IPO. We're excited to partner with you and build the future of aviation.

With that, please let me introduce our CFO, Herman Cueto. Herman is a trusted colleague and a friend. He comes from a background of manufacturing and assembly of high-quality products within a very regulated environment. He has extensive experience in the things that matter most to BETA and has earned the unwavering respect of his team and his peers here at BETA. Herman, please brief us on the financial results this quarter and our cash position.

Thank you, Kyle, and good morning, everyone, and thank you again for joining. When Kyle and I first met, our initial conversation was about strategic costing, the cost of an input when it enters a process versus when it leaves and all the factors that explain why. As someone who grew up in the business and having had the privilege of working cross-functionally my entire career, in that moment, I knew that BETA was a place where engineering and finance were truly in lockstep, a place where a deep understanding of things like materials, labor and overhead drives a strategic approach to building a better, safer, cleaner and more cost-effective product for our customers. And that leads us to the question we focus on every day. How do we leverage engineering data and financial insights to develop products that meet the financial outcomes we're aiming for, outcomes that ensure not only BETA wins, but that our customers do as well.

The last 6 months have been transformative for BETA, strategically, operationally and financially. Through the third quarter and into the fourth, we advanced our strategy and significantly strengthened our balance sheet, reinforcing the foundation we need as we continue moving with purpose through certification and industrialization. Our current balance sheet gives us the longest runway in the industry. At BETA, we have an incredible opportunity to build a world-class business alongside a world-class team, partners and customers. We've already achieved many of the near-term milestones, but the truth is we're just getting started.

Turning back to the third quarter and adding a bit of context to the strategy Kyle just outlined. Beyond engineering services, BETA is the only company in our space actively monetizing our enabling technologies with a positive contribution margin. Two examples of how we do that organically today are: one, through the sale of our electric propulsion systems; and two, the sale of products and services that we have pioneered through our network of charging infrastructure. I'm happy to report revenues of $8.9 million in the third quarter, which was a significant increase to Q3 of last year. Our results were ahead of our expectations as we benefited from motor sales that were originally planned for the fourth quarter of 2025. Sales in the third quarter to legacy aerospace companies like Embraer Eve were made possible by the earlier-than-expected commercialization of our propulsion technology, a commercial milestone we reached ahead of our internal schedule. We also saw strong growth in engineering services revenue as well as continued expansion in priority access fees from our charging network.

Year-to-date revenue through Q3 was $24.5 million, again, a significant increase over the first 9 months of the previous year, reflecting strength in both product and service revenues. In Q3, operating expenses totaled $86.8 million, including $56.4 million invested in research and development to support aircraft design and certification. Additionally, we invested $30.4 million in supporting functions that make up selling, general and administrative expenses. On a year-to-date basis, our Q3 operating expense totaled $256.7 million with $170.5 million invested in research and development and $86.2 million invested in selling, general and administrative. Adjusted EBITDA for the third quarter of negative $67.6 million also positively beat our expectations and is a reflection of our efforts to closely manage expenses. Through 9 months year-to-date, adjusted EBITDA was negative $200.7 million. We ended the quarter with $687.6 million in cash. This reflects the proceeds of our latest private financings, including the $300 million investment from GE.

Subsequent to quarter end, we received approximately $1.1 billion of net proceeds from our IPO, which will be captured in our Q4 results. Taken together, BETA is well funded to continue pursuing our certification and industrialization targets.

On the theme of industrialization and vertical integration, in the third quarter, we invested $13 million in capital expenditures. And through the first 9 months, we invested $25.7 million. This efficient use of capital supports the expansion of our manufacturing capacity, testing facilities and other resources for aircraft development. It's important to highlight that the lion's share of capital expenditures required for industrialization has already been completed. Principally, the construction of our 188,000 square foot production facility that was designed to support up to 300 aircraft per year has been online since late 2023. And just for reference, in 2023, our capital expenditures were $153 million, highlighting the early investment in industrialization.

Looking at the full year 2025, we expect revenue to be in a range of $29 million to $33 million and adjusted EBITDA to be in the range of negative $295 million to negative $325 million.

