Good afternoon. My name is David, and I will be your conference operator today. At this time, I would like to welcome everyone to Virgin Galactic's First Quarter 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Thank you. Hosting today's conference call will be Michelle Kly, Executive Vice President, General Counsel and Secretary at Virgin Galactic. As a reminder, today's call is being recorded. I would now like to turn the conference over to Ms. Cley.
Please go ahead.
Thank you, and good afternoon, everyone. Welcome to Virgin Galactic's Q1 2020 earnings conference call. On the call with me today are George Whiteside, Chief Executive Officer and John Campania, Chief Financial Officer, who will provide prepared remarks. Also on the call is Enrico Palermo, Chief Operating Officer, who will be available along with George and John to answer questions during the Q and A portion of the call. Earlier today, we issued a press release and made a slide presentation available on our Investor Relations website, which provides an overview of our business and financial highlights for Q1 of 2020.
During today's call, we will make certain forward looking statements within the meaning of the federal securities laws. Forward looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and as a result are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from forward looking statements in this communication. For more information about factors that may cause actual results to materially differ from forward looking statements, please refer to the earnings press release we issued today and other documents filed by Virgin Galactic from time to time with the Securities and Exchange Commission, including our Form 10 Q for the Q1 of 2020. Forward looking statements speak only as of the date they are made.
Readers are cautioned not to put undue reliance on forward looking statements. With that, I'd like to turn the call over to George Whiteside.
Thank you, Michelle. Good afternoon, everyone. First and foremost, I would like to start by offering my sincere hope that you and your families are staying safe during this unprecedented time. Today, I will provide an update on our Q1 activity and the milestones we achieved during the quarter. I will also update you on the impact of COVID-nineteen on our operations.
I will then discuss business highlights for the quarter and John will provide detail regarding our financial performance. Before we dive into our Q1 results, let me give a very brief refresher on our investment thesis that I walked through in detail last quarter. Virgin Galactic is the world's first and only public company focused on commercial human spaceflight. And we believe the commercial exploration of business model is highly efficient underpinned by the reusable, scalable nature of our spaceships. The design features meaningfully reduce the operational cost of each spaceflight over time, delivering strong unit economics.
We expect to benefit greatly from our 1st mover advantage, which is reinforced by significant barriers to entry for potential new competitors, supported by the substantial investment we've made in our technology and the progress we've achieved to date. In addition, we are confident in the financial strength of our business. And while we have not yet reopened commercial sales, I will provide details later in our call about the progress we have seen with our One Small Step initiative through which we have begun to validate the huge interest we are seeing from people signing up to our future flyer list. Our customer base is highly engaged and we have seen sustained interest in our product offering since our founding. Once commercialized, we intend to accelerate our business momentum by bringing more spaceships online and increasing our flight rate.
Over time, we expect to benefit from operating and build efficiencies. John will go into more detail on the financials later, but we remain in a strong cash position and we have no debt on our balance sheet. Finally, we have a strong management and flight operations team in place with decades of experience in the space and aviation sectors. Turning to Slide 4. Before I walk through the milestones we achieved during the Q1, I have a few updates on how the global COVID-nineteen pandemic, which is at the top of everyone's minds, has affected our company.
First, I want to make it clear that the health and safety of our employees, their families and our local communities are our top priorities and we believe we must all do our part to slow the spread of COVID-nineteen and support the nation's healthcare workers. As such, we have taken appropriately cautious steps to protect our workforce and support community efforts. As part of these efforts and in accordance with applicable government directives, we initially reduced and then temporarily suspended on-site operations at our facilities in Mojave and Spaceport America in March. During that period of time, approximately 2 thirds of our employees and contractors were able to complete their duties from home, which enabled much critical work to continue, including engineering analysis and drawing releases for VSS Unity, VMS EVE and the 2nd SpaceShipTwo vehicle, process and documentation updates as well as workforce training and education. Correspondingly, during this period, approximately 1 third of our workforce was unable to perform their normal duties from home.
