BETA Technologies, Inc. (BETA) Q3 2026 Earnings Call Transcript

Hello, everyone. Thank you for joining us and welcome to the Beta Technologies Third Quarter 2026 Financial Results Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one 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 Technologies' third 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 third 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 within the meaning of securities laws. 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. On our last call, we covered the MV250 debut at Farnborough, EIPP launch with United Therapeutics carrying organs, motor certification policy interpretation issues, and an aircraft backlog approaching the year-end goal of $4 billion. This morning, we will cover the commercial, military, and certification momentum and financials through this last quarter. Quarter three was the strongest revenue quarter in beta history. We beat the midpoint of our Q3 guidance by more than 50%. We also crossed more than a quarter million nautical miles of electric flight. We launched service in six EIPP sites, including Florida, this past week. Our exceptionally strong partnership and collaboration with GE continues to make us a better company, and in September, we beat delivery promises to Embraer EVE's program. We also hosted Chairman Yvanovic from the Ex-Im Bank and continued to advance the $830 million financing package to fund our domestic manufacturing and vertical integration expansion. More recently, on October 16th, we earned the FAA Market Survey Airworthiness Certificate for the ALEA A-250 November 250 X-ray Tango, marking the first electric eVTOL aircraft in history to receive one. Four days after receiving this authorization, we flew the first vertical-to-vertical market survey flight. New York to Vermont across Lake Champlain. It was a 34 nautical mile flight in less than 20 minutes. That's a drive that typically takes an hour and a half and includes a ferry. A few years ago, Beta was the very first to fly piloted EVTOL transition flights on full-scale aircraft. We were the first to produce the training-compliant eVTOL and qualify many pilots to fly, and now we are the first to earn an FAA authorization to give prospective customers the experience of an eVTOL aircraft through vertical takeoff, transition to wing-borne flight, and vertical landing. Getting here has required years of work. Each step builds on the foundation for the next. Our maniacal focus on simplicity has driven this progress, and it remains central to how we certify, manufacture, and commercialize our aircraft. As the eVTOL industry advances toward certification and commercialization, FAA authorizations provide concrete and objective measures of progress. This authorization had several prerequisites. We had to show stable flight in every corner of the flight envelope covering all flight load cases and speeds. We had to show stability in all wind conditions, both vertical and runway landings. We had to produce maintenance manuals and implement a maintenance program. Most importantly, we had to have a stable aircraft configuration across a meaningful number of flight hours. A focus on the customer has led us to a deliberate choice to remove complexity. No liquids, no gearboxes, no complex software algorithms, no extra blades, no thrust vectorings, no propeller actuators. Simpler systems have fewer failure modes. Fewer failure modes means the aircraft is available when the operator needs it, and it is generating revenue. FEDA now holds an FAA market survey authorization for both our CTOL and our VTOL aircraft. Both are built on a simple, common platform, sharing the same wing, tail, flight controls, systems, motors, and batteries. They are manufactured on the same production lines. That commonality allows progress in each certification program to support the other. Shifting to our defense business. In September, the CX-300 flew at the Miramar Airshow by invitation. We were the first electric aircraft to fly at that military airshow. The hybrid and autonomous MV-250 was on static display, and our prospective customers really dug into the detail of the aircraft. The response we are hearing from the defense community is direct and consistent. There is an existing capability gap we can fill with longer range, faster speeds, a very small logistics tail, autonomy, and we can do it at a significantly lower upfront and recurring operational cost. The MV250 builds on our commercial A250 platform, sharing its wing, tail, electric motors, flight controls, and other core systems, achieving near-total technical commonality. By adding the Sikorsky Matrix autonomy and the GE Beta Turbo Generator for hybrid operation, and a fuselage designed for uncrewed military missions, we deliver enhanced military performance without the time and cost of a clean sheet design. This foundational dual-use architecture allows the MV-250 to immediately inherit the manufacturing economies of scale, an existing supply chain, and the flight time from our commercial programs. We've had very strong engagement at all levels of the armed services, and we've seen commercial demand for hybrid and autonomous systems as well. We are currently assembling our second hybrid VTOL aircraft with the components for a third demonstration aircraft coming together. We will have more to share soon. Transitioning over to our EIP pre-projects that went live since our last call, we now have launched six of the seven programs that we were awarded. We brought the aircraft to the customer operations. We flew their routes, their schedules, and their conditions. We showed them what dispatch reliability looks like when there's no fuel system, no hydraulics to troubleshoot, and no oil to change. We flew in good weather and in bad weather. We showed them a very low cost per flight hour. We showed up early, quietly tested the routes, and delivered in every case. With these selections live, cargo moving, and medical transport happening, operators are building the institutional knowledge that will turn a pilot program into long-term commercial relationships. Phase one of the EIPP is about three things. One, proving mission closure. Two, demonstrating measurable cost savings. And three, building a record of safe and reliable operations. We are generating the data that will inform the policy for this entire category. Our components business continues to grow faster than we forecasted and has its own $1 billion backlog. We put our motors, batteries, flight control computers, and other systems into other companies' aircraft, potentially creating long-term service and parts relationships. We are presented with many more opportunities than we take. We run each of these opportunities through a rigorous evaluation to ensure it's aligned with Beta's overall development and commercial strategies. We have also recently invested in large format composite manufacturing