Q2 2024 Symbotic Inc Earnings Call

Yeah.

Operator: Good day, and thank you for standing by. Welcome to the Symbiotic Second Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode.

Good day, and thank you for standing by welcome to the symbiotic.

Quarter.

2024 financial results conference call.

At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.

Operator: 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Jeff Evanson, Vice President of Investor Relations. Please go ahead.

I'll ask a question during the session you will need to press star one one on your telephone you.

We'll then hear an automated message advising your hand is raised to withdraw your question. Please press star one again.

Please be advised that today's conference is being recorded I would now like to turn the conference over to your speaker for today, Jeff Evenson, Vice President of Investor Relations. Please go ahead.

Jeff Evanson: Thank you, Lisa. As a reminder, some of the statements that we make today regarding our business operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. However, actual results could differ materially.

Jeff Evanson: Thank you Lisa.

Jeff Evanson: As a reminder, some of the statements that we make today regarding our business operations and financial performance may be considered forward looking.

Jeff Evanson: Statements are based on current expectations and assumptions and are subject to a number of risks and uncertainties.

Results could differ materially.

Jeff Evanson: Please refer to our forms 10-K and 10-Q, including the risk factors. We undertake no obligation to update any forward-looking statements. In addition, during this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP-to-GAAP measures is included in today's earnings release, which is distributed and available to the public through our investor relations website located at ir.symbiotic.com. On today's call, we are joined by Rick Cohen, Symbiotics Founder, Chairman, and Chief Executive Officer, and Carol Hibbard, Symbiotics Chief Financial Officer. These executives will discuss our second quarter fiscal 24 results and our outlook, followed by Q&A. Rick?

Please refer to our forms 10-K, and 10-Q, including the risk factors.

Jeff Evanson: <unk> no obligation to update any forward looking statements.

Jeff Evanson: In addition, during this call we will present, both GAAP and non-GAAP financial measures.

Jeff Evanson: A reconciliation of non-GAAP to GAAP measures is included in today's earnings release, which is distributed and available to the public through our Investor Relations website located at IR Dot symbiotic dot com.

Jeff Evanson: On today's call. We are joined by Rick Cohen, <unk>, founder, Chairman and Chief Executive Officer, and Carol Hebard, Synbiotics Chief Financial Officer.

These executives will discuss our second quarter fiscal 2004 results and our outlook.

Jeff Evanson: Q&A.

Jeff Evanson: Rick.

Richard B. Cohen: Thank you, Jeff. Good afternoon, and thank you for joining us to review our most recent results. Our second quarter reflects solid financial progress. At the same time, we accelerated the pace of innovation significantly during the quarter. We will discuss some of our recent innovations at our Investor Day on May 9th. You can sign up for the webcast on the IR page of our website.

Richard B. Cohen: Thank you Jeff Good afternoon, and thank you for joining us to review our most recent results are.

Richard B. Cohen: Our second quarter reflects solid financial progress at the same time, we accelerated the pace of innovation significantly during the quarter.

Speaker Change: We will discuss some of our recent innovations at our Investor day on May nine.

Speaker Change: You can sign up for the webcast on the IR page of our website.

Richard B. Cohen: Key innovations this quarter include advancing our core technologies in artificial intelligence and automation; improving system performance and the customer experience; Enhancing safety; and Accelerating Deployment. I'd like to quickly highlight some important software improvements made this quarter. First, we improved our time-space reservation routing algorithm. This allowed us to more than double transfer debt capacity and boost spot density, which helps to increase throughput and system capacity. Additionally, we transitioned our code base to a microservices architecture for increased modularization. This enables more efficient coding, evolution, and support. Finally, on the hardware side, with the addition of a new AI chip, we have increased the computational power of Symbiote.

Speaker Change: Key innovations this quarter, including advancing our core technologies and artificial intelligence and automation.

Speaker Change: Improving system performance and the customer experience enhancing safety and accelerating deployment.

Speaker Change: Okay.

Speaker Change: I'd like to quickly highlight some important software improvements made this quarter.

Speaker Change: We improved our time space reservation routing algorithms. This allowed us to more than double transfer debt capacity and boost spot density, which helps to increase throughput and system capacity.

Speaker Change: We transitioned our code base to a micro services architecture for increased module the realization.

Speaker Change: This enables more efficient coding evolution and support.

Speaker Change: Finally on the hardware side with the addition of a new AI chip, we have increased the computational power of <unk>.

Richard B. Cohen: This higher compute power is key to unlocking more of the value of artificial intelligence across the entire sabotage. This quarter, we also wrapped up the restructuring and outsourcing of our manufacturing operations and standardized on the SimBot for all future deployments. This summer, we will begin the installation of our second break-pack solution with an undisclosed customer. We're excited about the potential of this application as we continue to evolve the technology, knowing it has the capability to become an important part of an integrated omni-channel warehouse solution that services wholesale, retail, and e-commerce channels with both case and parcel handling capacity. Greenbox recently signed their first logistics as a service customer, and issued a related order for a Symbiotic system all within this quarter, so Symbiotic will begin recognizing initial green box revenue in fiscal Q3.

This higher compute power is key to unlocking more of the value of artificial intelligence across entire subarctic system.

This quarter, we also wrapped up the restructuring it outsourcing of our manufacturing operations and standardized on the sandbox for all future deployments.

This summer we will begin the installation of our second break pack solution with an undisclosed customer.

Speaker Change: We are excited about the potential of this application as we continue to evolve the technology.

It has the capability to become an important part of an integrated Omnichannel warehouse solutions the services wholesale retail and e-commerce channels with both case and each handling capacity.

Speaker Change: Green box recently signed their first logistics as a service customer and issued related order for a symbiotic system all within this quarter. So symbiotic will begin recognizing initial green box revenue in fiscal Q3, great.

Richard B. Cohen: Greenbox will automate and operate a brownfield warehouse for CNS Wholesale Grocery. Partnering with Greenbox allows CNS to accelerate its transition to an autonomous supply chain in a capital efficient way. I'm excited that the CNS team saw the benefits of outsourcing with Greenbox. The Graybox team is currently evaluating locations across the US for these. Finally, while SoftBank team members have been performing much of the operational work at Greenbox, the initial hiring for a Greenbox management team has started.

Speaker Change: Green box will automate and operator, brownfield warehouses CNS wholesale growth.

Speaker Change: Partnering with Green box allows CNS to accelerated transition to autonomous supply chain in a capital efficient way I'm excited that the CNS team saw the benefits of outsourcing with Green box.

Speaker Change: <unk> team is currently evaluating locations across the U S. For these sites finally, while Softbank team members have been performing much of the operational work in Green box and initial hiring for our Green <unk> management team has started.

Richard B. Cohen: We expect to be able to announce our first hires in the next several months. To wrap up, we will continue to innovate, execute, and scale to deliver for our customers as we grow and drive increased profitability. I want to thank our entire team for their excellent work. Now Carol will discuss our financial results and outlook.

Speaker Change: We expect to be able to announce our first hires in the next several months.

To wrap up we will continue to innovate execute and scale to deliver for our customers as we grow and drive increased profitability.

Speaker Change: I, thank our entire team for their excellent work this quarter.

Speaker Change: Now Carol will discuss our financial results and outlook Daryl.

Carol J. Hibbard: Thank you, Rick. Second quarter revenue grew to $424 million, up 59% compared to the same quarter last year. Strong revenue growth is driven by significant progress across our 37 systems in the process. During the second quarter, we initiated three new system deployments and completed three systems, bringing us up to 18 fully operational. As indicated on our last call, systems start stabilized in the second quarter as the team focused on implementing the innovations that Rick just mentioned and Enhanced System Standardization for Phased Deployment.

Carol J. Hibbard: Rick second quarter revenue grew to $424 million up 59% compared to the same quarter last year.

The strong revenue growth was driven by significant progress across our 37 systems in the process of deployment.

Carol J. Hibbard: During the second quarter, we initiated three new system deployments and completed three systems, bringing us up to 18 fully operational system.

As indicated on our last call system start to stabilize in the second quarter as the team focused on implementing the innovations that Rick just mentioned and.

Carol J. Hibbard: An enhanced system standardization for Ace deployments.

Carol J. Hibbard: We expect quarterly system starts to accelerate during the rest of the quarter, so this quarter, our revenue numbers reflect that significant revenue growth can be driven by our ability to accelerate deployments in progress. And just as important, reductions in system deployment time create capacity to support future customers. Our backlog of committed contracted orders of $22.8 billion declined due to the revenue recognized during the quarter.

Carol J. Hibbard: We expect quarterly system starts to accelerate during the rest of the year.

Carol J. Hibbard: This quarter, our revenue numbers reflect a significant revenue growth can be driven by our ability to accelerate deployments in progress and just as important reductions in system deployment time create capacity to support future customer demand.

Our backlog of committed contracted orders of $22 8 billion declined due to the revenue recognized during the quarter.

Carol J. Hibbard: Our combined recurring revenue streams grew 85% sequentially and 145% year-on-year, reflecting the increase in the number of completed projects. Overall, non-GAAP gross margin was down slightly from last quarter, but still better than it. Innovations we deployed during the second quarter weighed upon system gross margin, but were largely offset by effective cost management and solid project execution. System Adjusted Gross Margin remains stable at 20% and generally in line with last. As usual, our system gross margin also reflects the burden of pass-through costs and lower margin innovation projects that weigh on a reported gross. Our combined recurring revenue streams contributed to positive adjusted gross profit.

Carol J. Hibbard: Our combined recurring revenue streams grew 85% sequentially and 145% year on year, reflecting the increase in the number of completed systems.

Carol J. Hibbard: Overall non-GAAP gross margin was down slightly from last quarter, but still better than expected.

Carol J. Hibbard: The innovations we deployed during the second quarter weighed upon system gross margin, but were largely offset by effective cost management and solid project execution.

Carol J. Hibbard: System adjusted gross margin remained stable at 20% and generally in line with last quarter.

Carol J. Hibbard: As usual our system gross margin also reflects the burden of pass through costs and lower margin innovation projects that way on a reported gross margin.

Carol J. Hibbard: Our combined recurring revenue streams contributed to positive adjusted gross profit.

Carol J. Hibbard: This demonstrates the high leverage in our business model, showing that we can be profitable with a small number of active sites generating recurring revenue while also being invested in the much larger number of systems still in deployment. As I said last quarter, we do not expect gross margin to improve every quarter, but we do expect gross margin to improve each year well into our future. We expect that as we scale over time, combined recurring gross margins can trend to open.

Carol J. Hibbard: This demonstrates the high leverage in our business model showing that we can be profitable with a small number of active sites generating recurring revenue, while also being invested for the much larger number of systems still in deployment.

Carol J. Hibbard: As I said last quarter, we do not expect gross margin to improve every quarter, but we do expect gross margin to improve each year well into our future.

Carol J. Hibbard: We expect that as we scale over time combined recurring gross margins concerned to over 60%.

Carol J. Hibbard: Operating leverage improved again sequentially as we achieved a 5.3% adjusted EBITDA rate compared to a 3.8% rate last year. This was driven by rapid revenue growth and gross margin expansion along with stable operating. As Rick indicated, we completed restructuring related to outsourcing bot assembly and component inventory management, including standardizing SimBot as our go-forward platform. As a result, we recognize a non-GAAP restructuring charge of $34 million, which is cash and equivalents, including marketable securities, for $276 million sequentially. 951.

Operating leverage improved again sequentially as we achieved a five 3% adjusted EBITDA rate compared to a three 8% rate last quarter.

Carol J. Hibbard: This was driven by rapid revenue growth and gross margin expansion along with stable operating expense.

Carol J. Hibbard: As Rick indicated we completed restructuring related to outsourcing <unk> Assembly and component inventory management, including standardizing Simba as our go forward platform.

Carol J. Hibbard: As a result, we recognize the non-GAAP restructuring charge of $34 million in the quarter.

Carol J. Hibbard: Our cash and equivalents, including marketable securities grew to $276 million sequentially to $951 million free.

Carol J. Hibbard: Free cash flow, defined as cash flow from operating activities of $21 million, less capital expenditures of $3 million, with $18 million, and better than expected during the quarter. In addition, we raised $258 million from our February follow-on offering, which gives us the flexibility to maintain our aggressive pace of innovation in a variety of areas, including non-ambient systems development. As expected, stock-based compensation was elevated due to the January vesting that occurred.

Carol J. Hibbard: Free cash flow defined as cash flow from operating activities of $21 million less capital expenditures of $3 million was $18 million and better than expected during the quarter.

Carol J. Hibbard: In addition, we raised $258 million from our February follow on offering which gives us the flexibility to maintain our aggressive pace of innovation in a variety of areas, including non ambient systems development.

Carol J. Hibbard: As expected stock based compensation was elevated due to the January investing that occurs each year. In fact, Q2 will usually be the quarter with the highest stock based comp every year.

Carol J. Hibbard: In fact, Q2 will usually be the quarter with the highest stock base comp ever. For the third quarter of fiscal 2024, we expect revenue of $450 million to $470 million and adjusted EBITDA between $27 and $29. This represents revenue growth of over 47% and an adjusted EBITDA margin. We now welcome your questions. Operator, please begin the Q&A. Thank you.

Carol J. Hibbard: For the third quarter of fiscal 2024, we expect revenue of $450 million $470 million and adjusted EBITDA between 27% and $29 million.

Carol J. Hibbard: This represents revenue growth of over 47% and an adjusted EBITDA margin increase.

Speaker Change: We now welcome your questions.

Speaker Change: Operator, please begin the Q&A.

Operator: As a reminder, if you would like to ask a question, please press star 1 1 on your telephone. We also ask that you wait for your name and company to be announced before you proceed with your question. One moment for the first question. The first question that we have is coming from Andy Koplowitz of Citi. Your line is open. Good afternoon, everyone. Hello, Andy. Hi, Rick.

Speaker Change: Thank you as a reminder, if you would like to ask a question.

Speaker Change: Please press star one on your telephone.

Speaker Change: We also ask that you wait for your name and company to be announced before you proceed with your question.

Speaker Change: One moment for the first question.

Operator: I know you said in the release that you made significant advances in terms of your innovation roadmap. So, let me give a little more color on what that means. I know you mentioned on the call already better software and the new AI chip. I'm sure you want to save much of this for the investor today. But did you, for instance, further accelerate the deployment time? It seems like break-pack revenue could come faster than expected. Maybe you can elaborate a little bit more on what you did in the quarter. Sure, Andy.

Speaker Change: The first question that we have is coming from Andy Kaplowitz of Citi. Your line is open.

Andrew Alec Kaplowitz: Good afternoon, everyone.

Andrew Alec Kaplowitz: Hello, Randy.

Andrew Alec Kaplowitz: Rick I know you said in the release that you made significant advances in terms of the innovation Road maps. So let me give a little more color into what that means I know you mentioned on the call already better software the new AI Chip I'm sure you want to say much of this for the Investor day, but did you for instance, further accelerate deployment time, it seems like brake pad revenue could come statutes.

Andrew Alec Kaplowitz: Maybe you can elaborate a little bit more on what you what you did in the quarter.

Richard B. Cohen: Sure Andy so.

Richard B. Cohen: So, we've been working on this for about three years now, but putting vision on our bond, and that combined with video chips that we're using, allows us to recognize boxes that may be deformed but still recognize what the product is. And so that makes our bots much more able to pick irregular cases. And as you know, we're one of the only people, maybe the only company, that puts our bots directly on shelves. We don't put them on trays.

We've been working on this for.

Richard B. Cohen: About three years, now, but putting vision on our bonds.

Richard B. Cohen: And that combined with.

Richard B. Cohen: Nvidia chips that we're using.

Richard B. Cohen: Allows us to recognize box.

Richard B. Cohen: Boxes that may be deformed.

Richard B. Cohen: But still recognize what the product is.

Richard B. Cohen: And so that makes our.

Richard B. Cohen: It's much more able to uptick irregular cases, and as you know we're one of the only people maybe the only one that puts our box directly on shelves. We don't put them entrees that requires a lot of expertise and a lot of knowledge and so we've been on this journey for a while.

Richard B. Cohen: That requires a lot of expertise and a lot of knowledge. And so we've been on this journey for a while. And now about 40% of our bots in our network are vision-enabled, and so there's a lot of work for the AI to catch up on recognizing 1,000 different pictures of a single box and saying, "Oh, that's XY's product." And the shape? I didn't recognize it before because we were just using sensors.

Richard B. Cohen: Now about 40% of our bonds and our network.

Richard B. Cohen: Our vision enabled.

Richard B. Cohen: So theres a bunch of work for the AI to catch up with recognizing a 1000 different pictures of a single box and say Oh, that's <unk>.

Richard B. Cohen: <unk> product.

Richard B. Cohen: And the shape I didn't recognize it before because we were just using sensors, but now with vision, we can actually recognize that so thats one thing.

Richard B. Cohen: But now, with vision, we can actually recognize that. So that's one thing. The other thing we did is that we changed the routing algorithms for our bots, and they will also be vision-enabled so that they're more reliable, so that if something happens, like a bot gets stuck on, or something breaks, or a case breaks, or something happens, we can now run around it. And we could do that a little bit, but now we can do it much better.

Richard B. Cohen: Other thing we did is that we.

Change the routing algorithms for our bonds and they will also be vision enabled so that they have.

Richard B. Cohen: More reliable so that if something happens like a bond gets stuck on.