In April, in accordance with our classification within the critical infrastructure designation, we resumed some limited operations, which we then ramped up each week as we developed revised operational and manufacturing plans that conform to the latest COVID-nineteen health precautions. As of today, over 90% of our employees whose work requires them to be in the facilities are now working back on-site. For the time being, we are encouraging those employees who are able to work from home to continue doing so while we develop our plans for the safe return of those workers to our facilities. In our facilities, we're taking additional measures to ensure the health and safety of our employees, which include universal facial coverings, rearranging facilities to follow social distancing protocols, conducting active daily temperature checks and undertaking regular and thorough disinfecting of surfaces and tools. We're also testing employees and contractors for COVID-nineteen, utilizing both PCR and antibody testing.
We have done this via external testing companies, which have excess test capability available. As of May 1, we have tested 5.79 of our employees, which comprises the vast majority of anyone who is required to work on-site, as well as a substantial fraction of the employees who are still working remotely. We're pleased to say that so far we have retained all of our employees, even those who are unable to work from home. Turning to Slide 5. We have also been focused on doing what we can to leverage our capabilities and resources to assist with COVID-nineteen relief efforts.
We entered into a Space Act agreement with NASA, under which our engineering teams at Virgin Galactic and the spaceship company are partnering with NASA to develop innovative solutions to the problems facing healthcare workers on the front lines. This team has designed and tested a low cost breathing hood called the PPB hood, which provides oxygen rich positive pressure to patients in need. The team has produced 400 PPB hoods pending EUA approval from the FDA. These prototypes are now being tested for comfort, ease of use and functionality. We've also been working with NASA on a separate project to develop and build negative pressure enclosures, which are specialist equipment that cover a patient on a gurney or a hospital bed to protect medical staff by containing infected air and filtering it so that it does not contaminate the wider room environment.
We've donated medical supplies from our stocks to communities in California and New Mexico, including masks, suits and gloves. We're also donating powered air purifying respirators to local hospitals. These important machines offer additional protection for the frontline workers who are in closest physical proximity to those patients suffering from COVID-nineteen. Looking ahead, we believe the real impact of COVID-nineteen will be determined by the pace at which we can get back to normal course operations. This will be partly influenced by local and federal governments.
For example, potential changes to stay at home orders and interstate travel restrictions. I'm encouraged by the tremendous efforts of our employees in responding to the challenges of COVID-nineteen and how they have responsibly handled new operational and manufacturing protocols. The fact that we were able to successfully conduct Friday's test flight is a testament to their commitment and resilience. It is too early to fully quantify the duration and severity of the impact the COVID-nineteen will have on our business and our pace of progression, but we will continue to update the public and the investment community as we gain better insight. However, as demonstrated by our successful glide play on Friday, we are working as efficiently as we can during this unique time.
Turning to Slide 7. Let me start by briefly highlighting some of the key milestones we achieved in 2019 that demonstrate our progress and pace so far. Following our successful launch of the 1st commercial space vehicle to put humans into space in December 2018, we flew the 1st non pilot crew member, our chief astronaut instructor Beth Moses on a commercial space vehicle in February 2019. We built and transferred operations to our commercial headquarters at Spaceport America and moved our carrier aircraft VMS EVE to New Mexico. In October, we became a publicly listed company trading on the New York Stock Exchange.
We also launched our astronaut readiness program with the help of our partners at Under Armour. Now turning to the specific achievements we accomplished during the Q1 of 2020 on Slide 8. Any of these we disclosed at the time, so I won't go into great detail on all of them, but to highlight just a few. On January 8, 2020, we announced that the 2nd spaceship in our fleet had completed a major build milestone and achieved weight on wheels. We achieved weight on wheels faster and more efficiently than our and more efficiently than our first chip allowing us to reach the weight on wheels milestone approximately 9 months faster than our first chip, largely through the use of modular build processes as well as experience curve benefits.
This milestone is a significant testament to the growing expertise and capabilities of our team and demonstrates the strength of our vertically integrated end to end aerospace manufacturer, the spaceship company. Turning to Slide 9. During the quarter, we continued to make strong progress on building our spaceships. In addition to the weight on wheels milestone, we also made progress in several other areas in the build program of our 2nd spaceship, including completing numerous structural and mechanical installations such as installing landing gear doors, feather actuator structure and feather horn attachment, as well as a number of other technical achievements outlined on this slide. We also commenced assembly of the spaceship's flight control systems and began preparing for integrated vehicle ground testing of our 2nd spaceship, which is the series of system and structural tests the spaceship will undergo before its first flight.
