Earnings call transcript Q1 2023

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Operator

Hello, and welcome to the Markforged's First Quarter 2023 Earnings Conference Call and Webcast [Operator Instructions].

As a reminder, this conference is being recorded.

It is now my pleasure to turn the call over to Austin Bohlig, Director of Investor Relations. Thank you, Austin.

Austin Bohlig

Good afternoon. of of Director Holding Bohlig, Austin Investor Markforged Relations Corporation. I'm XXXX our call. first to results quarter Welcome of conference

We will With be Shai earnings call press discussing our Terem; the results issued is Mark market announced and after our close Schwartz. and today. President me CFO, the release on CEO, in our

of Reform represent in Act be provisions of this statements, to of are call the Before XXXX. this statements facts to estimates include XX, Any call views management's statements like that that contained are the which should made will May not historical These to and remind today, of to forward-looking forward-looking deemed be pursuant actual are material we as non-GAAP Harbor to update obligation, as Litigation could required results by intention to found get at reconciliation today, forward-looking the course can statements. we'll differ XXXX results refer started, be be statements Securities subject management Safe materially. that revise Also, and everyone I'd making versus during non-GAAP Private other risks market that Web our to our schedule or and available disclaims any of issued which a financial in measures. GAAP today's except currently close statements. uncertainties law, press also showing investors.markforged.com. release call, certain during the cause Markforged site, on There's or after statements

Terem, call Shai Markforged. over President the turn to CEO now and I'll of

Shai Terem

in a and of infrastructure Markforged and an of in believe indicator efficiency An quarters. applications of solutions and for are early grew reflection especially our largest Forge financial QX. QX company's are which growth. pipeline shared of incremental made region strong first to the before quarter improvements our results, strong margin earnings choosing at yet increasing expense buildup. record controls and Thank number go-to-market the for meaningful to revenue metal We our for strong geographies in mission in of and see FXXX execution coupled composite strong make point us to the strategy coming the call. target. the Americas, the But manufacturers our support need. QX critical, you, joining XXXX our We is the can with strategy operating and and biggest on And started Demand great pipeline Digital our to solve particular, innovation, The our across with history. product Austin. our all QX for year buildup cost around everyone, metal us our thank gross structure, enabled our another We've in revenues gains plant you, EPS our opportunity we've

couple a digital demand of before, platform. spoke to manufacturing helping forge macro are us for fuel trends we As in

resilient across are their manufacturers first, derisk The more creating focused flexible the on chains. supply production in and by investing globe that solutions

is to it increased market We today. the transformation believe us platform and second billion uniquely on manufacturing industrial The is to opportunity $XX digital positioned our address the available focus floor on automation.

new the production parts. is manufacturing for Forge perfect the tell floor Digital customers Our tool and and that accelerates of us the replacement

and grew produces For on to Markforged some arm, the improve example, manufacturers with custom robotic automate to end cases, production overall saving, automation Robotics, service a XX for tools production fleet, offering to a Rapid Robotics our through in printers. effectors robotics customer performance. of as Rapid which sales time months provides site, cycles over grippers to

design manufacturers of production have robots for Handwrytten, touch. to customer Another with and personalized other iterative a even removing printers five uses bureau times. which notes faster stand service Athena develops Arizona is autonomously advanced and processes our parts who increase that robotic handwritten parts the Handwrytten create print to out that personal starting automating fleet applying out XD Manufacturing a for of operate true system of with in developed robotics produces that example by manufacturing a a orders grade We amazing. factory XXXX Markforged capable grow. lights focus production. Entering customers our arms. increase in And XX% FXXX the suite. in and to pipeline the showing exceed for digital have Truly This of to manufacturers and the has enabled for to robots of seek YouTube cost continue technology double our him achieve out our encourage automation the output robotic improving the solutions check the was new to floor utilization uploaded revenue a video these of action. continues we I the production you producing channel, FXXX. expectations to critical

to work the teams. FXXX diligent helping are expansion. drive to The our the produce and sequential is which operations gross cost by declining, margin Next to engineering

expect to decline margin historical our gross production objectives continue We FXXX this support throughout which will to cost meet to year, our rates.

for With pleased resistant the are and a FXXX, target ability and traction the interest. our early print to we large, is aerospace with strong key parts, market heightened

already scaling for utilizing and aircrafts. and with is we produce MRO parts go of that use the encouraging in What the operations, is maintenance, FXXX are We are repair production to the into extremely interest customers seeing new applications. FXXX or utilizing the

gen companies begin next While into the spec Forge are have development seeing lengthy cycle, to these already we aircraft. Digital their aerospace

