Good afternoon. My name is Tania and I will be your Conference Operator today. At this time, I would like to welcome everyone to Virgin Galactic's Third Quarter 2021 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. Thank you. Hosting today's conference call will be Seth Zaslow, Vice President of Investor Relations. As a reminder, today's call is being recorded. I would now like to turn the conference over to Mr. Zaslow. Please go ahead.

Thank you. And good afternoon, everyone. Welcome to Virgin Galactic's third quarter 2021 Earnings Conference Call. On the call with me today are Michael Colglazier, Chief Executive Officer, and Douglas Ahrens, Chief Financial Officer. Following prepared remarks from Michael and Doug, we will open the call for questions. Our press release was issued about an hour ago and is available on our Investor Relations website, as is this slide presentation that will accompany today's remarks. Let me refer you to slide 2 of the presentation, which contains 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 section of the Company's Form 10-K filed with the Securities and Exchange Commission and other documents filed by Virgin Galactic from time to time. Readers 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. Please also note that we will refer to certain non-GAAP financial information on today's call. You can find reconciliations of the non-GAAP financial measures for the most comparable GAAP measures in our earnings press release. With that, I would now like to turn the call over to Michael.

Thanks, Seth. Good afternoon, everyone. This has been an incredibly busy and important quarter for us. In July, we conducted our first phase flight with a full crew in the cabin. This is a great achievement for Virgin Galactic and a global cultural moment with tens of millions tuning in from around the world. In August, we began selling spaceflights exclusively to our space fair community, a group of early hand-raisers who reserve the right to be first in line. The response from this group has been fantastic. In October, we began our fleet enhancement period to meaningfully improve the durability, reliability, and predictability of our vehicles and enable high cadence commercial service. Before I walk you through the details on these updates and other important developments during the past three months, I'd like to take a step back. I've been CEO for a little over a year now, and I've spent that time listening, analyzing, and identifying the adjustments needed for us to progress against our long-term goals. We’ve made several changes over the last nine months in this regard. We’ve aligned people and processes to focus our efforts on long-term scale and profitability, and this new focus is enabling our transition from a prototyping space innovator to the globally scaled commercial operation we are becoming. I made key strategic hires, including a new CFO, a new president of aerospace, and new heads of engineering, people, and IT. All to ensure we have the right leaders and systems in place to realize our vision. Over the past year, we strengthened our balance sheet with two capital raises, giving us approximately $1 billion on hand to design and execute our long-term plan. I’m confident that these changes, and those I’ll talk about today, have placed us on the correct path to launch commercial operations and achieve our long-term vision. We are building a new industry from the ground up. All of you on the call who follow the sector know that aerospace is a complex endeavor and will require us to grow to 400 flights per year across multiple spaceports. We need to manufacture efficiently and predictably. And while unexpected setbacks are a normal part of aerospace, we can and will do more to anticipate them and lessen their impact on our operations. I've focused the Company on three primary work efforts that all ladder up to commercial service at scale. That is, fleet readiness, fleet expansion, and commercial strategy and execution. On fleet readiness, we are beginning our vehicle enhancement program. This will be a game changer in terms of predictability, durability, and flight rate capability. More on that in a moment. At the same time, we are planning for the expansion of our fleet with our Delta Class spaceships and next-generation ships in response to known demand for our product to support our global ambitions. We are developing our customer base for commercial service, maintaining a strong and engaged pipeline of future astronauts, while continuing to refine our consumer experience. We are executing on all three strategic pillars simultaneously. The work that has been done to align our organization, strengthen our balance sheet, and ensure we have the right leaders in place will enable us to execute successfully. The coming months will continue to be busy for our Company and for commercial space more broadly. Our peers, like us, continue to pass important milestones and as I've said before, this is good for us; it fuels demand and normalizes the concept of space travel. At the same time, we are building something very different. We fly spaceships. They are visually amazing, purpose-designed for safety and experience, and distinctly different from other offerings. Our experience is different. We focus on the journey and the memory, not just on the ride. Our future astronaut community is different, and all of these differences enable us to build a business for the long term. Moving to Slide 4, I’ll start with an update on commercial sales. I will follow with an overview of our enhancement program, near-term timelines, and close with our fleet expansion plans, then I'll turn the call over to Doug, who will provide a financial update. Moving to Slide 5 and our commercial sales efforts. We have opened sales to our early hand-raisers and we are selling tickets ahead of the pace we had planned. The pricing strategy we announced last quarter has been well received. Our private sales process is effective and efficient, and it is designed to scale. Given the newness of our product, we start by broadly showcasing the awe-inspiring, aspirational value of our experience. We capture top-of-the-funnel interest with leading CRM tools. Unity 22 accomplished this in brilliant fashion and brought tens of thousands of requests for information on our product. After filtering this large demand into highly qualified sales leads, we convert even the signed contracts via one-on-one sales discussions. We then onboard our new customers into our unique future astronaut community. Regarding sales pace, we plan to onboard new future astronauts ahead of our growth in fleet size. For the current sales cycle, we are targeting to have our first 1,000 future