Manufacturing-focused digital marketplace Xometry (NASDAQ:XMTR) beat analysts' expectations in Q2 CY2024, with revenue up 19.4% year on year to $132.6 million. On the other hand, next quarter's revenue guidance of $137 million was less impressive, coming in 1.3% below analysts' estimates. It made a non-GAAP loss of $0.01 per share, improving from its loss of $0.14 per share in the same quarter last year.

Is now the time to buy Xometry? Find out in our full research report.

Xometry (XMTR) Q2 CY2024 Highlights:

• Revenue: $132.6 million vs analyst estimates of $128.6 million (3.1% beat)

• EPS (non-GAAP): -$0.01 vs analyst estimates of -$0.15

• Revenue Guidance for Q3 CY2024 is $137 million at the midpoint, below analyst estimates of $138.8 million

• Gross Margin (GAAP): 39.9%, in line with the same quarter last year

• EBITDA Margin: -2%, up from -7.8% in the same quarter last year

• Free Cash Flow was -$13.5 million compared to -$16.08 million in the previous quarter

• Market Capitalization: $555.8 million

“We delivered record revenue, record gross profit and record gross margins as our AI-powered marketplace continues to gain market share,” said Randy Altschuler, Xometry’s CEO.

Calling itself the "Uber of Manufacturing", Xometry (NASDAQ:XMTR) is an online marketplace connecting manufacturers with customers who need custom parts and products.

Specialty Equipment Distributors

Historically, specialty equipment distributors have boasted deep selection and expertise in sometimes narrow areas like single-use packaging or unique lighting equipment. Additionally, the industry has evolved to include more automated industrial equipment and machinery over the last decade, driving efficiencies and enabling valuable data collection. Specialty equipment distributors whose offerings keep up with these trends can take share in a still-fragmented market, but like the broader industrials sector, this space is at the whim of economic cycles that impact the capital spending and manufacturing propelling industry volumes.

Sales Growth

A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Thankfully, Xometry's 49.6% annualized revenue growth over the last five years was incredible. This is a great starting point for our analysis because it shows Xometry's offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Xometry's annualized revenue growth of 28.7% over the last two years is below its five-year trend, but we still think the results were good and suggest demand was strong.

This quarter, Xometry reported robust year-on-year revenue growth of 19.4%, and its $132.6 million of revenue exceeded Wall Street's estimates by 3.1%. The company is guiding for revenue to rise 15.2% year on year to $137 million next quarter, in line with the 14.8% year-on-year increase it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 18.7% over the next 12 months.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. It's also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Unprofitable industrials companies require extra attention because they could get caught swimming naked if the tide goes out. It's hard to trust that Xometry can endure a full cycle as its high expenses have contributed to an average operating margin of negative 19.2% over the last five years. This result is surprising given its high gross margin as a starting point.

On the bright side, Xometry's annual operating margin rose by 18.5 percentage points over the last five years, as its sales growth gave it immense operating leverage. Still, it will take much more for the company to reach long-term profitability.

In Q2, Xometry generated an operating profit margin of negative 11.5%, up 13.7 percentage points year on year. This increase was solid, and since the company's operating margin rose more than its gross margin, we can infer it was recently more efficient with expenses such as sales, marketing, R&D, and administrative overhead.

EPS

Analyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.

Although Xometry's full-year earnings are still negative, it reduced its losses and improved its EPS by 17.8% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability. We hope to see an inflection point soon.

In Q2, Xometry reported EPS at negative $0.01, up from negative $0.14 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street is optimistic. Analysts are projecting Xometry's EPS of negative $0.19 in the last year to reach break even.

Key Takeaways from Xometry's Q2 Results

We were impressed by how significantly Xometry blew past analysts' EPS expectations this quarter. We were also excited its revenue outperformed Wall Street's estimates. On the other hand, its revenue guidance for next quarter was underwhelming. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 10.8% to $12.63 immediately after reporting.

Xometry may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.