UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2021~~2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-40546

XOMETRY, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware	32-0415449
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

7529 Standish Place Suite 200 Derwood, MD	20855
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (240) 335-7914

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.000001 per share

XMTR

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ ~~No ☐~~

As of November 2, ~~2021,~~2022, the registrant had ~~41,744,740~~44,763,937 shares of Class A common stock, $0.000001 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity (Deficit)	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1924
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3341
Item 4.	Controls and Procedures	3341
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	3443
Item 1A.	Risk Factors	3443
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3443
Item 3.	Defaults Upon Senior Securities	3443
Item 4.	Mine Safety Disclosures	3443
Item 5.	Other Information	3443
Item 6.	Exhibits	3544
Signatures		3645

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “can,” “will,” “would,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “forecasts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:


	•		our expectations regarding our revenue, expenses and other operating results;


	•		the anticipated growth of our business, including the anticipated growth of revenue from ~~seller~~supplier services, our ability to effectively manage or sustain our growth and to achieve or sustain profitability;


	•		the ongoing effects of the COVID-19 pandemic or other macroeconomic factors and ~~the~~geopolitical tension, such as those associated with Russia's invasion of Ukraine, which may lead to periods of global economic ~~uncertainty or other public health crises;~~uncertainty;


	•		future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements;


	•		our ability to attract new buyers and ~~sellers~~suppliers and successfully engage new and existing buyers and ~~sellers;~~suppliers;


	•		the costs and success of our sales and marketing efforts, and our ability to promote our brand;


	•		our reliance on key personnel and our ability to identify, recruit and retain skilled personnel;


	•		our ability to effectively manage our growth, including any international expansion;


	•		our ability to obtain, maintain, protect and enforce our intellectual property or other proprietary rights and any costs associated therewith;


	•		our ability to compete effectively with existing competitors and new market entrants; and


	•		the growth rates of the markets in which we compete.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled Risk Factors Part II, Item 1A, and elsewhere in this Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Form 10-Q. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Form 10-Q to reflect events or circumstances after the date of this Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

XOMETRY, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

~~(Unaudited)~~

(In thousands, except share and per share data)

September 30,
2021

December 31,
2020

Assets

Current assets:

Cash and cash equivalents

$
57,778

$
59,874

Marketable securities

266,739

0

Accounts receivable, less allowance for doubtful accounts of $0.7 million as of September 30, 2021 and $0.6 million as of December 31, 2020, respectively

25,157

14,574

Inventory

1,427

2,294

Prepaid expenses

4,988

913

Total current assets

356,089

77,655

Property and equipment, net

8,615

6,113

Operating lease right-of-use assets

3,101

1,922

Other assets

204

788

Intangible assets, net

1,455

1,652

Goodwill

833

833

Total assets

$
370,297

$
88,963

Liabilities, convertible preferred stock and stockholders’ equity

Current liabilities:

Accounts payable

$
5,198

$
5,640

Accrued expenses

17,487

13,606

Contract liabilities

3,379

2,355

Operating lease liabilities, current portion

1,108

1,013

Finance lease liabilities, current portion

5

14

Short-term debt

—

15,753

Total current liabilities

27,177

38,381

Operating lease liabilities, net of current portion

2,197

1,118

Total liabilities

29,374

39,499

Commitments and contingencies (Note 12)

Convertible preferred stock

Convertible preferred stock, $0.000001 par value, Seed-1, Seed-2, Series A-1, Series A-2, Series B, Series C, Series D and Series E. Authorized; 0 shares and 27,970,966 shares, 0 shares and 27,758,941 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

—

160,713

Stockholders’ equity (deficit)

Preferred stock, $0.000001 par value. Authorized; 50,000,000 shares and 0 shares; 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

—

—

Common stock, $0.000001 par value. Authorized; 0 shares and 42,000,000 shares; 0 shares and 7,755,782 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

—

—

Class A Common stock, $0.000001 par value. Authorized; 750,000,000 shares and 0 shares
41,714,711 shares and 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

—

—

Class B Common stock, $0.000001 par value. Authorized; 5,000,000 shares and 0 shares, 2,676,154 shares and 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

—

—

Additional paid-in capital

490,175

503

Accumulated other comprehensive income

186

210

Accumulated deficit

(149,438
)

(111,962
)
Total stockholders’ equity (deficit)

340,923

(111,249
)
Total liabilities, convertible preferred stock and stockholders’ equity

$
370,297

$
88,963


	September 30,			December 31,
	2022			2021
	(unaudited)			(audited)
Assets
Current assets:
Cash and cash equivalents	$	30,497		$	86,262
Marketable securities		310,694			30,465
Accounts receivable, less allowance for credit losses of $1.6 million as of September 30, 2022 and $0.8 million as of December 31, 2021		50,889			32,427
Inventory		5,632			2,033
Prepaid expenses		7,675			6,664
Other current assets		4,357			5,580
Total current assets		409,744			163,431
Property and equipment, net		16,303			10,287
Operating lease right-of-use assets		23,299			27,489
Investment in unconsolidated joint venture		4,298			4,198
Intangible assets, net		40,287			41,736
Goodwill		259,971			254,672
Other assets		382			773
Total assets	$	754,284		$	502,586
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	12,075		$	12,718
Accrued expenses		36,476			30,905
Contract liabilities		10,600			7,863
Operating lease liabilities, current portion		5,898			5,549
Finance lease liabilities, current portion		—			2
Total current liabilities		65,049			57,037
Operating lease liabilities, net of current portion		13,513			16,920
Convertible notes		279,441			—
Income taxes payable		1,532			1,468
Other liabilities		1,787			1,678
Total liabilities		361,322			77,103
Commitments and contingencies (Note 13)
Stockholders’ equity
Preferred stock, $0.000001 par value. Authorized; 50,000,000 shares; zero shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		—			—
Class A Common stock, $0.000001 par value. Authorized; 750,000,000 shares; 44,721,409 shares and 43,998,404 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		—			—
Class B Common stock, $0.000001 par value. Authorized; 5,000,000 shares; 2,676,154 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		—			—
Additional paid-in capital		617,278			597,641
Accumulated other comprehensive income (loss)		(492	)		149
Accumulated deficit		(224,943	)		(173,341	)
Total stockholders’ equity		391,843			424,449
Noncontrolling interest		1,119			1,034
Total equity		392,962			425,483
Total liabilities and stockholders’ equity	$	754,284		$	502,586

See accompanying notes to the unaudited condensed consolidated financial statements.

XOMETRY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share data)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Revenue

$
56,727

$
41,953

$
151,238

$
103,425

Cost of revenue

42,233

31,778

115,033

79,619

Gross profit

14,494

10,175

36,205

23,806

Sales and marketing

9,828

5,986

26,250

15,842

Operations and support

5,775

3,671

15,594

10,138

Product development

4,376

3,003

12,131

8,879

General and administrative

8,778

3,282

18,343

8,792

Total operating expenses

28,757

15,942

72,318

43,651

Loss from operations

(14,263
)

(5,767
)

(36,113
)

(19,845
)
Other (expenses) income

Interest expense

(79
)

(309
)

(799
)

(939
)
Interest and dividend income

417

2

457

215

Other expenses

(786
)

(109
)

(1,021
)

(340
)
Total other expenses

(448
)

(416
)

(1,363
)

(1,064
)
Net loss

(14,711
)

(6,183
)

(37,476
)

(20,909
)
Deemed dividend to preferred stockholders

—

(8,801
)

—

(8,801
)
Net loss attributable to common stockholders

$
(14,711
)

$
(14,984
)

$
(37,476
)

$
(29,710
)
Net loss per share, basic and diluted

$
(0.33
)

$
(1.99
)

$
(1.87
)

$
(3.98
)
Weighted-average number of shares outstanding used to compute
net loss per share, basic and diluted

43,962,863

7,546,458

20,092,600

7,458,671

Comprehensive loss:

Foreign currency translation

$
(41
)

$
(65
)

$
(24
)

$
(92
)
Total other comprehensive loss

(41
)

(65
)

(24
)

(92
)
Net loss

(14,711
)

(6,183
)

(37,476
)

(20,909
)
Total comprehensive loss

$
(14,752
)

$
(6,248
)

$
(37,500
)

$
(21,001
)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021

Revenue	$	103,571		$	56,727		$	282,857		$	151,238
Cost of revenue		62,670			42,233			171,321			115,033
Gross profit		40,901			14,494			111,536			36,205
Sales and marketing		21,416			9,828			58,846			26,250
Operations and support		11,620			5,775			36,158			15,594
Product development		7,613			4,376			22,698			12,131
General and administrative		15,126			8,778			43,143			18,343
Impairment of assets		325			—			444			—
Total operating expenses		56,100			28,757			161,289			72,318
Loss from operations		(15,199	)		(14,263	)		(49,753	)		(36,113	)
Other (expenses) income
Interest expense		(1,194	)		(79	)		(3,172	)		(799	)
Interest and dividend income		1,344			417			1,914			457
Other expenses		(289	)		(786	)		(1,733	)		(1,021	)
Income from unconsolidated joint venture		297			—			600			—
Total other income (expenses)		158			(448	)		(2,391	)		(1,363	)
Loss before income taxes		(15,041	)		(14,711	)		(52,144	)		(37,476	)
Benefit for income taxes		—			—			559			—
Net loss		(15,041	)		(14,711	)		(51,585	)		(37,476	)
Net (loss) income attributable to noncontrolling interest		(4	)		—			17			—
Net loss attributable to common stockholders	$	(15,037	)	$	(14,711	)	$	(51,602	)	$	(37,476	)
Net loss per share, basic and diluted	$	(0.32	)	$	(0.33	)	$	(1.10	)	$	(1.87	)
Weighted-average number of shares outstanding used to compute net loss per share, basic and diluted		47,303,090			43,962,863			47,057,521			20,092,600


Comprehensive loss:
Foreign currency translation	$	(559	)	$	(41	)	$	(573	)	$	(24	)
Total other comprehensive loss		(559	)		(41	)		(573	)		(24	)
Net loss		(15,041	)		(14,711	)		(51,585	)		(37,476	)
Comprehensive loss		(15,600	)		(14,752	)		(52,158	)		(37,500	)
Comprehensive income attributable to noncontrolling interest		14			—			85			—
Total comprehensive loss attributable to common stockholders	$	(15,614	)	$	(14,752	)	$	(52,243	)	$	(37,500	)

See accompanying notes to the unaudited condensed consolidated financial statements.

XOMETRY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(Unaudited)

Three months ended September 30, 2022 and 2021

(In thousands, except share and per share data)


	Convertible Preferred Stock
	Seed-1, Seed-2, Series A-1, Series A-2, Series B, Series C, Series D, Series E						Common Stock					Class A - Common Stock				Class B - Common Stock				Additional Paid-In			Accumulated Other Comprehensive			Accumulated			Total Stockholders'			Noncontrolling			Total
	Shares			Amount			Shares			Amount		Shares		Amount		Shares		Amount		Capital			Income (Loss)			Deficit			(Deficit) Equity			Interest			(Deficit) Equity
Balance, June 30, 2022		—		$	—			—		$	—		44,545,080	$	—		2,676,154	$	—	$	610,331		$	85		$	(209,906	)		400,510		$	1,105			401,615
Exercise of common stock options		—			—			—			—		156,196		—		—		—		847			—			—			847			—			847
Donated common stock		—			—			—			—		20,133		—		—		—		987			—			—			987			—			987
Stock based compensation		—			—			—			—		—		—		—		—		5,113			—			—			5,113			—			5,113
Comprehensive loss
Foreign currency translation		—			—			—			—		—		—		—		—		—			(577	)		—			(577	)		18			(559	)
Noncontrolling interest		—			—			—			—		—		—		—		—		—			—			—			—			—			—
Net loss		—			—			—			—		—		—		—		—		—			—			(15,037	)		(15,037	)		(4	)		(15,041	)
Total comprehensive loss		—			—			—			—		—		—		—		—		—			—			—			(15,614	)		14			(15,600	)
Balance, September 30, 2022		—		$	—			—		$	—		44,721,409	$	—		2,676,154	$	—	$	617,278		$	(492	)	$	(224,943	)	$	391,843		$	1,119		$	392,962

Balance, June 30, 2021		27,758,941		$	160,713			8,665,797		$	—		—	$	—		—	$	—	$	4,315		$	227		$	(134,727	)	$	(130,185	)	$	—		$	(130,185	)
Conversion of convertible preferred stock in connection with initial public offering		(27,758,941	)		(160,713	)		—			—		27,351,633		—		407,308		—		160,713			—			—			160,713			—			160,713
Exercise of common stock options		—			—			—			—		39,744		—		—		—		456			—			—			456			—			456
Conversion of common stock in connection with the initial public offering		—			—			(8,665,797	)		—		6,396,951		—		2,268,846		—		—			—			—			—			—			—
Issuance of common stock in connection with the initial public offering, net of underwriters' discount		—			—			—			—		7,906,250		—		—		—		325,263			—			—			325,263			—			325,263
Donated common stock		—			—			—			—		20,133		—		—		—		1,157			—			—			1,157			—			1,157
Cost of initial public offering		—			—			—			—		—		—		—		—		(3,995	)		—			—			(3,995	)		—			(3,995	)
Stock based compensation		—			—			—			—		—		—		—		—		2,266			—			—			2,266			—			2,266
Comprehensive loss
Foreign currency translation		—			—			—			—		—		—		—		—		—			(41	)		—			(41	)		—			(41	)
Net loss		—			—			—			—		—		—		—		—		—			—			(14,711	)		(14,711	)		—			(14,711	)
Total comprehensive loss																														(14,752	)		—			(14,752	)
Balance, September 30, 2021		—		$	—			—		$	—		41,714,711	$	—		2,676,154	$	—	$	490,175		$	186		$	(149,438	)	$	340,923		$	—		$	340,923

XOMETRY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(Unaudited)

Nine ~~Months Ended~~months ended September 30, ~~2021~~2022 and ~~2020~~2021

(In thousands, except share and per share data)


																					Convertible Preferred Stock
	Convertible Preferred Stock																				Seed-1, Seed-2, Series A-1, Series A-2, Series B, Series C, Series D, Series E						Common Stock					Class A - Common Stock				Class B - Common Stock				Additional Paid-In			Accumulated Other Comprehensive			Accumulated			Total Stockholders'			Noncontrolling		Total
	Seed-1, Seed-2, Series A-1, Series A-2, Series B, Series C, Series D, Series E			Common Stock				Class A - Common Stock			Class B - Common Stock			Additional Paid-In		Accumulated Other Comprehensive		Accumulated		Total Stockholders'	Shares			Amount			Shares			Amount		Shares		Amount		Shares		Amount		Capital			Income (Loss)			Deficit			(Deficit) Equity			Interest		(Deficit) Equity
Balance, December 31, 2021																						—		$	—			—		$	—		43,998,404	$	—		2,676,154	$	—	$	597,641		$	149		$	(173,341	)	$	424,449		$	1,034		425,483
Exercise of common stock options																						—			—			—			—		662,606		—		—		—		3,317			—			—			3,317			—		3,317
Donated common stock																						—			—			—			—		60,399		—		—		—		2,272			—			—			2,272			—		2,272
Stock based compensation																						—			—			—			—		—		—		—		—		14,048			—			—			14,048			—		14,048
Comprehensive loss
Foreign currency translation																						—			—			—			—		—		—		—		—		—			(641	)		—			(641	)		68		(573	)
Net loss																						—			—			—			—		—		—		—		—		—			—			(51,602	)		(51,602	)		17		(51,585	)
Total comprehensive loss																						—			—			—			—		—		—		—		—		—			—			—			(52,243	)		85		(52,158	)
Balance, September 30, 2022																						—		$	—			—		$	—		44,721,409	$	—		2,676,154	$	—	$	617,278		$	(492	)	$	(224,943	)	$	391,843		$	1,119	$	392,962
	Shares	Amount	Shares			Amount	Shares		Amount	Shares		Amount	Capital		Income (Loss)		Deficit		(Deficit) Equity
Balance, December 31, 2020	27,758,941	$160,713	7,755,782			$—	—		$—			$—	$503		$210		$(111,962)		$(111,249)			27,758,941		$	160,713			7,755,782		$	—		—	$	—		—	$	—	$	503		$	210		$	(111,962	)	$	(111,249	)	$	—	$	(111,249	)
Conversion of convertible preferred stock in connection with the initial public offering	(27,758,941)	(160,713)	—			—	27,351,633		—	407,308		—	160,713		—		—		160,713
Conversion of convertible preferred stock in connection with initial public offering																						(27,758,941	)		(160,713	)		—			—		27,351,633		—		407,308		—		160,713			—			—			160,713			—		160,713
Exercise of common stock options	—	—	910,015			—	39,744		—	—		—	1,787		—		—		1,787			—			—			910,015			—		39,744		—		—		—		1,787			—			—			1,787			—		1,787
Conversion of common stock in connection with the initial public offering	—	—	(8,665,797)			—	6,396,951		—	2,268,846		—	—		—		—		—			—			—			(8,665,797	)		—		6,396,951		—		2,268,846		—		—			—			—			—			—		—
Issuance of common stock in connection with the initial public offering, net of underwriters' discount	—	—	—		—	—	7,906,250		—	—		—	325,263		—		—		325,263			—			—			—			—		7,906,250		—		—		—		325,263			—			—			325,263			—		325,263
Donated common stock	—	—	—			—	20,133		—	—		—	1,157		—		—		1,157			—			—			—			—		20,133		—		—		—		1,157			—			—			1,157			—		1,157
Costs of initial public offering	—	—	—			—	—		—	—		—	(3,995)		—		—		(3,995)
Cost of initial public offering																						—			—			—			—		—		—		—		—		(3,995	)		—			—			(3,995	)		—		(3,995	)
Stock based compensation	—	—	—			—	—		—	—		—	4,747		—		—		4,747			—			—			—			—		—		—		—		—		4,747			—			—			4,747			—		4,747
Comprehensive loss
Foreign currency translation	—	—	—			—	—		—	—		—	—		(24)		—		(24)			—			—			—			—		—		—		—		—		—			(24	)		—			(24	)		—		(24	)
Net loss	—	—	—			—	—		—	—		—	—		—		(37,476)		(37,476)			—			—			—			—		—		—		—		—		—			—			(37,476	)		(37,476	)		—		(37,476	)
Total comprehensive loss																			(37,500)																															(37,500	)				(37,500	)
Balance, September 30, 2021	—	$—	—			$—	41,714,711		$—	2,676,154		$—	$490,175		$186		$(149,438)		$340,923			—		$	—			—		$	—		41,714,711	$	—		2,676,154	$	—	$	490,175		$	186		$	(149,438	)	$	340,923		$	—	$	340,923

Balance, December 31, 2019	25,483,182	$121,156	7,289,571			$—	—		$—	—		$—	$4,512		$—		$(77,609)		$(73,097)
Repurchase of convertible preferred stock	(2,246,886)	(12,852)	—			—	—		—	—		—	(5,429)		—		(3,372)		(8,801)
Issuance of convertible preferred stock	4,522,645	52,409	—			—	—		—	—		—	—		—		—		—
Exercise of common stock options	—	—	276,759			—	—		—	—		—	405		—		—		405
Stock based compensation	—	—	—			—	—		—	—		—	679		—		—		679
Comprehensive loss
Foreign currency translation	—	—	—			—	—		—	—		—	—		(92)		—		(92)
Net loss	—	—	—			—	—		—	—		—	—		—		(20,909)		(20,909)
Total comprehensive loss																			(21,001)
Balance, September 30, 2020	27,758,941	$160,713	7,566,330			$—	—		$—	—		$—	$167		$(92)		$(101,890)		$(101,815)

See accompanying notes to the unaudited condensed consolidated financial statements.

