Symbotic Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter ended June 24, 2023; year-to-date covers the nine months ended June 24, 2023. Comparative periods ended June 25, 2022. Dollar amounts below are USD unless stated otherwise.
Business context
Symbotic develops and installs warehouse automation systems, principally for large retailers. Systems revenue is generated as hardware and embedded software are installed and accepted. Walmart’s master automation agreement covers its 42 regional distribution centers and is expected to generate system revenue through fiscal 2028.
Key financial metrics
| Metric | Q3 FY2023 | Q3 FY2022 | Nine months FY2023 | Nine months FY2022 |
|---|---|---|---|---|
| Revenue | $311.8m | $175.6m | $785.0m | $348.9m |
| Gross profit / margin | $52.9m / 17.0% | $31.5m / 18.0% | $131.0m / 16.7% | $62.9m / 18.0% |
| Operating loss | $(42.0)m | $(33.0)m | $(169.3)m | $(86.1)m |
| Net loss | $(39.1)m | $(32.9)m | $(162.5)m | $(85.8)m |
| Adjusted EBITDA loss | $(3.4)m | $(21.8)m | $(30.9)m | $(69.3)m |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $186.3m | $(96.7)m |
- Q3 systems revenue grew 78%; nine-month systems revenue grew 129%. Management attributed growth chiefly to 33 system deployments in progress in the quarter, versus 13 in the comparable 2022 quarter.
- Gross margin declined year over year. Software maintenance and operation services both had negative gross profit in Q3, reflecting higher support staffing and operating personnel costs.
- Q3 Class A loss per share was $0.07, versus $0.03; nine-month loss per share was $0.29, versus $0.03. Consolidated losses differ from losses attributable to Class A common stockholders because of noncontrolling interests and, in the prior-year periods, pre-combination results.
- Stock-based compensation was $37.0m in Q3 and $121.8m year to date, a significant noncash expense.
Financial position and liquidity
- At June 24, 2023, cash and cash equivalents were $255.5m and marketable securities were $255.4m, versus cash of $353.5m and no marketable securities at September 24, 2022. Total current assets were $921.7m and current liabilities were $898.0m.
- Operating cash flow of $186.3m for the nine months included a substantial contribution from working-capital movements, notably a $349.4m increase in deferred revenue. Investing cash outflow was $271.5m, including $251.1m net purchases of marketable securities and $20.4m of property and equipment. Financing cash outflow was $10.7m.
- No borrowings or debt balance are reported in the provided financial statements. Current liabilities include $742.2m of deferred revenue, generally reflecting customer payments received ahead of performance.
- Vendor commitments totaled $1.166bn, including $1.053bn due in less than one year. Management stated cash, unrestricted marketable securities, working capital, and forecast operating cash flows should be sufficient for foreseeable needs for at least 12 months.
Material changes, outlook, and risks
- Remaining performance obligations for contracts longer than one year were $12.0bn, substantially related to Walmart. The company expects to recognize approximately 12% within 12 months and 80% within five years; timing depends on installation schedules. Estimates exclude certain variable consideration and cancellable contracts.
- One customer accounted for 89.2% of Q3 revenue and 87.3% of nine-month revenue. Customer concentration creates exposure if the relationship or contract activity changes.
- After quarter-end, Symbotic formed GreenBox with SoftBank: Symbotic Holdings owns 35% and SoftBank 65%. GreenBox is intended to finance and operate warehouse automation deployments globally. The filing describes a commercial agreement and a warrant issued to SoftBank; realization of expected benefits is uncertain.
- Also after quarter-end, founder-related trusts sold 17.8m Class A shares to SoftBank for $500m. This was a secondary share sale, not cash proceeds to Symbotic.
- During the second quarter, the company recorded restructuring-related severance, inventory impairment, and property and equipment impairment charges; the nine-month adjusted EBITDA reconciliation includes $8.4m of restructuring charges. Management said related actions were expected to be substantially completed during the fiscal year.
- Principal disclosed risks include execution of system installations and customer acceptance, dependence on a small number of customers, supplier concentration, substantial vendor commitments, and the ability to realize GreenBox benefits. Management reported disclosure controls were effective at the reasonable-assurance level; an internal audit function was established during the period.
Important facts for investors to verify
- Whether deployment pace, customer acceptance, and Walmart installation milestones support the $12.0bn remaining performance obligations and expected revenue timing.
- How sustainable operating cash flow is when customer advances and other working-capital timing effects are considered, and how the $1.166bn vendor commitments will be funded and fulfilled.
- Whether gross margins improve as deployments scale, given lower year-over-year margins and negative gross profit in support and operations services.
- The detailed economics, warrant dilution terms, funding responsibilities, and execution risks of GreenBox; confirm that the $500m share sale was not a company financing.
- Future customer and supplier concentration, and the extent to which stock-based compensation and restructuring items affect reported losses and non-GAAP measures.