As you heard from Kyle, BETA is building for the future, and to stay at the forefront of innovation in electric aviation, it's essential that we continue setting ourselves up for financial success, both today and in the years ahead. Our go-to-market strategy is intentionally designed to financially capture the full product life cycle from initial aircraft sales to the significant long-term service and aftermarket revenues that follow. We are continuously innovating and pushing the boundaries of what electric aviation can be. And by strengthening our balance sheet, staying disciplined and focused and executing against our strategy, we are positioning BETA for long-term enterprise profitability and success.

Thank you, everybody. And with that, I turn the call back over to the operator to begin Q&A.

[Operator Instructions] Our first question comes from Anthony Valentini with Goldman Sachs.

Kyle, I appreciate all the color you provided. I think the transparency is going to be really welcomed by the entire industry here. I just want to focus a little bit on the certification metrics that you guys provided. And it might be helpful just to kind of like talk through the metrics here. I'm looking at Page 15 and beyond in the deck. Are these numbers provided to you by the FAA? Or are these metrics that you guys are kind of coming up with on your own just to give people an idea of how far along you are?

Anthony, thanks for the question. So we decided to track metrics that are directly aligned with FAA order 8110 as opposed to coming up with our own stages. So these stages directly track to the FAA. The second thing that we did is we ensured that these metrics are measuring not just BETA's progress or the FAA's progress, it's actually a simulation of both. For example, in the CX300, you see the tracking, for example, our compliance planning. But for additional color, we've submitted 13 of 20 plans. So nearly 70%, 65% completed of the submissions, and the FAA has accepted 6 of those plans for certification. So what we're doing is we're looking at it as both parties have to show up and agree to a final acceptance as opposed to just tracking what we've done on our end, knowing that this particular industry due to the regulatory oversight requires that we both show up.

And I could go into each detail on each piece. But largely, one of the things that I think we should mention also is that in the implementation phase, which is about half of the total certification time in our estimation, will be broken up into 4 discrete metrics in the coming quarters as we work through these TIA aircraft and do the company conforming builds matched with the SOI Phase 3, which is a stage of involvement for software audits that both have to converge to the same place in the same time in order to enter the last stage of implementation, which is the flight test. So again, like the percent complete is based on what has been accepted, not what's been submitted.

Got it. Okay. That's incredibly helpful. A follow-up on that. In terms of the engine, I think when we were going through the process, you guys had mentioned that you were targeting end of 2025, early 2026 on the motor. And now I'm noticing that it's early 2026. Did it get kicked to the right a little bit because of the government shutdown? Or can you just talk a little bit about that?

Yes, for sure. It is early '26 that we're tracking to right now. We are in durability endurance testing, which is the longest pole of all that testing. That just takes time to get done. And that's one of the reasons we provided a range. Getting into that durability endurance testing, which we're running again right now requires ultimately thousands of hours of testing, and we're testing to the maximum extent possible in time. So that is planned for the first half of next year. And that for credit testing, we -- just by way of example, we built a whole lot of company conforming articles and have 11 FAA conformed articles. So when we're talking about the equivalency of TIA testing in airplanes, fully conformed articles and for credit testing is the electric engine equivalent. That is all complete and in test right now. And we started with the tests that take the longest to achieve, and we're performing the other tests. And one other kind of piece of color on that is, of course, this isn't the first time we run those tests. It's the first time we run them in front of the FAA. So we run and vet them over and over again internally, and the FAA comes to see them early, but to formally witness them is what's happening now.

Our next question comes from Kristine Liwag with Morgan Stanley.

Congratulations on the IPO, and thank you for the color you provided on the prepared remarks, Kyle. So maybe on the EIPP that you noted, you said you could have flights as early as next summer. Can you provide more details on what this pilot project could look like? What types of operations do you intend to support? And is this with the CTOL or both the CTOL and the VTOL?

Yes. Great question, Kristine. So it is both the CTOL and the VTOL in time. The CTOL goes first. So the general time is that the FAA -- the DOT and the White House, earlier this summer, issued the executive order. The FAA then put that into some amount of clarity with the DOT in September. Applications go in actually next week for all -- and the application -- the formal front of the application is a state. So the state applies for this, and that includes an operator, of course, the aircraft provider and the chargers. We are in, I believe, most all of the applications by us and all of our peers in the industry for the chargers. We are in at least 10 applications with the states right now, and some of those states are pairing up multiple states together.

