BETA Technologies Q3 2026 Earnings Call Transcript

Quartr
Provided by Quartr
November 3, 2026

Key Takeaways

  • Positive Sentiment: Record third-quarter performance: Revenue reached $17.7 million, up 98% year over year and more than 50% above the midpoint of guidance. BETA raised full-year 2026 revenue guidance to $52 million–$57 million, while maintaining its Adjusted EBITDA and CapEx outlook.
  • Positive Sentiment: BETA received the FAA’s first-ever market survey airworthiness authorization for an eVTOL and completed its inaugural VTOL market-survey flight. Management said its simplified aircraft architecture and commonality between CTOL and VTOL models provide a clearer path toward certification, though timing remains subject to regulatory execution.
  • Positive Sentiment: The company exceeded three of five 2026 targets ahead of schedule, including more than $4 billion in aircraft backlog, 250,000 nautical miles flown, and 168 charging sites. Six of seven eIPP programs are now operational, with BETA working toward Part 135 approvals that could enable revenue-generating flights.
  • Positive Sentiment: Defense momentum is increasing around the hybrid and autonomous MV250, with Pentagon engagement, ongoing aircraft assembly, and an anticipated rapid-prototyping contract. BETA is targeting contested logistics and other military missions while leveraging substantial technical and manufacturing commonality with its commercial aircraft.
  • Negative Sentiment: Despite $1.3 billion in cash and advancing discussions for an $830 million EXIM Bank financing package, the company remains heavily loss-making, with third-quarter Adjusted EBITDA of negative $97.4 million. Management also expects research and development spending to increase year over year in 2027 as it funds eIPP, defense, and other programs; the EXIM financing has not yet closed.
AI Generated. May Contain Errors.
Earnings Conference Call
BETA Technologies Q3 2026
00:00 / 00:00

There are 13 speakers on the call.

Operator

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 Devon Rothman, head of investor relations. Please go ahead.

Speaker 1

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 Cueto, 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.

Speaker 1

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.

Speaker 2

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.

Speaker 2

We also hosted Chairman Jovanovic from the EXIM Bank and continue to advance the $830 million financing package to fund our domestic manufacturing and vertical integration expansion. More recently, on October 16, we earned the FAA market survey airworthiness certificate for the ALIA A250 N250XT, marking the first 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 is 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 a training-compliant eVTOL and qualify many pilots to fly.

Speaker 2

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 towards 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.

Speaker 2

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. BETA 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 control 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 CX300 flew at the Miramar Air Show by invitation.

Speaker 2

We were the first electric aircraft to fly at that military air show. The hybrid and autonomous MV250 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 turbogenerator for hybrid operation, and a fuselage design for uncrewed military missions, we deliver enhanced military performance without the time and cost of a clean sheet design.

Speaker 2

This foundational dual-use architecture allows the MV250 to immediately inherit the manufacturing economies of scale, an existing supply chain, and the flight time from our commercial programs. We have had very strong engagement at all levels of the armed services, and we have 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 eIPP 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 is no fuel system, no hydraulics to troubleshoot, and no oil to change.

Speaker 2

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 1 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.

Speaker 2

We run each of these opportunities through a rigorous evaluation to ensure it is 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 is not only in composites. It is 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 EXIM Bank for an additional $830 million financing package continues to advance to support our vertical integration and production.

Speaker 2

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. Onto 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, 2 months early, three of the five are complete. Our commercial aircraft backlog stands at just over $4 billion, with over 1,000 aircraft in firm and option orders backed by financial commitments. Our recent sales focus has been on securing high-quality medical and cargo CTOL 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.

Speaker 2

Our sales organization has successfully established a service and support organization, and they developed a comprehensive forecasting and aircraft data awareness application called BETA Operate. 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 2 months in advance. The aircraft have been flying in the snow and the sleet here in the Northeast. They 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.

Speaker 2

We are at 168 charging sites, ahead of our year-end target of 150. These are not urban showcase 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 4.5 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 already demonstrated capacity of 4.5 aircraft per month across several key vertically integrated component lines, including flight control computers, battery packs, wire harnesses, and inverters. We are now extending that work across our major airframe structures through targeted pulse builds.

