SPCE Virgin Galactic

Michelle Kley Executive Vice President of Legal, General Counsel & Secretary
Michael Colglazier Chief Executive Officer
Mike Moses President, Space Missions and Safety
Jon Campagna Chief Financial Officer
Adam Jonas Morgan Stanley
Robert Spingarn Credit Suisse
Myles Walton UBS
Ron Epstein Bank of America
Oliver Chen Cowen
Noah Poponak Goldman Sachs
Pete Skibitski Alembic Global
Call transcript
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Michelle Kley

Thank you, and good afternoon, everyone. Welcome to Virgin Galactic's Third Quarter 2020 Earnings Conference Call.

On the call with me today are Michael Colglazier, Chief Executive Officer; Mike Moses, President, Space Missions and Safety; and Jon Campagna, Chief Financial Officer, who will provide prepared remarks. Earlier today, we issued a press release and made a slide presentation available on our Investor Relations website, which provides an overview of our business and financial highlights for the third quarter 2020.

During today's call, we will make certain forward-looking statements within the meaning of the federal securities laws.

risks projections on statements and current result, subject predictions, that future as are are based are expectations to statements and about other events a Forward-looking uncertainties. and and assumptions, forward-looking cause could to from communication. future Many statements factors this actual in differ events materially the

materially and the other For more earnings we today time Exchange and to risk of press filed factors including forward-looking section by statements, cause for to actual that release and information time included from from of XX-Q may Securities uncertainties please the Galactic risks documents Virgin Commission, about results the with differ Form refer XXXX. quarter to issued the in factor the the third our

Readers statements. not on certain Forward-looking call. undue reliance also are Please non-GAAP put today's statements will only are cautioned financial of speak to refer forward-looking as that the note we date on to information made. they

financial our earlier comparable reconciliations most to measures Colglazier. With website of the can at is which that, section today, press You earnings Investor of available on our like call turn these over find the Relations to Michael to the in release I'd measures GAAP issued

Michael Colglazier

brand, afternoon, I've are immersed Thanks was myself team in members. I months, everyone. and you and and company's loved into incredibly areas, hope commercial the operations, getting ones financial well talented weeks know two underway good our Michelle, spoke with your the to over keeping three last and safe. and and I healthy I last you job. I'm engineering, And the

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Mike Moses

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Michael Colglazier

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Jon Campagna

Michael. Thanks

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the increase to for QX grant R&D additional back were scheduled due and R&D the policy Social transaction of equity for $XX not million million our technological expenses forward which expenses closing Capital inventory in compensation $XX certain related a achieving the capitalization increase of reflects to determined the meet relate second The our identification $X of expenses we compared expect of primarily the before non-cash quarter items awards, stock-based for later, to GAAP to Hedosophia. Looking of charge to quarter million in feasibility. one-time non-cash XXXX.

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R&D a personnel equipment in for compared adjusted million for quarter. XXXX EBITDA, expenses $XX incurred tooling This the to cash quarter. negative in quarter increase. negative non-cash $XX as the the the to In were locations $X of more is $XX of to costs. primarily to Non-GAAP compared Adjusted as of second paid addition, of XXXX. result Cash second for for and stock-based compared EBITDA travel the excludes the of second between the million $X incremental expenditures employee third in million travel million expenditures well of vehicle Capital capital quarter as XXXX. million the third which was other $XX in costs quarter frequent million compensation, costs quarter consisted contributed quarter and totaled

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in revenue did we focus We during quarter test. payloads, on related earlier. revenue generate the be outlined as not quarter fourth As to anticipate modest given will continued flight the which expected, our flown the Michael

Turning R&D. to

mean As within a to we once vehicle here feasibility. will R&D and to we achieve passengers costs will costs. four that the capitalizing cabin, there currently a reminder, begin in until test completed What we fit is be continue power flight with we our space have vehicle expense technological our

quarter R&D for Our to million XXXX. $XX the second $XX in the totaled compared of million expenses quarter

a million the and of personnel $X expensing certain an previously, to As other I costs. and reflects increase R&D non-cash related charge items this outlined in to inventory

of Our previously expenses primarily awards, of our granting the Officer, the million for and mentioned. Space to compared quarter to including totaled million, those an equity to due increase XXXX; the of $X granted $XX SG&A Chief as quarter CEO second

flow cash Slide negative and flow Free million was the XX our million. for statement. of line cash which with in cash $XX negative QX to was looking generally Turning the quarter, $XX flow at free

