Q3 2025 Symbotic Inc Earnings Call

August 6, 2025

Operator: Have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by 1 on your telephone keypad. If you would like to withdraw your question, kindly press star 1 again. It is now my pleasure to turn today's call over to Mr. Charlie Anderson, Vice President of Investor Relations. Please go ahead.

Operator: Hands up in place a mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, kindly press star one again. It is now my pleasure to turn today's call over to Mr. Charlie Anderson, Vice President of Investor Relations. Please go ahead.

Charlie Anderson: Thank you. Hello. Welcome to Symbotic's Q3 of fiscal year 2025 Financial Results Webcast. I'm Charlie Anderson, Symbotic's Vice President of Investor Relations. Some of the statements that we make today regarding our business operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our Form 10-K, including the risk factors. We undertake no obligation to update any forward-looking statement. In addition, during this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, which is distributed and available to the public through our investor relations website located at ir.symbotic.com.

Charlie Anderson: Thank you. Hello. Welcome to Symbotic's third quarter of fiscal year 2025 financial results webcast. I'm Charlie Anderson, Symbotic's Vice President of Investor Relations. Some of the statements that we make today regarding our business operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our Form 10-K, including the risk factors. We undertake no obligation to update any forward-looking statement. In addition, during this call, we will present both GAAP and non-GAAP financial measures. The reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, which is distributed and available to the public through our investor relations website located at ir.symbotic.com.

Charlie Anderson: On today's call, we're joined by Rick Cohen, Symbotic's founder, chairman, and chief executive officer, and Carol Hibbard, Symbotic's chief financial officer, as well as Izzy Martens, our CFO successor designate, who will become CFO effective 9 August 2025. These executives will discuss our third quarter fiscal year 2025 results and our outlook, followed by Q&A. With that, I'll turn it over to Rick to begin. Rick.

Charlie Anderson: On today's call, we're joined by Rick Cohen, Symbotic's Founder, Chairman, and Chief Executive Officer, and Carol Hibbard, Symbotic's Chief Financial Officer, as well as Izzy Martins, our CFO Successor Designate, who will become CFO effective 9 August. These executives will discuss our Q3 fiscal year 2025 results and our outlook, followed by Q&A. With that, I'll turn it over to Rick to begin. Rick?

Rick Cohen: Thank you, Charlie. Good afternoon, thank you for joining us to review our most recent results. In Q3, we once again delivered strong financial results while driving key operational progress. Revenue increased by 26% year-over-year, importantly, we maintained improved margins thanks to disciplined cost control and solid project execution. I want to commend our team for their continued focus on high-quality delivery. Our automation systems are also showing tangible results for our customers. Adoption continues to scale, we recently set a record processing over 6.5 million cases in a single day through our operational systems. This level of throughput highlights the real value we're delivering to our customers. On the development side, we also made solid progress on our integration of Advanced Systems and Robotics for ASR business.

Rick Cohen: Thank you, Charlie. Good afternoon, and thank you for joining us to review our most recent results. In the third quarter, we once again delivered strong financial results while driving key operational progress. Revenue increased by 26% year over year, and importantly, we maintained improved margins thanks to disciplined cost control and solid project execution. I want to commend our team for their continued focus and high-quality delivery. Our automation systems are also showing tangible results for our customers. Adoption continues to scale, and we recently set a record processing over six and a half million cases in a single day through our operational systems. This level of throughput highlights the real value we're delivering to our customers. On the development side, we also made solid progress on our integration of Advanced Systems and Robotics, or ASR, business.

Rick Cohen: Notably, we've now identified sites for the development of the first prototypes of the next-generation solution. Installation is expected to begin early next calendar year, keeping us on track with our roadmap. From a technology standpoint, we're driving innovation across the stack. A key example of this is our teleoperations capability, which enables remote operators to use our bots to reposition misaligned cases that have shifted out of place during inbound processing. Before this capability, these tasks sometimes required manual intervention during scheduled downtime. Recently, we reached an important milestone, our first operational day at a large site with zero manual repositioning. Using machine learning, we are training our bots to automatically replicate these tasks, minimizing both downtime and labor needs. Our goal remains clear. Smarter bots equipped with cameras, LiDAR, and advanced GPUs enabling even greater efficiency and value.

Rick Cohen: Notably, we've now identified sites for the development of the first prototypes of the next-generation solution. Installation is expected to begin early next calendar year, keeping us on track with our roadmap. From a technology standpoint, we're driving innovation across the stack. A key example of this is our teleoperations capability, which enables remote operators to use our bots to reposition misaligned cases that have shifted out of place during inbound processing. Before this capability, these tasks sometimes required manual intervention during scheduled downtime. Recently, we reached an important milestone: our first operational day at a large site with zero manual repositioning. Using machine learning, we are training our bots to automatically replicate these tasks, minimizing both downtime and labor needs. Our goal remains clear: smarter bots equipped with cameras, LiDAR, and advanced GPUs, enabling even greater efficiency and value.

Rick Cohen: Finally, on the innovation front, yesterday, we announced a major product milestone, the debut of our next-generation storage structure. This marks what I believe is one of the most significant product upgrades in our company's history. This new structure substantially increases our already exceptional storage density, allowing customers to store considerably more products in the same space and/or reduce their overall storage footprint. A more compact structure also speeds case handling as bots travel shorter distances. Equally important, the new structure introduces preassembled, precision manufactured subcomponents, reducing on-site assembly parts by over 90%. It also features a unique leveling system that minimizes floor preparation. Together, we believe these improvements will accelerate deployment and enhance scalability, thus making the next-generation structure a game-changer for our business.

Rick Cohen: Finally, on the innovation front, yesterday we announced a major product milestone: the debut of our next-generation storage structure. This marks what I believe is one of the most significant product upgrades in our company's history. This new structure substantially increases our already exceptional storage density, allowing customers to store considerably more products in the same space and/or reduce their overall storage footprint. A more compact structure also speeds case handling as bots travel shorter distances. Equally important, the new structure introduces preassembled precision manufactured subcomponents, reducing on-site assembly parts by over 90%. It also features a unique leveling system that minimizes floor preparation. Together, we believe these improvements will accelerate deployment and enhance scalability, thus making the next-generation structure a game changer for our business.

Rick Cohen: Additionally, we plan to apply this structure across all aspects of the supply chain, from distribution centers to perishable goods environments to e-commerce and micro-fulfillment hubs. Customer response to next-generation storage has been very positive. In fact, we began signing projects that include the new storage structure in our fiscal Q3. We believe this next-gen storage structure supports our path to unlocking even higher margins and long-term value creation. In summary, Symbotic remains well-positioned. Our strong and growing product portfolio spans multiple levels of the supply chain, supported by a $22.4 billion backlog and a healthy balance sheet. Thank you to our team for their outstanding work this quarter and to our customers and shareholders for their continued support.

Rick Cohen: Additionally, we plan to apply this structure across all aspects of the supply chain, from distribution centers to perishable goods environments to e-commerce and micro-fulfillment hubs. Customer response to next-generation storage has been very positive. In fact, we began signing projects that include the new storage structure in our fiscal third quarter. We believe this next-gen storage structure supports our path to unlocking even higher margins and long-term value creation. In summary, Symbotic remains well-positioned. Our strong and growing product portfolio spans multiple levels of the supply chain, supported by a $22.4 billion backlog and a healthy balance sheet. Thank you to our team for their outstanding work this quarter, and to our customers and shareholders for their continued support.

Rick Cohen: I will now turn it over to Carol, who will discuss the quarterly financials before I come back to introduce Izzy Martins, who's taking over as CFO next week and will provide the forecast. Carol?

Rick Cohen: I'll now turn it over to Carol, who will discuss the quarterly financials before I come back to introduce Izzy Martens, who's taken over as CFO next week and will provide the forecast. Carol.

Operator: Thanks, Rick. Before I begin, I want to thank the entire team at Symbotic. It has been a pleasure to serve as CFO with you. Symbotic is in a strong position. I look forward to supporting the team during the transition period. Now to the results.

Izzy Martens: Thanks, Rick. Before I begin, I want to thank the entire team at Symbotic. It has been a pleasure to serve as CFO with you. Symbotic is in a strong position, and I look forward to supporting the team during the transition period. Now to the results. Third quarter revenue grew 26% year over year to $592 million, with revenue growth driven by solid progress across our 46 systems in deployment, expansion of the number of systems in operation, and continued progress on our ASR development. Our net loss for the third quarter was $32 million versus a loss of $27 million in the third quarter of fiscal year 2024. Adjusted EBITDA in the third quarter of $45 million was well above our forecast and up significantly year over year from $3 million in the third quarter of fiscal year 2024.

