On to day two of the RBC TIMT Conference. I'm Matt Swanson. If you haven't seen me sitting in one of these chairs yet in the last two days, I'm the Equity Research Analyst here at RBC. Super excited to be joined by Xometry. We have Randy Altschuler and James Miln. And I think the best way to kind of set up talking about this company is really to kind of go through the core value proposition for your buyers and your suppliers and how you kind of think about what's the key to running a marketplace that makes sure both sides benefit?
Sure. So I'm Randy Altschuler. I'm the CEO. James Miln is our CFO. So Xometry is focused on custom manufacturing. So when you think about manufacturing, one of the largest industries in the world, we're focused on a segment of that. And that's comprised of millions of buyers from companies, from the largest companies in the world to people who are just coming up with startup ideas. And it's also a heavily fragmented supplier base. So hundreds of thousands of small manufacturers spread across the United States and across the world. And the long tail of the internet had never. So there's no established pricing. You're not buying things off the shelf. On a SKU. So historically, to calculate how much something cost would take a long time.
So it was very hard to have a digital experience where you were basically sending out a request for information from the buyer to the customer, to the supplier. And suppliers, because it's so fragmented and these are small businesses, really didn't have visibility into a customer base outside of their local customers. So we said, when we started Xometry and the company was founded in 2013, there was an awesome opportunity here to bring this all online, bring the internet, and we're using machine learning, artificial intelligence, to create instant pricing for the buyers. So they're uploading their custom parts and they're getting an instant price. And then we're using that machine learning also to manufacturers to make these parts. And we also use that to give them a price to make things. So Xometry is creating liquidity for both buyers and suppliers.
We're enabling these suppliers to sell their capacity to customers all across the United States and across the world. We're enabling buyers, and some of our largest customers are the largest companies in the world, to access the full range of capabilities that these small manufacturers have.
Yeah, that's a fantastic overview. And over this last year, you've been really focused on really refining around the core of the business, the core marketplace. Students who maybe aren't up to date, could you just kind of give us a view of what the company is today relative to maybe two years ago?
Yeah. So, just to give you a sense, we went public, so we've done two really terrific things. We've grown our revenue rapidly, you know, just from financial metrics. We've also grown our gross profit rapidly, as well as our gross profit margins, and we've also gotten closer and closer to being Adjusted EBITDA positive, which we expect to this upcoming. We've also expanded the scope of our business. We've gone from international, used to be a small portion of our business. In 2020, I think we did about $2 million of international. Now we're at close to $100 million run rate internationally, and that comprises, you know, a high teens percentage of our business, so expanded our networks. We've grown our networks of both buyers and suppliers. We've grown our gross margin for our marketplace segment.
When we went public in the second quarter of 2021, our gross margin was about 23.5% for marketplace. This past quarter was 33.6%. So even as we've grown revenue at, you know, very significant rates, the gross profit has actually grown even faster. So we've made a lot of, and I don't know, James, do you want to add anything else?
Yeah, I just, I would just add to that in terms of like the product of our expanding marketplace of buyers and suppliers. That's more transactions, more orders on the marketplace with more suppliers. We're at over 4,200 suppliers globally now. So that network is significant. And so when you look at the gross margin progression, the algorithms have more data to deal with, have more ability to optimize the match for the buyer to the optimal supplier. And that's coming through in that improvement in gross margin that we've seen over time. We've continued to also add to our largest customers. So the last 12 months trailing, you know, around 15, we've just surpassed 1,500 in customer accounts over $50,000. So that's growing 24% year -over -year. So growing the supplier base, growing our buyers, growing our largest customers.
Alongside that geographic growth and growth in our buyer and supplier networks, we've been expanding what we can offer our customers. We're using machine learning. We've got these instant quoting models. We've been deploying more of them. Just recently, we deployed them for bending and cutting. That's a key part of our story. We've been investing in that. We've also, last year, established a relationship with Google's group that works on AI and particularly machine learning. And they've been helping us accelerate the deployment of those models. A lot of exciting things to come.
