Q2 2024 Xometry Inc Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the Xometry Q2 2024 Earnings Call Conference.

Good day and thank you for standing by. Welcome to the Xometry Q2 2024 Earnings Call Conference Call.

Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session to ask questions during the session. You'll need to press Star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Shawn Milne, VP of Investor Relations.

Speaker Change: At this time, all participants are in a listen-only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised.

To withdraw your question, please press star 11 again.

Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Shawn Milne, VP of Investor Relations.

Shawn Milne: Good morning, and thank you for joining us on Xometry's Q2 2024 earnings call. Joining me are Randy Altschuler, our Chief Executive Officer, and James Milne, our Chief Financial Officer.

Unknown Executive: Good morning, and thank you for joining us on Xometry's Q2 2024 earnings call. Such statements may be identified by terms such as believe, expect, intend, and may. These statements are subject to risks and uncertainties that 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-Q for the quarter ended June 30, 2024.

Speaker Change: good morning and thank you for joining us on zometrytri q two two thousand and twenty four earnings call joining me our rady all chuler our chief executive officer in james mill our chief financial officer

Shawn Milne: During today's call, we will review our financial results for the second quarter and discuss our guidance for the third quarter and full year 2024. Additionally, during today's call, we will make four 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 may be identified by terms such as believe, expect, intend, and may. Such statements are subject to risks and uncertainties, which could cause them to differ materially from actual results.

Speaker Change: During today's call, we will review our financial results for the second quarter and discuss our guidance for the third quarter and full year 2024.

Speaker Change: During today's call, we will make four looking statements, including statements related to the expected performance of our business, future financial results, strategy, long-term growth, and overall future prospects.

Speaker Change: Such statements may be 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.

Shawn Milne: 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-Q for the quarter ended June 30, 2024. We caution you not to place undue reliance on forward-looking statements and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events, or changes in our expectations.

Speaker Change: information concerning those risk is avail in our earnings press release distributed before the market open today and thenin our filings with the u s securities and exchange commission including our form ten -q for the quarter ended junethirtith two thousand and twenty four

Speaker Change: We caution you not to place undue reliance on forward-looking statements and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events, or changes in our expectations.

Shawn Milne: 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 measures 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.xometry.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.

Speaker Change: we'd also like to point out that on today's call we will a report gaap and non-gaap results we use these non-gaap financial measures internally for financial and operating decision-making purposes and as a means to evaluate period-to period comparisons

Unknown Executive: 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.xometry.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.

Speaker Change: 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.

Speaker Change: 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.xometry.com

Speaker Change: 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.

Randolph Altschuler: Good morning everyone, and thank you for joining us for our Q2 2024 earnings call. Q2 was a strong quarter for Xometry across many fronts. Our AI-powered marketplace delivered record revenue, record gross profit, and record gross margin. Powered by AI, our on-demand custom manufacturing marketplace continues to gain significant market share as buyers and suppliers realize the value, convenience, and resiliency of our platform to strengthen their supply chains globally. We've made great progress in Q2 and are focused on driving further penetration in this massive market as our key growth initiative. We've made great progress. We've made great progress. We've made great progress.

Randy: Good morning everyone, and thank you for joining us for our Q2 2024 earnings call. Q2 was a strong quarter for Xometry across many fronts. Our AI-powered marketplace delivered record revenue, record gross profit, and record gross margins.

Randolph Altschuler: Q2 was a strong quarter for Xometry across many fronts. Our AI-powered marketplace delivered record revenue, record gross profit, and record gross margin. One of the largest global technology companies expanded production programs into a new line of business, and a top global medical device company embedded Xometry Marketplace directly into their procurement program. Q2 Marketplace revenue grew 25% year over year and a robust 9% quarter over quarter. We expect to expand marketplace gross margin and drive strong gross profit growth in the second half of 2024. Strong marketplace revenue and gross profit growth drove a 70% improvement in our adjusted EBITDA loss to a record low 2% of revenue.

Speaker Change: power by ai our ondemand customer manufacturing marketplace continues to gain significant market share as buyers and suppliers realize the value convenience and resiliency of our platform to strengthen their supply chains globally

Speaker Change: We've made great progress in Q2 and are focused on driving further penetration in this massive market through our key growth initiatives.

Randolph Altschuler: As I spend time with customers around the globe, I see firsthand that we are increasingly becoming embedded across our customer supply chains as our marketplace digitizes inefficient and cumbersome processes while delivering value and reliability for buyers. Likewise, Xometry's platform enables suppliers to digitally monetize manufacturing capacity, improve profitability, and access global demand at minimal cost. In Q2, many Fortune 500 customers depended upon Xometry to help strengthen their supply chains, as we surpassed the $500 million annual revenue run rate.

Speaker Change: as i spend time with customers around the globe i see firsthand that we are increasingly becoming embedded across our customer supply chains as our marketplace digitizes inefficient and cage in processes while delivering value and reliability for buyers

Speaker Change: Likewise, Xometry's platform enables suppliers to digitally monetize manufacturing capacity, improve profitability, and access global demand at minimal cost.

Speaker Change: in q two many fortune five hundred customers depended upon geometry to help strengthen new supply chains as we surpassed the five hundred million annual revenue run rate

Randolph Altschuler: One of the largest global technology companies expanded production programs into a new line of business, and a top global medical device company integrated Xometry Marketplace directly into their procurement program. We have a tremendous runway for growth by increasing our penetration rates across manufacturing processes and end markets in a highly fragmented industry. In Q2, we delivered accelerating growth with revenue increasing 19% year-over-year to a record $133 million, driven by our Marketplace business.

Speaker Change: One of the largest global technology companies expanded production programs into a new line of business and a top global medical device company embedded Xometry Marketplace directly into their procurement program.

Speaker Change: We have a tremendous runway for growth by increasing our penetration rates across manufacturing processes and end markets in a highly fragmented industry.

Speaker Change: in q two we've delivered accelerating growth with revenue increasing nineteen percent year-over-year to a record one hundred thirty three million driven by our marketplace business

Randolph Altschuler: Q2 Marketplace revenue grew 25% year over year and a robust 9% quarter over quarter. We saw strength across many end markets, including semiconductors, industrial equipment, consumer products, aerospace, and defense. Q2 gross profit increased 21% year-over-year. Q2 marketplace gross profit increased 33% year-over-year and a strong 15% quarter-over-quarter driven by our AI-powered marketplace and increasing network of active suppliers. As we scale our data, our machine learning AI models get better at pricing and matching, which in turn fuels gross profit-dollar growth. The proof is in the results.

Speaker Change: q two marketplace revenue grew twenty-five percent year-over-year and a robust nine percent quarter-over-quarter we saw strength across many end markets including semiconductors industrial equipment consumer products aerospace and defense

Speaker Change: Q2 gross profit increased 21% year-over-year. Q2 marketplace gross profit increased 33% year-over-year, and a strong 15% quarter-over-quarter, driven by our AI-powered marketplace and increasing network of active suppliers.

Speaker Change: As we scale our data, our machine learning AI models get better at pricing and matching, which in turn fuels gross profit dollar growth.

Randolph Altschuler: In the past three years, we expanded our marketplace gross margin from 23.5% to 33.5%, underscoring the power of our AI-driven model. In Q2, we further invested in our marketplace technology, including key hires in machine learning and data science. We expect to expand marketplace gross margin and drive strong gross profit growth in the second half of 2024. Strong marketplace revenue and gross profit growth drove a 70% improvement in our adjusted EBITDA loss to a record low 2% of revenue.

Speaker Change: The proof is in the results. In the past three years, we expanded our marketplace gross margin from 23.5% to 33.5%, underscoring the power of our AI-driven model.

Speaker Change: In Q2, we further invested in our marketplace technology, including key hires in machine learning and data science. We expect to expand marketplace gross margin and drive strong gross profit growth in the second half of 2024.

Speaker Change: Strong marketplace revenue and marketplace gross profit growth drove a 70% improvement in our adjusted EBITDA loss to a record low 2% of revenue. We delivered strong leverage in our US marketplace while making investments to drive international growth and scale.

Randolph Altschuler: We delivered strong leverage in our U.S. marketplace while making investments to drive international growth and scale. In order to drive sustained market share gains, we're focused on these growth initiatives. First, expanding our network of active buyers and suppliers. In Q2, active buyers increased 27% year-over-year, with net additions of over 3,000.

Randolph Altschuler: We delivered strong leverage in our U.S. marketplace while making investments to drive international growth and scale. First, expanding our network of active buyers and suppliers. In Q2, active buyers increased 27% year-over-year, with net additions of over 3,000.

Speaker Change: In order to drive sustained market share gains, we're focused on these growth initiatives.

Speaker Change: First, expanding our network of active buyers and suppliers.

