Q2 2023 Xometry Inc Earnings Call
Good day and thank you for standing by welcome to the dollar tree to 'twenty, two 2023 earnings call.
Time, all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you need to press Star one one on your telephone you will hear an automated message advisor had this race to withdraw your question. Please press star one again, please be advised today's conference is being record.
I would now like to hand, the conference over to your Speaker today Shao Lee Vice President of Investor Relations. Shawn. Please go ahead.
Good morning, and thank you for joining us on geometries Q2, 2023 earnings call. Joining me are Randy I'll Chiller, our Chief Executive Officer, and Jim Rallo, Our Chief Financial Officer.
During today's call, we will review our financial results for the second quarter of 2023 and discuss our guidance for the third quarter and full year 2023.
During today's call, we will make forward looking statements, including statements related to the expected performance of our business future financial results strategy long term growth and overall future prospects such statements maybe identified by terms such as believe expect intend and may.
These statements are subject to risks and uncertainties, which could cause them to differ materially from actual results.
Information concerning those risks is available in our earnings press release distributed before the market opened today.
And in our filings with the U S Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2022, and our Form 10-Q for the quarter ended June 32023 that will be filed later today.
We caution you not to place undue reliance on forward looking statements and undertakes no duty or obligation to update any forward looking statements as a result of new information future events or changes in our expectations. We'd also like to point out that on today's call. We will report GAAP and non-GAAP results. We use these non-GAAP financial.
<unk> internally for financial and operating decision, making purposes and as a means to evaluate period to period comparisons.
non-GAAP financial measures are presented in addition to and not as a substitute or superior to measures of financial performance prepared in accordance with U S. GAAP.
To see the reconciliation of these non-GAAP measures. Please refer to our earnings press release distributed today and our Investor presentation, both of which are available on the investors section of our website at investors that geometry dot com.
A replay of today's call will also be posted on our website.
With that I'd like to turn the call over to Randy.
Thanks, Shawn good morning, everyone and thank you for joining us for our Q2 2023 earnings call in.
In Q2, we had the highest revenue and gross profit and geometry history, beating our previous highs from Q1 of this year. In addition, we continued to improve our operating leverage reducing our adjusted EBITDA loss in Q2 from Q1 by 26% or $3 $1 million.
Let's start with revenue, we grew revenue, 16% year over year, including stronger than expected, 24% year over year growth in marketplace revenue. The underpinnings of this growth include 44% year over year growth in active buyers as well as existing accounts contributing 96% of the marketplace revenue in Q2.
Q3 has started strong with continued momentum in marketplace growth, we expect marketplace growth of 30%, 33% in 2023 in.
In addition to excellent order growth, we're seeing strength in large orders, including the largest multi year production order in our history.
Next is gross profit we grew gross profit by 16% year over year, including strong 34% growth year over year and marketplace gross profit.
Marketplace gross margins were 31, 7%, an all time high by 130 basis points and an increase of 290 basis points from Q1.
Supplier services gross margins were 79, 8%, an all time high by 50 basis points and an increase of 240 basis points from Q1.
In the second half of 2023, we expect the gross margins growth marketplace and supplier services to be higher than those in the first half of the year.
Finally, as our adjusted EBITDA.
As I noted earlier in Q2, we continued to improve our operating leverage reducing our adjusted EBITDA loss from Q1 by 26% or $3 $1 million.
As a result of higher revenue and gross profits and cuts that we've been making in our fixed costs as our CFO , Jim Rallo will discuss further in his remarks in Q2, we reduced our workforce by approximately 4% and consolidated our office space combined with reduction in force. We ended Q1, our operating leverage is improving.
In Q3, we expect to see further leverage as we continue to reduce fixed cost and shift more of our operating expenses to be commensurate with our revenue and gross profit.
Using AI and machine learning zama trees, empowering our 48000 plus customers to build parts of their critical components and next generation industries from satellites and rockets to medical devices to electric vehicles to robotics.
