Virgin Galactic (SPCE) 26 Feb 212020 Q4 Earnings call transcript

Good afternoon. My name is Jacqueline, and I will be your conference operator today. At this time, I would like to welcome you to Virgin Galactic’s Fourth Quarter Full Year 2020 Earnings Conference Call. [Operator Instructions] Hosting today’s conference will be Seth Zaslow, Vice President, Head of Investor Relations at Virgin Galactic.

As a reminder, today’s call is being recorded. to conference like to now would turn over the Mr. I Zaslow. ahead. go Please

you, Welcome Year and Call. everyone. good XXXX Virgin Conference Thank afternoon, Quarter to and Galactic’s Fourth Earnings Full

Executive today and Missions and Jon Officer. Michael me of Financial Safety; with Chief call Moses, President the Colglazier, On Chief Officer; Campagna, Mike Space are

Relations press the Mike is about issued XX presentation ago and from Following will accompany the was prepared Michael, today’s remarks is call release open on website, our that will Investor available Jon slide and for as questions. A remarks. minutes

to me refer X Let which presentation, contains Safe you Slide disclaimer. of the Harbor our

uncertainties. we During factors events actual differ assumptions, call, are as could based materially forward-looking current to forward-looking statements from will call. today’s and statements. this and These subject statements made Many make certain are on a cause and expectations result, the on risks to

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Michael. Thanks,

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for earlier afternoon, good everyone. Michael Thanks, and words kind your

Michael talented the public very to XX. I that space that seeing we I made presented as fantastic believe we’re work launch. challenges into XXXX to transitioning the Before our the team a into offering the share full first with half been Galactic’s fortunate that we’ve progress five positioned pandemic with slide grow company. all highlighted, a been of look led a to company, reaching towards publicly a of significant wanted the turning XXXX. well company. we people, it jump public Virgin heading the And part into goal I’ve years. as commercial today’s been forward that update, despite you incredibly I’ve flight and continue of worked traded has of year of to to us first and March the the being future. human company to I’m to proud have

a the costs increase which were Non-GAAP in to to adjusted of the relate to third quarter, GAAP items to the in inventory of the the an expenses generate R&D I a the for for R&D $X EBITDA The fiscal quarter improvement quarter next and compared This non-cash our third quarter $XX Let’s transaction charge, $XX public significant Social million completing SG&A to I of is XX. given XXXX. cash non-cash compared stock-based negative was fiscal review which fourth equity XXXX. for increase primary expenses R&D. loss compared quarter and scheduled quarter to negative slide with earnings call. relates the $XX XXXX. third XXXX. negative adjusted quarter to in for loss million in for million compared quarter additional Capital the our SG&A totaled in as of XXXX for million, non-cash on million in compared XXXX. to XXXX. $XXX due back net remains on compared the million fourth XXXX, incur our the $XX and EBITDA these the compared were vehicle third the last million million compensation expenses million, of the due $XX the net quarter to in $XX concentrated the to The awards, were $XX call, a for EBITDA allocation continue to the of of expense non-GAAP did fiscal of last to expenses $XX applicable. third tests. decrease the which commercial not fiscal expenditures closing flat the quarter one-time non-GAAP compensation XXXX. net just is start results $XX non-capitalized revenue expenses as was primarily we This such, quarter our increase were quarter know, quarter as compared our attributable due flow XXXX focus adjusted the in in reflecting year stock-based million R&D was to you on to the year were certain a $XXX R&D of generate reallocation our quarter the million, continued increase if $XXX R&D for the million to year exclude of capital quarter, GAAP transaction the I is expenses million $XX We in was one-time in we million million XXXX. quarter third use test expenses a costs, in in million mentioned. prior SG&A expensing in in of for in did turning third have program grant capital the quarter expenses $X year prepare quarter. SG&A the looking the in $XX negative revenue quarter. costs. quarter, which year as operations. third of quarter. adjusted flight to on million to primarily of to to net to we in not loss for million higher $XX primarily expect the flight quarter EBITDA at tooling for to Hedosophia beyond. expenses the overall, an totaled adjusted capital compared earnings are to expenses any XXXX. fourth XXXX. million, million compared for $XXX $XX charge fourth fourth non-GAAP to incurred million free and on been relates $X consisted the in third during expenditures the outlined mentioned equipment focus other quarter. loss $XX to of company the as

