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Virgin Galactic Announces First Quarter 2023 Financial Results And Provides Business Update

  • First Commercial Flight 'Galactic 01' Remains on Track Targeting Late June
  • Successful Completion of VSS Unity Glide Flight Clears the Path for Spaceflight
  • Next Spaceflight With Virgin Galactic Crew On Board Scheduled for Late May

Virgin Galactic Holdings, Inc. (NYSE: SPCE) (“Virgin Galactic” or the "Company”) today announced its financial results for the first quarter ended March 31, 2023 and provided a business update.

Michael Colglazier, Chief Executive Officer of Virgin Galactic said, “We are excited to return to space with the 'Unity 25' mission planned for the end of May, and we are actively readying for commercial service to begin in late June. Concurrently, we are making steady progress on the development of our Delta Class spaceships, the driver of revenue growth and profitability in the business. Our strong cash position, combined with focused cost discipline and strategic investments in our growth initiatives, will enable our business to scale over the long-term.”

First Quarter 2023 Financial Highlights

  • Cash position remains strong, with cash, cash equivalents and marketable securities of $874 million as of March 31, 2023.
  • Net loss of $159 million, compared to a $93 million net loss in the first quarter of 2022, primarily driven by investments related to the development of the future fleet and enhancements for the current fleet.
  • GAAP selling, general and administrative expenses of $50 million, compared to $37 million in the first quarter of 2022, with the increase primarily driven by non-recurring legal and severance costs. Non-GAAP selling, general and administrative expenses of $40 million in the first quarter of 2023, compared to $30 million in the first quarter of 2022.
  • GAAP research and development expenses of $110 million, compared to $52 million in the first quarter of 2022, with the increase primarily driven by investments related to the development of the future fleet and enhancements for the current fleet. Non-GAAP research and development expenses of $107 million in the first quarter of 2023, compared to $48 million in the first quarter of 2022.
  • Adjusted EBITDA totaled $(140) million, compared to $(77) million in the first quarter of 2022, primarily driven by increases in research and development expenses.
  • Net cash used in operating activities totaled $136 million, compared to $66 million in the first quarter of 2022.
  • Cash paid for capital expenditures totaled $3 million, compared to $2 million in the first quarter of 2022.
  • Free cash flow totaled $(139) million, compared to $(68) million in the first quarter of 2022.
  • Generated $32 million in gross proceeds through the issuance of 5.8 million shares of common stock as part of the Company's at-the-market offering program announced on August 4, 2022.

Business Updates

  • Commercial service remains on track for Q2 2023.
  • VSS Unity’s successful glide flight on April 26, 2023, and earlier mated flight with VMS Eve, further validated the enhancements made to the ships during the modification period and cleared them for spaceflight.
  • On May 8, 2023, the Company announced a planned launch in late May for VSS Unity to return to space carrying Virgin Galactic mission specialists to conduct a final evaluation of the customer experience ahead of commencing commercial service.

Financial Guidance

The following forward-looking statements reflect our expectations for the second quarter and fiscal year 2023 as of May 9, 2023 and are subject to substantial uncertainty. Our results are based on assumptions that we believe to be reasonable as of this date, but may be materially affected by many factors, as discussed below in “Forward-Looking Statements.”

  • Forecasted free cash flow for the second quarter of 2023 is expected to be in the range of $(130) million to $(140) million.
  • Forecasted free cash flow for each of the third and fourth quarter of 2023 is expected to be in the range of $(120) million to $(130) million, as reduction of spend on current vehicles and continued cost discipline enable growth-related investments in our future fleet.

Non-GAAP Financial Measures

In addition to the Company's results prepared in accordance with generally accepted accounting principles in the United States (GAAP), the Company is also providing certain non-GAAP financial measures. A discussion regarding the use of non-GAAP financial measures and a reconciliation of such measures to the most directly comparable GAAP information is presented later in this press release.

Conference Call Information

Virgin Galactic will host a conference call to discuss the results at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) today. To access the conference call, parties should dial +1 833 470 1428 or +1 404 975 4839 and enter the conference ID number 028351. The live audio webcast along with supplemental information will be accessible on the Company’s Investor Relations website at https://investors.virgingalactic.com/events-and-presentations/. A recording of the webcast will also be available following the conference call.

