Virgin Galactic Holdings, Inc Q2 FY2025 Earnings Call

Ladies and gentlemen, thank you for your patience. My name is Desiree, and I will be your conference operator today. I would like to welcome everyone to Virgin Galactic's Second Quarter 2025 Earnings Conference Call. I will now hand the conference over to Eric Cerny from Investor Relations. You may proceed.

Thank you. Good afternoon, everyone. Welcome to Virgin Galactic's Second Quarter 2025 Earnings Conference Call. On the call with me today are Michael Colglazier, Chief Executive Officer; and Doug Ahrens, Chief Financial Officer. Following our prepared remarks, we will open the call for questions. Our press release and slide presentation that will accompany today's remarks are available on our Investor Relations website. Please see Slide 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, 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 the earnings release for a reconciliation of these non-GAAP financial metrics. Turning to our agenda for today's call on Page 3. Today's call will include an overview of the business, an update on progress in developing our next-generation spaceships, and a financial update. I'll now turn the call over to our CEO, Michael Colglazier.

Thanks, Eric, and hello, everyone. It's been a busy quarter with our entire company focused on producing our next-generation human spaceflight vehicles. Our internal teams and our partners have made significant advancements across all parts of the program, and I'm exceptionally proud of the team for their diligence in delivering quality and nimble problem-solving as they advance the work while handling the complexities of a large-scale aerospace program. I hope you've all been following our We Build Spaceships series on our social channels. Each episode takes the viewer into our production process with a somewhat documentary-style approach with the intention of showcasing the many layers of technical development that go into our spaceships while also introducing you to some of the amazing people who are dedicating their skills to open access to human spaceflight. We've been dropping new episodes on 2- to 3-week intervals, and this is a great way to follow along with our progress. We continue to track for the launch of our commercial spaceflight business in 2026, with both research and private astronaut flights expected to commence in the fall next year. Most parts of our spaceship program are tracking as expected and are within the scheduled time contingencies we have planned for each phase. Our fuselage schedule has slipped a bit, and that's why you are seeing us adjust the planned timing of our first research spaceflight into the fall of '26 versus the summer. We still expect private astronaut flights to begin later that fall. As we continue to advance our spaceship program and move forward with our strategic plan, we are managing the business prudently while keeping strength in our balance sheet with over $0.5 billion in cash, cash equivalents, and marketable securities. As expected, we continue to reduce our quarterly cash spending, and we've been able to reduce operating expenses and redirect resources as part of our disciplined approach. I'll kick things off with updates from our spaceship program, and then I'll touch on our launch vehicle program before handing the call over to Doug for a financial overview. Turning to Slide 4. As I said, we continue tracking our first commercial spaceflights for the fall of 2026. To accomplish this, we're in constant forward motion with parts fabrication and assembly at our supplier facilities and within our spaceship factory in Phoenix, Arizona. I'm excited to say that our Phoenix factory now has 100% of the program's assembly tooling on the floor. Much of this day-to-day progress is being documented and shared in our new series, We Build Spaceships, and we also provide highlights on a quarterly basis with our Galactic 10 videos, the latest of which was released earlier today. I encourage all of our customers, investors, and fans to watch these videos as they offer a deeper look into our spaceship production process. Slide 5 is a reminder that our spaceship production process has several key components, and the next few slides will highlight progress in each of these areas. On Slide 6, I'll start with our rocket systems. Our hybrid rocket motors' power comes from the oxidizer combining with solid fuel to create combustion. The image on the left is our completed oxidizer tank that will be going into our first spaceship. Having finished production and testing, this tank is now on the shop floor to be fit with a carbon fiber shell that will enable it to be cleanly installed between the forward and aft fuselage sections. The image on the right is of our propulsion system's relief valve. This is a small but critical component that ensures the safety of the propulsion system's oxidizer tank. This part has recently been qualified for flight, which means we've demonstrated through testing, documentation, and regulated processes that the manufactured part meets all design, safety, and regulatory requirements for its intended use in our spaceship system. This approach is replicated across hundreds of examples and reflects our diligent focus on quality and safety. On Slide 7 is one of these examples, this one involving our flight controls. Our engineers have expanded our test bench and system qualification efforts, and they are now testing signals from the pilot side stick that are sent to the spaceship central computer, where our software then relays the commands to an actuator that drives the horizontal stabilizer. This is an example of the end-to-end testing we use to prove out the sophistication of our flight control software. On Slide 8, our mechanical systems work is coming together nicely, and testing is underway at our safety and test facility in Irvine, California. Recently, the nose landing gear was delivered to this facility to start its testing process. We are also testing our pneumatic system, including the wing leading edge bottles, which mount behind the front edge of our wings. These bottles