Xometry Aktie

All right. Good morning, good afternoon, everyone. Thanks for joining. Cory Carpenter, Internet analyst at JPMorgan. Pleased to have the full Xometry team with us here today, the outgoing soon-to-be Exec Chair, Randy, the incoming CEO, Sanjeev; and CFO, James. Thanks for joining us.

Thanks, Cory. Great to be here.

Great to be here.

All right. So I'll sprinkle questions across the group. But to start, I think, Randy, for you, just to level set for everyone on the line in the room, just maybe start off with a high-level overview of the business and the problem that Xometry is solving.

Yes. So Xometry is the leading AI native marketplace for custom manufacturing. So custom manufacturing is a huge industry, hundreds and hundreds of billions of dollars, heavily fragmented with millions of buyers and millions of suppliers, and it's largely been undigitized. So it's been manual and offline.

We created a marketplace to bring together buyers and suppliers, and we use AI to create pricing for both buyers and suppliers and to optimize the match. We -- I co-founded the company in 2013. We've been growing rapidly. JPMorgan helped take us public in 2021, and we had -- things are going great. We had an accelerated growth in our last quarter.

Great. And then, Sanjeev, maybe for you, you're getting set to take over the CEO role, I think, in a few weeks. Obviously, you've been with the company for a while. So before we dive into the business, I thought it would be helpful just for investors to hear a bit on your background and your priorities as incoming CEO.

Thank you. I joined early last year, I came in with most of my experience around scaling larger high-growth opportunities in companies that are around the e-commerce topic and/or around logistics and supply chain with experience at Wayfair and McKinsey being the 2 prominent ones. To me, we've said this before, the destination is not changing. The person on the seat is changing as far as the CEO transition is considered.

So our priorities that we've actually been talking about for a good part of last year around product-led growth, around making sure that we continue to deepen our data and AI moat, continuing to drive category and enterprise experiences and then international growth, they all remain the same. I think we are continuing to make sure that the momentum on all of those areas continues to pick up, and we have more opportunities to deliver.

So Randy, you alluded to this in your first answer, just the manufacturing industry, it's obviously massive. I think you said hundreds of billions, but maybe put a finer point on that. How do you think about the addressable market and just where the industry is at in terms of online penetration?

Yes. So I think if you take a step back in manufacturing, we put it into sort of 2 big -- maybe 3 big buckets. One bucket is contract manufacturing. So that's when you're making millions and millions of something that is a very efficient, low-margin industry, mature industry. The second would be off-the-shelf parts. So common parts if you buy, that's also where you see e-commerce players like a Grainger or Fastenal, folks like that, MSCs of the world. And then you have the custom parts.

So think about an aerospace company, a medical device company, a robotics company that's making parts that are specific for their product. That's also a huge industry. But because it's custom manufacturing, it's not a commoditized product. It has turned into a very fragmented industry with every manufacturer being good at a very specific thing. And the long tail of the Internet hasn't really touched custom manufacturing because it's hard to figure out who's good at what and who is the right person to choose at a given time.

So because of this, it has remained offline. And what is the choice? What does the customer usually do? They go to their local manufacturer or they go to the manufacturer who they know. That may not be the best manufacturer for that particular order, but that's all they know. And then the supplier lives and dies with their local customers.

So if you're in Houston, Texas, you're going to be about oil and gas or if you're in Southfield, Michigan, you're going to be about automotive. Even if there's a great aerospace customer in Southern California who's desperate for your capacity and your capabilities, you wouldn't know about that because this is custom. So that's where AI is so important to bring it together. We've got lots of -- we'll talk about this later on, our proprietary algorithms and data, and that's enabling us to actually then create a lot more efficiency and transparency for both the buyer and the suppliers. It's one of these rare marketplaces where it's a win for both sides.

So a lot of disruption in the supply chains globally in recent years, tariffs, geopolitical conflicts. How is that impacting or is that accelerating the shift to digital? And how is that impacting buyer behavior in your business?

Yes. So what's interesting is over the last couple of years, it's changed just recently, but manufacturing has been in decline, like the overall market has declined. And again, just to put that in perspective, it is a huge market. So Cory, I didn't quite answer your question before about how -- what percentage of the market is digitized, a very small portion of it in terms of the supply chain.

We've still been growing at a very robust rate because we're taking market share as people understand that digital makes a lot of sense. And when you think about our customers, they're buying so many other things digitally that, of course, manufacturing should be the same way. When you see all these supply chain shocks, whether it's COVID or it's geopolitical issues or wars, et cetera, that just reinforces for people the need to have resilient supply chains to have ones that they can make changes. So if you're sourcing in a particular part of the world and something happens there, how do I quickly switch or diversify so I can protect my end customers.

And of course, Xometry being natively digital, having these supply chains in the United States, but also around the world, giving customers that flexibility becomes a logical choice for them. So I think it becomes a flight to, hey, where can I get the best resiliency? And as we've grown as a company and matured, where is the safest choice. And more and more, we're that choice.

So just on competition, I think that's a question we get a lot from investors. I mean off-line is clearly the biggest competitor still. But what does the competitive environment look like on the digital side? And just as we think longer term, is the competitive intensity increasing? Or is this more of a winner take all or take most type of market?

You want to...

Sure. I can take that. I would say just to put a number on the percentage of market that's online, we believe less than 1% is. So off-line fragmented job shop around the corner, that's 99% of where custom manufacturing happens today. And so there's a lot of headroom, we believe, for the online penetration to even get to the numbers that you typically see in e-commerce. That said, from a digital online marketplace perspective, if you look around, you'll see there's a combination of manufacturers with some online capabilities.

There are some really, really small online marketplaces as well. The key differentiator in my mind is it happens in all network-based flywheel businesses where data is at the core and the more data you collect, the better your flywheel works. So in our case, we've been around for over a decade, AI native from day 1. So our focus was always in making sure our data was structured such that we can continue to build on that flywheel.

And so at this point, we believe we have enough data for millions and millions of parts that we've produced and the lead time models that we've built, we recently said that we updated our lead time models to now use 4x the data sets that we used to before. We believe that, that's just going to continue to accelerate our ability to take more and more market share.

So you may have kind of answered this next question with that one. But just with all the focus on AI, investors are looking at every company trying to think about what's the disruption risk. So as we think about your moat, why is the Xometry marketplace not something that could be like vibe coded overnight?

It's a really important question. I think one that a lot of us have answered about every possible Internet business that we see out there or SaaS business. For us, if you look at the core AI models that we have, which is our pricing models, our manufacturing models and our supplier network and how we manage that, those models are built on files provided by our customer, which is a custom part for that particular customer. Those are converted into geometric data that's based on our algorithm.

And that data is retained in our tooling until the manufactured product is given to the customer, so it gets augmented by manufacturability information. That data, that proprietary data sits with us. That's not something that's available in a public domain. You can't go write -- get an LLM to get you data that would convert that into a price, a price that the LLM will guarantee to manufacture that product at the margins that we deliver. So our view is very clearly what sits with us in our core AI data models is all proprietary data. You can, of course, write an LLM, but likely it will point you back to coming to Xometry to get a manufacturer and to get it made.

Great. Okay. So I want to talk about your partnership you announced at earnings a few weeks ago, a strategic partnership with Siemens and embed Xometry directly into Siemens Xcelerator and a couple of other things. Could you just help us understand the scope of this partnership and how transformational you think it could be for the company?

I can start and Randy, feel free to join in. We think that partnership is completely transformative, one of a kind that we've not done ourselves before, but also nobody else has done in the market. So typically, the way getting price in a design tool today, so think about the top CAD tooling that exists out there, only 3 or 4 super large players, the way that pricing works today is that once you're done designing your file, you either mail it to a provider, the offline provider you're talking about to get a price or you actually download an add-on, one of them would be Xometry, install it on your local software and then actually try to get your price through that.

As you can imagine, in today's age of cybersecurity and the confidentiality that every customer in the company wants to maintain, it is generally an act of Congress to get a third-party add-on approved by your IT team to go be installed behind your firewall, right? Typically, it's not happening. So what Siemens partnership that we are doing is completely changing it by converting our core AI model into a native of the software. So in the future, when their design center software used by engineers for CAD tooling. When that ships, in built with it would be an AXC for Xometry.

So as an engineer, as you're designing your tool, you could get a price that Xometry will guarantee to manufacture it if you so wish to place your order right then or if you plan to make 4 or 5 changes right there to see what the price changes, you get real-time in the native tool feedback without having to go to your IT team to get an approval to install anything, without your file and your confidentiality ever leaving your system. And so therefore, this is a game changer because it just completely changes the way you get price and the way you are able to maintain security and confidentiality.

Of course, we've -- that's one big thing that we are excited about in the partnership. The other thing that we are working with them is on the supply frame business that they have, which is a business in which they take the bill of materials from companies and help price those for them to show what opportunity exists to address cost in those bill of materials. We can provide both custom part pricing in that through our custom marketplace, but we also have a services business, the e-commerce business, which actually has lots of off-the-shelf partner information. We can help them with those data points as well. So 1 design center, 2 supply frame. And then finally, the third part of that partnership is to integrate all of the information and updates straight into their PLM.

So technically, the Siemens Designcenter and PLM user never really has to leave their ecosystem and still be able to get the entire value of Xometry for us. We think it's super exciting because it changes the way customers buy, but it opens up a whole new channel for us in terms of marketing and getting more customers.

For the tech investor, I'll bucket myself in that crowd, who may be less familiar with Siemens, maybe give us a sense of their size and scope in the market? And then what does the kind of integration road map look like in terms of getting the product live?

So Siemens overall is in multiple different domains. The specific business that we're speaking to here is the one that's focused on digital industry software. And the aim of that digital industry software is to truly aggregate capabilities around manufacturing and design, so that they have tooling from CAD design to life cycle management and the ability to actually push that orders into the manufacturers back end. So it's all around digital software...

And it's Siemens, it's huge. I mean it's I think the leading industrial software company, and you're talking millions of users that use Siemens software. And just to put that perspective, we're very proud of last quarter. We had, obviously, a number -- highest number of users we've ever had, but also a record net add quarter-over-quarter since, I think, 9 quarters, we're at 85,000 users. So just going back to Sanjeev's excitement and all of our excitement about this, this has a chance to really be a big multiplier when you look at their installed base. It's much larger than ours. And it's -- they're a big player.

I'm actually going to jump. So Randy, I think one of the questions a couple or at 4Q earnings when you announced the transition to Exec Chair is, is Randy going to be doing? I think we now know what you've been doing. I guess as we look forward, where do you see potential for more -- how many -- how much more partnership opportunities are there? Is there any sort of exclusivity element to this we should be aware of?

Yes. So we have a very special relationship with Siemens, but that doesn't prevent us from building other relationships. And we think just as you said, Cory, I'm not riding up in the sunset. I'm the Executive Chairman. I'm still very, very engaged with Xometry. Obviously, Sanjeev is running the business as our CEO. But there are lots of other partnership opportunities, lots of other places around the ecosystem, and we are actively working on that.

So we think that Xometry has the opportunity to become that rail that's connecting buyers and suppliers that's helping in this digitization, getting to that final part of that digital thread to actual procurement and delivery, and there's lots of players in there. And so we think there's lots of opportunities to build those, and this is how we are working on those.

And that's where you're spending your time.

That's where we're spending the time.

So marketplace revenue is accelerated 3 quarters in a row, I mean, in a pretty meaningful way from 20% to close to 40%. What do you attribute this to? How do you think about the sustainability of this growth trajectory?

And even the covers [indiscernible], but Sanjeev joined us in January of last year, and he has been running a large portion of the business ever since. I think as he talked about, he brought this this is why we wanted Sanjeev as our next CEO, this product-led growth mentality. We've really leaned into that. And so when you look at the number of product releases we've had, the enhancements we've made in our buyer and supplier experience, that has accelerated at a pace that we never had at Xometry. Lots of marketing innovation. We've made lots of great changes.

So I think you're seeing proof of that, and that's why you're seeing that acceleration that's been happening now quarterly. And it's just the right way to go. And when you think about such a large TAM and going back to our penetration still so small, the way to do that at scale and to accelerate is through the product. And we're getting there in large part because of Sanjeev's leadership.

And also, we did bring in some other folks together with Sanjeev that he had worked with that had similar experience in scale businesses. Very proud of where we've gotten with Xometry. But as we get [indiscernible] quickly to $1 billion and beyond of run rate. We needed people who have been there, done that and done $10 billion and more than that. We've got many more people in the organization now for that, and that's helping us accelerate.

Yes. And I'd just add like the revenue -- the buyer -- the active buyer growth we saw has been accelerating as well. So that was our highest net adds for a couple of years. And so that's driving 20%, and that's on the back of what Randy was talking about, all the product innovation, the marketing improvements and go-to-market. We also saw revenue per buyer grow at an accelerated rate as well at 17% year-over-year.

And I think I'd line that up with all of the great initiatives on enterprise and all the progress we've been making there. We're penetrating more and more accounts. We -- at the end of last year, we had more than 140 with $500,000 or more on the platform. So we're seeing the continued acceleration both on the buyers and on the revenue per buyer as well as then international growing at an accelerated pace, too in the quarter of 42%. So these are all core initiatives that we've been driving, increasingly driven by our pace of product innovation.

Sanjeev, maybe you could talk about some of the products that you've rolled out that have had the biggest impact and then what you can tell us about the road map as well.

We continue to focus on changing the way the experiences of all of our customers are happening, right? So to me, one of the fundamental beliefs of the product road map has been that nobody wants clunky B2B software anymore. In your B2B buying experiences, everybody now wants to have the same seamless experience of a B2B engine. So just like you and I buy on Amazon, and we feel comfortable that the experience that we find the product easily, that the buying will be instant, then the follow-up will be super.

We believe that's where all of the B2B softwares are going. And in general, the e-commerce experience, everybody instantly expects it to be tomorrow. So I think we are building towards that. We've had some fantastic launches. So you heard about the injection molding, auto coating capability that we launched earlier last year, where we've now added 6 more materials. We've increased the number of coating capabilities such that we saw 15% more quoting in that interaction. And as you know, injection molding is a big, big TAM in our space. So we continue to focus on driving product capabilities to drive category expansion, customer experiences and buyer experience and partner experiences.

And then very recently, we spoke about the depth of the data models that we are working on. So increasing our lead time model, having it used 4x the data points to actually drive more accuracy, but that accuracy is also leading to us launching things like 1-day shipping. So now you can actually get a custom part uploaded today and have it shipped to you tomorrow. So we'll continue to drive selection, speed and pricing through all of these new innovations that you'll see, but lots of exciting things to come.

So I want to talk about enterprise for a bit. I mean one of the debates for years, I feel like, was the prototype versus largest production run. It's been less of a debate in recent quarters. But the enterprise business has clearly been a growth driver for you and the numbers you've given keep going higher in terms of how you're defining how big a customer can get. So could you just talk about what's working on the enterprise side and how you've been able to get that deeper penetration?

Maybe, James, why don't you give the stats and then Sanjeev and I can give the commentary around.

Yes. Yes. So on the enterprise, as we talked about, we've got over $50,000 accounts are at the top of the enterprise funnel, and that's been growing very healthily over the last few years. But what we've been talking about last year and this year was those accounts over 500,000. They've been growing more than 40%. We had 100 at the end of '24 and over 140 at the end of '26.

And we think that all of those have the capability, have the capacity to do $10 million plus and really putting out $1 billion-plus target that we see on enterprise in the next few years. And we had, at the end of last year, 4 of those accounts be over $10 million. So we've been making a lot of really great traction within the business.

Yes. And just to frame up those companies, so -- and as James has said, we've been raising the bar of what we consider successful accounts, 50,000 went public, now $500,000. Now we've got that $10 million bogey. People often ask us, is $10 million a lot. These companies are some of the biggest companies in the world, $10 million. We're proud of $10 million, but it's also a sad number, my 19-year-old say, like they're a much bigger number. These are companies, some of them are spending billions of dollars of manufacturing. And our slice of it going back to the TAM could be hundreds of millions of that.

So one of the things that's been helping us on the enterprise side is, first of all, we've got a great sales team there, a great sales leader. We made a change a couple of years ago and really pivoted and started changing our sales team to orient more towards enterprise, but there's also been -- and this is what's been critical, a lot of technology releases that we've done that have speeded up that growth. And I'll mention one, then I'll hand it over to Sanjeev.

We added something called Teamspace. And this enabled -- so historically, in the beginning, Xometry was more of a one-to-one experience between one buyer and Xometry. So you're understandably going to be buying single parts. As Xometry was growing, we're doing more assemblies. As we're getting more enterprise customers, they're saying, "Hey, we've got teams of people working on this. There's multiple parts involved. There's multiple assemblies. I need that procurement, I need that purchasing. I need to have all these different people involved." We came out with Teamspace. Since our launch, we've had thousands and thousands of teams launched. And so that's been a key software launch that's helped us grow within our enterprises.

And again, I think enterprise, as you know, is a B2B business that doesn't shop on a website, right? You have to be present in the journey where they're actually doing their shopping. So Design and Siemens is one example of that, but then you push that forward, integrations into ERP tooling, availability of punch-out solutions, that's been the other focus. So for us, the enterprise pie is not limited to what we can get somebody to come to our site, but we are making a very concentrated effort to be present in their journeys, whether it's design or procurement and making sure that we are actually forefront in the recognition that they have there.

So I want to come back to international. James, you called it out as a growth driver earlier. Maybe give us a sense of your footprint today on the international side. And then I think the Siemens partnership, they're certainly a global company. So how could that help with your international expansion?

Yes. So enterprise grew 42% year-over-year in the first quarter. So we really love that growth. We think we're still early in the opportunity. We made progress getting to $100 million-plus run rate internationally faster than in the U.S. And what's really exciting as well is we're seeing very similar buyer and supplier demands and expectations of what a digital marketplace needs to look like. And we're seeing similar unit economics with the gross margin. So we're in -- we have 18 different languages across Europe and Asia.

We've been taking learnings from the U.S. and being able to pull those into Europe, such as Teamspace. We've also launched injection molding, auto quoting in Europe, too. So these things will be much -- help us on that journey to getting over the long term, this marketplace to be consistent with other marketplaces, sort of 30% to 40% of the total revenue. Siemens is a very global company. I think a great partner for us for all the reasons we've said, but particularly from an international perspective as well and it helps on that journey of continuing to increase our awareness and our buyer penetration as we grow.

And I think the exciting thing about the international growth has really primarily been EMEA that's been driving that. We are now, as we've indicated, beginning to get more and more traction in Asia. So I think you have -- obviously, those markets independent could be both huge and are comparable to the United States. I think as we're getting both of those cranking, not just EMEA, that could, to James' point, get us faster to that 30% to 40% number that we think ultimately international be as a mix of the overall revenue of the company. So...

If anyone has a question, by the way, feel free to raise your hands, otherwise I will keep going. I think this is for you, James. So you raised your revenue outlook quite materially last quarter, but it does still imply a slowdown in growth in the back half of the year. So maybe could you just talk about your assumptions that are embedded in the guide around macro, around Siemens? And are you seeing any change in demand? Or how should we think about that?

Yes. We had a fantastic first quarter, and it's just been seeing the acceleration over the last few quarters, and those trends have continued to remain strong into Q2. The Siemens partnership is really exciting. I think it has a lot of potential in it. It's not in our guidance, not in our numbers for '26. So I think we'll come back as the milestones are hit to update you on that as we go.

As you say, Cory, we significantly raised our revenue growth. We're now looking at 27% to 28% for the year from an initial look of around 21%. That's just really reflecting the robust Q1. We raised Q2, and it does imply higher growth in the second half as well. So we're excited about those trends. And there's nothing one-off to call out in terms of what happened last year or as we think about the year ahead. So it's really about the drivers we've been talking about, the strategic drivers, the product-driven growth, the strength in enterprise and in international. And I think we couldn't be more excited about the long-term opportunity here.

Yes. I think just as we publicly said when we released earnings recently, Q2 has started strong, and we'll look at the second half of the year as we report to Q2, we'll give updates. People can look at our history. We've been -- I think we've been good at updating that, and we've seen acceleration. And so more good things to come.

So I think another -- we've talked about a few of the investor debates over the years. I think the last one we haven't hit on is marketplace gross margin. I think it's fair to say when we went public, there was probably skepticism that you'd hit your 35% to 40%. Actually, I think it was lower. I think you raised it.

30% to 35% initially.

Target. You're at the low end of the upwardly revised target now. So my question is, what's driven the expansion that you think investors may have underestimated or missed? And how should we think about the gross margin trajectory in the coming years?

I mean this really is a data AI-driven solution here, and data is the key. So we've got these algorithms, these proprietary algorithms to continue to enhance those algorithms and expand those algorithms. They need data. This is custom manufacturing. So what we've always explained to people is as we get more data, we're going to be more accurate and that will enable us to improve those gross margins.

And that is, in fact, what's happened. And then likewise, as we expand the size of our network, that will also help with that. And as we get deeper -- being embedded deeper within our manufacturers. So when you sort of see those different factors coming together, you've been seeing our gross margin improve. As you alluded to, Cory, we went public, we were at 25% in '21. Last year, we had almost 35% gross margin for the year, I think 34.7% or something. So -- and it's been steadily growing every year, 100-plus basis points.

So as we get more data, as our networks continue to expand, we expect to continue to see year-over-year improvement in those gross margins. This is, again, such an inefficient market, opaque market. We have such a large opportunity. And again, it's providing value for both the buyer and the supplier. That's what makes me -- I think our team is so excited. We're creating so much value here for both sides, that's special. You don't see that in a lot of marketplaces or a lot of businesses, frankly.

So James, you've talked about 20% incremental margins is like your target as you scale to the $1 billion of revenue. Why is that the right level for the business? And then is that the right level? Does that change with the Siemens partnership or as you scale about, you're getting close to that $1 billion mark?

We are. And yes, we've delivered about approximately 20% or above incremental adjusted EBITDA over the last 3 years. And it's really a calibration that reflects a balance leaning into the growth as we scale the platform, thinking about initiatives like international, but also demonstrating the scalability of the platform as we increase the gross margin and as we're able to get leverage more in OpEx. We have some segmentation between U.S. and international.

So I think when you break that apart, you can see how consistently we've also grown the U.S. business and seen better than 20% improvement there while making a careful investment on the international side to scale that being at an earlier stage. So I think as we scale to $1 billion and above, I think that continued progress on U.S., scaling of international and as we find abilities using automation, AI in our teams to get -- help us reduce our cost to serve and our cost of sales as we scale on the journey that we've been in.

I think where Siemens comes in is that like other major initiatives, they help us tap into that TAM. As Sanjeev was talking about, we're only at 1%, so -- or less than. So there's a lot of growth ahead of us. And as we do that, finding efficient ways to go to market and get our awareness out there, Siemens is a great example of that where the economics should be very similar on a revenue and gross margin, but the cost to serve should be significantly lower. And I think I would line that up with other major initiatives such as injection molding, international, all things that have a lot of opportunity and revenue runway ahead of them that can help us scale profitably.

Yes. So just to put it, our incremental margins -- contribution margins from -- at same business could be another accelerator of our overall profitability.

I thought we had too many questions, but we actually have 3 minutes left for the last question. So I'm going to -- maybe this is actually for everyone. Everyone has a minute. So just to wrap up high level. So maybe you can each give the one thing you're kind of most excited about that no one is talking about today, but you think could really be transformative for the business in the next year or 3 ahead.

Okay. I would say one of the most important things that I'm excited about is the data depth and the moat we have there. If you think about the Siemens partnership, one of the core anchors for that in my mind is the core AI models that we have and the proprietary data that sits there. Of all of the things that we can do with other conversations and models to launch, that data can be used to actually further increase collaborations, offerings, ability to actually drive more traction in new customers and categories. I think that to me is the really cool part of our business. That's not something we talk about enough.

I'm going to give 2 things. One is just -- I'm very excited about just going back to what we're seeing in this quarter and our overall outlook, the underlying metrics in our business are strong. There's no like we're seeing broad-based growth across industries, across customer segments. So this is exciting. You're just seeing more and more people coming to us, all those different metrics that build up to ultimately your revenue. So I'm excited about how that trend is continuing and even accelerating.

