Virgin Galactic (SPCE) 7 Aug 242024 Q2 Earnings call transcript

Good afternoon. My name is Sarah, and I'll be your conference operator today. At this time, I would like to welcome everyone to Virgin Galactic's Second Quarter 2024 Earnings Conference Call. [Operator Instructions]. I will now turn the call over to Eric Cerny, Vice President of Investor Relations.

you. Thank everyone. afternoon, Good Galactic's XXXX Virgin Conference Second to Earnings Quarter Call. Welcome

are call Chief Chief with the Michael Financial me Ahrens, On Doug today Colglazier, and Executive Officer. Officer;

open our call Following we will remarks, for prepared questions. the

available the slide and Please will remarks Relations release press our on X safe presentation Investor of Our our Slide for accompany that today's are presentation see disclaimer. website. harbor

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

time. risks risk more the made company's about these refer to please filings factors and For in the to SEC information time uncertainties, from

will undue statements otherwise. events that as be call, You forward-looking of Please disclaims reconciliation on a new turn to on result over our a also for like note specifically company that that, this future cautioned metrics. earnings release I'd refer statements, to may forward-looking obligation or refer to call. the With call not Please today's to to the non-GAAP non-GAAP to of whether any put reliance discussed financial metrics these during the update financial and certain Michael. are we information,

Eric. Thanks,

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Michael. Thanks,

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Turning X. Slide to

the business. X approximately seats current XXX first to year, $XXX,XXX at of allow would revenue a take economics to launch After Delta million. spaceship with flights an our period pricing have seat, spaceships, for X space per the following at deliver an $XXX class per expect Let's the closer of initial this and ramp-up of we look capacity annualized per of

Slide X. to Turning

growing This further demand. flight we by space and impressive enable expect additional per at of expected less we demand X combined year to billion As fully in we we capacity than plan estimated our space level to opportunities approximately fulfilling to supply prices. space more out scale. expand another fleet far still sports $X addressable unmet of X% our substantial then adding pricing annual revenue X,XXX a ships, per second XXX,XXX The billion. around globe. as to year, expand demand, at revenue other seats port XXX X% build flights is This with around would further with only With $X our market mothership year. increase to we be as growing is fleet supports total TAM parts of per operational or would revenue even addition outstrip to customers With of global current of the per around delivered sold an year,

adjusted to EBITDA to and million XX%. This Virgin amortization Slide time. table class business how This launch steady of Galactic's X. business Galactic's growth of mothership drives expect before XX% to our year. around ships interest, we expected one initial fleet exponential EBITDA $XXX earnings profits. X over significant very illustrate adjusted operations, represents in a Turning healthy only flight drive state grows helps but Virgin also fleet per expands is reaches taxes, and depreciation or not as revenue growth, With exceed to margin model the Delta

ships adjusted space as our XX%. to added and grow up margins around are remaining more This fixed even By to even around as to expected frequency to $X.X leverage cost X our spaceships, allows As are grow potential EBITDA profits fleet, to annually, more mothership have another exponentially. to adding profits the now billion to due spaceports fixed, developed much of increases. of XX% world. cost structure the the increase flights to with are margin Profits further business of estimated expansion additional is expanding

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sizable As we of months for we is incremental capital less payback have X said which vehicles, for period than expect exceptional a investments. before,

We model. have built maintained sheet balance and realize to profitable business this our

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are have While we value resources the our to by launch order enabling to from seek option our generation faster and the the additional To forecast high our of business, current spaceflights. model, in margins we to to sufficient acquisition enables the more recap customers unprecedented profit vehicles. accelerate deliver our capital profitably we summarize business growth

substantially We to expect business running We to model, this vehicles project we adjusted our for margin as we fleet. our business are expected our as fixed margins and scale. will cost exceed grow the exponentially EBITDA add of high margins those

back like our ensure day to Spaceship highly We spending are complete maintain mission. manufacturing in discipline, capacity the now deliver our Delta fiscal our spaceships I'd this to great Michael and Day we been Class to tools, over detail business to develop capital model. to making profitable we've in needed call on positioned we turn and share the are program. investing scrutinizing the to initial to progress out, our

Thanks, Doug.

