Strategy Inc

Good day and thank you for standing by. Welcome to the fourth quarter 2022 Sarcos Technology and Robotics Corporation 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 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mariah Shelton from Financial Profiles.

Thank you, Operator. Good afternoon, everyone, and welcome to the Sarkozy Technology and Robotics Corporation fourth quarter and full year 2022 earnings call. Joining us on the call this afternoon are Sarkozy President and Chief Executive Officer Kiva Allgood, and Chief Financial Officer, Drew Hamer. Kiva will start the call with a discussion of business highlights from 2022 and recent events. And Drew will then talk in more detail about the financial results before management takes questions from analysts. Before we begin, we must state that today's call will contain forward-looking statements, including statements concerning future commercial production and availability of our products, product features and capabilities, target markets and market trends, size, and expectations, customer demand, and future financial results, condition, and cash flows, including revenues, costs, and liquidity. In addition, any statements about future performance related to our acquisition of RE², including our expectations regarding the benefits to be achieved, the financial performance of the combined company, integration plans, and other statements regarding the combination of the two companies, are forward-looking statements. These statements represent management's beliefs and expectations as to future events of today, but there are many risks and uncertainties that could cause actual results to differ from what we have projected. Among those risks and uncertainties are those described in our annual report on Form 10-K, filed today with the SEC, and those mentioned in today's earnings press release. We encourage you to review the risks and uncertainties described in this press release and in our filings with the SEC for further information regarding these actual and potential risks and uncertainties. We also encourage you to review the special notes regarding forward-looking statements, including in our earnings release and 10-K for the full year 2022 filed with the SEC this afternoon, in which we posted an investor section of our website at sarcos.com and on the SEC's website. In addition, we will be discussing certain non-GAAP financial measures on our call today. Throughout this call, all financial measures will be GAAP unless otherwise noted. The reconciliation of any non-GAAP measures to the most directly comparable GAAP measures, as well as the description, limitations, and rationale for such measures are included in the earnings release filed with the SEC this afternoon and which is available on our website and on the SEC's website. A recording of this call will also be available on our website until April 16, 2023. The information that we're giving on this call today is as of today's date and we undertake no obligation to update the information subsequently. At this point, I'd like to turn the call over to Kiva Allgood, President and CEO of Sarkos.

