Velo3D Inc (VELO) 2024 Q4 法說會逐字稿

Greetings and welcome to the Velo3D fiscal year 2024 financial results conference call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce Bob Okunski, Vice President, Investor Relations at Velo3D. Please go ahead.

Thank you. I'd like to welcome everyone to our fourth-quarter and fiscal year 2024 earnings conference call. On the call today, we will start out with comments from Arun Jeldi, CEO of Velo3D, who will provide an overview of the new Velo3D and our strategic priorities to position the company for profitable growth. Following Arun's comments, Hull Xu, our CFO, will then review our fourth-quarter financial results and provide our guidance. As a reminder, a replay of this call will be available later today on the Investor Relations page of our website.

During today's call, we will make forward-looking statements that are subject to various risks and uncertainties that are described in the Safe Harbor slide of today's presentation, today's press release, as well as our 2024 10-K and additional 2024 SEC filings. Please see those documents for additional information regarding those factors that may affect these forward-looking statements.

Also, we will reference certain non-GAAP metrics during today's call. Please refer to the appendix of our presentation as well as today's earnings press release for the appropriate GAAP to non-GAAP reconciliations. We have also posted a set of PowerPoint slides providing additional details on our strategic initiatives and financial performance on the events and presentations page of our Investor Relations website.

With that, I'd like to turn the call over to Arun Jeldi, CEO of Velo3D. Arun?

Good afternoon, and thank you for joining Velo3D's fourth-quarter and fiscal year 2024 earnings conference call. Today marks an exciting and transformative milestone for our company. As we discuss the strategic combination with Arrayed Additive Inc., which is the parent company of [Arrayed Additive Notes Acquisition Corp.], signaling the beginning of Velo3D 2.0. This combination is a cornerstone of our renewed focus on driving sustainable, profitable growth and positioning ourselves for long-term value creation.

As an investor, you recognize the importance of growth opportunities that are both impactful and strategic. My decision to invest in Velo3D through Arrayed Additive stems from the immense potential I see in combining our companies together. Together, we now offer unmatched metal additive manufacturing capabilities, leveraging the best technologies and expertise from both sides.

This powerful synergy positions us to capitalize on significant growth opportunities in key sectors, including airspace, defense, automotive, and engineering. We're confident that this strategic integration will not only enhance our competitive edge but also deliver substantial long-term value for our shareholders. As we move forward, we remain committed to driving innovation and achieving sustainable growth, ensuring that Velo3D is well-positioned for our continued success.

There are seven key investor highlights from our recent transformation include a high-growth, high-margin business model built for profitability. What does that mean to Velo3D? We have shifted from a volume-driven model to a value-driven strategy focused on maximizing profitability, for example, fewer higher-value system sales. We are emphasizing the sale of advanced systems with significant higher ASPs, enabling better margins and longer-term customer relationships. There's diverse revenue streams.

In addition to system sales, our revenue mix now includes rapid production solutions, a recurring service-oriented offering enabling scalable parts production. And we also are stepping into services and software licensing, a predictable margin revenue. And finally, operational efficiency. Cost control initiatives and supply chain optimization are lowering our breakeven point. What is the outcome of doing this? As a result, we are building a resilient business with consistent cash flow potential and clear path to profitability.

The second key pilot is strategic synergies, expanding market reach, and technological depth. The combination with Arrayed Additive is accelerating our transformation in powerful ways. We, with a minimal product and customer overlap, this partnership adds complementary capabilities without cannibalizing existing business. We are increasing the material expertise. Arrayed's leadership in magnesium and aluminum 3D printing allows us to address lightweight, high-strength applications in aerospace, defense, and motorsports and EVs.

Expanded total addressable market. Our combining offerings significantly broadens the scope of industries and applications we serve, solidifying our position as a technological enabler across sectors. The third key point is strong positioning amid industry tailwinds. We are in the right place at the right time, reshoring momentum. Major US policy initiatives and global supply chain shifts are fueling onshore manufacturing, especially for strategic sectors like defense and aerospace.

Velo3D, a US-based leader, as the only US large bed-size supplier of high-end laser powder bed fusion systems, we offer mission-critical reliability with local accountability. National Security Advantage. Our solutions are increasingly aligned with federal priorities around manufacturing independence and technological sovereignty. What are the strategic advantages of this? We are not just riding the wave. We are helping to shape it by reshoring momentum as a US business leader, as a US-based leader, and national security advantage. We are actually thriving.

The fourth key point I want to address here is trend and financial position for scalable growth. With the close of Arrayed Additive transaction, we have taken major steps to solidify our balance sheet. We have reduced our debt. We eliminated nearly all senior debt and warrant liabilities, removing financial overhang and reducing interest expense burdens.

We had a bridge finance secured for $15 million, secures a runway to execute near-term growth and integration plans. We have focused on capital allocation with proper budgeting. Every dollar now supports initiatives that accelerates revenue, margin expansion, and long-term shareholder value.

The fifth key point I want to address here is accelerating revenue growth and backlog momentum. We are seeing tangible commercial transaction. There is a firm $16 million backlog, a growth base of commitment system orders, service contracts, and RPS projects. We have a robust pipeline, strong engagement across defense primes, aerospace OEMs, semiconductor manufacturers, and energy leaders. There is a high visibility into the future revenue. With long cycle procurement and high switching costs, our installed base leads to recurring revenue opportunities and high consumer retention.

