Good day, thank you for standing by. Welcome to Xometry's acquisition of Thomas. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during this session, you need to press star one on your telephone. I would now like to hand the conference over to your speaker today, Shawn Milne, Vice President of Investor Relations. Please go ahead.
Thank you for joining us on the call to discuss Xometry's acquisition of Thomas. Joining me are Randy Altschuler, our Chief Executive Officer, and Jim Rallo, our Chief Financial Officer. During today's call, we will provide forward-looking information, including statements about the potential benefits of the acquisition of Thomas, possible or assumed business strategies and synergies, anticipated earnings enhancements or potential growth opportunities, potential market opportunities, and future financial results. Such statements may be identified by terms such as believe, expect, intend, and may, and are based on assumptions that we believe to be reasonable as of this date.
These statements are subject to risks and uncertainties, which could cause them to differ materially from actual results. Risks and uncertainties include, among other things, our ability to successfully integrate Thomas's operations, our ability to implement our plans, forecasts, and other expectations with respect to Thomas's business, our ability to realize the anticipated benefits of the acquisition, including the possibility that the expected benefits from the acquisition will not be realized or will not be realized within certain time periods. Disruption from the acquisition, making it more difficult to maintain business and operational relationships, the inability to retain key employees are potential negative effects of the consummation of the acquisition on the market price of our common stock and on our operating results and unknown liabilities.
Additional risks and uncertainties that could affect our financial results are available on our Form 10-Q for the quarter ended September 30, 2021, and other filings that we make from time to time with the US Securities and Exchange Commission, which are available on the SEC's website at www.sec.gov. We caution you to not place undue reliance on forward-looking statements and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events, or changes in our expectations. We'd also like to point out that on today's call, we will report GAAP and non-GAAP results. We use these non-GAAP financial measures internally for financial and operating decision-making purposes and as a means to evaluate period-to-period comparisons.
Non-GAAP financial measures are presented in addition to and not as a substitute for or superior to measures of financial performance prepared in accordance with U.S. GAAP. To see the reconciliation of these non-GAAP measures, please refer to our earnings press release and our investor presentations, both of which are available in the investor section of our website at investors.xometry.com. A replay of today's call will also be posted on the website. With that, I will turn the call over to Randy.
Thank you for joining us on short notice to discuss the acquisition of Thomas. We are excited to introduce you to the Thomas platform and how the acquisition will accelerate the growth of our leading digital manufacturing marketplace. At the time of our IPO, we discussed our M&A framework.
Considering the size of the opportunity available to us to digitize the massive on-demand manufacturing industry, we will make targeted acquisitions to enhance our buyer and seller networks and further penetrate our market through new products and service categories. Thomas is such an opportunity. Thomas is truly a unique asset. Thomas is the leading platform for product sourcing, supplier selection, and marketing solutions for the manufacturing industry. The acquisition of Thomas significantly expands our buyer and seller bases, creating unparalleled global marketplace scale. Thomas immediately expands our seller services revenue by almost 10x and provides significant cross-selling opportunities for existing buyer and seller services, including our financial products and supplies. Thomas enhances our gross margin profile, shortens our path to profitability, and raises our long-term margin expectations as our CFO, Jim Rallo, will discuss in more detail later in the call.
Similar to what has happened in so many other industries, there is a secular shift to the digital in manufacturing. As a leading global digital manufacturing marketplace, Xometry is transforming one of the largest industries in the world. Unlike many of the other vertical marketplaces that are focused on the hyper-competitive consumer markets, the Xometry marketplace is a leader in a massive industry with no other global two-sided marketplaces. Approximately 30% of Fortune 500 companies are Xometry customers. We are driving efficiency, sustainability, and innovation by lowering the barriers to entry for both buyers and sellers. Our marketplace is transforming one of the largest industries in the world. This Xometry platform is a two-sided marketplace, connecting buyers and sellers of custom manufactured parts through a transparent online experience. For buyers, we provide immediate pricing, delivery times, and quality assurance in a highly fragmented market.
