Virgin Galactic’s Net Loss Grows to $77 Million, Company Sets Schedule for Additional Flight Tests

A view from inside the cockpit. (Credit: Virgin Galactic)
  • First of three additional flight tests set for later this month
  • Richard Branson scheduled to fly on third flight test in Q1 2021
  • New SpaceShipTwo set to rollout in Q1 2021

LAS CRUCES, N.M., November 5, 2020 (Virgin Galactic PR)– Virgin Galactic Holdings, Inc. (NYSE: SPCE) (“Virgin Galactic” or the “Company”), a vertically integrated aerospace and space travel company, today announced its financial results for the third quarter ended September 30, 2020.

“During the quarter we made good progress completing the final steps to prepare for VSS Unity’s first rocket powered test flight from Spaceport America this November. This will be the first-ever human spaceflight conducted from New Mexico,” said Michael Colglazier, Chief Executive Officer of Virgin Galactic. “We also made meaningful progress on our second SpaceShipTwo vehicle, which we plan to unveil in the first quarter of 2021. During my first three months at the Company, I have been continually impressed with the team and the tremendous work that has gone into making the dream of commercial spaceflight a reality. As we continue to prepare for commercial launch, we will reopen ticket sales following Richard Branson’s flight in 2021. I am excited and confident in our ability to execute our vision and provide transformative experiences to people around the world.”

Third Quarter 2020 Financial Highlights:

  • Cash position remains strong, with cash and cash equivalents of $742 million as of September 30, 2020.
  • Net loss of $77 million, compared to a $63 million net loss in the second quarter of 2020.
  • GAAP selling, general, and administrative expenses of $31 million, compared to $26 million in the second quarter of 2020. Non-GAAP selling, general and administrative expenses of $26 million in the third quarter of 2020, compared to $23 million in the second quarter of 2020.
  • GAAP research and development expenses of $46 million, compared to $37 million in the second quarter of 2020. Non-GAAP research and development expenses of $43 million in the third quarter of 2020, compared to $35 million in the second quarter of 2020.
  • Adjusted EBITDA totaled $(66) million, compared to $(54) million in the second quarter of 2020.
  • Cash paid for capital expenditures totaled $4 million, compared to $6 million in the second quarter of 2020.
  • Completed underwritten public offering of 23.6 million shares of common stock at a public offering price of $19.50 per share, resulting in net proceeds of over $440 million to be used for general corporate purposes and capital expenditures.

Third Quarter 2020 Business Highlights:

  • Completed the application of the thermal protection system on the Wing and Fuselage, progressed on systems installation, and successfully completed the initial Pilot Simulator evaluations of the second SpaceShipTwo vehicle, in preparation for its expected rollout in the first quarter of 2021.
  • Completed work on Spaceport America’s third floor astronaut training lounge and customer center.
  • Installed reclining seats, cabin cameras and download link hardware on VSS Unity for future live stream capability.
  • Implemented upgraded flight control system and upgraded horizontal stabilizers on VSS Unity to increase performance during the boost phase of the flight profile.
  • Unveiled the design of the SpaceShipTwo cabin interior via an exclusive virtual event, streamed live on YouTube.
  • Revealed initial design concept for high speed vehicle and announced non-binding memorandum of understanding with Rolls-Royce to collaborate in designing and developing engine propulsion technology for vehicle.

Recent Updates:

  • Expect first spaceflight from Spaceport America to occur between November 19-23, 2020. This flight will include revenue-generating payloads as part of the NASA flight opportunities program.
  • Entered into agreement with NASA and the Southwest Research Institute to fly planetary scientist Dr. Alan Stern on SpaceShipTwo vehicle from Spaceport America to conduct experiments in space.
  • Total Future Astronauts remained at approximately 600, as of October 31, 2020.
  • Reopening ticket sales in 2021 after Sir Richard Branson’s flight.
  • Retiring “One Small Step” program on December 31, 2020. The pool of participants has now reached close to 900 participants, as of October 31, 2020.

COVID-19 Impact

Along with its third quarter 2020 financial results, Virgin Galactic also provided an update regarding the impact of COVID-19. The Company is continuing to experience ongoing delays to its business and operations due to COVID-19, which has led to accumulated impacts to both schedule and cost efficiency. This is expected to continue through the fourth quarter and in 2021, though the Company has continued to stay on track for its planned upcoming flights. The Company has implemented strict protocols to ensure employee safety, including enforcing staggered shifts to lower on-site density and re-working communications processes with engineers who are primarily working from home.