We get selected sometime before March of next year. Now we've positioned ourselves to be able to deliver our first aircraft into that within 90 days of that selection. And naturally, that means that we've had to actually manage our supply chain, our production, our labor, our tooling so that we can deliver this on time. The part that's, I think, being worked out right now is what level of maturity and cert is included in these aircraft. And we're at a really advanced state for the cargo medical logistics, and that's our focus initially with these states, particularly rural access before we go to urban passenger, urban air mobility with the vertical takeoff and landing aircraft. So it's a phased approach, much like the balance of our business, and we're in a wide range of applications that will start as early as June of next year.

Super helpful color. And you said that the VTOL will follow after the CTOL. So with the June 2026 for the CTOL, how much faster or how quickly could you get the VTOL to also be in this program?

Yes. So everything around the design of the stepwise approach certification manufacturing and the EIPP has about just under a 12-month lag from the CTOL to the VTOL. Remember, our first CTOL came off the production line last November, our first VTOL came off the production line in August. All of the engineering assets and production assets are set up to do this type of cadence, learning from the conformities of the motor into the CTOL, learning from the conformities of CTOL into the VTOL. We will be able to provide a direct data on that -- or a firm data on that when we understand the level of conformity and maturity that is demanded in those applications. But in my opinion, we will achieve that sooner by focusing on cargo medical logistics because the FAA and their safety-first approach really likes applications that have a lower risk, and that's where we're starting. So about a year phase shifted is the answer to your question, probably less.

We'll go next to Ron Epstein with Bank of America.

Congratulations on the IPO. Maybe following up on some of your comments, Kyle, on supply chain and labor. How are you thinking about that with regard to the ramp? How are you thinking about recruiting personnel to have enough people on the floor to build aircraft? And then two, what challenges do you foresee in the supply chain in order to ramp the way you want to?

Yes. Great question. So the first part of it is a heavy focus on vertical integration to manage our supply chain. So we are largely in control of our own destiny when it comes to delivering the products from our primary manufacturing, which is, of course, the welding machining composites. There was post recently, you may have seen, that we've achieved a conformity of our composites in our own composite shop. We also leverage supply chain to kind of come together to create our composite structure. That has been a big focal point. In parallel with that, we focused on magnet semiconductors and batteries. For semiconductors, for example, we prebought both the safety critical semiconductors for controls and also our power semiconductors for everything we needed through development certification and initial deliveries. So there are certain strategies in certain places, vertical integration, prebuy.

We have also focused on our labor. So we had a pretty phenomenal turnout at a recent Career Day where we had to shut the doors at around 600 people who showed up to attempt to work here at BETA. We have no lack of access to really, really good talent when it comes to building things.

But one piece of like really important insight is we're not doing this without focusing on the economics of our product, the cost of build materials, for example, where we continue to focus on reducing the total touch time, labor and floor time of every single component. Recently, we took our fastened wing, which had 14,000 fasteners, 580 parts, took 6 weeks to build, and we redesigned it to be a bonded wing, which reduced it to less than 250 parts went to 0 fasteners, it took 4 days to build. And of course, it's significantly less expensive. And by the way, it lost 18 pounds and became stiffer.

So that's what we're applying to the major commodities that drive our cost of build materials. And of course, cost generally directly tracks with the reliance on labor. So vertical integration, prebuy in some cases and focusing on reduction of labor has given us a strategy that we're seeing our ability to produce the aircraft that we promised.

That's great. Great. And then maybe just one last follow-on from one of your comments. In your prepared remarks, you talked about deposited backlog. Can you mention why you framed it that way, deposited backlog as opposed to just backlog?

Yes. Thank you. It's actually a really big deal for us. We have to plan our production around something that has high-level surety. Naturally, engagements with customers starts with memorandum of understanding, letters of intent, then may go to term sheet. At some point in that with those kind of preorders, you get to the point where you get a deposit. So it's a financial commitment from these businesses that we want to buy n number of aircraft for x dollars. That is where we trigger a backlog kind of checkmark. So that deposit backlog, each of those are tied to some financial commitment. The last phase, which we're in now, and this is one of the things we're tracking very acutely internally, is converting those deposit-backed backlogs to actual serial numbers with a delivery date so that we can start exercising our progress payments. So that's one step further than the deposit-backed backlog. So those APAs, or aircraft purchase agreements, exactly solidify that schedule, and then we start getting those milestone payments. I'm sure Herman can talk to the recognition of revenue on that, but that's an important cash management tool for us.

