Virgin Galactic Holdings, Inc.

Good afternoon. My name is Desiree and I will be your conference operator today. At this time, I would like to welcome everyone to Virgin Galactic's third quarter 2025 earnings conference call. All lines having place 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 a question, press star one again. Thank you. I will now turn the call over to Eric Cerny, Vice President of Investor Relations. You may begin.

Thank you. Good afternoon, everyone. Welcome to Virgin Galactic's third quarter 2025 earnings conference call. On the call with me today are Michael Colglazier, Chief Executive Officer, and Doug Ahrens, Chief Financial Officer. Following our prepared remarks, 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 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. Viewer 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, whether as a result of new information, future events, or otherwise. Please also note that we'll 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. I would now like to turn the call over to our CEO, Michael Colglazier, and the agenda for today's call that can be found on page three of the earnings presentation.

Good afternoon, everyone. We have much to cover today with important progress updates on our spaceship program and a company-wide pivot toward operational readiness as we prepare to enter 2026. We remain full steam ahead, bringing our new spaceships into service. We continue to make excellent progress across the many elements of the program, and the number of outstanding items on our production checklist continues to decline with each passing week as we knock out the work. I'll start the call highlighting progress within our spaceship program, including major milestones being crossed and proof points supporting our flight rate and reusability assumptions. I'll share insights on our preparation for the launch of commercial service in Q4 next year, which is just a short year or so from today. I'll then pass the call to Doug for updates on our Q3 financial performance and a look ahead. Before diving into the details, I'm pleased to share the expected dates for flight test and our first space flight remain essentially unchanged from our prior forecast. With our flight test program expected to begin in Q3, and our first space flight in Q4 of 2026. I'll note that we are now using Q3 instead of summer and Q4 instead of fall, as we've had feedback from customers and investors in the southern hemisphere who point out that fall in the U.S. is actually spring in other parts of the world. Shifting to quarters helps make this more clear. Last quarter, we shared expectations for a modest extension of our critical path due to complexity in manufacturing a large part within our fuselage sub-assembly. That particular part, the lower skin of our forward fuselage, arrived in our spaceship factory earlier this month, well within the time extension we had expected, which is great news. Since last quarter, the fuselage has been and continues to be the pace-setting sub-assembly that drives the critical path of our spaceship program. Our team has focused intensely on resolving the manufacturing and supply chain needs of the fuselage with strong results. and we are currently forecasting the first fuselage to wrap up just a bit earlier than we expected last quarter. Over the last three months, we have seen the expected completion dates of our wing and feather subassemblies shift modestly to the right. However, both of these subassemblies remain ahead of the critical path, and the shifts, therefore, are not expected to have an impact on our flight dates. I'll share detail around the main issues we've been tackling, how we've resolved them, and insights into remaining items on our watch list as we get into the call. On page four, we've provided a link to the new Galactic 10 video that released this afternoon, as well as links to our recent episodes of our We Build Spaceships series. These short videos provide an excellent visual rundown of the program's latest accomplishments. Let's start the program update on page five with the structural parts that make up the spaceship. You'll recall our spaceships are built with three major structural sub-assemblies, the wing, the feather, and the fuselage. This page highlights progress on the wing, shown here with our team in the spaceship factory fitting the wing skins onto our first ship set. This group of skilled technicians is excited and proud of the work they're doing, and they are showcasing how the investment we put into production tooling is paying off, as the precision fit of the spaceship parts allows them to advance the assembly process smoothly. The wing in this image, which is destined for our first spaceship, will wrap up this phase and come down from this tool in December. Even more exciting, parts for the second wing ship set have already arrived in the spaceship factory and will immediately start to load into this wing up tool as soon as the first ship set moves forward. Moving to page six, I recently visited Bell Aerospace's facility in Fort Worth, Texas, to see the progress they've been making with our second major sub-assembly, the Feather. Bell's rapid production team has done incredible work leveraging their expertise in high temperature composites and tilt rotor assemblies to deliver one of the most unique and important parts of the spaceship. The photos on this page show the large feather boom skins finishing assembly and undergoing detailed imaging inspections. On page seven, I'm very pleased to share the first complete ship set of feather boom skins have all been delivered to Bell's final assembly facility. This is a major milestone, and Bell's top flight manufacturing technicians are already hard at work building the feather assembly that will become part of our first spaceship. Just like I described with the wing, the parts that will make up the next feather assembly are fast following, so the second ship set can start assembly as soon as this first feather ship set is sent off to Phoenix, where it will combine with the wing and the fuselage. Moving to page eight. the major elements that comprise our third major sub-assembly, the fuselage, have also been making good headway. Although, as I mentioned before, this part of the ship is driving our critical path. Broadly speaking, the fuselage has three major sections. The oxidizer tank, which sits in the heart of the fuselage and carries the liquid oxidizer used by our hybrid rocket motor system to power the spaceship. The forward fuselage, which houses our pilots and astronauts, and the aft fuselage, which houses the hybrid rocket motor itself. On page nine, I'm going to start with the oxidizer tank because our rocket systems team just passed a huge milestone by qualifying this new tank for the entire life of our ships. To give a bit of context on this achievement, in our original spaceship, VSS Unity, an earlier model tank had been built and qualified for 40 flights. While 40 flights is very impressive for first-generation space vehicles, the 40-flight limit would have imposed substantial downtimes in cost every time it needed to be swapped out, which would have limited our revenue generation capacity. The image on this page shows our next-generation tank during its qualification testing. We cycled this tank 4,000 times and it passed with flying colors. This new tank design is now qualified for the life of our Delta-class spaceships which we expect to be 500 or more space flights. This is an order of magnitude increase in reusability, and this tank is one of hundreds of parts where we have leveraged our years of R&D and engineering experience to build new spaceships with unprecedented durability and reusability. Page 10 shows the first flight article of this new line of tanks in our spaceship factory, where it will be prepped and installed within the heart of the fuselage assembly. Big shout out to our rocket systems teams for delivering this major milestone on time for our overall production schedule. Page 11 shows an image of the lower skin of the forward fuselage section. This is one of the largest parts on the spaceship. It has been the part driving our critical path, and it required a couple rounds of process refinement to get right. This first fuselage skin arrived in our spaceship factory earlier in November and was unboxed with