## Vertical Aerospace (EVTL) — a filings-driven deep dive into the “hard stuff” (pre-orders, certification gating, covenants, and the real commercialization bottlenecks) ### Executive takeaway (what matters most, based strictly on disclosures) Vertical’s “order book” is *real as market signal* but *not real as backlog* because the company repeatedly discloses that its pre-orders are **conditional / not legally binding** and only become binding once **master purchase agreements** are executed. ["not legally binding"](0001104659-25-022354|0) The company’s critical path is less about “can it fly?” and more about **certification + production approvals + funding**—with disclosures pointing to (i) a UK **DOA** already granted and later expanded, (ii) a **POA still needed**, and (iii) a **minimum-cash covenant** under the secured notes that the company projects it may breach without new capital. ["Design Organisation Approval"](0001104659-25-022354|0) ["minimum cash balance"](0001410578-25-001571|3) --- # 1) The “pre-order book” under the microscope: what’s disclosed vs. what’s implied ### 1.1 The key “hard-to-notice” clause: pre-orders don’t bind until MPAs exist Vertical states that pre-orders are “not legally binding” until a **master purchase agreement** is executed with final purchase terms (including final aircraft count and delivery timing). ["not legally binding until"](0001104659-25-022354|0) This matters because many investors treat “pre-orders” like aerospace backlog; the company explicitly warns you not to. ["pre-orders may be terminated"](0001104659-25-022354|0) ### 1.2 Pre-delivery payments: they exist, but the *conditions and refundability* are the real story Vertical discloses a **pre-delivery payment from Marubeni** for reserving delivery slots (25 aircraft), which “may be refundable in full” under certain circumstances. ["pre-delivery payment from Marubeni"](0001104659-25-022354|0) It also discloses **American Airlines’ commitment** to pay a pre-delivery payment only upon satisfaction of conditions including entering into an **American master purchase agreement**, and that the payment “may be refundable in full” under certain circumstances. ["AA Pre-Delivery Payment"](0001104659-25-022354|0) ### 1.3 Pre-order “composition table” (pulled from the 20-F narrative) *Units are “up to” unless noted; these are not binding backlog.* | Customer / channel | Disclosed pre-order / option | “Hard” detail that’s easy to miss | |---|---:|---| | American Airlines | Up to **250** + option **100** ["up to 250"](0001104659-25-022354|0) ["option to purchase an additional 100"](0001104659-25-022354|0) | Pre-delivery payment commitment is **conditional** on executing an **AA Master Purchase Agreement**; may be refundable. ["entering into a master purchase agreement"](0001104659-25-022354|0) ["refundable in full"](0001104659-25-022354|0) | | Bristow | Pre-order **25** + option **25** ["pre-order of 25"](0001104659-25-022354|0) ["option for up to 25"](0001104659-25-022354|0) | Still within the “not legally binding” framework until MPAs. ["not legally binding"](0001104659-25-022354|0) | | Iberojet | Pre-order **20** + option **80** ["pre-order of 20"](0001104659-25-022354|0) ["option for up to 80"](0001104659-25-022354|0) | Terms still subject to long-form purchase agreement finalization. ["master purchase agreement"](0001104659-25-022354|0) | | Marubeni | “Pre-order option” up to **200** ["up to 200"](0001104659-25-022354|0) | Pre-delivery payment for **25 slots**; may be refundable. ["reservation of aircraft delivery slots for 25"](0001104659-25-022354|0) ["refundable in full"](0001104659-25-022354|0) | | Kakao Mobility | Up to **50** ["up to 50"](0001104659-25-022354|0) | Included in “approximately 1,500 aircraft” pre-orders figure. ["approximately 1,500 aircraft"](0001104659-25-022354|0) | | FLYINGGROUP | Pre-order **25** + option **25** ["pre-order of 25"](0001104659-25-022354|0) ["option for up to 25"](0001104659-25-022354|0) | Same MOU → MPA gating logic. ["memoranda of understanding"](0001104659-25-022354|0) | | Avolon (indirect/leasing channel) | Pre-order up to **~310** + option **~190** ["pre-order up to approximately 310"](0001104659-25-022354|0) ["option to pre-order a further 190"](0001104659-25-022354|0) | Avolon had “placed approximately **550** aircraft” to airlines as of March 2022 (downstream placements, still not the same as binding purchase revenue). ["placed approximately 550 aircraft"](0001104659-25-022354|0) | **How to use this table like an analyst (interactive lens):** treat each “up to” as an *option-like marketing instrument* until