Markforged Holding Corp (MKFG) Faces Macroeconomic Headwinds in Q3 2023 Earnings
Markforged Holding Corp (NYSE:MKFG) reports a revenue decrease to $20.1 million in Q3 2023 from $25.2 million in Q3 2022.
Gross margin and non-GAAP gross margin both contracted year-over-year.
Net loss widened to $51.4 million, with a non-cash goodwill impairment charge significantly impacting operating expenses.
Cost reduction efforts, including a headcount reduction, are expected to save $9 - $12 million in 2024.
On November 13, 2023, Markforged Holding Corp (NYSE:MKFG) released its 8-K filing, detailing its financial performance for the third quarter ended September 30, 2023. The company, known for its industrial 3D printing solutions, faced significant challenges amid a tough macroeconomic environment, which led to a decline in revenue and an increase in net losses compared to the same period last year.
Financial Performance Overview
Markforged's revenue for Q3 2023 was $20.1 million, a decrease from $25.2 million in Q3 2022. The company's gross margin also saw a decline, dropping from 48.6% to 45.7%, with a similar contraction in non-GAAP gross margin from 49.2% to 46.9%. Operating expenses surged to $59.6 million, largely due to a non-cash goodwill impairment charge of $29.5 million, compared to $35.1 million in the prior year. Consequently, the net loss for the quarter expanded to $51.4 million from a net loss of $23.0 million in Q3 2022. Non-GAAP net loss was slightly improved at $13.8 million versus a loss of $15.1 million the previous year.
For the nine months ended September 30, 2023, Markforged reported a slight decrease in revenue to $69.6 million from $71.3 million in the same period in 2022. Gross margin for the nine months was 47.0%, down from 51.6% year-over-year, with non-GAAP gross margin at 48.2% compared to 52.1%. The company used $40.0 million in net cash for operating activities, an improvement from $65.3 million used in the same period last year.
Balance Sheet and Cash Flow Highlights
As of September 30, 2023, Markforged's cash, cash equivalents, and short-term investments totaled $126.0 million, a decrease from $136.0 million as of June 30, 2023. The balance sheet also reflects the impact of the goodwill impairment, with total assets standing at $257.4 million compared to $345.9 million at the end of 2022.
Management Commentary and Business Updates
Shai Terem, President and CEO of Markforged, commented on the results, stating,
While the medium-to-long-term opportunity for Markforged to help manufacturers reduce costs and strengthen supply chain resiliency remains intact, our third quarter results reflect worsening macroeconomic headwinds in the final weeks of the quarter, which delayed several large deals that we had expected to close."
He also highlighted the company's focus on profitability and the implementation of cost reduction efforts, including a headcount reduction, to align operating expenses with anticipated near-term demand.
Despite the challenges, Markforged launched new products and platforms, such as the Digital Source on-demand parts platform and the FX10 composite 3D printer, which are expected to contribute to future growth.
2023 Financial Outlook
Markforged is maintaining its revised revenue guidance of $90.0 - $95.0 million for 2023, with non-GAAP gross margins expected to be within the range of 47% to 48%. The company anticipates operating losses to be between $59 - $61 million, including one-time restructuring costs, and a non-GAAP EPS loss per share of $0.26 - $0.28.
For further details on Markforged's financial performance, including reconciliations of non-GAAP measures, readers are encouraged to review the full 8-K filing.
Investors and interested parties were invited to join the earnings webcast and conference call to discuss the results, with a replay available on the company's website until November 27, 2023.
Markforged's performance in Q3 2023 underscores the impact of macroeconomic factors on the manufacturing industry, and the company's proactive measures to navigate these challenges while continuing to innovate and expand its product offerings.
Explore the complete 8-K earnings release (here) from Markforged Holding Corp for further details.
This article first appeared on GuruFocus.
