Xometry, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Amounts are in U.S. dollars; financial statement amounts are in millions unless noted. Xometry operates an AI-enabled marketplace connecting buyers seeking custom manufactured parts with a network of manufacturing sellers in the U.S. and Europe.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $56.7 | $42.0 | $151.2 | $103.4 |
| Gross profit | $14.5 | $10.2 | $36.2 | $23.8 |
| Gross margin | 25.6% | 24.3% | 23.9% | 23.0% |
| Operating expenses | $28.8 | $15.9 | $72.3 | $43.7 |
| Operating loss | $(14.3) | $(5.8) | $(36.1) | $(19.8) |
| Net loss | $(14.7) | $(6.2) | $(37.5) | $(20.9) |
| Adjusted EBITDA (non-GAAP) | $(10.0) | $(4.6) | $(27.9) | $(16.9) |
- Q3 revenue grew 35% year over year; nine-month revenue grew 46%. Management attributed growth to more active buyers and increased spending by existing buyers.
- Gross margin improved year over year in both comparison periods. Management cited more accurate platform pricing as order data grew and a larger seller network.
- Operating expenses rose faster than revenue. Q3 sales and marketing was $9.8 million, operations and support $5.8 million, product development $4.4 million, and general and administrative $8.8 million.
- Q3 Adjusted EBITDA margin was (18)%, versus (11)% a year earlier; nine-month margin was (18)%, versus (16)%. Management cited higher costs as it scaled the business.
- Q3 net loss per share was $(0.33), compared with $(1.99) in Q3 2020. The prior-year common-stockholder loss included an $8.8 million deemed preferred-stock dividend, and the weighted-average share count differed substantially following the IPO.
Cash, debt, and liquidity
- At September 30, cash and cash equivalents were $57.8 million, marketable securities were $266.7 million, and current assets totaled $356.1 million. Cash plus marketable securities was approximately $324.5 million.
- Current liabilities were $27.2 million; total liabilities were $29.4 million. The $15.0 million term loan was repaid in July 2021; no short-term debt remained at quarter-end. Operating and finance lease liabilities remained.
- Nine-month operating cash use was $37.4 million, investing cash use $271.6 million, and financing cash provided $306.9 million. Investing outflows principally reflected purchases of marketable securities; financing inflows principally reflected IPO proceeds.
- The July IPO raised approximately $325.3 million net of underwriting discounts and commissions. The company also incurred approximately $4.0 million of other IPO costs and used IPO proceeds to repay the term loan.
- Management stated existing cash and cash equivalents were expected to fund working capital and capital expenditure needs for at least the next 12 months.
Business developments and material changes
- Active buyers reached 26,187, up 61% from a year earlier. Accounts with at least $50,000 of trailing-12-month marketplace spend reached 603, up 67%. Existing accounts generated 95% of Q3 revenue.
- Europe revenue grew to $5.0 million in Q3 from $0.8 million; U.S. revenue was $51.7 million, compared with $41.1 million.
- The IPO converted all outstanding preferred stock into common stock and established Class A and Class B common shares. Class B shares carry 20 votes per share, compared with one vote per Class A share.
- After quarter-end, Xometry announced the acquisitions of Big Blue Saw for stated total consideration of $2.5 million and FactoryFour for $6.3 million, including contingent consideration and stock. Big Blue Saw adds water-jet and laser-cutting capabilities; FactoryFour provides manufacturing production-tracking software.
Outlook, risks, and unusual items
- No specific revenue, earnings, or margin guidance was provided. Management expects expenses in sales and marketing, operations and support, product development, and general and administrative functions to increase in absolute dollars as the business grows; public-company costs are also expected to add to G&A.
- Management said the COVID-19 pandemic had not significantly adversely affected growth to date, but warned its future effects remain uncertain, including possible disruption to buyers’ and sellers’ operations and the broader economy.
- The filing discusses exposure to foreign-exchange movements in Europe and warns that significant inflationary cost pressures might not be fully offset through pricing. The company reported no material change to previously disclosed risk factors.
- Q3 G&A included a $1.2 million expense for donated shares. Other expenses included a $0.3 million debt-extinguishment loss and a $0.2 million unrealized securities loss. Stock-based compensation was $2.3 million for the quarter.
- The company reported no legal proceedings expected to have a material adverse effect, while noting outcomes of ordinary-course claims cannot be predicted with certainty. Management concluded disclosure controls were effective; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Reconcile the marketable-securities balance: the balance sheet and notes report $266.7 million at September 30, while the MD&A liquidity discussion states $226.7 million. The filing text is inconsistent; the reported balance-sheet figure is $266.7 million.
- Assess whether revenue growth, buyer engagement, and seller-network expansion can translate into operating leverage as expenses continue to rise.
- Review the composition and sustainability of Adjusted EBITDA, a non-GAAP measure, alongside GAAP losses and operating cash use.
- Evaluate dilution and voting control, including the 20-vote Class B shares, outstanding options and restricted stock units, and shares reserved for charitable contributions.
- Monitor the post-quarter acquisitions, their contingent consideration, integration, and any resulting costs or benefits.