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Virgin Galactic Announces Third Quarter 2020 Financial Results

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First Spaceflight from Spaceport America Expected to Occur Between November 19-23

Rollout of Second Spaceship Scheduled to Take Place in the First Quarter of 2021

Reopening Ticket Sales in 2021 Following Sir Richard Branson's Spaceflight

Virgin Galactic Holdings, Inc. (NYSE:SPCE) ("Virgin Galactic" or the "Company"), a vertically integrated aerospace and space travel company, today announced its financial results for the third quarter ended September 30, 2020.

"During the quarter we made good progress completing the final steps to prepare for VSS Unity's first rocket powered test flight from Spaceport America this November. This will be the first-ever human spaceflight conducted from New Mexico," said Michael Colglazier, Chief Executive Officer of Virgin Galactic. "We also made meaningful progress on our second SpaceShipTwo vehicle, which we plan to unveil in the first quarter of 2021. During my first three months at the Company, I have been continually impressed with the team and the tremendous work that has gone into making the dream of commercial spaceflight a reality. As we continue to prepare for commercial launch, we will reopen ticket sales following Richard Branson's flight in 2021. I am excited and confident in our ability to execute our vision and provide transformative experiences to people around the world."

Third Quarter 2020 Business Highlights:

  • Completed the application of the thermal protection system on the Wing and Fuselage, progressed on systems installation, and successfully completed the initial Pilot Simulator evaluations of the second SpaceShipTwo vehicle, in preparation for its expected rollout in the first quarter of 2021.
  • Completed work on Spaceport America's third floor astronaut training lounge and customer center.
  • Installed reclining seats, cabin cameras and download link hardware on VSS Unity for future live stream capability.
  • Implemented upgraded flight control system and upgraded horizontal stabilizers on VSS Unity to increase performance during the boost phase of the flight profile.
  • Unveiled the design of the SpaceShipTwo cabin interior via an exclusive virtual event, streamed live on YouTube.
  • Revealed initial design concept for high speed vehicle and announced non-binding memorandum of understanding with Rolls-Royce to collaborate in designing and developing engine propulsion technology for vehicle.

Third Quarter 2020 Financial Highlights:

  • Cash position remains strong, with cash and cash equivalents of $742 million as of September 30, 2020.
  • Net loss of $77 million, compared to a $63 million net loss in the second quarter of 2020.
  • GAAP selling, general, and administrative expenses of $31 million, compared to $26 million in the second quarter of 2020. Non-GAAP selling, general and administrative expenses of $26 million in the third quarter of 2020, compared to $23 million in the second quarter of 2020.
  • GAAP research and development expenses of $46 million, compared to $37 million in the second quarter of 2020. Non-GAAP research and development expenses of $43 million in the third quarter of 2020, compared to $35 million in the second quarter of 2020.
  • Adjusted EBITDA totaled $(66) million, compared to $(54) million in the second quarter of 2020.
  • Cash paid for capital expenditures totaled $4 million, compared to $6 million in the second quarter of 2020.
  • Completed underwritten public offering of 23.6 million shares of common stock at a public offering price of $19.50 per share, resulting in net proceeds of over $440 million to be used for general corporate purposes and capital expenditures.

Recent Updates:

  • Expect first spaceflight from Spaceport America to occur between November 19-23, 2020. This flight will include revenue-generating payloads as part of the NASA flight opportunities program.
  • Entered into agreement with NASA and the Southwest Research Institute to fly planetary scientist Dr. Alan Stern on SpaceShipTwo vehicle from Spaceport America to conduct experiments in space.
  • Total Future Astronauts remained at approximately 600, as of October 31, 2020.
  • Reopening ticket sales in 2021 after Sir Richard Branson's flight.
  • Retiring "One Small Step" program on December 31, 2020. The pool of participants has now reached close to 900 participants, as of October 31, 2020.

