Markforged (MKFG) - 2023 Q4 - Annual Results

Executive Summary & Highlights Fourth Quarter and Full-Year 2023 Financial Highlights Markforged reported a mixed financial performance for Q4 and full-year 2023. While Q4 saw sequential revenue growth and improved gross margins, full-year revenue and GAAP net loss deteriorated compared to 2022. The company demonstrated improved non-GAAP net loss and reduced cash usage from operations for the full year Q4 2023 vs Q4 2022 Financial Highlights (in thousands) | Metric | Q4 2023 | Q4 2022 | Change (YoY) | | :---------------------------------- | :-------- | :-------- | :----------- | | Revenue | $24,200 | $29,700 | -18.5% | | Gross Margin (GAAP) | 48.4% | 46.9% | +1.5 pp | | Non-GAAP Gross Margin | 49.5% | 47.5% | +2.0 pp | | Operating Expenses (GAAP) | $31,100 | $33,200 | -6.3% | | Non-GAAP Operating Expenses | $24,900 | $29,400 | -15.3% | | Net Loss (GAAP) | $(14,200) | $(10,700) | +32.7% (worse) | | Non-GAAP Net Loss | $(11,600) | $(13,300) | -12.8% (better) | | Cash, Cash Equivalents, & Short-term Investments (as of Dec 31) | $116,900 | $167,900 | -30.4% | Full Year 2023 vs Full Year 2022 Financial Highlights (in thousands) | Metric | FY 2023 | FY 2022 | Change (YoY) | | :---------------------------------- | :-------- | :-------- | :----------- | | Revenue | $93,800 | $101,000 | -7.1% | | Gross Margin (GAAP) | 47.4% | 50.2% | -2.8 pp | | Non-GAAP Gross Margin | 48.6% | 50.8% | -2.2 pp | | Net Cash Used in Operating Activities | $(48,900) | $(73,500) | -33.5% (improved) | Business Updates Markforged achieved strong sequential revenue growth in Q4 2023, exceeded gross margin and operating cost targets through effective cost controls, and significantly reduced cash used in operating activities for the full year. Key strategic wins include an expanded partnership with Automation Alley and the introduction of new products like the FX10, strengthening its product portfolio - Markforged delivered 20% sequential revenue growth in the fourth quarter of 2023[7] - Exceeded 2023 gross margin and operating cost targets, supported by effective cost controls[7] - Net cash used in operating activities in 2023 decreased by $24.6 million (approximately 33%) from 2022, driven by improving operational and working capital efficiencies[7] - Expanded relationship with Automation Alley through the sale of an additional 125 OnyxPro printers for its Project DIAMOnD initiative, building on 300 printers acquired in 2021[7] - Realized strong growth in subscription sales, driving services revenues up 25% year-over-year in 2023[15] - Launched three important new products in 2023: FX10, Vega, and Digital Source, strengthening the product portfolio[15] Management Changes Assaf Zipori, previously Acting CFO and Head of Strategy, has been officially appointed as Chief Financial Officer, recognized for his extensive experience and leadership within Markforged - Assaf Zipori, Markforged's Acting Chief Financial Officer, has assumed the role of Chief Financial Officer[8] - Zipori has served as Acting CFO from November 2019 through March 2021 and again from May 2023 until March 2024, and as Head of Strategy and Corporate Development since April 2021[9] 2024 Financial Outlook Markforged projects fiscal year 2024 revenues between $95-$105 million, with an anticipated mid-teen sequential decline in Q1 followed by sequential growth throughout the year, driven by new product introductions like the FX10. Non-GAAP gross margins are expected to be 48%-50%, with a non-GAAP operating loss of $42.5-$47.0 million and a non-GAAP loss per share of $0.19-$0.22 Fiscal Year 2024 Financial Guidance | Metric | Guidance Range | | :-------------------------- | :------------- | | Revenues | $95 - $105 million | | Non-GAAP Gross Margins | 48% - 50% | | Non-GAAP Operating Loss | $42.5 - $47.0 million | | Non-GAAP Loss Per Share | $0.19 - $0.22 per share | - Expects normal mid-teen percentage sequential revenue decline in Q1 2024, followed by sequential growth throughout the year[11] - Positive outlook for the second half of 2024, accompanied by accelerated growth, underpinned by new product introductions, particularly the FX10[11] Company Overview About Markforged Markforged is a leader in industrial 3D printing, providing its Digital Forge platform to over 10,000 customers globally for creating metal and advanced composite parts. The company emphasizes robust utilization of its printer network, strong growth in subscription sales, and a continuously strengthened product portfolio with recent introductions like the FX10 - Markforged enables resilient and flexible supply chains by bringing