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2/26/2025
telephone keypad if you would like to withdraw your question press the pound key everyone welcome to virgin galactics fourth quarter, and full year 2020 offer questions.
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. For more information about these risks and uncertainties, please refer to the risk factors in the company's SEC filings made from time to time. Your caution not to put undue reliance on forward-looking statements and the company specifically disclaims any obligation to update the forward-looking statements that may be discussed during this call today, 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 those non-GAAP financial metrics. Turning to our agenda for today's call on page three, Michael will open the call with a recap of 2024, followed by an in-depth update on the progress of our spaceship program. Mike Moses will join the call, followed by Doug Ahrens, who will provide a financial overview before we turn the call over to Q&A. With that, I would now like to turn the call over to Michael. Michael, go ahead.
Thanks, Eric. 2024 marked an inflection point for Virgin Galactic. We opened the year with our prototype spaceship, demonstrating the amazing customer experience delivered by Virgin Galactic Spaceflights. And we closed 2024 by wrapping up the multi-year design phase of our groundbreaking new spaceships. 2025 will be a year of momentum, as we are now building the spaceships that will dramatically expand human spaceflight with unprecedented levels of safety, rapid reusability, and cost efficiency. Fabrication of tools and parts for these ships is well underway, as you'll see in a moment, and our teams are excited to kick off assembly of our first spaceship next month at our spaceship factory in Phoenix. The production and launch timeline for the new ships remains on track, with our first commercial research spaceflight expected in the summer of 2026 and the first private astronaut spaceflight in the fall of 2026. We are able to be more specific with projecting our timelines because we now have line of sight to the delivery dates of each and every tool and part that supports assembly. With this work accelerating, we will spend time on today's call showcasing the advances already made as well as the milestones that will mark our progress going forward. One of the things that I am most excited about has been the transition of Virgin Galactic from an R&D focused company to a company that builds real assets that drive real value. I would like to highlight five of these key assets that differentiate our company. Turning to slide four. First is our new spaceship. These ships will have longer life, faster turnaround times, and lower cost per flight than any human-rated spaceship in the world. They are designed to fly twice a week with a lifespan of over 500 space flights. This is a breakthrough design and a huge step forward in commercial space. Second is our spaceship factory. We've made the needed non-recurring infrastructure investments, and we are now able to add ships to our fleet quickly and cost-effectively with a start-to-finish cycle time of new spaceships measured in months versus years. Third, our rocket system. We have created the world's most powerful hybrid rocket system, which is proudly on display in the Smithsonian. Our rocket system has outstanding safety features that are part of its elegant and reliable design, and the quick change capability of our rocket motor supports the fastest refueling and turnaround time of any single space vehicle that is capable of human spaceflight. Fourth, our customer and client experience, which is beyond compare. We have curated, honed, and demonstrated our industry-leading customer experience, delivering human-first spaceflight for private astronauts and unparalleled microgravity environments for space research and space scientists. Our fifth and enormously valuable asset is our carrier ship platform, internally known as our mothership, which rarely gets the attention it deserves. So let's give our carrier ships some airtime as we turn to slide five. The first of our carrier ships, named Eve, has supported every test flight and commercial space flight for Virgin Galactic to date. This aircraft has several incredible capabilities. Its unique design allows it to reach altitudes of over 50,000 feet, and it can carry payloads weighing up to 35,000 pounds. Many aircraft can carry heavy weight to mid-level altitudes, and some aircraft can carry modest payloads above 50,000 feet. But this combination of high altitude heavy lift capability is very rare. We believe this is an opportunity. Turning to slide six, as we've worked with industry experts to advance the design and planning of our next carrier ship, we believe the same high altitude heavy left capability that supports Virgin Galactic suborbital spaceflight business can also be of value to government and research customers, especially when a derivative model adds extended flight duration. HAIL aircraft, HAIL being an acronym for high altitude long endurance air vehicles, are needed for several types of government and research missions. And we plan to explore the opportunity for a unique hail heavy derivative of our carrier platform in the future. But first things first, and the absolute first thing is to bring Virgin Galactic to EBITDA positive operations by putting two of our new spaceships into service. So let's turn to slide seven and talk about how we are unlocking the growth and profitability of Virgin Galactic. 2024 was the year we designed our new spaceships. 