Speaker Change: in q two active buyers increasaseed twenty-seven percent year-over-year wewithve net additions of over three thousand

Randolph Altschuler: We expect our active buyer growth to remain healthy as there are millions of potential buyers and Xometry's brand awareness is growing but still low. We continue to increase the breadth and depth of our supplier network, which increased 36% in 2023. In Q2, we expanded our supplier base in the United States and other markets, such as India and Turkey. We're also growing our supplier reach in specific processes, including tube cutting, tube bending, and other tooling-based processes to support anticipated areas of customer growth.

Speaker Change: We expect our active buyer growth to remain healthy as there are millions of potential buyers, and Xometry's brand awareness is growing but still low. We continue to increase the breadth and depth of our supplier network, which increased 36% in 2023.

Speaker Change: in q two we expanded our supplier b in the united states and other markets such as india and turkey

Speaker Change: We're also growing our supplier reach in specific processes, including tube cutting, tube bending, and other tooling-based processes to support anticipated areas of customer growth.

Randolph Altschuler: For our suppliers, we continue to enhance Work Center, the digital operating system for manufacturers. In Q2, we further digitize the recruitment and onboarding experience for suppliers directly to work. Second, expanding the Marketplace menu. Our goal is to be the primary destination for our customers' manufacturing and supply chain needs. To help accomplish that, we need to provide instant quoting for as many manufacturing processes and materials as possible. In Q2, we made progress doing just that.

Speaker Change: For our suppliers, we continue to enhance WorkCenter, the digital operating system for manufacturing. In Q2, we further digitize the recruitment and onboarding experience for suppliers directly through WorkCenter.

Randolph Altschuler: Our goal is to be the primary destination for our customers' manufacturing and supply chain needs. To help accomplish that, we need to provide instant quoting for as many manufacturing processes and materials as possible. In Q2, we made progress doing just that. To expedite our development of new auto-coded processes within Xometry's AI-powered instant coding engine, we're leveraging Google's Verdex AI alongside a proprietary data and algorithm. To make that happen, we have a two-pronged approach.

Speaker Change: Second, Expanding the Marketplace Menu.

Speaker Change: Our goal is to be the primary destination for our customers' manufacturing and supply chain needs.

Speaker Change: To help accomplish that, we need to provide instant quoting for as many manufacturing processes and materials as possible. In Q2, we made progress doing just that. For example, in Europe , we added 10 new materials, including new steel and aluminum grades for CNC, and expanded 3D printing finishing options.

Randolph Altschuler: For example, in Europe, we added 10 new materials, including new steel and aluminum grades for CNC, and expanded 3D printing finishing options. To expedite our development of new auto-coded processes within Xometry's AI-powered instant coding engine, we're leveraging Google's Verdex AI alongside a proprietary data and algorithm. We are now beta testing new auto-quote tube bending and tube cutting software, which we expect to release later in Q3.

Speaker Change: To expedite our development of new auto-coded processes within Xometry's AI-powered Instant Coding Engine, we are leveraging Google's Verdex AI alongside our proprietary data and algorithms.

Speaker Change: We are now beta testing new AutoQuote tube bending and tube cutting, which we expect to release later in Q3.

Randolph Altschuler: Third, driving deeper enterprise engagement. Some of our biggest customers are the largest companies in the world. In Q2, we made strong progress with our land and expand efforts as the number of Marketplace accounts with the last 12-month spend of at least $50,000 increased 24% year-over-year to 1,436. While our growth with these accounts has been strong over the years, there's a terrific opportunity to significantly accelerate Xometry's adoption by then. To make that happen, we have a two-pronged approach.

Speaker Change: Third, driving deeper enterprise engagement.

Speaker Change: Some of our biggest customers are the largest companies in the world. In Q2, we made strong progress with our land and expand efforts as the number of marketplace accounts with last 12 months spend of at least $50,000 increased 24% year over year to 1,436.

Speaker Change: While our growth with these accounts has been strong over the years, there's a terrific opportunity to significantly accelerate Xometry's adoption by them.

Randolph Altschuler: First, we're leading with our technology. In Q2, we launched an ERP integration with a large global medical device company, which reduces friction in the procurement process. Additionally, the feedback for team space remains positive with rapid adoption, including over 3,300 teams and strong engagement on the platform.

Speaker Change: To make that happen, we have a two-pronged approach.

Speaker Change: first we're leading with our technology in q two we launched in the erp integration with a large global medical device company which reduces friction in a procurement process

Randolph Altschuler: Additionally, the feedback for Team Space remains positive, with rapid adoption, including over 3,300 teams and strong engagement on the platform. Through Xometry.eu, Xometry.uk, and Xometry.asia, we have leveraged Xometry's core technology to provide localized marketplaces in 15 different languages with networks of suppliers across Europe and Asia, as well as North America. This partnership simplifies their business processes and effectively makes Xometry an extension of their procurement department.

Speaker Change: additionally to feedback for team states remains positive with rapid adoption including over three thousand and threemainer teams and strong engagement on the platform team space moves the zgeometry marketplace from a focus on individual buyers and parts to procurement team's managing programs

Randolph Altschuler: Team Space moves the Zometry marketplace from a focus on individual buyers and ports to the procurement team's managing programs. Second, we continue to invest in our enterprise sales efforts, increasing our bench strength, including the hiring of our new chief sales officer, Sabir Dutt, in May. Sabir brings significant experience leading high-performing, high-growth sales teams that cater to large enterprise customers across nearly every sector. Fourth, Growing an International Nation In Q2, international revenue increased 31% year-over-year, driven by strong growth in Europe. Xometry Asia expanded into new English-speaking countries, including Australia, Singapore, and New Zealand.

Sabir Dutt: Second, we continue to invest in our enterprise sales efforts, increasing our bench strength, including the hiring of our new chief sales officer, Sabir Dutt, in May.

Sabir Dutt: severe brings significant experience leading high-performing high-growth sales teams that cater to large enterprise customers across nearly every sector

Speaker Change: Fourth, Growing Internationally

Speaker Change: In Q2, international revenue increased 31% year-over-year driven by strong growth in Europe .

Speaker Change: Xometry Asia expanded into new English-speaking countries including Australia, Singapore, and New Zealand. In China, Xometry launched enhanced customer service capabilities on its WeChat mini-app for buyers to quote, order, and track delivery.

Randolph Altschuler: In China, Xometry launched enhanced customer service capabilities on its WeChat mini app for buyers to quote, order, and track deliveries. Through Xometry.eu, Xometry.uk, and Xometry.asia, we have leveraged Xometry's core technology to provide localized marketplaces in 15 different languages with networks of suppliers across Europe and Asia, as well as North America. Our enterprise strategy is successful in Europe as well. In Q2, a UK-based aerospace equipment manufacturer chose Xometry for high-volume manufacturing. Xometry enabled them to move away from in-house production by providing flexible, scalable capacity to quickly produce certified parts, significantly reducing lead time. This partnership simplifies their business processes and effectively makes Xometry an extension of their procurement department. In Q2, international revenue accounted for 15% of total marketplace revenue.

Speaker Change: Through Xometry.eu, Xometry.uk, and Xometry.asia, we have leveraged Xometry's core technology to provide localized marketplaces in 15 different languages with networks of suppliers across Europe and Asia, as well as North America.

Speaker Change: our enterprise strategy is successful in europe as well in q two a uk-based aerospace equipment manufacturer chose ometry for high volume manufacturing

Speaker Change: sometry enabled them to move away from in-house production by providing flexible scalable capacity to quickly produce certified parts significantly reducing leadtimes

Speaker Change: This partnership simplifies their business processes and effectively makes Xometry an extension of their procurement department.

Speaker Change: in q two international revenue accounted for fifteen percent of total marketplace revenue we believe international can reach the thirty to forty percent level in the long term as with many other global online marketplaces

Randolph Altschuler: We believe international online retail sales can reach the 30% to 40% level in the long term, as with many other global online markets. Fifth, Enhancing Supplier Service Solutions, and Q2. We continue to invest in important foundational work to modernize the Thomas advertising platform. We're focused on restoring Thomas advertising growth, given the 85% plus gross margin and strong contribution margin opportunity of the platform. By improving the underlying platform technology, we will enhance the experience for both users and advertisers, providing opportunities for growth and engagement.

Speaker Change: Fifth, enhancing supplier service solutions.

Speaker Change: In Q2, we continue to invest in important foundational work to modernize the Thomas Advertising platform. We're focused on restoring Thomas Advertising growth, given the 85% plus gross margin and strong contribution margin opportunity of the platform.

Speaker Change: By improving the underlying platform technology, we will enhance the experience for both users and advertisers, providing opportunities for growth and engagement.