Yes. So Ron, I think when we talked about working capital a couple of months ago, we have set it up in a way where we get a deposit upon the firm order about a year before we begin manufacturing, we begin -- we get another deposit. And then 3 months before we begin manufacturing, we get another deposit. And when you sum it all up, it's about 50% of the selling price of the aircraft. So that puts us in a very good position from a working capital perspective. And then ultimately, we get the final payment when we deliver the aircraft to the customer, and we recognize 100% of the revenue once the customer signs off on it. So it's a very easy and pragmatic revenue recognition approach.

We'll go next to Sheila Kahyaoglu with Jefferies.

Congratulations on the IPO. Maybe 2 questions on the partnerships you announced. So the first on DB and the undersea propulsion systems, can you discuss the timing of that opportunity and how we think about overall marine for BETA?

Sure. So that program, much like our other propulsion programs, started because, in this case, DARPA and GD got wind of what we were doing and had hosted them here. I toured them personally around the business, showed them all the technologies. What really triggered the initiation of that program was BETA's ownership of the software, the hardware, the control electronics, the electromagnetics, putting that all together into something that could meet the national security needs because of that full ownership. But the second part was the performance and the performance of our propulsion systems won us that job.

Now it started with a relatively small job and for round numbers, $3 million to $5 million. The next phase of that particular program is approximately 10x greater than that, and the next phase is 10x greater than that. So it's a classified program, so I can't speak specifically to the technologies, but that's the progression over the next 2.5 years of that program. And I was just down at DARPA headquarters getting some classified briefs on the extension of that. So because of the successful deliverables that we just had, we've been exposed to 2 more major programs that are both classified as well.

So to answer the second part of your question, we are expanding our undersea applications. And as I mentioned in the prepared remarks, like people in the air, I'm a pilot, as you know, I think we flew together. We did. That was an awesome flight in the electric airplane. We can't tolerate failures in the air. We can't tolerate a system that we don't understand every part of it. You can't tolerate those failures when you're under the sea, when you're under the Arctic ice shelf ever. And if there are any issues, you need to have a backup system or redundancy that allows you to continue the mission. So although the tech is just a little bit different, of course, the cooling systems are different, the requirements are actually remarkably similar for those different types of applications. So I think you will see us expand into more marine applications, specifically the safety-critical and mission-critical undersea work.

Got it. No, really neat stuff. And then maybe one on the Eve partnership just because it progressed this quarter to a full-on agreement. And I think you mentioned $1 billion in the backlog for it. So just how do we think about that? And are there more to come?

Yes, for sure. There are more to come. We -- those relationships don't evolve overnight. In every case, and I think there's about 5 of them that we've identified with you guys. These airframers typically kind of start evaluating the market. They may choose somebody else, maybe they have some successes, maybe they have some failures. And they end up back looking at our propulsion because of its path to certification, its performance and the ability to rely on us as a production partner in the future.

We delivered a bunch of motors down to Brazil that allowed Eve to step into their flight test program, and that earned us the production contract. And again, it's just for the pusher right now. That production contract was only awarded after some pretty thorough risk assessment on our ability to produce here in Vermont, our quality management systems, our certification plan. And this is where I do need to openly compliment the rigor and the thoroughness of their engineering leadership and their supply chain leadership. We learned a ton working with them. So the actual deal itself, yes, it's approximately $1 billion based on their current backlog, and that's about 60-40 split between the initial sale of motors and the in-service agreed to kind of pay per hour fees that are associated with the use of that motor kind of totaling about $1 billion.

Our next question comes from John Godyn with Citigroup.

Congratulations. Kyle, you made a comment that there were hundreds more aircraft in active negotiation when you were talking about the backlog. And I was just hoping to kind of spend an additional second on that and understand what the contours of that may look like? Is that CTOL? Is that VTOL? Is that engines? Like you just mentioned, there were some other airframers interested. Existing customers? New customers? Whatever you can share? I feel like you wouldn't have made that comment if there wasn't some visibility and confidence to it.