Richard B. Cohen: And then to be able to actually see the bot in front of us is also innovative. The other thing we've done is start work on perishable testing, and we think that's going to go fairly well because there's not a lot of new things we have to do with perishables, but we want to test what happens when a bot runs over yogurt, so things like that. And then the next thing after that will be testing bots in a frozen environment. So those are a couple of things we've been doing. And Andy.

Richard B. Cohen: Our broken a broken case or something that we can now right around it and we always can do that a little bit but now we can do it much better and then to be able to actually see the bought in front of US is also innovative the other thing we've done.

Richard B. Cohen: Is.

Richard B. Cohen: We have started work on.

Richard B. Cohen: Perishable.

Richard B. Cohen: Testing and so we think thats going to fairly well because theres not a lot of new things, we have to do on perishables, but we want to test.

Richard B. Cohen: What happens when a bot runs over yogurt, so things like that and then the next thing after that we'll be testing bots on a frozen environment.

Richard B. Cohen: So those are a couple of things we've been doing.

Richard B. Cohen: Yes.

Richard B. Cohen: Yeah. I was going to say I'll tackle the accelerated deployment time. So last quarter, we highlighted that we had achieved our first "Employment in 20 Months." So this quarter, out of the three systems that we deployed, we had several that also achieved a 20 month deployment time. So we're, we've definitely got some additional proof.

Speaker Change: I was going to say I'll tackle the accelerated deployment times. So last quarter. We highlighted that we had achieved our first deployment in 20 months. So this quarter out of the three systems that we deploy we had several that also achieved the 20 months deployment time so.

Speaker Change: We've definitely got some additional proof points and as a reminder, some of the things that are enabling that faster deployment, we're seeing benefit of continuous learning over multiple deployments from our supply chain as well as our own folks.

Richard B. Cohen: And as a reminder, some of the things that are enabling that faster deployment. We're seeing the benefit of continuous learning over multiple deployments from our supply chain, as well as our own folks. We've got increased collaboration between ourselves and our customers. And then we talked quite a bit last quarter about quality and standardization to build on build instructions and our test procedures, and we're seeing the benefit of all of that.

Speaker Change: Got increased collaboration across ourselves and our customer.

Speaker Change: And then we talked quite a bit last quarter about the quality and the standardization that build on bill's instructions and our test procedures, we're seeing the benefit of all of that so going forward. We do have some straggler deployment for a column that will complete in the second half of this year that might take a little bit longer than that 20 months.

Richard B. Cohen: So going forward, we do some straggler deployments, I'll call them, that will complete the second half of this year that might take a little bit longer than that 20 months because each deployment is not the same size or complexity, but we're still on target for the future to have a number of opportunities that we see driving deployment time. Very helpful. And then, you know, another pretty big update on the green box side. So maybe you can talk about that.

Speaker Change: Does each deployment is not the same size or complexity, but we're still on target for the future to have a number of opportunities that we see driving deployment time less than 12 months.

Richard B. Cohen: I mean, you've been expecting your first customer, I think, this year, but, you know, starting in Q3. So, do you see an acceleration there from here? Do you focus on this customer?

Speaker Change: Very helpful and then another pretty big update on the Green box side. So maybe you can talk about that I mean, <unk> been expecting your first customer I think this year, but starting in Q3. So do you see an acceleration there from me here.

Speaker Change: The focus on this customer or is it like how does that work moving forward.

Richard B. Cohen: Like, how does that work moving forward? Yeah, so we'll have our first deployment CNS is going to use GreenBox to build a facility. Unknown Speaker I think when people then reach out to us, they'll reach out to Greenbox or reach out to CNS and say why did you make that decision, and it's everything that we've been saying. It's capital efficient, it allows people to get into automation quicker, and it allows CNS believes we'll have higher customer satisfaction using Rainbox than using a conventional warehouse.

Speaker Change: Yes so.

Speaker Change: We'll have our first deployment CNS is.

Speaker Change: Is is got to use green box to build a facility.

Speaker Change: For them.

Speaker Change: When people will then reach out to us they'll reach out to green box or reach out to CNS and say why did you make that decision and it's everything that we've been saying it's capital efficient it allows people to get into automation quicker and it allows.

Speaker Change: CNS believes we will have higher customer satisfaction, using green box and using a conventional warehouses.

Richard B. Cohen: And then we're the other thing we are. We are looking at sites across the country right now to put up additional sites. So we're feeling very bullish that if we build it, they'll come, and SoftBank's aligned with that. So we're excited about that.

And then whereas the other thing we are we are looking at sites across the country right now to put up additional sites.

Speaker Change: So we're feeling.

Speaker Change: Very bullish that if we build it they will come and Softbank is aligned with that so we're excited about that.

Speaker Change: I appreciate the color.

Operator: Thank you. One moment for the next question, and our next question will be coming from Matt Summerville of D. A. Davison. Your line is open. Thanks. Hey, Ricky, Carol, and Jeff.

Speaker Change: Thank you one moment for the next question.

Speaker Change: And our next question will be coming from Matt Summerville.

Speaker Change: D. A Davidson your line is open.

Matt J. Summerville: Hey, Ricky Carole Jeff.

Operator: I wanted to ask maybe a follow-up question on Greenbox and CNS. Is this a single location that's going to support CNS? And if so, how much of CNS is that actually supporting?

Matt J. Summerville: I wanted to ask maybe a follow up on Green box and CNS is this a single location, that's going to support DNS and if so how much of CNS that actually supporting I guess I'm trying to get an idea of core.

Carol J. Hibbard: I guess I'm trying to get an idea of, is CNS planning on standardizing their warehouse, if you will, on Greenbox? Or is this more of, I guess, more of a proof point that this is, that they want to see if this is the way they kind of want to proceed? I'm trying to understand their bigger picture thinking on strategy here and where this could evolve for you guys. So, Matt, I'll start.

Speaker Change: With CMS planning on standardizing their warehouse if you will on green box or is this more of I guess more of a proof point that this is that they want to see if this is the way they kind of want to proceed I'm trying to understand.

Speaker Change: Bigger picture thinking on strategy here and where this could evolve for you guys.

Speaker Change: So Matt I'll start.

Carol J. Hibbard: So, CNS chose GreenBox as it was looking for ways to accelerate its automation rollout. This is the first proof point, I'll say, for CNS. And as we continue to vet multiple customers, multiple inbound related to GreenBox, we can see potential for additional customers and potentially additional opportunities across CNS. And then with respect to the perishable side of things, what are maybe the two, three, or whatever number it makes sense to talk about; what are the key milestones we should be looking for that we should be waiting to hear about where this perishable is soon, you know, in terms of when that gets green-lighted, that you actually start selling and rolling some of these out? Yeah, I think I think it's probably a year out, my guess

Speaker Change: No.

Matt J. Summerville: CNS chose green box and they're always looking for ways to acceleration accelerated automation rollout.

Matt J. Summerville: This is the first proof point I'll save for CNS and as we continue to that multiple customers multiple inbound related to green box, we can see potential for additional customers and potentially additional opportunities across CNS.

Matt J. Summerville:

Matt J. Summerville: Okay.

Matt J. Summerville: And then with respect to the perishable side of things what are maybe the two three or however, many it makes sense to talk about what are the key milestones we should be looking for that we should be waiting to hear about where this perishable soon in terms of when that gets.

Matt J. Summerville: Green lighted the you actually start.

Matt J. Summerville: And the rolling some of these out.

Speaker Change: Yes, I think I think it's probably a year out is my guess.

Speaker Change: I think those milestones.

Carol J. Hibbard: And I think those milestones are going to be pretty easy to achieve, but the value of our system for our customers is incredible reliability. So, we're actually testing bots running in a structure in a perishable facility now. It's just a test site, but we have a customer that's interested in doing that. And so, we're running, and basically, what you do is you create disaster scenarios, you look for edge scenarios, and you make sure that it's a 32-degree temperature. We're not really talking about frozen yet, but between 32 and 55, a lot of humidity, our bots will work fine.

Speaker Change: Going to be pretty easy to achieve but.

Speaker Change: The value of our system for our customers is incredible reliability. So.

Speaker Change: <unk> testing bonds running infrastructure in our perishable facility.

Speaker Change: Now, it's just a test site, but have a customer that's interested in doing that and so we're running.

Speaker Change: And basically what you do is you create disaster scenarios, we look for edge scenarios and you make sure that a 32 degree temperature, we're not really talking about frozen yet, but between 32, and <unk> 55, Lauder humidity or Boswell work fine and we expect them to but we're doing the testing so I think.

Carol J. Hibbard: And we expect them to, but we're doing the testing. So, I think sometime within the next year, we probably will announce that we have a perishable site somewhere. And I have to be, I can't be too forward-looking, but I would say, but that's actually always been in our project, because it's not in the TAM we've talked about. I mean, the whole perishable world is a big world, and we think there are very special applications for Symbiotic because an ambient building is $100, $125 a foot, and perishable is probably 250, and frozen might be 350

Speaker Change: Some time.

Speaker Change: Within the next year.

Speaker Change: Probably we will announce that we have a perishable site somewhere.

Speaker Change: And I have to be.

Speaker Change: I can't be too forward, looking but but I would say, but that's actually always been in our project because it's not it's not in the Tam we've talked about I mean, the whole perishable world is a big World and we think there is very special applications for symbiotic because the <unk> building.

Speaker Change: 100, 125 Bucks a foot.

Speaker Change: And perishable is probably $2 50, and frozen might be $3 50.

Speaker Change: So the fact that we can store product is densely as we can we think theres a different.

Speaker Change: Algebra for why people will use <unk>.

Perishable, but we want to make sure before we sell a system that we've tested all the edge cases so.

Operator: So the fact that we can store products as densely as we can, we think there's a different algebra for why people will use perishables, but we want to make sure before we sell a system that we have tested all the edge cases. The long answer, the short answer to your question is that about a year from now, you should look for something. Great. Thanks, Rick. Thank you. One moment for the next question, and our next question will be from Mark Delaney of Goldman Sachs. Your line is open. Yes, good afternoon.

Speaker Change: Long answer short answer to your question is about a year from now you should you should look for something from us.

Speaker Change: Great. Thanks, Rick.

Speaker Change: Thank you one moment for the next question.

Speaker Change: And our next question is coming from Mark Delaney of Goldman Sachs. Your line is open.

Operator: Thanks very much for taking the questions. The first one was trying to better understand the revenue per system and installation. It went up a fair amount relative to last quarter.

Mark Trevor Delaney: Yes. Good afternoon, thanks, very much for taking the questions.

Mark Trevor Delaney: First one I was trying to better understand the revenue per system and installation. It went up a fair amount relative to last quarter and Carol you mentioned the progress you've made as a company and accelerating some of the installation times I'm, hoping to better understand how we should think about that ratio going forward and is there.

Carol J. Hibbard: And Carol, you mentioned the progress you've made as a company in accelerating some of the installation times. I'm hoping to better understand how we should think about that ratio going forward and whether there are opportunities to sustain or even build off of this level of revenue compared to the number of systems you have given all the initiatives you have underway.

Mark Trevor Delaney: <unk> to sustain or even build off of this level of revenue compared to the number of systems you have given all the initiatives you have underway.

Carol J. Hibbard: So I think that the number one thing driving what you're seeing on that ratio is where we're at in terms of that deployment lifecycle. So if you think about, we've talked about our revenue curve being the most revenue coming from those systems that are in the middle of installation. And so we'll have varying degrees of that every single quarter. And so it's hard to predict the specific ratio because the other thing that's driving that is each system is not the same size or the same complexity.

Carol J. Hibbard: Yes. Thanks for the question Mark So I think the number one thing driving what youre seeing on that ratio is where we're at in terms of that deployment lifecycle. So if you think about we've talked about our revenue curve being the most revenue coming from those systems that are in the middle of installing so.

Carol J. Hibbard: We'll have a varying degree of that every single quarter and so it's hard to predict the specific ratio because the other thing that's driving that is each system is not the same size or the same complexity and so youll continue to see that vary but as we move forward. Our revenue curve will continue to grow continue to St.

Carol J. Hibbard: And so you'll continue to see that they vary. But as we move forward, our revenue curve will continue to grow, and we will continue to see growth in that revenue. And that will, so that ratio, in terms of what it contributes from a system, will continue to have more than those 37 in deployment at any given time. That's helpful. You know, ties into my next question, would have better understood what completing the restructuring in your shift to an outsource model may mean, not only in terms of, Transcripts provided by Transcription Outsourcing, LLC.

Carol J. Hibbard: Growth in that revenue and that will so that ratio in terms of what it contributes from a system. We will continue to have more than 37 in deployment at any given time.

Speaker Change: That's helpful.

Speaker Change: And similar to my next question could it better understand well completing the restructuring and your shift to an outsourced model may mean, not only in terms of.

Speaker Change: Some of the financial implications lately profit margins, but could you also talk about what it might mean for your capacity in terms of how many systems. The company could have in place relative to the.

Speaker Change: The number of systems that can be working on any one time relative to the 37 that you currently have and installation.

Carol J. Hibbard: Yeah, so this quarter, we focused on completing the outsourcing that we began last year, and it was focused on the complete restructure and focus to move to our SimBot platform. And so I don't necessarily see the connection of how that necessarily drives to the scaling other than we now have a standardized SIMBOT.

Speaker Change: Yes. So this quarter, we focused on completing the outsourcing that we began last year and it was focused on.

Speaker Change:

Speaker Change: That complete restructure and focusing <unk> to our platform and so I don't necessarily see the connection of how that necessarily drives to the.

Speaker Change: Scaling other than we now have a standardized and Bob.

Carol J. Hibbard: We're going to be able to continue to deploy innovations along that SIMBOT, but what we did in terms of restructuring really shut down any additional inventory costs associated with all our obsolete bots. Thank you for your question. One moment for the next.

Speaker Change: We're going to be able to continue to deploy innovations along that same part, but what we did in terms of restructure really shut down any additional inventory costs associated with all our obsolete.

Speaker Change: Understood. Thank you.

Speaker Change: Thank you for your question one moment for the next question.

Operator: Our next question is coming from Nicole DeBlase, of Deutsche Bank. Your line is open. Yeah, thanks. Good afternoon, guys. Hi Nicole.

Speaker Change: Our next question is coming from Nicole to blame.

Nicole: With Deutsche Bank. Your line is open.

Nicole: Yes, thanks, good afternoon guys.

Operator: Hello, I wanted to ask you a couple questions on the financials. So the first thing is that the system's gross margin fell to the low double digits. I think you guys talked about in the opening remarks how that was driven by all of this innovation that you're working on. I guess, how quickly can that gross margin step up to, you know, a high teens or better level? Is that something you expect in the second half, or will these innovation headwinds continue?

Hi, Nicole.

Nicole: Hello, I wanted to ask a couple on the financials. So the first is the systems gross margin fell to a low double digit ads I think you guys talked about in the opening remarks, how that was driven by all of this innovation that you're working on I guess, how quickly cannot gross margin step up too.

Nicole: High teens or better level is that something you expect in the second half for Weldies innovation headwinds continue.

Carol J. Hibbard: So thanks for the question. We did better than expected on gross margins, but, as you indicated, we were stable quarter over quarter. And so there are a couple of items that weigh on our gross margins. So I'll talk about the things that are weighing on those gross margins now and then what we see for the future. So a couple of things are the innovations that we have in work. We talked last quarter about focusing on additional resources to ensure quality deployments for some of those sizable projects we have in flow. We have the benefit on many of our contracts that we have passed through costs.

Speaker Change: Thanks for the question, we did better than expected on gross margin, but as you indicated we were stable quarter over quarter and so a couple of items that weigh on our gross margin. So I'll talk about the things that are weighing on those gross margins now and then what we see for the future.

Speaker Change: A couple of things are the innovations that we have and work we talked last quarter about focusing on additional resources to ensure quality and deployments for some of those sizeable projects, we havent flow.

Speaker Change: The benefit on many of our contracts that we have pass through costs. It's why we're able to pass that through with a profit that remained stable at it weighs on our gross margin.

Carol J. Hibbard: So why are we able to pass that through with a profit that remains stable? Because it weighs on our gross margin. And then lastly, what's weighing on our gross margin is we have several lower margin projects in flow, and I would expect to see those start completing in the second half of this year. And so our 3Q guide reflects stable gross margins. So, as I said, we've got several significant milestones coming up in the second half of the year on some of these big projects.

Speaker Change: And then lastly, what's weighing on our gross margin as we have several lower margin projects and flow and I would expect to see those start completing in the second half of this year.

Speaker Change: And so our <unk> guide reflects stable gross margins.

Speaker Change: So as I said, we've got several significant milestones coming out in the second half of the year on some of these big projects and gross margin will improve every quarter, but we expect improvement in the coming years and that that will step up year over year.

Carol J. Hibbard: Gross margin won't improve every quarter, but we expect improvement in the coming years and that that will step up year over year. And as I mentioned earlier, just in terms of the unlock for gross margin, the single biggest one being the time it takes to deploy our system. And we continue to see steps in the right direction with each one that we're rolling out.

Speaker Change: And as I mentioned earlier, just in terms of the unlock for gross margin. The single biggest one being the time it takes to deploy our system and we continue to see steps in the right direction with each one that we're rolling out.

Carol J. Hibbard: Thanks, Carol. That's clear. And then I guess in the operations services business, we saw a really big step change, like revenue almost doubled sequentially there this quarter. I guess what drove that, and is this new level of revenue in operations services sustainable? Thank you. Yeah, so when you look at the step up, the single biggest driver is we now have 18 systems that are operational. We were at 15 last quarter.

