Symbotic Inc.

Thank you for standing by and welcome to Symbiotics' fourth quarter and fiscal 2024 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker 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. To remove yourself from the queue, press star 1 1 again. I would now like to hand the call over to Charlie Anderson, VP, Investor Relations. Please go ahead.

Thank you. Hello. Welcome to Symbiotics' fourth quarter 2024 financial results webcast. I'm Charlie Anderson, Symbiotics' VP of Investor Relations. Some of the statements that we make today regarding our business operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our Form 10-K, including the risk factors. We undertake no obligation to update any forward-looking statement. In addition, during this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's press release, which is distributed and available to the public through our Investor Relations website, located at ir.symbiotic.com. On today's call, we are joined by Rick Cohen, Symbiotics founder, chairman, and chief executive officer, and Carol Hibbard, Symbiotics chief financial officer. These executives will discuss our fourth quarter and full year fiscal 2024 results and our outlook, followed by Q&A. With that, I'll turn it over to Rick to begin. Rick?

Thank you, Charlie. Good afternoon, and thank you for joining us to review our most recent results. With a strong finish to the year, delivering on our commitment to quickly return to high growth, and historical gross margin levels. This was highlighted by completing a record number of system deployments in the fourth quarter, reflecting solid project execution. System starts also reaccelerated to a record level. For the full year, we grew revenue 55%, more than double the number of sites in operation, and more than doubled our software revenue, reflecting our ability to convert our backlog and scale. Importantly, we expect to maintain a high rate of year-over-year revenue growth while continuing to stabilize our gross margin in our first quarter. Carol will expand on this in the guidance. On the customer front, we recently announced a new customer, Walmex. By expanding into a new geography, Mexico, we are now officially executing on all five of the growth vectors laid out at our investor day in May. namely customer penetration and expansion, new verticals, new products, and now new geographies. Working with WOMX drives home the point that our solution can deliver significant ROI for customers in new geographies and further expands our addressable market. We believe customers in these geographies see the value of our palletizing and transportation savings on top of labor savings. The bottom line is that the number of opportunities we see for our technology portfolio continues to expand, and I'm excited by what that means in both the short and long term for my fellow shareholders. Turning to Greenbox, I'm pleased to report Greenbox continues to make progress building out its team, customer pipeline, and site network. This quarter, we began deployment on a second Greenbox location, this time in the state of Georgia. On the innovation front, we highlighted last quarter that we added vision capabilities to SIMBOTS at customer sites. Among other features, vision gives our customers the ability to perform teleops, which enables remote bot control for enhanced productivity. We have now successfully demonstrated this capability at multiple sites and view it as a key differentiator. We're making targeted investments in both people and products given the expanding opportunities we see in both new products and new geographies to augment our growth. In summary, this quarter we delivered on our commitment to quickly return to higher system gross margin, strong top line growth, and reaccelerate system starts. Our key objectives for 2025 are scaling for growth and investing in our innovation engine, all while maintaining a focus on delivering high-quality systems for our customers. By doing so, we look forward to another year of strong top-line growth, a significant rise in completed sites as our deployment process improves, and expanding profitability. I want to thank our entire team for their efforts, our customers for their trust, and our investors for their support. Now, Carol will discuss our financial results and outlook. Carol?