Equally important our digital marketplace and suite of cloud based solutions are enabling the long tail of the internet to finally reach thousands of small and medium sized manufacturers in the United States and around the world.
For our marketplace, our AI powered algorithms generate instant prices and lead times and optimize the match between buyers and suppliers.
Commentary helps buyers significantly reduce their time to market and strengthen their supply chains.
<unk>, we help small and medium sized manufacturers still there capacity with work that can boost their growth and profitability.
Over the past few years, we've been rapidly growing our network and expanded our marketplace globally at.
At the same time, we've made significant investments in product development and technology infrastructure and selective acquisitions.
We now offer tools to digitize work for both buyers and suppliers as well as provide software and information for customers to improve decision, making and increase efficiency.
With our market, leading position and increasingly global footprint and a total addressable market of two trillion dollars. We expect to continue to grow rapidly for many years to come.
In Q2.
Revenue increased 16% year over year to $111 million Q.
Q2 marketplace revenue was $93 5 million, 24% year over year growth.
We saw strong demand across many verticals, including general manufacturing.
Energy Aerospace and robotics.
<unk> was strong across all key processes in particular injection molding.
Recent investments in technology people and processes have sharpened our injection molding offering and we are beginning to reap the fruits of these efforts with increasing conversion rates and expanding pipeline of business.
Supplier services revenue was $17 $5 million down 13% year over year.
In May we exited the supply as part of our U S supplier services segment, which reduced revenue by $1 $7 million on a year over year basis in Q2.
This move enhances supplier services gross margin and improves our operating leverage going forward.
Jim will outline in more detail the impact of this move later in the call.
Within supplier services, our core marketing services revenue remained stable and we are expanding the advertising ecosystem on our platform.
Gross profit increased 16% year over year to $43 $6 million driven by 34% growth in marketplace gross profit.
Q2 marketplace growth profit increased 19% quarter over quarter.
AI is at the heart of our operations, allowing our marketplace to learn from every interaction.
Our machine learning algorithms gives us unique insight into three new design data and other important variables that are critical to providing accurate and instinct quotes for an ever expansive universal parts processes and finishes as well as particularly complicated multi chip part jobs.
Additionally, we continue to rapidly expand our supplier base, enabling our AI to provide the optimal match for both our buyers and suppliers.
These are the critical drivers of our marketplace gross profit growth.
Active buyers increased 44% year over year to 48294.
We are delivering strong active buyer growth both in the U S and internationally.
Since Q1, we've increased our marketing efficiency in part because of our strong growth in organic search we are balancing our advertising advancements against profitability goals.
Active paying suppliers grew 5% year over year in Q2 2023 to 7553 as we continue to build out the Thomas marketing ecosystem, including growth in self serve customers.
Existing the business of selling tools and materials impacted year over year growth of active paying suppliers by approximately 300 basis points.
International revenue grew 96% year over year, driven almost entirely by the growth in our European business.
International revenue grew 36% quarter over quarter, driven by strong growth in existing European markets.
The progress we are making in the U K the.
The same time, we continue to invest in our China and Turkish platforms.
In Q2, we made significant progress on our five point strategic plan that we outlined in early 2023.
As a result, we again delivered strong sequential growth in marketplace revenue marketplace gross margins and reduced our adjusted EBITDA losses.
For the second half of 2023, we expect to remain in strong growth mode and deliver a healthy marketplace revenue marketplace gross profit growth and improving operating leverage.
Here's a brief update on our five point strategic plan.
One.
We refocused sales efforts and our top 200 accounts, which represented approximately 50% of 2022 U S marketplace revenue the.
The collective stand that these 200 accounts on manufacturing far exceed cemeteries current marketplace revenue.
In early 2023, we redirected salespeople and customer support to them.
Given the higher spend we have with these accounts and the potential to grow that spend significantly in the years to come we are pushing deeper and wider into them.
Accounts are increasingly engaging us to support the production business and to manage their tail spend.
