Q4 2022 Virgin Galactic Holdings Inc Earnings Call
Thank you.
I will now turn the call over to Eric Cerny, Vice President of Investor Relations.
Thank you and good afternoon, everyone welcome to Virgin Galactic <unk> fourth quarter and full year 2022 earnings conference call on the call with me today are Michael Cole Glaser, Chief Executive Officer, and Doug Aron Chief Financial Officer.
Following prepared remarks from Michael and Doug will open the call for questions.
Our press release and slide presentation that will accompany today's remarks are available on our Investor Relations website.
Please see slide two of the presentation for our safe Harbor disclaimer during.
During today's call we may 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 in the company's filings with the SEC 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 the call.
Please also note we will refer to certain non-GAAP financial information on today's call.
With that I would like to turn the call over to Michael Michael Go ahead.
Good afternoon, everyone.
I am pleased to host today's Q4 earnings call and as we get started I'd like to acknowledge how great. It is to have our mother ship Vms Eve back home and Spaceport America and on the path to bring our first patient VSS unity back to space.
<unk> returned to the Sky's two weeks ago, and the ship flip back to new Mexico yesterday.
We're making good progress on validating the enhancements made throughout 2022, and we remain on track for commercial service in Q2 of this year.
Our agenda on slide three starts with a brief recap of 2022 before moving into our commercial readiness efforts.
I'll discuss progress on our future fleet development now I'll, then turn the call over to Doug to provide a financial review before opening the call to take questions.
Turning to slide four.
In 2022, we made important investments in the infrastructure and the partnerships that will lead us into the future.
First we invested in our near term operations by improving the durability and capability of our current vehicles to support higher frequency flight rates as we enter commercial service.
The largest effort in this area was enhancing our mother ship Pms.
We replaced and upgraded the launch pilot, which.
But just the structure at the center of the cannot Levered wing to which the spaceship attaches.
The pylon not only gives this patient a secure ride to launch opportunity, but it also regulates the cabin temperature air quality power and data connections during made at flight.
In addition to the work on the launch pilot, we fabricated and installed new horizontal stabilizers and we made numerous enhancements to our avionics and mechanical systems.
While this comprehensive work on eve took longer than we originally planned we have now completed our enhancements and I am incredibly appreciative of our team for the long hours that they put in to return these shifts to flight.
The work we completed in 2022 will serve us well for many years ahead.
Second we invested in our supply chain and spaceship fabrication infrastructure to enable our business to scale profitably.
2022 saw spring on experience design and manufacturing partners to fabricate our major subsidiaries and we also broke ground on a spaceship final Assembly factory in Phoenix.
Also in 2022, we laid the foundation for an astronaut experience that will be unrivaled.
We completed the conceptual design for a first of its kind astronaut campus and we acquired an incredible site for the campus close to Spaceport America that will be reserved exclusively for Virgin Galactic future astronauts and their guests as they prepare for their journey to space.
On slide five.
As we enter 2023, our near term focus is on commercial baseline operations. This.
This includes three areas of operation first safely flying our current ships BMS, even the SFC entity to space on a recurring basis.
This is the role of our space launch missions and safety team.
Second.
Preparing inspecting and returning our ships and ready for flight condition on regular intervals. This is the role of our baseline technical operations team.
And third hosting training preparing and celebrating our future astronauts, which is the role of our customer operations team.
All three of these groups are actively preparing to bring our customers to space and we are rehearsing and making preparations for the launch of commercial service.
In recent weeks, we conducted flights with eve from Mojave and yesterday reunited with unity at Spaceport America.
We are very pleased with the way. The mother ship is performed in each of these flights, which ensure the modifications that we have made performance expected under real flight conditions.
Our next steps in the validation process will include a series of flights, including the glide flight, where Vms Eve carries VSS unity to high altitude and releases this patient to perform an unparallel glide down the Spaceport America.
Following successful completion of those steps, we will look to conclude the validation process with a powered flight space that will include a Virgin Galactic crew will be assessing the in flight experience and verifying components of our ground based training program.
