Business context and reporting period
This unaudited Form 10-Q covers the quarter and six months ended June 30, 2023. The registrant named in the filing is Sarcos Technology and Robotics Corporation, a developer of robotic systems, solutions and AI/ML software. The filing describes a July 2023 strategy and restructuring update. All share and per-share amounts reflect the 1-for-6 reverse stock split effective July 5, 2023.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $1.28 million | $3.04 million | $3.57 million | $3.78 million |
| Operating loss | $29.96 million | $28.98 million | $53.15 million | $54.61 million |
| Net loss | $28.66 million | $23.12 million | $50.14 million | $42.32 million |
| Operating cash flow | Not separately provided for quarter | Not separately provided for quarter | $(39.99) million | $(27.92) million |
- Q2 gross profit was approximately $0.33 million, or 26% of revenue, compared with a gross loss of approximately $0.11 million in Q2 2022. For the first six months, gross profit was approximately $0.84 million, or 24% of revenue, versus approximately $0.15 million, or 4%, in 2022.
- At June 30, cash and cash equivalents were $25.6 million and marketable securities were $49.6 million, totaling $75.1 million, down from $114.5 million at December 31, 2022. Working capital was $75.6 million.
- Total liabilities were $21.6 million, including $12.8 million of operating lease liabilities. The filing reports no outstanding borrowings; lease liabilities are the principal disclosed debt-like obligations.
- Total assets were $120.7 million and stockholders’ equity was $99.0 million. Accumulated deficit was $352.8 million.
- Backlog, representing remaining performance obligations, was $4.8 million; the company expected most to be recognized within 12 months.
Material changes versus the prior comparable period
- Q2 revenue fell 58%, primarily because certain development contracts ended and had not been replaced. Product sales remained negligible: $3,000 in Q2 and for the first half of 2023.
- Q2 research and development expense rose 55% to $11.7 million, while general and administrative expense fell 55% to $8.3 million, largely reflecting lower stock-based compensation and lower insurance and legal costs. Sales and marketing expense increased 71% to $4.4 million.
- Net loss widened in Q2 despite lower total operating expenses, reflecting reduced warrant-liability gains versus the prior-year quarter. For the six-month period, net loss also increased, while operating loss narrowed.
- Operating cash use increased by $12.1 million year over year to $40.0 million for the first half, reflecting higher net loss and working-capital changes, including inventory purchases. Cash and securities declined by $39.4 million from year-end.
Outlook, management commentary and risks
- On July 12, 2023, management announced a narrower focus on Guardian Sea Class, selected aviation and solar applications, and commercial AI autonomy software. It also announced consolidation of Pittsburgh manufacturing into Salt Lake City and a workforce reduction of approximately 24%.
- The company recorded $5.1 million of Q2 charges: a $4.4 million inventory write-down and $0.7 million fixed-asset impairment. It anticipated approximately $6.0 million of additional net restructuring expense in Q3, including about $1.5 million of cash severance and benefits. The filing separately estimates $14.6 million in annualized savings from the workforce reduction; these are estimates, not realized savings.
- Management expected R&D, general and administrative, and sales and marketing expenses, excluding additional restructuring charges, to decrease significantly in the second half of 2023. It stated that available liquidity should support at least 12 months from the report date and that it believed it could operate into 2025 without raising capital. However, it expects to need additional capital before achieving positive operating cash flow, which it does not expect before 2025. It reported no current plan for an equity financing in 2023.
- Commercial products remain under development; the company disclosed no binding orders for commercial versions of its focus products. Management cited customer budget constraints, limited near-term demand for general-purpose systems, supply-chain constraints, and product-readiness considerations. High-volume production by its contract manufacturer was not expected until after 2023.
- Key risks include continued losses and cash burn, execution of the product and cost restructuring, uncertain customer demand and commercialization timing, reliance on limited-source suppliers, manufacturing and safety challenges, and the possibility of needing external financing on unfavorable terms. The company reported no material legal loss contingency and a $2.0 million unconditional purchase commitment, paid in Q3.
Important facts for investors to verify
- Whether the narrowed product portfolio generates binding commercial orders and converts the $4.8 million backlog into revenue.
- Actual cash burn, liquidity runway and any financing needs relative to management’s expectations of operating into 2025 and positive cash flow no earlier than 2025.
- Whether the announced workforce reduction and facility consolidation deliver the stated annualized savings without disrupting development, manufacturing or customer support.
- Progress toward commercial readiness and outsourced production, including supply availability, product safety and delivery timelines.
- The filing is under Sarcos Technology and Robotics Corporation; verify the relationship to Palladyne AI Corp. and any subsequent corporate name, ticker or business changes before comparing with later disclosures.