~~XOMETRY, INC. AND SUBSIDIARIES~~

~~Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)~~

~~(Unaudited)~~

~~Three Months Ended September 30, 2021 and 2020~~

~~(In thousands, except share and per share data)~~

Convertible Preferred Stock

Seed-1, Seed-2, Series A-1, Series A-2, Series B, Series C, Series D, Series E

Common Stock

Class A - Common Stock

Class B - Common Stock

Additional Paid-In

Accumulated Other Comprehensive

Accumulated

Total Stockholders'

Shares

Amount

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Income (Loss)

Deficit

(Deficit) Equity
Balance, June 30, 2021

27,758,941

$160,713

8,665,797

$—

                  —

$—

                  —

$—

$4,315

$227

$(134,727)

$(130,185)
Conversion of convertible preferred stock in connection with the initial public offering

(27,758,941)

(160,713)

                      —

             —

27,351,633

             —

407,308

             —

160,713

                     —

                  —

160,713
Exercise of common stock options

                      —

               —

                      —

             —

39,744

             —

                  —

             —

456

                     —

                  —

456
Conversion of common stock in connection with the initial public offering

                      —

               —

(8,665,797)

             —

6,396,951

             —

2,268,846

             —

                        —

                     —

                  —

                  —
Issuance of common stock in connection with the initial public offering, net of underwriters' discount

                      —

               —

                      —

             —

7,906,250

             —

                  —

             —

325,263

                     —

                  —

325,263
Donated common stock

                      —

               —

                      —

             —

20,133

             —

                  —

             —

1,157

                     —

                  —

1,157
Costs of initial public offering

                      —

               —

                      —

             —

                  —

             —

                  —

             —

(3,995)

                     —

                  —

(3,995)
Stock based compensation

                      —

               —

                      —

             —

                  —

             —

                  —

             —

2,266

                     —

                  —

2,266
Comprehensive income

Foreign currency translation

                      —

               —

                      —

             —

                  —

             —

                  —

             —

                        —

(41)

                  —

(41)
Net loss

                      —

               —

                      —

             —

                  —

             —

                  —

             —

                        —

                     —

(14,711)

(14,711)
Total comprehensive loss

(14,752)
Balance, September 30, 2021

                      —

$—

                      —

$—

41,714,711

$—

2,676,154

$—

$490,175

$186

$(149,438)

$340,923

Balance, June 30, 2020

25,483,182

$121,156

7,491,198

$—

                  —

$—

                  —

$—

$5,061

$(27)

$(92,335)

$(87,301)
Repurchase of convertible preferred stock

(2,246,886)

(12,852)

                      —

             —

                  —

             —

                  —

             —

(5,429)

                     —

(3,372)

(8,801)
Issuance of convertible preferred stock

4,522,645

52,409

                      —

             —

                  —

             —

                  —

             —

                        —

                     —

                  —

                  —
Exercise of common stock options

                      —

               —

75,132

             —

                  —

             —

                  —

             —

242

                     —

                  —

242
Stock based compensation

                      —

               —

                      —

             —

                  —

             —

                  —

             —

293

                     —

                  —

293
Comprehensive income

Foreign currency translation

                      —

               —

                      —

             —

                  —

             —

                  —

             —

                        —

(65)

                  —

(65)
Net loss

                      —

               —

                      —

             —

                  —

             —

                  —

             —

                        —

                     —

(6,183)

(6,183)
Total comprehensive loss

(6,248)
Balance, September 30, 2020

27,758,941

$160,713

7,566,330

$—

                  —

$—

                  —

$—

$167

$(92)

$(101,890)

$(101,815)

~~See accompanying notes to the unaudited condensed consolidated financial statements.~~

XOMETRY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Nine Months Ended
September 30,

2021

2020

Cash flows from operating activities:

Net loss

$
(37,476
)

$
(20,909
)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

2,304

2,256

Reduction in carrying amount of right-of-use asset

912

770

Stock based compensation

4,747

679

Non-cash interest expense

111

238

Loss on debt extinguishment

272

-

Donation of common stock

1,157

-

Unrealized loss on marketable securities

239

-

Changes in other assets and liabilities:

Accounts receivable, net

(10,645
)

(4,381
)
Inventory

842

(618
)
Prepaid expenses

(4,080
)

88

Other assets

580

(544
)
Accounts payable

(400
)

(3,142
)
Accrued expenses

3,931

8,100

Contract liabilities

1,053

1,038

Lease liabilities

(917
)

(720
)
Net cash used in operating activities

(37,370
)

(17,145
)
Cash flows from investing activities:

Purchase of marketable securities

(266,978
)

-

Purchase of short-term investments

-

(17,711
)
Proceeds from short-term investments

-

28,571

Purchases of property and equipment

(4,625
)

(2,888
)
Net cash (used in) provided by investing activities

(271,603
)

7,972

Cash flows from financing activities:

Proceeds from issuance of Series A-2, Series B, Series C, Series D and Series E convertible preferred stock, net of issuance costs

-

52,409

Repurchase of Series A-2, Series B, Series C and Series D convertible preferred stock

-

(12,852
)
Deemed dividend to preferred stockholders

-

(8,801
)
Proceeds from initial public offering, net of underwriters' discount

325,263

-

Payments in connection with initial public offering

(3,995
)

-

Proceeds from stock options exercised

1,787

405

Proceeds from term loan

-

4,000

Repayment of term loan

(16,136
)

-

Proceeds from other borrowings

-

4,783

Repayment of other borrowings

-

(4,783
)
Payments on finance lease obligations

(9
)

(9
)
Net cash provided by financing activities

306,910

35,152

Effect of foreign currency translation on cash and cash equivalents

(33
)

(9
)
Net (decrease) increase in cash and cash equivalents

(2,096
)

25,970

Cash and cash equivalents at beginning of period

59,874

40,122

Cash and cash equivalents at end of period

$
57,778

$
66,092

Supplemental cash flow information:

Cash paid for interest

$
907

$
970

Non-cash investing activity:

Non-cash purchase of property and equipment

$
(19
)

$
-


	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(51,585	)	$	(37,476	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		5,716			2,304
Impairment of assets		444			—
Reduction in carrying amount of right-of-use asset		5,351			912
Stock based compensation		14,048			4,747
Non-cash interest expense		—			111
Loss on debt extinguishment		—			272
Revaluation of contingent consideration		434			—
Income from unconsolidated joint venture		(100	)		—
Donation of common stock		2,272			1,157
Unrealized loss on marketable securities		1,659			239
Non-cash income tax benefit		(559	)		—
Loss on sale of property and equipment		71			—
Amortization of deferred costs on convertible notes		1,250			—
Deferred taxes benefit		(2	)		—
Changes in other assets and liabilities:
Accounts receivable, net		(19,032	)		(10,645	)
Inventory		(3,680	)		842
Prepaid expenses		(1,784	)		(4,080	)
Other assets		(3,922	)		580
Accounts payable		(240	)		(400	)
Accrued expenses		5,591			3,931
Contract liabilities		2,777			1,053
Lease liabilities		(4,219	)		(917	)
Net cash used in operating activities		(45,510	)		(37,370	)
Cash flows from investing activities:
Purchase of marketable securities		(281,897	)		(266,978	)
Proceeds from sale of marketable securities		4			—
Purchases of property and equipment		(9,608	)		(4,625	)
Proceeds from sale of property and equipment		165			—
Net cash used in investing activities		(291,336	)		(271,603	)
Cash flows from financing activities:
Proceeds from initial public offering, net of underwriters' discount		—			325,263
Payments in connection with initial public offering		—			(3,995	)
Proceeds from stock options exercised		3,317			1,787
Repayment of term loan		—			(16,136	)
Proceeds from issuance of convertible notes		287,500			—
Costs incurred in connection with issuance of convertible notes		(9,309	)		—
Payments on finance lease obligations		(2	)		(9	)
Net cash provided by financing activities		281,506			306,910
Effect of foreign currency translation on cash and cash equivalents		(425	)		(33	)
Net decrease in cash and cash equivalents		(55,765	)		(2,096	)
Cash and cash equivalents at beginning of the period		86,262			59,874
Cash and cash equivalents at end of the period	$	30,497		$	57,778
Supplemental cash flow information:
Cash paid for interest	$	1,414		$	907
Non-cash investing activity:
Non-cash purchase of property and equipment		—			(19	)

See accompanying notes to the unaudited condensed consolidated financial statements.

XOMETRY, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

(Unaudited)

(1) Organization and Description of Business

Xometry, Inc. (“Xometry”, the “Company”, ~~"we"~~“we”, or ~~"our"~~“our”) was incorporated in the State of Delaware in May 2013. Xometry is a global online marketplace connecting enterprise buyers with suppliers of manufacturing services, transforming one of the largest industries in the world. We use our proprietary technology to create a marketplace that enables buyers to efficiently source manufactured parts and assemblies, and empower suppliers of manufacturing services to grow their businesses. Xometry’s corporate headquarters is located in Derwood, Maryland.

Xometry uses proprietary technology to enable product designers, engineers, buyers, and supply chain professionals to instantly access the capacity of a global network of manufacturing facilities. The Company’s platform makes it possible for ~~customers~~buyers to quickly receive pricing, expected lead times, manufacturability feedback and place orders on the Company’s platform. The network allows the Company to provide high volumes of ~~on-demand,~~ unique parts, including custom components and aftermarket parts for its ~~customers. Xometry operates from its domestic facilities in Maryland, Kentucky, and Tennessee, with its corporate headquarters in Derwood, Maryland. One facility is operated in Munich, Germany.~~buyers.

During the second quarter of 2022, we launched the Industrial Buying Engine™ (“IBE”) which helps customers source and purchase from the more than 500,000 suppliers on Thomasnet.com. The IBE provides buyer choice including instant quote “buy-it-now” functionality and digitizes the old and time-consuming request-for-quote process. Through the IBE, buyers can request quotes for products and services from suppliers.

Xometry’s ~~seller~~suppliers’ capabilities include computer numerical control manufacturing, sheet metal ~~manufacturing,~~forming, sheet cutting, 3D printing (including fused deposition modeling, direct metal laser sintering, PolyJet, stereolithography, selective laser sintering, binder jetting, carbon digital light synthesis and multi jet fusion), die casting, stamping, injection molding, urethane casting, tube cutting, tube bending, as well as finishing services, rapid prototyping and high-volume production.

~~Initial Public Offering~~

~~On July 2, 2021, the Company closed its planned initial public offering ("IPO"), in which it issued~~We empower suppliers to grow their manufacturing businesses and ~~sold~~ ~~7,906,250~~ ~~shares~~improve machine uptime by providing access to an extensive, diverse base of ~~its Class A common stock. The initial offering price was $44.00~~ ~~per share. The Company received net proceeds~~buyers. We also offer suppliers supporting products and services to meet their unique needs. Our suite of ~~approximately $325.3~~ ~~million~~supplier services includes a cloud-based manufacturing execution system, access to competitively priced tools, materials and supplies from ~~the IPO after deducting underwriting discounts~~leading brands and ~~commissions of $22.6~~ ~~million. The Company also incurred approximately $4.0~~ ~~million of other offering costs in connection with its IPO.~~financial services products to stabilize and enhance cash flow.

~~Upon~~In 2021, we acquired Thomas Publishing Company (“Thomas”) and Fusiform, Inc. (d.b.a. FactoryFour) (“FactoryFour”), expanding our basket of supplier services to include digital marketing and data solutions and SaaS based solutions to help suppliers optimize their productivity.

During the ~~closing~~second quarter of 2022, we introduced Workcenter which gives suppliers a one-stop view into all of their Xometry and non-Xometry work. A cloud-based manufacturing execution system, Workcenter brings the ~~IPO on July 2, 2021,~~ ~~8,665,797~~ ~~shares of outstanding common stock were reclassified~~job board and financial services into ~~Class A common stock,~~ ~~27,758,941~~ ~~shares of outstanding convertible preferred stock were converted into Class A common stock,~~one, easy-to-use platform. With Workcenter, shop owners can build and ~~2,676,154~~ ~~shares of Class A common stock were exchanged by our co-founders~~manage workflows for ~~an equivalent number of shares of Class B common stock pursuant to the terms of the exchange agreement.~~all their projects, including those from non-Xometry customers, and also quote new projects from Xometry and Thomas.

~~Also on July 2, 2021, the Company reserved~~ ~~402,658~~ ~~shares of its Class A common stock, representing~~ 1% of the Company's fully diluted capitalization as of the date of approval of our board of directors, for charitable contributions to non-profit organizations. These shares will be issued over the next five years, in an amount not to exceed 20~~% of the initial reserve amount per calendar year. During the third quarter of 2021, the Company donated~~ ~~20,133~~ ~~shares of Class A common stock to a donor advised fund and recognized an expense associated with the charitable contribution of approximately $1.2~~ ~~million which is recorded in general and administrative expense in the Condensed Consolidated Statements of Operations and Comprehensive Loss.~~

(2) Basis of Presentation and Summary of Significant Accounting Policies

(a)

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's ~~final Prospectus~~Annual Report on Form ~~424(b)(4)~~10-K filed with the SEC on ~~July 1, 2021 (“Final Prospectus”).~~March 18, 2022.

The condensed consolidated balance sheet as of December 31, ~~2020,~~2021, included herein, was derived from the audited financial statements as of that date, but may not include all disclosures including certain notes required by U.S. GAAP on an annual reporting basis. In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss, stockholders' equity (deficit) and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ~~2021~~2022 or any future period.

The Company has 2two reporting segments which are referred to as: (1) the United States (“U.S.”) and (2) ~~Europe.~~International.

Foreign Operations and Comprehensive Loss

The U.S. dollar (“USD”) is the functional currency for Xometry’s consolidated ~~subsidiary~~subsidiaries operating in the U.S. The primary functional currency for the ~~Company’s~~Company's consolidated ~~subsidiary~~subsidiaries operating in Germany and to a lesser extent Japan is the Euro ~~(“EUR”~~

("Euro"). and the Yen, respectively. For the Company’s consolidated ~~subsidiary~~subsidiaries whose functional ~~currency is~~currencies are not the USD, the Company translates their financial statements into ~~USD.~~USDs. The Company translates assets and liabilities at the exchange rate in effect as of the financial statement date. Revenue and expense accounts are translated using an average exchange rate for the period. Gains and losses resulting from translation are included in accumulated other comprehensive income ~~(loss)~~ (“AOCI”), as a separate component of equity.

Noncontrolling Interest

In connection with the acquisition of Thomas on December 9, 2021, we assumed a 66.67% ownership in Incom Co., LTD. As we have a controlling interest in Incom Co., LTD, we have consolidated Incom Co., LTD into our financial statements. The portion of equity in Incom Co., LTD not owned by the Company is accounted for as a noncontrolling interest. We present the portion of any equity that we do not own in a consolidated entity as noncontrolling interest and classify their interest as a component of total equity, separate from total stockholders’ equity (deficit) on our Condensed Consolidated Balance Sheets. We include net income (loss) attributable to the noncontrolling interests in net income (loss) in our Condensed Consolidated Statements of Operations and Comprehensive Loss.

(b)

Use of Estimates

The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, which affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.

In light of the current unknown duration and severity of the COVID-19 pandemic, we continue to face potential uncertainty which may impact the judgments and estimates needed to apply our significant accounting policies. As of the date these condensed consolidated financial statements were issued, the impacts of the COVID-19 pandemic did not have a significant impact on our estimates or judgments. Judgments and assumptions may change, as new events occur and additional information is obtained, as well as other factors related to COVID-19 and economic recovery that could result in a meaningful impact on our consolidated financial statements in future reporting periods.

(c)

Business Combinations

The Company accounts for business combinations using the acquisition method of accounting, which requires, among other things, allocation of the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date. The excess of the fair value of purchase consideration over the values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair value of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to the valuation of intangible assets. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill if new information is obtained related to facts and circumstances that existed as of the acquisition date. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are reflected in the condensed consolidated statements of operations. Acquisition costs, such as legal and consulting fees, are expensed as incurred.

~~(c)~~(d)

Fair Value Measurements and Financial Instruments

The Company measures certain assets and liabilities at fair value on a recurring basis based on an expected exit price, which represents the amount that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability.

The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis, whereby inputs used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 - Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

The carrying amounts of certain of the Company’s financial instruments, which include cash and cash equivalents, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses and contract liabilities approximate their fair values due to their short maturities. The Company's marketable securities are recorded at fair value.

~~(d)~~(e)

Marketable Securities

The Company measures its marketable securities at fair value and recognizes any changes in fair value in net loss. ~~In August 2021, we invested approximately $266.6~~ ~~million of proceeds from~~Our marketable securities represent our ~~IPO~~investment in ~~marketable securities.~~a short-term bond fund and a money market fund. We consider our marketable securities as available for use in current operations, and therefore classify these securities as current assets on the Condensed Consolidated Balance Sheets. As of September 30, 2022, and December 31, 2021, the Company's marketable securities of $~~266.7~~310.7 million and $30.5 million, respectively were recorded at fair value, within Level 1 of the fair value hierarchy. The fair value of the Company’s Level 1 financial instruments is based on quoted prices in active markets, total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs, discounts or blockage factors. During the ~~third quarter~~three and nine months ended September 30, 2022, the Company recorded unrealized losses of $0.5 million and $1.7 million, respectively related to these securities. For the three months and nine months ended September 30, 2021, the Company recorded an unrealized ~~loss~~losses of $0.2 million related to these securities. These losses are recorded in other expenses on the Condensed Consolidated Statements of Operations and Comprehensive Loss.

~~(e)~~(f)

Accounts Receivable

Accounts receivable are stated at the amount the Company expects to collect from outstanding balances. For ~~customers~~buyers for which Xometry provides credit, the Company performs credit inquiries, including references checks, and ~~query~~queries credit ratings services and other publicly available information. Amounts collected on accounts receivable are included in net cash provided by operating activities in the statements of cash flows. Management provides for probable uncollectible amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on ~~its experience~~the age of the outstanding amounts, each customer’s expected ability to pay and ~~judgment.~~collection history, current market conditions, and reasonable and supportable forecasts of future economic conditions to determine whether the allowance is appropriate. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.

Allowance For Credit Losses

The allowance for credit losses related to accounts receivable and changes were as follows (in thousands):



	2022			2021

Allowance for credit losses
Balance at beginning of year, January 1	$	809		$	569
Charge to provision accounts		1,020			295
Recoveries or other		(237	)		(55	)
Balance at period end, September 30 and December 31	$	1,592		$	809

~~(f)~~(g)

Property and Equipment and Long-Lived Assets

Property and equipment are stated at cost. Equipment under finance leases is stated at the present value of minimum lease payments. Depreciation is calculated on the straight-line method over the estimated useful life of the assets, which range from three to seven years, or in the case of leasehold improvements, over the shorter of the remaining lease term or the useful life of the asset.

Property and equipment and ~~intangibles~~intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

Property and equipment includes capitalized internal-use software development costs. Eligible internal-use software development costs are capitalized subsequent to the completion of the preliminary project stage. Such costs include internal and external direct development costs totaling $~~3.9~~7.9 million for the nine months ended September 30, ~~2021~~2022 and $~~3.6~~5.2 million for the year ended December 31, ~~2020.~~2021. After all substantial testing and deployment is completed and the software is ready for its intended use, capitalization is discontinued and the internal-use software costs are placed in service and amortized using the straight-line method over the estimated useful life of the software, generally three years.

During the three and nine months ended September 30, 2022, the Company recorded impairments of approximately $0.3 million and $0.4 million, respectively related to abandoned software projects that were previously in development and/or other assets to be disposed. For the three and nine months ended September 30, 2022, $36,000 and $0.1 million, respectively of these impairments were recorded in our U.S. reporting segment. For the three and nine months ended September 30, 2022, $0.3 million, respectively of these impairments were recorded in our International reporting segment. No impairments were recorded during the three and nine months ended September 30, 2021.

~~(g)~~(h)

Revenue

The Company derives ~~substantially all~~the majority of its marketplace revenue in the U.S. and Europe from the sale of parts and assemblies fulfilled using a vast network of ~~sellers.~~suppliers. The Company recognizes revenue from the sales to our ~~buyers~~customers pursuant to Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”).

The Company determines that a contract exists between the Company and the customer when the customer accepts the quote and places the order, all of which are governed by the Company’s standard terms and conditions or other agreed terms with Xometry’s ~~customers.~~buyers. Upon completion of an order through Xometry’s platform, the Company identifies the performance obligation(s) within that order to complete the sale of the manufactured part(s) or assembly. Using Xometry’s in-house technology, the Company determines the price for the manufactured part(s) or assembly on a stand-alone basis at order initiation. The Company recognizes revenue from sales to ~~Xometry~~Xometry’s customers upon shipment, at which point control over the part(s) or assembly have transferred.

~~We have~~The Company has concluded that the Company is principal in the sale of part(s) and assemblies that use the Company’s network of third-party manufacturers because the Company controls the manufacturing by obtaining a right to direct a third-party manufacturer to fulfill the performance obligation Xometry has with the ~~buyer~~Company’s customers on Xometry’s behalf. The Company has considered the following conditions of the sale: (i) the Company has the obligation of providing the specified product to the customer, (ii) the Company has discretion with respect to establishing the price of the product and the price the Company pays the ~~sellers~~suppliers and the Company has margin risk on all of Xometry’s sales, (iii) the Company has discretion in determining how to fulfill each order, including selecting the ~~seller~~supplier and (iv) Xometry bears certain risk for product quality to the extent the ~~buyer~~customer is not satisfied with the final product.

