Xometry, Inc.

Good day and thank you for standing by. Welcome to Zometry Incorporated Q1 2023 earnings call. At this time, the participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sean Milne, Vice President of Investor Relations. Please go ahead.

And thank you for joining us on Xometry's Q1 2023 earnings call. Joining me are Randy Altshuler, our Chief Executive Officer, and Jim Rollo, our Chief Financial Officer. During today's call, we will review our financial results for the first quarter of 2023 and discuss our guidance for the second quarter and full year 2023. During today's call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, strategy, long-term growth, and overall future prospects. Such statements may be identified by terms such as believe, expect, intend, and may. These statements are subject to risks and uncertainties which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed before the market opened today and in our filings with the U.S. Securities and Exchange Commission, including our Form 10-K for the year ended December 31st, 2022, and our Form 10-Q for the quarter ended March 31st, 2023, that will be filed later today. We caution you to not place undue reliance on forward-looking statements and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events, or changes in our expectations. We'd also like to point out in today's call we will report GAAP and non-GAAP results. We use these non-GAAP financial measures internally for financial and operating decision-making purposes and as a means to evaluate period-to-period comparisons. Non-GAAP financial measures are presented in addition to and not as a substitute or superior to measures of financial performance prepared in accordance with U.S. GAAP. To see the reconciliation of these non-GAAP measures, please refer to our earnings press release distributed today in our investor presentation, both of which are available in the investor section of our website at investors.zometry.com. A replay of today's call will also be posted on our website. With that, I'd like to turn the call over to Randy.

