Markforged (MKFG) - 2024 Q1 - Quarterly Results

First Quarter 2024 Earnings Overview Markforged reported Q1 2024 revenue of $20.5 million, a net loss of $35.9 million due to litigation, and began shipping the FX10 CEO Commentary CEO Shai Terem highlighted strong execution in Q1 2024, setting a solid foundation for the year despite challenging global capital expenditures - Markforged started 2024 with strong execution, setting a solid foundation for the year ahead, despite challenging global capital expenditures on manufacturing equipment[4] - The company met a pivotal milestone by beginning to ship the FX10 in Q1, with encouraging market response and optimism for accelerated deliveries in the second half[4] - Markforged continued to build operational efficiencies and adhere to strong cost controls to drive sustainable, long-term growth[4] Key Financial and Business Highlights Markforged reported a decrease in Q1 2024 revenue to $20.5 million from $24.1 million YoY, but improved GAAP gross margin to 49.3% and non-GAAP gross margin to 51.3% Q1 2024 vs Q1 2023 Financial Highlights | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $20.5 million | $24.1 million | -14.9% | | Gross margin (GAAP) | 49.3% | 48.1% | +1.2 pp | | Non-GAAP gross margin | 51.3% | 49.3% | +2.0 pp | | Operating expenses | $47.2 million | $33.1 million | +42.6% | | Non-GAAP operating expenses | $24.1 million | $26.7 million | -9.7% | | Net loss (GAAP) | $35.9 million | $19.0 million | +89.0% | | Non-GAAP net loss | $12.2 million | $13.3 million | -8.3% | | Cash and cash equivalents (as of period end) | $107.9 million | $116.9 million (Dec 31, 2023) | -7.7% | - Markforged reached a pivotal milestone in Q1 by shipping the FX10, its next-generation 3D printer, which delivers high print quality at nearly twice the speed and up to twice the print volume of its predecessor, the X7. Initial market feedback has been encouraging[8] - The company improved operational efficiencies, achieving strong Q1 non-GAAP gross margin performance exceeding 51% despite lower revenues, and reducing net cash used in operating activities by approximately 52% from Q1 2023 to $7.4 million[8] - A jury found Markforged infringed on one patent claim of Continuous Composites Inc. and awarded $17.3 million in monetary damages, which the company strongly disagrees with and intends to appeal[8] Board of Directors Update Markforged announced the appointment of George Riedel to its Board of Directors, effective May 7, 2024 - George Riedel was appointed to Markforged's Board of Directors, effective May 7, 2024[6] - Riedel brings extensive executive leadership experience in global technology industries and a proven track record in corporate strategy, expected to be instrumental in guiding Markforged's focus on building shareholder value[6][7] 2024 Financial Outlook Markforged reiterated its 2024 guidance, projecting revenues of $95-$105 million and a non-GAAP operating loss of $42.5-$47.0 million Full Year 2024 Guidance Markforged reiterated its fiscal year 2024 guidance, anticipating revenues between $95 million and $105 million, with mid-single-digit quarter-over-quarter growth in Q2 and accelerated growth in H2 driven by new products like the FX10 2024 Financial Guidance | Metric | 2024 Guidance | | :--- | :--- | | 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 | - Markforged expects revenues to grow mid-single digits quarter-over-quarter in the second quarter, with an opportunity for accelerated growth in the second half of the fiscal year, underpinned by new products, particularly the FX10[9] Impact of Continuous Composites Litigation The provided 2024 financial guidance does not reflect any potential additional actions Continuous Composites may take, such as seeking further relief through post-trial motions for royalty payments on future revenue, which could impact the company's financial results - The 2024 guidance does not reflect any potential additional action Continuous Composites may take, including seeking additional relief through post-trial motions for royalty payments on future revenue[10] Company Information Markforged is an industrial 3D printing company providing hardware, software, and materials for additive manufacturing to over 10,000 customers About Markforged Markforged is an industrial 3D printing company enabling resilient and flexible manufacturing through its additive manufacturing platform, The Digital Forge - Markforged enables more resilient and flexible manufacturing by bringing industrial 3D printing to the factory