Virgin Galactic (NYSE: SPCE) has revealed ambitious plans for its space tourism business during its First Quarter 2024 Earnings Conference Call. CEO Michael Colglazier and CFO Doug Ahrens detailed the company's strategy to ramp up spaceflight operations, with the next spaceflight, Galactic 7, scheduled for June 8. This mission will be the last commercial flight with VSS Unity before the company transitions to its Delta-class spaceships. The expansion of the fleet and scheduled introduction of the first two Delta ships in 2026 are expected to significantly increase flight cadence and revenue, with a projected annual run rate of $450 million.
Key Takeaways
- Virgin Galactic plans to retire VSS Unity after its last flight on June 8, transitioning to Delta-class spaceships.
- The company expects VMS Eve to support three space missions per week, a 50% increase over previous estimates.
- With the Delta ships, Virgin Galactic anticipates a positive operating cash flow and $450 million in annualized revenue within the first year of operation.
- The first two Delta ships are slated for commercial service in 2026, with a ticket price of $600,000 per seat.
- Each operational spaceport is estimated to generate over $1 billion in annual revenue.
- Virgin Galactic will reopen ticket sales in 2025 to maintain a two-year backlog of customers.
Company Outlook
- Virgin Galactic is on track to increase space missions to approximately 125 flights per year with the Delta-class spaceships.
- The company plans to fly 750 astronauts annually, aiming for a contribution margin above 75% per spaceflight.
- Expansion plans include building more Delta ships at $50-60 million each and constructing additional spaceports globally.
- Infrastructure improvements at Spaceport America are underway to support the increased flight volume.
Bearish Highlights
- The peak cash burn for Virgin Galactic is anticipated to occur in 2024.
- There are ongoing legal issues with Boeing (NYSE:BA), although these are not expected to affect the mothership program.
Bullish Highlights
- The company is confident in its growth strategy, expecting significant revenue and cash flow increases with the Delta ships.
- Virgin Galactic's partnership with Virtuoso and direct sales strategy could enhance ticket sales when they resume.
Misses
- No specific misses were discussed in the earnings call.
Q&A Highlights
- The company clarified that 2024 will be the peak burn year with increased CapEx spending in the second half of the year.
- Virgin Galactic's legal position against Boeing is clear, with a counter suit filed, ensuring no impact on the mothership program.
- The majority of ticket sales are expected to be direct, with partnerships like Virtuoso supplementing sales efforts.
Virgin Galactic's detailed plans during their earnings call indicate a strong focus on increasing operational capacity and revenue. With the introduction of the Delta-class spaceships and the expansion of global spaceports, the company is poised for significant growth in the burgeoning space tourism industry. Despite the anticipated peak cash burn in 2024 and ongoing legal challenges, Virgin Galactic appears confident in its financial and operational strategies moving forward.
InvestingPro Insights
Virgin Galactic (NYSE: SPCE) is navigating a landscape of both ambition and uncertainty, as reflected in its financial metrics and analyst expectations. Here are some insights based on real-time data from InvestingPro that provide context to the company's current standing and future prospects:
- The company's market capitalization currently stands at $415.41 million, offering a glimpse into investor valuation amidst its plans for expansion.
- Virgin Galactic's price-to-earnings (P/E) ratio is at -0.67, with an adjusted P/E ratio for the last twelve months as of Q4 2023 at -0.83, signaling that the company is not currently profitable.
- Despite the lack of profitability, Virgin Galactic has shown impressive revenue growth of 194.12% over the last twelve months as of Q4 2023, suggesting potential for future financial success as their plans for space tourism materialize.
InvestingPro Tips highlight a mixed bag of analyst expectations and company performance indicators. Two analysts have revised their earnings upwards for the upcoming period, indicating some optimism in the company's ability to execute its strategy. However, the company is also recognized for its high cash burn rate, which aligns with the company's own admission of 2024 being a peak cash burn year.
