Xometry, Inc. (XMTR) Earnings Call Transcript & Summary

I have with me Mr. Jim Rallo, CFO of the company. He would be presenting us with some slide and a brief overview of the company, and then we can kick off with the Q&A session. Over to Jim now.

Thank you. Appreciate it. Thank you for the time this afternoon. Yes, so I just want to do a quick presentation. It's kind of a quick overview of the company. First and foremost, so I want to talk to you about our culture. So Xometry is a founder-led company. It's -- we're extremely high paced. We're extremely customer service-oriented. And we live and die every single day for, frankly, all of our customers. And our customers are our buyers and our suppliers. So we are a network company. I'll get to the detail side in a minute, but we have a two-sided marketplace. So we're in the manufacturing space. When you think about manufacturing, it's one of the last big industries to be digitized, and that's what we're doing. We're taking and making manufacturing accessible to everyone globally. We've got operations through Europe; obviously, United States; and we just launched in Asia. So if you went to xometry.asia, you'll see what is our first foray into Asia. So when you think about how historically manufacturing has happened, there's been a procurement team. Some company will have something they need to build. They will put out an RFQ. So manufacturers will respond to that. They'll be bidding back and forth. It takes a lot of time. So if you're a buyer, there's a lot of pain points involved. You've got to be able to vet that supplier. You've got to make sure they've got the quality. You've got to make sure they're going to be able to deliver on time and so forth. And if you're a supplier, you've got to spend time really on sales and marketing because you've got to make sure of your own folks list. You've got to get the word out and your capabilities out. And again, we take all of that pain out of the marketplace. So if you look at this slide right here, what you see is this sort of depicts how much friction exists in the manufacturing process. And what we do is we remove all this friction, and let me explain how we do that. So we are an AI-powered marketplace. So when somebody comes to our marketplace, and typically, that would be an engineer, they're going to upload a CAD file. That CAD file will be instantly priced by our artificial intelligence. Now that sounds like, wow, what's the big deal about that, right? I can go on every website and get an instant price. Well, this is a unique item. No one has ever seen it before. It's a specific design. So our official intelligence reads the geometry of that part and then goes into our database and find similar things to it and what that cost, and then that's how we determine the price. So the AI will instantly give that price to the person that uploaded that CAD file. If they accept that price, then what the artificial intelligence does is it works for suppliers that are in our marketplace that have the capabilities to build that part, because not everyone is qualified to build that part. And I just want to be clear, this is a managed marketplace. So what I mean by managed marketplace is, if you want to be a supplier in our marketplace, you are vetted by us. So we will send you -- first off, we'll have an interview with you. We have an onboarding team. We're going to get information on your capabilities, how many people you have working for you, how many machines you have in your shop and so forth and what those capabilities are. And then we will send you a test part. You will build that test part, you'll send it to our quality control team, then you'll get rated. And then once you do, assuming you pass, you're at a marketplace. And then the AI, because we score everything in our marketplace, the AI will start showing you jobs, but you'll get easy jobs to start with. And the more and more you do, without any issues, then the higher score you get and the bigger jobs you get and probably the more profit you're going to make. So again, back to artificial intelligence. So it's matching the supplier with the product that was uploaded, meaning who's got the capability in our supplier market side -- I'm sorry, on the market side of our -- geez, sorry, guys, the supplier side of our marketplace. So somebody may match up something that's very unique. We may only have 20 or 30 suppliers that can actually build that part. Those 20 to 30 will actually get to see it. Maybe the parts are a little more common, and we may have 1,000 people that can build that part or so forth. So what's important for us is to build that supplier base as well as build the buyer side. It's a two-sided marketplace. So we spend a lot of time providing services to both sides, and I'll get into more details of that in a second. But one thing I want to make clear is, like many marketplaces that you guys are probably familiar with, they are fee-based. We are not fee-based. We have a spread model. So