Berkshire Grey, Inc.

Good morning and welcome to the Berkshire Gray Q2 2022 earnings conference call. Today, all participants will be in a listen-only mode. Should you need assistance, please signal for a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. If you would like to withdraw your question, please press star then 2. Please note that today's event is being recorded. At this time, I would like to turn the conference over to Sarah Buda, Vice President, Investor Relations. Please go ahead.

Great. Thank you. Good morning, everybody, and thank you for joining Berkshire Gray's second quarter 2022 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 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 provided on this conference call due to various uncertainties and risk factors. Information concerning these uncertainties and risk factors is contained in our filings with the SEC. Forward-looking statements included on 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 as an alternative to any performance measures derived in accordance with GAAP. With that, I'll turn the call over to Tom Wagner, our CEO.

Thank you, Sarah. Good morning, everyone. Welcome to our second quarter 2022 earnings call. Today, Mark and I are going to update you on our quarterly performance, our operational execution, our long-term strategic alignment with customers, and the continued favorable macro environment driving the need for automation. First, let's talk about the quarter. In the second quarter, we delivered revenue of over $23 million, growth of almost $19 million year over year, and well ahead of expectations. Through July, we secured $23 million in new orders this year, of which approximately $20 million were secured since our last earnings call. We've made good progress with winning new orders and expect more to come in the second half, which is consistent with what we've shared previously. As we increase our deployment activities and grow our order book, we are focused on execution. During the second quarter, we actively deployed our solutions with eight customers across 16 sites throughout the United States and Canada. Deployments will continue to scale in the second half. We continue to prove ourselves and our technology is driving tangible value for customers. In fact, most of the orders we've received this year are follow-on orders with existing customers. Our deployment teams are executing and our technology continues to exceed customer expectations, which is important for us to meet our growth goals. Continuing the execution theme, we're making progress on improving product margins. Mark will provide more color shortly, but we have achieved cost improvements for all of our products, which will be realized for deployments in 2023. The end result is that we're well positioned for overall significant gross margin improvement next year and beyond. Now I'd like to discuss a strategic matter involving one of our major customers, FedEx. As many of you know, we've been deploying our RPSI solution at FedEx sites for a couple of years now. The RPSI solution, which stands for Robotic Product Sortation and Identification, takes in small packages like those produced by e-commerce, and with one system, singulates, scans, and sorts these items so they can make their way through the FedEx network. Our RPSI handles everything from padded mailers to boxes to tubes to envelopes to polybags with one system. Based on the success of RPSI last year, we have also secured orders for other BG technology solutions within different operating units at FedEx. Due to our technology and execution, we built a foundation of trust and partnership with FedEx. Last week, we announced a significant expansion of this important relationship. First, we secured an order from FedEx to develop a new AI robotic automation solution to help improve the efficiency of their package handling operations globally. This order means we will build on our technology platform and create a new incarnation of these technologies embodied in a new system. Most importantly, the new system will address a significant need, as we believe there is no other solution available today to automate this process. Once the initial development program is complete, we expect it will lead to additional commercial orders. Further, the solution can be sold to many others, since it addresses an issue that is commonplace for retailers and logistics companies alike. In fact, we estimate that there's a multi-billion dollar global market for this application alone. So by doing this work with FedEx, we build on our relationship and create a new differentiated solution for them while expanding our market opportunity over the long term. Because this arrangement is very strategic in nature, we also entered into an agreement to grant FedEx a warrant to purchase Berkshire Gray common stock. Specifically, Berkshire Gray has granted FedEx a warrant to purchase approximately 25 million shares of our common stock, which vests incrementally. The full vesting of all 25 million shares occurs upon the ordering of or payment for at least $200 million of our goods and services prior to December 31st, 2025. You can refer to our SEC filings on August 2nd for the details. Finally, last week, we also announced that we in FedEx intend to finalize a master system purchase agreement this year, which will streamline and expedite the procurement process for Berkshire Gray solutions across all FedEx operating companies globally. Having this in place can potentially accelerate our follow-on order process. As evidence of the importance of our relationship to FedEx, John Smith, CEO of FedEx Ground, commented about our announcement on LinkedIn, stating, FedEx announced it's extending its strategic partnership with Berkshire Gray to develop extensive AI robotic automation solutions throughout all stages of the global supply chain. He also went on to state, I'm especially excited to continue the work that initially began at FedEx Ground, integrating robotics into our operations to safely and effectively integrate sort the increasing number of small packages entering our network through e-commerce. John's commentary underscores the value of Berkshire Gray to their organization, and we're delighted with the strong relationship between our companies. As we stated on our last earnings call, one of our goals is to build on our success of repeat orders with customers and move our customers into long-term strategic relationships. The agreements with FedEx certainly marked progress in achieving that goal, and we continue to work on others. Now I'd like to talk about our perspective on the current macro environment. As we've described, 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 automate difficult, labor-intensive tasks within fulfillment operations, including picking, sorting, packing, moving, and organizing. Due to our patented, differentiated hardware and software, we believe respectfully that we automate these tasks better than any other company in the industry. Our solutions deliver upstream and downstream operational efficiencies, broad skew coverage, maximum throughput, and high accuracy. In fact, one customer recently commented that they were able to more than triple their productivity per square foot by implementing BG in their distribution centers. We deliver the value and return on investment our customers need. The follow-on orders we've received from customers affirm this. When it comes to the macros, the environment continues to be favorable. Our customers continue to be under tremendous pressure to meet consumer expectations and maintain their competitive advantage. One only needs to touch the cell phone in one's pocket to relate to consumer expectations. We, as consumers, demand fast fulfillment of orders, fast and efficient shipping, and if we go to a retail store, we want to find the items we're looking for in the store. Now, when it comes to competitive advantage for our customers, recall nearly every retailer and e-commerce company competes for consumer dollars. At Berkshire Gray, we offer operational improvements and competitive advantage. In parallel, when it comes to staffing warehouse operations, it continues to be hard to hire and retain people. Our automation allows our customers to redeploy existing employees to perform higher value-add functions, which further improves operational costs, particularly when inflationary pressures persist. In short, the tailwinds for our business remain strong. As such, our commercial teams are busy as ever working with existing customers and prospects to offer real solutions to real problems. In summary, we're delighted with our Q2 revenue growth, recent orders, and our strategic agreements with FedEx. The macro environment continues to be strong, and we continue to execute operationally. We are well positioned for growth. Now let me turn it over to Mark to give some details on the quarter and our outlook for the year.