Virgin Orbit (OTCMKTS: VORBQ) has received approval from the Delaware Bankruptcy Court to proceed with a sale later this month that could see a new owner in charge by early June. The company also released its 2022 financial results, which include data that chronicle its downward spiral.
Parties that want to purchase all or part of the Richard Branson-owned launch provider must formally register their interest by May 4. Bids are due nine days later. If more than one qualified bid is received, an auction would follow three days later. The court will then hold a sales hearing, followed by the closing of any deal on or before June 2.
Virgin Orbit Sale
Key Dates & Events
| Date | Deadline/Event |
|---|---|
| May 4, 2023 at 4:00 p.m. (ET) | Deadline to Submit Non-Binding Indications of Interest |
| May 8, 2023 at 4:00 p.m. (ET) | Stalking Horse Supplement Deadline |
| May 15, 2023 at 4:00 p.m. (ET) | Deadline to Object to Sale of the Assets |
| May 15, 2023 at 10:00 a.m. (ET) | Bid Deadline |
| May 17, 2023 at 5:00 p.m. (ET) | Deadline for Debtors to notify Potential Bidders of Whether Their Bids are Qualified Bids |
| May 18, 2023 10:00 a.m. (ET) | Auction (if necessary) |
| May 24, 2023 at 2:00 p.m. (ET) | Sale Hearing |
| On or prior to June 2, 2023 | Closing |
Virgin Orbit declared bankruptcy on April 4 after failing to raise the funds needed to continue operations. The filing came right after the company laid off 675 of its 775 employees.
Virgin Orbit uses a modified Boeing 747 to air launch small satellites with the LauncherOne booster. The company compiled a record of four successes and two failures over the past three years.
Financial Report Shows Struggle
Last week, Virgin Orbit released its financial report for 2022, which had been delayed due to the bankruptcy. The report shows how dire the company’s financial state had become by the end of last year.
In only 12 months, the launch company’s cash reserves plunged from $194 million to $51.2 million – $45 million of which had come in the form of two loans from Branson’s Virgin Investments Ltd. (VIL) in November and December. Without the cash infusion, Virgin Orbit’s reserves would have dropped down to $6.2 million.
Virgin Orbit reported $33.1 in revenue for 2022. However, it cost the company more than twice that amount – $85.7 million – to earn the revenue.
Virgin Orbit reported a net loss of $191.2 million for 2022. The company’s total net loss for 2020 through 2022 was $470.1 million. Revenue totaled only $44.3 million for the three-year period.
Part of the problem was Virgin Orbit’s struggle to increase its launch cadence. LauncherOne failed on its maiden flight in May 2020. While the company completed two successful launches in 2021 and hoped to conduct as many as six launches in 2022, it only managed two flights that year. Meanwhile, expenses had increased as the company added more employees and built more launch vehicles.
With the company in perilous financial shape, much was riding on Virgin Orbit’s heavily publicized launch that originated from Spaceport Cornwall in England on January 9. All appeared to go well at first; the company tweeted that the second stage had reached orbit.
But, it hadn’t. The stage and its nine satellites had burned up in the atmosphere. A subsequent investigation found that a fuel filter that cost about $100 had broken loose and reduced the thrust on the engine.
Branson pumped an additional $15 million into Virgin Orbit through VIL in an effort to keep the company afloat. The company instituted a week-long pause and furloughed nearly all its employees in mid-March in an effort to conserve cash. Layoffs and bankruptcy followed after talks with several potential buyers fizzled out. Nasdaq also suspended trading of the company’s stock.
Virgin Orbit’s financial results are below.
VIRGIN ORBIT HOLDINGS, INC.
