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Bankrupt Virgin Orbit Approved for Sale as 2022 Financial Results Show Company’s Spiral

By Doug Messier
Parabolic Arc
May 2, 2023
Filed under , , , ,
Bankrupt Virgin Orbit Approved for Sale as 2022 Financial Results Show Company’s Spiral
Virgin Orbit’s LauncherOne rocket ignites moments after being released by carrier aircraft Cosmic Girl for the company’s Launch Demo 2 mission. January 17th, 2021.

Virgin Orbit (OTCMKTS: VORBQ) has received approval from the Delaware Bankruptcy Court to proceed with a sale later this month that could see a new owner in charge by early June. The company also released its 2022 financial results, which include data that chronicle its downward spiral.

Parties that want to purchase all or part of the Richard Branson-owned launch provider must formally register their interest by May 4. Bids are due nine days later. If more than one qualified bid is received, an auction would follow three days later. The court will then hold a sales hearing, followed by the closing of any deal on or before June 2.

Virgin Orbit Sale
Key Dates & Events

May 4, 2023 at 4:00 p.m. (ET)Deadline to Submit Non-Binding Indications of Interest
May 8, 2023 at 4:00 p.m. (ET)Stalking Horse Supplement Deadline
May 15, 2023 at 4:00 p.m. (ET)Deadline to Object to Sale of the Assets
May 15, 2023 at 10:00 a.m. (ET)Bid Deadline
May 17, 2023 at 5:00 p.m. (ET)Deadline for Debtors to notify Potential Bidders of Whether Their Bids are Qualified Bids
May 18, 2023 10:00 a.m. (ET)Auction (if necessary)
May 24, 2023 at 2:00 p.m. (ET)Sale Hearing
On or prior to June 2, 2023Closing

Virgin Orbit declared bankruptcy on April 4 after failing to raise the funds needed to continue operations. The filing came right after the company laid off 675 of its 775 employees.

Virgin Orbit uses a modified Boeing 747 to air launch small satellites with the LauncherOne booster. The company compiled a record of four successes and two failures over the past three years.

Cosmic Girl in flight.
Cosmic Girl in flight. Image credit: Virgin Orbit.

Financial Report Shows Struggle

Last week, Virgin Orbit released its financial report for 2022, which had been delayed due to the bankruptcy. The report shows how dire the company’s financial state had become by the end of last year.

In only 12 months, the launch company’s cash reserves plunged from $194 million to $51.2 million – $45 million of which had come in the form of two loans from Branson’s Virgin Investments Ltd. (VIL) in November and December. Without the cash infusion, Virgin Orbit’s reserves would have dropped down to $6.2 million.

Virgin Orbit reported $33.1 in revenue for 2022. However, it cost the company more than twice that amount – $85.7 million – to earn the revenue.

Virgin Orbit reported a net loss of $191.2 million for 2022. The company’s total net loss for 2020 through 2022 was $470.1 million. Revenue totaled only $44.3 million for the three-year period.

Part of the problem was Virgin Orbit’s struggle to increase its launch cadence. LauncherOne failed on its maiden flight in May 2020. While the company completed two successful launches in 2021 and hoped to conduct as many as six launches in 2022, it only managed two flights that year. Meanwhile, expenses had increased as the company added more employees and built more launch vehicles.

With the company in perilous financial shape, much was riding on Virgin Orbit’s heavily publicized launch that originated from Spaceport Cornwall in England on January 9. All appeared to go well at first; the company tweeted that the second stage had reached orbit.

But, it hadn’t. The stage and its nine satellites had burned up in the atmosphere. A subsequent investigation found that a fuel filter that cost about $100 had broken loose and reduced the thrust on the engine.

Branson pumped an additional $15 million into Virgin Orbit through VIL in an effort to keep the company afloat. The company instituted a week-long pause and furloughed nearly all its employees in mid-March in an effort to conserve cash. Layoffs and bankruptcy followed after talks with several potential buyers fizzled out. Nasdaq also suspended trading of the company’s stock.

Virgin Orbit’s financial results are below.