As I mentioned, we are reworking many of our manufacturing processes and facility safety protocols to ensure we can continue operating during the COVID-nineteen pandemic. We do not yet have a sense of the full impact that these new protocols will have on our manufacturing pace, but I'm encouraged by how the team has embraced their responsibilities to keep their coworkers safe. Turning to Slide 10. On February 13, we relocated our first spaceship, VSS Unity, from Mojave to Spaceport America in New Mexico, where it joins our carrier aircraft VMS Eve. This captive carry flight provided a valuable opportunity for engineers to evaluate VSS Unity for over 3 hours at high altitude and cold temperatures, a longer period of time than is experienced during missions to space.
It also provided an opportunity to conduct pilot training and familiarization. Turning to Slide 11. I'm pleased to say that Spaceport America is now fully operational to conduct test flights. The relocation of our operations personnel is complete, bringing our total number of staff in New Mexico to 178 people. This quarter, we completed the build out of the 1st and second floors at Spaceport America.
We also made significant progress towards completion
of the 3rd floor, will
be used for astronaut training and flight preparation activities. Specifically, we moved the customer spaceship training cabin to its permanent home in the astronaut lounge on the 3rd floor and we completed its installation in its individual pod. We look forward to sharing this incredible training space with the public and the investment community later this year. We continue to have a team presence at Spaceport America with all employees working under strict COVID-nineteen safety protocols. Turning to Slide 12, I'll provide an update on the FAA approval process.
As I mentioned last quarter, we already have our commercial launch license, which allows us to conduct spaceflight missions. We are continuing to go through the final process to fly paying customers by providing the FAA with data that verifies and validates elements of our commercial license. We have now cleared 24 out of 29 of the verification and validation elements, 4 of which were completed since our last update in February. Many of these elements focused on verifying that the cabin is ready for flights, including obtaining and providing data on air quality, circulation, pressurization and ventilation. We are continuing to work hard on the remaining V and V elements and we plan to provide updates as appropriate.
Turning to slide 13. Now that we have relocated Spaceship Unity to Spaceport America, we have started building experience and familiarity with all the various aspects of mission execution: ground facilities, staff support, aerospace coordination, external interfaces and services, hosting and hospitality. As I mentioned last quarter, our primary focus is now to complete our test flight program. We continue to make progress on this during the Q1, including completing 5 VMS East carrier aircraft flights, a captive carry flight to ferry VSS Unity from Mojave to Spaceport America as well as significant preparations for the 1st glide flight of VSS Unity from Spaceport America. As you may have seen, last week we conducted a successful glide flight of our spaceship VSS Unity on May 1, 2020.
I believe this was a major achievement coming during the challenges of the COVID-nineteen pandemic, which required resilience, creativity and a stringent commitment to workforce health protocols. The team performed brilliantly. This glide flight provided the first opportunity to test all the components required to fly the carrier aircraft, VMS EVE, and spaceship in glide configuration out of a new home base and in new airspace. During the glide flight, the pilots performed a series of maneuvers of VSS Unity designed to gather data about the spaceship's performance and handling qualities. They also executed some of the key elements of a spaceflight profile, including takeoff and landing, along with high altitude release of the spaceship from the carrier aircraft.
The flight test provided an opportunity for the pilots and spaceflight operations team to continue familiarization with the new airspace around the gateway to space and a chance to capture valuable in flight data and conduct further pilot training. This data will be used to enhance our aerodynamic modeling and verify against similar maneuvers that were performed earlier in VSS Unity's test flight program. Once we finish analyzing the data from this flight, we will fly at least one additional glide flight. But as always, I flag that our engineers may want to repeat a test point and fly another flight. Once the glide flight portion of our test flight program is complete, we will focus our efforts on completing our powered flight program.
We will provide further updates as we continue to progress through our test flight program. As I have said previously, our focus for this year from a company and engineering perspective is working to get the vehicles and our operations prepared for long term regular commercial service. We also remain focused on flying Richard Branson to space as soon as we can. Turning to slides 14, 15 and 16, here are a few images from last week's Glide Flight. We've also included a link to a brief video of the Glide flight.
Turning to Slide 17. Earlier today, we announced we have entered into a Space Act agreement with NASA to facilitate the development of high speed technologies over the coming years. In partnering with NASA, we will help to advance the U. S. Efforts to produce technically feasible high Mach vehicles for potential civil applications.
