Symbotic Inc. (NASDAQ:SYM) Q4 2023 Earnings Call Transcript
Symbotic Inc. (NASDAQ:SYM) Q4 2023 Earnings Call Transcript November 20, 2023
Symbotic Inc. misses on earnings expectations. Reported EPS is $-0.08 EPS, expectations were $-0.06.
Operator: Good day and thank you for standing by. Welcome to the Symbotic Fourth Quarter and Fiscal Year 2023 Financial Results. At this time all participants are in a listen-only mode. After the speaker’s presentation there will a question-and-answer session. [Operator Instructions] Please note that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Jeff Evenson, Vice President of Investor Relations. Please go ahead.
Jeff Evanson: Hello. Welcome to Symbotic’s fourth quarter 2023 financial results webcast. I'm 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 the result of factors described in 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 also on file with the SEC. These non-GAAP measures may not be comparable to measures used by other issuers. Today, we'll provide guidance for the first quarter of fiscal '24, including revenue and adjusted EBITDA. We do not provide guidance for net loss, which is the most comparable GAAP financial measure to adjusted EBITDA. We are not able to provide reconciliations to adjusted EBITDA to GAAP financial measures because certain items required for such reconciliations are outside 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; Tom Ernst, Symbotic's Chief Financial Officer; as well as Carol Hibbard, our CFO successor designate. These executives will discuss our fourth quarter 2023 results and our outlook, followed by Q&A. Rick, would you take it away, please?
Rick Cohen: Thank you, Jeff. Good afternoon, everyone. Thank you for joining us to review our 2023 results and to discuss the year ahead. But first, I'd like to highlight some of our most important achievements in the past year. Fiscal 2023 was a year of doubles. By doubling our sites in deployment, our revenue nearly doubled and set us up for a strong revenue growth in 2024. Our gross profit grew even faster, more than doubling as gross margins increased significantly, and the number of stores served by the Symbotic system nearly doubled as our technology now serves over 3,000 customer stores. Such growth presents a contrast to the annual revenue against many vendors of supply chain technologies are reporting and is a testament to the strong and growing demand for the Symbotic System.
Today, Symbotic Systems are moving goods at a rated capacity of more than 400 million cases per year, and we are currently in the process of deploying additional capacity rated to move another 1.6 billion cases annually. This compares with the annual total U.S. addressable market of over 500 billion cases moved per year. So clearly, we see significant opportunities for continued strong revenue growth for many years to come. We recently welcomed our newest customer, Southern Glazer's Wine and Spirits to the Symbotic family. Southern Glazer's is the world's largest distributor of beverage alcohol. This announcement represents another win outside the food packaged goods verticals and demonstrates the capability of the Symbotic System to efficiently manage goods with a range of SKU profiles, and with complex handling and loading challenges, all while operating the regulated industry.
Of course, with such high demand for our systems, our ability to scale operations is the primary governor on our revenue growth. To that end, we have continued to invest heavily in extending and strengthening our network of outsourcing partners and manufacturing and installation, so we can maintain our focus on innovation and product development. Concurrently, we have hardened our supply chain to position Symbotic for even faster deployments, continued revenue growth and steadily improving margins. We've continued to rapidly innovate and SymBot our ninth generation automated bond is now in full production approaching 1,000 units in operation. These are units are running in the field every day, and they make our supply chain even more agile, accurate and efficient.
With improved vehicle dynamics and navigation as well as improved case handling, SymBot boosts the number of transactions per hour that a bot can handle over our previous generation bot. Furthermore, SymBot is engineered to take advantage of the average 6 terabytes of data per day generated by a typical system. We expect our artificial intelligence and software enhancements to serve as an efficiency and reliability multiplier, and SymBot is purpose-built to realize these benefits over time. The first prototype of our each handling technology, BreakPack is now delivering to stores every day, and we're pouring our learnings from this system into our BreakPack prototype, while we continue to ramp and test. We've done all of this while delivering increased profitability and cash flow.
Our gross margins have moved substantially. Our recurring revenue streams are now profitable, and we achieved a positive adjusted EBITDA, all while posting our fourth consecutive quarter of increased cash on hand. All of this success has been the result of greater problem solving and the hard work of our team members. I'd like to thank the tire Symbotic team for making all this possible, and we continue to pursue additional talents to enhance and build the Symbotic team. Now turning to what we plan to achieve in 2024, our goal will be to do more of the same. That is to scale, execute and innovate to deliver for our customers in the new year. We'll maintain our focus on delivering great systems for customers while scaling for rapid growth as we continue to accelerate our time to deploy systems.
We'll continue to invest in innovation to increase the capability of the Symbotic solution, introduce new products and drive profitability through expanding margins for both systems and recurring revenue streams. Turning to GreenBox, this will be an important year for our joint venture with SoftBank. GreenBox has been recruiting for its leadership team, and that is well underway. Inbound interest in GreenBox has exceeded expectations, and we continue to anticipate announcing the first GreenBox customer in 2024. Remember, GreenBox is just like any other customer for us because the sales to GreenBox is a sale, same as any other sale we make. But with the added benefit that we own 35% of GreenBox, which is what we believe will be profitable investment that generates strong cash flow for Symbotic shareholders.
