Virgin Galactic Holdings, Inc Q4 FY2024 earnings call

• 2024 marked an inflection point for Virgin Galactic, with 2025 being a year of building new SpaceShips and 2026 set for commercial research and private astronaut spaceflights.
• New SpaceShips will have longer life, faster turnaround times, and lower cost per flight, designed to fly twice a week with a lifespan over 500 spaceflights.
• SpaceShip Factory allows quick and cost-effective addition of ships. Rocket system is world's most powerful hybrid rocket with safety features. Customer experience is industry-leading. Mothership platform has high-altitude heavy-lift capability.
• Showcased progress in fabricating SpaceShip components like fuselage, feather, wing, and oxidizer tank. 2025 will start assembly of first SpaceShip in Phoenix, with milestones including glide flight in spring 2026, research flight in summer 2026, and private astronaut flight in fall 2026.

In the fourth quarter of 2024, revenue was $400,000 from future astronaut membership fees. For the full fiscal year 2024, revenue was $7 million driven by two commercial spaceflights and future astronaut membership fees. Total operating expenses in 2024 were $384 million, a 29% reduction from $538 million in the prior year. Adjusted EBITDA for the year was negative $289 million, an improvement of 32% from negative $427 million in the prior year.

• First commercial research spaceflight expected in summer 2026 and first private astronaut spaceflight in fall 2026.
• Approximately half of 2025 spending expected for one-time capital expenditures for tooling and manufacturing capacity and production of first two new Delta Class SpaceShips.
• 2025 first quarter revenue expected to be ~$400,000 for astronaut membership fees. Forecasted free cash flow for first quarter 2025 in range of negative $115 million to $125 million. Cash spending expected to decelerate in 2025 as tooling and manufacturing capacity investments are completed.

Q: Good evening. Appreciate all the detail with the timeline of flights in 2026, but how quickly do you think you can kind of ramp up from there? And then, if we think about your baseline initial fleet model, is that a good baseline for 2027 now that timeline has been locked in just thinking about the speed of flights in 2027?

A: Hey, Greg. It's Michael, and I'll give a start to that. And Mike Moses is as a bonus with us today, and I'll let him add his two cents as well. So, we will have done the ground testing and the flight testing to give us confidence in the vehicles, and we will have planned and have planned our maintenance strategies to enable these ships to turn on the pace that we've talked about twice a week, pretty much from the time we're ready to put them into private astronaut service, so which we talked about in the fall. And so, to your second part of your question, 2027, we feel we should be pretty much on track for the pace we've been talking. I think it's prudent for us to give ourselves a little bit of pacing, help our teams get ready to what will be truly unprecedented volumes of, not just commercial space, but any humans in space at that volume, and make sure that we are delivering the best customer experience every time. So, we will prudently ramp ourselves up a little bit as we lean into that, but I believe 2027, if not right January 1, right at the beginning of that year, we should be up at a pace that we've talked. Mike, anything you'd like to add on that?

Q: Good afternoon, everyone. I wanted to ask first, maybe on the rocket motor. I know you've been testing the propulsion system for the rocket motor. Have there been any changes in the propulsion system for Delta compared to Unity? Do you expect those to have similar thrust, efficiency and burn time?

A: Hi, Mike. This is Mike Moses. So, no changes to the motor itself from what we flew in Unity to what we'll be flying in Delta. As you saw in our presentation today, we did make a little bit of change to the tank, propellant tank that holds our liquid oxidizer. So, it's a slightly new design aimed at giving us lifetime. So, basically, more uses out of that tank on the order of hundreds of flights. So, that's a change, but we'll be able to check all that out on the ground before we get into flight. So, as it relates to the motor itself, similar thrust, similar performance profiles, as to what we were doing on Unity?

Q: Thanks. Good evening. I was hoping you could touch on the potential augmentation of the mothership for other applications. I know that your plan is, I think, for 2026 to start on the mothership, too. Is there a way, or do you see a path where co-funding is possible to maybe take away some of that burden as you bring on additional mission profiles?

A: Let me put the question to a bit of context, Myles, and then get to some of the specifics. So, we've been consistent sharing our business model growth path. First things first, we need to get our first two ships into Spaceport America, get to EBITDA-positive operations. Next thing we do, as Doug even alluded to in one of his pages today, add two more SpaceShips and another SpaceShip launch vehicle into New Mexico so that we fundamentally build out that first spaceport and we get all sorts of leverage on the fixed cost side to drive great exponential growth. That's phase one, a fully functioning spaceport in New Mexico. Phase two is to take that operation and replicate it in other parts of the world. As we've shared, we've had great progress moving with the Italians and looking at a potential air force base in the Puglia region of Italy. That is one of several places we could go, but a very, very exciting one. We're making good progress with them. So, to take the model that we've effectively built and as we're now talking, all these tools that we showed all the pictures of today, those are the same tools that will build SpaceShips for a spaceport in Italy, right? We've already built them. The design is already done. So, it's quite effective for us to then add incremental shifts. And so, phase two of our business plan is to go to second spaceports. And so, then, there's like, okay, well, what's next? And there are many things that could be what's next. Obviously, we need -- we've been using the word mothership internally. A lot of people don't understand it. So, just to make it clear, we're calling it a SpaceShip launch vehicle. Eve is our first one. And as we've been working on the -- not just the beginning design phases, we're reasonably through our conceptual design, moving towards solid preliminary design doing the trade-offs we need to do there. And we brought in outside experts to help us in that regard. We all pull back into what we've known for a decade, Eve and any derivative of Eve is hugely powerful in its ability to carry heavyweight to high altitude, and we talked about that on the call. So, Myles, now specifically to your question, we put in an image there. Obviously, these carrier ships, these SpaceShip launch vehicles can carry SpaceShips, but if you can carry something that heavy to the height we do, you could also carry a pod that can do other things. And there are a lot of efforts there. You're aware, Miles. There can be ISR, which for those who don't know the acronym, intelligence surveillance reconnaissance missions. There's testing missions that go along with that. There's a lot going on in the US right now, as I'm sure you're aware, that could use something that could carry heavy payloads to high altitudes. Our derivative would need to have further range, getting to the long endurance part of HALE. And we understand how we would modify the existing Eve ship to enable that. So, specifically to your question, is there opportunity for people to partner with us, and will we look for people who might want to partner with us? I think that's a super smart opportunity for us and one that we are actively paying attention to because we think this is a real potential for the government. With that said, first things first, we have to keep ourselves laser-focused on getting to the first of these two ships out and then the second one right behind it, so we get to EBITDA cash flow operations. So, we are staying almost entirely on that, but the small group, the Tiger team we have against these carrier ship platforms as we grow absolutely is looking into how we could partner with other people largely in who do more military support for the government and seeing if there's an opportunity to partner for good for everyone.