We believe we can leverage our robust platform of advanced technologies, significant vertically integrated design, engineering and manufacturing capabilities with the spaceship company and thousands of hours of flight training combined with the historic capabilities of NASA to develop additional aerospace applications. We are also the only team designing, building and flying a crewed vehicle at over Mach 3 at the edge of hypersonic flight, providing 1st mover advantage. This will enable the progression of new technical steps to improve U. S. Competitiveness and explore potential new sustainable solutions that aim to inform the development of national strategies for high speed travel.
We believe there are significant opportunities to apply higher speeds to aviation industries and drive technological development. We're very excited to be partnering with NASA and see this as an area with tremendous growth potential that we will continue to invest in alongside our commercial spaceflight operations. We believe this next generation of high speed travel could broaden consumer access to safe, customer driven, efficient and environmentally responsible transportation. Our design is focused on a winged vehicle concept, enabling sequencing and station holding capabilities that are not possible with vertically landed concepts. Turning to Slide 18.
On February 26, 2020, we launched our One Small Step initiative, which marked a significant milestone as we prepare to reopen ticket sales. This program offers advantages both to our customers and to the company. Once the new seats are released, they will be offered first to 1 Small Step registrants. 1 small step registrants who now form our new spacefairer community will also enjoy an enhanced relationship with Virgin Galactic in terms of communications and other dedicated initiatives on the customer journey to becoming astronauts. For the company, this program augments the direct sales funnel and allows us to begin establishing relationships with future customers.
It also provides us with a pool of qualified prospects for conversion via 1 Giant Leap to a confirmed spaceflight reservation and full future astronaut status. We've been delighted by the immediate positive response to the One Small Step initiative. Over a short period of time, we have received over 400 deposit payments from individuals from 44 countries, which exceeded our expectations. If we can convert all of these customers, that would represent well over $100,000,000 of future business depending on ticket price. Turning to slide 19.
During last quarter's earnings call, I provided an overview of our direct sales funnel, which remains strong in each of the leads, prospects and future astronauts stages. During 2019, we rolled out a regular cadence of milestone updates, including our 2nd spaceflight and the reveals of the Spaceport interior and customer spacesuits, emphasizing the significant progress we've been making towards commercial service. This program was supported by successful campaigns in traditional and social media. The ambition behind this program was to create a pool of prospects for spaceflight sales. And as we went through 2019, we used the news flow to encourage those potentially interested in flying with us to register online.
During the Q1, we continued taking steps to strengthen our pipeline of registrants, including launching an active social media campaign to promote new and exciting project related content featured in the mission update communications we periodically send to those who register. During this campaign, registrant numbers grew from our previously reported 7,957 as of February 23, 2020 to the current 9,160 as of April 29, 2020, an increase of roughly 15%. We executed another campaign around the launch of One Small Step to drive sign ups primarily by social media and email including 4 short promotional films which have now been viewed more than 1,000,000 times. This campaign helped drive over 400 spacefairer customers who have signed up for 1 small step to date representing both registrant conversions and direct applicants. The number of new spacefairer customers is rapidly approaching the 600 future astronauts who have already signed up and we are pleased to see continuing healthy growth in all stages of our sales pipeline and strength and stability in our community.
Importantly, as a result of strong relationships and an active engagement strategy, we've seen no meaningful increase in refund requests from our future astronauts as a result of COVID-nineteen. We think the major factor here is that the financial profile of many of our customers helps limit the impact of economic downturns on our business. In addition, our astronaut office, which takes care of our future astronauts, spacefarer and registrant communities, has been able to function fully and operate normally throughout this crisis. I would now like to turn the call over to our CFO, John Campagna, who will provide some additional detail about our Q1 financial results. Thanks, George.
Looking at Slide 21. We are pleased with our Q1 results, which reflects our ongoing progress as we settle into life as a public company. We are in a strong cash position and ended the quarter with cash and cash equivalents of $419,000,000 on our balance sheet as of March 31, 2020. Revenue for the quarter was $238,000 which we generated by providing engineering services. Net loss for the quarter was $60,000,000 and represents our 1st full quarter as a public company.