astronauts confirmed by the start of commercial service. We've tested our sales process over the last 2.5 months with our Spaceport community. As a reminder, this is the group of early hand-raisers who in 2020 placed a modest, fully refundable deposit of $1,000 to reserve the right to be offered reservations when they first became available. It's worth noting that these deposits were made before we announced our updated ticket price. The early sales indicators from this community have been strong. Since September, approximately 100 seats at our new pricing of $450,000 per seat have been purchased. Each contract includes a $150,000 deposit, $25,000 of which is non-refundable. We believe these results from a relatively small group that had little pre-qualification show the incredible strength and appeal of our membership. They also indicate the significant value that customers recognize in our product at current price points. We plan to close our sales efforts with this initial group and other early hand-raisers before the holidays. Beginning in early Q1, using a similar filtering process with the more than 60,000 people who originally inquired about flight information, we will offer the remaining slots to become one of our first 1,000 astronauts. The overflow demand from this group will be channeled into a new space fair program, whose members will be given first access to the next opportunities for spaceflights when they become available. As we've said many times, we know that traveling to space is perhaps the most meaningful journey that can be experienced. Preparation and anticipation substantially deepen the impact of transformational experiences, which is why Virgin Galactic focuses on the entirety of the journey and not just the spaceflight. This distinctly Virgin approach offers future astronauts a community with access to unique and exclusive experiences that start the moment of sale, continue during the buildup to the flight, and extend long after. Our intention is to always have a committed group of future astronauts that exceeds our near-term capacity, with a vetted list of space line applicants at the ready to convert ahead of new tranches of tickets becoming available. Our private astronaut market, while the most visible, is one of the three markets we are built to serve. The others being microgravity research and suborbital training for professional astronauts. The pricing strategy we announced last quarter reflects this diverse offering and has proven effective across all markets. We continue to field inquiries for reservations worldwide, including from governments and scientific researchers. Shifting now to our flight test and ship enhancement programs on slide 6. The Unity 22 flight was important for testing our customer experience. It was crucial for jumping-starting our commercial sales process and perhaps most importantly, it allowed us to sell the dream. The photo is of Teresa, Colin, and Richard cheering down at Earth. The look of awe on their faces says it all. This was clearly a transformative experience for them and proved to me that the products we’re offering are unmatched. The flight was watched by tens of millions of people around the world who wanted to share in the experience through our live stream. That's the power of what we're doing. During our in-flight, there was significant media coverage of an FAA investigation into an airspace deviation that we failed to communicate in real-time. We were at a flight test program and testing is designed for constant learnings and improvements. We learned, we addressed the learnings, and we moved forward as we've done in this case. Since much of the coverage of this topic had the potential to be misconstrued, I want to address it clearly and concisely. Our pilots anticipate, plan, and train for a range of flight conditions and acceptable flight paths to take our ships to space and back safely. Flight conditions during Unity 22 led to a flight path in line with our training and procedures. The flight reached space as planned, albeit with a less steep climb. On the glide back to the runway, our ship briefly left our previously permitted airspace. This is a scenario that requires notification to the FAA. While the FAA is always in our control room during flights, our flight test procedures did not have a specific protocol for mission control to communicate the situation to air traffic control in real-time, and this required rectification. We worked diligently and in full partnership with the FAA to identify a solution that was approved by them in September and which concluded the investigation. As depicted on Slide 7, the solution included the expansion of the protected airspace for future flights, providing room for a variety of future flight trajectories, including the trajectory that was flown by Unity 22. We also implemented enhanced communication protocols specific to our space flights to ensure mission control relays notifications to FAA air traffic control in real-time. These updates to our airspace and notification protocols have strengthened our preparations for the commercial launch of our spaceflight experience. Moving to Slide 8 and our planned modifications for Unity. These enhancements are designed primarily to increase the flight rate capability of our original ships. These changes will favorably impact the business for years, as they will allow us to work through our backlog of demand and unlock routine access to space as part of our value proposition and business model. On to take a moment to talk through the enhancements being made to each vehicle. The majority of modifications will be performed on our mothership, Eve. We recently flew Eve from Spaceport America in New Mexico to our manufacturing facility in Mojave where work has already begun. And just as a side note, the picture you see here on Slide 8 is a real shot that was taken by a company fan watching Eve's recent flight from New Mexico back to Mojave. It's a beautiful reminder of just how elegant and aspirational our spaceflight system is. As shown on Slide 9, Eve's enhancements will focus on three areas: First, we’re modifying the center wing and launch pilot. This area is challenging to inspect, and we are changing the design to a more robust structure that will greatly reduce the frequency of required inspections. Second, we plan to replace the horizontal stabilizers or eight steps located at the back of the vehicle. Third, we’re undertaking a body of work to upgrade our avionics and mechanical systems and strengthen various areas across the ship to reduce the volume of regular inspections and increase flight efficiency. These modifications will increase the overall service life of the vehicle. The combination of