Velo3D (VLDX) 2 Mar 232022 Q4 Earnings call transcript

Greetings and welcome to the Velo3D Reports Fourth Quarter and Fiscal Year 2022 Financial Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Bob Okunski, Vice President of Investor Relations. you. Thank

begin. may You

like conference everyone call. I’d quarter our XXXX earnings to you. to welcome fourth Thank

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

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

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we today’s information filings. are our Harbor as press During see Please those in that forward-looking subject today’s to will for well XX-Q may that factors Safe call, make are XXXX forward-looking those documents statements XX-K various affect slide the regarding uncertainties presentation, these as that of and today’s risks additional statements. third and release XXXX described quarter

today’s appendix the to Also, presentation, as we Please call. will refer as press reference today’s certain of non-GAAP reconciliations. our during GAAP to metrics earnings release the non-GAAP well appropriate for

this will call, we set PowerPoint our a of we page the Relations posted & have which of Investor website. enhance call Presentations during slides, Events the reference to on Finally,

turn of to like over I’d Buller, call CEO that, With Benny VeloXD. to Benny? the

like Thanks earnings call. our Bob. And to would everyone to I welcome fourth quarter

industry opportunity discussing strong why our are going and position long-term remain we I expand quarterly about wanted results, excited to positioned forward. Before X. our our to leadership slide we briefly highlight Please why well turn to

Overall, opportunity metal global parts. for market we high massive XD to printed untapped continue value a see

for through segment is increasing production XD driven for Laser across in industries. in growth the printing. This technology metal fastest For applications the volume Powder growing is excess in example, forecasting it Research Bed by of printing market Fusion making XX% XD multiple the XXXX, acceptance being growth of CONTEXT

are higher metal applications, and design some in printed providing much cost flexibility. XD quality parts, legacy the while now parts approaching Additionally, of

of and that design growing print enables changes We to fastest industry technology capability parts. possible is unique our their AM segments aerospace, since company the in and industrial the result the QX is and legacy XXXX. that technology. growth This parts differentiated this direct AM believe critical VeloXD now metal customers defense, produce are energy way other most fundamentally not space, the a with

metal and We that comprehensive software, the provides are fully scalable solutions. also hardware, only manufacturing to company printing AM platform integrated customers offer

remain very manufacturing. We about excited additive for overall the opportunity

changing high-value continue parts We to rapidly our world. are is technology metal the way across the believe manufactured

fourth like specifics Please now turn our to X. to the discuss quarter. of slide I would

very were Overall, We performance. we pleased demand with our our systems. saw QX strong continued for

the we revenue our quarter, rose On both a as quarter fourth XX% year-over-year and exceeded forecast basis, XXX%. For annual sequentially. rose revenue our

group of our we our but our see more As also our peer you chart, outpaced business grew last XXXX. production base than we scale increasing a momentum XX% year. also customer our as significantly was strong of and from can reflects the year operations. outperformance XXXX ability have first quarter demand not by market for technology, to only rapidly This the since customer

of materials. new add and markets, new XXXX as our a new footprint, number penetrate expand We expect to we significant qualify customers global in

further shipments XMZ systems ramped are in XC QX introductions. we significant our also Sapphire our and three product for Sapphire seeing the Additionally, new production quarter. traction We XMZ volume in of with

energy to believe the build to segments. aerospace the part further capacity in feet before, As significantly highlighted Sapphire tall parts competitive as XX X larger XMZ meter. parts as extends XC the especially volume We had cubic manufacture our expands with we up and advantage,

improved. of are two starting have over we quarters. Overall, chain the the see Operationally, the to initiatives benefits supply we last place conditions also manufacturing put and executed well in

to relation efforts, our significantly Given we chain forecast. in have supply our risk annual reduced

We managing to focus prudently also inventory continue levels. our on

We half match our we better levels of second can in demand year to as material expect the now inventory inventory this the expectations. in decline

manufacturing Finally, as increased has on production improvement cycle improved to times is This of our Sapphire impact efficiency. it XC improve a to direct system important gross and volume continue margin. due

to continue of our resources QX we million. have path profitability have visibility going confident Additionally, remain given We strong million $XX XXXX, a and clear momentum. into business and to of current bookings we backlog our $XX given that

like to for few which we our slide highlighting a this our detail minutes strategic industry reflects I on. year now initiatives believe X. continuing acceptance. in Please discuss I’ll greater turn to later would diversification, spend customer

of segment diversification our details breakout a systems as by XXXX of This XXXX, by customers end revenue. total market the slide of along with

constitute As you manufacturing and other customer footprint XX% from industrial we the our our defense, space vertical have charts, vertical can include as customer and markets see reliance on base. reliance on segment our energy, Customers such contract space now significantly expanded to of initial of the aviation the from outside space the applications.