2026 will be the year we fly our new spaceships. But 2025 is the year we actually build the first of these amazing new vehicles. With safety above all as the bedrock value of Virgin Galactic, we are working diligently to bring these ships to life with exceptional quality embedded at every stage. One of the places we have invested heavily in quality is the long-lasting aerospace tools that are used to build the parts of our spaceship. These tools are key to creating the best possible parts and the most efficient assembly for each and every spaceship. These tools are also key to creating long-term value, as they will be used again and again to expand our fleet. Slides 8 through 13 of the presentation have been included to provide a glimpse into the incredible progress that's been made by our Virgin Galactic teammates as well as by the hugely dedicated teams at Carbon Aerospace and Bell Textron. And while I can't name them all on this call, we are extremely appreciative of the outstanding work that is happening across the many companies who make up our extended supply chain. All these groups are excited to be part of commercial spaceship development, and they are building momentum as our collective efforts become very visible and tangible. This is an unusual topic for an earnings call, but I think it's important to share this level of detail as it underpins our progress and our forecasted delivery dates. There are three structural elements that come together to build our spaceships. The fuselage, the feather, and the wing. If you're following along with the presentation, there will be a graphic of the spaceship in the upper right corner of these upcoming slides, and the images on the slide refer to the sections highlighted in green. In slide eight, You can see the primary fuselage subassembly tools that are located in Carbon's fabrication facility. These tools are used to fabricate the upper and lower skins of the cabin shell. Moving to slide 9, you can see the Feather subassembly tooling. These tools have highly complex geometries, and they are used to make the largest part in our spaceship. Slide 10 shows the bulkhead, which is the major structural element that separates the cabin from the rocket system. The image shows the sheets of carbon fiber being laid up within the bulkhead tool before the entire assembly is sent to the autoclave to cure the part. On slide 11, we are using an example with the wing to give you a sense of how the entire part fabrication process works. Starting at the left, the first image shows technicians placing layers of carbon fiber in precise patterns with varying thicknesses on the tool. Once this layup process is complete, The tool and the carbon fiber are moved into an autoclave, which is a huge pressurized oven that cures the part in a way that gives our composite structures their strength. On the right, you can see the finished wing part ready for inspection and shipping to the spaceship factory in Phoenix. On slide 12, you can see the process steps used to create our oxidizer tank. This tank is a critical component of the spaceship that holds our liquid oxidizer for the rocket motor. powers the spaceship to space. The oxidizer tank in our prototype ship, Unity, only supported 40 to 50 flights before needing replacement, which would have required extensive maintenance downtime. The first of our new tanks is complete and is shown here in the test stand about to enter cycle testing. Cycle testing will establish the expected lifespan of the tank, which we project to be many times higher than Unity's. This is one example of the many places we have redesigned our spaceship to minimize maintenance downtimes and enable multiple spaceflights per week on a sustained basis. Our next tank will be entering the autoclave this coming week. This tank is designated for our first spaceship, and it is on schedule to arrive in Phoenix in time for installation into the fuselage. Slide 13 shows a still frame from a video our spaceflight president, Mike Moses, released this morning highlighting the top 10 things he was excited to see happen over the last month. If you haven't seen it, it's a quick and a fun way to showcase our progress, and I encourage you to watch it on our website or social channels. This will be an ongoing feature for Mike every month or two, and we will make it available to our customers, our investor base, and our fans so they can track along with our progress. Slide 14 previews several key milestones that will be taking place in 2025 and 2026. In March, we'll start assembly of our first spaceship in our new spaceship factory. This moment has been years in the making, and our manufacturing team in Phoenix is chomping at the bit. Building and testing of the first ship continues throughout the year, and we'll be highlighting the many tangible milestones along the way to mark our progress. Our first test flight, a glide flight, is expected in spring 2026. which will lead to our first research space flight in summer 2026 and our first private astronaut flight, which is expected in the fall 2026. It's exciting to see the momentum and visible progress ramping up. As the ship comes together, we will be inviting our customers into our spaceship factory to meet the team and see how the ships that will bring them to space are being built. Speaking of our customers, I was recently talking with one of our future astronauts about how different our approach to building these new spaceships is relative to how our prototype spaceship was built. She was very curious to understand how we are building and flight testing new spaceships so much faster than we had done in the past. I imagine that if a long-term customer is curious, as likely some of you are as well. So I've invited Mike Moses, our space line president, to share his perspective on the changes that drive confidence in our current schedule. Over to you, Mike.
