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Virgin Orbit to expand launch business, move into satellite services

COLORADO SPRINGS — Virgin Orbit will use the proceeds of a merger with a special-purpose acquisition company to expand its launch business and develop a satellite constellation for internet-of-things and Earth observation services.

Virgin Orbit announced Aug. 23 that it will merge with NextGen Acquisition Corp. II, a SPAC, in a deal expected to close at the end of this year. The deal includes a concurrent $100 million funding round backed by Boeing and AE Industrial Partners, providing Virgin Orbit with as much as $483 million in capital before transaction expenses.

Greg Summe, co-founder of NextGen, said in an investor call that he established the SPAC earlier this year to “find a high-growth technology company with a rapidly growing market, highly differentiated capability and an outstanding leadership team. We have found the perfect partner in Virgin Orbit.”

In a presentation released by Virgin Orbit Aug. 23, the company projected increasing its revenue by a factor of more than 100 over the next five years. The company estimates $15 million in revenue in 2021 but forecasts double- and triple-digit percentage growth through 2026, reaching $2.06 billion.

The majority of that revenue would come from its current launch business, using its LauncherOne rocket that is air-launched from a Boeing 747. About 40% of the proceeds of the deal would go toward scaling up production of the LauncherOne system, including investments in advanced manufacturing capabilities.

Summe and Dan Hart, chief executive of Virgin Orbit, emphasized the advantages of air launch during the investor call. “Our approach gives us tremendous efficiency,” Hart said, and provides advantages from reduced environmental impacts to being able to operate from many airports.

In both the presentation and the call, they also claimed that LauncherOne was cheaper than its competitors. Hart said that his company offers “the lowest cost per kilogram in the market,” but did not disclose a specific cost number. Virgin Orbit had been widely seen in the industry as more expensive that some of its competitors who offer small launch vehicles, while SpaceX has offered a low-cost option — $1 million for 200 kilograms, or $5,000 per kilogram — for smallsat rideshare payloads.

While neither Hart nor Summe discussed details of LauncherOne development, the company plans to spend 35% of the proceeds of the deal on research and development, such as launch upgrades. The investor presentation briefly outlined a “future technology development roadmap” that includes upgrades to the rocket to roughly double its payload performance to 500–600 kilograms. The company is studying an upper stage and orbital transfer vehicle as well as evaluating the ability to recover and reuse the first stage.

The presentation also included a concept called LauncherTwo, with a rocket mounted on top of the 747 rather than under its left wing like LauncherOne. The vehicle included wings and larger tail fins. That vehicle, Virgin Orbit said, offers “potential tripling of meaningful performance increase.”

Virgin Orbit’s ambitions go beyond more and larger launch vehicles. The company says it will establish a “space solutions” business, developing and launching a constellation of satellites to provide IoT and Earth observation services. Virgin Orbit foresees providing IoT services for the agriculture, aviation, maritime and pipeline monitoring markets and a “complete multimodal offering” of visible, infrared and radar imagery.

The company plans to launch its first four satellites in early 2023, two with IoT payloads and two with imagery payloads. That would be followed by a “full constellation thereafter,” but it didn’t disclose the size of the constellation or when it would be deployed.

Virgin Orbit projects its first space solutions revenue in 2023 at $10 million, growing to $436 million in 2026, or more than 20% of its total revenue forecast for that year.

Those high growth projections for both space solutions and launch services are required to be profitable. The company estimates it will have negative earnings before interest, taxes, depreciation, and amortization (EBITDA) of $155 million in 2021. It expects to near break-even in 2023 and have a positive EBITDA of $229 million in 2024, growing to $854 million in 2026.

In the presentation, Virgin Orbit estimates it will need about $420 million in cash from the second half of 2021 through 2023 to reach profitability. The company expects that, after expenses from the SPAC deal, it will net $418 million. However, that figure could decrease if NextGen shareholders elect to redeem their shares rather than participate in the merger, an issue seen in SPAC mergers both inside the space industry and in other industries in recent months.

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