UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20222023
OR
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☐ | 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) |
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Delaware | | 85-3608069 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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1700 Flight Way Tustin California | | 92782 |
(Address of Principal Executive Offices) | | (Zip Code) |
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(949) 774-7640 |
(Registrant’s telephone number, including area code) |
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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.
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Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
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Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
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| | 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, 2022,2023, there were 274,559,169399,715,289 shares of the Company’s common stock par value $0.0001, issued and outstanding.
VIRGIN GALACTIC HOLDINGS, INC.
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 developmentfuture commercial flights of our spaceflight fleet, which is comprised of our SpaceShipTwo spaceships, VSS Unity and VSS Imagine, and our mothership carrier aircraft, VMS Eve;fleet;
•our ability to conductsuccessfully develop and test flights;
•our ability to operate our spaceflight system after commercial launch;next generation vehicles, and the time and costs associated with doing so;
•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 impacteffect of terrorist activity, armed conflict (including any escalation of hostility arising out of the COVID-19conflict between Russia and Ukraine or other geopolitical conflicts), natural disasters or pandemic diseases on us, our operations,the economy generally, on our future financial or operational results, andor 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.
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, 20212022 (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.
PART I. FINANCIAL INFORMATION
VIRGIN GALACTIC HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(InUnaudited; in thousands, except share data) | | | | | | | | | | | | | | | | | |
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| | | 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) | | | | | | | | | | | | | | | | | |
| | | September 30, 2023 | | | | December 31, 2022 |
Assets | | | | | | | |
Current assets: | | | | | | | |
Cash and cash equivalents | | | $ | 231,030 | | | | | $ | 302,291 | |
Restricted cash | | | 38,031 | | | | | 40,336 | |
Marketable securities, short-term | | | 766,047 | | | | | 606,716 | |
Inventories | | | 17,062 | | | | | 24,043 | |
Prepaid expenses and other current assets | | | 24,051 | | | | | 28,228 | |
Total current assets | | | 1,076,221 | | | | | 1,001,614 | |
Marketable securities, long-term | | | 53,130 | | | | | 30,392 | |
Property, plant and equipment, net | | | 74,066 | | | | | 53,658 | |
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Other non-current assets | | | 64,567 | | | | | 54,274 | |
Total assets | | | $ | 1,267,984 | | | | | $ | 1,139,938 | |
Liabilities and Stockholders' Equity | | | | | | | |
Current liabilities: | | | | | | | |
Accounts payable | | | $ | 27,986 | | | | | $ | 16,326 | |
Accrued liabilities | | | 49,888 | | | | | 61,848 | |
Customer deposits | | | 97,923 | | | | | 102,647 | |
Other current liabilities | | | 4,342 | | | | | 3,232 | |
Total current liabilities | | | 180,139 | | | | | 184,053 | |
Non-current liabilities: | | | | | | | |
Convertible senior notes, net | | | 417,338 | | | | | 415,720 | |
Other long-term liabilities | | | 71,148 | | | | | 59,942 | |
Total liabilities | | | 668,625 | | | | | 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; 399,581,904 and 275,397,229 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively | | | 40 | | | | | 28 | |
Additional paid-in capital | | | 2,622,776 | | | | | 2,111,316 | |
Accumulated deficit | | | (2,022,148) | | | | | (1,623,795) | |
Accumulated other comprehensive loss | | | (1,309) | | | | | (7,326) | |
Total stockholders' equity | | | 599,359 | | | | | 480,223 | |
Total liabilities and stockholders' equity | | | $ | 1,267,984 | | | | | $ | 1,139,938 | |
See accompanying notes to condensed consolidated financial statements.
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 September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
Revenue | | $ | 1,728 | | | $ | 767 | | | $ | 3,991 | | | $ | 1,443 | |
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Operating expenses: | | | | | | | | |
Spaceline operations | | 25,648 | | | 590 | | | 26,200 | | | 737 | |
Research and development | | 44,848 | | | 97,411 | | | 241,292 | | | 211,578 | |
Selling, general and administrative | | 42,218 | | | 46,113 | | | 144,020 | | | 127,820 | |
Depreciation and amortization | | 3,286 | | | 2,214 | | | 9,723 | | | 7,981 | |
Total operating expenses | | 116,000 | | | 146,328 | | | 421,235 | | | 348,116 | |
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Operating loss | | (114,272) | | | (145,561) | | | (417,244) | | | (346,673) | |
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Interest income | | 12,856 | | | 3,524 | | | 28,590 | | | 6,327 | |
Interest expense | | (3,221) | | | (3,293) | | | (9,648) | | | (8,924) | |
Other income (expense), net | | 86 | | | (203) | | | 164 | | | 7 | |
Loss before income taxes | | (104,551) | | | (145,533) | | | (398,138) | | | (349,263) | |
Income tax expense | | 53 | | | 21 | | | 215 | | | 69 | |
Net loss | | (104,604) | | | (145,554) | | | (398,353) | | | (349,332) | |
Other comprehensive income (loss): | | | | | | | | |
Foreign currency translation adjustment | | (60) | | | (181) | | | 9 | | | (314) | |
Unrealized income (loss) on marketable securities | | 1,022 | | | (585) | | | 6,008 | | | (8,227) | |
Total comprehensive loss | | $ | (103,642) | | | $ | (146,320) | | | $ | (392,336) | | | $ | (357,873) | |
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Net loss per share: | | | | | | | | |
Basic and diluted | | $ | (0.28) | | | $ | (0.55) | | | $ | (1.26) | | | $ | (1.34) | |
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Weighted-average shares outstanding: | | | | | | | | |
Basic and diluted | | 375,853 | | | 263,907 | | | 316,198 | | | 260,255 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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) | | | | | | | |
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Net loss per share: | | | | | | | | | | | | | | |
Basic | | $ | (0.55) | | | $ | (0.19) | | | $ | (1.34) | | | $ | (1.11) | | | | | | | |
Diluted | | $ | (0.55) | | | $ | (0.32) | | | $ | (1.34) | | | $ | (1.11) | | | | | | | |
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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.
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 at 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) | |
Purchase of capped call | | — | | | — | | | (52,318) | | | — | | | — | | | (52,318) | |
Balance at 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 awards, net of withholding taxes | | 216,758 | | | — | | | (914) | | | — | | | — | | | (914) | |
Balance at 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 awards, net of withholding taxes | | 202,949 | | | — | | | (633) | | | — | | | — | | | (633) | |
Issuance of common stock pursuant to at-the-market offering | | 15,587,600 | | | 1 | | | 99,573 | | | — | | | — | | | 99,574 | |
Transaction costs | | — | | | — | | | (1,163) | | | — | | | — | | | (1,163) | |
Balance at September 30, 2022 | | 274,481,195 | | | $ | 27 | | | $ | 2,096,901 | | | $ | (1,472,975) | | | $ | (10,410) | | | $ | 613,543 | |
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(For the period ended September 30, 2021)
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| | 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 | |
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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 | |
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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 | |
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See accompanying notes to condensed consolidated financial statements.