Thanks, Sean. Good morning, everyone, and thank you for joining us for our Q1 2023 earnings call. In Q1, we had the highest revenue in Xometry's history. We grew revenue 26% year-over-year, including 35% year-over-year growth in marketplace revenue. We added a record number of active buyers as we continue to gain market share. We significantly increased gross margins and operating leverage, reducing our adjusted EBITDA loss in Q1 from Q4 by 17%, and by 23%, excluding non-recurring Sarbanes-Oxley Act implementation compliance costs. The continuing shift to the digital is inevitable. And as the leading two-sided marketplace, Xometry's asset-light digital marketplace creates efficiencies and value for buyers and suppliers alike. Artificial intelligence is at the heart of Xometry, generating prices for buyers and suppliers across a range of on-demand manufacturing processes. We continue to develop our proprietary machine learning algorithms, adding support for additional features, such as new materials and finishes, and training our models on an increasingly large data set of custom manufactured parts. Our technology helps buyers significantly reduce their time to market and strengthen their supply chains, and enables small and medium sized suppliers to fill their capacity with work that can boost their growth and profitability. With our market leading position, an increasingly global footprint, and a total addressable market of $2 trillion, we expect to continue to grow rapidly for many years to come. While there are no shortcuts, we are steadily and methodically executing on our vision of becoming the de facto digital rails for custom manufacturing. In Q1, revenue increased 26% year-over-year to $105.3 million. Q1 marketplace revenue was $86.7 million, representing 35% year-over-year growth. We saw strength across all processes and many verticals, including electric vehicles, energy, industrial equipment, and robotics. Our value proposition continues to resonate strongly across all sizes of businesses, especially large enterprise customers. Supplier services revenue was 18.6 million, down 3% year-over-year. Gross profit increased 20% year-over-year to $39.4 million, driven by 41% growth in marketplace gross profit. Q1 marketplace gross margins increased 140 basis points year-over-year and 170 basis points quarter-over-quarter to 28.8%. Active buyers increased 46% year-over-year to 44,716, driven by a record addition of 4,052 active buyers in Q1. Active paying suppliers grew by 11% year over year in Q1 2023 to 7,621, driven by growth in Thomas marketing products, including self-serve. Starting this quarter, we will provide a number of active paying suppliers on a quarterly basis to give an additional KPI for a supplier services segment. An active paying supplier is defined as a supplier who purchased one or more of our supplier services, including digital marketing services, data services, financial services, or supplies during the last 12 months. International revenue grew 77% year-over-year and 13% quarter-over-quarter, driven almost entirely by the growth in our European business. Xometry Asia is growing with strong momentum, including the planned launch with Alibaba1688.com in Q2. In Q1, we continued to execute on the five-point strategic plan we outlined during our Q4 2022 earnings call. Here's an update on our progress. We refocused sales efforts on our top 200 accounts, which represented approximately 50% of 2022 U.S. marketplace revenue. The collective spend of these 200 accounts and manufacturing far exceeds Xometry's current revenue. So in early 2023, we redirected salespeople and customer support to them. Given the higher spend we have with these accounts and the potential to grow that spend significantly in the years to come, we are pushing deeper and wider into them. Accounts are increasingly engaging us to potentially support their production business and to manage their tailspin. While the sales cycle for these efforts are longer, the potential spend from these transactions is significant. This does not change our goal of rapidly expanding our base of buyers through digital marketing and other marketing efforts. In fact, We're seeing strong signs of increasing brand awareness as our organic search volume is growing at a rapid clip, helping fuel record growth of new active buyers. In Q1, we made significant progress in expanding our marketplace menu. As we grow the number of processes, materials, and finishes we can offer our customers, we are increasingly able to serve as their one-stop destination. In Q1, we added more than three dozen materials and finishes, including galvanized steel, stainless steel, and custom CNC materials. Additionally, we launched instant quotes for parts with multiple finishes. We also launched a new quick-turn injection molding service for quotes in as fast as two hours and parts in as little as five business days. For U.S. buyers, we introduced a new domestic economy shipping option, which offers lower pricing and longer lead times than the standard shipping option, but with higher pricing than our traditional offshore economy option. We are pleased with the adoption of the domestic economy. In Q2, we will continue to expand the menu and will offer buyers the ability to select an increasing number of manufacturing technologies, leveraging the tremendous breadth of what the hundreds of thousands of suppliers listed on thomasnet.com can offer. This depth and breadth is critical since our market is not defined by commodity parts or SKUs, but instead is made up of thousands of different use cases. This is one of the reasons the custom manufacturing market is so fragmented. Our marketplace is unique in its ability to meet these needs. We continue to expand aggressively internationally. We delivered strong growth in Europe and launched in the UK, which is the third largest manufacturing market in the region. In the UK, we are seeing early strong demand in such industries as medical, electric vehicles, autonomous related technologies, renewable energy, and propulsion systems. Additionally, in early Q1, we made a small tuck-in acquisition in Turkey to further expand our alternative cost supplier network to serve the European market. We launched Xometry.com.tr, a localized marketplace introducing the instant quoting engine to Turkish customers. Since launch, Turkish customers from machine building, engineering, and other industries are ramping up the use of our technology. In late Q1, Xometry Asia signed an agreement to provide instant quoting for Alibaba's group's 1688.com B2B wholesale marketplace in China. Xometry's AI-powered instant quoting engine is the sole provider of real-time pricing and lead time for custom parts on 1688.com. The industrial section of the 1688 marketplace had annual traffic of 30 million visitors in 2022. This should be fully operational shortly, and we are excited by the opportunity and the trust given by 1688 in our instant quoting technology. The upcoming launch with 1688 notwithstanding, we remain pleased with the ramp in buyer demand in China as we're seeing strong order growth across many verticals, including medical devices, biotech, material production, machine building, and sensor technology. We expect China to contribute to revenue growth in 2023, and stronger in 2024. Through Xometry.eu, Xometry.UK, and Xometry.Asia, we have leveraged Xometry's core technology to provide localized platforms in 13 different languages with networks of suppliers across Europe and Asia, as well as North America. In Q1, we invested approximately an incremental $1 million to fund expansion into the UK and launch the Turkey localized marketplace. We believe these investments will pay off with continued strong international growth over the years to come. In Q1, we invested in, enhanced, and continued to drive adoption of our new products, including WorkCenter and the Industrial Buying Engine platform, increasing our footprint with both buyers and suppliers and enabling us to scale cost-effectively. For our suppliers, we made important progress on WorkCenter, the SaaS-like operating system that is the digital foundation for manufacturers. In Q1, we expanded the work center job management tools and capabilities, including support for custom job workflows, job scheduling, communication tools, and accounting integrations. For buyers, we took significant steps towards improving the industrial buying engine. The industrial buying engine digitizes the cumbersome and time-consuming request-for-quote process taking what was once off platform and integrating it into the heart of thomasnet.com. In Q1, we made it easier for buyers to initiate requests and for buyers and suppliers to engage by consolidating all communication onto a single unified UX and technical platform. While the revenue from industrial buying engine transaction fees on thomasnet.com is not yet significant to Xometry's overall revenue, as we more tightly integrate it with our instant quoting engine, we can increase our buyer's share of wallet and be their one-stop shop. We continue to modernize the marketing products and expand self-serve options on the ThomasNet.com platform, making it easier for suppliers to start their marketing journey. In Q1, we implemented auto-renewal for all ThomasNet marketing programs. In 2023, we're working to move to a pay-for-performance advertising model on ThomasNet.com. Most search and listing engines that support advertising use a pay-per-click or other performance-based advertising model, which aligns the interests of buyers and suppliers. As we improve search, we expect to see a higher level of buyer engagement, improving the opportunity for search monetization. This will help drive growth of our higher-margin supplier services, as well as boost use of the industrial buying engine. We are continuing to increase efficiency and reduce expenses across our organization. In January, we reduced our workforce by 6% to better streamline operations. We are finding additional savings, including to our fixed costs, to continue our progress throughout the year to help Xometry become adjusted EBITDA positive in Q4. The underlying metrics of the marketplace are robust, with strong additions of active buyers and record order accounts, including from existing accounts. Our international business had a record quarter in Europe and is building momentum in Asia. We made good progress with the rollout and adoption of WorkCenter and building integrations to enable Thomas and Xometry users alike to access the breadth and depth of thomasnet.com's 500,000 suppliers, the full value of which we are continuing to unlock. As a result, we are once again delivering strong sequential growth in marketplace revenue, marketplace gross margin, and reduced adjusted EBITDA losses. For 2023 overall, we expect our momentum to continue and to remain in strong growth mode. With that, I will turn the call over to our CFO, Jim Rallo, for a closer look at first quarter financial results and our business outlook.