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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023
OR
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)
Delaware
85-3608069
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1700 Flight Way
Tustin California
92782
(Address of Principal Executive Offices)(Zip Code)
(949) 774-7640
(Registrant’s telephone number, including area code)
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.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
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, 2023, there were 399,715,289 shares of the Company’s common stock outstanding.


Table of Contents
VIRGIN GALACTIC HOLDINGS, INC.
TABLE OF CONTENTS
Page


1

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 future commercial flights of our spaceflight fleet;
our ability to successfully develop and test our 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 spaceflight and commercial research and development payloads;
our ability to effectively market and sell 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 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 effect of terrorist activity, armed conflict (including any escalation of hostility arising out of the conflict between Russia and Ukraine or other geopolitical conflicts), natural disasters or pandemic diseases on the economy generally, on our future financial or operational results, or 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.
2

Table of Contents
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 II, Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (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.


3

Table of Contents
PART I. FINANCIAL INFORMATION
VIRGIN GALACTIC HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(Unaudited; in thousands, except share and per share amounts)
September 30, 2023December 31, 2022
Assets
Current assets:
Cash and cash equivalents$231,030 $302,291 
Restricted cash38,031 40,336 
Marketable securities, short-term766,047 606,716 
Inventories17,062 24,043 
Prepaid expenses and other current assets24,051 28,228 
Total current assets1,076,221 1,001,614 
Marketable securities, long-term53,130 30,392 
Property, plant and equipment, net74,066 53,658 
Other non-current assets64,567 54,274 
Total assets$1,267,984 $1,139,938 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$27,986 $16,326 
Accrued liabilities49,888 61,848 
Customer deposits97,923 102,647 
Other current liabilities4,342 3,232 
Total current liabilities180,139 184,053 
Non-current liabilities:
Convertible senior notes, net417,338 415,720 
Other long-term liabilities71,148 59,942 
Total liabilities668,625 659,715 
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 capital2,622,776 2,111,316 
Accumulated deficit(2,022,148)(1,623,795)
Accumulated other comprehensive loss(1,309)(7,326)
Total stockholders' equity599,359 480,223 
Total liabilities and stockholders' equity$1,267,984 $1,139,938 
See accompanying notes to condensed consolidated financial statements.
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VIRGIN GALACTIC HOLDINGS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited; in thousands, except per share amounts)
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Revenue$1,728 $767 $3,991 $1,443 
Operating expenses:
Spaceline operations25,648 590 26,200 737 
Research and development44,848 97,411 241,292 211,578 
Selling, general and administrative42,218 46,113 144,020 127,820 
Depreciation and amortization3,286 2,214 9,723 7,981 
Total operating expenses116,000 146,328 421,235 348,116 
Operating loss(114,272)(145,561)(417,244)(346,673)
Interest income12,856 3,524 28,590 6,327 
Interest expense(3,221)(3,293)(9,648)(8,924)
Other income (expense), net
86 (203)164 7 
Loss before income taxes(104,551)(145,533)(398,138)(349,263)
Income tax expense53 21 215 69 
Net loss(104,604)(145,554)(398,353)(349,332)
Other comprehensive income (loss):
Foreign currency translation adjustment(60)(181)9 (314)
Unrealized income (loss) on marketable securities1,022 (585)6,008 (8,227)
