Virgin Galactic Holdings Inc (SPCE) 2020 Q4 法說會逐字稿

Good afternoon. My name is Jacqueline, and I will be your conference operator today. At this time, I would like to welcome you to Virgin Galactic's Fourth Quarter and Full Year 2020 Earnings Conference Call.

(Operator Instructions)

Hosting today's conference will be Seth Zaslow, Vice President, Head of Investor Relations at Virgin Galactic. As a reminder, today's conference 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 Fourth Quarter and Full Year 2020 Earnings Conference Call. On the call with me today are Michael Colglazier, Chief Executive Officer; Mike Moses, President of Space Missions and Safety; and Jon Campagna, Chief Financial Officer.

Following prepared remarks from Michael, Mike and John, who will open the call for questions. Our press release was issued about 45 minutes ago and is available on our Investor Relations website, as is the 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 will 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 Virgin Galactic's annual report on 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 these non-GAAP financial measures to the most comparable GAAP measures in our earnings press release.

With that, I'd now like to turn the call over to Michael.

Thanks, Seth, and good afternoon, everyone. I hope you and your loved ones are keeping healthy and safe. First off, I'd like to welcome Seth Zaslow to Virgin Galactic. As you may have seen, Seth joined us a few weeks ago to lead our Investor Relations function, to serve as our primary liaison with the investment community. Seth is awesome, and we're very pleased to have him on board, and I'm confident you will all enjoy working with him.

Second, I'm sure many of you saw that our CFO, Jon Campagna, will be stepping down from his role to pursue his next adventure. I'd like to thank Jon on behalf of the entire Virgin Galactic team. Jon has been our CFO during our transition from a private to public company and help build excellent relationships within the investment community. He leaves us with a strong balance sheet at a time when the company is well positioned for future growth. I will share more about our incoming CFO, Doug Ahrens later in the call.

Moving on to the agenda. I'm going to start today's call with a brief recap of our 2020 accomplishment and an overview of our flight schedule. I'll then ask Mike Moses to provide some detail on our December 2020 flight as well as an update on our upcoming flight, which I know many of you are eager to hear about. I'll then talk about the progress we're making on expanding our fleet, followed by some thoughts on commercial plans and how we are positioning the organization for scale and success. After that, Jon will provide detail on our financial results.

So with that, let's get started. As I reflect back on 2020 and look ahead to 2021 and beyond, I can't help but be excited. It's an incredibly dynamic time for both our company and for the space industry as a whole as there is a high degree of interest and advancement that is bringing our society closer to the frontier space than ever before. And we are just getting started on what we believe is going to be a long period of growth and expansion.

Turning to Slide 4. 2020 was an active and productive year for Virgin Galactic, despite the challenges we faced as a result of the COVID-19 pandemic. At the start of the year, we completed a captive carry flight of our spaceship VSS Unity from Mojave, California to its new home in Spaceport America. This flight completed the transition of all Virgin Galactic space flight operations to our new commercial base in New Mexico. Shortly after this flight, COVID began to have an impact on our operations. As we shared in the past, building and flying spaceships during the pandemic is materially less efficient than normal. But despite scheduling and cost and efficiencies related to the pandemic, our team was able to make significant progress during the year. And I'd like to thank all of them for their extraordinary level of commitment, dedication to our mission.

In the second quarter, we completed 2 successful glide lights that provided us with valuable data on the ship and training par team pilots. Following these glide flights, we were able to complete 7 FAA verification and validation reports. Putting us in a strong position where we've now cleared 27 of the 29 reports and we'll address the proviso in our currently active FAA operator's license. We saw great success with our One Small Step program, which demonstrated the strong consumer demand for space fight, closing the program with approximately 1,000 people signed up and we are pleased that our total number of future astronauts remained at approximately 600 as of the end of the year 2020.

In August, we took advantage of favorable market conditions to further strengthen our balance sheet, and Jon will cover this topic in more detail in his remarks. We followed up our successful glide flights with a further test flight on December 12, which Mike Moses and I will talk more about shortly.

During the year, we also made progress on the build of our second and third spaceships. And in December, we realigned the company's structure from a business unit focus to a functional structure as groundwork for our plans to ship from a prototype and an R&D focus to an organization that can design and manufacture at scale. In this process, we retired The Spaceship Company brand and have aligned everyone in the organization under the Virgin Galactic brand.