While the sales cycle for these efforts are longer the potential spend from these transactions is significant.
In late Q2, we expanded the functionality of the geometry platform with team Center.
Teen Center allows teams of engineers and procurement professionals within an organization to collaborate and manage manufacturing supply chain projects and geometries marketplace team.
Team Center moves as amatory marketplace from a focus on individual buyers and individual parts to teens managing supply chain projects.
<unk> Center provides a suite of tools that enables customers to increase productivity and efficiency by providing real time order status and other data across the organization.
In early Q3, we began beta testing with some large enterprise customers. The early feedback is positive and we expect to enable this functionality across our top 200 premium accounts in coming months.
<unk> team center provides the opportunity to improve cross selling and engagement with our top accounts.
Western Norris has joined <unk> as our senior Vice President of Enterprise sales.
<unk> had strong enterprise sales experience most recently as the head of strategic and enterprise sales at Zoom info.
Additionally, west in several years at Salesforce, including leading the large enterprise business in industrial technology, where he built out the sales force practice in the manufacturing sector.
Two in.
In Q2, we made further progress expanding our marketplace menu as we grow the number of processes materials and finishes we can offer our customers. We are increasingly able to serve as their one stop destination.
In Q2, we expanded the AI powered zoometry instant quoting engine to include instant quoting of inserts multi part assemblies and expanded sheet cutting processes.
The enhanced features allow buyers to instantly get pricing and lead times on C&C cheap mental and sheet cut parts with standard inserts. While also analyzing multi part assemblies further accelerating commentaries assembly production work.
This expansion also delivers expanded sheet cutting options to crude a wider array of metal composite and rubber materials summit.
Commentary sheet cutting service can cut a variety of materials using the latest laser and water jet cutting technologies.
Three we continue to expand aggressively internationally, we delivered strong growth across Europe with increasing brand awareness. Additionally, customers and orders are ramping at a solid pace and recently launched markets in the U K and Turkey.
In Q2, Vomitory Asia in collaboration with Alibaba Group 16, 88, Dot Com launched our instant quoting technology and 16 88, b to B wholesale marketplace.
<unk> AI powered instant quoting engine is the sole provider of real time pricing and lead times for custom parts on 16 88 Dot com.
Product development efforts continue to further embed the symmetry technology into the customer journey, including the widely used 16 88 mobile app.
<unk> <unk> dot UK and <unk> Dot Asia, we've leveraged cemetery its core technology to provide localized marketplaces in 13 different languages with networks of suppliers across Europe , and Asia as well as North America.
For <unk>.
In Q2, we introduced enhanced and continued to drive adoption of new products, including the team Center work center and industrial buying engine platforms, increasing our footprint with both buyers and suppliers and enabling us to scale cost effectively.
For our suppliers, we continue to enhance work center the SaaS like operating system that is the digital foundation for manufacturers.
In Q2, we rolled out support for custom production workflows and improved notification experience.
In Q3, we will continue to expand and work center capabilities, including job scheduling and accounting integrations.
We are also focusing on improving the overall experience for suppliers, reducing the effort required to accomplish their daily tasks.
For partners doing work on behalf of the geometry marketplace. We are investing in features that provide geometry with better insight into the status imported parts.
For buyers, we continue to improve the industrial buying engine the industrial buying engine digitizes, the cumbersome and time consuming a request for quote process, taking what was once off platform and integrating it into the heart of Thomas net Dot com.
In Q2, we further streamlined the IBD experience, making even easier for buyers and suppliers to communicate and transact using I B E <unk>.
Suppliers can now send quotes and transact with buyers using IV, regardless of whether the buyer discovered the supplier on Thomas Smith.
While the revenue from the industrial buying engine transaction fees and Thomas net dot com are not yet a significant revenue stream.
As we more tightly integrate with our instant quoting engine, we can increase our buyer share of wallet and be their one stop shop.
We continue to modernize the advertising products and expand self serve options and Thomas net dot com platform, making it easier for suppliers to start their advertising journey.
