Q4 2022 Symbotic Inc Earnings Call

November 21, 2022

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

[music].

Operator: Good day, and thank you for standing by. Welcome to Symbotic's Q4 and fiscal year 2022 results webcast. At this time, all participants are on 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 need to press star one one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to speaker today, Jeff Evanson. Please go ahead.

Good day, and thank you for standing by to a symbiotic in fourth quarter and fiscal year 2022 results webcast. 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.

Session, you will need to press star one on your telephone please be advised that today's conference is being recorded.

I'd now like to hand, the conference over to your Speaker today, Jeff Evenson. Please go ahead.

Jeff Evanson: Thank you, Victor. Hello, everyone. Welcome to Symbotic's Q4 and fiscal year 2022 results webcast. I'm Jeff Evanson, Vice President of Investor Relations and Corporate Development. Our press release and discussion today will include forward-looking statements based on assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements, including as a result of the factors described in cautionary statements and risk factors in Symbotic's financial release and regulatory filings with the SEC, by which any forward-looking statements made during this call are qualified in their entirety. In addition, during this call, certain financial measures may be discussed that are not recognized under U.S. generally accepted accounting principles, which the SEC refers to as non-GAAP measures. We believe these non-GAAP measures assist management in planning, forecasting, and evaluating our business and financial performance, including allocating resources.

Thank you Victor Hello, everyone welcome to <unk> fourth quarter and fiscal year 2022 results webcast I'm.

Im Jeff Evenson, Vice President of Investor Relations and corporate development or.

Our press release and discussion today will include forward looking statements based on assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward looking statements.

Including as a result of the factors described in cautionary statements and risk factors, some biotics financial release and regulatory filings with the SEC.

By which any forward looking statements made during this call are qualified in their entirety.

In addition, during this call certain financial measures may be discussed that are not recognized under U S. Generally accepted accounting principles, which the SEC refers to as non-GAAP measures.

We believe these non-GAAP measures assist management in planning forecasting and evaluating our business and financial performance, including allocating resources.

Jeff Evanson: Reconciliations of these non-GAAP measures to their most comparable reported GAAP measures are included in our financial press release, which has been furnished to the SEC and is available in the investor relations section of our website and in our filings with the SEC. These non-GAAP measures may not be comparable to measures used by other issuers. Today, we will provide guidance for Q1, including revenue and adjusted EBITDA. We are not providing guidance for net loss today, which is the most comparable GAAP financial measure to adjusted EBITDA. We're not able to provide reconciliations of adjusted EBITDA to GAAP financial measures because certain items required for such reconciliations are outside of our control or cannot be reasonably predicted, such as the provision for stock-based compensation. On today's call, we're joined by Rick Cohen, Symbotic's Founder and Chief Executive Officer, and Tom Ernst, Symbotic's Chief Financial Officer.

Reconciliations of these non-GAAP measures to their most comparable reported GAAP measures are included in our financial press release, which has been furnished to the SEC and is available in the Investor Relations section of our website.

And in our filings with the SEC.

These non-GAAP measures may not be comparable to measures used by other issuers.

Today, we will provide guidance for the first quarter, including revenue and adjusted EBITDA.

We're not providing guidance for net loss today, which is the most comparable GAAP financial measure to adjusted EBITDA.

We're not able to provide reconciliations of adjusted EBITDA to GAAP financial measures because certain items required for such reconciliations are outside of our control or cannot be reasonably predicted such as the.

Provision for stock based compensation.

On today's call. We are joined by Rick Colon, Symbolics, founder and Chief Executive Officer, and Tom Ernst Symbiotic Chief Financial Officer. These executives will discuss our fourth quarter and fiscal year 2022 results, followed by Q&A and with that I'll turn it over to Rick Rick.

Jeff Evanson: These executives will discuss our Q4 and fiscal year 2022 results, followed by Q&A. With that, I'll turn it over to Rick. Rick?

Rick Cohen: Thank you, Jeff. 2022 has been an incredible year. We went public in June, and over the past year, we've signed new contracts to increase our backlog to over $11 billion, and we added a new customer with a multi-site contract as well. Our team has responded with incredible effort and passion, and in August, we gave every full-time employee shares in Symbotic. We're all partners here. The proof is in our quarterly results. Q4 revenue more than doubled compared to a year ago, and gross profit and adjusted EBITDA both reached record levels. Our roadmap is clear. We are facing the challenges of hypergrowth, and we are executing well and very focused on customer deliverables of quality and speed. The market for our systems is huge, and demand is growing with repeat orders from new and existing customers that are battling for our capacity.

Thank you Jeff 2022 has been an incredible year, we went public in June and over the past year, we have signed new contracts to increase our backlog to over $11 billion.

We added a new customer with a multi site contract as well.

Our team has responded with incredible effort and passion and in August . We gave every full time employee shares and symbiotic we're all partners here.

The proof is in our quarterly results fourth quarter revenue more than doubled compared to a year ago and gross profit and adjusted EBITDA both reached record levels.

Our roadmap is clear we are facing the challenges of hyper growth and we are executing well and very focused on customer deliverables of quality and speed.

The market for our systems is huge and demand is growing with repeat orders from new and existing customers that are battling for our capacity there.

Rick Cohen: The global supply chain is undergoing transformational change, and as the innovation leader, we are benefiting from a variety of trends. Traditional big tech is laying off while we are hiring. Our supplier network is improving and supply chain shortages are going away just as we are increasing orders and partnerships, and demand for our systems is increasing because we solve critical problems in providing people with the necessities of life, like food, like clothing, and like household goods. During the quarter, we significantly increased internal manufacturing output. We also accelerated system deployments and secured tier one partner capacity to grow even faster while we remain focused on our internal and external innovations. As announced in our earnings release, I'm returning to the role of chief executive officer.

Our global supply chain is undergoing transformational change and as the innovation leader, we are benefiting from a variety of trends traditional big check is laying off while we are hiring our supplier network is improving and supply chain shortages are going away just as we are increasing order.

And partnerships and demand for our systems is increasing because we solve critical problems and providing people with the necessities of life like food like clothing and like household goods.

During the quarter, we significantly increased internal manufacturing output. We also accelerated system deployments and secured tier one partner capacity to grow even faster, while we remain focused on our internal and external innovations.

As announced in our earnings release I'm, returning to the role of Chief Executive Officer, when reflecting on our critical next phase of growth. We determined that a single point of leadership is the best way to lead symbiotic.

Rick Cohen: When reflecting on our critical next phase of growth, we determined that a single point of leadership is the best way to lead Symbotic. I'd like to take this opportunity to thank Michael Loparco for his many contributions, including advancing our partner network and helping us to scale for future growth. 2023 is off to a great start, and we're excited about our future. Now, Tom will discuss our financial performance and our outlook. Tom?

I'd like to take this opportunity to thank Michael of Parco for his many contributions including advancing our partner network and helping us to scale for future growth 2023 is off to a great start and we're excited about our future now Tom will discuss our financial performance and our outlook.