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 Gain (Loss) | | Total |
| | Shares | | Amount | | | | |
Balance at 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 at-the-market offering | | 5,759,499 | | | — | | | 32,044 | | | — | | | — | | | 32,044 | |
Transaction costs | | — | | | — | | | (343) | | | — | | | — | | | (343) | |
Balance at March 31, 2023 | | 281,664,887 | | | 28 | | | 2,154,123 | | | (1,783,180) | | | (4,190) | | | 366,781 | |
Net loss | | — | | | — | | | — | | | (134,364) | | | — | | | (134,364) | |
Other comprehensive income | | — | | | — | | | — | | | — | | | 1,919 | | | 1,919 | |
Stock-based compensation | | — | | | — | | | 11,859 | | | — | | | — | | | 11,859 | |
Issuance of common stock pursuant to stock-based awards, net of withholding taxes | | 485,076 | | | 1 | | | (447) | | | — | | | — | | | (446) | |
Issuance of common stock pursuant to at-the-market offering | | 54,610,571 | | | 5 | | | 241,388 | | | — | | | — | | | 241,393 | |
Transaction costs | | — | | | — | | | (2,601) | | | — | | | — | | | (2,601) | |
Balance at June 30, 2023 | | 336,760,534 | | | 34 | | | 2,404,322 | | | (1,917,544) | | | (2,271) | | | 484,541 | |
Net loss | | — | | | — | | | — | | | (104,604) | | | — | | | (104,604) | |
Other comprehensive income | | — | | | — | | | — | | | — | | | 962 | | | 962 | |
Stock-based compensation | | — | | | — | | | 10,763 | | | — | | | — | | | 10,763 | |
Issuance of common stock pursuant to stock-based awards, net of withholding taxes | | 385,122 | | | — | | | (684) | | | — | | | — | | | (684) | |
Issuance of common stock pursuant to at-the-market offering | | 62,436,248 | | | 6 | | | 210,702 | | | — | | | — | | | 210,708 | |
Transaction costs | | — | | | — | | | (2,327) | | | — | | | — | | | (2,327) | |
Balance at September 30, 2023 | | 399,581,904 | | | $ | 40 | | | $ | 2,622,776 | | | $ | (2,022,148) | | | $ | (1,309) | | | $ | 599,359 | |
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(For the period ended September 30, 2022)
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| | 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) | |
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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) | |
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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 | |
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See accompanying notes to condensed consolidated financial statements.
VIRGIN GALACTIC HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(InUnaudited; in thousands)
(Unaudited) | | | | | Nine Months Ended September 30, | | | | | Nine Months Ended September 30, | |
| | | | 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 | | | $ | (398,353) | | | $ | (349,332) | | |
Stock-based compensation | Stock-based compensation | | | 34,488 | | | 48,704 | | | Stock-based compensation | | | 35,598 | | | 34,488 | | |
Depreciation, amortization and impairment | | | 12,174 | | | 8,635 | | | |
Depreciation and amortization | | Depreciation and amortization | | | 9,723 | | | 7,981 | | |
Amortization of debt issuance costs | Amortization of debt issuance costs | | | 1,466 | | | — | | | Amortization of debt issuance costs | | | 1,618 | | | 1,466 | | |
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 | | | (6,500) | | | 10,256 | | |
Change in operating assets and liabilities: | | Change in operating assets and liabilities: | | | |
Inventories | Inventories | | | 6,817 | | | 1,178 | | | Inventories | | | 3,996 | | | 6,817 | | |
Other current and non-current assets | Other current and non-current assets | | | 2,253 | | | 6,342 | | | Other current and non-current assets | | | 10,297 | | | 2,253 | | |
Accounts payable and accrued liabilities | Accounts payable and accrued liabilities | | | 23,828 | | | 1,824 | | | Accounts payable and accrued liabilities | | | (2,941) | | | 23,828 | | |
Customer deposits | Customer deposits | | | 13,108 | | | 2,148 | | | Customer deposits | | | (4,724) | | | 13,108 | | |
Other current and non-current liabilities | | | 136 | | | 3,026 | | | |
Other current and long-term liabilities | | Other current and long-term liabilities | | | (1,598) | | | 136 | | |
Net cash used in operating activities | Net cash used in operating activities | | | (248,999) | | | (165,637) | | | Net cash used in operating activities | | | (352,884) | | | (248,999) | | |
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 | | | (25,941) | | | (12,306) | | |
Purchases of marketable securities | Purchases of marketable securities | | | (604,945) | | | (286,132) | | | Purchases of marketable securities | | | (872,950) | | | (604,945) | | |
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 | | | 702,346 | | | 294,612 | | |
Cash used in investing activity | | | (322,639) | | | (288,584) | | | |
Cash flows from financing activities | | | | | | | |
Payments of lease obligations | | | (132) | | | (105) | | | |
Net cash used in investing activities | | Net cash used in investing activities | | | (196,545) | | | (322,639) | | |
Cash flows from financing activities: | | Cash flows from financing activities: | | | | | | |
Payments of finance lease obligations | | Payments of finance lease obligations | | | (175) | | | (132) | | |
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 | | | — | | | (11,278) | | |
Capped call premium | | | (52,318) | | | — | | | |
Purchase of capped call | | Purchase of capped call | | | — | | | (52,318) | | |
Repayment of commercial loan | Repayment of commercial loan | | | (310) | | | (310) | | | Repayment of commercial loan | | | — | | | (310) | | |
Proceeds from issuance of common stock | Proceeds from issuance of common stock | | | 99,573 | | | 500,000 | | | Proceeds from issuance of common stock | | | 484,145 | | | 99,573 | | |
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 | | | (3,001) | | | (3,479) | | |
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 | | | (5,106) | | | (1,137) | | |
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 | | | 475,863 | | | 455,968 | | |
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 decrease in cash, cash equivalents and restricted cash | | Net decrease in cash, cash equivalents and restricted cash | | | (73,566) | | | (115,670) | | |
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 | | | $ | 269,061 | | | $ | 434,360 | | |
| Cash and cash equivalents | Cash and cash equivalents | | | $ | 394,032 | | | $ | 702,565 | | | Cash and cash equivalents | | | $ | 231,030 | | | $ | 394,032 | | |
Restricted cash | Restricted cash | | | 40,328 | | | 18,078 | | | Restricted cash | | | 38,031 | | | 40,328 | | |
Cash, cash equivalents and restricted cash | Cash, cash equivalents and restricted cash | | | $ | 434,360 | | | $ | 720,643 | | | Cash, cash equivalents and restricted cash | | | $ | 269,061 | | | $ | 434,360 | | |
See accompanying notes to condensed consolidated financial statements.
VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) OrganizationDescription of Business and its wholly owned subsidiariesBasis of Presentation
Virgin Galactic Holdings, Inc. and, together with its wholly ownedconsolidated 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
Theseaccompanying unaudited condensed consolidated financial statements arehave 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 thesuch rules and regulationsregulations. 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. SecuritiesCompany's financial position, results of operations and Exchange Commission ("SEC"). All intercompany transactions and balances betweencash flows for the various legal entities comprising the Company have been eliminated in consolidation.periods presented.
Certain reclassifications of the components ofThe operating lossresults for the three and nine month periodmonths ended September 30, 2021 have been made to2023 are not necessarily indicative of the comparable prior periodresults 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 Estimatesfiscal year ended December 31, 2022.
The preparation of the consolidated financial statements in conformity with GAAP required usrequires 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 experienceActual results could differ materially from those estimates.
Statement of Operations Presentation
In July 2023, the Company concluded that technological feasibility had been achieved for its initial spaceship, VSS Unity, and on various other assumptions that we believe are reasonable undermothership carrier aircraft, VMS Eve, which together comprise the circumstances,Company’s current spaceflight system. As a result, future costs associated with this spaceflight system, including the resultsmanufacture of which formrelated rocket motors, will no longer qualify as research and development activities.
Following the basis for making judgments aboutlaunch of commercial service and achievement of technological feasibility, the carrying amountsCompany began presenting the operating expenses supporting the Company’s commercial spaceline activities as spaceline operations expense in the accompanying condensed consolidated statements of assetsoperations and liabilitiescomprehensive loss. Expenses incurred prior to the achievement of technological feasibility were classified as research and development and selling, general and administrative expenses. Spaceline operations expense includes costs associated with commercial spaceflight services and production costs that are not readily apparenteligible for capitalization. Spaceline operations expense also includes costs to support the Company’s Future Astronaut Community and costs related to payload cargo and engineering services, which were previously presented as customer experience expense.
(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 other sources. Actual results may differ materially from these estimates. Significant estimates inherent infuture astronauts that are contractually restricted for operational use until the preparationcondition of carriage is signed or the consolidated financial statements include, butdeposits are not limited to, accounting for revenue, contract assets, contract liabilities, useful lives of property, plantrefunded.