I think just in general, when investors hear the word manufacturing, it correlates with the word macro. So I guess, how are you guys seeing the macro right now? Also, how do you see your business being correlated to the overall macro environment?
Yeah. So, you know, one of the metrics people look at is ISM data. And I think the ISM has been in a contraction for the last 23 or 24, I think, months or something like that. Almost the last two years. Despite that, you know, this quarter, we just grew 19% year -over -year. So I think you're seeing two things. One is we're clearly gaining market share. Even in a contracting macro, we're gaining market share. And the second thing is our awareness is still relatively small. So Xometry just did about roughly $142 million, so in the last quarter. So we're going to get, you know, get close to almost a $600 million run rate. But that's still very small when you think about the universe that we're addressing here.
So I think we're continuing to grow, A, because we're getting market share and because people understand that our approach to accessing these small manufacturers is a better way of doing things than what's historically been done, which is through emails or phone calls or faxes, and the second thing is just as our awareness is growing, that's also helping us gain new customers too.
Matt, you know, just as we've talked about the year, you know, we said consistently through the year until the last earnings that we expect marketplace to be able to grow at least 20% despite, you know, this is a macro, which does have an impact in terms of that speed of adoption of buyers moving from offline to the online, embracing a new process. We're probably, you know, with our last earnings, we think we can, you know, finish the year here, 2024, growing 22%-23% on marketplace year over year. I think that's a lot about the execution of the team, how successful we've been, you know, through our sales team, go to market, through our ad spend, through our operations teams, and through adding to the menu, to bending, to cutting.
And all of those initiatives sort of set us up to continue for next year as well. So we think that those can continue to keep this sort of rate of growth going forward. Now, we're not assuming any change in the macro right now. I think we just assume that we just have to continue to execute well in this environment. And, you know, I think we'll be watching to see how that, you know, continues to evolve as we go into the new year.
Yeah, I mean, I think, yeah, just to tack on what James said, the macro, you know, we talk about the contraction of manufacturing. Another trend that's occurring is more concern about supply chains. And so, you know, in this hyperpolitical and, you know, there's other kinds of tensions around the world. There's a lot of concerns from customers who have supply chains that are particularly in Asia and making sure that they can secure that base and deliver to their customers. And Xometry is a perfect solution to that. So we're in. We have 16 localized marketplaces. We're in Europe. We're in Asia. We're obviously very strong, predominantly here in the United States. So if customers are looking to ensure that they can deliver their product to their end customers, something like the Xometry Marketplace is a wonderful way to protect their supply chain at no cost.
Like where a supply chain has a box, we give them that redundancy that they need, that security that they need. That is becoming increasingly important in today's time.
Yeah. No, so important. I'm going to make you talk about that again in a second here. So a lot of times when I'm talking to investors who might be new to the story, I use my personal experience. I live in Minnesota, and when you start driving northeast, south, or west of Minneapolis, you run into farmland and machine shops. And I think it helps to kind of like emphasize this idea of not the online price discovery, but also the idea that the reason they're built out there is what matters is the machines, and they need uptime. They run three eight-hour shifts, and what they care about is enough demand to keep those expensive machines always running, so from that resiliency from a supplier standpoint, I think the idea is that supply is less elastic than demand in general.
Does the challenging macro make it easier to find suppliers because it's harder for them to find demand? Are they more open to the idea?
More reliant on the notion of trying to find a new demand source, and does that impact your advertiser services?
So to start off, I mean, just hit the landscape here. You know, we are, in terms of a two-sided marketplace for custom manufacturing, we're really it. I mean, so this is not a case where you've got a crowded space. You know, you see that in a lot of B2C markets where you've got lots of competing marketplaces. I talk to people like, you know, Uber, Lyft where a guy's got the sticker and the mustache. I don't know if Lyft use the mustache anymore. In our case, we're really, if you're looking for a marketplace and you're a small machine shop, we are the predominant player to go. So we've been very fortunate that supply has never been an issue for us.
