BETA Technologies Inc (BETA) 2025 Q3 法說會逐字稿

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 who helped us through a successful IPO. Fidelity has been with us from the very first round, along with Amazon, Chuck Davis, [John Abley], 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 [DOD] programs, and new orders from [MRO], 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. That'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 tactful way. When I met Martine Rothblatt at United Therapeutics in 2017, I felt like two 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 to finally 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 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've 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've 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 multi-modal 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 three continents and 10 countries, landing at 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 10 times 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 on 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 Air Mobility.

This aircraft backlog doesn't include the post-sale services and aftermarket components, which makes the total backlog about four times 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 H-500A, 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 A-250 vertical takeoff and landing aircraft, which has a closed G-1 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 A-250 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 chair the GAMA Electric Propulsion and Innovation Committee, an industry group comprised of the 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 transparency and intellectual honesty. I want to spend a moment outlining five 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 three 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 this 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 H-500A, 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 standalone in the United States.

On the CX-300, which is a 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'll 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 have 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 new 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 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 airport-to-airport electric cargo and medical flights before urban air mobility really takes hold. With our recent order from ESmart 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 one of our joint development CT7-based turbogenerator 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 has been in the works for the last year, we've said little about the total scope and positive impact of 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 H-500B, which we're testing now and proving a significant increase in power and power density. You see, the BETA 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 [and 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 Cuto. 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 six 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 nine 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 nine 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 nine 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) Anthony Valentini, Goldman Sachs.

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 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 coming up with on your own just to give people an idea of how far along you are?

Hey, 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 with 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 [assimilation] of both.

For example, in the CX-300, you see the tracking, for example, our compliance planning. But for additional color, we've submitted 13 of 20 plans, so nearly 65% completed the submissions, and the FAA has accepted six 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 four 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 at the same place at the same time in order to enter the last stage of implementation, which is the flight test. So again, the percent complete is based on what has been accepted, not what's been submitted.

Got it. Okay, that's incredibly helpful. 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?

Yeah, for sure, it is early 2026 that we're tracking to right now. We are in durability endurance testing, which is the longest pole of all that testing, and 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, 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 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.

Kristine Liwag, 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?

Yeah, great question, Christine. So it is both the CTOL and the VTOL in time. The CTOL goes first. So the general timeline 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 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 manage our supply chain, our production, our labor, and 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 [certification] 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 a 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 on this program?

Yeah, so everything around the design of the stepwise approach, certification, manufacturing, and the eIPP has just under a 12-month lag from the CTOL to the VTOL. Remember our first CTOL came off the production line last November, and 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, and learning from the conformities of the CTOL into the VTOL.

We will be able to provide a direct date on that, or a firm date 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.

Ron Epstein, 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 that the way you want to?

Yeah, great question. So the first part of it is a heavy focus on vertical integration to manage our supply chain. So we're 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, and composites. There was a 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 come together to create our composite structure. That has been a big focal point.

In parallel with that, we've focused on magnets, semiconductors, and batteries. For semiconductors, for example, we pre-bought 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 and pre-buy.

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 really important insight is we're not doing this without focusing on the economics of our product, the cost of building 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 and 580 parts, and took six weeks to build, and we redesigned it to be a bonded wing which reduced it to less than 250 parts and went to zero fasteners. It took four 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 to build materials, and of course cost generally directly tracks with the reliance on labor. So vertical integration, pre-buy in some cases, and focusing on reduction of labor has given us a strategy that we're seeing in our ability to produce the aircraft that we promised.

That's 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?

Yeah, thank you. It's actually a really big deal for us. We have to plan our production around something that has a high level of surety. Naturally, engagements with customers start with memorandum of understanding, letters of intent, then they go to term sheet.

At some point in that, with those kinds of pre-orders, you get to the point where you get a deposit. So it's a financial commitment from these businesses that we want to buy any number of aircraft for x dollars. That is where we trigger a backlog check mark, so that deposit-backed 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. Those APAs, or aircraft purchase agreements, exactly solidify that schedule and then we start getting those milestone progress payments. I'm sure Herman could 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 then get another deposit, and then three 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. 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.

Sheila Kahyaoglu, Jefferies.

Congratulations on the IPO. Maybe two questions on the partnerships you announced. For the first on GE 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 program, started because, in this case, DARPA and GE got wind of what we were doing and had hosted them here. I toured them personally around the business and 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, and 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 10 times greater than that, and the next phase is 10 times 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. I was just down at DARPA headquarters getting some classified briefs on the extension of that. Because of the successful deliverables that we just had, we've been exposed to two more major programs that are both classified as well.

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 and we flew together, that was an awesome flight in the electric airplane. We can't tolerate failures in the air, and 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.

