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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 Holdings, Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' 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 1 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 Holdings, Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call. On the call with me today are Michael Colglazier, Chief Executive Officer, and Douglas 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 2 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, 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 have had a tremendously productive start to 2026 and the buildup to commercial space line operations is in full swing. Three massive milestones to call out at the start. First, we have 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 spaceflight on track for Q4, we have opened the sales window for Virgin Galactic Holdings, Inc. 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 will start by calling your attention to the fantastic image on page 3 of our presentation. As you can see, we have wrapped up final assembly of all three of our major subassemblies: the wing, the fuselage, and the feather, and the process of joining these into our first complete spaceship has begun. A 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 Holdings, Inc. 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 Holdings, Inc. spacefarer community. We have hired our new Chief Growth Officer, Megan Pritchard, and she is joining at one of the most exciting times in our company's history. Looking at the agenda on page 4, today I will offer insight into our sales plans for the year ahead, share expectations for ramping the cadence of spaceflight during the first months of operation, hit highlights on progress of future spaceports, and provide a road map 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 twelve months as we place our ships in commercial service, drive meaningful revenue from spaceflight operations, protect our balance sheet, and target quarterly positive cash flows as early as 2027. He will also review our fourth quarter and fiscal year 2025 results. Let us get started on page 5. With the outstanding progress the Virgin Galactic Holdings, Inc. team has delivered with our first spaceship, we have included a series of images on pages 5 through 7 of our new ship, as structural assembly nears completion. We are 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 Textron 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 would like to take a minute to call out why this enormous milestone is so important to Virgin Galactic Holdings, Inc.'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 have 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's structure in the span of just a few weeks. This final assembly time shaved 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 8. Sales have begun. With our first new spaceship preparing for its ground test phase, it is time to welcome more people into the Virgin Galactic Holdings, Inc. spacefarer 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 have opened a limited tranche of 50 spaceflight expeditions, each priced at $750,000. These spaceflights 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 spaceflight for several years. As I have shared before, we expect our prices will rise in steps over the near to medium term, and once this initial tranche of spaceflight reservations is concluded, we plan to retire sales at the $750,000 level to focus on welcoming this new group into our spacefarer community in trademark Virgin Galactic Holdings, Inc. 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 spaceflights 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 Holdings, Inc. 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 9. I would 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 receive during our initial flights. Once we have the missions, maintenance, and astronaut experience dialed in, we plan to progress to an average of eight spaceflights 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 of operations and dedication to an unparalleled astronaut experience will drive the actual pace of this progression and we will only proceed 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 2027, subject to vehicle and operational readiness. On page 10, we have 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 have been building our new spaceships, and the improvements have readied Eve to target a launch support capability of up to 12 to 15 spaceflights per month, which is higher than our expected average commercial cadence. This additional capacity from Eve should be extremely helpful 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 have 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 should coincide nicely with opportunities for a second spaceport in addition to expanding operations at Spaceport America. Speaking of future spaceports, on page 11, I would like to touch on progress with plans for our next spaceport. We are nearing conclusion of our initial study for Virgin Galactic Holdings, Inc. baseline operations in Italy. We have 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 spaceflight 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 opportunity in Italy, we also progressed discussions for a Virgin Galactic Holdings, Inc. spaceport with additional governments during the last quarter. I have 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 would 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 step, 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 is 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. 