these efforts, subject to testing and verification, will see us target Eve to complete 100 flights between major maintenance inspections, up from the current interval of 10 flights between inspections. While Eve is not flying, we're taking the opportunity to enhance VSS Unity with those same goals in mind. This program is designed to reduce the amount of unplanned maintenance by reinforcing, upgrading, and replacing various joints and components located throughout the ship and by reducing how often we need to inspect these parts. As with Eve, the culmination of these efforts will be improved flight frequency, less maintenance, and longer service life. Subject to testing and verification, our goal is a 4 to 5 week turnaround for Unity. Once our enhancement program is complete, we will validate the upgraded vehicles through appropriate testing and begin commercial service. Slide 10 depicts our expected flight schedule following the enhancement program. We will first fly Eve solo to validate the enhancements made to the ship. In the second half of 2022, Eve will then carry VSS Imagine to its permanent home at Spaceport America. This is going to be an exciting milestone that will mark the first time we have two active spaceships in service. Unity should begin revenue flights, starting with research flights, and we'll add private astronaut flights in Q4. VSS Imagine will begin its flight test program in 2022 with applied flights. We expect Imagine to commence revenue spaceflights in the first quarter of 2023. Imagine will start with research payloads and then proceed to join Unity with private astronaut flights. As previously announced, we recently reordered our schedule and moved our research flight with the Italian Air Force to follow the enhancement program. Although this change does not have a material impact on revenues or the timing of commercial service, I'd like to touch on the reasons for the schedule shift. Our preparations for the enhancement program include durability testing on materials used within our vehicles to better understand and enhance their service life and readiness for commercial service. As part of this, we've been conducting lab-based tests to expand our database on material properties. These tests help assess how certain structures could behave over their lifetime, with an aim to improve flight rates by increasing the time between major inspections. One particular test identified a possible reduction in the strength margin of materials used to modify some specific joints. For clarity, we have not observed any damage on our ships. However, to address this lag, we need to further analyze these joints to determine what, if any enhancements would be needed to further increase their strength and enable the flight interval objectives we are targeting. Given the time needed to complete this work, it was logical and beneficial to avoid delaying the enhancement program by choosing to complete this work in parallel. We expect that the required analysis, and if necessary, the follow-on modifications, will be completed within the schedule of the overall enhancement program. Turning to Slide 11 and fleet expansion. As we’ve said, we are targeting a flight cadence of 400 flights per year per spaceport. To get there, we need to efficiently expand our fleet, which means growing both our talent base and our footprint. To start, we're investing in a new engineering design and collaboration center. Our design and engineering team has been located at our facilities in Mojave. We have strong roots in Mojave; it has been a great facility for us and we will continue to maintain our presence there. However, we also recognize that growing a business requires us to be in locations where we can access additional talent at scale. We've decided to locate our center for design and engineering in the Southern LA Basin, as it is a strong aerospace corridor spanning from El Segundo all the way to San Diego. Just recently, we leased a location in the heart of this aerospace corridor that will serve as the primary hub for R&D and the design and engineering of our new vehicles, specifically the Delta Class spaceship and our next-generation motherships. We expect to ramp up our engineering and support team talent against these programs over the coming three quarters. I want to take a moment to talk about these next-generation vehicles, starting with the Delta Class. This is our production model spaceship, which is being designed to fly once per week. Over time, we anticipate Delta Class vehicles will constitute the bulk of our flight capacity. We are in the concept design phase of this work, which is the most critical from an investment standpoint. While the concept phase typically comprises only 10% to 15% of the program's overall effort, the work in this phase usually determines about 70% of the total cost base. Getting key design and manufacturing efficiencies built-in now is absolutely critical for the success of the program over the long-term. These decisions are being made by a cross-functional team of leaders, including engineers, manufacturing and maintenance experts, and pilots. In addition to the conceptual design work, we've been exploring options to house our Delta Class spaceship facilities, as we will need more space than is available at our Mojave factory. We've been in contact with multiple municipalities about locations and have received interest from at least three states. We expect that interest to grow, as we estimate we will be creating more than 1,000 new jobs and look forward to the new opportunities and community relationships that our expanded footprint will bring. As we add new spaceships, we will require additional motherships as well. Since the mothership relies primarily on airplane technology, which is industry-standard, there is an opportunity for us to benefit from third-party expertise for the majority of parts and fabrication. This will allow us to increase our speed-to-market and realize meaningful cost efficiencies without sacrificing quality or performance. We are in advanced negotiations on strategic relationships for the production of our new motherships, and we will provide updates on our progress on both the Delta Class and next-gen motherships in future calls. Regarding our second spaceship, VSS Inspire, we're continuing to evaluate the most efficient path forward. Our priority is commercial service at scale, and in the immediate term, we are directing our resources towards Eve, Unity, and Imagine, while simultaneously expanding our engineering team for the development of the Delta Class and next-gen motherships. We will update you on Inspire in future earnings calls. I will now turn the call over to Doug for a financial update.

