All right, good morning, and welcome to the William Blair Conference. I'm kind of shocked that this is my 21st William Blair Growth Stock Conference, including my internship in 2005. I'm Brian Drab, the Industrial Technology Analyst at William Blair, covering Xometry. I first, of course, have to remind everyone that you can find a full list of research disclosures on our website, williamblair.com. Today, we're very happy to have with us Xometry. We have Randy Altschuler, the CEO, James Miln, CFO, and Shawn Milne, who's the Head of Investor Relations. Thank you all for being here. I think most people in the room are probably familiar with Xometry. Since the company's IPO in 2021, it's been a very choppy economic backdrop for a number of reasons. I think we've had the ISM index above 50, maybe for a handful of months during that time.
In the meantime, Xometry has grown its customer base. It's basically tripled its customer base. It's doubled its manufacturing partner base. The marketplace that they run has seen revenue triple, and the gross margin in that marketplace has gone from the mid-20s to the mid-30s, despite a lot of people wondering how they're going to sustain mid-20s. To tell you how they did that and how they're going to perform going forward, I'm going to turn it over to Randy. Thanks very much for being here.
Thank you, Brian. We're going to just start with a short video here.
In order to build the products that surround us every day, product designers develop unique parts and assemblies and seek the best way to manufacture them. Most manufacturing is done by a fragmented global market of millions of small and medium-sized manufacturers. Finding the right one can be a time-intensive process, taking days or weeks, with prices and lead times varying greatly. Manufacturing suppliers also struggle to find the most profitable work for their capacity, as their resources and geography often limit them. Xometry's machine learning AI solves this problem by unlocking instant access to a global marketplace of thousands of manufacturers. Simply upload your CAD models to the platform and specify your manufacturing needs. This prompts Xometry's proprietary AI to analyze the geometries and features of each part file based on millions of data inputs.
Within seconds, Xometry's design for manufacturability AI computes and produces pricing, lead time options, and manufacturing process recommendations. Xometry's AI utilizes machine learning, which trains on thousands of features and analyzes similar types of previously completed parts and orders. Xometry's matching AI agent pairs the work to an optimal supplier, ensuring that high-quality parts are produced cost-effectively and on time. It scans thousands of vetted suppliers in Xometry's global network, using its knowledge of each supplier's unique capabilities. With each transaction, Xometry's AI learns more about each supplier's expertise and how to pair them with the right customer projects and optimize for repeat work and profitability. This increases supplier success rates and customer satisfaction. Through this innovative AI-driven approach, along with the strength of an expanding global supplier network, Xometry provides its customers with access to a resilient supply chain that can handle unexpected disruptions.
This groundbreaking platform lays the foundation for the future of streamlined manufacturing, optimized and powered by Xometry's AI. Xometry, where big ideas are built.
Anyway, I'm Randy Altschuler. I am the co-founder and CEO of Xometry. Let me just take a Zoom out for a second for those of you who are not familiar with Xometry. We are focused on the market for custom manufacturing. Obviously, manufacturing is a huge market. Custom manufacturing, we estimate, could be over a $2 trillion subsegment of that market. That is not when a customer is buying things specific for their prototyping or end use. Today, that is a highly fragmented market with hundreds of thousands of small manufacturers spread out across the United States and across the world providing this manufacturing and millions of buyers from small companies to the largest companies in the world. In order to create efficiencies and to do what has happened in so many other industries, we created a marketplace for custom manufacturing.
We provide value for both the buyers and the suppliers in this giant market. For the buyers, it's giving them instant access to custom manufacturing capacity and capabilities. We're doing that with AI. We're providing instant pricing. That's so remarkable because this is custom manufacturing. It's not an off-the-shelf part. It's not like retail where you're buying SKUs and you know exactly how much it should cost. In this case, it's custom, so the price itself is unknown. That's why before Xometry, it was very difficult for there to be an online marketplace experience. With Xometry now, you can get that instant pricing, and that gives the customer the ability to find the ideal manufacturer instantly and get what we believe is the best price and best lead time that's available. They can do that both domestically and internationally.
