Q3 2021 Berkshire Grey Inc Earnings Call

November 11, 2021

Good day, and thank you for standing by and welcome to the Berkshire Q3, 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 a question. During the session you will need to press star one on your telephone.

Please be advised.

Today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker today, Sara Buda, Vice President Investor Relations. Please go ahead.

Thank you good morning, everybody and thank you for joining Berkshire greatest third quarter 2021 earnings conference call earlier today, we issued a press release announcing our third quarter results as well as other press releases. The releases are available on our Investor Relations website at IR Dot Berkshire grade Dot com, leading today's discussion will be brief.

Sure, Great founder and Chief Executive Officer, Tom Wagner, and our Chief Financial Officer, Mark Sadler. 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.

<unk> operating performance and financial results of the business may differ materially from those expressed or implied in any forward looking statements due to various uncertainties and risk factors.

Information concerning these uncertainties and risk factors is contained in our filings with the SEC, including our S. One filed on September one 2021, our quarterly reports on Form 10-Q and in our other filings with the SEC forward looking statements in this call represent the company's view on November 11, 2021, and we do.

Not commit to update these statements.

As a reminder, we'll lose their 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 in 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 turn the call over to Tom Wagner our CEO.

Good morning, and thank you Sarah.

The virtue agree we'd make industry leading.

Robotic systems, So e-commerce, and retail orders handle e-commerce packages as they make their way to your door.

We bought it systems automate some of the most labor intensive and difficult tasks in fulfillment and logistics, including picking and packing items to fill orders moving and organizing inventory and preparing items to be loaded onto trucks.

Tailwind for our business are terrific.

Explosive growth in e-commerce, and persistent labor shortages.

Automating the supply chain mission critical.

This is our first earnings call as a public company. We're excited to share that we are on track with our long term growth plans.

Strong progress commercially so far this year.

Today, I'm going to talk about four areas orders and revenue market drivers and tail wins, new products and technology.

Our team under our partnerships.

With respect to orders and revenue.

As expected, we're seeing more repeat orders from our large blue chip anchor customers as we roll out solutions to more facilities in their networks and their back of the store operations.

Excellent progress and aligns with our planned long term trajectory.

Year to date, we have new orders of approximately $70 million.

Ultimately, 85% of those orders being repeat customers.

This validates that our customers are seeing good returns on their investment with Berkshire Greg.

Most recently, we received a $25 million a repeat order from an anchor customer for tens of our e-commerce package handling systems.

These systems will go into multiple locations.

Any additional locations yet for us to automate.

These systems also apply to operations in both e-commerce and package handling logistics.

This rollout where adoption effect is similar to what we saw earlier. This year, we received a repeat order for $23 million plus from a large global retailer for our same day grocery fulfillment systems. These will also be rolled out to many of their locations with many additional locations.

To automate.

We're also making good progress with new customers some have systems being installed some have orders under negotiation and many more potential business in our pipeline.

Recently, we received $11 million in orders from new customers.

Total orders since inception are over 184 million through October.

This is particularly strong considering we only love stealth mode. In Q4 of 2018 and already started to build our sales and commercial teams in earnest in 'twenty 'twenty.

Progress was strong we are customer proven with differentiated technologies do demonstrated ROI and we have received repeat orders from major customers.

This strong commercial progress has resulted in our highest backlog yet of $113 million as of early October.

We are where we expected to be with respect to our general commercial progress to date, and particularly with orders and backlog.

Revenue for Q3 is solid at approximately $19 million representing year over year top line growth of approximately 16 million.

There's also a sequential increase of $14 million from last quarter.

Now I'm going to shift gears and talk about market conditions, new products and technology.

How we're scaling for growth.

When it comes to our market drivers macro forces continue to provide strong tailwind for our business.

<unk> and consumer expectations due to the Amazon effect put enormous pressure on all retailers e-commerce and brick and mortar alike to ensure that the right goods are flowing to the right places at the right times in the right quantities to meet consumer expectations.

This flow of goods needs to be extremely efficient to be competitive recall Amazon uses robots in their operation and is operating with them at scale.

Labor scarcity, which was a top industry issue, even before the pandemic has become even more of an issue today.