For sellers, we provide access to buyers and a growing basket of seller services to help manufacturers more efficiently run their businesses. Enterprise buyers are increasingly attracted to our digital marketplace with its massive selection and transparency across ever-expanding new materials, finishes, and processes, as well as our integrations with leading ERP and CAD programs, further reducing friction in the traditional procurement process. The extensibility of our marketplace allows us to widen the use cases for all of our customers across key manufacturing processes and to attract new customers. We continue to deliver strong growth in active buyers, reaching over 26,000 in Q3, which is up 61% year-over-year. Our land and expand strategy is driving robust growth in accounts with last 12 months spend of $50,000. That number has increased 67% year-over-year in Q3.
At the same time, we continue to ramp up our network of active sellers, which grew 82% to 1,410 in 2020. Since our founding in 2013, our mission has been to build the leading digital marketplace for the $35 trillion manufacturing industry. Additionally, we knew there was a massive opportunity to introduce services to help our seller base improve their own businesses. Since the launch of the marketplace, we have focused on improving and adding functionality to our marketplace to deliver a better experience for buyers and sellers. We have launched integrations with leading 3D CAD software, such as the Dassault Systèmes SOLIDWORKS and Autodesk's Fusion 360 Inventor. We expanded the marketplace internationally with our launch in Europe in Q4 of 2019.
In 2019, we launched seller services, beginning with Xometry Supplies. Xometry Supplies enables our sellers to purchase the tools and materials they need to manufacture parts at very competitive prices, reducing their operating costs. In 2020, we launched our initial financial services, including the Xometry Advance Card, which gives sellers immediate access to 30% of the value of the Xometry job they accept. These financial products help sellers improve their cash flow and invest in growth. Our seller services have been well-received, with 40% of our active sellers purchasing supplies or utilizing at least one of our financial services in 2020. In early November, we acquired FactoryFour, a SaaS-based software solution which helps manufacturers improve lead times and make data-driven decisions through real-time production tracking and quality control.
FactoryFour will serve as a platform to provide sellers a suite of tools to help them run their businesses more efficiently and cost-effectively. We plan on integrating this offering with our existing suite of financial services in 2022. Thomas, with its unique suite of seller services and the platform to help 1.3 million registered users source industrial products, is a logical next step in our product innovation roadmap. Many of you may know the Thomas name, which is one of the most trusted brands for enterprise buyers, manufacturers, OEMs, and distributors, including 93% of the Fortune 1000. Thomas is the leading platform for product sourcing and supplier selection in the manufacturing industry. Thomas has a base of over 1.3 million registered users. These corporate buyers, engineers, and procurement professionals generate roughly 2 million sourcing sessions a month on the Thomas platform.
The platform is North America's largest source of data on over 500,000 sellers. Thomas provides a full range of advertising for sellers to generate opportunities from the 20+ million annual buyer sessions on the thomasnet.com platform, as well as website development and other marketing services to help manufacturers grow and more efficiently run their businesses. With over 500,000 sellers, Thomas is a leading information platform in the industry. These sellers operate in over 70,000 categories with over 6 million unique products. Importantly, Thomas has over 45,000 diversity certified suppliers, a category that is increasingly important to enterprise buyers. The Thomas platform has delivered strong growth in its user base over the past few years, driven by the secular shift to digital in manufacturing.
Its user base has grown from 735,000 in 2018 to over 1.3 million in September 2021. These users are deeply engaged with the platform, connecting with sellers and driving a large and growing number of requests for information or RFIs. Thomas estimates that the notional value of its RFIs is over $200 billion thus far in 2021. Additionally, this strong growth in traffic and user activity is entirely done on an organic basis and not through paid acquisition channels, underscoring the deep domain authority of the Thomas brand and sites. The acquisition of Thomas provides a perfect combination of monetization opportunities, given that Thomas does not monetize its user base and Xometry is in the early innings of monetizing its own considerably smaller seller base.
Currently, Thomas does not drive any revenue from its users and user activity, including the 20+ million annual sourcing sessions and RFIs. This provides a tremendous opportunity for the Xometry marketplace to be the monetization engine on the Thomas platform. In the last 12 months, Xometry's 26,000+ active buyers generated roughly $180 million in revenue on our marketplace. It's easy to see why we're so excited by this opportunity to provide Thomas's 1.3 million users access to our platform. On the seller services front, there is significant room to cross-sell Xometry Supplies and financial services products into Thomas's 500,000-plus sellers and offer Thomas's suite of services to our growing base of sellers. While growing at a rapid pace, our seller services is less than 5% of total revenue today.