The amortized cost, unrealized loss and equipment,estimated fair value of investments, accrued liabilities, income taxes including deferred tax assetsthe Company's cash, cash equivalents and liabilities and impairment valuation, warrants, stock-based awards and contingencies.marketable securities are as follows:
VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(c) Convertible Senior Notes
On January 1, 2022, the Company adopted ASU 2020-06, Accounting for Convertible Instruments 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 provisions of the notes and did not identify any material embedded features which would require bifurcation from the host debt. As such, the notes are accounted for entirely as a liability net of unamortized issuance costs. The carrying amount of the liability is classified 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. | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2023 |
| | Amortized Cost | | Gross Unrealized Loss | | Fair Value |
| | (In thousands) |
Cash and cash equivalents: | | | | | | |
Cash and restricted cash | | $ | 33,697 | | | $ | — | | | $ | 33,697 | |
Money market | | 235,364 | | | — | | | 235,364 | |
Marketable securities: | | | | | | |
U.S. treasuries | | 302,742 | | | (21) | | | 302,721 | |
Corporate bonds | | 517,741 | | | (1,285) | | | 516,456 | |
| | $ | 1,089,544 | | | $ | (1,306) | | | $ | 1,088,238 | |
| | | | | | | | | | | | | | | | | | | | |
| | 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 | |
(d) Capped Call Transactions
In connection with the pricingInterest receivable 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 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$4.5 million is included in prepaid expenses and other current assets in the 2027 Notes. accompanying condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022.
The Company's capped call transactions are accounted for as separate transactions from the 2027 NotesCompany recognizes amortization and are classified as equity instruments as a reduction to additional paid-in capitalaccretion of purchase premiums and discounts on its marketable securities within interest income in the Condensed Consolidated Balance Sheets.accompanying condensed consolidated statements of operations and comprehensive loss. The instruments are initially recorded at fair valueCompany recognized $6.0 million in accretion income, net and not subsequently remeasured so long as they continue to qualify$1.5 million in amortization expense, net for equity classification based onits marketable securities for the three months ended September 30, 2023 and 2022, respectively. The Company recognized $8.5 million in accretion income, net and $5.5 million in amortization expense, net for its marketable securities for the nine months ended September 30, 2023 and 2022, respectively.
The following table presents the contractual maturities of the Company's
intent and ability for the 2027 Capped Calls to be settled in sharesmarketable securities as 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.September 30, 2023: (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 interim 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
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. | | | | | | | | | | | | | | |
| | September 30, 2023 |
| | Amortized Cost | | Estimated Fair Value |
| | (In thousands) |
Matures within one year | | $ | 767,170 | | | $ | 766,047 | |
Matures in one to two years | | 53,313 | | | 53,130 | |
| | $ | 820,483 | | | $ | 819,177 | |
VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(4) Related Party Transactions(3) Inventories
Inventories are comprised of the following:
| | | | | | | | | | | | | | |
| | September 30, 2023 | | December 31, 2022 |
| | (In thousands) |
Raw materials | | $ | 10,822 | | | $ | 15,033 | |
Work-in-process | | 1,424 | | | — | |
Spare parts | | 4,816 | | | 9,010 | |
| | $ | 17,062 | | | $ | 24,043 | |
The Company licenses its brand name from certain entities affiliated with Virgin Enterprises Limited (“VEL”), a company incorporated in England. VEL is an affiliate
(4) Property, Plant and Equipment
Property, plant and equipment consists 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.following:
| | | | | | | | | | | | | | |
| | September 30, 2023 | | December 31, 2022 |
| (In thousands) |
Land | | $ | 1,302 | | | $ | 1,302 | |
Buildings | | 9,092 | | | 9,117 | |
Machinery and equipment | | 38,738 | | | 37,223 | |
Information technology software and equipment | | 38,400 | | | 33,387 | |
Flight equipment and rotables | | 3,825 | | | 195 | |
Leasehold improvements | | 36,369 | | | 31,086 | |
Construction in progress | | 18,367 | | | 4,339 | |
| | 146,093 | | | 116,649 | |
Less: accumulated depreciation and amortization | | 72,027 | | | 62,991 | |
| | $ | 74,066 | | | $ | 53,658 | |
The Company hasfollowing table sets forth a Transition Services Agreement ("TSA") with Virgin Orbit, LLC ("VO") based on allocated operatingsummary of depreciation and amortization expense from Virgin Orbit Holdings, Inc.related to property, plant 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.equipment:
(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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| | | 2023 | | 2022 | | 2023 | | 2022 | | |
| | | (In thousands) |
Spaceline operations | | | $ | 1,516 | | | $ | — | | | $ | 1,516 | | | $ | — | | | |
Research and development | | | 436 | | | 395 | | | 2,897 | | | 2,896 | | | |
Selling, general and administrative | | | 1,334 | | | 1,819 | | | 5,310 | | | 5,085 | | | |
| | | $ | 3,286 | | | $ | 2,214 | | | $ | 9,723 | | | $ | 7,981 | | | |
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 | |
(5) Leases
The Company included $39.8 million and $1.0 millioncomponents of current restricted cash held in a money market accountexpense related to leases are as of September 30, 2022 and December 31, 2021, respectively.follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| | (In thousands) |
Operating lease cost | | $ | 3,382 | | | $ | 2,553 | | | $ | 8,992 | | | $ | 6,622 | |
Variable lease cost | | 1,559 | | | 1,760 | | | 2,844 | | | 4,654 | |
Short-term lease cost | | 127 | | | — | | | 139 | | | — | |
| | | | | | | | |
Finance lease cost: | | | | | | | | |
Amortization of assets under finance leases | | 68 | | | 42 | | | 199 | | | 100 | |
Interest on finance lease liabilities | | 21 | | | 11 | | | 60 | | | 20 | |
Total finance lease cost | | 89 | | | 53 | | | 259 | | | 120 | |
Total lease cost | | $ | 5,157 | | | $ | 4,366 | | | $ | 12,234 | | | $ | 11,396 | |
The Company included $3.2 million and $2.3 millioncomponents of interest receivable in prepaid expenses and other current assetssupplemental cash flow information related to leases are as of September 30, 2022 and December 31, 2021, respectively.follows:
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: | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2023 | | 2022 |
| | (In thousands, except term and rate data) |
Cash Flow Information: | | | | |
Operating cash flows for operating leases | | $ | 7,050 | | | $ | 7,980 | |
Operating cash flows for finance leases | | $ | 60 | | | $ | 20 | |
Financing cash flows for finance leases | | $ | 175 | | | $ | 132 | |
Non-cash Activity: | | | | |
Assets acquired in exchange for lease obligations: | | | | |
Operating leases | | $ | 13,814 | | | $ | 16,338 | |
Finance leases | | $ | 219 | | | $ | 230 | |
Other Information: | | | | |
Weighted average remaining lease term: | | | | |
Operating leases (in years) | | 10.0 | | 10.8 |
Finance leases (in years) | | 3.2 | | 2.8 |
Weighted average discount rates: | | | | |
Operating leases | | 12.1 | % | | 12.1 | % |
Finance leases | | 12.9 | % | | 11.3 | % |
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 | |
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 | | | |
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 | |
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 | % |
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, 2023 | | December 31, 2022 |
| | September 30, 2022 | | December 31, 2021 | | (In thousands) |
| (Unaudited) | | | |
| (In thousands) | |
Operating leases | | |
Operating Leases: | | Operating Leases: | |
Long-term right-of-use assets | Long-term right-of-use assets | | $ | 49,324 | | | $ | 35,486 | | Long-term right-of-use assets | | $ | 59,570 | | | $ | 48,463 | |
| Short-term operating lease liabilities | Short-term operating lease liabilities | | $ | 3,190 | | | $ | 2,204 | | Short-term operating lease liabilities | | $ | 4,139 | | | $ | 3,020 | |
Long-term operating lease liabilities | Long-term operating lease liabilities | | 56,856 | | | 39,965 | | Long-term operating lease liabilities | | 69,592 | | | 56,645 | |
Total operating lease liabilities | Total operating lease liabilities | | $ | 60,046 | | | $ | 42,169 | | Total operating lease liabilities | | $ | 73,731 | | | $ | 59,665 | |
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 yearsRight-of-use assets are presented in other non-current assets and requirelease liabilities are presented in other current liabilities and other long-term liabilities in 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.accompanying condensed consolidated balance sheets.
