Four months ago, Virgin Galactic (SPCE -1.63%) announced a bold plan to build a factory in Mesa, Arizona, that will manufacture up to six new next-generation Delta class spaceships a year. Throw in a new deal with Boeing (BA 0.90%) to build two new motherships to carry the spaceplanes, and Virgin sounds like it's on track with its other bold plan -- to launch spaceplanes full of space tourists 400 times a year.  

That is, unless Virgin Galactic runs out of money first.

Virgin Galactic by the numbers

On Thursday evening, Virgin Galactic gave investors its latest update on that score, and I'm afraid the news wasn't great. In fiscal Q3 2022, Virgin Galactic lost $0.55 per share on sales of $767,000. The sales were more than expected, but the loss was much more than expected -- about three times more money than Virgin Galactic lost a year ago in Q3 2021.      

Now, the good news is that Virgin Galactic lost money for a good reason. Despite still being unable to carry space tourists to space even three years after its SPAC IPO, Virgin Galactic is continuing to invest heavily in research and development as it upgrades its existing Virgin Space Ship (VSS) Unity and its Virgin Mother Ship (VMS) Eve for tourism flights, and prepares to begin building its fleet of next-generation Delta spaceplanes. Fully $97 million of the company's $146 million loss owes to monies spent on R&D.

Still, a loss is a loss, and Virgin Galactic's losses this year are already about twice as large as what it lost in 2019, before the pandemic. And all of this company's losses are starting to add up -- and to subtract down from Virgin's bank account.

Cash burn (i.e., negative free cash flow) for the third quarter totaled $107 million, twice what the company burned in Q3 2021. Furthermore, Virgin Galactic CFO Douglas Ahrens advised in the company's post-earnings conference call that cash burn will probably increase to $120 million or more in Q4 -- and even then may not have hit its peak level.  

The clock is ticking

What does this mean for Virgin Galactic's future prospects? Well, consider:

According to management, VMS Eve should be ready to begin commercial spaceflights by Q2 2023. Virgin CEO Michael Colglazier, however, confirmed on Friday that the company's second spaceplane, VSS Imagine, will not be ready for commercial spaceflights at any point in 2023.

Granted, Virgin Galactic is still preparing to build five more advanced spaceplanes -- the aforementioned Delta class. It's even lined up a couple companies to help build the Deltas -- defense company Textron, which will provide the "feathering system" and flight control surfaces, and the less-well-known Qarbon Aerospace, which will build Delta's fuselage and wings.

Once these spaceplanes are built, Virgin Galactic expects to be able to fly 400 times annually. At $450,000 a ticket, and six passengers per flight, this would seem to imply annual revenue in excess of $1 billion -- probably enough revenue to turn the company profitable. Unfortunately, the Delta class won't even begin flight testing until sometime in 2025, and won't be ready for commercial service before 2026.  

And that means the clock is starting to tick faster on Virgin Galactic's cash reserves.

After completing another share issuance in August, Virgin Galactic now has $1.1 billion in cash. But if the company is burning through cash at the rate of between $107 million and $130 million per quarter, this implies that Virgin Galactic could still run out of cash sometime within the next eight to 10 quarters -- perhaps sooner, if you assume that starting up commercial operations next year will increase cash requirements, or perhaps a little later, assuming Virgin Galactic can start generating some revenue from space flights with VSS Unity next year.

With the Delta fleet still at least 12 full quarters (three full years) away from commercial flight status, however, that still implies that Virgin Galactic will run out of cash before its business becomes self-sustaining, and will need to sell even more shares to bridge the gap.

Even with its stock down 76% over the past year, I fear Virgin Galactic stock has farther to fall.