Xometry also derives revenue from its supplier services which is a suite of services offered to our suppliers. In connection with the acquisition of Thomas on December 9, 2021, our revenue also includes the sale of advertising. This revenue is generally recognized as control is transferred to the customer, in an amount reflecting the consideration we expect to be entitled to in exchange for such product or service. From time to time, a purchase order with a customer may involve multiple performance obligations, including a combination of some or all of our products. Judgment may be required in determining whether products are considered distinct performance obligations that should be accounted for separately or as one combined performance obligation. Revenue is recognized over the period or at the point in time in which the performance obligations are satisfied. Consideration is typically determined based on a fixed unit price for the quantity of product transferred. For purchase orders involving multiple performance obligations, the transaction price is allocated to each performance obligation based on relative standalone selling price, and recognized as revenue when each individual product or service is transferred to the customer.

Revenue is shown net of estimated returns, refunds, and allowances. As of September 30, ~~2021~~2022, and December 31, ~~2020,~~2021, the Company has a $~~0.1~~0.3 million and $0.2 million, respectively, provision for estimated returns, refunds or allowances.

Sales tax collected from customers and remitted to governmental authorities is excluded from revenue.

Contract Liabilities

Contract liabilities are primarily derived from ~~customer credit card~~ payments received in advance or at the time an order is placed, for which the associated performance obligations have not been satisfied and revenue has not been recognized based on the Company’s revenue recognition criteria described above.

The following table is a summary of the contract liabilities as of December 31, ~~2020~~2021 and September 30, ~~2021~~2022 (in thousands):

Rollforward of contract liabilities:

Contract liabilities at December 31, 2020

$
2,355

Revenue recognized

(59,033
)
Payments received in advance

60,057

Contract liabilities at September 30, 2021

$
3,379


Contract liabilities at December 31, 2021	$	7,863
Revenue recognized		(126,830	)
Payments received in advance		129,567
Contract liabilities at September 30, 2022	$	10,600

During the ~~period~~nine months ended September 30, ~~2021,~~2022, the Company recognized approximately $~~2.4~~7.2 million of revenue related to its contract liabilities at December 31, ~~2020.~~2021.

Sales Contract Acquisition Costs

The Company’s incremental costs to obtain a contract may include a sales commission which is generally determined on a per order basis. ~~The Company expenses sales commissions when earned, given the short period until the fulfillment~~For contracts in excess of ~~customer orders. The Company elected the practical expedient, allowed under Topic 606, to expense costs to obtain a contract as incurred when the amortization period would have been~~ one year, ~~or less.~~the Company amortizes such costs on a straight-line basis over the average customer life of two years for new customers and over the renewal period for existing customers which is generally one year. Sales commissions ~~Xometry pays~~ are included in Xometry’s sales and marketing expenses and cost of revenue in the Condensed Consolidated Statements of Operations and Comprehensive Loss. For the three months and nine months ended September 30, 2022, we recognized approximately $1.6 million and $3.1 million, respectively of amortization related to deferred sales commissions. The nine month ended amount includes a $1.9 million measurement period benefit related to our acquisition of Thomas. See Note 7 - Acquisitions.

~~(h)~~(i)

Cost of Revenue

Cost of revenue for marketplace primarily consists of the cost of the products that are manufactured or produced by the Company’s ~~sellers~~suppliers for delivery to buyers on ~~Xometry’s~~the Company's platform, internal and external production costs, shipping costs, and certain internal depreciation.

Cost of revenue for supplier services primarily consists of internal and external production costs and website hosting.

~~(i)~~(j)

Leases

~~On January 1, 2019, the Company adopted ASC Topic 842,~~ ~~Leases.~~ ~~This standard provided several optional practical expedients for use in transition.~~ The Company ~~elected to use what the FASB deemed the “package of practical expedients,” which allowed the Company not to reassess the Company’s previous conclusions about~~determines if an arrangement contains a lease ~~identification, lease classification~~ and the ~~accounting treatment for initial direct costs. The standard also provided several optional practical expedients for~~classification of that lease, if applicable, at its inception. Operating leases are included in operating lease right-of-use ("ROU") assets, operating lease liabilities and operating lease liabilities (net of current portion) in the ~~ongoing accounting for leases.~~Condensed Consolidated Balance Sheets. The Company ~~elected~~has finance leases as detailed in the ~~short-term lease recognition exemption for all leases that qualify, meaning that for~~Long-Lived Assets section above. For leases with terms of twelve months or less, the Company ~~will~~does not recognize ~~right-of-use ("ROU")~~ROU assets or lease liabilities on the Condensed Consolidated Balance Sheets. Additionally, the Company elected to use the practical expedient to not separate lease and

non-lease components for leases of real estate, meaning that for these leases, the non-lease components are included in the associated ROU asset and lease liability balances on the Company’s Condensed Consolidated Balance Sheets.

The Company determines if an arrangement contains a lease and the classification of that lease, if applicable, at inception. Operating leases are included in operating lease ROU assets, operating lease liabilities and operating lease liabilities (net of current portion) in the Condensed Consolidated Balance Sheets. The Company has finance leases as detailed in the Long-Lived Assets section above.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments under the lease. Operating lease ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The implicit rate within the Company’s operating leases is generally not determinable, as such the Company uses its incremental borrowing rate at lease commencement to determine the present value of lease payments. The operating lease ROU asset also includes any lease prepayments, offset by lease incentives. Certain of the Company’s leases include options to extend or terminate the lease. The expected lease term includes options to extend or terminate the lease when it is reasonably certain the Company will exercise such option.

Lease expense for lease payments is recognized on a straight-line basis over the term of the lease.

~~(j)~~(k)

Sales and Marketing

Sales and marketing expenses are expensed as incurred and include the costs of digital marketing strategies, branding costs and other advertising costs, certain depreciation and amortization expense, and compensation expenses, including stock-based compensation, to the Company’s sales and marketing employees. For the three and nine months ended September 30, 2022, the Company's advertising cost were $8.3 million and $23.3 million, respectively. For the three and nine months ended September 30, 2021, ~~and 2020,~~ the ~~Company’s~~Company's advertising ~~costs~~cost were $5.5 million and $~~3.3~~ ~~million, respectively and $~~14.4 ~~million and $8.4~~ million, respectively.

~~(k)~~(l)

Operations and Support

Operations and support expenses are the costs the Company incurs in support of ~~the customers~~buyers and ~~sellers~~suppliers on Xometry’s ~~platform~~platforms which are provided by phone, email and chat for purposes of resolving ~~customer~~buyer and ~~seller~~supplier related matters. These costs primarily consist of compensation expenses of the support staff, including stock-based compensation, certain depreciation and amortization expense and software costs used in delivering ~~customer~~buyer and ~~seller service.~~supplier services.

~~(l)~~(m)

Product Development

~~(m)~~(n)

General and Administrative

~~(n)~~(o)

Stock Based Compensation

All ~~stock based~~stock-based compensation, including stock options and restricted stock units, are measured at the grant date fair value of the award. The Company estimates grant date fair value of stock options using the Black-Scholes option-pricing model. The fair value of stock options and restricted stock units is recognized as compensation expense on a straight-line basis over the requisite service period, which is typically four years. The fair value of the restricted stock units is determined using the fair value of the Company's Class A common stock on the date of grant. Forfeitures are recorded in the period in which they occur.

The Black-Scholes model considers several variables and assumptions in estimating the fair value of stock-based awards.

These variables include:

•

expected annual dividend yield;

•

expected volatility over the expected term;

•

expected term;

•

risk free interest rate;

•

per share value of the underlying common stock; and

•

exercise price.

For all stock options granted, the Company calculated the expected term using the simplified method for “plain vanilla” stock option awards. The risk-free interest rate is based on the yield available on U.S. Treasury ~~issues~~issuances similar in duration to the expected

term of the stock-based award. As there was no public market for the Company's common stock prior to the ~~IPO,~~initial public offering (“IPO”), the Company estimates its expected share price volatility based on the historical volatility of publicly traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded share price. The Company utilized a dividend yield of zero, as it had no history or plan of declaring dividends on its common stock.

~~(k)~~(p)

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. The diluted net loss per share is computed by giving effect to all potentially dilutive securities outstanding for the period. For periods in which the Company reports net losses, diluted net loss per common share is the same as basic net loss per common share, because all potentially dilutive securities are anti-dilutive. Vested RSUs that have not been settled have been included in the appropriate common share class used to calculate basic net loss per share.

Subsequent to the Company's IPO on July 2, 2021, the Company computes net loss per share using the two-class method required for multiple classes of common stock and participating securities. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. Certain unvested share-based payment awards that contain nonforfeitable rights to dividends are treated as participating securities and therefore included in computing net income per share using the two-class method. The rights, including the liquidation and dividend rights, of the Class A common stock and Class B common stock are substantially identical, other than voting rights. Accordingly, the Class A common stock and Class B common stock shared proportionately in the Company’s net losses.

~~(p)~~(q)

Reclassifications

~~The Company has reclassified certain amounts~~Certain line items on ~~its~~the Company’s condensed consolidated financial statements ~~related to its prior periods~~have been reclassified to conform to ~~its~~the current period presentation. These reclassifications have not changed the results of operations of prior periods.

(r)

~~(q)~~

Recently Issued Accounting Standards

New Accounting Pronouncements ~~Effective~~Adopted in ~~Future Periods~~the Current Year

In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which reduced the number of models used to account for convertible instruments, amends the accounting for certain contracts in an entity’s own equity that would have previously been accounted for as derivatives and modifies the diluted earnings per share calculations for convertible instruments. We adopted ASU 2020-06 on January 1, 2022. As a result of the adoption of ASU 2020-06, the convertible notes issued in February 2022 were considered to be debt with no allocation to equity.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (“Topic 326”), Measurement of Credit Losses on Financial Instruments. Topic 326 changes the impairment model for most financial assets and certain other instruments. Under the new standard, entities holding financial assets and net investment in leases that are not accounted for at fair value through net income are to be presented at the net amount expected to be collected. An allowance for credit losses will be a valuation account that will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. Topic 326 iswas originally effective ~~as of~~for the Company on January 1, ~~2023. Early adoption is permitted.~~2023 given our Emerging Growth Company status. We will lose our Emerging Growth Company status on January 1, 2023 and will file our fiscal year Form 10-K as a non-Emerging Growth Company filer. Therefore, in preparation for fiscal year 2022 reporting, the Company applied Topic 326 as if we were not an Emerging Growth Company on July 1, 2022. The ~~Company is currently evaluating the impact~~adoption of Topic 326 on ~~its~~July 1, 2022 did not have a material impact on the Company's consolidated financial statements and related disclosures.

There are currently no other accounting standards that have been issued, but not yet adopted, that are expected to have a significant impact on the Company’s consolidated financial position, results of operations or cash flows upon adoption.

(3) Credit Concentrations

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company maintains its cash, which at times may exceed federally insured limits, in deposit accounts at major financial institutions. Most of the Company’s ~~customers~~buyers are located in the United States.

For the three and nine months ended September 30, 2022 and 2021, 0no ~~one customer accounted for more than 10% of the Company's revenue. For the three and nine months ended September 30, 2020,~~ 1 ~~customer~~single buyer accounted for more than 10% of the Company's revenue. As of September 30, ~~2021~~2022, and December 31, ~~2020,~~2021, 0no single ~~customer~~buyer accounted for more than 10% of the Company’s accounts receivable.

(4) Inventory

Inventory consists of raw materials, work-in-process, tools inventory and finished goods. Raw materials (plastics and metals) become manufactured products in the additive and subtractive manufacturing processes. Work in progress represents manufacturing costs associated with ~~customer~~buyer orders that are not yet ~~complete.~~complete and materials purchased for suppliers. The tools inventory primarily consists of small consumable machine tools, cutting devices, etc. Finished goods represents product awaiting shipment. Inventory consists of the following as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 (in thousands):


	September 30,		December 31,		September 30,		December 31,
	2021		2020		2022		2021

Raw materials	$	136	$	634	$	162	$	105
Work-in-progress		891		1,247		4,809		1,324
Tools inventory		330		312		553		365
Finished goods		70		101		108		239
Total	$	1,427	$	2,294	$	5,632	$	2,033

(5) Property and Equipment and Long-Lived Assets

Property and equipment consist of the following as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 (in thousands):


		September 30,			December 31,
	Useful Life	2022			2021

Technology hardware	3 years	$	2,710		$	2,220
Manufacturing equipment	5 years		3,022			2,946
Capitalized software development	3 years		21,145			13,126
Patent	17 years		—			157
Leasehold improvements	Shorter of useful life or lease term		1,258			1,222
Furniture and fixtures	7 years		1,036			1,155
Total			29,171			20,826
Less accumulated depreciation			(12,868	)		(10,539	)
Property and Equipment, net		$	16,303		$	10,287

September 30,

December 31,

Useful Life

2021

2020

Technology hardware

3 years

$
1,899

$
1,452

Manufacturing equipment

5 years

2,750

2,603

Capitalized software development

3 years

11,972

8,123

Patent

17 years

165

157

Leasehold improvements

Shorter of useful
life or lease term

717

717

Furniture and fixtures

7 years

826

675

Total

18,329

13,727

Less accumulated depreciation

(9,714
)

(7,614
)
Property and Equipment, net

$
8,615

$
6,113

Depreciation expense for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 was as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020		Three Months Ended September 30,				Nine Months Ended September 30,
									2022		2021		2022		2021
Cost of revenue	$	21	$	60	$	70	$	178	$	41	$	21	$	99	$	70
Sales and marketing		-		6		11		17		-		-		-		11
Operations and support		31		46		118		144		15		31		43		118
Product development		632		474		1,793		1,043		753		632		2,180		1,793
General and administrative		64		86		108		198		147		64		512		108
Total	$	748	$	672	$	2,100	$	1,580
Total depreciation expense									$	956	$	748	$	2,834	$	2,100

(6) Leases

Operating lease expense for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 was as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Cost of revenue

$
18

$
45

$
72

$
135

Operations and support

27

-

45

1

General and administrative

278

268

859

801

Total operating lease expense

$
323

$
313

$
976

$
937


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Cost of revenue	$	23	$	18	$	60	$	72
Operations and support		-		27		-		45
General and administrative		1,518		278		4,446		859
Total operating lease expense	$	1,541	$	323	$	4,506	$	976

During the ~~second~~first quarter of ~~2021,~~2022, the Company ~~extended by~~ ~~three years~~ ~~an existing operating lease and~~ entered into atwo new ~~three year~~ ~~facility operating lease.~~office leases in Doraville, Georgia and Shanghai, China. In connection with these leases, the Company recorded non-cash ROU assets and lease liabilities of $~~0.9~~0.1 million.

During the first quarter of 2022, the Company also executed a new lease for an office in North Bethesda, Maryland. The lease is expected to commence in the fourth quarter of 2022. The lease has a term of seven years with total cash rental payments of approximately $7.1 million.

During the third quarter of ~~2021,~~2022, the Company ~~extended~~ 2 ~~existing~~executed a new lease for an office in Chelmsford, United Kingdom and modified its leases ~~entered into~~ 2 ~~new leases~~in Ottobrunn, Germany and ~~terminated~~ 1 ~~lease. The new or extended leases has terms ranging between~~ ~~3-months~~ ~~and~~ ~~3 years~~.Derwood, Maryland. In connection with these leases the Company recorded non-cash ROU assets and lease liabilities of approximately $~~1.3~~ ~~million. For the one lease that was terminated, the Company derecognized a ROU asset and liability of $0.1~~1.2 million.

(7) ~~Common Stock~~Acquisitions

Big Blue Saw

On November 1, 2021, the Company acquired Big Blue Saw subject to an Asset Purchase Agreement. The acquisition of Big Blue Saw extends our marketplace capabilities in water jet and laser cutting. The Company accounted for the acquisition as a business combination. The aggregate non-contingent portion of the purchase price was $1.5 million and was paid in cash and Class A common stock on the acquisition date. In addition, the purchase price included a contingent consideration arrangement to the former owner of Big Blue Saw up to a maximum amount of $1.0 million (undiscounted) in two installments on the first and second anniversary of the acquisition and is based on client conversions. The initial fair value of the contingent consideration of $0.9 million was estimated by applying an income valuation approach. The measurement is based on inputs that are not observable in the market (Level 3 inputs). Key assumptions made include (a) discount rate and (b) probability weighted assumptions about client conversions.

~~Prior~~During the nine months ended September 30, 2022, the Company recorded an approximate $31,000 increase to the ~~Company's IPO~~contingent consideration liability with a corresponding expense recognized in general and administrative expense on ~~July 2,~~our Condensed Consolidated Statement of Operations and Comprehensive Loss. The Company re-evaluated the fair value of the contingent consideration based on current information available to the Company subsequent to our acquisition using a similar methodology as described above. As of September 30, 2022, and December 31, 2021, ~~holders~~the total contingent consideration had a fair value of $0.9 million and $0.9 million, respectively.

The Company performed a preliminary valuation analysis of the fair market value of the acquired assets and liabilities of Big Blue Saw during the fourth quarter of 2021. The Company completed its valuation of the acquired assets and liabilities during the second quarter of 2022 and expects to finalize the settlement of the working capital during the fourth quarter of 2022. The settlement of the working capital, which is not expected to be material, will impact goodwill. No changes to the initial purchase price allocation were made during 2022.

FactoryFour

On November 5, 2021, the Company acquired FactoryFour subject to an Asset Purchase Agreement. FactoryFour provides a SaaS based solution to help manufacturers improve lead times and make strong, data-driven decisions through real-time production tracking. The Company accounted for the acquisition as a business combination. The aggregate non-contingent portion of the purchase price was $3.3 million and was paid in cash and Class A common stock on the acquisition date. In addition, the purchase price includes a contingent consideration arrangement to the former owners of FactoryFour up to a maximum amount of $2.5 million (undiscounted) in three installments on the first, second and third anniversary of the acquisition and is based on gross total orders. The fair value of the initial contingent consideration of $1.5 million was estimated by applying an option pricing model. The measurement is based on inputs that are not observable in the market (Level 3 inputs). Key assumptions made include (a) discount rate, (b) time to expiration, (c) stock price, (d) hurdle rate, (e) risk free rate, (f) volatility, (g) dividend rate and (f) assumptions about gross total orders.

During the nine months ended September 30, 2022, the Company recorded an approximate $0.4 million increase to the contingent consideration liability with a corresponding expense recognized in general and administrative expense on our Condensed Consolidated Statement of Operations and Comprehensive Loss. The Company re-evaluated the fair value of the contingent consideration based on current information available to the Company subsequent to our acquisition. To estimate the current fair value, we applied an income valuation approach. The measurement is based on inputs that are not observable in the market (Level 3 inputs). Key assumptions made include (a) discount rate and (b) probability weighted assumptions about gross total orders. As of September 30, 2022, and December 31, 2021, the total contingent consideration had a fair value of $1.9 million and $1.5 million, respectively.

The Company performed its initial valuation analysis of the fair market value of the acquired assets and liabilities of FactoryFour during the fourth quarter of 2021. The Company finalized its valuation analysis in the first quarter of 2022. No changes to the initial purchase price allocation were ~~entitled~~made during 2022.

Thomas

On December 9, 2021, the Company acquired Thomas subject to the merger agreement. Xometry leverages Thomas’ marketing and data services to deliver a suite of end-to-end services for suppliers with additional financial services and digital marketing products. The Company accounted for the acquisition as a business combination. The goodwill of $~~one vote per share~~252.0 million arising from the acquisition of Thomas related to certain expected synergies which includes the ability to drive buyers and suppliers on to our platform and provide additional products and services. This goodwill, which is included in our U.S. reporting segment, is not expected to be deductible for tax purposes. The aggregate non-contingent portion of the purchase price was approximately $276.3 million and was paid in cash and Class A common stock on the acquisition date.

The Company performed a preliminary valuation analysis of the fair market value of the acquired assets and liabilities of Thomas during the fourth quarter of 2021. During the three months ended March 31, 2022, the Company recorded additional goodwill of approximately $0.6 million in connection with the identification of a deferred tax liability. This deferred tax liability was subsequently recognized into income during the three months ended March 31, 2022.

During the nine months ended September 30, 2022, the Company recognized measurement period adjustments primarily related to certain other assets and lease intangibles which resulted in additional goodwill of approximately $4.7 million. During the nine months ended September 30, 2022, the Company recorded an approximate $1.9 million one-time non-cash benefit in sales and marketing expense. The Company substantially completed its valuation of the acquired assets and liabilities during the third quarter of 2022 and expects to finalize the settlement of the working capital during the fourth quarter of 2022. The settlement of the working capital, which may be material, will impact goodwill.

