Velo3D, Inc., a leading additive manufacturing technology company for mission-critical metal parts, announced financial results for its fiscal third quarter ended September 30, 2023.
“Our third quarter results reflect solid execution as we posted year over year revenue growth of 26%, significantly improved our free cash flow[1] on a sequential basis and prudently managed our operational expenses,” said Benny Buller, CEO of Velo3D. “However, while we are proud of our significant success over the last two years resulting from the increasing acceptance of our Sapphire technology, we now believe our industry leading growth has come at the expense of cash flow, profitability and our commitment to the highest level of customer service. As a result, in October 2023, we made the strategic decision to realign our operations to pivot from emphasizing top line growth to optimizing free cash flow, maximizing customer success, reducing expenditures, and improving our operational efficiency. We firmly believe that this strategy will ensure the company will have the liquidity it needs to achieve its profitability goal in 2024.
“Specifically, we expect this realignment to lower our overall cost structure by approximately 40%, by the first quarter of 2024, including reductions in operating and facilities expenses. Additionally, we have also implemented new go-to-market and service strategies to rebuild our bookings and backlog pipeline which came in below our plan for the third quarter. With the early success of these programs, we expect to resume bookings growth in the fourth quarter for fiscal year 2024 deliveries. However, given the delays in certain fourth quarter orders, as well as the impact of our realignment, we now see our fiscal year 2023 revenue to be in the range of $91 million to $103 million.
“We remain excited about the significant future opportunity for the additive manufacturing industry as companies continue to choose Velo3D to produce their mission critical, high value metal parts. With our realignment focused on free cash flow and our expected bookings growth, we believe we are well positioned to execute on a profitable growth strategy in 2024.”
|
($ in Millions, except percentages and per-share data) |
3rd Quarter 2023 |
2nd Quarter 2023 |
3rd Quarter 2022 |
|
GAAP revenue |
$24.1 |
$25.1 |
$19.1 |
|
GAAP gross margin |
7.2% |
11.9% |
(0.6%) |
|
GAAP net loss1 |
($17.1) |
($23.2) |
($75.2) |
|
GAAP net loss per diluted share |
($0.09) |
($0.12) |
($0.41) |
|
Non-GAAP net loss2 |
($18.9) |
($19.3) |
($22.5) |
|
Non-GAAP net loss per diluted share2 |
($0.10) |
($0.10) |
($0.12) |
|
Cash and Investments |
$72 |
$47 |
$113 |
Information about Velo3D’s use of non-GAAP information, including a reconciliation to U.S. GAAP, is provided at the end of this release.
- Reconciliations to U.S. generally accepted accounting principles (GAAP) financial measures are presented below under “Non-GAAP Financial Information”.
- Non-GAAP net loss and non-GAAP net loss per diluted share exclude stock-based compensation expense, fair value adjustments for the Company’s warrants, contingent earnout and debt derivative liabilities, and loss on extinguishment of debt in the three months ended September 30, 2023, June 30, 2023 and September 30, 2022.
Summary of Third Quarter 2023 results
Revenue for the third quarter was $24.1 million, an increase of 26% year over year. Compared to the third quarter of 2022, Year of Sale revenue[2] 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 primarily due to delayed shipments as well as lower transaction pricing resulting from a shift in product mix. Support service and recurring payment revenue of $2.4 million was in line with the third quarter of 2022.
Gross margin for the third quarter was 7.2%, down sequentially, primarily driven by reduced system volume, increased inventory costs as well as a lower average selling price resulting from a sequential shift in product mix. The company expects gross margin to rise in the fourth quarter, though the level of increase is dependent on the expansion of its average selling price, execution on its material reduction initiatives and improvements in its manufacturing efficiency.
Operating expenses for the third quarter were $26.7 million compared to $28.7 million in the second quarter of 2023. The decrease in operating expenses was driven primarily by a $2.6 million reduction in research and development related to the rationalization of new product development programs. Sales and marketing and administrative costs were in line with company expectations. Non-GAAP operating expenses, which excludes stock-based compensation expense of $6.7 million, was $20.0 million, down approximately 10% sequentially. The company expects non-GAAP quarterly operating expenses to decline by approximately 40% in the first quarter of 2024 compared to the third quarter of 2023 as a result of the company’s realignment programs.
Net loss for the quarter was $17.1 million and reflected a gain of $8.7 million on the fair value of warrants, contingent earnout and debt derivative liabilities. Non-GAAP net loss, which excludes, among other items, the gain on fair value of warrants, contingent earnout and debt derivative liabilities as well as stock-based compensation expense, was $18.9 million in the three months ended September 30, 2023. Adjusted EBITDA for the quarter, excluding the same metrics, was a loss of $16.3 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 $72 million in cash and investments. Free cash flow for the quarter was ahead of the company’s forecasts and the company expects sequential improvement in cash flow through the first half of 2024.
Guidance
The company expects its fourth quarter to be a transition period as it focuses on the execution of its realignment strategy. As a result of the impact of our realignment and delays in certain fourth quarter bookings, the company now expects 2023 revenue to be in the range of $91-$103 million compared to its previous guidance of $105 – $115 million. The company believes its realignment strategy will extend its ability to achieve its profitability goals in 2024, including achieving free cash flow breakeven in the second quarter of 2024.
For the fourth quarter of 2023, the company expects the following:
- Revenue in the range of $15 million to $27 million
- Gross margin in the range of 5% to 17%, excluding non-recurring charges related to its cost reduction initiatives
For the fiscal year 2023, the company’s updated guidance is as follows:
- Revenue in the range of $91 million to $103 million
- Gross margin in the range of 9% to 12%, excluding non-recurring charges related to its cost reduction initiatives
The company will host a conference call for investors this afternoon to discuss its third quarter 2023 at 2:00 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.