Michael. I not premium call timing to Although primarily XXXX of flow coverage's, quarter insurance to to certain annual would free the in back providing of in are specific cash now the we our turn for increase to expect which typical over the guidance, due QX. are payments negative concentrated like fourth we

Michael Colglazier

Thanks, operator hand the to for now I'll Q&A. Jon. over


ahead. the first Adam question Jonas Please with line of from go Instructions] Stanley. [Operator Morgan is Your

Adam Jonas

everybody. Thanks

them QX Just highlighted, first the track a into first COVID issues the Is on expect the couple is that delays Branson the this quarters? that in differences as these delays? questions, Or the operation already part because flight significant your conditions Branson just on working QX. flight that close factors is persist to you in for to aren't in you for yet quarter of it due

Michael Colglazier

Adam. Thanks,

Adam Jonas

…first question, thanks.

Michael Colglazier

Thanks, is This Adams. Michael.

seeing impacts COVID. are We from

As I resources our that there's our out we quarters of just that protocols. you the and delayed in reasons doing one of shifts said, we of the flights, the lot on a into work can close flights, we've coming our is second spaceship upcoming been spread What see get off. coming follow talent focusing as and why though is really bit the a that's our a delay

So, in I schedule said XXrd. to do the November ability today, have believe flight successfully like the we XXth we to do this

the our rocket in the quarter. do we expect be go second end We one to that expect flight QX, still to QX third of go powered it'll off but probably within and

is the to going date there's that one we're and flights expectation. learn, after course, each things that Of may but assess always of our we these

Adam Jonas

Thanks, that be thinking on question how payload the mag? the should highlighted A that test modest revenue the quarter, about on Michael. revenue order of we you payloads, the for for

Jon Campagna

earlier, NASA look Michael have mean, on at will best as be flight $XXX,XXX there's sure, of payloads payloads, the is Yes, we Jon. is Adam. mentioned way think, planned, three probably for sort in later this that I but I that the to that range it's this month. Yes, that Yes, for

Adam Jonas

just cost finally that capabilities are remind Okay, if I more you gives that your that's ship, us per and your spaceship of proprietary edge in, flip reductions, obviously that manufacturing great. can moat. that one something kind you of can telemetry And the of price

you declining. getting now that could getting ship from is. really If final what very the seeing line how the of us second of sight ship you close cost Thanks first And testing price just order to of phase to per then much. to for the second us much tell of of the are magnitude as an to kind that give you're spaceship; third start

Jon Campagna

down we focus think, on Michael at going still the R&D here production how to those as of reductions to an a cost driving in we not coming we're we're those second you. costs mentioned are over able look an onward. to that we what in we'll those that we're and as to position as give so Yes, Adam, that reductions for and we're to from I point, are, third particular estimate At future shifts will a have from share as but evaluating months this to point, continue with moved sort focus certainly

Adam Jonas

Thanks, Jon.


with line from question the is Please of Suisse. next ahead. Your Spingarn Robert Credit go

Robert Spingarn

good Hi, a afternoon. of wanted Michael, I to a question. sort longer-term ask you

that that You number to that's where but XXX year to double about XXX. would $X ancillary is per wanted per we the billion with mature portion a mentioned number. I mentioned get revenue I guess because understand little And is of you just that Spaceport a bit better relative flights, what the flight

our more going some that the So that was talk the and maybe and hoping perhaps you yours I bit it maybe sounds on like to more number bridges about little a between and if gap spaceships talk utilize about pricing a of you're elaborate little ancillaries. could

Michael Colglazier

really, with bullish on will spent talking think to the those for One really sign flight will they to peak and build I which there emotional transformative flight family forward think, will our that experience on so journey us. into there, itself. when we Rob. parts opportunity when going on come of do, an And adding that is course around starts value And journey also nature one experience it in company a of am New experience we I to that and I more of that. demand that friends time in of part, And be not being to think I Mexico, problem, this expanding really and incredible. transformative the then itself, on. We're thing I it's is Thanks, booking the going we're join focus we the looking to moment about made space far we'll will of and will That's be much believe kind this I that the people supply. have have so but what in to am experience be from a the truly the where to in going providing. be will we what value we carry course, add deliver. lot be participate of

think footprint ways we over continue I'll that. on the support the to to will space will experience the ticket, call beyond to as I we And that and forward do look So itself flight help the expand looking to we're revenue widen pricing go. it and

billion So does $X I think those things. reflect that

Robert Spingarn

it to quantify too ticket that as for ask ancillaries XX%. be could you in to sounds of it as price? terms much Is soon like It relative me to