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 | |
(6) Accrued Liabilities
VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(9) Accrued Expenses
A summary of theThe 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 | |
| | | | | | | | | | | | | | |
| | September 30, 2023 | | December 31, 2022 |
| | (In thousands) |
Accrued compensation | | $ | 29,418 | | | $ | 26,554 | |
Accrued manufacturing sub-contractor and contract labor costs | | 6,059 | | | 19,398 | |
Other accrued expenses | | 14,411 | | | 15,896 | |
| | $ | 49,888 | | | $ | 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 Condensed Consolidated Balance Sheets.
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,
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 termsnet carrying value of the 2027 Notes are governed by an Indenture byis as follows:
| | | | | | | | | | | | | | | |
| | September 30, 2023 | | December 31, 2022 | |
| | (In thousands) | |
Principal | | $ | 425,000 | | | $ | 425,000 | | |
Less: unamortized debt issuance costs | | 7,662 | | | 9,280 | | |
Net carrying amount | | $ | 417,338 | | | $ | 415,720 | | |
During each of the three months ended September 30, 2023 and between2022, the Company and U.S. Bank National Association, as Trustee (the "2027 Indenture"). Upon conversion by the noteholders,recognized $3.2 million of interest expense on the 2027 Notes, may be settled in cash, sharesincluding $0.5 million 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.amortized debt issuance costs.
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, 2023 and 2022, the conditions allowing holdersCompany recognized $9.6 million and $8.9 million of interest expense on the 2027 Notes, to convert were not met,respectively, including $1.6 million and as a result, the 2027 Notes were classified as noncurrent liabilities as$1.5 million 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'samortized debt 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):costs, respectively.
VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| | | | | | | | | | | |
| | As of | |
| | September 30, 2022 | | | |
| | (Unaudited) | | | |
Principal | | $ | 425,000 | | | | |
Less: unamortized debt issuance costs | | (9,812) | | | | |
Net carrying amount | | $ | 415,188 | | | | |
As of September 30, 2022, we included $1.8 million of accrued interest expense on our 2027 Notes within accrued expenses. For the three months ended September 30, 2022, we recognized $3.2 million of total interest expense on our 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 Condensed Consolidated Balance Sheets. 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$53,000 and $25,000$21,000 for the three months ended September 30, 20222023 and 2021,2022, respectively. Income tax expense was $69,000$215,000 and $74,000$69,000 for the nine months ended September 30, 20222023 and 2021,2022, respectively. The effective income tax rate was nil for three and nine months ended September 30, 20222023 and 2021. Our2022. 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.
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,August 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”"Agent" and collectively, the “Agents”"Agents") providing for the offer and sale of up to $500.0$300 million of shares of the Company’sCompany'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.principal(s), through an "at the market offering" program (the "2022 ATM Program").
WeThe Company completed available offerings under the 20212022 ATM on July 16, 2021,Program in June 2023, selling a total of 59.4 million shares of common stock and generating $500.0$300.0 million in gross proceeds through the sale of 13,740,433 shares of the Company's common stock,since its inception, before deducting $6.2$3.0 million in underwriting discounts, commissions and other expenses payable by the Company.expenses.
On August 4, 2022,In June 2023, the Company entered into a distribution agency agreement with Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLCthe Agents providing for the offer and sale of up to $300.0$400 million of shares of the Company’s common stock, par value $0.0001 per share, through an ATM (the "2022 ATM program").
As of September 30, 2022, we sold a total of 15,587,600 shares of the Company's 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(s), through an "at the market offering" program (the "2023 ATM Program").
During the three months ended September 30, 2023, the Company sold 62.4 million shares of common stock under the 20222023 ATM program, generating $99.6Program and generated $210.7 million in gross proceeds, before deducting $1.2$2.1 million in underwriting discounts, commissions and other expenses payable byexpenses.
During the Company.nine months ended September 30, 2023, the Company sold 79.7 million shares of common stock under the 2023 ATM Program and generated $287.5 million in gross proceeds, before deducting $2.9 million in underwriting discounts, commissions and other expenses.
(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, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| | (In thousands, except per share amounts) |
Basic and diluted: | | | | | | | | |
Net loss | | $ | (104,604) | | | $ | (145,554) | | | $ | (398,353) | | | $ | (349,332) | |
Weighted average common shares outstanding | | 375,853 | | | 263,907 | | | 316,198 | | | 260,255 | |
Basic and diluted net loss per share | | $ | (0.28) | | | $ | (0.55) | | | $ | (1.26) | | | $ | (1.34) | |
Basic and diluted net loss per share is computed using the weighted-average number of shares of common stock outstanding during the period. The computation of diluted net loss per share excludes the effect of all potential common shares outstanding as their impact would have been anti-dilutive.
The Company has excluded stock-based awards and shares issuable upon conversion of the 2027 Notes from the diluted loss per share calculation because their effect was anti-dilutive. The total number of shares excluded for the three and nine months ended September 30, 2023 were 45.0 million. The total number of shares excluded for the three and nine months ended September 30, 2022 were 42.2 million.
VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(14) Net Loss Per Share(11) Stock-Based Plans and Compensation
Equity Incentive Plans
The following table presents net loss per shareCompany maintains two equity incentive plans -- the Amended 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) | |
Basic and diluted net loss per share was 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 diluted net loss per share for the three and nine month periods ended September 30, 2022 and for the nine months ended September 30, 2021 as the inclusion of all potential common shares outstanding would have been anti-dilutive.
For the three months ended September 30, 2021, the Company included the potential effect of the warrants to purchase shares of common stock as the effect would be dilutive. Diluted net loss per share 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 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.
VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(15) Stock-Based Compensation
The Company'sRestated Virgin Galactic Holdings, Inc. 2019 Incentive Award Plan ("2019(the "2019 Plan") is more fully described in Note 14 ofand the "NotesVirgin Galactic Holdings, Inc. 2023 Employment Inducement Incentive Award Plan (the "Inducement Plan").
Pursuant to Consolidated Financial Statements" on Form 10-K. Under the 2019 Plan, the Company has the ability to grant incentive stock options and non-qualified stock options, andrestricted stock awards, stock appreciation rights, restricted stock units ("RSUs") and other stock or cash-based awards to employees directors and other service providers. Performanceproviders of the Company and its subsidiaries and members of the Company’s board of directors. The 2019 Plan, as amended and restated, was adopted by the Company's board of directors and became effective in April 2023, subject to the approval of the Company’s stockholders, and was approved by the Company’s stockholders in June 2023. Prior to the amendment and restatement of the Virgin Galactic Holdings, Inc. 2019 Incentive Award Plan (the “Original Plan”), the Company initially reserved 21,208,755 shares of common stock for issuance. The amendment and restatement of the Original Plan increased the number of shares available for issuance by 8,200,000 shares.
Pursuant to the Inducement Plan, the Company has the ability to grant non-qualified stock options, restricted stock awards, stock appreciation rights, restricted stock units and other stock or cash-based awards to any prospective employee in connection with their commencement of employment with the Company, who (i) is being hired by the Company or (ii) is being rehired following a bona fide period of interruption of employment by the Company, as an inducement material to their commencing employment. The Company's board of directors adopted the Inducement Plan in June 2023 and reserved 2,800,000 shares of common stock for the issuance of awards thereunder.
Stock-BasedCompensation
Pursuant to both the 2019 Plan and the Inducement Plan, the Company has the ability to grant performance stock units ("PSUs") and performance stock options ("PSOs"). PSUs are RSUs that vest based on achievement of specified performance criteria. Performance stock options ("PSOs")PSOs are stock options that vest based on achievement of specified performance criteria.
