Q2 2024 Virgin Galactic Holdings Inc Earnings Call

August 7, 2024

Good afternoon. My name is Sarah and I'll be your conference operator today. At this time, I would like to welcome everyone to Virgin Galactic's second quarter 2024 earnings conference call.

Operator: This time I would like to welcome everyone to Virgin Galactic's second quarter, 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Operator: I would like to welcome everyone to Virgin Galactic's second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's 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, simply press star one again. I will now turn the call over to Eric Cerny, Vice President of Investor Relations.

Operator: After the speaker's 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, simply press star one again.

All lines have been placed on mute to prevent any background noise.

After the speaker's 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, simply press star one again. I will now turn the call over to Eric Cerny, Vice President of Investor Relations.

Eric Cerny: I will now turn the call over to Eric Cerny, Vice President of Investor Relations. Thank you. Good afternoon, everyone.

Eric Cerny: Thank you. Good afternoon, everyone.

Eric Cerny: Welcome to Virgin Galactic's second quarter, 2024 earnings conference call. On the call with me today are Michael Colglazier, Chief Executive Officer, and Doug Aaron's Chief Financial Officer.

Eric Cerny: Thank you. Good afternoon, everyone. Welcome to Virgin Galactic's second quarter 2024 earnings conference call. On the call with me today are Michael Colglazier, Chief Executive Officer, and Doug Ahrens, Chief Financial Officer. Following our prepared remarks, we will open the call for questions.

Eric Cerny: Welcome to Virgin Galactic's second quarter 2024 Earnings Conference call. On the call with me today are Michael Colglazier, Chief Executive Officer, and Doug Ahrens, Chief Financial Officer. Following our prepared remarks, we 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.

Eric Cerny: Following our prepared remarks, we 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.

Speaker Change: Our press release and slide presentation that will accompany today's remarks are available on our Investor Relations website.

Eric Cerny: 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 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 SEC filings made from time to time. Your caution 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 see slide 2 of the presentation for our Safe Harbor disclaimer.

Eric Cerny: 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 risk 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 SEC filings made from time to time. 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.

Eric Cerny: Please also note that we will refer to certain non-GAAP financial metrics on today's call. Please refer to our earnings release for a reconciliation of these non-GAAP financial metrics. With that, I'd like to turn the call over to Michael.

Speaker Change: 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 risk and uncertainties. Many factors could cause actual events to differ materially from the forward-looking statements made on this call.

Eric Cerny: For more information about these risks and uncertainties, please refer to the risk factors in the company's SEC filings made from time to time.

Eric Cerny: 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.

Eric Cerny: Whether as a result of new information, future events, or otherwise.

Michael: please also knownote that will refer to certain non-gaap financial metrics on today's call please refer to our earnings release for a reconciliation of these non-gaap financial metrics with that i'd like to turn the call over to michael

Michael Colglazier: With that, I'd like to turn the call over to Michael. Thanks, Eric. Let's go to slide three. Since our Q1 earnings call in May, we've made strong advancements on the development of our delt's class spaceships. We will have substantially wrapped up the multi-year design phase of these high-performance ships in Q3, as we pivot the organization's focus to the build and test phases. Designing step-function leaks and performance and reliability into these production model ships has required a huge effort by our engineering team. I'm really proud of their work and their progress, which is hard to showcase as design progress mostly takes place within software systems and analytic models.

Michael Colglazier: Thanks, Eric. Let's go to slide three.

Michael Colglazier: Since our Q1 earnings call in May, we've made strong progress on the development of our Delta-class spaceship. We will have substantially wrapped up the multi-year design phase of these high-performance ships in Q3, as we pivot the organization's focus to the build and test phases. Designing step function leaps in performance and reliability into these production model ships has required a huge effort by our engineering team. I'm really proud of their work and their progress, which is hard to showcase, as design progress mostly takes place within software systems and analytic models to spotlight the magnitude of their endeavor. We released a video this morning that provides an overview of the Delta spaceship design and the performance characteristics that have been planned for these ships. Watch it.

Michael: Thanks, Eric. Let's go to slide three.

Michael: Since our Q1 earnings call in May, we've made strong advancements on the development of our Delta-class spaceships.

Speaker Change: We will have substantially wrapped up the multi-year design phase of these high-performance ships in Q3, as we pivot the organization's focus to the build and test phases.

Eric Cerny: Designing step function leaps in performance and reliability into these production model ships has required a huge effort by our engineering team.

Eric Cerny: I'm really proud of their work and their progress, which is hard to showcase, as design progress mostly takes place within software systems and analytic models.

Michael Colglazier: To spotlight the magnitude of their endeavor, we released a video this morning that provides an overview of the delta spaceship design and the performance characteristics that have been planned for these ships. Watch it. It's great, and it gives you a clear view of the future of private space travel. During the second quarter, we've continued to manage the company with tenacious fiscal discipline. We've maintained strengths in our balance sheet to provide the resources needed to execute our strategic plan. And we remain on track to launch commercial operations with our first Delta spaceships in 2026 as planned.

Eric Cerny: To spotlight the magnitude of their endeavor, we released a video this morning that provides an overview of the Delta spaceship design and the performance characteristics that have been planned for these ships.

Michael Colglazier: It's great, and it gives you a clear view of the future of private space travel. During the second quarter, we continued to manage the company with tenacious fiscal discipline. We maintain strength in our balance sheet to provide the resources needed to execute our strategic plan, and we remain on track to launch commercial operations with our first Delta spaceships in 2026 as planned. We close the second quarter with an incredible spaceflight, Galactic 7, marking the completion of Virgin Spaceship Unity's operational phase and the brilliant conclusion of a nearly decade-long development and testing program.

Eric Cerny: Watch it. It's great and it gives you a clear view of the future of private space travel.

Speaker Change: During the second quarter, we've continued to manage the company with tenacious fiscal discipline.

Speaker Change: We've maintained strength in our balance sheet to provide the resources needed to execute our strategic plan, and we remain on track to launch commercial operations with our first Delta spaceships in 2026 as planned.

Michael Colglazier: We closed the second quarter with an incredible spaceflight, Galactic 7, marking the completion of Virgin Space Ship Unity's operational phase and the brilliant conclusion of a nearly decade-long development and testing program. The many space missions flown by this path-finding ship built incredible knowledge and expertise for the company.

Virgin Galactic: We close the second quarter with an incredible spaceflight, Galactic 7, marking the completion of Virgin Spaceship Unity's operational phase and the brilliant conclusion of a nearly decade-long development and testing program.

Michael Colglazier: The many space missions flown by this pathfinding ship built incredible knowledge and expertise for the company. I'd like to start the call by focusing on two core assets that we are now leveraging for competitive advantage and growth. First, we've created a customer experience beyond compare. The value perceived by our customers remained off the charts, at price points ranging from around half a million to around a million dollars.

Virgin Galactic: The many space missions flown by this pathfinding ship built incredible knowledge and expertise for the company.

Operator: This time I would like to welcome everyone to Virgin Galactic's second quarter, 2024 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, simply press star one again.

Michael Colglazier: Company.

Michael Colglazier: I'd like to start the call by focusing on two core assets that we are now leveraging for competitive advantage and growth. First, we've created a customer experience beyond compare. The value perceived by our customers remained off the charts at price point spanning from around half a million to around a million dollars. Second, we've developed a spaceflight system and technology that will revolutionize the operating model and economics of human spaceflight. While the turnaround time between flights of traditional space vehicles has historically been measured in months, Virgin Galactic now has the experience and data needed to target spaceship turn times that are measured in days, which throws open the door to profitable growth and scale.

Michael Colglazier: Second, we've developed a spaceflight system and technology that will revolutionize the operating model and economics of human spaceflight. Whereas the turnaround time between flights of traditional space vehicles has historically been measured in months, Virgin Galactic now has the experience and data needed to target spaceship turn times that are measured in days, which throws open the door to profitable growth and scale. Outstanding product quality that commands a premium price is a huge competitive advantage for any company.

Virgin Galactic: I'd like to start the call by focusing on two core assets that we are now leveraging for competitive advantage and growth.

Virgin Galactic: First, we've created a customer experience beyond compare.

Virgin Galactic: The value perceived by our customers remained off the charts at price points spanning from around half a million to around a million dollars.

Eric Cerny: I will now turn the call over to Eric Cerny, vice president of investor relations. Thank you. Good afternoon, everyone.

Speaker Change: Second, we've developed a spaceflight system and technology that will revolutionize the operating model and economics of human spaceflight.

Operator: Welcome to Virgin Galactic's second quarter, 2024 Earnings Conference call.

Eric Cerny: On the call with me today are Michael Colglazier, Chief Executive Officer and Doug Aaron's Chief Financial Officer. Following our prepared remarks, we 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.

Speaker Change: While the turnaround time between flights of traditional space vehicles has historically been measured in months,

Speaker Change: Virgin Galactic now has the experience and data needed to target spaceship turn times that are measured in days, which throws open the door to profitable growth and scale.

Eric Cerny: 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 risk 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 SEC filings made from time to time.

Michael Colglazier: Outstanding product quality that commands a premium price is a huge competitive advantage for any company. We have it, and it will drive the top line of our company's growth. With unprecedented turn times and reusability metrics, our Delta ships are planned to disrupt the historic cost structure of human spaceflight and deliver strong profit margins. World class product quality, paired with an industry leading cost structure, is a massive advantage. When combined with the production capability we are currently creating with our Delta class spaceship program. These assets form the basis of a powerful business model and growth engine for Virgin Galactic.

Eric Cerny: Your caution 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.

Speaker Change: Outstanding product quality that commands a premium price is a huge competitive advantage for any company. We have it, and it will drive the top line of our company's growth.

Michael Colglazier: We have it, and it will drive the top line of our company's growth. With unprecedented turn times and reusability metrics, our Delta ships are planned to disrupt the historic cost structure of human spaceflight and deliver strong profit margins. World-class product quality paired with an industry-leading cost structure is a massive advantage.

Speaker Change: With unprecedented turn times and reusability metrics, our Delta ships are planned to disrupt the historic cost structure of human spaceflight and deliver strong profit margins.

Speaker Change: World-class product quality paired with an industry-leading cost structure is a massive advantage.

Michael Colglazier: When combined with the production capability we are currently creating with our Delta Class Spaceship Program, these assets form the basis of a powerful business model and growth engine for Virgin Galactic. There are lots of opinions about Virgin Galactic's business model shared on various social channels and platforms, but we find many of those opinions are missing key pieces of information.

Speaker Change: when combined with the production capability we are currently creating with our delta class bashop program these assets bor in the basis of a powerful business model and growth engine for verg actic

Eric Cerny: Please also note that we will refer to certain non-gap financial metrics on today's call. Please refer to our earnings release for a reconciliation of these non-gap financial metrics.

Michael Colglazier: There are lots of opinions about Virgin Galactic's business model shared on various social channels and platforms. We find many of those opinions are missing key pieces of information. To improve the quality of information that's readily available to our large retail investor base, we released a video overview of Virgin Galactic's business model today, which can be found on our investor relations website and various social channels and platforms. It's incredibly important to have our investors tracking with our business strategy and our progress in executing the plan.

Speaker Change: There are lots of opinions about Virgin Galactic's business model shared on various social channels and platforms.

Michael Colglazier: With that, I'd like to turn the call over to Michael. Thanks Eric. Let's go to slide three. Since our Q1 earnings call in May, we've made strong advancements on the development of our delt's class spaceships. We will have substantially wrapped up the multi-year design phase of these high-performance ships in Q3, as we pivot the organization's focus to the build and test phases. Designing step-function leaks and performance and reliability into these production model ships has required a huge effort by our engineering team.

Speaker Change: we find many of those opinions are missing key pieces of information

Michael Colglazier: To improve the quality of information that's readily available to our large retail investor base, we released a video overview of Virgin Galactic's business model today, which can be found on our investor relations website and various social channels and platforms. It's incredibly important to keep our investors updated on our business strategy and our progress in executing the plan. So today, I've asked our CFO, Doug Ahrens, to share a deep look into our business model, including expectations around variable costs and the degree of fixed cost leverage we expect to see as we grow the size of our fleet.

Speaker Change: To improve the quality of information that's readily available to our large retail investor base, we released a video overview of Virgin Galactic's business model today, which can be found on our Investor Relations website and various social channels and platforms.

Speaker Change: It's incredibly important to have our investors tracking with our business strategy and our progress in executing the plan.

Michael Colglazier: So today, I've asked our CFO, Doug Arons, to share a deep look into our business model, including expectations around variable cost and the degree of fixed cost leverage we expect to see as we grow the size of our fleet. I'll come back on the line to discuss progress being made on our production model spaceships, and I'll talk about the shift in focus that will be occurring in the next month as we wrap up our multi-year design phase and pivot our attention more fully to the build and test phases of the Delta program. Doug will return to discuss financial results for the quarter.

Doug Ahrens: So today, I've asked our CFO , Doug Ahrens, to share a deep look into our business model, including expectations around variable cost and the degree of fixed cost leverage we expect to see as we grow the size of our fleet.

Michael Colglazier: I'm really proud of their work and their progress, which is hard to showcase as design progress mostly takes place within software systems and analytic models. To spotlight the magnitude of their endeavor, we released a video this morning that provides an overview of the delta spaceship design and the performance characteristics that have been planned for these ships. Watch it. It's great and it gives you a clear view of the future of private space travel.

Michael Colglazier: I'll come back on the line to discuss progress being made on our production model spaceships, and I'll talk about the shift in focus that will be occurring in the next month as we wrap up our multi-year design phase and pivot our attention more fully to the build and test phases of the Delta program. Doug will return to discuss financial results for the quarter, and we will then open the call for Q&A. Doug, it's over to you.

Speaker Change: i'll come back on the line to discuss progress being made on our production model speships and i'll talk about the shift in focus that will be occurring in the next month as we wrap up our multiyear design phase and pivot our attention more fully to the build and test phases of the delta program

Michael Colglazier: We'll then open the call for Q&A.

Speaker Change: Doug will return to discuss financial results for the quarter. We will then open the call for Q&A. Doug, over to you.

Doug Ahrens: Doug, over to you. Thanks, Michael. While it is obvious to most, it is worth repeating that we are a company operating in a very new industry. We have an innovative business model that is not yet known by many. We believe there's a gap between how the public markets understand our business relative to the value we are creating within the company. To ensure we can realize the benefits of this extremely powerful business model, we scrutinize our allocation of resources and maintain a constant, intense focus on our spending choices every day.

Michael Colglazier: During the second quarter, we've continued to manage the company with tenacious fiscal discipline. We've maintained strengths in our balance sheet to provide their resources needed to execute our strategic plan. And we remain on track to launch commercial operations with our first delta spaceships in 2026 as planned. We closed the second quarter with an incredible spaceflight, Galactic 7, marking the completion of Virgin Space Ship Unity's operational phase and the brilliant conclusion of a nearly decade-long development and testing program. The many space missions flown by this path-finding ship built incredible knowledge and expertise for the company. Company.

Doug Ahrens: Michael, while it is obvious to most, it is worth repeating that we are a company operating in a very new industry. We have an innovative business model that is not yet known by many. We believe there is a gap between how the public markets understand our business relative to the value we are creating within the company. To ensure we can realize the benefits of this extremely powerful business model, we scrutinize our allocation of resources and maintain a constant, intense focus on our spending choices every day. Today, we want to tie together all the components of our economic model and share that with you.

