Q4 2024 Xometry Inc Earnings Call
Good day and thank you for standing by welcome to the dollar Tree, Inc. Q4, 'twenty 'twenty four earnings call.
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Speaker Change: 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 geometries, Q4, and full year 2024 earnings call.
Speaker Change: Joining me are Randy I'll, Ciulla, our Chief Executive Officer, and James Milner, Chief Financial Officer.
Speaker Change: During today's call, we will review our financial results for the fourth quarter and full year 2024, and discuss our guidance for the first quarter and full year 2025.
Speaker Change: During today's call, we will make forward looking statements, including statements related to the expected performance of our business future financial results strategy long term growth and overall future prospects.
Speaker Change: Such statements may be identified by terms such as believe expect intend and may.
Speaker Change: These statements are subject to risks and uncertainties, which could cause them to differ materially from actual results.
Speaker Change: Information concerning those risks is available in our earnings press release distributed before the market opened today and in our filings with the U S Securities and Exchange Commission, including our Form 10-K for the year ended December 31 2024.
Speaker Change: We caution you to not place undue reliance on forward looking statements.
Speaker Change: Undertakes 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: 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.
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 <unk> geometry Dot com.
Speaker Change: Today's call will also be posted on our website.
Randy I'll: With that I'd like to turn the call over to Randy.
Randy I'll: Thanks, Shawn good morning, everyone and thank you for joining our Q4 2024 earnings call. We had a strong Q4 and we're off to a strong start in 2025 I will go into our results and outlook in more detail in just a moment.
Randy I'll: Powered by AI, our manufacturing marketplace continues to gain significant market share globally as buyers and suppliers realize the value convenience and resilience of our platform.
Randy I'll: As amatory marketplace enables our customers to fulfill all of their needs across the full lifecycle. Our extensible technology platform provides a broad deep marketplace that reduces cost and delivery dates for customers and improves throughput and profit for suppliers in a world with increasingly volatile supply chains.
Randy I'll: Dmitry provides customers surety of delivery.
Randy I'll: Q4 was a record quarter predominantly across many fronts tapping a pivotal year as we scale to adjusted EBITDA profitability.
Randy I'll: Driven by the strong execution of our teams we grew marketplace revenue, 23% in 2024 ahead of our initial 20% expectations. Despite the manufacturing contraction.
Randy I'll: The strength of our results in Q4, and the full year underscore our confidence in strong growth and scale in 2025.
Randy I'll: In Q4, our AI powered marketplace delivered record revenue record gross profit and record marketplace gross margin.
Randy I'll: We generated positive adjusted EBITDA and an important milestone in our mission to digitize the multi trillion dollar global custom manufacturing industry.
Randy I'll: In Q4, we delivered strong growth with revenue, increasing 16% year over year to a record 149 million.
Randy I'll: Marketplace revenue grew 20% year over year ahead of expectations, driven by 23% growth in active buyers, reaching over 68000 active.
Randy I'll: Active buyer net additions were over 3400 in Q4, the strongest quarter in 2024, driven by improved marketing efficiency we.
Randy I'll: We saw strength across many end markets, including aerospace consumer industrial equipment and engineering.
Randy I'll: International growth was robust in Q4, increasing 42% year over year, reaching the $100 million run rate.
Randy I'll: Vomitory Europe introduced new materials and added dozens of finishes providing customers with even more tailored solutions for their manufacturing needs.
Randy I'll: <unk> expanded express manufacturing options across Europe for dozens of materials, reducing lead times for our CNC machining and sheet metal fabrication.
Randy I'll: We're driving deeper enterprise adoption as large companies increasingly leverage our technology and global supplier network to build resilient supply chains and increase speed to market.
Randy I'll: 2024, we enhanced our marketplace offerings through new auto quote options and teams based collaboration features we also expanded our enterprise sales capabilities accelerating our land and expand strategy with key accounts and giving customers more reasons to rely on us for lifecycle management.
Randy I'll: Our investments are clearly paying off given robust 40% revenue growth in 2024 from our largest accounts with annual spend with commentary of at least $500000.
Randy I'll: In our Q4 earnings presentation, we highlighted several enterprise case studies, which underscore a strong buyer and revenue growth across many verticals, including aerospace and medical devices.
Randy I'll: Q4, gross profit increased 20% year over year to a record $59 million Q.
Randy I'll: Q4 marketplace gross profit increased a robust 32% year over year, driven by our AI powered marketplace and increasing network back to suppliers.
Randy I'll: As we scale, our data or machine learning AI model gets better pricing and matching which in turn fuels gross profit dollar growth.
Randy I'll: We grew active suppliers by 28% year over year, and 4375 manufacturers driving improvements in our AI matching algorithm.