Total comprehensive loss$(103,642)$(146,320)$(392,336)$(357,873)
Net loss per share:
Basic and diluted$(0.28)$(0.55)$(1.26)$(1.34)
Weighted-average shares outstanding:
Basic and diluted375,853 263,907 316,198 260,255 
See accompanying notes to condensed consolidated financial statements.
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VIRGIN GALACTIC HOLDINGS, INC.
Condensed Consolidated Statements of Stockholders' Equity    
(Unaudited; in thousands, except share amounts)
Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive
Loss
Total
SharesAmount
Balance at December 31, 2021258,166,417 $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 taxes307,471 — (1,882)— — (1,882)
Purchase of capped call— — (52,318)— — (52,318)
Balance at March 31, 2022258,473,888 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 taxes216,758 — (914)— — (914)
Balance at June 30, 2022258,690,646 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 taxes202,949 — (633)— — (633)
Issuance of common stock pursuant to at-the-market offering15,587,600 1 99,573 — — 99,574 
Transaction costs— — (1,163)— — (1,163)
Balance at September 30, 2022274,481,195 $27 $2,096,901 $(1,472,975)$(10,410)$613,543 
See accompanying notes to condensed consolidated financial statements.
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VIRGIN GALACTIC HOLDINGS, INC.
Condensed Consolidated Statements of Stockholders' Equity    
(Unaudited; in thousands, except share amounts)
Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive Gain (Loss)Total
SharesAmount
Balance at December 31, 2022275,397,229 $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 offering5,759,499 — 32,044 — — 32,044 
Transaction costs — — (343)— — (343)
Balance at March 31, 2023281,664,887 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 taxes485,076 1 (447)— — (446)
Issuance of common stock pursuant to at-the-market offering54,610,571 5 241,388 — — 241,393 
Transaction costs— — (2,601)— — (2,601)
Balance at June 30, 2023336,760,534 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 offering62,436,248 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)$599,359 
See accompanying notes to condensed consolidated financial statements.
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VIRGIN GALACTIC HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited; in thousands)
Nine Months Ended September 30,
20232022
Cash flows from operating activities:
Net loss$(398,353)$(349,332)
Stock-based compensation35,598 34,488 
Depreciation and amortization9,723 7,981 
Amortization of debt issuance costs1,618 1,466 
Other non-cash items(6,500)10,256 
Change in operating assets and liabilities:
Inventories3,996 6,817 
Other current and non-current assets10,297 2,253 
Accounts payable and accrued liabilities(2,941)23,828 
Customer deposits(4,724)13,108 
Other current and long-term liabilities(1,598)136 
Net cash used in operating activities(352,884)(248,999)
Cash flows from investing activities:
Capital expenditures(25,941)(12,306)
Purchases of marketable securities(872,950)(604,945)
Proceeds from maturities and calls of marketable securities702,346 294,612 
Net cash used in investing activities
(196,545)(322,639)
Cash flows from financing activities:
Payments of finance lease obligations(175)(132)
Proceeds from convertible senior notes 425,000 
Debt issuance costs (11,278)
Purchase of capped call (52,318)
Repayment of commercial loan (310)
Proceeds from issuance of common stock484,145 99,573 
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(3,001)(3,479)
Transaction costs related to issuance of common stock(5,106)(1,137)
Net cash provided by financing activities475,863 455,968 
Net decrease in cash, cash equivalents and restricted cash
(73,566)(115,670)
Cash, cash equivalents and restricted cash at beginning of period342,627 550,030 
Cash, cash equivalents and restricted cash at end of period$269,061 $434,360 
Cash and cash equivalents$231,030 $394,032 
Restricted cash38,031 40,328 
Cash, cash equivalents and restricted cash$269,061 $434,360 
See accompanying notes to condensed consolidated financial statements.