Stock Options
Twenty five percent of such 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 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 are expected to hold their options before exercised using the "simplified method" as described in Staff Accounting Bulletin No. 107.
(2) The expected volatility is a measureA summary of the amount by which a stock pricecomponents of stock-based compensation expense included in the condensed consolidated statements of operations and comprehensive loss is expected to fluctuate based primarily on our and our peers' historical data.as follows:
(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. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| | (In thousands) |
Stock option and PSO expense: | | | | | | | | |
Spaceline operations | | $ | 282 | | | $ | — | | | $ | 282 | | | $ | — | |
Research and development | | 318 | | | 596 | | | 1,343 | | | 2,020 | |
Selling, general and administrative | | 1,181 | | | 2,113 | | | 4,200 | | | 6,022 | |
Total stock option and PSO expense | | 1,781 | | | 2,709 | | | 5,825 | | | 8,042 | |
| | | | | | | | |
RSU and PSU expense: | | | | | | | | |
Spaceline operations | | 1,545 | | | — | | | 1,545 | | | — | |
Research and development | | 1,579 | | | 2,756 | | | 6,587 | | | 8,400 | |
Selling, general and administrative | | 5,858 | | | 6,045 | | | 21,641 | | | 18,046 | |
Total RSU and PSU expense | | 8,982 | | | 8,801 | | | 29,773 | | | 26,446 | |
Total stock-based compensation expense | | $ | 10,763 | | | $ | 11,510 | | | $ | 35,598 | | | $ | 34,488 | |
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.
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 | | — | | | | |
(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.
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.
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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | | | | | | |
VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
As of September 30, 2022,2023, the Company had unrecognized stock-based compensation related toexpense of $4.4 million for stock options, and PSOs was $12.5 million and $0.7 million, respectively. These amounts arewhich is expected to be recognized over a weighted-average periodsperiod of 2.0 years and 0.7 years, respectively. As0.9 years. Unrecognized stock-based compensation expense as of September 30, 2022, the unrecognized stock-based compensation related to2023 for RSUs and PSUs was $76.7totaled $49.8 million and $3.1$6.7 million, respectively. These amountsrespectively, which are both expected to be recognized over a weighted-average periodsperiod of 2.6 years and 2.5 years, respectively.1.1 years.
(16)(12) Fair Value Measurements
We utilizeThe Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. We estimateThe 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 summarizepresent the fair value ofCompany'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: | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | |
The estimatedbasis, 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:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2023 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In thousands) |
Assets: | | | | | | | | |
Money market | | $ | 235,364 | | | $ | — | | | $ | — | | | $ | 235,364 | |
| | | | | | | | |
U.S. treasuries | | 302,721 | | | — | | | — | | | 302,721 | |
Corporate bonds | | — | | | 516,456 | | | — | | | 516,456 | |
Total assets at fair value | | $ | 538,085 | | | $ | 516,456 | | | $ | — | | | $ | 1,054,541 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
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 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
The following tables present the Company's financial liabilities that are recorded at amortized cost, segregated among the appropriate levels within the fair value hierarchy: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2023 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In thousands) |
Liabilities: | | | | | | | | |
2027 Notes | | $ | — | | | $ | 156,532 | | | $ | — | | | $ | 156,532 | |
Total liabilities at fair value | | $ | — | | | $ | 156,532 | | | $ | — | | | $ | 156,532 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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.
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, 2023 are as follows:
| | | | | | | | | | | | | | |
| | Operating Leases | | Finance Leases |
| | (In thousands) | | |
2023 (for the remaining period) | | $ | 2,854 | | | $ | 78 | |
2024 | | 12,423 | | | 247 | |
2025 | | 12,771 | | | 218 | |
2026 | | 12,882 | | | 167 | |
2027 | | 12,601 | | | 52 | |
Thereafter | | 77,395 | | | 20 | |
Total payments | | 130,926 | | | 782 | |
Less: present value discount/imputed interest | | 57,195 | | | 142 | |
Present value of lease liabilities | | $ | 73,731 | | | $ | 640 | |
VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
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, 2022,2023, 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.
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 ourits current and former officers and directors on behalf of a putative class of investors who purchased ourthe 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 ourits current and former officers and directors made false and misleading statements and failed to disclose certain information regarding the safety of itsthe 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. DefendantsThe 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 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 February 24, 2023 and on August 8, 2023, the court granted in part and denied in part the defendants’ motion.On August 22, 2023, the plaintiffs filed a motion asking the court to dismiss on April 4, 2022,reconsider its August 8, 2023 order and thatto certify an interlocutory appeal, or in the alternative to enter a final judgment.The motion is nowwas fully briefed. briefed as of October 10, 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, threeand December 13, 2022, four alleged shareholders filed separate derivative complaints purportedly on behalf of the Company against certain of ourits 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.
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 | |
| | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2023 | | 2022 |
| | (In thousands) |
Supplemental disclosure of cash flow information: | | | | |
Cash payments for: | | | | |
Income taxes | | $ | 533 | | | $ | 34 | |
Interest | | 10,625 | | | 5,667 | |
| | | | |
Supplemental disclosure of non-cash investing and financing activities: | | | | |
Unpaid property, plant and equipment | | $ | 2,512 | | | $ | 1,356 | |
Transfer of inventory to rotables in property, plant and equipment | | 2,681 | | | — | |
Issuance of common stock through RSUs vested | | 8,740 | | | 9,557 | |
| | | | |
(15) Subsequent Events
On November 7, 2023, the Company announced a workforce reduction of approximately 185 employees, constituting approximately 18% of the Company’s workforce. The Company is taking this action to decrease its costs and strategically realign its resources. The Company currently estimates that it will incur charges associated with the workforce reduction of approximately $5 million, primarily related to employee severance payments, benefits and related termination costs. The Company expects to recognize the majority of these charges in the fourth quarter of 2023 and that the reduction in force will be substantially complete during the first quarter of 2024.
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 22nd 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.
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, suchparties.
Recent Developments
In late June 2023, we completed our first commercial spaceflight, 'Galactic 01,' which marked the start of our commercial service.
In July 2023, we concluded that technological feasibility had been achieved for our initial spaceship, VSS Unity, and mothership carrier aircraft, VMS Eve, which together comprise our current spaceflight system. As a result, future costs associated with this spaceflight system, including the manufacture of related rocket motors, will no longer qualify as research design,and development manufacturingactivities.
Following the launch of commercial service and integrationachievement of advanced technology systems.technological feasibility, we began presenting the operating expenses supporting our commercial spaceline activities as spaceline operations expense in the accompanying condensed consolidated statements of operations and comprehensive loss. Expenses incurred prior to the achievement of technological feasibility were classified as research and development and selling, general and administrative expenses. Spaceline operations expense includes costs associated with commercial spaceflight services and production costs that are not eligible for capitalization. Spaceline operations expense also includes costs to support our Future Astronaut Community and costs related to payload cargo and engineering services, which were previously presented as customer experience expense.
Through the date of the report, we have completed five commercial spaceflights, including two flights with researchers who conducted scientific experiments.
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.”
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 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 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, weWe 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, 2022,2023, we had reservations for space flightsspaceflights 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 for research and scientific experiments. As of September 30, 2022,2023, the tickets sold represent approximately $213.2$207 million in expected future spaceflight revenue upon completion of space flights.spaceflights.
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 commencecommenced our commercial operations with a single spaceship, VSS Unity and a single mothership carrier aircraft, VMS Eve, which together comprise our onlycurrent 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. 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 bringingbring 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 SystemsSystem
Our spaceflight systems aresystem is 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 meetsystem meets rigorous quality standards. However, our spaceflight systems aresystem is still subject to operational and process risks, such as manufacturing and design
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.
ComponentComponents 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 portionamount of our revenue by providing services relating to the research, design, development, manufacturefrom Future Astronaut community membership fees 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,events, as well as engineering services consistfor third parties.