Automation is required to be competitive.

Not a nice to have but a must have.

We offer our customers competitive advantage with robots automating functions that previously had to be done manually.

Our technology crosses the gap that makes functions like robotic picking packing and sortation useful in a commercial setting.

As such the Tam for what we do is enormous 280 billion today.

Our $184 million in orders, while very exciting is only the beginning of our growth.

On the product and technology fronts, thus far this year, we've announced six new offerings derived from our industry, leading technology suite of AI robotic picking the robotic movement for mobility.

One such offering is the RP P for robotic pick and pack, where robots pick items from inventory impact them directly into outbound boxes to fill orders.

Another is what we call the RSP W Robotics shuttle football, which automates a key step in ecommerce order fulfillment and improves operational.

Performance of this function by up to 300% when compared to a conventional pump.

Another important product announcement, we made this year is the second generation of our mobile fulfillment product or embark on this.

Second generation includes new mobile robots, plus improvements to our AI orchestration software that controls and coordinate the activities of fleets of robotics.

This enables the aggregate system throughput and other performance objectives.

I'm pleased to report that these new robots are in service and filling orders as we speak.

All of these products can be used with other Berkshire, great products with legacy systems and with other third party equipment like ASR our solutions.

These new products are created from our proprietary technology suite.

On that front, we combined trade secret AI software with patented hardware to create products, we automate that which was not automated bowls and there is a material moat around what we do.

Our technical team has over 1000 years of experience in AI and robotics.

We have over 30, phds and across the company more than 75% of all employees have technical and scientific backgrounds.

We recently received 11 more patent awards, which brings us to 93 patents in total up from 72 earlier this year and we have well over 300 filings.

In parallel our AI continues to evolve.

While many of our AI.

The answers are trade secret and competitive advantage for us I can share that recent progress includes upgraded software modules that enabled the robots to densely packed outbound containers.

Great space utilization sports, even better ROI for our customers and helps to conserve packaging, which is super from an environmental perspective.

We continue to invest in our leading technology and have more market changing products and our roadmap.

In terms of team scaling and go to market.

We have enormous opportunities in our market and are scaling to meet those opportunities. We hired over 160 people this year and functions ranging from engineering to sales marketing and solution deployment.

Our go to market strategy consists of landing and expanding with our blue chip anchor customers leveraging partners through the Berkshire, Great partner Alliance and expanding our new customer base through direct sales. We've made significant progress on all three of these fronts are.

Our business units are organized into five verticals retail e-commerce grocery three PL and parcels and each has a dedicated manager sales team and customer success team.

Our general managers have an average 30 years of experience and deep industry knowledge and a variety of verticals.

Our partnerships program complements our direct sales activities expands our range of capabilities and offerings and helps us to scale deployment operations.

We're currently seeing real traction with this program both from a customer engagement perspective and from interested partners. So far this year, we signed nine new partnership agreements ranging from systems integrators, such as IHS to global enterprise technology providers like <unk>.

Looking forward to sharing with you our progress on these fronts.

Overall, we're excited by both our progress this year and that it aligns with our long term trajectory the macros around the business are strong.

Customer proven and we're seeing repeat orders from blue chip anchor customers. According to plan.

We're also adding new customers through direct sales and partnering into the larger ecosystem.

Orders through October our $70 million and we have $184 million in orders to date, great progress from our perspective and this is only the beginning.

Mark over to you.

Thanks, Tom and good morning, everyone I'd like to start off by providing some more detail around the substantial commercial progress that we've made this year so far.

Orders to date or 140, <unk> hundred $84 million, an increase of over $70 million or over 60% from the end of 2020, and an increase of over $130 million or approximately 250% over the third quarter of 2020.

Backlog is 113 million growth of $43 million from the beginning of this year and more than $100 million higher than the third quarter of 2020.

As a reminder, we define backlog as sign contracts with systems, yet to be delivered and installed this.

This backlog and two includes two contract signed shortly after the end of the third quarter.

We previously communicated that both orders and revenues will be backend loaded in 2021. So we are where we expect it to be with our commercial progress so far this year.

We also continued to make substantial progress expanding our relationships with our blue chip anchor customers as Tom noted in his remarks.

