Vertical Aerospace Ltd. (EVTL) Q2 2026 Earnings Report, Transcript and Summary

Good morning. My name is Jill, and I will be your conference moderator today. At this time, I would like to welcome everyone to the Vertical Aerospace Second Quarter 2026 Business and Strategy Update Call. [Operator Instructions] I will now turn the call over to Gillian Levine, Investor Relations Lead at Vertical Aerospace. You may begin your conference.

Good morning, and welcome to Vertical Aerospace's First Half 2026 Business Update Call. Before we begin, I would like to remind you that during today's call, we will be making forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially. Any forward-looking statements we make are based on assumptions as of today, and we undertake no obligation to update them as a result of new information or future events. We have posted an accompanying presentation to the Investor Relations section of our website, which contains additional information and cautionary language regarding forward-looking statements. For a more complete discussion of the risks and uncertainties affecting our business, please refer to the financial results and other materials filed with the SEC today. Today's call will be led by Stuart Simpson, our Chief Executive Officer. Stuart will be joined by Simon Davies, our Chief Test Pilot; and Michael Cervenka, our Chief Commercial and Strategy Officer. Following prepared remarks, we will open the call for questions. With that, I will hand it over to Stuart.

Thank you, Gillian, and good morning, everyone. The first half of 2026 has been one of the most important periods in Vertical's history. In April, we completed the first two-way piloted transition flight under the oversight of the U.K. Civil Aviation Authority and have since completed multiple transition flights. In June, our final full-scale prototype began piloted flight testing, doubling our flight test capacity. And this week, it also completed piloted transition. In July, we took that progress out of the test environment and into the public arena at the Farnborough International Airshow, where we made history as the first eVTOL flight demonstration at the airshow. At Farnborough, the industry did not just see an aircraft complete a single carefully staged flight. It saw Vertical fly in a real operating environment in front of regulators, customers, aerospace partners, government leaders and investors and then repeat that performance every day throughout the week. That distinction matters. It shows the maturity of our platform and moves to discussion from whether technology can work to whether it can be operated consistently, integrated safely and ultimately commercialized at scale. Farnborough also reinforced the core principle we have long embraced. Successfully commercializing a new class of aircraft requires more than an advanced airframe. It requires a coordinated ecosystem spanning certification, operators, airspace integration, infrastructure, manufacturing, export finance and long-term capital. Over the past several months, we have made meaningful progress across every one of those areas. Today, Simon will share the pilot's perspective on Farnborough and the progress of that flight test program. Michael will then explain how we are building the broader ecosystem around Farnborough. And I will close with the significance of the U.K. government support, our financial position and the key milestones ahead. Before I hand over to Sai, we would like to share a short film on Farnborough. [Presentation]

Thank you, Stuart. That video really showcases the superb capabilities of our aircraft. For those of you who haven't yet logged into our webcast, I would encourage you to do so after the call to take a look. Farnborough was not only a remarkable week for the Vertical team, but for the entire aviation industry. On day one of the show, we completed the first ever eVTOL flying display at Farnborough, a historic milestone. We flew a complete transition flight, taking off vertically, accelerating smoothly with the forward propellers tilting forward, lift transferring to the wing and the aircraft cruising like an airplane. We reversed that sequence for landing, demonstrating the defining capability of a tilt rotor aircraft, operating like a helicopter to take off and land without the need for a runway and cruising efficiently like an airplane. And the most important point from the cockpit was the aircraft behaved exactly as designed. We then repeated this every day of the show with the team delivering the same controlled performance with changing weather headwinds, tailwinds, crosswinds, normal for urban operations in front of 140,000 people. Farnborough is a challenging environment to display even a certified aircraft, but for a flight test team and a prototype aircraft to deliver five consecutive days with this kind of repeatability is a strong indicator of system maturity. Being able to show the entire aviation community and the public what we've achieved in person was an incredible and emotional moment. What wasn't visible at the airshow was the journey to get to Farnborough. Following the CAA's expansion of our permit to fly, we once again moved beyond our home flight test environment at Cotswold Airport and into public airspace, flying to RAF Brize Norton, RAF Benson, Blackbushe Airport and Farnborough Airport, so two military bases and two civil airports. This required our pilots, engineers and operations team to plan and execute the movement of a new type of aircraft through real airspace and real airport environments. We work with air traffic control, air field operators and our regulator, operated away from our normal support base and demonstrated the procedures, discipline and coordination that routine commercial operations will require while adding to our knowledge of the operating environment for Valo as we proceed towards certification. Getting to this moment was only possible from the culmination of a much broader and rigorous operational campaign that began in 2024. For over two years, we have systematically expanded the aircraft capabilities from tethered hover to vertical lift to wing-borne flight and ultimately, full piloted transition. Every stage has been conducted with a pilot and under the close oversight of the U.K. Civil Aviation Authority as we continue to mature both the aircraft and our flight test organization. Meanwhile, back at our flight test center, our second full-scale prototype is now continuing through its own piloted flight test campaign. Having two aircraft in the program allows us to increase the cadence of testing and demonstrations. And importantly, this aircraft is also intended to support hybrid electric flight testing, which we'll discuss further on this call. For me, the conclusion from Farnborough is straightforward. The aircraft flew as a mature, reliable platform into multiple airports in changing conditions. The team demonstrated disciplined operations away from our home environment, and we repeated that performance in public across the entire week. We will now carry all the learning and information from this experience forward as we progress Valo towards Critical Design Review and Certification. Michael, over to you.