And we actually have. We could easily that 4,200 number that James just talked about. We could make that. We could significantly grow that even faster. We're balancing how much capacity we give those, you know, how much demand we give those folks because we not only want suppliers to join our marketplace and we've got software tools we give them, which you can talk about later on, Workcenter and ways to make their lives easier. We want them to lean in, right? We want to become a reliable, important part of their business. So we're fortunate in that. But Matt, you brought up a good point that these small manufacturers don't have visibility into the rest of the world or even the rest of our country.
So if you're a small manufacturer outside Detroit or you're in Seattle, Washington, who is really, I mean, everybody was taking the blunt of the strike in Seattle, Washington, but the suppliers, those local machine shops, you're reading about them, not only the small guys, medium size, they're getting killed. Same thing if you're in Houston, Texas, you're probably living and dying with oil and gas, even while there may be an explosion of demand from aerospace companies in Southern California or medical device companies in Boston. So there is a lot of, and this is sort of the unique thing about our market. It's very opaque. The information flow, because it's so fragmented, is very, it's not, it doesn't run smoothly, both for pricing, lead times, and even open capacity. So it turns out there is lots of demand, but the manufacturers don't know how to access that.
Xometry is a great way for that small manufacturer in Seattle, Washington, who was just getting killed during the strike to diversify and to help themselves or, you know, other examples across the country, where their sales and marketing, where that ability to access it. Then we're using our AI, and this is very important, not to just shovel them whatever we get out the door, but to actually customize what we're offering to them to what they're best suited for. They appreciate that. Like they do not, they don't want to bid for stuff. They don't want to get bad jobs. They want to get stuff that fits the envelope of what they can do. They want to be given a price to do that. We do that.
And I think that's a big unlock, changing it from a bidding situation to, hey, here's a price to make it. If you're a small business owner, you can't afford to spend all your time bidding. You want a price.
I told you we'd get back to tariffs. I think based on my investor conversations, I kind of want to break this down into like three categories. And so there's the onshoring piece, which you mentioned in your answer. The second piece would be, which you mentioned too, was the idea that tariffs are going to create more openness to diversifying supply chains. And then the third would just be about instant quoting. And this has been a dynamic within Xometry where you can choose for something to be built domestically and maybe with a little bit more lead time and a little lower price, have it built internationally. Presumably that tariff would then be built into that international price. And so just how you're, I guess, depending on where international means. But just how you're thinking about those three areas.
Yeah. So let me, I'm not sure I remember all three of them.
You can combine them all together.
I'll remind our James to jump in anytime too. So, you know, we've been diversifying our supplier base. So, you know, I talked about before we've got 16 localized marketplaces predominantly throughout Europe. We've got them in Asia as well. We're in Turkey. We're continuing to expand in other markets. That means adding suppliers in different locations. So going back to Turkey, there's a lot of work that's done in Turkey that services Europe. That's historically been true and something that we've leaned into as well. We've been expanding in places like India, which from a tariff perspective may be treated differently than a country like China, for example, Mexico, other places in the Northern Hemisphere. So there are lots of different permutations of what these supply chains are going to look like, and it is very dependent on what the customer is ordering.
That is one of the beauties of what we can do with Xometry. We can build into our ability for them to source things at the most optimal place to take advantage of maybe this country is less tariffs on this particular kind of good versus another country. And we can do that to meet their customer needs. And sometimes a customer wants to pay that premium to onshore it. They say, hey, even though there may not be a tariff issue here, but I still want to be making it here domestically. By the way, that could be true in Europe as well. I could be in the EU and say, I want to be made in the EU. I know it could be made for less internationally. So we're able to do that because we're a tech company. We don't own the assets. We're agnostic.