Class program Turning to Slide Progress QX. Delta in substantial our Spaceship was X. on

and understand visually of begin engineering which as next been the the to teams excellent of our overview Our start phases design of Carbon tool delivered a Virgin engineering Delta design enormous team our has by design I Aerospace. the the to to of completion more work as from an underway. pace video and our primary a spaceship provides focus get month, In good on provides primary way spaceships. focus mentioned and on our the of The will been at more pivot partners to by key completion, build production Textron amount team enabled has and that test call accelerating Galactic fabrication Bell at has the well our

to build design the up, will tools of we our wrapping has have While released that key used parts already spaceships. phase be been the Delta

Texas will X these Here, then our X, assembled and at parts be that assembly of and on our new of be in they used see the campus of Most shipped can final you Pages build Phoenix. to the partners' fuselage. major will and will examples in built parts be to tools facilities,

show be unfamiliar will parts For to objects tools already in been our which the have the make parts fleet these examples images that cost-effective fabrication, fashion. aerospace for with used those who create of rapidly images the assets that expand of metallic that similar built. to fleet of The are tools of used molds be again of are to important These examples time our to and can allows us tools are a entire spaceships, parts time spaceship our needed spaceships.

and detailed while an Another asset as July, Phoenix. our plans We X developing certificates final as assembly receive equipment. occupancy final well assembly rehearsal to we and tools materials and buildings is in team Phoenix in of our training have preparing assembly located completed received in now for campus is advanced

an buildings Page see image completed on the X. can You of

spaceship XXXX. service deliver remains program to on into in Delta Our track commercial ships

mentioned, and our pivot primary QX, tool fabrication focus the build of and spaceship fourth QX. quarter accelerating up ramping third test the program development with both we parts I the and in in expect phases Delta to to As in

commencing into and in receive parts rollout ship with half campus the of of to half XXXX. in first We our first subassemblies and testing our XXXX of second major the expect Phoenix delta

we shared second test structural our to article systems in 'XX. order vehicle test the phase integrated these running half iron commencing to a before, efforts all of efficient parallel bird ground in to with and plan testbed we an test testing in As have major with static be

We sharing the call the with against the I'll the development financial our ahead, investors will months cover can to quarters to results so track these quarter. Doug, you our be all in milestones from and along updates progress. second hand back

Thanks, Michael.

for of Free million Total lower and operating Notably, to expenses. SG&A property, period to driven compared in year negative the the R&D $X spaceflight fees. revenue average to $XX $XX up and flow year. million we Capital expenses the related both Galactic in the period generated compared approximately was astronaut to were $XXX,XXX commercial million development membership $XXX negative were expenditures our equipment in second Turning plant investment Galactic the prices XX $XXX in million period, by million as million $XXX same Delta Slide XX. last seat. the ramped and fleet. flight driven XX year of We compared were cash million future ticket prior $XXX in quarter by prior to class per

Turning to Slide XX.

cash Our balance sheet and remains strong with $XXX million marketable in equivalents cash, securities.

projections. Moving to our

the expected range third I'll Forecasted to million million. $XXX free for be call turn the back is to cash quarter the of in $XXX to now Michael. over negative flow XXXX of

light the our human have space it sight. my recently more having meaningful I I highly Galactic, company Virgin profitable joined is as the by went public. Doug. you, the hit Thank anniversary and potential X-year year after in in highly and never our high of been frequency, goal both excited clear of progress

our call will development ships growth are is fleet. We customer charts that off expand top questions. The focus we our as for a launch capacity line This for we let's reusability expand turn experience mark are a and in as drive value delta forward in flight. to Delta and exciting, as fleet. is our The focus continued design driving Operator, we to human by the our QX we progress. perceived we building and into will open currently and our a profitability the space our is on from with an industry-leading sharing customers built a the phase testing. time on have planned game program structure, being ships deliver cost model solid capabilities look Production unparalleled. high outstanding transition space spaceship built changers profitability and as to new

