Virgin Galactic Q1 2025 Earnings Report

Virgin Galactic EPS Results

• Actual EPS: -$2.38
• Consensus EPS: -$2.23
• Beat/Miss: Missed by -$0.15
• One Year Ago EPS: N/A

Virgin Galactic Revenue Results

• Actual Revenue: $0.46 million
• Expected Revenue: $0.33 million
• Beat/Miss: Beat by +$128.00 thousand
• YoY Revenue Growth: N/A

Virgin Galactic Announcement Details

• Quarter: Q1 2025
• Date: 5/15/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 15, 2025
• Conference Call Time: 5:00PM ET

Virgin Galactic (NYSE:SPCE) is a spaceflight company primarily engaged in the development and operation of suborbital space vehicles for commercial space tourism, scientific research, and future space logistics. The company designs, manufactures, and operates a fleet of reusable spacecraft under the SpaceShipTwo and WhiteKnightTwo families, offering customers a unique opportunity to experience microgravity and view Earth from space. In addition to passenger flights, Virgin Galactic also pursues research missions and payload integration services for government and commercial clients seeking microgravity environments for experiments.

Founded in 2004 by Sir Richard Branson as part of the Virgin Group, Virgin Galactic emerged from the success of the Ansari X Prize–winning SpaceShipOne program developed by Scaled Composites. Over the years, the company has undertaken an extensive flight test program to validate its spaceflight systems, culminating in multiple powered test flights by its VSS UnitySpaceShipTwo vehicle. Listed on the New York Stock Exchange under the ticker SPCE since late 2019, Virgin Galactic has secured hundreds of ticket reservations from customers spanning more than 60 countries.

The company’s manufacturing operations are based in Mojave, California, while flight operations are conducted from Spaceport America in New Mexico, the world’s first purpose-built commercial spaceport. Virgin Galactic has also announced plans to expand its commercial footprint by establishing additional spaceport facilities in collaboration with international partners, including projects in the United Kingdom and the United Arab Emirates. This global approach aims to support a growing cadence of flights and broaden access to suborbital missions for both tourists and research payloads.

Virgin Galactic’s leadership team is led by Chief Executive Officer Michael Colglazier, who joined the company in 2020 after serving in senior roles at Disney Parks and Resorts. Under his guidance and with strategic oversight from Executive Chairman Sir Richard Branson, the company continues to focus on achieving routine commercial service, enhancing safety protocols, and scaling operations. With an emphasis on sustainability, innovation, and customer experience, Virgin Galactic seeks to establish space tourism as a regular commercial offering and pave the way for future space logistics and exploration endeavors.

Virgin Galactic Q1 2025 Earnings Call Transcript

Key Takeaways

• Progress on next-generation spaceships: Virgin Galactic expects its first research spaceflight in summer of 2026 followed by private astronaut flights in fall of 2026 as production advances across propulsion, avionics, mechanical systems and carbon composite parts.
• Cost control and liquidity: Year-over-year operating expenses decreased 21% to $89 million in Q1, supported by over $5 billion in cash, cash equivalents and marketable securities to fund the pre-revenue phase.
• First-quarter financial results: Revenue totaled ~$500,000 with an adjusted EBITDA loss of $72 million and free cash flow of –$122 million, while Q2 spending is expected to decline with a free cash flow range of –$105 million to –$115 million.
• Ticket sales reopening: The company plans a bespoke, wave-based sales process to reopen spaceflight reservations in Q1 of 2026, with white-glove customer onboarding and expected pricing above $600,000.
• Expansion and diversification: Virgin Galactic is midway through a feasibility study for a European spaceport in Southern Italy and exploring government and research applications for its carrier aircraft to develop incremental revenue streams.

Presentation

[Operator]

Good afternoon. My name is Luella, and I will be your conference operator today. At this time, I would like to welcome everyone to Virgin Galactic's First Quarter twenty twenty five 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.

[Operator]

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

[Eric Cerny, VP - Investor Relations at Virgin Galactic]

Thank you. Good afternoon, everyone. Welcome to Virgin Galactic's first quarter twenty twenty five earnings conference call. On the call with me today are Michael Colglaser, Chief Executive Officer and Doug Arons, Chief Financial Officer. Following our prepared remarks, we will open the call for questions.