capabilities. We are building FAA-conforming composite and metallic structure for our flight test aircraft. We have brought precision, traceability, and quality controls together on the factory floor. We have consistently made the strategic choice to spend capital on vertical integration. It isn't only in composites. It's also in the motors, the batteries, and the flight control computers. This vertical integration has allowed us to move extremely quickly and keep our cost of bill of materials in check. Our loan application with the Ex-Im Bank for an additional $830 million financing package continues to advance to support our vertical integration and production. We expect to be the first company in advanced air mobility to reach a maturity level that allows access to this scale of non-dilutive debt capital. On to KPIs. At the beginning of this year, we set five aggressive year-end targets, book $4 billion in aircraft backlog, cross a quarter million nautical miles of flight, secure 150 charging sites, prove a 4.5 aircraft per month production rate, and advance certification. Today, two months early, three of the five are complete. Our commercial aircraft backlog stands at just over $4 billion, with over 1,000 aircraft and firm and option orders backed by financial commitments. Our recent sales focus has been on securing high-quality medical and cargo CETL customers to support a successful entry into service. Airline customers continue to struggle with high fuel prices and are watching the EIPP missions closely, specifically for the realized cost savings. Our sales organization has successfully established a service and support organization, and they've developed a comprehensive forecasting and aircraft data awareness application called BetaOperate. This will be the backbone of the customer support channel into Beta in the future. As of this call, we have crossed a quarter million nautical miles flown. When we set that target, we thought it was achievable but hard. The all-weather IFR capability, high reliability, and high dispatch rates are the drivers behind us reaching this goal more than two months in advance. The aircraft have been flying in the snow and the sleet here in the Northeast. They've been to New Zealand, Australia, Japan, Hawaii, across the country many times, into Florida humidity, into the desert, into the Arctic, and the Nordics, 14 countries in total. The exposure to a variety of environmental and operating conditions has made our aircraft better. We're at 168 charging sites, ahead of our year-end target of 150. These aren't urban showcased installations. They are in the communities our EIPP operators serve. Hospitals, regional airports, emergency response staging areas. That infrastructure is where the missions are. In manufacturing, we continue to make meaningful progress towards our target of demonstrating a production capacity equivalent to four and a half aircraft per month. Our focus at this stage is on establishing and validating the manufacturing capability we will need when we ramp production on certified aircraft, rather than staffing for sustained production at this rate today. We've already demonstrated capacity of four and a half aircraft per month to craft several key vertically integrated component lines, including flight control computers, battery packs, wire harnesses, and inverters. We're now extending that work across our major airframe structures through targeted pulse builds. Our highest manufacturing priority remains in the production of fully conforming flight test aircraft in support of certification, which requires additional FAA oversight, inspection, and part traceability. We're making deliberate investments in capacity while prioritizing those critical certification builds, with the underlying manufacturing infrastructure targeted to be in place by year-end and additional rate demonstrations continuing into early 2027. This approach positions us to scale production efficiently as we acutely manage our direct labor and material costs, and it positions us to add direct labor at the right time. Turning to our H-500A certification program, we continue to complete and submit four-credit testing documents and data to the FAA. Durability and lightning testing are complete. Software development is substantially complete, with all runs performed on four-credit tests of the software. We are through the hardest phases of the engine program and carrying what we learned directly into our other programs. We have aligned with the FAA on how to demonstrate compliance across every test area. Reaching this level of progress put us in the right positions to move forward formally with our next engine certification project. We submitted the H500B amended type certification application earlier last month. Through early engagement with the FAA, we have confirmed conceptual alignment that the B is a derivative product and will be an amended type certificate. The B will follow the path the A has paved, while introducing improvements in cost, performance, weight, and producibility. I want to also provide an update on our CX300 program. The certification plans we need to start early system testing have all been accepted by the FAA, and testing is underway. We continue to host FAA pilots for the flight familiarization activities that help us move towards Type Inspection Authorization, or TIA. The aircraft we are building today will have operational use cases well beyond certification tests. In a moment, Herman will walk through the implications of how we account for this, which also reflects the maturity of our programs as we transition towards commercial operations. On the A-250, beyond the market survey certificate, two regulatory developments moved in our direction. The noise testing we conducted jointly with Penn State and the FAA came back strong. The FAA is using that data to find the noise requirements for this aircraft class and inform the rules. And the FAA published its safety continuum policy towards power lift aircraft. The safety levels it establishes confirm the cross-platform compliance approach we designed into the CX300 and A250 from the start. The team here at Beta has kept their heads down, focused on the quiet work of certification, production quality, and safety of flight data. We've earned the respect and trust of the best in aerospace, and our partnerships with GE Aerospace, Embraer E, General Dynamics APS, and others are strong and growing. The current administration has been very supportive of the AAM industry. The leaders in the FAA continue to reduce unnecessary friction while prioritizing simple, reliable, and safe aircraft. At the start of this year, we told you what we were setting out to do. A quarter million nautical miles, 150 charging sites, and 4 billion in the backlog. Today, I can say confidently, we did those things with time to spare. Our focus is being rewarded, and our strategy is working.