Speaker Change: Got it thanks, Carol that's clear and then I guess on the operation services business, we saw a really big step change like on the revenue almost doubled sequentially. There. This quarter I guess, what drove that and is this new level of revenue and operation services sustainable. Thank you.

Carol J. Hibbard: Now when you compare that to just a year ago, we were at nine. So, a significant step up. You're going to continue to see that grow. And I'll separate software and I'll separate the operations because I think you started with the operations piece of it. We expect operations revenue to continue to grow as we bring systems online, but you will likely not see the same level that you saw this quarter.

Carol J. Hibbard: Yes, so when you look at the step up the single biggest drivers. We've now have 18 systems that went operational we are at 15 last quarter.

Carol J. Hibbard: You compare that to just a year ago, we were at nine so a significant step up.

Carol J. Hibbard: Youre going to continue to see that grow and I'll I'll separate software and I'll separate the operations because I think he started with the operations piece of it we expect operations to operations revenue to continue to grow as we bring systems online you will likely not see the same level that you saw this quarter, we had several one time.

Carol J. Hibbard: We had several one-time events in the quarter that contributed not only to revenue but to our gross profit margin in the operations area. So a few of those you will not see repeat, but you should expect that revenue to continue to grow. Thank you. I'll pass it on.

Carol J. Hibbard: Events in the quarter that were that contributed not only to revenue, but to our gross profit profit in the operations area. So a few of those you will not see repeat but you should expect that revenue to continue to grow.

Speaker Change: Thank you I'll pass it on.

Operator: Thank you for your questions. One moment for the next question. Our next question will be coming from Ken Newman of KeyBank Capital Markets. Your line is open. Hey guys, thanks for taking the question. Hello, can you hear me?

Speaker Change: Thank you for your question one moment.

Speaker Change: Next question please.

Speaker Change: Our next question will be coming from Ken Newman of Keybanc capital markets. Your line is open.

Ken Newman: Hi, guys. Thanks for taking the question.

And maybe just.

Ken Newman: And then can you hear me.

Operator: Yes, we can hear you. Okay, sure. So first question here, I'm just curious, you know, you're obviously talking about accelerating deployments or initiations here into the back half. Is there any way to kind of size how you think about acceleration to the back half? You did three this past quarter. Is it fair to assume that you kind of return to that, call it four or five types of projects in the back half and accelerate, you know, into 2025? And so we don't guide you on system start.

Ken Newman: Yes, we can hear you.

Ken Newman: Okay sure.

Speaker Change: So first question here I'm just curious.

Speaker Change: Obviously, you are talking about accelerating deployment for initiation here into the back half is there.

Speaker Change: Any way to kind of size, how you think about acceleration to the back half you did three this past quarter is it fair to assume that you're kind of return to that call. It four five types of projects in the back half and accelerate into 2025.

And so we don't guide on system starts, but I'll start with where we were this quarter at $3 that we indicated last quarter that we would see stabilization of our system starts that allowed the team to focus on all the innovations that Rick talked about and really implement systems standardization for those phased deployments. So that's what you saw.

Carol J. Hibbard: But I'll start with where we were this quarter at three. So we indicated last quarter that we would see stabilization of our system starts that allowed the team to focus on all the innovations that Rick talked about and really implement system standardization for those phase deployments. So that's what you saw this quarter, and it is a team effort to make a decision to go ahead and implement a new project or a new SAO.

This quarter.

And it is a team effort.

Speaker Change: To make a decision to go ahead and implement a new project, our new sow. So thats a complex decision between ourselves our suppliers and our customers. So our customers also need to manage their operations through all of our installation activities, including decommissioning legacy systems preparing the site. So it's a combined effort when we decide.

Carol J. Hibbard: So that's a complex decision between ourselves, our suppliers, and our customers. So our customers also need to manage their operations through all of our installation activities, including decommissioning, legacy systems, and preparing the site. So it's a combined effort when we decide to go initiate. But given our contracted backlog, at $23 billion, you're going to see the system start ramping up in the second half. Okay, that's helpful.

Speaker Change: To go initiate.

Speaker Change: But given our contracted backlog.

Speaker Change: At $23 billion Youre going to see the systems start to step up in the second half of the year.

Carol J. Hibbard: And then for my second question, you know, I think you had positive free cash flow of just over $18 million this quarter. Is there anything that would prevent you from being free cash flow positive for the full year as it relates to some of the innovation spending that you guys are expecting for the rest of this year or any of the other restructuring actions you might be considering? Yeah, as we look to the end of the year, we're expecting we don't guide on cash either, but you should expect to see positive working capital as we head to the back half of the year.

Speaker Change: Yeah.

Speaker Change: Okay. That's helpful. I appreciate that and then for my second question.

Speaker Change: I think you had positive free cash flow of just over $18 million this quarter.

Speaker Change: Is there anything that would prevent you from being free cash flow positive for the full year as it relates to some of the innovation spending that you guys are expecting for the rest of this year or any of the other restructuring actions you might be considering.

Carol J. Hibbard: Each quarter, there could be some lumpiness, I'll say in that because depending on what maturity level of the systems we have in deployment, just as I described the revenue curve, the cash curve also mirrors that. And so we could have some quarters where we are really heavy in terms of the final installation, and that might be a driver of cash. As a reminder, we're very front loaded in terms of when we sign projects, so you can still see some lumpiness, but we are on a trajectory for positive working capital going forward. Thanks.

Speaker Change: And so as we look to the Anthony here, we're expecting we don't guide on cash either but you should expect to see positive working capital as we head to the back half of the year each quarter, there could be some lumpiness, all saying that because depending on what maturity level of the systems. We have in deployment just as I described there.

Speaker Change: Revenue curve the cash curve also mirrors that and so we could have some quarters, where we are really heavy in terms of the final installation that might be a driver on cash as a reminder, we're very front loaded in terms of when we signed projects. So you can still see some lumpiness, but we are on a trajectory for positive working working capital going forward.

Speaker Change: Thanks.

Operator: Thank you. One moment for the next question. Our next question is coming from Greg Palm on behalf of Craig Hillam. Your line is open.

Speaker Change: Thank you one moment for the next question.

Speaker Change: And our next question is coming from Greg Palm of Craig Hallum. Your line is open.

Operator: Yeah, thanks for taking the questions. I'm curious, you know, we've been talking about driving timelines down for some time, and you've been really successful at doing that. And I'm just curious how much of that is, you know, in your hands versus at the, you know, maybe expense of some of your outsourcing partners? And do you think that reducing the timelines at the expense of margins means that as you continue to get better, you might not need, I don't know, as many folks that are paid overtime or you know, any of the other related costs to ensuring that you have happy customers and get a Yeah, thanks for the thanks for the question.

Gregory William Palm: Yeah. Thanks.

Gregory William Palm: For taking my questions I'm curious you know we've been talking about driving timelines down for some period and you've been really successful at doing that and I'm. Just curious how much of that is in your hands versus at the maybe expense of some of your outsourcing partners do you think that you are reducing the timelines at the <unk>.

Gregory William Palm: <unk> of margins, meaning that as you continue to get better that you might not need on our homes. Many folks that are paid over time or any of the other related costs to ensuring that you have happy customers and get our system in a shorter amount of time.

Carol J. Hibbard: I'll start with the first part in terms of how much is in our hands and versus all of our partners. It is a joint effort, so we're there helping to ensure the management of the project. Symbiotic is also responsible for the planning up front.

Speaker Change: Yes, thanks for thanks for the question.

Speaker Change: I'll start with the first part in terms of how much is in our hands and versus all of our partners. It is a joint effort, so where they're helping to ensure the management of the project symbiotic is also responsible for the planning upfront. So you've got to start the system right and make sure you've got all the planning in place that <unk>.

Speaker Change: Aerial shows up and then all of our partners need to deliver to the schedules that we lay out so it's a combined effort across ourselves and that our customers certainly have a play in that too and just ensuring the readiness.

Carol J. Hibbard: So you've got to start the system right and make sure you've got all the planning in place so that material shows up, and then all of our partners need to deliver on the schedules that we lay out. So we'd say a combined effort between ourselves. And then our customers certainly have a play in that too, just ensuring the readiness. A fair point in terms of the timelines we've achieved, so we have talked about wanting to make sure we're putting the resources on a certain project so that we can deploy on time and make sure we are deploying a very high quality project.

Speaker Change: Fair point in terms of the timelines we've achieved so we have talked about wanting to make sure we're putting the resources.

Speaker Change: On a certain projects so that we can deploy on time and make sure. We are deploying a very high quality project I'd say as you would see us moving towards our going through our learning curve and we continue to learn at every single site installation as do our suppliers youre going to see that will continue to improve that timeline.

Carol J. Hibbard: I'd say as you see us moving towards our, going through our learning curve, and we continue to learn at every single site installation, as do our suppliers, you're going to see that we'll continue to improve that timeline without needing the additional resources to ensure schedule. Yeah, okay, that makes sense.

Speaker Change: Without needing the additional resources to ensure schedule.

Operator: And as we think about, you know, sizing up that non-ambient opportunity, I know you've talked about that, that Tam or that Sam, you know, in the past, but, you know, just given your thoughts around maybe having, you know, some orders or some facilities, can you at least size up what type of share expansion is possible? Like, could you theoretically double the size of the opportunity with some of your current customers? I mean, is it more? Is it significantly less? I'm not expecting an exact answer.

Speaker Change: Yes, Okay that makes sense and as we think about sizing up that non ambient opportunity I know you've talked about that tam or that Sam.

Speaker Change: In the past but.

Speaker Change: Just given your thoughts around maybe having some orders or some facilities can you at least.

Speaker Change: Size up what type of share expansion as possible like could you theoretically double the size of the opportunity with some of your current customers. I mean is it more is it significantly less I'm not expecting an exact answer but it would just be curious to know what that sort of wallet share expansion opportunity is again with your current customers not necessarily.

Operator: But it would just be curious to know what that sort of wallet share expansion opportunity is, again, with your current customers, not necessarily with customers that you haven't won to date with something else. So I'll start, and then Ricchiuti shared his thoughts. So we have not put, you know, a number out there in terms of sizing the TAM from our existing customer base, but we've also indicated that our current backlog does not include that particular.

Speaker Change: With customers that you haven't won to date with something else.

Speaker Change: So I'll start and then Rick can can share his thoughts so we have not but.

And a number out there in terms of sizing that Tam from our existing customer base.

Speaker Change: But we've also indicated that our current backlog does not include <unk>.

Richard B. Cohen: That particular opportunity and we know that each of our customers has the opportunity to go ahead and expand to non ambien and so we consider that a significant opportunity for somebody going forward.

Operator: And we know that each of our customers has the opportunity to go ahead and expand to non-ambient, and so we consider that a significant opportunity for Symbiotico. Yeah, I guess I, I think the table is very large.

Richard B. Cohen: Yes.

Richard B. Cohen: I guess.

Richard B. Cohen: I think the Tam is very large.

Richard B. Cohen: I probably shouldn't be more specific than that right now. There are more ambient facilities than there are refrigerated facilities, so that's one thing. But the economics of refrigeration are such that if you have a 200,000 square foot perishable building, and you want to expand it, and maybe you can't expand it enough, and you have to build a whole new building.

Richard B. Cohen: Probably.

Speaker Change: Shouldnt be more specific than that right now.

Speaker Change: There are more there are more ambient facilities than there are refrigerated facilities. So thats one thing but.

Speaker Change: But.

Speaker Change: The economics.

Speaker Change: Refrigerated.

Speaker Change: Are such that if you have a 200000 square foot perishable building.

Speaker Change: And you want to expand it and maybe you can expand it enough.

Speaker Change: To build a whole new building our system is a very good solution for that.

Richard B. Cohen: Our system is a very good solution for that. So, you know, if we had a $23 billion backlog on ambient, I would say perishables, probably. Not as big as our existing backlog, but it's very large. Yeah, okay. I appreciate that.

Speaker Change: So.

Speaker Change: You know if we have a $23 billion backlog.

Speaker Change: On an ANV and I would say perishables probably.

Speaker Change: Not as big as our existing backlog, but it's very large.

Operator: And if I could just sneak in one more clarification, Carol, I think you said, expect growth and operation services revenue going forward. Was that sequentially off of the 20 million in revenue that you just put up in Q2? No, it's because there are some one-time events that I referred to.

Yeah, Okay, I appreciate that and if I could just sneak in one more clarification Karel I think you said.

Speaker Change: <unk> growth and operation services revenue going forward was that sequentially off of the $20 million in revenue that you just put up in Q2.

Karel: No it does.

Karel: There are some one time events that I referred to so there is a.

Operator: So there's a, you know, percentage of this quarter's revenue that we put up for operations that won't be, Okay. So growth on a year over year basis, not sequentially. That's right. That's right.

Karel: Percentage of this quarters revenue that we put up for operations that won't be repeatable.

Speaker Change: Got it so growth on a year over year basis, not sequentially. That's right. That's right, yes, okay, alright, thanks for that I will leave it there. Thanks.

Operator: Yep. Okay. All right. Thanks for that. I will leave it there.

Karel: Thanks.

Operator: Thanks. Thank you. One moment for the next question, and our next question will be coming from Matt, excuse me, Mike Latimore of North Capital Markets. Your line is open.

Speaker Change: Thank you one moment for the next question.

And our next question will be coming from that excuse me, Mike Lattimore of North capital markets. Your line is open.

Operator: All right, great. Thanks. Yeah, congrats on the results and outlook here. On BreakPak, can you talk a little bit more about the prospects there? You know, what are you seeing from current customers? Is it opening up, you know, more new logo discussions? And maybe just clarify, is it in, you know, kind of the Walmart backlog or not?

Michael James Latimore: Alright, great. Thanks, Congrats on the results and outlook here.

Michael James Latimore: On break pack can you talk a little bit more about the prospects. There what are you what interest levels are you seeing from current customers is it opening.

Michael James Latimore: More new logo discussions.

Michael James Latimore: And maybe just clarify is it in kind of the Walmart backlog or not at this point.

Richard B. Cohen: So I'll start by saying BreakPak is considered part of the Walmart backlog, so Walmart considers BreakPak as one of the elements that they'll continue to go deploy. I'd say from a BreakPak perspective, we indicated in our opening remarks that this will be our second BreakPak, so we also indicated we are offering BreakPak for sale. We think there is a large market for BreakPak for all of our customers, and as we've talked about before, BreakPak is also a part of GreenBox.

Speaker Change: So I'll start.

Break pack is considered part of the Walmart backlog, so Walmart considers.

Speaker Change: <unk> is one of the elements that they'll continue to go deploy I'd say from a brake pad perspective this year.

Speaker Change: Indicated in our opening remarks that this will be our second break pack. So we also indicated we are.

Speaker Change: Offering brake pads for sale, we think there is a large market for brake pack for all of our customers and I think we've talked about before a brake pad is also a part of green box. It could be part of all of the Green box customers that are coming in outside of that I'm sure. There is additional market or break pack customers.

Richard B. Cohen: It could be part of all of the GreenBox customers that are coming in. Outside of that, I'm sure there's an additional market for BreakPak customers beyond who's in our current customer base. Yeah, so the bread pack in the Walmart application is, or anything that goes into the store that's not a full case.

Speaker Change: <unk>, who is in our current customer base.

Yes, so the brake pack in the Walmart application as well.

Richard B. Cohen: But if you think of Walmart, every Walmart supercenter has a pharmacy and a drugstore. This is a perfect application for any of the big drugstore companies. It could also be interesting for dollar stores. So, we think this is a very big market that we really haven't talked much about because our BreakPak solution is very different from anything on the market. And it takes, and the reason it's different is because it uses a lot of software, a lot of vision, and a lot of the smarts that we have in our SimBot. We now have a Minibot that does the same thing. Actually does, and it does some things in a miniature version that is even better than the SimBot in terms of handling small packages.

Speaker Change: Or anything that goes into the store that's not a full case, but if you think of.

Speaker Change: All of our.

As every Walmart supercenter as a pharmacy in a drugstore.

Speaker Change: This is a perfect application for any of the big drugstore companies.

Speaker Change: It's also could be interesting for dollar stores. So we think this is a very big market that we really haven't talked much about.

Speaker Change: Our brake pad solution is very different.

Speaker Change: On the market and it takes and the reason it's different is because it uses a lot of the software a lot of the vision and a lot of smart that we have in our Simba. We now have a mini bar that does the same thing actually does it.

Speaker Change: Does some things.

Speaker Change: Miniature version.

Speaker Change: Even better than the sandbox in terms of hearing small packages. So we think.

Richard B. Cohen: So, we think that's a big market, but we haven't been. I don't think a lot of people know about what this capability is yet, but they'll find out very soon. Got it. And then on the ability to do more system starts here, does that require kind of continued, let's say, blocking and tackling or refinement of outsourcing? Are there others?

Speaker Change: That's a big market, but we haven't been.

I don't think a lot of people know about what this capability as yet, but they will find out very soon.

Speaker Change: Got it and then on the.

Speaker Change: Just.

Speaker Change: Ability to do more systems starts here.

Speaker Change: Does that require kind of continued.

Speaker Change: Let's say blocking and tackling or refinement of outsourcing or are there others or maybe some other kind of step function requirements in terms of sourcing efficiency.

