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Virgin Orbit pauses operations for a week, furloughs nearly entire staff as it seeks funding

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Richard Branson’s Virgin Orbit, with a rocket under the wing of a modified Boeing 747 jetliner, takes off for a key drop test of its high-altitude launch system for satellites from Mojave, California, July 10, 2019.
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Mike Blake | Reuters

Virgin Orbit is furloughing nearly all its employees and pausing operations for a week as it looks for a funding lifeline, people familiar with the matter told CNBC.
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Shares of Virgin Orbit fell roughly 31% in after-hours trading from its Wednesday close of $1.01 a share. The stock has slid steadily from its debut of near $10 a share in December 2021.

Company executives briefed staff on the situation in an all-hands meeting at 5 p.m. ET on Wednesday, according to people who were in the meeting. The furlough is unpaid, though employees can cash in PTO, with only a small team continuing to work. Virgin Orbit is also moving up payroll by a week to Friday.

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In the all-hands, company leaders told employees that they aimed to provide an update on the furlough and funding situation by next Wednesday or Thursday, according to the people, who asked to remain anonymous to discuss internal matters.

Virgin Orbit did not respond to CNBC’s requests for comment, but told Reuters that the company is starting an “operational pause,” and expects to give “an update on go-forward operations in the coming weeks.”

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The rocket-building company developed a system that uses a modified 747 jet to send satellites into space by dropping a rocket from under the aircraft’s wing mid-flight. But the company’s last mission suffered a mid-flight failure, with an issue during the launch causing the rocket to not reach orbit and crash into the ocean.

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When Virgin Orbit reported third-quarter results in early November, it disclosed cash on hand of $71.2 million as of the end of the quarter. In the face of $30.9 million in revenue, Virgin Orbit reported an adjusted EBITDA loss of $42.9 million for the period as it continued to burn cash.

Since the fourth quarter, the company has steadily brought in funds in the form of debt via an investment arm of Richard Branson’s Virgin Group. The company raised $25 million in an unsecured convertible note in November, before raising $20 million and $10 million in senior secured convertible notes in December and February, respectively. The notes give Branson’s parent company “first-priority” to Virgin Orbit’s assets.

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As of Wednesday, the company had yet to announce when it would report fourth-quarter 2022 results.

Earlier this week, Virgin Orbit CEO Dan Hart last-moment canceled a scheduled appearance on a panel during a space industry conference in Washington, D.C. set for Tuesday.

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GameStop stock soars after retailer posts first quarterly profit in two years

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GameStop posts first quarterly profit in two years, shares surge
GameStop on Tuesday posted a quarterly profit for the first time in two years, finishing out its fiscal year on a high note in the holiday quarter after grappling with sales declines, inventory woes and cash flow pressure.

Shares of the company soared more than 45% during after-hours trading.

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For the quarter ended Jan. 28, net sales dropped slightly to $2.23 billion from $2.25 billion in last year’s fourth quarter. The video game retailer also posted a profit of $48.2 million, or 16 cents a share, compared to a loss of $147.5 million, or 49 cents, a year ago.

GameStop did not provide financial guidance and has not done so since the early days of the pandemic. Its results can’t be compared with Wall Street estimates because too few analysts cover the company.

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The retailer had been working to steer itself back to profitability, and got there in part by cutting costs. Selling, general and administrative expenses came in at $453.4 million for the quarter, or 20.4% of sales, compared to $538.9 million, or 23.9% of sales, in the year-earlier period.

A GameStop store operates in a strip mall on March 16, 2023 in Chicago, Illinois.
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Scott Olson | Getty Images

CEO Matt Furlong said on an investor call the company is going into 2023 with further plans to cut excess costs including in European markets, where it has already exited and begun to pull out of some countries. He said that GameStop is also considering bolstering its business with higher margin categories such as toys.

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GameStop had previously been riding some short-term, meme-stock momentum, but that has since leveled out and the company has made progress in right-sizing its business by cleaning up its inventory levels and reworking its cost structure.

