Summary

• Xometry is an AI-powered marketplace, popular Thomasnet industrial sourcing platform, and suite of cloud-based services that are rapidly digitizing the $2.4 trillion manufacturing industry.
• They provide manufacturers with the critical resources they need to grow their business and make it easy for buyers to access global manufacturing capacity and create locally resilient supply chains.
• They offer sourcing and pricing across a network of buyers and suppliers, providing a suite of configurable manufacturing processes through their diverse supplier network. Xometry offers these tailored processes through a user-centric platform that is reliable and flexible, leveraging additional products and services to increase buyer and seller engagement over time.
• In 2022, the company experienced significant growth in sales, with total sales reaching $381 million. This marked an increase of $162.66 million or 74.8% compared to the sales figure of $218.34 million in 2021.
• The company's gross profit for 2022 amounted to $147.55 million, reflecting a substantial difference of $90.55 million or 156.9% from the gross profit of $57 million in the previous year, 2021.
• Additionally, the company's operating profit decreased in 2022, totaling $-73 million, which was lower by $14.31 million or 24.4% compared to the operating profit of $-58.69 million in 2021.
• The net profit for the year 2022 was $-76 million, representing a decrease of $15 million or 24.6% compared to the net profit of $-61 million in 2021.
• Moreover, the diluted earnings per share (EPS) for 2022 were reported as $-1.62, which showed an increase of $0.71 or 30.5% compared to the diluted EPS of $-2.33 in 2021.

Brief Company Overview

Xometry, Inc. (NASDAQ: XMTR) is an AI-powered marketplace, popular Thomasnet industrial sourcing platform, and suite of cloud-based services that are rapidly digitizing the $2.4 trillion manufacturing industry. They provide manufacturers with the critical resources they need to grow their business and make it easy for buyers to access global manufacturing capacity and create locally resilient supply chains. The Xometry Instant Quoting Engine leverages millions of pieces of data to quickly and effectively analyze complex parts in real-time, match buyers with the right suppliers globally, and provide accurate pricing and lead times. Through its extensible marketplace, Xometry continuously scales its offerings, delivering an ever-expanding menu of manufacturing capabilities.

They offer sourcing and pricing across a network of buyers and suppliers, providing a suite of configurable manufacturing processes through their diverse supplier network. Additionally, Xometry enables business success through additional products and services tailored to the unique needs of each side of their marketplace. Their platform is AI-driven, continuously learning from millions of data inputs from marketplace interactions, providing rich insights and analytics that allow for further improvement of the efficiency of their ecosystem and the products and services they offer. Xometry offers these tailored processes through a user-centric platform that is reliable and flexible, leveraging additional products and services to increase buyer and seller engagement over time.

As of December 2023, the company had a 52-week share price range of $38.74 to $12.45. The forwarding P/E ratio of the company is 136.99 times, the price-to-sales ratio (ttm) is 3.73 times, the profit margin is -18.77%, the operating margin is -10.97%, the return on assets (ttm) is -6.92%, the return on equity is -22.29%, and the diluted earnings per share (ttm) is $-1.70. The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock as reported by The Nasdaq Global Select Market on June 30, 2022 was $1.2 billion. The number of shares of Registrant’s Class A common stock outstanding as of March 9, 2023 was 45,070,484.

Recent Developments

• Xometry announced a partnership with Google Cloud to help accelerate new auto-quote methods and models within its AI-powered Instant Quoting Engine. Utilizing Vertex AI, Xometry aims to expedite the deployment of its instant-quoting to encompass the broadest and most comprehensive set of manufacturing technologies. The Vertex AI platform will enable Xometry to bring new offerings to market faster in entirely new categories, thereby enhancing its indispensability to customers and suppliers globally.¹
• In October, 2023, Xometry launched Xometry Teamspace following a successful beta test with several large customers in Q3 of 2023. Teamspace is a cloud-based collaboration tool that enables employees at the same company to manage projects within Xometry’s AI-powered platform. Serving as a crucial addition to Xometry’s online marketplace, Teamspace facilitates streamlined order management, enhances efficiency, and promotes data-based decision-making. Since its launch, over 300 teams have been created on the platform.²

