Velo3D, Inc.

Hello, and welcome to the Velo3D Reports first quarter 2022 financial results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Bob Akunski, Head of Investor Relations for Velo3D. Please go ahead.

Thank you. I'd like to welcome everyone to our first quarter 2022 earnings conference call. On the call today, we will start out with comments from Benny Bullard, CEO of Velo3D, who will provide a summary of the quarter as well as provide an update on the key strategic priorities for 2022. Following Benny's comments, Bill McComb, our CFO, will then review our first quarter 2022 financial results and provide our guidance. As a reminder, a replay of this call will be available later today on the investor relations page of our website. During today's call, we will make forward-looking statements that are subject to various risks and uncertainties that are described in the safe harbor slide of today's presentation, today's press release, as well as our 2021 10-K filing. Please see those documents for additional information regarding those factors that may affect these forward-looking statements. 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 gap to non-gap reconciliations. Finally, to enhance this call, we have posted a set of PowerPoint slides which were referenced during the call on the events and presentations page of our investor relations website. With that, I'd like to turn the call over to Benny Buller, CEO of Bello3D. Benny?

Thanks, Bob. And I'd like to welcome everyone to our first quarter earnings call. Please turn to slide four. Overall, as our first quarter results show, we are continuing to cement our position as a differentiated technology leader in high-value manufacturing. Our metal additive manufacturing technology changes the way products in aerospace, energy, power, and other industries segments are designed and produced. It is used to make some of the most critical parts of these products, and we are maintaining our focus on driving the vast blue ocean market opportunity that is enabled by our unique and superior technology. I would now like to discuss the specifics of our results. We are pleased with our Q1 performance as we posted our third straight quarterly revenue increase as a public company, added to our backlog and bookings, and expanded our new customer footprint. Given these results, we remain highly confident in achieving our 2022 revenue target of $89 million, a year-over-year growth rate of 225%. For the quarter, revenue rose 17% sequentially and more than 900% year over year, as customer adoption of our Cephar technology remains very high. We shipped eight systems during the quarter. Demand for our Cephar and Cephar XC systems continued to grow, and we exited Q1 with a record backlog of $55 million. Additionally, we booked seven systems during the quarter, including a number of new customers. 2022 visibility has also improved given our performance as we now have more than 75% of our 2022 revenue guidance already in backlog, recurring, or recognized. We also successfully managed our supply chain during Q1 to meet our quarterly production goals. We continue to see challenges in the supply chain but are working closely with our suppliers to avoid any disruptions. Finally, we achieved an important milestone for the company during the quarter as we started volume production of our Sephora XE. I would now like to spend a few minutes discussing why we remain confident in achieving our 2022 revenue target of $89 million. I'll focus my remarks on our improving 2022 visibility on slide five, as well as provide additional details on our ongoing success with our Sephora XE product on slide six, turning to slide five. As I previously mentioned, our 2022 confidence is driven by the fact that we have significant visibility for this year. In addition, we expect to see ongoing strong demand for both our Cephar and Cephar XC systems as customers continue to choose our industry-leading technology for their AM needs. Specifically, the chart provides a detailed breakdown of our 2022 revenue expectations by category exiting Q1 versus where we were coming into the year. As you can see, we made significant progress increasing our 2022 visibility over the last three months and now have more than 75% of our 2022 revenue target already recognized, recurring or booked for this year. A key driver for this improvement is our continued success in securing new system bookings. The result is a significant increase of our shippable backlog that will contribute to our 2022 revenue. This can be seen by the sequential reduction in future bookings needed to reach our 2022 revenue guidance as it fell from approximately 40% of our full year guidance at the beginning of the year to approximately 25% at the end of Q1. In summary, given our Q1 results, strong bookings activity and growing backlog we remain very confident in achieving our 2022 revenue forecast. Moving on to slide six, I would like to highlight our ongoing success with the rollout of our Zephyr XA system. Overall, we believe the increasing demand for our Zephyr XA is directly related to the unique value of our technology and continue to see strong adoption from both our OEM and contract manufacturing partners. As a reminder, The key elements of the Sephora XC relative to the Sephora include about 400% higher production rate, lower part costs by as much as 60% to 80%, and the ability to produce 400% larger volume parts. I also want to briefly highlight that the Sephora XC is utilizing the same intelligent fusion manufacturing technology they use by Sephora and is designed as a scale-up solution. This enables customers to develop their products and qualify their manufacturing technology on Cephar. Then, when they are ready to scale up production volume, they purchase a Cephar XC to achieve the same productivity of multiple Cephars at a fraction of the cost, all while utilizing the same manufacturing process. This core capability enables a seamless production transition and scale-up from Cephar to Cephar XC. This