Good afternoon. My name is Luella, and I will be your conference operator today. At this time, I would like to welcome everyone to Virgin Galactic's first quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I will now turn the call over to Eric Cerny, Vice President of Investor Relations.

Thank you. Good afternoon, everyone. Welcome to Virgin Galactic's first quarter 2025 earnings conference call. On the call with me today are Michael Cole Glazier, Chief Executive Officer, and Doug Aarons, Chief Financial Officer. Following our prepared remarks, we will open the call for questions. Our press release and slide presentation that will accompany today's remarks are available on our Investor Relations website. Please see slide two of the presentation for our Safe Harbor disclaimer. During today's call, we may make certain forward-looking statements. These statements are based on current expectations and assumptions and as a result are subject to risk and uncertainties. Many factors could cause actual events to differ materially from the forward-looking statements made on this call. For more information about these risks and uncertainties, please refer to the risk factors in the company's SEC filings made from time to time. You are cautioned not to put undue reliance on forward-looking statements, and the company specifically disclaims any obligation to update the forward-looking statements that may be discussed during this call, whether as a result of new information, future events, or otherwise. Please also note that we will refer to certain non-GAAP financial information on today's call. Please refer to our earnings release for a reconciliation of these non-GAAP financial metrics. Turning to our agenda for today's call on page three. Today, we'll cover progress in developing our next-generation spaceships, a look ahead at future commercial initiatives, and a financial update. I'll now turn the call over to our CEO, Michael Kohl-Gleicher.