COVID-19 Impact

Along with its third quarter 2020 financial results, Virgin Galactic also provided an update regarding the impact of COVID-19. The Company is continuing to experience ongoing delays to its business and operations due to COVID-19, which has led to accumulated impacts to both schedule and cost efficiency. This is expected to continue through the fourth quarter and in 2021, though the Company has continued to stay on track for its planned upcoming flights. The Company has implemented strict protocols to ensure employee safety, including enforcing staggered shifts to lower on-site density and re-working communications processes with engineers who are primarily working from home.

The Company continues to follow rigorous health and safety procedures and testing protocols for its employees, following guidelines from the CDC and state and local officials. Only those employees whose work requires them to be in Virgin Galactic's facilities are working on-site in Mojave and New Mexico.

Conference Call Information

Virgin Galactic will host a conference call to discuss the results at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) today. To access the conference call, parties should dial (778) 560-2846 and enter the conference ID number 1946019. The live audio webcast along with supplemental information will be accessible on the Company's Investor Relations website at investors.virgingalactic.com. A recording of the webcast will also be available following the conference call.

About Virgin Galactic Holdings

Virgin Galactic Holdings, Inc. is a vertically integrated aerospace and space travel company, pioneering human spaceflight for private individuals and researchers, as well as a manufacturer of advanced air and space vehicles. Using its proprietary and reusable technologies and supported by a distinctive, Virgin-branded customer experience, it is developing a spaceflight system designed to offer customers a unique, multi-day, transformative experience. This culminates in a spaceflight that includes views of Earth from space and several minutes of weightlessness that will launch from Spaceport America, New Mexico. Virgin Galactic and The Spaceship Company believe that one of the most exciting and significant opportunities of our time lies in the commercial exploration of space and the development of technology that will change the way we travel across the globe in the future. Together we are opening access to space to change the world for good.

Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of federal securities laws with respect to Virgin Galactic Holdings, Inc. (the "Company"), including statements regarding the Company's spaceflight systems, markets and expected performance. These forward-looking statements generally are identified by words such as "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "future," "opportunity," "plan," "may," "should," "will," "would," and similar expressions. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements in this presentation, including but not limited to the factors, risks and uncertainties included in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020, as such factors may be updated from time to time in our other filings with the Securities and Exchange Commission (the "SEC"), which are accessible on the SEC's website at www.sec.gov and the Investor Relations section of our website at www.virgingalactic.com. These filings identify and address other important risks and uncertainties that could cause the Company's actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and, except as required by law, the Company assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise.

Third Quarter 2020 Financial Results

VIRGIN GALACTIC HOLDINGS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited and in thousands except for per share data)

 
 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

2020

 

June 30,

2020

 

September 30,

2019

 

September 30,

2020

 

September 30,

2019

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

 

 

 

$

 

 

 

$

832

 

 

 

$

238

 

 

 

$

3,252

 

 

 

Cost of revenue

 

 

 

 

 

 

 

406

 

 

 

173

 

 

 

1,690

 

 

 

Gross profit

 

 

 

 

 

 

 

426

 

 

 

65

 

 

 

1,562

 

 

 

Selling, general, and administrative expenses

 

30,936

 

 

 

26,047

 

 

 

17,814

 

 

 

83,738

 

 

 

44,719

 

 

 

Research and development expenses

 

46,243

 

 

 

37,150

 

 

 

34,528

 

 

 

117,675

 

 

 

96,119

 

 

 

Operating loss

 

(77,179

)

 

 

(63,197

)

 

 

(51,916

)

 

 

(201,348

)

 

 

(139,276

)

 

 

Interest income

 

322

 

 

 

506

 

 

 

387

 

 

 

2,005

 

 

 

1,137

 

 

 

Interest expense

 

(9

)

 

 

(8

)

 

 

 

 

 

(26

)

 

 

(2

)

 

 

Other income (expense)

 

(44

)

 

 

221

 

 

 

91

 

 