Randolph Altschuler: One of our top goals is to drive increasing advertiser penetration on the platform, which is approximately 1% today out of the roughly 500,000 suppliers listed on Thomas. The Thomas Platform continues to attract new logos and expand relationships with key customers. In Q2, Thomas signed a new partnership with the Italian Trade Agency, Machines Italia, to connect buyers to the North American subsidiaries of dozens of Italian manufacturers. Also, Thomas expanded its relationship with American Crane, one of the largest manufacturers and distributors of cranes in the United States.

Speaker Change: One of our top goals is to drive increasing advertiser penetration on the platform, which is approximately 1% today out of the roughly 500,000 suppliers listed on Thomas.

Speaker Change: The Thomas Platform continues to attract new logos and expand relationships with key customers.

Speaker Change: In Q2, Thomas signed a new partnership with the Italian trade agency, Machines Italia, to connect buyers to the North American subsidiaries of dozens of Italian manufacturers.

Speaker Change: also thomas expanded relationship with american crane one of the largest manufacturer and distributors of cranes in the united states

Randolph Altschuler: I'm proud of the collective efforts of our global team. Our continued strong execution and growth demonstrates the significant strides we're making to digitize supply chains, a combination of our extensible technology platform, spanning data lake, and rapidly growing networks of buyers and suppliers will continue to fuel strong growth and margin expansion. I'll now turn the call over to James for a more detailed review of Q2 and our business outlook.

Speaker Change: I'm proud of the collective efforts of our global team. Our continued strong execution and growth demonstrates the significant strides we're making to digitize supply chains.

Speaker Change: the combination of our extenssible technology platform expanding data lake and rapidly growing networks of buyers and suppliers will continue to fuel strong growth and margin exptansion

Speaker Change: i'll now turn the call over to james for a more detailed review of q two and our business outlook

James Milne: Thanks Randy and good morning everyone. As Randy mentioned, Q2 is a record quarter for Xometry on many fronts. Q2 revenue increased 19% year-over-year to $133 million, driven by strong marketplace growth. Q2 marketplace revenue was $117 million, and supplier services revenue was $15.3 million. Q2 marketplace revenue increased 25% year over year driven by strong execution across our teams and growth initiatives. Q2 active buyers increased 27% year-over-year to 61,530 with a net addition of 3,026 active buyers.

James Mill: Thanks Randy and good morning everyone. As Randy mentioned, Q2 was a record quarter for Xometry across many fronts. Q2 revenue increased 19% year over year to $133 million, driven by strong marketplace growth.

Randolph Altschuler: Q2 marketplace revenue was $117 million, and supplier services revenue was $15.3 million. Q2 active buyers increased 27% year-over-year to 61,530, with a net addition of 3,026 active buyers. The number of accounts with the last 12-month spend of at least $50,000 on our platform increased 24% year-over-year to 1,436 with 55 net new accounts. The number of active paying suppliers for Q2 2024 was 6,992 on a trading 12-month basis, a decrease of 7% year-over-year.

Speaker Change: Q2 marketplace revenue was $117 million and supplier services revenue was $15.3 million.

Speaker Change: Q2 marketplace revenue increased 25% year-over-year driven by strong execution across our teams and growth initiatives.

Speaker Change: Q2 active buyers increased 27% year-over-year to 61,530, with a net addition of 3,026 active buyers.

James Milne: Q2 marketplace revenue for active buyers decreased 1% year over year and increased 4% quarter over quarter. The number of accounts with the last 12-month spend of at least $50,000 on our platform increased 24% year-over-year to 1,436 with 55 net new accounts, as we continue to deepen our relationships with our customers across many end markets. Supplier services revenue declined 13% year over year in Q2, primarily driven by the discontinuation of the sale of tools and materials in the U.S. and the wind-down of non-core services.

Speaker Change: q two marketplace revenue per active by a decreased one percent year-over-year and increase four percent quarter-over-quarter

Speaker Change: the number of accounts with last twelve month spend at least fifty thousand dollars on our platform increased twenty-four percent yearover- year to one thousand four hundred and thirty six with fifty-five net new accounts

Speaker Change: as we continue to deep en our relationships with our customers across many end markets

Speaker Change: Supplier services revenue declined 13% year-over-year in Q2, primarily driven by the discontinuation of the sale of tools and materials in the U.S. and wind-down of non-core services.

James Milne: As Randy mentioned, we are modernizing the Thomas Advertising Platform, including investments to improve user and advertiser engagement. The number of active paying suppliers for Q2 2024 was 6,992 on a trading 12-month basis, a decrease of 7% year-over-year.

Speaker Change: as we andy mentioned we are modernizing the thomas advertising platform including investments to improve user and advertising engagement

Speaker Change: The number of active paying suppliers for Q2 2024 was 6,992 on a training 12-month basis, a decrease of 7% year-over-year.

James Milne: Q2 gross profit was $52.9 million, an increase of 21% year over year, with a gross margin of 39.9%. Q2 gross margin for marketplace was at a record 33.5%, up 180 basis points year over year. Q2 Marketplace Gross Margin is a clear validation of our machine learning AI-powered economic model, which optimizes pricing with more data and improves matching with an expanding supplier network. Q2 marketplace gross profit dollars increased 33% year over year. We are focused on driving marketplace gross profit dollar growth through the combination of top line growth and gross margin expansion.

Speaker Change: Q2 gross profit was $52.9 million, an increase of 21% year-over-year with gross margin of 39.9%.

Randolph Altschuler: Q2 Gross Margin for Marketplace was a record 33.5%, up 180 basis points year over year. Q2 total non-GAAP operating expenses increased 6% year-over-year to $55.7 million, well below revenue growth. Marketplace advertising spend increased 9% year-over-year, or 6.9% of marketplace revenue, down 100 basis points year-over-year, as we continue to closely monitor advertising spend and efficiency. At the end of the second quarter, cash-in-cash equivalents and marketable securities were $241 million.

Speaker Change: q two gross margin for marketplace was a record thirty-three point five percent up one hundred and eighty basis points year-over-year

Speaker Change: Q2 Marketplace Gross Margin is a clear validation of our machine learning AI powered economic model which optimizes pricing with more data and improves matching with an expanding supplier network.

Speaker Change: Q2 marketplace gross profit dollars increased 33% year-over-year.

Speaker Change: we are focused on driving marketplace gross profit dollar growth through the combination of top line growth and growross margin expansion

James Milne: Q2 Gross Margin for Supplier Services was a record 88.9%, driven by our increasing focus on the higher gross margin Thomas Marketing and Advertising services. Moving on to Q2, Operating Costs. Q2 total non-gap operating expenses increased 6% year-over-year to $55.7 million.

Speaker Change: Q2 Gross Margin for Supplier Services was a record 88.9% driven by our increasing focus on the higher gross margin Thomas Marketing and Advertising services.

Speaker Change: moving on to q two operating costs q two total non-gaap operating expenses increased six percent year-over-year to fifty-five point seven million dollars well below revenue growth

Speaker Change: As I said last quarter, we are applying stronger discipline and rigor to our capital and resource allocation across teams.

Speaker Change: In Q2 2024, this resulted in non-GAAP operating expenses remaining flat quarter-over-quarter, driving strong leverage across sales and marketing, operations, and product development.

Speaker Change: marketplace advertising spend increased nine percent year-over-year or six point nine percent of marketplace revenue down one hundred basis points year-over-year as we continue to closely monitor advertising spend and efficiency

James Milne: Q2 adjusted EBITDA loss was $2.6 million, or 2% of revenue, compared with 7.8% of revenue in Q2. Adjusted EBITDA loss improved $6 million year-over-year, or 70%, driven by growth in revenue and gross profit. At the end of the second quarter, cash-in-cash equivalents and marketable securities were $241 million.

Speaker Change: qub two adjusted ebitda loss was two point six million or two percent of revenue compared with seven point eight percent of revenue in q two two thousand and twenty- three

Speaker Change: que to adjusted ebitda loss improved six million dollars year-over-year or seventy percent driven by growth in revenue and gross profit

Speaker Change: at the end of the second quarter cash and cash quivalents and marketable securities were two hundred and forty-one million dollars

James Milne: Q2 was a clear demonstration of the ability of Xometry's AI-powered marketplace to deliver strong gross margin expansion and gross profit growth. We remain focused on operating expense discipline while investing in our growth initiatives. In prior years, we delivered 20% plus incremental adjusted EBITDA margin year-over-year. However, driven by our efforts in the first half of 2024, we delivered 25% year-over-year incremental adjusted EBITDA margin. We expect to reach adjusted EBITDA profitability at the $600 million revenue run rate.

Speaker Change: q two was a clear demonstration of the ability for zometries aipowered marketplace to deliver strong gthross margin expansion and gross profit growth

Speaker Change: We remain focused on operating expense discipline while investing in our growth initiatives.

