Hello, welcome to the Markforged first quarter 2023 earnings conference call and webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Austin Bohlig, Director of Investor Relations. Please go ahead, Austin. Good afternoon. I'm Austin Bohlig, Director of Investor Relations of Markforged Holding Corporation. Welcome to our first quarter of 2023 results conference call. We will be discussing the results announced in our earnings press release issued after market close today. With me on the call is our President and CEO, Shai Terem, 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, May 11, 2023, 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. During the course of today's call, we refer to certain non-GAAP financial measures. There is 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.markforged.com. I'll now turn the call over to Shai Terem, President and CEO of Markforged. Thank you, Austin Bohlig, thank you everyone for joining us on our Q1 2023 earnings call. We have started the year strong with yet another record first quarter revenues and the largest pipeline in our company's history. We've shared our strategy before around product innovation, go-to-market and financial efficiency gains and infrastructure buildup. We believe our Q1 revenue and our gross margin results in particular are a reflection of strong execution of our strategy and an early indicator of the meaningful opportunity for Markforged in the coming quarters. Demand for the Digital Forge grew across all geographies in Q1, as increasing number of manufacturers are choosing our metal and composite solutions to solve mission-critical metal applications at the point of need. Especially great to see strong pipeline buildup in the Americas, which is our biggest region and can support our planned growth. The incremental improvements we've made to our FX20 cost structure, coupled with our strong operating expense controls, enabled us to make our Q1 EPS target. As we spoke before, a couple of macro trends in manufacturing are helping us to fuel demand for our Digital Forge platform. The first. Manufacturers across the globe are focused on creating more resilient and flexible production by investing in solutions that de-risk their supply chains. The second is its increased focus on digital transformation and industrial automation. We believe our platform is uniquely positioned to address the $40 billion market opportunity available to us on the manufacturing floor today. Our customers tell us the Digital Forge is the perfect tool for their manufacturing floor and accelerates the production of new and replacement parts. For example, our customer, Rapid Robotics, provides automation tools through robotics-as-a-service offering to manufacturers to automate production sales. With a fleet which grew over time to 10 Markforged printers, Rapid Robotics produces on-site custom grippers and end effectors for their robotic arm, saving, in some cases, months of production cycles to improve overall performance. Another example in Arizona is our customer, Handwrytten, which develops robots to autonomously create personalized, handwritten notes that stand out with a personal touch. Handwrytten uses a fleet of five Markforged printers for iterative robotic design and faster production times. We even have customers applying advanced robotics to increase production. Athena 3D Manufacturers, who operate as a service bureau that produces critical parts for other manufacturers, has developed a system capable of true lights-out manufacturing by automating the processes of starting print and removing parts with robotic arms. This automation has enabled them to double output and achieve a 40% increase in utilization of the digital technology suite. I encourage you to check out the video we have uploaded to our YouTube channel showing these robots in action. Truly amazing. As manufacturers seek production-grade solutions for the factory floor, revenue for the FX20 continue to exceed our expectations, and the pipeline of new orders continues to grow. Entering 2023, our focus was improving the cost of producing the FX20s. Thanks to the diligent work by our engineering and operation teams, the cost to produce the FX20 are declining, which is helping to drive sequential gross margin expansion. We expect FX20 production costs to continue to decline throughout this year, which will support our objectives to meet our historical gross margin rates. With the ability to print large, high-temp resistant parts, the aerospace market is a key target for the FX20, and we are pleased with our early traction and strong interest. We are already scaling with customers utilizing the FX20 for maintenance, repair, and operations, or MRO applications. What is extremely encouraging is the interest we are seeing in utilizing the FX20 to produce end-use parts that go into the production of new aircraft. While these have lengthy development cycle, we are already seeing aerospace companies begin to stack the Digital Forge into their next-gen aircraft. For example, U.S.