Xometry, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; financial statements are unaudited. Xometry operates a global online marketplace connecting buyers with manufacturing suppliers, alongside supplier services including advertising, supplies, financial products and software.
Financial and operating results
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $105.3 million | $83.7 million |
| Gross profit / margin | $39.4 million / 37.4% | $32.9 million / 39.4% |
| Operating loss | $(19.8) million | $(19.0) million |
| Net loss attributable to common stockholders | $(18.3) million; $(0.38) per share | $(20.0) million; $(0.43) per share |
| Net cash used in operating activities | $(16.5) million | $(24.3) million |
| Adjusted EBITDA loss (non-GAAP) | $(11.8) million; 11% of revenue | $(12.7) million; 15% of revenue |
Revenue increased 26%, primarily from marketplace revenue, which rose 35% to $86.7 million. Supplier services revenue declined 3% to $18.6 million. Marketplace gross margin improved to 28.8% from 27.4%; supplier services gross margin declined to 77.4% from 79.3%. Overall gross margin fell as cost of revenue grew faster than revenue.
Sales and marketing expense was $22.4 million, operations and support $12.6 million, product development $8.1 million, and general and administrative expense $16.0 million. Operating expenses increased to $59.2 million from $51.9 million. Higher interest and dividend income contributed to the narrower net loss, while operating loss widened.
Business metrics: active buyers increased 46% to 44,716; accounts with at least $50,000 of last-twelve-month marketplace spend increased 40% to 1,109; active paying suppliers increased 11% to 7,621. Existing accounts generated 96% of quarterly revenue.
Balance sheet, liquidity and debt
At March 31, 2023, cash and cash equivalents were $39.7 million and marketable securities were $256.5 million, totaling $296.2 million. Cash and cash equivalents declined from $65.7 million at year-end 2022. Current assets were $372.8 million and current liabilities $64.8 million. Total assets were $724.7 million.
The company reported $287.5 million principal amount of unsecured convertible notes due February 2027, with a $280.4 million carrying value. The notes bear 1% coupon interest and have an initial conversion price of approximately $56.11 per share. Management believes available cash and marketable securities are sufficient for working capital and capital expenditure needs for at least the next twelve months.
Investing cash outflow was $10.0 million, including $4.2 million for property and equipment and internal-use software, $3.3 million for the Tridi acquisition, and $2.7 million for marketable securities. Financing cash inflow was $0.5 million, mainly from option exercises.
Changes, outlook and notable items
- Marketplace growth and improved marketplace margin were partly offset by lower supplier services revenue and lower supplier services margin.
- On January 2, 2023, Xometry acquired Tridi Teknoloji A.S. in Turkey for access to the Turkish market and supplier network. Preliminary purchase accounting included $4.3 million of goodwill and contingent consideration with an initial fair value of $0.9 million.
- The company provided no specific revenue or earnings guidance. Management expects to continue investing in sales and marketing, operations and support, product development, and general and administrative functions, while noting near-term expense fluctuations are possible.
- Management cited macroeconomic uncertainty, inflation, higher interest rates, banking-market disruptions, the Russia-Ukraine war and the pandemic as potential headwinds to customer spending and business results. The filing says inflation had not materially affected results to date, but cost increases may not be fully offset by pricing.
- Disclosure controls and procedures were deemed ineffective due to an unremediated material weakness in internal control over financial reporting, primarily involving risk assessment and process-level controls for revenue and cost of revenue following the Thomas acquisition. Remediation steps began in Q1; management said controls require further testing before the weakness can be considered remediated.
- The company reported no material legal proceedings or material changes to previously disclosed risk factors. A 2022 workforce reduction of approximately 6% was largely paid by March 31, 2023, with $0.3 million of related costs remaining accrued.
Most important facts for investors to verify
- Whether revenue growth, active-buyer expansion and marketplace margin improvement continue, and whether supplier services revenue and margin stabilize.
- Operating cash burn and the pace of cash depletion, including whether the $296.2 million cash-and-securities balance remains sufficient as management expects.
- Progress in remediating and testing the material weakness in financial reporting controls.
- Potential dilution or cash obligations associated with the 2027 convertible notes, contingent acquisition consideration and outstanding equity awards.
- Tridi integration and performance, and exposure to macroeconomic, foreign-currency and inflation-related risks.