[Eric Cerny, VP - Investor Relations at Virgin Galactic]

Our press release and slide presentation that will accompany today's remarks are available on our Investor Relations website. Please see Slide two of the presentation for our Safe Harbor disclaimer. During today's call, we may make certain forward looking statements. These statements are based on current expectations and assumptions and as a result are subject to risks and uncertainties. Many factors could cause actual events to differ materially from the forward looking statements made on this call.

[Eric Cerny, VP - Investor Relations at Virgin Galactic]

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. Please also note that we will refer to certain non GAAP financial information on today's call. Please refer to our earnings release for a reconciliation of these non GAAP financial metrics. Turning to our agenda for today's call on Page three.

[Eric Cerny, VP - Investor Relations at Virgin Galactic]

Today, we'll cover progress in developing our next generation spaceships, a look ahead at future commercial initiatives and a financial update. I'll now turn the call over to our CEO, Michael Colglaser.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Thanks, Eric. Welcome everyone to our first quarter earnings call. We opened 2025 driving solid progress toward putting our next generation spaceships into commercial service. An enormous amount of work is taking place across our company as well as at our key suppliers, and we continue to expect our first research spaceflight will take place in summer of twenty twenty six, with private astronaut flights following in fall of twenty twenty six. Our company wide focus on controlling expenses continues as we move with purpose through the remainder of our pre revenue phase.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Year over year operating expenses have continued to decrease as our spending has shifted to create the capital assets that drive our business model. This focus on cost has kept our balance sheet strong with well over $05,000,000,000 in cash, cash equivalents and marketable securities on hand. Turning to Slide four. Progress on our new spaceships is an important topic for all our stakeholders, and I will spend time on today's call providing color across many of the areas that make up spaceship production. We released a short video recap of our progress this morning, and I encourage you to check that out.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Since we have far more going on than we can cover in an earnings call or a highlight video, I will also share some new ways we are going to bring you behind the scenes to follow along with our progress in more detailed ways. This slide highlights many of the concurrent work streams that are underway to deliver our new spaceships. These include rocket and propulsion systems, avionics and flight controls, mechanical systems, and the ongoing development and delivery of carbon parts. So let's get into it on slide five. Our hybrid rocket motor system is a huge strategic advantage that supports the long service life of our spaceships while enabling quick turnaround time between flights.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Our spaceships are built for breakthrough reusability of 500 flights or more, and most of the components within our propulsion system are built for the life of the ship. The rocket motor, which is designed to be removed and replaced in a matter of hours, is part of what we expect will allow us to drive single ship turnaround time down to days versus the weeks or months typically seen with other rockets. One of the important components of this system is the oxidizer tank. Last quarter, we shared an image of our first flight ready tank in production. We have since finished fabrication of that tank, completed acceptance testing, and are now doing final prep before sending it to the spaceship factory, where it will be integrated into the fuselage subassembly.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Our rocket systems team is amazingly skilled, and it's exciting to see these systems come together. Turning to page six. I want to recognize great progress from our avionics team. Avionics are the electronic and digital platforms that connect with each system on the ship. These systems give our pilots the information and controls they need to safely operate their missions.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

With our new spaceships, we're taking advantage of the latest in modern avionics to support even greater predictability and repeatability of our flight profile. In addition, by leaning more heavily into off the shelf avionics hardware, in combination with our own proprietary software, we are creating systems that require less maintenance and support faster turnaround times. The ingenuity and elegance that underpin these systems is incredible, especially as they are built with multiple layers of redundancy while maintaining lightweight design and robust maintainability. The test benches in our lab, shown in the image on this page, provide a platform for us to test and verify our spaceship software far in advance of flight, which is designed to significantly derisk and expedite our flight test program. On page seven, you'll see an image of the simulator where pilots are already testing our new flight control system.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