Carol Hibbard: Q3 revenue grew 26% year-over-year to $592 million, with revenue growth driven by solid progress across our 46 systems in deployment, expansion of the number of systems in operation, and continued progress on our ASR development. Our net loss for Q3 was $32 million versus a loss of $27 million in Q3 of fiscal year 2024. Adjusted EBITDA in Q3 of $45 million was well above our forecast and up significantly year-over-year from $3 million in Q3 of fiscal year 2024. In terms of the backlog, our backlog of $22.4 billion remained in a strong position. The sequential decrease from $22.7 billion last quarter was due to revenue recognized in the quarter, partially offset by final pricing on projects started.

Izzy Martens: In terms of the backlog, our backlog of $22.4 billion remained in a strong position. The sequential decrease from $22.7 billion last quarter was due to revenue recognized in the quarter, partially offset by final pricing on projects started. In our third quarter, we began five new system deployments. We also had five systems go operational in the quarter, bringing our total to 42 operational systems. As we mentioned last quarter, we view the most critical portion of deployment as the time between the start of installation and when the system goes operational at acceptance. This is the time in which we see the most revenue and profit contribution. In the third quarter, we again saw improvements against this metric.

Carol Hibbard: In our Q3, we began five new system deployments. We also had five systems go operational in the quarter, bringing our total to 42 operational systems. As we mentioned last quarter, we view the most critical portion of deployment as the time between the start of installation and when the system goes operational at acceptance. This is the time in which we see the most revenue and profit contribution. In the Q3, we again saw improvements against this metric. During the Q3, we had a Phase 1 completion for our largest customer that was nearly two times the size of our historical average for Phase 1 deployments for this customer. Despite that added size, the time between start of installation and going operational was only slightly higher than our historical average and significantly less if we normalize for size.

Izzy Martens: During the third quarter, we had a phase one completion for our largest customer that was nearly two times the size of our historical average for phase one deployments for this customer. Despite that added size, the time between start of installation and going operational was only slightly higher than our historical average and significantly less if we normalize for size. We also completed two phase two deployments for our largest customer that both took over 20% less time between start of installation and acceptance than the historical average of their predecessors. With the continued growth in operational systems, we saw our software revenue more than double year over year to $8.1 million, and operation services revenue grew 54% year over year to $24.9 million. Turning to margins, system gross margin continued last quarter's trend of significant year-over-year improvement thanks to strong cost control and project execution.

Carol Hibbard: We also completed two Phase 2 deployments for our largest customer that both took over 20% less time between start of installation and acceptance than the historical average of their predecessors. With the continued growth in operational systems, we saw our software revenue more than double year-over-year to $8.1 million. Operations services revenue grew 54% year-over-year to $24.9 million. Turning to margins, system gross margin continued last quarter's trend of significant year-over-year improvement thanks to strong cost control and project execution. Gross margin on software maintenance and support exceeded 75% as it continued its trend towards software industry margins as we gained scale. In operations services, we came in with a slight profit.

Izzy Martens: Gross margin on software maintenance and support exceeded 75% as it continued its trend towards software industry margins as we gained scale. In operation services, we came in with a slight profit. Operating expenses on a GAAP basis were up sequentially, primarily due to a $16 million restructuring charge from the workforce reduction associated with our acquisition of the Walmart ASR business. On a non-GAAP basis, operating expenses were down sequentially, coincident with activity from the development phase of ASR. We finished the quarter with cash and equivalents of $778 million, which decreased from $955 million in the second quarter, primarily due to the timing of cash receipts. In summary, we had a strong financial quarter, matched with continued operational progress. I'm now going to hand it back to Rick, who will introduce Izzy. Rick.

Carol Hibbard: Operating expenses on a GAAP basis were up sequentially, primarily due to a $16 million restructuring charge from the workforce reduction associated with our acquisition of the Walmart ASR business. On non-GAAP basis, operating expenses were down sequentially, coincident with activity from the development phase of ASR. We finished the quarter with cash and equivalents of $778 million, which decreased from $955 million in Q2, primarily due to the timing of cash receipts. In summary, we had a strong financial quarter matched with continued operational progress. I'm now going to hand it back to Rick, who will introduce Izzy. Rick?

Rick Cohen: Thank you, Carol. On behalf of everyone at Symbotic, I wanna thank you for your contributions, namely your leadership in driving improved project execution while controlling costs, which we are reaping the benefits of today. We are fortunate to have a good amount of overlap between Carol and Izzy, who joins us from Avis Budget Group, where she served as CFO and previously served as Executive Vice President, Americas, where she oversaw a market segment with over $9 billion of revenue. Izzy brings to us strong track record of financial leadership and operational expertise, which is critical for the next phase of the company. We're thrilled to have her here. With that, I'll turn it over to Izzy, who will introduce herself and provide the forecast. Izzy?

Rick Cohen: Thank you, Carol. On behalf of everyone at Symbotic, I want to thank you for your contributions, namely your leadership in driving improved project execution while controlling costs, which we are reaping the benefits of today. We are fortunate to have a good amount of overlap between Carol and Izzy, who joins us from Avis Budget Group, where she served as CFO and previously served as Executive Vice President of Americas, where she oversaw a market segment with over $9 billion of revenue. Izzy brings to us a strong track record of financial leadership and operational expertise, which is critical for the next phase of the company. We're thrilled to have her here. With that, I'll turn it over to Izzy, who will introduce herself and provide the forecast. Izzy.

Izzy Martins: Thank you, Rick. I'm honored to join Symbotic, a recognized leader in supply chain transformation through robotics and innovation. It's exciting to be a part of an organization that consistently pushes the boundaries of operational excellence. I also want to extend my sincere thanks to Carol for the warm onboarding experience and for generously sharing her deep institutional knowledge over the past month. Her guidance has been invaluable, and I am grateful for her continued support during this transition. I look forward to partnering with our exceptionally talented leadership team as we enter our next phase of growth with a strong focus on delivering sustained value for our customers and our shareholders. Finally, I am eager to engage with many of you in the investment community in the coming months. I welcome the opportunity to share our vision for the future. Now turning to the forecast.

Izzy Martens: Thank you, Rick. I'm honored to join Symbotic, a recognized leader in supply chain transformation through robotics and innovation. It's exciting to be a part of an organization that consistently pushes the boundaries of operational excellence. I also want to extend my sincere thanks to Carol for the warm onboarding experience, and for generously sharing her deep institutional knowledge over the past month. Her guidance has been invaluable, and I am grateful for her continued support during this transition. I look forward to partnering with our exceptionally talented leadership team as we enter our next phase of growth, with a strong focus on delivering sustained value for our customers and our shareholders. Finally, I am eager to engage with many of you in the investment community in the coming months. I welcome the opportunity to share our vision for the future. Now turning to the forecast.

Izzy Martens: As Rick highlighted earlier, we are in the process of bringing to market a next-generation storage structure that we fully expect will set the new standard for our customers. Over the long term, we anticipate this innovation will unlock meaningful opportunities, enabling more efficient deployments and supporting a higher margin profile for Symbotic. In the near term, we anticipate an adjustment in the timing of several previously planned deployments as efforts are realigned to support the transition to the next-generation storage structure. As a result, the quarter-over-quarter sequential growth we've seen in recent periods will be less pronounced in the fourth quarter. Looking ahead to the first half of 2026, we believe we could see similar impact as we adjust deployment schedules to accommodate a transition to the new structure. It is important to note that this does not affect our overall backlog.

Izzy Martins: As Rick highlighted earlier, we are in the process of bringing to market a next-generation storage structure that we fully expect will set the new standard for our customers. Over the long term, we anticipate this innovation will unlock meaningful opportunities, enabling more efficient deployments and supporting a higher margin profile for Symbotic. In the near term, we anticipate an adjustment in the timing of several previously planned deployments as efforts are realigned to support the transition to the next-generation storage structure. As a result, the quarter-over-quarter sequential growth we've seen in recent periods will be less pronounced in the Q4. Looking ahead to the first half of 2026, we believe we could see similar impact as we adjust deployment schedules to accommodate a transition to the new structure. It is important to note that this does not affect our overall backlog.

Izzy Martins: In fact, we believe the new structure's rapid assembly characteristics will allow us to scale faster over time. With that in mind, for Q4 of fiscal 2025, we expect revenue between $590 to 610 million, and adjusted EBITDA between $45 and 49 million. With that, we now welcome your questions. Operator, please begin the Q&A.

Izzy Martens: In fact, we believe the new structure's rapid assembly characteristics will allow us to scale faster over time. With that in mind, for the fourth quarter of fiscal 2025, we expect revenue between $590 and $610 million, and adjusted EBITDA between $45 and $49 million. With that, we now welcome your questions. Operator, please begin the Q&A.

