Virgin Galactic Holdings, Inc: Form 10-Q for the period ended Jun 30, 2025

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 for the fiscal year ended December 31, 2024 (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” sections of our Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 and under the "Cautionary Note Regarding Forward-Looking 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 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 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, spaceflight operation, and post-flight maintenance of our spaceflight system. Our spaceflight system was developed using our proprietary technology and processes and is focused on providing space travel experiences for private astronauts, researcher flights and professional astronaut training. We have also leveraged our knowledge and expertise in manufacturing spaceships to occasionally perform engineering services for third parties. To expand capacity, we are currently developing our next-generation spaceflight vehicles. These next-generation spaceflight vehicles, which include our Delta Class spaceships and additional launch vehicles, are expected to dramatically increase our annual flight rate. Following the completion of the non-recurring engineering work on our Delta Class spaceships, we have redeployed engineering resources to the next phase of design for our next-generation launch vehicle. In addition, we are exploring the opportunity to use a derivative model of our launch vehicle as a High-Altitude, Long-Endurance ("HALE") aircraft, which we believe could be utilized for several types of government and research purposes.

Recent Developments

The development of our new Delta Class spaceships is on track. We are progressing through our build milestones with key tools and materials continuing to arrive at our spaceship final assembly facility. Commercial service remains planned for 2026, with both research and private astronaut flights expected in the fall of 2026.

On July 18, 2025, plaintiffs and defendants executed a Memorandum of Understanding outlining the terms of a settlement to resolve all claims in the putative class action complaint filed against us in the action entitled Lavin v. Virgin Galactic Holdings, Inc. (“Lavin Action”). See Note 12 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information. We are currently working on the final settlement agreement to submit to the Court for final approval and expect to make all payments by the end of 2025.

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” and in Part II, Item 1A. of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025.

Customer Demand

We have already received significant interest from potential astronauts. Going forward, we expect the size of our backlog and the number of astronauts that have flown to space on our spaceflight system to be an important indicator of our future performance. Our sales remain paused, but we expect to open tranches of sales reservations in the first quarter of 2026 as we approach the start of commercial service. As of June 30, 2025, we have reservations for spaceflights for approximately 675 future astronauts, which represent approximately $190 million in expected future spaceflight revenue upon completion of the spaceflights.

Safety Performance of Our Spaceflight Systems

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

Results of Operations

The following tables set forth our results of operations for the periods presented. The period-to-period comparisons of financial results are not necessarily indicative of future results.

(In thousands)

For the Three and Six Months Ended June 30, 2025 Compared to the Three and Six Months Ended June 30, 2024

Revenue

Revenue for the three and six months ended June 30, 2025 was primarily attributable to access fees related to our astronaut community. Revenue for the three and six months ended June 30, 2024 was primarily attributable to revenue generated from our commercial spaceflights and access fees related to our astronaut community.

Spaceline Operations

(In thousands, except %)

Spaceline operations expense includes costs 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; the consumption of rocket motors, fuel and other consumables; costs to maintain and support our astronaut community; and costs to provide payload cargo and engineering services.

Spaceline operations expense decreased from $27.3 million for the three months ended June 30, 2024 to $14.2 million for the three months ended June 30, 2025. The decrease was primarily driven by a $8.7 million decrease in cash compensation and other employee benefit costs and a $4.1 million decrease in materials, sub-contractor and contract labor costs, and other operational costs.

Spaceline operations expense decreased from $49.9 million for the six months ended June 30, 2024 to $35.0 million for the six months ended June 30, 2025. The decrease was primarily driven by an $11.3 million decrease in cash compensation and other employee benefit costs and a $3.8 million decrease in decrease in materials, sub-contractor and contract labor costs, and other operational costs.

Research and Development

(In thousands, except %)

Research and development expenses represent costs incurred to support activities that advance our future fleet towards commercialization, including basic research, applied research, concept formulation studies, design, development, and related testing activities. Research and development costs consist primarily of equipment, material, and labor costs (including from third-party contractors) for designing the spaceflight system’s structure, spaceflight propulsion system, and flight profiles for our next-generation spaceships and launch vehicles, as well as allocated facilities and other supporting overhead costs.

