3D Printing Financials: Velo3D Makes Killer Q4 Earnings

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Claiming to be the fastest-growing company in the metal additive manufacturing (AM) industry, Velo3D (NYSE: VLD) reported one of its strongest quarterly results in history. The California-based business revealed revenue for the fourth quarter of 2022 was $30 million, a 56% sequential increase against the previous quarter. On a year-over-year basis, the fourth quarter and annual revenues rose 200%, positioning the total revenue for the year at $81 million.

Sequential year of sale revenue improvement was driven by an increase in system volume, a higher average selling price due to a more favorable transaction mix resulting from record Sapphire XC shipments, and an increase in deferred payment transactions compared to the third quarter of 2022. On a year-over-year basis, revenue growth reflected higher annual system sales, specifically a significant increase in the sales of the company’s Sapphire XC system compared to the fiscal year 2021, as well as the growth in support service and recurring payment revenue resulting from an increase in the company’s installed base.

Customers have also been one of the critical drivers of growth for Velo3D. The business has significantly expanded its customer footprint from its initial reliance on the space vertical to include markets such as energy, aviation and defense, contract manufacturing, and other industrial applications. As a result, customers outside the space segment now constitute 75% of the customer base, a global diversification trend that will continue in 2023.

However, in 2022, revenue from system sales was heavily weighted toward space applications, driven primarily by the sale of nine Sapphire XC systems to a single space customer (most likely SpaceX due to its longstanding history with Velo3D), along with the procurement of machine fleets by other space customers, such as Lockheed Martin, Launcher (acquired by Vast), and Hermeus.

Four of Launcher’s Orbiter engines, additively manufactured with Velo3D’s technology. Four of Launcher’s Orbiter engines are additively manufactured with Velo3D technology. Image courtesy of Velo3D/Launcher.

Committed to profitability

Velo 3D said it recorded a net income of $22.6 million for the quarter after booking a net loss of $14.42 million a year earlier. However, the adjusted EBITDA for the three months ended December 31, 2022, recorded a loss of $14.4 million, reflecting a minimal gain year-over-year. These results prove the company is on a steadfast path toward profitability, especially with Q4 bookings of $15 million and a backlog of $43 million.

“Our primary focus for this year is driving profitability and improving cash flow. We will accomplish this through a combination of growth, margin expansion, and spending reduction initiative,” said Velo3D CEO Benny Buller during an earnings call with investors. “We have significantly outpaced our peer group since the first quarter of 2021. This outperformance reflects not only strong customer demand for our technology but also our ability to rapidly scale our business and production operations.”

Velo3D CEO Benny Fuller gave the opening keynote at Additive Manufacturing Strategies (AMS) event in New York. Image courtesy of 3DPrint.com.

Last year, Velo3D also grew its customer base by more than 50% and was expected to add a significant number of new customers in 2023. Much of this growth is a direct result of Velo3D’s technology which enables customers to print parts that are not possible with legacy AM, explains Buller. This capability fundamentally changes how the aerospace, defense, energy space, and other industrial segments design and produce their most critical parts. We are also the only metal AM company to offer fully integrated hardware, software, and a comprehensive printing platform that provides customers with scalable manufacturing solutions.

Reflecting on the company’s financial performance, Senior Research Analyst with Lake Street Capital Markets Troy Jensen said Velo3D showed the “strongest growth in the additive space.”

Buller pointed out a “massive untapped global market opportunity for high-value 3D metal printed parts” and that the laser powder bed fusion market could be the fastest-growing segment in 3D printing. As Velo3D gets ready to face what it describes as an “increasing acceptance of metal 3D printing technology for volume production” across many applications, it ramped up the manufacturing of its Sapphire 1MZ and Sapphire XC 1MZ systems in the last quarter of 2022, with three shipments.

Improved supply chain conditions are great news for the metal 3D printer manufacturer. In its previous third-quarter earnings post, it reported that supply chain disruptions had significantly limited the availability of specific key system components, especially system-level electronics, delaying the production of its Sapphire XC 1MZ. In addition, this headway in the production cycle times of Velo3D’s Sapphire XC system is essential as it directly impacts gross margin, which was 6% for the quarter, sturdy progress compared to the previous quarter’s negative 1% gross margin.

As the largest build volume of any laser powder bed fusion printer from Velo3D, the new Sapphire XC 1MZ significantly expands part build volume up to ten cubic feet with parts as tall as one meter. This capacity is ideal for manufacturing large parts, especially in the aerospace and energy segments.

Sapphire XC 1MZ 3D printer The Sapphire XC 1MZ 3D printer from Velo3D. Image courtesy of Velo3D.

The plan

As far as 2023 goes, management expects revenue growth to be above 50%, given the strong demand trends exiting 2022. Velo3D is confident that its revenue will oscillate between $25 and $28 million in the first quarter of the year (primarily supported by existing backlog) and expects total revenue for the year to be between $120 million and $130 million. Guidance for the year also anticipates a gradual reduction in labor costs, including a selective hiring freeze, reduced attrition, and less spending for certain employee specifics. Despite ongoing recession fears, experts say the job market remains stronger than expected as job openings return to normal.

However, there have been general mass layoffs, and the constant turnover remains high. Velo3D is not quite swinging toward that trend, but the hiring freeze and the lack of replacements for departing employees could be significant. To reduce operating expenses, the business will also implement several programs to reduce discretionary expenses across the company.

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