Xometry, Inc.

Good morning. My name is Dustin, and I'll be your conference operator today. This time, I'd like to welcome everyone to the Xometry Inc. Q1 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press the star Thank you. I'd like to introduce you to our CEO, Randy Altshuler, CFO James Milne, and our VP of Investor Relations, Sean Milne. Sir, you may begin the conference.

Good morning, and thank you for joining us on Zometry's Q1 2024 earnings call. Joining me are Randy Altshuler, our Chief Executive Officer, and James Milne, our Chief Financial Officer. During today's call, we will review our financial results for the first quarter and discuss our guidance for the second quarter and full year 2024. 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 our 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-Q for the quarter ended March 31, 2024, 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 that on 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 and our investor presentation, both of which are available on the investors section of our website at investors.xometry.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 2024 earnings call. Powered by AI, our marketplace continues to gain significant market share as buyers and suppliers realize the value, convenience, and resiliency of our platform to strengthen their supply chains globally. In Q1, we grew revenue 16% year over year to $123 million, driven by our marketplace business. Q1 marketplace revenue grew 24% year over year. We saw strength across many end markets, including semiconductors and industrial equipment, electronics, aerospace and defense, and automotive. Q1 gross profit increased 22% year-over-year. Q1 marketplace gross profit increased 37% year-over-year, driven by our AI-powered marketplace and increasing network of active suppliers. We expect to further expand marketplace gross margin and drive strong gross profit growth throughout 2024. On top of strong marketplace revenue and gross profit growth, we improved our adjusted EBITDA loss in Q1 by 37% on a year-over-year basis, driven by leverage in our core U.S. marketplace. As our first quarter results clearly show, with our market leading position and the size of the available opportunity, we can drive strong revenue and gross profit growth and improve operating leverage regardless of the manufacturing backdrop. Of course, we want to grow as much as possible. which will not only strengthen our competitive moat, but also enable us to achieve our long-term profit margins faster. Here are the investments we've been making to accelerate our results. First, expanding our network of active buyers and suppliers. In Q1, active buyers increased 32% year over year, with net additions growing 8% quarter over quarter. For 2024, We expect our active buyer growth to remain healthy as there are millions of potential buyers and Xometry brand awareness continues to improve. We also continue to expand our supplier base globally with 36% growth in 2023. In Q1, we expanded our domestic network and added new partners in India, China, and Turkey. For our suppliers, we continue to enhance WorkCenter, the digital operating system for manufacturers. We are improving the overall experience for suppliers, reducing the effort required to review jobs, track material purchases, and monitor fabrication progress. Second, expanding the marketplace menu. We want to be the go-to destination for our customers' manufacturing needs. To help accomplish that, we need to provide instant quoting for as many manufacturing processes and materials as possible. Like any other industry, the faster and easier you can make it for someone to buy, the more traction you will get. In Q1, we continued to make progress doing just that. For example, in Europe, we expanded the instant quoting engine to include vacuum casting for customers to take advantage of low-cost, high-quality plastic production. To further expedite our deployment of new auto-quoted processes within Xometry's AI-powered instant quoting engine, in Q4 of 2023, we partnered with Google's Verdicts AI team. Our progress has been encouraging. And in the third quarter of this year, we expect to test multiple new auto quoting models with our U.S. and then European customers. Third, driving deeper enterprise engagement. Some of our biggest customers are the largest companies in the world. While our growth within these accounts has been strong over the years, there's a terrific opportunity to significantly accelerate their adoption of Xometry. To make that happen, we have a two-pronged approach. First, we are leading with our technology. In addition to reducing friction for customers by integrating purchasing directly into the ERP systems, we have deployed and continue to enhance our TeamSpace software. TeamSpace moves the Xometry marketplace from a focus on individual buyers and parts to procurement teams managing programs. The feedback remains positive with rapid adoption including over 2,300 teams and strong engagement on the platform. This year, we've already integrated new features for our injection molding offering directly into TeamSpace, which includes a tooling dashboard providing engineering review and fabrication status. Second, we continue to invest in our enterprise sales effort, increasing our bench strength and ramping our sales force to service and grow relationships with our largest customers. We are making progress with global companies as they look for a technology partner to help manage dispersed and complex supply chains. In the United States, a leading global medical device company chose Xometry for an injection molding production program after first prototyping with our platform. The company found value in our quality, time to deliver, and increasing ease of management with our new Teams-based software. We expect to see continued growth with this customer in the quarters ahead as they look to Xometry for additional injection molding services and other manufacturing processes that we bring to market. Also in Q1, we signed a multi-year agreement with a European customer in the vehicle and delivery space. Xometry was chosen due to the breadth of our marketplace. Using the network of suppliers in the Xometry marketplace, this customer doesn't need to build and manage their own supply chain for their critical product. Fourth, growing internationally. In Q1, international revenue increased 69% year over year, driven by strong growth in Europe. In 2024, we continue to push deeper in our existing international markets. In Q1, we added Czech as a language in our EU site. Through Xometry.eu, Xometry.uk, and Xometry.asia, we have leveraged Xometry's core technology to provide localized marketplaces in 15 different languages with networks of suppliers across Europe and Asia, as well as North America. In Q1, International revenue accounted for 18% of total marketplace revenue. We believe international can reach the 30% to 40% level in the long term, as is with many other global online marketplaces. Fifth, enhancing supplier services solutions. In Q1, we continued to invest in important foundational work to modernize the Thomas advertising platform. We remain focused on restoring Thomas advertising growth given the 85% plus gross margins and strong contribution opportunity of the platform. We are now beta testing new self-serve advertising campaign creation tools for suppliers. While still early, we're seeing some positive signs of supplier engagement, including end-to-end self-serve campaign configuration and checkout. We expect returns on these investments to be strong. We've made similar bets in the past and they've paid off. For example, in 2019, we invested in international expansion, launching in Europe in early 2020. We scaled the international business from $3 million in revenue in 2020 to over $60 million in fiscal year 2023. In addition, we continue to invest in our machine learning based AI, which is fueling marketplace gross margin expansion. When we went public in the middle of 2021, Our marketplace gross margin was in the 24% range, and we ended Q1 of this year at 32%. Improving our scale in revenue and gross profit dollars provides a clear path to profitability. Coupled with those investments, we remain committed to delivering improving operating leverage each quarter, which James will discuss in more detail. I'm proud of the collective efforts of our team worldwide. Our continued strong growth demonstrates the significant strides we're making to digitize manufacturing supply chains. I'll now turn the call over to James for a more detailed review of Q1 in our business outlook.