Doug Ahrens: Thanks, Michael. While it is obvious to most, it is worth repeating that we are a company operating in a very new industry.

Doug Ahrens: We have an innovative business model that is not yet known by many. We believe there is a gap between how the public markets understand our business relative to the value we are creating within the company.

Speaker Change: to ensure we can realize the benefits that this extremely powerful business model we scrutinize our allocation of resources and maintain a constant intense focus on our spending choices every day

Doug Ahrens: Today, we want to tie together all the opponents of our economic model and share that with you. Our experience to date conducting space lights on a monthly basis has validated our assumptions around our operating costs and the economies of scale we expect to achieve as we expand our Berkeley. Historically, the design and operations of human spacecraft made regular, repeatable flight operations with individual space vehicles complex and time-consuming, and therefore the cost of human space travel was prohibitively high. While the space industry typically measures turnaround time between flights of a single vehicle in months, Virgin Galactic's new delta ships are being built to operate with an average turnaround time of just three days.

Doug Ahrens: today we want to tie together all the opponents of our economic model and share that with you our experienceced to date conducting space flights on a monthly basis has validated our assumptions around our operating costs and the economies from scale weexpect to achieve as we expand our fleet

Doug Ahrens: Our experience to date conducting spaceflights on a monthly basis has validated our assumptions around our operating costs and the economies of scale we expect to achieve as we expand our fleet. Historically, the design and operations of human spacecraft made regular, repeatable flight operations with individual space vehicles complex and time-consuming, and therefore, the cost of human space travel was prohibitively high. While the space industry typically measures turnaround time between flights of a single vehicle in a month, Virgin Galactic's new Delta ships are being built to operate with an average turnaround time of just three days, an enormous breakthrough that structurally changes the cost of human spaceflight.

Speaker Change: Historically, the design and operations of human spacecraft made regular, repeatable flight operations with individual space vehicles complex and time-consuming, and therefore the cost of human space travel was prohibitively high.

Doug Ahrens: While the space industry typically measures turnaround time between flights of a single vehicle in months, Virgin Galactic's new Delta ships are being built to operate with an average turnaround time of just three days, an enormous breakthrough that structurally changes the cost of human spaceflight.

Doug Ahrens: An enormous breakthrough that structurally changes the cost of human spaceflight. The design of our spaceflight system enables each spaceship to fly hundreds of customers to space each year, significantly increasing the number of people who are able to make the journey, but also bringing costs down.

Doug Ahrens: The design of our spaceflight system enables each spaceship to fly hundreds of customers to space each year, significantly increasing the number of people who are able to make the journey while also bringing costs down. Turning to slide four, let's take a closer look at the economics of the business.

Doug Ahrens: Turning to slide four, let's take a closer look at the economics of the business. After an initial ramp-up period following the launch of our first two Delta class spaceships, we expect to have capacity to deliver approximately 125 space lights per year. With six seats per spaceship, and at current pricing of $600,000 per seat, this would allow for an annualized revenue of $450 million. Turning to slide five, as we then expand our fleet by adding another mothership and two more spaceships, we expect flight capacity to increase to around 275 flights per year, with annual revenue growing to approximately $1 billion.

Michael Colglazier: Outstanding product quality that commands a premium price is a huge competitive advantage for any company. We have it and it will drive the top line of our company's growth. With unprecedented turn times and reusability metrics, our Delta ships are planned to disrupt the historic cost structure of human spaceflight and deliver strong profit margins. World class product quality, paired with an industry leading cost structure, is a massive advantage. When combined with the production capability we are currently creating with our Delta class spaceship program.

Doug Ahrens: Turning to slide four, let's take a closer look at the economics of the business.

Doug Ahrens: After an initial ramp-up period following the launch of our first two Delta-class spaceships, we expect to have capacity to deliver approximately 125 spaceflights per year. With six seats per spaceship, and at current pricing of $600,000 per seat, this would allow for an annualized revenue of $450 million. Turning to slide 5, as we then expand our fleet by adding another mothership and two more spaceships, we expect flight capacity to increase to around 275 flights per year, with annual revenue growing to approximately $1 billion. This impressive revenue level is delivered with around 1,650 seats sold per year.

Doug Ahrens: After an initial ramp-up period following the launch of our first two Delta-class spaceships, we expect to have capacity to deliver approximately 125 spaceflights per year.

Doug Ahrens: with six seats per spaceship and at current pricing of $600,000 per seat. This would allow for an annualized revenue of $450 million.

Doug Ahrens: Turning to slide 5, as we then expand our fleet by adding another mothership and two more spaceships, we expect flight capacity to increase to around 275 flights per year, with annual revenue growing to approximately $1 billion.

Michael Colglazier: These assets form the basis of a powerful business model and growth engine for Virgin Galactic. There are lots of opinions about Virgin Galactic's business model shared on various social channels and platforms. We find many of those opinions are missing key pieces of information.

Doug Ahrens: This impressive revenue level is delivered with around 1,650 seats sold per year. With an estimated total addressable market, or TAM, of 300,000 customers growing at 8% per year, we would still only be fulfilling less than 1% of global demand. This further supports our pricing opportunities as demand is expected to far outstrip supply, even as we scale.

Doug Ahrens: This impressive revenue level is delivered with around 1,650 seats sold per year.

Doug Ahrens: With an estimated total addressable market, or TAM, of 300,000 customers growing at 8% per year, we would still only be fulfilling less than 1% of global demand. This further supports our pricing opportunities as demand is expected to far outstrip supply, even as we scale. With substantial unmet demand, we plan to further expand our fleet to build out additional spaceports in other parts of the globe. The addition of a fully operational second spaceport would enable combined revenue of around $2 billion per year at current prices.

Doug Ahrens: with an estimated total addressable market or tam of three hundred thousand customers growing at eight percent per year we would still only be fulfilling less than one percent of global demand this further supports our pricing opportunities as demanded expected to far outstrip supply even as we scale

Doug Ahrens: With substantial unmet demand, we plan to further expand our fleet to build out additional space ports and other parts of the globe. The addition of a fully operational second space port would enable combined revenue of around $2 billion per year at current prices.

Doug Ahrens: With substantial unmet demand, we plan to further expand our fleet to build out additional spaceports in other parts of the globe.

Doug Ahrens: The addition of a fully operational second spaceport would enable combined revenue of around $2 billion per year at current prices.

Douglas Ahrens: So today, I've asked our CFO Doug Arons to share a deep look into our business model, including expectations around variable cost and the degree of fixed cost leverage we expect to see as we grow the size of our fleet.

Doug Ahrens: Turning to slide six, this table helps illustrate how Virgin Galactic's business grows as the fleet expands over time. Virgin Galactic's business model not only drives significant revenue growth, but is also expected to drive exponential growth in profits. When our initial launch fleet of two Delta Class ships and one mothership reaches steady state flight operations, we expect adjusted EBITDA for earnings before interest, taxes, depreciation, and amortization to exceed $100 million per year. This represents a very healthy adjusted EBITDA margin around 20 to 25%. As more spaceships are added to our fleet, fixed cost leverage allows profits to grow exponentially.

Doug Ahrens: Turning to slide 6, this table helps illustrate how Virgin Galactic's business grows as the fleet expands over time. Virgin Galactic's business model not only drives significant revenue growth, but it's also expected to drive exponential growth and profit. When our initial launch fleet of two Delta class ships and one mothership reaches steady-state flight operations, we expect adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization, to exceed $100 million per year. This represents a very healthy adjusted EBITDA margin of around 20 to 25 percent.

Doug Ahrens: Turning to slide 6, this table helps illustrate how Virgin Galactic's business grows as the fleet expands over time.

Michael Colglazier: I'll come back on the line to discuss progress being made on our production model spaceships and I'll talk about the shift in focus that will be occurring in the next month as we wrap up our multi-year design phase and pivot our attention more fully to the build and test phases of the Delta program. Doug will return to discuss financial results for the quarter.

Doug Ahrens: Virgin Galactic's business model not only drives significant revenue growth, but it's also expected to drive exponential growth in profits.

Doug Ahrens: When our initial launch fleet of two Delta-class ships and one mothership reaches steady state flight operations, we expect adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization, to exceed $100 million per year.

Operator: We'll then open the call for Q&A.

Douglas Ahrens: Doug, over to you. Thanks, Michael. While it is obvious to most, it is worth repeating that we are a company operating in a very new industry. We have an innovative business model that is not yet known by many. We believe there's a gap between how the public markets understand our business relative to the value we are creating within the company. To ensure we can realize the benefits of this extremely powerful business model, we scrutinize our allocation of resources and maintain a constant intense focus on our spending choices every day.

Doug Ahrens: This represents a very healthy adjusted EBITDA margin of around 20 to 25 percent.

Doug Ahrens: As more spaceships are added to our fleet, fixed cost leverage allows profits to grow exponentially. By adding another mothership and two more spaceships, profits now have the potential to grow up to half a billion dollars annually, with adjusted EBITDA margins expanding to around 45 to 50 percent. This estimated margin expansion is due to much of the cost structure of our business remaining fixed, even as the frequency of flights increases.

Doug Ahrens: As more spaceships are added to our fleet, fixed-cost leverage allows profits to grow exponentially. By adding another mothership and two more spaceships, profits now have the potential to grow up to half a billion dollars annually, with adjusted EBITDA margins expanding to around 45 to 50 percent.

Doug Ahrens: By adding another mothership and two more spaceships, profits now have the potential to grow up to $1.5 billion annually, with adjusted EBITDA margins expanding to around 45 to 50%. This estimated margin expansion is due to much of the cost structure of our business remaining fixed, even as the frequency of flights increases. Profits are expected to increase even further as additional space ports are developed around the world. As you can see on the chart, with two fully utilized space ports, we expected just EBITDA to be roughly $1 billion per year, with adjusted EBITDA margins expanding to 50 to 55%.

Doug Ahrens: This estimated margin expansion is due to much of the cost structure of our business remaining fixed, even as frequency of flights increases.

Doug Ahrens: Profits are expected to increase even further as additional spaceports are developed around the world. As you can see on the chart, with two fully utilized spaceports, we expect Adjusted EBITDA to be roughly $1 billion per year, with Adjusted EBITDA margins expanding to 50-55%. The business model of that magnitude of profit growth is extraordinary. It's that profit potential, combined with the tremendous experience of human spaceflight we are delivering, that motivates all of us at Virgin Galactic every day. We are currently focused on building the components of this powerful economic engine.

Douglas Ahrens: Today, we want to tie together all the opponents of our economic model and share that with you. Our experience to date conducting space lights on a monthly basis has validated our assumptions around our operating costs and the economies of scale we expect to achieve as we expand our Berkeley. Historically, the design and operations of human spacecraft made regular repeatable flight operations with individual space vehicles complex and time consuming, and therefore the cost of human space travel was prohibitively high. While the space industry typically measures turnaround time between flights of a single vehicle in months, Virgin Galactic's new delta ships are being built to operate with an average turnaround time of just three days.

Doug Ahrens: and then. A business model with that magnitude of profit growth is extraordinary. It's that profit potential combined with the tremendous experience of human spaceflight we are delivering that motivates all of us at Virgin Galactic every day.

Speaker Change: a business model was that magnitude of profit growth is extraordinary

Speaker Change: It's that profit potential, combined with the tremendous experience of human spaceflight we are delivering, that motivates all of us at Virgin Galactic every day.

Doug Ahrens: We are currently focused on building the components of this powerful economic engine. We are investing in the manufacturing capacity for the assembly of spaceships, and we are building the capability to make additional spaceships at an estimated recurring cost of $50 to $60 million a piece. As we have said before, we expect a payback period of less than six months for incremental vehicles, which is exceptional for sizeable capital investments.

Doug Ahrens: We're investing in manufacturing capacity for the assembly of spaceships. We're building the capability to make additional spaceships at an estimated recurring cost of $50 to $60 million a piece. As we have said before, we expect a payback period of less than six months for incremental vehicles, which is exceptional for sizable capital investments. We have built and maintained our balance sheet to realize this profitable business model. We are pleased to announce that we have substantially completed our $400 million at-the-market, or ATM, equity offering program.

Douglas Ahrens: An enormous breakthrough that structurally changes the cost of human spaceflight. The design of our spaceflight system enables each spaceship to fly hundreds of customers to space each year, significantly increasing number of people are able to make the journey, but also bringing cost down.

Speaker Change: As we have said before, we expect a payback period of less than six months for incremental vehicles, which is exceptional for sizable capital investments.

Doug Ahrens: We have built and maintained our balance sheet to realize this profitable business model. We are pleased to announce that we have substantially completed our $400 million at-the-market, our ATM equity offering program. As of the date of this call, we have raised $394 million through this ATM, bolstering the balance sheet and ensuring we have the liquidity needed to bring our first two Delta Class spaceships in the service. As we have outlined with our first two Delta ships in service, we can generate over $100 million of adjusted EBITDA annually, and we have the resources to get there.

Doug Ahrens: We have built and maintained our balance sheet to realize this profitable business model.

Douglas Ahrens: Turning to slide four, let's take a closer look at the economics of the business. After an initial ramp up period following the launch of our first two delta class spaceships, we expect to have capacity to deliver approximately 125 space lights per year. With six seats per spaceship, and at current pricing of $600,000 per seat, this would allow for an annualized revenue of $450 million.

Doug Ahrens: We are pleased to announce that we have substantially completed our $400 million at-the-market, or ATM, equity offering program.

Doug Ahrens: As of the date of this call, we have raised $394 million through this ATM, bolstering the balance sheet and ensuring we have the liquidity needed to bring our first two Delta-class spaceships into service. As we've outlined, with our first two Delta ships in service, we can generate over $100 million of adjusted EBITDA annually, and we have the resources to get there, but that's not our endgame. The chart shows the exponential growth and profitability that we estimate will be delivered as we add two additional spaceships and an additional mothership to our fleet at Spaceport America in New Mexico.

Speaker Change: as of the date of this callwe have raised three hundred andninety-four million dollars through this atm bol streuring the balance sheet and ensuring we have the liquidity needed to bring our first two delta class bishops in service

Doug Ahrens: as outlined with our first two deltaships and service we can generate over one hundred million dollars at theadjusted ebitda annually and we have the resources to get there but that's not our end game

Douglas Ahrens: Turning to slide five, as we then expand our fleet by adding another mothership and two more spaceships, we expect flight capacity to increase to around 275 flights per year with annual revenue growing to approximately $1 billion. This impressive revenue level is delivered with around 1,650 seats sold per year. With an estimated total addressable market, or TAM, of 300,000 customers growing at 8% per year, we would still only be fulfilling less than 1% of global demand. This further supports our pricing opportunities as demand is expected to far outstrip supply even as we scale.

Doug Ahrens: But that's not our end game. The chart shows the exponential growth and profitability that we estimate will be delivered as we add two additional spaceships and an additional mothership to our fleet in space for America and New Mexico. As shown in the middle column on this chart, these few additional ships are projected to generate up to $500 million a adjusted EBITDA per year at current price points as it leverage the fixed costs that will have already been put in place. While we forecast, our current resources are sufficient to profitably launch our business, we have the option to seek additional growth capital in order to accelerate our profit generation by enabling the faster acquisition of more vehicles.