Consolidated Balance Sheets
(In thousands, except for per-share data)
| As of December 31, 2022 | As of December 31, 2021 | ||||
| Assets | |||||
| Current assets | |||||
| Cash and cash equivalents | $ | 51,199 | $ | 194,154 | |
| Restricted cash | 2,231 | 828 | |||
| Accounts receivable, net | 389 | 2,080 | |||
| Contract assets | 464 | 3,077 | |||
| Inventory | 77,062 | 33,927 | |||
| Due from related party | — | — | |||
| Prepaid expenses and other current assets | 15,847 | 4,712 | |||
| Total current assets | 147,192 | 238,778 | |||
| Property, plant and equipment, net | 71,331 | 61,425 | |||
| Right-of-use assets | 14,539 | 14,685 | |||
| Investments | 6,812 | 13,498 | |||
| Other non-current assets | 930 | 3,354 | |||
| Total assets | $ | 240,804 | $ | 331,740 | |
| Liabilities and Stockholders’ Equity (Deficit) | |||||
| Current liabilities | |||||
| Accounts payable | $ | 21,926 | $ | 10,334 | |
| Current portion of lease obligation | 1,752 | 1,642 | |||
| Current portion of provision for contract losses | 11,775 | — | |||
| Current portion of convertible debt | 39,865 | — | |||
| Accrued liabilities | 24,972 | 23,790 | |||
| Deferred revenue | 20,414 | 12,150 | |||
| Due to related party | 718 | 42 | |||
| Total current liabilities | 121,422 | 47,958 | |||
| Lease obligation, net of current portion | 14,355 | 14,078 | |||
| Deferred revenue, net of current portion | 14,187 | 28,991 | |||
| Related party convertible debt, net of current portion | 39,534 | — | |||
| Public and private placement warrant liabilities | 2,596 | 20,188 | |||
| Other long-term liabilities | 290 | 7,555 | |||
| Total liabilities | 192,384 | 118,770 | |||
| Commitments and contingencies (Note 17) | |||||
| Stockholders’ equity (deficit) | |||||
| Preferred stock, $0.0001 par value, 25,000,000 shares authorized; none issued and outstanding | — | — | |||
| Common stock, $0.0001 par value, 2,000,000,000 shares authorized; 337,710,003 and 334,919,914 shares issued and outstanding as of December 31, 2022 and 2021, respectively | 34 | 34 | |||
| Additional paid-in capital | 1,060,117 | 1,033,393 | |||
| Accumulated deficit | (1,011,612) | (820,454) | |||
| Accumulated other comprehensive loss | (119) | (3) | |||
| Total stockholders’ equity | 48,420 | 212,970 | |||
| Total liabilities and stockholders’ equity | $ | 240,804 | $ | 331,740 |
See accompanying notes to consolidated financial statements.
VIRGIN ORBIT HOLDINGS, INC.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except for per-share data)
| Years Ended December 31, 2022 | Years Ended December 31, 2021 | Years Ended December 31, 2020 | |||||
| Revenue | $ | 33,106 | $ | 7,385 | $ | 3,840 | |
| Cost of revenue | 85,739 | 37,872 | 3,168 | ||||
| Gross (loss) profit | (52,633) | (30,487) | 672 | ||||
| Selling, general and administrative expenses | 120,467 | 92,796 | 43,003 | ||||
| Research and development expenses | 43,263 | 48,079 | 137,135 | ||||
| Operating loss | (216,363) | (171,362) | (179,466) | ||||
| Other (expense) income, net: | |||||||
| Change in fair value of equity investments | (7,486) | 6,792 | — | ||||
| Change in fair value of liability classified warrants | 17,592 | 3,749 | — | ||||
| Change in fair value of convertible notes | 9,101 | — | — | ||||
| Interest expense, net | (1,326) | (24) | (4,852) | ||||
| Other income | 7,335 | 3,560 | 62,671 | ||||
| Total other income, net: | 25,216 | 14,077 | 57,819 | ||||
| Loss before income taxes | (191,147) | (157,285) | (121,647) | ||||
| Provision for income taxes | 11 | 6 | 5 | ||||
| Net loss | (191,158) | (157,291) | (121,652) | ||||
| Other comprehensive (loss) income | |||||||
| Foreign currency translation adjustment | (119) | 137 | (93) | ||||
| Total comprehensive loss | $ | (191,277) | $ | (157,154) | $ | (121,745) | |
| Net loss per share: | |||||||
| Basic and diluted | $ | (0.57) | $ | (0.55) | $ | (0.50) | |
| Weighted average shares outstanding | |||||||
| Basic and diluted | 335,586,934 | 287,527,234 | 244,163,821 |
VIRGIN ORBIT HOLDINGS, INC.