Finally, we will continue to judiciously grow our team as we continue to focus on innovation in talent in the use of software and hardware engineering and artificial and data intelligence. Tom will talk more about the quarterly financial details. But before that, I would like to introduce Carol Hibbard, the newest member of our senior management team. Carol will take over the role of Chief Financial Officer from Tom next month as Tom begin his retirement. Thank you, Tom. We have been fortunate to have overlap between these two talented executives to ensure a smooth transition, and I would like to thank Tom for his hard work. So Carol, would you mind sharing a few words now.
Carol Hibbard: Thank you, Rick. I'm excited to join Symbotic. What Rick and his team are building is truly amazing. I look forward to helping to take Symbotic to the next level as we bring greater value to our customers and make the supply chain more agile and efficient for everyone. I look forward to meeting many of you soon. Tom, over to you to take us through the financial results.
Tom Ernst: Thank you, Carol. Welcome to the Symbotic team. But before I begin, I would like to personally thank the entire team at Symbotic. It has been an absolute honor and pleasure to work with such a talented team and to be part of our amazing burning. I'm proud of the progress made thus far and look forward to watching the journey to completely transform the supply chain. Turning to our quarterly results. Our fourth quarter revenue grew to $392 million, up 60% compared to a very strong fourth quarter a year ago. The revenue growth this quarter was driven primarily by faster execution on deployments. The pace of new system starts and the acceleration of system installations saw a market improvement. We initiated four new system deployments during the quarter and advanced two systems to full operation.
As of the end of the fourth quarter, we had 12 fully operational systems and 35 systems in the process of deployment. This represents an increase from 10 operational systems and 33 deployments in progress last quarter and seven operational systems and 17 deployments in products in the fourth quarter of last year. While some deployment starts were down slightly from last quarter, a more important way to think about deployment starts and our revenue growth is that with 35 systems in progress at quarter end of this represents an over 100% increase from the 17 systems in progress a year ago and leaves us very well positioned strong revenue growth in the quarters ahead. Time to deploy a system is also important in driving revenue growth, and we continue to shrink the time of deployments with the help of our partnership initiatives as well as through our ongoing efforts to standardize our platform and streamline our deployment processes.
As Rick mentioned, our network of outsourcing partners is executing well. We continue to see significant opportunity in efficiencies over time and as we continue to add more partners to our outsourcing network. Our outsourcing partners are ramping so well that during the fourth quarter, we chose to end autonomous bot manufacturing operations in our Wilmington, Massachusetts location and established a $14 million restructuring reserve primarily associated with the dissolution of materials and inventory. Our backlog at the end of the fourth quarter was $23.3 billion, which include the addition of the GreenBox joint venture we announced in August. Remember, the addition of our $11 billion of backlog from GreenBox is backed by the capital of GreenBox’s investors led by SoftBank and is a noncancelable commitment.
Once these contracted GreenBox installations are complete, we expect that this agreement alone will contribute over $500 million of high margin recurring revenue per year to our overall revenue growth. Our sales and deployment progress for platform purchases continue at a rapid pace. Each quarter, we add new deployments from multiple customers. For example, progress of Walmart continues to plan, and we recently started deployment of the second of five warehouse facilities with UNFI. It is important to note that as we scale our customer base is becoming more diverse. The 35 deployments in progress are with six different customers. In total, all eight of our customers are generating revenue for us, and this is before considering the recently announced agreement with Southern Glazer's, which started in our fiscal first quarter of 2024.
We reached important milestone this quarter with our recurring revenue streams now reaching positive gross margin. This shows the high leverage in our business model that we can be profitable with such a small number of active sites with recurring revenue while also being invested for the much larger number of systems still in deployment. We continue to expect that as we scale over time that recurring gross margins can trend to over 60%. Our adjusted gross margin increased by 80 basis points to 19.1%, up from 18.3% last quarter, driven primarily by recurring revenue streams turning to profitability, along with a slight improvement in system gross margin. Our fourth quarter system adjusted gross margin increased 20 basis points sequentially from last quarter.
These results still reflect significant costs associated with lower margin innovation projects, the burden of pass-through costs to protect gross profit dollars, but that can weigh on a reported gross margin percentage and costs associated with rapidly scaling our operations. Operating leverage improved again sequentially as we achieved a 3.4% adjusted EBITDA rate compared to a 1% loss rate last quarter. This was driven by our rapid revenue and gross profit growth along with slower operating expense growth. Our cash and equivalents, including marketable securities and restricted cash grew $35 million sequentially. So we ended the year with $548 million on hand. These balances increased almost $200 million over the past year, driven by the positive working capital benefit of our customer and vendor invoicing terms.
We also had some timing benefits in 2023 to provide a tough comparison in the first quarter of 2024. Otherwise, we anticipate seeing a working capital expansion again for 2024. In conclusion, we're continuing to scale our business and innovating rapidly to deliver for our customers. We look forward to speaking with you again next quarter to provide an update on our progress. I'd like to personally thank you for your interest in Symbotic as I hand the reins over to Carol. Carol will now provide our guidance for the first quarter.
Carol Hibbard: Thanks, Tom. For the first quarter of fiscal year 2024, we expect revenue of $350 million to $370 million and adjusted EBITDA between $11 million and $14 million, which represents revenue growth of 70% to 79% and adjusted EBITDA margin increasing over 11 percentage points, both on a year-on-year basis. We now welcome your questions. Operator, will you please open the Q&A.
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