Doug Ahrens: the tart shows the exponential growth in profitability that we estimate will be delivered as we add two additional spachips and additional mothership to our fleet and spaceboard america and new mexico

Doug Ahrens: As shown in the middle column on this chart, these few additional ships are projected to generate up to $500 million in adjusted EBITDA per year at current price points as they leverage the fixed costs that will have already been put in place. While we forecast our current resources to be sufficient to profitably launch our business, we have the option to seek additional growth capital in order to accelerate our profit generation by enabling the faster acquisition of more vehicles.

Doug Ahrens: As shown in the middle column on this chart, these few additional ships are projected to generate up to $500 million adjusted EBITDA per year at current price points as they leverage the fixed costs that will have already been put in place.

Doug Ahrens: While we forecast our current resources are sufficient to profitably launch our business, we have the option to seek additional growth capital in order to accelerate our profit generation by enabling the faster acquisition of more vehicles.

Douglas Ahrens: With substantial unmet demand, we plan to further expand our fleet to build out additional space ports and other parts of the globe. The addition of a fully operational second space port would enable combined revenue of around $2 billion per year at current prices.

Doug Ahrens: To recap and summarize the business model, the unprecedented value we deliver to our customers enables high margins from space lights. We expect this margin will substantially exceed the fixed costs of running our business as we scale. We project high adjusted EBITDA margins from our business model, and those margins are expected to grow exponentially as we add vehicles to our fleet. We are investing capital now to develop the tools, manufacturing capacity, and initial spaceships needed to deliver to this highly profitable business model. Day in and day out, we maintain our fiscal discipline, scrutinizing our spending in great detail to ensure we are positioned to complete our mission.

Doug Ahrens: To recap and summarize the business model, the unprecedented value we deliver to our customers enables high margins for spaceflights, and we expect this margin will substantially exceed the fixed costs of running our business as we scale. We project high adjusted EBITDA margins for our business model, and those margins are expected to grow exponentially as we add vehicles to our fleet. We are investing capital now to develop the tools, manufacturing capacity, and initial spaceships needed to deliver this highly profitable business model.

Doug Ahrens: To recap and summarize the business model, the unprecedented value we deliver to our customers enables high margins for space flights. We expect this margin will substantially exceed the fixed costs of running our business as we scale.

Douglas Ahrens: Turning to slide six, this table helps illustrate how Virgin Galactic's business grows as the fleet expands over time. Virgin Galactic's business model not only drives significant revenue growth, but is also expected to drive exponential growth in profits. When our initial launch fleet of two Delta Class ships and one mothership reaches steady state flight operations, we expect adjusted EBITDA for earnings before interest, taxes, depreciation and amortization to exceed $100 million per year.

Doug Ahrens: We project high adjusted EBITDA margins for our business model, and those margins are expected to grow exponentially as we add vehicles to our fleet.

Doug Ahrens: We are investing capital now to develop the tools, manufacturing capacity, and initial spaceships needed to deliver this highly profitable business model. Day in and day out, we maintain our fiscal discipline, scrutinizing our spending in great detail to ensure we are positioned to complete our mission.

Doug Ahrens: Day in and day out, we maintain our fiscal discipline, scrutinizing our spending in great detail to ensure we are positioned to complete our mission. I'd like to turn the call back over to Michael to share the progress we've been making on our Delta Class Spaceship Program.

Douglas Ahrens: This represents a very healthy adjusted EBITDA margin around 20 to 25%. As more spaceships are added to our fleet, fixed cost leverage allows profits to grow exponentially. By adding another mothership and two more spaceships, profits now have the potential to grow up to $1.5 billion annually, with adjusted EBITDA margins expanding to around 45 to 50%. This estimated margin expansion is due to much of the cost structure of our business remaining fixed, even as frequency of flights increases.

Michael Colglazier: I'd like to turn the call back over to Michael to share the progress we've been making on our Delta class spaceship program. Thanks, Doug. Starting to slide seven. Progress on our Delta class spaceship program was substantial in Q2. Our engineering team has been accelerating the pace of design completion, which has enabled more and more tool fabrication to get underway. In the next month, our teams will begin to pivot from a primary focus on design completion to primary focus on the build and test phases of our production spaceships. The video I mentioned at the start of the call provides an excellent overview of our Delta space ship design and provides a good way to visually understand the enormous amount of work that has been delivered by our Virgin Galactic engineering team as well as by our key partners at Bell Textron and Carbonare.

Doug Ahrens: I'd like to turn the call back over to Michael to share the progress we've been making on our Delta Class spaceship program.

Michael Colglazier: Turning to slide 7, progress on our Delta-class spaceship program was substantial in Q2. Our engineering team has been accelerating the pace of design completion, which has enabled more and more tool fabrication to get underway. In the next month, our teams will begin to pivot from a primary focus on design completion to a primary focus on the build and test phases of our production spaceships. The video I mentioned at the start of the call provides an excellent overview of our Delta spaceship design and provides a good way to visually understand the enormous amount of work that has been delivered by our Virgin Galactic engineering team, as well as by our key partners at Bell Textron and Carbon Aerospace.

Michael: Thanks Doug. Turning to slide 7.

Michael: Progress on our Delta-class spaceship program was substantial in Q2. Our engineering team has been accelerating the pace of design completion, which has enabled more and more tool fabrication to get underway.

Doug Ahrens: The next month our teams will begin to pivot from a primary focus on design completion to primary focus on the build and test phases of our production spaceships.

Douglas Ahrens: Profits are expected to increase even further as additional space ports are developed around the world. As you can see on the chart, with two fully utilized space ports, we expected just EBITDA to be roughly $1 billion per year with adjusted EBITDA margins expanding to 50 to 55%, and then.

Doug Ahrens: The video I mentioned at the start of the call provides an excellent overview of our Delta spaceship design and provides a good way to visually understand the enormous amount of work that has been delivered by our Virgin Galactic engineering team, as well as by our key partners at Bell Textron and Carbon Aerospace.

Michael Colglazier: Space. While the design phase has been wrapping up, we've already released key tools that will be used to build the parts of our delta spaceships. Here, on pages 7 and 8, you can see examples of the tools that will be used to build major parts of the fuselage. Most of these parts will be built and assembled in Texas at our partners' facilities, and they will then be shipped to our new final assembly campus in Phoenix. For those who are unfamiliar with aerospace parts fabrication, these images show examples of tools similar to molds that will be used to make the parts of our spaceship.

Douglas Ahrens: A business model with that magnitude of profit growth is extraordinary. It's that profit potential combined with the tremendous experience of human spaceflight we are delivering that motivates all of us at Virgin Galactic every day. We are currently focused on building the components of this powerful economic engine. We are investing in the manufacturing capacity for the assembly of spaceships and we are building the capability to make additional spaceships at an estimated recurring cost of $50 to $60 million a piece.

Michael Colglazier: While the design phase has been wrapping up, we have already released key tools that will be used to build the parts of our Delta spaceship. Here, on pages 7 and 8, you can see examples of the tools that will be used to build major parts of the fuselage. Most of these parts will be built and assembled in Texas at our partner's facilities, and they will then be shipped to our new final assembly campus in Phoenix.

Doug Ahrens: While the design phase has been wrapping up, we have already released key tools that will be used to build the parts of our Delta spaceships.

Doug Ahrens: Here, on pages 7 and 8, you can see examples of the tools that will be used to build major parts of the fuselage.

Doug Ahrens: Most of these parts will be built and assembled in Texas at our partners facilities and they will then be shipped to our new final assembly campus in Phoenix.

Michael Colglazier: For those who are unfamiliar with Aerospace Parks applications, these images show examples of tools, similar to molds, that will be used to make the parts of our spaceship. The images of the metallic objects are examples of tools that have already been built. These tools are important assets. They can be used time and time again to create the parts needed for our entire fleet of spaceships, which allows us to rapidly expand our spaceship fleet in a cost-effective fashion.

Douglas Ahrens: As we have said before, we expect a payback period of less than six months for incremental vehicles, which is exceptional, for sizeable capital investments. We have built and maintained our balance sheet to realize this profitable business model. We are pleased to announce that we have substantially completed our $400 million at the market, our ATM equity offering program. As of the date of this call, we have raised $394 million through this ATM, bolstering the balance sheet and ensuring we have the liquidity needed to bring our first two Delta class spaceships in the service. As we have outlined with our first two Delta ships in service, we can generate over $100 million of adjusted EBITDA annually and we have the resources to get there.

Doug Ahrens: For those who are unfamiliar with aerospace parts application, these images show examples of tools, similar to molds, that will be used to make the parts of our spaceship.

Michael Colglazier: The images of the metallic objects are examples of tools that have already been built. These tools are important assets. They can be used time and time again to create the parts needed for our entire fleet of spaceships, which allows us to rapidly expand our spaceship fleet in a cost-effective fashion.

Doug Ahrens: The images of the metallic objects are examples of tools that have already been built.

Doug Ahrens: These tools are important assets. They can be used time and time again to create the parts needed for our entire fleet of spaceships.

Doug Ahrens: which allows us to rapidly expand our spaceship fleet in a cost-effective fashion.

Michael Colglazier: Another asset that we have completed is our final assembly campus located in Phoenix. We received final certificates of occupancy for our two buildings in Phoenix in July. An advanced team is now developing detailed assembly plans, as well as training and rehearsal materials, while preparing to receive assembly tools and equipment. You can see an image of the completed buildings on page 9. Our delta spaceship program remains on track to deliver ships into commercial service in 2026. As I mentioned, we expected TIVET our primary focus to the build and test phases of the delta spaceship program in Q3.

Michael Colglazier: Another asset we have completed is our final assembly campus located in Phoenix. We received final certificates of occupancy for our two buildings in Phoenix in July, and an advanced team is now developing detailed assembly plans as well as training and rehearsal materials while preparing to receive assembly tools and equipment. You can see an image of the completed buildings on page 9.

Doug Ahrens: Another asset we have completed is our final assembly campus located in Phoenix.

Doug Ahrens: We received final certificates of occupancy for our two buildings in Phoenix in July , and an advanced team is now developing detailed assembly plans, as well as training and rehearsal materials while preparing to receive assembly tools and equipment.

Douglas Ahrens: But that's not our end game. The chart shows the exponential growth and profitability that we estimate will be delivered as we add two additional spaceships and an additional mothership to our fleet in space for America and New Mexico. As shown in the middle column on this chart, these few additional ships are projected to generate up to $500 million a adjusted EBITDA per year at current price points as it leverage the fixed costs that will have already been put in place. While we forecast our current resources are sufficient to profitably launch our business, we have the option to seek additional growth capital in order to accelerate our profit generation by enabling the faster acquisition of more vehicles.

Doug Ahrens: You can see an image of the completed buildings on page 9.

Michael Colglazier: Our Delta Spaceship Program remains on track to deliver ships into commercial service in 2026. As I mentioned, we expect to pivot our primary focus to the build and test phases of the Delta Spaceship Program in Q3, tool development accelerating in both the third and fourth quarters, and parts fabrication ramping up in Q4. We expect to receive major parts and subassemblies into our Phoenix campus in the first half of 2025, with the rollout and testing of our first Delta ship commencing in the second half of 2025.

Doug Ahrens: Our Delta Spaceship Program remains on track to deliver ships into commercial service in 2026.

Doug Ahrens: As I mentioned, we expect to pivot our primary focus to the build and test phases of the Delta spaceship program in Q3.

Michael Colglazier: The tool development accelerating in both the third and fourth quarter and parts fabrication ramping up in Q4. We expect to receive major parts and subassemblies into our Phoenix campus in the first half of 2025, but rolled out and testing of our first delta ship commencing in the second half of 2025. As we shared before, we plan to be running major systems tests with our ironbird test bed and structural tests with the static test article in parallel to all these efforts in order to have an efficient integrated vehicle ground testing phase commencing in the second half of '25.

Doug Ahrens: The tool development accelerating in both the third and fourth quarter, and parts fabrication ramping up in Q4.

Doug Ahrens: We expect to receive major parts and subassemblies into our Phoenix campus in the first half of 2025 with rollout and testing of our first Delta ship commencing in the second half of 2025.

Douglas Ahrens: To recap and summarize the business model, the unprecedented value we deliver to our customers enables high margins from space lights. We expect this margin will substantially exceed the fixed costs of running our business as we scale. We project high adjusted EBITDA margins from our business model and those margins are expected to grow exponentially as we add vehicles to our fleet. We are investing capital now to develop the tools, manufacturing capacity, and initial spaceships needed to deliver to this highly profitable business model. Day in and day out, we maintain our fiscal discipline, scrutinizing our spending in great detail to ensure we are positioned to complete our mission.

Michael Colglazier: As we shared before, we plan to be running major systems tests with our IronBird test and structural tests with a static test article in parallel to all these efforts in order to have an efficient integrated vehicle ground testing phase commencing in the second half of 2017. We will be sharing updates against all these milestones in the months and quarters ahead so our investors can track along with our development progress. Doug, I'll hand the call back to you to cover the financial results for the second quarter.

Doug Ahrens: As we shared before, we plan to be running major systems tests with our IronBird testbed and structural tests with a static test article in parallel to all these efforts in order to have an efficient, integrated vehicle ground testing phase commencing in the second half of 2025.

Michael Colglazier: We will be sharing updates against all these milestones in the months and quarters ahead so our investors can track along with our development progress.

Doug Ahrens: We will be sharing updates against all these milestones in the months and quarters ahead so our investors can track along with our development progress.

Doug Ahrens: Doug, I'll hand the call back to you to cover the financial results from the second quarter. Thanks, Michael. Turning it to slide 10. We generated a revenue of $4 million driven by the Galactic 7 commercial space flight and future astronaut membership fees. Notably, average ticket prices for the Galactic 7 flight were approximately $900,000 per seat. Total operating expenses were $106 million compared to $141 million in the prior year period, driven by both lower R&D and SG&A expenses. Capital expenditures were $34 million compared to $10 million in the prior year period as we ramped up investment in property, plant, and equipment related to development of our delta class fleet.

Doug Ahrens: Doug, I'll hand the call back to you to cover the financial results from the second quarter.

Doug Ahrens: Thanks, Michael. Turn to slide 10.

Doug Ahrens: We generated revenue of $4 million driven by the Galactic 7 commercial spaceflight and future astronaut membership fees. Notably, average ticket prices for the Galactic 7 flight were approximately $900,000 per seat. Total operating expenses were $106 million compared to $141 million in the prior year period driven by both lower R&D and SG&A expenses. Capital expenditures were $34 million compared to $10 million in the prior year period as we ramped up investment in property, plant, and equipment related to the development of our Delta-class fleet.

Doug Ahrens: Thanks, Michael. Turning to slide 10, we generated revenue of $4 million driven by the Galactic 7 commercial spaceflight and future astronaut membership fees. Notably, average ticket prices for the Galactic 7 flight were approximately $900,000 per seat.

Michael Colglazier: I'd like to turn the call back over to Michael to share the progress we've been making on our Delta class spaceship program. Thanks Doug, starting to slide seven. Progress on our Delta class spaceship program was substantial in Q2. Our engineering team has been accelerating the pace of design completion which has enabled more and more tool fabrication to get underway. In the next month, our teams will begin to pivot from a primary focus on design completion to primary focus on the build and test phases of our production spaceships.

