Velo3D (VLDX) 10 Aug 222022 Q2 Earnings call transcript

Greetings and welcome to Velo3D reports Second Quarter Earnings Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] and please note that this conference is being recorded. I will now turn the conference over to Bob Okunski, Vice President of Investor Relations of Velo3D. sir. you Thank begin. I may

I’d quarter like to John. welcome to earnings conference second XXXX our call. Thanks everyone

On the balance provide call from today, strategic as we will start the on CEO the as key VeloXD, an of update Benny for out of who XXXX. summary will the a priorities quarter, well of Buller, with comments

our Benny’s XXXX financial quarter comments, our review second Bill Following and McCombe, guidance. provide then our CFO, will results

on the As be today a reminder, available website. our this replay Relations will call Investor a of of page later

XX-Q that of During regarding call. today’s well presentation, during are documents presentation, the and metrics may are these information call, certain as will and reconciliations. we non-GAAP appendix forward-looking filings. forward-looking today’s today’s as statements we appropriate earnings XXXX additional release those the our in press statements. today’s will our uncertainties Please subject that reference to make affect as for see Safe described Also, for of XX-K the well press risks those GAAP to slide release Harbor non-GAAP various to today’s as XXXX Please that refer factors QX

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our Slide welcome to to X. like second turn earnings I’d And everyone Bob. you call. quarter Thank Please to

believe the our develop continue product leading is metal look Before Customers ready into We the to they need. six context value industry put discussing to to our growth I firmly over strong by last differentiation. innovation parts produce want driven our success high quarters. being and results, quarterly our

systems. our XXXX. that There have is manufacturing driven separate for we is more significantly increasing by can reason simple for additive first of additive demand customers parts XX available is clearly when what offer same success to our legacy the quarter to revenue they to with that. our manufacturing. chart, currently down by you better see with than from you the technology industry growth than print compare a This has to market, times also We been compromises the This have the group, compared grown leading the As to a solution according over they need do been customers evident peer is research. whose context VeloXD the in had period avoiding flat enabling revenues

track the focused additive on the as peers. direct manufacturing XXXX. early our is metal a on strategy segments, market manufacturing of our this market We different that legacy possibly is share are additive we than become to result, gain largest result a to company as As end go of feel

again our Please and manufacturing. specifics and believe energy, differentiated high I changes our revenue and posted Overall, most and additive parts unique their be for to on this are our slide year-over-year turn to remain untapped opportunity massive with Our backlog capitalize existing aerospace customer with trend market technology. growth, the the of providing like execution sequential footprint. the now our committed a We QX continue to as that discuss technology manufacturing meet and maintained strong We technology way X. their our parts, expanded extremely critical other would to pleased design were customers metal global we power produced industrial and expanding segments the fundamentally legacy value additive see produce parts. with to we new results. cannot to and we well-positioned

as more remains than our very high. XX% XC Sapphire revenue customer quarter rose sequentially systems adoption the and XXX% For year-over-year of

QX million. a chain $XX million in due handful record our $XX to We despite challenges. posted booked for Sapphire We the a systems and new Demand delay of during backlog continues XC into to Sapphire grow. revenue early systems of supply customer orders the also quarter of significant both maintaining launch while

half shippable scale strong highly of and backlog of facility. second first year year-over-year bookings our growth we million new production revenue remain we results, this revenue our Sapphire at to as continue for achieving manufacturing XXXX executed we $XX a quarter confident Given Operationally, XXX%. our target rate in successfully well our

customer margin to is scale important equivalents. direct reduction a production to it gross Our as ability has correlation in

metal XXX fusion to the manufacture millimeter expanded available XXXX millimeter our leadership our launch feet. at with and XC of in are parts this during largest top cubic powder volume believe with product the we total of product world’s system is bed that up up diameter production quarter to the Finally, we this laser commercially Sapphire capability XMZ, XX the to

aerospace provide $XX this We to expect our ship seeing few the slide and of of are first and quarter high Please X. in to target systems industries. confidence now to this would from update turn a on I achieving demand our revenue our million, demonstrated like energy as product solid bookings strong XXXX quick a