Following successful completion and verification of the analysis for those missions and consistent with our recent outlook regarding the flight schedule, we expect to commence commercial service in Q2, beginning with our research focus flight with the Italian Air Force, followed by regular private astronaut and research missions thereafter.
And between these validation flights are baseline teams are preparing for safe and repeatable flying by executing mission control simulations training exercises and other dress rehearsal activities with full integration of government agencies and partners at Spaceport America to ensure a seamless flight an astronaut experience.
The customer operations team is preparing spaceport America, but increased flight cadence and delivery of an unforgettable experience for our customers.
They are working through rehearsals from simulations to ensure the astronaut experience before during and after the flight is truly one of a kind.
Turning to slide six I'd like to share some insights into our future fleet development, specifically the Delta class day shifts in our next generation mother ships as these production vehicles will be the key enablers of revenue growth and profitability for the company over the long term.
At a high level. This is a multiyear fleet development program that is running concurrently with our near term commercial operations, which utilize even immunity.
Our future fleet development roadmap calls for the first of our Delta class base shifts to come off the line at our Phoenix Assembly facility in time for entering commercial service in 2026.
Whereas 2022 was about establishing our design and manufacturing strategy selecting our primary suppliers and building up our internal teams.
2023 is now focused on completing designs for both the next generation mother ships and Delta spaceships.
Building the required tooling and beginning to parts fabrication for these ships.
Moving into 2024, we anticipate parts fabrication will continue and the assembly phase for both the next generation mother ships and Delta class B ships will also begin utilizing the sub assemblies from our suppliers.
Ground testing and flight testing is expected to commence in 2025 and preparation for commercial service in 2026.
In conjunction with that roadmap, we are making progress on our final assembly facility in Phoenix, Arizona.
We are currently working through the interior design production layout and fit all phases of the project to support initial assembly with parts expected to arrive in 2024.
With our roadmap in place the teams are working hard to achieve the various milestones that will lead to the scale needed to drive our business in the future.
I'll now turn the call over to Doug for an update on our financials.
Thanks, Michael Good afternoon, everyone.
Turning to slide seven and our financial results for the fourth quarter and full year.
Starting with the fourth quarter, we generated revenue of $869000 driven by future astronaut membership in event fees.
Operating expenses were $154 million compared to $81 million in the prior year period the.
The increase is primarily attributable to a $62 million increase in R&D costs tied to our fleet enhancement activity and the development work for our future fleet.
We reported a GAAP net loss of $151 million.
Compared to $81 million in the prior year period, driven by higher R&D costs.
Adjusted EBITDA was a negative $133 million in the fourth quarter compared to negative $65 million in the prior year period.
For fiscal year 2022, we generated revenue of $2 3 million.
Primarily driven by future astronaut membership in event fees and revenue recognized for research activities.
Operating expenses were $502 million compared.
Compared to $323 million in the prior year.
The increase is primarily attributable to a $170 million increase in R&D costs tied to our fleet enhancement activity. The development work for our future fleet and an $8 million increase in SG&A, primarily due to higher employee costs to support our growth.
We reported a GAAP net loss of $500 million compared.
Compared to $353 million in the prior year, driven primarily by higher R&D costs.
Adjusted EBITDA for the year was negative $431 million.
Compared to negative $245 million in the prior year.
Moving to slide eight free cash flow was negative $135 million in the fourth quarter compared to negative $67 million in the same period last year.
For the year free cash flow was negative $397 million.
Compared to negative $235 million in the prior year.
Our balance sheet remains strong with $980 million in cash cash equivalents and marketable securities we.
We intend to maintain that capital strength, while prudently investing in the business.
In 2022, we generated $425 million in gross proceeds through the issuance of convertible notes and $103 million.
In gross proceeds through the issuance of $16 3 million shares as part of an aftermarket or ATM equity offering program.
Specific to the fourth quarter, we raised $3 8 million in gross proceeds utilizing the ATM.
At the end of fiscal 2022, our issued and outstanding share Count was approximately 275 million shares compared to 258 million shares at the end of fiscal 2021.
For the first quarter of 2023.
We forecast free cash flow to be in the range of negative $135 million to negative $145 million.
