Xometry, Inc. — Q2 2021 Form 10-Q Summary
Business context and reporting period
Xometry operates an AI-enabled marketplace connecting buyers with a network of manufacturers for on-demand parts and assemblies. This unaudited filing covers the quarter and six months ended June 30, 2021; financial statement amounts below are in millions of dollars unless otherwise noted.
Financial and operating performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $50.6 | $34.8 | $94.5 | $61.5 |
| Gross profit | $11.9 | $8.3 | $21.7 | $13.6 |
| Gross margin | 23.5% | 23.8% | 23.0% | 22.2% |
| Operating expenses | $23.7 | $14.0 | $43.6 | $27.7 |
| Operating loss | $(11.8) | $(5.7) | $(21.8) | $(14.1) |
| Net loss | $(12.3) | $(6.1) | $(22.8) | $(14.7) |
| Adjusted EBITDA, non-GAAP | $(9.1) | $(4.8) | $(17.9) | $(12.3) |
- Q2 revenue grew 45% year over year; first-half revenue grew 54%. The company attributed growth to more active buyers and higher spending by existing accounts. Active buyers rose 66% year over year to 23,942 at June 30; 95% of Q2 revenue came from existing accounts.
- Q2 operating expenses increased 69% year over year, faster than revenue. Q2 Adjusted EBITDA margin was (18)% versus (14)%; first-half margin improved to (19)% from (20)%.
- U.S. revenue was $47.2 million in Q2 and $88.5 million for the first half; Europe revenue was $3.4 million and $6.0 million, respectively. Europe revenue rose from $0.6 million and $1.1 million in the comparable periods.
- Cash and cash equivalents were $37.4 million at June 30, down from $59.9 million at December 31, 2020. Current assets were $92.9 million and current liabilities were $73.4 million.
- For the first half, operating cash flow was $(20.6) million, investing cash flow $(2.7) million, and financing cash flow $0.8 million. Capital expenditures were $2.7 million.
- At June 30, short-term debt, including accrued end-of-term fees, was $15.9 million. The $15.0 million principal term loan carried an 8.7% stated rate. After quarter-end, the company repaid the loan for $16.2 million using IPO proceeds; it expected to record an approximately $0.3 million extinguishment loss.
Material changes versus the prior comparable period
- Revenue growth and higher gross profit accompanied continued net losses. Q2 gross margin slipped 0.3 percentage points year over year, while first-half gross margin improved 0.8 percentage points.
- Q2 sales and marketing rose 73%, operations and support 73%, product development 40%, and general and administrative 89%. Management cited growth investment, hiring, higher stock-based compensation, and public-company preparation costs.
- Stock-based compensation was $2.5 million for the first half, versus $0.4 million a year earlier.
- Accounts receivable increased to $21.4 million from $14.6 million at year-end; accrued expenses increased to $39.2 million from $13.6 million, including accrued IPO costs.
Outlook, commentary, risks, and unusual items
- The company closed its IPO on July 2, 2021, selling 7,906,250 Class A shares at $44 per share and receiving approximately $325.3 million in net proceeds. Management said existing cash and IPO proceeds were expected to fund working capital and capital expenditure needs for at least 12 months.
- No specific revenue or earnings guidance was provided. Management expects absolute operating expenses to increase as the business grows and anticipates added public-company costs. It described potential long-term cost-of-revenue leverage from greater seller network liquidity and improved pricing efficiency.
- COVID-19 had not significantly adversely affected business growth to date, but management warned that its ongoing and longer-term effects remain uncertain, including possible disruption to buyers, sellers, and supply chains.
- Key disclosed risks include continued losses and uncertain path to profitability; ability to attract and retain buyers and sellers; dependence on third-party manufacturers and shipping; quoting and quality-assurance exposure; competition; cybersecurity, privacy, and platform availability; regulatory and international operating risks; and growth execution.
- The IPO converted 27.8 million preferred shares into Class A shares. The co-founders exchanged 2.7 million Class A shares for Class B shares, which carry 20 votes per share; the filing states the co-founders held approximately 56.2% of voting power after the IPO.
- Management reported disclosure controls were effective and no material change to internal control over financial reporting during the quarter. The company reported no legal proceedings expected to have a material adverse effect.
Most important facts for investors to verify
- Whether rapid revenue growth can continue and translate into improving gross margins and operating leverage, given rising operating expenses and persistent losses.
- Cash burn, receivable collection, and working-capital requirements against the IPO proceeds and management’s stated liquidity runway.
- Completion and accounting treatment of the July debt repayment, including the anticipated extinguishment loss.
- How IPO-related share issuance, equity compensation, and the dual-class voting structure affect dilution and public-stockholder influence.
- Exposure to COVID-19-related disruption, third-party manufacturing and shipping, product quality, and platform or data-security incidents.