Virgin Galactic announces third quarter 2022 Financial Results And Provides Business Update

Virgin Galactic Holdings, announced its financial results for the third quarter that ended September 30, 2022, last week and provided a business update.

Photo Virgin Galactic Holdings

Third Quarter 2022 Financial Highlights:

Cash position remains strong, with cash and cash equivalents and marketable securities of $1.1 billion as of September 30, 2022.

Net loss of $146 million, compared to a $48 million net loss in the third quarter of 2021.

GAAP selling, general, and administrative expenses of $46 million, compared to $48 million in the third quarter of 2021. Non-GAAP selling, general and administrative expenses of $38 million in the third quarter of 2022, compared to $40 million in the second quarter of 2021.

GAAP research and development expenses of $97 million, compared to $34 million in the third quarter of 2021. Non-GAAP research and development expenses of $94 million in the third quarter of 2022, compared to $31 million in the third quarter of 2021.

Adjusted EBITDA totaled $(129) million, compared to $(68) million in the third quarter of 2021.

Net cash used in operating activities totaled $(101) million, compared to $(52) million in the third quarter of 2021.

Free cash flow totaled $(107) million, compared to $(53) million in the third quarter of 2021.

Cash paid for capital expenditures totaled $6 million, compared to $1 million in the third quarter of 2021.

Generated $100 million in gross proceeds through the issuance of 15.6 million shares of common stock as part of the at the market offering announced on August 4, 2022.

Michael Colglazier, Chief Executive Officer of Virgin Galactic said, “We remain on track to launch commercial service in the second quarter of 2023, and we look forward to validating the modifications to VMS Eve and VSS Unity with multiple scheduled test flights in the coming months. We are also executing on our key strategic initiatives to scale our business as a global Spaceline over the long-term. With Aurora Flight Sciences building our next generation motherships, and the selection of experienced manufacturers, Bell Textron and Qarbon Aerospace, to help build our Delta Class Spaceships, we have our primary suppliers in place to expand our fleet and support our long-term growth.”

Business Highlights and Recent Updates:

On November 2, 2022, we announced Bell Textron and Qarbon Aerospace as primary suppliers to build Delta Class spaceships. The first Delta Class spaceship is expected to be completed in 2025.

On track to launch commercial service in Q2 2023.

Virgin Galactic is an aerospace and space travel company, pioneering human spaceflight for private individuals and researchers with its advanced air and space vehicles. It is developing a spaceflight system designed to connect the world to the love, wonder and awe created by space travel and to offer customers a transformative experience.

Third Quarter 2022 Financial Results

VIRGIN GALACTIC HOLDINGS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited and in thousands, except for per share data)
		Three Months Ended								Nine Months Ended
		September 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
Revenue		$	767			$	2,580			$	1,443			$	3,151
Operating expenses:
Customer experience			590				207				737				270
Selling, general, and administrative			46,113				48,268				127,820				128,503
Research and development			97,411				34,289				211,578				103,997
Depreciation and amortization			2,214				2,895				7,981				8,635
Total operating expenses			146,328				85,659				348,116				241,405
Operating loss			(145,561	)			(83,079	)			(346,673	)			(238,254	)
Interest income			3,524				240				6,327				785
Interest expense			(3,293	)			(6	)			(8,924	)			(19	)
Change in fair value of warrants			—				34,432				—				(34,650	)
Other income, net			(203	)			70				7				110
Loss before income taxes			(145,533	)			(48,343	)			(349,263	)			(272,028	)
Income tax expense			(21	)			(25	)			(69	)			(74	)
Net loss			(145,554	)			(48,368	)			(349,332	)			(272,102	)
Other comprehensive income (loss):
Foreign currency translation adjustment			(180	)			3				(313	)			11
Unrealized loss on marketable securities			(585	)			(437	)			(8,227	)			(437	)
Total comprehensive loss		$	(146,319	)		$	(48,802	)		$	(357,872	)		$	(272,528	)
Net loss per share:
Basic		$	(0.55	)		$	(0.19	)		$	(1.34	)		$	(1.11	)
Diluted		$	(0.55	)		$	(0.32	)		$	(1.34	)		$	(1.11	)
Weighted-average shares outstanding:
Basic			263,907,259				254,749,195				260,255,202				244,157,923
Diluted			263,907,259				255,147,228				260,255,202				244,157,923

VIRGIN GALACTIC HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
		September 30, 2022				December 31, 2021
		(Unaudited)
Assets
Current assets
Cash and cash equivalents		$	394,032			$	524,481
Restricted cash			40,328				25,549
Marketable securities, short-term			606,713				79,418
Inventories			22,851				29,668
Prepaid expenses and other current assets			22,094				19,476
Total current assets			1,086,018				678,592
Marketable securities, long-term			69,072				301,463
Property, plant, and equipment, net			48,874				47,498
Other non-current assets			55,220				41,281
Total assets		$	1,259,184			$	1,068,834
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable		$	19,872			$	9,237
Accrued liabilities			43,389				28,787
Customer deposits			103,971				90,863
Other current liabilities			3,336				2,636
Total current liabilities			170,568				131,523
Non-current liabilities
Convertible senior notes, net			415,188				—
Other long-term liabilities			59,885				43,047
Total liabilities			645,641				174,570
Stockholders' equity
Preferred stock, $0.0001 par value; 10,000,000 authorized; none issued and outstanding			—				—
Common stock, $0.0001 par value; 700,000,000 shares authorized; 274,481,195 and 258,166,417 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively			27				26
Additional paid-in capital			2,096,901				2,019,750
Accumulated deficit			(1,472,975	)			(1,123,643	)
Accumulated other comprehensive income			(10,410	)			(1,869	)
Total stockholders' equity			613,543				894,264
Total liabilities and stockholders' equity		$	1,259,184			$	1,068,834

