“Our third quarter performance reflects solid execution as we again posted strong year-over-year revenue growth, increased our sizeable backlog and expanded our new and existing customer footprint,” said Benny Buller, CEO of Velo3D. “However, our third quarter financial results were primarily impacted by key component shortages which affected our production schedule, resulting in certain system shipment delays. We have instituted a number of strategic initiatives to address these challenges and are confident in achieving our fourth-quarter financial forecasts. As a result of the shipment delays, and potential fourth-quarter supply chain and production disruptions, we are reducing our 2022 revenue forecast from $89 million to a range of $75 million to $80 million.”
“Our third quarter performance reflects solid execution as we again posted strong year-over-year revenue growth, increased our sizeable backlog and expanded our new and existing customer footprintBenny Buller, CEO, Velo3D
Revenue for the third quarter was $19.1 million, in line with the second quarter of 2022 and an increase of 119% compared to the third quarter of 2021. Compared to our original 2022 plan, third-quarter 2022 revenue reflected the impact of system shipment delays due to supply chain component shortages and production constraints. On a sequential basis, year of sale revenue was impacted by the system sales mix as well as a higher proportion of launch customer shipments than in the second quarter. This impact was partially offset by higher recurring revenue due to a greater number of systems in the field. The year-over-year improvement in revenue was primarily driven by increased system sales and a more favorable mix of Sapphire XC system sales resulting in an increase in average selling price.
Gross margin for the Q3 was negative 1% and down sequentially due to the margin impact of an increased number of launch customer deliveries for the company’s Sapphire XC systems, higher than expected inventory adjustment charges associated with the production of its Sapphire XC product. Labor and overhead costs for the third quarter were in line with forecasts and the company expects further improvement in its bill of material costs through the first half of 2023.
Operating expenses by Velo3D for Q3 were in line with the second quarter at $27.8 million. General and administrative cost increased due to re-allocations of facilities and IT costs between departments, higher professional services and taxes. Research and development expenses and selling and marketing expenses decreased slightly due to the above re-allocations. Non-GAAP operating expenses, which excludes, among other items, stock-based compensation expense of $5.2 million, was $22.7 million in the three months ended September 30, 2022.
The company ended the quarter with a strong balance sheet with $113 million in cash and investments. As a result, the company believes it has the liquidity for ongoing technology investments as well as providing the resources needed to fund its growth plans.
“Specifically – Mr. Buller continued – demand for our industry-leading Sapphire family of systems remains high as we expanded both our new and existing customer footprint during the quarter. For example, new customer additions included two marquee European aerospace OEMs as well as our first sale to a strategic, Fortune 100, U.S. automotive manufacturer. Additionally, we had three customers purchasing multiple systems, reinforcing our credibility as a technology leader in the AM market. We also booked $27 million in new orders in the third quarter and our backlog now totals $66 million. This success provides significant revenue visibility for the fourth quarter as well as building a strong foundation for future growth as we enter 2023.”
Given its strong bookings and significant backlog, the company expects fourth-quarter sequential revenue growth in the range of 25-50%. However, due to the impact of the Q3r shipment delays as well as potential fourth-quarter supply chain and production disruptions, Velo3D now expects 2022 revenue to be in the range of $75-$80 million compared to its previous guidance of $89 million.
“Looking forward, we remain very excited about the future as our bookings and backlog growth reflect the increasing adoption of our technology. We are confident that we have a clear path to profitability given our current capital resources. We expect to achieve this by leveraging our strong top-line growth, our focus on rapidly accelerating production efficiency, prudent expense and working capital management and a return to normalized pricing. As a result, we believe we are well positioned to profitably capitalize on the rapidly expanding market for mission-critical, high-value metal parts,” concluded Buller.
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