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Thank you. I will now turn the call over to Eric Cerny, Vice President of Investor Relations.

Thank you. Good afternoon, everyone. Welcome to Virgin Galactic's 1st quarter 2026 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. I would now like to turn the call over to our CEO, Michael Colglazier, who will begin on page 3 of our presentation.

Thanks, Eric. Good afternoon, everyone. It's been a quick month and a half since our last earnings call. I'm happy to share we've been advancing the many efforts across the company in line with our plans and prior guidance. We delivered the first of our new spaceships from our assembly hangar to our test and launch hangar. Ground testing of that spaceship is underway. We remain on track to commence flight testing in Q3 and space flight in Q4. With commercial space flight operations continuing to draw closer on the horizon, we've accelerated efforts across the company to prepare for the ramp of activity. We're hiring our next group of world-class spaceship pilots as we prepare for flight test and ongoing space flight operations.

We've provided our roughly 650 founding astronauts, who make up roughly a year's worth of advanced bookings, with expected flight windows in 2027 and early 2028. We've received excellent reception and early booking response to the newly priced space flight expeditions we released to the market in April, and we've begun construction of a rocket motor assembly line in Phoenix, which is expected to be operational in Q4. In addition, we've also managed the financial strength of the company. Spending continues to decline quarter by quarter. Debt retirements are being made on or ahead of schedule, and cash balances are being maintained at appropriate levels as we work through the final quarters of our pre-revenue phase.

Our agenda today will be relatively light, reflecting both the short term since our Q4 earnings call and the consistency of progress against our prior statements and objectives. Turning to page 4. Since our last call, we finished the major structural task with our first spaceship, and we were all pleased to reach the weight on wheels milestone in April as we moved the ship from our assembly hangar to our test and launch hangar, which is co-located on the grounds of our Phoenix campus. Outstanding work by our entire team. Structural assembly continues to progress as planned for both our static test article and our second spaceship, and the images on page 5 showcase some of the larger parts of our static test article coming together. As you saw during the build of our first spaceship, the final assembly process moved quite rapidly.

This rapid assembly process continues with the static test article, which, as a reminder, is built for extensive use in our testing program, but which will not be flying. Our second operational spaceship will follow the static test article, and this ship has begun fabrication. We will again leverage the same rapid assembly process for the second spaceship, and we expect the second ship will enter service between late Q4 2026 and early Q1 2027. This timing keeps us on track with our plans to substantially increase the number of space flights per month during the first two quarters of 2027. Turning to page 6 to talk about our ground test efforts. At a technical level, our ground test approach is comprehensive and takes advantage of industry best practices with testing progressing in parallel across multiple locations.

We've made purposeful changes in our approach to ground testing versus the process that was used with our original spaceship, Unity, and the upfront investments we made in this area are now paying off. We purposely invested in off-ship testing infrastructure to significantly increase the number of systems test that can be accomplished prior to and during the final spaceship assembly. Our safety and test center in Irvine, California, has been running parts of our ground test campaign for many months. The image on this page showcases our Iron Bird test platform, one of the many off-ship infrastructure investments we've made. These investments have enabled us to complete large amounts of the ground test program in dedicated facilities with purpose-built test rigs and equipment.

This parallel off-ship testing activity reduces expected time spans for the on-ship ground test elements, with much of the on-ship testing focused on verification of systems installations rather than first-time checkouts of hardware. At a practical level, this means we can now advance our new spaceships from structural assembly through on-ship ground testing and end-of-flight test in much less time than what was required with our VSS Unity, while having a more robust ground test program overall. Moving to page 7. I hope you've all seen our recently released episode of We Build Spaceships, which provides a great overview of our ground testing efforts. The link to the video is on this page, and I'll summarize by highlighting the various facilities where this important work is taking place. First, at our Safety and Test Center in Irvine, we continue to conduct key qualification tests of our hardware.

Qualification testing puts the hardware components through the paces of the conditions they see in flight, including temperature and vibration, as well as extreme conditions they can be subject to. This past quarter, we completed dozens of component qualifications, including our central computer. This computer is the heart of the digital flight control system, which translates pilot inputs into commands to move the flight control surfaces at the back of the spaceship. We are also testing systems on our Iron Bird, a test platform that allows full system-level testing of how hardware responds in flight. Second, at the Southwest Research Institute in San Antonio, Texas, we've completed testing of our flight control surfaces under loaded flight conditions, and we're now preparing to structurally test our wing, fuselage, and feather subassemblies.

These tests are part of our overall structural testing effort, which is conducted to verify that our as-built configurations meet or exceed the design standards we have set out to achieve. These tests also allow detailed correlation of the various analytical models that we use to predict behaviors in flight test and commercial service. Third, our team continues to qualify various software and avionics systems at our engineering headquarters in Orange County, California, and at vendor facilities across the country. Software plays a vital role in our spaceship, especially in our new flight control architecture, and we are using industry best practices to ensure our code is ready and safe.

Fourth, in the Test and Launch Center in Phoenix, our team is now completing installation of many electrical and mechanical systems that are embedded inside the ship, while also conducting a range of on-ship production acceptance tests on systems that have been put in place, verifying the quality of each system as it's installed. In June, the team will begin integrated vehicle ground testing, which is used to check out complete end-to-end performance of the spaceship. Turning to page 8, I'd like to talk briefly about our flight test program. When our ground tests in Phoenix are complete, we'll carry the new spaceship to Spaceport America using our launch vehicle, Eve. Once we are in New Mexico, we will start the glide flight phase of testing. This will be akin to the glide testing we did with our Unity ship.

However, the duration will be substantially shorter given the faster turn times of our new Delta-class vehicles. We continue to expect the flight test phase to commence with glide test in Q3, progressing to rocket-powered flights in Q4. As I mentioned on our last call, one of the many ways we are preparing for the first flight test of our new spaceship is by bringing our prototype spaceship, Unity, back for an encore performance. Unity's glide characteristics and energy management profile provide an outstanding real-world proxy, which, in addition to extensive simulator training, will prepare our pilots to put our new spaceships through the required flight test points. This image from earlier this week shows Unity in its pre-flight configuration with our launch vehicle, Eve. We are expecting Unity to be back in the skies later this month for the first of several glide flights above Spaceport America.

Moving to page 9. Our key schedule milestone dates remain consistent with the expectations we shared during our last earnings call, which is great news. As those who track the aerospace industry know, keeping forward momentum in line with expectations is notoriously challenging with these complex programs, and our ability to maintain consistent progress against our schedule is due to the massive effort, ingenuity, and nimble adaptations from our Virgin Galactic team. Great job to all of you at VG who are listening in. Page 10 highlights some of our preparations for commercial spaceflight operations. Talent is key to our business, most of our hiring needed for commercial spaceflight operations will come in the third and fourth quarters as we continue to manage our costs prudently. A few key roles will be needed earlier, including the expansion of our truly world-class pilot corps.

The licensing process for our new spaceships is well underway, and we are working closely with the FAA to ensure all elements are submitted according to plan and the licensing process moves ahead accordingly. We anticipate the various elements associated with the new Part 450 licensing regime will continue throughout the year, and we expect to receive our license prior to our first powered flight in Q4. We have approximately 650 founding astronauts booked for Virgin Galactic spaceflight expeditions. They are an amazing group of people, and collectively, they represent around a year of advanced bookings for the business, which is a tremendous asset as we begin operations.

With clarity on flight windows growing substantially as we near the start of commercial spaceflight operations, we have given each of our founding astronauts a rough expectation of their flight window via a newly introduced astronaut portal. We expect the majority of our founding astronauts will complete their spaceflight expedition during 2027, with the remainder flying to space in the first half of 2028. We recently opened a limited number of bookings for Virgin Galactic spaceflight expeditions, each priced at $750,000, with flight dates expected in mid-2028. The response has been strong and global in nature, and we've received qualified inquiries from customers across more than 20 countries. We're now actively progressing through the booking process with individuals, research organizations, and government agencies.

As a reminder, booking a space flight expedition is a deliberate process that typically unfolds across several months as customers move from initial engagement to in-depth conversations, continuing through a detailed review of terms and conditions, and ultimately to the booking of their expedition. This process is consistent with other high consideration, high value experiences. Many of the conversations we are having are moving to the contracting phase more quickly than we would typically expect, and we are very encouraged by the pace we're seeing. We've secured deposits for a meaningful portion of the available seats at this price point, and I expect we will close this limited tranche of space flight expeditions at the $750,000 price during our glide flight program in Q3.