Thank you, Rick. Before I discuss our financial results, I wanted to address the restatements to our quarterly financial statements included in the earnings press release. As we were reviewing our business processes and preparing our full-year financial statements, we identified occurrences during fiscal year 2024 where goods and services, primarily relating to specific milestone achievements, were expensed prior to the time that the corresponding milestones were achieved. The net result is essentially timing differences between the quarters within fiscal 2024 and has no impact on our full-year results since the appropriate expenses were properly recorded in the fourth quarter. Our earnings press release describes the restatements in greater detail, and we have also posted a supplemental presentation with the variances to our investor relations website, which is also included as an exhibit to the 8K we filed today. As a result of the restatement of the financial results for the previously reported quarters, we'll be filing amended form 10Qs for fiscal year 2024 to reflect the amounts that are included in the earnings press release. We also plan to timely file our 10K next week. With that, let me turn to our financial results. Fourth quarter revenue grew to $577 million, with strong revenue growth driven by solid progress across our 44 systems in the process of deployment. Our exceptionally strong fourth quarter results reflect a favorable alignment of symbiotic vendor and customer collaboration and help contribute to $1.8 billion of full-year revenue. This quarter, we also recorded our first quarter of net income as a public company. We also delivered on our commitment to increase system start sequentially. We began nine new system deployments and completed four systems, bringing us up to a total of 25 operational systems. Turning to backlog, our backlog of committed contracted orders of $22.4 billion remained largely consistent with last quarter, as the revenue recognized during the quarter was partially offset by final pricing on contracts already in the backlog. I will note that WALMAX was signed after the quarter end and will be additive to the backlog next quarter. As mentioned earlier, system margins rebounded strongly, returning to a historical level. Gross margin on software maintenance and support eclipsed 50% for the quarter, trending toward typical industry software margins as more systems go operational. In operations services, we did experience a slight negative gross margin as we added resources at certain sites where we have large projects and are adding new capabilities. We do expect to improve upon this performance and return to modest profitability in operations services as we move through the fiscal year. We finished the year with cash and equivalents of $727 million, which declined sequentially from $870 million in the third quarter. This was driven primarily by the timing of cash receipts that we have since received in the first week of October. For the first quarter of fiscal 2025, we expect revenue of $495 million to $515 million and adjusted EBITDA between $27 million and $31 million. reflecting continued strong year-over-year growth, stable gross margins, and an uptick in OpEx student investments Rick alluded to. In short, we are making the improvements outlined this quarter and expect to realize strong EBITDA margin expansion as we scale. We now welcome your questions.

Operator, please begin the Q&A.

Thank you as a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the queue you may press star one one again, please stand by while we compile the Q amp a roster. Our first question comes from the line of Andy capital with city bank your question, please Andy.

Hi, hello, this is Natalia Bach on behalf of Amy Capuch from Citigroup. The first question I'd like to ask is the margins of the quarter were better than we had guided, and for the first quarter you're calling for stable gross margins with EBITDA margins sequentially lower. Can you help us bridge what is pressuring the margin in the quarter? And as you think about the remainder of the year, Would you say that one Q could be the lowest margin quarter and that margins could inflect sequentially over the course of the year?

All right. Good evening, and thanks for the question. So our gross margin this quarter hit 19.6%, which was a rebound back to historical levels. So we quickly returned to those historical gross margins. If you remember, our three Q margin was depressed due to the elongated construction schedules and the implementation of several improvements that we had put in place. We didn't see that same occurrence in 4Q. As we think through our 1Q25 guide, it really reflects a continuation and a period of transition to higher gross margins as we focus on achieving several significant milestones across some of our larger systems. We continue to prioritize quality deployments, and then we're going to still be on a trajectory to continue to improve schedule and improve costs and expand those gross margins throughout the year.

Okay, helpful.

And then if I could just ask one more question. I think you've spoken about increasing sales penetration in Europe. Can you briefly touch on any updates that you have in that region? And then this quarter, you announced an agreement in Mexico. Would you say that relatively lower cost geographies could potentially be either Symbotic or Greenbox's customers, or was it more of a one-time opportunity with Walmex, given your relationship with Walmart?

Yes, so we have nothing new to report on Europe. We continue to have discussions, but nothing new to report there. On Mexico and new geographies, certainly it speaks highly of the relationship that we have with Walmart and the fact that they're happy with us. But in working with Walmart on understanding these new geographies, I think we're appreciating some of the value creation opportunities that we're creating in other markets other than just the U.S. where supply chains are different, transportation is different, wage rates are different, but there are other things that we add value to. So I don't think Mexico is a one-off. I don't think South America, Central America are one-offs, but right now we have our first customer and we're very excited.

Got it. Thank you so much.

Thank you. Our next question comes from the line of Jim Rashudi of Needham & Company. Please go ahead, Jim.

Hi. Thank you. I was wondering if we could just go back to the quarter and the revenue coming in above guidance. Maybe you could talk a little bit about what drove that. And the follow-up on that is we don't obviously have a lot of history with the company, but I Don't recall many instances where we've seen sequentially down revenues. So maybe if you could just help us understand what drove the Q4 revenue performance and what's baked into the Q1 guidance. Thank you.

Yeah, so good evening, Jim. So our 4Q24 operational performance. resulted in the $577 million of revenue. This was a really strong quarter driven by several factors. So we talked about significant progress being made on our 44 systems that are in deployment. We completed four systems, which was a record, and we started nine systems, which was also a record for Symbotic. And the schedule delays that we had in the third quarter that we talked about, those elongated construction delays, they corrected faster than we had planned. which allowed us to complete additional milestones this quarter. And so as we think through the strong quarter, our fourth quarter tends to be very strong. We pull in, tends to be similar to fourth quarter last year. Our year end, we come in at a strong level. Our one Q guide still reflects continued strong growth. We're guiding the 40% year over year as we head into the first quarter.