Randolph Altschuler: In prior years, we delivered 20% plus incremental adjusted EBITDA margin year-over-year. However, driven by our efforts in the first half of 2024, we delivered 25% year-over-year incremental adjusted EBITDA margin. We have a large market opportunity ahead and low penetration rates across many end markets, such as aerospace and processes, including CNC. While the underlying metrics continue to be strong, we remain mindful of the uncertain macro. We expect Marketplace gross profit to grow faster than Marketplace revenue, and we expect to drive improving operating leverage year over year through 2024 as we execute on our strong roadmap of growth initiatives.

Speaker Change: In prior years, we delivered 20% plus incremental adjusted EBITDA margin year-over-year. Driven by our efforts in the first half of 2024, we delivered 25% year-over-year incremental adjusted EBITDA margin.

Speaker Change: We expect to reach Adjusted EBITDA profitability at the $600 million revenue run rate. As we scale above that level, towards $1 billion plus, we expect continued 20% plus incremental Adjusted EBITDA leverage.

James Milne: As we scale above that level, towards 1 billion plus, we expect continued 20% plus incremental adjusted EBITDA leverage. We have a large market opportunity ahead and low penetration rates across many end markets, such as aerospace and processes, including CNC. We will continue to balance investing in the future with driving operating leverage in the model. Now, moving on to guidance.

Speaker Change: We have a large market opportunity ahead and low penetration rates across many end markets, such as aerospace and processes, including CNC. We will continue to balance investing in the future with driving operating leverage in the model.

James Milne: We are reaffirming our fiscal 2024 revenue outlook and continue to expect marketplace growth of at least 20%. Marketplace growth for the first six months of 2024 has been stronger than expected, increasing close to 25% year over year, driven by healthy underlying metrics and excellent execution by our team. While the underlying metrics continue to be strong, we remain mindful of the uncertain macro.

Speaker Change: Now, moving on to guidance.

Speaker Change: we are reaffirming our fiscal two thousand and twenty-four revenue outlook and continue to expect marketplace growth of at least twenty percent

Speaker Change: Marketplace growth for the first six months of 2024 has been stronger than expected, increasing close to 25% year-over-year, driven by healthy underlying metrics and excellent execution by our team.

Speaker Change: While the underlying metrics continue to be strong, we remain mindful of the uncertain macro. We expect marketplace gross profit to grow faster than marketplace revenue, and we expect to drive improving operating leverage year over year through 2024 as we execute on our strong roadmap of growth initiatives.

James Milne: We expect Marketplace gross profit to grow faster than Marketplace revenue, and we expect to drive improving operating leverage year over year through 2024 as we execute on our strong roadmap of growth initiatives. For the third quarter, we expect revenue in the range of $136 million to $138 million, representing year-over-year growth of 14 to 16 percent. We expect Q3 marketplace growth to be approximately 18-20% year-over-year. We expect Q3 supplier services to be down approximately 5-10% year-over-year due to the wind-down of non-core services.

Randolph Altschuler: For the third quarter, we expect revenue in the range of $136 million to $138 million, representing year-over-year growth of 14 to 16 percent. We expect Q3 marketplace growth to be approximately 18 to 20% year over year.

Speaker Change: For the third quarter, we expect revenue in the range of $136 to $138 million, representing year-over-year growth of 14 to 16 percent.

Speaker Change: we expect q three marketplace growth to be approximately eighteen to twenty percent year-over-year

Speaker Change: We expect Q3 supply services to be down approximately 5-10% year over year due to the wind down of non-core services.

Speaker Change: in q three we expect adjusted ebitda loss to be in the range of one point five to three point five million improving from a loss of four point two million in the q three of two thousand and twenty-three

Speaker Change: in q three we expect stop-based compensation expense including related payroll taxes to be approximately eight million or six percent of revenue

James Milne: In Q3, we expect adjusted EBITDA losses to be in the range of $1.5 to $3.5 million, improving from a loss of $4.2 million in Q3 of 2023. In Q3, we expect stop-based compensation expense, including related payroll taxes, to be approximately 28 million, or 6% of revenue. With that, operator, can you please open up the call for questions? Thank you.

Speaker Change: With that, operator, can you please open up the call for questions?

Operator: Thank you very much. Please hold for a moment while we compile the Q&A roster. Our first question today comes from Brian Drab, with William Blair. Your line is open.

Speaker Change: Thank you very much.

Speaker Change: Please hold for a moment while we compile the Q&A roster.

Operator: Thank you very much. Our first question today comes from Brian Drab, with William Blair. Your line is open.

Speaker Change: Our first question today comes from Brian Drab with William Blair. Your line is open. Hi, good morning. Thanks for taking my questions and congratulations on a solid result in a tough environment.

Brian Drab: Hi, good morning. Thanks for taking my questions and congratulations on a solid result in a tough environment. I just wanted to ask first, you know, I think a question that's going to be on a lot of people's minds is, what are you seeing here in the first five weeks of the third quarter? You just put up 25% growth in the first half of the year, James just mentioned that it was stronger than expected, but you know, if you're going to hit 20% for the full year, I guess you should say at least 20%. You know, it seems to imply, you know, maybe a little bit of a slowdown in growth year over year for the second half. So what are you seeing so far in the third quarter?

Brian Drab: Hi, good morning. Thanks for taking my questions and congratulations on a solid result in a tough environment.

Speaker Change: I just wanted to ask first, you know, I think a question that's going to be on a lot of people's minds is what are you seeing here in the first five weeks of the third quarter? You know, you just put up 25% growth in the first half of the year, James just mentioned is stronger than

Speaker Change: than expected but you know you're going to hit twenty percent for the

Speaker Change: full year i guess you said at least twenty percent it seems to imply maybe a little bit of a slowdown in growth year-over-year for for the second half so what do you see sofar in the third quarter

Randolph Altschuler: Yeah, hey Brian, this is Randy, and thank you, and I just want to reiterate we're seeing strong, you know, metrics across the business, and they continue to be strong. You know, we're not signaling that we think there's going to be a slowdown in the second half of the year, but we're sticking to the guidance that we provided through the beginning of the year, which is marketplace growth of at least 20% and supplier services down 10% year-over-year. So we're just being consistent, but the underlying metrics continue to be strong.

Randolph Altschuler: Yeah, hey Brian, this is Randy, and thank you. And I just want to reiterate, we're seeing strong, you know, metrics across the business, and they continue to be strong. You know, we're not signaling that we think there's going to be a slowdown in the second half of the year, but we're sticking to the guidance that we provided through the beginning of the year, which is marketplace growth of at least 20% and supplier services down 10% year over year. So we're just being consistent, but the underlying metrics continue to be strong.

Speaker Change: Yeah, hey, Brian , this is Randy and thank you. And I just want to reiterate, we're seeing strong, you know, metrics across the business, you know, continue to be strong.

Speaker Change: we're not signing that we think 'sgoing to be a slow down the secondhalf the year but we're sticing to the guidance that we providide through

Speaker Change: through the beginning of the year, which is marketplace growth is at least 20% and supplier services down 10% year over year. So we're just being consistent, but the underlying metrics continue to be strong.

Shawn Milne: Yeah, and Brian, hey, it's Shawn. Just remember, Brian, in the fourth quarter, the year-over-year comparison goes from 22% last year in Q3 to 42%. Just keep in mind that the comp in Q4 and the second thing that James said in his prepared remarks is that we expect very strong gross profit dollar growth in the second half. You know, we saw a real step up in our gross margin in Q2 for Marketplace, and that's important when you think about your models in the second half of the year.

Shawn Milne: Brian H, Shawn, just remember Brian in the fourth quarter. The year-over-year comparison goes from 22% last year in Q3 to 42%. Just keep in mind that the comp in Q4 and the second thing that James said in his prepared remarks is that we expect very strong growth profit and dollar growth in the second half. We saw a real step up in our growth margin in Q2 from marketplace, and that's important when you think about your models in the second half of the year.

Speaker Change: Yeah, Brian , hey, it's Shawn. Just remember, Brian , in the fourth quarter, you know, the year-over-year comparison goes from 22% last year in Q3 to 42%. Just keep in mind that...

Speaker Change: the comp in Q4. And the second thing that James said in his prepared remarks is, we expect very strong gross profit dollar growth in the second half. You know, we saw a real step up in our gross margin in Q2 for marketplace. And that's important when you think about your models in the second half of the year. Unknown Speaker

Brian Drab: Yeah, definitely see that tough coming in the fourth quarter. So appreciate that.

Speaker Change: Yeah, definitely see that that tough comp coming in the fourth quarter, so appreciate that. I guess I'll just ask one more question for now. What are you expecting?

Brian Drab: I guess I'll just ask one more question for now. What are you expecting? Yeah, I'm expecting after such a solid gross margin result in the marketplace. What are you expecting for? gross margin in the marketplace in the third quarter and going forward, in general.

Speaker Change: After such a solid gross margin result in the marketplace, what are you expecting for

Speaker Change: Gross Margin in the Marketplace in the third quarter and going forward in general.

