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Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

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Equity Bottom-Up

<h2>KEY POINTS</h2>
<ul>
<li>Virgin Orbit CEO Dan Hart sees the company as “well positioned to execute on multiple launches with a diverse set of customers and geographies. This includes the first ever space launch from the United Kingdom, which is made possible by our flexible launch capabilities.”</li>
<li>The advantages of Virgin Orbit’s operational air-launched satellite launch systems allowed it to fly three launches with 100% mission success since January 2021, carrying 26 satellites to space serving all key customer groups. It also penned agreements with Arqit Quantum, Astroscale Holdings, NASA, and ANA Holdings for upcoming launches.</li>
<li>With six launches planned for 2022, including the first ever launch from the UK, targeting this summer, Virgin Orbit looks to make its proprietary air-launch technology a disruptive force in the small satellite launch business. The plans are for two launches from Cornwall, England, and four from Mojave, California.</li>
<li>Virgin Orbit’s design advantages over all its competitors include: (1) quickly launching from anywhere at any time, (2) higher reliability as evidenced by its commercial launch records and simpler propulsion system (two engines vs. up to as many 11 engines on competitors, (3) lower cost, weather flexibility, and longer-range capabilities, and (4) significantly lower environmental impact. No other provider can offer these capabilities, leading to markets that only VORB can service including quick-response military requests.</li>
<li>Virgin Orbit estimates that more than 50% of its 2022 forecast revenue is already accounted for by active contracts. Its binding and non-binding backlog was $575.0 million, an increase of over 500% from $86.0 million at the end of 2020. The company has $2.3 billion in identified opportunities and $1.3 billion in active proposals. The long-term nature of its launch contracts, and its customer wins in 2021, give it enough confidence to publicly forecast a 5-year CAGR of 166%.</li>
<li>The company’s comparables include space-based companies of a similar size and growth rate. Its comps have an average 2025 EV/EBITDA of 6.6x, while VORB is trading at 4.7x, a 29% discount. Rocket Lab is the only small launch competitor to have also reached regular commercial operations, making it the best comp, but its 2025 EBITDA margin is projected to be 22%, while Virgin Orbit’s is expected to be 32%.</li>
</ul>

KEY POINTS

Virgin Orbit CEO Dan Hart sees the company as “well positioned to execute on multiple launches with a diverse set of customers and geographies. This includes the first ever space launch from the United Kingdom, which is made possible by our flexible launch capabilities.”
The advantages of Virgin Orbit’s operational air-launched satellite launch systems allowed it to fly three launches with 100% mission success since January 2021, carrying 26 satellites to space serving all key customer groups. It also penned agreements with Arqit Quantum, Astroscale Holdings, NASA, and ANA Holdings for upcoming launches.
With six launches planned for 2022, including the first ever launch from the UK, targeting this summer, Virgin Orbit looks to make its proprietary air-launch technology a disruptive force in the small satellite launch business. The plans are for two launches from Cornwall, England, and four from Mojave, California.
Virgin Orbit’s design advantages over all its competitors include: (1) quickly launching from anywhere at any time, (2) higher reliability as evidenced by its commercial launch records and simpler propulsion system (two engines vs. up to as many 11 engines on competitors, (3) lower cost, weather flexibility, and longer-range capabilities, and (4) significantly lower environmental impact. No other provider can offer these capabilities, leading to markets that only VORB can service including quick-response military requests.
Virgin Orbit estimates that more than 50% of its 2022 forecast revenue is already accounted for by active contracts. Its binding and non-binding backlog was $575.0 million, an increase of over 500% from $86.0 million at the end of 2020. The company has $2.3 billion in identified opportunities and $1.3 billion in active proposals. The long-term nature of its launch contracts, and its customer wins in 2021, give it enough confidence to publicly forecast a 5-year CAGR of 166%.
The company’s comparables include space-based companies of a similar size and growth rate. Its comps have an average 2025 EV/EBITDA of 6.6x, while VORB is trading at 4.7x, a 29% discount. Rocket Lab is the only small launch competitor to have also reached regular commercial operations, making it the best comp, but its 2025 EBITDA margin is projected to be 22%, while Virgin Orbit’s is expected to be 32%.