In Q2, we expanded our self serve offerings to include advertising subscription packages bundled with video.
In the second half of 2023, we're making further investments to move to a pay for performance advertising model on Thomas net Dot com.
In addition, we continue to improve the relevancy and match quality of search results.
As we upgrade our search capability, we expect to see a higher level of buyer engagement enhancing the opportunity for search monetization.
This will help drive growth of our higher margin supplier services as well as boost use of the industrial buying engine.
In Q2.
Cassandra web galarza joined us as the new VP of supplier services sales.
<unk> is an accomplished sales executive with extensive experience with online marketplaces, including for Casa in home advisor.
I spent 16 years as home advisor and held key sales leadership roles.
Five we are continuing to increase efficiency and reduce expenses across our organization.
In Q2, we reduced our adjusted EBITDA loss by a $3 $1 million from Q1, driven by strong growth in marketplace gross profit and improved operating leverage.
As I previously mentioned, we exited the supplies business in the U S. In may which will improve supplier services gross margin and lower operating expenses. We also consolidated office space and then an additional targeted reduction in our workforce in Q2.
We are finding additional savings, including fixed costs to continue our progress throughout the year helped dominantly become adjusted EBITDA positive in Q4 of 2023.
Jim will provide more context to these changes later in the call.
For Q3, we expect our momentum to continue and to remain a strong growth mode as we accelerate market share gains.
The continuing shift in custom manufacturing to digital is inevitable.
<unk> as a leading provider of vertical technology solutions from our two sided global marketplace to software information marketing and analytics products is well positioned to drive and benefit from this massive shift.
As the co founder and CEO Zama tree I've never been more optimistic about the future of our company.
We are steadily and methodically executing on our vision of becoming the de facto digital rails for custom manufacturing.
The opportunity is giant and we are confident we will be one of the winners.
With that I'll turn the call over to our CFO , Jim Rallo for a closer look at second quarter financial results and business outlook.
Thanks, Randy and good morning, everyone. As Randy mentioned Q2 was a record revenue and gross profit quarter for Zama tree Q2 revenue increased 16% year over year to $111 million driven by strong marketplace growth.
Q2 marketplace revenue was $93 5 million and supplier services revenue was $17 5 million, reflecting the discontinuation of the sale of supplies in the quarter.
On our Q1 call, we indicated that given the significantly low gross margin of selling tools and materials to our manufacturing partners, we were not going to proactively offer the service.
In Q2, we discontinued the sale of them altogether and.
Made staffing changes accordingly, which will result in better profitability for Zama tree.
Q2 marketplace revenue increased 24% year over year, driven by strong growth in the number of active buyers, partly offset by lower average revenue per buyer on a year over year basis.
Our active buyer in order growth were much stronger than reported revenue growth in Q2.
Q2 active buyers increased 44% year over year to 48294 with 3578, new active buyers.
In Q2, the percentage of revenue from existing accounts was 96% underscoring the efficiency and transparency of our business model that leads to increasing accounts stickiness and spend over time.
Once an account joins our platform, we aim to expand the relationship and increase engagement and spending activities from the account over time.
The number of accounts with the last 12 months spend of at least 50000 on our platform reached 1159 at the end of Q2 up 30% year over year.
Supplier services revenue declined 13% year over year in Q2, we discontinued the sale of supplies in the U S. In the middle of Q2, which negatively impacted supplier services revenue by approximately $1 7 million our core Thomas marketing services revenue remained stable in Q2.
Part of our strategic plan for 2023 is to modernize the Thomas net dot com advertising platform and expand the self serve marketing products are we.
We expect these efforts to grow the number of digital marketing customers and to reduce the sales costs associated with acquiring them, providing additional operating leverage of our sales and marketing spend.
The number of active paying suppliers for Q2 2023 was 7553 on a trailing 12 month basis, an increase of 5% year over year.
The exit of the supplies business impacted year over year growth by approximately 300 basis points.