James Milne: Yeah, Brian, it's James. Thanks for the question. So we're really pleased with the performance of the gross margin, as we said on the call, this really validates the AI-driven model, the increasing data we're seeing on the platform, the ability for us to connect, match best, you know, with the best and optimal supplier, optimizing pricing, you know, hitting 33.5% in Q2 there, so 180 basis points year over year.

James Milne: That's really helping drive this gross profit improvement. We still think we can target 35 by the end of the year. We believe that with the increasing growth of the marketplace, the data, and the suppliers, we've got all the components there to continue that drive. We're really excited about that. I think it's a really important part of the value proposition of the marketplace and Xometry as we go through the rest of this year. Yeah, perfect. Okay. Thank you very much.

Speaker Change: Yeah, Brian , it's James. Thanks for the question.

James Mill: So we're really pleased with the performance of the Gross Margin, as we said on the call, this really validates the AI-driven model, the increasing data we're seeing on the platform, the ability for us to connect, match best, with the best and optimal supplier, optimizing pricing.

Speaker Change: You know, hitting 33.5% in Q2 there, so 180 basis points year-over-year, that's really helping drive this gross profit improvement.

James Rallo: We still think we can target towards 35 by the end of the year. We believe that with the increasing growth of the marketplace, the data, and the suppliers, we've got all the components there to continue that drive. Really excited about that. I think it's a really important part of the value proposition of the marketplace and Xometry as we go through the rest of this year.

Speaker Change: We still think we can target towards 35 by the end of the year.

Speaker Change: will, you know, we believe that with the increasing growth of the marketplace, the data, the suppliers,

Speaker Change: You know, we've got all the components there to continue that.

Speaker Change: I'm really excited about that, I think it's a really important part of the value proposition of the marketplace and Xometry as we go through the rest of this year.

Speaker Change: Yeah, perfect. Okay. Thank you very much.

Speaker Change: thank you

Operator: Our next question comes from Nick Jones with Citizens JMP. Your line is open.

Speaker Change: Thank you.

mickjones: our next question comes from mickjones with citizens jmp your line is open

Operator: Great, thanks for taking the questions. I have two.

Nicholas Jones: Great, thanks for taking the questions. I have two.

mickjones: great thanks for taking the questions i have to the first one on kind of marketplace revenue per active buyer sequenti it improved

Nicholas Jones: The first one on kind of marketplace revenue per active buyer sequentially improved. Can you speak to or put a finer point on kind of active buyer purchasing behavior? Are they looking for kind of longer delivery times, looking for steeper discounts through your kind of portal? Any color there would be really helpful just to kind of understand how they're behaving.

Nicholas Jones: The first one on kind of marketplace revenue per active buyer sequentially improved. Can you speak to or put a finer point on kind of active buyer purchasing behavior? Are they looking for kind of longer delivery times, looking for steeper discounts through your kind of portal? Is any color there would be really helpful just to kind of understand how they're behaving?

mickjones: Are they looking for kind of longer delivery times, looking for steeper discounts through your kind of portal?

Nicholas Jones: And then the second question is really about sales and marketing. You're driving nice leverage there in terms of kind of maybe absolute dollars. I guess, how flexible are you planning to be with the sales and marketing spend for the rest of the year? Thank you.

Nicholas Jones: And then the second question is really about sales and marketing. You're driving nice leverage there in terms of kind of maybe absolute dollars. I guess, how flexible are you planning to be with the sales and marketing spend for the rest of the year? Thank you.

Speaker Change: really helpful just to kind of understand how they're behaving. And then the second question is really on sales and marketing. You're driving nice leverage there. In terms of kind of maybe absolute dollars, I guess how flexible are you planning to be with the sales and marketing spend through the rest of the year? Thank you.

James Milne: Thanks, Nick. So, this is James.

Speaker Change: so this strength

Speaker Change: fact to the question it really sees again when the performance in the quarter active bios up net ad over to three thousand acedve by growing twenty seven percent year over the year and the lot of ourgrowthinership ' supporting both by growth with continue to expand the network of bring more market you know menu options

James Milne: Thanks for the question. I'm really pleased, again, with the performance in the quarter. Active buyers are up, you know, net assets over 3,000. Active buyers are growing 27% year over year. And a lot of our growth initiatives are supporting both, you know, buyer growth by continuing to expand the network, bringing more market, you know, menu options, increasing growth in enterprise, as well as growing revenue per buyer. We grew accounts with more than $50,000 by 24% year over year. So, that was a nice, nice add in the quarter. And I think those enterprise and marketplace menu efforts are all there to help us continue to drive both of these metrics.

Speaker Change: increasing growth in enterprise, as well as they can grow revenue per buyer.

Speaker Change: we grew countsil one or fifty thousand dollars up twenty-four percent year-over-year so that was a nice nith ad in the quarter and i think those enterprise and marketplace men efforts or that to help us continue to drive both of the metrics

Randolph Altschuler: Yeah, just going to add also, you know, again, we're seeing, you know, very strong, strong underlying metrics, customers are obviously buyers are leaning into Xometry, and we're taking market share. And just to double down on what James said, we can see that not only in the absolute number of buyers, but also as you think about these larger accounts, the enterprise accounts, you know, these bigger 50,000 plus, more and more of them are coming to us as Xometry is, you know, a terrific option for them in the broader market. Hey Nick, It's Shawn. Just on the advertising side, you know; we

Speaker Change: Yeah, you know, going forward.

Speaker Change: Yeah, just going to add also, you know, again, we're seeing, you know, very strong, strong underlying metrics.

Speaker Change: you know, customers are, obviously, buyers are leaning into Xometry, and we're taking market share. And just to double down on what James said, we can see that not only in the absolute number of buyers, but also as you think about these larger accounts, the enterprise accounts.

James Mill: You know, these bigger 50,000 plus, more and more of them are coming to us as Xometry is, you know, a terrific option for them in this, in the broader market.

Shawn Milne: Hey Nick, it's Shawn. Just on the advertising side, you know, we continue to certainly monitor that closely and balance that against our growth initiatives. You know, we talked about on the call, we saw real good leverage there year over year with, you know, advertising as a percent of marketplace revenue was 6.9% in Q2, down 100 basis points year over year. And while we drove 25% marketplace growth, so I'm feeling good about our marketing efforts.

Shawn Milne: Hey Nick, it's Shawn. Just on the advertising side, you know, we continue to certainly monitor that closely and balance that against our growth initiatives. You know, we talked about on the call, we saw real good leverage there year over year with, you know, advertising as a percent of marketplace revenue was 6.9% in Q2, down 100 basis points year over year, while we drove 25% marketplace growth. So, I'm feeling good about our marketing efforts.

Speaker Change: and think a charm just on the advertis inside you know we continue certainly

Speaker Change: monitor that closely and balance that against our growth initiatives.

Speaker Change: we talked about on the call we saw real good leverage there year over-year was

Speaker Change: advertising as percent a marketplace revenue was six point nine percent in q two down one hundred basis points year over-year while we drove twenty five percent marketplace growth so feeling good about our marketing efforts

Speaker Change: Great, thank you guys.

Operator: Our next question comes from Ron Josey with Citi. Your line is open.

Speaker Change: Thank you.

Ronald Josey: All right, thanks for taking the question. Randy, you talked about new AutoQuote categories, you know, the overall benefits, and expanding internationally. I wanted to understand a little bit more, as Instant Quoting expands, just how has this capability improved conversion rates? I was wondering how it's changed sort of the go-to-market approach overall, and we mentioned a few times over the past year just the use of Vertex to accelerate development here. I'd love to understand a little bit more how Vertex is helping to expand or accelerate this Instant Quoting capability. And then my second question is for James.

ron joie: our next question comes from ron joie would city your line is open

Operator: All right, thanks for taking the question. Randy, you talked about new auto quote categories, you know, the overall benefits, and expanding internationally. I wanted to understand a little bit more, as instant quoting expands, just how this capability improves conversion rates? I wondered how it's changed for the go-to-market approach overall, and we mentioned a few times over the past year just the use of Vertex to accelerate development here. I'd love to understand a little bit more how Vertex is helping to expand or accelerate this instant quoting capability. And then my second question is for James.

Ron Josey: thanks for taking the question reny you talked about new auto quote categories overall the benefits from expanding internationally i wanted i understand a bit more it's aquoting expands just how is this capability improved conversion rates

Speaker Change: what wondering how it's changed or go to market approach overall and and we mentioned a few times over the past year just the use of verte to acler development here we love to understand a littlebit more how vertex is helping to expand or accelerate this instant quoting capability and then some question is for james you mentioned or reiterraate the goal and for q with the thirty five percent i think

Ronald Josey: You mentioned or reiterated the goal to end 4Q with the 35%, I think, marketplace gross profit margin. I just want to understand a little bit more about the drivers there. Is that the, you know, basically the results of land and expand coming out there and working more complex products on the platform international? Any specific products or factors to call out that drive continued gross margin expansion here? Thank you.