Thanks, Michael. I've been part of Virgin Galactic as we built and did the flight testing for Spaceship Unity. Building and flight testing are two important phases. I want to talk about how we are approaching both of them in a different way with our Delta class program. Let me start by talking about the build phase, where we have high confidence in the schedule based on three factors, design software, high quality suppliers, and an experienced team. First, before we even started making tools and parts, we built the spaceship digitally using advanced model-based software. This digital twin of our spaceship allows for precision in the design, especially as it relates to how various parts will fit together and interact in the real world. Each part is referenced to a fixed plane, exactly where it will be placed in the spaceship. And this lets us determine everything from where to place the bolts on one part, to the bolt holes on the adjacent part, to where the brackets need to be placed to hold the wiring and the plumbing. Despite best efforts, sometimes parts don't perfectly line up, so our design allows for certain parts to have tolerance to float and absorb any small deviations that may occur during manufacturing. This allows for a speedy assembly as the parts arrive into Phoenix. Second, our parts are being made by suppliers who are industry leaders, companies that are used to mass producing parts. They have proven processes and controls in place to make and inspect all parts before shipping them to our spaceship factory in Phoenix. Coupled with the digital thread I just mentioned, we are making these Delta spaceships in the same manner and with the same suppliers as modern aircraft. By comparison, our prototype spaceship Unity was built and assembled in a very linear fashion, often requiring the assembly sequence to pause as we needed to rework parts to ensure the proper fit. Lastly, our team has experience with assembling spaceships. The folks setting up and running our spaceship factory are our most experienced technicians and leaders. They built Unity and will be bringing all of these learnings to bear. Our factory itself is laid out based on our past experiences. We have assembly work areas designed to provide an extremely efficient and effective build flow, and our engineering teams will be deployed directly to the shop floor so they can enable rapid resolution of any issues that may arise. In summary, Delta was designed intentionally to allow for an efficient build using aerospace industry proven methods. The model-based software, the precision of the tools, combined with our suppliers' process controls and our highly experienced assembly team enables a much shorter timeline. Now let me pivot to discuss what happens once the spaceship is built, which is flight testing. It's important to keep in mind that Delta is able to take advantage of the years of flight testing that went into spaceship Unity. Unity required moving in small incremental steps to build up the knowledge about the spaceship's performance and limits. The test flights of Delta will be much more like regression testing, where we are incrementally expanding how Delta flies, but doing so by comparing it to how we know Unity flew. We aren't forging ahead into unknown territory. Another key difference between Unity and Delta is the use of our Ironberg, a full-scale engineering testbed of the Delta spaceship systems and electronics. Gathering this test data prior to flight tests helps shorten the timeline. Finally, While Delta will fly a similar number of test points, its ability to fly more frequently means that we will complete flight testing in months instead of years. These specific differences in how our Delta ships are being built and tested underpin the confidence in our delivery, and we are incredibly excited to send our first Delta ship to space in the summer of next year. With that, I'll hand the call over to our CFO, Doug Ahrens, to share a financial update and outlook.
