Good day, and thank you for standing by. Welcome to the Xometry Fourth Quarter 2025 Earnings Conference Call. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host for today, Shawn Milne, VP of Investor Relations. Please go ahead.

Good morning, and thank you for joining us on Xometry's Q4 and Full Year 2025 Earnings Call. Joining me are Randy Altschuler, our Chief Executive Officer; Sanjeev Singh Sahni, our President; and James Miln, our Chief Financial Officer. During today's call, we will review our financial results for the fourth quarter and full year 2025 and discuss our guidance for the first quarter and full year 2026. During today's call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, strategy, long-term growth and overall future prospects. Such statements may be identified by terms such as believe, expect, intend and may. These statements are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed before the market opened today and in our filings with the U.S. Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2025. We caution you not to place undue reliance on forward-looking statements and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events or changes in our expectations. We'd also like to point out that on today's call, we will report GAAP and non-GAAP results. We use these non-GAAP financial measures internally for financial and operating decision-making purposes and as a means to evaluate period-to-period comparisons. Non-GAAP financial measures are presented in addition to and not as a substitute or superior to measures of financial performance prepared in accordance with U.S. GAAP. To see the reconciliation of these non-GAAP measures, please refer to our earnings press release distributed today and in our investor presentation, both of which are available on the Investors section of our website. A replay of today's call will also be posted on our website. With that, I'd like to turn the call over to Randy.

Thanks, Shawn. Good morning, and thank you for joining our Q4 2025 earnings call. Our record Q4 quarter and record full year 2025 powerfully demonstrate the success of our AI native marketplace in the massive, complex and highly fragmented custom manufacturing market. Our revenue growth and profitability accelerated as 2025 progressed, and we are encouraged by our strong start to 2026. Alongside reporting record financial results, today, we announced the planned transition in Xometry's leadership. Effective July 1, 2026, I will transition to become the Executive Chair of the Board; and Sanjeev Singh Sahni, Xometry's current President, will become Chief Executive Officer. This transition is a result of a deliberate long-term succession process with our Board, and we are aligned in our conviction that Sanjeev is the right leader for our next chapter. Together with Laurence Zuriff, I co-founded Xometry in 2013 with a mission to make the world's manufacturing capacity accessible to all by digitizing the vast, highly fragmented custom manufacturing market. We stay true to that vision from the start, and that consistency is now delivering scale and accelerating growth and profitability. I'm proud that in 2025, our marketplace served over 80,000 active buyers around the world. The record performance we are reporting today and the momentum that built throughout 2025 and is carrying into the first quarter of 2026 reflects the investments and changes we've been making in our product, technology and go-to-market strategies and leadership. As we continue to lean into product-led growth, I've decided that this is the right time to hand over the leadership of Xometry to Sanjeev. Sanjeev has been my close partner since he joined in January of last year and has held the operational mandate for our global teams. During his tenure, Sanjeev has been instrumental to Xometry's accelerated revenue growth and expanded profitability while further deepening our suite of advanced technology and AI capabilities across the business. Sanjeev's track record at Xometry and his background of driving global growth, innovation and scale with large global marketplaces makes him the right leader to drive our next stage of innovation and profitable growth. Sanjeev has done a terrific job as our President, and I expect that he will continue to outperform as our CEO. In my new role as Executive Chair and as the largest individual long-term shareholder, I will remain closely involved in the company's future, focusing on strategic growth initiatives and key corporate partnerships. In short, I'm not going anywhere. While this transition will be a milestone for Xometry, as always, our focus remains on executing the significant opportunity in front of us. It is a pivotal time in manufacturing, driven by accelerating digital transformation, increasing customer demands for speed and transparency, rapid AI-driven innovation and the crucial need for resilient supply chains, including the push towards reshoring. This new era necessitates resilient digital workflows and robust supplier networks. Xometry's AI native marketplace is digitizing how custom manufacturing is priced, sourced and fulfilled by replacing manual legacy processes. Our networks of buyers and suppliers, alongside the proprietary data they generate through their interactions in our marketplace continue to grow and create increasing network effects. Over the last year, we've accelerated our product development to meet these increasing expectations and requirements of custom manufacturing buyers. We have enhanced flexibility in manufacturing selection by expanding the portfolio of high-performance manufacturing materials and certifications. For rapidly innovating sectors across all end markets, Xometry provides a secure certified platform that facilitates AI-enabled sourcing with improved visibility into qualified domestic suppliers to meet the growing need for speed, scale and compliance. As I said earlier, Q4 was a record quarter for Xometry across many fronts, including revenue, gross profit and adjusted EBITDA. Q4 revenue growth accelerated, increasing 30% year-over-year, driven by 33% marketplace growth through our expanding networks of buyers and suppliers and deepening enterprise engagement. Q4 marketplace gross margin expanded 80 basis points year-over-year to 35.3%. The expansion of our marketplace gross margin underscores the significant economic value generated by our AI native marketplace. Our competitive moat continues to increase as we grow our networks of buyers and suppliers and gain more data to continuously train our algorithms. This continuous improvement has driven substantial and steady growth in our marketplace gross margins, moving from 25% 4 years ago to approximately 35% in 2025. Enterprise growth remained robust in Q4, finishing off a strong 2025 as revenue from marketplace accounts with last 12-month spend of at least $500,000 increased by over 40% year-over-year. We are focused on driving further penetration in our largest accounts, each with an estimated potential spend of at least $10 million annually. In 2025, we ended with 4 accounts with at least $10 million of spend, driven by strong execution from sales in our technology solutions and an acceleration in large multiyear production programs across key end markets. Our strong Q4 financial results capped a transformative year for Xometry as we delivered accelerating revenue growth and 4 consecutive quarters of positive and increasing EBITDA margins. At the same time, we invested in and strengthened our platforms to deliver robust secular growth and expanding profitability in the coming years. We're off to a strong start in Q1 and expect robust growth to continue in 2026, which James will discuss later in the call. I will now turn it over to our President, Sanjeev Singh Sahni, to discuss some of the initiatives that are driving our strong growth and increasing profitability.