great excitement. Happily, work on the fuselage can now advance with this part located in the final assembly tool shown here. For those on the call who aren't close to carbon part manufacturing, it's helpful to note that the need to resolve manufacturing challenges likely faced with this fuselage skin is fairly typical, especially when large, complex carbon parts are produced for the very first time. While time extensions are not desired, they are not unexpected. And as I mentioned earlier, we had reserved schedule contingency for the part fabrication phase, and we have stayed within that contingency. As the premier company defining suborbital human spaceflight, we will always take the necessary time to work out whatever process or design changes are needed to produce safe, flight-ready parts. And that's what we did here. Our partners at Bell had to resolve some similar manufacturing issues with the big feather skins that we discussed earlier back on pages six and seven. Those challenges have been sorted by the Bell team, and the time involved in sorting them extended the forecasted delivery date of the feather assembly to Phoenix from late Q4 2025 to the first half of Q1 2026. This push of the feather delivery into Q1 does not impact the timing of our flight test or our first space flight because the fuselage remains the driver of the critical path of our program. On page 12, I'd like to share a couple of the remaining items on our watch list. You'll see in the graphic we have two skins that make up the forward fuselage. The green shaded upper skin where the windows are located and the orange shaded lower skin that we just spoke about. The oxidizer tank I mentioned earlier is located directly behind the pilot and passenger cabin that is formed by these upper and lower skins. You'll also see we have skins for the aft fuselage located behind the oxidizer tank. The upper skin and the aft skins are currently in production and are expected to arrive in the spaceship factory in December. We have applied all the manufacturing process improvements learned over the last several months to the fabrication of these remaining parts. Assuming these parts arrive as expected in December, we'd anticipate our first spaceflight to take place earlier in Q4 of 2026. If these parts need some extra time to resolve, we'd expect our first spaceflight to be later in Q4 of 2026. Moving to page 13, I'd like to highlight some of the areas within the company where we see additional economic potential beyond our suborbital space business. The first of these opportunities sits within our avionics team. Like the rocket systems team I mentioned earlier, these people are world-class and passionate, and their work plays a central role throughout both our spaceships and our launch vehicles. We recently released an episode of We Build Spaceships that focuses on our avionics efforts. and I encourage you to watch it to better understand the scope of this team's capabilities. We have strategically organized both our rocket systems and avionics teams to take advantage of potential opportunities within commercial space that could benefit from adaptations of our products and expertise. The primary near-term focus for both these teams is bringing our new spaceships into service. However, once we are cash positive and have refined our spaceship production process, we plan to pursue incremental business opportunities in these areas, leveraging our outstanding talent and IP. The second opportunity I'd like to highlight is connected with our launch vehicle, EVE. An outstanding team of engineers, technicians, and pilots were behind a terrific upgrade program for EVE, and they recently returned the ship to the skies above New Mexico, as shown on this page. This group executed on time and under budget while substantially improving each flight interval and inspection program. I'm excited to say our launch vehicle is now capable of flying spaceships on successive days, and we're planning to ramp to an average availability of three to four flights a week. We expect this enhanced capability will support excellent utilization of our first two spaceships, as E's ability to launch on successive days provides us with great flexibility to handle weather and unexpected issues so we can deliver our targeted rate of 125 space missions per year with our first two spaceships. With this upgrade, EVE will have potential to support additional missions that demonstrate the capabilities of Virgin Galactic launch vehicles. Hats off to everyone involved in this project. I'll close out the program update with a final observation before shifting to our commercial readiness efforts. I continue to see the number of outstanding items on our production checklist decrease as we continue to lock in outstanding supplier delivery dates, resolve manufacturing issues, and generally knock out the work. I'm also pleased to see the amplitude or range of potential impacts posed by remaining issues moderating as we get more and more of the work done. This is how almost all major development or construction programs go, and ours is no different. Everyone who has built or remodeled a house knows things get more predictable as progress advances. And everyone who has built or remodeled a house knows that sometimes a few elements take longer than expected. But the majority of work continues to progress while those lagging elements catch up. One measure of progress we've been watching is how many of the structural parts needed to build the first spaceship have arrived on the dock in Phoenix. By mid-December, we expect to have approximately 90% of the carbon and metallic parts for the first ship in hand. That is super helpful, and it's allowing our procurement and project management teams to really focus on bringing in the final components and keeping us on track. Moving to page 14, I'd like to spend some time on our commercial readiness plans. I'm very encouraged to see teams across the entirety of our company begin to pivot to commercial operations. The progress with the shifts is exciting for everyone, and the added energy that comes with operational planning is palpable. We're hiring a chief growth officer to lead our consumer launch and revenue development initiatives. We're interviewing the best of the best of the world's pilots to join our pilot corps. And we're planning for the growth of our customer operations teams to take care of both our astronauts and their guests when they're onsite at Spaceport America. With all this happening, we remain on track to open in Q1 of 2026 our first tranche of sales opportunities for future space missions. In preparation, we have a full rebuild of our digital presence underway, with a particular focus on sales funnel progression and a dedicated astronaut portal. We'll unveil our new digital presence in the new year, although the astronaut portal will always be a special and private experience reserved for those within our community of astronauts. I hosted a customer event in Miami a few weeks ago, with people coming in from Europe, Latin America, New Zealand, and of course from Florida and the eastern U.S., The discussions I had with our customers that evening reminded me yet again how passionate and supportive this group is and how meaningful their journey to space will be in their lives. This group has been incredibly patient and loyal, and they fully appreciate our diligent approach to building their spaceships the right way. With that said, they are definitely ready for their space journeys to begin, and excitement is building as that moment draws closer at hand. We expect most of our current customers will take their space journey during 2027. As these bolstered flight rate capability, combined with the quick turn time expected from our first two spaceships, should allow us to ramp our capacity fairly quickly. In addition to private astronaut space journeys, we continue to advance the space research side of our business, and you may have seen the recent announcement about our partnership with Purdue University. Scheduled for 2027, the Purdue One mission will carry a five-person crew of Purdue faculty, students, and alumni, along with a rack of research experiments. We are excited by the potential of these types of missions as they represent a meaningful opportunity for us to partner with world-class research universities and institutions.

