Velo3D, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Velo3D develops and sells or leases metal additive-manufacturing printers and provides customer support services.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $9.8 million | $26.7 million |
| Gross profit (loss) | $(2.8) million | $2.5 million |
| Gross margin | (28.8)% | 9.5% |
| Operating expenses | $18.6 million | $26.8 million |
| Operating loss | $(21.5) million | $(24.3) million |
| Net loss | $(28.3) million | $(36.3) million |
| Net loss per share, basic and diluted | $(0.11) | $(0.19) |
| Cash used in operating activities | $(20.5) million | $(30.8) million |
- Revenue fell 63%, primarily because fewer printer systems were sold; printer sales declined 69% to $7.7 million. Support services were broadly unchanged at $1.7 million.
- Cost of revenue declined less than sales, down 48% to $12.6 million. Higher service, production and product-launch costs contributed to the negative gross margin.
- Operating expenses fell 30%, including lower R&D, selling and marketing, and general and administrative costs. Interest expense rose to $3.9 million from $0.2 million, largely reflecting the secured notes.
- At March 31, cash and cash equivalents were $7.8 million and short-term investments were $3.2 million, versus $24.5 million and $6.6 million, respectively, at year-end. Current assets were $98.3 million and current liabilities $60.9 million.
- Debt carrying value was $36.3 million, including $34.3 million classified as current; disclosed principal outstanding was approximately $36.8 million. The notes carry a 6% stated rate, but the reported effective interest rate was 45.1%. Contractual repayment terms require 120% of principal repaid, plus interest.
- Bookings were $17 million versus $20 million year over year. Printer backlog was $22 million at March 31, up from $13 million at December 31, 2023 and down from $24 million a year earlier.
Liquidity, outlook and material developments
- Management concluded there is substantial doubt about Velo3D’s ability to continue as a going concern: it said liquidity was insufficient to meet operating needs and obligations for at least 12 months from issuance of the statements, and additional financing is required. Without it, the company may need to sell assets, liquidate or file for bankruptcy.
- After quarter-end, Velo3D made two $5.5 million payments under an April 1 note amendment, to redeem or repay approximately $4.2 million and $4.6 million of principal, respectively, plus accrued interest. It issued noteholders warrants for up to 21.9 million shares at $0.4556 per share.
- An April 10 offering of 34.3 million shares and warrants for up to 34.3 million additional shares at $0.35 per share generated approximately $12 million gross proceeds. Proceeds were intended for working capital, capital expenditures and general corporate purposes, including note repayment. The filing reports cash and investments of approximately $5.7 million and receivables of $11.1 million as of May 9.
- The board’s strategic review remains ongoing and includes potential merger, business combination or sale alternatives; no outcome is assured. The company expects revenue growth to recover in the second half of 2024 and thereafter, but also warned of further near-term revenue contraction. Management expects gross margins to improve in the second half as production efficiency and costs improve.
- Management identified customer order delays, customer concentration, and printer reliability and uptime as key operating concerns. Some receivables were past due; collecting certain balances and acceptance-test payments depends on successful system performance.
- NYSE had notified the company that its share price did not meet the $1 minimum-price listing standard; the cure period was scheduled to end June 28, 2024. Failure to regain compliance could result in delisting.
- Disclosure controls were deemed ineffective, and material weaknesses in financial reporting controls remained unremediated at March 31. The company cited weaknesses involving staffing and segregation of duties, debt and equity accounting, inventory, contract assets and liabilities, financial statement presentation, and IT controls.
- The filing notes that prior-period interim statements were revised for immaterial errors, including revenue and cost classifications. It states the errors were not material and did not change previously reported cash flows.
Important facts for investors to verify
- Cash runway, near-term funding needs and whether additional financing is available on acceptable terms.
- Compliance with secured-note covenants, redemption obligations and any further amendments or repayments.
- Fully diluted share count and potential dilution from the April offering warrants, noteholder warrants, and existing warrants and equity awards.
- Progress on printer reliability, past-due receivables, acceptance tests, bookings and backlog conversion into revenue and cash.
- NYSE listing status and any outcome of the board’s strategic review.
- Remediation of material weaknesses and clarification of the filing’s differing descriptions of the income-tax provision: the statements report $4,000, while MD&A says no provision was recorded.