Herman, over to you. Thank you, Kyle, and good morning, everyone. At the start of this year, we laid out a series of milestones and investments designed to advance certification, demonstrate commercial readiness, and build the manufacturing capabilities that will underpin our long-term unit economics. The progress Kyle outlined brings that strategy to life. The ALEA A250 becoming the first electric VTOL to hold FAA market survey authorization, six EIPP selections now live, continued investment in vertical integration and industrialization enabled by advancing XM Bank financing and surpassing three of our five year-end KPI targets, backlog, nautical miles, and charging sites, all ahead of schedule. Further, on October 20th, we performed the inaugural VTOL market survey flight, Plattsburgh to Burlington, 34 nautical miles, 20 minutes. The cumulative impact of these achievements highlight how we are translating capital into measurable progress, reducing risk across the business, and strengthening the foundation for commercial scale. On October 21st, I had the privilege of meeting with senior leadership at the Pentagon to discuss the MV-250, our development progress, our industrialization timeline, and how this aircraft fills a gap in the existing fleet. The conversations were encouraging, and we expect to have more to say on this program in the coming quarters. With that backdrop, let me turn to our third quarter financial results. Third quarter revenue was $17.7 million, the highest quarterly revenue in Beta's history and meaningfully above our guidance of $8 million to $12 million. Revenue grew approximately 98% year over year, and we delivered our second consecutive quarter of sequential growth, all organic, no inorganic revenue through acquisitions. This performance was driven by increasing component deliveries, continued progress across partnership programs, infrastructure revenue pulled forward by the EIPP, and integration and flight test support for third-party aircraft using our motors, batteries, and flight control computers. While the timing of when these activities can be recognized as revenue can vary from quarter to quarter, the underlying relationships and programs are durable. Year-to-date revenue reached $42.5 million, already exceeding the low end of our full-year guidance range of $42 million to $50 million, with a full quarter remaining. Operating expenses in the quarter were $140.5 million, including R&D expenses of $90.5 million and G&A expenses of $50 million. Adjusted EBITDA was negative $97.4 million, better than our guidance range of negative $115 million to negative $125 million. Three factors drove the outperformance. Higher revenue, operating expenses below our quarterly forecast, and the commencement of capitalization of qualifying aircraft components. The initial aircraft components will be utilized for internal business operations and certification, with subsequent manufactured units deployed to expand EIPP operations and future campaigns. This reflects the progress and maturity of the CX-300 program. As CX-300 production advances, we expect to capitalize qualifying aircraft components on the balance sheet, an important transition as we build toward certified aircraft production and commercial sale. Year-to-date adjusted EBITDA stands at negative $305 million against a full-year guidance range of negative $400 million to negative $445 million. We ended the quarter with approximately $1.3 billion in cash and cash equivalents. Since the quarter ended, Ex-Im Bank has continued to make progress in closing the incremental $830 million in financing to support our domestic manufacturing expansion. We've started clearing the bank's review committees. This is long-duration, low-cost, non-dilutive capital that comes directly from the Treasury's balance sheet and is pointed at strategic gaps in American manufacturing. This is capital designed for what we are building, and work is already underway. The continued support by the Ex-Im Bank is a validation of our strategy. The world's largest export credit agency reviewed what we are building in Burlington, Vermont, and is working to put $830 million behind it. We expect to be the first company in advanced air mobility to close a commitment of this scale. As that financing advances, we believe Beta has the strongest balance sheet in our sector. Turning now to our outlook for 2026. We are raising our full year 2026 revenue guidance. We now expect revenue to be in a range of $52 million to $57 million. Our full year adjusted EBITDA and CapEx guidance remains unchanged. We look forward to providing 2027 guidance on our fourth quarter call in the new year. 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 1 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. Please stand by while we compile the Q&A roster. Your first question is from the line of Anthony Valentini with Barclays. Your line is now open. Please go ahead.

