10-Q: Velo3D Faces Going Concern Doubt Amidst Liquidity Crisis

Velo3D reported increased revenue but faces substantial doubt about its ability to continue as a going concern due to insufficient liquidity and significant debt obligations.

Summary

• Total revenue for the three months ended June 30, 2025, increased by 31.2% to $13.6 million from $10.3 million in the comparable period of 2024.
• Total revenue for the six months ended June 30, 2025, increased by 13.7% to $22.9 million from $20.1 million in the comparable period of 2024.
• Gross loss for the three months ended June 30, 2025, improved to $(1.6) million from $(2.9) million in the comparable period of 2024.
• Gross loss for the six months ended June 30, 2025, improved to $(0.9) million from $(5.7) million in the comparable period of 2024.
• Net loss for the three months ended June 30, 2025, was $(13.8) million, significantly higher than $(0.2) million in the comparable period of 2024, primarily due to non-cash gains on warrants and earnout liabilities in 2024 not recurring.
• Net loss for the six months ended June 30, 2025, was $(39.2) million, compared to $(28.5) million in the comparable period of 2024.
• Operating expenses decreased significantly: for the three months ended June 30, 2025, they saw a 40.4% reduction to $10.5 million from $17.6 million in the comparable period of 2024. For the six months ended June 30, 2025, they saw a 36.2% reduction to $23.1 million from $36.3 million in the comparable period of 2024.
• Cash and cash equivalents as of June 30, 2025, were $0.9 million, down from $1.2 million at December 31, 2024.
• Accumulated deficit reached $(469.5) million as of June 30, 2025.
• Total current liabilities were $42.7 million as of June 30, 2025, up from $38.0 million at December 31, 2024.
• The current portion of debt increased to $16.9 million as of June 30, 2025, from $5.7 million at December 31, 2024.
• Bookings for the three months ended June 30, 2025, were $12 million, up from $5 million in the comparable period of 2024.
• Bookings for the six months ended June 30, 2025, were $20 million, down from $22 million in the comparable period of 2024.
• Backlog remained consistent at $16 million as of June 30, 2025, and 2024.

Sentiment

Score: 2

Explanation: The company is in a critical financial state, explicitly stating 'substantial doubt about our ability to continue as a going concern' due to insufficient liquidity. While revenue increased and operating expenses decreased, the net loss widened significantly, and cash reserves are extremely low, necessitating immediate additional financing to avoid potential liquidation or bankruptcy.

Positives

• Revenue increased for both the three and six months ended June 30, 2025, compared to the prior year periods, driven by product mix and system sales.
• Gross loss improved significantly, with gross margin improving from (28.0)% to (11.7)% for the three months ended June 30, 2025, and from (28.4)% to (3.9)% for the six months ended June 30, 2025.
• Operating expenses decreased substantially across research and development, selling and marketing, and general and administrative categories due to cost reduction efforts.
• Interest expense decreased significantly due to the reduction in Senior Secured Notes.
• Bookings for the three months ended June 30, 2025, increased to $12 million from $5 million in the prior year period.

Negatives

• Substantial doubt exists about the ability to continue as a going concern due to insufficient liquidity.
• Cash and cash equivalents are critically low at $0.9 million as of June 30, 2025.
• The company has an accumulated deficit of $(469.5) million.
• Net loss significantly increased in Q2 2025 to $(13.8) million from $(0.2) million in Q2 2024, and in H1 2025 to $(39.2) million from $(28.5) million in H1 2024, largely due to non-recurring non-cash gains in the prior year.
• Current portion of debt increased to $16.9 million, indicating significant short-term obligations.
• Bookings for the six months ended June 30, 2025, decreased to $20 million from $22 million in the prior year period.
• The company is unable to secure credit terms and volume discounts with suppliers, leading to premium payments or advance payments for components.
• Customer concentration remains a risk, with top three customers accounting for 65.2% of revenue in Q2 2025 and 54.6% in H1 2025.
• The company was delisted from the New York Stock Exchange (NYSE) and commenced trading on the OTCQX Best Market on September 11, 2024.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to insufficient liquidity to meet operating needs and satisfy obligations for at least 12 months.
• The inability to raise additional financing on acceptable terms, or at all, could lead to the inability to continue operations, asset sales, liquidation, or bankruptcy.
• Customers may delay 3D printer orders until the company's financial condition improves, impacting bookings and backlog.
• The company's inability to secure credit terms and volume discounts with suppliers forces it to pay premiums, in advance, or source from alternate suppliers at unfavorable terms.
• Suppliers may terminate business relationships or pursue legal action due to delayed payments.
• The need for significant cost-cutting measures, including further reductions in force, may limit business growth and make employee retention difficult.
• Uncertainty regarding U.S. tariffs and trade relationships, and implementation of new legislative or regulatory policies, could impose additional costs or reduce the ability to sell products.
• The company is subject to U.S. and other anti-corruption laws, trade controls, and economic sanctions, with potential for civil, criminal, and administrative penalties for non-compliance.
• There is uncertainty regarding how new U.S. Department of Justice enforcement guidelines for the Foreign Corrupt Practices Act (FCPA) may affect the industry or business.
• Risks are associated with doing business in foreign countries with less developed legal systems and higher corruption levels.
• The company may be held liable for the actions that its joint venture partners take.
• Various state and municipal governments, universities, and other investors maintain prohibitions or restrictions on investments in companies that do business with sanctioned countries, persons, and entities.

