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 fourth quarter and full year 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 your question, press star one again. Thank you. I will now turn the call over to Eric Cerny, Vice President of Investor Relations. Please go ahead.

Good afternoon, everyone. Welcome to Virgin Galactic's fourth quarter and full year 2025 earnings conference call. On the call with me today are Michael Cole-Glazier, Chief Executive Officer, and Doug Ahrens, Chief Financial Officer. Following our prepared remarks, we will 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. 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. I would now like to turn the call over to our CEO, Michael Colglazier. Go ahead, Michael.

Hello, everyone. We've had a tremendously productive start to 2026, and the buildup to commercial spaceline operations is in full swing. Three massive milestones to call out at the start. First, we've completed structural assembly of all three major components of our ship, the wing, the fuselage, and the feather. Second, the weight on wheels milestone for this first ship is expected in the next few weeks as the process of joining the wing, fuselage, and feather has been moving along even better than expected. This allows the ground test phase to begin in April with commencement of the flight test phase on track for Q3 as planned. And third, with the launch of our first space flight on track for Q4, We have opened the sales window for Virgin Galactic Spaceflight Expeditions, and we are now adding people to our spacefarer community at new price points. We are very excited to share the progress made since our last earnings call, and I'll start by calling your attention to the fantastic image on page three of our presentation. As you can see, we've wrapped up final assembly of all three of our major sub-assemblies, the wing, the fuselage, and the feather. and the process of joining these into our first complete spaceship has begun. With structural assembly set to finish over the next week or two, we expect to bring this ship into ground testing in April, which has it on track for our first spaceflight in Q4 2026. Amazing progress by our entire company. With our first ship moving full steam ahead, we have released a limited tranche of Virgin Galactic spaceflight expeditions, each priced at $750,000. Our new website is now live and will support the information and application process for those interested in joining the Virgin Galactic Spacefarer community. We've hired our new chief growth officer, Megan Pritchard, and she's joining at one of the most exciting times in our company's history. Looking at the agenda on page four, today I'll offer insight into our sales plans for the year ahead, share expectations for ramping the cadence of spaceflight during the first month of operation, hit highlights on progress of future spaceports, and provide a roadmap of expected milestones and catalysts as our first spaceship is ready for its maiden spaceflight. Doug will discuss our plans for cash management, capital structure support, and revenue planning over the next 12 months as we place our ships into commercial service, drive meaningful revenue from spaceflight operations, protect our balance sheet, and target quarterly positive cash flows as early as 2027. He'll also review our fourth quarter and fiscal year 2025 results. Let's get started on page five with the outstanding progress the Virgin Galactic team has delivered with our first spaceship. We've included a series of images on pages five through seven of our new ship that structural assembly nears completion. We're incredibly excited at how well the ship is coming together. During our last call, we highlighted some specific challenges we were having with elements of our fuselage, and the fuselage remained on the critical path for us throughout the build phase for this first ship. With that said, we finished the fuselage assembly last week and joined it to the wing assembly shortly thereafter. Our feather assembly from Bell Textrod has made its way across country to our factory And we expect to connect the feather to the wing and fuselage over the next week or two, and then move this ship into its ground testing phase. I'd like to take a minute to call out why this enormous milestone is so important to Virgin Galactic's future. We invested years designing this next generation ship, and the result is spectacular. That heavy lift is behind us. We then spent significant time and capital developing tools both to build the carbon parts and also to assemble those parts into the final structure of the ship. These tools were built to exacting standards, designed to last, and they will support the efficient production of many spaceships going forward. Next, we spent time refining the process to produce a wide variety of carbon composite parts for our ships. As I mentioned with our fuselage, some components required a few iterations to get right, which is fairly typical of first-yield parts. but we've adapted our processes and techniques and we can now repeatedly produce high quality parts. All these efforts came together and are enabling us to assemble the ship structure in the span of just a few weeks. This final assembly time shaped months off our historical process, and we expect this efficient assembly process to be replicated as we expand our fleet over time. In sum, We now have the infrastructure and capability to build and assemble spaceships efficiently, reliably, and at scale. This provides an enormous competitive advantage as we grow our business. Turning to exciting news on page eight, sales have begun. With our first new spaceship preparing for its ground test phase, it's time to welcome more people in the Virgin Galactic Space Fair community, which already contains over 650 founding astronauts. To support the process, we have reimagined and rebuilt our entire digital presence to focus on informing and engaging aspiring astronauts with a streamlined and purposeful approach to our new public website at VirginGalactic.com. I hope everyone listening will take time to explore this new site as the life-changing aspects of our spaceflight experience really come through. We've opened a limited tranche of 50 spaceflight expeditions each priced at $750,000. These space flights will be slotted in our manifest immediately after we fly the current members of our founding astronaut community, many of whom have been anticipating their space flight for several years. As I've