what I mean by that is our artificial intelligence gives a buyer a price, which they're going to pay. And then we give the supplier basically a cost, right, of what we're going to pay them. And we make the difference. And so we're not bounded by a certain fee range. It's not like it's 10%, and that's it. We're basically, again, solving for the [ friction that's ] in the marketplace. And so our gross profit margins, last quarter in the marketplace side of our business, were 27.4%. And those were up significantly over last year from 22%, the year before that, 19%. And the reason for that is the more transactions we do and the more suppliers we bring in our marketplace, the higher our gross profit gets. And the reason for that is because we have more data. So the AI gets smarter and smarter, and thus, we don't price things wrong. The second reason is because if the more suppliers you have, the faster they're taking the jobs. The faster they take the jobs because again, the first price we put out there is always the lowest price. Someone picks up that lowest price, that's going to be our highest gross profit margin in. If somebody -- if no one takes that, then we have to up the price until we get someone to take it because we're on the line to build it. So when you look at the industries that we're in, we frankly cover just about everything. So automobile, health care, space, government, learning space, I mean actual NASA is a client. So we've got -- and why that's important is because our suppliers have certifications. So if you need flight certification, we've got suppliers that have that certification. If you need space certification, we've got suppliers that have that certification. So if it's going to be ITAR, we have suppliers that have that certification. So again, the buyer sets all of that when they come into our marketplace. So basically, it's we make it the way they make it, they want it made by the company that has those qualifications. And the thing about our marketplace is a lot of people just think we're a prototype company. Not true at all. We actually do production runs. There's some examples right here of some larger production runs where we're building hundreds of thousands, millions -- or millions of parts for our buyers. And typically, when you do these larger orders like this, you are shipping those over a schedule. So you're not usually typically doing them all at once. They could be over a year. It could be over 2 quarters or something like that, depends just on the size. So we go -- we make anywhere from one part, which may be a prototype, to 50,000, 100,000 or millions of parts. It just depends on what the buyer needs. So when you look at our highlights, financial highlights, we're growing -- extremely fast growing. The company is growing at 50% plus. And we've improved the gross profit margin, as I said earlier. The other thing is we give a lot of metrics, so how you can judge the marketplace. When you think about like the number of buyers, a lot of marketplace companies give the number of buyers. Of course, we do that. We're also telling you, though, the number of accounts that are spending more than $50,000 with us. And that's important because what's happened over time is our marketplace has gotten stickier, and people trust us more and more and more than their prior networks that they were using. And so they're giving us more work. So the number of accounts that we have of big customers, if you want to call them that, keep growing and the size -- and you can measure that again by the $50,000 over the last 12 months. We always give that out. And then, I think, the other thing is this is a very predictable business. As the CFO, that was one of the things that really attracted me to the company when I started about 2.5 years ago, which is that 94% to 96% of our orders every single month and every quarter are coming from existing customers. So again, very, very predictable business. Let me just give you a couple of case studies here. So for our larger clients, our accounts, as I called them earlier, right, we have what's called a land-and-expand strategy. So typically, our marketing is a digital marketing top of funnel for us. We typically -- somehow an engineer will find us at some organization. They'll put an order in, and they'll have a very good experience. And then some of our sales team will reach out to that person and leverage that person and their relationships inside that organization to basically get more and more business from them. And you can see here how successful we've been with this, and some of these companies, you guys know. Global e-commerce leader, I'm sure you guys can figure out who that is, and electrical vehicle manufacture, same thing. So aerospace and defense, I said before, we've got the ability to do space, spaceflight, regular flight, ITAR, whatever our customers need. Pharmaceuticals, I would pause on that just for a second and say, we were a part of Project Warp Speed. So several of the