The partnership between our engineering team and our spaceship pilots is great to watch. The immersive hands on testing enabled by the simulator is also designed to derisk and expedite our flight test program as it enables our pilots to fly and refine hundreds of incredibly accurate spaceflight simulations well ahead of our first flight. As a shout out to our flight controls team and pilot corps, they just received the prestigious Jack Northrop Award from the Society of Experimental Test Pilots for Virgin Galactic's presentation of our fly by wire spaceship controls. On page eight, I'd like to touch on mechanical systems. These are the important moving parts within the ship, which include landing gear, pneumatic systems, valves and actuators, just to name a few.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Each of these systems has its own set of design, manufacturing and test requirements. This slide shows various parts of our landing gear. The mechanical systems team already has 95% of the landing gear parts complete and ready for assembly. Pages nine through 13 highlight some of the many carbon parts that have been built as well as examples of parts currently in the production cycle. The outer surfaces of the spaceship, built with incredibly strong heat resistant BMI carbon composite, are referred to as skins.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Here, you see images of wing skins, fuselage skins, and feather boom skins, as well as an image of the aft bulkhead, all of which are key structures that make up the spaceship. The image on page 14 captures some of our wing final assembly tools that are installed in our spaceship factory. High fidelity precision tooling, including these examples from the wing, allow for a much more streamlined assembly process, enabling us to shave months off our historical assembly time while assuring the quality and safety of our building process. This tooling also equips us to make additional spaceships quickly and cost efficiently as we grow and scale our fleet. Lots of exciting work is still ahead as we bring these new spaceships into service.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

We have detailed program plans for each element of the ship, which allow us to project both schedule and cost with reasonable fidelity. We do not, of course, expect every part of the program to be executed exactly as planned. Almost all large scale aerospace programs experience bumps in the road that weren't part of the original design. The key to good execution is being able to respond in a nimble fashion whenever these bumps show up, and our manufacturing team, along with our supply chain partners, have demonstrated outstanding ability to adapt around unexpected scenarios. A case in point materialized in our wing subassembly plan last month.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

One of the wing parts we expected to arrive at our spaceship factory in April was delayed, requiring us to replan the sequence of assembly. Because our assembly tools and processes allow for flexibility in the build process, we've been able to adjust our wing assembly order around the arrival of the late part. In this case, while wing assembly is now starting later than originally planned, the nimble adjustments from the team allow us to adapt to the change without impacting the critical path of the overall project. In addition to maintaining a quick nimble approach across our manufacturing effort, we build contingency or buffer into our schedule estimates, which we manage at the corporate level. This contingency planning provides us the flexibility to absorb unexpected scenarios in one area of the program without disrupting other workflows or macro program timelines.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Turning to slide 15. As you can tell, enormous progress is occurring across the company. It's fascinating and important work, but the volume is too great to do it justice in an earnings call format. For this reason, starting in June, we will begin publishing an in-depth series across our social channels that showcases how we build our spaceships. We believe this will be an engaging and exciting way to bring along our customers, our investors, and our fans as we build the spaceships that are designed to dramatically reduce the cost of commercial human spaceflight and open the door to wider access to space travel.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

We expect the series to debut on our social channels next month. As I shared at the outset of the call, our entire company is focused on bringing these spaceships into service in a safe, timely and cost efficient fashion. Before I hand the call over to Doug to talk about the financials of our spaceship program, let's turn to Slide 16 and touch on three commercial initiatives that are being planned now for execution in the future. First, I'd like to share some color on how we plan to reopen sales as we get closer to bringing our new spaceships into service. We expect to run a highly bespoke education sales process that will onboard new customers in distinct ways.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

This approach has several intended benefits. For customers, tailoring the number of new arrivals into our future astronaut community during each wave allows us to provide a white glove onboarding experience that will form the foundation of each customer's journey to space. From a yield management perspective, this allows us to adjust our pricing wave by wave. We expect to open the first wave of spaceflight reservations in Q1 of twenty twenty six, which we see as the ideal time to leverage the excitement leading up to the initial flights of our new spaceships. Specific pricing has not been set, although we expect the price will increase relative to our last price of $600,000 We expect the majority of people who will join in this first wave will be new customers, including both scientists and private systems.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