hold compressed air that provides breathable air for the cabin, maneuvers the vehicle in space, and drives our landing gear and feather actuators. These and dozens of other mechanical systems will be tested thoroughly at this center in parallel with the assembly of our first spaceship, which helps us move with confidence into the ground and flight testing phases of the program. On Slides 9 through 12, you'll see examples of the many composite parts that are being built, shipped, and assembled. Over the past few months, we have seen a great deal of progress with composite parts making their way through the fabrication process and into the factory. Slide 9 shows the bulkheads fabricated for the cabin within the fuselage of the new vehicle, including the forward and aft bulkheads. The forward bulkhead was the first to arrive at our spaceship factory, and the aft bulkhead arrived this week. On this slide, you can see the full fabrication process from the bulkhead sitting in its fabrication tool to nondestructive inspection to assembly in Phoenix. Slide 10 shows progress with our feather boom skins, which are the external surfaces of our spaceship's tail. The feather boom is our largest subassembly, and all 4 boom skins are in various stages of fabrication. These are significant parts that are designed and built by our partner, Bell Aerospace, and these are big steps forward. Slide 11 shows the wing skins, which are also making great progress. The image on the left shows the lower wing skins, which are already in the spaceship factory working through subassembly. The image on the right shows our upper wing skins at our partner Qarbon Aerospace's facility. Inspections have been completed on one of the upper skins, and it will ship to Phoenix soon. The other upper skin has been trimmed and will go into inspection shortly. While we're talking about the wing, on Slide 12, you can see the leading edge shear webs, which make up the forward structure of the wing. These parts have been received and are in place in the wing up assembly tool of the factory. You will also see the aft spar has moved into the wing up tool, and this is a great step. During last quarter's call, I mentioned we had a delay in the fabrication of this part, and we planned to manage it without impacting the critical path of the overall project. Since then, our engineers redesigned the part, we reworked the manufacturing work instructions with our partners at Qarbon, and then built, inspected, and shipped a new part. Now that part is delivered and in the wing assembly tool, and the team is able to move the wing assembly forward. Another example of how we are resolving the inevitable challenges in a project of this scale involves a deficiency in the first article of our fuselage skin, which I mentioned in the opening. While each part is different, the process of resolving this fuselage part is very similar to what we just did in resolving the wing spar. We first do inspections and imaging of the part to assess the root cause of the manufacturing challenge. That root cause analysis highlights whether we need to make a design adjustment, a material adjustment, a layup procuring process adjustment, or a combination of the above. It's a pretty typical process and one that our team of internal and production partner experts are used to tackling. While we continue to carry schedule contingency for the remaining phases of our spaceship program, we expect the fuselage skin will have a modest impact on the timeline for completing assembly of our first spaceship. This is why we've adjusted the expected timing of our first spaceflight to the fall of '26, with private astronaut flights still expected to commence later in the fall of '26. So what should you expect to see as we continue to move forward on our timeline for spaceflight? Well, in the first half of Q4, you should expect to see the completed wing assembly. The second half of Q4, you should expect to see the feather assembly complete. The fuselage will probably bring up the rear in December or January. We plan to start our glide flight test program next summer. We expect this will be the most time-intensive part of the flight test program. We expect to celebrate our first spaceflight and the commencement of commercial operations in the fall of 2026, with private astronaut journeys to space also in the fall of 2026. We will be sharing insights into all stages of our spaceship program development progress through our We Build Spaceships series. Our next episode will drop later this month, and we expect to continue releasing new episodes on a cadence of every 2 to 3 weeks throughout this year to showcase our progress and keep our customers, investors, and fans well informed. Moving to Slide 13. Before handing the call over to Doug, just a brief note on the development of our next-generation launch vehicle, which is an important aspect of our long-term growth strategy. We've made great progress on our spaceship program, and we are now able to direct more of our engineering talent towards the design of our next spaceship launch vehicle. Of course, the vast majority of our engineering and technical operations teams remain laser-focused on delivery of our first 2 spaceships. As that spaceship work continues to close out, we're able to begin to shift our design focus towards our launch vehicle program. We have given the launch vehicle program the internal project name of LV-X, which stands for Launch Vehicle X, with a primary focus on developing a launch vehicle variant for use by Virgin Galactic to support our spaceships, but also with a design and planning eye towards a potential government variant that could be used in research and defense applications. In this latter category, I'm pleased to share that Virgin Galactic and Lawrence Livermore National Laboratory, one of our nation's premier national labs, are collaborating on a feasibility study. We'll share more details at a later date as we progress and continue to assess opportunities for our carrier ship platform to support government research, systems, and missions. Okay. Over to Doug for a financial update.