As Si mentioned, Farnborough demonstrated the maturity of both our aircraft and our flight test program. Today, we're the only eVTOL company flying transition with a pilot on board with two full-scale aircraft under the direct oversight of a civil aviation regulator. That matters because this kind of flying gives us invaluable real-world operational experience, helping our pilots, engineers and flight test teams refine the procedures and knowledge that will support certification and entry into service of Valo. Farnborough also demonstrated the breadth of the ecosystem forming around Valo. During the week, we announced progress across commercial demand, market development, autonomy, airspace integration and charging, from welcoming Sigma Air Mobility part of Luxaviation Group as a new customer to working with GACA to lay the foundations for Valo's future entry into Saudi Arabia. We do not view these as a collection of stand-alone announcements. Each addresses an important part of turning a successful aircraft platform into a scalable aerospace business. Rather than take you through every announcement individually, I would like to focus on three that particularly demonstrate how this ecosystem is coming together. Our autonomy partnership with Near Earth, our work on next-generation charging through ECLiPSE and our role in integrating eVTOL aircraft into European airspace through VERTI-GO. First, autonomy and defense, where our differentiated platform and key partners provide Vertical with a unique strategic advantage. Valo has been designed from the outset as a common aircraft platform that can serve both commercial and defense markets with electric and hybrid electric propulsion and over time, increasingly autonomous capabilities. This approach allows us to address a broader range of missions without developing an entirely separate aircraft for each use case. This shortens development time lines, reduces operating costs and enables capabilities to be delivered faster to customers. At Farnborough, we announced a partnership with Near Earth Autonomy to support our one-platform strategy to compete in defense and commercial markets. Near Earth brings more than a decade of experience delivering autonomous aviation programs involving organizations, including the U.S. Marine Corps, U.S. Army, Honeywell and Leonardo S.p.A. Importantly, Near Earth's autonomy technology is designed to integrate with Honeywell's Anthem avionics system, which is already at the heart of Valo. That common digital architecture provides what we believe is a faster and lower risk route to introducing autonomous capabilities than developing a separate platform or rebuilding the aircraft core systems. Over time, this could expand Valo's potential across missions, including logistics, resupply, medical transport and distributed defense operations. The U.K. Ministry of Defense has also confirmed its interest in our hybrid electric and autonomous capabilities, reinforcing the relevance of this common platform strategy. Meanwhile, our hybrid program is progressing well. Our hybrid propulsion system is already in integration testing on the dedicated HYPER rig at Cotswold Airport. The rig allows us to validate the turbine generator, electrical systems, control architecture and fault responses before they are installed in an aircraft ahead of hybrid electric flight testing in the first half of 2027. The second area is battery technology and charging infrastructure. Vertical made a deliberate decision to develop proprietary battery capability in-house. We source cells from leading suppliers that design the battery management system and integrate those cells into aerospace-grade battery packs at our Vertical Energy Center. This gives us control over the performance and continued development of one of Valo's most critical systems. It also creates a meaningful recurring revenue opportunity. With aircraft batteries currently expected to be replaced approximately once a year, every Valo delivered has the potential to generate battery revenues throughout its operating life, expanding the lifetime value of each aircraft beyond the initial sale. This battery technology will only be commercially viable if aircraft can recharge quickly, manage heat efficiently and return to service without costly bespoke ground infrastructure. That is why we are developing a charging solution. And at Farnborough, this got a further boost. We announced ECLiPSE, a U.K. government-supported program led by Vertical in partnership with the University of Bath and InnCat to develop next-generation high-power charging and liquid cooling infrastructure for electric aircraft. The objective is to improve charging performance while reducing system size, installation complexity and long-term operating costs. Our solution is much more compact, allowing for broad deployment and much more cost efficient versus other options coming to market. Faster, more efficient charging should enable greater aircraft utilization and improve the economics for operators. Importantly, the infrastructure developed for ECLiPSE is intended to be vehicle agnostic. Whilst it will support Valo, it is being designed for use across different electric aircraft platforms, helping establish the common infrastructure needed for the wider electric aviation market to scale. The third area is certification and airspace integration. Vertical benefits from a well-defined certification pathway through the U.K. CAA and EASA. Both regulators have established dedicated (SC)-VTOL standards with published certification requirements and defined means of compliance. This gives us clear criteria against which Valo is being designed, tested and ultimately assessed. This approach is also expected to enable swift portability across regions. Beyond CAA and EASA, we have active certification validation projects with four other regulators, the U.S. Federal Aviation Administration, FAA, National Civil Aviation Agency of Brazil, ANAC, and the Japan Civil Aviation Bureau, JCAB, and most recently signed an MOU with GACA. Certifying the aircraft, however, is only part of bringing a new category into commercial service. The industry must also establish the procedures that will allow eVTOL aircraft to operate safely and routinely alongside existing airspace users. That is where Project VERTI-GO comes in. VERTI-GO is a major European Union-funded program led by Honeywell Aerospace under the SESAR joint undertaking, the EU's flagship program for modernizing European airspace. Its 12-partner consortium brings together aircraft manufacturers, regulators, air navigation service providers, airports and technology companies to develop the operating procedures required to integrate piloted eVTOL aircraft and remotely operated cargo aircraft into shared European airspace. Vertical has been selected as the program's piloted eVTOL demonstration partner with demonstration flights planned between Malaga and Marbella in Spain. This builds on the work we have already undertaken with NATS, the U.K.'s air navigation service provider through the U.K.'s Future Flight Challenge. We see VERTI-GO as Europe's counterpart to the U.S. eVTOL integration pilot program. It connects the defined U.K. and European aircraft certification pathway with the practical work required to introduce these aircraft into real aviation networks, moving the industry beyond demonstrating that an aircraft can fly and towards proving how it can operate safely, repeatedly and at scale. Taken together, Near Earth, ECLiPSE and VERTI-GO demonstrate the broader strategy. We are developing the aircraft autonomy, charging infrastructure and operating framework in parallel so that Valo can enter service as part of a functioning and scalable aviation ecosystem. Stuart, back to you.

