Velo3D, Inc. Common stock 2026 Q2 Earnings Call

Thank you, operator. Good afternoon, everyone, and welcome to Velo3D's second quarter 2026 earnings call. Before we begin, please note that today's call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Please refer to our press release issued earlier today, as well as our filings with the SEC, including our Form 10-K, for a discussion of these risks. We will also reference certain non-GAAP financial measures during the call. Reconciliations between GAAP and non-GAAP results can be found in today's press release, which is available on the investor relations section of our website. A replay of this call will also be available shortly after its conclusion. With that, I will turn the call over to our CEO, Arun Jaldi.

Good afternoon, everyone, and thank you for joining Velo3D's second quarter 2026 earnings call. The second quarter represented another important period of execution for Velo3D. As we continue to build on the strong momentum established at the beginning of the year, we are seeing continued expansion across our manufacturing capabilities, growing engagement from strategic customers, and increasing recognition of Velo3D as a critical partner supporting production-scale additive manufacturing across aerospace, defense, energy, and other industrial markets. Our financial performance during the quarter reflected this continuing momentum. Revenue increased 52.3% year-over-year to $20.7 million, driven by continued strength across our aerospace and defense end markets, as qualified programs increasingly transition into production deployments. We believe this performance reflects the continued execution of our strategy and the growing confidence customers are placing in Velo3D as a long-term manufacturing partner.

From a profitability standpoint, we continue to demonstrate meaningful operational progress. Gross margin expanded to 21.5%, an increase of 33.2% compared to the prior year period. This improvement reflects higher manufacturing utilization, improved production efficiencies, stronger operational discipline, and continued benefits from the strategic initiatives we have implemented over the past year. It also reflects a refinement in the allocation of certain labor and overhead costs to align with operational activities, which Jim will cover in more detail. Our balance sheet strengthened meaningfully during the quarter. We ended the quarter with $91.1 million in cash and cash equivalents, providing greater financial flexibility to execute our growth strategy and support ongoing operations, manufacturing expansion, and strategic investments. One of the most significant milestones this quarter was the launch of our new Livermore production campus.

This investment represents a transformational expansion of our manufacturing footprint and is expected to triple the company's manufacturing capacity once fully operational. The campus is expected to become operational later this year and will serve as Velo3D's primary production and manufacturing center. Beyond expanding production capacity, the Livermore campus represents a critical step in Velo3D's evolution into a data-driven digital manufacturing company. Every production build we execute at our own facilities generates valuable manufacturing data that helps improve our software, process intelligence, and production capabilities. By centralizing manufacturing operations within a highly automated production environment, we expect to capture and leverage significantly more real-world manufacturing data to accelerate the development of our next-generation digital design and manufacturing software platform. We believe this creates a powerful competitive edge as our install base and production volumes continue to grow, so does our proprietary manufacturing dataset.

That data enables us to further optimize print parameters, improve process predictability, accelerate customer qualification, and develop increasingly intelligent software powered by artificial intelligence and machine learning. Over time, we believe this flywheel strengthens every aspect of our platform, from design optimization and simulation to in-process monitoring and quality assurance. Ultimately, our vision extends beyond manufacturing hardware. We are building the next generation of digital manufacturing, enabling customers to design and manufacture complex mission-critical parts anywhere, anytime, on-demand, and without the design limitations of traditional manufacturing. We believe the Livermore production campus is a foundational step toward realizing that vision by transforming Velo3D into software and data-powered manufacturing company capable of continuously improve the performance of every system deployed across our global manufacturing network.

Our distributed manufacturing strategy also continued to gain momentum during the quarter through the expansion of our strategic partnership with Mears Machine Corporation. Mears ordered its fifth Velo3D Sapphire XC metal additive manufacturing system with options for two additional systems, further expanding manufacturing capacity, supporting aviation, defense, energy, and space applications. We believe this continued investment reflects the growing confidence our manufacturing partners have in Velo3D's technology and demonstrates how our distributor production model continues to scale alongside customer demand. Expanding our network of qualified production partners enables us to provide greater manufacturing flexibility while strengthening domestic supply chain resilience across several strategically important industries. We also announced a strategic partnership with Aurelia Technologies focused on advancing the use of metal additive manufacturing within next-generation gas turbine systems.