Operator: You mentioned or reiterated the goal to end 4Q with the 35%, I think, marketplace gross profit margin. I just want to understand a little bit more about the drivers there. Is that the, you know, basically the results of land and expand coming out there and working more complex products on the platform international? Any specific products or factors to call out that drive continued gross margin expansion here? Thank you.

Speaker Change: Marketplace, Gross Profit and Margin. Just want to understand a little bit more on the drivers there. Is that basically the results of Land and Expand coming out there and working more complex products on the platform international? Any specific products or factors to call out that drives continued gross margin expansion here? Thank you.

Randolph Altschuler: Thanks for the question. This is Randy.

Ron Josey: Uh, thanks for the question. This is Randy. So, uh, you know, the benefits of more and more than we can auto-quote are sort of mirrored. Uh, you know, first of all, reduces friction within the buyer experience. And we know not just in the case of manufacturing, but across all markets, the- the more and more you can reduce friction and make it easier for a customer, uh, the more they're gonna lean in and buy from you, frankly. And the same thing is true as you digitize it. And again, our customers are- are used to more and more of their lives being digitized. It's logical for them for that to happen in manufacturing. So the more that it can be digitized, that's also very powerful. Uh, and then we become more and more of that one-stop shop for that customer. So many of our buyers, when you think about a- a- a company, particularly larger companies, they're buying-

Randolph Altschuler: So, you know, the benefits of more and more that we can auto-quote are sort of mirrored. First of all, it reduces friction within the buyer experience. And we know, not just in the case of manufacturing but across all markets, the more and more you can reduce friction and make it easier for a customer, the more they're going to lean in and buy from you. Frankly, and the same thing is true as you digitize it.

Randolph Altschuler: And again, our customers are used to more and more of their lives being digitized. It's logical for them for that to happen in manufacturing. So, the more that it can be digitized, that's also very powerful.

Randolph Altschuler: And then we become more and more of that one-stop shop for that customer. So, many of our buyers, when you think about a company, particularly larger companies, they're buying across multiple categories of manufacturing technologies. The more that we can be that one-stop shop and they can lean on us from everything from machining to 2, 3D printing, all those things under one roof, the more likely they are to stay with us and put more and more of their share of the wallet.

Ron Josey: across multiple categories of manufacturing technologies

Ron Josey: The more that we can be that one-stop shop and they can lean in to us.

Ron Josey: From everything from machining to 3D printing, all those things under one roof, the more likely they are to stay with us.

Randolph Altschuler: And again, it's talked about, you know, sort of strong underlying metrics in our market, taking market share. And part of that is because we're just making it easier and easier for buyers to come to us. The Google-Vertex AI relationship has been terrific because they're giving us AI techniques that they have that are helping us release these models faster. And that will be key. You know, we're looking at increasing the pace of the new auto-coated technologies that we add to our marketplace and Google's techniques. And they're really good at this. That team is helping us make that happen, and as I said, you'll start seeing that this quarter and in quarters to come.

Ron Josey: and put more and more of their share of wallet. And again, it's talked about, you know, sort of strong underlying metrics in our market, taking market share. And part of that is because we're just making it easier and easier for the buyers to come to us.

Speaker Change: The Google-Verix AI relationship has been terrific because they're giving us

Speaker Change: a i techniques that they've got they're helping us release these models faster and that will be keyyou know we're looking at up increasing the pace of the newal autoquoted technology that we add to our marketplace and google techniques and they're really good at this that that team are helping us to make that happen and then they said ' still startcertaining that this quarter and a quarters to follow

James Milne: and Hi-Roye, it's changing. So on the gross margin, the gross profit growth, just to reiterate on the progress today, a record 33.5% in the quarter, up 180 basis points this year, and that's driving gross profit growth 33% in the marketplace, pacing to 25% on revenue. So, as we said before, and, you know, we outlined in our best of deck, AI is the main driver of gross margin expansion over time.

Speaker Change: And hi Ryan, it's James. So on the gross margin and gross profit growth, you know, just to reiterate on the progress to date, you know, records 33.5% in the quarter, up 180 basis points year-over-year.

Ryan: And that's driving gross profit growth 33% on the marketplace, outpacing the 25% on revenue.

Speaker Change: So as we said before and you know we outline also in our best of deck, AI is the main driver of gross margin expansion over time.

James Milne: So what's really going on there with more data, with the expanding supplier network, and improvements in our own machine learning and AI price prediction, we just continue to optimize, and as we grow as a leading marketplace, and we're getting more and more data, it's enabling the system to be able to really optimize between the supplier cost side and the pricing and the buyer side. So our system really balances that buyer and supplier pricing and conversion rates over time, driving overall gross profit dollar growth.

Ryan: So what's really going on there with more data, with the expanding supply network.

Speaker Change: and improvements on our own machine learning and AI price prediction.

Speaker Change: which is continue to optimize, you know, and as we grow and, you know, lead as a leading marketplace.

Speaker Change: And we're getting more and more data. It's enabling the system to be able to really optimize.

Speaker Change: Unknown Speaker Between you know the supplier cost side and the pricing and the buyer side, so our system really balances that buyer and supplier pricing and conversion rates over driving overall gross profit dollar growth. So adding new

James Milne: So adding new processes to the menu, adding new options, is really helpful. Those are things that, over the long term, will continue to just grow, again, the data and the supplier network that we have and help us continue on what we've done over the last few years and expand, as Randy said on the call, expanding the margin already by 10 points. It's not always going to be exactly a linear trend, you know; it will depend on what's going on with supply and demand in the market as well.

Speaker Change: you know, processes to the menu, adding new options is really helpful. Those are things that over the long term continue to just grow, again, the data and the supply network that we have and help us continue on what we've done over the last few years and expand, as Randy said on the call, expanding the margin already 10 points.

Speaker Change: Thank you.

Randy: It's not always going to be exactly a linear trend, you know, it will depend on what's going on in supply and demand in the market as well, but from the progress we've seen so far this year and over multiple years, I think we feel confident we'll continue to be on a track towards this 35% goal.

James Milne: But from the progress we've seen so far this year, and over multiple years, I think we feel confident we'll continue to be on a track towards this 35% goal. Great. Thanks, Randy.

James Milne: Great. Thanks, Randy. Thanks, James.

trainy: great thanks trainy thanks james

Speaker Change: Yeah, cool.

Operator: Our next question comes from Cory Carpenter with J.P. Morgan. Your line is open.

Operator: Our next question comes from Cory Carpenter with J.P. Morgan. Your line is open.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Cory Carpenter with J.P. Morgan. Your line is open.

Speaker Change: Hey, this is Danny on for Cory. Thanks for the questions.

Danny: For the first, it looks like international growth decelerated a bit in QQ. Can you maybe parse out the different trends you're seeing from international customers versus trends in the US? And then for the second question, I believe you called out semiconductors as a strong end market in QQ. Can you maybe expand on what you're seeing here and kind of whether this is being driven by broader demand for AI adoption?

James Milne: Thanks, this is James. On the international stage, I'm really pleased with the performance there. I think we look at queue on queue, continuing to see really good additions to that growth through the first half of the year. But we did have a very strong comp a year ago. That business nearly doubled in growth a year ago, so we're really pleased with the performance that we're seeing there and continue to see that as a big driver and a big opportunity to become a bigger part of our business as we move forward. Yeah, and to be clear, I mean, the trends in international are very strong.

Danny: Thanks.

Speaker Change: fact has changed on international really pleased with the performance that i think we'll a vo q on q continuing to see really good addition to that growth through the first half of the year

Danny: We did have a very strong comp a year ago, that business nearly doubled in growth a year ago. So we're really pleased with the performance that we're seeing there and continue to see that as a big driver and a big opportunity to become a bigger part of our business as we move forward.

Cory Carpenter: Yeah, and to be clear, I mean, the trends in international are very strong.

James Milne: Yeah, and to be clear, I mean, the trends in international are very strong. As James said, it's really just a comp issue.

Danny: Yeah, and to be clear, I mean, the trends in international are very strong, as James said, it's really just a comp issue, it's not, it's nothing more than that, and we're very pleased with what's going on internationally.

Randolph Altschuler: It's not, it's nothing more than that. And we're very pleased with what's going on internationally, and it continues to be a huge opportunity to continue to grow that market aggressively. On the semiconductor side, you know, we're definitely benefiting from a lot of different trends, whether it's the trend in AI, you've got domestic investments that are happening as well here in the United States. So it's a multiple or multitude of factors that are driving that. And that's, you know, become a nice sector for us.

Cory Carpenter: and continues to be a huge opportunity to continue to grow that market aggressively.