<unk> paying suppliers is the number of suppliers, who have purchased one or more of our supplier services, including digital marketing services data services supplies or financial services. During the last 12 months. We believe this kpis will help investors to better understand how we operate the supplier services segment.
And track its performance.
Q2, gross profit was $43 6 million, an increase of 16% year over year total gross profit margin was 39, 2% Q2 gross margin for marketplace was 31, 7% up 250 basis points year over year, and 290 basis points quarter over quarter.
Q2 marketplace gross profit increased 34% year over year.
We are focused on driving marketplace gross profit dollar growth.
Q2 gross margin for supplier services was an all time high of 79, 8% driven by the high gross margin of Thomas marketing and advertising services and growing financial services supplier services gross margin increased 240 basis points quarter over quarter due to the discontinuation of the sale of supplies, which carried a significant.
Inefficiently lower gross margin moving onto Q2 operating costs Q2, total non-GAAP operating expenses increased 14% year over year to $52 5 million driven by continued investments in the business and public company costs. In Q2, we took further actions to reduce operating expenses with a four.
Percent reduction in workforce on top of the 6% previously announced in Q1.
Additionally, we consolidated our office space lowering our office lease expense by $2 $7 million on an annual basis. These actions will further aid in our path to profitability in the second half of 2023, we're balancing these fixed cost reductions with important investments in our international and enterprise sales.
Teams.
Within our operating expenses sales and marketing is our largest component in Q2, non-GAAP sales and marketing expenses were $20 5 million, excluding stock based compensation and amortization and restructuring charge.
non-GAAP sales and marketing expenses increased 14% as compared to $18 million in Q2 2022.
This increase in non-GAAP sales and marketing expenses on a year over year basis was driven by continued investment to expand our network of buyers and suppliers and hiring of additional salespeople to support strong growth in our land and expand strategy. We delivered strong growth in new active buyers in Q2, leveraging increasing brand awareness and ifs.
<unk> marketing spend as advertising spend declined approximately 4% year over year.
Q2, adjusted EBITDA loss was $8 7 million or seven 8% of revenue compared with eight 7% of revenue in Q2 2022.
Q2, adjusted EBITDA excludes $8 7 million of lease abandonment costs as we consolidated office space.
In Q2. Additionally, Q2, adjusted EBITDA excludes restructuring costs of <unk> 7 million for the reduction in workforce.
And <unk> 6 million associated with the exit of supplies.
These moves are part of our strategic focus to improve operating leverage and path to profitability.
Turning to segment reporting in Q2 revenue from our U S and international operating segments was $95 4 million and $15 $6 million, respectively segment loss from our U S and international operating segments for Q2 was $22 9 million and $3 6 million respectively.
We continue to invest in our international business, which grew revenue at 96% year over year in Q2.
At the end of the second quarter cash and cash equivalents and marketable securities were $286 1 million.
Now moving onto guidance, we expect Q3 2023 revenue in the range of $1 $19 million to $121 million representing year over year growth of 15% to 17%, we expect marketplace revenue growth to remain strong in Q3 2023.
We expect to exit of supplies to impact Q3, 2023 revenue by approximately $2 million year over year growth, excluding supplies is expected to be 17% to 19%.
We expect supplier services gross margins to improve in Q3 quarter over quarter, reflecting the higher margin Thomas marketing services, and Fintech revenue and the discontinuation of the sales of supplies in Q3, we expect adjusted EBITDA loss to be in the range of five five to $6 5 million a cigna.
<unk>, 25% to 36% improvement quarter over quarter.
Q3, adjusted EBITDA loss will be lower quarter over quarter, driven by sequential growth in marketplace revenue improving marketplace gross profit and further measures to tighten operating expenses, particularly fixed costs. In Q3, we expect stock based compensation expense to be approximately $5 million to $6 million, which we will exclude from adjusted EBITDA.
As Randy mentioned, we expect robust marketplace growth and gross profit growth in 2023.
We expect marketplace revenue growth of 30% to 33% for the full year 2023.
