Good afternoon, everyone, and welcome to JP Morgan's 50th Annual Global Technology, Media and Communications Conference. We appreciate everyone coming out today and are excited to be back in person. I'm Raquel Betesh. I'm a software analyst here in research at JP Morgan, and today I have the pleasure of speaking with Randy Altschuler, the Chief Executive Officer of Xometry. Thank you for being here, Randy. This is your first JP Morgan technology conference as a public company. For those unfamiliar in the audience, can you provide a brief overview of the company? Sure. Good afternoon, everyone, and thank you for having me here at the conference. Xometry is the leading marketplace for custom manufacturing. There's a global manufacturing market which is $35 trillion+, and there's a segment of that market, which now together with our acquisition of Thomas is $2.6 trillion, which involves buyers buying manufacturing from small to medium-sized manufacturers. It's a very inefficient market, lack of price transparency, a very heavily fragmented supplier base. With our artificial intelligence, we're connecting buyers and suppliers of manufacturing in real time. We also have a basket of services for our suppliers to help them grow and better their businesses. Can you elaborate a little bit on where the value lies for both buyers and sellers on the platform, given that it's the two-sided marketplace business model? Yeah. For buyers, and Xometry has a very extensible technology platform. We play in many verticals from aerospace to defense to medical devices, robotics, automotive. For these buyers, it is very difficult for them to find the optimal solution for their manufacturing needs. If they went to four or five different manufacturers with a request for quote, it can sometimes take days or even weeks to get back a response, and the price differential between the RFQs can be hundreds of% off. Likewise, they're going to small to medium-sized manufacturers, which inherently are more risky. With our artificial intelligence, buyers or customers can come to our website and instantly get a price. That price reflects hopefully best in market pricing for them based on the wide network of suppliers we have. We're constantly training our data and growing our network, hopefully always providing better value for our buyers. On the supplier side, these small manufacturers, they have, they're usually landlocked or limited to their local customer base. If you're a manufacturer in Michigan, usually you live and die with the automotive industry, for example. If you're in Houston, Texas, maybe that's with the oil and gas industry. Even if you have open capacity, it's very difficult for you to find the customers outside of your direct region to fill that capacity. As suppliers in Xometry marketplace, they can not only fill all of their open capacity, but they can also optimize the kind of work that they get, because for a supplier, any two different jobs could provide radically different kinds of margins for them, depending on the skills that are required, the equipment required. With Xometry, they're able to get work that better fits the envelope of what they can do. It's more profitable work for them. Then on top of that, we have this basket of supplier services. For example, financial services that help them speed up their cash flow so they can invest in their business. We have other services that help them with their marketing and data solutions, and also the ability to purchase tools and materials, the inputs they need to manufacture at lower prices. We're helping lower their operating costs. For these small businesses, inherently, they tend to have higher operating costs than larger companies. Your TAM is $260 billion as manufacturing industry is one of the largest segments of the global economy, making your TAM one of the largest TAMs in our software universe. To what extent do you believe you can penetrate the market there? Yeah. In our space, it's very unusual because the long tail of the Internet has not touched a lot of these manufacturers. If you're a service provider or a retailer, there are lots of options for you to sell your goods or if you're to sell your services, but that really hasn't happened in manufacturing. We're providing a really unique value proposition for those suppliers. Likewise, for the customers, the shift to digital that's happened in so many other industries hasn't happened in manufacturing either. It's sort of inevitable. It's a secular shift that's happening right now. For these buyers, so many other things are being bought via marketplaces and in e-commerce like manner. It makes sense that manufacturing would have a similar dynamic. We're very confident that we can convince the buyers that, hey, this is an easier, faster, less expensive way for you to purchase manufacturing. Likewise for suppliers, this is a better way for you to fill your capacity and a better way for you to operate your business. They're still gonna be serving one another, but via the Xometry marketplace, we hope to make them both better. I know you touched a little bit on your AI algorithms, but can you elaborate? Do you guys consider that your secret sauce of the business? What do the AI algorithms really mean for the marketplace? Yeah. It certainly is part of our secret sauce. We've got a team of Ph.D.s in everything from computational geometry to other disciplines, and we've developed these models. We're training on thousands of different features on different kinds of parts, different