Approximately 85% of our backlog consists of anchor customers and 85% of our orders. So far this year represent follow on orders from anchor customers as well. This is generally in line with our plan for this year and supports our strategy of expanding our long term anchor customer relationships.

Also as part of our plan, we are investing in the vertical teams focused on acquiring new customers. Our early results are encouraging and align with our long term growth strategy of adding future anchor customers from each of our target verticals.

There is strong interest from the market and our solutions.

We will continue to update you on our progress with respect to orders and backlog each quarter.

Revenues for the third quarter of 2021 or approximately $18 8 million the significant increase in revenue for the third quarter represents an increase of 750% over the same period in 2020, and an increase of 317% sequentially from the second quarter of this year.

Turning to other operational metrics gross profit for the third quarter, and 2021 was negative $2 7 million or negative 15%.

During the third quarter, we commenced deployment at some project sites with technology that was being installed for the first time.

And I will note as well Covid and global and customer global supply chain issues still adds complexity to these installations on site.

As a result, and since our revenue base is still relatively small gross profit for the quarter was primarily impacted by higher than expected costs at these sites.

We fully expect that as our revenues continue to grow our gross margins will improve and we are confident in our ability to achieve our long term gross margin targets of approximately 50%.

Moving to operating expenses 2021 continues to be a year of investment.

In particular, we're making investments in our go to market and engineering and operations teams to best position us to capitalize on a massive $280 billion addressable market.

Total operating expenses in the third quarter were $44 2 million, excluding stock based compensation total operating expenses were approximately $33 million in the quarter, representing an approximate $4 $6 million increase sequentially from the second quarter in 2021 the.

The increase in total operating expenses, excluding stock based compensation was driven primarily by increases in head count.

And for perspective as of September 32021, we had about 400 people and we hired about 160 people globally since the beginning of 2021 to gear up for our growth, including senior leaders in sales engineering and operations.

Although we expect to continue to add resources, we do expect that the pace of new hires will slow in the coming quarters.

Adjusted EBITDA, which is defined as loss from operations adjusted for depreciation and stock based compensation expense was negative $32 3 million for the third quarter of 2021.

Total stock based compensation for the third quarter of 2021 was $13 9 million and depreciation expense was about $800000.

Moving to the balance sheet, we ended the quarter with a solid cash position of two 230 $203 million.

Capital spending was about $600000 and we expect capital spending will be less than $4 million for the full year.

Looking ahead for the full year of 2021, we expect to deliver revenue of approximately $50 million.

The entire amount of remaining revenue is under contract for this year.

That said because we recognize revenue on a percentage of completion basis, there can be variability in the actual revenue recognition driven primarily by customer deployment schedules, which again could be impacted by ongoing COVID-19 issues and global supply chain issues or other customer scheduling issues.

So to summarize we are growing orders and backlog as expected and we remain very bullish on our long term growth plan. We look forward to executing on that plan and we're excited about the successes we've made to date and we remain enthusiastic about the trajectory of our business now.

Now operator, we're ready to turn it over for Q&A.

As a reminder to ask a question.

Star one on your telephone.

Sure Your question press the pound key.

Please stand by while we compile the Q&A roster.

Our first question comes from the line of John Walsh from Credit Suisse. Your line is now open.

Hi, good morning.

<unk>.

Good morning, John.

Hi, congratulations on the first quarter public here.

Sure no no easy or no small task accomplished.

Thank you.

Wanted to ask a little bit about what youre seeing with your own kind of supply chains and.

As you think about delivering on kind of the orders and the backlog that you have can you give us any kind of color around the phasing of that backlog how much visibility do you have into next year and then kind of do you have.

All of the chips and the components that you need to kind of deliver and execute on that.

Obviously, you gave us the comment on Q4 that all of those revenues are already under contract.

Yes so.

Start up by.

Give me some facts right. So we talked about backlog of being a $113 million.

And as.

As we exit this year, we expect that about 90 of that will be in backlog.

Which we feel really good about now.

Now other orders that we may receive in Q4.

And into Q1 could also potentially contribute to revenue next year.

But obviously you know what can really impact that would be things like that are not under our control things like ongoing COVID-19 issues.