They have a wide range of different options, including different time periods in which they can receive the parts and in different manufacturing technologies. This is being utilized by some of the largest companies in the world. The other side are the suppliers. Again, there are hundreds of thousands of small manufacturers spread out across the United States and across the world. The long tail of the internet had never touched these suppliers. They had this open capacity, but they were effectively landlocked with their local customers. If you were outside of Detroit or in Detroit, your customer base was going to be predominantly auto. Even if there was an aerospace company that could use your services in California, before Xometry, you were not able to get access to that customer.
With our marketplace, you're able to get jobs from all across the country, and we're using AI to give you the jobs that meet your needs. Instead of just giving you any job, we look at your capabilities, we see your history, what you've liked, how you've performed well, and then we feed you more work. It's more profitable, and there's no cost for the supplier to join us. As Brian mentioned, we've tripled our active buyer base since we went public in 2021. In Q1, we had over 71,000 active buyers. We provide an annual statistic on active suppliers, so we had a little less than 4,400 of those. On an LTM basis, we had $574 million, and we had a gross profit of $224 million.
As you can see, in Q1, our revenue grew 23% year- over- year, and our marketplace revenue—so we have a different segment of our business—but our marketplace revenue grew 27% year- over- year. Just to double down on what I was talking about, Xometry, AI—everybody's talking about AI—since our founding in 2013, we've been using AI to create liquidity and power our marketplace. We use it in a couple of ways. First, we use it to figure out what price is appropriate for the customer when they order. Again, it's a bespoke part. We're looking at—we've built models. We're using algorithms, machine learning to say, "Hey, we've never made this part before, but it's similar in different ways to other parts," and then we extrapolate out what we think is the right price. We're constantly refreshing that.
We're getting more and more data, and we're updating those algorithms regularly. Once the customer orders, we're using those algorithms to figure out who are the ideal suppliers to manufacture these parts, whether it's the quality, the on-time delivery, the price point, and not only what's good for the customer, but again, what's good for the supplier. The more often the suppliers are in our marketplace and the more data we get on them, the smarter we are about what they're looking for. I always like to use the analogy of TikTok videos. For those of you who watch TikTok or have children who watch TikTok, after just a few videos, TikTok shockingly knows what you want to watch next, and they feed you that.
We're trying to do the same thing for our suppliers because ultimately, we want to help our suppliers not only get business but improve their profitability. If we can go now to the next slide. Okay, great. One thing I just want to double down on is the huge market opportunity in front of us. We are the leading marketplace. We're the leader, but we're still relatively small versus the entire market. This just illustrates for you that right now, our penetration rate is less than 1% when you look at different slices of the market. We're not only proud of the growth that we've had this year, and we've actually indicated accelerated growth in 2025 versus 2024. We did that last year when we saw this year was going to be a stronger year for us.
Not only do we see accelerated growth, but we see the opportunity to grow for a very long time because this is such a gigantic market. Can we get the next slide, please? This again, just to what this gives you some idea of our CAGR since 2019. These are the things that we publicly disclose. You can see everything from active buyers and suppliers growing rapidly over the 2019 to 2024 period. Our revenue grew very rapidly, but, and Brian alluded to this, our gross profit even grew faster. A lot of companies hack their way to growth by lowering their margins. We were actually able to not only grow very quickly, but we were able to grow our gross profit even faster. We expect that gross margin expansion to continue. One of the great things is we are a technology company.
We're an asset-like company. We're not a manufacturer ourselves. Our technology is extensible across many end markets. Here's just a scan of it. We're not long or particularly vulnerable to any one customer or any one market. That's one of the reasons why our growth has been so durable. Whether it's been the COVID times, whether it's been concerns about tariffs, whether it's been normal times, Xometry has consistently grown. That's because with our technology platform, it's relevant for so many different industries. Sometimes industries are going to spike. Sometimes they're going to be going lower. We're not only gaining market share, but we're crossing across all these different industries. All right, next slide. We also have a clear strategy for growth. Again, we're a marketplace here. You've seen this happen in other marketplaces, and we're the leading one.
