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Tuesday, February 25, 2020

-=Virgin Galactic (SPCE) reported earnings on Tue 25 Feb 20 (a/h)

Late Tuesday, Virgin Galactic reported a net loss of $73 million on revenue of $529,000, missing FactSet forecasts for $748,004. Adjusted per-share figures aren't available yet, but analysts saw a loss of 21 cents a share. But an EBITDA loss of $55 million was deeper than the $46.9 million loss analysts expected.

The company also announced that it opening new reservations with its One Small Step program. The program will allow space tourists to pay a $1,000 deposit to commit to a firm seat reservation once they are available. Virgin Galactic has received 7,957 online reservation registrations vs. the 3,557 expressions of interest in flight reservations by the end of Q3.

On Wednesday, CEO George Whitesides told CNBC that ticket prices could rise from a prior range of $200,000-$250,000 each, adding that the company plans to explain its premium pricing model later this year.

"What we've seen is that people really want to do this, particularly for certain types of special flights, maybe earlier flights or flights with particular people," he said. "You could see prices that are three, four, five – I could even imagine a million dollars for certain very special flights."

Intercontinental Hypersonic Travel
But Virgin Galactic hasn't said when it will reopen ticket sales and continues to avoid offering a specific timeline for the start of spaceflights for paying costumers. When asked during Tuesday's conference call about the schedule for a first flight in mid-July, executives skirted the question and talked about how important safety is.

The VSS Unity spacecraft was transferred to test facilities in New Mexico earlier this month. Virgin Galactic said late Tuesday it has conducted 20 out of 29 verification and validation elements for the FAA. Ten of those were completed this quarter. The company is working "hard" on the remaining elements and will provide updates as appropriate.

Right now, Virgin Galactic is modeling a space tourism market of 1.8 million people with net worth of over $10 million, but has seen interest from individuals with less money. That pool of potential customers is expected to grow through 2024, management said.

Virgin Galactic also said Tuesday that it sees a "huge opportunity" to apply high-speed global mobility technology to reduce travel time, noting that it's the only team designing, building and flying a commercial crew vehicle today that can travel at supersonic speed.

The company touted its partnership with Boeing (BA), whose venture capital arm HorizonX has a $20 million minority stake in Virgin Galactic, in high-speed travel. The aerospace giant seeks to help Virgin Galactic develop a vehicle to travel Earth at hypersonic speeds.

Analysts previously have noted that Virgin Galactic has potential beyond space tourism, namely as a provider of intercontinental travel at superfast speeds. In December, Morgan Stanley analyst Adam Jonas wrote that Virgin Galactic faces a "niche" market in space tourism, while hypersonic point-to-point travel plan is "really likely to drive the upside."

On Wednesday, Whiteside told CNBC that Virgin Galactic wants to integrate its "vehicle system" into the national airspace systems, allowing it to land at airports and link to local transport systems.

Virgin Galactic Stock
Shares fell 16% to 28.74 on the stock market today, then lost another 9% in late trading, after previously soaring 400% from a low in December. Boeing rose 0.5%.

Morgan Stanley's Jonas said last week that "a modest correction is overdue, and frankly, healthy, in our opinion." He noted that little has changed since he started coverage on Virgin Galactic stock in December with an overweight rating and a 22 price target.

He added that Virgin Galactic could offer new shares, which typically sparks a sell-off. "While the company has sufficient levels of liquidity to meet the needs of launching its commercial service, investors may nonetheless ask, or even encourage, management to consider adding to the coffers."

Late Tuesday, Whitesides said he was "gratified" by the share price. When asked if he was thinking of raising capital, he said that right now he was really focused on the engineering.

Meanwhile, SpaceX also has its eye on space tourism, and said last week it will fly up to four customers aboard its Crew Dragon capsule, already developed for NASA astronauts, under a deal with booking agent Space Adventures.

SpaceX is a potential rival in point-to-point global travel as well. Its Starship spacecraft is being designed for deep-space travel, but SpaceX has said it could take passengers across continents via low Earth orbit.

Spaceflight Reservations
Despite Virgin Galactic stock soaring in recent months, the company hasn't turned a profit yet and isn't expected to any time soon. Analysts polled by FactSet see a 2020 loss of 34 cents a share on revenue of $6.94 million.

In Q3, losses widened to $51.5 million from $39.2 million a year ago, as R&D costs grew 13% to $34.5 million. On an adjusted basis, the per-share loss was 20 cents vs. breakeven a year ago, according to an SEC filing.

Revenue more than doubled to $832,000, "which was generated by transporting scientific payloads and providing engineering services," Virgin Galactic said in November.

But the Q3 report also said Virgin Galactic had received reservations from over 600 people in 60 countries. On Tuesday, the company said it has $80 million in deposits for trips to space, representing $120 million in potential revenue, the same amounts that Virgin Galactic announced in Q3 as ticket sales have remained closed.

The company closed ticket sales after a deadly crash of a test flight in 2014. The National Transportation Safety Board ruled that the deadly 2014 crash was caused by a co-pilot error and a failure of Scaled Composites, the company that built the SpaceShipTwo, to prevent a single human error from causing a catastrophic failure.

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