approach is not only driving demand for the Cefar XC, but is also accelerating the adoption of our Cefar system, especially with new customers. Our ability to offer a cost optimized scale up solution for Cefar XC enables more customers to start their journey on the Cefar platform. Specifically for the quarter, Cefar XC accounted for more than 45% of our total revenue. As we increase the shipment rate of Cefar XC, our confidence in this year's guidance increases. Looking forward, Sephora XC now accounts for more than 90% of our total backlog. Given these strong trends, we have made the decision to expand our Sephora XC production rate starting in the second half of the year. In summary, increasing customer adoption of Sephora XC enabled us to exit the quarter with a record total backlog of $55 million. up 17% sequentially and more than 80% year over year. Visibility for 2022 is high and we remain very positive on the long-term fundamentals of our business. More and more customers increasingly value our leading technology to build without compromise the high value parts they need. I would like now briefly to discuss a few of our key operating metrics for the quarter, as well as review our 2022 targets, which remain unchanged. Please turn to slide seven. We added two new customers in Q1 while booking a number of new customers during the quarter. We are maintaining our guidance for 24 new customers in 2022 through the expansion of our United States footprint, as well as benefiting from the significant customer interest in Europe post our market entry late last year. We also shipped eight systems in Q1. For 2022, we expect to more than double shipments to 48 at the midpoint of guidance, also unchanged from last quarter. Finally, our average existing customer purchases ratio for the quarter was 0.33, which was consistent with our long-term forecast of between 1.2 and 1.4, on an annualized basis. On slide eight, we are providing an update on our key revenue metrics for the first quarter under the same format. Overall, revenue for the quarter was $12 million. Sales revenue was $10 million with the balance from recurring revenue. For 2022, our guidance remains unchanged at $89 million at the midpoint, including approximately $11 million in recurring revenue. Year-of-sale ASP for the quarter was in line with expectations at $1.3 million, as we mentioned last quarter. We expect year-of-sale ASP to rise in 2022 to between $1.5 to $1.7 million as the result of increasing sepharxy sales, as well as a shift in transaction mix to more printer sales. Before turning the call over to Bill to discuss our financials, I would like to conclude my remarks by providing a brief update on our 2022 strategic priorities. Please turn to slide nine. Overall, we continue to see a rapidly expanding global market for high value metal parts and remain committed to providing our customers with the technology to meet their growing needs. First, we remain focused on increasing our existing customer footprint to follow on system purchases. We continue to invest in both our technology and support capabilities as the success of our customers is what drives purchases of additional systems. From a new customer perspective, we are excited about our European expansion this year. We see Europe as a significantly untapped opportunity and based on discussions with potential customers over the last three months, interest in our technology is very high. we expect Europe to account for a material portion of our new customer count for this year. Our second priority is to execute on our manufacturing expansion plans, which will provide the capacity we need to meet the growing demand for our software systems. Overall, we remain focused on successfully managing our supply chain in relation to our production schedule, especially electronic components. To date, we have been able to mitigate any material impact on our business through multi-tier collaborations. We are not only helping our suppliers directly, but also working with their supply chain in the procurement of critical components to ensure we meet our production goal. Additionally, we are leveraging our relationships with our top customers to secure needed inventory. That being said, our supply chain remains an ongoing challenge and we are maintaining higher-than-normal inventory as a mitigation to the risks in the supply chain. Also, with the successful shift to volume production of Zephyr XC, we now have the additional resources to further optimize system performance and production quality, factors that we believe are critical for customer success and key to driving repeat orders. On the cost side, we continue to expect a material reduction in Zephyr XC production costs through the end of the year as we leverage our manufacturing experience. This reduction will be driven primarily by higher volume production over a fixed cost base, as well as benefiting from our accumulated learnings to increase efficiency and throughput. Our final priority is to continue to deliver industry-leading service to our customers. We believe our customer service separates us from our peers and is a critical driver of why we continue to see strong demand from our existing customer base. As a result, we are driving a systematic data-driven effort to continuously improve the reliability and quality of our systems. We believe the reliability of additive machines should reach the level of traditional subtractive milling machines over time, and we will keep investing and improving our products until we achieve this level of reliability. Finally, we continue to expand and develop our growing customer support team to maintain our industry-leading service capabilities. We are excited about what we have accomplished to date and believe we are well-positioned to capitalize on the significant global opportunity for our technology. We remain confident in our 2022 forecast and look forward to executing on our future vision. With that, I'd like to turn the call over to Bill to discuss the financials and our guidance.