2021 Saw Revenue Up 92%, Backlog Grow 6x, Numerous New Clients, and Multiple Successful Launches

<h2>KEY POINTS</h2>
<ul>
<li>Virgin Orbit CEO Dan Hart highlighted the advantages of its operational air-launched satellite launch systems at the Deutsche Bank Media, Internet &amp; Telecom Conference yesterday. Hart also pointed to the company’s 100% mission success rate—even in relatively bad weather, the lower costs, and the responsiveness the military needs.</li>
<li>With six launches planned for 2022, including the first ever launch from the UK, targeting this summer, Virgin Orbit looks to make its proprietary air-launch technology a disruptive force in the small satellite launch business. The plans are for two launches from Cornwall, England, and four from Mojave, Ca.</li>
<li>Virgin Orbit’s design advantages over its competitors include: (1) quickly launching from anywhere at any time, (2) higher reliability as evidenced by its commercial launch records and simpler propulsion system (two engines vs. up to as many 11 engines on competitors), (3) lower cost, weather flexibility, and longer-range capabilities, and (4) significantly lower environmental impact. No other provider can offer these capabilities, leading to markets that only VORB can service.</li>
<li>The company operates in three markets and its $72 billion TAM is part of a growing $1.1 trillion space economy. Its markets include: (1) Small-Satellite Launch Market—$25 billion TAM in commercial, civil, and national security launches, primarily targeting low Earth orbit; (2) Space-Based Connectivity Market—$30 billion TAM in specialized Internet-of-Things (IoT) applications like ship management, pipeline monitoring, intelligent agriculture, and connected aircrafts; and (3) National Security Market—$17 billion TAM in missile defense and hypersonic applications.</li>
<li>Virgin Orbit says that over 50% of its 2022 forecast revenue is already accounted for by active contracts. The company has $2.3 billion in identified opportunities and $1.3 billion in active proposals. The long-term nature of its launch contracts, and its customer wins in 2021, give it enough confidence to publicly forecast a five-year CAGR of 166%.</li>
<li>The company’s comparables include space-based companies of a similar size and growth rate. The comps have an average 2025E EV/EBITDA of 6.2x while VORB is trading at 3.9x, a 38% discount. Rocket Lab is the only small launch competitor to have also reached regular commercial operations, making it the best comp, but it has a projected 2025 EBITDA margin of 22% while Virgin Orbit’s is expected to be 32%.</li>
</ul>
<h2>COMPANY OVERVIEW</h2>
<p>Virgin Orbit has developed a proprietary air-launch technology coupled with outstanding manufacturing infrastructure and a proven team to transform space access for a diverse and global customer base. Since its founding in 2017, Virgin Orbit has developed the world’s first air-launched, liquid-fueled launch system, making it the premier dedicated satellite launch service.</p>
<p>The company’s second successful launch, conducted on June 30, 2021, delivered satellites for commercial and national security customers from the US and abroad directly into their target orbits. In January 2021, the company debuted its launch capability by successfully launching satellites for NASA.</p>
<p>Virgin Orbit uses a customized 747 aircraft as a mobile launch site, a flying mission control, and a fully reusable first-stage vehicle. By beginning each mission at approximately 35,000 feet above sea level and already travelling at a high speed, the simple and reliable LauncherOne rocket achieves a significant performance advantage over grounded launch sites while reducing local carbon emissions and acoustic impacts at the launch site when compared to a traditional ground launch.</p>
<p>The mobility of the system also allows Virgin Orbit to bring launch capabilities to dozens of nations that currently have space agencies and satellite industries but no domestic launch capability. The company has been selected by the United Kingdom and Brazil to bring launch to those nations’ shores, in addition to Virgin Orbit’s announced launch site in Japan.</p>
<p>Virgin Orbit’s ability to launch responsively from any location around the world also gives it a valuable national security role in ensuring the resiliency and replaceability of critical satellite infrastructure assets.</p>
<p>Read all our reports on&nbsp;Virgin Orbit&nbsp;on our website.</p>
<h2>VALUATION</h2>
<h2>VORB Is Trading At a 38% Discount to Its Comps</h2>
<p>The company sees as its comparables as space-based companies of a similar size and growth rate. Its comps have an average 2025E EV/EBITDA of 6.2x, while VORB is trading at 3.9x, a 38% discount. Virgin Orbit’s projected 2025 EBITDA margin of 32% would make it significantly more profitable than Rocket Lab, with 2025E EBITDA margin of 22%. Rocket Lab is the only small launch competitor to have also reached regular commercial operations, making it the best comp.</p>
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<h2>DISCLOSURES</h2>
<p>Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.<br><br>WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.<br><br>John Roy, PhD, who is the writer of this report, covers the Technology sector for WTR. Mr. Roy, PhD and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.<br><br>Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.<br><br>WTR is being compensated for its research by the company which is the subject of this report. WTR receives no more than a maximum of $10,500 per month from a given client and is required to have at least a 6-month commitment. None of the earned fees are contingent on, and WTR’s client agreements are not cancellable for the content of its reports. WTR does not accept any compensation in the form of warrants or stock options or other equity instruments that could increase in value based on positive coverage in its reports.<br><br>WTR or an affiliate may seek to receive compensation for non-research services to covered companies, such as charges for presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services that WTR or an affiliate might offer to clients.<br><br>The manner of WTR’s research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly-written compliance guidelines.<br><br>The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors, agents or affiliate shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.<br><br>All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.</p>