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VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(1) Description of Business and Basis of Presentation
Virgin Galactic Holdings, Inc., together with its consolidated subsidiaries ("Virgin Galactic" or the "Company"), is focused on the development, manufacture and operation of spaceships and related technologies for the purpose of conducting commercial spaceflight and flying commercial research and development payloads into space.
The accompanying unaudited condensed consolidated financial statements have 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"), have been condensed or omitted pursuant to such rules and regulations. 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 Company's financial position, results of operations and cash flows for the periods presented.
The operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results 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 Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual 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 mothership carrier aircraft, VMS Eve, which together comprise the Company’s 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 and development activities.
Following the launch of commercial service and achievement of technological feasibility, the Company began presenting the operating expenses supporting the Company’s 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 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 future astronauts that are contractually restricted for operational use until the condition of carriage is signed or the deposits are refunded.
The amortized cost, unrealized loss and estimated fair value of the Company's cash, cash equivalents and marketable securities are as follows:
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VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
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 market235,364 — 235,364 
Marketable securities:
U.S. treasuries302,742 (21)302,721 
Corporate bonds517,741 (1,285)516,456 
$1,089,544 $(1,306)$1,088,238 

December 31, 2022
Amortized CostGross Unrealized LossFair Value
(In thousands)
Cash and cash equivalents:
Cash and restricted cash$51,651 $— $51,651 
Money market249,249 — 249,249 
Certificate of deposits41,727 — 41,727 
Marketable securities:
U.S. treasuries79,570 (53)79,517 
Corporate bonds564,853 (7,262)557,591 
$987,050 $(7,315)$979,735 
Interest receivable of $4.5 million is included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022.
The Company recognizes amortization and accretion of purchase premiums and discounts on its marketable securities within interest income in the accompanying condensed consolidated statements of operations and comprehensive loss. The Company recognized $6.0 million in accretion income, net and $1.5 million in amortization expense, net for its 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 marketable securities as of September 30, 2023:
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 
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VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(3) Inventories
Inventories are comprised of the following:
September 30, 2023December 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 

(4) Property, Plant and Equipment
Property, plant and equipment consists of the following:
September 30, 2023December 31, 2022
(In thousands)
Land$1,302 $1,302 
Buildings9,092 9,117 
Machinery and equipment38,738 37,223 
Information technology software and equipment38,400 33,387 
Flight equipment and rotables
3,825 195 
Leasehold improvements36,369 31,086 
Construction in progress18,367 4,339 
146,093 116,649 
Less: accumulated depreciation and amortization
72,027 62,991 
$74,066 $53,658 
The following table sets forth a summary of depreciation and amortization expense related to property, plant and equipment:
Three Months Ended September 30,
Nine Months Ended
September 30,
2023202220232022
(In thousands)
Spaceline operations$1,516 $ $1,516 $ 
Research and development436 395 2,897 2,896 
Selling, general and administrative1,334 1,819 5,310 5,085 
$3,286 $2,214 $9,723 $7,981 
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VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(5) Leases
The components of expense related to leases are as follows:
Three Months Ended September 30,
Nine Months Ended
September 30,
2023202220232022
(In thousands)
Operating lease cost$3,382 $2,553 $8,992 $6,622 
Variable lease cost1,559 1,760 2,844 4,654 
Short-term lease cost127  139  
Finance lease cost:
Amortization of assets under finance leases
68 42 199 100 
Interest on finance lease liabilities21 11 60 20 
Total finance lease cost89 53 259 120 
Total lease cost$5,157 $4,366 $12,234 $11,396 
The components of supplemental cash flow information related to leases are as follows:
Nine Months Ended September 30,
20232022
(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)10.010.8
Finance leases (in years)3.22.8
Weighted average discount rates:
Operating leases12.1 %12.1 %
Finance leases12.9 %11.3 %
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VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements

The supplemental balance sheet information related to leases is as follows:
September 30, 2023December 31, 2022
(In thousands)
Operating Leases:
Long-term right-of-use assets$59,570 $48,463 
Short-term operating lease liabilities$4,139 $3,020 
Long-term operating lease liabilities69,592 56,645 
Total operating lease liabilities$73,731 $59,665 

Right-of-use assets are presented in other non-current assets and lease liabilities are presented in other current liabilities and other long-term liabilities in the accompanying condensed consolidated balance sheets.