I think the one thing that people don't understand is the journey from quoting to delivery, that is a difficult journey to conquer. And we are very methodically and very smartly conquering that each step of the way and creating a digital journey, removing friction, making it easier for both the buyer and the supplier. That's a huge moat. It's -- each part of that is not trivial and each of that adds up to successful delivery. And I think we're doing a great job in getting -- and providing that for customers, and that is a huge -- going back to the data point that Sanjeev made about competitive moat, just being able to do that is also a huge competitive moat.

Unlike B2C marketplaces where you've got 1,000 people that are crowding in and quickly get this is a hard market to get into. And by us conquering all these different things, we are making this really formidable position for us and preventing other people from conquering us and taking over.

Yes. I think the final thing I'd add is just the growth of the supplier network. And I think the asset that we have that's hugely valuable there as buyers look for unmatched speed and capacity resilience across the globe. We've been building up this network, the certifications, the sophistication, the quality and building on Sanjeev, that workflow and data that can go from design to manufacture as we help our suppliers get -- read more signals and get more data there, we can match better and better to the optimal supplier and it will be a great experience for them, great job for them, profitable job for them and it meets the needs of the buyer and Xometry is able to accrete value from that.

Great. We'll leave it there. Thank you all.

Thank you. Thank you.

Good day, and thank you for standing by. Welcome to Xometry's Quarter 1 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Shawn Milne, Vice President of Investor Relations. Shawn, go ahead.

Good morning, and thank you for joining us on Xometry's Q1 2026 Earnings Call. Joining me are Randy Altschuler, our Chief Executive Officer; Sanjeev Singh Sahni, our President; and James Miln, our Chief Financial Officer.

During today's call, we will review our financial results for the first quarter of 2026 and discuss our guidance for the second quarter and full year 2026. During today's call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, strategy, long-term growth and overall future prospects. Such statements may be identified by terms such as believe, expect, intend and may. These statements are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed before the market opened today and in our filings with the U.S. Securities and Exchange Commission, including our Form 10-Q for the quarter ended March 31, 2026. We caution you not to place undue reliance on forward statements or 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 or superior to measures of financial performance prepared in accordance with U.S. GAAP. To see the reconciliation of the non-GAAP measures, please refer to our earnings press release distributed today and our investor presentation, both of which are available on the Investors section of our website at investors.xometry.com. A replay of today's call will also be posted on our website.

With that, I'd like to turn the call over to Randy.

Thanks, Shawn. Good morning, and thank you for joining our Q1 2026 earnings call. Our accelerating growth and record Q1 results demonstrate the success of our AI-native marketplace in the massive, complex and highly fragmented custom manufacturing market. The record performance we are reporting today reflects the investments and changes we've been making in our product, technology and go-to-market strategies.

Q1 was a record quarter for Xometry across many fronts, including revenue, gross profit and adjusted EBITDA. Q1 revenue growth accelerated, increasing 36% year-over-year, a 600 basis point acceleration from Q4, driven by 40% Marketplace growth through our expanding networks of buyers and suppliers and increasing wallet share. Alongside strong enterprise growth, we are seeing improving broad-based strength across the marketplace driven by our product initiatives.

Q1 net adds were strong and we grew active buyers 20% year-over-year. We expect continued strong growth ahead as we further tap into this largely off-line market. Q1 adjusted EBITDA increased to $10.5 million, an improvement of $10.4 million year-over-year as we deliver expanding margins on top of accelerated growth.

In addition to our record financial results, today, we announced a strategic partnership with Siemens, the world's leading industrial software company, who is embedding Xometry's AI capabilities natively into Siemens Xcelerator and investing $50 million in Xometry Class A common stock to back that conviction. By natively integrating Xometry's marketplace capabilities directly into Siemens integrated design to manufacturing software ecosystem, including the Siemens Design Center, this partnership puts Xometry's manufacturability, pricing and sourcing intelligence in front of Siemens' global customer base at the moment design decisions are made. Through this embedded experience, engineers will receive real-time feedback on design feasibility, manufacturing options, pricing and lead times directly within their existing design workflow. They can also seamlessly place and track orders through to delivery. The result is a continuous digital thread from design decision to delivered part.

Xometry is uniquely equipped to power this partnership with over a decade of proprietary transactional data, real-world manufacturer feedback and closed-loop production outcomes across our global supplier network. These serve as the foundation of our manufacturability, pricing and sourcing intelligence, and they are what makes this experience possible at scale. In addition to the Siemens Design Center integration, the partnership will include the integration of Thomas, Xometry's North American industrial sourcing network with Siemens Supplyframe to bring deep design to sourcing intelligence for both electronic and mechanical components to completely source the bill of materials for Siemens customers.

As Xometry's enterprise installed base deepens with more accounts embedding us into their core engineering and procurement workflows, the Siemens partnership extends that intelligence upstream into the design environment itself, helping teams move from digital intent to physical production with fewer handoffs and greater transparency. And this also accelerates the expansion of Xometry's installed base in the process.

Together, this strategic partnership will accelerate our collective penetration of the massive, highly fragmented custom manufacturing market with Siemens global platform extending Xometry's reach across all commercial markets. Our teams are actively working on the integration road map, and we look forward to sharing milestones as the partnership develops. We're thrilled to be working with Siemens to further strengthen the design digital thread.

For those new to our story, Xometry has operated as an AI-native marketplace since its inception with data science, machine learning and core AI models integrated into operations. Xometry's core AI models, which manage the custom orders to part manufacturing journey are trained on proprietary transactional data. Xometry's proprietary pricing and sourcing models are embedded directly within live marketplace transactions, integrating digital quoting, supplier selection, production performance and delivery outcomes into a closed-loop learning system. Each completed order strengthens future predictions, increasing accuracy, speed and reliability across the network.

By embedding design to fulfillment intelligence directly into engineers' workflows, Xometry reduces information asymmetry in manufacturing procurement and is transforming what has historically been a fragmented manual coordination problem into a scalable competitive advantage ground in both digital intelligence and physical world execution.

Our strong Q1 financial results marked 3 consecutive quarters of accelerating revenue growth and 4 quarters of increasing EBITDA margins. At the same time, we've invested in and strengthened our platforms to deliver robust secular growth and expanding profitability in the coming years. We're off to a strong start in Q2, and we expect robust growth to continue in 2026, which James will discuss later in the call.

I will now turn it over to our President and incoming CEO, Sanjeev Singh Sahni, to discuss some of the initiatives that are driving our strong growth and increasing profitability.

Thanks, Randy, and good morning. The strong Q1 results we are reporting today are direct evidence that the product-led strategy formulated last year is working. This quarter validates our strategic thesis and marks the clear acceleration of our path to a new trajectory.

We are defining the e-commerce playbook in custom manufacturing and raising the experience bar for buyers and suppliers everywhere. Our teams are beginning to inflect the growth curve and build a path to this new trajectory. Today, I will focus on sharing some developments from our strategic elements focused on our proprietary and core AI models, e-commerce marketplace experience and expansive supplier network.

Our new strategic partnership with Siemens is very exciting as it will help us serve ever more engineers and transform their buying journeys. The Siemens partnership is a strong external proof point that our core AI models are becoming the infrastructure for how the industrial world designs and sources parts.

In Q1, we made significant progress on proprietary core AI models. Our proprietary intelligence is crucial for creating value across the entire marketplace. Our strategy over the past year has been to establish our core AI models as the differentiators. They are the reason why Xometry continues to take significant market share.

Our models are laser-focused on improving pricing, speed and selection for both buyers and suppliers. The ability to translate a decade plus of proprietary data into immediate operating leverage and long-term Marketplace growth is what underpins our confidence in accelerating the move to the next S-curve of growth.

First, we launched a new enterprise machine lead time model that represents a significant expansion of Xometry's predictive intelligence capabilities. The new lead time model represents a significant expansion of Xometry's predictive intelligence capabilities, leading to a superior prediction accuracy for custom model parts. Enabled by the scale of performance data from the global supplier network, the model enhances operational throughput by driving a reduction in standard lead time offerings and expanding rapid delivery to facilitate 1-day lead times across a growing catalog of materials and geometries.

Our updated model leverages a training data set 4x larger than its predecessor and now integrates critical factors like specialized certifications, new materials and advanced finishing options. Enterprise customers are not experimenting with us anymore. They are expanding.

Second, we shaped several new journeys on our e-commerce marketplace experience. Our customer and supplier online journeys are rapidly defining the e-commerce playbook in custom manufacturing. One of our core beliefs and something I feel strongly about is that the B2B buying experience in manufacturing should be every bit as good as what people experience in their personal lives on Amazon, Wayfair, or Alibaba.

The days of clunky B2B procurement software, multistep checkout processes and waiting for days for an e-mail code are simply over. What we are seeing is a generational shift in who is making manufacturing purchasing decisions. The engineers, procurement buyers and supply chain lead roles are now full of dynamic digitally native individuals. They expect the same frictionless journey at work that they have in their personal lives. And when they find that Xometry can deliver to that, they become Xometry champions inside their organizations. That's true whether they are at a Fortune 500 company or a high-growth start-up.

With our focus on improving the customer journeys on the platform, we introduced 2 features. First, we launched the Name Your Part feature, which enables customers to match their internal name conventions to what they have on Xometry, creating a unified part and SKU-like structure on our platform. This is an important feature that is already reducing buyer friction and substantially simplifying the reordering process. We can see in recent activity in Teamspace, the name your Part feature is gaining traction as Xometry becomes increasingly part of customers' bill of materials. Second, we enriched our pricing models to include greater personalization of customer pricing. We enhanced the dynamic pricing logic that powers the pricing intelligence layer of our Instant Quoting Engine. We see this drive higher conversions, balance margin outcomes and drive higher overall growth while enabling better outcome for our customers.

In Q1, we continued to improve our injection molding offering in the U.S., adding 6 new materials and 3 additional finishes to give buyers greater choice and selection, increasing instant coding of injection molding parts by over 15%. Xometry's proprietary AI-powered platform manages the full cycle of injection molding needs from instant quoting to delivery and reordering in one of the largest custom manufacturing markets in the U.S. The platform enables a spectrum of injection molding options from prototype and low-volume bridge tooling to high-volume multi-cavity production tooling in approximately 50 different materials, colors and finishes.

Finally, we are ever more focused on expanding our global supplier network and improving supplier experience. Our global supply network of approximately 5,000 suppliers is a significant strategic advantage, giving buyers unmatched speed, capacity and resilience, allowing for immediate scaling and offering sourcing flexibility across 50 countries on 4 continents. We continue to add more suppliers with higher levels of specialized certifications to support the growing needs of customers in specific industries. In 2025, demand for certified manufacturing surged with jobs requiring certifications increasing 35% on our platform.

For our suppliers, we continue on improving their experience through new technology and tools in Workcenter, including the recent release of on-platform communications. By centralizing job-related communications directly within Workcenter, we are shifting more engagement online, improving visibility and further reducing friction for our suppliers. Insights we draw from suppliers' interactions on our platform give us significant sourcing insights to drive margin outcomes. This quarter confirms our strategic path and the power of our AI-driven flywheel.

As I prepare to take on the CEO role in July, I'm very excited about the trajectory ahead. And I look forward to leading Xometry through its next product-led growth curve that we have already embarked on.

I will now turn the call over to James, for a more detailed review of Q1 and our business outlook.

Thanks, Sanjeev, and good morning, everyone. Our results for Q1 underscore the continued scaling and increasing efficiency of our marketplace, driving both accelerated growth and expanding profitability. Revenue growth increased for the third quarter in a row, and Marketplace gross profit dollars saw even faster growth, exceeding 50% year-over-year. This accelerating top line was paired with yet another quarter of improved adjusted EBITDA profit margins. These achievements demonstrate that our Marketplace is becoming the essential infrastructure for a predominantly offline and fragmented industry.

Q1 revenue grew 36% year-over-year to $205 million, a 600 basis point sequential acceleration from Q4. Q1 Marketplace revenue was $191 million and services revenue was $13.8 million. Q1 Marketplace revenue increased 40% year-over-year, a 700 basis point acceleration from Q4, driven by strong execution, expansion of buyer and supplier networks as we continue to capture significant market share. Q1 active buyers increased 20% year-over-year to 85,581 with a net addition of 3,760 active buyers, the highest number of net adds in 9 quarters. Strong Q1 net additions were driven by our product-led growth strategy and efficient corporate marketing initiatives. Q1 Marketplace revenue per active buyer increased a robust 17% year-over-year, primarily due to increasing wallet share.

We view accounts with at least $50,000 spend at the top of the enterprise funnel. In Q1, the number of accounts with last 12-month spend of at least $50,000 on our platform increased 21% year-over-year to 1,864 with a strong net adds of 104. Enterprise investments continue to show strong returns. Our enterprise strategy focuses on our largest accounts, which we believe each have $10 million plus in potential annual account revenue. Services revenue was roughly flat quarter-over-quarter as we stabilize the core advertising business. We are focused on improving engagement and monetization on the platform, which remains a leader in industrial sourcing, supplier selection and digital marketing solutions.

Q1 gross profit was $78.5 million, an increase of 39% year-over-year. Q1 gross margin for Marketplace was 34.7%, an increase of 290 basis points year-over-year. Q1 Marketplace gross profit dollars increased a robust 53% year-over-year. We are focused on driving Marketplace gross profit dollar growth through the combination of top line growth and gross margin expansion. Our commitment to strong discipline and rigor in capital and resource allocation across all teams while continuing to invest in growth initiatives is reflected in our Q1 operating costs.

Total non-GAAP operating expenses for Q1 were $68.2 million, a 21% increase year-over-year, a rate significantly lower than our revenue growth. In Q1, sales and marketing decreased 110 basis points year-over-year to 14.2% of revenue. This reflects improving enterprise sales execution and disciplined advertising spend. Marketplace advertising spend was a record low 3.9% of Marketplace revenue, down 60 basis points year-over-year as we delivered accelerating growth and expanding profitability. In Q1, operations and support decreased 70 basis points year-over-year to 8.2% of revenue. We are focused on driving increasing automation with AI across operations and support.

Q1 adjusted EBITDA was $10.5 million compared with $0.1 million in Q1 2025. Q1 adjusted EBITDA improved $10.4 million year-over-year, driven by strong growth in revenue, gross profit and operating efficiencies. Alongside accelerating revenue growth, we delivered expanded adjusted EBITDA margin of 5.1% compared with 4.4% in Q4 2025. Q1 U.S. segment adjusted EBITDA was $13.3 million, a $10.3 million improvement year-over-year. Q1 U.S. segment adjusted EBITDA margin was 7.7% compared to 2.4% a year ago, driven by expanding gross profit and strong operating expense leverage. Our International segment adjusted EBITDA loss was $2.8 million in Q1 2026 or 8% of revenue, a 400 basis point improvement from a loss of 12% in Q1 2025. We expect continued improvement in International segment operating leverage in 2026.

At the end of the first quarter, cash and cash equivalents and marketable securities were $224 million. We generated $14.6 million in operating cash flow and $4.8 million in free cash flow in Q1 2026, driven by strong operating leverage and working capital efficiency. In the first quarter, we invested $10.6 million in cash CapEx, almost entirely software-related, reflecting our technology investments in the platform and accelerating product rollouts. We are focused on improving cash flow conversion given our asset-light model and limited capital spending.

Our disciplined execution has led to strong revenue and gross profit growth in our AI-native marketplace, coupled with significant operating leverage and increased operating cash flow generation. We are focused on strategically balancing future investment with a relentless pursuit of operating leverage, given the vast market opportunity and our low penetration rates. As we rapidly approach a $1 billion run rate, we have a clear trajectory for improving adjusted EBITDA margins while sustaining our investment in growth.

Now moving on to guidance. We are raising our outlook for the year. For the second quarter, we expect revenue in the range of $214 million to $216 million or 32% to 33% growth year-over-year. We expect Q2 Marketplace growth to be approximately 35% to 36% year-over-year, driven by ongoing momentum from our growth initiatives. We expect Q2 services revenue to be largely flat quarter-over-quarter as we continue to work through the transition of the recently launched Thomas ad serving platform and search upgrades.

In Q2, we expect adjusted EBITDA of $11 million to $12 million compared to $3.9 million in Q2 2025. For the full year 2026, we are raising our revenue growth outlook to at least 27% to 28% from 21%, driven by approximately 30% Marketplace growth. We expect 2026 Marketplace gross margins to be higher than 2025 as each quarter of growth and technological advancement incrementally fuels margin performance. For 2026, we expect services approximately flat year-over-year with modest growth in the second half of the year as we expect that revenue in the second half begins to increase quarter-over-quarter. For the full year 2026, we expect incremental adjusted EBITDA margins of at least 20%.

Before we open it up for questions, I want to recognize our team. The results we've discussed today reflect their execution, and I'm equally excited for what those results make possible going forward. We have real momentum, a large market in front of us and a team that has demonstrated it can deliver. That combination gives us genuine confidence in what's ahead.

With that, operator, can you please open up the call for questions?

Our first question comes from Cory Carpenter of JPMorgan.

I wanted to ask about the Siemens partnership, in particular, maybe for some of us more on the Internet side, less familiar. Could you just help us frame how meaningful is this for you? Kind of what exposure does this get you that you did not have before? And then how should we expect it to layer in some of the KPIs like active buyers in the coming quarters?

This is Randy, and thanks for joining. And I'll jump in and maybe our President and incoming CEO, Sanjeev, will join as well. So we think, this is a big deal. I mean, Siemens is the leading industrial software company globally. It has millions of users. As you know, we have 85,000 active buyers. So their user base dwarfs ours, and we are embedding directly into their PLM and CAD software. So right where we want to capture the engineers and the procurement people, that is Siemens business. This will extend our reach into -- globally, it will extend our reach into all different sectors across different industries. So it could be a very big deal for us.

I think from a KPI perspective, just as I alluded to, with millions of users, it could really boost up significantly our active buyer count. So lots of good things. And it also can improve our profitability as you can think we're capturing these -- these are Siemens customers. Logically, our sales and marketing spend will be dramatically less here as we're getting them here natively into their software.

Just to add on to that, I think, Cory, the way to think about this opportunity is that we are truly integrating directly into the Siemens software as a native embedded solution deployed within their SaaS and on-prem premises environments, which means real-time data connectivity to the engineer who is designing their product and being able to price it right there in their flow. So without having to break their flow, they would be able to get pricing on parts from Xometry, which would be a very, very big improvement to the user experience and their ability to move from price to placing the order very seamlessly, something that does not exist today at all.

Our next question comes from Brian Drab of William Blair.

Randy, congratulations and congrats to the whole team, but well, what an accomplishment. I wanted to just follow up on the Siemens question. So first of all, can you talk about how that business is going to be structured in terms of margins for you? I know you just said it's going to require less selling and marketing. But Siemens is obviously kind of acting sort of like a distributor, you're using their platform, and they're going to take some value. But the sales through that platform, you're saying should be accretive to overall EBITDA margin. Is that right?

So Brian, we're going to monetize. We're going to -- the gross margins that those should be very similar, Brian, to what we see today. We'll also be recognizing revenue similar to what we're seeing today. And as we said, we'll have less OpEx associated with it. So we think from an incremental margins from this revenue should be more profitable.

In terms of recent performance in the first quarter, have you seen or can you talk about in any more detail, strength relatively across different end markets like aerospace, space defense, I imagine, continues to be very strong, or is it just broad-based? And then are you seeing any benefit to your business from the disruption to the global supply chains related to the war et cetera.

Yes, absolutely. So I think, first of all, like we really saw growth across all of our industries, Brian. It was very broad-based, which is very exciting for us across many different customer segments. And I think we -- certainly, the macro has been improving. The ISM data, manufacturing data has been improving. But in general, we just continue to gain more and more market share, and that's been a big driver of our growth.

I think when you think about all the disruptions that have happened now for years since COVID, I think it just underscores to buyers the need for resilient supply chains, the need for digital supply chain flexibility, and that's what Xometry is. It enables people instantly to source from different regions, make changes. We strongly believe this is the future of manufacturing supply chains and we're the leader in it. And so I think that's just helping us gain more and more adoption by users and more and more market share.

I was just going to build on that. I mean, what Randy was saying, you saw accelerated net adds on the buyers, accelerated net adds on our accounts over 50,000, continued success on the enterprise front as well as continued success on the product-led strategy. So creating a broad-based offering and building out broad-based momentum.

Can I ask just one more quick one? So there was, I think, some anxiety on the call last time with the report because of the succession of Sanjeev coming in. Randy, you said very clearly, I'm not really going anywhere. I'm going to be working on some significant partnerships. Now that's materialized. We know exactly what you're talking about in terms of a partnership. My question is, are there -- you used the term partnerships, plural. Is this a sign of potential further -- is this indication of like other partnerships that we could see down the road?

Yes. I mean, absolutely. Look, first, we're building a very special partnership with Siemens, a very unique one. So we're excited and grateful for that. But we're certainly hopeful that there'll be other partnerships, Brian, to say, down the road. And I'm excited to focus my time on those and assist Sanjeev here, who's been crucial to building this partnership as well as our execution.

As James said, this is really about our product. I mean, Siemens is excited about our product, integrating our product. This just validates our product-led growth strategy that Sanjeev, since he joined us last year has been leading and where we go in the future. But certainly, more good stuff to come and hopefully more partnerships, but love the unique one that we built, special one that we built with Siemens.

Yes. And I think it really validates the custom manufacturing TAM that we see, $275 billion. These are the sorts of relationships that we want as the infrastructure, as the platform for custom manufacturing to be able to accelerate our growth and continue to execute really well on the product, improve that and get in front of more buyers and more suppliers.

Our next question comes from Andrew Boone of Citizens Bank.

Can we double-click on active buyer? It was the strongest net adds in 2 years. Can you help us understand that outperformance? And then how should we think about that going forward? And then as we think about AI just in terms of a bigger picture view as a tool that you guys are now inserting across the business. Can you talk about this very specifically within the Instant Quote engine? What is that unlocked in terms of accuracy or any other benefits you guys want to highlight as we think about the evolution of what Instant Quote can be?

Yes. I'll start with the active buyers and then hand over to Sanjeev to talk about the AI integration and what that means. So look, I think -- and I appreciate, Andrew, pointing out, this is the biggest add that we've had for 2 years.

I think you can expect to see more exciting numbers from the add perspective as we continue to further develop our technology platform to be more personalization as we extend the reach through our product and through our marketing, we're getting broader adoption. Partnerships certainly like the one, the unique one we're building with Siemens here will accelerate that. And I think the other great thing is not only did we have record net adds the last 2 years, but we grew the spend per buyer as well. I think that grew 17% year-over-year. So that's also an indication not only we're getting more buyers, but our share of wallet is increasing. And that's -- we think there's opportunity to continue to grow that share even as we grow that number of active buyers.

Yes. I would also say, Andrew, Shawn -- you can see in the slide in the deck that we grew the active buyer number was strong. At the same time, the ad spend as a percent of Marketplace revenue declined 50 basis points year-over-year.

Andrew, to your question on AI and what we're continuing to do there and how we're embedding the Instant Quoting Engine. As you can see, I think part of our focus with the product-led growth has been to double down on the predictive intelligence capabilities that our proprietary AI model brings to us.

I mentioned on the call that over the last several cycles, we've been focused on improving and expanding the model itself. Our updated model leverages the training data set, which is now 4x larger than its predecessor and even integrates new factors that actually help us price better, be more specific to new materials, even have advanced finishing options, which we continue to see more and more of as a need from our customers. Truly, I think this is most exciting for our enterprise customers whose needs are super expansive, but also to make sure that they now can come to us with a trust that we'll be able to deliver irrespective of the need.

Our next question comes from Greg Palm of Craig-Hallum.

Yes, I'd like to offer my congratulations on basically all the above as well. I wanted to maybe go back to the Siemens announcement. I don't know if you can give us just a little bit of background on sort of kind of how that came about mostly from their end. I'm also a little bit confused and it looks like a great deal for you, but what's kind of in it for them? And I mean, as I think about them and their global sort of installed base and exposure, I mean, do you think this could be a good really helpful catalyst to accelerate growth internationally?