Speaker Change: Total operating expenses were $106 million compared to $141 million in the prior year period, driven by both lower R&D and SG&A expenses.

Doug Ahrens: Capital expenditures were $34 million compared to $10 million in the prior year period as we ramped up investment in property, plant, and equipment related to development of our Delta-class fleet.

Michael Colglazier: The video I mentioned at the start of the call provides an excellent overview of our Delta space ship design and provides a good way to visually understand the enormous amount of work that has been delivered by our Virgin Galactic Engineering team as well as by our key partners at Bell Textron and Carbonare. Space. While the design phase has been wrapping up, we've already released key tools that will be used to build the parts of our delta spaceships.

Doug Ahrens: Free cash flow was negative $114 million in the second quarter compared to negative $135 million in the same period last year. Turning it to slide 11, our balance sheet remained strong with $821 million in cash, cash equivalents, and marketable securities.

Doug Ahrens: Free cash flow was negative $114 million in the second quarter, compared to negative $135 million in the same period last year. Turning to slide 11, our balance sheet remains strong with $821 million in cash, cash equivalents, and marketable securities. Moving to our projections, forecasted free cash flow for the third quarter of 2024 is expected to be in the range of negative $115 million to $125 million. I'll now turn the call back over to Michael.

Doug Ahrens: Free cash flow was negative $114 million in the second quarter compared to negative $135 million in the same period last year.

Doug Ahrens: Turning to slide 11, our balance sheet remains strong with $821 million in cash, cash equivalents, and marketable securities.

Doug Ahrens: Police. Moving to our projections, forecasted free cash flow for the third quarter of 2024 is expected to be in the range of negative $115 million to $125 million.

Michael Colglazier: Here, on pages 7 and 8, you can see examples of the tools that will be used to build major parts of the fuselage. Most of these parts will be built and assembled in Texas at our partners' facilities, and they will then be shipped to our new final assembly campus in Phoenix. For those who are unfamiliar with aerospace parts fabrication, these images show examples of tools similar to molds that will be used to make the parts of our spaceship.

Michael: moving to another projections forecasted free cash flow for the d quarter of two thousand and twentyfour is expected to be in the range of negative one hundred and fifteen million to one hundred twenty-five million dollars i'll now turn the call back over to michael

Michael Colglazier: I'll now turn the call back over to Michael. Thank you, Doug. I recently hit my four-year anniversary at Virgin Galactic, having joined the company in the year after it went public. I have never been more excited by both our progress and our potential as the goal of high frequency, highly meaningful, and highly profitable human spaceflight is in clear sight. We have built a customer experience that is unparalleled. The value perceived by our customers is off the charts and will drive our top-line growth as we expand our fleet. Production model spaceships currently in development are game changers in human spaceflight.

Michael Colglazier: I recently hit my four-year anniversary at Virgin Galactic, having joined the company in the year after it went public. I have never been more excited by both our progress and our potential as the goal of high-frequency, highly meaningful, and highly profitable human spaceflight is in clear sight. We have built a customer experience that is unparalleled. The value perceived by our customers is off the charts and will drive our top line growth as we expand our fleet.

Michael: Thank you, Doug.

Michael: I recently hit my four-year anniversary at Virgin Galactic, having joined the company in the year after it went public.

Michael: I have never been more excited by both our progress and our potential, as the goal of high frequency, highly meaningful, and highly profitable human spaceflight is in clear sight.

Michael: We have built a customer experience that is unparalleled.

Michael: The value perceived by our customers is off the charts and will drive our top-line growth as we expand our fleet.

Michael Colglazier: Production model spaceships currently in development are game changers in human space. The reusability and turn-time capabilities being built into the Delta ships are planned to deliver high capacity with an industry-leading cost structure, driving solid profitability as we launch and outstanding profitability as we expand. Q3 will mark a new phase for our Delta Spaceship Program as we transition from a focus on design to a focus on building and testing. This is exciting, and we look forward to sharing our continued progress. Operator, let's open the call to questions.

Michael: Production model spaceships currently in development are game changers in human spaceflight.

Michael Colglazier: The reusability and turn-time capabilities being built into the delta ships are planned to deliver high capacity with an industry-leading cost structure, driving solid profitability as we launch and outstanding profitability as we expand our fleet. Q3 will mark a new phase for our Delta spaceship program as we transition from a focus on design to a focus on building and testing. This is exciting, and we look forward to sharing our continued progress.

Michael: The reusability and turn-time capabilities being built into the Delta ships are planned to deliver high capacity with an industry-leading cost structure, driving solid profitability as we launch and outstanding profitability as we expand our fleet.

Michael: Q3 will mark a new phase for our Delta spaceship program as we transition from a focus on design to a focus on building and testing.

Operator: Operator, let's open the call for questions. Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Please ensure that your phone is not on mute when called upon. One moment, please, for your first question.

Michael: This is exciting, and we look forward to sharing our continued progress.

Michael Colglazier: Our delta spaceship program remains on track to deliver ships into commercial service in 2026. As I mentioned, we expected TIVET our primary focus to the build and test phases of the delta spaceship program in Q3. The tool development accelerating in both the third and fourth quarter and parts fabrication ramping up in Q4. We expect to receive major parts and subassemblies into our Phoenix campus in the first half of 2025, but rolled out and testing of our first delta ship commencing in the second half of 2025.

Speaker Change: Operator, let's open the call for questions.

Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Please ensure that your phone is not on mute when called upon. One moment, please, for your first question. Your first question comes from the line of Greg Konrad with Jeffreys. Your line is open.

Speaker Change: thank you if you would like to ask a question please press star one on your telephone key padd if you would like to withdraw your question simply press star one again please ensure that your phone is not on m one called upon one moment please for your first question

Greg Conrad: Your first question comes from the line of Greg Conrad with Jeffries. Your line is open. Good evening.

Speaker Change: Your first question comes from the line of Greg Konrad with Jeffries. Your line is open.

Michael Colglazier: Maybe just to start on the two-space port scenario, when do you expect to see any decision being made? How is our discussion going? Is there maybe the potential to tie a second space or to any potential growth capital needs? I think we really said generally from the time we really get serious, I think that's a four to five-year effort to bring a new space port online by the time you work through all the needs of government, airspace, and depending upon location, what needs to be done from a facility infrastructure standpoint. So for us, that wants to generally be happening in 25, although we are actively talking to various entities that are interested in this long way.

Michael Colglazier: Maybe just to start on the two-spaceport scenario, you know, when do you expect to see any decision being made, how are the discussions going, and is there maybe the potential to tie a second spaceport to any potential growth capital?

Greg Konrad: Good evening.

Greg Konrad: Hi, Greg.

Michael Colglazier: As we shared before, we plan to be running major systems tests with our ironbird test bed and structural tests with the static test article in parallel to all these efforts in order to have an efficient integrated vehicle ground testing phase commencing in the second half of 25. We will be sharing updates against all these milestones in the months and quarters ahead so our investors can track along with our development progress.

Greg Konrad: Maybe just to start on the two-spaceport scenario, you know, when do you expect to see any decision being made, how are discussions going, and is there maybe the potential to tie a second spaceport to any potential growth capital needs?

Michael Colglazier: I think, you know, we've always said generally from the time we really get serious, I think it's a four to five year effort to bring a new spaceport online by the time you work through all the needs of government, airspace, and, depending upon the location, what needs to be done from a facility infrastructure standpoint. So for us, that wants to generally be happening within 25, although we are actively talking to various entities that are interested in this along the way. So generally, I think it's a four to five year piece, and I think 25 is the window when you would see us probably wanting to talk about something there.

Speaker Change: I think, you know, we've always said generally from the time we really get serious, I think that's a four to five year

Douglas Ahrens: Doug, I'll hand the call back to you to cover the financial results from the second quarter. Thanks, Michael. Turning it to slide 10. We generated a revenue of $4 million driven by the Galactic 7 commercial space flight and future astronaut membership fees. Notably, average ticket prices for the Galactic 7 flight were approximately $900,000 per seat. Total operating expenses were $106 million compared to $141 million in the prior year period driven by both lower R&D and SGNA expenses.

Greg Konrad: effort to bring a new spaceport online by the time you work through all the needs of government, airspace, and depending upon the location what needs to be done from a facility infrastructure standpoint.

Greg Konrad: so for us that once to generally be happening in twenty-five although we are actively talking to various entities that are interested in this along way

Michael Colglazier: So generally, I think it's a four to five-year piece, and I think 25 is the window when you would see us probably wanting to talk about something there. And then to your question on, is that partnership that would happen most surely with a government entity, I would say, at some level, for airspace, is there a way to blend that into growth capital? Depending upon the location, the government, and the interest there, I think the answer is yes; that is a possibility. Our partnership in Spaceport America is with the state of New Mexico, who owns and built that facility, and we lease that from them.

Greg Konrad: So generally I think it's a four or five year piece and I think 25 is the window when you would see us.

Douglas Ahrens: Capital expenditures were $34 million compared to $10 million in the prior year period as we ramped up investment in property plant and equipment related to development of our delta class fleet. Free cash flow was negative $114 million in the second quarter compared to negative $135 million in the same period last year. Turning it to slide 11, our balance sheet remained strong with $821 million in cash, cash equivalent, and marketable security.

Michael Colglazier: And then to your question about that partnership that would happen most assuredly with a government entity, I would say at some level for airspace, is there a way to blend that into growth capital? Depending upon the location, the government, and the interest there, I think the answer is, yes, that is a possibility. Our partnership in Spaceport America is with the state of New Mexico, who owns and built that facility, and we lease it from them.

Speaker Change: Probably wanting to talk about something there.

Greg Konrad: And then to your question on, is that partnership that would happen most assuredly with a government entity, I would say, at some level for airspace, is there a way to blend that into growth capital?

Speaker Change: Depending upon the...

Greg Konrad: The location, the government, and the interest there, I think the answer is yes, that is a possibility.

Speaker Change: Our partnership in Spaceport America is with the state of New Mexico, who owns and built that facility and we leased that from them. So the major investment in that first spaceport was in the physical plant.

Douglas Ahrens: Police. Moving to our projections, forecasted free cash flow for the third quarter of 2024 is expected to be in the range of negative $115 million to $125 million.

Michael Colglazier: So the major investment in that first spaceport was in the physical plant. Some of the places that we are considering have a lot of their physical plants built out already, and there may be other places where we could partner collectively to create a good economic engine for the community in which we enter. So I think that's a possibility, but I think it's dependent upon the government and the needs that they would have. What would the specifics of that look like?

Greg Konrad: Some of the places that we are considering have a lot of their physical plants built out already and there may be other places where we could partner collectively to create a good economic engine for the community in which we enter.

Michael Colglazier: I'll now turn the call back over to Michael. Thank you, Doug.

Michael Colglazier: I recently hit my four-year anniversary at Virgin Galactic, having joined the company in the year after it went public. I have never been more excited by both our progress and our potential as the goal of high frequency, highly meaningful, and highly profitable human spaceflight is in clear sight. We have built a customer experience that is unparalleled. The value perceived by our customers is off the charts and will drive our top-line growth as we expand our fleet.

Greg Conrad: So I think that's a possibility, but I think it's dependent upon the government and the needs that they would have to be what would this be specific. So that would click. and then appreciate all the data and numbers that you gave, and of course we always ask for. More after you give that, but just thinking about that growth capital on the two-space board.

Greg Konrad: So, I think that's a possibility, but I think it's dependent upon the government and the needs that they would have to be what would the specifics of that look like.

Michael Colglazier: And then we appreciate all the data and numbers that you gave us. And, of course, we always ask for more after you give us that.

Speaker Change: and then appreciate all the the data and numbers that you gave and of course we always ask for more after you give that but just thinking about

Doug Ahrens: But just thinking about, you know, that growth capital and the two spaceports, I mean, how do you think about the free cash flow, you know, conversion of the company at scale? And how does maybe CapEx play into that? Just thinking about the accelerated build of spaceships and just how you can convert that EBITDA to cash.

Doug Ahrens: I mean, how do you think about the free cash flow conversion of the company at scale and how does maybe CAP-X play into that, just thinking about the accelerated build of facetips and just how you can convert that EBITDA to cash?

Speaker Change: You know, that growth capital and the two-space board. I mean, how do you think about the free cash flow?

Michael Colglazier: Production model spaceships currently in development are game changers in human spaceflight. The reusability and turn-time capabilities being built into the delta ships are planned to deliver high capacity with an industry-leading cost structure, driving solid profitability as we launch and outstanding profitability as we expand our fleet.

Speaker Change: you know, conversion of the company at scale and how does maybe CapEx play into that, just thinking about the accelerated build of spaceships and just how you can convert that EBITDA to cash.

Doug Ahrens: Thanks, Greg. This is Doug.

Doug Ahrens: Thanks, Greg. This is Doug. So we wanted to give you the EBITDA, as you can see what we're generating from the business in terms of operating cash flows. And that's all available to plow back into the business as we see fit. So we're pleased; you know, that is a source of capital that we can use to push all back into CAP-X if we want, or we could scale back if that was the wiser choice. But most likely, what we're going to choose to do is invest that because that's how we get more vehicles faster and move us, you know, to the profitable columns as you move to the right.

Michael Colglazier: Q3 will mark a new phase for our delta spaceship program as we transition from a focus on design to a focus on building and testing. This is exciting and we look forward to sharing our continued progress.

Greg Konrad: Thanks Greg, this is Doug. So we wanted to give you the EBITDA so you can see what we're generating from the business in terms of operating cash flows and that's all available to plow back into the business.

Doug Ahrens: So we wanted to give you EBITDA so you can see what we're generating from the business in terms of operating cash flows, and that's all available to plow back into the business as we see fit. So we're pleased that it is a source of capital that we can use to push all back into CapEx if we want, or we could scale back if that was the wiser choice. But most likely, what we're going to choose to do is invest in that because that's how we get more vehicles faster and moves us to the profitable columns as you move to the right.

Speaker Change: as we see fit. So we're pleased, you know, that is a source of capital, you know, that we can use to

Speaker Change: all back into CAPEX if we want, or we could scale back if that was the wiser choice. But most likely what we're going to choose to do is invest that because that's how we get more vehicles faster and moves us to the profitable columns as you move to the right. So we're going to want to invest in those vehicles and bring on new spaceships and motherships as quickly as possible.

Greg Conrad: Your first question comes from the line of Greg Conrad with Jeffries. Your line is open. Good evening.

Michael Colglazier: So we're going to want to invest in those vehicles and bring on new spaceships and other ships as quickly as possible and get to the columns where you see EBITDA expanding, as shown on the page.

Doug Ahrens: So we're going to want to invest in those vehicles and bring in new spaceships and motherships as quickly as possible and get to the columns where you see EBITDA expanding, as shown on the page. And I think to Doug...

Michael Colglazier: Maybe just to start on the two-space port scenario, when do you expect to see any decision being made, how our discussion is going? Is there maybe the potential to tie a second space or to any potential growth capital needs? I think we really said generally from the time we really get serious, I think that's a four to five-year effort to bring a new space port online by the time you work through all the needs of government, airspace, and depending upon location, what needs to be done from a facility infrastructure standpoint.