kinds of manufacturing technologies. As we're accumulating data, and we're accumulating millions of points of data now, we're using machine learning, a technique particularly called deep learning, to come up with these algorithms that not only price the parts for the buyers, but also price the parts for the suppliers and optimizes the match between the buyers and the suppliers. That data gets smarter as we accumulate more of it. The more data we get, the more accurate the pricing becomes, the more effective we are with buyers and suppliers. Even as Xometry has grown so quickly since our founding, I co-founded the company in 2013. We opened for business in 2014. We've been growing like a weed. Last year we grew from about $141 million of revenue to $218 million. This year we've guided from $218 million-$392 million, $392 million-$400 million. Even as we've been growing at that rapid rate, you've seen our gross margins increase tremendously as well because the data is getting smarter and smarter. It's very powerful, and we're retraining our data set every week. To the extent there's any inflation in the market or anything's happening, our data set's catching up, and we're providing that real-time pricing transparency or real-time pricing status for both the buyers and the suppliers. Now I think it's important we touch on the macros. Given that manufacturing is a highly cyclical industry, what are your expectations to Xometry's top and bottom line given the current macroeconomic environment? Yeah. First of all, it's a giant industry, and even though I'm really proud that we're gonna be, you know, do up to $400 million this year, and we're the leader, we're still very small versus the overall size of the market. I'm very confident that our, what people would call hypergrowth will continue for the future. As I mentioned earlier, there is a secular shift now to the digital. This is a better solution for buyers and suppliers, and as the leading two-sided marketplace, we are the recipient of that secular shift. You know, we've seen great activity in the marketplace. You know, as we gave guidance for Q2, it was not only great year-over-year guidance, but it was also double-digit sequential growth from Q1- Q2. We actually did our earnings just a few weeks ago for Q1. We actually upped the bottom end of our revenue guidance for the full year, and also increased the range of the gross margins guidance as well. We're seeing great activity, and we can expect that to continue throughout this year and beyond. Following up on that, is there any notion that a slowdown could bring more sellers to the platform as they look to fill gaps in their production schedule? Yeah. I think, to the extent. Again, Xometry has grown through all sorts of environments. We grew pre-COVID and during COVID when entire sectors shut down. The year when we saw full brunt, we went from $80 million to $141 million, so we grew rapidly that year. I'm confident that durable growth will continue in any environment. If there was a recession, I think it would benefit us with both the buyers and the suppliers. For the buyers, in that case, they're gonna be looking for better pricing, and the best way for them to get better pricing is to go to a marketplace at Xometry where we have, you know, that flywheel going in a robust set of suppliers. They're also gonna be concerned about the financial wherewithal of their small to medium-sized manufacturers. For our buyers, for our customers, we're helping them make the products that they need to run their actual businesses, so there's gonna be a flight to safety or surety. Xometry is now a public company, and we have a strong balance sheet, so we provide that good cushion for them against the potential problems that small and medium-sized manufacturers might have in a more difficult environment. Likewise, when you look at the suppliers, just as you pointed out, if they need to fill capacity, their local customer maybe isn't doing so well in their particular industry, maybe there's a slowdown in their industry, they can come to Xometry, and we can fill that capacity for them. We also have those suite of supplier services from our financial services, to our data services and marketing services, that help them manage cash flow and lower their operating costs and grow their businesses. That'd be even more attractive to them in a recessionary environment. In the context of ongoing supply chain challenges, can you talk to us about how the Xometry platform benefits the buyers and, more importantly, the sellers? Yeah. You know, right now, some of the buzzwords are resiliency in your supply chain. You wanna make sure that, particularly for folks who have historically sourced things overseas. Most of what we do, so Xometry is based in the Washington, D.C. area, Maryland. We also are based in Germany and Europe, and we also are opened up in Q1 in China based in Shanghai. Most of what we do is done on continent or in country. Most of what we provide for American customers, North American customers, is done by American manufacturers. Building those local resilient supply chains is increasingly important to people, particularly with supply chain disruptions, geopolitical issues, the effects of COVID, you know, when entire countries are shutting down. Customers who have sole sourced in the past are now, for business continuity reasons, they need to start multi-sourcing or have redundant supply chains. Xometry can give that to them instantly. They don't have to build that on their