8-K: Markforged Reports Q4 and Full-Year 2023 Results, Appoints New CFO

Markforged announced its fourth quarter and full-year 2023 financial results, showing sequential revenue growth but a year-over-year decline, and appointed Assaf Zipori as Chief Financial Officer.

Summary

• Markforged reported a revenue of $24.2 million for the fourth quarter of 2023, a 20.4% increase compared to the previous quarter, but down from $29.7 million in the same quarter of 2022.
• The company's gross margin for the quarter was 48.4%, up from 46.9% in the same period last year.
• For the full year 2023, revenue was $93.8 million, down from $101.0 million in 2022, with a gross margin of 47.4%, compared to 50.2% the previous year.
• Net loss for the fourth quarter was $14.2 million, compared to a net loss of $10.7 million in the fourth quarter of 2022.
• The company's cash, cash equivalents, and short-term investments totaled $116.9 million as of December 31, 2023, down from $167.9 million at the end of 2022.
• Markforged anticipates 2024 revenues to be between $95 and $105 million, with a non-GAAP operating loss between $42.5 million and $47.0 million.
• The company expects a mid-teen percentage sequential revenue decline in the first quarter of 2024, followed by sequential growth throughout the rest of the year.
• Assaf Zipori, who has been serving as Acting CFO, was appointed Chief Financial Officer effective March 5, 2024.

Sentiment

Score: 5

Explanation: The document presents a mixed picture with positive sequential revenue growth in Q4 but a year-over-year decline and a significant net loss. The company is taking steps to improve efficiency and has a positive outlook for the second half of 2024, but the overall sentiment is neutral due to the current financial challenges.

Positives

• Markforged experienced a significant 20.4% sequential revenue growth in the fourth quarter of 2023.
• The company improved its gross margin to 48.4% in the fourth quarter of 2023.
• Net cash used in operating activities decreased by 33% in 2023, indicating improved operational efficiency.
• Markforged saw a 25% year-over-year increase in services revenue, driven by strong subscription sales.
• The company launched three new products in 2023, expanding its product portfolio.
• Markforged expects revenue growth throughout 2024 after a slow first quarter.
• The company has a strong balance sheet and is focused on cost controls.
• The appointment of Assaf Zipori as CFO provides stability in the financial leadership.

Negatives

• Markforged's revenue for the fourth quarter of 2023 was down compared to the same quarter in 2022.
• Full-year 2023 revenue was lower than the previous year, decreasing from $101.0 million to $93.8 million.
• The company's gross margin for the full year 2023 decreased to 47.4% from 50.2% in 2022.
• Net loss for the fourth quarter increased to $14.2 million from $10.7 million in the same period of 2022.
• Cash, cash equivalents, and short-term investments decreased from $167.9 million to $116.9 million year-over-year.
• The company anticipates a non-GAAP operating loss between $42.5 million and $47.0 million for 2024.
• Markforged expects a mid-teen percentage sequential revenue decline in the first quarter of 2024.

Risks

• Elevated interest rates are expected to continue impacting capital spending, potentially delaying system sales.
• The company faces macroeconomic headwinds that may persist throughout 2024.
• Markforged anticipates a sequential revenue decline in the first quarter of 2024.
• The company's cash reserves have decreased significantly year-over-year.
• The company is still operating at a loss and expects a significant non-GAAP operating loss for 2024.
• The company's future performance is subject to risks and uncertainties, including general economic conditions and market trends.

Future Outlook

Markforged anticipates 2024 revenues to be between $95 and $105 million, with a non-GAAP operating loss between $42.5 million and $47.0 million. The company expects a mid-teen percentage sequential revenue decline in the first quarter of 2024, followed by sequential growth throughout the rest of the year. They have a positive outlook for the second half of the year, underpinned by new product launches.

Management Comments

• We ended the year with positive momentum as we continued to execute our strategy to lead the adoption of additive manufacturing on the factory floor, said Shai Terem, President and CEO of Markforged.
• Although in the near term we expect elevated interest rates will continue to impact capital spending, the need for manufacturers to reduce costs and build more resilient supply chains remains a long-term tailwind driving demand for the Digital Forge.
• We have a strong product portfolio and are encouraged by robust utilization across our global fleet network.
• We look forward to realizing the growth potential our new products provide, especially in the second half of the year.
• We believe this, combined with our tight cost controls and strong balance sheet, keeps us on a clear path to profitability.
• I am very pleased to announce the appointment of Assaf as our CFO, said Shai Terem.
• Assaf has been a key member of our executive team for over four years and has repeatedly demonstrated the business acumen and leadership to head our financial organization.
• Im confident in his continued leadership to help us on our journey to profitable growth.
• Since joining Markforged Ive been inspired by our fantastic team, the power of our technology and our mission to bring industrial production to the point of need. I am grateful for this opportunity and am confident in our teams ability to drive success, said Zipori.

Industry Context

The announcement reflects the ongoing challenges in the manufacturing sector due to macroeconomic headwinds and capital spending constraints. However, Markforged's focus on additive manufacturing and its new product launches align with the industry's trend towards more resilient and flexible supply chains. The expansion of the Automation Alley partnership highlights the growing adoption of 3D printing in industrial settings.

Comparison to Industry Standards

• Markforged's revenue growth of 20.4% sequentially in Q4 2023 is a positive sign, but the year-over-year decline indicates challenges in a competitive market. Companies like Stratasys and 3D Systems, which also operate in the additive manufacturing space, have been facing similar headwinds, with varying degrees of success in navigating the current economic climate.
• The gross margin of 48.4% in Q4 2023 is within the range of industry standards for hardware and software companies, but the full-year decline to 47.4% suggests pricing pressures or increased costs. Stratasys, for example, has reported gross margins in the 40-50% range, while software-focused companies often have higher margins.
• The reduction in net cash used in operating activities by 33% is a positive development, indicating improved operational efficiency. However, the overall net loss of $103.6 million for the year is a concern, and the projected non-GAAP operating loss for 2024 suggests that profitability remains a challenge. Other companies in the sector are also working towards profitability, with varying timelines and strategies.
• The expansion of the Automation Alley partnership is a positive indicator of market adoption, but the overall revenue decline suggests that Markforged needs to continue to focus on sales and marketing efforts to drive growth. Competitors like Desktop Metal are also focusing on strategic partnerships and new product launches to expand their market share.

Management Changes

Stakeholder Impact

• Shareholders may be concerned about the year-over-year revenue decline and net loss, but encouraged by the sequential growth and cost-cutting measures.
• Employees may be impacted by the company's restructuring efforts and cost controls.
• Customers may benefit from the new product launches and the company's focus on improving its technology.
• Suppliers may be affected by the company's cost-cutting measures and changes in demand.
• Creditors may be concerned about the company's financial performance and cash reserves.

Next Steps

• Markforged will continue to execute its strategy to lead the adoption of additive manufacturing.
• The company will focus on realizing the growth potential of its new products, especially in the second half of the year.
• Markforged will maintain tight cost controls and focus on its path to profitability.
• The company will host a webcast and conference call to discuss the results.
• Markforged will file its Annual Report on Form 10-K with the SEC.

Key Dates

Keywords

3D Printing, Additive Manufacturing, Financial Results, Gross Margin, Revenue, Operating Loss, Chief Financial Officer, Manufacturing, Digital Forge, Industrial Production