floor[13] - Its additive manufacturing platform, The Digital Forge, allows manufacturers to create strong, accurate parts in both metal and advanced composites[13] - The company serves over 10,000 customers in 70+ countries and is headquartered in Waltham, Mass., where it designs hardware, software, and advanced materials[13] Conference Call and Webcast Markforged hosted a webcast and conference call on May 8, 2024, at 5:00 p.m. ET to discuss the Q1 2024 results - Markforged hosted a webcast and conference call on Wednesday, May 8, 2024, at 5:00 p.m. ET to discuss the Q1 2024 results[11] - A replay of the conference call was available on the Company's website and telephonically until Wednesday, May 22, 2024[12] Investor Contacts Contact information for media inquiries (Sam Manning, Public Relations Manager) and investor relations (Austin Bohlig, Director of Investor Relations) is provided - Media contact: Sam Manning, Public Relations Manager (sam.manning@markforged.com)[32] - Investor contact: Austin Bohlig, Director of Investor Relations (investors@markforged.com)[32] Non-GAAP Financial Measures Markforged uses non-GAAP financial measures to evaluate performance, providing GAAP reconciliations and cautioning on their limitations Explanation of Non-GAAP Measures Markforged uses non-GAAP financial measures (gross margin, operating profit/loss, net profit/loss, EPS) to evaluate business performance, believing they are useful - Markforged believes non-GAAP gross margin, operating profit (loss), net profit (loss), and earnings per share are useful in evaluating business performance[14] - These non-GAAP measures have limitations as an analytical tool and should not be considered in isolation from, or as a substitute for, GAAP financial information. They may also not be comparable to measures used by other companies[15] - Non-GAAP measures are generally defined by adjusting GAAP figures for stock-based compensation expense, amortization, certain non-recurring costs, and for net profit/loss and EPS, also net change in fair value of warrant liabilities and contingent earnout liabilities[17] Reconciliation of GAAP to Non-GAAP Measures The report provides detailed reconciliations from GAAP to non-GAAP financial measures for the three months ended March 31, 2024, and 2023 Non-GAAP Net Loss Reconciliation (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net loss (GAAP) | $(35,946) | $(19,019) | | Stock compensation expense | $3,461 | $4,356 | | Change in fair value of derivative liabilities | $(31) | $(189) | | Change in fair value of contingent earnout liability | $161 | $(808) | | Amortization | $378 | $277 | | Litigation judgment | $17,300 | $0 | | Non-recurring costs | $2,446 | $2,081 | | Non-GAAP net loss | $(12,231) | $(13,302) | Non-GAAP Cost of Revenue and Gross Profit Reconciliation (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Cost of revenue (GAAP) | $10,414 | $12,508 | | Stock compensation expense | $(49) | $(73) | | Amortization | $(357) | $(228) | | Non-GAAP Cost of Revenue | $10,008 | $12,207 | | Gross profit (GAAP) | $10,133 | $11,582 | | Stock compensation expense | $49 | $73 | | Amortization | $357 | $228 | | Non-GAAP gross profit | $10,539 | $11,883 | Non-GAAP Operating Loss Reconciliation (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Loss from operations (GAAP) | $(37,111) | $(21,502) | | Stock compensation expense | $3,461 | $4,356 | | Amortization | $378 | $277 | | Litigation judgment | $17,300 | $0 | | Non-recurring costs | $2,446 | $2,081 | | Non-GAAP operating loss | $(13,526) | $(14,788) | Financial Statements Markforged's Q1 2024 financial statements show total assets of $231.6 million, cash of $107.9 million, and a net loss of $35.9 million Condensed Consolidated Balance Sheets As of March 31, 2024, total assets were $231.6 million, down from $247.9 million at December 31, 2023. Cash and cash equivalents decreased to $107.9 million from $116.9 million Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2024 | December 31, 2023 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $107,924 | $116,854 | -$8,930 | | Total current assets | $158,270 | $172,464 | -$14,194 | | Total assets | $231,630 | $247,952 | -$16,322 | | Litigation judgment payable | $17,300 | $0 | +$17,300 | | Total current liabilities | $60,053 | $40,748 | +$19,305 | | Total liabilities | $103,727 | $86,342 | +$17,385 | | Total stockholders' equity | $127,903 | $161,610 | -$33,707 | - Cash and cash equivalents decreased by $8.9 million from December 31, 2023, to March 31, 2024[7][20] - Total