Symbotic Inc. — Q1 FY2023 Form 10-Q
Reporting period: Three months ended December 24, 2022; comparisons are with the three months ended December 25, 2021. Amounts below are in U.S. dollars.
Business context and financial performance
Symbotic develops and installs warehouse automation systems using autonomous robots and AI-enabled software. The quarter’s growth was driven by 22 system deployments in progress, compared with 9 a year earlier, including installations under its Walmart agreement.
| Metric | Q1 FY2023 | Prior-year quarter | Change or context |
|---|---|---|---|
| Revenue | $206.3 million | $77.1 million | Up 168% |
| Systems revenue | $197.9 million | $71.2 million | Up 178%; principal growth driver |
| Gross profit / margin | $35.2 million / 17% | $14.5 million / 19% | Profit rose, but margin declined |
| Operating expenses | $104.8 million | $37.5 million | R&D and SG&A increased substantially |
| Operating loss | $69.6 million | $23.1 million | Loss widened |
| Net loss | $68.0 million | $23.1 million | Loss attributable to common stockholders was $7.2 million; Class A loss per share was $0.12 |
| Adjusted EBITDA loss | $16.3 million | $21.3 million | Non-GAAP measure; improved year over year |
R&D expense increased 129% to $50.7 million, reflecting engineering headcount and development work, including next-generation robots and AI capabilities. SG&A increased 252% to $54.0 million, driven largely by employee and stock-based compensation, business infrastructure, and public-company costs. Stock-based compensation was $49.5 million, including $49.2 million for restricted stock units. Systems generated $37.0 million of gross profit; software maintenance and operation services had gross losses of $0.4 million and $1.3 million, respectively.
Cash flow, liquidity, and obligations
- Operating cash flow: Provided $101.1 million, versus $40.0 million a year earlier. Management attributed the result principally to working-capital movements, including increased deferred revenue from active projects and the timing of customer receipts and vendor payments; it also included $49.5 million of noncash stock compensation.
- Investing and financing: Investing used $103.8 million, including $96.8 million of purchases of marketable securities and $7.0 million of property and equipment. Financing cash flow was zero. Cash declined $2.7 million during the quarter.
- Liquidity: At December 24, 2022, cash and cash equivalents were $350.7 million and marketable securities were $96.8 million. Management said available cash, securities, working capital, and forecast operating cash flows should cover foreseeable needs for at least 12 months.
- Debt and liabilities: The filing does not report borrowings or a clear amount of interest-bearing debt. Total liabilities were $758.6 million, including $589.8 million of current and long-term deferred revenue; these customer contract liabilities are not debt. Operating lease liabilities were $6.0 million.
- Commitments: Vendor commitments totaled $814.5 million, of which $774.4 million was due in less than one year. The filing reports no off-balance-sheet arrangements.
Material changes, outlook, and risks
- Revenue growth reflects more installations underway and continued Walmart deployments. The Walmart master agreement covers systems in all 42 regional distribution centers; installations are expected to continue through fiscal 2028.
- Remaining performance obligations for contracts longer than one year were $12.0 billion, substantially related to Walmart. The company expects to recognize approximately 9% in the next 12 months; timing depends on installation schedules. This amount is not a guarantee of future revenue.
- Customer concentration remains high: two customers represented 91.9% of quarterly revenue, and one customer represented 91.9% of accounts receivable at quarter-end. Management warned that losing a major customer could materially affect results.
- Gross margin declined to 17% as the business scaled. Maintenance and operation services were loss-making, with management citing support-team and site staffing costs.
- The company recorded a $2.0 million CEO transition charge. It also recorded $0.3 million of income tax expense despite a pretax loss and maintained a full valuation allowance against deferred tax assets. Estimated future Tax Receivable Agreement payments were $114.8 million, but no liability was recorded based on current projections.
- Management cited risks including customer concentration, installation delays or failure to meet customer requirements, competition, product defects, changing economic conditions, and the possibility that additional financing may not be available on acceptable terms. The filing reported no material changes to risk factors in the prior 10-K and no legal matters expected to have a material adverse effect.
Important facts for investors to verify
- Whether deployment pace, customer acceptance, and Walmart installation schedules support the stated backlog and revenue timing.
- How much operating cash flow depends on advance customer payments and working-capital timing, and whether cash generation remains positive as installations scale.
- Whether gross margins improve, particularly in maintenance and operation services, as staffing and support costs rise.
- The exposure created by customer concentration and the large accounts-receivable balance attributable to one customer.
- The timing and potential cash impact of vendor commitments, the Tax Receivable Agreement, and future capital and operating needs.
- The effect of substantial stock-based compensation on reported losses, dilution, and the interpretation of Adjusted EBITDA.