shared before, we expect our prices will rise in steps over the near to medium term. And once this initial tranche of space flight reservations is concluded, we plan to reach higher sales at the $750,000 level to focus on welcoming this new group into our space fair community in trademark Virgin Galactic fashion. We will then open our next tranche of availability, which we expect will be priced higher than $750,000. We will also be offering a very limited number of reservations to join our earliest space flights on our new spaceship. To date, slightly less than 800 people have flown to space throughout history. And we expect flights from government agencies will leave fewer than 200 remaining slots to be one of the first 1,000 humans in space. We will be pricing these very limited opportunities substantially higher than our regular reservations. With sales beginning and commercial operations on the horizon, I am extremely pleased to welcome our first Chief Growth Officer, Megan Pritchard, to Virgin Galactic. Megan joins us from Uber. where she most recently led the U.S. mobility portfolio, including the luxury segment Uber Elite. Megan's career has been spent building commercial success in groundbreaking industries, from eVTOL to autonomous vehicles to expansive growth and category expansion in the rideshare industry. Her charter is to drive growth and scale across the company with an immediate focus on our initial sales efforts and a broad remit that includes scaling our business at Spaceport America, establishing additional revenue streams for our existing and emerging technology, building brand partnerships, and accelerating the development of new spaceports. Moving to page nine, I'd like to share how we are planning to ramp our flight cadence during the early months of operation. We expect to begin commercial spaceflight operations with a cadence of approximately four spaceflights per month. We plan to have our space missions and maintenance teams trained and ready to turn the ships at a higher pace. But we want to take the time necessary to dial in our astronaut experience and incorporate any learnings and feedback we received during our initial flights. Once we have the missions, maintenance, and astronaut experience dialed in, we plan to progress to an average of eight space flights per month. We will then ensure all parts of our operation are scaling appropriately before moving to 10 flights per month or more. Actual flight cadence will be influenced by weather and other factors, of course, but our planning efforts are built with these flight rates in mind. Safety in operation and dedication to an unparalleled astronaut experience will drive the actual pace of this progression, and we will only proceed with a step up in flight cadence when everything is fully ready. At this early planning stage, Our goal is to move into a cadence of 10-plus flights per month sometime in the second quarter of 2027, subject to vehicle and operational readiness. On page 10, we've recently been flying our launch vehicle, Eve, as part of our pilot proficiency training. This ship was given a very meaningful upgrade over the last year while we've been building our new spaceships, and the improvements have readied Eve to target a launch support capability of up to 12 to 15 space flights per month, which is higher than our expected average commercial cadence. This additional capacity from EVE should be extremely helpful in allowing us to respond to weather-related flight delays so we can generally stay on track with our flight dates and customer commitments on a week-to-week basis. Our engineering and maintenance teams, along with our pilot corps, have done an incredible job with this launch vehicle. We expect the substantial upgrades we've made to EVE over the last few years will support a service life into 2032 or beyond. But we also plan to expand our spaceflight capacity beyond what EVE can support. That will require additional launch vehicles to support the next set of spaceships coming off the line. Our new launch vehicle development program, internally known as the LVX program, has been advancing modestly as we have kept most of our engineers focused on the delivery of our new spaceships. We expect the majority of our engineers will pivot to the LVX program as our spaceships move into flight test. And we currently are targeting commercial deployment of new LVX vehicles along with additional spaceships in 2030, which would coincide nicely with opportunities for a second spaceport in addition to expanding operations at Spaceport America. Speaking of future spaceports, on page 11, I'd like to touch on progress with plans for our next spaceport. We are nearing conclusion of our initial study for Virgin Galactic Spaceline operations in Italy. We've had a very successful engagement with our partners in the Italian government, and we jointly sorted important efforts necessary to fly from a location within the Puglia region in southern Italy. Key achievements include understanding how airspace will be deconflicted, identification of probable flight paths and space flight trajectories, definition of infrastructure requirements of the spaceport, robust assessment of weather patterns across the year, and positive investigations into both supply chain and hospitality availability within the local area. Next steps will include specifics around licensing, timetables, and business arrangements, and we are looking forward to continuing this effort with our Italian partners this year. In addition to the exciting opportunity in Italy, we also progressed discussions for a Virgin Galactic Spaceport with additional governments during the last quarter. I've been very encouraged by the interest and opportunity within each of these locations, and I look forward to sharing more around international expansion opportunities in addition to the substantial growth we expect from Spaceport America. Starting on page 12, I'd like to outline several upcoming milestones and expected catalyst opportunities as our first spaceship moves through ground testing, advances to flight testing, and prepares to launch into commercial operation. First up in April, our first spaceship will begin a series of ground testing efforts, specifically known as production acceptance testing, or PAT, and integrated vehicle ground testing, or IVGT. Production acceptance testing will be done on every spaceship we produce and is conducted to ensure that all systems, including electrical, pneumatic, and hydraulic, are properly