Vertical Aerospace Ltd. Ordinary Shares

Thank you for standing by. My name is Carly and I will be your conference operator today. At this time, I would like to welcome everyone to the Vertical Aerospace Q1 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Charlotte. Please go ahead.

Hello, everybody. Good morning. I'm Charlotte Cowley, Director of Strategic Finance at Vertical Aerospace, and I'm delighted to welcome you to our Q1 2025 earnings call today. Before we get started, I would like to remind you that during today's call, we'll be making forward looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially from those contemplated by the forward looking statements. Any forward looking statements we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. We've posted an accompanying slide deck to the investor relations section of our website at investors.verticalaerospace.com, which contains information and cautionary warnings on forward-looking statements. For a more complete discussion about these risks and uncertainties, we've also filed a 6K with the SEC this morning. Now, I would like to hand you over to Stuart.

Good morning, good afternoon, good evening, everyone. Thank you for joining us and welcome to our Q1 call. I'm Stuart Simpson, the CEO of Vertical Aerospace. I'm going to cover three things. Firstly, to remind you why we believe we are set to succeed. Secondly, I'll update you on our progress during the quarter. And thirdly, to give you some colour around the big announcement we made yesterday of our hybrid programme, a hybrid aircraft with a range of 1,000 miles. This represents a huge additional market opportunity for us across defence and wider commercial operations, all incremental to our base flight plan 2030 that has already been communicated. Given it is all about having the right capacity for moving people and things, this hybrid gives us an incredible opportunity because we have the largest dimensions of our tilt rotor pairs, and this puts us in a brilliant position to be able to dominate this space. Then Dr. Limhai Somerville, our Director of Engineering, will discuss our battery and technical details and progress made on hybrid to date. I'll then touch on where we closed the quarter in terms of financials before we open the call for questions. In November, we launched our Flight Path 2030 business strategy, setting a clear roadmap to lead the eVTOL sector by the end of the decade. We established transparent financial and operating metrics for 2025, 2028, 2030 and beyond, including a credible timetable for certification. As you will hear today, we have already made meaningful progress towards achieving these targets, further strengthening our belief that Vertical is going to be a winner in the sector. We have a best-in-class aircraft in terms of safety, capacity for both people and luggage, and comfort. We are the only eVTOL player positioned to serve the full global market by certifying to the highest aviation standards. We are moving at pace through the certification process with all phases of piloted flight tests on track to be completed in 2025. We have a highly capital efficient approach with a clear path to profitability, spending approximately 75% less than our peers for a superior product. And we have a lean and highly experienced team that has certified 30 plus aircraft and propulsion systems. Turning to our progress since the start of the year, it's been a quarter of significant momentum, and I'm pleased to share several key developments as we advance our mission to bring electric flight to customers. Starting with our test program, where we have achieved a number of important technical milestones, building on our completion of thrust-borne testing earlier this year. Most notably, we delivered record-breaking piloted high-speed taxi tests with our VX4 demonstrator. These tests validated key systems under real-world conditions and are a major step towards our next piloted wing-borne flight, which we anticipate starting in Q2. Completing piloted Wingbourne will be an incredibly significant moment for us. Not only will this make us in the top two OEMs in the industry for piloted flight tests, but as a UK-based aerospace business, where unlike other jurisdictions, the burden of safety is shared with a regulator, having a joint liability with the company. As such, each phase of testing can only occur with specific approvals from the UK Civil Aviation Authority. As you can imagine, we are working incredibly closely with them to achieve this next step. To this end, we have submitted around 20,000 pages of documentation to the CAA to extend our permit to fly to encompass piloted wing-borne flight. The CAA's approval of this test will serve as a strong signal of their confidence in the safety, design and ability of the VX4 aircraft to operate in public airspace. We expect to advance to this stage over the next few months. I would like to address one topic that has arisen in recent days. We are aware a claim was made that the UK CAA will be aligning their certification standards to those of the FAA. As you would expect, we have very frequent interaction with the CAA as our home regulator, both at the working level and with the most senior levels of its executive management team. Since that claim was made, the CAA's management have confirmed the following to us in writing The CAA's position on certification of eVTOL aircraft is set out transparently in its certification of eVTOL aircraft publication available on its website. This document confirms the CAA will use SCVTOL as the certification basis for eVTOL aircraft in the UK. SC VTOL includes the safety requirement that these aircraft demonstrate a catastrophic failure rate of 10 to the minus 9. There has been no change to this published certification standard for EVTOLs. The CAA is working with other authorities, including both the FAA and EASA towards international harmonization of EVTOL certification. Based on this written confirmation, it is clear to us that the UK safety objectives remain unchanged. Any such change would require due process, which includes a public consultation. As we have said for several years, we welcome attempts between global regulators to harmonise certification standards, but we do not believe this should or will be at the expense of passenger safety. We firmly believe that passengers will expect these aircraft to be as safe as commercial airliners, and we know our customers share that view. Safety is non-negotiable. We remain confident that by certifying our aircraft to the