3D Printing Financials: Markforged’s 2023 Earnings Reveal Strategic Gains and Losses

Like other companies in the 3D printing industry, Markforged’s (NYSE: MKFG) latest earnings report for 2023 revealed both challenges and wins amid a turbulent economic landscape. The company reported a decline in the last quarter and full-year revenue year-over-year, navigating through the financial changes impacting capital spending and overall market dynamics. The company also faced intensified net losses in 2023 and delayed system sales. However, it has demonstrated resilience with strategic moves to streamline operations and capture new growth opportunities. Best of all, its numbers beat analyst expectations, with unadjusted earnings per share (EPS) loss of 6 cents versus the estimated 7 cents loss and revenues of $24.2 million surpassing the expected $21 million, according to Cantor Fitzgerald analyst Troy Jensen.

Markforged posted a decrease in annual revenue from $101 million in 2022 to $93.8 million in 2023, as well as a fourth-quarter revenue of $24.2 million, down from $29.7 million in the same period the previous year. The business also registered a net loss for the fourth quarter of $14.2 million, showing an improvement in its financial position, with a full-year net loss decreasing to $51.2 million from $60.1 million in 2022. The company also reduced its unadjusted net loss to $11.6 million in the fourth quarter from $13.3 million the year before.

A great deal of these numbers highlight the economic pressure that the industry is facing but only tell a part of the story. Markforged’s efforts to enhance its operational efficiency and reduce net losses are shown in the improvement of its gross margins to 49.5% in the fourth quarter, up from 47.5% in the previous year, and a decrease in operating expenses.

Markforged FX10. Image courtesy of Markforged.

Despite a challenging macroeconomic environment, Markforged reported 20% sequential revenue growth in the last quarter of 2023. While the company has not yet achieved profitability, it has made strategic investments in new technologies and expansions to ensure future growth, such as its expanded partnership with Automation Alley, which led to the sale of 125 OnyxPro printers in the fourth quarter for its Project DIAMOnD initiative. This is an expansion beyond the 300 printers Automation Alley acquired in 2021 and is part of a strategic partnership between Automation Alley and Digital Source, Markforged’s on-demand platform for 3D printing original equipment manufacturer (OEM) certified parts.

Moreover, Markforged’s global printer network saw significant activity, with subscription sales pushing a 25% increase in service revenues year-over-year. Also, at Formnext in November 2023, the firm launched three new products: FX10, Vega, and Digital Source. President and CEO Shai Terem indicated excitement over the strong initial demand for the FX10 and said Markforged remains on schedule to begin shipping in the first half of this year.

“With these new products alongside the FX20, PX100, and the rest of our industrial printer lineup, we enter 2024 with the strongest product portfolio in the company’s history. These new products help position us for growth in 2024 and beyond,” Terem told investors during an earnings call. “We believe the strong utilization rates and the resulting recurring revenue streams will grow in 2024. Markforged remains laser-focused not just on growth but also on margin expansion and achieving profitability.”

Furthermore, management says it is particularly encouraged by sequential improvement in unadjusted gross margins, which exceeded 49% in the fourth quarter, as well as improving operational and working capital efficiencies throughout 2024.

Amid its latest earnings report, Markforged also announced the official appointment of Assaf Zipori as Chief Financial Officer (CFO). With years of experience at Markforged, Zipori’s leadership is expected to steer the company toward its goal of profitable growth, says Terem.

Zipori remarked during the earnings call that a key goal for 2024 is to sustain the “positive momentum, scaling up our business and enhancing operational efficiencies even further.” The executive said the improvement in operating expenses and losses—which went down in both the fourth quarter and full year—resulted from ongoing efforts to reduce operating expenses and optimize cash utilization.

Markforged team led by CEO Shai Terem at the NYSE for the company’s public debut. Image courtesy of NYSE.

In 2023, the company took several steps to build operating leverage and right-size its cost structure to decrease operating expenses further to an annual run rate of between $92.5 million and $95 million in 2024. Markforged also forecasts revenues of $95 million and $105 million for 2024, with a clear strategy to overcome macroeconomic headwinds and capitalize on the growing demand for digital manufacturing solutions.

While Markforged’s guidance acknowledges the persistence of macroeconomic headwinds throughout the year, Markforged holds a more positive outlook for the second half of the year, accompanied by accelerated growth. Management said introducing new products, particularly the FX10, underpinned their outlook. Also, in line with seasonal industry trends, they expect to see the average mid-teen sequential revenue percentage decline in the first quarter and expect revenue to grow modestly sequentially in the second quarter. Finally, the company anticipates net losses will persist in 2024.