own. Likewise for suppliers, going back to what happens in a recession or a difficult environment, if their local customer is hurting, there's an issue with their local customer, we can source work from them from other places. Sometimes that's other countries, but sometimes that's also here within the continent of the United States. It's from a different state or a different region of the country. Xometry breaks up their revenue into marketplace revenue and seller services for those who are less familiar. I first wanna touch upon marketplace revenue. In Q1, you provided additional disclosure on marketplace and supplier services. Can you give us a brief overview of the components of revenue and gross margins in each business? Sure. Marketplace revenue is composed of customers coming and buying parts or assemblies from the Xometry marketplace. Our gross margin is effectively the difference between what a buyer will buy the parts from Xometry and how much Xometry pays a supplier to make those parts. That gross margin has grown in Q1 of last year. Last year, we divided Xometry more between. We just had Xometry. We've now broken out separately, but that gross margin has grown effectively almost 500 basis points over the last 12 months. We're continuing to see that gross margin grow as we get more data and as we get more and more active sellers or suppliers in the marketplace. That's our marketplace revenue. Our supplier services revenue has got our financial service products in it. It's got the marketing and data services in it, and it also has our business where we are helping our suppliers procure the inputs, the materials and tools that they need for less money. That had in Q1 a 77.9% of gross margin. Our aggregate gross margin, I think, was 39.3%, 39.4%. We expect to see, you know, continued gross growth in both parts of the business, and particularly in the marketplace side of the business, we continue to expect to see continued accretion of our gross margin. Active buyers have continued to grow in the network, up over 40% year-over-year for the last several quarters. Can you talk about the strength you're seeing here and how we should think about the trend going forward? In that context as well, can you expand on the thought that active buyers serve as a leading indicator for Xometry? Yeah. We've got a very effective customer acquisition model. It starts with the top of funnel for us is usually digital marketing. As you said, last quarter, we added over 2,500 new active buyers. We had, I think, 30,600+ active buyers in the quarter. That's folks who have ordered within the last 12 months, and that number has been growing very nicely. We're continuing to have a nice top of funnel to acquire new buyers. We're also growing very nicely organically within our existing customer base. You're seeing individual engineers referring us to one another or procurement people one another, and we're also doing more enterprise work. Top of funnel's marketing, and then we have a sales team that has a land and expand strategy. Once we've acquired those customers, and particularly when they're larger customers, we're now delving deeper into those accounts to grow the spend of those accounts. Another metric that we report out is accounts with more than $50,000 of spend on an LTM basis. That number actually grew 92% year-over-year in Q1. We added 90 new accounts there. We're seeing some great 90 new accounts sequentially from Q4- Q1, so we're seeing some great growth there as well. Building off of that on, the growth of your larger accounts, can you elaborate on how the larger accounts of $50,000+ help drive stickiness and recurring stream of revenue? Yeah. You know, obviously, the more the customer or the account spending with us, the more entangled we are or embedded we are into that customer. We've been doing some other things that have increased the stickiness. We've now got integrations with our customers' ERP systems, so they can actually purchase from Xometry without even coming to our site. Whether or not they're using SAP or they're using Coupa, they can do what's called a punch out, and that procurement person can buy directly within their ERP system. It gives us a good beachhead within that customer. We also have integrations with the leading CAD programs, Autodesk programs, Dassault's, PTC's programs. That also again makes it very easy for the individual engineer to buy from us without even having to come to our site. They can do it right within their CAD, their CAD software. The other nice thing is we're building those integrations. We're also seeing an increase in number of production orders that we're doing. As customers or accounts become more comfortable with us and as we add more production-level manufacturing technologies to our marketplace, suppliers who can provide things like not only injection molding but die casting and stamping, we're seeing more and more production orders. That's also showing a nice increase in our revenue from those customers. To the extent people wanna download our Q1 earnings deck, we've got a nice slide in there that's got some case studies, and you can see the tremendous growth we've seen in various accounts in various verticals because we're very wide. When we talk about a recession, even when one industry may be weak, we cover so many industries. You can see different examples of where we've grown really strongly over the last few years within these different verticals on the backs of more technologies, more integrations, and more production. When you win with these large enterprise buyers, why do you win? What are the key pieces of your value proposition that are drawing these customers in? Yeah. When you think about a large company, and we work with the largest companies in the world, they're often buying sometimes billions of U.S.