Thanks, Randy, and good morning. I'm honored and excited to step into the CEO role at Xometry on July 1. Under Randy's leadership, Xometry has been defined by a singular unwavering mission to make the world's manufacturing capacity accessible to all. I look forward to working closely with Randy and our talented global team to accelerate our product-led growth and further cement Xometry as the essential marketplace for the custom manufacturing industry. Reflecting on the past year, I continue to be impressed by our large market opportunity and long runway of growth ahead as we increasingly become a product-led company. We are focused on key growth initiatives, including expanding our marketplace offerings, driving structural growth for enterprise accounts and building out our global supplier network. Let me start by talking about expanding marketplace offerings. In 2025, Xometry accelerated the pace of innovation, enabling better pricing, speed and selection for our buyers and finding the optimal match for suppliers in our network. Xometry launched auto quotes for injection molding services in the U.S. and Europe, providing customers immediate access to pricing and lead time estimates for one of the most critical production processes and one of the largest categories in custom manufacturing. We expanded our marketplace capabilities, including AI-powered design for manufacturing or DFM, which utilizes machine learning and automated algorithms to identify and correct production issues early in the design phase. We recently added the ability to interpret technical drawings within our AI DFM, further enhancing our proprietary data set. In Q4, we added a portfolio of high-performance materials for additive manufacturing technologies to the U.S. marketplace. These materials are critical for advanced applications in aerospace, defense, and medical device industries. Additionally, we introduced a preferred subprocess feature for CNC machining. Also in 2025, we launched our highly successful Teamspace feature in the EU. Teamspace continues to scale with over 11,000 teams created globally since launch. Additionally, Xometry EU launched its parts library, simplifying how customers manage and reuse part data across projects. The EU parts library consolidates the client's entire upload part history into a single filterable interface, enabling users to quickly reorder previously quoted or produced parts. In 2026, our focus remains on key marketplace expansion efforts. These include: first, increasing our marketplace offerings. In injection molding, we will expand our capabilities, further enhancing the buyer experience and growing the associated supplier network. Also, we will continue to add material and finished offerings, enabling us to service more complex and production scale programs. Second, continuing to advance our pricing intelligence, including more personalized pricing based on customer context and order characteristics. Third, further raising the bar to deliver a world-class e-commerce experience through deeper integration of automated DFM analysis and AI-assisted customer and supplier workflows. One of the key drivers of accelerating growth of our marketplace has been our ability to drive structural enterprise growth. As Randy mentioned, we delivered strong enterprise growth in 2025 with 40% plus revenue growth from our larger customers. Xometry is becoming more embedded within the enterprise customer workflows, which in turn drives larger and more predictable spend. In 2025, we ended with 4 accounts with at least $10 million spend driven by strong execution from sales and the efficacy of our technology solutions. We expect more accounts to join the $10 million-plus threshold in 2026, driven in part by many multiyear production programs across key end markets. In 2026, we are focusing on driving further structural enterprise adoption through deeply embedded sales and marketing motions and increasing use of technology solutions, including Teamspace and ERP procurement integrations. Now let me talk about our Commerce Industrial sourcing platform. We made significant progress in 2025, modernizing our commerce platform so we can return to growth. Thomas is a leading digital platform connecting industrial buyers with over 500,000 listed North American suppliers. Thomas supports manufacturers, distributors and service providers with tools and resources to drive business growth. In Q4, we launched a new dynamic ad serving model and Thomas Smart Search, setting the stage for a completely new experience on the Thomas platform. We are pleased with the early results from the Thomas platform. In 2026, Thomas is focused on improving how buyers and suppliers interact across the Thomas network by allowing the buyers to describe requirements more naturally and quickly to find local suppliers. We will improve search results, relevance, and help our advertisers better access the extensive demand on Thomas. To continue to grow Thomas awareness, we are strengthening the Thomas brand with a new marketing campaign. Finally, we are focused on expanding our global supplier network and improving the supplier experience. Our global supplier network of approximately 5,000 active suppliers is a significant strategic advantage, giving buyers unmatched speed, capacity, and resilience, allowing for immediate scaling and offering sourcing flexibility across 50 countries on 4 continents. In the U.S., we expanded our supplier base with a focus on larger suppliers with key quality certifications to ensure the needs of our enterprise customers. Globally, we expanded our sourcing network to include more suppliers in Europe, India, China, and Turkey. In 2025, we launched the new Workcenter mobile app to improve supplier experience and engagement. The Workcenter platform is Xometry's proprietary all-in-quote-to-cash solution, enabling its partners to source and consolidate work, manage operations, monitor performance, and secure cash flow. By providing easier access to the job board and job management, we expect to drive increasing supplier engagement. In 2026, we will continue to strengthen marketplace density by enhancing supplier matching precision and expanding network depth across geographies and capabilities, especially in India. We will further increase the choice of processes and lead time from suppliers across the world. In 2026, we have an exciting roadmap of updates and new features for our Workcenter mobile app, including improving usability by enhancing how users review jobs and designs. There's much more to come in the following months as we focus on further improving buyer and supplier experiences and expanding our platforms. As Randy mentioned, our momentum remains strong in Q1. We expect robust profitable growth to continue in 2026, given strong demand on our marketplace and our product roadmap. I will now turn the call over to James for a more detailed review of Q4 and our business outlook.

