Virgin Orbit Holdings, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

9 Months Ended

Sep. 30, 2022

The Company leases offices and other facilities and certain manufacturing and office equipment under long-term, non-cancelable operating and finance leases. Some leases include options to purchase, terminate, or extend for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised. The Company does not recognize ROU assets and lease obligations for short-term leases.

The components of lease expense related to leases for the period are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(In thousands)
Lease Cost:
Operating lease expense	$	222	$	784	$	2,050	$	2,168
Short-term lease expense	$	1,302	$	719	$	2,594	$	2,447
Finance lease cost:
Amortization of right-of-use assets	$	69	$	64	$	232	$	192
Interest on lease obligations	6		6		20		19
Total finance lease cost	75		70		252		211
Total lease cost	$	1,599	$	1,573	$	4,896	$	4,826

The components of supplemental cash flow information related to leases for the period are as follows:


	Nine Months Ended September 30,
	2022			2021

	(In thousands)
Cash flow information:
Cash paid for amounts included in the measurement of lease obligations for the period ended:
Operating cash flows for operating leases	$	2,011		$	2,018
Operating cash flows for finance leases	$	20		$	19
Financing cash flows for finance leases	$	227		$	187

Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	549		$	1,632
Finance leases	$	528		$	—
Termination of right-of-use asset, net	$	1,300		$	—

Other information:
Weighted average remaining lease term:
Operating leases (in years)	8			8
Finance leases (in years)	2			1

Weighted average discount rates:
Operating leases	11.6		%	11.0		%
Finance leases	5.4		%	5.4		%

The supplemental condensed consolidated balance sheet information related to leases for the period is as follows:


	As of
	September 30, 2022		December 31, 2021
	(In thousands)
Finance leases
Long-term right-of-use assets	$	564	$	252

Short-term finance lease liabilities	$	288	$	258
Long-term finance lease liabilities	302		79
Total finance lease liabilities	$	590	$	337

Operating leases
Long-term right-of-use assets	$	12,748	$	14,433

Short-term operating lease liabilities	$	1,167	$	1,384
Long-term operating lease liabilities	12,498		13,999
Total operating lease liabilities	$	13,665	$	15,383

Lease Obligations

The Company has several non-cancelable operating leases primarily related to the lease of its manufacturing and testing facilities. These leases generally contain renewal options for periods ranging from 2 to 10 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 of 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 capital lease payments as of September 30, 2022 are as follows:


	Operating Leases		Finance Leases

	(In thousands)
2022	$	670	$	89
2023	2,745		270
2024	2,792		206
2025	2,308		78
2026	2,766		—
Thereafter	9,803		—
Total payments	$	21,084	$	643
Less:
Imputed interest/present value discount	(7,419)		(53)
Present value of lease liabilities	$	13,665	$	590

Leases

The components of lease expense related to leases for the period are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(In thousands)
Lease Cost:
Operating lease expense	$	222	$	784	$	2,050	$	2,168
Short-term lease expense	$	1,302	$	719	$	2,594	$	2,447
Finance lease cost:
Amortization of right-of-use assets	$	69	$	64	$	232	$	192
Interest on lease obligations	6		6		20		19
Total finance lease cost	75		70		252		211
Total lease cost	$	1,599	$	1,573	$	4,896	$	4,826

The components of supplemental cash flow information related to leases for the period are as follows:


	Nine Months Ended September 30,
	2022			2021

	(In thousands)
Cash flow information:
Cash paid for amounts included in the measurement of lease obligations for the period ended:
Operating cash flows for operating leases	$	2,011		$	2,018
Operating cash flows for finance leases	$	20		$	19
Financing cash flows for finance leases	$	227		$	187

Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	549		$	1,632
Finance leases	$	528		$	—
Termination of right-of-use asset, net	$	1,300		$	—

Other information:
Weighted average remaining lease term:
Operating leases (in years)	8			8
Finance leases (in years)	2			1

Weighted average discount rates:
Operating leases	11.6		%	11.0		%
Finance leases	5.4		%	5.4		%

The supplemental condensed consolidated balance sheet information related to leases for the period is as follows:


	As of
	September 30, 2022		December 31, 2021
	(In thousands)
Finance leases
Long-term right-of-use assets	$	564	$	252

Short-term finance lease liabilities	$	288	$	258
Long-term finance lease liabilities	302		79
Total finance lease liabilities	$	590	$	337

Operating leases
Long-term right-of-use assets	$	12,748	$	14,433

Short-term operating lease liabilities	$	1,167	$	1,384
Long-term operating lease liabilities	12,498		13,999
Total operating lease liabilities	$	13,665	$	15,383

Lease Obligations


	Operating Leases		Finance Leases

	(In thousands)
2022	$	670	$	89
2023	2,745		270
2024	2,792		206
2025	2,308		78
2026	2,766		—
Thereafter	9,803		—
Total payments	$	21,084	$	643
Less:
Imputed interest/present value discount	(7,419)		(53)
Present value of lease liabilities	$	13,665	$	590