As we begin commercial service, we anticipate each site will recognize the revenue equivalent of approximately $600000.
Keep in mind that the first six sites or so will include one of our astronaut trainers, who will be making in person assessments of the cabin experience and recommending any adjustments to our ground based training programs as necessary.
This will result in one less revenue during these first flights.
After which unity will carried for passengers a research seat equivalents.
We would expect working through the slight manifest in the reservations that carried higher ticket prices will change the revenue profile of later flights.
That I will hand, the call back to Michael for some closing comments.
Thanks, Doug.
In conclusion 2022 was the year for investing in our future to support our commercial space line goals.
We focused on preparing our current fleet for commercial service.
Mobilizing our manufacturing partnerships to build our future fleet.
We will probably first look to leverage multiple locations and other parts of the world, but we do have that flexibility to go higher if we so chose.
Okay last question on the Delta class production, which is very important for scaling what are the milestones or critical points. We should think about the R&D spend growth over the next few years are there things we should be aware of thank you best regards.
Thanks, Oliver so just.
Little bit more color on the milestones around the delta classes being sample. So this year, we will be completing designs after the ship and actually building the tooling for the parts and we will be starting part fabrication now the parts will be doing in 2023 are the kind of big long.
<unk> lead outer outer mode line, which is already consistent part so that would be in the fuselage. The skins for this space ship itself. The foundation all parts of the wing the parts of our Feather Assembly. So those will actually start this year later in the year, because we're still putting the designs and locking those down but those will actually.
Start after we build the tooling and then get that parts of that going in 2024, you will see parts fabrication continue but we will then start the assembly of the shifts in 2024 and that then wraps up so that when we get into 2025, we're doing first ground and flight testing on the vehicle.
So those are the details that are going through there we've got our supply chain partners.
Signed on and already working with us in this regard.
But you'll want to keep coming back quarter after quarter, alright, how those designs progressing right. When are you starting to tooling on that parts fabrication still looking.
Kind of a tail into 'twenty three those would be milestones that will be checkpoints for making sure that we're continuing on the path to commercial service in 'twenty six.
Okay.
Thank you just lastly on that R&D question anything we should know for the modeling and also.
It goes to Capex is that correct from an operating expense overtime.
Hi, Oliver this is Doug yes.
Yes. So we are in the design phase now so youll see nonrecurring engineering cost as we develop the first article and then we'll be investing in the tooling and the parts fabrication. So youll see the spending ramp up there it does.
Shift over to Capex once we reach a certain stage of the.
Finalization of the design and then we will do the accounting adjustment.
Switch over to Capex, we will see a change there in terms of the magnitude of it. We've got two two main suppliers, helping us with the Delta class and the way we've set up these contracts is it's a set of task orders that are under development and we are doing.
People would refer to as a rapid aircraft development program when we do a lot of.
Steps in parallel.
Parallel so we're doing things concurrently so we develop each of these.
Cost estimates for the subsequent task orders as we go.
Have the model of course, but it wouldn't be in our best interest to put those numbers out there right now because they are still under negotiation with our major suppliers. So hopefully you can understand that.
Yeah very helpful. Thank you best regards.
Thanks Oliver.
Thank you for your questions.
Next question comes from Emily Dutchman with Wolfe Research. Please go ahead.
Hey, guys. How are you this evening.
Great Hi, Mike.
Hi, there just a quick question so first on head count.
Head count.
At the end of the year.
Secondly, with that how are you thinking about the pace of hiring in the next year.
Okay.
Head Count we ended last year talking to Doug here as I didn't have that one of my fingers and 100 200, or so on a headcount basis.
For the company and we'll do a quick double check on that one, but I think thats about right.
And.
Last year, but it's definitely a growth year for us and adding head count as we ramped up our team.
We have a few places left to continue to build so we're still in somewhat of a growth mode, but we've hired the majority of the people in the roles that we need.
Carriers, both in commercial operations and on the development path kind of our programs and engineering and developing these new ships now our partners right there'll be building up their teams or reallocating folks from some of the larger companies will be reallocating as our work starts to flow to them.