KEY POINTS

Virgin Orbit CEO Dan Hart highlighted the advantages of its operational air-launched satellite launch systems at the Deutsche Bank Media, Internet &amp; Telecom Conference yesterday. Hart also pointed to the company’s 100% mission success rate—even in relatively bad weather, the lower costs, and the responsiveness the military needs.
With six launches planned for 2022, including the first ever launch from the UK, targeting this summer, Virgin Orbit looks to make its proprietary air-launch technology a disruptive force in the small satellite launch business. The plans are for two launches from Cornwall, England, and four from Mojave, Ca.
Virgin Orbit’s design advantages over its competitors include: (1) quickly launching from anywhere at any time, (2) higher reliability as evidenced by its commercial launch records and simpler propulsion system (two engines vs. up to as many 11 engines on competitors), (3) lower cost, weather flexibility, and longer-range capabilities, and (4) significantly lower environmental impact. No other provider can offer these capabilities, leading to markets that only VORB can service.
The company operates in three markets and its $72 billion TAM is part of a growing $1.1 trillion space economy. Its markets include: (1) Small-Satellite Launch Market—$25 billion TAM in commercial, civil, and national security launches, primarily targeting low Earth orbit; (2) Space-Based Connectivity Market—$30 billion TAM in specialized Internet-of-Things (IoT) applications like ship management, pipeline monitoring, intelligent agriculture, and connected aircrafts; and (3) National Security Market—$17 billion TAM in missile defense and hypersonic applications.
Virgin Orbit says that over 50% of its 2022 forecast revenue is already accounted for by active contracts. The company has $2.3 billion in identified opportunities and $1.3 billion in active proposals. The long-term nature of its launch contracts, and its customer wins in 2021, give it enough confidence to publicly forecast a five-year CAGR of 166%.
The company’s comparables include space-based companies of a similar size and growth rate. The comps have an average 2025E EV/EBITDA of 6.2x while VORB is trading at 3.9x, a 38% discount. Rocket Lab is the only small launch competitor to have also reached regular commercial operations, making it the best comp, but it has a projected 2025 EBITDA margin of 22% while Virgin Orbit’s is expected to be 32%.