Ongoing supply of global supply chain issues.

Directly or indirectly.

And customer schedule, so the exact timing and when we would realize those revenues could be impacted by those factors, but yeah, but the facts are.

We were at 113 million in backlog now we expect to exit this year with 90.

Which we feel pretty good about but there are some of these uncertainties that could impact the exact timing of realization.

Of that $90 million.

Great. Thank you and then maybe a bigger picture question here and.

And you touched on it obviously in your prepared remarks around labor and wage inflation. I think you know last time, you talked at the analyst day, you put some metrics around customer rois et cetera.

If we were to kind of mark to market for where we're seeing wage inflation go can.

Can you just talk to us a little bit how some of those rois to your customers have they changed at all.

Just any kind of perspective on that.

Sure. Thank you when we do the ROI modeling with customers the main inputs or labor savings capacity increases in <unk>.

So its efficiencies labor is one of the larger levers in that calculation to the extent that wages rise this improves customer ROI and is reflected directly in those calculations.

Okay is there any kind of rule of thumb on on kind of the payback if labor inflation higher by 10%.

That cuts the payback or improves the ROI do you have any kind of rule of thumb for investors and ourselves.

It's going to it's going to vary.

Greatly from customer to customer.

You know what one analysis that we did.

Very briefly with one particular customers showed that a $1 increase in the hourly.

Wage rate would.

<unk> result in like a half of <unk>.

A percentage point in IR and return for them. So.

It's pretty big and.

I think as the as wages rise.

Being more and more of a sense of urgency.

With the customers and trying to get.

Things done.

And automate.

Great.

Ill pass it along to my fellow analysts appreciate it.

Forward to seeing you guys next week.

Thank you likewise, thank you.

Okay.

Thank you. Our next question comes from the line of Greg Palm from Craig Hallum Capital. Your line is now open.

Yeah. Thanks, Good morning, everyone and again ill offer my congratulations on your first report as a public company and just the continued progression so far.

Great. Thank you Greg.

I guess sort of along those lines I'm, assuming your entrance into the public markets has probably helped broaden awareness for the company and what sort of solutions. Yeah. You have it I mean can you talk about what your current pipeline looks like I know you gave us some metrics I think February earlier this year.

Curious, how that's trended today.

So.

<unk>.

We think that the orders and backlog are really a more meaningful metric to track because that's really sort of commitments for future revenue.

When you look at when we measure ourselves on that basis and the progress that we've made this year at $70 million.

We're quite pleased with that and what that's really showing is our ability to grab the market opportunity.

As we expected.

In a relatively short period of time right I mean, it's only really been in the last 18 to 24 months or so are really began to to build our commercial team. So.

Orders and backlog are really the metric what we can say qualitatively, though is that you know.

The number of companies that we've been engaged with.

Continues to grow we're targeting over 1000 companies out there.

Globally that we believe.

Have a need for automation and a lot of folks have reached out to us as well.

We're as engaged as ever with our anchor customers and.

Their.

Rollout plans for automation in our technology and I think that's that's sort of proven out in the numbers that we've that we've talked about today with the repeat orders. So generally speaking there is a sort of a general rising tide in terms of interest and.

And.

Our progress Bill.

Building our pipeline.

Yes that makes it makes sense and just given all the sort of the trends around you know labor scarcity and wages going up et cetera over the last few.

Months.

Do you think that makes at least some of your anchor customers more aggressive in the timing of the rollout of automation or not necessarily.

Greg This is a conversation that actually I think you would we ever had before which is there is the prior to the pandemic and prior to the current conditions, where labor is highly exacerbated there is already tremendous energy in the system and so.

For the folks that that planned into that they were already in high gear.

Additional energy comes into the system due to the current labor conditions and due to the pandemic accelerating some of our.

Shopping trends in her behaviors as consumers.

The anchors that are big folks I would say that already where they on alert and they continue to be on alert and we continue to be providing them with systems.

We're bullish on everything we've spoken about.

They were already in motion.

Yeah got it Okay, and then the $25 million repeat order.

Can you just confirm it is is that going to be for fiscal 'twenty, two installation and I guess in terms of how many locations might be appropriate going forward. It sounds like there's a lot more locations left to automate is that is that so.

