Q2 2023 Virgin Galactic Holdings Inc Earnings Call
Good afternoon. My name is Sarah and I will be your conference operator today at this.
This time I would like to welcome everyone to Virgin Galactic <unk> second quarter 2023 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 you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again.
I will now turn the conference over to Eric Cerny, Vice President of Investor Relations. Thank you and good afternoon, everyone. Welcome to Virgin Galactic <unk> second quarter 2023 earnings conference call on the call with me today are Michael <unk>, 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 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 forward looking statements made on this call.
More information about these risks and uncertainties. Please refer to the risk factors in the company's SEC filings made from time to time you.
You 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 whether as a result of new information future events or otherwise.
Please also note that we will refer to certain non-GAAP financial information on today's call.
Please refer to our earnings release for a reconciliation of these non-GAAP financial metrics.
With that I would like to now turn the call over to Michael.
Good afternoon, everyone. Thank you for joining us on our second quarter earnings call.
We are thrilled to have launched commercial service and look forward to sharing more about that on today's call.
Turning to our agenda on slide three I'll start today's call by highlighting the activity around our space flights during the quarter and then discuss the progress we are making on our Delta class ships before turning the call over to Doug to share insights into our financial performance.
Following our prepared remarks, we will open the call for your questions.
Turning to slide four we returned to space in late May with a spectacular unity 25 space mission.
<unk> 25 crew spent four days in training in preparation at Spaceport America before boarding VSS unity and rocketing into space at nearly three times the speed of Sal.
The mission was an incredible success not only did it validate the efficacy of our astronaut training program. It also affirmed the absolutely stunning experience Virgin Galactic provides.
Moving to slide five.
On June 29, we transformed VSS unity into a sub orbital space lab with the launch of our first commercial space mission Galactic one.
The mission broth members of the National Research Council of Italy, and the Italian Air Force to space, along with 13 research payloads.
Galactic one was an outstanding achievement for our customers as the Italian astronauts and ground based crew successfully executed all 13 of the research experiments.
Feedback from our Italian partners was extremely positive and the Italian team members receive congratulatory notes from across the country, including from Italian Prime Minister Maloney.
As highlighted on slide six our space flight system in flight profile provide researchers with a long list of benefits.
Our spaceship cabin is modular and can be adjusted to various needs.
Experiments can be structured as autonomous payloads human tended research racks, and even as research studies designed to be worn by the crew themselves.
Our unique runway takeoff and landing enables research payloads to be loaded immediately prior to flight.
<unk> time that experiment spend outside of the lab and providing researchers with expedited access to their data after landing.
Our ability to provide unprecedented access to space for researchers government agencies and universities means more opportunities for microgravity research and more expansion of human knowledge.
Historically microgravity research is required accepting the very long lead times and extremely high cost of accessing the international space station or accepting the limited continuous microgravity duration offered by parabolic flights.
We believe our sub orbital space lab product hits, the sweet spot and we are pleased to offer researchers and scientists access to several minutes of continuous micro gravity that will allow for deeper and more frequent study of micro gravities effects on the human body.
Fluid dynamics planned through growth and much more.
As we now begin to build out this product vertical we believe the combination of extended time in microgravity capability for researchers to accompany their experiments in space and relatively favorable cost positioning will enable the attraction of both new and repeat research customers.
On to slide seven.
While galactic one showcased our research product Galactic too is going to set the stage for a new era of sub orbital human space flight that will dramatically broaden access to space for private individuals.
We are just over a week away from the planned launch of this historically.
The Galactic to crew provides a glimpse into the breadth of access that Virgin Galactic will enable as we scale, our fleet and expand our business.
Their ages range from 18% to 80 days.
The hail from two of the more than 60 countries already represented within our future astronaut community.
They have widely diverse reasons for wanting to travel to space and their journeys will have widely diverse and positive impacts within their respective communities.
Along with our pilots an astronaut instructors they showcase that commercial space is opening the door for opportunities that are within the aspirations of all humans.
Similar to Galactic one we will be live streaming the galactic to mission.
The live stream footage widespread media coverage from the slight helps to showcase our product and build awareness of the safety of our systems as well as the unique and highly differentiated space experience delivered by Virgin Galactic.
I encourage all of you to join US on August 10th for the live stream of this historic mission at Virgin Galactic Dot com.
