Virgin Orbit Has Run Out of Money
Formed not long ago in 2017 as a spin-off of Richard Branson’s Virgin Galactic, Virgin Orbit was meant to be the future of accessing space. The design featured an air-launched two-stage rocket capable of delivering 300 kg of payload to low Earth orbit. Unfortunately for the company, it was just reported that they are going out of business.
CEO Dan Hart announced the news during an all-hands meeting of the company yesterday afternoon. Around 90% of the entire Virgin Orbit workforce will be laid off, putting the significance of this news in perspective. The main reason has to do with a lack of funding and the most recent mission. Earlier this year LauncherOne failed to reach orbit despite a nominal drop from the aircraft.
This put extra stress on a company already struggling to stay afloat. Here I will go more in-depth into the recent update on this event, everything we know about Virgin Orbits’ future, why this happened, and more.
The End of Virgin Orbit
Earlier this month we began to see the state that Virgin Orbit was in. Specifically, around two weeks ago Virgin Orbit temporarily halted operations and furloughed most of its employees as it looked for funding, according to media reports. At the time it was reported that Virgin Orbit would be standing down for a week, “with only a small team continuing to work,” In Virgin Orbit’s most recent quarterly earnings report, which it issued last November, the company disclosed an operating loss of $50.5 million, with just $71 million cash on hand. That’s why Virgin Orbit was looking for ways to deal with a cash-flow issue.
The company had raised around $60 million in four tranches from Virgin Investments Limited (VIL) since November, all in the form of loans with interest rates as high as 12%. The most recent funding of around $5 million, came late this February. The loans are secured by Virgin Orbit’s assets, giving VIL “first-priority security interest” to those assets, including its Boeing 747 aircraft. For the most part, the company said very little publicly about those loans, other than confirming statements in the Securities and Exchange Commission filings that the funds would go towards working capital.
This leads us to today and the events that took place yesterday. “Unfortunately, we’ve not been able to secure the funding to provide a clear path for this company,” Hart said Thursday, according to Sheetz, who obtained audio of the meeting. “We have no choice but to implement immediate, dramatic, and extremely painful changes.” About a week ago, the company was in discussions with Matthew Brown, a Texas venture capital investor who claimed to have invested in more than 13 space-related companies, although he was not a familiar name in the industry. Brown said in an interview with CNBC March 23 he was in “final discussions” with Virgin Orbit that he expected to close within a day. That investment was reported to be worth up to $200 million. However, the deal fell through several days later. Virgin Orbit worked to find another investor but, as of March 30, no deals were found.
Based in Long Beach, California, at its founding in 2017, Virgin Orbit had more than 300 employees led by president Dan Hart, a former vice president of government satellite systems at Boeing. The company from which it was spun off, Virgin Galactic, continued to focus on two other capabilities: human suborbital spaceflight operations and advanced aerospace design, manufacturing, and testing.
A few months prior to going public, Virgin Orbit was owned by Richard Branson’s Virgin Group and the Emirati state-owned Mubadala, which had invested about $1 billion in Virgin Orbit through August 2021. In August when the SPAC merger was announced, Virgin Orbit estimated it needed $420 million in cash, starting in the second half of 2021, to reach positive cash flow in 2024. When it went public in December 2021, after completing its SPAC merger, the company raised $228 million, less than half than the $483 million it expected to raise. Virgin Orbit held an “opening bell” ceremony at Nasdaq on January 7, 2022 to celebrate going public; it opened at $10 per share. The stock is currently trading around 20 cents per share. As far as the company’s workers, Virgin Orbit will provide a severance package to all of the employees who will be let go, Hart said during Thursday’s all-hands meeting.
LauncherOne Failure
In addition to a lack of funding over the past few months, the other big influencing factor was the most recent launch failure. On January 9th 2023, during the first attempted orbital launch from the United Kingdom, Virgin Orbit’s LauncherOne experienced an anomaly, leading to a premature shutdown of the rocket and failure to reach orbit. Virgin Orbit began its investigation into the failure within hours of the conclusion of the mission. The failure investigation team received immediate access to extensive telemetry data collected during the mission from the ground stations in the UK, Ireland, and Spain, as well as systems onboard its carrier aircraft, providing a robust dataset that the investigation team has thoroughly examined.