And that will happen, but we're also able to do is now square finished the work on our enhancement program with <unk> in particular, we're able to redeploy the talent that had been occupied on those efforts into our operating areas so boats into our.
Kind of a baseline technical operations in new Mexico, but also into helping as we get into final assembly in Phoenix, So I would say modest growth and a few targeted areas mostly engineering.
When we get into the.
2024 period in Phoenix, and we really start.
Assembly processes, there that particular site, we will ramp up further as we go for 23 modest growth.
One other thing I can add there.
With the head count we did have a lot of contractors here during the enhancement period. So.
As that is completed we have ramped down that that head count and so now you're seeing us add more permanent head count for the next phase, which is the fleet development. So it's not a net add of heads with the numbers, we gave you but.
Those are the those are the full time equivalent so it'll be here, while we ramped down the contractors.
Sure.
Thank you and then one more if I may on the customer pipeline future astronauts pipeline sorry, if I may have missed this in the commentary, but are you able to size that pipeline at the moment and do you get as granular as the geographical spread of the customer pipeline.
Well.
A couple of ways on that so.
Tam if you will on on this industry is obviously, one that's being built because the industry is being built a couple of your account.
Counterparts have.
Done some good research I think into associated that market and kind of leave those works to stand on their own.
But we're obviously building this up as we go.
You mentioned international on our customers we have.
Astronauts from over 62 different countries are I think 60 to maybe 63 now different countries across the world.
We obviously track our existing base, there and no we know where we have kind of greater and lesser momentum.
That brings us to the and as we consider international space ports.
Europe is a logical place for us Middle East is a logical place for US Asia is a logical place for us I feel pretty good about Spaceport America for North America, right now and they're kind of gives you that where we think the big markets.
Our aggregated and obviously the groups that we're bringing in.
Do travel and are willing to travel to different parts of the world. So I do think we can bring our global audience to any of our individual sites that will eventually have but I think it is helpful to be located in proximity to large markets as well.
Great. Thank you very much.
Thank you Emily.
The next question comes from Michael <unk> with Keybanc capital markets. Please go ahead.
Hey, good afternoon.
Welcome Michael So.
First question.
I appreciate the milestones you laid out for the Delta class.
I wanted to ask on which milestone or which year that you laid out do you expect to be the most capital intensive.
So whatever that peak burn rate is and I know there are a lot of moving parts, but I'm just trying to get an idea for the duration of that rate or what steps would require the larger cash outlays.
Sure 24, Alright, 24, you'll see the continuation of parts fabrication.
Assembly is going to be going on not only at our Phoenix plant for final assembly, but within our supply chain partners for.
Major sub Assembly assembly, so that's where you're kind of getting getting the peak nonrecurring engineering in the peak assembly of initial ships.
And then as we move those into ground and flight testing that would start to come down we would expect.
As Doug mentioned we.
Some.
Good capability I would say too.
Accelerate or kind of keep the accelerator down or.
Hedge back up on our paces, we feel we need to we feel really good about the return on investment of the money that we're putting in and so we would like to go ahead and get this fleet built up and start delivering on the experience, but we have flexibility in that if we need to.
Specifically to your question I think 2024 is likely to be our peak.
And how far in advance of Delta's first revenues like do you plan to begin that testing of the Delta ships, you said 2025, but did that have.
Few months or is that the better part of the year.
And how does that compare to the length of testing for legacy ships is that the same amount of testing you needed for unity.
For example, or can you check a lot of those boxes for Delta just given the testing that you've already completed on the legacy fleet.
Yes, we don't.
I expect to see some of the entity was a very extensive flight test because it was breaking new ground almost on every flight.
Delta's flight tests are going to be fine similar flight profiles.
With a outer mode line, that's fundamentally the same very similar to our last ship and but with different material properties and some different handling characteristics inside so the scope of the flight testing.
Is less than what you would see in unity, but it is a new vehicle.
I put a parameter.
Parameter probably this early on the team of exactly how many months that that will be met.
And months and and I think the focus of that is just as we always do a nice sequential test learn and expand the envelope and analyze go forward with that but it is off a much deeper based on knowledge will also have many flights under our belt by that time that have also built up our knowledge.