Here's how we can expand our networks of buyers and suppliers. There are millions of buyers out there. There are hundreds of thousands of suppliers out there. We're very proud of how many we have today, but there's a lot more room we can go. We can drive deeper with our enterprise customers. One of the things that we disclosed in our Q1 earnings was that we have over 100 customers that in 2024 did more than $500,000 of LTM revenue with us. We believe that those customers could each do $10 million of annual business with us. These are the largest companies in the world. They're using Xometry. Between our technology, we have specific technology tools we're using to grow deeper into those enterprise customers. Through our sales efforts, we're expanding within them. They've seen very rapid growth, but there's a huge runway to continue.
We're going to push for more and more enterprise engagement. We're further expanding what we can offer in our marketplace. What are the different things we can instantly price? Today, we instantly price a number of manufacturing technologies, a number of materials and finishes, but there are so many more that we can add. The good news is with our AI-powered algorithms, we're able to do that rapidly, and you should expect to see the Xometry offering continue to expand for a long time moving forward. That just enables us to grow our share of wallet with the customers. Instead of the customer only using us for one or two things, they're able to do all their shopping with Xometry. We've also been growing very rapidly internationally.
Our international growth, and our CFO, James Miln, will talk about that later, has been terrific. It's primarily been in Europe. We're beginning to see some really nice traction in Asia. We have 18 localized marketplaces. If you're in different countries, if you're in France, you've got a local marketplace for the French market. You can buy from French manufacturers. You can buy from overseas manufacturers. We customize the experience for the French customer. We're using the same tech platform in all these different marketplaces, but we're able to expand relatively rapidly and with little CapEx investment in these different places. We have supplier services. Xometry bought a company called Thomasnet. That's basically one of the largest, or it's the largest directory for industrial manufacturing. Over 500,000 manufacturers are listed in that.
Customers have the ability to find things beyond what they can find in our instant quoting engine. This is just a preview. With this, I am going to hand it over to our CFO, James Miln. You are going now. Yeah. Okay. All right, James.
Thanks, Randy, and thanks, everybody. Just to dig a little deeper into each of those growth initiatives and the numbers behind them, this large and growing marketplace of buyers and suppliers. You can see the ramp in buyers here. In Q1, we were able to grow buyers another 22% year-over-year in Q1 to over 71,000 buyers. At the same time, we've been growing that and expanding our global supplier network. You see in 2024, we ended the year with over 4,375 active suppliers on the network. When we think about enterprise, we give a stat around the accounts that we have with last 12 months of more than $50,000. That's been growing really well as well over the last few years at a CAGR of around 28%. We finished last year with nearly 1,500.
Now, we really think of those as a really great indicator of the enterprise funnel. What we talked about in our Q4 call and our Q1 call was the potential that we see to grow this enterprise segment. It's been an area of investment that we're starting to see some leverage from in the first quarter of this year. As Randy mentioned, we've got more than 100 of those accounts with more than $500,000 in LTM revenue in 2024. We have some case study detail in our presentation on our investor site. You'll see there that we have large customers who have grown in recent years from hundreds of thousands of dollars to millions, five, six, seven, eight million. We're on our way to having these accounts with more than $10 million in annual LTM.
We believe that over time, many of these can get to a more than $10 million annual opportunity. Again, building on what Randy was saying in terms of the strategy of adding more functionality, more processes, more certifications, more finishes to our platform. Last year, we were able to add tube cutting and tube bending to the core processes that we already have in place. There are others that we are investing in, and we have done work to help apply new data models to areas where we are launching new processes, new finishes, certifications to help those ramp up with liquidity faster on the platform and add more to meet the needs of our increasing number of buyers and enterprise customers. To build on the growing of the international footprint, you will see here that just in 2020, international was 2% of our marketplace revenue.
In 2024, it got up to 18% of that revenue. It's been growing really well. We've been growing particularly out of Europe, and our operations there are headquartered out of Munich, Germany. We've been building out the networks and the marketplaces across EMEA, including countries like Turkey, and then out of Asia as well, centered out of Shanghai. To double down on what Randy was saying, we've got 18 languages. We can take six different currencies. What we've seen, really importantly, is that the needs of buyers and the needs of suppliers are very consistent globally. As we look at building out the marketplace, we're seeing very similar opportunities with the value proposition that Xometry provides.