Yes, so the the order is targeted at delivery in 2022 subject to some of the issues that Mark pointed out which is we always have to plan.

Schedules with customer.

Another level of detail right.

It's tens of locations.

With that same customer there are hundreds of other locations that are amenable to automation of this type.

Gotcha, so so tens of of locations, meaning actual addresses or.

Locations inside a specific facility.

No I understand the question actual addresses tens of different facility.

Okay, Great alright, well ill leave it there best of luck going forward. Thanks.

Thank you.

Thank you as a reminder to ask a question you will need to press star one on your telephone.

John Your question press the pound key.

At this time I am showing no further questions I would like to turn the call back over to Tom Wagner for closing remarks.

Well. Thank you all for joining today, if you have any questions. Please reach out to the team. We hope you have a good rest of the day and this concludes our call. Thank you. Thank you.

This concludes today's conference call. Thank you for participating you may now disconnect.

Uh huh.

[music].

Okay.

[music].

Good day and thank you for standing by welcome to the Berkshire, Great Q3, 2021 earnings Conference call.

This time, all participants are in a listen only mode. After the speaker's presentation. There will be a question answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand.

The conference over to your Speaker today, Sara Buda, Vice President Investor Relations. Please go ahead.

Leading today's discussion will be Berkshire grades founder and Chief Executive Officer, Tom Wagner, and our Chief Financial Officer, Mark Sadler. 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.

Our operating performance and financial results of the business may differ materially from those expressed or implied in any forward looking statements due to various uncertainties and risk factors.

Not commit to update these statements.

As a reminder, we will lose their referring to some non-GAAP financial measures during today's call.

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.

With that I will turn the call over to Tom <unk> our CEO.

Good morning, and thank you Sarah.

The virtue, Greg we make industry, leading AI enabled robotic systems, So e-commerce and retail orders and handle e-commerce packages as they make their way to your door.

Our robotic systems automate some of the most labor intensive and difficult tasks in fulfillment and logistics, including picking and packing items to fill orders moving organizing inventory and preparing items to be loaded onto trucks.

The tailwind for our business our terrific is the explosive growth in e-commerce and persistent labor shortages.

Automating the supply chain mission critical.

Our first earnings call as a public company. We're excited to share that we are on track with our long term growth plans and have made strong progress commercially so far this year.

Today, I'm going to talk about four areas.

And revenue market drivers and tail wins, new products and technology and scaling our team and our partnerships.

With respect to orders and revenue as expected, we're seeing more repeat orders from our large blue chip anchor customers as we roll out solutions to more facilities in their networks and their back of the store operations.

This is excellent progress and aligns with our planned long term trajectory.

Year to date, we have new orders of approximately $70 million with approximately 85% of those orders being repeat customers.

This validates that our customers are seeing good returns on their investment with Berkshire Greg.

Most recently, we received a $25 million repeat order from an anchor customer for tens of our e-commerce package handling systems.

These systems will go into multiple locations and there are many additional locations yet for us to automate.

These systems also apply to operations in both e-commerce and package handling logistics.

This rollout for adoption effect is similar to what we saw earlier this year. When we received a repeat order for $23 million plus from a large global retailer for our same day grocery fulfillment systems. These will also be rolled out to many of their locations with many additional locations yet.

To me.

We're also making good progress with new customers.

And systems being installed some have orders under negotiation and many more potential business in our pipeline.

Recently, we received $11 million in orders from new customers.

Total orders since inception are over a 184 million through October this.

This is particularly strong considering we only less stealth mode. In Q4 of 2018 and already started to build our sales and commercial teams in earnest in 2020.

Progress was strong we are customer proven with differentiated technologies do demonstrated ROI and we have received repeat orders with major customers.

This strong commercial progress has resulted in our highest backlog yet of $113 million as of early October.

We are where we expected to be with respect to our general commercial progress to date, and particularly with orders and backlog.

Revenue for Q3 is solid at approximately $19 million representing year over year topline growth of approximately $16 million.

This was also a sequential increase of $14 million from last quarter.

Now I'm going to shift gears and talk about market conditions, new products and technology and how we're scaling for growth.