Spaceline Operations
Spaceline operations expense includes costs to maintain and operate our spaceflight systems; non-capitalizable costs to build our new vehicles and manufacture items required to support the making of materials and human capital,our vehicles, such as payrollrocket motors and benefits,spare parts; the consumption of rocket motors, fuel and other consumables; costs to perform these services. Additionally, customer experience expenses include costs associated with maintainingmaintain and growingsupport our Future Astronaut community through offerings providedcommunity; and costs to community members, as well as hospitality, medical, safety, security, training,provide payload cargo 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.engineering services.
Research and Development
Prior to achieving technological feasibility, we expensed all research and development costs associated with developing and building our current spaceflight system. Until we complete the design phase of our next generation spaceflight system, we will not capitalize expenditures incurred to construct this spaceflight system and we will continue to expense these costs as incurred to research and development.
Research and development expense representsexpenses represent costs incurred to support activities that advance our human spaceflight systemfuture fleet towards commercialization, including basic research, applied research, concept formulation studies, design, development, and related testing activities. Research and development costs will 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 hourscosts (including from third partythird-party contractors) for developingdesigning the spaceflight system’s structure, spaceflight propulsion system, and flight profiles;profiles for our next generation spaceships and
•rent, maintenance, motherships, as well as allocated facilities and other supporting overhead costs.
Selling, General and Administrative
Selling, general and administrative expenses allocated to the researchconsist primarily of compensation and development departments.
Asother employee benefit costs for employees involved in general corporate functions, including executive management and administration, accounting, finance, legal, information technology, sales and marketing, and human resources. Non-compensation components of September 30, 2022, our current primary researchselling, general and development objectives focus on the development of our mothershipadministrative expenses include accounting, legal and spaceship vehicles for commercial spaceflightsother professional fees, facilities expenses, 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;other corporate expenses.
•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 Condensed Consolidated Statements of Operations and Comprehensive Loss. 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.
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 isare not necessarily indicative of future results.
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 | | 2023 | | 2022 |
| | (In thousands) | | | (In thousands) |
Revenue | Revenue | | $ | 767 | | | $ | 2,580 | | | $ | 1,443 | | | $ | 3,151 | | | Revenue | | $ | 1,728 | | | $ | 767 | | | $ | 3,991 | | | $ | 1,443 | |
| Operating expenses: | Operating expenses: | | | Operating expenses: | |
Customer experience | | 590 | | | 207 | | | 737 | | | 270 | | | |
Spaceline operations | | Spaceline operations | | 25,648 | | | 590 | | | 26,200 | | | 737 | |
Research and development | | Research and development | | 44,848 | | | 97,411 | | | 241,292 | | | 211,578 | |
Selling, general and administrative | Selling, general and administrative | | 46,113 | | | 48,268 | | | 127,820 | | | 128,503 | | | Selling, general and administrative | | 42,218 | | | 46,113 | | | 144,020 | | | 127,820 | |
Research and development | | 97,411 | | | 34,289 | | | 211,578 | | | 103,997 | | | |
Depreciation and amortization | Depreciation and amortization | | 2,214 | | | 2,895 | | | 7,981 | | | 8,635 | | | Depreciation and amortization | | 3,286 | | | 2,214 | | | 9,723 | | | 7,981 | |
Total operating expenses | Total operating expenses | | 146,328 | | | 85,659 | | | 348,116 | | | 241,405 | | | Total operating expenses | | 116,000 | | | 146,328 | | | 421,235 | | | 348,116 | |
| Operating loss | Operating loss | | (145,561) | | | (83,079) | | | (346,673) | | | (238,254) | | | Operating loss | | (114,272) | | | (145,561) | | | (417,244) | | | (346,673) | |
| Interest income | Interest income | | 3,524 | | | 240 | | | 6,327 | | | 785 | | | Interest income | | 12,856 | | | 3,524 | | | 28,590 | | | 6,327 | |
Interest expense | Interest expense | | (3,293) | | | (6) | | | (8,924) | | | (19) | | | Interest expense | | (3,221) | | | (3,293) | | | (9,648) | | | (8,924) | |
Change in fair value of warrants | | — | | | 34,432 | | | — | | | (34,650) | | | |
Other income, net | | (203) | | | 70 | | | 7 | | | 110 | | | |
Other income (expense), net | | Other income (expense), net | | 86 | | | (203) | | | 164 | | | 7 | |
Loss before income taxes | Loss before income taxes | | (145,533) | | | (48,343) | | | (349,263) | | | (272,028) | | | Loss before income taxes | | (104,551) | | | (145,533) | | | (398,138) | | | (349,263) | |
Income tax expense | Income tax expense | | (21) | | | (25) | | | (69) | | | (74) | | | Income tax expense | | 53 | | | 21 | | | 215 | | | 69 | |
Net loss | Net loss | | $ | (145,554) | | | $ | (48,368) | | | $ | (349,332) | | | $ | (272,102) | | | Net loss | | $ | (104,604) | | | $ | (145,554) | | | $ | (398,353) | | | $ | (349,332) | |
For the Three and Nine Months Ended September 30, 20222023 Compared to the Three and Nine Months Ended September 30, 20212022
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 September 30, | | $ Change | | % Change | | Nine Months Ended September 30, | | $ Change | | % Change |
| | 2023 | | 2022 | | | | 2023 | | 2022 | | |
| | (In thousands, except %) |
Revenue | | $ | 1,728 | | | $ | 767 | | | $ | 961 | | | 125 | % | | $ | 3,991 | | | $ | 1,443 | | | $ | 2,548 | | | 177 | % |
We recorded revenues of $0.8 millionRevenue for the three months ended September 30, 2023 was primarily attributable to revenue generated from our commercial spaceflightsand membership fees related to our Future Astronaut community. Revenue for the three months ended September 30, 2022 comparedwas primarily attributable to revenues of $2.6 millionmembership fees related to our Future Astronaut community.
Revenue for the threenine months ended September 30, 2021. Revenues2023 was primarily attributable to revenue generated from our commercial spaceflightsand membership fees related to our Future Astronaut community. Revenue for the threenine months ended September 30, 2022 werewas 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 completionperformance of certain technical milestones related to payloadengineering services.
We recorded revenuesSpaceline Operations
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | $ Change | | % Change | | Nine Months Ended September 30, | | $ Change | | % Change |
| | 2023 | | 2022 | | | | 2023 | | 2022 | | |
| | (In thousands, except %) |
Spaceline operations | | $ | 25,648 | | | $ | 590 | | | $ | 25,058 | | | nm | | $ | 26,200 | | | $ | 737 | | | $ | 25,463 | | | nm |
Following the launch of $1.4 millioncommercial service and achievement of technological feasibility, we began presenting the operating expenses supporting our commercial spaceline activities as spaceline operations expense in the accompanying condensed consolidated statements of operations and comprehensive loss.
Spaceline operations expense for the three and 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, 20222023 were primarily attributable to membership fees relatedcosts to maintain and operate our spaceflight system; non-capitalizable costs to build our new vehicles and manufacture items required to support the making of our vehicles, such as rocket motors and spare parts; and costs to maintain and support 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.community.
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 | % | |
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 costsSpaceline operations expense for the three months ended September 30, 2022 were primarily attributable to costs related to maintain and support our Future Astronaut community event. 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 costscommunity. Spaceline operations expense for the nine months ended September 30, 2022 were primarily attributable to costs related to our Future Astronaut community event, other costs to maintain and support our Future Astronaut community and labor costs provided for scientific researchincurred in connection with 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,
Research and agent fees related to sponsorship revenue.Development
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | $ Change | | % Change | | Nine Months Ended September 30, | | $ Change | | % Change |
| | 2023 | | 2022 | | | | 2023 | | 2022 | | |
| | (In thousands, except %) |
Research and development | | $ | 44,848 | | | $ | 97,411 | | | $ | (52,563) | | | (54) | % | | $ | 241,292 | | | $ | 211,578 | | | $ | 29,714 | | | 14 | % |
Selling, GeneralResearch 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) | % | |
Selling, general and administrativedevelopment expenses decreased from $48.3$97.4 million for the three months ended September 30, 20212022 to $44.8 million for the three months ended September 30, 2023. The decrease was primarily driven by a $37.2 million decrease in direct labor, materials and other direct costs associated with the development of our spaceflight systems, an $11.3 million decrease in compensation and other employee benefit costs, a $1.6 million decrease in facilities costs, and a $1.5 million decrease in stock-based compensation.
