Q4 2020 Virgin Galactic Holdings Inc Earnings Call
[music].
Good afternoon, My name is Jacqueline and I will be your conference operator today.
At this time I would like to welcome you cheat.
Searching galactic <unk> fourth quarter and full year 2020 earnings conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If he would like to ask your questions. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question press the pound key.
Hosting today's conference.
We'll be Seth Zaslow, Vice President head of Investor Relations at Virgin Galactic as a reminder, today's call is being recorded I would now like to turn the conference over to Mr. The Zaslow. Please go ahead.
Thank you and good afternoon, everyone.
Welcome to Virgin Galactic <unk> fourth quarter, and full year 2020 earnings conference call on.
On the call with me today are Michael Cole Glaser, Chief Executive Officer, Mike Moses President of space missions, and safety and Jon Campagna, Chief Financial Officer.
Following prepared remarks from Michael Mike and John We will open the call for questions.
The press release was issued about 45 minutes ago and is available on our Investor Relations website as.
As the slide presentation that will accompany today's remarks.
Let me refer you to slide two of the presentation, which contains our safe Harbor disclaimer.
During today's call we will make certain forward looking statements. These statements are based on current expectations and assumptions and as a result are subject to risks and uncertainties.
Many factors could cause actual events to differ materially from the forward looking statements made on this call.
For more information about these risks and uncertainties. Please refer to the risk factors section of Virgin Galactic <unk> annual report on form 10-K filed with the Securities and Exchange Commission and other documents filed by Virgin Galactic from time to time.
Readers are cautioned not to put undue reliance on forward looking statements and the company specifically disclaims any obligation to update the forward looking statements that may be discussed during this call.
Please also note that we will refer to certain non-GAAP financial information on today's call you.
You can find reconciliations of these non-GAAP financial measures to the most comparable GAAP measures and our earnings press release.
With that I'd now like to turn the call over to Michael.
Thanks, Seth and good afternoon, everyone I hope you and your loved ones are keeping healthy and safe.
First off I'd like to welcome Seth Zaslow with the Virgin Galactic is.
As you May Athene, and <unk> joined US a few weeks ago with the leader Investor relations function and serve as our primary liaison with the investment community.
So that is off of them and we're very pleased to have him on board and I'm confident you will all enjoy working with him.
Second I am sure. Many of you saw the CFO John companion will be stepping down from his role to pursue his next adventure.
I'd like to thank John on behalf of the entire Virgin Galactic team John has been our CFO during our transition from private and public company and help build excellent relationships within the investment community.
He leaves us with a strong balance sheet at a time when the company is well positioned for future growth.
You'll hear more about our income and CFO, Doug Aaron's later on the call.
Moving on to the agenda I'm going to start today's call with a brief recap of our 2020 accomplishment and an overview of our client schedule.
I'll then of Mic Moses to provide some detail on our December 2025 wells.
Well as an update on our upcoming slate, which I know many of you are eager to hear about.
I'll then talk about the progress, we're making on expanding our fleet followed by some thoughts on commercial plans and how we are positioning the organization for scale and success.
After that John will provide detail on our financial results.
So with that let's get started.
As I reflect back on 2020, and look ahead to 2021 and beyond I can't help but be excited.
It's an incredibly dynamic time for both of our company and for the space industry as a whole because there is a high degree of interest and advancement that is bringing our society closer to the frontier space than ever before and.
And we're just getting started on what we believe is going to be a long period of growth and expansion.
Turning to slide for 2020 was and active and productive year for Virgin Galactic. Despite the challenges we faced as the result of the COVID-19 pandemic.
And at the start of the year, we completed a captive carry flight of our spaceship VSS unity from Mojave, California to its new home at Spaceport America.
<unk> completed the transition of all Virgin Galactic spaceflight operations to our new commercial data and new Mexico.
Shortly after the flight Covid began to have an impact on our operations as we shared in the past building and flying spaceships during the pandemic is materially less efficient than normal.
But despite the scheduling and cost and efficiencies related to the pandemic. Our team was able to make significant progress during the year and I'd like to thank all of them for their extraordinary level of commitment and dedication to our mission.
And the second quarter, we completed two successful glide flight the provided us with valuable data on the ship and training cartoons pilots.
Following these glide flight, we were able to complete seven FAA verification and validation reports, putting us on a strong position, where we've now cleared of 27 of the 29 reports and will address the provides the and our currently active FAA operators license.
We saw great success with our one small step program, which demonstrated the strong consumer demand for space flight.
The closing program with approximately 1000 people signed up and we are pleased that our total number of future astronauts remained at approximately $600 at the end of the year 2020.
In August we took advantage of favorable market conditions to further strengthen our balance sheet and John will cover this topic in more detail in his remarks.
