Velo3D, Inc. — FY2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022; comparisons are with FY2021. Velo3D makes integrated metal additive-manufacturing printers and software, primarily for aerospace, defense, space, energy, automotive and industrial customers.
Financial and operating performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $80.8 million | $27.4 million |
| Gross profit / margin | $2.9 million / 3.6% | $5.0 million / 18.1% |
| Operating expenses | $107.2 million | $62.7 million |
| Operating loss | $104.3 million | $57.8 million |
| Net income (loss) | $10.0 million | $(107.1) million |
| Cash used in operating activities | $124.0 million | $56.4 million |
- Printer sales were $71.3 million, up 210%; recurring-payment revenue was $4.2 million and support-services revenue was $5.3 million.
- Revenue rose 194%, primarily from higher printer volumes and the Sapphire XC product mix. Bookings were $71 million, versus $52 million; year-end printer backlog was $43 million, versus $47 million.
- Gross margin fell substantially as Sapphire XC production ramped, costs increased, and launch-customer price concessions affected results. Management estimated those concessions reduced 2022 gross margin by about 7.7 percentage points.
- The $10.0 million net income is not evidence of operating profitability: it included noncash gains of $94.1 million from remeasurement of contingent earnout liabilities and $19.1 million from warrant liabilities. The company reported a $104.3 million operating loss.
- At year-end, cash and cash equivalents were $32.0 million, short-term investments $48.2 million, and total current assets $172.9 million. Current liabilities were $46.1 million. Inventory rose to $71.2 million from $22.5 million.
- Debt was $8.2 million net of deferred financing costs (approximately $8.4 million of gross borrowings). The company used $124.0 million in operating cash and ended the year with $80.2 million in cash, cash equivalents and short-term investments.
- Capital expenditures for property and equipment were $13.8 million. Noncancellable purchase commitments were $52.4 million, due as parts and assemblies are delivered during 2023.
Material changes versus FY2021
- Revenue nearly tripled, but cost of revenue grew faster, increasing from 81.9% to 96.4% of revenue and compressing gross margin from 18.1% to 3.6%.
- Operating loss widened by $46.5 million as research and development, sales and marketing, and general and administrative expenses increased. R&D spending rose to $46.3 million from $27.0 million.
- Operating cash use more than doubled, principally alongside a $47.0 million increase in inventory and other working-capital needs. Cash and equivalents declined from $207.6 million to $32.0 million; short-term investments increased to $48.2 million from $15.5 million.
- FY2021 included a $50.6 million noncash loss from modification of a convertible note; that item did not recur in FY2022.
- SpaceX accounted for 28.4% of FY2022 revenue, compared with 27.8% in FY2021. The top three customers accounted for 46.4%, down from 62.1%.
Outlook, risks and unusual items
- No specific revenue or earnings guidance is provided. Management expects operating cash use and capital expenditures to decrease in 2023, R&D costs to stabilize over time, and gross margin to improve in the second half of 2023 through manufacturing efficiencies and lower costs. These are expectations, not guarantees.
- Management said available cash, investments and proceeds from 2023 ATM sales, together with expected operating cash generation, should fund working capital and capital expenditures for at least 12 months from the filing date. The company remains loss-making and expects near-term negative operating cash flow; future funding may be needed.
- Customer concentration, long sales cycles, supply-chain constraints, product ramp and reliability, and the ability to lower production costs are significant risks. The company stated that supply-chain challenges increased material and shipping costs and delayed shipments in 2022.
- The SVB closure in March 2023 temporarily raised liquidity and covenant questions. Velo3D disclosed approximately $4 million at SVB and said it regained access to its funds on March 13. Its loan agreement requires at least 90% of operating and deposit accounts to be held at SVB or specified SAM accounts; the company was discussing an amendment with the bridge bank or could transfer cash or repay borrowings.
- The loan agreement also includes a $20 million minimum-liquidity requirement and revenue covenants. The company reported prior covenant waivers and was in compliance with reporting covenants at year-end.
- Management concluded disclosure controls and internal control over financial reporting were ineffective at December 31, 2022, citing material weaknesses in staffing and control environment, segregation of duties, inventory, contract balances and certain IT controls. Financial-statement adjustments were made. Remediation is ongoing and not yet validated as effective.
- The filing reports $11 million of ATM sales by March 8, 2023, but disclosures differ on the stated ATM capacity: one section describes up to $40 million, while the subsequent-events note refers to a $4 million prospectus amount. Investors should confirm the applicable offering limit and remaining capacity.
- The auditor gave an unqualified opinion on the financial statements, but did not audit or opine on internal-control effectiveness. No material legal proceedings were reported.
Important facts for investors to verify
- Whether Sapphire XC and 1MZ production improves per-unit costs and delivers the forecast margin recovery, especially in the second half of 2023.
- Whether the $43 million backlog converts into shipments, customer acceptance and cash collections, and how bookings and customer concentration develop.
- Cash burn, inventory levels, noncancellable purchase commitments, ATM proceeds and potential dilution; reconcile the filing’s inconsistent ATM capacity disclosures.
- Resolution of the SVB-related deposit covenant, continued access to credit facilities and compliance with minimum-liquidity and revenue covenants.
- Progress in remediating material weaknesses, particularly inventory, contract balances, segregation of duties and financial-system access controls.
- The assumptions and future effects of noncash warrant and earnout liability remeasurements, which materially affected reported net income.