Instructions]. One question. first [Operator for you. Thank your please, moment,

Your of with first Konrad question from the Greg line comes Jefferies.

being see any going? a made? to expect to to just maybe space any Maybe capital potential to tie potential discussions or And the growth decision the is second needs? you when do X spaceport start on there How are scenario,

the always get time I said, we really serious. think from generally we've

X- upon standpoint. you needs infrastructure by be that's to all think effort spaceport through of done work aerospace I a and the from what location, a the to a online, time depending to needs the bring new government, X-year facility

So, we be that in for although us, are 'XX, way. generally happening entities wants talking in to this to various actively along are interested the that

is -- would So wanting the generally, at window see entity, on then upon partnership blend I government think to some think XX% into there. most aerospace. level I government way you I interest the growth your is X- a say, it's X-year Is us piece. probably that with the that to talk that to the And to about a question Depending something would would happen And when there. surely capital. and for there location, a

I is think the a answer that is, yes, possibility.

with Our is Mexico partnership state built facility from and and the owns America them. of leased in Spaceport New we that that who

the space major was investment physical plant. in the that first in So, port

of considering a may which lot the built that of places where physical plants places out engine Some we enter. for there the to good a other economic and we create be already we have are in partner community could their collectively

look possibility, a they that that's what be government would the think have but specifics I the and to think dependent like. the would needs upon of I that it's So,

and just the thinking And that And mean, the flow appreciate ask accelerated of cash. at to just about And how company maybe that, EBITDA scale? just thinking convert that, X into about that you play build can always spaceships growth on the data that how give of about think conversion then, we cash how CapEx does you the of I the and free all course, I spaceport. more you after for capital gave. numbers do you but

is This Greg. Doug. Thanks,

you back generating we the so give EBITDA, business we business And as flows. fit. available terms the in all wanted see see to what So, from could plow you that's operating the of into we're to cash

to pleased But as to is back that back if that we're of we how CapEx most the want So, a scale moves vehicles get move likely, that, what was source could more or right. push that's to choose we we to choice. profitable if faster because columns capital the we're and you that all into the invest can that use is us to do wise we going

to invest on So, want to shown and the and calls as EBITDA we're to those motherships expanding as you on possible get quickly the spaceships going and in new bring vehicles page. where see

And I invest done. in at as cost facilities, the have and We will in the the the we tools, a will think been cost to ships, Doug's cost coming point, right? those variable additional additional basis, completed ships upfront have already design on the the upfront is

at And the relatively so replicating examples new us ships that now variable using on today, tools great. is prices low we're and showed those ships the like we gives and return

we So, and fleet return to but I our invested anything on in from shareholders going a see money on CapEx we're use, think approach that a scaling do make capital great investment for ROIC, ships putting our to we're standpoint, look sure I from our great return up.

choice. that be primary our so would And first

Chen from line Your with next of Cowen. question comes the Oliver TD

the addressable Hi, sounds Michael quite Doug, and market attractive.

of the parts you chain subassemblies supply to part of supply next assumptions the are people the as and chain, about that some we parts progress thinking year the you to per you the are service in and current mentioned, as key get an need? are environment Also, XXX,XXX important underpin the you're How and you've the people seeing the making. at that look what X% and that year? Just in ability been and terms

Oliver. Thanks,

First, on the TAM estimates.

see research metric a diagram think a or the annual with $XX of particular of growth. one the with it of We're a X% million kind you of That people a worth bit cascading Venn overlap. growing or filter at globally whether we net that as of on So, expect number starting to a above. is

filters. of there. fairly use starting on sets then of a people it's is worth in One proportion their So, -- of filtering net from substantial that And a X propensity experiences. we're to

in have interest may definitely invest So, unlike experiential other like just then prioritize of a stay people filtering of and third, net worth lives. right, or space. and a who at to And in stated perspective travel home lot We're getting the space their for ways. in a travel, earth who people for

and group. we of that's down that's hopefully, with percentage so available less And experience in an and think prioritize probably team. are that of are and half note who the on with But internal of resources up the our $XX are less. that I greater the answers this put range depends funnel up and it. that our understanding I'll astronaut just half And our Probably of there, around million are willing their towards type some kind to people a of question. own package future that

the on supply we chain side, constantly top supply of On are issues. chain

I do we imply means no intend never by a glitch. to So, see or issue an

On them the well. continue to whole manage we note,

we of the ourselves. managed design and have these assembly So, the we're for managing ourselves, ships final

know, we that will you subassemblies Bell and people the think Carbon the major creating there. be as primary as I have