We followed up our successful glide flight with a further test flight on December 12, which Mike most of the Tonight, and we'll talk more about shortly.
During the year. We also made progress on the build of our second and third stations and in December we realigned the company structure from a business unit focus to of functional structure of the groundwork for our plans to shift from of prototyping and R&D focus to an organization that can design and manufactured at scale.
And this process. We retired the spaceship company brand and is aligned to everyone and the organization under the Virgin Galactic brand.
Turning to slides five through seven.
These three slides summarize the plan we discussed on last quarter's call for the next three flights and our test flight program.
And while the specific timing of of each flight of shifted we're still working towards completing the three clients.
The first of these was originally set for November 2020.
Due to Covid restrictions and new Mexico, we deferred the flight to December while.
And while the December flight did not reach spaces planned it did provide valuable learnings and.
In particular, the demonstrated the effectiveness of our safety systems, and our lives scenario, which reinforced the importance of our space flight system architecture, and our robust testing and training programs.
Subsequent to the flight we have performed and completed our root cause analysis, which has put us and are positioned to move forward with the program.
I'd like to ask Mike Moses to share details about the December flight and the status of our upcoming client.
Thanks, Michael.
Moving on to slide eight.
During the December <unk>, the rocket motor halted as it were starting the ignition sequence because of the onboard rocket motor computer lost connection.
This system like others on the spaceship its.
Designed such that of defaults to a safe state whenever power of our communications is lost.
We planned for and rehearsed many potential scenarios, including the ones such as this and the pilot and the space ship as well as the engineers and mission control, we're well prepared for this event.
Following the flight we completed an extensive analysis to investigate why the rocket motor computer lost connection and we are confident that we've identified and isolated the issue to be a reboot of the computer likely caused by the electromagnetic interference or EMI.
EBIT has been upgraded with the new flight control computer system, which offers of finer degree of pilot control.
This system has performed well on a glide flight tests and it's one of the components, we are testing and a rocket powered flight.
Our team is determined that part of this new system is the source of higher EMI levels that were present on that last flight.
<unk> is a relatively common challenge and aerospace and in January we proceeded with modifications that were designed to lower the EMI levels and better protect certain systems.
After confirming through testing that these corrective actions would prevent a reboot of the rocket motor computer we determined that we were ready to target of February launch.
As we completed our preflight technical readiness checks for that February flight some of our shipboard sensor readings showed fluctuations and it became apparent that those changes that we had made to address EMI had unintentionally created additional noise within our center environment.
While this noise.
And in itself is a safety issue. It did let us know that the EMI levels on the ship or impacting areas that while low and probability of.
Potentially trigger another fail safe scenario, possibly one that could prevent us from seeing the full rocket motor burden.
Our safety culture is built around the principle that everyone. In the company has the ability to call attention to and issue and Thats exactly the right approach when youre dealing with human spaceflight.
And in this case, we flagged and the EMI issue that needs resolution and we chose to delay the February launch to mitigate further before flying.
To reduce the EMI levels, we and enhancing the new flight control computer with additional features.
Once we complete these modifications will thoroughly test the system on the ground both in the lab and on unity, following which we will recommence our flight test program.
Michael back to you.
Thanks, Mike.
Just to reinforce Mike's comments.
One of the imperatives from me when I decided to join and Virgin Galactic was confirming the company had and unwavering commitment to safety culture, and that's exactly what we're seeing here.
We know our space flight system works, we know we can go to space and.
And we are all very eager to get back to space.
And we see something that isn't quite of bank, we tackle it hard and we fix it and then we move forward and that's what we're doing.
Once the BMI issue is addressed to our satisfaction, we intend to return to the test flight program sequence that we previously communicated our.
Our estimate to complete this work is the eight to nine weeks, which suggests our next test line will be in May.
While we're not going to play specific dates around our second and third tests might we expect them both to occur this summer.
Turning to slide nine.
Our space flight system is built to serve three markets private astronauts micro revenue research and simple orbital training for professional astronauts.
Our flight with Richard Branson will demonstrate our private astronaut experience and we will open sales for this market on display.
Our microgravity research product includes base points, where two pilots client racks of research payloads and the cabin, where we're and two pilots by researchers on board with their experiment for a human tended research line.
The sub orbital training product supports governance and countries that would like to include suborbital spaceflight is part of the training program for their professional astronauts.
With regard to these latter two markets I'm pleased to confirm today that the the Italian Air Force has partnered with Virgin Galactic on the flight that will demonstrate our capabilities for both human intended research and so of orbital astronaut training.
They will be flying three spaceflight participants and multiple payloads and they will conduct astronaut training and addition to experiment during the flight.
The Italian Air Force flight, which we expect to occur in late summer or early fall will be of revenue generating light and we will conclude our product test program.