I think that this shows how we believe this can continue to grow really well and, like many other global marketplaces, get us to 30%-40% of our revenue from where we are today. We're well on that path. On the Thomas side, a big focus here is enhancing our monetization of this leading industrial sourcing advertising platform. We have about 5,000 premium-paying suppliers today. We've got over 1.4 million registered users. The platform is very rich and deep and broad in terms of all the different categorization of suppliers and manufacturers on the platform. We also offer a suite of marketing services to many of those companies who are looking to get more users and more leads to their sites.
We're working on continuing to improve the search and improve the advertising platform to grow this very profitable piece of our business. Just to recap a few of those underlying trends, the annual revenue, you can see here we've continued to see significant growth at scale in the first quarter. Just to bring it back to the most recent, we grew marketplace 27% year- over- year. We saw some great strength in the U.S. as we continue to grow internationally as well. Our overall revenue has now broken the $600 million LTM mark, delivering $151 million in Q1 and growing 23% year- over- year.
Sorry, James. Sam, do you mind closing that door?
We're seeing increasing value in our continuing in all the cohorts that we've brought on over the last several years. You can see indicated by this chart, as we continue to be successful in the accounts that we bring into Xometry, they grow with Xometry over time as we are able to add more to the marketplace menu and get deeper into our relationships driven both by enterprise and also then by the broader selection, more efficiency of marketing to bring customers back again to the platform. Importantly, in terms of the economic engine of Xometry, the strong gross profit growth. We've seen that continue to grow year-over-year. In the first quarter, we continue to see nice gross profit growth year-over-year.
We were also able to make some investment in driving liquidity in our marketplace across multiple markets so that we're well positioned in an environment of more unilateral trade and tariffs to be able to source from different regions and give our buyers the best options on the Xometry platform. We continue to see really nice gross profit growth, and we expect our gross margins to continue to rise this year, which is a factor of both more orders, more buyers, more data for AI and the machine learning algorithms to work with, and also our expanding supplier network so we have more options to match that order with the optimal supplier.
The impacts of that you can see over the long term here as we put in more buyers and more orders matching with more suppliers, we've been able to grow our gross margin 10 percentage points since 2020. From 23.5% to 33.5% in 2024. Our long-term target on this and view is that this marketplace gross margin can be in the 35%-40% range. We exited last year very close to that level, and we'll continue to see improvements this year. The strong buyer growth is also coming through improving advertising efficiency as we've continued to add a consistent number of new buyers to the platform each quarter. That's coming with increased efficiency as we've also built out and matured both our sales and our marketing functions.
We expect this to continue to show efficiency over time as part of our path to improving here from our adjusted EBITDA profitability. We have been really pleased with what those efficiencies that the platform's been able to demonstrate over these periods. Beyond marketing, we have also seen in general great efficiency, strong leverage across our expense areas as we continue to scale the platform. We have seen this steadily over the last few years, and that continued in the first quarter. We saw a really nice increase on the sales and marketing side in leverage and efficiency. This followed about a year ago where we were leaning into building out the enterprise team and continuing to grow in international.
It's been really nice to see that come with 27% marketplace growth in the first quarter, but also being able to show the leverage in the model as we move forward. I think there are a lot of good initiatives with the team and with our leadership team in place, a lot of focus on how to drive more automation and scale as we move forward to see continued leverage in areas like operations and support. That's really driving great progress that we've been making in profitability and our adjusted EBITDA margin. We've seen over 20% incremental margins come through in the last few years, about 20% in 2023 and 22% last year in 2024. We expect to continue to see, and we've communicated, 20% incremental adjusted EBITDA margins as we scale from here, the $600 million run rate, to $1 billion.
As Randy outlined, we've got a large, actually really massive opportunity ahead of us. Scaling this business and the growth of the business is a fantastic opportunity for us. We want to do that with discipline and with profitability as well. We think that this is the right balance of growth and profitability as we grow from here to a billion. We're an asset-light model. We're relevant across all of these different categories and all of these different regions. The model can apply to all of these, which differentiates us in terms of that asset-light approach and the ability for that to over time generate strong cash flow. As we get adjusted EBITDA into full-year profitability here and continue on that into 2026, we'll be able to then show that converting into free cash flow as well.