Thank you, Michael. The ecosystem Michael described is particularly visible here in the U.K., where government support now spans technology development, manufacturing, defense, future flight policy and export finance. As Vertical progresses from aircraft development to industrialization, building the manufacturing capability to support certification, production and long-term growth becomes increasingly important. During Farnborough, we announced that Vertical is in advanced discussions with the U.K. government on a broad package to support that next phase, anchoring the first of our planned global production facilities in the U.K. This will build on our near-term manufacturing investments, including our early aircraft assembly facility at Cotswold Airport and expanded Vertical Energy Center due to open in the third and fourth quarters this year while providing the foundation for future production at scale. The proposed U.K. government package includes a further grant of up to $30.5 million in connection with the down selection of U.K. sites for aircraft assembly and battery manufacturing. When finalized, that would bring support awarded to Vertical from the U.K. government to approximately $100 million. The support is broader than a single grant. The Ministry of Defense has confirmed its interest in our platform, hybrid electric and autonomous capabilities. We have also signed a nonbinding MoU with U.K. Export Finance to establish a framework for potential export lift and customer financing support. We continue to work with Innovate U.K. and other government programs as we move from prototype development towards industrial scale up. We are progressing the U.K. site down selection and will announce a result within the next six months. Locating design and production approvals within the same CAA regulatory framework will ensure close coordination as we move through certification into production. This is not only important for Vertical. Our first full-scale final assembly and battery manufacturing facilities are expected to support around 700 direct highly skilled jobs by 2030 with wider benefits across the U.K. aerospace supply chain. It reinforces the U.K.'s ability to design, certify, manufacture and export a new generation of aircraft. Let me now turn to funding and our financial position at the close of the first half of 2026. I want to separate three things clearly: cash on our balance sheet, the makeup of our recent financing package and approach we take to deploying our available capital. That distinction is important for investors and how we manage the program. Following period end and building on the significant technical and commercial progress achieved during the first half, including our historic public flight demonstrations at Farnborough, we announced a financing package expected to provide approximately $100 million in gross proceeds from a combination of new and existing investors. We deliberately structured the recent financing using three complementary sources of capital. First, we raised $35 million through an underwritten offering to a group of new and existing investors. Second, Mudrick Capital accelerated $40 million under its existing convertible note facility. This comprises a recently completed $5 million draw and the accelerated funding of the remaining $35 million available under that facility. This represents further support from our largest shareholder. Third, we drew $25 million under our existing preferred equity facility with Yorkville, providing an additional source of near-term capital while preserving further potential capacity under the broader financing framework. As of today, 13th August 2026, we have available cash and cash equivalents on our balance sheet of approximately $134 million. And following receipt of all the financing commitments, which are expected on or around today, we anticipate having available cash of $148 million. The construction of the package was deliberate. Our first objective was to secure a meaningful amount of capital upfront rather than relying exclusively on smaller incremental draws that would remain dependent on future market conditions and trading volumes. Our second was to balance external equity investment with continued support from our largest shareholder and capital available through our existing facilities. Finally, we wanted to preserve flexibility across a range of future funding sources, including our remaining facilities, strategic investment, government support and other capital market opportunities. We also believe this was the appropriate time to act. Over the last six months, Vertical has completed piloted two-way transition with two full-scale prototypes, demonstrated the aircraft publicly at Farnborough International Airshow through five successful flights in five days, expanded its commercial and defense partnerships and secured increased support from the U.K. government. The financing allows us to convert that operational momentum into the financial capacity required to maintain program pace as we move into the next phase of certification and industrialization. This is, therefore, not simply about extending the runway. The capital supports a defined set of milestones that create significant program value. These include achieving Critical Design Review, which will establish the certifiable design baseline for Valo, progressing towards the build and test of certification conforming aircraft, opening our expanded Vertical Energy Center, which will triple our battery production capacity over time and developing our future U.K. production capabilities. Finally, retrofitting our third prototype aircraft to begin hybrid electric flight testing during the first half of 2027. Together with our