Carol J. Hibbard: Will there be some other kind of step function requirements in terms of outsourcing efficiency? No, our ability to start new systems is not dependent on outsourcing. We focused on outsourcing to scale, and we believe we've achieved that. So we are outsourced and have the capability to continue to expand. I'd say the slowing that we saw for this quarter on new starts is going to change in the back half of this year.

Speaker Change: No our ability to start new systems is not dependent on outsourcing we focused on outsourcing to scale and we believe we've achieved that.

Speaker Change: So we are we are outsourced and have the capability to continue to expand I'd say the slowing that we saw for this quarter on new starts.

Speaker Change: That's going to change in the back half of this year and Youll see that number continue to grow.

Carol J. Hibbard: And you'll see that number continue to grow, just reflective of the $23 billion backlog we have. And when you look at the timing of when we plan on deploying this system, it will start to pick up. Great, thank you.

Speaker Change: Just reflective of the $23 billion backlog we have.

Speaker Change: And when you look at the timing of when we plan on deploying that the system starts we will start to pick up.

Speaker Change: Okay great.

Speaker Change: Alright, thank you.

Speaker Change: Thanks.

Operator: Thank you. One moment for the next question. And the next question will be coming from Robert Mason, Average Line is open. Yes, good afternoon.

Speaker Change: Thank you one moment for the next question.

Speaker Change: And the next question will be coming from.

Speaker Change: Robert Mason of Baird. Your line is open.

Operator: Just a question around Greenbox. How do you think about their ability to quickly ramp up? Just given the current schedule of current customers you have, just trying to think about how if they were to add, whether it be CNS or if they add other customers, just how quickly you think that, you know, they could layer incremental starts on top of the existing schedule. So, as we talk about Greenbox in our first deployment next quarter, we are identifying the management team. So, we're picking the leaders to put in place.

Robert W. Mason: Hi, yes, good afternoon.

Robert W. Mason: Just a question around Green box, how do you think about their ability to quickly ramp up.

Robert W. Mason: Just given the current schedule of current customers you have.

Robert W. Mason: I'm just trying to think about how if they were to add whether it be CNS, where if they add other customers just how quickly you think that.

Robert W. Mason: They could layer incremental starts.

Robert W. Mason: On top of the existing schedule.

Carol J. Hibbard: Greenbox will then go ahead and begin ramping up with the additional resources. And so, they're in the process of growing that team. And we believe our ability to ramp up Greenbox will be over the course of the next several quarters. You'll continue to see new additions to our Greenbox deployment. And just to clarify, when we talked about the first revenue from this first cream box order, we were talking about revenue in the June quarter. Okay, okay, very good. And just maybe a clarification question about breakback.

Robert W. Mason: So as we talk about Green box on our first deployment next quarter.

Robert W. Mason: So we are identifying the management team. So we're picking the leaders to put in place Green box will then go ahead and begin ramping up with the additional resources and so they are in the process of growing that team and we believe our ability to ramp green box will be over.

Robert W. Mason: The course of the next several quarters, you'll continue to see new editions to our Green box.

Robert W. Mason: Deployments.

Robert W. Mason: And just to clarify when we talked about first revenue from this first remarks order, we're talking about revenue in the June quarters.

Richard B. Cohen: It sounds like you can market that system to customers who do not, or would not necessarily be required to already own or have one of your current case handling systems. Am I understanding that correctly? So they would have a, they would have a very large, they would have, Most of the people doing breakbacks still have the store box. And at some point, you take the box, you cut it open, and you dispense the items in the box. So they don't necessarily need a break pack.

Speaker Change: Okay, Okay very good.

Speaker Change: And just maybe a clarification question around brake pad.

Speaker Change: It sounds like that you can market that system to customers who.

Speaker Change: Do not or would not necessarily be required to already own or have.

Speaker Change: One of your current case handling systems I understand understanding that correctly.

Speaker Change: So they would have they would have a various they would have.

Speaker Change: Most of the people are doing brake pad.

Speaker Change: Still have to store box.

Speaker Change: And at some point you take the box you cut it open in new dispense the items in the box. So they don't necessarily need a break packed they don't necessarily need a storage solution as large as some of the ones that we deploy but they still have to store boxes, they will still need.

Richard B. Cohen: They don't necessarily need a storage solution as large as some of the ones that we deployed, but they still have to store boxes. They'll still need the regular Symbots, and they'll still need something to palletize the totes when they come out. So it could be a smaller system, but they'll still need part of our basic system to make it work. Okay, very good. Thank you.

Speaker Change: The regular <unk>.

Speaker Change: And they'll still need something that probably palletize the totes when they come out so it could be a smaller system, but they'll still need part of our basic system to make it work.

Speaker Change: Okay very good thank you.

Speaker Change: Yeah.

Operator: Thank you for your questions. One moment for the next question. Our next question is coming from Joe Giordano of T.D.

Thank you for your question.

Speaker Change: One moment for the next question.

Speaker Change: Our next question is coming from Joe <unk>.

Joe: <unk> Dano TD Cowen your line is open.

Operator: Cowan, your line is open. Hi, everyone. Good evening. I guess I'll start, Rick, on the SimBot and some of the innovations you put in there now that you're standardized on it. Just curious, of the 18 sites that you're running, I assume that there are bots that have been deployed that are not like the most. Vision Enabled using the current technology. Like, what's your response, what's your obligation to go back and kind of backward integrate the newest and greatest into existing facilities? Yeah, so, Joe, we were very disciplined.

Joe: Hi, everyone.

Joe: Good evening, I guess I'll start Rick on the <unk> and some of the innovations you put in there now that youre standardize on it.

Joe: Just curious of the 18 sites that youre running I assume that Theres box.

Speaker Change: That had been deployed that are not like the most.

Speaker Change: Vision enabled using much into current technology like what's your response, what's your obligation to go back and kind of backward integrate integrate like the newest and greatest into existing facilities.

Yes, so so Joe we were.

Sure.

Very disciplined.

Richard B. Cohen: A long time ago, about what we sold. And there was a period before this big growth spurt where we knew we were going to change the bot. So basically, all there are about four warehouses that have pre-SEMBOTs, and part of the restructuring charge is cleaning up everything else. But all of our so one and one of the reasons we're going to go faster is everything is standardized. Now, there are no, there are no legacy bots.

Speaker Change: Long time ago about.

Speaker Change: What we sold and there was a period before this big growth spurt.

Speaker Change: We knew we were going to change the bot so basically.

Speaker Change: All of.

Speaker Change: There are about four warehouses that have pretty similar months.

Speaker Change: And part of the restructuring charges cleaning up everything else.

Richard B. Cohen: There are four early sites. One of them is a CNS site. There's a couple other sites that are early bots, but going forward, we made the decision, we took the charge, this is the way we want to run the business, and so we don't want to always be dealing with all these different versions of bots. So all of the Walmart systems, for instance, have the same bot. And everybody going forward for the last two years now has the same bot.

Speaker Change: All of our so one of the reasons, we're going to go fast or is everything is standardized now there is no. There are no legacy bonds. There is there is there are four early sites.

Speaker Change: One of US is CNS side, there's a couple of other sites that are early bonds, but going forward. We made the decision. We took the charge. This is the way we want to run the business and so we do want.

Speaker Change: So I have two.

Speaker Change: Please.

Speaker Change: Dealing with all of these different versions of bonds. So all of the Walmart systems for instance at the same Bob.

Everybody going forward for the last two years now has the same bonds.

Richard B. Cohen: So we made that decision, we've taken the charge, we're very standardized. And then on Greenbox with the CNS site, is this essentially like an outsourced single-tenant site where CNS is going to utilize the entire capacity? And just curious how you see the balance of Greenbox on leveraging existing large customers for that sort of purpose versus multi-tenant sites. And so those multi-tenant sites, do you feel like there's still software engineering capabilities that need to be developed to really handle the onboarding and offboarding?

Speaker Change: So we made that decision we've taken the charge, where we're very standardized now.

Speaker Change: Perfect and then on re box with the CNS sight is this essentially like an outsourced single tenant sites.

Speaker Change: And we're seeing us is going to Romney tatler.

Speaker Change: You utilize the entire capacity and just curious like how you see the balance of Green box link on leveraging existing large customers for that sort of purpose versus multi tenant sites like for those multi tenant sites do you feel like Theres still.

Speaker Change: Like software engineering capabilities need to be developed to really handle like the onboarding off boarding smoothly.

Richard B. Cohen: Yeah, so this is primarily going to be a CNS-only site, but not necessarily in the future. So if we have extra capacity, we'll bring other customers, and Greenbox will bring other customers into the site. One of the things that makes Symbiotics so special in this space is that we have perfect inventory management. And by perfect, when we ship a million boxes in a week, we might have one mistake, and we can't figure out how, but it's six or seven sigma accuracy.

Speaker Change: Yeah. So so this is primarily going to be a CNS only site.

Speaker Change: Not necessarily in the future. So we have extra capacity will bring other customers green box and bring other customers into the site.

Speaker Change: And in one of the things that makes symbiotic so special in this space as well perfect inventory management.

Speaker Change: And by perfect when we ship a million boxes a week.

Speaker Change: Might have one mistake and we can't figure out how but at six 6% or 700 Sigma accuracy and so there'll be some onboarding of additional customers but.

Richard B. Cohen: So there'll be some onboarding of additional customers. We have that pretty well figured out, and so this first site could be 100% CNS, or it could be 80% CNS and other customers if we have room. And so the model would be for customers to look at CNS and say, "Oh, now I understand the green box." If I want to take a building, and I could be an anchor tenant and say, I'll take 50% of the building in the green box, and you'll sell the rest of the building.

Speaker Change: We have that pretty well figured out.

Speaker Change: And so this first site will.

Speaker Change: Could be a 100% CNS or it could be 80% CNS and other and other customers if we have room.

Speaker Change: And so the model would be for <unk>.

Speaker Change: Customers could look at CNS and say Oh, now I understand green box, if I wanted to take a building and it can be an anchor tenant and say I'll take 50% of the building a green box Youll go sell the rest of the building that's exactly what we want out of the marketplace.

Richard B. Cohen: That's exactly what we want out of the market. So it could be an anchor customer, or in some places, it could be 100 customers, and no customer is bigger than 10% of the capacity. So that's what we're going to begin selling out there now. But the technology as it currently exists can support, in a theoretical facility, lots of different customers with no anchor, and they're all really small. You know, I would imagine that the population changes fairly often; if, you know, businesses are moving and expanding, or people are going away, the capability exists to bring on and bring off customers to a site like that. It already exists.

Speaker Change: So it could be an anchor customer or in some places it could be it could be a 100 customers and no customer is bigger than 10% of the capacity. So that's that's that's what we're seeing.

Speaker Change: Im going to begin selling out there now.

Speaker Change: The technology as it currently exists can support like.

Speaker Change: In a theoretical facility that's lots of different customers with no anchor then they are all really small.

Speaker Change: I would imagine that that population changes fairly often this businesses are moving in and expanding our team. We're going away is the capability exists to bring on and bring off customers into a site like that already exist.

Richard B. Cohen: Yeah, so we would have to build a management team to handle customer relations. But in our structure, you could have 100 boxes in a row, and we would have perfect traceability. It could be 100 different customers owning 100 boxes in an aisle. They have perfect traceability.

Speaker Change: Yes, so we would have to build a management team to handle the customer relations.

But in our structure you could have 100 boxes in a row and we.

You would have perfect.

Speaker Change: Traceability it could be 100 different customers owning 100 boxes in an aisle.

Richard B. Cohen: So that part of it, the technology is already there. We just have to build out customer management. That's what I figured.

Speaker Change: Perfect traceability, so that part of it the technology is already there we have to build out the customer management fees, yes, that's what I figured okay. Thank you.

Speaker Change: Thanks.

Speaker Change: Thank you.

Speaker Change: And one for the next question.

Operator: Okay, thank you. Thank you. And one moment for the next question. And our next question is coming from Derek Soderberg of Cantor Fitzgerald.

Speaker Change: And our next question is coming from Derek.

Derek: <unk> of Cantor Fitzgerald Your line is open.

Operator: Your line is open. Yeah, thanks for taking my questions. Just piggybacking off of one of the last questions. With the new hardware and software innovations, will all of those be pushed out to systems currently in operation on any new systems? Or is it more of an optional add-on for customers?

Derek: Yes, thanks for taking my questions just piggyback piggybacking off of one of the last questions.

Derek: With the new hardware and software innovations will all of those be pushed out two systems currently in operation.

Derek: Any new systems or is it more of an optional add on for customers and then I'm wondering whether or not the any of the new hardware or software innovation turn into either cash payments are upside to existing contract terms or anything like that and then I've got a follow up.

Carol J. Hibbard: And then I'm wondering whether or not any of the new hardware or software innovations turn into either cash payments or upside to existing contract terms or anything like that. And then I've got a follow-up. So I'll start and then Rick can add at the end. So it depends.

Carol J. Hibbard: And so the innovations that we have in Flow typically focus on several things. We're innovating by looking at R&D and additional enhancements to our system. And so we do view those as potential opportunities in the future for additional revenue and additional sales. We also continue to innovate and look at R&D for how we're going to make the systems more efficient from an operational perspective and focus on reliability. So some of those enhancements are being rolled out to the systems we have in flow today and will be part of what's in our contracted backlog.

So I'll start and then broken out at the end so.

Speaker Change: It depends and so the innovations that we have inflow, we typically focus on several things we're innovating for for looking at R&D and additional enhancements to our systems and so we do view those as potential opportunities in the future for additional revenue and additional sales we also.

Speaker Change: Also continue to innovate and look at R&D for how we're going to make the systems more efficient from an operational perspective and focus on reliability. So some of those enhancements are being rolled out to the systems, we havent flow today and will be part of what's in our contracted backlog and then the third.

Carol J. Hibbard: And then the third, which we've talked quite a bit about, is that we're focused on innovations that will drive costs out of either system deployment or system operation. And so there's a mix in there, and some of the innovation that we're working on is absolutely driven to our current customer set, but others would be growth going forward. Yeah, the other thing is that we've always contemplated that if we can make the bonds go twice as fast, and you need half as many bots. Who gets that?

Speaker Change: Which we've talked quite a bit about is we're focused on innovations that will drive cost out of either system deployment, our system operation and so there is a mix in there and so some of the innovation that we're working on absolutely disturbing to our current customer set that others would be growth going forwards.

Speaker Change: Yeah. The other thing is that we've we've always contemplated that.

And if we can make.

Speaker Change: The bonds go twice as fast.

Speaker Change: And you need half as many bonds.

Speaker Change: Who gets that income.

Richard B. Cohen: And so either we charge for reduced maintenance, or if we take and we have the same number of bots that go twice as fast, and the palatizing cells can do twice as much work, we would be entitled to a recurring income stream for the additional work that we're doing. So that's always been contemplated, but we're not there yet.

Speaker Change: And so either we charge for reduced maintenance or if we take and we have the same number robots to grow twice as fast.

Speaker Change: And the Pelletizing cells can do twice as much work, we would be entitled to.

Speaker Change: A recurring income stream for the additional work that we're doing so that's always been contemplated but we're not we're not there yet.

Carol J. Hibbard: And then, as my follow-up, just to clarify some of your commentary, Carol, I think you said there are some lower margin projects out there. Can you talk a bit about what's changing on the project front that would characterize a project as low margin at this point and what kind of step up in gross margins might we see after, I guess, some of these low margin projects are worked through this year? I'm just looking for you to kind of clarify some of that. Thank you.

Speaker Change: Got it and then as my follow up just to clarify some of your commentary Carol I think you said there are some lower margin projects out there can you talk a bit about what's changing on the project front that would characterize a project as low margin at this point and what kind of step up in gross.

Speaker Change: Margins might we see after I guess some of these low margin projects are worked through this year I'm just looking for you to kind of clarify some of that thanks.

Carol J. Hibbard: Yeah, so we've got projects in flow that were our earlier innovation projects, some of them, fairly early systems, proof of concepts are included in there. And so as they burn off, you'll start to see our gross margin step up. I'm not going to tie a specific timeline to those because the schedules vary. But you should expect gross margin to start rising into next year. Got it. Really appreciate it.

Carol J. Hibbard: Yeah. So we've got projects in Clos that were our earlier innovation projects some of them fairly early systems proof of concepts are included in there and some of them as they burn off youll start to see our gross margin stepped up I'm not going to tie specific timeline to those schedules Barry.

Carol J. Hibbard: But you should expect into next year gross margin to start stepping up.

Speaker Change: Got it really appreciate it thanks.

Speaker Change: Sir.

Operator: Thanks, Derek. Thank you. And this does conclude the Q&A session for today. I would now like to turn the call back over to Jeff for closing remarks. Please go ahead.

Speaker Change: Thank you and this does conclude the Q&A session for today I would now like to turn the call back over to Jeff for closing remarks. Please go ahead.

Jeff Evanson: Thank you, Lisa, and thank you everyone for joining our call tonight. We appreciate your interest in Symbiotic, and we look forward to seeing you online for our Investor Day. Goodbye.

Jeff: Thank you Lisa and thank you everyone for joining our call Tonight. We appreciate your interest and symbiotic and we look forward to seeing you online for our Investor Day Goodbye.

Jeff: Okay.

Operator: This does conclude today's conference call. Thank you for joining. You may all disconnect. [inaudible] ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,.

Speaker Change: This does concludes today's conference call. Thank you for joining you may all disconnect.

Operator: . Good day, and thank you for standing by. Welcome to the Symbiotic second quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode.

Speaker Change: [music].

Speaker Change: Okay.

