8-K: Velo3D Announces Fiscal Year 2023 Results Amid Strategic Realignment

Velo3D reports its fourth quarter and full year 2023 financial results, highlighting strategic realignment efforts and a focus on customer success.

Summary

• Velo3D announced its financial results for the fourth quarter and fiscal year 2023, ending December 31, 2023.
• The company's revenue for the fourth quarter was $1.8 million, a significant decrease compared to $29.8 million in the same quarter of the previous year.
• Full-year revenue for 2023 was $77.6 million, slightly down from $80.8 million in 2022.
• The company experienced a negative gross margin of over 100% in the fourth quarter, primarily due to reduced system volume and inventory valuation charges.
• Operating expenses for the fourth quarter were $24.5 million, including $4.7 million in one-time charges related to realignment initiatives.
• Non-GAAP operating expenses were $16.5 million, a 17% sequential decrease.
• The company expects non-GAAP quarterly operating expenses to decline by more than 30% in the first quarter of 2024 compared to the third quarter of 2023.
• Net loss for the quarter was $58.2 million, which included a $27.6 million gain on the fair value of warrants and a $19.2 million loss on debt extinguishment.
• Non-GAAP net loss for the quarter was $61.1 million.
• The company ended the quarter with $31 million in cash and investments.
• Velo3D has booked over $15 million in new orders since mid-December 2023, with more than 50% from existing customers.
• The company expects sequential improvement in revenue, gross margin, and operating expenses on a quarterly basis in 2024.
• Velo3D aims to achieve free cash flow breakeven in the second half of 2024.
• The company projects revenue between $80 million and $95 million for fiscal year 2024, with gross margins between 20% and 30%.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there are positive signs of strategic realignment and cost reduction, the significant revenue decline and negative gross margin in Q4 are concerning. The company's future outlook is cautiously optimistic, but there are significant risks and uncertainties.

Positives

• The company has successfully reduced operating expenses by more than 15% sequentially, excluding one-time charges.
• Velo3D has seen a recovery in bookings, with over $15 million in new orders since mid-December 2023.
• The company has improved customer success metrics, including reduced field issue resolution times and improved system uptime.
• Velo3D has expanded its customer base, adding 12 new customers in 2023.
• The company expects positive gross margin in the first quarter of 2024.
• Velo3D is well positioned to capitalize on increasing industry demand for additive manufacturing solutions.
• The company has improved its free cash flow by 35% year over year.

Negatives

• The company experienced a significant decrease in revenue in the fourth quarter of 2023, with only $1.8 million compared to $29.8 million in the same quarter of the previous year.
• Velo3D reported a negative gross margin of over 100% in the fourth quarter, primarily due to reduced system volume and inventory valuation charges.
• The company incurred a net loss of $58.2 million for the quarter, including a $19.2 million loss on debt extinguishment.
• Velo3D recorded a $27 million non-cash charge related to the valuation of its inventory during the quarter.
• The company's cash and investments decreased to $31 million at the end of the quarter.

Risks

• The company's ability to execute its business plan may be affected by competition, growth management, and maintaining relationships with customers and suppliers.
• Changes in applicable laws or regulations could impact the company's operations.
• The company's ability to service and comply with its indebtedness is a risk.
• There is a risk that the company may not be able to raise financing in the future.
• The company's ability to continue as a going concern is a risk.
• The company's ability to maintain the listing of its common stock on the New York Stock Exchange is a risk.
• The company may be adversely affected by economic, business, and/or competitive factors.
• The impact of the global COVID-19 pandemic remains a risk.
• The company's actual results may differ from its forward-looking statements.

Future Outlook

The company expects sequential improvement in revenue, gross margin, and operating expenses on a quarterly basis in 2024 and aims to achieve free cash flow breakeven in the second half of 2024. Revenue for fiscal year 2024 is projected to be between $80 million and $95 million, with gross margins between 20% and 30%.

Management Comments

• 2023 was a transformational year for the company as we re-aligned our strategic and business priorities from driving revenue growth to ensuring customer success, improving system reliability and materially reducing our cost structure, said Brad Kreger, CEO of Velo3D.
• We are pleased with the significant progress we are making related to our key initiatives as we have significantly reduced our costs and materially improved our operational efficiency.
• Additionally, our new go to market approach is paying dividends as we have resumed our bookings growth, including signing a number of new, strategic customers in the defense industry with Kratos Defense and Bechtel Plant Machinery.
• I remain very excited about our market opportunities in 2024, especially in defense given the recent $825 billion Department of Defense funding approval.
• We believe this reflects their confidence in our technology as well as the success of our initiatives in improving customer satisfaction, said Kreger.
• Were continuing to execute on our cost realignment programs to improve margins and cash flow, while prudently managing working capital.

Industry Context

Velo3D's focus on strategic realignment and cost reduction reflects a broader trend in the additive manufacturing industry, where companies are increasingly prioritizing profitability and operational efficiency. The company's success in securing new defense contracts aligns with the growing demand for advanced manufacturing solutions in the aerospace and defense sectors.

Comparison to Industry Standards

• Velo3D's revenue decline in Q4 2023 is concerning when compared to industry leaders like Stratasys and 3D Systems, who have shown more stable revenue streams, although these companies also have a broader range of products and services.
• The negative gross margin of over 100% in Q4 is significantly worse than industry averages, where companies typically aim for gross margins above 40%.
• However, Velo3D's focus on reducing operating expenses and improving cash flow is a positive step, and if successful, could bring them closer to industry benchmarks.
• The company's success in securing new defense contracts is a positive sign, as this sector is a key growth area for additive manufacturing, with companies like Aerojet Rocketdyne and Lockheed Martin being major players.
• Velo3D's focus on customer success and system reliability is also important, as these are key differentiators in the competitive additive manufacturing market, where companies like EOS and HP are also focusing on these areas.

Stakeholder Impact

• Shareholders may be concerned about the significant revenue decline and net loss in the fourth quarter.
• Employees may be affected by the company's cost reduction initiatives, including potential workforce reductions.
• Customers may benefit from the company's focus on improving system reliability and customer success.
• Suppliers may be impacted by the company's cost realignment programs.
• Creditors may be concerned about the company's financial performance and ability to service its debt.

Next Steps

• The company will continue to execute its strategic realignment plan.
• Velo3D will focus on improving customer success and system reliability.
• The company will work towards achieving free cash flow breakeven in the second half of 2024.
• Velo3D will host a conference call to discuss its fourth quarter 2023 financial results.
• The company will file its Quarterly Report on Form 10-Q with the SEC.

Key Dates

Keywords

additive manufacturing, 3D printing, metal parts, financial results, strategic realignment, operating expenses, bookings, gross margin, cash flow, customer success