Velo3D, Inc.

Good afternoon, and welcome to the Velo's 3D First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. As a reminder, today's conference call is being recorded. I'll now turn over the call to Mr. Bob Otenski, Vice President of Investor Relations at Velo 3D Corporation. Thank you, sir. You may

Thank you. I'd like to welcome everyone to our first quarter 2023 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 an update on certain key strategic priorities for 2023. Following Benny's comments, Bill McComb, our CFO, will then review our first quarter 2023 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 2022 10-K and additional SEC 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 also 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'd like to welcome everyone to our first quarter earnings call. We remain very excited about the overall opportunity for additive manufacturing as our technology is rapidly changing the way high-value metal parts are manufactured across the world. Our ability to capitalize on this opportunity is the key driver behind our significant growth, which in turn is enabling us to accelerate our path to profitability. I would now like to discuss the specifics of our first quarter. Please turn to slide three. Overall, We were very pleased with our Q1 results as we saw continued strong demand for our systems. For the quarter, revenue more than doubled year-over-year to $27 million. This performance reflects not only strong customer demand for our technology, but also our ability to rapidly scale our business and production operations. Operationally, we executed well as we further ramped production of our Cefar XC and Cefar XC1MZ products, to meet increasing demand from new and existing customers for these systems. This production success was a direct result of the efficiency initiatives we put in place over the last six months. Additionally, bookings rose more than 30% sequentially to $20 million and reflects strong customer demand for our technology. With our first quarter bookings and backlog of $24 million, We believe we have increasing confidence to achieve our second quarter and fiscal year 2023 goals. Finally, our path to profitability remains on track as improved operational efficiency enabled us to expand our margins while reducing adjusted operating expenses. As a result, we significantly improved our net cash flow by more than 50% sequentially. Exceeding our cash forecast for the quarter, we remain committed to approaching breakeven in the fourth quarter of this year. I would now like to briefly discuss why we remain confident in achieving our Q2 and 2023 revenue targets. Turning to slide four. As I previously mentioned, our 2023 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 Cepha and Cepha AXI systems as customers continue to choose our industry-leading technology for their AM needs. This chart provides a detailed breakdown of our Q2 and 2023 revenue expectations by category. Given our strong Q1 revenue performance, expected recurring revenue from our expanding installed base, and healthy backlog, we remain confident in achieving our goals for the year. 75% of our Q2 forecasted revenue is either booked or recurring. And on our annual basis for 2023, more than 50% of our forecast is either recognized, recurring, or already booked with a record pipeline of opportunities, which significantly derives our 2023 booking gap. As a result, we believe we are well positioned to achieve our 2023 revenue guidance of $120 to $130 million. I'd now like to provide a quick update on our operational initiatives. As we have discussed previously, we instituted a number of strategic programs over the last nine months to improve our production efficiency, as well as to minimize future supply chain disruptions. Please turn to slide five. Overall, we continued to make significant progress on a number of initiatives in the first quarter. In relationship to manufacturing, we further strengthened our operations team as we added a number of leaders who have particular experience in highly complex manufacturing environment. Additionally, we materially reduce production cycle times by further leveraging our continuous improvement capability on the production floor. We are also benefiting from programs to standardize manufacturing flow in our production facility. We have also successfully reorganized our factory floor to accelerate the production process. These efforts include tighter management of material flow to the production cells and reducing production labor waste associated with material shortages. On the supply chain, we have accomplished a number of initiatives. We have completed the build out of our supply chain leadership as well as improved multiple operational processes with the goal of reducing or eliminating shortages in the future. Although we plan additional supply chain improvements, Our current state of supply chain provides us much better confidence in managing our inventory and avoiding shortages. Finally, we remain focused on prudently managing our inventory and working capital. We continue to work with our new and existing vendors to better manage our supply chain as we are starting to see the initial benefits of our staggered delivery contracts that more closely matches our build schedule. Additionally, we have implemented tighter material and production planning processes to improve inventory control. Finally, we are seeing improved supply chain conditions overall that will enable us to manage our production on a more real-time basis. I would like to close out my remarks by providing an update to our 2023 strategic priorities that I highlighted last quarter. Our primary focus for this year remains driving to profitability by significantly improving EBITDA. This will be done through revenue growth, margin expansion, and expense control. As a result, we expect to materially improve cash flow. Please turn to slide six. First, the first three bullets on this page will be regarding to EBITDA. We remain confident in our goal of more than 50% revenue growth this year. Our strong Q1 result, increased booking, and healthy backlog reflect increasing demand for our industry-leading technology and position us well for the balance of the year. We also made significant progress on expanding gross margin in the first quarter and remain on track for sequential improvement through the end of the year. This further expansion will be driven by lower bond costs and increasing overall volume as well as higher ASP given the continued mix shift to our Sephora XE products. Additionally, we expect to realize the full benefits of our bill of material cost control programs and production efficiency initiatives in the second half of the year. Our first quarter results also show solid progress in lowering operating costs as we continue to prudently manage our expenses. The cost control initiatives we put into place over the last quarter are yielding results as our adjusted operating expenses declined 5% sequentially compared to the fourth quarter, reversing the trend of increased sequential spend in 2022. We expect a similar rate of reduction on a quarterly basis as we go through the year. We remain committed to reducing adjusted operating expenses by 20% in Q4 of 2023 compared to Q4 of 2022. Finally, improving cash flow. We expect sequential improvement in cash flow as we go through the year driven by improved EBITDA as I just discussed. Additionally, we will benefit from a reduction in working capital as we remain on plan to reduce year-over-year inventory by 10% to 15% this year. We expect to see the benefits of these inventory efforts starting in the third quarter of this year. 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 Our path to profitability is clear and we remain confident in achieving our 2023 goals. With that, I'd like to turn the call over to Bill to discuss our financials and provide our guidance. Bill.