Thanks, Michael. And good afternoon, everyone. Turning to slide 12. Before I review the financial results for the quarter, I'd like to begin with a few comments on our broader financial strategy. As you heard from Michael, we continue to see enormous demand for our spaceflight services. To begin to address that demand, our objective is to expand our fleet efficiently. In the short-term, the enhancement period is a critical element of that strategy. Increasing flight rates and extending the service life of our current fleet will provide meaningful benefits for years to come. We are pleased to be embarking on this essential phase of work as it brings us closer to the start of commercial service next year. In addition, during this phase, we are completing the preparation of VSS Imagine, thereby adding a second spaceship to our fleet. In connection with the enhancement period, you'll see a noticeable increase in the Company's expenditures next quarter as we will be actively working on multiple shifts concurrently. Looking further out, we expect that the elevated activity level will extend into 2022 as we complete our planned enhancements. An elevated level of spending is also expected to continue in the second half of 2022 as we focus on expansion of our fleet, namely the development of the Delta Class and next-generation mothership. We plan to scale our engineering teams, engage in supply chain, and develop tooling for these new vehicles. We are excited to be transitioning to this important phase in our Company's overall journey to scale up our capacity to meet the tremendous demand for our space flight services. We expect to share more details on these programs in future calls. Our Balance Sheet remains an area of strength for us. We are well-capitalized with cash, cash equivalents, and marketable securities of approximately $1 billion as of the end of the third quarter. Going forward, we will continue to evaluate opportunities to raise capital as we grow and scale our business. We plan to use a combination of cash-on-hand, revenue from commercial space flights, and future inflows of capital to fund our strategic objectives. Let's review our results for the third quarter. Free cash flow was negative $53 million compared to negative $59 million in the prior year period, and our guidance of approximately negative $65 million for the third quarter. The variance to guidance was primarily due to a shift in the timing of the Unity 23 flight as well as the start of the enhancement program, both of which resulted in lower spending than previously forecast. We also received higher-than-expected cash inflows from the sale of private astronaut reservations following the reopening of ticket sales. Looking ahead, we anticipate fourth quarter free cash flow in the range of -$85 to -$95 million. The increase in spending relative to the third quarter is expected to be driven primarily by the increased activity I mentioned related to the enhancement period, as well as the work we are performing on the Delta Class and mothership programs. Consistent with prior years, we also expect to incur certain public company costs in the quarter. Turning to slide 13, our income statement. We generated revenue of $2.6 million in the quarter related to sponsorship activity from the Unity 22 space flight in July, as well as revenue earned under government contracts from progress on the completion of certain technical milestones related to payload services. Total GAAP operating expenses for the third quarter were $85 million, compared to $77 million in the prior year period. The increase in expenses was primarily due to marketing-related costs attributable to the Unity 22 spaceflight and the reopening of ticket sales, as well as an increase in employee costs and non-cash stock-based compensation expenses. These increases were partially offset by a decrease in contract labor and material costs associated with the development of our spaceflight system. Total non-GAAP operating expenses were $70 million, compared to $66 million in the prior year period. GAAP net loss for the third quarter was $48 million, compared to a loss of $92 million in the third quarter of 2020. The decrease in net loss was attributed to the change in the fair value of warrants, partially offset by an increase in stock-based compensation expense. Adjusted EBITDA was negative $68 million, compared to negative $66 million in the prior-year period. I'd like to now hand the call back to Michael.