Speaker Change: get to the columns where you see EBITDA expanding, as shown on the page. I think to Doug's point, as we invest in additional ships,

Michael Colglazier: I think to Doug's point, you know, as we invest in additional shifts, the cost on those additional ships is coming on a variable basis, right? We will have already completed the upfront cost in the facilities, the upfront cost in the tools. The design will have been done, and so now we're replicating using tools like the examples we showed today.

Michael Colglazier: I think, to Doug's point, you know, as we invest in additional ships, the cost on those additional ships is coming out of a variable basis, right? We will have already completed the upfront cost and the facilities, the upfront cost and the tools; the design will have been done. And so now we're replicating using, you know, tools like the examples we showed today. And that gives us new ships that are relatively low variable prices, and the return on those ships is great. So, you know, anything we do from a CAP-X standpoint, I think we're going to look from a Roca you'll return on invested capital approach and make sure that we're putting our money to shareholders' great use.

Speaker Change: to

Doug Ahrens: The cost on those additional ships is coming at a variable basis, right? We will have already completed...

Doug Ahrens: The upfront cost in the facilities, the upfront cost in the tools, the design will have been done.

Speaker Change: And so now we're replicating using tools like the examples we showed today.

Michael Colglazier: And that gives us new ships at relatively low variable prices, and the return on those ships is great. So anything we do from a CapEx standpoint, I think we're going to look from a return on invested capital approach and make sure that we're putting our money to great use for shareholders. But I see a great return on investment in scaling our ships and our fleet up, and so that would be our primary first choice.

Speaker Change: And that gives us new ships at relatively low variable prices.

Speaker Change: and the return on those ships is great.

Michael Colglazier: So for us, that wants to generally be happening in 25, although we are actively talking to various entities that are interested in this long way. So generally, I think it's a four to five-year piece and I think 25 is the window when you would see us probably wanting to talk about something there. And then to your question on, is that partnership that would happen most surely with a government entity, I would say, at some level, for airspace, is there a way to blend that into growth capital?

Speaker Change: You know, anything we do from a CapEx standpoint, I think we're going to look from a ROKI, a return on invested capital approach.

Michael Colglazier: But I see great return on investment for scaling our ships and our fleet up. And so that would be our primary first choice.

Speaker Change: and make sure that we're putting our money to shareholders' great use.

Speaker Change: But I see great return on investment for scaling our ships and our fleet up. And so that would be our primary first choice.

Oliver Chen: Thank you. Your next question comes from the line of Oliver Chen with TD Cowan. Your line is open.

Operator: Your next question comes from the line of Oliver Chen with TD Cowan. Your line is open.

Speaker Change: thank you

Speaker Change: your next question comes from the line of oliver chen with tv tawen your line is open

Oliver Chen: Hi, Michael and Doug. The addressable market sounds quite attractive. Just what are some of the key assumptions that underpin the 300,000 people at 8% per year? Also, as you mentioned, parts and subassemblies are an important part as we look to next year and the progress you've been making.

Michael Colglazier: Hi Michael and Doug. The addressable market sounds quite attractive. What are some of the key assumptions that underpin the 300,000 people at 8% per year? Also, as you mentioned, parts and subassemblies are an important part as we look to next year and the progress you've been making. How are you thinking about the supply chain and the current environment that you're seeing in terms of service and supply chain and the ability to get the parts and the people that you need?

Oliver Chen: Hi, Michael and Doug. The address will mark it.

Oliver Chen: Sounds quite attractive. Just what are some of the key assumptions that underpin the 300,000 people at 8% per year? Also, as you mentioned, parts and sub-assemblies are an important part as we look to next year.

Michael Colglazier: Depending upon the location, the government and the interest there, I think the answer is yes, that is a possibility. Our partnership in space port America is with the state of New Mexico who owns and built that facility and we lease that from them. So the major investment in that first space port was in the physical plant. Some of the places that we are considering have a lot of their physical plants built out already and there may be other places where we could partner collectively to create a good economic engine for the community in which we enter.

Oliver Chen: How are you thinking about the supply chain and the current environment that you're seeing in terms of service and supply chain and the ability to get the parts and the people that you need? Thank you.

Speaker Change: and the progress you've been making. How are you thinking about the supply chain and the current environment that you're seeing in terms of service and supply chain and the ability to get the parts and the people that you need? Thank you.

Michael Colglazier: Thanks, Oliver. First on the TAM estimates, so whether you think of it as a kind of a cascading filter or a bit of a Venn diagram overlap, we're starting with research on the number of people globally with a net worth of $10 million or above. That particular metric is the one that we expect to see growing at 8% annual growth, so it's starting there.

Michael Colglazier: Oliver. First on the TAM estimates... So whether you think of it as a kind of a cascading filter or a bit of a Venn diagram overlap, we're starting with research on the number of people globally with a net worth of $10 million or above. That particular metric is the one that we expect to see growing at 8% annual growth, so it's starting there. And then we're filtering that through two sets of filters.

Speaker Change: Thanks, Oliver. First on the TAM estimates...

Speaker Change: So whether you think of it as a kind of a cascading filter or a bit of a Venn diagram overlap, we're starting with

Michael Colglazier: So I think that's a possibility, but I think it's dependent upon the government and the needs that they would have to be what would this be specific. So that would click, and then appreciate all the data and numbers that you gave, and of course we always ask for. More after you give that, but just thinking about that growth capital on the two-space board. I mean, how do you think about the free cash flow conversion of the company at scale and how does maybe CAP-X play into that, just thinking about the accelerated build of facetips and just how you can convert that EBITDA to cash?

Speaker Change: Research on the number of people globally with a net worth of $10 million or above.

Speaker Change: That particular metric is the one that we expect to see growing at 8% annual growth, so it's starting there.

Michael Colglazier: And then we're filtering that into two sets of filters. One is a propensity of people to use a fairly substantial proportion of their net worth on experiences. So unlike people who may have a lot of net worth and just like to stay at home or invest in other ways, we're definitely filtering for people who prioritize experiential travel in their lives. And then third, a stated interest in interest in space travel and getting a perspective of the Earth from space. And so that's kind of the funnel down around there, and that's we package that up with some of our internal understanding with our own team.

Speaker Change: And then we're filtering that in two sets of filters. One is a propensity of people to use a fairly substantial proportion of their net worth on experiences.

Michael Colglazier: One is a propensity for people to use a fairly substantial proportion of their net worth on experiences. So unlike people who may have a lot of net worth and just like to stay at home or invest in other ways, we're definitely filtering for people who prioritize experiential travel in their lives. And then third, a stated interest in space travel, right, and getting a perspective of the Earth from space.

Speaker Change: So, you know, unlike people who may have a lot of net worth and just like to stay at home or invest in other ways, we're definitely filtering for people who prioritize experiential travel in their lives.

Michael Colglazier: Thanks, Greg. This is Doug. So we wanted to give you the EBITDA as you can see what we're generating from the business in terms of operating cash flows. And that's all available to plow back into the business as we see fit. So we're pleased, you know, that is a source of capital that we can use to push all back into CAP-X if we want, or we could scale back if that was the wiser choice.

Speaker Change: And then third, a stated interest in...

Speaker Change: interest in space travel, right, and getting a perspective of the Earth from space. And so that's that's kind of the funnel down around there. And that's, we, we package that up with some of our internal understanding with our own team. I'll note

Michael Colglazier: And so that's kind of the funnel down around there, and we package that up with some of our internal understanding with our own team. I'll note that of our existing and future astronaut group, probably half are in the 10 million and up range, and probably half are less. And I think that just depends on the people who prioritize this type of an experience and are willing to put a greater percentage of their available resources towards it. But hopefully, that answers that question.

Michael Colglazier: I'll note of our existing current our future astronaut group; probably half are in the 10 million in an up range, and probably half are less. And I think that just depends on the people who are less prioritize this type of an experience and are willing to put a greater percentage of their available resources towards it.

Michael Colglazier: But most likely, what we're going to choose to do is invest that because that's how we get more vehicles faster and move us, you know, to the profitable columns as you move to the right. So we're going to want to invest in those vehicles and bring on new spaceships and other ships as quickly as possible and get to the columns where you see EBITDA expanding as shown on the page. I think to Doug's point, you know, as we invest in additional ships, the cost on those additional ships is coming out of a variable basis, right?

Speaker Change: of our existing Future Astronaut Group.

Speaker Change: Probably half are in the...

Speaker Change: 10 million and up range and probably half are less.

Speaker Change: And I think that just depends on the people who are less prioritized this type of an experience and are willing to put a greater percentage of their available resources towards it. But hopefully that answers that question. On the supply chain side...

Michael Colglazier: But hopefully that answers that question. On the supply chain side, we are constantly on top of supply chain issues, so by no means do I intend to imply we never see an issue or a glitch. On the whole, though, we continue to manage them well. So we have managed the design of these ships ourselves, and we are managing the final assembly for ourselves. I think, as you know, we have Bell and Carbon as the primary people that will be creating the major sub-assemblies there. So we work with Bell and Carbon for a wider range of vendors to support.

Michael Colglazier: On the supply chain side, we are constantly on top of supply chain issues, so by no means do I intend to imply we never see an issue or a glitch. On the whole, though, we continue to manage them well. So we have managed the design of these ships ourselves, and we're managing the final assembly for ourselves. I think, as you know, we have Bell and Carbon as the primary people that will be creating the major sub-assemblies there. So we work with Bell and Carbon for a wider range of vendors to support. Some Bell and Carbon go directly to schools, and some we provide as owner-furnished items.

Speaker Change: ah

Speaker Change: We are...

Speaker Change: Constantly, on top of supply chain issues, so by no means do I intend to imply we never see an issue or a glitch. On the whole, though, we continue to manage them well.

Michael Colglazier: We will have already completed the upfront cost and the facilities, the upfront cost and the tools, the design will have been done. And so now we're replicating using, you know, tools like the examples we showed today. And that gives us new ships that are relatively low variable prices, and the return on those ships is great. So, you know, anything we do from a CAP-X standpoint, I think we're going to look from a Roca you'll return on invested capital approach and make sure that we're putting our money to shareholders' great use. But I see great return on investment for scaling our ships and our fleet up. And so that would be our primary first choice.

Speaker Change: So we have managed the design of these ships ourselves.

Greg Conrad: Thank you.

Speaker Change: and we're managing the final assembly for ourselves i think as you know we have bell and carbon as the primary people that will be creating the sub major subasmbli there so we work with belland carbon for a wider range of

Michael Colglazier: And this is, in a good way; this is an aerospace program, and the aerospace industry is big. There are lots of suppliers. There is lots of availability. We are mostly a carbon fiber ship. We have metallics that are typical in the aerospace industry, some aluminum and some titanium. And we've been way ahead of ensuring the material orders here, that we have the billets, we have the general supplies, and we've been ordering those up early so as not to let that get in the way. And then, you know, you'll have a situation come up.

Michael Colglazier: Some Bell and Carbon go directly; some we provide as owner furnished items. And this is in a good way; this is an aerospace program. And the aerospace industry is big. There are lots of suppliers; there are lots of availability. We are mostly a carbon fiber ship. We have metallics; you know those are typical in the aerospace industry: some aluminum, some titanium. And we've been way ahead of ensuring the material orders here that we have the billets, we have the general supplies, and we've been ordering those up early, so it's not to let that get in the way.

Speaker Change: Vendors to support some Bell and Carbon go directly some we provide as owner furnished items

Speaker Change: And this is...

Speaker Change: In a good way, this is an aerospace program.

Speaker Change: and the aerospace industry is...

Speaker Change: Big.

Speaker Change: There are lots of suppliers, there are lots of availability.

Oliver Chen: Your next question comes from the line of Oliver Chen with TD Cowan. Your line is open. Hi, Michael and Doug. The addressable market sounds quite attractive. Just what are some of the key assumptions that underpin the 300,000 people at 8% per year? Also, as you mentioned, parts and subassemblies are an important part as we look to next year and the progress you've been making. How are you thinking about the supply chain and the current environment that you're seeing in terms of service and supply chain and the ability to get the parts and the people that you need? Thank you. Thanks, Oliver.

Speaker Change: We are mostly a carbon fiber ship. We have metallics, you know, those are typical in the aerospace industry, some aluminum, some titanium.

Speaker Change: And we've been way ahead of ensuring the material orders here, that we have the billets, we have the general supplies, and we've been ordering those up early so as not to let that get in the way.

Michael Colglazier: And then you know you'll have a situation come up. We had one, not too recently, where one of the tools, as we're refining, what you'll hear is the loft of the tools. We're refining the actual shape of what the mold will look like, so the part will come out correctly. There can be analysis that needs to go in there, and some of our efforts needed to accelerate the analysis that we were doing, and we had to work through the supply chain to be able to make that move at a good pace. So we have lots of smaller issues along the way like that, but so far the major slugs of material, major supply issues we are staying in front of.

Michael Colglazier: We had one not too recently where one of the tools, as we're refining, what you'll hear is the loft of the tools. We're refining the actual shape of what the mold will look like so the part will come out correctly. There can be analysis that needs to go into it, and some of our efforts needed to accelerate the analysis that we were doing, and we had to work through the supply chain to be able to make that move at a good pace.

Speaker Change: And then, you know, you'll have a situation come up, we had one...

Speaker Change: not too recently we

Speaker Change: One of the tools as we're refining, what you'll hear is the loft of the tool, as we're refining the actual shape of what the mold will look like so the part will come out correctly.

Oliver Chen: First on the TAM estimates, so whether you think of it as a kind of a cascading filter or a bit of a Venn diagram overlap, we're starting with research on the number of people globally with a net worth of $10 million or above. That particular metric is the one that we expect to see growing at 8% annual growth, so it's starting there. And then we're filtering that into two sets of filters.

Speaker Change: There can be analysis that needs to go in there, and some of our efforts needed to accelerate the analysis that we were doing, and we had to work through the supply chain to be able to make that move at a good pace.

Michael Colglazier: So we have lots of smaller issues along the way, like that. But so far, the major slugs of material, major supply issues, we are staying in front of. But, you know, it's a week-to-week look and forecast ahead to make sure we remain ahead.

Speaker Change: We have lots of smaller issues along the way like that, but so far the major slugs of material, major supply issues, we are staying in front of and

Michael Colglazier: But you know it's a week-to-week look and forecast ahead to make sure we remain ahead.

Speaker Change: But, you know, it's a week-to-week look and forecast ahead to make sure we remain ahead.

Oliver Chen: One is a propensity of people to use a fairly substantial proportion of their net worth on experiences. So unlike people who may have a lot of net worth and just like to stay at home or invest in other ways, we're definitely filtering for people who prioritize experiential travel in their lives. And then third, a stated interest in interest in space travel and getting a perspective of the Earth from space. And so that's kind of the funnel down around there and that's we package that up with some of our internal understanding with our own team.

Michael Colglazier: Okay, and one follow-up: you've given a lot of clear information on the leverage ability of the model as well as the opportunity. The equity value of the stock is pretty modest relative to the opportunity, so what do you think is more underappreciated, in your opinion? It's an open-ended question. Thank you. I think modest is the gracious term in the way that tends to spray solver, but thank you. We would agree that the value that is being built into and created by the company is not accurately reflected in the market capitalization value that we currently are seeing.

Operator: Okay. And one follow-up.