Thanks, Eric. Welcome, everyone, to our first quarter earnings call. We open 2025, driving solid progress toward putting our next-generation spaceships into commercial service. An enormous amount of work is taking place across our company as well as at our key suppliers, and we continue to expect our first research spaceflight will take place in summer of 2026, with private astronaut flights following in fall of 2026. Our company-wide focus on controlling expenses continues as we move with purpose through the remainder of our pre-revenue phase. Year-over-year operating expenses have continued to decrease as our spending has shifted to create the capital assets that drive our business model. This focus on cost has kept our balance sheet strong, with well over half a billion dollars in cash, cash equivalents, and marketable securities on hand. Turning to slide four, progress on our new spaceships is an important topic for all our stakeholders, and I will spend time on today's call, providing color across many of the areas that make up spaceship production. We released a short video recap of our progress this morning, and I encourage you to check that out. Since we have far more going on than we can cover in an earnings call or a highlight video, I will also share some new ways we are going to bring you behind the scenes to follow along with our progress in more detailed ways. This slide highlights many of the concurrent work streams that are underway to deliver our new spaceships. These include rocket and propulsion systems, avionics and flight controls, mechanical systems, and the ongoing development and delivery of carbon parts. So let's get into it on slide five. Our hybrid rocket motor system is a huge strategic advantage that supports the long service life of our spaceships while enabling quick turnaround time between flights. Our spaceships are built for breakthrough reusability of 500 flights or more, and most of the components within our propulsion system are built for the life of the ship. The rocket motor, which is designed to be removed and replaced in a matter of hours, is part of what we expect will allow us to drive single-ship turnaround time down to days versus the weeks or months typically seen with other rockets. One of the important components of this system is the oxidizer tank. Last quarter, we shared an image of our first flight-ready tank in production. We have since finished fabrication of that tank, completed acceptance testing, and are now doing final prep before sending it to the spaceship factory where it will be integrated into the fuselage subassembly. Our rocket systems team is amazingly skilled and it's exciting to see these systems come together. Turning to page six, I want to recognize great progress from our avionics team. Avionics are the electronic and digital platforms that connect with each system on the ship. These systems give our pilots the information and controls they need to safely operate their But our new spaceships, we're taking advantage of the latest in modern avionics to support even greater predictability and repeatability of our flight profile. In addition, by leaning more heavily into off-the-shelf avionics hardware, in combination with our own proprietary software, we are creating systems that require less maintenance and support faster turnaround times. The ingenuity and elegance that underpin these systems is incredible, especially as they are built with multiple layers of redundancy while maintaining lightweight design and robust maintainability. The test benches in our lab, shown in the image on this page, provide a platform for us to test and verify our spaceship software far in advance to Flight, which is designed to significantly de-risk and expedite our flight test program. On page 7, you'll see an image of the simulator where pilots are already testing our new flight control system. The partnership between our engineering team and our spaceship pilots is great to watch. The immersive, hands-on testing enabled by the simulator is also designed to de-risk and expedite our flight test program, as it enables our pilots to fly and refine hundreds of incredibly accurate spaceflight simulations well ahead of our first flight. As a shout-out to our flight controls team and pilot corps, they just received the prestigious Jack Northrup Award from the Society of Experimental Test Pilots for Virgin Galactic's presentation of our fly-by-wire spaceship controls. On page 8, I'd like to touch on mechanical systems. These are the important moving parts within the ship, which include landing gear, pneumatic systems, valves, and actuators, just to name a few. Each of these systems has its own set of design, manufacturing, and test requirements. This slide shows various parts of our landing gear. The mechanical systems team already has 95% of the landing gear parts complete and ready for assembly. Pages 9-13 highlight some of the many carbon parts that have been built, as well as examples of parts currently in the production cycle. The outer surfaces of the spaceship, built with incredibly strong, heat-resistant BMI carbon composite, are referred to as skins. Here, you see images of wing skins, fuselage skins, and feather boom skins, as well as an image of the aft bulkhead, all of which are key structures that make up the spaceship. The image on page 14 captures some of our wing final assembly tools that are installed in our spaceship factory. High-fidelity precision tooling, including these examples from the wing, allow for a much more streamlined assembly process, enabling us to shave months off our historical assembly time while assuring the quality and safety of our building process. This tooling also equips us to make additional spaceships quickly and cost efficiently as we grow and scale our fleet. Lots of exciting work is still ahead as we bring these new spaceships into service. We have detailed program plans for each element of the ship, which allow us to project both schedule and cost with reasonable fidelity. We do not, of course, expect every part of the program to be executed exactly as planned. Almost all large-scale aerospace programs experience bumps in the road that weren't part of the original design. The key to good execution is being able to respond in a nimble fashion whenever these bumps show up, and our manufacturing team, along with our supply chain partners, have demonstrated outstanding ability to adapt around unexpected scenarios. A case in point materialized in our wing sub-assembly plan last month. One of the wing parts we expected to arrive at our spaceship factory in April was delayed, requiring us to re-plan the sequence of assembly. Because our assembly tools and processes allow for flexibility in the build process, we've been able to adjust our wing assembly order around the arrival of the late part. In this case, while wing assembly is now starting later than originally planned, the nimble adjustments from the team allow us to adapt to the change without impacting the critical path of the overall project. In addition to maintaining a quick and nimble approach across our manufacturing effort, we build contingency, or buffer, into our schedule estimates, which we manage at the corporate level. This contingency planning provides us the flexibility to absorb unexpected scenarios in one area of the program without disrupting other workflows or macro program timelines. Turning to slide 15, as you can tell, enormous progress is occurring across the company. It's fascinating and important work, but the volume is too great to do it justice in an earnings call format. For this reason, starting in June, we will begin publishing an in-depth series across our social channels that showcases how we build our spaceships. We believe this will be an engaging and exciting way to bring along our customers, our investors, and our fans as we build the spaceships that are designed to dramatically reduce the cost of commercial human spaceflight and open the door to wider access to space travel. We expect this series to debut on our social channels next month. As I shared at the outset of the call, our entire company is focused on bringing these spaceships into service in a safe timely and cost-efficient fashion before i hand the call over to doug to talk about the financials of our spaceship program let's turn to slide 16 and touch on three commercial initiatives that are being planned now for execution in the future first i'd like to share some color on how we plan to reopen sales as we get closer to bringing our new spaceships into service we expect to run a highly bespoke education and sales process that will onboard new customers in distinct waves. This approach has several intended benefits. For customers, tailoring the number of new arrivals into our future astronaut community during each wave allows us to provide a white glove onboarding experience that will form the foundation of each customer's journey to space. From a yield management perspective, this allows us to adjust our pricing wave by wave. We expect to open the first wave of spaceflight reservations in Q1 of 2026, which we see as the ideal time to leverage the excitement leading up to the initial flights of our new spaceships. Specific pricing has not been set, although we expect the price will increase relative to our last price of $600,000. We expect the majority of people who will join in this first wave will be new customers, including both scientists and private citizens. With that said, our experienced flying spaceship Unity has us optimistic about repeat business coming from the approximately 675 customers already on our manifest. As a case in point, all three of the private astronauts who flew on our last space flight, Galactic 7, have signed on to fly again once our new spaceships are in service. Second, we continue to advance the preliminary development work on our next spaceport, and we are midway through our feasibility assessment with the Italian government for a spaceport in southern Italy. As we shared before, we see excellent potential in a spaceport located in either Europe or the Middle East. Moving to page 17. Third, I want to share a bit more on a carrier ship platform. We've been asked on earnings calls in the past as to whether we plan to develop markets and revenue streams in addition to suborbital spaceflight. I have consistently shared that we first needed to focus our company, bring our new production spaceships into service, and deliver cash-positive operations. While we still have much important work ahead of us to deliver our new spaceships in 2026, the progress we have already made is now allowing us to direct energy toward business development pursuits that could eventually lead to incremental revenue opportunities. We believe taking a more expansive view of our carrier ship platform may be one of those opportunities. Last quarter, we discussed the potential for our carrier aircraft to be adapted for government and research use, given its unique ability to carry heavy payloads to high altitude. The need for an aircraft that can reach high altitude or long durations while lifting heavy payloads, which we refer to as a hail heavy aircraft, has existed for many years, and the volume of missions that could leverage this capability has been increasing. Turning to slide 18, since last quarter, we have connected with leaders within the Department of Defense, national laboratories, and aerospace and defense companies to ascertain the potential product market fit of our carrier aircraft's capabilities with government customer needs. We've been encouraged by initial feedback, which has identified both existing and emerging missions that could potentially benefit from access to hail-heavy support aircraft. Examples of these missions could include airborne research and development testing, intelligence, surveillance, and reconnaissance support, command and control node capabilities, and multiple opportunities within the emerging Golden Dome Initiative. In the near term, we plan to explore early steps, including cooperative research and development agreements, as well as other R&D opportunities within the industry to showcase the missions our existing and future carrier ships could support. With that, I'll turn the call over to our CFO, Doug Ahrens.

