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spk04: Good afternoon. My name is Sarah and I will be your conference operator today. At this time, I would like to welcome everyone to Virgin Galactic's second quarter 2023 earnings conference call. 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, press star one again. I will now turn the conference over to Eric Cerny, Vice President of Investor Relations.
spk06: Thank you. Good afternoon, everyone. Welcome to Virgin Galactic's second quarter 2023 earnings conference call. On the call with me today are Michael Colglaser, Chief Executive Officer, and Doug Ahrens, Chief Financial Officer. Following prepared remarks from Michael and Doug, we'll open the call for questions. Our press release and slide presentation that will accompany today's remarks are available on our Investor Relations website. Please see slide two of the presentation for our safe harbor disclaimer. During today's call, we may make certain forward-looking statements. These statements are based on current expectations and assumptions, and as a result, are subject to risks and uncertainties. Many factors could cause actual events to differ materially from forward-looking statements made on this call. 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. With that, I would like to now turn the call over to Michael.
spk10: Good afternoon, everyone. Thank you for joining us on our second quarter earnings call. We are thrilled to have launched commercial service and look forward to sharing more about that on today's call. Turning to our agenda on slide three, I'll start today's call by highlighting the activity around our space flights during the quarter and then discuss the progress we are making on our Delta class ships before turning the call over to Doug to share insights into our financial performance. Following our prepared remarks, we will open the call for your questions. Turning to slide four, we returned to space in late May with a spectacular Unity 25 space mission. The Unity 25 crew spent four days in training and preparation at Spaceport America before boarding VSS Unity and rocketing to space at nearly three times the speed of sound. The mission was an incredible success. Not only did it validate the efficacy of our astronaut training program, it also affirmed the absolutely stunning experience Virgin Galactic provides. Moving to slide five, on June 29th, we transformed VSS Unity into a suborbital space lab with the launch of our first commercial space mission, Galactic One. The mission brought members of the National Research Council of Italy and the Italian Air Force to space, along with 13 research payloads. Galactic One was an outstanding achievement for our customers. as the Italian astronauts and ground-based crew successfully executed all 13 of the research experiments. Feedback from our Italian partners was extremely positive, and the Italian team members received congratulatory notes from across their country, including from Italian Prime Minister Maloney. As highlighted on slide six, our space flight system and flight profile provide researchers with a long list of benefits. Our spaceship cabin is modular and can be adjusted to various needs. Experiments can be structured as autonomous payloads, human-tended research racks, and even as research studies designed to be worn by the crew themselves. Our unique runway takeoff and landing enables research payloads to be loaded immediately prior to flight, minimizing time that experiments spend outside of the lab and providing researchers with expedited access to their data after landing. Our ability to provide unprecedented access to space for researchers, government agencies, and universities means more opportunities for microgravity research and more expansion of human knowledge. Historically, microgravity research has required accepting the very long lead times and extremely high cost of accessing the International Space Station, or accepting the limited continuous microgravity duration offered by parabolic flights. We believe our suborbital space lab product hits a sweet spot, and we are pleased to offer researchers and scientists access to several minutes of continuous microgravity that will allow for deeper and more frequent study of microgravity's effects on the human body, fluid dynamics, plant food growth, and much more. As we now begin to build out this product vertical, we believe the combination of extended time in microgravity Capability for researchers to accompany their experiments in space and relatively favorable cost positioning will enable the attraction of both new and repeat research customers. On to slide seven. While Galactic One showcased our research product, Galactic Two is going to set the stage for a new era of suborbital human spaceflight that will dramatically broaden access to space for private individuals. We are just over a week away from the planned launch of this historic flight. The Galactic 2 crew provides a glimpse into the breadth of access that Virgin Galactic will enable as we scale our fleet and expand our business. Their ages range from 18 to 80. They hail from two of the more than 60 countries already represented within our future astronaut community. They have widely diverse reasons for wanting to travel to space. and their journeys will have widely diverse and positive impacts within their respective communities. Along with our pilots and astronaut instructors, they showcase that commercial space is opening the door for opportunities that are within the aspirations of all humans. Similar to Galactic One, we will be live streaming the Galactic Two mission. The live stream footage and widespread media coverage from these flights helps to showcase our product and build