Randy I'll: As a result marketplace gross margin expanded 320 basis points year over year to a record 34, 5% in Q4.
Randy I'll: Over the last three years, we expanded our marketplace gross margin by over 10 points from 23, 5% to 34, 5% in Q4 underscoring the power of our AI driven model.
Randy I'll: Strong marketplace revenue and marketplace gross profit growth drove adjusted EBITDA profitability of $1 million or $3 9 million dollar improvement year over year.
Randy I'll: As I look ahead to the rest of 2025 I'm also excited about the recent additions to our executive team.
Randy I'll: These executives have proven experience scaling e-commerce and marketplace businesses and will help us drive further automation and operational excellence across our global marketplace.
Randy I'll: Our vision is to be the global marketplace that digital rails for buyers and suppliers in the two trillion dollars custom manufacturing market and we continue to make great strides towards that goal.
Randy I'll: In 2025, we remain focused on our key growth initiatives first expand our buyer and supplier networks. We expect our active buyer growth to remain healthy as there are millions of potential buyers and symmetries brand awareness is growing but still low.
Randy I'll: In 2025, we plan to enhance our customer segmentation efforts leveraging AI capabilities in our advertising tech stack to increase marketing efficiency through better personalization targeting and customer engagement.
Randy I'll: We're also improving the supplier experience through our work center software as we rapidly scale, our network across the globe, including new regions, such as India. We've.
Randy I'll: We've grown our active supplier network by over threefold since the beginning of 2021 as our technology allows manufacturers to digitally monetize their manufacturing capacity improve their profitability and access global demand at minimal cost.
Randy I'll: Our supplier network stands out due to its size and reach spanning three continents, enabling our customers react quickly to changing customer demand and global trade policy.
Randy I'll: Second drive deeper enterprise engagement some of our biggest customers are the largest companies in the world. The geometry marketplace is increasingly becoming the go to trusted platform and custom manufacturing.
Randy I'll: Over the past four years, we've grown marketplace accounts with last 12 months spend of at least $50000 by approximately a 30% CAGR to nearly 1500 in 2024.
Randy I'll: As I mentioned, our enterprise investments are paying strong dividends as revenue from marketplace accounts with last 12 months band of at least $500000 increased by over 40% year over year in 2024.
Randy I'll: In 2025, we are focused on driving further penetration in our largest accounts each with an estimated potential spend at least $10 million annually.
Speaker Change: Third expand the marketplace menu.
Speaker Change: Our goal is to be the primary destination for our customers' manufacturing and supply chain needs.
Speaker Change: Our pricing and sourcing models leverage AI to provide instant quoting for as many manufacturing processes and materials as possible.
Speaker Change: In 2024, we launched instant quoting for laser tube cutting into bending we expect to add new processes to our marketplace in 2025.
Speaker Change: Within our marketplace. We are investing in next generation enhanced AI models to improve cost and lead time optimization.
Speaker Change: We're working on cutting edge applications of generative AI to incorporate customer behavior segmentation real time market data and manufacturing complexities to our marketplace algorithms. In addition, we believe the damage that can be a leader in developing and applying multimodal models to process different types of data.
Speaker Change: Such as images taxed and three D. CAD at the same time, allowing geometry to more fully support the buyer workflow from design to manufacturing.
Speaker Change: Fourth growing internationally, we will continue to drive growth in Europe with increased penetration within our large enterprise accounts.
Speaker Change: Based on investments in 2024, we expect APAC to continue to ramp and become a more material driver to overall revenue growth in 2025.
Speaker Change: In 2024 International revenue represented 18% of total marketplace revenue.
Speaker Change: Long term, we believe international can represent 30% to 40% of marketplace revenue consistent with many other global online marketplaces.
Speaker Change: Fifth enhancing supplier services, we are investing the restore Thomas advertising growth given the 85% plus gross margin and strong contribution margin opportunity by improving the underlying platform technology, we will enhance the experience for both users and advertisers providing opportunities for growth and engagement, we're launching <unk>.
Speaker Change: New AD server technology platform in 2025 to drive improved supplier engagement as we aim to improve monetization of Thomas.
Speaker Change: One of our top goals is to drive increasing advertiser penetration on the platform, which is approximately 1% today of the roughly 500000 suppliers listed on Thomas.
Speaker Change: Together based on these initiatives, we expect to grow revenue faster in 2025 and 2024.
Speaker Change: As I said Q1 is off to a strong start and we expect total revenue growth year over year to accelerate to $20 to 21%.
Speaker Change: Through improved technology and automation led by AI, We will continue to drive strong operating leverage.