As we go forward to fly in our customer space. The majority of our webcast will be for private viewing as we focus our efforts on customers and their guests.
Turning to slide eight.
We are building consumer interest and confidence by operating our commercial baseline safely and consistently on a planned monthly cadence.
We are executing on that objective.
The performance of our spaceflight system over the last two flights has been excellent and we've been very pleased to see both spaceship unity and our mother ship Eve performs so predictably following their enhancement programs.
The enhancement program was successful and the improved ship performance now enables us to plan, our flight days with reasonable advanced notice to our customers.
Regular flight cadence gives us a meaningful database of feedback around both the astronaut experience and overall spaceflight performance.
Monthly flights also provide valuable maintenance data with which we can continuously improve our operations.
Moving to page nine.
We continue to progress the development of our Delta class space ships, which will drive the revenue growth and profitability of the company as we scale the business.
Our production roadmap for the Delta class remains consistent with what we shared last quarter with 2023 focused on completing designs for the Delta spaceships building the required tooling and beginning fabrication of structural components for the ships.
As we move into 2024, we anticipate completing the assembly and equipment installation designs, completing part fabrication and initiating the assembly phase at our facility in Phoenix, Arizona utilizing the sub assemblies from our suppliers.
We continue to operate on a timeline that supports testing in 2025 in advance of the first Delta shift entering commercial service in 2026.
Okay.
Delta ships have been designed to have a relatively low unit production cost and have material improvement slight cadence relative to our initial ship VSS unity.
The Delta development process has yielded some excellent enhancements to the shifts architecture, particularly with regard to manufacture ability and maintainability and we're tracking well against our primary ship performance criteria.
Before I turn the call over to Doug I want to convey how incredibly moved our restaurants have been following their flights.
Across the board, whether it be research flights or private astronaut missions Virgin Galactic is delivering an incomparable experience.
It is exciting to be fly to space on a regular basis and we also know that we have many more milestones ahead of us.
We continue to make progress on our Delta class shifts as these vehicles are going to enable us to deliver the same incomparable experience to more customers at a faster rate.
With that Doug, let's turn the call over to you.
Thanks, Michael Good afternoon, everyone, turning to slide 10, and our financial results for the second quarter.
Generated revenue of approximately $2 million driven.
Driven by our commercial space during the quarter and future astronaut membership fees.
Operating expenses were $141 million compared.
Compared to $110 million in the prior year period.
The increase is primarily attributable to a $24 million increase in R&D costs tied to engineering work for our future fleet SG&A increased $7 million.
We reported a GAAP net loss of $134 million compared to $111 million in the prior year period, primarily driven by higher R&D costs.
Adjusted EBITDA was negative $116 million in the second quarter compared to negative $93 million in the prior year period.
Free cash flow was in line with our guidance at negative $135 million in the second quarter compared to negative $91 million in the same period last year.
Moving to slide 11 at the end of the second quarter cash cash equivalents and marketable securities on the balance sheet totaled $980 million, a sequential increase of $106 million from the first quarter of fiscal 2023.
During the quarter, we raised $241 million in gross proceeds as part of our aftermarket or ATM equity offering programs.
With the startup commercial service you will see some changes in the presentation of operating expenses. When we report third quarter results in November .
Going forward the customer experience category will be expanded and renamed space line operations accounting for costs associated with operating our commercial space line.
These items include components of baseline technical operations and space missions, and safety, which were previously presented in R&D or SG&A.
This re categorization does not change aggregate operating expenses.
Moving to slide 12, and our financial outlook.
With commercial service, we anticipate a monthly flight gains beginning in August with two commercial space flights in the third quarter and three commercial space flights in the fourth quarter.
Given the flight cadence and manifest details, we forecast revenue to be approximately $1 million in each of the third and the fourth quarters.
Our capital expenditures for the third quarter are expected to be between $10 million and $15 million.
The growth in Capex is driven by the construction of the spaceship Assembly facility in Phoenix as well as technology used in the design process for our Delta class vehicles.
We continue to expect our forecasted free cash flow for each of the third and the fourth quarters of 2023 to be in the range of negative $120 million to $130 million.
With that I'll hand, the call back to Michael for some closing comments.
Thanks, Doug.
In closing the second quarter was an important one for us.
We celebrated a critical milestone for the company, having safely and successfully launched commercial service with extremely satisfied customers.
We are very excited to be just over a week away from our second commercial space flight with Galactic to client first of approximately 800 customers with reservations.
