Velo3D, Inc.

Greetings. Welcome to the Velo3D Reports third quarter 2022 results. 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. Please note this conference is being recorded. I'll now turn the conference over to your host, Bob Okunski, Vice President of Investor Relations.

You may begin. Thank you. I'd like to welcome everyone to our third quarter 2022 earnings conference call. On the call today, we will start out with comments from Benny Buller, CEO of Velo3D, 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 third 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 second quarter 2022 10-Q 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 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 Velo3D. Benny?

Thanks, Bob, and I would like to welcome everyone to our third quarter earnings call. We remain very excited about the opportunity for additive manufacturing and continue to believe our technology is rapidly changing the way mission-critical parts are manufactured across multiple industries. I would now like to discuss the specifics of our third quarter. Please turn to slide four. At the high level, We were pleased with our Q3 performance as we posted strong year-over-year revenue growth of 119%, increased our sizable backlog by 20%, and expanded our new and existing customer footprint. We also continued to see strong demand for our industry-leading technology during the quarter as Q3 bookings rose 50% sequentially to $27 million, with our backlog now totaling $66 million. I would also like to highlight the significant operational success we have had over the last 18 months. As you can see from the chart, year-to-date revenue has tripled compared to last year, while last 12 months' revenue has more than doubled. This trend reflects not only strong customer demands for our technology, but also our ability to rapidly scale our business and production operations this year. However, our Q3 revenue was below plan as supply chain disruptions limited the availability of certain key system components. These shortages impacted our production schedule and led to a number of customer shipments being delayed to the fourth quarter. Given the impact of our third-quarter shipment delays, ongoing supply chain uncertainty, and the continued initial run of our SAFR XC1MZ system, we are reducing our 2022 revenue guidance to a range of $75 to $18 million. To emphasize, the adjustment to our 2022 revenue guidance is not fundamental or demand-related, but entirely due to the potential impact of the factors I just discussed. As I mentioned, demand for our CIFAR and CIFAR-XA systems remain high. This reflects our success in continuing to expand our footprint across multiple markets and new applications. In particular, we are starting to benefit from our market expansion investments as we added a number of new marquee customers during the quarter. For example, we are seeing strong traction in Europe as we booked two market-leading European aerospace OEMs during the quarter. Additionally, we also added a top-tier automotive OEM here in the United States. 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 will achieve this by leveraging our strong top line goal in combination with our relentless focus on accelerating production efficiency. We also expect to benefit from our working capital and expense management initiative, as well as return to normalized pricing given the end of our launch customer and early bird system discounts. As a result, we believe we are well positioned to profitably capitalize on the rapidly expanded market for mission-critical high-value metal parts. I would now like to provide some additional color on the challenges we faced in the quarter, as well as our strategic initiatives to drive operational improvements in 2023. Please turn to slide five. As I previously mentioned, we experienced significant supply chain disruptions during the quarter, which affected our production plan. Specifically, we were impacted by key component shortages, especially system-level electronics. Additionally, when we did receive the necessary parts, the parts arrived too late in the quarter in order to qualify and ship the systems on time. As a result, we didn't meet our production goals for the quarter. While the supply chain conditions remain challenging, we have secured substantially all the parts needed for our production planned this quarter. We also experienced longer than expected production and testing cycle times for our first Cefar XC-1MZ systems, which contributed to our shipment delays. Similar to the ramp of our Cefar XC product, initial volume production of the Cefar XC-1MZ presented us with certain challenges that needed to be addressed during the building process, which affected our ability to meet our shipment forecast. I am happy to announce that we have already shipped our first Sepharag C1 and Z earlier this quarter. Given the history of previous new product runs, these challenges will diminish as we ramp volume and game production experience. We do not expect to reach the volume levels needed to fully overcome these issues until the first quarter of 2023. I want to reiterate that demand for this system continues to increase and we remain focused on efficiently scaling our Sepharic C1MZ production to achieve our growth quarter shipment target. Given the challenges I have discussed, we have identified and instituted a number of strategic initiatives to minimize future supply chain disruptions and improve our overall production efficiency. Please turn to slide six. Overall, we made significant progress on a number of initiatives in the quarter. First, we have continued to build our supply chain team as well as improving multiple operational processes with the goal of reducing shortages in the future. Second, we successfully instituted a number of programs to further streamline our purchasing process and better manage our inventory to meet our challenges. These initiatives will enable us to materially lower our inventory levels while improving efficiency. We expect to see this benefit starting in the first half of 2023. Third, we reorganized our factory floor to accelerate the production process to reduce delay. Efforts here include tighter management of material flow to the production cells and reducing production labor waste associated with material shortages. Looking forward, our initiatives for the fourth quarter and 2023 are focused on growing our output through production efficiency gains rather than increasing investment. We are making progress in these areas and expect measurable benefits from these efforts starting in the first quarter of next year. Our key focus remains on reducing our system balance of materials cost through a combination of increased outsourcing of subassemblies parts as well as the benefit of increasing volume over a fixed cost base. Both of these efforts will allow us to scale without materially increasing labor costs while improving efficiency. Additionally, we are instituting initiatives to reduce production cycle times by further leveraging our continuous improvement capability on the production floor. These programs are enabling us to analyze data and processes in real time, provide feedback to the team, and implement changes more quickly. Finally, we continue to work with our new and existing vendors to better manage our supply chain, including The staggering of component deliveries to better match our bill schedule and minimize overall inventory levels. I would now like to highlight why we remain very confident in our long-term growth opportunity as customers continue to choose our industry-leading technology to produce their most critical metal parts. Please turn to slide seven. Overall, we are pleased with our progress in adding new customer as well as expanding our geographic footprint. With the opening of our European operations and recent penetration of new industries, we are addressing a significant portion of the global laser metal powder bed fusion market. Additionally, the significant investment we needed to make in building out our sales and marketing group for long-term growth is now behind us. We are already seeing the benefit of this investment as reflected in our strong third quarter bookings and backlog growth. With our recent hires, we believe our sales and marketing organization is now fully staffed to deliver on the next phase of growth for the company. As I previously discussed, we've booked a number of new customers during the quarter, including three landmark customers in new markets. First, our European expansion is going well as we booked two industry-leading EU aerospace customers in Q3. Interest remains high in Europe, and we have a number of opportunities to add to our footprint there in the first quarter. In the US, we also added a major automotive manufacturer as we expand our material applications. To close out our new customer highlights, we also had three customers acquiring multiple Zephyr systems on their initial purchase. This reinforces the growing acceptance of our technology in the market. Also, we recently shipped our first tool steel machine for automotive applications, following a recent marriage in steel material qualification. Demand for this application is strong with our first order within a few months of our qualifying announcement. Qualifying this material is a game changer for the automotive and tooling industry as it enables production of high quality die-cast tooling with a geometrical flexibility that has not been possible before. Velo3D is the only company that can print the large diameter, high quality internal channels needed for those applications, which will enable higher throughput while reducing cost for the customer. Finally, we are continuing to expand our industry footprint outside the space sector with new customer additions and follow-on purchases from companies in the aviation, hypersonics, automotive, defense, and energy industries. In closing, we are excited about the 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 ability to reach profitability given our current liquidity and look forward to executing on a long-term strategic vision. With that, I would like to turn the call over to Bill to discuss the financials and our guidance.