Business context and reporting period
The supplied metadata names Palladyne AI Corp., but the filing is Sarcos Technology and Robotics Corporation’s Form 10-Q for the quarter ended March 31, 2022. Sarcos develops mobile robotic systems, including the Guardian XO and Guardian XT. The results below exclude RE2, acquired on April 25, 2022.
Key financial metrics
Amounts are in U.S. dollars; financial statement figures are in millions unless noted.
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $0.743 | $1.799 |
| Cost of revenue | $0.488 | $1.202 |
| Gross profit / margin | $0.255 / 34.3% | $0.597 / 33.2% |
| Operating expenses | $26.372 | $6.987 |
| Operating loss | $(25.629) | $(5.188) |
| Net loss | $(19.202) | $(5.198) |
| Basic and diluted loss per share | $(0.14) | $(0.05) |
| Cash used in operations | $(12.452) | $(3.871) |
| Cash used in investing | $(0.514) | $(0.962) |
| Cash used in financing | $(5.190) | Cash provided: $1.819 |
At March 31, cash and cash equivalents were $198.958 million, down from $217.114 million at December 31, 2021. Working capital was $202.4 million. The company reported no outstanding PPP loans or other notes payable; warrant liabilities were $7.283 million. It stated cash on hand was sufficient for at least 12 months. Subsequent to quarter-end, it used approximately $30 million net cash for the RE2 acquisition.
Material changes versus the prior comparable period
- Revenue fell 59%, primarily as research and development services revenue declined 54% to $0.733 million; product revenue fell to $0.010 million from $0.199 million.
- Operating expenses rose 277%. Research and development increased 109% to $5.881 million as the company expanded staffing and focused on core-product development. General and administrative expenses increased to $17.792 million, including $10.5 million of stock-based compensation, mainly tied to merger-related awards. Sales and marketing rose to $2.211 million.
- Net loss increased to $19.202 million from $5.198 million. A $6.414 million noncash gain from remeasuring warrant liabilities partly offset the operating loss; the liability declined from $13.701 million at year-end to $7.283 million.
- Operating cash use increased to $12.452 million. Cash decreased by $18.156 million in the quarter, including $5.254 million used to cover tax withholding on vested equity awards.
Outlook, risks and unusual items
- Management expected initial commercial production of Guardian XO and Guardian XT units by the end of 2022, with initial customer deliveries in early 2023, while warning that supply constraints, staffing, development, manufacturing, safety or testing issues could delay the schedule. It expected research and development, general and administrative, and sales and marketing expenses to remain elevated.
- The company had no RaaS subscription agreements and no binding commercial orders for the upcoming commercial versions of Guardian XO and Guardian XT. Remaining performance-obligation backlog was $1.8 million, expected to be recognized during 2022.
- On April 25, 2022, Sarcos acquired RE2 for approximately $30 million cash, net of cash acquired, 10.8 million shares, and assumed options covering 3.9 million shares. Management cited integration and execution risks; acquisition results are not included in Q1 figures.
- COVID-19-related customer-site restrictions and supply-chain disruption were delaying product assessments and deployment. The filing also cited inflation, labor shortages, component availability, competition, commercialization and customer-adoption uncertainty, and the untested RaaS model.
- Disclosure controls and procedures were deemed ineffective as of March 31, 2022, due to a material weakness involving technical accounting issues in equity transactions. Management described remediation efforts, including experienced hires and outside consulting support.
- The company reported no known legal matters expected to have a material adverse effect and no material loss contingency recorded. It had a $36 million unconditional Palantir commitment remaining as of quarter-end, payable from 2023 through 2026.
Important facts for investors to verify
- Confirm the issuer: this is a Sarcos filing, not a Palladyne AI Corp. filing.
- Track progress against the Guardian XO and XT production and delivery timetable, and look for binding customer orders or RaaS subscriptions.
- Assess cash burn and liquidity after the RE2 acquisition, including the $36 million Palantir commitment and planned spending increases.
- Monitor RE2 integration, acquisition-related dilution, and the company’s share count: 139.0 million shares were outstanding at March 31, while the cover reports 153.8 million as of April 29.
- Review remediation of the material weakness and any subsequent changes in disclosure controls.