Thanks, Sanjeev, and good morning everyone. Having worked closely with Randy over the past 2 years, I've seen firsthand how his and Laurence's vision have translated into the rapidly growing profitable business we are reporting today. I would like to thank Randy for leading the company to where we are today and setting Xometry up for our next chapter. Looking ahead, I speak to the entire executive team when I say we welcome the opportunity to work alongside Sanjeev to accelerate our momentum. He has been a disciplined partner in driving our 2025 performance, and we are excited to continue to scale the business toward our long-term targets under Sanjeev's leadership. Turning now to our financial results. Xometry had an excellent Q4, marked by accelerating revenue growth and a significant increase in marketplace gross profit. This performance highlights the real-time responsiveness of our marketplace to customer demand and solidifies Xometry's position as the digital rails for the largely offline and fragmented custom manufacturing industry. As we progress toward $1 billion in revenue, we anticipate continuous improvements in profitability alongside ongoing investment in our growth initiatives. 2025 was a standout year for Xometry as we accelerated annual revenue growth 800 basis points to 26%, further expanded marketplace gross margin by 120 basis points and delivered full-year profitability with $18.5 million in adjusted EBITDA compared to a loss of $9.7 million in 2024. At the same time, investments in our platforms have positioned us for robust secular growth and increased profitability in the coming years. In Q4, revenue grew 30% year-over-year to more than $192 million, a 200 basis point sequential acceleration from Q3. Q4 marketplace revenue was $178 million and supplier services revenue was $13.9 million. Q4 marketplace revenue increased 33% year-over-year, driven by strong execution, expansion of buyer and supplier networks and growth with larger accounts. Marketplace growth was robust across many verticals, including aerospace and defense, electronics and semiconductors, energy and automotive. Q4 active buyers increased 20% year-over-year to 81,821 with a net addition of 3,539 active buyers, driven by efficient corporate marketing initiatives. Q4 marketplace revenue per active buyer increased 11% year-over-year, primarily due to strong enterprise growth. We view accounts with at least $50,000 spend at the top of the enterprise funnel. In Q4, the number of accounts with last 12 months spend of at least $50,000 on our platform increased 18% year-over-year to 1,760. Enterprise investments continue to show returns with strong revenue growth from marketplace accounts, ending 2025 with over 140 accounts with last 12 months spend of at least $500,000. Our enterprise strategy focuses on our largest accounts, which we believe each have $10 million plus in potential annual account revenue. Services revenue declined approximately 1% quarter-over-quarter as we have largely stabilized the core advertising business. We are focused on improving engagement and monetization on the platform, which remains a leader in industrial sourcing, supplier selection and digital marketing solutions. Q4 gross profit was $75.2 million, an increase of 27% year-over-year, with gross margin of 39.1%. Q4 gross margin for marketplace was 35.3%, an increase of 80 basis points year-over-year. Q4 marketplace gross profit dollars increased a robust 36% year-over-year. We are focused on driving marketplace gross profit dollar growth through the combination of top line growth and gross margin expansion. The growth in our marketplace gross margin underscores the significant value our AI-native marketplace is providing. Moving on to Q4 operating costs. Q4 total non-GAAP operating expenses were $67 million, increasing 15% year-over-year, demonstrating strong leverage by growing at half the rate of our revenue growth. We are applying strong discipline and rigor to our capital and