We look forward to delivering this transformational experience on a recurring basis, we remain on track to scale the business in the future with the delivery of our Delta class fleet.
Finally, before we end the call today I want to take a moment to address the passing of our good friend chair of the board of a level.
Even with a champion for our mission and for the Virgin brand.
We continue to keep his family in our thoughts and will forever be grateful for his leadership and his time with us.
Our entire board, it's been incredibly helpful and Ray Mavis, our lead independent director has seamlessly stepped in as our interim chair.
Ray brings extensive public sector experience to our board having served as U S Secretary of the Navy as the governor of Mississippi.
With that I will turn to questions operator, we're ready to begin the Q&A portion of the call.
Thank you. Thank you have a question. Please press star one if you wish to withdraw your question. Please.
Please press star one again.
Your first question comes from the line of Greg Konrad with Jefferies. Please go ahead.
Good evening.
Hi, Greg.
Maybe just to square the revenue comments I mean, you did over 2 million in Q2, you talked about a $1 million in Q3 and Q4 on.
Two and three flights.
What's included in that I would think they'd be a little bit higher just given the space flight activity.
Yeah, Hi, Greg This is Doug.
So in Q2, we had the Italian flight, which was the research flights so little higher revenue.
Going forward for Q3 and Q4, when we look at the manifest details it depends if it's going to be asked from us or research flight. So depending on what we do with that mix and the manifest in particularly the fourth quarter. We may see higher revenue. So if we look at the potential here is probably going to be close.
The $1 million in Q3, and if we do research in the fourth quarter it'd be probably over $2 million.
And then just on the R&D you talked about.
The restatement in Q3, but R&D stepped down about $25 million sequentially Capex up a little bit is that Q2, R&D kind of the right level ex the restatement going forward, just given the rework and reentry of <unk> now being complete.
Yes, so youre going to see some things changing.
On the income statement, because the R&D will start to move over into Spaceland operations.
Things that were historically, there will now be.
In the operations category, which basically represents the cost of operating this baseline so.
You'll see our technical operations group go over their space on emissions and safety. This is all the maintenance and ground support and safety and pilots and all of that so a lot of movement.
But in general what Youre still seeing is without that restatement is R&D is continuing at this level for a while because we're in the design.
<unk> phase of the Delta class.
And that effort is continuing for the foreseeable future into 2024, so without that re class you'd still see the R&D progressing.
Similar levels.
Thank you.
Your next question comes from the line of Oliver Chen with TD Cowen. Please go ahead.
Hi, it's Tom on for Oliver.
Just a question on how ticket sales are trending, especially after the most recent flight and then how you expect that to trend forward and Additionally, if you could just remind us on how long the lower priced.
Tickets are expected to last relative to the price increase.
Hey, Tom Michael here. So I think you may recall, we have I'm sure you recall we have.
About 800 people in the queue.
And with the kind of monthly cadence off of our ships.
Even unity.
And until we get the delta shifts going into 2006 that turns into generally a four year backlog, which is a little longer than we prefer to think of two to three back your backlog is the appropriate place for that.
So youre going to see us I'd say use these early flight to add confidence in our system to add confidence in the safety of human space flight on February <unk>.
See I think youre going to hear excitement really impressive excitement from the people, who fly and as those stories come back and that combination is purposeful for us because it will build confidence in this new industry confidence in what this can be and aspirations and excitement to come and we're going to let that bill.
A little while because we have a backlog that's a little longer than we would prefer and then as we start to get a little closer in towards our Delta shifts.
Ready to come online, we will open up in successive tranches of sales I think youll see that from us that lets us manage the price points at which we released inventory and we will.
We will be supply constrained for a little while so it also helps us manage and yield manage the suppliers. We've put that out so we're going to not have sales outside of what we've talked about before.
We've continued to allow for research sales to play forward and we have a small amount of sales available through the virtuoso travel network.
Anybody who kind of once in we'll probably go through that channel over the next.
Reasonable period of time, and then I said as we get close to being able to have the Delta fleet scale up then you'll see US open the door with larger and larger tranches always keep it at two to three year backlog along the way.
The second thing I think you asked was how do I think about the price points.
So of that 800, the first 600 or so of those the vast majority were in between 200 $250000.
Ranging from tickets that were sold all the way back in like 2005.
Up through when the company went public.