The following table (in thousands) summarizes the consideration paid for Thomas and the preliminary fair value of the assets acquired and liabilities assumed on the acquisition date:


	Previously Reported				Purchase Price Allocation
	As of				Measurement Period
	December 31, 2021				Adjustment			As Adjusted
Consideration:
Cash	$	174,838			$	—		$	174,838
Fair value of Class A common stock		101,499				—			101,499
Fair value of consideration		276,337				—			276,337

Recognized amounts of identifiable assets acquired and liabilities assumed:
Current assets		18,244				(5,978	)		12,266
Property and equipment		890				—			890
Intangible assets		40,400				1,444			41,844
Right-of-use assets		24,130				—			24,130
Other long-term assets		250				(206	)		44
Investment in unconsolidated joint venture		4,156				—			4,156
Lease liabilities		(18,690	)			—			(18,690	)
Deferred tax liability		—				(559	)		(559	)
Income taxes payable		(1,647	)			—			(1,647	)
Other long-term liabilities		(281	)	��		—			(281	)
Contract liabilities		(6,634	)			—			(6,634	)
Current liabilities		(30,183	)			—			(30,183	)
Noncontrolling interest		(1,036	)			—			(1,036	)
Total identifiable net assets assumed		29,599				(5,299	)		24,300
Goodwill		246,738				5,299			252,037
Total	$	276,337			$	—		$	276,337

The following table (in thousands) summarizes the fair value of the identifiable intangible assets:


	Total		Estimated life
Customer relationships	$	36,600	15
Database		2,400	5
Trade name		800	10
Developed technology		600	5
Lease intangible assets		1,444	4
Total intangible assets	$	41,844

The estimated fair value of the intangible assets acquired was determined by the Company. The Company engaged a third‑party expert to assist with the valuation analysis. The Company used a relief from royalty method to estimate the fair values of the developed technology, database and tradename and a multi-period excess earnings method to estimate the fair value of the customer relationships. To estimate the fair value of the lease intangible assets the company used a discounted cash flow analysis. To measure the fair value of the noncontrolling interest, the Company used a market approach which considered historical revenues of the investee and market multiples (Level 3 inputs).

Thomas’ results of operations were included in the Company's consolidated financial statements from the date of acquisition, December 9, 2021. The following unaudited pro forma condensed combined financial information gives effect to the acquisition of Thomas as if it was consummated on January 1, 2020 (the beginning of the comparable prior reporting period), and receive dividends and, upon liquidation or dissolution, were entitled to receive all assets available for distribution to stockholders. The holders had no preemptive or other subscription rights and there were no redemption or sinking fund provisions with respect to such shares. Common stock was subordinateincludes pro forma adjustments related to the ~~preferred stock with respect~~amortization of acquired intangible assets.

This unaudited data is presented for informational purposes only and is not intended to ~~dividend rights, rights upon liquidation, and dissolution~~represent or be indicative of the ~~Company.~~results of operations that would have been reported had the acquisition occurred on January 1, 2020. It should not be taken as representative of future results of operations of the combined companies. The following table presents the unaudited pro forma condensed combined financial information:


	For the Three Months Ended September 30,			For the Nine Months Ended September 30,
	2021			2021
	(unaudited)
Revenue	$	73,649		$	201,602
Net loss attributable to common stockholders		(14,164	)		(38,187	)

(8)Disaggregated Revenue Information

The following table present our revenues disaggregated by line of business. Revenue from our marketplace primarily reflects the sales of parts and assemblies on our platform. Revenue from supplier services primarily includes the sale of advertising and to a lesser extent supplies, financial service products and SaaS products.

Revenue is presented in the following tables for the three and nine months ended September 30, 2022 (in thousands, supplier service revenue for the three and nine months ended September 30, 2021, was not considered material):


	For the Three Months Ended September 30,		For The Nine Months Ended September 30,
	2022		2022
Marketplace revenue	$	84,060	$	224,073
Supplier service revenue		19,511		58,784
Total revenue	$	103,571	$	282,857

(9)Investment in Unconsolidated Joint Venture

In connection with the Company's ~~IPO~~acquisition of Thomas on ~~July 2, 2021, the~~ ~~8,665,797~~ ~~shares of common stock outstanding on June 30, 2021 were reclassified to Class A common stock. Of those~~ ~~8,665,797~~ ~~shares of common stock,~~ ~~2,268,846~~ ~~were exchanged for Class B common stock.~~

~~On July 2,~~December 9, 2021, the Company ~~amended~~assumed a 50% interest in Industrial Media, LLC ("IM, LLC") with the other 50% owned by Rich Media Group, LLC. IM, LLC primarily manages content creation, advertising sales, and ~~restated its certificate~~marketing initiatives for the Industrial Engineering News brand, certain magazines, videos, website and associated electronic media products for industrial engineers. The Company’s ownership interest in the net assets of ~~incorporation to provide for two classes~~IM, LLC approximated $5.2 million. We estimated the fair value of ~~common stock: Class A common stock~~the net assets using market approach which considered market multiples and ~~Class B common stock.~~revenue assumptions based on historical operating results (Level 3 inputs). The ~~Company's authorized capital stock consists~~Company estimated a basis difference of approximately $~~805~~4.2 million ~~shares, all with a par value of $0.000001~~which is accounted for as equity method goodwill and not subject to amortization. ~~per share, of which:~~



~~750,000,000~~ ~~are designated Class A common stock;~~



~~5,000,000~~ ~~are designated Class B common stock; and~~



~~50,000,000~~ ~~are designated preferred stock.~~

Shares of Class A common stock and Class B common stock have the same rights and privileges and rank equally, share ratably and are identical in all respects, including but not limited to dividends and distributions, liquidation rights, change of control transactions, subdivisions and combinations, no preemptive or similar rights, and conversion.

~~Holders of our Class A common stock are entitled to~~ ~~one vote per share~~ ~~on any matter that is submitted to a vote of our stockholders. Holders of our Class B common stock are entitled to~~ ~~20 votes per share~~ ~~on any matter submitted to a vote of our stockholders.~~

~~(8)Convertible Preferred Stock~~

The Company issued the following series of its preferred stock–Series Seed-1 Convertible Preferred Stock in September 2013, Series Seed-2 Convertible Preferred Stock in July 2014, Series A-1 Convertible Preferred Stock in October 2015, Series A-2 Convertible Preferred Stock in December 2016 and July 2020, Series B Convertible Preferred Stock in June 2017 and July 2020, Series C Convertible Preferred Stock in June 2018 and July 2020, Series D Convertible Preferred Stock in May 2019 and July 2020, Series E Convertible Preferred Stock in July 2020 (collectively referred to as the “Convertible Preferred Stock”).

As of December 31, 2020, the numbers of authorized and outstanding shares in the Convertible Preferred Stock, with their total respective liquidation preferences, were as follows (in thousands, except share and per share data):

Shares

Liquidation

Carrying

Par Value

Authorized

Outstanding

preference

Value

Series:

Series Seed-1 Convertible Preferred Stock

$0.000001

4,200,000

4,200,000

$
4,200

$
4,200

Series Seed-2 Convertible Preferred Stock

$0.000001

2,188,322

2,188,322

2,998

2,998

Series A-1 Convertible Preferred Stock

$0.000001

4,211,094

4,211,094

8,800

8,704

Series A-2 Convertible Preferred Stock

$0.000001

1,591,230

1,591,230

12,884

12,839

Series B Convertible Preferred Stock

$0.000001

4,132,055

4,044,271

20,764

20,347

Series C Convertible Preferred Stock

$0.000001

3,754,201

3,754,201

26,248

26,004

Series D Convertible Preferred Stock

$0.000001

5,494,064

5,494,064

54,933

54,864

Series E Convertible Preferred Stock

$0.000001

2,400,000

2,275,759

32,693

30,757

Totals

27,970,966

27,758,941

$
163,520

$
160,713

~~In connection with the Company's IPO on July 2, 2021,~~ ~~27,758,941~~ ~~shares of Convertible Preferred Stock were converted to Class A common stock. Of those~~ ~~27,758,941~~ ~~shares of Convertible Preferred Stock,~~ ~~407,308~~ ~~were exchanged for Class B common stock.~~

~~(9)~~(10) Stock Based Compensation

In 2014, the Company adopted a stock compensation plan (the "2014 Equity Incentive Plan") pursuant to which the Company may grant stock options, stock purchase rights, restricted stock awards, or stock awards to employees, directors and consultants (including prospective employees, directors, and consultants). This plan was terminated in February 2016. ~~NaN~~No additional awards may be granted under the 2014 Equity Incentive Plan, however, outstanding awards continue in full effect in accordance with their existing terms.

In 2016, the Company adopted a stock compensation plan (the “2016 Equity Incentive Plan”) pursuant to which the Company may grant stock options, stock purchase rights, restricted stock awards, or stock awards to employees, directors and consultants (including prospective employees, directors, and consultants). No additional awards may be granted under the 2016 Equity Incentive Plan, however, outstanding awards continue in full effect in accordance with their existing terms.

In connection with the IPO on July 2, 2021, the Company's board of directors adopted the 2021 Equity Incentive Plan (the "2021 Equity Incentive Plan"). The 2021 Equity Incentive Plan provides for the grant of incentive stock options ("ISOs"), nonstatutory stock options ("NSOs"), stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based awards and other awards, or collectively, awards. ISOs may be granted only to Xometry employees, including Xometry officers, and the employees of Xometry affiliates. All other awards may be granted to Xometry employees, including our officers, Xometry non-employee directors and consultants and the employees and consultants of Xometry affiliates. ~~The maximum number of shares of common stock that may be issued under the Company's 2021 Plan is~~ ~~4,026,588~~ ~~shares.~~

As of September 30, ~~2021,~~2022, there were ~~3,919,219~~5,143,659 shares available for the Company to grant under the 2021 Equity Incentive Plan. ~~As of December 31, 2020, there were~~ ~~203,535~~ ~~shares available for the Company to grant under the 2016 Equity Incentive Plan.~~

Stock Options

Prior to the Company's IPO on July 2, 2021, the fair value of the Company’s common stock was estimated by management as there was no public market for the Company’s common stock. Xometry’s market-based methodology considered a number of objective and subjective factors including third-party valuations of its common stock, the valuation of comparable companies, sales of the Company’s convertible preferred stock to outside investors in arms-length transactions, the Company’s operating and financial performance, the lack of marketability, and general and industry specific economic outlook, amongst others.

The weighted average assumptions for the nine months ended September 30, ~~2021~~2022 and ~~September 30, 2020~~2021 are provided in the following table.


	September 30,			September 30,			Nine Months Ended September 30,
	2021			2020			2022			2021
Valuation assumptions:
Expected dividend yield	—			—			—%			—%
Expected volatility		53	%		47	%		66	%		53	%
Expected term (years)		6.0			6.0			6.0			6.0
Risk-free interest rate		1.1	%		0.7	%		1.9	%		1.1	%
Fair value of share	$	26.96		$	3.83		$	34.86		$	26.96

A summary of the status of the Company’s stock option activity and the changes during the nine months ended September 30, ~~2021~~2022, are as follows (in millions, except share and per share amounts):

Number of
Shares

Weighted
Average
Exercise Price
Per Share

Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value

Exercisable at December 31, 2020

1,193,301

$
2.14

7.2

$
2.8

Balance at December 31, 2020

3,152,774

$
2.97

8.3

$
4.7

Granted

1,393,431

$
12.24

10.0

Exercised

(949,759
)

$
1.94

6.5

Forfeited

(109,506
)

$
6.62

—

Expired

(8,825
)

$
2.61

—

Balance at September 30, 2021

3,478,115

$
6.85

8.6

$
176.8

Exercisable at September 30, 2021

947,409

$
3.23

7.6

$
51.6


	Number of Shares			Weighted Average Exercise Price Per Share		Average Remaining Contractual Term		Aggregate Intrinsic Value
Exercisable at December 31, 2021		987,622		$	3.35		7.5	$	47.3
Balance at December 31, 2021		3,286,870			6.98		8.4		145.5
Granted		321,649			34.86		—		—
Exercised		(607,114	)		5.53		—		—
Forfeited		(134,024	)		8.13		—		—
Expired		(1,783	)		6.10		—		—
Balance at September 30, 2022		2,865,598			10.36		7.9		133.0
Exercisable at September 30, 2022		1,274,443			5.92		7.4		64.8

~~In April 2021, the Company granted stock options to purchase up to~~ ~~1.3~~ ~~million shares of our common stock at an exercise price of $12.32~~ ~~per share which generally vest over a requisite service period of~~ ~~four years. In the second quarter of 2021, the Company assessed the fair value of the Company's April 2021 stock option grant, giving consideration to the Company's initial public offering price of $44.00~~ ~~per share. The Company assumed a $28.00~~ ~~per share fair value, which was based on a~~ 30% discount from the midpoint of our initial price range, in order to determine the appropriate stock-based compensation expense for financial reporting purposes. The Company estimated that the fair value of the April 2021 grants approximated $~~25.6~~ ~~million which is being recognized over~~ ~~4 years~~ ~~from the grant date.~~

The weighted average grant date fair value of options granted during the nine months ended September 30, 2022 and 2021, was $21.08 and $18.73., respectively. The total intrinsic value of options exercised during the nine months ended September 30, 2022 and 2021, was $22.0 million and $26.4 ~~million.~~million, respectively.

At September 30, 2022 and 2021, there was approximately $20.4 million and $23.9 million, respectively of total unrecognized compensation cost related to unvested stock ~~options granted under the 2016 Equity Incentive Plan.~~options. That cost is expected to be recognized over a weighted average period of approximately ~~3.4~~three years ~~years at~~as of September 30, 2022 and September 30, 2021.

The Company currently uses authorized and unissued shares to satisfy share award exercises.

Restricted Stock Units

A summary of the status of the Company’s restricted stock unit activity and the changes during the nine months ended September 30, ~~2021~~2022 are as follows (in millions, except share and per share amounts):


	Number of Shares			Weighted Average Grant Date fair value (per share)		Aggregate Intrinsic Value

Unvested RSUs as of December 31, 2021		186,480		$	63.94	$	9.6
Granted		820,066			41.05		—
Vested		(51,900	)		60.29		—
Forfeited and cancelled		(113,493	)		49.91		—
Unvested RSUs as of September 30, 2022		841,153			43.75		47.8

Number of
Shares

Weighted
Average
Grant Date fair value (per share)

Aggregate
Intrinsic
Value

Unvested RSUs as of December 31, 2020

-

$
-

$
-

Granted

107,648

$
75.32

Vested

(615
)

$
76.10

Forfeited and cancelled

(279
)

$
76.10

Unvested RSUs as of September 30, 2021

106,754

$
75.31

$
6.2

At September 30, ~~2021,~~2022, there was approximately $~~7.8~~31.0 million of total unrecognized compensation cost related to unvested restricted stock units granted under the 2021 Equity Incentive Plan. That cost is expected to be recognized over a weighted average period of approximately ~~3.8~~three years ~~years at~~as of September 30, 2022. No restricted stock units were granted during the three and nine months ended September 30, 2021.

Total stock-based compensation cost for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020		2022		2021		2022		2021

Sales and marketing	$	335	$	46	$	690	$	106	$	1,135	$	335	$	3,071	$	690
Operations and support		670		75		1,364		175		1,715		670		4,879		1,364
Product development		488		109		979		253		1,097		488		3,119		979
General and administrative		773		63		1,714		145		1,166		773		2,979		1,714
Total stock compensation expense	$	2,266	$	293	$	4,747	$	679	$	5,113	$	2,266	$	14,048	$	4,747

~~(10)~~(11) Income Taxes

A full valuation allowance has been established against our net U.S. federal and state deferred tax assets and foreign deferred tax assets, including net operating loss carryforwards.

During the nine months ended September 30, 2022, the Company has a $0.6 million income tax benefit in the U.S. The Company had 0no current or deferred income tax benefit or expense in the U.S. or ~~Germany~~outside the U.S. for the ~~three and~~ nine months ended September 30, ~~2021 and 2020.~~2021. This estimated annual effective tax rate of 0%, which excludes the impact of the $0.6 million discrete adjustment, differs from the U.S. federal statutory rate primarily due to the effects of certain permanent items, foreign tax rate differences, and increases in the valuation allowance against deferred tax assets.

Net Operating Loss and Credit Carryforwards

As of December 31, ~~2020,~~2021, the Company has net operating loss (“NOL”) carryforwards for U.S. federal income tax purposes, and similar state amounts, of approximately $~~90.1~~195.7 million available to reduce future income subject to income taxes before limitations. As of December 31, ~~2020,~~2021, the Company had a net operating loss carryforward for tax purposes related to its foreign subsidiary of $~~10.2~~20.5 million. U.S. federal net operating carryforwards generated prior to 2018 in the approximate amount of $~~26.6~~71.9 million will begin to expire, if 0tnot utilized, in ~~2033. German~~2022. Our non-U.S. net operating loss and U.S. federal net operating losses post 2017 have an indefinite life. The Company expects ~~the~~ $~~90.1~~128.4 million of legacy Xometry U.S. federal net operating losses to be available to offset future taxable income. ~~The~~During the three months ended September 30, 2022, management completed its evaluation of any limitations on the ability of the Company to utilize the Thomas subsidiary net operating loss carryforward of $67.3 million. As a result of this evaluation, management has ~~not completed an updated~~determined that the annual limitation, as determined under Section 382 ~~study to assess whether an ownership change occurred subsequent to our IPO on July 2, 2021.~~ ~~Pursuant to Sections 382 and 383~~ of the Internal Revenue Code, ~~annual use of our~~would not prevent the Company from utilizing the net operating ~~loss carryforwards may be limited in~~losses before expiration to the ~~event a cumulative change in ownership of more than 50% occurs within a three-year period.~~extent the Company is able to generate sufficient future taxable income.

~~(11)~~(12) Net Loss Per Share Attributable to Common Stockholders

The Company computes net loss per share of Class A common stock, Class B common stock and participating securities using the two-class method. Basic and diluted EPS are the same for each class of common stock and participating securities because they are entitled to the same liquidation and dividend rights. The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data):

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Net loss

$
(14,711
)

$
(6,183
)

$
(37,476
)

$
(20,909
)
Deemed dividend to preferred stockholders

—

(8,801
)

—

(8,801
)
Net loss attributable to common stockholders

$
(14,711
)

$
(14,984
)

$
(37,476
)

$
(29,710
)

Weighted-average number of shares outstanding used to compute net loss per share, basic and diluted

43,962,863

7,546,458

20,092,600

7,458,671

Net loss per share, basic and diluted

$
(0.33
)

$
(1.99
)

$
(1.87
)

$
(3.98
)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net loss	$	(15,041	)	$	(14,711	)	$	(51,585	)	$	(37,476	)
Net (loss) income attributable to noncontrolling interest		(4	)		—			17			—
Net loss attributable to common stockholders	$	(15,037	)	$	(14,711	)	$	(51,602	)	$	(37,476	)
Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted		47,303,090			43,962,863			47,057,521			20,092,600
Net loss per share attributable to common stockholders, basic and diluted	$	(0.32	)	$	(0.33	)	$	(1.10	)	$	(1.87	)

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share because including them would have had an anti-dilutive effect, or issuance of such shares is contingent upon the occurrence of an event:


	As of September 30,		As of September 30,		September 30,
	2021		2020		2022		2021
Stock options outstanding		3,478,115		3,122,261		2,865,598		3,478,115
Unvested restricted stock units		106,754		—		841,153		106,754
Warrants outstanding		112,026		112,026		87,784		112,026
Shares reserved for charitable contribution		382,525		—		301,993		382,525
Convertible notes						5,123,624		—
Total shares		4,079,420		3,234,287		9,220,152		4,079,420

~~(12)~~(13) Debt Commitments and Contingencies

2027 Convertible Notes

In February 2022, we entered into a purchase agreement with certain counterparties for the sale of an aggregate of $287.5 million principal amount of convertible senior notes due in 2027 (the “2027 Notes”) in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The 2027 Notes consisted of a $250 million initial placement and an over-allotment option that provided the initial purchasers of the 2027 Notes with the option to purchase an additional $37.5 million aggregate principal amount of the 2027 Notes, which was fully exercised. The 2027 Notes were issued pursuant to an indenture dated February 4, 2022. The net proceeds from the issuance of the 2027 Notes were $278.2 million, net of debt issuance costs. The debt issuance costs are amortized to interest expense using the effective interest rate method.

The 2027 Notes are unsecured obligations which bear regular interest at 1% per annum and for which the principal balance will not accrete. The 2027 Notes will mature on February 1, 2027 unless repurchased, redeemed, or converted in accordance with their terms prior to such date.