Operator: At this time, I would like to remind everyone that in order to ask a question, press star, then 1 on your telephone keypad. We also ask that you please limit your questions to 1 so that everyone can have the opportunity to engage with our speakers for today. We will pause for just a moment to compile the Q&A roster. Okay, your first question comes from the line of Andrew Kaplowitz with Citi. Please go ahead. Your line is open.

Operator: At this time, I would like to remind everyone that in order to ask a question, press star and then the number one on your telephone keypad. We also ask that you please limit your questions to one, so that everyone can have the opportunity to engage with our speakers for today. We will pause for just a moment to compile the Q&A roster. Okay, same first question, Thomas from the line of Andrew Kaplowitz with Citigroup. Please go ahead. Your line is open.

Andrew Kaplowitz: Good afternoon, everyone. Carol, thanks for your help. Welcome, Izzy.

Izzy Martins: Good afternoon.

Carol Hibbard: Good afternoon.

Andrew Kaplowitz: Maybe you can help us quantify this next-generation storage technology in terms of how, first, how much faster can it make installation times, and how do you think about the retrofit opportunity set for Symbotic of this technology? Would you expect, for instance, Walmart to do a bunch of retrofitting on systems that you've already completed with them, and then will they actually pay you for that?

Andrew Kaplowitz: Maybe you can help us quantify this next-generation storage technology in terms of how, first, how much faster can it make installation times? How do you think about the retrofit opportunity set for Symbotic of this technology? Would you expect, for instance, Walmart to do a bunch of retrofitting or systems that you've already completed with them, and then will they actually pay you for that?

Rick Cohen: Yeah. I'll take that. No, we don't expect Walmart to do retrofits. The beauty of this system is that it can run side by side with the old structure, but it takes less room. In truth, some of the projects we're working on with Walmart will actually be smaller because of the new structure, but actually allow them to sell us more product in the same building or additional capabilities. For instance, we could put in the same building that was gonna just do replenishment to stores. We could put a BreakPack system in, and we could actually put a ASR system in that might actually begin to start to look a little bit like an e-commerce solution. The capabilities are hugely expand our business.

Rick Cohen: Yeah, I'll take that. No, we don't expect Walmart to do retrofits. The beauty of this system is that it can run side by side with the old structure, but it takes less room. In truth, some of the projects we're working on with Walmart will actually be smaller because of the new structure, but actually allow them to sell us more product in the same building. Where additional capabilities, for instance, we could put in the same building that was going to just do replenishment to stores, we could put a brake pack system in, and we could actually put an ASR system in that might actually begin to start to look a little bit like an e-commerce solution.

Rick Cohen: The capabilities are hugely expand our business, and that was one of the things that we wanted to talk about, that smaller, the history of all innovation always comes down to whether it's transistors or many other things. Miniaturization is, for the most part, always a huge positive, and that's really what we're doing. Likewise, they will continue to use the old structures and the buildings that they have, but like some of the phase three buildings that we're doing actually have a new structure right alongside the old structure. That took some real development work on our part, but we didn't want the customers to have to go backwards. They're very excited about the positives.

Rick Cohen: That was one of the things that we wanted to talk about that smaller. The history of all innovation is always comes down to whether it's transistors or many other things. Miniaturization is, for the most part, always a huge positive, and that's really what we're doing. Likewise, they will continue to use the old structures and the buildings that they have, but like some of the Phase 3 buildings that we're doing are actually have a new structure right alongside the old structure. That took some real development work on our part, but we didn't want the customers to have to go backwards. They're very excited about the positives.

Izzy Martins: Andy, I'll follow up on your question related to deployment timelines. As you know, we follow a key metric, which is in install to actual deployment timeline. Historical, that's been about 12 months, and we've seen step downs in that on our existing core. Given the reduction in parts and the streamlined assembly that we plan in terms of that build, you would likely see that timeline begin to reduce, and we'll share that progress as we, you know, roll out the design and begin deployment.

Carol Hibbard: Andy, I'll follow up on your question related to deployment timelines. As you know, we follow a key metric, which is install to actual deployment timeline. Historically, that's been about 12 months, and we've seen step-downs in that on our existing core. Given the reduction in parts and the streamlined assembly that we plan in terms of that build, you would likely see that timeline begin to reduce, and we'll share that progress as we roll out the design and begin deployment.

Andrew Kaplowitz: Rick, I just want to follow up. Like, the way you think about the growth, like, line, it's less steep for the next few quarters, and then it can be even steeper than it was past that. That's the way to think about it, you know, in a positive direction. Correct?

Andrew Kaplowitz: Rick, I just want to follow up. The way you think about the growth line, it's less steep for the next few quarters, and then it can be even steeper than it was past that. That's the way to think about it in the positive direction, correct?

Rick Cohen: Yeah. That's exactly the way we thought about it. When we started looking at the development of this, we thought about that. For instance, we've now had a number of inquiries about perishables because the cost of construction and of the facility itself is so expensive today. To be able to retrofit a perishable facility, this may turn out to be the best retrofittable perishable facility that exists. It's a brand-new product for us.

Rick Cohen: Yeah, that's exactly the way we thought about it. When we started looking at the development of this, we thought about that. For instance, we've now had a number of inquiries about perishables because the cost of construction of the facility itself is so expensive today. To be able to retrofit a perishable facility, this may turn out to be the best retrofitable perishable facility that exists. It's a brand new product for us.

Andrew Kaplowitz: Rick, I just wanted to ask you about you've increased the sales force. You talked about that last quarter, you know, backlog still in this sort of $22 to 23 billion range. I think you talked about still expecting to get some new customers or a new customer this year. Is that still the case? Is it more likely to come at Symbotic or GreenBox?

Andrew Kaplowitz: Rick, I just wanted to ask you about you've increased the sales force. You talked about that last quarter, backlog still in this sort of $22 to 23 billion range. I think you talked about still expecting to get some new customers or a new customer this year. Is that still the case, and is it more likely to come at Symbotic or Greenbox?

Rick Cohen: I think it's going to come at both. We announced the new structure yesterday, but we've been marketing the new structure probably for the last three to six months with customers, telling them it might be coming. We've started doing some designs. The first installation will actually be in Vallejo, in Mexico, for a big Walmart project. They're going to start to come after that. We've just really started marketing that in the last three to six months, and our inbound discussions with new customers are accelerating as a result of it.

Rick Cohen: I think it's gonna come at both. We announced the new structure yesterday, but we've been marketing the new structure probably for the last 3 to 6 months with customers telling them it might be coming. We started doing some designs. The first installation will actually be at Bajío in Mexico for a big Walmart project. They're gonna start to come after that. We've just really started marketing that in the last 3 to 6 months. Our inbound discussions with new customers is accelerating as a result of it.

Andrew Kaplowitz: Appreciate all the color.

Rick Cohen: Thanks, Jen.

Rick Cohen: Thanks, Jim.

Operator: Your next question comes from the line of Joe Giordano with TD Cowen. Your line is open.

Operator: Your next question, Thomas, from the line of Joe Giordano with Rick Cohen, your line is open.

Joe Giordano: Hey, guys. Maybe I'll start just on that structure. You know, I'm sure we all watched the videos. I get it's clear why this would be faster to put together. I'm just curious, maybe you could talk me through, like, the main reasons why it's more dense. I think that's a little bit harder to just tell from the video, like, why it's necessarily smaller. Can you help us, like, what does this mean for, like, the price of these things?

Joseph Giordano: Hey, guys. Maybe I'll start just on that structure. You know, I'm sure we all watched the videos. I get it's clear why this would be faster to put together. I'm just curious, maybe you could talk me through, like, the main reasons why it's more dense. I think that's a little bit harder to just tell from the video, like, why it's necessarily smaller. Can you help us, like, what does this mean for, like, the price of these things?

[Analyst]: Hey, guys. Maybe I'll start just on that structure. I'm sure we all watched the videos. It's clear why this would be faster to put together. I'm just curious, maybe you could talk me through the main reasons why it's more dense. I think that's a little bit harder to just tell from the video, why it's necessarily smaller. Can you help us? What does this mean for the price of these things?

Rick Cohen: The reason that it's smaller is that it's a cantilever structure. Believe it or not, the posts that supported the original structure took up 10% of the linear storage space. The other thing you'll see in the video is because we have fingers or tines, we can actually put 3.2 shelves per level versus 2.2 levels per level, which is a 30% increase. That's why the 40% is a pretty good number for storage density.