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. With flight testing on our horizon, it is time to expand our team of pilots and accelerate proficiency training. To do that, we have 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 ship, 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 is 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-powered 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. It will be an exciting spring, summer, and fall as anticipation builds with the start of commercial operations. On page 15, a quick note on two additional milestones coming later this year. First, with production 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 is 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 in 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 would 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 space line operations. First and foremost, we will be using cash to complete our first two spaceships and place them into service, as those two ships 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 spaceflight. To enhance our cash flows as we start commercial operations, we will be offering a limited number of higher-priced 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 spaceflight 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 dilutive. 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 will now turn the call over to Douglas Ahrens 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. Good afternoon, everyone. I will start with the highlights of the capital realignment transactions we completed in December, and I will share how this forms the landscape for us to realize the economic potential of our business. I will follow with a recap of our recent financial results before providing an outlook for 2026 as we transition to commercial service. Starting with our capital realignment transactions on page 17, in December we successfully executed an exchange with several of the holders of our 2027 convertible bonds addressing $355 million of the $425 million convertible bonds originally due in February 2027. These transactions were done very intentionally and with capital preservation in mind. There were several key benefits to our business from executing these transactions. First, we extended the final maturity date of the new notes to December 2028, which better aligns with our planned ramp in cash flow from commercial operations with the two new spaceships in service. Second, we eliminated $142 million of contractual debt payments, representing a very substantial reduction in future indebtedness. Third, we built flexibility into the new structure, giving us the option to settle portions of the debt obligations with either cash or equity depending on future conditions. As part of the exchange, we also issued warrants, which are intended to align with shareholder interests given the warrant exercise price is more than double our recent stock price. Additionally, the warrants require cash payment to the company when exercised, further enhancing our balance sheet. These transactions were thoughtfully executed and are expected to support our ability to deliver shareholder value over the long term. To recap, we have substantially extended the maturity of our debt, materially reduced the principal amount due, added flexibility for method of payment, and with the inclusion of warrants, we have further aligned all stakeholders' interests with meaningful share price appreciation. Through the successful completion of these capital realignment transactions, we believe we have built a financial runway to launch and grow commercial space line operations. I think it is important for us to take a moment and reflect on Virgin Galactic Holdings, Inc.'s financial life cycle and call out the extraordinary place we have now reached. The first phase of our financial life cycle was the development phase, when we spent many years on research and development to optimize the performance of our unique spaceflight system. Not only did we create an amazing human spaceflight experience, but we also built significant barriers to entry with our technology. The next phase was the investment phase, when we put the infrastructure in place that enables us to build incredible spaceships. We have the factory capacity and tooling needed to repeatedly produce space vehicles that are designed for manufacturability and maintainability. With the first new spaceship nearing completion and the second ship in line, we are wrapping up the initial investment phase. We are set up for cost-efficient scaling of the fleet going forward. We have effectively converted cash into valuable assets on the balance sheet in the form of both factory capacity and new spaceships. As this initial investment phase concludes and we head into commercial service, we expect to see further improvement in free cash flow each quarter of this calendar year. This brings us to the next and particularly exciting phase, the commercial phase. With our first spaceship nearing completion and preparing to head into ground testing, we are now gearing up for the start of commercial service in the fourth quarter of this calendar year. Further emphasizing this incredible moment, we are welcoming our new Chief Growth Officer and opening up sales to new customers. With the start of the commercial phase, we plan to accelerate our flight rate and open the doors for sustained profitable growth. We are thrilled to have reached this extraordinary place on our journey. Let us now shift to our recent financial results on page 18. Starting with Q4 2025, we generated revenue of $300,000 from access fees related to future astronauts. Total operating expenses for the fourth quarter were reduced by 26% to $61 million compared to $82 million in the prior-year period as we reduced expenses and also continued to see the shift from R&D to capital investments in new spaceships. Similarly, net loss improved by 18% to $63 million in the fourth quarter compared to $76 million in the prior-year period. Adjusted EBITDA improved by 23% to negative $49 million in the fourth quarter compared to negative $63 million in the prior-year period. Free cash flow was negative $95 million in the fourth quarter, at the midpoint of our prior guidance and a 19% improvement compared to the prior-year period. Turning to page 19. For the full fiscal year 2025, we generated revenue of $2 million from future astronaut access fees. Total operating expenses were $287 million in 2025, reflecting a 25% reduction from $384 million in 2024. We reported a net loss of $279 million in 2025, representing a 