Velo 3d | Burlap's Gambles

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Founded in 2015, Velo3d rapidly became a great contender in the additive manufacturing market. Well funded, led by a motivated and ingenious founder, Velo3d is trying to stay in the forefront of a booming industry promising a really interesting and disruptive technology that fits perfectly in the current economic conjunctures. In his short history, Velo3d capabilities has already been recognized by numerous high-profile companies, notably SpaceX for their new Raptor engines.

Technological moat

In 2019, Velo3d was the top assignee of 3D printing metals patents, this indicates strong targeting of an emerging market which should theoretically results in bigger market shares as the technology matures.
One of Velo3d main selling point is the SupportFree™ manufacturing process and "its unique ability to print low angles and over-hangs down to zero degrees" which is allegedly a disruptive process offering unprecedented opportunities.
The new Sapphire XC expand on the previous generation but at scale, "This provides users up to 5X productivity improvement and 75% cost reduction per part when compared to the existing Sapphire system".

Recent developments

As of September 2021, the company went public for a total proceed of $275m in cash and $430m in net proceeds.
Ongoing construction of a new facility for the production of over 400 SapphireXC annually.
Company’s repeat purchases by existing customers and expanding customer base, with the addition of nine new customers so far in 2021, more than doubling the Company’s customer base since year-end 2020.

Noticeable partnerships

SpaceX - Raptor Engines parts

"Technology has been critical for the company’s most efficient and challenging engine, which are designed and produced around the capabilities of our manufacturing technology."

Hanwan - Turbomachinery

"Hanwha was able to print its impeller flat to the built plate with no internal supports."

SierraTurbines - Aurelius mk1 Micro Turbines

"Consolidated 61 parts into one. 40x more efficient, 10x more power density, and 50% lighter in weight."

Launcher - Liquid oxygen (LOX) turbopump/ Propellant tank

"VELO3D’s SupportFree technology made creating the part considerably less complex, time-consuming and wasteful than it would otherwise have been."

Guidance

For fiscal year 2022, the Company is providing the following guidance.

Revenue - $89 million
Total bookings – 47-49
Total shipments – 47-49
Sapphire XC shipments – 23-25
New customer additions – 23-25

Burlap's 2 minutes DDs

Strong macroeconomics tailwinds as supply chains are weakened worldwide, Additive materials/3d printing could fill that gap between oriental parts supplier and occidental manufacturers.
Offer a very disruptive technology that can be really transformative for numerous industries
For fiscal year 2022, given its significant backlog and increasing demand for its Sapphire® XC solution, the Company remains confident in its ability to achieve its 2022 revenue forecast of $89 million.
Growing portfolio. Recent expansion in European markets, diversified through different industries like aerospace, power generation and advanced manufacturing.
Business model generating recurrent revenues that could generate better margins long-term.
Elon Musk's SpaceX company was interested in buying Velo3D, though the company didn't want to sell.

Valuation is a bit rich, future growth seem priced in until at least 2025 if you compare market cap to forward earnings and revenues estimates.
Competition could develop a more efficient and performing technology that could price out Velo3D current IP.
Possible supply chain issues due to high reliance on partnerships for parts, have to consider the current worldwide shortage of semiconductors, chips and battery metals.
AM metal printing is still a really expensive and slow process compared to more traditional manufacturing methods, per example: 1 kg of iconel 718 is estimated at more than $1000/kg of material without other costs factored in.
Requires intensive investments, especially in testing, per example: expensive computed tomography scans.
Metal powders are highly dangerous and volatile substances that could become liabilities in the case of incidents and mishandling. Health and safety issues to be considered.