As by fact I this significant previously for the year. mentioned, we our have visibility XXXX confidence that is driven

much recognized, were a area. target, by QX where $XX normally half $X as to the of have improvement booked would Overall, category by first and XXXX more is initiatives. result the addition, we time In significant Similar provides conditions In QX. in was customers be for reduction QX can than gap, recurring exiting chart at million benefit electronics ongoing in our into success, driven additive situation of to we and in quarter, forcing our choose of year. the are industry breakdown this to from detailed in XXXX for to revenue This strong performance, which needs. a a by primarily in QX leading the last and now a improvement we earlier manufacturing of to XX% daily this financial for to Sapphire bookings year the as Sapphire QX procure demand for than continue particular, revenue million us, bookings chain and XC technology expectations coming for see expect both already year. versus our needed, the systems in seven end especially our In sequentially end challenging, point this times the from cost supply very declined be we continue our challenge to length which inventory us relation our

planned. given As conditions to any we $XX ongoing year a will not supply bookings discuss, Bill our gross at are launched through solid improvement of and slower expect results, in this we will backlog, have and the initiatives half minimize our material the do a XXXX million. point, recovery strong guidance than margin this chain in in new balance iterating We activity first the In impacts. summary, of result

production call our brief turning providing drive Before initiatives to turn to profitability Bill overview long slide the and like conclude Please given to our discuss to a financials, over forecast. term our of I’d improve remarks by my efficiency X. to growth

material our costs. reducing bill First, of

mentioned successfully This of reduce a As light production, for asset we we lower costs in parts. and significant include utilize us the subcontractors an enabled our we the employ required production. to cycle for of past, has time have set strategy majority up labor scale where production,

Sapphire manufacturing a migration the this completed to for not have we chain supply contract at XC point. However,

labor in We for our currently and but parts to to This assembled system improve are spending our us key many scale without streamline our to Sapphire increasing assembly suppliers, them XC process in scale initiative to procurement leverage consolidate the efficiency. process complex are combined of of suppliers our strategy outsourcing house. of the production allow with will

first the We initiative expect of the full to benefit see in this half of XXXX. strategic

instituted planning reduce while and chain. us will to include with deliveries and minimize our inventory while manage and production procurement processes enable we time. and to working schedules. more key Second, further programs our short suppliers our inventory to Initiatives closely This capital reduce investment have integrate automate levels working maintaining lead more to our match efficiently to supply

Finally, learn further and manufacturing is our as accelerated production continuous we tied operations, lowering improvements and system production leverage instituted selling to our mistakes our to more by quickly allowing on directly to time we recently focused accelerate cost. us implement scale process. are This from effort experience reducing our in process is This quickly. overhead improvement cycle

of we and we our few focused up production scaling have on our in training team quarters in been Sapphire are the last laser investing Additionally, manufacturing. XC

that capitalize on our turn can operational reducing XD parts. As now XXXX post we growing believe improving confident investment efficiency are opportunity we forward to are Sapphire factory and These initiatives we conclusion, in invest condition. and XC this as With we strong training financials for on reach believe are maintain in quality to necessary critical to to remain executing over forecast future high about benefit I’d vision. the printing well in as efficiency. look and and to guidance. have the have profitability. our like In to and of improving strategic growth added long in be margins well-positioned discuss production drive infrastructure trajectory stabilized Bill demand to the excited a will to production our and metal We value our the overall significantly work call the We term

Benny. Thanks,

by to to sale than in XX.X our in increase an sequential up the ASPs was million for Please the XXX% quarterly shipped of XX% the more Revenue primarily The on was systems X. year-over-year. million sequentially XX.X year in Sapphire from slide of driven quarter quarter. Moving and performance, XC financial XX.X million to to number turn increase the revenue

