Xometry, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Unaudited financial information; dollar amounts below are in millions unless stated otherwise.
Business context
Xometry operates an online marketplace connecting buyers with manufacturing suppliers and also sells supplier services, including advertising, supplies, financial products and software. In Q2, it launched the Industrial Buying Engine, connecting buyers with Thomasnet.com suppliers, and introduced Workcenter for supplier workflow management. The results include Thomas, acquired in December 2021; its advertising business contributed substantially to supplier-services revenue.
Key financial metrics
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $95.6 | $50.6 | $179.3 | $94.5 |
| Gross profit | $37.7 | $11.9 | $70.6 | $21.7 |
| Gross margin | 39.4% | 23.5% | 39.4% | 23.0% |
| Operating loss | $(15.6) | $(11.8) | $(34.6) | $(21.8) |
| Net loss | $(16.5) | $(12.3) | $(36.5) | $(22.8) |
| Net loss per share | $(0.35) | $(1.46) | $(0.78) | $(2.79) |
| Adjusted EBITDA loss | $(8.3) | $(9.1) | $(21.0) | $(17.9) |
Q2 marketplace revenue was $75.6 million and supplier-services revenue was $20.0 million. Marketplace gross margin was 29.2% in Q2 and 28.4% for the first half; supplier-services gross margin was 77.9% and 78.6%, respectively. Adjusted EBITDA is a non-GAAP measure.
For the six months, operating cash use was $34.2 million, compared with $20.6 million a year earlier. Investing cash use was $285.8 million, largely reflecting $280.6 million of marketable-security purchases; financing provided $280.7 million, principally from convertible notes. At June 30, cash and equivalents were $46.8 million and marketable securities were $309.8 million, totaling $356.7 million. Current assets were $414.2 million and current liabilities were $59.8 million.
At June 30, convertible notes had $287.5 million principal and $279.0 million carrying value. The unsecured notes mature in 2027, bear 1% coupon interest, and are convertible at an initial price of approximately $56.11 per share. Stockholders’ equity was $400.5 million; accumulated deficit was $209.9 million.
Material changes versus prior comparable periods
- Revenue grew 89% in Q2 and 90% in the first half. Management attributed marketplace growth to more active buyers and higher spend from existing buyers; supplier-services growth primarily reflected the Thomas acquisition.
- Q2 gross margin rose to 39.4% from 23.5%, which management linked to improved marketplace pricing efficiency, supplier growth and the higher-margin supplier-services mix.
- Despite higher gross profit, GAAP net loss increased in dollars in both comparisons, alongside substantial increases in operating expenses. Higher costs reflected the acquisition, hiring, marketing, stock-based compensation and public-company expenses.
- Active buyers reached 33,491, up 40% year over year; accounts with at least $50,000 of trailing-12-month marketplace spend reached 894, up 76%. Existing accounts generated 95% of Q2 revenue.
- Cash and marketable securities increased from $116.7 million at December 31, 2021, largely due to the February 2022 note issuance, while cash used in operations also increased year over year.
Outlook, risks and unusual items
Management stated that available cash, cash equivalents and marketable securities were expected to support working-capital and capital-expenditure needs for at least the next 12 months. The filing gives no specific revenue, earnings or profitability guidance. Management expects continued investment in sales and marketing, operations and support, product development, and general and administrative functions.
- Management cited potential effects from COVID-19, macroeconomic uncertainty, geopolitical tensions including the war in Ukraine, inflation and foreign-exchange movements. It warned that cost increases may not be fully offset through pricing.
- Q2 included a $1.9 million non-cash benefit in sales and marketing from Thomas purchase-accounting adjustments, a $1.3 million stock donation expense, and a $0.1 million impairment of abandoned software projects. First-half unrealized losses on marketable securities were $1.2 million.
- Thomas acquisition goodwill was approximately $252.0 million and was not expected to be tax-deductible. The company also reported $259.97 million of total goodwill at June 30.
- Potential dilution includes convertible notes, stock options and restricted stock units. The notes may be settled in cash, shares or a combination, at the company’s election.
- The company reported no material legal proceedings and no material changes to previously disclosed risk factors. Management concluded disclosure controls were effective; it reported no material change in internal control over financial reporting during the quarter.
Investor verification points
- Assess how much growth is organic marketplace expansion versus the Thomas acquisition, and whether marketplace and supplier-services margins are sustainable.
- Review operating cash burn, receivables growth and working-capital needs alongside management’s 12-month liquidity statement.
- Check the convertible-note conversion, settlement and repurchase provisions, and evaluate potential dilution against the $56.11 initial conversion price.
- Reconcile non-GAAP Adjusted EBITDA and non-GAAP net loss to GAAP results, including acquisition-related adjustments and stock-based compensation.
- Monitor the Thomas purchase-price allocation, goodwill and tax attributes, including the then-pending evaluation of acquired net operating loss limitations.