highest commercial aircraft safety standards globally, we will be uniquely positioned in the industry with the only offering capable of serving all jurisdictions around the world. This brings me to another important point. These aircraft are being designed to carry passengers and will be certified as such, which is why we maintain it is absolutely critical to conduct a piloted test with one of our experienced test pilots in the cockpit under real world conditions. All the data we have from previous flight tests, hours of modeling, and numerous simulations give us total confidence in the capability of our aircraft and the success of our upcoming piloted wing-borne flight test. In terms of our operational goals for 2025, we're on track to complete all phases of our piloted flight test program by the end of the year, including transition flight, the final stage of testing, giving us even more confidence in our certification timeline. The team's discipline and execution continue to prove that we have the right approach to certification and development, and that the VX4 is one of the most advanced eVTOL aircraft under development today. And as you know, we do all our development with a pilot on board to ensure that we get not just digital feedback and data, but information from our test pilot. Real world insight from some of the world's most experienced test pilots. This ensures the final aircraft will meet our customer expectations for safety, comfort and quality. Importantly, as we continue to progress on our priorities, we are on track to double our airborne test fleet capabilities this year as we complete the assembly of the identical twin prototype aircraft, which has already been moved to our flight test center at Cotswolds Airport for finalization of the assembly. This will also unlock further learnings as we install the hybrid powertrain that we referred to earlier in the call. Moving on to partnerships, we have made significant progress both commercially and strategically. Just last week, we finalised a key decision to advance our production plans. Specifically, we formalised and expanded our partnership with Honeywell to deliver flight controls and aircraft management systems for our certification and production aircraft. In addition, we have chosen Honeywell for Anceptors to make VX4 easier and safer for pilots to fly. This partnership and the use of Honeywell's leading systems will unlock the efficiencies and speed necessary for Vertical to lead the industry in bringing the safest and most scalable product to market. It is a contract of some significant value, worth approximately a billion dollars over the next 10 years. Honeywell has been and will continue to be a fantastic partner. I'm delighted we have forged such a close working relationship over the last six years and can see this lasting long into the future. We are also supporting the acceleration of a global wide industry charging infrastructure by adopting the combined charging standard CCS for the VX4, the same as Beta and Archer. We believe a unified approach to charging is essential for the industry to be successful globally. It will help ensure seamless integration for OEMs, operators and infrastructure providers, while reducing costs and accelerating the adoption of electric aviation. Using the CCS fast charging standard will allow Vertical's VX4 to achieve quick turnaround times, including rapid battery charging and conditioning for shuttle operations. Ultimately, our adoption of CCS will enable immediate interoperability with all CCS chargers of this standard, including Beta's growing network. Finally, we've announced the addition of three new directors to our board, building on the steps we took earlier in the year, with Donal Slattery re-joining as chair and Eamon Brennan joining as a board advisor. The three new directors are Chris Haber, J.K. Brown and Carsten Stendervaert. With these appointments, we continue to strengthen our governance and strategic leadership with deep complementary experiences, particularly in industrial scale up. And all three have phenomenal capital markets expertise. Chris, amongst other roles, has been the COO of InvestCore and Advent International. JK was a founding partner at Oxif Capital Management, and Carsten is currently Co-Chief Investment Officer for Sustainable Investing at Bridgewater Associates and a Board Advisor to GIC. Their combined insights and expertise will be invaluable as we enter our next phase of development. I will hand over to Dr. Limhai Somerville, our Director of Engineering, to provide some detail on our success in battery development, a team he has been leading for the last six years. It is the strength of the innovation and capability within this team that has enabled us to unveil details of our well-advanced hybrid program yesterday. It is tremendously exciting and unlocks new additional multi-billion dollar market opportunities for us. This aircraft will have a range of over a thousand miles, opening up additional use cases, most specifically within defence, cargo, emergency services and long range commercial missions, where it is all about moving people and things. As I said before, our airframe is of a greater scale than peers, so we feel we are well placed to dominate in this space. all represent upside opportunities to the targets we shared in Flight Path 2030. The hybrid powertrain will be integrated into our next generation VX4 variant with flight testing planned to start next year. Within Flight Path 2030, it is worth remembering that our battery systems will be replaced more frequently than the airframe itself, one to two times a year, depending on how our customers fly and use the aircraft. something akin to the razor razor blade model. This means into the 2030s, Vertical's revenues will reach a 50-50 split of aircraft to battery with a very healthy gross margin of greater than 40% from the battery. In addition, there are most likely second life applications such as marine or sea toll, for example, which will provide an additional source of revenue for the business. Again, not included in the base case flight plan 2030. I'm incredibly proud to say that Limhi is due to present to the Royal Society of London later this month. The Royal Society is the UK's National Academy of Sciences and Limhi has been invited to give a presentation to this prestigious institution on verticals battery capability and how vertical is set to lead the industry. That presentation will highlight the incredible promise of our proprietary battery technology. Over to you Limhi.