COMPANY OVERVIEW
Virgin Orbit has developed a proprietary air-launch technology coupled with outstanding manufacturing infrastructure and a proven team to transform space access for a diverse and global customer base. Since its founding in 2017, Virgin Orbit has developed the world’s first air-launched, liquid-fueled launch system, making it the premier dedicated satellite launch service.
The company’s second successful launch, conducted on June 30, 2021, delivered satellites for commercial and national security customers from the US and abroad directly into their target orbits. In January 2021, the company debuted its launch capability by successfully launching satellites for NASA.
Virgin Orbit uses a customized 747 aircraft as a mobile launch site, a flying mission control, and a fully reusable first-stage vehicle. By beginning each mission at approximately 35,000 feet above sea level and already travelling at a high speed, the simple and reliable LauncherOne rocket achieves a significant performance advantage over grounded launch sites while reducing local carbon emissions and acoustic impacts at the launch site when compared to a traditional ground launch.
The mobility of the system also allows Virgin Orbit to bring launch capabilities to dozens of nations that currently have space agencies and satellite industries but no domestic launch capability. The company has been selected by the United Kingdom and Brazil to bring launch to those nations’ shores, in addition to Virgin Orbit’s announced launch site in Japan.
Virgin Orbit’s ability to launch responsively from any location around the world also gives it a valuable national security role in ensuring the resiliency and replaceability of critical satellite infrastructure assets.
Read all our reports on&nbsp;Virgin Orbit&nbsp;on our website.
VALUATION
VORB Is Trading At a 38% Discount to Its Comps
The company sees as its comparables as space-based companies of a similar size and growth rate. Its comps have an average 2025E EV/EBITDA of 6.2x, while VORB is trading at 3.9x, a 38% discount. Virgin Orbit’s projected 2025 EBITDA margin of 32% would make it significantly more profitable than Rocket Lab, with 2025E EBITDA margin of 22%. Rocket Lab is the only small launch competitor to have also reached regular commercial operations, making it the best comp.


DISCLOSURES
Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.  WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.  John Roy, PhD, who is the writer of this report, covers the Technology sector for WTR. Mr. Roy, PhD and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.  Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.  WTR is being compensated for its research by the company which is the subject of this report. WTR receives no more than a maximum of $10,500 per month from a given client and is required to have at least a 6-month commitment. None of the earned fees are contingent on, and WTR’s client agreements are not cancellable for the content of its reports. WTR does not accept any compensation in the form of warrants or stock options or other equity instruments that could increase in value based on positive coverage in its reports.  WTR or an affiliate may seek to receive compensation for non-research services to covered companies, such as charges for presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services that WTR or an affiliate might offer to clients.  The manner of WTR’s research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly-written compliance guidelines.  The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors, agents or affiliate shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.  All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.

CEO Highlights Advantages of VORB’s Air-Launched Satellite Launch System at Deutsche Conference

United States

Virgin Orbit Holdings Inc. provides satellite launching services. The Company operates space launch systems to delivered commercial, civil, national security, and international satellites into orbit. Virgin Orbit Holdings serves customers worldwide.

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Virgin Orbit Holdings (VORB US)

2021 Saw Revenue Up 92%, Backlog Grow 6x, Numerous New Clients, and Multiple Successful Launches

KEY POINTS Virgin Orbit CEO Dan Hart sees the company as “well positioned to execute on multiple launches with a diverse set of customers and...

Water Tower Research

CEO Highlights Advantages of VORB’s Air-Launched Satellite Launch System at Deutsche Conference

KEY POINTS Virgin Orbit CEO Dan Hart highlighted the advantages of its operational air-launched satellite launch systems at the Deutsche Bank...

Water Tower Research

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