Berkshire Grey, Inc.

Good day and thank you for standing by. Welcome to the Berkshire Gray Q3 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Sarah Buda, Vice President, Investor Relations. Please go ahead.

Thank you. Good morning, everybody, and thank you for joining Berkshire Gray's third quarter 2021 earnings conference call. Earlier today, we issued a press release announcing our third quarter results as well as other press releases. The releases are available on our Investor Relations website at ir.berkshiregray.com. Leading today's discussion will be Berkshire Gray's founder and chief executive officer, Tom Wagner, and our chief financial officer, Mark Fidler. Following management's prepared remarks, we will open up the call to questions. Before we get started, we would like to inform you that certain statements made during this conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Future operating performance and financial results of the business may differ materially from those expressed or implied in any forward-looking statements due to various uncertainties and risk factors. Information concerning these uncertainties and risk factors is contained in our filings with the SEC, including our S-1 filed on September 1, 2021, our quarterly reports on Form 10-Q, and in our other filings with the SEC. Forward-looking statements included in this call represent the company's view on November 11, 2021, and we do not commit to update these statements. As a reminder, we will be referring to some non-GAAP financial measures during today's call. A detailed reconciliation of GAAP and non-GAAP measures can be found in our earnings press release today, which will be furnished to the SEC and is available now on our IR website. These non-GAAP measures are an addition and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP and should not be considered an alternative to any performance measure derived in accordance with GAAP. With that, I will turn the call over to Tom Wagner, our CEO.