resource allocation across teams while investing in our growth initiatives. In Q4, sales and marketing decreased 20 basis points year-over-year to 15.6% of revenue. Marketplace advertising spend was 5.2% of marketplace revenue, which was down 40 basis points year-over-year as we delivered accelerating growth and expanding profitability. In Q4, operations and support decreased 80 basis points year-over-year to 8.1% of revenue. We are focused on driving increasing automation with AI across operations and support. Q4 adjusted EBITDA was $8.4 million, an increase of $7.3 million year-over-year, driven by strong growth in revenue, gross profit and operating efficiencies. In 2025, we delivered our target of approximately 20% incremental adjusted EBITDA margin. In Q4, our U.S. segment adjusted EBITDA was $10.8 million or 6.8% adjusted EBITDA margin, a $6.8 million improvement year-over-year, driven by expanding gross profit and strong operating expense leverage. Our International segment adjusted EBITDA loss was $2.4 million in Q4 2025, a $0.5 million improvement from a loss of $3 million in Q4 of 2024. We expect continued improvement in International segment operating leverage in 2026. At the end of the fourth quarter, cash and cash equivalents and marketable securities were $219 million. We generated $6.1 million in operating cash flow in 2025, driven by strong operating leverage and focus on working capital efficiency. In the fourth quarter, we invested $10.3 million in CapEx, almost entirely software-related, reflecting our technology investments in the platform and accelerating product rollouts. We are focused on improving working capital efficiency and cash flow conversion given our asset-light model and limited capital spending. Throughout 2025, our AI native marketplace delivered strong revenue and gross profit growth, along with significant operating leverage, showcasing our disciplined execution. As we progress towards $1 billion in revenue, we anticipate to continue to deliver at least 20% incremental adjusted EBITDA leverage annually. Given the vast market opportunity and our low penetration rates, we will continue to strategically balance future investment with the relentless pursuit of operating leverage. Now moving on to guidance. For the first quarter, we expect revenue in the range of $187 million to $189 million or 24% to 25% growth year-over-year. We expect Q1 marketplace growth to be approximately 27% to 28% year-over-year. As Randy mentioned, trends remained strong in Q1, even as we are mindful of the uncertain macro environment. We expect Q1 services revenue to be largely flat quarter-over-quarter as we work through the transition of the recently launched Thomas Ad serving platform and search upgrades. In Q1, we expect adjusted EBITDA of $6.5 million to $7.5 million compared to roughly breakeven in Q1 of 2025. In Q1, we expect stock-based compensation expenses, including related payroll taxes to be approximately $11 million or approximately 6% of revenue. For the full year 2026, we expect at least 21% revenue growth, driven by our Q1 outlook and at least 20% growth in Q2 to Q4. Our guide for the year reflects us continuing to be mindful of the uncertain macro environment. We expect 2026 marketplace gross margin to be higher than 2025 as each quarter of growth and technological advancement incrementally fuels performance in the subsequent quarters. For 2026, we expect services revenue approximately flat year-over-year with modest growth in the second half of the year. For the full year 2026, we expect incremental adjusted EBITDA margins of at least 20%. I want to close by thanking our dedicated Xometry team members worldwide, whose tireless commitment, professionalism and passion are instrumental to our continued success. We are incredibly proud of our shared accomplishments and look forward to continuing to revolutionize the manufacturing industry together. With that, operator, can you please open up the call for questions?