Speaker Change: Okay, and one follow-up. You've given a lot of clear information on the leverageability of the model as well as the opportunity.

Michael Colglazier: You've given a lot of clear information on the leverageability of the model as well as the opportunity. The equity value of the stock is pretty modest relative to the opportunity. So what do you think is more underappreciated than your opinion? It's an open-ended question. Thank you.

Speaker Change: the equity value of the stock is pretty modest relative to the opportunity so what what do you think is more underappreciated than your opinion it's a it's an open-ended question thank you

Michael Colglazier: I think modest is a gracious term in the way that sentence is phrased, Oliver, but thank you. We would agree that the value that is being built into and created by the company is not accurately reflected in the market capitalization value that we currently are seeing. So what is in the way? Well, what are the risks that I don't think are in the way? I don't think technical risk is the question, because we've proved that out with Unity. I don't think it's a safety risk piece, which is what we demonstrated with all of our flights over the last year.

Speaker Change: I think modest is a gracious term in the way that sentence is phrased, Oliver, but thank you. We would agree that the value that is being built into and created by the company is not accurately reflected in the market capitalization value that we currently are seeing.

Oliver Chen: I'll note of our existing current our future astronaut group, probably half are in the 10 million in an up range and probably half are less. And I think that just depends on the people who are less prioritize this type of an experience and are willing to put a greater percentage of their available resources towards it. But hopefully that answers that question. On the supply chain side, We are constantly on top of supply chain issues, so by no means do I intend to imply we never see an issue or a glitch.

Michael Colglazier: So what is in the way? Well, you know what are the risks that I don't think are in the way? Well, I don't think technical risk is the question because we prove that out with Unity. I don't think it's a safety risk piece, which is what we were demonstrating with all of our flights over the last year. It's not regulatory risk because we've worked through that with our spaceship Unity, so and it's not product market fits, not customer risk because that's shown to have great value. So what's left in that piece is primarily driven by execution risk.

Speaker Change: So what is in the way? Well, you know, what are the risks that I don't think are in the way? Well, we I don't think technical risk is the question because we we've proved that out with unity. I don't think it's a

Speaker Change: Safety risk piece, which is what we were demonstrating with all of our flights over the last year. It's not regulatory risk, because we've worked through that with our Spaceship Unity. And it's not product market fit, it's not customer risk, because that's shown to have great value.

Michael Colglazier: It's not regulatory risk, because we've worked through that with our spaceship Unity. So it's not product market fit, it's not customer risk, because that's shown to have great value. So what's left in that piece is primarily driven by execution risk. Are we going to finish the work that we have and get that done in time and pace and physical discipline so as not to create financial risk? And execution risk happens.

Speaker Change: So, what's left in that piece is primarily driven by execution risk. Are we going to finish the work that we have and get that done in time and pace and physical discipline so as not to create financial risk?

Michael Colglazier: Are we going to finish the work that we have and get that done in time and pace and physical discipline so as not to create financial risk? And an execution risk happens. It's on all manufacturing industries. There's execution risk. How are we handle it? We have first massive diligence daily across all parts of this program to both make sure we're getting done the work that needed to get done that day, and we're looking forward to make sure that something new isn't on the horizon that needs firefighting. So that's one. Two, we keep a contingency buffer built within our schedule and our plan.

Oliver Chen: On the whole though, we continue to manage them well. So we have managed the design of these ships ourselves and we are managing the final assembly for ourselves. I think as you know we have Bell and Carbon as the primary people that will be creating the major sub-assemblies there. So we work with Bell and Carbon for a wider range of vendors to support. Some Bell and Carbon go directly, some we provide as owner furnished items.

Michael Colglazier: It's in all manufacturing industries; there's execution risk. How do we handle it? We have, first, massive diligence daily across all parts of this program to both make sure we're getting done the work that needed to get done that day, and we're looking forward to make sure that something new isn't on the horizon that needs firefighting. So that's one.

Speaker Change: and an execution risk happens. It's on all manufacturing industries there's execution risk.

Speaker Change: How do we handle it? We have, first...

Speaker Change: Massive diligence daily across all parts of this program to both make sure we're getting done the work that needed to get done that day and we're looking forward to make sure that something new isn't on the horizon that needs firefighting.

Oliver Chen: And this is in a good way, this is an aerospace program. And the aerospace industry is big. There are lots of suppliers, there are lots of availability. We are mostly a carbon fiber ship. We have metallics, you know those are typical in the aerospace industry, some aluminum, some titanium. And we've been way ahead of ensuring the material orders here that we have the billets, we have the general supplies and we've been ordering those up early, so it's not to let that get in the way.

Michael Colglazier: Two, we keep contingency, or buffer, built within our schedule and our plan. Our teams are not meant to use it, but we also recognize there are unknowns that nobody can fully predict, and we need to have the capacity to absorb those while also looking for opportunities to improve as well. So we're managing this very tightly along the way. And personally, if I look at where the market is reacting, I think there's... must be a heavy weighting on what I think is less fully informed opinions. You know, we'll see opinions out of, look, Virgin Galactic is spending money without revenue; that must be bad.

Speaker Change: So, that's one.

Speaker Change: to we keep contingency buffer built within our schedule on our plan our teams are not meant to use it but we also recognize there are unknowns that nobody can fully predict and we need to have the capacity to absorb those while also looking for opportunities to improve as well

Michael Colglazier: Our teams are not meant to use it, but we also recognize there are unknowns that nobody can fully predict, and we need to have the capacity to absorb those while also looking for opportunities to improve as well. So we're managing this very tightly along the way, and I personally, if I look at where the market is reacting, I think there's must be a heavy waiting into, I think, is less fully informed opinions. We'll see opinions out of, look, Virgin Galactic is spending money without revenue; that must be bad. And while we are in a pre-revenue phase and we are clearly investing heavy capital in, it's very purposeful because we're building the assets in the infrastructure that will create an incredible company.

Speaker Change: So, we're managing this very tightly along the way, and I personally, if I look at where the market is reacting, I think there's...

Speaker Change: must be a heavy weighting into i think is less fully informed opinions and we'll see opinions out of look virgin clactic is spending money without revenue that must be bad

Oliver Chen: And then you know you'll have a situation come up. We had one, not too recently where one of the tools as we're refining what you'll hear is the loft of the tools. We're refining the actual shape of what the mold will look like so the part will come out correctly. There can be analysis that needs to go in there and some of our efforts needed to accelerate the analysis that we were doing and we had to work through the supply chain to be able to make that move at a good pace.

Michael Colglazier: And while we are in a pre-revenue phase, and we are clearly investing heavy capital, it's very purposeful because we're building the assets and the infrastructure that will create an incredible company. And it's that last part, as simple as it sounds, that I don't think is being accurately reflected. So we have gone to the step of putting out a thoughtful video of our business model. It's six minutes long. I encourage everybody to watch it and share it with their friends.

Speaker Change: And while we are in a pre-revenue phase and we are clearly investing heavy capital in, it's very purposeful because we're building the assets and the infrastructure that will create an incredible company.

Michael Colglazier: And it's that last part, as simple as it sounds, that I don't think is being accurately reflected.

Speaker Change: And it's that last part, as simple as it sounds, that I don't think is being...

Michael Colglazier: So we have gone to the step of putting out a thoughtful video of our business model. It's six minutes. I encourage everybody to watch it, share with your friends, and it lays everything out in a succinct fashion. And then let's have a conversation around that. But right now I believe we're missing some of those important points. We're investing for the future, and I think that gets missed, perhaps, in some of the past.

Speaker Change: accurately reflected.

Speaker Change: So we have gone to the step of putting out a thoughtful video of our business model. It's six minutes. I encourage everybody to watch it, share it with your friends, and it lays everything out in succinct fashion.

Oliver Chen: So we have lots of smaller issues along the way like that, but so far the major slugs of material, major supply issues we are staying in front of. But you know it's a week-to-week look and forecast ahead to make sure we remain ahead.

Michael Colglazier: And it lays everything out in succinct fashion. And then, let's have a conversation around that. But right now, I believe we're missing some of those important points. We're investing for the future, and I think that gets missed perhaps in some of the past. So hopefully today is a good way to start changing that and getting a better balance in information.

Speaker Change: And then let's have a conversation around that. But right now, I believe we're missing some of those important points. We're investing for the future, and I think that gets...

Michael Colglazier: Okay and one follow-up, you've given a lot of clear information on the leverage ability of the model as well as the opportunity. The equity value of the stock is pretty modest relative to the opportunity, so what do you think is more underappreciated in your opinion? It's an open-ended question. Thank you. I think modest is the gracious term in the way that tends to spray solver, but thank you. We would agree that the value that is being built into and created by the company is not accurately reflected in the market capitalization value that we currently are seeing.

Michael Colglazier: So hopefully today is a good way to start changing that and getting better balance and information shared.

Speaker Change: missed perhaps in some of the past. So hopefully today is a good way to start changing that and getting better balance in information shared.

Michael Colglazier: Thanks, Michael.

Operator: Thanks, Michael. Thanks, Doug. Best regards.

Doug Ahrens: Thanks, Doug.

Michael Colglazier: Best regards.

Miles Walton: Thanks, Oliver. Your next question comes from the line of Miles Walton with Wolf Research. Your line is open. Thanks, good evening. And thanks for the video. You really get the juices flowing. I think it was a well-produced overview.

Speaker Change: Thanks, Michael. Thanks, Doug. Best regards.

Operator: Your next question comes from the line of Miles Walton with Wolf Research. Your line is open.

Oliver Chen: Thanks, Oliver.

Speaker Change: Your next question comes from the line of Miles Walton with Wolfe Research. Your line is open.

Myles Walton: Thanks. Good evening. And thanks for the thanks for the video. You really get the juices flowing. I think it was well-produced.

Miles Walton: Thanks. Good evening.

Speaker Change: And thanks for the video. You really get the juices flowing. I think it was well-produced.

Doug Ahrens: Overview. Doug, can I focus on slide six for a second? I just want to make sure I understand the economics, particularly the space line operations and SG&A of your initial fleet assumption. Because obviously, if I look at just the first half of this year, you're already annualizing, you know, 100 million dollars for space line and 120 million dollars for SG&A. So how does whatever's in those two lines change from here to there? Or are you just saying, you know, the costs that we're incurring today are going to be the same costs we're going to incur when we're flying 125 flights a year?

Miles Walton: Doug, can I focus on slide six for a second? I just want to make sure I understand the economics, particularly the space line operations and SGNA of your initial fleet assumption. Because obviously, if I look at just the first half of this year, you're already annualizing $100 million for space line and $120 million for SGNA. So how does whatever's in those two lines change from here to there? Or are you just saying the costs that we're incurring today are going to be the same costs we're going to incur when we're flying 125 flights a year?

Miles Walton: overview. Doug, can I focus on slide six for a second? I just want to make sure I understand the economics...

Speaker Change: That's particularly the space line operations and SG&A of your initial fleet.

Michael Colglazier: So what is in the way? Well you know what are the risks that I don't think are in the way? Well I don't think technical risk is the question because we prove that out with unity. I don't think it's a safety risk piece, which is what we were demonstrating with all of our flights over the last year. It's not regulatory risk because we've worked through that with our spaceship unity, so and it's not product market fits, not customer risk because that's shown to have great value.

Miles Walton: Assumption.

Speaker Change: Because obviously if I look at just the first half of this year, you're already annualizing.

Speaker Change: you know hundred

Speaker Change: $100 million for Spaceline and $120 million for SG&A. So how does whatever's in those two lines change from here to there? Or are you just saying, you know, the costs that we're incurring today are going to be the same costs we're going to incur when we're flying 125 flights a year?

Doug Ahrens: Yes, thanks, Miles. So, yeah, the costs that are in those buckets are very similar to what they are today because what you see growing as we increase the flight rate is the variable costs that go up. So we bring in the revenue, and then we've got what we showed as variable space-like costs, which is the rocket motor and the fuel and the hospitality and all of that that goes around the flights. But the fixed cost portion is as it's stated; it's fundamentally fixed. The activity is in that group of varies over time. Right now they've been working on flying unity, and now we're working on things like getting the factory ready in Phoenix and so on.

Doug Ahrens: Yes, thanks, Miles. So yeah, the costs that are in those buckets are very similar to what they are today. Because what you see growing as we increase the flight rate is the variable costs that go up. So we bring in the revenue, and then we've got what we showed as the variable spaceflight costs, which is the rocket motor and the fuel and the hospitality and all of that that goes around the flights. But the fixed cost portion is, as it's stated, it's fundamentally fixed.

Michael Colglazier: So what's left in that piece is primarily driven by execution risk. Are we going to finish the work that we have and get that done in time and pace and physical discipline so as not to create financial risk? And an execution risk happens. It's on all manufacturing industries. There's execution risk. How are we handle it? We have first massive diligence daily across all parts of this program to both make sure we're getting done the work that needed to get done that day, and we're looking forward to make sure that something new isn't on the horizon that needs firefighting.

Yes: Yes, thanks, Miles. So, yeah, the costs that are in those buckets are very similar to what they are today, because what you see growing as we increase the flight rate is the variable costs that go up. So we bring in the revenue, and then we've got what we showed as variable spaceflight costs, which is...

Speaker Change: The rocket motor and the fuel and the hospitality and all of that that goes around the flights.

Doug Ahrens: The activities in that group vary over time. Right now, they've been working on flying Unity, and now we're working on things like getting the factory ready in Phoenix and so on. And we've got people working on Delta programs. That group is still employed and doing different things. And then they shift back into flying.

Speaker Change: But the fixed cost portion is, as it's stated, it's fundamentally fixed.

Speaker Change: The activities in that group varies over time. I mean, right now, you know, they've been working on flying Unity, and now we're working on things like getting the factory ready in Phoenix and so on. So we're – and we've got people working on Delta programs. That group is still employed and doing different things, and then they shift back into flying. And then you start to see it grow as we add more and more vehicles from there. SG&A, also, it's –

Michael Colglazier: So that's one. Two, we keep contingency buffer built within our schedule and our plan. Our teams are not meant to use it, but we also recognize there are unknowns that nobody can fully predict, and we need to have the capacity to absorb those while also looking for opportunities to improve as well. So we're managing this very tightly along the way, and I personally, if I look at where the market is reacting, I think there's must be a heavy waiting into, I think, is less fully informed opinions.

Doug Ahrens: So we've got people working on Delta programs. That group is still employed in doing different things, and then they shift back into flying. And then you start to see it grow as we add more and more vehicles from there. SGNA also it's by definition fundamentally fixed. As we start to fly more, there's no real reason why it would grow more than a modest amount from where we are today in terms of administrative costs. And we've got sales function is probably the area where you'll see the growth versus the rest of it, which is fairly fixed.

Doug Ahrens: And then you start to see it grow as we add more and more vehicles from there. SG&A, also, is, by definition, fundamentally fixed. As we start to fly more, there's no real reason why it should grow more than a modest amount from where we are today in terms of administrative costs. And the sales function is probably the area where you'll see the growth versus the rest of it, which is fairly fixed. So sales would be the area where we would ramp up over time in that bucket to make sure we have all of the volume that's projected here. But that's really the logic behind it.

