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MH

Markforged Holding Corp (MKFG)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 revenue was $20.55M, down 15% YoY, with non-GAAP gross margin at 51.3% (up ~200 bps YoY and ~180 bps QoQ), supported by operational efficiency and product mix; GAAP gross margin was 49.3% .
  • The company began shipping FX10, citing strong early customer feedback (e.g., Toyota) and a growing pipeline; management expects accelerating deliveries over the coming quarters .
  • FY24 guidance was reiterated in Q1 (revenue $95–$105M, non-GAAP GM 48–50%, non-GAAP operating loss $42.5–$47.0M, non-GAAP EPS loss $0.19–$0.22) with Q2 revenue expected to grow mid-single digits QoQ; note the $17.3M litigation accrual excluded from non-GAAP .
  • A jury verdict related to Continuous Composites resulted in a $17.3M accrual (GAAP) in Q1; management strongly disagrees and is pursuing post-trial and appeals options; potential future royalties were noted as a risk factor in company communications .

What Went Well and What Went Wrong

What Went Well

  • FX10 shipments started with encouraging customer feedback and pipeline growth; management sees FX10 as a flagship product, potentially reaching supply-demand balance by Q4 or earlier .
    Quote: “We reached a pivotal milestone in Q1 by shipping the first FX10 units… initial market feedback has been encouraging.” — Shai Terem .
  • Non-GAAP gross margin reached 51.3%, up from Q4 and YoY, reflecting operational efficiencies and product mix; CFO highlighted long-term aim for mid-50s margins .
    Quote: “Gross margin for the quarter was 51.3%… positively impacted by operational efficiencies and product mix.” — Assaf Zipori .
  • Subscription-based software/services showed healthy adoption, with services revenue growth and improved operating cash flow utilization (net cash used in operating activities was $7.4M, ~52% better YoY) .

What Went Wrong

  • System revenue remained pressured by elevated interest rates and weak capital spending; Q1 revenue declined to $20.55M from $24.09M YoY .
  • Regional softness in EMEA/APAC weighed on results; management expects recovery as pipelines convert .
  • The $17.3M litigation judgment accrual impacted GAAP results and underscores legal overhang; management noted potential for additional relief claims by the plaintiff (royalties) in post-trial motions .

Financial Results

MetricQ3 2023Q4 2023Q1 2024
Revenue ($USD Millions)$20.08 $24.17 $20.55
GAAP Gross Margin %45.7% 48.4% 49.3%
Non-GAAP Gross Margin %46.9% 49.5% 51.3%
GAAP Operating Expenses ($USD Millions)$59.6 (incl. $29.5M goodwill impairment) $31.1 $47.2 (incl. $17.3M litigation accrual)
Non-GAAP Operating Expenses ($USD Millions)$24.9 $24.9 $24.1
GAAP Net Loss ($USD Millions)$(51.4) $(14.2) $(35.9)
Non-GAAP Net Loss ($USD Millions)$(13.8) $(11.6) $(12.2)
GAAP EPS ($)$(0.26) N/A$(0.18)
Non-GAAP EPS ($)N/A$(0.06) $(0.06)
Cash & Cash Equivalents ($USD Millions)N/A$116.9 $107.9

Segment and geographic breakdown:

Revenue BreakdownQ3 2023Q4 2023Q1 2024
Hardware ($USD Millions)$12.15 $15.43 $11.27
Consumables ($USD Millions)$5.16 $5.90 $6.40
Services ($USD Millions)$2.76 $2.84 $2.87
Americas ($USD Millions)$10.05 $11.23 $10.10
EMEA ($USD Millions)$5.71 $7.92 $6.34
APAC ($USD Millions)$4.32 $5.02 $4.12

KPIs and operating metrics:

KPIQ3 2023Q4 2023Q1 2024
Non-GAAP Operating Loss ($USD Millions)$(15.44) $(12.98) $(13.53)
Weighted Avg. Shares (basic/diluted, Millions)197.41 / 197.41 N/A199.29 / 199.29
Net Cash Used in Operating Activities ($USD Millions)N/AN/A$7.4 (company commentary)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2024$95–$105 (Q4 2023 issue) Reiterated $95–$105 (Q1 2024) Maintained (Q1)
Revenue ($USD Millions)FY 2024$95–$105 $90–$95 (updated in Q2 2024) Lowered (post-Q1 update)
Non-GAAP Gross Margin %FY 202448–50% 48–50% (Q1 confirm; later “upper range” in Q2) Maintained (Q1); upward bias later
Non-GAAP Operating Loss ($USD Millions)FY 2024$(42.5)–$(47.0) $(42.5)–$(47.0) Maintained
Non-GAAP EPS (loss per share)FY 2024$(0.19)–$(0.22) $(0.19)–$(0.22) Maintained
Q2 2024 Revenue QoQQ2 2024“Grow modestly QoQ” “Mid-single digits QoQ” Clarified upward QoQ