As we shared previously, once this tranche is allocated, we will pause new bookings and begin onboarding this next cohort of astronauts. Following that, we plan to open a subsequent tranche, likely at a higher price point. Finally, before I hand the call over to Doug, I am happy to share that construction has begun on our new rocket motor assembly line located adjacent to our spaceship assembly hangars at our Phoenix campus. We have a substantial number of motors already in inventory that will carry us through flight test and into the start of commercial space flight operations, but we plan to ensure a steady, ongoing supply to support our growing space flight cadence. In this regard, we plan to have the new rocket motor assembly line operational in Q4.

This timing aligns with the completion of our second spaceship, allowing us to shift our talented team in Phoenix from spaceship assembly to rocket motor assembly without missing a beat. Doug, let me pass the call over to you for the financial update.

Thanks, Michael. I'll start with our financial results for the quarter just ended and follow with a few details about our recent capital market activities. I'll provide more color on our projected cash flows and the P&L as we move into commercial spaceflight operations and scale the business. With regard to our recent financial results and our projections, you'll notice a trend of continuous improvement in free cash flow because the peak spending for spaceship development is behind us. We've been moving through spaceship assembly and into testing, which results in a progressively smaller cost footprint. Moving to page 11. In the first quarter of 2026, we generated revenue of $200,000 from access fees related to future astronauts. Total operating expenses for the first quarter were $66 million, a 26% reduction from $89 million in the prior year period.

This change reflects a continued shift from R&D to capital investments in production of our spaceships and lower overall spend as we move through the assembly phase of the first spaceships. Our first quarter net loss improved by 23% to $65 million compared to $84 million in the prior year period. Adjusted EBITDA improved by 24% to negative $55 million in the first quarter compared to negative $72 million in the prior year period. Capital expenditures were $40 million, down from $46 million in the prior year period. Free cash flow was negative $93 million in the first quarter, a 23% improvement compared to the prior year period. Moving to page 12.

We ended the first quarter with $251 million in cash equivalents, and marketable securities, which includes $11 million in gross proceeds raised through our At the Market or ATM equity offering program. Not included in that cash balance is $52 million in gross proceeds from the ATM during the month of April. On April 30, we announced the potential redemption of $10 million of 2028 first lien notes through an exchange for shares of common stock. This redemption is being made ahead of schedule and reduces the debt payments due in September of this year. This is a great example of the flexibility built into our capital realignment transactions that we completed last December, and which we discussed during our last earnings call. We recognize that there's dilution caused by the ATM program and debt redemption I just described.

However, we expect the dilutive impact will be far outweighed by the value created from assets being built with this capital. These assets are recorded in our property plant and equipment on the balance sheet, which totals $427 million at the end of the first quarter. Moving to our projections. Revenue for the second quarter of 2026 is expected to be approximately $100,000 for future astronaut access fees. Free cash flow for the second quarter of 2026 is expected to be in the range of negative $87 million to $92 million, with slightly less than half being for CapEx as we continue to prepare our spaceships for commercial service. We anticipate that free cash flow will continue to improve modestly in the third quarter of 2026.

We will be growing various functions within spaceflight operations during flight test and in preparation for the start of commercial service, but we expect this to be more than offset by larger reductions in capital expenditures as spaceship development progresses. During the fourth quarter of 2026, we expect to see continued improvement in spending and also the beginning of revenue for spaceflight operations. We have been presenting the annualized business model shown on page 13 during several of our recent earnings calls. By the fourth quarter of this year, we expect operating expense, including variable spaceflight costs, to be in the quarterly range of $70 million-$80 million. Notably, this level of quarterly spending aligns with the annualized view of the model as shown in the first column on this page.

Our cost footprint is expected to be reduced to this level by the fourth quarter because we are progressing from spaceship manufacturing to the launch of commercial spaceflight operations. Next, I want to highlight the powerful unit economics, by which I mean the economics of a single flight, that are now possible given the dramatic reductions in the cost of human spaceflight driven by our highly reusable system. Most importantly, reusability drives the cost of each flight down dramatically. This, combined with the high value of our spaceflight experience, which supports our pricing model, results in a high contribution margin per flight. In other words, the revenue from each flight can far exceed the variable cost for that flight. Given the low unit cost structure, even at historical $200,000 price points, each flight is expected to generate a positive contribution margin.

For illustrative purposes in the economic model on page 13, at an average price of $600,000 per astronaut, we're expecting a very healthy contribution margin of over 80%. As we scale operations and given the baseline cost structures shown on this model, we begin to see the tremendous flow through of profit to the bottom line. Now let's circle back to expectations for early commercial operations. In January 2027, we expect to fly four flights per month and reach 8 flights per month by Q2. Ahead of this, our cadence of space flights in Q4 of this year will be intentionally constrained to allow time for learning between flights. As we get closer to the launch of commercial spaceflight operations, we'll provide more information on the expected dates for the first flights.

Additionally, we are modeling the majority of our early flights with average revenue per astronaut at $200,000. In the fourth quarter, cash receipts are expected to exceed revenue as we begin to collect customer payments ahead of flights planned for early 2027. Given the strength in our balance sheet, our declining spending, and our unit economics, our liquidity supports our transition to commercial spaceflight operations. Moving beyond 2026, we expect to achieve modest quarterly positive cash flow within 2027 as we fly a large percentage of astronauts with the reservations that were historically sold at lower prices. We forecast that we will achieve the adjusted EBITDA shown in the first column of the business model on page 13 on an annualized basis sometime during 2028 as the average ticket price improves. With that, I'll turn it back over to Michael.

Thanks, Doug. Finishing up on page 14 with a picture of our 1st production spaceship in the test and launch hangar. Every time I view our spaceships, I marvel at both the engineering and artistry that underpin everything about Virgin Galactic's spaceflight system. Like all spacecraft built to handle the rigors of leaving and returning to the Earth's atmosphere, our spaceships are powerful, incredibly strong, durable, and robust. Distinctively, our spaceships are stunning achievements of industrial design with a grace, elegance, and flat-out cool factor that is unique to Virgin Galactic. Just wait until you see this ship with its new livery. We're proud of our progress, and we've opened up tours of the spaceship factory for founding astronauts, prospective customers, and invited guests. We expect to christen this 1st ship and send it out to Spaceport America around the time of our next earnings call.

We're moving with momentum, and it's awesome to see. Let's open the call for questions.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via speakerphone in your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. Our first question comes from the line of Oliver Chen with TD Cowen. Your line is open.

Hi, Michael and Doug. Nice to see all the progress. Regarding the early booking responses, Michael, that you spoke to and the encouragement there, what's the nature of what you've seen and also the implication for decisions on pricing? The second ship is pretty exciting as well. What have you learned from the first ship that will bode well for the process and the second ship and then future ships perhaps? Doug, on the ATM program, which helps fund the ROIC accretive, you know, actions, what should we know about your use of that program going forward and/or the framework? Thank you.

Thanks, Oliver. I'll start it out. It's Michael here. I think the nature of who we're talking to is really interesting and encouraging. We have, you know, I'd say some of the people that are more prevalent in our founding astronauts, those early 650, people who have always thought about going to space, always had the dream of going to space and wanting to do it. We see some of those. We see people who want to fly with their family members, parents or children. We're seeing people coming and saying, "I want to do with this with my friends. I wanna do this as a buddy trip. I wanna do this as a girls trip." We're seeing people who are coming in and saying, "I have research that I've been wanting to do.

How do I connect with your research program?" We have governments that are, you know, not governments like the U.S. or China or Russia that are doing their own space programs, but governments who probably can't do that, but have an interest in their own space program reaching out to us. We have people who are more like corporate charters and wanting to book for a variety of corporate reasons. The diversity, I think is fantastic, and I'm very heartened by that. The general shift, I'd say, in tone from, you know, six years ago when I started of, "Oh, why would you think about going to space?" We haven't seen that.