Thanks, Mike. Good afternoon, everyone. Turning to slide 15, in addition to presenting our recent financial results, I'll share my perspective on the tremendous strides we've made to build the assets that will create a powerful economic engine for Virgin Galactic. Starting with the fourth quarter of 2024, we generated revenue of $400,000 from future astronaut membership fees. As our Delta spaceship program advances, it drives a favorable trend in operating expenses. Total operating expenses for the fourth quarter were $82 million compared to $117 million in the prior year period, as our spending has shifted from R&D to capital investments in manufacturing assets that will be leveraged to build multiple spaceships. Adjusted EBITDA showed a favorable trend as well, being negative $63 million in the fourth quarter compared to negative $84 million in the prior year period. Free cash flow was negative $117 million in the fourth quarter, at the low end of the range we guided in our last earnings call. Turning to slide 16. For the full fiscal year 2024, we generated revenue of $7 million, driven by two commercial space flights, as well as future astronaut membership fees. Notably, average ticket prices on the last space flight rose to $800,000 per seat, compared to just over $300,000 per seat in the prior year, indicating the incredible value being delivered to our astronauts through our space flight experience. The favorable trends in our financials were even more visible for the full year. As a result of cost reduction efforts and a shift toward investment in manufacturing assets for spaceship production, total operating expenses were $384 million in 2024, reflecting a 29% reduction from $538 million in the prior year. We reported a GAAP net loss of $347 million, representing a 31% improvement compared to $502 million in the prior year. Adjusted EBITDA for the year was negative $289 million, an improvement of 32% from negative $427 million in the prior year. Obviously, these improvements are a result of Virgin Galactic moving beyond the heavy R&D phase of spaceship design and now building manufacturing assets we will use to cost-effectively build our fleet. Michael showed pictures of the tooling that has been created to build spaceship components. These are high-quality value-creating assets that give us the capability to repeatedly build additional spaceships at a relatively low variable cost of $50 to $60 million each, enabling a payback period of under six months for each new spaceship. Approximately half of our spending in 2025 is expected to be for one-time capital expenditures for tooling, manufacturing capacity, and the production of our first two new Delta-class spaceships. Our balance sheet reflects this growing capital investment, which appears as property, plant, and equipment, or PP&E. With these investments, the book value of our PP&E currently exceeds $200 million, and the book value of PP&E is expected to continue to grow and to nearly double by the end of 2025. Moving to slide 17, we ended the year with $657 million in cash, cash equivalents, and marketable securities. In 2024, we generated $138 million in gross proceeds through an at-the-market or ATM equity offering program. Moving to our projection, revenue for the first quarter of 2025 is expected to be approximately $400,000 for astronaut membership fees. Forecasted free cash flow for the first quarter of 2025 is expected to be in the range of negative $115 million to $125 million. We expect cash spending to decelerate through 2025 as we complete the investments in tooling and manufacturing capacity to build spaceships. We are tightly managing our spending with fiscal discipline across the board. Turning to slide 18, we are providing a recap of our economic model, which clearly shows the business opportunity in front of us. Right now, we are laser-focused on achieving the economics in the first column with the introduction of our initial fleet of two new Delta-class spaceships. With just two spaceships and current pricing of $600,000 per seat, we expect to achieve an annualized level of approximately $450 million of revenue. Because of the tremendous value being delivered to our astronauts at current pricing of $600,000 per seat, our contribution margins are forecasted to exceed 80%. resulting in adjusted EBITDA of about $100 million per year with just our first two spaceships in service. Profits have the potential to grow exponentially as we add spaceships and another launch vehicle to our fleet at Spaceport America in New Mexico. Michael outlined the outstanding progress we are making with spaceship production and the key milestones ahead, leading up to commercial space flights next year. As we progress through these exciting milestones and march toward profitability with two new spaceships, we will continue to evaluate opportunities to optimize our balance sheet and also deliver a winning outcome for all our stakeholders. With that, I'll turn the call back over to Michael.
Thanks, Doug. As you can see, outstanding progress is underway across the company. As I mentioned at the opening, 2025 is a year of momentum, and that momentum has already begun. Our entire company is laser focused on delivering these first two Delta spaceships in a timely fashion, consistent with the scheduled milestones discussed today. We are driving effective execution across all elements of the program, and we do so with a belief in our mission and excitement to see our first ship in space next summer. Let's open the call for questions.