So, a with Carbon range to wider support. and work Bell vendors we of for

industry Carbon is and is lots some availability. and aerospace go program owner-furnished good Bell big. a the as of way, provide is are of are lots an suppliers, this There items. And this aerospace we in Some directly, there

fiber We mostly are carbon ship. a

billets, in Those what industry, refining hear the like. general look have then so the you'll the mold tools. ensuring up. situation of have to metallics. way here way. the up of had aerospace it's actual And the the we've shape that get recently you'll come where in ahead titanium. the orders We're We we've we refining have not aluminum, of supplies, ordering we not have loft some those We tools as been and one let a of the too one the will is are And some we're been material what typical that the early,

analysis that in part the there. correctly. So, be can go out needs to come There will

we we needed to that accelerate to work to doing, supply be the pace. move and able make efforts to the through our had of a analysis chain that at were good some And

lots have the of the along sure major smaller we remain look front in way ahead. like issues slugs so issues We and forecast major it's to ahead far, of. a we material, are supply staying of But make that. week-to-week But

Okay. And one follow-up.

clear as the the You've the on well opportunity. stock the modest model information the of as relative leverageability The value given of opportunity. lot equity pretty of a to is

what do is think So, an your you in It's question. underappreciated more opinion? open-ended

think the seeing. a I company way sentence that currently the is are built that is gracious agree reflected term would Oliver, in phrased into and in accurately modest that capitalization the created but is market is thank We the being you. that value we value not by

it's the the what not what through risk proved because market is worked with in product a are our question over year. fit, regulatory with Unity. way? technical shown are think way. it's last customer value. because in risks I risk what we've I Unity. It's out because So, demonstrating I risk And don't the are don't flights to that don't that's the have think is great Well, piece, with all is risk the our we've that of think not spaceship that we which not safety

parts risk happens. It's time We is that on we're manufacturing first, this daily and going done make horizon the that massive make firefighting. fiscal all diligence that day, risk. So, we finish and There's getting piece on get have do And all across execution execution needed discipline to pace that of to something have, primarily financial that program risk. it? to needs what's in done to not as driven get looking Are industries. that left sure and work the so execution by in that sure the work isn't we and How new done create to handle risk. we're both forward we

our So, buffer, Two, keep built our we within plan. one. schedule and contingency that's

are it, for are recognize that not the also well. opportunities teams those, use we to but looking need have and predict, while to absorb capacity there unknowns as meant Our to nobody fully can to improve also we

the bad. And I So, the pre-revenue opinions, along in. reacting, revenue phase, we're there's tightly an infrastructure Galactic building because we'll I of, assets that be is and look, last create look weighting it's don't informed as personally, is we -- incredible where spending capital accurately I are without think and are be way. that while we this that money very into, if think less very clearly a is in out is the And company. will It's reflected. must heavy fully must managing opinions heavy and simple sounds, see Virgin I at a market it the purposeful we're part And that investing as being think,

some it, So, have And our we of I investing think missing with the future, important right watch I everybody business gone out succinct encourage video we're we're share for of and past. those gets perhaps everything missed a X step I now, thoughtful in your fashion. to to putting have of But that It's the the model. lays points minutes. friends. believe in conversation of let's that. it then And out around some the

information getting changing balance is in good today a and shared. start way hopefully, to So better that

question next Wolfe with line the of Myles Research. from Your Walton comes

the Good thanks video. evening, for and

well-produced initial assumption? $XXX you're your $XXX get a to for operations obviously, and sure line space the understand case and if Slide at X want million this SG&A. year, economics, think really first the You particularly half focus for fleet annualizing overview. make SG&A space it can I already Doug, million second. I of just flow, on Because was for the I I and the I a just line of look

same going here XXX are you incur there? are just So, incurring today saying to lines to change how flying Or to whatever that when does X we're a flights the going year? we're we're those costs from in be costs the

