Question: What does an unprofitable space company, one with no earnings and almost no revenue, call its "earnings report"? Answer: "Virgin Galactic's (NYSE:SPCE) First Quarter 2020 Financial Results." 

And so it was that on Tuesday the space tourism company established by Sir Richard Branson in 2007 and made public without an IPO in October 2019 released an "earnings report" that read a lot more like a business status update.

Virgin Galactic's WhiteKnightTwo mothership in flight.

Image source: Virgin Galactic.

Virgin Galactic by the numbers

In Q1 2020, Virgin Galactic collected all of $238,000 in revenue (down 87% year over year) and eked out a small gross profit of $65,000. Marketing, overhead, and research and development costs quickly ate up those funds, however, leaving Virgin Galactic with a $61 million operating loss for the quarter (up 42% year over year), and a $59.9 million net loss on the bottom line (up 41% year over year) after factoring in an income tax benefit, or $0.30 per diluted share.

In short, no profits for Virgin Galactic.

Profits, schmoffits

Of course, this was to be expected. After all, although Virgin Galactic has flown multiple test flights of its VMS Eve mothership and VSS Unity spaceplane, it has yet to begin carrying paying customers into space. And, well, no customers, no revenue. No revenue -- no profits.

Lucky for Virgin Galactic (and its shareholders), for the time being at least Virgin Galactic doesn't actually need profits. As management explained in its report, as of the end of March Virgin Galactic still had $419.4 million in cash on its books, alongside $12.3 million in "restricted cash."

Even assuming the company continues burning cash at the rate it did in Q1 ($60.3 million), that's enough cash to keep Virgin Galactic solvent for at least seven more quarters. By that point, one firmly hopes, the company will have succeeded in initiating commercial operations, begun flying passengers to space, begun collecting revenue from those passengers, and started earning some profits on that revenue.

Status update

Speaking of Virgin Galactic's first paying flight, the company did not state a specific target date for that mission. CEO George Whitesides did, however, assure investors that "we made significant progress toward our goal of opening access to space in a safe and responsible way" in Q1. In particular, he noted that Virgin Galactic has now "cleared ... 24 out of 29" of the conditions the FAA set for "Verification and Validation" of the flight system.

In addition, Virgin Galactic says it has collected more than 400 "One Small Step" deposits of $1,000 each from parties interested in flying on its spaceplanes at some future date (these being in addition to the 600-plus customers who have already bought tickets in advance). The CEO noted that these deposits are down payments "representing over $100 million of potential future revenue upon full ticket payment," which tells us that the company's initial ticket price -- $250,000 -- has not yet moved either up or down.

Virgin Galactic also expanded its list of potential future customers by 1,200, bringing total "registrations of interest in flight reservations" to approximately 9,200.

Wild card

None of the above, of course, was entirely unexpected. In the absence of commercial operations, all Virgin Galactic really could be expected to do at this point in time is continue its development work and build out its marketing list. What did come as a surprise was that Virgin Galactic revealed in a separate announcement on Tuesday that it had just signed a "Space Act Agreement" with NASA "to advance the United States' efforts to produce technically feasible, high Mach vehicles for potential civil applications." 

No dollar value was assigned to this new relationship with NASA. Nonetheless, Whitesides argued that the deal marks "the beginning of an important partnership for Virgin Galactic and [Virgin Galactic's sister-company that builds its spaceships,] The Spaceship Company that will support the future development of aviation technology."

In so doing, he also probably reminded investors of the reason many of them got excited about Virgin Galactic stock in the first place: Morgan Stanley's December 2019 "buy" recommendation, and the banker's assertion that if Virgin Galactic can build a hypersonic airplane business, it could one day be worth more than all the company's space tourism ventures combined.

Even in the absence of profits, that reminder alone was sufficient to send Virgin Galactic stock flying 5% higher in after-hours trading.