Recent Financing Activities

• Xometry announces the pricing of a $250 million offering of Convertible Senior Notes. The Notes will be general unsecured obligations of Xometry and will accrue interest payable semiannually in arrears on February 1 and August 1 of each year, commencing on August 1, 2022, at a rate of 1.00% per year. The Notes are set to mature on February 1, 2027, unless earlier converted, redeemed, or repurchased.³

Financial Performance Highlights

Q3 2023 Highlights

In the third quarter of 2023, the company reported sales of $118.93 million, reflecting an increase of $23.33 million or 24.4% compared to the third quarter of 2022, which had sales of $95.6 million. The net profit for the third quarter of 2023 was $-12 million, showing an increase of $4.6 million or 27.7% when compared to the net profit of $-16.6 million in the third quarter of 2022. Furthermore, the company's diluted earnings per share (EPS) for the third quarter of 2023 increased to $-0.25, a positive change of $0.077 or 23.5% compared to the diluted EPS of $-0.327 in the third quarter of 2022.

Annual Performance Highlights

In 2022, the company experienced significant growth in sales, with total sales reaching $381 million. This marked an increase of $162.66 million or 74.8% compared to the sales figure of $218.34 million in 2021. The company's gross profit for 2022 amounted to $147.55 million, reflecting a substantial difference of $90.55 million or 156.9% from the gross profit of $57 million in the previous year, 2021. Additionally, the company's operating profit decreased in 2022, totaling $-73 million, which was lower by $14.31 million or 24.4% compared to the operating profit of $-58.69 million in 2021. The net profit for the year 2022 was $-76 million, representing a decrease of $15 million or 24.6% compared to the net profit of $-61 million in 2021. Moreover, the diluted earnings per share (EPS) for 2022 were reported as $-1.62, which showed an increase of $0.71 or 30.5% compared to the diluted EPS of $-2.33 in 2021.

Revenue growth was primarily driven by an increase in marketplace revenue and supplier services revenue resulting from the acquisition of Thomas. The marketplace revenue increase was mainly due to rises in active buyers, attributed to investments in sales and marketing, alongside existing buyers increasing their spending on the platform for the year ended December 31, 2022, compared to the prior year. Supplier services revenue growth was primarily fueled by the acquisition of Thomas in December 2021.

The increase in the cost of revenue was primarily the result of an increase in marketplace cost of revenue and supplier service costs of revenue due to the acquisition of Thomas. Marketplace cost of revenue surged due to increased payments to suppliers on the platform, driven by the growth in the buyer base and increased activity by existing accounts. Supplier services cost of revenue rose primarily as a result of the acquisition of Thomas in December 2021.

The increase in gross profit was primarily attributed to the acquisition of Thomas, revenue increases from the marketplace, and improved marketplace gross margin compared to the prior year period. The gross margin improvement for the marketplace was partly due to the AI-driven platform, which enhanced pricing efficiency through increased orders over time, improving datasets, and making pricing decisions more accurate.

In 2022, operating activities resulted in a net cash usage of $62.6 million, driven by a $(76.0) million net loss adjusted for $42.9 million in non-cash charges, including stock-based compensation and depreciation. The decrease in operating assets and liabilities was $29.5 million, primarily due to increased accounts receivable reflecting company growth. Investing activities used $238.6 million, mainly for purchasing marketable securities and property, partially offset by sales. Financing activities provided $281.0 million, primarily from issuing 2027 Notes and stock options, offset by issuance costs.

Business Overview

Xometry's operations comprised of marketplace (platform) and supplier services.

Marketplace

Xometry’s AI-enabled technology marketplace operates through proprietary machine learning algorithms and a comprehensive dataset, creating a sophisticated platform for manufacturing. This setup allows buyers to procure products on demand while enabling suppliers to identify new manufacturing opportunities that align with their specific processes and capacity.