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Operator: 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Jeff Evanson, Vice President of Investor Relations. Please go ahead.

Speaker Change: Good day, and thank you for standing by and welcome to the symbiotic second quarter.

Speaker Change: 2024 financial results conference call.

Speaker Change: At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.

Speaker Change: You asked the question during the session you will need to press star one on your telephone.

Speaker Change: We'll then hear an automated message advisory your hand is raised to withdraw your question. Please press star one again.

Speaker Change: Please be advised that today's conference is being recorded.

Speaker Change: Now like to her.

Speaker Change: With over to your speaker for today, Jeff Evenson, Vice President of Investor Relations. Please go ahead.

Speaker Change: Okay.

Jeff Evanson: Thank you, Lisa. As a reminder, some of the statements that we make today regarding our business operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our forms 10-K and 10-Q, including the risk factors. We undertake no obligation to update any forward-looking statements.

Jeff Evanson: Thank you Lisa.

Jeff Evanson: In addition, during this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP-to-GAAP measures is included in today's earnings release, which is distributed and available to the public through our investor relations website located at ir.symbiotic.com. On today's call, we are joined by Rick Cohen, Symbiotics Founder, Chairman, and Chief Executive Officer, and Carol Hibbard, Symbiotics Chief Financial Officer. These executives will discuss our second quarter fiscal 24 results and our outlook, followed by Q&A. Rick?

Jeff Evanson: As a reminder, some of the statements that we make today regarding our business operations and financial performance may be considered forward looking.

Jeff Evanson: Such statements are based on current expectations and assumptions and are subject to a number of risks and uncertainties.

Speaker Change: Actual results could differ materially.

Speaker Change: Please refer to our forms 10-K, and 10-Q, including the risk factors.

Speaker Change: We take no obligation to update any forward looking statements.

Speaker Change: In addition, during this call we will present, both GAAP and non-GAAP financial measures.

Speaker Change: A reconciliation of non-GAAP to GAAP measures included in today's earnings release, which is distributed and available to the public through our Investor Relations website located at IR Dot symbiotic dot com.

Speaker Change: On today's call. We are joined by Rick Colon, Symbolics, founder Chairman and Chief Executive Officer, and Carol Hibbard symbiotic Chief Financial Officer.

Unknown Attendee: These executives will discuss our second quarter fiscal 'twenty four results and our outlook followed by Q&A.

Rick Colon: Rick.

Richard B. Cohen: Thank you, Jeff. Good afternoon, and thank you for joining us to review our most recent results. Our second quarter reflects solid financial progress. At the same time, we accelerated the pace of innovation significantly during the quarter. We will discuss some of our recent innovations at our Investor Day on May 9. You can sign up for the webcast on the IR page of our website.

Unknown Attendee: Thank you Jeff.

Unknown Attendee: And thank you for joining us to review our most recent results.

Our second quarter reflect solid financial progress at the same time, we accelerated the pace of innovation significantly during the quarter.

Unknown Attendee: We will discuss some of our recent innovations at our Investor day on May nine.

Unknown Attendee: You can sign up for the webcast on the IR page of our website.

Richard B. Cohen: Key innovations this quarter include advancing our core technologies in artificial intelligence and automation; improving system performance and the customer experience; Enhancing safety; and Accelerating Deployment. I'd like to quickly highlight some important software improvements made this quarter. First, we improved our time-space reservation routing algorithm. This allowed us to more than double that transfer capacity and boost bot density, which helps to increase throughput and system capacity. Second, we transitioned our code base to a microservices architecture for increased modularization. This enables more efficient coding, evolution, and support. Finally, on the hardware side, with the addition of a new AI chip, we have increased the computational power of SimBot.

Unknown Attendee: Key innovations this quarter, including advancing our core technologies and artificial intelligence and automation.

Unknown Attendee: Improving system performance and the customer experience enhancing safety and accelerating deployment.

Unknown Attendee: Okay.

Unknown Attendee: I'd like to quickly highlight some important software improvements made this quarter.

Unknown Attendee: We improved our time space reservation routing algorithms.

Unknown Attendee: Allowed us to more than double transfer debt capacity and boost spot density, which helps to increase throughput and system capacity.

Unknown Attendee: We transitioned our code base to a micro services architecture for increased modular space.

Unknown Attendee: This enables more efficient coding evolution and support.

Unknown Attendee: Finally on the hardware side with the addition of a new AI chip, we have increased the computational power of cinemark.

Richard B. Cohen: This higher compute power is key to unlocking more of the value of artificial intelligence across the entire sabotage. This quarter, we also wrapped up the restructuring and outsourcing of our manufacturing operation and standardized on the SIMBOD for all future deployments. This summer, we will begin the installation of our second break-pack solution with an undisclosed customer. We're excited about the potential of this application as we continue to evolve the technology, knowing it has the capability to become an important part of an integrated omni-channel warehouse solution that services wholesale, retail, and e-commerce channels with both case and individual handling capacity. Greenbox recently signed their first logistics as a service customer, and issued a related order for a Symbiotic system all within this quarter.

Unknown Attendee: This higher compute power is key to unlocking the value of artificial intelligence across the entire symbiotic.

Unknown Attendee: Yeah.

Unknown Attendee: This quarter, we also wrapped up the restructuring it outsourcing of our manufacturing operations and standardized on the sandbox for all future deployments. This.

Unknown Attendee: This summer we will begin the installation of our second break Pacs solution with an undisclosed customer.

Unknown Attendee: We are excited about the potential of this application as we continue to evolve the technology knowing it has the capability to become an important part of an integrated Omnichannel warehouse solutions and services wholesale retail and e-commerce channels with both case and <unk> handling capacity.

Unknown Attendee: Green box recently signed their first logistics as a service customer and issued related order press symbiotic system all within this quarter. So symbiotic will begin recognizing initial green box revenue in fiscal Q3.

Richard B. Cohen: So Symbiotic will begin recognizing initial green box revenue in fiscal Q3. Greenbox will automate and operate a brownfield warehouse for CNS Hostel Grocery. Partnering with Greenbox allows CNS to accelerate its transition to an autonomous supply chain in a capital efficient way. I'm excited that the CNS team saw the benefits of outsourcing with Greenbox. The Raybox team is currently evaluating locations across the US for these. Finally, while SoftBank team members have been performing much of the operational work at Greenbox, the initial hiring for a Greenbox management team has started.

Unknown Attendee: Green box will automate and operator brownfield warehouse for CNS wholesale growth.

Unknown Attendee: Alright, Barry with Green box allows CNS, an accelerated transition to autonomous supply chain and a capital location way.

Unknown Attendee: Cited that the CNS team saw the benefits of outsourcing the green box.

Unknown Attendee: Remarks team is currently evaluating locations across the U S for these sites.

Unknown Attendee: Finally, while Softbank team members have been performing much of the operational work the green box. The initial hiring for our Green <unk> management team has started and we expect to be able to announce our first hires in the next several months.

Richard B. Cohen: We expect to be able to announce our first hires in the next several months. To wrap up, we will continue to innovate, execute, and scale to deliver for our customers as we grow and drive increased profitability. I want to thank our entire team for their excellent work. Now, Carol will discuss our financial results and outlook.

Unknown Attendee: To wrap up we will continue to innovate execute and scale to deliver for our customers as we grow and drive increased profitability.

Unknown Attendee: Thank our entire team for their excellent work this quarter.

Unknown Attendee: Now Carol will discuss our financial results and outlook Daryl.

Carol J. Hibbard: Thank you, Rick. Second quarter revenue grew to $424 million, up 59% compared to the same quarter last year. Strong revenue growth was driven by significant progress across our 37 systems in the process. During the second quarter, we initiated three new system deployments and completed three systems, bringing us up to 18 fully operational systems. As indicated on our last call, systems started to stabilize in the second quarter as the team focused on implementing the innovations that Rick just mentioned and Enhanced System Standardization for Phased Deployment.

Carol: Thank you Rick second quarter revenue grew to $424 million up 59% compared to the same quarter last year.

Carol: The strong revenue growth was driven by significant progress across our 37 systems in the process of deployment.

Carol: The second quarter, we initiated three new system deployments and completed three systems, bringing us up to 18 fully operational system.

Carol: As indicated on our last call system start to stabilize in the second quarter as the team focused on implementing the innovations that Rick just mentioned.

Carol: And enhance systems standardization for phased deployments.

Carol J. Hibbard: We expect quarterly system starts to accelerate during the rest of the quarter, so this quarter, our revenue numbers reflect that significant revenue growth can be driven by our ability to accelerate deployments in progress. And just as important, reductions in system deployment time create capacity to support future customers. Our backlog of committed contracted orders of $22.8 billion declined due to the revenue recognized during the quarter.

Carol: We expect quarterly system starts to accelerate during the rest of the year.

Carol: This quarter, our revenue numbers reflect a significant revenue growth can be driven by our ability to accelerate deployments in progress and just as important reductions in system deployment time create capacity to support future customer demand.

Carol: Our backlog of committed contracted orders of $22 8 billion declined due to the revenue recognized during the quarter.

Carol J. Hibbard: Our combined recurring revenue streams grew 85% sequentially and 145% year-on-year, reflecting the increase in the number of completed projects. Overall, non-GAAP gross margin was down slightly from last quarter, but still better than it. Innovations we deployed during the second quarter weighed upon system growth margins, but were largely offset by effective cost management and solid project execution. System-adjusted gross margin remains stable at 20% and generally in line with As usual, our system gross margin also reflects the burden of pass-through costs and lower-margin innovation projects that weigh on a reported gross... Our combined recurring revenue streams contributed to positive adjusted gross profit.

Carol: Our combined recurring revenue streams grew 85% sequentially and 145% year on year, reflecting the increase in the number of completed systems.

Carol: Overall non-GAAP gross margin was down slightly from last quarter, but still better than expected.

Carol: Innovations, we deployed during the second quarter and weighed upon system gross margin, but were largely offset by effective cost management and solid project execution.

Carol: System at the adjusted gross margin remained stable at 20% and generally in line with last quarter.

Carol: As usual our system gross margin also reflects the burden of pass through costs and lower margin innovation projects that way on a reported gross margin.

Carol: Our combined recurring revenue streams contributed to positive adjusted gross profit.

Carol J. Hibbard: This demonstrates the high leverage in our business model, showing that we can be profitable with a small number of active sites generating recurring revenue while also being invested in the much larger number of systems still in deployment. As I said last quarter, we do not expect gross margin to improve every quarter, but we do expect gross margin to improve each year well into our future. We expect that as we scale over time, combined recurring gross margins can trend upward.

Carol: This demonstrates the high leverage in our business model showing that we can be profitable with a small number of active sites generating recurring revenue, while also being invested for the much larger number of systems still in deployment.

Carol: As I said last quarter, we do not expect gross margin to improve every quarter, but we do expect gross margin to improve each year well into our future.

Carol: We expect that as we scale over time combined recurring gross margins concerned over 60%.

Carol J. Hibbard: Operating leverage improved again sequentially as we achieved a 5.3% adjusted EBITDA rate compared to a 3.8% rate last year. This was driven by rapid revenue growth and gross margin expansion along with stable operating. As Rick indicated, we completed restructuring related to outsourcing bot assembly and component inventory management, including standardizing SimBot as our go-forward platform. As a result, we recognize a non-GAAP restructuring charge of $34 million, and cash and equivalents, including marketable securities, of $276 million sequentially.

Operating leverage improved again sequentially as we achieved a five 3% adjusted EBITDA rate compared to the three 8% rate last quarter.

This was driven by rapid revenue growth and gross margin expansion along with stable operating expense.

Carol: As Rick indicated we completed restructuring related to outsourcing bought assembly and component inventory management, including standardizing Simba as our go forward platform.

Carol: As a result, we recognized the non-GAAP restructuring charge of $34 million in the quarter.

Carol: Our cash and equivalents, including marketable securities grew $276 million sequentially to $951 million free.

Carol J. Hibbard: 951 million. Free cash flow defined as cash flow from operating activities of $21 million, less capital expenditures of $3 million, with $18 million, and better than expected during the course. In addition, we raised $258 million from our February follow-on offering, which gives us the flexibility to maintain our aggressive pace of innovation in a variety of areas, including non-ambient systems development. As expected, stock-based compensation was elevated due to the January vesting that occurred.

Carol: Free cash flow defined as cash flow from operating activities of 21 million less capital expenditures of $3 million was $18 million and better than expected during the quarter.

Carol: In addition, we raised $258 million from our February follow on offering which gives us the flexibility to maintain our aggressive pace of innovation in a variety of areas, including non MBS systems development.

Carol: As expected stock based compensation was elevated due to the January investing that occurs each year. In fact Q2 was usually be in the quarter with the highest stock based comp every year.

Carol J. Hibbard: In fact, Q2 will usually be the quarter with the highest stock base comp ever. For the third quarter of fiscal 2024, we expect revenue of $450 million to $470 million and adjusted EBITDA between $27 and $29. This represents revenue growth of over 47% and an adjusted EBITDA margin. We now welcome your questions. Operator, please begin the Q&A. Thank you.

For the third quarter of fiscal 2024, we expect revenue of $470 million $470 million and adjusted EBITDA between 27% and $29 million.

Carol: This represents revenue growth of over 47% and an adjusted EBITDA margin increase.

Speaker Change: We now welcome your questions.

Speaker Change: Operator, please begin the Q&A.

Operator: As a reminder, if you would like to ask a question, please press star 1 1 on your telephone. We also ask that you wait for your name and company to be announced before you proceed with your question. One moment for the first question. The first question that we have is coming from Andy Kaplowitz of Citi. Your line is open. Good afternoon, everyone. Hello, Andy. Hi, Rick.

Speaker Change: Thank you as a reminder, if you would like to ask a quick question.

Speaker Change: Please press star one on your telephone.

Speaker Change: We also ask that you wait for your name and company to be announced before you proceed with your question.

Speaker Change: One moment for the first question.

Operator: I know you said in the release that you made significant advances in terms of your innovation roadmap. So, if you could give a little more color on what that means, I know you mentioned on the call already better software and the new AI chip. I'm sure you want to save much of this for the investor today, but did you, for instance, further accelerate the deployment time? It seems like break-back revenue could come faster than expected. Maybe you can elaborate a little bit more on what you did in the quarter. Sure, Andy.

Speaker Change: The first question that we have is coming from Andy Kaplowitz of Citi. Your line is open.

Good afternoon, everyone.

Andrew Alec Kaplowitz: Hello, Randy Hi, Rick I know you said in the release that you made significant advances in terms of innovation roadmap. So could you give a little more color into what that means I know you mentioned on the call already better software the new AI Chip I'm sure you want to say much of this for the Investor day, but did you for instance, further accelerate deployment.

Andrew Alec Kaplowitz: It seems like brake pad revenue could come statute is that and maybe you can elaborate a little bit more on what you what you did in the quarter.

Randy: Sure Andy so.

Richard B. Cohen: So, we've been working on this for about three years now, but putting vision on our bot, and that combined with the video chips that we're using, allows us to recognize boxes that may be deformed but still recognize what the product is. So that makes our bots much more able to pick irregular cases. And as you know, we're one of the only people, maybe the only company, that puts our bots directly on shelves. We don't put them on trays.

We've been working on this for about.

Randy: About three years, now, but putting vision on our bonds.

Randy: And that combined with.

Randy: Nvidia chips that we're using.

Randy: Allows us to recognize.

Randy: Boxes that may be deformed.

Randy: But still recognize what the product is.

Randy: And so that makes are much more able to uptick irregular cases and as you know we're one of the only people maybe the only one that towards our box directly on shelves. We don't put them entrees that requires a lot of expertise and a lot of knowledge and so we've been on this journey for a while.

Richard B. Cohen: That requires a lot of expertise and a lot of knowledge. And so we've been on this journey for a while. Now about 40% of our bots in our network are vision-enabled, and so there's a lot of work for the AI to catch up on recognizing 1,000 different pictures of a single box and saying, "Oh, that's XY's product." And the shape? I didn't recognize it before because we were just using sensors.

Randy: And now about 40% of our bonds and our network.

Randy: Our vision enabled.

Randy: So theres a bunch of work for the AI to catch up with recognizing a 1000 different pictures of a single box and say Oh, that's <unk>.

Randy: <unk> product.

Randy: And the shape I didn't recognize it before because we were just using sensors, but now envision we can actually recognize that so thats one thing.

Richard B. Cohen: But now, with vision, we can actually recognize that. So that's one thing. The other thing we did is that we changed the routing algorithms for our bots, and they will also be vision-enabled so that they're more reliable so that if something happens, like a bot gets stuck on, a broken, or a broken case, or something like that, we can now run around it. And we could always do that a little bit, but now we can do it much better. And then to be able to actually see the bot in front of us is also very innovative.

Randy: Other thing we did is that we.

Randy: <unk> the routing algorithms for our bonds and they will also be envisioned enabled so that.

Randy: More reliable so that if something happens like a bond gets stuck on.

Randy: Our broken a broken case or something that we can now right around it and we always can do that a little bit but now we can do it much better and then to be able to actually see the bought in front of US is also innovative the other thing we've done.

Richard B. Cohen: The other thing we've done is we have started work on perishable testing, and we think that's going to go fairly well because there aren't a lot of new things we have to do with perishables, but we want to test what happens when a bot runs over yogurt, things like that. And then the next thing after that will be testing bots in a frozen environment. So those are a couple of the things we've been doing. And then Andy.

Is.