existing cash resources and facilities, the package is expected to extend our cash runway through towards the end of third quarter 2027. It gives us greater resilience and clearer visibility over the delivery of these milestones while allowing us to engage with potential strategic and other funding partners from a stronger operating position. Over the next 12 months, we currently expect net cash outflows from operations of approximately $150 million. The principal uses of cash are directly linked to the program milestones discussed previously, with the completion of CDR being the next major milestone. During the first half, net cash used in operating activities was $112 million, reflecting our investment in flight testing, Critical Design Review, supplier activity, manufacturing readiness, our battery program and hybrid development. In the first quarter, we announced a broader financing framework of up to $850 million, inclusive of a $50 million equity raise. Following completion of the latest transactions, we will have raised or accessed approximately $185 million in aggregate gross proceeds from these facilities since March, comprising $85 million of equity, $50 million of convertible notes and $50 million of preferred equity. We would continue to have approximately $700 million of potential capacity under the Yorkville preferred equity and equity line facilities. Importantly, this represents potential future financing capacity, not cash on the balance sheet or unconditional liquidity, and remains subject to applicable conditions, limitations and market environment. However, it is committed capital. In summary, our approach to capital allocation remains disciplined. We will continue to evaluate the most appropriate mix of equity, strategic capital, government support and flexible financing. I'll close by setting out milestones investors should use to measure our progress. First is the aircraft level Critical Design Review, which we expect to complete by the end of 2026. This CDR will establish the certifiable design baseline for Valo, aligning the aircraft suppliers certification plans and enables the build and test of certification-ready aircraft. It is the next major gating milestone in the program. Second is industrial readiness. As mentioned, we are targeting the early production of aircraft assembly facility to come online during the third quarter of 2026, the expanded Vertical Energy Center during fourth quarter. Once fully operational, the expanded energy center will triple battery production, supporting our proprietary aerospace battery program and the batteries required for certification aircraft, while also building the foundation for future production and aftermarket opportunities. Third is hybrid. Integration testing is underway on our hybrid rig HYPER. We expect to select the long-term turbo generator supplier during the latter half of 2026 and to begin flight testing the hybrid electric prototype in the first half of 2027. This program extends the capability of the Valo airframe into longer-range civil, defense, logistics and special mission applications. Fourth is certification. Following the rebaselining announced in July, we expect to achieve type certification of Valo in 2029 through the U.K. CAA and the AAA pathway. The framework is established, the certification requirements and means of compliance are defined, and we remain in close engagement with both regulators. I can't stress this enough. Valo's U.K.-European pathway is being designed from the outset for global reach. Once Valo is certified by the U.K. CAA and the EASA under the (SC)-VTOL safety framework, which targets airliner level of safety for commercial eVTOL operations, the next step in the United States and other jurisdictions will be validation of that type certificate through existing bilateral and local processes rather than starting from scratch in each market. As Michael mentioned, our goal is for U.K. and EU certification to act as a foundation for rapid validation in the U.S. and other key regions, enabling Valo to enter service as a truly global aircraft with a consistent safety and performance standard, not just a single market product. The progress we've made during the first half of the year gives us real confidence in the road ahead. We've delivered major flight test milestones, expanded our flight test capability, demonstrated the aircraft in real operating environments, advanced our hybrid program, strengthened our industrial, commercial and technology partnerships, received confirmation of MoD interest in our platform, hybrid and autonomous capabilities and secured further U.K. government support now totaling over $100 million to build the manufacturing capability that will underpin certification and production. Throughout today's presentation, you've heard that our strategy extends beyond building a great aircraft. We're building the ecosystem, industrial capability and partnerships needed to bring an entirely new category of aviation into commercial service. None of this would be possible without the extraordinary dedication of our team. Every milestone we've discussed today reflects the commitment and expertise of colleagues across the business, and I'd like to thank them for everything they've achieved so far this year. As always, we remain committed to maintaining an open dialogue with our investors. We'll be attending several investor conferences over the coming weeks, including Jefferies, Deutsche Bank and H.C. Wainwright, and we look forward to meeting many of you there. If you'd like to arrange a meeting, please contact your sales representative or our Investor Relations team. Thank you for your continued support, and we're happy now to take your questions.