you see (a) executed MPAs, (b) non-refundable deposits, and (c) delivery-slot / pricing escalation language finalized. Vertical explicitly flags that even escalation clauses may or may not exist once formalized. ["price escalation clauses"](0001104659-25-022354|0) --- # 2) Certification and production approvals: the gating items that actually determine revenue timing ### 2.1 DOA vs POA vs Type Certificate (why this is a “filings-only” edge) Vertical discloses it received an eVTOL **Design Organisation Approval (DOA)** from the UK CAA in March 2023; it also says the DOA scope was **expanded in July 2024** (including additional aspects of flight control, avionics and electrical systems). ["issued us with an eVTOL DOA"](0001104659-25-022354|0) ["expanded in July 2024"](0001104659-25-022354|0) But it also discloses a **Production Organisation Approval (POA)** is required and still needs to be obtained/maintained to manufacture aircraft to an approved type design. ["Production Organisation Approval (“POA”)"](0001104659-25-022354|0) ### 2.2 “Concurrent” certification strategy (CAA + EASA first, others validate later) Vertical says it expects **concurrent type certification from CAA and EASA** and then “validation from the FAA and other international regulators” later. ["concurrent type certification"](0001104659-25-022354|0) It also discloses it had undertaken initial “Technical Familiarizations” with five regulators: **CAA, EASA, FAA, JCAB, ANAC**. ["five aviation regulators"](0001104659-25-022354|0) ### 2.3 The company’s own long-range timeline targets (Flightpath 2030 / investor materials) A disclosed investor update sets out targets including **certifying the VX4 in 2028**, production rate **exceeding 200 units in Q4 2030**, scaling to **>700 units/year** in the medium-term, and **cash break-even in 2030**. ["Certifying the VX4 in 2028"](0001104659-24-130529|2) ["exceeding 200 VX4 units"](0001104659-24-130529|2) ["greater than 700 units"](0001104659-24-130529|2) ["cash break-even in 2030"](0001104659-24-130529|2) --- # 3) The supply chain: named “single points of failure” hidden in Risk Factors Vertical discloses specific expected primary suppliers for key subsystems—this is unusually concrete and often buried in risk disclosure: | Critical subsystem | Disclosed primary supplier (expected) | Why it’s a bottleneck (per filing language) | |---|---|---| | Battery cells | Molicel ["battery cells primarily from Molicel"](0001104659-25-022354|0) | If alternative sourcing is needed, it could “increase our costs” and create “significant delays.” ["increase our costs"](0001104659-25-022354|0) | | Mechanical systems | Hanwha Aerospace ["mechanical systems primarily from Hanwha Aerospace"](0001104659-25-022354|0) | Same substitution risk / timing risk. ["adversely affect our ability"](0001104659-25-022354|0) | | Flight control + avionics | Honeywell ["flight control system and avionics systems primarily from Honeywell"](0001104659-25-022354|0) | A certification program is extremely sensitive to avionics/controls changes; delays propagate into certification timelines. ["could cause significant delays"](0001104659-25-022354|0) | **Why this is “hard-to-find alpha”:** these are not generic “we rely on suppliers” statements; Vertical names expected primaries for core systems and ties them directly to high-volume production assumptions. ["projected high volume production numbers"](0001104659-25-022354|0) --- # 4) Liquidity + covenants: where the filings are most explicit (and where the story changes over time) ### 4.1 Going concern disclosures: specific cash, burn, and “sufficiency window” In the 20-F, Vertical discloses: cash and cash equivalents of **£22.5 million** at Dec 31, 2024, projected **net cash outflows from operating activities ~£100 million** over the next 12 months (after expected R&D tax receipts/grants), and that the group’s “existing resources” would only fund operations “into, but no longer than, the **fourth quarter of 2025**.” ["£22.5 million"](0001104659-25-022354|0) ["net cash outflows from operating activities"](0001104659-25-022354|0) ["no longer than, the fourth quarter of 2025"](0001104659-25-022354|0) ### 4.2 The minimum-cash covenant: same covenant, different projected breach timing (important!) Vertical discloses a covenant in the Convertible Senior Secured Notes indenture requiring **minimum cash of at least $10 million at all times**. ["minimum cash balance of at least $10 million"](0001104659-25-022354|0) But two different disclosures give different *projected breach timing*: - **20-F (FY2024):** projected breach in **Q4 2025** unless additional capital is raised. ["breach this covenant in the fourth quarter of 2025"](0001104659-25-022354|0) - **6-K interim notes (six months ended June 30, 2025):** projected breach in **Q2 2026** unless additional capital is raised. ["breach this covenant in the second quarter of 2026"](0001410578-25-001571|3) This is exactly the kind of “filings breadcrumb” that’s easy to miss: the covenant is the same, but the runway expectation moves—likely reflecting intervening financing or operating changes (the filings don’t explicitly attribute the delta in these excerpts, so we don’t speculate). ["highly dependent"](0001410578-25-001571|3) ### 4.3 “Runway” snapshot table (as disclosed) | Metric / disclosure | Value | Source | |---|---:|---| | Cash & cash equivalents (Dec 31, 2024) | £22.5m ["£22.5 million"](0001104659-25-022354|0) | 20-F FY2024 | | “As at the date of this report” cash (20-F narrative) | ~£77m ["approximately £77 million"](0001104659-25-022354|0) | 20-F FY2024 | | Cash & cash equivalents (Mar 31, 2025) | £68.8m ["£68.8 million"](0001104659-25-066866|0) | 424B5 (incorporated context) | | Cash & cash equivalents (June 30, 2025) | £62m (preliminary) ["£62 million"](0001104659-25-066866|0) | 424B5 | | “Sufficient to fund operations toward the middle of 2026” (management estimate) | qualitative ["toward the middle of 2026"](0001104659-25-066866|0) | 424B5 | --- ## Optional drill-down prompts (pick any one; no extra context needed) 1) “Show me the exact language around *master purchase agreements* and what conditions precedent are described.” (I’ll map the legal gating terms customer-by-customer.) ["master purchase agreement"](0001104659-25-022354|0) 2) “Build a covenant risk timeline and reconcile Q4’25 vs Q2’26 breach projections.” ["breach this covenant"](0001104659-25-022354|0) ["breach this covenant"](0001410578-25-001571|3) 3) “Turn supplier dependencies into a *certification risk register* (what changes force re-test / re-certification).” ["primarily from Honeywell"](0001104659-25-022354|0) If you want, I can also produce a **single-page “investment memo”** that converts these disclosures into (a) a certification gating chart, (b) a liquidity/covenant dashboard, and (c) a pre-order-to-revenue conversion framework—still fully cited to filings.

## Vertical Aerospace (EVTL) — a filings-driven deep dive into the “hard stuff” (pre-orders, certification gating, covenants, and the real commercialization bottlenecks) ### Executive takeaway (what matters most, based strictly on disclosures) Vertical’s “order book” is *real as market signal* but *not real as backlog* because the company repeatedly discloses that its pre-orders are **conditional / not legally binding** and only become binding once **master purchase agreements** are executed. ["not legally binding"](0001104659-25-022354|0) The company’s critical path is less about “can it fly?” and more about **certification + production approvals + funding**—with disclosures pointing to (i) a UK **DOA** already granted and later expanded, (ii) a **POA still needed**, and (iii) a **minimum-cash covenant** under the secured notes that the company projects it may breach without new capital. ["Design Organisation Approval"](0001104659-25-022354|0) ["minimum cash balance"](0001410578-25-001571|3) --- # 1) The “pre-order book” under the microscope: what’s disclosed vs. what’s implied ### 1.1 The key “hard-to-notice” clause: pre-orders don’t bind until MPAs exist Vertical states that pre-orders are “not legally binding” until a **master purchase agreement** is executed with final purchase terms (including final aircraft count and delivery timing). ["not legally binding until"](0001104659-25-022354|0) This matters because many investors treat “pre-orders” like aerospace backlog; the company explicitly warns you not to. ["pre-orders may be terminated"](0001104659-25-022354|0) ### 1.2 Pre-delivery payments: they exist, but the *conditions and refundability* are the real story Vertical discloses a **pre-delivery payment from Marubeni** for reserving delivery slots (25 aircraft), which “may be refundable in full” under certain circumstances. ["pre-delivery payment from Marubeni"](0001104659-25-022354|0) It also discloses **American Airlines’ commitment** to pay a pre-delivery payment only upon satisfaction of conditions including entering into an **American master purchase agreement**, and that the payment “may be refundable in full” under certain circumstances. ["AA Pre-Delivery Payment"](0001104659-25-022354|0) ### 1.3 Pre-order “composition table” (pulled from the 20-F narrative) *Units are “up to” unless noted; these are not binding backlog.