Virgin Galactic Q2 FY2022 Earnings Report Preview: What to Look For

Virgin Galactic Holdings Inc. (SPCE), owned by billionaire entrepreneur Sir Richard Branson, announced last month plans to sharply increase production of space vehicles. The company will open a new plant in Arizona to produce up to six vehicles per year to fuel the growth of the company's space tourism business. The added capacity is crucial to Virgin Galactic's goal of building a sustainable revenue stream and ending years of losses.

Investors will focus on whether Virgin Galactic's latest plans will improve its financial performance both in the short term, and over the next few years, when it reports earnings on Aug. 4 for Q2 FY 2022. Analysts expect the company to post another loss per share, which would be at least its 14th straight quarter of negative EPS. Revenue also is expected to plunge.

Virgin Galactic has taken a number of steps in recent months to position itself for rapid growth starting next year. As mentioned, the company on July 14 said it plans to sharply boost space vehicle production. And on July 6, Virgin Galactic said it's partnering with a Boeing & Co. subsidiary to make motherships, which carry the spaceship until its released at about 50,000 feet. The company also announced in late July that it was partnering with global luxury travel company Virtuoso to offer a limited number of Virgin Galactic spaceflight seats to Virtuoso’s clients.

Virgin Galactic already has started selling tickets to the general public for flights into space but it has pushed back the expected launch date of its commercial spaceflight services to Q1 FY 2023. Each ticket costs $450,000, a third of which must be paid upfront as a deposit with the final payment to be made prior to the flight.

Shares of Virgin Galactic have underperformed the broader market over the past year. The stock outperformed briefly during the first week of August 2021, then moved on a sustained decline until late January 2022. Since then, the stock has traded essentially sideways. During the past 12 months, Virgin Galactic has posted a total return of -75.4% compared to -6.8% for the S&P 500 as of Aug. 2, 2022.

Virgin Galactic Earnings History

Virgin Galactic missed EPS estimates but beat revenue expectations in Q1 FY 2022. The company reported EPS of -$0.36 compared to -$0.55 in the same quarter a year earlier. It also reported $0.3 million in revenue, an improvement from zero revenue in the same quarter a year earlier. That amounted to the fourth consecutive quarter of revenue after posting no revenue in the four previous quarters. In its quarterly report, the company said that ticket demand for its space travel service remained strong with about 800 reservations.

In Q4 FY 2021 Virgin Galactic reported a loss per share $0.31, the same as a year earlier. The company reported $0.1 million in revenue compared to zero in the prior-year quarter, but down sharply from $2.6 million in revenue in Q3 FY 2021. Despite the ongoing losses, the company emphasized in its quarterly report that its cash position remained strong with cash, cash equivalents, and marketable securities of approximately $931 million as of the end of the year.

Analysts are expecting mixed results when Virgin Galactic's announces results for Q2 FY 2022. The company is expected to report another loss per share for at least the 14th quarter in a row. Revenue is expected to fall 50% to $0.3 million from $0.6 million in the same quarter a year ago.

Virgin Galactic's effort to launch a viable space tourism business has suffered from mounting losses, delayed schedules and test flights, and regulatory problems since the company went public in October 2019. The company finally received approval from the Federal Aviation Administration (FAA) for a full commercial launch license in June 2021, the first time the agency had provided a license to take customers into space.

Virgin Galactic completed its first fully-crewed spaceflight last year, which carried billionaire Branson as one of its passengers. While the flight met its test objectives, which included evaluations of the cabin and customer experience, it ran afoul of the FAA. The agency temporarily grounded Virgin Galactic after learning that its spacecraft had deviated from restricted airspace during its flight. Later, in September 2020, the FAA cleared Virgin Galactic to begin flights again after the company agreed to make required changes. The company initially had planned its full commercial launch in the fourth quarter of this 2022, but the company in May pushed that date back to the first quarter of 2023 due to supply chain problems and labor shortages.