We then brought that price point down and opened up a price point of $450000. So roughly you've got another 200 seats and a $450000. The research flights we sell with.
Are fewer in number and we expect plus or minus around 10% of our volume in the first thousand.
Those will be at.
On average $600000 per seat equivalent.
Kind of gives you a mix of these early flights.
We have effectively outside of the virtuoso seats.
Closed at $450000 price point.
We do reopen up sales, we haven't announced pricing for that.
Sure, we don't expect that to be less.
Great that's very helpful and.
And then a follow up on.
The research flight demand could you just talk a little bit about the drivers of demand for research flights and then what factors lead you to prioritize research flights relative to ticketed passengers for tourism.
I'll take the last part first and then go forward so.
On the whole, we're going to prioritize the vast majority of our inventory to private astronauts.
I think that's the broad vision, that's always been at the founding of this company and kind of core to our vision of opening space and access to space up for individuals who aspire to do so.
We do believe research is important we believe research matters to the ongoing growth of human knowledge. We believe that research is a profitable business along the way and we also believe research appropriately ads I think a halo a positive halo over the top of commercial spaceflight and so for all those.
Reasons, we've allocated generally 100 of our first.
So about 10%.
And I would like to see that kind of be in that range as we as we grow now what are the factors that are here.
You mentioned briefly in the prepared remarks.
There is.
Two ends of the spectrum that are currently available to people who want to do Microgravity research in Microgravity research is hugely important.
Yes.
Kind of humanity in March.
Starts to work to spend more time and space for all the various reasons that are out there.
So theres a lot of research needs to be done it has either been.
Experiment that goes to the space station, which is <unk>.
A long time to get in line, because theres not that much capacity for that it's very expensive to get it there and you kind of have one shot to make it work and that puts a lot of pressure on those experiments to make them very robust.
And you have one one experiment that last a long time.
On the other end of the spectrum you have a parabolic flights at the higher end of the current piece, which on average gives you about 20 seconds of micro gravity, it's not.
As pristine microgravity is.
Claims can bounce around in the air a little bit.
And you can get repetition on that but you just don't have enough length of time, we're sounding rockets are very short.
Our drop tower is a very very short and so what we heard coming back from our Italian partners on this and from other researchers we've talked to is Theres, a sweet spot that sub orbital space is enabling.
And the flexibility that our spaceship provides as we can either keep or remove seats at payload racks and or not allow those to be tended by the researchers or actually flown researches impairments flown on the restaurants themselves hits. This middle ground that has just never been available before and so now we can provide.
Minutes of very clean microgravity time, and that allows not only for a wider range of experiments that could go up but because our cost price points, especially compared to getting to the space station are so much less.
Now researchers can actually plan for a sequence of experiments or repeating experiments with slightly different parameters.
They learn more and usually those are on the way towards either a larger piece that will go to the space station or eventually the moon or sometimes they are just they can get everything they need through us. So those are the parameters that people need and then the people who buy those are heavily government and government funded institutions and so what.
We are doing now is taking.
The success of this first flight putting that into a kit that all of those researchers government agencies can use in their own appropriations discussions U S government and other governments across the globe.
Your next question comes from the line of Peter Osterlund with <unk> Securities. Please go ahead.
Hey, good afternoon I'm on for much more than this afternoon I appreciate you taking the questions.
So firstly I just wanted to ask I appreciate the color you've given on pricing, but I just kind of following up on that in this timeframe, where youre operating just with unity is half a million per flight about what youre expecting on average for civilian flights through 2025 or are there any considerations related to number of passengers for flight on these first couple of flights that are in <unk>.
From what you would expect on average as you kind of get into 'twenty 'twenty four 'twenty five.
Sure. So when we look at the capacity of unity and the ticket prices were.
Applying these days you would expect to see for the near term.
600, K per flight because there is one seat allocated for an astronaut trainer in the near term as we move into 2024, we expect to open up that fourth seat and so then you would see.
Four times 200000 or eight.
$800000 in revenue per flight is what we're projecting and if we get.
The research seats mixed in there you would see some uplift from that.
Yes.
Very helpful. Thank you.
Follow up I just wanted to ask.
Their fleet development activities.
Just curious any challenges or surprises that you'd call out either in terms of cost labor or design challenges that might be different from what you would expect that at the beginning of the year or is it mostly just been on track up to this point.
Okay.
No I haven't seen surprises that are here.