Tom Ernst: Thank you, Rick. Our Q4 revenue of $244 million grew 167% over the prior year period, despite last year's Q4 including approximately $35 million of proof of concept milestone revenue. Excluding that one-time revenue, total Q4 revenue more than tripled year over year. We initiated a record 5 new system deployments during the quarter and, as planned, advanced 1 system into the fully functional production stage. We now have 17 active system deployments with multiple customers, which represents an increase from 13 systems last quarter and an increase from just 5 systems in the Q4 of last year. On 26 September, 2 days after our quarter closed, we won an agreement for 5 systems with new customer UNFI. Under the agreement, UNFI also has an option to implement Symbotic's warehouse automation systems in additional distribution centers.

Tom.

Rick.

Fourth quarter revenue of $244 million grew 167% over the prior year period, Despite last years fourth quarter, including approximately $35 million of proof of concept milestone revenue.

Excluding that onetime revenue total fourth quarter revenue more than tripled year over year.

We initiated a record five new system deployments during the quarter and as planned advanced one system into the fully functional production stage.

We now have 17 active system deployments with multiple customers, which represents an increase from 13 systems last quarter and an increase from just five systems in the fourth quarter of last year.

On September 26, two days after our quarter closed we want an agreement for five systems with new customer UNFI.

Under the agreement UNFI also has an option to implement some box warehouse automation systems and additional distribution centers.

Tom Ernst: Our extraordinary revenue growth was driven by both faster progress on deployments already underway and the 5 deployments started during the quarter. We accelerated deployments by standardizing our systems and streamlining our deployment processes. Next, we gained speed through our scaling efforts, including strong contributions from our outsourcing partners. Finally, while still seeing challenges, the overall supply chain environment has improved. One of the very attractive financial elements of our business model is our recurring revenue stream, which represents a significant portion of the lifetime value of the systems in our over $11 billion backlog. This stream of revenue is associated with software license and maintenance, along with operation services that begins when we complete a system deployment and recurs monthly as the customer uses the system and our services. During Q4, we completed our first fully functional system against our large backlog.

Our extraordinary revenue growth was driven by both faster progress on deployment is already underway and five deployments started during the quarter.

We accelerated deployments by standardizing our systems and streamlining streamlining our deployment processes next.

Next we gained speed through our scaling efforts, including strong contributions from our outsourcing partners.

Finally, while still seeing challenges the overall supply chain environment has improved.

One of the very attractive financial elements of our business model is a recurring revenue stream, which represents a significant portion of the lifetime value of the systems and are over $11 billion backlog.

This stream of revenue is associated with software license and maintenance along with operation services that begins when we complete our system deployment and recurring monthly is the customer uses the system and our services.

During the fourth quarter, we completed our first fully functional system against our large backlog.

Tom Ernst: This deployment triggers recurring revenue for that system. In the near term, we expect the recurring revenue streams to be small relative to our rapidly growing systems revenue. As system completions waterfall, recurring revenue should grow to have much higher gross margin than systems revenue, and it should grow to become a greater portion of total revenue and provide powerful operating leverage to our business. Our Q4 system gross margin continues to reflect significant costs associated with rapidly scaling our operations and the burden of elevated pass-through steel costs that together represent several hundred basis points of systems gross margin in the quarter.

This deployment triggers recurring revenue for that system.

In the near term, we expect our recurring revenue streams to be small relative to our rapidly growing systems revenue.

But as system completions waterfall recurring revenue should grow to have much higher gross margin than systems revenue and it should grow to become a greater portion of total revenue and provide powerful operating leverage to our business.

Our fourth quarter system gross margin continues to reflect significant costs associated with rapidly scaling our operations and the burden of elevated pass through steel costs that together represents several hundred basis points of systems gross margin in the quarter.

Rick Cohen: In addition, Q4 includes significant one-time expenses, including costs related to adding outsourcing as an option to our business model. Excluding these one-time and outsourcing costs, system gross margin would have marginally improved quarter-over-quarter. In Q4, operating expense growth moderated to 7% sequentially, despite redundant costs associated with ramping partners and ongoing investments in our innovation initiatives like SymBot and BreakPack. Operating leverage improved as we achieved a record 8.2% adjusted EBITDA loss rate compared to 26.3% in Q4 a year ago, driven by our increased gross profit and slower operating expense growth. As we look ahead to achieving positive cash flow, we have strong operating leverage, and with $353 million of cash on hand, we are very well capitalized to execute our growth plans. Turning to our outlook.

Tom Ernst: In addition, Q4 includes significant one-time expenses, including costs related to adding outsourcing as an option to our business model. Excluding these one-time and outsourcing costs, system gross margin would have marginally improved quarter-over-quarter. In Q4, operating expense growth moderated to 7% sequentially, despite redundant costs associated with ramping partners and ongoing investments in our innovation initiatives like SymBot and BreakPack. Operating leverage improved as we achieved a record 8.2% adjusted EBITDA loss rate compared to 26.3% in Q4 a year ago, driven by our increased gross profit and slower operating expense growth. As we look ahead to achieving positive cash flow, we have strong operating leverage, and with $353 million of cash on hand, we are very well capitalized to execute our growth plans. Turning to our outlook.

In addition, the fourth quarter include significant onetime expenses, including costs related to adding outsourcing is an option to our business model.

Excluding these onetime and outsourcing cost system gross margin would have marginally improved quarter over quarter.

In the fourth quarter operating expense growth moderated to 7% sequentially. Despite redundant costs associated with ramping partners and ongoing investments in our innovation initiatives like Simba and break pack.

Operating leverage improved as we achieved a record eight 2% adjusted EBITA loss rate compared to 26, 3% in the fourth quarter a year ago.

Driven by our increased gross profit and slower operating expense growth.

As we look ahead to achieving positive cash flow, we have strong operating leverage and with $353 million of cash on hand, we are very well capitalized to execute our growth plans.

Rick Cohen: For Q1 fiscal 2023, we expect revenue of $170 to 200 million and an adjusted EBITDA loss of between $21 and $25 million. This represents 140% revenue growth and a 15 percentage point improvement in our adjusted EBITDA loss rate year-over-year at the midpoint. In closing, we're excited about our progress in helping revolutionize the supply chain. As a part of this journey, we will continue to innovate rapidly and scale our business to deliver against our more than $11 billion revenue backlog. We are excited to work in partnership with our customers, suppliers, and you, our shareholders, as we build this great company together. We now welcome your questions. Victor, will you please open the Q&A?

Tom Ernst: For Q1 fiscal 2023, we expect revenue of $170 to 200 million and an adjusted EBITDA loss of between $21 and $25 million. This represents 140% revenue growth and a 15 percentage point improvement in our adjusted EBITDA loss rate year-over-year at the midpoint. In closing, we're excited about our progress in helping revolutionize the supply chain. As a part of this journey, we will continue to innovate rapidly and scale our business to deliver against our more than $11 billion revenue backlog. We are excited to work in partnership with our customers, suppliers, and you, our shareholders, as we build this great company together. We now welcome your questions. Victor, will you please open the Q&A?

Turning to our outlook for the first quarter of fiscal 2023, we expect revenue of $170 million to $200 million.

And an adjusted EBITDA loss of between 21 and $25 million.

This represents 140% revenue growth and a 15 percentage point improvement in our adjusted EBITDA loss rate year over year at the midpoint.