Our net loss narrowed from $73,000,000 in the Q4 of 2019. Non GAAP SG and A expenses have been adjusted to exclude stock based compensation and transaction related costs associated with the preparation and filing of an S-one registration statement in the Q1, and non GAAP R and D expenses have been adjusted to exclude stock based compensation. GAAP SG and A expenses for the quarter were 27,000,000 dollars Non GAAP SG and A expenses for the quarter were $23,000,000 GAAP R and D expenses for the quarter were $34,000,000 while non GAAP R and D expenses for the quarter were $33,000,000 Adjusted EBITDA, which excludes stock based compensation and transaction related costs associated with the preparation and filing of an S-one registration statement in the Q1 totaled negative 53,000,000 This is compared to adjusted EBITDA of negative $55,000,000 in the Q4 of 2019. Cash paid for capital expenditures was $4,000,000 in the Q1 of 2020 compared to $6,000,000 in the Q4 of 2019. Capital expenditures in the Q1 consisted primarily of vehicle tooling costs and investments in Spaceport America as we continue to prepare that facility for commercial operations.
Lastly, we completed the redemption of all outstanding public warrants on a cashless basis on April 13, 2020, in accordance with the warrant agreement. All public warrants and units ceased trading on that date, so we now only have common shares trading publicly. Turning to Slide 22. I'd like to take some time to run through some of the line items on our income statement to provide more context on the drivers behind some of these numbers. 1st, on revenue, as we expected, revenue in the quarter was minimal and was driven by providing engineering services under one of our government related contracts.
Looking forward to the rest of 2020, our primary focus is executing on our test flight program and ensuring the safety of our workforce given the challenges associated with the COVID-nineteen pandemic. Because of this, we anticipate minimal revenue for the remainder of the year. Turning to R and D. As a reminder, our vehicle costs currently sit within R and D and will continue to be expensed there until we achieve technological feasibility. While subject to change, we anticipate achieving technological feasibility once we have completed a powered test flight to space with 4 passengers in the cabin.
At the point of achieving technological feasibility, we'll begin to capitalize our vehicle costs. Our R and D expenses for the quarter totaled $34,000,000 a decrease of $3,000,000 compared to the Q4 of 2019, primarily due to a cash incentive plan disbursement that was paid in 2019 in connection with the close of the transaction with Social Capital at Esophila as well as certain cost reductions taken during the quarter. Our SG and A expenses for the quarter totaled $27,000,000 a decrease of $10,000,000 compared to the Q4 of 2019, primarily due to a cash incentive plan disbursement and transaction related expenses that were paid in 2019 in connection with the close of the transaction with Social Capital ahead of Sofia as well as certain cost reductions taken during the quarter. As I mentioned on our last call, we use adjusted EBITDA as a key measure of our performance. Adjusted EBITDA excludes stock based compensation and non recurring transaction costs.
Our stock based compensation for the period increased by $1,000,000 to $4,000,000 compared to the Q4 last year and represents our 1st full quarter of incurring those expenses. Adjusted EBITDA in the quarter improved as a result of management's actions to reduce expenses in light of recent economic developments associated with the coronavirus pandemic, including reductions in bonuses. Turning to Slide 23 and looking at the cash flow statement. The decrease in cash and cash equivalents over the quarter totaled $61,000,000 an improvement compared to the previous quarter, primarily as a result of a reduction in transaction related costs and management's actions to reduce cash spend. Although we are not providing specific guidance on cash burn, the Q1 of 2020 represents our full quarter as a public company and we believe is an approximate indication of our ongoing cash burn for the incremental public company related costs.
Cash paid for capital expenditures decreased from the prior quarter by $2,000,000 to $4,000,000 Capital expenditures for the quarter were primarily attributed to continuing investments in Spaceport America operational readiness and vehicle tooling costs. While we continue to maintain a healthy balance sheet, given the current economic climate, we are taking additional steps to preserve our liquidity, including reducing executive bonuses and temporarily reducing executive and director compensation and deferring or eliminating non essential hiring and contractor engagements. Finally, I would like to quickly touch on the S-one registration statement we filed with the SEC on Friday. Under the terms of the registration rights agreement entered into by Virgin Galactic Holdings and Social Capital, Head of Sofia, in connection with our merger, we had a contractual obligation to register the resale of the shares of a handful of our shareholders within 6 months of closing the transaction, which we have now done. I would now like to turn the call back over to George for some final remarks.
