Velo3D, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. Velo3D develops and sells or leases metal additive-manufacturing printers and provides support services. Unless noted otherwise, amounts are in U.S. dollars.
Key financial results
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $12.2 million | $1.2 million |
| Gross profit (margin) | $0.015 million (about 0.1%; reported as 0.0%) | $(0.390) million ((33.3)%) |
| Operating expenses | $28.2 million | $11.5 million |
| Operating loss | $(28.2) million | $(11.9) million |
| Net loss | $(65.3) million | $(13.5) million |
| Net loss per share | $(0.36) | $(0.85) |
| Cash used in operating activities | $30.1 million | $2.6 million |
- Revenue mix: Printer sales were $10.2 million, recurring payments $0.9 million, and support services $1.1 million. Revenue increased 942.5% year over year, principally reflecting six printer sales versus none in Q1 2021.
- Margins and spending: Gross profit was near break-even despite higher revenue. Management cited launch-customer pricing for Sapphire XC, higher material costs, and labor and factory overhead. R&D rose to $12.9 million, selling and marketing to $6.0 million, and general and administrative expense to $9.3 million.
- Noncash charges: The net loss included a $31.2 million loss from remeasurement of contingent earnout liabilities and a $6.0 million warrant fair-value loss. Stock-based compensation was $5.0 million. These items affected earnings but were noncash.
- Liquidity: At March 31, cash and cash equivalents were $104.4 million and short-term investments were $81.7 million, totaling $186.2 million. Total current assets were $250.0 million versus current liabilities of $56.2 million. Liquid resources were $223.1 million at year-end 2021; the quarter’s cash decline partly reflected $66.9 million of purchases of short-term investments.
- Debt and commitments: Debt totaled $7.5 million, including $3.0 million drawn on a revolving line and $4.6 million of equipment loans; $5.1 million was current. The company also disclosed $67.9 million of non-cancellable purchase commitments, primarily for delivery in the second half of 2022.
Changes, outlook, and risks
- Shipments increased to eight printers from four: six sold and two leased in Q1 2022, compared with none sold and four leased in Q1 2021. Bookings were seven versus six. The company reported 20 cumulative system customers and a $55.0 million backlog of firm printer orders.
- Customer concentration remains significant: the largest customer accounted for 65.4% of Q1 revenue, and the top three accounted for 87.5%. Management expects its largest customer, SpaceX, to remain important and anticipated its share of revenue could increase in 2022, depending on shipment timing.
- Management expects operating cash use to increase during the remainder of 2022 as operations scale. It planned a further $2–3 million of facility equipment and improvement investment to complete the Sapphire XC manufacturing facility by the first half of 2022. No specific full-year revenue or earnings guidance is provided in the filing text.
- Management stated that cash and expected operating cash generation should fund working capital and capital expenditures for at least 12 months from the May 16, 2022 financial-statement issuance date, while also warning that additional financing may be needed. The company has a history of losses and negative operating cash flow.
- Risks highlighted include supply-chain constraints and shipment delays, COVID-19 and broader economic/geopolitical uncertainty, customer and supplier concentration, product reliability and commercialization, and the costs of scaling production and R&D.
- Post-quarter financing development: On May 13, 2022, the company modified its loan agreement, extending the revolving line’s maturity from May 14 to June 13, 2022 and waiving a default related to failure to maintain at least $25 million of revenue for the six months ended March 31, 2022.
- Controls and contingencies: Disclosure controls were not effective as of March 31, 2022 because previously identified material weaknesses remained unremediated, including deficiencies in staffing, segregation of duties, accounting for debt/equity instruments and inventory accruals, and IT controls. Management reported immaterial misstatements in Q1 accounts and described remediation efforts. The company reported no material pending legal proceedings.
Important facts for investors to verify
- Whether the $55.0 million backlog and Sapphire XC reservations convert into shipments, recognized revenue, and cash collections on schedule.
- Customer concentration, particularly the timing and scale of SpaceX orders, and whether the customer base diversifies.
- Gross-margin progress as production scales, launch pricing changes, and material, labor, and overhead costs evolve.
- Cash burn, the $67.9 million of non-cancellable commitments, facility spending, and any need for additional financing.
- Whether the revolving credit line was renewed or repaid by its June 13, 2022 extended maturity date, and compliance with loan covenants.
- Progress in remediating material weaknesses and preventing further financial-reporting errors.
- The filing’s earnout disclosure: the income statement and MD&A identify a $31.2 million fair-value loss, while the Note 10 rollforward labels the $31.2 million change a “gain”; clarify this apparent inconsistency.