Thanks, Michael. Good afternoon, everyone. Turning to slide 19 and our financial review of the first quarter, revenue was approximately $500,000 from future astronaut access fees and event fees. Total operating expenses for the first quarter decreased 21% to $89 million, compared to $113 million in the prior year period. We remain highly focused on managing our expenses across all areas of the company. Consistent with the trend during 2024, we continue to see a reduction in operating expenses as our spending shifts from research and development to capital investments in manufacturing assets that can be used to repeatedly build spaceships. With production of our first two spaceships underway, we've also been capitalizing the components that are being manufactured or purchased. Capital expenditures for the first quarter grew to $46 million compared to $13 million in the prior year period. Adjusted EBITDA improved to negative $72 million dollars in the first quarter, compared to negative 87 million dollars in the prior year period. Free cash flow was negative 122 million dollars in the first quarter, within the range of our guidance. Moving to slide 20, we ended the first quarter with 567 million dollars in cash, cash equivalents, and marketable securities. During the quarter, we generated 31 million dollars in gross proceeds to an at-the-market or ATM equity offering program. The ATM program remains in place both as a potential source of growth capital and as a means to bolster the balance sheet when appropriate. Today, you will see some additional SEC filings from us about the program, but those are all just technical filings and they all still relate to the same existing $300 million program we entered in November 2024. The filings are not establishing a new or upsized Program. Moving to our projection, revenue for the second quarter of 2025 is expected to be approximately $400,000 for astronaut access fees. Forecasted free cash flow for the second quarter of 2025 is expected to be in the range of negative $105 million to $115 million. This projection represents lower spending going forward as the required peak investment level is now behind us. We further project that cash spending will continue to decline through 2025 as we complete this phase of investment. Moving through the final assembly and testing phase, we expect to continue converting some of our cash on hand into manufacturing assets and spaceships as we bring our initial Delta fleet into service. We anticipate that approximately half of our spending in 2025 will be for one-time capital expenditures for tooling, manufacturing capacity, and the production of our first two new Delta class spaceships. On our last call, I highlighted that our growth in capital expenditures is reflected in Property, Plant, and Equipment, or P, P, and E, on our balance sheet, and we expect In fact, that trend will continue to play out in 2025. At the end of the first quarter, we reported $249 million in PP&E, compared to $209 million at the end of 2024. With that, I'll turn the call back over to Michael.

Thanks, Doug. Closing on page 21, Q1 demonstrated strong progress, advancing the build of our new spaceships and keeping pace with our plans to begin commercial spaceflight in 2026. I'm encouraged by the momentum and responsiveness of the teams across Virgin Galactic and our supply partners, and I'm looking forward to showcasing how we build spaceships in our new series that will launch next month. We are moving through the necessary steps to conclude the pre-revenue phase of the company. The assets we are creating during this phase are tremendous, including the spaceships that will go into commercial service, as well as the IP, tooling, and manufacturing infrastructure that will be used to expand our fleet. We believe these assets will open up a powerful and profitable business model that will benefit from an industry-leading cost structure, fixed cost leverage as we scale, and an unparalleled customer experience. We're excited to see our new ships come to life in 2025, and we can't wait to begin flying our customers to space in 2026. Operator, let's open the call for questions.