In closing, we're excited about our progress in helping revolutionize the supply chain.

As a part of this journey, we will continue to innovate rapidly and scale our business to deliver against our more than $11 billion revenue backlog.

We are excited to work in partnership with our customers suppliers and you our shareholders as we build this great company together.

We now welcome your questions Victor would you please open the Q&A.

Operator: Sure thing. As a reminder, to ask a question, you'll need to press star one one on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from the line of Piyush Awasthi from Citi. Your line is open.

Sure.

As a reminder to ask a question press star one on your telephone please stand by we compile the Q&A roster.

Our first question comes from the line of Piyush Awash adversity.

<unk> from Citi. Your line is open.

Piyush Awasthi: Good evening, guys.

Good evening guys.

Rick Cohen: Hello.

Hello.

Piyush Awasthi: Maybe starting with Rick. You highlighted that Michael helped scale for future growth. Maybe elaborate on key initiatives that Michael worked on or implemented. Now with you back in the CEO seat, can you talk about your strategic priorities, let's say, in the next 12 to 18 months?

Maybe starting with.

You highlighted that Michael hub scale for future growth, maybe maybe elaborate on key initiatives that Michael walked on implemented.

Now would you back in the CEO seat can you talk about your strategic priorities, let's say in the next 12 to 18 months.

Rick Cohen: Sure. We had started a lot of these strategic plans over a year ago. Those plans were really to outreach to partners who could help us in the manufacturing process. We had already outsourced to a lot of steel manufacturers. The plans really are just to continue to develop and work on the partners. What's happened in the last year as tech has slowed down, we're finding the partners are more aggressive in pricing. We're finding partners that were fully booked before are now anxious to help us. The partnership plan, which we started a while ago, is now in full bore, and we're expecting that to continue to develop and bear fruit. What I'm finding in my role is that the

Sure.

We had we had started a lot of these strategic plans over a year ago.

And those plans were really to outreach to partners.

Who could make help.

Help us in.

In the manufacturing process, we're already outsourced to a lot of steel manufacturers. So the plans really are just too.

Continue to develop and work on the partners and what's happened in the last year as Tech has slowed down we're finding the partners are more aggressive.

And pricing will fall.

Finding partners that were fully booked before are now anxious to help us. So the partnership plan, which we started a while ago is now in full bore and we're expecting that to continue to develop and bear fruit and we're now finding and my role is that the.

Rick Cohen: What's been interesting is you can't really separate the product development from the partners from the scaling, and that's why we're combining all these offices into one. Because a part of what I have to do is actually go out and meet with the partners and convince them how big an industry this is, because a lot of them were focused on electric vehicles or some other part of tech. People are now starting to realize that warehouse automation is gonna be a very, very big industry. I'm leading that effort now, and we're building a team to actually work with the suppliers and build up a good backlog of suppliers and more capabilities than hopefully we need, but that'll be a good thing.

<unk>.

What's been interesting is you can't really separate our product development from the partners from the scaling and that's why we're combining all of these offices into one because a part of what I have to do is actually go out and meet with our partners and humid Sam how big an industry. This is because a lot of them were focused on.

On electronic vehicles or some other part of tech and people are now starting to realize their warehouse automation is going to be a very very big industry. So I'm, leading that effort now and we.

We're building a team to actually work with our suppliers and build up a good backlog of suppliers and more capabilities than hopefully we need but that'll be a good thing.

Piyush Awasthi: Got it. Very helpful. You talked about UNFI contract. To the extent you can, maybe quantify the terms of the agreement. The macro environment is slowing, so maybe talk about if you're seeing any changes in the pricing discussions that you're having with your customers. Do you think you can still hold on to pricing?

Got it very helpful.

You talked about UNFI contract will be extended to maybe quantify the terms of the agreement.

Macro environment is slowing so maybe talk about if youre seeing any changes in the pricing discussions that you're having with your customers or you think you can still hold onto pricing.

Rick Cohen: I can't really talk about pricing. I can tell you that the macro environment is actually working in our favor. What we're seeing is that our customers are pretty successful customers, and they're leaning in to secure the capacity as they expect to actually expand. If the market slows down, most of our customers will do very well in that environment, and they wanna make sure they have the capacity to grow.

I can't really talk about pricing.

I can tell you that the macro environment.

Is actually working in our favor.

What we're seeing is that our customers are pretty successful customers and they are leaning in to secure the capacity.

As they as they expect to actually expand if the market slows down most of our customers will do very well in that environment and I want to make sure. They have the capacity to grow and Piyush, we can't speak to specific customers, but just add color as we think about our overall pipeline and the reception we're getting in the marketplace.

Tom Ernst: Piyush, we can't speak to specific customers, but to add color as we think about our overall pipeline and the reception we're getting in the marketplace, the demand for our time is exceptionally high. You know, we think that the opportunity for us to realize much stronger pricing than we have in the past is very high without speaking to any specific customer.

The demand for our time is is exceptionally high and so we think that the opportunity for us to realize much stronger pricing than we have in the past is very high without speaking to any specific customer got.

Piyush Awasthi: Got it. Very helpful. Thank you, guys.

Got it very helpful. Thank you guys.

Tom Ernst: Thank you.

Sure.

Thank you.

Operator: One moment for our next question. Our next question comes from the line of James Ricchiuti from Needham. Your line is open.

One moment our next question.

Our next question comes from the line of Jim Ricchiuti from Needham Your line is open.

Tom Ernst: Hi, Jim.

Hi, Jim.

James Ricchiuti: Hi. Can you hear me okay?

Jim Ricchiuti: Hi. Can you hear me okay?

Hi can you hear me okay.

Tom Ernst: We can.

James Ricchiuti: Thank you. The question I have relates to the Q1 guidance, which was stronger than expected. I'm wondering, you know, how we might think about either the deployment of systems over the course of fiscal 2023 and the cadence of revenues. Obviously, the revenues are gonna move around quarter to quarter. I think we're all aware of that. I'm just wondering if you can give us anything we need to be mindful of in terms of how revenues progress over the course of fiscal 2023.

Jim Ricchiuti: Thank you. The question I have relates to the Q1 guidance, which was stronger than expected. I'm wondering, you know, how we might think about either the deployment of systems over the course of fiscal 2023 and the cadence of revenues. Obviously, the revenues are gonna move around quarter to quarter. I think we're all aware of that. I'm just wondering if you can give us anything we need to be mindful of in terms of how revenues progress over the course of fiscal 2023.

We can question.

Good question I think you asked.

Quick question I have relates to the Q1 guidance, which was.

Stronger.

Unexpected.

And I'm wondering.

How we might think about.

Either.

Sure.

Of systems over the course of.

Fiscal 'twenty three and the cadence of revenue obviously, the revenues are going to move around quarter to quarter. I think we're all aware of that but I'm. Just wondering if you can give us anything.

We need to be mindful of in terms of how revenues progress over the.

Of course, some physical accordingly.