Rick Cohen: The reason that it's smaller is that it's a cantilever structure. Believe it or not, the posts that supported the original structure took up 10% of the, we think of it as, linear storage space. The other thing you'll see in the video is because we have fingers or tines, we can actually put 3.2 shelves per level versus 2.2 shelves per level, which is a 30% increase. That's why the 40% is a pretty good number for storage density. What we basically did is took all the air out of the structure and increased the cubic density and the linear density of the space, which, outside of me, is probably the most boring thing in the world for most people to talk about, but it has huge impacts to the customer. We've actually patented it. It's probably the first new structure.

Rick Cohen: What we basically did is took all the air out of the structure and increased the cubic density and the linear density of the space, which outside of me, is probably the most boring thing in the world for most people to talk about, but it has huge impacts to the customer. We've actually patented. It's probably the first new structure. Everybody else is using traditional warehouse rack more or less to do their automation. This is a brand-new structure which we have lots of patents on, and it goes up very quickly. We have a bunch of new design structural engineer people that have helped us with this. That's the first answer to your question. Then we designed it so it could go up in modular pieces. There's no...

Rick Cohen: Everybody else is using traditional warehouse rack, more or less, to do their automation. This is a brand new structure, which we have lots of patents on, and it goes up very quickly. We have a bunch of new design structural engineer people that have helped us with this. That's the first answer to your question. We designed it so it could go up in modular pieces. The other system had shelves, and we would run about a million rivets per structure, and there's no rivets in this structure. It's a big, big change, much faster to install.

Rick Cohen: The other system had shelves and we would run about 1 million rivets per structure, and there's no rivets in this structure. It's big change, much faster to install.

Joe Giordano: The implications on cost for something like that?

[Analyst]: The implications on cost for something like that?

Joseph Giordano: The implications on cost for something like that?

Rick Cohen: The implication on cost is we're value pricing this. For the customer, we think we can save them more money because they don't need as much space. For us, we expect to make higher margins.

Rick Cohen: The implication on cost is we're value pricing this. For the customer, we think we can save them more money because they don't need as much space, and for us, we expect to make higher margins.

Joe Giordano: Higher margins and maybe lower dollars, but maybe protect the dollar amount, the gross profit dollars. Is that, like, the right way to think about it?

Joseph Giordano: Higher margins and maybe lower dollars, but maybe protect the dollar amount, the gross profit dollars. Is that, like, the right way to think about it?

[Analyst]: Higher margins and maybe lower dollars, but maybe protect the dollar, the gross profit dollars. Is that the right way to think about it?

Rick Cohen: Maybe not lower, maybe not lower dollars.

Carol Hibbard: I think another way to think about it, Joe, is it's gonna vary by customer because we're building this in less space. The customer will have a decision to make of they might wanna maximize that additional density and utilize that because we've created them capacity. I think it'll vary as they look at how they wanna go and deploy.

Carol Hibbard: I think another way to think about it, Joe, is it's going to vary by customer because we're building this in less space. The customer will have a decision to make of they might want to maximize that additional density and utilize that because we've created them capacity. I think it will vary as they look at how they want to go into place.

Joe Giordano: Just mechanically in the model here, like, how should we think about stock-based comp going forward? 'Cause I think it was initially expected to trend lower. It's been pretty high the last couple quarters, and it's like a huge head back to adjusted margins. You know, where do you see the glide path on that?

[Analyst]: Just mechanically in the model here, how should we think about stock-based comp going forward? I think it was initially expected to trend lower. It's been pretty high the last couple of quarters, and it's a huge head back to adjusted margins. Where do you see the glide path on that?

Joseph Giordano: Just mechanically in the model here, like, how should we think about stock-based comp going forward? 'Cause I think it was initially expected to trend lower. It's been pretty high the last couple quarters, and it's like a huge head back to adjusted margins. You know, where do you see the glide path on that?

Carol Hibbard: Yeah. I'd say the glide path of what you saw last quarter and where we are this quarter, we will continue that trend at least for the next few quarters going forward. Really, the increase has been a focus on, you know, obviously some of the talent you've seen us bring in, and then our head count has gone up. That also is, some of the increase was related to just our overall acquisition associated with ASR in there as well.

Carol Hibbard: Yeah, I'd say the glide path, what you saw last quarter and where we are this quarter, we will continue that trend at least for the next few quarters going forward. Really, the increase has been a focus on, obviously, some of the talent you've seen us bring in, and then our headcount has gone up. That also is, some of the increase was related to just our overall acquisition associated with ASR in there as well.

Joe Giordano: Thanks, guys.

Joseph Giordano: Thanks, guys.

[Analyst]: Thanks, guys.

Carol Hibbard: Thanks.

Operator: Your next question comes from the line of Nicole DeBlase with Deutsche Bank. Your line is open.

Operator: Your next question, Thomas, from the line of Nicole DeBlase with Deutsche Bank. Your line is open.

Nicole DeBlase: Yeah. Thanks. Good afternoon, guys.

[Analyst] (Deutsche Bank): Yeah, thanks. Good afternoon, guys.

Carol Hibbard: Hello.

Nicole DeBlase: Hello. Maybe just starting with the big step-up that you saw in software growth margins, pretty impressive this quarter to be north of 70%. Any comments on the drivers of that? Should we now view that above 70 level as sustainable moving forward?

[Analyst] (Deutsche Bank): Hello. Maybe just starting with the big step-up that you saw in software growth margins, pretty impressive this quarter to be north of 70%. Any comments on the drivers of that? Should we now view that above 70% level as sustainable moving forward?

Carol Hibbard: Yeah. Thanks for the question, Nicole. I'd say given that this is the Q2 or Q3 in a row where we've seen the step-up, I would assume that 70% level continues going forward. This quarter, we added 7 new acceptances into the quarter. We're really seeing the benefit of scale. Last quarter, we added 8 systems that hit complete. This quarter we saw 5. We're really seeing the benefit of being able to scale across the software team.

Carol Hibbard: Yeah, thanks for the question, Nicole. I'd say given that this is the second or third quarter in a row where we've seen the step-up, I would assume that 70% level continues going forward. This quarter, we added seven new acceptances into the quarter, and we're really seeing the benefit of scale. Last quarter, we added eight systems that hit complete, and this quarter, we saw five. We're really seeing the benefit of being able to scale across the software team.

Nicole DeBlase: Got it. That's great. Thanks, Carol. Secondly, on free cash flow, I think it was a use of cash this quarter, which surprised me a little bit. Can you just provide some more color on that? Maybe it has something to do with the new structure, et cetera, and any thoughts on free cash in Q4.

[Analyst] (Deutsche Bank): Got it. That's great. Thanks, Carol. Secondly, on free cash flow, I think it was a use of cash this quarter, which surprised me a little bit. Can you just provide some more color on that? Maybe it has something to do with the new structure, etc. Any thoughts on free cash in Q4?

Carol Hibbard: Yeah. The free cash flow was not associated with the new structure. It was entirely timing of receipts. We signed projects later in the quarter, and we'll see that step back up in Q4. One thing to note on free cash flow going forward, which is tied to the new structure, you've seen our CapEx relatively flat around, you know, $12 to 15 million a quarter. You're gonna see a step-up over the next couple of quarters as we make the investments to support the build of the new design. All of the tines that Rick talked about, we're investing in the equipment to produce those. You'll see a step-up in CapEx over the next couple of quarters.

Carol Hibbard: Yeah, the free cash flow was not associated with the new structure. It was entirely timing of receipts. We signed projects later in the quarter, and we'll see that step back up in the fourth quarter. One thing to note on free cash flow going forward, which is tied to the new structure. You've seen our CapEx relatively flat around $12 to $15 million a quarter. You're going to see a step-up over the next couple of quarters as we make the investments to support the build of the new design. All of the times that Rick talked about, we're investing in the equipment to produce those. You'll see a step-up in CapEx over the next couple of quarters.

[Analyst] (Deutsche Bank): Okay. Any way to quantify the step-up in that CapEx approximately?

Nicole DeBlase: Okay. Any way to quantify the step-up in that CapEx approximately?

Carol Hibbard: Yeah. I'd say you'll see CapEx about 2x what you saw this quarter.

Carol Hibbard: Yeah, I'd say you'll see CapEx about 2x what you saw this quarter.

[Analyst] (Deutsche Bank): Okay, perfect. Thank you. I'll pass it on.

Nicole DeBlase: Okay. Perfect. Thank you. I'll pass it on.

Operator: Your next question comes from the line of Mark Delaney with Goldman Sachs. Please go ahead.

Operator: Your next question, Thomas, from the line of Mark Delaney with Goldman Sachs. Please go ahead.

Joe Giordano: Yeah. Yes, good afternoon. Thank you very much for taking my questions.

Mark Delaney: Yeah. Yes, good afternoon. Thank you very much for taking my questions.