Yes. So look, I think we're building something very special with Siemens, and I think that's going to give their users a very unique opportunity to access our data to improve their intelligence in terms of pricing and sourcing. It's being built natively within the Siemens system. So it is very special and unique. And I think that will be a huge value add for the Siemens users. I think as you said, it obviously, Greg, is great for us and they do have a massive user installed base, obviously much, much larger than ours, and it is truly global. And as we've talked about and as you can see in the press release, this is a global rollout that we expect. So this should help us not only here in the United States, but across all of our regions. So very exciting.

Greg, to your question specifically on how it helps them. This is Sanjeev. Very specifically, if you think about it, this actually embeds the entire Xometry experience within the Siemens platform, which means that the Siemens user actually never has to leave the Siemens platform to actually price the part and then track the journey of the part being manufactured and delivered to them, which is going to be very unique and puts them also in a very different category compared to any of the other competitors that they face off on a daily basis in the spaces of CAD and PLM. Now being able to make sure that their engineers and the users have a very unique journey, we think is a true differentiator for them as well.

I guess I'm looking or thinking about the full year guide, in light of what's going on in the macro, given the Siemens partnership. I mean, the full year guide based on what you've done in Q1 and the guide Q2, I mean, implies not just a pretty big deceleration in Marketplace growth in the second half but implies a major deceleration in net adds. It implies no growth in revenue per buyer. So I guess I'm just asking in light of all of that, maybe it's just conservatism. There's still a lot of year left, but just wanted to get your quick thoughts on that as well.

Yes. Let me just -- first of all, our guide doesn't include anything about Siemens at all. So let's just -- that is not baked into our numbers. And as that partnership develops, we'll certainly update and if that impacts or when it impacts our numbers, we'll certainly share that. I think just to level set here, we did raise our guidance in Q2 or implied guidance pretty significantly here the 32% to 33% growth. And our guidance also -- and that includes -- that 35% to 36% Marketplace growth in Q2.

Our guidance also implies higher growth in the second half of the year, higher than the guidance that we just gave about 1.5 months ago. And I just want to say that the trends remain strong. We have started Q2 very strong. And so as things continue, we will continue to update as we've done all along. But so far, the trends remain strong. And again, we've raised our guidance not only for Q2, but for the second half of the year as well.

Just build, Greg, I think we're really excited. I mean, I think now at 27% to 28% for the full year, that's an acceleration from 2025 growth of 26%. So another year of Marketplace growth of 30%, which is what we did last year. We're excited about the trends we see, very excited about this relationship with Siemens.

I'll just note as well that there's a couple of slides in the earnings presentation on Siemens. So you can reference those as well as you're digging in here. And I think the strength in the product road map, the strength in enterprise, what that does is says in terms of the opportunity ahead of us, the TAM that we have to penetrate, we still feel very early. There's a lot of opportunity ahead. But when it comes to guidance, it's still early in the year, and we'll update you as we go through.

Yes. I mean, just to be clear, we're not seeing anything that would imply deceleration, but we're being smart here.

Yes, makes sense. We'll be looking forward to those updated guidance metrics throughout the year.

Our next question comes from Troy Jensen of Cantor Fitzgerald.

First off, congrats on the great results. I guess I also want to dive in a little bit on Siemens. I think you hit on it a little bit, but just to confirm, there's no exclusivity associated with this and you guys would be able to do similar stuff with like an Autodesk and SolidWorks?

Yes. We're building something -- thanks for joining us. So we're building something special and unique and proprietary with Siemens. So that relationship is. But we will continue to work with other companies, other beyond companies and others. But I just want to say what we've done with Siemens is very unique and special to them.

The $50 million investment, was that something that happened after the quarter closed? Or can you just touch on it a little bit more?

Yes, that's after the quarter closed. So it will be -- you'll see it in the Q as a subsequent event.

James, just maybe one for you, if I could throw it in quick. What revenue level do you think you need to reach like an EBITDA breakeven for your international business?

Yes. I mean, I think we're there overall globally. I don't think -- we're not going to guide to that on a segment basis. We're really pleased with the progress we're making. As you know as well, we were free cash flow positive in the quarter and we're getting close to the level which we mentioned last quarter in terms of where we think that that's sustainable at $225 million a quarter in revenue. I think we're really excited about the growth opportunity in international and seeing the margin continue to improve. So we think those losses will continue to improve as the year goes on.

I am showing no further questions at this time. I would now -- I would like to thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

Good day, and thank you for standing by. Welcome to the Xometry Fourth Quarter 2020 Earnings Conference Call [Operator Instructions] Please note that today's conference is being recorded. I will now hand the conference over to your speaker host for today, Shawn Milne, VP of Investor Relations. Please go ahead.

Good morning, and thank you for joining us on Xometry's Q4 and Full Year 2025 Earnings Call. Joining me are Randy Altschuler, our Chief Executive Officer; Sanjeev Singh Sahni, our President; and James Milne, our Chief Financial Officer. During today's call, we will review our financial results for the fourth quarter and full year 2025 and discuss our guidance for the first quarter and full year 2026.

During today's call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, strategy, long-term growth and overall future prospects. Such statements may be identified by terms such as believe, expect, intend and may. These statements are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed before the market opened today and in our filings with the U.S. Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2025.

We caution you not to 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 remains to evaluate period-to-period comparisons.

Non-GAAP financial measures are presented in addition to and not as a substitute 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 distributed today and in our investor presentation both of which are available on the Investors section of our website at investors.xometry.com. A replay of today's call will also be posted on our website. With that, I'd like to turn the call over to Randy.

Thanks, John. Good morning, and thank you for joining our Q4 2025 earnings call. Our record Q4 quarter and record full year 2025 and powerfully demonstrate the success of our AI native marketplace in the massive, complex and highly fragmented custom manufacturing market. Our revenue growth and profitability accelerated as 2025 progress, we are encouraged by our strong start to 2026. Alongside reporting record financial results, today, we announced the planned transition in Xometry's leadership. Effective July 1, 2026, and I will transition to become the Executive Chair of the Board; and Sanjeev Singh sane, Xomitry's current President will become Chief Executive Officer.

This transition is a result of a deliberate long-term succession process with our Board, and we are aligned in our conviction that Sanjiv is the right leader for our next chapter. Together with Laurence Sure, I cofounded Xometry in 2013 and with a mission to make the world's manufacturing capacity accessible to all by digitizing the VaaS, highly fragmented custom manufacturing work. We stayed true to that vision from the start. -- and that consistency is now delivering scale and accelerating growth and profitability. I'm proud that in 2025, our marketplace serves over 80,000 active buyers around the world.

The record performance we are reporting today and the momentum that built throughout 2025 and is carrying into the first quarter of 2026, reflects the investments and changes we've been making in our product technology and go-to-market strategies and leadership. As we continue to lean into product-led growth, I've decided that this is the right time to hand over the leadership of Xometry to Sanjiv. Sanjeev has been my close partner since he joined in January of last year and has held the operational mandate for our global teams.

During his tenure, Sanjeev has been instrumental to Xometry's accelerated revenue growth and expanded profitability while further deepening our suite of advanced technology and AI capabilities across the business. Sanjiv's track record at Xometry, and his background of driving global growth, innovation and scale with large global marketplaces makes him the right leader to drive our next stage of innovation and profitable growth.

Sanjeev has done a terrific job as our President and I expect that we will continue to outperform as our CEO. In my new role as Executive Chair and as the largest individual long-term shareholder, I will remain closely involved in the company's future focusing on strategic growth initiatives and key corporate partnerships. In short, I'm not going anywhere. While this transition will be a milestone for zometry, as always, our focus remains on executing the significant opportunity in front of us. It is a pivotal time in manufacturing driven by accelerating digital transformation, increasing customer demands for speed and transparency, rapid AI-driven innovation, and the crucial need for resilient supply chains, including the push towards reshoring.

This new era necessitates resilient digital workflows and robust supplier networks. Xometry's AI native marketplace is digitizing how custom manufacturing is price, source and fulfilled by replacing manual legacy processes. Our networks of buyers and suppliers alongside the proprietary data they generate through their interactions in our marketplace, continue to grow and create increasing network effects. Over the last year, we've accelerated our product development to meet these increasing expectations and requirements of custom manufacturing buyers.

We have enhanced flexibility in manufacturing selection by expanding the portfolio of high-performance manufacturing materials and certifications who rapidly innovating sectors across all end markets, Xometry provides a secure certified platform that facilitates AI-enabled sourcing with improved visibility into qualified domestic suppliers to meet the growing need for speed, scale and compliance. As I said earlier, Q4 was a record quarter for Xometry across many fronts, including revenue, gross profit and adjusted EBITDA. Q4 revenue growth accelerated, increasing 30% year-over-year, driven by 33% marketplace growth through our expanding network of buyers and suppliers and deepening enterprise engagement.

Q4 marketplace gross margin expanded 80 basis points year-over-year to 35.3%. The expansion of our marketplace gross margin underscores the significant economic value generated by our AI native marketplace. Our competitive moat continues to increase as we grow our network of buyers and suppliers and gain more data to continuously train our algorithms. This continuous improvement has driven substantial and steady growth in our marketplace gross margins moving from 25% 4 years ago to approximately 35% in 2025. Enterprise growth remained robust in Q4, finishing off a strong 2025 as revenue from marketplace accounts with last 12-month spend of at least $500,000 increased by over 40% year-over-year. We are focused on driving further penetration in our largest accounts, each with an estimated potential spend that lease $10 million annually.

In 2025, we ended with 4 accounts with at least $10 million of spend driven by strong execution from sales in our technology solutions and an acceleration in large multiyear production programs across key end markets. Our strong Q4 financial results cap a transformative year for Xometry as we delivered accelerating revenue growth and 4 consecutive quarters of positive and increasing EBITDA margins.

At the same time, we invested in and strengthened our platforms to deliver robust secular growth and expanding profitability in the coming years. We're off to a strong start in Q1 and expect robust growth to continue in 2026, which James will discuss later in the call. I will now turn it over to our President, Sanjeev Singh Sane to discuss some of the initiatives that are driving our strong growth and increasing profitability.

Thanks, Andy, and good morning. I'm honored and excited to step into the CEO role at Xometry on July 1. We -- under Andy's leadership, Xometry has been defined by a singular unwavering mission to make the world's manufacturing capacity accessible to us. I look forward to working closely with Randy and our talented global team to accelerate our product-led growth and further cement Xometry as the essential marketplace for the custom manufacturing industry. Reflecting on the past year, I continue to be impressed by our large market opportunity, and long runway of growth ahead as we increasingly become a product-led company.

We are focused on key growth initiatives, including expanding our marketplace offerings, driving structural growth for enterprise accounts, and building out our global supplier network. Let me start by talking about expanding marketplace offerings. In 2025, Xometry accelerated the pace of innovation enabling better pricing, speed and selection for our buyers and finding the optimal match for suppliers in our network. Xometry launched auto codes for injection molding services in the U.S. and Europe providing customers immediate access to pricing and lead time estimates for 1 of the most critical production processes and 1 of the largest categories in customer manufacturing.

We expanded our marketplace capabilities, including AI-powered design for manufacturing, or DFM, which utilizes machine learning and automated algorithms to identify and correct reduction issues early in the design phase. We recently added the ability to interpret technical drawings within our AI DFM, further enhancing our proprietary data set. In Q4, we added a portfolio of high-performance materials for additive manufacturing technologies to the U.S. marketplace. These materials are critical for advanced applications in aerospace, defense and medical device industries.

Additionally, we introduced a preferred subprocess feature for CNC machining. Also in 2025, we launched our highly successful team space feature in the EU. Team space continues to scale with over 11,000 teams created globally since launch. Additionally, Xometry EU launched its sports library, simplifying how customers manage and reuse part data across projects. The EU parts library consolidates their clients' entire upload artistry into a single filterable interface, enabling users to quickly reorder previously quoted or produced parts.

In 2026, our focus remains on key marketplace expansion efforts. These include: first, increasing our marketplace offerings. In injection molding, we will expand our capabilities, further enhancing the buyer experience and growing the associated supplier network. Also, we will continue to add material and finish offerings enabling us to service more complex and production scale programs; second, continuing to advance our pricing intelligence, including more personalized pricing based on customer context and order characteristics.

Third, further raising the bar to deliver a world-class e-commerce experience through deeper integration of automated DFM analysis and AI-assisted customer and supplier workflows. One of the key drivers of accelerating growth of our marketplace has been our ability to drive structural enterprise growth. As Randy mentioned, we delivered strong enterprise growth in 2025 with 40% plus revenue growth from our larger customers.

Xometry is becoming more embedded within the enterprise customer workflows, which in turn drives larger and more predictable spend. In 2025, and we ended with 4 accounts with at least $10 million spend, driven by strong execution from sales and the efficacy of our technology solutions. We expect more accounts to join the $10 million-plus threshold in 2026 driven in part by many multiyear production programs across key end markets. In 2026, we are focusing on driving further structural enterprise adoption through deeply embedded sales and marketing motions and increasing use of technology solutions, including team space and ERP procurement integrations.

Now let me talk about our Thomas Industrial sourcing platform. We made significant progress in 2025, modernizing our Thomas platform so we can return to growth. Thomas is a leading digital platform connecting industrial buyers with over 500,000 listed North American suppliers. Thomas supports manufacturers, distributors and service providers with tools and resources to drive business growth. In Q4, we launched a new dynamic ad serving model and Palmer Smart Search setting the stage for a completely new experience on the Thomas platform.

We are pleased with the early results from the Thomas platform. in 2026. Thomas is focused on improving how buyers and suppliers interact across the Thomas network by allowing the buyers to describe requirements more naturally and quickly to find local suppliers. We will improve search results relevance and help our advertisers better access the extensive demand on Thomas. To continue to grow Thomas awareness, we are strengthening the Thomas brand with a new marketing campaign.

Finally, we are focused on expanding our global supplier network and improving the supplier experience. Our global supplier network of approximately 5,000 active suppliers is a significant strategic advantage, giving buyers unmatched speed, capacity and resilience, allowing for immediate scaling and offering sourcing flexibility across 50 countries on 4 continents. In the U.S., we expanded our supplier base with a focus on larger suppliers with key quality certifications to ensure the needs of our enterprise customers.

Globally, we expanded our sourcing network to include more suppliers in Europe, India, China and Turkey. In 2025, we launched the new WorkCenter mobile app to improve supplier experience and engagement. The WorkCenter platform is Xometry's proprietary all-in quote-to-cash solution, enabling its partners to source and consolidate work, manage operations, monitor performance and secure cash flow. By providing easier access to the job board and job management, we expect to drive increasing supplier engagement.

In 2026, we will continue to strengthen marketplace density by enhancing supplier matching precision and expanding network depth across geographies, and and capabilities, especially in India. We will further increase the choice of processes and lead time from suppliers across the world. In 2026, we have an exciting road map of updates and new features for our WorkCenter mobile app, including improving usability by enhancing how users review, jobs and desires.

There's much more to come in the following months as we focus on further improving buyer and supplier experiences and expanding our platforms. As Randy mentioned, our momentum remained strong in Q1, we expect robust profitable growth to continue in 2026, given strong demand on our marketplace and our product road map. I will now turn the call over to James for a more detailed review of Q4 and our business outlook.

Thanks, Sanjiv, and good morning, everyone. Having worked closely with Randy over the past 2 years, I've seen firsthand how his and Laurence's vision have translated into the rapidly growing profitable business we are reporting today. I would like to thank Randy for leading the company to where we are today and setting Xometry up for our next chapter. Looking ahead, I speak for the entire executive team when I say we welcome the opportunity to work alongside Sanjeev to accelerate our momentum.

He has been a disciplined partner in driving our 2025 performance, and we are excited to continue to scale the business toward our long-term targets under Sanjeev's leadership. Turning now to our financial results. So much we had an excellent Q4 marked by accelerating revenue growth and a significant increase in marketplace gross profit. This performance highlights the real-time responsiveness of our marketplace to customer demand and solidify Xometry's position as the digital rails for the largely offline and fragmented custom manufacturing industry.

As we progress towards $1 billion in revenue, we anticipate continuous improvements in profitability alongside ongoing investment in our growth initiatives. 2025 was a standout year for Xometry, as we accelerated annual revenue growth 800 basis points to 26%, further expanded marketplace gross margin by 120 basis points and delivered full year profitability with $18.5 million in adjusted EBITDA compared to a loss of $9.7 million in 2024.

At the same time, investments in our platforms have positioned us for robust secular growth and increased profitability in the coming years. In Q4, revenue grew 30% year-over-year to more than $192 million a 200 basis point sequential acceleration from Q3. Q4 Marketplace revenue was $178 million, and supplier services revenue was $13.9 million. Q4 Marketplace revenue increased 33% year-over-year, driven by strong execution, expansion of buyer and supplier networks and growth with larger accounts.

Marketplace growth was robust across many verticals, including aerospace and defense, electronics and semiconductors, energy and automotive. Q4 active buyers increased 20% year-over-year to 81,821, with a net addition of 3,539 active buyers, driven by efficient corporate marketing initiatives. Q4 Marketplace revenue per active buyer increased 11% year-over-year, primarily due to strong enterprise growth. We view accounts with at least $50,000 spend at the top of the enterprise funnel.

In Q4, the number of accounts with last 12 months spend of at least $50,000 on our platform increased 18% year-over-year to 1,760. Enterprise investments continue to show returns with strong revenue growth from marketplace accounts, ending 2025 with over 140 accounts with last 12-month spend of at least $500,000. Our enterprise strategy focuses on our largest accounts, which we believe each have $10 million plus in potential annual account revenue.

Services revenue declined approximately 1% quarter-over-quarter as we have largely stabilized the core advertising business. We are focused on improving engagement and monetization on the platform, which remains a leader in industrial sourcing, supplier selection and digital marketing solutions. Q4 gross profit was $75.2 million, an increase of 27% year-over-year, with gross margin of 39.1%. Q4 gross margin for Marketplace was 35.3% and an increase of 80 basis points year-over-year.

Q4 Marketplace gross profit dollars increased a robust 36% year-over-year. We are focused on driving marketplace gross profit dollar growth through the combination of top line growth and gross margin expansion. The growth in our marketplace gross margin underscores the significant value our AI native marketplace is providing. Moving on to Q4 operating costs. Q4 total non-GAAP operating expenses were $67 million, increasing 15% year-over-year. demonstrating strong leverage by growing at half the rate of our revenue growth.

We are applying strong discipline and rigor to our capital and resource allocation across teams while investing in our growth initiatives. In Q4, sales and marketing decreased 20 basis points year-over-year to 15.6% of revenue. Marketplace advertising spend was 5.2% of Marketplace revenue, which was down 40 basis points year-over-year as we delivered accelerating growth and expanding profitability. In Q4, Operations and support decreased 80 basis points year-over-year to 8.1% of revenue.

We are focused on driving increasing automation with AI across operations and support. Q4 adjusted EBITDA was $8.4 million, an increase of $7.3 million year-over-year driven by strong growth in revenue, gross profit and operating efficiencies. In 2025, we delivered our target of approximately 20% incremental adjusted EBITDA margin. In Q4, our U.S. segment adjusted EBITDA was $10.8 million or 6.8% adjusted EBITDA margin, a $6.8 million improvement year-over-year driven by expanding gross profit and strong operating expense leverage.

Our International segment adjusted EBITDA loss was $2.4 million in Q4 2025. And a $0.5 million improvement from a loss of $3 million in Q4 of 2024. We expect continued improvement in International segment operating leverage in 2026. At the end of the fourth quarter, cash and cash equivalents and marketable securities were $219 million. We generated $6.1 million in operating cash flow in 2025 driven by strong operating leverage and focus on working capital efficiency. In the fourth quarter, we invested $10.3 million in CapEx, almost entirely software related reflecting our technology investments in the platform and accelerating product rollouts.

We are focused on improving working capital efficiency and cash flow conversion given our asset-light model and limited capital spending. Throughout 2025, our AI native marketplace delivered strong revenue and gross profit growth, along with significant operating leverage, showcasing our disciplined execution. As we progress towards $1 billion in revenue, we anticipate to continue to deliver at least 20% incremental adjusted EBITDA leverage annually. Given the vast market opportunity and our low penetration rates, -- we will continue to strategically balance future investment with the relentless pursuit of operating leverage.

Now moving on to guidance. For the first quarter, we expect revenue in the range of $187 million to $189 million or 24% to 25% growth year-over-year. We expect Q1 marketplace growth to be approximately 27% to 28% year-over-year. As Randy mentioned, trends remained strong in Q1, even as we are mindful of the uncertain macro environment. We expect Q1 services revenue to be largely flat quarter-over-quarter as we work through the transition of the recently launched Thomas ad serving platform and search upgrades.

In Q1, we expect adjusted EBITDA of $6.5 million to $7.5 million compared to roughly breakeven in Q1 of 2025. In Q1, we expect stock-based compensation expenses, including related payroll taxes to be approximately $11 million or approximately 6% of revenue. For the full year 2026, we expect at least 21% revenue growth, driven by our Q1 outlook and at least 20% growth in Q2 to Q4. Our guide for the year reflects us continuing to be mindful of the uncertain macro environment. We expect 2026 marketplace gross margin to be higher than 2025, as each quarter of growth and technological advancement incrementally fuels performance in the subsequent quarters.

For 2026, we expect services revenue approximately flat year-over-year with modest growth in the second half of the year. For the full year 2026, we expect incremental adjusted EBITDA margins of at least 20%. I want to close by thanking our dedicated Xometry team members worldwide, whose tireless commitment, professionalism and passion are instrumental to our continued success. We are incredibly proud of our shared accomplishments and look forward to continuing to revolutionize the manufacturing industry together. With that, operator, can you please open up the call for questions.

[Operator Instructions] And our first question coming from the line of Cory Carpenter with JPMorgan.

Maybe, Randy, 1 for you and 1 for you, Sanjeev. Randy, could you just expand a bit on why now for the CEO change? Why was this the right time for you? And where do you expect to focus your time -- and then Sanjeev, look, clearly a ton in the product pipeline that you're -- but maybe could you just talk about what are you most excited about? Or what initiatives do you think could have the most meaningful impact on growth this year? .

Great. Well, Cory, Look, while this is news today, this transition is the result of the deliberate succession process and as we undergo this transition, and I think it's important to remember that even though we're changing the first in the seat, and I'm sitting right next to right here, we're not changing the destination on the math. And my commitment to Xometry is a stronger as ever.

And the timing of this transition is deliberate, and it reflects the trend of our position. With the record 2025 results, we're on a clear increasingly profitable trajectory, making this the ideal window for a leadership transition later this year on July 1. And these results, frankly, from last year and the momentum we're seeing in the first quarter this year reflect the impact of Sanjeev's leadership and its focus on product line growth, which have been key components of our recent success.

And as the largest individual long-term shareholder here, I'm not going anywhere, as you ask how we remain deeply involved in our future, specifically driving our strategic growth initiatives and corporate partnerships. I plan developing across industry initiatives from a strategic vantage point. Specifically, where Xometry has a significant opportunity become the essential platform for the industry is rapidly moving towards a digital first AI-powered model. And we are very uniquely positioned, and I think there's a lot of strategic partnerships we can build based on that.

Executing on those initiatives, which are driving significant market share gains in this massive, fragmented market is really critical for our growth ongoing. We expect the pace of new product introductions to continue in '26 as we further expand the marketplace menu, setting up the continued growth in wallet share. We are focused on both initiatives across the board, including expanding our marketplace offering, driving structural growth for enterprise accounts and building out our global supply network.

As I have grown and scaled marketplaces in my career, I have seen how the financial models are inherently attractive. Network effects that build competitive modes are able to generate increasing value as the companies grow. As the last few years have demonstrated, we've been able to reaccelerate growth while continuing to improve gross margins and deliver at least 20% incremental adjusted EBITDA margins. As Xoemtry scales, I expect that we will be able to continue to demonstrate consistently strong leverage, delivering increasing profitability and cash flow.

And our next question coming from the line of Andrew Boone with Citizens.

You guys printed a really strong 4Q with acceleration. As I look at the guidance for 1Q '26 and then 2026 in total, it implies a deceleration. Can you just speak to that? Is that conservatism? Is there something from macro that you guys are seeing? Or anything else that you want to highlight there? And then as I think about the pacing of international investments, you guys talked about improvement for 2026. Can you guys just elaborate on that in terms of what our expectations should be as we think about the path to profitability for international?

