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

Okay. I think with that, I know we're going to have people moving in and out of the room, but to keep the train moving on time, we're going to get started. So it's my pleasure to welcome Xometry back to the conference, but it's actually the first time for Sanjeev to be here at the conference in the role of CEO. So welcome to the conference.

Thank you for having me. It's such a pleasure.

So I think for those who are less familiar with Xometry as a story and as a business, maybe frame for us the custom manufacturing landscape today and what some of your key priorities are now that you're in the CEO role when you think about the next couple of years?

Sure. So custom manufacturing, just for anybody who's not done or seen many of it is basically things that don't exist today. So a part that you can't just kick off the shelf, a SKU that you can't buy on Amazon or Grainger or whatever, things that people are innovating or building for themselves. We think of that as like a $275 billion opportunity. Most of the work today is done offline manual where people within a 30-, 50-mile radius of their manufacturing facility will find a small job shop or a manufacturing shop that will help create that custom part that they want for their overall end goal. The way we think of that opportunity is that if you can take that offline $275 billion, bring them online, make it easier to shop custom parts that have never been produced before, the way you shop your most favorite e-com platform, Amazon, Walmart, whatever you would like, we have the opportunity to convert those people from waiting for multiple weeks to get the offline quote to then have it produced over multiple months to get them to a stage where custom parts come at the speed of e-commerce today, 2 days, 5 days, 10 days, your choice at a price that you see instantly online and an experience that feels as good as shopping your best platform. So completely transforming that space, traditional offline, manual, small radius to global opportunity, instant buys at your speed. Today, maybe 1% of that TAM is online and almost all of it we have. But hopefully, we can take a lot more of it online.

So maybe talk a little bit about this online penetration idea. You've obviously produced as a company, improved accelerating growth over the last couple of quarters and couple of periods. How are you thinking about that penetration opportunity? And what some of the unlocks have to be executed against to capture that market opportunity?

I would say just a little more context on the opportunity as well, right? As you think about why this opportunity exists today. One, of course, the traditional process is slow and cumbersome. But also the nature of customers and leaders that you're seeing in R&D, in production, in procurement are the Gen Zers who are now looking to get the same kind of B2C experience in their purchases as they do on their favorite e-commerce players, but also want to go at much faster speed like I was sharing. So to that extent, creating a great e-commerce experience, helping them find the products easily, helping them continue to actually feel like they have one partner to depend on, not hundreds of shops. And so becoming that one shop where they can get all of the parts that they need and then continuing to actually bring them the best intelligence on the parts that we can. So when there's a manufacturing issue, making sure we surface it super early, when there's actually a pricing that they want based on little changes that they made on the part, we are able to hit rate at the speed that they would like. And so to that extent, what we've done is we've tried to create a strategy around making that journey significantly better.

Okay. And how does that feed back to your views about the durability of growth over the medium to long term? So you've got the operating momentum, you've got the market opportunity. Bridge to how investors should be thinking about the durability of that growth over a medium or longer-term duration period of time.

I mean we're just coming off of a phenomenal quarter. We had 4 consecutive quarters of accelerating growth. As you've seen, it's gone not only just on growth, but even the revenue per buyer has been accelerating. So we had 21% growth in revenue per buyer. A lot of it is actually really long term because, one, we're not seeing that growth in one segment or the other. We're not seeing that growth in any particular process type we do. So we do CNC machining, additive manufacturing, sheet to injection molding, so various different categories. It's not concentrated anywhere. It's not happening because a particular industry is growing faster. It's not happening because a particular process is growing faster. It's growing because it's a secular trend of that offline to online. It's growing because we know our experiences online are resonating better where we are substantially pulling ahead of any little competition that exists elsewhere. I mean the simple comparison comes to other marketplaces, which grew at 0% in the same period, we grew 45%. So clearly pulling ahead because of the strategy that we've been implementing in the last 1.5 years.

Okay. Obviously, there's multiple sides to your marketplace. But let's talk about growing the supplier side, both in terms of depth of work on the supplier side as well as continuing to grow the geographic SKU of suppliers. Talk about some of the initiatives you have in place to continue to sort of grow and scale the supplier side.

I mean coming from an e-commerce background of my own, I think to me, -- for the first time, our partners are getting to be treated as equals to our customers. I think that's the very beginning and fundamental difference. Historically, suppliers in manufacturing are treated like a brokers. On our platform, they are treated the same way our customers do. So we have a dedicated online platform called Work Center for them, where they get jobs from our platform. They can see their performance scores. They can actually see their financials and invoices, just like you would expect on a customer side of the marketplace, that experience is more really holistic on the other side as well. But what we are also doing thoughtfully is as the nature of demand is really picking up across all of the sectors, we are making sure that we are not only bringing partners online on a first come first basis, but actually making sure that, for example, in the U.S., we've seen a lot of demand around parts that need to be produced from certified shops, whether that's AS9100 for aerospace, whether it's ITAR for export restricted stuff. We are making sure partners that bring specific capabilities get to skip the queue and get onboarded first. While we are continuing to expand globally, we made a massive push into India. We have more than 300 partners there as we speak. We are driving growth in Vietnam. We've always had a big presence in Europe and Turkey, thanks to the work we've done over the years. So both dimensions, one, their capability, their experience and using that to actually drive their ongoing engagement.

Okay. Helpful on the supplier side. When you think about the journey you've been on with enterprises, if we went back years and years before you joined the organization, there was a lot of prototyping, you're moving deeper into larger production runs. Talk a little bit about the enterprise journey you've been on to create and capture more volumes from enterprise clients over time.

