UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2022~~March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-38202


Virgin Galactic Holdings, Inc.
(Exact name of registrant as specified in its charter)


Delaware						85-3608069
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


1700 Flight Way Tustin California						92782
(Address of Principal Executive Offices)						(Zip Code)


(949) 774-7640
(Registrant’s telephone number, including area code)


N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which

registered

Common stock, $0.0001 par value per share

SPCE

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐

~~Non-accelerated filer~~	☐	~~Smaller reporting company~~	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of ~~October 31, 2022,~~May 3, 2023, there were ~~274,559,169~~282,586,299 shares of the Company’s common stock ~~par value $0.0001, issued and~~ outstanding.

Table of Contents

VIRGIN GALACTIC HOLDINGS, INC.

TABLE OF CONTENTS


		Page
	PART I - FINANCIAL INFORMATION

	Cautionary Note Regarding Forward-Looking Statements	2
	~~PART I - FINANCIAL INFORMATION~~
Item 1.	Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations and Comprehensive Loss	5
	Condensed Consolidated Statements of Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	87
	Notes to Condensed Consolidated Financial Statements	98
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	291 7
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	402 3
Item 4.	Controls and Procedures	412 3
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	4224
Item 1A.	Risk Factors	4224
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4224
Item 3.	Defaults Upon Senior Securities	4224
Item 4.	Mine Safety Disclosures	4224
Item 5.	Other Information	4224
Item 6.	Exhibits	4324
Signatures		4526

Table of Contents

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements (including within the meaning of the Private Securities Litigation Reform Act of 1995) concerning us and other matters. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs of management, as well as assumptions made by, and information currently available to management.

Forward-looking statements may be accompanied by words such as “achieve,” “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “future,” “grow,” “increase,” “intend,” “may,” “opportunity,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strategy,” “target,” “will,” “would,” or similar words, phrases, or expressions. These forward-looking statements are subject to various risks and uncertainties, many of which are outside our control. Therefore, you should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the following:

•any delay in completing the flight test program and final development of our spaceflight fleet, which is comprised of our ~~SpaceShipTwo spaceships,~~spaceship, VSS Unity, ~~and VSS Imagine,~~ and our mothership carrier aircraft, VMS Eve;

•our ability to successfully develop our next generation vehicles, and the time and costs associated with doing so;

•our ability to conduct test flights;

•our ability to operate our spaceflight system after commercial launch;

•the safety of our spaceflight systems;

•the development of the markets for commercial human spaceflight and commercial research and development payloads;

•our ability to effectively market and sell human spaceflights;

•our ability to convert our backlog or inbound inquiries into revenue;

•our anticipated full passenger capacity;

•our ability to achieve or maintain profitability;

•delay in development or the manufacture of spaceflight systems;

•our ability to ~~successfully develop our next generation vehicles, and the time and costs associated with doing so;~~

•~~our ability to~~ supply our technology to additional market opportunities;

•our expected capital requirements and the availability of additional financing;

•our ability to attract or retain highly qualified personnel;

•the ~~impact~~effect of terrorist activity, armed conflict, including any escalation of hostility arising out of the conflict between Russia and Ukraine, natural disasters or pandemic diseases, including without limitation the COVID-19 pandemic, on ~~us, our operations,~~the economy generally, and on our future financial or operational results, and our access to additional financing;

•consumer preferences and discretionary purchasing activity, which can be significantly adversely affected by unfavorable economic or market conditions;

•extensive and evolving government regulation that impact the way we operate;

•risks associated with international expansion;

•our ability to maintain effective internal control over financial reporting and disclosure and procedures; and

•our ability to continue to use, maintain, enforce, protect and defend our owned and licensed intellectual property, including the Virgin brand.

Table of Contents

Additional factors that may cause actual results to differ materially from current expectations include, among other things, those set forth in Part I, Item 1.“Business,” Part I, Item 1A. “Risk Factors,” and Part I,II, Item 2.7. “Management's Discussion and Analysis of Financial Condition and Results of Operations" ofin our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 (the “Annual Report on Form 10-K") and in Part I, Item 2. “Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report on Form 10-Q. Although we believe that the expectations reflected in the forward-looking statements are reasonable, our information may be incomplete or limited, and we cannot guarantee future results. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

Each of the terms the “Company,” “Virgin Galactic,” “we,” “our,” “us” and similar terms used herein refer collectively to Virgin Galactic Holdings, Inc., a Delaware corporation, and its consolidated subsidiaries, unless otherwise stated.

Table of Contents

PART I. FINANCIAL INFORMATION

VIRGIN GALACTIC HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(InUnaudited; in thousands, except share ~~data)~~
September 30, 2022 December 31, 2021
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 394,032 $ 524,481
Restricted cash 40,328 25,549
Marketable securities, short-term 606,713 79,418
Inventories 22,851 29,668
Prepaid expenses and other current assets 22,094 19,476
Total current assets 1,086,018 678,592
Marketable securities, long-term 69,072 301,463
Property, plant, and equipment, net 48,874 47,498
Other non-current assets 55,220 41,281
Total assets $ 1,259,184 $ 1,068,834
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 19,872 $ 9,237
Accrued liabilities 43,389 28,787
Customer deposits 103,971 90,863
Other current liabilities 3,336 2,636
Total current liabilities 170,568 131,523
Non-current liabilities
Convertible senior notes, net 415,188 —
Other long-term liabilities 59,885 43,047
Total liabilities 645,641 174,570
Commitments and contingencies (Note 17)
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; 274,481,195 and 258,166,417 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively 27 26
Additional paid-in capital 2,096,901 2,019,750
Accumulated deficit (1,472,975) (1,123,643)
Accumulated other comprehensive income (10,410) (1,869)
Total stockholders' equity 613,543 894,264
Total liabilities and stockholders' equity $ 1,259,184 $ 1,068,834
and per share amounts)


	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
Commitments and contingencies (Note 13)
Stockholders' Equity
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; none issued and outstanding	—		—
Common stock, $0.0001 par value; 700,000,000 shares authorized; 281,664,887 and 275,397,229 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	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

See accompanying notes to condensed consolidated financial statements.

Table of Contents

VIRGIN GALACTIC HOLDINGS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(InUnaudited; in thousands, except ~~for~~ per share ~~data)~~amounts)

~~(Unaudited)~~


	Three Months Ended March 31,
	2023		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

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Revenue $ 767 $ 2,580 $ 1,443 $ 3,151
Operating expenses:
Customer experience 590 207 737 270
Selling, general, and administrative 46,113 48,268 127,820 128,503
Research and development 97,411 34,289 211,578 103,997
Depreciation and amortization 2,214 2,895 7,981 8,635
Total operating expenses 146,328 85,659 348,116 241,405
Operating loss (145,561) (83,079) (346,673) (238,254)
Interest income 3,524 240 6,327 785
Interest expense (3,293) (6) (8,924) (19)
Change in fair value of warrants — 34,432 — (34,650)
Other income, net (203) 70 7 110
Loss before income taxes (145,533) (48,343) (349,263) (272,028)
Income tax expense (21) (25) (69) (74)
Net loss (145,554) (48,368) (349,332) (272,102)
Other comprehensive income (loss):
Foreign currency translation adjustment (180) 3 (313) 11
Unrealized loss on marketable securities (585) (437) (8,227) (437)
Total comprehensive loss $ (146,319) $ (48,802) $ (357,872) $ (272,528)
Net loss per share:
Basic $ (0.55) $ (0.19) $ (1.34) $ (1.11)
Diluted $ (0.55) $ (0.32) $ (1.34) $ (1.11)
Weighted-average shares outstanding:
Basic 263,907,259 254,749,195 260,255,202 244,157,923
Diluted 263,907,259 255,147,228 260,255,202 244,157,923

See accompanying notes to condensed consolidated financial statements.

Table of Contents

VIRGIN GALACTIC HOLDINGS, INC.

Condensed Consolidated Statements of Stockholders' Equity

(InUnaudited; in thousands, except ~~for per unit and~~ share ~~data)~~amounts)

~~(Unaudited)~~


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total
	Shares	Amount
Balance as of December 31, 2021	258,166,417	$	26	$	2,019,750	$	(1,123,643)	$	(1,869)	$	894,264
Net loss	—	—				(93,057)		—		(93,057)
Other comprehensive loss	—	—				—		(5,805)		(5,805)
Stock-based compensation	—	—		10,895		—		—		10,895
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	307,471	—		(1,882)		—		—		(1,882)
Transaction costs	—	—		(52,318)		—		—		(52,318)
Balance as of March 31, 2022	258,473,888	$	26	$	1,976,445	$	(1,216,700)	$	(7,674)	$	752,097

~~(For the period ended September 30, 2021)~~


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total
	Shares	Amount
Balance as of December 31, 2022	275,397,229	$	28	$	2,111,316	$	(1,623,795)	$	(7,326)	$	480,223
Net loss	—	—		—		(159,385)		—		(159,385)
Other comprehensive income	—	—		—		—		3,136		3,136
Stock-based compensation	—	—		12,976		—		—		12,976
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	508,159	—		(1,870)		—		—		(1,870)
Issuance of common stock pursuant to the at-the-market offering	5,759,499	—		32,044		—		—		32,044
Transaction costs	—	—		(343)		—		—		(343)
Balance as of March 31, 2023	281,664,887	$	28	$	2,154,123	$	(1,783,180)	$	(4,190)	$	366,781

Common Stock
Balance as of # of Shares Par Value Additional Paid-In Capital Accumulated Deficit Accumulated
Other Comprehensive
Income (Loss) Total
Balance as of December 31, 2020 236,123,659 $ 23 $ 1,297,794 $ (770,744) $ 5 $ 527,078
Net loss — — — (129,694) — (129,694)
Other comprehensive income — — — — 26 26
Stock-based compensation — 22,111 — — 22,111
Issuance of common stock pursuant to stock-based compensation, net of withholding taxes 1,150,771 — 323 — — 323
Balance as of March 31, 2021 237,274,430 23 1,320,228 (900,438) 31 419,844
Net loss — — — (94,040) — (94,040)
Other comprehensive loss — — — — (20) (20)
Stock-based compensation — — 14,423 — — 14,423
Issuance of common stock pursuant to stock-based compensation, net of withholding taxes 275,283 — 840 — — 840
Common stock issued related to warrants exercised 3,387,827 — 104,176 — — 104,176
Balance as of June 30, 2021 240,937,540 23 1,439,667 (994,478) 11 445,223
Net loss — — — (48,368) — (48,368)
Other comprehensive loss — — — — (432) (432)
Stock-based compensation — — 12,170 — — 12,170
Issuance of common stock pursuant to stock-based compensation, net of withholding taxes 685,487 — 1,916 — — 1,916
Common stock issued related to warrants exercised 2,034,390 — 65,914 — — 65,914
Issuance of common stock pursuant to an at-the-market offering 13,740,433 2 499,998 — — 500,000
Transaction costs related to an at-the-market offering — — (6,494) — — (6,494)
Balance as of September 30, 2021 257,397,850 $ 25 $ 2,013,171 $ (1,042,846) $ (421) $ 969,929

See accompanying notes to condensed consolidated financial statements.

~~Table of Contents~~

~~VIRGIN GALACTIC HOLDINGS, INC.~~

~~Condensed Consolidated Statements of Equity~~

~~(In thousands, except for per unit and share data)~~

~~(Unaudited)~~

~~(For the period ended September 30, 2022)~~

Common Stock
Balance as of # of Shares Par Value Additional Paid-In Capital Accumulated Deficit Accumulated
Other Comprehensive
Loss Total
Balance as of December 31, 2021 258,166,417 $ 26 $ 2,019,750 $ (1,123,643) $ (1,869) 894,264
Net loss — — (93,057) — (93,057)
Other comprehensive loss — — — (5,805) (5,805)
Stock-based compensation — — 10,895 — — 10,895
Issuance of common stock pursuant to stock-based compensation, net of withholding taxes 307,471 — (1,882) — — (1,882)
Purchase of capped calls — — (52,318) — — (52,318)
Balance as of March 31, 2022 258,473,888 26 1,976,445 (1,216,700) (7,674) 752,097
Net loss — (110,721) (110,721)
Other comprehensive loss — — (1,970) (1,970)
Stock-based compensation — 12,083 — 12,083
Issuance of common stock pursuant to stock-based compensation, net of withholding taxes 216,758 — (914) — (914)
Balance as of June 30, 2022 258,690,646 26 1,987,614 (1,327,421) (9,644) 650,575
Net loss — — — (145,554) — (145,554)
Other comprehensive loss — — — — (766) (766)
Stock-based compensation — — 11,510 — — 11,510
Issuance of common stock pursuant to stock-based compensation, net of withholding taxes 202,949 — (633) — — (633)
Issuance of common stock pursuant to an at-the-market offering 15,587,600 1 99,573 — — 99,574
Transaction costs related to an at-the-market offering — — (1,163) — — (1,163)
Balance as of September 30, 2022 274,481,195 $ 27 $ 2,096,901 $ (1,472,975) $ (10,410) $ 613,543

~~See accompanying~~ ~~notes~~ ~~to condensed consolidated financial statements.~~

Table of Contents

VIRGIN GALACTIC HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(InUnaudited; in thousands)

~~(Unaudited)~~


		Nine Months Ended September 30,						Three Months Ended March 31,
			2022		2021				2023		2022
Cash flows from operating activities
Cash flows from operating activities:							Cash flows from operating activities:
Net loss	Net loss		$	(349,332)	$	(272,102)	Net loss		$	(159,385)	$	(93,057)
Stock-based compensation	Stock-based compensation		34,488		48,704		Stock-based compensation		12,976		10,895
Depreciation, amortization and impairment			12,174		8,635
Depreciation and amortization							Depreciation and amortization		3,245		2,852
Amortization of debt issuance costs	Amortization of debt issuance costs		1,466		—		Amortization of debt issuance costs		535		403
Change in fair value of warrants			—		34,650
Non-cash interest and other operating activities, net			6,063		(42)
Change in assets and liabilities
Other non-cash items							Other non-cash items		(236)		86
Change in operating assets and liabilities:							Change in operating assets and liabilities:
Inventories	Inventories		6,817		1,178		Inventories		1,873		201
Other current and non-current assets	Other current and non-current assets		2,253		6,342		Other current and non-current assets		5,721		2,282
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities		23,828		1,824		Accounts payable and accrued liabilities		(297)		1,126
Customer deposits	Customer deposits		13,108		2,148		Customer deposits		(569)		9,228
Other current and non-current liabilities			136		3,026
Other current and long-term liabilities							Other current and long-term liabilities		68		(67)
Net cash used in operating activities	Net cash used in operating activities		(248,999)		(165,637)		Net cash used in operating activities		(136,069)		(66,051)
Cash flows from investing activity
Cash flows from investing activities:							Cash flows from investing activities:
Capital expenditures	Capital expenditures		(12,306)		(2,452)		Capital expenditures		(2,767)		(1,773)
Purchases of marketable securities	Purchases of marketable securities		(604,945)		(286,132)		Purchases of marketable securities		(83,287)		(204,898)
Proceeds from maturities and calls of marketable securities	Proceeds from maturities and calls of marketable securities		294,612		—		Proceeds from maturities and calls of marketable securities		305,791		—
Cash used in investing activity			(322,639)		(288,584)
Cash flows from financing activities
Payments of lease obligations			(132)		(105)
Net cash provided by (used in) investing activities							Net cash provided by (used in) investing activities		219,737		(206,671)
Cash flows from financing activities:							Cash flows from financing activities:
Payments of finance lease obligations							Payments of finance lease obligations		(59)		(34)
Proceeds from convertible senior notes	Proceeds from convertible senior notes		425,000		—		Proceeds from convertible senior notes		—		425,000
Debt issuance costs	Debt issuance costs		(11,278)		—		Debt issuance costs		—		(11,248)
Capped call premium			(52,318)		—
Repayment of commercial loan			(310)		(310)
Purchase of capped call							Purchase of capped call		—		(52,318)
Proceeds from issuance of common stock	Proceeds from issuance of common stock		99,573		500,000		Proceeds from issuance of common stock		32,044		—
Proceeds from issuance of common stock pursuant to stock options exercised	Proceeds from issuance of common stock pursuant to stock options exercised		49		18,856		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							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	Transaction costs related to issuance of common stock		(1,137)		(6,753)		Transaction costs related to issuance of common stock		(320)		—
Withholding taxes paid on behalf of employees on net settled stock-based awards			(3,479)		(15,779)
Net cash provided by financing activities	Net cash provided by financing activities		455,968		495,909		Net cash provided by financing activities		29,795		359,517
Net increase (decrease) in cash and cash equivalents			(115,670)		41,688
Cash, cash equivalents and restricted cash at beginning of year			550,030		678,955
Cash, cash equivalents and restricted cash ending balances			$	434,360	$	720,643
Net increase in cash, cash equivalents and restricted cash							Net increase in cash, cash equivalents and restricted cash		113,463		86,795
Cash, cash equivalents and restricted cash at beginning of period							Cash, cash equivalents and restricted cash at beginning of period		342,627		550,030
Cash, cash equivalents and restricted cash at end of period							Cash, cash equivalents and restricted cash at end of period		$	456,090	$	636,825

Cash and cash equivalents	Cash and cash equivalents		$	394,032	$	702,565	Cash and cash equivalents		$	415,682	$	601,464
Restricted cash	Restricted cash		40,328		18,078		Restricted cash		40,408		35,361
Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash		$	434,360	$	720,643	Cash, cash equivalents and restricted cash		$	456,090	$	636,825

See accompanying notes to condensed consolidated financial statements.