The mission successfully executed pre-flight preparations, carrier aircraft takeoff, captive carry flight, and rocket release. The ignition, first stage flight, stage separation, second stage ignition, and fairing deployment of the LauncherOne rocket were all nominal. However, the data indicated that from the beginning of the second stage first burn, a fuel filter within the fuel feedline had been dislodged from its normal position. Additional data shows that the fuel pump that is downstream of the filter operated at a degraded efficiency level, resulting in the Newton 4 engine being starved for fuel. Performing in this anomalous manner resulted in the engine operating at a significantly higher than rated engine temperature. Components downstream and in the vicinity of the abnormally hot engine eventually malfunctioned, causing the second stage thrust to terminate prematurely. The early thrust termination ended the mission, and the second stage and its payloads fell back to Earth, landing in the approved safety corridor in the Atlantic Ocean.
The failed payload included nine satellites from seven different customers. This was Virgin Orbit’s first attempted launch from the UK at Spaceport Cornwall. A Virgin Orbit mission is quite unique and is meant to start with take off of a Boeing 747-400 aircraft named Cosmic Girl. The next step is rocket deployment. Depending on the orbital trajectory of the mission, the plane will travel anywhere between 30 minutes and four hours before reaching the deployment zone. At cruising altitude of around 35,000 feet, their chief pilot hits the Big Red Button that releases the rocket from the pylon. From here they commence the first stage burn. LauncherOne is angled skyward at about 27° at the moment of release. After a 4-second freefall, the first stage engine, NewtonThree, bursts to life, accelerating the rocket to more than 8,000 miles per hour. Once its fuel is spent, the first stage detaches.
With LauncherOne now between 310 to 745 miles above the Earth’s surface, NewtonFour kicks off a series of burns to circularize its orbit. The fairing pops open, exposing the payload as it nears its destination. Finally, with very precise timing, the second stage ejects the satellite into its final orbit. Atmospheric drag will eventually pull the second stage back down to Earth, where it burns up in the atmosphere.
In a quote following the failed mission, Hart said, “In space launch, a failure is painful for all involved. Intense disappointment gets quickly channeled into the motivation to dig into the cause, to understand all contributing elements and to thereby get back to flight with a better system and a wiser team. Our investigation is not yet complete; the team is hard at work and we’ll pursue the cause and contributors to wherever the system analysis takes us. However, with many clear clues from extensive data assessment now understood, we are modifying our next rocket with a more robust filter and we are looking broadly to assure that all credible contributors to mission failure are rooted out and addressed. With those modifications being incorporated on our factory floor, we will proceed cautiously toward the launch of our next rocket, which is well into the integration and test process.” This was said around February which explains the forward thinking despite the situation ahead of the company. Unfournteatly, it’s very unlikely that we see another Virgin Orbit launch in the future.
Focusing more on past funding and how Virgin Orbit got to its current state, when the SPAC merger was announced in August 2021, Virgin Orbit aimed to be profitable on an EBITDA-basis by 2024. The company said it had about $300 million in active contracts, and expected its rocket launch business to grow to about 18 launches in 2023. The company expected to have about $15 million in revenue in 2021, with a loss of $156 million; however, it aimed at further revenue growth, reaching $2.1 billion in revenue by 2026. The company’s third-quarter financial report, issued in November 2022, showed cash on hand of $71.2 million, $30.9 million in revenue, and an adjusted EBITDA loss of $42.9 million for the period. The company’s backlog of binding contracts fell by 12%, to $143 million, compared to the end of the prior quarter, and forecast that it would only have three launches in 2022, compared to a forecast of four to six, made earlier in 2022. This downward trajectory combined with recent events was enough to truly put the company under.
Conclusion
Virgin Orbit will soon lay off close to 90% of its work force as it halts operations for the foreseeable future. With no big investors interested in throwing more money at the company, they are forced to close shop and move on. We will have to wait and see how it progresses and the impact it has on the space industry.