You know, I've been off in London and New York for, I'll call it a connecting with potential customer trips. The tone is, "This is amazing." I'm so excited by this. Then you see a range of people, right? Some people are like, "I wanna do this in a couple of years. I wanna do this on my ex milestone birthday." Some are like, "I just wanna go do this right now." We send them over to our sales team. Hopefully that gives you a little bit of sense of the nature of the people we're talking to. Pricing, we will continue to just have the same purposeful pricing strategy. The value has to massively exceed the price in which we charge.

That's our first premise, we believe it's doing that and more so. We expect we'll retire this first tranche at $750 and open up the next one higher. I don't think we're ready to kind of say where higher at this stage, I do expect that it will be higher. We'll probably continue that for a couple more clicks and then steady out somewhere. Hopefully that gives you some sense on the pricing. I'll talk a bit on, Doug, on the first ship to the second, hand it to you. There's a sizable shift between the first ship. The second set of structural parts are going into our static test article, the second spaceship is, you know, kind of the third one through our production line.

One of the big things I'm noticing is the consistency in which the carbon parts that we're manufacturing are coming out as we get to our second spaceship. We've kind of figured out the recipe as we used to describe it, right? We've licked the manufacturing problems there, and that means they kind of come out clean, and they're easy for us to take in and move forward. That's the primary piece. The first assembly we went through was super smooth because we had used a determinant assembly process all the way through everything we'd done. At the same time, the first time through, you find the little things.

You know, small things that kind of clash when you try to put two things together and you didn't quite expect something that kind of is in the way and you had to kind of move it around. That's all cleaned up now. The net of all that is going to the 2nd ship, we expect it to come in functionally more cheaply in its set of parts because we won't have to redo a carbon part. They're coming out more consistently. The process will be more swift in the assembly, the net of that means it's quicker and less costly to build. We expect that will continue probably more so as we expand our fleet over time. Doug?

Thanks for the question, Oliver. Regarding the ATM and our plans going forward. We've used the majority of it, right? It was a $300 million program. We have $87 million left on it's been a successful program. That's built up our cash balance that really helps us, you know, get through this transition phase to the start of commercial service. Really going forward, what we're looking for is, you know, it provides additional growth capital for us. Example was, you know, we just expanded our rocket motor or are expanding our rocket motor factory capacity so we can have a larger volume of motors running through for growth. It also provides capital for us to continue working on a launch vehicle program.

Those are good opportunities for additional growth capital. It's there for us if we need it. You know, I just wanna point you back to these unit economics we were talking about earlier and what we're headed for. You know, we're getting into a phase now where we've become stabilized and self-sufficient with the operations of the company so that, you know, drives a less reliance on things like ATMs going forward. That's positive as we get to commercial service.

Yeah.

Okay. Thank you. There's been a lot of general enthusiasm with SpaceX and space as large. You have a lot of partnerships or institutional ideas around governments and space ports as well. What are your thoughts on the evolution of more recurring revenue and also the nature of how you're different from SpaceX and what this may mean for your strategies or the industry at large with space being a big idea?

I'll start at the end, Oliver. Space is a big idea, has been and is getting a lot of momentum. You're seeing more of the ETFs coming out around space. I think that's positive and well merited. Obviously a lot of energy around the SpaceX IPO as that seems to be coming forward. I think that will continue as you see a lot of articles to just generate more innovation within commercial space. A lot of good things coming as SpaceX continues to mature and goes forward. I think we will benefit from that. You talked about recurring revenue. I assume you're talking like things for us and where are we different. Well, one thing is we are clearly focused in this first business model on human spaceflight.

That's part of SpaceX's offering. Theirs, you know, starts at $50 million up. Ours is starting at $750,000. You know, close to a couple orders of magnitude less in cost. You know, that's obviously a focus and all of our focus on the experiential benefits are there. We'll take that as we talk to multiple spaceports. We've built all the infrastructure, now those fixed costs are behind us, the non-recurring engineering's behind us, now we're looking to scale that out. We continue, we've talked publicly about Italy. We continue to be working with our Italian partners on how and when we want to bring that spaceport forward, we continue with additional countries, I'd say, very excited about the potential to bring spaceports in additional countries.

That all just leverages all the infrastructure we've put in, and you start to see the flow-through economics that Doug talked about with that. There's also a lot of other interesting things as, you know, governments, U.S. government in particular, but other governments look at what can be done with space. I think people are starting to recognize the frequency with which we will be going through the atmosphere and the ways we do has a lot of potential. One of the things we're going to be exploring are, what things we can do as almost, you know, ride-along efforts, going forward. That is intriguing to us.

I think we shared in the past that we are qualified under the Golden Dome IDIQ, and so we continue to look at ways in which we can be supportive of the government in that regard. I really think you're going to see expansion in the types of people and markets that can use these space vehicles going forward. Hopefully that gives you a little bit of context to that on that.

Yeah, very helpful. Thanks. Best regards.

Thanks, Oliver.

Our next question comes from the line of Greg Konrad with Jefferies. Your line is open.

Good evening.

Hey, Greg.

Maybe just start with one clarification question. I think you mentioned $200K. Was that per passenger, and how long do you expect that to be at that price level, given I think in the past you talked about potentially filtering in some shorter cycle customers at a higher price point?

Thanks, Greg. This is Doug. We do have a lot of early, you know, reservations that were priced at $200,000 to $250,000, and these were sold years ago. You know, we're of course prioritizing that for these, you know, customers that have been with us for a long time. You'll see those, you know, at the front end of this because that's, you know, kind of on a FIFO basis. That's how that lands. We do have opportunities to mix in other prices. We did specifically talk about an opportunity for some customers to come in earlier to be one of the first 1,000 astronauts to space. You know, that comes at a premium price.

That is a program as an example of how people can be mixed in at earlier price points or earlier flights. That's something that would tend to filter in. Then you start to see other ticket prices come in. We had other tickets at $450, then $600, and now $750. You'll start to see those blend in as the year goes on. It's as those blend and the sequencing. That's TBD about how that will happen. We just want to kind of set expectations at the very beginning.

You know, you'll see the lower tickets and then some of those ones that are moving up in the line, you know, to be in the first 1,000, they've got to be in the first two quarters of the year is if you look at our flight rate. That kind of tells you about when you'd see those start mixing in, and that will start elevating our price points.

I think, you know, in terms of like the new sales at $750K, I think you talked about maybe that coming in mid 2028 if I heard correctly. I mean, if we think about that target base model that you've laid out, you know, assuming $600K per ticket, you know, as you kind of get to that higher price point, I mean, does anything change on the cost side or, you know, should we think of that as largely incremental to that base margin that you laid out on the initial fleet?

Right. That's all going to be incremental because the cost here would not change. As you pointed out, this model reflects average ticket price of $600,000. We put that in there a while ago. As prices go above that level, that's all incremental and flows right through to the bottom line and adds to the EBITDA.

I'll leave it at two. Thank you.

Thanks, Greg Konrad.

Next question comes from the line of Myles Walton with Wolfe Research. Your line is open.

Thanks. Good evening.

Mike, I think-- Michael, I think you talked about the Part 450 licensing regime, and I know that just went effective. How different is the licensing regime going forward? How much more effort do you have to obtain that license? Then as you ramp flights, could you remind us of basically the ongoing, recurring licensing? Is there any reason to think that that will be, you know, an obstacle to getting up to pace?

Thanks, Myles. I think great news with the Part 450 work. You know, we've obviously been working with the FAA, you know, for quite a while with this. We have turned in our application for our space flight operator's license, and that's been accepted. The FAA's received our application. We've got a letter back that's been accepted. That has a fairly structured process and an understood timeline going forward. That process and timeline we all expect to conclude before we go to space. That's I think we're feeling very confident in our approach to getting our space flight operator's license in that regard. We have a very focused team that's been working closely with the FAA all along.

Of course, you know, Mike Moses is our point on all of that and is very well engaged. You are well aware, as we always talk, each of our ships are experimental in nature. They must have experimental airworthiness certificates. Eve, our launch vehicle, has that. Our first Delta ship, you know, has to be airworthy to get that certificate, and that happens after we finish the construction and testing. We expect our first Delta ship will get its experimental airworthiness certificate just ahead of us taking it over to Spaceport America before we kind of do a captive carry flight and the glide flights. Those experimental airworthiness certificates are on recurring renewals. We've been doing that with Unity and Eve all along.