Speaker 2

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 are 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 H500A certification program. We continue to complete and submit for-credit testing documents and data to the FAA. Durability and lightning testing are complete. Software development is substantially complete, with all runs performed on for-credit tests of the software.

Speaker 2

We are through the hardest phases of the engine program and carrying what we learn 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.

Speaker 2

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 A250, 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 define the noise requirements for this aircraft class and inform the rules. The FAA published its safety continuum policy towards powered lift aircraft. The safety levels it establishes confirm the cross-platform compliance approach we designed at the CX300 and A250 from the start.

Speaker 2

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, Eve Air Mobility, 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.

Speaker 3

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 ALIA 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 EXIM 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.

Speaker 3

On October 21st, I had the privilege of meeting with senior leadership at the Pentagon to discuss the MV250, 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-$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.

Speaker 3

This performance was driven by increase in 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.

Speaker 3

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 CX300 program. As CX300 production advances, we expect to capitalize qualifying aircraft components on the balance sheet, an important transition as we build towards 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, EXIM Bank has continued to make progress in closing the incremental $830 million in financing to support our domestic manufacturing expansion.

Speaker 3

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 EXIM 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.

Speaker 3

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.

Operator

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 one 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. 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.

Speaker 4

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

Speaker 2

Hey, Anthony. Kyle here. It is an interesting question, the furthest along, and I do firmly believe we will be the first to certify in the VTOL industry. It is not necessarily because we are the furthest along, it is because we have less total to do. We have 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 produce statistically relevant data for certification. Taking those off the airplane gives us just a clearer path to certification. So, just adjusting your question from further along, people are working hard across the industry.

Speaker 2

I think some of the choices we made a long time ago have given us a clearer path to certification. 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.

Speaker 4

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

Speaker 2

Yeah. Thanks for that question. I think the very first kind of entry point is extremely important. BETA did not elect to do a clean sheet aircraft. We took an aircraft that we already had and we are adding hybridization and autonomy. So it is the same wing, tail, flight controls, batteries, all the same structure. It is really nice. It is a nice transition. That is what has enabled us to build multiple examples of this aircraft very, very quickly. Recall, we are already getting paid by DEVCOM within the Army to do hybridization and autonomy, the two gaps between our existing product and what they are asking. The second part of your question about contested logistics. Contested logistics is definitely the prime target, but this is kind of a multi-mission aircraft. We have been evaluating SAR, launched effects, some type of CASEVAC. There is a lot of good momentum.

Speaker 2

As Herman said in his remarks, he spent time down at the Pentagon, I certainly have, kind of talking through the capability gap of the military. We have just been demonstrating out with We were out on the Russian border in Aurora 2026 with the US Army doing a ton of demonstrations alongside Black Hawks, evaluating the cost of moving material. It is a great fit. That was, by the way, with a CTOL electric aircraft, for the sake of clarity. It was a great fit for our aircraft. Just kind of looking forward, I think it is really important to note that all this design commonality then gets recaptured again when we talk about manufacturing synergies and commonality down the road. Yeah, we are aware there are a lot of people out there offering contested logistics VTOL aircraft.

Speaker 2

We chose to take a very simple and pragmatic approach to it, and I do believe that, whether you are UPS or a healthcare provider like United Therapeutics or you are the US 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 is largely the same aircraft. That is our strategy.

Speaker 4

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

Operator

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

Speaker 5

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.

Speaker 2

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 BETA 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 on the technological side. On the operational side, I'll give you an example. We went down to North Carolina. eIPP day was low overcast clouds, mostly IFR.

Speaker 2

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 all-weather capability of the aircraft was critical if we are going to propose this aircraft as a cargo medical logistics aircraft. I mean, I do not know this, but I would go as far as to speculate that there is 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 have cycled our customer pilots through our training system, we have continuously improved and refined the training system. I would say those are the three biggest things.

Speaker 2

There are some nuanced ones around insurance and financing and engaging with the customer, all the kind of the edge elements of supporting a successful launch into the market on the airplane. Lastly, I would say, we have designed a charge system that has 8 modules in it, 8 times redundancy. We knew that chargers on the ground could not fail for airplanes because you cannot go to the next McDonald's down the street. You have to charge and you have to fly. 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.