Yes. Thanks, Myles.

are in the because they the are as we are rate that today what yes, growing buckets increase what see that similar the is flight So up. to you costs costs those very variable go

all it's The working fundamentally bring things fuel and revenue, I they've that, the now, of which factory hospitality, cost, as time. rocket that so group portion space in stated, in is fixed Phoenix varies been cost then ready in the around like the what working and and and we fixed. we've showed is we the now and flying right is like on Unity got But activities So, we're on goes flights. motor and on. that over it's mean, the variable the getting

on more So, see it's different they Delta things, we're and to working doing back fundamentally employed and by from also, into still add it there. And then vehicles SG&A, more and is and group we've you shift grow That -- flying. got definition, start people we fixed. then as programs.

to more, there's no we terms of where area grow a costs. are where the real administrative see reason is growth would it, As which more rest got today we sales fixed. why the the in it versus function is you'll than amount the from we've And modest start probably fairly fly of

to would behind area that's we be of the sales it. in we sure the really would up But ramp where here. logic volume bucket projected over make So, all that that's time have the

is or run targeting. that treatment accounting in that an line, again, the treatment for $XXX the SG&A new because, guess. R&D you part, $XXX have million there's I rate so versus you're today know I million the accounting The line

has to something clearly, doing what away today you're SG&A? within from go So

observation. Yes, good so

of portion small get or a there's on So, space will reclassed R&D that operations. this into

in other out and we not We those have you some But will are of a you in of that and to shift mentioned. our amount as flying so see we down buckets into just involved reclassing phase move road, the but kind lot, but operations. the this functions management on, G&A, of some

maybe know just of how has ago, been? one million. XX in Okay. was that this months The backlog, quick I All it number right. astronauts the $XXX then And stable one.

I XXX. year of was think the at end the

approximately I Are backlog? a further said Is XXX. there in video off? of are we presentation, think seeing the the curating What bit backlog? little movement the kind you the bleed of

seeing, you're say, I'd Mostly mostly stability.

partly the going we same reasons. where out, the stable. There who down. We early a that that a over folks holding been been bigger have a of year, through. program various folks majority but we going last in the so through, number Of couple the So, have large people was of drop of pretty been flew folks for very saw places of basic have are come dropped who the level that have have that's

change stage. a are in Some life of

issues Some health have have up, other may issues have may come come some had that up. that have

the And of group. early from have preponderant. We majority least The folks. the program, people been about the this incredibly who stay that of large working stage, at valuable company. very We at them we strong them. groups various very us where away the have our the stepped updates has company. go this of group people on We're so, a And to of and have feel been as cities to give and and they're we preponderance connected with

right we sales said, open As don't we have now.

kind the quite So, we're up of we comfortable a But as tail backlog, working amount we when open. to these numbers people when us come line right these still This go do not on and actively up of backlog sales, in here. we're of gives to open end you'll backfill with the see the now. have start

Instructions]. [Operator

Markets. Your Michael with next question Leshock Capital of the from KeyBanc comes line

guidance. the flow asking start I wanted on cash free to

you've I of line and previously would to given burn just expected largest be think in XQ XXXX guide, $XXX support to the XXXX with a that ship. burn what burn you to class date that's done just in in cash be imply Delta around level. But XQ the the million, of

that maybe are million XXXX to assuming burn expecting cash spending $XXX So, in step-up just be fourth you're expecting you year? largest million a the in to $XXX the in the still quarter, range,

