Virgin Galactic(SPCE) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue for Q4 2023 was $2.8 million, driven by commercial space flights and future astronaut membership fees [21] - Total operating expenses for Q4 2023 were$117 million, down from 154 million in the prior year, primarily due to lower R&D and SG&A expenses [21] - For fiscal year 2023, revenue was 6.8 million, with total operating expenses of $538 million, compared to$502 million in the prior year [22] - GAAP net loss for 2023 was $502 million, slightly higher than the$500 million loss in the prior year [22] - Cash, cash equivalents, and marketable securities stood at $982 million at the end of 2023 [23] - Adjusted EBITDA for Q4 2023 was negative$84 million, an improvement from negative $133 million in the prior year [40] - Free cash flow for Q4 2023 was negative$114 million, better than guidance due to timing of supplier payments [41] Business Line Data and Key Metrics - Since May 2023, the company has flown 24 people to space, bringing the total number of astronauts to 32, representing nearly 5% of all astronauts in human history [7] - The current backlog of future astronauts is approximately 725, with new sales not planned until closer to the launch of the Delta fleet [8] - The entry price for private astronaut seats has increased from $450,000 to$600,000, aligning with research flight pricing [8] - The Delta class spaceship will carry six astronauts, a 50% increase in seating capacity compared to Unity, which carries four [13] - Delta spaceships are expected to fly 8 times per month, compared to Unity's once a month, potentially generating 12x the revenue per ship [14] Market Data and Key Metrics - The total addressable market (TAM) for private astronaut space travel is estimated at 300,000 individuals, growing at an annual rate of 8% [24] - A fully operational spaceport supporting around 2,000 aspirants per year would represent less than 1% market penetration [24] - The company expects to generate $1.1 billion to$1.4 billion in annual revenue per spaceport at 300-400 flights per year, assuming an average ticket price of 600,000 [44] Company Strategy and Industry Competition - The company's vision is to make space more accessible and transformative, with a focus on scaling the business through the Delta class spaceships [4][5] - The Delta fleet is expected to drive long-term growth, with increased capacity, flight rates, and cost efficiency [13][14] - The company is leveraging aerospace industry suppliers like Bell Textron and Qarbon Aerospace for the development and assembly of Delta spaceships [16] - The company sees significant upside potential in its business model, particularly with the Delta class ships, which are expected to drive excellent contribution margins [10] - The company is focused on achieving cash flow positive operations by completing the design, build, and test work for the Delta fleet [11] Management Commentary on Operating Environment and Future Outlook - Management highlighted the successful launch of commercial operations in 2023, with six flights in six months, demonstrating safety, reliability, and repeatability [46] - The company is transitioning from R&D and prototype roots to a manufacturing and consumer-driven space company, with Delta class ships expected to enter service in 2026 [85] - Management expressed confidence in the schedule for Delta, citing lessons learned from Unity and the use of digital models and integrated assemblies [36] - The company plans to expand its fleet and add multiple spaceports globally, with the next spaceport expected around 2029 [33] Other Important Information - The company has a strong balance sheet with 982 million in cash, cash equivalents, and marketable securities, providing sufficient capital to bring the first two Delta ships into service [23][43] - The company is building a final assembly spaceship factory in Phoenix to support future expansion [10] - The Delta class spaceships are expected to have a contribution margin of over 75%, with ticket prices now at $600,000, up from$450,000 [57] Q&A Session Summary Question: CapEx and R&D Spend for 2024 - The majority of spending will shift to CapEx in 2024, with total cash spending expected to be lower than 2023 as the company moves into production [30] Question: Spaceport Expansion Timeline - The next spaceport is expected around 2029, with potential locations in the U.S. or doubling infrastructure at Spaceport America [33] Question: Delta Class Contribution Margin and Pricing - The contribution margin for Delta class ships is expected to exceed 75%, with ticket prices now at $600,000, up from$450,000 [57] - The company sees strong pricing power, with recent openings sold at close to $1 million, reflecting the high value of the experience [59] Question: Spaceport Experience and Community Engagement - The company is enhancing the spaceport experience, with plans to expand hospitality and community engagement as flight cadence increases [63][66] Question: Static Testing for Delta Class Ships - Static testing for Delta class ships will occur in 2024, with major subassembly testing expected later in the year [109] Question: Design Changes Due to Pin Detachment - No significant design changes are required for the mothership or spaceship following the pin detachment incident, with only minor adjustments to the retention mechanism [114][127]