3D Printing Financials: Record Revenue & Heightened Losses for VELO3D’s Q1 2022

Velo3D (NYSE: VLD) announced mixed first-quarter earnings results on May 10, 2022, leading to a 5.2% decrease in the stock price in after-hours trading and a 12.4% drop when the stock market opened the following day. This time around, the metal 3D printer manufacturer said sales had increased more than 900% year-over-year to $12.2 million, driven primarily by high customer adoption of its Sapphire family of products. Although this is Velo3D’s third-quarter revenue increase as a public company, its net losses increased sequentially from $14.4 million in the last quarter of 2021 to $65.3 million. Even so, the company ended the period with a strong $186 million balance sheet that will provide enough liquidity for its ongoing technology investments and growth plans.

One of the key milestones during this first quarter is that Velo3D began volume production of its newest industrial metal 3D printers, the Sapphire XC. Designed as a scale-up solution to Sapphire, the new machine is not only driving demand but also accelerating the adoption of the Sapphire system, which leverages the brand’s proprietary Intelligent Fusion manufacturing technology.

Financially, Sapphire XC accounted for more than 45% of the quarter’s total revenue, and looking forward; it now accounts for more than 90% of the total backlog. Given this strong trend, Velo3D CEO Benny Buller said, “we have made the decision to expand our Sapphire XC production rate starting in the second half of the year.” Sapphire XC currently has a significant backlog which stands at about five to six months, mainly because it takes about a month to assemble, integrate, test, and ship a system, and the timeline between order and commencing production is quite variable depending on the circumstances, and how many orders are ahead. Overall, the company exited the quarter with a record total backlog of $55 million, up 17% sequentially and more than 80% year-over-year.

VELO3D Sapphire XC Metal 3D Printer. Image courtesy of VELO3D.

During the quarter, Velo3D shipped eight new systems, booked seven systems (including several new customers), and improved its 2022 visibility with more than 75% of the entire year’s revenue guidance already in the backlog. In addition, by expanding its US footprint and significant customer interest in Europe, the company is sure 2022 will bring 24 new customers in total and could double shipments to 48 by midyear.

During an earnings call with investors, Buller highlighted that “overall, we continue to see a rapidly expanding global market for high-value metal parts and remain committed to providing our customers with the technology to meet their growing AI needs (…) We believe the reliability of additive machines should reach the level of traditional subtractive milling machines over time, and we will keep investing and improving our products until we achieve this level of reliability.”

As Velo3D continues to ramp production volumes through the year and accumulate experience building Sapphire XCs, CFO Bill McCombe said they remain on track with the outlook for gross margin that was given last quarter and a 30% gross margin target by the fourth quarter of this year. Additionally, he pointed out that adjusted operating expenses for the period, excluding stock-based compensation, rose $5 million or 28% sequentially to $23.2 million, while R&D expenses rose $3.4 million due to a widening range of technology initiatives and increased personnel costs.

McCombe told investors he expects inventory to stabilize in the second half of the year, by which time they will “build a sizable inventory cushion.” On top of that, Velo3D had capital expenditures of $3 million, primarily related to the build-out of a new manufacturing facility, which was disclosed last quarter, and is now largely completed, providing the firm with the necessary capacity to meet its growth forecast.

Even though results for this quarter seem to be going according to plan, Buller told investors that supply chain issues still abided and that they had to spend a lot of time securing components. As a result, the team is working closely with suppliers directly to avoid disruptions in the procurement of critical components, especially electronic ones, to ensure its production and shipment goals.

“Velo3D is leveraging relationships with top customers to secure needed inventory. That being said, our supply chain remains an ongoing challenge, and we are maintaining higher than normal inventory as a mitigation to the risk in the supply chain. Also with the successful shift to volume production of Sapphire XC, we now have the additional resources to further optimize system performance and production quality, factors that we believe are critical for customer success and key to driving repeat orders,” suggested the CEO.

The VELO3D management at the NYSE on October 7, 2021. Image courtesy of VELO3D.

It’s been less than a year since Velo3D debuted on the New York Stock Exchange (NYSE), and the value of its shares already tumbled 64%, from $7.55 on October 7, 2021, to $2.69 on May 10, 2022. However, company management is confident that Velo3D is on track with its $89 million revenue guidance for the full year and predicts shipments are on schedule for delivery.

The executive team said they expect continued growth in Velo3D bookings rate with 2022 bookings in the range of 47 to 49 systems and its shipment guidance in the range of 47 to 49 shipments. Given the continued sales momentum, a growing backlog, strong demand for the Sapphire XC system, and solid balance sheet, the company considers it well-positioned to capitalize on significant growth opportunities in the additive manufacturing market in the years ahead.