Virgin Galactic (NYSE: SPCE) released its earnings report after trading hours ended on Tuesday that revealed its net loss widened from $93.1 million to $159.4 million in the first quarter as the suborbital space tourism company ramped up spending to expand its vehicle fleet and prepared for its first revenue-generating passenger flight in late June.
Net loss per share for quarter one rose to 57 cents from 36 cents for the same period last year. Adjusted EBITDA loss rose from $76.8 million to $139.8 million year over year.
The Virgin Galactic earnings report shows $392,000 in revenue in the first quarter. The company’s cash, cash equivalents, and marketable securities totaled $874 million as of March 31, 2023.
Company officials attributed the growing loss to increased spending on a new generation of Delta-class SpaceShipTwo suborbital space planes and WhiteKnightTwo carrier aircraft that are scheduled to enter service in 2026.
Powered Flights to Restart
Virgin Galactic is set to resume powered suborbital flights with its VSS Unity spacecraft later this month after a gap of nearly two years. Mission commander Mike Masucci and pilot CJ Sturckow will fly four Virgin Galactic employees to the edge of space in what is scheduled as the spacecraft’s final flight test before the start of commercial service in late June.
Chief Astronaut Instructor Beth Moses will be making her third suborbital flight aboard VSS Unity. She will be joined in the passenger cabin by three rookies, including Astronaut Instructor Luke Mays, Flight Sciences Engineer Chris Huie, and New Mexico native Jamila Gilbert. They will evaluate the passenger experience during the flight.
Jameel Janjua will serve as commander of the VMS Eve carrier aircraft that will air launch the space plane. Nicola Pecile will serve as pilot.
Virgin Galactic will then fly Italian Air Force pilots Col. Walter Villadei and Lt. Col. Angelo Landolfi, and the Italian National Research Council’s Pantaleone Carlucci on the company’s first commercial passenger flight at the end of June. Moses will join them in the passenger cabin on the research mission.
Virgin Galactic has previously earned revenue from flying microgravity experiments in the cabin without any researchers aboard. The Italian flight will be the first time that paying passengers will be aboard the spaceship.
This milestone will follow more than a decade of delays. Virgin Galactic Founder Richard Branson announced plans for SpaceshipTwo in September 2004 with expectations of beginning commercial service as early as 2007.
In the third quarter, Virgin Galactic will begin to fly the first of around 800 ticket holders, some of whom put down deposits beginning in 2005. Seats originally sold for $200,000. Virgin Galactic raised the price to $250,000 in 2013, and then to $450,000 in 2022.
Company officials have said they expect VSS Unity to fly on a once-per-month basis with up to four passengers per flight. The advanced Delta-class SpaceShipTwo vehicles are being designed to fly on a weekly basis with six passengers.
VSS Unity‘s last powered flight test was on July 11, 2021. It carried Branson, Moses, and two company employees to test the astronaut experience.
The Federal Aviation Administration (FAA) grounded VSS Unity for more than a month because the spacecraft veered outside of its assigned airspace during the flight. Virgin Galactic then took the space plane and its VMS Eve mothership out of service for a series of modifications. VSS Unity completed a glide flight on April 26 to test the modifications.
Virgin Galactic Earnings Report
Virgin Galactic’s first-quarter financials, as well as excerpted disclaimers from the company’s press release, are below.
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 | Three Months Ended March 31, 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 | Three Months Ended March 31, 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 | Three Months Ended March 31, 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 | Three Months Ended March, 31, 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 | Three Months Ended March, 31, 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 | Three Months Ended March, 31, 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) |