Speaker Change: We remain in the early innings of the secular digital shift of manufacturing one of the largest economic sectors and geometry is the leading online marketplace. Many companies talk about AI geometry is powered by AI, which we will expect to continue to drive global scale market share gains and improving profitability.
Speaker Change: I'm proud of our team's accomplishments their talent are extensible technology platform rapidly growing network of buyers and suppliers and expanding data Lake together are fueling our competitive advantage and powering our strong growth.
Speaker Change: Many of the world's greatest companies turned to us to drive innovation and create supply chain resiliency.
Speaker Change: They need in an increasingly dynamic global trade environment.
James Milner: I'll now turn the call over to James for a more detailed review of Q4 and our business outlook.
Thanks, Randy and good morning, everyone.
James Milner: As Randy mentioned Q4 was a record quarter for XOMA tree across many fronts, and we expect significant growth and operating leverage to continue in 2025.
James Milner: Q4 revenue increased 16% year over year to $149 million driven by strong marketplace growth.
James Milner: Q4 marketplace revenue was $135 million and supplier services revenue was $14 million.
James Milner: Q4 marketplace revenue increased 20% year over year ahead of our 16% to 18% expectations driven by strong execution growth with larger accounts and international growth as we continue to capture significant market share.
James Milner: Q4 marketplace revenue was impacted by approximately half to $1 million due to a stronger U S. Dollar since we provided Q4 guidance on November 5th.
James Milner: Q4 active buyers increased 23% year over year to 68267 with a net addition of 3416 active buyers.
James Milner: Our highest net additions in 2024.
James Milner: Key for our marketplace revenue per active buyer was down 3% year over year due to a tough comparison from Q4 2023 and.
James Milner: And up 1% quarter over quarter.
James Milner: In Q4.
James Milner: The number of accounts with last 12 months band of at least $50000 on our platform increased 12% year over year to 1495.
James Milner: We view accounts with at least 50000 dollar spend as the top of the enterprise funnel.
James Milner: We expect to continue to grow this base of accounts overtime.
James Milner: Growth in enterprise was strong in 2024 with revenue increasing over 40% for marketplace accounts with last 12 month's Spence of at least $500000.
James Milner: As Randy mentioned, our enterprise strategy focus on our largest accounts, which we believe each half $10 million plus in potential annual account revenue.
Supply it services revenue declined 13% year over year in Q4, primarily driven by the wind down of our noncore services and to a lesser extent Thomas advertising or marketing services due to manufacturing contraction in the U S.
James Milner: As Randy mentioned, we are focused on improving engagement and monetization on the platform, which remains a leader in industrial sourcing supplier selection and digital marketing solutions.
James Milner: The number of active paying suppliers in our supply of services segment was 6582 for Q4 on a trailing 12 month basis, a decrease of 9% year over year.
James Milner: Q4, gross profit was $59 million, an increase of 20% year over year with gross margin of 39, 7%.
James Milner: Q4 gross margin for marketplace was a record 34, 5% up 320 basis points year over year.
James Milner: Q4 marketplace gross margin expansion underscores the success of our machine learning AI powered economic model, which optimizes pricing with more data and increase matching with an expanding supplier network.
Q4 marketplace gross profit dollars increased 32% year over year.
James Milner: We are focused on driving marketplace gross profit dollar growth through the combination of topline growth and gross margin expansion.
James Milner: Q4 gross margin for supply of services remained strong at 89.7% driven by our increasing focus on the higher gross margin Thomas advertising and marketing services.
James Milner: Moving onto Q4 operating costs.
James Milner: Q4, total non-GAAP operating expenses increased 12% year over year to $58 2 million well below revenue growth.
James Milner: We are applying strong discipline and rigor to our capital and resource allocation across teams.
James Milner: In Q4 2024. This resulted in non-GAAP operating expenses growing less than 3% quarter over quarter, driving strong beverage across sales and marketing and other operating expenses.
James Milner: After investing in our enterprise sales efforts, we delivered 480 basis points of sales and marketing leverage from Q1 to Q4 2024.
Market place advertising spend decreased 4% year over year and was five 6% of marketplace revenue, which is down 140 basis points year over year, as we balance growth and profitability in an uncertain macro.
James Milner: Q4, adjusted EBITDA was $1 million or 0.7% of revenue compared with a loss of $2 $9 million or 2.2% of revenue in Q4 2023.
James Milner: Q4, adjusted EBITDA improved $3 $9 million year over year, driven by growth in revenue gross profit and operating efficiencies.
James Milner: For 2024, we delivered incremental adjusted EBITDA margin of 22% slightly higher than our long term target of 20%.
James Milner: Starting in Q4, we provided adjusted EBITDA for both the U S and international operating segments.