Doug, I'll turn the call over to you. Thanks, Michael. Good afternoon, everyone. I'll start with our financial results for the third quarter and a review of the balance sheet. Then I'll give a preview of our spending assumptions for 2026 leading up to the start of commercial service. I'll wrap up with a recap of our longer-term economic model. Turning to slide 15, revenue in the third quarter was approximately $400,000 attributable to future astronaut access fees. Total operating expenses for the third quarter decreased 19% to $67 million compared to $82 million in the prior year period. Net loss improved by 15% to $64 million compared to $75 million in the prior year period. Adjusted EBITDA improved by 11% to negative $53 million in the third quarter compared to negative $59 million in the prior year period. Free cash flow was negative $108 million in the third quarter within the range of our prior guidance and an 8% improvement compared to the prior year period. Moving to slide 16 on the balance sheet. We ended the third quarter with $424 million in cash, cash equivalents, and marketable securities. During the quarter, we generated $23 million in gross proceeds to our ATM equity offering program. Our balance sheet remains strong in preparation for commercial service planned for later next year. As we build our spaceships, spending continues to shift from significant investments in R&D expense to capital investment. For the third quarter, capital expenditures were $51 million, up from $39 million in the prior year period. As we have pointed out on prior calls, our growth in capital expenditures is reflected in property, plant, and equipment, or PP&E on the balance sheet. At the end of the third quarter, we reported $350 million in PP&E, increasing 67% from the $209 million at the end of 2024. This represents our significant investment in assets such as manufacturing capacity and spaceships that we expect to yield tremendous future economic returns. Moving to our projections, revenue for the fourth quarter of 2025 is expected to be approximately $300,000, primarily related to astronaut access fees. Forecasted free cash flow for the fourth quarter of 2025 is expected to be in the range of negative $90 million to $100 million, in line with our prior guidance. Spending trends have played out as expected. Peak spending on tooling occurred back in the first quarter of 2025. Since then, we've reduced our cash spending each quarter. Looking ahead, we expect continued quarterly reductions in cash spending to the third quarter of 2026, until spending begins to rise with the anticipated start of commercial service in the fourth quarter. We know that strength in our capital structure is imperative to our success. We will continue to be very prudent with our deployment of capital, primarily for the completion of our new spaceships as we march toward commercial service. We also expect to receive cash inflows from customers ahead of their space flights. In addition, our ATM equity offering program remains available to further strengthen our balance sheet as appropriate. We're making excellent progress toward delivering the powerful economic model that we have shared with you before and is shown on slide 17. As we refine our operating plans for 2026 and 2027, we continue to see the economics of the model holding true. With the initial fleet of our two spaceships capable of an anticipated 125 flights per year in a steady state and using our most recent ticket price of $600,000 per seat We expect to generate approximately $450 million in annual revenue at high margins and yield approximately $100 million in adjusted EBITDA. Moving beyond that, we foresee significant economies of scale with the expansion of our fleet. By adding a second launch vehicle and two more spaceships, we expect to grow annual revenue to approximately $1 billion and yield approximately $500 million of adjusted EBITDA. We are very excited about the substantial progress we are making to achieve this highly profitable business model. With that, I'll turn the call back over to Michael.

