WHEN: Today, Thursday, June 29, 2023
WHERE: CNBC’s “Closing Bell: Overtime”
Following is the unofficial transcript of a CNBC exclusive interview with Virgin Galactic CEO Michael Colglazier on CNBC’s “Closing Bell: Overtime” (M-F, 4PM-5PM ET) today, Thursday, June 29. Following is a link to video on CNBC.com:
All references must be sourced to CNBC.
MORGAN BRENNAN: That’s right, Jon. Thank you. So joining me now is CEO Michael Colglazier and of course, we are in front of VSS Unity which is the spaceship that went to the edge of space today. Major, major milestone, what comes next?
MICHAEL COLGLAZIER: Next thing we’re gonna do Morgan is do it again. So, today was an incredible flight for us. Obviously, the first commercial flight that’s a big deal for the company, but more importantly, the dream is now kind of coming into play and to be able to take customers and see the reaction of our customers changes the entire attitude of the company. We’ve done the hard work. Now we’re going to move into service delivery. And so as we get repetition, we fly our Galactic 02 flight in August as we start our monthly cadence after that, I think we’re going to demonstrate to the world just how powerful the experience of this company is.
BRENNAN: You do have this backlog of about about 800 people, how are you going to decide who flies when and I ask that in part because we’re talking about ticket prices that span from $200,000 to $450,000 and up.
COLGLAZIER: Sure, and we also have research customers like yourself the Italians today, and those seats generally start at about $600,000 per, on a seat equivalent basis. So we carry two manifests, we carry a separate manifest for research clients like the Italians today. And in parallel, we run a manifest with our future astronauts as we call them private astronauts. And those folks are generally going to go in order, right kind of a FIFO order, and we’ll bring them through so you’ll see the people who signed up quite some time ago as our early fliers and then we’ll be flying this spaceship, Unity, on a monthly basis. So which is amazing for human spaceflight and commercial space. It’s pretty small economically. And when we then bring our Delta ships, the production model that we’re working on into service, which we expect to be in 2026, that’s when you’ll see the volume really take off.
BRENNAN: So we’re gonna see a ramp in revenue then as we do, as you can see these monthly flights but to your point, Delta class coming online 2026 Many analysts say this is the moment when you start to see a path to profitability. How many flights is it going to take for that to happen?
COLGLAZIER: The Delta ships on a variable basis are incredibly profitable, right, as you would expect in a fixed cost capital intensive industry once you’re through with the prototypes and building now production models, you can deliver this service on that variable basis, and it’s so powerful because while we expect them to cost $50 to $60 million on a variable basis once we’ve invested the — and petroleum efforts, we can fly them we expect 500 times or so and so there’ll be very profitable to fly. How quickly we expand the fleet then determines how much of our profits we’re injecting into growing and scaling the business versus dropping through to the bottom line and we’ll make those calls as we get closer.
BRENNAN: And now you’re selling more shares to raise more capital in focus for the market another $400 million dollars currently I think being sold or underway. Is this going to be enough cash to bring Delta online?
COLGLAZIER: So we always are going to keep strengthening our balance sheet. I think it’s been something that’s been very important for Virgin Galactic, these early commercial space companies there and obviously it’s what has been a pre-revenue company and for the next few years, a fairly modest revenue company, it’s incredibly important to keep strength in our balance sheet. So yes, we put a $400 million structure out there now. That gives us a lot of runway. We have choice as we scaled the business that’s kind of all starting firms that are capital intensive, do, how much do we invest and what pace do we invest in the scaling of the fleet? Now we want to scale it. That’s where we’re going to drive the greatest return for our shareholders. And we believe the capital markets will be available at whatever need we have for that. But if we find the capital markets are tight, we can always bring back the pace at the fleet scaling and manage our balance sheet that way.
BRENNAN: How big is the total addressable market for these private space flights?
COLGLAZIER: I think it’s going to be very large. I think it’s going to be a capacity constrained market for quite some time. And obviously, the size of the market is somewhat—
BRENNAN: Why do you think that? Does a recession change that?
COLGLAZIER: No because the experience is just so shockingly, powerfully important and meaningful to the people who go and so I’ve seen this through and had extensive conversations with our own team that we’ve brought up, talked to Colonel Villadei today from a researcher, government astronaut and training, how meaningful this experience is, and so the price which is expensive but I want to talk about it relatively is high but the value is so strong. I think that’s where the market comes from because the experience is so worth it. And it is an expensive piece. $450,000 is our entry price point. Now, relatively that’s about two orders of magnitude less than the price of somebody who wants to go to the space station. Now it’s a very different experience, but that’s very unattainable. And as we scale our fleet, as we put fixed cost in, as we now get low variable cost ships, and we start to be able to bring our cost structure down, I think the market expands far faster than our capacity will be able to keep up. And so that really becomes the objective of the company is to scale this fleet.
BRENNAN: Commercial human spaceflight, private space tourism, it’s been thrust into the spotlight for better or worse, right or wrong in the midst of this tragic incident that we saw with a submersible that was diving to the Titanic last week. Talk to me about safety and whether you’ve seen any kind of impact to demand or questions raised about safety from your own customer base in the wake of that.
COLGLAZIER: First Morgan, like, from people all around the world, our hearts are going out to the family, to the friends of the crew that was lost. It was an incredibly tragic incident that we all were horrified to watch unfold. Second, comparing that to the commercial space industry is just simply an apples to oranges comparison. Virgin Galactic ships are built, they’re designed, they’re maintained in a way that leverages decades of experience in the aerospace industry, we’re regulated by the FAA. We’ve had an operative’s license for the FAA since 2016. We’ve had the ability to fly commercial paying passengers since 2021 on that FAA approved license. I think most importantly, we’ve been sharing our data with the FAA through this entire company’s history. The FAA sits with us in mission control at every flight. They were here at our flight today and so, they’re embedded in with us and able to be growing as we grow our company as we grow this industry. And while humans going to space with commercial companies is relatively new, the bedrock foundation of safety that this entire company is built around, it is not all of our industry, especially Virgin Galactic, is going to build this and fly when we’re safe. And we do the data analysis. We do the hard engineering work, we maintain it the right way, and we don’t fly until we’re ready. We’re ready today and that’s why we launched our commercial service.
BRENNAN: Where’s Richard Branson? This has been his baby. He’s still the largest stakeholder. How actively involved is he in this in this company now?
COLGLAZIER: It’s incredibly awesome to have a founding story and a founder that’s as authentic and just passionate and fun as Richard is and his joy of this company. Now, the Virgin Group remains our largest shareholder, they’re very active. Richard and I are kind of what’s happening today and talking about what’s going on with the flight. But we’re a public company. We have an independent board of directors, we’re setting great strategy and as you’d expect, we keep our largest shareholder group highly involved. But Richard’s passion for this company is going to continue and our passion for Virgin and kind of be a pinnacle to Virgin experiences, something that’s very important to every team member at Virgin Galactic.
BRENNAN: And he’s certainly been very active on social media even though he’s not here in person. I suppose here in spirit—
COLGLAZIER: His presence is always here.
BRENNAN: That’s right. Michael Colglazier, thank you so much for joining me exclusively, post flight on this major day for Virgin Galactic and Jon, for commercial human spaceflight and human spaceflight in general as we do enter this new era where it becomes more accessible. And yes, we’re talking about six figure price tags but more affordable as well versus what history has bared out.
