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Investing in Innovation: Spotlight on XMTR

Aug 29, 2024

Company Overview

Xometry is like a highly sophisticated, AI-powered matchmaking service for the manufacturing world. Imagine a dating app, but instead of connecting people for romantic relationships, it connects businesses that need custom parts manufactured with a vast network of manufacturing partners who can produce those parts.

Here's a more detailed breakdown:

The Marketplace: Think of Xometry as a bustling digital bazaar for manufacturing. On one side, you have buyers (businesses) who need specific parts or products made. Conversely, you have sellers (manufacturing partners) with various capabilities and machines ready to take on jobs.
AI-Powered Matching: Like a dating app that uses algorithms to match people based on compatibility, Xometry uses artificial intelligence to match a customer's manufacturing instantly needs with the most suitable manufacturer in their network. This AI considers factors like manufacturing process, material, quantity, timeline, and cost.
One-Stop Shop: Xometry is like a department store for manufacturing services. Instead of going to different specialty shops for different needs, customers can access a wide range of manufacturing processes all in one place. These include 3D printing, CNC machining, sheet metal fabrication, injection molding, and more.
Instant Quoting: Imagine if you could walk into a tailor's shop, describe a custom suit, and instantly get a price quote and delivery date. That's what Xometry does for manufacturing. Their AI provides instant quotes for custom parts, eliminating the need for time-consuming back-and-forth communications.
Quality Control: Like a strict bouncer at an exclusive club, Xometry vets all manufacturing partners in their network to ensure they meet high-quality standards. This gives customers confidence in the quality of their ordered parts.
Global Network: Picture a worldwide web of manufacturing capabilities. Xometry has partners across the globe, allowing them to offer competitive pricing, faster lead times, and a diverse range of capabilities.
Additional Services: Beyond matchmaking, Xometry also offers additional services like a concierge for complex projects (think of it as a personal shopper for manufacturing needs) and a supplies shop (like an attached convenience store where you can buy raw materials and tools).

In essence, Xometry is revolutionizing the manufacturing industry by digitizing and streamlining the process of sourcing custom parts. They're making it as easy to order a complex, custom-manufactured part as it is to order a book online, bringing efficiency, speed, and accessibility to a traditionally complex and fragmented industry.

From a technical perspective, Xometry's stock recently broke above the $18-$19 resistance level, signaling a potential upward momentum. The ideal entry point for investors looking to capitalize on this trend would be in the $16 to $19 range, where the stock may find support. Waiting for a pullback to this zone could offer a more favorable risk-to-reward ratio, allowing you to catch the stock as it potentially rebounds from this newly established support level.

Business Segments and Revenue Breakdown

Xometry operates primarily in two segments: Manufacturing Services and Marketplace. To show you how its business is divided and where its money comes from, let’s create a pie chart of its revenue breakdown by segment.

Competitive Edge and Market Analysis

Key Competitive Strengths:

Diverse Manufacturing Network: Xometry operates a vast network that includes a wide range of manufacturing capabilities. This allows them to offer various manufacturing services such as CNC machining, 3D printing, injection molding, and more.
Imagine Xometry as the ringmaster of a circus, where the circus is the global manufacturing landscape. Just like a ringmaster who coordinates a variety of acts to keep the show exciting and versatile, Xometry coordinates with multiple manufacturers, each specializing in different production techniques. This diversity enables them to meet virtually any manufacturing need, making them a go-to platform for companies looking for tailored manufacturing solutions.

Technology-Driven Platform: Xometry utilizes an advanced, AI-driven platform that connects customers with the manufacturing capacity they need. The platform uses machine learning algorithms to match projects with the best manufacturing solutions based on efficiency, quality, and cost.
Think of Xometry’s platform as a smart cookie jar. In this jar, not only are cookies of every flavor stored, but the jar also helps you pick the best cookie based on what everyone else says are their favorites. Similarly, Xometry's platform assesses the capabilities of different manufacturers and matches them with customer requirements, ensuring that each customer gets the best possible outcome for their specific needs.

Risks and Weaknesses:

Dependence on Manufacturing Partners: Their success is tied to the quality and reliability of their partners. If their partners fail, it’s like when your ice cream falls off the cone—disappointing and messy.
Economic Sensitivity: Their business can go up and down with the economy. When companies tighten their belts, they order fewer custom parts, which can make things tough for Xometry.

Management Team

Randy Altschuler, Chief Executive Officer

A successful entrepreneur, Randy co-founded Xometry in 2013, took it public in 2021 (NASDAQ: XMTR), and continues to lead it through a period of significant growth. In FY 2022, Xometry’s revenue grew 75% year-over-year. Before founding and leading Xometry, Randy co-founded and was Executive Chairman of CloudBlue, a leading provider of recycling services for electronic equipment. CloudBlue was acquired by Ingram Micro in 2013. Before CloudBlue, Randy was the co-founder and co-CEO of OfficeTiger, a global BPO company that would eventually employ 4,500 people. OfficeTiger was acquired by RR Donnelley in 2006.

An expert in the application of Artificial Intelligence in manufacturing, Randy serves on the Board of Directors of the Maryland Tech Council. He graduated from Princeton University, earned an MBA from Harvard Business School and also studied at the University of Vienna as a Fulbright Scholar.

James Miln, Chief Financial Officer

A veteran of big-name tech and consumer brands, Miln brings considerable financial planning, operational, and investor relations expertise to Xometry. He joins the company from Yelp where, as Senior Vice President of Finance and Investor Relations, he helped steer the company through a period of strong, product-driven growth, including the introduction of new AI-powered search experiences. Before Yelp, Miln held key roles at eBay, Yahoo!, and Unilever and has also led global teams in Europe for Yahoo! And Unilever.

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Financial Performance: A Road to Stability

Xometry (XMTR) has exhibited a steady financial improvement, reflected in its recent earnings data. The company's EPS (Earnings Per Share) has shown a consistent upward trend, reducing losses significantly from previous quarters. Despite facing challenges, Xometry’s revenue has steadily increased.

The company's strategic initiatives are evident in its narrowing losses and increasing revenues, which signal a potential shift toward profitability. Market performance, while volatile, shows promise as Xometry continues to refine its business model.

In Xometry's latest earnings report, the company highlighted a 22% year-over-year revenue growth, driven by increased demand on its AI-powered marketplace. Gross profit margin improved to 33%, up from 30% in the previous quarter, reflecting better cost management and operational efficiency. However, the company continues to operate at a loss, with a net loss of $30 million, as it focuses on expanding its platform and scaling its operations. Investments in technology and market expansion remain key priorities for Xometry as it aims to achieve profitability in the future.