Markforged Holding Corporation

Greetings and welcome to the Mark Ford's fourth quarter 2023 earnings conference call. At this time, all participants are in 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 Bowling, Director of Investor Relations. Thank you, Austin. You may begin.

Good afternoon. I'm Austin Bollig, Director of Investor Relations of Mark Forge Holding Corporation. Welcome to our fourth quarter of 2023 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 Tarem, and our CFO, Azaf Sapori. 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 7, 2024, and are subject to material risks and uncertainties that could cause actual results to differ materially. Markforged 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 closed today, which can also be found on our website at investors.markforged.com. I'll now turn the call over to Shai Turem, President and CEO of Markforged.

Thank you, Austin, and thank you, everyone, for joining us on our Q4 2023 earnings call. We ended the year with a positive momentum as we continued to execute our strategy. While the challenging CapEx environment of 2023 delayed system sales, we were encouraged by 20% sequential revenue growth in the fourth quarter, which helped drive sales to the high end of our 2023 target range. Thanks to effective cost controls, we also exceeded our 2023 gross margin and operating cost targets. We are well positioned for growth as we drive the adoption of additive manufacturing on the factory floor to increase efficiency, reduce costs, and improve supply chain resiliency. With revenue growth aided by the new FX10, PX100, and digital source combined With the continued focus on expense control, we believe we remain on a clear path to profitability. During Q4, we saw positive momentum with many customers across the globe. One example is our expanded relationship with Automation Alley and Project Diamond through the sale of an additional 125 Onyx Pro printers, augmenting the existing fleet of 300 printers Automation Alley originally acquired in 2021. This win is part of a strategic partnership between Project Diamond and Digital Source, our on-demand platform for 3D printing OEM certified parts. We believe this expansion validates our secure cloud-based software capabilities that include fleet management, quality control, and part validation. We are excited about the partnership with Automation Alley and advancing our vision for digital source. As we enter 2024, manufacturers need to reduce costs and build more resilient supply chains remain a tailwind driving demand for the digital forge. The opportunity to move maintenance, repair and operations, or MRO, from physical to digital inventory, and bring industrial production to the point of need, provides a massive market opportunity. Our global customers increasingly recognize the Digital Forge as a powerful platform for achieving these goals. Danone, a global nutrition, essential dairy, and plant-based product leader, provides another great example. Factory Bayern is Danone's leading production center in Europe processing milk sourced from Polish farms. The products manufactured at this facility are distributed to both the domestic market and more than 20 other countries. The Byron factory in Poland faced supply chain disruptions, spare parts availability challenges, and equipment maintenance issues. In response, Danone Dairy plant turned to the Digital Forge and X7 printers due to their reliability, ease of use, and industrial strength parts. In the first year, by their own estimates, Danone Dairy Plant reduced cost by 80% across 374 printed parts. As we look ahead into 2024, we expect the capital spending environment will continue to be challenging as a result of the current macroeconomic environment, including elevated interest rates. While our guidance factoring these challenges persisting through the year, we believe we're positioned for growth in the second half of 2024, driven by our new product introductions, robust fleet utilization, and improving efficiencies in our go-to-market operations. Innovation for the factory floor drives Mark Forge forward. At Formnext in November last year, we launched three important new products, FX10, Vega, and Digital Source. We're excited about the strong initial demand for the FX10, and we remain on schedule to begin shipping in the first half of this year. With these new products alongside the FX20, the X100 and the rest of our industrial printer lineup. We entered 2024 with the strongest product portfolio in the company's history. These new products help position us for growth in 2024 and beyond. The health of our global printer network remain robust as customers sold even more factory floor applications using our metal and advanced composite solutions. Furthermore, We are pleased with the strong growth in subscription sales, which helped drive services revenues up 25% year over year in 2023. We believe the strong utilization rates and the resulting return revenue streams will grow in 2024. Mark Forge remains laser focused, not just on growth, but also on margin expansion and achieving profitability. were particularly encouraged by sequential improvement in non-GAAP gross margins, which exceeded 49% in the fourth quarter. Coupled with improving operational and working capital efficiencies throughout 2024, we are confident we can navigate the challenging macroeconomic environment with continued prudent cash management and our strong balance sheet. We strongly believe that FX10 the FX20, the PX100, and Digital Source, along with the rest of our factory-proven industrial printers, meet critical industry needs to strengthen manufacturing resiliency and supply chains. As global capital expenditure constraints loosen, we are well positioned to realize the substantial growth opportunities that our platform provides. Before turning the call over, I am very pleased to announce that Asaf Sipori, the company acting chief financial officer since May 2023, has been named chief financial officer. Asaf has been a key member of our executive team for over four years and has repeatedly demonstrated the business acumen and leadership to head our financial organization. I'm confident in his continued leadership to help us on our journey to profitable growth. With that, I now turn the call over to Asaf Tipori, our CFO, who will offer more details on our financial performance and guidance for the year.