3D Printing Financials: Velo3D Misses Earnings and Adjusts Full Year Guidance

Velo3D (NYSE: VLD) announced results for its third quarter and trimmed its full-year 2022 revenue guidance to between $75 million and $80 million compared to its previous guidance of $89 million. The metal 3D printer manufacturer’s new outlook takes into account shipment delays on third-quarter revenues, continuing supply chain risks in the last quarter of the year, and potential production timing risks of Velo3D’s new large-format printer, the Sapphire XC 1MZ.

Supply Chain Issues Impact Metal 3D Printer Shipments

For the fiscal third quarter, total revenue grew 119% year over year to $19.1 million but missed expectations. Velo3D CEO Benny Buller told analysts that the last quarter’s revenue was “below planned,” as supply chain disruptions limited the availability of certain key system components, especially system-level electronics.

Buller also added that once the company received the necessary parts, they arrived too late in the quarter to qualify and ship the systems on time. As a result, Velo3D couldn’t meet its production goals for the quarter. As for the last three months of the year, Buller is confident that they have secured all the parts needed for production supply.

On a sequential basis, the year of sale revenue was impacted by the system sales mix and a higher proportion of launch customer shipments than in the second quarter. This impact was partially offset by higher recurring revenue due to a greater number of systems in the field. The year-over-year improvement in revenue was primarily driven by increased system sales and a more favorable mix of Sapphire XC system sales, which increased the average selling price.

The Sapphire XC 1MZ Metal 3D Printer

Buller said on a conference call that certain challenges during the Sapphire XC 1MZ building process had affected Velo3D’s business. According to the seasoned executive, they are experiencing longer than expected production and testing cycle times for the first batch of Sapphire XC 1MZ systems, which contributed to the shipment delays in the quarter. However, the first machine has already been shipped. Buller highlighted that historically, Velo3D has seen this type of challenge with new products diminish as they run volume and game production experience and expects to overcome all of these issues by the first quarter of 2023.

Addressing investors, Buller pointed out that the demand for the new system continues to increase. At the same time, the company remains focused on efficiently scaling the Sapphire XC 1MZ production to achieve its growth-quarter shipment target. To deal with the challenges that have risen during the quarter that ended September 30, 2022, Buller and his team have identified and instituted several strategic initiatives to minimize future supply chain disruptions and improve overall production efficiency. For example, there are now a few programs in place to streamline the purchasing process and manage inventory to meet any challenges, along with reorganizing the factory floor to accelerate the production process and reduce delay.

Impact on Overall Profitability

With respect to profitability, the company reported a net loss of $75.2 million, or 41 cents per share, compared to a loss of $66.6 million, or $3.36 per share, a year ago. This reflected a loss of $47.5 million on the fair value of warrants and contingent liabilities.

Velo3D says it has $113 million in cash and investments as of the end of the quarter, down from $142 million as of June 30, 2022, and less than half of last year’s reported cash in the Q3. Still, the company believes it has the liquidity for ongoing technology investments and provides the resources needed to fund its growth plans.

“Looking forward, our initiatives for the fourth quarter and 2023 are focused on growing our output through production efficiency gains rather than increasing investment. We are making progress in these areas and expect measurable benefits from these efforts starting in the first quarter of next year,” explained Buller.

Velo3D Remains Confident

Demand for the brand’s industry-leading Sapphire family of systems remains high, and Velo3D has expanded both new and existing customer footprint during the quarter. New customer additions included two major European aerospace OEMs as well as the first sale to a strategic Fortune 100 U.S. automotive manufacturer. Also, the company saw three customers purchasing multiple systems and booked $27 million in new orders in the third quarter, with the backlog now at $66 million.

Besides, Buller expressed confidence about the firm’s “clear path to profitability” given its current capital resources and the rapidly expanding market for high-value, mission-critical metal parts, which form the core business for Velo3D. The CEO also stated that he expects to achieve profitability by leveraging top-line solid growth, focusing on rapidly accelerating production efficiency, prudent expense, working capital management, and a return to normalized pricing. As a result, we believe we are well positioned to capitalize on the rapidly expanding market for mission-critical, high-value metal parts,” concluded Buller.

Velo3D Shares Drop

Unlike what happened after Velo3D announced its impressive second-quarter earnings and saw its stock soar more than 30%, this time around, shares dropped 20% on Wednesday, November 9, to $2.87 after the AM leader reported lower earnings than analysts expected and issued a disappointing outlook for the year.

Immediately after releasing the third quarter report, Velo3D announced that it intends to file a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission (SEC) within the next ten days. Although the company has no immediate intention to conduct an offering of securities registered under the registration statement, executives consider it prudent to file the shelf registration statement as a standard corporate practice upon passing its first anniversary as a public company.