At this time, I would like to remind everyone in order to ask a question, Press star, then the number one on your telephone keypad. Before we take our first question, I'd like to turn the call over to Eric Cerny, Investor Relations. Please go ahead.
Thank you. For awareness, we filed a couple of post-effective amendments to our form S3 registration statement and a prospective supplement this afternoon. These filings relate to our existing ATM program and our filing status. There is no new ATM program. Thank you, operator. We're ready for the first question.
Your first question comes from the line of Fred Conrad with Jefferies. Please go ahead.
Good evening. You know, appreciate all the detail with the timeline of flights in 2026, but how quickly do you think you can kind of ramp up from there? And then if we think about your baseline
initial fleet model is that a good baseline for 2027 now that you know timeline has been locked in just thinking about the the speed of flights in 2027 uh hey greg it's michael and i'll i'll give a start to that and mike moses is as a bonus with us today and i'll let him add his two cents as well so we will have done the ground testing and the flight testing to give us confidence in the vehicles. And we will have planned and have planned our maintenance strategies to enable these ships to turn on the pace that we've talked about twice a week, pretty much from the time we're ready to put them into private astronaut service. So, which we talked about in the fall. And so to your second part of your question, 2027, we feel we should be pretty much on track for the pace we've been talking. I think it's prudent for us to give ourselves a little bit of pacing, help our teams get ready to what will be truly unprecedented volumes of not just commercial space, but any humans in space at that volume, and make sure that we are delivering the best customer experience every time. So we will prudently ramp ourselves up a little bit as we lean into that, but I believe 2027 if not right January 1st, right at the beginning of that year, we should be up at a pace that we've talked. Mike, anything you'd like to add on that?
Yeah, no, just in support of that, our test campaign, if you're familiar with flight testing, kind of can be made up of several parts, a thing called DT and OT, development test and operational test. And we're able to combine the two. So while we do our flight testing program, we'll be testing out the operational side of things, both in the air and on the ground. And so you'll see some turnaround times during our flight test program that are fairly short, representative of the commercial service turn times. And you'll see some that are longer as we do more detailed data analysis. But the idea being we get our feet underneath us in the development program, the test program, and then that last part of 2026. So, Michael, as you said, we would hit the ground running at full rate in 2027.
I mean, and I guess just as a follow-up to that, you know, first research, spaceflight in summer, first private astronaut flight in fall. Should we expect, you know, multiple research spaceflights in that window before you get to the first private astronaut or kind of what's in the manifest between those two events?
Yeah, Greg, exactly. I won't give specific guidance on the numbers of flights planned, but yeah, on the order of, you know, six to 10 spaceflights to test out all the various aspects, we'll be flying a mix of research payloads, employees, test subjects, you know, checking out the cabin. But really, the point is to test out the systems as they go to space. And again, in my remarks, you heard me say, just as a reminder, this isn't the first spaceship to go to space, right? So we're building off the back of Unity. So we're really just testing the differences that we built into Delta. And so a similar number of test points. But yeah, I think we'll be able to go rapidly through the test program.
And then maybe just one last one. You know, as the schedule has firmed up and you kind of have dates, like, what's your current thinking around reopening the order book and maybe any indications when we could see that happen?
Back to Michael, Greg. I still believe the right timing for people to come on in Virgin Galactic is around the two-year window. And as you, I believe, know, we have a solid book of business that will consume up our first year. So as we reach, I'd say, the end of this year, perhaps the opening of next, but probably the end of this year, I think that's the right time to begin opening up, say, reasonable-sized tranches of sales. I don't think we'll just throw the gates open. I think we'll pull in a group at a time and continue to ensure we've got an order book in advance of the capacity of our vehicles going forward. Thank you.
Your next question comes from the line of Michael Ashok with KeyBank Capital Markets. Please go ahead.
