Virgin Galactic Holdings, Inc.

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.

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.

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.