Hello, everyone. Thank you for joining us and welcome to the Beta Technologies First Quarter 2026 Financial and Operating Results. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. I will now hand the call over to Devin Rothman, Head of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Thank you for joining us for Beta Technology's first quarter 2026 earnings call. Joining me today are Kyle Clark, our founder and chief executive officer, and Herman Cudo, 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, Devin, and good morning, everyone. Thanks for joining us. We're We're excited to share with you the progress we've made since our last earnings call. In two months, we've progressed our commercial goals, adding $375 million to our aircraft backlog, advanced our long-term strategy, and continued 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 orderings, 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 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 seven out of the eight 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 out performance 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 BEDA aircraft during the EIPP. These selections are both a testament to BEDA'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 seven selections. Our recognition in the EIPP is a 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 Logan Air and the Royal Mail in Scotland in coordination with the UK CAA. In Japan, we flew with SOGIS 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 one 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 six months due to growing demand signals for unmanned detritable aircraft continues to advance the key element of this autonomous veto 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 warfighter 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 MV-250 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 technology 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 four billion dollar 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 Aaliyah. 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 10th, 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've 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 the 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 entrance into this space. We see more of these opportunities with states developing, and I'll expect this will be a growing theme in future calls. and now let's discuss max demonstrated production rate we are focused on building manufacturing capability and inventory of long lead materials as we prepare our production areas for higher rate than our current rate of a 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 2100 engine software requirements and we are now dispositioning 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 trail-breaking 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 rulemaking and trail breaking 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 at 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 this 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 H-500A 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 a type certification of the CX 300 aircraft or the launch of the aircraft into the EIPP program. We've also made measurable progress in our CTL 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, eight 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'll use for aircraft structural tests. 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, stepwise approach allows our VTOL program to benefit from our CETOL 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 CETOL 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 seven of the eight 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 token 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 CETOL 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 CETOL 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.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your first question comes from the line of Christine Lewag from Morgan Stanley. Christine, your line is open. Please go ahead.

Hey, good morning, Kyle, Herman, and Devin. Kyle, thank you for your transparency on the H500A engine certification timeline. 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?

Yeah, for sure. Good morning. So on containment specifically, you know, the legacy rule comes from the blade disc route 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 in 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 one 10th of 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 quote 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 that 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's shut down it continues to windmill at the prop we've compromised the coils mechanically with nails with pinnacles 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, you know, in a PT6, you have 2.3 gallons of oil sitting in there. That's all flammable. You just don't have that in an electric motor. And, and so, you know, 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, 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, we have to come up with something that allows the specialists 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, you know, 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 a 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 for 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.

And thank you, Kyle. I guess it's very encouraging to hear that it's hard to start a fire with an electric motor. Seems like a good problem to have. And as a follow-up, you know, 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? Thank you.

Yeah, 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 six 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 turtle boat 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. You know, there's a general recognition by GE that we have very, very high levels of safety and technology. But sometimes the, it's the sound that makes the music and the way in which we present these plans and procedures. So it, um, it's really been a great relationship, uh, 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. You know, on the other side, they, they recognize that we have a particular operating philosophy. Um, you know, in the case of the motor, for example, we elected to take the hardest nut off the wheel first it if you can't get that one off you don't get the wheel off the off the off the car and and they appreciate this because they are learning a ton from the groundbreaking kind of trail breaking exercises we're doing with the faa and that bi-directional 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.

Great. Thanks for the color.

Your next question comes from the line of Andreas Shepard with Cantor Fitzgerald. Andreas, your line is open. Please go ahead.

Great. Thank you. Good morning, everyone. And thanks so much for taking our questions. Kyle, congrats on all the great progress. I wanted to maybe touch on EIPP. So Beta obviously selected for seven out of the eight 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? Thank you.

Yeah, so I mean, I think one of the important differentiators is that we are ramping into real-world operations as opposed to demonstrations. 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 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, you want to talk a little bit about that?

Yeah, that's a great point. 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, an operational readiness perspective. So we're really excited to partner with our operators and get these out.