Randy: We have started work on.

Randy: Perishable.

Randy: And so we think thats going to go fairly well because theres not a lot of new things, we have to do on perishables, but we want to test.

Randy: What happens when a bot runs over yogurt, so things like that and then the next thing after that we'll be testing bots on a frozen environment.

Randy: So those are a couple of things we've been doing.

Randy: Yes.

Richard B. Cohen: Yeah. I was going to say, I'll tackle the accelerated deployment time. So last quarter, we highlighted that we had achieved our first "Employment in 20 Months." So this quarter, out of the three systems that we deployed, we had several that also achieved a 20 month deployment time. So we're, we've definitely got some additional proof points.

Speaker Change: Go ahead.

Speaker Change: I was going to say I'll tackle the accelerated deployment times. So last quarter. We highlighted that we had achieved our first deployment in 20 months. So this quarter out of the three systems that we deploy we had several that also achieved the 20 months deployment time.

Speaker Change: We've definitely got some additional proof points and as a reminder, some of the things that are enabling faster deployment, we're seeing benefit of continuous learning over multiple deployments from our supply chain as well as our own folks.

Richard B. Cohen: And as a reminder, some of the things that are enabling that faster deployment. We're seeing the benefit of continuous learning over multiple deployments from our supply chain, as well as our own folks. We've got increased collaboration across ourselves and our customers. And then we talked quite a bit last quarter about quality and standardization to build on build instructions and our test procedures. We're seeing the benefit of all of that.

Speaker Change: Got increased collaboration across ourselves and our customer.

Speaker Change: And then we talked quite a bit last quarter about the quality and the standardization to build unbilled instructions and our test procedures and we're seeing the benefit of all of that.

Richard B. Cohen: So going forward, we have some straggler deployments, I'll call them, that will complete in the second half of this year that might take a little bit longer than that 20 months because each deployment is not the same size or complexity, but we're still on target for the future to have a number of opportunities that we see driving deployment time. Very helpful. And then, you know, another pretty big update on the green box side. So maybe you can talk about that.

Speaker Change: Going forward, we do have some straggler deployment I'll call them that will complete in the second half of this year that might take a little bit longer than that 20 months because each deployment is not the same size or complexity, but we're still on target for the future to have a number of opportunities that we see driving deployment time less than 12 months.

Richard B. Cohen: I mean, you've been expecting your first customer, I think, this year, but, you know, starting in Q3. So, do you see an acceleration there from here? Do you focus on this customer?

Speaker Change: That's very helpful. And then another pretty big update on the Green box side. So maybe you can talk about that I mean <unk> been expecting you know your first customer I think this year, but starting in Q3 so.

Speaker Change: <unk> seen acceleration there from me here.

Speaker Change: You focus on this customer like how does that work moving forward.

Richard B. Cohen: Like, how does that work moving forward? Yeah, so we'll have our first deployment. CNS is going to use GreenBox to build a facility for them. I think when people then reach out to us, they'll reach out to Greenbox or reach out to CNS and say, Why did you make that decision? And it's everything that we've been saying it's capital efficient. It allows people to get into automation quicker.

Speaker Change: Yes so.

Speaker Change: We will have our first deployment CNS is.

Speaker Change: As.

Speaker Change: Got to use green box to build a facility.

Them.

Speaker Change: When people will then reach out to us they'll reach out to a green box or reach out to CNS and say why did you make that decision and it's everything that we've been saying it's capital efficient it allows people to get into automation quicker and it allows.

Richard B. Cohen: And it allows CNS believes we'll have higher customer satisfaction using the green box and using a conventional warehouse. And then we're the other thing we are we are looking at sites across the country right now to put up additional sites. So we're feeling very bullish that if we build it, they'll come, and SoftBank's aligned with that. So we're excited about that. Please shut the car.

Speaker Change: CNS believes we will have higher customer satisfaction, using green box and using a conventional.

Speaker Change: Warehouses.

Speaker Change: Okay and then the other thing we are we are looking at sites across the country right now to put up additional sites.

Speaker Change: So we're feeling.

Speaker Change: Very bullish that if we build it they will come and Softbank is aligned with that so we're excited about that.

Speaker Change: I appreciate the color.

Operator: Thank you. One moment for the next question, and our next question will be coming from Matt Summerville of D. A. Davison. Your line is open. Thanks. Hey, Ricky, Carol, and Jeff.

Speaker Change: Thank you one moment for the next question.

Speaker Change: And our next question will be coming from Matt Summerville.

Speaker Change: D. A Davidson your line is open.

Speaker Change: Thanks.

Matt J. Summerville: Hey, Ricky Carole Jeff.

Operator: I wanted to ask maybe a follow-up question on Greenbox and CNS. Is this a single location that's going to support CNS? And if so, how much of CNS is that actually supporting?

Matt J. Summerville: I wanted to ask maybe a follow up on Green box and CNS is this a single location that's going to support.

Matt J. Summerville: DNS and if so how much of CNS is that actually supporting I guess, what I'm trying to get an idea for the CNS.

Carol J. Hibbard: I guess I'm trying to get an idea of, is CNS planning on standardizing their warehouse, if you will, on Greenbox? Or is this more of, I guess, more of a proof point that this is, that they want to see if this is the way they kind of want to proceed? I'm trying to understand their bigger picture thinking on strategy here and where this could evolve for you guys. So, Matt, I'll start.

Matt J. Summerville: CNS planning on standardizing their warehouse if you will on green box or is this more of I guess more of a proof point that this is that they want to see if this is the way they kind of want to proceed I'm trying to understand the bigger picture thinking on strategy.

Matt J. Summerville: <unk> here and where this could evolve for you guys.

So Matt I'll start so soon.

Carol J. Hibbard: So, CNS chose GreenBox as it was looking for ways to accelerate its automation rollout. This is the first proof point, I'll say, for CNS. And as we continue to vet multiple customers, multiple inbound related to GreenBox, we can see potential for additional customers and potentially additional opportunities across CNS. And then with respect to the perishable side of things, what are maybe the two, three, or whatever number it makes sense to talk about; what are the key milestones we should be looking for that we should be waiting to hear about where this perishable is soon, you know, in terms of when that gets green-lighted, that you actually start selling and rolling some of these out? Yeah, I think I think it's probably a year out, my guess

Matt J. Summerville: CNS chose Green box and this is looking for ways to acceleration accelerated automation rollout.

Matt J. Summerville: This is the first proof point I'll save for CNS and as we continue to that multiple customers multiple inbound related to green box, we can see potential for additional customers.

Matt J. Summerville: And potentially additional opportunities across CNS.

Matt J. Summerville:

Matt J. Summerville: Okay.

Matt J. Summerville: And then with respect to the perishable side of things what are maybe the two three or however, many it makes sense to talk about what are the key milestones we should be looking for that we should be waiting to hear about where this perishable soon in terms of when that gets.

Matt J. Summerville: Green lighted the U S you start.

Matt J. Summerville: So in rolling some of these out.

Speaker Change: Yes, I think I think it's.

Speaker Change: A year out is my guess.

Speaker Change: I think those milestones.

Are going to be pretty easy to achieve but.

Carol J. Hibbard: And I think those milestones are going to be pretty easy to achieve, but the value of our system for our customers is incredible reliability. So, we're actually testing bots running in a structure in a perishable facility now. It's just a test site, but we have a customer that's interested in doing that. And so, we're running, and basically, what you do is you create disaster scenarios, you look for edge scenarios, and you make sure that it's at a 32-degree temperature. We're not really talking about frozen yet, but between 32 and 55, a lot of humidity, our bots will work fine.

Speaker Change: The value of our system for our customers is incredible reliability. So we're actually testing bonds running infrastructure in.

Speaker Change: Our perishable facility.

Speaker Change: Now, it's just a test site, but have a customer that's interested in doing that and so we're running.

Speaker Change: And basically what you do is you create disaster scenarios you look for edge scenarios and you make sure that a 32 degree temperature, we're not really talking about frozen yet, but between 32 and <unk> 55.

Speaker Change: Unity, our Boswell work fine and we expect them to but we're doing the testing so I think some time.

Carol J. Hibbard: And we expect them to, but we're doing the testing. So, I think sometime within the next year, we probably will announce that we have a perishable site somewhere, and I have to be...I can't be too forward-looking, but I would say, but that's actually always been in our project, because it's not in the TAM we've talked about. I mean, the whole perishable world is a big world, and we think there are very special applications for Symbiotic because an ambient building is $100, $125 a foot, and perishable is probably 250, and frozen might be 350.

Within the next year.

Speaker Change: Robert Willie will announce that we have a perishable site somewhere.

Speaker Change: And I have to be I can't be too forward, looking but but I would say, but that's actually always been in our project because it's not it's not in the Tam we've talked about I mean, the whole perishable world is a big World and we think there is very special applications for symbiotic because.

And <unk> and building.

Speaker Change: Is 100 125 Bucks a foot.

Speaker Change: And perishable is probably $2 50, and frozen it might be $3 50.

Carol J. Hibbard: So the fact that we can store products as densely as we can, we think there's a different algebra for why people will use perishables, but we want to make sure before we sell a system that we have tested all the edge cases. So. Long answer. The short answer to your question is that about a year from now, you should look for something.

Speaker Change: So the fact that we can store product is densely as we can we think theres a different.

Speaker Change: Algebra for why people will use.

Perishable, but we wanted to make sure before we sell a system that we've tested all of the edge cases so.

Speaker Change: Long answer the short answer to your question is about a year from now you should you should look for something from us.

Operator: Great. Thanks, Rick. Thank you. One moment for the next question. And our next question will be coming from Mark Delaney of Goldman Sachs. Your line is open. Yes, good afternoon.

Rick: Great. Thanks, Rick.

Speaker Change: Thank you one moment for the next question.

Speaker Change: And our next question is coming from Mark Delaney of Goldman Sachs. Your line is open.

Operator: Thanks very much for taking the questions. The first one was trying to better understand the revenue per system and installation. It went up a fair amount relative to last quarter, and Carol, you mentioned the progress you've made as a company in accelerating some of the installation times. I'm hoping to better understand how we should think about that ratio going forward, and are there opportunities to sustain or even build off of this level of revenue compared to the number of systems you have given all the initiatives you have underway?

Mark Trevor Delaney: Yes, good afternoon, and thanks very much for taking the questions.

Mark Trevor Delaney: First one on just trying to better understand the revenue per system and installation. It went up a fair amount relative to last quarter and Carol you mentioned the progress you've made as a company and accelerating some of the installation times I'm, hoping to better understand how we should think about that ratio going forward and is there.

<unk> to sustain or even build off of this level of revenue compared to the number of systems you have given all the initiatives you have underway.

Operator: Thanks for the question, Mark. So I think the number one thing driving what you're seeing in that ratio is where we are in terms of that deployment lifecycle. So if you think about, we've talked about our revenue curve being the most revenue coming from those systems that are in the middle of installation. And so we'll have a varying degree of that every single quarter. And so it's hard to predict the specific ratio because the other thing that's driving that is each system is not the same size or the same complexity.

Carol: Yes. Thanks for the question Mark So I think that the number one thing driving what youre seeing on that ratio is where we're at in terms of that deployment lifecycle. So if you think about we've talked about our revenue curve being the most revenue coming from those systems that are in the middle of install and so.

Carol: We'll have a varying degree of that every single quarter and so it's hard to predict the specific ratio because the other thing that's driving that is each system is not the same size or the same complexity and so you'll continue to see that vary but as we move forward. Our revenue curve will continue to grow continue to St.

Carol J. Hibbard: And so you'll continue to see that they vary. But as we move forward, our revenue curve will continue to grow, and we will continue to see growth in that revenue. And that will, so that ratio, in terms of what it contributes from a system, will continue to have more than those 37 in deployment at any given time. That's helpful. You know, ties into my next question; we'd better understand what completing the restructuring in your shift to an outsource model may mean, not only in terms of, 3 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 Yeah, so this quarter, we focused on completing the outsourcing that we began last year, and it was focused on the complete restructuring and focus to move to our Sim

Carol: And that revenue and that will so that ratio in terms of what it contributes from a system will continue to have more than 37 in deployment at any given time.

That's helpful.

Carol: So much to my next question could it better understand what completing the restructuring and your shift to an outsourced model may mean, not only in terms of.

Carol: Some of the financial implications like profit margins, but could you also talk about what it might mean for your capacity in terms of how many systems. The company could have in place relative to the.

Yeah.

Carol: It could be working on any one time relative to the 37 that you currently have and installation.

Carol: Yes. So this quarter, we focused on completing the outsourcing that we began last year and it was focused on.

Carol: The complete restructure and focusing <unk> to our platform and so I don't necessarily see the connection of how that necessarily drives to the.

Carol J. Hibbard: And so I don't necessarily see the connection of how that necessarily drives to the scaling, other than we now have a standardized SIMBOT. We're going to be able to continue to deploy innovations along that SIMBOT. But what we did in terms of restructuring really shut down any additional inventory costs associated with all our obsolete bots. Thank you for your question. One moment for the next.

Carol: Scaling other than we now have a standardized and Bob.

Carol: We're going to be able to continue to deploy innovations along that same thought but what we did in terms of restructure really shut down any additional inventory costs associated with all our obsolete.

Speaker Change #100: Understood. Thank you.

Speaker Change #101: Thank you for your question one moment for the next question.

Operator: Our next question is coming from Nicole DeBlase, of Deutsche Bank. Your line is open. Yeah, thanks. Good afternoon, guys.

Speaker Change #101: Our next question is coming from Nicole to blame.

Nicole: With Deutsche Bank. Your line is open.

Nicole: Yes, thanks, good afternoon guys.

Operator: Hello, I wanted to ask a couple of questions on the financials. So the first is that the system's gross margin fell to low double digits. I think you guys talked about in the opening remarks how that was driven by all of this innovation that you're working on. I guess how quickly can that gross margin step up to, you know, a high teens or better level? Is that something you expect in the second half?

Nicole: Hi, Nicole.

Nicole: Hello, I wanted to ask a couple on the financials. So the first is the systems gross margin fell to a low double digit ads I think you guys talked about in the opening remarks, how that was driven by all of this innovation that you're working on I guess, how quickly cannot gross margin step up too.

Nicole: High teens or better level is that something you expect in the second half or will these innovation headwinds continue.

Carol J. Hibbard: Or will these innovation headwinds continue? So, thanks for the question. We did better than expected on gross margins, but, as you indicated, we were stable quarter over quarter. And so there are a couple of items that weigh on our gross margins. So I'll talk about the things that are weighing on those gross margins now and then what we see for the future. So a couple of things are the innovations that we have in the works.

Speaker Change #102: Thanks for the question, we did better than expected on gross margin, but as you indicated we were stable quarter over quarter and so a couple of items that weigh on our gross margin. So I'll talk about the things that are weighing on those gross margins now and then what we see for the future. So a couple of things are the innovations that.

Speaker Change #102: We haven't work, we talked last quarter about focusing on additional resources to ensure quality and deployments for some of those sizeable projects. We havent flow we have the benefit on many of our contracts that we have pass through costs. It's why we're able to pass that through with a profit that remains stable at ways.

Carol J. Hibbard: We talked last quarter about focusing on additional resources to ensure quality deployments for some of those sizable projects we have in flow. We have the benefit on many of our contracts that we have passed through costs.

Carol J. Hibbard: So why are we able to pass that through with a profit that remains stable? Because it weighs on our gross margin. And then lastly, what's weighing on our gross margin is we have several lower margin projects in flow, and I would expect to see those start completing in the second half of this year. And so our 3Q guide reflects stable gross margins. So, as I said, we've got several significant milestones coming up in the second half of the year on some of these big projects.

Speaker Change #102: On our gross margin and then lastly, what's weighing on our gross margin as we had several lower margin projects and flow and I would expect to see those start completing in the second half of this year.

Speaker Change #102: And so our <unk> guide reflects stable gross margin.

Speaker Change #102: As I said, we've got several significant milestones coming out in the second half of the year on some of these big projects and gross margin will improve every quarter, but we expect improvement in the coming years and that that will step up year over year.

Carol J. Hibbard: Gross margin won't improve every quarter, but we expect improvement in the coming years and that that will step up year over year. And as I mentioned earlier, just in terms of the unlocking of gross margin, the single biggest one being the time it takes to deploy our system, and we continue to see steps in the right direction with each one that we're rolling out. Got it. Thanks, Carol.

Speaker Change #102: And as I mentioned earlier, just in terms of the unlock for gross margin. The single biggest one being the time it takes to deploy our system and we continue to see steps in the right direction with each one that we're rolling out.

Carol J. Hibbard: That's clear. And then I guess on the operations services business, we saw a really big step change, like revenue almost doubled sequentially there this quarter. I guess what drove that, and is this new level of revenue in operations services sustainable? Thank you. Yeah, so when you look at the step up, the single biggest driver is we now have 18 systems that are operational; we were at 15 last quarter. Now when you compare that to just a year ago, we were at 9, so a significant step up.

Speaker Change #103: Got it thanks, Carol that's clear and then I guess on the operation services business, we saw a really big step change like on the revenue almost doubled sequentially. There. This quarter I guess, what drove that and is this new level of revenue and operation services sustainable. Thank you.

Carol: Yes, so when you look at the step up the single biggest drivers. We've now have 18 systems that went operational we're at 15 last quarter.

Carol: You compare that to just a year ago, we were at nine so a significant step up.

