Q4 2024 Velo3D Inc Earnings Call
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Speaker Change: As a reminder, this conference is being recorded it is now my pleasure to introduce barbell country, Vice President Investor Relations at Hello, Three D <unk>.
Please go ahead.
Okay.
Speaker Change: Thank you I'd like to welcome everyone to our fourth quarter and fiscal year 2024 earnings conference call on.
Speaker Change: On the call today, we will start out with comments from our Rouge L. D. C E O ability D, who will provide an overview of the new dealt with three D and our strategic priorities to position the company for profitable growth.
Speaker Change: Following our rudy's comment Paul Xu our CFO will then review our fourth quarter financial results and provide our guidance.
Speaker Change: As a reminder, a replay of this call will be available later today on the Investor Relations page of our website.
Speaker Change: During today's call we will make forward looking statements that are subject to various risks and uncertainties.
Speaker Change: That are described in the Safe Harbor slide of today's presentation today's press release as well as our 2024 10-K and additional 2024 SEC filings. Please see those documents for additional information regarding those factors that may affect these forward looking statements.
Speaker Change: Also we will reference certain non-GAAP metrics during today's call. Please refer to the appendix of our presentation as well as today's earnings press release for the appropriate GAAP to non-GAAP reconciliations.
Speaker Change: We have also posted a set of Powerpoint slides, providing additional details on our strategic initiatives and financial performance on the events and presentations page of our Investor Relations website.
Speaker Change: With that I'd like to turn the call over to Arun Shelby CEO of Delta three D. Arun.
Arun Shelby: Good afternoon, and thank you for joining <unk> fourth quarter and fiscal year 2024 earnings conference call.
Speaker Change: Hey.
Speaker Change: Marks an exciting and transformational milestone for our company.
Speaker Change: As we have discussed the strategy combination.
Speaker Change: But ah right attitude.
Speaker Change: Inc, which is the parent company right now due to.
Speaker Change: Acquisition called <unk>.
Speaker Change: Signaling the beginning their fellow T D 2.0.
Speaker Change: This combination is a cornerstone of our renewed focus on driving sustainable profitable dropped and positioning ourselves for.
Speaker Change: Long term value creation as.
Speaker Change: As an investor you recognize the importance of growth opportunities that are bolt impactful and strategic.
My decision to invest in Valor G D through at Ada attitude stems from the immense potential ICM to combining our companies together.
Speaker Change: Together, we now offer unmatched metal additive manufacturing capabilities, leveraging the best technologies and expertise from both sides.
Speaker Change: This powerful synergy positions us to capitalize on significant growth opportunities in key sectors, including aerospace defense automotive and engineering.
Speaker Change: We're confident that this strategic integration will not only enhance our comps you do hedge but also daily where substantial long term value for our shareholders as.
Speaker Change: As we move forward, we remain committed to driving innovation and achieving sustainable broke.
Speaker Change: Ensuring that <unk> is well positioned for continued success.
Speaker Change: There are seven key investor highlights from our recent transformation include.
Speaker Change: A high growth high margin business model built for profitability.
Speaker Change: What does that mean to validate it.
Speaker Change: We have shifted from a volume driven model to a value driven strategy focused on maximizing profitability for example.
Speaker Change: Fewer higher value system sales.
Speaker Change: Emphasizing the sale of advanced systems, with significant higher asp's, and Abilene better margins and longer term.
Speaker Change: <unk> relationships.
Speaker Change: It is a diverse revenue streams.
Speaker Change: In addition to system sales our revenue mix now includes rapid production solutions and recurring service oriented offering enabling scalable Pax production.
Speaker Change: And we also are stepping into services and software licensing and predictable margin extra team revenues and finally operational efficiency.
Speaker Change: Cost control initiatives and supply chain optimization.
Speaker Change: Our breakeven point.
Speaker Change: What does that all come off doing this as a result, we are building a resilient business.
Speaker Change: <unk> cash flow potential and clear path to profitability.
The second key highlight is fantastic synergies expanding market reach and technological depth.
Speaker Change: The combination with batteries attitude is accelerating our transformation in powerful ways.
Speaker Change: We with a minimum of product and customer overlap. This partnership adds complementary capabilities without cannibalizing existing business.
Speaker Change: We are increasing the material expertise and leadership in magnesium and aluminium three D printing allows us to address lightweight high strength applications in aerospace defense and motor sports and Evs.
Speaker Change: The total addressable market or combining offering.
