Symbotic reported strong financial and operational results for the first quarter of fiscal 2024.
First quarter revenue grew nearly 80% year-over-year to $369 million, driven by scale and an increasing number of systems in deployment.
Initiated 5 new system deployments and completed 3, with 15 fully operational systems and 37 in the process of deployment by the end of Q1.
Gross margin increased sequentially by 90 basis points to 20%, primarily due to improvement in system gross margin.
Non-GAAP system gross margin increased 110 basis points from the last quarter.
Adjusted EBITDA rate improved to 3.8% from 3.4% in the previous quarter.
Cash and equivalents, including marketable securities and restricted cash, grew $129 million sequentially to $677 million.
For Q2 fiscal 2024, revenue is expected to be between $400 million and $420 million with adjusted EBITDA between $12 million and $15 million.
Operational Achievements
Set a new deployment record with a full Symbotic system build, installation, and commissioning process completed in only 20 months.
Introduced SymBot, a mobile bot with the newest NVIDIA chips and AI-powered automation software, enhancing transaction speed and reliability.
BreakPack development progressed faster than expected, moving beyond the prototype stage and now ready for general availability.
GreenBox, a joint venture, is receiving significant inbound interest and is expected to recognize its first revenue in fiscal 2024.
Strategic Developments
Implemented SAP software across the company to aid in scaling and compliance efforts.
Stabilized the pace of system deployment starts to manage future revenue growth effectively.
Working on further reductions in system deployment time and standardizing the system platform to streamline deployment processes.
Backlog remains stable at $23.2 billion with the addition of new customer Southern Glazers in November.
Recurring revenue streams grew 5% sequentially and 45% year-on-year, contributing to positive gross profit.
Expects gross margin to improve each year and recurring gross margins to trend over 60% as the company scales.
Question and Answer
Second Quarter Guidance and EBITDA Margins
Question
What factors are impacting the EBITDA margins in the second quarter, and when can we expect a more significant sequential improvement in margins?
Answer
The second quarter guidance reflects flexibility to accommodate increased spending for accelerated deployment schedules and high-quality system delivery.
Margins are expected to improve in the second half of the year and show year-over-year improvement.
BreakPack Stand-Alone Product and Target Customers
Question
Can you provide more information about BreakPack being available as a stand-alone product, its target customers, and initial market response?
Answer
Target customers for BreakPack include drugstores, smaller store formats, and customers with a long tail of slow-moving items.
The initial market response has been positive, and BreakPack will be marketed as an add-on product to the core offering as Symbotic gains more comfort with its performance.
Supplier Network and Inventory Challenges
Question
Can you provide an update on the supplier network, the timing of alleviating inventory challenges, and the impact on lead times?
Answer
The company is seeing better inventory and higher-quality products from suppliers, allowing for faster implementation times and exceeding customer expectations for quality.
Suppliers are now more interested, price-competitive, and willing to invest in quality, leading to a good position with suppliers.
In 2024, the company will focus on gaining efficiencies from suppliers and start seeing the benefits of these relationships.
New Customer Mix and Steel Impact
Question
Can you provide more details on the new customer mix, specifically the impact of steel on margins and the variability of steel costs?
Answer
Out of the five new systems, Southern Glazers is the only new customer, while the other four are additional statements of work for existing customers.
The company has pass-through clauses in its contracts to manage steel cost fluctuations.
Steel costs are expected to be a minor contributor to margin expansion, not accounting for a significant portion of the 90 basis points sequential improvement.
SymBot Key Performance Indicators (KPIs)
Question
Can you review the key performance indicators (KPIs) of SymBot compared to the previous generation, particularly regarding transactions per hour and other relevant metrics?
Answer
SymBot can handle a tapered box, providing increased flexibility and a larger universe of products that can be managed.
It features vision capabilities, enabling the recognition of boxes that were previously invisible.
SymBot can pick and place packages 10 seconds faster than the original bot and handle more than one bot at a time on outbound operations.
BreakPack Revenue Contribution and Non-Ambient Market
Question
Do you expect BreakPack to contribute to revenue in fiscal 2024, and when will Symbotic target the non-ambient market?
Answer
BreakPack may contribute to revenue towards the end of 2024 due to the selling cycle, while the non-ambient market is being piloted with perishable testing in a perishable warehouse.
The company expects to offer perishables in approximately 12 months and frozen items in the future.
System Starts and Operational Stabilization
Question
Can you explain the decision to temporarily stabilize the number of system starts and how it aligns with operational management and outsourcing partnerships?
Answer
Stabilizing the number of system starts does not imply a lack of growth but rather a focus on delivering on the existing backlog and ramping up the number of operational systems.
The company will continue to improve the number of systems deployed each quarter, with a focus on delivering systems from the current backlog and adding one to two new customers per year.
EBITDA Guidance and Customer Support
Question
What does the EBITDA guidance assumption of flexibility in deploying resources to support customers entail, and is this related to difficulties with recent projects or supporting newer customers?
Answer
The flexibility in deploying resources is necessary due to the current scaling phase, with 37 projects in deployment compared to 22 a year ago.
The company is focused on adhering to schedules and delivering high-quality systems, even if it requires additional resources or slightly longer timelines.
