What assumptions underpin the reaffirmed expectation to be EBITDA‑positive in the first half of 2026?

Answer

The reaffirmed outlook that Velo3D will be EBITDA‑positive in the first half of 2026 rests on a set of inter‑related assumptions that the company has communicated—either explicitly or implicitly—through its Q2 2025 results and accompanying commentary. Below is a comprehensive breakdown of those assumptions, grouped by the key drivers of earnings before interest, taxes, depreciation and amortisation (EBITDA).

1. Sustained High‑Rate Revenue Growth

• Assumption: Velo3D will continue to deliver > 30 % annual revenue growth in 2025 (as already reaffirmed) and will maintain a comparable growth trajectory into 2026.
• Why it matters: A 30 %+ growth rate expands the top line fast enough to offset fixed and variable cost structures, pushing the EBITDA margin from negative toward positive.

2. Backlog Expansion and Conversion

• Assumption: The backlog will keep expanding (it rose from $15.9 M on 30 Jun 2025 to $17.8 M on 25 Jul 2025) and will be converted into billable revenue at a pace that matches or exceeds the growth rate of new bookings.
• Why it matters: A growing, high‑quality backlog provides a predictable pipeline that fuels the revenue‑growth assumption and reduces the risk of short‑term demand shortfalls.

3. Stable or Improving Gross Margins

• Assumption: The gross margin on Velo3D’s 3‑D printing systems and related services will hold steady or improve as the company scales production, leverages learning‑curve efficiencies, and possibly secures more favourable component pricing.
• Why it matters: Even with rapid top‑line growth, if gross margins erode, the incremental revenue cannot translate into higher EBITDA. Maintaining margin levels ensures each additional dollar of revenue contributes positively to EBITDA.

4. Controlled Operating Expenses

• Assumption: SG&A, R&D, and G&A costs will grow at a slower rate than revenue. This includes:
  • Sales & marketing efficiency: Leveraging the expanding backlog to drive higher conversion rates without proportionally higher spend.
  • R&D spend discipline: Focusing on incremental product enhancements rather than large, capital‑intensive new programmes that would spike expense.
  • G&A optimisation: Continuing any cost‑containment initiatives (e.g., headcount optimisation, shared services) that keep overheads in check.
• Why it matters: EBITDA is essentially (Revenue – COGS – Operating Expenses). If operating expenses rise slower than revenue, the EBITDA gap narrows and can turn positive.

5. Capital‑Expenditure (CapEx) Management

• Assumption: CapEx will be funded primarily through cash flow and/or non‑dilutive financing, limiting the need for large, interest‑bearing debt that would increase financing costs (which, while not part of EBITDA, affect cash availability for operating needs).
• Why it matters: Keeping CapEx “off‑balance‑sheet” or low‑interest‑bearing preserves cash for working‑capital and operating‑expense needs, indirectly supporting the EBITDA target.

6. Pricing Power & Market Acceptance

• Assumption: Velo3D can maintain or modestly increase pricing on its high‑value additive‑manufacturing solutions, reflecting strong differentiation (e.g., superior material capabilities, reliability) and limited competitive pressure.
• Why it matters: Higher average selling prices boost revenue per unit without a proportional cost increase, directly benefitting EBITDA.

7. Macroeconomic & Industry Stability

• Assumption: No major macro‑economic downturn or sector‑specific shock that would suppress demand for advanced manufacturing equipment in the aerospace, automotive, or energy markets—segments where Velo3D’s technology is most relevant.
• Why it matters: The company’s growth assumptions are predicated on a stable demand environment; a contraction would jeopardise both backlog conversion and revenue growth.

8. Effective Working‑Capital Management

• Assumption: Inventory turnover, receivables collection, and payables timing will be optimized so that cash conversion cycles do not erode the cash needed to fund operations.
• Why it matters: While not a direct EBITDA line‑item, efficient working‑capital reduces the need for external financing and supports the overall cost‑structure discipline required for EBITDA positivity.

How the Assumptions Interlock

1. Revenue‑Growth + Backlog Conversion → Larger top‑line.
2. Gross‑Margin Stability + Controlled Op‑Ex → Incremental revenue translates into incremental EBITDA.
3. CapEx & Working‑Capital Discipline → Ensures cash is available to sustain the operating model without adding financing costs that could indirectly pressure EBITDA.
4. Pricing Power + Market Acceptance → Enhances revenue per unit, reinforcing the growth trajectory.
5. Macroeconomic Stability → Provides the external environment needed for the internal assumptions to hold true.

When all of these assumptions are realized, the incremental revenue outpaces incremental costs, allowing Velo3D’s EBITDA to cross the zero‑line in the first half of 2026.

Bottom‑Line Summary

• Core assumption: > 30 % annual revenue growth continues, driven by a growing, high‑quality backlog.
• Margin assumption: Gross margins stay flat or improve while operating expenses rise slower than revenue.
• Cost‑structure assumption: CapEx and working‑capital are managed prudently, avoiding cash‑flow strain.
• External assumption: Market demand and macro‑economic conditions remain supportive.

If Velo3D successfully executes on these inter‑dependent assumptions, the company expects to generate positive EBITDA during the first half of 2026, as reaffirmed in its Q2 2025 earnings release.