industrial 3D printing to the factory floor[15] - Its additive manufacturing platform, The Digital Forge, allows manufacturers to create strong, accurate parts in both metal and advanced composites[15] - Serves over 10,000 customers in 70+ countries[15] - Headquartered in Waltham, Mass., where it designs hardware, software, and advanced materials[16] Financial Statements (GAAP) Consolidated Balance Sheets The balance sheet shows a decrease in total assets from $345.9 million in 2022 to $247.9 million in 2023, primarily due to a reduction in cash, cash equivalents, and short-term investments, and the impairment of goodwill. Total liabilities also decreased slightly, while stockholders' equity saw a significant reduction Consolidated Balance Sheet Highlights (in thousands) | Metric | December 31, 2023 | December 31, 2022 | | :---------------------------------- | :------------------ | :------------------ | | Total Assets | $247,952 | $345,941 | | Cash and cash equivalents | $116,854 | $124,242 | | Short-term investments | $0 | $43,690 | | Goodwill | $0 | $31,116 | | Total Liabilities | $86,342 | $93,387 | | Total Stockholders' Equity | $161,610 | $252,554 | Consolidated Statements of Operations For the full year 2023, Markforged reported a revenue decline to $93.8 million from $101.0 million in 2022. Gross profit decreased, and operating expenses increased significantly due to a goodwill impairment charge, leading to a substantially higher net loss of $103.6 million compared to $25.4 million in 2022 Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :---------------------------------- | :---------------------- | :---------------------- | | Revenue | $93,784 | $100,958 | | Gross profit | $44,414 | $50,706 | | Total operating expenses | $155,795 | $137,790 | | Loss from operations | $(111,381) | $(87,084) | | Net loss | $(103,567) | $(25,388) | | Net loss per share - basic and diluted | $(0.53) | $(0.13) | Consolidated Statements of Comprehensive Loss The total comprehensive loss for 2023 was $104.7 million, an increase from $24.3 million in 2022, primarily driven by the higher net loss and a foreign currency translation adjustment Consolidated Statements of Comprehensive Loss Highlights (in thousands) | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :-------------------------- | :---------------------- | :---------------------- | | Net loss | $(103,567) | $(25,388) | | Total comprehensive loss | $(104,661) | $(24,320) | Disaggregated Revenue Revenue for both Q4 and full-year 2023 saw declines across hardware, consumables, and all geographic regions compared to the previous year, with services revenue being the only category to show year-over-year growth for the full year By Nature of Products and Services Disaggregated Revenue by Nature of Products and Services (in thousands) | Category | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--------- | :------ | :------ | :------ | :------ | | Hardware | $15,432 | $21,015 | $59,287 | $69,112 | | Consumables | $5,897 | $6,510 | $23,996 | $23,423 | | Services | $2,841 | $2,139 | $10,501 | $8,423 | | Total Revenue | $24,170 | $29,664 | $93,784 | $100,958 | By Geographic Location Disaggregated Revenue by Geographic Location (in thousands) | Region | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :------- | :------ | :------ | :------ | :------ | | Americas | $11,228 | $12,488 | $43,715 | $46,638 | | EMEA | $7,921 | $10,567 | $29,744 | $30,185 | | APAC | $5,021 | $6,609 | $20,325 | $24,135 | | Total Revenue | $24,170 | $29,664 | $93,784 | $100,958 | Non-GAAP Financial Measures & Reconciliation Explanation of Non-GAAP Measures Markforged utilizes non-GAAP financial measures, including gross margin, operating profit (loss), net profit (loss), and earnings per share, to provide insights into its core business performance. These measures exclude items such as stock-based compensation, amortization, fair value adjustments, and certain non-recurring costs, which were modified in 2022 to include litigation costs and exclude amortization impact - Non-GAAP measures are used to evaluate business performance, including non-GAAP gross margin, operating profit (loss), net profit (loss), and earnings per share[17] - Non-GAAP gross margin excludes stock-based compensation, amortization, and certain non-recurring costs[22] - Non-GAAP operating profit (loss) excludes stock-based compensation, amortization, and certain non-recurring costs[22] - Non-GAAP net profit (loss) and earnings per share exclude stock-based compensation, net change in fair value of warrant liabilities and contingent earnout liabilities, amortization, and certain non-recurring