Through this collaboration, we expect to support customers pursuing greater design consolidation, faster product development cycles, enhanced supply chain resilience, and meaningful cost reduction initiatives. We believe partnerships like Aurelia demonstrates the expanding applicability of additive manufacturing beyond traditional aerospace applications and reinforce our ability to deliver differentiated manufacturing solutions across a broader range of industrial markets. Beyond our operational execution, we also continue to strengthen Velo3D's presence within the public markets. During the quarter, we were added to both the Russell 3000 Index and the Russell Microcap Index, increasing our visibility among institutional investors and broadening market awareness of the company. We believe this inclusion represents another important milestone as Velo3D continues to mature as a public company and expand its shareholder base. We also strengthened our corporate governance with the appointment of Lily Mei as an independent director to our board of directors.

Lily brings extensive leadership experience across both the public and private sectors, including her tenure as mayor of Fremont, California, one of the nation's leading centers for advanced manufacturing and technology innovation. We believe her experience in economic development, manufacturing ecosystems, and public-private collaboration will provide valuable strategic perspective as we continue executing our long-term growth strategy. More broadly, customers across our pipeline continues to strengthen. We are seeing increasing interest from aerospace, defense, and industrial customers evaluating additive manufacturing for production scale applications. Existing customers continue expanding into additional programs, while new opportunities increasingly involve larger, more strategic production deployments. We believe these trends reinforce our view that the industry continues transitioning from isolated qualification programs towards broader production adoption. The macro environment also remains highly supportive of our long-term strategy.

Governments and commercial manufacturers continue prioritizing domestic production capabilities, supply chain resilience, manufacturing agility, and advanced technology capable of reducing lead times while improving performance. We believe Velo3D remains well-positioned to benefit from these long-term secular trends. As we bring the Livermore production campus online later this year and continue executing against our strategic initiatives, we believe Velo3D is entering an important new phase of growth. Our expanded manufacturing capacity, improved liquidity, growing strategic partnerships, and increasing customer adoption provide a solid foundation for continued execution and long-term value creation. Overall, the second quarter represented another meaningful step forward in Velo3D's evolution. We believe the investments we are making today, including our expanded manufacturing infrastructure, strategic partnerships, and continued operational execution, position the company to support the next generation of production scale additive manufacturing across critical industries.

While we recognize there remains significant work ahead, we are encouraged by the momentum we continue to see across our business. Our focus remains unchanged, execute with discipline, scale efficiently, strengthen customer partnerships, and continue investing in the capabilities that we believe will drive sustainable long-term growth, expanding profitability, and long-term shareholder value creation. With that, I'll turn the call over to our CFO, Jim Suva, to walk through our financial performance in more detail.

Thanks, Arun, and good afternoon, everyone. I am pleased to announce that second quarter results were even stronger than the first quarter results. We continue to see solid execution across the business, which drove an acceleration in our financial results both quarter-over-quarter and year-over-year. We delivered robust revenue growth, continued improvement in our gross margins, grew our backlog, further strengthened our balance sheet and secured an expansion site that is expected to triple our manufacturing capacity. This comes at a time when we are experiencing continued demand from our customers, which gives us great confidence in the direction of our business. With that, let me walk you through the financial results for the quarter. Second quarter 2026 revenue was $20.7 million, up 52.3%, compared to $13.6 million in the year-ago quarter.

The increase was driven primarily by an increase in the average selling price and an increase in RPS revenue. Second quarter 2026 revenue also grew sequentially, up 50% from $13.8 million in the first quarter 2026. Gross margin for the second quarter was 21.5%, compared to negative 11.7% in the year-ago quarter and 17.2% in the first quarter of 2026. The gross margin increase reflected higher average selling prices, a more favorable product mix, and refinement in the allocation of certain labor and overhead costs from cost of revenue to operating expenses to align with current operational activities. We are not only pleased with the gross margin improvement in the second quarter, but we also expect gross margin to improve as RPS scales, new Sapphire XC systems are built to order, and positive leverage from top-line revenue growth.

Operating expenses for the second quarter were $15.5 million, up from $10.0 million a year ago. On a non-GAAP basis, excluding $2.4 million of stock-based compensation, operating expenses were $13.1 million, up compared to $8.8 million in the prior year quarter. The increase reflects a return to hiring to support our strong revenue growth and backlog, as well as the refinement of certain labor and overhead costs described a moment ago. GAAP net loss for the second quarter was $11.5 million, an improvement of $1.8 million compared to the net loss of $13.3 million in the year-ago quarter. Non-GAAP net loss for the second quarter was $9.0 million, excluding stock-based compensation of $2.5 million and certain other items, an improvement compared to a non-GAAP net loss of $11.4 million in the year-ago quarter.