James Milner: In Q4 U S segment, adjusted EBITDA was $4 million or three 3% of revenue.
James Milner: A $4 $8 million improvement year over year, driven by expanding gross margin and strong operating expense leverage.
James Milner: International segment adjusted EBITDA loss was $3 million in Q4 of 2024 compared to a loss of $2.1 million in Q4 of 2023.
James Milner: Investments in sales and technology to drive further scale in Europe and Asia Pacific.
James Milner: At the end of the fourth quarter cash and cash equivalents in marketable securities were $240 million, increasing $5.8 million from Q3 2020 for the.
James Milner: The increase in cash was driven by positive adjusted EBITDA of $1 million.
James Milner: Capex of $4 $5 million and positive changes in working capital as we aligned our partner payments more closely with receivable days.
James Milner: We are focused on improving working capital efficiency and cash flow conversion, given our asset light model and limited capital spending.
James Milner: Q4 demonstrates the ability of our AI.
James Milner: AI powered marketplace to deliver strong gross margin expansion and gross profit growth.
James Milner: We remain focused on operating expense discipline, while investing in our growth initiatives in 2024, we delivered 22% year over year incremental adjusted EBITDA margin as we scale towards $1 billion of revenue, we expect continued 20% plus incremental adjusted EBITDA leverage.
James Milner: Given our large market opportunity and low penetration rates, we will continue to balance investing in the future with driving operating leverage.
James Milner: Now moving onto guidance for the first quarter, we expect revenue in the range of $147 million to $149 million or 20% to 21% growth year over year.
James Milner: And acceleration from 16% in Q4 2024.
James Milner: We estimate that the stronger U S. Dollar will negatively impact Q1 revenue by approximately $1 million on a year over year basis.
James Milner: We expect Q1 marketplace growth to be approximately 24% to 26% year over year, an acceleration from 20% in Q4 2024.
James Milner: As Randy mentioned 2025 is off to a strong start.
James Milner: We expect Q1 supply services to be approximately flat quarter over quarter.
James Milner: In early 2025 in the face of volatile global trade policies, we accelerated our global sourcing strategy, including scaling up suppliers in different geographies as.
James Milner: As we ramp up order volume in these geographies. This investment has temporarily dampen gross margin in Q1 on a quarter over quarter basis.
James Milner: We expect marketplace gross margin to improve into Q2 and continue to expect market place gross margin to expand year over year in 2025.
James Milner: In Q1, we expect adjusted EBITDA loss of approximately $1.5 million compared to a loss of seven $5 million in Q1, 'twenty 'twenty four.
James Milner: We expect Q1 incremental adjusted EBITDA margin to be approximately 22% to 24% year over year.
James Milner: In Q1, we expect stock based compensation expenses, including related payroll taxes to be approximately $8 million to $9 million or approximately 6% of revenue.
James Milner: We expect overall revenue growth in 2025 to exceed 120 for growth based on FX rates quarter to date, we estimate that the stronger U S. Dollar could impact revenue by approximately $4 million in 2025 on a year over year basis.
James Milner: For the full year 2025, we expect marketplace growth of at least 20% across each quarter driven by our growth initiatives in our large fragmented market.
James Milner: We expect supply of services to be down approximately 5% to 10% year over year.
James Milner: We remain focused on driving marketplace gross profit dollar growth through the combination of topline growth and gross margin expansion.
James Milner: And lastly, we expect to be adjusted EBITDA positive for the full year 2025, and expect incremental adjusted EBITDA margins of approximately 20% for 2025.
James Milner: I want to close by thanking our dedicated Summitry team members around the world that commitment to our buyers and suppliers is instrumental to our continued growth and core to our mission of digitizing manufacturing.
Speaker Change: With that operator can you. Please open up the call for questions.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again, please standby, while we compile the Q&A roster.
Eric Sheridan: Our first question comes from the line of Eric Sheridan with Goldman Sachs. Your line is now open.
Eric Sheridan: Thank you so much for taking my questions two if I could come back to the priorities you laid out.
Speaker Change: A little bit about how we should be thinking about the pathway to that.
Speaker Change: What kind of penetration or mix from international in the years ahead, what needs to be built what needs to be scaled how do you think about that mix of your revenue internationally continuing to evolve.
Speaker Change: Remember as you pointed out there and then maybe just a quick second one throughout multi modal AI and how it might.
Speaker Change: Capture more of the buyer process and improve our friction and conversion of the bioprocess as well can you talk a little bit about the building blocks of getting from where we are today to multimodal AI, how big the bioprocess. Thank you.
Eric Sheridan: Hey, Eric.
Speaker Change: Good morning, So we talked about the international we expect that to be about 30% to 40% of our.