costs[22] - Beginning Q2 2022, non-recurring costs were modified to include certain non-recurring litigation costs, and beginning Q4 2022, the impact of amortization of intangible assets was removed[20] Reconciliation of GAAP to Non-GAAP Measures The reconciliation tables demonstrate the adjustments made to GAAP figures to arrive at non-GAAP metrics. For Q4 2023, non-GAAP net loss improved year-over-year, and non-GAAP operating loss also showed improvement compared to Q4 2022. For the full year 2023, non-GAAP net loss and operating loss were lower than in 2022, indicating a better underlying operational performance when excluding specific non-cash and non-recurring items Reconciliation of GAAP Net Loss to Non-GAAP Net Loss (in thousands) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :---------------------------------- | :-------- | :-------- | :-------- | :-------- | | Net loss (GAAP) | $(14,198) | $(10,732) | $(103,567) | $(25,388) | | Stock compensation expense | $3,829 | $2,589 | $13,987 | $18,209 | | Change in fair value of derivative liabilities | $646 | $(264) | $426 | $(1,485) | | Change in fair value of contingent earnout liability | $(3,545) | $(6,325) | $(1,036) | $(57,307) | | Amortization | $244 | $104 | $1,024 | $146 | | Goodwill impairment | $0 | $0 | $29,467 | $0 | | Non-recurring costs | $1,412 | $1,299 | $8,451 | $5,719 | | Non-GAAP net loss | $(11,612) | $(13,329) | $(51,248) | $(60,106) | Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit (in thousands) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :-------------------------- | :-------- | :-------- | :-------- | :-------- | | Gross profit (GAAP) | $11,691 | $13,926 | $44,414 | $50,706 | | Stock compensation expense | $57 | $7 | $259 | $354 | | Amortization | $217 | $66 | $877 | $97 | | Non-recurring costs | $0 | $85 | $0 | $94 | | Non-GAAP gross profit | $11,965 | $14,084 | $45,550 | $51,251 | Reconciliation of GAAP Operating Loss to Non-GAAP Operating Loss (in thousands) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :---------------------------------- | :-------- | :-------- | :-------- | :-------- | | Operating loss (GAAP) | $(19,361) | $(19,291) | $(111,381) | $(87,084) | | Stock compensation expense | $3,829 | $2,589 | $13,987 | $18,209 | | Amortization | $244 | $104 | $1,024 | $146 | | Goodwill impairment | $0 | $0 | $29,467 | $0 | | Change in fair value of derivative liabilities | $898 | $0 | $898 | $0 | | Non-recurring costs | $1,412 | $1,299 | $8,451 | $5,719 | | Non-GAAP operating loss | $(12,978) | $(15,299) | $(57,554) | $(63,010) | Additional Information Special Note Regarding Forward-Looking Statements This section serves as a cautionary note, emphasizing that statements about future events, such as growth rates, revenue guidance, and product adoption, are forward-looking and subject to various risks and uncertainties, including economic conditions and market trends. Investors are advised not to place undue reliance on these statements as actual results may differ materially - The press release contains forward-looking statements based on beliefs, assumptions, and currently available information[21] - These statements involve risks, uncertainties, and other factors that may cause actual results to be materially different from expressed or implied information[21] - Forward-looking statements include future growth rate, revenue, gross profit margin, earnings guidance, impact of investments, restructuring, executive contributions, timing for profitability, product utilization, market growth, product launch timing, market trends, macroeconomic factors, and product benefits/functionality[21] - Investors should not rely on these statements as representing Markforged's views as of any date subsequent to the press release date[23] Conference Call and Webcast Information Markforged provided details for its earnings conference call and webcast held on March 7, 2024, including access information for live participation and a telephonic replay available until March 21, 2024 - The company hosted a webcast and conference call on Thursday, March 7, 2024, at 5:00 p.m. ET to discuss results[12] - Participants could access materials and audio webcast via the investors section of the company's website[12] - A replay was available on the company's website and telephonically until Thursday, March 21, 2024, 11:59 PM ET[13] Contacts Contact information for media and investor relations inquiries is provided - Media Contact: Sam Manning, Public Relations Manager (sam.manning@markforged.com)[38] - Investors Contact: Austin Bohlig, Director of Investor Relations (investors@markforged.com)[38]