awareness of the safety of our systems, as well as the unique and highly differentiated space experience delivered by Virgin Galactic. I encourage all of you to join us on August 10th for the live stream of this historic mission at virgingalactic.com. As we go forward with flying our customers to space, the majority of our webcast will be for private viewing as we focus our efforts on customers and their guests. Turning to slide eight, we are building consumer interest and confidence by operating our commercial space line safely and consistently on a planned monthly cadence. We are executing on that objective. The performance of our space flight system over the last two flights has been excellent, and we've been very pleased to see both Spaceship Unity and our mother ship, Eve, perform so predictably following their enhancement programs. The enhancement program was successful, and the improved ship performance now enables us to plan our flight dates with reasonable advance notice to our customers. Regular flight cadence gives us a meaningful database of feedback around both the astronaut experience and overall spaceflight performance. Monthly flights also provide valuable maintenance data with which we can continuously improve our operation. Moving to page nine, we continue to progress the development of our Delta-class spaceships, which will drive the revenue growth and profitability of the company as we scale the business. Our production roadmap for the Delta class remains consistent with what we shared last quarter, with 2023 focused on completing designs for the Delta spaceships, building the required tooling, and beginning fabrication of structural components for the ships. As we move into 2024, we anticipate completing the assembly and equipment installation designs, completing parts fabrication, and initiating the assembly phase at our facility in Phoenix, Arizona, utilizing the sub-assemblies from our suppliers. We continue to operate on a timeline that supports testing in 2025 in advance of the first Delta ship entering commercial service in 2026. Delta ships have been designed to have a relatively low unit production cost and have material improvement in flight cadence relative to our initial ship, VSS Unity. The Delta development process has yielded some excellent enhancements to the ship's architecture, particularly with regard to manufacturability and maintainability. and we are tracking well against our primary ship performance criteria. Before I turn the call over to Doug, I want to convey how incredibly moved our astronauts have been following their flights. Across the board, whether it be research flights or private astronaut missions, Virgin Galactic is delivering an incomparable experience. It is exciting to be flying to space on a regular basis, and we also know that we have many more milestones ahead of us. We continue to make progress on our Delta class shifts as these vehicles are going to enable us to deliver this same incomparable experience to more customers at a faster rate.
spk07: With that, Doug, let's turn the call over to you. Thanks, Michael. Good afternoon, everyone. Turning to slide 10 and our financial results for the second quarter. We generated revenue of approximately $2 million driven by a commercial space flight during the quarter and future astronaut membership fees. Operating expenses were $141 million compared to $110 million in the prior year period. The increase is primarily attributable to a $24 million increase in R&D costs tied to engineering work for our future fleet. SG&A increased $7 million. We reported a gap net loss of $134 million compared to $111 million in the prior year period, primarily driven by higher R&D costs. Adjusted EBITDA was negative $116 million in the second quarter compared to negative $93 million in the prior year period. Free cash flow was in line with our guidance at negative $135 million in the second quarter compared to negative $91 million in the same period last year. Moving to slide 11. At the end of the second quarter, cash, cash equivalents, and marketable securities on the balance sheet totaled $980 million, a sequential increase of $106 million from the first quarter of fiscal 2023. During the quarter, we raised $241 million in gross proceeds as part of our at-the-market or ATM equity offering programs. With the start of commercial service, you will see some changes in the presentation of operating expenses when we report third quarter results in November. Going forward, the customer experience category will be expanded and renamed space line operations, accounting for costs associated with operating a commercial space line. These items include components of space line technical operations and space line missions and safety, which were previously presented in R&D or SG&A. This recategorization does not change aggregate operating expenses. Moving to slide 12 in our financial outlook. With commercial service, we anticipate a monthly flight cadence beginning in August, with two commercial space flights in the third quarter and three commercial space flights in the fourth quarter. Given the flight cadence and manifest details, we forecast revenue to be approximately $1 million in each of the third and the fourth quarters. Our capital expenditures for the third quarter are expected to be between $10 million and $15 million. The growth in CapEx is driven by the construction of the Spaceship Assembly Facility in Phoenix, as well as technology used in the design process for our Delta-class vehicles. We continue to expect our forecasted free cash flow for each of the third and the fourth quarters of 2023 to be in the range of negative $120 to $130 million. With that, I'll hand the call back to Michael for some closing comments.