Speaker Change: Significantly broadens the scope of industries and applications, we serve solidifying our position as a technological enabler across sectors.
Speaker Change: The third key point is strong positioning amid industry tailwind.
Speaker Change: We are in the right place at the right time, ensuring momentum made.
Speaker Change: U S policy initiatives and global supply chain shifts are freely offshore onshore manufacturing, especially for strategy sectors like defense and aerospace.
Speaker Change: Volatility a U S based leader as the U S as well.
Speaker Change: On the U S large bed size supplier of high end laser powder bed fusion systems, we offer mission critical reliability with local accountability.
Speaker Change: National Security advantage, our solutions are increasingly aligned with federal priorities at our manufacturing independence and technological solver Nicky.
Speaker Change: What are the strategies you can vantage yourself base, we are not just riding the wave we are helping to shape it.
Speaker Change: By re shoring momentum.
Speaker Change: As the U S business later.
Speaker Change: Based litter and National security advantage, we are actually thriving.
Speaker Change: The fourth key point I wanted to address here is.
Speaker Change: And then finance financial position for scalable growth.
Speaker Change: The closed off at any added two transaction, we have taken major steps to solidify our balance sheet.
Speaker Change: We have reduced our debt, we eliminated nearly all senior debt and warrant liabilities from removing financial overhang and they're using interest expense burdens.
We had a bridge finance secured for $15 million.
Speaker Change: So runway to execute near term growth and integration class we.
Speaker Change: Focused on capital allocation with proper budgeting every dollar now supports initiate use that accelerates revenue margin expansion and long term shareholder value.
Speaker Change: The fifth key point I wanted to address key areas accelerating revenue growth and black backlog momentum, we are seeing tangible commercial transaction.
Speaker Change: There is a farm 16 million dollar backlog, a growing base of comic men's system orders service contracts and Rps projects.
Speaker Change: Have a robust pipeline.
Speaker Change: Strong engagement across different defense primes, aerospace Oems semiconductor manufacturers and energy leaders.
Speaker Change: There is a high visibility into future revenue.
Speaker Change: With long cycle procurement and high switching costs.
Speaker Change: Our installed base leads to recurring revenue opportunities and high consumer retention.
Speaker Change: What is that to do with all of this.
Speaker Change: What that means is our near term growth is underpinned by real demand loss speculate to opportunities with revenue growth of more than 30% in 2025.
Speaker Change: We have introduced rapid production solution the future of manufacturing now our Rps business is correctly.
Speaker Change: A cornerstone of our strategy.
Speaker Change: It solves industry pain point, so with high mix low volume production is hard to scale.
Speaker Change: Rps does it.
Unmatched speed and repeatability.
Speaker Change: There is a recurring revenue driver Rps projects are typically long term offering consistent cash flow with high margins.
Speaker Change: We are vertically integrated strategy, we are expanding our partnerships and capabilities to bring more off the value.
Speaker Change: Chain in house, reducing cost of goods and improving gross margins.
Speaker Change: Our target Rps to contribute.
Speaker Change: 40% of total revenue by 2026.
Speaker Change: With further upside through volume and value add services. It does not mean, we are deviating or system sales. It means we are adding more value to value added revenue.
Speaker Change: With Rps solution provider.
Speaker Change: There's a clear path to profitability by 2026 that is a major key point that I wanted to address here.
Speaker Change: We are laser focused on achieving EBITDA profitability by first half of 2026 driven.
Speaker Change: Driven by improved Asps and gross margins from system sales.
Speaker Change: Tailorable recurring revenue from Rps and services operate operating leverage as we grow revenue with limited cost expansion.
Speaker Change: And more agile and integrated organization structure.
Speaker Change: We're not chasing growth at any cost we are building sustainable profitable momentum.
Speaker Change: What does that mean for investors a transformed high margin business model.
Speaker Change: Access to rapidly growing markets with limited competition.
Speaker Change: Logica leadership defense critical manufacturing.
Speaker Change: <unk> balance sheet and operational discipline incredible.
Speaker Change: Reasonable path to profitability and value creation.
Speaker Change: Join us and the inflection point, we have done we have done the heavy lifting.
Speaker Change: The strategic pieces are in place the momentum is building.
Speaker Change: We believe <unk> is no longer a speculative bet.
Speaker Change: It's a smart long term investment opportunity with significant upside potential.
Speaker Change: We are committed to transparency.
Speaker Change: Disciplined execution and building enduring value for our shareholders.
Speaker Change: We hope you will join us as we execute on our strategic vision.