 

5

 

 

 

128

 

 

 

Loss before income taxes

 

(76,910

)

 

 

(62,478

)

 

 

(51,438

)

 

 

(199,364

)

 

 

(138,013

)

 

 

Income tax (benefit) expense

 

40

 

 

 

40

 

 

 

37

 

 

 

34

 

 

 

123

 

 

 

Net loss

 

(76,950

)

 

 

(62,518

)

 

 

(51,475

)

 

 

(199,398

)

 

 

(138,136

)

 

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

48

 

 

 

 

 

 

(58

)

 

 

(6

)

 

 

 

(79

)

 

 

Total comprehensive loss

 

$

(76,902

)

 

 

$

(62,518

)

 

 

$

(51,533

)

 

 

$

(199,404

)

 

 

$

(138,215

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.34

)

 

 

$

(0.30

)

 

 

$

(0.27

)

 

 

$

(0.94

)

 

 

$

(0.71

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

Basic and diluted

 

225,253,536

 

 

 

211,784,541

 

 

 

193,663,150

 

 

 

213,193,386

 

 

 

193,663,150

 

 

 

 

VIRGIN GALACTIC HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

 

 

 

 

 

September 30,

2020

 

December 31,

2019

 

 

(Unaudited)

 

 

Assets

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

741,575

 

 

 

$

480,443

 

 

Restricted cash

 

13,268

 

 

 

12,278

 

 

Inventories

 

25,147

 

 

 

26,817

 

 

Prepaid expenses and other current assets

 

9,871

 

 

 

17,133

 

 

Total current assets

 

789,861

 

 

 

536,671

 

 

Property, plant, and equipment, net

 

57,255

 

 

 

49,333

 

 

Other non-current assets

 

18,930

 

 

 

19,542

 

 

Total assets

 

$

866,046

 

 

 

$

605,546

 

 

Liabilities and Stockholders' Equity

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable

 

$

8,490

 

 

 

$

7,038

 

 

Accrued expenses

 

22,056

 

 

 

22,277

 

 

Customer deposits

 

83,190

 

 

 

83,362

 

 

Other current liabilities

 

2,300

 

 

 

3,168

 

 

Total current liabilities

 

116,036

 

 

 

115,845

 

 

Other long-term liabilities

 

23,763

 

 

 

22,141

 

 

Total liabilities

 

$

139,799

 

 

 

$

137,986

 

 

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; 234,021,503 and 196,001,038 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

 

23

 

 

 

20

 

 

Additional paid-in capital

 

1,047,246

 

 

 

589,158

 

 

Accumulated deficit

 

(321,075

)

 

 

(121,677

)

 

Accumulated other comprehensive income

 

53

 

 

 

59

 

 

Total stockholders' equity

 

726,247

 

 

 

467,560

 

 

Total liabilities and stockholders' equity

 

$

866,046

 

 

 

$

605,546

 

 

VIRGIN GALACTIC HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited and in thousands)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

2020

 

June 30,

2020

 

September 30,

2019

 

September 30,

2020

 

September 30,

2019

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(76,950

)

 

 

$

(62,518

)

 

 

$

(51,475

)

 

 

$

(199,398

)

 

 

$

(138,136

)

 

 

Stock-based compensation

 

8,625

 

 

 

5,525

 

 

 

 

 

 

18,575

 

 

 

 

 

 

Depreciation and amortization

 

2,677

 

 

 

2,615

 

 

 

1,714

 

 

 

7,397

 

 

 

4,920

 

 

 

Other operating activities, net

 

8

 

 

 

66

 

 

 

(129

)

 

 

75

 

 

 

(375

)

 

 

Change in assets and liabilities

 

 

 

 

 

 

 

 

 

 

Inventories

 

3,457

 

 

 

192

 

 

 

1,918

 

 

 

1,669

 

 

 

(2,310

)

 

 

Other current and non-current assets

 

2,891

 