With that said, our experience flying Spaceship Unity has us optimistic about repeat business coming from the approximately six seventy five customers already on our manifest. As a case in point, all three of the private astronauts who flew on our last spaceflight, Galactic seven, have signed on to fly again once our new spaceships are in service. Second, we continue to advance the preliminary development work on our next spaceport, and we are midway through our feasibility assessment with the Italian government for a spaceport in Southern Italy. As we shared before, we see excellent potential in a spaceport located in either Europe or The Middle East. Moving to page 17.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Third, I want to share a bit more on our carrier ship platform. We've been asked on earnings calls in the past as to whether we plan to develop markets and revenue streams in addition to suborbital spaceflight. I've consistently shared that we first needed to focus our company, bring our new production spaceships into service, and deliver cash positive operations. While we still have much important work ahead of us to deliver our new spaceships in 2026, the progress we have already made is now allowing us to direct energy toward business development pursuits that could eventually lead to incremental revenue opportunities. We believe taking a more expansive view of our carrier ship platform may be one of those opportunities.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Last quarter, we discussed the potential for our carrier aircraft to be adapted for government and research use, given its unique ability to carry heavy payloads to high altitude. The need for an aircraft that can reach high altitude for long durations while lifting heavy payloads, which we refer to as a hail heavy aircraft, has existed for many years, and the volume of missions that could leverage this capability has been increasing. Turning to slide 18. Since last quarter, have connected with leaders within the Department of Defense, National Laboratories and Aerospace and Defense companies to ascertain the potential product market fit of our carrier aircraft capabilities with government customer needs. We've been encouraged by initial feedback, which has identified both existing and emerging missions that could potentially benefit from access to hail heavy support aircraft.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Examples of these missions could include airborne research and development testing, intelligence surveillance and reconnaissance support, command and control node capabilities, and multiple opportunities within the emerging Golden Dome initiative. In the near term, we plan to explore early steps, including cooperative research and development agreements as well as other R and D opportunities within the industry to showcase the missions our existing and future carrier ships could support. With that, I'll turn the call over to our CFO, Doug Arons.

[Doug Ahrens, CFO at Virgin Galactic]

Thanks, Michael. Good afternoon, everyone. Turning to slide 19 and our financial review of the first quarter. Revenue was approximately $500,000 from future astronaut access fees and event fees. Total operating expenses for the first quarter decreased 21% to eighty nine million dollars compared to $113,000,000 in the prior year period.

[Doug Ahrens, CFO at Virgin Galactic]

We remain highly focused on managing our expenses across all areas of the company. Consistent with the trend during 2024, we continue to see a reduction in operating expenses as our spending shifts from research and development to capital investments in manufacturing assets that can be used to repeatedly build spaceships. With production of our first two spaceships underway, we've also been capitalizing the components that are being manufactured or purchased. Capital expenditures for the first quarter grew to $46,000,000 compared to $13,000,000 in the prior year period. Adjusted EBITDA improved to negative $72,000,000 in the first quarter compared to negative $87,000,000 in the prior year period.

[Doug Ahrens, CFO at Virgin Galactic]

Free cash flow was negative $122,000,000 in the first quarter, within the range of our guidance. Moving to slide 20. We ended the first quarter with $567,000,000 in cash, cash equivalents and marketable securities. During the quarter, we generated $31,000,000 in gross proceeds to an at the market or ATM equity offering program. The ATM program remains in place both as a potential source of growth capital and as a means to bolster the balance sheet when appropriate.

[Doug Ahrens, CFO at Virgin Galactic]

Today, you will see some additional SEC filings from us about the program, but those are all just technical filings, and they all still relate to the same existing $300,000,000 program we entered in November 2024. The filings are not establishing a new or upsized program. Moving to our projection. Revenue for the second quarter of twenty twenty five is expected to be approximately $400,000 for astronaut access fees. Forecasted free cash flow for the second quarter of twenty twenty five is expected to be in the range of negative $105,000,000 to $115,000,000 This projection represents lower spending going forward as the required peak investment level is now behind us.

[Doug Ahrens, CFO at Virgin Galactic]

We further project that cash spending will continue to decline through 2025 as we complete this phase of investment. Moving through the final assembly and testing phase, we expect to continue converting some of our cash on hand into manufacturing assets and spaceships as we bring our initial Delta fleet into service. We anticipate that approximately half of our spending in 2025 will be for onetime capital expenditures for tooling, manufacturing capacity, and the production of our first two new Delta class spaceships. On our last call, I highlighted that our growth in capital expenditures is reflected in property, plant and equipment, or PP and E, on our balance sheet. We expect that trend will continue to play out in 2025.