We're able to do a lot more.
<unk> alright, with our Arrow Arrow.
Dynamic models in our flight Sciences group that also help.
I'd say it makes that as an efficient process as we can the other thing we can do.
By virtue of having built tooling and getting that nonrecurring engineering done with the tooling is we can have more than one ship embedded into the flight test program.
Something that we're evaluating now is being able to kind of work on different points with multiple shifts and the process there because it doesn't take us relatively that long.
To do a final assembly on the ship so hope.
Hopefully that gives you a little bit of color into that process.
Yes helpful.
And lastly for me.
The issuance of shares through at the market program with minimal in the quarter relative to the $100 million in <unk>. How are you viewing the cadence of any further issuance as we move through 2023, given the $200 million or so remaining.
Well, we have the 200 million as he said there for us to utilize and it's always a it's based on market conditions and we're always watching.
And trying to optimize and it has to do with things like share price and volume and that sort of thing.
So we'll use it appropriately when theres opportunities to do so.
Got it thank you.
Alright, Thanks, Michael.
Thank you for your question.
The next question comes from Michael CMO Lee with Truest. Please go ahead.
Hey, good evening guys. Thanks for taking the questions.
Maybe just to kind of stay on that.
Capital spending in Capex.
So should we basically broadly think that cash burn 'twenty three 'twenty four should equate to about $1 billion I mean does that.
The right way to think about this.
So thanks for the question.
As I mentioned.
That's something we want to put a total number on just because of the number of moving parts in between.
Both the timing and the magnitude of the spend so I tried to give you directionally what to expect and we did highlight here that it will be growing most likely into 2024.
There's enough moving parts in there that it's it's a little difficult.
To put a total number on it that we want to put out there for on a multiyear guidance basis, just because you've got the Delta class plus the mother ships.
Plus we have the factory floor, the manufacturing as well as the spaceport expansion and the Ashok campus. So is enough things in there that are all lining up in terms of being ready for service. Yes. There is a little movement in there I think it's b reaching to put a.
Specific number out there for a two year spend at this point I think part of what goes into Doug, but there is we have flexibility on how many of those things we choose to run concurrently or not.
Okay.
Fair enough and then just I mean are you guys comfortable with just having.
Youre going to have one chicken operation through 2026.
Is that from a from an operational risk standpoint, and sort of deemphasizing imagine.
Are you guys comfortable with that kind of model.
Well, one I'm very excited and comfortable with unity and excited to have the mother ship back there. So we can get that going so that's all good news.
Second thing is.
We want to really get the volume of this up.
What we're all in this company for us to take hundreds and then thousands of new tens of thousands eventually people spaces, where we're trying to go to and that requires a production model. So thats why youre seeing us focus first on unity. So that we can just regularly prove out and showcase the experience.
We will continue to learn technically of course, but I think it's really going to help normalize to the marketplace and showcase the power of what we do.
Really are needing to get focus to the production model, so that puts imagine as option value in the middle.
And we can turn to it when we've got everything else well in hand, and humming along is we want to and then come back to imagine, but we look here to have our delta ships, beginning flight testing in 2025 and Thats couple.
A couple of years out now it's still to come but.
We're moving well ahead on that I think we'll get all of our learning on unity <unk>.
The have imagine.
As that.
To go to when we want to go to it but first things first let's deliver our experience with unity and let's make sure that we're building out the low variable cost production unit and Delta.
Got it sounds fair.
Last one I guess, maybe two quick ones is there any FAA certification neither required for the modifications that were made to EBIT for that part of the validation.
Alright, so two different things we have a commercial operators license, we talked about that I think on the last call.
And Thats good through July of 2024, those go on two year renewals and then <unk>.
Each of our ship has an experimental airworthy airworthiness certificate.
<unk>, just renewed hers and so thats a yearly basis.
We will go and renew unities later this year.
Okay perfect.
Last one I think the customer deposits on the balance sheet down a little bit sequentially can you talk to maybe ticketed passengers in backlog or any trends there.
I'll just in the general trends.
We are kind of the same place where we've been before.