Jon Campagna

Yes, our one strategy is flexibility things it excited going of to lot think, constrained is our have will a I I pricing gives product opposed constrained, a the of when that about into model. experience, the you but evolve one off pricing supply demand to and that truly incredible am as be

around time. that share So what to will strategies be and looking I future at that calls forward to looks experience am able in to bring being pricing our experience

Robert Spingarn

third to just wanted it a I think build clarify first about finish Branson flight How Okay. flight, that? flight? a on the the then to commercial a And test is test flight we third just as should is timeline, powered or

Michael Colglazier

flight know, program. Sure, you continuing are we, our test as

be think a November for what be experience part to test be we and employees. full in we'll bring of test the the up second we're program to QX better to those assess time coming program cabin flight with Richard four the with doing first flight XXth XXrd, will who here. passengers the that's go, I where think The The one will flight and who first all of

flight Our and the far test focused how so up mostly is on technology we're there. getting

to adventurer We of and make experience, sure as not also only environment want we on cabinet flight. the chief that kind are will weightless how to but in we founder, testing Richard our person that join think the go


question Please is line ahead. UBS. with Myles the next from Your go Walton of

Myles Walton

scarcity to step that the population here transition retiring sales. particular in initiating you one the Michael to Thanks, much good create could you the small small of wondering is one deposits? the to evening. astronaut And how Thanks. And retirement I expect ticket want step because was small the funnel. in the of on the maintain to step do if comment you from the one

Michael Colglazier

So we hi, sales we're Myles, the Branson. Richard of of this important learned the speaking future them. up I our community thing to way, some been looking part by flight following being have opening has to forward to is and in incredible how astronauts with do One

shift to those one with the are really people what shy we so once going calling to program as to XXX their we're community. look small has are we think so sales up. there. going and opening But But start we sales up, little been going in thoughtful to interest helpful. And future uh each we've will we joining it's far promised registered people we a time those step that's one the And do be we where assessing to very of have how decided of interest. It's and open and focus I that astronaut this are people reopen

not really it's much so, complicated more than And that.

but I has helpful think now really program up following space interest, sales degree fully to forward looking fight. the of sign a letting Richard's been reopening and register people fair we're in

Myles Walton

is something other of uptake go terms Okay. of into you'll Branson that happens or in when that that XXXX? flights And much significant of think later maybe the one we in flight, in should question pace after as

Michael Colglazier

we before from want the have focus experience. really in really who and us also make do, to get ensure just that a the as signed have probably transformative we life then will we plan flight of is slow focus I always and technological safety in come commercial objective to dialed test first we this we think is do our the experience we service, want on that way. to to right. heard into but future up measured in. and The people We and feasibility achieve that to sure truly all take We're we've going close to push as as

see will then be start increased us and do as measured you'll also and our fleet slow increasing So, a size. we we that


America. go is Ron question of Please Epstein from the next with ahead. Your Bank of line

Ron Epstein

guys. afternoon good Hi,

picture you. just a Michael, for big So, question

you what's longer, your but give at the been the kind now little hundred XXX and been if of day You've been what's us maybe about a can days, company surprises, a perspective. challenges the

Michael Colglazier

depth have, and it couple doing, going was grounded the surprises. we doing company the talent. of surprised that Sure, in a with up is what really I all levels pleasantly really of talent down for across company. we're And a

excellent really to So see. that was

the key we feasibility will chapter, that technological of that I the away second us we've business through focus And talent and business. also prototype for the itself, move as can roles the some come the flying be of from is for have really incredible things is has scale is into incredible earlier this And we great of have R&D of that this a space footing require but and And our mentioned important. excited these really those to to surprised build a is cusp the been manufacturing have going What now we and such really years about already scale. and really flight of we I look put move to assets in what's chapter. first this. business. as the I quality monetize date developed As into between on as gone an designing is been we now system into also shift excited, the and am XX in ability I'm what we to growing that now learning’s think it We're yes about call, in

Ron Epstein

on see in investments positive a space, a commercial commercial but change we maybe friendly else, to in the space. do cheerleader were the not a change? administration happen you we're just commercial in think a question. to on space, about And Secretary maybe do very different space, administration you If is administration What in nothing Commerce, in and of administration, pushing of feel see presidential for and if ways. was commercial space we cusp was the in space commercial like a see change It little see bit of how they big real right. change expect was very, believer Trump a the a seems Department very we'll If a Ross, Commerce Department of

