Markforged Holding (MKFG) 9 Nov 222022 Q3 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to the Markforged Third Quarter 2022 Earnings Conference Call.

During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to Austin Bohlig, Director of Investor Relations. ahead. go Please

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

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

represent forward-looking and making to of November statements, statements disclaims to Harbor obligation, could materially. started, XXXX. historical get Reform this required to that be of everyone are any in subject fact are cause we statements. should estimates differ pursuant or deemed remind and or revise and are views call statements Act contained actual X, today, management's I'd uncertainties XXXX include be Markforged forward-looking which not like statements intention other this made material the These during provisions by update will Private to Before risks call statements. of to of that that be Securities law, to that as results statements as management except Safe Any forward-looking the Litigation

investors.markforged.com. of can measures. also the currently be found showing which today's refer during our non-GAAP our we'll press at financial in available course Also, GAAP versus certain market after There's today, close to schedule reconciliation results a call, the non-GAAP release website, issued on

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

products, deliver the power Forge the continued grow you our third the us new is the on EPS sequential product, operating to the product Forge and operating our XXXX more strong to exciting itself. the embed to Despite more final leverage QX control Austin, to parts Forge Digital quarter, to challenging manufacture and on of to in allowed thank customers for demand and new Digital unleashing It cost design see earnings target. Thank for everyone in and us joining you, see globally and our environment, call. Digital

the such automotive, all in even in see industries and motorcycles, in equipment. in aerospace, medical world I key and examples drones, over as electric

we for challenges gross In target, and geopolitical EPS quarter. continued, not the revenue targets EMEA, globally our mature chain margin while And we pressures deliver on the and inflation line Americas our our However, we met as the of business. impacted supply and opportunities we market to the not thanks growing company. growing FXXX in for of its and our quarter meet able to history largest demand exited pipelines the of the opportunity and target. cost team of one our the were with did But

of more onshore long-term increasing to of couldn't gain bring more industrial intact our point The of in an number to as manufacturers make vision using our to Digital manufacturing more about excited and need. production to chain. the fundamentals resilient by of be their momentum continue Western the supply remain business the We world Forge

we supply seek had grade unprecedented resilient newest make FXXX, their printer, manufacturers generating anticipated, as excitement more flexible. and production is solutions chains As our the to

parts as and printing and of expectations. met the backlog assembly such with shipped materials, applications, backlog. quarter to both printing and The orders. continuous this unit We critical FXXX constraints, is aerospace-grade contributed material we every carbon for a ended FXXX Procurement for arms. solving robotic fiber replacement building demand QX, mission built production with the reinforced In line automotive still of

fulfill enable the us planning production to rate to We continue orders that will reach receive are to to work them in commercial XXXX. we as relentlessly run early FXXX mature and

uncertainties. meeting half a modest growth expectation be from our APAC highlight impact in experiencing the The more us APAC region second significant the to currently was in a XXXX. macroeconomic quarter, for of appears for third

quarter-over-quarter, XX% quarter, to current demand by and the currency immune and third the not strong and inflation accelerated were demand pressures. global and in led XX% year-over-year including EMEA the for APAC Americas for For revenue FXXX. mature challenges, in products our war grew Ukraine,

macro to of on XXXX, conditions reach our reprioritized our potential profitable and impact Due the to impact team reorganized greatest end intention initiatives we by our believe business breakeven the we go-to-market to the our growth. that for path have broader the of and recently on

this the August, in helps jetting expand technology high Metal our parts. With metal The market in excited addition end-use acquisition production completion opportunity the Digital into expanded us addressable about of metal our of we are metal production. the mass of volume binder

automotive Digital that who led Metal meet uses top-notch coupled for nRoot are this Blackwing the Cadillac us I best-in-class V-Series, customers they used such as about things parts to doing which quality, to the with parts produce As deal, customers, same reliability. like [ph], rave vehicles in

I exciting In very hear the luxury Digital from and how also the begin share to medical, automotive who potential Digital of pushing goods to new in field the especially innovation. solution. the example I human Forge using our every a day want customers, those want is of Metal industry boundaries