Research and development expenses increased from $211.6 million for the nine months ended September 30, 2022 to $241.3 million for the nine months ended September 30, 2023. The increase was primarily driven by a $53.7 million increase in manufacturing sub-contractor and contract labor costs, consulting, and other direct costs associated with the development of our spaceflight systems and a $9.5 million increase in compensation and other employee benefit costs. These increases were partially offset by a $31.5 million decrease in direct labor and materials costs associated with the development of our spaceflight system and a $2.5 million decrease in stock-based compensation.
Selling, General and Administrative
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | $ Change | | % Change | | Nine Months Ended September 30, | | $ Change | | % Change |
| | 2023 | | 2022 | | | | 2023 | | 2022 | | |
| | (In thousands, except %) |
Selling, general and administrative | | $ | 42,218 | | | $ | 46,113 | | | $ | (3,895) | | | (8) | % | | $ | 144,020 | | | $ | 127,820 | | | $ | 16,200 | | | 13 | % |
Selling, general and administrative expenses decreased from $46.1 million for the three months ended September 30, 2022. This2022 to $42.2 million for the three months ended September 30, 2023. The decrease was primarily due todriven by a $8.7$3.8 million decrease in marketing related expenses attributable to our spaceflightcompensation and other employee benefit costs, a $2.5 million decrease in July 2021. Thisconsulting costs, and a $1.1 million decrease wasin stock-based compensation. These decreases were partially offset by a $4.6$4.5 million increase in salary, bonus,marketing and other employee benefits and a $2.1 million increase in consulting, legal and other professionalpromotion costs.
Selling, general and administrative expenses decreasedincreased 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 due2022 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.
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 | % | |
Research and development expenses increased from $34.3 million for the three months ended September 30, 2021 to $97.4 million for the three months ended September 30, 2022. This increase was primarily due to costs associated with developing our spaceflight system, specifically a $49.7 million increase in contract labor and materials and a $8.8 million increase in salaries, bonus, 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 costs.
Research and development expenses increased from $104.0$144.0 million for the nine months ended September 30, 2021 to $211.6 million for the nine months ended September 30, 2022. This2023. The increase was primarily due to costs associated with developing our spaceflight system, specificallydriven by a $77.9$7.9 million increase in contract labor and materials and a $20.9 million increase in salaries, bonus,compensation and other employee benefits. In addition, there wasbenefit costs, a $5.3 million increase in facilitiesmarketing and promotion costs, a $2.0 million increase in software and other information and technology costs, and a $4.6$1.8 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 September 30, | | $ Change | | % Change | | Nine Months Ended September 30, | | $ Change | | % Change |
| | 2023 | | 2022 | | | | 2023 | | 2022 | | |
| | (In thousands, except %) |
Depreciation and amortization | | $ | 3,286 | | | $ | 2,214 | | | $ | 1,072 | | | 48 | % | | $ | 9,723 | | | $ | 7,981 | | | $ | 1,742 | | | 22 | % |
Depreciation and amortization expense decreasedincreased from $2.9 million for the three months ended September 30, 2021 to $2.2 million for the three months ended September 30, 2022 a decreaseto $3.3 million for the three months ended September 30, 2023, an increase of $0.7$1.1 million when compareddue to 2021.the acquisition of property, plant and equipment.
Depreciation and amortization expense decreasedincreased 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 $0.7to $9.7 million when compared to 2021.
Change infor 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 periodsmonths ended September 30, 2022.
2023, an increase of $1.7 million due to the acquisition of property, plant and equipment.
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 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | $ Change | | % Change | | Nine Months Ended September 30, | | $ Change | | % Change |
| | 2023 | | 2022 | | | | 2023 | | 2022 | | |
| | (In thousands, except %) |
Interest income | | $ | 12,856 | | | $ | 3,524 | | | $ | 9,332 | | | 265 | % | | $ | 28,590 | | | $ | 6,327 | | | $ | 22,263 | | | 352 | % |
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, 2022.2022 to $12.9 million for the three months ended September 30, 2023. This increase was primarily driven by increased average balances of marketable securities and deposits in interest earned on marketable securities.bearing accounts, as well as higher interest rates.
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, 2022.2022 to $28.6 million for the nine months ended September 30, 2023. This increase was primarily driven by interest earnedhigher investment returns on marketable securities.
securities and higher interest rates on deposits in interest bearing accounts.
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 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | $ Change | | % Change | | Nine Months Ended September 30, | | $ Change | | % Change |
| | 2023 | | 2022 | | | | 2023 | | 2022 | | |
| | (In thousands, except %) |
Interest expense | | $ | 3,221 | | | $ | 3,293 | | | $ | (72) | | | (2) | % | | $ | 9,648 | | | $ | 8,924 | | | $ | 724 | | | 8 | % |
Interest expense increased from less than $0.1was $3.2 million for three months ended September 30, 2021 to2023 and $3.3 million for the three months ended September 30, 2022. This increase was primarily driven byInterest expense consists of interest expense and amortization of debt issuance costs related to our January 2022convertible senior convertible notes.
Interest expense increased from less than $0.1$8.9 million for nine months ended September 30, 2022 to $9.6 million for the nine months ended September 30, 2021 to $8.9 million for the nine months ended September 30, 2022.2023. This increase was primarily driven by a full nine months of interest expense and amortization of debt issuance costs related to our January 2022convertible 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.
notes in 2023.
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) | % |
Income tax expense was immaterial for the three and nine months ended September 30, 20222023 and 2021.2022. We have accumulated net operating losses at the U.S. federal and state level as we have not yet started commercial operations.levels. We maintain a substantially full valuation allowance against our net U.S. federal and state deferred tax assets. The income tax expenses shown above areexpense 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, 2022,2023, we had cash, cash equivalents and restricted cash of $434.4$269.1 million and $675.8 million in marketable securities. Since the consummationsecurities of our business combination transaction in 2019, our$819.2 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 | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2023 | | 2022 |
| | (In thousands) |
Net cash provided by (used in): | | | | |
Operating activities | | $ | (352,884) | | | $ | (248,999) | |
Investing activities | | (196,545) | | | (322,639) | |
Financing activities | | 475,863 | | | 455,968 | |
Net decrease in cash, cash equivalents and restricted cash | | $ | (73,566) | | | $ | (115,670) | |
Operating Activities
Net cash used 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 $52.3operating activities was $352.9 million for the 2027 Capped Calls. See Note 11 in our condensed consolidated financial statementsnine months ended September 30, 2023, and consisted primarily of $398.4 million of net losses, adjusted for non-cash items, which primarily included elsewhere in this Quarterly Report on Form 10-Q for additional information on the 2027 Capped Calls.
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$35.6 million and depreciation and amortization expense of $9.7 million.
Net cash used in operating activities was $249.0 million for the nine months ended September 30, 2022, whichand consisted primarily consisted of $349.3 million of net losses, adjusted for non-cash items, which primarily included depreciation, amortization and impairment expense of $12.2 million, stock basedstock-based compensation expense of $34.5 million and depreciation and amortization expense of debt issuance costs of $1.5 million, non-cash interest and other operating activities of $6.1$8.0 million, as well as $46.1 million of cash provided by working capital.from changes in operating assets and liabilities.
Investing Activities
Net cash used in operatinginvesting activities was $165.6$196.5 million for the nine months ended September 30, 2021, which primarily2023, and consisted of $272.1$873.0 million in purchases of net losses, adjusted for non-cash items, which primarily included depreciationmarketable securities and amortization expense$25.9 million in capital expenditures, partially offset by $702.3 million in proceeds from maturities and calls of $8.6 million, stock based compensation expense of $48.7 million, and change in fair value of warrants of $34.7 million, as well as $14.5 million of cash provided by working capital.