[Operator Instructions] Your first question comes from the line of Chris Pierce with Needham.

I guess just to sort of get right into it, I guess, how do you, the technical progress you guys have shown versus the market disconnect versus your peers, like what do you think closes that gap? Is it strategic? Is it something outside of sort of investor expectations? Like, and is this something you spend time thinking about given the liquidity situation? Or is it just head down, execute, keep flying, keep sort of moving the ball forward?

Chris, thank you very much for the question. Look, of course, we think about it, and we would love to get that gap closed, and I think we will. The first thing is we will just continue, as you say, to keep our heads down and execute flawlessly. Everything we set out almost two years ago in Flight Path 2030, we've delivered on. And in fact, we've delivered more than that, all in the right time and frankly, with less money than we said we would spend. I think that demonstrates what vertical is all about. We do what we say. We are efficient, and we are making tremendous progress. That being said, we've had this discussion around strategic partners. We have great strategic partners that we've been working with for many years. Honeywell among them, they've been deeply embedded in this program for six years, key part of us doing transition. American Airlines, along with our other customers, help define the aircraft and make it the market-leading proposition that it is. As you know, there is this ongoing desire to find other strategic partners. And I think when we find the right one of those that's truly accretive to the business, we will get a stock price re-rating and a and that market disconnect will start to close. So we do think about it. We will keep executing and we, of course, continue to look for other partners. Hopefully, that gives you a bit of a feel for it, Chris.

And then just on the nonfinancial side, I guess, how should we think about the order book after Farnborough, sort of what are you seeing? Is that something that's something that could kind of drive some momentum as well? Is it sort of, what should we expect the rest of this year as far as order book?

Yes. Good question, Chris. We, as you know, we've had our order book closed for a long time. I think we did one small announcement, but very high profile over the last few months. But in general, we're very, very selective with the customers that we engage with. But Farnborough was a wonderful showcase for us to have the five flawless flights outside every day to demonstrate the capability and inside to have the Valo on show showcasing how different it is in the category and how it can define the category has been extraordinary. So we've got a lot of conversations ongoing. I'll probably do some announcements post CDR because at that time, that gives us a more solid foundation for discussion with customers because that Critical Design Review, that aircraft Critical Design Review will let us confidently say, look, this is the mass of the aircraft. This is the payload. This is the range. And actually, that can really help with customer discussions. So I'd expect to see some announcements probably towards the end of this year and into the start of next year. That's probably the way to think about it, Chris.

Your next question comes from the line of Laura Li with Deutsche Bank.

So first, I want to ask about the timeline because could you elaborate a little bit more? What are the main factors behind this shift from 2028 to 29? And how should we think about the associated cash needs from now and then? Because I think you used to say something around like $200 million gap. And how should we think about that now?

Thanks, Laura. So the certification time line we talked about just before Farnborough and nudging that out from '28 to '29, really a reflection on a couple of things. We were a little bit late on transition kind of a quarter late. But what that really meant was it tied up our engineering team still focusing on transition rather than turning all that resource on to the certification aircraft, the VX4. So as you know, part of what we really pride ourselves here on at Vertical is being very clear and transparent to the market, and we felt it was appropriate just to nudge that out to 2029. But we're confident that we can do that. We've got a clear line of sight to it. As you know, we're working very closely with the Civil Aviation Authority and EASA. They are deeply involved in our program, understand the steps we've got to take and are both supportive of this time line to 2029. In terms of cash needs, cash needs remain around $700 million, and we're comfortable and confident we will be able to achieve that. So hopefully, that gives you what you were looking for, Laura.

I have one follow-up on the Vertical project with Honeywell. Could you provide more details on this vertical project, like how you expect it to be structured and how the road map look like? I think you just announced some demo in Spain, but how you are like prioritizing which markets come next or like where do you see more demand out there?

Yes, of course. Look, we've been, I think the distinction I would draw here, the eIPP in America is great. I'd love to see the competitors flying because it's bringing the industry to life. Of course, we've been flying under regulatory oversight here every single flight we do. So we're very used to having that level of scrutiny. With regard to the flying with Honeywell, I'll just pass that over to Michael Cervenka, who can give you some color commentary on it.