Mike. Thanks, Doug. This is

XXXX acceleration It's about QX 'XX, that about prepared give in QX, but past you direction trailing into activity -- activity a I do some with to the we little of guidance we flattish didn't year. remarks, we and have expect the So to higher. the do spending largest development as talked QX, can We be a yes, parts QX. give fabrication. That's on tooling going still and

then And So, QX, you'll could around time things be see the see start the ramp QX QX, you'll to kind of XXXX. peak of frame. in local down QX

A lower you of highlighted, not of number, the little amount we're things So XXX, in lower we just than the that see directionally that. that's where going. though, than kind level

of inquired and of research range you're to success see reliability we the any so then of heard that first class the agencies more to given action the in some it. government ramp? thinking testimonials Have the of product you've offering, flights as that now any secondly, proven in customers. of Delta grade And how Unity your about about research flights then the flights? kind And XX% slated of starts still Got for or got research you targeting that's Are question. So, the change flights research?

is program environment customer very access long our a product the I'll have and research price our point because been But micrography we for equally from successful, charged. research quite is to has different at spend our typically private most place. offer successful astronauts. relatively albeit that price Mike. quite time it's quite valuable one, as and clean, We lens take about we and that The private astronaut of a talking the that

wins And there. so, it of front on just every kind

had researchers a of for saw on Gerard, have have another We research probably -- I signed and Kelly, think you flight. group

think I flown research new Lots use either platform station that obviously space things beyond. to refine our even they are that the as we do or before, to with payloads. goes do university with people flyers repeat further you'll their or research like our before see who've it out of partners

we a need government-funded but And but of will So, Most be the most most the research us very from little we're far good getting specific the need customers dates. requires of them government all, specific to Most customers, dates. there, know with little good. has and generally dates, are product our our funding a some quality real and not been more and specific. very be of specificity availability out repeat of it pretty

see up as research So, private also ramp in, us get sales. to closer start up we we you'll open also as astronaut sales

XX% right? up. will that's in note, go adjusted have a start early we think that's on the see target think a flights. scale to I space for the lot target But that XX% sure. Page I nice continue to as getting don't in this about early the X we this a scale a days. periods chart, second way definitely our research it's will as asked right If the the spaceport, to of you you to We'll up, I we Now, XXX, you get the I market our -- all will pricing. market sense

from We've While take parallel. those and prices used house offer. always we don't that the sales seats open, referrals do have we existing into I've brought as term, customers, some we

private the of equivalent, researcher payload point, we kind the up all is will $XXX,XXX a astronaut, human seat open when price really ships this for a and price sales equivalent at a the set removed seat it's on off again. for every our current a or seat rack delta That's reassess in, whether So, we our put market basis. at

appreciate Then lastly, I the that economics provided. you

the future? a some space America a at spaceships is space into see kind X court? it look for of you Is of start in expanding into second build of for Spaceport before that the looking Just it. at and expected second need to what X a -- assumptions, the before space the you you that motherships to capacity Does

next in delta phase. before not see start on We'll next definitely the ships to these need that It's the working launched we even on before 'XX. spaceport that working

place bigger X go fleet doing spaceships to going these underutilized behind are the of start mothership, that's thing math And as growing contribution first. from set smartest revenue it's imbalance one to It's points. that. But line. to because initial primarily There X asking, an from a fleet, question Mike, cost and couple and expanded the it's things X you spaceport. you're space an lines we the of growing. we to have the of margin move the and One notice how However, a ratios you'll leverage to of if relative

to and talking SG&A as costs fully couple we there, lot even operations of a on one our can ships. we have baseline a more about earlier of questions that in in as We leverage get the add run was fixed

Now point, what We're additional it. will this ahead then to than moving in conservative X, of chart to higher when and getting like look shows There's us to spaceports. talk weather at for be trying the like and about XXX -- you've flights that far heard not an additional we and get us too past. with X space reasonably

balanced a spaceship that But to be being things along have to just spare these ready a each may hot trying place flights adding of there. to worth so, pick the way. up in have able of and a And set fifth it it's additional

page on points. to So, these but base we the of each where tweak you might would have us here is see numbers, the what we like start

joining. question-and-answer thank the today's session. concludes also will This for call. conference you It conclude We

now may You lines. your disconnect