diversification look continue trend XXXX global to as our new verticals expect capitalize both, we market to in demand increasing segments. on We and in existing

system two weighted to factors. was to major sales. Revenue This was XXXX, heavily by space. Turning driven by

the of where large a our First, customer to result systems we single space last contract XC customer Sapphire year. was shipped it X

the procure quicker to in players machines Second, and patterns space of customers establish spirit fleets adoption to have entrepreneurial larger that segments. other moved due

a to This to in efforts vertical footprint in but space. and remain expand further of percentage primarily the to existing by this be XXXX space will as our both new decline ourselves our revenue outside expect system markets driven We year. strong

as are Please turn for VeloXD to would now and choose value to simple like example manufacturing additive high metal I use parts. customers the into to a slide X. to continuing put to why perspective

manufacturing what for the we common exchanger provide our one a Sapphire traditional versus This using of example process heat compares systems.

than this can Sapphire one As quality pieces. this traditional than more types XXX as Velo we of you the with of achieve traditional piece part very better can With a welding, multiple part required in such complex higher performance finished this the product. requires methods. and see, separate with print fabrication machining, part structures a On methods to brazing, is system,

changes, implement done is with design systems ability our that customer Additionally, easily something quickly which the provide techniques. traditional be to not the can with

customer a by and to overall the reduce part methods. able quality XX%, As than lower manufacturing traditional a cost manufacturing, part result, was steps higher

choose significantly advantages XX the high of improve supply enabled design X customer for time we weeks value customers partner. outsourced time These with highlight Finally, metal cycle continue to chain parts to X to an their real the with against a XX why manufacturing. to VeloXD for months

would Please like to I slide priority. X. key strategic to XXXX closing, turn In discuss briefly our

improving for year cash Our driving primary is this profitability focus flow. to and

this of growth, and expansion a combination margin initiative. spending reduction accomplish We through will

expect of First, this XX% we more revenue growth than year.

Given achieve we our industry-leading the the goal. technology, have momentum strong to exiting demand XXXX, sales this we trends for believe

Additionally, by continued reflected that in of of the half this our than is than our fact and driven be growth land strategy. expend base execution strategy more this now system. our more The Sapphire own customer of will success one

in gross from our material production Second, of and we as bill cost improved initiatives further our benefit efficiency. reduction margin expansion

transactions We completion also product with expect and ASPs of to the a Sapphire discounted continuous year. our shift half increase in the our the first in pricing mix a of overall XC further

XXXX. initiatives as hiring reduction employee freeze, by a as certain expenses XX% of in year-over-year in costs. attrition spending well gradual reduction QX These programs. efforts a QX reduce back, compared include selective we’ll in reduce adjusted labor Third, These of for to XXXX operating include

Our driving goal growth. our revenue is stronger operating reduce to structure, while

discretionary We of to also the the programs number are Company. a implementing reduce expenses across

Finally, significantly flow. improving cash

through EBITDA. year, expect sequential we driven by as improved go We improvement the flow in cash

in in XXXX, improvement chain an inventory see will we delivery to working we and improved addition, given expect supply year-over-year reduce In to capital XX% planning XX% material as schedules. by

expect quarter this to efforts reduction inventory see in the the We of the third year. benefits of starting

our are our our to the capitalize printed We confident for XXXX. are strategic we believe and well future ability to parts. forward plan long-term on high executing profitability opportunity value current we and closing, we reach well remain executed to excited our in metal as about in growing liquidity, look XD demand given In positioned

financials the our that, to to like turn our I’d over With discuss provide to guidance. and call Bill? Bill