[Analyst] (Goldman Sachs): Yes, good afternoon. Thank you very much for taking my questions. First, on the new storage structure, thanks for all the details you shared already on that topic. I'm hoping you could be a little clearer. When do you expect to start providing this to customers? You mentioned Mexico being the first location with Walmart, but I wasn't quite sure when you expect that to begin. If you could also help us understand of the backlog, is your expectation that most of the systems you haven't started yet are going to be with this new structure, or do you need to go out and negotiate that?

Mark Delaney: First on the new storage structure. Thanks for all the details you shared already on that topic. I'm hoping you could be a little clearer. When do you expect to start providing this to customers? You mentioned Mexico being the first location with Walmart, but I wasn't quite sure when you expect that to begin. If you could also help us understand of the backlog, is your expectation that most of the systems you haven't started yet are gonna be with this new structure, or do you need to go out and negotiate that?

Carol Hibbard: I'll go ahead and start. Yeah, as Rick indicated, we already have customers who have signed. In fact, all five of our starts for this quarter, we signed those assuming the Next Gen Structure configuration. Our expectation is our customers going forward will all be associated with the Next Gen Structure. We expect the first one to begin installation mid next fiscal year, so our mid fiscal year 2026.

Carol Hibbard: I'll go ahead and start. Yeah, as Rick indicated, we already have customers who have signed. In fact, all five of our starts for this quarter, we signed those assuming the next-gen structure configuration. Our expectation is our customers going forward will all be associated with the next-gen structure. We expect the first one to begin installation mid-next fiscal year, so mid-fiscal year 2026.

Mark Delaney: Okay. The sort of that sequential moderation you spoke about, you're still starting some. Are there still gonna be some system starts just with the old structure until the new one's ready or are new starts gonna be effectively near zero until middle of next year?

[Analyst] (Goldman Sachs): Okay. For that sequential moderation you spoke about, you're still starting some—are there still going to be some system starts just with the old structure until the new one's ready, or are new starts going to be effectively near zero until middle of next year?

Carol Hibbard: Yeah. No, new starts won't go to zero. That's a good clarification point. In fact, we had 5 new starts this quarter. All 5 of them are going to proceed with the new structure. With the design activity we spent over the last several quarters, we'll go ahead and incorporate the CapEx and be able to begin installation of those sites in mid-2026. You are not going to see a stop of new South signatures as we go forward based on the new design. You saw a slowing of them this quarter as we had customers waiting for some of the deployments that they would have started, and that's what you're seeing impactful in our guide is for the Q4 and what we referenced for the first half of 2026.

Carol Hibbard: Yeah. No, new starts won't go to zero. That's a good clarification point. In fact, we had five new starts this quarter. All five of them are going to proceed with the new structure. With the design activity we spent over the last several quarters, we'll go ahead and incorporate the CapEx and be able to begin installation of those sites in mid-2026. You are not going to see a stop of new start signatures as we go forward based on the new design. We saw a slowing of them this quarter as we had customers waiting for some of the deployments that they would have started. That's what you're seeing impactful in our guide for the fourth quarter and what we referenced for the first half of 2026.

Mark Delaney: Okay. Just one other from me, if I could, on GreenBox. When Symbotic announced the GreenBox deal two years ago, the plan, I believe, was to start installation of all of those systems within six years. I think it's been a relatively limited number of systems that Symbotic has started for GreenBox thus far. I'm hoping to better understand what your expectation is at this point, and do you still expect to begin installation of all of those GreenBox systems within the prior six-year target? Thank you.

[Analyst] (Goldman Sachs): Okay. Just one other from me, if I could, on Greenbox. When Symbotic announced the Greenbox deal two years ago, the plan, I believe, was to start installation of all of those systems within six years. I think it's been a relatively limited number of systems that Symbotic has started for Greenbox thus far. I'm hoping to better understand what your expectation is at this point. Do you still expect to begin installation of all of those Greenbox systems within the prior six-year target? Thank you.

Carol Hibbard: As you indicated, we've got three systems currently in deployment. You actually saw within the quarter, we're seeing installation ramp up, and so you're seeing revenue from GreenBox start increasing on those systems. We have indicated over the last couple of quarters, we saw slower than planned starts of GreenBox systems. We expect to see now that we've got the CEO in place and the sales team in place, we expect to start seeing that move forward in the coming quarters.

Carol Hibbard: As you indicated, we've got three systems currently in deployment. You actually saw within the quarter, we're seeing installation ramp up. You're seeing revenue from Greenbox start increasing on those systems. We have indicated over the last couple of quarters, we saw slower-than-planned starts of Greenbox systems. We expect to see, now that we've got the CEO in place and the sales team in place, we expect to start seeing that move forward in the coming quarters.

[Analyst] (Goldman Sachs): Okay. Thank you.

Mark Delaney: Okay. Thank you.

Operator: Your next question comes from the line of Colin Rusch with Oppenheimer. Your line is open.

Operator: Your next question, Thomas, from the line of Colin Rusch with Oppenheimer. Your line is open.

Colin Rusch: Thanks so much, guys. You know, there's been an awful lot of innovation in around the energy storage space. I'm just curious about how much leverage and, you know, how much opportunity there is to optimize bot performance, you know, uptime, you know, some of the design as you start to see some of those chemistries mature to a level that you get comfortable with?

[Analyst] (Oppenheimer): Thanks so much, guys. There's been an awful lot of innovation in and around the energy storage space. I'm just curious about how much leverage and how much opportunity there is to optimize bot performance, uptime, some of the design as you start to see some of those chemistries mature to a level that you get comfortable with.

Rick Cohen: Yeah. The new structure being denser will mean that the bot trips will be shorter. We're expecting to see somewhere, a pretty substantial increase in bot transactions per minute, per hour. If we have less travel time, we'll need less bots, and that'll reduce the cost of a system. The second thing is that we're also, when we're talking about bots, putting LiDAR and upgrading the vision chips, and the ability for the bots to compute what they're looking at. All of those things are there's a big push on innovation, which will happen, I think, in certainly within the next year, where bots are gonna be able to do substantially more work than they do right now.

Rick Cohen: Yeah. The new structure, being denser, will mean that the bot trips will be shorter. We're expecting to see somewhere a pretty substantial increase in bot transactions per minute, per hour. If we have less travel time, we'll need fewer bots, and that'll reduce the cost of a system. The second thing is that we're also, while we're talking about bots, putting LiDAR and upgrading the vision chips and the ability for the bots to compute what they're looking at. All of those things, there's a big push on innovation, which will happen, I think, certainly within the next year, where bots are going to be able to do substantially more work than they do right now.

[Analyst] (Oppenheimer): Okay. I'll follow up afterwards on the battery impact. I guess from a dexterity and kind of material handling perspective, obviously, you guys are the clear leader in terms of the number of materials and the types of materials that you guys can handle. I guess, are there areas that you guys are trying to innovate on right now that might open up incremental opportunities? Can you give us a sense of timing in terms of just some of the materials that are difficult to manage that you guys might be able to unlock here over the near term?

Colin Rusch: Okay. I'll follow up afterwards on the battery impact. I guess from a dexterity and kind of material handling perspective, obviously, you guys are the clear leader in terms of the number of materials and the types of materials that you guys can handle. I guess, are there areas that you guys are trying to innovate on right now that might open up incremental opportunities? Can you give us a sense of timing in terms of just some of the materials that are difficult to manage that you guys might be able to unlock here over the near term?

Rick Cohen: When you say materials, I'm not sure exactly what you mean. One of the clear targets that we're going after is perishables, because at $500 a square foot for some of these buildings, smaller buildings are usually valuable to the customer. They get the savings on the building, and we get to be able to sell them a very valuable system. That's one thing. Same thing on the freezer. Freezers are not that hard for us to do, but the storage density has made people look at some of the prior providers and say, maybe I can expand my existing freezer without having to add as much space as I thought. Where we're really going after value creation is ambient was all about the ability for us to handle so many more items than traditional systems.

Rick Cohen: Freezers are not that hard for us to do, but the storage density has made people look at some of the prior providers and say, oh, maybe I can expand my existing freezer without having to add as much space as I thought. Where we're really going after a value creation is ambient was all about the ability for us to handle so many more items than traditional systems. On the perishable side, there's also the value that's created just because the facility itself are so expensive even before they put our system in. That's one area that we're definitely going after. We don't think the temperature has a significant effect on our bots.

Rick Cohen: On the perishable side, there's also the value that's created just because the facility itself is so expensive even before they put our system in. That's one area that we're definitely going after. We don't think the temperature has a significant effect on our bots.

Nicole DeBlase: That's actually super helpful. Thanks so much, you guys.

[Analyst] (Oppenheimer): That's actually super helpful. Thanks so much, guys.

Operator: Your next question comes from the line of Derek Soderberg with Cantor Fitzgerald. Your line is open.