The stock closed trading on Tuesday at around $18 per share, down dramatically from its 52-week high of nearly $50 about a year ago.

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GameStop’s turnaround plan was reinvigorated by a leadership shake-up in 2021 that put Furlong, an Amazon veteran, at the helm and added Ryan Cohen, Chewy founder and former Bed Bath & Beyond activist investor, as board chair. The company also laid off staff and replaced its chief financial officer.

The retailer has been working to revamp its real estate portfolio and increase its online business as the video game industry heads in that direction.

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For the full fiscal year, GameStop saw $5.93 billion in sales, down slightly from $6.01 billion in fiscal 2021, and saw increased revenues from its collectibles category, which the retailer is banking will promote long-term growth.

Like many retailers, GameStop experienced supply chain delays that left it with a backlog of inventory after it previously tried to meet high demand. The company is still hanging on to $682.9 million in inventory, which is down from $915 million a year ago, according to its fourth-quarter balance sheet.

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As part of its revival strategy, GameStop also has been trying to improve its cash balance. This quarter, its cash and cash equivalents were $1.39 billion.

While managing the burdens of its brick-and-mortar presence, the company has also been working to find its digital identity. So far, those experiments have come with a few missteps.

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In September, it launched an ill-fated partnership with the now-bankrupt crypto exchange FTX. The companies had planned to collaborate on e-commerce marketing and GameStop was going to sell FTX gift cards in its stores. Two months later, GameStop tweeted that it would be “winding down” the partnership and refunding anyone who had purchased an FTX gift card in its stores.

In addition, the company has been experimenting with an NFT marketplace since July. That launch came amid chatter of a “crypto winter” as cryptocurrencies experienced a widespread cooldown from their 2021 rallies. The marketplace saw an initial volume surge but has since leveled off and may not be the ticket to a stable digital presence the company had hoped it would be.

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Still, Furlong said on a call with investors that compared to 2021, when many “predicted we were heading for bankruptcy,” the company is better positioned.

“GameStop is a much healthier business today than it was at the start of 2021,” he said.

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Nike’s holiday quarter plagued by bloated inventory, weak China sales

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People wearing protective face masks walk past the closed Nike store on 5th Avenue, during the outbreak of the coronavirus disease (COVID-19), in New York City, May 11, 2020.
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Mike Segar | Reuters

Nike easily beat Wall Street’s expectations for its holiday quarter earnings and revenue, though its bloated inventory continued to weigh on its margins and China sales fell short of expectations.
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Nike, like other retailers, has been in the process of offloading a glut of inventory brought on by supply chain disruptions and shifting consumer demands that’s been weighing on its margins.

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Gross margins were down to 43.3% for the quarter, a decrease of 3.3 percentage points, due to higher markdowns and promotions its used to liquidate its inventory.

While Nike CEO John Donahoe told investors last quarter he believes the company is past its inventory peak, the company warned gross margins were expected to take a hit during the holiday quarter.

Inventories were up 16% compared with the year ago period at $8.9 billion, which the company attributed to higher product input costs and elevated freight expenses.

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Here’s how the sneaker giant performed in its third fiscal quarter of 2023 compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

  • Earnings per share: 79 cents vs. 55 cents expected
  • Revenue: $12.39 billion vs. $11.47 billion expected

The company’s reported net income for the three-month period that ended Feb. 28 was $1.2 billion, or 79 cents per share, compared with $1.4 billion, or 87 cents per share, a year earlier.

Sales rose to $12.39 billion, up 14% from $10.87 billion a year earlier.

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Nike has been looking to see a sales rebound in China, its third-biggest market by revenue, as the region recovers from the Covid pandemic. But those hopes failed to materialize. Sales were down 8% in the region during the third quarter to $1.99 billion, despite the end of China’s zero-Covid policy that had weighed on operations.

Wall Street analysts had anticipated sales in the region of $2.09 billion, according to StreetAccount estimates.