installed and function correctly in an integrated configuration. After that's done, we plan to begin the IVGT process, a deep systems-level integration test done on the first vehicle, which is conducted to validate and verify the overall system design and confirm that it meets all performance and safety requirements. This thorough ground testing period should wrap up in July when we expect to open the hangar doors in Phoenix, christen this first ship with its new livery installed, and transport it to Spaceport America in New Mexico, where it will begin flight testing shortly thereafter. Moving to page 13. Next up in May will be some excitement at our operating base in New Mexico. The flight testing on our horizon it's time to expand our team of pilots and accelerate proficiency training. To do that, we've been interviewing some of the world's best test pilots to join our elite spaceship pilot corps. Commencing in May, our pilots are scheduled to begin flying our original spaceship, Unity, on a series of glide flights above Spaceport America. Our new spaceships share the same outer mold line and energy management characteristics as our original ships. which makes Unity an outstanding training vehicle in advance of our first glide flight with our new spaceship. This series of glide flights with Unity also gives our mission control and maintenance teams excellent preparation ahead of the new spaceship test flights. And it's going to be a majestic sight when Unity delivers these encore performances in the New Mexico skies. Advancing to page 14. The next milestone following ground testing and the Unity glide flight series will be the start of our flight test program, which we expect to commence in the third quarter. The flight test program will include a series of glide and rocket power test flights. We plan to have a partial burn test flight where we will ignite the rocket motor but purposely stop short of a full duration burn. This will be followed by a full duration burn spaceflight. The full flight test program is expected to extend into the fourth quarter. The main objective of our glide flights is to incrementally expand the flight envelope and evaluate overall vehicle performance, including tuning and validating the tuning of the fly-by-wire flight control system. Rocket powered flights focus on validating the performance of the ship during key stages of flight and validating predictive thermal models. Other test points will include the evaluation of the cabin experience, training and customer operations procedures, and maintenance and turnaround processes. The test program is ultimately designed to validate all systems, operating procedures, and the astronaut experience before entering commercial service. Throughout this phase, our timeline is driven by disciplined data collection, analysis, and model refinement. We will be posting and publishing images from all these flights along the way, and it will be an exciting spring, summer, and fall. as anticipation builds for the start of commercial operations. On page 15, a quick note on two additional milestones coming later this year. First, with productions of spaceships well underway, we are gearing up to begin rocket motor assembly within our Phoenix factory, with production expected to begin in Q4, 2026. We have a solid inventory of motors already on hand, but the new rocket motor assembly line It's planned to keep pace with rocket motor production needs as we scale flight at Spaceport America, and the line is designed to support rocket production needs for a second spaceport as well. Next, with our first spaceship entering the test phase, fabrication efforts are pivoting to support both static testing efforts and also production of our second spaceship, which we expect will enter service between late Q4 2026 and early Q1 2027. in line with our planned ramp and spaceflight cadence. Turning to page 16, we often receive questions from our retail shareholder base regarding production schedule, commercial service launch dates and cadence, and cash management, including how we consider the benefits of cash inflows from our ATM program relative to its dilutive effects. I believe we touched on schedule and launch cadence already, but before I hand the call over to Doug, I'd like to spend a little time on our cash management and capital market strategy as we conclude our pre-revenue phase and prepare to drive meaningful cash inflows with the launch of commercial spaceline operations. First and foremost, we will be using cash to complete our first two spaceships and place them into service as those two shifts enable the start of high-margin revenue operations and begin to unlock the tremendous value of our business model. As we bring these ships into service, we expect to generate significant cash from the current backlog of customers as their final payments become due in advance of their space flight. To enhance our cash flows as we start commercial operations, we will be offering a limited number of higher price space expeditions on our earliest flights for those who wish to be part of the first 1,000 people in space. We plan to manage our flight manifest in a fashion that will allow modestly positive quarterly cash flow within 2027, with positive cash flow forecasted to scale in 2028 and beyond as we fly astronauts and researchers who have reserved their space flight at higher price points. We entered into a series of capital realignment transactions last December and moved most of our debt maturity into 2028 in alignment with our planned ramp in price and profitability. Doug will share more about the many benefits of these capital realignment transactions, including flexibility in payment terms. We expect to leverage opportunities with the $138 million remaining within our existing ATM program to support corporate objectives in the upcoming year. Utilizing an ATM program is diluted. However, we expect the value created from the assets that are being put into service with support from this ATM use will substantially outstrip the potential dilutive impact. We are excited to move into cash generating operations as we place our new spaceships into service, expand our book of business with the addition of new astronauts, and prepare for high growth in the years ahead. I'll now turn the call over to Doug for the full financial update, including detail on our plans to leverage these aforementioned strategies to transition the company from a pre-revenue state to a profit-creating enterprise. Thanks, Michael.