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
(In thousands, except for per-share data)
| Common Stock Share | Common Stock Par Value | Additional Paid-in Capital | Accumulated other comprehensive loss | Accumulated Deficit | Total | ||||||
| Balance as of December 31, 2019 | 221,829,175 | $ | 22 | $ | 428,328 | $ | 41 | $ | (541,511) | $ | (113,120) |
| Net loss | — | — | — | (121,652) | (121,652) | ||||||
| Stock-based compensation | — | — | 3,154 | — | — | 3,154 | |||||
| Exercise of stock options | 108,456 | — | 409 | — | — | 409 | |||||
| Advances to stock option holders | — | — | (18) | — | — | (18) | |||||
| Other comprehensive loss | — | — | — | 93 | — | 93 | |||||
| Parent Company contributions | 44,681,954 | 5 | 149,995 | — | — | 150,000 | |||||
| Parent Company distributions | — | — | (118,488) | — | — | (118,488) | |||||
| Balance as of December 31, 2020 | 266,619,585 | $ | 27 | $ | 463,380 | $ | 134 | $ | (663,163) | $ | (199,622) |
| Net loss | — | — | — | — | (157,291) | (157,291) | |||||
| Stock-based compensation | — | — | 10,621 | — | — | 10,621 | |||||
| Exercise of stock options | 963,790 | — | 2,807 | — | — | 2,807 | |||||
| Advances to stock option holders | — | — | 18 | — | — | 18 | |||||
| Other comprehensive loss | — | — | — | (137) | — | (137) | |||||
| Issuance of common stock due to Parent Company contributions | 35,737,509 | 3 | 169,137 | — | — | 169,140 | |||||
| Conversion of long-term debt due to Parent Company to Parent Company non-cash contributions | — | — | 235,108 | — | — | 235,108 | |||||
| Reverse recapitalization, net of transaction costs | 31,599,030 | 4 | 152,322 | — | — | 152,326 | |||||
| Balance as of December 31, 2021 | 334,919,914 | $ | 34 | $ | 1,033,393 | $ | (3) | $ | (820,454) | $ | 212,970 |
| Net loss | — | — | — | — | (191,158) | (191,158) | |||||
| Stock-based compensation | — | — | 18,636 | — | — | 18,636 | |||||
| Issuance of common stock related to stock options exercised | 402,185 | — | 1,480 | — | — | 1,480 | |||||
| Issuance of common stock pursuant to stock-based awards | 5,406 | — | — | — | — | — | |||||
| Issuance of common stock due to convertible note conversion | 2,382,498 | — | 6,608 | — | — | 6,608 | |||||
| Other comprehensive loss | — | — | — | (116) | — | (116) | |||||
| Balance as of December 31, 2022 | 337,710,003 | $ | 34 | $ | 1,060,117 | $ | (119) | $ | (1,011,612) | $ | 48,420 |
VIRGIN ORBIT HOLDINGS, INC.