Carol J. Hibbard: You're going to continue to see that grow. I'll separate software and I'll separate the operations because I think you started with the operations piece of it. We expect revenue from operations to continue to grow as we bring systems online, but you will likely not see the same level that you saw this quarter.

Carol: Youre going to continue to see that grow and I'll I'll separate software and I'll separate the operations because I think you started with the operations piece of it we expect operations to operations revenue to continue to grow as we bring systems online you will likely not see the same level that you saw this quarter, we had several one time.

Carol J. Hibbard: We had several one-time events in the quarter that contributed not only to revenue but to our gross profit margin in the operations area. So a few of those you will not see repeat, but you should expect that revenue to continue to grow. Thank you. I'll pass it on.

Carol: Events in the quarter that were that contributed not only to revenue, but to our gross profit profit in the operations area. So a few of those you will not see repeat but you should expect that revenue to continue to grow.

Speaker Change #104: Thank you I'll pass it on.

Operator: Thank you for your question. One moment for the next question. Our next question will be coming from Ken Newman of Key Bank Capital Markets. Your line is open. Hey guys, thanks for taking the question. Hey, can you hear me?

Speaker Change #105: Thank you for your question one moment.

Speaker Change #106: Next question please.

Speaker Change #106: Our next question will be coming from Ken Newman of Keybanc capital markets. Your line is open.

Ken Newman: Hi, guys. Thanks for taking the question.

Ken Newman: Ken maybe just.

Ken Newman: And then can you hear me.

Operator: Yes, we can hear you. Okay, sure. So first question here, I'm just curious, you know, you're obviously talking about accelerating deployments or initiations here into the back half. Is there any way to kind of size how you think about acceleration to the back half? You did three this past quarter. Is it fair to assume that you kind of return to that, call it four or five types of projects in the back half and accelerate, you know, into 2025?

Ken Newman: Yes, we can hear you.

Ken Newman: Okay sure.

Ken Newman: So first question here I'm just curious.

Ken Newman: Obviously, you're talking about accelerating deployments are initiations here into the back half is there.

Speaker Change #107: Any way to kind of size, how you think about acceleration into the back half you did three this past quarter is it fair to assume that you're kind of return to that call. It four five types of projects in the back half and accelerate into 2025.

Speaker Change #107: And so we don't guide on system starts, but I'll start with where we were this quarter at three so we indicated last quarter that we would see stabilization of our systems starts that allowed the team to focus on all the innovations that Rick talked about and really implement systems standardization for those phase deployment. So that's what you saw.

Operator: And so we don't guide on system starts, but I'll start with where we were this quarter at three. So we indicated last quarter that we would see stabilization of our system starts that allowed the team to focus on all the innovations that Rick talked about and really implement system standardization for those phase deployments. So that's what you saw this quarter.

Speaker Change #107: This quarter.

Carol J. Hibbard: And it is a team effort to make a decision to go ahead and implement a new project or a new SAO. So that's a complex decision between ourselves, our suppliers, and our customers. So our customers also need to manage their operations through all of our installation activities, including decommissioning, legacy systems, and preparing the site. So it's a combined effort when we decide to go in. But given our contract is backlogged with $23 billion, you're going to see the system start stepping up in the second half.

Speaker Change #107: And it is a team effort.

Speaker Change #107: To make a decision to go ahead and implement a new project, our new sow. So thats a complex decision between ourselves our suppliers and our customers. So our customers also need to manage their operations through all of our installation activities, including decommissioning legacy systems preparing the site. So it's a combined effort when we decide.

Speaker Change #107: To go initiate.

Speaker Change #107: But given our contracted backlog.

Speaker Change #107: At $23 billion Youre going to see the systems start to step up in the second half of the year.

Carol J. Hibbard: Okay, that's helpful. I appreciate that. And then for my second question, you know, I think you had positive free cash flow of just over $18 million this quarter. Is there anything that would prevent you from being free cash flow positive for the full year as it relates to some of the innovation spending that you guys are expecting for the rest of this year or any of the other restructuring actions you might be considering?

Speaker Change #108: Okay. That's helpful. I appreciate that and then for my second question.

Speaker Change #108: I think you had positive free cash flow of just over $18 million this quarter.

Speaker Change #108: Is there anything that would prevent you from being free cash flow positive for the full year as it relates to some of the innovation spending that you guys are expecting for the rest of this year or any of the other restructuring actions you might be considering.

Carol J. Hibbard: Yeah, as we look to the end of the year, we're expecting we don't guide on cash either, but you should expect to see positive working capital as we head to the back half of the year. Each quarter, there could be some lumpiness, I'll say in that because depending on what maturity level of the systems we have in deployment, just as I described the revenue curve, the cash curve also mirrors that.

Yeah as far as.

Speaker Change #108: We look to the year, we're expecting we don't guide on cash either but you should expect to see positive working capital as we head to the back half of the year each.

Speaker Change #108: Each quarter, there could be some lumpiness, all saying that because depending on what maturity level of the systems. We have in deployment just as I described the revenue curve being cash curve also mirrors that and so we could have some quarters, where we are really heavy in terms of the final installation that might be a driver on cash as a reminder, we're very front loaded.

Carol J. Hibbard: And so we could have some quarters where we are really heavy in terms of the final installation, and that might be a driver on cash. As a reminder, we're very front loaded in terms of when we sign projects. So you could still see some lumpiness, but we are on a trajectory for positive working capital going forward. Thank you.

Speaker Change #108: In terms of when we signed projects. So you could still see some lumpiness, but we are on a trajectory for a positive working working capital going forward.

Speaker Change #108: Thanks.

Speaker Change #109: Thank you one moment for the next question.

Operator: One moment for the next question. Our next question is coming from Greg Palm of Craig Hillam. Your line is open. Yeah, thanks for taking the questions.

Speaker Change #109: And our next question is coming from Greg Palm of Craig Hallum. Your line is open.

Operator: I'm curious, you know, we've been talking about driving timelines down for some time now, and you've been really successful at doing that. And I'm just curious how much of that is, you know, in your hands versus at the, you know, maybe expense of some of your outsourcing partners? And do you think that reducing the timelines at the expense of margins means that as you continue to get better, you might not need, I don't know, as many folks that are paid overtime or you know, any of the other related costs to ensure that you have happy customers and get a system in a shorter amount of time? Yeah, thanks for the question. I'll start with the first part, in terms of how much is in our hands and versus all of our partners.

Gregory William Palm: Yeah. Thanks.

Gregory William Palm: For taking the questions I'm curious you know we've been talking about driving time went down for some period and you've been really successful at doing that and I'm. Just curious how much of that is in your hands versus at the expense of some of your outsourcing partners do you think that you are reducing the timelines.

The expense of margins, meaning that as you continue to get better that you might not need on our homes. Many folks that are paid over time or any of the other related costs to ensuring that you have happy customers and get our system at a shorter amount of time.

Carol J. Hibbard: It is a joint effort, so we're there helping to ensure the management of the project. Symbiotic is also responsible for the planning up front.

Speaker Change #110: Yes, thanks for thanks for the question.

Speaker Change #110: I'll start with the first part in terms of how much is in our hands and versus all of our partners. It is a joint effort, so where they're helping to ensure the management of the project symbiotic and is also responsible for planning upfront.

Carol J. Hibbard: So you've got to start the system right and make sure you've got all the planning in place so that material shows up. And then all of our partners need to deliver on the schedules that we lay out. So it's a combined effort between all of us.

Speaker Change #110: So you've got to start the system right and make sure you've got all the planning in place that that material shows up and then all of our partners need to deliver to the schedules that we lay out so it's a combined effort across ourselves and that our customers certainly have a play in that too and just ensuring the readiness.

Carol J. Hibbard: And then our customers certainly have a play in that too, just ensuring the readiness. A fair point in terms of the timelines we've achieved, so we have talked about wanting to make sure we're putting the resources on a certain project so that we can deploy on time and make sure we are deploying a very high quality project. I'd say as you see us moving through our learning curve and we continue to learn at every single site installation, as do our suppliers, you're going to see that we'll continue to improve that timeline without needing the additional resources to ensure schedule. Yeah, okay, that makes sense.

Fair point in terms of the timelines we've achieved so we have talked about wanting to make sure we're putting the resources.

On a certain projects so that we can deploy on time and make sure. We are deploying a very high quality project I'd say is you'd see us moving towards our going through our learning curve and we continued to learn at every single site installation as do our suppliers you're going to see that will continue to improve that timeline with.

Speaker Change #110: Meeting the additional resources to ensure schedule.

Operator: And as we think about, you know, sizing up that non-ambient opportunity, I know you've talked about that, that Tam or that Sam, you know, in the past, but, you know, just given your thoughts around maybe having, you know, some orders or some facilities, can you at least size up what type of share expansion is possible? Like, could you theoretically double the size of the opportunity with some of your current customers? I mean, is it more? Is it significantly less? I'm not expecting an exact answer.

Speaker Change #111: Yes, okay that makes sense.

Speaker Change #111: And as we think about sizing up that non ambient opportunity I know you've talked about that Tam or that Sam.

Speaker Change #111: Past, but.

Speaker Change #112: Just given your thoughts around maybe having some orders or some facilities can you at least.

Speaker Change #112: Size up what type of share expansion as possible like could you theoretically double the size of the opportunity with some of your current customers. I mean is it more is it significantly less I'm not expecting an exact answer but it would just be curious to know what that sort of wallet share expansion opportunity is again with your current customers not necessarily.

Operator: But it would just be curious to know what that sort of wallet share expansion opportunity is, again, with your current customers, not necessarily with customers that you haven't won to date with something else. So I'll start, and then Ricchiuti shared his thoughts. So we have not put, you know, a number out there in terms of sizing the TAM for our existing customer base, but we've also indicated that our current backlog does not include that particular item.

Speaker Change #112: <unk> with customers that you haven't won to date with something else.

Speaker Change #113: So I'll start and then Rick can sheraton spot, so we have not but.

Speaker Change #113: A number out there in terms of sizing that Tam from our existing customer base.

Speaker Change #113: But we've also indicated that our current backlog does not include <unk>.

Speaker Change #113: That particular opportunity and we know that each of our customers has the opportunity to go ahead and expand to non ambient and so we consider that a significant opportunity for somebody go.

Operator: And we know that each of our customers has the opportunity to go ahead and expand to non-ambient, and so we consider that a significant opportunity for Symbiotica. Yeah, I guess I, I think the team is pretty large.

Speaker Change #113: Yes.

Speaker Change #113: I guess.

Speaker Change #114: I think the Tam is very large.

Speaker Change #114: Probably.

Richard B. Cohen: Shouldn't be more specific than that right now. There are more ambient facilities than there are refrigerated facilities, so that's one thing. But the economics of refrigeration are such that if you have a 200,000 square foot perishable building, and you want to expand it, and maybe you can't expand it enough, and you have to build a whole new building.

Speaker Change #115: Shouldnt be more specific than that right now.

Speaker Change #115: There are more there are more ambient facilities than there are refrigerated facilities. So thats one thing.

Speaker Change #115: But the economics.

Speaker Change #115: Refrigerated.

Speaker Change #115: Are such that if you have a 200000 square foot perishable building.

Speaker Change #115: And you want to expand it and maybe you can expand it enough.

Speaker Change #115: Have to build a whole new building our system is a very good solution for that.

Richard B. Cohen: Our system is a very good solution for that. So, you know, if we had a $23 billion backlog on ambient, I would say perishables, probably. Not as big as our existing backlog, but it's very large. Yeah, okay. I appreciate that. And if I could just sneak in one more clarification, Carol, I think you said to expect growth in operation services revenue going forward. Was that sequentially off of the 20 million in revenue that you just put up in Q2? No, it's because there are some one-time events that I referred to.

Speaker Change #115: So.

Speaker Change #115: If we have a $23 billion backlog.

Speaker Change #115: On <unk> I would say perishables probably.

Speaker Change #115: Not as big as our existing backlog, but it's very large.

Speaker Change #116: Yeah, Okay, I appreciate that and if I could just sneak in one more clarification Karel I think you said.

Karel: <unk> growth and operation services revenue going forward was that sequentially off of the $20 million in revenue that you just put up in Q2.

Karel: No because because there are some one time events that I referred to so there's a.

Operator: So there's a, you know, percentage of this quarter's revenue that we put up for operations that won't be, Okay. So growth on a year over year basis, not sequentially. That's right. Okay. All right. Thanks for that. I will leave it there.

Percentage of this quarters revenue that we put up for operations that won't be repeatable.

Speaker Change #117: Got it so growth on a year over year basis, not sequentially. That's right. That's right, yes, okay, alright, thanks for that I will leave it there. Thanks.

Speaker Change #117: Thanks.

Operator: Thanks. Thank you. One moment for the next question, and our next question will be coming from Matt, excuse me, Mike Latimore of North Capital Markets. Your line is open.

Speaker Change #118: Thank you one moment for the next question.

Speaker Change #118: And our next question will be coming from that excuse me, Mike Lattimore of North capital markets. Your line is open.

Operator: All right, great. Thanks. Yeah, congrats on the results and outlook here. On BreakPak, can you talk a little bit more about the prospects there? You know, what are you seeing from current customers? Is it opening up, you know, more new logo discussions? And maybe just clarify, is it in, you know, kind of the Walmart backlog or not?

Michael James Latimore: Alright, great. Thanks, Congrats on the results and outlook here.

Michael James Latimore: On break pack can you talk a little bit more about the prospects. There what are you what interest levels are you seeing from current customers is it opening.

Michael James Latimore: More new logo discussions.

Michael James Latimore: And maybe just clarify is it in kind of the Walmart backlog or not at this point.

Carol J. Hibbard: So I'll start by saying BreakPak is considered part of the Wal-Mart backlog, so Wal-Mart considers BreakPak as one of the elements that they'll continue to go deploy. I'd say from a BreakPak perspective, we indicated in our opening remarks that this will be our second BreakPak, so we also indicated we are offering BreakPak for sale. We think there is a large market for BreakPak for all of our customers, and as we've talked about before, BreakPak is also a part of GreenBox.

Speaker Change #119: So I'll start.

Speaker Change #119: Break pack is considered part of the Walmart backlog, so Walmart considers.

Speaker Change #119: <unk> is one of the elements that they'll continue to go deploy it.

Speaker Change #120: I'd say from a brake pad perspective.

Speaker Change #120: We indicated in our opening remarks that this will be our second break pack. So we also indicated we are.

Speaker Change #120: Offering brake pads for sale, we think there is a large market for brake pack for all of our customers and I think we've talked about before our break pack is also a part of green box. It could be part of all of the Green box customers that are coming in outside of that I'm sure. There is additional market or break pack customers.

Carol J. Hibbard: It could be part of all of the GreenBox customers that are coming in. Outside of that, I'm sure there's an additional market for BreakPak customers beyond who's in our current customer base. Yeah, so the breakback in the Walmart application is, or anything that goes into the store that's not a full case. But if you think of Walmart, every Walmart supercenter has a pharmacy and a drugstore. This is a perfect application for any of the big drugstore companies.

Speaker Change #120: Beyond who is in our current customer base.

Speaker Change #121: Yes, so the brake pack in the Walmart application as well.

Speaker Change #121: Or anything that goes into the store that's not a full case, but if you think.

Speaker Change #121: All of our.

Speaker Change #121: Every Walmart supercenter as a pharmacy in a drugstore.

Speaker Change #121: This is a perfect application for any of the big drugstore companies.

Richard B. Cohen: It could also be interesting for dollar stores. So, we think this is a very big market that we really haven't talked much about because our BreakPak solution is very different from anything on the market. And it takes, and the reason it's different is because it uses a lot of software, a lot of vision, and a lot of the smarts that we have in our SimBot. We now have a Minibot that does the same thing. Actually does, and it does some things in a miniature version that is even better than the SimBot in terms of handling small packages.

It's also could be interesting for dollar stores. So we think this is a very big market that we really haven't talked much about because our brake pad solution is very different.

Speaker Change #121: They go out in the market and it takes and the reason it's different is because it uses a lot of the software a lot of the vision.

Lot of smart that we have in our Simba, we know over many bought it does the same thing actually does.

Speaker Change #121: It does some things in a miniature version that even better than the sandbox in terms of healing small packages. So we think.

Richard B. Cohen: So, we think that's a big market, but we haven't been to it yet. I don't think a lot of people know about what this capability is yet, but they'll find out very soon.

Speaker Change #121: That's a big market, but we haven't been.

Speaker Change #122: I don't think a lot of people know about what this capability as yet, but they will find out very soon.

Carol J. Hibbard: And then on the, just the ability to do more system starts here. Does that require kind of continued, let's say, blocking and tackling or refinement of outsourcing? Or are there others?

Speaker Change #123: Got it and then on the.

Just.

Carol J. Hibbard: Will there be some other, you know, kind of step function requirements in terms of outsourcing efficiency? No, our ability to start new systems is not dependent on outsourcing. We focused on outsourcing to scale, and we believe we've achieved that. So we are outsourced and have the capability to continue to expand. I'd say the slowing that we saw for this quarter on new starts is going to change in the back half of this year.

Speaker Change #123: Our ability to do more systems starts here.

Does that require kind of continued.

Speaker Change #123: Let's say blocking and tackling or refinement of outsourcing or are there others.

Speaker Change #123: <unk> be some other kind of step function requirements in terms of sourcing efficiency.

Speaker Change #123: No our ability to start new systems is not dependent on outsourcing we focused on outsourcing to scale and we believe we've achieved that.