liabilities increased significantly by $17.4 million, primarily due to the accrual of a $17.3 million litigation judgment payable[20] Condensed Consolidated Statements of Operations For Q1 2024, revenue was $20.5 million, down from $24.1 million in Q1 2023. Gross profit decreased to $10.1 million from $11.6 million Condensed Consolidated Statements of Operations (in thousands) | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $20,547 | $24,090 | -$3,543 | | Cost of revenue | $10,414 | $12,508 | -$2,094 | | Gross profit | $10,133 | $11,582 | -$1,449 | | Sales and marketing | $7,844 | $10,576 | -$2,732 | | Research and development | $9,935 | $10,380 | -$445 | | General and administrative | $12,165 | $12,128 | +$37 | | Litigation judgment | $17,300 | $0 | +$17,300 | | Total operating expenses | $47,244 | $33,084 | +$14,160 | | Loss from operations | $(37,111) | $(21,502) | -$15,609 | | Net loss | $(35,946) | $(19,019) | -$16,927 | | Net loss per share - basic and diluted | $(0.18) | $(0.10) | -$0.08 | - Revenue decreased by 14.7% year-over-year to $20.5 million in Q1 2024[7][22] - Operating expenses increased significantly by 42.8% year-over-year, primarily due to a $17.3 million accrual for litigation judgment[7][22] - Net loss widened to $35.9 million in Q1 2024, compared to a net loss of $19.0 million in Q1 2023[7][22] Condensed Consolidated Statements of Comprehensive Loss For the three months ended March 31, 2024, total comprehensive loss was $37.0 million, compared to $18.9 million in the prior year Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Net loss | $(35,946) | $(19,019) | -$16,927 | | Foreign currency translation adjustment | $(1,041) | $158 | -$1,199 | | Total comprehensive loss | $(36,987) | $(18,911) | -$18,076 | - Total comprehensive loss for Q1 2024 was $37.0 million, an increase from $18.9 million in Q1 2023, primarily driven by the increased net loss and a foreign currency translation adjustment[23] Disaggregated Revenue This section details Markforged's revenue breakdown by nature of products and services, and by geographic location for Q1 2024 and Q1 2023 By Nature of Products and Services In Q1 2024, hardware revenue decreased significantly to $11.3 million from $15.2 million YoY. Consumables revenue remained stable at $6.4 million, while services revenue increased to $2.9 million from $2.4 million Disaggregated Revenue by Nature of Products and Services (in thousands) | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Hardware | $11,274 | $15,195 | -$3,921 | | Consumables | $6,404 | $6,455 | -$51 | | Services | $2,869 | $2,440 | +$429 | | Total Revenue | $20,547 | $24,090 | -$3,543 | - Hardware revenue decreased by 25.7% year-over-year in Q1 2024[24] - Services revenue increased by 17.6% year-over-year in Q1 2024[24] By Geographic Location All geographic segments experienced revenue declines in Q1 2024 compared to Q1 2023. Americas revenue slightly decreased to $10.1 million from $10.5 million, while EMEA saw a larger drop to $6.3 million from $8.5 million, and APAC decreased to $4.1 million from $5.1 million Disaggregated Revenue by Geographic Location (in thousands) | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Americas | $10,095 | $10,458 | -$363 | | EMEA | $6,335 | $8,492 | -$2,157 | | APAC | $4,117 | $5,140 | -$1,023 | | Total Revenue | $20,547 | $24,090 | -$3,543 | - EMEA revenue decreased by 25.4% year-over-year, and APAC revenue decreased by 20.0% year-over-year in Q1 2024[26] Legal Disclosures This section contains forward-looking statements, cautioning that actual results may differ materially due to inherent risks and uncertainties Special Note Regarding Forward-Looking Statements This section contains forward-looking statements based on beliefs and assumptions, which involve risks and uncertainties that could cause actual results to differ materially - This press release contains forward-looking statements based on beliefs and assumptions, involving risks, uncertainties, and other factors that may cause actual results to be materially different[18] - Forward-looking statements include future growth rate, revenue, gross profit margin and earnings guidance; contributions of directors; timing of launches and adoption of products (including FX10); market trends; macroeconomic factors; and the Continuous Composites litigation[18] - Markforged cautions against relying on these statements as representing its views as of any date subsequent to the press release date, and has no current intention to update them except as required by applicable law[18]