The 2027 Notes are convertible into cash, shares of our Class A common stock, or a combination of cash and shares of our Class A common stock, at our election, at an initial conversion rate of 17.8213 shares of Class A common stock per $1,000 principal amount of 2027 Notes, which is equivalent to an initial conversion price of approximately $56.11 per share of our Class A common stock. The conversion rate is subject to customary adjustments for certain events as described in the indenture governing the 2027 Notes.

We may redeem for cash all or any portion of the 2027 Notes, at our option, on or after February 5, 2025 if the last reported sale price of our Class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days at a redemption price equal to 100% of the principal amount of the 2027 Notes to be redeemed, plus accrued and unpaid interest or additional interest, if any.

Holders of the 2027 Notes may convert all or a portion of their 2027 Notes at their option prior to November 1, 2026, in multiples of $1,000 principal amounts, only under the following circumstances:

•

if the last reported sale price of our Class A common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is greater than or equal to 130% of the applicable conversion price of the 2027 Notes on each such trading day;

•

during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of the 2027 Notes for each day of that ten consecutive trading day period was less than 98% of the product of the last reported sale price of our Class A common stock and the applicable conversion rate of the 2027 Notes;

•

on a notice of redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, in which case we may be required to increase the conversion rate for the 2027 Notes so surrendered for conversion in connection with such redemption notice; or

•

on the occurrence of specified corporate events.

On or after November 1, 2026, the 2027 Notes are convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

Holders of the 2027 Notes who convert the 2027 Notes in connection with a make-whole fundamental change, as defined in the indenture governing the 2027 Notes, or in connection with a redemption are entitled to an increase in the conversion rate. Additionally, in the event of a fundamental change, holders of the 2027 Notes may require us to repurchase all or a portion of the 2027 Notes at a price equal to 100% of the principal amount of 2027 Notes, plus any accrued and unpaid special interest, if any.

We accounted for the issuance of the 2027 Notes as a single liability measured at its amortized cost, as no other embedded features require bifurcation and recognition as derivatives.

The following table presents the outstanding principal amount and carrying value of the 2027 Notes as of the dates indicated (in thousands):


	September 30,
	2022
Principal	$	287,500
Unamortized debt discount		(7,475	)
Unamortized debt issuance costs		(584	)
Net carrying value	$	279,441

The annual effective interest rate for the 2027 Notes was approximately 1.6%. Interest expense related to the 2027 Notes for the periods presented below was as follows (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022		2022
Coupon interest	$	719	$	1,887
Amortization of debt discount		432		1,151
Amortization of transaction costs		37		99
Total interest expense	$	1,188	$	3,137

The Company estimates the fair value of the 2027 Notes with inputs that are unobservable. The following table presents the carrying value and estimated fair value of the 2027 Notes as of the date indicated (in thousands):


	September 30, 2022
	Carrying Value		Fair Value
2027 Notes	$	279,441	$	265,609	(1)

(1) The fair value is estimated using a discounted cash flow analysis, using interest rate that we believe are offered for similar borrowings (a Level 3 measurement).

Term Loan Facility

The Company was party to an amended and restated loan and security agreement ("Amended Loan and Security Agreement") with Hercules Capital, Inc. (“Hercules”) for a term loan ("the Term Loan Facility"). Under the Amended Loan and Security

Agreement, effective January 30, 2020, the Company could borrow up to $15 million under the Term Loan Facility, all of which became available to the Company immediately on the agreement date. On July 9, 2021, the Company repaid the full amount of its term loan with Hercules with proceeds from the ~~IPO (see Note 1).~~IPO. In connection with the debt extinguishment, the Company paid Hercules $~~16.2~~16.1 million and recorded a loss on debt extinguishment of approximately $0.3 million.

Prior to its repayment, the term loan accrued interest at the greater of (i) 8.7% per annum or (ii) 8.7% per annum plus the prime rate minus 4.75% per annum. The term loan agreement required a maximum $1.2 million end of term fee due and payable on the maturity date of May 1, 2022, however, if the term loan was repaid prior to November 1, 2021, the amount owed would be $0.9 million. ~~As of December 31, 2020, the Company owed $15.8~~ ~~million on this term loan, including principal borrowings and accrued end of term fee.~~

As part of the initial term loan agreement with Hercules, the Company issued a warrant to purchase 87,784 shares of the Company’s Series B Convertible Preferred Stock with a strike price of $5.13 per share that expires in May 2025. Upon closing of the IPO on July 2, 2021, the warrant held by Hercules may only be exercised for shares of Class A common stock.

The Term Loan Facility contained customary affirmative and negative covenants, including covenants that required Hercules consent to, among other things, merge or consolidate or acquire assets outside the ordinary course of business, make investments, incur additional indebtedness or guarantee indebtedness of others, pay dividends and redeem and repurchase the Company’s capital stock, enter into transactions with affiliates outside the ordinary course of business, and create liens on Company assets. Xometry was in compliance with covenants at the time the term loan was repaid and as of December 31, 2020.

Contingencies

The Company from time to time may be subject to various claims and legal proceedings covering a range of matters that arise in the ordinary course of its business activities. In the opinion of the Company, although the outcome of any legal proceedings cannot be predicted with certainty, the ultimate liability of the Company in connection with its legal proceedings is not expected to have a material adverse effect on the Company’s financial position or operations.

~~(13)~~(14) Segments

Xometry is organized in 2two segments referred to as: (1) the U.S. and (2) ~~Europe.~~International (formerly referred to as Europe). Xometry’s operating segments are also the Company’s reportable segments. Xometry’s reportable segments, whose products and offerings are generally the same, are managed separately based on geography. Xometry’s two segments are defined based on the reporting and review process used by the chief operating decision maker (“CODM”), the Chief Executive Officer. The Company evaluates the performance of the operating segments primarily based on revenue and segment “profits/loss” which is largely the results of the segment before income taxes. The Company has not allocated certain general and administrative expenses to the ~~Europe~~International segment. The Company’s CODM monitors assets of the consolidated Company, but does not use assets, by operating segment when assessing performance or making operating segment resource decisions.

The following tables reflect certain segment information for the three and the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Revenue

U.S.

$
51,739

$
41,145

$
140,266

$
101,537

Europe

4,988

808

10,972

1,888

Total

$
56,727

$
41,953

$
151,238

$
103,425

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Segment Losses

U.S.

$
(12,550
)

$
(4,101
)

$
(30,152
)

$
(16,092
)
Europe

(2,161
)

(2,082
)

(7,324
)

(4,817
)
Total

$
(14,711
)

$
(6,183
)

$
(37,476
)

$
(20,909
)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue
U.S.	$	94,829	$	51,739	$	258,553	$	140,266
International		8,742		4,988		24,304		10,972
Total	$	103,571	$	56,727	$	282,857	$	151,238


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Segment Losses
U.S.	$	(10,732	)	$	(12,550	)	$	(36,977	)	$	(30,152	)
International		(4,305	)		(2,161	)		(14,625	)		(7,324	)
Total	$	(15,037	)	$	(14,711	)	$	(51,602	)	$	(37,476	)

~~(14)Related Party Transactions~~

Prior the Company's IPO on July 2, 2021, certain companies and/or affiliates of companies that were holders of the Company’s Convertible Preferred Stock acquired products and assemblies through the Xometry platform. These Convertible Preferred Stock converted to Class A common stock on July 2, 2021. As such, Xometry’s revenue, accounts receivable, and accounts payable include amounts from these companies and/or affiliates of these companies.

~~For the nine months ended September 30, 2021, Xometry recognized $0.7~~ ~~million from companies/and or affiliates of these companies. For the three months and nine months ended September 30, 2020, Xometry recognized revenue of approximately $0.2~~ ~~million and $1.1~~ ~~million, respectively from companies/and or affiliates of these companies. As December 31, 2020, the Company had approximately $0.4~~ ~~million of accounts receivable from companies and/or affiliates of these companies.~~

~~Certain companies and/or affiliates of companies that were holders of the Company’s Convertible Preferred Stock were no longer considered related parties after the IPO.~~

In February 2018, the Company entered into a consulting agreement with Business Improvement Systems, Inc., which is owned by Peter Goguen. Peter Goguen is Xometry’s Chief Operating Officer. Pursuant to the terms of this agreement, the Company paid Business Improvement Systems, Inc. a monthly consulting fee in the amount of $~~11,667. Business Improvement Systems, Inc. ("BIS") provided the Company with consulting services related to operating services. This agreement was terminated as of January 31, 2021.~~

~~For the three months ended September 30, 2021,~~ 0 ~~amounts were paid to BIS. For the three months ended September 30, 2020, the Company paid BIS, approximately $0.1~~ ~~million. As of September 30, 2021, the Company had~~ 0 ~~amounts payable to BIS. As of December 31, 2020, the Company had $0.1~~ ~~million payable to BIS.~~

~~For the nine months ended September 30, 2021 and 2020, the Company paid BIS, approximately $0.2~~ ~~million and $0.2~~ ~~million, respectively.~~

1621

(15) Goodwill and Intangible Assets

The following tables summarize the Company’s intangible assets (dollars in thousands):


	September 30, 2021								September 30, 2022
	Weighted average amortization period in years		Gross carrying amount		Accumulated amortization		Net carrying amount		Weighted average amortization period in years		Gross carrying amount		Accumulated amortization		Net carrying amount

Intangible Assets
Amortizing intangible assets:
Non Compete		2	$	106	$	106	$	—
Customer Relationships		1		539		520		19		15	$	36,652	$	2,025	$	34,627
Trade Names		6		173		141		32		10		841		77		764
Developed Technology		3		762		558		204		4		1,218		592		626
Vendor Relationships		15		1,404		204		1,200		15		1,267		276		991
Database										5		2,400		390		2,010
In-place Lease Intangible Asset										4		548		109		439
Above Market Lease Intangible Asset										4		896		183		713
Patents										17		157		40		117
Total intangible assets			$	2,984	$	1,529	$	1,455			$	43,979	$	3,692	$	40,287


	December 31, 2021
	Weighted average amortization period in years		Gross carrying amount		Accumulated amortization		Net carrying amount
Intangible Assets
Amortizing intangible assets:
Customer Relationships		15	$	37,139	$	674	$	36,465
Trade Names		9		973		147		826
Developed Technology		4		1,502		605		897
Vendor Relationships		15		1,404		226		1,178
Database		5		2,400		30		2,370
Total intangible assets			$	43,418	$	1,682	$	41,736

The following tables provides a roll forward of the carrying amount of goodwill (in thousands):

December 31, 2020

Weighted
average
amortization
period in
years

Gross
carrying
amount

Accumulated
amortization

Net
carrying
amount

Intangible Assets

Amortizing intangible assets:

Non Compete

2

$
106

$
106

$
—

Customer Relationships

1

539

512

27

Trade Names

6

173

141

32

Developed Technology

3

762

438

324

Vendor Relationships

15

1,404

135

1,269

Total intangible assets

$
2,984

$
1,332

$
1,652



	2022				2021

Balance as of January 1:
Gross goodwill	$	257,746			$	3,907
Accumulated impairments		(3,074	)			(3,074	)
Net goodwill as of January 1		254,672				833
Goodwill adjustment during the year		5,299		(1)		253,839
Net goodwill as of September 30, 2022, and December 31, 2021	$	259,971			$	254,672

(1) See Note 7 - Acquisitions.

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, Xometry’s goodwill of $~~0.8~~260.0 million and $254.7 million, respectively, is part of the Company's U.S. operating segment.

As of September 30, ~~2021,~~2022, estimated amortization expense for intangible assets for the remainder of ~~2021~~2022 and the next five years is: $~~0.1~~ ~~million in 2021, $0.3~~0.9 million in 2022, $~~0.1~~3.6 million in 2023, $~~0.1~~3.6 million in 2024, $~~0.1~~3.6 million in 2025, ~~and~~ $~~0.1~~3.2 million in ~~2026.~~2026, $2.6 million in 2027 and $22.8 million thereafter.

Amortization expense for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 was as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Sales and marketing	$	26	$	155	$	77	$	491	$	776		26	$	2,326		77
Product development		40		40		120		177		86		40		257		120
General and administrative(1)		2		2		7		8		91		2		299		7
Total	$	68	$	197	$	204	$	676	$	953	$	68	$	2,882	$	204

(1) Amortization of the lease related intangible assets is recorded as operating lease expense in general and administrative.

1723

~~(16) Subsequent Events~~

~~On November 1, 2021, the Company acquired certain assets and liabilities from Big Blue Saw LLC ("Big Blue Saw"), subject to an Asset Purchase Agreement for total consideration of $2.5~~ ~~million. The total consideration includes cash consideration at closing of $1.25~~ ~~million, $250,000~~ ~~of Class A common stock at closing and contingent consideration of $1.0~~ ~~million. Big Blue Saw extends our marketplace capabilities in water jet and laser cutting.~~

~~On November 5, 2021, the Company acquired certain assets and liabilities from Fusiform, Inc. (dba FactoryFour), subject to an Asset Purchase Agreement for total consideration of $6.3~~ ~~million. The total consideration includes cash consideration at closing of $1.9~~ ~~million, $1.9~~ ~~million of Class A common stock at closing and contingent consideration of $2.5~~ million. FactoryFour will provide a SaaS based solution to help manufacturers in the Xometry marketplace improve lead times and make strong, data-driven decisions through real-time production tracking.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed in Part II, Item 1A, "Risk Factors" in ~~this Quarterly~~our Annual Report on Form ~~10-Q.~~10-K for the year ended December 31, 2021. Our historical results are not necessarily indicative of the results that may be expected in the future and our current quarterly results are not necessarily indicative of the results expected for the full year or any other period.

Overview

Xometry, Inc. (“Xometry”, “Company”, ~~"our"~~“our” or ~~"we"~~“we”) was incorporated in the State of Delaware in May 2013. Xometry is a global online marketplace connecting enterprise buyers with suppliers of manufacturing services, transforming one of the largest industries in the world. We use our proprietary technology to create a marketplace that enables buyers to efficiently source manufactured parts and assemblies, and empower suppliers of manufacturing services to grow their businesses. Xometry's corporate headquarters is located in Derwood, Maryland.

Our mission is to accelerate innovation by providing real time, equitable access to global manufacturing capacity and demand. Our vision is to drive efficiency, sustainability and innovation for industries worldwide by lowering the barriers to entry to the manufacturing ecosystem.

We are a leading AI-enabled marketplace for on-demand manufacturing, transforming one of the largest industries in the world. We use our proprietary technology to create a marketplace that enables buyers to efficiently source on-demand manufactured parts and assemblies, and empowers sellers of manufacturing servicesempower suppliers to grow their ~~businesses.~~manufacturing businesses and improve machine uptime by providing access to an extensive, diverse base of buyers. We also offer suppliers supporting products and services to meet their unique needs. Our suite of supplier services includes a cloud-based manufacturing execution system, access to competitively priced tools, materials and supplies from leading brands and financial service products to stabilize and enhance cash flow. In addition, we offer suppliers digital marketing and data solutions and SaaS based solutions to help suppliers optimize their productivity.

We define “buyers” as individuals who have placed an order to purchase on-demand parts or assemblies on our marketplace. Our buyers include engineers, product designers, procurement and supply chain personnel, inventors and business owners from businesses of a variety of sizes, ranging from self-funded start-ups to Fortune 100 companies. We define “accounts” as an individual entity, such as a sole proprietor with a single buyer or corporate entities with multiple buyers, having purchased at least one part on our marketplace. We define ~~“sellers”~~“suppliers” as individuals or businesses who have been approved by us to either manufacture a product on our platform for a buyer or have utilized our ~~seller~~supplier services, including our financial services or the purchase of supplies.

~~Our~~The majority of our revenue is ~~generated by~~derived from the sale of part(s) and assemblies to our ~~customers.~~customers on our marketplace, which we refer to as marketplace revenue. The ~~sellers~~suppliers on our platform offer a diversified mix of manufacturing processes. These manufacturing processes include ~~CNC~~computer numerical control (“CNC”) manufacturing, sheet metal ~~manufacturing,~~forming, sheet cutting, 3D printing (including fused deposition modeling, direct metal laser sintering, PolyJet, stereolithography, selective laser sintering, binder jetting, carbon digital light synthesis and multi jet fusion), die casting, stamping, injection molding, urethane casting, tube cutting, tube bending, as well as finishing services, rapid prototyping and high-volume production. We enable buyers to source these processes to meet complex and specific design and order needs across several industries, including Defense, Aerospace, ~~and Defense,~~ Healthcare, Automotive, Consumer Goods, Industrial, Robotics, Government, and Education.

~~In addition, in mid-2020~~During the second quarter of 2022, we launched ~~a suite of financial~~the Industrial Buying Engine™ (“IBE”) which helps customers source and purchase from the more than 500,000 suppliers on Thomasnet.com. The IBE provides buyer choice including instant quote “buy-it-now” functionality and digitizes the old and time-consuming request-for-quote process. Through the IBE, buyers can request quotes for products and services from suppliers.

Our supplier services revenue primarily includes the sale of advertising and marketing services and to a lesser extent, supplies and financial service products that help our ~~sellers~~customers better manage cash flow at all stages of job ~~production from which we have generated a marginal amount of revenue to date.~~production. Our financial services products, such as Xometry Pay, enable ~~sellers~~suppliers to stabilize and enhance their cash flows, supply discounts that allow ~~sellers~~suppliers to lower their operating costs, and resource management tools to optimize their businesses. In 2021, we acquired Thomas Publishing Company (“Thomas”) and Fusiform, Inc. (d.b.a. FactoryFour) (“FactoryFour”), expanding our basket of supplier services to include

advertising and marketing services and to a lesser extent SaaS based solutions to help suppliers optimize their productivity. Our revenue from Thomas is primarily advertising revenue.

During the second quarter of 2022, we introduced Workcenter which gives suppliers a one-stop view into all of their Xometry and non-Xometry work. A cloud-based manufacturing execution system, Workcenter brings the job board and financial services into one, easy-to-use platform. With Workcenter, shop owners can build and manage workflows for all their projects, including those from non-Xometry customers, and also quote new projects from Xometry and Thomas.

Our business benefits from a virtuous network liquidity effect, because adding buyers to our platform generates greater demand on our marketplace which in turn attracts more ~~sellers~~suppliers to the platform, allowing us to rapidly scale and increase the number of manufacturing processes offered on our platform. In order to continue to meet the needs of buyers and remain highly competitive, we expect to continue to add ~~sellers~~suppliers to our platform that have new and innovative manufacturing processes. Thus, our platform is unbounded by the in-house manufacturing capacity and processes of our current ~~sellers.~~

On July 2, 2021, the Company closed its planned IPO, in which it issued and sold 7,906,250 shares of its Class A common stock. The initial offering price was $44.00 per share. The Company received net proceeds of approximately $325.3 million from the IPO after deducting underwriting discounts and commissions of $22.6 million. The Company also incurred approximately $4.0 million of other offering costs in connection with its IPO.

Upon the closing of the IPO on July 2, 2021, 8,665,797 shares of outstanding common stock were reclassified into Class A common stock, 27,758,941 shares of outstanding convertible preferred stock were converted into Class A common stock, and 2,676,154 shares of Class A common stock were exchanged by our co-founders for an equivalent number of shares of Class B common stock pursuant to the terms of the exchange agreement.

Also on July 2, 2021, the Company reserved 402,658 shares of its Class A common stock, representing 1% of the Company's fully diluted capitalization as of the date of approval of our board of directors, for charitable contributions to non-profit organizations. These shares will be issued over the next five years, in an amount not to exceed 20% of the initial reserve amount per calendar year. During the third quarter of 2021, the Company donated 20,133 shares of Class A common stock to a donor advised fund and recognized an expense associated with the charitable contribution of approximately $1.2 million which is recorded in general and administrative expense in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

On November 1, 2021, the Company acquired certain assets and liabilities from Big Blue Saw LLC ("Big Blue Saw"), subject to an Asset Purchase Agreement for total consideration of $2.5 million. The total consideration includes cash consideration at closing of $1.25 million, $250,000 of Class A common stock at closing and contingent consideration of $1.0 million. Big Blue Saw extends our marketplace capabilities in water jet and laser cutting.

On November 5, 2021, the Company acquired certain assets and liabilities from Fusiform, Inc. (dba FactoryFour), subject to an Asset Purchase Agreement for total consideration of $6.3 million. The total consideration includes cash consideration at closing of $1.9 million, $1.9 million of Class A common stock at closing and contingent consideration of $2.5 million. FactoryFour will provide a SAAS based solution to help manufacturers in the Xometry marketplace improve lead times and make strong, data-driven decisions through real-time production tracking.suppliers.