-based Hermeus is working with the U.S. Air Force and NASA on a multi-year plan to radically accelerate air travel by developing a Mach 5 aircraft capable of commercial flight. Early in their development process, they began using our X5 and have recently added an FX20 to their fleet to produce the types of advanced composite parts required to achieve hypersonic passenger flights. By adopting our technology early in their product life cycle, we are helping to enable next gen air travel and planting the seeds for future growth. At the end of Q1, we moved into our new global headquarter in Waltham, just outside of Boston. It is new state-of-the-art R&D labs, and we can already feel the excitement that comes from collaborating in person every day and believe this move will drive even more operational efficiencies over time. We remain laser sharp focused on margin expansion and driving profitable growth. We're particularly encouraged by the sequential improvement in gross margin, which exceeded 49% in the first quarter. We are committed to reaching profitability without needing to raise additional capital. Manufacturing is changing significantly, and we're well-positioned to benefit from the full potential of this inflection point. Given our upcoming new product introductions, growing pipeline, and healthy margins, we're even more confident in our ability to achieve this objective. As you have probably seen in our announcement earlier today, this will be our last earnings call with Mark as our CFO. I want to thank Mark for his service to Markforged and helping us on our journey from a private start-up to a public company. For me, personally, Mark has been a great partner. He will continue to support us for the next few months while we search for our next CFO. For continuity, Assaf Zipori, our previous CFO and current Head of Strategy and Corporate Development, who has been with us for the past 3.5 years, will assume the role on an interim basis. Mark is not leaving us just yet. We wish him well on his next project. 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. Thanks, Shai. Let's turn to our financial results for the first quarter of 2023. Please note that my comments reflect our non-GAAP results and outlook. For your reference, our earnings press release, issued earlier this afternoon and posted to our investor relations website, includes our GAAP to non-GAAP reconciliation to assist with my commentary. Revenue increased 10.2% to $24.1 million for the first quarter of 2023, compared with revenues of $21.9 million for the first quarter of 2022. Gross profit in Q1 was $11.9 million, compared to $11.7 million for the first quarter of 2022. As a result, we generated a gross profit margin of 49.3%, compared to 53.6% in the first quarter of 2022. On a year-over-year comparison basis, our Q1 gross margin was impacted by increases in freight and logistics costs, as well as by the added component material and labor costs associated with ramping up FX20 commercial production. That said, on a sequential basis, our gross margins expanded by 180 basis points versus Q4 of 2022. Our product mix has shifted toward high margin products and improved FX20 production costs. Our operating expenses were $26.7 million for the first quarter of 2023, compared to $26.4 million for the first quarter of 2022, even accounting for the increased operating expenses associated with the absorption of two acquisitions last year. On a sequential basis, operating expenses were down 9% from Q4 of 2022, reflecting our commitment to containing costs. Net loss for the first quarter of 2023 was $13.3 million or $0.07 per share based on our weighted average shares outstanding for the quarter of $195.6 million. On to our guidance. We were pleased with our results for Q1 and the start of the year. Our revenue guidance continues to reflect the uncertain macro environment, and we reiterate anticipated revenues for the year to be within the range of $101 million-$110 million. We expect fiscal year 2023 non-GAAP gross margin to be in the range of 47%-49%. We were encouraged with the progress we made with our gross margin in Q1, and we are confident that longer term, they will continue to improve towards historical levels. The disciplines we exerted over our operating expenses in Q1 will continue as we progress through 2023. We expect operating expenses to decline as a percentage of our revenues, resulting in a non-GAAP operating loss in the range of $55 million-$58 million for the year. This translates into non-GAAP EPS results for the full year to be a loss in the range of $0.27-$0.29 per share. We executed on our strategy to lower our quarterly cash burn, with cash flow from operations decreasing $3.7 million or approximately 20% from the first quarter of 2022 to the first quarter of 2023. As we have previously stated, we expect to reduce our operating cash burn in 2023 to under $50 million, a decrease of $32 million or 39% as compared to 2022. This will be realized through higher revenues and margin expansion, continued inventory reductions and working capital improvements, and increased yields on our cash and equivalents in short-term instruments. We expect to end 2023 with a balance of approximately $120 million in cash and equivalents and short-term investments. We are encouraged with our Q1 results. We believe they are a reflection that our strategy and strong execution are working and an early indicator for us of the opportunity coming in future quarters. Further, we continue to believe we have the infrastructure in place that supports our long-term innovation and go-to-market objectives for profitable growth without the need to raise additional capital. Finally, I want to thank Shai and the entire team at Markforged for their collaboration and support over the past years. It has been my honor and pleasure to work side by side with this group of passionate people focused on providing manufacturers a flexible and resilient platform to produce mission-critical parts at the point of need. It is the right time to step aside and be a fan and champion for the very bright future of this company. That concludes our prepared remarks today. Operator, please open up the call for questions. Certainly. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. One moment please, while we poll for questions. Our first question today is coming from Troy Jensen from Lake Street Capital Markets. Your line is now live. Hey, gentlemen, congrats on the nice results here. Thank you. Thank you. Hey, quick, Shai, for you, FX20, I guess I'd be really curious on ULTEM and I guess I don't know if I've seen parts produced from the FX20 that's got ULTEM with continuous carbon fiber in it. This traction that you're talking about specifically in aerospace, can you just let us know if it's for larger Onyx parts or is it the traction with ULTEM? I think it's for both, and definitely the ULTEM is very, very interesting to the aerospace companies. There's no doubt there's more complexity in parts that involve ULTEM and continuous fiber, but we do see some of them out there. We are very pleased with the FX20 results. It's really increasing significantly. Yep. Perfect. All right. Mark, for you, just on gross margins, I mean, you're already above the high end of the range for the year, can you talk about, you know, sequentially, you know, what's gonna force this back down to below 49%? Yeah, I think it's really a reflection, Troy Jensen, of the lack of visibility we have into the market. There continues to be some macro pressures that we're feeling. You know, we had a great quarter, but it wasn't an easy quarter. We, as we look into the future, we don't wanna get ahead of ourselves here. We feel really good about the trajectory we're on. As I said in the prepared remarks, I think our first quarter results, and particularly on the gross margin side, they are a reflection that what we're doing is working, and we see ourselves returning to historical levels. Just after the first quarter out of the gate, we're not prepared to change our guidance. Really that's a reflection of the visibility. All right. Yeah, understood. Then, maybe last one for Shai. Just PX100. Can you give us an update and, you know, thoughts on, you know, the number of units you can ship this year? When does that become meaningful for you guys? Yeah. As you saw in Rapid, we brought it for the first time to the US. There's a lot of traction around it, a lot of demand building up, good backlog, I think also. I hope we're gonna start shipping systems in Q3 this year. I think, this year, still relatively to the size of the business, I don't see it as a very big impact, it's definitely growing materially. We see very impressive demand from automotive, from luxury goods, consumer electronics, and medical industries that we've not seen before. All right. Understood. Mark, good luck with the golf game and congrats guys. Keep up the good work. Thanks, Troy. Thank you, Troy. Thank you. Next question is coming from Greg Palm from Craig-Hallum. Your line is now live. Yeah, thanks. Congrats on the good results here as well. I'm just kind of broadly speaking, you know, curious, you know, if you could just kind of give us more of an update on what you're seeing out there demand wise. A couple of your peers talked about, you know, push-outs and delays in customer purchase decisions, but your quarter came in quite a bit better. Just curious what you're seeing out there. Yeah. Thank you. We definitely see demand building up significantly stronger than a year ago. The pipeline is significantly bigger. With that, we also see some delay in the decision making. The conversion are a little bit slower. The cost of capital now is a big issue, especially for small businesses. As you saw, the results, I think, speak for themselves. We're able to grow still in this environment, and, I hope the situation will continue to improve and we still have a very good year ahead of us. Yeah. Understood. I'm having a difficult time tying out the gross margins commentary. I guess I'm gonna take a stab at a question as well. I guess I get the lack of visibility, but, you know, the full year revenue guide assumes higher levels of revenue throughout the year. I think, Shai, you talked about in the prepared commentary specifically around FX20 production costs continuing to come down throughout the year. I appreciate the conservatism, but I'm having a hard time, you know, tying out, you know, the gross margin in Q1, which was quite a bit better than expectations and the potential that that actually comes down throughout the year, just given the tailwinds I just talked about. Thanks, Greg. I think, there's a number of factors, as you can imagine, that go into it. You know, just as an example, as you bring on a new product and there are some engineering changes that are incorporated, new suppliers that are incorporated, you end up with materials that you can't use in production, and that impacts gross margin. You know, we've got a new product and as it is being distributed out in the field, we have to think about our warranties and reserves and provisions, et cetera, for that. It's more complex than simply the cost of production although that's a very important part of it as you highlighted. I think for us, we feel like we're on a great trajectory, and I think you're asking the right question. We feel very positive about the direction our gross margin is moving. Having said that, there is still this lack of full visibility or at least the return to the visibility levels we had a few years ago. As a result, we're just not prepared to make any changes to our guidance just yet. Okay. Nope, that makes sense. Can you just remind us, you know, in lump this the FX20 production costs within the other various supply chain related impacts on gross margin that you suffered, you know, last year? Maybe just remind us, quantify, how much that was, and then I guess at what point do you think those headwinds will be fully recouped or mostly recouped? You know, fully understanding that, you know, there is a lack of visibility at this point, but what's your current thought there? About two or three quarters ago, I think we did quantify it when maybe our gross margin on a year-over-year basis was down about 8%. We talked about where that 8% comes from. Roughly half of it, if I recall, was from the FX20, and the other half of it we were seeing from general supply chain challenges, price increases, one-off parts that were costing us 3x or 5x more than we previously paid for it. Some of that is