Yes. This is Randy Andrew, and thank you for the question. Let me just start by saying we have a lot of momentum. We've mentioned, I think, a couple of times in the crib and we raised sort of the guidance for Q1. So Q1 has started very strong. I think we are mindful of the macro, so that's why. But just to be clear, we also raised our guidance for the year as well.

So as the year progresses, and hopefully, we keep the momentum, we'll continue to update. But so far, there's been no change, lots of strong momentum and we're hopeful and confident that will continue throughout the year.

Yes. Andrew, this is James. Just to build on that. I think as you point out, Q4 was a great quarter seeing marketplace growth accelerated to 33% year-over-year. I think that does really reflect the progress the team are making, particularly this -- the enterprise growth we've been driving becoming more embedded in those workflows with our largest customers, seen as enterprise accounts more than 500,000 grow to more than $140 million, seeing the revenue per buyer up 11% year-over-year and seeing the traction that we're making there is really encouraging.

And behind that is also the product-led initiatives. And we really feel like we've taking significant share here. I think as we look forward, Andrew, you said like we always are mindful of that macro environment. We control what we can control. I think we're very pleased with being able to increase the outlook for Q1 here and for the year ahead. And I think as we go through each quarter, we'll be able to continue to give you updates as we move forward. The second question, was that international

International profitability.

Yes. And so on that too, I'm really pleased with the overall opportunity and performance we had in international. What we've talked about before is the unit economics that we're seeing the gross margin, the gross cap structure are very similar internationally as we see in the U.S. And as we penetrate deeper into different international markets, really see very common use cases and needs for our buyers and a common opportunity for us to take advantage of our marketplace offering for our suppliers.

So I think that over the long term, certainly continue to feel very strongly about international being able to grow into a larger part of our business, going up to 30% to 40%. And I think over time show very similar economics and so it's great to see the U.S. leading the way and getting to nearly 7% adjusted EBITDA margin here. And I think we'll continue to just balance those choices on profitability and growth as we continue to grow the international business.

Our next question in queue coming from the line of Brian Drab with William Blair.

Randy, congratulations on the decision. And it's been an amazing run so far. I was wondering if you -- 1 thing that stood out, and I'm joining the call late, but 1 thing that stood out was the slide showing what you're doing with some of the larger customers and how fast those customer counts are growing and the revenue with those customers are growing. You now have 4 customers over $10 million in revenue.

Can you talk about what you're doing and specifically, as you can for those customers and how you're having success whether it's like working yourself into the bill of materials for production runs, ERP systems, et cetera, to build those big customers because it looks like it's really happening.

Yes, Brian, thank you. And I think larger customers and as we talked about, we've got that -- a bunch of these customers now that we think have a $10 million spend we're probably got them now, we've got the 10 -- I don't know Prim,youheard that. If you joined the call where you have over 140 customers now that have more than 500,000 LTM Sanitas. That's up from 40% from last year when we had 100. So that's been growing rapidly. .

And there's a couple of keys to that. It starts with the technology. We are embedded more and more in the workflow, and we're embedded in their supply chain. Our punch outs or integrations with their ERP and their purchasing systems are instrumental in that. So that just makes us part of what they're doing every day. Then you layer on top of that, the improvement that we're continuously make in the team space, which has been a terrific product for us. And team space also lend itself to larger products, projects.

As we talked about, we have more and more multiyear projects with these customers team space helps facilitate that, and we're constantly adding features to that and enhancing that. So that's that product-led growth. And then marrying that of the investments that we've been making in the last couple of years in our in our sales force and our go-to-market, and now we're going that also with you making changes in the marketing side as well. sector joined us the beginning of last year as our new CMO. So all those things are coming together to build out those longer customers.

For those types of customers, is the work very -- has it varied across your different process offerings? Or does it -- do they focus typically on one?

No, it's -- Barry. And I think, Brian, a couple -- that slide was intended to show a couple of things. First of all, that our platform is extensible. We're in multiple different industries. We have strength in many industries. Number two, would also, if you go through it, like we're doing multiple different processes as well. So that's 1 of the advantages of a marketplace and our platform. It's extensible. And also, we can continue that, and we mentioned that certain new processes, the instinct for injection on that we had at the end of last year in the U.S. and we had Europe, the new materials, all that's adding to more one-stop shopping. .

I did want to mention 1 more thing, Brian, which is the macro is shaky, there's a lot of noise out there. There is a flight to reliability and security and safety and the nonentry platform provides that, particularly as a public company with their transparency, with the systems we have in place, the security we have in place, for larger customers, that is very important as they think about ensuring that they can deliver to their own customers, they want a partner that can make that happen in our platform as that partner.

And then just lastly on this topic, and then I'll pass it on. The next Slide 11 shows the different -- I like these slides that you show different work that you're doing for some major customers. I don't know if those are the same customers? I imagine there is some overlap between these slides. These are probably customers that are at least 2 and or 50,000 with you.

But for the customers that you're doing the $10 million in revenue with. Are those customers that are generally doing production work with you, low volume production and you're in the bill of materials or it's just recurring production that you're involved in? Or is it just a ton of development work? Or is it both?

It's certainly more heavily weighted towards production, Brian, and we are increasingly in the bound just as you develop your to the bond Absolutely. .

Our next question coming from the line of Eric Sheridan with Goldman Sachs. .

I wanted to build on sort of a couple of the answers you've given so far. When you think about the verticalization of the platform today, what are you seeing as the biggest tailwind to growth on an industry vertical standpoint today? And how are you thinking about continuing to maintain or build on some of that operating momentum in certain industry verticals. And which ones do you feel you're under indexed to today? And what do you think you need to do in terms of changing some of the indexing across some industry verticals or maybe you feel are more opportunity sets looking longer term?

Yes. Look, I think, Eric, as I mentioned earlier, we are pretty well diversified across multiple verticals, and that's the advantage of our technology platform is extensible. And so when you see the growth that we're getting, it's across multiple industries. So I would say there's 1 vertical versus another. I think overall, and this is, for me, 1 of the most exciting things about odometry and -- and while -- why we're going to have durable enduring large growth for many years to come, we're underpenetrating the overall market.

The TAM is huge, and I'm super proud of the results that we have, but we should be -- continue to grow super well for a long time with Vettam is massive out there. And look, I think there is definitely a trend towards digitization, more and more people are using AI-powered models as the leader in that as we can get the word out, more and more companies are -- that the tailwind is people realize this is a better solution.

People want resilient supply chains, people want it to be digital. People want to have the way technology available to them and we're at that intersection of many of them between manufacturing and technology between design and delivery, and we play that key role. So the more we get that word out, the more that we can build these integrations, and this is 1 of the many things that Sanjeev is bringing to the table, you'll continue to see that growth continue and hopefully even accelerate.

Eric, Randy just to add, I think as we build out our global supply network, the enterprise capabilities that we have across multiple verticals are a important added value that we bring, whether that's in aerospace or cybersecurity and defense and medical and then having the work center platform, being able to whatever the vertical will be able to put up these jobs to the optimal supplier, the best match who has the capabilities can deliver quality that us continuing to build on that performance across all of these categories to Randy's point, cases penetrate, where we still have a lot of opportunity ahead.

Our next question coming from the line of Ron Josey with Citi.

Randy, congrats on Sanjeev, looking forward to working more closely with you. I wanted to ask a little bit as a follow-up to Eric's question here, just the brand awareness amongst your buyer base. Randy, you just talked about the TAM being so large and we're just sort of getting started on getting to buyers. So talk just about brand awareness what Xometry is offering, particularly as sales and marketing spend. I think that accelerated in the quarter. And so just talk to us about how you balance, call it, overall profitability in sales and marketing with building that awareness and then, James, as we think about 2026 and the 20% incremental adjusted EBITDA margins, I believe that's consistent with 25. I'd love to hear your thoughts about how the management team is balancing incremental investments, which is overall greater EBITDA as we do get to the scale or are we just super early given the size of the TAM.

So let me tackle it and Sanjeev and James will jump in. So let me just start by saying, look, there's a pool of millions of buyers and we are balancing the profitability and making sure we've got profitable growth in marketing. We've got some good slides here that shows that -- that's becoming more and more efficient as we've been going on. So I'd say we are -- we've got robust growth. And as we talked about, Q1 has started very strong as well. But there certainly is a balance between growth and profitability, and we're trying to optimize for both that 20% incremental profitability.

So I think we have a long way to go on the awareness side. We're making good strides. But again, that's where you should expect to see durable long-term growth year after year from us. as more and more people learn about us, it's also where the technology is critical. And by integrating by the time channels be becoming embedded in the workflows, as Brian mentioned earlier, being part of, as Frank Gran mentioned earlier, being part of Xometry material that enables you, without spending marketing dollars to get much greater awareness within your customer base.

And in these large customers, these 10 million plus customers that we now have in the 500,000-plus, it's great next step to hit that milestone. Those are key ways to get out because those companies have often tens of thousands of employees and desperate in different locations. The more we can be embedded in their systems that gets you like free advertising free building and particularly as I mentioned earlier, as more and more customers are in this environment, looking for resilient supply chains and more maturity and reliability that also helps to drive more people to our platform.

Let me just add a couple to that on. As you know, geometry has been an AI-native marketplace for inception. So the use of data science, machine learning and foundational models has been key. But even as the AI overviews and AI-enabled answer and answer the optimization engines or GEOs are gaining scale. We actually think of them as a new organic channel for brand messaging and awareness. We are investing AI marketing capabilities internally, but continuing to strengthen where we are with those efforts.

In fact, we believe that we are very well positioned to take advantage of this change in how people search because we've been known to create high-quality content and expertise across multiple different categories that we operate in. So I think with new opportunities with answer engines and AI views, we actually are using them to drive some of that message.

And Ron, on the investment and profitability question, over the last 2 years, you've seen us reaccelerate growth and deliver our full year adjusted EBITDA profitability and incremental margins of 20% and more. Actually, we've actually delivered those incremental margins over the last 3 years. So I think that is helping really demonstrate very tangibly the leverage that we see in the marketplace model. To your point, I think it is still very early. There's still a huge opportunity ahead.

We're very focused on giving some guideposts here as we scale to $1 billion to continue to deliver at least 20% incremental adjusted EBITDA even as we continue to invest in those growth initiatives, the advantage of being an asset-light model with strong cash flow conversion from adjusted EBITDA means that as we continue to grow here and approach $1 billion, we'll be seeing that come through both in adjusted EBITDA and in the cash flow.

And I think that gives us a lot of optionality as we think about the capital allocation and the opportunities ahead to really further scale the business. So it won't always be leaning quarter-to-quarter, but certainly, you've seen us demonstrate this over the last few years, and I think we continue to expect to do that on our up to $1 billion head.

Our next question coming from the line of Greg Palm with Craig.

Congrats on the results. And obviously, to Randy and Sanjeev congrats on the planned transition here. I wanted to maybe start with a macro question because there is some thought that we may actually see a broader rebound in manufacturing this year. It's been a while since we've kind of had that. Number one, have you seen any change in, call it, supplier behavior on a year-to-date basis relative to last year or the last few years? And just in terms of the marketplace overall, what kind of impacts what that might have both on revenue and also from a gross margin standpoint, if we did see -- call it, a rebounding manufacturing market and thus, maybe a byproduct with some tighter capacity industry-wide?

Yes. So just to start, I think it's been business as usual. And I would be clear, I don't think our results are the beneficiary of any sort of pull forward or anything tariff related, et cetera, I think it's just as we've been gaining more and more market share as we become more and more band our customers, more people are looking for digital solutions that helped us and so we haven't seen any change from a macro perspective. I think, as we gave our guidance this year, we mentioned we are mindful of the macro, but if there was an upturn in macro, that would absolutely be a tailwind for us.

It would be helpful for us. I think the improvement in our margins reflects our approach. We're training our models. Our algorithms are improving as we get more and more data, we get more and more accurate. And as we grow those networks to buyers and suppliers, that -- the data -- those networks, that's what's enabling us to grow our gross merchants, and we've been doing that very steadily and consistently year-over-year since we went public.

So I think you should expect, as James said, in 2026, for our gross margins to be higher than they were in 2025. We're excited for Q1 gross margins to be higher year-over-year and sequentially. And I think if we do get a tailwind from a favorable macro, that will only be helping us even not only growth side, but also on the bottom line as well.

Makes sense. And then I wanted to just follow up on the cohort analysis because there's some interesting stuff there. In terms of the makeup of those $10 million accounts. I just want to be clear, are they doing -- is it a quantity or quality, like are they doing a lot more projects? Or are they doing bigger, higher value? And in terms of like how these accounts are serviced from an account manager standpoint, anything differently in terms of how that started and has evolved through that relationship that maybe you can use to push more accounts into this specific cohort.

So a couple of things. So there's certainly with those larger accounts, there's more and more production work. So there's certainly larger projects as we sort of talked about earlier, there is overall more volume. And I think so you also see the number of users that we've got in those accounts. So it's a combination, but certainly large care projects are helping there. And then we're built into -- and Brian mentioned earlier, we're built in to build materials. So that's like that creates a lot of stickiness or if you become the go-to for certain parts of that customer for a long time. .

And again, those technology innovations help a lot with this. I think it's -- as we -- as you asking about what's the key to those larger accounts. they'll start small, where we get the awareness I think particularly these integrations being embedded in their workflows and in their technology, that has been critical to the growth. And then -- and when you get those technology lock-ins, that makes it very sticky. It makes it easier for the customer to default to you and it provides additional learnings particularly in those larger customers across a bigger base because these are large companies.

So those things really help. We also have, obviously, as you can imagine, our sales force, we've got a tiered sales force like a lot of other companies. So in terms of account management, you've kind of got some different motions there, too. But it's really the technology that's the critical element that it helps that happen.

Our next question coming from the line Josh Chen with UBS.

Congrats, Randy, Sanjeev, on the transitions. Maybe just 2 quick questions from me. Number one, on obviously, very strong demand from customers. I guess, how do you feel about your momentum adding active suppliers are you concentrated more on larger suppliers, so maybe the count doesn't matter quite as much? And then second question is, as you continue to grow EBITDA, what are your thoughts about potentially getting to a breakeven free cash flow at some point in the near future.

Thanks for the question, Josh, it's Sanjeev. Let me take the first part. I think -- as you mentioned, I think suppliers growth is a key element of continue to drive the marketplace growth. As you mentioned, we have close to 5,000 suppliers overall and system balances, how we do margins across your suppliers, so continuing to grow both sides of the marketplace is equally important to us across those spaces. But yes, as we think about the ongoing growth in the large enterprise accounts and the kind of needs they have, we continue to make sure that in our network, we not only have suppliers that are capable of delivering those large programs, but also have the right certifications and and requirements that are needed to meet the quality certifications of that customer.

And so therefore, balancing the network for both size, breadth and depth, so size in terms of number breadth in terms of geographical trend where we want to make sure that we can service the customer needs from anywhere in the globe and then depth in terms of processes that they can service for us remains critical, and we continue to invest in there.

Josh, on cash flow. So good question. I think you've already seen us go positive or very close to positive on a couple of quarters in the last year. So generally, an asset-light model with good cash conversion, cash flow is coming after adjusted EBITDA. So we had our first full year of adjusted EBITDA profitability $18.5 million. So as we expect, over the last -- over the next year, we'll start getting to sustainable free cash flow positive as well as we continue to grow.

Just to put a little bit more framing around that. I think CapEx, operational cash flow last year was actually positive at $6 million. We have been investing in our product-led strategy and so you've seen a that was $10.3 million in the quarter. I think if we assume a similar sort of percentage of revenue in the year ahead at around 6%, then when we hit the $225 million quarterly run rate I would expect to be free cash flow positive on a sustainable basis.

Our next question comes from the line of Matt Swanson with RBC Capital Markets.

We've touched on this in a couple of different parts, but I wanted to focus a little bit more on the work center mobile app and just kind of what benefits that might give you from the competitive environment of just making it easier to work with for suppliers. They obviously have a limited number of hours every day the machines can be running. How does that kind of help to make sure that they're running Xometry projects? .

Thanks for that question, Jon. I think the work center mobile app is proving to be a substantial lock-in with our partners and suppliers across the globe. The advantages that we see are across 3 different interactions that those partners and suppliers have. One is on the job board itself, which is accepting the job and we offer them a lot of the suppliers are not always in front of their computer to be able to actually accept jobs and the flexibility that our mobile app provides them to be able to accept a job where they might be actually at a machine and/or they might be away from their desk at home, given the size and scale of some of the suppliers that the huge benefit just to get started.

The second 1 is around management of the job itself and I think the big advantage there is as they work through those jobs, they want to make sure that they are able to provide us with most timely inputs, both in terms of updates on the job, but also questions that might arise during manufacturing, so improving the analysis around the DFM piece that we were talking about before. So it acts as a mechanism for us to get real-time data back from the manufacturing flows coming back into our models and helping us improve those. And then finally, of course, managing their own cash flows. As you can imagine, a lot of these suppliers are trying to balance lots of jobs that they have, like you mentioned, but also trying to manage the outcomes for the business. So this has been the 3 areas of engagement that we continue to see increase.

I appreciate that. I know there's been a lot of questions on the large customer front because these are some impressive numbers. So you guys delivered -- but I guess what I was wondering is when you're thinking about how customers go from $50,000 to $500,000 to $10 million, are there any internal metrics that you look at that kind of signal people are starting to upsize, have you seen any correlation with like the further spreading out of team space or anything else that kind of gives you more confidence that the enterprise momentum we've seen in '25 will kind of continue to build in 2026.

I think it starts with those customers, we have a pretty good idea or estimate of what their total spend is. So it just starts qualifying that these companies can send $10 million plus with us. And I think if we ever share the names of you who those customers are, they're spending many multiples more than that $10 million. So even if we have a modest share of their total spend, that is a very achievable number. So it just starts with that. And again, because of our platform, it's very extensible.

You can imagine that it's relevant -- it's relative to a lot of industries, and there's lots of big customers they're buying billions of dollars of custom manufacturing a lot more than that. So it starts with just that qualification. I think as you sort of correctly sort of alluded to, as we get more and more buyers who are adopting the platform as more and more teams are created because that's the way for customers to invite their colleagues to join and use the platform. That's obviously a great signal.

And then as we get traction with our integrations with the punch outs get embedded in become included in those bonds, those are also great signals. But these are customers that clearly are spending the money. It's our job to show them is the best solution and then and that's why we're seeing momentum there. We would expect that number to us to grow every year in that group of 500,000 plus to grow as well. Lots more to go.

There are no further questions in the queue at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.

Hi, and welcome to Xometry's Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to VP of Investor Relations, Shawn Milne.

Good morning, and thank you for joining us on Xometry's Q3 2025 Earnings Call. Joining me are Randy Altschuler, our Chief Executive Officer; Sanjeev Singh Sahni, our President; and James Miln, our Chief Financial Officer. During today's call, we will review our financial results for the third quarter 2025 and discuss our guidance for the fourth quarter and full year 2025.

During today's call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, strategy, long-term growth and overall future prospects. Such statements may be identified by terms such as believe, expect, intend and may. These statements are subject to risks and uncertainties, which could cause them to differ materially from actual results.

Information concerning those risks is available in our earnings press release distributed before the market opened today and in our filings with the U.S. Securities and Exchange Commission, including our Form 10-Q for the quarter ended September 30, 2025.

We caution you not to 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 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 distributed today and our investor presentation, both of which are available on the Investors section of our website at investors.xometry.com. A replay of today's call will also be posted on our website.

With that, I'd like to turn the call over to Randy.

Thanks, Shawn. Good morning, and thank you for joining our Q3 2025 earnings call. Our Q3 performance powerfully demonstrates the success of our purposely built marketplace model in this massive and highly fragmented custom manufacturing market. We are proving that a superior experience for both buyers and suppliers, fueled by the power of marketplace dynamics is delivering sustainable growth and value.

Our marketplace structure is a key differentiator, powering our industry-leading growth and significant adoption amongst our customers and suppliers. Our marketplace sits at the intersection of manufacturing, AI and technology, and we are excited about digitizing custom manufacturing as we accelerate platform innovation.

Q3 was a record quarter for Xometry across many fronts, including revenue, gross profit, marketplace gross margin and adjusted EBITDA. Q3 revenue growth accelerated, increasing 28% year-over-year to $181 million. Marketplace growth accelerated, increasing 31% year-over-year, driven by our rapidly expanding networks of buyers and suppliers and deepening enterprise engagement.

We are delivering this level of growth in an ongoing manufacturing contraction, underscoring our significant market share gains. We're off to a strong start in Q4, and we're again raising our full year marketplace growth outlook, which James will discuss later in the call.

Powered by improving AI pricing and selection algorithms, we drove a 210 basis points increase in marketplace gross margin year-over-year in Q3, driving 40% growth in marketplace gross profit, expanding marketplace gross margin underscores the value we're creating with our AI-powered marketplace.

Our efficacy and competitive moat continues to increase as we grow our networks of buyers and suppliers and gain more data to continuously train our algorithms. This has driven significant and steady increases in our marketplace gross margins from the 25% level 4 years ago to 35.7% in Q3 of this year.

Each quarter of growth and improvements in our technology helps to incrementally power the quarters that follow. Our results in Q3 and year-to-date marked strong progress on our mission to become the de facto digital rails in custom manufacturing. Alongside strong financial results, we are making investments that will pay off in years to come as we drive innovation across our global marketplaces and supplier networks.

Our President, Sanjeev Singh Sahni, has accelerated our product development efforts to embed technology and an expanding suite of AI capabilities across the organization. We continue to win, especially with larger customers as we improve price, speed and selection on the marketplace. In early Q4, we launched auto-quote for injection molding services in the United States, following a launch earlier this year in Europe. Xometry's new auto-quoting capability simplifies the injection molding manufacturing process, providing a seamless digital experience to enable customers to move quickly from design to finished part.

The platform enables a spectrum of injection molding options from prototype and low-volume bridge tooling to high-volume multi-cavity production tooling in over 35 different materials, colors and finishes. We advanced our AI-powered design for manufacturing capabilities, expanding our automated extraction engine that interprets technical drawings and CAD files. This enhancement improves the accuracy of our quotes and supplier matching, further reducing friction and improving the buyer experience.

For our customers, we're increasing supply chain resilience and agility by offering access to a diverse expanding global manufacturing network of over 4,500 active suppliers. This allows buyers to instantly diversify their supplier base, reducing dependence on a single source or region and enhancing overall resilience.

In Q3, we continue to expand our global network and our global sourcing efforts and flexible asset-light model are resonating with customers given the rapidly changing global trade environment. We're delivering a scalable enterprise offering through tools like Teamspace and ERP integrations to become more embedded in customer workflows, reducing buyer friction and expanding wallet share in these large accounts.

Our technology initiatives, combined with our enterprise sales efforts are powering our land-and-expand strategy. In Q3, a U.S. aerospace company faced a major production challenge, needing complex tight tolerance components on an aggressive time line with limited supplier options. This company turned to the Xometry marketplace as a trusted partner capable of delivering precision, speed and reliability.

Based on the success of this program, Xometry quickly expanded to other divisions within the company, becoming a preferred manufacturing partner for rapid production. In Europe, a medical device manufacturer partnered with Xometry to accelerate production of precision components for its next-generation surgical systems.

What began with CNC machined and 3D printed parts evolved into multiple high-volume production programs, including injection molded assemblies for other advanced equipment. By leveraging the Xometry marketplace, the customer was able to innovate faster and drive scale in the competitive medical technology market. These are good examples of enterprise customers we believe can generate $10 million plus in annual revenue.

For our suppliers, our marketplace is driving increasing value, enabling them to sell their capacity digitally, unlock access to global demand and increase asset utilization and profitability through our Workcenter platform. In early Q4, we launched the new Workcenter mobile app. The Workcenter platform is Xometry's proprietary all-in-one quote-to-cash solution, enabling its partners to source and consolidate work, manage operations, monitor performance and secure cash flow.

This powerful new tool is designed to help suppliers within the Xometry partner network manage job offers, production workflows and shop performance anytime, anywhere. By providing easier access to the job board and job management, we expect to drive increasing supplier engagement. Additionally, the new app provides for better communication flow to ensure that partners are quickly informed of critical updates and job opportunities.