Yes. I guess maybe I'll point to one that was quite public at the Paris Air Show with the second largest kind of regional carrier in the country, which is Republic Airways. And we openly allow people to track our aircraft. It's funny, like early this morning about 3:00 a.m., I saw our aircraft landed with a bunch of pilots that have been flying like a continuous 70-hour mission. They are flying in the rain, the sleet, the snow up here, and that is with one of those customers that we're trying to convert from an MOU into deposit-backed orders. And that would add a couple of hundred aircraft to the backlog alone. Now that will start with CTOL and go to VTOL. And what we've seen in our backlog, especially over the last quarter is that the majority of the orders are coming in for conventional takeoff and landing, or CTOL, aircraft and with an intention to go to VTOL. And the reason is, is that the infrastructure exists today. The pilot licensing is clear and very, very attainable for their existing pilots, and they consume it on the routes that make sense for them, especially when they start with cargo and logistics.

And the performance of the aircraft, and I do want to note something, one of the things that everybody -- I mean, you got to make airplanes light, you got to make them reliable, you got to make them meet the mission. Our CTOL aircraft right now actually has payload margin. That means that when we say it carries 1,250 pounds, there's actually -- it can carry more than that, even within its max gross takeoff weight. And it was a bit of a conservative engineering miss that we're going to leverage into the next aircraft release. So I bring up that example to say that when we go out and say we can fly this mission, we're covering that and more. So the CTOL is an obvious order right now for those folks based on the operational economics of it. And that's where we're seeing the biggest growth in our backlog.

Yes, that's great. It sounds like there's a lot of activity out there. And given that you're willing to kind of offer some of those KPIs, I feel like it's likely, and it sounds like you would say we should see more orders every quarter for the next few quarters. It sounds like there's a lot of activity. Is that what we should expect every quarter kind of some more of these orders coming in?

Yes. That's what we expect. We're seeing those come in. Given the success we're having, it gives us actually a little more leverage on the pricing because those orders are coming in and they're starting to get a little bit of urgency around securing those production slots through APAs. So it's not -- we're not just counting the number of aircraft. Now we're really focusing on the quality of the orders that is both the terms that we agreed to, of course, the pricing being one of them and other secondary and tertiary terms to those contracts, but also the quality of the operators that we're deploying into.

We get asked a lot about MRO services and pilot training and other things. And as you probably know, we really do focus on the large, credible operators that already have those things in place and can be successful partners, especially in the early days of these launches. So yes, you should see increased orders, but also please note the quality of the orders that we're pursuing and the level of which those engagements produce near-term revenue through the CTOL aircraft building into the VTOL.

Great. And if I could slip just one more in. You had that comment that the aftermarket backlog was 4x the size of the backlog, if I heard that correctly. That may not be perfectly quantified, but I just thought that was a fantastic data point. Do you guys have any plans to maybe dig into that, elaborate on that, firm that up? Is there a way to kind of do that contractually? I think the aftermarket piece is obviously a big part of the story, and that was just a great data point.

Yes. Let me just correct that for one second. The aftermarket backlog is 3x higher than the sale of the aircraft. What I mentioned was the total backlog is 4x higher because you have the 1 unit plus 3x, that's the total backlog. So just to -- I hate to be the engineering nerd of being very precise with language, but the total backlog is 4x higher.

The -- but to elaborate a little bit more on the qualitative portion of that, which is the -- in certain contracts, we have a contractual price for the aftermarket battery. In other contracts, one that was made very public with Air New Zealand, for example, it's a leased aircraft, and they're doing power or energy by the hour. So that backlog will come in 2 forms: selling of the aftermarket product on a per unit basis, where we provide a core refund for the return batteries and a charge for overhaul battery; and energy by the hour. Now we're being very thoughtfully cautious about getting extended too far on anything that is a per flight hour payment. But that's where these APAs come in to make sure that we're protected, the customer gets a lower cost of operation and an ever-increasing performance in the battery. But we estimate for each $4 million to $4.5 million airplane, there's about $13 million of backlog -- excuse me, of aftermarket.

Yes. And one thing, John, is as we had spoken about in the past, the aircraft is a working aircraft. It will fly for 20 years, 35,000 hours. And if the aircraft is flown like that, the battery will be changed about once a year. And that aftermarket, if you look in the slide deck that we shared today, you see -- we call it the double whale back chart, you see how big and durable that aftermarket revenue is. And it goes on for close to 20 years. So it's a meaningful part of our business. It's a wonderful gross margin opportunity for our business. And I think it's important that, that point is made on that aftermarket. So it's extremely durable.