How are you thinking about the total addressable market of $300,000 or more previously, and any thoughts you may have there? Second question is the free cash flow is encouraging, especially given that peak investments are behind you. What are your thoughts longer term in terms of the free cash flow burn reaching below $100 million, or how would you think more medium to longer term there? And I just would love any tactical thoughts if tariffs are impacting some of your material inputs at all. Thank you very much.

Thanks, Oliver. How about this, Michael? I'll take the first one and the last one. Doug, free cash flow over to you. So I don't think we have different inputs at the moment, Oliver, as to the macro 300,000 total addressable market and the growth of that. The analysis that went behind that a couple years ago I thought was pretty solid by several of the investment banks that covered the industry. So I don't have any updates to that from proprietary research. I do believe that at the start of this, we are going to see tremendous amount of activity through the sales process, and that's why referral and repeat visitation is so important to us. We put in one note, you probably caught, I just thought, a nice piece of optimism on how powerful our experience is. We had three private astronauts on our last flight. We also had a Turkish government researcher on that flight. All three of those private astronauts have signed up again. It was that meaningful of an experience. So when I see the early years of this, I think we will grow by sales and a heavy amount through referral and a decent amount through repeat. And so the amount we need to tap into the top of the funnel, those 300,000 individuals, is really pretty light at the beginning. And I think that will grow over time as we scale the fleet up. Just, Doug, before I give it to you, I talked to our head of supply chain a couple times, both in advance this call and just following along with Taros. Most of our work, as you'd expect, is U.S. sourced. As you go multiple layers down the supply chain, some of the raw materials can come from outside of the U.S. Because we've been working on this for a while, we have ordered all the long lead materials in advance. So all of all the stock we need for these first two ships is pretty much already in. There are small elements, but relatively de minimis into the economics here. Packing and things we ship from, we ship all of our parts and there's a lot of wood in the crates and wood is up because wood's coming from Canada, things like that. But most of the meaningful expenditures that could have been subject to tariffs have already been purchased. So Doug on pre-cash flow.

Yeah, thanks Michael. Thanks for the question, Oliver. So yeah, we're pleased that the peak spending is now behind us. And that's because we've been investing in tooling and it was all the R&D before that. But we showed a lot of pictures of tools that have been already built and they're in the factory. There's a one-time investment that allow us to make copies of the spaceships now with that. But that's where the peak spending was coming from. So now as we go forward, we still have more investments to do as we finish that and really invest in these remaining two spaceships. But what that gives us is a trend where the spending, the required spending by quarter goes down. So the trend through 2025 is a declining spend trend. And as you noted, yeah, we're still targeting to be below 100 million spend by the fourth quarter of 2025. And then you asked about long-term. We do expect that beyond that, the spending level will continue to decline into 2026. And then we start to cross over because in 2026, we have our two spaceships in operations. We start to get cash inflows ahead of the space flights, and that's when it turns over to a positive cash flow business model. So we're pleased with that outlook. Looking much longer term, I can refer you back to the economic model that we've shared in past calls, that's still valid. That's still what we are projecting that with two spaceships in service and with the launch vehicle, EVE, we expect to be able to get to a revenue level of $450 million a year in steady state. And that generates 90 million to call it 100 million of EBITDA. And that can be all cash flow unless we choose to plow that back into building more assets. So that's the different phases of our cash flow projections, Oliver.

Thanks a lot. One follow-up. Michael, you have an extensive background from Disney and we lead luxury here at TD Cowan. We'd just love your latest views on anything that's changed or how you're thinking lately about customer engagement, experiential, and the lifestyle brand aspect of what you're doing.

The only thing I'd add on that note, Oliver, is it's in sight, and we're really excited as a company to start to make Virgin Galactic a real name in that luxury and aspirational brand space. We have everything we need in what this industry is, what the quality of our product is, the aspiration and exclusivity of the product, and now we're building the incredible machines that will allow us to do it. so we're excited to step in and be a real player here.

Thank you. Best regards.

Your next question comes from the line of Greg Conrad. Again, everyone, if you would like to ask a question, press star one on your telephone keypad. Mr. Conrad, your line is now open.

Good evening. Maybe just to follow up on the reopening of sales in Q1, you mentioned a first wave, But just given, you know, how you're thinking about future flight cadence, any color in terms of how you think about the size of that first wave? And then what is the ideal backlog just given that flight cadence? You know, you were at a thousand before you started flights the first time. Like, how do you think about the ideal size of backlog given the overall market size?

