Vertical Aerospace Ltd. Q3 FY2025 earnings call

• Domhnal Slattery introduced the call, highlighting the upcoming unveiling of the new certification aircraft design on December 10 in London and discussed the flight test progress, including the upcoming piloted transition flight as a critical milestone under U.K. CAA oversight. • Stuart Simpson talked about the company's OEM model, sourcing parts from Tier 1 aerospace manufacturers, cost to certification components (people/operating expenses, nonrecurring costs, CapEx), and production plans including initial facilities at Cotswold Capital and Vertical Energy Center. • Emphasized the VX4's unique features: largest cabin space in the industry, 70% increased passenger cabin volume, cockpit 50% larger, luggage compartment 200% larger than certain competitors, scalable from 4 to 6 passengers, which improves operator revenue, profit, and margins. • Discussed key priorities for 2026 including concluding a strategic partnership and growing the order book.

No specific financial performance details for product segments provided in the transcript.

• Maintained full year 2025 spend guidance of USD 110 million to USD 125 million, with spend in line with expectations as of Q3 2025. • Anticipated spending $235 million over the next 12 months and will provide more granular 2026 spend forecast at full year earnings call. • Certification timeline includes PDR completed, CDR expected in mid-2026, with 7 certification aircraft to be tested through 2028 certification. • Plans for 2026 include hybrid flight testing of the third prototype starting mid-2026. • Targeting closure of a strategic partnership with a global industrial player.

• Regulatory uncertainties related to certification process. • Market valuation gap compared to competitors, with Vertical's market cap at a significant discount despite achieving key metrics like technology, capital efficiency, certification progress, and customer base. • Uncertainties around the pace and success of securing strategic partnerships and order book growth.

Q: Where are we at on Aircraft 3 production and the development of the hybrid powertrain for early '26 flight testing?

A: Aircraft 3 production is on plan, to be completed in the first couple of weeks of December. Hybrid powertrain development is also on plan, with the aircraft expected to be flying in the middle of 2026.

Q: When might the U.K. MOD or NATO MODs be interested in procuring aircraft for troop transport?

A: Defense budgets in Europe are at 8-decade highs, and Vertical is in direct dialogue with major European governments, confident of securing the first order in 2026.

Q: Can you talk about your manufacturing strategy?

A: Manufacturing strategy includes phase 1 in the U.K., with plans for 3 manufacturing facilities globally by the middle of the next decade, including in the U.S., Europe, and Asia. $75 million spent on initial capacity at Cotswold Airport and Vertical Energy Center, with discussions with the U.K. government on major facilities and decision on European location in Q1 2026.

Q: Could you clarify the funding from U.K. Department of Transport under OxCam AAM Corridor initiative?

A: Funding is part of a bucket for demonstrating capabilities between Oxford and Cambridge, with Vertical part of enabling the initiative but details on direct attribution to Vertical and technical milestones to access fund were discussed as part of a broader initiative.

Q: Should we assume more spending on top of the $700 million towards certification for the hybrid powertrain?

A: The $700 million includes everything needed for the hybrid program to get up and running and flying over the next 12 months, with costs for hybrid relatively low due to the aircraft's ability to take the gas turbine without major airframe changes.

Q: Can you sketch through the certification plan over the next 2 years until 2028?

A: CDR expected in mid-2026, locking in final 25% of components and supply chain. Next aircraft built in Q1 '27, flying, with 6 more certification aircraft built and flown with regulator oversight, certifying in the second half of 2028. Process is transparent and no pull forward of timeline.

Q: Talk about the differentiation of the bigger cabin versus competitors?

A: Design was customer-led, spending time with global customers to prioritize cabin size and luggage capacity. Resulted in the VX4 having the largest cabin in the industry, 70% increased passenger cabin volume, 50% larger cockpit, 200% larger luggage compartment than certain competitors, scalable from 4 to 6 passengers.

Q: Can we assume the strategic partnership includes investment and carry through 2026/2027?

A: Any strategic partnership conclusion would likely include investment to reassure the market, and there are opportunities for nondilutive funding for hybrid aircraft development, especially in defense market negotiations. The aircraft's features like silent takeoff/landing, low noise/thermal signature are appealing to defense industry.