Operator: Your next question, Thomas, from the line of Derek Soderberg with Cantor Fitzgerald. Your line is open.

Derek Soderberg: Hey, everyone. Thanks for taking the questions. Rick, just a question on the competitive environment. I think, you know, we've all seen, you know, videos online. There's humanoid robots out there. I think one of your competitors has kind of robotic unloading technology from a semi-truck. Any sort of change in the competitive environment? I know there was a question earlier on some of the technology, you know, it seems like the pace of innovation has really stepped up. Any new concerns or any new technologies out there?

[Analyst]: Yeah. Hey, everyone. Thanks for taking the questions. Rick, just a question on the competitive environment. I think we've all seen videos online. There's humanoid robots out there. I think one of your competitors has kind of robotic unloading technology from a semi-truck. Any sort of change in the competitive environment? I know there was a question earlier on some of the technology, but it seems like the pace of innovation has really stepped up. Any new concerns or any new technologies out there?

Rick Cohen: Well, I mean, we're always concerned, but the response that we're getting... The truck unloading is really a very specific thing, and we're in touch with a lot of those folks. It might be an add-on to our system that would actually make our system more valuable. The humanoid robots are very good at manufacturing, but our robots are going 25 miles an hour, the humanoid robots are gonna be very good stationary or slow-moving machines. They're. Basically what they incorporate is dexterity and fingers and good vision. We do that with our bots, but because we're picking up cases, we're less concerned with the humanoid robots. I think that's a different aspect of automation than we're going after.

Rick Cohen: Well, I mean, we're always concerned. The response that we're getting—the truck unloading is really a very specific thing. We're in touch with a lot of those folks. It might be an add-on to our system. That would actually make our system more valuable. The humanoid robots are very good at manufacturing. Our robots are going 25mi an hour. The humanoid robots are going to be very good stationary or slow-moving machines. Basically, what they incorporate is dexterity, fingers, and good vision. We do that with our bots, but because we're picking up cases, we're less concerned with the humanoid robots. I think that's a different aspect of automation that we're going after. We're seeing more and more requests for us to look at things that people had previously used our competitors for.

Rick Cohen: We're seeing more and more requests for us to look at things that people had previously used our competitors for. I would say we feel good about where we are, and we think our TAM and our market share is gonna grow, until it does, I can't prove it out, but that's what I think.

Rick Cohen: I would say we feel good about where we are, and we think our TM and our market share are going to grow. Until it does, I can't prove it out, but that's what I think.

Derek Soderberg: Got it. That's helpful. Then just with the new storage system, I think there were a number of questions on, you know, the cost, how it's gonna impact backlog. You know, just when you combine that with a lot of the changes you guys have made on the EPC front, bringing that in-house, you know, it's been a while since we've gotten kind of an update on maybe the structural gross margins of, you know, the hardware piece, the systems piece. Where are we sort of headed with all these changes that you guys have made? What are sort of the structural gross margins in systems? How much more room do we have to kinda continue to see margin expansion from here in systems? Thanks.

[Analyst]: Got it. That's helpful. With the new storage system, I think there were a number of questions on the cost, how it's going to impact backlog. Just when you combine that with a lot of the changes you guys have made on the EPC front, bringing that in-house, it's been a while since we've gotten kind of an update on maybe the structural gross margins of the hardware piece, the systems piece. Where are we sort of headed with all these changes that you guys have made? What are sort of the structural gross margins and systems? How much more room do we have to kind of continue to see margin expansion from here in systems? Thanks.

Carol Hibbard: Yeah. The next-generation storage structure, Derek, is actually one of the key enablers on our path to 30% system gross margin. Systems-wise, we're still on that path. We've talked about overall improvements around schedule being a driver. Bringing back the EPC was certainly one of the significant drivers to get us where we posted the last couple of quarters. The next-generation storage structure, the pure fact that it's streamlining assembly, reducing the, you know, the million rivets that Rick mentioned, that's going to help us on our trajectory towards higher gross margins. As we think about the value creation piece of this, as we go out and attract new customers, we're certainly driving to utilize that to grow the gross margin profile.

Carol Hibbard: Yeah. The next-gen structure, Derek, is actually one of the key enablers on our path to 30% system gross margins. Systems-wise, we're still on that path. We've talked about overall improvements around schedule being a driver. Bringing back the EPC was certainly one of the significant drivers to get us where we posted the last couple of quarters. The next-gen structure, the pure fact that it's streamlining assembly, reducing the million rivets that Rick mentioned, that's going to help us on our trajectory towards higher gross margins. As we think about the value creation piece of this, as we go out and attract new customers, we're certainly driving to utilize that to grow the gross margin profile.

Derek Soderberg: Great. Really appreciate it.

[Analyst]: Great. Really appreciate it.

Carol Hibbard: Thanks.

Operator: Your next question comes from the line of Greg Palm with Craig-Hallum. Your line is open.

Greg Palm: Yeah. Thanks for taking the questions. I maybe just wanna go back to, you know, the quarter 'cause what really, I guess, stood out to us was the operating leverage. The incremental margins were extremely high in the quarter. I'm just curious if there's anything, you know, sort of one time, any benefit in the quarter that you saw. Just as we kinda think about fiscal 2026, how should we kinda think about that going forward?

[Analyst]: Yeah, thanks for taking the questions. I maybe just want to go back to the quarter because what really, I guess, stood out to us was the operating leverage. The incremental margins were extremely high in the quarter. I'm just curious if there's anything sort of one-time, any benefit in the quarter that you saw? Just as we kind of think about fiscal 2026, how should we kind of think about that going forward?

Carol Hibbard: Yeah. From a gross margin perspective, the step-up in software was certainly a good contributor. When I think about mix, we had a higher contribution this quarter from our Advanced Systems and Robotics portion of the business, higher margin content than some of our historical contracts have been. You're seeing that. Then the other lever which continued to be beneficial this quarter is that timeline to deployment that we indicated. From the start of install to final acceptance, we're seeing continued improvements along how long it's taking us to build these. You're seeing that reflected in our gross margin.

Carol Hibbard: Yeah. From a gross margin perspective, the step-up in software was certainly a good contributor. When I think about mix, we've had a higher contribution this quarter from our Advanced Systems and Robotics portion of the business, higher margin content than some of our historical contracts had been. You're seeing that. The other lever, which continued to be beneficial this quarter, is that timeline to deployment that we indicated from the start of install to final acceptance. We're seeing continued improvements along how long it's taking us to build these, and you're seeing that reflected in our gross margin performance.

[Analyst]: Okay, that's helpful. I guess just maybe one clarification. In terms of the new storage system, I'm curious. Has this been a part of the product roadmap for a number of years? Was this something that was maybe more directed by one of your customers? I'm just kind of curious to sort of know the timeline or the history, and maybe some of the background.

Greg Palm: Okay. That's helpful. I guess just maybe one clarification. In terms of the new storage system, I'm curious, you know, has this been a part of the product roadmap for a number of years? Was this something that was maybe more directed by one of your customers? I'm just kinda curious to sort of know the timeline or the history and maybe some of the background.

Rick Cohen: Yeah. I've been working on this for a couple years, I dated my first drawing of it, the way I describe it is I feel like Frank Gehry. I actually had a design, I needed some engineers that could actually build it.

Rick Cohen: Yeah. I've been working on this for a couple of years. I dated my first drawing of it, but the way I describe it, I feel like Frank Gehry. I actually had a design, and I needed some engineers that could actually build it. This has been in the works for two years. We've teased customers with it, tested them, asked them if they wanted it. They got very excited. Really, it's been the last year that we—I mean, if you come visit us, we have the test systems right down the street now. It's a magnificent new product.

Matt Summerville: This has been in the works for 2 years. We've teased customers with it, tested them, asked them if they wanted it. They got very excited. Really it's been the last year. I mean, if you come visit us, we have the test systems right down the street now, it's just a magnificent new product.

Rick Cohen: This has been in the works for 2 years. We've teased customers with it, tested them, asked them if they wanted it. They got very excited. Really it's been the last year. I mean, if you come visit us, we have the test systems right down the street now, it's just a magnificent new product.

Rick Cohen: Yeah. Okay. Carol, best of luck going forward, and Izzy looks forward to working with you.

Greg Palm: Yeah. Okay. Carol, best of luck going forward, and Izzy looks forward to working with you.

[Analyst]: Yeah. Okay. Carol, best of luck going forward, and Izzy, looking forward to working with you.

Carol Hibbard: Great. Thanks, Greg.

Carol Hibbard: All right. Thanks, Greg.

Operator: Your next question comes from the line of Ken Newman with KeyBanc Capital Markets. Your line is open.