Thanks, Greg. Like, I think having a one to two year backlog is appropriate. I think once, and that's consistent with where we've been. Once your past two years, I think people are waiting a little longer than is helpful. And, you know, technically you need a month of backlog and it's just fine. But I think having a solid backlog is better. I also think having a year's worth of backlog allows for greater flexibility from a yield management standpoint. So what we're trying to do now is we start with waves, because we will be putting our new ships into service. We will start them. They're all expected to fly twice a week when we have the carrier ship capacity to do so. And we expect, in general, to be able to fly 125 flights over the course of the year. So we'll work to, you know, overheat that, but that's kind of our targeted numbers. So at six people per ship, 120 flights a year, that's the capacity that we'll, I'll say, target from an annual point until we expand our fleet. So that means we want to have six times 125, that many people, signed up on a rolling basis a year in advance. And the question really becomes, what price point do we want to bring those people in as our flight rate moves forward? That's one of the benefits of Waves from a business standpoint is we can look at the value we're creating. I think we'll get continued referral and excitement. I do think that will continue to expand the demand pressure against the existing fleet. And we can think about pricing appropriately there. The other thing with going in Waves, which is super important to the customer experience, we're not just bringing people up and down to space. This is a life experience. It's a life journey. and we want to bring people in from the moment they sign on in a way that shows them this is something that is unique in the world and that experience starts from the moment they sign up. If we just kind of throw the doors open and can't handle the volume or ration the volume coming in, it makes it harder for us to give that white glove treatment to each and every individual astronaut that joins in. So that's why we do it from a customer standpoint. business-wise, it allows us to yield, manage, and stair-step pricing up as we go along.

And then, you know, as a follow-up, you mentioned you were about halfway through a feasibility study for a second spaceport in Italy.

Can you maybe talk about what some of those, you know, main gating factors are in terms of establishing feasibility, and do economics play into that decision in any way whether that's you know funds in from Italy or how that gets funded sure so the I'll talk you from our side from the Italian side what we're doing right now is establishing clarity of what airspace would be needed is a very important element there so there's an Air Force base that is in the Puglia region of Italy that's been designated by the Italian government as a spaceport region. President Maloney has designated a non-trivial amount of funds into helping move that region into a horizontal, like a runway-based spaceport. So there's good government support in that area. Where we fly is dependent upon lots of factors, And so a lot of what's going on is the specific flight paths, studying the wind and the weather patterns, both across seasons, across days, and intraday, across the hours, because depending upon prevailing winds and other factors, we would fly different flight paths, obviously originating and returning to the same runway, but going in different ways. That has different implications to what airspace is either available or might need adjustment within the overall Italian airspace. So that's the heaviest one that we're doing right now. I think when it gets down to economics, the runway is already there. it turns into facilities and hangers for ships at a spaceport and a place for us to train our customers along the way, obviously then building the ships that would operate in there. Those are the primary, I'd say, upfront investment elements of the new spaceport. Thank you. You're welcome.

Your next question comes from the line of Miles Walton of Wolf Research. Please go ahead.

Hi, guys. This is Greg Dahlberg on for Miles. Thank you for the time. I kind of wanted to dig a little bit deeper into the repeat business aspect just because you guys have been emphasizing the importance here. I was wondering, is there like maybe a win rate you're assuming in your medium long-term planning assumptions for a repeat business, I guess, just trying to gauge what it could look like when the cadence of flight starts to really kick up? Thank you.

I think early days, obviously, Greg, in being able to predict, we have a relatively small number of flights. And so the statistical significance is going to be a bit limited there. So more of what we, you know, as far as statistics go, we have, I'd say in the double digits, you know, low to mid double digits of people who have flown that have raised their hand and want to do a a repeat with us, percentage-wise there. But I think it's hard to really pull that as the statistical data point to go forward. What I look more closely at is how meaningful was the experience. When I have a chance to talk to people who have flown with us and I get a chance to talk to them afterwards, how meaningful has it stayed? How relevant is this? How important is this in their ongoing life? How much are they talking about it, sharing about it? And just ask, you know, is this something you would like to do again? And if you'd like to do it again, would you like to do it, you know, with people you know, your friends, your family, buddy group, whatever that is. And the feedback I get is very consistent in, I would love to do this again. And so then I think it depends upon the individual and where their economic situation stands as to whether this is something that they would like to prioritize sooner or later. So we'll see how that all plays itself out. But I do think it's a meaningful piece. What's probably more meaningful is when you have a customer experience that's this powerful is the referral factor, right? Because all the people that our flown astronauts talk to become potential customers for us. And a lot of our flown astronauts, no people within that, you know, kind of 300,000 total addressable market, and that makes a more easier customer acquisition process through the referral effort.

Got it. Thank you for the time. You're welcome.

If there are no further questions, ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.