Future Outlook

The company expects research and development costs to remain similar for the remainder of 2025 due to maturation of its Sapphire family of systems and investments in current product lines, increasing in the long term. Selling and marketing expenses are expected to increase for the remainder of 2025 as the company re-engages with key customers and drives Rapid Production Solutions (RPS) traction. General and administrative expenses are expected to decrease due to savings from a reduction in force implemented in late 2024 and ongoing cost reduction initiatives. Interest expense is expected to continue decreasing due to reduced debt. Capital expenditures are expected to increase in 2025 compared to 2024 as the company invests in printer capacity and related facilities for RPS. The company expects to need additional financings to fund operations and satisfy debt obligations in the near-term.

Management Comments

• Management believes that substantial doubt exists about the Company’s ability to continue as a going concern.
• As of the date of the issuance of these unaudited condensed consolidated interim financial statements, the Company does not have sufficient liquidity to meet its operating needs and satisfy its obligations for at least 12 months from the date of issuance of the these unaudited condensed consolidated interim financial statements.
• The Company will need to engage in additional financings to fund its operations and satisfy its obligations in the near-term.
• Without such additional funding, we will not be able to continue operations and may be required to sell assets, liquidate and/or file for bankruptcy.
• We expect the cost to manufacture new systems in 2025 to improve as a result of overhead and fixed cost reduction efforts implement in late 2024.
• We expect our cash used in operating activities to decrease, driven by our efforts to stabilize our working capital requirements through our expense reduction efforts and overall enterprise efficiency improvement programs.

Industry Context

Velo3D operates in the metal additive manufacturing (3D printing) industry, focusing on high-value metal parts for sectors like space, aviation, defense, automotive, energy, and industrial markets. The company positions its proprietary laser powder bed fusion (L-PBF) technology as superior, reducing the need for support structures and enabling complex geometries that traditional AM solutions struggle with. The industry is characterized by customers seeking lighter, stronger, more reliable parts with lower costs for low-volume production and shorter lead times. Velo3D's "land and expand" strategy involves initial single machine purchases for validation, followed by additional system purchases as technology is embedded. Macroeconomic conditions, including inflation, interest rates, and supply chain shortages, continue to impact the industry and the company's operations.

Comparison to Industry Standards

• The company's technology is described as "years ahead of competitors" due to its ability to deliver complex high-value metal parts without redesign, unlike "other legacy AM technologies."
• The company's "land and expand" strategy, where customers initially purchase a single machine for validation and then acquire additional systems, indicates a customer adoption pattern common in high-tech, capital-intensive industries where initial proof-of-concept is crucial before broader integration.
• The company's current financial state, including the "going concern" warning and inability to secure credit terms, suggests it is performing significantly below industry standards for financially stable, publicly traded manufacturing companies. Comparable companies in the additive manufacturing space (e.g., 3D Systems, Stratasys, Desktop Metal) generally aim for positive cash flow and profitability, which Velo3D has not achieved.
• The delisting from NYSE to OTCQX Best Market is a clear indicator of failing to meet major exchange listing standards, placing it below typical public company benchmarks.

Management Changes

Corporate Governance

Legal Proceedings

• The company is not currently a party to any material legal proceedings.

Related Party Transactions

• On January 7, 2025, the company issued a $5.0 million Senior Secured Convertible Promissory Note to Thieneman Properties, LLC.
• On February 10, 2025, the company issued a $10.0 million Senior Secured Convertible Promissory Note to Thieneman Construction, Inc.
• On December 24, 2024, Arrayed Notes Acquisition Corp., a subsidiary of Arrayed Additive, Inc., became the owner of approximately 95% of the company's issued and outstanding common stock through a debt-for-equity exchange. Arrayed continues to hold $5.0 million in principal amount of Secured Notes.

Stakeholder Impact

• Shareholders: Significant dilution from past and potential future equity raises; substantial doubt about the company's ability to continue as a going concern poses a high risk of capital loss; delisting from NYSE to OTCQX impacts liquidity and prestige.
• Employees: Potential for further reductions in force; difficulty in retention due to financial instability.
• Customers: Delays in 3D printer orders due to financial concerns; potential impact on support services if financial conditions worsen.
• Suppliers: Inability to secure credit terms and volume discounts, leading to premium payments or advance payments; risk of business relationship termination or legal action due to delayed payments.
• Creditors: Existing debt holders (like Arrayed, Thieneman Properties, Thieneman Construction) are exposed to significant risk given the going concern warning and the company's need for further financing to meet obligations.

Next Steps

• Engage in additional financings to fund operations and satisfy debt obligations in the near-term.
• Continue to fund payroll for employees.
• Improve operating infrastructure.
• Continue to sustain operations.
• Implement significant cost-cutting measures, including further reductions in force.
• Continue to focus on certain markets that show strong attendance at additive manufacturing conferences to build product awareness.
• Continue to review conclusions about the appropriate amount of the valuation allowance on deferred tax assets quarterly.
• Reassess accounting for the Momentus Master Service Agreement upon execution of a Statement of Work.
• Continue efforts to remediate material weaknesses in internal control over financial reporting.
• Hire and train additional accounting and IT personnel.

Key Dates

Recommendation

The company explicitly states "substantial doubt about our ability to continue as a going concern" and has critically low cash reserves ($0.9 million) against significant current liabilities ($42.7 million, including $16.9 million in current debt). While revenue increased and operating expenses decreased, the net loss widened, and the company is unable to secure favorable terms with suppliers. The need for immediate additional financing, with no assurance of obtaining it on acceptable terms, presents an extremely high risk of liquidation or bankruptcy. The delisting from NYSE further reduces liquidity and investor confidence. This filing indicates severe financial distress and an unsustainable operating model without significant, uncertain external capital.

Keywords

3D printing, additive manufacturing, metal AM, SEC filing, 10-Q, financial results, liquidity, going concern, debt, capital raise, corporate governance, risk factors, manufacturing, aerospace, defense, automotive, energy, L-PBF, Sapphire