The on-going COVID-19 pandemic has globally resulted in loss of life, and business closures impacting our buyers and sellers, restrictions on travel, and closures of certain aspects of our operations. The extent to which the COVID-19 pandemic will impact our business in the future is highly uncertain and cannot be predicted at this time. The pandemic has caused us to modify our business practices to help minimize the risk of the virus to our employees, which could negatively impact our business. These measures included temporarily requiring employees to work remotely, suspending all non-essential business travel for our employees, limiting external guests visiting our offices, and canceling, postponing, or holding meetings and events virtually. Given the continually evolving situation, there is no certainty that the measures we took were sufficient to mitigate the risks posed by the virus and we may not have sufficient protection or recovery plans to continue to deal with the COVID-19 pandemic.suppliers. Even after the COVID-19 pandemic subsides, it may have a continued and lasting impact on the global economy, including our business.

~~In addition, future~~ Future shelter-in-place orders and similar regulations may impact the ability of our buyers and ~~sellers~~suppliers to operate their businesses. Any limitations on or disruptions or closures of buyers’ and ~~sellers’~~suppliers’ businesses could adversely affect our business.

The COVID-19 pandemic to date has not significantly adversely impacted the growth of our business. We believe the COVID-19 pandemic has validated our platform, highlighting the need for resilient supply chains, and reshaping the way buyers source their manufacturing needs.

Key Marketplace Operational and Business Metrics

In addition to the measures presented in our condensed consolidated financial statements included elsewhere in this filing, we use the following key operational and business metrics to help us evaluate our marketplace business, measure our performance, identify trends affecting our business, formulate business plans and develop forecasts, and make strategic decisions:

2025

Active Buyers

We define Active Buyers as the number of buyers who have made at least one purchase on our marketplace during the last twelve months. An increase or decrease in the number of Active Buyers is a key indicator of our ability to attract, retain and engage buyers on our platform.

Active Buyers has consistently grown over time. The number of Active Buyers on our platform reached 36,789 as of September 30, 2022, up 40% from 26,187 as of September 30, ~~2021, up 61% from 16,266 as of September 30, 2020.~~2021. The key drivers of Active Buyer growth are continued account and buyer engagement and the success of our strategy to attract new buyers.

2126

Percentage of Revenue from Existing Accounts

We define an existing account as an account where at least one buyer has made a purchase on our marketplace. We believe the efficiency and transparency of our business model leads to increasing account stickiness and spend over time. Buyers can utilize our marketplace for both one-off and recurring manufacturing opportunities. For example, a buyer may choose to utilize our marketplace’s CNC manufacturing processes to manufacture a discrete component for a prototype, and then may choose to later use our marketplace to mass produce that same component. A buyer may also recommend our marketplace to other engineers within their organizations who are designing other products and who may use an entirely different set of manufacturing processes, deepening our reach and stickiness with an account.

For the quarter ended September 30, ~~2021, 95%~~2022, 96% of our revenue was generated from existing accounts. We believe the repeat purchase activity from existing accounts reflects the underlying strength of our business and provides us with substantial revenue visibility and predictability.

2227

Accounts with Last Twelve-Month Spend of At Least $50,000

Accounts with Last Twelve-Month, or LTM, Spend of At Least $50,000 means an account that has spent at least $50,000 on our marketplace in the most recent twelve-month period. We view the acquisition of an account as a foundation for the addition of long-term buyers to our marketplace. Once an account joins our platform, we aim to expand the relationship and increase engagement and spending activities from that account over time. The number of accounts with LTM Spend of at least $50,000 on our platform reached 974 as of September 30, 2022, up 62%from 603 as of September 30, ~~2021, up 67%from 361 as of September 30, 2020.~~2021.

Adjusted EBITDA

We define Adjusted EBITDA as net ~~income (loss),~~loss, adjusted ~~to exclude~~for interest expense, interest and dividend income and other ~~expense,~~expenses, income tax benefit, and certain other non-cash or non-recurring items impacting net loss from time to time, principally comprised of depreciation and amortization, stock-based compensation, ~~expense,~~ charitable contributions of common stock, income from an unconsolidated joint venture, impairment charges and ~~impairment charges.~~acquisition and other adjustments not reflective of the Company's ongoing business, such as adjustments related to purchase accounting, the revaluation of contingent consideration and transaction costs. Adjusted EBITDA is a performance measure that we use to assess our operating performance and the operating leverage in our business. Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA for a period by revenue for the same period.

For the three months ended September 30, ~~2021,~~2022, Adjusted EBITDA ~~increased~~loss decreased to ~~$(10.0)~~$(6.5) million, as compared to Adjusted EBITDA loss of ~~$(4.6)~~$(10.0) million for the same quarter in ~~2020.~~2021. For the quarter ended September 30, ~~2021,~~2022, Adjusted EBITDA ~~increased~~Margin decreased to ~~(18)~~(6)% of revenue, as compared to ~~(11)~~(18)% of revenue for the same quarter in ~~2020,~~2021, driven primarily by ~~higher~~increased operating ~~expenses~~efficiencies as we continue to ~~scale~~grow our ~~business.~~revenue and margins faster than our expenses.

For the nine months ended September 30, ~~2021,~~2022, Adjusted EBITDA ~~increased~~loss decreased to ~~$(27.9)~~$(27.5) million, as compared to Adjusted EBITDA loss of ~~$(16.9)~~$(27.9) million for the same period in ~~2020.~~2021. For the nine months ended September 30, ~~2021,~~2022, Adjusted EBITDA ~~increased~~Margin decreased to ~~(18)~~(10)% of revenue, as compared to ~~(16)~~(18)% of revenue for the same period in ~~2020,~~2021, driven primarily by ~~higher~~increased operating ~~expenses~~efficiencies as we continue to ~~scale~~grow our ~~business.~~revenue and margins faster than our expenses.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net loss	$	(15,041	)	$	(14,711	)	$	(51,585	)	$	(37,476	)
Addback (deduct)
Interest expense, interest and dividend income and other expenses		139			448			2,991			1,363
Depreciation and amortization		1,909			816			5,716			2,304
Amortization of lease intangible		333			—			999			—
Income tax benefit		��			—			(559	)		—
Stock based compensation expense		5,113			2,266			14,048			4,747
Acquisition and other		42			—			(1,242	)		—
Charitable contribution of common stock		987			1,157			2,272			1,157
Income from unconsolidated joint venture		(297	)		—			(600	)		—
Impairment of assets		325			—			444			—
Adjusted EBITDA	$	(6,490	)	$	(10,024	)	$	(27,516	)	$	(27,905	)

Non-GAAP Net Loss

We define Non-GAAP net loss, as net loss adjusted for depreciation and amortization, stock-based compensation expense, amortization of lease intangible, amortization of deferred costs on convertible notes, unrealized loss on marketable securities, loss on sale of property and equipment, charitable contributions of common stock, impairment charges, and acquisition and other adjustments not reflective of the Company's ongoing business, such as adjustments related to purchase accounting, the revaluation of contingent consideration and transaction costs.


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021
Non-GAAP Net Loss:
Net loss	$	(15,041	)	$	(14,711	)	$	(51,585	)	$	(37,476	)
Add (deduct):
Depreciation and amortization expense		1,909			816			5,716			2,304
Stock-based compensation		5,113			2,266			14,048			4,747
Amortization of lease intangible		333			—			999			—
Amortization of deferred costs on convertible notes		469			—			1,250			—
Unrealized loss on marketable securities		469			239			1,659			239
Acquisition and other		42			—			(1,242	)		—
Loss on sale of property and equipment		—			10			71			8
Charitable contribution of common stock		987			1,157			2,272			1,157
Impairment of assets		325			—			444			—
Non-GAAP Net Loss	$	(5,394	)	$	(10,223	)	$	(26,368	)	$	(29,021	)

For the three months ended September 30, 2022, Non-GAAP net loss decreased to $(5.4) million, as compared to Non-GAAP net loss of $(10.2) million for the same quarter in 2021. For the quarter ended September 30, 2022, Non-GAAP net loss decreased to (5)% of revenue, as compared to (18)% of revenue for the same quarter in 2021.

For the nine months ended September 30, 2022, Non-GAAP net loss decreased to $(26.4) million, as compared to Non-GAAP net loss of $(29.0) million for the same period in 2021. For the nine months ended September 30, 2022, Non-GAAP net loss decreased to (9)% of revenue, as compared to (19)% of revenue for the same period in 2021.

Adjusted EBITDA ~~is a~~and Non-GAAP net loss are non-GAAP financial ~~measure~~measures that we use, in addition to our GAAP financial measures, to evaluate our business. We have included Adjusted EBITDA and Non-GAAP net loss in this filing because ~~it is a~~they are key ~~measure~~measures used by our management to evaluate our operating performance. Accordingly, we believe that Adjusted EBITDA ~~provides~~and Non-GAAP net loss provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team and board of directors. Our calculation of Adjusted EBITDA and Non-GAAP net loss may differ from similarly titled non-GAAP measures, if any, reported by our peer companies and therefore may not serve as an accurate basis of comparison among companies. Adjusted EBITDA and Non-GAAP net loss should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Net loss

$
(14,711
)

$
(6,183
)

$
(37,476
)

$
(20,909
)
Addback

Interest expense, interest and dividend income and other expenses

448

416

1,363

1,064

Depreciation and amortization

816

869

2,304

2,256

Charitable contribution of common stock

1,157

—

1,157

—

Stock based compensation expense

2,266

293

4,747

679

Adjusted EBITDA

$
(10,024
)

$
(4,605
)

$
(27,905
)

$
(16,910
)

Components of Results of Operations

Revenue

Our marketplace revenue is primarily comprised of sales to ~~buyers~~customers through our platform. Buyers purchase specialized CNC manufacturing, sheet metal manufacturing, 3D printing, injection molding, urethane casting, tube cutting, tube bending and finishing services. ~~Buyer~~Customer purchases range from rapid prototyping of single parts to high-volume production on our marketplace. These products are primarily manufactured by our network of ~~sellers. We also derive an immaterial portion~~suppliers.

Supplier services revenue includes the sale of ~~our revenue from our offerings to sellers, which includes seller~~marketing and advertising services, and to a lesser extent SaaS based solutions, the sale of supplies and financial service products.

Cost of Revenue

~~Cost~~Marketplace cost of revenue primarily consists of the cost to us of the products that are manufactured or produced by us or our ~~sellers~~suppliers for delivery to buyers on our platform, internal and external production costs, shipping costs and certain internal depreciation. We expect cost of revenue to increase in absolute dollars to the extent our revenue increases and transaction volume increases. As we grow and add ~~sellers~~suppliers to our platform, ~~and~~we are able to ~~expand~~improve our ~~network liquidity effect,~~pricing efficiency, we expect cost of revenue to decline as a ~~percent~~percentage of revenue over time.

Cost of revenue for supplier services primarily consists of internal and external production costs and website hosting.

Gross Profit

Gross profit, or revenue less cost of revenue, is primarily affected by the growth of our revenue. Our gross profit margin is primarily affected by liquidity of our ~~seller~~suppliers’ network and the efficiency of our pricing and will be benefited by increasing the use of existing ~~seller~~supplier services and the variety of ~~seller~~supplier services offerings over time.

Operating Expenses

Our operating expenses consist of sales and marketing, operations and support, product development and general and administrative functions.

Sales and Marketing

Sales and marketing expenses are expensed as incurred and include the costs of our digital marketing strategies, branding costs and other advertising costs, certain depreciation and amortization expense, and compensation expenses, including stock-based compensation, to our sales and marketing employees. We intend to continue to invest in our sales and marketing capabilities in the future to continue to increase our brand awareness, add new accounts and further penetrate existing accounts. We expect sales and marketing expense to increase in absolute dollars in the future as we grow our business, though in the ~~near term~~near-term sales and marketing expenses may fluctuate from period to period based on the timing of our investments in our sales and marketing functions as these investments may vary in scope and scale over future periods.

Operations and Support

Operations and support expenses are the costs we incur in support of the ~~customers~~buyers and ~~sellers~~suppliers on our platform which are provided by phone, email and chat for purposes of resolving ~~customer~~buyer and ~~seller~~suppliers related matters. These costs primarily consist of compensation expenses of the support staff, including stock-based compensation, certain depreciation and amortization expense and software costs used in delivering ~~customer~~buyer and ~~seller service.~~suppliers services. We expect operations and support expense to increase in absolute

dollars in the future, though in the ~~near term~~near-term operations and support expenses may fluctuate from period-to-period based on total revenue levels and the timing of our investments in our operations and support functions as these investments may vary in scope and scale over future periods.

Product Development

Product development costs which are not eligible for capitalization are expensed as incurred. This account also includes compensation expenses, including stock-based compensation expenses to our employees performing these functions and certain depreciation and amortization expense. We expect product development expense to increase in absolute dollars in the future, though in the ~~near term~~near-term product development expenses may fluctuate from period-to-period based on total revenue levels and the timing of our investments in our product development functions as these investments may vary in scope and scale over future periods.

General and Administrative

General and administrative expenses primarily consist of ~~professional service fees, public company costs, charitable contributions and certain depreciation and amortization expense. It also includes~~ compensation expenses, including stock-based compensation expenses, for executive, finance, legal and other administrative ~~personnel.~~personnel, professional service fees and certain depreciation and amortization expense. We expect our general and administrative expenses to increase. We expect to incur additional general and administrative expenses as a result of operating as a public company, including as a result of increased legal, accounting, and directors’ and officers’ insurance expenses.

Other (Expense) Income

Interest Expense

Interest expense consists of interest incurred on our outstanding borrowings under our outstanding ~~debt facility. In 2020, we amended our term loan agreement, increasing the principal by $4.0 million for total borrowings of $15.0 million.~~convertible notes or other borrowings. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” ~~On July 9, 2021, we repaid our $15.0 million term loan.~~

Interest and Dividend Income

Interest and dividend income consists of interest on our cash and cash equivalents and dividend income from our investments.

Other Expenses

Other expenses consist primarily of unrealized losses ~~losses on the extinguishment of debt~~ and other expenses.

25Income from Unconsolidated Joint Venture

Income from unconsolidated joint venture consists of our share of the joint venture's income.

Results of Operations

Comparison of the Three Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

The following table sets forth our ~~statement~~unaudited statements of operations data for the periods indicated:


	Three Months Ended September 30,						Three Months Ended September 30,
	2021			2020			2022			2021
	(in thousands)						(in thousands)
Revenue	$	56,727		$	41,953		$	103,571		$	56,727
Cost of revenue		42,233			31,778			62,670			42,233
Gross profit		14,494			10,175			40,901			14,494
Operating expenses:
Sales and marketing		9,828			5,986			21,416			9,828
Operations and support		5,775			3,671			11,620			5,775
Product development		4,376			3,003			7,613			4,376
General and administrative		8,778			3,282			15,126			8,778
Impairment of assets								325			—
Total operating expenses		28,757			15,942			56,100			28,757
Loss from operations		(14,263	)		(5,767	)		(15,199	)		(14,263	)
Other (expenses) income:
Interest expense		(79	)		(309	)		(1,194	)		(79	)
Interest and dividend income		417			2			1,344			417
Other expenses		(786	)		(109	)		(289	)		(786	)
Total other expenses		(448	)		(416	)
Income from unconsolidated joint venture								297			—
Total other income (expenses)								158			(448	)
Loss before income taxes								(15,041	)		(14,711	)
Benefit for income taxes								—			—
Net loss		(14,711	)		(6,183	)		(15,041	)		(14,711	)
Deemed dividend to preferred stockholders		—			(8,801	)
Net (loss) income attributable to noncontrolling interest								(4	)		—
Net loss attributable to common stockholders	$	(14,711	)	$	(14,984	)	$	(15,037	)	$	(14,711	)

The following table sets forth our ~~statement~~unaudited statements of operations data expressed as a percentage of total revenue for the periods indicated:


							Three Months Ended September 30,
	Three Months Ended September 30,						2022			2021
	2021			2020
Revenue		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenue		74.4	%		75.7	%		60.5	%		74.4	%
Gross profit		25.6	%		24.3	%		39.5	%		25.6	%
Operating expenses:
Sales and marketing		17.3	%		14.3	%		20.7	%		17.3	%
Operations and support		10.2	%		8.8	%		11.2	%		10.2	%
Product development		7.7	%		7.2	%		7.4	%		7.7	%
General and administrative		15.5	%		7.8	%		14.6	%		15.5	%
Impairment of assets								0.3	%		—	%
Total operating expenses		50.7	%		38.1	%		54.2	%		50.7	%
Loss from operations		(25.1	)%		(13.8	)%		(14.7	)%		(25.1	)%
Other (expenses) income:
Interest expense		(0.1	)%		(0.7	)%		(1.2	)%		(0.1	)%
Interest and dividend income		0.7	%		—	%		1.3	%		0.7	%
Other expenses		(1.4	)%		(0.3	)%		(0.3	)%		(1.4	)%
Total other expenses		(0.8	)%		(1.0	)%
Net Loss		(25.9	)%		(14.8	)%
Deemed dividend to preferred stockholders		—	%		(21.0	)%
Income from unconsolidated joint venture								0.3	%		—	%
Total other income (expenses)								0.1	%		(0.8	)%
Loss before income taxes								(14.6	)%		(25.9	)%
Benefit for income taxes								—	%		—	%
Net loss attributable to common stockholders		(25.9	)%		(35.8	)%		(14.6	)%		(25.9	)%
Net (loss) income attributable to noncontrolling interest								—	%		—	%
Net loss attributable to common stockholders								(14.6	)%		(25.9	)%

The following tables present our disaggregated revenue and cost of revenue. Revenue from our marketplace primarily reflects the sales of parts and assemblies on our platform. Revenue from supplier services primarily includes the sale of advertising and to a lesser extent supplies, financial service products and SaaS products.

Revenue and cost of revenue is presented in the following tables for the three months ended September 30, 2022 (in thousands, amounts for the three months ended September 30, 2021, were not considered material):


	For the Three Months Ended September 30,
	2022
Marketplace
Revenue	$	84,060
Cost of revenue		58,479
Gross Profit	$	25,581

Supplier services
Revenue	$	19,511
Cost of revenue		4,191
Gross Profit	$	15,320

Revenue

Total revenue increased ~~$14.8~~$46.8 million, or ~~35%~~83%, from ~~$42.0 million for the three months ended September 30, 2020 to~~ $56.7 million for the three months ended September 30, ~~2021.~~2021 to $103.6 million for the three months ended September 30, 2022. This growth was primarily a result of an increase in marketplace revenue and an increase in supplier services revenue due to our acquisition of Thomas. Total revenue from marketplace and supplier services for the three months ended September 30, 2022 was $84.1 million and $19.5 million, respectively. The marketplace increase was primarily the result of a ~~61%~~40% increase in ~~the number of~~ active buyers resulting from ~~investment~~investments in sales and marketing, as well as existing buyers increasing their spend on the platform for the three months ended September 30, ~~2021~~2022, as compared to the prior year period. Supplier services revenue growth was driven primarily by our acquisition of Thomas in December 2021 and to a lesser extent growth in supplies revenue.

2633

Total revenue from our U.S. and ~~Europe~~International operating segments for the three months ended September 30, 2022 and 2021, was $94.8 million and ~~2020, was~~ $51.7 million, ~~and $41.1 million,~~respectively, for the U.S. ~~respectively,~~, and $8.7 million and $5.0 million, ~~and $0.8 million,~~respectively, for ~~Europe respectively.~~International.

Cost of Revenue

Total cost of revenue increased ~~$10.5~~$20.4 million, or ~~33%~~48%, from ~~$31.8 million for the period ended September 30, 2020 to~~ $42.2 million for the three months ended September 30, ~~2021.~~2021 to $62.7 million for the three months ended September 30, 2022. This increase was primarily the result of an increase in marketplace cost of revenue and increase in supplier service costs of revenue due to our acquisition of Thomas. Total cost of revenue from marketplace and supplier services for the three months ended September 30, 2022 was $58.5 million and $4.2 million, respectively.

Marketplace cost of revenue was driven by increased payments to ~~sellers~~suppliers on our platform due to the growth in our buyer base and increased activity by existing accounts on our marketplace. Our supplier services cost of revenue increased primarily as a result of our acquisition of Thomas in December 2021.

Gross Profit and Margin

Gross profit increased ~~$4.3~~$26.4 million, or ~~42%~~182%, from ~~$10.2 million for the three months ended September 30, 2020 to~~ $14.5 million for the three months ended September 30, ~~2021.~~2021 to $40.9 million for the three months ended September 30, 2022. The increase in gross profit was primarily due to the ~~increase~~acquisition of Thomas, increases in revenue ~~described above.~~from marketplace and improved marketplace gross margins as compared to the prior year period.