Canaveral, network Forge. based real-time parts sensors Our of insights their entire with transportation, for other global customer's, small critical satellites a provide Ciberspace Cape is a to finance, weather, industries. on almost satellite building printing with XXX They're Digital [ph], and loaded

lighter, than producing with example industrial in-house great to right and optimizing by stronger using of how solution need. fiber hardened aluminum By is point can up on money that onyx rapid at XXprinter are reinforcement, radiation a carbon each production is our XX% saving weight. bring but of Ciberspace launch the This satellites our

macro such coupled inputs, energy This forecasts is core and a raw as difficult continue put time to Supply disruption, materials. for cloudy global manufacturers. chain on pressure with

driving this. our very continue we exactly we growth on towards decisions business our by execute Supported our fundamentals. the solution, back confident demonstrates investment profitable balance and to strong production very Forge, and pipeline to the manufacturers our and complicated, strategy sheet, differently capital feel in I bring make pressures think same shore. these Digital have pressures these With While on are believe

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

quarter results well will I September Shai. our comments outlook review XXXX. my XXXX, reflect outlook. as year non-GAAP Thanks, and ended XX, third that quarter review now our and as results fourth the note full for Please our for financial

afternoon our to reference, release, earlier to website, to your issued press assist GAAP and our reconciliation earnings For our commentary. non-GAAP posted this Investor with Relations my includes

of production, the $XX efforts, ramp of our for quarter. X% meet the were of of secure million, increased meet we Despite FXXX third $XX.X as and and to best were demand. XXXX. compared challenges sufficient revenue unable Revenue to These result, we to and revenue a third for XXXX target production volume components to for growing quarter million production quarter mechanical the our to unable with units slowed complete our the electrical

for $XX.X million, the quarter $XX.X profit of third compared million to third Gross for was the XXXX. quarter

the a XX.X% impacted XXXX. XX.X% producing compared result, state million target production, at by quarter versus in gross third generated over current profit As a The or our in of gross steady profit negatively margin percentage cost gross points. to $X.X margin of we of an FXXX our four QX,

into steadily of through continue at balance production XXXX XXXX XXXX. We and the then the half first levels through to costs expect and of improve current FXXX

quarter quarter million declined expenses for $XX third of Operating XXXX, $XX.X and in to quarter the for compared XXXX. from million $XX.X the the sequentially second were million, in

$XX.X of per our the XXXX quarter net million, was share. third or a loss $X.XX loss For of

revenues, a in a loss we As the focus toward improved of percentage quarter for second as our profitable of to net growth. comparison us XXXX, managed

to of well-positioned million, on execute we exited goals. cash on long-term plan a and balance Finally, the $XXX.X with third quarter our

Now onto guidance.

we outlook, year $XX in $XX revenues are in the million, financial updated of which to considers market for would We provided. previously current the full We guidance range of quarter our at updating reflect fiscal midpoint conditions. XXXX fourth to which end lower be our near year the the the revenue million result XXXX to anticipate the range

the fourth range We be expect the to XX% within year XX%. range to of the XX% full margin to of to gross would in XX%, gross which margin XXXX equate quarter in

million, range full $XX.X would We loss XXXX million for range be quarter which anticipate our year. to the equate for fourth loss in in $XX.X to year million $XX operating to the the of of $XX.X million to the operating

from per a XXXX share, share. be to the a quarter to QX. improvement $X.XX loss improved EPS further equate to full in to expected of $X.XX in would the EPS $X.XX per year the for operating results QX of Our fourth anticipate sequentially to loss the XXXX in we which loss range are to be $X.XX and results QX range a for

revenue Our growth XXXX. of macroeconomic annual XX% long-term in was headwinds with goal met

product XXXX, is portfolio, these changed. expense achievable goal our of into our controls. expect our and we innovation the strength given headwinds disciplined but continue has roadmap, ambition believe not We And long-term to

please open Operator, concludes remarks for our the prepared today. questions. for That up call

Jensen first with you. line comes Thank Please from the Our Lake Troy Capital. Street ahead. go [Operator question Instructions] of

Hey, gentlemen, thanks question. for taking my

here. late on jumped I Sorry,

asking if from contribution addressed. So an more that high was I'm real get I me something or just when a you on big thoughts platform? shipments and update material FXXX, apologize on maybe end here give But that we could

take Yes, thanks for joining that, Shai in add Troy, may some here. and happy to us. color

reasons up on commercial began contract what maybe are supply would now little to we've our getting year. as of end the quarter is in reach production FXXX, been particularly pushed this And we the a bit run So this the and chain out year ship by that ramping side. a we saying That's manufacturer rate longer. for

Okay. Right.