Thanks, Stuart. So I think, firstly, just to talk through what it involves, it brings together aircraft manufacturers, and navigation providers, airports, regulators and technology partners to develop procedures for shared European airspace. As I mentioned, it's the European equivalent to the FAA eIPP program, and we're the piloted demonstration partner. As you point out, we're going to be doing planned flights between Malaga and Marbella. And so firstly, clearly, there's a brilliant set of use cases in that area. But it's also about understanding the operating procedures within the European air space, getting kind of wider public and stakeholder engagement. So, this doesn't count towards certification, but I think it's a really important part about going beyond certification into operational proving.

Your next question comes from the line of Louie DiPalma with William Blair.

Can you further discuss your defense partnership with Near Earth autonomy and the hybrid development of Valo? And how much of a priority is the hybrid form factor for the U.K. Ministry of Defense?

Of course, I will just touch on the hybrid before passing it to Michael. So look, we're very excited about hybrid. We signed it off 2.5 years ago. It's been running on the bench. We now have a new gas turbine running on the bench, and we'll be installing that powertrain in the current Aircraft 3 in Q1 next year and flying that. And the joy we have relative to others is our larger airframe is a direct carryover from the electric aircraft to the hybrid. What it means is, and this is one of the reasons we have a lot of interest in it, our time to market is really accelerated versus others. So we're very, very excited about it. And over the next 6 months, we'll also announce our certification and industrialization partner for that hybrid program. So who is going to provide the gas turbine. With that, Louie, I'll pass over to Michael for a bit more in depth on the Near Earth.

Maybe just to add a little bit more on hybrid. So as Stuart says, really, we've got three aircraft from one-platform. So we've got the pure civil battery-powered aircraft. That remains our core focus. That's the CDR that Stuart talked about happening in November this year. And then hybrid really opens up two options for us. One is a civil variant, which looks incredibly competitive against some of the intermediate single and light twin helicopter market. So that's about a 400 helicopter a year market, and then it opens up defense options. The rig work that we've been doing has really been all of the technology proving around the integration of a hybrid system. So essentially on our aircraft in the battery variant, we have eight batteries. For hybrid, we removed four of them and replace that with a gas turbine system. Key steps in that are firstly, understanding the power management. So when are you taking power from the gas turbine, the batteries and how are you managing all of that. Then the other important bit is managing all of the electrical architecture, safety systems and so on. So all of that technology-proving integration and derisking, we've been doing through the series of rig tests. And then it's a relatively small step from that to then integrate it onto the aircraft. In fact, we've just now got two aircraft having plan transition. So I think that really demonstrates the capability, and what we're seeing is certainly on the defense side, as Stuart has mentioned, some real interest in that platform. It is quite different. It is the only eVTOL platform that has the size and capability to fit in a gas turbine system with incredible payload and range, but also brings together Valo's tilt rotor system with all of the maneuverability, redundancy and noise profile advantages. So we see this having a wide range of applications from dispersed logistics, medevac, surveillance reconnaissance, electronic warfare and so on, where we've got some real differentiation. So I think that's super exciting. Just to reiterate, battery is the core, but this is a relatively easy step for us to keep this program running in parallel, if you like. Just on autonomy, so Near Earth, I mean, we've been talking to you for quite some time. You may be aware that Honeywell is an investor in Near Earth. Near Earth has got phenomenal capabilities that they've built up over more than a decade. And in that, they've taken some existing legacy helicopters, which are really complex because, of course, they are manually flown. So both Bell and Leonardo helicopters, they put flight control systems and then autonomy on top of that. So that's a really big complex step. And they through some U.S. DoD programs, they've actually acted as a prime where they've demonstrated the ability to fly autonomous logistics missions into unprepared space. And you can imagine all of the complexities to do that and do that safely. The real beauty we've got for Valo is that autonomy system from the beginning was designed to run on the Anthem avionics suite that we have on our aircraft. So rather than having to bolt on additional boxes, essentially that can run on the compute that's already being certified for Valo, and it provides a really easy step. Now how we see that playing out is autonomy is a very big topic, and we haven't got time to go into detail, but there are clearly a wide range of defense applications where this is proving the technology is already there. So we'll have to go through the necessary approvals, but this is really an execution challenge. For Civil, we've always had the approach of making the aircraft really as simple and safe to fly and as automated as possible. I think Near Earth and Honeywell and us have a joint interest, strategic benefit, if you like, to maturing these technologies and taking us on that gradual journey towards increased automation towards autonomy and the civil platforms.

And is there any projected timeline on when the hybrid aircraft should perform this transition flight?