Turning to Slides 5 through 7. These 3 slides summarize the plan we discussed on last quarter's call for the next 3 flights in our test flight program. While the specific timing of each flight is shifted, we're still working towards completing these 3 flights. The first of these was originally set for November 2020. Due to COVID restrictions in New Mexico, we deferred the flight to December. While the December flight did not reach space as planned, it did provide valuable learnings. In particular, it demonstrated the effectiveness of our safety systems in a live scenario, which reinforced the importance of our space flight system architecture and our robust testing and training programs. Subsequent to the flight, we have performed and completed our root cause analysis, which has put us in a position to move forward with our program.

I'd like to ask Mike Moses to share details about the December flight and the status of our upcoming flight.

Thanks, Michael. Moving on to Slide 8. During the December test flight, the rocket motor halted as it was starting the emission sequence because the onboard rocket motor computer lost connection. This system, like others on the spaceship, is designed such that it defaults to a safe state whenever power or communications is lost. We plan for and rehearse many potential scenarios, including ones such as this, and the pilot in the spaceship as well as the engineers and mission control, were well prepared for this amount.

Following the flight, we completed an extensive analysis to investigate why the rocket motor computer lost connection, and we are confident that we've identified and isolated the issue to be a reboot of the computer, likely caused by electromagnetic interference, or EMI. It has been upgraded with a new flight control computer system, which offers a finer degree of pilot control. This system has performed well in our glide flight tests and is one of the components we are testing in our rocket powered flights. Our team has determined that part of this new system is the source of higher EMI levels that were present on that last flight. EMI is a relatively common challenge in aerospace. And in January, we proceeded with modifications that were designed to lower the EMI levels and better protect certain systems. After confirming through testing that these corrective actions would prevent a reboot of the rocket motor computer, we determined that we were ready to target a February launch.

As we completed our pre-flight technical readiness checks for that February flight, some of our shipboard sensor readings showed fluctuations. And it became apparent that those changes that we had made to address EMI had unintentionally created additional noise within our sensor environment. While this noise not in itself is a safety issue, it did let us know that the EMI levels on the ship were impacting areas that, while low in probability could potentially trigger another fail safe scenario, possibly one that could prevent us from seeing a full rocket motor burn. Our safety culture is built around the principle that everyone in the company has the ability to call attention to an issue. And that's exactly the right approach when you're dealing with human space flight. In this case, we flagged an EMI issue that needs resolution and we chose to delay the February launch to mitigate it further before flying. To reduce the EMI levels, we will be enhancing the new flight control computer with additional features. Once we complete these modifications, we'll thoroughly test the system on the ground, both in the lab and on unity, following which we will recommence our flight test program.

Michael, back to you.

Thanks, Mike. Just to reinforce Mike's comments. One of the imperatives for me when I decided to join Virgin Galactic was confirming the company had an unwavering commitment to its safety culture, and that's exactly what we're seeing here. We know our space flight system works. We know we can go to space, and we are all very eager to get back to space. But when we see something that isn't quite right, we tackle it hard and we fix it, and then we move forward. And that's what we're doing. Once the EMI issue is addressed to our satisfaction, we intend to return to the test flight program sequence that we previously communicated. Our estimate to complete this work is 8 to 9 weeks, which suggests our next test flight will be in May. While we're not going to play specific dates around our second and third test flights, we expect them both to occur this summer.

Turning to Slide 9. Our spaceflight system is built to serve 3 markets. Private astronauts, microgravity research and suborbital training for professional astronauts. Our flight with Richard Branson will demonstrate our private astronaut experience, and we will open sales for this market following this light.

Our microgravity research product includes space flights for 2 pilots flying racks of research payloads in the cabin or win 2 pilots fly researchers on board with their experiment for a human tended research flight. The suborbital training product supports governments and countries that would like to include suborbital spaceflight as part of a training program for their professional astronauts.

With regard to these latter 2 markets, I'm pleased to confirm today that the Italian Air Force is partnered with Virgin Galactic on a flight that will demonstrate our capabilities for both human tended research and suborbital astronaut training. They will be flying 3 space flight participants in multiple payloads, and they will conduct astronaut training in addition to experiments during the flight. The Italian Air Force flight, which we expect to occur in late summer or early fall, will be a revenue-generating flight and will conclude our product test program.

Moving on to our fleet expansion on Slide 10. I am really pleased to announce that we'll be rolling out the first of our SpaceShipThree class of vehicles on March 30, and I'm excited to show you this sneak peek at the next shift in our future fleet. SpaceShipThree has been built with a modular design and uses enhanced fabrication and assembly processes, which will enable better performance in terms of flight rate and maintainability. And SpaceShipThree will provide a base for how we scale the future design of our spaceships.