Troy, demand very, side, on comments, see demand continue it the side, there. We any the build shared don't it's slowdown very the strong, On we up. on but to

We've multiple continues industries, it's way, it. FXXX grow. On and demand the customers other customers, the bigger, love so more to and getting the stronger side on

backlog get just for to to is reach of kind substantive up [ph] ramping the again right? So product production the

getting It's chain about all environment. very It's just Exactly. parts. tough the supply

you've this to ship and our to build then understand, typically build us before, forecast then this sorry and order I on heard order. Troy, harp business. think, and component we it you We -- Yes, of

an So business we've today, if XX were purchase run to we'd tomorrow. to That's to ship you our of how you chosen model. part it

because we're FXXX, our to last speed. production dollars left We the there up not couldn't With get the revenue table yet. on quarter we

understand. I Right. completely

only the not You're ones.

It how is some then about a awesome. work I done technology of one the product. of kind guess So the Metal? like sounds I've Digital on own quick my on

kind of timeline, product? more of do also that a curious also it, your in on you Just you sell to and contribution trained portfolio when think is get to revenue expect integration, sales ramp kind force from when of do

That's we around very a excited And Metal. are great Digital question.

adopted only one exciting with to enough up, go see real a transaction fortunate been like to had the did to building into August before, very really in some see and luxury it to goods more demand There's completed automotive, the printed even we was not see we and parts interesting XX, medical, prospects. some it. car. So customers and that others, I play when to so when industries in we month it's officially it's

very very, exciting. So

I year year. that not to probably it so think impact Metal, we up do quarter have expect it's but going the we're material next to Digital this ramp first

We day-to-day we have continue it than a different approach to get to progress bit to leveraging the little we're a direct right partners. our working with with that we're customers. the more channel is global It's The with definitely here, way it. that probably but our business coverage

Perfect.

Okay. and taking in Germany next my for Thanks week. luck good questions,

Troy. Thanks,

next Group. Please ahead. with is Greg Capital of question And from line Craig-Hallum our the Palm go

because guess for taking still and you're FXXX. commentary. market and but some the you're questions. I demand about I talking basically I guess pressures Yes, macro follow-up thanks about of the wanted talking I'm bit growing robust a to on confused also for

is sales of lengthening by confirm to just outside cycles, been purchasing has the So And at impacted pressure decisions, FXXX? not whatnot? the and all the FXXX

and Greg, for questions. thanks half, first the take your I'll

product, be seeing it's quantify us and new excitement demand for impacted difficult it, way us and the for of such actually but would to and around that. we're there's could greater, every an could it's by sales other even be or not. like a such impact the product excitement to greater. to The us an the being even say that has not So there's FXXX, reason cycles lengthening for to It been stand FXXX whether sort that is no

is taking had one in the of history seeing a that time close we're we've What it's growing the on biggest pipeline of pipeline, is the pipelines company, to ever the lengthening. and

great, macroeconomic the demand So feeling the is current from are certainly we uncertainties. impact but

sense. makes that Okay,

cost expand In just terms bit go-to-market, some of that? you're upon reorganization just of potential you what and the little a the doing can behind the of savings

want do Shai, you to take that?

Sure.

go-to-market make we do think possible. we the try say this would after, improving have to we It as leverage what will side I with that a efficient we're sure thing to currently it's has impact see bit the growth challenges. and We the little one and adjustment near in prudent the the the to but to right and as macro So in operation we we you quarter cost that adjust our the term even can. as seeing

that, Somewhat related that but there's just that's a path additional that I'm achieve internally goal. if to that, can helps with if associated or the that curious level breakeven you to pulled exiting of XXXX, there's be revenue levers

We targets some that need becomes whatever internal to through it. in achieve to prepared we're Having the today, to let those goal, know ever think it's We're in but we we'll public make if said order imagine have adjustments that make otherwise. and you around, we as something make that business difficult that, our to pinpoint we are certainly for environment, numbers hashing with to current not us can going that. you

it macro ago, of environment Okay, relative let's very but that year a there's lot pulled goal. I under to different be can even that a still help levers guess a that sounds you now achieve say like

That is correct.

lots every 'XX reason hardware Digital from the Metal between revenue that continue year, to about software side, have of On And commercialized and be to hardware, excitement. next be core we our and will excited and 'XX. there's

good. back I'll luck. queue. Thanks. in Okay, Good hop

Thanks, Greg.