The Company continues to follow rigorous health and safety procedures and testing protocols for its employees, following guidelines from the CDC and state and local officials. Only those employees whose work requires them to be in Virgin Galactic’s facilities are working on-site in Mojave and New Mexico.

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 (778) 560-2846 and enter the conference ID number 1946019. The live audio webcast along with supplemental information will be accessible on the Company’s Investor Relations website at  investors.virgingalactic.com. A recording of the webcast will also be available following the conference call.

About Virgin Galactic Holdings

Virgin Galactic Holdings, Inc. is a vertically integrated aerospace and space travel company, pioneering human spaceflight for private individuals and researchers, as well as a manufacturer of advanced air and space vehicles. Using its proprietary and reusable technologies and supported by a distinctive, Virgin-branded customer experience, it is developing a spaceflight system designed to offer customers a unique, multi-day, transformative experience. This culminates in a spaceflight that includes views of Earth from space and several minutes of weightlessness that will launch from Spaceport America, New Mexico. Virgin Galactic and The Spaceship Company believe that one of the most exciting and significant opportunities of our time lies in the commercial exploration of space and the development of technology that will change the way we travel across the globe in the future. Together we are opening access to space to change the world for good.

Third Quarter 2020 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,
2020
 June 30,
2020
 September 30,
2019
 September 30,
2020
 September 30,
2019
           
Revenue $   $   $832   $238   $3,252   
Cost of revenue       406   173   1,690   
Gross profit       426   65   1,562   
Selling, general, and administrative expenses 30,936   26,047   17,814   83,738   44,719   
Research and development expenses 46,243   37,150   34,528   117,675   96,119   
Operating loss (77,179)  (63,197)  (51,916)  (201,348)  (139,276)  
Interest income 322   506   387   2,005   1,137   
Interest expense (9)  (8)     (26)  (2)  
Other income (expense) (44)  221   91   5   128   
Loss before income taxes (76,910)  (62,478)  (51,438)  (199,364)  (138,013)  
Income tax (benefit) expense 40   40   37   34   123   
Net loss (76,950)  (62,518)  (51,475)  (199,398)  (138,136)  
Other comprehensive loss:          
Foreign currency translation adjustment 48      (58)  (6)   (79)  
Total comprehensive loss $(76,902)  $(62,518)  $(51,533)  $(199,404)  $(138,215)  
           
           
Net loss per share:          
Basic and diluted $(0.34)  $(0.30)  $(0.27)  $(0.94)  $(0.71)  
           
Weighted-average shares outstanding:      
Basic and diluted 225,253,536   211,784,541   193,663,150   213,193,386   193,663,150   
 
VIRGIN GALACTIC HOLDINGS, INC.Condensed Consolidated Balance Sheets(In thousands, except share data)
   
  September 30,
2020
 December 31,
2019
  (Unaudited)  
Assets    
Current assets    
Cash and cash equivalents $741,575   $480,443  
Restricted cash 13,268   12,278  
Inventories 25,147   26,817  
Prepaid expenses and other current assets 9,871   17,133  
Total current assets 789,861   536,671  
Property, plant, and equipment, net 57,255   49,333  
Other non-current assets 18,930   19,542  
Total assets $866,046   $605,546  
Liabilities and Stockholders’ Equity    
Current liabilities    
Accounts payable $8,490   $7,038  
Accrued expenses 22,056   22,277  
Customer deposits 83,190   83,362  
Other current liabilities 2,300   3,168  
Total current liabilities 116,036   115,845  
Other long-term liabilities 23,763   22,141  
Total liabilities $139,799   $137,986  
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; 234,021,503 and 196,001,038 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively 23   20  
Additional paid-in capital 1,047,246   589,158  
Accumulated deficit (321,075)  (121,677) 
Accumulated other comprehensive income 53   59  
Total stockholders’ equity 726,247   467,560  
Total liabilities and stockholders’ equity $866,046   $605,546  
VIRGIN GALACTIC HOLDINGS, INC.Condensed Consolidated Statements of Cash Flows(Unaudited and in thousands)
 