Thanks, Doug. Before moving to Q&A, I want to leave you with a few observations about our industry that reinforce why I’m so confident about our future. First, demand for space travel will outstrip supply for the foreseeable future. Second, we are truly differentiated in the sector. What others are doing is helpful, and their success is good for the industry overall. However, we have a different approach, not just to space flight, but to the entire consumer experience right from the moment of sale. Lastly, we’re selling much more than a chance to hear from space. For that and alone is remarkable. We've created a meaningful community, and we continue to find that there's a strong desire to join this community as evidenced by our ability to convert our followers into future astronauts. It’s an exciting time for the Company. Our long-term vision is strong, our goals are clear, and we're making meaningful progress. With that, let's turn to questions. Operator, we're ready to begin the question-and-answer portion of the call.

Certainly. We will now begin the question-and-answer session. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly to allow questions to generate in queue. The first question is from the line of Oliver Chen with Cowen. You may proceed.

Hi, thank you. Michael, as we look ahead, the supply chain will be very important. What are some key aspects in terms of the priorities there and some of the bigger challenges or opportunities you have as you formulate and construct a robust supply chain? And on the balance of magic and logic here, on the magic side and the consumer experience, it sounds like the ticket sales were very well-received. What are your thoughts going forward as you think about the broader consumer experience and how you will incorporate friends and family, as well as thinking more broadly about pricing and opportunities? Thank you.

