Virgin Galactic Holdings, Inc. — Q1 2022 Form 10-Q
Business context and period: Unaudited results for the three months ended March 31, 2022. Virgin Galactic is developing reusable spacecraft and related operations for commercial human spaceflight and research payloads. It had not yet launched commercial passenger service.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $0.3 million | $0 |
| Operating expenses | $91.7 million | $81.3 million |
| Operating loss | $91.4 million | $81.3 million |
| Net loss | $93.1 million | $129.7 million |
| Net loss per share | $0.36 | $0.55 |
| Operating cash used | $66.1 million | $48.8 million |
- Revenue came from Future Astronaut membership fees and engineering services. Customer-experience expense was $25,000; the filing no longer presents gross margin.
- R&D expense rose 48% to $51.8 million, primarily due to higher contract labor and facilities costs. SG&A fell 15% to $37.0 million, mainly because stock-based compensation declined.
- Net loss improved year over year, largely because Q1 2021 included a $48.7 million non-cash warrant fair-value expense; operating loss increased.
- At March 31, cash, cash equivalents and restricted cash totaled $636.8 million, with $580.0 million of marketable securities. The filing says available capital and the operating plan were expected to fund operations for at least 12 months.
- Working capital was supported by $100.1 million of customer deposits, recorded as a liability. Investing cash outflow was $206.7 million, primarily purchases of marketable securities; financing cash inflow was $359.5 million.
- In January, the company issued $425 million of unsecured 2.50% convertible notes due 2027; net carrying value was $414.2 million. It spent $52.3 million on related capped calls. No material current debt was reported; operating lease liabilities totaled $42.1 million.
- Marketable securities had $7.8 million of gross unrealized losses at quarter-end; the company also reported a $5.8 million unrealized loss on securities in other comprehensive loss.
Material changes, outlook and risks
- As of April 30, 2022, the company reported approximately 800 ticket reservations and $101.8 million in customer deposits. It said deposits represented approximately $200 million in expected future revenue upon completed flights. Ticket sales reopened at a base price of $450,000 per seat; general-public sales opened in February 2022.
- The filing gives inconsistent commercial-launch timing: one passage says service was expected to begin in Q1 2023, while another says Q4 2022. It also says planned vehicle maintenance, enhancements and subsequent flight testing remained prerequisites. The report does not resolve the discrepancy.
- Virgin Galactic expected to begin VSS Imagine flight testing in the second half of 2022. Initial commercial operations were expected to rely on one spaceship, VSS Unity, and one mothership, VMS Eve, constraining flight capacity.
- Management expected expenses to rise as development, fleet expansion and commercialization continued. It identified supply-chain delivery, flight-test completion, safety, regulation, staffing, COVID-19 and financing needs as risks to schedule and operations.
- The company reported a securities class action alleging misleading statements concerning vehicle safety and the commercial flight program, two related derivative suits, and an April 2022 shareholder litigation demand. Management said it intended to defend the class action; the demand was under evaluation. The filing stated pending proceedings were not considered material, while noting outcomes remain uncertain.
Most important facts for investors to verify
- Which commercial-service launch target is current, and what milestones remain for maintenance, enhancements and flight testing?
- Whether reservations and customer deposits convert into completed, revenue-generating flights, and whether the stated $101.8 million deposits and approximately $200 million expected future revenue use different measures.
- Actual operating cash burn and the adequacy of liquidity as development and commercialization spending increases.
- Progress and costs for VSS Imagine, the Delta-class fleet and next-generation motherships, including their effect on achievable flight capacity.
- Developments in the securities class action, derivative suits and shareholder demand, as well as any resulting financial exposure.