Thanks, Michael. Good afternoon, everyone. We'll start with the financial results for the second quarter and then discuss how we are marching forward to deliver on our exceptional economic model. Turning to Slide 14. Revenue in the second quarter was approximately $400,000 from future astronaut access fees. Total operating expenses for the second quarter decreased 34% to $70 million compared to $106 million in the prior year period. Total operating expenses were also down $19 million from the $89 million we reported in the first quarter. I wanted to mention that we have reached a preliminary settlement from the securities class action lawsuit, and the net financial impact on the company is expected to be approximately $2.9 million. We currently expect insurance will cover all or substantially all of the go-forward costs associated with the settlement and pending derivative claims. Adjusted EBITDA improved by 34% to negative $52 million in the second quarter compared to negative $79 million in the prior year period. Adjusted EBITDA also improved 28% sequentially from the first quarter. Free cash flow was negative $114 million in the second quarter, within the range of our prior guidance and representing a 7% improvement from negative $122 million in the first quarter. Moving to Slide 15 and balance sheet. We ended the second quarter with $508 million in cash, cash equivalents, and marketable securities. During the quarter, we generated $56 million in gross proceeds through our ATM equity offering program. You can see that our balance sheet remains strong, and we remain very focused on managing expenses as we progress through the build phase for our new spaceship fleet. I want to take a few minutes to share a little more color on our disciplined approach to managing expenses while strategically positioning the company to execute on our highly profitable business model. In past quarters, we previewed anticipated trends in our financial results, and those trends are playing out as expected. Second quarter operating expenses were down 34% year-over-year, and we forecast expenses to continue to decline in Q3 and Q4 on a year-over-year basis. As we progress through the spaceship build process, spending has been shifting from significant investments in R&D expense to capital investment. For the second quarter, capital expenditures were $58 million, up from $34 million in the prior year period and also up from $46 million we reported in the first quarter. We anticipate that approximately half of our spending in 2025 will be for one-time capital expenditures for manufacturing capacity and the production of our first 2 new spaceships. On prior calls, I've highlighted that our growth in capital expenditures is reflected in property, plant, and equipment or PP&E on our balance sheet. At the end of the second quarter, we reported $306 million in PP&E, growing nearly 50% compared to $209 million at the end of 2024. This represents our investment in the assets that we expect to yield tremendous future economic returns. We also continue to directly drive reductions in our operating expenses. As we have shifted from the design phase to the build phase of our new spaceships, we are redirecting engineering resources and reducing expenses. As is typical at the conclusion of the design phase of a development program, we've adjusted our team structures and scaled down resources in parallel with the completion of work. Recall that we strategically leveraged expert contract engineering talent to work alongside our in-house engineering team through the design phase of the spaceship program. Given that the design part of the program is practically complete, we have moved the majority of our in-house engineering talent to the build program, retained a smaller footprint in the go-forward spaceship design program, and importantly, reassigned others to the next-generation launch vehicle program. With those changes across our engineering organization, we reduced our contract engineering workforce by nearly 150 people or 85% from a year ago. In addition, given the go-forward engineering workload for both our spaceship and launch vehicle programs is reduced from our peak, we recently adjusted the size of our in-house engineering team to account for this lower demand for resources, with overall company headcount reduced by approximately 7%. As you've heard today, we're making excellent progress with the spaceship program and working toward delivering on the economics of the business model we have shared with you in the past, as is shown on Slide 16. We expect the capital on hand is sufficient to deliver the initial fleet of 2 new spaceships. At the same time, we're using our ATM equity offering program to build growth capital to advance our expanded fleet scenario while supporting strength in our balance sheet. As Michael mentioned, we're prudently moving forward with the engineering work on our LV-X program. Having a second launch vehicle at Spaceport America, along with 2 more spaceships, will enable us to fully utilize the flight capacity of the spaceport. We continue to explore outside interest in our launch vehicle platform from government entities. To revisit the suborbital spaceflight business model, when our initial fleet of 2 spaceships and existing launch vehicle reaches steady-state operation, it is expected to support 125 flights per year, ramp to approximately $450 million in revenue, and generate $100 million of adjusted EBITDA. By expanding our fleet with a second launch vehicle and 2 more spaceships, we expect to grow our business to approximately $1 billion in revenue and yield $500 million of adjusted EBITDA. Moving to our projections. Revenue for the third quarter of 2025 is expected to be approximately $400,000 primarily related to astronaut access fees. Forecasted free cash flow for the third quarter of 2025 is expected to be in the range of negative $100 million to $110 million, and the midpoint of that range represents a sequential decline of 8% from Q2. We further project that cash spending will continue to decline through 2025 and be below $100 million in the fourth quarter as we complete this phase of investment. With that, I'll turn the call back over to Michael.