Benny. Thanks

to Compared X. $XX.X sequentially QX, year higher factors. to selling please higher volume financial due of performance, million a three Fourth and or quarterly to million rose up revenue revenue year-over-year. sale our was approximately and forecast to average quarter to XX% on due XX% QX our $XX.X of turn Moving and price, XXX% was exceeded slide which

shift systems of product shipped we Sapphire mix a towards the in XC First, these systems as of more record number quarter. a

launch in the Second, transactions, revenue of prices. fourth which more fewer And the shipments regular higher XC customer quarter. Sapphire discounted at We sales. last shipments deferred these payment completed finally, than carry

up was recurring field. basis, million million, On Recurring up to the and was rose $XX year XXX% million, in quarter revenue service XXX% and in million. to of reflected from sequentially systems $XXX,XXX year-over-year a the $X sale $X.X of $X.X from million the revenue increased number $X.X revenue to for

was the other were improvements line Gross gross from costs. partially resulting scrap, by in quarter revenue and margin in X%, selling The lower recurring forecasts. primarily offset prices material and average by margin These driven for and higher higher was increase costs obsolescence with inefficiencies. and service our

benefit Adjusted operating million QX. non-recurring expenses would’ve for expenses, $XX.X items, stock-based our from down were of from $XX.X expense compensation, Adding stock-based million been certain This included million, reductions. operating $XX $X.X million. these compensation excluding back the a quarter, excluding in

$X.X slightly. million of R&D marketing expenses with the of XMZ non-recurring benefited line mentioned completion in R&D expense and expense project and reflected our XC declined better was $X.X above. G&A QX, Sapphire expense up and the from while also development reductions million control. sales was

net the changes of quarter which million liabilities. of XXXX excludes the to was related net GAAP million, EBITDA R&D $XX million. non-GAAP gain On and somewhat the loss value adjusted a items but $XX.X fair in stock-based non-cash a historical warrants was below expense, expect quarter million in a for our rebound to loss was and income excluding compensation the basis, same for approximately of and earnout to We levels. $XX.X $XX.X remain this gain including

I XX. outlook would Please like to more bit provide slide XXXX. on to detail gross margin our turn for a

margin QX mentioned our earlier, I gross As was X%. in XXXX

to expect our XXXX, margins gross progress through as factors. a QX we we As of following by XXXX, result improve of XX% approximately the to

to selling mix implement First, prices are price for improve systems Sapphire Sapphire and XC. expected higher as we XC average priced our product more shifts as the increases towards

contracts costs. supply long-term cost decline as or should of predictable and that schedules storage material Second, are reduce the signed are have expected been delivery contracts freight costs in with under These being recently negotiated. increase also deliveries more lower process to

In addition, scrap material we’re reduce a effort making costs. to concerted inefficiency and

Finally, factory a decline greater costs whole and we percentage as of efficiency. flat volumes we relatively labor cost to revenue production and through as expect increase overhead other

up for usage XX. balance in $XX a Cash with cash $XX million, Please quarter the to turn the of major slightly very and $XX was non-recurring million executed strong to to reductions million. loss as the non-cash compared the quarter million $X usage of QX very components were cash balance back with sheet The follows. We limited and on slide amounted EBITDA QX. sheet adding expense debt. a

deferred quarter. This also this which of recouped We larger transaction had usual $X be are effect a had number in as of will payments sales payment million, a these over than cash structures time, received. with negative

increased in delivery will gain growth $X traction. planning Inventory We XXXX. staggered better slow started minimize and the to as inventory transactions million in efforts these types through of to some by

to XXXX, of XXXX. half in growth second out of then in half We to slow the expect first and inventory decline flatten and

facilities CapEx from for million and $X of equipment. comprised was and $X million, CapEx and in down lease systems QX was

our expect usage program receivables, on proceeds payments is and range facility. QX the inclusive We $XX million of timing from be certain bank to depending to shipments. for total ATM million $XX deposits, of the and This under of booking in equity financing cash in

the expect -- usage to each expect through XXXX. quarter cash continue end we of We decline to

the remain liquidity have to through our that fund we business confident we Finally, plan the profitability.

our to outlook XXXX. slide to turn I’d now for XX. provide Please like

in We million, and to revenue of to to to first XXXX of our million backlog, expect in gross quarter be range XX%, the excluding which by $XX a items. margin existing range X% non-recurring is $XX be supported largely

XX% expect to million million. $XXX revenue be we range and of greater XXXX, growth For in a of full year revenues than to $XXX

of We approximately in the expect the to XX% gross range to margin XX% of for with gross margin year XX%. be QX

in are growth, resources conclusion, on on clear In and capital improvements flow. path margins focused efficiency, within current profitability our executing we through cash our operating to

turn the like questions. for I’d to that, Operator? call With over

Thank Instructions] you. [Operator

Please Blair. Our question. the Brian of first live. proceed William from question comes with line Brian, line is your with Drab your

Sorry. Can hear you me?

can we Yes, Brian.

