• Revenue: $4 million, driven by the Galactic 07 commercial space flight and future astronaut membership fees.
• Average Ticket Price: Approximately $900,000 per seat for the Galactic 07 flight.
• Total Operating Expenses: $106 million, down from $141 million in the prior year period.
• Capital Expenditures: $34 million, compared to $10 million in the prior year period.
• Free Cash Flow: Negative $114 million, compared to negative $135 million in the same period last year.
• Cash, Cash Equivalents, and Marketable Securities: $821 million.
• Projected Free Cash Flow for Q3 2024: Expected to be in the range of negative $115 million to $125 million.

• Warning! GuruFocus has detected 5 Warning Signs with SPCE.

Release Date: August 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Virgin Galactic Holdings Inc (NYSE:SPCE) has made significant advancements in the development of their Delta Class spaceships, with the design phase nearing completion and a shift towards the build and test phases.
• The company has maintained fiscal discipline, ensuring a strong balance sheet to support their strategic plans, including the launch of commercial operations with Delta spaceships by 2026.
• Virgin Galactic Holdings Inc (NYSE:SPCE) has successfully completed the Galactic 07 space flight, marking the end of the Virgin Spaceship Unity's operational phase and contributing valuable knowledge and expertise.
• The company has developed a space flight system with reduced turnaround times between flights, aiming for days instead of months, which could lead to profitable growth and scalability.
• Virgin Galactic Holdings Inc (NYSE:SPCE) has a strong customer base with high perceived value, supporting premium pricing and driving top-line growth.

Negative Points

• The company is still in a pre-revenue phase, requiring heavy capital investment without immediate revenue generation, which may concern investors.
• Execution risk remains a significant concern, as the company needs to complete the development and launch of their Delta Class spaceships on time and within budget.
• There is a gap between public market understanding and the value being created within the company, potentially affecting market capitalization and investor perception.
• The company faces potential supply chain challenges, although they are actively managing these issues to prevent disruptions.
• The financial results show a negative free cash flow of $114 million for the second quarter, indicating ongoing financial challenges as the company invests in its future capabilities.

Q & A Highlights

Q: When do you expect to make a decision on a second spaceport, and could it be tied to growth capital needs? A: Michael Colglazier, CEO: We anticipate that bringing a new spaceport online is a four- to five-year effort, with serious discussions likely starting in 2025. We are actively talking to various entities interested in this. Partnerships, especially with government entities, could potentially be tied to growth capital, similar to our partnership with the state of New Mexico for Spaceport America.

Q: How do you view the free cash flow conversion at scale, and how does CapEx play into that? A: Douglas Ahrens, CFO: The EBITDA generated from operations will be reinvested into the business to accelerate the build of spaceships and motherships. This investment will help us move to profitable columns faster. The cost of additional ships will be variable, with upfront costs already covered, allowing for a great return on investment.

Q: What are the key assumptions behind the 300,000 addressable market growing at 8% annually? A: Michael Colglazier, CEO: The TAM is based on global individuals with a net worth of $10 million or more, growing at 8% annually. We filter this group for those who prioritize experiential travel and have a stated interest in space travel. Our current customer base includes individuals both above and below this net worth threshold.

Q: How stable is the backlog of astronauts, and what movement are you seeing? A: Michael Colglazier, CEO: The backlog is mostly stable, with some attrition from early program participants due to life changes or health issues. We maintain strong connections with our future astronauts and are comfortable with the current backlog size. Sales are not currently open, but we expect numbers to increase when they do.

Q: Are you still targeting 10% of flights for research, and have more agencies inquired about research flights? A: Michael Colglazier, CEO: Yes, we are targeting 10% for research flights initially. The research product has been successful, offering a valuable microgravity environment. We have repeat customers and expect to ramp up research sales as we get closer to specific flight dates. Pricing for research seats is aligned with private astronaut seats at $600,000.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.