Speaker 5

Great. That is super helpful. Thank you.

Operator

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

Speaker 6

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

Speaker 2

Yeah. Thanks for the question. 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. 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, of course, 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. 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. I guess we didn't even put this in our remarks.

Speaker 2

A part of that charging network, we put our first chargers into hospitals recently as well. So, that was a big milestone for the company, positioning ourselves to answer the call with the eIPP flights moving organs, tissues, and blood products.

Speaker 6

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

Speaker 2

Yeah, I think you are accurate in saying that the ramp-up of the MV250 will be slightly ahead of the eVTOL. 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 past the individual system tests. Like I said, we have been paid by DEVCOM to develop and show them hybridization and autonomy. There has been a lot of flying on our electric aircraft. We put those different pieces together on our CTOL aircraft, and now we are putting them together on MV250. This particular product will land in a rapid prototyping contract that will get deployed out into the world, and we will do the same thing we have done on the CTOL this year on the MV250 in the coming months and years.

Speaker 2

It is all kind of built, as you know, on this partnership with GE around the turbogenerator, 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.

Speaker 6

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

Speaker 2

Thank you.

Speaker 6

I'll move back to John.

Operator

Your next question is from the line of John Godyn with Citigroup. Your line is now open. Please go ahead.

Speaker 7

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.

Speaker 2

Yeah. 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, of course, BETA. The phase 2 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 2 of the operations really lean into 135 operations and for 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.

Speaker 8

Yeah. John, I think to Kyle's point, 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 are working with the FAA, with the operators, as these questions are being answered for us real-time. We are getting the pathways for those operational approvals, working with the FAA and the DOT, who have been just rigorously working towards this for us. Those answers are still in the works, but we are anticipating to have that pathway in the coming weeks.

Speaker 7

Great. That is helpful. Then kind of as 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.

Speaker 2

Yeah. It is interesting. If I think back about 5 years, we had listened closely to 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 Eve Air Mobility program, General Dynamics, a bunch of other programs. There are actually 5 aircraft programs using our batteries, flight controls, motors, props, some combination thereof out there right now. 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.

Speaker 2

They are seeds that we have planted, and as everybody knows, getting a motor or a battery or a flight controller embedded into an aircraft that ultimately is type designed, or type certified, excuse me, is sticky. It is extremely sticky, and that is how we select the programs that we are engaged in. 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 $1 billion is largely made up by one customer, and that is a seed that we planted when we gave them our first set of pusher and lifter motors. I think it will return in their initial kind of production, and then, of course, in the service support and aftermarket.

Speaker 3

Matt, maybe I could just add a little bit of context as well. Stepping back, when you look at BETA has multiple ways to win, whether it is through components, charging, partnership programs. 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. Keep in mind, these partnership programs are a lot of times about taking BETA's technology and integrating it onto their systems. As Kyle described, it just makes it very, very sticky. To your question on margins, the margin acceleration that we saw, if you were to look at Q3 2025 versus Q3 2026, we saw about 300 basis points of gross margin acceleration.

Speaker 3

Volume through the shop floor, things like that, all starting to stack up as we move towards industrialization.

Speaker 7

Great. That is super helpful. Thanks, guys.

Operator

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

Speaker 9

Hey, good morning, everyone. And congrats again for the FAA survey approval for the VTOL. Kyle, 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. I was wondering, what did you learn in the past few months and maybe through the survey period that gives you the confidence that you would be the first, especially as you were previously focused on the fixed wing before and the CTOL? It sounds like there's a change here in your view on certification.

Speaker 2

Look, Kristine, 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. 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. 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." That's the track we're taking across decisions on the engineering, the implementation and production, the conforming article builds. I don't see what's going on at the other folks in this industry.

Speaker 2

I'm sure there's a lot of really hardworking people, but we do see the high-level strategic choices that are made. I think that we have established and continue to establish a differentiation. As I said in the prepared remarks, 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 largely contains systems that have already been approved by the FAA for a VTOL or CTOL aircraft, and then roll into the VTOL. It's part of our strategy. I believe it's working. I can't obviously say with any type of certainty, but I was asked my opinion on it, and I'm going to give you an honest answer.