Speaker Change: On the semiconductor side, you know, we're definitely benefiting from a lot of different trends, whether it's the trend in AI, you've got domestic investments that are being happening as well here in the United States, so it's a multiple or multitude of factors that are driving that, and that's, you know, become a nice

Speaker Change: a nice sector for us.

Cory Carpenter: Thanks.

Operator: And our next question comes from Matt Swanson with RBC. Your line is open.

Speaker Change: Thank you.

Speaker Change: And our next question comes from Matt Swanson with RBC. Your line is open.

Matthew Swanson: Yeah, thank you for taking my questions and congratulations on the quarter. Maybe building on some of the comments about market share gains and people leaning into Xometry, it was great to hear the traction teams' challenges. I think you said up to 3,300 teams. Maybe you could just give us a little bit more color on kind of the customer feedback as it's starting to get more broadly adopted and anything you're noticing from kind of the usage trends with it.

Speaker Change: Yeah, thank you for taking my questions and congratulations on the quarter. Maybe building on some of the comments about market share gains and people leaning into Xometry, it was great to hear the traction teams face. I think you said up to 3,300 teams.

Speaker Change: Maybe you could just give us a little bit more color on kind of the customer feedback as it's starting to get more broadly adopted, and anything you're noticing from kind of the usage trends with it.

Randolph Altschuler: Yeah, you know, this is largely a technology story. And the more that we can reduce that friction for the customer, the more that we can make it, when you think about teams of buyers together, building projects, or products, or entire programs, things like communication between them, being able to share documentation, being able to integrate within the ERP system, the purchasing system of the customer, the ability to reorder more parts from that program, you know, because those programs will go over periods of time and need to be able to reorder parts periodically.

Randolph Altschuler: Yeah, you know, this is largely a technology story. And the more that we can reduce that friction for the customer, the more that we can make it, when you think about teams of buyers together, building projects, or products, or entire programs, things like communication between them, being able to share documentation, being able to integrate within the ERP system, the purchasing system of the customer, the ability to reorder more parts from that program, you know, because the programs will go over periods of time and need to be able to reorder parts periodically, all those different factors, the more that we can make those seamless, the more that we can digitize those, and make it intuitive to the customer, the more that they're going to continue to lean into Xometry. And particularly when you think about our B2B audience, reliability,

Randolph Altschuler: Yeah, you know, this is.

Randolph Altschuler: largely in a technology story and the more that we can reduce that friction for the customer of the more that we can make it when you think about teenss of a buyers together building projects

Speaker Change: were produought s

Randolph Altschuler: or entire programs. Things like communication between them, being able to share documentation, being able to integrate within the ERP system, the purchasing system of the customer, the ability to reorder more parts,

Randolph Altschuler: All those different factors, the more that we can make those seamless, the more that we can digitize them, and make them intuitive to the customer, the more that they're going to continue to lean into Xometry. And particularly when you think about our B2B audience, reliability and convenience are key factors. And with our digital and extensible platform, that's very attractive to them, and we're constantly adding to it. You know, I talked about in my script, we're making investments on the machine learning side and on the data science side. And just overall, you know, in our technology team to continue to make it easier for our customers.

Randolph Altschuler: From that program, you know, the programs will have will go over periods of time and need need to be able to be reordered parts periodically. All those different factors, the more that we can make those.

Randolph Altschuler: Seamless, the more that we can digitize those.

Randolph Altschuler: and make it intuitive to the customer, the more that they're going to continue to lean into Xometry.

Randolph Altschuler: And particularly when you think about our B2B audience, reliability and convenience are key factors.

Randolph Altschuler: and with our digital and extensible platform that's very attractive to them. And we're constantly adding to it. You know, I talked about in my script, we're making investments on machine learning side and on the data science side. And just overall, you know, in our technology team to continue to make it easier for our customers.

Matthew Swanson: That's super helpful, and it was really nice to hear about the resilience in what feels like an uneven macro environment. I was just curious, if we do see headwinds, are there any tailwinds that come from that? And the idea that either you see more supplier interest because demand is harder to come by, or just the ROI of the platform makes it more attractive to buyers. Do you see any offsets that would change your go-to-market motion at all?

Matthew Swanson: That's super helpful, and it was really nice to hear about the resilience in what feels like an uneven macro environment. I was just curious, if we do see headwinds, are there any tailwinds that come from that? And the idea that either you see more supplier interest because demand is harder to come by, or just the ROI of the platform makes it more attractive to buyers. Do you see any offsets, or does it change your go-to-market motion at all?

Speaker Change: That's super helpful. And it was really nice to hear the resiliency in what, you know, feels like an uneven macro environment.

Matthew Swanson: I was just curious, if we do see headwinds, are there any...

Speaker Change: tailwinds that come from that. And the idea that either you see more supplier interest because, you know, demand is harder to come by or just the ROI of the platform making it more attractive to buyers. Do you see any, you know, offsets or is it change your go-to-market motion at all?

Shawn Milne: Yeah, it's Shawn. I mean, you know, it's a good point. I mean, clearly, we're becoming more important for both our buyers and suppliers. And, you know, we've said before, we spend very little on supplier acquisition. And, you know, certainly in this environment, they're leaning in more with Xometry, and the more we can offer them with our WorkCenter software, we can help them improve their operations. And really, again, as Randy said on the call, it's important to understand that we're allowing these suppliers to, you know, monetize their capacity digitally. This is something that's not been done before. So we've got more suppliers coming to us and, you know, expanding the network.

Matthew Swanson: Yeah, it's Shawn. I mean, you know, it's a good point. I mean, clearly we're becoming more important for, you know, both our buyers and suppliers and...

Speaker Change: You know, we've said before, we spend very little on supplier acquisition, and, you know, certainly in this environment, they're leaning in more with Xometry, and the more we can offer them with our WorkCenter software, we...

Speaker Change: can help them improve their operations and really again is ready on the call it's important to understand we're allowing these suppliers to monetize their capacity digitally this is something that's not been done before so we've gotone more suppliers coming to us and expanding the network

James Milne: Yeah, Matt, this is James. Just to add to that, I think the key offering that Zomership provides for both buyers and suppliers is this flexible, resilient supply chain solution. So for buyers, being able to instantly access multiple solutions, the platform to be able to take away a lot of complexity, and then on the supply side, accessing, in effect, global demand and minimal cost, and being able to utilize their assets, can optimize their profitability as well.

James Rallo: Yeah, Matt, this is James. Just to add to that, I think the key offering that Xometry provides to both buyers and suppliers is this flexible, resilient supply chain solution. So for buyers, being able to instantly access, you know, multiple solutions, the platform to be able to take away a lot of complexity, and then on the supplier side, accessing, in effect, global demand at minimal cost, and being able to, you know, utilize their assets, can optimize their profitability as well.

James Rallo: Yeah, Matt, this is James. Just to add to that, I think, you know, the key offering that Xometry provides to both buyers and suppliers is this flexible, resilient supply chain solution. So for buyers being able to instantly access, you know, multiple solutions.

James Rallo: you know, the platform to be able to take away a lot of complexity and then on supplier side accessing, in effect, global demand at minimal cost and being able to, you know, utilize their assets.

James Rallo: So I think whatever the macro trends are, and even, you know, as things go through the rest of this year, and even with, you know, political changes as well, I think that our platform and the flexibility and resiliency that we have make us well suited to support our buyers and our suppliers through that.

James Rallo: can optimiz their profitability as well so i think what this is a broader point on i think whatever the macro

James Rallo: trends and even, you know, as things go through the rest of this year and even with, you know, political changes as well, you know, I think that

James Rallo: Our platform and the flexibility and resiliency that we have, you know, it makes us well suited to support our buyers and our suppliers through that.

Randolph Altschuler: Yeah, and just add one more thing, for buyers, you know, the transparency of our pricing and the ability for them to see in real time as they change quantities, materials, processes. If a buyer is looking to optimize, you know, get the best deal and find the most efficient way to do that, our technology enables them to make that happen. And again, just going back to that user experience, the transparency of reducing, reducing the friction, making it easy for them to make choices and see what those choices cost, that's very powerful, and the more uneasy the environment, the more customers want that transparency.

Speaker Change: Yeah, just to add one more thing for buyers, you know, the transparency of our pricing and the ability for them to see in real time as they change quantities, materials, processes,

James Rallo: If a buyer is looking to optimize

Speaker Change: get the best f and find that both posficition way to do that our technology enables them to make that happen and again just gone that to that user experience to transparency to reduce reducing the friction makingit easy for them to make choices

Speaker Change: and see what those those choices cost that's very careful and the more uneasy environment to more customers want that trsparency

James Rallo: it

Speaker Change: Thank you.

Operator: And our next question is from Greg Palm with Craig Holland. Your line is open.

Speaker Change: Thank you.

James Rallo: And our next question is from Greg Palm with Craig Holland. Your line is open.

Gregory Palm: Yeah, thanks. Good morning, everybody.