FXXX their for travel have our in aircraft a working NASA future enable multiyear flights. Early we're growth. on gen helping planting fleet example, using air Force accelerate to began with flight. a and XX travel required lifecycle, to in types early US of developing [Ameus] the their seeds added capable parts produce the product hypersonic their composite air next adopting development passenger and to an process, is radically achieve US technology commercial they Mark and by recently to of For the based plan advanced By Air to V

feel collaborating every improvement we even At excitement exceeded we over remain sharp new just first It person efficiencies labs margins, move end already the the of in of comes in particularly R&D into gross on in our driving of this quarter. can laser the the state We XX% from profitable Boston. is time. operational headquarters expansion QX, We're art day outside encouraged Waltham believe global moved that new focused the and which sequential growth. margin more and will by and drive in

needing raise from committed profitability to changing Manufacturing potential well additional capital. benefit of are significantly reaching full to without point. the to is We and this we're inflection positioned

product our new upcoming in pipeline we’re our this margins, even confident Given introductions, to and healthy growing ability objective. achieve more

Mark announcement our to Markforged this our in and public seen startup helping as a private his service last call probably our CFO. thank from you've with a our company. today, will be to earnings earlier I for to want on journey us Mark As

our CFO. personally, been For us next He partner. support me, we a next for Mark the while has great to will months, search for few continue

on a his will and is continuity, Strategy role and wish assume CFO Head the past next yet half subsidiary has not interim up been For we the basis. of Corporate and previous for project. Mark years current him leaving with well three our on an Development us but just

of With and will the over on Schwartz, guidance to that, the year. call turn performance who now I remainder for Mark offer financial details our the our more CFO,

Mark Schwartz

Shai. Thanks

comments quarter reflect to our Please that results and our XXXX. results first the for of my turn Let's note financial outlook. non-GAAP

revenues non-GAAP release increased press GAAP compared XXXX. million in of and quarter XX.X% commentary. for was this quarter million quarter reference, first of XXXX reconciliation the to $XX.X compared the assist million for for XXXX. of $XX.X earnings $XX.X with QX Relations million Investor includes site Revenue our Gross my our afternoon to Web to posted first earlier $XX.X of issued the your to to first with For our profit

margins margin well by profit and points of XX.X% as generated As costs labor compared XXXX. of a logistics QX expanded in gross freight production. basis, sequential first a QX up result, impacted added and was basis, said, in our we a margin the the ramping to gross increases our as year-over-year by XX.X% costs, by That basis of XXX a comparison XXXX. with on On associated versus FXXX material commercial component gross quarter

mix high has products product margin FXXX costs. towards and shifted improved Our production

first of $XX.X basis, million were absorption the of for for year. the On commitment for operating XXXX XXXX, Net even of operating XXXX, $XX.X $XX.X reflecting was last on Our the quarter two XXXX million shares of first from of QX sequential the for the the our weighted our expenses average with associated loss to compared first or million for down outstanding based share continuing acquisitions costs. quarter quarter were million. quarter expenses operating of X% to a increased expenses per $X.XX accounting $XXX.X

our guidance. our pleased of We and start the onto with results for the were year. Now QX

reflect million. $XXX continues environment, Our uncertain revenues be million to within anticipated the the $XXX to revenue for reiterate we and macro the of range year to guidance

to term XX% will gross We expenses as through margin we in we expect our over in encouraged QX XXXX. made we progress will be XX%. the were levels. operating in margins we QX the they to of non-GAAP progress with historical XXXX with confident are to We continue fiscal towards our The that disciplines exerted longer improve gross and range continue year

first the operations non-GAAP revenues, operating million to approximately on cash per million to range million year. to or into a strategy $X.X in quarter of translates XXXX be quarter the expect EPS expenses $XX with the lower XX% burn to percentage We $X.XX operating for range year our in in $X.XX loss share. our This a loss $XX to decline of for full as executed cash to We resulting the results our first from the of non-GAAP from of quarterly the a of flow decreasing XXXX.

in margin will under XX% inventory and $XX to improvements stated, we increased XXXX. and and yields burn decrease compared As realized and on expansion, higher cash have through our be million previously to instruments. equivalents short we to term $XX reduce operating This million, continued and XXXX revenues as reductions our cash a expect capital or working of

balance $XXX end a and to of XXXX term expect short investments. million equivalents cash with in and We approximately

in an a of are opportunity QX we for strong results. future supports and further, additional are profitable We growth for our execution with and our indicator go-to-market capital. our without believe they have coming are working And and objectives term us reflection the believe to We long we quarters. in encouraged that raise continue the infrastructure the that to innovation need early place strategy

been my and remarks Shai resilient to group this over the thank of the our team today. the years. call right for platform company. for a Operator, point people manufacturers honor at for to concludes by and at flexible It work That fan past on want and and mission future has It parts to the is produce step a aside this champion questions. the of up prepared of open to critical be and need. bright entire please very and time with their focused side collaboration pleasure support passionate Markforged providing side the I Finally,