Moving on to our fleet expansion on slide 10.
I am really pleased to announce that we'll be rolling out the first of our spaceship three class of vehicles on March 13th and.
And I'm excited to show you the sneak peek at the next ship and our future fleet.
<unk> has been built with the modular design and uses the enhanced fabrication and assembly processes, which will enable better performance in terms of flight rate and maintain ability.
And the pace at three will provide a base for how we scale of the future design of our spaceships.
Moving to page 11.
The first vehicle and Asia III class will commence with ground testing following the March 30th rollout of debt and we expect that the ship will begin glide flight testing of this summer.
The second vehicle and this space at three class will begin assembly at this point as well.
Our current flight test protocol for the first spaceship through vehicle calls for four glide flight and for power plants, and we expect the space flights will be revenue producing.
Following our initial glide flight test there will be a multi month period of analysis and modification to the spaceship before we bring it out for our final glide tends to empower test.
Given space for three will not require on mother ship. During this period, we have decided to implement enhancements and accelerates and long term maintenance updates to the mothership need and will improve the predictability and frequency of flight rate.
To avoid sequential downtime, we will also implement some additional enhancements to unity. During this period and will also improve predictability and slightly the.
We expect the combined analysis and refurbishment period for all three vehicles to run from approximately four months.
At the conclusion of this period, we expect the VSS unity will begin flying and private astronaut's and space of three it will be and are positioned to complete its flight testing, which we expect to be in early 'twenty two.
On the refurbished from other ship <unk> will be the carrier aircraft for both vehicles.
Moving to slide 12.
As we've previously communicated we are embarking on a multi year effort the targets flying 400 flights per year per spaceport.
To do so we will need to efficiently build more stations and more and the other ships.
And I'm pleased to share today that we have formally launched two new programs within Virgin Galactic that will be critical to this effort the.
The first will be for a next generation spaceship, the fourth generation, which we're referring to internally as the delta class of vehicles.
We'll be updating our engineering drawings to improve manufacture ability and.
And we will invest and our manufacturing facilities processes and partnerships to improve cost and schedule efficiency.
These vehicles are designed to have faster turnaround times due to the reduction and maintenance between plate.
While we will initiate our commercial service using the space of two and patient three class vehicle.
It is our Delta class of space ships that we believe will really accelerate the economic growth of the company.
The second and equally important new program as for our next generation mother ship.
We plan to have the capability to fly and multiple times per day out of space for it and we will need and multiple mother ships to do so.
We have incredible teams assigned to these important programs and we will have more to say on these initiatives as we move forward.
Turning to slide 13, we are attracting incredible talent to joined Virgin Galactic as we accelerate our path to commercialization.
And I'd like to highlight some of the leaders and advisers, who have played key roles as we pivot the higher rate production and widen our lens on the commercial opportunities ahead of us.
As announced earlier today Swamy ire will be joining Virgin Galactic as president of Aerospace systems.
Swamy is going to lead our extraordinary team of engineers designers and technicians and support teams who are building the fleet of vehicles and designing the future opportunities that underpin our business.
Swamy will join US later in March and he comes to us from GKN Aerospace, where he served as president of advanced Defense systems.
Over 20 years of experience and commercial and highly classified aerospace defense and cyber industries Swamy brings great depth and expertise and business expansion, while also having the deep process and production orientation and necessary to lead our growth and scale.
He is a powerful leader who is perfectly suited to lead our aerospace team into the next chapter.
In addition, we are thrilled to welcome Steve Justice to Virgin Galactic is of our Vice President of engineering.
Steve brings incredibly deep leadership and engineering experience, having spent four decades of Lockheed Martin Skunk works.
Steve will lead and grow of World Class Engineering team supporting our spaceship three Delta class propulsion, and new mother ship programs as well as our longer term efforts around high speed point to point and travel.
Turning to slide 14.
And I'm excited to announce the Doug Aron is joining us as our new CFO.
With prior experience as both the public and private company CFO, Doug of the led global teams to rapidly grow companies and complex technology and manufacturing environments.
Leadership and relational skills as.
And as capital markets and M&A expertise, while all of the incredibly valuable as we scale and monetize the business.
Doug Most recently served as CFO of <unk> of public company and the semiconductor industry, where he was responsible for all finance functions, leading up to the successful acquisition by and video Corporation in 2020 and on.
Contact and Swamy and Steve Doug is also of pilot and Doug and this company you are and Great company there.
Turning to slide 15, our business model depends on ramping the production of our fleet our.
Our commercial success will also be built on the quality of the experience we offer to our future astronauts and the impact of our consumer brand and marketing strategy that will launch our sales effort and support widespread consumer engagement.