* | Customer / channel | Disclosed pre-order / option | “Hard” detail that’s easy to miss | |---|---:|---| | American Airlines | Up to **250** + option **100** ["up to 250"](0001104659-25-022354|0) ["option to purchase an additional 100"](0001104659-25-022354|0) | Pre-delivery payment commitment is **conditional** on executing an **AA Master Purchase Agreement**; may be refundable. ["entering into a master purchase agreement"](0001104659-25-022354|0) ["refundable in full"](0001104659-25-022354|0) | | Bristow | Pre-order **25** + option **25** ["pre-order of 25"](0001104659-25-022354|0) ["option for up to 25"](0001104659-25-022354|0) | Still within the “not legally binding” framework until MPAs. ["not legally binding"](0001104659-25-022354|0) | | Iberojet | Pre-order **20** + option **80** ["pre-order of 20"](0001104659-25-022354|0) ["option for up to 80"](0001104659-25-022354|0) | Terms still subject to long-form purchase agreement finalization. ["master purchase agreement"](0001104659-25-022354|0) | | Marubeni | “Pre-order option” up to **200** ["up to 200"](0001104659-25-022354|0) | Pre-delivery payment for **25 slots**; may be refundable. ["reservation of aircraft delivery slots for 25"](0001104659-25-022354|0) ["refundable in full"](0001104659-25-022354|0) | | Kakao Mobility | Up to **50** ["up to 50"](0001104659-25-022354|0) | Included in “approximately 1,500 aircraft” pre-orders figure. ["approximately 1,500 aircraft"](0001104659-25-022354|0) | | FLYINGGROUP | Pre-order **25** + option **25** ["pre-order of 25"](0001104659-25-022354|0) ["option for up to 25"](0001104659-25-022354|0) | Same MOU → MPA gating logic. ["memoranda of understanding"](0001104659-25-022354|0) | | Avolon (indirect/leasing channel) | Pre-order up to **~310** + option **~190** ["pre-order up to approximately 310"](0001104659-25-022354|0) ["option to pre-order a further 190"](0001104659-25-022354|0) | Avolon had “placed approximately **550** aircraft” to airlines as of March 2022 (downstream placements, still not the same as binding purchase revenue). ["placed approximately 550 aircraft"](0001104659-25-022354|0) | **How to use this table like an analyst (interactive lens):** treat each “up to” as an *option-like marketing instrument* until you see (a) executed MPAs, (b) non-refundable deposits, and (c) delivery-slot / pricing escalation language finalized. Vertical explicitly flags that even escalation clauses may or may not exist once formalized. ["price escalation clauses"](0001104659-25-022354|0) --- # 2) Certification and production approvals: the gating items that actually determine revenue timing ### 2.1 DOA vs POA vs Type Certificate (why this is a “filings-only” edge) Vertical discloses it received an eVTOL **Design Organisation Approval (DOA)** from the UK CAA in March 2023; it also says the DOA scope was **expanded in July 2024** (including additional aspects of flight control, avionics and electrical systems). ["issued us with an eVTOL DOA"](0001104659-25-022354|0) ["expanded in July 2024"](0001104659-25-022354|0) But it also discloses a **Production Organisation Approval (POA)** is required and still needs to be obtained/maintained to manufacture aircraft to an approved type design. ["Production Organisation Approval (“POA”)"](0001104659-25-022354|0) ### 2.2 “Concurrent” certification strategy (CAA + EASA first, others validate later) Vertical says it expects **concurrent type certification from CAA and EASA** and then “validation from the FAA and other international regulators” later. ["concurrent type certification"](0001104659-25-022354|0) It also discloses it had undertaken initial “Technical Familiarizations” with five regulators: **CAA, EASA, FAA, JCAB, ANAC**. ["five aviation regulators"](0001104659-25-022354|0) ### 2.3 The company’s own long-range timeline targets (Flightpath 2030 / investor materials) A disclosed investor update sets out targets including **certifying the VX4 in 2028**, production rate **exceeding 200 units in Q4 2030**, scaling to **>700 units/year** in the medium-term, and **cash break-even in 2030**. ["Certifying the VX4 in 2028"](0001104659-24-130529|2) ["exceeding 200 VX4 units"](0001104659-24-130529|2) ["greater than 700 units"](0001104659-24-130529|2) ["cash break-even in 2030"](0001104659-24-130529|2) --- # 3) The supply chain: named “single points of failure” hidden in Risk Factors Vertical discloses specific expected primary suppliers for key subsystems—this is unusually concrete and often buried in risk disclosure: | Critical subsystem | Disclosed