Aerospace in general is growing and <unk>.
Competition for engineering roles in certain types of fields.
Remain healthy.
The defense industry has more pressure upon it for everything Thats going on with the war in Ukraine, and so we continue to hold our own I think against that and we have an incredible group of engineers that are delivering against this so that part I would say is just kind of normal for all of aerospace that's going on.
And we've had I think really pleased relationships with our delta suppliers here. So in fact, we've got some of them on site today from both bell and carbon and that's been really good we are working with them.
It's not new technology, but.
More state of the industry technology of using.
We will use the word digital thread here digital twin but design and.
Software that allows us to go both for the design phase into the parts of the tooling and manufacturing fees essentially all the way to maintenance and so ensuring that all of our teams whether it's ourselves or our partners are faisel without software moving through is something that we've put a lot of training into.
But again not surprising so.
Our keeping great focus on this obviously each time, we talk about the Delta shifts we reiterate this is where the business model.
This is where we ramp up both in cadence.
And an ability to have a relatively low cost on the variable production unit cost of those shifts and they're super important. So our attention is on it and we're going to keep it that way.
Great. Thanks, a lot for taking the questions.
Thanks Barry.
Our next question comes from the line of Matt Akers with Wells Fargo. Please go ahead.
Yeah, Hey, guys. Good afternoon. Thanks for the question I wanted to ask.
Just your latest thoughts on imagine and I think you've described that as kind of option.
Option value that you could activate at the point now that <unk> got unity fly that's something you could look to exercise at this point.
So imagine is.
He said, we've kind of kept it as an option for us and it's going to remain as an option for us the picture.
<unk> nine I think of the accompanying deck, which was talking about our delta class ships.
That image is actually an image of imagine and we use it because delta is derived from that base and there are many things that we've already been able to benefit from in evolving the production model ship from imagine.
The reasons that we put it.
Off to the side is because the engineers that we have focused on this early design phase for the Delta shifts are.
The same types of engineers that we would have through the testing phase.
Of imagine modified sciences like avionics work areas like that and we need those people focused upfront on delta. So that we can get the momentum of delta into the supply chain that we've built.
At the time when those key engineers have kind of completed that and we're kind of well down the path towards delta.
The production to build in production of those Delta shifts.
Any quick.
And the way in which we are.
Not only going to learn to flight test.
But we're also building as you would expect to see in a rapid commercial aerospace development program. We are building, you'll hear the words iron bird or a static test article we're building.
Systems that are on the ground that can allow us to very rapidly move through design elements.
And we're wind tunnel testing the Delta ship actually this month. So a lot of that allows us to have a relatively abbreviated flight test program and so when you hear us we're doing flight testing in 'twenty, five and allowing the first delta shifts into commercial and 26.
We're kind of at a point, where they're almost outpacing imagine at that point. So we are going to keep imagine.
It's still here with us and we haven't secured and ready, but it is likely going to be used in service of the Delta program as opposed to hey, we're going to turn our attention over to imagine and get that going and again that that allows us to anchor our technical operations, our flight support mission control group.
On one consistent of vehicle, which is the Delta shift and then as we have multiple of those shifts.
At the same engineering base, it's the same maintenance manuals. It's the same program and that will allow for a more efficient operation.
Got it okay. Thanks for the color I'll leave it at one.
Thanks, Matt.
Your next question comes from the line of Christina <unk> with Morgan Stanley . Please go ahead.
Great Hey, guys good afternoon.
Hi, Christine.
You mentioned the ability to flex cash burn by controlling the timing for Nexgen Motherships can you provide any color to your current thinking around the timeline.
So that strategy that we outlined in the last call is still consistent with what we're looking at today again, because we're pleased with how <unk> is performing.
After the enhancement period, where doing so are we did so that now we see <unk>.
Continuing through the Delta flight test program. So we are benefiting from that so because of that we're still anticipating that we will be working on delta.
First and getting through some.
Remaining design elements and then moving on to the parts fabrication and rolling off of that over to the next generation Mothership program. So there's a lot of the same engineers again, so it allows us to stagger the engineering resources and the focus of the company from one program to the next so.
That would be in the.
The following year. So 2024 is when Youll see the mothership program.
Start to pick up more heavily as we roll off of the initial phases of the Delta program. So that's still consistent with what we were planning before.
And then just as Michael Christine just.