We expect that will continue. Hopefully that answers your question on the licensing piece.

Yeah. No, that's great.

Very good.

Oh, go ahead.

Yeah, no, please. If you could remind me on the ramp question.

I was just wondering from a regulatory perspective, as you ramp, is there any ongoing recurring approvals you're going to need that, you know, that in any way are risk to the recurring nature of flight? Obviously four months in January is not as quick as you want to be, but it's heck of a lot quicker than what you've ever done.

Yeah, I don't see something in the licensing effort, of course. We expect to be, you know, completely close with the FAA, just like we did with all of our Unity flights throughout here. Nothing I would expect to see that would change in the basis. You know, our ability to turn the ships wasn't constrained by the FAA or licensing. It was our own inspections and maintenance process, and that's what's so different with these new ships. I don't think there's a licensing complication that we're expecting there. We will be partnering with them on every flight as we go.

Okay, great. Just one last one, if I could. Have you reached out to the administration from a perspective of investment? Obviously they have expressed an interest in lots of different areas. Your emerging area might be an interest of them as well, and just curious, more from the investment side if there's any conversation. Thanks.

We are definitely in connection with the administration, especially some of the DOD departments as you'd expect, both in space, Air Force, AFRL, things like that. I think there's interest in lots of areas. Now you used the word investment. You know, sometimes investment can come from sponsoring things that can help us add capabilities or help us expand capacity versus say a direct investment in the company. But there's also, you know, conversations, you know, with I'll call it other groups that would also be interested in partnering with us that we could always look to both for commercial business but also investment to help us expand and grow, you know, more from a growth capital standpoint. Nothing to share or announce here.

But I do think as we are now getting very practical and real, the assets themselves are visible, tangible. You can see them. The dates are, you know, close in on the horizon. It gives us a wider opportunity to talk about what else might we be able to do with these assets, who might we be able to do them for, and I think exciting to find value. I think we shared last time, we have a new member of our executive team, Megan Prichard came in as our Chief Growth Officer. A part of Megan's team obviously will be focused on the sales of spaceflight expeditions. But a part of it is broader growth profile that would include new business and government growth like you're referring to.

Thanks, Michael.

Thanks, Myles.

Again, if you would like to ask a question, press star then the number one on your telephone keypad. We do have our last question comes from the line of Kristine Liwag with Morgan Stanley. Your line is open.

Hey, guys. This is Gabby on for Kristine. Good evening, and thanks for taking the question. Last quarter you shared encouraging progress on the Italy spaceport opportunity, you know, including work around airspace, potential flight paths, and infrastructure requirements. Could you provide an update on where that study stands today and what the key next steps are?

Thanks, Gabby. I'll talk about Italy and then a bit more broadly about second spaceports. The work continues. The main part of the effort we had done with ENAC, I'll call it similarly the FAA version for Italy, that structurally has been completed. We understand how and where the flight paths, the way we deconflict airspace, the approach we would take and everything around that. That's pretty solid. Our next steps are really going to be both on the business model to work with our Italian partners there and the timing in which we want to do that and what's the public-private partnership is likely to look like. Those will be the next steps that are there with Italy.

We're, you know, remain incredibly excited about that opportunity and spaceport, and I think the same is true for the Italians. At kind of in parallel, I'd say, we continue to talk about other locations for spaceports in other parts of the world. You've always heard us say we think there's probably three to four permanent spaceports, and then potential for more partial year spaceports. Those conversations have been continuing, and I think in a very, very positive way.

Nothing to share or announce on this, other than I think the understanding of both the economic engine that is brought with a, you know, kind of fully functioning spaceport, the opportunity that a spaceport brings to a government for its own potential interest to get into commercial space and the ability to bring lots of people to those countries, all those elements are meaningful, and we're looking forward to continuing those dialogues with the countries we've been talking to.

Great. Super helpful. Thanks so much.

Thank you.

Ladies and gentlemen, that concludes the question and answer session. Thank you all for joining. You may now disconnect.

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

Good afternoon, everyone. Welcome to Virgin Galactic's fourth quarter and full-year 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 two of the presentation for our Safe Harbor disclaimer. During today's call, we may make certain forward-looking statements. These statements are based on current expectations and assumptions, and as a result, are subject to 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. I would now like to turn the call over to our CEO, Michael Colglazier. Go ahead, Michael.

Hello, everyone. We've had a tremendously productive start to 2026, and the buildup to commercial spaceflight operations is in full swing. Three massive milestones to call out at the start. First, we've completed structural assembly of all three major components of our ship, the wing, the fuselage, and the feather. Second, the weight-on-wheels milestone for this first ship is expected in the next few weeks as the process of joining the wing, fuselage, and feather has been moving along even better than expected. This allows the ground test phase to begin in April, with commencement of the flight test phase on track for Q3 as planned. Third, with the launch of our first space flight on track for Q4, we have opened the sales window for Virgin Galactic space flight expeditions, and we are now adding people to our spacefarer community at new price points.

We are very excited to share the progress made since our last earnings call, and I'll start by calling your attention to the fantastic image on page three of our presentation. As you can see, we've wrapped up final assembly of all three of our major sub-assemblies, the wing, the fuselage, and the feather, and the process of joining these into our first complete spaceship has begun. With structural assembly set to finish over the next week or two, we expect to bring this ship into ground testing in April, which has it on track for our first space flight in Q4 2026. Amazing progress by our entire company. With our first ship moving full steam ahead, we have released a limited tranche of Virgin Galactic space flight expeditions, each priced at $750,000.

Our new website is now live and will support the information and application process for those interested in joining the Virgin Galactic spacefarer community. We've hired our new Chief Growth Officer, Megan Prichard, and she's joining at one of the most exciting times in our company's history. Looking at the agenda on page four, today I'll offer insight into our sales plans for the year ahead, share expectations for ramping the cadence of space flight during the first months of operation, hit highlights on progress with future spaceports, and provide a roadmap for expected milestones and catalysts as our first spaceship is ready for its maiden space flight.

Doug will discuss our plans for cash management, capital structure support, and revenue planning over the next 12 months as we place our ships into commercial service, drive meaningful revenue from space flight operations, protect our balance sheet, and target quarterly positive cash flows as early as 2027. He'll also review our fourth quarter and fiscal year 2025 results. Let's get started on page five with the outstanding progress the Virgin Galactic team has delivered with our first spaceship. We've included a series of images on pages five through seven of our new ship as structural assembly nears completion. We're incredibly excited at how well the ship is coming together. During our last call, we highlighted some specific challenges we were having with elements of our fuselage, and the fuselage remained on the critical path for us throughout the build phase for this first ship.

With that said, we finished the fuselage assembly last week and joined it to the wing assembly shortly thereafter. Our feather assembly from Bell Textron has made its way across the country to our factory, and we expect to connect the feather to the wing and fuselage over the next week or two, and then move this ship into its ground testing phase. I'd like to take a minute to call out why this enormous milestone is so important to Virgin Galactic's future. We invested years designing this next-generation ship, and the result is spectacular.

That heavy lift is behind us. We then spent significant time and capital developing tools, both to build the carbon parts and also to assemble those parts into the final structure of the ship. These tools were built to exacting standards, designed to last, and they will support the efficient production of many spaceships going forward.

Next, we spent time refining the process to produce a wide variety of carbon composite parts for our ships. As I mentioned with our fuselage, some components required a few iterations to get right, which is fairly typical of first yield parts. We've adapted our processes and techniques, and we can now repeatedly produce high-quality parts. All these efforts came together and are enabling us to assemble the ship's structure in the span of just a few weeks. This final assembly time shaved months off our historical process, and we expect this efficient assembly process to be replicated as we expand our fleet over time. In sum, we now have the infrastructure and capability to build and assemble spaceships efficiently, reliably, and at scale. This provides an enormous competitive advantage as we grow our business. Turning to exciting news on page eight, sales have begun.

With our first new spaceship preparing for its ground test phase, it's time to welcome more people into Virgin Galactic spacefarer community, which already contains over 650 founding astronauts. To support the process, we have reimagined and rebuilt our entire digital presence to focus on informing and engaging aspiring astronauts with a streamlined and purposeful approach to our new public website at virgingalactic.com. I hope everyone listening will take time to explore this new site as the life-changing aspects of our space flight experience really come through. We've opened a limited tranche of 50 space flight expeditions, each priced at $750,000. These space flights will be slotted in our manifest immediately after we fly the current members of our founding astronaut community, many of whom have been anticipating their space flight for several years.