Consolidated Statements of Cash Flows
(In thousands)
| Years Ended December 31, 2022 | Years Ended December 31, 2021 | Years Ended December 31, 2020 | ||||
| Cash flows from operating activities | ||||||
| Net loss | $ | (191,158) | $ | (157,291) | $ | (121,652) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
| Depreciation and amortization | 12,721 | 14,433 | 13,975 | |||
| Stock-based compensation | 18,636 | 3,154 | ||||
| Inventory write-down | 1,966 | 4,078 | — | |||
| Gain on sale of fixed assets | (90) | — | — | |||
| Write-off of right-of-use assets | 70 | — | — | |||
| Non-cash interest on long-term debt, due to Parent Company | — | — | 4,831 | |||
| Non-cash investment in Sky and Space | — | (1,706) | — | |||
| Change in fair value of equity investments | 9,322 | (6,792) | — | |||
| Change in fair value of liability classified warrants | (17,592) | (3,749) | — | |||
| Change in fair value of convertible notes | (9,101) | — | — | |||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | 1,691 | 1,278 | (1,351) | |||
| Contract assets | 2,613 | (3,077) | — | |||
| Inventory | (40,591) | (37,940) | (66) | |||
| Prepaid expenses and other current assets | (11,135) | (1,259) | 320 | |||
| Deferred transaction costs | — | — | — | |||
| Other non-current assets | 2,422 | (32) | (82) | |||
| Due (to) from related party, net | 676 | (75) | 898 | |||
| Accounts payable | 11,591 | 6,639 | (480) | |||
| Other long-term liabilities | (1,131) | 2,142 | (472) | |||
| Accrued liabilities | 1,290 | 5,326 | 5,921 | |||
| Deferred revenue | (11,540) | 13,502 | (48,090) | |||
| Other, net | 53 | (95) | 78 | |||
| Net cash used in operating activities | (219,287) | (153,997) | (143,016) | |||
| Cash flows from investing activities: | ||||||
| Purchase of property and equipment | (20,902) | (25,280) | (13,337) | |||
| Proceeds from sale of property and equipment | 90 | — | — | |||
| Proceeds from sale of investment in Arqit | 2,365 | — | — | |||
| Purchase of investment in Arqit | — | (5,000) | 39 | |||
| Net cash used in investing activities | (18,447) | (30,280) | (13,298) | |||
| Cash flows from financing activities: | ||||||
| Payments of finance lease obligations | (298) | (257) | (243) | |||
| Proceeds from the exercise of stock options | 1,480 | 2,807 | 409 | |||
| Advances to stock option holders | — | 18 | (18) | |||
| Contributions from Parent Company contributions | — | 169,139 | 150,000 | |||
| Parent Company distributions | — | — | (118,488) | |||
| Proceeds from YA II Convertible Debenture | 50,000 | — | — | |||
| Proceeds from November VIL Convertible Note | 25,000 | — | — | |||
| Proceeds from December VIL Convertible Note | 20,000 | — | — | |||
| Proceeds from reverse recapitalization | — | 200,102 | — | |||
| Payment of transaction costs related to reverse recapitalization | — | (19,336) | — | |||
| Net cash provided by financing activities | 96,182 | 352,473 | 31,660 | |||
| Net (decrease) increase in cash and cash equivalents and restricted cash | (141,552) | 168,196 | (124,654) | |||
| Cash and cash equivalents and restricted cash at the beginning of the period | 194,982 | 26,786 | 151,440 | |||
| Cash and cash equivalents and restricted cash at the end of the period | $ | 53,430 | $ | 194,982 | $ | 26,786 |
VIRGIN ORBIT HOLDINGS, INC.
Consolidated Statements of Cash Flows (continued)
(In thousands)
| Years Ended December 31, 2022 | Years Ended December 31, 2021 | Years Ended December 31, 2020 | ||||||
| Cash and cash equivalents | $ | 51,199 | $ | 194,154 | $ | 22,433 | ||
| Restricted cash | 2,231 | 828 | 4,353 | |||||
| Cash and cash equivalents and restricted cash | $ | 53,430 | $ | 194,982 | $ | 26,786 | ||
| Supplemental disclosures | ||||||||
| Schedule for non-cash investing activities and financing activities | ||||||||
| Conversion of long-term debt due to Parent Company to Parent Company non-cash contributions | $ | — | $ | 235,108 | $ | — | ||
| Non-cash investment in SatRev | $ | 5,000 | $ | — | $ | — | ||
| Unpaid property, plant and equipment received | $ | 1,064 | $ | 121 | $ | 26 |