The app also enables seamless data capture through photos, certifications and status updates to improve accuracy and get information flowing quickly, delivering greater quality, transparency and responsiveness to customers. We expect that the Workcenter app will deepen supplier engagement and enhance our data to further support marketplace gross margin expansion and improve the buyer and supplier experience.

For Thomas, in Q3, we launched our new dynamic ad serving technology and began selling on a new platform for new customers. The new pay-for-performance platform enables advertisers to set budgets, better define their target audience, maximize ad effectiveness and improve ROI tracking. While still early, we are pleased how the platform is functioning, and we're pleased with the initial sales efforts.

We expect the new technology will increase advertising penetration and engagement. In Q4, we will further integrate our new natural language search experience to improve buyer engagement as search results are more relevant. There's much more to come in the following months on the innovation front as we focus on further improving buyer and supplier experience and expanding our platforms.

Our momentum remains strong in Q4. We're raising our 2025 revenue growth outlook given robust demand in our marketplace and the strong execution of our teams. We expect strong secular growth to continue in 2026 and in coming years as we rapidly scale to $1 billion plus.

I will now turn the call over to James for a more detailed review of Q3 and our business outlook.

Thanks, Randy, and good morning, everyone. Q3 was a great quarter for Xometry, delivering accelerating revenue growth, robust expansion in marketplace gross margin and significant adjusted EBITDA leverage as our marketplace responds to customers' needs in real time.

Xometry is becoming their digital rails in this massively fragmented and largely off-line custom manufacturing market. As we scale towards $1 billion of revenue, we expect to deliver improving profitability even as we continue to invest in our growth initiatives.

Q3 revenue increased 28% year-over-year to $181 million, driven by strong marketplace growth. Q3 marketplace revenue was $167 million and supplier services revenue was $14.1 million. Q3 marketplace revenue increased 31% year-over-year, a 500 basis points acceleration from Q2, driven by strong execution, expansion of buyer and supplier networks and growth with larger accounts as we continue to capture significant market share.

Marketplace growth was robust across many verticals, including semiconductors and energy, aerospace and defense and automotive. Q3 active buyers increased 21% year-over-year to 78,282 with a net addition of 3,505 active buyers. Q3 marketplace revenue per active buyer increased 9% year-over-year, primarily due to strong enterprise growth and efficient corporate marketing initiatives in the U.S.

In Q3, the number of accounts with last 12-month spend of at least $50,000 on our platform increased 14% year-over-year to 1,724, an increase of 71 from Q2 of 2025. We view accounts with at least $50,000 spend at the top of the enterprise funnel. We expect to continue to grow this base of accounts over time.

Enterprise investments continue to show returns with strong revenue growth in Q3 for marketplace accounts with last 12-month spend of at least $500,000. Our enterprise strategy focuses on our largest accounts, which we believe each have $10 million plus in potential annual account revenue. Supplier services revenue declined approximately 1% quarter-over-quarter as we have largely stabilized the core advertising business.

We are focused on improving engagement and monetization on the platform, which remains a leader in industrial sourcing, supplier selection and digital marketing solutions. Q3 gross profit was $72 million, an increase of 29% year-over-year with gross margin of 39.9%. Q3 gross margin for Marketplace was 35.7%, an increase of 210 basis points year-over-year.

Q3 gross profit dollars increased a robust 40% year-over-year. We are focused on driving marketplace gross profit dollar growth through the combination of top line growth and gross margin expansion. We continue to adjust our pricing to reflect changing tariffs and our AI cost algorithms update regularly to reflect changes in our supplier network.

Moving on to Q3 operating costs. Q3 total non-GAAP operating expenses increased 17% year-over-year to $66.1 million, well below revenue growth. We are applying strong discipline and rigor to our capital and resource allocation across teams while investing in our growth initiatives. In Q3, sales and marketing decreased 140 basis points year-over-year to 15.9% of revenue. This reflects improving enterprise sales execution and disciplined advertising spend.

Marketplace advertising spend was 5% of marketplace revenue, which was down 130 basis points year-over-year as we balance growth and profitability. In Q3, operations and support decreased 60 basis points year-over-year to 8.2% of revenue. We are focused on driving increasing automation with AI across operations and support. Q3 adjusted EBITDA was $6.1 million compared with a loss of $0.6 million in Q3 2024.

Q3 adjusted EBITDA improved $6.8 million year-over-year, driven by strong growth in revenue, gross profit and operating efficiencies. Year-to-date, we have delivered approximately 21% incremental adjusted EBITDA margin, primarily driven by strong marketplace gross margin expansion.

In Q3, our U.S. segment adjusted EBITDA was $10.3 million or 6.8% adjusted EBITDA margin, a $9 million improvement year-over-year, driven by expanding gross profit and strong operating expense leverage, particularly in sales and marketing. Our International segment adjusted EBITDA loss was $4.2 million in Q3 2025 compared with $2 million in Q3 2024, driven in part by our investments to drive further global scale.

We expect improved International segment operating leverage in Q4. At the end of the third quarter, cash and cash equivalents and marketable securities were $225 million, decreasing approximately $1 million from Q2 2025. Driven by strong operating leverage and focus on working capital efficiency, we generated $5.8 million in operating cash flow in Q3.

We invested $7.4 million in CapEx, primarily software related, reflecting our technology investments in the platform and accelerating product rollouts shared earlier by Randy. We are focused on improving working capital efficiency and cash flow conversion given our asset-light model and limited capital spending.

We expect CapEx to be approximately $8 million to $9 million in Q4 2025. Q3 demonstrates the ability of our AI-powered marketplace to deliver strong revenue and gross profit growth and operating leverage as we remain disciplined in our execution. As we scale towards $1 billion of revenue, we expect approximately 20% plus incremental adjusted EBITDA leverage on an annual basis.

Given our large market opportunity and low penetration rates, we will continue to balance investing in the future with driving operating leverage.

Now moving on to guidance. For the fourth quarter, we expect revenue in the range of $182 million to $184 million or 23% to 24% growth year-over-year. We expect Q4 marketplace growth to be approximately 25% to 27% year-over-year. As Randy mentioned, trends remain strong in Q4 even as we are mindful of the uncertain macro environment.

We expect Q4 supplier services revenue to decrease approximately 4% year-over-year as we work through the transition of the recently launched Thomas Ad serving platform. In Q4, we expect adjusted EBITDA of $6 million to $7 million compared to $1 million in Q4 2024. In Q4, we expect stock-based compensation expenses, including related payroll taxes, to be approximately $11 million or approximately 6% of revenue.

For the full year 2025, we are raising our marketplace growth outlook from our previous guidance of at least 23% to 24% to 27% to 28% growth. We continue to expect the supplier services to be down approximately 5% year-over-year. This results in our revenue outlook for the full year rising to $676 million to $678 million.

For the full year 2025, we are raising our adjusted EBITDA guidance to $16 million to $17 million. As we look ahead, we believe that our growth initiatives can continue to drive at least 20% total revenue growth in 2026, given the large fragmented market opportunity, our initiatives to expand wallet share with strategic accounts and further international expansion, while we remain mindful of the macro environment.

I want to close by thanking our dedicated Xometry team members around the world. Their commitment to our buyers and suppliers is instrumental to our continued growth and core to our mission of making the world's manufacturing capacity accessible to all.

With that, operator, can you please open up the call for questions?

[Operator Instructions] Our first question comes from the line of Andrew Boone of Citizens.

You guys just talked about the 20% growth for 2026. Can you help us by unpacking that a little bit? Can you talk about kind of the assumptions that are underlying that, whether there are any macro assumptions that are embedded within kind of the 20% growth overall or whether that's really idiosyncratic drivers that can power growth next year kind of regardless of the situation?

Andrew, it's James. Thanks for the question. We're really obviously very happy with the performance that we're seeing this year, Marketplace growth of 31% in the third quarter. That's really being driven by the growth initiatives that we've been very consistently driving across enterprise, across scaling our network of buyers and suppliers and improving the technology of the platform as well.

So we're seeing it broad-based at the moment across multiple processes across our broad diversity of categories. So as we're working on our plans for 2026, we wanted to give some view as to -- of our confidence in the consistency of that growth at a 20% plus level. We'll clearly come back with the Q4 earnings with more details on guidance for 2026. So we just wanted to give you a bit of a framework of how to think about that for next year.

Yes. And Andrew, it's Shawn. And if you just think about the underpinnings of your model heading into 2026, we continue to drive strong active buyer growth, and you see strong revenue per buyer growth, too. So those are some of the underpinnings of the model driving the 20% plus into '26.

Yes. And I think also just to jump in, it's Randy. We are always mindful of the macro. So we didn't assume any improvement in that next year. This is really about Xometry continuing to gain market share and control our own faith. And that's what's driving our assumptions here.

And then the Workcenter mobile app feels like a large unlock as you guys simplify kind of the process for kind of your stakeholders that are clearly the underneath driver of operations to drive the platform. Can you just double-click in terms of what the unlock is in terms of creating that mobile experience and how people are using it and helping to unlock kind of more demand across the platform?

This is Sanjeev Sahni. Let me start by talking about our AI efforts. As you know, we've been an AI-native company from the beginning. AI has been part of our DNA, whether it's data science, machine learning or deep learning models, we've always had those as core to our way of working and scaling the customer and partner experience.

We launched the Workcenter mobile app in the U.S. for our large and expanding partner base truly to drive that customer and supplier experience because we really believe as partners adopt a more friendly way of giving us data about their orders, sharing updates on quality control, sharing updates on dispatch, sharing updates on which job they like, which job they don't. We get deeper into engagement with them and are able to help them manage their business, help them manage time lines and quality for our customers.

This is just the beginning of a series of AI-enabled tools that we continue to launch and scale. As you know, our focus has been on deploying that towards pricing, speed and selection as a core theme on where our efforts go. And so this cycle, this was our effort in driving speed and continuing to scale that with our partners.

Our next question comes from the line of Brian Drab of William Blair.

First, I was wondering if you could just talk a little bit more about some of the changes that you're making within the team, some of the additions, Sanjeev, I know you've talked a lot about adding talent and technical capabilities. Can you talk about the importance of that and how that's going to help you get to this $1 billion revenue level and beyond?

Thank you for the question. Again, I think we are seeing very strong success in attracting top talents from some of the best tech companies in the world. As part of our efforts, we want to make sure that we continue to deliver on the strong pipeline of tech outcomes for our customers and partners, like Randy already mentioned, this cycle, we launched auto-quoting for injection, molding, offering that we think will significantly expand our marketplace menu.

Injection molding, as you know, is a very, very large category. And this is one where we've launched auto-quoting by building on our experience in the offline where we've now got a set of buyers, suppliers, we've got models that have been refined and now driving technology behind those models helps us bring it to the customer in an online platform, which they can easily adopt and help us drive significantly higher market share.

But again, going back to what I was saying before, our AI efforts are truly around price selection speed. So if you think about price, we've been continuing to test behavior-based models. We've been trying to test various sortations on our site, which you can see when it comes to selection, I just mentioned injection molding and then speed, the Workcenter and mobile app.

So across areas, including Thomasnet, where we've launched dynamic ad serving technology, this is becoming a truly product-led, product-driven organization with our CTO, Vaidy and his team now in their 6 months in the organization.

Okay. And then can I ask a much more near-term question. And looking at the guidance and the step function increase that you have from second quarter to third quarter, so you're up almost $20 million in revenue from second quarter to third quarter and then modeling just a couple of million increase sequentially into the fourth quarter.

How are you thinking about that guidance? And what have you -- have you seen anything in the first 5 weeks of the quarter? Is there anything beyond kind of typical holiday seasonality that you're thinking about?

Yes. Thanks, Brian. So again, I think, as you know, really great performance in Q3 here on -- even despite an uneven manufacturing environment, Xometry is executing really well. Across enterprise, we're seeing a lot of strength, broad-based across the accounts.

We're seeing, we believe, strong wallet share gains, revenue per buyer being up 9%. We've seen strong growth across processes from CNC to sheet to additive. I think as we look into the guide, as usual, we take into account those trends we're seeing in the business, which we're very pleased about as well as the risks given the uncertain manufacturing environment.

And so with overall marketplace revenue growth over the year now at 27% to 28% plus on the basis of that strong active buyer growth as well, really pleased with what we're seeing. And just as I said, that all builds into the guidance that we give.

Yes. And Brian, it's Randy. Just add a couple of things. We were very clear, both in my remarks and James' remarks, Q4 is off to a strong start. So as we talked about when we entered Q3, we had momentum there.

We are seeing continued momentum here in Q4. And we -- that's -- I think our strongest guide this year in terms of year-over-year growth is the guide that we're giving for this fourth quarter. So we just continue to be mindful of the macro, but we have a lot of momentum.

Our next question comes from the line of Matt Swanson of RBC Capital Markets.

This is Simran on for Matt Swanson. Congrats on a great quarter. To start, could you just double-click on the trends that you've been seeing in enterprise and Teamspace and how we should think about that opportunity continuing to grow throughout 2026?

Yes. Just to reiterate, enterprise are customers that we think have had more than $500,000 of spend, and that number grew rapidly last year in terms of their year-over-year in 2020. That number grew -- the revenue generated by them grew rapidly. So there's a couple of things. And in this quarter, you're also seeing our revenue per buyers increased 9% year-over-year.

And in part, that is as our enterprise customers are leaning more and more in. There's a couple of technology things that are making that happen. First, widespread adoption of Teamspace by those enterprise customers, and we continue to enhance Teamspace, and that's giving us more traction. Our punchouts, so our integration with our enterprise customers' ERP systems that's also accelerating.

So accelerating adoption of Teamspace, of our ERP punchouts. And then our enterprise sales motion, we've been talking about that. We've been investing in our enterprise sales team. So when you bring that all in, that's resulting in greater traction with those enterprise customers, which is in part reflected by that 9% growth in buyer spend quarter-over-quarter -- year-over-year, sorry, year-over-year.

I would just add, I think we're really -- Xometry is purpose-built for sort of the industry trends that we're seeing now, the move towards supply chain resiliency, importance of getting agility and speed to market and really being able to access technology and supply chain.

And I think that, that's what the team has built for many years and is behind our initiatives. And again, it's consistent in terms of how we'll be growing ahead into 2026.

That makes sense. That's really helpful. And then with the new product launches in the EU, can you just remind us how you're thinking about international expansion and those investments heading into next year?

This is James. I mean I'll kick off. I think international, we're very pleased with the performance that we've had there over the years, continuing to see that grow and scale. In the quarter, we're up 23% year-over-year. And we really think there's a lot of opportunity here given the large and highly fragmented markets that there are, not just in the U.S. but in Europe and in Asia.

We had the recent launch of Teamspace that's been going well. We've also been expanding that marketplace more materials, more processes, more quoting possibilities. We're very pleased to see the injection molding order quoting coming to the U.S. after we were able to first launch that in Europe.

So this combination of the market opportunity, again, with the Xometry solution and product road map gives us a lot of confidence and able to continue to see that grow. And as we said before, we believe that could be 30% to 40% of Xometry over time.

Yes. And just to remind everybody, in 2020, our international revenue was approximately $1 million. We've grown that now to $120 million run rate. So just going back to what James said, we expect that to be eventually 30% to 40% of our marketplace revenue and all the trends are moving nicely in that direction.

Our next comes from the line of Greg Palm of Craig-Hallum.

Just thinking back to Q2 and obviously, more so this quarter, but we're not really used to this sort of level of upside on the revenue line. So I'm just curious, like has your visibility changed at all? I'm just kind of curious, as you think back to when you provided guidance last quarter, what changed where you were basically able to outperform by this magnitude?

We continue to see our customers leaning in more and more and adoption of technology tools that we've been investing now for a while, whether it's Teamspace, whether it's Workcenter, it's the punchout integrations, those adoptions are accelerating. And here's the great news, Greg. As we think about the fourth quarter next year, the injection molding and supporting launched this quarter, just launched.

The mobile app for Workcenter is recent. So -- and we've got a product road map chockful of releases that are going to be coming not only in Q4, but also throughout 2026. So I think you'll have seen us continue to gain momentum. And a lot of that is, as we talked about, the investments we've made in AI and technology and that product adoption from our customers is accelerating.

Okay. Awesome. And then just as it relates to Q4, I think it implies an incremental margin for the full year around 20%, which I think is a little bit below what you provided last quarter. Is this just sort of maybe a more near-term expansion in some of these investments that you've alluded to?

I mean, any reason why we wouldn't see incrementals sort of climbing back in the 20s and early '26? Or how are you sort of thinking about that cadence of incremental margins as we progress into next year?

Yes. Thanks, Greg. As we said, we're always about balancing the growth and the profitability. I think when we think about the opportunity ahead for Xometry, it's such a large market that we need to make the right choices to invest in product technology to be able to scale the business.

But we also recognize the importance of delivering profitability and improvement on that along the way. And that's why overall, we've given this framework of 20% at least incremental margins to the bottom line. In the last couple of years, you've seen us do that.

Year-to-date, we're at 21%. I think you're right, if you put in our guide, then we'd be around 20% for the full year. That is an increase in adjusted EBITDA dollars that we're delivering over what we had in the last update.

So we're really pleased with that progression. And I think that that's what we're doing. We're going to continue to balance growth and profitability so that we can grow into this huge opportunity ahead of us.

And here's the great news, Greg, as revenue is accelerating and we've gotten more growth than we've expected, that gives us some optionality to make some investments.

We're obviously, as James said, very focused on profitability as well, but greater growth gives us some options, and we're going to make sure we're taking advantage of that and being smart on both sides of it.

Our next question comes from the line of Ron Josey of Citi.

This is Robert on for Ron. Great to see the active buyers growth up 21% in the quarter. Question is, I guess, how much of this was driven by international expansion given all the improvements that you made with new materials and faster lead times versus an expansion within existing client base?

Robert, this is James. So really pleased with the active buyer growth. I think, in particular, what we're seeing is with a lot of the initiatives that we've been driving both with product and with our marketing teams over the last year, we continue to see success in attracting new buyers to the platform.

I think U.S. enterprise actually has been very strong for us. You've seen that in -- we've called that out in terms of driving the revenue, but it's also been on the active buyer side. And the proposition that we have, again, with these macro trends going on and looking for supply chain resiliency and agility, Xometry is purpose-built for this.

And I think we've been improving our messaging and improving the way that we've been deploying our marketing. So you've actually seen advertising only up modestly year-over-year, and yet we've been continuing to grow our revenue and our active buyers robustly. So it's been strong in U.S. enterprise, but we have a global opportunity as well.

Yes. And just to double-click on what James said, it's Randy. It's really broad-based. So it's our existing accounts, those enterprise customers that are leaning in more and activating more, but it's also attracting new buyers, both here domestically and abroad.

And then on marketplace gross margins, they reached a record this quarter, and they're at 35.7%. And this is the second quarter that they're now well within your long-term target range. So should we consider this as the new sustainable baseline for the marketplace going forward, just given benefits from AI, et cetera?

Yes. I mean I think that what you're seeing is the result, as you said, of the overall continued improvements in our AI price prediction accuracy, the machine learning, the opportunity we have as we scale, we have more data, we have more suppliers, we have more sourcing.

I continue to expect gross margin to be up year-over-year in Q4. We are in that range, 35% to 40%. And so it will always be linear every quarter up and to the right. But I think that we feel that the combination of improving our AI of more data and our sourcing keeps us in that 35% to 40% range.

Yes. I think we're pretty excited that this quarter, not only do we have accelerated marketplace growth, but we actually grew our gross profit dollars in marketplace even faster. So that's a signal that our customers are valuing and our suppliers value the service that we're bringing to them.

Okay. On that note, I think we're going to get going with our next fireside chat. It's my pleasure to welcome the team from Xometry to be part of the conference this year. They've actually been part of this conference every year over the last couple of years. So that's been a great consistency, and we always appreciate it when they come. Randy Altschuler, CEO; James Miln, CFO; also Shawn Milne from the IR team are here as well. Guys, thanks for coming to the conference.

Thanks so much for having us here.

Okay. So I think I always do like to level set a little bit and give you the opportunity. The company has done so many interesting innovative things over the last couple of years. Talk a little bit about the journey the company has been on and sort of reflect back a little bit before we have a lot of questions and a lot of conversations about where we're going over the next couple of years.

Yes. Look, I mean, just first to level set, 2025 has been a strong year for Xometry, where we're seeing accelerated growth and I think that's for a number of reasons. First, we're continuing to penetrate even deeper within our enterprise customers. So when we started Xometry, I'm the co-founder of the business back in 2013. As we're getting awareness now, we obviously started with smaller companies. But as time has developed, we're getting deeper, deeply -- more and more deep embedded with larger customers, these enterprise customers. And that journey has continued. And as we built technology tools to enable us to embed in those customers, plus we've developed a sales team that has expertise in going to market with enterprise customers, those have grown and grown and are fueling our growth, and we expect that trend to continue.

We're also seeing a lot more output from our software development and developing our platform, our user experience, the marketplace, the number of things that we can instantly quote for a customer. So our selection, the different options that we're -- fulfillment options that we're offering, sourcing across the United States, across the world, giving customers that flexibility. So particularly as there's been more and more over the recent years, more and more focus on supply chain resilience, multisourcing, concerns about macro issues, Xometry's marketplace is gaining more and more traction because we provide that to people digitally.

And then also the trend towards digitization. You're seeing more and more -- you've seen that in other industries, but over the last few years and since we started Xometry, that trend has been coming more and more to manufacturing. So again, it's been in so many other industries, but manufacturing largely remains offline. So now that's increasingly -- and AI is just accelerating that push. So for us, AI is valuable in many places, and we use it. We'll talk later about all the different ways that we use AI on our platform, but just the trend towards AI is good for us for both our buyers and our suppliers in manufacturing.

Understood. You recently welcomed a number of new executives into the company. I've also gotten questions from investors that have seen some of those announcements and track such things on LinkedIn. Talk a little bit about who you brought into the organization, why they were the right people and how those individuals align with where you want to go from a priority and a growth standpoint.

Yes. So look, we started the company, me and Lauren Zuriff from zero. So this is a true start-up. And we had a wonderful team of folks that help us get to that $0 to $500 million of revenue. But now as we're accelerating beyond that, we're going to get to that $1 billion mark and beyond, it was a good idea now to bring in a different team that was used to larger marketplaces and had scaled way beyond where we are today because those are the folks that want with next to me to help us inform both our product road map, our sales road map and how we're going to execute.

So we made a lot of changes from our CFO, James Miln, who joined us at the beginning of last year. We brought in a new President from Wayfair, Sanjeev Singh Sahni. We brought in a new CTO, Vaidy; a new CMO, Stephany. So brought in folks. And what do they have all in common? They're from larger companies, ones that have multibillion dollars worth of revenue, companies that have successfully scaled also in relatively short periods of time and companies that have product-led growth. So have sales teams and sales teams are critical, obviously critical, but have product-led growth and that the marketing is layered into helping that journey happen.

So we're very excited about how many people use Xometry today, but there are potentially millions of buyers out there who are buying manufacturing we want our numbers to include those. And this is the right team to help make that happen.

Great. Super interesting. Okay. Let's come back to the marketplace. Continue to put up good strong growth. You had a very good most recent quarter. Talk about the key levers that are driving the momentum around the marketplace and how to think about both sides of the marketplace between buyers and sellers and what some of the building blocks of that momentum are?

I mean, first and foremost, it's our technology that's helped us accelerate growth this year. And when we talked -- when we gave our Q2 numbers, we talked about how Q3 started strong as well. So as we're delivering that product road map, we're getting rewarded for that by our buyers, our customers. And that means, as I mentioned before, it means instantly quoting more things. So at the -- in an instant, I can buy something with more and more complexity. It's talking about offering many different options for customers when they think about sourcing. Again, a lot of trends around, hey, I source internationally, maybe I want to look domestically or I want to source in multiple locations. Can I do that from my computer? Can I do that from my phone? Yes, you can do that with the Xometry marketplace.

So as we're delivering that, then you're getting more and more. Our -- we're embedding more and more within our enterprise customers. So when you think about our -- we talked about that last year, we had over 100 accounts or companies that spent more than $500,000 with us on an LTM basis, and those customers grew 40% last year. Why are they growing 40%? And these are some of the largest companies in the world because they see the value of managing their supply chain, which is vast, with the Xometry marketplace, we're giving them tools to make that easier.