As I've shared before, we expect our prices will rise in steps over the near to medium term, and once this initial tranche of space flight reservations is concluded, we plan to retire sales at the $750,000 level to focus on welcoming this new group into our spacefarer community in trademark Virgin Galactic fashion. We will then open our next tranche of availability, which we expect will be priced higher than $750,000. We will also be offering a very limited number of reservations to join our earliest space flights on our new spaceship. To date, slightly less than 800 people have flown to space throughout history, and we expect flights from government agencies will leave fewer than 200 remaining slots to be one of the first 1,000 humans in space.

We will be pricing these very limited opportunities substantially higher than our regular reservations. With sales beginning and commercial operations on the horizon, I am extremely pleased to welcome our first Chief Growth Officer, Megan Prichard, to Virgin Galactic. Megan joins us from Uber, where she most recently led the U.S. mobility portfolio, including the luxury segment Uber Elite. Megan's career has been spent building commercial success in groundbreaking industries from eVTOL to autonomous vehicles to expansive growth and category expansion in the rideshare industry. Her charter is to drive growth and scale across the company with an immediate focus on our initial sales efforts and a broad remit that includes scaling our business at Spaceport America, establishing additional revenue streams for our existing and emerging technology, building brand partnerships, and accelerating the development of new spaceports.

Moving to page nine, I'd like to share how we are planning to ramp our flight cadence during the early months of operation. We expect to begin commercial space flight operations with a cadence of approximately four space flights per month. We plan to have our space missions and maintenance teams trained and ready to turn the ships at a higher pace, but we want to take the time necessary to dial in our astronaut experience and incorporate any learnings and feedback we receive during our initial flights. Once we have the missions, maintenance, and astronaut experience dialed in, we plan to progress to an average of eight space flights per month. We will then ensure all parts of our operation are scaling appropriately before moving to 10 flights per month or more.

Actual flight cadence will be influenced by weather and other factors, of course, but our planning efforts are built with these flight rates in mind. Safety and operation and dedication to an unparalleled astronaut experience will drive the actual pace of this progression, and we will only proceed with a step up in flight cadence when everything is fully ready. At this early planning stage, our goal is to move into a cadence of 10+ flights per month sometime in the second quarter of 2027, subject to vehicle and operational readiness. On page 10, we've recently been flying our launch vehicle, Eve, as part of our pilot proficiency training.

This ship was given a very meaningful upgrade over the last year while we've been building our new spaceships, and the improvements have readied Eve to target a launch support capability of up to 12-15 space flights per month, which is higher than our expected average commercial cadence. This additional capacity from Eve should be extremely helpful in allowing us to respond to weather-related flight delays, so we can generally stay on track with our flight dates and customer commitments on a week-to-week basis. Our engineering and maintenance teams, along with our pilot corps, have done an incredible job with this launch vehicle. We expect the substantial upgrades we have made to Eve over the last few years will support a service life into 2032 or beyond. We also plan to expand our space flight capacity beyond what Eve can support.

That will require additional launch vehicles to support the next set of spaceships coming off the line. Our new launch vehicle development program, internally known as the LV-X program, has been advancing modestly as we have kept most of our engineers focused on the delivery of our new spaceships. We expect the majority of our engineers will pivot to the LV-X program as our spaceships move into flight test. We currently are targeting commercial deployment of new LV-X vehicles along with additional spaceships in 2030, which should coincide nicely with opportunities for a second spaceport in addition to expanding operations at Spaceport America. Speaking of future spaceports, on page 11, I'd like to touch on progress with plans for our next spaceport. We are nearing conclusion of our initial study for Virgin Galactic Spaceline operations in Italy.

We've had a very successful engagement with our partners in the Italian government, and we've jointly sorted important efforts necessary to fly from a location within the Puglia region in southern Italy. Key achievements include understanding how airspace will be deconflicted, identification of probable flight paths and space flight trajectories, definition of infrastructure requirements of the spaceport, robust assessment of weather patterns across the year, and positive investigations into both supply chain and hospitality availability within the local area. Next steps will include specifics around licensing, timetables, and business arrangements, and we are looking forward to continuing this effort with our Italian partners this year. In addition to the exciting opportunity in Italy, we also progressed discussions for a Virgin Galactic spaceport with additional governments during the last quarter.

I've been very encouraged by the interest and opportunity within each of these locations, and I look forward to sharing more around international expansion opportunities in addition to the substantial growth we expect from Spaceport America. Starting on page 12, I'd like to outline several upcoming milestones and expected catalyst opportunities as our first spaceship moves through ground testing, advances to flight testing, and prepares to launch into commercial operation. First up in April, our first spaceship will begin a series of ground testing efforts, specifically known as production acceptance testing, or PAT, and integrated vehicle ground testing, or IVGT. Production acceptance testing will be done on every spaceship we produce and is conducted to ensure that all systems, including electrical, pneumatic, and hydraulic, are properly installed and function correctly in an integrated configuration.

After that's done, we plan to begin the IVGT process, a deep systems-level integration test done on the first vehicle, which is conducted to validate and verify the overall system design and confirm that it meets all performance and safety requirements. This thorough ground testing period should wrap up in July when we expect to open the hangar doors in Phoenix, christen this first ship with its new livery installed, and transport it to Spaceport America in New Mexico, where it will begin flight testing shortly thereafter. Moving to page 13. Next up in May will be some excitement at our operating base in New Mexico. With flight testing on our horizon, it's time to expand our team of pilots and accelerate proficiency training. To do that, we've been interviewing some of the world's best test pilots to join our elite spaceship pilot corps.

Commencing in May, our pilots are scheduled to begin flying our original spaceship, Unity, on a series of glide flights above Spaceport America. Our new spaceships share the same outer mold line and energy management characteristics as our original ship, which makes Unity an outstanding training vehicle in advance of our first glide flight with our new spaceship. This series of glide flights with Unity also gives our mission control and maintenance teams excellent preparation ahead of the new spaceship test flights. It's going to be a majestic sight when Unity delivers these encore performances in the New Mexico skies. Advancing to page 14. The next milestone following ground testing and the Unity glide flight series will be the start of our flight test program, which we expect to commence in the third quarter. The flight test program will include a series of glide and rocket-powered test flights.

We plan to have a partial burn test flight where we will ignite the rocket motor but purposely stop short of a full-duration burn. This will be followed by a full-duration burn space flight. The full flight test program is expected to extend into the fourth quarter. The main objective of our glide flights is to incrementally expand the flight envelope and evaluate overall vehicle performance, including tuning and validating the tuning of the fly-by-wire flight control system. Rocket-powered flights focus on validating the performance of the ship during key stages of flight and validating predictive thermal models. Other test points will include the evaluation of the cabin experience, training and customer operations procedures, and maintenance and turnaround processes. The test program is ultimately designed to validate all systems, operating procedures, and the astronaut experience before entering commercial service.

Throughout this phase, our timeline is driven by disciplined data collection, analysis, and model refinement. We will be posting and publishing images from all these flights along the way, and it will be an exciting spring, summer, and fall as anticipation builds for the start of commercial operations. On page 15, a quick note on two additional milestones coming later this year. First, with production of spaceships well underway, we are gearing up to begin rocket motor assembly within our Phoenix factory, with production expected to begin in Q4 2026. We have a solid inventory of motors already on hand, but the new rocket motor assembly line is planned to keep pace with rocket motor production needs as we scale flight at Spaceport America, and the line is designed to support rocket production needs for a second spaceport as well.

Next, with our first spaceship entering the test phase, fabrication efforts are pivoting to support both static testing efforts and also production of our second spaceship, which we expect will enter service between late Q4 2026 and early Q1 2027 in line with our planned ramp in spaceflight cadence. Turning to page 16. We often receive questions from our retail shareholder base regarding production schedule, commercial service launch dates and cadence, and cash management, including how we consider the benefits of cash inflows from our ATM program relative to its dilutive effects.