Thanks Okay. my taking for questions.

housekeeping So just first, small a item.

you gross or to levels mentioned items comment margin just talking excluding of items. of You you there nonrecurring you is note anticipating? certain any in non-recurring about guidance were this Can that are kind on the going hit what

specific -- There completely it we a -- just come definition had just is is It’s Bill. items. We when included. clear anticipating by in if that to any we nonrecurring a ordinary we That’s that of this wasn’t anticipate. mind, statement. wanted up nothing that that are not made the we Brian, casual something out make can’t to that

Right. Okay.

idea just a unusual, Just then, another way of lot Thanks. into in chains and margin, about inventory applications of, rather see, is two OEMs for of gross fit talk markets your are holes been check. is which wanted the starting you and these being energy specifically saying kind the you And but by used that to so potential. Can of and than markets. like end is applications starting adjusted of industrial energy MRO? to or digital getting fill nothing you the used are supply that machine industrial, There in is it technology terms more to within big first end have for some

for applications the we So of first see digital kind inventory with MRO. are significant spare applications traction a parts, of that

the -- these in in these turbo machinery. that see see segments, traction. And good where mentioned, are we we places we two valves, in first As in these exchangers, heat are

first So, that tractions. see the places are these bigger we

there? just still how win things longer some choppy Europe? you to then, ask, Is are starting cycles, there, or can it over I going sales And in are still Thanks. customers

have we orders repeat the on customers to started winning from horizon in and Europe. We customers. won Europe, even We some definitely some

had So, the the [ph] is sales in are particularly There’s momentum. and and of nascent The know we getting as XXXX the and getting due longer from it’s sales of just of long less. we are people diligence our United definitely lot cycles the are there kind cycles a States. cycle taking, in customers

and line the Jim Ricchiuti from comes of with question next Our Needham Company.

the have the So, I verticals. respect outlook. And verticals I to question color appreciate the think full ‘XX the have with the I some just the of you on of Which is site the to have of the these with best clearly, you trying line you’ve I sense I’m to backlog. a which clearest just visibility. got to of mean, respect verticals get revenue outlook? as do

-- have I’m mathematically based don’t will answer because I not -- It’s the from… that of kind be estimating precise

That’s okay.

X the But that on I think left that is on representing the we the see picture see. that slide visibility you

a a But CM we industrial, represents is what have in little pipeline. all space, smaller similar So, are the other picture. aerospace, defense see And this than automotive, this segment. Maybe ones segment the larger. proportionally the

ask what the environment? some Maybe too, you’re light Benny, where in to hesitancy just also I signs to of another of is, is, are verticals there some way trying question I’m guess to seeing macro the get

good question. easier. that really a And That’s is to answer

-- because we is companies Where do bigger definite yet constraints So, the if and we constraints. manufacturing see there more financing particularly customers, see we smaller environment. a one of the you see slowdown we funding in segment, our the we see segment and slowdown didn’t that lot at don’t the macro -- contract look do see of

that’s looks So we And contract in driving reason slow definitely down why -- the one one manufacturing segment smaller -- financing. one that XXXX. segment that’s the reason will see

been it. That’s question me OEM. And Got wondering able as with North it the with or had that to either if MXXX automotive American you’ve customer Last application? customers leverage win tool you last I’m understandable. year that nice a relates side with auto the on is, other for to

Yes. the customer and more another pipeline. There in few already is a

on comes Markets. the Street of Lake with Our Jensen Troy next line question Capital

Bill for questions of here. Couple

down that ship -- to the It in sounds half. million $XX like it sequential just first expecting was a on primarily So, you’re basis. million, $XX backlog

can And lot of confirm this talk just kind a if you backlog about of half then second just just that So, would. then visibility, depleted? you if getting is

made progress deposits. for Yes. their a the there Look They system. in revenue, backlog, with there made a they on haven’t customers were to of were financing of haven’t to where the couple lot respect addition --

the conservatism. the are in So, the canceled, backlog not existence, were adjusted so of -- even though interest out the them still of we we orders in orders

So, that made. factors of adjustment down. backlog That’s came the one the that was

bookings lumpy we are think, process. still feel I Look, the processes

ticket We’re prices. selling systems with multimillion dollar

process. would of market, the pipeline very the so, comfortable it’s say, the we with we I activity lumpy tone based a our just guidance. And on feel see, of

Okay, perfect.