We are adjusting 2023 revenue guidance to $464 million to $474 million from $470 million to $480 million to reflect the discontinuation of the sale of supplies in the U S, which will impact revenue by approximately $6 million on a full year basis, we do not expect this to.
Have a material impact on gross profit dollars.
We expect to be profitable on an adjusted EBITDA basis. In Q4, 2023, we expect significantly improved operating leverage in the second half of 2023, driven by strong marketplace revenue growth and higher gross profit margins on both marketplace and supplier services on a year over year basis.
We expect significant leverage over fixed and semi fixed costs, such as our public company costs.
At the same time, we have reduced operating expenses not directly related to generating revenue or gross profit.
Setting the stage for stronger operating leverage through 2023 and into 2024.
With that operator can you. Please open up the call for questions.
Thank you we will now conduct the quest.
And the answer session as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the roster.
And our first question comes from Eric Sheridan from Goldman Sachs.
Thank you so much for taking the questions maybe two if I could.
First just away from some of the growth initiatives you laid out how would you characterize the broader macro environment that you're seeing whether you want to characterize it by certain geographies or industry verticals curious what's happening in the environment broadly away from some of the gross growth initiatives that you had laid out and then coming back to the strategy.
Laid out how should we be thinking about the implementation of that strategy around timeline of implementation at what you're most excited about in terms of inflicting either buyer growth or spend per buyer. Thanks. So much.
Yes, good morning, and thanks for the question so as we talked about.
Q3 is off to a strong start in the marketplace momentum is continuing and continuing and as we saw it and talked about in Q2, we're seeing seeing strength across industries and across our manufacturing technology as well, particularly injection molding and yes, we've been making investments as part of it.
Five point plan.
And we are increasing the breadth of what we can offer on our platform. So while I can't speak to the overall macro and we're not baking in any improvement in an anchor on our numbers, we're seeing some strong momentum.
Q2, Q3 is also off to a strong start and Eric It's Sean I would just add too and we talked a lot about international.
I'm very pleased with growth in Europe , we were up 96% year over year and as you know we launched a couple new markets early in the year in the U K and Turkey.
Pleased with the early ramp there so expect to see strong growth in international.
And then also Eric I know you ask your question your second question about <unk>.
Spanning per buyer.
As we've talked about in the.
The call earlier was we're expanding what we can offer our customers we've been broadening the things. They are offered in voluntary marketplace. Likewise, we talked about this new initiative, new product that we've got able to work with teams.
Engineers in procurement professionals on projects as <unk> historically been much more focused on individuals.
New initiative working with teams and we're successfully piloting that with a number of large organizations and we expect to expand that to our two other largest accounts in the coming months, we think that will not only help us go deeper with our customers but also.
Be able to expand the number of users within those organizations as well.
Thank you.
Please standby and graph Sir our next question comes from William.
From Brian Drab from William Blair.
Go ahead, Brian .
Okay.
Okay.
Bryan Bryan from William Blair.
Okay.
Can you hear me.
Brian We can't hear you.
But let me try and next question operator.
Put right back into Q1.
Please.
Operator can we go to next question. Please.
Our next question comes from Ron Josey from Citi.
Great. Thanks for taking the question guys I had two maybe Randy as a follow up to the active buyer that spend per active buyer trends I wanted to ask specifically just about the growth of new active buyers and I understand 96% of revenues from existing accounts, but just talk to us about the ramp up of newer active buyers are you seeing similar trend as in the past.
Just given the growth we've seen in the expansion of new buyers coming to the market any insights on cohorts et cetera. It would be helpful. And then just on gross margins.
Obviously, it's great that we've seen that expand since really quarter to quarter since <unk>, but do we still expect.
The same guidance for 2020 for mid 30 plus percent gross margins for marketplace. Thank you.
I'll just take the buyer growth, we continue to see that.
Very strong growth in new active buyers. The one thing we did call out this quarter.
<unk> seen some of our marketing investments.