Our first question comes from Cory Carpenter with JPMorgan.

Randy, could you explain why now is the right time for the CEO change and where you plan to focus your efforts? Sanjeev, there’s clearly a lot happening in the product pipeline, but could you share what excites you the most and which initiatives you believe will have the greatest impact on growth this year?

Great. Well, Cory, good morning. Look, while this is news today, this transition is the result of a deliberate succession process. And as we undergo this transition, I think it's important to remember that even though we're changing the person in the seat, and I'm sitting right next to him right here, we're not changing the destination on the map. And my commitment to Xometry is as strong as ever. And the timing of this transition is deliberate and it reflects the strength of our position. With a record 2025 results, we're on a clear increasingly profitable trajectory, making this the ideal window for a leadership transition later this year on July 1. And these results, frankly, from last year and the momentum we're seeing in the first quarter of this year reflect the impact of Sanjeev's leadership and his focus on product-led growth, which have been key components of our recent success. And as the largest individual long-term shareholder here, I'm not going anywhere. As you asked, I remain deeply involved in our future, specifically driving our strategic growth initiatives and corporate partnerships. I plan on developing across industry initiatives from a strategic vantage point, specifically where Xometry has a significant opportunity to become the essential platform for an industry that is rapidly moving towards a digital-first AI-powered model. And we are very uniquely positioned, and I think there's a lot of strategic partnerships we can build based on that. And I'll hand off to Sanjeev.

Thanks for the question. Executing on growth initiatives, which are driving significant market share gains in this massive fragmented market is really critical for our growth ongoing. We expect the pace of new product introductions to continue in '26 as we further expand the marketplace menu, setting up for continued growth in wallet share. We are focused on growth initiatives across the board, including expanding our marketplace offering, driving structural growth for enterprise accounts and building out our global supplier network. As I have grown and scaled marketplaces in my career, I have seen how the financial models are inherently attractive. Network effects that build competitive moats are able to generate increasing value as the companies grow. As the last few years have demonstrated, we've been able to reaccelerate growth while continuing to improve gross margins and deliver at least 20% incremental adjusted EBITDA margins. Xometry scales, I expect that we will be able to continue to demonstrate consistently strong leverage, delivering increasing profitability and cash flow.

Our next question coming from the line of Andrew Boone with Citizens.

You guys printed a really strong 4Q with acceleration. As I look at the guidance for 1Q '26 and then 2026 in total, it implies a deceleration. Can you just speak to that? Is that conservatism? Is there something from macro that you guys are seeing? Or anything else that you want to highlight there? And then as I think about the pacing of international investments, you guys talked about improvement for 2026. Can you guys just elaborate on that in terms of what our expectations should be as we think about the path to profitability for international?

Yes, this is Randy, Andrew, and thank you for the question. Let me just start by saying we have a lot of momentum. We've mentioned a couple of times in the script, and we raised our guidance for Q1. So Q1 has started very strong. I think we are mindful of the macro. But just to be clear, we also raised our guidance for the year as well. As the year progresses, and hopefully, as we maintain this momentum, we'll continue to update. So far, there's been no change, lots of strong momentum, and we're hopeful and confident that will continue throughout the year.

Yes. Andrew, this is James. Just to build on that. I think, as you point out, Q4 was a great quarter seeing marketplace growth accelerate to 33% year-over-year. I think that does really reflect the progress the team are making, particularly the enterprise growth we've been driving becoming more embedded in those workflows with our largest customers, seeing those enterprise accounts more than 500,000 grow to more than 140, seeing the revenue per buyer up 11% year-over-year and seeing the traction that we're making there is really encouraging. And behind that is also the product-led initiatives. And we really feel like we're taking significant share here. I think as we look forward, Andrew, you say like we always are mindful of that macro environment. We control what we can control. And I think we're very pleased with being able to increase the outlook for Q1 here and for the year ahead. And I think as we go through each quarter, we'll be able to continue to give you updates as we move forward. The second question, was that international?

Yes.

On international..

International profitability...

Yes. And so on that, too, really pleased with the overall opportunity and performance we've had in international. What we've talked about before is the unit economics that we're seeing, the gross margin, the gross profit structure are very similar internationally as we see in the U.S. And as we penetrate deeper into different international markets, really see very common use cases and needs for our buyers and a common opportunity for us to take advantage of our marketplace offering for our suppliers. So I think that over the long term, certainly continue to feel very strongly about international being able to grow into a larger part of our business going up to 30% to 40%. And I think over time, show very similar economics. And so it's great to see the U.S. leading the way and getting to nearly 7% adjusted EBITDA margin here. And I think we'll continue to just balance those choices on profitability and growth as we continue to grow the international business.

Our next question in queue coming from the line of Brian Drab with William Blair.

Randy, congratulations on the decision. It's been an impressive journey so far. I wanted to highlight something that caught my attention, though I joined the call a bit late. I noticed the slide that discussed your progress with some of the larger customers and how quickly their numbers and revenue are increasing. You now have four customers generating over $10 million in revenue. Could you elaborate on what strategies you are employing for these customers and how you are achieving success? Are you integrating into their production materials, ERP systems, or similar areas to support the growth of these substantial clients? It appears that significant progress is being made.