To support these objectives, we are incredibly fortunate to have attracted two groups of advisers, who are lending there are truly world class expertise to these endeavors.
First on the commercial front.
Earlier this week, we announced the Joe Woody will serve as our experienced architect and he will lead the team of internal and external experts to develop and bring to life. The overall experience for our future astronauts the guest and other customers.
And incredible Creative force Joe previously spent 40 years of Walt Disney Imagineering, where he led projects that brought to life. Some of the Disney parks, most authentic and compelling experiences, including Disney's animal Kingdom.
I am excited to share the Blair rich has been engaged to support our customer brand architecture and marketing strategy.
Virgin Galactic story is big and bold and requires the consumer engagement approach and is on an equivalent scale.
Players spent over 20 years of Warner Brothers, most recently, serving as president of worldwide marketing and she is uniquely skilled to advise us at this embryonic stage of our brand and marketing efforts.
And finally I'm thrilled the Jeff Goodman has been engaged to lend his expertise to our revenue planning and new business development efforts.
Jeffs deep expertise, leading global business development for Disney Parks, and as Chief commercial officer for the Disneyland resort is immensely helpful. As we build our strategic roadmap to monetize the business.
Moving to slide 16, and we've also recently announced the establishment of the space Advisory Board the.
The board will serve as an important resource to me and to our senior team as we start commercial spaceflight service develop next generation vehicles and work to inspire people on a global scale.
The space Advisory Board will consist of established world renowned experts within the aerospace industry and and currently includes George Whitesides, our founding CEO and former chief of staff of NASA, who will chair of the board.
Dr. Sandy Magnus former NASA astronaut and deputy Chief of the astronaut office, Dr. Magnus as a member of the <unk> Aerospace Safety Advisory Board and she has served in leadership roles at the Department of Defense and the American Institute of Aeronautics and Astronautics.
Chris Hatfield of former astronaut and who served as commander of the international space station.
As far as phase three times, including the trip to the Russian space station here.
He has also served as chief of International Space station operations at the NASA Johnson Space Center.
And Dr. David Wayland, who previously served as Chief scientist Boeing Defense space, and security and director of DARPA Tactical Technology Office Dave.
David is a member of the National Academy of Engineering, and the former member of the Defense Science Board and the Air Force Scientific Advisory Board.
I would now like to turn the call over to John for financial update.
Thanks, Michael for your kind words earlier and good afternoon, everyone before we jump into today's update I wanted to share with you all and it has been a fantastic five and a half years I've been fortunate to have worked with the team of incredibly talented people and I'm very proud of the work that I've been part of that led to the public offering of the company transitioning us to be and the firm.
Publicly traded human spaceflight company.
And look forward to seeing the company continue to grow into the future.
Turning to slide 18.
2020 March Virgin Galactic first full years of public company.
As Michael highlighted despite the challenges that the pandemic presented we've made significant progress towards our goal of reaching commercial launch and.
And we believe we are well positioned heading into 2021.
Let's review the results for the fourth quarter.
We did not generate any revenue during the quarter given our continued focus on flight tests.
Net loss for the quarter was $74 million compared to $77 million net loss and the third quarter of 2020, non-GAAP SG&A expenses and non-GAAP R&D expenses have been adjusted to exclude stock based compensation and non capitalized transaction costs, if applicable non-GAAP SG&A expenses for the quarter were $23 million compared to 26.
And the third quarter of 2020, GAAP SG&A expenses for the quarter were $33 million compared to $31 million and the third quarter of 2020, the increase and SG&A expense is attributable to an increase of noncash stock based compensation expenses due to the scheduled grant of additional equity awards, which really.
Back to the closing of the transaction and with the social capital had a Sofia and 2019.
We expect to continue to incur these expenses and the next quarter and beyond on non-GAAP R&D expenses for the quarter were $40 million compared to $43 million and the third quarter of 2020, GAAP R&D expenses for the quarter were $41 million compared to $46 million and the third quarter of 2020.
The decrease and R&D expense is due to the onetime 5 million noncash charge incurred in the third quarter, which I mentioned on our last earnings call, which relates to the expensing of certain inventory items to R&D.
Adjusted EBITDA totaled negative $60 million for the quarter.
This is compared to adjusted EBITDA of negative $66 million and the third quarter of 2020 the <unk>.
Improvement and adjusted EBITDA, primarily relates to the reallocation of the onetime noncash charge expense to R&D and the third quarter as I just mentioned looking at the year overall.
As you know our primary focus remains on completing our test flight program as we prepare to start commercial operations.
As such we did not generate significant revenue and 2020.
Net loss for fiscal year, 2020 was $273 million compared to a $211 million net boss and fiscal year 2019.
Adjusted EBITDA totaled negative 232 million for fiscal year 2020, compared to a negative 187 million for fiscal year 2019.