Hey, good afternoon, everyone. I wanted to ask first, maybe on the rocket motor, I know you've been testing the propulsion systems for the rocket motor, and have there been any changes in the propulsion system for Delta compared to Unity? Do you expect those to have similar thrust, efficiency, and burn time?
Mike, this is Mike Moses. So no changes to the motor itself from what we flew in Unity to what we'll be flying in Delta. As you saw in our presentation today, we did make a little bit of change to the tank, the propellant tank that holds our liquid oxidizer. So it's a slightly new design aimed at giving us lifetime. So basically more uses out of that tank on the order of hundreds of flights So that's a change, but we'll be able to check all that out on the ground before we get into flight. So as it relates to the motor itself, similar thrust, similar performance profiles as to what we were doing on Unity.
And then on the first Delta flight being for research payloads, as we think about maybe the first year or two of Delta ships in commercial service, have you considered having a higher percentage of research flights at that higher margin, at least initially, to kind of accelerate your path to positive free cash flow?
I think we'll do a mix. There's balancing of all the constituencies here. Of course, we will prioritize ensuring the company is in good financial state and ensuring that as we fly our ships, those are driving EBITDA positive operations for us. We can do that and bring in a substantial percentage of those flights for customers that have been in the queue for a while, even though they've been in earlier and earlier price points, which were much less, they've all been waiting super patiently, and it's time for us to fly them to space. So we'll be doing both. What's really important to know, especially for our astronauts who've been waiting so long, but for everyone, the capacities that we have with these Delta ships enable us We've put out, we believe, with a conservative estimate, 125 flights a year. At six people per ship on those flights, we'll be able to move through our existing backlog of people fairly quickly. So we can bring in a high percentage of research flights at, as you mentioned, probably higher rates than some of our early pieces, and also bring in... our existing astronaut base and fly them quite quickly. So I think the capacity will give us the chance to do both and then we scale from there.
Okay. And then lastly for me on the red wire announcement, it was good to see that. How do you Michael Prast- See the commercial research market evolving over the longer term, maybe you could talk a bit about. Michael Prast- That agreement that you have and just wondering if you see more opportunities for similar contracts going forward, or if you've maybe thought about the size of what that addressable market might be thanks.
It's nice having Mike Moses on this call. You and I look at each other and like, hey, okay, you're from NASA and you're past. Why don't you take that one and I'll pick up on it.
So go ahead, Mike. Sure thing. Yeah, the agreement with Redwire is fantastic. And I think it highlights not only what we're doing here at Virgin Galactic, but what you see in the commercial spaceflight industry in general, which is a real surge in the commercialization opportunities that spaceflight offers. Our platform is, while maybe not unique in its capability, certainly offers a unique way to tackle what I would call a really fun and kind of game-changing thing where researchers can fly with their science, right? So in most other scientific fields, you design an experiment, you go into a lab, you do it yourself, you get your results. But in spaceflight, you hand that over to a professional astronaut who's up on the space station, and they execute the science for you. So the human-tended research opportunities, I think, are immense in spaceflight. The commercial suborbital market offers a chance to fly very frequently. Rapid reflight of your payload and your research, you can tune it. It can be less cost because it doesn't have to be highly automated and live on a space station for years at a time. So I think that's going to be groundbreaking research. in what we can do. So I do think there's a big appeal to the research market. The Redwire contract specifically really kind of advances the technology application that we'll be applying. So the science, the meat of that agreement, right, is a smart locker that has power, has data, has communications with the payloads and the ship, and allows the researcher to have access to much more capability in the back of our spaceship.
And It's Michael. I believe I've shared this before, but as we watch the government especially really push both to the moon and to Mars, those will have lots of science and research being able to be leveraged and take advantage of those flights. It's still going to be very expensive to get to the moon. It's still incredibly expensive to get to Mars. And so any research that's going to be on those ships for those longer-duration missions, wants to be really figured out. And the best way to really figure out is to test and test and trial and trial. And that's where we believe we have an incredible platform to allow people to refine, maybe adapt, toughen, or change their research that is planning to go further places. So we provide an excellent step stone into the longer duration missions that research is so important to.
