Velo3D, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing, not a standalone fourth-quarter report. The September 29, 2021 merger with JAWS Spitfire was accounted for as a reverse recapitalization; pre-merger results are those of Legacy Velo3D.
Business context and operating performance
Velo3D sells and leases metal additive-manufacturing systems, software and support services, primarily to OEMs and contract manufacturers in space, aviation, defense, energy and industrial markets. It reported 18 cumulative system customers, 10 new customers, 34 bookings and 23 printer shipments in 2021, versus 8 customers, 5 new customers, 18 bookings and 13 shipments in 2020.
The company launched its larger Sapphire XC system at year-end 2021. It reported 18 firm XC orders and $43 million of XC backlog at December 31. Management says the system is designed to make parts up to four times larger and reduce part costs by approximately 65%–80% versus the existing Sapphire system.
Financial results and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $27.4 million | $19.0 million |
| Gross profit / gross margin | $5.0 million / 18.1% | $6.4 million / 33.6% |
| Operating expenses | $62.7 million | $27.6 million |
| Loss from operations | $57.8 million | $21.2 million |
| Net loss | $107.1 million | $21.8 million |
| Cash used in operating activities | $56.4 million | $26.4 million |
| Cash used in investing activities | $33.6 million | $3.4 million |
| Cash provided by financing activities | $282.9 million | $35.6 million |
Revenue grew 44.6%, led by printer sales, recurring-payment revenue and support services. Gross margin fell as costs rose faster than revenue, reflecting XC launch and production costs, customer launch pricing, supply-chain expediting and higher support costs. R&D expense rose to $27.0 million from $14.2 million; selling and marketing rose to $12.4 million from $7.0 million; and general and administrative expense rose to $23.4 million from $6.4 million.
At year-end, cash and cash equivalents were $207.6 million and short-term investments were $15.5 million, totaling $223.1 million. Current assets were $268.1 million and current liabilities $46.7 million. Debt was $8.1 million, including $5.1 million current and $3.0 million long-term. The company had an accumulated deficit of $229.9 million. It received $278.3 million of net proceeds from the merger and PIPE financing; the PIPE raised $155 million gross.
Material changes, outlook and risks
- Merger and unusual items: A $50.6 million noncash loss from modification/extinguishment accounting for a $5.0 million convertible note materially increased the reported net loss. Other fair-value items included a $9.3 million noncash gain on contingent earnout liabilities and a $5.2 million loss on warrant liabilities. Warrants and earnout shares are reported as liabilities and remeasured, which can cause earnings volatility.
- Customer and supplier concentration: The top three customers represented 62.0% of revenue, down from 71.8% in 2020. SpaceX contributed 27.8%, compared with 41.1% in 2020. The company also identifies four key suppliers and cites supply and pricing exposure.
- Growth and cash needs: Management expects continued operating losses and negative cash flow in the near term, higher operating cash use in 2022, and rising R&D and selling costs. It expects cash on hand and merger/PIPE proceeds to cover working-capital and capital-expenditure needs for at least 12 months from the March 28, 2022 financial-statement issuance date, but says additional financing may be needed. It planned another $4–$6 million of factory equipment and facility investment in the first half of 2022.
- XC execution: Management expects production efficiencies to reduce XC costs in the second half of 2022. Launch pricing is expected to weigh on margins through the third quarter of 2022 for deliveries under a launch-customer contract. Reservations may not convert to orders, and supply constraints or installation delays could defer shipments and revenue.
- Controls and reporting: Management concluded disclosure controls were ineffective and disclosed material weaknesses involving finance staffing and segregation of duties, accounting for complex debt/equity instruments and contract balances, and IT general controls. The filing reports audit adjustments and a prior SPAC warrant-related restatement. Management did not provide an ICFR effectiveness assessment for 2021 under the reverse-acquisition transition accommodation. The auditor issued an unqualified opinion on the financial statements.
- Other exposures: COVID-19 and component shortages affected timing and shipments; the filing also cites macroeconomic, geopolitical, competitive, product-quality, export-control, cybersecurity and environmental risks. No material legal proceedings were reported.
Key facts investors should verify
- Whether the $43 million Sapphire XC backlog and reported firm orders convert into timely shipments, customer acceptance and collected cash.
- Whether revenue growth can improve gross margin as XC manufacturing and support costs normalize, and how launch pricing affects 2022 results.
- Cash burn, planned facility spending, debt maturities and the company’s stated liquidity runway; assess whether additional financing or dilution may be required.
- Customer concentration, including SpaceX order and shipment timing, and the resilience of key suppliers amid continuing component constraints.
- Remediation and testing of the disclosed material weaknesses, and the effects of warrant and earnout liability remeasurement on reported results and potential dilution.