pharmaceutical companies who are making the vaccines for COVID, we did a lot of the part -- we manufactured a lot of the parts that went to the manufacturing lines. So we really -- as I said earlier, we run the gamut across a lot of different industries. And then when talking about product innovation, so we -- we're never ever, ever satisfied with what we're doing. So we're continually improving the marketplace for both buyers and sellers. We just acquired a company called Thomas. I'll spend a second on this. But Thomas was a 130-year-old company that was basically a manufacturing listing service. And of course, they want digital about 20, 25 years ago. It's basically the Google of manufacturing, and they have over 1 million buyers. And they have over 500,000 suppliers in their marketplace, and they provide services to those suppliers. That's how they make their money. They have marketing services. Like I said, you can spend more to be seen earlier as like a buyer would come on and search for a certain need they have. If you're going to get shown up first in the top 5 or something, you're going to pay for that, pretty similar mile to Google. Why that's important for us is because when you look at the number of suppliers they have, the number of buyers they have, if we can just get single-digit percentages of those to convert to our marketplace, it's a home run for us. So one of the things we're watching at the end of this quarter, beginning of the third, is we're going to put our marketplace capability embedded in the Thomas platform, which today, Thomas is not an active marketplace. It's if you're a buyer, you go there to discover suppliers, and then you will reach out to that supplier directly. So you have to take the extra step. Now if you want, you'll be able to transact directly on the Thomas marketplace. I talked about some of these earlier, so I'm probably not going to go over these again. Thomas, I already talked about that, too. So right here is our road map over the next couple of quarters. Like I said before, we are continually upgrading the marketplace for services to suppliers and buyers. Again, one of those things is the Xometry Everywhere. So we just launched Xometry Everywhere, where we've embedded Xometry and the ability to get an instant quote in different partners in the manufacturing area. Supplier base. One of the big pushes we're going to make to upgrade our supplier base services is we're going to give them we're going to call a freemium model for an operating system. So a lot of the small manufacturers we have in our supplier base, they're using Excel, some of them are using whiteboards to track how their business operates. In some cases, they're using QuickBooks for their accounting. Our system connects directly with QuickBooks. So it makes it super easy for them if they're already using that. But when you think about manufacturers, especially in the U.S., most of them are fairly small shops, less than 20 people. So there's hundreds of thousands of small manufacturers in the U.S. And again, they're mostly tiny, mostly family businesses. We actually have -- if you go back, we went public about a year ago from now. And we've got some really good case studies and stories in our S-1 if you guys would want to take a look at that of some of our suppliers. So we're going to basically give away the system. The advantage for us, what that is, it's going to be really easy for them to manage their work and really easy for us to understand what they want, right? So today, we think we know what they want based on their capabilities, but we don't know. Now we'll be able to know exactly what they're looking for and feed them the jobs that they want where they're best suited. I think I talked about this earlier, significant growth to scale. But again, we've guided to $392 million to $400 million of revenue this year, expanding gross profit margins and lower spend. So last quarter was probably our -- what I would say is largest EBITDA loss. We are now scaling down from that. And so we have told the Street that we will be profitable by the end of next year. So -- and what I mean by that -- and that's for the full year basis. So we'll have some small losses the rest -- we'll have losses the rest of this year. We'll have some small losses in Q1 and Q2 of next year. Q3 and Q4, we expect to make money on an adjusted EBITDA basis, and that should allow us to be profitable for the full year. And how we're going to get there is the continued strong revenue growth and the continued strong gross profit growth. And we break that out for you guys every quarter and, of course, in our K for the different -- for the 2 different lines of business we have, which are supplier services and marketplace. So I pretty much already hit this slide. Let's see. And then yes, so long-term growth, we continue to evolve. That's it for the overview. I'm happy to take any questions. I think BofA has got a couple of questions, too. So happy to sit down and answer those.