When it comes to our market drivers macro forces continue to provide strong tailwind for our business changes in consumer expectations due to the Amazon effect.

Enormous pressure on all retailers e-commerce, and brick and mortar alike to ensure that the right goods are flowing to the right places at the right times in the right quantities to meet consumer expectations.

This flow of goods needs to be extremely efficient to be competitive recall Amazon uses robots in their operation and is operating with them at scale.

Labor scarcity, which was a top industry issue, even before the pandemic has become even more of an issue today.

Automation is required to be competitive it's not a nice to have but a must have and we offer our customers competitive advantage with robots automating functions that previously had to be done manually.

Our technology crosses the gap that makes functions like robotic picking packing and sortation useful in a commercial setting.

As such the Tam for what we do is enormous 280 billion today.

And our $184 million in orders, while very exciting is only the beginning of our growth.

One such offering is the RP for robotic pick and pack, where robots pick items from inventory impact them directly into outbound boxes to fill orders.

There is what we call the RSP W. A robotics shuttle footwall, which automates a key step in ecommerce order fulfillment and improves operational.

Performance of this function by up to 300% when compared to a conventional loan.

Another important product announcement, we made this year is the second generation of our mobile fulfillment product or <unk>.

The second generation includes new mobile robots plus.

Improvements to our AI orchestration software controls and coordinate the activities of fleets of robotics.

This enables the aggregate system throughput and other performance objectives.

Pleased to report that these new robots are in service and filling orders as we speak.

All of these products can be used with other Berkshire, great products with legacy systems and with other third party equipment like ASRM solutions.

These new products are created from our proprietary technology suite on.

On that front, we combined trade secret AI software with patented hardware to create products, we automate that which was not automated <unk> and there is a material moat around what we do.

Our technical team has over 1000 years of experience in AI and robotics, we have over 30 phds and across the company more than 75% of all employees is technical and scientific backgrounds.

We recently received 11 more patent awards, which brings us to 93 patents in total up from 72 earlier this year and we have well over 300 filings.

In parallel our AI continues to evolve.

While many of our AI advances, our trade secret and competitive advantage for us I can share that recent progress includes upgraded software modules that enable the robots to densely packed outbound containers.

Great space utilization sports, even better ROI for our customers and helps to conserve packaging, which is super from an environmental perspective.

We continue to invest in our leading technology and have more market changing products and our roadmap.

In terms of team scaling and go to market, we have enormous opportunities in our market and are scaling to meet those opportunities.

<unk> hired over 160 people this year and functions ranging from engineering to sales marketing and solution deployment.

Our go to market strategy consists of landing and expanding with our blue chip anchor customers.

Leveraging partners through the Berkshire, Great partner Alliance and expanding our new customer base through direct sales. We've made significant progress on all three of these fronts. Our business units are organized into five verticals retail e-commerce grocery <unk> and parcels and each has a dedicated.

And manager sales team and customer success team.

Our general managers have an average 30 years of experience and deep industry knowledge and a variety of verticals.

Our partnerships program complements our direct sales activities expands our range of capabilities and offerings and helps us to scale deployment operations.

We're currently seeing real traction with this program both from a customer engagement perspective and from interested partners. So.

So far this year, we signed nine new partnership agreements ranging from systems integrators, such as IHS to global enterprise technology providers like <unk>.

We're looking forward to sharing with New York.

<unk> on these fronts.

Overall, we're excited by both our progress this year and that aligns with our long term trajectory.

The macros around the business are strong where customer proven and we are seeing repeat orders from blue chip anchor customers. According to plan.

We're also adding new customers through direct sales and partnering into the larger ecosystem.

Orders through October our $70 million and we have $184 million in orders to date, great progress from our perspective and this is only the beginning.

Mark over to you.

Thanks, Tom and good morning, everyone I'd like to start off by providing some more detail around the substantial commercial progress that we've made this year so far.

Backlog is 113 million growth of $43 million from the beginning of this year and more than $100 million higher than the third quarter of 2020.

As a reminder, we define backlog as signed contracts with systems, yet to be delivered and installed this.

This backlog and two includes two contract signed shortly after the end of the third quarter.

