Symbotic Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended March 25, 2023; comparisons are with the periods ended March 26, 2022. Amounts are in U.S. dollars. The filing is unaudited.
Business context and results
Symbotic develops and installs warehouse automation systems combining hardware, embedded software and related services. Systems revenue is primarily recognized as customer systems are installed and accepted. Growth in the quarter was largely tied to the Walmart Master Automation Agreement covering 42 regional distribution centers; management expects installations under that agreement to continue through fiscal 2028.
| Metric | Three months ended Mar. 25, 2023 | Three months ended Mar. 26, 2022 | Six months ended Mar. 25, 2023 | Six months ended Mar. 26, 2022 |
|---|---|---|---|---|
| Revenue | $266.9 million | $96.3 million | $473.2 million | $173.3 million |
| Gross profit / margin | $42.8 million / 16.1% | $16.9 million / 17.6% | $78.0 million / 16.5% | $31.4 million / 18.1% |
| Operating loss | $(57.7) million | $(30.0) million | $(127.3) million | $(53.0) million |
| Net loss | $(55.4) million | $(29.9) million | $(123.4) million | $(53.0) million |
| Adjusted EBITDA loss (non-GAAP) | $(11.2) million | $(26.2) million | $(27.5) million | $(47.5) million |
Quarterly revenue rose 177%; six-month revenue rose 173%. Systems revenue was $257.6 million for the quarter, up 188%, and made up 97% of revenue. Management attributed the increase to 28 system deployments in progress versus 9 in the comparable quarter. Gross margin declined as a percentage of revenue despite higher gross profit. Software maintenance and operation services had negative gross profit in both periods, with costs rising from added support and operating staff. Operating expenses increased substantially, including research and development and selling, general and administrative costs. Stock-based compensation was $35.2 million in the quarter and $84.8 million for six months.
Quarterly net loss attributable to Class A common stockholders was $6.1 million, or $0.10 per share; for six months it was $13.3 million, or $0.22 per share. The larger consolidated net loss was mostly attributable to noncontrolling interests.
Cash, liquidity and obligations
- At March 25, cash and cash equivalents were $257.0 million and marketable securities were $205.5 million. Current assets were $866.4 million and current liabilities were $849.8 million; the company reported no borrowings in the presented balance sheet.
- Six-month operating cash flow was positive $132.4 million, versus negative $62.9 million a year earlier. It benefited materially from a $263.5 million increase in deferred revenue and $84.8 million of stock-based compensation; customer payment timing and other working-capital movements also affected cash flow.
- Investing cash outflow was $216.1 million, including $203.1 million of Treasury-security purchases and $13.0 million of property and equipment purchases. Financing cash outflow was $10.7 million, primarily taxes on net share settlement of awards.
- Remaining performance obligations for contracts longer than one year were $12.0 billion, substantially related to Walmart. The company expects about 11% to be recognized within 12 months and about 80% within five years; timing depends on installation schedules.
- Vendor commitments totaled $898.6 million, almost all due within one year. Management said cash, unrestricted marketable securities, working capital and forecast operating cash flows should cover foreseeable needs for at least 12 months.
Management commentary, risks and unusual items
- Customer concentration is significant: one customer accounted for 89.7% of quarterly revenue and 86.1% of six-month revenue. That customer represented 96.6% of accounts receivable at quarter-end. The filing identifies Walmart as the primary driver of deployments and remaining obligations; the customer table uses anonymized labels.
- During the quarter, Symbotic initiated restructuring to support delivery through outsourcing partnerships. Charges included $2.3 million of severance, $5.2 million of inventory impairment and $0.1 million of property and equipment impairment; management also cited $0.7 million of severance for other headcount reductions. The filing says the restructuring was expected to be substantially completed during fiscal 2023.
- Management cited risks including reliance on major customers, execution and timing of installations, customer acceptance requirements, competition, technology and product development, and the ability to scale outsourcing partnerships. The filing says no material changes had occurred to previously disclosed risk factors and no known contingency was expected to materially affect operations, financial position or liquidity.
- The company reported $12.4 million of warranty reserves, up from $4.4 million a year earlier. It also disclosed expected future Tax Receivable Agreement payments of $117.8 million if tax savings are realized; no liability was recorded based on current projections.
- No specific full-year revenue or earnings guidance was provided in the supplied filing text. Management’s stated liquidity outlook is for at least the next 12 months. Disclosure controls were assessed as effective at the reasonable assurance level.
Most important facts for investors to verify
- Whether deployment pace, customer acceptance and installation timing support conversion of the $12.0 billion remaining performance obligations into revenue and cash.
- How much revenue, receivables and future commitments remain dependent on the largest customer, and whether customer concentration changes.
- Whether gross margins recover as systems scale, given lower year-over-year margins and losses in service categories.
- Whether positive operating cash flow is sustainable apart from advance customer payments, deferred revenue growth and other working-capital timing.
- How vendor commitments, restructuring costs, warranty claims and potential tax-receivable payments affect liquidity and cash needs.