  Three Months Ended Nine Months Ended
  September 30,
2020
 June 30,
2020
 September 30,
2019
 September 30,
2020
 September 30,
2019
Cash flows from operating activities          
Net loss $(76,950)  $(62,518)  $(51,475)  $(199,398)  $(138,136)  
Stock-based compensation 8,625   5,525      18,575      
Depreciation and amortization 2,677   2,615   1,714   7,397   4,920   
Other operating activities, net 8   66   (129)  75   (375)  
Change in assets and liabilities          
Inventories 3,457   192   1,918   1,669   (2,310)  
Other current and non-current assets 2,891   1,119   (7,592)  6,152   (5,928)  
Accounts payable and accrued expenses 1,633   2,064   5,361   719   2,560   
Customer deposits 1,456   (1,530)  1,125   (172)  1,319   
Other current and non-current liabilities 1,502   892   9,664   2,394   9,664   
Net cash used in operating activities (54,701)  (51,575)  (39,414)  (162,589)  (128,286)  
Cash flows from investing activity          
Capital expenditures (3,996)  (6,103)  (5,380)  (14,135)  (13,680)  
Cash used in investing activity (3,996 ) (6,103)  (5,380)  (14,135)  (13,680)  
Cash flows from financing activities          
Payments of finance lease obligations (40)  (26)  (8)  (89)  (55)  
Net transfer from Parent Company       4,944      106,119   
Proceeds from Parent Company       40,000      40,000   
Proceeds from issuance of common stocks 460,200         460,200      
Transaction costs (19,399)  (770)     (20,866)     
Withholding taxes paid on behalf of employee on net settled stock-based awards (399)        (399)     
Net cash provided by (used in) by financing activities 440,362   (796)  44,936   438,846   146,064   
Net increase (decrease) in cash and cash equivalents 381,665   (58,474)  142   262,122   4,098   
Cash, cash equivalents and restricted cash at beginning of period 373,178   431,652   85,324   492,721   81,368   
Cash, cash equivalents and restricted cash at end of period $ 754,843    $ 373,178    $85,466   $754,843   $85,466   
           
Cash and cash equivalents $741,575   $359,912   $74,438   $741,575   $74,438   
Restricted cash 13,268   13,266   11,028   13,268   11,028   
Cash, cash equivalents and restricted cash $754,843   $373,178   $85,466   $754,843   $85,466   

Use of Non-GAAP Financial Measures (Unaudited)

This press release references certain non-GAAP financial measures, including adjusted EBITDA, non-GAAP selling, general, and administrative expense and non-GAAP research and development expense. 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. It defines non-GAAP selling, general, and administrative expenses as selling, general, and administrative expenses other than stock-based compensation and non-capitalized transaction costs, and non-GAAP research and development expenses as research and development expenses other than stock-based compensation. None of these non-GAAP financial measures is a substitute for or superior to measures of financial performance prepared in accordance with generally accepted accounting principles in the United States (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 months September 30, 2020, June 30, 2020, September 30, 2019 and nine months ended September 30, 2020 and 2019, respectively, are set forth below:

Amounts in thousands ($) Three Months Ended Nine Months Ended
  September 30,
2020
 June 30,
2020
 September 30,
2019
 September 30,
2020
 September 30,
2019
Net Loss (76,950)  (62,518)  (51,475)  (199,398)  (138,136) 
Income tax (benefit) expense 40   40   37   34   123  
Interest expense 9   8      26   2  
Depreciation & amortization 2,677   2,615   1,715   7,397   4,921  
EBITDA (74,224)  (59,855)  (49,723)  (191,941)  (133,090) 
Non-capitalized transaction costs*          697     
Stock-based compensation 8,625   5,525      18,575     
Adjusted EBITDA (65,599)  (54,330)  (49,723)  (172,669)  (133,090) 

A reconciliation of selling, general, and administrative expenses to non-GAAP selling, general, and administrative expenses for the three months ended September 30, 2020, June 30, 2020, September 30, 2019 and nine months ended September 30, 2020 and 2019, respectively, are set forth below:

Amounts in thousands ($) Three Months Ended Nine Months Ended
  September 30,
2020
 June 30,
2020
 September 30,
2019
 September 30,
2020
 September 30,
2019
Selling, general, and administrative expenses 30,936  26,047  17,814  83,738  44,719 
Stock-based compensation 5,056  3,546    11,472   
Non-capitalized transaction costs*       697   
Non-GAAP selling, general,
administration expenses
 $25,880  $22,501  $17,814  $71,569  $44,719 

A reconciliation of research and development expenses to non-GAAP research and development expenses for the three months ended September 30, 2020, June 30, 2020, September 30, 2019 and nine months ended September 30, 2020 and 2019, respectively, are set forth below:

Amounts in thousands ($) Three Months Ended Nine Months Ended
  September 30,
2020
 June 30,
2020
 September 30,
2019
 September 30,
2020
 September 30,
2019
Research and development expenses 46,243  37,150  34,528  117,675  96,119 
Stock-based compensation 3,570  1,979    7,103   
Non-GAAP Research and
development expenses
 $42,673  $35,171  $34,528  $110,572  $96,119 
*Non-capitalized transaction costs include non-recurring expenses related to preparation and filing of an S-1 registration statement in the first quarter.