Speaker Change: As we start to fly more, there's no real reason why it would grow more than a modest amount from where we are today in terms of administrative costs, and we've got sales function is probably the area where you'll see the growth versus the rest of it, which is fairly fixed. So sales would be the area where we would ramp up over time in that bucket to make sure we have all of the volume that's projected here. But that's really the logic behind it.

Michael Colglazier: We'll see opinions out of, look, Virgin Galactic is spending money without revenue, that must be bad. And while we are in a pre-revenue phase and we are clearly investing heavy capital in, it's very purposeful because we're building the assets in the infrastructure that will create an incredible company. And it's that last part as simple as it sounds that I don't think is being accurately reflected.

Doug Ahrens: So sales would be the area where we would ramp up over time in that bucket to make sure we have all of the volume that's projected here. But that's really the logic behind it. So there's no, I know there's an accounting treatment in the R&D line; that's that part I get. There's no accounting treatment for the SG&A line because, again, the run rate you have today is 120 million versus. because that, you know, $100 million or so you're targeting, so clearly something has to go away from what you're doing today within SGNA. There's a small, yes, so good observations.

Doug Ahrens: So there's no accounting treatment for the R&D line; that part I get. There's no accounting treatment for the SG&A line because, again, the run rate you have today is $120 million versus that $100 million or so you're targeting. So clearly, something has to go away from what you're doing today within SG&A.

Speaker Change: So there's no, I know there's an accounting treatment in the R&D line, that part I get. There's no accounting treatment for the SG&A line because, again, the run rate you have today is $120 million versus that $100 million or so you're targeting.

Doug Ahrens: There's a small portion of this that will get reclassed into R&D or space line operations. We have some kind of functions that are involved in management and so on in this phase of our operations, but as we shift to flying and we move down the road, you will see some reclassing into those other buckets out of G&A, but not a lot, but the amount you just mentioned.

Speaker Change: So clearly something has to go away from what you're doing today with the...

Doug Ahrens: There's a small portion of this that we'll get reclassed into R&D or space-line operations. We have some kind of functions that are involved in management and so on. In this phase of our operations, but as we shift to flying and we move down the road, you will see some reclassing into those other buckets out of GNA, but not a lot, but the amount you just mentioned.

Speaker Change: you know

Speaker Change: There's a small, yes, so good observation, so there's a small portion of this that will get reclassed into R&D or space line operations. We have some kind of functions that are involved in management and so on in this phase of our operations, but as we shift to flying and we move down the road, you will see some reclassing into those other buckets out of G&A, but not a lot, but the amount you just mentioned.

Michael Colglazier: And then let's have a conversation around that. But right now I believe we're missing some of those important points. We're investing for the future, and I think that gets missed perhaps in some of the past.

Oliver Chen: So hopefully today is a good way to start changing that and getting better balance and information shared. Thanks, Michael. Thanks, Doug. Best regards. Thanks, Oliver.

Operator: Okay. All right. And then just one quick one.

Michael Colglazier: Okay. And then just one quick one. The number of astronauts in the backlog, how stable has that been? I know this maybe 18 months ago was 800. I think at the end of the year was 750. I think the presentation, the video said approximately 700. Are you curating further the backlog? Is there a little bit of lead off? What kind of movement are we seeing in the backlog? Mostly you're seeing, I'd say, mostly stability, so we have been holding the same basic level going through. We flew a number of people over the last year, so that was partly going down.

Miles Walton: Your next question comes from the line of Miles Walton with Wolf Research. Your line is open. Thanks, good evening. And thanks for the video. You really get the juices flowing. I think it was a well-produced overview.

Speaker Change: okay and then just one quick one the number of restaurantauts in the backlog how stable has that been i know this maybe eighte monthsago is eight hundred i thinkatthe end ofthe year sevenhundredand fifty

Myles Walton: The number of astronauts in the backlog, how stable has that been? I know this maybe 18 months ago was 800. I think at the end of the year it was 750. I think the presentation, the video said approximately 700. Are you curating the backlog further? Is there a little bit of bleed off? What kind of movement are we seeing in the backlog?

Speaker Change: I think the presentation, the video, said approximately 700. Are you curating further the backlog? Is there a little bit of bleed off? What kind of movement are we seeing in the backlog?

Douglas Ahrens: Doug, can I focus on slide six for a second? I just want to make sure I understand the economics, particularly the space line operations and SGNA of your initial fleet assumption. Because obviously if I look at just the first half of this year, you're already annualizing $100 million for space line and $120 million for SGNA. So how does whatever's in those two lines change from here to there? Or are you just saying the costs that we're incurring today are going to be the same costs we're going to incur when we're flying 125 flights a year?

Michael Colglazier: Mostly, you're seeing, I'd say, mostly stability, so we have been holding the same, basic level going through. We flew a number of people over the last year, so that was partly going down. There have been a couple places where we saw a bit bigger drop in folks coming through, but that's pretty stable.

Speaker Change: Mostly you're seeing, I'd say, mostly stability. So we are, have been holding the same

Speaker Change: basic level going through. We flew a number of people over the last year so that was partly going down.

Michael Colglazier: There have been a couple places where we saw a bigger drop of folks have come through, but that's pretty stable. Of the folks who have dropped out, the large majority of that have been folks who are very early in the program for various reasons. Some are in a change of life stage. Some may have other issues have come up; some may have had health issues have come up. And so the majority of the people who have stepped away from the program, at least at this stage, have been preponderant; the preponderant of that has been our very early folks.

Speaker Change: There have been a couple of places where we saw a bit bigger drop of folks that have come through, but that's pretty stable. Of the folks who have dropped out...

Michael Colglazier: Of the folks who have dropped out, the large majority of those have been folks who are very early in the program for various reasons. Some are in a change of life stage. Some may have other issues that have come up. Some may have had health issues that have come up. The majority of the people who have stepped away from the program, at least at this stage, have been preponderance.

Speaker Change: The large majority of that have been folks who are very early in the program for various reasons.

Douglas Ahrens: Yes, thanks, Miles. So yeah, the costs that are in those buckets are very similar to what they are today because what you see growing as we increase the flight rate is the variable costs that go up. So we bring in the revenue and then we've got what we showed as variable space-like costs, which is the rocket motor and the fuel and the hospitality and all of that that goes around the flights.

Speaker Change: Some are in a change of life stage. Some may have other issues have come up. Some may have had health issues have come up.

Speaker Change: and and so the the majority of the people who have

Speaker Change: stepped away from the program at least at this stage have been preponderance the preonor so that has been our very early folks

Michael Colglazier: We feel very strong about this group. We stay connected with them. We're working, and we go to the various cities where we have large groups of them and give updates on the company. And they're incredibly valuable group people to us and as a company. As we share, we don't have sales open right now. So we're not actively working to backfill when these open. This still gives us quite a backlog. And we're comfortable with the amount of backlog we have right now. But when we do open up sales, you'll start to see these numbers go up as people come in on the tail end of the line here.

Michael Colglazier: The preponderance of that has been our very early... We feel very strong about this group. We stay connected with them. We're working, and we go to the various cities where we have large groups of them and give updates on the company, and they're an incredibly valuable group of people to us and as a company. As we shared, we don't have sales open right now, so we're not actively working to backfill when they open.

Douglas Ahrens: But the fixed cost portion is as it's stated, it's fundamentally fixed. The activity is in that group of varies over time. Right now they've been working on flying unity and now we're working on things like getting the factory ready in Phoenix and so on. So we've got people working on Delta programs. That group is still employed in doing different things and then they shift back into flying. And then you start to see it grow as we add more and more vehicles from there.

Speaker Change: We feel very strong about this group. We stay connected with them. We're working and we go to the various cities where we have large groups of them and give updates on the company and they're incredibly valuable group of people to us as a company.

Michael Colglazier: This still gives us quite a backlog, and we're comfortable with the amount of backlog we have right now. But when we do open up sales, you'll start to see these numbers go up as people kind of come in on the tail end of the line. All right. Thanks.

Speaker Change: As we shared, we don't have sales open right now, so we're not actively working to backfill when these open. This still gives us quite a backlog, and we're comfortable with the amount of backlog we have right now.

Speaker Change: But when we do open up sales, you'll start to see these numbers go up as people kind of come in on the tail end of the line here.

Michael Colglazier: Okay.

Operator: All right.

Michael LaShawk: Thanks. Once again, ladies and gentlemen, if you have a question, it is Star 1 on your telephone keypad. Your next question comes from the line of Michael LaShawk with Keeping Capital Markets. Your line is open. Hey, good afternoon. I wanted to start asking on the free cash flow guidance. I think you previously expected 2024 to be the largest cash burn and support of the Delta class ship. So just given what you've done today in the 3Q guide, that would imply a 4Q burn of around 135 million. And that's just to be in line with 2023 burn level.

Douglas Ahrens: SGNA also it's by definition fundamentally fixed. As we start to fly more, there's no real reason why it would grow more than a modest amount from where we are today in terms of administrative costs. And we've got sales function is probably the area where you'll see the growth versus the rest of it, which is fairly fixed. So sales would be the area where we would ramp up over time in that bucket to make sure we have all of the volume that's projected here.

Operator: Once again, ladies and gentlemen, if you have a question, it is star one on your telephone keypad. Your next question comes from the line of Michael Leshock with KeyBank Capital Markets. Your line is open.

Speaker Change: Okay. All right. Thanks.

Speaker Change: Once again, ladies and gentlemen, if you have a question, it is star 1 on your telephone keypad.

Speaker Change: Your next question comes from the line of Michael Leshock with KeyBank Capital Markets. Your line is open.

Michael LeShock: Hey, good afternoon. I wanted to start asking about the free cash flow guidance. I think you previously expected 2024 to be the largest cash burn in support of the Delta class ships. So just given what you've done to date in the 3Q guide, that would imply a 4Q burn of around $135 million. And that's just to be in line with the 2023 burn rate. So are you expecting a step up in cash burn in the fourth quarter, maybe in the $140 million to $150 million range? Just assuming that you're still expecting 2024 to be the largest spending year.

Michael LeShock: Hey, good afternoon. I wanted to start asking on the free cash flow guidance that I think you previously expected.

Speaker Change: 2024 to be the largest cash burn in support of the Delta class ships.

Douglas Ahrens: But that's really the logic behind it. So there's no, I know there's an accounting treatment in the R&D line, that's that part I get. There's no accounting treatment for the SGNA line because again the run rate you have today is 120 million versus, because that, you know, $100 million or so you're targeting, so clearly something has to go away from what you're doing today within SGNA. There's a small, yes, so good observations.

Speaker Change: So just given what you've done to date in the 3Q guide, that would imply a 4Q burn of around 135 million, and that's just to be in line with 2023 burn level.

Doug Ahrens: So, are you expecting a step up in cash burn in the fourth quarter, maybe in the 140 to 150 million range, just assuming that you're still expecting 2024 to be the largest? Spending year. Thanks, Mike.

Speaker Change: So are you expecting a step up in cash burn in the fourth quarter, maybe in the $140 to $150 million range, just assuming that you're still expecting 2024 to be the largest spending year?

Douglas Ahrens: There's a small portion of this that we'll get reclassed into R&D or space-line operations. We have some kind of functions that are involved in management and so on. In this phase of our operations, but as we shift to flying and we move down the road, you will see some reclassing into those other buckets out of GNA, but not a lot, but the amount you just mentioned.

Doug Ahrens: Thanks, Mike. This is Doug.

Doug Ahrens: This is Doug. So yes, we do still expect 224 to be the largest spending year. It's, or about, you know, it's about flatish to 223 a little higher. We didn't give guidance past Q3, but I can give you some direction that, as we talked about in the week, prepared remarks, we do have an acceleration of activity going on with tooling development and part fabrication. That's a Q3, Q4 activity and trailing into Q1. So you'll see the kind of local peak be around the Q4, Q1 time frame, and then you'll start to see things ramp down in Q2, Q3 of 225.

Miles Walton: Okay.

Michael LeShock: Thanks, Mike. This is Doug. So, yes, we do still expect 2024 to be the largest spending year, or it's about flattish to 2023, a little higher. We didn't give guidance past Q3, but I can give you some direction that, as we talked in the prepared remarks, we do have an acceleration of activity going on with...

Michael Colglazier: And then just one quick one. The number of astronauts in the backlog, how stable has that been? I know this maybe 18 months ago was 800, I think at the end of the year was 750. I think the presentation, the video said approximately 700. Are you curating further the backlog? Is there a little bit of lead off? What kind of movement are we seeing in the backlog? Mostly you're seeing, I'd say, mostly stability, so we are, have been holding the same basic level going through.

Doug Ahrens: So yes, we do still expect 2024 to be the largest spending year. It's about, you know, it's about flattish to 2023, a little higher. We didn't give guidance past Q3, but I can give you some direction that, as we talked about in the prepared remarks, we do have an acceleration of activity going on with the tooling development and parts fabrication. That's a Q3, Q4 activity and trailing into Q1. So you'll see the kind of local peak be around the Q4, Q1 time frame, and then you'll start to see things ramp down in Q2, Q3 of 2025. So that's, you know, where we see things going. A little lower than the amount you just highlighted, though not to the level of 150, that kind of number. We're lower than that.

Speaker Change: The Tooling Development and Parts Fabrication, that's a Q3-Q4 activity and trailing into Q1. So you'll see the kind of local peak be around the Q4-Q1 time frame, and then you'll start to see things ramp down in Q2-Q3 of 2025. So that's directionally, you know, where we see things going. A little lower than the amount you just highlighted, though, not in the level of 150, that kind of number. We're lower than that.

Doug Ahrens: So that's directionally where we see things going, a little lower than the amount you just highlight, though not the level of 150. That kind of number, we're lower than that. Got it.

Michael Colglazier: Got it. And then any change in how you're thinking about research flights as Delta class starts to ramp up? Are you still targeting that 10% or so range of flights slated for research? That's the first question. And secondly, we got to see the research product in action and heard the great testimonials of some of your customers. Have any more government agencies inquired about research flights now that you've kind of proven the reliability of the offering given the success of Unity's flight?

Michael Colglazier: And then any change in how you're thinking about research slice as Delta class starts to ramp, are you still targeting that 10% or so range of slice related for research? That's the first question. And then secondly, we got to see the research product in action and heard the great testimonials of some of your customers. Have any more government agencies inquired about research flight? Now that you've kind of proven the reliability of the offering given the success of Unity Slice.

Speaker Change: Got it.

Speaker Change: and then any change in how you're thinking about research flights as delta class starts to ramp are you still targeting that ten percent or so range of flight plated for research

Michael Colglazier: We flew a number of people over the last year, so that was partly going down. There have been a couple places where we saw a bigger drop of folks have come through, but that's pretty stable. Of the folks who have dropped out, the large majority of that have been folks who are very early in the program for various reasons. Some are in a change of life stage. Some may have other issues have come up, some may have had health issues have come up.

Speaker Change: So that's the first question, and then secondly, we got to see the research product in action and heard the great testimonials of some of your customers.

Speaker Change: Have any more government agencies inquired about research flights now that you've kind of proven the reliability of the offering given the success of Unity Flights?

Michael Colglazier: I'll take that one, Mike. The research program and research product that we have has been equally successful. I'll be it from a different customer lens as our private astronaut flights. We typically spend most of our time talking about our private astronauts, but it's very successful because we offer access to a microgravity environment that relatively is quite long and quite clean. And at the price point, it is quite valuable for the price charged. And so it just kind of wins on every front there. We have had, I think you probably saw Kelly Gerardi and a group of researchers have signed on for another research flight.