The company prioritizes long-term customer satisfaction and quality system delivery over short-term margin optimization.
R&D Expenses and Long-Term Deployment Goals
Question
Why have R&D expenses declined in recent quarters, and what is the outlook for R&D spending? What are the long-term goals for deployment timelines?
Answer
The decline in R&D expenses from the fourth quarter to the first quarter is due to the extra week in the previous year’s fourth quarter.
R&D expenses are expected to grow modestly throughout the year, with a focus on innovation projects and efficiency improvements.
The long-term goal for deployment timelines is to reduce the 20-month cycle to 12 months or lower.
Growth Investment and OpEx Trends
Question
Why is there a need to accelerate growth investments now, given the recent OpEx trends and the significant revenue growth?
Answer
The company is modulating OpEx growth and improving spending efficiency, with OpEx expected to grow at a slower rate than revenue.
The focus is on increasing margins through SymBot capabilities and smaller system offerings.
Non-Ambient Food Opportunity and Walmart Backlog
Question
Can you provide any insights into the size of the non-ambient food opportunity with existing customers and whether the Walmart backlog includes revenue for non-ambient systems?
Answer
The Walmart backlog does not include non-ambient systems, and the non-ambient food market is a significant opportunity due to the need for increased system capabilities and smaller system footprints.
The company is focused on increasing system density and reducing the number of bots required, which could lead to both margin improvement and the ability to offer systems at lower price points.
BreakPack Use Cases and Deployment Timeline
Question
How important is it to secure a use case for BreakPack outside of large customers like Walmart, and how does this impact the market expansion strategy?
Answer
While it would be beneficial to secure use cases outside of large customers, the current focus is on delivering high-quality systems and exceeding customer expectations, which will build credibility and facilitate market expansion.
Deployment Pace and Outsourcing Partners
Question
Will the pace of deployments be consistent or experience fluctuations as new outsourcing partners are brought on board?
Answer
The company is focused on standardizing designs, speeding up implementation, and simplifying programming to ensure consistent deployment timelines and avoid fluctuations.
Customer Support Spending and Bottlenecks
Question
What are the main bottlenecks requiring increased spending to support higher growth, and is this related to in-house engineers or third-party suppliers?
Answer
The increased spending is primarily on operators and on-site personnel for the final stage of commissioning and deployment to ensure system reliability.
Working Capital Expansion and Cash Flow
Question
Can you provide more details on the expected working capital expansion in the second half of the year and the confidence in top cash or free cash flow improvement?
Answer
Working capital expansion is expected due to the front-loaded cash inflows during deployments, with higher cash outflows in the second quarter similar to the first quarter.
Excluding warrant exercises, cash flow is expected to be flat for the year.
Revenue Guidance Conservatism and Project Variability
Question
Was the revenue guidance more conservative in the past due to fewer projects in deployment and higher project variability, and how has this changed with the current project portfolio?
Answer
The revenue guidance is now more precise and less conservative due to the increased number of projects in deployment, which reduces the impact of individual project variability on quarterly results.
System Production Ramp and Customer Service
Question
Is there anything preventing a faster ramp-up in system production, and is this related to customer scheduling or other factors?
Answer
The ramp-up in system production is paced to ensure excellent customer service and satisfaction while delivering on the existing backlog.
SymBot Capabilities and Margin Impact
Question
With SymBot’s ability to handle multiple bots on outbound operations, will this lead to fewer bots required in a system and potentially impact margins?
Answer
SymBot’s capabilities are designed to increase margins through higher efficiency and system density, enabling the company to offer smaller systems at lower price points.
GreenBox Deployment Schedule and Customer Sign-ons
Question
Can you confirm the expected timing of initial revenue recognition for GreenBox and provide insights into the deployment ramp-up and its dependence on customer sign-ons?
Answer
GreenBox is expected to start generating revenue in fiscal 2024, with a slow start followed by rapid expansion as the concept is proven and demand increases.
Deployment Pace and Acceleration
Question
Are there any constraints preventing the acceleration of deployment pace beyond current levels, such as bringing on additional partners or further reducing deployment timelines?
Answer
The company is confident in its ability to accelerate deployment pace and deploy systems faster than in the past, with the current quarter’s deployments having started a year ago.
Live System Turn-on Expectations
Question
How many live systems are expected to be turned on this year, and what are the factors influencing this number?
Answer
The company typically does not provide specific guidance on the number of live systems, but the trend is towards continued improvement, with a focus on reducing the 20-month deployment cycle for an average system.
Recurring Revenue Growth and Attach Rates
Question
How should we expect recurring fee percentages to evolve as new systems come online, and what is the outlook for recurring revenue growth and attach rates?
Answer
Recurring revenue growth will be steeper in future quarters as more systems come online, and attach rates are expected to improve as the company focuses on signing new customers.
GreenBox Joint Venture Formation and Milestones
Question
How will the costs related to GreenBox joint venture formation trend throughout the year, and what are the major milestones to be achieved before the first customer announcement?
Answer
The costs related to the joint venture formation were one-time expenses and will not continue.
The major milestones for GreenBox include finalizing the first customer announcement and expanding the management team to build a larger sales force.