At the end of the day, we're going to do what's best for our customers. I think they appreciate that. That's very different than if we ourselves were a manufacturer. Obviously, then we'd be biased towards one particular solution.
I would just add that, you know, as a public company in terms of like, you know, our competition or, you know, where we're, you know, on the public side is sort of limited. There's some, you know, maybe some specific vertical players. But you look at our scale, at our supplier network, 4,200, at our, you know, at our growth and size. And so in periods of instability or uncertainty, then, you know, the trust that you can have in, buyers can have in the Xometry platform to be able to source the quality, the certifications, the delivery time is there. And remember, you know, we're really helping like a very fragmented base of manufacturers. So, you know, all these small, medium-sized machine shops.
And so our technology layer on top of that is helping, you know, connect, but also help them get the demand out there in, you know, maybe in times of uncertainty, even more, you know, reason to utilize the Xometry platform.
One of the big things we've been talking about this year. And a product that I seem to like to talk about more than anybody is your collaboration solution in Teamspace. And you mentioned it reached 4,000 teams last quarter. So could you build on the strategy of enterprise adoption and the importance of building a platform solution like Teamspace?
Yes. When we think about our customers, there are different personas. There are different kinds of customers that we have even within a company. So we have matured as we've expanded our services, as we've gone deeper into the companies. We're more and more not just making a single part, but we're making parts and even entire assemblies, the marketplace making entire assemblies. Because nobody orders a part just for a part. They're going to put it into something else. So more and more customers are leaning in and buying that entire assembly from us. And there's much more involved projects or products that they're buying from Xometry. So we needed to change that experience on our site, not just to match for that single user, but also match for teams of engineers and procurement people who are collaborating and coordinating together.
And that was really the origins of Teamspace, which we launched last year. And that's the ability for multiple parties, whether it's engineers, procurement people, folks in supply chain, to all collaborate together around a project or product, which will have multiple parts, multiple delivery schedules, all of which are their dependencies on one another. And so we've been continuing to enhance that. That's encouraging larger projects to come our way. And particularly in larger companies, it's also a way to get better visibility. So if you're Matt, if you're a supply chain person or a buyer and you're in charge of a product that's got 20 different parts, you're going to invite all the folks that are involved in those 20 parts to join your Teamspace called Team Matt and from RBC. And they'll come on board.
When you're inviting them, even if they don't know Xometry now, when they accept that invite, now they're a registered user in Xometry. And it's a great way for us to grow organically within customers, particularly larger customers. Because going back to what I said in the beginning, one of the things that's helping our growth is not only that we're gaining market share, but also we're gaining our. It's a good way to do it. It's a good tactic for us. So it's very powerful. We're going to continue to invest in Teamspace and add more and more value to customers knowing from a supply chain perspective, this is a great way for them to handle their larger projects.
Yeah. In terms of visibility, it seems like it also makes you more of a standard operating procedure within the enterprise.
Right. We want to be embedded. So we also have abilities to integrate directly into their purchasing systems. They're called PunchOuts, kind of like a store within that customer. And that's also a wonderful way because in a lot of companies, particularly larger companies, you're purchasing, where you purchase from is dictated from procurement or supply chain. If we're your approved vendors, you can pick anyone you want as long as it's from this group that we've given you here. We want to be in that group. And if we've got digital headquarters right in their system, that makes it a lot more powerful. So absolutely.
Matt, again, like going back to like, again, we're talking about like very custom manufacturing. There's specialized manufacturers out there, again, mostly small and medium. So when you're on the corporate side at a large enterprise, this is like the long tail of your purchasing. There's a lot of fragmentation there. So we can help like with the Teamspace, get collaboration on their side, give them visibility. I think internally to their own processes to be able to see what's going on in this quite fragmented space. We've been successful, as Randy was saying. Like one question we often get is about like, you know, are you just prototyping or how much is prototyping versus production?
