Velo3D
The last 12 months has been a turbulent and volatile time for the additive manufacturing (AM) industry, and not many have felt a harsher pinch than Velo3D.
As one of the few additive manufacturing companies to be publicly listed, its bumps in the road are emphasised by the transparency that being on the stock exchange demands. We can see when a tough quarter knocks them off track of their revenue targets, we can see when they have been forced to reduce headcount as part of a 40% reduction in operational expenses, and we can see when their share value takes a hit.
For a company that made the leap to become a publicly listed company within five years of coming to market, it is perhaps no surprise that Velo3D has encountered each of these scenarios. When companies, especially start-ups, open themselves up to such public scrutiny, there are bound to be bumps in the road. And so we have it: by the start of 2024, just over two years after it listed on the New York Stock Exchange (NYSE), it had been served a noncompliance notice by the NYSE, its founder Benny Buller had stepped down from his role as CEO, and the company had commenced a strategic review that could see Velo3D sold.
The exact wording of that latter development was that Velo3D would ‘explore strategic alternatives that may include, but are not limited to, a strategic transaction, potential merger, business combination or sale.’ So, as things stand, what does Velo3D’s future look like?
“There’s not a whole lot I can comment on the details of that particular process. I think we’ve mentioned we would be exploring partnerships, mergers, sale, and that continues to be true,” Velo3D Interim CEO Brad Kreger told TCT. “What I would say is, I think we feel like there’s a tremendous amount of value creation potential for the company, whether we operate as a standalone or go through some sort of strategic transaction. As far as the day-to-day execution of the business, we’re focused on the fundamentals and executing.”
Kreger was announced as Interim CEO on the day that Buller resigned. He joined the company in December 2022 as EVP of Operations, where he was tasked with putting in place systems and processes that focused on quality, addressing a ‘confluence of quality issues and reliability issues’ that stemmed from ‘rapid scaling and rapid production innovation.’
“A bit of a commercial execution gap started to materialise,” Kreger said. “If you look at 2022, it was a year of radical growth. Growth and demand that, I think, the company struggled to keep up with. It caused a lot of movement in the company and a lot of rapid scaling. The consequences of that were, in many cases, there wasn’t time to put good rigour and processes in place.”
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Having announced some promising indicators last month, Velo3D would suggest that good progress has been made here. The installation time for Sapphire metal 3D printers has been ‘significantly reduced’ according to the company, while an approximate 40% headcount increase within its Customer Service and Quality teams will help to provide on-site support in ‘all major metropolitan areas.’ The time it takes to resolve customer issues has also reportedly come down by 45% in the last six months, and then there’s the headline figure of around 12 million USD of machine orders being secured since mid-December. More than 50% of those bookings have come from key strategic accounts – in other words, existing users – which the company believes indicates customer satisfaction and confidence in its technology.
Kreger notes that last year, Velo3D was hearing from customers that they would hold off on their next machine purchase until their Sapphire system was ‘running smoothly’.
“We’ve been able to turn that corner,” Kreger said. “We’re seeing the results of those investments in customer service and production quality. The way that’s being observed is we’re seeing those customers now come back to the table and placing those orders.”
This gradual return to seeing manufacturers part way with their capital expenditure to invest, or re-invest, in the Sapphire metal 3D printing technology can be put down to these ‘fundamental’ and ‘rigorous’ processes in the background. Kreger credits Michelle Sidwell, EVP of Global Sales and Business Development, with providing assistance here. Sidwell is said to have come with a ‘deep, rich set of tools and processes and process rigour’ around value selling, while a collection of new faces in senior management roles has given the company some new perspective.
“One of the things Benny did over the last year was bring in a lot of strong, new leadership. I think with Michelle leading our commercial organisation, with Bernie [Bernard Chung] stepping in as CFO, myself, it’s bringing a lot of fresh eyes to the situation and a lot of solid business experience to bring mature best practices in how we operate the company.”
In a former role at Fluidigm, Kreger was credited with ‘successfully leading strategic initiatives’ to increase production of its mass cytometry technology, improving the company’s ‘customer experience through operational efficiencies, enhanced infrastructure and streamlined execution.’
He has experience, then, working in early-stage hardware companies that are looking to scale. And as he revealed to TCT, that included dealing with mergers and acquisitions.
“A lot of my career prior to coming to Velo3D was doing a lot of integration work in companies that were making acquisitions and folding in companies of comparable size – 100-150 million USD revenue companies,” he explained. “A lot of that was putting in best practices, business processes, business systems. The beauty here is we have an amazing product and amazing technology, there’s not a lot that needs to happen there. It speaks for itself; it stands on its own. What this company really needed is to get the fundamentals in place as a business, so that we can leverage this technology and create the value creation that I think we deserve and that the technology demands.”
As he looks out at the wider additive manufacturing landscape, Kreger is hopeful that the next 12-24 months will be brighter. A decline in interest rates should see more capital deployed, while a diversification of market segments should mean AM isn’t so reliant on the same few industry verticals. But he also acknowledges that the trend of mergers and acquisitions in the industry will likely continue. So, will Velo3D be subject to that consolidation?
“I do expect there to be a certain amount of consolidation in the market. I think for where the industry is at this stage, that’s appropriate. A certain amount of consolidation in the marketplace is probably needed,” Kreger said, after explaining: “That’s something we’re exploring, looking at all opportunities. But as an organisation, we’re focused on the day-to-day execution as a standalone company.”