Well, we'll be installing the hybrid into the Aircraft 3, as Michael said, in Q1 or early Q2 next year. And then we'll take it through its normal flight test procedures. So a very, very exciting moment for us because with what we've done, we've already proven that the aircraft can do transition with electric. This really just substitutes in a different powertrain. So there is no huge technology challenge here. We know the powertrain works. We know the aircraft design works. So it's not a major step for us.

Your next question comes from the line of Sameer Joshi with H.C. Wainwright.

I just have a question on the cash burn expected over the next 12 months. When we look at the cash from operations for the first half of 2026, it's around GBP 83 million. And for the next three months, we are projecting GBP 110 million. I would just like to see how the last six months are different from the next 12 months? And why is it not sort of GBP 160 million, GBP 170 million for the next 12 months?

Yes. Good question. Thank you for that. Just to confirm, the spend for the first half of this year was $112 million. Now that was a high spend because we had an awful lot going on in the first half this year. So spend is nonlinear in these types of programs. It's pretty lumpy, and this first half was particularly busy. Supplier payments to underpin drive towards the CDR, the aircraft level CDR that we're doing in Q4 this year. We have a lot of spend associated with getting to and through Farnborough. We did some battery investment. And we also invested in our near-term manufacturing facilities for both the batteries, VEC2, where we've expanded the capacity threefold and invested in the new facility for pilot production of the aircraft at Kemble. So that just bumped this first half of the year up a little bit. As we look forward to next year, the spend is driven by the milestones that I've talked about. There will be a bit more spend related to the near-term manufacturing facilities. We've then got the aircraft level CDR that we're doing in Q4. Then as we roll into next year, there's a bit of additional spend on installing the hybrid into Aircraft 3 and then flying and demonstrating it. So that's really the difference. It was a bit of an expensive quarter given what we are trying to achieve this year. And then next year, it's not quite as lumpy. So hopefully, that explains it a little bit, Sameer.

Yes, that's good. We talked about in response to some questions about the VERTI-GO and in prepared remarks as well. But would you be able to talk a little bit about the ECLiPSE program? Is there any monetary commitment from any party here? How should we look at this progressing over the next 12 to 24 months?

Sorry, could you just repeat that? The line broke up a little bit, Sam. Which program would you like?

The ECLiPSE program, the battery program. The battery program, yes, of course. David, maybe you would like to comment on that.

Yes. Thank you for the question, Sameer. The ECLiPSE program is sponsored by the United Kingdom government, and that's to work with them to develop a high-power charging system. So as Michael said in his remarks, we have a proprietary battery system at Vertical Aerospace, and that's our core. We've invested in our Vertical Energy Center to develop the technologies. Now to build this ecosystem. I really like the way that Michael explained this because we're developing and certifying this aircraft halo, but we're essentially flying formation in developing the ecosystem at the same time so that the ecosystem elements and the certification can land on parallel runways at the same time so that we will hit the ground running literally in entry into service in 2029. So part of the ecosystem is the charging systems. Now what we have at Vertical, which is really exciting from my perspective is this proprietary charging system that provides high-power charging and cooling in a small footprint at a very cost-efficient manner. So through the ECLiPSE program, we are working with the United Kingdom government to develop that with the intent of being able to set up the ecosystem in the United Kingdom, but that also gives us this advancement of this proprietary capability.

And maybe if I can just add one point. Some of this came about actually, we obviously, fundamentally, we're not going to operate the aircraft. Our strategy is to be an OEM, but we work with that wider ecosystem in terms of how the aircraft get deployed. And included in that are a lot of the infrastructure players. And the feedback we were getting from them was the options they had available to them were really too expensive and too large. And fundamentally, we don't want that barrier to enable Valo and other electric aircraft to be deployed successfully all over the world. So we've taken it upon ourselves to kind of fill that gap with a really compelling offering.

Supplying batteries is also, I mean, I think it is a value proposition that seems to be lost with the investor community. But in terms of financing this ECLiPSE program, is the U.K. government committing any resources? And how much, what resources are expected from vertical?

So the U.K. government are committing resources to it. We know that. This is why we announced it. We've already got funding for that and the funding within our budget, the numbers that I talked about earlier. So we will be executing against that as we go forward. It's not huge numbers, Sameer. It's a pretty small amount of money that you need to execute this. We've actually been working on it for some time. So this is really just tidying up the last little bit of it. So it's not a huge cash drain going forward.

Your next question comes from the line of Andres Sheppard with Cantor Fitzgerald.

It was great to see the team at Farnborough and more importantly, it was great to see the aircraft fly at Farnborough. So congrats on that as well. Stuart, I want to maybe come back to defense and hybrid. I know you've talked about it extensively in your remarks. But I guess my question here is, how are we thinking about commercialization here? And is there perhaps an opportunity to accelerate the defense and/or the hybrid, perhaps even ahead of the civil side since obviously has a more progressive certification process. Just curious how you're thinking about that, if perhaps there's an opportunity to maybe, again, accelerate defense opportunities.