You know, we've talked to, we've given some anecdotes about in the various learnings this year about different large enterprise customers where we've got the PunchOuts, we've got them on Teamspace, they've been doing production orders with us. We even had our first seven-figure deal in Asia that we talked about, which, you know, will happen over several quarters and is delivering, you know, a whole production assembly for a consumer tech company. And so really, you know, we're that full gamut and, you know, as Randy was saying, moving from part to part to even assembly.
I mean, prototyping is also good business, but when we're thinking about that idea of becoming standardized, what do you think your customer's thought process is when they're looking at saying, all of a sudden, I need more capacity in a moment and kind of the trade-off of Xometry versus like building a manufacturing plant? Because that's something I'm thinking about with the tariffs, right? It's the idea that's like, if I need to have more capacity for the next four years, Xometry seems like a great option to fill that void instead of changing your whole business for it.
I do. I mean, I'd say if, yeah, I mean, that's a great use case. Absolutely. If people are beginning to change that, I mean, and particularly if you've already made the decision historically not to build it yourself. So to change gears and say suddenly to counter the risk that I'm seeing here, I'm going to start building my own plants, this is a great option instead to say, hey, I don't need to do that. I haven't wanted to do it historically. Boom, I've got Xometry. And again, I just, you know, James sort of alluded to this. We talked about it. Like historically, when you think about, and this is our customers have bought from these small manufacturers directly.
These small manufacturers, they're wonderful companies, but they can't afford to have online, you know, support and all the sort of bells and whistles, but important things that you expect in these sort of digital experiences. So as it rises in importance to the customer in terms of, you know, going from prototype to production, when it's core to what there is, they're even more leaning into us because the alternative is that small manufacturer who's got that risk. So it's just, it's increasingly a better option for that, and we're a public company. We've got the governance and visibility, not only the scale, but just a lot of those things that are also very important to our customers, security, environmental, all sorts of other issues.
So two things we highlight going to 2025 as growth drivers for international and wallet share gains. Maybe starting on the latter, how do you think about growing wallet share within your customer base?
I think it's a couple of things. One, more and more it's being their one-stop shop, so can we offer more? Are we instantly quoting more? Because the company, you know, you want to be more of their spend, and our customers are not just buying, you know, sheet metal or sheet cutting or 3D printing or machine parts. They're buying lots of different things, so the more that we can just be the place, like going to the supermarket. I mean, if you went to the supermarket and they only had one aisle, you know, then you're forced to go to five different stores, we want to have lots of aisles. So the more that we can do that, the more they're going to lean in and buy from us, particularly if we've got a great experience.
The second thing is just to go deeper into what they're already buying from us, getting a bigger share of that. Even today with our biggest customers, and those are some of the biggest companies in the world, we still only get a portion of what they're spending in a particular category, just improving our pricing, our delivery, our offering within our existing categories too, getting better at what we're doing now and also expanding the capabilities and capacities. Again, we're asset light. We're a technology company, so we don't have to go out and buy a bunch of machines. We've got to build the algorithms and deploy them. We're working on how to deploy those even faster, but we have that competitive advantage.
Yeah, and it certainly feels like Teamspace could lead into that wallet share gain too.
Teamspace absolutely could. And again, that's why we're consistently adding features to it, investing in it. It just makes it stickier. And those integrations with our customers buying and purchasing systems too just reduce friction.
Yeah. The other piece I mentioned was international. And you've said this quite a few times during answers to other questions. But can you help investors think about the investments international and then also kind of how markets vary?
Yeah. So again, I want to make sure I got it right, and I think in 2020 we had three million.
That's right.
$3 million revenue in 2020. This past quarter we did how much for international? I forget it.
We're at $100 million run rate. We've 55%.