The manufacturing industry, one of the largest globally, is still in the early stages of digitization. Buyers seeking manufacturing processes encounter challenges due to a highly fragmented and regionalized base of suppliers prone to supply chain disruptions, and difficult to manage efficiently. Opaque pricing structures, long lead times, and a lack of quality controls contribute to an inefficient, unpredictable, and unreliable procurement process. On the other hand, suppliers face limited customer sourcing capabilities, inconsistent demand, volatile operating costs, and resource constraints, leading to significant financial pressure on their businesses. To improve the reliability and resilience of global supply chains, buyers and suppliers require a more efficient, agile transactional method.

Xometry facilitates buyers from various industries in sourcing a wide range of manufacturing processes to meet their requirements. The majority of the company's revenue is generated from the prices charged to buyers on its platform. Buyers typically initiate transactions by uploading engineering schematics containing 3D design specifications, usually in the form of computer-aided design (CAD) files. Transactions are priced using the company's proprietary, AI-enabled instant quoting engine, considering factors such as volume, manufacturing process, material, and location. The convenience and transparency of this model foster increasing buyer loyalty and spending over time. Additionally, Xometry incorporates elements of environmental, social, and governance (ESG) practices into its marketplace by offering buyers the option to purchase carbon credits to offset the carbon footprint associated with their parts' production.

Supplier Services

Xometry’s supplier service primarily includes the sale of advertising and marketing services, and to a lesser extent, supplies, and financial service products that aid customers in managing cash flow at all stages of job production. Their financial services products, such as Xometry Pay, enabled suppliers to stabilize and enhance their cash flows, offer discounts to lower operating costs, and provide resource management tools for business optimization. In 2021, Xometry acquired Thomas Publishing Company (“Thomas”) and Fusiform, Inc. (d/b/a FactoryFour) (“FactoryFour”), expanding their basket of supplier services to include advertising and marketing services, and to a lesser extent, SaaS-based solutions aimed at helping suppliers optimize productivity. During 2022, Xometry launched the Industrial Buying Engine™ (“IBE”), designed to assist customers in sourcing and purchasing from the more than 500,000 suppliers on Thomasnet.com. The IBE digitized the old and time-consuming request-for-quote process, enabling buyers and suppliers to transact on Thomasnet.

Revenue

Revenue from Xometry's marketplace primarily reflects the sales of parts and assemblies on their platform. Revenue from supplier services primarily includes the sale of advertising and, to a lesser extent, supplies, financial service products, and SaaS products.  Below is the revenue of 2022 based on service type.

Xometry's revenue streams are delineated in the table, with the marketplace generating $303.13 million, constituting 79.54% of the total revenue, and supplier services contributing $77.92 million, representing 20.46% of the total revenue. This breakdown underscores the significant revenue derived from the marketplace, primarily through the sales of parts and assemblies on their platform, while supplier services, including advertising sales and related offerings, contribute a smaller but noteworthy portion of the total revenue.

Other Business Information

Xometry's commercial success hinges significantly on their ability to secure and safeguard intellectual property and proprietary rights concerning current and future technologies and services. They employ a combination of legal frameworks including patent, trademark, copyright, and trade secret laws, along with license agreements, confidentiality procedures, and non-disclosure agreements to establish, maintain, and protect their intellectual property assets such as technology, software, know-how, and brand. However, these measures offer only limited protection. As of December 31, 2022, Xometry owns eight issued United States patents related to machine learning for generating fabrication and manufacturing predictions, with expiration dates between 2036 and 2037, and three pending patent applications aimed at similar technologies, anticipated to expire between 2039 and 2040. Additionally, they hold approximately 45 registered U.S. trademarks and over 100 foreign trademarks internationally, relying on copyright laws and licenses to safeguard software and other proprietary technologies.