As Virgin Galactic prepares to retire VSS Unity and introduce the Delta-class spaceships, it is worth noting that analysts are not anticipating profitability this year and expect a sales decline. This information, coupled with the company's significant return over the last week, underscores the volatility that comes with investing in a company at the frontier of space tourism.
For readers looking to delve deeper into Virgin Galactic's financial health and future outlook, InvestingPro offers a wealth of additional tips. With the coupon code PRONEWS24, you can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to these valuable insights. There are a total of 18 InvestingPro Tips available at https://www.investing.com/pro/SPCE, each offering nuanced perspectives on the company's performance and potential.
Full transcript - Social Capital Hedosophia (SPCE) Q1 2024:
Operator: Good afternoon. My name is Tanya and I will be your conference operator today. At this time, I would like to welcome everyone to Virgin Galactic's First Quarter 2024 Earnings Conference Call. All lines been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn the call over to Eric Cerny, Vice President of Investor Relations. Please go ahead.
Eric Cerny: Thank you. Good afternoon everyone. Welcome to Virgin Galactic's First Quarter 2024 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 our earnings release for a reconciliation of these non-GAAP financial metrics. With that, I'd like to now turn the call over to Michael.
Michael Colglazier: Thanks Eric and good afternoon everyone. On slide 3, you'll see the agenda for today. I'll share several updates about our commercial space line and the progress we're making toward our long-term business objectives. On the immediate horizon is our next spaceflight, Galactic 7, scheduled for June 8. Galactic 7 will be our last commercial flight with VSS Unity, and this will mark an important turning point for Virgin Galactic, and the spaceflight will be a celebratory moment as we reflect on the many successes of our pathfinding first commercial spaceship. The learnings we have built over our last seven spaceflights have enormously benefited our spaceship designs. In addition, we have also learned a great deal about the performance of our mothership, VMS Eve, which has been an incredible asset for the company following the ship's major enhancement program that was completed in 2023. One of the many benefits of using a specialized airplane for our first stage of spaceflight is the frequency of flight operations that can be achieved with an aircraft versus a liquid rocket booster. Using flight and engineering data from Eve service history, our technical operation teams are developing a targeted maintenance plan and operations schedule for Eve. And I'm pleased to share that we now expect VMS Eve to support three space missions per week, a 50% increase over prior base case estimations. This is fantastic news. We expect Eve and our first two Delta ships will be able to execute approximately 125 space flights carrying 750 or so astronauts to space each year. To put that in perspective, Eve and the first two Delta ships will bring more people to space in a single year than the total number of astronauts who have ever journeyed to space to-date. Economically, that equates to roughly $450 million in annualized revenue within the first 12 months following entry into commercial service. Of course, those numbers are expected to grow substantially as we scale our operations by adding new ships and expand across multiple spaceports. During today's call, I'll ask Doug Ahrens, our Chief Financial Officer, to shed more light on our financial operating model, giving you a sense of what our economics are estimated to look like with the initial rollout of our first 2 Delta ships and in the years to follow. With that, let's get started on Slide 4. At Virgin Galactic, nothing is more exciting than seeing a spaceflight in action and witnessing the incredible impact that the journey to space has on our astronauts and their families. On June 8th, we will again watch Unity soar above the planet from Spaceport America, this time with a blended manifest of research and private astronauts. This will be our seventh commercial flight and our 12th spaceflight overall. A research astronaut on board will conduct several human-tended experiments and we will also have several autonomous rack mounted payloads on board in connection with NASA's Flight Opportunities Program and academic institutions. Three private astronauts will also join this flight, two from the US and one from Italy. Given the blended nature of this particular manifest, Galactic 7 is expected to realize an average per-seat price of over $800,000, the highest of our commercial flights flown to date. The value of our space flights for our customers is enormous and we are seeing ongoing strength in our pricing, which we expect will continue as we introduce the Delta ships and grow the business. When we see Unity fly next month, it will be a very exciting and proud moment. Unity has helped to revolutionize commercial human space flight and has served Virgin Galactic incredibly well, demonstrating the safety and repeatability of our spaceflight system while informing the design of our next generation ships. Unity will continue to play a role in training, and the ship will reside in Spaceport America to commemorate its historic role in commercial space travel. As you know, Unity reached the point where it was turning monthly, completing six spaceflights in six months last year, a significant