Xometry, Inc. (NASDAQ:XMTR) Q4 2022 Earnings Call Transcript

Eric Sheridan: Totally understood. And maybe the second one more for Jim. In terms of the way you’re framing the efficiencies you’re pulling into the business now versus the potential exit velocity of ’23. How should we be thinking about incremental margins and mix of sort of fixed versus variable costs? Or what’s implied and maybe the way you’re thinking about Q4 of ’23. So we better understand how the business is set up from an incremental margin standpoint beyond 2023. Thanks so much.

Jim Rallo: Yes. Good questionnaire. So a couple of things. One we had some significant costs this quarter around finalizing Sarbanes Oxley that, obviously is a onetime for us. We need to continue to maintain that. But the initial integration of that was obviously a lot of work for our team. And we obviously use some consultants to get there as well. In addition, I think well we took a very quick move to institute a riff, which is going to save us $8 million over next year. And then again we are seeing good changes in the gross profit margin already. And so we were expecting it continue to grow that gross profit margin throughout the year. I think when you look at those factors put together we feel pretty confident about getting like I said to that profitability and adjusted EBITDA basis in Q4.

Randy Altschuler: Yes. Maybe Eric just had a little commentary there. So when you look at things like our G&A, in particular, our product development line items expect to gain real leverage. And we had been going in Q4 obviously was sort of an anomaly for us when we went the wrong direction, but we expected to gain real leverage on the line items in particular. And it’s marketing that will continue to grow, but we’re monitoring that as well. So I think we are going to gain substantial efficiencies as the quarter as the year goes on. And as Jim also indicated, and we’ve said you’re going to see gross profit margins, largely in marketplace, largely rebound here in Q1. And with that positive trend kind of resuming what you saw from us in prior quarters going on that just that also adds incremental dollars for every dollar of revenue, incremental profit for every dollar of revenue as we leverage those expense, those OpEx line items.

Eric Sheridan: Great. Thanks for the color.

Operator: One moment for our next question. Our next question comes line of Karl Keirstead from UBS. Your line is open.

Karl Keirstead: Okay, great. Thank you. Maybe two for Randy. These macro issues as you’re describing them around suppliers willing to take lower prices and slowing order growth from buyers. I’m just curious whether this is a little bit more unique to an online marketplace model like yours or company specific versus macro in the sense that, as we see results across the manufacturing sector, we would expect to everybody in the line hear evidence of the same trends that you’re describing. So the crux of the question is how marketplace of Xometry, specific these pressure points are?

Randy Altschuler: Well, look, I think one thing to be clear about when we mentioned the call, but I just want to double down on that, as you know, we are gaining market share. So not only we have an act record number, we had a record number of active buyers in Q4. But we continue to see very strong growth trends in adding active buyers and we see really strong growth in adding order account. So we’re gaining market share in here. I think it has been an odd macro environment. So I don’t think that’s specific in terms from a cost perspective. I don’t think that’s specific to us. I think that’s more an overall environment that you’re seeing. So I wouldn’t describe anything particular to us. Shawn if you want to.

Shawn Milne: Yes, no, I mean, Karl, I mean , we’ve seen others in the space actually see their revenues decline year-over-year and I’m sure you’ve watched the macro environment as much as we do. And there certainly was some lower manufacturing output in the fourth quarter too.