Table of Contents

VIRGIN GALACTIC HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~

(1) ~~Organization~~Description of Business and ~~its wholly owned subsidiaries~~Basis of Presentation

Virgin Galactic Holdings, Inc. ~~and~~, together with its ~~wholly owned~~consolidated subsidiaries ("~~we," "us," "our,"~~Virgin Galactic" or the "Company" ~~and similar terms) are~~), is focused on the development, manufacture and operation of spaceships and related technologies for the purpose of conducting commercial human spaceflight and flying commercial research and development payloads into space.

The ~~development and manufacturing activities are located in Tustin, California and Mojave, California, with plans to operate the commercial spaceflights out of Spaceport America located in New Mexico.~~

~~(2) Summary of Significant Accounting Policies~~

~~(a) Basis of Presentation~~

~~These~~accompanying unaudited condensed consolidated financial statements ~~are~~have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial reporting. Certain information and footnote disclosures, normally included in annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles ~~(“GAAP”~~("GAAP") ~~and~~, have been condensed or omitted pursuant to ~~the~~such rules and ~~regulations~~regulations. However, in management's opinion, the condensed consolidated financial statements reflect all adjustments, including those of a normal recurring nature, necessary to present fairly the ~~U.S. Securities~~Company's financial position, results of operations and ~~Exchange Commission ("SEC"). All intercompany transactions and balances between~~cash flows for the ~~various legal entities comprising the Company have been eliminated in consolidation.~~

~~Certain reclassifications of the components of~~periods presented. The operating ~~loss~~results for the three ~~and nine month period~~months ended ~~September 30, 2021 have been made to~~March 31, 2023 are not necessarily indicative of the ~~comparable prior period~~results that may be expected for the entire fiscal year. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements contained in the ~~Condensed~~ ~~Consolidated Statements of Operations and Comprehensive Loss~~ to conform to the same current period presentations. Specifically, cost of revenue has been reclassified to customer experience, and gross margin is no longer presented. Customer experience expenses related to spaceflight operations include the consumption of a rocket motor and fuel and other consumables, as well as payroll and benefits for our pilots and ground crew. Customer experience expenses related to the payload cargo services, as well as engineering services, consist of materials and human capital, such as payroll and benefits, to perform these services. Additionally, customer experience expenses include costs associated with maintaining and growing our Future Astronaut community through offerings provided to community members, as well as hospitality, medical, safety, security, training, and facility costs that areCompany's Annual Report on Form 10-K for the benefit of our future astronauts. Additionally, depreciation and amortization expense are presented separately instead of included in selling, general, and administrative or research and development expenses. These reclassifications had no impact on total loss as previously reported.

~~(b) Use of Estimates~~fiscal year ended December 31, 2022.

The preparation of ~~the consolidated~~ financial statements in conformity with GAAP ~~required us~~requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. We base these estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results ~~may~~could differ materially from ~~these~~those estimates. ~~Significant estimates inherent in~~

(2) Cash, Cash Equivalents and Marketable Securities

The Company maintains certain cash balances restricted as to withdrawal or use. Restricted cash consists of cash deposits received from future astronauts that are contractually restricted for operational use until the ~~preparation~~condition of carriage is signed or the ~~consolidated financial statements include, but~~deposits are ~~not limited to, accounting for revenue, contract assets, contract liabilities, useful lives of property, plant~~refunded.

The amortized cost, unrealized loss and ~~equipment,~~estimated fair value of ~~investments, accrued liabilities,~~the Company's cash, cash equivalents and marketable securities are as follows:


	March 31, 2023
	Amortized Cost		Gross Unrealized Gain (Loss)		Fair Value
	(In thousands)
Cash and cash equivalents:
Cash and restricted cash	$	49,143	$	—	$	49,143
Money market	364,722		—		364,722
Certificate of deposits	42,225		—		42,225
Marketable securities:
U.S. treasuries	98,873		29		98,902
Corporate bonds	323,263		(4,242)		319,021
	$	878,226	$	(4,213)	$	874,013

Table of Contents

VIRGIN GALACTIC HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements


	December 31, 2022
	Amortized Cost		Gross Unrealized Loss		Fair Value
	(In thousands)
Cash and cash equivalents:
Cash and restricted cash	$	51,651	$	—	$	51,651
Money market	249,249		—		249,249
Certificate of deposits	41,727		—		41,727
Marketable securities:
U.S. treasuries	79,570		(53)		79,517
Corporate bonds	564,853		(7,262)		557,591
	$	987,050	$	(7,315)	$	979,735

The Company included $2.7 million and $4.5 million of interest receivable in prepaid expenses and other current assets as of March 31, 2023 and December 31, 2022, respectively.

The Company recognizes amortization and accretion of purchase premiums and discounts on its marketable securities within interest income, ~~taxes including deferred tax~~net. The Company recognized $0.4 million in accretion income, net and $2.2 million in amortization expense, net for its marketable securities within interest income, net for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, the amortized cost and estimated fair value of the Company's marketable securities were $422.1 million and $417.9 million, respectively. These marketable securities all had contractual maturities within one year and, accordingly, have been presented in current assets ~~and liabilities and impairment valuation, warrants, stock-based awards and contingencies.~~in the accompanying condensed consolidated balance sheet.

(3) Inventories

Inventories are comprised of the following:


	March 31, 2023		December 31, 2022
	(In thousands)
Raw materials	$	15,691	$	15,033
Spare parts	6,479		9,010
	$	22,170	$	24,043

Table of Contents

VIRGIN GALACTIC HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~

~~(c) Convertible Senior Notes~~(4) Property, Plant and Equipment

~~On January 1, 2022, the Company adopted ASU 2020-06,~~ ~~Accounting for Convertible Instruments~~Property, plant and ~~Contracts in an Entity's Own Equity~~,which removes from GAAP the liability and equity separation model for convertible instruments with either cash or beneficial conversion features. As a result, convertible debt instruments would only be separated into multiple components if they were issued at a substantial premium or if embedded derivatives requiring bifurcation were identified. The convertible senior notes (the "2027 Notes") were not issued at a substantial premium, and the Company analyzed the provisionsequipment consists of the ~~notes~~following:


		March 31, 2023		December 31, 2022
	(In thousands)
Land		$	1,302	$	1,302
Buildings		9,117		9,117
Aircraft		740		195
Machinery and equipment		37,662		37,223
Information technology software and equipment		34,126		33,387
Leasehold improvements		31,448		31,086
Construction in progress		12,126		4,339
		126,521		116,649
Less: accumulated depreciation and amortization		66,156		62,991
		$	60,365	$	53,658

The following table sets forth a summary of depreciation and ~~did not identify any material embedded features which would require bifurcation from the host debt. As such, the notes~~amortization expense related to property, plant and equipment:


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Selling, general and administrative	$	2,001	$	1,599
Research and development	1,244		1,253
	$	3,245	$	2,852

(5) Leases

The components of expense related to leases are ~~accounted for entirely~~ as ~~a liability net~~follows:


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Operating lease cost	$	2,810	$	1,975
Variable lease cost	701		1,249
Short-term lease cost	6		—

Finance lease cost
Amortization of assets under finance leases	65		29
Interest on finance lease liabilities	19		5
Total finance lease cost	84		34
Total lease cost	$	3,601	$	3,258

Table of ~~unamortized issuance costs.~~ Contents

VIRGIN GALACTIC HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

The ~~carrying amount~~components of ~~the liability is classified~~supplemental cash flow information related to leases are as long-term as the instrument does not mature within one year of the balance sheet date and the holder is not permitted to demand repayment of the principal within one year of the balance sheet date. However, if conditions to convertibility are met as described further in ~~Note 11~~, the Company may be required to reclassify the carrying amount of the liability to current. The embedded conversion features are not remeasured as long as they do not meet the separation requirement of a derivative. Issuance costs are amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the term of the notes. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share, however there was no impact during the current quarter as the convertible instruments were anti-dilutive.follows:


	Three Months Ended March 31,
	2023			2022
	(In thousands, except term and rate data)
Cash Flow Information:
Operating cash flows for operating leases	$	2,055		$	1,758
Operating cash flows for finance leases	$	19		$	5
Financing cash flows for finance leases	$	59		$	34
Non-cash Activity:
Assets acquired in exchange for lease obligations:
Operating leases	$	—		$	502
Finance leases	$	86		$	—
Other Information:
Weighted average remaining lease term:
Operating leases (in years)	10.4			11.5
Finance leases (in years)	3.2			1.9
Weighted average discount rates:
Operating leases	12.1		%	11.7		%
Finance leases	12.7		%	8.1		%

The supplemental balance sheet information related to leases is as follows:

~~(d) Capped Call Transactions~~


	March 31, 2023		December 31, 2022

	(In thousands)
Operating Leases:
Long-term right-of-use assets	$	47,952	$	48,463

Short-term operating lease liabilities	$	3,534	$	3,020
Long-term operating lease liabilities	56,321		56,645
Total operating lease liabilities	$	59,855	$	59,665

~~In connection with the pricing of our 2027 Notes, the Company entered into capped call transactions with respect to its common stock (the "2027 Capped Calls"). The 2027 Capped Calls~~

Right-of-use assets are ~~purchased call options that give the Company the option to purchase shares of our common stock, subject to anti-dilution adjustments substantially identical to those~~presented in other non-current assets and lease liabilities are presented in other current liabilities and other long-term liabilities in the 2027 Notes. The Company's capped call transactions are accounted for as separate transactions from the 2027 Notes and are classified as equity instruments as a reduction to additional paid-in capital in the Condensed Consolidated Balance Sheets. The instruments are initially recorded at fair value and not subsequently remeasured so long as they continue to qualify for equity classification based on the Company's intent and ability for the 2027 Capped Calls to be settled in shares of our common stock. The capped call transactions have the effect of reducing the number of shares outstanding if exercised. Therefore, the capped call transactions are anti-dilutive and not included in the calculation of diluted shares outstanding for the purposes of diluted net loss per share. See ~~Note 11~~ ~~for additional information on the 2027 Capped Calls.~~

~~(e) Other Summary of Significant Accounting Policies~~

There have been no other significant changes from the significant accounting policies disclosed in Note 2 of the “Notes to Consolidated Financial Statements” included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the "Annual Report on Form 10-K").

The interim financial information is unaudited, but reflects all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. The interimaccompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K. Interim results are not necessarily indicative of the results for a full year.

~~(3) Recent Accounting Pronouncements~~balance sheets.

~~Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASU”). See~~ ~~Note 2~~ ~~for additional information on recently adopted accounting pronouncements.~~

1011

Table of Contents

VIRGIN GALACTIC HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~

~~(4) Related Party Transactions~~

The Company licenses its brand name from certain entities affiliated with Virgin Enterprises Limited (“VEL”), a company incorporated in England. VEL is an affiliate of the Company. Under the trademark license, the Company has the exclusive right to operate under the brand name “Virgin Galactic” worldwide. Royalty payables, excluding sponsorship royalties, for the use of license are the greater of 1% of revenue or $40,000 per quarter, prior to the commercial launch date. Sponsorship royalties payable are 25% of sponsorship revenue. We paid license and royalty fees of $40,000 and $390,000 for the three months ended September 30, 2022 and 2021, respectively. We paid license and royalty fees of $120,000 and $470,000 for the nine months ended September 30, 2022 and 2021, respectively.

The Company has a Transition Services Agreement ("TSA") with Virgin Orbit, LLC ("VO") based on allocated operating expense from Virgin Orbit Holdings, Inc. and its subsidiaries (“VOH”), a majority owned company of Virgin Investments Limited ("VIL"), for operations-related functions based on an allocation methodology that considers our headcount, unless directly attributable to the business. Operating expense allocations include use of machinery and equipment, pilot services, and other general administrative expenses. We were allocated $46,000 and $33,000 operating expenses, net, from VOH for the three months ended September 30, 2022 and 2021, respectively. We were allocated $80,000 and $104,000 of operating expenses, net from VOH for the nine months ended September 30, 2022 and 2021, respectively. The Company has a receivable from VOH of $32,000 and $43,000 as of September 30, 2022 and December 31, 2021, respectively.

~~(5)Cash, Restricted Cash, Cash Equivalents and Marketable Securities~~

~~The amortized cost, unrealized loss and estimated fair value of the Company's cash, cash equivalents, restricted cash, and marketable securities as of September 30, 2022 and December 31, 2021:~~

As of September 30, 2022
Amortized Cost Gross Unrealized Losses Fair Value
(In thousands)
Cash, restricted cash and cash equivalents
Cash and restricted cash $ 8,358 $ — $ 8,358
Money market 384,575 — 384,575
Certificate of deposits 41,427 — 41,427
Marketable securities
US treasuries 149,102 (183) 148,919
Corporate debt securities 536,913 (10,047) 526,866
Total cash, cash equivalents, restricted cash and marketable securities $ 1,120,375 $ (10,230) $ 1,110,145

~~Table of Contents~~

~~VIRGIN GALACTIC HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

As of December 31, 2021
Amortized Cost Gross Unrealized Losses Fair Value
(In thousands)
Cash, restricted cash and cash equivalents
Cash and restricted cash $ 55,592 $ — $ 55,592
Money market 402,889 — 402,889
Certificate of deposits 91,549 — 91,549
Marketable securities
Corporate debt securities 382,884 (2,003) 380,881
Total cash, cash equivalents and marketable securities $ 932,914 $ (2,003) $ 930,911

~~The Company included $39.8 million and $1.0 million of current restricted cash held in a money market account as of September 30, 2022 and December 31, 2021, respectively.~~

~~The Company included $3.2 million and $2.3 million of interest receivable in prepaid expenses and other current assets as of September 30, 2022 and December 31, 2021, respectively.~~

The Company recognizes amortization and accretion of purchase premiums and discounts on our marketable securities within interest income, net. The Company recognized $1.5 million and $0.3 million in amortization expense for our marketable securities within interest income, net for the three months ended September 30, 2022 and September 30, 2021, respectively. The Company recognized $5.5 million and $0.3 million in amortization expense for marketable securities within interest income, net for the nine months ended September 30, 2022 and September 30, 2021, respectively.

We record gross realized gains and losses as a component of other income, net in the consolidated statements of operations. For the three months ended September 30, 2022, the Company recognized $0.2 million loss in other income, net, and for the three months ended September 2021, the Company did not recognize any material gross realized gains and losses. For the nine months ended September 30, 2022, the Company recognized $0.3 million loss in other income, net. For the nine months ended September 30, 2021, the Company did not recognize any material gross realized gains and losses.