Thanks, Doug. In summary, we continue to advance our spaceship production and are on schedule for our first commercial spaceflights in 2026. With the progress achieved in our spaceship program, we are moving ahead with preliminary design of our launch vehicle carrier ship platform to enable expansion of our spaceship fleet and the potential for other research and government opportunities. Our team is doing a fantastic job with the complex work of building spaceships, and we look forward to sharing their progress in the weeks and months ahead. Let's open it to questions.

Our first question comes from Greg Konrad with Jefferies.

Maybe just to follow up on the fuselage skin comment. Appreciated the details. But you mentioned a root cause analysis and some of the things that you're potentially looking at. Can you just clarify, has there been a determination or resolution at this point in time? And what adjustments need to be made?

Sure. I'll provide a brief explanation. The fuselage skins are similar to the cabin's tube in the spaceship, fitting between the two bulkheads on the deck. These skins are made from BMI carbon composite and feature a core resembling a honeycomb structure, which adds stiffness, somewhat like how corrugated cardboard is sturdier. While curing these parts, we're focused on ensuring a good fit across the core. Initially, we dealt with various weights of core materials, which differ in density to manage varying compressor forces. The thermal expansion characteristics of these different weights lead to varying degrees of expansion in the autoclave process. We've identified this as the source of the issue and are simplifying the types of core we use. We'll complete this process and move forward from there. I hope this provides some context, and I apologize for the technical details for those less interested in material science.

That's helpful. And then maybe if you can just talk a little bit more about the dynamics. So the research flight shifted to fall, but it doesn't seem like there's any change to the astronaut spaceflight schedule for fall 2026. What were the dynamics that allowed you to keep the astronaut spaceflight while the research first flight maybe pushes out a little bit?

The main development is that there is a timeline of approximately 1.5 to 2 months for this specific part, which is only a segment of the overall shipment process. This component was not on the critical path of the program. When we adjusted this, similar to what we did with the spar, the time it will take for this part to re-enter the program is less than the total duration of 1 to 2 months. Essentially, while we were previously at the end of these quarters, we are now likely moving towards the earlier part of these quarters. The shift is less than a quarter in total. Consequently, our private astronaut flights will occur a little later in the fall than initially planned, but they are still expected to take place in the fall according to our best planning and expectations.

Our next question comes from the line of Myles Walton with Wolfe Research.

Michael, I think last quarter, you spoke to opening or reopening ticket sales in 1Q '26. I imagine given the private astronaut flights haven't moved much, that's still the plan?

That is correct. We still plan to do that in the first quarter of 2026. We haven't finalized or shared our pricing yet. I believe what I mentioned last time still stands. Our last stated price was $600,000 per ticket. I don't expect that to decrease when we reopen sales, but we haven't been specific about the sales price yet.

Okay. And then maybe just on the ATM or the use thereof. Obviously, it's important to maintain liquidity. But I'm curious, at this level of liquidity, given the milestones you have ahead and given the quantum of dilution you had to take in with $50 million, I think you had 37% dilution, is it more of a wait and see and hold off on the ATM? Or is there a minimum $500 million of cash liquidity you want to maintain, Doug?

Thanks for the question, Myles. We view the ATM primarily as a tool for growth. It allows us to invest in initiatives like the launch vehicle program, which helps increase our revenue and overall capacity by expanding our fleet. In the past, we've mentioned that we have enough capital to complete the first two spaceships and reach commercial service with positive cash flow. Currently, we're focused on building more capacity on the balance sheet to support our engineering teams as they advance toward the next phase of growth with the launch vehicles. That's our main objective. This approach also strengthens our balance sheet, and while there isn't a set minimum cash balance, we aim to be prudent. Everything is going as we anticipated, aligning with what we've communicated before. We're using our resources to invest in vehicles that will generate future revenue, focusing on reaching the crossover point to positive cash flow while balancing those priorities to drive growth.

