Virgin Galactic Q2 FY2022 Earnings Preview: Key Insights and What to Expect

Key Highlights

• Analysts forecast an EPS of -$0.36, a slight improvement from -$0.39 in Q2 FY2021.
• Projected revenue is expected to decline by approximately 50% compared to the same quarter last year.
• Virgin Galactic aims to ramp up production to six space vehicles annually to accelerate its space tourism growth.

Virgin Galactic Holdings Inc. (SPCE), founded by visionary entrepreneur Sir Richard Branson, recently unveiled plans to significantly increase its space vehicle manufacturing capacity. The company is establishing a new facility in Arizona designed to produce up to six spacecraft per year, underpinning its ambitions to expand the commercial space tourism market. This production scale-up is vital to establishing a steady revenue stream and curbing years of financial losses.

Investors eagerly await the Q2 FY2022 earnings release on August 4, closely monitoring whether these strategic moves will translate into improved financial outcomes. Despite anticipated continued losses—potentially marking the 14th consecutive quarter of negative EPS—there is cautious optimism about the company’s long-term trajectory. Revenue is also expected to experience a sharp decline this quarter.

In recent months, Virgin Galactic has taken strategic steps to position itself for accelerated growth starting next year. On July 14, the company announced plans to boost spacecraft production significantly. Earlier, on July 6, it revealed a partnership with a Boeing subsidiary to manufacture motherships, essential for carrying the spacecraft to around 50,000 feet before release. Additionally, a collaboration with luxury travel network Virtuoso was announced in late July to offer exclusive spaceflight seats to high-end clientele.

Virgin Galactic has commenced ticket sales for public spaceflights, with launches now scheduled for Q1 FY2023, delayed from earlier projections. Tickets are priced at $450,000 each, requiring a one-third deposit upfront and full payment prior to flight.

Over the past year, Virgin Galactic's stock has significantly underperformed the broader market. After a brief rally in early August 2021, shares declined steadily until January 2022 and have since traded sideways. Over the last 12 months, the stock recorded a total return of -75.4%, compared to -6.8% for the S&P 500 as of August 2, 2022.

Virgin Galactic Earnings Performance Overview

In Q1 FY2022, Virgin Galactic missed EPS estimates but exceeded revenue expectations, reporting an EPS of -$0.36 versus -$0.55 the previous year and generating $0.3 million in revenue, marking its fourth consecutive quarter with revenue after a prior stretch without any. The company highlighted sustained demand with approximately 800 reservations for space travel.

During Q4 FY2021, the company posted a loss per share of $0.31, consistent with the prior year. Revenue was $0.1 million, up from zero but down from $2.6 million in Q3 FY2021. Despite ongoing losses, Virgin Galactic maintained a strong cash position with about $931 million in cash, equivalents, and marketable securities at year-end.

For Q2 FY2022, analysts predict mixed results: another EPS loss, the 14th consecutive quarter, and a revenue drop of 50% to $0.3 million from $0.6 million a year earlier.

Virgin Galactic’s journey toward establishing a viable space tourism enterprise has faced numerous hurdles, including persistent losses, delays, regulatory challenges, and test flight setbacks since its public debut in October 2019. The company secured a full commercial launch license from the Federal Aviation Administration (FAA) in June 2021—the first of its kind for customer spaceflights.

Last year, Virgin Galactic completed its inaugural fully-crewed spaceflight, with Sir Richard Branson aboard. Though the mission achieved its test goals, it encountered FAA scrutiny after the spacecraft deviated from restricted airspace, resulting in a temporary grounding. The FAA reinstated flight approval in September 2020 following required adjustments. Originally targeting a commercial launch in Q4 2022, Virgin Galactic postponed this to Q1 2023 due to supply chain and staffing challenges.

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