spk10: Thanks, Doug. In closing, the second quarter was an important one for us. We celebrated a critical milestone for the company, having safely and successfully launched commercial service with extremely satisfied customers. We are very excited to be just over a week away from our second commercial spaceflight, with Galactic 2 flying the first of approximately 800 customers with reservations. We look forward to delivering this transformational experience on a recurring basis, and we remain on track to scale the business in the future with the delivery of our Delta-class fleet. Finally, before we end the call today, I want to take a moment to address the passing of our good friend and chair of the board, Evan Lovell. Evan was a champion for our mission and for the Virgin brand. We continue to keep his family in our thoughts and will forever be grateful for his leadership and his time with us. Our entire board has been incredibly helpful, and Ray Mabus, our lead independent director, has seamlessly stepped in as our interim chair. Ray brings extensive public sector experience to our board, having served as U.S. Secretary of the Navy and as the Governor of Mississippi. With that, we'll turn to questions. Operator, we're ready to begin the Q&A portion of the call.
spk04: Thank you. If you have a question, please press star 1. If you wish to withdraw your question, you would please press star 1 again. Your first question comes from the line of Greg Conrad with Jefferies. Please go ahead.
spk01: Good evening. Hi, Greg. Maybe just to square the revenue comments, I mean, you did over $2 million in Q2. You talked about $1 million in Q3 and Q4 on two and three flights. What's included in that? I would think they'd be a little bit higher just given the space flight activity.
spk07: Hi, Greg. This is Doug. So in Q2, we had the Italian flight, which was a research flight, so a little higher revenue. Going forward for Q3 and Q4, when we look at the manifest details, it depends if it's going to be astronauts or research flights. So depending on what we do with that mix in the manifest in particularly the fourth quarter, we may see higher revenue. So if we look at the potential here, it's probably going to be closer to $1 million in Q3. And if we do research in the fourth quarter, it would be probably over $2 million.
spk01: And then just on the R&D, you talked about the restatement in Q3, but R&D stepped down about $25 million sequentially, capped back up a little bit. Is that Q2 R&D kind of the right level X the restatement going forward, just given the rework and reentry of E now being complete?
spk07: Yes, you're going to see some things changing on the income statement because the R&D will start to move over into spaceline operations. So things that were historically there will now be in the operations category, which basically represents the cost of operating the spaceline. So you'll see our technical operations group go over there, space line missions and safety. This is all the maintenance and ground support and safety and pilots and all of that. So a lot of movement. But in general, what you're still seeing without that restatement is R&D is continuing at this level for a while because we're in the design phase of the Delta class, and that effort is continuing for the foreseeable future into 2024. So without that reclass, you'd still see the R&D progressing at these similar levels.
spk12: Thank you.
spk04: Your next question comes from the line of Oliver Chen with TD Cowan. Please go ahead.
spk09: Hi, it's Tom on for Oliver. Just a question on how ticket sales are trending, especially after the most recent flight, and then how you expect that to trend forward. And additionally, if you could just remind us on how long the lower-priced tickets are expected to last relative to the price increase.
spk08: Hey, Tom.
spk09: Michael here.
spk10: So I think you may recall we have – I'm sure you recall – we have around about 800 people in the queue. And with the monthly cadence off of our first big ships, even Unity, and until we get the Delta ships going in 26, that turns into generally a four-year backlog, which is a little longer than we prefer. I think a two to three-year backlog is the appropriate place for that. So you're going to see us, I'd say, use these early flights to add confidence in our system, to add confidence in the safety of human space flight on suborbital journeys, to see, I think you're going to hear excitement, really impressive excitement from the people who fly and as those stories come back. And that combination is purposeful for us because it will build confidence in this new industry, confidence in what this can be, and aspirations and excitement to come. And so we're going to let that build a little while because we have a backlog that's a little longer than we would prefer. And then as we start to get a little closer in towards our Delta ships ready to come online, we will open up in successive tranches of sales. And I think you'll see that from us. That lets us manage the price points at which we release inventory. And we intend, you know, we will be supply constrained for a little while. So it also helps us manage and you'll manage the supply as we put that out. So we're going to not have sales outside of what we've talked about before. We've continued to allow for research sales to play forward. And we have a small amount of sales available through the Virtuoso Travel Network. you know, anybody who kind of wants in will probably go through that channel over the next, you know, reasonable period of time. And then, like I said, as we get closer to being able to have the Delta fleet scale up, then you'll see us open the door with larger and larger tranches, always keeping a two to three year backlog along the way. The second thing I think you asked was, how do I think about the price points? So, of the 800, The first 600 or so of those, the vast majority were in between $200,000 and $250,000, ranging from tickets that were sold all the way back in 2005 up through when the company went public. We then brought that price point down and opened up a price point of $450,000, and so roughly you've got another 200 seats in at $450,000. The research flights we sell which are fewer in number, and we expect plus or minus around 10% of our volume of the first thousand, those will be at, on average, $600,000 per seat equivalent. So that kind of gives you a mix of these early flights. We have effectively, outside of the Virtuoso seats, closed at the $450,000 price point. When we do reopen up sales, we haven't announced pricing for that. But we have a share we don't expect that to be less.