~~The following table presents the contractual maturities of the Company's marketable securities as of September 30, 2022:~~

As of September 30, 2022
Amortized Cost Estimated Fair Value
(In thousands)
Matures within one year $ 614,641 $ 606,713
Matures between one to two years 71,374 69,072
Total $ 686,015 $ 675,785

(6) ~~Inventory~~

~~As of September 30, 2022 and December 31, 2021, inventory is comprised of the following:~~

~~Table of Contents~~

~~VIRGIN GALACTIC HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

As of
September 30, 2022 December 31, 2021
(Unaudited)
(In thousands)
Raw materials $ 13,267 $ 21,127
Spare parts 9,584 8,541
Total inventory $ 22,851 $ 29,668

For the three months ended September 30, 2022 and 2021,we wrote off $2.2 million and $0.2 million of inventory due to excess and obsolescence, respectively. For the nine months ended September 30, 2022 and September 30, 2021, we wrote off $3.3 million and $0.4 million of inventory due to excess and obsolescence, respectively.

~~(7) Property, Plant, and Equipment, net~~

~~As of September 30, 2022 and December 31, 2021, property, plant, and equipment, net consisted of the following:~~

As of
September 30, 2022 December 31, 2021
(Unaudited)
(In thousands)
Land $ 1,302 $ —
Buildings 9,118 9,117
Leasehold improvements 30,457 29,155
Aircraft 195 195
Machinery and equipment 35,670 37,002
IT software and equipment 28,911 23,523
Construction in progress 3,152 2,901
108,805 101,893
Less accumulated depreciation and amortization (59,931) (54,395)
Property, plant, and equipment, net $ 48,874 $ 47,498

Accrued Liabilities

The ~~following table sets forth the summary of depreciation and amortization expense for property, plant and equipment, net:~~

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(Unaudited and in thousands)
Customer experience $ — $ — $ — $ —
Selling, general, and administrative 1,819 1,592 5,085 4,774
Research and development 395 1,304 2,896 3,861
$ 2,214 $ 2,895 $ 7,981 $ 8,635

~~Table of Contents~~

~~VIRGIN GALACTIC HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~(8) Leases~~

~~On July 14, 2022, the Company entered into an agreement to lease 151,096 square feet of manufacturing and operations facilities in Mesa, Arizona consisting of two hangars ("Hangar C" and "Hangar B").~~

The lease has an initial term of approximately ten years and five months after the commencement date applicable to Hangar C or Hangar B, whichever is later, and is expected to commence ten months following the date of the agreement was entered into with respect to Hangar C and fifteen months following the date of the agreement was entered into for Hangar B. The average annual base rent under the lease is approximately $3.0 million. The Company has four options to extend the term of the lease, each for an additional five years.

~~The Company's leases are more fully described in Note 8 of the "Notes to Consolidated Financial Statements" to its Annual Report on Form 10-K.~~

~~The components of lease expense related to leases for the periods presented below are as follows:~~

Three Months Ended
September 30,
2022 2021
(Unaudited and in thousands)
Lease Cost:
Operating lease expense $ 2,553 $ 1,244
Short-term lease expense — 6
Finance Lease Cost:
Amortization of right-of-use assets 42 34
Interest on lease liabilities 11 6
Total finance lease cost 53 40
Variable lease cost 1,760 1,475
Total lease cost $ 4,366 $ 2,765

~~Table of Contents~~

~~VIRGIN GALACTIC HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Nine Months Ended
September 30,
2022 2021
(Unaudited and in thousands)
Lease Cost:
Operating lease expense $ 6,622 $ 3,758
Short-term lease expense — 26
Finance Lease Cost:
Amortization of right-of-use assets 100 103
Interest on lease liabilities 20 20
Total finance lease cost 120 123
Variable lease cost 4,654 4,185
Total lease cost $ 11,396 $ 8,092

~~The components of supplemental cash flow information related to leases for the period are as follows:~~

Nine Months Ended September 30,
2022 2021
(In thousands, except term and rate data)
Cash flow information:
Operating cash flows for operating leases $ 7,980 $ 4,065
Operating cash flows for finance leases $ 20 $ 20
Financing cash flows for finance leases $ 132 $ 105
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations
Operating leases $ 16,338 $ 501
Finance Leases $ 230 $ 19
Other Information:
Weighted average remaining lease term:
Operating leases (in years) 10.80 12.30
Finance leases (in years) 2.75 2.29
Weighted average discount rates:
Operating leases 12.14 % 11.66 %
Finance leases 11.26 % 8.22 %

~~Table of Contents~~

~~VIRGIN GALACTIC HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~The supplemental balance sheet information related to leases for the period is as follows:~~

As of
September 30, 2022 December 31, 2021
(Unaudited)
(In thousands)
Operating leases
Long-term right-of-use assets $ 49,324 $ 35,486
Short-term operating lease liabilities $ 3,190 $ 2,204
Long-term operating lease liabilities 56,856 39,965
Total operating lease liabilities $ 60,046 $ 42,169

~~Commitments~~

The Company has certain non-cancelable operating leases primarily for its premises. These leases generally contain renewal options for periods ranging from 3 to 20 years and require the Company to pay all executory costs, such as maintenance and insurance. Certain lease arrangements have rent free periods or escalating payment provisions, and we recognize rent expense of such arrangements on a straight line basis.

Future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) and future minimum finance lease payments as of September 30, 2022 are as follows:

Operating Leases Finance Leases
(In thousands)
2022 (for the remaining period) $ 2,106 $ 47
2023 8,676 170
2024 10,034 94
2025 10,190 64
2026 10,347 35
Thereafter 71,707 2
Total lease payments $ 113,060 $ 412
Less:
Imputed interest/present value discount $ (53,014) $ (62)
Present value of lease liabilities $ 60,046 $ 350

~~Table of Contents~~

~~VIRGIN GALACTIC HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~(9) Accrued Expenses~~

~~A summary of the~~ components of accrued liabilities are as follows:

As of
September 30, 2022 December 31, 2021
(Unaudited)
(In thousands)
Accrued payroll $ 8,331 $ 4,214
Accrued vacation 6,383 5,372
Accrued bonus 11,578 12,218
Accrued interest expense 1,771 —
Accrued contract labor 7,869 1,147
Other accrued expenses 7,457 5,836
Total accrued expenses $ 43,389 $ 28,787


	March 31, 2023		December 31, 2022

	(In thousands)
Accrued contract labor	$	17,919	$	16,415
Accrued payroll	8,284		3,861
Accrued vacation	7,979		7,132
Accrued bonus	7,064		15,561
Other accrued expenses	18,160		18,879
	$	59,406	$	61,848

~~(10) Commercial Loan~~

~~As of~~

~~September 30, 2022~~

~~December 31, 2021~~

~~(Unaudited)~~

~~(In thousands)~~

~~Commercial loan~~

—

~~310~~

~~Less: Current portion~~

—

~~(310)~~

~~Non-current portion~~

—

On June 18, 2020, we financed the purchase of software licenses through a loan totaling approximately $0.9 million. The loan amortized in three equal annual installments of approximately $0.3 million with the final payment due October 1, 2022 with 0% interest rate. The loan is secured by a standby letter of credit issued from our financial institution and restricted cash has been recorded for the corresponding outstanding balance. The outstanding balance is recorded in other current-liabilities on the C ~~ondensed~~ C ~~onsolidated~~ B ~~alance~~ S ~~heets~~.

~~The imputed interest of this loan was immaterial.~~

~~(11)~~(7) Convertible Senior Notes

~~2027 Convertible Senior Notes~~

On January 19, 2022, the Company completed an offering of $425 million aggregate principal amount of ~~the 2027 Notes.~~convertible senior notes (the "2027 Notes"). The 2027 Notes are senior unsecured obligations of the Company and bear interest at a fixed rate of 2.50% per year. Interest is payable in cash semi-annually in arrears on February 1 and August 1 of each year,

~~Table of Contents~~

~~VIRGIN GALACTIC HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

beginning on August 1, 2022. The 2027 Notes mature on February 1, 2027 unless earlier repurchased, redeemed or converted.

The ~~terms~~net carrying value of the 2027 Notes ~~are governed by an Indenture by and between the Company and U.S. Bank National Association,~~is as Trustee (the "2027 Indenture"). Upon conversion by the noteholders, the 2027 Notes may be settled in cash, shares of the Company's common stock or a combination of cash and shares of common stock, par value $0.0001 per share (the “common stock”), at our election, based on the conversion rate.

The 2027 Notes are convertible at an initial conversion rate of 78.1968 shares of common stock per $1,000 principal amount of the 2027 Notes, which is equal to an initial conversion price of approximately $12.79 per share of common stock, subject to adjustment upon the occurrence of certain events. Noteholders will have the right to convert their notes during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on June 30, 2022, under the following circumstances:

•during any calendar quarter after June 30, 2022 (and only during such calendar quarter) if the last reported sale price of the Company's common stock for each of at least 20 trading days in a period of 30 consecutive trading days ending on and including the last trading day of the preceding calendar quarter is more than 130% of the then applicable conversion price for the Notes per share of common stock;

•during the five consecutive business days immediately after any ten consecutive trading day period in which the trading price per $1,000 principal amount of 2027 Notes for each day of that period was less than 98% of the product of the last reported sale price of our common stock and the then applicable conversion rate;

•the Company calls any or all of the 2027 Notes for redemption, holders may convert all or any portion of their notes at any time prior to the close of business on the scheduled trading day prior to the redemption date, even if the 2027 Notes are not otherwise convertible at such time; or

•~~specified distributions to holders of our common stock are made or specified corporate events occur, as described in the 2027 Indenture.~~

On and after November 1, 2026, noteholders will have the right to convert their notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. The Company will have the right to elect to settle conversions in cash, in shares of its common stock or in a combination of cash and shares of its common stock. During the three and nine months ended September 30, 2022, the conditions allowing holders of the 2027 Notes to convert were not met, and as a result, the 2027 Notes were classified as noncurrent liabilities as of September 30, 2022.

The 2027 Notes will be redeemable, in whole or in part (subject to certain limitations), for cash at the Company's option at any time, and from time to time, on or after February 6, 2025 and on or before the 20th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of the Company's common stock exceeds 130% of the conversion price for a specified period of time and certain liquidity conditions have been satisfied. The redemption price will be equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. During the three and nine months ended September 30, 2022, the Company did not redeem any of the 2027 Notes.

Holders of the 2027 Notes who convert their 2027 Notes in connection with certain corporate events that constitute a make-whole fundamental change (as defined in the 2027 Indenture) or in connection with the Company's issuance of a redemption notice are, under certain circumstances, entitled to an increase in the conversion rate. Additionally, in the event of a corporate event that constitutes a fundamental change (as defined in the 2027 Indenture), holders of the 2027 Notes may require the Company to repurchase all or a portion of their 2027 Notes at a price equal to the principal amount of the 2027 Notes being repurchased, plus any accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date.

~~The 2027 Notes, net consisted of the following (in thousands):~~

~~Table of Contents~~

~~VIRGIN GALACTIC HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

follows:

~~As of~~

~~September 30, 2022~~March 31, 2023

~~(Unaudited)~~(In thousands)

Principal

425,000

Less: unamortized debt issuance costs

~~(9,812)~~8,745

Net carrying amount

~~415,188~~416,255

~~As of September 30, 2022, we included $1.8 million of accrued interest expense on our 2027 Notes within accrued expenses. For~~During the three months ended ~~September 30, 2022, we~~March 31, 2023, the Company recognized $3.2 million of ~~total~~ interest expense on ~~our~~the 2027 Notes, including $0.5 million of amortized debt issuance costs. ~~For the nine months ended September 30, 2022, we recognized $8.9 million of total interest expense on our 2027 Notes, including $1.5 million of amortized debt issuance cost.~~

~~Capped Call Transactions~~

In connection with the pricing of the 2027 Notes, the Company entered into capped call transactions with respect to its common stock. The 2027 Capped Calls are purchased call options that give the Company the option to purchase, subject to anti-dilution adjustments substantially identical to those in the 2027 Notes, approximately 33 million shares of its common stock for approximately $12.79 per share (subject to adjustment), corresponding to the approximate initial conversion price of the 2027 Notes, exercisable upon conversion of the 2027 Notes. The 2027 Capped Calls have initial cap prices of $20.06 per share (subject to adjustment), which represents a premium of 100% over the closing price of the Company's common stock on January 13, 2022, and will expire in 2027, if not exercised earlier. The 2027 Capped Calls are intended to reduce potential dilution to the Company's common stock upon any conversion of the 2027 Notes and/or offset the potential cash payments that the Company could be required to make in excess of the principal amount upon any conversion of the 2027 Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the 2027 Capped Call transactions. The 2027 Capped Calls are separate transactions, each between the Company and the applicable option counterparty, and are not part of the terms of the 2027 Notes and will not affect any holder's rights under the 2027 Notes or the 2027 Indenture. Holders of the 2027 Notes will not have any rights with respect to the 2027 Capped Call transactions.

The Company paid an aggregate amount of $52.3 million for the 2027 Capped Calls. As these transactions meet certain accounting criteria, the amount paid for the 2027 Capped Calls was recorded as a reduction to additional paid-in capital in the C ~~ondensed~~ C ~~onsolidated~~ B ~~alance~~ S ~~heets. The fair value of the 2027 Capped Calls is not remeasured each reporting period so long as they continue to qualify for equity classification, which they did for the current period.~~

~~(12)~~(8) Income Taxes

Income tax expense was ~~$21,000~~$128,000 and $25,000 for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. Income tax expense was $69,000 and $74,000 for the nine months ended September 30, 2022 and 2021,~~ respectively. The effective income tax rate was nil for three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021. Our~~2022. The effective tax rate differs from the U.S. statutory rate primarily due to a ~~substantially~~ full valuation allowance against ~~our~~ net deferred tax assets where it is more likely than not that some or all of the deferred tax assets will not be realized.

~~Table of Contents~~

~~VIRGIN GALACTIC HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~(13)~~(9) Stockholders' Equity

~~There have been no significant changes from the Stockholders' Equity disclosed in Note 12 of the “Stockholders Equity” included in our Annual Report on Form 10-K.~~

~~Stockholders' Agreement~~

In connection with the closing of the Virgin Galactic business combination in October 2019 (the "Business Combination"), the Company entered into a stockholders’ agreement with certain of the Company’s investors. Pursuant to the terms of the Stockholders’ Agreement, as long as VIL is entitled to designate two directors to the Company’s Board of Directors, the Company must obtain VIL’s prior written consent to engage in certain corporate transactions and management functions such as business combinations, disposals, acquisitions, incurring indebtedness, and engagement of professional advisors, among others.

~~Warrants and Warrant Redemption~~

Public and private placement warrants were initially issued as part of Social Capital Hedosophia Holdings Corp.'s ("SCH") initial public offering in 2017 and assumed upon the consumption of the Business Combination. As of September 30,On August 4, 2022, ~~and December 31, 2021, there were no public or private placement warrants outstanding.~~

The Company remeasured the fair value of the Warrants at each reporting date with changes recorded in earnings. In connection with the Company's remeasurement of the Warrants to fair value, the Company recorded income of approximately $34.4 million for the three months ended September 30, 2021 and expense of $34.7 million for the nine months ended September 30, 2021.

~~At The Market Offerings~~

~~On July 12, 2021,~~ the Company entered into a distribution agency agreement with Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC (each, an “Agent” and collectively, the “Agents”) providing for the offer and sale of up to ~~$500.0~~$300 million of shares of the ~~Company’s~~Company's common stock ~~par value $0.0001 per share, through an "at the market offering" program ("ATM"),~~ from time to time ~~by the Company~~ through the Agents, acting as ~~the Company’s~~ sales agents, or directly to one or more of the Agents, acting as ~~principal.~~

We completed available offerings under the 2021 ATM on July 16, 2021, generating $500.0 million in gross proceeds through the sale of 13,740,433 shares of the Company's common stock, before deducting $6.2 million in underwriting discounts, commissions and other expenses payable by the Company.

On August 4, 2022, the Company entered into a distribution agency agreement with Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC providing for the offer and sale of up to $300.0 million of shares of the Company’s common stock, par value $0.0001 per share,principal, through an ~~ATM~~"at the market offering" program (the "2022 ATM program").