fiscal For $XX cash negative was fiscal for for and year primarily of year flow totaled million XXXX $XX totaled vehicle expenditures compared building compared $XXX full negative XXXX. million million XXXX. $XXX fiscal to attributable to year capital tooling. year million for the free to increase XXXX, improvements

for we quarterly to flow ahead, $XX million to quarter. return approximately free our anticipate negative cash Looking

our strong sheet of remain million. ended equivalents strong. the position SXXX and cash and remains We Importantly, balance cash year cash with in a

objectives. look raise we continue about now via $XX.X strategic stock hand in I’d million to back to offering to opportunistic conditions raising took favorable to of proceeds million be market our third As capital net call quarter, Michael. a forward, of the further in advantage secondary a we’ll $XXX to like reminder, the to shares. going

Thanks, Jon.

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question [Operator from Instructions] comes Spingarn Credit Your Robert first from Suisse.

open. is line Your

Hi, of give background what Michael, some these like changes you precipitated out on the could further was and of really you’re perhaps sounds the filling management these boards. afternoon. creation us some good missing? ranks, what advisory It

for hear to good you. Rob. Hey,

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Jacqueline, we’re I think our ready next question. for

comes Myles UBS. question Walton from next from Your

open. is line Your

the Moses, you I Thanks. Good I on a highlighted evening. ask could just was you? us you it. are as good hoping EMI How Mike on detail So question give and

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Thanks, Yes. myles.

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we to the of go kind source. So the that’s fix at decided with where

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haven’t number turn we we how those spaceships. on depends given So, a there, quickly each guidance obviously It upon myles. of specific

fly a we clear, least side, more a day, mothership know the maybe On to at want we twice little three.

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you. Thank Okay.

welcome. You’re

America. comes from Your next Epstein question from bank of Ron

Your line is open.

to out pushed you obviously, enough the raise and myles’ question. guys evening, I more to or money? guys. to gotten have you there have And break I good get cash guess, there. to you some to with are on What mean, going to follow are do as that’s even Hey, capital right. a going

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on So, production forward think room sheet. we’ve get our balance we’re quite got plenty good there. fleet there We a growing sitting to moving and of

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for both flights of strategies following for we’ll how excited commercial very sales We’re launch our and excited those them.

question from Noah from Goldman Poponak comes next Your Sachs.

Your open. line is

going? Hey, guys. for How’s this on Noah. is it Dan

Dan. Hi,

that the people guys? multiple what to choose going a in just competitive a maybe, appears parts over to completed test you are another getting you do folks of when this, then How ago, you doing fly of to flying with the Blue important So, pretty be world we’re – experience Origin makes think Shepard that folks. developing that we the the month landscape is with the see here? most do saw experiment New guys And flight close

doing what So, excited before, I’m they’re as we doing. is said Blue

I normalized a think as space wants time be be supply to aspirational quite And space think the some something for industry really, the is strong. thing, demand do. for to to is showcase that but I people important whole to it’s shore, the everyone be as going going constrained going flying to a really to that and

as we could in multiple comfortable really this that the that be players market having very positioning transformative that good said, the how how that in is take. show I will confident and and with a So, can we’re think exciting thing.