spk09: Great. That's very helpful. And then a follow-up on the research flight demand. Could you just talk a little bit about the drivers of demand for research flights and then what factors lead you to prioritize research flights relative to ticketed passengers for tourism? Thanks.
spk10: Hey, I'll take the last part first and then go forward. On the whole, we're going to prioritize the vast majority of our inventory to private astronauts. I think that's the broad vision that's always been at the founding of this company and kind of core to our vision of opening space and access to space up for individuals who aspire to do so. We do believe research is important. We believe research matters to the ongoing growth of human knowledge. We believe that research is a profitable business along the way. We also believe research appropriately adds, I think, a halo, a positive halo over the top of commercial spaceflight. And so for all those reasons, you know, we've allocated generally 100 of our first thousand flights, about 10%. And I would like to see that kind of be in that range as we grow. Now, what are the factors that are here? You know, mentioned briefly in kind of prepared remarks, there's, kind of two ends of the spectrum that are currently available to people who want to do microgravity research and microgravity research is hugely important as kind of humanity in large starts to work to spend more time in space for all the various reasons that are out there. So there's a lot of research needs to be done. It has either been an experiment that goes to the space station, which is long time to get in line because there's not that much capacity for that it's very expensive to get it there and you kind of have one shot to make it work and that puts a lot of pressure on those experiments to make them very robust and you have one one experiment that lasts a long time on the other end of the spectrum you have parabolic flights at the higher end of the current piece which on average give you about 20 seconds of microgravity it's not as pristine microgravity as the planes can bounce around in the air a little bit. And you can get repetition on that, but you just don't have enough length of time, or sounding rockets are very short, or drop towers are very, very short. And so what we heard, you know, coming back from our Italian partners on this and from other researchers we've talked to, is there's a sweet spot that suborbital space is enabling. And the flexibility that our spaceship provides is we can either keep or remove seats, add payload racks in or not, allow those to be tended by the researchers, or actually flown, research experiments flown on the astronauts themselves, hits this middle ground that has just never been available before. And so now we can provide minutes of very clean microgravity time. And that allows not only for a wider range of experiments that could go up, But because our cost price points, especially compared to getting to the space station, are so much less, now researchers can actually plan for a sequence of experiments or repeating experiments with slightly different parameters as they learn more. And usually those are on the way towards either a larger piece that will go to the space station or eventually the moon, or sometimes they are just, they can get everything they need through us. So those are the parameters that people need. People who buy those are heavily government and government funded institutions. And so what we're doing now is taking the success of this first flight, putting that into a kit that all those researchers and government agencies can use in their own appropriations discussions, U.S.
spk08: government and other governments across the globe.
spk04: Your next question comes from the line of Peter Osterland with Truist Securities. Please go ahead.
spk11: Hey, good afternoon. I'm on for much more this afternoon. Appreciate you taking the questions. Um, so first I just wanted to ask, uh, appreciate the color you've given on pricing, but just kind of following up on that in this timeframe where you're operating just with unity is half a million per flight about what you're expecting on average for civilian flights through 2025. Or are there any considerations related to number of passengers per flight on these first couple flights that are different from what you'd expect on average as you kind of get into 2024, 2025?
spk07: Sure. So when we look at the capacity of Unity and the ticket prices that we're flying these days, you would expect to see for the near term about 600K per flight because there is one seat allocated for an astronaut trainer in the near term. As we move into 2024, we expect to open up that fourth seat, and so then you would see four times $200,000 or $800,000 in revenue per flight is what we're projecting. And if we get research seats mixed in there, you would see some uplift from that.
spk11: Very helpful. Thank you. And then as a follow up, just wanted to ask under fleet development activities, have you experienced any challenges or surprises that you'd call out either in terms of cost, labor or design challenges that might be different from what you expected at the beginning of the year? Or has it mostly just been on track up to this point?
spk08: No, I haven't seen surprises that are here.