Hey, guys. Good morning. I'm curious if, given the announcements and the quarter and the progress that you've made on some of the key steps here in certification, if you guys feel like you're the furthest along to getting your VTOL certified relative to competitors in the industry.

Hey, Anthony. Kyle here. It's an interesting question the furthest along, and I do firmly believe we will be the first to certify in the VTOL industry, and it's not necessarily because we're the furthest along. It's because we have less total to do. You know, we've made a bunch of choices to not have to certify kind of obscure new and novel technologies like what they call simplified vehicle operations, which is a convoluted flight algorithm. On flight controllers laid over the fundamental first principle physics flight control system, thrust vectoring, liquid cooling, all the gearboxes, all the things that go into certification that have to be extremely reliable, well tested, and then, you know, produce statistically relevant data for certification. And taking those off the airplane gives us just a clearer path to certification. So, you know, just adjusting your question from further along, people are working hard across the industry. I think some of the choices we made a long time ago have given us a clearer path to certification. And with the recent publication of the Safety Continuum for Powered Lift, it gives us this kind of stepwise approach that mirrors our entry into service strategy.

Okay, that's very helpful. Maybe on the defense side, it seems like there's a great opportunity here for the VTOL industry to maybe like pull forward some revenue, given that the Defense Department is looking for autonomous and attributable systems. But it also seems like there's a lot of different offerings from different, you know, companies between Andrel and Archer, I think Boeing and even Lockheed have their own products. Can you guys maybe just provide a little bit of detail of like where you think that you're differentiated from a product standpoint? And then are you guys going after contested logistics or missionized programs? And are there programs of record that we should be expecting to come out? Maybe just like some, you know, high level. You know, explanation on what you guys are seeing there to the extent that you're able to to talk about it. Thanks.

Yeah, thanks. Thanks for that question. The. I think the very first kind of entry point is extremely important. Beta didn't elect to do a clean sheet aircraft. We took an aircraft that we already had and we're adding hybridization and autonomy. So it's the same wing tail, flight controls, batteries, all the same structure. It's really nice. It's a nice transition. That's what's enabled us to build multiple examples of this aircraft very, very quickly. And recall, we're already getting paid by DEVCOM within the Army to do hybridization and autonomy, the two gaps between our existing product and what they're asking. The second part of your question about Contestive Logistics, Contestive Logistics is definitely the prime target, but this is kind of a multi-mission aircraft. We've been evaluating SAR, launched effects, some type of CASAVAC. There's a lot of good momentum. As Herman said in his remarks, he spent time down in the Pentagon. I certainly have kind of talking through the capability gap of the military. And then we've just been demonstrating out with, you know, we were out on the Russian border in Aurora 2026 with the U.S. Army doing a ton of demonstrations alongside Blackhawks, evaluating the cost of moving material. It's a great fit. That was, by the way, with a CETO electric aircraft for the sake of clarity. It was a great fit for our aircraft. And then just kind of looking forward. I think it's really important to note that all this design commonality then gets recaptured again when we talk about manufacturing synergies and commonality down the road. So, yeah, we're aware there's a lot of people out there offering Contest Logistics VTOL aircraft. We chose to take a very simple and pragmatic approach to it. And I do believe that, you know, whether you're UPS or a healthcare provider like United Therapeutics or UDOS Military, you want the same thing. You want a simple, reliable, high dispatch rate aircraft that has high survivability, that is low cost to operate. That does not demand an entirely new aircraft design. You pick up stuff, you move it to a new place, you put it down. There are minor mission changes that demand autonomy and hybridization, but it's largely the same aircraft. So that's our strategy.

Makes sense. Thank you, Kyle. I'll turn it over there.

Your next question is from the line of Sheila Kayayou with Jefferies. Your line is now open. Please go ahead.

Good morning, everyone. This is Kira on for Sheila. Thank you so much for taking my question. Great to see the progress on the EIPP and with the FAA this quarter. With that, you mentioned generating the data that will inform the policy for the entire category. What have you learned about the beta aircraft in these early EIPP operations, and what are the key data metrics you're focused on? Thank you.