Another one $XX.X for was you, Bill. about QX OpEx million.

I think, that to you year-over-year QX said that expect down you be year. XX% this

about talking we’re So, OpEx… million in $XX

No.

a that Let the better. me little math explain on

of So, non-recurring million reductions. QX expense benefited $X.X from

added I to remarks, my in -- base $XX back get we of to million. those So, adjusted

we’re that reduction. So, XX% that a it’s from million $XX projecting

Okay.

Is million. $XX.X it’s that… So

non-cash. were were Things they were -- they and non-recurring

true add remarks. a what what did. should so, we referenced in And which in back, order I to get is rate, really run And you those that’s my

the $XX XX%. which talking that’s So, million reduction, at so we’re a from basis minus about XX%

absolute expecting function declines a going point like year, there you throughout or are step on And the basis sequential an or… on is to one be

it’s Troy. to goal control, got range reduction We’ll of would the gradual of I it first initiatives. steadily quarter. perfect but Yes. beginning and perfect course say visibility be a year. wide reduce We in don’t would our implementing have cost be a decline, the We’ve during those the

and they’ll the be as So, and the we to start then get QX. accelerated might towards they’ll -- first get first even quarter be to quarter be then reduction and flat small, might QX, start QX

Got you. good the and I guys. All right, all got. work. That’s up Congrats keep

Troy. Thanks

question Next of question proceed from the question. Brian is Drab. Please follow-up line a your with

you. Thank Drab. Brian It’s Okay.

could I competitive still not the the see It the early I But installed base to know, So, for you all if like And it. I the that included in And to figures you just now, number that of to table had I missing tell machines any understand are about used total to wanted get see customers? that would just… if of interesting or including there. data us anything number table, of wish would on. you we total we I’m reason, great mention maybe be that the

Yes. look, grow installed to all Unfortunately is our without violating every policy. can can’t number not, meaningful Brian. anything -- the I of quarter customers -- grows obviously say every the base hard It’s I is quarter. and say

Can and You machine into talk about customers you to ask of that it insight initial demand to customers the and just are to metric more sales sales? Are second machine gave also one back That’s -- seeing are good used was I then? some current follow-on us Can ratio you Okay. third fine. because from just that a if seeing about repeat the often you machine? sales? have how a going for coming you current and talk

recurring Yes. and Once pipeline. seeing those purchases we the in again, we have are

So, as can of to that in a our you the again, be specific. continues that our public once general tell mix But is thing matter, only really feature that But can’t product business. I to And talked that give be price a about but -- continue we’ve remarks the has we shift existing Sapphire continued customer purchases, specific. really systems, existing higher matter, No. towards purchase a priced don’t ticket to recurring the is look, those XCs, higher customers which new -- the we as systems. general

thing But very a that, is this I of portion our say business. would one is significant

purchase. customer -- the The repeat repeat

Yes.

you’re -- said Because the raising comment raising Yes. that I Did you material hear how models. think Could increase? at on affects And much is you price our comment we’re a the that that I And XC. obviously prices? on correctly? can that all you

affect It models increase, in meaningful way. the Brian. doesn’t any modest It’s a relatively

right. so Okay. much. and All should going bear a too Prices lot. up, one everything All right. Makes are sense. Thanks no

Thank you.

back queue. for Benny a in to questions call There hand are further no I’d the Buller to remarks. closing like

executed good we participating year in of We ambitious for deliver had and XXXX. goals. everyone XXXX execution tradition plan very this our call. you earning to really in delivered We keep in to where and Thank a

earnings So, you. looking next forward to seeing you call. on our Thank

Ladies participation. and for conclude today’s this your gentlemen, Thank does teleconference. you

day. You may time, this have disconnect a and your lines at wonderful