Moving to Page 11. The first vehicle on this SpaceShipThree class will commence with ground testing following the March 30 rollout of it, and we expect that the ship will begin glide flag testing this summer. The second vehicle in this SpaceShipThree class will begin assembly at this point as well. Our current flight test protocol for the first phase of 3 vehicle calls for 4 glide flights and 4 power flights. And we expect the space flights will be revenue producing. Following our initial glide flight test, there will be a multi-month period of analysis and modification to the spaceship before we bring it out for our final glide test and power test.

Given SpaceShipThree will now require our mother shift during this period. We've decided to implement enhancements and accelerate some long-term maintenance updates to our mothership Eve, that will improve the predictability and frequency of flight rate. To avoid sequential downtimes, we will also implement some additional enhancements to unity during this period that will also improve predictability in-flight rate. We expect the combined analysis and refurbishment period for all 3 vehicles to run for approximately 4 months. At the conclusion of this period, we expect that VSS Unity will begin flying private astronauts. And SpaceShipThree will be in a position to complete its flight testing, which we expect to be in early '22. Our refurbished mothership Eve will be the carrier aircraft for both vehicles.

Moving to Slide 12. As we previously communicated, we to do so, we will need to efficiently build more spaceships and more motherships. I'm pleased to share today that we have formally launched 2 new programs within Virgin Galactic that will be critical to this effort. The first will be for our next-generation spaceship, the fourth generation which we're referring to internally as the delta class of vehicles. We'll be updating our engineering drawings to improve manufacturability, and we will invest in our manufacturing facilities, processes and partnerships to improve cost and schedule efficiency. These vehicles are designed to have faster turnaround times due to the reduction in maintenance between flights. While we will initiate our commercial service using the SpaceShipTwo and SpaceShipThree class vehicles, it is our delta class of space shifts that we believe will really accelerate the economic growth of the company.

The second, an equally important new program is for our next-generation mothership. We plan to have the capability to fly in multiple times per day at a Spaceport, and we will need multiple motherships to do so. We have incredible teams to sign to these important programs, and we will have more to say on these initiatives as we move forward.

Turning to Slide 13. We are attracting incredible talent to join Virgin Galactic as we accelerate our path to commercialization. Today, I'd like to highlight some of the leaders and advisers who will play key roles as we pivot to higher rate production and widen our lens on the commercial opportunities ahead of us. As announced earlier today, Swami Iyer will be joining Virgin Galactic as President of Aerospace systems. Swami is going to lead our extraordinary team of engineers, designers and technicians and support teams who are building the fleet of vehicles and designing the future opportunities that underpin our business. Swami will join us later in March. And he comes to us from GK and Aerospace, where he served as President of Advanced Defense Systems. With over 20 years of experience in commercial and highly classified aerospace, defense and cyber industries, Swami brings great depth and expertise and business expansion, while also having the deep process and production orientation necessary to lead our growth and scale. He is a powerful leader who is perfectly suited to lead our aerospace teams in the next chapter.

In addition, we are thrilled to welcome Steve Justice to Virgin Galactic as our Vice President of Engineering. Steve brings incredibly deep leadership and engineering experience, having spent 4 decades at Lockheed Martin Skunk Works. Steve will lead and grow a world-class engineering team supporting our SpaceShipThree and delta class, propulsion and new mothership programs as well as our longer-term efforts around high-speed point-to-point travel.

Turning to Slide 14, I'm excited to announce that Doug Ahrens is joining us as our new CFO. With prior experience as both a public and private company CFO, Doug has led global teams to rapidly grow companies in complex technology and manufacturing environments. Doug's leadership and relational skills, his capital markets and M&A expertise will all be incredibly valuable as we scale and monetize the business. Doug most recently served as CFO at Mellanox, a public company in the semiconductor industry, where he was responsible for all finance functions, leading up to a successful acquisition by NVIDIA Corporation in 2020. And a fun fact, like Swami and Steve, Doug is also a pilot. And Doug, in this company, you are in great company here.

Turning to Slide 15. Our business model depends on ramping the production of our fleet. Our commercial success will also be built on the quality of the experience we offer to our future astronauts and the impact of our consumer brand and marketing strategy that will launch our sales effort and support widespread consumer engagement. To support these objectives, we are incredibly fortunate to have attracted 2 groups of advisers who are lending their truly world-class expertise to these endeavors.

