Velo3D, Campbell, California, USA, has released its financial results for third fiscal quarter ending September 30, 2023. Revenue for the third quarter was $24.1 million, whilst net loss was $17.1 million. The company ended the quarter with a solid balance sheet with $72 million in cash and investments. Free cash flow for the quarter was ahead of the company’s forecasts and the company expects sequential improvement in cash flow through the first half of 2024.
“Our third quarter results reflect solid execution as we posted year over year revenue growth of 26%, significantly improved our free cash flow on a sequential basis and prudently managed our operational expenses,” said Benny Buller, CEO of Velo3D. “However, while we are proud of our significant success over the last two years resulting from the increasing acceptance of our Sapphire technology, we now believe our industry leading growth has come at the expense of cash flow, profitability and our commitment to the highest level of customer service.
“As a result, in October 2023, we made the strategic decision to realign our operations to pivot from emphasising top line growth to optimising free cash flow, maximising customer success, reducing expenditures, and improving our operational efficiency. We firmly believe that this strategy will ensure the company will have the liquidity it needs to achieve its profitability goal in 2024,” he continued.
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“Specifically, we expect this realignment to lower our overall cost structure by approximately 40%, by the first quarter of 2024, including reductions in operating and facilities expenses. Additionally, we have also implemented new go-to-market and service strategies to rebuild our bookings and backlog pipeline which came in below our plan for the third quarter. With the early success of these programmes, we expect to resume bookings growth in the fourth quarter for fiscal year 2024 deliveries. However, given the delays in certain fourth quarter orders, as well as the impact of our realignment, we now see our fiscal year 2023 revenue to be in the range of $91 million to $103 million.”
Gross margin for the third quarter was 7.2%, down sequentially, primarily driven by reduced machine volume, increased inventory costs as well as a lower average selling price resulting from a sequential shift in product mix. The company expects gross margin to rise in the fourth quarter, though the level of increase is dependent on the expansion of its average selling price, execution on its material reduction initiatives and improvements in its manufacturing efficiency.
Operating expenses for the third quarter were $26.7 million compared to $28.7 million in the second quarter of 2023. The decrease in operating expenses was driven primarily by a $2.6 million reduction in research and development related to the rationalisation of new product development programmes. Sales and marketing and administrative costs were in line with company expectations.
Non-GAAP operating expenses, which excludes stock-based compensation expense of $6.7 million, was $20.0 million, down approximately 10% sequentially. The company expects non-GAAP quarterly operating expenses to decline by approximately 40% in the first quarter of 2024 compared to the third quarter of 2023 as a result of the company’s realignment programmes.
Net loss for the quarter was $17.1 million and reflected a gain of $8.7 million on the fair value of warrants, contingent earnout and debt derivative liabilities. Non-GAAP net loss, which excludes, among other items, the gain on fair value of warrants, contingent earnout and debt derivative liabilities as well as stock-based compensation expense, was $18.9 million in the three months ended September 30, 2023. Adjusted EBITDA for the quarter, excluding the same metrics, was a loss of $16.3 million.
Buller concluded, “We remain excited about the significant future opportunity for the additive manufacturing industry as companies continue to choose Velo3D to produce their mission critical, high value metal parts. With our realignment focused on free cash flow and our expected bookings growth, we believe we are well positioned to execute on a profitable growth strategy in 2024.”