Speaker Change: Marketplace revenue sort of consistent with what you see with other global marketplaces I think there is two fold one on EMEA.
Speaker Change: We've had some strong growth, we expect that growth to continue.
Speaker Change: And even though we've gone from that.
Speaker Change: Back in 2019 $1 million revenue to now a $100 million run rate last 12 months, there's still lots of room to grow in EMEA and then in Asia Pac.
Early days there we did call out yesterday that we think thats going to make a more meaningful impact.
Speaker Change: In 2025, and we expect that to also play a bigger and bigger role in our international growth.
Speaker Change: In terms of your question about the multimodal. So just today when somebody gets an instant quote on the damage side.
Speaker Change: Hello to <unk>, CAD file and we need that CAD file to generate the quote.
Speaker Change: As we move to a multimodal model customers would have the ability to upload a file a flat file or drawing and they get an instant quote from that.
Speaker Change: Just using a <unk> CAD files so.
Speaker Change: The world of manufacturing there are still many parts that arent done in three D. Kathryn.
Speaker Change: Users, but there are still many parts, particularly legacy parts that theres, just a drawing and this just will open up a large universe of things that you get instant quoting our site it will reduce friction.
Speaker Change: It's more profitable for us and it's a better customer experience.
Speaker Change: Great. Thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Cory Carpenter with Jpmorgan. Your line is now open.
Cory Carpenter: Good morning, Randy I had one for you and maybe a follow up.
Speaker Change: Per year.
Speaker Change: So Randy units and a few times 2025 off to a strong start.
Speaker Change: Hoping you could expand a bit on what you're seeing in the broader manufacturing environment and how the change in Paraguay and landscape is impacting your conversations with buyers and suppliers. Thank you.
Speaker Change: Yes, So I think a couple of things one is and we talked about this in the transcript.
Speaker Change: We're seeing increasing success in our enterprise segment of our business.
Speaker Change: First its reaction from our customers from our technology gain space, we've been adding more and more features to that that is being very well received by all of our customers, particularly our enterprise customers.
Speaker Change: And also our integrations with ERP systems, and our <unk> CAD and so that's very powerful reducing frictions are enterprise customers are really embracing those we're seeing wonderful growth. There and then also in this volatile environment. There is a push for safety and for our customers.
Speaker Change: Have we fragmented market, which has historically been dominated by small local manufacturers in fact advantage with public company that we have in technology backbone, where strength, that's increasingly appealing to customers across many verticals.
Speaker Change: Thank you and James you mentioned in your <unk> guidance comments that you were accelerating global sourcing strategy. Given these uncertain, but could you just talk about that expand on that a little bit more and how that's impacting your <unk> guidance. Thank you.
James Milner: Yeah. Thanks, Cory so.
James Milner: We're excited about the growth ahead here in 'twenty and Q1 here with guidance the market place growth of 24% to 26%.
James Milner: So where we're seeing as Randy was saying you know good penetration with enterprise accounts.
James Milner: Kevin mentioned that as part of our strategy you know its been expanding our supplier network.
We've got to nearly 4400 supplying that work globally, we've been expanding that into different geographies, we've talked about India Turkey.
James Milner: And so we continue to do that but we've accelerated some of that and the volume going to those.
James Milner: Those two geographies in Q1.
James Milner: And that's having some dampening impact on a quarter over quarter basis for gross margin not really.
James Milner: We wanted to highlight that because in terms of our guide of one and a half million loss to adjusted EBITDA.
That was a that's a component of that.
James Milner: We expect this as our algorithms I pick up on the data and the supplier network will continue to.
James Milner: Help us improve our gross margin.
James Milner: From Q1 into Q2 and continue to expect us to have healthy gross margin improvement over the year and really this is all about driving gross profit dollars I mean at the end of the day the combination of data with our strong supplier network enables us zama tree well positioned as a flexible resilient network in this environment to be a great solution.
James Milner: Our customers and to drive gross profit dollars.
James Milner: And Corey this is Randy let me just jump in with a couple of extra things as well. So just to remind everybody in Q1 of last year, we lost $7 million, an adjusted EBITDA basis. So this is an incremental adjusted EBITDA margin of approximately 23% at the midpoint of our guidance and also just will take Jane Mccahon. We think this will be temporary in the first quarter.
James Milner: We expect.
James Milner: That you'll see in 2025, a higher gross margin.
James Milner: From a margin perspective, and obviously from a dollar perspective, then you added 24. So it was an investment that was worthwhile, making in the first quarter end and as I said the year is off to a strong start and we will continue to reap benefits from that as the year progresses.
James Milner: Thank you.
James Milner: Our next question.
