Filing summary
Registrant identity: The supplied filing is Sarcos Technology and Robotics Corporation’s Form 10-Q, not a filing identified as Palladyne AI Corp. Investors should verify the issuer and filing before attributing these results to Palladyne. The report covers the quarter and six months ended June 30, 2022; it was signed August 9, 2022. Figures below are in U.S. dollars.
Business context and reporting period
Sarcos develops mobile robotic systems for industrial and other unstructured environments. Its products include Guardian XO, Guardian XT and, following its April 25, 2022 acquisition of RE2, the Sapien robotic arm line. Reported 2022 results include RE2 only from the acquisition date.
Key financial metrics
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $3.04 million | $1.14 million | $3.78 million | $2.94 million |
| Cost of revenue | $3.15 million | $0.68 million | $3.63 million | $1.88 million |
| Gross profit (loss), calculated | $(0.11) million | $0.47 million | $0.15 million | $1.06 million |
| Operating expenses | $32.02 million | $8.81 million | $58.39 million | $15.80 million |
| Operating loss | $(28.98) million | $(7.67) million | $(54.61) million | $(12.86) million |
| Net loss | $(23.12) million | $(5.26) million | $(42.32) million | $(10.46) million |
| Net loss per share, diluted | $(0.16) | $(0.05) | $(0.30) | $(0.10) |
Calculated gross margin was approximately negative 3.6% in Q2 2022 and positive 3.9% for the first half of 2022. The filing reports no positive operating cash flow and does not provide a positive operating margin.
- Cash and liquidity: June 30 cash and cash equivalents were $73.3 million, with $79.5 million in marketable securities; combined, $152.8 million, compared with $217.1 million in cash and cash equivalents at December 31, 2021. Working capital was $154.4 million.
- Cash flow, first half: $27.9 million used in operations, $109.9 million used in investing, and $6.0 million used in financing. Investing use included $79.5 million of marketable-security purchases and $29.7 million of acquisition cash, net of cash acquired.
- Debt and obligations: No outstanding debt at June 30. Current liabilities were $9.8 million and total liabilities $17.7 million. The filing also lists $17.1 million of future operating-lease payments and a $36.0 million remaining unconditional Palantir software/services purchase commitment through 2026.
- Equity and acquisition: Stockholders’ equity was $246.3 million. RE2 purchase consideration was approximately $90.2 million, including cash, shares and assumed options; $70.9 million of goodwill and $21.3 million of identifiable intangible assets were recorded. Shares outstanding were 152.2 million at June 30 and 154.8 million as of July 29, 2022.
Material changes versus prior comparable periods
- Q2 revenue increased 166% year over year, mainly from RE2 research-and-development services; first-half revenue rose 29%. Product revenue remained small and declined year over year for the first half.
- First-half operating expenses rose 270%. General and administrative costs increased sharply, including substantial stock-based compensation; R&D and sales and marketing also increased as the company expanded and advanced commercialization.
- First-half net loss increased to $42.3 million from $10.5 million. A $10.5 million noncash gain from remeasuring warrant liabilities reduced the reported loss; Q2 included a $4.1 million warrant-liability gain.
- Cash, cash equivalents and marketable securities declined by $64.3 million from year-end, with significant amounts moved into marketable securities and used for the RE2 acquisition and operations.
Outlook, commentary and risks
- Management said available cash and marketable securities were expected to fund operations for at least 12 months from the report date, but also expected to seek additional financing and did not anticipate positive operating cash flow through at least 2024.
- Management expected initial production of Guardian XT and Sapien 6M by the end of 2022, with customer deliveries in early 2023; Guardian XO initial production was anticipated in the second half of 2023. These are forward-looking estimates, not guaranteed commitments.
- The company prioritized Guardian XT and Sapien 6M; Guardian XO commercialization was delayed amid supply constraints and redesign work. Management cited component availability, inflation, hiring, development, manufacturing ramp-up and COVID-19-related disruption as potential causes of further delays.
- The company had no RaaS subscription agreements and no binding commercial orders for the upcoming commercial versions of Guardian XO or Guardian XT. Management described demand and the RaaS model as unproven; it reported limited binding commitments for Sapien products.
- RE2 integration, supplier concentration, reliance on contract manufacturing that was not yet under definitive agreement, product safety and performance, and the need for additional capital are key risks. The filing also notes a $42.0 million Palantir commitment, of which $36.0 million remained scheduled after June 30.
- The filing states that a previously identified material weakness in internal control over financial reporting was remediated as of June 30, 2022, after additional accounting hires and engagement of an outside consulting firm. Management also concluded disclosure controls were effective at quarter-end.
Important facts for investors to verify
- Confirm whether Sarcos Technology and Robotics Corporation is the intended issuer; the request names Palladyne AI Corp.
- Check subsequent filings for changes to the product-launch and delivery timelines, commercial orders, customer trials and RaaS agreements.
- Track cash burn, marketable-security balances, financing activity and any revised estimate of the company’s funding runway.
- Review RE2 integration progress and any updates to the preliminary purchase-price allocation, goodwill or acquired-intangible valuations.
- Monitor gross margins and cost growth, particularly stock-based compensation, fixed-price contract costs, manufacturing costs and the Palantir commitment.
- Verify subsequent disclosures about internal-control remediation and any further material weaknesses or reporting issues.