Thanks, Oliver. To the first question on supply chain, I think there are three components of our spaceflight system: the mothership, the spaceship, and our propulsion system. Our approach to each of those will heavily integrate into the aerospace supply chain organizations but in different ways. For the mothership, we are actively pursuing a strategic relationship to accelerate the engineering, tooling development, manufacturing, and assembly of that piece. Our motherships are more of a standard aircraft piece. It's unique, certainly, but we can leverage the supply chain well there. So, we will take heavy advantage of the supply chain there, and we are very pleased with the progress we've been making on that. As for our spaceships, we now have more opportunity to go into the aerospace supply system with greater volume, allowing us to leverage the supply chain more for parts, sub-assemblies, and some large sub-assemblies along the way. The propulsion system will follow a similar route. We've brought in a new leader of our supply chain business, Lisa, who has great experience in aerospace supply chain, and she’s ramping up our efforts here. As to the magic and the logic, we were very encouraged by the response from our space fair community. They've been wonderful people who've been with us for a while, and it requires relatively little work on our part to pre-qualify that group. To receive around 100 spaceflight reservations from them at the new price point really shows the value of what we’re doing. Now, regarding where we're going with the consumer experience, we didn't bring much to talk about today, but we are generally looking at creating an 'astronaut campus' where people will prepare in the number of days before and after their flight. That work is very exciting. We'll bring more of that forward in future earnings calls. Embedded in that, Oliver, is parallel experience tracks for friends and family to come in. We do expect the astronauts to bring friends and family, and that is incorporated into the price point as they come along the way—so the $450,000 price point includes the ability to bring some friends and family along. We think that is a smart business strategy to make the astronaut's experience stronger and it will encourage more people to express interest down the line.

Thank you. Best regards.

Thanks, Oliver.

Thank you, Mr. Chen. The next question comes from the line of Doug Harned with Bernstein. You may proceed.

Hi, Doug. I wanted to first make sure I understood the demand side. So you had 600 originally and then you've added 100 since you went to the higher price point of $450,000. However, you said you've got about 60,000 expressions of interest. It seems, perhaps naively, that you could have filled up those last 300 slots pretty easily out of that. How does that work? Why is that not the case?

How to think about each of them. Generally, I agree with you. We are very positive and optimistic about filling the last thousand, which will represent our first thousand versus service. The first thing we did was, as promised, go back to the space fair community to test our sales process. We used a CRM tool against a fairly small audience population to test the customer journey we would use to take that group into highly qualified leads. With those leads, we invested time and saw very strong conversion rates from sales calls to actual committed spaceflight reservations. We liked how our CRM mechanisms provided the right level of filtering. After the Unity 22 flight, we opened up our interest list just to collect the names of interested people. We think many of those people want to travel, but some of them will likely not make it through the customer journey. That said, we expect this 60,000 count to yield a lot more demand versus the remaining 300 we have left in our first thousand. This group we will give first access to the next tranche of tickets, so we are always going to stay active at the top of the funnel and release tickets in tranches, allowing us to provide a dedicated sales effort against this and always stay ahead of the pace.

If I can on the schedule, you've talked about the next mothership for the Delta Class. It seems like you've got a lot to do and how has that schedule changed?

We’ve spent the last nine months positioning the Company to handle the upcoming work. We’ve been focusing on building up our teams. As for 2023, we expect Unity to come onboard for commercial service at the end of '22, flying basically on a monthly basis. Imagine, which will start its flight test program in the first quarter of '23, is expected to generate revenue with research flights initially, and as we get into the second half of '23, it will start private astronaut flights. We believe that Imagine will run on a bi-weekly basis. This gives you some context on flight rates and the timeline for Delta Class, but we expect to move at pace. That’s why we’re pulling down a new design center in the Southern LA Basin and ramping up our engineering resources. We are expanding our supply chain with some strategic relationships to ensure strong compliance.