First, on the commercial front. Earlier this week, we announced that Joe Rohde will serve as our Experience Architect, and he will lead the team of internal and external experts to develop and bring to life the overall experience for our future astronauts, their guests and other customers. An incredible creative force, joe previously spent 40 years at Walt Disney Imagineering, where we led projects that brought to life some of Disney Park's most authentic and compelling experiences, including Disney's Animal Kingdom. I am excited to share that Blair Rich has been engaged to support our customer brand architecture and marketing strategy. Virgin Galactic story is big and bold and requires a consumer engagement approach that is on an equivalent scale. Blair spent over 20 years at Warner Bros., most recently serving as President of Worldwide Marketing and she is uniquely skilled to advise us at this embryonic stage of our brand and marketing efforts.

And finally I'm I am thrilled that Geoff Goodman has been engaged to lend his expertise to our revenue planning and new business development efforts. Geoff's deep expertise, leading global business development for Disney Parks and as Chief Commercial Officer for the Disneyland Resort is immensely helpful as we build our strategic road map to monetize the business.

Moving to Slide 16. We've also recently announced the establishment of a Space Advisory Board. The advisory Board will serve as an important resource to me and to our senior team as we start commercial space fight service, develop next-generation vehicles and work to Inspire people on a global scale. The Space Advisory Board will consist of established world-renowned experts within the aerospace industry, and it currently includes George Whitesides, our founding CEO and former Chief of Staff of NASA, who will chair the Board. Dr. Sandy Magnus, former NASA Astronaut and Deputy Chief of the Astronaut Office. Dr. Magnus is a member of Masa's aerospace Safety Advisory board, and she has served in leadership roles at the Department of Defense and the American Institute of Aeronautics Anastomotic; Chris Hadfield, a former astronaut who served as commander of the international space station. Chris has gone to space 3 times, including the trip to the Russian space station Mir. He has also served as Chief of International Space Station operations at the NASA Johnson Space Center; and Dr. David Whelan, who previously served as Chief Scientist, Boeing Defense, Space and Security and Director of DARPA's Tactical Technology Office. David is a member of the National Academy of Engineering and a former member of the Defense Science Board and the Air Force Scientific Advisory Board.

I would now like to turn the call over to Jon for a financial update.

Thanks, Michael, for your kind words earlier, and good afternoon, everyone. Before we jump into today's update, I wanted to share with you all that it has been a fantastic 5.5 years. I've been fortunate to have worked with a team of incredibly talented people, and I'm very proud of the work that I've been part of that led to the public offering of the company, transitioning us to being the first publicly traded human space lite company. I look forward to seeing the company continue to grow into the future.

Turning to Slide 18. 2020 Marks Virgin Galactic's first full year as a public company. As Michael highlighted, despite the challenges that the pandemic presented, we made significant progress towards our goal of reaching commercial launch, and we believe we're well positioned heading into 2021.

Let's review our results for the fourth quarter. We did not generate any revenue during the quarter given our continued focus on flight tests. Net loss for the quarter was $74 million compared to a $77 million net loss in the third quarter of 2020. Non-GAAP SG&A expenses and non-GAAP R&D expenses have been adjusted to exclude stock-based compensation and non-capitalized transaction costs, if applicable. Non-GAAP SG&A expenses for the quarter were $23 million compared to $26 million in the third quarter of 2020. GAAP SG&A expenses for the quarter were $33 million compared to $31 million in the third quarter of 2020. The increase in SG&A expenses is attributable to an increase in noncash stock based compensation expenses due to the scheduled grant of additional equity awards, which relate back to the closing of the transaction with Social Capital Hedosophia in 2019. We expect to continue to incur these expenses in the next quarter and beyond.

Non-GAAP R&D expenses were $40 million compared to $43 million in the third quarter of 2020. GAAP R&D expenses for the quarter were $41 million compared to $46 million in the third quarter of 2020. The decrease in R&D expenses is due to the onetime $5 million noncash charge incurred in the third quarter, which I mentioned on our last earnings call, which relates to the expensing of certain inventory items to R&D. Adjusted EBITDA totaled negative $60 million for the quarter. This is compared to adjusted EBITDA of negative $66 million in the third quarter of 2020. The improvement in adjusted EBITDA primarily relates to the reallocation of the onetime noncash charge expensed to R&D in the third quarter, as I just mentioned.

Looking at the year overall, as you know, our primary focus remains on completing our test flight program as we prepare to start commercial operations. As such, we did not generate significant revenue in 2020. Net loss for fiscal year 2020 was $273 million compared to a $211 million net loss in fiscal year 2019. Adjusted EBITDA totaled negative $232 million for fiscal year 2020 compared to a negative $187 million for fiscal year 2019.

