Symbotic Inc. (NASDAQ:SYM) Q1 2023 Earnings Call Transcript January 30, 2023

Operator: Thank you for standing by and welcome to the Symbotic's First Quarter 2023 Financial Results Conference Call. As a reminder, this conference call is being recorded. I will now turn the conference over to your host, Mr. Jeff Evanson, Vice President of Investor Relations. Please go ahead.

Jeff Evanson: Thank you, Valerie. Good afternoon, everyone. Welcome to Symbotic's first quarter 2023 results webcast. As Valerie mentioned, I am Jeff Evanson, Symbotic's VP of Investor Relations. Our press release and discussion today will include forward-looking statements, based on assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements, including as a result of factors described in the cautionary statements and risk factors in Symbotic's financial release and regulatory filings with the SEC, by which any forward-looking statements made during this call are qualified in their entirety. In addition, during this call, we will discuss certain financial measures that are not recognized under U.S. Generally Accepted Accounting Principles, which the SEC refers to as non-GAAP measures.

We believe these non-GAAP measures assist management in planning, forecasting and evaluating our business and financial performance, including allocating resources. Reconciliations of these non-GAAP measures to their most comparable reported GAAP measures are included in our financial press release, which is available in the Investor Relations section of our website and is on file with the SEC. These non-GAAP measures may not be comparable to measures used by other issuers. Today, we will provide guidance for the second quarter, including revenue and adjusted EBITDA. These are not €“ we are not providing guidance for net loss today, which is the most comparable GAAP financial measure to adjusted EBITDA. We are not able to provide reconciliations of adjusted EBITDA to GAAP financial measures, because certain items required for such reconciliations are outside of our control and/or cannot be reasonably predicted, such as the provision for stock-based compensation.

On today's call, we are joined by Rick Cohen, Symbotic's Founder, Chairman and Chief Executive Officer; and Tom Ernst, Symbotic's Chief Financial Officer. These executives will discuss our first quarter 2023 results, our outlook, and then we will follow up with Q&A. So with that, Valerie €“ oh, I am sorry, Rick, go ahead.

Rick Cohen: Thanks, Jeff. 2023 is off to a great start and we are excited about our outlook. Again, our results reflect strong execution of our growth opportunity. In our first quarter, the Symbotic team delivered triple-digit revenue growth and improved both gross profit and adjusted operating margins. I thank our entire team for their hard work and excellent execution. Last quarter, we highlighted our plans to build on our existing base of outsourcing partners. During this quarter, we added additional Tier 1 suppliers to build capacity to meet our growing demand as well as to ensure supply chain and redundancy. These outsourcing partners now span our full deployment process for manufacturing of bots, cells and lifts to construction and installation.

We are excited about our partners growing contributions as they help us accelerate delivery of systems while maintaining our extraordinary rate of growth. These partnerships will also help us to reduce system costs and streamline deployments and reduced deployment time creates the capacity to satisfy the high demand of our solutions. In summary, our supply chain continues to improve, also moderating, and we continue to attract top talent. Demand for our solutions continues to grow and our contracted backlog now stands at $12 billion. Now, Tom will discuss our financial performance and outlook. Tom?

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Tom Ernst: Thank you, Rick. Our first quarter revenue of $206 million grew 168% over the prior year period. We initiated 6 new system deployments during the quarter and as planned, advanced one system to fully-functional production operations. We now have 22 active system deployments with multiple customers, up from 17 systems last quarter and 9 systems in the first quarter of last year. Our extraordinary revenue growth was driven by both progress on deployments already underway and the 6 deployments started during the quarter. We are gaining efficiency in our deployments by standardizing our systems, streamlining our deployment processes and realizing the benefits of outsourcing. Our cash and equivalents, including marketable securities, grew $94 million sequentially to $448 million due to favorable working capital performance.

Looking forward, we believe last quarter's balance of $353 million will be a low watermark. We believe we have more than adequate resources on hand to achieve our strong growth plans and remain very well capitalized to execute our strategy. Recurring revenue grew 25% sequentially as deployments have begun to move to production operations. We now have 8 systems operating at customer sites. In the near to mid-term, we expect recurring revenue to be small relative to our rapidly growing systems revenue. Over time, as system completions waterfall, recurring revenue should grow to have a much higher gross margin than systems revenue as well as become an increasing share of our revenue mix to provide powerful operating leverage to our business. Our first quarter gross margin increased 230 basis points sequentially.

These results still reflect significant costs associated with rapidly scaling our operations and the burden of elevated pass-through steel costs. In the first quarter, operating expenses, excluding stock-based comp, declined sequentially, demonstrating the cresting of expenses that we had anticipated. Despite this, we still have ongoing redundant costs associated with ramping partners and ongoing investments in our innovation initiatives, such as SymBot and BreakPack. Operating leverage improved as we achieved a record 7.9% adjusted EBITDA loss rate compared to 27.6% in the first quarter a year ago driven by our revenue growth and moderating operating expenses. Our backlog increased this quarter to $12 billion. Cost-adjusted pricing, the addition of UNFI as a customer and an additional non-Walmart existing customer deployments start contributed to the 8% sequential increase.

Turning to our outlook for the second quarter of fiscal 2023, we expect revenue of $205 million to $230 million and an adjusted EBITDA loss of between $13 million and $17 million. This represents 126% revenue growth year-over-year at the midpoint of our revenue guidance range. In closing, 2023 is off to a great start and our team is energized. We are excited about the year ahead and our opportunity to transform the supply chain. We will continue to scale our business and innovate rapidly to deliver against our $12 billion revenue backlog. We look forward to speaking with you again next quarter to provide an update on our progress. We now welcome your questions. Operator, will you please open the Q&A?

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