Gross margin ~~improved to 25.6%~~for marketplace was 30.4% for the three months ended September 30, ~~2021 from 24.3% for~~2022 which was a significant improvement over the ~~three months ended September 30, 2020. Our~~prior year period in part due to our AI-driven ~~platform pricing~~platform. Pricing has become more efficient due to the increased number of orders over time, improving the data set and thus making our pricing decisions more accurate. Additionally, we continue to grow our active ~~sellers~~suppliers resulting in more competition for buyers’ orders and therefore a lower cost of revenue. Gross margin for our supplier services was 78.5% for the three months ended September 30, 2022 primarily due to our acquisition of Thomas.

Operating Expenses

Sales and Marketing

Sales and marketing expense increased ~~$3.8~~$11.6 million, or ~~64%~~118%, from ~~$6.0 million for the three months ended September 30, 2020 to~~ $9.8 million for the three months ended September 30, 2021 to $21.4 million for the three months ended September 30, 2022, primarily as a result our acquisition of ~~continued investment to drive revenue growth, our hiring of~~Thomas in December 2021, increases from additional sales employees and ~~increased stock based~~ compensation ~~expense primarily related to options granted~~costs including stock-based compensation and increases in ~~the second quarter of 2021, as compared to the corresponding period in the prior year.~~marketing and advertising spend. As a percent of total revenue, sales and marketing expenses increased to ~~17%~~20.7% for the three months ended September 30, ~~2021~~2022 from ~~14%~~17.3% for the three months ended September 30, ~~2020.~~2021.

~~For the three months ended September 30, 2021 and 2020, stock based compensation expense recorded in sales and marketing was $0.3 million and $46,000, respectively.~~

Operations and Support

Operations and support increased ~~$2.1~~$5.8 million, or ~~57%~~101%, from ~~$3.7 million for the three months ended September 30, 2020 to~~ $5.8 million for the three months ended September 30, 2021 to $11.6 million for the three months ended September 30, 2022, primarily as a result our acquisition of Thomas in December 2021, hiring of additional operations and support employees ~~hired to support the growth of buyer~~ and ~~seller activity on our platform, and increased stock based~~their compensation ~~expense primarily related to options granted in the second quarter of 2021, as compared to the corresponding period in the prior year.~~costs including stock-based compensation. As a percent of total revenue, operations and support expenses increased to ~~10%~~11.2% for the three months ended September 30, ~~2021~~2022 from 9%10.2% for the three months ended September 30, ~~2020.~~

~~For the three months ended September 30, 2021 and 2020, stock based compensation expense recorded in operations and support was $0.7 million and $0.1 million, respectively.~~2021.

Product Development

Product development expense increased ~~$1.4~~$3.2 million, or ~~46%~~74%, from ~~$3.0 million for the three months ended September 30, 2020 to~~ $4.4 million for the three months ended September 30, 2021 ato $7.6 million for the three months ended September 30, 2022, primarily as result of our acquisition of Thomas in December 2021, hiring additional development employees and ~~increased stock based~~their compensation ~~expense primarily related to options granted~~costs including stock-based compensation, and increases in ~~the second quarter of 2021, as compared to the corresponding period in the prior year.~~consulting expenses and software and maintenance. As a percent of total revenue, product development expenses ~~increased~~decreased to 8%7.4% for the three months ended September 30, ~~2021~~2022 from 7%7.7% for the three months ended September 30, ~~2020.~~

~~For the three months ended September 30, 2021 and 2020, stock based compensation expense recorded in product development was $0.5 million and $0.1 million, respectively.~~2021.

General and Administrative

General and administrative expense increased ~~$5.5~~$6.3 million, or ~~167%~~72%, from ~~$3.3 million for the three months ended September 30, 2020 to~~ $8.8 million for the three months ended September 30, 2021 ~~primarily as a result~~to $15.1 million for the three months ended September 30, 2022. The primary driver of anthe increase was due to our acquisition of Thomas in ~~compensation-related expenses,~~December 2021, hiring additional administrative employees and their compensation costs including ~~increased stock based compensation,~~stock-based compensation. We incurred additional ~~legal, accounting and financial headcount and third party expenses in preparation for becoming a~~ public company ~~as well as~~costs for insurance, legal and accounting services. We also recorded additional ~~overhead expenses to support the growth of our business operations. During the third quarter of 2021, the Company also made charitable contributions of $1.2 million.~~costs for card processing fees, software and maintenance and facility costs. As a percent of total revenue, general and administrative expenses ~~increased~~decreased to ~~16%~~14.6% for the for the three months ended September 30, ~~2021~~2022 from 8%15.5% for the three months ended September 30, ~~2020.~~2021.

~~For~~Impairment of assets

Impairment of assets of $0.3 million related to incomplete software projects that were abandoned and/or other assets to be disposed of during the three months ended September 30, ~~2021 and 2020, stock based compensation expense recorded in general and administrative was $0.8 million and $0.1 million, respectively.~~2022.

2734

Other (Expenses) Income

Interest Expense

Interest expense ~~decreased~~increased by ~~$0.2~~$1.1 million, or ~~74%~~1,411%, from ~~$0.3 million for the three months ended September 30, 2020 to~~ $0.1 million for the three months ended September 30, 2021 to $1.2 million for the three months ended September 30, 2022, primarily as a result of ~~repaying our term loan~~the interest on the 2027 convertible notes issued in ~~July 2021.~~February 2022.

Interest and dividend income

Interest and dividend income increased toby $0.9 million, or 222%, from $0.4 million for the three months ended September 30, 2021 to $1.3 million for the three months ended September 30, 2022, primarily due to dividend income from our marketable ~~securities.~~securities.

Other Expenses

Other expenses ~~increased~~decreased by ~~$0.7~~$0.5 million, or ~~621%~~63%, from ~~$0.1 million for the three months ended September 30, 2020 to~~ $0.8 million for the three months ended September 30, 2021 to $0.3 million for the three months ended September 30, 2022, as a result of a $0.3 million loss on debt extinguishment recognized in the third quarter of ~~debt, $0.2~~2021 and the impact of foreign exchange.

Income from unconsolidated joint venture

Income from unconsolidated joint venture increased $0.3 million due to our acquisition of ~~unrealized loss~~a 50% interest in Industrial Media, LLC in connection with our acquisition of Thomas on ~~marketable securities and $0.2 million of other expenses.~~December 9, 2021.

Additional Segment Considerations

Total segment loss from our U.S. operating segment for the three months ended September 30, 2022 and 2021, ~~and 2020,~~ was ~~$12.5~~$10.7 million and ~~$4.1~~$12.6 million, respectively. Total segment loss from our ~~Europe~~International operating segment for the three months ended September 30, 2022 and 2021, was $4.3 million and ~~2020, was~~ $2.2 million, ~~and $2.1 million,~~ respectively.

Comparison of the Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

The following table sets forth our unaudited ~~statement~~statements of operations data for the periods indicated:


	Nine Months Ended September 30,
	2022			2021
	(in thousands)
Revenue	$	282,857		$	151,238
Cost of revenue		171,321			115,033
Gross profit		111,536			36,205
Operating expenses:
Sales and marketing		58,846			26,250
Operations and support		36,158			15,594
Product development		22,698			12,131
General and administrative		43,143			18,343
Impairment of assets		444			—
Total operating expenses		161,289			72,318
Loss from operations		(49,753	)		(36,113	)
Other (expenses) income:
Interest expense		(3,172	)		(799	)
Interest and dividend income		1,914			457
Other expenses		(1,733	)		(1,021	)
Income from unconsolidated joint venture		600			—
Total other expenses		(2,391	)		(1,363	)
Loss before income taxes		(52,144	)		(37,476	)
Benefit for income taxes		559			—
Net loss		(51,585	)		(37,476	)
Net (loss) income attributable to noncontrolling interest		17			—
Net loss attributable to common stockholders	$	(51,602	)	$	(37,476	)

Nine Months Ended September 30,

2021

2020

(in thousands)

Revenue

$
151,238

$
103,425

Cost of revenue

115,033

79,619

Gross profit

36,205

23,806

Operating expenses:

Sales and marketing

26,250

15,842

Operations and support

15,594

10,138

Product development

12,131

8,879

General and administrative

18,343

8,792

Total operating expenses

72,318

43,651

Loss from operations

(36,113
)

(19,845
)
Other (expenses) income:

Interest expense

(799
)

(939
)
Interest and dividend income

457

215

Other expenses

(1,021
)

(340
)
Total other expenses

(1,363
)

(1,064
)
Net loss

(37,476
)

(20,909
)
Deemed dividend to preferred stockholders

—

(8,801
)
Net loss attributable to common stockholders

$
(37,476
)

$
(29,710
)

The following table sets forth our unaudited ~~statement~~statements of operations data expressed as a percentage of total revenue for the periods indicated:


	Nine Months Ended September 30,
	2022			2021

Revenue		100.0	%		100.0	%
Cost of revenue		60.6	%		76.1	%
Gross profit		39.4	%		23.9	%
Operating expenses:
Sales and marketing		20.8	%		17.4	%
Operations and support		12.8	%		10.3	%
Product development		8.0	%		8.0	%
General and administrative		15.3	%		12.1	%
Impairment of assets		0.2	%		—	%
Total operating expenses		57.1	%		47.8	%
Loss from operations		(17.7	)%		(23.9	)%
Other (expenses) income:
Interest expense		(1.1	)%		(0.5	)%
Interest and dividend income		0.7	%		0.3	%
Other expenses		(0.6	)%		(0.7	)%
Income from unconsolidated joint venture		0.2	%		—	%
Total other expenses		(0.8	)%		(0.9	)%
Loss before income taxes		(18.5	)%		(24.8	)%
Benefit for income taxes		0.2	%		—	%
Net loss		(18.3	)%		(24.8	)%
Net (loss) income attributable to noncontrolling interest		—	%		—	%
Net loss attributable to common stockholders		(18.3	)%		(24.8	)%

Nine Months Ended September 30,

2021

2020

(in thousands)

Revenue

100.0
%

100.0
%
Cost of revenue

76.1
%

77.0
%
Gross profit

23.9
%

23.0
%
Operating expenses:

Sales and marketing

17.4
%

15.3
%
Operations and support

10.3
%

9.8
%
Product development

8.0
%

8.6
%
General and administrative

12.1
%

8.5
%
Total operating expenses

47.8
%

42.2
%
Loss from operations

(23.9
)%

(19.2
)%
Other (expenses) income:

Interest expense

(0.5
)%

(0.9
)%
Interest and dividend income

0.3
%

0.2
%
Other expenses

(0.7
)%

(0.3
)%
Total other expenses

(0.9
)%

(1.0
)%
Net loss

(24.8
)%

(20.2
)%
Deemed dividend to preferred stockholders

—
%

(8.5
)%
Net loss attributable to common stockholders

(24.8
)%

(28.7
)%

Revenue and cost of revenue is presented in the following tables for the nine months ended September 30, 2022 (in thousands, amounts for the nine months ended September 30, 2021, were not considered material):


	For the Nine Months Ended September 30,
	2022
Marketplace
Revenue	$	224,073
Cost of revenue		158,712
Gross Profit	$	65,361

Supplier services
Revenue	$	58,784
Cost of revenue		12,609
Gross Profit	$	46,175

Revenue

Total revenue increased ~~$47.8~~$131.6 million, or ~~46%~~87%, from ~~$103.4 million for the nine months ended September 30, 2020 to~~ $151.2 million for the nine months ended September 30, ~~2021.~~2021 to $282.9 million for the nine months ended September 30, 2022. This growth was primarily a result of an increase in marketplace revenue and an increase in supplier services revenue due to our acquisition of Thomas. Total revenue from marketplace and supplier services for the nine months ended September 30, 2022 was $224.1 million and $58.8 million, respectively. The marketplace increase was primarily the result of ~~a 61% increase~~increases in active buyers resulting from ~~investment~~investments in sales and marketing, as well as existing buyers increasing their spend on the platform ~~from~~for the nine months ended September 30, 2022, as compared to the prior ~~year.~~year period. Supplier services revenue growth was driven primarily by our acquisition of Thomas in December 2021.

Total revenue from our U.S. and ~~Europe~~International operating segments for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ was ~~$140.2~~$258.6 million and ~~$101.5~~$140.3 million, respectively, for the U.S. ~~respectively,~~, and $24.3 million and $11.0 million, ~~and $1.9 million,~~respectively, for ~~Europe respectively.~~International.

Cost of Revenue

Total cost of revenue increased ~~$35.4~~$56.3 million, or ~~44%~~49%, from ~~$79.6 million for the nine months ended September 30, 2020 to~~ $115.0 million for the nine months ended September 30, ~~2021.~~2021 to $171.3 million for the nine months ended September 30, 2022. This increase was primarily the result of an increase in marketplace cost of revenue and increase in supplier service costs of revenue due to our acquisition of Thomas. Total cost of revenue from marketplace and supplier services for the nine months ended September 30, 2022 was $158.7 million and $12.6 million, respectively.

Gross Profit and Margin

Gross profit increased ~~$12.4~~$75.3 million, or ~~52%~~208%, from ~~$23.8 million for the nine months ended September 30, 2020 to~~ $36.2 million for the nine months ended September 30, ~~2021. The increase in gross profit was due primarily~~2021 to ~~the increase in revenue described above.~~

~~Gross margin increased to 23.9%~~$111.5 million for the nine months ended September 30, ~~2021~~2022. The increase in gross profit was primarily due to the acquisition of Thomas, increases in revenue from ~~23.0%~~marketplace and improved marketplace gross margin as compared to the prior year period.

Gross margin for marketplace was 29.2% for the nine months ended September 30, ~~2020. Our~~2022 which was a significant improvement over the prior year period in part due to our AI-driven ~~platform pricing~~platform. Pricing has become more efficient due to the increased number of orders over time, improving the data set and thus making our pricing decisions more accurate. Additionally, we continue to grow our active ~~sellers~~suppliers resulting in more competition for buyers’ orders and therefore a lower cost of revenue. Gross margin for our supplier services was 78.6% for the nine months ended September 30, 2022 primarily due to our acquisition of Thomas.

Operating Expenses

Sales and Marketing

Sales and marketing expense increased ~~$10.4~~$32.6 million, or ~~66%~~124%, from ~~$15.8 million for the nine months ended September 30, 2020 to~~ $26.3 million for the nine months ended September 30, 2021 to $58.8 million for the nine months ended September 30, 2022, primarily as a result our acquisition of ~~continued investment to drive revenue growth,~~Thomas in December 2021, increases in marketing and advertising spend, additional sales employees and ~~increased compensation-related~~their compensation costs including stock-based compensation, consulting expenses ~~including stock based compensation primarily related to options granted in 2021, as compared to~~and software and maintenance costs for the ~~corresponding period in the prior year.~~sales and marketing department. As a percent of total revenue, sales and marketing expenses increased to ~~17%~~20.8% for the nine months ended September 30, ~~2021~~2022 from ~~15%~~17.4% for the nine months ended September 30, ~~2020.~~2021.

~~For the nine months ended September 30, 2021 and 2020, stock based compensation expense recorded in sales and marketing was $0.7 million and $0.1 million, respectively.~~

Operations and Support

Operations and support increased ~~$5.5~~$20.6 million, or ~~54%~~132%, from ~~$10.1 million for the nine months ended September 30, 2020 to~~ $15.6 million for the nine months ended September 30, 2021 to $36.2 million for the nine months ended September 30, 2022, primarily as a result of hiring of additional operations and support employees ~~hired to support the growth~~and their compensation costs including stock-based compensation, our acquisition of ~~buyer~~Thomas in December 2021 and ~~seller activity on our platform, and increased stock based compensation expense primarily related to options granted in 2021, as compared to the corresponding period in the prior year.~~consulting expenses. As a percent of total revenue, operations and support expenses ~~remained flat at approximately 10%~~increased to 12.8% for the nine months ended September 30, ~~2021 and 2020.~~

~~For~~2022 from 10.3% for the nine months ended September 30, ~~2021 and 2020, stock based compensation expense recorded in operations and support was $1.4 million and $0.2 million, respectively.~~2021.

Product Development

Product development expense increased ~~$3.3~~$10.6 million, or ~~37%~~87%, from ~~$8.9 million for the nine months ended September 30, 2020 to~~ $12.1 million for the nine months ended September 30, 2021 ato $22.7 million for the nine months ended September 30, 2022, primarily as result of our acquisition of Thomas in December 2021, hiring additional development employees and ~~increased stock based~~their compensation ~~expense primarily related to options granted in 2021, as compared to the corresponding period in the prior year.~~costs including stock-based compensation, consulting and software and maintenance expenses. As a percent of total revenue, product development expenses ~~decreased to 8%~~remained flat a 8.0% for the nine months ended September 30, ~~2021 from 9% for the nine months ended September 30, 2020.~~2022 and 2021.

~~For the nine months ended September 30, 2021 and 2020, stock based compensation expense recorded in product development was $1.0 million and $0.3 million, respectively.~~37

General and Administrative

General and administrative expense increased ~~$9.6~~$24.8 million, or ~~109%~~135%, from ~~$8.8 million for the nine months ended September 30, 2020 to~~ $18.3 million for the nine months ended September 30, 2021 ~~primarily as a result~~to $43.1 million for the nine months ended September 30, 2022. The primary driver of anthe increase was due to our acquisition of Thomas in ~~compensation-related~~December 2021. Our general and administrative expenses ~~including stock based~~increased due to higher compensation ~~additional legal, accounting~~ and ~~financial headcount and third party expenses in preparation of become a~~stock-based compensation due to new administrative employees. Additionally, we incurred higher public company ~~as well as~~costs for insurance, legal and accounting services. We donated an additional ~~overhead~~$1.1 million of Class A common stock to our donor advised fund and recorded higher expenses ~~to support the growth of our business operations. During the third quarter of 2021, the Company also made charitable contributions of $1.2 million.~~for card processing fees, software and maintenance, facilities costs and transaction related costs. As a percent of total revenue, general and administrative expenses increased to ~~12%~~15.3% for the for the nine months ended September 30, ~~2021~~2022 from 9%12.1% for the nine months ended September 30, ~~2020.~~2021.

~~For the nine months ended September 30, 2021 and 2020, stock based compensation expense recorded in general and administrative was $1.7 million and $0.1 million, respectively.~~

Other (Expenses) Income

Interest Expense

Interest expense ~~decreased~~increased by ~~$0.1~~$2.4 million, or ~~15%~~297%, from ~~$0.9 million for the nine months ended September 30, 2020 to~~ $0.8 million for the nine months ended September 30, 2021 to $3.2 million for the nine months ended September 30, 2022, primarily as a result of ~~repaying our outstanding borrowings under our term loan~~the interest on the 2027 convertible notes issued in ~~July 2021.~~February 2022.

Interest and ~~dividend income~~Dividend Income

Interest and dividend income increased by ~~$0.2~~$1.5 million, or ~~113%~~319%, from ~~$0.2 million for the nine months ended September 30, 2020 to~~ $0.5 million for the nine months ended September 30, 2021 ~~as a result of~~to $1.9 million for the three months ended September 30, 2022, primarily due to dividend ~~received~~income from our marketable securities ~~in 2021, offset by lower interest income on cash and cash equivalents.~~.

Other Expenses

Other expenses increased by $0.7 million, or ~~200%~~70%, from ~~$0.3 million for the nine months ended September 30, 2020 to~~ $1.0 million for the nine months ended September 30, 2021 to $1.7 million for the nine months ended September 30, 2022, primarily as a result of ~~a $0.3 million loss on extinguishment of debt from the repayment of the term loan in July 2021, $0.2~~$1.5 million of unrealized loss on marketable securities ~~and $0.2~~offset by a $0.3 million loss on debt extinguishment recognized in the third quarter of ~~other expenses.~~2021.

Income from Unconsolidated Joint Venture

Income from unconsolidated joint venture increased $0.6 million due to our acquisition of a 50% interest in Industrial Media, LLC in connection with our acquisition of Thomas on December 9, 2021.

Benefit for Income Taxes

Benefit for income taxes increased by $0.6 million due to an income tax benefit resulting from our acquisition of Thomas.

Additional Segment Considerations

Total segment loss from our U.S. operating segment for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ was ~~$30.2~~$37.0 million and ~~$16.1~~$30.2 million, respectively. Total segment loss from our ~~Europe~~International operating segment for the nine months ended September 30, 2022 and 2021, was $14.6 million and ~~2020, was~~ $7.3 million, ~~and $4.8 million,~~ respectively.