Good morning, and thank you, Sarah. At Berkshire Gray, we make industry-leading AI-enabled robotic systems that fill e-commerce and retail orders. and handle e-commerce packages as they make their way to your door. Our robotic systems automate some of the most labor-intensive and difficult tasks in fulfillment and logistics, including picking and packing items to fill orders, moving and organizing inventory, and preparing items to be loaded onto trucks. The tailwinds for our business are terrific as the explosive growth in e-commerce and persistent labor shortages make automating the supply chain mission critical. This is our first earnings call as a public company. We're excited to share that we are on track with our long-term growth plans and have made strong progress commercially so far this year. Today I'm going to talk about four areas, orders and revenue, market drivers and tailwinds, new products and technology, and scaling our team and our partnerships. With respect to orders and revenue, As expected, we're seeing more repeat orders from our large blue-chip anchor customers as we roll out solutions to more facilities and their networks and their back-of-store operations. This is excellent progress and aligns with our planned long-term trajectory. Year-to-date, we have new orders of approximately 70 million, with approximately 85% of those orders being repeat customers. This validates that our customers are seeing good returns on their investment with Berkshire Gray. Most recently, we received a $25 million repeat order from an Anchor customer for tens of our e-commerce package handling systems. These systems will go into multiple locations, and there are many additional locations yet for us to automate. These systems also apply to operations in both e-commerce, and package handling logistics. This rollout or adoption effect is similar to what we saw earlier this year when we received a repeat order for $23 million plus from a large global retailer for our same-day grocery fulfillment systems. These will also be rolled out to many of their locations with many additional locations yet to automate. We're also making good progress with new customers. some have systems being installed, some have orders under negotiation, and many more are potential business in our pipeline. Recently, we received 11 million in orders from new customers. Total orders since inception are over 184 million through October. This is particularly strong considering we only left stealth mode in Q4 of 2018 and only started to build our sales and commercial teams in earnest in 2020. Progress is strong. We are customer proven with differentiated technologies and demonstrated ROI, and we have received repeat orders from major customers. This strong commercial progress has resulted in our highest backlog yet of 113 million as of early October. We are where we expected to be with respect to our general commercial progress to date, and particularly with orders and backlog. Revenue for Q3 is solid at approximately $19 million, representing year-over-year top-line growth of approximately $16 million. This is also a sequential increase of $14 million from last quarter. Now I'm going to shift gears and talk about market conditions, new products and technology, and how we're scaling for growth. When it comes to our market drivers, macro forces continue to provide strong tailwinds for our business. Changes in consumer expectations due to the Amazon effect put enormous pressure on all retailers, e-commerce and brick and mortar alike, to ensure that the right goods are flowing to the right places at the right times and the right quantities to meet consumer expectations. This flow of goods needs to be extremely efficient to be competitive. Recall, Amazon uses robots in their operations and is operating with them at scale. Labor scarcity, which was a top industry issue even before the pandemic, has become even more of an issue today. Automation is required to be competitive. It's not a nice-to-have but a must-have, and we offer our customers competitive advantage with robots automating functions that previously had to be done manually. Our technology crosses the gap, and makes functions like robotic picking, packing, and sortation useful in a commercial setting. As such, the TAM for what we do is enormous, 280 billion today, and our 184 million in orders, while very exciting, is only the beginning of our growth. On the product and technology fronts, thus far this year we've announced six new offerings, derived from our industry-leading technology suite of AI, robotic picking, and robotic movement or mobility. One such offering is the RPP, or Robotic Pick and Pack, where robots pick items from inventory and pack them directly into outbound boxes to fill orders. Another is what we call the RSPW, or Robotic Shuttle Footwall, which automates a key step in e-commerce order fulfillment and improves operational and performance of this function by up to 300% when compared to a conventional put wall. Another important product announcement we made this year is the second generation of our mobile fulfillment product, or MRF. This second generation includes new mobile robots plus improvements to our AI orchestration software that controls and coordinates the activities of fleets of robots. This enables the aggregate system to meet throughput, and other performance objectives. I'm pleased to report that these new robots are in service and filling orders as we speak. All of these products can be used with other Berkshire Gray products, with legacy systems, and with other third-party equipment like ASRS solutions. These new products are created from our proprietary technology suite. On that front, we combine trade secret AI software with patented hardware to create products. We automate that which was not automatable, and there is a material moat around what we do. Our technical team has over a thousand years of experience in AI and robotics. We have over 30 PhDs, and across the company, more than 75% of all employees have technical and scientific backgrounds. We recently received 11 more patent awards, which brings us to 93 patents in total, up from 72 earlier this year, and we have well over 300 filings. In parallel, our AI continues to evolve. While many of our AI advances are a trade secret and competitive advantage for us, I can share that recent progress includes upgraded software modules that enable the robots to densely pack outbound containers. Great space utilization supports even better ROI for our customers, and helps to conserve packaging, which is super from an environmental perspective. We continue to invest in our leading technology and have more market-changing products in our roadmap. In terms of team scaling and go-to-market, we have enormous opportunities in our market and are scaling to meet those opportunities. We've hired over 160 people this year in functions ranging from engineering to sales, marketing, and solution deployments. Our go-to-market strategy consists of landing and expanding with our Blue Chip Anchor customers, leveraging partners through the Berkshire Gray Partner Alliance, and expanding our new customer base through direct sales. We've made significant progress on all three of these fronts. Our business units are organized into five verticals, retail, e-commerce, grocery, 3PL, and parcels, and each has a dedicated manager, sales team, and customer success team. Our general managers have, on average, 30 years of experience and deep industry knowledge in a variety of verticals. Our partnerships program complements our direct sales activities, expands our range of capabilities and offerings, and helps us to scale deployment operations. We're currently seeing real traction with this program, both from a customer engagement perspective and from interested partners. So far this year, we've signed nine new partnership agreements, ranging from systems integrators such as AHS to global enterprise technology providers like ATOS. Looking forward to sharing with you our continued progress on these fronts. Overall, we're excited by both our progress this year and that it aligns with our long-term trajectory. The macros around the business are strong. We're customer-proven. and we're seeing repeat orders from Blue Chip Anchor customers according to plan. We're also adding new customers through direct sales and partnering into the larger ecosystem. Orders through October are 70 million, and we have 184 million in orders to date. Great progress from our perspective, and this is only the beginning. Mark, over to you.