Turning to capital allocation on slide 19.
And the fourth quarter free cash flow was the use of $74 million, reflecting an increase of $15 million compared to the prior quarter.
This increase was primarily due to higher public company costs, which are concentrated in the fourth quarter and I outlined on our last earnings call capital expenditures were $4 million for the fourth quarter of 2020 flat compared to $4 million for the third quarter.
Capital expenditures and the fourth quarter consisted primarily of vehicle tooling and other equipment costs for full year 2020 free cash flow totaled negative $250 million compared to negative 223 million for fiscal year 2019 cash.
<unk> expenditures totaled 17 million for fiscal year, 2020, compared to $14 million for fiscal year 2019.
The increase was primarily attributable to building improvements and vehicle Tony.
Looking ahead, we anticipate our quarterly free cash flow to return to approximately negative $60 million per quarter.
Importantly, our balance sheet remains strong and remain in a strong cash position and ended the year with cash and cash equivalents of $666 million.
As a reminder, and the third quarter, we took advantage of favorable market conditions to raise $441 million and net proceeds of the secondary stock offering of $23 6 million shares.
Going forward, we will continue to look to the opportunistic about raising capital to further our strategic objectives.
I'd like to now hand, the call back to Michael.
Thanks, John.
Turning to slide 21.
And again want to take a moment to thank our entire team who have been so hard at work on our various initiatives the dedication and passion that I have been seen throughout these challenging times truly amazing.
I'm extremely proud of the progress we made in 2020 and I'm, even more excited about what we have coming up in 'twenty one.
Our focus remains on the following three areas.
Number one fleet readiness completing.
Completing our test flight program and preparing for commercial service.
Number two we've expansion adding.
Adding new patients and new mother ship store fleet and pivoting the organization from an R&D phase two of manufacturing phase that will allow the business to scale over time and.
And number three developing the astronaut and consumer experience, we're assembling to the build out of our commercial strategy and the monetize and scale of the business.
It's an incredibly exciting time for both Virgin Galactic and for the space industry as a whole.
There is such an incredible amount of innovation going on right now it's really extraordinary.
Operator, we're now ready to begin the Q&A portion of the call.
Are you there.
And my apologies.
As a reminder to ask a question you want me to kind of star one on your telephone keypad to withdraw your question press the counter.
Your first question comes from Robert Spingarn from Credit Suisse. Your line is open.
Hi, good afternoon.
Michael perhaps you could give us some further background on what precipitated some of these management changes and the creation of these advisory boards.
It sounds like.
You really filling out.
The ranks of what was missing.
Hey, Rob.
Good to hear from you. So it's pretty easy story and consistent with I think where we've been the company's had just an incredible first chapter that is I think I've used the words brought us right up to the precipice of getting the technical feasibility of how our space flight system works and.
Really importantly, the next step of this is going to be the take that technology and move to a manufacturing footing, where we can build and scale of fleet of vehicles and moving to a commercial footing, where we really step forward and a very strong way and the marketplace. So if you look at each of these.
They are outstanding and individuals who have come to join US and are really additive to what we're doing so when you see swamy and Steve coming in.
These are people, who are both expert and aerospace right deep experience and have seen and developed things like what we're doing and our area.
But also they're just incredible leaders of people and in order to scale and build all of our space ships all of our other ships that is a team effort and the team needs leaders, who will be both.
And really skilled and really expert and doing it but also folks who have the driving personality of driving focus that will enable us to move the organization forward at the scale and pace. So it couldn't be more thrilled there and then on the commercial side.
Both Joe Blair and Jeff again. These are advisers, who are helping the specific parts of getting us prepped and ready and ready to launch on the consumer piece and parallel as we move our fleet forward. The space Advisory Board. These people are deep and their expertise and their exact.
And who we want as advisors to the company and both on the fleet development and some of the new vehicles, we may want to pursue in the future, but also just and the experience that we want to bring and I.
Thank you can tell by the talent and the quality of the folks there they are going to be huge additions. So it's really it's the chapter one chapter two story and I think super additive to where we're going and what I think you would expect of us.
Okay and then just maybe this is more of a technical question, but now that we of spaceships.
And two three and then the Delta series is there any way to quantify the different levels of call. It annual revenue capture between the different types of ships.
Hi.
I don't know we have the ability to give you the revenue quantification, but the difference between these spaceship to unity, that's where we're flying now was built as our demonstrator vehicles and that's how we've been working through the flight Sciences and flight test program and as such was the one we modify along the way through flight test it.
Has pretty low rate as we talk about the frequency and wish of flies the <unk>.
Patient three class the first of which we showed that sneak peek earlier and the presentation.