Great. Thanks, everyone. Thanks, Mike.
Your next question comes from the line of Miles Walton with Wolf Research. Please go ahead.
Thanks. Good evening. Hi, Miles. I was hoping you could touch on the potential augmentation of the Mothership for other applications. And I know that your plan is, I think, for 2026 to start on the Mothership 2, is there a way or do you see a path where co-funding is possible to maybe take away some of that burden as you bring on additional mission profiles?
Let me put the question to a bit of context, Miles, and then get to some of the specifics. So we've been consistent sharing our business model growth path. First things first, we need to get Our first two ships into Spaceport America get to EBITDA positive operations. Next thing we do, as Doug even alluded to in one of his pages today, add two more spaceships and another spaceship launch vehicle into New Mexico so that we fundamentally build out that first spaceport, and we get all sorts of leverage on the fixed cost side to drive great exponential growth. That's phase one. a fully functioning spaceport in New Mexico. Phase two is to take that operation and replicate it in other parts of the world. As we've shared, we've had great progress moving with the Italians and looking at a potential Air Force base in the Puglia region of Italy. That is one of several places we could go, but a very, very exciting one. We're making good progress with them. So to take the model that we've effectively built and As we're now talking, all these tools that we showed all the pictures of today, those are the same tools that will build spaceships for a spaceport in Italy. We've already built them. The design is already done. So it's quite effective for us to then add incremental ships. And so phase two of our business plan is to go to second spaceports. And so then there's like, OK, well, what's next? And there are many things that could be what's next. Obviously, we've been using the word mothership internally. A lot of people don't understand it, so just to make it clear, we're calling it a spaceship launch vehicle. Eve is our first one. And as we've been working on the, not just the beginning design phases, we're reasonably through our conceptual design, moving towards solid preliminary design, doing the trade-offs we need to do there. And we brought in outside experts to help us in that regard. We all pull back into what we've known for a decade, Eve and any derivative of Eve is hugely powerful in its ability to carry heavy weight to high altitude, and we talked about that on the call. So, Miles, now specifically to your question, we put in an image there. Obviously, these carrier ships, these spaceship launch vehicles can carry spaceships, but if you can carry something that heavy to the height we do, you could also carry a pod that can do other things. And there are a lot of efforts there. You're aware, Miles, there can be ISR, for those who don't know the acronym, Intelligence Surveillance Reconnaissance Missions. There's testing missions that go along with that. There's a lot going on in the U.S. right now, as I'm sure you're aware, that could use something that could carry heavy payloads to high altitudes. Our derivative would need to have further range, you know, getting to the long endurance part of HALE. And we understand how we would modify the existing eveship to enable that. So specifically to your question, is there opportunity for people to partner with us and will we look for people who might want to partner with us? I think that's a super smart opportunity for us and one that we are actively paying attention to because we think this is a real potential for the government. With that said, first things first, we have to keep ourselves laser focused on getting to the first of these two ships out, and then the second one right behind it, so we get to EBITDA cash flow operations. So we are staying almost entirely on that, but the small group, the Tiger team we have against these carrier ship platforms as we grow absolutely is looking into how we can partner with other people, largely who do more military support for the government, and seeing if there's an opportunity to partner for good for everyone.
Okay. No, that's crystal clear, Michael. And then, Doug, I think I heard you right, but just correct me if I'm wrong. Did you say that 2025 cash consumption would be below the 475 in 2024? And then I think on the last call, you were looking for 2025 first quarter to potentially tick up in cash flow consumption, which doesn't look like it's happening. Has there been sort of re-sequencing of cash profiles since the last call for the better?
No, there's been no real changes other than we talked about a peak in Q1. I think that peak's a little lower than we projected. So then the trend down for the year will continue. And exiting, you know, we had talked about exiting below $100 million spend by the fourth quarter. So, yes, definitely lower spend in 2025 than 2024. Okay. Thank you.
