Xometry (XMTR) Reports Preliminary Q4 2021 Results and Convertible Senior Notes Offering
Xometry (XMTR) has just announced that preliminary Q4 revenue will be $65.5 - $67.5 million. This is in the range of what we expected when factoring in the $3.5 to $4.5 million of acquired revenue from the Thomas Publishing business. And it’s above management’s prior Q4 guidance of $60 - $62 million. Excluding the acquired revenue, growth was roughly 64.5%. Including acquired revenue, growth was roughly 75%. Gross margin, including acquired revenue, was around 27.5%. This is also in line with expectations and represents an increase from 25% gross margins reported in the year-ago quarter. Recall that Thomas Publishing is higher margin revenue (85% versus XMTR at 25%) so it should continue to help overall Xometry margins moving forward (new target is 40% to 45% versus 35% to 40% prior). In short, the business is doing what we expected. Official results are due out on March 17.
In concert with the preliminary results Xometry is proposing a $250 million senior convertible notes offering. The proposed use of the funds is typical for a company like this, including, “… working capital and general corporate purposes and for acquisitions of, or strategic investments in, complementary businesses, products, services or technologies.” Pricing has not been proposed yet.
In response to these announcements shares of XMTR are down double digits. Let’s think about this for a second because the timing is interesting.
Xometry has no debt and should have ended the year with around $60 million in cash. It shouldn’t need to raise capital to keep the lights on. Management knows the market won’t love an offering, but it also knows borrowing costs are likely to rise. My best guess is they are padding the bank account so the company has capital to pursue smaller acquisitions, which might be more attractively priced now than they were just a few months ago. Moreover, I suspect the stock’s reaction is more about the offering than it is about the quarterly results.
I have yet to see any of the analysts that follow the company post any notes on these events. I suspect that they will come out in defense of the company and that will help shares firm up. The next step will be the pricing of the offering. How that comes in, and how the stock reacts once the offering is complete, will give us a very good indication of where XMTR will head next.
We’ve been eyeing the 40 level as a major zone of support. With XMTR still above that, and given what I’ve just said, I’m keeping XMTR at buy. I’ll report back as soon as I know more, or if anything changes. BUY