$ of manufacturing. There's a segment of it where they have to go to these small, medium-sized manufacturers, and they're dealing with hundreds, sometimes thousands of these small, medium-sized manufacturers. It's very expensive for them to procure these small lots of manufacturing. If they can effectively take that entire spend and run it through the Xometry marketplace and have one throat to choke, and unfortunately it's my throat, but if they can have one throat to choke and they can eliminate a lot of the time and the cost to procure, that's worth a lot for them. Also, I mentioned this earlier, it's also a safer option for them to have. Instead of depending on that small to medium-sized manufacturer for mission-critical things for them, things that they require to deliver to their customers, now they've got a public company with that balance sheet and with the transparency and governance in front of them to stand behind that. That's very powerful for them. With our algorithms, we're also finding them better deals. They don't have to go out and scour the country or the planet to find the best deal. They can, you know, get those great deals just by coming from Xometry. As we've added more suppliers and as we've gotten more efficient, even in today's environment, we're seeing prices for a lot of our parts go down because we're retraining that model every week, and as we're getting more and more efficient, we can give customers better deals. When things are getting more expensive, sometimes they can come to Xometry, and actually it can be cheaper. That's something as we grow and we get more of that flywheel, we hope that will continue. Can you talk a little bit about churn and what trend you're seeing there? Yeah. You know, we went public last year in June, and you can check out in our S-1. We've got some great cohort data that we've been tracking. We actually saw year-over-year a growth in our LTV to CAC, I think of about 20%. Last report, LTV to CAC was 6.1x, which is, you know, great. Best-in-class unit economics. That's really being driven by two things. One thing is our gross profit is growing, so we're becoming more profitable, and that's making each individual customer more valuable for us or more lucrative for us. We're also seeing that none of our cohorts are tailing off. You're looking at, it's sticky and the cohorts continue to order over and over again. As we've been calculating that LTV to CAC, we have some sort of terminal value on when they're gonna extinguish. We haven't seen that. Of all the monthly cohorts we've had since we started our company, we've only had one cohort that is not. All of our cohorts have continued to do well except for one cohort. One monthly cohort from January of 2014. That creates a really nice predictable set of recurring revenue. That's why we were so confident in giving guidance for this year. Even though we're not a SaaS company, we have recurring revenue and that just enables us to manage our business. What are the key drivers for expanding gross margins in your marketplace? Yeah, there are really, as I said, there's sort of two key drivers. One is just more data. Anybody would tell you in the business of machine learning, it's all about the data. The more data we get, the more effective our predictions on price are gonna be. We're like a market maker. We're setting the price for something that is bespoke. It's difficult, like a high yield versus trading munis and high yield. We're creating that, and the more data we get, the more accurate we can be about predicting what that price should be. We're also adding to the features that we're training on. We're training on more and more features, and we're getting more and more data. We get smarter. We make less mistakes. We misprice less. The second thing is we have more active sellers or more active suppliers. The more suppliers we have, we're more likely to get a better outcome for both Xometry, the buyers and the sellers themselves. Those two things, the more data and the more active suppliers, have really contributed to increase in gross margins. We've indicated this year on the marketplace. Gross margins, you'll continue to see those grow. Kind of piggybacking there off of seller growth. Sellers tend to use Xometry to fill gaps in their production schedule. How do you plan to stimulate sellers to view and use Xometry as more of a primary distribution channel? Yeah, we acquired last year a company called FactoryFour, which had a MES system, a manufacturing execution system, that enables suppliers to manage their production, their quality. We actually provided in our latest earnings deck a product release schedule, which I'd encourage people to take a look at. We're gonna be providing a freemium version of that to all the suppliers that we've got. Xometry bought a company called Thomasnet, which has 500,000 listed suppliers. They'll all get this free software to help them manage their production. Most of these suppliers or many of them don't have any system today. They're small manufacturers. They're using spreadsheets, so we hope that will drive adoption. We're also gonna be routing all the opportunities that come from Xometry and our ecosystem through this through this software. They