Turning to capital allocation on Slide 19. In the fourth quarter, free cash flow was a use of $74 million reflecting an increase of $15 million compared to the prior quarter. This increase was primarily due to higher public company costs, which are concentrated in the fourth quarter, as I outlined on our last earnings call. Capital expenditures were $4 million for the fourth quarter of 2020, flat compared to $4 million for the third quarter. Capital expenditures in the fourth quarter consisted primarily of vehicle tooling and other equipment costs.

For full year 2020, free cash flow totaled negative $250 million compared to negative $223 million for fiscal year 2019. Capital expenditures totaled $17 million for fiscal year 2020 compared to $14 million for fiscal year 2019. The increase was primarily attributable to building improvements and vehicle tooling. Looking ahead, we anticipate our quarterly free cash flow to return to approximately negative $60 million per quarter.

Importantly, our balance sheet remains strong. We remain in a strong cash position and ended the year with cash and cash equivalents of $666 million. As a reminder, in the third quarter, we took advantage of favorable market conditions to raise $441 million in net proceeds via a secondary stock offering of 23.6 million shares. Going forward, we will continue to look to be opportunistic about raising capital to further our strategic objectives.

I'd like to now hand the call back to Michael.

Thanks, Jon. Turning to Slide 21. I again want to take a moment to thank our entire team who has been so hard at work on our various initiatives, the dedication and passion that I've been seeing throughout these challenging times truly amazing. I'm extremely proud of the progress we made in 2020 and and I'm even more excited about what we have coming up in '21.

Our focus remains on the following 3 areas: number one, fleet readiness, completing our testified program and preparing for commercial service; number two, fleet expansion, adding new spaceships and new motherships to our fleet and pivoting the organization from an R&D phase to a manufacturing phase that will allow the business to scale over time; and number three, developing the astronaut and consumer experience. We're assembling so to build out our commercial strategy and to monetize and scale the business. It's an incredibly exciting time for both Virgin Galactic and for the space industry as a whole. There is such an incredible amount of innovation going on right now. It's really extraordinary.

Operator, we're now ready to begin the Q&A portion of the call.

(Operator Instructions)

Your first question comes from Robert Spingarn from Crédit Suisse.

Michael, perhaps you could give us some further background on what precipitated some of these management changes and the creation of these advisory boards. It sounds like you're really filling out the ranks. But what was missing?

Rob, good to hear from you. So it's a pretty easy story and consistent with, I think, where we've been. The company's had just an incredible first chapter that has -- I think I would use the words, brought us right up to the precipice of getting the technical feasibility of how our space flight system works. And really importantly, the next step of this is going to be to take that technology and move to a manufacturing footing where we can build and scale a fleet of vehicles. And moving to a commercial footing where we really step forward in a very strong way in the marketplace. So if you look at each of these roles, they are outstanding individuals who have come to join us and are really additive to what we're doing. So when you see Swami and Steve coming in. These are people who are both expert in aerospace, right, deep experience and have seen and develop things like what we're doing in our area. But also, they are just incredible leaders of people. And in order to scale and build all of our spaceships, all of our motherships. That is a team effort and the team meets leaders who will be both really skilled and really expert in doing it, but also folks who have a driving personality a driving focus that will enable us to move the organization forward at this scale and pace.

So I couldn't be more thrilled there. And then on the commercial side, both Joe, Blair & Geoff, again, these are advisers who are helping do specific parts of getting us prepped and ready and ready to launch on the consumer piece in parallel as we move our fleet forward. The Space Advisory Board, these people are deep in their expertise. And they're exactly who we want as advisers to the company, both on the fleet development and some of the new vehicles we may want to pursue in the future. But also just in the experience that we want to bring, and I think you can tell by the talent and the quality of the folks there. They are going to be huge additions. So it's really -- it's a Chapter One, Chapter Two story, and I think super additive to where we're going and what I think you'd expect of us.

Okay. And then just maybe this is more of a technical question. But now that we have SpaceShipsTwo, Three and then the delta series, is there any way to quantify the different levels of, call it, annual revenue capture between the different types of ships?