accomplishment for our PathFinder Spaceship. At the same time, we have always known that VMS Eve, a specialized airplane, is able to turn much faster. One of the great advantages of our spaceflight system is this combination of carrier airplane and mated spaceship. In addition to providing the benefit of a runway take-off and landing, the mothership design enables the efficient turnaround capabilities of an aircraft. As we've put our mothership through the paces with regular flights and inspections, Eve has performed brilliantly. As I mentioned at the opening, our technical operations team, using flight and engineering data from Eve Service History, are developing a targeted maintenance plan and operations schedule that supports three space missions per week, a 50% increase over our prior base case estimations. The third flight per week will prove highly beneficial to our business model when we resume commercial service. With the launch of just our first 2 Delta ships, we expect to operate a robust and meaningful business with positive operating cash flow. This is why we have prioritized the cash we already have on hand to bring these ships into service. On a related note, Eve's impressive flight capacity will also serve us well with our next generation mothership program. As we stated last year, we re-sequenced the next mothership program to better manage our capital and spending levels in the near term, and we are continuing to exercise that optionality. We've been pleased with our development approach to our Delta spaceships where Virgin Galactic maintains design authority and leverages the manufacturing and engineering expertise of a few key industry partners. We expect to follow a similar approach with our next mothership program, and we will be shifting our engineering talent towards our next mothership design following the conclusion this summer of the bulk of our Delta spaceship design. As we balance our desire for rapid growth with our spending pace ahead of meaningful revenue, we will target 2028 for delivery of the first of our next-gen motherships. This timing enables us to manage our existing capital confidently, which in turn sets us up for long-term success. Importantly, our growth strategy remains the same, to scale our commercial space travel business, first by adding ships to our fleet in New Mexico, and then expanding to additional spaceports in excellent locations around the globe. Turning to Slide 5, let's talk about progress and tangible milestones we're hitting within our Delta program. As you can see in the chart on Slide 5, there are multiple phases to our Delta program, beginning with design, then moving to tooling, parts fabrication, sub-assemblies, final assemblies, and then on to flight test and commercial service. While sequential, these phases have purposeful overlap throughout the development process. Currently, we're working through the latter part of our design phase, which we expect to wrap up this summer. Along the way, as designs of individual parts are completed, we have been releasing those designs to begin development of the tools that will be used in the parts fabrication process. Similarly, as those initial tools are completed and delivered, our partners at Bell and Carbon are able to start fabricating parts, and they are beginning to accumulate the components that will be necessary for their respective sub-assemblies. The images on slide 6 show some of the tools that have been delivered or are in development, as well as an example of what a finished part looks like within its tooling. This particular part is a door for the landing gear within the wing. Tool delivery and parts fabrication are beginning to accelerate as we work to complete the bulk of the design phase this summer and move more fully into the build phase. Most of you know that Bell is supplying the unique feathering system and flight control surfaces for Delta, while carbon is producing the fuselage and wing components. I met recently with teams from both companies and I'm excited about the emphasis that they put on quality and performance of these key components while aligning with our overall production schedule. In parallel with design, tooling, and parts fabrication, we have been building out the facilities needed for both our test assets and our final assembly factory. The facility in Phoenix that will house our final assembly operation is nearing completion, seen here on slide 7. We expect to take occupancy of the building this summer, and we'll begin setting up the factory floor for assembly and developing our training tools and processes in preparation for the final assembly stage in the first half of 2025. Also on Slide 7, you can see the mock-up of our cabin interior for Delta, which we are using to confirm human factors in addition to fit and finish. We have a host of upgrades we are adding to our Delta cabin interiors and we're looking forward to revealing the full interior design and functionality later this year. You've heard us talk about our test asset called the Iron Bird and the design of the full build out of this system is shown on slide 8. We recently opened the test facility that houses this Iron Bird system, and it's up and running in Irvine near our Southern California headquarters. The Iron Bird allows us to test and verify the operation of dozens of Delta subsystems, including avionics, feather actuation, and pneumatics on the ground and in parallel to the assembly of our ships. Again, the purpose of this system is to provide the widest possible scope of ground testing prior to performing