So we're embedding in their procurement software, whether it's Ariba or Coupa, et cetera. So they don't even have to come to the Xometry site to order. Those just reducing friction, making it easier where we have add-ins or plug-ins to their CAD software. So if you're an engineer at one of these large corporations, you can use Xometry's functionality right within the CAD software. So those sorts of deployment of technology are just making it easier for these large enterprise customers to default to using Xometry.

And then finally, our enterprise sales team. We brought in last year, Subir Dutt, who had come from Google and has vast experience on the enterprise side. And so we've been investing in our enterprise sales team. You marry that enterprise sales team with our enterprise technology tools, the overall improvement of our marketplace that's helped us do really well.

Okay. I do want to maybe just follow up quickly on the enterprise and think about one other element. When you think out over the multiple period of time, what are the key unlocks to scale enterprise into a percentage of the mix? Because I think you've talked about this on prior earnings calls, right? It's one thing to be one-off buyers, one-off sellers on each side of the marketplace, building scaled repeat almost always-on business, I think, has been a theme you've talked about. Just talk a little bit about what that might look like from a mix perspective.

Yes. So Xometry started as being a very transactional business for our customers, one-offs looking for us finance on a one-off basis. And the user experience was very one-off. And now over time, we've been doing things that, first of all, enable groups of customers who are working together on entire -- either entire product or an assembly to be able to interact with Xometry. So we launched something called Teamspace a couple of years ago, and that's gained, I think we were past 8,500 teams today. So that enables groups of engineers, groups of procurement people within companies to work with us. And it also enables them to invite other people within the company to join that team.

So it's a great way organically, like when Slack came out and everybody was inviting each other to join Slack, it's the same thing with Teamspace. So that's one thing that's enabled us to get that traction from the enterprise buyers. I talked about those integrations, those punchouts with their ERP systems and the integrations with the CAD files. And then also just the kinds of things people are buying from us. So we've moved from one-off to, hey, I've got a supply chain here. There are certain categories of things that I'm purchasing on a recurring basis. It could be large multiyear contracts. It could also be just an entire category of thing, end-use parts that are critical for the functionality for the success of my own business. I'm going to use the Xometry marketplace to buy those. I'm going to take part of my supply chain and stick it into the Xometry marketplace. That's gaining traction, and that's enabling us to not only grow revenue, but also just become more profitable. You've seen our gross margins spike up nicely. It's just making it easier and easier for our customers to buy and for us to execute.

Okay. And if I can just add in that, like to Randy's point before, so 100 customers over $500,000 spend last year, growing at 40%. We had some case studies that we talked about and show in our investor deck where we have companies in the high single millions of dollars. And we believe that with what Randy outlined and the combination of sales and technology, we can get to $10 million plus in those accounts over time. So I think that there's a really exciting opportunity as we deliver ourselves as a solution beyond just the transaction, but the solution that Xometry provides for this wide range of needs that there are for custom parts.

Okay. I wanted to turn to international. I know you mentioned gross margin there. I do want to come back to that. But before we get there, maybe talk a little bit about international. You've laid out some longer-term targets about where international can get to as a percentage of the mix. You've shown good international results more recently. Talk a little bit about the journey you're on with international and what some of the building blocks you need to put in place to achieve some of those long-term targets on a mix standpoint.

Yes. Just to level set, we started international about 2020, where we had roughly $2 million of revenue. Right now, we're at $100 million plus run rate. So it's grown very nicely over the last few years. And last quarter, we grew, I think, 31% international. And here's what's exciting. So as we -- and we started in Europe, so started in the EU, and we're in the U.K. now, and we're in most countries within the EU. And what's been exciting is the value proposition, our business model that we have in the United States has resonated just as much as in Europe as it does in the U.S. In fact, I think we scaled to over $100 million in revenue internationally faster than we did here in the United States.

So -- and the good thing is also we're able to take our tech stack, and this is what's wonderful about being a technology company. And you'll be able to take that tech stack and you're able to lift that and put that into new geographies. Now you localize it for language and you're going to localize it for particular maybe procurement or payment options that might be specific for a country. And there may be certain materials or other things that are -- but in general, we're able to scale our technology and bring it into these different geographies. And then we expanded a couple of years ago into Asia Pac. We've got our Chinese marketplace. And again, we're localizing it. We've got a WeChat app. You don't have that equivalent in the United States and a lot more usage on mobile than you're going to see in Asia than you might see in other countries. So we eventually expect international to be up to 30% to 40%, right, of our marketplace revenue. And today, I think last quarter, it was in the mid- to high teens.

Yes, it was 18% last quarter. And then just we're in 18 languages, multiple currencies. So the extensibility, as Randy says, of the platform and the validity of the business model being able to apply globally is exciting.

And what's exciting to just add to that is our big customers, most of them are multinational, right? So the ability to offer this solution, and this enables us also to be a bigger part of their overall strategy. If you're in multiple locations, you're in multiple countries, larger companies, in particular, want what's easier. They want great value. They want great delivery. They want reliability. Those things are crucial, but they also want what's easier. If we're that one platform that can help them in many different regions, that's very exciting for them.

I just want to pick up on one point you made there towards the end. When you try to apply your business model to some of these international markets, are there any differences you call out with respect to either unit economics or payback periods or things you think investors should keep in mind in terms of scaling the business, but then also tying it back to the contribution from a profitability standpoint.

Yes. And we have some segment breakout in our financials. And you'll see there in the last quarter, making really -- as we scale the U.S., we're at 5% adjusted EBITDA margin, and we're in investment mode still internationally. But when we look at those unit economics, we're seeing a very similar sort of gross margin profile. In fact, international today is a little higher. And we feel that we're probably ahead of where we were in terms of U.S. in terms of like the revenue pace and the profitability that we're showing. So yes, we think it's very -- we're going to be able to repeat what we've been seeing in the U.S. as we scale further internationally.

Got it. So understood on international. Bringing it back more to the near term, you did outperform on marketplace gross margins this quarter. Talk a little bit about what is embedded in your framework for the business either in the second half of this year or even going out to 2026 in terms of how marketplace gross margins might evolve.

So AI really powers the marketplace and the marketplace gross margin. We hit an all-time high in Q2, 35.4%. That's within the long-term range that we've set of 35% to 40%. And so what's the AI doing? It really is driving our price prediction accuracy and the machine learning with more data and expanding our supplier network helps us match the optimal supplier. And so our system then, as we get all the orders in, we're balancing buyer and supplier pricing and conversion rates over time. So it's not always going to be linear, like every quarter is not always up and to the right. In fact, we made some deliberate investments in the first quarter of this year that helped accelerate the pace of our learning and liquidity in the marketplace.

I think positioned us well for Q2 and well for being able to satisfy global needs and requirements across different geographies. So I think we expect it to continue to improve year-over-year here for '25 and continue to just march within that 35% to 40% long-term range.

Okay. Understood.

Eric, I just want to go back to something when we talk about international. And I think it's important, particularly folks somewhat newer to our story, this Xometry is -- the marketplace is not a unique thing for like it doesn't just resonate in the United States. This is not just a U.S. story. When you think about custom manufacturing, which is a giant market, you have millions of buyers. You have here in the U.S., I think, estimated like 500,000 small manufacturers with an average of less than 20 employees. That is a very similar dynamic you have in most countries around the world. So the idea of creating a digital AI-powered marketplace to connect those buyers and suppliers resonates everywhere because everybody has the same problem. It's off-line. It's -- the pricing is opaque and it's inefficient.

It doesn't matter which country you're in, your ability to speed that up, your ability to create transparency, your ability to have a better outcome, that resonates everywhere. And that's what -- one of the many things I think is so powerful about what we're doing. It is truly a -- it resonates globally.

Okay. No, good clarifying point there. I do want to pivot to supplier services. Maybe just to set the stage, I'll probably have a few follow-ups, but how are you framing the go-forward strategy for the core supplier services portfolio, including Thomasnet?

Yes. So core to our supplier services is advertising. So Thomasnet is sort of the leading search place for folks who are looking to buy industrial goods. So we've got almost 500,000 listed suppliers in Thomasnet, very specific, and it's a company that has a storied history of over 100 years. So if you're looking -- and very broad, much broader than where Xometry is, but soundly in that industrial category. What we've been focusing on is advancing the technology on Thomasnet for both the searcher and for the advertiser. So we talked about last quarter, we've been doing some work on the search end side of things. This quarter, we're beginning to release new things on the advertising side, a new ad server.

And this is going to enable us to increase the penetration we have with our -- with advertisers. So we have, as I mentioned before, over 500,000 or roughly 500,000 listed suppliers. Today, only about 1% of them, circa 5,000 or less than 5,000 of them are actually buying advertising from us. By updating the advertising technology, the ad server, we're going to be able to sell more inventory, more of our ad inventory and make it easier for our advertisers to buy it and to get more value for their money. And then likewise, as we've been improving the search and there's obviously lots of advances in search that are going on. And we're bringing that more modern search technology to Thomas, we're delighting more of the folks who are coming and visiting the demand side. So as we're doing both things, we're optimistic that, that will have benefits and bring Thomas back to growth.

Maybe I'll ask 2 that are sort of double clicks on that. But when you think about the friction holding back advertisers today, what do you see as the friction you're solving for that would create the unlock on the advertiser demand side?

So the advertiser loves Thomas in the sense that it's got this very strong brand. They know that the searches are coming are good searchers, like there's a good -- they can get a good ROI there. but the technology was outdated. And so they're used to Google AdWords and they're spending money in other platforms that just make it a lot easier for them to deploy their dollars and easier for them to pay for performance. I mean, ultimately, that's what people want to do. They pay for performance. So it's important for us to update our technology to give them that option.

Self-service, Thomas was very historically very dependent on a sales team. Obviously, sales team remains important. But how do I just get it done myself? How do I unlock these things myself? So those are the improvements we're making. We're using proven technology to do that. And as I said, those are beginning to be released now. So that will be very helpful just to make it easier for advertisers to engage and get value for their money.

Just to put a finer point on it, when you think about investing in this transition for Thomas, any elements you can help us with in terms of the duration of the investments that need to be made relative to the yield or the output on those investments over the next couple of years?

So yes, I mean, we're doing that within our P&L right now. So within the guidance that we gave. So you can see that we're finding opportunities to find saving in Thomas that we have done over the last couple of years that helps us sort of reinvest those dollars in this opportunity. We'll update you as we go into the new year when we probably get into the heart of the transition. But overall, I think as Randy was saying, what this is really doing, we've got about 80,000 different categories on Thomasnet. And the way -- with legacy technology and more driven manually, that limited how many of those categories in effect, we were selling. And with technology, we can just open that up.

And that spend the investment, it's already been in our numbers. We've been doing this since last year. So it's no big giant number coming up something like that. We've been spending steadily, investing in the business the same way we've been investing in international and some of our other technology initiatives. We're obviously getting more and more profitable to our bottom line, but we're also alongside of that, investing in different exciting options and growing Thomas is one of those. It's almost an 88% or 89% gross margin business. So those investments, we think that we've been, again, doing since last year, we think are very worthwhile.

Okay. And just to put the last point on this before we pivot, play out to the end state, how do we think about the flywheel effect of what can be scaled and deployed at Thomas feeding back to the marketplace years down the road? How do you conceptualize what this looks like in its end state?

Yes. So Thomas has over 1 million registered users, as I mentioned before, been around a long time. There's high awareness in that industrial market of it. Xometry is a younger company with a lot less active buyers today. So the ability to convert some of those Thomas users to be Xometry buyers is very attractive. And as we just make it more -- as we improve the Thomas experience, that will have a knock-on impact of people being able to use the broader Xometry ecosystem. Likewise, as we expand the categories of things that we can instantly quote as we expand the selection on xometry.com, the Thomas suppliers are great providers of those services. So we're a 2-sided marketplace.

We need -- people actually make this stuff. Thomas has got that, and they've got all these other categories already filled out with some wonderful manufacturers. So there's a great synergy there for as well. And then ultimately, when you think about our buyer, we want them to have one shopping cart, whether they buy from Xometry or they want to buy from somebody from directly on Thomas. When you think about marketplaces like Amazon, from Amazon or fulfilled from one of their providers. But it's one shopping cart, one experience, make it really easy, the trust, reliability, those things that you -- that customers want to have, we want to have that one experience for them, be that one-stop shop for them.

Understood. I'll joke that because it's a technology conference, I have to ask about AI. I think I'm contractually obligated to do that. You guys were talking about AI before a lot of other people were talking about AI. You should get a nod in that direction from me because I've known you a long time. Talk a little bit about how AI is at the center of what you do and how AI is sort of a component of a lot of what you're building from a strategic priority standpoint when you think out over the next couple of years.

Yes. So the very heart of one of the key things we do at Xometry is we provide liquidity for buyers and suppliers. We create the price. Now that may seem like a trivial thing because in traditional e-commerce, you're buying things. Of course, there's a price. But in this case, there are no SKUs. It's custom manufacturing. So the customer is asking for something that may have never been produced before. And historically, to get that price has taken days, weeks and it's been very difficult. We use AI, and we've done that from -- as we started the company to actually create that instant price. We also then use the AI to optimize the match between the buyer of the manufacturer and the supplier of the manufacturing.

And then finally, we're using that AI also to give a price for the supplier as well. So we're giving both the buyer and the supplier prices, and we're optimizing that match. And the cool thing is because we're using AI, which learns from data, as we've been getting more and more data, we've been getting smarter and smarter. And that's -- you can see that in our bottom line as our gross margins have been improving over time. But you're also seeing that as -- again, this year as growth has accelerated, you're seeing that we're getting better and better with our pricing, and we're satisfying more of our buyers and our suppliers with that. So that's been the foundation of Xometry. The great news now is we're investing in AI across many parts of our ecosystem.

So we talked about taking important information from drawings that our customers have and extracting those automatically and using that information. And so I mentioned our new President, Sanjeev Singh Sahni and Vaidy, our new CTO. They are very focused on embedding AI and creating benefit for it, both for our customers and suppliers, but also for our own internal operations across our entire ecosystem. So there isn't one group at Xometry right now that's working on embedding AI. It's literally every department within Xometry.

Maybe a follow-up there because this has been a recurring theme of the conference, just elements of deploying AI internally. Like what is your working framework that you provide investors on how AI might either allow you to expand margins and/or fuel further or accelerated growth investments and hold margins as you think out over the next couple of years. Anything there you've got from a framework standpoint?

I mean I'll give -- I think just building on what Randy was saying, I think at the core, it's a core driver of the gross margin. And so that in terms of being smarter about matching the buyer to the supplier and then helping us optimize that, which comes through the gross profit dollars that then we can choose to then be smarter about the pricing, both to the buyer and the supplier and optimize that. And then I think we are very focused, as Randy was saying, on how it can help us on the productivity side across all of our organizations. I think across product and technology, across customer service and even into our G&A functions. And so I think as we look at our incremental -- hitting our incremental margins of 20% incremental EBITDA, that we're excited about what that can allow us to redeploy into investments in the business.

Okay. Understood. Maybe just sticking with you, James, before I bring it home with Randy. Talk a little bit -- we talked about margins. We talked a lot about some of the investments you're making. Talk a little bit about the capital allocation framework that the company operates under, just so you can level set with the investors here.

Yes. Thanks, Eric. So we've been a very exciting time for Xometry as we continue to see great growth. In fact, as Randy said, accelerated growth this year and solidify our profitability. So adjusted EBITDA, we turned profitable when we hit $600 million at the end of last year run rate. We've continued to deliver on that path this year. And what we said is as we scale to $1 billion, we would expect incremental adjusted EBITDA margins of 20%. So I think as we put that through, that means we're closer here to then cash flow positive.

And that puts us in a very strong position as we're seeing robust growth and also improving profitability and cash flow. In fact, we were able to have a very successful refinancing of our convertible debt a few months ago, and that's extended the maturity of most of that debt out to 2030. So that was about liability management in terms of there are a lot of risks in the macro and a lot of variability out there. And we want to be making sure that we are well -- a strong balance sheet as we execute on the organic opportunities that are ahead of us.

I think as we move forward, then part of our strategy will also be as we crystallize what the team can deliver, how can we supplement that maybe with some tuck-in M&A, which with a strong balance sheet of over $200 million in cash today, we're in a good position should we have something to execute on. So I think that, that's how we think about it is we're really focused on scaling to a $1 billion and really to multiple billions after that and generating our own free cash flow.

Great. Okay. Randy, we talked a lot about proof points you've gotten from where the company has been over the last couple of years and some of your key initiatives going forward. Bring it all together, when you think about what you're trying to build for the long term, what would you frame as your 2 or 3 biggest strategic priorities? And how do they come back to things that we can monitor from the outside in that you're sort of going to build, deploy and scale when you think about where you want to take the company?

Look, as I mentioned before, this is a huge space. The total addressable market is gigantic. And every day, we're building that competitive moat with the data that we're gathering, with the networks of buyers and suppliers, with the technology that we're embedding in our customers. Our vision is that in this huge space, if you're a buyer and you want to buy custom manufacturing, your default is to come Xometry because that -- we have the widest selection, we have the most reliable delivery. We have leading prices and lead times, the options, and it's just the simplest way to buy and the most reliable way to buy. And that large companies, in particular, are taking entire portions of their supply chain and utilizing the Xometry marketplace for fulfillment for them.

On the flip side for suppliers that we are the go-to place. Of course, I'm working with the Xometry ecosystem. I'm buying advertising on Thomas. I'm a partner on xometry.com. By the way, I'm sometimes using Xometry for my own orders. It's kind of expanding what I can. And we're -- and with the software, we have something called Teamspace. I mean, at Work Center, we give away free software for our suppliers to operate their businesses. I think about like a Shopify or things like that or what Toast does for restaurants, we give that, that they're using that software to run their entire business, not just the business that they generate from Xometry, but their whole business. And we're giving them really good free software to do that. And so we're -- in some sense, their operating system to grow their business because these businesses want to manufacture. They don't -- if we can get rid of all the noise in the same way, the customer doesn't want friction and noise and they want ease of use.

Our suppliers are manufacturers, they want to make stuff. They want to fulfill orders. The easier we can make it for them, the more that they can grow, the more profitable they can be. And that's at the heart of these small and medium-sized businesses. Their P&L and their business P&L are almost one. And so they want to grow, but they also want to be profitable. We can help make that happen. And as time goes on, I want to make that easier and easier for them.

Okay. Well, we covered a lot of ground. I want to thank both of you guys for being part of the conference again this year. Please join me in thanking Xometry.

Thank you, Eric.

Happy to have to share the stage, be on stage with Xometry's CEO and Founder, Randy Altschuler; and then CFO, James Miln. So I think we all know about Xometry. We've been public for a few years now, and so we can sort of get to the questions. But I was talking to a few guys today, and we know Xometry is a marketplace for manufacturing or whatever. But also, I thought the buzzword supply chain platform is a good way of saying what Xometry is. So throwing out that comment because I like the way that sounds, and I think that makes a lot of sense.

So with that said, let's jump into it.

So let's see, Randy, we -- I want to -- you're coming off a pretty good 2Q, right? And just rattling off numbers, 2Q results, we saw a 21.5% growth in annual buyers. You saw 26% marketplace revenue growth. You saw gross margins in marketplaces expand. Just talk to us about just what the drivers of this momentum here. I think you mentioned smarter quoting, dynamic pricing, workflows, sourcing. We'll get into the products at maybe a higher level. Paint the picture for us on where we are.

Sure. So as you described, a good second quarter. Year-to-date growth has accelerated from last year, both overall revenue and our marketplace revenue growth, record high gross margin for marketplace and overall record gross margin of over 40%. So a lot of momentum there.

What's driving that? A couple of different factors. So first, our AI continues to get smarter and smarter, as we ingest more data from more and more transactions and as we grow our networks and buyers and suppliers. So the key to our marketplace and driving this, both the pricing and the matching between the buyers and the suppliers is the successful ingestion of that data and utilization of it. So that's been going well.

There's increasing adoption of Xometry for, as you talked about, supply chain solutions. So as you think about our larger customers, they're looking at better, more efficient ways to manage their supply chain, often which are still with tens of hundreds of small manufacturers, the Xometry marketplace is a very efficient way to do that. We integrate directly into their procurement systems. We help them with their -- we integrate into their CAD design systems. So all sorts of ways. So we're just providing more efficiency and reducing friction.

And then we just continue to invest in the buyer experience. So you're talking about better pricing, faster speed, better selection. These are the things that are going to drive customers and grow our share of wallet, not only with more customers, but with each of those customers, they're going to be spending more with us as well.

Sure. I think that's a really good way of saying it, better pricing, faster speed, better selection. It sounds like a company in Amazon, but -- I think Amazon up in Seattle, but it does eliminate a lot of the friction out there. And so I want to dig into that a little bit more because this past quarter, we talked a little bit more about few products, Instant Quoting, Teamspace, ERP integrations. So let's dive into Instant Quoting. And specifically, I would love for you to help us better understand the complexity that's involved with Instant Quoting. So I think we're always adding new materials. And so just help us understand the benefits, the complexity and what goes into this Instant Quoting product?

Yes. So those who are still a little less familiar with Xometry, one of the unique things is when you're talking about custom manufacturing, you're not traditional retail purchasing, where you're buying a SKU off the shelf where the price is well known. And if you went to two or three different suppliers, the price would vary by 1% or 2% or 5% maybe. In this instance, it's custom. And so there's a lot of price inconsistency. You can go to two or three suppliers and somebody could charge 100% more than somebody else or take twice as long. And just to get that price and lead time can take hours, days or even weeks. And a lot of that has been done historically offline.

So using AI, we're able to instantly provide customers with pricing and with those lead times, and that's getting smarter and smarter as we ingest more and more data. Also, we're finding new applications for AI. So one of the requirements in Xometry quoting is to have a 3D CAD file. Our technology reads that file and helps generate a price. But a lot of customers, in fact, the majority of manufacturing, when you think about the giant TAM that's available to us, historically, there hadn't been 3D CAD. There had been drawings, technical drawings or prints, they got different names, literally like a physical representation of it. Now we're using -- beginning to use AI to read and extract information directly from those files.

So the customer, particularly when you think about legacy parts or service parts, sustainment parts where there isn't a 3D CAD file, now the customer drawing data directly from that, that's making a better experience for the customer. It's speeding up the entire process, and it's just continuing to allow us to serve a greater audience and a bigger share of what that audience is wanting to buy.

And how do you merchandise Instant Quoting? So for example, you can imagine just the amount of variability in product that's being ordered. And so not every product, I think, is Instant Quoting eligible. Please correct me if I'm wrong.

Absolutely.

And so how do you ensure that if a client or someone is asking for whatever product that, look, you may not have this in quoting, but this is here or to get that repeat usage going?

Yes. And so we are constantly expanding what we can instant quote. And so we're adding more and more, whether it's manufacturing technologies, it's materials, post-processing, all sorts of different configurations. We're also adding the suppliers. So we're building those supplier networks. And that's one of the very unique assets that we have. Not only do we have all these buyers and all this data, but we've got this wonderful supplier network, which has grown over 40% since 2019 on a compound annual basis.

And so as we're adding more processes, we're adding more and more supplier networks that can fulfill those. And again, it's just such a -- when you think about well-functioning or highly functioning marketplaces that are widely adopted, just being able to get everything you need in a very convenient, reliable way is so powerful. We're able to achieve that as we're expanding more and more what is in that menu.

Sure. So maybe switching to another product that I think we've seen for a couple of years now, but has really turned on is Teamspace. So this past quarter, we launched in Europe, U.K., Turkey. I believe we now have 7,000 teams on it if I am...

I think we have over 8,500.

Over 8,500. And so it feels like a tipping point to a certain extent with Teamspace and particularly, it's helping Xometry's EU operations. So help us understand a little bit more about Teamspace. And I know it's been out there, but maybe for all of us. And then the ability to expand into newer markets, the impact there.