Research and development expenses decreased from $41.5 million for the three months ended June 30, 2024 to $20.1 million for the three months ended June 30, 2025. The decrease was primarily driven by a $19.2 million decrease in sub-contractor and contract labor costs associated with the development of our next generation spaceflight vehicles and a $1.8 million decrease in cash compensation and other employee benefit costs.

Research and development expenses decreased from $100.5 million for the six months ended June 30, 2024 to $53.4 million for the six months ended June 30, 2025. The decrease was primarily driven by a $36.7 million decrease in sub-contractor and contract labor costs associated with the development of our next generation spaceflight vehicles and a $10.4 million decrease in cash compensation and other employee benefit costs.

Selling, General and Administrative

(In thousands, except %)

Selling, general and administrative expenses consist primarily of compensation and other 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 selling, general and administrative expenses include accounting, legal and other professional fees, facilities expenses, and other corporate expenses.

Selling, general and administrative expenses decreased from $33.9 million for the three months ended June 30, 2024 to $31.9 million for the three months ended June 30, 2025. The decrease was primarily driven by a $2.2 million decrease in stock-based compensation, a $1.4 million decrease in professional fees and a $1.4 million decrease in outside services and other corporate costs. These decreases were partially offset by a $2.9 million expense associated with the settlement of the Lavin Action.

Selling, general and administrative expenses increased from $61.8 million for the six months ended June 30, 2024 to $62.4 million for the six months ended June 30, 2025. The increase was primarily driven by a $2.9 million expense associated with the settlement of the Lavin Action and a $2.5 million increase in cash compensation and other employee benefit costs. These increases were partially offset by a $4.2 million decrease in stock-based compensation.

Depreciation and Amortization

Depreciation and amortization expense increased from $3.3 million for the three months ended June 30, 2024 to $4.2 million for the three months ended June 30, 2025. Depreciation and amortization expense increased from $7.0 million for the six months ended June 30, 2024 to $8.4 million for the six months ended June 30, 2025. The increases were primarily due to the acquisition of property, plant and equipment.

Interest Income

Interest income decreased from $11.1 million for the three months ended June 30, 2024 to $5.8 million for the three months ended June 30, 2025. Interest income decreased from $23.4 million for the six months ended June 30, 2024 to $13.0 million for the six months ended June 30, 2025. These decreases were primarily driven by decreased average balances of marketable securities and deposits in interest-bearing accounts.

Interest Expense

Interest expense was $3.2 million for each of the three months ended June 30, 2025 and 2024. Interest expense was $6.5 million for each of the six months ended June 30, 2025 and 2024. Interest expense primarily consists of interest expense and amortization of debt issuance costs related to our convertible senior notes.

Income Tax Expense (Benefit)

Income tax expense (benefit) was immaterial for the three and six months ended June 30, 2025 and 2024. We have accumulated net operating losses at the U.S. federal and state levels. We maintain a full valuation allowance against our net U.S. federal and state deferred tax assets. The income tax expense (benefit) is primarily related to corporate income taxes for our operations in the United Kingdom, which operates on a cost-plus arrangement.

Liquidity and Capital Resources

As of June 30, 2025, we had cash, cash equivalents and restricted cash of $193.7 million and total marketable securities of $314.0 million. Our principal sources of liquidity have come from sales of our common stock and offering of convertible senior notes ("2027 Notes").

Historical Cash Flows

(In thousands)

Operating Activities

Net cash used in operating activities was $131.4 million for the six months ended June 30, 2025, and consisted primarily of $151.8 million of net losses, adjusted for non-cash items, which primarily included stock-based compensation expense of $9.6 million and depreciation and amortization expense of $8.4 million, partially offset by $4.0 million of accretion of marketable securities purchased at a discount and $5.3 million of net changes in operating assets and liabilities.

Net cash used in operating activities was $192.4 million for the six months ended June 30, 2024, and consisted primarily of $195.8 million of net losses, adjusted for non-cash items, which primarily included stock-based compensation expense of $16.5 million and depreciation and amortization expense of $7.0 million, partially offset by $10.0 million of accretion of marketable securities purchased at a discount and $11.8 million of net changes in operating assets and liabilities.

Investing Activities

Net cash provided by investing activities was $30.6 million for the six months ended June 30, 2025, and consisted primarily of $356.0 million in proceeds from maturities and calls of marketable securities, partially offset by $220.9 million in purchases of marketable securities and $104.4 million in capital expenditures.