Thanks, John. Before we turn to Q and A, I would like to talk about our priorities for Q2 and beyond. Clearly, this is an unprecedented and challenging time for companies and individuals across the world. Our number one priority is the health and safety of our employees, their families and the communities in which we operate. We remain focused on completing our test flight program and preparing for commercial launch as soon as we are able.
The successful completion of our first free flight of VSS Unity on Friday was a key milestone in that respect. As I outlined earlier, while we have made tremendous progress over the past few weeks, we continue to work on our manufacturing processes and facility safety protocols to ensure we can continue operating successfully during the COVID-nineteen pandemic. It is too early to fully quantify the duration and severity of the impact that COVID-nineteen will have on our business. I would like to thank our entire team for their continued dedication and passion in the face of such challenging times. I'm tremendously encouraged that during an unprecedented crisis, virtually our entire customer community has remained with us, and we have rapidly expanded the number of spacefarers who have put down money to express their desire to fly to space with us.
This underscores how as it has in past downturns, our customer base is remarkably resilient, which will serve the company well going forward. I'm also tremendously excited about our new partnership with NASA around high speed flight technologies. I truly believe NASA and ourselves are the leaders in civil high mach flight technologies and what we will create together will be amazing. Finally, the team is excited about one of our long awaited milestones, which we expect to announce in the coming months, the unveil of our commercial customer cabin. Our entire team remains fully focused on preparing for commercial launch and opening up access to space, and we look forward to sharing more with you on future earnings calls.
I'll now hand over to the operator for Q and A. Thanks very much.
Thank you. Your first question comes from the line of Robert Spingarn with Credit Suisse. Your line is open.
Good afternoon, guys.
Hey, Ross.
George, I'd like to start with the time line. And obviously, recognizing that we are in an unprecedented situation, you've cautioned around that. But what can you tell us about the shift in the timeline, whether it's COVID driven or just the normal ramp to getting into commercial service?
Well, Rob, I think, what I would start with is that it was a really big deal to get off this last flight on Friday. The ability of the team to essentially operate under COVID health constraints was something that I was keeping a close eye on as we progressed through April. And the fact that we were able to get this flight off in that time was heartening to me because it suggested that we are able to create updated operational protocols that will allow our team to operate safely and carry out test flight missions. I think the big question now is how does that sort of play out? I think that's the question nationally as well.
How there's an infinite amount of questions on that front, but that is what we are really focused on. I think what we need to do next is fly at least one more glide flight and then get into powered flight testing and see how that goes. We're feeling pretty good overall. The fact that we were able to do this flight was a big step of confidence, I think, that we can operate safely and effectively during this COVID timeline. But I'm I think basically we need to see how that goes for a bit before we give sort of projections for the remainder of the Powered Flight Test program because I really want to get a sense of how if at all these constraints affect
current regime, could you do a powered flight or do you have to wait for further adjustment and lockdown and state ordered type changes?
Yes, good question. The short answer is no. We work in close partnership with the New Mexico Spaceport Authority as well as the other relevant authorities, Albuquerque FAA, the Range Control at White Sands and Holloman. And the operational interfaces for Friday's Flight really were flawless. They worked really well.
We have been doing a lot of relevant at the relevant government centers did a great job and it all worked very smoothly. As you know, Rob, as part of our AST license, we're able to conduct power flights under that license. So, we have no regulatory constraint in that respect. I think what you can expect is continued high communication between us and the local government authorities, state government authorities, FAA, the federal folks. But I think right now, what we have demonstrated is that we have we did a tremendous amount of work in late March and into April to figure out how to conduct proper health COVID protocols in an operational flight environment.
And we did that successfully. Now I don't know how long we're going to have to go through that. Hopefully, this pandemic does recede over the course of the year. But what we've proven is that we can continue operations in that environment. Now, that said, it's not all perfect.
We did restrict the number of people on-site, which can have an impact. And obviously, we're trying to follow various health protocols in terms of distancing and various other things. So those are the kinds of things I want to monitor as we go forward over the coming period of time to see how really how quickly we're able to progress. I think we've done well. The fact also that we've been I think right out in front from an industrial manufacturer and operator perspective on COVID testing, I think has really helped a lot.
We were able to identify a provider who had excess capacity early and then beginning testing our folks quickly so that when they come back to work, they can have increased confidence that they're going to work in a safe environment. When you combine that with all the other things that we're doing in the facilities in terms of sanitary actions and masks and everything else, I think people are feeling pretty good when they're coming to work, which is obviously really important. So anyway, I don't think we have any major constraints, but there will be things that we'll need to monitor and we'll need to see how those things affect our operations as we go forward.
