New Horizon Aircraft Ltd. (HOVR) Earnings

Management highlights

- Program Progress * Completed a successful transition flight of the company's large-scale prototype in the prior year, and advanced the full-scale Cavarate X-7 program from technology validation to full-scale aircraft construction * Pushed the full-scale demonstrator completion milestone from the end of calendar 2027 to spring 2027 (a one-quarter acceleration), driven by streamlined development planning focused on certifiability rather than fastest prototype delivery * Built out a network of experienced aerospace development partners for specialized components and manufacturing, including Beta Technologies (flight control computers), Randolph Composite Solutions (fuselage and empennage), North Aircraft Industries (wing design/testing), Marshall Aerospace (flight dynamics/control models), Pratt & Whitney Canada, MT Propeller, and MHI Regional Jet * Integrated certification requirements, including elevated safety and design standards, into the prototype phase earlier than many competing programs to streamline downstream testing and deliver a robust, certifiable aircraft - Product Differentiation * The 7-seat Cavarate X-7 is a hybrid electric VTOL aircraft with patented fan-in-wing technology, designed for 98% wing-borne flight (like conventional aircraft) combining helicopter vertical flexibility with the speed, range, and economics of standard fixed-wing aircraft * Target performance: 250 mph maximum speed, 500 mile range, 1,500 pound useful load, capability for vertical, short, and conventional takeoff/landing, and all-weather instrument flight rule operations including flight into known icing * Hybrid architecture eliminates requirement for ground charging infrastructure, and independent analysis estimates operating costs of 97 cents per passenger seat mile (at 500 annual flight hours), up to 75% lower than comparable capacity helicopters * Company strategy is to operate as a pure-play aircraft OEM (not an operator/airline), enabling capital efficiency and focus on aircraft design, certification, and manufacturing - Team Growth * Current internal headcount is over 55 employees, with plans to grow to over 100 employees by the end of fiscal 2027, and double that headcount by fiscal 2028 across engineering, certification, quality, manufacturing, and program management roles * Added key experienced leadership, including Richard Alexander as Chief of Certified Programs to align development, certification, quality, and production planning - Financial Position * Ended Fiscal 2026 with $78.3 million CAD in cash (up from $7.5 million CAD year-over-year), the strongest balance sheet in company history * Raised over $88 million CAD in financing during Fiscal 2026 at over $2 per share, including two registered direct offerings generating $45 million USD gross proceeds, plus additional capital from an at-the-market program and non-dilutive government grants * Research and development costs increased to $13.2 million CAD in Fiscal 2026 from $3.7 million CAD year-over-year, reflecting higher investment in the development program; G&A costs remained stable at $10.2 million CAD, with most incremental spending directed to development * Total cash used in operating activities was $16 million CAD for Fiscal 2026 (~$4 million CAD per quarter, up from $9 million CAD total in the prior year)

Guidance

- The current cash balance provides more than 24 months of liquidity to support increased planned investment in Fiscal 2027, which will cover component receipt, team expansion, systems integration, and preparation for ground and flight testing * The company continues to pursue non-dilutive government funding, including already approved projects under the INSATI program that reimburse up to 40% of eligible project costs, and is positioned to access opportunities from increased Canadian defense spending * Full-scale demonstrator completion is targeted for spring 2027, followed by initial ground testing and a full flight test program in 2027 * Type certification with Transport Canada remains on track for delivery of a certified aircraft by 2030 * Staffing is projected to grow to over 100 employees by the end of fiscal 2027, and double to over 200 employees by the end of fiscal 2028 * Cash burn in Fiscal 2027 is expected to increase to a rate between the current quarterly level and double the prior quarterly cash burn, with an approximate 50-50 split between personnel costs and demonstrator aircraft components * Licensing revenue is identified as the most likely near-to-medium term path to revenue generation, with potential partnership opportunities expected to progress in 2027 and 2028

Segment performance

New Horizon Aircraft is a single-segment advanced aircraft development company with no revenue-generating product segments in Fiscal 2026, as it remains in the development phase for its Cavarate X-7 hybrid VTOL aircraft. All spending is focused on research and development and general & administrative operations for the X-7 program.

Risks & headwinds

- Development of a new clean-sheet aircraft carries inherent technical risk; systems integration of multiple federated supplier components is the primary near-term technical challenge * Certification of a new aircraft category carries regulatory risk: while the company designed the X-7 under a well-defined known regulatory framework, unforeseen challenges during the certification process remain possible * Aggressive team expansion creates talent acquisition risk, though the company is positioned to access existing robust aerospace talent pools across Canada and plans expansion into additional talent-dense regions to address this * Achieving production and commercialization targets depends on successful execution of multiple technical, certification, and supply chain milestones, with potential for delays that could impact timing and costs

Analyst Q&A

• Q: What is the structure of the Beta Technologies partnership—does it include equity, exclusivity, or co-development beyond a standard supplier relationship? /

  A: The partnership does not include any equity stake or investment from Beta. It is more collaborative than a standard off-the-shelf supplier relationship, requiring close joint technical development to successfully integrate Beta's VTOL-specific flight control system into the unique X-7 platform.

• Q: Can current development partners scale to support low-rate production, or will a new supplier base be needed for production? /

  A: Production scalability has been prioritized from the earliest design stages, with design choices (like uniform wing ribs for simpler manufacturing) made to enable volume production. All current key partners, including Pratt & Whitney Canada and Randolph Composite Solutions, have the capacity to scale through low and medium volume production, matching the company's target peak production rate of 200-300 aircraft per year.

• Q: Where do you plan to source talent for your aggressive headcount growth, and will you need to move manufacturing to the U.S. to access regional incentives? /

  A: Canada has a robust existing aerospace ecosystem with deep talent pools, and the company currently plans to remain based in Canada while expanding into additional talent-dense regions (Kitchener-Waterloo, Montreal) domestically. The company's peak production target does not require multi-billion U.S. manufacturing facilities, but it does plan to conduct flight testing in the U.S. for favorable weather, and is open to global MRO and production expansion if needed.

• Q: What key point about the company's value proposition do investors often miss? /

  A: Investors frequently underappreciate the X-7's unique all-weather operational utility: most existing vertical lift aircraft cannot fly in bad weather, icing, or instrument flight conditions, while the X-7 is designed for year-round operation like standard commercial aircraft. The 75% lower operating cost per mile compared to helicopters is also underappreciated; this combination of lower cost, higher safety, and full operational capability creates a large existing market demand.