Operator

Instructions] first Markets. [Operator Street coming from Capital Troy Lake today is Our Jensen question from

Troy Jensen

Quick, out you, seen I the Shai if carbon really And in guess, be all don't parts I fiber continuous got for FXXX, from ULTEM. FXXX it. produce templates, that's I've guess, I'd I know on curious

us talking parts Onyx So larger for this you're in traction or is ULTEM? traction you about aerospace, know with that if it's can the just specifically let it

Shai Terem

the with in and parts that I There's the the think and are out both we results, we some of companies. for interesting but there's But really is it’s very definitely no involve there. significantly. very ULTEM pleased to fiber, aerospace complexity ULTEM doubt continuous do it's FXXX see them very, increasing more

Troy Jensen

year. And above the end of margins. already you're gross Mark, on just the range I the you, high mean, for for

force talk us below you to down about going can XX%? sequentially So back what's to

Mark Schwartz

great think wasn't into to feeling. Troy, pressures there's reflection, the that it Yes, just we're visibility We market. but -- lack I have some an of we quarter really continues And the be easy a quarter. macro of there had it's a

we So look the And get ourselves the don't into of good as about feel we're we trajectory really to ahead we on. future, here. want

prepared our in to guidance after and out of the just reflection said to first quarter see the think historical the a they results, we're what I gate, our I quarter ourselves But working. the is we're doing on that's side, particularly As change gross first levels. returning reflection prepared of really, not margin and that are visibility. a the we remarks, And

Troy Jensen

number maybe more for of can you then one guys? does just an this you that And give update or for and can when us become last ship your you on the meaningful Shai, units year, PXXXX. thoughts

Shai Terem

demand through shipping saw time in brought there's it, for Good this the lot backlog, Rapid, around I you we're of start QX As also, year. think and a traction lot hope first US, systems we of the in up. it going a building to I

big electronics seen impact very, demand I business, relatively it consumer very automotive, of luxury we've that a goods, as the from I definitely it's see think to materially. but this and medical not the year We don't size from still industries impressive very see before. growing

Operator

coming is Greg question Next from Hallum. Craig from Palm

Greg Palm

of, kind give outs seeing a purchase an and your us what just there Couple about push of in on speaking, curious better. your but peers just could I'm kind quarter you're if demand came delays of bit decisions, you of broadly talked customer in out wise? quite more update

you're out curious seeing what just So there.

Shai Terem

We a year singnificantly stronger up significantly is some we bigger. ago, in than the definitely building decision-making. With delay see see demand that the and also pipeline

situation ahead grow still that speak bit year will themselves, we conversions the I this very results, But us. for the was in little slower, I and good So to a continue big especially are saw, small still of of issue, able the and improve And a businesses. have think, environment. as because to capital we’re hope we for

Greg Palm

tying commentary. gross a having difficult I'm time margin out the

I'm to continuing prepared a the the a of to year I year. throughout get the So as year. specifically take throughout talked guide the Shai, of production think, commentary stab FXXX about I in at around well. revenue come higher guess costs going And guess levels revenue visibility you down I full I but lack question assumes the

a that conservatism, the given about? and time appreciate gross actually just margin was and having the year, throughout which tailwinds -- I tying bit comes So the the but talked just quite the I'm just that QX, potential expectations than I down better hard out

Shai Terem

into go as I imagine, you that a can number of it. think, factors, there's

and as on margins. And some got example, incorporated, product. production, there field, with are you cetera, a incorporated, materials you gross impacts is new warranties We've new et provisions, distributed for changes we reserves suppliers about it can't our end think that and the are an and that as to that. a product you have that out as being Just bring are use and in new that in engineering up

that, than although, us, But complex we for very the simply highlighted. of it's like very So on feel great a of part important more the you're think And prepared not our a any right trajectory. a direction we're positive yet. there I that's gross least this is margin moving. said our a at the of result, we had return few think, asking you to But questions. And production, We is the just years levels still or the visibility it, having to as changes ago. about feel as full cost make lack just I we're guidance visibility to

Greg Palm

in within current point at or was? I what understanding will Fully recouped those your mean, fully And maybe lump do you last chain that that us, then just just at various remind gross guess on other how costs you can a us, you suffered I that think impacts quantify the FXXX what's the remind of recouped? much mostly margin supply visibility production point. year, But related there's headwinds thought lack be there? this

Shai Terem

for ago, So a basis gross talked that or it. recall the did half down than that seeing think it I we've about year-over-year times if one quantify challenges, our I and margin from us the half we was where paid about times were other of X%. comes from roughly two it we And general supply more on from previously or when three price maybe FXXX parts X it X% was of were about we increases, X off and costing chain quarters

back but was, its targets it it we improving. is system. is It's to no of isn't but where chain to improving, FXXX way Supply The Some question. it's out also of that definitely from we've the be need the it where is set, there's improving. making not

probably I X% and And FXXX. and the probably would broadly still where we're supply from to expect we attributed X% equally to say be or away to so that's still the more chain

Greg Palm

But year? just can mean, of you next be specifically, do think I on point most some the timeline that at recouped that

Shai Terem

bit challenging will system chain time year be us. certain FXXX behind say having this time the we're should of think a that like from predict fair the out in a be year to sometime supply think next call now. little to it's But I be I more wise. for is a by The -- should the

Operator

coming question Next Shannon from is from Suisse. Cross Credit

Shannon Cross

the percent at increased as wondering, revenue numbers, total I'm significantly. your a recurring has looking of

would behind So I'm to just that? curious what point you factors

Shai Terem

As see between you can a the revenue that split [successes] return the we and has have. material consumption

also before, discussed think, launched -- the I about course, probably on side, of I we but more we this recently, we new a subscription plan. probably think material

we So have forward. contribution also believe going will that

revenue continue see definitely will the time. we So increase to over return that

Mark Schwartz

that not power stability. for being other a percentage result, of QX software as stable, that more the and because are you down and is model that areas And sort in I see quarter-over-quarter this results, of the reflected is much, is while seasonally, higher nearly say and first hardware would down is also quarter, services the as there revenues. that a of those

Shannon Cross

you're then about, And layer you there contribution to how time. should if to on you going subscription But paid for it's top software about potential software? how doing know what a shift your I we mean, think the I in take as we standpoint should business? from more curious, think I'm

Shai Terem

customers. are think plan, new more One which elements bit to is a expensive the I more little it. value is but subscription there gives to two our

bigger the have on is bigger that the to will, a of revenue continue impact success significant the bigger consumption systems. we to course, as And significantly plans. bigger that So have push we other positive impact continue on our that side recurring earnings. have positive fleets very another the of and also it But that also of system will grow

Shannon Cross

granular in just a of you're buying that the and to in strength get And verticals prior interested terms anymore? they anything seeing in? Europe, just that. I'm you extent talk where kind they buying maybe follow-up are of geographically then To what can and who's curious, about a and as you of in can are questions, one about the bit talk what

Shai Terem

as quarter across year-over-year, which across So be grow can you and is very all see, regions fortunate to this able to all segments great. we're

think are is, strong We're more their And chains. manufacturing tool machine sharp very put part where manufacturing success. there manufacturing. customers vendors we best the is my point think for can that Manufacturers supply go the for our that I have and the and see inflection view, trying to I reason are resilient the solution. we put for being razor to be looking for growth, focused in more we the great the into general. the parts in this eventually and are more main to be accurate solutions probably in floor need Markforged and that another machines. parts see on floor, part and manufacturing more is of we into of highest And start more see we solutions product, on an that

example, customers, of going binder see parts into and more And more already some going our for jetting into cars. parts we With with aircraft. FXXX, have

think customers our this where and stuff focus to we build is growth. of the into really side enabling So their their on I the and chain, manufacturing we because resiliency product supply see into

Mark Schwartz

of leader the the at that, a maybe and autonomy to edge into very we as now. I the it Shannon, out decision-making results that last added now, that three the mentioned over we certain before, level later. And region, quarters strong we we're would but seeing quarters add to three in pushed have EMEA a

group that We very are have leadership, passionate in running folks very collaborative very EMEA that group, strong business. a a of

of really the an So growth. it's aspect important been

Operator

from Next question Blair. Brian Drab is William from coming

Brian Drab

supply margin coming what single the fourth factor? what sequential first it or factor, quarter, FXXX costs the biggest or the biggest improvement to was chain, the in was down manufacturing from So gross quarter is

Mark Schwartz

in down engineering pure FXXX, and the to areas. of fewer changes. related it I two and One the one coming questions. secondarily, earlier of production fewer mentioned of cost But It's briefly is Brian, there's the is sort

that so material and obsolete off is that family. used be less part to as not product being there's of material doesn't And as written need

margin largely So the -- FXXX. increase But is it's gross related both to of in those. it's

Brian Drab

rather comment because gross And then the than I about question, I'm honestly. Greg the Greg, with more guidance I'm more than guess a just a guidance, midpoint confused margin the of average around mean, of quarter great a XX.X% you just so XX.X% you the implies after I midpoint of the second, that have to quarter XX%. third, to guidance. fourth had hit

high the chain given end supply -- saying the is not like weakest confusing it's manufacturing getting year. you're in you're of FXXX the because even, improvement you're this better, throughout the costs, that it's or volume surprised I'm expecting great range making something So is quarter, the just seasonally improvements

we're understanding we makes really feel So to or going is doesn't uneasy something, this here like that's not sense. I call -- where just feel it that leave it -- the like me boogeyman not hiding just make don't

though, it's going it's an don't leaving already I you uneasy any times? there's -- us around three asked to a we've So other know if little provide of feeling. because can that's bit that, clarity it

Mark Schwartz

Well, differently, a appreciate here all. Brian, I think little be not asked I and at to trying that. bit can you We're obtuse it

the maybe enough there's enough have the say where competence feel expect that's and slightly would at now no something, can don't range on we down, just But FXXX, based you it. to boogeyman the nothing good of should better raise saying there, I that we but at cost don't we guidance, it’s Brian. you this looked that realistically, not sort feel comfortable US, that just feel where our yet weigh we that We're created to should think, end range, of do but still we quarter expect there's out maybe higher When within address we going at all first in that. initiatives see that And cutting raising we that. and visibility after to was. differently midpoint we I maybe get the

Operator

from Next is Maymon Jared from question Berenberg.

Jared Maymon

know I guess, demand are larger about we think, the guide. said insights First also what year. talked data here, if you than you not some if guys I I'm kind of you revenue pipeline misquoting look last you the guys so impressive have. it was on of one is I defense. that automotive, and is the Shai, have saying from significantly just you, aerospace

You that of in back the data from field. are lot obviously a get the systems

guess just of level run in I low the the I end the guys you close of QX, are of look I revenue when at closing on basis, where on you're guidance. fairly to mean, already a So rate a guidance, in kind

So I are orders is, trying to your some to out? guess there And an that then that you and cancelled assumptions, I'm assuming guys concerning, HX else just doesn't we when understand look if you're or kind of you at anything recession there's pushed tell something there? that fruition come maybe there's seeing can some is there's us upside, or utilization that's in

Mark Schwartz

start on But it head Jared you more way the that. you I'll I think Shai can couched add there, hit Maybe color. the and

to So that year, year we throughout uncertainty going had have the level we year. guidance March and baked in when relayed all this thought earnings and into weren't of smooth earlier perhaps we sailing about our that revenue the that guidance our call, of a

do that. our of years probably of I to suggesting a most feeling around isn't others little the are one few sort positive time just a they before months we this. three talking today year, that to ago, more data visibility we about from stray bit that like we'd we're well. little cautious we points more quarter And two a and being had in and would don't current see the have rest given think But the or economists were as we're ago that -- the again, and than

Shai Terem

the it start. positive. more as Mark remains. still feel a described, a in quarter, still bit low in We exactly good was think, but it's macro level, uncertainty good I there's But little a remains

wait anything. before want change we to we So quarter another

Jared Maymon

which that I then guess you data obviously just second up from book. data question. guys you kind to of following from visibility from order the part, of second And some got customer. then you've just assumed the backlog strong the received the kind quarter, And on visibility about thinking was guys have the

purchases, margin QX a believe could near some I'm curious, just next tailwinds to could to that up seeing So provide consumable anything on that utilization percentage leads the quarter as you're even sales, term, you QX? that or just of in data that gross be anything

Mark Schwartz

this One being data I up around consumables question earlier No, necessarily of those from a services percentage coming related are don't few that around revenue significantly quarters, necessarily brought that's the that have stream stream thing a bit the our last our quarter higher points. revenue of think and higher by and than that gross an revenue perhaps doesn't business. But in margin. stability all the

always of the hardware a is we've margin a business. As sustainable, said, standalone our as margin gross healthy, gross it's margin, good gross a

So I too much Jared. read that, into wouldn't

Operator

I'd of the We for end reached turn our back closing to you. floor Thank session. or question-and-answer like comments. further the over any

Shai Terem

much, quarter in joining for us you you very and Thank earnings. forward everyone see looking our first our to next for results,

Operator

does Thank you. That conclude webcast. today's teleconference and

wonderful day. you for today. may your You disconnect have We your line at and participation a thank time, this

Markforged Holding (MKFG) 11 May 232023 Q1 Earnings call transcript