How Virgin Galactic (SPCE) Makes Money

Virgin Galactic carries payload cargo and offers engineering services

Virgin Galactic Holdings Inc. (SPCE) was founded in 2004 and is owned and backed by billionaire entrepreneur Sir Richard Branson. The aerospace company is focusing on developing spacecraft for human travel and tourism. As part of that goal, Virgin Galactic is working on a flight program to offer customers multi-day flights that include views of Earth from space. Its operations include designing, developing, manufacturing, ground and flight testing, and maintenance of its spaceflight vehicles.

The market for global sub-orbital transportation and space tourism is projected to reach approximately $2.6 billion by 2031. It is an emerging industry with only a handful of players racing to dominate the market. They include: Elon Musk's Space Exploration Technologies Corp., better known as SpaceX; Jeff Bezos' Blue Origin LLC; Axiom Space Inc.; and Boeing Co. (BA).

Key Takeaways

  • Virgin Galactic is an aerospace company developing a spaceflight system designed to offer travelers high-ticket space tourism adventures.
  • The company's main sources of revenue currently are carrying payload cargo and providing engineering services.
  • Virgin Galactic plans to generate the majority of its revenue from selling flight tickets to space once it launches its spaceflight services business.
  • The company plans to conduct its 23rd test flight of VSS Unity, one of its space vehicles, as early as mid-October.

Virgin Galactic's Financials

Virgin Galactic announced in early August financial results for Q2 of its 2021 fiscal year (FY), the three-month period ended June 30, 2021. The company's net loss widened to $94.0 million from $72.0 million in the year-ago quarter. The company has been generating virtually no revenue. In Q2, for example, it generated $0.6 million in revenue compared to no revenue in the same three-month period a year ago. The biggest expenses that contributed to the net loss were selling, general, and administrative expenses and research and development expenses.

Virgin Galactic highlighted in its earnings report that it had completed two successful spaceflights, the first in May and another in July. The second flight was the 22nd flight and, the fourth voyage into space, of the VSS Unity. The Unity is the company's spaceship built for transporting humans into space. The flight passed several test objectives, including evaluations of the cabin and customer experience. The first flight of the quarter carried scientific research that generated revenue for the company.

Virgin Galactic's Business Segments

Virgin Galactic operates as a single segment. The company's primary sources of revenue are from carrying payload cargo and by providing advanced technology aerospace engineering services to the U.S. government. Virgin Galactic's goal – and main strategy – is to generate the majority of its revenue from ticket sales for flights into space through a spaceflight services program.

Virgin Galactic's Recent Developments

On Sept. 29, 2021, Virgin Galactic announced that it is cleared to fly spaceflights licensed by the Federal Aviation Association (FAA), following an FAA inquiry. The inquiry was into issues related to Virgin Galactic's air traffic control clearance and real-time mission notification during a highly publicized flight of the VSS Unity in July. Branson was one of the passengers on that flight, making him the first billionaire space company founder to ride in his own spacecraft. The FAA accepted the proposed corrective actions by the company, including: updated calculations for expanding the protected airspace for future flights; and additional steps in flight procedures to ensure real-time mission notifications to FAA Air Traffic Control.

On Sept. 10, 2021, the company provided an update concerning the timing of "Unity 23", the 23rd test flight of VSS Unity, which will be conducted in cooperation with the Italian Air Force. Virgin Galactic said that it was resolving a pending issue related to a potential manufacturing defect in a part made by a third-party supplier. As a result, Virgin Galactic said that mid-October was the earliest it that it would open its flight window for Unity 23.

Article Sources
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  1. Virgin Galactic Holdings Inc. "Form 10-K/A for the Fiscal Year Ended December 31, 2020," Page 5. Accessed Oct. 3, 2021.

  2. Virgin Galactic Holdings Inc. "Form 10-Q for the quarterly period ended June 30, 2021," Page 27. Accessed Oct. 3, 2021.

  3. Bloomberg. "As per BIS Research Study, Global Sub-Orbital Transportation and Space Tourism Market to Reach $2.58 Billion by 2031." Accessed Oct. 3, 2021.

  4. McKinsey & Co. "Wall Street to Mission Control: Can space tourism pay off?" Accessed Oct. 3, 2021.

  5. Virgin Galactic Holdings Inc. "Form 10-Q for the quarterly period ended June 30, 2021," Page 5. Accessed Oct. 3, 2021.

  6. Virgin Galactic Holdings Inc. "VIRGIN GALACTIC ANNOUNCES SECOND QUARTER 2021 FINANCIAL RESULTS." Accessed Oct. 3, 2021.

  7. Virgin Galactic Holdings Inc. "Form 10-Q for the quarterly period ended June 30, 2021," Page 11. Accessed Oct. 3, 2021.

  8. Virgin Galactic Holdings Inc. "Form 10-Q for the quarterly period ended June 30, 2021," Page 30. Accessed Oct. 3, 2021.

  9. CNBC. "Richard Branson reaches space on Virgin Galactic flight." Accessed Oct. 4, 2021.

  10. Virgin Galactic Holdings Inc. "VIRGIN GALACTIC CLEARED TO FLY FOLLOWING CONCLUSION OF FAA INQUIRY." Accessed Sept. 29, 2021.

  11. Virgin Galactic Holdings Inc. "VIRGIN GALACTIC PROVIDES UPDATE ON UNITY 23 TEST FLIGHT." Accessed Sept. 29, 2021.

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