VIRGIN GALACTIC HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited and in thousands)
		Nine Months Ended September 30,
		2022				2021
Cash flows from operating activities
Net loss		$	(349,332	)		$	(272,102	)
Stock-based compensation			34,488				48,704
Depreciation, amortization and impairment			12,174				8,635
Amortization of debt issuance costs			1,466				—
Change in fair value of warrants			—				34,650
Non-cash interest and other operating activities, net			6,063				(42	)
Change in assets and liabilities
Inventories			6,817				1,178
Other current and non-current assets			2,253				6,342
Accounts payable and accrued liabilities			23,828				1,824
Customer deposits			13,108				2,148
Other current and non-current liabilities			136				3,026
Net cash used in operating activities			(248,999	)			(165,637	)
Cash flows from investing activity
Capital expenditures			(12,306	)			(2,452	)
Purchases of marketable securities			(604,945	)			(286,132	)
Proceeds from maturities and calls of marketable securities			294,612				—
Cash used in investing activity			(322,639	)			(288,584	)
Cash flows from financing activities
Payments of lease obligations			(132	)			(105	)
Proceeds from convertible senior notes			425,000				—
Debt issuance costs			(11,278	)			—
Capped call premium			(52,318	)			—
Repayment of commercial loan			(310	)			(310	)
Proceeds from issuance of common stock			99,573				500,000
Proceeds from issuance of common stock pursuant to stock options exercised			49				18,856
Transaction costs related to issuance of common stock			(1,137	)			(6,753	)
Withholding taxes paid on behalf of employees on net settled stock-based awards			(3,479	)			(15,779	)
Net cash provided by financing activities			455,968				495,909
Net increase (decrease) in cash and cash equivalents			(115,670	)			41,688
Cash, cash equivalents and restricted cash at beginning of year			550,030				678,955
Cash, cash equivalents and restricted cash ending balances		$	434,360			$	720,643
Cash and cash equivalents		$	394,032			$	702,565
Restricted cash			40,328				18,078
Cash, cash equivalents and restricted cash		$	434,360			$	720,643

Use of Non-GAAP Financial Measures (Unaudited)

This press release references certain financial measures that are not prepared in accordance with generally accepted accounting principles in the United States (GAAP), including Adjusted EBITDA, non-GAAP selling, general, and administrative expense, non-GAAP research and development expense and free cash flow. The Company defines Adjusted EBITDA as earnings before interest expense, taxes, depreciation and amortization, stock-based compensation, and certain other items the Company believes are not indicative of its core operating performance. The Company defines non-GAAP selling, general, and administrative expenses as selling, general, and administrative expenses other than stock-based compensation and non-GAAP research and development expenses as research and development expenses other than stock-based compensation. The Company defines free cash flows as net cash used in operating activities less capital expenditures. None of these non-GAAP financial measures is a substitute for or superior to measures of financial performance prepared in accordance with GAAP and should not be considered as an alternative to any other performance measures derived in accordance with GAAP.

The Company believes that presenting these non-GAAP financial measures provides useful supplemental information to investors about the Company in understanding and evaluating its operating results, enhancing the overall understanding of its past performance and future prospects, and allowing for greater transparency with respect to key financial metrics used by its management in financial and operational-decision making. However, there are a number of limitations related to the use of non-GAAP measures and their nearest GAAP equivalents. For example, other companies may calculate non-GAAP measures differently, or may use other measures to calculate their financial performance, and therefore any non-GAAP measures the Company uses may not be directly comparable to similarly titled measures of other companies.

A reconciliation of Adjusted EBITDA to net loss for the three and nine months ended September 30, 2022 and September 30, 2021 , respectively, are set forth below:

Amounts in thousands ($)		Three Months Ended								Nine Months Ended
		September 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
Net Loss		$	(145,554	)		$	(48,368	)		$	(349,332	)		$	(272,102	)
Income tax expense			21				25				69				74
Interest expense			3,293				6				8,924				19
Depreciation & amortization			2,214				2,895				7,981				8,635
Stock-based compensation			11,510				12,169				34,488				48,704
Change in fair value of warrants			—				(34,432	)			—				34,650
Adjusted EBITDA		$	(128,516	)		$	(67,705	)		$	(297,870	)		$	(180,020	)

A reconciliation of selling, general, and administrative expenses to non-GAAP selling, general, and administrative expenses for the three and six months ended September 30, 2022 and September 30, 2021, respectively, are set forth below:

Amounts in thousands ($)		Three Months Ended						Nine Months Ended
		September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Selling, general, and administrative		$	46,113		$	48,268		$	127,820		$	128,503
Stock-based compensation			8,158			8,540			24,068			37,004
Non-GAAP selling, general, and administration expenses		$	37,955		$	39,728		$	103,752		$	91,499

A reconciliation of research and development expenses to non-GAAP research and development expenses for the three and six months ended September 30, 2022 and September 30, 2021, respectively, are set forth below:

Amounts in thousands ($)		Three Months Ended						Nine Months Ended
		September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Research and development		$	97,411		$	34,289		$	211,578		$	103,997
Stock-based compensation			3,352			3,629			10,420			11,700
Non-GAAP Research and development expenses		$	94,059		$	30,660		$	201,158		$	92,297

The following table reconciles forecasted net cash used in operating activities to forecasted free cash flow for the fourth quarter of 2022 (in thousands):

		Forecasted Range
Net cash used in operating activities		($ 118,000) - ($ 125,000)
Capital expenditures		($ 2,000) - ($ 5,000)
Free cash flow		($ 120,000) - ($ 130,000)