[Doug Ahrens, CFO at Virgin Galactic]

At the end of the first quarter, we reported $249,000,000 in PP and E compared to $2.00 $9,000,000 at the end of twenty twenty four. With that, I'll turn the call back over to Michael.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Thanks, Doug. Closing on page 21. Q1 demonstrated strong progress advancing the build of our new spaceships and keeping pace with our plans to begin commercial spaceflight in 2026. I'm encouraged by the momentum and responsiveness of the teams across Virgin Galactic and our supply partners, and I'm looking forward to showcasing how we build spaceships in our new series that will launch next month. We are moving through the necessary steps to conclude the pre revenue phase of the company.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

The assets we are creating during this phase are tremendous, including the spaceships that will go into commercial service as well as the IP, tooling and manufacturing infrastructure that will be used to expand our fleet. We believe these assets will open up a powerful and profitable business model that will benefit from an industry leading cost structure, fixed cost leverage as we scale and an unparalleled customer experience. We're excited to see our new ships come to life in 2025, and we can't wait to begin flying our customers to space in 2026. Operator, let's open the call for questions.

[Operator]

Your first question comes from the line of Oliver Chen with TD Cowen. Please go ahead.

[Oliver Chen, Managing Director - Retail, Luxury, New Platforms Sector Head at TD Cowen]

Hi, Michael and Doug. It's really encouraging about ticket sales opening in first quarter twenty twenty six. How are you thinking about the total addressable market of $300,000 or more previously? And any thoughts you may have there? Second question is the free cash flow is encouraging, given that peak investments are behind you.

[Oliver Chen, Managing Director - Retail, Luxury, New Platforms Sector Head at TD Cowen]

What are your thoughts longer term in terms of the free cash flow burn reaching below $100,000,000 Or how would you think more medium to longer term there? And this would love any tactical thoughts if tariffs are impacting some of your material inputs at all. Thank you very much.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Thanks, Oliver. How about this is Michael. I'll take the first one and the last one. Doug, throw free cash flow over to you. So I don't think we have different inputs at the moment, Oliver, as to the macro $300,000 total addressable market and the growth of that.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

The analysis that went behind that a couple of years ago, thought was pretty solid by several of the investment banks that covered the industry. So I don't have any updates to that from proprietary research. I do believe that at the start of this, we are going to see tremendous amount of activity through the sales process, and that's why referral and repeat visitation is so important to us. We put in one note, you probably caught, I just thought, a nice piece of optimism on how powerful our experience is. We had three private astronauts on our last flight.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

We also had a Turkish government researcher on that flight. All three of those private astronauts have signed up again. It was that meaningful of an experience. So when I see the early years of this, I think we will grow, by sales and a heavy amount through referral and a decent amount through repeat. And so the amount we need to tap into the top of the funnel, those 300,000 individuals, is really pretty light at the beginning, and I think that will grow over time as we scale the fleet up.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Doug, before I give it to you, I talked to our Head of Supply Chain a couple of times both in advance of this call and just following along with tariffs. Most of our work, as you'd expect, is U. S. Sourced. As you go multiple layers down the supply chain, some of the raw materials can come from outside of The U.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

S. Because we've been working on this for a while, we have ordered all the long lead materials in advance. So all the stock we need for these first two ships is pretty much already in. There are small elements but relatively de minimis into the economics here. Packing and things we ship from we ship all of our parts, and there's a lot of wood in the crates.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

And wood is up because wood is coming from Canada, things like that. But most of the meaningful expenditures that could have been subject to tariffs have already been purchased. So Doug, on free cash flow?

[Doug Ahrens, CFO at Virgin Galactic]

Thanks, Michael. And thanks for the question, Oliver. So yes, we're pleased that the peak spending is now behind us. And that's because we've been investing in tooling and all the R and D before that. But we showed a lot of pictures of tools that have been already built, and they're in the factory. That's there's a onetime investment, so that allow us to to make copies of the spaceships now with that.