Pablo: I'd now invite Pablo.
Pablo: Xu our CFO to discuss our detailed financial performance and guidance.
Pablo: Thank you Ron moving on to our financial performance fourth quarter revenue was $12 6 million up significantly from a year ago and sequentially.
Pablo: The improvement was driven by increased system sales as well as our new go to market strategy.
Pablo: Seeing to gain traction.
Pablo: Gross margin for the fourth quarter was negative three 5%, primarily due to lower fixed cost absorption.
We expect gross margin to improve as we go through 2025 as a result of operational efficiency initiatives that we started to implement last year and continue to implement this year.
Pablo: As <unk> revenue begins to ramp we expect our overall margin to improve as we work through the initial setup costs associated with new parts.
Pablo: We also made significant progress on reducing our operating cost structure in the fourth quarter as non-GAAP opex declined year over year to $18 7 million excluding share based compensation.
Pablo: On an annual basis 2020 for operating expenses declined more than 20% as compared to 2023.
Pablo: The decrease in operating expenses reflects a reduction in all expense categories and savings related to our realignment initiatives, which included two rounds of reductions in force.
Pablo: As we.
Pablo: <unk> 2025, with a new outlook, we are making investments in certain areas to ensure the delivery of our financial plan.
Pablo: And the high quality services that our customers have come to expect from Belo three D.
Pablo: However, even with the planned investments, we expect a reduction in opex as a percentage of revenue on a year over year basis.
Pablo: GAAP net loss for the quarter was $21 7 million.
Pablo: On a non-GAAP basis, which excludes stock based compensation and a noncash gain as a result of the debt for equity exchange net loss was $22 2 million.
Pablo: Adjusted EBITDA for the quarter, excluding stock based comps gain funded debt for equity exchange and one time restructuring charges was.
Pablo: It was negative $14 6 million compared to a negative $50 million in Q4 of 2023.
Pablo: We exited 2024 with $16 million in backlog and added to our growing sales pipeline in the first quarter of this year.
Pablo: In relation to our balance sheet, we have significantly strengthened our financial position due to three factors.
Pablo: One <unk>.
Pablo: The elimination of a substantial amount of our senior secured debt, which had a very aggressive repayment schedule.
Pablo: Two.
Pablo: Our recently completed warrant exchange transaction, which addressed eminent cash liabilities and preserved cash for our business operations.
Pablo: And finally, we.
Pablo: We secured a $15 million in bridge financing, which gives us the resources to execute on our strategic initiatives.
Pablo: Turning to 2025 full year guidance.
Pablo: We expect the revenue to be in the range of $50 million to $60 million.
Pablo: Gross margin to improve in sequential quarters exiting 2025 at above 30%.
Pablo: As we invest in our future profitable growth and expansion plans, we expect non-GAAP operating expenses to be in a range of $40 million to $50 million and capital expenditure to be between 15 and $20 million.
Pablo: In conclusion, we are focused on executing our new business strategy with a clear path to profit profitability in 2026.
Pablo: Through a combination of revenue growth margin expansion and identified expense reductions.
Pablo: With that I'd like to open the call to questions.
Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the in the question queue.
Speaker Change: Press Star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment please poll for questions.
Speaker Change: Thank you there are no questions at this time I would like to hand, the floor back over to Arun guilty for any closing comments.
Speaker Change: Okay.
Arun: Thank you everyone. Thank you for supporting Mellow <unk> all these years.
Speaker Change: <unk>.
Speaker Change: Change our pathway and.
Speaker Change: Get to her new position as a new willow to Guangzhou.
Speaker Change: We need your support and.
Speaker Change: And.
Speaker Change: It gives us the momentum needed for the company.
Speaker Change: Below is not just a.
Speaker Change: Metal additive manufacturing company and use it as a part of U S China U for manufacturing.
Speaker Change: The reason why I read entity.
Speaker Change: <unk> has believed in mellow and want to be.
Speaker Change: Making velo product.
Speaker Change: We really want and we want to support us in this journey.
Speaker Change: We will make proud and getting back manufacturing to U S. As President Trump's vision is.
Speaker Change: We wanted to make sure Willow actually executes in that matter, a hybrid model and Belo is a proven Pcs and it will.
Grow its strategy as we evolve and 2025 is a new beginning to Ella and I appreciate all my team and investors.
Speaker Change: Our customers and vendors and supporting US. Thank you very much for your Sip book have a good weekend and a great year ahead. Thank you.
Speaker Change: This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.