Velo3D, Inc.

Greetings, and welcome to Velo3D reports their second quarter earnings results 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 during the conference, please press star zero on your telephone keypad. And please note that this conference is being recorded. I will now turn the conference over to Bob Okunski, Vice President of Investor Relations at Velo3D. Thank you, sir. You may begin.

Thanks, John. I'd like to welcome everyone to our second quarter 2022 earnings conference call. On the call today, we will start out with comments from Benny Buller, CEO of LL3D, who will provide a summary of the quarter, as well as an update on certain key strategic priorities for the balance of 2022. Following Benny's comments, Bill McComb, our CFO, will then review our second 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 and Q1 2022 10-Q filings. 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 GAAP to non-GAAP reconciliations. Finally, to enhance this call, we have posted a set of PowerPoint slides which we will reference 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 Vela3D. Benny? Thank you, Bob.

and I would like to welcome everyone to our second quarter earnings call. Please turn to slide four. Before discussing our strong quarterly result, I want to put into context our success over the last six quarters. We firmly believe our industry-leading growth is being driven by our innovation and product differentiation. Customers continue to look to Velo3D to produce the high-value metal parts they need. As you can see from the chart, We have grown revenue by more than 15 times compared to the first quarter of 2021. This growth has been driven by increasing demand for our industry-leading safari systems. There is a simple reason for that. We offer our customers a technology that is significantly better additive manufacturing solution than what is currently available in the market, enabling customers to print the parts they need, avoiding the compromises they had to do with legacy additive manufacturing. This success is also clearly evident when you compare Velo3D to our peer group, whose revenues have been flat to down over the same period according to context research. As a result, we are on track to become the largest metal additive manufacturing company, possibly as early as the end of 2022. We feel this share gain is a direct result of our go-to-market strategy that is focused on a different market segment than our legacy additive manufacturing peers. Our unique and differentiated technology fundamentally changes the way the aerospace, energy, power, and other industrial segments design and produce their most critical parts, parts that cannot be produced with legacy additive manufacturing technology. Overall, we continue to see a massive and tapped global market opportunity for high-value metal parts. We believe we are extremely well-positioned to capitalize on this trend and remain committed to providing our customers with the technology to meet their expanding additive manufacturing needs. I would now like to discuss the specifics of our results. Please turn to slide five. We were pleased with our Q2 execution as we again posted strong sequential and year-over-year revenue growth, maintained our backlog, and expanded our new and existing customer footprint. For the quarter, Revenue rose 60% sequentially and more than 160% year-over-year, as customer adoption of our SAFIRE technology remains very high. We also posted record revenue despite the delay of a handful of early launch customer systems into Q3 due to supply chain challenges. Demand for both our SAFIRE and SAFIRE access systems continues to grow. We booked $18 million in new orders during the quarter while maintaining a significant backlog of $55 million. Given our first half revenue results, strong second quarter bookings, and shippable backlog for this year, we remain highly confident in achieving a 2022 revenue target of $89 million, a year-over-year growth rate of 225%. Operationally, we executed well as we continued to successfully scale our Sephora DC production at our new manufacturing facility. Our ability to scale production is important as it has a direct correlation to cost reduction and gross margin improvement. Finally, we expanded our product leadership during this quarter with the launch of our Sepharic C1MZ. We believe this is the world's largest commercially available metal laser powder bed fusion production system with the capability to manufacture parts that are up to 1,000 millimeter tall and 600 millimeter in diameter at the total part volume of up to 10 cubic feet. We expect to ship our first few systems of this product this quarter and are seeing a strong demand demonstrated as solid bookings from the energy and aerospace industries. I would now like to provide a quick update on our high confidence in achieving a 2022 revenue target of $89 million. Please turn to slide six. 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 SEPHAR and SEPHAR-X systems as customers continue to choose our industry-leading technology for their additive manufacturing needs. Similar to last quarter, This chart provides a detailed breakdown of our 2022 revenue expectations by category exiting Q2 versus where we were in Q1 and coming into the year. Overall, as a result of our first half financial performance and Q2 bookings success, we now have more than 95% of our 2022 revenue target already recognized recurring or books for this year. In particular, This improvement was primarily driven by a significant reduction in our year and bookings gap, which declined by seven times sequentially from $21 million in Q1 to $3 million at the end of Q2. In relation to the supply chain, conditions continue to be very challenging, especially in the electronics area. This situation is a daily challenge for us, forcing us to procure inventory much earlier than would normally be needed and delaying the point in time in which we can benefit from our cost improvement initiatives. As Bill will discuss, this will result in a slower improvement in gross margin than we planned. We do not expect any material recovery in supply chain conditions through the balance of the year at this point and have launched new initiatives to minimize the ongoing impact. In summary, Given our first half results, strong bookings activity, and a solid backlog, we are iterating our 2022 guidance of $89 million. Before turning the call over to Bill to discuss our financials, I'd like to conclude my remarks by providing a brief overview of our initiatives to drive production efficiency and improve profitability given our long-term growth forecasts. Please turn to slide seven. First, reducing our bill of material costs. As we have mentioned in the past, we employ an asset-light strategy for production where we utilize subcontractors for a significant majority of our required parts. This has enabled us to reduce the cycle time of production, lower labor costs, and successfully and quickly scale SEPA production. However, we have not completed the migration to a contract manufacturing supply chain for Cefarexi at this point. We are in the process of outsourcing the assembly of complex parts for our Cefarexi system to key suppliers, but currently many of them are assembled in-house. This initiative, combined with our strategy to consolidate suppliers to leverage our scale, will streamline our procurement process, allow us to scale without increasing labor, spending, and improve production efficiency. We expect to see the full benefit of this strategic initiative in the first half of 2023. Second, we have instituted programs to reduce our inventory levels and more efficiently manage our supply chain. Initiatives include further investment to automate and integrate our planning and procurement processes while working with key suppliers to more closely match deliveries to our production schedules. This will enable us to reduce working capital and minimize inventory while maintaining short lead time. Finally, we are focused on reducing production cycle time and lowering overhead costs. This effort is directly tied to scale as we leverage our production experience to accelerate our manufacturing process. This process is further accelerated by our recently instituted continuous improvement learning system in our operations, allowing us to learn more quickly from our mistakes and implement improvements quickly. Additionally, we are investing in training of our production team. In the last few quarters, we have been laser-focused on scaling up our Cefarex-C manufacturing. As we have stabilized Cefarex-C production, we now can invest in training and infrastructure to drive efficiency. These initiatives will have the added benefit of improving overall quality and significantly reducing post-production work in the factory and the field. We believe these investments in operational efficiency are necessary to maintain our strong growth trajectory as well as be critical to improving our margins and reach for profitability. In conclusion, we are excited about our future opportunity and believe we are well positioned to capitalize on the growing demand for high value 3D printed metal parts. We remain confident in our 2022 forecast and look forward to executing on our long-term strategic vision With that, I'd like to turn the call over to Bill to discuss the financials and our guidance.