Okay. But I mean there has to be a consideration of the dilution of the current enterprise if you're funding heavily dilution to the future enterprise. I mean you have to be balancing that as well, I would imagine.

Absolutely. Yes. So it's a balance because we see tremendous returns in investing in the future and allowing us to expand our flight capacity, get to this long-term economic model that we've shown you. So by bringing in that cash now to allow us to get to that growth, we pull that in, right? We get to those higher returns and that higher EBITDA that we talked about much sooner than if we just waited for the positive cash flow to fund that organically naturally.

I'd just kick in, Myles, on top of Doug there. Yes, we are trying to be very balanced and thoughtful about everything through here. So when we're moving forward with, I'll call it, design on the LV-X program, the launch vehicle program, that's a lighter touch. I think you're going to see us move more fully into spaceline operations and actually creating cash flow before you see big, big economic pushes on LV-X. And if we find something different along the way as we're exploring opportunities for government uses of that platform, well, maybe that's a different reason to push the accelerator. But right now, we're just being prudent to move the design along in a balanced fashion so that we're not overly waiting to scale when we're ready.

Okay. And the last one, you mentioned the employee reduction on the engineering side of 150. Was that backfilled by production employees? I think the plan was this year to maintain roughly similar employee headcount, but the mix was going to change. Is that still the case?

So, it's Michael here. I'm trying to recall how many people we’ve added at our Phoenix facility. That’s really where we’ve received a lot of new hires. It’s likely around 50 people. The larger number Doug mentioned referred to a decrease in contractor resources, which has occurred. As we continue to assess what’s needed to push the Delta spaceships into operation, I’d say we’re taking a disciplined approach to LV-X. The net engineering workload for these two programs is greater than what we had initially. Recently, we had to let go a group of engineers who were exceptional and contributed greatly to Virgin Galactic’s mission. Unfortunately, we just don’t have enough workload in these two programs to justify the size of certain departments, which is why some of our full-time engineers left the company recently.

Next question comes from the line of Oliver Chen with TD Cowen.

Michael and Doug, as we think about fourth quarter, is it reasonable to expect that the free cash flow burn would be in the negative $100 million to $120 million region? Or anything we should know about for fourth quarter would be helpful. Also, as you think about the LV-X launch vehicle program, do you have any general thoughts on the total addressable market and your interest there? And I think you commented on this, but anything that we should know about how you're pacing or thinking about R&D related to that? And then finally, any thoughts on developments with customer experience and the luxury customer experience at scale for fall 2026?

Thanks, Oliver. This is Doug. I'll take the first question and hand it over to Michael. So regarding the free cash flow, we have indicated that the third quarter coming up, we expect to be between $100 million and $110 million. And then consistent with what we've expected from the past is Q4 will be under $100 million. So we expect to exit the fourth quarter of this year at a spending level below $100 million, and that continues. So we would also continue to see reductions in spending going into 2026 as well. So that's our forecast at this time.

Oliver, I'll discuss the LV-X and then touch on the customer side. The clear necessity for additional launch vehicles will be primarily for Virgin Galactic's suborbital spaceflight business. The "X" in the LV-X program signifies that we can create different variants of the ship. Our main focus at this stage will be on a Virgin Galactic variant that closely resembles our existing Eve mother ship, likely incorporating several upgrades as one would expect in new models. Our engineering approach will also consider what we are learning as we engage with government, research, and defense sectors to assess the market's need for a high-altitude, heavy-lift, reasonably long-endurance vehicle. Based on this need, we aim to ensure the design of our Virgin Galactic variant can be adapted for a government model. We've been actively pursuing this, and it's clear. Regarding the market size, we are still evaluating potential use cases. There is undoubtedly a significant demand for high-altitude testing, which may lead to the development of other ships, planes, or equipment. While testing will likely demand fewer vehicles overall, we need to understand if there are systems and requirements within the government, particularly in defense, that would necessitate a larger quantity. We're currently performing assessments to determine what needs the government may have for such a vehicle and exploring potential partnerships, which will aid in comprehending the business potential. The feasibility study with Lawrence Livermore has been incredibly helpful in this regard and is one method we’re using to better understand this market. There’s no additional information at this moment, but we feel optimistic based on the positive feedback regarding the capabilities of our launch vehicles. Now, concerning our customers, we’re excited about the progress on that front. A lot of our current work revolves around fine-tuning how we scale while maintaining a world-class experience for our luxury customers. This adventure is intensive, high-end, and requires significant individual attention, especially as we move from one flight per week to two, then three. Managing the logistics and ensuring our facilities can accommodate the increased volume while continuing to provide personalized service is crucial. We're starting to receive mock-ups of our updated space suits, which is exciting. We’re also developing an astronaut portal on our website for future astronauts, detailing what they’ll need for their journey and outlining the training before their flight. This preparation is essential as we anticipate next year will see significant ramp-up in our activities.