 

 

1,119

 

 

 

(7,592

)

 

 

6,152

 

 

 

(5,928

)

 

 

Accounts payable and accrued expenses

 

1,633

 

 

 

2,064

 

 

 

5,361

 

 

 

719

 

 

 

2,560

 

 

 

Customer deposits

 

1,456

 

 

 

(1,530

)

 

 

1,125

 

 

 

(172

)

 

 

1,319

 

 

 

Other current and non-current liabilities

 

1,502

 

 

 

892

 

 

 

9,664

 

 

 

2,394

 

 

 

9,664

 

 

 

Net cash used in operating activities

 

(54,701

)

 

 

(51,575

)

 

 

(39,414

)

 

 

(162,589

)

 

 

(128,286

)

 

 

Cash flows from investing activity

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

(3,996

)

 

 

(6,103

)

 

 

(5,380

)

 

 

(14,135

)

 

 

(13,680

)

 

 

Cash used in investing activity

 

(3,996

 

)

 

(6,103

)

 

 

(5,380

)

 

 

(14,135

)

 

 

(13,680

)

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

Payments of finance lease obligations

 

(40

)

 

 

(26

)

 

 

(8

)

 

 

(89

)

 

 

(55

)

 

 

Net transfer from Parent Company

 

 

 

 

 

 

 

4,944

 

 

 

 

 

 

106,119

 

 

 

Proceeds from Parent Company

 

 

 

 

 

 

 

40,000

 

 

 

 

 

 

40,000

 

 

 

Proceeds from issuance of common stocks

 

460,200

 

 

 

 

 

 

 

 

 

460,200

 

 

 

 

 

 

Transaction costs

 

(19,399

)

 

 

(770

)

 

 

 

 

 

(20,866

)

 

 

 

 

 

Withholding taxes paid on behalf of employee on net settled stock-based awards

 

(399

)

 

 

 

 

 

 

 

 

(399

)

 

 

 

 

 

Net cash provided by (used in) by financing activities

 

440,362

 

 

 

(796

)

 

 

44,936

 

 

 

438,846

 

 

 

146,064

 

 

 

Net increase (decrease) in cash and cash equivalents

 

381,665

 

 

 

(58,474

)

 

 

142

 

 

 

262,122

 

 

 

4,098

 

 

 

Cash, cash equivalents and restricted cash at beginning of period

 

373,178

 

 

 

431,652

 

 

 

85,324

 

 

 

492,721

 

 

 

81,368

 

 

 

Cash, cash equivalents and restricted cash at end of period

 

$

 

754,843

 

 

 

 

$

 

373,178

 

 

 

 

$

85,466

 

 

 

$

754,843

 

 

 

$

85,466

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

741,575

 

 

 

$

359,912

 

 

 

$

74,438

 

 

 

$

741,575

 

 

 

$

74,438

 

 

 

Restricted cash

 

13,268

 

 

 

13,266

 

 

 

11,028

 

 

 

13,268

 

 

 

11,028

 

 

 

Cash, cash equivalents and restricted cash

 

$

754,843

 

 

 

$

373,178

 

 

 

$

85,466

 

 

 

$

754,843

 

 

 

$

85,466

 

 

 

Use of Non-GAAP Financial Measures (Unaudited)

This press release references certain non-GAAP financial measures, including adjusted EBITDA, non-GAAP selling, general, and administrative expense and non-GAAP research and development expense. The Company defines adjusted EBITDA as earnings before interest expense, taxes, depreciation and amortization, stock-based compensation, and certain other items the Company believes are not indicative of its core operating performance. It defines non-GAAP selling, general, and administrative expenses as selling, general, and administrative expenses other than stock-based compensation and non-capitalized transaction costs, and non-GAAP research and development expenses as research and development expenses other than stock-based compensation. None of these non-GAAP financial measures is a substitute for or superior to measures of financial performance prepared in accordance with generally accepted accounting principles in the United States (GAAP) and should not be considered as an alternative to any other performance measures derived in accordance with GAAP.