definitely making its way out of the system. Supply chain is improving, there's no question. It's not back to where it was, but it's improving. The FX20 isn't where we need it to be from the targets we've set, but it is also improving. I would say we're still probably 5% or 6% away from where we expect to be, and that's probably still equally attributed to the supply chain more broadly and to the FX20. Just on the timeline specifically, I mean, do you think that most of that can be recouped at some point next year? I think the FX20 for certain should be out of the system by the time we're, you know, we're having a call like this in a year from now. The supply chain is a little bit more challenging to predict time-wise, but I think it's fair to say next year sometime that should be behind us. Okay, perfect. I will leave it there. Thanks. Thanks, Greg. Thank you, Greg. Thank you. Next question is coming from Shannon Cross from Credit Suisse. Your line is now live. Thank you very much for taking my question. I'm wondering, looking at your numbers, the recurring revenue as a% of total has increased significantly. I'm just curious what factors would you point to behind that? Yeah. As you can see, the return revenue has a split between material consumption and the success plan that we have. I think probably, more recently, it's probably on the material side, of course, but we also, I think we discussed about this before, we launched a new subscription plan, we believe that will also have contribution going forward. We definitely see that the return revenue will continue to increase over time. I would also say, Shannon, it's Mark, that the power of this model and that software and services is more stable is reflected in the Q1 results. While hardware is down seasonally, those other areas are not down nearly as much. There is that sort of quarter-over-quarter stability. As a result, for the first quarter, you see that being a higher percentage of revenues. Got it. I'm curious, how should we think about if you layer on top what you're doing from a subscription, standpoint in your software business? Like, how I mean, I know it's gonna take time, but how should we think about the potential for contribution there, you know, as you shift to more paid software? I think there are two elements to it. One is the new subscription plan, which is a little bit more expensive but gives more value to our customers. That will of course have a positive impact on our earnings. Also the other side of it is that we continue to push bigger systems that have significant bigger consumption and significantly bigger success plans. That will also have another very positive impact on the recurring revenue as we continue to grow the fleets of the bigger systems. Okay, that's helpful. Can you talk a bit about strength in Europe? You know, what you're seeing and maybe talk, you know, geographically any more, you know, to the extent that you can get granular in terms of verticals in that. I'm just kind of curious, you know, as a follow-up to one of the prior questions, just anything about, you know, who's buying and where are they buying and what are they interested in. Thank you. Sure. As you can see, we're very fortunate to be able to grow across all region and across all segments this quarter, year-over-year, which is great. I think the main reason is probably that we are razor-sharp focused on manufacturing. We're trying to be the best tool for the manufacturing floor for our customers and for machine builders that need to put very strong and accurate parts into their machines. There is, in my view, an inflection point in the manufacturing in general. Manufacturers are looking for more resilient supply chains. Markforged can be part of the solution, and I think this is where we see the highest growth. We see more and more solutions being put on the manufacturing floor. We see more and more solutions that go into parts that are eventually part of another product. We start to have great success. Some of our customers, for example, with Binder Jetting, already have parts going into cars. With the FX20, we see more and more parts going into aircraft. I think, because we focus on the manufacturing side of stuff and really enabling our customers to build resiliency into their product and into their supply chain, this is where we see the growth. I would add to that, Shannon, that, you know, we've mentioned it before, but we added a very strong leader in EMEA over the last, maybe three quarters now. As we have pushed out decision-making and autonomy at a certain level to the edge into the region, we're seeing the results of that now, three quarters later. We have very strong leadership, a very collaborative group, a very passionate group of folks in EMEA, that are running that business. It's been really an important aspect of the growth. Great. Thank you very much. Good luck, Mark. Thank you, Shannon. Thank you, Shannon. Thank you. Next question is coming from Brian Drab from William Blair. Your line is now live. Hey, thank you. In the sequential gross margin improvement, you know, from fourth quarter to first quarter, what was the biggest factor? Is it the FX20 manufacturing costs coming down or supply chain or what was the single biggest factor? It's related to the FX20, Brian, in two areas. One is the pure cost of production is coming down. Secondarily, I mentioned it sort of briefly one of the earlier questions, but, you know, there's fewer and fewer engineering changes, there's less material that is not being used and doesn't need to be written off as obsolete material as part of that product family. It's both of those, but it's the increase in gross margin is largely related to FX20. Okay. Yeah. I guess more just a comment rather than a question. Honestly, I'm with Greg. I'm more confused than Greg about the gross margin guidance because, I