We have right around 800, or so people onboard and the future astronaut category, we pulled 100 of our first thousand seats off.
To use for research that we're going to call. It feather in to the manifest along the way and we will start by seeing the Italians on a research flight first step in commercial service and then we have a group that we're working with our virtuoso that we've given an allotment of inventory too. So I think my guess is virtuoso will probably.
Pick up on their efforts as we move back to space. So no real changes in that category. We saw last year 2022, some people of our 800 base.
I'll drop off wasn't our largest you're dropping off as you might imagine with everything in the disruption going on in the economy in the world.
Was a bit higher than some and we generally backfill that with what I referred to is how seats friends and family referrals from existing future astronauts that kind of kept our overall numbers basically the same.
Got it okay. Okay. Thanks, guys.
Thank you.
Thank you.
The next question is from Christine <unk> with Morgan Stanley . Please proceed.
Hey, good evening Christine.
Hey, following up on Mike's questions earlier on cash.
We annualize your <unk> cash guy that could be a free cash flow usage of $560 million per year.
You guys have a $980 million cash balance so that would only leave you with $420 million by year end.
Doug you mentioned that you can accelerate or slow down investments to preserve cash can you quantify the flexibility is that in the tens of millions or hundreds of millions.
And maybe I'll stop there and then I've got a few follow ups on that.
Thanks, Christine this is Doug, yes, the ability to flex our spending is actually pretty significant.
But it's more in the one hundreds of millions range versus tens.
We'd rather not do that because we see great returns on these investments.
And we want to invest in the vehicles and the expansion because the.
Omics of producing more ships is very attractive right because each copy is relatively inexpensive.
Compared to the engineering and the work that we do upfront. So we want to be able to make these copies get those.
Economics, running so we'd rather not slow down, but we could if we needed to spend.
Spend less on the infrastructure and the fleet development.
As needed.
Some pretty significant leverage there in terms of what we could do.
If necessary.
Great and is there a minimum cash balance you're comfortable with.
And then also when you think about that ramp of those chips are there other creative financing solutions that you can look to so you can continue to accelerate production.
Production without.
Compromising.
Sure sure.
Your cash position maybe like secured.
Asset financing or anything like that are those available or are these two.
Space ship still too niche for that.
Sure. So on the mend cash so theres not a specific number we've put out there, but we do like having a strong balance sheet for the REIT.
And as I mentioned, we see great opportunities.
The investments we have we want to have that flexibility. So our preference clearly is to maintain that strength.
Let it shrink so we will strive to do that but I wouldn't put a specific number out there in terms of alternative financing and others.
There's equity there's debt.
And you mentioned some other secured methodologies we haven't pursued.
At this stage because we have the $980 million, we have the flexibility we talked about the equity markets have been supportive we are able to raise debt.
Before we have that potential again in the future and look to that as an alternative but we can explore other alternatives if.
If we want to get more creative at this stage.
Sticking to the basics.
Great. Thanks for the color and if I could squeeze one on ease I mean, you've now had two successful test flights.
As the operating data comparing to what you anticipated or are there any surprises and is 100 flights before the next major maintenance overhaul still where it's tracking.
So great questions Christine.
Just because it is a broad call and people listening in.
We're using the word verification or validation flights, what we're doing here with <unk> is not trying to break new ground. These are fundamentally regression testing flight. So how we use them to gather actual flight data.
We use that to correlate our flight sciences models, because we've made some structural shifts within the plane right specifically in the center wing.
<unk>.
Made a heavier in beef year launch pylon.
There is there is some difference structural strength in that part of the wing and Theres some actual small.
Elements that have changed slightly.
Kind of the profile of the wing in fact, if you look in one of our slides.
Whatever five number was where we kind of showed to launch pylon in the horizontal stabilizers. If you look closely in that you'll see a couple of small protrusions on the leading edge of the wing. There is same on the back we use what we call them an exoskeleton approach to add.
B the way that we would attach the pylon onto the wing and that created a little bit more material on those areas and so what youre seeing on those protrusions ours fairings very small carrington. So we don't expect those to have any impact and we're using these test as an example to confirm that there is not any material.