can manage their own work there. We're just trying to get more embedded in their day-to-day work, what's on platform and off platform, and we're also embedding in that FactoryFour software all of our financial services. We're making it really easy, one pane of glass for them to manage all their work, including work that comes from our ecosystem and adding products that they can make them more efficient. To what extent are buyer and seller growth correlated? Since the pricing from the buyer's perspective improves when more sellers compete. You know, we wanna see a healthy growth in both. You know, I think particularly, and you kind of touched upon it earlier, within the buyers and the sellers themselves, suppliers, we also wanna grow our share of wallet within them. We're still a relatively modest portion of their overall capacity or utilization, so we wanna grow that. I think you'll continue to see robust growth in sellers, but you'll also see us do more and more, and have a bigger spend. You could see when you looked at 2020 versus 2021, the average spend per supplier actually grew about 6%. We're gonna grow that network, but we're also gonna go deeper too. If you could speak a little bit to the trends you're seeing in average order sizes, and then how you plan to stimulate larger orders going forward. Yeah. We called out specifically that we've been seeing more and more production orders, and that's giving us great visibility into our revenue this year. We recognize revenue when we ship. But we've gotten those orders, and as we start shipping them, that will obviously drive revenue. That's a really great trend for us. We're seeing those larger orders and that's being driven by some of the things I mentioned before. First of all, we're introducing more manufacturing, more production manufacturing technologies into the marketplace, so we're giving the customer the option to buy the production from us, and we've got more and more options for them. Our land and expand strategy and enterprise strategy is becoming increasingly successful, so we're embedding ourselves within those customers. We're just getting more visibility at the higher ranks, the chief procurement officer and other folks who can make larger decisions versus one-off order decisions. Now we've got people who are responsible for entire books of spend saying, "Hey, this could be a good option for us to push this full amount of spend via the marketplace versus just doing it one transaction at a time. Now I wanna touch on supplier services. It's still early, but how has the traction been so far, particularly with financial services, and how do they help enhance the stickiness of the platform? Yeah, our suppliers are small companies, and cash is king for them. They're, you know, often it's an owner-operator, and a lot of their costs are fixed or upfront, so they're paying off their equipment, they've gotta pay their staff, they gotta pay the materials. Anything you can do to accelerate their cash flow is a huge plus for them. Those are the customers they love. We have a suite of services, including a debit card, where they can get paid upfront for part of it. We have something called Fast Pay, and we have, I think it's called Quick Pay, so they can get paid right after they deliver a job as well. That's been very popular with our suppliers. As we go deeper into this giant supplier network we got with the acquisition of Thomas, these 500,000 suppliers, we expect to see our total payment value rise pretty substantially from that as we get more and more suppliers who can avail themselves of those products. Obviously, that creates stickiness and loyalty. We're also trying to drive those suppliers to bring their own customers into the marketplace, because if they do that, they can take advantage of those financial service products that will help them speed up their cash flow. When should we actually expect supplier services to materially contribute to revenue and your gross margin expansion? Yeah. I, you know, I think it's a decent contributor this year from a revenue perspective. We expect that to be, you know, that will be a nice driver. It obviously helps with the margin as well. I think this year you'll see stronger growth in marketplace than you will in supplier services. We've added a lot of things to make the supplier services easier. We've got self-service options. We've created different price points for things like advertising services that we've got. Different things that I think will start increasing the number of suppliers that are gonna be purchasing our services. Plus, embedding this free software in them just makes it really easy for them to increase their adoption. Can you discuss the Thomas acquisition and what appealed to you the most there, and what does that really add for supplier services in terms of value? Yeah, to give some context, Thomasnet was a 100-year-old company. Think about it like the Google for industrial sourcing of custom parts. It has 500,000 suppliers, has 1.4 million registered users. We bought that company in Q4 of last year. Just to put that into context, they have 1.4 million registered users. Xometry has, we just had 30,600 active buyers. We are focused on converting those Thomas users who Thomas never monetized into Xometry buyers. There's a huge opportunity for continued uplift and growth. That's exciting. You'll particularly see that in the back end of the year. Plus, Thomas has 500,000 suppliers listed on Thomasnet. Xometry last year had 2,003 active suppliers. We're