~~As of September 30, 2022, we~~During the three months ended March 31, 2023, the Company sold ~~a total of 15,587,600~~5.8 million shares of ~~the Company's~~ common stock under the 2022 ATM program, generating ~~$99.6~~$32.0 million in gross proceeds, before deducting ~~$1.2~~$0.3 million in underwriting discounts, commissions and other ~~expenses payable by~~expenses.

Since inception and through March 31, 2023, the ~~Company.~~Company sold a total of 22.0 million shares of common stock under the 2022 ATM program, generating $135.4 million in gross proceeds, before deducting $1.4 million in underwriting discounts, commissions and other expenses.

2012

Table of Contents

VIRGIN GALACTIC HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~

~~(14) Net Loss~~(10) Earnings Per Share

The following table presents net loss per share and related information:

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(In thousands, except for share and per share data)
Numerator:
Net loss attributable to common shareholders $ (145,554) $ (48,368) $ (349,332) $ (272,102)
Less: revaluation of warrant liability — (34,432) — —
Adjusted net loss (145,554) (82,800) (349,332) (272,102)
Denominator:
Weighted average shares of common stock outstanding 263,907,259 254,749,195 260,255,202 244,157,923
Add: dilutive effect of common stock issuable from assumed exercise of warrants — 398,033 — —
Weighted average shares outstanding, diluted 263,907,259 255,147,228 260,255,202 244,157,923
Net loss per share:
Basic $ (0.55) $ (0.19) $ (1.34) $ (1.11)
Diluted $ (0.55) $ (0.32) $ (1.34) $ (1.11)


	Three Months Ended March 31,
	2023		2022
	(In thousands, except per share amounts)
Basic and diluted:
Net loss	$	(159,385)	$	(93,057)
Weighted average common shares outstanding	278,450		258,288
Basic and diluted net loss per share	$	(0.57)	$	(0.36)

Basic and diluted net loss per share ~~was~~is computed using the weighted-average number of ~~common~~ shares of common stock outstanding during the ~~three and nine month periods ended September 30, 2022 and September 30, 2021. Basic net loss per share is the same as~~period. The computation of diluted net loss per share ~~for~~excludes the ~~three and nine month periods ended September 30, 2022 and for the nine months ended September 30, 2021 as the inclusion~~effect of all potential common shares outstanding as their impact would have been anti-dilutive.

~~For the three months ended September 30, 2021, the~~The Company ~~included the potential effect~~has excluded stock-based awards and shares issuable upon conversion of the ~~warrants to purchase shares of common stock as~~2027 Notes from the ~~effect would be dilutive. Diluted net~~diluted loss per share calculation because their effect was anti-dilutive. The total number of shares excluded for the three months ended September 30, 2021 was computed by dividing the net loss, adjusted for the revaluation of warrant liability for private warrants, by the weighted average number of common shares outstanding for the period, adjusted for the dilutive effect of shares of common stock equivalents resulting from the assumed exercise of the warrants. The treasury stock method was used to calculate the potential dilutive effect of these common stock equivalents for the three months ended September 30, 2021.

~~Potentially dilutive securities that~~March 31, 2023 and 2022 were ~~not included in the diluted per share calculation for these periods, as they would have an anti-dilutive impact on net loss per share, are as follows (in thousands):~~

As of September 30,
2022 2021
Issued and outstanding stock options 3,794 4,428
Issued and outstanding performance stock options 406 —
Unvested restricted stock units issued and outstanding 4,502 3,442
Unvested performance stock units issued and outstanding 255 90
Shares related to the 2027 Notes (1)
33,234 —
Warrants to purchase shares of common stock — 8,000
42,191 15,960

~~(1)~~ ~~The Company uses the if-converted method for calculating any potential dilutive effect of the conversion options embedded in the 2027 Notes on diluted net loss per share, if applicable.~~

47.2 million and 42.2 million, respectively.

~~Table of Contents~~

~~VIRGIN GALACTIC HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~(15)~~(11) Stock-Based Compensation

~~The Company's~~Pursuant to the 2019 Incentive Award Plan ("2019 Plan") ~~is more fully described in Note 14 of the "Notes to Consolidated Financial Statements" on Form 10-K. Under the 2019 Plan,~~, the Company has the ability to grant incentive stock options, non-qualified stock options and restricted stock units ("RSUs") to employees, directors and other service providers. Performance stock units ("PSUs") are RSUs that vest based on achievement of specified performance criteria. Performance stock options ("PSOs") are stock options that vest based on achievement of specified performance criteria.

A summary of the components of stock-based compensation expense included in selling, general and administrative and research and development expenses in the condensed consolidated statements of operations and comprehensive loss is as follows:

~~Stock Options~~


	Three Months Ended March 31,
	2023		2022
	(in thousands)
Stock option and PSO expense:

Selling, general and administrative	$	1,638	$	1,722
Research and development	533		689
Total stock option and PSO expense	2,171		2,411

RSU and PSU expense:

Selling, general and administrative	8,322		5,555
Research and development	2,483		2,929
Total RSU and PSU expense	10,805		8,484
Total stock-based compensation expense	$	12,976	$	10,895

~~Twenty five percent~~As of ~~such~~March 31, 2023, the Company had unrecognized stock-based compensation expense of $8.0 million for stock options cliff vest at the grant date first anniversary, with the remaining options vesting ratably over the following three years, subject to continued employment on each vesting date. Vested options will be exercisable at any time until ten years from the grant date, subject to earlier expiration under certain terminations of service and ~~other conditions. The stock options granted have an exercise price equal to the closing stock price of our common stock on the grant date.~~

~~In March 2022, we issued stock options as incentive compensation~~$0.2 million for ~~certain key employees. The fair values of these stock options were estimated using a Black-Scholes model with the following assumptions:~~


	~~2022~~
~~Expected life (in years)(1)~~	~~6.11~~
~~Expected volatility(2)~~	~~69.0~~	%
~~Risk free interest rate(3)~~	~~2.19~~	%
~~Dividend yield(4)~~	—	%

~~(1)~~ ~~The expected life is the period of time that participants~~PSOs. These amounts are expected to ~~hold their options before exercised using the "simplified method"~~be recognized over weighted-average periods of 0.9 years and 0.2 years, respectively. Unrecognized stock-based compensation expense as ~~described in Staff Accounting Bulletin No. 107.~~

~~(2)~~ ~~The expected volatility is a measure~~ of ~~the amount by~~March 31, 2023 for RSUs and PSUs totaled $74.4 million and $8.3 million, respectively, which ~~a stock price is~~are expected to ~~fluctuate based primarily on our~~be recognized over weighted-average periods of 1.3 years and ~~our peers' historical data.~~

~~(3)~~ ~~The risk-free interest rate for the periods within the contractual term of the options is based on the U.S. Treasury yield curve in effect at the time of the grant.~~

~~(4)~~ ~~The Company does not currently pay dividends nor has announced plans to begin paying dividends.~~1.4 years, respectively.

2213

Table of Contents

VIRGIN GALACTIC HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~

~~The following table sets forth the summary of options activity for the nine month ended September 30, 2022 under the 2019 Plan (dollars in thousands, except per share data):~~

Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years)
Aggregate Intrinsic Value(1)
Weighted Average Grant Date Fair Value ($)
Options outstanding at December 31, 2021 4,253,767 $ 14.09 7.60 6,187 —
Granted 303,030 7.99 4.95
Exercised (4,182) 11.79
Forfeited options (758,250) 18.96
Options outstanding at September 30, 2022 3,794,365 $ 13.91 6.74 — —
Options exercisable at September 30, 2022 2,346,118 $ 13.96 6.14 — —

~~(1)~~ Aggregate intrinsic value is calculated based on the difference between our closing stock price at period end and the exercise price, multiplied by the number of in-the-money options and represents the pre-tax amount that would have been received by the option holders, had they all exercised all their options on the period end date.

~~Performance Stock Options~~

Compensation expense on the PSOs will be recognized over the period between the grant date and the estimated vest date. The number of PSOs that will vest depends on the attainment of certain stock price goals. Vested options will be exercisable at any time until ten years from the grant date, subject to earlier expiration under certain terminations of service and other conditions. The stock options granted have an exercise price equal to the closing stock price of our common stock on the grant date.

~~In March 2022, we issued PSOs as incentive compensation for certain key employees. The fair values of these stock options were estimated using a Monte-Carlo simulation with the following assumptions:~~


	~~2022~~
~~Expected exercise behavior(1)~~	~~75.0~~	%
~~Expected Volatility(2)~~	~~58.0~~	%
~~Risk free interest rate(3)~~	~~2.19~~	%
~~Dividend yield(4)~~	—	%

~~(1)~~ ~~PSOs are expected to be exercised after 75% of the period between the vest date and the end of the contractual term has lapsed.~~

~~(2)~~ ~~The expected volatility is a measure of the amount by which a stock price is expected to fluctuate based primarily on our and our peers' historical data.~~

~~(3)~~ ~~The risk-free interest rate for the periods within the contractual term of the options is based on the U.S. Treasury yield curve in effect at the time of the grant.~~

~~(4)~~ ~~The Company does not currently pay dividends nor has announced plans to begin paying dividends.~~

~~Table of Contents~~

~~VIRGIN GALACTIC HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~The following table sets forth the summary of PSO activity for the nine month ended September 30, 2022 under the 2019 Plan (dollars in thousands, except per share data):~~

Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years)
Aggregate Intrinsic Value(1)
Weighted Average Grant Date Fair Value ($)
PSOs outstanding at December 31, 2021 — $ — 0.00 —
Granted 405,680 8.99 4.93
Exercised — —
Forfeited options — —
PSOs outstanding at September 30, 2022 405,680 $ 8.99 9.47 —
PSOs exercisable at s September 30, 2022 — $ — 0.00 —

~~Restricted Stock Units~~

~~The RSUs vest over four years with 25% cliff vest at the first year anniversary of the grant date, with the remaining vesting ratably over the next three years.~~

~~The following table sets forth the summary of RSUs activity for the nine months ended September 30, 2022 under the 2019 Plan (dollars in thousands, except per share data):~~

Shares Weighted Average Fair Value
RSUs outstanding at December 31, 2021 2,396,732 $ 27.89
Granted 3,900,745 8.42
Vested (1,144,802) 20.20
Forfeited (650,533) 16.54
RSUs outstanding at September 30, 2022 4,502,142 $ 13.65

~~Performance Stock Units~~

Between 25% and 200% of the PSUs are eligible to vest based on the achievement of certain performance-based goals or market-based goals by specified target dates, subject to continued service through the applicable vesting date. PSUs with performance-based goals are amortized over the requisite service period in which it is probable that the performance goal is achieved. PSUs with market-based goals will vest based on the Company's common stock performance following the end of the three year performance measurement period based on the highest closing price over twenty consecutive trading days during the performance measurement period. PSUs with market-based goals cannot vest before the end of the performance measurement period, thus the requisite service period is three years.

~~Table of Contents~~

~~VIRGIN GALACTIC HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~In March 2022, we issued PSUs as incentive compensation for certain key employees. The fair values of these stock units were estimated using a Monte-Carlo simulation with the following assumptions:~~


	~~2022~~
~~Expected volatility(1)~~	~~95.0~~	%
~~Risk free interest rate(2)~~	~~2.13~~	%
~~Dividend yield(3)~~	—	%

~~(1)~~ ~~The expected volatility is a measure of the amount by which a stock price is expected to fluctuate based primarily on our and our peers' historical data.~~

~~(2)~~ ~~The risk-free interest rate for the periods within the contractual term of the options is based on the U.S. Treasury yield curve in effect at the time of the grant.~~

~~(3)~~ ~~The Company does not currently pay dividends nor has announced plans to begin paying dividends.~~

~~The following table sets forth the summary of PSUs activity for the nine months ended September 30, 2022 under the 2019 Plan (dollars in thousands, except per share data):~~

Shares Weighted Average Fair Value
PSUs outstanding at December 31, 2021 89,839 $ 26.47
Granted 277,552 14.62
Forfeited (112,518) 26.17
PSUs outstanding at September 30, 2022 254,873 $ 14.67

~~Stock-based compensation expense was recorded in the following expense categories in the~~ C ~~ondensed Consolidated Statements of Operations and Comprehensive Loss~~:

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(in thousands)
Stock option and PSO expense
   Selling, general and administrative $ 2,113 $ 1,735 $ 6,022 $ 12,590
   Research and development 596 776 2,020 2,445
      Total stock option and PSO expense 2,710 2,511 8,042 15,035
RSU and PSU expense
   Selling, general and administrative 6,045 6,805 18,046 24,414
   Research and development 2,756 2,853 8,400 9,255
      Total RSU and PSU expense 8,800 9,658 26,446 33,669
      Total stock-based compensation expense $ 11,510 $ 12,169 $ 34,488 $ 48,704

~~Table of Contents~~

~~VIRGIN GALACTIC HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

As of September 30, 2022, the unrecognized stock-based compensation related to stock options and PSOs was $12.5 million and $0.7 million, respectively. These amounts are expected to be recognized over weighted-average periods of 2.0 years and 0.7 years, respectively. As of September 30, 2022, the unrecognized stock-based compensation related to RSUs and PSUs was $76.7 million and $3.1 million, respectively. These amounts are expected to be recognized over weighted-average periods of 2.6 years and 2.5 years, respectively.

~~(16)~~(12) Fair Value Measurements

~~We utilize~~The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. ~~We estimate~~The Company estimates fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which is categorized in one of the following levels:

•Level 1 ~~inputs:~~inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the

reporting entity at the measurement date;

•Level 2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability; and

•Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

~~The carrying amounts included in the~~ ~~Condensed Consolidated Balance Sheets~~ ~~under current assets and current liabilities approximate fair value because of the short maturity of these instruments.~~

The following tables ~~summarize~~present the ~~fair value of~~Company's financial assets that are recorded ~~in the Company’s~~ ~~Condensed Consolidated Balance Sheets~~ ~~as of September 30, 2022 and December 31, 2021~~ at fair value on a recurring ~~basis:~~basis, segregated among the appropriate levels within the fair value hierarchy:

Fair Value Measurements as of September 30, 2022
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Money market $ 386,578 $ — $ — $ 386,578
Certificate of deposit 41,777 — — 41,777
US treasuries 148,919 — — 148,919
Corporate debt securities — 526,866 — 526,866
Total assets at fair value $ 577,274 $ 526,866 $ — $ 1,104,140
Liabilities:
2027 Notes $ — $ — $ 238,451 $ 238,451
Total liabilities at fair value $ — $ — $ 238,451 $ 238,451


	March 31, 2023
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Money market	$	364,722	$	—	$	—	$	364,722
Certificates of deposit	42,225		—		—		42,225
U.S. treasuries	98,902		—		—		98,902
Corporate bonds	—		319,021		—		319,021
Total assets at fair value	$	505,849	$	319,021	$	—	$	824,870


	December 31, 2022
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Money market	$	249,249	$	—	$	—	$	249,249
Certificates of deposit	41,727		—		—		41,727
U.S. treasuries	79,517		—		—		79,517
Corporate bonds	—		557,591		—		557,591
Total assets at fair value	$	370,493	$	557,591	$	—	$	928,084

The ~~estimated~~following tables present the Company's financial liabilities that are recorded at amortized cost, segregated among the appropriate levels within the fair value ~~of the 2027 Notes were determined based on the quoted bid prices of the 2027 Notes in an over-the-counter market on the last trading day of the reporting period.~~hierarchy:


	March 31, 2023
	Level 1		Level 2		Level 3		Total
	(In thousands)
Liabilities:
2027 Notes	$	—	$	204,255	$	—	$	204,255
Total liabilities at fair value	$	—	$	204,255	$	—	$	204,255

2614

Table of Contents

VIRGIN GALACTIC HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~

Fair Value Measurements as of December 31, 2021
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Money Market $ 402,889 $ — $ — $ 402,889
Certificate of Deposit 91,549 — — 91,549
Corporate debt securities — 380,881 — 380,881
Total assets at fair value $ 494,438 $ 380,881 $ — $ 875,319


	December 31, 2022
	Level 1		Level 2		Level 3		Total
	(In thousands)
Liabilities:
2027 Notes	$	—	$	193,439	$	—	$	193,439
Total liabilities at fair value	$	—	$	193,439	$	—	$	193,439

~~(17)~~(13) Commitments and Contingencies

Leases

The Company has certain non-cancelable operating leases primarily for its premises. These leases generally contain renewal options for periods ranging from 3 to 20 years and require the Company to pay all executory costs, such as maintenance and insurance. Certain lease arrangements have rent free periods or escalating payment provisions, and the Company recognizes rent expense for such arrangements on a straight line basis.