Ken Newman: Hey, guys. Hey, Carol, maybe a little bit of help and piggybacking off the margin question just now, maybe can you help us think about systems gross margin sequentially from Q3 to Q4? Just given all the shift in the production schedules, can that still stay flat, or would you expect that to still be up sequentially Q3 to Q4?

[Analyst]: Hey, guys. Hey. Carol, maybe a little bit of help in piggybacking off the margin question just now. Can you help us think about systems' gross margin sequentially from the third or the fourth quarter? Just given all the shift in the production schedules, can that still stay flat, or would you expect that to still be up sequentially Q3 to Q4?

Carol Hibbard: Yeah. Our expectation is we'll see systems gross margin about where they were in Q3. We'll see that continued trajectory.

Carol Hibbard: Yeah. Our expectation is we'll see systems' gross margin about where they were in the third quarter. We'll see that continued trajectory. As we mentioned on software earlier, we believe the 70% level on software gross margin is where we're going to head.

Ken Newman: Okay.

Carol Hibbard: As we mentioned on software earlier, we believe the 70% level on software gross margin is where we're gonna head.

Ken Newman: Got it. Okay. Maybe one more on the cash flow. Appreciate the help on the CapEx and some of the moving pieces on timing of receipts. You know, you do have a pretty high portion of your revenue going towards R&D. I'm just curious if there's anything you're gonna parse out on what's potentially able to be capitalized going forward with this new tax bill and how to think about structural free cash flow through the cycle with the new policy?

[Analyst]: Got it. Okay. Maybe one more on the cash flow. Appreciate the help on the CapEx and some of the moving pieces on timing of receipts. You do have a pretty high portion of your revenue going towards R&D. I'm just curious if there's anything you can kind of parse out on what's potentially able to be capitalized going forward with this new tax bill and how to think about structural free cash flow through the cycle with the new policy.

Carol Hibbard: Yeah, I'd say, for R&D, the levels that you're seeing today will continue. We actually got the benefit over the last couple of quarters of a substantial portion of R&D is now actually moving to our contracted associated with the Advanced Systems and Robotics. You're seeing that as a lever too in our R&D as what you saw in this quarter. R&D from Q2 to Q3, you saw a slight reduction there, and that's because we're able to charge that off to our contracted R&D value.

Carol Hibbard: Yeah. I'd say for R&D, the levels that you're seeing today will continue. We actually got the benefit over the last couple of quarters of a substantial portion of R&D is now actually moving to our contracted associated with the Advanced Systems and Robotics. You're seeing that as a lever too in our R&D as what you saw in this quarter. R&D from Q2 to Q3, you saw a slight reduction there, and that's because we're able to charge that off to our contracted R&D value.

Ken Newman: Got it. Okay. Thanks.

[Analyst]: Got it. Okay. Thanks.

Carol Hibbard: Thanks, Ken.

Operator: Once again, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Mike Latimore with Northland Capital Markets. Your line is open.

Mike Latimore: Okay. Great. Thanks. In terms of just new starts, should they be kind of, you know, in this mid-single digit range for a while until you get rolling with the Next Gen Storage System? Or how should we think about just kind of new start trajectory?

Michael Latimore: Okay. Great. Thanks. In terms of just new starts, should they be kind of, you know, in this mid-single digit range for a while until you get rolling with the Next Gen Storage System? Or how should we think about just kind of new start trajectory?

[Analyst]: Okay. Great. Thanks. Yeah. In terms of just new starts, should they be kind of in this mid-single-digit range for a while until you get rolling with the next-gen storage system? How should we think about just kind of new start trajectory?

Carol Hibbard: I'd say this is the quarter where we saw a fewer number of starts as we were waiting to make sure we got the design finalized. You'll see new starts step up. We've talked about the average of mid to high single digit new starts. Obviously, last quarter, we hit a record high of 10 new starts. This quarter dropped down to five. You should see that step up again, going forward now that we have the design commercially available, and that's what a couple of our customers were waiting on in terms of moving forward with deployment.

Carol Hibbard: Yeah. I'd say this is the quarter where we saw a fewer number of starts as we were waiting to make sure we got the design finalized. You’ll see new starts step up. We've talked about the average of mid to high single-digit new starts. Obviously, last quarter, we hit a record high of 10 new starts. This quarter, dropped down to 5. You should see that step up again going forward now that we have the design commercially available. That's what a couple of our customers were waiting on in terms of moving forward with deployment.

Mike Latimore: Great. Just a clarification on the guidance. When you talk about the first half of 2026, is the implication that it should be a similar quarterly revenue level to what you're seeing or guiding to in the Q3?

Michael Latimore: Great. Just a clarification on the guidance. When you talk about the first half of 2026, is the implication that it should be a similar quarterly revenue level to what you're seeing or guiding to in the Q3?

[Analyst]: Great, just clarification on the guidance. When you talk about the first half of 2026, is the implication that it should be a similar quarterly revenue level to what you're seeing or guiding to in the September quarter?

Carol Hibbard: Yeah. As you know, we don't, we don't guide beyond the next quarter. If you look at what we put in our queue for the next 12 months associated with our, you know, RPO consumption, similar level to what we're guiding for Q4 would be where that would put us for the first half.

Carol Hibbard: Yeah. As you know, we don't guide beyond the next quarter. If you look at what we put in our Q for the next 12 months associated with our RPO consumption, similar level to what we're guiding for Q4 would be where that would put us for the first half.

Mike Latimore: Okay. Great. Thanks very much.

Michael Latimore: Okay. Great. Thanks very much.

[Analyst]: Okay. Great. Thanks very much.

Carol Hibbard: Thank you.

Operator: Next question comes from the line of Matt Summerville with D.A. Davidson. Your line is open.

Operator: Next question, Thomas from the line of Matt Somerville with D.A. Davidson. Your line is open.

Matt Summerville: Thanks. Just a couple things real quick. Does this new storage system, does that help accelerate new customer acquisition for you guys? Will you look to maybe change that cadence or that targeting of 1 to 2 a year to something greater than that? Can you just give a little bit more of a detailed update on GreenBox? Is there anything you're able to disclose on tenants? I have a follow-up.

Matthew Summerville: Thanks. Just a couple things real quick. Does this new storage system, does that help accelerate new customer acquisition for you guys? Will you look to maybe change that cadence or that targeting of 1 to 2 a year to something greater than that? Can you just give a little bit more of a detailed update on GreenBox? Is there anything you're able to disclose on tenants? I have a follow-up.

[Analyst] (Deutsche Bank): Thanks. Just a couple of things real quick. Does this new storage system, does that help accelerate new customer acquisition for you guys? Will you look to maybe change that cadence or that targeting of one to two a year to something greater than that? Can you just give a little bit more of a detailed update on Greenbox? Is there anything you're able to disclose on tenants? I have a follow-up.

Rick Cohen: Yeah, I mean, on new customers, we expect that to grow faster than it is right now. The customers we're in dialogue with is at the highest level it's ever been. This structure gives us the ability to sell smaller systems and bigger systems both at the same time, and it gives us a lot more flexibility. We would expect that to accelerate. On GreenBox, we're continuing to roll out sites and adding on to the organization there to rapidly grow the sales force. We're in discussions with a lot of folks. Some folks are looking at Symbotic systems, and some folks are actually looking at GreenBox as possibilities. That actually gives us more variability or more capabilities to lean customers.

Rick Cohen: Yeah. I mean, on new customers, we expect that to grow faster than it is right now. The customers we're in dialogue with is at the highest level it's ever been. It gives us the ability—new structure gives us the ability to sell smaller systems and bigger systems both at the same time. It gives us a lot more flexibility. We would expect that to accelerate. On Greenbox, we're continuing to roll out sites and adding on to the organization there to rapidly grow the sales force. We're in discussions with a lot of folks. Some folks are looking at Symbotic systems, and some folks are actually looking at Greenbox as possibilities. That actually gives us more variability or more capabilities to lean customers.

Rick Cohen: As we start to roll out the Greenbox covering the country, we're getting significantly more interest as opposed to, well, you can just do one location versus rolling out a number of locations. The first location in Lathrop is scheduled to go live pretty soon. That'll be income-producing as well.

Rick Cohen: As we start to roll out the GreenBox covering the country, we're getting significantly more interest as opposed to where you can just do one location versus rolling out a number of locations. The first location in Lathrop is scheduled to go live pretty soon, so that'll be income producing as well.

Matt Summerville: with respect to this new innovation that's been the topic of the discussion tonight, will you be ramping up any new manufacturing partners for that portion of the system, or is that not part of this array or any new installers relative? I guess I'm trying to understand what is may change from a manufacturing or installer standpoint, if you will.