Yeah, thanks, Sheila. Key data metrics, dispatch reliability, availability of the aircraft, and then, of course, the nuances of that. As I mentioned in my remarks, we've developed a pretty sophisticated program called Data Operate that extracts the data from the self-aware aircraft and evaluates the health of every system within the aircraft before and after and actually during every flight. Every aircraft is actually outfitted with a Starlink bidirectional downlink that allows that aircraft to report its status at all times. The amount of data that we're getting is actually awesome. That's like on the technological side. On the operational side, I mean, I'll give you an example. We went down to North Carolina. EIPP day was low overcast clouds, mostly IFR. It was VFR in the vicinity of the airport. And I was able to fly with the governor and the head of the Department of Transportation in North Carolina, really reminding us that an all-weather capability of the aircraft was critical if we're going to propose this aircraft as a cargo medical logistics aircraft. I mean, I don't know this, but I would go as far as to speculate that there's no way that UPS would ever fly a VFR-only aircraft. So flying all-weather has been a big kind of operational thing. And then, of course, as we've cycled our customer pilots through our training system, we've continuously improved and refined the training system. I'd say those are the three biggest things. There's some nuanced ones around insurance and financing and engagement with the customer, all the kind of the edge elements of supporting a successful launch into the market on the airplane. And lastly, I'd say, you know, we've designed a charge system that has eight modules in it, eight times redundancy. We knew that chargers in the ground couldn't fail for airplanes because you can't go to the next McDonald's down the street. You've got to charge and you've got to fly. And so our charge system reliability has been another important learning point, which has been also very, very successful for us. And I think we made the right design choices early to add reliability to that.

Great. That's super helpful. Thank you.

Your next question is from the line of Andrews Shepard with Cantor Fitzgerald. Your line is now open. Please go ahead.

Hey, everyone. Good morning. Congratulations on the quarter, and thanks for taking our questions, and congrats on the market survey. Certainly a big differentiator there. Kyle, I guess I wanted to come back to the EIPP. Now that we have the market survey for the eVTOL, wondering if you can maybe update us on how you plan to use both now the CETOL and the eVTOL for the different EIPP projects and for the VTOL specifically, you know, what kind of applications are you targeting? Thank you.

Thanks for the question. You know, the team here has architected an EIPP proposal that has this stepwise approach into service. It starts with the CTOL and then moves into the VTOL in phases. The first VTOL missions, and by the way, we inserted autonomy in there as well. So we have autonomous all-electric CTOL flights between the CTOL and the VTOL EIPP. The first demos will be airport to airport, And then the likely next one will be to hospitals. This is part of United Therapeutics' early philosophy on the eVTOL aircraft that they sponsored the development of. And out of respect to them and because we think it's a great entry market, that's really where we're going to start VTOL flights. And I guess we didn't even put this in our remarks. Another part of that charging network. We put our first chargers into into hospitals recently as well. So that was a big milestone for the company positioning ourselves to to answer the call with the IPP flights moving organs, tissues and blood products.

Excellent. Very helpful. And maybe just as a quick follow-up, I wanted to come back to the defense side. So on the MV250, can you maybe remind us again, you know, how should we think about those initial deliveries? What kind of opportunities specifically you're looking at? And, you know, what kind of ramp up should we expect for the MV250, maybe ahead of the eVTOL?

Thank you. Yeah, I think you're accurate in saying that the ramp up of the MV250 will be slightly ahead of the EV toll. You know, the Department of Defense Department of War has been very, very clear about this capability gap. And a lot of momentum has generated recently. We are we are past the individual system test. Like I said, we've been paid paid by DEVCOM to develop and show them hybridization and. autonomy. There's been a lot of flying on our electric aircraft. We put those different pieces together on our CETOL aircraft, and now we're putting them together on MV250. And this particular product will land in a rapid prototyping contract that will get deployed out into the world, and we'll do the same thing we've done on the CETOL this year on the MV250 in the coming months and years. And it's all kind of built, as you know, in this partnership with GE around the turbo generator, providing this extended range, extended speed, and higher payload of the aircraft, which puts it kind of out of the league of existing resources the Army specifically has.

Excellent. Thank you very much, and congrats to the team again on the quarter. Thank you.

Your next question is from the line of John Godian with City Group. Your line is now open. Please go ahead.

Hey, guys. This is Max on for John. Thanks for taking my question. You referenced the demonstration goals in phase one of the EIPP program earlier, including proving mission closure, demonstrating cost savings, and building your record of safe operations. Can you speak a bit on some of the next phases in this program and what you hope to demonstrate in each of these programs that you have been awarded? Curious on what this looks like over the medium term.

Thanks. So these first operations are done under Part 91 with a very close collaboration between the customers engaged, the states, the FAA, the Department of Transportation, and, of course, Beta. The phase two of the operations, and if you have a follow-up on the details of it, I'll hand it off to Kristen here, but the phase two of the operations really lean into 135 operations and four revenue-generating flights. Naturally, doing 10, 20, 30, 50 flights under Part 91 is no problem. We wouldn't leave an asset there just to fly without some type of long-term customer benefit and revenue from it. So the next step will be revenue-generating flights under 135.