Speaker Change: Our next question comes from the line of Brian Drab with William Blair. Your line is now open.
Hi, Good morning, Thanks for taking my questions. I was wondering if you could give us any sense for how order growth has been.
Speaker Change: In the fourth quarter 2024 overall.
Speaker Change: Any insight into the difference between order growth.
Speaker Change: And increases in price.
Speaker Change: Yeah.
Brian Drab: You know, Brian we usually we don't talk about order growth per se I do want to point out that we had a record number of ads for 2024 active buyers of over 3400. So that was a record quarterly add for us in 2024, So we're seeing an expanded base of buyers.
Speaker Change: And so we're seeing growth in orders, obviously, but we're also seeing growth.
Speaker Change: In particularly enterprise and other segments of our business. So I'd say across the board, it's been strong and as I indicated the call Q1 of $25 95 is also off to strong start as well so it's been good.
Go ahead.
Speaker Change: Alright.
Speaker Change: Just to be clear that orders have been growing well.
Speaker Change: Well in 2024 in.
Speaker Change: Youre expecting.
Speaker Change: When you say.
Speaker Change: First quarter 'twenty five off to a strong start.
Speaker Change: Does that include an expectation for.
Speaker Change: For strong orders year over year.
Speaker Change: Yes, we grew orders obviously in Q4, and we're growing orders in Q1, I mean again, we don't report out order growth, specifically, Brian, but yes, we're growing our order count.
Speaker Change: And again just went through our in 'twenty in Q4 at a record AD.
Speaker Change: Active buyers in the fourth quarter for the year.
Speaker Change: So, yes, we're seeing strength across the board.
Speaker Change: Okay great.
Speaker Change: Obviously, it's still a very generally very tough industrial environment in a tough macro environment. So.
Speaker Change: Yeah.
Speaker Change: When that gets better I imagine the orders will flow accelerate.
Speaker Change: And then just.
Speaker Change: Wanted to ask you about Thomas can.
Speaker Change: Can you can you talk about the relationship between Thomas and the legacy business, a little bit on where we stand now.
Speaker Change: As Thomas creating leads for for Zama trees rapid quoting.
Speaker Change: Is it just kind of feels like when we're talking about it.
Speaker Change: And the opportunity that we're talking about Thomas.
Speaker Change: It is separate from somewhat separate from the legacy business today.
Speaker Change: Yeah, and Brian do you want to just report back I mean, let's be clear in Q1, we are guiding.
Speaker Change: Accelerated revenue growth in 2021% from where we were in the fourth quarter, and then marketplace growth of anywhere from 24% to 26%. So again, just I imagine original question between orders and add new customers in.
Speaker Change: Enterprise customers, we're seeing great growth on the marketplace side in terms of our revenue growth not only in Q4, but what we're expecting in Q1 and Thomas.
Speaker Change: We do get some referrals.
Speaker Change: We do have a long term plan about more synergies between the Thomas platform Csonka platform, but right now our focus is on the.
Speaker Change: The integration of the new AD server and then technology. So thats our focus right now we want to get a higher penetration, we're only at about 1% of the advertiser IV listers on the common side, our advertisers at the very high margin business for us. So as we think about prioritization, but let's get that technology integration completed let's ramp up that number.
Speaker Change: And then we will of course turn to those synergies and integrations with the broader geometry ecosystem.
Speaker Change: Alright makes sense, okay. Thanks, Randy.
Speaker Change: Thank you.
Our next question comes from the line of Ron Josey with Citi. Your line is now open.
Speaker Change: Great. Thanks for taking the question earlier, you talked in the opening remarks about progress Atlanta expand and focus on increasing penetration to your core accounts. This year would love to understand how the changes you've made to improve the sale of nursing have driven that and or.
Speaker Change: Just expanding the marketplace menu has helped to drive that if you can unpack the difference between.
Speaker Change: And sales function and marketplace menu that would be really helpful. And then James I want to understand gross margins a little bit more understood the investments in volumes going to new geographies and that's impacting <unk> I wonder here.
Speaker Change: What gave us the confidence that we'll see margins improve I understand scale and everything else, but I wonder if you're seeing any improvements thus far.
Speaker Change: And these new Geos that gives me confidence and gross margins expanding thank you.
Speaker Change: Yes, Ron let me, let me jump on that first question. So.
Speaker Change: When we talk about our success so far with enterprise, we mentioned in their remarks about segmentation. So we've been investing all last year, we talked about investing in our in our enterprise sales team as well as the technology tools, which are critical to face if the ERP integrations. It's the CAD plugging. So that's that whole package married together witnessing.
Increased segmentation of our sales team and making sure that we're taking it as a economic approach to this so really applying those resources to those enterprise accounts, we called out a number of accounts now and with more than $500000.