(6) Accrued Liabilities
The components of accrued liabilities are as follows:
September 30, 2023December 31, 2022
(In thousands)
Accrued compensation$29,418 $26,554 
Accrued manufacturing sub-contractor and contract labor costs6,059 19,398 
Other accrued expenses14,411 15,896 
$49,888 $61,848 
(7) Convertible Senior Notes
On January 19, 2022, the Company completed an offering of $425 million aggregate principal amount of 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, beginning on August 1, 2022. The 2027 Notes mature on February 1, 2027 unless earlier repurchased, redeemed or converted.
The net carrying value of the 2027 Notes is as follows:
September 30, 2023December 31, 2022
(In thousands)
Principal$425,000 $425,000 
Less: unamortized debt issuance costs7,662 9,280 
Net carrying amount$417,338 $415,720 
During each of the three months ended September 30, 2023 and 2022, the Company recognized $3.2 million of interest expense on the 2027 Notes, including $0.5 million of amortized debt issuance costs.
During the nine months ended September 30, 2023 and 2022, the Company recognized $9.6 million and $8.9 million of interest expense on the 2027 Notes, respectively, including $1.6 million and $1.5 million of amortized debt issuance costs, respectively.
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VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(8) Income Taxes
Income tax expense was $53,000 and $21,000 for the three months ended September 30, 2023 and 2022, respectively. Income tax expense was $215,000 and $69,000 for the nine months ended September 30, 2023 and 2022, respectively. The effective income tax rate was nil for three and nine months ended September 30, 2023 and 2022. The effective tax rate differs from the U.S. statutory rate primarily due to a full valuation allowance against net deferred tax assets where it is more likely than not that some or all of the deferred tax assets will not be realized.
(9) Stockholders' Equity
In August 2022, 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" and collectively, the "Agents") providing for the offer and sale of up to $300 million of 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 "2022 ATM Program").
The Company 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, the Company entered into a distribution agency agreement with the Agents providing for the offer and sale of up to $400 million of 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 2023 ATM Program and 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, 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 $2.9 million in underwriting discounts, commissions and other expenses.
(10) Earnings Per Share
The following table presents net loss per share and related information:
Three Months Ended September 30,Nine Months Ended
September 30,
2023202220232022
(In thousands, except per share amounts)
Basic and diluted:
Net loss$(104,604)$(145,554)$(398,353)$(349,332)
Weighted average common shares outstanding375,853 263,907 316,198 260,255 
Basic and diluted net loss per share$(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.
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VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(11) Stock-Based Plans and Compensation
Equity Incentive Plans
The Company maintains two equity incentive plans -- the Amended and Restated Virgin Galactic Holdings, Inc. 2019 Incentive Award Plan (the "2019 Plan") and the Virgin Galactic Holdings, Inc. 2023 Employment Inducement Incentive Award Plan (the "Inducement Plan").
Pursuant to the 2019 Plan, the Company has the ability to grant incentive stock options and non-qualified stock options, restricted stock awards, stock appreciation rights, restricted stock units ("RSUs") and other stock or cash-based awards to employees and other service providers 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-Based Compensation
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. PSOs are stock options that vest based on achievement of specified performance criteria.
A summary of the components of stock-based compensation expense included in the condensed consolidated statements of operations and comprehensive loss is as follows:
Three Months Ended September 30,Nine Months Ended
September 30,
2023202220232022
(In thousands)
Stock option and PSO expense:
Spaceline operations$282 $ $282 $ 
Research and development318 596 1,343 2,020 
Selling, general and administrative1,181 2,113 4,200 6,022 
      Total stock option and PSO expense1,781 2,709 5,825 8,042 
RSU and PSU expense:
    Spaceline operations1,545  1,545  
    Research and development1,579 2,756 6,587 8,400 
    Selling, general and administrative5,858 6,045 21,641 18,046 
      Total RSU and PSU expense8,982 8,801 29,773 26,446 
      Total stock-based compensation expense$10,763 $11,510 $35,598 $34,488 
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VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
As of September 30, 2023, the Company had unrecognized stock-based compensation expense of $4.4 million for stock options, which is expected to be recognized over a weighted-average period of 0.9 years. Unrecognized stock-based compensation expense as of September 30, 2023 for RSUs and PSUs totaled $49.8 million and $6.7 million, respectively, which are both expected to be recognized over a weighted-average period of 1.1 years.
(12) Fair Value Measurements
The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The 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: 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 following tables present the Company's financial assets that are recorded at fair value on a recurring basis, segregated among the appropriate levels within the fair value hierarchy:
September 30, 2023
Level 1Level 2Level 3Total
(In thousands)
Assets:
Money market$235,364 $ $ $235,364 
U.S. treasuries302,721   302,721 
Corporate bonds 516,456  516,456 
Total assets at fair value$538,085 $516,456 $ $1,054,541 
December 31, 2022
Level 1Level 2Level 3Total
(In thousands)
Assets:
Money market$249,249 $ $ $249,249 
Certificates of deposit41,727   41,727 
U.S. treasuries79,517   79,517 
Corporate bonds 557,591  557,591 
Total assets at fair value$370,493 $557,591 $ $928,084 
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VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
The following tables present the Company's financial liabilities that are recorded at amortized cost, segregated among the appropriate levels within the fair value hierarchy:
September 30, 2023
Level 1Level 2Level 3Total
(In thousands)
Liabilities:
2027 Notes$ $156,532 $ $156,532 
Total liabilities at fair value$ $156,532 $ $156,532 
December 31, 2022
Level 1Level 2Level 3Total
(In thousands)
Liabilities:
2027 Notes$ $193,439 $ $193,439 
Total liabilities at fair value$ $193,439 $ $193,439 
(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 LeasesFinance Leases
(In thousands)
2023 (for the remaining period)$2,854 $78 
202412,423 247 
202512,771 218 
202612,882 167 
202712,601 52 
Thereafter77,395 20 
Total payments130,926 782 
Less: present value discount/imputed interest57,195 142 
Present value of lease liabilities$73,731 $640 
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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, 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 the 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 the Company and certain of its current and former officers and directors on behalf of a putative class of investors who purchased the Company's common stock between July 10, 2019 and October 14, 2021.
The amended complaint alleges, among other things, that the Company and certain of its current and former officers and directors made false and misleading statements and failed to disclose certain information regarding the safety of the 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. The 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 reconsider its August 8, 2023 order and to certify an interlocutory appeal, or in the alternative to enter a final judgment. The motion was fully briefed as of October 10, 2023. The Company intends to continue to vigorously defend against this matter.