Yeah, and John, I think to Kyle's point, you know, what we did in phase one with the route validation, the pilot training, carrying the representative payloads in the areas and really demonstrating the full capability of the aircraft. Now, stepping into phase two, we're working with the FAA, with the operators as these questions are being answered for us real time. We're getting the pathways for those operational approvals, working with the FAA and the DOT, who have been just rigorously, you know, working towards this for us, and those answers are still in the works, but we're anticipating to have that pathway, you know, in the coming weeks.

Great. That's helpful. And then kind of switching gears a bit, you mentioned the components business having a billion-dollar backlog itself and driving a bunch of the revenue beat this quarter. I recall last quarter we spoke about this opportunity driving attractive margins across your value chain. I was just curious if you could provide an update there and discuss how this business is progressing in terms of volume and margins and any further insight you guys can provide there would be helpful. Thanks.

Yeah, you know, this, it's interesting. If I think back about five years, we had listened closely to your, to your, this group of analysts, frankly, about how the components business was something that we should pursue for a number of reasons, including the margins associated with components in this space. We have since obviously leaned in and having partners like GE and the Embraer EVE program, General Dynamics, a bunch of other programs. There's actually five aircraft programs using our batteries, flight controls, motors, props, some combination thereof out there right now. And the revenue numbers are obviously important, and it was great for Herman and his team to post a significant beat, but the makeup of those revenue numbers are significantly more important. They're seeds that we've planted, and as everybody knows, getting a motor or a battery or flight controller embedded into an aircraft that ultimately is type-designed, or type-certified, excuse me. It's sticky. It's like extremely sticky, and that's how we select the programs that we're engaged in. And not only does it contribute meaningfully to our revenue right now, it contributes at a high margin, and it gives us a path towards future revenue. That billion dollars is largely made up by one customer, and that's a seed that we planted when we gave them our first set of pusher and lifter motors. And I think it'll return in their initial kind of production, and then, of course, in the service support and aftermarket.

Matt, maybe I could just add a little bit of context as well. So stepping back, when you look at beta, beta has multiple ways to win, whether it's through components, charging, partnership programs, and I think you saw it this quarter. When you look at the product revenue and the service revenue, we had product revenue growing 78%. A lot of that is enabled by charge, for example. Service revenue grew 108%, and all of that is enabled by partnership programs. And keep in mind, these partnership programs are a lot of times about taking beta's technology and integrating it onto their systems. And as Kyle described, it just makes it very, very sticky. And to your question on margins, the margin acceleration that we saw, if you were to look at Q325 versus Q326, we saw about 300 basis points of gross margin acceleration. So volume through the shop floor, things like that, all starting to stack up as we move towards industrialization.

Great. That's super helpful. Thanks, guys.

Your next question is from the line of Christine Lewag with Morgan Stanley. Your line is now open. Please go ahead.

Hey, good morning, everyone, and congrats again for the FAA survey approval for the VTOL. So, Kyle, you know, earlier you mentioned that you now expect to be the first eVTOL to be certified with the FAA. I think this is the most definitive, most confident statement you've had regarding timing, and so I was wondering, what did you learn in the past few months and maybe for the survey period that gives you the confidence that you would be the first, especially as, you know, you were previously focused on the fixed-wing And before in the CTOL, it sounds like there's a change here in your view on certification.

Well, Christine, if I told you we weren't the first, it would be a little bit ironic, considering we've made the decisions we've made, because we truly do believe in it. And the reason I have confidence is I observe the quiet work that happens every day here at Beta by the people that are focused on certification, industrialization, our quality systems, and the other things that aren't as flashy. And those people and those teams are extremely dedicated to doing it right because there's a saying in aviation, there's always time to do it right because there's rarely time to do it again. And that's the track we're taking across decisions on the engineering, the implementation and production, the conforming article builds. So, you know, I don't see what's going on at the other folks in this industry. I'm sure there's a lot of really hardworking people. But we do see the high level strategic choices that are made. And I think that we have established and continue to establish a differentiation. And as I said in the prepared remarks, like it often is lost on people that everything that we did on the propeller to get that certified, everything we did on the motor to get that to the state it's in, near certification, on the CTOL all leads into a VTOL that is largely, you know, largely contains systems that have already been approved by the FAA for a VTOL or CTOL aircraft, and they roll into the VTOL. So it's part of our strategy. I believe it's working. I can't obviously say with any type of certainty, but, you know, I was asked my opinion on it, and I'm going to give you an honest answer.

Super helpful, Kyle. Now, regarding the revenue outlook, you know, you raised that for the full year, but that seems to be reflected mostly for the stronger 3Q. Were there any one-time items, or will you quantify some sort of pull forward, and could you see similar acceleration in your 4Q results that you saw in 3Q?