the that journey strong that are suborbital about approach abilities the but do also with consumer And launch program, I architecture. that that our Some and is the some advantage flight we’re a in we’ve think I talked spaceflight we think a lot at both believe to us be is culminates And experienced those scientific good the on of what architect, other for I They’re us. in system flight. and help very I experience, to people with very well. training has then The way our two as the to Rohde, brought talked competitive taking space Joe as also of to system to works. spaceship it a robust G-forces There the unique, astronaut give just suited research. will that be system in a – markets And will deep approach markets you’re very what components past. we and training we do in can will about. particular. astronaut that advantage that going the do customer-focused in that in our market we’ll a And be very with take of seeing the will private think this we’ve

is business grow and shows feel that in total. commercial good with think, market in This good feel blue really the and people having So, I that for really and is a to, is grow also there getting going good there. strength a some

you extent, can revenue new spaceships. you pace that helpful. can the and how to just the billion guys that’s annually guys spoken will at super it. Yes, guys $X more, in that one roll spaceports to Got the roll into per you Maybe, have dictate Spaceport, fast which

So any steps new on are any building next actually away from far spaceports? – realistically, towards we how timeline

I that are won’t think along kind timeline, the can the comment share what steps will we but of on a I go way.

to faster fleet capability spaceport to Spaceport vehicles our out, start see we’re and the build for that. up get build minute, second will first Spaceport finishing That’s world. a on be first board SpaceShip much, up, basis, our vehicles But that vehicles maximize to more for our to new vehicles place to understand get that’s in we place on And so program manufacturing class are bit and America. is in our really on I what sequence manufacturing program class I don’t be the where efficiency fleet we’re we to this our Delta up the America spaceport, Obviously, we than if that fleet happening the start you places then a bringing of we’ll and arrive doing. a capability to up in if going – points III So, capability those one. the you have such is these from testing, of steps we as we’ll go on scaling just at out we that that that engaging have and in think that think other us that our it, Spaceport in And full in produce mothership of going regular then before next we up. some getting flight around Mexico, at will New manufacturing. America ramp have fashion able And our up kind scaling Delta much build that going a when class the space now of our as flying start and to about of we could get will a fleet on we scale as be new standpoint, first up.

and know about So, to production as helpful our pace you I manufacturing grows. how think team facilities, really that’s think

Cowen. question from from comes Oliver Your next Chen

line Your open. is

Oliver. Hi,

you. Good thank Hi, afternoon.

as do your we architect in what the with balancing, and you you will also, and and what how need CapEx seek using factors innovations terms of of you scale arrangements? experience you’re as we hypothesis think flexible goals what you some what’s about should and manufacturing prioritize the CapEx, the do own next and engagement be piece, there With scaling consumer balancing will Also for investments to versus are about over what the the that earlier year think there? to your for you

Oliver. thanks, Okay.

first have think going prepared the and making Joe On see that time bringing Rich, case in in planet and to focus from sign back up private be ready gift. guests look done everything Goodman, the way. for intensive the they the sure that to the for do, to the in with people Mexico buildup of what in, when along come New to been with the them when we’re one, on family you us people we us Geoff trying the on come I that to Blair first are kind them and they’ve the moment, training got and where astronaut And market is friends down Rohde, the so it. that in like have they

to don’t of authentic very look journey ahead be making be that that the will a in, if to hit I fun want transformational the what of – that we’re So, that’s think preparation lot on showcase because bringing and I when they our focus sure focused get storytelling. of it’s will the creative here. doing It’s we’re you for team, of there talents is at really a a But lot going kind come. very

So, as prioritizing designs forward we’re experience more you’ll those see as to that storytelling come we and to going those look are and themes the sharing away.

want As to And of the we’re plenty at pace I We spending be think a CapEx, design got to on the we’re into time, programs. well-funded plan we’ve I said spaceships, new us. of phase, earlier right of the as we it ahead our vehicles now. substantially fleet with do question, investments. as we as in but manufacturing pertains mothership bigger of that will will both really doing, increase the not runway move There Delta to well make class

of the First in forward, is going that the solid investments we make that pull it. capital the amount thing, maybe, able as may been will the is to think take really case, yet. business we alluded partnerships and of don’t down aerospace accord that’s looking going to our we’re now. some we’ve mentioned, the in a need forward. now. you’ve at have estimating be on that I going industry money And to said, we We There’s With an to sure the put plan incredible know we capacity but and that return right

also see some do looking I us economically strategic but pace accelerate things we that at you’ll ways of make to the can ourselves, fleet really think partnerships our development.