Your next question comes from the line of Adam Jonas with Morgan Stanley. Your line is open.
Thanks, operator, and thanks, George, and everybody on the call. I hope everyone's healthy and doing well, both with the community of the company and your families. Question on the Space Act agreement with NASA. In the press release, George, you said we see this as an area of tremendous growth and we'll continue to invest in it alongside our commercial spaceflight operations. Does today's agreement change either the ramp or run rate of CapEx or R and D spending over the next couple of years anyway that you'd like to highlight?
Not in the immediate months. So, great question. I mean, I think what this does as you know is establish a framework for us to have technology interface and shared sort of research areas that will allow us to make quicker progress on key areas that are the long lead technology areas for a Himach vehicle. And as you've probably seen in the releases, we're going to be focusing on thermal issues and propulsion, which anybody who knows about high Mach vehicles, these are 2 of the key areas, right? And so NASA has tremendous amount of background in these areas that we can take advantage of, but they're also really interested in getting real data from operating high mach vehicles like our spaceship.
So and I think that what's been really heartening is to see the way that our teams are interacting well. So we've now built up quite a great team internal working on Himach Technologies and they've got some great relationships with the folks at Langley some of the other centers. And so, I think that this will serve as a way to make sure we're moving quickly on the longest lead we're able to do that in a smart way because one of the things that I've learned about development is you really have to focus on the long lead issues first and make sure you've got great teams working on them. So we're grateful to Doctor. Kenyon at the Arrow branch and others for partnering with us on this.
And I think we're In my
In my discussions at least with investors, prospective investors, current investors, very common question we get is about Blue Origin, which you've highlighted as one of your very few competitors. You're obviously much farther down the road and putting people to space and commercialization than they are, but 2 different paths and in some cases, some very significant differences. But when your perspective space tours and customers ask you kind of what's the difference between the experience that you offer and what Jeff and the folks at Blue are talking about? Kind of how do you explain that? And again, I recognize the time
to market is totally different. You're the only game in town now, unless you want to go on a Soyuz. So,
anything you want to highlight? Thanks.
Yes, sure. What I'd like to share, as you know, I have always been a big believer that this market is big enough for a couple of entities. I think it's going to be supply constrained for a while to come. And the growth that we've seen in some of the other customer funnel areas underscore that. But what we've done is pursue 2 fundamentally different architectures, right?
And the basis of that choice is dependent really on the longer term areas of investment and market sizing that or market focus that both teams are working on. And so we have chosen a winged vehicle architecture that is very conducive to evolution into a highmark point to point system. The great folks at Blue have chosen a system that is very well suited to future planetary and interplanetary exploration as evidenced by the great win that they got from NASA last week in the lunar lander area. The vehicles that they've got is really good for landing on the moon. What we think is that our vehicle is really good, both from the perspective of a customer experience to suborbital spaceflight, which is, of course, our primary near term market.
The fact that we have this great air launch architecture, which we tested on Friday, where we take the spaceship up to 50,000 feet gives us an enormous comfort level around safety, because we're using airplane technologies for the first 50,000 feet and the last 50,000 feet. And it'd be a really nice smooth ride up to that altitude and then also landing. It was awesome to see Dave Mackay, our Chief Pilot land the spaceship for the first time on the runway in New Mexico just like 100 and eventually 1,000 of future astronauts will fly. The winged architecture that we have is a very simple hybrid rocket motor and we think that that's a great underscoring our confidence and our safety posture. And of course, the fact that we've got a ton of windows and people will be able to float around the cabin will be great things.
So as always, I like to say, I think there's going to be great experiences. Obviously, ours is around 90 minutes and theirs is about 11. But I do think that there's going to be great experiences with both and we wish the Blue team well as they embark on a very exciting thing, which is a focus on lunar exploration. And that will be terrific as we pursue sort of point to point stuff back on planet Earth. So that's how I'd answer your Hi,
Hi, everybody. Thanks for the time.
Hi, Joe. I
guess this is for George. You have 9,000 or so indications of interest, I think. You've compelled 400 of those people to give you a small deposit. How should we think about the balance? Are these people that you've actually spoken to?
Or are they sort of up next to get a phone call sometime during Q2? How many of them have said no? How many of them have said I'm thinking about it? Can you just give us a sense of what sort of steps remain for the balance?
Yes, that's a great question. So I think the good news is that no one said no. The headline is we're working through it as quick as we can. Having 400 actually rapidly growing past 400 folks already sign up, getting close to the 600 folks that we've already signed with sort of full contracts or full deposits is encouraging to me. The fact that we now have this another 1,000 plus people that just added their names to the queue on the registration of interest side is great.
I mean, so that side of things is growing quickly. And I do think that the folks who are signing up for the small step program are the folks who will buy tickets. And that's encouraging because we're rapidly building out the 1st few years of our customer operations. As you say, we have a lot of work to do ahead of us, which is great and the commercial team is doing great work reaching out to these folks, talking to them and converting many of them. Many of them are just inbound conversion, so that's great too.
But we have a big sort of pool of potential targets that we're working through now. And that's what we'll keep doing over the course of the year and years to come.
Cool. And then maybe one for John. John, just I mean, in general, I know we still have a lot of wooden shop to get commercial service launched. But broadly speaking, any difference in the way you're thinking about the margin profile once you do begin commercial service and start to ramp relative to some of the financial targets that you laid out this fall?
Yes, Daryl, it's a great question. I mean, essentially, no. We as has always been the case, we have a lot of sort of fixed costs as part of our operations. And as we continue to add spaceships and build that capacity, that margin gets to those higher numbers that we've talked about in the past. So it's definitely our focus to execute on the test plan, continue to build spaceships to achieve those higher margins that we anticipate.
Your next question comes from the line of Robert Spingarn with Credit Suisse. Your line is open.
I wanted to just follow-up on a few of the things you've already talked about and ask some clarifying questions. And I have 3 of them. The one small step deposits, how did those the $400,000 where you took in the $1,000 a piece, how did those trend across Q1 and into April? I think you said this is through April, this figure. Just curious as how the crisis may have changed customer interest temporarily?
Yes. I have to maybe look at our data to see exactly, Rob. So maybe we'll try to get you that data if we can. I'm not sure I know off the of my head. But I wouldn't be surprised if we see some kind of impact going into Q2.
I'm not sure we saw that much in Q1, but certainly people's attention are on their families and focused on taking care of their homes, and that's fine. And so, we may see some effect like that, but I don't have that number off the top of my head right now.
Okay. And then on the NASA agreement, you talked about it a little bit before, but is there an actual revenue opportunity that's been agreed upon or some kind of a contract or you I'm just curious what kind of terms, who's spending what and how that all works together?
I think the terms of the Space Act agreement become public at some point in the future. There's a little bit of a waiting period before it gets sort of publicly accessible. This initial phase of the Space Act agreement, Rob, is essentially where we bring together our resources. They're bringing together their resources, we're bringing together our resources and we work on these initial technology areas to start. And then I think that there's some exciting opportunities both potentially with NASA and other government agencies and we'll see how those play out over coming months years.
Okay. And then my last question was on your progress on the second spaceship and wanted to see whether or not you're on plan understanding I would imagine that the virus has slowed things down a bit. But on plan for time and cost on the second spacecraft?
Yes, good question. We've got Enrico here, who's our COO. Maybe he can take a crack at that
one. He'd be happy to. As George summarized before, we've obviously implemented new protocols throughout our operation and that extends into our manufacturing operation here in Mojave, California. And I'm really proud of how the team has managed. So like the test flight in New Mexico, we've been able to continue with our safety protocols fabricating the next spaceship.
The team was bolstered by the achievement of weight on wheels earlier this year and then George briefed the activities since then that we've made significant progress on the assembly. But as George said earlier, it's too early to quantify the length and the severity of the pandemic's impact to our business and that includes manufacturing. But we're bolstered by weight on wheels, we're bolstered by the fact that more than 90% of our technicians are back at work and making good progress. And we're all
Now I would now like to turn the call back to George Whiteside, CEO for some closing remarks.
All right. Well, thanks everybody. Appreciate you dialing in or webcasting into our earnings call. We appreciate your interest and support, and we look forward to updating everyone on our progress during the next quarter's call. Thanks and stay safe.
All right. Bye bye.
This concludes today's conference call. You may now disconnect.