Okay. Great. Very helpful. A couple of follow-ups, Michael. What are the hardest parts ahead that you'd say with respect to the assembly phase? And any other thoughts on Italy and the spaceport opportunity there as well?

Yes. The challenging aspect of our spaceship development journey was primarily experienced during the engineering phase. While every phase has its own difficulties, the engineering phase feels less restricted. In our earnings presentations, we are now showcasing various components of the spaceship, including avionics, flight controls, mechanical systems, and carbon composite parts, as well as our rocket systems. I'm seeing all these elements come together quite well. I spoke with Mike Moses before this call to check in, and he's excited about the progress being made. Our teams are motivated and energized as we approach being ready for flight. The components being produced aren't just for the first ship; they are also for the second and third parts of our static test article for the second flying ship. For example, when we release parts like the fuselage or last quarter's wing spar, they are challenging, but our team manages it effectively. It’s typical for the first component from the shop to require some process adjustments. I’m not sure if you caught our We Build Spaceships episode 3 about carbon part manufacturing, where our Chief Engineer mentioned the need to fine-tune the process. This requires expertise, but we are handling it and making progress. So, I'm feeling positive about all of that. Regarding Italy, the new Director General of ENAC, Alexander D'Orsogna, is visiting today. I saw him and his Director of Technical Innovation, Giovanni, with the team working on the study for a spaceport in Italy. They are pleased to be here, and I believe this partnership is beneficial as we conduct our assessment. The evaluation of the Grottaglie Southern Italy Spaceport should conclude toward the end of this year, possibly extending into early next year. The collaboration with the Italian government is strong.

Our next question comes from the line of Michael Leshock with KeyBanc Capital Markets.

I wanted to focus on the potential of the Italian spaceport. If the feasibility study is successful, when would you expect to begin construction on a second spaceport? I'm not asking for specific dates but rather the milestones you need to achieve with your current spaceport before expanding. Additionally, what are you targeting in terms of the size of the Delta fleet and mother ships before building the new facility? Any insights on this would be appreciated.

Yes. Everybody is very excited about Italy, and it sits right behind me very excited about Spaceport America and New Mexico, which is the first order of business, of course. So the effort we have going on now brings, as you know, 2 spaceships with our existing launch vehicle, Eve. And that gets us to a good business. We're cash positive. We're making good money. We're kind of self-sustaining on that. But we really now have the fixed cost in so that growth incrementally drives a lot of flow-through, and that's our focus. The first step on that is this LV-X program. We need additional launch vehicles. So we're moving the design prudently while we're still in this kind of really pre-revenue, pre-earnings phase so that we can get to this expansion. And I would expect that LV-X program, because we're going to be a little prudent in the timing until we're further along with spaceships, '29 probably is when we bring those in, and we'd see the first of those moving into Spaceport America. We would expect the LV-X program probably not to have the degree of tooling that we built with spaceships. We don't need as many carrier ships. But the tooling will still be developed with those where we can bring multiple copies out once the engineering and the tools have been built on a pretty frequent basis. So that to me means we would have capacity in the plant to bring the next carrier ship, the next launch vehicle, as well as a couple of spaceships to get started in Italy in 2030, and we can do fast expansion from there.

And then maybe looking into 2026, as we look at the quarterly spending, do you expect that quarterly burn rate to gradually improve in these kind of $10 million or $20 million increments or so sequentially? Or do you expect maybe a couple of quarters from now, we might see a larger $50 million improvement as you move through some of the biggest quarters in terms of the investments that you have going on right now?

I expect to see a continued decline in spending, dropping below $100 million by the fourth quarter. This trend will continue to decrease in the early part of 2026, but it won't be significant drops; rather, it will be a steady continuation. Once we begin commercial service, we'll start generating revenue, transitioning to positive cash flow around that time. So, we have a downward trend with no major reductions until we launch commercial service, at which point the trend will reverse.

There are no further questions at this time. Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.