20% improvement compared to a net loss of $347 million in the prior year. Adjusted EBITDA for the year was negative $226 million, a 22% improvement compared to negative $289 million in the prior year. Free cash flow was negative $438 million in 2025. Moving to page 20. We ended the year with $338 million in cash, cash equivalents, and marketable securities. In 2025, we generated $122 million in gross proceeds through an aftermarket, or ATM, equity offering program. For 2025, capital expenditures were $198 million, up from $122 million in the prior year. That growth in CapEx is reflected in property, plant, and equipment, or PP&E, on the balance sheet. We reported $389 million in PP&E at the end of 2025, an increase of 86% from $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. Spending trends in 2025 played out as expected. Peak spending occurred back in 2025. We have reduced our cash spending each quarter since then. Looking ahead, we expect continued reductions in cash spending each quarter this year. Although we plan to add resources in our space line operations and customer operations teams in anticipation of commercial service in 2026, these operating costs are expected to be more than offset by the reductions in manufacturing costs as we finalize the build of our initial spaceship fleet. Continuing with our projections, revenue for 2026 is expected to be $200,000 for astronaut access fees. Forecasted free cash flow for 2026 is expected to be in the range of negative $90 million to $95 million. We expect free cash flow to show sequential improvement following Q1. By Q4 2026, we expect to receive significant new cash inflows from customers as we initiate commercial service. Commercial service is obviously the pathway to delivering the economic model that we first laid out for you in August 2024, and that model is shown again here on page 21. We continue to see the economics of the model holding true. We plan to communicate two key metrics that drive the economics: flights per month and revenue per flight. The first metric, flights per month, is a powerful indicator of the success of our spaceflight system and is a key differentiator for us relative to a traditional vertical launch approach. Michael talked about our expectation of attaining a targeted flight rate of 10 or more flights per month sometime in 2027. This translates to approximately the annual flight rate of 125 flights per year as shown in the first column on this page. The second metric, revenue per flight, is a function of ticket pricing. Michael also mentioned that our current price for a spaceflight expedition has increased to $750,000 per seat. Plus, we will offer a limited number of tickets at a higher price to fly on the earlier flights. Given we currently have approximately 650 future astronauts tickets at various prices, revenue per flight will vary depending on how these tickets flow through the flight manifest. Currently, we expect to achieve modest quarterly positive cash flow within 2027 as we fly a large percentage of astronauts with tickets that were historically sold at lower prices. We forecast that we will achieve the adjusted EBITDA shown in the first column of this business model on an annualized basis sometime during 2028. We are pursuing a high growth trajectory. We are very excited to be approaching the growth phase of our business with the anticipated start of commercial service. In the 10-K to be filed, we included a going concern disclosure and management's plans to resolve it. The assessment leading to this disclosure looks at cash, cash equivalents, and marketable securities on the balance sheet as of the date of the filing of the 10-K and compares those amounts to our spending projections for the next twelve months. It also takes into account all contractual debt payments due within the next twelve months, which are assumed to be settled in cash. According to generally accepted accounting principles, this assessment does not yet allow inclusion of our expected future cash inflows from spaceflights, such as those we have highlighted today. It also does not include the potential of any additional capital inflows such as the $138 million remaining on the ATM. Given this methodology, the going concern disclosure is to be expected. We are at this stage in our financial life cycle where we are successfully converting cash into valuable assets in the form of manufacturing capacity and new spaceships that can drive our economic model. We forecast the start of commercial service in the fourth quarter of this year, and we expect significant cash inflows in connection with that milestone. Throughout the year, we plan to maintain appropriate strength in our balance sheet, and we are thrilled to be on the cusp of ramping commercial space line operations. With that, I will turn the call back over to Michael.
Thanks, Doug. I will close on page 22, which again shows the image of our new spaceship finishing final assembly in our Phoenix factory. What an accomplishment. It is a shared success that was only possible with enormous effort and dedication from our partners at Bell Textron and Carbon Aerospace, as well as a lengthy list of key suppliers who stepped up to deliver a very lengthy bill of material that enabled fabrication of the ship. Most of all, this ship coming together so well is a testament to the talent, genius, grit, and tenacity of our teammates at Virgin Galactic Holdings, Inc. We are on a bold endeavor and this team is delivering day in and day out. I am proud and inspired to see our team and our partners come together, and we cannot wait to show this ship off to the world when it is formally christened in just a few months. We have reached pivotal milestones this quarter, with the upcoming conclusion of our first spaceship assembly phase, the launch of sales, the impending start of ground testing of our spaceship program. We will be opening our factory to visits from our founding astronaut community in the next month, and I think this group is going to be over the moon with excitement as they see their spaceship coming to life so beautifully. Let us open the call for questions. Thank you.
