Berkshire Grey, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Berkshire Gray 4th Quarter 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 the question during this session, you will need to press star then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to turn the conference over to your speaker for today. Sara Buda, you may begin.

Terrific. Thank you. Good morning, everybody, and thank you for joining Berkshire Gray's fourth quarter and fiscal year 2021 earnings conference call. Earlier today, we issued a press release announcing our financial results. The release is 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'd 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 provided on this conference call due to various risks and uncertainties. Information concerning these uncertainties and risk factors is contained in our filings with the SEC. Forward-looking statements including in this call are based on information currently available to us and represent the company's current view as of the date these statements are made. 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 now turn the call over to Tom Wagner, CEO.

Good morning, and thank you, Sarah. Given this is only our second earnings call as a public company, I'll start off with some context about who we are and where we're going. 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. We have developed breakthrough AI robotic technology that automates difficult and labor-intensive tasks within fulfillment operations, including picking, sorting, packing, moving and organizing. These are core functions that are found in almost every logistics operation and lead to a $280 billion addressable market for our products. Our technology is proven in production doing work and driving tangible returns for Fortune 100 customers. We've secured repeat orders from every one of our anchor customers and are growing our new business pipeline as well. Now let me get into some of the details of 2021 and the macro trends driving our growth in 2022 and beyond. 2021 was a strong year for Berkshire Grant with three main achievements. First, we delivered breakthrough robotic solutions for our customers, generating $51 million in revenue. Second, we secured $85 million in new orders, of which 75% were from Anchor customers. Customers with repeat orders mean our technology is installed, in production, proven, and delivers quantifiable value. We're part of our customers' automation strategies. Third, we doubled our pipeline, bringing it to 3.5 billion, and doubled the number of new customers. Many of the new customers have the potential to become strategic, long-term relationships with multi-year rollout plans for our products to be installed in facilities across their network. So 2021 was a watershed year for us, and we took a huge step forward. We proved our commercial value proposition as evidenced by the substantive follow-on orders by our anchor customers, new orders from new logos, and significant pipeline growth. All of this gives us even greater confidence in our long-term outlook than we had even six months ago. Our strong customer momentum is continuing into 2022. We started this year with $105 million in backlog, which for us means signed contracts. Our revenue guidance for 2022 of approximately $90 million indicates about 80% growth year on year. While the pace of deployments is a bit slower than we and our customers would like due to factors like customer supply chain delays, The commitment from our anchor customers is strong, and our pipeline of new business is growing as anticipated. One of our most important messages for you today is that our customers find our technology and products highly effective and want more. Target featured us in their recent earnings call presentation, showing videos of our robots moving and sorting their goods while they were talking about the need for them to invest in automation. Walmart recently invited us to display our technology at their exclusive annual kickoff meeting where executives showcase key technologies they believe are an important part of their growth strategy. FedEx has publicly talked about how our automated robotic package handling systems deliver value and are a potential fit for hundreds of their locations. Between increased appetite and visibility with Anchor customers, In the addition of new customers, our pipeline has doubled from early 2021 and stands today at 3.5 million. We are currently in negotiations for large-scale strategic arrangements that, if executed, will add even more energy to the system and help drive economies of scale and efficiency improvements. Our customers appreciate the value of these systems and the underlying technology and and appreciate that they simply can't get it anywhere but Berkshire Gray. So let me spend a few minutes talking about that technology. Our robotic products automate order fulfillment processes within a distribution center, warehouse, package handling facility, and even back of store. If you could look into a typical warehouse operation, there are many steps that our systems can automate from when goods enter a warehouse until they depart in the form of filled orders. We pick, sort, pack, move, and organize items. For example, picking items from inventory and packing them into boxes to fill e-commerce orders. Or picking items from inventory to build store resupply boxes, which better enables stores to serve both in-person and e-commerce customers from the store. Or rapidly sorting ordered items preparatory to loading them on trucks. Our products automate entire steps in the warehouse. The repeat orders from Anchor customers indicate just how effective we are at automating these steps. Along the lines of automating steps, in 2021, we introduced four new products, one of which is a new configuration of our technologies