In sharp contrast, the Thomas platform generated $67 million in revenue from its seller base over the past year. We believe these synergies will accelerate the long-term growth of our marketplace, rapidly expanding our active buyer base and our active seller base, further strengthening the network effects of the marketplace. The addition of Thomas's high margin revenue immediately expands our gross margins. Additionally, as we introduce the Xometry marketplace to the Thomas seller network, we expect to see continued improvements in selection and matching from our AI-powered algorithm, which is a key driver to expanding our gross margins. We believe this powerful combination will drive strong, durable growth, increase our gross margin profile, and provide the confidence to raise our long-term Adjusted EBITDA margin outlook, which Jim will outline in more detail.
The addition of Thomas significantly expands our market opportunity as the platform provides access to products and sellers across 70,000+ industrial categories. The platform has incredible breadth as buyers can source sellers and parts reaching over $2 trillion of the $35 trillion global manufacturing industry. The combination of Xometry and Thomas together can better serve the end-to-end needs of buyers. With that, I will turn the call over to our CFO, Jim Rallo, to provide more details on the transaction and outlook.
Thanks, Randy. We're acquiring Thomas for $300 million, comprising of $198.5 million in cash and $101.5 million in Xometry Class A common stock. As Randy explained, the strategic rationale for the deal is straightforward. Thomas will accelerate our growth as a leading global digital manufacturing marketplace. We intend to leverage Thomas's 1.3 million registered buyers and over 500,000 sellers to rapidly expand our buyer and seller base. We expect to issue 2.1 million shares of Xometry Class A common shares for a total basic share count of 43.8 million post-transaction. Taking a look at the combined new company financials, Thomas revenue grew 3% in the 12 months ended September 30, 2021.
The ability to monetize its strong user growth and engagement has been constrained by the limited resources of a family-owned business. Over 80% of Thomas revenue is generated by sellers buying sponsorships on the platform and using Thomas marketing services offerings. As a digital services platform, Thomas generated very strong gross margin of approximately 85% for the 12 months ended September 30, 2021. Adjusting for executive redundancies, Thomas adjusted EBITDA is approximately $1 million. We are confident in our ability to continue to drive strong organic growth and drive meaningful revenue synergies from Thomas as early as 2022 and ramping into 2023. In 2022, we expect the pro forma growth rate to remain unchanged from prior standalone Xometry growth based on year one revenue synergies. We expect the deal to accelerate our path to profitability and expect full year profitability in 2023.
Lastly, the deal is immediately accretive to our gross margin and non-GAAP adjusted EBITDA margin. Based on the Thomas acquisition and its impact on seller services, as well as ongoing gross margin improvements in our core marketplace business, we are raising our long-term gross margin expectations to 40%-45%. We expect strong leverage from the Thomas deal and are raising our long-term adjusted EBITDA assumptions to 20%-30% from 15%-25%. With that, operator, can you now open the line for questions?
Thank you. As a reminder, to ask a question, you'll need to press star one on your telephone. To withdraw your question, press the pound key. Our first question comes from Sterling Auty with JP Morgan. Your line is open.
Yeah, thanks. Hi, guys. I was wondering if you could go into a little bit more detail to help us understand kind of the monetization motion. You mentioned the seller sponsorship. Can you tell us a little bit more about how that works, and will that remain the same structure as part of Xometry?
Yeah, good morning. Thanks for the question. This is Randy, so thank you. Thomas has a suite of services that it sells to sellers. Primary in that is the ability for sellers to pay for placement within the Thomasnet platform. That's where you see, you know, over 20 million annual sourcing sessions a year. Sellers pay for placement to be discovered within that platform. Thomas also monetizes their sellers by helping those sellers take their products and place them within the Thomasnet platform, but also on their own websites. They also provide them a suite of information services for those sellers as well.
In general, they're helping with marketing and data services, helping the sellers grow their business on Thomasnet and off platform as well. They don't monetize, as we mentioned before, at all the users, even though the users are doing these. There's 1.3 million users running these tremendous amounts of RFIs every year. Combined with Xometry, we expect to be able to monetize that user base with our transaction engine and at the same time expand the suite of services that we're gonna sell to the Thomas user base, seller base, as well. Some of those sellers will also become sellers on the Xometry marketplace and take work from Xometry customers.