Thank you, Jim. That was a great overview. So if anybody in the audience has any questions, we can start with those and then...

You showed something like 30,000 [indiscernible] customers -- you showed 30,000 MAUs and then something like 700 or 800 customers that did 50,000 a year. So what's -- I couldn't do the math quickly enough, but...

Yes, let me go back to that whole again.

Yes. What's your mix of kind of 50,000-and-up customers versus not in your revenue?

Yes. So if we look at -- let me get those metrics. Hold on. So when you -- so we have 790 accounts, this is Q1 data, again, we put this out every quarter, that spent more than 50,000 with us on an LTM basis. And then when you look at the actual number of active buyers, right, there's 30,000 buyers. Let me -- and I should -- this is a good question because I should have defined that when I was going over the slide. So a buyer for us is an individual. So it could be a single engineer in a very large company. That person is a buyer. So an account is the company. So a company may have hundreds of buyers that are using our platform or even more. And so that's the difference there. That's a delineation.

The main question I have is just customer concentration. How concentrated is your customers? Is it on Fortune 1000 companies mainly that make up 80% of your revenue? Question [indiscernible].

When we start a deal with a lot of the Fortune 1000, we have no customer concentration. I would tell you that our largest customer is low, low single digits. Low, low single digits is our largest customer.

Just thinking about your gross margins and the marketplace in general. How are you ensuring quality of product? I just would love to hear your thoughts on that and how the AI works around that.

Sure. So again, we score everything on our marketplace. So like I said, when you're a supplier, this is a managed marketplace, you can't just join our marketplace. You will -- there's a -- you will basically put your information in saying you want to join the marketplace. Our marketplace onboarding team will reach out to you, like I said, and will understand your business. Again, how many people you have, what kind of equipment you have, what are you interested in and so forth. And then based on that, we will send you a test part. And then that test part will come back. They will build that test part. They'll send it back to us directly. Our quality control team will look at that test part. And if they pass, they're in the marketplace. So it's not a free for all. Now you start getting easy jobs when you come on the marketplace. And the way we work is we ship directly from the supplier to the buyer. The buyer has so many days to inspect that part. If they have a problem, they come to us. We take care of everything. And we will deal with that supplier to get the part fixed or rebuilt or whatever it needs to make sure that the customer ultimately gets what they need.

What percent [indiscernible]?

Again, low, low, low single digits, because your -- all of these suppliers are bedded and the -- like the complicated stuff is going to go to a supplier that's been with us for years, that's got the capability to do that. You're not going to be building something that's going to get launched in space if you just joined our marketplace.

Love to hear a little bit about your, I guess, breadth of coverage in terms of end markets for manufacturing. Are there areas that in terms of your partners you have now that you're covering? How should we think about, I guess, new market expansion? And what's the most exciting? Are there areas you can't go into for whatever reasons in terms of partner scale or whatever it might be?

Yes. So when I was talking about this slide, we're dealing with a huge amount of industries, right? And when you look at the TAM, again, our TAM is about $2.4 trillion with the capabilities we have today. And like I said, we're striving for $400 million this year of revenue. So we've got a long way to go. The only area really where we -- we're not involved with right now is anything that's electronic. So we don't do any kind of computer boards. We're not doing chips or anything like that. So our marketplace today is -- what I would say is mechanical parts. They may be movable parts, but they're mechanical in nature. They're not powered by something. That's frankly the only thing we're not doing.

So just focusing on the supply side for a second. I don't recall seeing anything in the slides that characterized your suppliers, whether they're start-ups, foreign or domestic. Is it sort of like sophisticated big organizations or guys in the trailer sort of thing? Can you kind of give us some sense of who these people are that create these products?

Good question. And frankly, it runs the gamut. So we've got some pretty large suppliers that do a lot of work with us and they're fairly sophisticated. And we've got -- one of my customer service people call them the Fred in the shed. So somebody has got like a single maybe CNC machine or something like that, and they build simple stuff for us and so forth. So it really runs the gamut. But again, that's part of that onboarding. What are your capabilities? How much work do you think you want from us? And again, you have to earn your badge, if you would, as you move through building stuff for us each time.

Do you have any sense of the concentration of kind of entrepreneurial companies that are maybe using you as their sole source of demand or their start-up source of demand?

The answer is, right now, no. I think we will know more about that once we launch this operating system because we'll have visibility into all of their work, because we'll just be able to see that data. So that's really important for us. So not only will we know what they want, but we'll obviously understand what they're doing off-platform and so how much of their business we have within. I think, look, if you look at the manufacturing data for the United States, I think it's something like there's 600,000 small manufacturers in the U.S., something like that. And the vast majority of them have sub-20 employees. So most of these shops are smaller.

