10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39453

Markforged Holding Corporation

(Exact Name of Registrant as Specified in its Charter)


Delaware	92-3037714
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

60 Tower Road Waltham, MA	02451
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (866) 496-1805

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
 

Trading
Symbol(s)
 

Name of each exchange
on which registered
 

Common Stock, par value $0.0001 per share
Redeemable Warrants, each whole warrant exercisable for one share of Common Stock, $0.0001 par value

MKFG
MKFG.WS

New York Stock Exchange
New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

As of November 13, 2023, the registrant had 198,415,076 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Condensed Consolidated Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	1
	Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022	2
	Unaudited Condensed Consolidated Statements of Other Comprehensive Income (Loss) for the three and nine months ended September 30, 2023 and 2022	3
	Unaudited Statement of Changes in Stockholders' Equity for the three and nine months ended September 30, 2023 and 2022	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	5
	Unaudited Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II.	OTHER INFORMATION	41
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 3.	Defaults Upon Senior Securities	76
Item 4.	Mine Safety Disclosures	76
Item 5.	Other Information	76
Item 6.	Exhibits	77
Signatures		78

Risk Factors Summary

The risk factors detailed in Item 1A entitled “Risk Factors” in this Quarterly Report on Form 10-Q are the risks that we believe are material to our investors and a reader should carefully consider them. Those risks are not all of the risks we face and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they occur. The following is a summary of the risk factors detailed in Item 1A:

•

We have a history of net losses and may not be able to achieve profitability for any period in the future or sustain cash flow from operating activities. We have a relatively limited operating history and have experienced rapid growth, which makes evaluating our current business and future prospects difficult and may increase the risk of your investment. Our operating results may fluctuate significantly from period-to-period.

•

The additive manufacturing industry in which we operate is characterized by rapid technological change, which requires us to continue to develop new products and innovations to meet constantly evolving customer demands and which could adversely affect market adoption of our products.

•

A future pandemic, epidemic, or outbreak of an infectious disease, may materially and adversely affect our business and our financial results and could cause a disruption to the development of our products. The continued impact of the economic downturn and related supply chain disruptions have continued to adversely impact our business.

•

Adverse developments affecting the financial services industry or other third parties, such as a liquidity crisis, increased levels of defaults or non-performance by financial institutions or transactional counterparties or the perception that any of these events could occur, could adversely affect our current and projected business operations and our financial condition and results of operations.

•

We face significant competition in our industry. If we are unable to create new products or meet the demands of our customers, our business could be materially adversely affected.

•

We depend on our network of value-added resellers and our business could be materially adversely affected if they do not meet our expectations.

•

We depend heavily on third-party suppliers. If they or their facilities become unavailable or inadequate, our business could be adversely affected. We may experience significant delays in the design, production and launch of our additive manufacturing solutions and enhancements to existing products, and we may be unable to successfully commercialize products on our planned timelines.

•

We rely on a limited number of third-party logistics providers for distribution of our products, and their failure to effectively distribute our products, including because of delays and disruptions caused by current conditions in global shipping capacity would adversely affect our sales.

•

If demand for our products does not grow as expected, or if market adoption of additive manufacturing does not continue to develop, or develops more slowly than expected, our revenues may stagnate or decline, and our business may be adversely affected.

•

Defects in new products or in enhancements to our existing products that give rise to product returns or warranty or other claims could result in material expenses, diversion of management time and attention, and damage to our reputation.

•

We may be unable to consistently manufacture our products to the necessary specifications or in quantities necessary to meet demand at an acceptable cost or at an acceptable performance level. As manufacturing becomes a larger part of our operations, we will become exposed to accompanying risks and liabilities. We depend on a limited number of third-party contract manufacturers for a substantial portion of our manufacturing needs and we depend on a number of suppliers for other parts and components; since the second half of 2021, we have increasingly experienced, and expect to continue to experience, price increases, supply shortages and delays and any such delay, disruption or quality control problems in their operations which could cause harm to our operations, including loss of market share, reduced margins and damage to our brand.