Spiteri, Grenier, Laidlaw, St. Jean, and D. Abughazaleh derivatively on behalf of the Company vs. Certain Current and Former Officers and Directors
On February 21, 2022, March 1, 2022, September 21, 2022, and December 13, 2022, four alleged shareholders filed separate derivative complaints purportedly on behalf of the Company against certain of its 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, 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.
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VIRGIN GALACTIC HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(14) Supplemental Cash Flow Information
Nine Months Ended September 30,
20232022
(In thousands)
Supplemental disclosure of cash flow information:
Cash payments for:
Income taxes
$533 $34 
Interest10,625 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 vested8,740 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.
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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 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” section of our Annual Report on Form 10-K 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
Virgin Galactic Holdings, Inc. is 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, 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 have also leveraged our knowledge and expertise in manufacturing spaceships to occasionally perform engineering services for third parties.
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 and development activities.
Following the launch of commercial 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. 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.”
Customer Demand
We 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, 2023, we had reservations for spaceflights for approximately 800 future astronauts. In August 2021, 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. As of September 30, 2023, the tickets sold represent approximately $207 million in expected future spaceflight revenue upon completion of spaceflights.
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Available Capacity and Annual Flight Rate
We commenced our commercial operations with VSS Unity and VMS Eve, which together comprise our current spaceflight system. As a result, our annual flight rate will be constrained by the availability and capacity of this spaceflight system. To reduce the capacity constraint associated with having only one spaceflight system, we are currently developing 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 are dedicating significant engineering resources to the work that precedes production of the future fleet. Simultaneously, we are focused on the flight consistency of Unity and Eve to bring our customers to space and to demonstrate the value of our product.
Safety Performance of Our Spaceflight System
Our spaceflight system 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 system meets rigorous quality standards. However, our spaceflight system 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 spaceflight revenue.
Components of Results of Operations
Revenue
Following the commercial launch of our 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 amount of revenue from Future Astronaut community membership fees and events, as well as engineering services for 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 our vehicles, such as rocket motors and spare parts; the consumption of rocket motors, fuel and other consumables; costs to maintain and support our Future Astronaut community; and costs to provide payload cargo and 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 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 will 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 motherships, as well as allocated facilities and other supporting overhead costs.
Selling, General and Administrative
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.
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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.
Three Months Ended September 30,
Nine Months Ended
September 30,
2023202220232022
(In thousands)
Revenue$1,728 $767 $3,991 $1,443 
Operating expenses:
Spaceline operations25,648 590 26,200 737 
Research and development44,848 97,411 241,292 211,578 
Selling, general and administrative42,218 46,113 144,020 127,820 
Depreciation and amortization3,286 2,214 9,723 7,981 
Total operating expenses116,000 146,328 421,235 348,116 
Operating loss(114,272)(145,561)(417,244)(346,673)
Interest income12,856 3,524 28,590 6,327 
Interest expense(3,221)(3,293)(9,648)(8,924)
Other income (expense), net86 (203)164 
Loss before income taxes(104,551)(145,533)(398,138)(349,263)
Income tax expense53 21 215 69 
Net loss$(104,604)$(145,554)$(398,353)$(349,332)