And as Jim said in his script, our advertising spend was actually down 4% year over year.
Our marketing is becoming more efficient we're seeing strong growth in our organic search so very healthy across the active buyer front, but again, we're balancing your AD spend this quarter, but yeah, and I think just to add to that when you look at the use of a.
New cohorts, we're very excited about the new accounts that we've been bringing on board. We've got a slide in the deck, where we talk about our cohort analysis and as you've seen the year one revenue from our new cohorts every year has been growing.
So that's really very exciting for us.
In terms of gross margins.
We had our highest we went up to $31.
Gross margins for marketplace.
A huge chunk.
From Q1.
And so there's no change in our guidance next year, when we expect that by the end of the 35, 40% you Ron I would say when you look at margins that the second half of the year margins will be higher than in the first half of the year that will apply to both the marketplace as well as seller services. So youll see seller services margin jumbo as we exited.
The supplies business, so that business, obviously, it carries a much lower margin.
With that exit again, we'll have better margin in our seller services.
Great. Thank you guys.
Thanks, Matt.
Our next question comes from Nick Jones from JMP Securities.
Great Good morning.
One on kind of the breadth of offerings continue to increase the number of processes or the breadth of offerings on our site.
How much is that a factor in increasing span and how much are you hearing.
From I guess buyers looking for processes are a manufacturing processes that are not on the site today.
As we can.
And it's also.
I was into some of the new functionality, we have working with teams.
Not only engineered for procurement professionals those procurement professionals have.
Multiple kinds of spend underneath and so they are buying and multiple manufacturing categories. So our ability to expand.
The menu of what we can offer makes it easier for them and we're seeing increasing numbers of procuring people, who are trying to consolidate spend and if <unk> can offer more of that we can be more and more of their one stop shop, that's very attractive to that so and we're noticing you did you talk about what we're adding to our menu.
That is based on feedback that we're getting from our customers.
Various ways some of that built into our UI. It didn't help us what are they looking for that theyre not seeing right now.
Until then we get that feedback in a more actively than adding it to our to our marketplace.
To add to that too that.
Our ability to do that really continues to be strong because of the suppliers that we have in the Thomas network. So we've got a lot of suppliers. The Thomas network did bring capabilities that we haven't had historically and as arbitrary network. So again, just taken advantage of some of the synergies from that acquisition.
Yes.
Is it also when you look at our use of AI.
Alright technology that also helps us in a very extensible and helps us scale or we can offer as well.
Great maybe a follow up on that I mean from here I mean, how should we think about increasing the breadth of the offering I mean can you double it I mean, I guess, how much wood to chop is there.
From here kind of over time.
There is a tremendous amount of work and we're looking at ways to accelerate the number.
New processes and technologies that we can offer so.
As Jen alluded to leveraging the tremendous supplier base.
<unk> net and the data that we're getting from transactions they've done with their customers and helpful for us.
There's going to be expanding in Asia, so lots to come.
Great. Thank you.
And our next question comes from Brian Drab from William Blair.
Alright, good morning, I'm trying a different phone now I'm. Unlike three conference calls at once so I guess found a phone that doesn't work.
Can you talk a little bit about what you've learned over the last couple of quarters in terms of the speed with which orders are being received by the supplier base and.
You know what you've learned about how the macro impacts that speed to acceptance and maybe what happens when the macro improves and capacity began to tighten a little bit across the supplier base.
Yes, Hey, Brian chime in.
As Randy talked about really really no change consistent.
We're trying to really drive faster order growth, obviously as Jim said in his prepared remarks, Nate our order growth and buyer growth as you know are much stronger than our revenue growth.
We put forth are planned to really execute on our business and drive strong order growth no matter whats happening in the macro we're seeing if you look at the RFP quarter over quarter, it's stable.
So that's kind of where we see it right now, but our plan is to execute under.
Different environment. So that's what we're working on.
Okay and early on.