Speaker 9

Super helpful, Kyle. Now, regarding the revenue outlook, 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? Could you see similar acceleration in your 4Q results that you saw in 3Q?

Speaker 3

Christine, it's Herman. That's a great question. As you know, revenue exceeded the high end of guidance by more than 50%. 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. 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 wanted to give you the 52 to 57. It implies somewhere between $9 million-$14 million in the quarter.

Speaker 3

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.

Speaker 9

Great. Thank you very much.

Operator

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

Speaker 10

Hey, good morning, everyone. Following up on Andres's question, I guess I'd just love to hear, what are you hearing from customers within, as you've done these 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 deposit-backed orders? Would it be just we would see in the order book? What should our expectation be based on enthusiasm from customers as you fly for them?

Speaker 2

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 is a big one. 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.

Speaker 2

Part of getting a market survey is also having maintenance manuals and a maintenance process. 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 the frequency of downtime, dispatch rate?" 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 forecasts, but with real data, has been really, really helpful. We've accumulated enough hours and miles to really ring that out. 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 was a big market.

Speaker 2

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. It's a huge and growing market that we think that is the right entry point. So, learning about those obscure applications has been. I can't talk about it yet, there'll be some 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.

Speaker 10

Okay, perfect. Thank you for the detail. Just one for Herman. I know that if we kind of roll back maybe six months ago, you had guided us towards 2Q R&D and sort of kind of where things landed. Now that we've seen things step down in 3Q, as we think about phase 2 or additional phases of the eIPP, I know you're not guiding 2027, but should we think about there being sort of a kind of a bubble step up in R&D in 2027 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 get up there?

Speaker 3

You said it perfectly. We're not going to guide 2027 right now. What I would say, Chris, is there have been so many opportunities that have presented themselves this year. 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. 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. We'll talk more about that in the new year when we guide 2027.

Speaker 10

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

Operator

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

Speaker 11

Good morning. This is Tomas Russo on for Noah Poponak. I wanted to ask on the large passenger aircraft, how are you thinking about allocating capacity between that program and ALIA? Given the higher battery content for airframe, what's the right framework we should think about for sizing how much this program expands the total aftermarket opportunity?

Speaker 2

Yeah. I think, 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, 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.

Speaker 2

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. I think it's important to note, when you think about 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.

Speaker 2

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 CTOL aircraft 336 nautical miles. We intend to go and best that. It's a strategy that's looking at the longer form. So, 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.

Speaker 11

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

Speaker 2

Yeah. I will tell you, probably this is the first time I have 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 are hitting past their half-life of what we anticipated in batteries. We have a measurable difference in the degradation of the batteries. That is really good for us and for the customers to lower the cost of operation, because when you really dissect the recurring cost of operation, the battery degradation is a big part of that. 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. Focusing on the customer has been a philosophy here from day one.

Speaker 2

Frankly, we have 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, what we kind of measure in terms of capacity, is really only realized with a ton of hours of flying. So, it has been, frankly, quite positive, and I think that is the first time we have actually disclosed what the results are showing us. Thanks for the question. I appreciate it.

Speaker 11

I appreciate the insight. I will pass it back there.

Operator

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

Speaker 12

Hey, good morning. You got Ned Morgan on for Andre. Herman, you alluded to it a moment ago, but as the 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?

Speaker 3

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. But 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. Then, of course, there's going to be pilot training. There will be maintenance-type things. But the large driver will be charge.

Speaker 12

Got it. Thanks. Then a follow-up. As we're looking at 2027, for your five main KPIs, are you able to provide any preliminary thoughts on what you expect to set the mat?

Speaker 2

Yeah. No, we are 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 will kind of disclose our next year's guidance, including KPIs, on our fourth quarter earnings call. But look, the reality is we will keep accelerating, and that is the baseline.

Speaker 12

Got it. Thank you very much.

Operator

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

Speaker 2

Awesome. Thank you, everybody, and I just really appreciate people sticking around and getting through this call. 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 they are 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. What is 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 were not validated on day one, but they are validated years after those decisions are made, and that work has been done.

Speaker 2

I feel like we're on just really solid footing to take the next steps into finishing this year strong and continuing this momentum into next year. Thank you, everybody, for believing in this team, and we'll continue to keep our heads down and delivering for you.

Operator

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

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