Michael Colglazier: I'll take that one, Mike. The research program and research product that we have is equally successful, albeit from a different customer lens, as our private astronaut flights. We typically spend most of our time talking about our private astronauts, but it's very successful because we offer access to a microgravity environment that is relatively long and quite clean and, at the price point, is quite valuable for the price charged. And so it just kind of wins on every front there.

Speaker Change: I'll take that one, Mike.

Michael Colglazier: And so the majority of the people who have stepped away from the program, at least at this stage, have been preponderant, the preponderant of that has been our very early folks. We feel very strong about this group. We stay connected with them. We're working and we go to the various cities where we have large groups of them and give updates on the company. And they're incredibly valuable group people to us and as a company, as we share, we don't have sales open right now.

Mike: It's been equally successful.

Mike: I'll be it from a different customer lens.

Speaker Change: as our private astronaut flights.

Mike: spend most of our time talking about our private astronauts.

Speaker Change: But it's very successful because we offer access to a microgravity environment that relatively is quite long and quite clean and at the price point is quite valuable for the price charged.

Michael Colglazier: So we're not actively working to backfill when these open. This still gives us quite a backlog. And we're comfortable with the amount of backlog we have right now. But when we do open up sales, you'll start to see these numbers go up as people come in on the tail end of the line here.

Michael Colglazier: We have had, I think you probably saw Kelly Girardi and a group of researchers have signed on for another research flight. I think you'll see things like that with people who've flown before. We obviously do that with payloads. Lots of our university partners are repeat flyers as they either do new research or use our platform to refine their research before it goes further out to the space station or even beyond. So the product quality has been very good, and the repeat availability of it will be very good. Most of our research customers, not all, but most, need pretty specific dates. Most of them are government funded, and most government funding requires some specificity about dates.

Miles Walton: Okay.

Speaker Change: and so it just kind of wins on every front there.

Operator: All right. Thanks.

Speaker Change: We have had, I think you probably saw, Kelly Girardi and...

Michael Colglazier: I think you'll see things like that with people who have flown before. We obviously do that with payloads. Lots of our university partners are repeat flyers as they either do new research or use our platform to refine their research before it goes further out to the space station or even beyond. So the product quality has been very good, and the repeat availability of it will be very good. Most of our research customers, not all, but most, need pretty specific dates. That's most of them are government funded, and most government funding requires some specificity of dates.

Mike: group of researchers have signed on for another research flight

Mike: I think you'll see things like that with people who've flown before. We obviously do that with payloads.

Operator: Once again, ladies and gentlemen, if you have a question, it is star one on your telephone keypad.

Mike: Lots of our university partners are repeat flyers as they either do new research or use our platform to refine their research before it goes further out to the space station or even beyond.

Michael LaShawk: Your next question comes from the line of Michael LaShawk with keeping capital markets. Your line is open. Hey, good afternoon.

Mike: So, the product quality has been very good and the

Douglas Ahrens: I wanted to start asking on the free cash flow guidance. I think you previously expected 2024 to be the largest cash burn and support of the Delta class ship. So just given what you've done today in the 3Q guide, that would imply a 4Q burn of around 135 million. And that's just to be in line with 2023 burn level. So are you expecting a step up in cash burn in the fourth quarter, maybe in the 140 to 150 million range, just assuming that you're still expecting 2024 to be the largest. Spending Year. Thanks, Mike.

Mike: repeat availability of it will be very good. Most of our research customers, not all, but most,

Mike: Need pretty specific dates. That's most of them are government funded and most government funding requires

Michael Colglazier: And we're a little far out from getting real specific with our dates, and we know generally they're there, but the customers need us to be a little more specific. So as we get closer in, you'll see us also start to ramp up research sales as we also open up private astronaut sales.

Michael Colglazier: And we're a little far out from getting real specific with our dates, and we know the general direction, but the customers need us to be a little more So as we get closer in, you'll see us also start to ramp up research sales as we also open up private astronaut sales. Now, you asked about 10 percent.

Mike: some specificity of dates.

Mike: And we're a little far out from getting real specific with our dates, and we know generally there, but the customers need us to be a little more specific.

Speaker Change: so as we get closer in you'll see us also start to ramp up research sales as we also open up private ashtront sales now you ask about ten percent i think that's a nice target in the early days

Michael Colglazier: I think that's a nice target in the early days. We'll see as we scale this up. Right. If you go to page six on this chart, as we start getting to, you know, 275, you get to a second spaceport. It's a lot of space flights. I don't have a sense if the market will the research market will continue to scale to 10 percent all the way up. But I definitely think that's the right target in our early, early periods for sure.

Michael Colglazier: Now you asked about 10%. I think that's a nice target in the early days. We'll see as we scale this up. If you go to page six on this chart, as we start getting to 275, you get to the second space port. It's a lot of space flights. I don't have a sense that the research market will continue to scale the 10% all the way up, but I definitely think that's the right target in our early periods, for sure. I will note, we adjusted our pricing. While we don't have sales open, we do take referrals from existing customers.

Douglas Ahrens: This is Doug. So yes, we do still expect 224 to be the largest spending year. It's, or about, you know, it's about flatish to 223 a little higher. We didn't give guidance past Q3, but I can give you some direction that as we talked about in the week, prepared remarks, we do have an acceleration of activity going on with tooling development and part fabrication. That's a Q3, Q4 activity and trailing into Q1.

Mike: We'll see as we scale this up, right? If you go to page 6 on this chart, as we start getting to, you know, 275, you get to the second spaceport, it's a lot of spaceflights.

Mike: I don't have a sense if the market will, the research market will continue to scale to 10% all the way up, but I definitely think that's the right target in our

Michael Colglazier: I will note that we adjusted our pricing while we don't have sales open. We do take referrals from existing customers and, as I've always used this term, have some house seats that we offer. We've brought those prices into parallel. So at this point, every seat equivalent, whether it's for a private astronaut, a human researcher, or we remove the seat and put a payload rack in, is at six hundred thousand dollars on a seat equivalent basis. That's our kind of current off-the-market price. When we really open up sales for the Delta ships, we'll reassess our pricing.

Mike: Early, early periods for sure. I will note we adjusted our pricing. While we don't have sales open, we do take referrals from existing customers and

Douglas Ahrens: So you'll see the kind of local peak be around the Q4, Q1 time frame, and then you'll start to see things ramp down in Q2, Q3 of 225. So that's directionally where we see things going, a little lower than the amount you just highlight though, not the level of 150. That kind of number, we're lower than that. Got it.

Michael Colglazier: And as I've always used this term, some house seats that we offer, we brought those prices into parallel. So at this point, every seat equivalent, whether it's for a private astronaut, a human researcher, or we remove the seat and put a payload rack in, all is at 600,000 on a seat equivalent basis. That's our current off-the-market price. When we really open up sales for the delta ships, we'll reassess our price eating.

Mike: and, as I've always used this term, some house seats that we offer.

Mike: We've brought those prices into parallel.

Mike: So, at this point, every seat equivalent, whether it's for a private astronaut, a

Mike: human researcher, or we remove the seat and put a payload rack in, all is at $600,000 on a seat equivalent basis. That's our kind of current off-the-market price. When we really open up sales for the Delta ships, we'll reassess our price seat again.

Michael Colglazier: Then lastly, I appreciate the economics that you provided. Just looking at some of the assumptions. Is it four spaceships and two motherships at Space Fort America before you start to look into expanding into a second space port? Is that kind of what you need to see before you build a second space port? Is that the expected capacity of a space port in the future? It's not that we need to see that before working on the next space port. We'll definitely start working on the next space port even before these delta ships launch in '26. However, it's the smartest place to go first.

Michael Colglazier: Then lastly, I appreciate the economics that you provided, just looking at some of the assumptions. Is it four spaceships and two motherships at Spaceport America before you start to look into expanding into a second spaceport? Is that kind of what you need to see before you build a second spaceport? And is that the expected capacity of a spaceport in the future? It's not that we need to...

Mike: Then lastly, I appreciate the economics that you provided.

Speaker Change: Just looking at some of the assumptions, is it four spaceships and two motherships at Spaceport America before you start to look into expanding into a second spaceport? Is that kind of what you need to see before you build a second spaceport?

Michael Colglazier: I'll take that one Mike. The research program and research product that we have has been equally successful. I'll be it from a different customer lens as our private astronaut flights. We typically spend most of our time talking about our private astronauts, but it's very successful because we offer access to a microgravity environment that relatively is quite long and quite clean. And at the price point is quite valuable for the price charged.

Speaker Change: And is that the expected capacity of a spaceport in the future?

Michael Colglazier: It's not that we need to see that before working on the next spaceport. We'll definitely start working on the next spaceport even before these Delta ships launch in 26. However, it's the smartest place to go first.

Speaker Change: It's not that we need to see that before working on the next spaceport. We'll definitely start working on the next spaceport even before these Delta ships launch in 26. However, it's the smartest place to go first.

Michael Colglazier: One thing you'll notice if you start doing the math of how revenue and contribution margin is growing relative to these cost lines is that we have a bigger set of leverage as we move from the initial fleet to the expanded fleet and go from one to two spaceports. There are a couple of things behind that, but to the question you're asking, Mike, it's primarily because two spaceships and one mothership is an imbalanced line.

Michael Colglazier: One thing you'll notice if you start doing the math of ratios of how revenue and contribution margin are growing relative to these cost lines growing. We have a bigger set of leverage as we move from the initial fleet to the expanded fleet and going from one to two space ports. There are a couple of things behind that. But to the question you're asking, Mike, is primarily because two spaceships and one mothership: that's an imbalanced line. It's an underutilized space port. We have a lot of our fixed cost in to run space line operations there. And even in SGNA is one of the earlier questions I was talking about, that we can fully get leverage on as we add a couple more ships.

Speaker Change: One thing you'll notice if you start, you know, doing the math of ratios of how is revenue and contribution margin growing relative to these cost lines growing.

Speaker Change: And we have a bigger set of leverage as we move from the initial fleet to the expanded fleet than going from one to two spaceports. There are a couple of things behind that. But to the question you're asking, Mike...

Michael Colglazier: And so it just kind of wins on every front there. We have had, I think you probably saw Kelly Gerardi and a group of researchers have signed on for another research flight. I think you'll see things like that with people who have flown before. We obviously do that with payloads. Lots of our university partners are repeat flyers as they either do new research or use our platform to refine their research before it goes further out to the space station or even beyond.

Speaker Change: It's primarily because two spaceships and one mothership

Speaker Change: ah

Michael Colglazier: It's an underutilized spaceport. We have a lot of our fixed costs in to run baseline operations there, and even in SG&A, as one of the earlier questions was talking about, that we can fully get leverage on as we add a couple more ships. Now, this chart shows us with two and four, and then at that point, like moving to an additional spaceport. You've heard us talk about higher than 275 flights in the past.

Mike: that's an imbalance line it's an utilized space forort we have a lot of our fix cost

Speaker Change: in to run baseline operations there, and even in SG&A, as one of the earlier questions was talking about, that we can fully get leverage on as we add a couple more ships.

Michael Colglazier: Now this chart shows us with two and four. And then at that point, like moving to an additional space port, you've heard us talk about higher than 275 flights in the past. We're trying to be reasonably conservative and not getting too far ahead of what weather will look like when we get to additional space ports. And so trying to have a balanced place there, but it may be that it's worth adding a fifth spaceship in each of these things just to have a hot spare ready and being able to pick up additional set of flights along the way.

Michael Colglazier: So the product quality has been very good and the repeat availability of it will be very good. Most of our research customers, not all, but most need pretty specific dates. That's most of them are government funded and most government funding requires some specificity of dates. And we're a little far out from getting real specific with our dates and we know generally there, but the customers need us to be a little more specific. So as we get closer in, you'll see us also start to ramp up research sales as we also open up private astronaut sales.

Mike: Now this chart shows us with two and four, and then at that point, like, moving to an additional spaceport.

Michael Colglazier: We're trying to be reasonably conservative and not get too far ahead of what the weather will look like when we get to additional spaceports, and so trying to have a balanced place there. But it may be that it's worth adding a fifth spaceship to each of these things just to have a hot spare ready and being able to pick up an additional set of flights along the way. So you might see us tweak the numbers, but what we have here on the page is where we would like to start each of these spaceships.

Mike: there's you've heard us talk about higher than two hundred and seventy five flights in the past we're trying to be reasonably conservative and not not getting too far ahead of what wether will' look like when we get to additional space ports

Mike: and so trying to have a balanced place there. But it may be that it's worth adding a fifth spaceship in each of these things just to have a hot spare ready and being able to pick up additional set of flights along the way. So

Michael Colglazier: So you might see us tweak the numbers, but what we have here on the page is where we would like to start each of these space ports. Got it.

Mike: you might see this

Mike: tweak the numbers but what we have here on the page is where we would like to start each of these spacepoints

Michael Colglazier: Thanks, guys.

Operator: This concludes the question and answer session. It will also conclude today's conference call. We thank you for joining us. You may now disconnect your line.

Operator: Excuse me.

Speaker Change: Got it. Thanks, guys.

Operator: This concludes the question-and-answer session. It will also conclude today's conference call. We thank you for joining. You may now disconnect your lines.

Speaker Change: This concludes the question and answer session. It will also conclude today's conference call. We thank you for joining. You may now disconnect your lines.

Speaker Change: ?? ?? ?? ?? ??

Michael Colglazier: I will note, we adjusted our pricing while we don't have sales open, we do take referrals from existing customers. And as I've always used this term, some house seats that we offer, we brought those prices into parallel. So at this point, every seat equivalent, whether it's for a private astronaut, a human researcher, or we remove the seat and put a payload rack in, all is at 600,000 on a seat equivalent basis. That's our current off-the-market price. When we really open up sales for the delta ships, we'll reassess our price eating.

Michael Colglazier: We'll definitely start working on the next space port even before these delta ships launch in 26. However, it's the smartest place to go first. One thing you'll notice if you start doing the math of ratios of how is revenue and contribution margin growing relative to these cost lines growing. We have a bigger set of leverage as we move from the initial fleet to the expanded fleet and going from one to two space ports.

Michael Colglazier: There are a couple of things behind that. But to the question you're asking, Mike, is primarily because two spaceships and one mothership, that's an imbalanced line. It's an underutilized space port. We have a lot of our fixed cost in to run space line operations there. And even in SGNA is one of the earlier questions I was talking about, that we can fully get leverage on as we add a couple more ships.

Michael Colglazier: Now this chart shows us with two and four. And then at that point, like moving to an additional space port, you've heard us talk about higher than 275 flights in the past. We're trying to be reasonably conservative and not getting too far ahead of what weather will look like when we get to additional space ports. And so trying to have a balanced place there, but it may be that it's worth adding a fifth space ship in each of these things just to have a hot spare ready and being able to pick up additional set of flights along the way. So you might see us tweak the numbers, but what we have here on the page is where we would like to start each of these space ports.

Michael LaShawk: Got it. Thanks, guys.

Operator: Excuse me. This concludes the question and answer session. It will also conclude today's conference call. We thank you for joining. You may now disconnect your lines.

Q2 2024 Virgin Galactic Holdings Inc Earnings Call

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