Consolidated Balance Sheets
(In thousands, except for per-share data)

As of December 31, 2022As of December 31, 2021
Current assets
Cash and cash equivalents$51,199$194,154 
Restricted cash2,231 828 
Accounts receivable, net389 2,080 
Contract assets464 3,077 
Inventory77,062 33,927 
Due from related party— — 
Prepaid expenses and other current assets15,847 4,712 
Total current assets147,192 238,778 
Property, plant and equipment, net71,331 61,425 
Right-of-use assets14,539 14,685 
Investments6,812 13,498 
Other non-current assets930 3,354 
Total assets$240,804 $331,740
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities
Accounts payable$21,926 $10,334 
Current portion of lease obligation1,752 1,642 
Current portion of provision for contract losses11,775 — 
Current portion of convertible debt39,865 — 
Accrued liabilities24,972 23,790 
Deferred revenue20,414 12,150 
Due to related party718 42 
Total current liabilities121,422 47,958 
Lease obligation, net of current portion14,355 14,078 
Deferred revenue, net of current portion14,187 28,991 
Related party convertible debt, net of current portion39,534 — 
Public and private placement warrant liabilities2,596 20,188 
Other long-term liabilities290 7,555 
Total liabilities192,384 118,770 
Commitments and contingencies (Note 17)
Stockholders’ equity (deficit)
Preferred stock, $0.0001 par value, 25,000,000 shares authorized; none issued and outstanding— — 
Common stock, $0.0001 par value, 2,000,000,000 shares authorized; 337,710,003 and 334,919,914 shares issued and outstanding as of December 31, 2022 and 2021, respectively34 34 
Additional paid-in capital1,060,117 1,033,393 
Accumulated deficit(1,011,612)(820,454)
Accumulated other comprehensive loss(119)(3)
Total stockholders’ equity48,420 212,970 
Total liabilities and stockholders’ equity$240,804 $331,740 

See accompanying notes to consolidated financial statements.

Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except for per-share data)

Years Ended December 31, 2022Years Ended December 31, 2021Years Ended December 31, 2020
Cost of revenue85,739 37,872 3,168 
Gross (loss) profit(52,633)(30,487)672 
Selling, general and administrative expenses120,467 92,796 43,003 
Research and development expenses43,263 48,079 137,135 
Operating loss(216,363)(171,362)(179,466)
Other (expense) income, net:
Change in fair value of equity investments(7,486)6,792 — 
Change in fair value of liability classified warrants17,592 3,749 — 
Change in fair value of convertible notes9,101 — — 
Interest expense, net(1,326)(24)(4,852)
Other income7,335 3,560 62,671 
Total other income, net:25,216 14,077 57,819 
Loss before income taxes(191,147)(157,285)(121,647)
Provision for income taxes11 
Net loss(191,158)(157,291)(121,652)
Other comprehensive (loss) income
Foreign currency translation adjustment(119)137 (93)
Total comprehensive loss$(191,277)$(157,154)$(121,745)
Net loss per share:
Basic and diluted$(0.57)$(0.55)$(0.50)
Weighted average shares outstanding
Basic and diluted335,586,934 287,527,234 244,163,821 

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
(In thousands, except for per-share data)

Common Stock ShareCommon Stock Par ValueAdditional Paid-in CapitalAccumulated other comprehensive lossAccumulated DeficitTotal
Balance as of December 31, 2019221,829,175 $22 $428,328 $41 $(541,511)$(113,120)
Net loss— — — (121,652)(121,652)
Stock-based compensation— — 3,154 — — 3,154 
Exercise of stock options108,456 — 409 — — 409 
Advances to stock option holders— — (18)— — (18)
Other comprehensive loss— — — 93 — 93 
Parent Company contributions44,681,954 149,995 — — 150,000 
Parent Company distributions— — (118,488)— — (118,488)
Balance as of December 31, 2020266,619,585 $27$463,380$134$(663,163) $(199,622)
Net loss— — — — (157,291)(157,291)
Stock-based compensation— — 10,621 — — 10,621 
Exercise of stock options963,790 — 2,807 — — 2,807 
Advances to stock option holders— — 18 — — 18 
Other comprehensive loss— — — (137)— (137)
Issuance of common stock due to Parent Company contributions35,737,509 169,137 — — 169,140 
Conversion of long-term debt due to Parent Company to Parent Company non-cash contributions— — 235,108 — — 235,108 
Reverse recapitalization, net of transaction costs31,599,030 152,322 — — 152,326 
Balance as of December 31, 2021334,919,914 $34$1,033,393 $(3)$(820,454)$212,970 
Net loss— — — — (191,158)(191,158)
Stock-based compensation— — 18,636 — — 18,636 
Issuance of common stock related to stock options exercised402,185 — 1,480 — — 1,480 
Issuance of common stock pursuant to stock-based awards5,406 — — — — — 
Issuance of common stock due to convertible note conversion2,382,498 — 6,608 — — 6,608 
Other comprehensive loss— — — (116)— (116)
Balance as of December 31, 2022337,710,003 $34 $1,060,117 $(119)$(1,011,612)$48,420 