Speaker Change: Yeah, thanks. Good morning, everybody.

Speaker Change: Just thinking back to Q2, you know, just, you know, putting a finer point on, you know, outperformance. Can you just, you know, give us a little bit of sense on where you saw the most outperformance relative to maybe the

James Rallo: Initial guide and then, you know, just in terms of kind of what you're seeing more broadly.

Speaker Change: out there. I mean, it's very clear manufacturing trends are slowing here, but it doesn't sound like you're sort of seeing it. So, you know, can you maybe just give us a little bit of sense on, you know, again, kind of, you know, why or how you're taking more shift, I guess, now in this kind of environment?

James Rallo: Thanks for the question. It's James. I'll kick it off and

Gregory Palm: Just thinking back to Q2, you know, just, you know, putting a finer point on, you know, outperformance, can you just, you know, give us a little bit of sense on where you saw the most outperformance relative to maybe the initial guide? And then, you know, just in terms of kind of what you're seeing more broadly out there, I mean, it's very clear manufacturing trends are slowing here, but it doesn't sound like you're sort of seeing it. So, you know, can you maybe just give us a little bit of a sense on, you know, again, kind of why or how you're taking more shifts, I guess, now in this kind of environment?

James Rallo: no

Speaker Change: andct the question it' changed 'llkick it the teers canadd know i think co

Speaker Change: strong evidence that we're acting really well across all of our end markets and all of our processes.

Speaker Change: as well as controlling expenses in ina ciplined way so despite the uneven and uncertain magro environment our focus on our growth initiati and on executing on those i in that was' coming through here and then the gross profit performance coming in thirty three percent

Speaker Change: That was a real strong highlight for the quarter. I think we were really pleased with how we were able to execute on that, the models and delivering that gross margin.

Speaker Change: That was probably, you know, part of the, you know, an important driver of our relative outperformance when it came to, you know, the Justity Biddar as well.

Randolph Altschuler: Yeah, and just to add, you know, they said before, the metrics, underlying metrics, remain strong. You know, we feel good about, we're in the second half of the year as well.

Speaker Change: Yeah, and just to add, I mean, you know, as we've said,

Speaker Change: Before, you know, the metrics underlying metrics remain strong, you know, we feel good about where the second half of the year as well.

Randolph Altschuler: A lot of this, as we think about gaining market share, a lot of it is about our technology and just making it easier for all the different segments of the markets or for the buyers, whether it's team space, more auto-coded processes, the ability to link into their ERP systems, all those things just make it very compelling for a buyer. And then on the supplier side, WorkCenter. You know, we continue to invest in WorkCenter.

Speaker Change: A lot of this, as we think about gaining market share.

Speaker Change: A lot of it is about our technology and just making it easier for all the different segments of the markets, or for the buyers, whether it's team space.

Speaker Change: more auto-coded

James Rallo: the ability to link into their ERP systems, all those things just make it very compelling for a buyer. And then on the supplier's side, WorkCenter, you know, we continue to invest in WorkCenter. That's the system, the manufacturing execution system that we give to our suppliers.

Randolph Altschuler: That's the system, the manufacturing execution system that we give to our suppliers to manage work from Xometry is their own work. We're continuing to develop that and reduce friction for them. So it makes them, the more that they can move quicker and more efficiently, the more profitable it is for our suppliers. So not only are our buyers always wanting to do better, but our suppliers are too, and our technology plus our matching algorithms that optimize which supplier makes which parts, you pair that together with WorkCenter and our continuous improvement in those, that's very appealing.

Speaker Change: to manage work from Xometry is their own work. We're continuing to develop that and reduce friction for them.

Speaker Change: So it makes them, the more that they can move quicker, more efficiently, the more profitable it is for our suppliers. So not only are our buyers always wanting to do better, but our suppliers are too. And our technology, plus our matching algorithms that optimize which supplier makes which parts.

Cory Carpenter: Hey, this is Danny on behalf of Cordy. Thanks for the questions. For the first time, it looks like international growth decelerated a bit in QQ. Can you maybe parse out the different trends you're seeing from international customers versus trends in the US? And then for the second question, I believe you called out semiconductors are strong and market in QQ. Can you maybe expand on what you're seeing here and kind of whether this is being driven by broader demand-ray eye adoption? Thanks.

Speaker Change: You pair that together with WordCenter and our continuous improvement in those, that's very appealing.

Gregory Palm: Yep, okay, that makes sense. And then just on the EBITDA guide for Q3, so, you know, essentially the same level of EBITDA as Q2, higher level of revenue, but it's obviously, you know, it implies something a lot less than that 20% incremental margin, James, so just give us a little bit of color kind of what's backed in or what's assumed in the EBITDA guide for Q3 versus what you saw in Q2.

Speaker Change: Yep, okay, makes sense.

Speaker Change: And then just on the EBITDA guide for Q3, so essentially the same level of EBITDA.

Speaker Change: Q2 higher level of revenue it's obviously you know it implies something you know a lot less than that 20% incremental margin James to just give us a little bit color kind of what's backed in or what's assumed in the EBITDA guide for Q3 versus what you saw in Q2.

James Milne: Thanks, Greg. So, again, I'm really pleased with the performance we delivered in the second quarter. You know, we saw a 70% improvement in the adjusted EBITDA loss. You know, we're at 2% of revenue there on the loss. As we've talked about and framed, the path here is profitability beyond the $600 million run rate. And what Randy and I are working on with the team is to make sure that we're investing the right amount, we're being disciplined in how we're executing across our OPEC space, and we're, you know, optimizing for the great growth opportunity that there is ahead as we scale.

James Rallo: Thanks, Greg. So, again, really pleased with the performance we drove in the second quarter. You know, we saw a 70% increase improvement in the adjusted EBITDA loss. You know, we're at 2% of revenue there on the loss.

James Rallo: ah

Speaker Change: As we've talked about and framed, you know, the path here is profitability beyond the $600 million run rate.

Randy: And what, you know, Randy and I are working on with the team is to make sure that we're investing the right amount. We're being disciplined on how we're executing across our OPEC space.

Speaker Change: And we're, you know, optimizing to the great, you know, growth opportunity that there is ahead as we scale.

James Milne: So, you know, we were able to, you know, execute really well in the second quarter as we look at the second half of the year and get to that $600 million run rate. We're really just making sure that we've got those, you know, we're putting our investments in place and allocating our capital in the most efficient way to drive to that end result of, you know, surpassing breakeven and getting into profitability as we pass $600 million. And I think overall that it fits within this 20% EBITDA incremental path. Okay, I understand.

Gregory Palm: Okay, understood. I will leave it there. Thanks.

Speaker Change: So, you know, we were able to execute really well in the second quarter as we look to the second half of the year and getting to that $600 million run rate, we're really just making sure that we've got like those, you know, we're putting our investments in place.

Speaker Change: and allocating our capital in the most efficient way they drive to that end result of, you know, getting, surpassing break-even and getting into profitability as we pass 600 million. And I think overall that fits within this 20% EBITDA incremental path.

Operator: Okay, understood. I will leave it there. Thanks.

Operator: Okay, understood. I will leave it there. Thanks.

Operator: This does conclude our question and answer session and the program for today. Thank you for your participation in today's conference. You may now disconnect.

Operator: This does conclude our question and answer session and the program for today. Thank you for your participation in today's conference. You may now disconnect.

Operator: ay

Operator: This does conclude our question and answer session and the program for today.

Operator: Thank you for your participation in today's conference. You may now disconnect. Have a great day.

James Milne: Well below revenue growth. As I said last quarter, we are applying stronger discipline and rigor to our capital and resource allocation across teams. In Q2 2024, this resulted in non-GAP operating expenses remaining flat, quarter over quarter, driving strong leverage across sales and marketing, operations, and product development. Marketplace advertising spend increased 9% year-over-year or 6.9% of marketplace revenue, down 100 basis points year-over-year as we continue to closely monitor advertising spend and efficiency.

James Milne: Thanks for the question. It's James off-kick it off, and the team can add, you know, I think global strong evidence that we're executing really well across, you know, all of our end markets and all of our processes, as well as, you know, controlling expenses in a disciplined way. So despite the uneven and uncertain macro environment, our focus on our growth initiatives and on executing on those, I think that's what's coming through here. You know, there's a, you know, and then a growth profit performance coming in at 35%.

James Milne: You know, that was a real strong highlight for the quarter. I think we were really pleased with how, you know, we were able to execute on that, the models and deliver that growth margin. That was probably, you know, part of the, you know, an important driver of our relative outperformance when it came to, you know, the adjustity, but dull as well.

James Milne: So I think whatever the macro trends and even those things go through the rest of this year and even with political changes as well, I think that our platform and the flexibility of those incidents here that we asked for, it makes us well suited to support our buyers and our suppliers through that. Yeah, and just that one more thing for buyers, you know, the trends.