As we've said they are built on a modular fashion. They are built to be maintained and more reliable pace theres still built and a relatively handcrafted form.
And the same techniques and we did for you to do that with the learnings of that and so those vehicles will perform the way we want them to perform but our pace of building that class of vehicles as the little slow and Thats, what the Delta class of vehicles is about this is where we will go back with the same functionality of our spaceships, but we can and modify our engineering drawing so.
And that we make things that can be manufactured at higher rate and ensuring the manufacturing processes. We're doing them in ways that allow us to have less and maintenance between flights. So what youll see is the frequency of spaceship III will fly more so than to the frequency of space ship for we werent client that we're kind of the Delta class vehicles.
We'll be more frequent and spaceship III and if that Delta class of vehicles that I think will be the one we built and the economic back of the company with.
And I think we're ready for our next question.
Your next question comes from Myles Walton from UBS. Your line is open.
And Michael Thanks, Good evening, how are you.
So Mike most of and I was hoping I could ask you. Your question just on the <unk> issue you highlighted and gave us good detail on.
And sometimes you can get around it through shielding that doesn't sound like the situation here it sounds like you're actually having of getting the guts of the of the flight controller itself and so I'm just curious.
Again.
The solution and it's been implemented and is now on test or you know the cause and you are identifying the solution and then you have to ask what I'm just trying to put a fine on too.
And on that one.
Yeah. Thanks Myles.
And so we started between December and February tackling with shielding and grounding like you mentioned right and that's how we we tried to address the elevated levels. We saw when we were prepared to go to our final preflight checks of the February launch we saw from of our sensor readings pressures and temperatures those types of things show from.
Unusual fluctuations, which kind of let us know that EMI.
Still present, and maybe and systems that we didn't initially anticipate so that's where we decided to kind of go with the fix at the source so on.
Modifications to the flight control computer that is the source of this elevated noise level is our current plan. So we have the the modification for the designed it's b and prototypes now we'll be doing testing on the on the ground and the bench on the lap and then and just a little bit on the ship and we need to run it through all of its paces before we're ready to commit to a launch.
But that's the that's the reason for the index.
Okay, Alright, thanks, Mike and Michael Glazer, sorry, Mike.
But what's the complement of spaceships and mother ships to achieve the 400 flights per space, where I'm not sure I.
And I know what the answer is.
So we haven't.
Given guidance on a specific number there miles it obviously depends upon how quickly we turn each of those space ships on the mothership side, a little more clear.
We know we want to fly at least twice a day, maybe three so we will probably shoot for three mother ships for every space Port that we do and that will allow us to get the frequency of flights that we want.
<unk> guest of high single digits to low double digits of space ships per spaceport.
I would say.
<unk> look, but not something that we have guidance on right now we need to see what the turn times of each of those classes of vehicles will be once we've got them built and going but.
And Thats how were generally building plans are on it.
Okay. Thank you.
Youre welcome.
Your next question comes from Ron Epstein from Bank of America. Your line is open.
Hey, good.
Good evening guys.
I guess as a follow on to.
Myles question.
Yeah.
What are you guys kind of breakeven with cash and and I mean, the obviously that has gotten pushed out to the right and do you have enough capital to get there or are you going to have to raise some more money.
Well, we believe we are very well capitalized and again I think John's done a great job as we took advantage of good market conditions last August so we're sitting on.
Quite a good balance sheet, we think we've got plenty of room, there to get our fleet production moving and growing forward. There. So we're not giving guidance on specifically when we are turning cash positive and turning that around.
But obviously, we feel well positioned economically going forward there.
But I mean, I guess, maybe if I push on a little bit more of them.
How much sort of window that we have and this.
This is a pretty big flip directly of another one and you could push it out two years right and how.
And how long do rehab.
Well first I don't think this is the big slip at all right, which is I think we are pushing from our flight eight to nine weeks and.
We're commencing the same program that we've had there so I wouldn't characterize it that way and.
And we're moving on the same path and in fact just to be clear.
Got the next flight, which we're estimating goes in May and then we have the next two flights as we announced before and sequence of those will be in the summer. We of shared we will have our first fully <unk>.
Singer loaded revenue producing flight.
We believe that we'll be at kind of late summer early fall and I don't think Thats, a big slipped by any sense Thats, just being prudent and getting EMI taken care of on on on our ships here and so and then we've been spending.
Plus or minus $60 million a quarter.
And we're sitting on over $660 million at the close of 2020. So I think that gives a sense, we are well capitalized and not in any GAAP challenges there.
Hopefully that gives you a little bit more sense I think we're in good shape, okay great.
Great and then maybe just the other one.
Congratulations on the Italian Air Force.
Work.
Are you talking to other air forces or other government customers and.
Could you give us any color on that.