Okay, very good. Thank you.

Thank you, Doug.

Thank you, Mr. Harned. The next question comes from the line of Kristine Liwag with Morgan Stanley. You may proceed.

Hi, Kristine. Kristine, are you there? Maybe you're on mute. Operator, why don't we go to the next question and if Kristine comes back into the queue, we can come back to her.

Certainly. The next question is on the line. Kristine has joined the queue again, so Kristine, your line is now open.

Hi, Kristine.

Hi, can you guys hear me?

Yes, we can.

Michael, with the planned fleet expansion, can you just discuss the cash investment requirements for the Eve enhancement and the Unity enhancement, and the timeline of that cash cost?

I’ll give just a note on what we’re doing and maybe let Doug pick up any specifics behind it. But you’re seeing our spend going to a larger amount in the fourth quarter as guidance we're giving, which makes sense. We’re working on multiple shifts as we enter this enhancement program, which will carry out in the manufacturing facility all the way into the first half of next year. So that's where you heard Doug share that we expect that elevated level of spend to continue into 2022. As that's happening, we are also building our design efforts, moving into tooling, moving into how we are going to get the Delta and Mothership programs moving beyond concept into later phases. Doug may offer more detail on that.

It’s important to think about the phasing of this work. We're excited to move into this next chapter with the expansion of our fleet with the new mothership and the Delta Class. At the front end, you've got the investment in NRE, which is the initial part geared towards the first artifact in the fleet, and you will see that investment appreciated over time as we progress. So you've got front-end investments paying dividends for years, but as Michael mentioned, we’ll be focused on reentry and tooling as we lead into parts fabrication and assembly.

I see. Following up on VSS Inspire, it seems you already have the parts to build that spaceship. What was the decision-making process behind building that versus going straight from Imagine to Delta?

We have about 85% of the parts of Inspire completed. Our priority is to get to commercial; that’s our clear priority in two areas. First, we’ve got to get through this enhancement program with Imagine and the Mothership Eve, which will have greater capacity. So, we’re putting our efforts right now toward those three legacy ships and then into the future fleet.

Thanks, Kristine.

Thank you, Ms. Liwag. The next question comes from the line of Ron Epstein with Bank of America. You may proceed.

Just a follow-on to some of the prepared remarks. You guys mentioned potential future inflows like capital to help finance all of this. How are you thinking about that? Convert? I mean, what are you thinking about?

I'll take that, Ron. Thanks for the question. We're heading into an important phase of activity that’s going to provide some great catalysts for our Company. We have the enhancement program ready to get us to commercial service. We've also got the development of Delta and next-gen Mothership to expand our fleet. We fully expect these to be significant catalysts for our Company going forward. We have about $1 billion of cash and equivalents on the Balance Sheet, giving us great runway for this work. We see spaceflight revenue starting to kick in already, including deposits. There are multiple ways to raise capital—equity or debt—and we’ll look closely at these options as we reach that point.

How are you managing supply chain production while ramping up? Everything will be ramping, and big manufacturers will be looking for first dibs. How do you think about that?

It’s about selecting supply chain partners thoughtfully. We’re leveraging supply chain partners who are excited to diversify their business with what we’re doing rather than solely relying on high volume commercial air. We see a wide ecosystem available for us. When managing that, we intend to be active in our supply chain. Ensuring both quality and partnership with suppliers is critical. We will be building our supply chain team to be present with the manufacturers for large major pieces while also ensuring there's intensive quality control on smaller parts. We’ve seen good interest from the supply chain for what we want to do, and we are not concerned about capacity in the aerospace supply area.

When do you expect to be cash flow positive given all the changes in the program?

The key to that will be the ramp of the Delta Class, which will lead to a significant increase in our cash inflows. That is the point in time to think about.

The next question comes from the line of Scott Forbes with Jefferies. You may proceed.