Company History

Xometry's journey began in 2013 when co-founders Randy Altschuler and Laurence Zuriff embarked on a mission to disrupt the manufacturing industry through digital innovation. Recognizing the inefficiencies and complexities inherent in traditional manufacturing processes, they envisioned a platform that would streamline and modernize the way companies source and produce custom parts and assemblies. Thus, Xometry was born, with the aim of providing a seamless online marketplace where buyers could connect with a network of pre-vetted suppliers for their manufacturing needs.

In its inaugural year, Xometry launched its online marketplace, laying the groundwork for its ambitious vision. The platform offered a user-friendly interface where buyers could upload their design specifications and receive instant quotes from a diverse pool of suppliers. This innovative approach not only simplified the procurement process but also significantly reduced lead times, empowering customers with unprecedented speed and flexibility in sourcing custom-manufactured parts.

Building on its early success, Xometry secured its first round of seed funding in 2014, marking a significant milestone in its growth trajectory. This infusion of capital enabled the company to accelerate its expansion plans and invest in technology development, further enhancing the capabilities of its platform. With a focus on continuous innovation, Xometry introduced several new features in 2015, including real-time pricing and lead time estimation, leveraging advanced algorithms and machine learning techniques to optimize the customer experience.

In 2016, Xometry's momentum continued to build as it attracted additional funding from prominent venture capital firms in its Series A funding round. This influx of capital fueled rapid growth and expansion, positioning Xometry as a leading player in the digital manufacturing space. The company capitalized on this momentum by introducing further enhancements to its platform, including improved user interface and expanded supplier network, cementing its reputation for innovation and efficiency.

The year 2017 proved to be transformative for Xometry with its acquisition of MakeTime, a fellow online manufacturing platform. This strategic move not only bolstered Xometry's market position but also enhanced its technological capabilities. MakeTime's proprietary software solutions were seamlessly integrated into the Xometry platform, further enhancing its efficiency and scalability. The acquisition marked a significant step forward in Xometry's journey towards becoming a comprehensive digital manufacturing solution provider.

Buoyed by its success, Xometry embarked on a path of rapid expansion, opening additional manufacturing facilities across the United States in 2018. This strategic expansion bolstered Xometry's production capacity and geographic reach, enabling the company to better serve its growing customer base and meet increasing demand for custom-manufactured parts.

In 2019, Xometry achieved a major milestone with its initial public offering (IPO) on the NASDAQ stock exchange under the ticker symbol "XMTR." The IPO not only provided Xometry with access to additional capital but also validated its disruptive business model and growth potential in the eyes of investors. The successful IPO catapulted Xometry into the spotlight, attracting widespread attention from both the investment community and industry stakeholders.

In the following years, Xometry continued to innovate and expand its offerings, introducing new services such as Xometry Pay, a streamlined payment platform designed to simplify transactions for buyers and suppliers on the platform. The company also made strategic acquisitions, including Thomas Publishing Company ("Thomas") and Fusiform, Inc. (d/b/a FactoryFour) ("FactoryFour"), further diversifying its portfolio of services and expanding its market reach.

In 2022, Xometry launched the Industrial Buying Engine™ ("IBE"), a revolutionary digital platform that transformed the sourcing and procurement process for customers. The IBE provided instant quotes and streamlined transactions with suppliers, revolutionizing the way company’s source and procure custom parts and assemblies.

References

1. ^ https://www.tipranks.com/news/the-fly/xometry-leverages-google-cloud-to-accelerate-digitization-of-manufacturing
2. ^ https://www.globenewswire.com/news-release/2023/10/24/2765515/0/en/Xometry-Integrates-Teamspace-Collaboration-Tool-Into-Its-AI-Powered-Marketplace.html
3. ^ https://investors.xometry.com/news-releases/news-release-details/xometry-announces-pricing-250-million-offering-convertible#:~:text=The%20Notes%20will%20be%20general,earlier%20converted%2C%20redeemed%20or%20repurchased.