Our next question comes from Chris Pierce with Needham.

I'd love to hear the early learnings you guys are getting from customer deployments and how this might help with more linear adoption. Like I mean, do you see partners being in orders as they turn over their fleets? Or are they already running new routes to see sort of how they can expand their operating envelope? Kind of whatever you could share on that?

Yes. So the biggest learnings, we're getting a lot out of our overseas deployments. We fly a lot in the U.S., of course. One of the learnings in Europe is that reserves really matter. The ATC and the efficiency of getting aircraft in, especially when there's high-traffic regions, are really important to manage. So having adequate reserves and having acute knowledge of what those reserves are. So very technically, like we have a state of charge estimator within the battery, that state of charge estimator is pretty pessimistic all the time because we have a conservative approach with the FAA for safety. So if you think you have 45 minutes of flight time remaining, you may have 60 or 120 in some cases. But learning to train the pilots to know under what conditions they can maximize those ranges in reserves and how to do that has been a really positive learning. And that goes in informing both the technology and the training regimens for the pilots.

The second big thing is around the maintenance requirements. So as we've been flying these things, we started -- in our first deployments earlier this year, we would deploy a couple of maintainers, a couple of pilots, usually a flight test engineer and somebody to manage the chargers. We're down to deploying things overnight with just a pilot. And that is a product of understanding what that pilot needs to successfully and safely complete that mission, the next mission and every mission after that.

What do they need to inspect? What do they need to maintain? And it turns out to be very, very little. We flew across the country and back numerous times now. And in our last run across the country, the only thing we did is put a little bit of air in the tires. So that's been a really phenomenal learning and more of a validation that electric aviation offers a safer and more reliable product out in the real world.

We've learned a lot about charging and flight planning as well. But there hasn't been any big ahas. We, of course, got the little technical things like flying in the rain and the sleet and the snow. We found a couple of little leaks that we quickly remedied with seals around gaskets and other things. And yes, it -- there hasn't been big ahas, but getting out in the real world just reminds us that aviation is a serious business, you got to get the right reserves and you got to have the right flight planning in place, and that data is important to us.

And how are they thinking about what are they telling you, hey, this is great for our existing routes. This creates new routes we hadn't been able to consider before. Like what are you kind of hearing as far as how they might integrate the aircraft into their kind of route planning?

Yes. So there's 2 big like draws to the implementation of it. Yes, in their existing route planning, that's where the CTOL fits. If you lower the cost of carriage for the packages, they're just simply -- they have an attrition problem with their existing aircraft where they're worn out, they can't get parts. They're begging for this airplane to just simply fulfill the feeder fleet network that they have today. There's no question with that.

Some of the larger new orders see it as an augmentation to their existing business for a couple of reasons. One of them is pretty interesting. It's to fulfill a gap in the pilot pipeline. So we have dual control side-by-side seating that allows a pilot to progress from primary training, they first learn at an airplane, to get into a low-risk application like cargo and logistics with a captain in the left seat, a first officer in the right seat or vice versa. As that pilot builds time, they move into what you consider the left seat, and they would move then into regional like jet transport, for example, or corporate flying. So that's a gap that exists today, and a lot of our customers see value in implementing the CTOL aircraft to fill that gap, provide a new service to their customers and train their pilots. And that's a keen interest in our aircraft.

Our next question comes from Andre Madrid with BTIG.

You've given a lot of color on the milestones to look ahead for on the CTOL and the VTOL variants. But can we maybe just dive a little deeper into mVTOL, the military variant? I mean, what should we be looking out for? And could you fill us in on some of the recent updates there?

Yes. Probably not going to go too deep on it, but I will -- I'll hit the top of the waves here. Our engagement with General Electric very strategically starts with the MV-250, which is a military variant of the 250. It is an autonomous, unmanned hybrid aircraft that has performance that exceeds existing vertical takeoff and landing aircraft. What I mean by performance is that it will go further and faster than a helicopter. It is -- it's really a totally different argument to the military than the one we were making previously, which was higher reliability, lower fuel dependency, low thermal signature and low noise. Now we fundamentally have a product that does more than the existing product. And we know that China is putting these things in the air right now. And if we unfortunately get into a fight in South China Sea or in the first, second, third and island chains, we need a long-range support vehicle for our troops. First, aerial cargo logistics and then potentially other applications.