flight tests, making flight tests more streamlined and efficient. Turning to Slide nine regarding schedule. Our overall plan remains intact with commercial service expected to begin with our first 2 Delta ships in 2026. Sharing some color underneath the macro timeline, we have been adapting our detailed schedule to take advantage of opportunities and to react to sub-elements of the plan that need more time for completion. As with most large aerospace programs, we find schedule improvement opportunities while also identifying elements that are extending beyond their originally allotted time durations. And we work to integrate both of these into the overall plan. The key with regard to schedule is to adapt the sequencing and application of resources to ensure the critical path of the program remains on track. At a tactical level, we are realizing schedule improvement to the final assembly timelines as we compare our detailed build plan activities versus our initial estimates. Our final assembly process for Delta is much different and improved versus our prototype work with Unity and Imagine, and we are seeing the benefits of our digital threat approach manufacturing strategy with Bell and Carbon. While the build planning has been positive for our schedule, we have had elements within our design phase extend longer. Net-net, the benefits we have found and the time extensions we have realized have bounced out, and our overall program schedule remains intact, with schedule contingencies and buffers still in place to handle unexpected items that will surely arise over the course of the upcoming work. Our team at Virgin Galactic and our partners at Bell and Carbon are all committed to the success of the program. And the collaboration between the groups as we work through the typical ups and downs of a complex program have been great to witness. I'll now turn the call over to Doug so we can share more detail about the financial operating model and how our first two Delta ships have a meaningful impact on our business in the near term, generating strong operating cash flows even before we fully build out our fleet in New Mexico or expand to additional spaceports. Doug, over to you.
Doug Ahrens: Thank you, Michael. Good afternoon, everyone. Let's go to slide 10. The planned increase in flight cadence for our mothership Eve is a game-changer when the first 2 Delta ships enter commercial service. With steady-state operations, flying Eve 3 times a week means we have the capacity to conduct approximately 125 flights per year, allowing for potential weather or operational inefficiencies. At that pace, with six seats per space flight. We plan to fly 750 astronauts to space annually with our first two Delta ships. Not only does this enable us to serve the existing ticket holders fairly rapidly, but it also enables us to begin serving new customers and higher price points. Applying the recently announced pricing of $600,000 per seat, within a year after Delta Interservice, we expect to be able to achieve a run rate of $450 million annually. This is a sizable business that can be achieved with the mothership we have, plus the addition of the first two Delta-class spaceships. We have shared with you previously that we expect to see contribution margins above 75% for each spaceflight. This is the margin we project after accounting for the variable cost of each flight, such as the rocket motor, fuel, hospitality expenses for the astronauts, et cetera. This contribution margin will be more than enough to cover the fixed costs of running the business, leading to meaningful operating cash flow. This is the first stepping stone in our economic growth story, as these profits can be reinvested to further expand our fleet and drive additional growth. At that stage, we plan to build incremental Delta ships at a recurring cost of $50 million to $60 million each. These are highly accretive assets. The cost of our future ships are so low because the designs are already done. The tools will already have been built. The supply chain will be in place, and our spaceship assembly factory will be up and running. These are the investments we are making right now, and which give us the infrastructure needed to further drive substantial growth. Our intentions are to continue to expand at Spaceport America and then to add more spaceports in other locations around the world. As we've said before, we estimate that each operational spaceport can generate over $1 billion of revenue annually. Turning to slide 11, I want to run through a very high-level recap of our financial results for the first quarter. We generated revenue of $2 million driven by a commercial space flight and future astronaut membership fees. Total operating expenses were $113 million compared to $164 million in the prior year period, primarily driven by lower R&D and SG&A expenses, partly reflective of our restructuring efforts last year. Free cash flow was negative $126 million in the first quarter compared to negative $139 million in the same period last year. Turning to slide 12. Our balance sheet remains strong with $867 million in cash, cash equivalents, and marketable securities. During the first quarter, we generated $7 million in gross proceeds through an at-the-market or ATM equity offering program. Moving to our projections, revenue for the second quarter of 2024 is expected to be approximately $3.5 million. Forecasted free cash flow for the second quarter of 2024 is expected to be in the range of negative $110 million to $120 million. I will now turn the call back over to Michael.
