By James Rogers
Space tourism company Virgin Galactic reported first-quarter results after the bell on Tuesday.
Virgin Galactic Holdings Inc. gave an update on its closely monitored cash position when it reported its first-quarter results after the bell on Tuesday, and the company's cash burn, in particular, caught the eye.
Shares of the space tourism company fell 1% in premarket trading after Virgin Galactic posted lower-than-expected second-quarter revenue. However, analyst firm KeyBanc Capital Markets pointed to Virgin Galactic's (SPCE) lower-than-expected cash burn as a positive.
First-quarter free cash flow represented a burn of $126 million, compared to a burn of $139 million in the same period last year. This was also below the $129 million burn expected by analysts surveyed by FactSet and KeyBanc Capital Markets' $131 million burn estimate.
"The company was on track for 2Q24 FCF burn of between $110 million and $120 million versus our estimate of $135 million," KeyBanc Capital Markets analyst Michael Leshock wrote in a note published Tuesday by the night. Analysts surveyed by FactSet expect cash burn of $126.9 billion in the second quarter.
"While the lower-than-expected consumption is a positive sign, the company continues to expect 2024 to be the year with the highest capital usage in support of its next-generation Delta class fleet, implying that FCF consumption in the second half of 2024 could be modestly higher than our estimates." Leshock added.
Related: This is how much Virgin Galactic made from space tourists last quarter
Virgin Galactic ended the first quarter with cash, cash equivalents and marketable securities of $867 million, compared to $874 million at the end of the same period last year. The company's cash situation is closely monitored. Virgin Galactic shares fell in December after its founder Richard Branson ruled out new investments in the space tourism company, which had recently developed its short-term growth strategy.
Last week, Virgin Galactic said it is targeting a launch window opening on June 8 for its historic Galactic 07 mission. The Galactic 07 mission will be the last flight of Virgin Galactic's Unity spacecraft before it stops operations. commercial operations to develop its new Delta-class spacecraft.
The Delta spacecraft featured prominently during the conference call to discuss the company's first quarter results.
"Progress on SPCE's Delta-class ships remains on track and the company revealed that it expects its current mothership, Eve, to be able to support up to 125 flights per year when the first two Delta ships come online in 2026," he wrote. KeyBanc Capital. The shock of the markets. "By increasing flight frequency and establishing Delta operations, SPCE seeks to place additional Delta mothership and ships into service in 2028 and beyond."
Related: Virgin Galactic sets date for last commercial flight of Unity spacecraft
Virgin Galactic recently announced that Delta tickets will be priced at $600,000, compared to the current ticket price of $450,000.
โSPCE hopes to reopen ticket sales sometime in 2025, before the debut of Delta class, at a new higher price of $600,000 per seat,โ Leshock said. "This implies an annual revenue rate of $450 million (>75% contribution margin) with just the Eve mothership and two Delta ships."
"While we recognize that it will take time to reach this full pace, it would mark an important inflection point for the Company as it continues to position itself as a leader in space tourism in the long term," the analyst added.
Related: Virgin Galactic soars 22% and posts highest profit in 10 months
Leshock noted that Virgin Galactic remains in a legal battle with Boeing Co. (BA) over the intellectual property rights to its mothership. "Importantly, we have gained greater clarity on the issue and believe there will be minimal, if any, impact to SPCE, and we believe there is a strong case to be made," Leshock said. "We are surprised that BA brought the case and see no impact on SPCE's ability to enforce (regardless of the final determination)."
During the first quarter conference call, Virgin Galactic CEO Michael Colglazier said the issues with Boeing are not material. "It will not be a distraction to us in any way as we move forward with our mothership program," he said.
Of the 10 analysts surveyed by FactSet, two have a buy rating, five have a hold rating, and three have an underweight or sell rating on Virgin Galactic. The company's shares are down 58.8% in 2024, compared to the S&P 500 Index's SPX gain of 8.8%.
-James Rogers
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05-08-24 0837ET
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