Tom Ernst: Yeah. Thanks for the question, Jim. Just thinking about the growth, you know, we're pushing the business to grow on multiple fronts. If you look at the quarter we just posted, we clearly had some very strong results across the board. You know, those results are just driven by strength in our ability to install the systems quickly and fast uptake with our supply chain partners, new starts, and an overall improving supply chain. As we think about pushing the business on multiple fronts, it was clearly a quarter where things went in our favor. You know, as we look forward, we're focused on growing really fast.

Yeah. Thanks, Thanks for the question Jim So so just thinking about the growth.

We're pushing the business to grow on multiple fronts and so if you look at the quarter, we just posted.

We clearly had some very strong results across the board.

And those results are just driven by strengthened our ability to install install the systems quickly about fast uptake with our supply chain partners, new starts and an overall improving supply chain. So as we think about pushing the business on multiple fronts. It was clearly a quarter, where where things went well.

In our favor.

As we look forward, we're focused on growing really fast.

Tom Ernst: You know, I think as we're deploying these systems through these first waves of systems, we can see some significant quarter-on-quarter variability just due to the number of systems in our overall growth. You should think about the general trend that we're trying to take those number of systems that we're deploying and pushing to that fully functional live and grow it as fast as we can.

No I think as we as we are deploying new systems through the first wave of systems, we can see some significant quarter on quarter variability just due to the number of systems in our overall growth, but you should think about the general trends that we're trying to take those number of systems that we're deploying and pushing into that fully functional live in <unk>.

So it as fast as we can.

James Ricchiuti: Got it. A follow-up question is just on OpEx. A pretty significant step-up in R&D and SG&A. How do you see these expense items scaling from the levels that we're at in the current quarter? You know, perhaps as we think about you know, the year as a whole. It sounds like you're clearly still in a heavy investment mode given the prospects of the business and now what looks to be more available talent out there.

Jim Ricchiuti: Got it. A follow-up question is just on OpEx. A pretty significant step-up in R&D and SG&A. How do you see these expense items scaling from the levels that we're at in the current quarter? You know, perhaps as we think about you know, the year as a whole. It sounds like you're clearly still in a heavy investment mode given the prospects of the business and now what looks to be more available talent out there.

Got it and follow up question.

On the Opex.

A significant step up in.

R&D and SG&A, how do you see how do you see these expense items scaling from the levels.

That we're at in.

In the current quarter and perhaps as we think about.

Europe as a whole it sounds like you're clearly still in a heavy investment mode. Given the prospects of the business. We're now what looks to be more available talent out there.

Tom Ernst: We did see OpEx grow. Now, growth moderated to about 7% quarter on quarter, and that's despite 167% year-on-year growth in revenue. You know, I think as we look forward and what's implicit in our guidance would be another more moderate growth in OpEx. You know, as we think about our growth overall, kind of looking at the results for the full year and then thinking about looking forward, we see some very strong operating leverage. You know, thinking about that operating leverage, this OpEx growth, you know, despite growing very fast, a significant portion, a majority of our OpEx is invested in new innovation along with expanding our capacity to grow the business.

We did we did see opex grow it growth moderated to about 7% quarter on quarter and that's despite.

167% year on year growth in revenue.

I think as we look forward and what's implicit in our guidance would be another more moderate growth in opex.

As we think about our growth overall kind of looking at the results for the full year and then thinking about looking forward.

See some very strong operating leverage and so thinking about that that operating leverage.

This opex growth despite growing very fast.

Significant portion of the majority of our Opex is invested in new innovation along with.

Expanding our capacity to grow the business.

Tom Ernst: You know, we're showing strong leverage while still making these big investments to actually make the business grow faster and come out with new products. It's a great position to be in.

We're showing strong leverage while still making these big investments to actually make the business grow faster and come out with new products.

It's a great position to be in.

James Ricchiuti: Helpful. Thanks a lot. I'll jump back in the queue.

Jim Ricchiuti: Helpful. Thanks a lot. I'll jump back in the queue.

Helpful. Thanks, a lot I'll jump back in the queue.

Tom Ernst: Thanks, Jim.

Thanks, Jim.

Operator: One moment for our next question. Our next question comes from the line of Chris Snyder from UBS. Your line is open.

In a moment our next question.

Our next question comes from the line of Chris Snyder from UBS. Your line is open.

Chris Snyder: Thank you. Could you just kind of follow up on some of the gross margin challenge or headwinds in the quarter? You know, I think you guys called out, if I heard right, several hundred basis points from steel, and then also some one-time costs around outsourcing. Could you maybe just kind of recap what those were in the quarter? You know, kind of how should we expect the GM gross margin to trend going forward?

Thank you.

Could you just kind of follow up on some of the gross margin challenge or headwind in the quarter. I think you guys called out if I heard right several hundred basis points from from steel and then also some onetime costs around outsourcing could you maybe just kind of recap what those were in the quarter and then how should we expect the gross margin.

And going forward.

Tom Ernst: Yeah. Thanks for the question, Chris. In Q4, we continued to see what we had seen all of fiscal 2022, which was we are bearing some costs associated with just growing fast in the COGS line, along with those steel pass-through costs. That's been consistent throughout the course of fiscal 2022. That does represent several hundred basis points of gross margin impact to where we see a more structural gross margin mid to longer term. To your question, we did have some additional one-time costs, including some costs associated with outsourcing in Q4. You know, examples of those costs are twofold. I'll give you two. We consolidated our warehouse operations and enhanced some other material handling processes.

Yes. Thanks for the question, Chris So in the fourth quarter, we continued to see what we had seen all all of fiscal 'twenty, two which was.

We are bearing some costs associated with just growing fast in the Cogs line, along with those steel pass through costs. So that's been consistent throughout the course of fiscal 'twenty two.

Does represent several hundred basis points of gross margin impact to where we see a more structural gross margin mid to longer term.

And to your question, we did have some additional onetime costs, including some costs associated with outsourcing in the fourth quarter.

Examples of those of those costs are a couple fold I'll give you two.

We consolidated our warehouse operations warehousing operations and enhanced some other material handling processes and so we absorbed some of those costs as one time and period costs to make that shift and this is these are some key things that we wanted to do to really accelerate our ability to work with outsourcing partners.

Tom Ernst: We absorbed some of those costs as one-time and period costs to make that shift. These are some key things that we wanted to do to really accelerate our ability to work with outsourcing partners. Another example is, you know, we have some major innovation initiatives underway. Some of those costs in part will flow into COGS, not just in R&D. In Q4, we made some significant headway in some of those innovation projects that did come in as in-period costs. I think as you think about that looking forward, we do see Q4 as a low water mark. Thinking about our fiscal 2022 gross margin overall, we see some very strong gross margin leverage as we look forward with our operations.

Another example is.

We have some major innovation initiatives underway some of those costs in part will flow into Cogs not just in R&D.

And.

In the fourth quarter, we made some significant headway in some of those innovation projects that that did comment as in period costs.

So I think as you think about that looking forward, we do see the fourth quarter is a low watermark and thinking about our fiscal 'twenty two gross margin overall, we see some very strong gross margin leverage as we look forward with our operations.