mean, the midpoint of the guidance implies 47.5% after you just had a great quarter of around 49%. I mean, second, third, fourth quarter, that you have to average 47.5% to hit the midpoint of the guidance. I'm surprised you're not saying, you know, high end of the range or something like that even because this is just confusing given that it's the seasonally weakest quarter. You're making great improvements in the FX20 manufacturing costs. The supply chain's getting better. You're expecting volume improvement throughout the year. Like, that's not. I feel like it, we're gonna leave this call not really understanding where, like, the, you know, the boogeyman is hiding here or something. It just makes me feel uneasy that we don't. It just doesn't make sense. That's just gonna. It's leaving me with a little bit of an uneasy feeling. I don't know if there's any other clarity you can provide around that, though, because we've already asked it 3x. Yeah. Well, I think you asked it a little bit differently, Brian. I can appreciate that. We're not trying to be obtuse here at all. I think, you know, realistically, we just don't have enough visibility to get confidence in maybe raising that. You asked it slightly differently, and maybe we can address that. When we created our guidance, we looked at sort of where that midpoint was. Now, after the first quarter, and based on the cost-cutting initiatives where we see the FX20, I would say we still feel good within that range, but maybe we do feel better at the higher end of that range, Brian. We're not, we're not at all saying that you should expect something, you know, there's no boogeyman out there. There's nothing that you should expect that's going to weigh this down, but we just don't feel comfortable enough yet to raise it. Okay. All right, I'll follow up more later. I think that's the first time I ever said boogeyman on a earnings call, but. I'm sure it's the first time I've ever said it. I don't think I've ever said it personally. All right, good luck, Mark. Take care. Thank you. Thanks, Brian. Thank you. Next question is coming from Jared Maymon from Berenberg. Your line is now live. Hey, guys. Thanks for taking the questions. First one. Hey, Jared. [crosstalk] Hey, thanks. First one's just on the revenue guide. I guess if we kinda look at what you guys are saying here, impressive demand from automotive, aerospace, and defense. Shai, I think if I'm not misquoting you said the pipeline is significantly larger than it was last year. I know you guys have also talked about some of the data insights that you have. You obviously get a lot of data back from the systems that are in the field. I guess just when I look at the guidance, I mean, in Q1, you guys are already fairly close to a level of revenue where on a run rate basis you're kind of closing in on the low end of the guidance. I guess I'm just trying to understand is when we look at your assumptions, are you guys kind of assuming that there's an H2 recession and there's some orders canceled, they're pushed out, and if that doesn't come to fruition, then maybe there's some upside? Or is there something you're seeing in utilization that's concerning? Anything else that you can tell us there? Yeah. Maybe I'll start, Jared, and Shai can add more color. I think you hit it on the head there, the way you couched that. When we thought about the year earlier this year and relayed that in our March earnings call, we had baked into that revenue guidance and all of our guidance, a level of uncertainty that perhaps we weren't going to have smooth sailing throughout the year. I think, you know, most economists and others are probably a little bit more positive today than they were two or three months ago about the rest of the year. We're feeling that as well. Again, just given that we don't have the visibility we had a few years ago, we're being a little cautious and suggesting that, you know, one quarter in isn't the time to sort of stray from our current talking points around this. We'd like to see more data before we do that. Yeah. I think exactly as Mark described it. It was a good quarter. It's a good start. We feel a little bit more positive, but the uncertainty in the macro still remains. In low level, but still remains, so we want to wait another quarter before we change anything. If at all. Got it. Okay. Just following up on kind of the second part, which was the data question. I guess just kind of thinking about the second quarter, you guys, I assume have some visibility from that backlog, the order book, and then you've obviously got, you know, strong visibility from the data that you guys receive from the customers. I'm just curious, anything that you're seeing on utilization data that leads you to believe that consumable purchases as a percentage of sales could be up next quarter or anything that could provide some gross margin tailwinds even just in the near term, Q1- Q2? No, I don't think that those are necessarily related data points. You know, one thing brought up by an earlier question around the percentage of our revenue coming from consumables and services being a bit higher this quarter than perhaps the last few quarters. And that's, and that's all around the stability of that revenue stream in our business. But that revenue stream doesn't necessarily have a significantly higher gross margin. As we've always said, the gross margin of our hardware as a standalone is a good gross margin. It's a healthy, sustainable gross margin business. I wouldn't read, I wouldn't read too much into that, Jared. Got it. Loud and clear. Thanks, guys. Thank you. Thank you, Jared. Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments. Thank you very much everyone for joining us for our first quarter results and looking forward to seeing you in our next earnings. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation.