Markforged Holding Corp (MKFG)·Q2 2024 Earnings Summary

Executive Summary

• Q2 2024 revenue was $21.7M, down 14.7% YoY but up 5.6% sequentially; GAAP gross margin expanded to 50.2% and non-GAAP gross margin to 51.9%, reflecting operational efficiencies and product mix .
• Management announced a $25M cost reduction program, targeting an OpEx run-rate of ~$70M in 2025; FY24 revenue guidance was reduced to $90–$95M from $95–$105M, while non-GAAP gross margin is now guided to the upper end of 48–50% and non-GAAP operating loss remains $42.5–$47M .
• FX10 shipments accelerated and the first PX100 shipped in Q2; management expects low-single-digit QoQ growth in Q3 and a return to double-digit YoY growth in H2 driven by new products, positioning the company for H2 reacceleration .
• Legal overhang: if post-trial royalty claims are successful, management estimates a 5–7 percentage point near-term reduction to gross margin; restricted cash of $19.1M posted for the verdict highlights balance sheet encumbrance .
• Stock reaction catalysts: the combination of a guidance cut offset by cost actions and product momentum (FX10/PX100) creates a “show-me” setup; progress on H2 growth and visibility into legal resolution likely drives near-term sentiment .

What Went Well and What Went Wrong

What Went Well

• Margin expansion: GAAP gross margin rose to 50.2% (vs. 47.0% YoY), and non-GAAP gross margin to 51.9% (vs. 48.3% YoY), aided by efficiencies and mix; CFO: “This margin expansion was driven by operational efficiencies and product mix.” .
• Product milestones: accelerated FX10 shipments and first PX100 shipment; CEO: “FX10 shipments have also accelerated… we shipped the first PX100… positioning the Company to return to growth in the second half.” .
• Cost discipline: announced $25M cost reduction to reach ~$70M OpEx run-rate in 2025; “not expected to compromise our ability to grow” .

What Went Wrong

• Top-line pressure: Q2 revenue down 14.7% YoY on lower system sales amid high interest rates; CFO cited “tough market conditions with high interest rates” pressuring systems .
• Guidance cut: FY24 revenue outlook lowered to $90–$95M (from $95–$105M), acknowledging more persistent macro headwinds .
• Legal risk to margins: potential royalties on certain U.S. sales could reduce gross margin by 5–7 percentage points near-term if awarded; restricted cash posted for judgment constrains liquidity flexibility .

Financial Results

Consolidated Metrics vs Prior Periods and Prior Year

Segment Breakdown

Geographic Mix

KPIs

Guidance Changes

Notes: Guidance excludes potential impacts from post-trial royalty claims related to Continuous Composites litigation .

Earnings Call Themes & Trends

Management Commentary

• CEO: “We demonstrated strong execution in Q2… The positive feedback and growing pipeline underscore the strength of our recent innovations, and positions the Company to return to growth in the second half.” .
• CEO: “We have successfully shipped the first PX100 in Q2… in automotive, medical, aerospace and luxury goods… we remain on plan to ship additional units in the second half.” .
• CFO: “Gross margins for the quarter was 51.9% [non-GAAP]… driven by operational efficiencies and product mix.” .
• CFO: “We now expect non-GAAP gross margins to be in the upper range of our previous 48% to 50% guidance.” .
• CFO on legal: “In the near term, we would expect royalty payments if awarded to result in a 5 to 7 percentage point reduction in our gross margins.” .

Q&A Highlights

• Cost reduction focus: Majority of $25M savings from R&D after launching three new platforms; intent is sustainable growth without compromising product roadmap .
• Revenue trajectory: H2 growth predicated on FX10 pipeline and PX100 shipments; management sees sequential improvement from Q1 to Q2 and continued momentum despite tough CapEx environment .
• Legal expenses: Non-GAAP excludes legal fees; details available in GAAP-to-non-GAAP reconciliation (press release tables) .
• Gross margin dynamics (context from Q1): Near-term margin pressure possible during product ramps, but longer-term target mid-50s remains intact .

Estimates Context

• S&P Global Wall Street consensus for Q2 2024 revenue and EPS was unavailable via our S&P Global tool mapping for MKFG, so a beat/miss assessment versus consensus could not be determined. We anchored comparisons to company guidance and reported results [GetEstimates error noted; see analysis].
• Implication: Street models likely need to reflect lower FY24 revenue ($90–$95M) and higher non-GAAP gross margin profile (upper end of 48–50%) following the update, and incorporate potential royalty impact scenarios on gross margin if post-trial relief is awarded .

Key Takeaways for Investors

• Margin execution offsetting soft hardware demand: Continued non-GAAP GM expansion to 51.9% despite macro weakness indicates operational progress; watch sustainability into H2 ramps and potential royalty headwinds .
• Guidance reset: FY24 revenue lowered to $90–$95M, but gross margin outlook improved; models should reflect lower top line with better margin mix .
• H2 growth catalyst: FX10 momentum and PX100 commercialization underpin expected H2 double-digit YoY growth; monitor IMTS-related capability releases and pipeline conversion .
• Legal overhang: Scenario-plan for a 5–7 pt GM hit if royalties awarded; restricted cash and lease termination savings provide some offset on cash trajectory .
• Cost actions: $25M savings with 2025 OpEx run-rate target of ~$70M improves path to profitability if H2 growth materializes .
• Mix shift: Services and subscriptions provide recurring ballast; consumables resilient relative to systems in weak CapEx cycles .
• Near-term trading: Stock likely sensitive to tangible H2 order intake, FX10/PX100 delivery cadence, and legal developments; clarity on royalties and Q3 QoQ growth are key sentiment drivers .