Yeah. $24 million. So almost $100 million run rate. So it's grown like a weed over the period of time. Today we're predominantly in the EU. Again, we've got localized. When we go into a new market, Matt, we set up a marketplace in that language. We've got local suppliers. We've got some folks who are on the ground in that. Small teams of people, but we've got folks on the ground. We're in most of the EU countries today. Then about two years, I think about two years ago, we expanded to Asia. We launched our Asia site based in Shanghai. Now we're in Asia. We've been expanding in places like Australia and New Zealand and Asia-Pacific. We go into those markets. We build localized marketplaces. We accept local currencies.
And the reception has been remarkably similar because the story of custom manufacturing, the fragmentation, the huge demand, but the fragmented supply chain resonates in all countries or all the countries we know about. And so we're using that core technology we built here, that pricing engine. We're localizing it because prices are different in Europe than they are in Asia, than they are in the United States. But the investments we're making in the United States are very transferable to what we're doing in these other countries. And you know, we've gotten our traction. We're getting to a faster run rate in Europe. And we're ahead of pace than we were in the United States because they're leveraging everything that we've invested in here. We're expecting to see other jumps in speed in other markets as we launch and then utilize what we've already got.
Matt, you know, like yeah, now 90% of our marketplace, you know, from international, I think long term we see that as, you know, being like similar to other scaled marketplaces could be 30%-40%. We've talked as well that the gross margin profile we see is relatively similar because I think it goes to what Randy is saying in terms of like it's a very similar buyer and supplier environment. Like the buyers have the same pain points. The suppliers are still fragmented, you know. And so the.
Frictionless for the buyers. It seems to be global, and clearly we're investing at a higher rate in international right now. As we build up these markets, we need to invest in sales and marketing and try to drive the top line as we build out, you know, the product and operations, but we've been, you know, I think we can definitely see paths to that improving over time in the markets that we're scaling and getting up to a good scale.
We got a few minutes left. I just wanted to pause. Do we have any questions from the audience? All right. So I think the next place I wanted to go, we've talked a lot about revenue generation. Can we just think about the drivers of margin expansion going forward and kind of your key initiatives for long-term targets?
Yeah. So, you know, Xometry, we're getting very close here to break even. We said earlier this year that we think at the $600 million annual run rate, that's where we will surpass breakeven. We're actually a little bit ahead of that as we come into Q4 here. And so back of, you know, we've been delivering about 20% incremental adjusted EBITDA. We did that in 2023, but again, a little ahead of pace of that in 2024. And so as we, and that's also to increase our gross margin and deliver towards our long-term growth target. We've got a long-term target of 35%-40%. We think we'll be.
For marketplace.
For marketplace. Yeah, and we think we'll be, you know, we're exiting the year close to that 35%, and then we've continued to see nice leverage out of our ad spend over time as we grow and scale the marketplace, and so we'll continue to be focused and disciplined on that ROI for ad spend as well as then on sales and operations as we scale here. I think, you know, the initiatives we have in place. I think we can continue to invest at a healthy level within that framework, so we'd expect, you know, as we get through Q4, we'll be at 25%. We're Adjusted EBITDA profitable in 2025. And actually we're focused then on, you know, soon after that getting the cash flow break even and positive too.
And you know, we really have everything, you know, in our control in terms of being able to scale to the massive opportunity that's still.
You know, we grew our supplier services gross margin in the last quarter, which is huge for us. So we're at our highest in marketplace, which is 33.6%, but also in supplier services combined is 40%. And as James said, we'll hit that in Q4. So that's the milestone.
Yeah.
We're getting real tight on time, but what are you most excited about for Xometry? You can pick the timeline. Two years, three years, five years in general.
I'm excited for Xometry to be the operating system for small and medium-sized manufacturers when they think about delivering to their customers and that you're using Xometry to do that, and for customers, I'm excited for us to be the de facto place for them to use for their supply chain for custom manufacturing, so for both buyers and suppliers, we're helping, we're the de facto place they're going to manage their custom manufacturing.
Appreciate the time, guys. Thank you so much for coming.
Thank you.
Thanks, Matt. Thank you.