分析師問答
We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press 1 again. If you are called upon to ask your question and are listening via speakerphone in your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press 1 to join the queue. Our first question comes from the line of Oliver Chen with TD Cowen. Your line is open.
Hi. Thanks a lot, Michael and Doug. Regarding the chief growth officer and what you see ahead with the consumer, what are your thoughts on our hypothesis on the opportunities and the workflow with much happening there. Also, as we think about the model going forward, what should we know about CapEx more quarterly? And then more broadly, the new spaceport sounds like a big opportunity. What is on the roadmap for that investment cost and how that may manifest? I know there is a lot of economic benefits you will bring to a region, and then lastly, more specifically, the commercial spaceflight in fourth quarter is very exciting. Any parameters on that? What is embedded in your guidance for the revenue that quarter?
Hey, Oliver. It is Michael. Why don’t I take the first and third and let Doug take the second and fourth? But if you would do me a favor, Oliver, just a little more clarity on your first question.
Yeah. As we look ahead, I guess, Megan, the announcement of Megan Pritchard, what is on the roadmap for what you see as the growth framework and thinking about the luxury and consumer side, the strategy?
Got it. Incredibly excited to have Megan joining us. She is an amazing executive. She starts Monday. And as we kind of mentioned in the prepared remarks, there is tactical and then there is strategic. Tactically, Megan will lead our team that is driving growth in sales during this year. All that growth will be flowing through Spaceport America. So that is a focus on our suborbital space business with both private citizens and researchers. Megan's remit is much broader, and the team and processes she will build will be broader. That includes expansions of our suborbital business model. I will jump ahead a little bit to the spaceport question. Megan will be heavily involved in the identification and partnership development we do on new spaceports. You asked about economics. Each deal will be different depending on local arrangements. Broadly, these are likely to be joint agreements. We will look to bring our spaceflight system, our space vehicles, and all the technology around that. We would look for our partner countries to bring the physical infrastructure in those areas, such as the spaceport runway and airspace coordination. We would look to the community around for the astronaut experiences outside of flight — hotels, food and dining, activities for astronauts and for friends and family who come. Then there would be a sharing of the economics. Each country has different things to bring to the table, so arrangements will be unique depending upon each country's specific interest. In addition to growing our initial book of business further and managing the price, we expect price growth in the near term to be on Megan's plate, and then looking to expand through additional spaceports because those are a number of years in development. We will be looking at additional business models that we can leverage both with our existing and emerging technologies. I think bringing someone of Megan's caliber with a wide remit will help us grow and accelerate the business. Doug, do you want to talk the questions Oliver had on CapEx and revenue?
Yes. So regarding the CapEx, we guided the free cash flow to be between negative $90 million to negative $95 million for the year. That is at the midpoint. Then we said it would continue to improve each quarter sequentially through the year. That is what we are expecting. To put the CapEx in perspective, around half of the projections for the first quarter and into the second quarter are CapEx as we finish up the work on primarily Delta One, and we have got Delta Two coming in, the stack test article, all of that. So you will see CapEx be around half of the spending early in the year. Then as the total spending comes down, CapEx comes down even faster in the second half because now we are moving into more of an operating phase and our spending shifts to commercial operations and the spaceport. So that is really more front-end loaded in the first half of the year and then tapers off on the CapEx side in the second half. Regarding revenue, it is a little early to be giving revenue guidance four quarters out. But just to put it in perspective, we did say that we expect to start commercial service in that quarter, and we gave a cadence to expect that in the beginning we would be expecting about one flight a week, so roughly four flights a month. And then when we are ready, we will ramp up to eight flights a month, and we gave a timeline to get to 10 or so flights per month by 2027. It depends a little bit on exactly when we start in the fourth quarter, and the other variable is the mix of ticket pricing. We talked about a variety of prices, and those will weave their way into the early manifest. As we discussed today, you have the legacy customers and some new opportunities for people who want to be in the first 1,000 astronauts ever to go to space. Again, it varies on a few things there, Oliver, but I hope that gives you a little more color.