Liquidity and Capital Resources

General

We have financed our operations primarily through sales of our equity securities and borrowings under our ~~term loan facility.~~convertible notes. As of September 30, ~~2021,~~2022, our cash and cash equivalents and marketable securities totaled ~~$57.8~~$341.2 million, compared with ~~$59.9~~$116.7 million as of December 31, ~~2020.~~2021. We believe our existing cash and cash equivalents and marketable securities will be sufficient to support our working capital and capital expenditure requirements for at least the next twelve months. We believe we will meet our longer-term expected future cash requirements primarily from a combination of cash flow from operating activities and available cash and cash equivalents. We may also engage in equity or debt financings to secure additional funds. Our future capital requirements will depend on many factors, including our revenue growth rate, receivable and payable cycles, the timing and extent of investments in product development, sales and marketing, operations and support and general and administrative expenses.

On July 2, 2021, we closed our planned initial public offering ("IPO"), in which we issued and sold 7,906,250 shares of our Class A common stock. The initial offering price was $44.00 per share. We received net proceeds of approximately $325.3 million from the IPO after deducting underwriting discounts and commissions of $22.6 million. The Company also incurred approximately $4.0 million of other offering costs in connection with its IPO. In August 2021, we invested approximately $266.6 million of proceeds from our IPO in marketable securities. We consider marketable securities as available for use in current operations, and therefore classify these securities as current assets on the Condensed Consolidated Balance Sheets. As of September 30, 2021, the Company held $226.7 million of marketable securities.

Our capital expenditures consist primarily of internal-use software costs, manufacturing equipment, computers and peripheral equipment, furniture and fixtures and leasehold improvements and patents.

~~Term Loan Facility~~Convertible Notes due 2027

The ~~Company was party~~2027 Notes are unsecured obligations which bear regular interest at 1% per annum and for which the principal balance will not accrete. The 2027 Notes will mature on February 1, 2027 unless repurchased, redeemed, or converted in accordance with their terms prior to an amended and restated loan and security agreement (“Amended Loan and Security Agreement”) with Hercules Capital, Inc. (“Hercules”) for a term loan (the "Term Loan Facility"). Under the Amended Loan and Security Agreement, effective January 30, 2020, the Company could borrow up to $15 million under the Term Loan Facility, all of which became available to the Company immediately on the agreementsuch date. On July 9, 2021, the Company repaid the full amount of its term loan with Hercules with proceeds from the IPO. In connection with the debt extinguishment, the Company paid Hercules $16.2 million and recorded a loss on debt extinguishment of approximately $0.3 million.

~~Prior to its repayment, the term loan accrued interest at the greater of (i) 8.7% per annum or (ii) 8.7% per annum plus the prime rate minus 4.75% per annum.~~ The term loan agreement required a maximum $1.2 million end of term fee due and payable on the maturity date of May 1, 2022, however, if the term loan was repaid prior to November 1, 2021, the amount owed would be $0.9 million. As of December 31, 2020, the Company owed $15.8 million on this term loan, including principal borrowings and accrued end of term fee.

~~As part of the initial term loan agreement with Hercules, the Company issued a warrant to purchase 87,784~~2027 Notes are convertible into cash, shares of ~~the Company’s Series B Convertible Preferred Stock with~~our Class A common stock, or a ~~strike price~~combination of ~~$5.13 per share that expires in May 2025. Upon closing~~cash and shares of ~~the IPO on July 2, 2021, the warrant held by Hercules may only be exercised for~~our Class A common stock, at our election, at an initial conversion rate of 17.8213 shares of Class A common stock per $1,000 principal amount of 2027 Notes, which is equivalent to an initial conversion price of approximately $56.11 per share of our Class A common stock. The conversion rate is subject to customary adjustments for certain events as described in the indenture governing the 2027 Notes.

~~The Term Loan Facility contained customary affirmative~~We may redeem for cash all or any portion of the 2027 Notes, at our option, on or after February 5, 2025 if the last reported sale price of our Class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days at a redemption price equal to 100% of the principal amount of the 2027 Notes to be redeemed, plus accrued and ~~negative covenants, including covenants~~unpaid interest or additional interest, if any.

Holders of the 2027 Notes may convert all or a portion of their 2027 Notes at their option prior to November 1, 2026, in multiples of $1,000 principal amounts, only under the following circumstances:

•

during the five-business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of the 2027 Notes for each day of that ~~required Hercules’ consent~~ten consecutive trading day period was less than 98% of the product of the last reported sale price of our Class A common stock and the applicable conversion rate of the 2027 Notes;

•

on a notice of redemption, at any time prior to ~~among other things, merge or consolidate or acquire assets outside~~ the ~~ordinary course~~close of business ~~make investments, incur additional indebtedness~~on the scheduled trading day immediately preceding the redemption date, in which case we may be required to increase the conversion rate for the 2027 Notes so surrendered for conversion in connection with such redemption notice; or ~~guarantee indebtedness~~

•

on the occurrence of ~~others, pay dividends and redeem and repurchase our capital stock, enter into transactions with affiliates outside~~specified corporate events.

On or after November 1, 2026, the ~~ordinary course~~2027 Notes are convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

We ~~were in compliance~~accounted for the issuance of the 2027 Notes as a single liability measured at its amortized cost, as no other embedded features require bifurcation and recognition as derivatives.

As of September 30, 2022, the 2027 Notes have a carrying value of $279.4 million with ~~covenants at the time the term loan was repaid and as~~an effective annual interest rate of ~~December 31, 2020.~~1.6%.

Cash Flows

The following table presents a summary of our cash flows from operating, investing, and financing activities for the nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021.

Nine Months Ended
September 30,

2021

2020

(in thousands)

Net cash (used in) operating activities

$
(37,370
)

$
(17,145
)
Net cash (used in) provided by investing activities

(271,603
)

7,972

Net cash provided by financing activities

306,910

35,152


	Nine Months Ended September 30,
	2022			2021
	(in thousands)
Net cash used in operating activities	$	(45,510	)	$	(37,370	)
Net cash used in investing activities		(291,336	)		(271,603	)
Net cash provided by financing activities		281,506			306,910

Operating Activities

For the nine months ended September 30, 2022, net cash used in operating activities was $45.5 million, primarily due to a net loss of $(51.6) million adjusted for non-cash charges of $30.6 million and a net decrease in our operating assets and liabilities of $(24.5) million. The non-cash adjustments primarily relate to stock-based compensation of $14.0 million, depreciation and amortization of $5.7 million, $1.7 million unrealized loss on marketable securities, $2.3 million donation of common stock and $5.4 million of reduction to our right of use lease assets. The net decrease in operating assets and liabilities is primarily driven by an increase in accounts receivable of $19.0 million primarily due to our continued revenue growth, an increase in other assets of $3.9 million, an increase in inventory of $3.7 million, an increase in prepaid expenses of $1.8 million and a decrease in lease liabilities of $4.2 million. These increases were offset by an increase in accrued expenses of $5.6 million and an increase in contract liabilities of $2.8 million.

For the nine months ended September 30, 2021, net cash used in operating activities was $37.4 million, primarily due to a net loss of $37.5 million adjusted for non-cash charges of $9.7 million and a net decrease in our operating assets and liabilities of $(9.6) million. The non-cash adjustments primarily relate to stock-based compensation of $4.7 million, depreciation and amortization of $2.3 million, $1.2 million of charitable contributions of common stock and $0.9 million of reduction to our right of use lease assets. The net decrease in operating assets and liabilities is primarily driven by an increase in accounts receivable of $10.6 million and prepaid expenses of $4.1 million. These decreases are partially offset by increases in accrued expenses of $3.9 million and $1.1 million of contract liabilities, primarily due to the growth of our business.

Investing Activities

For the nine months ended September 30, ~~2020,~~2022, net cash used ~~in operating~~by investing activities was ~~$17.1~~$291.3 million, primarily due to ~~a net loss~~the purchase of ~~$20.9 million adjusted for non-cash charges~~marketable securities of ~~$3.9~~$281.9 million and ~~a net decrease in our operating assets~~$9.6 million for purchases of property and liabilities of $0.2 million. The non-cash adjustments primarily relate to stock-based compensation of $0.7 million, $0.8 million reduction of our right of use lease assets and depreciation and amortization of $2.3 million. The net decrease in operating assets and liabilities is primarily driven by a $4.4 million increase in accounts receivable, a $3.1 million decrease in accounts payable, a $0.7 million decrease in lease liabilities and a $0.6 million increase in inventory. These changes are partially offset by an $8.1 million increase in accrued expenses and a $1.0 million increase in contract liabilities.

~~Investing Activities~~equipment (which includes internal-use software development costs).

Cash used by investing activities was $271.6 million during the nine months ended September 30, 2021, primarily due to investments of $267.0 million of proceeds from the IPO in marketable securities and $4.6 million for purchases of property and equipment (which includes internal-use software development costs).

~~Cash provided by investing activities was $8.0 million during~~Financing Activities

For the nine months ended September 30, ~~2020, primarily due to~~2022, net cash provided by financing activities was $281.5 million, reflecting $287.5 million of proceeds from the ~~redemption~~issuance of ~~our short terms investments which resulted in cash~~the 2027 convertible senior notes and $3.3 million of proceeds ~~net~~from the exercise of ~~approximately $10.9 million,~~stock options. These inflows were offset by ~~$2.9~~$9.3 million ~~for the purchase~~ of ~~property and equipment (which includes internal-use software development costs).~~convertible note costs incurred in connection with these notes

~~Financing Activities~~.

Cash provided by financing activities was $306.9 million during the nine months ended September 30, 2021, reflecting $1.8 million of proceeds from the exercise of stock options and $325.3 million of proceeds from the IPO, net of our underwriters discount. These inflows were offset by $4.0 million of other offering costs incurred in connection with our IPO and the $16.1 million repayment of our term loan with proceeds from the IPO.

Cash provided by financing activities was $35.2 million during the nine months ended September 30, 2020, reflecting net proceeds of $39.6 million from the issuance of convertible preferred stock, $4.0 million of additional borrowings on our term loan and $4.8 million of other borrowings under the Paycheck Protection Program (“PPP”). These inflows were offset by repayment of the PPP loan on July 8, 2020 and an $8.8 million deemed dividend to preferred stockholders.

~~Off-Balance Sheet Arrangements~~

We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting ~~Policies~~Estimates

Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. We base our estimates on historical experience

and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected. For additional information about our critical accounting policies and estimates, see the disclosure included in our ~~final Prospectus~~Annual Report on Form ~~424(b)(4)~~10-K as well as Note 2 – Basis of Presentation and Summary of Significant Accounting Policies in the notes to the condensed consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Recent Accounting Pronouncements

For a description of our recently adopted accounting pronouncements and recently issued accounting standards not yet adopted, see Note 2 – Basis of Presentation and Summary of Significant Accounting Policies in the notes to the condensed consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q.

JOBS Act Accounting Election

We qualify as an “emerging growth company” pursuant to the provisions of the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation, and stockholder advisory votes on golden parachute compensation.

The JOBS Act also permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. ~~We have elected~~On July 1, 2022, we irrevocably opted not to ~~“opt-in” to this~~use the extended transition period for complying with any new or revised financial accounting standards, and ~~therefore,~~as such, we ~~will not be subject~~are required to ~~the same~~adopt new or revised ~~accounting~~ standards at the same time as other public ~~companies that comply~~companies.

Based on the Company's aggregate worldwide market value of voting and non-voting common equity held by non-affiliates as of June 30, 2022, the Company will become a “large accelerated filer” and lose emerging growth company status beginning with ~~such new or revised accounting standards~~its Annual Report on ~~a non-delayed basis.~~Form 10-K for the year ending December 31, 2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure to potential changes in interest rates. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.

Foreign Currency Exchange Risk

Our revenue and costs are principally denominated in U.S. dollars and are not subject to foreign currency exchange risk. Our ~~European~~International operating segment generates revenue outside of the United States that is denominated in currencies other than the U.S. dollar. Our results of operations could be impacted by changes in exchange rates.

Inflation Risk

We do not believe that inflation has had a material effect on our business, results of operations, or financial condition. If our costs were to become subject to significant inflationary pressures such as those caused by the conflict in Ukraine, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, results of operations and financial condition.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting that occurred during the quarter ended September 30, ~~2021~~2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. However, our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company have been detected.

3342

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we are involved in various claims and legal actions that arise in the ordinary course of business. We are not a party to any legal proceedings, that individually or in the aggregate, are reasonably expected to have a material adverse effect on our consolidated results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more matters could have a material adverse effect on our consolidated results of operations, financial condition or cash flows.

For the period ending September 30, 2022, there were no material legal proceedings brought against the Company nor were there any material developments to any ongoing legal proceedings which constituted reportable events.

Item 1A. Risk Factors.

There have been no material changes to our risk factors as previously disclosed in Item 1A. contained in Part III of our ~~Quarterly~~Annual Report on Form 10‑QK for the ~~quarter~~year ended ~~June 30,~~December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~Unregistered Sales of Equity Securities~~Not applicable.

~~From July 1, 2021 through September 30, 2021 no options were granted under our 2016 Equity Incentive Plan.~~

~~Use of Proceeds~~

On July 2, 2021, we closed our IPO, in which we sold 7,906,250 shares of our common stock at a price of $44.00 per share. The offer and sale of the shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-256769), which was declared effective by the SEC on June 30, 2021. We raised approximately $325.3 million in net proceeds after deducting underwriting discounts and commissions. We intend to use the net proceeds we received from our IPO for general corporate purposes, including working capital, operating expenses and capital expenditures. We used a portion of the net proceeds to repay our outstanding indebtedness under our Amended Loan and Security Agreement, which would have matured on May 1, 2022 and under which $15.0 million was outstanding at an annual interest rate of 8.7% as of the time it was repaid. The representatives of the underwriters of our IPO were Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries and to non-employee directors pursuant to our director compensation policy.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~(a)~~

Not applicable.

3443

Item 6. Exhibits.

The documents listed in the Exhibit Index of this Quarterly Report on Form 10-Q are herein incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).


Exhibit Number		Description

~~10.1+~~3.1		Amended and Restated Certificate of Incorporation of Xometry, Inc. ~~2021 Equity Incentive Plan~~, (incorporated herein by reference to Exhibit ~~10.9~~3.1 to the Company’s ~~Registration Statement~~Current Report on Form ~~S-1/A~~8-K (File No. ~~333-256769)~~001-40546), filed with the SEC on ~~June 21,~~July 2, 2021).
~~10.2+~~3.2		~~Forms~~Amended and Restated Bylaws of ~~grant notice, stock option agreement and notice of exercise under the~~ Xometry, Inc. ~~2021 Equity Incentive Plan~~, (incorporated herein by reference to Exhibit ~~10.10~~3.2 to the Company’s ~~Registration Statement~~Current Report on Form ~~S-1/A~~8-K (File No. ~~333-256769)~~001-40546), filed with the SEC on ~~June 25, 2021).~~
~~10.3+~~		Forms of restricted stock unit grant notice and award agreement under the Xometry, Inc. 2021 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S-1/A (File No. 333-256769), filed with the SEC on June 25, 2021).
~~10.4+~~		Amended and Restated Employment Agreement by and between Xometry, Inc. and Randolph Altschuler, to be in effect on the completion of the offering (incorporated herein by reference to Exhibit 10.12 to the Company’s Registration Statement on Form S-1/A (File No. 333-256769), filed with the SEC on June 25, 2021).
~~10.5+~~		Amended and Restated Employment Agreement by and between Xometry, Inc. and James Rallo, to be in effect on the completion of the offering (incorporated herein by reference to Exhibit 10.13 to the Company’s Registration Statement on Form S-1/A (File No. 333-256769), filed with the SEC on June 25, 2021).
~~10.6+~~		Amended and Restated Employment Agreement by and between Xometry, Inc. and Peter Goguen, to be in effect on the completion of the offering (incorporated herein by reference to Exhibit 10.14 to the Company’s Registration Statement on Form S-1/A (File No. 333-256769), filed with the SEC on June 25, 2021).
~~10.7+~~		Form of Indemnification Agreement entered into by and between Xometry, Inc. and each director and executive officer (incorporated herein by reference to Exhibit 10.15 to the Company’s Registration Statement on Form S-1/A (File No. 333-256769), filed with the SEC on June 21, 2021).
~~10.8~~		Form of Exchange Agreement by and among Xometry, Inc., Randolph Altschuler and Laurence Zuriff (incorporated herein by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S-1/A (File No. 333-256769), filed with the SEC on June 21,July 2, 2021).
31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

~~+ Management contract or compensatory plan, contract or arrangement.~~

* Filed herewith.

** ~~Furnished herewith.~~These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

3544

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on

its behalf by the undersigned thereunto duly authorized.


	XOMETRY, INC.

Date: November 10, ~~2021~~2022	By:	/s/ Randolph Altschuler
		Randolph Altschuler
		Chief Executive Officer and Director

Date: November 10, ~~2021~~2022	By:	/s/ James Rallo
		James Rallo
		Chief Financial Officer

3645


	September 30, 2021			December 31, 2020

Assets
Current assets:
Cash and cash equivalents	$	57,778		$	59,874
Marketable securities		266,739			0
Accounts receivable, less allowance for doubtful accounts of $0.7 million as of September 30, 2021 and $0.6 million as of December 31, 2020, respectively		25,157			14,574
Inventory		1,427			2,294
Prepaid expenses		4,988			913
Total current assets		356,089			77,655
Property and equipment, net		8,615			6,113
Operating lease right-of-use assets		3,101			1,922
Other assets		204			788
Intangible assets, net		1,455			1,652
Goodwill		833			833
Total assets	$	370,297		$	88,963
Liabilities, convertible preferred stock and stockholders’ equity
Current liabilities:
Accounts payable	$	5,198		$	5,640
Accrued expenses		17,487			13,606
Contract liabilities		3,379			2,355
Operating lease liabilities, current portion		1,108			1,013
Finance lease liabilities, current portion		5			14
Short-term debt		—			15,753
Total current liabilities		27,177			38,381
Operating lease liabilities, net of current portion		2,197			1,118
Total liabilities		29,374			39,499
Commitments and contingencies (Note 12)
Convertible preferred stock
Convertible preferred stock, $0.000001 par value, Seed-1, Seed-2, Series A-1, Series A-2, Series B, Series C, Series D and Series E. Authorized; 0 shares and 27,970,966 shares, 0 shares and 27,758,941 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		—			160,713
Stockholders’ equity (deficit)
Preferred stock, $0.000001 par value. Authorized; 50,000,000 shares and 0 shares; 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		—			—
Common stock, $0.000001 par value. Authorized; 0 shares and 42,000,000 shares; 0 shares and 7,755,782 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		—			—
Class A Common stock, $0.000001 par value. Authorized; 750,000,000 shares and 0 shares 41,714,711 shares and 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		—			—
Class B Common stock, $0.000001 par value. Authorized; 5,000,000 shares and 0 shares, 2,676,154 shares and 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		—			—
Additional paid-in capital		490,175			503
Accumulated other comprehensive income		186			210
Accumulated deficit		(149,438	)		(111,962	)
Total stockholders’ equity (deficit)		340,923			(111,249	)
Total liabilities, convertible preferred stock and stockholders’ equity	$	370,297		$	88,963


Rollforward of contract liabilities:
Contract liabilities at December 31, 2020	$	2,355
Revenue recognized		(59,033	)
Payments received in advance		60,057
Contract liabilities at September 30, 2021	$	3,379



		Shares				Liquidation		Carrying
	Par Value	Authorized		Outstanding		preference		Value
Series:
Series Seed-1 Convertible Preferred Stock	$0.000001		4,200,000		4,200,000	$	4,200	$	4,200
Series Seed-2 Convertible Preferred Stock	$0.000001		2,188,322		2,188,322		2,998		2,998
Series A-1 Convertible Preferred Stock	$0.000001		4,211,094		4,211,094		8,800		8,704
Series A-2 Convertible Preferred Stock	$0.000001		1,591,230		1,591,230		12,884		12,839
Series B Convertible Preferred Stock	$0.000001		4,132,055		4,044,271		20,764		20,347
Series C Convertible Preferred Stock	$0.000001		3,754,201		3,754,201		26,248		26,004
Series D Convertible Preferred Stock	$0.000001		5,494,064		5,494,064		54,933		54,864
Series E Convertible Preferred Stock	$0.000001		2,400,000		2,275,759		32,693		30,757
Totals			27,970,966		27,758,941	$	163,520	$	160,713


	December 31, 2020
	Weighted average amortization period in years		Gross carrying amount		Accumulated amortization		Net carrying amount
Intangible Assets
Amortizing intangible assets:
Non Compete		2	$	106	$	106	$	—
Customer Relationships		1		539		512		27
Trade Names		6		173		141		32
Developed Technology		3		762		438		324
Vendor Relationships		15		1,404		135		1,269
Total intangible assets			$	2,984	$	1,332	$	1,652

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company