So the 3 pieces of that equation are the autonomy in the aircraft. BETA owns 100% of that. The autonomy outside the aircraft. We partnered with several partners. One of them we announced was Near Earth Autonomy. The hybridization. And as you know, we've built several hybrid aircraft. Now we're moving into the big leagues with GE, who makes the best engines in the world, coupled with our generator, and now we have a turbo generator together mounted on top of our aircraft. And that -- those things right there are built on exactly the same wing, boom, motors, flight control systems as our civil aircraft.

So when we talk about this, it's no secret that whether you're carrying medical cargo, people or military supplies, you want a safe, reliable, lightweight and super high-performance system. So all you really do in this case is you change the fuselage so that you can accommodate the loads of that particular mission, whether it be passenger, cargo, in this case, military. The beautiful thing about the military application is by taking the pilot out, you save a lot more than the weight of the pilot. You take all the safety infrastructure that you need for human flight, and that's actually a significant amount. And net-net, and you're going to get probably surprised with this. When you do that, you get about twice the performance of the aircraft. And I could break down all the technical reasons why that happens. But really, it comes down to eliminating the weight necessary to hold a person is significantly greater than the person itself.

That allows us to have commonality on the what we call the top deck, the wing, the booms, the tail and the motors and the props, and then a fuselage that changes out, the addition of the turbo generator, more than twice the performance of the overall system and you add in hybridization and you get remarkable ranges that are greater. And I think personally, as an American, I would not want to supply our troops with something that was inferior to our adversaries. So we want to deliver a cargo logistics support infil-exfil aircraft that will connect all of those islands in a way that can support our troops with critical supplies. And we are actively doing that and putting those puzzle pieces together. And I think that you can expect that you're going to see quite a bit more from us. And again, in spirit of BETA, we talk about stuff we've already done. So I'm not going to sit here and tell you all the things that we're going to do next year, but we'll report on that very shortly.

Well, I'm looking forward to that, and you're right, I was pretty surprised on the performance. That's great to hear. Another follow-up, if I could squeeze it in. I mean, a peer of yours recently announced that they're supplying an electric powertrain for a strategic partnership between the U.S. and the foreign contractor. I mean you mentioned the opportunity to serve as a merchant supplier for commercial customers, but with the rise in allied defense spending, I mean, how are you guys looking at the international defense opportunity as a merchant supplier?

Yes. Well, our team spent the last week replying to an RFI and RFP with a foreign ally. So it is not lost on us that Europe is drastically increasing their percentage of their GDP on military spending, and that drones, drone warfare and troop support is a necessary thing in the future of fights. So we are there as well. We are actively engaging with those folks. I personally went and met with the commander of Europe, NATO, and we kind of talked through the time lines of this stuff. And I think that I can't speak for our competitors, but I know that we are right there in the conversation and proving that this thing flies on a regular basis in Europe and people are seeing it down under and even over in Asia.

Awesome. That's super helpful. I appreciate it, Kyle. It's great to hear the progress you're making with our allies.

Thanks, Andre.

That concludes the question-and-answer portion of today's call. With that, I will now turn the call back over to Kyle for closing remarks. Please go ahead.

Awesome. Thank you, operator. Appreciate it, and thanks for everybody who stuck around this long through our earnings call. I just want to kind of provide a heartfelt sincere appreciation for the people here at BETA, the employees, the contractors, our suppliers who have just really accelerated this company from an R&D company into something that's delivering real product now. So thank you, everybody. It's incredibly meaningful to the mission that we're trying to pursue. And I think that we are trying to kick this off in the right way as a serious A&D company that keeps our promises, focuses on results, reports things after they happen. And we have a strategy that is stepwise pragmatic.

And before people think about what to do with BETA stock, I think it's important to look a little bit deeper. And I think each of the people who have dug into BETA have realized that there is quite a foundation being built for the future of aerospace, both in technology, in people, in infrastructure for manufacturing and all the pieces that go into a long-term enduring business that's going to step up and up and up and grow into a leading supplier and producer of aircraft and other high-reliability technical products that help our U.S. military, help our GDP and ultimately close in our mission of creating a sustainable aviation future.

So thank you, everybody. Really appreciate the time.

This concludes today's BETA Technologies Third Quarter 2025 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.