Xometry, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Xometry operates an online marketplace connecting buyers with manufacturing suppliers and also provides supplier services, including advertising, software, supplies and financial products.
Financial results and liquidity
Amounts below are in millions of dollars except per-share data and percentages.
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $103.6 | $56.7 | $282.9 | $151.2 |
| Gross profit | $40.9 | $14.5 | $111.5 | $36.2 |
| Gross margin | 39.5% | 25.6% | 39.4% | 23.9% |
| Operating loss | $(15.2) | $(14.3) | $(49.8) | $(36.1) |
| Net loss | $(15.0) | $(14.7) | $(51.6) | $(37.5) |
| Net loss per share, basic and diluted | $(0.32) | $(0.33) | $(1.10) | $(1.87) |
| Adjusted EBITDA loss (non-GAAP) | $(6.5) | $(10.0) | $(27.5) | $(27.9) |
- Q3 revenue grew 83% year over year; nine-month revenue grew 87%. Marketplace revenue was $84.1 million in Q3 and $224.1 million for nine months; supplier services revenue was $19.5 million and $58.8 million, respectively.
- Management attributed growth to more active buyers and increased spending by existing accounts, as well as Thomas acquisition-related supplier services revenue. Q3 marketplace gross margin was 30.4% and supplier services gross margin was 78.5%; management cited improved pricing efficiency and greater supplier competition.
- Q3 GAAP net loss was broadly similar to the prior year despite substantially higher revenue. For nine months, GAAP net loss widened, while operating loss increased. Management reported improved Adjusted EBITDA margin: (6)% in Q3 versus (18)% and (10)% for nine months versus (18)%, respectively. These are non-GAAP measures and should be considered alongside GAAP results.
- Operating cash use was $45.5 million for nine months, compared with $37.4 million in 2021. Investing cash use was $291.3 million, chiefly reflecting $281.9 million of marketable-security purchases and $9.6 million of property and equipment purchases. Financing provided $281.5 million, mainly from convertible notes.
- At September 30, cash and cash equivalents were $30.5 million and marketable securities were $310.7 million, totaling $341.2 million, versus $116.7 million at December 31, 2021. Current assets were $409.7 million and current liabilities $65.0 million.
- The company reported $287.5 million principal amount of unsecured 1% convertible senior notes due February 2027; carrying value was $279.4 million. Initial conversion price was approximately $56.11 per share. The filing reports no other outstanding term loan balance.
Material changes and business developments
- Thomas, acquired in December 2021, contributed advertising and supplier-services revenue in 2022; therefore, comparisons with 2021 reflect a changed consolidated business. Thomas accounted for $252.0 million of reported goodwill at acquisition; goodwill was $260.0 million at September 30, 2022.
- Active buyers reached 36,789, up 40% year over year. Accounts with trailing-twelve-month marketplace spend of at least $50,000 reached 974, up 62%. Existing accounts generated 96% of Q3 revenue.
- The Industrial Buying Engine launched in Q2 2022, enabling sourcing from Thomasnet.com’s supplier network. Workcenter, also introduced in Q2, combines supplier workflow, job-board and financial-services functions.
- Nine-month operating expenses rose to $161.3 million from $72.3 million, with higher sales and marketing, operations and support, product development, and general and administrative costs. Stock-based compensation was $14.0 million for the period.
Outlook, risks and contingencies
- The filing provides no specific quarterly or full-year revenue or earnings guidance. Management stated that cash, cash equivalents and marketable securities should support working capital and capital expenditure needs for at least the next 12 months.
- Management expects continued investment in sales and marketing, operations and support, product development and general and administrative functions; it also noted that public-company costs and expenses may increase. The filing does not establish a timeline to profitability.
- Risks discussed include macroeconomic uncertainty, COVID-19 effects on buyers and suppliers, geopolitical tension including Russia’s invasion of Ukraine, potential inflationary costs, foreign exchange exposure, competition, and the ability to attract and retain buyers, suppliers and employees. The company reported no material change to previously disclosed risk factors.
- Unusual or notable items included $1.7 million of nine-month unrealized losses on marketable securities, $0.4 million of asset impairments, contingent-consideration revaluation expense related to acquisitions, and a $1.9 million one-time non-cash benefit to sales and marketing expense related to Thomas purchase accounting.
- The company reported no material legal proceedings or material developments in ongoing proceedings; it cautioned that outcomes of ordinary-course claims cannot be predicted with certainty.
Key facts for investors to verify
- How much reported growth is organic marketplace growth versus revenue added through Thomas, and how supplier-services revenue and margins develop.
- Whether marketplace gross-margin gains persist as order volume, supplier mix and pricing conditions change.
- Cash burn, working-capital needs—particularly the increase in accounts receivable—and the duration of the stated liquidity runway.
- The potential dilution or cash repayment implications of the $287.5 million convertible notes, including conversion conditions and the 2027 maturity.
- The recurring cost of stock-based compensation and operating-expense growth relative to revenue, alongside both GAAP losses and non-GAAP measures.
- Final Thomas acquisition working-capital settlement and any related goodwill or purchase-accounting adjustments; the filing said settlement was expected in Q4 2022 and could be material.