	Operating Leases		Finance Leases
	(In thousands)
2023 (for the remaining period)	$	7,176	$	213
2024	10,074		211
2025	10,190		182
2026	10,347		131
2027	10,313		16
Thereafter	61,216		6
Total payments	109,316		759
Less: present value discount/imputed interest	49,461		137
Present value of lease liabilities	$	59,855	$	622

Legal Proceedings

From time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. The Company applies accounting for contingencies to determine when and how much to accrue for and disclose related to legal and other contingencies. Accordingly, the Company discloses contingencies deemed to be reasonably possible and accrues loss contingencies when, in consultation with legal advisors, it is concluded that a loss is probable and reasonably estimable. Although the ultimate aggregate amount of monetary liability or financial impact with respect to these matters is subject to many uncertainties and is therefore not predictable with assurance, management believes that any monetary liability or financial impact to the Company from these matters, individually and in the aggregate, beyond that provided at ~~September 30, 2022,~~March 31, 2023, would not be material to the Company’s consolidated financial position, results of operations or cash flows. However, there can be no assurance with respect to such result, and monetary liability or financial impact to the Company from legal proceedings, lawsuits and other claims could differ materially from those projected.

Table of Contents

VIRGIN GALACTIC HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

Lavin v. the Company

On May 28, 2021, a class action complaint was filed against usthe Company in the Eastern District of New York captioned Lavin v. Virgin Galactic Holdings, Inc., Case No. 1:21-cv-03070. In September 2021, the Court appointed Robert Scheele and Mark Kusnier as co-lead plaintiffs for the purported class. Co-lead plaintiffs amended the complaint in December 2021, asserting violations of Sections 10(b), 20(a) and 20A of the Securities Exchange Act of 1934 against usthe Company and certain of ~~our~~its current and former officers and directors on behalf of a putative class of investors who purchased ~~our~~the Company's common stock between July 10, 2019 and October 14, 2021.

The amended complaint alleges, among other things, that wethe Company and certain of ~~our~~its current and former officers and directors made false and misleading statements and failed to disclose certain information regarding the safety of ~~its~~the Company's ships and success of its commercial flight program. Co-lead plaintiffs seek damages, interest, costs, expenses, attorneys' fees, and other unspecified equitable relief. ~~Defendants~~The defendants moved to dismiss the amended complaint and, on November 7, 2022, the court granted in part and denied in part the defendants’ motion and gave the plaintiffs leave to file a further amended complaint. Plaintiffs’ filed a ~~motion~~second amended complaint on December 12, 2022. The second amended complaint contains many of the same allegations as in the first amended complaint. The defendants moved to dismiss the second amended complaint on ~~April 4, 2022,~~February 24, 2023 and ~~that~~their motion ~~is now~~will be fully ~~briefed.~~ briefed as of May 5, 2023.The Company intends to continue to vigorously defend against this matter.

Spiteri, Grenier, Laidlaw, St. Jean, and ~~Laidlaw,~~D. Abughazaleh derivatively on behalf of the Company vs. Certain Current and Former Officers and Directors

On February 21, 2022, March 1, 2022, ~~and~~ September 21, 2022, ~~three~~and December 13, 2022, four alleged shareholders filed separate derivative complaints purportedly on behalf of the Company against certain of ~~our~~its current and former officers and directors in the Eastern District of New York captioned Spiteri v. Branson et al., Case No. 1:22-cv-00933, Grenier v. Branson et al., Case No. 1:22-cv-01100, ~~and~~ Laidlaw v. Branson et al., Case No. 1:22-cv-05634, and St. Jean v. Branson et al., Case No. 1:22-cv-7551, respectively. On February 13, 2023, an alleged shareholder filed a derivative complaint purportedly on behalf of the Company against certain of its current and former officers and directors in the District of Delaware captioned Abughazaleh v. Branson et al., Case No. 23-cv-00156. Collectively, the complaints assert violations of Sections 10(b), 14(a), and 21D of the Securities Exchange Act of 1934 and claims of breach of fiduciary duty, aiding and abetting breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, contribution and indemnification, and unjust enrichment arising from substantially similar allegations as those contained in the securities class action described above. The complaints seek an unspecified sum of damages, interest, restitution, expenses, attorneys’ fees and other equitable relief. The cases are at a preliminary stage.

~~Table of Contents~~

~~VIRGIN GALACTIC HOLDINGS, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~(18) Employee Benefit Plan~~

The Company has defined contribution plans, under which the Company pays fixed contributions into a separate entity, and additional contributions to the plans are based upon a percentage of the employees’ elected contributions. The Company will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized within selling, general, and administrative expenses and research and development in the ~~Condensed Consolidated Statements of Operations and Comprehensive Loss~~, as incurred. Defined contributions were $1.4 million and $1.5 million for the three months ended September 30, 2022 and 2021, respectively. Defined contributions were $4.0 million and $4.1 million for the nine months ended September 30, 2022 and 2021, respectively.

~~(19)~~(14) Supplemental Cash Flow Information

Nine Months Ended September 30,
2022 2021
(in thousands)
Supplemental disclosure
Cash payments and refunds for:
Income tax refund $ 56 $ —
Income tax paid (90) (84)
$ (34) $ (84)
Schedule for noncash investing activities:
Unpaid property, plant, and equipment received $ 1,356 $ 1,021
$ 1,356 $ 1,021
Schedule for noncash financing activities:
Issuance of common stock "cashless" warrants exercised $ — $ 170,090
Issuance of common stock through restricted stock units vested 9,557 36,692
Commercial Loan (310) (310)
$ 9,247 $ 206,472


	Three Months Ended March 31,
	2023		2022
	(in thousands)
Supplemental disclosure of cash flow information:
Cash payments for:
Income taxes	$	128	$	7
Interest	5,313		—

Supplemental disclosure of non-cash investing and financing activities:
Unpaid property, plant and equipment	$	7,125	$	1,115
Issuance of common stock through RSUs vested	4,218		4,949

2816

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise requires, all references in this section to the “Company,” "Virgin Galactic," “we,” “us,” or “our” refer to Virgin Galactic Holdings, Inc. and its subsidiaries.

You should read the following discussion and analysis of our financial condition and results of operations together with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as the audited financial statements and the related notes thereto, and the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” included in our Annual Report on Form ~~10-K.~~10-K for the fiscal year ended December 31, 2022 (the "Annual Report on Form 10-K"). This discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve risks and uncertainties. As a result of many factors, such as those set forth under the “~~Risk Factors~~”“Risk Factors” section of our Annual Report on Form 10-K and under the "~~Cautionary~~"Cautionary Note Regarding Forward-Looking ~~Statements~~"Statements" section and elsewhere in this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

We are at the vanguard of a new industry, pioneering a consumer space experience using reusable spaceflight systems. We believe the commercial exploration of space represents one of the most exciting and important technological initiatives of our time. Approximately 640 humans have ever traveled above the Earth’s atmosphere into space. This industryVirgin Galactic Holdings, Inc. is growing dramatically due to new products, new sources of private and government funding, and new technologies. Demand is emerging from new sectors and demographics, which we believe is broadening the total addressable market. As government space agencies have retired or reduced their capacity to send humans into space, private companies are beginning to make exciting inroads into the fields of human space exploration. We have embarked on this journey with a mission to put humans and research experiments into space and return them safely to Earth on a routine and consistent basis. We believe that opening access to space will connect the world to the wonder and awe created by space travel, offering customers a transformative experience, and providing the foundation for a myriad of exciting new industries.

~~We are~~ an aerospace and space travel company offering access to space for private individuals, researchers and government agencies. Our missions include flying passengers to space as tourists, as well as flying scientific payloads and researchers to space in order to conduct experiments for scientific and educational purposes. Our operations include the design and development, manufacturing, ground and flight testing, and post-flight maintenance of our spaceflight system vehicles. Our spaceflight system is developed using our proprietary technology and processes and is focused on providing space experiences for private astronauts, researcher flights and professional astronaut training.

We intend to offer our customers a unique, multi-day experience culminating in a spaceflight that includes several minutes of weightlessness and views of Earth from space. Our elegant and distinctive spaceflight system – which takes off and lands on a runway – has been designed for optimal safety and comfort. As part of our commercial operations, we have exclusive access to the Gateway to Space facility at Spaceport America located in New Mexico. Spaceport America is the world’s first purpose-built commercial spaceport and will be the site of our initial commercial spaceflight operations. We believe the site provides us with a competitive advantage as it has a desert climate with relatively predictable weather conditions preferable to support our spaceflights and it also has airspace that is restricted for surrounding general air traffic which facilitates frequent and consistent flight scheduling.

Our near-term focus is to launch the commercial program for human spaceflight. In December 2018, we made history by flying our groundbreaking spaceship, VSS Unity, to space. This represented the first flight of a spaceflight system built for commercial service to take humans into space. In February 2019, we flew our second spaceflight with VSS Unity, which carried a crew member in the cabin in addition to the two pilots. After relocating our operations to Spaceport America, we have flown an additional two spaceflights in May and July of 2021. The May 2021 flight carried revenue-generating research experiments as part of NASA’s Flight Opportunities Program. This was the third time Virgin Galactic has flown technology experiments in the cabin on a spaceflight. This flight also completed the data submission to the FAA resulting in the approval for the expansion of our commercial space transportation operator license to allow for the carriage of space flight participants. This marked the first time the FAA licensed a spaceline to fly customers and was further validation of the inherent safety of our system.

~~Our flight in July 2021 was the 22~~nd ~~flight of VSS Unity, the fourth rocket powered spaceflight and the first spaceflight with a full crew of four mission specialists in the cabin, including our Founder, Sir Richard Branson.~~

~~Table of Contents~~

We believe that the market for commercial human spaceflight is significant and untapped. As of September 30, 2022, we received reservations for approximately 800 spaceflight tickets and collected more than $104.0 million in deposits from future astronauts. With each ticket purchased, future astronauts will experience a multi-day journey to prepare their mind and body for their upcoming flight, which includes a comprehensive spaceflight training preparation program and culminates with a trip to space on the final day. Each ticket purchased after our ticket sale reopening in 2021 also includes a membership in Virgin Galactic's Future Astronaut community. This membership provides access to events and experiences, including exclusive weeks 'at home' with Virgin Galactic Astronaut 001, Sir Richard Branson.

We have developed an extensive set of integrated aerospace development capabilities encompassing preliminary vehicle design and analysis, detail design, manufacturing, ground testing, flight testing, and maintenance of our spaceflight system. Our fully reusable spaceflight system consists of two primary components: our carrier aircraft, which is called the mothership, and our spaceship.

Our mothership is a twin-fuselage, custom-built aircraft designed to carry the spaceship up to an altitude of approximately 45,000 feet where it is released for its flight into space. Using the mothership’s air launch capability, rather than a standard ground-launch, reduces the energy requirements of our spaceflight system as the spaceship does not have to ascend through the higher density atmosphere closest to the Earth’s surface. It is also a fully reusable part of our spaceflight system. The spaceship is a vehicle with the capacity to carry pilots and private astronauts, research experiments, and researchers that travel with their experiments for human tended research flights into space and return them safely to Earth. It is powered by a hybrid rocket propulsion system, which propels the spaceship on a trajectory into space. The hybrid rocket motor utilizes liquid oxidizer and solid fuel and is designed to be a simple, safe, reliable propulsion system for the spaceship. The spaceship’s cabin has been designed to maximize the future astronaut’s safety, experience and comfort. A dozen windows line the sides and ceiling of the spaceship, offering customers the ability to view the blackness of space as well as stunning views of the Earth below.

Our team is currently in various stages of designing, testing and manufacturing additional spaceships, motherships, and rocket motors in order to meet the expected demand for human spaceflight experiences. Our next generation spaceships will include the various learnings from our flight test program so we are able to design and manufacture our future spaceships to allow for greater predictability, faster turnaround time and easier maintenance. Concurrently, we are also researching and developing new products and technologies to grow our company.

Our operations also include spaceflight opportunities for research and technology development. Researchers have historically utilized parabolic aircraft and drop towers to create moments of microgravity and conduct significant research activities related to the space environment. In most cases, these solutions offer only seconds of continuous microgravity time and do not offer access to the upper atmosphere or space itself. Researchers can also conduct experiments on sounding rockets or satellites. These opportunities are expensive, infrequent and may impose highly limiting operational constraints. Our spaceflight system is intended to provide the scientific research community access to space for affordable and repeatable access to microgravity. Our suborbital platform is an end-to-end offering, which includes not only our vehicles, but also the hardware such as middeck lockers that we provide to researchers that request them, along with the processes and facilities needed for a successful campaign. The platform offers a routine, reliable and responsive service allowing for experiments to be repeated rapidly and frequently and with the opportunity to be tended in-flight by one or more researchers. This capability will enable scientific experiments as well as educational and research programs to be carried out by a broader range of individuals, organizations and institutions than ever before. Our commitment to advancing research and science has been present in all of our spaceflights to date. In May of 2021, we carried payloads into space for research purposes through NASA's Flight Opportunities Program, and our flight in July of 2021 included research payloads from the University of Florida.

We have also leveraged our knowledge and expertise in manufacturing spaceships to occasionally perform engineering services for third parties, such as research, design, development, manufacturing and integration of advanced technology systems.

Factors Affecting Our Performance

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in Part 1, Item 1A. of our Annual Report on Form 10-K titled “Risk Factors.”

~~Table of Contents~~

~~Impact of COVID-19~~

The COVID-19 pandemic and the protocols and procedures we implemented in response to the pandemic caused delays to our business and operations, which led to accumulated impacts to both schedule and cost efficiency and some delays in operational and maintenance activities, including delays in our test flight program. While we are no longer experiencing delays from these measures, the longevity and extent of the COVID-19 pandemic remain uncertain, including due to the emergence and impact of the COVID-19 variants. Measures we may need to take in the future and challenges that result from the pandemic could affect our operations necessary to complete the development of our spaceflight systems, our scheduled flight test programs and commencement of our commercial flights. See the section entitled Part II, Item 1A. "~~Risk Factors"~~ for further discussion of the impacts of the COVID-19 pandemic on our business. We believe our cash and cash equivalents on hand at September 30, 2022, and management's operating plan, will provide sufficient liquidity to fund our operations for at least the next twelve months from the issuance of these financial statements included in this Quarterly Report on Form 10-Q.

Commercial Launch of Our Human Spaceflight Program

We are the first spaceline to receive Federal Aviation Administration approval to carry commercial customers to space. This was through an update to our existing commercial spaceflight license which we have held since 2016. We are in the final phases of developing our commercial spaceflight program. Prior to launch of commercial service, we must complete a period of planned maintenance and enhancements to the vehicles, as well as subsequent vehicle flight testing. Commercial service is currently expected to commence in the second quarter of 2023. We continuously monitor our supply chain for potential risk associated with the delivery of materials from our suppliers, which in turn could impact the schedule for completion of the enhancement period and the start of commercial service. We have identified some areas of risk for timely delivery and continue to work on mitigating these identified risks. Any delays in successful completion of our test flight program, whether due to ~~the~~ supply chain ~~the impact of COVID-19 and related~~issues, general macroeconomic factors or otherwise, will impact our ability to generate revenue from human spaceflight.

Customer Demand

While not yet in commercial service for human spaceflight, we have already received significant interest from potential future astronauts. Going forward, we expect the size of our backlog and the number of future astronauts that have flown to space on our spaceflight system to be an important indicator of our future performance. As of ~~September 30, 2022,~~March 31, 2023, we had reservations for space flights for approximately 800 future astronauts. In August 2021, following Sir Richard Branson's successful test flight, we reopened ticket sales to a select group and increased the pricing of our consumer offerings to a base price of $450,000 per seat. In February 2022, we opened ticket sales to the general public. We are reserving our first 100 ~~ticket sales~~seats within our first 1,000 commercial seats sold for research and scientific experiments. As of ~~September 30, 2022,~~March 31, 2023, the tickets sold represent approximately ~~$213.2~~$211 million in expected future spaceflight revenue upon completion of space flights.