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Sales in China have been soft as consumers contended with sweeping lockdowns and rising infections. While some activity has begun to pick back up, consumers aren’t back to pre-pandemic shopping levels just yet, according to a Citi research note.

Outside China, Nike saw double-digit sales increases in all of its other markets. Sales in North America were up 27% and in Europe, Middle East and Africa, revenue jumped 17% compared with the year-ago period. In Asia Pacific and Latin America, sales were up 10%.

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A lot of money is on the line for women’s pro soccer in the U.S.

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OL Reign forward Sofia Huerta (11) and Portland Thorns FC forward Sophia Smith (9) battle for the ball during a NWSL match between the Portland Thorns and the OL Reign on March 18, 2022 at Lumen Field in Seattle, WA.
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Jeff Halstead | Icon Sportswire | Getty Images

The National Women’s Soccer League’s eleventh season kicks off Saturday, and investors will be paying close attention to the league to see whether it can capitalize on all of the changes that Commissioner Jessica Berman made during her first year on the job.
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Last year was transformative for women’s professional soccer, as Berman took the helm of an organization that had been plagued with problems ranging from accusations of emotional and sexual abuse and sexism, and an overall lack of confidence in the league.

The NWSL hired Berman, who was a labor lawyer at Proskauer Rose for 13 years, in March 2022, from her role as deputy commissioner of the Premier Lacrosse League. Her biggest priorities? Restore faith in women’s soccer and grow the business.

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Since then, the commissioner has made changes to not only drastically transform the culture of the league but also supersize the business through its infrastructure, staffing and rules. Sports Business Journal named her the “Best Hire of the Year” for 2022. 

It’s all led to a pivotal moment for the league, as it looks to add more teams and its media deal is up for grabs. Then, this summer, the FIFA Women’s World Cup will put the league’s talent on display – about 25% to 30% of NWSL’s players will travel to Australia and New Zealand for the tournament.

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At the moment, the league has momentum. Berman told reporters Tuesday that business is strong and ticket sales are rising.

“Attendance and ticket sales are really the rocket fuel that will grow this league,” she said. “We’re up 20% in season ticket holders on a league-wide basis.”

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Building on a strong year

More than 1 million fans attended matches last year, the league said, as nearly every market grew following the pandemic. Attendance was up about 80% in 2022, while ticketing revenue grew more than 125%, according to NWSL.

Sponsorship revenue also surged 87% last year, Berman said. The league averaged 37 sponsorship deals per team, which is more than any other women’s sport, according to sports data and intelligence platform Sponsor United. The league also plans to expand to 14 teams from 12 beginning next year.

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The NWSL just signed a deal to bring soccer back to Utah with a new ownership group in a deal reportedly worth between $2 million and $5 million, a major bargain that had been part of a deal negotiated in 2020, before team valuations started to soar.

The league is also in advanced discussions to further expand in San Francisco for 2024, followed by Boston, which is launching “later,” both with a whopping $50 million franchise tag, according to The Wall Street Journal.

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Women’s pro soccer valuations are also soaring. It used to take a few million dollars to get in on the league. Today, Angel City FC, based in Los Angeles, is valued at $100 million, according to Sportico.

NWSL commissioner Jessica Berman speaks during the 2023 NWSL Draft at the Pennsylvania Convention Center on January 12, 2023 in Philadelphia, Pennsylvania. (Photo by Tim Nwachukwu/Getty Images)

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Tim Nwachukwu | Getty Images Sport | Getty Images

Athletes, celebrities and investors all want a piece of the action. Big name investors include everyone from Eli Manning, Kevin Durant, Sue Bird, Natalie Portman and Jennifer Garner.

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“I think, if anything that we’ve learned in the last 11 months, which is that the market will tell us our value so long as we give it the appropriate opportunity to produce that value. And everything that I’ve seen, has validated that,” Berman said.