And your manufacturers, they are mainly U.S.-based, I take it?

No. I would say we certainly have a lot of U.S.-based because we started here. We've launched in Europe. So our headquarters in Europe are in Munich. And we've got -- that business has been growing actually faster than the rest of the company. So we're growing at 70, 80. Last year, we grew 500% in Europe. Again, we -- all those numbers are publicly available information. But so we've also improved our margins in Europe, too. So -- and then as I said earlier, we just launched in Asia. So if you go to xometry.asia, you can take a look there. That's all in Mandarin. And that is a network in Asia, specifically China right now. So we are -- we've always had suppliers from China, to be clear, but we haven't had a lot of buyers in China. And so the idea is we leverage our supplier network in China and introduce them to a buyer network in which we're starting to build.

What do you think is the most misunderstood by the investors about your company, about your growth opportunity and what you do today?

So I think the -- what's -- and to just be frank, I used to buy -- I'm sorry about that. I used to work on Wall Street years ago. And I think my experience with Wall Street is if you don't use it, sometimes it's difficult for you to understand the business, right? I mean everyone knows Uber, right? I mean it's easy, right? Everyone knows Amazon. It's easy. But when you think about manufacturing, there's not a lot of people that are doing manufacturing in their day-to-day lives. So I think for us, getting the story out and the simple -- like I said, how simple it is to use our marketplace has really been one of our tougher things to get that messaging out. From the business model standpoint, I think the other thing where we're misunderstood a little bit is -- again, that's why I spent a lot of time talking about the spread model, right? So our gross profit is not -- we're not bound. So also our TAM is not bound. Right now, our TAM is $2.4 trillion, but the global TAM for manufacturing is, I don't know, it's like $37 trillion or something. I mean -- but we just don't have -- like I said, we're missing electronics, for example. We don't do any of that. So there are things that we don't have in our portfolio today that I'm confident, over the years, we will build out. But right now, we've got a huge opportunity. We've barely scratched the surface.

One over here. Sorry for other -- yes. One person over here. So I think going -- just going back to one of the slides, you had a diagram of a 5-year TAM or 4- or 5-year TAM. And I was kind of curious when you were talking about government and government services. Sometimes investors are sort of trained to think about government contracts as sort of like a backstop and they're pretty sticky. Do you view that actually the same way? Or do you think that we should sort of view it as an actual tremendous growth channel over time, perhaps even expanding beyond just U.S. government services?

Well, I mean I think our marketplace is definitely very sticky for both sides. So we typically don't lose buyers. We typically don't lose suppliers. I don't want to say ever, obviously, but we make it so easy for them to transact. And again, we're in the middle of that transaction. So everyone has faith. The suppliers, they know they're going to get paid and they're going to get paid on time. And we've actually rolled out financial products for them. So if they want, they can get instant paid. There's a fee for that. They can also wait a few days and take a lesser fee, another few days and take a lesser fee if they want to get paid upfront. Our typical payment terms are 30 days after they ship. So the ability to get that money right away when they ship is very helpful. We also have rolled out a debit card program for them, where we put 30% of the job, up to $7,500, on a debit card, which is no charge to them to buy supplies. And they can buy those supplies right through our network. So we've got a network of, I'm going to call them, drop shippers of whatever it may be, steel, aluminum, special tools, whatever they need to do that. And they can use that money that we've given them upfront on that debit card to buy those things. So we've got -- we really try to, again, make it a sticky marketplace for both sides.

So you've talked a little bit about higher repeatability or stickiness, as you said, for your customer. But in terms of your jobs, I guess what percentage are recurring versus kind of one and done or one-off? And how has it changed over time?

