XMTR Q3 2024: Marketplace Gross Margin Reaches Record 33.6%
- AI and Technology Advancements: The company’s continued investment in its AI for smarter price prediction and supplier matching has driven record marketplace gross margins of 33.6% and positions it to target long‐term margins in the 35–40% range.
- Robust Marketplace and Network Expansion: The strong performance in Q3—evidenced by 3,300 net new active buyers (totaling 64,851 buyers) and a significantly expanding supplier network exceeding 4,200 suppliers—underscores durable demand and scalability.
- Product Innovation and International Growth: The continued adoption of Teamspace by large customers and successful geographic expansion (e.g., a 7-figure order in APAC and 55% YoY international revenue growth) create additional growth avenues for the company.
- Supplier Services Weakness: Management expects supplier services revenue to remain down approximately 10% YoY in Q4, indicating ongoing challenges in turning around this lower-margin segment and dependency on non-core services that could impair overall profitability.
- International Expansion Uncertainty: While international revenue grew 55% YoY, management highlighted that the international segment is still in an early, investment-heavy phase, with profitability targets unconfirmed, which poses risks if cost escalations persist.
- Macroeconomic and Trade Policy Risks: Concerns were raised regarding potential tariff and trade policy changes post-elections. Although management is confident about U.S. manufacturing, continued global uncertainties may adversely affect order volumes and cost structures.
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Growth Drivers
Q: What will drive 2025’s growth?
A: Management emphasized that enhanced buyer and supplier network expansion, deeper customer wallet share, and ongoing AI investments set the stage for at least 20% growth in 2025. -
AI & Margins
Q: How is AI affecting margins?
A: Leaders highlighted that persistent AI investments have boosted marketplace gross margins from 23.5% to 33.6% and aim for a long-term target in the 35%-40% range. -
Buyer Sustainability
Q: Are buyer additions sustainable long-term?
A: The team noted record performance with 3,300+ net new buyers and 64,851 active buyers, underscoring a large, addressable market of millions ready for further growth. -
International Profitability
Q: When will international operations turn profitable?
A: Management stressed that international revenue, up 55% YoY and nearing a $100M annual run rate, is poised to move to profitability as investments in Europe and Asia-Pac continue. -
Supplier Services Outlook
Q: Will supplier services rebound in 2025?
A: Executives explained that despite a recent YoY decline, strategic initiatives are underway to stabilize and eventually drive supplier services into growth with high gross margin returns. -
Instant Quoting Impact
Q: How is instant quoting improving conversion?
A: By expanding processes like tube bending and cutting, the platform is boosting conversion rates and increasing high-value accounts, as evidenced by the highest quarterly additions of 70 accounts with over $50K spend. -
Policy & Q4 Guidance
Q: Impact from tariffs and Q4 expectations?
A: Management noted that trade policy changes won’t materially affect operations and provided cautious Q4 revenue guidance of $145M–$147M amid uncertain macro conditions. -
Supplier Network Capabilities
Q: What’s new in supplier network growth?
A: They pointed to an expansion in the supplier base from 3,500 to over 4,200 active suppliers, alongside adding new capabilities like tube bending through enhanced certifications and Thomasnet support. -
Teamspace Adoption
Q: How is Teamspace adoption progressing?
A: There is strong uptake of Teamspace with over 4,000 teams created, signaling its success with large customers managing complex assemblies. -
Generative AI Use
Q: Any generative AI for design creation?
A: Management was reserved on details regarding generative AI for buyer design, simply reaffirming ongoing investments in AI across the platform.
Research analysts covering Xometry.