•

We have experienced, and expect to continue to experience, rapid growth and organizational change since our inception. If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and customer satisfaction or attract new employees and customers.

•

A real or perceived defect, security vulnerability, error or performance failure in our software or technical problems or disruptions caused by our third-party service providers could cause us to lose revenue, damage our reputation and expose us to liability.

•

Our existing and planned global operations subject us to a variety of risks and uncertainties that could adversely affect our business and operating results. Our business is subject to risks associated with selling machines and other products in non-United States locations. Global economic, political and social conditions and uncertainties in the market that we serve may adversely impact our business.

•

A significant portion of our business depends on sales to the public sector, and our failure to receive and maintain government contracts or changes in the contracting or fiscal policies of the public sector could have a material adverse effect on our business.

•

We are, and have been in the recent past, subject to business and intellectual property litigation. We could be subject to personal injury, property damage, product liability, warranty and other claims involving allegedly defective products that we supply. We could face liability if our additive manufacturing solutions are used by our customers to print dangerous objects.

•

If we are unable to adequately protect our proprietary technology or obtain and maintain patent protection for our technology and products or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired.

•

If we are unable for any reason to meet the continued listing requirements of the New York Stock Exchange (“NYSE”), such action or inaction could result in a delisting of our securities.

•

We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or fail to maintain effective internal control over financial reporting, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.

EXPLANATORY NOTE

On July 14, 2021, we consummated the merger (the "Merger") contemplated by the Agreement and Plan of Merger, dated as of February 23, 2021 (the “Merger Agreement”), by and among one, a Cayman Islands exempted company limited by shares (“one”), Caspian Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of one (“Merger Sub”), and MarkForged, Inc., a Delaware corporation (“Legacy Markforged”). As a result of the Merger, Legacy Markforged merged with and into Merger Sub with Legacy Markforged surviving as our wholly-owned subsidiary and, following one’s filing of a notice of deregistration and necessary accompanying documents with the Cayman Islands Registrar of Companies, and a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which one was domesticated, one changed its name to “Markforged Holding Corporation.”

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements that are forward-looking and as such are not historical facts. This includes, without limitation, statements regarding the financial position, business strategy and the plans and objectives of management for our future operations of Markforged Holding Corporation (“Markforged,” the “Company,” “we,” “us”). These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Quarterly Report on Form 10-Q, words such as “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “might”, “plan”, “possible”, “potential”, “predict”, “project”, “should”, “strive”, “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

Forward-looking statements in this Quarterly Report on Form 10-Q include, for example, statements about:

•

the benefits of the Merger, and other recent acquisitions and our ability to realize such benefits;

•

our financial performance;

•

the effect of uncertainties related to economic downturns and global supply chain disruptions, or any future pandemics;

•

the expected growth of the additive manufacturing industry;

•

our anticipated growth and our ability to achieve and maintain profitability in the future;

•

the impact of the regulatory environment and complexities with compliance related to such environment on us;

•

the effect of and our ability to respond to general economic, political and business conditions, including recent increases in interest rates, rising inflation, foreign exchange fluctuations and risk of recession;

•

our ability to access sources of capital, including debt financing and other sources of capital to finance operations and growth;

•

the success of our marketing efforts and our ability to expand our customer base;

•

our ability to develop and deliver new products, features and functionality that are competitive and meet market needs;

•

our ability to maintain an effective system of internal control over financial reporting;

•

our ability to remediate our material weaknesses in our internal control of financial reporting;

•

our ability to grow and manage growth profitably and retain key employees; and

•

the outcome of legal or governmental proceedings that may be instituted against us.

These forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

MARKFORGED HOLDING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, 2023 and December 31, 2022

(In thousands, except share data and par value amounts) (Unaudited)


	September 30, 2023			December 31, 2022
Assets
Current assets
Cash and cash equivalents	$	98,166		$	124,242
Short-term investments		27,800			43,690
Accounts receivable, net of allowance for expected credit losses ($483 and $1,559, respectively)		22,298			29,294
Inventory		28,720			26,409
Prepaid expenses		2,172			2,847
Other current assets		3,296			3,334
Total current assets		182,452			229,816
Property and equipment, net		17,210			18,298
Intangible assets, net		16,182			17,626
Goodwill		—			31,116
Right-of-use assets		38,080			45,955
Other assets		3,520			3,130
Total assets	$	257,444		$	345,941
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	11,612		$	14,425
Accrued expenses		8,352			9,663
Deferred revenue		8,423			8,854
Lease liabilities		7,592			8,022
Other current liabilities		44			—
Total current liabilities		36,023			40,964
Long-term deferred revenue		5,689			5,358
Contingent earnout liability		4,924			2,415
Long-term lease liabilities		37,060			40,608
Other liabilities		3,104			4,042
Total liabilities		86,800			93,387
Commitments and contingencies (Note 15)
Stockholders’ equity
Common stock, $0.0001 par value; 1,000,000,000 shares authorized at September 30, 2023 and December 31, 2022; 197,605,658 and 194,560,946 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		19			19
Additional paid-in capital		362,604			352,564
Accumulated deficit		(190,466	)		(101,097	)
Accumulated other comprehensive (loss) income		(1,513	)		1,068
Total stockholders’ equity		170,644			252,554
Total liabilities and stockholders’ equity	$	257,444		$	345,941

See notes to the unaudited condensed consolidated financial statements.

MARKFORGED HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three and nine months ended September 30, 2023 and 2022

(In thousands, except share data and per share data) (Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Revenue	$	20,075		$	25,208		$	69,614		$	71,294
Cost of revenue		10,907			12,959			36,891			34,514
Gross profit		9,168			12,249			32,723			36,780
Operating expenses
Sales and marketing		8,194			11,783			28,436			35,104
Research and development		9,724			10,421			30,390			31,375
General and administrative		12,202			12,873			36,450			38,094
Goodwill impairment		29,467			—			29,467			—
Total operating expenses		59,587			35,077			124,743			104,573
Loss from operations		(50,419	)		(22,828	)		(92,020	)		(67,793	)
Change in fair value of derivative liabilities		(94	)		(448	)		220			1,221
Change in fair value of contingent earnout liability		(2,502	)		(656	)		(2,509	)		50,982
Other expense, net		(55	)		(39	)		(277	)		(429	)
Interest expense		(127	)		(2	)		(243	)		(11	)
Interest income		1,602			1,006			4,870			1,380
Loss before income taxes		(51,595	)		(22,967	)		(89,959	)		(14,650	)
Income tax (benefit) expense		(233	)		3			(590	)		6
Net loss	$	(51,362	)	$	(22,970	)	$	(89,369	)	$	(14,656	)
Weighted average shares outstanding - basic		197,410,137			189,766,945			196,391,315			188,225,543
Weighted average shares outstanding - diluted		197,410,137			189,766,945			196,391,315			188,225,543
Net loss per share - basic	$	(0.26	)	$	(0.12	)	$	(0.46	)	$	(0.08	)
Net loss per share - diluted		(0.26	)		(0.12	)		(0.46	)		(0.08	)

See notes to the unaudited condensed consolidated financial statements.

MARKFORGED HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (LOSS)

For the three and nine months ended September 30, 2023 and 2022

(In thousands, except share data and per share data) (Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Net loss	$	(51,362	)	$	(22,970	)	$	(89,369	)	$	(14,656	)
Other comprehensive loss, net of taxes:
Unrealized loss on available-for-sale marketable securities, net		(17	)		—			(42	)		—
Foreign currency translation adjustment		(993	)		(1,612	)		(2,539	)		(1,612	)
Total comprehensive loss	$	(52,372	)	$	(24,582	)	$	(91,950	)	$	(16,268	)

See notes to the unaudited condensed consolidated financial statements.

