Being a privately-held company, SpaceX’s finances have been notoriously opaque. No doubt Elon Musk prefers it that way, because he can’t be too pleased with last month’s Wall Street Journal “expose” of their account books.  The story is still behind the WSJ paywall so we’ll have to take The Motley Fool‘s word for it:

In an expose compiled from “exclusive … internal documents” — probably obtained from the “former SpaceX employees” that it interviewed — theJournal confirms that SpaceX has in fact been losing money since at least the beginning of 2015. Says the Journal, not only did SpaceX rack up losses of $260 million in 2015, but it actually incurred “an operating loss every quarter, and also negative cash flow of roughly $15 million.”

For the record, this means SpaceX was losing money nearly one year before the company removed the famous “profitable and cash-flow positive” assertion from its website.

Not too surprising, considering that their launch rate was still well below target even before losing two boosters to “rapid unscheduled disassembly.”

No Kerbals were harmed during this simulation.
Not SpaceX, but you get the idea. No Kerbonauts were harmed in production of this graphic.

These documents show that the June 2015 SpaceXplosion blew up SpaceX’s vaunted record of profitability and positive cash flow, which erupted into “a geyser of red ink.”

Not only did SpaceX lose a rocket in that explosion, but its space fleet was grounded for six straight months, unable to launch or generate revenue for the company while SpaceX worked to determine what went wrong, and fix it. SpaceX did eventually fix the problem, returning to space in December 2015. Regardless, SpaceX ended up launching only six times that year — not frequently enough to prevent it from incurring a $260 million operating loss.

In 2016, SpaceX continued launching up until its September “anomaly,” when a mishap during rocket fueling exploded another Falcon rocket on its launch pad. That explosion cut short launches for 2016 at just eight successful missions — two more than SpaceX managed in 2015, but probably still not enough to keep the company in the black.

Which brings us to Fool’s most recent foray into forensic finances: How Profitable is SpaceX, Really? Not very, it turns out:

As revealed in the Journal‘s report, SpaceX turned just a small fraction of its $1 billion in 2014 launch revenue into operating profit — much less net profit. The numbers aren’t entirely clear from the Journal‘s chart, but appear to show SpaceX earning an operating profit of perhaps 0.2% on $1 billion in revenue — profitability far below the 10%-ish profit margin that Boeing earns on its space operations, or the 12.6% operating profit margin at Lockheed Martin.

That bleak situation got even worse in 2015 when a small reduction in launch revenue sufficed to push SpaceX deeply into the red, and forced the company to record a $260 million loss on $945 million in revenue.

Read the whole thing, though I think the analysis falls short in a couple of ways:

First, comparing their launch business to LockMart, Boeing, or ArianeSpace is an oversimplification if not downright misleading. They’ve benefited from a tremendous amount of government subsidies in a way that SpaceX hasn’t. “Cost-Plus” contracts have been the traditional way of doing business for decades, in which the government pays the cost of production along with a guaranteed profit margin. Does that sound like a model which encourages frugality? How much padding do you think goes into the final bill?

SpaceX financed their early design and production, helped along by grants and technical expertise from NASA. Now that they have a (mostly) viable system, they are paid for their services in the same way the military might charter an airliner to move troops and supplies. In other words, it’s not the same as bankrolling the program. NASA guarantees payment for Falcon 9 or Dragon, they do not guarantee profit. That’s up to the operator.

Second, Elon Musk has made it very clear that SpaceX’s business model eventually falls apart without reusability, it’s for this reason most of their operating profits are being plowed back into R&D. The Interplanetary Transport Vehicle is going to take a lot of cheddar to make it off the drawing board (or CAD file; I’m dating myself). He’s also said that he has no intention of taking the company public until the Mars mission architecture is in place, because Mars will never happen if SpaceX is subject to the outside pressures of stockholders focused on short-term gains. Even a patient fund manager with a multi-year time horizon is probably not going to be too excited about a risky multi-decade project.

Finally, SpaceX is the disruptor in a market that was not very competitive until they came along. New entrants often sacrifice short-term profits to draw in long-term customers (See Jeff Bezos and Amazon, Inc.), so maybe we shouldn’t be too worried about this yet. Musk is no dilettante (of which I’ve encountered a few in the airline business), he’s a true believer with big pockets.

And did I say this is “risky?” Yes I did, lest you think I’m just another Musk fanboy. I’m more inclined toward Blue Origin’s philosophy that they’re just building the hardware for the rest of us to use, but it takes all kinds for this to work. For us to have any hope of becoming a spacefaring society, it’s vital for SpaceX and its contemporaries to succeed. Musk is focused on Mars perhaps to the point of having tunnel vision, which will probably have to change in the short term if their long term plans are to succeed. They absolutely must make the F9 launch business work, otherwise Red Dragon, DragonRider, and ICT may literally never get off the ground. And that would be tragic.

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