Speaker Change: Of LTM stand in that that's a strong number for us so I think that segmentation that focus and the investments that we've made throughout 2024 and the enterprise sales team had been had been reaping benefits for us.
Speaker Change: Terms are on the site itself, we did expand to banning into cutting our constantly adding new materials, new features and I think when you combine that together with teen space and segmented.
Speaker Change: Approach on the sales side and the investments that we've made in enterprise, that's all rolled into greater success on the enterprise side.
Speaker Change: We've identified.
Speaker Change: But that can be a huge growth engine for us moving forward.
Speaker Change: And Ryan this is James so on gross margin.
James Milner: To remind us we ended the year Q4 gross margin at a record 34, 5% up 320 basis points year over year.
James Milner: So we have a fantastic annual progress over the last few years, we've grown margins by 10 points that is a combination of us acquiring out of supply and that we're growing out our orders more data, giving AR with them its more opportunity to match to the right supplier.
James Milner: Today right manufacturing so that's the strategy. We're on we continue to do that I think what we're seeing right now is in the face of more volatility on global trade policies, we wanted to accelerate into some of our global sourcing.
James Milner: And with scaling up those different geographies.
James Milner: And so as we wrap that.
James Milner: As our algorithms learn then there is a temporary dampening on the gross margin in Q1, but what gives us confidence is the track record we've had over the last few years, we continue to drive up margin. We know what we're doing here and we think it's the right thing to do to position us for the full year ahead.
James Milner: And I think that the ongoing development of our supply network of more data of continuing to improve our marketplace menu.
James Milner: And the underlying product.
James Milner: <unk> got to continue with us on that path of increasing gross profit dollars through a combination of the revenue top line and gross margin improvement and Ron just to double click on that again. Our model is gross margin is not linear quarter to quarter and if you could look at it just adds to the track record that James referred to if you look at consistently year.
Over year, we're growing that gross margin in 2024 that grew by two five points.
So 250 basis points. So we're confident we'll continue to see growth in 'twenty, five versus 24, and and Youll see that John.
James Milner: The increase from Q1 to Q2 so.
James Milner: Again, if you just look at we thought as well good investments made we're still showing.
James Milner: Adjusted incremental adjusted EBITDA margin of 23% versus last year lost seven asked just wanted to have so we think that's well worth it.
Randy I'll: Thank you Randy Thank you James.
James Milner: Thank you. Thank you.
Speaker Change: Our next question comes from the line of Matt Swanson with RBC. Your line is now open.
Matt Swanson: Yeah. Thank you so much for taking my questions.
Matt Swanson: Two kind of about the current tariff situation. The first I guess it would be are you seeing specifically in the enterprise segment kind of being more proactive or reactive.
Matt Swanson: Very quickly.
Matt Swanson: And in an evolving landscape and then in terms of your conversations with enterprise customers are you starting to get a sense for how they wanted to deal I guess with the changing tariff landscape.
Matt Swanson: Yes, I think it's <unk>.
Matt Swanson: Certainly top of mind for many customers.
Matt Swanson: For them, it's about risk mitigation. So that's one of the things that's so attractive about our marketplace. The fact that we're not a vertically integrated manufacturer, but but we're an asset light technology company. So the ability for them to deploy into different geographies seamlessly with almond tree, it's very dealing and again just going back to.
Matt Swanson: Our strong Q4, and what we're seeing here into Q1 with accelerated growth I think thats certainly appealing to those to those customers, particularly the larger customers.
Matt Swanson: Yes, I think I guess I think at this stage in terms of like how it's impacting our guidance is still early.
Matt Swanson: And so I think we're watching carefully the situation as we said I think on our core business, which is felt good about how we finished the year in studying that.
Matt Swanson: But I think it's almost repositioned as a flexible and resilient solution.
Matt Swanson: And as we adapt ourselves to be able to.
Matt Swanson: Service to our customers as well.
Matt Swanson: Best then.
Matt Swanson:
Matt Swanson: In a good position here.
Matt Swanson: Thank you that's really helpful.
Matt Swanson: Then it was nice to see the acceleration from an absolute number of ads for teams space collaboration tools in general statements like David kind of benefit from some of the complexity of the current environment.
Matt Swanson: Do you think that's any part of the teen space acceleration or is it more about awareness and the features that you've added.
Matt Swanson: I think it's probably more about just awareness.
Matt Swanson: And also as we penetrate deeper.
Speaker Change: In these enterprise customers, we're moving more and more away from single parts to entire assemblies are products. We also gave if you look in the earnings deck. We gave some nice examples of some of these larger orders that are coming through as amatory system. So I think dean base, just really facilitate that nicely and as we are.