I believe we touched on schedule and launch cadence already, but before I hand the call over to Doug, I'd like to spend a little time on our cash management and capital market strategy as we conclude our pre-revenue phase and prepare to drive meaningful cash inflows with the launch of commercial spaceflight operations. First and foremost, we will be using cash to complete our first two spaceships and place them into service as those two ships enable the start of high-margin revenue operations and begin to unlock the tremendous value of our business model. As we bring these ships into service, we expect to generate significant cash from the current backlog of customers as their final payments become due in advance of their spaceflight.

To enhance our cash flows as we start commercial operations, we will be offering a limited number of higher-priced space expeditions on our earliest flights for those who wish to be part of the first 1,000 people in space. We plan to manage our flight manifest in a fashion that will allow modestly positive quarterly cash flow within 2027, with positive cash flow forecasted to scale in 2028 and beyond as we fly astronauts and researchers who have reserved their spaceflight at higher price points. We entered into a series of capital realignment transactions last December and moved most of our debt maturity into 2028 in alignment with our planned ramp in price and profitability. Doug will share more about the many benefits of these capital realignment transactions, including flexibility in payment terms.

We expect to leverage opportunities with the $138 million remaining within our existing ATM program to support corporate objectives in the upcoming year. Utilizing an ATM program is dilutive. However, we expect the value created from the assets that are being put into service with support from this ATM use will substantially outstrip the potential dilutive impact. We are excited to move into cash-generating operations as we place our new spaceships into service, expand our book of business with the addition of new astronauts, and prepare for high growth in the years ahead. I'll now turn the call over to Doug for the full financial update, including detail on our plans to leverage these aforementioned strategies to transition the company from a pre-revenue state to a profit-creating enterprise.

Thanks, Michael. Good afternoon, everyone. I'll start with the highlights of the capital realignment transactions we completed in December, and I'll share how this forms the landscape for us to realize the economic potential of our business. I'll follow with a recap of our recent financial results before providing an outlook for 2026 as we transition to commercial service. Starting with our capital realignment transactions on page 17. In December, we successfully executed an exchange with several of the holders of our 2027 convertible bonds, addressing $355 million of the $425 million of convertible bonds originally due in February 2027. These transactions were done very intentionally and with capital preservation in mind. There were several key benefits to our business from executing these transactions.

First, we extended the final maturity date of the new notes to December 2028, which better aligns with our planned ramp in cash flow from commercial operations with the two new spaceships in service. Second, we eliminated $142 million of contractual debt payments, representing a very substantial reduction in future indebtedness. Third, we built flexibility into the new structure, giving us the option to settle portions of the debt obligations with either cash or equity, depending on future conditions. As part of the exchange, we also issued warrants, which are intended to align with shareholder interest given the warrant exercise price is more than double our recent stock price. Additionally, the warrants require cash payment to the company when exercised, further enhancing our balance sheet. These transactions were thoughtfully executed and are expected to support our ability to deliver shareholder value over the long term.

To recap, we have substantially extended the maturity of our debt, materially reduced the principal amount due, added flexibility for method of payment, and with the inclusion of warrants, we have further aligned all stakeholders' interests with meaningful share price appreciation. Through the successful completion of these capital realignment transactions, we believe we have built a financial runway to launch and grow commercial Spaceline operations. I think it's important for us to take a moment and reflect on Virgin Galactic's financial life cycle and call out the extraordinary place we have now reached. The first phase of our financial life cycle was the development phase, when we spent many years on research and development to optimize the performance of our unique space flight system. Not only did we create an amazing human space flight experience, but we also built significant barriers to entry with our technology.

The next phase was the investment phase, when we put the infrastructure in place that enables us to build incredible spaceships. We have the factory capacity and tooling needed to repeatedly produce spaceships that are designed for manufacturability and maintainability. With the first new spaceship nearing completion and the second ship in line, we are wrapping up the initial investment phase. We are set up for cost-efficient scaling of the fleet going forward. We have effectively converted cash into valuable assets on the balance sheet in the form of both factory capacity and new spaceships. As this initial investment phase concludes and we head into commercial service, we expect to see further improvement in free cash flow each quarter of this calendar year. This brings us to the next and particularly exciting phase, the commercial phase.

With our first spaceship nearing completion and preparing to head into ground testing, we are now gearing up for the start of commercial service in the fourth quarter of this calendar year. Further emphasizing this incredible moment, we are welcoming our new Chief Growth Officer and opening up sales to new customers. With the start of the commercial phase, we plan to accelerate our flight rate and open the doors for sustained profitable growth. We're thrilled to have reached this extraordinary place in our journey. Let's now shift to our recent financial results on page 18. Starting with the fourth quarter of 2025, we generated revenue of $300,000 from access fees related to future astronauts.

Total operating expenses for the fourth quarter were reduced by 26% to $61 million compared to $82 million in the prior year period as we reduced expenses and also continued to see the shift from R&D to capital investments in new spaceships. Similarly, net loss improved by 18% to $63 million in the fourth quarter compared to $76 million in the prior year period. Adjusted EBITDA improved by 23% to -$49 million in the fourth quarter compared to -$63 million in the prior year period. Free cash flow was -$95 million in the fourth quarter at the midpoint of our prior guidance and a 19% improvement compared to the prior year period. Turning to page 19, for the full fiscal year 2025, we generated revenue of $2 million from future astronaut access fees.

Total operating expenses were $287 million in 2025, reflecting a 25% reduction from $384 million in 2024. We reported a net loss of $279 million in 2025, representing a 20% improvement compared to a net loss of $347 million in the prior year. Adjusted EBITDA for the year was -$226 million, a 22% improvement compared to -$289 million in the prior year. Free cash flow was -$438 million in 2025. Moving to page 20, we ended the year with $338 million in cash equivalents, and marketable securities. In 2025, we generated $122 million in gross proceeds through an at-the-market, or ATM, equity offering program.

For 2025, capital expenditures were $198 million, up from $122 million in the prior year. That growth in CapEx is reflected in property, plant, and equipment, or PP&E, on the balance sheet. We reported $389 million in PP&E at the end of 2025, an increase of 86% from $209 million at the end of 2024. This represents our significant investment in assets such as manufacturing capacity and spaceships that we expect to yield tremendous future economic returns. Spending trends in 2025 played out as expected. Peak spending occurred back in the first quarter of 2025. We have reduced our cash spending each quarter since then. Looking ahead, we expect continued reductions in cash spending each quarter this year.

Although we plan to add resources in our space line operations and customer operations teams in anticipation of commercial service in 2026, these operating costs are expected to be more than offset by the reductions in manufacturing costs as we finalize the build of our initial spaceship fleet. Continuing with our projections, revenue for the first quarter of 2026 is expected to be approximately $200,000 for astronaut access fees. Forecasted free cash flow for the first quarter of 2026 is expected to be in the range of -$90 million to -$95 million. We expect free cash flow to show sequential improvement following Q1. By the fourth quarter of 2026, we expect to receive significant new cash inflows from customers as we initiate commercial service.

Commercial service is obviously the pathway to delivering the economic model that we first laid out for you in August 2024, and that model is shown again here on page 21. We continue to see the economics of the model holding true. We plan to communicate two key metrics that drive the economics, flights per month and revenue per flight. The first metric, flights per month, is a powerful indicator of the success of our space flight system and is a key differentiator for us relative to a traditional vertical launch approach. Michael talked about our expectation of attaining a targeted flight rate of 10 or more flights per month sometime in the second quarter of 2027. This translates to approximately the annual flight rate of 125 flights per year, as shown in the first column on this page.

The second metric, revenue per flight, is a function of ticket pricing. Michael also mentioned that our current price for a space flight expedition has increased to $750,000 per seat. Plus, we will offer a limited number of tickets at a higher price to fly on the earlier flights. Given we currently have approximately 650 future astronauts with tickets at various prices, revenue per flight will vary depending on how these tickets flow through the flight manifest. Currently, we expect to achieve modest quarterly positive cash flow within 2027 as we fly a large percentage of astronauts with tickets that were historically sold at lower prices. We forecast that we will achieve the Adjusted EBITDA shown in the first column of this business model on an annualized basis sometime during 2028.

