Yahoo Finance Virgin Galactic Q3 earnings miss estimates in light of delays
Virgin Galactic (SPCE) reported earnings that missed estimates after the closing bell on Monday, Nov. 8. The company failed to meet expectations for adjusted earnings per share and EBITDA in light of commercial operations delays.
Here were the main metrics from Virgin Galactic's report, compared to Bloomberg consensus estimates:
Adjusted EPS: -$0.32 vs. -$0.28 expected, -$0.34 Y/Y
Adjusted EBITDA: -$68 million vs. -$63.8 million expected, -$66 million Y/Y
Despite misses for adjusted EPS and EBITDA, however, third quarter revenue beat consensus estimates — $2.58 million against $1.83 million expected. Its cash position came in at around $1.0 billion, including cash and cash equivalents of $721 million and marketable securities of $286 million as of Sept. 30. Virgin Galactic reiterated in its report that the expected start of its private astronaut commercial service is "on track for Q4 2022."
The company also noted successes in selling early spaceflight seat reservations, stating that the current pricing of $450,000 per seat has been "well received."
"In August 2021, [Virgin Galactic] opened sales to our Spacefarer community, the group of early hand-raisers who had reserved the right to be first in line for tickets," the report reads. "The Company announced a target of 1,000 reservations prior to the launch of private astronaut commercial service. Approximately 700 of these 1,000 have been sold to date."
Followed closely by retail investors ever since Virgin Galactic shares soared to over $55 in the lead-up to founder Richard Branson’s maiden voyage to space aboard the VSS Unity, the stock has slumped amid delays and regulatory concerns. All of this culminated in a lackluster October for the spaceflight company, with shares trading at around $19.50 — down over 25% year-over-year — ahead of Monday’s earnings report.
Virgin Galactic announced on Sept. 29 that it is cleared to fly FAA-licensed spaceflights following the conclusion of an FAA inquiry that focused on air traffic control clearance and real-time mission notification related to the Unity 22 flight in July.
However, on Oct. 14, management said that Virgin Galactic would be delaying commercial space travel service to the fourth quarter of 2022 and would not be conducting any more planned test flights in the remainder of 2021. This sent shares tumbling to cap off the month of October with a low of $18.75 — a level not seen since May in the buildup to Branson’s first spaceflight.
According to Andrew Chanin, co-founder and CEO of ProcureAM, the delay in commercial flight puts Virgin Galactic’s cash burn and allocation at the forefront of investors’ minds. ProcureAM manages the world's first pure-play space ETF (UFO), which includes Virgin Galactic as a holding.
“The cash raise over the summer from the dilution will be top of mind for investors for this report — where exactly the cash has been allocated,” Chanin told Yahoo Finance. “How quickly have they been spending money? Are they focusing on technology and sending more people up to space or diversifying their business?”
Indeed, diversification of Virgin Galactic’s business portfolio remains another major investor concern. And although commercial spaceflight competitors such as Jeff Bezos’ Blue Origin have been facing roadblocks of their own, Blue Origin’s overarching aim to make access to space more cost-effective and reliable through its reusable launch vehicles rather than primarily focusing on the space tourism market may put it in a stronger position than Virgin Galactic.
“An important thing to note is that competitors in the space tourism industry have diversified business lines while Virgin Galactic is relatively limited,” Chanin said. “We are interested to see if there will be other revenue streams the company can take on to entice investors. For instance, in the past, they have touched on point-to-point hypersonic travel and we think updates in that area could be positive news for investors.”
Ultimately, Chanin said, investors seem to want more guidance on the timeline and schedule for Virgin Galactic’s commercial operations.
“As we see the timeline shift more toward the end of 2022, we'll want to see if we can expect to meet that timeline or experience more delays,” he added.
This post will be updated with the results of Virgin Galactic's Q3 results Monday after market close. Check back for updates.
Thomas Hum is a writer at Yahoo Finance. Follow him on Twitter @thomashumTV
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