please. one take Jacqueline, let’s last question,

Certainly.

question Alembic Advisors. Global from final Your Pete from Skibitski is

Your line is open.

for applaud being I first, safety And good the guys. Michael you Jon, guys with program. Hey, the evening, of aspect rigorous luck. best of

I that’s think great.

congrats So, there.

of Just pivoting, wondering just suffering much guys you’ve or and there. of a can have we to the kind kind how from trends due our COVID? of about sense schedule loss impact you risk remains improving hours been how productivity much labor talk I’m of COVID if

in We a normal, say clearly now. because COVID. in process right managed I team efficient less got of state been has would really this the than have

we’ve I’ll dates them as we people call way we think any, be those the now. have able the that once closer it, into are assess we’re future have get we and through, kind can to concerns or of together. built today quarters all the impacts right don’t move slower risk about schedule from we while best everything shared about So, in will than vaccinations COVID I

something country to from faster don’t going are but forward getting the upside I So, the see vaccinations different there. I am there, the looking all we moving getting as across and

ability to customers, And the okay. the just new of size that implies, in program. step I talk small increasing should closed say, right the of follow you’ve one but the pull on me, the number spaceships, one all – up Okay, the excuse of

should aggressively kind expect, of of new goes kind Sir after customers? flies of to whole kind we that program new marketing recruit basically, So, really out Richard a

us will will I the does Richard I take are look the we’ve well I’d into as way commercial that we at think, of been Blair’s advising that when as and if And advise and advantage use we’ll to who think us, people our Geoff’s, background and take worldwide that launch here, bringing come you us a look Branson at moment a in strategy, with momentum. of interest side business. fly really those

So, we’re thoughtful. being very

a as following we at think fairly astronaut excited going in event come and really to to that for expect we’re sales that we be demonstrate that’s for people that large the will why are scale We us. event. private it. said very And market up And opening

also that think clear. put clear the in really we will footage I in be and the will momentum experience place be

we’re up great Some to open be more developed will way designed a sales. that asking work Joe of And that will visually and the Rohde us at with help in be time. really to that point

fall. we’ll Force window the early new flight the a with Italian sales will our up use the Air flight That We’re new will market astronauts come and – start going later also the the with then also revenue give I’m that a in against to sorry, us open the market Italians. in that following summer, first Italian to

back the This concludes Colglazier remarks. Michael Q&A turn to call. over the of closing for session call I’ll the

Thanks.

questions. thanks First, good today. catch It’s everybody all with to for the up

move areas heard three company. we are sure the to primary make that as focus forward, want everybody for the following Just the I really

The on of readiness. fleet these is first

test program. our completing We’re

Air Richard’s launching forward welcoming flights. Italian formally as revenue the we flight, our Force, as around mentioned, strategy to are we begin commercial looking just We and

pivoting leaders for the is organization phase phase focus about and allow scale a and to R&D from adding fleet I the experience. the an built astronaut of seeing really around to are think the that we second drive The business announced And fleet us forward you’re will is company This we third, in spaceships overtime, manufacturing two. motherships our They’re and and the consumer number today. then wonderful developing to that new these expansion. to additions

incredible all top and As on strategy. at we at commercial are work our they team hard an out assembled just the mentioned, building we’ve

call. really to our Thanks on we things coming We during So, next I’d thank see quarter’s you today’s look everybody and continued the interest ahead. to support. on joining We like your wonderful appreciate updating for forward call. so progress much.

and today’s Ladies gentlemen, participation. concludes for your call. Thank you this conference

disconnect. You may now