For the Three and Nine Months Ended September 30, 2023 Compared to the Three and Nine Months Ended September 30, 2022
Revenue
Three Months Ended September 30,$
Change
%
Change
Nine Months Ended September 30,$
Change
%
Change
2023202220232022
(In thousands, except %)
Revenue$1,728 $767 $961 125 %$3,991 $1,443 $2,548 177 %
Revenue for the three months ended September 30, 2023 was primarily attributable to revenue generated from our commercial spaceflights and membership fees related to our Future Astronaut community. Revenue for the three months ended September 30, 2022 was primarily attributable to membership fees related to our Future Astronaut community.
Revenue for the nine months ended September 30, 2023 was primarily attributable to revenue generated from our commercial spaceflights and membership fees related to our Future Astronaut community. Revenue for the nine months ended September 30, 2022 was primarily attributable to membership fees related to our Future Astronaut community, as well as the performance of engineering services.




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Spaceline Operations
Three Months Ended September 30,$
Change
%
Change
Nine Months Ended September 30,$
Change
%
Change
2023202220232022
(In thousands, except %)
Spaceline operations$25,648 $590 $25,058 nm$26,200 $737 $25,463 nm
Following the launch of commercial service and achievement of technological feasibility, we began presenting the operating expenses supporting our commercial spaceline activities as spaceline operations expense in the accompanying condensed consolidated statements of operations and comprehensive loss.
Spaceline operations expense for the three and nine months ended September 30, 2023 were primarily attributable to costs to maintain and operate our spaceflight system; non-capitalizable costs to build our new vehicles and manufacture items required to support the making of our vehicles, such as rocket motors and spare parts; and costs to maintain and support our Future Astronaut community.
Spaceline operations expense for the three months ended September 30, 2022 were primarily attributable to costs to maintain and support our Future Astronaut community. Spaceline operations expense for the nine months ended September 30, 2022 were primarily attributable to costs to maintain and support our Future Astronaut community and labor costs incurred in connection with engineering services.
Research and Development
Three Months Ended September 30,$
Change
%
Change
Nine Months Ended September 30,$
Change
%
Change
2023202220232022
(In thousands, except %)
Research and development$44,848 $97,411 $(52,563)(54)%$241,292 $211,578 $29,714 14 %
Research and development expenses decreased from $97.4 million for the three months ended September 30, 2022 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
2023202220232022
(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 to $42.2 million for the three months ended September 30, 2023. The decrease was primarily driven by a $3.8 million decrease in compensation and other employee benefit costs, a $2.5 million decrease in consulting costs, and a $1.1 million decrease in stock-based compensation. These decreases were partially offset by a $4.5 million increase in marketing and promotion costs.
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Selling, general and administrative expenses increased from $127.8 million for the nine months ended September 30, 2022 to $144.0 million for the nine months ended September 30, 2023. The increase was primarily driven by a $7.9 million increase in compensation and other employee benefit costs, a $5.3 million increase in marketing and promotion costs, a $2.0 million increase in software and other information and technology costs, and a $1.8 million increase in stock-based compensation.
Depreciation and Amortization
Three Months Ended September 30,$
Change
%
Change
Nine Months Ended September 30,$
Change
%
Change
2023202220232022
(In thousands, except %)
Depreciation and amortization$3,286 $2,214 $1,072 48 %$9,723 $7,981 $1,742 22 %
Depreciation and amortization expense increased from $2.2 million for the three months ended September 30, 2022 to $3.3 million for the three months ended September 30, 2023, an increase of $1.1 million due to the acquisition of property, plant and equipment.
Depreciation and amortization expense increased from $8.0 million for the nine months ended September 30, 2022 to $9.7 million for the nine months ended September 30, 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
2023202220232022
(In thousands, except %)
Interest income$12,856 $3,524 $9,332 265 %$28,590 $6,327 $22,263 352 %
Interest income increased from $3.5 million for the three months ended September 30, 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 bearing accounts, as well as higher interest rates.
Interest income increased from $6.3 million for the nine months ended September 30, 2022 to $28.6 million for the nine months ended September 30, 2023. This increase was primarily driven by higher investment returns on marketable securities and higher interest rates on deposits in interest bearing accounts.
Interest Expense
Three Months Ended September 30,$
Change
%
Change
Nine Months Ended September 30,$
Change
%
Change
2023202220232022
(In thousands, except %)
Interest expense$3,221 $3,293 $(72)(2)%$9,648 $8,924 $724 %
Interest expense was $3.2 million for three months ended September 30, 2023 and $3.3 million for the three months ended September 30, 2022. Interest expense consists of interest expense and amortization of debt issuance costs related to our convertible senior notes.
Interest expense increased from $8.9 million for nine months ended September 30, 2022 to $9.6 million for the nine months ended September 30, 2023. This increase was primarily driven by a full nine months of interest expense and amortization of debt issuance costs related to our convertible senior notes in 2023.