Final continual thought on that is that allows us to bring these additional mother ships in it kind of sequence. When we're building the volume of our Delta fleet, So that way right at about the time that he will tap out from a capacity standpoint, we will be bringing on new better ships at that point to manage the scale of the fleet.
Great. Thanks, and then also.
After all you guys change your pricing structure to the 450000 for the passenger flights and then you've got $125000 in a fully refundable deposit.
Have you discussed any cancellation requests that you've received so far.
And how sticky has been the orders that you guys have received to date.
So we have a limited number of cancellations kind of year over year, the largest was not unexpectedly way back in 2014.
And we have not seen and I'll call it.
Out of line uptick in any of that where I get the most questions on that particular topic.
Following.
The tightened experience and he did you see any fall off associated with all the media around that we did not in fact.
We've heard from many of our future astronauts they are.
Very clear, especially those who have been with us a long time.
Everything that goes into the safety of this platform and they are able to talk that through with themselves and others and so we have not seen any dropouts due to that either you will see some people drop for.
Not often but sometimes it'll be for economics.
Times, it can be for medical reasons or health reasons.
And then that's why you've heard us say we can.
Some housekeeping.
There and so what we're doing is generally replacing those as somebody falls off we can replace Onesies and Twosies are back on the way. So hopefully that gives you some.
Color window into those.
Okay, great. Thank you for the color thanks, guys.
Youre welcome Thanks Christine.
Your next question comes from the line of Michael <unk> with Keybanc capital markets. Please go ahead.
Hey, good afternoon.
Wanted to start on the.
The cash balance that you are at today and just as we think about some of the Optionality that you have with your common stock offerings, what level of cash and marketable securities are you comfortable with.
And do you expect to maintain that position of around 1 billion for the foreseeable future.
Yeah, we're very pleased with the.
On the balance sheet, right now and the strength, there and our ability to have access to the capital markets. It's been great. So.
Yes, we are.
Approximately a $1 billion today, and we like where we are.
This gives us the flexibility to invest in these programs that we see are going to generate really high returns.
And.
<unk> gives us a pretty good runway. So we like where we are and we fully intend to keep our balance sheet strong.
Throughout this this.
As we move towards the ramp of the Delta class. So we don't have a specific.
Minimum cash balance, but we do intend to keep it strong.
And then following up on the Delta class progression you had mentioned you're on track with the development process, but wanted to ask a bit more specifically since you previously expected to complete design and tooling and then begin parts fab this year.
Is that still the near term expectation and what has been accomplished to date.
Yes, so that is still the expectation.
Well, we'll see.
Sequence before parts and both of those sequence of course before the sub assemblies can be created and sent over to us.
And the way, we're rolling that a bit in a sequential pattern will have.
Towards completing this year some parts being built on those tools tooling, probably finishing in early next year.
The tools that are needed later in the process.
Come on and then the parts that are needed later in the process come back in and all of those need to be done because.
Probably second half of the year, we will be bringing those into our Phoenix for.
Starting with the final assembly process, so that all kind of remains on track and moving as we expected.
Through there.
The.
Okay.
Yes, I think you ask a question on what else that we've seen in there one of the things I guess I would share I said add on.
I'll call it an executive overview it wasn't executive summary, it was a deep day.
On the design process and report out for where we are in some of the major milestones of Delta and how we've used the imagined baseline.
This fourth generation spaceship Delta class.
I was really pleased with what's come forward there the key things we're trying to do is not create a shift it looks different.
And.
The ships that will we think will perform generally the same as our imagine ship will performance lighter carries six people go hire all of those things.
It's really been validating is the work that has been done to enable us to turn this ship on a weekly basis, yes, we're going to continue to aspire to even improve there.
And.
Work that has been done to confirm the length of time I think we've put up 500 approximate flights out for useful life and we feel very good on those numbers as well and that weekly turn that length of time and the flights that's where the the cost of this on a per fleet basis gets to be.
<unk> really positive compared to other mechanisms of human spaceflight.
It's been the detail of that design and showcasing how we're going to carry that through there has been very.
Confidence building for me.
I mentioned briefly just a little bit ago, we are putting the right energy into doing. This these are not going to be one off ships. So we are developing you'll hear us use the word a copper bird.
Actually doing that in our engineering headquarters. It gets located in this week and that will have us running through all of the avionics and avionics systems electrical systems that we can just cycle in cycle in cycle in advance will be building in iron bird to test out the mechanical systems that go through there.