tuned in size, shape, and function for a step which is ubiquitous in e-commerce operations, footwall sortations. Our robotic footwall sorts e-commerce orders and increases throughput over 300% versus conventional solutions. This product is a drop-in replacement for conventional, non-automated equipment, installs in little time, requires little infrastructure on the part of the customer, and works with our other products. Orders have already been received for this product, and we expect more. Tick, sort, pack, move, and organize is what our robotic systems do today, and the put wall follows this model. Our products are unique, highly technical modules that automate whole warehouse functions. This separates us both from component suppliers and systems integrators. Our products can be combined with each other to automate multiple steps in warehouse operations. For instance, chains of operations like picking, sortation, packing, and movement. Or our products can be used to automate a single step in the operation, where multiple modules can provide new scale and increase throughput to that step. For instance, installing many robotic induction stations in parallel to provide high induction rates. We will continue to innovate our current product and will introduce new ones in areas where we have strength and differentiation. There are areas of warehouse operations today where complementary systems are sometimes used. ASRS, or automated storage and retrieval systems, are one such example. ASRS systems typically provide dense, long-term storage of inventory. For clarity, we don't need or require an ASRS system to produce value. We have installations today where no such system is present. However, we also have installations today and business in our pipeline where we pick, sort, pack, and move out of multiple brands in ASRS to create new value for our customers. Of course, there are other complementary systems as well, such as warehouse management systems, traditional loop or unit sorters, and so forth, all of which we can interface with. To capitalize on the complementary nature of these systems, we are building strategic partnerships with systems integrators. Last week, we announced a new partnership with Swisslog, the leading integrator of auto store ASRS systems. In this partnership, we provide kicking, sortation, packing, and movement for ASRS installations. More importantly, through the full use of our product suite, the combined offerings of Swisslog and Berkshire Gray provide differentiated solutions in the marketplace. This partnership also provides us with another channel to market, access to new customers, and it provides us with a strong partner to support the implementation of our systems. With this addition, our alliance program now includes more than 11 partners. This means more channels and strong support for the implementation of our systems, which is becoming increasingly important as we scale forward. Partnerships are enabled by our proven products and the underlying technology. We're a leader on the technology front with protected competitive advantage. During 2021, our patent portfolio grew from 71 about a year ago to 120 today. These filings cover everything from picking systems to gripping systems to scanning systems. They cover our mobile robots and even cover AI and machine learning, among others. We also have process patents that protect how our intelligent robots perform their functions. We've been developing technology since 2013, and we will continue to lead on this front. The most important part of technology, of course, is that customers see its value and understand its efficacy. We meet or exceed the performance characteristics that our customers need. The most clear endorsement of our technology is the repeat orders from our customers and the pipeline growth. The strong adoption of our technology is driven by the need of the industry to transform and automate. Strong macro trends and tailwinds are behind this transformation and align with our business. The acceleration of the shift to the digital economy is clear. Consumers want precisely what they want, and they want it delivered as soon as possible. This puts tremendous pressure on retailers, e-commerce providers, logistics organizations, and package handling companies. and they all need to automate. Other macro trends include labor scarcity, which means warehouse and logistics operations are often short-staffed. Adding to this is the current climate of wage inflation, which has driven up costs at the same time that retailers are working to be more competitive with each other and with Amazon. And, of course, Amazon is highly automated. At Berkshire Gray, these trends reinforce the need for new automation that picks, sorts, packs, moves and organizes goods and packages. Overall, we at Berkshire Gray are well positioned for continued growth. Our technology and team are industry leading. We have strong macro tailwinds driven by the shift in consumer behavior and labor scarcity. We have unique and differentiated products that are proven and in operation with Fortune 100 customers who love our technology and want more. We doubled our pipeline with our anchor customers and new accounts and are in negotiations for large-scale strategic arrangements that could add even more energy to the system. We continue to forge strategic partnerships with some of the most respected companies in our industry. We're at the early stages of our growth and are building a business for the long term. Because of continued insight from our customers and material pipeline activity, We have even more conviction now about the growth opportunity we have in front of us today as we build a profitable billion-dollar company. Mark will now go into some of the detail regarding our 2021 results and our outlook for 2022. Mark, over to you.