Notes:

  • Q1 2024 commentary explicitly excluded potential additional royalty relief claims tied to the Continuous Composites litigation from guidance .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 2023)Current Period (Q1 2024)Trend
Macro/capex headwindsWorsening macro late Q3; delayed large deals; cost restructuring announced Capex environment still challenging; consumption steady; modest QoQ growth targeted in Q2 Headwinds persist; cautious recovery path
New product launches (FX10, PX100, Vega)FX10 & Vega launched at Formnext; backlog building FX10 shipped with strong feedback; pipeline growing; plan to accelerate deliveries Execution progressing; ramp ahead
Digital Source (on-demand parts platform)Strategic partnership (Automation Alley); adoption focus, limited near-term revenue Strong engagement (enterprise), adoption focus; not material revenue near term Building adoption; longer-term monetization
Regional trendsAPAC softness in Q3; mixed geography EMEA/APAC softness; expected recovery with pipeline Near-term softness; anticipated rebound
Gross margin trajectoryQ4 non-GAAP 49.5%; aiming mid-50s longer term Q1 non-GAAP 51.3%; range 48–50% for FY with potential upper-end bias Gradual improvement; ramp pressure near-term
Legal/regulatory (Continuous Composites)Litigation discussed; non-recurring costs included $17.3M accrual; management pursuing post-trial/appeal; potential royalty claims noted Legal overhang; cash impact mitigated in Q2 via surety bond (later)

Management Commentary

  • “We started 2024 with strong execution, setting a solid foundation for the year ahead… FX10… very encouraging and we are optimistic about the opportunities the FX10 will bring in the second half” — Shai Terem .
  • “Revenue for Q1 was $20.5 million… down from the first quarter of 2023… Gross margin… 51.3%… positively impacted by operational efficiencies and product mix” — Assaf Zipori .
  • “We strongly disagree with [the Continuous Composites] verdict and intend to seek to overturn the verdict… exploring all available options” — Shai Terem .
  • “We expect revenue to grow mid-single digits quarter-over-quarter in Q2… opportunity for accelerated growth in the second half… particularly the FX10” — Assaf Zipori .

Q&A Highlights

  • FX10 pipeline and ramp: Pipeline building “as expected and maybe even more”; supply to meet demand potentially by Q4, “even earlier” .
  • Litigation scope: Related to the continuous carbon fiber technology within hardware; claim relates to the U.S.; too early for more specifics; company pursuing overturn .
  • Regional performance: EMEA/APAC saw larger YoY impact; management expects eventual recovery based on pipeline .
  • Gross margins outlook: Q1 expansion encouraging; ramping FX10/PX100 could pressure near-term margins; aiming toward upper end of FY range as revenue grows in H2 .
  • Digital Source: Strong enterprise engagement; adoption focus now; limited near-term revenue .

Estimates Context

  • S&P Global consensus for MKFG was unavailable via our data interface at the time of review; therefore we cannot quantify beats/misses versus Wall Street consensus for Q1 2024. Values retrieved from S&P Global were unavailable.
Metric vs ConsensusPeriodActualConsensus (S&P Global)Surprise
Revenue ($USD Millions)Q1 2024$20.55 N/AN/A
Non-GAAP EPS ($)Q1 2024$(0.06) N/AN/A

Key Takeaways for Investors

  • Margin execution resilient: Non-GAAP gross margin at 51.3% despite softer system revenue; watch for near-term ramp headwinds from FX10/PX100 but upper-range bias later in FY if H2 revenue accelerates .
  • Product ramp as catalyst: FX10 shipments started; accelerating deliveries and added capabilities could drive H2 growth and improve utilization/recurring revenues; monitor order conversion and supply alignment .
  • Legal overhang: The $17.3M accrual (GAAP) and potential post-trial royalty claims pose uncertainty; company is appealing; later surety bond funding indicates liquidity planning—trading may be sensitive to legal milestones .
  • Guidance posture (as of Q1): FY24 revenue $95–$105M, GM 48–50%, non-GAAP operating loss $42.5–$47.0M; Q2 revenue targeted mid-single-digit QoQ growth—watch H2 trajectory versus guidance and any updates .
  • Regional normalization: Near-term softness in EMEA/APAC expected to recover as pipelines convert; evidence of recovery would support multi-region growth narrative .
  • Cash runway and cost control: $107.9M cash at Q1 and improved operating cash utilization (~52% YoY improvement); disciplined OpEx supports runway to growth initiatives .
  • Tactical trading setup: Near-term stock moves likely keyed to FX10 ramp updates, margin trajectory, and litigation developments; medium-term thesis hinges on factory-floor adoption, recurring revenue growth, and achieving mid-50s gross margins over time .