Income Tax Expense
Income tax expense was immaterial for the three and nine months ended September 30, 2023 and 2022. 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 is primarily related to corporate income taxes for our operations in the United Kingdom, which operates on a cost-plus arrangement.
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Liquidity and Capital Resources
As of September 30, 2023, we had cash, cash equivalents and restricted cash of $269.1 million and marketable securities of $819.2 million. Our principal sources of liquidity have come from sales of our common stock and offering of convertible senior notes ("2027 Notes").
Historical Cash Flows
Nine Months Ended September 30,
20232022
(In thousands)
Net cash provided by (used in):
Operating activities$(352,884)$(248,999)
Investing activities(196,545)(322,639)
Financing activities475,863 455,968 
Net decrease in cash, cash equivalents and restricted cash
$(73,566)$(115,670)
Operating Activities
Net cash used in operating activities was $352.9 million for the nine months ended September 30, 2023, and consisted primarily of $398.4 million of net losses, adjusted for non-cash items, which primarily included stock-based compensation expense of $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, and consisted primarily of $349.3 million of net losses, adjusted for non-cash items, which primarily included stock-based compensation expense of $34.5 million and depreciation and amortization expense of $8.0 million, as well as $46.1 million of cash provided from changes in operating assets and liabilities.
Investing Activities
Net cash used in investing activities was $196.5 million for the nine months ended September 30, 2023, and consisted of $873.0 million in purchases of marketable securities and $25.9 million in capital expenditures, partially offset by $702.3 million in proceeds from maturities and calls of marketable securities.
Net cash used in investing activities was $322.6 million for the nine months ended September 30, 2022, and consisted of $604.9 million in purchases of marketable securities and $12.3 million in capital expenditures, partially offset by $294.6 million in proceeds from maturities and calls of marketable securities.
Financing Activities
Net cash provided by financing activities was $475.9 million for the nine months ended September 30, 2023, and consisted primarily of net cash proceeds from the sale and issuance of common stock of $479.0 million, partially offset by tax withholdings paid for net settled stock-based awards of $3.0 million.
Net cash provided by financing activities was $456.0 million for the nine months ended September 30, 2022, and consisted primarily 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 $98.4 million, partially offset by the purchase of the capped call related to the 2027 Notes of $52.3 million and tax withholdings paid for net settled stock-based awards of $3.5 million.
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, carrier aircraft and rocket motors in connection with commercialization;
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hire additional personnel in manufacturing operations, testing programs, maintenance operations and guest services as we increase the volume of our spaceflights;
scale up required operational facilities, such as hangars and warehouses; and
establish our astronaut campus in New Mexico
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 of carrier aircraft 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 August 2022, 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 $300 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 "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 entered into a distribution agency agreement with the Agents providing for the offer and sale of up to $400 million of 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, we sold 62.4 million shares of common stock under the 2023 ATM Program and 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.
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, including the construction of additional spaceships and motherships, expansion of our footprint at Spaceport America in New Mexico, construction of our astronaut campus and payment of the principal amount of our convertible senior notes as they become due. We expect to generate revenue from our spaceflight program, which commenced with our first commercial spaceflight, 'Galactic 01,' in late 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 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.”
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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. 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 referred 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.
During the fiscal quarter ended September 30, 2023, 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 2022 Annual Report on Form 10-K.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
During the fiscal quarter ended September 30, 2023, there were no significant changes to our market risks compared to those previously disclosed in Part II, Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" included in our 2022 Annual Report on Form 10-K.
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, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
As 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.
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Except as otherwise disclosed, there were no changes in our internal control over financial reporting during the three months ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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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 c