Michael Colglazier: Thanks, Doug. To recap today's call, we are planning to fly the last commercial flight of VSS Unity on June 8, taking a researcher and three private astronauts to space, and delivering an incomparable and life-changing experience to each of them. This will mark our seventh commercial flight and 12th space flight in total, again demonstrating the Virgin Galactic space flight system is safe, reliable, and repeatable with an experience beyond compare. I also shared that we expect our existing mothership will have the capacity to fly up to 3 times a week with the first two Delta ships, or upwards of 125 times a year, supporting a strong revenue business in the first stage of Delta operations. We are making important progress with our Delta suppliers and are seeing steady progress with designs, tooling development, initial parts fabrication, and preparations to open our final assembly factory this summer. Our Delta schedule remains on track for commercial service in 2026. At the same time, we remain committed to our long-term high-growth business model, the scaling operations at Spaceport America with a fleet of four to five spaceships, followed by the creation of fully utilized spaceports and continuous operations from multiple locations around the world. With that, we'll turn to questions. Operator, we're ready to begin the Q&A portion of the call.
Operator: Thank you. [Operator Instructions] Your first question comes from the line of Greg Konrad with Jefferies. Your line is open.
Gregory Konrad: Good evening.
Michael Colglazier: Hi, Greg.
Gregory Konrad: Appreciate the incremental details. Just on the $450 million annual run rate of revenue, it seems like that assumes the $600,000 ticket price. How much backlog of lower tickets are there to kind of cycle through, before you kind of get to that higher price point? Or how should we think about near-term revenue just given some launch pricing?
Doug Ahrens: Yeah, hi, Greg. This is Doug. Yeah, so we have approximately 600, a little more over 600 astronauts at the lower price points and then we have some that were sold at $450,000. So one of the important things we noted is at the flight rate of 125 flights a year, we can fly up to 750 astronauts per year. So that will move through our backlog of customers fairly quickly. So what we gave you was our annualized run rate at about 12 months out after we've moved through the backlog we already have. And then we've applied the ticket pricing that we've recently announced of $600,000 because that's what we're projecting at this time. It's worth noting though that we said that this flight coming up, Galactic 7, the average price per seat is over $800,000. So it's showing the pricing leverage we have. So we think it's a fair number to use to say $600,000 for the future for that point in time.
Gregory Konrad: And then just to confirm, the first two Delta class spaceships roll-out at the same time or enter commercial at the same time and then you know appreciated the detail around the mothership 2028. How much does that become a pacing item, just given it seems like maybe you'll be able to exceed that from a Delta standpoint in 2027?
Michael Colglazier: Hey, Greg, it's Michael. So, Eve, which is excellent, still will remain the bottleneck against the capacity of the Delta ships. So, when we bring a second mothership out, at that point, those two Delta ships would become the bottleneck. So we'd want to pair the arrival of that new mothership with a fast follow with additional Delta ships, for sure. And we kind of keep that balanced as we grow the fleet up. But with Eve, three times a week, the way we can do that allows, some weeks we'll have a back-to-back flight, then there'll be a number where we'll run more than three a week. There'll be other weeks where we will run less than three a week because we're doing a regularly scheduled maintenance piece. Within that operation, there may be opportunity to go up above where we are, but we feel good with what we're stating today at 125 by the time we factor weather days and rain days and efficiencies that will come out. So that's probably a good gate until we get to 2028, that 125 flights as a kind of planning target for your modeling. And then it really opens up as we add additional motherships.