So I would say a couple of things. I talked about -- so when you look at these, these are some examples of much bigger jobs where, again, the parts could be hundreds of thousands, over 1 million, something like that. And you typically are shipping that like over a period of time, okay? But that being said, right, I also talked about, let's see, the number of accounts, right, to do over 50,000. And so if you look at how that's grown, right, over -- really since the first quarter of '21, it's tremendous. And what that tells you is back to the predictability of the business. Remember, I said 94% to 96% of our orders every single month or quarter are coming from existing customers. So we still have every cohort that we've started the company with in 2013. We haven't lost one. So we track all that. And again, it's the value that we're adding. It's the use of the marketplace and the stickiness. So I think we have a sales team. That sales team is mostly focused on growing the accounts, meaning the large companies. And then we've got -- top of funnel for us is, again, digital marketing. So we do a fair amount of spend online. That drives a lot of new buyers to our marketplace, and that will drive new accounts as well.

Any more questions from the audience? I can start with one. So Jim, in Q1, you launched Xometry Everywhere platform. So can you talk a little bit more about the product? And how does it benefit your ecosystem?

Right. So for example, Xometry Everywhere means that we basically put the code out there, and we've got it embedded in, what I would say is, different engineering platforms. So -- as well as some other sites which are -- a lot of engineers will be involved in. And they can basically quote anything they want. So that will drive -- just to see how much it would cost to build it -- to build something. So -- and then if they want, then they can obviously hit the price and have that part built. But the idea was, before, if you wanted to get a quote, you had to come to the Xometry website. Now you do not. We work with a lot of the CAD companies, and we've embedded Xometry Everywhere in those platforms themselves.

So Jim, one question that's on everybody's mind right now is the macro environment. So coming off from a strong Q1 and a strong outlook for Q2, could you talk about the demand environment given the macro risk? And how can it affect your platform?

Yes. So I think, look, well, I talked about a TAM a lot today. So we've got a huge opportunity. We're just so small compared to the opportunity we have. The same thing is we've got some experience, right, with what I would say is a downturn. We grew dramatically during the COVID time, and our gross profit grew, our number of buyers grew, our number of suppliers grew. And mostly because we have a very resilient marketplace in a very resilient supply network. So we've got the ability to flex. If there's a shortage somewhere, we've got ability to flex -- making stuff out of Europe or out of China or in the U.S. or the COVID example, the U.S. shut down. Some states were shut down, others were open. And we just moved that manufacturing to the states where they were open. And so we've got, like I said, a very, very resilient platform.

Great. So in the last few months, the investor focus has shifted from growth to profitability. So how are you reacting to this change? And how do you plan to balance growth with profitability going forward?

Yes. So I think -- so look, we certainly understand as a management team that the market has changed dramatically. When we went public, it was frankly acceptable that we've had a loss. We told people we'd get public in 3 years, and we realized that, that's not adequate. So we've moved that timetable up a full year. And that puts us, as I said earlier in my remarks, that we will be adjusted EBITDA profitable next year for the full year.

Okay. And active buyers are continuing to grow on the network. And so can you talk us about the strength that you are seeing there and how you think about active buyers serve as a leading indicator of the strength of your business?

Yes. So again, when you look at those buyer metrics -- sorry, let me go back to those real quick here. So when you look at the buyer metrics, I mean they have been consistent for a while. We're talking 44% year-over-year growth, right, which is pretty darn close to our -- also our revenue growth of over 50%. But we -- it goes back to before like why we're so bullish on the fact that we'll continue to grow buyers and suppliers is because of this, because we just make it easy, right? Think about all the things you do in your own lives that just make it easy. I never even go on another website for anything retail than Amazon, right? It's just easy. Same thing with Uber, right? I never worried about if I got to get a ride somewhere. I just click the app and I get it. And that's what we've done for manufacturing. We're really the first to digitize manufacturing and come up with this artificial intelligence-backed process, and it's frankly the easy button for manufacturing.

Great. And can you talk about the buyer and seller churn on the platform? Like what are some of the major factors that you see that contribute to the churn? And what's your strategy there?