About Virgin Galactic Holdings

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. You can find more information at https://www.virgingalactic.com/.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements contained in this press release other than statements of historical fact, including, without limitation, statements regarding our spaceflight systems, expected flight schedule, timing of commercial launch, development of our Delta class spaceships and motherships, our objectives for future operations and the Company’s financial forecasts, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “potential,” “continue,” “anticipate,” “intend,” “expect,” “strategy,” “future,” “could,” “would,” “project,” “plan,” “target,” and similar expressions are intended to identify forward-looking statements, though not all forward-looking statements use these words or expressions. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including but not limited to the factors, risks and uncertainties included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as such factors may be updated from time to time in our other filings with the Securities and Exchange Commission (the "SEC"), accessible on the SEC’s website at www.sec.gov and the Investor Relations section of our website at www.virgingalactic.com, which could cause our actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent management’s estimates as of the date of this press release. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change.

First Quarter 2023 Financial Results

VIRGIN GALACTIC HOLDINGS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited; in thousands, except per share amounts)

 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

 

2022

 

 

 

 

 

 

Revenue

 

$

392

 

 

$

319

 

 

 

 

 

 

Operating expenses:

 

 

 

 

Customer experience

 

 

318

 

 

 

25

 

Selling, general and administrative

 

 

50,365

 

 

 

37,007

 

Research and development

 

 

109,870

 

 

 

51,827

 

Depreciation and amortization

 

 

3,245

 

 

 

2,852

 

Total operating expenses

 

 

163,798

 

 

 

91,711

 

 

 

 

 

 

Operating loss

 

 

(163,406

)

 

 

(91,392

)

 

 

 

 

 

Interest income

 

 

7,330

 

 

 

818

 

Interest expense

 

 

(3,211

)

 

 

(2,474

)

Other income, net

 

 

30

 

 

 

16

 

Loss before income taxes

 

 

(159,257

)

 

 

(93,032

)

Income tax expense

 

 

128

 

 

 

25

 

Net loss

 

 

(159,385

)

 

 

(93,057

)

Other comprehensive income (loss):

 

 

 

 

Foreign currency translation adjustment

 

 

35

 

 

 

(25

)

Unrealized income (loss) on marketable securities

 

 

3,101

 

 

 

(5,780

)

Total comprehensive loss

 

$

(156,249

)

 

$

(98,862

)

 

 

 

 

 

Net loss per share:

 

 

 

 

Basic and diluted

 

$

(0.57

)

 

$

(0.36

)

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

Basic and diluted

 

 

278,450

 

 

 

258,288

 

VIRGIN GALACTIC HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(Unaudited; in thousands)

 

 

 

March 31, 2023

 

December 31, 2022

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

415,682

 

 

$

302,291

 

Restricted cash

 

 

40,408

 

 

 

40,336

 

Marketable securities, short-term

 

 

417,923

 

 

 

606,716

 

Inventories

 

 

22,170

 

 

 

24,043

 

Prepaid expenses and other current assets

 

 

23,608

 

 

 

28,228

 

Total current assets

 

 

919,791

 

 

 

1,001,614

 

Marketable securities, long-term

 

 

 

 

 

30,392

 

Property, plant and equipment, net

 

 

60,365

 

 

 

53,658

 

Other non-current assets

 

 

53,357

 

 

 

54,274

 

Total assets

 

$

1,033,513

 

 

$

1,139,938

 

Liabilities and Stockholders' Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

25,597

 

 

$

16,326

 

Accrued liabilities

 

 

59,406

 

 

 

61,848

 

Customer deposits

 

 

102,078

 

 

 

102,647

 

Other current liabilities

 

 

3,749

 

 

 

3,232

 

Total current liabilities

 

 

190,830

 

 

 

184,053

 

Non-current liabilities:

 

 

 

 

Convertible senior notes, net

 

 

416,255

 

 

 

415,720

 

Other long-term liabilities

 

 

59,647

 

 

 

59,942

 

Total liabilities

 

 

666,732

 

 

 

659,715

 

Stockholders' Equity

 

 

 

 

Preferred stock

 

 

 

 

 

 

Common stock

 

 

28

 

 

 

28

 

Additional paid-in capital

 

 

2,154,123

 

 

 

2,111,316

 

Accumulated deficit

 

 

(1,783,180

)

 

 

(1,623,795

)

Accumulated other comprehensive loss

 

 

(4,190

)

 

 

(7,326

)

Total stockholders' equity

 

 

366,781

 

 

 

480,223

 

Total liabilities and stockholders' equity

 

$

1,033,513

 

 

$

1,139,938

 

VIRGIN GALACTIC HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited; in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

Net loss

 

$

(159,385

)

 

$

(93,057

)

Stock-based compensation

 

 

12,976

 

 

 

10,895

 

Depreciation and amortization

 

 

3,245

 

 

 

2,852

 

Amortization of debt issuance costs

 

 

535

 

 

 

403

 

Other non-cash items

 

 

(236

)

 

 

86

 

Change in operating assets and liabilities:

 

 

 

 

Inventories

 

 

1,873

 

 

 

201

 