I think this is probably towards the end. To finalize in terms of then as we think about our capital allocation strategy, the primary focus is investing in that organic growth in the buyer and supplier networks, the huge opportunity that's ahead of us, expanding the platform, the technology, the international expansion that can help us drive scale. With that comes profitability. We want to maintain our strong balance sheet. We have $231 million in cash and cash equivalents today. As we make that, we're getting close to free cash flow positive as well. We'll continue to be asset-light, minimize the CapEx, and drive our incremental adjusted EBITDA of 20%. I think that it's an exciting space. There's a lot of innovation in the space. There's technology.
There are ways that perhaps we can identify tuck-in acquisitions that could help accelerate that organic growth strategy. That'll be part of our consideration for technology and talent as we move forward. It is really about accelerating our core marketplace growth and leaning into this huge opportunity that's ahead of us.
We'll leave it on this slide at the end, but yeah, back to you, Brian. Yeah.
I'm going to ask a question. I had a choice between either sharing Randy's lapel or.
Okay.
I'll step here for a second, but we have four minutes for Q&A, and then we'll be in the Jenny B room if anyone wants to continue the discussion with us there. Can you double-click on the growing with the 500,000-plus customers, the customer spending $500,000 LTM revenue? How are you doing that? Can you talk about Teamspace and how impactful that's been?
Yeah. So when you look at those customers that have spent over $500,000 with us on an LTM basis, and again, we've identified them all to be candidates of $10 million+, these are large, massive companies. In order to grow organically within them, we've done it both through technology and through our sales efforts. In technology, we launched something called Teamspace. That's the ability for multiple buyers at a customer to collaborate together in the Xometry marketplace to buy assemblies or entire products. When you think about enterprises, there's a lot of coordination that's going on about what parts are arriving, how they're being put together. This is very, very helpful, particularly for large companies that have large orders. That's helped us with that. Also, we've integrated with their purchasing system. We have what's called punchouts. They can do it directly from Ariba.
They could just buy right from us. They do not even need to come to our site and upload a PO. We have done those integrations with the ERP systems to reduce any friction for the purchasing organization. Finally, we have add-ins for the largest CAD programs. If you are a designer, an engineer, and you are creating your parts, you can actually access Xometry's instant pricing and then buy from Xometry with add-ins that we have created for the native application. That helps us to grow organically within these large companies. We also have our dedicated sales force. About a year ago, we brought on a new head of our sales team, Subir Dutt. We are able to deploy that sales force using these software tools and grow very rapidly in these large companies.
Thank you. One of the most common questions that I get is we're in a world where there's so much disruption of supply chains right now, and tariffs are causing such a headache for so many different companies. Is Xometry thriving in an environment like that? What happens if things somehow, someday go back to normal?
Sure.
Can you talk about that?
Yeah, it's a double-edged sword. We've been great. We've had durable growth in all sorts of environments. As I said earlier, in COVID, we grew rapidly. After COVID, we grew rapidly. Our Q1 performance, where we had 27% marketplace growth, was not a pull forward because of tariffs. I want to be very clear about that. That was our normal pace of business. Even last year before the election, before Liberation Day, we had insight that this year was going to be a year of accelerated growth for us. I will say, though, the more uncertainty there is in the market, that does play to our strengths because customers need to get their end products delivered to their customers. That's also true for production.
When you think about the spectrum for customers ordering just prototype parts and production parts, the more important the part is, and end-use parts are obviously more important to the customer than prototypes, the more they're going to lean in to use Xometry. We're a public company. We've got the governance, the visibility of a public company. We have the resilience, the ability for them to diversify where they're manufacturing across geographies or even across different manufacturers. The more important it is to them, the more likely they're going to lean into Xometry. That's why you've got some of the largest companies in the world growing rapidly with us.
Okay. With that, we're going to wrap up. Xometry is all about efficiency. We're going to be right on time. Thank you very much, Randy and James, for being with us today. Sorry for the little quirks in the IT. That is one of the downfalls of being the first one to present at the conference, but I'm sure we'll replace that battery in that remote, and it'll be great going forward.
Thank you, everyone. Sorry for the little glitches that we had.
Thank you. Thanks, Brian. Thanks, everyone.
Thanks.