Michael Colglazier

the following the everybody elections Well us away really closely. regardless sure breaking like sides say join great fully from and to I'm – of time and XX continue. And I the government your today. working next the that on where will Over administration I years that administrators expect on appreciate One our have is plays we've got with of history both call of aisle. been leaders a thing will out. really I

regardless We good with down government the have excellent election we're out. relationships path teams, I plays where going forward the think and


Please of next is line Cowen. go Chen from ahead. Your Oliver the question with

Oliver Chen

of in and look opportunity as is XXX we you. you And just accretive how assumed perspective, spaceship, bigger you you. Our we your a on Thank flights are will value that also spaceport. from also a and as scaling ahead? leverage that indicate Michael or think challenging thinking pricing more and modeling lower. lifetime of out mentioned Hi. and both that the for the customer year, would of you scale Thank what the the as well to as seek longer about be number experience spaceports like remarks opportunities lot The about the opportunity surveys what as equation? part per and up-raising

Michael Colglazier

Thanks, Oliver.

don't part part take the first, of me On the let you mind. second well, that; first if

will expect per we accomplish order lots regard. in spaceport. demand When is the and I many of go. every reached supply a as when target and up to ramp going But few flight to So for flight here, now current good need XXX as to now that, and motor utilized about several going and Many obviously rocket that approximation in the motors, focused to I it been to are order spaceships lots a test be to we I we're like we've think that rocket pivot said, a think I flights see footing a to of have that to we be are a think in year obviously and on motherships, going on a fully spaceport. manufacturing motherships in for we XXX spaceships our able that something we

will an well economics economic which that engine. drive we in the incredible I company, be operate. It our as communities but will as think for

for the you of that first your this product Our And very that. will if I we'll time? more that parts, part is will about question will be see interest other course excited comes I'm your, very, mind future, first I many together New of be just How think Oliver as in me the I'm world. of and the a Mexico, focus restating parts you sorry, powerful of would one think in first but really

Oliver Chen

plans a value maximization and Just with thinking about not lifetime there for customer experiential, mean, I pricing. intersect and scaling and likely as as creative well


Michael Colglazier


Oliver Chen

…and the what hypothesis… see being you that's

Michael Colglazier

Thank think is a I while truly background And it's you. you. this from a with transformative a we where thank Right, believe Obviously, experience. one-and-done customer lifetime not a be a experience. don't going experience, in is a I'm to coming a relationship once

perspective to scale others compelling bring I back fly and that. if think experience be is do to want going to people and different we they time opportunity will it the to be think so over them that look from with as from this get I markets, space different a will different And to come spaceports.

right as have talked here, joined XXX the been they community the really that to they're kind shared future our So to I astronauts journey has the of that the fact and on now commitment powerful. that

will out over in value lot I customers and delivering I we'll a there's think a think that ways of our lot play of that, focus but time. opportunity on for

Oliver Chen

Spaceport about unit will globally the partnerships to it and Okay. Spaceports And on approach how you more the and/or expansion Spaceport, capital thinking there globally? Thanks. number capital light required and of possibly make

Michael Colglazier


flight focused imagine the fully getting near this test, operations proven, really Spaceport. get at you our starting feasibility and utilized we're then going technological a in as into our stage, think would growing commercial on completing term I to

think be put So it I lot a premature it's with on that provide that. believe of for little a do world be But partnerships here fund and economic And spaceports. to we will with opportunity. I forth think as we'll around how probably engine thoughts will I future generated good will the me how expand the


of the with from Sachs. Your next Please go is Noah ahead. Goldman question line Poponak

Noah Poponak

that Hey, flight October X, as move for flight XXX% related sure COVID how Unity the And make going? to to to or powered from not powered between everyone. restriction have technical clear aggressive you completely Just spacing community? do the it feel about then, evening X anything opposed Hi, with how's and want otherwise. have it X November I first is or