We are pursuing a high growth trajectory, and we are very excited to be approaching the growth phase of our business with the anticipated start of commercial service in the fourth quarter of this calendar year. Let's take a moment to discuss how the accounting world reflects this stage of our company's financial life cycle. In our 10-K to be filed, we included a going concern disclosure and management's plans to resolve it. The assessment leading to this disclosure looks at cash equivalents, and marketable securities on the balance sheet as of the date of the filing of the 10-K and compares those amounts to our spending projections for the next 12 months. It also takes into account all contractual debt payments due within the next 12 months, which are assumed to be settled in cash.

According to generally accepted accounting principles, this assessment does not yet allow inclusion of our expected future cash inflows from space flights, such as those we've highlighted today. It also does not include the potential of any additional capital inflows, such as the $138 million remaining on the ATM. Given this methodology, the going concern disclosure is to be expected. We are at the stage in our financial life cycle where we are successfully converting cash into valuable assets in the form of manufacturing capacity and new spaceships that can drive our economic model. We forecast the start of commercial service in the fourth quarter of this year. We expect significant cash inflows in connection with that milestone. Throughout the year, we plan to maintain appropriate strength in our balance sheet, and we are thrilled to be on the cusp of ramping commercial spaceflight operations.

With that, I'll turn the call back over to Michael.

Thanks, Doug. I'll close on page 22, which again shows the image of our new spaceship finishing final assembly in our Phoenix factory. What an accomplishment. It's a shared success that was only possible with the enormous effort and dedication from our partners at Bell Textron and Qarbon Aerospace, as well as a lengthy list of key suppliers who stepped up to deliver a very lengthy bill of material that enabled fabrication of the ship. Most of all, this ship coming together so well is a testament to the talent, genius, grit, and tenacity of our teammates at Virgin Galactic. We are on a bold endeavor, and this team is delivering day in and day out.

I'm proud and inspired to see our team and our partners come together, and we can't wait to show this ship off to the world when it is formally christened in just a few months. We've reached pivotal milestones this quarter with the upcoming conclusion of our first spaceship's assembly phase, the launch of sales, and the impending start of ground testing of our spaceship program. We'll be opening our factory to visits from our founding astronaut community in the next month, and I think this group is going to be over the moon with excitement as they see their spaceship coming to life so beautifully. Let's open the call for questions.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via speakerphone in your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. Our first question comes from the line of Oliver Chen with TD Cowen. Your line is open.

Hi. Thanks a lot, Michael and Doug. Regarding the Chief Growth Officer and what you see ahead with the consumer, what are your thoughts on our hypothesis on the opportunities and the workflow with much happening there? Also, as we think about the model going forward, what should we know about CapEx more quarterly? And then more broadly, the new spaceport sounds like a big opportunity. What's on the roadmap for that investment cost and how that may manifest? I know there's a lot of economic benefits you'll bring to a region. And then lastly, more specifically, the commercial spaceflight and fourth quarter is very exciting. Any parameters on that? What's embedded in your guidance for the revenue that quarter? Thank you very much.

Hey, Oliver, it's Michael. Why don't I take, I think, the first and third and let Doug take the second and fourth. If you would do me a favor, Oliver, just a little more clarity on your first question.

Yeah, as we look ahead, I guess, the announcement of Megan Prichard, what's on the roadmap for what you see as the growth framework and thinking about the luxury and consumer side of the strategy?

Got it. I'm incredibly excited to have Megan join us. She's an amazing executive. She starts Monday. As we kinda mentioned in the prepared remarks, there's, I'll call it tactical, and then there's strategic. Tactically, Megan will lead our team that is driving growth in sales during this year, that all that growth will be flowing through its Spaceport America. That's a focus on our suborbital space business with both private citizens and researchers. Megan's remit is much broader, and the team and processes she'll build will be much broader. That includes, I'll say expansions of our suborbital business model. I'll jump ahead a little bit, Oliver, to number four, you talked about new spaceports.

Megan will be heavily involved in the identification and kind of partnership development we do on new spaceports. You ask about economics. Each deal will be different, and each partnership will be different depending. But broadly, these are likely to be joint venture agreements, you know, in the countries at hand. Broadly, we will look to bring from Virgin Galactic our space flight system, our space vehicles, and all the technology around that. We would look for our partner countries to bring the physical infrastructure in those areas. The spaceport, runway, airspace, of course, is key from a government standpoint. We would look to the community around for, I'll call it the astronaut experiences outside of flight.

Hotels, food and dining, beverages, activities to do, both for the astronauts and for all the friends and family who come. That's kind of who's bringing what to the table and then a sharing of the economics through that. Hopefully that gives you a little bit of clarity there. Like I said, each country has different things to bring to the table, and so I imagine things will be unique depending upon each country's specific interest. In addition then to growing our initial book of business further and managing the price, we think it would be price growth in the near term for that on Megan's plate, and then looking to expand through additional spaceports and get that underway because those are, you know, a number of years in development.

We'll be looking to additional business models that we can leverage both with our existing and, you know, emerging technologies that we create. Nothing more to share about that one broadly, but I think we've been bringing someone in of Megan's caliber, like I said, with a wide remit to help us grow and accelerate the growth of our company. Doug, you wanna talk about the couple questions Oliver had, number two and four?

Yes. Regarding the CapEx, we guided the free cash flow to be between -$90 million and -$95 million for Q1. We said it would continue to improve each quarter sequentially through the year. That's what we're expecting. To put the CapEx in perspective, around half of the projections for the first quarter and into the second quarter are CapEx. As we finish up the work on primarily you know Delta One, and we've got Delta Two coming in, the static test article, all of that. You'll see CapEx be you know around half.

As the total spending comes down, the CapEx comes down even faster in the second half because now we're moving into more of an operating phase and our spending shifts to the commercial operations, you know, with the spaceport and all of that. That's really more front-end loaded, the first half of the year and then tapers off on the CapEx side in the second half.

Regarding the revenue, it's a little early to be giving revenue guidance, you know, four quarters out, but just to put it in perspective, we did say that we expect to start commercial service in that quarter, and we gave kind of a cadence to expect that in the beginning, we would be expecting about one flight a week, and so four flights a month, and then when we're ready, we'll ramp up to eight flights a month, and we give a timeline getting to ten or so flights per month by the second quarter of 2027. You know, again, it depends a little bit on how we or exactly when we start in the fourth quarter. Then the other variable, of course, is the manifest, the mix of ticket pricing. We've talked about quite a variety of prices, and those will weave their way into the early manifest.

As we discussed today, you've got the legacy customers, and you've got some new opportunities here for people who want to be in the first 1,000 astronauts ever to go to space. Again, it varies on a few things there, Oliver, but I hope that gives you a little more color.

Okay, last and a follow-up. On the four times monthly flight to the eight to the 10 times, what are the variables in terms of reaching 10 sooner or reaching 10 later that we should consider in the sensitivities as we model that monthly flight cadence ramp?

Sure. It's Michael. If you think about it as almost balancing the line a little bit, we're super excited at the work that has happened with our launch vehicle Eve and talked about Eve we expect has a capacity to support 12-15 launches. Better than three to four a week, if you want to think of it that way. That's higher than what we expect we will average across the year. That's important. That will help us do some catch up if we have a string of bad weather and other things. Let's say Eve is running three a week for conservative assumptions here. We've built each of these spaceships with an expectation that they can fly twice a week. Having one spaceship would theoretically let us fly twice a week. Eve has the capacity to fly twice a week.

That would get you to the eight flights per month capability with one spaceship and one mothership, one launch vehicle Eve. Now we have a second spaceship coming and we expect that to arrive late Q4 of 2026 into early Q1 of 2027. That also we expect will be able to fly twice a week. At that point, Eve, depending upon how it does between 12-15 a month, Eve starts to become the bottleneck of our system, which is of course why we have our LV-X program to expand our capacity overall. To go from greater than eight, we will need both Eve obviously, but we will need our second ship to be able to move past eight per month and into 10+ per month. Hopefully that gives you a good sense of how to think about that math.

Very helpful. Thanks, gentlemen. Best regards.

Our next question comes from the line of Greg Konrad with Jefferies. Your line is open.

Good evening.

Hi, Greg.

Maybe just to continue with the last question, just to verify, I think you talked about the next mothership. Did you say 2030? Then I think in the past you had talked about an expanded fleet scenario. Should we think about the third spaceship not coming online or kind of reaching that model to that 2030 timeframe? Or how do you think about what's next after the two spaceships?

