Velo3D, Inc., a leading additive manufacturing technology company for mission-critical metal parts, today announced financial results for its fiscal second quarter ended June 30, 2023.
“Our second quarter results reflect strong execution as we expanded our global footprint, improved manufacturing cycle times through our efficiency initiatives and prudently managed our costs,” said Benny Buller, CEO of Velo3D. “Demand for our industry leading technology remains strong as we booked a record amount of new customer orders during the quarter and exited Q223 with a growing pipeline across a diverse set of industries. In particular, we continued to expand our presence in the defense vertical while maintaining our leading position as a preferred supplier to the global space industry. However, despite these positive demand trends, second quarter bookings came in below plan, primarily due to delays in booking certain orders, which will impact our second half revenue forecast. As a result, we now expect our fiscal year 2023 revenue to be in the range of $105 million to $115 million. Importantly, our path to profitability remains clear and with the announcement of our registered direct offering of $70 million of senior secured convertible notes, we believe we have strong liquidity to reach our goal of sustained profitability.
“Operationally, manufacturing cycle times continue to improve for our Sapphire XC and Sapphire XC 1MZ systems. As these systems have become the majority of our quarterly shipments, we are now seeing the benefits of scale in our production processes. This scale, combined with the continued improvement in materials costs and manufacturing efficiency, has enabled us to improve our gross margin in the second quarter. We also remain committed to managing our expense structure and expect to materially reduce our operating costs in the second half of the year.
“Finally, we continue to execute on our 2023 strategic priorities and our focus for the balance of the year continues to be on margin expansion, reducing our manufacturing and operating costs and improving cash flow. We are excited about the future as demand for our industry leading technology remains high as customers continue to look to Velo3D to manufacture the critical, high value metal parts they need.”
Summary of Second Quarter 2023 results
Revenue for the second quarter was $25.1 million, an increase of 28% year over year. Compared to the second quarter of 2022, Year of Sale revenue[1] improvement was driven by a higher average selling price due to higher transaction pricing and a more favorable Sapphire XC system product mix. On a sequential basis, Year of Sale revenue declined slightly due to lower transaction pricing and lower maintenance and other part sales. Support service and recurring payment revenue of $1.9 million was in line with the second quarter of 2022 as the increase in support service revenue resulting from a larger installed base was offset by a decrease in recurring payment revenue due to a one-time charge and expiration and buyouts of system leases.
Gross margin for the second quarter was 11.9%, up 100 basis points sequentially. Printer sales margin increased approximately 400 basis points to 14.9% due to improved material and production efficiency. This improvement was partially offset by higher service support costs and a one-time charge affecting recurring payment revenue. The company expects further improvement in its material costs through the end of 2023.
Operating expenses for the second quarter were $28.7 million compared to $27.0 million in the first quarter of 2023. The increase in operating expenses was driven by a $1.9 million increase in research and development primarily related to material costs for a new product development program. Both sales and marketing and administrative costs were in line with company expectations. Non-GAAP operating expenses, which excludes stock-based compensation expense of $6.5 million, was $22.2 million. The company remains committed to reducing its operating expenses in the second half of 2023.
Net loss for the quarter was $23.2 million and reflected a gain of $2.7 million on the fair value of warrants and contingent earnout liabilities. Non-GAAP net loss, which excludes, among other items, the gain on fair value of warrants and contingent earnout liabilities as well as stock-based compensation expense, was $19.3 million in the three months ended June 30, 2023. Adjusted EBITDA for the quarter, excluding the same metrics, was a loss of $17.5 million. For more information regarding the company’s non-GAAP financial measures, see “Non-GAAP Financial Information” below.
The company ended the quarter with a solid balance sheet with $47 million in cash and investments. Net cash flow for the quarter was in line with forecasts and the company expects sequential improvement in cash flow through the balance of the year.
Guidance
The company expects third quarter year-over-year revenue growth in excess of 27%. However, due to the delay in Q2 bookings signings, the company now expects 2023 revenue to be in the range of $105-$115 million compared to its previous guidance of $120 – $130 million.
For the third quarter of 2023, the company expects the following:
- Revenue in the range of $25 million to $29 million
- Gross margin in the range of 14% to 18%, assuming no non-recurring charges
For the fiscal year 2023, the company’s updated guidance is as follows:
- Revenue in the range of $105 million to $115 million
- Gross margin in the range of 14% to 18%, assuming no non-recurring charges – with gross margin of 21% to 25% in the fourth quarter of 2023
- Continued improvement in quarterly cash flow for the balance of 2023
The company will host a conference call for investors this afternoon to discuss its second quarter 2023 at 1:30 p.m. Pacific Time. The call will be webcast and can be accessed from the Events page of the Investor Relations section of Velo3D’s website at ir.velo3d.com.