Just to circle back to the demand side, you talked about positive feedback around updated pricing, but has there been any impact or conversion from the flight delays and have you seen any meaningful change in the demographics of your customers?

We have not seen any impact to our demand or base of future astronauts from the shift in schedule. We moved Unity 23; that is a multi-month shift but the overall program remains stable. The building of real flight capacity and the movement of future astronauts is not impacted significantly.

From an overarching risk perspective, where do you see yourself on the learning curve as you unlock this full-flight potential?

This is a crucial period for us. We discussed transitioning from a prototyping space innovator to a globally scaled commercial enterprise. The requirements that come along with delivering in a more focused and predictable fashion are crucial. The work we've done over the last nine months moves us toward this focus and we’re confident in our technical capabilities moving forward.

We’ve focused on commercial scale while ensuring technical risks were resolved and committing to long-term value creation. We feel confident in how we’re moving forward at this phase.

Thank you.

Thanks, Scott.

The next question comes from the line of Michael Ciarmoli with Truist. You may proceed.

Hey, good evening, guys. Thanks for taking the question. Maybe just a follow-up on Ron's line of questioning. On the supply chain and securing commercial partners, I think earlier you mentioned some NRE costs. Are you guys bearing all of those NRE costs and how are you negotiating contracts with potential suppliers? Basically, are you farming out to take on some risk?

There are options in that approach with some partners that can help to accelerate our design. The mothership does have some unique functionality, but it is less the core of our intellectual property around our overall spaceflight system. We can take advantage of partners for engineering, tooling manufacturers, parts, and assembly. For the spaceships, however, we will maintain the core technology and engineering design ourselves. We will explore options for parts and sub-assemblies, and even consider assembly at the ends of the program.

Assuming the Delta Class is intended to be the production series spacecraft, do you have any planning regarding upgrading the RocketMotor to raise the apogee above the Karman line or increase the microgravity time for customers?

There will be some fascinating developments as we start doing our spaceflights with spaceship 3B. Each time we flew Unity, we expanded the flight envelope and made adjustments accordingly. With Imagine, we will incorporate the knowledge gained to improve our upcoming models.

Thank you, guys.

Operator, why don't we take one last question, please?

Certainly. Our last question comes from the line of Peter Skibitski with Alembic Global. You may proceed.

Good afternoon, everyone. Thanks. Can you hear me? Okay, great.

We can hear you.

Quick question for Doug. The elevated SG&A spend in the quarter, are we going to head back to a more normalized $40 million a quarter type spend as you head into 2022 or can the spend even decline next year, given the focus on R&D and CapEx through the enhancement period?

If we look at the most recent quarter, we did have some things in there that don’t necessarily recur, such as costs related to marketing for Unity 22, which will not appear again. However, we expect some growth in G&A into the future as we scale the rest of the business, but certainly not at the same rate. So, while you may see some normalization, it will not dramatically change the profile.

I appreciate the color. If I could sneak one last one in. Just so we don’t get too far ahead of our skis on customer deposits, it looked like you guys in the quarter booked the $25,000 non-refundable deposit, so should we expect backlog to remain pretty flat until we get to late 2022 or late 2023? Is that the expectation?

To clarify about the deposit. We talked about the approximately 100 seats or space flights we sold reservations for. The deposits here come in at $150,000, but they were booked over Q3 and the first part of the current quarter. So what you're seeing on our Balance Sheet reflects what came in as of September, and there is a lag from contracting to cash appearing.

So we should expect a bigger jump in the fourth quarter?

Yes, it will keep growing because we’re going to continue selling spaceflights, and we take in $150,000 per flight.

Okay, great. Thank you.

Thank you, Mr. Skibitski. At this point, we'd like to thank everyone for your interest in Virgin Galactic and for joining today's call. This concludes our third quarter 2021 Earnings Conference Call. I hope you all enjoy the rest of your day. You may now disconnect your lines.