Xometry, Inc.

Good day, and thank you for standing by. Welcome to the Xometry Q2 2024 earnings call conference call. At this time, all 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 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Sean Milne, VP of Investor Relations.

Good morning, and thank you for joining us on Xometry's Q2 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 second quarter and discuss our guidance for the third 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 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 June 30, 2024. We caution you not to 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.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.

Good morning everyone and thank you for joining us for our Q2 2024 earnings call. Q2 was a strong quarter for Xometry across many fronts. Our AI-powered marketplace delivered record revenue, record gross profit, and record gross margins. Powered by AI, our on-demand custom manufacturing 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. We've made great progress in Q2 and are focused on driving further penetration in this massive market through our key growth initiatives. As I spend time with customers around the globe, I see firsthand that we are increasingly becoming embedded across our customer supply chains as our marketplace digitizes inefficient and cumbersome processes while delivering value and reliability for buyers. Likewise, Xometry's platform enables suppliers to digitally monetize manufacturing capacity, improve profitability, and access global demand at minimal cost. In Q2, many Fortune 500 customers depended upon Xometry to help strengthen their supply chains as we surpassed the $500 million annual revenue run rate. one of the largest global technology companies, expanded production programs into a new line of business, and a top global medical device company embedded the Xometry marketplace directly into their procurement program. We have a tremendous runway for growth by increasing our penetration rates across manufacturing processes and end markets in a highly fragmented industry. In Q2, we delivered accelerating growth with revenue increasing 19% year-over-year to a record $133 million, driven by our marketplace business. Q2 marketplace revenue grew 25% year-over-year and a robust 9% quarter-over-quarter. We saw strength across many end markets, including semiconductors, industrial equipment, consumer products, aerospace, and defense. Q2 gross profit increased 21% year-over-year. Q2 marketplace gross profit increased 33% year-over-year and a strong 15% quarter-over-quarter, driven by our AI-powered marketplace and increasing network of active suppliers. As we scale our data, our machine learning AI models get better at pricing and matching, which in turn fuels gross profit dollar growth. The proof is in the results. In the past three years, we expanded our marketplace gross margin from 23.5% to 33.5%. underscoring the power of our AI-driven model. In Q2, we further invested in our marketplace technology, including key hires in machine learning and data science. We expect to expand marketplace gross margin and drive strong gross profit growth in the second half of 2024. Strong marketplace revenue and marketplace gross profit growth drove a 70% improvement in our adjusted EBITDA loss to a record low 2% of revenue. We delivered strong leverage in our U.S. marketplace while making investments to drive international growth and scale. In order to drive sustained market share gains, we're focused on these growth initiatives. First, expanding our network of active buyers and suppliers. In Q2, active buyers increased 27% year-over-year, with net additions of over 3,000. We expect our active buyer growth to remain healthy as there are millions of potential buyers and Xometry's brand awareness is growing, but still low. We continue to increase the breadth and depth of our supplier network, which increased 36% in 2023. In Q2, we expanded our supplier base in the United States and other markets such as India and Turkey. We're also growing our supplier reach in specific processes, including tube cutting, tube bending, and other tooling-based processes to support anticipated areas of customer growth. For our suppliers, we continue to enhance WorkCenter, the digital operating system for manufacturing. In Q2, we further digitize the recruitment and onboarding experience for suppliers directly through WorkCenter. Second, expanding the marketplace menu. Our goal is to be the primary destination for our customers' manufacturing and supply chain needs. To help accomplish that, we need to provide instant quoting for as many manufacturing processes and materials as possible. In Q2, we made progress doing just that. For example, in Europe, we added 10 new materials, including new steel and aluminum grades for CNC and expanded 3D printing finishing options. To expedite our development of new auto-quoted processes within Xometry's AI-powered instant quoting engine, we are leveraging Google's Verdix AI alongside our proprietary data and algorithms. We are now beta testing new auto-quote tube bending and tube cutting, which we expect to release later in Q3. Third, driving deeper enterprise engagement. Some of our biggest customers are the largest companies in the world. In Q2, we made strong progress with our land and expand efforts, as the number of marketplace accounts with last 12-month spend of at least $50,000 increased 24% year-over-year to 1,436. While our growth with these accounts has been strong over the years, there's a terrific opportunity to significantly accelerate Xometry's adoption by them. To make that happen, we have a two-pronged approach. First, we're leading with our technology. In Q2, we launched an ERP integration with a large global medical device company, which reduces friction in the procurement process. Additionally, the feedback for TeamSpace remains positive with rapid adoption, including over 3,300 teams and strong engagement on the platform. TeamSpace moves the Xometry marketplace from a focus on individual buyers and parts to procurement teams managing programs. Second, we continue to invest in our enterprise sales efforts. increasing our bench strength, including the hiring of our new Chief Sales Officer, Sabir Dutt, in May. Sabir brings significant experience leading high-performing, high-growth sales teams that cater to large enterprise customers across nearly every sector. Fourth, growing internationally. In Q2, international revenue increased 31% year-over-year, driven by strong growth in Europe. Xometry Asia expanded into new English-speaking countries, including Australia, Singapore, and New Zealand. In China, Xometry launched enhanced customer service capabilities on its WeChat mini app for buyers to quote, order, and track delivery. 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. Our enterprise strategy is successful in Europe as well. In Q2, a UK-based aerospace equipment manufacturer chose Xometry for high-volume manufacturing. Xometry enabled them to move away from in-house production by providing flexible, scalable capacity to quickly produce certified parts, significantly reducing lead times. This partnership simplifies their business processes and effectively makes Xometry an extension of their procurement department. In Q2, international revenue accounted for 15% of total marketplace revenue. We believe international can reach the 30% to 40% level in the long term, as with many other global online marketplaces. Fifth, enhancing supplier service solutions. In Q2, we continue to invest in important foundational work to modernize the Thomas advertising platform. We're focused on restoring Thomas advertising growth, given the 85% plus gross margin and strong contribution margin opportunity of the platform. By improving the underlying platform technology, we will enhance the experience for both users and advertisers, providing opportunities for growth and engagement. One of our top goals is to drive increasing advertiser penetration on the platform, which is approximately 1% today out of the roughly 500,000 suppliers listed on Thomas. The Thomas platform continues to attract new logos and expand relationships with key customers. In Q2, Thomas signed a new partnership with the Italian trade agency, Machines Italia, to connect buyers to the North American subsidiaries of dozens of Italian manufacturers. Also, Thomas expanded its relationship with American Crane, one of the largest manufacturers and distributors of cranes in the United States. I'm proud of the collective efforts of our global team. Our continued strong execution and growth demonstrates the significant strides we're making to digitize supply chains. The combination of our extensible technology platform, expanding data lake, and rapidly growing networks of buyers and suppliers will continue to fuel strong growth and margin expansion. I'll now turn the call over to James for a more detailed review of Q2 and our business outlook.