Gregory Konrad: So just a quick follow-up to that. So should we assume, not assume, the third Delta enter service until 2028 then?
Michael Colglazier: Yeah, we would match the third Delta ship with the addition of the next mothership.
Gregory Konrad: Thank you.
Michael Colglazier: You're welcome.
Operator: Your next question comes from the line of Myles Walton with Wolfe Research. Your line is open.
Myles Walton: Thanks, good evening. Michael, the way you're describing it, you're going to actually burn through your backlog of customers reasonably quickly. So I'm curious, what is your thought process on reopening initially the sales window? And also just from a running the business perspective how do you want to run with a backlog such that you can -- you sort of run to a predictable pace as opposed to something else and also provide your flying customers with enough lead time for them to plan around their trips.
Michael Colglazier: Right. Thanks for the question, Myles. Consistently, I think it's helpful to have on both the customer side and the business side a two-year run. And the customer side that first year is really recognizing the journey that this spaceflight is. It's not just the up and down moment by any sense. It is a journey and we will build people through that journey from the moment they sign on. I think once you go past two years to three years that journey starts to get a little long for people and they are getting antsy. But two years I think is appropriate and then we'd like to give people in a steady state basis around 12 months of notice, it says okay your flights going to be 12 months from now in that month, so people can start to prepare, schedules and friends and family who will come. So if you look at our existing backlog of customers with us starting in 2026, that means within 2026 and 2027, we should really process through the existing folks. So by the time we get to 2028, especially when we have that next mothership, if we're going to have a two-year backlog in front of that, we want everybody kind of on board by the beginning of 2026. So just backing that up, you'll see us start the sales process within the 2025 period. We won't wait till the end of 2025 to do that because we'd like to have another years of backlog in place by the time we start 2026. And we're balancing getting people on board in time to have, I said, both the journey for them as well as a nice comfortable backlog for us to focus on executing our operations. At the same time, if we try to bring people in too early, I think we lose some of the pricing pressure that we're obviously been demonstrating with these last flights. So we want to keep a balance there so that we maintain the power of pricing that befits the quality of the experience we're delivering, but still allow both our customers and us for planning. So hopefully that two-year window explains that.
Myles Walton: That does, yeah, That's a perfect explanation. Maybe one on the details of the accounting. CapEx, I know you were looking for $40 million to $50 million in the quarter. It was light, but R&D was heavy. I'm going to guess that that was because you didn't transition fully to capitalizing versus R&D. Is that the way to read it?
Michael Colglazier: Right, yeah, it's just an accounting convention of when we flip the switch. But you'll see that start to ramp up this year, especially in the second half. So you'll start to see majority capex. It'll start to exceed OpEx. As we wrap up the design work here, and we're building more tooling, and then parts fabrication happens, you'll see the shift take place.
Myles Walton: Okay, and sorry, just one last one, which is if you will be cycling through a thousand customers a year in 2028 and their constituencies, what kind of physical plant improvement and timeline for investment are you going to have to make within Spaceport America on the experiential side?