Michael Colglazier

flight COVID that we'll will never FCC use not as fall. we'd we're all be Noah; referring be was On We of at October first What is request actually your XXnd. part, window That had be up downlinks. here. question, an for in license and may open was you that flight as have I Mexico out spectrum the powered New our transmitting window planned our put when be a to to to of the flying from flight first flying on units part always think part we we on said that,

flight there. good on window So we're feeling our

powered good the As of at to purposeful. with always But end feel it'll QX. that I'll second be we our well the in third we We feel this flight flight; very do, spacing, as we at of each QX. say and take good flight about said, these rocket about flight stage that's this, today by

prudently with first the forward thing in go to going mind. are absolutely; safety, We it's

of We data as flights down there. from and decision that And ships these at our look comes is all each make the they we analyze it. back what do the so we after we come

will But dates. I feel today, it's tests retest they engineers like. we knowledge So upcoming our they would that want with always to the possible our something us that good about flight or find sit as additional

Noah Poponak

will vehicle, kind of you've will a that to mean with after regard at more timing tell schedule all that, What us the I that looking be that program of that out? will be you the milestones the you rolled can much in have? about vehicle? With full we Okay. test how second

Michael Colglazier


rollout second testing. our So this acronym, is with we'll ground IVGT. out and spaceship, bring for we come of in will that learned I and when in into What QX, have rollout off fun we start

carry had that ground testing, and testing, of As will we flight data into analysis then we finished we will same through here. the type we move

giving us higher that guidance But forward timing ship higher this of a ship be rate, because I we pieces. a now model time, do excited on those all give service, that provides for will going and right are we So be think our will turnaround shorter the of won't shifts


the Please for Skibitski final your Alembic Global. question line at with And Pete is ahead. go

Pete Skibitski

evening, good Yes, guys.

flights. higher Just math a of the And on the is one discussion designed couple getting back rates. getting to the XXX quick ones; of second for slides to your mentioned ship

my How can that the this each are able I do they to point, Can about model you ships and talk at you follow-on second going do ship think rate have I the month. being to ship per five do? guys about six, seven. flights thinking these

Michael Colglazier

XXX about return more that target hit where themselves; Obviously year ships high flights the ships. reasonably to the less model, them, ships I can And for overall turn factors a specific rate. how think cost we're to as main the think we'll of the at focus of quickly move today probably the we into need a and our going manufacturing I that. the we're build going Well, about we

And have part so will we the learning forward. that's that of going

modular easy a lets ship quick it's think turnaround get regard. second to time, know give in do in is I will we us it's it that fashion. and better early probably a a designed maintain guidance the to little that But in more we and have a designed fashion

here, As those you view thing to with will be do own things closer your we be committing that about inform so committing can modeling. we learning's to that of be will get clarity is the we one as

Pete Skibitski

speak reach to for mentioned. guys Okay. Can ship? smoothness horizontal technical, higher But to altitude or just the on for maybe or maybe? the me, control do That's Mike ride? mentioned, that improve safety does And great. anybody I'm Does last one just that you the a the that little what system, curious of the to a allow but I appreciate you flight the particularly it. upgrades stabilizer maybe

Mike Moses

is that this Yes. Pete, Mike Moses. I one. answer can

actually primary stabilizers use. are one controls we of horizontal our that flight the So

kind of its us allow turn flying we're the boost vehicle, the drop straight then in and ship turn we up up. bite and tail level horizontal and on to stabilizers and when the So straight

So they are very critical system for us.

can it of have, they anything So the does to kind that of control really if because you us sort that performance, reliability, us with profile. fine we curve, boost speak improve help tuning to of do allows their net the want to

even this. to importantly, about, system. more the, what improvement again, it Michael it upgrade we more And has gives talked and us some little that with room So talking robust allows were electronic software really to an just us in capability more system developing a maybe

in to in For ahead go we to got run expansion some but decided look on to get as it's flight us future and future future, we higher time and the ships it, now put great of capability for a it some Unity rates.


you. this will time the remarks. at to I turn call And Thank closing back for Michael

Michael Colglazier

brief be I'll here. Hey,

your you hard at on say thank I taking for First, of entire been to you going for upcoming to wait I speak for and I cannot call, preparing flight want take our I space the at interest us of all been in thank incredible. but and Mojave, we a to this we New has just in flight appreciate know election continued people support support when for people news, all do our Mexico, progress Mexico, forward working of a have earnings day. appreciate first want team good everybody spaceflight powered after so of in Virgin time. and during next the for call the joining quarter's updating our as a well. company. call. People and you everybody moment the and Thanks the New There's weeks to lot We this I each few a on look on Galactic. this I have


thank And call. participation. conclude conference today's does you for We this your

disconnect. now may You