spk10: Aerospace in general is you know, growing and competition for engineering roles in certain types of fields remains healthy. The defense industry has more pressure upon it for everything that's going on with the war in Ukraine. And so, you know, we continue to hold our own, I think, against that. And we have an incredible group of engineers that are delivering against this. So that part, I would say, is just kind of normal for all aerospace that's going on. and we've had i think really pleased relationships uh with our delta suppliers here so in fact uh we've got some of them on site today from both bell and carbon and that's that's been really good we are working with them um it's not new technology but more state of the industry technology of using uh we'll use the word digital thread you may hear digital twin but uh design and uh uh software that allows us to go both for the design phase into the parts the tooling and manufacturing phase eventually all the way to maintenance and so ensuring that all of our teams whether that's ourselves or our partners are facile with that software moving through is something that we put a lot of training into but again not surprising so we are keeping great focus on this obviously each time we talk about the delta ships we reiterate this is where The business model depends. This is where we ramp both in cadence and in ability to have a relatively low cost on the variable production unit cost of those ships. And they're super important, so all attention is on it, and we're going to keep it that way.
spk08: Great. Thanks a lot for taking the questions. Thanks, Peter.
spk04: Your next question comes from the line of Matt Akers with Wells Fargo. Please go ahead.
spk12: Hey, guys. Good afternoon. Thanks for the question. I wanted to ask just your latest thoughts on Imagine, and I think you've described that as kind of option value that you could activate at some point. Now that you've got Unity flying, is that something you could look to exercise at this point?
spk10: So Imagine is, as you said, we've kind of kept it as an option for us, and it's going to remain as an option for us. The picture, you know, page nine, I think, of the accompanying deck, which was talking about our Delta-class ships, that image is actually an image of Imagine. And we use it because Delta is derived from that base. And there are many things that we've already been able to benefit from in evolving the production model ship from Imagine. The reasons that we put it, you know, kind of off to the side is is because the engineers that we have focused on this early design phase for the Delta ships are the same types of engineers that we would have through the testing phase of Imagine. A lot of flight sciences, a lot of avionics work, areas like that. And we need those people focused up front on Delta so that we can get the momentum of Delta into the supply chain that we've built. At the time when those key engineers have kind of completed that and we're kind of well down the path towards Delta, the production, the build and production of those Delta ships is pretty quick. And the way in which we are not only going to learn through flight test, but we're also building, as you would expect to see in a rapid commercial aerospace development program, We are building, you'll hear the words iron bird or a static test article. We're building systems that are on the ground that can allow us to very rapidly move through design elements. And, you know, we're wind tunnel testing the Delta ship actually this month. So a lot of that allows us to have a relatively abbreviated flight test program. And so when you hear us, we're doing flight testing in 25 and allowing the first Delta ships into commercial in 26. we're kind of at a point where they're almost outpacing Imagine at that point. So we are going to keep Imagine. It's still here with us, and we have it secured and ready, but it is likely going to be used in service of the Delta program as opposed to, hey, we're going to turn our attention over to Imagine and get that going. And again, that allows us to anchor our technical operations, our flight support and mission control group, on one consistent vehicle, which is the Delta ship. And then as we have multiple of those ships, it's the same engineering base, it's the same maintenance manual, so it's the same program.
spk08: And that will allow for a more efficient operation. Got it. Okay, thanks for the call. I'll leave it at one. Thanks, Matt.
spk04: Your next question comes from the line of Christine Leweg with Morgan Stanley. Please go ahead. Great. Hey, guys. Good afternoon.
spk09: Hi, Christine.
spk02: You mentioned the ability to flex cash burn by controlling the timing for next-gen motherships. Can you provide any color to, you know, your current thinking around the timeline?
spk07: Yeah, so that strategy that we outlined in the last call is still consistent with what we're looking at today, again, because we're pleased with how EVE is performing. after the enhancement period we're doing, or we did, so that now we see Eve continuing through the Delta flight test program. So we are benefiting from that. So because of that, we are still anticipating that we will be working on Delta first and getting through some remaining design elements and then moving on to the parts fabrication and rolling off of that over to the next generation mothership program. So it's a lot of the same engineers again. So it allows us to stagger the engineering resources and the focus of the company from one program to the next. So that would be in the following year. So 2024 is when you'd see the mothership program start to pick up more heavily as we roll off of the initial phases of the Delta program. So that's still consistent with what we were planning before.