Table of Contents

~~We are the first spaceline to receive FAA approval to carry commercial customers to space. This was through an update to our existing commercial spaceflight license which we have held since 2016.~~

Available Capacity and Annual Flight Rate

We expect to commence commercial operations with a single spaceship, VSS Unity, and a single mothership carrier aircraft, VMS Eve, which together comprise our only spaceflight system. As a result, our annual flight rate will be constrained by the availability and capacity of this spaceflight system. Additionally, we may commence commercial operations while temporarily assigning one of the four passenger seats in VSS Unity to be occupied by one of our employees to gather input about the experience in order to help us create ~~in the long-term~~ a better experience for our ~~customers.~~customers in the long-term. To reduce the capacity constraint associated with having only one spaceflight system, we are currently developing our ~~newest spaceship, VSS Imagine. We intend to expand our fleet further with our~~ next generation spaceflight vehicles, which include our Delta class spaceships and our next generation motherships, which will allow us to increase our annual flight rate. We believe that expanding the fleet will allow us to increase our annual flight rate once commercialization is achieved. We are dedicating significant engineering resources to the work that precedes production of the future fleet. Simultaneously, we are focused on the launch and flight consistency of Unity and Eve to begin bringing our customers to space and to demonstrate the value of our product. Prioritizing our resources against these important efforts will likely impact the pace of work on our second spaceship, VSS Imagine, and we are reassessing its schedule for entering commercial service.

Safety Performance of Our Spaceflight Systems

Our spaceflight systems are highly specialized with sophisticated and complex technology. We have built operational processes to ensure that the design, manufacture, performance and servicing of our spaceflight systems meet rigorous quality standards. However, our spaceflight systems are still subject to operational and process risks, such as manufacturing and design

~~Table of Contents~~

issues, human errors, or cyber-attacks. Any actual or perceived safety issues may result in significant reputational harm to our business and our ability to generate human spaceflight revenue.

~~Component of~~ Results of ~~Operations~~

~~Revenue~~

To date, we have primarily generated revenue from fees related to our Future Astronaut community membership and Future Astronaut community event, by transporting scientific commercial research and development payloads using our spaceflight systems and by providing engineering, and scientific research services. We also have generated revenues from sponsorship arrangements.

Following the commercial launch of our human spaceflight services, we expect the significant majority of our revenue to be derived from ticket sales to fly to space and related services. We also expect that we will continue to receive a small portion of our revenue by providing services relating to the research, design, development, manufacture and integration of advanced technology systems.

~~Customer Experience~~

Customer experience expenses related to spaceflight operations include the consumption of a rocket motor and fuel and other consumables, as well as payroll and benefits for our pilots and ground crew. Customer experience expenses related to the payload cargo services, as well as engineering services, consist of materials and human capital, such as payroll and benefits, to perform these services. Additionally, customer experience expenses include costs associated with maintaining and growing our Future Astronaut community through offerings provided to community members, as well as hospitality, medical, safety, security, training, and facility costs that are for the benefit of our astronauts.

~~Selling, General and Administrative~~

Selling, general and administrative expenses consist of human capital related expenses for employees involved in general corporate functions, including executive management and administration, accounting, finance, tax, legal, information technology, marketing and commercial, and human resources; rent relating to facilities, including a portion of the lease with Spaceport America, and equipment; professional fees; and other general corporate costs. Human capital expenses primarily include salaries, cash bonuses, stock-based compensation and benefits. As we continue to grow as a company, we expect that our selling, general and administrative costs will increase on an absolute dollar basis.

~~Research and Development~~

Research and development expense represents costs incurred to support activities that advance our human spaceflight system towards commercialization, including basic research, applied research, concept formulation studies, design, development, and related testing activities. Research and development costs consist primarily of the following costs for developing our spaceflight systems:

•~~flight testing programs, including rocket motors, fuel, and payroll and benefits for pilots and ground crew performing test flights;~~

•~~equipment, material, and labor hours (including from third party contractors) for developing the spaceflight system’s structure, spaceflight propulsion system, and flight profiles; and~~

•~~rent, maintenance, and other overhead expenses allocated to the research and development departments.~~

As of September 30, 2022, our current primary research and development objectives focus on the development of our mothership and spaceship vehicles for commercial spaceflights and developing our rocket motor, a hybrid rocket propulsion system that will be used to propel our spaceship vehicles into space. The successful development of mothership, spaceship and rocket motor involves many uncertainties, including:

•~~our ability to recruit and retain skilled engineering and manufacturing staff;~~

•~~timing in finalizing spaceflight systems design and specifications;~~

•~~successful completion of flight test programs, including flight safety tests;~~

~~Table of Contents~~

•~~our ability to obtain additional applicable approvals, licenses or certifications from regulatory agencies, if required, and maintaining current approvals, licenses or certifications;~~

•~~performance of our manufacturing facilities despite risks that disrupt productions, such as natural disasters and hazardous materials;~~

•~~performance of a limited number of suppliers for certain raw materials and components;~~

•~~performance of our third-party contractors that support our manufacturing and research and development activities including the quality of components and subassemblies;~~

•~~our ability to maintain rights from third parties for intellectual properties critical to research and development activities;~~

•~~continued access to launch sites and airspace;~~

•~~our ability to continue funding and maintain our current research and development activities; and~~

•~~the impact of the ongoing global COVID-19 pandemic.~~

A change in the outcome of any of these variables could delay the development of our motherships, spaceships, or rocket motors, which in turn could impact when we are able to commence our human spaceflights.

As we are currently still in our final development and testing stage of our spaceflight system, we have expensed all research and development costs associated with developing and building our spaceflight system. We expect that our research and development expenses will decrease once technological feasibility is reached for our spaceflight systems as the costs incurred to manufacture additional spaceship vehicles, built by leveraging the invested research and development, will no longer qualify as research and development activities.

~~Depreciation and Amortization~~

Depreciation of property, plant, and equipment, net is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter period of the estimated life or the lease term. Once we have completed our test flight program and commenced commercial operations, we will capitalize the cost to construct any unfinished and additional spaceships and motherships. As these additional spaceships and motherships are placed into service, the related depreciation will be included in the Depreciation and Amortization line item on the C ~~ondensed~~ C ~~onsolidated~~ S ~~tatements of~~ O ~~perations and~~ C ~~omprehensive~~ L ~~oss. We have not capitalized any spaceship development costs to date.~~

~~Change in Fair Value of Warrants~~

Change in fair value of warrants reflects the non-cash change in the fair value of warrants. Certain warrants issued as part of the Company's initial public offering in 2017 and assumed upon the consummation of the Virgin Galactic business combination in October 2019 (the "Business Combination") were recorded at their fair value on the date of the Business Combination and are remeasured as of any warrant exercise date and at the end of each reporting period. No warrants were outstanding during the three and nine month period ended September 30, 2022.

~~Interest Income~~

~~Interest income primarily includes interest earned on our cash and cash equivalents and marketable securities.~~

~~Interest Expense~~

~~Interest expense consists of amortization of debt issuance costs and contractual interest expense for our 2027 Notes, as well as interest expense related to our finance lease obligations.~~

~~Other Income~~

~~Other income consists of miscellaneous non-operating items, such as gains on marketable securities and handling fees related to customer refunds.~~

~~Table of Contents~~

~~Income Tax Provision~~

We are subject to income taxes in the United States and the United Kingdom. Our income tax provision consists of an estimate of federal, state, and foreign income taxes based on enacted federal, state, and foreign tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws.

~~Results of Consolidated~~ Operations

The following tables set forth our results of operations for the periods ~~presented and expresses the relationship of certain line items as a percentage of revenue for those periods.~~presented. The period-to-period comparisons of financial results is not necessarily indicative of future results.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
		(In thousands)									(In thousands)
Revenue	Revenue	$	767	$	2,580	$	1,443	$	3,151	Revenue	$	392	$	319

Operating expenses:	Operating expenses:									Operating expenses:
Customer experience	Customer experience	590		207		737		270		Customer experience	318		25
Selling, general and administrative	Selling, general and administrative	46,113		48,268		127,820		128,503		Selling, general and administrative	50,365		37,007
Research and development	Research and development	97,411		34,289		211,578		103,997		Research and development	109,870		51,827
Depreciation and amortization	Depreciation and amortization	2,214		2,895		7,981		8,635		Depreciation and amortization	3,245		2,852
Total operating expenses	Total operating expenses	146,328		85,659		348,116		241,405		Total operating expenses	163,798		91,711

Operating loss	Operating loss	(145,561)		(83,079)		(346,673)		(238,254)		Operating loss	(163,406)		(91,392)

Interest income	Interest income	3,524		240		6,327		785		Interest income	7,330		818
Interest expense	Interest expense	(3,293)		(6)		(8,924)		(19)		Interest expense	(3,211)		(2,474)
Change in fair value of warrants		—		34,432		—		(34,650)
Other income, net	Other income, net	(203)		70		7		110		Other income, net	30		16
Loss before income taxes	Loss before income taxes	(145,533)		(48,343)		(349,263)		(272,028)		Loss before income taxes	(159,257)		(93,032)
Income tax expense	Income tax expense	(21)		(25)		(69)		(74)		Income tax expense	128		25
Net loss	Net loss	$	(145,554)	$	(48,368)	$	(349,332)	$	(272,102)	Net loss	$	(159,385)	$	(93,057)

Table of Contents

For the Three ~~and Nine~~ Months Ended ~~September 30, 2022~~March 31, 2023 Compared to the Three ~~and Nine~~ Months Ended ~~September 30, 2021~~March 31, 2022

Revenue

Three Months Ended September 30, $
Change %
Change Nine Months Ended September 30, $
Change %
Change
2022 2021 2022 2021
(In thousands, except %)
Revenue $ 767 $ 2,580 $ (1,813) (70) % $ 1,443 $ 3,151 $ (1,708) (54) %


	Three Months Ended March 31,				$ Change		% Change
	2023		2022
	(In thousands, except %)
Revenue	$	392	$	319	$	73	23	%

~~We recorded revenues of $0.8 million~~Revenue for the three months ended ~~September 30, 2022, compared~~March 31, 2023 was primarily attributable to ~~revenues of $2.6 million~~membership fees related to our Future Astronaut community. Revenue for the three months ended ~~September 30, 2021. Revenues for the three months ended September 30,~~March 31, 2022 ~~were~~was primarily attributable to membership fees related to our Future Astronaut community fees related to our Future Astronaut community event, and scientific research services earned under government contracts. Revenues for the three months ended September 30, 2021 were primarily attributable to sponsorship revenue generated from our Unity 22 spaceflight in July 2021, as well as ~~revenue earned under government contracts from progress on~~ the ~~completion~~performance of ~~certain technical milestones related to payload~~engineering services.

~~Table of Contents~~

We recorded revenues of $1.4 million for the nine months ended September 30, 2022, compared to revenues of $3.2 million for the nine months ended September 30, 2021. Revenues for the nine months ended September 30, 2022 were primarily attributable to membership fees related to our Future Astronaut community, fees related to our Future Astronaut community event, and scientific research services under government contracts. Revenues for the nine months ended September 30, 2021 were primarily attributable to sponsorship revenue and spaceflights in May and July of 2021, as well as revenue earned under government contracts from progress on the completion of technical milestones related to payload services.

Customer Experience

Three Months Ended September 30, $
Change %
Change Nine Months Ended September 30, $
Change %
Change
2022 2021 2022 2021
(In thousands, except %)
Customer experience $ 590 $ 207 $ 383 185 % $ 737 $ 270 $ 467 173 %


	Three Months Ended March 31,				$ Change		% Change
	2023		2022
	(In thousands, except %)
Customer experience	$	318	$	25	$	293	1,172	%

~~We recorded customer experience costs of $0.6 million for the three months ended September 30, 2022, compared to $0.2 million of costs for the three months ended September 30, 2021.~~ Customer experience costs for the three months ended ~~September 30, 2022~~March 31, 2023 were primarily attributable to costs related to our Future Astronaut ~~community event. Costs~~community. Customer experience costs for the three months ended September 30, 2021 were primarily attributable to incremental costs related to the completion of payload services, labor costs provided for engineering services under long-term U.S. government contracts, and agent fees related to sponsorship revenue.

We recorded customer experience costs of $0.7 million for the nine months ended September 30, 2022, compared to $0.3 million for the nine months ended September 30, 2021. Customer experience costs for the nine months ended September 30,March 31, 2022 were primarily attributable to ~~costs related to our Future Astronaut community event, other costs to maintain our Future Astronaut community, and labor costs provided for scientific research~~the performance of engineering services. Costs for the nine months ended September 30, 2021 were primarily attributable to incremental costs related to the completion of payload services, labor costs provided for engineering services under long-term U.S. government contracts, and agent fees related to sponsorship revenue.

Selling, General and Administrative
Three Months Ended September 30, $
Change %
Change Nine Months Ended September 30, $
Change %
Change
2022 2021 2022 2021
(In thousands, except %)
Selling, general and administrative $ 46,113 $ 48,268 $ (2,155) (4) % $ 127,820 $ 128,503 $ (683) (1) %


	Three Months Ended March 31,				$ Change		% Change
	2023		2022
	(In thousands, except %)
Selling, general and administrative	$	50,365	$	37,007	$	13,358	36	%

Selling, general and administrative expenses ~~decreased~~increased from ~~$48.3~~$37.0 million for the three months ended ~~September 30, 2021~~March 31, 2022 to ~~$46.1~~$50.4 million for the three months ended ~~September 30, 2022. This decrease~~March 31, 2023. The increase was primarily ~~due to a $8.7 million decrease in marketing related expenses attributable to our spaceflight in July 2021. This decrease was partially offset~~driven by a ~~$4.6~~$7.6 million increase in ~~salary, bonus,~~compensation and other employee ~~benefits and~~benefit costs, a ~~$2.1~~$2.6 million increase in ~~consulting,~~stock-based compensation, a $1.1 million increase in information technology and software costs and a $1.0 million increase in legal and other professional costs.

Selling, general and administrative expenses decreased from $128.5 million for the nine months ended September 30, 2021 to $127.8 million for the nine months ended September 30, 2022. This decrease was primarily due to a $12.9 million decrease in stock-based compensation and a $8.7 million decrease in marketing related expenses attributable to our spaceflights in May and July 2021. These decreases were partially offset by a $12.1 million increase in salary, bonus and other employee benefits, a $6.3 million increase in consulting, legal and other professional costs and a $2.2 million increase in software licensing and IT costs.

~~Table of Contents~~

Research and Development

Three Months Ended September 30, $
Change %
Change Nine Months Ended September 30, $
Change %
Change
2022 2021 2022 2021
(In thousands, except %)
Research and development $ 97,411 $ 34,289 $ 63,122 184 % $ 211,578 $ 103,997 $ 107,581 103 %


	Three Months Ended March 31,				$ Change		% Change
	2023		2022
	(In thousands, except %)
Research and development	$	109,870	$	51,827	$	58,043	112	%

Research and development expenses increased from ~~$34.3~~$51.8 million for the three months ended ~~September 30, 2021~~March 31, 2022 to ~~$97.4~~$109.9 million for the three months ended ~~September 30, 2022. This~~March 31, 2023. The increase was primarily ~~due to costs associated with developing our spaceflight system, specifically~~driven by a ~~$49.7~~$42.4 million increase in contract and sub-contract labor, material costs and ~~materials~~other direct costs, and a ~~$8.8~~$13.5 million increase in ~~salaries, bonus,~~compensation and other employee ~~benefits. In addition, there was a $2.9 million increase in facilities costs and a $1.9 million increase in consulting, insurance, IT and other professional~~benefit costs.

