Virgin Galactic Holdings, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Virgin Galactic develops and operates commercial spaceflight services and related technologies. It began commercial service in June 2023; by the date of the filing, it reported completing five commercial flights.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $1.7 million | $0.8 million | $4.0 million | $1.4 million |
| Operating expenses | $116.0 million | $146.3 million | $421.2 million | $348.1 million |
| Operating loss | $114.3 million | $145.6 million | $417.2 million | $346.7 million |
| Net loss | $104.6 million | $145.6 million | $398.4 million | $349.3 million |
| Net loss per share | $0.28 | $0.55 | $1.26 | $1.34 |
| Operating cash used | $352.9 million | $249.0 million |
Revenue remained small relative to operating costs; the filing does not present a conventional gross margin. Q3 research and development expense fell to $44.8 million from $97.4 million, while nine-month R&D rose to $241.3 million from $211.6 million. Spaceline operations expense was $25.6 million in Q3 and $26.2 million for nine months, reflecting the start of commercial operations and a new expense classification. Higher interest income—$12.9 million in Q3 and $28.6 million year to date—partly reduced net losses.
Liquidity, debt and capital
- At September 30, cash, cash equivalents and restricted cash totaled $269.1 million; marketable securities totaled $819.2 million. Total current assets were $1.08 billion and current liabilities were $180.1 million.
- Net cash used in operating and investing activities was $352.9 million and $196.5 million, respectively, for the first nine months. Financing provided $475.9 million, primarily from common-stock issuance.
- The company reported $425 million principal amount of 2.50% convertible notes due February 2027; net carrying amount was $417.3 million. Total liabilities were $668.6 million.
- ATM equity sales generated $287.5 million gross proceeds during the first nine months of 2023, including $210.7 million in Q3. Shares outstanding increased to 399.6 million at quarter-end from 275.4 million at year-end 2022, a significant dilution for shareholders.
Business changes, outlook and risks
- Management said it achieved technological feasibility for the current VSS Unity/VMS Eve system in July 2023. The company began reporting commercial spaceline costs separately; costs for the next-generation fleet continue to be expensed as R&D until its design phase is complete.
- As of September 30, the company reported reservations for approximately 800 future astronauts and tickets sold representing about $207 million of expected future spaceflight revenue, conditional on completing flights.
- Management said available capital was sufficient for at least the next 12 months, while noting that spending could exceed expectations and additional financing may be needed beyond that period. Fleet development, manufacturing scale-up, facilities and the astronaut campus are expected to require substantial funding.
- In November 2023, the company announced a shift from monthly to quarterly Unity flights, a planned pause in Unity flights in mid-2024, Delta-class test flights expected in mid-2025, and revenue service targeted for 2026. These are forward-looking plans, not reported results.
- Also after quarter-end, the company announced a workforce reduction of approximately 185 employees, or 18% of staff, with estimated charges of about $5 million, mostly expected in Q4 2023.
- Key risks include flight safety and reliability, delays or cost overruns in developing next-generation vehicles, limited fleet capacity, converting reservations into completed flights and revenue, and the need for future financing. The filing discusses a securities class action and related shareholder derivative cases; management said it intended to defend the class action and did not consider pending proceedings material, while noting outcomes remain uncertain.
Important facts for investors to verify
- Whether the announced Unity cadence and pause, Delta test-flight timing, and 2026 revenue-service target remain achievable.
- Actual flight frequency, safety performance, passenger capacity, and conversion of reservations into completed flights and recognized revenue.
- Cash burn and liquidity relative to fleet-development commitments, and whether additional debt or equity financing will be required.
- Future share issuance and its effect on dilution; also verify the company’s latest share count and ATM-program activity.
- Final costs and timing of the workforce reduction, and developments in the disclosed litigation.