Jim our ahead. And line Suva is the of next Citigroup. go Instructions] Please [Operator from question with

or curious, bit? some the Thank company pressures and or I or we there alleviate like a your unique that the components of are PCs was is in securing you. not of actually The challenges wondering about parts components. which hitting of I'm technology constraints reason little has of your ask it certain past if the alleviated that's why things. When month oversupply, to are securing is other two, the product, think I the worsened for help just or to FXXX, starting

seeing impacts or on a Like building to entirely, we're of supply item one really piece Jim. that item. Not limited hardware, any ability produce full any is unavailable that your

the So is always be in able something priority say I the improving. wouldn't the to parts order to moving challenges of find but build There's day-to-day change top week-to-week, or machines. it's that to the list to that

you hey, maybe visibility, follow-up, putting proactively have orders? your that year a mid-next state, chain, a into a we as then do have Or to maybe don't And like Okay. proactive start better telling you maybe to more have much it supply equilibrium are done they in say, if or worth so? gets lot the you it's already

next case. does going challenge year. we as entire thought the were were that these into is they're are chain Yes, it's the a point, this sort combination not hoped said At today along of those this and things. The supply sometime year leak chain, us begin that appear to our you supply We telling to vendors, but certainly going that we does our wrong, improve. it recall, it's it all year sight. of this to an that next end We've partners seeing year, issues to does that may it that in appear us hope

press Okay. in make run being release, the the it goal or like that are and your upon curious, sure a situation statement XXXX, or year? profitability made kind supply full I calibrated correctly. believe that hear exiting then And completely you to will are that contingent chain to good I investors is is based curious rate And in or think resolved because of just upon like assumptions any just that's we about

need the from pulled, we We product the There's you supply continuing sales not and point. think end levers as to and certainly our lots teams. that Jim, can reach that will of well of would as marketing as with for be year. introduction the new be generate imagine we're side indicating it to full XXXX, Yes, today by that demand our

continue as We So that feel lots one chain about that our are The of something and things to that imagine. happen. isn't we supply control. need monitor, it's to can those is that you great in

you. Thank

And Stifel. from ahead. McCabe line with Kieran our Please next go of question comes the

could you kind base exceptional kind trends any kind taking color your key or just FXXX? you're color Hey, if you're the in softness my what that business, verticals, where provide of business general on outside on you strength FXXX of Outside the base of for wonder or of verticals of yes, seeing question. thank key and a seeing kind your sort

Thank you.

I the think it covered to continues on be as before. same we industries

for [ph] deeper customers I into industrial more build for also to go think see deeper more our itself. going manufacturing for and the parts strong GXX and product, but aerospace, floor that are solution their is into we build with very, very that just recently not What products. and us. Automotive tools help are application, features using the product to I

was that to saw testing COVID-XX in have by I do machines, be in has two saw with I Markforged enough there parts Markforged. medical electric fortunate motorcycles that and Markforged. used rapid that only printed I parts parts equipment for And to saw them. have ago, I Australia weeks military drones with the

see more So as industries product more and we into itself in the these adoption final well. key

you Okay. very much. Thank

Kieran, I color I add important you. yes, little to to also there a it's think sorry -- wanted for interrupt.

generating mentioned that before. highlight, powerful an a think I from on multinational about call, this we're that is large time And a industry. buys think think FXXX. and have product excitement important seeing being their organizations it's in bought it's statement from buy the never us I this first first We to previous from the also we've anything Markforged

you. Thank Great.

Our from go next Shannon Suisse. line question ahead. Credit Please of comes from Cross the

I printers, are customers Or very usage big I devices terms general, seen a you're have on significant sort what purchase wondering of just about of, understand you what because just might don't in and taking to Thank in time. there's Thank pullback? the you. know, maybe trying longer and some of the on alleviated be there over been in realize was but in have they're pressure you much. to how the industry, it I printing. what's going I'm changes clearly magnitude seeing

active we don't yet. a We would what see to quarter-over-quarter, call printers decrease grow you. say Thank year-over-year. continue I especially will

customers, So it, the I interest it tell try much have year-to-date, where decline. The don't get are lot customers out our it's continue see usually as best we to because to a them you as that the money. of say of we ROI solution for can use saving any the would have I possible, that to print the proving and