The league is busy looking for new ownership groups in Chicago and Portland after a yearlong investigation. Portland Thorns owner Merritt Paulson and Chicago Red Stars owner Arnim Whisler both announced in December, they would be selling their teams.

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Berman said the vetting stages for new ownership groups in Chicago and Portland are in “advanced stages,” and they aren’t going to set an “artificial deadline.” She said it’s about putting the right person in place who is not just well resourced but also willing to invest in the club to provide a professional environment.

“The old ways of doing business are probably no longer applicable,” Berman said. “We’re not going to close deals in 30 to 60 days. We’re dealing with really sophisticated people who appropriately have questions,” she added.

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Berman says they are not looking for the quick win when it comes to ownership, rather finding the right partner.

“We’re looking to go from a mentality of surviving to thriving,” she said. “I think all of that requires a changes in mentality, culture and expectations.”

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As part of that transformation, Berman and the league are investing heavily.

The league recently moved its headquarters to Madison Avenue in New York from Chicago. It is also beefing up staff, doubling the number of people in the league office in order to support all the new initiatives they are working on. Berman said multiple teams have doubled or tripled their investment into staffing as well.

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“These little things actually matter in terms of having people feel professional and valued,” she said.

In January, ahead of the NWSL draft, Berman outlined major updates to the salary cap. Each team will see a 25% increase from $1.1 million per year in 2022 to $1.375 million in 2023.

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Media deal up for grabs

Viewership for NWSL matches also rose 30% last year on Paramount +.

Last year’s championship, which aired in primetime thanks to sponsor Ally Financial upping its financial commitment, was the most-watched game in league history, with a 71% increase in viewership. Paramount+ said it was the most streamed NWSL matched ever, even though it was up against Game 1 of the World Series and a college football game between rivals Michigan and Michigan State.

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These metrics should come in handy as the league’s three-year, $4.5 million deal with Paramount Global, which also owns CBS, is set to expire at the end of the new season.

Berman said she’s had robust conversations about the rights, and said there are several interested parties.

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“We think that there are some really interesting opportunities here and overseas to consider as we think about growing our brand globally and really claiming our space as the best league in the world,” she said.

The league also announced a recent partnership with EA Sports to feature NWSL players and clubs in EA Sports FIFA game for the first time ahead of a new season.

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Culture change

OL Reign forward Megan Rapinoe (15) scores on a penalty kick during the second half of the National Womens Soccer League game between NJ/NY Gotham FC and OL Reign on September 21, 2022 at Red Bull Arena in Harrison, New Jersey.

Rich Graessle | Icon Sportswire | Getty Images

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The NWSL’s culture is under the microscope, as well.

The league is implementing major reforms – from new mandatory training sessions, the addition of anonymous hotlines, player surveys, safety officers, mental health benefits and more.

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The league was involved in a yearlong investigation after two former players came forward and accused longtime coach Paul Riley of sexual harassment. Sally Yates, a former top Justice Department official, conducted her own investigation, as well. The reports confirmed the allegations of systemic abuse, sexual misconduct and found “widespread misconduct” in more than half of the league’s teams.

Berman took swift action following the findings, making changes in personnel, putting new infrastructure in place to prevent future problems and issuing massive fines to the offending teams. The NWSL permanently banned Riley and three other coaches who were accused of misconduct. Riley has denied the accusations.

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“The teams are really welcoming of the increased focus and support in this area knowing that it is really sort of table stakes as we think about the growth of the league,” Berman said.

Berman spent much of her first year as commissioner on a “listening tour,” meeting with players, coaches and executives to hear “first-hand experiences” and what needs to change.

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Today, Berman hopes the new changes and protections will position the league for success.

Berman said she’s heard from players that they are tired from the burdens of having to carry some of weight of culture challenges and reforms.

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“I think it’s their hope that we the league and through ownership and management can really take on the burden and work behind the scenes to offer the playing environment that meets the standard that I’ve committed to, which is a place that makes the players proud to play,” Berman said.

Reports finds systemic abuse in women's professional soccer league



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