also converting some of those listed suppliers into Xometry suppliers. That will also help increase gross margin and things like adoption of our financial services. There's this huge opportunity here. You know, we think that will just. It's opportunities. It's upside. Our core Xometry business is growing like a weed. We've guided that the marketplace will grow 50%-60% this year, the revenue, and our gross profit from marketplace will grow 75%-80%. Still hyper-growth in that, but supplier services is just a great opportunity to juice that all up. For those that are unfamiliar, can you talk about what the Xometry Everywhere initiative is, and then provide some color on kind of the number of websites once you explain the context? Historically, if you wanted to use our instant pricing engine, which is very unique because it's very hard to instantly price custom manufacturing. I mean, think about it, you're an aerospace company, and you have a custom part for your stuff, and historically, it's taken you forever to get a price. You can come to our site and get it priced instantly. You had to come to our website to get that pricing. We started deploying that pricing engine first in these CAD programs, you know, Autodesk, Dassault, PTC now, and now we've created some software that you can embed it in any website. We started embedding it in websites where engineers like to go and procurement people like to go, because we wanna be the pricing mechanism of record. The same way every time anybody uses Google, that's powerful data for Google. Anytime anybody uses our pricing engine, that's powerful data for us. We're syndicating it out in many places. That's also gonna be, we're gonna use that same technology to embed our instant quoting into Thomasnet, which has millions of visits. That way, it makes it very easy for those Thomasnet 1.4 million registered users to purchase Xometry services right within Thomasnet. They don't even have to come to the Xometry website. On your earnings call, you discussed some exciting new releases in the pipeline coming in Q2, including a freemium offering for your supplier base. Can you talk about the vision and the strategy here? Yeah. Two key releases that you'll see within the next 38 days or whatever, and we'll have some big splash around it. One is on the buyer side. We're gonna embed, just as I was mentioning before, within Thomasnet, we're gonna embed the Xometry instant quoting, so there'll be a buy now option, because Thomasnet was historically an RFQ option. Right alongside the RFQ option, we'll have a buy now option. We're also gonna enable the customer to do the RFQ on platform. The way Thomas used to work is you go to Thomasnet, the buyer would choose, they could choose. They had lots of criteria to choose suppliers they wanted to bid on something. They would launch the RFQ, and it would move all off platform. The supplier would get an email. Everything would happen off platform. We're moving that all on platform. We're gonna enable the customer, the potential buyer to communicate, interact, and to transact on the Thomasnet site. Right alongside that, they'll have the buy now option with the instant pricing. That should be very successful in not only converting some of those 1.4 million registered Thomas users into Xometry customers, but it will help us monetize those RFQs, which they never got monetized before with Thomas at Thomasnet. That's really powerful. The second thing is, and I mentioned this earlier, we're gonna be giving out this software to all the suppliers for free to manage the work they're getting from Thomas. All those RFQs, instead of them going to RFQ, instead of them going to email, will now go into this manufacturing execution system, this free software we're giving them. All the work they get from Xometry will come into this, and they can manage their own work. It'll be free, one pane of glass, and we'll be giving them our financial services embedded in that. It just gives us a very inexpensive distribution to tens of thousands of manufacturers, virtually overnight, and provides a lot more engagement. We're in the last minute here, but if you could speak a little bit to your long-term growth outlook, and then I know you guys had strong international revenue growth, 146% year-over-year, and how that kind of factors into your long-term outlook as well. Xometry will continue to grow like a weed. $80 million, $141 million, $218 million. This year, we've got $392 million-$400 million. I expect our growth to continue to be in a hyper level for many years to come. We are the largest. I think we're the only two-sided marketplace, or at least I could say the leading and largest two-sided marketplace in this space, and there's still so much room to grow. We work with the largest companies in the world, which alone have hundreds of millions of dollars of spend. As we embed, as our land and expand strategy grows, we'll get more and more of their spend. Likewise, we have this huge supplier base. As we embed deeper into them, and they run more and more of their business through us, we can grow that supplier services, and monetize that and gain stickiness there. International will continue to be an important part of it. Europe has grown like a weed. We've now launched in Asia, and like other marketplaces, we expect at some point that to be up to 40% of our overall revenue. Randy, thank you so much for joining us. It's been a pleasure. Thank you everybody for coming out today. Hope you enjoy the rest of the conference.