Christina, it's Herman. That's a great question. As you know, revenue exceeded the high end of guidance by more than 50%. And as we always do, our Q4 outlook reflects revenue that we have really high confidence in delivering. Keep in mind, as beta evolves, our shop floor right now is we go through a lot of balancing. So there's work that we do for customers. There's work that we do for our own certification production priorities. So that mix between the two things can impact quarterly revenue timing. We do have line of sight to be on the higher end of the range, but we want it to give you the 52 to 57. It implies somewhere between nine, $14 million in the quarter. But if you step back and you look at it. On a full-year basis, at the midpoint of the current guide, we're growing more than 50%, and we feel that's a better way to look at it.

Great. Thank you very much.

Your next question is from the line of Chris Pierce with Needham. Your line is now open. Please go ahead.

Hey, good morning, everyone. You know, kind of following up on Andres' question, I guess I'd just love to hear, you know, what are you hearing from customers? Within, you know, as you've done these, you know, demonstrations for them, and what should our expectation be for what's next? Not just autonomous and VTOL, but what should we see on the customer side? Would it be, like, deposit-backed orders? Would it be just, we would see them in the order book? Like, what should our expectation be based on, you know, enthusiasm from customers as you fly for them?

Yeah. I mean, I'll just give you a fun, visceral answer. Flying a fly-by-wire aircraft with a really stable configuration, when I fly with the chief pilots or our team flies with their teams, the feedback is exceptional. I mean, the visibility, the modern avionics, it's a safe airplane. It's got all the technologies that prevent the mistakes that have put people in danger in the past. So that's like number one. The data-rich aircraft, as I talked about before, I won't retrace those steps, but that's a huge benefit to customers. Awareness is the ability for them to make good decisions. The cost. It is a big one, but to answer your question more acutely on what do we expect out of kind of the market survey ticket and the VTOL, it's a third-party validation that this aircraft has a stable configuration, and that's important to our customers, and part of getting a market survey is also having maintenance manuals and a maintenance process, and those are the types of questions you get from the more sophisticated customers. They're asking, kind of lastly, how much does the aircraft cost? They ask, how much does it cost to operate? Why? What are the things I have to do? What's frequency, downtime, dispatch rate? And then, like, the 10th question down the list is how much does it cost? So being able to answer those questions, not just with speculative kind of forecast, but with real data has been really, really helpful. And we've, you know, accumulated enough hours and miles to really ring that out. You know, the other thing that has surprised me personally is that we've seen some really neat customers step up. Customers that are doing things that you didn't even really know it was a big market. I mean, we were flying radio isotopes, for example, car parts to factories that didn't want to be down. It's very expensive to have a car line down. These cargo and logistics things, we kind of talk about it abstractly, but buried within that, our economy moves on the things that get to the factories to build the stuff. And we want to be a part of that. And it's a huge and growing market that we think that is the right entry point. So learning about those obscure applications has been, and I can't talk about it yet, there'll be a press release soon. One of the orders that tipped us over the $4 billion backlog balance was from a company moving one of these obscure cargo elements.

Okay, perfect. Thank you for the detail. And then just one for Herman. I know that, you know, if we kind of roll back maybe six months ago, you had guided us towards TQ, R&D, and sort of kind of where things landed. Now that we've seen things step down in 3Q, but as we think about phase two or additional phases of the EIPP, I know you're not guiding 27, but should we think about there being sort of a kind of a bubble step up in R&D in 27 as well as we think about all the flying you guys are doing and the more flying that you're going to do now that the VTOL is ready to kind of go? Get up there.

Yeah, you said it perfectly. We're not going to guide. 2027 right now. But what I would say, Chris, is there have been so many opportunities that have presented themselves this year. You know, when you look at the work we're doing on the MV250, we talked about pulling in that investment this year. EIPP has been wildly successful, and it's unlocking a big revenue opportunity with things like charge. So, I would expect that on the R&D side that you will see a step up year over year, and maybe it's with EIPP, but there are other exciting investments that we want to put dollars behind, and we'll talk more about that in the new year when we guide 2027.

Okay, that's very helpful. Thank you very much and good luck.

Your next question is from the line of Noah Papanak with Goldman Sachs. Your line is now open. Please go ahead.

Good morning. This is Tumas Russo on for Noah Papanak. Kyle, I want to ask on the large passenger aircraft, how are you thinking about allocating capacity between that program and ALEA? And given the higher battery content for airframes, what's the right framework we should think about for sizing how much this program expands the total aftermarket opportunity?

