Markforged (MKFG) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Presents Markforged's unaudited condensed consolidated financial statements and notes for Q3 2022 and FY 2021 Unaudited Condensed Consolidated Balance Sheets | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | Change (2022 vs 2021) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Assets | $351,866 | $337,314 | +$14,552 | | Total Liabilities | $93,802 | $93,145 | +$657 | | Total Stockholders' Equity | $258,064 | $244,169 | +$13,895 | | Cash and Cash Equivalents | $181,805 | $288,603 | -$106,798 | | Inventory | $24,561 | $10,377 | +$14,184 | | Goodwill | $31,249 | $0 | +$31,249 | | Intangible Assets, net | $15,377 | $0 | +$15,377 | | Contingent Earnout Liability | $8,740 | $59,722 | -$50,982 | Unaudited Condensed Consolidated Statements of Operations | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :---------------------------------- | :----------------------------------- | :----------------------------------- | :----------------------------------- | :----------------------------------- | | Revenue | $25,208 | $24,045 | $71,294 | $64,584 | | Gross Profit | $12,249 | $13,715 | $36,780 | $37,855 | | Loss from Operations | $(22,828) | $(22,380) | $(67,793) | $(42,113) | | Net (Loss) Profit | $(22,970) | $21,703 | $(14,656) | $594 | | Net (Loss) Profit per Share - Basic | $(0.12) | $0.13 | $(0.08) | $0.01 | Unaudited Condensed Consolidated Statements of Other Comprehensive Income (Loss) | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :---------------------------------- | :----------------------------------- | :----------------------------------- | :----------------------------------- | :----------------------------------- | | Net income (loss) | $(22,970) | $21,703 | $(14,656) | $594 | | Foreign currency translation adjustment | $(1,612) | $0 | $(1,612) | $0 | | Total comprehensive income (loss) | $(24,582) | $21,703 | $(16,268) | $594 | Unaudited Statement of Changes in Convertible Preferred Stock and Stockholders' Equity (Deficit) | Metric | Dec 31, 2021 (in thousands) | Sep 30, 2022 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Additional Paid-in Capital | $319,859 | $350,022 | | Accumulated Deficit | $(75,709) | $(90,365) | | Total Stockholders' Equity | $244,169 | $258,064 | Unaudited Condensed Consolidated Statements of Cash Flows | Metric | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :---------------------------------- | :----------------------------------- | :----------------------------------- | | Net cash used in operating activities | $(65,317) | $(38,795) | | Net cash used in investing activities | $(41,629) | $(2,323) | | Net cash provided by financing activities | $1,599 | $279,138 | | Net change in cash, cash equivalents, and restricted cash | $(105,368) | $238,020 | Unaudited Notes to Condensed Consolidated Financial Statements Note 1. Organization, Nature of the Business, and Risks and Uncertainties Markforged, founded 2013, specializes in additive manufacturing; completed a 2021 merger; monitors COVID-19 and economic impacts - Markforged was founded in 2013 to transform manufacturing with high-strength, cost-effective additive manufacturing parts[34] - The company completed a reverse recapitalization merger with AONE on July 14, 2021, raising $288.8 million in net proceeds after redemptions, employee transactions, and costs[35][36] - The COVID-19 pandemic and economic downturn have impacted the company's supply chain, accounts receivable, inventory, and other assets, but no material impact on accounting estimates was identified as of September 30, 2022[37] Note 2. Merger and Reverse Recapitalization The Merger, completed July 14, 2021, involved AONE domesticating to Delaware and merging with Legacy Markforged, accounted for as a reverse recapitalization - The merger was completed on July 14, 2021, with AONE domesticating to Delaware and renaming to Markforged Holding Corporation, and Legacy Markforged surviving as a wholly-owned subsidiary[35] - All Legacy Markforged convertible preferred stock was converted into common stock prior to the closing[39][45] - The merger was accounted for as a reverse recapitalization, treating Legacy Markforged as the accounting acquirer[45] - The company raised $360.9 million in proceeds from AONE's trust account and PIPE financing, incurring $34.5 million in transaction costs[47] Note 3. Summary of Significant Accounting Policies This note outlines the company's significant accounting policies, including basis of presentation, reporting currency, use of estimates, and specific policies for various financial items - The financial statements are prepared in conformity with US GAAP and SEC regulations, with interim period adjustments being normal and recurring[49] - Significant estimates include allowance for doubtful accounts, inventory reserves, fair value of contingent earnout liability, earnout share awards, private placement warrant liability, revenue recognition assumptions, and valuation of intangibles and goodwill[51] - The company adopted ASC 842 for leases on January 1, 2022, recognizing operating lease ROU assets and liabilities of $12.2 million and $14.0 million, respectively, with no material impact on operations or cash flows[89][90] Note 4. Acquisitions Markforged completed two acquisitions in 2022: Teton Simulation Software for $6.6 million and Digital Metal AB for $43.3 million, expanding software and metal additive manufacturing capabilities - Teton Simulation Software Acquisition (April 4, 2022): * Total consideration: $6.6 million (cash and equity) * Purpose: Integrate SmartSlice™ technology with Eiger™ for streamlined additive manufacturing workflow * Goodwill recognized: $4.475 million[92][93][96] - Digital Metal AB Acquisition (August 31, 2022): * Total consideration: $43.34 million (cash and equity) * Purpose: Extend capabilities into high-throughput production of metal additive parts with binder jetting solution * Good