Xometry, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Xometry operates a technology-enabled marketplace connecting buyers with manufacturing suppliers, plus supplier services. Figures below are in U.S. dollars; financial statement amounts are in millions unless noted.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Change |
|---|---|---|---|
| Revenue | $118.9 | $103.6 | +15% |
| Gross profit / margin | $46.2 / 38.9% | $40.9 / 39.5% | Profit +13%; margin −0.6 points |
| Operating loss | $(13.2) | $(15.2) | Loss narrowed |
| Net loss | $(12.0) | $(15.0) | Loss narrowed |
| Net loss per share | $(0.25) | $(0.32) | Improved |
| Adjusted EBITDA loss | $(4.2) | $(6.5) | Non-GAAP; improved |
Q3 marketplace revenue rose 22% to $102.5 million; supplier services revenue fell 16% to $16.5 million. Marketplace gross margin improved to 31.1% from 30.4%; supplier-services margin rose to 87.2% from 78.5%, partly reflecting the exit from lower-margin supplies. Overall gross margin declined as revenue mix shifted.
For the first nine months, revenue increased 19% to $335.3 million and gross profit rose 16% to $129.2 million. Net loss widened to $56.9 million from $51.6 million, while operating loss grew to $61.0 million from $49.8 million. Adjusted EBITDA loss improved to $24.6 million from $27.5 million (non-GAAP).
- Cash flow: Operating cash use was $28.6 million for the nine months, versus $45.5 million a year earlier. Investing activities provided $6.2 million, mainly reflecting $30.0 million of marketable-security sales, partly offset by $12.1 million of property and equipment purchases and $3.3 million for Tridi. Financing provided $1.4 million.
- Liquidity: Cash and cash equivalents were $44.4 million and marketable securities were $232.4 million at September 30, totaling $276.8 million. Management stated these resources should fund working capital and capital expenditures for at least the next 12 months and over the long term.
- Debt: $287.5 million principal amount of unsecured 1% convertible notes due February 2027; carrying value was $281.3 million. Effective annual interest rate was approximately 1.6%. Notes are convertible subject to specified conditions and have a stated initial conversion price of approximately $56.11 per share.
- Balance sheet: Total assets were $700.5 million and total liabilities $363.6 million. Accounts receivable was $64.0 million, with a $2.1 million credit-loss allowance.
Material changes and operating metrics
- Active buyers increased 43% year over year to 52,467; accounts with at least $50,000 of trailing-12-month marketplace spend increased 26% to 1,223. Existing accounts generated 96% of Q3 revenue.
- Active paying suppliers declined 2% to 7,415, primarily due to the supplies-business exit; excluding supplies, the count increased 4% to 7,337.
- International revenue grew to $15.5 million in Q3 from $8.7 million; U.S. revenue was $103.4 million versus $94.8 million.
- In January, Xometry acquired Turkish marketplace Tridi for approximately $5.0 million of fair-value consideration, including contingent consideration, expanding its European capabilities and access to Turkey.
Outlook, commentary, and risks
- No specific revenue, earnings, or margin guidance is provided. Management expects to continue investing in sales and marketing, operations and support, and product development, while expenses may fluctuate.
- Management attributed marketplace margin improvement to its AI-enabled pricing, more order data, and broader supplier selection. It cited macroeconomic uncertainty, interest rates, geopolitical tensions, inflation, and potential reductions in customer spending as risks to growth and results.
- In Q2, the company abandoned or ceased using certain office locations and recorded an $8.7 million one-time lease expense; it remains obligated to pay rent under those leases. Nine-month restructuring costs were $0.7 million following a workforce reduction of approximately 4% in May. Exiting the U.S. supplies business resulted in $0.6 million of closure costs.
- Controls: Disclosure controls were not effective as of September 30, 2023 because of a material weakness in internal control over financial reporting, associated with risk assessment and process-level controls, primarily for revenue and cost of revenue following the Thomas acquisition. Remediation steps were underway but the weakness was not yet considered fully remediated.
- The company reported no material changes to previously disclosed risk factors and no material legal proceedings for the period. It cautions that forward-looking statements are subject to risks and actual results may differ.
Important facts for investors to verify
- Whether remediation of the material weakness is completed and controls operate effectively.
- Whether marketplace growth and margin gains continue, and whether supplier-services revenue stabilizes after the supplies exit.
- Operating cash use, receivables and collections, and the sustainability of the $276.8 million cash and marketable-securities balance against ongoing losses and investment needs.
- Potential dilution or cash repayment implications of the 2027 convertible notes, including conversion and repurchase terms.
- The ongoing costs and cash obligations of abandoned leases, restructuring, and the Tridi contingent consideration.
- How much reported and adjusted performance depends on non-cash compensation and other exclusions from non-GAAP measures.