Yeah, I think, you know, just along the themes that I mentioned before, for the large passenger aircraft, as I mentioned in the S-1, It is built from the same common technology and manufacturing capability that we have developed for these aircraft. It is a consideration. I'll give you an example. In the flight control computers, you know, for a cargo and logistics aircraft, you could reduce the design assurance level of the flight computers we elected to make. Flight computers that were fit for the application in a part 29 or part 25 aircraft, and that allows us to reuse that technology. Same with the composites, the allowables associated with composites, the design guides, the drawing standards, all the things that we do kind of behind the scenes to give ourselves a safe and reliable aircraft at a smaller scale. We can turn the knob just slightly and make that technology immediately applicable to the large aircraft. We have a relatively small, we call it an advanced systems team. We set that team up in groups of 6 to 12 people, and they have been working quite hard on the development and setting the table for all of our future programs, including a larger passenger aircraft that I had mentioned in the past, and the results are extremely promising. There are, I think it's important to note, when you think about, like, the improvement of a vehicle, like a Tesla automobile, for example, people think that the range improved because the batteries got better. Just under half of the range improvement came from the batteries. The rest came from lightweighting structure, aerodynamics, propulsive efficiency, gear train efficiency. These are things that we work just as hard at as the adoption of new energy storage technologies. So we're seeing longer and longer ranges of the aircraft. As you know, we've flown our CETOL aircraft 336 nautical miles. We intend to go invest that. And it's a strategy that's looking at the longer form. So, you know, it's rooted in knowing what we're going to do in the future and setting the table now to enable us to do that efficiently.

Thank you. And I want to quickly ask, with the uptick in point operations this quarter, is there any color you can provide on how the operating economics for ALEA are tracking toward your initial expectations?

Yeah, I'll tell you, probably this is the first time I've said this publicly. We now have enough data on the batteries to show that the degradation is less than we forecasted. That means a more economic operation. We have aircraft that are getting into enough cycles that they're hitting past their half-life. If we anticipated in batteries, we have a measurable difference in the degradation of the batteries. That's really good for us and for the customers to lower the cost of operation because when you really dissect the recurrent cost of operation, the battery degradation is a big part of that. And the lower that cost that can be on a per flight basis, the more often our customers will fly and therefore the more profitable the aircraft will be for them. And focusing on the customer has been a philosophy here from day one. And frankly, we've done millions of cycles on individual cells, modules, and packs in our laboratories, but you have to go fly it to prove it. The temperature, the environment, the cooling, the cadence, the actual exercise of the batteries that causes that irreversible degradation, which we call what we kind of measure in terms of capacity, is really only realized with a ton of hours of flying. So it's been, frankly, quite positive. And I think that's the first time we've actually disclosed what the results are showing us. Thanks for the question. I appreciate it.

I appreciate the insight. I'll pass it back there.

Your next question is from the line of Andre Madrid with US Bank Corp BTIG. Your line is now open. Please go ahead.

Hey, good morning. You got Ned Morgan on for Andre. Herman, you alluded to it a moment ago, but as EIPP operations expand, how should we think about the monetization opportunity? I recognize a lot of the value is operational learning and accelerating adoption, but could it ultimately also be a meaningful source of revenue?

Yeah, I think so. When we move from Part 91 to 135, I think that creates an opportunity to do different things with the aircraft, whether that's renting it or leasing it. I think that opportunity will present itself. The real opportunity that we're seeing, and we're seeing it today, is the states who are participating in the EIPP leaning forward with charge. As we had spoken about in the past, we received an order from Florida for 34 chargers that we've been manufacturing and deploying. We're seeing other states in the EIPP start to do different things with charge as well to put the infrastructure in place today for electric aviation. I think that's where you're going to see the big revenue drivers. And then, of course, there's going to be pilot training. There will be maintenance type things, but the large driver will be charge.

Got it. Thanks. And then a follow-up. As we look into 27, you know, for your five main KPIs, you know, are you able to provide any preliminary thoughts on what you expect to set the mat?

Yeah, no, we're not going to provide guidance on our KPIs for next year. We do have internal goals that are closely tracked within the team and the board, and we'll kind of disclose our next year's guidance, including KPIs, on our fourth quarter earnings call. But look, the reality is we'll keep accelerating, and that's the baseline.

Got it. Thank you very much.

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

Awesome. Thank you, everybody, and I just really appreciate people sticking around and getting through this call. You know, the results this quarter, in my estimation, are just a product of the team here and their commitment and focus by those 1,500 people who, as I said before, are dedicated to the quiet work. I think that, you know, they're focused on the right thing and the fundamentals, the first principle of physics and improving the way that we fly. I think this company as a whole is on sound strategic footing and unquestionably a solid technological foundation. And what's really gratifying this quarter, and I got to tell you, I just feel really good about the energy and the momentum here, is that those things are being validated. They weren't validated on day one, but they're validated years after those decisions are made, and that work has been done. And I feel like we're on just really solid voting to take the next steps into finishing this year strong and continuing this momentum into next year. So thank you everybody for believing in this team and we'll continue to keep our heads down and delivering for you.

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