That makes sense. I think it's clear how, you know, you could see the cross-sell opportunity. Just to get an understanding of Thomas, can you give us a sense what kind of revenue growth rate have they been experiencing maybe over the last year or over the last couple of years?
Yeah. As we mentioned, they had grown 3%, year-over-year, from 2020- 2021. The remarkable thing is, you know, under private ownership, they were capital constrained, so they invested very little in sales and marketing. Now, you know, with Xometry and with our platform, we can really exploit. You know, they have basically zero paid marketing or very, very little paid marketing. Now, taking advantage of our marketing engine, taking advantage of our sales team, we can explode that growth, not only the Xometry side of growth, but also the growth in the Thomasnet platform as well.
Makes sense. Thank you.
Thank you. Our next question comes from Matt Hedberg with RBC Capital Markets. Your line is open.
Hey, it's Dan Bergstrom for Matt Hedberg. Thanks for taking our questions. Maybe could you expand upon what Thomas does on the content side to maybe attract and retain users? Looks like they publish and produce a lot of interesting industry content, insights, trends, you know, on a daily basis even, I think. Is this something that's incremental to you and maybe can immediately increase your relationship with active buyers and better reach potentially new buyers?
Yeah, absolutely. The Thomas platform with 500,000 sellers and over 70,000 industrial categories has just an amazing amount of data available. When you're looking at these 1.3 million registered users coming to the site with the 20+ million sourcing sessions, that just provides data that we can offer to buyers and to users about what the status of the market is, what pricing trends look like, what capacity looks like. That's something that Xometry we just haven't had the depth that the Thomasnet platform provides for us. Not only can we provide these buyers and users with all this information and tremendous capabilities, but now we can also use our transaction engine to help them buy even more from the combined Xometry and Thomasnet platform.
You know, as we talked about, we are increasingly becoming an enterprise solution for our customers. We're constantly adding more materials, manufacturing technologies, processes. With Thomasnet, we can explode that, and we can also offer those buyers now a level of specificity that was never available on Xometry. Being able to go super local if they wanted to, you know, geolocate exactly where they might potentially want a manufacturer to be able to go down to a whole wide range of different accreditations, looking at if you're looking to source for a woman-owned business or a veteran-owned business, and other categories which are increasingly important.
All that's now, that transparency is available to us, and it just provides our buyers tremendous data, tremendous access, and the ability more and more for Xometry to be their one-stop shop for all of their manufacturing needs.
That's great. Maybe could you expand upon the legacy knowledge or really authority in manufacturing that you're acquiring here with Thomas? You know, obviously, they've transitioned online, but there's really some legacy, you know, kind of authority or definitive source of manufacturing that you're gaining here with the big green book that everybody knows in the industry.
Yeah, I mean, that's a great point. I mean, they are the trusted authority. Everybody uses Thomas. It's such a well-known name because they've been around so long and have been so trusted. I think, you know, Xometry has grown like a weed, but, you know, we're still relatively small to this giant market that's available to us. The combination with Thomas immediately gives us a brand that everybody is comfortable with, and just adds instantly more credibility to Xometry and just doubles down on the secular shift to the digital. Thomas did that shift as well as they moved off the book onto online.
Now with the Xometry marketplace, that just continues to reinforce and solidify this trend to the digital and the trend to the marketplace.
Thank you.
Thank you. Our next question comes from Nick Jones with Citi. Your line is open.
Great. Thanks for taking the questions. Can you expand a little bit on some of the advertising solutions like creating copy, building websites? It sounds like there's some search engine optimization. I mean, does that kind of put you into a different competitive landscape, kind of against local agencies and those types of players in the industry?
Yeah. I think, you know, Thomas provides this suite of marketing services to the sellers to the manufacturers. It's very unique because Thomas has, as sort of the previous question meant, they are sort of the authority in the manufacturing industry. I think that's why it's so attractive to sellers when they're looking to optimize their marketing to grow their businesses. Thomas is, you know, provides a unique opportunity for them to do that just because of their built-in institutional knowledge of manufacturing and what buyers are looking for. Going back to they've got all those sourcing sessions, they know exactly where trends are, that's gonna help these manufacturers or these sellers grow their business. Now we can offer those sellers something they didn't have before.
