Velo3D (NYSE: VLD) initially made a significant impact with its breakthrough approach to laser powder bed fusion (LPBF) for metals, which involved controlling more variables and employing a novel recoating method to build geometries that machines from other companies could not. Following this, the firm developed larger systems and gained high-profile customers, particularly in the New Space sector. The company’s engagement in a SPAC transaction brought substantial capital, heightened visibility, and increased scrutiny.
However, as the macroeconomic environment worsened, the company faced hurdles, marked by the departure of its CEO and CFO, and including concerns about a potential sale. The company is now under the leadership of interim CEO Brad Kreger and interim CFO Bernard Chung, who are working to right the ship and power forward. We sat down with them for an interview to gain insight into their efforts.
About Velo3D’s Leadership
Brad Kreger is a seasoned manufacturing executive, with over two decades of service at Affymetrix, a pioneering DNA microarray company later acquired by ThermoFisher. He held several key positions at Affymetrix, including Director of Operations, Process Engineering, and Reagent Manufacturing. After the acquisition, he served as Director of Sequence Engineering at ThermoFisher. Following this, Kreger led operations at Standard BioTools, a life sciences testing company, before taking on a leadership role in operations at Velo3D. He eventually stepped up as the interim CEO of Velo3D.
“When I joined a year ago, Velo was experiencing massive growth, but we needed to transform our manufacturing. We had constraints and challenges in production,” Kreger told 3DPrint.com. “I led our effort to implement more processes and systems into manufacturing and the manufacturing organization. We implemented new processes for scalability and to increase efficiency. We became a quality organization.”
Bernard Chung is an experienced accountant who initially rose through the ranks to become a director at KPMG. His career includes senior roles in accounting and reporting at major corporations such as Amkor, Bechtel, Swift Transportation, and Textainer. Chung joined Velo3D as Vice President of Finance and Accounting and more recently assumed the role of the company’s interim CFO.
Adjusting Velo3D’s Cost Structure
Kreger expressed enthusiasm about the strong bookings Velo3D has achieved, though he acknowledged some initial customer hesitancy. However, he noted that customers are now regaining confidence in working with the company. Brad also emphasized a shift towards a more operational focus and value engineering, which he believes will establish a more stable foundation for Velo3D.
“Previously, supply chain issues constrained manufacturing capacity, but now this isn’t the case. Some previous partners, contract manufacturers for sub-assemblies, were not the right players for us to work with. We’ve now found the right suppliers,” Kreger explained. “We managed to harden our supply chain and improved our cost profile. Margins were also one of the things that we looked at as part of our 2023 supply chain optimization. Of course, it will take time for us to feel this as we deplete inventories. But, we’re scalable from a supply chain standpoint now.”
Kreger is optimistic about the company’s financial outlook, hoping for it to reach cash flow neutrality by the end of Q2. Additionally, Brad mentioned that there is a “line of sight to a sustainable cost structure” projected for the first half of 2024.
Drawing on his extensive experience in manufacturing complex capital equipment and scaling benchtop equipment to industrialization, Kreger believes he can significantly contribute in his current role. His primary focus is on reducing the cost profile of the firm and realigning the company with its new direction and product quality.
“There is tremendous potential, and the firm is focused on good business fundamentals, moving towards break-even,” Kreger said. “We’re committed to the verticals we’ve historically operated in and continue to land and expand customers that can have multiple system placements. But we’re also taking ourselves into new customer segments and see existing customers doubling down on us. We’re also moving further into the defense space and things like hypersonics.”
Fortunately, Brad is not alone in his endeavors at Velo3D. Bernard Chung, along with other team members, is supporting him in this journey. Chung concurs that there is a new approach being implemented at the company.
“Now, the focus is on making us cash positive instead of revenue at all costs,” Chung said. “We want to deliver value to customers and find valuable customers. We’re reducing operating expenses by 40% and will bring that down quarter to quarter. We’ve gone from four facilities to one. We’re also focusing our R&D projects on those that drive value for customers. We are creating new markets and supporting what customers need, but we also want to generate higher returns. We’re now doing better pre-qualification of customers, really finding those with the means to acquire multiple systems.”
Regarding the speculation about Velo3D potentially selling to a strategic or other partner, Kreger has indicated that while the company is open to exploring serious opportunities, “The company has tremendous potential as an independent entity with its own good business prospects, fundamentals and future. Our focus is on standalone operations, excellence, break even and a bright future.”
The new team at Velo3D appears to be navigating a prudent path forward. Assuming leadership and charting a new course amid considerable pressure is a challenging task. Velo3D’s early emphasis on reliability, repeatability, and true production capabilities positions the company advantageously as the market matures. Additionally, the adoption of a more software-like architecture should enable the company to continuously push the envelope and upgrade older machines. What do you think? Is the firm on the right track?
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