Thanks, Maria. Good afternoon and welcome to everyone joining us on the call today. As you saw in our press release earlier, we had a strong fourth quarter and full year with revenue coming in on the high end of our guidance range. In addition to increasing revenue, it was a productive year and a giant leap forward. Sarcos is a recognized technology and software company developing the latest innovations in robotics and software technology. And the RE-squared acquisition we made in 2022 is playing a key role in that recognition. By combining our two companies, Sarcos is now able to offer a much wider range of robotic systems and solutions to meet our customers' needs and expand into even more industries. Most importantly, we gained the RE2 team, and their deep expertise in robotics, machine learning, and AI. We have integrated RE2 sapient products into our portfolio and incorporated them into our Guardian product lineup, which now encompasses the Guardian XM, intelligent robotic system, the Guardian C-class robotic system, and the Guardian XT, dexterous robotic system. We are commercializing these systems first because of the expected strong demand that the products are capable of real-world use, and we're managing supply chain risks associated with these products. Although we continue to develop the Guardian XO, we don't believe production of the initial commercial version will be ready until sometime after 2023. We have a customer pipeline that is ready now for the XM, XT, and C class, and we see the powering utilities, aviation, defense, maritime, and construction industries as the end markets where our technologies can make the biggest, fastest impact. We're seeing a strong customer preference to buy our systems outright rather than lease them in a robotic as a service model. We are also seeing strong customer demand in our software solutions. Our systems include software to enable basic control, teleoperation, semi-autonomous capabilities. We will provide additional software options such as supervised autonomy as an incremental service. Our supervised autonomy framework uses multimodal sensor data to perceive, interact, and conceptualize unstructured environments. Combined with our success-based learning AI approach, the supervised autonomy framework harnesses the power of real-time and learned behavior data input. That enables our robots to execute task-specific autonomy in unstructured environments. Our advanced success-based AI enables human workers flexibility, creativity, and improvisational skills to deliver improved workflow performance and safer interactions between humans and machines for jobs in unstructured environments. Our success-based reinforcement learning functionality uses advanced AI and machine learning to improve the overall dexterity, mobility, safety, and autonomy of a robot so that it can learn new skills to enhance its abilities autonomously. Our AR approach of supervised autonomy could be leveraged not only in the Guardian line, but also in robots that aren't our own products. By licensing our software to others, we have recurring revenue opportunities that don't require the capital of a RAS model. We began production of the Guardian XM and met our goal of producing 10 units in Q4, but we need to move bigger and faster. And to do that, we recently signed an agreement with a major contract manufacturer that will allow us to scale production. We achieved technical milestones this year through several field trials, including those with the U.S. Navy for the Maritime Mine Neutralization System, which is the foundation for the Guardian Sea Class. After two years of field trials, we successfully integrated our starfish and end effector to demonstrate complex tasks requiring grasping movements and touch similar to those of the human hand. a remote operator commanded the robot system to operate in real-world situations. It's a prime example of how we're developing robotic technologies to take humans out of harm's way and dangerous jobs. We are now commercializing the C-Class system and providing the most value to our customers by optimizing the user experience. As I mentioned on the Q3 call, we executed demanding field trials in the Navy's repair technology exercise, where several Sarkos robotic systems were put to the test including the Guardian XM, the Guardian C-Class, and the Guardian DX, which is our defense teleoperated dexterous robotic system, and the Guardian S, our remote visual inspection robotic system. These technologies can be used at height or, in the case of the C-Class, at great depth that are unsafe for our workers. We conducted a demonstration of our outdoor-based autonomous baggage loading system developed in conjunction with Chani Airport Group. This system automates loading and unloading bags from passengers' planes, which is obviously a physically demanding job. Deploying robotic systems in this way has the potential to transport airports, improving worker safety, and reducing passenger delays, especially in bad weather. Additionally, autonomy technologies are a potential solution for the growing need for labor in the aviation industry. Baggage loading is just one of those many ways our technologies could address needs in aviation. and there will be more to come in this market. And I hope you saw last week's press release announcing that we had completed the final validation in our outdoor economist manipulation of photovoltaic panels, known as OAMP, Project for Robotics Solar Field Construction Solutions. We worked with the industry leaders such as Mortenson, JLG Industries, Array Technologies, and Pratt & Miller at a Mortenson project site to validate the solution The solar energy is facing labor shortages, and we expect our solution to significantly increase productivity, thus reducing crew sizes and greatly reducing installation costs. This validation process was a critical step towards commercialization. And beyond the physical hardware development, we have developed AI-based algorithms for semi-autonomous detection, tracking, and classification of objects, whether they are stationary or moving. We are advancing fully immersive teleoperation technology for extended reality interactions between humans and robots that combines virtual reality and augmented reality, affordable motion capture technology to provide a greater sense of realism, increased performance, safety, and control. We launched two industry-sponsored research efforts with leading universities in the field of AI-based control technologies for robotics, to advance dexterity, maneuverability, and robustness in dynamic and unstructured environments. And we continue to expand our simulations and mixed reality solutions that use augmented reality, virtual reality, digital twins, and AI-enablement simulation techniques to create simulation environments in which we can train, optimize robot operations. Simulations are important when conditions are too expensive, risky, or time-consuming to do in the physical world. As you can tell, we've accomplished this great deal in 2022 and years prior, and those accomplishments will serve us as the springboard for growth going forward. In 2023, we anticipate increasing both our product and product development contract sales to $23 to $25 million as we commercialize our existing lineup while developing new technologies for the future. Customers are paying us to be first in line for the first production units, and paying us to deliver them faster than anyone else. We've been working for years to be in this position. We are ready. And finally, I'd be remiss if I didn't mention one more key event in 2022, and that's the appointment of Drew Hamer as our Chief Financial Officer, who quickly became a valued member of our strategic leadership team. And now I'll turn it over to Drew to report on the financials.