Your next question comes from the line of Oliver Chen. Again, if you would like to ask a question, press star 1 on your telephone keypad. Mr. Oliver Chen, please go ahead.
Hi, it's Tom Nasson for Oliver. I wanted to ask a follow-up on the previous free cash flow question. Between now and summer of 2026 or fall of 2026, How should we expect the trajectory of free cash flow to ramp to positivity over time?
Okay, this is Doug. Thanks for the question, Tom. So yeah, to expand on this, I think it's important to get some perspective of where we're at. We're in a really good position right now with our balance sheet. And we had been in the process earlier of building up cash that prepared us to convert that cash into assets now. That's in the form of manufacturing capacity, tooling, and now our first two spaceships. And I mentioned on the earlier remarks, you can see this in our book value, right? It's now over $200 million in the property, plant, and equipment, and that will continue to grow substantially. So now you're going to see spending going down um through 2024 and then in excuse me 2025 and then going into 2026 because that that investment in the capital will be behind us and we're just moving towards commercial operations so the the way to think about this as we enter 2026 we've got some great assets uh available now we'll have a couple of spaceships and we're going to be going into commercial service And what happens then is now we would start to see cash inflows ahead of the flights. So at this point, when we're entering commercial service and all of that, I mean, to use a football term, we're first in goal, right? We're in a really good position here. And I think that the value of the company becomes really obvious as we hit these milestones and move towards commercial service. So to put it in perspective, we would be trending down through 2025, as I said, And then 2026 is an inflection year because commercial service is in the summer of 2026, and that's when we start to see cash inflows coming in, and we've become positive around the time of beginning space flights.
Great. And then as a follow-up, I wanted to ask about any potential updates you might have on the customer experience side of the business, especially given the potential progress on a second spaceport in Italy? And then overall, given the potential for a second spaceport, is there any updates to your existing private astronaut TAM estimate?
I'll take that one, Tom, to Michael here. One thing, if you watch the top 10 video that Mike Moses put out this morning, it's great. It's quick. It's fun. One of the things you'll see in there is where we had a group from ENIC, the FAA of Italy, was at Spaceport America. And one of the things that we've done is been able to adapt our pilot simulator, it can get geographically accurate in the world, and looked at various flight profiles and ways to go from the base in which we're talking about in southern Italy. Boy, you just even look at that video, you can imagine how glorious it is to not just look over the boot of Italy, uh, but all of what you're seeing in Southern Europe there is pretty spectacular. So, so that's real progress being made against that. I think I'm looking over to Mike Moses. I think that effort wraps up in 2025, the exploratory effort there. So we'll have some points of view by the end of this year. about how we go forward in Italy, but it's a really good partnership and working relationship. You asked the question about TAM. I think you asked it specifically with the notion of an extra spaceport. I think the ability to go to space from everybody that we've taken up and everybody we've heard that has gone to space is so stunning and so impactful that people will really travel to where the opportunity is. If you wanted to climb Everest, you have to go to Everest. So I think people will travel for this, and they clearly are. We have our astronaut bases from all across the world, 60 plus countries. With that said, I think being able to see different parts of the world increases the frequency of repeat visitation on this. I think it is not a one and done experience. And I think being able to have just the visceral experience of going and seeing the Earth from space is worth doing multiple times. But when you can see different parts of the planet, I think that becomes an opportunity to not just go again, but then if you're going again, bringing other people. So that's one way I'll call it the individuals don't change, but the number of times an individual goes to space probably does. And I also think there's just something natural to having deeper penetration of a market when you're kind of around your home base. And so I would imagine we'll see deeper penetration from Europe. If we have a spaceport in Italy, we'll see deeper penetration from Southeast Asia if we have a spaceport in Southeast Asia. Same thing in the Middle East. So we're excited to be over multiple places, but again, right now we're just focused on New Mexico and bringing that spaceport up to full capacity.
Mr. Chen, your line is still open.
Great, thank you. No more questions for me. Thanks, Tom.
That concludes our question and answer session. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.