Other current and non-current assets

 

 

5,721

 

 

 

2,282

 

Accounts payable and accrued liabilities

 

 

(297

)

 

 

1,126

 

Customer deposits

 

 

(569

)

 

 

9,228

 

Other current and long-term liabilities

 

 

68

 

 

 

(67

)

Net cash used in operating activities

 

 

(136,069

)

 

 

(66,051

)

Cash flows from investing activities:

 

 

 

 

Capital expenditures

 

 

(2,767

)

 

 

(1,773

)

Purchases of marketable securities

 

 

(83,287

)

 

 

(204,898

)

Proceeds from maturities and calls of marketable securities

 

 

305,791

 

 

 

 

Net cash provided by (used in) investing activities

 

 

219,737

 

 

 

(206,671

)

Cash flows from financing activities:

 

 

 

 

Payments of finance lease obligations

 

 

(59

)

 

 

(34

)

Proceeds from convertible senior notes

 

 

 

 

 

425,000

 

Debt issuance costs

 

 

 

 

 

(11,248

)

Purchase of capped call

 

 

 

 

 

(52,318

)

Proceeds from issuance of common stock

 

 

32,044

 

 

 

 

Proceeds from issuance of common stock pursuant to stock options exercised

 

 

 

 

 

49

 

Withholding taxes paid on behalf of employees on net settled stock-based awards

 

 

(1,870

)

 

 

(1,932

)

Transaction costs related to issuance of common stock

 

 

(320

)

 

 

 

Net cash provided by financing activities

 

 

29,795

 

 

 

359,517

 

Net increase in cash, cash equivalents and restricted cash

 

 

113,463

 

 

 

86,795

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

342,627

 

 

 

550,030

 

Cash, cash equivalents and restricted cash at end of period

 

$

456,090

 

 

$

636,825

 

 

 

 

 

 

Cash and cash equivalents

 

$

415,682

 

 

$

601,464

 

Restricted cash

 

 

40,408

 

 

 

35,361

 

Cash, cash equivalents and restricted cash

 

$

456,090

 

 

$

636,825

 

Use of Non-GAAP Financial Measures

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 expenses, non-GAAP research and development expenses and free cash flow. The Company defines Adjusted EBITDA as earnings before interest expense, income 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 flow as net cash provided by operating activities less capital expenditures. None of these non-GAAP financial measures is a substitute for or superior to measures prepared in accordance with GAAP and should not be considered as an alternative to any other 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 net loss to Adjusted EBITDA for the three months ended March 31, 2023 and 2022 is set forth below (in thousands):

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

 

2022

 

Net loss

 

$

(159,385

)

 

$

(93,057

)

Interest expense

 

 

3,211

 

 

 

2,474

 

Income tax expense

 

 

128

 

 

 

25

 

Depreciation and amortization

 

 

3,245

 

 

 

2,852

 

Stock-based compensation

 

 

12,976

 

 

 

10,895

 

Adjusted EBITDA

 

$

(139,825

)

 

$

(76,811

)

A reconciliation of selling, general and administrative expenses to non-GAAP selling, general and administrative expenses for the three months ended March 31, 2023 and 2022 is set forth below (in thousands):

 

 

Three Months Ended March, 31,

 

 

 

2023

 

 

2022

Selling, general and administrative expenses

 

$

50,365

 

$

37,007

Stock-based compensation

 

 

9,960

 

 

7,277

Non-GAAP selling, general and administrative expenses

 

$

40,405

 

$

29,730

A reconciliation of research and development expenses to non-GAAP research and development expenses for the three months ended March 31, 2023 and 2022 is set forth below (in thousands):

 

 

Three Months Ended March, 31,

 

 

 

2023

 

 

2022

Research and development expenses

 

$

109,870

 

$

51,827

Stock-based compensation

 

 

3,016

 

 

3,618

Non-GAAP research and development expenses

 

$

106,854

 

$

48,209

The following table reconciles net cash used in operating activities to free cash flow for the three months ended March 31, 2023 and 2022 (in thousands):

 

 

Three Months Ended March, 31,

 

 

 

2023

 

 

 

2022

 

Net cash used in operating activities

 

$

(136,069

)

 

$

(66,051

)

Capital expenditures

 

 

(2,767

)

 

 

(1,773

)

Free cash flow

 

$

(138,836

)

 

$

(67,824

)

The following table reconciles forecasted net cash used in operating activities to forecasted free cash flow for the second quarter of 2023 (in thousands):

 

 

Forecasted Range

Net cash used in operating activities

 

$(120,000) - $(127,000)

Capital expenditures

 

(10,000) - (13,000)

Free cash flow

 

$(130,000) - $(140,000)

 

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