Yes, of course, Andres. So a huge thank you to you, Andres, as well. I think the panel that you hosted at Farnborough was just fantastic. It was great to be on stage with the other CEOs. So thank you for that, just bringing eyes and interest to this industry is fantastic. So thank you. Regarding defense and hybrid, look, you're absolutely right. We could accelerate this and flip and go hybrid first. At the minute, we're not because it's such a close follower. We are well down the road with Valo as an all-electric. We're progressing extremely well with the hybrid powertrain. We already know it works. We'll demonstrate it next year in an aircraft. But should the U.K. government come in or indeed any other military come in and say, look, we really want this now. We can absolutely pull that forward and deliver that either in parallel with the 2029 time line for the electric or potentially even earlier depending on certification requirements. So really good question, Andres. Thank you.

Maybe just as a quick follow-up. Coming back now to the Project VERTI-GO or the eIPP European equivalent. I think Michael mentioned this is not necessarily tied to certification, but it does help as validation towards that certification process. So I guess my question here is, how are you thinking about, or what are you hoping to achieve with this program? Is it a revenue generator down the line? Is it validation for the technology? Is it eyes to the industry? Is it all the above? Or just how are you thinking about it? And what are you hoping to get out of it?

Well, I will say one word and then hand it to Michael, but this will be an outstanding opportunity to demonstrate the capability of the aircraft in an amazing high-profile area of Spain. And then Michael, maybe if you want to add a bit more.

Yes. So I think that there's a lot of parallels with eIPP in terms of a lot of the things you talked about in terms of why you would do this. And the big bit is demonstrating the capability, demonstrating how this fits within the ecosystem, helping accelerate the wider stakeholders that are needed to bring these aircraft into operation. Like eIPP, it doesn't generate revenue itself, but there is one distinct difference, which is eIPP is not a funded program. So all of the U.S. payers participating in eIPP are doing it so entirely at their own expense, whereas this particular program actually is grant co-funded by the European Parliament. So we have the benefit that we get some of the costs covered. But really, it's around demonstrating and validating the operation of the aircraft in that ecosystem and all the different pieces that need to come together to make that happen.

Your next question comes from the line of Savanthi Prelis-Syth with Raymond James and Associates.

Just on the battery and charging solutions you're developing. I know you talked a little bit about this before, but I was curious if there's an opportunity here to kind of sell into some aerospace companies or even airports ahead of kind of the certification? Or do you kind of really need certification before you can kind of start monetizing that?

So Savi, absolutely, there's opportunity to monetize before certification. That's one of the reasons we're doing it. We also believe we've got a fantastic technical solution here that's smaller, cheaper, but equally as powerful as other things that are available. But yes, we have got great opportunity to monetize earlier than certification. I guess what do you need to achieve to get to that point? Or what's the timeline look like? We've not gone public with that, but you can book it pre certification.

And then just on kind of the Valo aircraft. Just curious how many aircraft you plan on building as you kind of get through 2027 and 2028. And if, going back to VERTI-GO, if you'll be planning on flying the Valo aircraft? Or will you be flying some of the Aircraft 3 or Aircraft 2?

Yes. We'll be flying Valo, and we will be ramping up production towards the end of next year, and we will be flying in the Valo in 2028. We'll be building seven of those initially and then some hybrid ones as well. So that's the way to think about that. And we'll certainly be flying Valo at Farnborough in two years. We've gone from having nothing flying there to an amazing year this year with prototype aircraft, and we'll have Valo on full display flying there in a couple of years. very, very exciting.

We have reached the end of our Q&A session. I will now turn the call back to Stuart for closing remarks.

So first of all, thank you all for joining and the continued interest in Vertical, hugely appreciated. I'd just like to take a moment to thank the Vertical team for all they've achieved this year. It's been a quite extraordinary first half of the year with everything that we've achieved on a fraction of what others are spending. The next six months will continue to be exciting. We will continue, as someone said, to keep our heads down and execute. We will be opening the VEC2 battery manufacturing facility. We'll open the aircraft pilot production facility at Cotswold Airport. We will do our certification next step with the aircraft level CDR in Q4, which will confirm the commercial viability of the aircraft, the mass, the payload, the range, which facilitates deep discussions with our current and future customers. We will announce the selection of our certification and industrialization partner for the hybrid product. We'll start installing the hybrid into Aircraft 3, and we will announce the location of our full-scale manufacturing facilities for both battery and aircraft. So it's going to be another extremely busy six months for us here at Vertical. And thanks again for all of your interest and support. Look forward to talking to you all soon. Thank you.

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