Research and development expenses increased from $104.0 million for the nine months ended September 30, 2021 to $211.6 million for the nine months ended September 30, 2022. This increase was primarily due to costs associated with developing our spaceflight system, specifically a $77.9 million increase in contract labor and materials and a $20.9 million increase in salaries, bonus, and other employee benefits. In addition, there was a $5.3 million increase in facilities costs and a $4.6 million increase in consulting, insurance, IT and other professional costs. These increases were partially offset by a $1.3 million decrease in stock-based compensation.

Depreciation and Amortization

Three Months Ended September 30, $
Change %
Change Nine Months Ended September 30, $
Change %
Change
2022 2021 2022 2021
($ in thousands) (In thousands, except %)
Depreciation and amortization $ 2,214 $ 2,895 $ (681) (24) % $ 7,981 $ 8,635 $ (654) (8) %


	Three Months Ended March 31,				$ Change		% Change
	2023		2022
	(In thousands, except %)
Depreciation and amortization	$	3,245	$	2,852	$	393	14	%

Depreciation and amortization expense ~~decreased~~increased from $2.9 million for the three months ended ~~September 30, 2021~~March 31, 2022 to ~~$2.2~~$3.2 million for the three months ended ~~September 30, 2022, a decrease~~March 31, 2023, an increase of ~~$0.7~~$0.4 million ~~when compared~~due to ~~2021.~~

~~Depreciation~~the acquisition of property, plant and amortization expense decreased from $8.6 million for the nine months ended September 30, 2021 to $8.0 million for the nine months ended September 30, 2022, a decrease of $0.7 million when compared to 2021.

~~Change in the Fair Value of Warrants~~

Three Months Ended September 30, $
Change %
Change Nine Months Ended September 30, $
Change %
Change
2022 2021 2022 2021
($ in thousands) (In thousands, except %)
Change in fair value of warrants $ — $ 34,432 $ (34,432) (100) % $ — $ (34,650) $ 34,650 (100) %

~~Change in fair value of warrants reflects the non-cash change in the fair value of warrants. No warrants were outstanding during the three and nine month periods ended September 30, 2022.~~

~~Interest Income~~
Three Months Ended September 30, $
Change %
Change Nine Months Ended September 30, $
Change %
Change
2022 2021 2022 2021
(In thousands, except %)
Interest income $ 3,524 $ 240 $ 3,284 1,368 % $ 6,327 $ 785 $ 5,542 706 %

Interest income increased from $0.2 million for the three months ended September 30, 2021 to $3.5 million for the three months ended September 30, 2022. This increase was primarily driven by interest earned on marketable securities.

Interest income increased from $0.8 million for the nine months ended September 30, 2021 to $6.3 million for the nine months ended September 30, 2022. This increase was primarily driven by interest earned on marketable securities.equipment.

3619

Table of Contents

Interest Income


	Three Months Ended March 31,				$ Change		% Change
	2023		2022
	(In thousands, except %)
Interest income	$	7,330	$	818	$	6,512	796	%

Interest ~~Expense~~

Three Months Ended September 30, $
Change %
Change Nine Months Ended September 30, $
Change %
Change
2022 2021 2022 2021
(In thousands, except %)
Interest expense $ 3,293 $ 6 $ 3,287 54,783 % $ 8,924 $ 19 $ 8,905 46,868 %

~~Interest expense~~income increased from ~~less than $0.1 million for three months ended September 30, 2021 to $3.3~~$0.8 million for the three months ended ~~September 30, 2022.~~March 31, 2022 to $7.3 million for the three months ended March 31, 2023. This increase was primarily driven by higher interest rates on marketable securities and deposits in interest bearing accounts.

Interest Expense


	Three Months Ended March 31,				$ Change		% Change
	2023		2022
	(In thousands, except %)
Interest expense	$	3,211	$	2,474	$	737	30	%

Interest expense increased from $2.5 million for three months ended March 31, 2022 to $3.2 million for the three months ended March 31, 2023. This increase was primarily driven by a full quarter of interest expense and amortization of debt issuance costs related to our ~~January 2022~~convertible senior ~~convertible~~ notes.

Interest expense increased from less than $0.1 million for the nine months ended September 30, 2021 to $8.9 million for the nine months ended September 30, 2022. This increase was primarily driven by interest expense and amortization of debt issuance costs related to our January 2022 senior convertible notes.

~~Other Income (expense), net~~

Three Months Ended September 30, $
Change %
Change Nine Months Ended September 30, $
Change %
Change
2022 2021 2022 2021
($ in thousands) (In thousands, except %)
Other income (expense), net $ (203) $ 70 $ (273) (390) % $ 7 $ 110 $ (103) (94) %

Other income (expense), net decreased from less than $0.1 million for three months ended September 30, 2021 to $(0.2) million for the three months ended September 30, 2022, a decrease of $0.3 million when compared to 2021.

Other income (expense), net decreased from $0.1 million for the nine months ended September 30, 2021 to less than $0.1 million for the nine months ended September 30, 2022, a decrease of $0.1 million when compared to 2021.

Income Tax Expense

Three Months Ended September 30, $
Change %
Change Nine Months Ended September 30, $
Change %
Change
2022 2021 2022 2021
($ in thousands) (In thousands, except %)
Income tax expense $ 21 $ 25 $ (4) (16) % $ 69 $ 74 $ (5) (7) %


	Three Months Ended March 31,				$ Change		% Change
	2023		2022
	(In thousands, except %)
Income tax expense	$	128	$	25	$	103	412	%

Income tax expense was immaterial for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. We have accumulated net operating losses at the U.S. federal and state ~~level~~levels, as we have not yet started commercial operations. We maintain a ~~substantially~~ full valuation allowance against our net U.S. federal and state deferred tax assets. The income tax ~~expenses shown above are~~expense is primarily related to ~~minimum state filing fees in the states where we have operations as well as~~ corporate income taxes for our operations in the United Kingdom, which operates on a cost-plus arrangement.

Liquidity and Capital Resources

As of ~~September 30, 2022,~~March 31, 2023, we had cash, cash equivalents and restricted cash of ~~$434.4~~$456.1 million and ~~$675.8 million in~~ marketable ~~securities. Since the consummation~~securities of ~~our business combination transaction in 2019, our~~$417.9 million. Our principal sources of liquidity have come from ~~our~~ sales of our common stock and offering of convertible senior notes ("2027 Notes").

Historical Cash Flows

In January 2022, we completed an offering of the 2027 Notes due on February 1, 2027, unless earlier repurchased, redeemed or converted, and received aggregate proceeds of $425 million, before deducting costs of issuance of $11.2 million. The 2027 Notes are senior, unsecured obligations of the Company, and bear interest at a fixed rate of 2.50% per year. Interest is payable in cash semi-annually in arrears on February 1 and August 1 of each year, beginning on August 1, 2022. The 2027 Notes mature on February 1, 2027 unless earlier repurchased, redeemed or converted. In connection with the 2027 Notes, we entered into capped call transactions with respect to our common stock (the "2027 Capped Calls"). We paid an aggregate amount of $52.3 million for the 2027 Capped Calls. See Note 11 in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information on the 2027 Capped Calls.


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Net cash provided by (used in):
Operating activities	$	(136,069)	$	(66,051)
Investing activities	219,737		(206,671)
Financing activities	29,795		359,517
Net increase in cash, cash equivalents and restricted cash	$	113,463	$	86,795

3720

Table of Contents

~~Historical Cash Flows~~
Nine Months Ended September 30,
2022 2021
(In thousands)
Net cash (used in) provided by
Operating activities $ (248,999) $ (165,637)
Investing activities (322,639) (288,584)
Financing activities 455,968 495,909
Net change in cash and cash equivalents and restricted cash $ (115,670) $ 41,688

Operating Activities

Net cash used in operating activities was ~~$249.0~~$136.1 million for the ~~nine~~three months ended ~~September 30, 2022, which~~March 31, 2023, and consisted primarily ~~consisted~~ of ~~$349.3~~$159.4 million of net losses, adjusted for non-cash items, which primarily included ~~depreciation, amortization and impairment expense of $12.2 million, stock based~~stock-based compensation expense of ~~$34.5~~$13.0 million and depreciation and amortization expense of ~~debt issuance costs of $1.5 million, non-cash interest and other operating activities of $6.1~~$3.2 million, as well as ~~$46.1~~$6.8 million of cash provided byfrom changes in working capital.

Net cash used in operating activities was ~~$165.6~~$66.1 million for the ~~nine~~three months ended ~~September 30, 2021, which~~March 31, 2022, and consisted primarily ~~consisted~~ of ~~$272.1~~$93.1 million of net losses, adjusted for non-cash items, which primarily included stock-based compensation expense of $10.9 million and depreciation and amortization expense of ~~$8.6 million, stock based compensation expense of $48.7 million, and change in fair value of warrants of $34.7~~$2.9 million, as well as ~~$14.5~~$12.8 million of cash provided byfrom changes in working capital.

Investing Activities

Net cash ~~used in~~provided by investing activities was ~~$322.6~~$219.7 million for the ~~nine~~three months ended ~~September 30, 2022, which~~March 31, 2023, and consisted of ~~$604.9 million purchases of marketable securities, as well as $12.3 million in capital expenditures, which was offset by $294.6~~$305.8 million in proceeds from maturities and calls of marketable ~~securities.~~

securities, partially offset by $83.3 million in purchases of marketable securities and $2.8 million in capital expenditures.

Net cash used in investing activities was ~~$288.6~~$206.7 million for the ~~nine~~three months ended ~~September 30, 2021, which~~March 31, 2022, and consisted of ~~$286.1~~$204.9 million in purchases of marketable securities ~~as well as $2.5~~and $1.8 million in capital expenditures.

Financing Activities

Net cash provided by financing activities was ~~$456.0~~$29.8 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023, and consisted primarily of net cash proceeds from the sale and issuance of common stock of $31.7 million, partially offset by tax withholdings paid for net settled stock-based awards of $1.9 million.

Net cash provided by financing activities was $359.5 million for the three months ended March 31, 2022, ~~which~~and consisted primarily ~~consisted~~ of the issuance of the 2027 Notes for net proceeds of ~~$413.7~~$413.8 million, ~~and net cash proceeds from sale and issuance of common stock of $98.5 million,~~partially offset by the purchase of the capped call related to the 2027 ~~Capped Calls~~Notes of $52.3 million and tax withholdings paid for net settled stock-based awards of ~~$3.5~~$1.9 million.

Net cash provided by financing activities was $495.9 million for the nine months ended September 30, 2021, which primarily consisted of net cash proceeds from sale and issuance of common stock of $512.1 million, offset by tax withholdings for net settled stock-based awards of $15.8 million.

Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we continue to advance the development of our spaceflight system and the commercialization of our human spaceflight operations. In addition, we expect ~~customer experience~~our operating expenses to increase significantly as we commence commercial operations and add additional spaceships to our operating fleet.

Specifically, our operating expenses will increase as we:

•scale up our manufacturing processes and capabilities to support expanding our fleet with additional spaceships, carrier aircraft and rocket motors upon commercialization;

•pursue further research and development on our future human spaceflights, including those related to our research and education efforts on point-to-point travel;

~~Table of Contents~~

•hire additional personnel in research and development, manufacturing operations, testing programs, maintenance operations and guest services as we increase the volume of our spaceflights upon commercialization;

•seek regulatory approval for any changes, upgrades or improvements to our spaceflight technologies and operations in the future, especially upon commercialization;

•maintain, expand and protect our intellectual property portfolio;

•establish our astronaut campus in New Mexico; and

•hire additional personnel in management to support the expansion of our operational, financial, information technology, and other areas to support our operations as a public company.

Table of Contents

~~In some cases, we~~We expect our arrangements with third-party providers, including under our Master ~~Agreement~~Agreements with Aurora Flight Sciences Corporation (“Aurora"), a wholly owned subsidiary of The Boeing Company, for the design and manufacture of our next generation of carrier aircraft and Bell Textron Inc. ("Bell") and Qarbon Aerospace ("Qarbon") to manufacture key subassemblies for our next generation spaceships, will require significant capital expenditures from ~~us, but such~~us. Certain estimated amounts in connection with third-party arrangements are subject to future negotiations and cannot be estimated with reasonable certainty. Although we believe that our current capital is adequate to sustain our operations for at least the next twelve months, changing circumstances may cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. Additionally, we are in the final phases of developing our commercial spaceflight program. While we anticipate initial commercial launch with a single spaceship, we currently have additional spaceship vehicles under construction. We anticipate the costs to manufacture additional vehicles will begin to decrease as we continue to scale up our manufacturing processes and capabilities. Until we achieve technological feasibility with our spaceflight systems, we will not capitalize expenditures incurred to construct any additional components of our spaceflight systems and we will continue to expense these costs as incurred to research and development.

Issuances of Common Stock

On August 4, 2022, we entered into a distribution agency agreement with Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC (each, an “Agent” and collectively, the “Agents”) providing for the offer and sale of up to $300 million of shares of our common stock from time to time through the Agents, acting as sales agents, or directly to one or more of the Agents, acting as principal, through an "at the market offering" program (the "2022 ATM program").

Since inception and through March 31, 2023, we sold a total of 22.0 million shares of common stock under the 2022 ATM program, generating $135.4 million in gross proceeds, before deducting $1.4 million in underwriting discounts, commissions and other expenses.

Short-term Liquidity and Capital Resources

For at least the next twelve months, we expect our principal demand for funds will be for our ongoing activities described above. We expect to meet our short-term liquidity requirements primarily through our cash, cash equivalents and marketable securities on hand. We believe we will have sufficient liquidity available to fund our business needs, commitments and contractual obligations for the next twelve months.

Long-term Liquidity and Capital Resources

Beyond the next twelve months, our principal demand for funds will be to sustain our operations, including the construction of additional motherships under an agreement with a third-party contractor, and spaceship vehicles, construction of our astronaut campus, expansion of the New Mexico Spaceport, and for the payment of the principal amount of our convertible senior notes as it becomes due. We expect to begin generating revenue from our human spaceflight program, which is expected to launch in the second quarter of 2023. To the extent this source of capital as well as the sources of capital described above are insufficient to meet our needs, we may also conduct additional offerings of our securities or refinance debt. We expect these resources will be adequate to fund our ongoing operating activities.

The commercial launch of our human spaceflight program and the anticipated expansion of our fleet have unpredictable costs and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control, that may affect the timing and magnitude of these anticipated expenditures. Some of these risk and uncertainties are described in more detail in our Annual Report on Form 10-K under the heading Item 1A. “Risk Factors—Risks Related to Our Business.”

Contractual Obligations and Commitments

Except as set forth in~~Note 17, Commitments and Contingencies, of~~ the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there have been no material changes outside the ordinary course of business to our contractual obligations and commitments as described in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K. Additionally, in some cases, we have entered arrangements with third-party providers for services, such as the design and manufacture of our next generation of carrier aircraft. The amounts we would pay under those arrangements will be significant but are not contractually committed until we execute specific task orders with the applicable counterparty, are subject to future negotiations and cannot be estimated with reasonable certainty.

3922

Table of Contents

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements and, therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. ~~Please refer~~

During the fiscal quarter ended March 31, 2023, there were no significant changes to ~~Note 2~~our critical accounting policies and estimates compared to those previously disclosed in "Critical Accounting Policies and Estimates" included in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our ~~condensed consolidated financial statements included elsewhere in this Quarterly~~2022 Annual Report on Form ~~10-Q for information about these critical accounting policies, as well as a description of our other significant accounting policies.~~10-K.

~~Recent Accounting Pronouncements~~

~~Please refer to~~ ~~Note 3~~ in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a description of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

~~We have operations within~~During the ~~United States~~fiscal quarter ended March 31, 2023, there were no significant changes to our markets risks compared to those previously disclosed in Part II, Item 7A. Quantitative and the United Kingdom and as such we are exposed to market risks in the ordinary course of our business, including the effects of interest rate changes and fluctuations in foreign currency exchange rates. We are also exposed to market risk from changesQualitative Disclosures About Market Risk included in our ~~stock prices, which impact the fair value of our 2027 Notes. Information relating to quantitative and qualitative disclosures about these market risks is set forth below.~~

~~Interest Rate Risk~~

~~We had cash, cash equivalents and marketable securities totaling $1.1 billion as of September 30,~~ 2022 of which $1.1 billion was invested in money market funds, certificate deposits, U.S. treasuries, and corporate debt securities. Our cash and cash equivalents are held for working capital purposes. Our marketable securities are held for capital preservation purposes. We do not enter into investments for trading or speculative purposes.

