Markforged Holding Corp (MKFG) Q1 2024 Earnings Call Transcript Highlights: Navigating ...

• Revenue: Q1 was $20.5 million, down 15% from Q1 2023.

• Gross Margin: Q1 at 51.3%, up from Q1 2023.

• Operating Expenses: Q1 were $24.1 million, down from $26.7 million in Q1 2023.

• Operating Loss: Q1 was $13.5 million, improved from $14.8 million in Q1 2023.

• Net Loss: Q1 was $12.2 million, improved from $13.3 million in Q1 2023.

• Loss Per Share: Q1 was $0.06.

• Net Cash Used in Operating Activities: Q1 was $7.4 million, a 52% improvement from Q1 2023.

• Cash and Cash Equivalents: Ended Q1 at $107.9 million.

• 2024 Revenue Guidance: Expected to be between $95 million to $105 million.

• 2024 Gross Margin Guidance: Expected to be between 48% to 50%.

• 2024 Non-GAAP Operating Loss Guidance: Expected to be between $42.5 million to $47 million.

• 2024 Non-GAAP EPS Guidance: Expected loss per share to be between $0.19 to $0.22.

• Warning! GuruFocus has detected 5 Warning Signs with MKFG.

Release Date: May 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Markforged Holding Corp (NYSE:MKFG) started 2024 with strong execution and optimism for growth in the second half of the year, driven by new product introductions.

• The company has successfully shipped the first units of its next-generation 3D printer, the FX.10, which offers significant improvements in print quality and speed.

• Markforged Holding Corp (NYSE:MKFG) reported a healthy adoption rate for its subscription-based software and services, with revenue growing 18% year over year.

• Operational efficiencies and product mix improvements led to a gross margin increase to 51.3% in Q1 2024, up from the previous quarter and year.

• The company has managed to reduce operating expenses and optimize cash utilization, leading to improved financial performance compared to the previous year.

Negative Points

• Revenue for Q1 2024 was down 15% from the first quarter of 2023, primarily due to lower system revenue influenced by a challenging macroeconomic environment.

• Markforged Holding Corp (NYSE:MKFG) faced a significant legal setback with a jury awarding $17.3 million in damages for patent infringement, although the company is seeking to overturn the verdict.

• The company's international performance was notably weak, particularly in Europe and Asia, reflecting broader economic challenges.

• Despite new product launches, the company anticipates continued pressure on gross margins due to the ramp-up of new technologies and market conditions.

• Markforged Holding Corp (NYSE:MKFG) is still navigating through a tough market environment, which could impact its ability to meet its financial targets for 2024.

Q & A Highlights

Q: Can you give us some sense of where the pipeline stands today for the FX.10, what the capacity is like, and how you see that playing out throughout the end of the year? A: (Shai Terem - President and CEO) The initial feedback from customers like Toyota has been very positive. The pipeline is building up as expected, and it might take a quarter or two until supply meets demand. We anticipate reaching a full run rate where supply matches demand by Q4 this year.

Q: What product lines are affected by the patent verdict, and which geographies do these comprise? A: (Assaf Zipori - Acting CFO, SVP of Strategy) The verdict affects our hardware, specifically the continuous carbon fiber technology within our hardware. The claim is related to the US, and we are actively exploring all options to overturn the verdict.

Q: Can you explain the large year-over-year impact on your international performance, particularly in Europe and Asia? A: (Shai Terem - President and CEO) The cycles of changes that previously affected the US are now being seen in EMEA and APAC. We expect recovery in these regions soon based on our current pipeline.

Q: Were the initial FX.10 shipments mostly to existing customers, and when will new customers start receiving their orders? A: (Assaf Zipori - Acting CFO, SVP of Strategy) Initially, we shipped some printers to our channel partners and distribution network. The initial orders usually come from existing customers like Toyota, but there are also many new customers. We expect both existing and new customer shipments to continue into Q2.

Q: Can you share more about the traction you're getting with the Digital Forge and any customer success stories? A: (Shai Terem - President and CEO) We see great engagement with the Digital Forge, especially around enterprise accounts looking to change their business models and supply chains. While it's not generating material revenue yet, the adoption and business model transformation are encouraging.

Q: How do you see gross margins evolving in Q2 with the FX launch, and what are the long-term targets? A: (Shai Terem - President and CEO) We are encouraged by the Q1 gross margin expansion and aim for mid-50s in the long term. The release of more technologies and ramping up of the FX.10 could put pressure on margins, but we feel comfortable with our current guidance range, aiming for the upper end depending on second-half revenue performance.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.