If there are any issues, you need to have a backup system or redundancy that allows you to continue the mission. 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?

Yeah, for sure there are more to come. Those relationships don't evolve overnight in every case, and I think there's about five of them that we've identified with you guys. These airframers typically 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. 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, and our certification plan.

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, yeah, it's approximately $1 billion based on their current backlog. That's about a 60% to 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, totaling about $1 billion.

John Godyn, 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 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.

Yeah, I guess maybe I'll point to one that was quite public at the Paris Air Show with the second largest regional carrier in the country, which is Republic Airways. We openly allow people to track our aircraft. It's funny, like early this morning about 3 AM. I saw our aircraft landed with a bunch of pilots that have been flying 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. That would add a couple 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 of CTOL aircraft, with an intention to go to VTOL.

The reason 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. The performance of the aircraft -- and I do want to note something, one of the things that everybody -- I mean, you've got to make airplanes light, you've got to make them reliable, [you've got to make them] the mission.

Our CTOL aircraft right now actually has payload margin. That means that when we say it carries 1,250 pounds, it can actually carry more than that, even within its max gross takeoff weight. 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.

Yeah, that's great. It sounds like there's a lot of activity out there, and given that you're willing to 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, some more of these orders coming in?

Yeah, 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 APA. So 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 and, of course, the pricing being one of them.

There are 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 at 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 four times 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.

Yeah, let me just correct that for a second. The aftermarket backlog is three times higher than the sale of the aircraft. What I mentioned was the total backlog is four times higher. Because you have the one unit plus three times, that's the total backlog.

I hate to be the engineering nerd about being very precise with language, but the total backlog is four times higher. To elaborate a little bit more on the qualitative portion of that, 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 two 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 an overhauled battery, and in an 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 and 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 aftermarket.

Yes. And one thing, John, as we had spoken about in the past, the aircraft is a working aircraft. It'll 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-whaleback 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.

Chris Pierce, 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. Do you see partners feathering in orders as they turn over their fleets, or are they already running new routes to see how they can expand their operating envelope? Just whatever you could share on that.

Yeah, so the biggest learnings -- we're getting a lot out of our overseas deployments. We fly a lot in the US, 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, we have a state-of-charge estimator within the battery, and 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 and reserves, and how to do that, has been a really positive learning. That goes into informing both the technology and the training regimens for the pilots.

The second big thing is around the maintenance requirements. 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 was 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 haven't been any big AHAs.

Of course, we 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 yeah, there haven't been big AHAs, but getting out in the real world just reminds us that aviation is serious business. You've got to get the right reserves, and you've got to have the right flight planning in place, and that data is important to us.

Okay. And how are they thinking about it? 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 hearing as far as how they might integrate the aircraft into their route planning?

Yeah, so there's two 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 of 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 GAAP 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 out of 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'd consider the left seat. And they would move them in 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.

Andre Madrid, 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?

Yeah, probably not going to go too deep on it, but I will hit the top of the waves here. Our engagement with General Electric very strategically starts with the MV250, 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'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. If we unfortunately get into a fight in the South China Sea, or in the first, second, and third island chains, we need a long-range support vehicle for our troops. First aerial cargo logistics, and then potentially other applications.

So the three pieces of that equation are the autonomy in the aircraft. BETA owns 100% of that. The autonomy outside the aircraft, we've 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 those things right there are built on exactly the same wing, boom, motors, and 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. All you really do in this case is change the fuselage so that you can accommodate the loads of that particular mission whether it be passenger, cargo, or 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.

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. 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, which is significantly greater than the person itself. That allows us to have commonality on 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 then you add in hybridization and you get remarkable ranges that are greater.

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 infill/exfill aircraft that will connect all of those islands in a way that can support our troops with critical supplies. 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 the 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, so 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 US and a foreign contractor. I mean, you've 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 GDP on military spending and that drones, drone warfare, and troop support is a necessary thing in the future of [fights].

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 talked through the timelines of this stuff. 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. Thanks so much for the color and it's great to hear the progress you're making with our allies.

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, I appreciate it and thanks to everybody who stuck around this long through our earnings call. I just want to provide a heartfelt, sincere appreciation for the people here at BETA, the employees, the contractors, and our suppliers who have 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, and reports things after they happen. We have a strategy that is stepwise pragmatic.

Before people think about what to do with BETA's 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, and in infrastructure for manufacturing. All of 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 on our mission of creating a sustainable aviation future.

So thank you, everybody, really appreciate the time.

Thank you. This concludes today's BETA Technologies third-quarter 2025 earnings conference call. Please disconnect your line at this time and have a wonderful day.