Okay. Last and a follow-up. On the four-times monthly flight to the eight to the 10-times, what are the variables in terms of reaching 10 sooner or later that we should consider in the sensitivities as we model that monthly flight cadence ramp?
Sure. Think about it as balancing the line a little bit. We are very pleased with the work that has happened with our launch vehicle, Eve. We expect Eve has capacity to support 12 to 15 launches per month, which is higher than what we expect to average across the year, and that is important because it helps with catch-up if we have weather delays. But let us say Eve is running three a week for conservative assumptions. We have built each spaceship with an expectation that they can fly twice a week. So having one spaceship would theoretically let us fly twice a week. Eve has the capacity to fly twice a week, and that would get you to the eight flights per month capability with one spaceship and one mothership, one launch vehicle Eve. We have a second spaceship coming and we expect that to arrive in late 2026 into early 2027. That second spaceship also should be able to fly twice a week. At that point, Eve, depending on how it performs between 12 to 15 flights per month, starts to become the bottleneck of our system. That is why we have the LVX program to expand our capacity overall. To go beyond eight, we will need both additional spaceships and additional launch vehicle capacity. Hopefully that gives you a good sense of how to think about that math.
Very helpful. Thanks, gentlemen. Best regards.
Our next question comes from the line of Gregory Arnold Konrad with Jefferies. Your line is open.
Good evening. Continuing with the last question. Just to verify, I think you talked about the next mothership. Did you say 2030, and then I think in the past, you had talked about an expanded fleet scenario. Should we think about the third spaceship not coming online or reaching that model to that 2030 timeframe, or how do you think about what is next after the two spaceships?
Yes. I think 2030 is the right timing for a next launch vehicle. We generally want two spaceships coming out for every launch vehicle we bring out to keep a balanced set. The launch vehicle is the longer lead item for us, which is why we are targeting it for 2030. As we mentioned on the call, we now have the infrastructure to build spaceships efficiently, quickly, and cost effectively. If you have not seen it, the Galactic 10 video released shortly after market close shows a quick time-lapse of how we take a completed fuselage and wing and join them together. We expect over the next week or two at most to combine that with the feather that is already ready. We are now able to build spaceships in a very effective and efficient fashion. We would want at least one, if not two, of those spaceships ready to go by the time we bring the launch vehicle in 2030. That is a straightforward process for us now.
And then maybe just to follow up on the reopening of ticket sales. I think you are doing a limited first tranche and then talked about another limited tranche and eventually a second tranche. Can you maybe just talk about timing, how you are thinking about the metrics and balancing backlog, and then I think also since last time we talked, there have been some changes to the competitive backdrop. I think there has been some discontinuation from competitors. How has that materialized in terms of demand?
Let us start with the competitive piece. One competitor announced a shift in focus toward lunar programs. We wish them the best on that important effort. For people who wish to take a suborbital spaceflight at a more accessible price point, we believe we are well-positioned as a company of choice. Regarding availability, the number we are putting out is part of our pricing strategy rather than a specific fixed number. We will step our pricing up over time in the short and medium term. That is why you see us with a limited number of 50 at $750,000. For context, we currently have a little over 650 founding astronauts, which is a meaningful group that will carry us from 2027 into early 2028. So there isn't pressure to fill the backlog immediately, but we want to build our book of business at higher price points. That is why we are starting with 50 spaceflight expeditions at $750,000. We will retire that price point, take a beat, welcome those 50 people into our community in a world-class way, and then open up again at a higher price point. We expect to repeat that process a couple times until we hit a steady-state price point and build our book of business going forward.
No. That was perfect. I really appreciate it. Thank you.
Next question comes from the line of Myles Alexander Walton with Wolfe Research. Your line is open.
