Xometry, Inc. — Q2 2023 Form 10-Q
Business context and period. Xometry operates an online marketplace connecting buyers with manufacturing suppliers, alongside supplier services including advertising and software. This unaudited filing covers the quarter and six months ended June 30, 2023; comparisons are with the corresponding 2022 periods. Amounts below are in U.S. dollars unless stated otherwise.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $111.0 million | $95.6 million | $216.3 million | $179.3 million |
| Gross profit / margin | $43.6 million / 39.2% | $37.7 million / 39.4% | $82.9 million / 38.3% | $70.6 million / 39.4% |
| Operating loss | $28.1 million | $15.6 million | $47.8 million | $34.6 million |
| Net loss | $26.6 million | $16.5 million | $44.9 million | $36.5 million |
| Net loss per share, diluted | $0.55 | $0.35 | $0.94 | $0.78 |
| Cash used in operating activities | Not stated for quarter | Not stated for quarter | $22.6 million | $34.2 million |
- Revenue mix: Q2 marketplace revenue rose 24% to $93.5 million; supplier services revenue fell 13% to $17.5 million, primarily following the U.S. supplies-business exit. For the first half, marketplace revenue grew 29% to $180.2 million while supplier services declined 8% to $36.1 million.
- Margins and expenses: Q2 marketplace gross margin improved to 31.7% from 29.2%; supplier-services margin was 79.8% versus 77.9%. Consolidated Q2 gross margin was nearly flat year over year. Operating expenses increased 34% to $71.6 million, including higher general and administrative expense.
- Non-GAAP measures: Q2 Adjusted EBITDA loss was $8.7 million versus $8.3 million; margin improved to negative 8% from negative 9%. Non-GAAP net loss was $6.6 million versus $8.4 million. For the first half, Adjusted EBITDA loss was $20.4 million versus $21.0 million, and Non-GAAP net loss was $16.4 million versus $21.0 million. These are company-defined measures, not substitutes for GAAP results.
- Liquidity and debt: At June 30, cash and cash equivalents were $56.7 million and marketable securities were $229.4 million, totaling $286.1 million. Current assets were $364.8 million and current liabilities $69.0 million. The company had $287.5 million principal amount of unsecured convertible notes due 2027, with a $280.8 million carrying value and 1% coupon. Management said existing cash and marketable securities should fund working capital and capital expenditure needs for at least the next 12 months.
- Cash flows: First-half investing activities provided $12.7 million, including $30.0 million of marketable-security sale proceeds; purchases of property and equipment were $8.5 million and the Tridi acquisition used $3.3 million net of acquired cash. Financing activities provided $1.1 million, primarily from option exercises. Cash and cash equivalents declined $8.9 million from year-end.
Changes, outlook and risks
- Revenue grew 16% in Q2 and 21% in the first half, driven by marketplace activity. Active buyers rose 44% year over year to 48,294; accounts with at least $50,000 in trailing-12-month marketplace spend rose 30% to 1,159. Existing accounts generated 96% of Q2 revenue.
- Management attributed marketplace margin improvement to pricing efficiency, its data-driven platform and a larger supplier network. It gave no specific numerical revenue or earnings guidance in the provided filing text.
- Q2 included an $8.7 million one-time lease-abandonment charge after the company ceased using certain offices; it remains obligated for rent under those leases. The company also recorded $0.7 million of restructuring costs following a workforce reduction of approximately 4%, and $0.6 million of costs to exit its U.S. supplies business.
- The January 2023 acquisition of Turkey-based Tridi expanded marketplace access and supplier capabilities in Turkey; preliminary goodwill recorded was $4.8 million.
- Management cited macroeconomic uncertainty, including inflation, interest rates and geopolitical events, as risks that could affect customer spending and costs. International operations also expose results to foreign-exchange movements.
- Control issue: Disclosure controls were assessed as ineffective at June 30, 2023 due to an unremediated material weakness in internal control over financial reporting, primarily involving risk assessment and controls for revenue and cost of revenue associated with the Thomas acquisition. Remediation steps were underway but had not operated long enough to be considered fully effective.
- The filing reported no material changes to previously disclosed risk factors and no material legal proceedings for the period.
Important facts for investors to verify
- Whether marketplace growth and improving marketplace gross margin persist, and how the declining supplier-services revenue affects the revenue mix.
- Progress and testing results for remediation of the material weakness in financial reporting controls.
- Cash consumption, capital expenditure needs and liquidity relative to the 2027 notes, including conversion and repurchase provisions.
- The ongoing cash and expense effects of abandoned leases, restructuring and the supplies-business exit.
- How much of reported losses and adjusted results reflects recurring operations versus excluded or unusual items; review the company’s non-GAAP reconciliations and definitions.