We really don't see a lot of buyer or seller churn. I mean I think that comes through in the KPIs that we give. And again, mostly because we keep rolling out more and more products that are helpful. And more and more -- on the supplier side, we've got more and more products that are helpful for them to run their business because again, they're mostly small business, as I said before. And on the buyer side, we continue to roll out new capabilities. So when you think about manufacturing, everyone sort of thinks about, we just need this part manufactured or this product manufactured. But in some cases, there's finishes that have to go on top of that and so forth. We're constantly adding capabilities into our marketplace by adding new suppliers. So frankly, it goes back to, if you want to build something, you have it your way. We will build it exactly the way you want it, which we're really the only two-sided marketplace out there that can do that today. There's no one else doing what we're doing. There are people that will give you a quote for a product, and they'll manufacture that themselves, but they're not using a network. And so their capabilities are bounded, if you would, by the fact that they only have those machines in their shop and they can't -- they just can't expand and get the growth that we have because, again, the more suppliers we add, the more capabilities we add, the more growth we can have.

So Jim, one of your major competitive moat is your AI pricing -- AI-driven model -- AI pricing model. So can you talk a little bit more about like why is it difficult for your competitors to replicate this thing?

Well, the thing about the AI model is that we've got a lot of data. So it really is a moat that we have compared to, again, anybody else that would want to start this business. And look, I'll give you some examples. I mean when we first started -- when we launched the AI, we had plenty of parts where we were losing money on because we didn't have the data. So until you get the data, it's hard to actually be able to get the AI trained and really have it work efficiently. And that's why we get better every single year and why our gross profit continues to climb, because we're getting smarter and smarter. The machine learning or as my team calls it deep learning, AI, we just -- the more data it gets, the less, what I would say is, mispricing happens. And mispricing can be, by the way, to the supplier or the buyer. So it's not just that we overcharge somebody or undercharge somebody or something like that. It could go both ways. And again, those -- the number of times that's happening now is de minimis compared to what it was 4 years ago, 5 years ago.

Got it. So after acquiring Thomas, you raised your long-term gross margin targets to 40% to 45%. So can you tell us what is the part to those long-term gross margins? And what are some of the key drivers there?

Sure. So as I talked about the Thomas business before -- and again, all this is public information when we did the transaction. Let me get to Thomas real quick. Hold on. So Thomas was, again, more of a marketing company. Then it's not -- then it certainly -- there was no active manufacturing going on. So if you were a buyer, you come to Thomas to discover suppliers. And again, they have a lot more suppliers in their network than we do. They have a lot more buyers in their network than we do. We found that to be extremely attractive. They've got somewhere between a 75% and 80% gross profit margin. So it's a very accretive business to us for -- to our gross profit. And we are breaking that out separately. So for shareholders, I mentioned that earlier. So we break out our marketplace business, which is basically the legacy Xometry. There are some financial services in there. I mentioned that earlier that we had, but we moved that over to Thomas. So Thomas is our -- basically our supplier side of the business and the services that we give to the suppliers. And so you'll be able to see the revenue from the supplier side, and you'll be able to see the COGS and thus the gross profit that we're generating from the supplier side. And the same on the marketplace side, which again is the legacy Xometry business. And yes, when we bought that business, we obviously updated our gross profit projections. It's -- and we put our path to profitability, as I said earlier, a full year forward.

Great. So we are almost on time here. Just one last question. So Jim, in closing, what is the single biggest item that excites you the most about the future of Xometry and gives you confidence that it will become a reality?

I think that -- well, first off, I think we've become a reality. So we've got a who's who of client base, and we're very proud of that. At the end of the day, we need our buyers and we need our suppliers, and those numbers continue to grow. And that really is fulfilling for us on the team. So like I said, I started this out by talking about our culture. We are relentless inside of Xometry to continue to improve the marketplace for our buyers and suppliers. And that's what's really driving the business. It's a good group of people in the organization. Everyone rallies around, again, the buyers and suppliers, and they are -- they're driving the marketplace. So I feel confident that we can continue the rapid growth that we've had historically in the future. Again, we've got a massive TAM, and we've barely tapped into that.

Thank you very much, Jim.

Thank you.