Thanks. Good evening. I was hoping you could touch on the post-glide flight of the new spaceship to commercial service. I think you mentioned, Michael, that there is a partial burn, then there is one full powered burn. Is that all there is prior to the first commercial operation being presumably the third powered burn?
That is correct, Myles. In fact, the second flight will be carrying research experiments. We have Mike Moses in town today; he is here and available to expand on the flight test plan. Mike, if you do not mind, could you expand on that?
Sure. Myles, happy to. To clarify: one rocket-powered flight that is not full duration will not take us to space; it will get us supersonic and allow us to see how things behave in the Mach 1 to 1.5 region. Then there are two flights to space before we enter commercial service. The first will carry just pilots on board and research in the back through the NASA Flight Opportunities program — we have a manifest of payloads to bring in revenue on that first test flight to space. The next will be another flight with two pilots and six mission specialists in the back. Those will be internal personnel to validate the cabin experience and our procedures and processes. The reason we can conduct fewer rocket-powered flights than the earlier Unity flight test program is we are not learning the envelope for the first time. Our control system is different and some systems are different, but we know much from Unity flights. We need to verify and validate performance, but we are not discovering basic envelope behavior. That allows us to move through the program more rapidly. We will always operate with safety and prudence, analyze data carefully, and ensure the ship is behaving as expected. We will also focus on glide flights because the new handling flight control systems are different and need more attention. Overall, the test program should be fairly expeditious as we move through test spaceflight.
Got it. Makes a lot of sense. There was this, so I am looking at the 10-K relative to the going concern, and there is a comment in there about management's plan for addressing and mitigating the condition. One of those points is partnering with third parties to fund and accelerate the pace of future space vehicle development. Can you elaborate on that, Michael? What exactly is meant by partnering with third parties? Is this different than your current organization? Is this something you are already doing or something incremental?
We are exploring efforts with governments for spaceports as well as opportunities with the U.S. government that could relate to our launch vehicle. There is nothing to announce at this point in either area. Over the next twelve months, both categories are relevant in how we might partner with governments, whether U.S. or international, around new spaceports. A partnership model could involve bringing in economics to accelerate vehicle development for specific uses. At this stage, these are exploratory discussions and we will share more when appropriate.
Okay. That makes sense. And, Doug, just one quick one to clarify. The cash flow commentary about the quarterly positive cash flow in 2027 — we are talking about cash flow, right? Not specifically free cash flow?
Specifically, I used the generic term cash flow for a reason. Our intent is to build our cash balance through 2027 so we would be spending less than we bring in from all sources. The reason I said cash flow instead of free cash flow is there is a scenario where we bring in further investment, for example through the capital markets, and then plow that back into R&D. Financing cash flows are not included in free cash flow, so you could have a negative free cash flow even though you are spending less than you generate overall. When I say cash flow, that accommodates that. The intent is to say we expect to spend less than we generate, and we are targeting individual quarters to cross that threshold in 2027.
Okay. Alright. Thank you.
We do have our last question. It comes from the line of Michael David Leshock with KeyBanc Capital Markets. Your line is open.
Hey. Good afternoon. Just following up on the 2026 free cash flow guidance and your expectations for the burn rate to improve sequentially through the year — is there any one quarter where you would expect the biggest step up? Is that kind of a 2Q event when you shift more from production into testing? Just curious if there are any milestones that might drive more of a step change in cash burn versus the more gradual improvement.
It is really a gradual improvement until the fourth quarter. We expect continuous quarter-on-quarter reductions in spending until the fourth quarter when we get cash coming in from customers as they pay for the remainder of their flight reservations. That is the main driver for a big change in that quarter. Think of it as a continuous reduction in spending each quarter until Q4 when you get a significant shift from customer cash inflows.
On the potential defense-use case and initiatives like Golden Dome: nothing specific to share at this time. We are accepted into the IDIQ for that initiative and qualified as a supplier. We are evaluating immediate-term opportunities we may be able to support with Eve and our new spaceships as well as more developmental things with longer lead times. We continue to engage and will provide updates when appropriate.
Ladies and gentlemen, that concludes the question and answer session. Thank you all for joining in. You may now disconnect.