Chris Snyder: I appreciate that. You know, if you just kind of look at like steel prices, you know, down pretty significantly off the high, and, you know, it sounds like earlier the company's pretty confident, you know, in the ability to hold and if not even grow price. You know, it sounds like there's a pretty favorable price cost outlook here over the next, you know, 12 months. How should we think about, you know, maybe that lag? You know, obviously, you guys aren't realizing spot commodities in real time. You know, how long does it take that, you know, kind of cost relief to flow through the business relative to, you know, kind of the what we see in the spot market? Thank you.

I appreciate that and can you just kind of looked at like steel prices down pretty significantly off the high.

And that sounds like earlier the company is pretty confident.

And the ability to hold if not even grow price so.

Sounds like there's a pretty favorable price cost outlook here over the next 12 months, how should we think about that.

That lag, obviously, you guys aren't realizing smart spot commodities in real time.

How long does it take that.

Cost relief to flow through the business relative to kind of that.

But what we see in the spot market. Thank you.

Tom Ernst: Thanks for the question. Thinking about all these effects in total too, excluding these one-time effects you saw in Q4, our gross margin would have been up quarter on quarter. The one-time effects were actually significant in Q4. You're pointing out steel as well. It's anywhere from 6 to up to a 12-month lag in terms of we lock in steel capacity for some items well in advance of installation. As you're watching steel indices, you should think about maybe on average a 6-month lag in terms of weighted for us.

Yes, thanks for the question so.

Thinking about all of these effects in total two X. These onetime effects, we saw in the fourth quarter. Our gross margin would have been up quarter on quarter. So the one time effects were actually significant in the fourth quarter Youre pointed out steel as well.

It's anywhere from six to up to a 12 month lag in terms of we lock in steel capacity for some items well in advance of installation. So as youre watching steel indices, you should think about maybe on average a six month lag in terms of weighted for us.

Chris Snyder: I-

Okay.

Tom Ernst: Go ahead, Chris.

Go ahead, Chris.

Chris Snyder: Thank you, Tom Ernst. If I can just squeeze in one last one. So on more of the transitory gross margin headwinds, like the outsourcing, you know, the innovation, you know, are those going away, or are those gonna stay with the business? I'd imagine, you know, you guys will continue to outsource to kind of ramp as fast as possible, and I'm sure that that innovation engine's not slowing either. That's my last one. Thank you.

Thank you Pat if I can just squeeze one last one.

I'm more of a transitory gross margin headwinds like the outsourcing the innovation.

Are those going away.

Or are those going to stay with the business I would imagine you guys will continue to outsource to kind of ramp as fast as possible and I'm sure that that innovation engine is not slowing either.

And that's my last one thank you.

Tom Ernst: Yeah. At the gross margin line, they're a little bit more weighted towards the one-time. We have been and will continue to invest to support some redundant costs that are associated with ramping on these outsourcing partners in the near term. We see those providing very significant mid- and long-term revenue. In fact, as we think about the overall strategy here with outsourcing, we see it providing us, you know, first a path to being a much bigger company, and that path to being a bigger company gives us a path to being more profitable, but not just because of the revenue, because we think it provides us structural margins that are much higher, both at the gross, and operating margin level as we think long term of the business.

At the gross margin line, there a little bit more weighted towards the onetime.

We are we have been and will continue to invest to support some redundant costs that are associated with ramping on these outsourcing partners in the near term.

We see those providing very significant mid and long term revenue and in fact, as we think about the overall strategy here with outsourcing we see it providing us.

First a path to be in a much bigger company.

And that path to being a bigger company.

US a path to be more profitable, but not just because of the revenue because we think it provides a structural margins that are much higher both at the gross and operating margin level as we think long term of the business.

Chris Snyder: Thank you.

Thank you.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Matt Summerville from D.A. Davidson. Your line is open.

Thank you one moment for our next question.

Our next question comes from the line of Matt Summerville from D. A Davidson your line is open.

Matt Summerville: Hey, thanks. A couple questions. First, I'm wondering if some of the things you're talking about today, whether it be headwinds related to, you know, growth-related expenses, et cetera, has that changed your expectation as far as when you believe Symbotic will achieve free cash and Adjusted EBITDA positivity?

Hey, thanks.

Couple of questions first I'm wondering is.

One of the things you are talking about today, whether it be headwinds related to growth related expenses et cetera.

That changed your expectation as far as when do you believe symbiotic will achieve free cash and adjusted EBITDA positivity.

Tom Ernst: Thanks for the question, Matt. As we think about growth, you know, we're obviously, we've given one quarter forward guidance. You know, these initiatives to really accelerate our path with supply chain partners, we think provides us greater profit in the mid and long term. In the immediate near term, as obviously is implicit in our Q4 and Q1, we're investing just a little bit more to get there. You know, hopefully, that gives you a little bit of context.

Thanks for the question Matt.

So as we think about growth.

Obviously, we've given one quarter forward guidance.

These initiatives to really accelerate our path with supply chain partners, we think provides us greater.

Greater profit in the mid and long term.

In the immediate near term obviously is implicit in our fourth quarter first quarter, we're investing just a little bit more to get there. So.

Hopefully that gives you a little bit of context.

Matt Summerville: As a follow-up, I wanted to talk a little bit more about the management change with, you know, Michael exiting. You know, at one point, you know, Rick, you obviously felt it was better to maybe not have a single point of leadership. I guess I'm curious what maybe transpired since you went down that path that led you to decide that in fact, you know, the single point methodology, if you will, is indeed the way to go for Symbotic. Do you feel that that's true over the long term, or is this more of a near-term decision? Thank you.

And then as a follow up.

I wanted to.

Talk a little bit more.

About.

The management changed with Michael exiting.

At one point.

Rick you, obviously felt it was better to maybe not have a single point of leadership and I guess I'm curious what maybe transpired.

Since you went down that path that led you to decide.

Scott.

Single point methodology, if you will is indeed.

Way to go for symbiotic and do you feel that that's true over the long term or is this more of a near term decision. Thank you.

Rick Cohen: Yeah, I've been the CEO here for 10 years. I really didn't anticipate everything that was gonna happen over the last 6 months. I would say the messaging from both suppliers and customers is a single point is better. It was a pretty straightforward decision. The ability to separate out at the very top my desire for product development and my desire to be with customers. I thought we could separate that from the scaling and the manufacturing. The reality is, at this point, they're just too intertwined. I think at some point it'll happen, but this was just not the right time.

Yes, so and I have been.

Oh here for 10 years.

I really.

Didn't.

I didn't anticipate everything that was going to happen over the last six months.

And I would say the messaging from both suppliers and customers as a single point is better.

And so.

<unk>.

It was a pretty straightforward decision.

The.

The ability to separate out at the very top my desire for product development and my desire to be with customers.

Thought we could separate that from the scaling and the manufacturing and the reality is at this point Theyre just too intertwined.

I think I think at some point it will happen, but this was just not the right time.

Rick Cohen: I don't think it was, and it wasn't fair to Michael, and it wasn't the right thing to do at this point to do that. It was an agreeable change, and that's what we did.

Sure.

I don't think it was.

Fair to Michael and it wasn't the right thing to do at this point to do that so it was it was a.

And agreeable.

Sure.

Change and Thats, what we did.

Matt Summerville: Thanks, Rick. Appreciate the color. That's it for me.