Yes. So Teamspace is the ability for groups of buyers at our customers, and it could be a combination of engineers of procurement people, strategic sourcing people altogether who are buying not only just one-off products, but entire assemblies and products. And so that communication and collaboration is really important. All of that can happen within Teamspace. It's also a great way for us to grow organically within our customers. We've seen, as James just said, over 8,500 teams have been adopted. That's helped us across the board. In the U.S., in particular, it's helped us with our enterprise customers as they're doing larger and larger projects with us, outsourcing effectively more of their supply chain, Teamspace is helping them with that coordination effort.

We did launch Teamspace in EMEA in July. The initial results we're very happy with. And that will allow us -- we're less mature and that market grew 31% international last quarter. So it's growing rapidly, but it's a few years behind the United States and historically has not been as focused on the enterprise customers. As we now have launched Teamspace there, we'll now gain more traction in those enterprise customers. In the U.S., those enterprise customers, we talk about our top 100 customers grew over 40% in 2024. And these are customers that are spending more than $500,000 with us and which we think have $10 million plus each potential. We've got some really exciting opportunities in Europe and Asia as well to do similar things.

And if I can just add, I think with Teamspace, as you said at the beginning, Ron, in terms of being a solution for our buyers, especially in enterprise, as this helps them aggregate up like all of the transactions that they do with Xometry, and it moves it to that level from individual transactions with individual buyers, engineers or supply chain managers to more of that strategic partnership that they can see evolving on Teamspace through with Xometry. I think it gives our teams, again, a sort of a platform from which to have the more strategic conversation over time to get to $10 million-plus and maybe even larger.

I want to get into the $10 million in a second here, but sticking with the product side, Randy, you talked about procurement and CAD systems before. ERP integrations was something that was highlighted quite a bit this past quarter. And so talk to us about the importance here of just how that's minimizing the friction.

Yes. So as much as possible, we want to integrate within the procurement systems of our customers. That's very important for a number of reasons. First of all, it's just easier for them to procure. They don't have to come to our website. They don't have to e-mail us a PO. They can do that directly from the procurement systems. Communication is happening directly between system from system. It's more efficient. Sands are touching everything. It's just a better experience. It also creates a virtual storefront for Xometry within these companies.

So we're very proud about our growth in our enterprise customers. But as we just talked about, we could do a heck of a lot more. Part of the issue is just getting awareness out and making sure that these large corporations, some of which are the largest corporations in the world, where gets out by being embedded in the procurement system and having that storefront, suddenly lots more engineers, procurement people, purchasing people can now access and buy from Xometry. And a lot of times in these larger companies, being in those systems is the key to winning. Nobody is price insensitive. Price always matters, but factors like that are very important to those customers, and that's why we're seeing so much success.

Sure. So one of the things that I think was fascinating, and James, you just talked about, Randy, you just talked about it, the potential for multiple customers. Maybe 100, I think I just heard. Please correct me if I'm wrong, get to $10 million from a revenue perspective. And what I wanted to understand is we've been talking over the past couple of years the land and expand strategy. We've been talking the, call it, basically rebuilding the sales force to that land and expand strategy. I think we've had a few key hires as well with Sanjeev. So what I'd love to hear is your thoughts on the progress of land and expand. And how does the company go from whatever it is, $100,000, $500,000 is a big number, $10 million. That's a pretty big leap. And so any insights there would be very helpful.

Sure. I'll start and then James, feel free to jump in. So it starts with the technology. It starts with Teamspace as we talked about. It talks about the integrations in those ERP systems. It talks about having the integrations with their CAD program. So you're catching the customer at all different levels of the life cycle from just creation of the actual product to the procurement of the product and just reducing friction. So that's very powerful.

Then you marry that together with a go-to-market. We brought on board last year from Google, a new Head of Sales. And so that enterprise motion and the team that can deliver that when we're giving them the technology to do it, when we're expanding the breadth of what we can quote, that's just allowing them to be very successful. So that combination, I think you're seeing that as growth this year has accelerated. And we -- as we announced our Q2 earnings, we talked about Q3 has started strong as well. So you're beginning to see the payoff from those investments that we were making last year and in that enterprise, both on the technology side and on the sales side.

Yes. So in our investor presentation, we have a slide with a few case studies. So in 2024, we already have customers who have got to the high single-digit millions. And when you look at a customer that did $9 million in 2024, it's -- again, thinking about it from their point of view, Xometry is solving a multitude of work in custom parts, in end-use parts that goes to small- and medium-sized manufacturers. And those -- that has complexity to manage that Xometry, not only are you getting that best price, but the lead time, the quality and the trust that that's building with being able to funnel that work through Xometry as a platform and as a solution.

And so as we see that scale, it's not about -- we sometimes get this question of prototype to production. It's not that linear prototype to production. What it is, is it's a multitude of these end use cases, custom parts that are required, whether it's service, replacement, R&D, production, a combination of things for maybe one assembly or maybe it's across several within different divisions. And that's why we see this path. We see the performance that we've had in prior cohorts, and we see that project forward with a path where $10 million-plus seems very achievable. And that's even at still a level that's somewhat transactional. I think as we get deeper and more integrated through the solutions Randy outlined, there's potential for well over $10 million.

Yes. And I just want to double-click on something that James said. And customers, when they use the Xometry marketplace, they're not just trying to buy a part or buy an assembly or buy a product. They also have to solve the problem of the complexity, as James alluded to, of the entire procurement acquisition process, receiving the parts, documentation, all that. That is just -- and even the status of what's going on with my work. So things in the B2C world that are like table stakes, where is my job? Is the pizza out of the oven or not? Where is the package and things like that? In the manufacturing world, it's light years behind that. So the largest companies in the world, when they're trying to find out the status of their critical parts, they're sending e-mails, they're making phone calls. And that -- those are often the only touch points they have with their manufacturers. They do not have real-time insight into what's going on and when delivery is.

One of the wonderful things that we offer our customers, among other things, is we've got Workcenter, which is the software that all of our suppliers. So if you're a partner, supplier in this two-sided marketplace, you have to manage your orders and deliver using Workcenter. That gives insight into the status of the order, what's going on that customers don't have today and even try to get would be a very manual and arduous process. We're using technology to solve that problem. We're using technology to enable them.

When you're building something where there are multiple parts, that collaboration and finding out where one part is versus the other, again, historically, that's been done via e-mails to people within a company or things like that. That's all happening on Teamspace. So as you think about our technology, making that process easier, reducing friction, ensuring successful delivery and success of the project, that's worth a lot for our customers. And they just can't get that from a small and medium-sized manufacturers. Those manufacturers are awesome at manufacturing, but their digital storefront or footprints or systems, they just don't have those.

Is Workspace available to everybody or that's part of...

Yes. So Teamspace is available to everybody. And Workcenter, every one of our suppliers has it, and we've made it available for them to use for all of their customers. So not just for Xometry, but for them to use it for all their customers. And we're a two-sided marketplace. We want to help our suppliers excel. We're very -- our algorithms not only help the customer get a price and to buy, but the algorithms also help ensure that our suppliers are getting jobs that best match their capabilities.

Why do we care about that? Well, for a couple of reasons. One is those are jobs that are going to more successfully deliver, right? Everybody is good at particular things. They always say, go with your strengths, not try to fix your weaknesses. And also, it's financially better for the supplier. So it's quite unique in some marketplaces, it's just about driving down the supplier. In our instance, we're giving the suppliers the most profitable work because we're giving them the choice of jobs from all around the country and all around the world.

For these small or medium-sized manufacturers, usually, historically, they've only been able to service local customers. So if I'm in Houston, Texas, I'm oil and gas. Oil and gas isn't doing well, I'm out of luck. Or if I'm outside Detroit, I'm worried about automotive. Now we're opening up that they can get work from everywhere, so they can choose what is best for them. And that is really powerful for these small and medium-sized businesses.

That's super interesting. One of the things I heard -- I thought I heard last quarter, please correct me if I'm wrong, that Xometry is increasingly being used for both quick turn and long-term production planning. Did I hear that correctly?

That is. So we're doing more and more longer-term projects and production as well as quick turn. And as sort of James said, it's an evolution where our customers are thinking about Xometry as a solution to a problem and not just an immediate problem like this one part or this one production order, but hey, I think about the grand scope of all the things that I need to produce my supply chain, which portion of that supply chain is best suited for the Xometry marketplace, the Xometry platform. And that's -- and so that ends up being a combination of both large production orders, smaller orders, quick turn, longer term, a wide range of different materials, processes. That's why, again, expanding the menu is increasingly powerful. They're doing more and more of their shopping at Xometry same way you could buy more and more from Amazon, and that's a very compelling value prop for them.

And it's an evolution of how Xometry has sort of gone through this. And so maybe 2.5 years, we were on stage talking about land and expand and talking about the broader macro and here we are.

Well, look, we're a 12-year overnight success, right? And here's a tremendous competitive moat that we have is that we're building up the data and the networks and the tech that supports that. Like this is not -- there's a lot of competition in different B2C marketplaces where the lift, the entry point is a lot lower. In this market, because it is custom, because it is complex, because precision, the bar is much higher. And so every transaction, everything we're doing is building that moat and enabling us to be more and more successful. And again, as we've accelerated our growth this year versus last year and as we talked about the Q3 had started strong, you're getting some momentum there from that.

And one of the things that we just talked about the large opportunity of potentially 8 million to 10 million, but also this past quarter, we saw accelerating growth with accounts of an LTM of, I think, 50,000. So growth accelerated there. Any insights there? Maybe, James, this is for you, but any insights on sectors or tools, products that are adopting that's driving that growth of maybe the -- it's hard to say smaller, but certainly smaller than the couple of hundred thousand or 9 million clients.

Well, it's very important to us to see that growth. That over $50,000 we sort of see as the top of that enterprise funnel. And so we added, I think, a joint record net adds with what we've done maybe back in '23. So really nice to see that. I think it's on the back of continued success on the enterprise go-to-market that we invested in at the beginning of '24. And we saw that begin to accelerate. And then I think that's helped us deliver well.

There are some verticals that we pointed out, aerospace and defense, robotics, automotive. But overall, we're a very well-diversified marketplace. The Xometry model works across all industries and types. And the only other thing I'd just say, and we said this on the call, for us, there was no pull forward. It's custom. So the noise from tariffs for us is we wouldn't see anything noticeable in terms of trend or change in our mix. So I think a lot of it's driven by seeing that nice step-up in the accounts of more than 50,000 is behind the enterprise work we've been doing.

Well, to that, I did want to ask about the broader manufacturing environment. So I think Xometry commissioned a survey called the American manufacturing resurgence and has talked about more and more onshoring back to the U.S. And so talk to us more around just the broader manufacturing environment, tariffs or not, just sort of what we're seeing, what we might see over the next couple of years.

Yes. So I mean, at first, when we think about manufacturing, the ISM sort of the data has not been good. So for the last, I think, 36 months or mostly every month, you've seen manufacturing contraction. So -- and while a lot of other companies have been shrinking, Xometry has been growing. Again, accelerated growth this year because we're gaining market share. So there hasn't been any lift from that. And there is obviously a lot of renewed interest now in reshoring. So we are seeing a bunch of renewed interest. We haven't had a pull forward from that yet, we haven't had a benefit of that, but certainly, that is a lot on people's minds. And I think you're going to be seeing more of that multi-sourcing. So some of it may be reshoring here in the United States, some of it may be diversifying their supply chains across multiple geographies.

Another thing that's so attractive about Xometry, we help you create that resilient supply chain with a push of a couple of buttons. You can either -- if you want to reshore something, you can reshore or if you decide, hey, I still want to do things overseas, I want to mix. I want to be in different locations, you can do all of that. And it's -- you don't need a fancy, you can do that from your desktop. You can do that at 4:00 in the afternoon on a Saturday. So that's very powerful to give those tools. So if the ISM and if the manufacturing did ever turn up, that would be great. But again, we've been growing very nicely because we're gaining market share and because the TAM is so huge.

And to that, let's talk a little bit more about the supply side. I know we're talking about reshoring and the supply. I think we're working with around 4,400 active suppliers thereabouts. So talk to us about how we're expanding the supply base specifically and how you manage or balance as any marketplace would supply and demand challenges.

Sure. So our supplier base grew about 28% last year. We report that on an annual basis. And it's grown, as I said, since 2019, over 40% on a compound annual growth rate. So we're steadily adding suppliers. And we're diversifying majority of what we do here for our U.S. customers is done, vast majority here in the United States, but we're also diversifying suppliers across the world. We have our international business, which has been growing nicely. So we're looking at different geographies for lots of different reasons. So that's been growing.

And we're continuing to enhance things like Workcenter to provide more value, make it easier for our suppliers to deliver. So we want to remove the -- as much as we want to remove the friction for our buyer and allow our buyer to focus on building great product, delivering great product to their customers, for our suppliers, we want to let them focus on manufacturing. They're really good at that. And so we want to find them the work that's best fit their needs, their capabilities.

As our suppliers work more and more with us, we understand more what they're good at. And it's almost like a recommendation engine. So like if any of us have kids or just any of us watch TikTok, five or six videos into it, it's got you hooked. It knows what you like to watch. I don't know what Ron, would you like to watch. But it's got you hooked. It's the same thing with our suppliers. So the more that they work with us, the more the algorithm learns, this particular manufacturer likes this kind of work, and that enables us to satisfy what they're looking at, and it ends up with a better result for our customer, too.

Yes. To that point, we talked about supply base and vast majority in the U.S. international is growing. And so international is now 16.5-ish, call it, mid-teens percentage of total revs and growing quite nicely. Do you think we get to like a 50-50 mix? Or how do you think about international going forward?

Yes. We think there's tremendous opportunity internationally. What we said is 30% to 40% is what we see. I think what's really exciting is when we've looked at this and the success we've had internationally, we're seeing very much the same market dynamics and the same need of buyers and the same needs for our suppliers. So that's encouraging. And then we have segment analysis as well where you can also see that we're seeing similar economics. So the gross margins, in fact, internationally, our marketplace were a little higher, but I'd say generally about the same.

We're a little earlier in terms of the investment cycle there. But in terms of the return that we've seen so far and the growth, we got to $100 million run rate faster than we did in the U.S. So in EMEA, in Asia Pac, we see a tremendous opportunity for growth. And I think our focus going forward is also going to be a lot on doing that in a global way, automating and getting scale globally and globalizing the network and then the platform behind it. So I think a lot of opportunity both to see the growth and more leverage as well.

Yes. And just to piggyback, one of the exciting things about our international growth is the tech stack that we built here in the United States, we're able to lift that and move those to different geographies. So in fact, when we launched in China a few years ago, it was the European team that assisted took the tech stack there and moved it to China. So that makes it -- we talk about being extensible for customers, it's extensible for different geographies. And we have a new CTO or CTO joined us earlier this year together with Sanjeev, we mentioned, who joined us as our President, new CTO. And so we've seen -- we've been growing our technology team. We're seeing an acceleration in our development. So when you think about the buyer experience, when you think about our supplier experience, hopefully, we have a chance to talk about Thomas. We're seeing increased and faster efforts on those. And that's just -- that's paying off both from a -- that's going to pay off from both a profitability perspective, but also just from a customer satisfaction perspective and ultimately, revenue growth perspective, too.

Let's talk about Thomas. So we've been talking about revitalization of Thomas, I think, for some time. Are we here?

Yes. We are -- in the third quarter, we've begun testing. We're begin testing our new ad server. So earlier, I think in Q2, we started testing revised search, so revamped search. And now we're doing the ad server. So we are moving Thomas to a more modern platform. That's going to enable us to expand our set of advertisers. So Thomas has on it roughly 500,000 manufacturers or people in industrial sourcing. So 500,000 suppliers listed on Thomas, 1% of those are advertisers or roughly 1% of those. So by -- and there was -- there have been some technology blockage to that, that have been made it very difficult for some of our -- would-be advertisers to jump in. It's been a lift, but now we're coming out of it, and that's just going to enable a lot more people to buy. And by enhancing or revamping the search experience, it's going to enable our people to find more what they're looking for. And so that -- we're really excited about that. That's obviously a high-margin 90% business. So growing that is going to be very helpful for our overall profitability.

Yes. And when we ran the test on the search, we saw a 10% increase in engagement. I think -- so we're very encouraged and confident that we're going to see that continue as we then couple that with the new ad tech that Randy outlined. And so really, it just -- there's a lot of opportunity there to, again, add inventory and have more of our suppliers participating in the marketplace to help them get the leads that they're looking for.

And just to go back, Ron, something we're talking about earlier about delighting customers bigger share of wallet. Thomas is an extension of that because Thomas is much broader than what we have today in Xometry. So more and more, and we have also -- we had a new CMO join us in the beginning of the year as well. We're focusing more and more and sharing with our customers the benefit of that larger ecosystem. So if you can't find what you're looking for on xometry.com, on Thomas, we've got an even broader selection of categories that don't exist yet, you can do your one-stop shopping there. And again, that's -- as we improve the technology, make it easier and easier, integrated shopping carts, things like that, it's a no-brainer for that customer.

Got it. Perfect. Perfect. We'll look out for that. So we have about 4 minutes left. I've got some more questions, of course, on margins, on gross profit, but I do want to open it up for the audience if there's any questions out there. If not, I'll keep going. So think about questions and raise your hand and let us know.

But let's talk about margins, I'll talk about gross profit or gross margins on the marketplace in particular. We saw an expansion this quarter, 200 basis points on a year-over-year. A lot of it, I think I heard AI-driven algo changes are contributing. But can you give us examples of this gross margin that -- of what's driving gross margin and how you think about that going forward? Because I know the guidance is for it to continue to increase, no doubt. We get a lot of questions of why is it increasing? What's the thesis behind it?

I'll start with the numbers and Randy can join in as well. So yes, we hit an all-time high in Q2. The marketplace gross margin was 35.4%. We said for some time that the long-term range is 35% to 40%. So it's very nice to sort of broken through there. Coming back to your question on suppliers, we've seen that grow compound annual growth of 40% over the last 5 years, and we've grown our buyers at a similar rate. So as we've grown the marketplace, that's more data, that's more orders on the platform, more for the algorithms to work with. And fundamentally, what Xometry is doing is finding that perfect match for the buyer, that great price for the buyer and then fits the capabilities and the capacity of the supplier.

And over time, we've seen our gross margin rise through that. And that's really what's driving this, Ron. When you see the trend year-over-year, those are the key drivers. Now behind the scenes, there's a lot of activity going on. I think there's a lot as we add materials, as we add processes, as we add certifications, as we add suppliers. And a really good demonstration of that was in Q1, where we did see margin come a little down versus Q4 as we accelerated growing the liquidity in the international marketplaces to drive suppliers. And then we said that, that would come back on track in Q2 and very pleased to have then seen that come together and deliver that record margin.

Yes. I mean just to remind people, when we went public our first quarter, our gross margin was in the 23s. As James said, we just did 35%, and we've indicated that we think that the marketplace gross margin is going to end up in the 35% to 40% margin. And you've seen year-over-year us successfully increase that. So we do expect to continue to see that annual increase in the gross margin as we use our data, we use our networks to figure out that inefficiencies. And again, it's a win-win. It's a win-win because we're getting the supplier work that they're more profitable about, and we're pointing the customer to that supplier. And too often, a customer is going to somebody who's not the best deal for them, and they're shortchanging both the customer and frankly, even the supplier who's maybe doing something that's not their best work either.

Sure. That's great. That's super helpful. Any questions? Yes, we have a microphone coming in.

Are we doing prototype for people who have certain customers' design? What kind of market share really for the service and product?

Sorry. So we don't just do prototyping. We've talked about we do lots of production work and end-use products for our customers. So we've talked about the addressable market being almost $2 trillion. So when you think about -- again, this is custom manufacturing. So not off-the-shelf parts that people are going to buy, but instead custom things, whether it's aerospace or medical or automotive and lots of different industries. Those have historically been served or served by hundreds of thousands, in some cases, millions of small manufacturers spread out across the United States and across the world. So it's a huge TAM. We're enabling that buyer and the supplier to meet in a more efficient way in the Xometry marketplace.

With that, I think we're out of time. But I will say, James, is there anything to add on margins in like 15 seconds or less or we've covered a lot. So...

Yes. I think we've covered a lot. I would just say we think the path to $1 billion, we see a 20% incremental margin as we move forward on an adjusted EBITDA basis. And I think that is about us balancing growth and profitability as we really see, to Randy's point, the large opportunity ahead to scale.

Perfect. Well, great. Randy, James, thank you very much for the time.

Thank you.

Good day, and thank you for standing by. Welcome to the Xometry Q2 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Shawn Miln, VP of Investor Relations. Please go ahead.

Good morning, and thank you for joining us on Xometry's Q2 2025 Earnings Call. Joining me are Randy Altschuler, our Chief Executive Officer; Sanjeev Singh Sahani, our President; and James Miln, our Chief Financial Officer. During today's call, we will review our financial results for the second quarter 2025 and discuss our guidance for the third quarter and full year 2025.

During today's call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, strategy, long-term growth and overall future prospects. Such statements may be identified by terms such as believe, expect, intend and may. These statements are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed before the market opened today and in our filings with the U.S. Securities and Exchange Commission, including our Form 10-Q for the quarter ended June 30, 2025. We caution you not to 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 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 distributed today and in our investor presentation, both of which are available in the Investors section of our website at investors.xometry.com. A replay of today's call will also be posted on our website. With that, I'd like to turn the call over to Randy.

Thanks, Sean. Good morning, and thank you for joining our Q2 2025 earnings call. Q2 was another strong quarter with record revenue, gross margin and adjusted EBITDA. Q2 revenue increased 23% year-over-year to $163 million as we gained significant share in the large and fragmented custom manufacturing market. Marketplace growth remained robust, increasing 26% year-over-year, driven by our rapidly expanding networks of buyers and suppliers and deepening enterprise engagement. Our global marketplaces continue to respond well to the volatile supply chain environment.

Powered by our improving AI pricing and selection algorithms, marketplace gross margin reached a record 35.4% in Q2, up 190 basis points year-over-year, contributing to a record overall company gross margin of 40.1%. Expanding marketplace gross margin underscores the value we're creating with our AI-powered marketplace. Our efficacy and competitive moat continues to increase as we grow our networks of buyers and suppliers and gain more data to continuously train our algorithms. This has driven significant and steady increases in our marketplace gross margins from the 25% level 4 years ago to 35% plus today. Each quarter of growth and improvements in our technology helps to incrementally power the quarters that follow.

In Q2, we delivered strong operating leverage with adjusted EBITDA of $3.9 million, an improvement of $6.6 million year-over-year. Our results, industry-leading growth and significant market share gains underscore the differentiated and durable advantages of our marketplace model. We're building a superior business model that delivers strong experience for both buyers and suppliers while driving increasing operating scale and expanding adjusted EBITDA margin. We delivered these results even as we continue to invest in our key growth initiatives and drive further use of AI throughout our platforms.

Since joining Xometry in January in the new role as President, Sanjiv Singh Sahani has accelerated our efforts to embed technology and AI across the organization to enhance our position as the digital rails in this massively fragmented and traditionally off-line custom manufacturing market. We are deploying generative AI at scale to improve experience and drive additional value for both our buyers and suppliers. Our pace of product introductions is increasing, including several new releases in Q2 and early Q3. These include, in Q2, we continued to improve the buyer experience in our marketplace. We enhanced our instant quoting and selection, expanded instant quoting for new additive materials and added the ability to dynamically view 2D drawings in the quote flow.

In Q2, Xometry EU launched our Teamspace solution in Europe, U.K. and Turkey. Teamspace is a cloud-based solution within the Xometry platform that enables customers to collaborate with other users on projects and custom part orders. This global expansion enables Xometry to drive deeper enterprise engagement and enhance viral buyer growth. We are pleased with the initial results. In Q3, Xometry EU launched integration capabilities for enterprise customers to streamline procurement. This feature enables buyers to order custom parts directly from the Xometry EU site while still within the buyer's procurement platform, streamlining the purchasing process, reducing errors and improving efficiency by automating data transfer between systems.

In July, we began testing an improved mobile experience for our suppliers in Work Center, our cloud-based platform for suppliers. The new Work Center mobile app enables suppliers to interact more easily within Xometry's platform, including viewing 3D part design files, sharing images of work in progress and receiving push notifications. Also in July, we introduced a new AI-powered capability that automates the extraction of information from technical drawings to help drive more accurate quoting and supplier selection. This capability will be further enhanced to accelerate our initiative to instantly quote technical drawings.