Speaker Change #123: So we are we are outsourced and have the capability to continue to expand I'd say the slowing that we saw for this quarter on new starts that's going to change in the back half of this year and you'll see that number continue to grow.

Carol J. Hibbard: And you'll see that number continue to grow. Just reflective of the $23 billion backlog we have. And when you look at the timing of when we plan on deploying that, the system starts, will start to pick up. Yeah. Great. Thank you.

Speaker Change #123: Just reflective of the $23 billion backlog we have.

Speaker Change #123: And when you look at the timing of when we plan on deploying that the system starts we will start to pick up.

Speaker Change #124: Okay great.

Speaker Change #125: Alright, thank you.

Speaker Change #125: Thanks.

Operator: Thank you. One moment for the next question. And the next question will be coming from Robert Mason, Average Line is open. Yes, good afternoon.

Speaker Change #126: Thank you one moment to the next question.

Speaker Change #127: And the next question will be coming from.

Speaker Change #127: Robert Mason of Baird. Your line is open.

Operator: Just a question around Greenbox. How do you think about their ability to quickly ramp up? Just given the current schedule of current customers you have, just trying to think about how if they were to add, whether it be CNS or if they add other customers, just how quickly you think that, you know, they could layer incremental start. So, as we talk about Greenbox in our first deployment next quarter, we are identifying the management team. So we're picking the leaders to put in place.

Robert W. Mason: Hi, yes, good afternoon.

Robert W. Mason: Just a question around Green box, how do you think about their ability to quickly ramp up.

Robert W. Mason: Just given the current schedule of current customers you have.

Robert W. Mason: I'm just trying to think about how if they were to add whether it be CNS, where if they add other customers just how quickly you think that.

Robert W. Mason: They could layer incremental starts.

Robert W. Mason: On top of the existing schedule.

Robert W. Mason: So as we talk about Green box on our first deployment next quarter.

Robert W. Mason: So we are identifying the management team. So we're picking the leaders to put in place Green box will then go ahead and begin ramping up with the additional resources and so they are in the process of growing that team and we believe our ability to ramp green box will be over.

Carol J. Hibbard: Greenbox will then go ahead and begin ramping up with the additional resources. And so they're in the process of growing that team. And we believe our ability to ramp up Greenbox will be over the course of the next several quarters. You'll continue to see new additions to our Greenbox deployment. And just to clarify, when we talked about the first revenue from this first, Cream Box Order, we're talking about revenue in the June quarter. Okay, okay, very good. And just maybe a clarification question about breakback.

Robert W. Mason: The course of the next several quarters, you'll continue to see new editions to our Green box.

Robert W. Mason: Deployments.

Robert W. Mason: And just to clarify when we talked about first revenue from this first remarks order, we're talking about revenue in the June quarters.

Richard B. Cohen: It sounds like you can market that system to customers who do not or would not necessarily be required to already own or have one of your current case handling systems. Am I understanding that correctly? So they would have a, they would have a very large, they would have; most people doing breakbacks still have to store a box. And at some point, you take the box, you cut it open, and you dispense the items in the box. So they don't necessarily need a break pack.

Speaker Change #128: Okay, Okay very good.

Speaker Change #128: And just maybe a clarification question around brake pad.

Speaker Change #128: It sounds like that you can market that system to customers who.

Speaker Change #128: Do not or would not necessarily be required to already own or have.

Speaker Change #128: One of your current case handling systems I understand understanding that correctly.

Speaker Change #128: So they would have they would have a various they would have.

Speaker Change #128: Most of the people and doing brake pad.

Speaker Change #128: Still have to store box.

Speaker Change #128: And at some point you take the box you cut it opened in new dispense the items in the box. So they don't necessarily need a break packed they don't necessarily need a storage solution as large as some of the ones that we deployed.

Richard B. Cohen: They don't necessarily need a storage solution as large as some of the ones that we deployed, but they still have to store boxes. They'll still need the regular SimBots, and they'll still need something to probably palletize the totes when they come out. So it could be a smaller system, but they'll still need part of our basic system to make it work. Okay, very good. Thank you.

Speaker Change #128: But they still have to store boxes, they will still need the regular <unk>.

Speaker Change #128: And they'll still need something that probably palletize the totes when they come out so it could be a smaller system, but they'll still need part of our basic system to make it work.

Speaker Change #129: Okay very good thank you.

Speaker Change #129: Yeah.

Operator: Thank you for your questions. One moment for the next question. Our next question is coming from Joe Giordano of T.D.

Speaker Change #130: Thank you for your question.

Speaker Change #131: One moment for the next question.

Our next question is coming from Joe.

Speaker Change #131: Giordano.

Joseph Craig Giordano: D. Cowen your line is open.

Operator: Cowan, your line is open. Hi, everyone. Good evening. I guess I'll start, Rick, on the SimBot and some of the innovations you put in there now that you're standardized on it. Just curious, of the 18 sites that you're running, I assume that there are bots that have been deployed that are not, like the most, Vision Enabled using the current technology. Like, what's your response? What's your obligation to go back and kind of backward integrate the newest and greatest into existing facilities? Yeah, so, Joe, we were very disciplined.

Joseph Craig Giordano: Hi, everyone.

Joseph Craig Giordano: Good evening, I guess I'll start Rick on the sandbox and some of the innovations you put in there now that youre standardize on it.

Joseph Craig Giordano: Just curious of the 18 sites that youre running I assume that Theres box.

Speaker Change #133: Been deployed that are not like the most vision enabled using current technology like what's your response, what's your obligation to go back and kind of backward integrate like the newest and greatest into existing facilities.

Speaker Change #134: Yes, so so Joe we were.

Speaker Change #135: Very disciplined.

Richard B. Cohen: A long time ago, about what we sold. And there was a period before this big growth spurt where we knew we were going to change the bot. So basically, there are about four warehouses that have pre-SEMBOTs, and part of the restructuring charge is cleaning up everything else. But all of our so one and one of the reasons we're going to go faster is everything is standardized. Now, there is no, there are no legacy bots, there's there is, there are four early sites.

Speaker Change #135: Long time ago about.

Speaker Change #135: What we sold and there was a period before this big growth spurt.

Speaker Change #135: We knew we were going to change the bot so basically.

All of this.

Speaker Change #135: There are about four warehouses that have.

Speaker Change #135: <unk> months.

Speaker Change #135: And part of the restructuring charges cleaning up everything else.

Speaker Change #135: All of our so one of the reasons, we're going to go fast or is everything is standardized now there is no. There are no legacy bonds. There is there is there are four early sites.

Richard B. Cohen: One of them is a CNS site, there's a couple other sites that are early bots, but going forward, we made the decision, we took the lead, this is the way we want to run the business, and so we don't want to always be dealing with all these different versions of BOTS. So all of the Walmart systems, for instance, have the same BOTS, and everybody going forward for the last two years now has the same box.

Speaker Change #135: One of US is CNS side, there's a couple of other sites that are early bonds, but going forward. We made the decision. We took the charge. This is the way we want to run the business and so we do want.

Speaker Change #135: So I have two.

Speaker Change #135: Please.

Speaker Change #135: Dealing with all of these different versions of bought so all of the Walmart systems for instance, MSA bonds.

Speaker Change #135: Everybody going forward for the last two years now has the same bonds.

Richard B. Cohen: So we made that decision, we've taken the charge, and we're very standardized. And then on Greenbox with the CNS site, is this essentially like an outsourced single-tenant site where CNS is going to utilize the entire capacity? I'm just curious how you see the balance of Greenbox on leveraging existing large customers for that sort of purpose versus multi-tenant sites.

Speaker Change #135: So we made that decision we've taken the charge, where we're very standardized known.

Speaker Change #136: Perfect and then on re box with the CNS sight is this essentially like an outsourced single tenant sites.

Speaker Change #136: And we're seeing us is going to run the toddler.

Speaker Change #136: You utilize the entire capacity and just curious like how you see the balance of Green box link on leveraging existing large customers for that sort of FERC versus multi tenant sites and so those multi tenant sites do you feel like Theres still.

Richard B. Cohen: And so those multi-tenant sites, do you feel like there's still software engineering capabilities that need to be developed to really handle the onboarding and offboarding? Yeah, so this is primarily going to be a CNS-only site, but not necessarily in the future. So if we have extra capacity, we'll bring other customers, and Greenbox will bring other customers into the site. One of the things that makes robotics so special in this space is that we have perfect inventory management. And by perfect, when we ship a million boxes in a week, we might have one mistake, and we can't figure out how, but it's six or seven sigma accuracy.

Speaker Change #136: Like software engineering capabilities that need to be developed to really handle like the onboarding off boarding smoothly.

Speaker Change #136: Yeah. So so this is primarily going to be a CNS only site.

Not necessarily in the future. So we have extra capacity will bring other customers green box and bring other customers into the site.

Speaker Change #136: And one of the things that make symbiotic so special in this space as well perfect inventory management.

Speaker Change #136: And by perfect when we ship a million boxes a week.

Speaker Change #136: One mistake and we can't figure out how but at.

Speaker Change #136: Six six or seven Sigma accuracy, and so there'll be some onboarding of additional customers but.

Richard B. Cohen: So there'll be some onboarding of additional customers. We have that pretty well figured out, and so this first site will either be 100% CNS, or it could be 80% CNS and other customers if we have room. And so the model would be for customers could look at CNS and say, "Oh, now I understand the green box." If I want to take a building, and I could be an anchor tenant and say, I'll take 50% of the building in the green box, and you'll sell the rest of the building.

Speaker Change #136: We have that pretty well figured out.

Speaker Change #136: And so this first site will could be a 100% CNS or it could be 80% CNS and other and other customers if we have room.

Speaker Change #136: And so the model would be for <unk>.

Speaker Change #136: Customers could look at CNS and say Oh, now I understand green box, if I want to take a building and it can be an anchor tenant and say I'll take 50% of the building a green box Youll go sell the rest of the building that's exactly what we want out of the marketplace.

Richard B. Cohen: That's exactly what we want out of the market. So it could be an anchor customer, or in some places, it could be 100 customers, and no customer is bigger than 10% of the capacity. So that's what we're going to begin selling out there now. But the technology as it currently exists can support, in a theoretical facility, lots of different customers with no anchor, and they're all really small. You know, I would imagine that the population changes fairly often; if, you know, businesses are moving and expanding, or people are going away, the capability exists to bring on and bring off customers to a site like that. It already exists.

Speaker Change #136: So it could be an anchor customer or in some places it could be it could be 100 customers and no customer is bigger than 10% of the capacity. So that's that's that's what we're seeing.

Speaker Change #136: Im going to begin selling out there now.

Speaker Change #136: The technology as it currently exists can support like.

Speaker Change #136: Theoretical facility, that's lots of different customers with no anchor then they are all really small.

Speaker Change #136: I would imagine that that population changes fairly often this businesses are moving in and expanding our team we're going away the capability exists to bring on bring off customers into a site like that already exist.

Richard B. Cohen: Yeah, so we would have to build a management team to handle the customer relations. But in our structure, you could have 100 boxes in a row, and we would have perfect traceability. It could be 100 different customers owning 100 boxes in an aisle; they have perfect traceability.

Speaker Change #137: Yes, so we would have to build a management team to handle the customer relations.

But in our structure you could have a 100 boxes in a row and we would have perfect.

Speaker Change #137: Traceability it could be 100 different customers owning 100 boxes of an aisle.

Richard B. Cohen: So that part of it, the technology is already there. We just have to build out customer management. That's what I figured.

Speaker Change #137: Perfect traceability, so that part of it the technology is already there.

Speaker Change #138: We have to build out the customer management fees, yes, that's what I figured okay. Thank you.

Speaker Change #138: Thanks.

Speaker Change #139: Thank you.

Speaker Change #140: And one of them for the next question.

Operator: Okay, thank you. Thank you. And one moment for the next question. And our next question is coming from Derek Soderberg of Cantor Fitzgerald.

Speaker Change #140: And our next question is coming from Derek.

Derek: <unk> of Cantor Fitzgerald Your line is open.

Operator: Your line is open. Yeah, thanks for taking my questions. Just piggybacking off of one of the last questions. With the new hardware and software innovations, will all of those be pushed out to systems currently in operation and any new systems? Or is it more of an optional add-on for customers?

Derek: Yes, thanks for taking my questions just picking back piggybacking off of one of the last questions.

With the new hardware and software innovations will all of those be pushed out two systems currently in operation.

Derek: Any new systems or is it more of an optional add on for customers and then I'm wondering whether or not the.

Carol J. Hibbard: And then I'm wondering whether or not any of the new hardware or software innovations turn into either cash payments or upside to existing contract terms or anything like that. And then I've got a follow-up. So I'll start and then Rick can add at the end. So it depends.

Derek: Any of the new hardware and software innovation turn into either cash payments are upside to existing contract terms or anything like that and then I've got a follow up.

Carol J. Hibbard: And so the innovations that we have in Flow typically focus on several things. We're innovating by looking at R&D and additional enhancements to our system. And so we do view those as potential opportunities in the future for additional revenue and additional sales. We also continue to innovate and look at R&D for how we're going to make the systems more efficient from an operational perspective and focus on reliability. So some of those enhancements are being rolled out to the systems we have in flow today and will be part of what's in our contracted backlog.

So I'll start and then if I can add at the end so.

Speaker Change #141: It depends and so the innovations that we have in flow. We typically focus on several things we're innovating for for looking at R&D and additional enhancements to our systems and so we do view those as potential opportunities in the future for additional revenue and additional sales we are.

Speaker Change #141: Also continue to innovate and look at R&D for how we're going to make the systems more efficient from an operational perspective and focus on reliability. So some of those enhancements are being rolled out to be.

Speaker Change #141: Systems, we havent flow today and will be part of what's in our contracted backlog and then the third which we've talked quite a bit about is we're focused on innovations that will drive cost out of either system deployment, our system operation and so there is a mix in there and so some of the innovation that we're working on absolutely disturbing to our current customers.

Carol J. Hibbard: And then the third, which we've talked quite a bit about, is that we're focused on innovations that will drive costs out of either system deployment or system operation. And so there's a mix in there, and some of the innovation that we're working on is absolutely driven to our current customer set, but others would be growth going forward. Yeah, the other thing is that we've always contemplated that if we can make the bonds go twice as fast, and you need half as many bots. Who gets that interview?

Speaker Change #141: But others would be growth going forwards.

Speaker Change #141: The other thing is that we've we've always contemplated that.

Speaker Change #141: And if we can make.

The bonds go twice as fast.

Speaker Change #141: And you need half as many bonds.

Speaker Change #141: Who gets that income.

Richard B. Cohen: And so either we charge for reduced maintenance, or if we take and we have the same number of bots that go twice as fast, and the palatizing cells can do twice as much work, we would be entitled to a recurring income stream for the additional work that we're doing. So that's always been contemplated, but we're not there yet. Got it. And then, as my follow-up, just to clarify some of your commentary, Carol, I think you said there are some lower-margin projects out there.

Speaker Change #141: And so either we charge for reduced maintenance or if we take and we have the same number of bots to grow twice as fast.

Speaker Change #141: And the Pelletizing cells can do twice as much work.

Speaker Change #141: We would be entitled to.

Speaker Change #141: A recurring income stream for the additional work that we're doing so that's always been contemplated but we're not we're not there yet.

Speaker Change #142: Got it and then as my follow up just to clarify some of your commentary Carol I think you said there are some lower margin projects out there can you talk a bit about what's changing on the project front that would characterize a project as low margin at this point.

Richard B. Cohen: Can you talk a bit about what is changing on the project front that would characterize a project as low margin at this point and what kind of step up in gross margins we might see after, I guess, some of these low margin projects are worked through this year?

What kind of step up in gross margins might we see after I guess some of these low margin projects are worked through this year I'm just looking for you to kind of clarify some of that thanks.

Carol J. Hibbard: I'm just looking for you to kind of clarify some of that. Thank you. Yeah, so we've got projects in flow that were our earlier innovation projects. Some of them, fairly early systems, and proof of concepts are included in there.

Carol: Yeah, So we've got projects and slowed that where our earlier innovation projects. Some of them fairly early systems proof of concepts are included in there and some of them as they burn off youll start to see our gross margin step up I'm not going to tie specific timeline to those because the schedules Barry.

Carol J. Hibbard: And so as they burn off, you'll start to see our gross margin step up. I'm not going to tie a specific timeline to those because the schedules vary, but you should expect next year's gross margin to start rising. Got it.

Carol: But you should expect into next year gross margin to start stepping up.

Carol J. Hibbard: I really appreciate it. Thanks, Derek. Thank you. And this does conclude the Q&A session for today. I would now like to turn the call back over to Jeff for closing remarks. Please go ahead.

Speaker Change #143: Got it really appreciate it thanks.

Speaker Change #144: Thanks Derek.

Speaker Change #144: Thank you and this does conclude the Q&A session for today I would now like to turn the call back over to Jeff for closing remarks. Please go ahead.

Jeff Evanson: Thank you, Lisa. And thank you everyone for joining our call tonight. We appreciate your interest in Symbiotic, and we look forward to seeing you online for our Investor Day. Goodbye. This does conclude today's conference call. Thank you for joining us. You may all disconnect.

Thank you Lisa and thank you everyone for joining our call Tonight. We appreciate your interest and symbiotic and we look forward to seeing you online for our Investor Day Goodbye.

Speaker Change #144: Okay.

Speaker Change #145: This does concludes today's conference call. Thank you for joining you may all disconnect.