Virgin Galactic Holdings, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Virgin Galactic develops and operates commercial human spaceflight and research-payload services. It completed its first commercial spaceflight, Galactic 01, in late June, marking the start of commercial service.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $1.9 million | $0.4 million | $2.3 million | $0.7 million |
| Operating expenses | $141.4 million | $110.1 million | $305.2 million | $201.8 million |
| Operating loss | $139.6 million | $109.7 million | $303.0 million | $201.1 million |
| Net loss | $134.4 million | $110.7 million | $293.7 million | $203.8 million |
| Net loss per share | $0.46 | $0.43 | $1.03 | $0.79 |
| Operating cash used | Not separately stated | Not separately stated | $261.4 million | $153.0 million |
Revenue remained small relative to expenses; the company continued to report substantial operating and net losses. Q2 revenue primarily reflected Galactic 01 and Future Astronaut community membership fees. Research and development was the largest expense, increasing 39% year over year in Q2, primarily due to development-related contractor, materials, direct and employee costs.
Liquidity, debt and financing
- At June 30, cash and cash equivalents were $358.3 million, restricted cash was $39.7 million, and marketable securities were $581.9 million. Together these totaled about $979.9 million, including restricted cash.
- Net cash used in operations was $261.4 million for the first six months, versus $153.0 million a year earlier. Capital expenditures were $12.6 million.
- The company had $425 million principal amount of 2.50% senior unsecured convertible notes due February 2027; their balance-sheet carrying value, net of issuance costs, was $416.8 million.
- Equity issuance provided $273.4 million of cash in the first half. In Q2, the company sold 17.2 million shares under its new $400 million at-the-market program for $76.8 million gross proceeds. Common shares outstanding were 336.8 million at quarter-end, versus 275.4 million at December 31, 2022.
Changes, outlook and risks
- Compared with Q2 2022, revenue increased by $1.5 million, but net loss widened by $23.6 million. For the first half, operating cash use increased by $108.4 million and net loss widened by $90.0 million.
- Management said it expects expenses to rise as it scales commercial operations, develops next-generation Delta spaceships and motherships, expands manufacturing and hires personnel. The company operates with one spaceship and one mothership, constraining flight capacity; one of Unity’s four passenger seats was temporarily assigned to an employee.
- Management stated that available capital was expected to fund business needs, commitments and contractual obligations for at least the next 12 months. It cautioned that costs and timing are uncertain and that additional debt or equity financing may be needed if available sources are insufficient. No specific revenue or profitability guidance was provided.
- Management cited supply-chain delivery risks, potential delays to future flights and vehicle development, safety and operational risks, and uncertainty in customer demand and financing needs. About 800 future astronauts had reservations at quarter-end; tickets sold represented approximately $207 million in expected future spaceflight revenue upon completed flights.
- The filing describes a securities class action and related shareholder derivative lawsuits. The company said it intended to defend the matters and did not consider pending proceedings likely to have a material adverse effect, while noting outcomes are uncertain.
Important facts for investors to verify
- Whether commercial flights proceed on schedule and the single-system fleet can deliver reliable service and increase flight capacity.
- How quickly reservations and ticket sales convert into completed flights, recognized revenue and cash receipts.
- Whether operating cash use and development costs remain consistent with management’s liquidity expectations and whether further financing is needed.
- The pace and cost of Delta-class vehicle and next-generation mothership development, including supplier commitments not yet estimable with reasonable certainty.
- Potential dilution from at-the-market equity sales and the outcomes of the disclosed litigation.