Michael Colglazier: That's a great question. The plant at Spaceport America, for those who haven't been there, we have one major hanger that can handle our operations for the mothership and a number of spaceships. As we grow and as we bring in another mothership, we do expect to work with the Space Board of New Mexico and add what we would call kind of a launch hanger. That would be an additional hanger primarily for the mated pair of spaceship and mothership. And that hanger would also be where we do the maintenance on the motherships. So we'll add an additional hangar there. It's not the architectural statement of what's the primary hangar base in New Mexico. That building is not only a hangar, it's our customer operations, it's training, all those things. So it's an airplane hangar that needs to be built, So that would be 1 of the pieces of infrastructure that's there. The other piece will come in the training facilities that are there. As we start to fly, really even with these two Delta ships, and we're flying more than once a week, we will break training out into an additional training facility and use the spaceport and the third floor where we have been doing training that will really become kind of a launch day focus and will bring a training facility separately. So we have choices about whether to build those [out or to rent] (ph) facilities for that, but we expect those to be in the Las Cruces, New Mexico area as well. So those are the two, I'm looking over to Doug if there's anything other from a major investment, but an aircraft hangar as we scale and training facilities.
Myles Walton: Thank you.
Michael Colglazier: You’re welcome.
Operator: [Operator Instructions] Your next question comes from the line of Michael Leshock with KeyBanc. Your line is open.
Michael Leshock: Hey, good afternoon.
Michael Colglazier: Hi, Mike.
Michael Leshock: I think that you've previously said 2024 is kind of the peak cash burn year in support of Delta. And then looking at your 2Q guided implied somewhere around $130 million quarterly burn rate give or take for 3Q and 4Q each. So it likely would be a step up in the burn sequentially at some point this year if 2024 is the peak burn year. So is that still your view and do you have any line of sight when you expect to see the peak quarterly cash burn just assuming Delta class schedule progresses as expected.
Michael Colglazier: Yeah, thanks Mike. Yeah, we do expect the peak burn to be here in 2024. That's still the case. So you'll see a ramp. We haven't guided specifically beyond Q2, but we do see a trend coming for Q3 and Q4 that we would be increasing our spending on CapEx, as I mentioned previously, because we're still going to be going through the tooling completion and moving heavily into parts fabrication. So the peak is still to come, but in this year for Delta.
Michael Leshock: Okay. And then I think you said you're targeting 2028 for the second mothership, which should get over 125 flights per year on those first 2 Delta ships. Just wondering if the ongoing legal issues with Boeing have the potential to impact any plans on the mothership front or if you could share any update there? Thanks.
Michael Colglazier: Sure. The very short answer is no. The issues with Boeing are not material and are not going to be impacting how we progress our mothership program. Our position with Boeing is very clear and if you haven't had a chance, there's a very thorough overview of that in the counter suit that we put out. But in short, our positions, we received unacceptable work from Boeing. The intellectual property that was in debate is either owned outright or duly licensed by us and, you know, all the elements of that are laid out in that case. With that said, again, it's not a material piece. It will not be a distraction for us in any way as we move forward with our mothership program. But it's a good read if you want to read the background there.
Michael Leshock: Yeah, I did. It was surprising to see for me. Okay, and then I think just lastly for me, previously you allocated a portion of ticket sales to Virtuoso. Did they sell their portion fully and is that something, a partnership that you're going to continue to leverage when you open up ticket sales again?
Michael Colglazier: Virtuoso has not fully used their allocation. Like us, they've kind of -- we've pulled back on the sales piece until we get closer in. I think the opportunity for companies like Virtuoso where they have a very healthy and active base in particular in adventure travel and high-end travel is a relevant potential channel for us. I clearly will be doing a lot direct. But I do think there's help in -- as this becomes known and normal, we had a huge deal just in this last year of six flights in six months and that seemed like a huge deal. We're going to show up in to the 2026 and start operations on a pace of 125 human space flights a year and it's going to be completely different idea of what's going on here. The [word] (ph) will be out, people will be known. And at that place, wide distribution and access to people is sometimes helpful. And so I think we'll continue to test efforts like we've done with Virtuoso, but I do expect the bulk will probably be direct sales.
Michael Leshock: Got it. Thanks guys.
Michael Colglazier: Thank you Mike.
Operator: This concludes the Q&A session as well as today's conference. We thank you for joining, you may now disconnect your lines.
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