Yes, thank you, Brian. We have several larger customers now, and we believe four of them can reach a $10 million spending level. Currently, we have over 140 customers who are spending more than $500,000 annually with us, which is a significant increase from last year's 100. This growth is driven by a few key factors. First, our technology is becoming an integral part of their workflows and supply chains. Our punch-outs and integrations with their ERP and purchasing systems are crucial, making us a daily aspect of their operations. Additionally, we are continuously enhancing Teamspace, which has proven to be a valuable product that supports larger projects. We're seeing an increase in multiyear projects with these customers, and Teamspace helps facilitate that by adding new features and improvements. Furthermore, we have invested in our sales force and marketing strategies in recent years. With Stephany Verstraete joining as our new CMO at the start of last year, all these elements are aligning to support the development of our larger customer base.

For those types of customers, is the work very varied across your different process offerings? Or do they typically focus on one?

No, it's varied. That slide was intended to show a couple of things. First, our platform is extensible. We operate in multiple industries and have strengths in many sectors. Second, we're handling various processes, which is a key advantage of a marketplace and our platform. It’s extensible, and we can continue to add new processes, like the instant quoting for injection molding that we introduced at the end of last year in the U.S. and now in Europe, along with new materials. All of this contributes to more one-stop shopping. Additionally, the macro environment is shaky. There's a lot of noise out there, leading to a flight to reliability, security, and safety. The Xometry platform provides that, particularly as a public company, thanks to our transparency and the security systems we have in place. For larger customers, this is crucial as they want to ensure they can reliably deliver to their end customers, and our platform is that partner.

And then just lastly on this topic, and then I'll pass it on. The next Slide 11 shows the different work. I like these slides that you show different work that you're doing for some major customers. I don't know if those are the same customers. I imagine there's some overlap between these slides. These are probably customers that are at least doing or $50,000 with you. But for the customers that you're doing the $10 million in revenue with, are those customers that are generally doing production work with you, low-volume production and you're in the bill of materials, it's this recurring production that you're involved in? Or is it just a ton of development work? Or is it both?

It's certainly more heavily weighted towards production, Brian. And we are increasingly in the BOM, just as you diligence it to the BOM. Absolutely.

Our next question coming from the line of Eric Sheridan with Goldman Sachs.

I wanted to build on sort of a couple of the answers you've given so far. When you think about the verticalization of the platform today, what are you seeing as the biggest tailwind to growth on an industry vertical standpoint today? And how are you thinking about continuing to maintain or build on some of that operating momentum in certain industry verticals? And which ones do you feel you're under-indexed to today? And what do you think you need to do in terms of changing some of the indexing across some industry verticals or maybe you feel are more opportunity sets looking longer term?

Yes. I believe we are well diversified across various sectors, which is a significant advantage of our technology platform. This versatility allows us to achieve growth across multiple industries without favoring one over another. One of the most exciting aspects of Xometry is our potential for sustained and substantial growth in the coming years, as we are still underrepresented in the broader market. The total addressable market is vast, and I am very proud of our achievements. We are positioned to continue experiencing strong growth for the foreseeable future because of this vast opportunity. There is a clear trend toward digitization, with an increasing number of people adopting AI-powered solutions. As we spread the word about our capabilities, more companies are recognizing that this is a superior solution. People are looking for resilient, digital supply chains and the latest technology. We occupy a crucial intersection between manufacturing and technology, as well as design and delivery. The more we can promote our offerings and develop integrations, which is one of the key contributions from Sanjeev, the more we can expect to see ongoing growth, possibly even accelerating.

Eric and Randy, I want to emphasize that as we expand our global supply network, the enterprise capabilities we possess across various sectors provide significant added value. This applies whether we are dealing with aerospace, cybersecurity, defense, or medical fields. Our Workcenter platform enables us to match jobs with the optimal suppliers who have the necessary capabilities, ensuring quality delivery. By continuously improving performance across all these categories, as Randy mentioned, we are positioned to tap into the substantial opportunities that lie ahead.

Our next question coming from the line of Ron Josey with Citi.

Randy, congrats and Sanjeev, looking forward to working more closely with you. I wanted to ask a little bit as a follow-up to Eric's question here, just the brand awareness amongst your buyer base. Randy, you just talked about the TAM being so large, and we're just sort of getting started on getting the buyers. So talk to us about brand awareness with what Xometry is offering, particularly as sales and marketing spend, I think that accelerated in the quarter. And so just talk to us about how you balance, call it, overall profitability in sales and marketing with building that awareness. And then, James, as we think about 2026 and the 20% incremental adjusted EBITDA margins, I believe that's consistent with '25. I'd love to hear your thoughts about how the management team is balancing incremental investments with just overall greater EBITDA as we do get to this scale? Or are we just super early given the size of the TAM?