Andreas, it's Herman. Maybe just a little color that I could share. You know, I think one of the things that Kristen's 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, you know, 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. Thanks, everyone. That's very reassuring and very great to hear. Maybe as a quick follow-up, maybe a quick two-part question, first one being, you know, 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 test program.

I'm going to hit the top of the waves in 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 pre-build 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 they're 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. You know, 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 and back to the four principles it was you know 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 a nice transitioning aircraft and and I don't want to go out making claims but you know we've flown now three different designs of VTOL aircraft. The latter two through transition in both directions with all azimuth winds, 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 bi-directional transitions, you can put us down for four across multiple different types of aircraft.

Andreas, 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.

Yeah, I just wanted to say on that note, because we do talk a lot about the insulation 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.

Excellent. Thank you so much, everyone. Really appreciate all that great color. Congrats again on all the progress. We'll pass it on. Thanks, Andres.

Your next question comes from the line of Ron Epstein with Bank of America. Ron, your line is open. Please go ahead.

Hey, good morning, guys. Maybe Kyle, start off a question for you following up on Christine'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, you know, I mean, in some sense, they're asking you to light a rock on fire if your rock doesn't burn. It almost seems nonsensical. So culturally, how do you navigate that so you can get to the place where you want to be?

Yeah, it's a great question. I mean, without getting deep into the strategy, Ron, I can tell you that 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 uh and 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 um to making sure the 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, you know, 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 and 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 saved doing vertical, does that just convert, right, to more range and forward flood?

Yeah, 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. You know, 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, you know, 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 chalk us up to four to the last question, I didn't mean four transition. I meant four different types of vehicles doing those transitions. and hundreds and hundreds of of flight tests yeah yeah and have you said that what you expect the range of retail to be um 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 uh and you need to account for weather conditions but again that's a starting point um you know 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, you know, it's really like, you know, 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 outpays the product, and you give us a little color on that.

Yeah, 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. Got it. All right. Thank you.

Your next question comes from the line of Billy Healy with Jeffries. Billy, your line is open.

Please go ahead. and thanks for taking the questions i'm on for sheila today um can you just speak about you know the potential revenue and margin profile defense business with the gd contract and you know how the g partnership on mv 250 could scale over time yeah i think um 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, thanks. And then just following up on R&D, you know, stepping up to 92 million in the quarter, you know, how much of this is driven by certifications versus EIPP versus, you know, the turbo generator with GE? And, you know, what should we expect going forward?

Yeah, so inside of the quarter, less about EIPP and more about certification. The programs like MV250 investing behind that, the VTOL, and then, you know, of course, we're spending a lot of time and energy right now with the motor certification and also the CETOL 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's 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 one last year, growing into a phase two 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, a potential $300 million on a per contract basis for these programs. And really, as you would expect, the early days, quote, 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.

Great. Thank you.

Your next question comes from the line of John Godden with Citigroup. John, your line is open. Please go ahead.

Hey, guys. Thanks for taking my question. Kyle, I wanted to revisit the charging network, sort of bigger picture, because you described, you know, 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 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? You know, 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 tall road dynamic, you know, that, you know, my recollection is, you know, 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 economics kind of evolving as the scale takes shape? Thanks.

Yeah, I mean, starting at the highest level, the charging network is extremely strategically important to the advancement of advanced 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 conflate 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 non-reserved or the reserve times in the non-reserved 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 in Florida, I should say more specifically or accurately, backing the procurement of these chargers because they want to enable electric aviation and advanced 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 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. You know, 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 work 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 could be waiting for aircraft adoption and and it's really the customer who ends up getting stuck in the middle so the forward thinking that went into really designing you know in this example the charge network was was all about this frictionless customer experience that we're we're trying to provide our operators with that's great um appreciate it and 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 you know, 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, you know, any sort of orange flags, if you will, that are on your mind for managing? Thank you.

Yeah, 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. You know, 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 stack the inventory for our planned builds. And then, you know, we've advanced some, you know, 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. You know, 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, you know?

Appreciate it.

Thanks, guys.

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. Appreciate the questions, everybody and the analysts. But as I've said for the past couple quarters, and I'll say it again, we're continuing to position ourselves just to win in the market. And 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. We're not looking for the flashbang. 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 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's 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, Devin.

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