Release Date: July 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Symbotic Inc (SYM, Financial) reported record revenue growth of 58% year-over-year, reaching $492 million for the third quarter.
- The company successfully started five new system deployments and completed three, bringing the total to 21 fully operational systems.
- Symbotic Inc (SYM) generated $50 million in cash from operating activities during the quarter.
- The backlog of committed contracted orders remained strong at $22.8 billion.
- The company made significant progress on new innovations, including a new minibot and the first Symbotic system deployment for GreenBox.
Negative Points
- System gross margin fell below expectations due to elongated construction schedules and higher labor costs.
- Revenue growth may temporarily slow as the company reabsorbs a portion of the construction management process to reduce costs.
- The company faced delays in construction and implementation, leading to inefficiencies and higher costs.
- Retrofit costs for SymBots in the field with new sensor arrays impacted financial performance.
- Cash and equivalents declined to $81 million, partly due to the first investment in GreenBox.
Q & A Highlights
Q: Rick or Carol, can you give a little more color into what happened with system gross margin and why it will rebound in Q4? Are you basically saying that in some cases, outsourcing is not working for your deployments? And maybe what happened to convince you to take construction management again in-house, and what is the visibility into your Q4 expected margin improvement?
A: (Carol Hibbard, CFO) We chose outsourcing over a year ago to scale rapidly, but we are now bringing back in-house the EPC (engineering procurement construction) element to better control costs and schedules. Delays in construction and inefficiencies, such as permit delays, have increased costs. We are confident that bringing this function back in-house will improve our gross margins. (Richard Cohen, CEO) We are not discounting our products; the issue is higher-than-expected project costs. We have enhanced our supply chain team and believe we can manage these projects better internally.
Q: How do we interpret the commentary that you're going to have accelerating deployments from the five you had in Q3 and then revenue will accelerate in Q1 '25 with the commentary that improving your deployment process may temporarily slow your revenue growth?
A: (Carol Hibbard, CFO) We had fewer system starts last quarter, which impacts Q4 revenue. However, we ramped up to five system starts this quarter and expect this number to grow incrementally. The temporary slowdown is due to improving our deployment process, but we expect revenue to reaccelerate in Q1 '25.
Q: I think in your commentary on GreenBox, you noted that everything's on track there. I was wondering if maybe you could just peel back the onion a little bit and give us some additional color on what all you're seeing for GreenBox JV.
A: (Richard Cohen, CEO) We have our first install in California and are in discussions with landlords for additional sites. We are building out the management team and having discussions with potential anchor customers. The progress is steady, and we are excited about the potential for the business.
Q: Can you update us on progress on the non-ambient effort that you have ongoing and how you see that timeline?
A: (Richard Cohen, CEO) We are experimenting with perishables at a couple of sites in Massachusetts and learning a lot. There are no showstoppers, and we are continuing to spend on R&D. We believe this will be a significant business opportunity in the future.
Q: Could you quantify exactly how large those impacts were in the quarter? That way, we get a better sense of just what EBITDA margin would have been had these costs not crept up on you late into the quarter.
A: (Carol Hibbard, CFO) The entire impact on gross margin, which was at 15.6%, was due to cost growth, construction delays, and rolling forward innovation. We expect to return to 20% gross margin in Q4, although there will still be some pressure.
Q: Is there any way you can quantify the interest level you're getting for GreenBox today? Is that pipeline growing? How would you characterize the size of the firms you're getting interest from today?
A: (Richard Cohen, CEO) We are seeing interest primarily from medium and large regional firms. We aim to develop a sales force to target mom-and-pop shops, but we need anchor tenants first. The interest level is growing as we progress.
Q: What gives you the comfort that bringing EPC in-house will improve performance?
A: (Richard Cohen, CEO) We have hired people from large automation firms who have experience in this area. We believe we can manage the contractors better ourselves, reducing costs and improving efficiency.
Q: How does the funding for GreenBox tie into the larger outlays on the cash flow statement?
A: (Carol Hibbard, CFO) The GreenBox investment was part of the initial capital call, impacting cash flow. Additionally, there was a distribution to Sym Holdings LLC members due to expected profitability for tax purposes, which also impacted cash flow.
Q: Can you comment on when you expect to deploy the second BreakPack and how BreakPack more broadly is going?
A: (Richard Cohen, CEO) The second BreakPack system will start construction in our next fiscal year and is expected to roll out in 2025. We have redesigned the minibot, and the customer is excited. We see this as a growth opportunity.
Q: Should we anticipate a pickup in margins as revenue growth accelerates in fiscal Q1?
A: (Carol Hibbard, CFO) Yes, we expect EBITDA margins to improve above mid-single digits in fiscal Q1 '25 and continue to improve as we deploy higher-margin projects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