MARKFORGED HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

For the three and nine months ended September 30, 2023 and 2022

(In thousands, except share data) (Unaudited)


	Common Stock				Additional Paid-in			Accumulated			Accumulated Other Comprehensive
	Shares		Amount		Capital			Deficit			Loss			Total
December 31, 2021		185,993,058	$	19	$	319,859		$	(75,709	)	$	—		$	244,169
Exercise of common stock options		942,836		—		580			—			—			580
Stock vested under compensation plan less shares withheld to cover taxes		182,066		—		—			—			—			—
Stock-based compensation expense		—		—		4,285			—			—			4,285
Earnout stock-based compensation expense		—		—		1,137			—			—			1,137
Net income and comprehensive income		—		—		—			4,239			—			4,239
March 31, 2022		187,117,960	$	19	$	325,861		$	(71,470	)	$	—		$	254,410
Exercise of common stock options		443,712		—		916			—			—			916
Stock vested under compensation plan less shares withheld to cover taxes		319,165		—		(315	)		—			—			(315	)
Stock-based compensation expense		—		—		4,005			—			—			4,005
Earnout stock-based compensation expense		—		—		907			—			—			907
Issuance of Common Stock in connection with acquisitions		602,097		—		2,354			—			—			2,354
Net income and comprehensive income		—		—		—			4,075			—			4,075
June 30, 2022		188,482,934	$	19	$	333,728		$	(67,395	)	$	—		$	266,352
Exercise of common stock options		322,270		—		585			—			—			585
Stock vested under compensation plan less shares withheld to cover taxes		426,162		—		(167	)		—			—			(167	)
Stock-based compensation expense		—		—		4,773			—			—			4,773
Issuance of Common Stock in connection with acquisitions		4,100,000		—		9,840			—			—			9,840
Earnout stock-based compensation expense		—		—		513			—			—			513
Issuance of Common Stock in connection with acquisition earnout achievement		312,489		—		750			—			—			750
Net loss		—		—		—			(22,970	)		—			(22,970	)
Other comprehensive loss		—		—		—			—			(1,612	)		(1,612	)
September 30, 2022		193,643,855	$	19	$	350,022		$	(90,365	)	$	(1,612	)	$	258,064

December 31, 2022		194,560,946	$	19	$	352,564		$	(101,097	)	$	1,068		$	252,554
Exercise of common stock options		502,299		—		180			—			—			180
Stock vested under compensation plan less shares withheld to cover taxes		580,375		—		(118	)		—			—			(118	)
Stock-based compensation expense		—		—		4,144			—			—			4,144
Earnout stock-based compensation expense		—		—		212			—			—			212
Net loss		—		—		—			(19,019	)		—			(19,019	)
Other comprehensive income		—		—		—			—			108			108
March 31, 2023		195,643,620	$	19	$	356,982		$	(120,116	)	$	1,176		$	238,061
Exercise of common stock options		952		—		1			—			—			1
Stock vested under compensation plan less shares withheld to cover taxes		1,236,392		—		(28	)		—			—			(28	)
Stock-based compensation expense		—		—		1,938			—			—			1,938
Earnout stock-based compensation expense		—		—		(248	)		—			—			(248	)
Net loss		—		—		—			(18,988	)		—			(18,988	)
Other comprehensive loss		—		—		—			—			(1,679	)		(1,679	)
June 30, 2023		196,880,964	$	19	$	358,645		$	(139,104	)	$	(503	)	$	219,057
Exercise of common stock options		7,043		—		6			—			—			6
Stock vested under compensation plan less shares withheld to cover taxes		717,651		—		(159	)		—			—			(159	)
Stock-based compensation expense		—		—		4,143			—			—			4,143
Earnout stock-based compensation expense