Sometimes with, to cycle, see the they their do own they it's working, we're follow it up the next after, okay, them. that driver I'll all build into resiliency great chain, in suffering It's good a from. when supply it's cost savings because for one a which

just the approaching, And obviously you cash, new fund last you you your of obviously I sort cash. your a bit guess, with an cost changed you have terms on which But things maybe But or to and you're a don't -- flow uses, careful balance how and is on you. I side, in Thank positive, cash definitely. areas curious, willingness issue months, but think know are in your I'm when three how usage have the about think about best the when talked of with of sheet. thoughts you

I say you've would thanks, mentioned Yes, I sort look of -- Shannon. think it.

sales across we expenses. but efforts, balance business. are of innovation, believe and focused our paying the operating particular and close our marketing, cost our be what strong in on remain have very controls of attention certainly to outside We We innovation to our we our

in the past gross at even result EPS enabled the had line this achieve us our miss on we I and think top hitting the target, that's though margin. quarter, we did to a

imagine current in view spend where decisions it urgency recognize, chair a So bit that which cycle vicious sitting spend next make that to don't doing, folks doing need asking a the Anecdotally, my of out in we're and others types out, focus. but quarter my be pushed the pushing can are be it's same I'm we the and that created are making, about I same. certainly, a is spend There's that continues necessarily in making the period. or to if of by little we in to that, that industry the the have or questions certain something gets

Yes, thank you very much.

you. Thank

our Blair. the And question from Drab line William Please of from go Brian next is ahead.

we There go.

the to of get one. four are to you using queue into figure conference that a So instead the one, guys while only Took service question me call star, that out. uses

you guess to that So question I my any demand one lot quarter? well, is that how equipment that's question I the just non-FXXX for to back ship but know customers of just FXXX determine a I times of direct the yet. in as questions of couldn't the to underlying don't for demand. goes trying I'm is, the you've kind one meet This there's several Greg's and and clear demand did you the know been is, FXXXs third said

question, We that take Yes, we the quarter. quarter. shipped part in of you Brian. quarter, FXXXs in I'll Yes, question. we've second quarter, and third the ship third Thank did the the the first shipped the for asking in

we We what backlog, rate. our be at the over believe quarters. are run That we to eliminate of that's coming couple next but not will commercial believe

the about in didn't but macro revenues helping much pressure, shipping that it? with Then is for it the showing how given or non-FXXXs, talk hardware you're macro ramp, you're offset Okay. Is more equipment non that safe last this year-over-year. the is year, I When the is you say interpret the pressure year, macro to pressure up you FXXXs the seeing that Great. FXXX hardware. FXXX flat

hadn't sold the It's possible for that -- was as way Greg, asked, the to us I if difficult determine think we it the question by is well very the FXXX before. uncertainties really impacted It because it's by and is,

that. understand I No,

and impacting of would core in higher difficult for Absolutely, the Americas but outside our us and business That it's FXXX, say that. it's the be the even demand to EMEA. particularly

that a lines. same pretty Okay, year-over-year, along the healthy. the utilization is and equipment then pretty just was it's and the still sign Consumables XX% and the still healthy which of growth is last question,

the of near that went the in in you quarter, play seeing to forward term? fourth utilization do the in change field? you are any the Thanks. expect equipment As the How you going into out

Yes, think see a change. don't I we'll

We continue we material in in growth the believe going the install to printers increase grow we're we utilization continue the and active the usage, to the consumption, especially with and a and in the to since see base, and see FXXX.

it normalization, much when if quarter to FXXXs, we printer, so faster every which clear utilization each So to had wasn't it's quarter shipping system, get are shipped usually system. FXXXs supposed and the far, going we other we that because of takes more a a than this before, to year every printer quarter before about on it's any reproduction than be higher bigger, the

a we believe see we're revenue recurring next in significant in to few So quarters. that the increase the still going

Yes, perfect.

Okay. Thank much. you very

Thanks, Brian.

you. Thank

no in now to call remarks. Q&A over queue. Shai the turn I have for further Terem will questions we closing And the

very and you quarter. much Thank everyone for we'll joining you us next see

disconnect participation and please your for your conclude you We for that call lines. ask today. you does thank That your conference