spk10: And then just as Michael, Christine, just final continual thought on that is that allows us to bring these additional motherships in at this kind of sequence when we're building the volume of our Delta fleet. So that way, right about the time that Eve will tap out from a capacity standpoint, we would be bringing on new motherships at that point to manage the scale of the fleet.
spk02: Great. Thanks. And then also, after you guys change your pricing structure to the $450,000 for the passenger flights and then you've got $125,000 in a fully refundable deposit, can you discuss any cancellation requests that you've received so far and how sticky has been the orders that you guys have received to date?
spk08: So we have a limited number of cancellations kind of year over year.
spk10: The largest was not unexpectedly way back in 2014. And we have not seen an, I'll call it an out of line uptick in any of that. Where I get the most questions on that particular topic was following the Titan experience. And hey, did you see any fall off associated with all the media around that? We did not, in fact. We've heard from many of our future astronauts. They are very clear, especially those who have been with us a long time, about everything that goes into the safety of this platform. And they were able to talk that through with themselves and others. And so we've not seen any dropouts due to that either. You'll see some people drop for not often, but sometimes it'll be for economics. Sometimes it can be for medical reasons or health reasons. And then that's why you've heard us say we've, you know, keep some house seats there. And so what we're doing is generally replacing those as, you know, if somebody falls off, we can replace, you know, onesies and twosies back on the way. So hopefully that gives you some color window into those.
spk02: Yeah, great. Thank you for the color. Thanks.
spk08: You're welcome. Thanks, Christine.
spk04: Your next question comes from the line of Michael Lesshawk with KeyBank Capital Markets. Please go ahead.
spk00: Hey, good afternoon. I wanted to start on the cash balance that you're at today. And just as we think about some of the optionality that you have with your common stock offerings, what level of cash and marketable securities are you comfortable with? And do you expect to maintain that position of around a billion for the foreseeable future?
spk07: Yeah, we're very pleased with the balance sheet right now and the strength there and our ability to have access to the capital markets. It's been great. So, yeah, we are approximately a billion dollars today, and we like where we are. This gives us the flexibility to invest in these programs that we see are going to generate really high returns. and gives us a pretty good runway. So we like where we are, and we fully intend to keep our balance sheet strong throughout this phase as we move towards the ramp of the Delta class. So we don't have a specific minimum cash balance, but we do intend to keep it strong.
spk00: And following up on the Delta class progression, you had mentioned you're on track with the development process, but Wanted to ask a bit more specifically, since you previously expected to complete design and tooling and then begin parts fab this year, is that still the near-term expectation in what has been accomplished to date?
spk10: Yeah, so that is still the expectation. Tooling will sequence before parts. And both of those sequence, of course, before the sub-assemblies can be created and then sent over to us. And the way we're rolling that a bit in a sequential pattern, we'll have tools completing this year, some parts being built on those tools, tooling probably finishing in early next year so the tools that are needed later in the process come on, and then the parts that are needed later in the process come back in. all those need to be done because you know uh probably second half of the year we will be bringing those into phoenix for you know kind of starting in the final assembly process so that all kind of remains uh on track and moving as we expected uh through there the yeah i think you asked a question you know what what else have we seen in there you know one of the things i guess i'd share I set in on, I'll call it an executive overview. It wasn't an executive summary. It was a deep day on the design process and report out for where we are in some of the major milestones of Delta and how we've used the Imagine baseline into this fourth generation spaceship, the Delta class. I was really pleased with what's come forward there. You know, the key things we're trying to do is not create a ship that looks different, and the ship that we think will perform generally the same as our imagined ship will perform. It's lighter, carries six people, go higher, all those things. What's really been validating is the work that has been done to enable us to turn this ship on a weekly basis. We're going to continue to aspire to even approve there. And the work that has been done to confirm The length of time, I think we put a 500 approximate flights out for useful life and we feel very good on those numbers as well. And in that weekly turn, that length of time in the flights, that's where the cost of this on a per flight basis gets to be really positive compared to other mechanisms of human spaceflight. So it's been the detail of that design and showcasing how we're going to carry that through that's been very confidence building for me. I mentioned briefly just a little bit ago, we are putting the right energy into doing this. These are not going to be one-off ships. So we are developing, you'll hear us use the word, a copper bird. We're actually doing that in our engineering headquarters. It gets located in this week. And that will have us running through all the avionics and avionics systems, electrical systems, that we can just cycle and cycle and cycle in advance. We'll be building an iron bird to test out the mechanical systems that go through there and running and running and running and running those. So we're not having to wait until we get into flight test or actual use to understand the margins and the maintenance intervals or parts. We're going that through all the way through. We'll be building a static test article for our ships and being able to take that to, you know, kind of an ultimate limit load to confirm all the maintenance intervals that we're putting in. So those things are all very confidence-building for me as I watch the diligence with which our engineering and program teams are putting this together.
