Xometry (NASDAQ:XMTR) - Powering the Digital Transformation of Manufacturing

Published on September 24, 2024 | Ticker: XMTR

Xometry, Inc. (NASDAQ:XMTR) is a global artificial intelligence-powered online marketplace connecting buyers with suppliers of manufacturing services, driving the digital transformation of one of the largest industries in the world. The company's innovative platform and technology solutions are revolutionizing the way businesses source custom-manufactured parts and assemblies, while empowering suppliers to grow their operations.

Business Overview

Xometry was incorporated in 2013 and is headquartered in North Bethesda, Maryland. The company's AI-enabled technology platform is powered by proprietary machine learning algorithms and datasets, resulting in a sophisticated two-sided marketplace that is rapidly digitizing the manufacturing industry. Xometry's platform enables product designers, engineers, buyers, and supply chain professionals to instantly access the capacity of a global network of manufacturing facilities, providing them with real-time pricing, expected lead times, and manufacturability feedback.

On the buyer side, Xometry's marketplace offers a diverse range of manufacturing processes, including CNC machining, sheet metal forming, 3D printing, injection molding, and more. This allows buyers to source the exact parts and assemblies they need across various industries, including aerospace, healthcare, robotics, and automotive. For suppliers, Xometry provides access to a large and diverse base of buyers, helping them grow their businesses and improve machine uptime.

In addition to its core marketplace, Xometry offers a suite of supplier services, including digital advertising and marketing solutions through its Thomasnet platform, financial services to stabilize cash flow, and a cloud-based manufacturing execution system to optimize supplier productivity.

Financial Performance

Xometry reported annual revenue of $463.4 million in 2023, a decrease of 3.2% from the previous year. The company's net loss for the year was $67.5 million, compared to a net loss of $59.3 million in 2022. Xometry's annual operating cash flow was -$29.9 million, and its annual free cash flow was -$48.4 million.

In the first quarter of 2024, Xometry generated revenue of $122.7 million, up 16.5% year-over-year. Marketplace revenue, which accounts for the majority of the company's top line, grew 24% to $107.2 million, while supplier services revenue declined 17% to $15.5 million. Gross profit increased 22% to $47.9 million, with the company's marketplace gross margin expanding to a record 32.0%, up from 28.8% in the prior-year period.

Xometry's adjusted EBITDA loss in the first quarter of 2024 was $7.5 million, an improvement of 37% compared to the same period in 2023. The company ended the quarter with $253.8 million in cash, cash equivalents, and marketable securities.

Geographic Breakdown

Xometry's revenue is primarily generated in the United States, which accounted for 84% of total revenue in the first quarter of 2024. The company's international segment, which includes operations in Europe and Asia, contributed the remaining 16% of revenue, growing 69% year-over-year.

Guidance and Outlook

For the second quarter of 2024, Xometry expects revenue in the range of $127 million to $129 million, representing year-over-year growth of 14% to 16% (or 15% to 17% adjusting for the discontinuation of the sale of tools and materials). The company anticipates marketplace revenue growth of approximately 20% year-over-year, while supplier services revenue is expected to decline by around 15% due to the exit from the tools and materials business.

Xometry expects its adjusted EBITDA loss in the second quarter to be between $6 million and $8 million, an improvement from the $8.7 million loss in the same period last year. For the full year 2024, the company continues to expect marketplace growth of at least 20% and a decline of approximately 10% in supplier services revenue.

Competitive Landscape and Risks

Xometry operates in a highly competitive industry, facing competition from both traditional manufacturing service providers and other online marketplaces. The company's ability to maintain its competitive edge and continue its growth trajectory is dependent on its ability to expand its supplier network, enhance its technology platform, and drive deeper engagement with enterprise customers.

Additionally, Xometry is exposed to macroeconomic risks, such as fluctuations in inflation, geopolitical tensions, and the impact of economic downturns on manufacturing activity and capital spending. The company's financial performance is also susceptible to changes in customer demand, supplier capacity, and pricing dynamics within the manufacturing industry.

Conclusion

Xometry's first-quarter results demonstrate the company's ability to drive strong revenue and gross profit growth, even in an uncertain manufacturing environment. The company's focus on expanding its buyer and supplier networks, enhancing its technology platform, and deepening enterprise customer relationships positions it well to continue its digital transformation of the manufacturing industry. While macroeconomic risks and competitive pressures remain, Xometry's innovative approach and market-leading position suggest it is well-equipped to navigate the challenges ahead and capitalize on the significant long-term opportunity in the global manufacturing ecosystem.

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