for the including technology out declined in in of material labor QX basis reliability growth margin XX.X our liabilities. result million half line turn forecast, the now Please increased higher provide We the materials our On adjusted QX operating lease out of in to due value customer X out XX. service in X% number personnel. these spend a XXX threefold and based in are a the XXX net service pricing to our the frontloaded and continue half field. transaction million X% costs Recurring gross our and X.X in revenue gain system and costs, were margin. investments R&D excluding with up in from of up QX million overhead the gains recurring compensation a and XX had to costs the built based slightly systems Gross costs. compensation improved new increased costs Support to fair was product to reliability, XX% up to was to million line and year slide an with loss expenses costs these improvements. same basis higher warrants service of and largely the service was quarter million. of planned U.S. Europe. of XX.X a approximately expected the including substantially sale X.X income the of included we QX Adjusted to declined on also of marketing by system as and a the of gross expected loss from G&A sequentially, related expectations net for new non-GAAP to development X.X in excluding These second changes quarter. for impacted was building to excludes original X.X margins the year. the presence On for shipping products, the the from million like to X.X also quarter, earn affecting productivity at gross due to the from for revenue buyout million, QX our was XX.X elevated network which increased we increase expenses for costs process million and was update due quarter, revenue slightly to higher for million. in non-cash impacts, year. continuation costs margin QX. higher line service network second an revenue a stabilize I’d stock a stock expense to a and lease also With was million nearly million. remainder million as on than and and and of EBITDA for and quarter in year-over-year GAAP that Sales

QX I margin X%. was in As mentioned, line our gross with expectations at

chain year are shown second as margin affecting outlooks. supply have QX beginning difficult performance duration the margin timing and we current factors gross very in of slide, where some compare the the the changed experienced the and of the of expected on gross However, half conditions and

of And year. are the the First, second production with we shift total rate with now roughly these while and the a half up full in pricing change year track this on the will as spread shipments of see more as through to some impact labor launch of result overhead no our of plan. year, impact the our over cost customer the be savings scale will

and order driven environment small the XXXX scale So following ensure those at In now This expected of regards benefits. XXXX. are UN cost to we to delivery uncertainties. to availability and components our orders our order we the year reflect the was Where costs. our supply shipment and and In our of expected and production shift ahead to needs which beginning labor a safety the by we change a our only quantities plan build realize to it our the the significant see outlook current the for opportunities is saving costs, disruption significant is of materials materials building between we delayed a shortages first of The potential see account forecasts in to half delivery forecasted. an face overhead These goals, to components continued of clear to ability savings production on factors. expected for QX in material necessary chain has originally date meet deviation cushion and build in place delays. therefore of to

certain many While components in the expectations components delayed, in came of were deliveries quarter. of ahead

shipments contributing systems some of inventory addition, buildup, beyond pushed In QX. were to also further out completed

of inventory, components we acquired systems. both the which these As and until XXXX. half three pricing for supply this delayed bill at QX of and a of of used costs most of was have these for continue result two anticipated first our QX to will first previously production. of higher be materials to quarters cost material of and QX will half And will production factors, Accordingly, now the QX be savings required

to secure also components gross material impact parts on expedited to in critical to margin. our shortages needed incur goals. added to the certain addition, us we of shipping shipment building high the In required costs meet This costs

QX costs a result these our effects, being taken gross and in range the we QX margin of of of reduce margins to XX%. gross material and to a as inventory XX% steps We’ve range As number expect now QX will be the same levels.

seeing start to quarter, inventory and off continuing We decrease expect to leveling in decrease this QX. and

material We start costs expect build QX XXXX. to to in drop of

recently U.S. higher partnerships, materials return entered backlog leverage supply in confidence outlook, reduce large cost per our and commitments, to we inventory a we given Specifically, have receive term reduced and making longer and deliveries chain unit levels. into volume where scale, and spread out

of forward. year. roughly described these to We in confident ability our next expect more the in margin I’ve breakeven XXXX going to to types improvement EBITDA of challenges late remain Despite drive be and we complete deals above

XX was the very with driven increase the primarily in sheet I million for quarter ended was to a balance inventory million in balance slide working usage Turning million. cash We and second the before. we growth the the XX inventory down capital leased We manufacturing to giving to year completion come the our of our inventory million the our deliveries. capacity systems X new of the facility CapEx draw forecasts. as half necessary to staggered and CapEx meet and related was expect primarily of in stocks an QX strong on quarter very XX. XX with sheet exited XXX of described and us debt. in for down Investment Cash limited by million

QX by expect capital. to investment cash materially total be to working QX in compared We lower in a usage driven lower

to our more I’d visibility, believes a to of Please to also reflects we million the in of continues technology the fund Valley XXXX. XX new as the Finally, of Bank total confidence guidance momentum highlight like us on and revenue This now our long are would for balance outlook year, our million, for strong market like even have of a products to that credit backlog based we continue were to of our business giving of we see in revolving provide the that the that ample and Silicon performance customer facilities we recently in financing evolve the growth with term XX lease Overall, increased plan. our we from turn reiterating XX. for our first half our year slide pleased to liquidity to with significant million demand. I the growth will and trends for XX our balance year. strong total launch

higher by For by Sapphire example, is and This we’re driven the significantly unit forecasted systems. higher growth. for higher seeing offset ASPs systems forecasted XC versus Sapphire lower priced demand

We’re higher material existing model. customers versus as in our significantly customers new right a our purchase recurring our existing seeing customers from the also mix initial towards customers shift than is

for for sheet, to In strong market Finally, our to while the our backlog, year on to sales to call next efficiently goal over conclusion, questions, over scale significant Sapphire profitability demand growth years and months. we remains XC the we’re operator. opportunities maximize XX the system, well-positioned XX balance given of I growth our to capitalize manufacturing momentum, our the that what our company as the would the in see improving the focusing With continued ahead. additive for balance turn in like on solid growing

proceed we be comes question and of Brian [Operator time, from Our the you. William a session. Instructions] At line Thank with conducting with Drab first your answer Blair. question Please question. this will

couple number customers, I’m But that. number some I deck forward. change in shipments, slides level in the thanks information total are start don’t of quarter, for the A anything about just going number tell my by you give favorite the of unit slides. you here. your taking total disclose, shipments curious if in of that about in know questions. to new that there’s Hi, provided us of to a want you just not asking can my disclosure customers? I for previous wanted of of shipment,

Brian, they competitors. Most to that suppliers quite found savor in because you’re companies unique. I the is extremely they appreciate And don’t favorite slide. are our our What right. them. to They will not we are it also that are provide

sensitive, And Sorry. It we in information. etc. competitive conventional replace metrics contains very of the these bookings metrics a of lot more periods backlogs to with decided

systems? you wondering XC I’m I In say Can you shipped did XC that? more the And ship to if systems quarter, guess. than one customer? you

Yes.

You shipped customers in multiple it quarter. the to

Correct.

of Is of shipments a the the you were guess I is delayed why some in strategic a difference there the some I’m delayed. systems? said then Or And customer or weren’t? your or just flagship were orders customer some reason curious, there and

ship systems, even Yes, in bought those systems the as have the all you is, started reality systems. lot we systems, that to And we just urgent the be And to a systems need even are on more in inventory. real but for tried a more we’ll we those that ship we of of that noticed not then we so have to able urgent more were with demand large real hope we able and ship very And systems we backlog. wanted. customers

we of So the we to the that deliver bookings, couldn’t larger needed all components we significant quarter customers to just the had. even much had But in demand all the terms get we needed. we than to

customers we ship systems wanted. were unfortunately, not we the So able all that the to to launch

oversimplify that year and things then such start could these it a kind like have cores. machine manufacturing get you spring relatively XXXX compared efficiencies to I to really year all situation want loading mean, high that hard last such chain come seems parts continue like and more a the be build that The you’ve is it. don’t we where there’s loosens it. that easier it is And learned of much look how where been this this level and a couple to mean supply easy the to for get XXXX about is But there. question unusual time. lessons just my with up, the obviously Benny manufacturing hard I if the has demand to seems getting question, once a you’re where to need you been manufacture it to through you challenge I

But want right. I just one impression. correct So to you’re absolutely

do I easing getting act So supply see I visibility is do much that the together. immediately the better have see not condition chain predict we our external up. don’t to that.

the be So we specifically, to Sapphire been we we that production infrastructure and cost, suppliers, provide of XC where with have to will stabilizing production. signing attention suppliers ramping also have at as more more this are that, suppliers, in cycle allowing consolidating assemblies And we with strategic us us invest controls improve much our activities. the up quality now production time better agreements in larger much more a

our So management informed product well we also and of the of suppliers planning activities as procurement. kind the procurement and activities our as

material. execution helping dealing supply visibility all activities much combined, surprises. which if and you you get do the you get those the problems weeks will problems. see disappear supply that Unfortunately, than the it’s if the So better a of chain every new in before us material, to before you chain not But two to day, much better with much kind months, surprises better and need the you need three to get

So the crisis and are the longer chain. challenges feel at deal we more to with of in we supply as for this better we confident being getting dealing able as are that with

from line Bank America. comes Please of with the And question question. of Wamsi Mohan with next our your proceed

of taking Europe? environment just Does for on current question. geopolitical that on expected curious, how characterize conflict my the demand Wamsi. behalf ongoing demand Europe trajectory? This John that’s in going thanks I’m would you the previously Hi, change actually, the with

phases the business And the in growth of of our early very States. Europe. the So at we majority kind at are United in vast has been

on in customers the lot lot the of for a of we know kind pond. So York the there with what that of is build we dealing us. majority the credibility to is of There a of questions, us, vast mostly don’t and New need still that other fact market, the with the is side

We we European been Europe. the from in very see strong just acquiring customers, interest strong for that the take been main in long things customers the see But from a market. long. sales European driver of the has customers this first cycles have fact need So very the

have also in We recently. some successes very Europe good

the Europe I this that this is signs of, we recession, the market. and It’s is ourselves and sitting of that into dropping. in proving don’t see kind getting are we’re a on So demand traction just phase

successes the in this have are these So we market. first

know And said going account. are last Would the portion if acquisition I you Europe you will new material for mention customer the not correctly, disclose you account true? quarter, customer remember I did a of that but to information, that still hold

Yes.

just And to I headwinds, just the these margin. follow previously XX%. quick gross when speak, as margin about target initiatives, to of know a up, jump mentioned so stated beyond over you but look expect want do macro I to various reach gross offset XXXX, to to if

I initiatives help will us margin. bill material drive with the will, the So and of will that so the can, gross I down

them of will Some hit in QX.

And will QX. effect some of fully them in get into

predict XX%. So at should QX, by we would be I that,

think be will I close that, than still XX%. QX in to less think I but somewhere

through cost this Yes. way we We’ve to got work that inventory high our acquired.

rate but We and far have the XXXX begin these until materials be careful next begun the it is official P&L quarter, will more want supplied the reductions to year but this fourth cost on a or then first advance in not guesstimate. I to quarter thereabouts give reasonable deals, we think to of won’t any strategic be QX guidance but in to the really which impact partnerships, bring that do

with with from Please And comes question proceed our Co. question. your of and the Jim line Needham Ricchiuti next

XE provide did you additional as relates you, Sapphire? any the legacy backlog versus to it Thank

Sapphire the the vast backlog we and But the not a Sapphire very did breakdown. of Sapphire backlog majority and backlog But as We the XC actually as have XC vast significant is XC XMZ. Sapphire majority XC provide backlog. XC XMZ. XMZ is of well XMZ that Sapphire Sapphire

we But should on color you, it. it, the half and Thank OpEx Do but be… may margins second commentary about Benny. we to appreciate did you how I to about be any have out half? thinking gross looking provide the second need Bill, missed

increasing but service, cost we to incremental Jim, Most that of happy which to Look the is like going didn’t, margin, goods very I’m will sold. of also part flattish incremental customer part headcount. I of modest to. are and labor bulk of think be But cost we our production of gross growth.

incremental limited. labor cost pretty is So OpEx the hitting

you Are labor? material the of in any pricing components are whatnot, you seeing taking light say actions, of just and in terms

care take manufacturing the We not didn’t our customers. We why actions. is that to our action is drop price for we solution pricing the market reason did not, as going take And the believe products for our we strategic. costs increase did for and we

we and costs So to and of this mission on customers. costs to drop the our a are lower lower provide for

our So as opportunities and that that plan we for reaching for we planned on prefer opposed customers to targets increasing cost, we focus see the and for the price as dropping the that to the price.

question jump back I’ll that in. And that I last And Benny. I have, appreciate

resulting funnel being chain, you’re your for given competitors are some maybe? everyone’s challenges and building customers affected in that risk by any next the Do you well. feel supply that the as that As think backlog presumably some about year is perhaps customers just we there’s facing