Thanks, Doug. Let's close on page 18. It's been a big quarter for us. Strong progress is underway in our spaceship development efforts, and I'm very proud of how our team has made such a superlative effort to bring us to this point. Everyone at Virgin Galactic, along with the dedicated teams at Bell, Carbon, and our suppliers, It's hard at work to deliver the dream of accessible spaceflight. It's fantastic to see that dream becoming more tangible and more inevitable as each month goes by. Let's open the call for questions.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Thank you. And our first question comes from the line of Greg Conrad with Jefferies. Your line is open.

Good afternoon. Maybe just to start, I mean, you mentioned opening the first tranche of sales in Q1 2026. Any other initial observations on size of that tranche or how you're thinking about flight price on reopening? Hi, Greg. It's Michael.

Price, we haven't said it publicly, but I continue to expect it will be higher than the price, our last published price, which was $600,000. And I think that is likely to be a trend you will see. So to your second question on volume, I use the word tranche of sales specifically. We'll put a quantity out. We'll sell that at a price and do that assessment as a good kind of yield management, revenue management group would, and then reset the price for the next tranche. And I think we'll do that. Our expectations is that will likely stair-step itself upward, but we'll do that tranche by tranche.

And then just as a follow-up, I think you also mentioned, you know, majority of the backlog of astronauts, you know, winding down in 2027. You know, how are you thinking about the ramp and flight cadence and maybe implications for 2027, just given it seems like, you know, end of 2026, a lot of those flights will be moving forward.