Yes, let me address this, and Sanjeev and James will add their insights. First, there is a significant pool of buyers to tap into. We are focused on balancing profitability with achieving profitable growth in our marketing efforts. Our presentations have shown that this process is becoming increasingly efficient. I would say we are experiencing strong growth, and as we mentioned, Q1 has started off very well. However, we are aware of the need to balance growth with profitability as we aim for a 20% incremental increase in profitability. We still have a lot to achieve in terms of awareness, but we are making progress. This is where we expect to see sustainable long-term growth year after year as more people become familiar with our brand. Technology plays a crucial role here; by integrating our services, like Punchouts and embedding our offerings into workflows, we can increase awareness within our customer base without additional marketing expenditure. For our larger clients, particularly those with over $10 million in revenue, reaching this $500,000 milestone is significant. These companies often have numerous employees across various locations, so the more we can be integrated into their systems, the more we benefit from organic visibility and support. Furthermore, as more customers seek resilient and reliable supply chains, this trend will further attract them to our platform.

Let me just add a couple to that, Ron. As you know, Xometry has been an AI native marketplace for inception. So use of data science, machine learning and foundational models has been key. But even as the AI overviews and AI-enabled answer the optimization engines or GEOs are gaining scale. We actually think of them as a new organic channel for brand messaging and awareness. We are investing in AI marketing capabilities internally, but continue to strengthen where we are with those efforts. In fact, we believe that we are very well positioned to take advantage of this change in how people search because we've been known to create high-quality content and expertise across multiple different categories that we operate in. So I think with new opportunities with answer engines and AI overviews, we actually are using them to drive some of that message home.

And Ron, on the investment and profitability question, over the last 2 years, you've seen us reaccelerate growth and deliver our full year adjusted EBITDA profitability and incremental margins of 20% and more. Actually, we've actually delivered those incremental margins over the last 3 years. So I think that is helping really demonstrate very tangibly the leverage that we see in the marketplace model. To your point, I think it is still very early. There's still a huge opportunity ahead. We're very focused on giving some guideposts here as we scale to $1 billion to continue to deliver at least 20% incremental adjusted EBITDA even as we continue to invest in those growth initiatives. The advantage of being an asset-light model with strong cash flow conversion from adjusted EBITDA means that as we continue to grow here and approach $1 billion, we'll be seeing that come through both in adjusted EBITDA and in the cash flow. And I think that gives us a lot of optionality as we think about the capital allocation and the opportunities ahead to really further scale the business. So it won't always be linear quarter-to-quarter, but certainly, you've seen us demonstrate this over the last few years, and I think we continue to expect to do that on our path to $1 billion here.

Our next question coming from the line of Greg Palm with Craig-Hallum.

Yes. Congrats on the results and obviously, to Randy and Sanjeev, congrats on the planned transition here. I wanted to maybe start with a macro question because there is some thought that we may actually see a broader rebound in manufacturing this year. It's been a while since we've kind of had that. Number one, have you seen any change in, call it, supplier behavior on a year-to-date basis relative to last year or the last few years? And just in terms of the marketplace overall, what kind of impacts would that might have both on revenue and also from a gross margin standpoint, if we did see, call it, a rebounding manufacturing market and thus maybe a byproduct with some tighter capacity industry-wide?

Yes. So just to start, I think it's been business as usual. And I want to be clear, I don't think our results are the beneficiary of any sort of pull forward or anything tariff related, et cetera. I think it's just as we've been gaining more and more market share as we become more and more embedded in our customers, more people are looking for digital solutions that's helped us. And so we really haven't seen any change from a macro perspective. I think as we gave our guide for this year, we mentioned we are mindful of the macro. But if there was an upturn in the macro, that would absolutely be a tailwind for us. It would be helpful for us. I think the improvement in our margins reflects our AI approach. We're training our models. Our algorithms are improving as we get more and more data, we get more and more accurate. And as we grow those networks of buyers and suppliers, that the data plus the growth of those networks, that's what's enabling us to grow our gross margins, and we've been doing that very steadily and consistently year-over-year since we went public. So I think you should expect, as James said, in 2026 for our gross margins to be higher than they were in 2025. We're excited for Q1 gross margins to be higher year-over-year and sequentially. And I think that if we do get a tailwind from a favorable macro, that will only be helping us even not only on the growth side, but also on the bottom line as well.

That makes sense. I wanted to follow up on the cohort analysis because there's some interesting information there. Regarding the $10 million accounts, could you clarify whether they are focused on quantity or quality? Are they undertaking more projects or are they working on larger, higher-value projects? Additionally, how are these accounts managed by account managers? Has there been any change in how the relationship has developed that could help you attract more accounts into this specific group?