Got it. And Rick, you alluded to some vision technology that you're adding. I wonder if you could talk a little bit about the technology acquisition you made of Veo Robotics, what it brings to you, and just in general how you're viewing the M&A environment, if we could potentially see additional technology-type acquisitions.

Yeah.

So Veo is a... a very unique company that has some really valuable IP on safety and access, which is very important because our robots move very quickly. And so the opportunity at Veo was really unique, and we jumped on it right away, hired the whole company. They're working here now, great people. And I think we are going to find... Even in the last quarter, we have a lot more inbound. We're very focused on being a good acquirer and building good relationships with these companies that we're acquiring. The vision technology that we're employing allows for safety and a bunch of other things to be used in applications that typically aren't used in mobile robotics. So we think there's lots of opportunities, and we continue to get inbound for new technologies.

Got it. Thank you.

Thank you. Our next question comes from the line of Ross Sparnbleck of William Blair. Please go ahead, Ross.

Hey, good evening, guys.

Hi, Ross.

Hey, the Greenbox Georgia announcement, maybe I missed it. Was that with CNS Wholesale or is it a new customer?

No, the Greenbox is our first Greenbox facility that we're building and we're developing a market now to get customers in there. So we're building this without an anchor customer right now, but it'll take about two years before or 18 months before the building actually come live and so we're very actively recruiting customers and we're very focused on a multi-tenant solution which is where we think Greenbox really offers a lot of opportunity and we've had a number of inbounds from both small and large CPG companies and other e-commerce companies. And so now that we have a building, we're very excited that we hopefully will be closing some deals on some customers in the next year or so. But it'll take a while before the building's actually ready for deployment.

Yeah, I can imagine. That's helpful. I mean, how should we think about the financing of that? Is it a CapEx or OpEx decision with you and SoftBank? And this is all to ask. I mean, CapEx is starting to take up a little bit. Is this... late in the green box, or is it just more capacity expansion as you guys look to kind of double your ability to deliver in the next couple years?

Yeah, it's both. I mean, there will be CapEx that will be spent on getting the infrastructure and the Atlanta facility ready, and we're also continuing to invest in new R&D here at Zimbabwe.

Perfect. Thank you, guys. Thank you.

Our next question comes from the line of Mark Delaney of Goldman Sachs. Your line is open, Mark.

Hey, thanks for taking our question. You have Will on for Mark Delaney. And so for my first question, in fiscal 24, you guys have been targeting one or two new customers per year. Is that still the right framework to think about for fiscal 25? And just kind of on that, when you think about your go-to-market strategy and expanding it to some of these new verticals and geographies, do you need to expand your sales force as well?

I was going to – I'll start, and then, Rick, you can talk to what we need to do to potentially expand our sales force. So if I think about one to two customers per year, for 2024, our new customer is Southern Glaciers. We accomplished that in the first quarter of the year. It seems like forever ago. And as we look forward to 2025, as we announced a few weeks ago, Walmex will be our first new customer in 2025 that will bring our customers set to 10. So I think we're still on that trajectory of one to two new customers per year. We always want to make sure we're prioritizing the build out of our $22 billion backlog with our existing customers. and make sure that we're deploying and executing to the systems we have in our backlog as we create capacity going forward to identify additional new customers.

Rick, do you have anything? And we also made the decision this year that we will be expanding our sales force, and we're in the process of designing what that sales force would look like and how big it will be. But we will be expanding our sales force.

Okay, thank you for the color there. And just for my follow-up, On the Walmart deal, I believe you said it was two new systems. Pardon me if I missed it, but how much does that add to the backlog? And then on the pricing side, do those sites have preferential pricing similar to Walmart given the relationship there? Or is it closer to Southern Glazers? Thank you.

So Walmart Mexico will add about $400 million to the backlog. And again, we'll do that in first quarter. So that's for two sites. So the two first sites that we have in Mexico are much larger than what we have seen in what we've deployed so far, and they're also greenfield sites. And so the timeline in terms of when you actually see revenue contributing for Symbotic will be a little bit different timeframe, but the sites are large. We're excited that they are greenfield because it also shows that we have the capability to not only do a brownfield site, but it is a greenfield. Walmart Mexico is not part of the existing contract geometry, and so that's why it's a new customer and a new opportunity for us going forward. We believe that Walmart has clear ambitions to deploy further than the two, but we're excited to get started on the first two.