Nothing extra to announced today, although we are and active conversations with people and I think we'll want to do things similar to the Italians.
I think we are seeing from US is we're looking to the flight with Richard Branson to really showcase for the world what our private astronautics brands will be and that's why we'll be opening up and really pushing our commercial sales strategy following that flight and.
And the Italian astronaut and which the revenue producing flight and we're excited to get into that side and an inflection point and our business.
As we bring back the kind of.
<unk> and experience that we work with with the Italian Air Force I think that will also be the demonstrator of flight for that slice of our market and you will see us push further into I'll call. It the sales channels following the Italians there.
We're very excited for both of those flights and excited for how we'll launch our commercial sales strategy is following them.
Your next question comes from Noah <unk> from Goldman Sachs. Your line is open.
Hey, guys. This is Dan on for now and how has it gone.
Hi, Dan.
So we saw that Blue origin completed and another test flight with the new Shepherd just over a month ago of theaters are getting pretty close to find folks.
How do you guys see the competitive landscape developing here and then maybe and a world win when multiple people are doing this what do you think is going to be the most important parts of the experiment that of the.
Experience that makes folks to supply with you guys.
So as we said before.
I'm excited blue is doing what they're doing I think it's going to be important for.
The space industry as a whole suite of showcase that people find the space as a normalized debt aspirational sure, but something that everyone wants to do and I think the supply is going to be constrained for quite some time.
And the demand is going to be really really strong so I think having multiple players and the market that Ken.
And show how exciting this is and our transformer that could be is a good thing with that said, we're really comfortable and very confident and the positioning that we will take some of that has to do with the space.
Spaceship spaceflight system architecture, and we've talked about that and the past I also think youre seeing with some of the people. We've brought in to help launch the consumer experience what we'll do at your roadie as our experienced architect we're going to be taking a very customer focused approach with the private astronaut market in particular.
And that will be a journey that culminates in the slide and I think we will take a very unique deep and robust approach to that will be.
A very strong competitive advantage for us and then I believe our space flight system is very suited to the other two markets that we just talked about there both the.
Overall training and <unk> train program, but also what we can do with scientific research. There are a lot of components and the way our system works. The G forces on it that I think will give us advantage and.
Good ability and those markets as well so feel good and also feel good with blue getting in there. This is a business that is going to I think really grow and grow and having some people and there that shows our commercial strength is really good for the market of total.
Got it yeah, that's super helpful.
Maybe one more just you know you guys have spoken to the the $1 billion annually and revenue per spaceport and yes to the extent the the pace of what you guys can rollout in the space Force will dictate how fast you guys can rollout and the spaceship, so and any realistically any timeline on how far away. We are from the next steps towards actually.
Building new spaceports.
But I won't.
Comment on a timeline, but I think we can share what are the kind of steps that will go along the way. So the first steps are we're going to start to maximize the out Spaceport America, and new Mexico, and that's what you see is doing and that's how we're finishing up our space flight testing, bringing our spaceships III class vehicles out and then getting going now on the Delta class of vehicle.
And so that will start to ramp that up.
I don't think we have to get to full efficiency at Spaceport America. Our first place before we start engaging and other places around the world, but from a sequence standpoint, we will get some points up on the board and be flying on a regular basis. So that we understand this is really a bit more of scaling of our fleet manufacturing and if I could just build on.
On that for a minute as we build up the new program the Delta class of vehicles and build our manufacturing capability for that.
And as we get going on a new mother ship program and have our capability to produce those vehicles up obviously, we'll be scaling up the fleet and Spaceport America and as we scale of that fleet up if you think about it when we then go to our next base Port we will have the manufacturing capability and place such debt.
Kind of the fleet will be able to arrive at that second space port and a much much faster fashion and then it is happening and our first one so I think thats helpful to know as you think about how our manufacturing.
Facilities team and and production pace really grows.
Your next question comes from Oliver Chen from Cowen. Your line is now open.
Hi, Oliver Hi, Thank you.
Good afternoon, and with the experienced architect and also of the consumer engagement piece and what factors will you prioritize in terms of.
And the goal there and what's your hypothesis for what will be some of the earlier innovations that you seek to do there.
And so as we think about Capex.
How are you balancing of scaling and what what should we think about for capex for the over the next year.
And as you scale manufacturing and your balance and what you need to do.
With your own investments versus using flexible arrangements.
Okay. Thanks Oliver.
On the first one.
What we're trying to do and I think when you see us bringing in <unk>.
People like Joe Rodi, and play of Rich Jeff Goodman.
We are going to focus and the private ask drop market on making sure that.
The buildup from the time people sign on with Us.
Up to the moment, where they come in and the first case and the new Mexico for intensive training.
<unk> has got them so prepared that when they look back down to the planet and kind of have that gift.