Up and running and running and running and running those so we're not having to wait until we get into flight test or actual use to understand.
The margins and the maintenance intervals of our parts, we're going through all the way through we'll be building a static test article.
For our ships and being able to take that kind of an ultimate limit load to confirm all the maintenance intervals that were putting in so those things are all very confidence building for me as I watch the diligence with which our engineering program teams are putting this together.
Great. Thank you.
Your next question comes from the from the line of Myles Walton with Wolfe Research. Please go ahead.
Thanks, Good evening.
Michael I was hoping you could talk a bit about the engagement plan after a galactic <unk> and in the frame of reference I think you mentioned these would start to become more private experiences.
I'm curious how do you maintain the visibility is going to be required to.
Create and sell the experiential side of this while keeping our intimate private.
<unk>.
Basically the customers paying for right.
We have to do both of course so.
One I would say we will definitely find.
<unk>.
Of our flight that we want to kind of do deep showings out.
Thats easy around our research flights as we do those.
Pieces and there is new stories, along the way there and there will be some flights that we will want to do in a full public manner as you would expect.
Maybe not all but a lot of our future astronauts.
Are quite excited to tell their own story, but don't necessarily want us to broadcast their personal experience and so we will find the balance I think youll always hear us talking about when our flights go there will always be recaps, the OSB footage and video pieces out.
And there doesn't always need to be.
A detailed streaming of the interior of the cabin.
For each group of private astronauts supply.
What I do think you'll see though is we'll be giving that material to our astronaut.
Not all but I imagine the majority of those will also become very active in bringing those out so we're going to I won't even call. It finding the balance. This is a both an type of a scenario we have to first and foremost focus on our customers deliver the experience that they want to deliver the quality and not.
Okay.
I kind of overly commercialize their personal experiences they've put a lot of energy and effort aspiration into this we have to deliver that and when we do that right that is the absolute best marketing, we will get because they will become missionary force. So can I get that right and I think within that we can also ensure that we.
Are touting, what we do and building confidence in the safety competence and the power of the experience and just the general excitement of our company I think we can do both so don't want to overplay. It now probably have display over answering but I.
I just want to make sure so hey.
You may not showcase like the interior of every cabin and flight because that's not appropriate.
Yes.
Maybe a different operational question on the Delta class at this point do you have a viewpoint of how many would actually be in service in 2007 is it.
One or two or is it the.
4% to six Youre thinking about on an annual basis of capacity other manufacturing.
<unk> hundred six could be on the line in 'twenty six.
I think the.
The end of.
27 store Youre, asking will probably be in between there is you've heard US say, we're building our factory for four to six ships a year, it's logical to start that on the lower side right.
As you start to build buildup, just muscle memory and.
Kind of work any kinks that are in the system.
So we will probably be <unk>.
Less than the full cadence of that but more than the first couple were wanting to get a couple out right away and so we will be using two ships.
And the flight test program and so those will roll right into service, we'll have probably a little bit of a break between those two.
But not so far that we kind of mess up the line from a supply chain standpoint, and then we'll start moving again on a pace.
Let's get the first four out I think the other question that will come with that is what's the turn rate of those ships.
As I mentioned just on the question before.
Very good about our ability to hit a weekly turn from all of the analysis, we've seen and we're going to keep pushing on that metric. So nothing else to add today, but that's another one that I think has got some interesting leverage.
Okay and last one on the financials is this a point where you can kind of confirm you're past the peak cash burn.
Quarterly cadence I guess, it's implied for the second half I, just don't know if youre able to say that we're.
So we're past this quarterly cadence we saw in the first half into next year as well.
Well, we're only giving guidance for Q3 and Q4 and for the following years, we are going to be.
Making sure that we're able to invest in the fleet because we see this great returns. So that involves the delta class and the mother ships, because we see really great.
<unk> returns from those investments.
We're going to be leaning into that when possible.
If necessary, we can control that pace and we could slow that spending and keep that.
That level down, but we think the returns are very attractive and shareholders will be supportive of us really trying to build the fleet.
The rapid rate, so, but we've got flexibility.
Great. Thanks.
Thanks, Bob.
This concludes the question and answer session as well as today's call. Thank you for joining you may now disconnect your lines.
Yeah.
Yeah.
Okay.
Jim and answer session as well as today's call.