primary supplier (expected) | Why it’s a bottleneck (per filing language) | |---|---|---| | Battery cells | Molicel ["battery cells primarily from Molicel"](0001104659-25-022354|0) | If alternative sourcing is needed, it could “increase our costs” and create “significant delays.” ["increase our costs"](0001104659-25-022354|0) | | Mechanical systems | Hanwha Aerospace ["mechanical systems primarily from Hanwha Aerospace"](0001104659-25-022354|0) | Same substitution risk / timing risk. ["adversely affect our ability"](0001104659-25-022354|0) | | Flight control + avionics | Honeywell ["flight control system and avionics systems primarily from Honeywell"](0001104659-25-022354|0) | A certification program is extremely sensitive to avionics/controls changes; delays propagate into certification timelines. ["could cause significant delays"](0001104659-25-022354|0) | **Why this is “hard-to-find alpha”:** these are not generic “we rely on suppliers” statements; Vertical names expected primaries for core systems and ties them directly to high-volume production assumptions. ["projected high volume production numbers"](0001104659-25-022354|0) --- # 4) Liquidity + covenants: where the filings are most explicit (and where the story changes over time) ### 4.1 Going concern disclosures: specific cash, burn, and “sufficiency window” In the 20-F, Vertical discloses: cash and cash equivalents of **£22.5 million** at Dec 31, 2024, projected **net cash outflows from operating activities ~£100 million** over the next 12 months (after expected R&D tax receipts/grants), and that the group’s “existing resources” would only fund operations “into, but no longer than, the **fourth quarter of 2025**.” ["£22.5 million"](0001104659-25-022354|0) ["net cash outflows from operating activities"](0001104659-25-022354|0) ["no longer than, the fourth quarter of 2025"](0001104659-25-022354|0) ### 4.2 The minimum-cash covenant: same covenant, different projected breach timing (important!) Vertical discloses a covenant in the Convertible Senior Secured Notes indenture requiring **minimum cash of at least $10 million at all times**. ["minimum cash balance of at least $10 million"](0001104659-25-022354|0) But two different disclosures give different *projected breach timing*: - **20-F (FY2024):** projected breach in **Q4 2025** unless additional capital is raised. ["breach this covenant in the fourth quarter of 2025"](0001104659-25-022354|0) - **6-K interim notes (six months ended June 30, 2025):** projected breach in **Q2 2026** unless additional capital is raised. ["breach this covenant in the second quarter of 2026"](0001410578-25-001571|3) This is exactly the kind of “filings breadcrumb” that’s easy to miss: the covenant is the same, but the runway expectation moves—likely reflecting intervening financing or operating changes (the filings don’t explicitly attribute the delta in these excerpts, so we don’t speculate). ["highly dependent"](0001410578-25-001571|3) ### 4.3 “Runway” snapshot table (as disclosed) | Metric / disclosure | Value | Source | |---|---:|---| | Cash & cash equivalents (Dec 31, 2024) | £22.5m ["£22.5 million"](0001104659-25-022354|0) | 20-F FY2024 | | “As at the date of this report” cash (20-F narrative) | ~£77m ["approximately £77 million"](0001104659-25-022354|0) | 20-F FY2024 | | Cash & cash equivalents (Mar 31, 2025) | £68.8m ["£68.8 million"](0001104659-25-066866|0) | 424B5 (incorporated context) | | Cash & cash equivalents (June 30, 2025) | £62m (preliminary) ["£62 million"](0001104659-25-066866|0) | 424B5 | | “Sufficient to fund operations toward the middle of 2026” (management estimate) | qualitative ["toward the middle of 2026"](0001104659-25-066866|0) | 424B5 | --- ## Optional drill-down prompts (pick any one; no extra context needed) 1) “Show me the exact language around *master purchase agreements* and what conditions precedent are described.” (I’ll map the legal gating terms customer-by-customer.) ["master purchase agreement"](0001104659-25-022354|0) 2) “Build a covenant risk timeline and reconcile Q4’25 vs Q2’26 breach projections.” ["breach this covenant"](0001104659-25-022354|0) ["breach this covenant"](0001410578-25-001571|3) 3) “Turn supplier dependencies into a *certification risk register* (what changes force re-test / re-certification).” ["primarily from Honeywell"](0001104659-25-022354|0) If you want, I can also produce a **single-page “investment memo”** that converts these disclosures into (a) a certification gating chart, (b) a liquidity/covenant dashboard, and (c) a pre-order-to-revenue conversion framework—still fully cited to filings.