Markforged Holding Corporation

Greetings and welcome to the Mark Forge fourth quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Austin Boleg, Director of Investor Relations. Thank you, Austin. You may begin.

Good afternoon. I'm Austin Volek, Director of Investor Relations of Mark Forged Holding Corporation. Welcome to our fourth quarter and fiscal year 2022 results conference call. We will be discussing the results announced in our earnings press release issued after market closed today. With me on the call is our President and CEO Shai Turem and our CFO Mark Schwartz. Before we get started, I'd like to remind everyone that management will be making statements during this call that include estimates and other forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. These statements represent management's views as of today, March 6, 2023, and are subject to material risks and uncertainties that could cause actual results to differ materially. Mark Forge disclaims any intention or obligation, except as required by law, to update or revise forward-looking statements. Also during the course of today's call, we refer to certain non-GAAP financial measures. There's a reconciliation schedule showing the GAAP versus non-GAAP results currently available in our press release issued after market close today, which can also be found on our website at investors.markforge.com. I'll now turn the call over to Shai Turam, President and CEO of Markforge.

Thank you, Austin, and thank you everyone for joining us on our Q4 2022 earnings call. We ended the year strong with a record quarterly revenues as demand for the digital forge continue to grow worldwide despite the challenging operating environment. Throughout 2022, we saw more and more manufacturers solve mission-critical metal applications on their factory floor using combinations of our metal and advanced composite solutions. And with our effective cost controls, we met our earnings per share target, keeping us on our path to profitability. The long-term fundamentals of our business continue to be a powerful differentiator as we gain further momentum in our target markets. Additionally, supply chain disruption has been a catalyst for growth as manufacturers shorten their supply chains through industrial point-of-need production. I couldn't be more excited about our vision to make manufacturing more resilient and flexible by using the Digital Forge to address the $43 billion market opportunity available to us today. A great example of a customer harnessing the innovation of the Digital Forge is Texas-based Dixie Iron Works. They used our solution to achieve an edge in the globally competitive oil and gas industry. When Dixie needed to make an engineering change to a critical o-ring, their supplier quoted a price that would have made their product too expensive. Instead, they designed a better and less expensive version of the part using our X7 printer, and since then, expanded to a fleet of six Markforge X7 printers, producing parts onsite in Texas around the clock. Based on their early success with Markforge, Dixie expanded even further with our Metal X solution. and are now producing critical steel parts with our solution instead of using traditional CNC's. This is a great example of how on-shoring industrial production at the point of need can be a competitive advantage for manufacturers. With that said, we still feel a wait and see mentality with our manufacturing customers who are concerned by the macroeconomic uncertainty. As such, we have yet to realize what we see as the full growth potential of our product lineup. While we are confident that once the world gets out of this cycle, this bottleneck will open up and our growth will accelerate, we have already taken the required actions to adjust our cost base and ensure we stay on our path to profitability. Since the second quarter of 2022, we have taken nearly $20 million out of our cost structure after giving effect to the two acquisitions completed in 2022. Notably, we reduced our costs while investing over $70 million in our innovation pipeline through M&A and R&D. And in 2023, we expect increased operational leverage resulting in a $30 million decline in our cash burn. While in the Americas, we are experiencing delayed purchase decisions as a result of near-term macro uncertainty we executed on our growth strategy in both the EMEA and APAC regions in the fourth quarter of 2022, with revenues growing 36% in EMEA and 20% in APAC year-over-year. We anticipate that both of these regions will again achieve outside growth in 2023. In the Americas, we are taking actions to optimize our go-to-market model to accelerate the return to growth and anticipate the benefits of on-shoring in the years to come. In 2022, we made a meaningful progress towards achieving profitable growth. We materially expanded our addressable market organically through the introduction of the FX20 and inorganically for acquisitions of TITAN simulation and digital metal. We are confident that in the next couple of years, we will see accelerated growth from our enhanced product offering and continue to build operational leverage via strong cost control until we get to profitability. In 2022, we began commercializing the FX20, our largest production-ready composite solution for manufacturers requiring parts of industrial tanks and high temperature resistance. As we mentioned previously, demand for the FX20 has exceeded our expectations. In fact, in its first year of general availability, we received multi-system orders for the FX20 from multiple customers. We continue to ramp FX20 capacity to meet the expected levels of demand in 2023. But while demand was robust, we were short of our FX20 cost target. This shortfall resulted in a decrease of our gross margins in Q4. We expect cost improvements in Q1 and throughout 2023 and intend to reach our production cost target in the next year. We successfully executed on our M&A strategy in 2022, acquiring two companies with products that we expect to expand our addressable market opportunity in 2023 and beyond. The first, Teton Simulation, enables manufacturers to have a greater confidence that their part will meet certain specification in mission-critical applications, removing a key barrier to additive manufacturing adoption. We integrated the technology into the digital forge for a feature known as simulation and rolled out a free beta to all of our customers in Q4. The response from our customers has been positive with thousands of trial registrants to date and part simulated in our software prior to production. We expect to offer simulation as a component of a tiered SAR subscription offering that we plan to launch in Q2 this year. Our second acquisition, Digital Metal, closed in Q3 2022 and expands our addressable market into high-throughput production of precise end-use metal parts, a key long-term growth strategy. In Q1 2023, we plan to launch the PX100, which doubles the speed compared to the previous model up to 1,000 cc per hour and build size up to 10 liters to ensure high volume production of end-use metal parts for lower cost per part. Initial customer reaction has been positive. We expect this line to contribute to our revenue growth in 2023 and beyond. A great example of how digital metal solution has opened new markets for Markforged comes from our customer Distal Motion, a Swiss-based medical device company that manufactures cutting-edge robotic surgical systems. Serial production parts for our metal binder jetting solution are used in real-life medical procedures. This is a great example of how our solution gives manufacturers the flexibility in their supply chains that is needed to make life-changing breakfasts. Manufacturing has changed. We are at the inflection point as manufacturers use our digital forge to deliver more resilient and flexible solutions for the manufacturing store. Supported by our robust balance sheet and strong innovation pipeline, we continue to execute on our strategy towards profitable growth and feel confident in our business fundamentals. With that, I now turn the call over to Mark Schwartz, our CFO, who will offer more details on our financial performance and guidance for the remainder of the year.