[Doug Ahrens, CFO at Virgin Galactic]

But that's that's where the peak spending was coming from. So now as we go forward, we still have more investments to do as we finish that and really invest in these remaining two spaceships. But what that gives us is a trend where the spending the required spending by quarter goes down. So the trend through 2025 is a declining spend trend. And as you noted, yes, we're still targeting to be below $100,000,000 spend by the fourth quarter of twenty twenty five.

[Doug Ahrens, CFO at Virgin Galactic]

And then we ask you asked about long term. We do expect that beyond that, the spending level will continue to decline into 2026. And then we start to cross over because in 2026, we have our two spaceships in operations. We start to get cash inflows ahead of the space flights, and that's when it turns over to a positive cash flow business model. So we're pleased with that outlook.

[Doug Ahrens, CFO at Virgin Galactic]

Looking much longer term, I can refer you back to the economic model that we've shared in past calls. That's still valid. That's still what we are projecting that with two spaceships in service and with the launch vehicle EVE, we expect to be able to get to a revenue level of $450,000,000 a year in steady state, and that generates $90,000,000 to call it $100,000,000 of EBITDA. And that can be all cash flow unless we choose to plow that back into building more assets. That's the different phases of our cash flow projections, Oliver.

[Oliver Chen, Managing Director - Retail, Luxury, New Platforms Sector Head at TD Cowen]

Thanks a lot. Very helpful. One follow-up. Michael, you have an extensive background from Disney and luxury here at TD Cowen. Would just love your latest views on anything that's changed or how you're thinking lately about customer engagement, experiential and the lifestyle brand aspect of what you're doing. Thank you.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Only thing I'd add on that note, Oliver, is it's in sight, and we're really excited as a company to start to make Virgin Galactic a real name in that luxury and aspirational brand space. We have everything we need in kind of what this industry is, what the quality of our product is, the aspiration and exclusivity of the product, and now we're building the incredible machines that will allow us to do it. So we're excited to step in and be a real player here. Thank you. Best regards.

[Operator]

Your next question comes from the line of Greg Mr. Conrad, your line is now open.

[Greg Konrad, SVP-Equity Research at Jefferies Financial Group]

Good evening.

[Greg Konrad, SVP-Equity Research at Jefferies Financial Group]

Maybe just to follow-up on the reopening of sales in Q1. You mentioned a first wave, but just given how you're thinking about future flight cadence, any color in terms of how you think about the size of that first wave? And then what is the ideal backlog just given that flight cadence? You were at 1,000 before you started flights the first time. Like how do you think about the ideal size of backlog given the overall market size?

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Thanks, Greg. I think having a one to two year backlog is appropriate. I think once and and that's consistent with where we've been. Once you're past two years, I think people are, waiting a little longer than is helpful. And, technically, you need a month of backlog and it's just fine.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

But I think having a solid backlog is better. I also think having a year's worth of backlog allows for greater flexibility from a yield management standpoint. So what we're trying to do now is we start with Waves because we will be putting our new ships into service. We will start them they're all expected to fly twice a week when we have the carrier ship capacity to do so. And we expect in general to be able to fly 125 flights over the course of the year.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

So we'll work to over hit that, but that's kind of our targeted numbers. So at six people per ship, 125 flights a year, that's the capacity that we'll, I'll say, target from an annual point until we expand our fleet. So that means we want to have six times 125 that many people signed up on a rolling basis a year in advance. The question really becomes what price point do we want to bring those people in as our flight rate moves forward. That's one of the benefits of Waves from a business standpoint is we can look at the value we're creating.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

I think we'll get continued referral and excitement. I do think that will continue to expand the demand pressure against the existing fleet and we can think about pricing appropriately there. The other thing with going in waves, which is super important to the customer experience, we're not just bringing people up and down the space. This is a life experience. It's a life journey, and we want to bring people in from the moment they sign on in a way that shows them this is something that is unique in the world, and that experience starts from the moment they sign up.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

If we just kind of throw the doors open and and can't handle the volume or, ration the volume coming in, it makes it harder for us to give that white glove treatment to each and every individual astronaut that joins in. So that's why we do it from a customer standpoint. Business wise, it allows us to yield manage and stair step pricing up as we go along.