Consolidated Statements of Cash Flows
(In thousands)

Years Ended December 31, 2022Years Ended December 31, 2021Years Ended December 31, 2020
Cash flows from operating activities
Net loss$(191,158)$(157,291)$(121,652)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization12,721 14,433 13,975 
Stock-based compensation18,636 3,154 
Inventory write-down1,966 4,078 — 
Gain on sale of fixed assets(90)— — 
Write-off of right-of-use assets70 — — 
Non-cash interest on long-term debt, due to Parent Company— — 4,831 
Non-cash investment in Sky and Space— (1,706)— 
Change in fair value of equity investments9,322 (6,792)— 
Change in fair value of liability classified warrants(17,592)(3,749)— 
Change in fair value of convertible notes(9,101)— — 
Changes in operating assets and liabilities:
Accounts receivable1,691 1,278 (1,351)
Contract assets2,613 (3,077)— 
Prepaid expenses and other current assets(11,135)(1,259)320 
Deferred transaction costs— — — 
Other non-current assets2,422 (32)(82)
Due (to) from related party, net676 (75)898 
Accounts payable11,591 6,639 (480)
Other long-term liabilities(1,131)2,142 (472)
Accrued liabilities1,290 5,326 5,921 
Deferred revenue(11,540)13,502 (48,090)
Other, net53 (95)78 
Net cash used in operating activities(219,287)(153,997)(143,016)
Cash flows from investing activities:
Purchase of property and equipment(20,902)(25,280)(13,337)
Proceeds from sale of property and equipment90 — — 
Proceeds from sale of investment in Arqit2,365 — — 
Purchase of investment in Arqit— (5,000)39 
Net cash used in investing activities(18,447)(30,280)(13,298)
Cash flows from financing activities:
Payments of finance lease obligations(298)(257)(243)
Proceeds from the exercise of stock options1,480 2,807409 
Advances to stock option holders— 18 (18)
Contributions from Parent Company contributions— 169,139 150,000 
Parent Company distributions— (118,488)
Proceeds from YA II Convertible Debenture50,000 — 
Proceeds from November VIL Convertible Note25,000 — 
Proceeds from December VIL Convertible Note20,000 — 
Proceeds from reverse recapitalization— 200,102 — 
Payment of transaction costs related to reverse recapitalization— (19,336)— 
Net cash provided by financing activities96,182 352,473 31,660 
Net (decrease) increase in cash and cash equivalents and restricted cash(141,552)168,196 (124,654)
Cash and cash equivalents and restricted cash at the beginning of the period194,982 26,786151,440 
Cash and cash equivalents and restricted cash at the end of the period$53,430 $194,982 $26,786 

Consolidated Statements of Cash Flows (continued)
(In thousands)

Years Ended December 31, 2022Years Ended December 31, 2021Years Ended December 31, 2020
Cash and cash equivalents$51,199 $194,154 $22,433 
Restricted cash2,2318284,353
Cash and cash equivalents and restricted cash$53,430 $194,982$26,786 
Supplemental disclosures
Schedule for non-cash investing activities and financing activities
Conversion of long-term debt due to Parent Company to Parent Company non-cash contributions$— $235,108 $— 
Non-cash investment in SatRev$5,000 $— $— 
Unpaid property, plant and equipment received$1,064 $121 $26 

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