Investing Activitiesmarketable securities.
Net cash used in investing activities was $322.6 million for the nine months ended September 30, 2022, whichand consisted of $604.9 million in purchases of marketable securities as well asand $12.3 million in capital expenditures, which waspartially offset by $294.6 million in proceeds from maturities and calls of marketable securities.
Financing Activities
Net cash used in investingprovided by financing activities was $288.6$475.9 million for the nine months ended September 30, 2021, which2023, and consisted primarily of $286.1net cash proceeds from the sale and issuance of common stock of $479.0 million, purchasespartially offset by tax withholdings paid for net settled stock-based awards of marketable securities, as well as $2.5 million in capital expenditures.
Financing Activities$3.0 million.
Net cash provided by financing activities was $456.0 million for the nine months ended September 30, 2022, whichand consisted primarily consisted of the issuance of the 2027 Notes for net proceeds of $413.7 million and net cash proceeds from sale and issuance of common stock of $98.5$98.4 million, partially offset by the purchase of the capped call related to the 2027 Capped CallsNotes of $52.3 million and tax withholdings paid for net settled stock-based awards of $3.5 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 expensesexpenditures to increase substantiallyfluctuate in connection with our ongoing activities, particularly as we continue to advance the development of our next generation spaceflight system and the commercializationleverage investments in capital expenditures.
As our fleet of our human spaceflight operations. In addition,spaceships expands, we expect customer experience expensesour expenditures to increase significantly as we commencescale our commercial operations and add additional spaceships to our operating fleet.
operations. Specifically, our operating expenseslong-term expenditures will increase as we:
•scale up our manufacturing processes and capabilities to support expanding our fleet with additional spaceships, carrier aircraft and rocket motors uponin connection with 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;
•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;spaceflights;
•seek regulatory approval for any changes, upgrades or improvements to our spaceflight technologiesscale up required operational facilities, such as hangars and operations in the future, especially upon commercialization;
•maintain, expandwarehouses; and protect our intellectual property portfolio;
•establish our astronaut campus in New Mexico; andMexico
•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.
In some cases, weWe expect our arrangements with third-party providers including underto manufacture key subassemblies for our Master Agreement with Aurora Flight Sciences Corporation (“Aurora"), a wholly owned subsidiary of The Boeing Company,next generation spaceships and for the design and manufacture of our next generation of carrier aircraft will require significant capital expenditures from us, but suchexpenditures. Certain estimated amounts in connection with third-party arrangements are subject to future negotiations and cannot be estimated with reasonable certainty.Although we
We believe that our current capital is adequate to sustain our operations for at least the next twelve months, changingmonths. 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 anticipatehave completed our initial commercial launch with a single spaceship, we are currently have additional spaceship vehicles under construction.developing our next generation spaceflight vehicles. We anticipate the costs to manufacture additional vehicles will begin to decrease as we continue to scale up our manufacturing processes and capabilities. Until
Issuances of Common Stock
In August 2022, we achieve technological feasibilityentered into a distribution agency agreement with our spaceflight systems, we will not capitalize expenditures incurredCredit 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 construct any additional components$300 million of shares of our spaceflight systemscommon stock from time to time through the Agents, acting as sales agents, or directly to one or more of the Agents, acting as principal(s), through an "at the market offering" program (the "2022 ATM Program").
We completed the 2022 ATM Program in June 2023, selling a total of 59.4 million shares of common stock and generating $300.0 million in gross proceeds since its inception, before deducting $3.0 million in underwriting discounts, commissions and other expenses.
In June 2023, we will continueentered into a distribution agency agreement with the Agents providing for the offer and sale of up to expense these costs$400 million of shares of the Company's common stock from time to time through the Agents, acting as incurredsales agents, or directly to researchone or more of the Agents, acting as principal(s), through an "at the market offering" program (the "2023 ATM Program").
During the three months ended September 30, 2023, we sold 62.4 million shares of common stock under the 2023 ATM Program and development.generated $210.7 million in gross proceeds, before deducting $2.1 million in underwriting discounts, commissions and other expenses.
During the nine months ended September 30, 2023, we sold 79.7 million shares of common stock under the 2023 ATM Program and generated $287.5 million in gross proceeds, before deducting $2.9 million in underwriting discounts, commissions and other expenses.
Short-term Liquidity and Capital Resources
Outlook
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 spaceships and motherships, under an agreement with a third-party contractor, and spaceship vehicles,expansion of our footprint at Spaceport America in New Mexico, 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 becomesthey become due. We expect to begin generatinggenerate revenue from our human spaceflight program, which is expected to launchcommenced with our first commercial spaceflight, 'Galactic 01,' in the second quarter oflate June 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 conductneed to seek additional offerings of our securitiesdebt or refinance debt. We expect these resources will be adequate to fund our ongoing operating activities.
equity financing.
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“Risk Factors—Risks Related to Our BusinessBusiness.”
Contractual Obligations and Commitments
Except as set forth inNote 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“Management’s Discussion and Analysis of Financial Condition and Results of Operations”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.
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 describedreferred to 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 September 30, 2023, there were no significant changes to
Note 2our 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 Quarterly2022 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 withinDuring the United States and the United Kingdom and as such we are exposedfiscal quarter ended September 30, 2023, there were no significant changes to our market risks compared to those previously disclosed in the ordinary course of our business, including the effects of interest rate changesPart II, Item 7A. "Quantitative 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.
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, 2022,2023, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
ThereAs described under the heading “Recent Developments” 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, the launch of commercial service and achievement of technological feasibility for our current spaceflight system represents a change that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting for the three months ended September 30, 2023. Therefore, significant changes were made to our internal control over financial reporting to support the related changes in accounting processes and financial presentation, and appropriately address the underlying risks. These changes include implementation of preventative and detective controls that support the capitalization of costs related to our assets that have achieved technological feasibility.
Except as otherwise disclosed, there were no changes in our internal control over financial reporting during the three months ended September 30, 20222023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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 subsidiaryDuring the three months ended September 30, 2023, none 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 subassembliesour officers or directors adopted or terminated any contract, instruction or written plan for the Company’s new Delta class spaceships.purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non Rule 10b5-1 trading arrangement."
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 ordersIn November 2023, we announced 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‘Galactic 06’ is expected to commence revenue-generating payloadtake place in January 2024, and that we are shifting our Unity flight cadence from monthly to quarterly. We also announced that we plan to pause Unity spaceflights in mid-2024, and that we expect to re-commence flying with test flights for our Delta Class spaceships in late 2025, progressingmid-2025, in advance of revenue service expected to private astronaut flightsbegin 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.
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 | | 8-K | 001-38202 | 3.1 | 10/29/2019 | |
3.2 | | 8-K | 001-38202 | 3.2 | 10/29/2019 | |
10.1(2)(3) | | 10-Q | 001-38202 | 10.1 | 08/04/2022 | |
10.2(2)(3) | | | | | | * |
10.3(2)(3) | | | | | | * |
10.4(3) | | | | | | * |
31.1 | | | | | | * |
31.2 | | | | | | * |
32.1 | | | | | | ** |
32.2 | | | | | | ** |
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 | | 8-K | 001-38202 | 3.1 | 10/29/2019 | |
3.2 | | 8-K | 001-38202 | 3.2 | 10/29/2019 | |
| | | | | | | | | | | | | | | | | | | | |
| | Incorporated by Reference | |
Exhibit No. | Exhibit Description | Form | File No. | Exhibit | Filing Date | Filed/Furnished Herewith |
31.1 | | | | | | * |
31.2 | | | | | | * |
32.1 | | | | | | ** |
32.2 | | | | | | ** |
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 or exhibit to the SEC upon request.
(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.
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, 20228, 2023 | | /s/ Michael Colglazier |
| Name: | Michael Colglazier |
| Title: | Chief Executive Officer (Principal Executive Officer) |
| | |
Date: November 3, 20228, 2023 | | /s/ Douglas Ahrens |
| Name: | Douglas Ahrens |
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) |