[Greg Konrad, SVP-Equity Research at Jefferies Financial Group]

And then as a follow-up, you mentioned you were about halfway through a feasibility study for a second space port in Italy. Can you maybe talk about what some of those main gating factors are in terms of establishing feasibility? And do economics play into that decision in any way, whether that funds in from Italy or how that gets funded?

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Sure. So I'll talk to you from our side, from the Italian side. What we're doing right now is establishing clarity of what airspace would be needed is a very important element there. So there's an Air Force base that is in the Puglia region of Italy that's been designated by the Italian government as a spaceport region. President Maloney has designated a nontrivial amount of funds into helping move that region into a horizontal, like a runway based spaceport.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

So there's good government support in that area. Where we fly is dependent upon lots of factors. And so a lot of what's going on is the specific flight paths, studying the wind and the weather patterns both across seasons, across days and intraday, across the hours. Because depending upon prevailing winds and other factors, we would fly different flight paths, obviously originating and returning to the same runway, but going in different ways. That has different implications to what airspace is either available or might need adjustment within the overall Italian airspace.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

So that's the heaviest one that we're doing right now. I think when it gets down to economics, the runway is already there. It turns into facilities and hangars for ships out of spaceport and a place for us to train our customers along the way, obviously, than building the ships that would operate in there. Those are the primary, I'd say, upfront investment elements of the new spaceport.

[Greg Konrad, SVP-Equity Research at Jefferies Financial Group]

Thank you. You're welcome.

[Operator]

Your next question comes from the line of Myles Walton of Wolfe Research. Please go ahead.

[Gregory Dahlberg, Senior Associate, Equity Research at Wolfe Research, LLC]

Hi, guys. This is Greg Dahlberg on for Miles. Thank you for the time. I kinda wanted to dig a little bit deeper into the repeat business aspect just because you guys have been, you know, emphasizing the importance here. I was wondering, is there like a maybe a win rate you're assuming in your medium, long term planning assumptions for repeat business?

[Gregory Dahlberg, Senior Associate, Equity Research at Wolfe Research, LLC]

I guess just trying to gauge what it could look like when the cadence of flight starts to really kick up. Thank you.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

I think early days, obviously, Greg, in being able to predict. Have a relatively small number of flights. And so the statistical significance is going to be a bit limited there. So more of what we as far as statistics go, we have, I'd say, the double digits, low to mid double digits of people who have flown that have raised their hand and want to do a repeat with us percentage wise there. And but I think it's hard to, you know, really pull that as the statistical data point to go forward.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

What I look more closely at is how meaningful was the experience When I have a chance to talk to people who have flown with us and I get a chance to talk to them afterwards, how meaningful has it stayed? How relevant is this? How important is this in their ongoing life? How much are they talking about it, sharing about it? And just ask, is this something you would like to do again?

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

And if you'd like to do it again, would you like to do it with people you know, your friends, your family, buddy group, whatever that is. And the feedback I get is very consistent in, I would love to do this again. And so then I think it depends upon the individual and where their economic situation stands as to whether this is something that they would like to prioritize sooner or later. So we'll see how that all plays itself out, but I do think it's a meaningful piece. What's probably more meaningful is when you have a customer experience that's this powerful is the referral factor.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

Right? Because all all the people that our flown astronauts talk to become potential customers for us. And a lot of our flown astronauts know people within that kind of 300,000 total addressable market, and that makes a more easier customer acquisition process through the referral effort.

[Gregory Dahlberg, Senior Associate, Equity Research at Wolfe Research, LLC]

Got it. Thank you for the time.

[Michael Colglazier, President and Chief Executive Officer at Virgin Galactic]

You're welcome.

[Operator]

If there are no further questions, ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Participants

Executives

• Eric Cerny, VP - Investor Relations
• Michael Colglazier, President and Chief Executive Officer
• Doug Ahrens, CFO

Analysts

• Oliver Chen, Managing Director - Retail, Luxury, New Platforms Sector Head at TD Cowen
• Greg Konrad, SVP-Equity Research at Jefferies Financial Group
• Gregory Dahlberg, Senior Associate, Equity Research at Wolfe Research, LLC