I don't know if we have the ability to give you a revenue quantification, but the difference between these SpaceShipTwo unity, that's where we're flying now was built as our demonstrator vehicle. That's how we've been working through the flight sciences and flight test program. And as such, it's the one we modify along the way through flight test. It has pretty low rate as we talk about the frequency in which it flies. The SpaceShipThree class, the first of which we showed that sneak peak earlier in the presentation. As we said, they're built in a modular fashion. They're built to be maintained at a more reliable pace. There's still a built in a relatively handcrafted form using the same techniques that we did for unity, but with the learnings of that. And so those vehicles will perform the way we want them to perform but our pace of building that class of vehicles is a little slow. And that's what the delta class of vehicles is about.

This is where I will go back with the same functionality of our spaceships that we can modify our engineering drawings so that we make things that could be manufactured at a higher rate and ensuring the manufacturing processes, we're doing them in ways that allow us to have less maintenance between flights. So what you'll see is the frequency of SpaceShipThree, we'll fly more so than Two. This frequency of SpaceShipFour. We weren't called that we're find the delta class of vehicles will be more frequent than SpaceShiphree and it's that delta class of vehicles that I think will be the one we build kind of the economic back of the company with.

Your next question comes from Myles Walton from UBS.

So Mike Moses, I was hoping I could ask you a question on the EMI issue you highlighted and gave us good detail on. Sometimes you can get around it through shielding that doesn't sound like the situation here, it sounds like you're actually having you get into the guts of the flight controller itself. And so I'm just curious, again, how you have the solution, and it's been implemented and is now in test? Or you know the cause and you're identifying the solution and then you have to test it. I'm just trying to put a fine tune on that one.

Yes. Thanks, Myles. So we started between December and February, tackling with shielding and grounding, like you mentioned, right? And that's how we tried to address the elevated levels we saw when we were prepared to go to our final preflight checks for the February launch, we saw some of our sensor readings, pressures and temperatures, those types of things, show some unusual fluctuations, which kind of let us know that EMI was still present and maybe in systems that we didn't initially. So that's where we decided to kind of go with the fix at the source. So a modification to the flight control computer that is the source of this elevated noise level is our current plan.

So we have the modification for that design. It's being prototyped now. We'll be doing testing on the ground in the bench, on the lab and then in just a little bit on the ship. And we need to run it through all its paces before we're ready to commit to a launch, but that's the reason for the current stand down.

Okay. All right. And my color, sorry, too many mics, but what's the complement of spaceships and motherships to achieve the 400 flights per space port? I'm not sure I know what that answer is.

So we haven't given guidance on a specific number there, Myles. It obviously depends upon how quickly we turn each of those spaceships. On the mothership side, a little more clear, we know we want to fly at least twice a day, maybe 3. So we will probably shoot for 3 motherships for every space port that we do, and that will allow us to get the frequency of flights that we want. I've guessed high single digits to low double digits of spaceships per Spaceport. That's, I'd say, an informed look, but not something that we have guidance on right now. We need to see what the turn times of each of those class of vehicles will be once we've got them built and going. But that's how we're generally building plans around it.

Our next question comes from Ron Epstein from Bank of America.

It's a follow-on to Mike's question. When are you guys going to break even with cash? And I mean, obviously, that's gotten pushed out to the right. Do you have enough capital to get there? Are you going to have to raise some more money?

Well, we believe we are very well capitalized. And again, I think Jon has done a great job as we took advantage of good market conditions last August. So we're sitting on quite a good balance sheet. We think we've got plenty of room there to get our fleet production moving and growing forward there. So we're not giving guidance on specifically when we are turning cash positive and turning that around. But obviously, we feel well positioned economically going forward there.

But I mean, I guess, maybe if I push it out a little bit more, I mean, how much sort of window do we have? I mean this is a pretty big slip have another one, you could push it out 2 years. I mean, how long do we have?

Well, first, I don't think this is a big slip at all, right? This is -- I think we're pushing from our flight, 8 to 9 weeks, and we're commencing the same program that we've had there. So I wouldn't characterize it that way. And then we're moving on the same path. In fact, just to be clear, we've got the next flight, which we're estimating goes in May. Then we have the next 2 flights as we announced before in sequence, those will be in the summer. We are shared, we'll have our first fully passenger loaded revenue-producing flight. We believe that will be a kind of late summer or early fall. And I don't think that's a big split by any sense. That's just being prudent in getting EMI taken care of on our ships here. And so then we've been spending, plus or minus $60 million a quarter. And we're sitting on over $660 million at the close of 2020. So I think that gives a sense we are well capitalized and not in any GAAP challenges there. So hopefully, that gives you a little bit more sense. I think we're in good shape.

Okay. Great. And then maybe just another one. Congratulations on the Italian Air Force work. Are you talking to other Air Forces or other government customers? And can you give us any color on that?