And they've done everything to be ready for it and the guest and friends and family that come with them and have been along the way. So our focus is really making sure the preparation for that hits and there will be a lot of I don't want to.
Kind of get ahead of the creative team because I think that's going to be a lot of fun when they showcase of what we're doing here, but if you look at the talent that we're bringing in.
It's very authentic storytelling.
Very focused on and our transformational journey that will come and so youll see those as the themes that we are prioritizing and we're going to look forward to sharing more of those experienced designs and storytelling and come away.
As it pertains to.
Capex.
I said around the earlier question, we are well funded right now and at the pace of spending we're doing.
I think we've got plenty of runway ahead of us.
And we do plan to increase the fleet of vehicles substantially both the delta of class a space ships as well as our new mother ship programs.
There will be of time, not and the design phase, but as we really moved into manufacturing that we were once you make bigger investments first thing we're going to make sure is that the.
And our return on the investments and the money we put in is really solid and now we know thats the case.
And as we've been looking and estimating our.
Business plan going forward.
But we don't have a need to pull that capital down yet.
With that said you've mentioned I think maybe alluded to it there is.
And an incredible amount of capacity and the aerospace industry right now and we will look hard at some of the partnerships that we may be able to take going forward I think youll see us looking economically at ways that we can do things ourselves, but also make some really strategic partnerships to accelerate the pace.
Of our fleet development.
Yeah.
Jacqueline let's take one last question please.
Certainly and you just final question is from Pete <unk> from Alembic Global Advisors. Your line is open.
Hey, Good evening, guys John Best of luck.
And Michael first and I applaud you guys are being of rigorous with the safety aspect of the program I think that's great. So congrats there.
Just pivoting can we talk about how much schedule risk remains just from the impact of Covid.
And I'm kind of wondering if you guys have a sense of how much kind of loss of labor hours and productivity.
Suffering due to Covid and.
And our trends of improving there.
Yeah.
We clearly have been less efficient than normal because of Covid I would say of the team has really got this and of managed process and state right. Now so while we are slower than we will be once kind of vaccinations move all the way through and we're able to get people and closer quarters together.
Don't think we have any.
I'll kind of future concerns or risk about schedule and everything about the data that we've shared today have the COVID-19 impacts built into those from as best we can assess the right now so I don't I don't see something different there, but I am looking forward to the upside as we all are.
Getting the vaccinations moving across the country and getting going faster from there.
Okay, Okay, and just one follow up on.
The talk of increasing the size of the or excuse me.
The number of spaceships I should say.
All of that implies right.
The ability to pull of new customers, but you've closed the one small step program. So.
Should we expect after sort of Richard flies basically kind of of.
A whole new kind of marketing program that really kind of aggressively goes out to recruit new customers.
I think if you look at who we've been bringing into advisors here.
Take a look at players background and strategy as well as Jeff.
And those people are advising us and a way that we will take advantage of the momentum and I think worldwide interest that will come when Richard brands and does fly with us and we will use that moment to really launch the commercial side of our business. So we're being very thoughtful we expect that to come in at a fairly large scale events and we think people are going to be very excited.
And for it and that will really demonstrate as we said the private astronaut market for us and Thats why.
We're opening sales up following that event I think the momentum will be really clear and the.
<unk> and experience that we put in place will also be clear some of the work that we're asking Joe roadie to help us with will be more developed and designed digitally at that point and time and that will be a really great way to open up sales.
We're also then going to use our first revenue flight with the Italian astronauts sorry of the Italian Air Force.
That will come later in the summer early in the fall that will also give us the window to open up and new market and we will start sales against that new market. Following the flight with the Hittite.
This concludes the Q&A session of the call and I'll turn the call over backup.
On to Michael Glazer for closing remarks.
Thanks.
First thanks for all of the questions. It's good to catch up with everybody today.
Just as we move forward I want to make sure everybody heard the following three areas that are really the primary focus for the company. The first of these is on fleet readiness and we're completing our test program. We are launching our commercial strategy around Richard's flight as we just mentioned and looking forward of welcoming of the Italian Air Force as we formally began revenue flights.
And the second focus for the company is around fleet expansion. This.
This is about adding new spaceships and mother ships to our fleet and pivoting the organization from an R&D phase two of manufacturing phase that will allow the business the scale over time and I think youre seeing the additions of these really wonderful leaders that we announced today.
They are built to drive us forward and number two and then third we are developing the astronaut and consumer experience and we just mentioned we have assembled an incredible team at the top and they are all hard at work on building out our commercial strategy.
We see really wonderful things coming ahead I'd like to thank everybody for joining on todays call. We appreciate your continued interest and support and we look forward to updating you on our progress during the next quarters call. Thanks, so much.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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