The Company believes that presenting these non-GAAP financial measures provides useful supplemental information to investors about the Company in understanding and evaluating its operating results, enhancing the overall understanding of its past performance and future prospects, and allowing for greater transparency with respect to key financial metrics used by its management in financial and operational-decision making. However, there are a number of limitations related to the use of non-GAAP measures and their nearest GAAP equivalents. For example, other companies may calculate non-GAAP measures differently, or may use other measures to calculate their financial performance, and therefore any non-GAAP measures the Company uses may not be directly comparable to similarly titled measures of other companies.

A reconciliation of adjusted EBITDA to net loss for the three months September 30, 2020, June 30, 2020, September 30, 2019 and nine months ended September 30, 2020 and 2019, respectively, are set forth below:

Amounts in thousands ($)

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

2020

 

June 30,

2020

 

September 30,

2019

 

September 30,

2020

 

September 30,

2019

Net Loss

 

(76,950

)

 

 

(62,518

)

 

 

(51,475

)

 

 

(199,398

)

 

 

(138,136

)

 

Income tax (benefit) expense

 

40

 

 

 

40

 

 

 

37

 

 

 

34

 

 

 

123

 

 

Interest expense

 

9

 

 

 

8

 

 

 

 

 

 

26

 

 

 

2

 

 

Depreciation & amortization

 

2,677

 

 

 

2,615

 

 

 

1,715

 

 

 

7,397

 

 

 

4,921

 

 

EBITDA

 

(74,224

)

 

 

(59,855

)

 

 

(49,723

)

 

 

(191,941

)

 

 

(133,090

)

 

Non-capitalized transaction costs*

 

 

 

 

 

 

 

 

 

 

697

 

 

 

 

 

Stock-based compensation

 

8,625

 

 

 

5,525

 

 

 

 

 

 

18,575

 

 

 

 

 

Adjusted EBITDA

 

(65,599

)

 

 

(54,330

)

 

 

(49,723

)

 

 

(172,669

)

 

 

(133,090

)

 

A reconciliation of selling, general, and administrative expenses to non-GAAP selling, general, and administrative expenses for the three months ended September 30, 2020, June 30, 2020, September 30, 2019 and nine months ended September 30, 2020 and 2019, respectively, are set forth below:

Amounts in thousands ($)

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

2020

 

June 30,

2020

 

September 30,

2019

 

September 30,

2020

 

September 30,

2019

Selling, general, and administrative expenses

 

30,936

 

 

26,047

 

 

17,814

 

 

83,738

 

 

44,719

 

Stock-based compensation

 

5,056

 

 

3,546

 

 

 

 

11,472

 

 

 

Non-capitalized transaction costs*

 

 

 

 

 

 

 

697

 

 

 

Non-GAAP selling, general,

administration expenses

 

$

25,880

 

 

$

22,501

 

 

$

17,814

 

 

$

71,569

 

 

$

44,719

 

A reconciliation of research and development expenses to non-GAAP research and development expenses for the three months ended September 30, 2020, June 30, 2020, September 30, 2019 and nine months ended September 30, 2020 and 2019, respectively, are set forth below:

Amounts in thousands ($)

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

2020

 

June 30,

2020

 

September 30,

2019

 

September 30,

2020

 

September 30,

2019

Research and development expenses

 

46,243

 

 

37,150

 

 

34,528

 

 

117,675

 

 

96,119

 

Stock-based compensation

 

3,570

 

 

1,979

 

 

 

 

7,103

 

 

 

Non-GAAP Research and

development expenses

 

$

42,673

 

 

$

35,171

 

 

$

34,528

 

 

$

110,572

 

 

$

96,119

 

*Non-capitalized transaction costs include non-recurring expenses related to preparation and filing of an S-1 registration statement in the first quarter.

 

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