There are a couple of points to consider. With the larger accounts, there's definitely more production work involved, leading to larger projects. Overall, there's a significant increase in volume, and the number of users in those accounts is noteworthy. This combination of factors, especially the larger projects, is beneficial. We're incorporated into bill of materials, which creates a strong connection with customers, ensuring they rely on us for specific parts over time. Our technological innovations play a crucial role in this process. When it comes to larger accounts, they often start small, where we gain visibility. The integration of our services into their workflows and technologies has been essential for growth. These technology lock-ins enhance our appeal and make it easier for customers to choose us repeatedly, increasing awareness within these large organizations. Our tiered sales force also supports account management in various ways. Ultimately, the technology is the key factor that drives this success.

Our next question coming from the line of Josh Chan with UBS.

Congratulations, Randy and Sanjeev, on the transition. I have two quick questions. First, given the strong demand from customers, how do you view your momentum in adding active suppliers? Are you focusing more on larger active suppliers, making the count less significant? Second, as you continue to grow EBITDA, what are your thoughts on potentially reaching breakeven free cash flow in the near future?

Thanks for the question, Josh. This is Sanjeev. As you mentioned, supplier growth is crucial for driving marketplace growth. We currently have close to 5,000 suppliers overall. Our system manages margins between buyers and suppliers, so expanding both sides of the marketplace is vital. Regarding the ongoing growth in large enterprise accounts and their specific needs, we ensure our network has suppliers capable of delivering the required programs, along with the necessary certifications and standards to meet customer quality demands. Balancing the network for size, geographical spread, and process depth is critical, and we continue to invest our time in these areas.

Josh, regarding cash flow, that's a great question. We've already shown positive cash flow or come very close to it in a couple of quarters over the past year. Our asset-light model supports good cash conversion. Cash flow follows our adjusted EBITDA, which reached its first full-year profitability of $18.5 million. Therefore, I expect that in the next year, we'll achieve sustained positive free cash flow as we keep growing. To give you more context, our operational cash flow last year was actually positive at $6 million. We have been investing in our product-led strategy, leading to a CapEx of $10.3 million for the quarter. If we maintain a similar revenue percentage for the upcoming year, around 6%, we anticipate being sustainably free cash flow positive when we reach a quarterly run rate of $225 million.

Our next question comes from the line of Matt Swanson with RBC Capital Markets.

We've touched on this in a couple of different parts, but I wanted to focus a little bit more on the Workcenter mobile app and just kind of what benefits that might give you from the competitive environment of just making it easier to work with for suppliers. They obviously have a limited number of hours every day their machines can be running. How does that kind of help to make sure that they're running on Xometry product projects?

Thanks for that question, Matt. I think the Workcenter mobile app is proving to be a substantial lock-in with our partners and suppliers across the globe. The advantages that we see are across 3 different interactions that those partners and suppliers have. One is on the job board itself, which is accepting a job when we offer them. A lot of the suppliers are not always in front of their computer to be able to actually accept jobs, and the flexibility that a mobile app provides them to be able to accept the job where they might be actually at a machine and/or they might be away from their desk at home given the size and scale of some of these suppliers, that's the huge benefit just to get started. The second one is around management of the job itself. And I think the big advantage there is as they work through those jobs, they want to make sure that they are able to provide us with most timely inputs, both in terms of updates on the job, but also questions that might arise during manufacturing. So improving the analysis around the DFM piece that we were talking about before. So it acts as a mechanism for us to get real-time data back from the manufacturing flows coming back into our models and helping us improve those. And then finally, of course, managing their own cash flows. As you can imagine, a lot of these suppliers are trying to balance lots of jobs that they have, like you mentioned, but also trying to manage the outcomes for their business. So this has been the 3 areas of engagement that we continue to see increase.

I appreciate that. And I know there's been a lot of questions on the large customer front because these are some impressive numbers you guys delivered. But I guess what I was wondering is when you're thinking about how customers go from $50,000 to $500,000 to $10 million, are there any internal metrics that you look at that kind of signal people are starting to upsize? Have you seen any correlation with like the further spreading out of Teamspace or anything else that kind of gives you more confidence that the enterprise momentum we've seen in '25 will kind of continue to build in 2026?

I think it starts with those customers, and we have a good idea of their total spend. It begins with qualifying that these companies can spend over $10 million with us. If we shared the names of these customers, you would see they are spending significantly more than that $10 million. Even a modest share of their total spend is a very achievable target. This qualification is key. Our platform is highly extensible, making it relevant to many industries, and there are substantial customers making billions of dollars in custom manufacturing, far exceeding that amount. It starts with this qualification. As you noted, with more buyers adopting the platform and more teams being created, customers can invite their colleagues to join and utilize the platform, which is a positive sign. Moreover, as we gain traction with our integrations and become embedded in workflows, these are additional encouraging indicators. These customers are clearly ready to spend. Our task is to demonstrate that this is the best solution. That's why we are witnessing momentum. We expect the number of customers spending over $10 million to grow each year along with those spending over $500,000. There is still much more potential ahead.

And there are no further questions in the queue at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.