Markforged Holding Corporation, the company strengthening manufacturing resiliency by enabling industrial production at the point of need, has emerged as a prominent player in the additive manufacturing industry. Founded in 2013 by two MIT-educated engineers, Markforged has quickly established itself as a leader in the development of innovative 3D printing solutions.

Company Overview

The company’s flagship product, the Digital Forge, is an intuitive additive manufacturing platform that empowers engineers, designers, and manufacturing professionals globally. This cutting-edge technology combines precise and reliable 3D printers, metal and composite proprietary materials, and cloud-based learning software to provide manufacturers with the tools they need to create more resilient and agile supply chains. Markforged’s initial focus was on developing additive manufacturing solutions that could produce industrial-grade components using materials like carbon fiber and metal. In its early years, the company faced challenges typical of many startups, including securing funding and refining its technology to meet customer needs. However, Markforged made steady progress, growing its customer base and expanding its product portfolio. A significant milestone was reached in 2018 when the company introduced the world’s first 3D printer capable of printing in both metal and continuous fiber reinforced composite materials.

Corporate History

Markforged’s journey has been marked by significant milestones and challenges. In 2021, the company underwent a reverse recapitalization, merging with AONE, a special purpose acquisition company, to become a publicly-traded entity. This transaction provided Markforged with additional capital to fuel its growth and expansion plans.

Financials

Financially, Markforged has reported mixed results in recent years. In the fiscal year 2023, the company generated revenue of $93.78 million and incurred a net loss of $103.57 million. The net loss was primarily attributed to increased operating expenses, including significant investments in research and development, as well as one-time charges related to the company’s acquisition and integration activities. The company also reported an operating cash flow of -$48.90 million and a free cash flow of -$52.49 million for the fiscal year 2023.

For the third quarter of 2024, Markforged reported revenue of $20.48 million, a slight increase of 2% from the $20.1 million recorded in the same period of the prior year. This relatively flat revenue growth was driven by lower system revenue, which continues to be impacted by a challenging macroeconomic environment with high interest rates. However, consumables revenue increased 12% year-over-year, while services revenue grew 13%, aided by the launch of subscription offerings. The company incurred a net loss of $23.37 million for the quarter, with operating cash flow of -$14.03 million and free cash flow of -$14.45 million.

Gross margin improved to 49.0%, up from 45.7% in the third quarter of 2023, highlighting the company’s focus on operational efficiency and cost optimization. Markforged now expects non-GAAP gross margins to be in the upper range of their previous 48% to 50% guidance for the fiscal year 2024.

To further strengthen its financial position, Markforged announced a $25 million cost reduction initiative in the second quarter of 2024. This measure is expected to reduce the company’s annual operating expense run rate to approximately $70 million by 2025, positioning Markforged for a stronger financial footing and a path to sustainable growth.

Liquidity

As of September 30, 2024, Markforged reported cash and cash equivalents of $59.28 million. The company’s debt-to-equity ratio stood at 0.27, while its current ratio and quick ratio were 2.39 and 1.98, respectively, indicating a relatively stable short-term liquidity position.

Product Segments

Markforged operates in two main product segments: Hardware and Software.

The Hardware segment, which is the company’s core business, encompasses the design, manufacturing, and sale of its additive manufacturing products. This includes 3D metal printers, 3D composite printers, and sintering furnaces. For the first nine months of 2024, the Hardware segment generated $35.52 million in revenue, a decrease of 19% compared to the prior year period, reflecting the challenging macroeconomic environment.

Markforged’s flagship product, the FX20 system, is the company’s largest and most complex 3D printer. However, the FX20 has faced production challenges, including issues procuring materials and production constraints, which limited revenue in 2022. Additionally, the initial production costs for the FX20 exceeded targets, negatively impacting Markforged’s gross margin.

The Software segment includes Markforged’s cloud-based software offerings that provide a seamless additive manufacturing workflow for customers. This includes the company’s Eiger software platform, which integrates with its 3D printers and enables features like remote monitoring, part optimization, and workflow management. For the first nine months of 2024, the Software segment generated $9.12 million in revenue, an increase of 19% year-over-year, driven by the recurring nature of software subscriptions and the launch of new subscription offerings in the second quarter of 2023.

The company’s growth strategy has been centered around the continued development and rollout of its innovative product offerings. In 2024, Markforged introduced the FX10 Metal Kit, a print engine that brings metal printing capability to its FX10 industrial 3D printer. This integration allows customers to print both metal filaments and composites with continuous fiber reinforcement, providing them with a versatile and powerful solution for their manufacturing needs.

Additionally, Markforged celebrated a significant milestone in the second quarter of 2024 with the successful shipment of the first PX100 3D printer. This advanced system is designed to set new standards in highly regulated markets, such as automotive, medical, aerospace, and luxury goods, further expanding the company’s reach and capabilities.

Geographic Performance

Markforged operates globally, with revenue split across the Americas (48%), EMEA (31%), and APAC (21%) in the third quarter of 2024. This diverse geographic footprint allows the company to tap into various markets and mitigate regional economic fluctuations.

Industry Dynamics

The additive manufacturing industry in which Markforged operates is characterized by rapid technological change, requiring the company to continuously enhance and expand the functionality and features of its products and technologies. To maintain its competitive edge, Markforged has invested heavily in research and development, with a focus on developing new materials, improving print quality, and enhancing the overall user experience. The industry is expected to grow at a compound annual growth rate (CAGR) of around 20-25% over the next 5 years as adoption of 3D printing expands in industrial manufacturing applications.

Challenges and Setbacks

However, the company’s journey has not been without its challenges. In 2021, Markforged was embroiled in a patent infringement lawsuit with Continuous Composites, a company based in Idaho. On April 11, 2024, a jury returned a verdict against Markforged, awarding Continuous Composites $17.34 million in damages. This setback has had a significant impact on the company’s financial performance. Subsequently, Markforged entered into a Settlement Agreement with Continuous Composites in September 2024 to resolve all claims, requiring the company to make an initial $18 million payment and three additional installment payments totaling $7 million over the next 3 years. This settlement is secured by a security interest in Markforged’s patent intellectual property rights.

Additionally, the company has had to navigate broader macroeconomic headwinds, including supply chain disruptions and inflationary pressures, which have impacted its financial performance at times.

Future Outlook

Despite these challenges, Markforged remains optimistic about its future prospects. For fiscal year 2024, the company is guiding for revenue between $90 million and $95 million, acknowledging more persistent macroeconomic headwinds than previously anticipated. However, Markforged expects revenues to grow low single digits quarter-over-quarter in Q3 and continues to see double-digit year-over-year growth return in the second half, driven by sales of new products, particularly the FX10.

The company expects non-GAAP operating loss to be in the range of $42.5 million to $47 million for the year, resulting in a non-GAAP loss per share in the range of $0.19 to $0.22 per share.

Markforged is leveraging its innovative product portfolio, strong customer relationships, and growing installed base to drive increased adoption of its additive manufacturing solutions in the industrial sector. Furthermore, Markforged’s commitment to cost control and operational efficiency, as evidenced by its recent cost reduction initiatives, suggests a path towards improving financial performance and sustainable growth.

As Markforged navigates the evolving additive manufacturing landscape, the company’s ability to remain agile, continue innovating, and effectively manage its financial and operational challenges will be crucial in determining its long-term success. With a focus on delivering high-quality, industry-leading solutions, Markforged is well-positioned to capitalize on the growing demand for flexible and resilient manufacturing capabilities.

Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.