You talked about you showed us some information regarding profitability for the company domestically versus in the international business out of the international business doing really well in terms of quarter on quarter growth more than 30% again this quarter.
Can you comment at all about.
Are we at actually at like <unk>.
EBITDA profitable.
The U S and the international piece that is catching up with scale or.
And any comment along those lines.
Yes, I'll take that Brian Jim So I think look in the.
In the U S. We are certainly not adjusted EBITDA profitable at this point in time.
As we've said, we anticipate that will happen in Q4, and you'll look there's some good dynamics going on right now if you think about it so we did have.
Obviously your consolidation of our real estate, we discussed that we also discussed our smaller risks in the last quarter and those things we didn't really get the benefit of those things a little bit of benefit in the last quarter, but not very much. So that's going to carry on through the second half of the year.
And then again as I said earlier, we expect our margins.
The second half of the year to be stronger.
On marketplace and.
And seller services. So I think the increased margin in the second half of the year. The continued growth from both U S and international.
As well as the cost saving initiatives that we've laid out we should be we should be able to get there by Q4.
Okay and can I ask one more.
Again, it kind of split between a couple calls, but I did hear you mentioned Alibaba.
And I think he said there is some software work being done.
As you explore that opportunity to learn more about that opportunity.
Can you or have you made any comment around sizing.
Sizing that for us it just feels like this nebulous incredible potentially huge opportunity.
I just have no idea how to size this and neither does any investor.
Called me said at anything like expectations for 2024, and what what kind of revenue you could potentially see from that business.
Yeah, and Brian ran again, so two things one is on the call.
Remarks, we talked about.
We're continuing to expand our integration with Alibaba in particular on your mobile App a lot of people are using the mobile app. So that integration is very important and we're working actively together with Alibaba to put it into the mobile app.
In terms of this year.
We do expect we expect to get continued robust international growth in the second half of the year.
But we're not baking unit that can be coming from from the Alibaba relationship. It's really driven right now by in Europe , and a strong broke and we are seeing there.
So I think right now where it's still too early for us to give it a read out either than our international segment remains Super strong at this point really because of Europe , but we'll see how that can play out its great potential, but we still don't know yet.
Okay, alright, thanks very much.
Okay.
Okay.
And our next question comes from Matt Hedberg from William <unk> from RBC.
Hey, great guys. Thanks for taking my questions.
Randy I think you started out the call or near the top talking about.
For large customer strength and large customer or in fact, I think one.
<unk> had one of your largest.
What kind of production runs.
Wonder if maybe drill in a little bit on that.
Maybe some more specifics there and how do you think about the pipeline of some of these larger.
Larger customers.
Yes, and just on that in my remarks, I mentioned that we had our largest multi year.
Commitment from a customer in our history. So.
We're definitely seeing more and more and more larger orders and those can be multiple years.
As we saw in that example, so that does provide a nice pipeline I think also in recognition of that we've been making we've been making.
Changes in some of our product our technology products, we talked about.
Its ability that we've got.
Great with teams of engineers and procurement professionals and known as often as you can imagine and we're still in beta testing now, but as you can imagine those often revolve around.
Around production projects, sometimes those are going to be for extended periods of times and then finally, we talked about strength in injection molding.
And those are typically.
Those can typically be more on the production side and those tools can be used for multiple years. So.
Certainly provides a nice a nice.
Outlook on a longer period of time for us.
Got it and then with bringing worsen.
It sounds like a good background for you guys any sorts of.
I mean, how do you how you think about him.
Perhaps impacting enterprise sales or any sort of changes or just any any additional details on that would be helpful.
Yes, we are.
More and more into your goes back to a question earlier in your call, where we're working with with.
Organizations about committed spend.
And involving multiple categories. So.
Folks who come from an enterprise background, whether in software enterprise or or others, you'll have deep experience in that.
And so we're developing that investing in that and we think it'll be a great leader for our effort for those efforts.
Thanks Ryan.
This concludes today's conference call. Thank you for participating you may not may now disconnect.
Okay.
Yes.
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