Aerodynamic impact to that so those tests have gone very well so far we continue to do them sequentially.
The next flight we will.
Used to kind of continue to expand if we've done regression testing to gather data. We're also looking to ensure that nothing that we did.
Could create an opportunity to introduce any flutter characteristics into this area. So that we work our way up to that so that's what these first two flights have done we'll do another flight and carried out to Max speed in that regard, but we've been very pleased with the performance of the ship. It's correlating as expected, we're just going to continue on that process.
Pilots had nice things to say, which was good to hear.
Great. Thank you guys. Thanks for the color.
Thanks Christy.
Thank you.
Next question comes from Austin Moeller with Canaccord. Please go ahead.
Hi, good evening.
Just my first question here just given the cash that you have on the balance sheet and the plans for production through 2026 do you expect that to yield one delta class of orbital space Swain and one next generation mothership or do you expect additional units that you should be able to produce with <unk>.
Have on hand.
Well, let's say, Doug you can kind of we can tag team on this one.
Frame that started this Austin with our strategy is to invest a nonrecurring engineering work both in the engineering design and in the building of tooling that allows us to build parts in an ongoing basis and final assembly infrastructure that allows us to continue to assemble.
Copies of this production model both of these production model ships at realm.
Relatively quite relatively low variable cost, that's where we'll get the economics thats, where it will drive the margins in the business, that's where we get the flow through from a shareholder value standpoint. So that's the same on both that approach is the same on both the Delta class ships and our next generation mother ships in both of these.
Internally as well as with our supply chain partners, we are creating the <unk>.
Tooling and doing that in kind of a long where tooling such that we can go ahead and continue to create replicas of those as we both build out Spaceport America and then look even further ahead and to being able to continue to populate our state courts and other locations in the world. So that's been our manufacturing strategy all along.
So obviously as we get into those ramp up years will also be flying shifts and then you have more income coming in and so that you can kind of balance that on an internal cash generation basis, so going forward.
You shared a lot on economics I know, if you have anything else you'd want to add.
Just regarding.
The cash we have and then.
The cost of the vehicles.
It's getting too close to quantifying.
Quantifying the cost of a spaceship and the mother ship at this stage given what I mentioned about the negotiations that are ongoing so.
We will go with Michael's description is.
The color that you gave.
Hopefully helpful to you.
Okay and then just another question the asteroid campus is being built new Mexico by 2026, but just thinking about incremental revenue opportunities for the company have you guys considered.
Doing like a real cause a Roche Cosmo Star City style astronaut training service.
To help add to revenue generation just in addition to the actual space flights.
I think.
Just so I would say the same thing to you that I am saying to everybody on our team at Virgin Galactic right. We're first going to stay focused on flying unity to space with.
With even second on getting our Delta class of Nextgen motherships up so that is very clearly, where we're putting our attention right now and being super efficient with our spend as we do it.
So with that said I think there is a lot of opportunity.
For widening out our revenue potential as we start to get regular flights to space, but I do think.
The heaviest bulk of of getting our leverage to have additional revenue streams like the ones you are talking about.
Really get enabled as you start to get closer to you at least a weekly if not multi times a week cadence there because there's just a lot of excitement a huge emotional excitement just being around and seen.
Our ships go to space and we can.
You can envision opportunities around that that would be it.
Materially smaller price points of course, but I think that's for the future a little bit right. Now we just want to stay focused in 2023 on getting the job done with unity and Eve and getting our Delta class Nextgen mother ships going.
Okay, and then just one more if I may have you had any customers come to us through the marketing process that have complained about the high pricing on blue origins sub orbital flight relative to yours.
Okay.
Our customers are amazing people some people are.
Observing their multiple choices in the world.
Yes, I think we're excited for everybody to be go into space I won't comment on relative pricing.
But I do note that there are different price points as you as you pointed out.
Okay, great. Thanks for all the color.
Thanks, Austin, Thank you Frank.
Thank you for your question Austin.
There are no further questions in the queue. So that will conclude today's Virgin Galactic fourth quarter and full year 2022 earnings call. Thank you for your participation you may now disconnect your lines.