I would say enterprises are a big, big focus for us. As you've seen, we've been sharing stats on what used to be greater than $50,000 orders, then we moved to showing $500,000 orders. Last year, we showed you core customers did more than $10 million. There's going to be a lot more in each bucket this year for sure. All of that is happening because one of the big things that we pride ourselves on is those buyers that actually see us deliver on the value they keep bringing more buyers to the platform. So not only are the accounts that we work with growing, the number of buyers in each account keeps growing. And I think to me, the enterprise value stems from that good world spreading and more people using our services, but then also actually continuing to build mechanisms to make it easier to work with us. So we spent a lot of time in the last 18 months eating our strategy where punch out, which is our ability to actually integrate straight into procurement platforms where if you're on your Ariba or your Coupa platform, you can click a button and land to Xometry and actually purchase on Xometry without necessarily having to go outside your platform. On the post-order side, integrating things like purchase orders, invoices, ASNs, -- and of course, Siemens, which we can talk about a little bit, is going to be another step in that direction. But really, our focus has been on just making it easier for the enterprise buyer to shop on Xometry, whether they're staying within their platform or getting information in their platform, but then also their ability to actually share what they're doing. So Teamspace is a product that we have where they can share all their orders with their teams. And as we see them use that Team Space, we see them bring more users to the platform too.

Got it. Okay. I do want to talk about Siemens. Obviously, that announcement was -- had a positive reaction from the stock market, and there was multiple elements to that announcement about both the partnership, what it might mean to build scale and volume on the platform longer term as well as an equity stake as well. Talk a little bit about how that partnership came about and how investors should be thinking as the partnership rolls out and scales, what it could mean for contribution to the platform as we get into 2027 and beyond.

So Siemens, I'll start with the history. For a long time, we've actually been talking to and working with various different CAD software companies. And if you think about it, the integrations we've done in the past is we've launched add-ons. So if you're a CAD user, you can go and download an add-in. That add-in then becomes the way you actually can interact with Xometry from within your CAD software. But for us, that is not something that brings traction in the large enterprise customers and big customers where the IT teams decide what you can add to your software or not. If it ships with the software that they approved, you're more likely to be open to it. But if it's a lonely engineer on the shop floor or in the R&D team who wants to download and add in, likely they will not get that approval. That has been a challenge. On the Siemens side, it is very obvious a lot of these CAD companies have invested for years together on what's called should costing. And should costing is basically if you create a part in your CAD tool and the CAD tool has an input on what's the cost of the material, what's the cost of the labor, what's the number of parts needed, you can create a bottom-up estimate. Those should costs have improved over the years, but they are never the market price. And they're never the market price on which somebody is guaranteeing that they will have the part on your door. Bringing those 2 problems together is what we are trying to actually make sure we can address the customer's real issue. And the customer's real issue is, in my tool, show me a price that if I say, yes, I want to buy you will promise to deliver it to my door. And if I iterate multiple times in real time, tell me how the price changes, right? And so we are doing true deep integration with Siemens as part of our work now. where our pricing intelligence, our manufacturability intelligence is going to be natively embedded in the Siemens software when it ships to the customers, which means no add-ins no shipping your file, you click an x button on your design center tooling and you get instant pricing and guarantee of time line from Xometry and your file never actually leaves until you hit orders placed. So for us, this is actually very, very exciting. This needs a complete transformation in how integrated we are, how we take this intelligence and put it behind their firewall. And I think that's where the teams are really doubling down right now. The tech teams have developed a joint plan, the release date, scaler plan. So we are going to be available across all versions of design centers. So they have a cloud version. They have a version called X, which is integrated across multiple software and they have an on-prem version. We are going to be present in every single version as this release happens. Very, very exciting. A lot of it is going to start rolling out in 2027. And so for '26, we have not made any such assumptions. Even for 27, we expect to actually show a gradual ramp-up in that use. But it's very exciting. The first time we'll be truly deeply integrated. In fact, any pricing -- market pricing being available in those tools.

Okay. Interesting. Beyond Siemens, what is the potential scope for that sort of partnership model to be replicated in other parts of the broader manufacturing ecosystem. When you think about what you've built and sort of plugging and integrating it into existing providers? Like what does that landscape of opportunity look like? .

Massive. In my view, I think that's the one fundamental thing that's changed in the last 18 months that we've been driving transformation. We've realized that the real value that Xometry adds is, like I said, the pricing intelligence, the manufacturing intelligence and the massive data that we've built all that intelligence on. One of the things that was really front and center in the conversations in February when all of SaaS was dying and the challenges were being spoken about everywhere, it became very obvious that the 1 thing that nobody else has access to is the proprietary data of millions of files on a decade place of work that Xometry has done. So that market price is based on data only we possess and the data that only we have access to. And so therefore, making that pricing, that manufacturability and their time lines available in other people's platforms, became a true opportunity that we are actually very aggressively pursuing. So Siemens is the first place in the design stage, it will show up, but you think about the entire manufacturing from intent to the delivered part cycle, there is intent, there is design finalization, there's procurement integration, there's feedback and then there's the actual manufacturing shop where tools are used to produce that specific part, and materials are sourced. You're going to have our intelligence show up across that entire spectrum. And so to me, that's very exciting because now customers will have access to our intelligence, not just from our portal, but from the tools that they use every day, which changes the dynamics on how you think about our business in itself. These are channels that ride on other people's platforms, customers that are already using them today. So we get access to what could be millions of customers versus our 90,000 active customers today, thanks to all these investments that we are doing across the floor. So it's very, very exciting where you go from a small number to a very large number and you say all your marketing and sales dollars.