Symbotic Inc. (NASDAQ:SYM) Q1 2024 Earnings Call Transcript February 5, 2024
Symbotic Inc. misses on earnings expectations. Reported EPS is $-0.08 EPS, expectations were $-0.05. Symbotic Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by, and welcome to Symbotic’s First Quarter Fiscal 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentations, there’ll be a question-and-answer session. [Operator Instructions] Please be advised that today’s call is being recorded. At this time, I’d like to turn the call over to Jeff Evanson, Vice President of Investor Relations. Please go ahead.
Jeff Evanson: Thanks, Val. Hello, everyone. 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 a result of the 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, including revenue and adjusted EBITDA. We’re not providing guidance for net loss today, which is the most comparable GAAP financial measure to adjusted EBITDA. We’re 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 provision for stock-based compensation.
On today’s call, we’ll be joined by Rick Cohen, Symbotic’s Founder, Chairman and Chief Executive Officer; and Carol Hibbard, Symbotic’s Chief Financial Officer. These executives will discuss our first quarter fiscal ‘24 results and our outlook followed by Q&A. With that, I’ll turn it over to Rick. Rick?
Richard B. Cohen: Thank you, Jeff. Good afternoon, everyone. Thank you for joining us to review our most recent results and discuss the year ahead. In our first quarter, we reported strong financial results and posted equally impressive operational results. Our team set a new deployment record, completing the full build, installation, and commissioning process for an entire Symbotic system in only 20 months. While we can’t currently deploy all systems this quickly, this reflects the deployment speed improvements we are making, and we are focused on further reductions in deployment time as we build capacity to support growing customer demand. One such improvement is SymBot. The mobile bot is now well established as our platform workhorse.
SymBot has the newest NVIDIA chips with an enhanced version of our automation software that is powered by artificial intelligence. While SymBot can perform more transactions per hour and has improved the liability over our previous generation bot, SymBot will also improve our ability to deploy systems more quickly and efficiently with even higher customer ROI. SymBot also helps extend the capability of our system and sets the stage for our entry into new markets such as non-ambient food. Turning to BreakPack. Our development of BreakPack progressed faster than expected over this past quarter and has advanced beyond the prototype stage. While we are always refining all our products, BreakPack is now ready for general availability to our full range of potential customers.
Turning to our joint venture, GreenBox is receiving a lot of inbound interest. So like Symbotic, GreenBox is being selective in choosing the right customers to work with. GreenBox will share more about their roadmap for they announced their first customer, but we expect to be recognizing our first revenue from GreenBox in fiscal 2024. So in summary, our story is unchanged. We will continue to innovate, execute and scale to deliver for our customers as we grow and drive increased profitability in a capital efficient way. Now, Carol will discuss our financial results and outlook. Carol?
Carol Hibbard: Thank you, Rick. I’ve enjoyed an exciting first 90 days here at Symbotic. During that time, we’ve enhanced the capability and scope of the entire Symbotic to scale for the future. For example, we successfully implemented SAP software across the company, which helps with everything from scaling to Sarbanes-Oxley compliance. Our first quarter revenue grew to $369 million up nearly 80% compared to the same quarter last year and reflects an accelerated pace of growth from last quarter’s 60% year-on-year growth. This was driven primarily by scale and the increasing number systems we have in deployment. During the first quarter, we initiated five new system deployments and completed three as we continue to add both new customers and additional projects for existing customers.
So at the end of Q1, we had 15 fully operational systems and 37 systems in the process of deployment. This is an increase from 12 operational systems and 35 deployments in progress last quarter and eight operational systems and 22 deployments in progress in the first quarter of last year. We have temporarily stabilized the pace of system deployment starts. Our future revenue growth is really driven by our ability to scale deployments and progress. Continued reductions in system deployment time as demonstrated by the system we recently deployed in just 20 months, leaves us well-positioned to support customer demand. It is important to note that as we scale, our customer base is becoming more diverse. The 37 deployments in progress are with six of our nine customers.
We continue to standardize our system platform and identify opportunities to further streamline our deployment processes. To that end, our network of outsourcing partners is executing well. We continue to see significant opportunities to gain efficiencies over time and to build capacity as we continue to add partners to our outsourcing network. Our backlog remains stable at $23.2 billion and now reflects the addition of Southern Glazer’s, who became a customer in November. Our recurring revenue streams grew 5% sequentially and 45% year-on-year. Adjusting for our 53-week year in 2023, recurring revenue streams reflect nearly a 12% sequential growth, but still below the 25% sequential increase in completed systems, because these systems were completed in the back half of the quarter.
So we expect accelerating recurring revenue growth as we head into our second quarter. Gross margin increased sequentially by 90 basis points to 20%, driven primarily by improvement in system gross margin. While we do not expect gross margin to improve every quarter, we do expect it to improve each year well into our future. Our first quarter non-GAAP system gross margin increased 110 basis points from last quarter. As a reminder, these results still reflect significant costs associated with lower margin innovation projects like BreakPack, the burden of pass through costs to protect gross profit dollars, but can weigh on a reported gross margin percentage and costs associated with rapidly scaling our operations. Our recurring revenue streams again contributed to positive gross profit.
This demonstrates the high leverage in our business model showing 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%. Operating leverage improved again sequentially as we achieved a 3.8% adjusted EBITDA rate compared to a 3.4% rate last quarter. This is driven by a rapid revenue growth and gross margin expansion along with stable operating expenses. Our cash and equivalents including marketable securities and restricted cash grew $129 million sequentially to $677 million. During the quarter, Walmart exercised its last remaining warrants at $10 per share, adding $159 million to our cash balance.
Excluding the warrant proceeds, this total would have been [$518 million] (ph) reflecting a $30 million use of cash in the quarter. As the working capital benefits of 2023 temporarily reset, we expect cash to decline slightly again in the second quarter before we return to working capital expansion in the back half of 2024. For the Second quarter of fiscal 2024, we expect revenue of $400 million to $420 million and adjusted EBITDA between $12 million $15 million which represents revenue growth of over 50% and improved adjusted EBITDA margin of over 700 basis points, both on a year-on-year basis. We now welcome your questions. Operator, please begin the Q&A.
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