Thank you for I appreciate the color that's it for me Okay.

Rick Cohen: Yeah.

Operator: One moment for our next question. Our next question comes from the line of Mark Delaney from Goldman Sachs. Your line is open.

One moment for our next question.

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

Chris Snyder: Yes, good afternoon, and thank you very much for taking the question. First is on the increased capacity that you're taking with the help of manufacturing partners. Maybe elaborate a little bit more in terms of how much added capacity Symbotic now has in terms of number of shipments that you have in a quarter or a year, and where you think that can go over the intermediate to longer term.

Mark Delaney: Yes, good afternoon, and thank you very much for taking the question. First is on the increased capacity that you're taking with the help of manufacturing partners. Maybe elaborate a little bit more in terms of how much added capacity Symbotic now has in terms of number of shipments that you have in a quarter or a year, and where you think that can go over the intermediate to longer term.

Yes, good afternoon, and thank you very much for taking the question first is on the increased capacity that you are taking with the help of manufacturing partner and maybe elaborate a little bit more in terms of how much added capacity subarctic now has in terms of the number of shipments that you can do you have in a quarter or a year and where do you see.

That can go over the intermediate to longer term.

Tom Ernst: Well, I'll take first. Good afternoon, Mark. You know, what our initiatives here in the quarter and over the course of fiscal 2022 have done for us has enabled us to get visibility with outsourcing partners for our growth plans over the next few years. You know, we've done this, and we want to continue to deepen this partner network with redundant multiple suppliers, and, you know, working with world-class providers. It's about having that visibility into our multiple years of growth that enable us that flexibility to really drive to the rapid growth that our $11 billion backlog allows us to.

Well I'll take first.

Good afternoon, Mark so what our initiatives here in the quarter and over the course of fiscal 'twenty. Two have done for US has enabled us to get visibility with outsourcing partners for our growth plans over the next few years. So we've done this and we want to continue to deepen this partner network with redundant.

Multiple suppliers.

And working with World class providers, so it's about having that visibility into our multiple years of growth that enable us that flexibility to really.

Drive to the rapid growth that our 11 $11 billion backlog allows us to.

Mark Delaney: Okay. As you think about your, you know, the operational changes you're making and the ability to have more redundant sources of supply or perhaps add more overall supply, what does it mean in terms of your ability to win additional customers? I mean, you spoke to one, you know, today in your prepared remarks, but do you think you can potentially bring on more customers as you add additional outsourced manufacturing partners? Thanks.

Okay.

And as you think about the operational changes youre, making and the ability to have more redundant choices of supplier or perhaps add more overall supply.

What does it mean in terms of your ability to.

When additional customer to me you spoke to one yesterday in your prepared remarks, but did you think you can potentially bring on more customers as you add additional.

Outsourced manufacturing partners.

Rick Cohen: Yeah, this is Rick. We're gonna grow very quickly. We're gonna keep things under control. When we go from 17 systems to 20 systems to 25 systems, then I think we'll be able to answer your question that we can grow faster. We're not gonna disappoint our customers. We're very focused on delivering on time. What we're doing is building a real base of capabilities, and when we then need to call on our suppliers to increase supply, I think they'll all be willing to step up. We're not gonna single thread anything. We're gonna have multiple suppliers, and part of what I'm spending a lot of time on the road with suppliers is actually convincing them how big this business is and when we'll scale up. It'll be a while before.

Yes. This is Rick.

We're going to.

We're going to grow very quickly.

We're going to keep things under control.

When we go from 17 systems or <unk> systems 25 systems.

I think we will be able to answer your question that we can grow faster.

But we're not going to disappoint, our customers were very focused on delivering on time. So what we're doing is building.

A real base of capabilities.

And when we then need to call on our suppliers to increase supply.

I think they will all be willing to step up we're not going to single thread anything we're going to have multiple suppliers and.

Part of what I'm spending a lot of time on the road with suppliers is actually convincing them how big this business is and when we will scale up so it'll be a while before.

Rick Cohen: I mean, we're on an incredible growth trajectory already with this huge backlog, and just fulfilling the existing customers is gonna be full-time. Once we get the sense that we can fulfill our existing business and grow more, then we'll go even faster.

I mean, we're an incredible growth trajectory already with this huge backlog and just fulfilling the existing customers is going to be full time, but once we get the sense that we can fulfill our existing business and grow more than that then we'll go even faster, yes, I'll just add to that Mark I mean, it's you.

Tom Ernst: Yeah, I'll just add to that, Mark. I mean, it's you know our business well. Each individual system we deploy is a very, very big system, a lot of revenue. When we announce a multi-site win with a customer, that's visibility to a lot of business. It really only takes new customers by the ones or twos per year for us to have an incredible amount of business in front of us.

Our business well.

Each individual system, we deploy as a very very big system a lot of revenue. So when we announce a multi site win with the customer thats visibility to a lot of a lot of business. So it really only takes new customers by the ones or twos per year per year for us to have.

An incredible amount of business in front of us.

Mark Delaney: Thank you.

Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Mike Latimore from Northland Capital. Your line is open.

Thank you.

One moment our next question.

Our next question comes from the line of Mike Latimore from Northland Capital. Your line is open.

Michael Latimore: Great. Thanks very much, Jack. Congrats on the very strong results there. It sounds like you made a ton of progress in terms of, you know, capturing or getting outsourcing partners. Can you provide any sort of, you know, color as to how far into the kinda execution on the outsourcing plans you are? Are we, you know, inning one or two, or are we inning seven or eight here?

Mike Latimore: Great. Thanks very much, Jack. Congrats on the very strong results there. It sounds like you made a ton of progress in terms of, you know, capturing or getting outsourcing partners. Can you provide any sort of, you know, color as to how far into the kinda execution on the outsourcing plans you are? Are we, you know, inning one or two, or are we inning seven or eight here?

Great. Thanks, very much Jack congrats on the very strong results there.

It sounds like you made a ton of progress in terms of.

Capturing organic outsourcing partners.

Can you provide any sort of <unk>.

As to how far into that kind of execution on the outsourcing plans you are are we.

One or two or seven or eight here.

Okay.

Rick Cohen: That's a good one. Baseball, huh? A lot can happen in the ninth inning. I guess the best way to answer your question is, we're very focused. We're very far down the line of making the decision, and what has happened in the last year is, lots of partners who didn't have capacity are now coming back and say, We have capacity. I think we're feeling pretty good. I think we're

That's a good one baseball a lot can happen in the ninth inning.

I would think.

But.

I guess the best way to answer your question is.

We're very focused.

Were very far down the line and making the decision.

And what has happened in the last year is <unk>.

Lots of partners, who didnt have capacity now coming back and say we have capacity. So I think we're feeling pretty good I think we're in the sixth inning and maybe we're ahead by five runs, but we haven't won yet but I think we're.

Michael Latimore: Mm-hmm

Mike Latimore: Mm-hmm

Rick Cohen: ... in the sixth inning, and maybe we're ahead by five runs, but we haven't won yet. I think we're feeling pretty good. We've still got our opening pitcher in, and we're hitting pretty well. I guess the best way to answer it is we're very encouraged by the partnerships that we're able to get.