Net cash provided by investing activities was $83.7 million for the six months ended June 30, 2024, and consisted primarily of $479.4 million in proceeds from maturities and calls of marketable securities, partially offset by $348.8 million in purchases of marketable securities and $47.5 million in capital expenditures.

Financing Activities

Net cash provided by financing activities was $83.6 million for the six months ended June 30, 2025, and consisted primarily of net cash proceeds from the sale and issuance of common stock pursuant to our at-the-market offering program.

Net cash provided by financing activities was $69.9 million for the six months ended June 30, 2024, and consisted primarily of net cash proceeds from the sale and issuance of common stock pursuant to our at-the-market offering program.

Funding Requirements

We expect our expenditures to fluctuate in connection with our ongoing activities, particularly as we continue to advance the development of our next-generation spaceflight system and leverage investments in capital expenditures.

As our fleet of spaceships expands, we expect our expenditures to increase as we scale our commercial operations. Specifically, our long-term expenditures will increase as we:

• scale up our manufacturing processes and capabilities to support expanding our fleet with additional spaceships, launch vehicles and rocket motors in connection with commercialization;
• hire additional personnel in manufacturing operations, testing programs, maintenance operations and guest services as we increase the volume of our spaceflights; and
• scale up required operational facilities, such as hangars and warehouses.

We expect our arrangements with third-party providers to manufacture key subassemblies for our next-generation spaceships and for the design and manufacture of our next-generation launch vehicles will require significant capital expenditures. Certain estimated amounts in connection with third-party arrangements are subject to future negotiations and cannot be estimated with reasonable certainty.

We believe that our current capital is adequate to sustain our operations for at least the next twelve months. Changing circumstances may cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. While we have completed our initial commercial launch with a single spaceship, we are currently 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.

Issuances of Common Stock

In June 2023, we entered into a distribution agency agreement with Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC (each, an "Agent" and collectively, the "Agents") providing for the offer and sale of up to $400 million of shares of our common stock from time to time through the Agents, acting as sales agents, or directly to one or more of the Agents, acting as principal(s), through an "at-the-market offering" program (the "2023 ATM Program").

In November 2024, we terminated the 2023 ATM Program, having sold a total of 12.8 million shares of common stock and generating $396.2 million in gross proceeds, before deducting $3.9 million in underwriting discounts, commissions and other expenses.

In November 2024, we entered into an open market sale agreement with Jefferies LLC ("Jefferies") providing for the offer and sale of up to $300 million of shares of our common stock from time to time through Jefferies, acting as sales agent, or directly to Jefferies, acting as principal, through an "at-the-market offering" program (the "2024 ATM Program").

During the six months ended June 30, 2025, we sold 22.7 million shares of common stock under the 2024 ATM Program and generated $86.3 million in gross proceeds, before deducting $2.6 million in underwriting discounts, commissions and other expenses.

As of June 30, 2025, we sold a total of 26.8 million shares of common stock under the 2024 ATM Program, generating $115.4 million in gross proceeds since its inception, before deducting $3.4 million in underwriting discounts, commissions and other expenses.

Liquidity 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.

Beyond the next twelve months, our principal demand for funds will be to sustain our operations, operate our spaceline at Spaceport America in New Mexico, and expand our fleet of spaceships, launch vehicles, and supporting facilities. We expect to generate revenue from our spaceflight program, which is expected to restart in 2026. To the extent this source of capital as well as sources of capital described above are insufficient to meet our needs, we may need to seek additional debt or equity financing.

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

Contractual Obligations and Commitments

Except as set forth in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there have been no material changes outside the ordinary course of business to our contractual obligations and commitments as described in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K.

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 U.S. generally accepted accounting principles. 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 referred to below have the greatest potential impact on our condensed consolidated 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.

During the fiscal quarter ended June 30, 2025, there were no significant changes to our critical accounting policies and estimates compared to those previously disclosed in "Critical Accounting Policies and Estimates" included in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2024 Annual Report on Form 10-K.

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 our Chief Financial Officer concluded that, as of June 30, 2025, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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 II, Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K, in Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 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 in our Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the quarter ended March 31, 2025.