Our cash equivalents and our investment portfolio are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates. Due in part to these factors, our future investment income may fall short of our expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. However, because we classify our marketable securities as “available for sale,” no gains are recognized due to changes in interest rates. As losses due to changes in interest rates are generally not considered to be credit related changes, no losses in such securities are recognized due to changes in interest rates unless we intend to sell, it is more likely than not that we will be required to sell, we sell prior to maturity or we otherwise determine that all or a portion of the decline in fair value are due to credit related factors.

In January 2022, we issued the 2027 Notes in an aggregate principal amount of $425.0 million. Concurrently with the issuance of the 2027 Notes, we entered into separate capped call transactions. The 2027 Capped Calls were completed to reduce the potential dilution from the conversion of the 2027 Notes. The 2027 Notes have a fixed annual interest rate of 2.50%. Accordingly, we do not have economic interest rate exposureAnnual Report on the 2027 Notes. However, changes in market interest rates impact the fair value of the 2027 Notes. In addition, the fair value of the 2027 Notes fluctuates when the market price of our common stock fluctuates. The fair value was determined based on the quoted bid price of the 2027 Notes in an over-the-counter market on the last trading day of the reporting period.

~~As of September 30, 2022, a hypothetical 100 basis point change in interest rates would not have had a material impact on the value of our cash equivalents or investment portfolio.~~

~~Foreign Currency Risk~~

The functional currency of our operations in the United Kingdom is the local currency. We translate the financial statements of the operations in the United Kingdom to United States Dollars and as such we are exposed to foreign currency risk. Currently, we do not use foreign currency forward contracts to manage exchange rate risk, as the amount subject to foreign currency risk is not material to our overall operations and results.

Form 10-K.

~~Table of Contents~~

Item 4. Controls and Procedures

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September 30, 2022,~~March 31, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended ~~September 30, 2022~~March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4123

Table of Contents

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are from time to time subject to various claims, lawsuits and other legal and administrative proceedings arising in the ordinary course of business. Some of these claims, lawsuits and other proceedings may involve highly complex issues that are subject to substantial uncertainties, and could result in damages, fines, penalties, non-monetary sanctions or relief. However, we do not consider any such claims, lawsuits or proceedings that are currently pending, individually or in the aggregate, to be material to our business or likely to result in a material adverse effect on our future operating results, financial condition or cash flows. See Note 1713 in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.

Item 1A. Risk Factors

Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described as risk factors, any one or more of which could, directly or indirectly, cause our actual operating results and financial condition to vary materially from past, or anticipated future, operating results and financial condition. For a discussion of our potential risks and uncertainties, see the risk factors previously disclosed in Part I, Item 1. “Business,” Part I, Item 1A. “Risk Factors,” and Part I,II, Item 2.7. “Management's Discussion and Analysis of Financial Condition and Results of Operations" ofin our Annual Report on Form 10-K and in Part I, Item 2. “Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report on Form 10-Q. There have been no material changes to the risk factors disclosed onin our Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On November 2, 2022, Virgin Galactic, LLC (the “Subsidiary”), a wholly owned subsidiary of Virgin Galactic Holdings, Inc. (the “Company”) executed agreements (the “Master Agreements”) with Bell Textron Inc., a subsidiary of Textron Inc., and Qarbon Aerospace (Foundation), LLC (collectively, the “Suppliers”), under which the Suppliers will assist with the design and will manufacture the major subassemblies for the Company’s new Delta class spaceships.

The work under the Master Agreement is to be performed under a series of task orders, which cover the design assist, material procurement, tooling, and manufacturing of the new spaceships. Some portions of the work will be performed under task orders that will be billed on a time-and-materials basis, while others will be performed on a fixed-price basis.

The Subsidiary will retain responsibility as the design authority for the program, pursuant to which it will have final approval of the spaceship design and will perform final assembly, integration, and testing of the vehicles. The Subsidiary is also responsible for obtaining the airworthiness certificate for each spaceship manufactured under the program, as well as approval to use the new spaceship as part of the Company’s space flight system licensed by the U.S. Federal Aviation Administration.

The Master Agreement contains customary terms relating to payment terms, intellectual property, proprietary information, and termination. Under the preliminary schedule for the program, the first Delta class spaceship is expected to commence revenue-generating payload flights in late 2025, progressing to private astronaut flights in 2026. The foregoing description of the Master Agreement is a summary and is not complete and is qualified in its entirety by reference to the full text of the Master Agreements.

Not applicable.

~~Table of Contents~~

Item 6. Exhibits

The following documents are filed as part of this report:

(1) Exhibits. The following exhibits are filed, furnished or incorporated by reference as part of this Quarterly Report on Form 10-Q.
Incorporated by Reference
Exhibit No. Exhibit Description Form File No. Exhibit Filing Date Filed/Furnished Herewith
2.1(1)
Agreement and Plan of Merger, dated July 9, 2019, by and among the Registrant, Vieco 10 Limited, Foundation Sub 1, Inc., Foundation Sub 2, Inc., Foundation Sub LLC, TSC Vehicle Holdings, Inc., Virgin Galactic Vehicle Holdings, Inc. and Virgin Galactic Holdings, LLC
8-K/A 001-38202 2.1 07/11/2019
2.1(a)(1)
Amendment No. 1 to Agreement and Plan of Merger, dated October 2, 2019, by and among the Registrant, Vieco 10 Limited, Foundation Sub 1, Inc., Foundation Sub 2, Inc., Foundation Sub LLC, TSC Vehicle Holdings, Inc., Virgin Galactic Vehicle Holdings, Inc., Virgin Galactic Holdings, LLC and Vieco USA, Inc.
S-4 333-233098 2.1(a) 10/03/2019
3.1
Certificate of Incorporation of the Registrant
8-K 001-38202 3.1 10/29/2019
3.2
By-Laws of the Registrant
8-K 001-38202 3.2 10/29/2019
10.1(2)(3)
Master Agreement, dated July 5, 2022, by and between the Registrant and Aurora Flight Sciences Corporation
10-Q 001-38202 10.1 08/04/2022
10.2(2)(3)
Standard Industrial/Commercial Multi-Tenant Sublease - Net, dated July 14, 2022, by and between the Registrant and Gateway Executive Airpark, LLC
*
10.3(2)(3)
First Amended and Restated Standard Industrial/Commercial Multi-Tenant Sublease - Net, dated July 14, 2022, by and between the Registrant and Gateway Executive Airpark, LLC
*
10.4(3)
Agreement and General Release, dated August 30, 2022, by and between the Registrant and Michelle Kley
*
31.1
Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*
31.2
Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*
32.1
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
**
32.2
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
**
101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document *
101.SCH Inline XBRL Taxonomy Extension Schema Document *
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document *

Incorporated by Reference

Exhibit No.

Exhibit Description

Form

File No.

Exhibit

Filing Date

Filed/Furnished Herewith

3.1

Certificate of Incorporation of the Registrant

8-K

001-38202

3.1

10/29/2019

3.2

By-Laws of the Registrant

8-K

001-38202

3.2

10/29/2019

10.1(1)

Transition and Separation Agreement, dated January 11, 2023, by and between Galactic Co., LLC and Swami Iyer

10-K

001-38202

10.13(a)

2/28/2023

31.1

Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

4324

Table of Contents

Incorporated by Reference

Exhibit No.

Exhibit Description

Form

File No.

Exhibit

Filing Date

Filed/Furnished Herewith

31.2

Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

(1) ~~Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted schedule~~Indicates management contract or ~~exhibit to the SEC upon request.~~compensatory plan.

~~(2)~~ Portions of this exhibit (indicated by asterisks) have been omitted pursuant to Regulation S-K, Item 601(b)(10). Such omitted information is not material and the registrant customarily and actually treats such information as private or confidential. Additionally, schedules and attachments to this exhibit have been omitted pursuant to Regulation S-K, Items 601(a)(5).

~~(3)~~ Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.

4425

Table of Contents

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Virgin Galactic Holdings, Inc.

Date: ~~November 3, 2022~~May 9, 2023		/s/ Michael Colglazier
	Name:	Michael Colglazier
	Title:	Chief Executive Officer (Principal Executive Officer)

Date: ~~November 3, 2022~~May 9, 2023		/s/ Douglas Ahrens
	Name:	Douglas Ahrens
	Title:	Chief Financial Officer (Principal Financial and Accounting Officer)

4526



	September 30, 2022		December 31, 2021
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	394,032	$	524,481
Restricted cash	40,328		25,549
Marketable securities, short-term	606,713		79,418
Inventories	22,851		29,668
Prepaid expenses and other current assets	22,094		19,476
Total current assets	1,086,018		678,592
Marketable securities, long-term	69,072		301,463
Property, plant, and equipment, net	48,874		47,498
Other non-current assets	55,220		41,281
Total assets	$	1,259,184	$	1,068,834
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	19,872	$	9,237
Accrued liabilities	43,389		28,787
Customer deposits	103,971		90,863
Other current liabilities	3,336		2,636
Total current liabilities	170,568		131,523
Non-current liabilities
Convertible senior notes, net	415,188		—
Other long-term liabilities	59,885		43,047
Total liabilities	645,641		174,570
Commitments and contingencies (Note 17)
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; 274,481,195 and 258,166,417 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	27		26
Additional paid-in capital	2,096,901		2,019,750
Accumulated deficit	(1,472,975)		(1,123,643)
Accumulated other comprehensive income	(10,410)		(1,869)
Total stockholders' equity	613,543		894,264
Total liabilities and stockholders' equity	$	1,259,184	$	1,068,834


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Revenue	$	767	$	2,580	$	1,443	$	3,151

Operating expenses:
Customer experience	590		207		737		270
Selling, general, and administrative	46,113		48,268		127,820		128,503
Research and development	97,411		34,289		211,578		103,997
Depreciation and amortization	2,214		2,895		7,981		8,635
Total operating expenses	146,328		85,659		348,116		241,405

Operating loss	(145,561)		(83,079)		(346,673)		(238,254)

Interest income	3,524		240		6,327		785
Interest expense	(3,293)		(6)		(8,924)		(19)
Change in fair value of warrants	—		34,432		—		(34,650)
Other income, net	(203)		70		7		110
Loss before income taxes	(145,533)		(48,343)		(349,263)		(272,028)
Income tax expense	(21)		(25)		(69)		(74)
Net loss	(145,554)		(48,368)		(349,332)		(272,102)
Other comprehensive income (loss):
Foreign currency translation adjustment	(180)		3		(313)		11
Unrealized loss on marketable securities	(585)		(437)		(8,227)		(437)
Total comprehensive loss	$	(146,319)	$	(48,802)	$	(357,872)	$	(272,528)


Net loss per share:
Basic	$	(0.55)	$	(0.19)	$	(1.34)	$	(1.11)
Diluted	$	(0.55)	$	(0.32)	$	(1.34)	$	(1.11)

Weighted-average shares outstanding:
Basic	263,907,259		254,749,195		260,255,202		244,157,923
Diluted	263,907,259		255,147,228		260,255,202		244,157,923


	Common Stock
Balance as of	# of Shares	Par Value		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total
Balance as of December 31, 2020	236,123,659	$	23	$	1,297,794	$	(770,744)	$	5	$	527,078
Net loss	—	—		—		(129,694)		—		(129,694)
Other comprehensive income	—	—		—		—		26		26
Stock-based compensation		—		22,111		—		—		22,111
Issuance of common stock pursuant to stock-based compensation, net of withholding taxes	1,150,771	—		323		—		—		323



Balance as of March 31, 2021	237,274,430	23		1,320,228		(900,438)		31		419,844
Net loss	—	—		—		(94,040)		—		(94,040)
Other comprehensive loss	—	—		—		—		(20)		(20)
Stock-based compensation	—	—		14,423		—		—		14,423
Issuance of common stock pursuant to stock-based compensation, net of withholding taxes	275,283	—		840		—		—		840
Common stock issued related to warrants exercised	3,387,827	—		104,176		—		—		104,176


Balance as of June 30, 2021	240,937,540	23		1,439,667		(994,478)		11		445,223
Net loss	—	—		—		(48,368)		—		(48,368)
Other comprehensive loss	—	—		—		—		(432)		(432)
Stock-based compensation	—	—		12,170		—		—		12,170
Issuance of common stock pursuant to stock-based compensation, net of withholding taxes	685,487	—		1,916		—		—		1,916
Common stock issued related to warrants exercised	2,034,390	—		65,914		—		—		65,914
Issuance of common stock pursuant to an at-the-market offering	13,740,433	2		499,998		—		—		500,000
Transaction costs related to an at-the-market offering	—	—		(6,494)		—		—		(6,494)
Balance as of September 30, 2021	257,397,850	$	25	$	2,013,171	$	(1,042,846)	$	(421)	$	969,929


	As of September 30, 2022
	Amortized Cost		Gross Unrealized Losses		Fair Value
	(In thousands)
Cash, restricted cash and cash equivalents
Cash and restricted cash	$	8,358	$	—	$	8,358
Money market	384,575		—		384,575
Certificate of deposits	41,427		—		41,427
Marketable securities
US treasuries	149,102		(183)		148,919
Corporate debt securities	536,913		(10,047)		526,866
Total cash, cash equivalents, restricted cash and marketable securities	$	1,120,375	$	(10,230)	$	1,110,145


	As of December 31, 2021
	Amortized Cost		Gross Unrealized Losses		Fair Value
	(In thousands)
Cash, restricted cash and cash equivalents
Cash and restricted cash	$	55,592	$	—	$	55,592
Money market	402,889		—		402,889
Certificate of deposits	91,549		—		91,549
Marketable securities
Corporate debt securities	382,884		(2,003)		380,881
Total cash, cash equivalents and marketable securities	$	932,914	$	(2,003)	$	930,911


	As of September 30, 2022
	Amortized Cost		Estimated Fair Value
	(In thousands)
Matures within one year	$	614,641	$	606,713
Matures between one to two years	71,374		69,072
Total	$	686,015	$	675,785


	As of
	September 30, 2022		December 31, 2021
	(Unaudited)
	(In thousands)
Raw materials	$	13,267	$	21,127
Spare parts	9,584		8,541
Total inventory	$	22,851	$	29,668


	Nine Months Ended September 30,
	2022		2021
	(Unaudited and in thousands)
Lease Cost:
Operating lease expense	$	6,622	$	3,758
Short-term lease expense	—		26

Finance Lease Cost:
Amortization of right-of-use assets	100		103
Interest on lease liabilities	20		20
Total finance lease cost	120		123

Variable lease cost	4,654		4,185
Total lease cost	$	11,396	$	8,092


	As of September 30,
	2022	2021
Issued and outstanding stock options	3,794	4,428
Issued and outstanding performance stock options	406	—
Unvested restricted stock units issued and outstanding	4,502	3,442
Unvested performance stock units issued and outstanding	255	90
Shares related to the 2027 Notes (1)	33,234	—
Warrants to purchase shares of common stock	—	8,000
	42,191	15,960


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value(1)	Weighted Average Grant Date Fair Value ($)
Options outstanding at December 31, 2021	4,253,767	$	14.09	7.60	6,187	—
Granted	303,030	7.99				4.95
Exercised	(4,182)	11.79
Forfeited options	(758,250)	18.96
Options outstanding at September 30, 2022	3,794,365	$	13.91	6.74	—	—

Options exercisable at September 30, 2022	2,346,118	$	13.96	6.14	—	—


	Shares	Weighted Average Fair Value
RSUs outstanding at December 31, 2021	2,396,732	$	27.89
Granted	3,900,745	8.42
Vested	(1,144,802)	20.20
Forfeited	(650,533)	16.54
RSUs outstanding at September 30, 2022	4,502,142	$	13.65


	Shares	Weighted Average Fair Value
PSUs outstanding at December 31, 2021	89,839	$	26.47
Granted	277,552	14.62
Forfeited	(112,518)	26.17
PSUs outstanding at September 30, 2022	254,873	$	14.67