We're feeling pretty good where so we still got our <unk>.

Our opening picture in and we're hitting pretty well.

So.

I guess the best way to answer it is we're very encouraged by the partnerships that we're able to get.

Michael Latimore: Mm-hmm.

Mike Latimore: Mm-hmm.

Rick Cohen: We're encouraged that the supply chain shortages are declining. We're encouraged by the chips because we were kind of in a startup, we made very good decisions, and I think the partners are also looking for a new avenue for growth. I think we're pretty far along.

We are encouraged that the supply chain shortages are declining we are encouraged by the chips and so because we were kind of in a startup we've made very good decisions and I think the partners are also looking for a new Avenue for growth. So.

I think we're pretty far along.

Michael Latimore: All right. Great. No, it makes sense. I assume you're, in terms of the current year we're in, I assume you're sort of fully scheduled for the year. Are there some unscheduled periods here?

Mike Latimore: All right. Great. No, it makes sense. I assume you're, in terms of the current year we're in, I assume you're sort of fully scheduled for the year. Are there some unscheduled periods here?

Alright, great.

Sure.

I assume you are in terms of the current year were sitting here sort of fully is scheduled for the year I guess.

All the carriers here.

Rick Cohen: We're fully scheduled.

We're fully scheduled.

Michael Latimore: Got it. Just last one, is there any inherent seasonality, you know, like in the Q4, just given holidays, or should we not think of that?

Mike Latimore: Got it. Just last one, is there any inherent seasonality, you know, like in the Q4, just given holidays, or should we not think of that?

Got it.

Last one.

Is there any inherent seasonality.

December quarter, just given holidays or should we not think of that.

Rick Cohen: Yeah, I was just talking to somebody today in the construction space, and the good thing is we're already building everything we're doing in existing warehouses for the most part. There's no weather-related, and there really is no seasonality-related to what we're doing. What happens with our projects is, starting probably in the summer, people make space available, and then we're just building in that space. They've already made the decisions within a facility to give us space well before the holidays. It's not very seasonal at all.

Yes, I was just talking to somebody today in the construction space and.

The.

The good thing is we're already we're building everything we're doing in existing warehouses for the most part and so there is no weather related and there really is no seasonality related to what we're doing what happens with our projects is starting probably in the summer people make space available and then we're just building in that space. So.

They've already made the decisions within a facility to give us space well before the holiday. So it's not very seasonal at all.

Michael Latimore: Okay, great. Thank you very much.

Mike Latimore: Okay, great. Thank you very much.

Okay great.

Very much.

Operator: One moment for our next question. Our next question comes from the line of Brian Gesuale from Raymond James. Your line is open.

Our next question.

Our next question comes from the line, Brian <unk> from Raymond James Your line is open.

Tom Ernst: Yeah, good evening. Thanks for taking my questions here. Just a couple. I wanted to maybe ask about BreakPack, when we might start to see some of those systems get deployed.

Brian Gesuale: Yeah, good evening. Thanks for taking my questions here. Just a couple. I wanted to maybe ask about BreakPack, when we might start to see some of those systems get deployed. Also maybe wondering if some of the step-up in R&D and costs incurred there are innovations on that front, and maybe just how we can think about the length of time for these systems to deploy versus a regular system. Thank you.

Yes, good evening.

Thanks for taking my questions here.

A couple I wanted to maybe ask about break pack.

When we might start to see some of those systems get deployed also maybe wondering if some of the step up in R&D and cost incurred there are innovations on that front.

Brian Gesuale: Also maybe wondering if some of the step-up in R&D and costs incurred there are innovations on that front, and maybe just how we can think about the length of time for these systems to deploy versus a regular system. Thank you.

Maybe just how we can think about the length of time.

These systems to deploy versus irregular system. Thank you.

Tom Ernst: BreakPack is a system I know we've talked about at our Analyst Day that we see as a game changer in the industry. You know, as you know, Brian, this is something that really enables us to get in and handle at the individual item level, including mixed item totes. It's a game changer for the customers. We are in a live proof of concept deployment of a system with the customer. You know, we haven't talked about when we expect that to turn into product that we intend to ship and make generally available to customers over and over again. That's something still to look forward to, but it is something we're excited about.

So break pack is a system that we've talked about we talked about at our analyst day that we see as a game changer in the industry.

As you know Brian this is something that really enables us to get in and handle at the individual each level.

Including mixed each totes, it's game changing.

<unk> for the customers.

In a live proof of concept deployment of our system with the customer.

We haven't talked about when we expect that to turn into a product that we intend to ship and make generally available to customers over and over again, so thats thats something thats still something to look forward to but it is something we're excited about.

Tom Ernst: Yes, it does make up a significant level of our R&D investment. You know, that was the case last year. We continue to make investments in R&D on BreakPack as we think about fiscal 23 as well.

Yes. It does it does make up a significant.

Level of R&D investment.

<unk> and <unk>.

We that was that was the case last year, we continue to make investments in R&D on brake pad, because we think about fiscal 'twenty three as well.

Brian Gesuale: Fantastic. That's great color. I guess maybe can we just talk about give us a little bit of sense for systems to be completed this year. I think you had about 5 in the Q4 of last year. Many of these, so you've got like a year under your belt. I think we're on kind of an 18-month kind of deployment cycle. Can you maybe just talk about what you're seeing as the supply chain eases in terms of that 18 months, and how we might see some of these systems kind of get over their delivery milestones? Thank you.

Fantastic that's great color and then I guess, maybe can we just talk about give us a little bit of sense for CIS.

Systems to be completed this year I think you had about five in the queue Q4 of last year. So many of these so you've got like a year under your belt I think we are on kind of an 18 month kind of deployment cycle.

Can you maybe just talk about what Youre seeing is the supply chain eases in terms of that 18 months and how we might see some of these systems kind of get over their delivery milestones. Thank you.

Tom Ernst: Yeah. Brian, I think you know, our goal is to continue to start deployments of new systems and complete deployments of systems each and every quarter. You should expect that there will be some variability on a quarter-in/quarter-out basis on that. But as you think about, you know, on the annual basis, our goal is to continue to ramp and grow this business, you know, year on year, full year. Looking for growth.

Yes, Brian I think our goal is to continue to to start deployments of new systems and complete deployments of systems. Each and every quarter you should expect that there will be some variability on a quarter in quarter out basis on that.

But as you think about.

On the annual basis, our goal is to continue to ramp and grow this business.

Year on year.

Full year or so.

Looking for growth.

Brian Gesuale: Great, I appreciate it. I'll jump back in the queue, guys.

Great I appreciate it I'll jump back into queue guys.

Tom Ernst: Thank you.

Thank you.

Operator: One moment for our next question. Our next question comes from line of Derek Soderberg from Cantor. Your line is open.

One moment for our next question.

Our next question comes from the line of Derek Soderberg from Cantor Your line is open.

Derek Soderberg: Hey, guys. Thanks for taking my questions, and my congrats on the strong results as well. I know you guys have talked about initiatives around shrinking the deployment timeline. I'm curious to what extent did, you know, any progress there in shrinking that deployment timeline have an impact on the upside this quarter? And then can you sort of share in terms of, maybe months or days, how long it takes for a new deployment win today, to reach live production? And then I have a follow-up.