On Thomasnet, we are pleased with the initial test results of our new search experience using natural language algorithms to improve buyer search results based on intent. We were pleased to see a 10% plus improvement in our buyer engagement levels. Now in Q3, we will begin selling on the new ad serving technology platform for new customers. We expect that the new technology will increase advertising penetration and engagement. There is much more to come in the following months and quarters on the technology front as we focus on further improving buyer and supplier experience and expanding our platforms.

Our technology initiatives, combined with our enterprise sales and marketing efforts are powering our land-and-expand strategy. For example, in Q2, Xometry became a preferred supplier for a major European aerospace company. The customer chose Xometry for our easy-to-use platform and business model, enabling the customer to start transitioning from its legacy procurement system. Embedded in the customer supply chain, Xometry is now being used for quick turn projects and long-term production programs. This is a good example of an enterprise customer, which we believe can generate $10-plus million in annual revenue.

Now before I hand it over to James, I want to take a moment to highlight how we're winning, especially with large customers and why we believe Xometry is increasingly becoming a strategic sourcing partner to some of the world's most demanding buyers. First, driving technology innovation to deliver improving marketplace price, speed and selection. We continue to strengthen our AI-driven marketplace with smarter quoting, dynamic pricing and integrated workflows to make the platform more valuable to our networks of buyers and suppliers. For buyers, this means faster, more accurate sourcing with greater transparency, increasing agility and speed to market.

Second, we're improving supply chain resiliency. Our marketplace helps customers mitigate supply chain volatility and disruptions by offering access to a diverse expanding global manufacturing network of over 4,000 active suppliers. This allows buyers to instantly diversify their supplier base, reducing dependencies on a single source or region and enhancing overall resilience. Our global sourcing efforts and flexible asset-light model are resonating with customers given the rapidly changing global trade environment.

Third, delivering a scalable enterprise offering. Our land-and-expand playbook is powered by technology as enterprise accounts increasingly adopt our software solutions, including Teamspace and ERP integrations. As we drive adoption of enterprise technology, we become more embedded in customer workflows, reducing buyer friction and expanding wallet share in these large accounts.

Fourth, driving value to our global supplier network. Our marketplace is driving increasing value for suppliers, enabling them to sell their capacity digitally, unlock access to global demand and increase asset utilization and profitability. Suppliers leverage our cloud-based software platform, Workcenter to more efficiently manage their operations and they utilize our fintech products to improve cash flows. We continue to win and momentum remains strong in Q3. We are raising our 2025 revenue growth outlook given robust demand in our marketplace and strong execution of our teams. I will now turn the call over to James for a more detailed review of Q2 and our business outlook.

Thanks, Randy, and good morning, everyone. Q2 was another strong quarter for Xometry, delivering strong revenue growth, robust expansion in marketplace gross margin and significant adjusted EBITDA leverage as our marketplace responds to customers' needs in real time. Xometry is becoming their digital rails in this massively fragmented and largely off-line custom manufacturing market. As we scale towards $1 billion of revenue, we expect to deliver improving profitability even as we continue to invest in our growth initiatives.

Q2 revenue increased 23% year-over-year to $163 million, driven by strong marketplace growth. Q2 Marketplace revenue was $148 million and supplier services revenue was $14.3 million. Q2 Marketplace revenue increased 26% year-over-year, driven by strong execution and growth with larger accounts as we continue to capture significant market share. Marketplace growth was robust across many verticals, including aerospace and defense, automotive and robotics. Q2 active buyers increased 22% year-over-year to 74,777 with a net addition of 3,323 active buyers. Q2 marketplace revenue per active buyer increased 4% year-over-year, primarily due to strong enterprise growth in the United States.

In Q2 2025, U.S. marketplace revenue increased 25% year-over-year. International revenue growth accelerated to 31% year-over-year growth, and we continue to expand our marketplace capabilities, including the recent launch of Teamspace in Europe. In Q2, the number of accounts with last 12-month spend of at least $50,000 on our platform increased 15% year-over-year to 1,653, an increase of 108 from quarter 1, 2025. We view accounts with at least $50,000 spend at the top of the enterprise funnel. We expect to continue to grow this base of accounts over time.

Enterprise investments continue to show returns with strong revenue growth in Q2 for marketplace accounts with last 12-month spend of at least $500,000. Our enterprise strategy focuses on our largest accounts, which we believe each have $10 million plus in potential annual account revenue. Supplier services revenue declined approximately 2% quarter-over-quarter as we have largely stabilized the core advertising business ahead of key product upgrades later in 2025.

We are focused on improving engagement and monetization on the platform, which remains a leader in industrial sourcing, supplier selection and digital marketing solutions. Q2 gross profit was $65.2 million, an increase of 23% year-over-year with a record gross margin of 40.1%. Q2 gross margin for marketplace was a record 35.4%, an increase of 190 basis points year-over-year. Q2 Marketplace gross profit dollars increased 34% year-over-year. We are focused on driving marketplace gross profit dollar growth through the combination of top line growth and gross margin expansion. We continue to adjust our pricing to reflect changing tariffs and our AI cost algorithms update regularly to reflect changes in our supplier network. Q2 gross margin for supplier services remained strong at 88.7%, driven by our increasing focus on the higher gross margin Thomas advertising and marketing services.

Moving on to Q2 operating costs. Q2 total non-GAAP operating expenses increased 10% year-over-year to $61.7 million, well below revenue growth rates. We are applying strong discipline and rigor to our capital and resource allocation across teams while investing in our growth initiatives. In Q2, sales and marketing and G&A decreased 180 and 170 basis points year-over-year, respectively, to 16.4% and 8.9% of revenue. This reflects improving enterprise sales execution and disciplined advertising spend. Marketplace advertising spend was 5.6% of marketplace revenue, which was down 130 basis points year-over-year as we balance growth and profitability.

Q2 adjusted EBITDA was $3.9 million compared with a loss of $2.6 million in Q2 of 2024. Q2 adjusted EBITDA improved $6.6 million year-over-year, driven by growth in revenue, gross profit and operating efficiencies. In Q2, we delivered an incremental adjusted EBITDA margin of 22%, above our target of at least 20%, primarily driven by strong marketplace gross margin expansion. In Q2, our U.S. segment adjusted EBITDA was $6.9 million or 5.1% adjusted EBITDA margin, a $6.6 million improvement year-over-year, driven by expanding gross profit and strong operating expense leverage, particularly in sales and marketing. Our International segment adjusted EBITDA loss was $2.9 million in Q2 2025, roughly flat year-over-year, driven by investments to further drive global scale.

At the end of the second quarter, cash and cash equivalents and marketable securities were $226 million, decreasing approximately $5 million from Q1 2025. The decrease in cash was driven by CapEx, primarily software related of $6.9 million, reflecting our technology investments in the platform and accelerating product rollouts shared earlier by Randy. We are focused on improving working capital efficiency and cash flow conversion given our asset-light model and limited capital spending. We expect CapEx to remain approximately $7 million per quarter for the balance of 2025.

In June, we completed our convertible debt refinancing and closing of $250 million of new 0.75% convertible notes due 2030. This transaction enabled us to extend the maturity of most of our existing debt with improved terms, a lower coupon and reduced potential dilution to the existing capital structure. The transaction fortifies our balance sheet by addressing over $200 million principal amount that had 2027 maturities, while providing us with financial flexibility to continue focusing on our growth initiatives and margin expansion. Importantly, this transaction was structured to minimize the potential future dilution for our equity shareholders with an effective 75% conversion premium.

Q2 demonstrates the ability of our AI-powered marketplace to deliver strong revenue and gross profit growth and operating leverage as we remain disciplined in our execution. As we scale towards $1 billion of revenue, we expect continued 20% plus incremental adjusted EBITDA leverage on an annual basis. Given our large market opportunity and low penetration rates, we will continue to balance investing in the future with driving operating leverage.

Now moving on to guidance. For the third quarter, we expect revenue in the range of $167 million to $169 million or 18% to 19% growth year-over-year. We expect Q3 marketplace growth to be approximately 20% to 22% year-over-year. As Randy mentioned, trends remain strong in Q3 even as we are mindful of the uncertain macro environment. We expect Q3 supplier services revenue to decrease approximately 2% to 4% year-over-year and be approximately flat quarter-over-quarter. We expect Q3 marketplace gross margin to improve year-over-year and continue to expect full year marketplace gross margin to also increase year-over-year. In Q3, we expect adjusted EBITDA of $4 million to $5 million compared to a loss of $0.6 million in Q3 2024.

In Q3, we expect stock-based compensation expenses, including related payroll taxes, to be approximately $9 million or approximately 6% of revenue. For the full year 2025, we are raising our marketplace growth outlook from our previous guidance of at least 22% to 23% to 24% growth, driven by our growth initiatives in our large fragmented market. We expect supplier services to be down approximately 5% year-over-year. We are raising our revenue outlook for the full year. We expect overall growth in 2025 of at least 20%, exceeding 2024 growth of 18%. Lastly, for the full year 2025, we expect incremental adjusted EBITDA margin of approximately 21%.

I want to close by thanking our dedicated Xometry team members around the world. Their commitment to our buyers and suppliers is instrumental to our continued growth and core to our mission of making the world's manufacturing capacity accessible to all. With that, operator, can you please open up the call for questions.

[Operator Instructions] Our first question today comes from Cory Carpenter with JPMorgan.

Randy, one for you and then James, one for you. For Randy, you talked to a number of product initiatives at the company. I wanted to ask where you're seeing the most impact on the business and what your focus areas on the product side are for the second half of the year. And then, James, more financially related, a lot of press around manufacturing reading slowing in July. It sounds like you're still seeing strong trends continue, but perhaps any insights you could provide on what you're seeing so far this quarter and what you're assuming in the guide would be helpful.

Yes. You know what, I'm actually -- Cory, great to hear from you. I'm going to have Sanjiv start on that first question about the product introductions, and then I'll chime in as well, and then we'll get to James. So Sanjiv, go ahead...

Thank you, Randy. Thank you for the question. I have now been in the role of President for 7 months. I'm focused on driving the day-to-day running of the company while scaling the value from our current setup. When Randy asked me to join, I believe there was a significant opportunity to embed e-commerce principles to improve the buyer and supplier experience and efficiently rapidly scale our business.

In my experience, asset-light marketplaces have to scale when they can efficiently and effectively ingest significant amounts of data about the customers and their orders and then use the insights from the data to find the most suitable supplier at the least cost who can fulfill the order on time. My focus has been to accelerate the technology and AI deployment to capture more and more of this data and scale our AI models to improve pricing, speed and selection for our buyers and suppliers on the platform.

I'm proud to echo what Randy shared earlier that we are already seeing an increased pace of product rollouts and technology deployments in Q2 and Q3 already. This includes things like instant coding selection and increased additive materials, launching Teamspace and Enterprise integration in Europe, testing a mobile app experience in work center, automating extraction of information from technical drawing and then on Thomasnet, testing of a new search experience using natural language. Overall, AI is central to driving significant improvements in our operating leverage in all functions across all markets.

Great. Thank you, Sanjiv. Corey, on your second question, we're raising our full year marketplace growth outlook to 23% to 24% from at least 22%. So Q2, really pleased with the quarter, 26% growth. We saw great growth in the U.S. and in international and enterprise continues to show good traction. As Randy mentioned, I think Xometry is really purpose-built for this rapidly changing global environment, and our marketplace has prospered in terms of macro volatility in the past. Now we remain somewhat cautious on the macro environment. It continues -- manufacturing indices continue to suggest some buyers remain cautious. But as we've done in the first half, we're very focused on our initiatives, our growth initiatives, what we're seeing that we can drive through enterprise, through growing our buyer network that we expect to be able to continue to do. We've taken all those trends into account in terms of the guidance.

Our next question comes from Brian Drab with William Blair.

Just a couple on gross margin to start. The first quarter, you had a little pressure on gross margin as you were making some adjustments to your international manufacturing base. Can you talk about how that went? It seems like that was successfully completed at this point and with the rebound in gross margin, really impressive rebound in gross margin. And so can you just talk about that dynamic? And also, was there anything unusual in the second quarter gross margin? And does the guidance imply that maybe gross margin ticks down a little bit sequentially in the second half? Or can you sustain this really high level in the second half?

Thanks, Brian. It's James. So yes, gross margin was a record in the quarter, 35.4%, up 190 basis points year-over-year into our long-term guidance range of 35% to 40%. As you noted and as we discussed before, in Q1, we proactively made investments in order to ramp up volume in geographies that we felt would be helpful in this environment. And we were able to see a much more normalized progression of our gross margin in the second quarter. So it's up sharply Q-over-Q. And really, the core of this is being AI-driven. It's the main driver of our gross margin expansion, the continual improvements, as Sanjeev was talking about as well on our AI pricing prediction, machine learning with more data and our AI-driven sourcing. We expect Q3 margin to continue to be up year-over-year. It's not always linear quarter-over-quarter. So I think that is an important point as we think about progression from here into Q3 into Q4. But we do expect it to continue to show nice improvements year-over-year for the quarter and for the full year.

Okay. And I'll just ask one more. I don't know if you guys noticed, but the ISM index has been basically below 50 for like 30 months. It's not really showing up in your results. And I'm just wondering, are you having conversations internally where you're just saying if the situation improves in the U.S., Europe, internationally, we really feel like you're leaving a lot on the table, like growth could accelerate. I mean we're not seeing growth from anyone really in Europe, and you're talking about 31% international growth with strength in Europe. I'm just wondering if you could comment on that, like the potential for even further acceleration in a better environment.

Yes. Brian, it's Randy. I appreciate that question. Look, I mean, I think we've been -- we're talking about it now for a while, as you rightfully noted, indices have all been down for a couple of years. And Xometry has been maintaining its strong growth because we're gaining market share and there's more and more adoption by customers of our Xometry marketplace is the best way for sourcing. So we continue to forecast strong growth based on that. But absolutely, if the macro turns around, that would be a nice tailwind for us. So be good days. But again, we're optimistic. as we talked about coming into Q3, we're off to a strong start in Q3 as well as more and more people are adopting our global marketplace and taking advantage of the AI-driven algorithms and matching.

Yes, Brian, it's Shawn. And just if you look at the guidance, I mean again, we've been consistent. We don't expect any improvement in the way we give our guidance. And as you've heard on the call from Randy and Sanjiv, we're really focused on driving product innovation on the platform and really improving the buyer and supplier experience and controlling what we can control.

Right. And so the outlook does not include any improvement in the environment is what you're saying, Shawn?

We're continuing to temper our outlook with being cautious and conservative about what the macro will be.

Our next question comes from Ronald Josey with Citi.

I wanted to follow up on the product question and another one just on the overall macro trends. So Randy, you talked -- I just want to understand your thoughts on instant quoting and the benefits to conversion rate as that just goes to more and more products. So that's on instant quoting. And then, James, on your prepared remarks, you mentioned, I think, adjustments to pricing in the quarter. And I wanted to understand the pricing environment as it relates to macro and tariffs and everything else.

Thanks, Ron. I'll jump in here and then Sanjeev can add anything. So we are very focused on increasing the scope of what we can instantly quote. That includes additional manufacturing processes, materials, post-processing. And that's reducing friction in our marketplace. It's increasing the speed by which customers not only can order, but where there can be delivery and can also lead to better outcomes. So that is definitely a focus. You'll continue to see that as we're investing in our algorithms and that expansion in our offering itself.

Thanks, Randy. Just to add to that, I think our focus remains on improving buyer and customer experience by deploying technology at a very rapid pace while continuing to expand the usage of our AI algorithms across the board. Randy pointed to several examples in his remarks earlier where we've launch product in Q2, continue to see a gaining pace on that in Q3. So we are very proud of that.

Ron, on the question on pricing and tariffs. So as we talked about on our last call, tariffs are input into our pricing like other changes in duties and shipping, et cetera. So as we see and as our algorithms and our network sees impacts on costs or on pricing in the network, then our marketplace reflects that. And I think I just zoom out a bit in terms of as a global marketplace, we're investing in the ability to give our customers the best sourcing options. So as we adjust pricing, that allows customers to make their choices in terms of the options on our marketplace. We're able to -- our pricing engine is able to account for changes in international fulfillment. We can work with many of our enterprise customers to secure the domestic supply that they're looking for and as relevant, provide them with the offshore solution. So it's really about the marketplace is purpose-built for these sorts of environments. We're flexible and resilient. We've got a great strong domestic supplier base, but also a global base of over 4,300 suppliers. And so we feel like we're giving our customers the choice and flexibility that they need to find and secure the sourcing that they want.

And the next question comes from Andrew Boone with Citizens.

I wanted to ask about the step-up in sales and marketing from 1Q to 2Q. Is there anything to call out there? And then how do we think about just marketing efficiency on a go-forward basis? And then $500,000 accounts accelerated in the quarter. Is there anything you guys can call out in terms of just the move upmarket and the success you're seeing in terms of driving dollars in terms of larger accounts? Understood that, that may be a threshold that you guys don't necessarily solve for, but how do we think about that growth and the sustainability of it?

Andrew. I'll kick off on the sales and marketing point. We did see a pickup as we saw more normalized, let's say, marketing spend in the quarter. I remember back in Q1, we were balancing growth and profitability in an uncertain environment, waiting on sort of the announcements of the -- with some caution into the April tariff changes. We were able to continue to see really great leverage year-over-year, both on overall sales and marketing, where we saw 180 points year-over-year and our marketplace advertising, where we saw 130 basis point leverage year-over-year and now that at 5.6%. So really, it's a case of sort of seeing some Q-on-Q normalization, but the trend that we're going down continues to be that one of continuing to see greater leverage from our sales and marketing investments.

Yes. Andrew, it's Shawn. I would just maybe tie the 2 questions together as advertising spend normalized from Q1 to Q2, part of that -- the outcome there was faster growth than the 500 $50,000 spend KPI, which was very strong on a net add basis.

Yes. I think -- I mean, 108 accounts had year-over-year, that's one of the best quarters that we've had. I think the strongest net adds since Q4 of '23. I think a lot of coming from our focus on the driving the land and expand strategy. And to point again to our earnings presentation, we have some nice case studies in there and how we're scaling enterprise accounts. And we really think that with our offerings on the technology side as well as our partnering through our sales and operations organization, we're really helping be that one-stop solution for our customers, lowering their procurement costs and optimizing their sourcing strategies.

Yes. Just -- this is Randy. Just to jump in here. I mean, particularly as we continue to evolve Teamspace, we're making changes and investments in that and those ERP integrations, that sort of one-two punch really is integrating our workflows more and more with our customer supply chains, and that's resulting not only in more accounts with more than $50,000 spend on an LTM basis, but it's also growing that larger base that we talked about of accounts with more than $500,000 of annual spend. So it's really technology-driven, and we're continuing to invest in that.

Our next question is from Matt Swanson with RBC.

Congratulations on the results. Randy, you actually led me in perfectly here on that Teamspace and ERP commentary. I guess just as you're seeing enterprises start to spend more and more time in the Xometry platform, can you just talk about maybe some logical adjacencies of kind of maybe what Teamspace Phase 2 is in terms of where you think you can kind of expand the platform and other things you can do in the enterprise?

I think we've talked about that a lot of our strategy revolves around our strategy about increasing our share of wallet with our customers and the manufacturing world. One of the reasons why the Xometry marketplace model is being adopted by more and more is that there's a lot of different use cases, lots of variety and these different -- what seemingly are small differences make a big difference to our customers. So more and more, we want to enable that enterprise customer to go in and be able to do all their shopping in the Xometry marketplace. So as we expand the things that we can auto quote, whether it's manufacturing technologies, it's materials, post processing, lots of different options, different fulfillment options, that will enable us to gain more and more share with the enterprise customers. So going back to the three basics, speed, price and selection and reducing the friction with the technology, if we stick to that strategy and continue to invest in that, that will enable us to grow that share of wallet and become deeper and deeper embedded in those enterprise customers' supply chains.

And then you mentioned as one of the reasons you guys are winning large customers is that supply chain resiliency. There's obviously a lot of tariff noise, a lot of PMI noise. does that seem like kind of the biggest theme in terms of like what's driving some of this outperformance, maybe even more so from the enterprise side? Is that like the big takeaway from all this noise that people just know that they need to figure out a more maybe elastic supply chain?

Look, I think, we've had durable growth since the founding of the company and since we've been a public company. So I think it's more that more and more people are adopting the marketplace model. It's been successful in so many other industries. I think as time is progressing and as our awareness grows and as we continue to innovate more, invest in those technology initiatives, reduce the friction, customers are just realizing that this is a great option. And certainly, when there's some noise in the market that helps that certainly helps raise awareness. But this is a global trend. We've always talked about a secular shift to the digital that's inevitable, and it's continuing. And just to be clear, you haven't asked, but there's been no pull forward here or anything like that. This is just an ongoing trend that we've been seeing.

Our next question is from Eric Sheridan with Goldman Sachs.

Maybe one -- the first one, maybe building on that last question. As you see some shifts in the global macro behavior and elements of the way in which supply chains are built, are you seeing any theme around broader domestic sourcing? And is there any way that you might be able to benefit or align some of the platform to benefit if you do see elements of shifts towards more domestic sourcing on the manufacturing side? And then the second one, you talked in the prepared remarks about improving the mobile experience. Can you talk a little bit about what we should be watching from the outside in on rolling out a new and improved mobile experience and how it either might reduce friction or improve conversion on the platform?

That's great, Eric. I'll take the first one, and then Sanjiv will take the second. So we are continuing to expand our domestic supplier base. We've talked about the majority of our U.S. orders are sourced domestically. We're expanding that supplier base. It's over 4,300 and to give our customers more choice and flexibility. Certainly, reshoring trends could be beneficial to the marketplace, but Eric, it's still too early to tell. And so again, I'll reiterate that we're off to a strong start in Q3. It's exciting times for us, but the macro continues to be -- we're conservative about it. We're not really seeing any uptick on it. It's -- our growth is really from gaining market share and improving our marketplace.

Thank you. And just to follow on around the question for the mobile app. testing in the mobile app in July is focused on our partner and supplier experience. So very much linked to the first question you asked. We see that the app enables our suppliers to interact more easily with the Xometry platform where they can see 3D part files, they can share work in progress, they can receive push notifications, give us updates. So we actually see the supplier engagement as the primary experience driver from this first work center mobile app testing that's going on right now. So a lot more to come.

Our next question is from Greg Palm with Craig-Hallum.

Congrats on the results. Maybe just going back to the Q2 guidance that you put back out in May. The magnitude of upside was maybe most noteworthy. So I'm just kind of curious what you sort of saw specifically in May and June. And just to be clear, like are you seeing similar strength in July? Any difference? But I'd love to just sort of get a little bit of feel for kind of the cadence of the quarter.

[Technical difficulty] Sorry. So I was just coming back, yes, I mean, in terms of the guidance we said of the 20% to 22% range, coming in at 26%, obviously, very pleased with that. It's driven by stronger-than-expected marketplace revenue and strong gross profit performance. And enterprise continues to perform well, really pleased with the net adds that we had in the quarter. International growth as well was very solid. Really, it comes back to our growth initiatives. But as we look out, we continue to be mindful of the environment that we're in. continues to be quite a bit of uncertainty out there. So we sort of embed that into our outlook as we look forward.

Yes. I mean just to jump in, Greg, we've been clear that Q3 is off to a strong start. We haven't been shy about that. But as Shane said, we're going to continue to be mindful of the macro as we've been for a while here. And so that's going to -- that's always going to temper our expectations here.

Yes. Understood. And then any specific end markets that stood out? I know you named a couple. And specifically, how big of an end market is aerospace and defense at this point?

We -- the great thing about being a technology marketplace, it's extensible across many different verticals. And as you know, there's even a slide in our earnings deck or in our investor deck that shows all the different verticals we're in. So we're very and that's enabled us to have durable growth during -- for a long time and during different periods. So I'd say we're -- you're seeing strength across almost all the different verticals that we're in. And it's just a testament to adoption of our marketplace model as the best operating model in this segment of manufacturing.

This does conclude our question-and-answer session. Thank you for your participation in today's conference. This concludes the program, and you may now disconnect.