So our, in the, We'll probably continue to use metrics we talked about a long time ago as we were preparing for our first flights. What's the flight per month that we achieve as a company, and what's the revenue per flight? And so I'll focus on flight per month here to your question. The ships that we're bringing forward when they arrive at Spaceport America, I'd say the ships themselves and the status of the maintenance team will be prepared for them to meet the cadence we've talked about. So if it's 125 flights a year, roughly, we're talking a 12-flight-per-month metric. So the machines will be ready to do that. We will choose to, I'd say, ramp our operations in a prudent fashion. So we'll probably start with one flight a week, and then we'll move to two flights a week, and then we'll move up to three flights a week. And I would expect that progression to take place roundabout over the first two to three months of operation from our first space flight. Thank you. Thanks, Greg.

Our next question comes from the line of Oliver Chen with TD Commons. Your line is open.

Hi, Michael and Doug. Regarding the the Q3 2026 flight test plan and also the Q4 commercial launch, how would you prioritize the different risk factors that you're looking at that could yield variability in your expectations given that you called out a few different items? And then on the oxidizer tank and qualification of that, should we understand some implications for how that could positively benefit margins as well as cost savings? And third question, I think you mentioned avionics. Would love your thoughts on what that opportunity may look like and why you could be well positioned there as well. Thank you.

Thanks, Oliver. I'll start on some of these. So let me go ahead and go phase by phase, Oliver. So I called out on whatever slide that was the upper skin that is left on our fuselage and some of the aft skins are there. And what's nice is to be able to narrow down, like there aren't that many carbon parts that we're actually waiting on to get into our factory. There's some smaller piece parts coming, but those are the two big ones. And I flagged them and just tried to be transparent to everybody. We expect those to roll into December and stay on path. We've put all the learnings we've had from our original spars a couple quarters ago to the fuselage part a quarter ago. So expect those to come out. Until, you know, we've got them in our hands in the spaceship factory, we won't have all of that risk removed. But we feel comfortable enough in the variability of those parts to say one way or the other, we still expect our first spaceflight in Q4 of next year. So that's kind of on, I'll call it the critical path of getting the carbon parts in. We've been having amazing success as we have the parts in that fit and finish of these as they go into our tools are letting us move better and more efficiently than even we had hoped. So that's really good news for us at the assembly level. So I'm not flagging a high degree of risk in the assembly of those parts into the spaceship. So that puts us moving towards getting to flight test in Q3. So between finishing the building of the ship and the start of flight test in Q3, we do a lot of ground testing. We are mostly checking all the systems as they integrate onto the ship. Are they all working and performing as expected? And we do an important test called a ground vibration test, that allows us to check kind of the harmonic resonance of the ship itself before we put it into flight. Those things have variability across each test, but we believe we've allotted enough time within that to handle the variability of any of the individual tests or the system tests. So we feel good and confident in our Q3 start of flight test. For flight test, you may recall, Oliver, we are talking the primary thing we're looking to do here is dial in the fly-by-wire flight system that our pilots use to control the ships. That's a new upgrade for this class of ships versus our original ship, Unity. And we've been doing all sorts of work offline to prepare for that. And we've given ourselves enough flights in the flight test program to move through there. So we believe we are doing both the things offline in test benches, offline in an integrated fashion in our Ironbird facility, which we've talked about kind of building a spaceship without the skins that we are testing all the mechanical systems and electrical systems on that way ahead of time. Then we'll do a full integrated test in our factory in Phoenix ahead of time so that when we get to flight test, we want to be verifying that everything is working as expected. That's really what we're doing as opposed to learning. Unity's flight test was all about learning. These ships' flight tests will all be about verifying. So hopefully that gives you a sense of remaining risk and how we're managing them going forward. You talked about the tank, one of many examples where we have re-engineered, you know, kind of part by part of this ship to add durability, longevity, which together, you know, equals reusability and asset reutilization and takes down the cost, both the variable cost, but especially the fixed cost of creating these spaceships. So that tank is one of, you know, literally hundreds. One of our galactic... 10 moments, I don't remember if it was 8 or 7, Mike Moses talks about a pneumatic pressure valve. That was qualified to allow us to have a part that now lasts for the life of the ship. Unity's version of that was not at all a life of ship piece, and it took a lot of maintenance and inspections between flights. Almost every carbon part has been rebuilt in this way. So the total that plays out economically is it allows us Incredible reusability, right? You've heard us say 500 flights per ship. We think the structure of the ship probably will go beyond that, but we're calling it that as now. These tanks and these pneumatic pressure valves, the carbon parts as they come out, each one is just kind of checking the box for us that we've designed this the right way. So I think you mentioned, does that give us cost savings? What it does is really validates the economic model that Doug was talking about. I think we put a version of that inside the deck again. But the cost assumptions that we put into that model more than a year ago now, I think, are really kind of validating as we move forward with things like this tank. And lastly, Alvaro, you talked about avionics. So these are, I think you're aware, all the electronic systems that are there. A lot of times in... These are very well done for aviation, you know, the aerospace, the aero side of aerospace, and I'd say adapted to space. In our case, we are building these ourselves, and they are optimized for a space environment. And that means, when I say optimized, that means they are fit for purpose. They are incredibly robust. They are incredibly durable. The systems themselves are doubly, triply redundant, and they're lightweight. And that combination is what's needed as people are trying to get high, whether that's high into space or very high altitude into things the government would want. I think there's opportunity for us to use our special expertise with that team. That team needs to stay focused in getting our spaceships built right now, but I'm excited for letting them loose once we get that done. Hopefully that answers your question.