Nothing extra to announce today, although we are in active conversations with people that I think we'll want to do things similar to the Italians. What I think we are seeing from us is we're looking to the flight with Richard Branson to really showcase for the world what our private astronaut experience will be. And that's why we'll be opening up and really pushing our commercial sales strategy following that flight. And the Italian astronaut, which is a revenue-producing flight. We're excited to get into that side and inflection point in our business. As we bring back the kind of footage and experience that we work with, with the Italian Air Force, I think that will also be the demonstrator flight for that slice of our market. And you'll see us push further into, I'll call it, the sales channels following the Italians there. We're very excited for both of those flights and excited for how we'll launch our commercial sales strategies following them.

Your next question comes from Noah Poponak from Goldman Sachs.

This is Dan on for Noah. So we saw that Blue Origin completed another test flight with the New shepperd just over a month ago, peers are getting pretty close to flying folks. How do you guys see the competitive landscape developing here? And then maybe in a world when multiple people are doing this, what do you think is going to be the most important parts of the experiment that -- of the experience that makes folks choose supply with you guys?

So as we said before, I'm excited Blue is doing what they're doing. I think it's going to be important for the space industry as a whole to showcase that people find a space as a normalized thing, aspirational sure, but something that everyone wants to do. And I think the supply is going to be constrained for quite some time and the demand is going to be really, really strong. So I think having multiple players in the market that can show how exciting this is and how transformative it could be is a good thing. With that said, we're really comfortable and very confident in the positioning that we will take. Some of that has to do with the spaceships spaceflight system architecture, and we've talked about that in the past. I also think you're seeing with some of the people we've brought in to help launch the consumer experience, what we'll do with Joe Rohde as our experience architect, we're going to be taking a very customer-focused approach with the private astronaut market in particular. And that will be a journey that culminates in this flight, and I think we will take a very unique, deep and robust approach to that, that will be a very strong competitive advantage for us. And then I believe our spaceflight system is very suited to the other 2 markets that we just talked about there, both the suborbital training and restructuring program, but also what we can do with scientific research. There are a lot of components in the way our system works, the G Force is on it that I think will give us advantage and good abilities in those markets as well. So feel good and also feel good with blue getting in there. This is a business that is going to, I think, really grow and grow and having some people in there that shows commercial strength is really good for the market of total.

Got it. Yes, that's super helpful. Maybe one more. Just -- you guys have spoken to the $1 billion annually in revenue per space board. And to the extent the pace at which you guys can roll out new space ports will dictate how fast you guys can roll out new spaceship. So any -- realistically, any time line on how far away we are from next steps towards actually building new spaceports?

I won't comment on a time line, but I think we can share what are the kind of steps that would go along the way. So first steps are -- we're going to start to maximize out to be sport America and New Mexico. And that's what you see us doing. That's where we're finishing up our spaceflight testing, bringing our SpaceShipThree class of vehicles out and then getting going now on the delta class of vehicles that will start to ramp that up. I don't think we have to get to full efficiency at Spaceport America First Place before we start engaging in other places around the world. But from a sequence standpoint, we'll get some points up on the Board and be flying on a regular basis so that we understand this is really a bit more of scaling our fleet manufacturing. And if I could just build on that for a minute, as we build up this new program, the delta class of vehicles and build our manufacturing capability for that. And as we get going on our new mothership program and have our capability to produce those vehicles up, obviously, we'll be scaling up the fleet in Spaceport America. And as we scale that fleet up, if you think about it, when we then go to our next spaceport, we will have the manufacturing capability in place such that kind of the fleet will be able to arrive at that second spaceport in a much, much fashion than is happening than our first one. So I think that's helpful to know as you think about how our manufacturing facilities team and production pace really grows.

Your next question comes from Oliver Chen from Cowen.

With the experienced architect and also the consumer engagement piece, what factors will you prioritize in terms of the goals there? And what's your hypothesis for what will be some of the earlier innovations that you seek to do there. Also, as we think about CapEx, how are you balancing scaling? And what should we think about for CapEx over the next year as you scale manufacturing and your balancing what you need to do with your own investments versus using flexible arrangements.