Hey, guys. Thanks for taking my questions and my congrats on the strong results as well I know you guys have talked about initiatives around shrinking the deployment timeline.

I'm curious to what extent did any progress there in shrinking that deployment timelines have an impact on the upside this quarter.

And then can you sort of share in terms of maybe months or days, how long it takes for a new deployment wind today to reach live production and then I have a follow up.

Tom Ernst: Yeah. Thanks, Derek. We did benefit from seeing some acceleration in our ability to deploy. You know, part of that is just getting some relief on supply chain challenges, and part of it is just we're getting more at bats from, you know, the first wave of systems which naturally you'd expect took us longer than they should as we get going. Yes, we saw acceleration. That was a continuation of a trend we saw in Q3. You know, that's something that we're focused on continuing to drive in the near term. As we think systemically, both through product innovation along with our overall approach with partners, putting in systemic capabilities that can help us really improve that over the long run.

Yes. Thanks, Derrick So we did we did benefit from seeing some acceleration in our ability to deploy.

Part of that is just getting some relief on supply chain challenges and part of it is just.

We're getting more at bats from the first wave of systems, which which naturally you would expect.

It took us it took us longer than they should as we get going so but yes. We saw acceleration that was a continuation of a trend we saw in the third quarter.

And that's something that we're focused on.

Continuing to drive in the near term and as we think systemically.

Both through product innovation, along with our overall approach with partners, putting in and systemic <unk>.

Capabilities that can help us really improve that over the long run.

Tom Ernst: You know, we're still seeking for an average deployment to be in that year and a half-ish type of range here in this first wave of our business as we're rolling out. You know, we can look to drive that lower and set faster targets when it's appropriate, but you know, around that timeframe is still our current process.

Our average we're still seeking for an average deployment to be in that year and a half ish type of range here in this in this first wave of our businesses, we are rolling out and.

We can.

To drive that lower and set lower.

Faster targets, when it's appropriate but around that time frame is still our current our current process.

Derek Soderberg: Got it. That's helpful. As my follow-up, was there any systems revenue associated with the five new deployments this quarter? Just wondering if you could maybe give us some detail on, you know, how long it takes from initiating a new deployment to you guys seeing the first revenue from those projects. Thanks.

Got it that's helpful and then as my follow up was.

There any systems revenue associated with the five new deployments this quarter.

Just wondering if you could maybe give us some detail on how long it takes from initiating a new deployment you guys seeing first revenue from those projects.

Tom Ernst: When we initiated the new deployment, revenue starts as the work starts. You know, typically it's small. Yes, our revenue is generated as work is progressed across system deployments from the start of the early build phase through the end of the test and validation phase. Strong majority of revenue comes in the bulk of the installation, commissioning, test, and validation of the product, though.

When we initiated the deployment revenue was starts as the work starts so.

Typically typically it's small.

But yes, our revenue is generated as work has progressed across system deployments from the start of the early build phase three.

Through that end of the test and validation phase.

A strong majority of revenue comes.

In the bulk of the debt installation Commission test and validation of the product though.

Derek Soderberg: Great. Thanks.

Great. Thanks.

Operator: Thank you.

Tom Ernst: Thank you, Derek.

Keith Thank you Derrick.

Operator: Our last question comes from line of Robert Mason from Baird. Your line is open.

And our last question offline, Rob Mason from Baird. Your line is open.

Brian Gesuale: Yes, good evening. My question was actually around the new customer announcement. You had mentioned that you are signed to deploy in five new distribution centers, but I recall, you know, currently you deployed sometimes multiple systems in a distribution center. Is that going to be the case with UNFI as well?

Rob Mason: Yes, good evening. My question was actually around the new customer announcement. You had mentioned that you are signed to deploy in five new distribution centers, but I recall, you know, currently you deployed sometimes multiple systems in a distribution center. Is that going to be the case with UNFI as well?

Yes, good evening.

My question was actually around.

The new customer.

Now spent.

You had mentioned that you saw.

Signed to deploy in five new distribution centers, but I recall currently you deployed sometimes multiple systems.

The distribution center was is that going to be the case with UNFI as well.

Tom Ernst: We didn't disclose how many phases a customer does. You're right, Rob, that it's often common for us that a customer will take

So.

Tom Ernst: We didn't disclose how many phases a customer does. You're right, Rob, that it's often common for us that a customer will take a multiphase deployment in the distribution center. Our announcement with UNFI was that we will do five distribution centers of theirs with an option to do more.

We don't we didnt disclose how many phases the customer does you're right Rob that it's often common for us that a customer will take multi phased deployment in a distribution center.

Tom Ernst: A multiphase deployment in the distribution center. Our announcement with UNFI was that we will do five distribution centers of theirs with an option to do more.

Our announcement with UNFI was that we will do five distribution centers of theirs with an option to do more.

Robert Mason: Any, you know, color, Tom, that you can provide just on how you mentioned in the press release they currently have automation in a number of their DCs. Just where you're deploying these, what, you know, the current, you know, system of operation looks like in the distribution center. Are you know, is this a manual warehouse converting to automation, or are they converting existing automation to yours?

Rob Mason: Any, you know, color, Tom, that you can provide just on how you mentioned in the press release they currently have automation in a number of their DCs. Just where you're deploying these, what, you know, the current, you know, system of operation looks like in the distribution center. Are you know, is this a manual warehouse converting to automation, or are they converting existing automation to yours?

Any color Tom that you can provide just on how.

They mentioned and you mentioned in the press release. They currently have automation in a number of their Dcs, just where youre deploying these what.

The current.

System.

Of operation it looks like in the distribution center.

Is this a manual warehouse converting to automation or are they converting existing automation tier.

Tears.

Tom Ernst: They're manual warehouses with some limited automation.

Their manual warehouses with some limited automation.

Matt Summerville: Yes, some common typical conveyance-based mechanization.

Rick Cohen: Yes, some common typical conveyance-based mechanization.

Some common typical conveyance based mechanization.

Robert Mason: I see. Okay. Very good. Thank you.

Rob Mason: I see. Okay. Very good. Thank you.

I see okay very good thank you.

Matt Summerville: Thank you, Rob.

Rick Cohen: Thank you, Rob.

Thank you Rob.

Operator: Thank you. Now, I'd like to turn the conference back to Jeff for any closing remarks.

Thank you and I would now like to turn the conference back to Jeff for any closing remarks.

Jeff Evanson: Thank you, Victor. Thank you everyone for joining our call tonight. We appreciate your interest in Symbotic, and we look forward to seeing you at conferences or on our facility tours or virtually, over the next quarter. Goodbye.

Thank you Victor Thank you everyone for joining our call Tonight. We appreciate your interest and symbiotic and we look forward to seeing you at conferences or on our facility tours or virtually.

Over the next quarter Goodbye.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.

And this concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.

Operator: To raise your hand during Q&A, you can dial star one one.

The conference will begin shortly to raise your hand during Q&A you can dial one one.

Operator: To raise your hand during Q&A, you can dial star one one.

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Q4 2022 Symbotic Inc Earnings Call

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Earnings