Yeah, it does. One quick follow up, Doug. The operating expenses were better than we had expected. Was that in line with your expectations? And you have been on that process of capitalizing. Was that similar to what you were planning to do with capitalizing the expenses? Thank you.

Yes. Hi, Oliver. So, yes, it is with it's in line with our expectations. because the guidance we gave was to be between $100 and $110 million of negative cash flow for the quarter, and that included an assumption around CapEx that came in line with our expectations. And so, yes, you've seen that conversion over time. There's been less OpEx and more CapEx as we've been building out the spaceships, and we're capitalizing those costs. and that's the trend you're seeing. You'll see that continue for a little bit longer as we wrap up the work in manufacturing, and then you'll see a ramp down in CapEx happening out here in kind of the middle of 2026. And I wanted to just come back to one more thing you asked about the economics of the tank, the oxidizer tank, and how that helps us. One of the real benefits is by having a longer life tank, one that lasts the whole life of the spaceship, because we don't have to replace it during the life of the spaceship. So before the tank we had, the previous design lasted about, it was only qualified for about 40 flights. And this tank sits in the middle of the spaceship. So to replace it means opening up the spaceship, taking out that tank, putting a new one in, which interrupts commercial service. So it's not so much the cost of the tank, that's a factor, But being able to continue to operate, not have an interruption to do a major maintenance event like that is a big deal. Hey, thanks a lot. Happy holidays. Thanks. Same to you, Alvar.

Our next question comes from the line of Michael Leshock with KeyBank Capital Markets. Your line is open.

Hey, good afternoon. I wanted to ask on the competitive landscape and potential TAM for research flights. Of course, you have the ISS for microgravity research, but also more financially viable and accessible options like suborbital parabolic flights. Could you talk about the differentiators of your research offering versus peers and how big do you think that market could get longer term?

There are a few things in that category of differentiation. One that's very meaningful, part of what is exciting for Purdue as an example, is it's functionally a little laboratory where the scientists and researchers can go along with their experiments. So you can't do that on a sounding rocket, and it's super expensive to try to get up to the ISS on that. So the ability to fly and travel with experiments is very, very meaningful. So that's one. The quality of microgravity environment is one of the things that has been a big differentiator from the scientists that have flown with us in the past, and that continues to be a huge attractive element, especially versus parabolic flights and things like that. It's just an entirely different level. The opportunity for research to be done in a frequent and repetitive nature to build the data set is also incredibly important. And whether that research takes place on our spaceships as we go with unprecedented frequency to space, or whether it's something that needs to get up to high altitude, which our launch vehicle does on every flight, the ability for us to put experiments and equipment on our ships to build a data set we will have, I think, an unparalleled capability to build those data sets up in ways that just haven't been possible before. And so we think there's a really interesting opportunity for research institutions. We're very excited about Purdue and dynamics like that where you're really combining not only the science and the research, but just the fascinating interest of alumni groups from an engineering organization like that. So that's a category. that I think is very interesting. But also just broadly, there's so many things that I think government research groups have the opportunity to do here. Hopefully that gives you a little bit of sense there. I think the volume of this will stay in balance with our private astronaut capacity as it pertains to the spaceship. But I think our launch vehicles also have capability to do some really interesting testing as well.