Jim? are You there

as challenges customers that, secure chain of as looks building for that are the alternatives signs for just some funnel you you challenge? pretty year, supply as facing not year are you think half the next maybe is build that given any perhaps seeing at looking vendors you’re as the it well. that first Or next the backlog acute Sorry, supply are about

has about in ways. One, to in backlog it keep your into way share so answer is penetration terms easy and easy I think growing, question and effect is your of our the market question the will way the to of opposed the than serve, less keeps production our So market and Sapphire two why growing. Sapphire XX there Definitely time is customers is we is can on XC weeks our why as relatively reasons is time. lead customers. short. Sapphire to didn’t, disproportional deliver backlog one on the we that a And high to because lead The

customers the of in times weeks right system or now XX that purchase lead Sapphire is so. order Our XC for

said, basically was in weeks, this So going us, XX are to have that we for else. someone with customers long we didn’t switch too

to may that the your direct So answer. be question

helpful. very That’s

have lead reasonable. weeks, time was the If may is right lead now that But the XX been time different. very

Our line Jensen comes the of with Capital. next question. question Please Troy Instructions] your from [Operator proceed Lake with Street

Hi, on congrats quarter off here. nice gentlemen, first the

printers. I So target producing the manufacturers you maybe talked know for Ben. contract too. also I base for about your customer contract manufacturers you, you know

your you’ve penetrating traditional, kind of had that So traction customers. that

Yes.

of significant this to would to the that we of think manufacturers strong contract that market we And are go that half of to I I segment. quarters sales few contract manufacturers. about last pretty portion that see contract very going printers contract purchases. repeat So our more manufacturers. keep our see in growing manufacturers. We a in utilization we driving is estimate doing And lot

the supply growing or lot need that in parts reasons that really very instead we invest see do of strategic solid. So additive, a chain. customers, see capability vertically and made the that the And a not is one that will have for capability, to manufacturing integrated the we segment’s the of OEMs, in directive

actually additive a now a enabling those as chain play development is for empowered to of have diverse is reassuring very past. kind this we business traditional extremely the customers pure exact seen sort additive with that chain. supply of really rely to our high for a opposed chain a of in quality supply on copy That supply that is So professional scalable those customers,

you Flextronics thinking printing service right? and and bureau mean think customers. service Do the local there. for about? shop, machine players differentiate That’s that what manufacturers parts think of bureaus, I of big contract differentiate is contract a you manufacturers you Jabil out of as a do When talk when by and and between I I some I’m Benny kind

talked I I’m you our me of Yes. kind and about different. because I that do. when with asked with my our glad customers, team are this definitions slightly

lot service yes, sophisticated So contract be built print users. as $XX bureaus, and what of as like in production million me vast of me, What to to control a to companies can controls, And quality are majority And I for CNC Flextronics, capability contract actually or people XD experience and large machines a manufacturing very and that’s and companies as cases, well $XXX negligible real doing some quality experience. fleets for work amount employ be will think as that are printers. some that I manufacturers companies of CNC in production this are that this of could employing of machining cases, when million of or those Jabil is end service the with well I purposes manufacturers. bureaus have machining, life think call

really we on with the second not group So contract when the working we people of and focused group. I are are say manufacturer, first

MZ? to on now the largest mean, you’ve sure be for you And him multiple confirm XMZ, got can I’m pretty going the that I customers but the it’s customer just

The Sapphire XC Sapphire XMZ? or XMZ

XC. The

XC quarter. of it ordered Okay We customers. XMZ announced the last And has been will of quarter. a first number be this shipments by system

The first customer. next then two will And few customers. shipments quarter for be will be same more to the

work. Well, keep congrats the the good and up on results good

of I’ll end the now we time, the over have this Benny remarks. Buller any turn call closing At the question reached and answer session, to for you. and back Thank

great and call. So earnings on our to the thank I everyone listening questions want to

We up you, are with extremely glad going to everyone. be follow specifically excited Thank questions. we’ll anyone forward. more And with

today’s This everyone. Thank conclude does you, conference.

disconnect may participation have time. Thank lines a this great You you for your at and your day.