We previously communicated that both orders and revenues will be backend loaded in 2021. So we are where we expect it to be with our commercial progress so far this year.

We also continued to make substantial progress expanding our relationships with our blue chip anchor customers as Tom noted in his remarks.

Approximately 85% of our backlog consist of anchor customers and 85% of our orders. So far this year represent follow on orders from anchor customers as well. This is generally in line with our plan for this year and supports our strategy of expanding our long term anchor customer relationships.

There is strong interest from the market and our solutions.

We will continue to update you on our progress with respect to orders and backlog each quarter.

Revenues for the third quarter of 2021 or approximately $18 8 million.

The significant increase in revenue for the third quarter represents an increase of 750% over the same period in 2020, and an increase of 317% sequentially from the second quarter of this year.

Turning to other operational metrics gross profit for the third quarter, and 2021 was negative $2 7 million or negative 15%.

During the third quarter, we commenced deployment at some project sites with technology that was being installed for the first time.

And I will note as well Covid and global and customer global supply chain issues still adds complexity to these installations on site.

As a result, and since our revenue base is still relatively small gross profit for the quarter was primarily impacted by higher than expected costs at these sites.

We fully expect that as our revenues continue to grow our gross margins will improve and we are confident in our ability to achieve our long term gross margin targets of approximately 50%.

Moving to operating expenses 2021 continues to be year of investment.

In particular, we're making investments in our go to market and engineering and operations teams to best position us to capitalize on a massive $280 billion addressable market.

The increase in total operating expenses, excluding stock based compensation was driven primarily by increases in head count.

Although we expect to continue to add resources, we do expect that the pace of new hires will slow in the coming quarters.

Adjusted EBITDA, which is defined as loss from operations adjusted for depreciation and stock based compensation expense was negative $32 3 million for the third quarter of 2021.

Total stock based compensation for the third quarter of 2021 was $13 9 million and depreciation expense was about $800000.

Moving to the balance sheet, we ended the quarter with a solid cash position of two 230 $203 million.

Capital spending was about $600000 and we expect capital spending will be less than $4 million for the full year.

Looking ahead for the full year of 2021, we expect to deliver revenue of approximately $50 million the.

The entire amount of remaining revenue is under contract for this year.

Now operator, we're ready to turn it over for Q&A.

As a reminder to ask a question you want me to Brad Star one on your telephone.

<unk> Your question press the pound team. Please stand by while we compile the Q&A roster.

Our first question comes from the line of John Walsh from Credit Suisse. Your line is now open.

Hi, good morning.

Good morning, John.

Hi, congratulations on the first quarter public here.

Sure no no easy or no small task accomplished.

Thank you.

Wanted to ask a little bit about what youre seeing with your own kind of supply chains.

And as you think about delivering on kind of the orders.

The backlog that you have.

Can you give us any kind of color around the phasing of that backlog how much visibility do you have into next year and then kind of do you have.

All of the chips and the components that you need to kind of deliver and execute on that obviously you gave us the comment on Q4 that all of those revenues are already under contract.

Yes so.

You can start up by.

Give me some facts right. So we talked about backlog of being a $113 million.

And.

As we exit this year, we expect that about 90 of that will be in backlog.

Which we feel really good about.

Now other orders that we may receive in Q4.

And into Q1 could also potentially contribute to revenue next year.

But obviously.

What can really impact that would be things like that are not in our control things like ongoing COVID-19 issues.

Ongoing supply global supply chain issues.

Directly or indirectly.

And customer schedules, so the exact timing and when we will realize those revenues could be impacted by those factors, but yes, but the facts are.

We were at 113 million in backlog now we expect to exit this year with 90.

Which we feel pretty good about but there are some of these uncertainties that could impact the exact timing of realization of.

Of that $90 million.

Great. Thank you and then maybe a bigger picture question here in.

And you touched on it obviously in your prepared remarks around labor and.

And wage inflation I think last time, you talked at the analyst day, you put some metrics around customer rois et cetera.

If we were to kind of mark to market for where we're seeing wage inflation go can.

Can you just talk to us a little bit how some of those rois to your customers have they changed at all.

Just any kind of perspective on that.