spk08: Great. Thank you.
spk04: Your next question comes from the line of Miles Walton with Wolf Research. Please go ahead.
spk05: Thanks. Good evening. Hi, Miles. I was hoping you could talk a bit about the engagement plan after Galactic 2.0. In the frame of reference, I think you mentioned these would start to become more private experiences. I'm just curious, how do you maintain the visibility that's going to be required to create and sell the experiential side of this while keeping it intimate, private, what basically the customer is paying for?
spk10: Right. We have to do both, of course. One, I'd say we will definitely find a frequent cadence of our flights that we want to kind of do deep showings of. That's easy around our research flights as we do those pieces. And there's new stories along the way there. And there will be some flights that we will want to do in a full public manner. As you'd expect, you know, a lot, maybe not all, but a lot of our future astronauts are quite excited to tell their own story but don't necessarily want us to broadcast their personal experience. And so we'll find a balance. I think you'll always hear us talking about when our flights go. There'll always be recaps. There'll always be footage and video pieces out. There doesn't always need to be kind of a detailed streaming of the interior of the cabin for each group of private astronauts that fly. What I do think you'll see, though, is we'll be giving that material to our astronauts, and not all, but I imagine the majority of those will also become very active in bringing those out. So we're going to, I won't even call it finding the balance. This is a both-and type of a scenario. We have to first and foremost focus on our customers, deliver the experience that they want, deliver the quality and not a kind of, overly commercialize their personal experience. They've put a lot of energy and effort and aspiration into this. We have to deliver that. And when we do that right, that is the absolute best marketing we will get because they will become missionary for us. So we're going to get that right. And I think within that, we can also ensure that we are touting what we do and building confidence in the safety, confidence in the power of the experience, and just the general excitement of our company. I think we can do both. So don't want to overplay it now, probably have just by over answering, but we, I just want to make sure it's like a way or hey, may not showcase like the interior of every cabin flight because it's not appropriate.
spk05: Yeah. Maybe a different operational question on the Delta class. At this point, do you have a viewpoint of how many would actually be in service in 27? Is it one or two or is it? The four to six you're thinking about on an annual basis of capacity, other manufacturing, those four to six could be on the line in 26.
spk10: Yeah, I think the end of 27, I'm sure you're asking, will probably be in between there. As you've heard us say, we're building our factory for four to six shifts a year. It's logical to start that on the lower side. right, as you start to build up just muscle memory and kind of work any kinks that are in the system out. So we will probably be less than the full cadence of that, but, you know, more than the first couple. We're wanting to get, you know, a couple out right away because we'll be using two ships miles in the flight test program, and so those will roll right into service. We'll have probably a little bit of a break between those two, But not so far that we kind of mess up the line from the supply chain standpoint, and then we'll start moving again on a pace. Probably, you know, let's get the first four out. I think the other question that will come with that is what's the turn rate of those ships? As I mentioned just on the question before, feeling very good about our ability to hit a weekly turn from all the analysis we've seen. And we're going to keep pushing on that metric, so nothing else to add today. That's another one that I think has got some interesting leverage.
spk05: Okay. And last one on the financials. Is this a point where you can kind of confirm you're past the peak cash burn quarterly cadence? I guess it's implied for the second half. I just don't know if you're able to say that we're past this quarterly cadence we saw in the first half into next year as well.
spk07: Well, we're only giving guidance for Q3 and Q4. And for the following years, you know, we're going to be making sure that we're able to invest in the fleet because we see these great returns. So, you know, that involves the Delta class and the motherships because we see really great financial returns from those investments. So we're going to be leaning into that when possible. But if necessary, you know, we can control that pace and we could slow that spending and keep that level down. But we think the returns are very attractive and shareholders would be supportive of us really trying to build the fleet at the rapid rate. But we've got flexibility.
spk08: Thanks. Thanks, Miles.
spk04: This concludes the question and answer session as well as today's call. Thank you for joining. You may now disconnect your lines.
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