What is that to do with all of this? What that means is our near-term growth is underpinned by real demand, not speculative opportunities with revenue growth of more than 30% in 2025. We have introduced rapid production solution, the future of manufacturing. Now our RPS business is quickly becoming a cornerstone of our strategy. It solves industry pain points of with high mix, low volume production, it's hard to scale. RPS does it with unmatched speed and repeatability.

There is a recurring revenue driver. RPS projects are typically long-term, offering consistent cash flow with high margins. We have a vertically integrated strategy. We are expanding our partnerships and capabilities to bring more of the value chain in house, reducing cost of goods and improving gross margins. Our target RPS, to contribute 40% of total revenue by 2026 with further upside through volume and value-add services. It does not mean we are deviating our system sales. It means we are adding more value to Velo as revenue with RPS solution provider.

There's a clear path to profitability by 2026. That is a major key point I want to address here. We are laser focused on achieving EBITDA profitability by first half of 2026 driven by improved ASPs and gross margins from system sales, scalable recurring revenue from RPS and services, operating leverage as we grow revenue with limited cost expansion, a more agile and integrated organization structure. We're not chasing growth at any cost. We're building sustainable, profitable momentum.

What does that mean for investors? A transformed high-margin business model, access to rapidly growing markets with limited competition, technological leadership in defense-critical manufacturing, strength and balance sheet and operational discipline, a credible and visible path to profitability, and value creation.

Join us at the inflection point. We have done the heavy lifting. The strategic pieces are in place. The momentum is building. We believe Velo3D is no longer a speculative bet. It's a smart, long-term investment opportunity with significant upside potential. We are committed to transparency, disciplined execution, and building enduring value for our shareholders. We hope you will join us as we execute on our strategic vision.

Thank you. I now invite Hull Xu, our CFO, to discuss our detailed financial performance and guidance.

Thank you, Arun. Moving on to our financial performance, fourth-quarter revenue was $12.6 million, up significantly from a year ago and sequentially. The improvement was driven by increased system sales as well as our new go-to-market strategy starting to gain traction. Gross margin for the fourth quarter was negative 3.5% and primarily due to lower fixed cost absorption.

We expect gross margin to improve as we go through 2025 as a result of operational efficiency initiatives that we started to implement last year and continue to implement this year. As RTS revenue begins to ramp, we expect our overall margin to improve as we work through the initial set of costs associated with new parts.

We also made significant progress on reducing our operating cost structure in the fourth quarter as non-GAAP OpEx declined year over year to $18.7 million, excluding share-based compensation. On an annual basis, 2024 operating expenses declined more than 20% as compared to 2023. The decrease in operating expenses reflects a reduction in all expense categories and savings related to realignment initiatives, which included two rounds of reductions in force.

As we begin 2025 with a new outlook, we are making investments in certain areas to ensure the delivery of our financial plan and the high-quality services that our customers have come to expect from Velo3D. However, even with a planned investment, we expect a reduction in OpEx as a percentage of revenue on a year-over-year basis.

GAAP net loss for the quarter was $21.7 million. On a non-GAAP basis, which excludes stock-based compensation and a non-cash gain as a result of the debt for equity exchange, net loss was $22.2 million. Adjusted EBITDA for the quarter excluding stock-based comps, gain from the debt for equity exchange, and one-time restructuring charges was negative $14.6 million compared to a negative $50 million in Q4 of 2023. We exited 2024 with $16 million in backlog and added to our growing sales pipeline in the first quarter of this year.

In relation to our balance sheet, we have significantly strengthened our financial position due to three factors. One, the elimination of a substantial amount of our senior secured debt, which had a very aggressive repayment schedule. Two, our recently completed warrant exchange transaction, which addressed eminent cash liabilities and preserved cash for our business operations. And finally, we secured $15 million in bridge financing, which gives us the resources to execute on our strategic initiatives.

Turning to 2025 full-year guidance, we expect revenue to be in the range of $50 million to $60 million, growth margin to improve in sequential quarters exceeding 2025 at above 30%. As we invest in our future of profitable growth and expansion plans, we expect non-GAAP operating expenses to be in a range of $40 million to $50 million and capital expenditure to be between $15 million and $20 million. In conclusion, we are focused on executing our new business strategy with a clear path to profitability in 2026 through a combination of revenue growth, margin expansion, and identified expense reductions.

With that, I'd like to open the call to questions.

(Operator Instructions) Thank you. There are no questions at this time. I would like to hand the floor back over to Arun Jeldi for any closing comments.

Thank you, everyone. Thank you for supporting Velo3D all these years. As we change our pathway and get to a new position as a new Velo 2.0, we need your support. And give us the momentum needed for the company. Velo is not just a metal additive manufacturing company in US. It's a part of US strategy for manufacturing. That's the reason why Arrayed Additive has believed in Velo and want to be making Velo proud.

We really want everyone to support us in this journey. We'll make proud in getting back manufacturing to US as President Trump's vision is. We want to make sure Velo actually executes in that manner. A hybrid model in Velo is a proven thesis, and it will grow its strategy as we evolve, and 2025 is a new beginning to Velo. And I appreciate all my team and investors, our customers and vendors in supporting us. Thank you very much for your support. Have a good weekend and a great year ahead. Thank you. Bye.

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.