Sure. Thank you when we do the ROI modeling with customers the main inputs or labor savings capacity increases and process efficiencies labor is one of the larger levers in that calculation to the extent that wages rise this improves customer ROI.

And is reflected directly in those calculations.

Okay is there any kind of rule of thumb on on kind of the payback if labor inflation higher by 10%.

That cuts the payback or improves the ROI do you have any kind of rule of thumb for investors and ourselves.

It's going to it's going to vary.

Greatly from customer to customer.

One one analysis that we did.

Very briefly with one particular customers showed that a $1 increase in the hourly.

Wage rate would.

Result in like a half.

Five percentage point in IR and return for them. So.

It's pretty big and.

As the as wages rise, we're seeing more and more of a sense of urgency.

With the customers and trying to get.

Get things done and automate.

Great I will pass it along to my fellow analysts appreciate it look forward to seeing you guys next week.

Thank you. Thank you.

Thank you. Our next question comes from the line of Greg Palm from Craig Hallum Capital. Your line is now open.

Yeah. Thanks, Good morning, everyone and again ill offer my congratulations on your first report as a public company and just the continued progression so far.

Great. Thank you Greg.

I guess sort of along those lines I'm, assuming your entrance into the public markets has probably helped broaden awareness for the company and what sort of solutions. Yeah. You have I mean can you talk about what your current pipeline looks like I know you gave us some metrics as of I think February earlier this year.

Just curious how that's trended today.

So.

We think that the orders and backlog are really a more meaningful metric to track because that's really sort of commitments for future revenue.

When you look at when we measure ourselves on that basis and the progress that we've made this year at $70 million.

We're quite pleased with that and what that's really showing is our ability to grab the market opportunity.

As we expected.

In a relatively short period of time right I mean, it's only really been in the last 18 to 24 months or so are really began to to build our commercial team. So.

Orders and backlog are really the metric what we can say qualitatively, though is that.

The number of companies that we've been engaged with.

<unk> continues to grow we're targeting over 1000 companies out there.

Globally that we believe.

Have a need for automation and a lot of folks have reached out to us as well.

Whereas engaged as ever with our anchor customers in there.

They're.

And.

Progress Bill.

Building our pipeline.

Yes that makes it makes sense and just given all the sort of the trends around labor scarcity and wages going up et cetera over the last few months.

Do you think that makes at least some of your anchor customers more aggressive in the timing of the rollout of automation or not necessarily.

Greg This is.

Conversation that actually I think you had we had before which is there is.

Prior to the pandemic and prior to the current conditions.

Labor is highly exacerbated there is already tremendous energy in the system and so for the folks that the planned into that there were already in high gear.

Additional energy comes into the system due to the current labor conditions and due to the pandemic accelerating some of our <unk>.

<unk> trends in her behaviors as consumers.

The anchors at Batesville.

Already where they on alert and they continue to be on alert and we continue to be providing them with systems.

We're bullish on everything we've spoken about.

They were already in motion.

Yeah got it Okay, and then the $25 million repeat order.

Can you just confirm is that going to be for fiscal 'twenty, two installation and I guess in terms of how many locations might be appropriate going forward. It sounds like there is a lot more locations left to automate is that is that so.

Yes, so the the order is targeted at delivery in 2022 subject to some of the issues that Mark pointed out which is we always have to plan the schedules with customer or another level of detail right.

It's tens of locations.

With that same customer there are hundreds of other locations that are amenable to automation of this type.

Gotcha, so so tens of of locations, meaning actual addresses or locations inside a specific facility.

No I understand the question actual addresses tens of different facilities.

Interesting, okay, great alright, well ill leave it there best of luck going forward. Thanks.

Thank you.

Thank you as a reminder to ask a question you will need to press star one on your telephone kill withdraw your question press the pound key.

At this time I am showing no further questions I would like to turn the call back over to Tom Wagner for closing remarks.

Well. Thank you all for joining today, if you have any questions. Please reach out to the team. We hope you have a good rest of the day and this concludes our call.

Thank you.

This concludes today's conference call. Thank you for participating you may now disconnect.

Q3 2021 Berkshire Grey Inc Earnings Call

Request a DemoDemo

BGRY

Berkshire Grey

Earnings