Yes, I think 2030 is the right timing for a next launch vehicle. It's not a perfect match, but broadly we want two spaceships coming out for every launch vehicle that we bring out. That kind of brings a balanced set. If the launch vehicle, which is the longer lead item for us is what's coming 2030, as we mentioned on the call, we now have the infrastructure to build spaceships efficiently, quickly, and cost-effectively. If you haven't seen it, or if anybody on the call has not seen the Galactic 10 video that released shortly after market close, you'll see in there just kind of a quick time lapse of how we take a completed fuselage and a completed wing and bring the joining of those together.

We expect over the next week or two at most, you'll see us into combining that with the feather that's already there. We are able to build spaceships in a very effective and efficient fashion. We would want at least one of those spaceships, if not two, we'll call it ready to go by the time we bring the launch vehicle in 2030. That's a fairly straightforward process for us to do now.

Maybe just to follow up on the reopening of ticket sales. I mean, I think you're doing a limited first tranche and then talked about the other limited tranche and eventually a second tranche. Can you maybe just talk about timing, how you're thinking about the metrics and balancing backlog? I think also since last time we talked, there's been some changes to the competitive backdrop. I mean, how has that maybe materialized in terms of demand?

Go ahead. Let's see where to start with that. I guess we'll start with the competitive piece just to ask Greg. Blue Origin made an announcement that they are trying to focus on their lunar program, which is very exciting and important to the country. We wish them the best. I think their stated piece was that they were out for no less than two years. I think it's probably right for people who wish to take a space flight expedition and not go to the space station for $50 million, but do so at a more manageable price point. We believe we're well-positioned to be their company of choice in that regard, and I think that will help from a demand standpoint from us for sure. That's one.

Two, the kind of amount of availability we're putting out is more for price strategy, pricing strategy than it is for picking a specific number. We think it is important to be clear that we're going to step our pricing up as we go, at least in the short and medium terms. That's why you see us with a fairly limited number of 50 at a $750,000 price point. I think everybody knows this, but just for context, in case anyone's new, we currently have 650 or so, a little more, founding astronauts, and that's a meaningful group that will carry us from 2027 into early 2028. It's not that there's necessarily pressure on us to fill the backlog, but we do want to build our book of business at higher price points.

That's why we're going to start at 50 spaceflight expeditions at $750,000. We'll retire that price point. We'll take a beat and bring those 50 people into our community because we want to do that in a world-class way. We'll open up again. We'll pick the number. We do expect the price point will be above $750,000. We haven't picked that yet. I think we'll repeat that process a couple of times until we hit a steady state price point and build our book of business going forward. Now, I may have missed one other part of your question, Greg.

No, no. That was perfect. I really appreciate it. Thank you.

You're welcome.

Next question comes from the line of Myles Walton with Wolfe Research. Your line is open.

Thanks. Good evening.

Hey, Myles.

I was hoping you could touch on the post-glide flight of the new spaceship to commercial service. I think you mentioned, Michael, that there's a partial burn and then there's one full powered burn. Is that all there is prior to the first commercial operation being presumably the third powered burn?

That is correct, Myles. In fact, the second piece will be carrying research experiments on the second flight. It will technically be our first. We do have Mike Moses in town today. He's in from—he's been back and forth in New Mexico and our factory in Phoenix much, but he's here. Mike, of course, is our expert in everything to do with flight tests. Mike, if you don't mind expanding upon that.

Yeah, sure. Myles, happy to. Maybe just to clarify so we don't talk past each other. One rocket-powered flight that's not full duration will not take us to space just to get us supersonic and see how things behave in the Mach 1.5 region. Then two space flights before we enter commercial service, the first with just pilots on board and research in the back. Through the NASA Flight Opportunities program, we've got a manifest of payloads to bring in revenue on that first test flight to space. Then another one with two pilots and six mission specialists in back. Those will be internal folks to validate the cabin experience and mostly our procedures and processes, like Michael said. Then we'll be ready for commercial service.

The reason that we're able to only have a couple of rocket-powered flights, unlike the Unity flight test program, is we're not learning that envelope for the first time. Our control system is different. We have some systems that are different. We certainly need to verify and validate the performance of the vehicle. We're not learning exactly what stresses are put on the vehicle, exactly how hot it'll get or exactly what happens in zero gravity as the ship maneuvers. We know all of that from the Unity flights. We're able to very rapidly move through that program. Of course, we will always operate with safety in mind and prudence. We'll take our time to analyze the data, make sure that the ship's actually behaving the way we thought it did, and then we'll be ready to move.

A combination of not needing to do as many flights as Unity and a Delta spaceship that's designed to fly faster, so the turnarounds between test flights should be able to go a little faster, means that'll be a fairly expeditious program as we move through test space flights. You'll see us focusing more on the glide flights. That's where the new handling flight control systems are different, and we want to spend the most time looking at that envelope.

Got it. Makes a lot of sense. I'm just looking at the 10-K relative to the going concern, and there's a comment in there about the management's plan for addressing and mitigating the condition. One of those points is partnering with third parties to fund and accelerate the pace of future space vehicle development. Can you elaborate on that, Michael? What exactly is meant by the partnering with third party? Is this different than your current organization? Is this something you're already doing or is this something that is looked at as being incremental?

We have efforts that I'd say we're exploring, Myles, both with governments for spaceports as well as the opportunities perhaps with the U.S. government and opportunities we may have with our launch vehicle and things we can do with our launch vehicle in those regards. I think there's nothing to share at this point in either of those places. As it pertains to our plans, which the way this accounting is done is over the next 12 months, I think both of those categories become relevant and how we might partner with governments, be it the U.S. government or an international government around a new spaceport. The partnership model, one could conceive, would bring in economics to allow us to accelerate the development of the vehicles for those.

Yeah. Okay. That makes sense. Doug, just one quick one just to clarify for me. The cash flow commentary about the quarterly positive cash flow in 2027, we're talking about free cash flow, right? Not operating cash flow.

I specifically was using just the generic term cash flow for a reason, but let me just explain why. We have all intents here to build our cash balance through 2027. We would be spending less than we bring in from all sources. The reason I chose the words cash flow instead of free cash flow is there's a scenario where if we brought in further investment, like we were just talking about with Michael, you know, say it came into the capital markets, then we plowed that back into R&D, you don't get credit for those financing cash flows.

Free cash flow in that scenario, you know, you could get a negative number even though, you know, we're building for the future and, you know, not spending more than what we bring in. When I just say cash flow, that accommodates that. Again, the intent there is to say that we will spend less than we generate, and we're targeting, you know, individual quarters to cross that threshold in 2027.

Okay. All right. Thank you.

Again, if you would like to ask a question, press star then the number one on your telephone keypad. We do have our last question comes from the line of Michael Leshock with KeyBanc Capital Markets. Your line is open.

Hey, good afternoon. Just following up on the 2026 free cash flow guidance and your expectations for the burn rate to improve sequentially through the year, is there any one quarter where you'd expect the biggest step up? Is that kind of a 2Q event when you shift more from production into testing? But just curious if there's any milestones that you could talk about that might drive more of a step change in cash burn versus a more gradual improvement.

It's really a gradual improvement till the fourth quarter. We were expecting, you know, just quarter-over-quarter lower than the one before. By the fourth quarter we see a big change because that's when we get cash coming in from customers as they, you know, pay for the rest of their flight reservation. That's the main driver in that quarter. Think of it as a continuous reduction in spending each quarter until the fourth quarter when you get a big shift in the other direction.

Great. Is there any update you can provide on the potential use case of your technology for defense initiatives like Golden Dome? You've talked about that in the past, and you mentioned the need to potentially carry heavy payloads at high altitudes. Just curious if that's still a focus, if there's been any update on that front that you can share. Thanks.

Nothing specific to share, Mike. We are, I'd say accepted into the IDIQ for the Golden Dome initiative, so we are, you know, qualified as a supplier for that effort. You know, we are spending our time being clear on what are both immediate things, immediate term opportunities that we may be able to support with both our existing launch vehicle Eve and with our new spaceships as they come up, as well as things that are, I'll call more developmental in nature, which are usually a little bit further in lead times. Nothing specific to share in that regard.

Great. Thank you.

Ladies and gentlemen, that concludes the question and answer session. Thank you all for joining in. You may now disconnect.