Speaker Change: As I mentioned, we've been constantly adding features to it. So I think it's more just reducing friction for the customer, making it easier reducing risk.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Greg Palm with Craig Hallum. Your line is now open.
Greg Palm: Yes, hi, good morning, maybe just following up on some of the tariff.
Greg Palm: Are you seeing any changes in behavior from kind of your buyers just given what's going on I mean, whether that's sourcing parts from different geographies than they were previously shipping timelines anything.
Greg Palm: Sort of note.
Greg Palm: On the buyer side of things.
Greg Palm: Yes, I think theres definitely.
Greg Palm: A much more awareness and there are customers, who are definitely looking to mitigate risk by using using in some cases multiple geographies, sometimes it's about switching from international sourcing the domestic sourcing sometimes it's about moving into different geographies.
Greg Palm: And again, we're very.
Greg Palm: Very well suited to that and we're meeting our customers where they are so yeah.
Greg Palm: Yes, I think there's definitely increased awareness, there and it's a great opportunity for commentary.
Greg Palm: Yes, Greg.
Greg Palm: Our strategy on the global sourcing side and continuing to build out obviously positions us well.
Randy I'll: Again, as Randy said and meet our customers where they are.
Greg Palm: And in terms of that.
Greg Palm: Sourcing the supplier network are you able to give us the proportion of revenue. That's currently being supplied or are imported from China, specifically and as the whole move to other geographies and focus on investments in.
Greg Palm: I was just like India is that is that part of what's going on here or is it something different.
Greg Palm: But we don't break that out I think.
Greg Palm: Again, Greg this is positive in terms of as a global marketplace positions.
Greg Palm: Nationally.
Greg Palm: By having multiple.
Greg Palm: Countries and geographies being able to source and supply.
Greg Palm: That positions the marketplace to provide the most value to our customers. So.
Greg Palm: Yes.
Greg Palm: We're positioned well for being flexible and resilient with any changes we've seen some initial tariffs.
Greg Palm: As those progress we're able to put those onto our platform and have those be reflected in our in our pricing in the marketplace and to help buyers make those decisions.
Greg Palm: So our strategy here.
Greg Palm: I have a 4300 suppliers at the end of last year, that's been growing very healthily over the last few years and will continue to grow that so that we can offer our customers more choice and flexibility which is <unk>.
Greg Palm: Always been important but even more so today.
Speaker Change: Yes that makes sense, alright, I will leave it there thanks.
Greg Palm: Alright, thank you.
Speaker Change: Our next question comes from the line of Josh Chan with UBS. Your line is now open.
Josh Chan: Hi, Good morning, Randy James Sean Thanks for taking my questions. Just two quick ones I guess mentioned, adding 3400 active buyers. This quarter I guess, what went right in terms of your marketing initiatives and how.
Josh Chan: How do you think about the those factors potentially continuing into 2025.
Josh Chan: And then I guess my my second one is on the temporary gross margin headwind in Q1, I guess, what's the confidence that it takes.
Josh Chan: One quarter for the for the algorithm to learn the new dynamics and end.
Josh Chan: That gross margin kind of progresses back to the original attract after Q1. Thank you.
Josh Chan: Yes.
Josh Chan: Yes, So let me just the both of those questions. So first I think what youre seeing in terms of new buyers.
Josh Chan: That record added for 2020 for vacuum new buyers in the quarter is really led by product by growth our technology platform, whether it's in the United States or Europe.
Josh Chan: Or Asia Pac, we're reducing friction we're making it easier we are enhancing the space all of these sorts of things.
When customers are looking for solutions technology.
Josh Chan: Technology led ones in our marketplace are very very appealing and very differentiated from for what they would normally find so I think that those investments we've been making in technology over the years are really paying off and we're also getting smarter about our marketing as well as where as we are.
Josh Chan: Thinking about more personalization higher segmentation, that's also reaping benefits in <unk>.
Josh Chan: The gross margin.
Josh Chan: In Q1 again, we expect to grow 2020 524, we've done that every year, we we don't want that to be a big deal going into Q2, because we've consciously made this investment.
Josh Chan: So it's not a it's an incidental thing but.
Josh Chan: We do see that customers want to.
Josh Chan: This unsteady environment they want to be.
Josh Chan: Deeper in certain geographies and so we made that investment, but it's a conscious decision and we're very confident.
Josh Chan: They will see a nice uptick right away in Q2 and continue that trend that you've seen every year now since we went public a growing gross profit margins.
Speaker Change: Great. Thank you for the color and good luck next year.
Thank you.
Speaker Change: I'm showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Speaker Change: Okay.
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