Okay. Thanks, Oliver. On the first one, what we're trying to do, and I think when you see us bringing in people like Joe Rohde and Blair Rich and Geoff Goodman. We are going to focus in the private Astro market on making sure that the buildup from the time people sign on with us, up to the moment where they come in, in the first case into New Mexico for intensive training has got them so prepared that when they look back down to the planet and kind of have the gift. They've done everything to be ready for it and their guests and friends and family that come with them have been along the way. So our focus is really making sure the preparation for that hits, and there will be a lot of -- I don't want to kind of get ahead of the creative team because I think that's going to be a lot of fun when they showcase what we're doing here. But if you look at the talents that we're bringing in, it's very authentic storytelling. It's very focused on a transformational journey that will come. And so you'll see those as the themes that we are prioritizing and we're going to look forward to sharing more as those experienced designs and storytelling come away.

As it pertains to CapEx, as I said on earlier question, we're well funded right now. And at the pace of spending we're doing, I think we've got plenty of runway ahead of us. We do plan to increase the fleet of vehicles substantially, both the delta class of spaceships as well as our new mother ship programs. There will be a time, not in the design phase, but as we really move into manufacturing, that we will want to make bigger investments. First thing we're going to make sure is that the return on the investments and the money we put in is really solid. Now we know that's the case as we've been looking and estimating our business plan going forward. But we don't have a need to pull that capital down yet.

With that said, you mentioned, I think, or maybe alluded to it, there's an incredible amount of capacity in the aerospace industry right now. And we will look hard at some of the partnerships that we may be able to take going forward. I think you'll see us looking economically at ways that we can do things ourselves, but also make some really strategic partnerships to accelerate the pace of our fleet development.

Jacqueline, let's take one last question, please.

Your final question is from Peter Skibitski from Alembic Global Advisors.

Michael, first, I applaud you guys for being rigorous with the safety aspect of the program. I think that's great. So congrats there. Just pivoting, can we talk about how much schedule risk remains just from the impact of COVID. I'm kind of wondering if you guys have a sense of how much kind of lost labor hours some productivity you've been suffering due to COVID. And are trends improving there?

We clearly have been less efficient than normal because of COVID. I would say the team has really got this in a managed process and state right now. So while we are slower, then we will be, once kind of back the nations move all the way through and we're able to get people and closer quarters together. I don't think we have any, I'll call it, future concerns or risk about schedule everything about the dates that we've shared today have the COVID impacts built into those from as best we can assess them right now. So I don't see something different there, but I am looking forward to the upside as we all are getting the vaccinations moving across the country and getting going faster from there.

Okay. Okay. And just one follow-up on the talk of increasing the size of the -- excuse me, the number of spaceships, I should say. All that implies, right, the ability to pull in new customers, but you've closed the One Small Step program. So should we expect, after sort of Richard flies, basically kind of a whole new kind of marketing program that really kind of aggressively goes out to recruit new customers?

I think if you look at who we've been bringing in to advise us here, and I take a look at Blair's background and strategy as well as Geoff's, those people are advising us in a way that we will take advantage of the momentum. And I think worldwide interest that will come when Richard Branson does flies with us. And we'll use that moment to really launch the commercial side of our business. So we're being very thoughtful. We expect that to come in at a fairly large-scale event. And we think people are going to be very excited for it. And that will really demonstrate, as we said, the private astronaut market for us, and that's why we're opening sales up following that event. I think the momentum will be really clear in the footage and experience that we put in place will also be clear. Some of the work that we're asking Joe Rhode to help us with will be more developed and designed visually at that point in time, and that will be a really great way to open up sales. We're also then going to use our first revenue flight with the Italian astronauts -- sorry, the Italian Air Force that will come later in the summer or early in the fall. That will also give us a window to open up a new market, and we'll start sales against that new market following the flight with the tide.

This concludes the Q&A session of the call. I'll turn the call over back to Michael Colglazier for closing remarks.

Thanks. First, thanks for all the questions. It's good to catch up with everybody today. Just as we move forward, I want to make sure everybody heard the following 3 areas that are really the primary focus on for the company. The first of these is on fleet readiness. And we're completing our test program. We are launching our commercial strategy around Richard's flight, as we just mentioned, and looking forward to welcoming the Italian Air Force as we formally begin revenue flights. The second focus for the company is around fleet expansion. This is about adding new spaceships and motherships to our fleet and pivoting the organization from an R&D phase to a manufacturing phase that will allow the business to scale over time. And I think you're seeing the additions of these really wonderful leaders that we announced today they're built to drive us forward, #2. And then third, we are developing the astronaut consumer experience. As we just mentioned, we've assembled an incredible team at the top, and they are all hard at work on building out our commercial strategy. So we see really wonderful things coming ahead.

I'd like to thank everybody for joining on today's call. We appreciate your continued interest and support. We look forward to updating you on our progress during the next quarter's call. Thanks so much.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.