We offer them access to the Xometry marketplace and our instant pricing for both buyers and for the sellers. Now they have that opportunity to add to their business, not only through the Thomas marketing services, not only through discovery on the Thomasnet platform, but now they have access to the Xometry customer base and the instant transactions that weren't available to them before. That's also a very powerful additive thing. Plus, we also have our basket of financial services. That's something that Thomas has never offered before. Now we can offer that to the sellers. It's our Xometry Advance Card and some of our quick pay products. That will also help accelerate the growth of the sellers in their own businesses, on and off platform.
The real synergies here, Nick, are that their seller services are different than ours. When we put them together, it's really the full suite of what a seller would need. When you look at their 500,000 sellers and the opportunity that we have, again, on the financial services, as Randy mentioned, and again, our ability to get them supplies at lower costs, that's really the benefit here on the seller side. We're really expanding our seller marketplace.
You know, we're growing like a weed. This will, you know, this will continue to help us leverage and continue to grow our business.
Great. Maybe just expanding a little bit. When I look at some of the services like SEO website development, I mean, it sounds like that requires quite a few more people than maybe a marketplace. I guess, how fast is that business growing? Do you need personnel? I mean, does Thomas have people running Google Ad campaigns on behalf of suppliers to help them build out their business and kind of manage it on an ongoing basis, and there's like a take rate element of the ad?
Yeah. I think, you know, Thomas has a team of folks that help the sellers and the manufacturers with those marketing services. You know, again, leveraging their institutional knowledge, they're able to do that in a very profitable, efficient way. Again, I think that's just another value add, going back to what Jim had said, to being the end-to-end suite of services for those sellers, helping them grow their business through those on and off platform. I think that we wanna capture the loyalty of these sellers and monetize their business, wherever it may be. This is just another set of tools in our, you know, basket here. Thomas is just experts at doing this. That's what we get with this institutional knowledge.
They're the best.
Got it. Thanks for taking the questions.
Thank you. Our next question comes from Mike Ng with Goldman Sachs. Your line is open.
Hey. Good morning. Thank you for the question. I was just wondering if you could expand a little bit about your expectations for the magnitude or timing of revenue synergies. I think you made some comments about how the pro forma revenue growth in 2022 will be in line with standalone. I think that implies a fairly meaningful acceleration at Thomas from the 3% trailing 12 months. You know, what are some of the, you know, one or two things, you know, we might see in 2022 to execute against those revenue synergies? Maybe you can talk a little bit about the integration plan. Thank you.
Yeah. I think we've been very clear that we don't. When you include those revenue synergies, we expect the Xometry growth to continue as planned. We're very excited about those synergies. There are a host of different synergies that we're looking at. For example, expanding the number of users on the Xometry marketplace today. As we talked about, Thomas has 1.3 million registered users, over 20 million annual sourcing sessions. Today, they generate zero revenue from that base. Meanwhile, as we report out, we have 26,000 active buyers in Q3, and that's generating over $180 million of TTM last 12 months revenue.
The ability to monetize some of that huge 1.3 million user base on Thomas and provide transactions to them is just tremendous upside for the, you know, for the combined business. Likewise, we talked about. We've got, you know, about 1,400 active sellers in Xometry last year, in 2020. That's generating, you know, less than 10% of our overall revenue. Meanwhile, Thomas has got this tremendous suite of services that they generated, you know, close to $67 million on a TTM basis. Now we can provide those services to the Xometry active sellers as well as cross-sell into the Thomas base, our suite of services, the Fintech products, the supplies product, you know, the FactoryFour acquisition, where we're gonna be offering an MES system.
That provides also another tremendous level of monetization. Enhancing our basket service for sellers and cross-selling, huge opportunity to grow synergies. Now having a lot more users, registered users and buyers and monetizing them, we're very confident when you add that together, those will provide terrific revenue synergies and enable our revenue growth to continue unimpeded.
Yeah, Mike, just to add to that too. The services that Thomas provides are higher margin than ours. As we get the synergies on the Thomas side, right, that's gonna enhance our margin profile as we grow the business.
Thanks, Randy. Thanks, Jim.
Thank you. That's all the time we have for Q&A. This now concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.