by WASHINGTON — Despite a widening first-quarter loss, Virgin Orbit executives said they believe they have enough financial runway for their air-launch business to pick up steam this year.
In first quarter financial results released on May 11, the company announced a net loss of $62.6 million and an adjusted loss of earnings before interest, taxes, depreciation and amortization (EBITDA) of $49.6 million. The company reported revenue of just $2.1 million in the quarter.
The results were significantly worse than the same quarter in 2021, when Virgin Orbit had revenue of $5.5 million, a net loss of $32.3 million, and an adjusted EBITDA loss of $29 million. As in the first quarter of this year, Virgin Orbit flew a single LauncherOne mission in the first quarter of 2021.
The company blamed the loss on “expected revenue recognition from contract losses given our initial phase of low-rate production,” as well as higher expenses associated with being a public company. Virgin Orbit went public when it closed its merger with a special purpose acquisition company (SPAC) in late December.
On an earnings call, Brita O’Rear, Virgin Orbit’s chief financial officer, said the low earnings were related to the “introductory price” the company offered on the initial LauncherOne missions. In its first three operational launches, the company averaged just $2.5 million in revenue per launch. Upcoming “near-term” releases, she said, will bring in revenues of $6 million to $12 million each.
“We see a progression of higher launch revenue as our contracts now reflect increased customer confidence given our proven technology and transition to recurring operations,” he said.
Dan Hart, CEO of Virgin Orbit, said the upper end of that launch revenue range would likely be related to national security and other government launches, as well as those taking place outside the United States. “International flights will generate higher revenues. It is a unique and differentiated ability,” he said. In contrast, a commercial launch to a standard orbit such as Solar Synchronous Orbit would be at the lower end of that revenue range due to competition with other vehicles.
Virgin Orbit had negative free cash flow of $66.6 million in the quarter, and with $127 million in cash at the end of the quarter, analysts on the call asked if the company would soon need to raise additional capital. O’Rear said the first quarter should see the biggest cash outflow of the year for the company.
“Right now, we see our cash burn improve over the year,” he said, stating the company has “enough liquidity” to get through the year without raising more capital. The company in March announced a standby stock purchase agreement with a hedge fund, Yorkville Advisors, to sell up to $250 million worth of shares over three years. Virgin Orbit has yet to exercise that agreement, he said.
Virgin Orbit did not provide revenue or loss projections for the second quarter or the rest of the year in the earnings release. The company, which earlier this year projected six launches in 2022, will make just its second launch of the year, and first since January, no earlier than June 29. That mission, dubbed “Straight Up” by the company, will carry seven US government payloads in a launch procured by the US Space Force.
Hart said the subsequent LauncherOne mission will be the long-awaited first launch from the UK, flying from Spaceport Cornwall. That launch is scheduled for the third quarter, pending licenses from the British government for both the launch and the spaceport. Hart said that after the Cornwall launch, the company will make “additional launches” at Mojave Air and Space Port, but did not provide a formal estimate of the number of launches it now anticipates doing in 2022.
Anticipating a higher launch rate, Virgin Orbit announced on May 10 an agreement with L3Harris to acquire and modify two additional Boeing 747 aircraft. One of those planes would be ready “as early as 2023,” Hart said on the call. Having a second plane would allow the company to maintain a launch cadence if its current plane, dubbed “Cosmic Girl,” needs maintenance and allows the company to launch at two different locations.
However, he declined to say how much it will cost to acquire and modify the two planes. “We’re in the middle of discussions about that, and we have a couple of attractive options.”
The company also declined to say what launch rate it needs to break even. “We haven’t been sharing the number of pitches to break even,” Hart said. “We will consider it as we go forward.”