Great, and then just wanted to ask on weather, is that a limiting factor for flight cadence? I know you've incorporated weather in all of your projections, but I'm curious if you have any assumptions for how many days per year would be considered launch-eligible days on average? Thanks.

Yeah, I may not have that number exactly. First, I'll start off, one of the joys of flying from southern New Mexico is is it sunny 85% of the days of the year. And the conditions we need to fly really just need to be good for a few hours of the day. That's usually in the mornings, but we have a degree of flexibility there. So the very location we chose is the first thing that benefits us from weather. There will be weather. It'll rain. It'll be too windy. There'll be a monsoon that blows through. And we expect that. And one way to... give you context to your question. If you look at our flight capability expectations for each spaceship, right, we expect each spaceship to be able to fly twice a week, so roughly 100 flights a year per. And we have two of those spaceships. You can say, okay, we have spaceship capacity, you know, it's 200. We look at our launch vehicle. We've talked about the launch vehicle ramping up to three flights a week. We continue to do work on that vehicle with Fantastic result. So we think there may be some upside there, but let's, for this discussion, just keep it at three flights a week. So that says the launch vehicle roughly has 150 flight a week capacity, and we've been sharing 125. So that difference there between, you know, let's say that if we were limited to three flights a week on the mothership and we may have upside there, we're giving ourselves, you know, 25 flights of yield loss across the course of time in an environment where weather's usually good along the way. Now, the real question here is, well, let's say you have a rain day. So, Mike, you're supposed to fly on a Wednesday, and the next group is supposed to fly three days later, right, Thursday, Friday, Saturday. If it rains on Wednesday, we don't want to just scrub your flight. I'd rather have you go on Thursday, or if it rains two days, I'd rather have you go on Friday, Or worst case, I'd rather have you go on Saturday and have the Saturday group go on Sunday. And one of the things that we're so excited about with our launch vehicle, Eve, is while we believe that we'll average three to four flights a week as we ramp that up, we can't actually fly it back-to-back days. So if it is going to rain on a, let's say, back to the Wednesday-Saturday piece, it may be that we choose to fly... on Thursday and Friday instead of Wednesday and Saturday, and then get our ships back on their general maintenance cycles. So we're giving ourselves a lot of flexibility with the capabilities of these ships to work around weather that will inevitably come up. Hopefully that gives you some context of our stated targets.

Great. Thanks so much.

And again, if you would like to ask a question, press star then the number one on your telephone keypad. We'll take our next question from Luis Rafeto with Wolf Research. Your line is open.

Hi, thank you very much. Hello? Hey, can you guys hear me?

Yes.

Great. Maybe just to follow up on that last question, should the Purdue research mission, is that sort of the typical research revenue or is there any reason that would be different from what we've seen previously?

No reason you should expect that to be different from our last stated pricing. Okay, thank you.

And then as you think about cash flow next year, I know you talked about the spend coming down through the third quarter, but then in the fourth quarter sort of starting to go back up as you start commercial ops. Do you still see a path to positive free cash flow as those ops start back up or start up, excuse me?

Yes. So we've got this downward trend in our spending, which gets us through to the start of commercial service. And then again, the cash flow positivity will be a function of a couple of things, you know, the timing of that. And the first is the flight rate, and then it'll be the ticket pricing of, you know, what's blended in in the manifest. But the key is getting the commercial service, getting the two spaceships in operation. And Michael mentioned that, you know, the second spaceship would be coming fairly soon after the first one. and we would be able to get to these flight rates that get us to the cash flow positivity within two to three months after the start of commercial service. And so at that point, depending on what we are doing with the ticket pricing, how the passengers are moving through, because we have some tickets from the past that are more like $250,000, and we have more recent tickets at $600,000, depending on how those blend in, and that progresses, that will define the exact timing of the cash flow positivity. But the key is the flight rate, and it's looking good.

Thank you very much.

There are no further questions at this time. Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.