[Analyst] (Deutsche Bank): With respect to this new innovation that's been the topic of the discussion tonight, will you be ramping up any new manufacturing partners for that portion of the system, or is that not part of this? Or any new installers relative? I guess I'm trying to understand what may change from a manufacturing or installer standpoint, if you will.

Matthew Summerville: with respect to this new innovation that's been the topic of the discussion tonight, will you be ramping up any new manufacturing partners for that portion of the system, or is that not part of this array or any new installers relative? I guess I'm trying to understand what is may change from a manufacturing or installer standpoint, if you will.

Rick Cohen: Yeah. We're working with a couple of new manufacturers to have people that will make basically the tines. Most of that steel is coming from the US, so it's not really affected by tariffs. It's a different design of the steel. The installation will be our same installation teams. We've actually been using those teams here in Wilmington at the ITC, practicing installing structures. Anybody can come and visit, but the installation is much simpler.

Rick Cohen: Yeah. We're working with a couple of new manufacturers to have people that will make basically the tines. The steel is basically—most of that steel is coming from the US, so it's not really affected by tariffs. It's a different design of the steel. The installation will be our same installation teams. We've actually been using those teams here in Wilmington at the ITC practicing installing structures. Anybody can come and visit. The installation is much simpler. The learnings from floor, the learnings from what we've been doing for the last couple of years in installation have really gone into once we figured out the new structure, then we actually brought in a bunch of structural engineers and a bunch of construction folks to actually design it to make it much easier to install.

Rick Cohen: The learnings from Fluor, the learnings from what we've been doing for the last couple of years in installation have really gone into once we figured out the new structure, then we actually brought in a bunch of structural engineers and a bunch of construction folks to actually design it to make it much easier to install. I would say the way I describe it, what we're doing here is we went from custom furniture to IKEA. Then I can't install an IKEA project without my wife's help. We still need to train the installers. It's pretty simple.

Rick Cohen: I would say the way I describe it, what we're doing here is we went from custom furniture to IKEA. I can't install an IKEA project without my wife's help. We still need to train the installers, but it's pretty simple.

Matt Summerville: Got it. Thank you.

Matthew Summerville: Got it. Thank you.

[Analyst] (Deutsche Bank): Got it. Thank you.

Operator: Your next question comes from the line of Rob Mason with Baird. Please go ahead.

Operator: Your next question, Thomas, from the line of Rob Mason with Baird. Please go ahead.

Rob Mason: Yes, good evening. I had a question on the ASR portion of your business. Carol, I think I inferred from your commentary that the development revenues were up sequentially there. Just I was curious if you could confirm it, maybe give us a feel for what those contributed. You know, as a follow-on to that, is that revenue at some steady state as we go forward, which we'll recognize per quarter?

Robert Mason: Yes, good evening. I had a question on the ASR portion of your business. Carol, I think I inferred from your commentary that the development revenues were up sequentially there. Just I was curious if you could confirm it, maybe give us a feel for what those contributed. You know, as a follow-on to that, is that revenue at some steady state as we go forward, which we'll recognize per quarter?

[Analyst]: Yes. Good evening. I had a question on the ASR portion of your business. Carol, I think I inferred from your commentary that the development revenues were up sequentially there. I was curious if you could confirm it, maybe give us a feel for what those contributed. As a follow-on to that, is that a revenue at some steady state as we go forward, what you'll recognize per quarter?

Carol Hibbard: Yeah. We were up sequentially from Q2 to Q3. We talked about last quarter being at mid-single digit. We're in high single digit in terms of the contribution to the revenue this quarter. You'll see that carry on at least in the next quarter or two. As we indicated in our prepared remarks, we've identified two of the prototype facilities. We've actually begun ordering equipment. As the design progresses, we're now getting ready to start building out our prototypes. You're gonna see that level maintained for the next couple of quarters.

Carol Hibbard: Yeah. We were up sequentially from the second quarter to the third quarter. We talked about last quarter being at mid-single digit. We're in high single digit in terms of the contribution to the revenue this quarter. You'll see that carry on at least in the next quarter or two. As we indicated in our prepared remarks, we've identified two of the prototype facilities. We've actually begun ordering equipment. As the design progresses, we're now getting ready to start building out our prototypes. You're going to see that level maintained for the next couple of quarters.

Rob Mason: When the prototype build start, how does that influence? The development revenue goes down, and it still gets classified in systems, though, right?

[Analyst]: When the prototype builds start, how does that influence? The development revenue goes down, and it still gets classified in systems, though, right?

Robert Mason: When the prototype build start, how does that influence? The development revenue goes down, and it still gets classified in systems, though, right?

Carol Hibbard: That's right. It's all classified in systems.

Rob Mason: Okay. Very good. Thank you.

Robert Mason: Okay. Very good. Thank you.

[Analyst]: Okay. Very good. Thank you.

Carol Hibbard: Thanks.

Operator: Thank you, everyone, and that concludes our question and answer session for today. I will now turn the call back over to Mr. Charlie Anderson for the closing remarks. Please go ahead.

Operator: Thank you, everyone. That concludes our question and answer session for today. I will now turn the call back over to Mr. Charlie Anderson for the closing remarks. Please go ahead.

Rick Cohen: Yeah. Thanks, everybody, for joining our call tonight. We really appreciate your interest in Symbotic and look forward to seeing many of you during the quarter at the various investor conferences we'll be attending. Thank you and good night.

Charlie Anderson: Yeah. Thanks, everybody, for joining our call tonight. We really appreciate your interest in Symbotic and look forward to seeing many of you during the quarter at the various investor conferences we'll be attending. Thank you and good night.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. Have a nice day ahead, everyone.

Arthur just because it marks or there will be a question and answer session. If you would like to ask a question during that time simply press star followed by one on your telephone keypad. If you would like to withdraw your question Press Star. One again. It is now my pleasure to turn today's call over to Mr. Charlie Anderson, Vice President of Investor Relations.

Please go ahead.

Thank you Hello, and welcome to <unk> third quarter of fiscal year 2025 financial results webcast I'm, Charlie Anderson, Symbolics, Vice President Investor Relations.

Some of the statements that we make today regarding our business operations and financial performance may be considered forward looking such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties.

Results could differ materially please.

Please refer to our Form 10-K, 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 GAAP to non-GAAP measures is included in today's earnings press release, which is distributed and available to the public through our Investor Relations website.

Located at IR <unk> Dot com on.

On today's call. We are joined by Rick Cowen Symbolics, founder, Chairman and Chief Executive Officer, and Carol Hibbard, <unk>, Chief Financial Officer, as well as easy Barton, our CFO successor, designate who will become CFO effective August nine.

These executives will discuss our third quarter fiscal year 2025 results and our outlook followed by Q&A.

That I will turn it over to Rick to begin Rick.

Thank you Charlie.

Good afternoon, and thank you for joining us to review our most recent results.

In the third quarter, we once again delivered strong financial results, while driving key operational progress.

Revenue increased by 26% year over year, and importantly, we maintained improve margins, thanks to disciplined cost control and solid project execution.

I want to commend our team for their continued focus on high quality delivery.

Our automation systems are also showing tangible results for our customers.

Adoption continues to scale and we recently set a record processing over $6 5 million cases in a single day through our operational systems. This level of throughput highlights the real value, we're delivering to our customers.

On the development side, we also made solid progress on our integration of advanced systems, and robotics or ASR business.

Notably we've now identified sites for the development of the first prototypes of the next generation solution installation is expected to begin early next calendar year, keeping us on track with our roadmap.

From a technology standpoint, we're driving innovation across the stack. A key example of this is Kelly operations capability, which enables remote operators to use our bots to reposition misaligned cases that have shifted out of place during inbound processing.

Before this capability these tasks, sometimes required manual intervention drilling schedule downtime.

Recently, we reached an important milestone our first operational day and a large site with zero manual repositioning using machine learning we are training our bots to automatically replicate these task minimizing both downtime and labor needs. Our goal remains clear smarter bots equipped with.

Cameras, Lidar and advanced Gpus, enabling even greater efficiency and value.

Finally on the innovation front yesterday, we announced a major product milestone the debut of our next generation storage structure. This marks what I believe is one of the most significant product upgrades in our company's history.

This new structure substantially increases our already exceptional storage density, allowing customers to store considerably more products in the same space and or reduce their overall storage footprint.

A more compact structure also speeds case handling as bots travel shortages.

Equally important the new structure introduces pre assembled precision manufacturing sub components, reducing onsite assembly parts by over 90%.

It also features a unique leveling system that minimize this flow of preparation.

Together, we believe these improvements will accelerate deployment and enhanced scalability, thus, making the next generation structure a game changer for our business.

Digitally we plan to apply this structure across all aspects of the supply chain from distribution centers to perishable goods environments to e-commerce and micro fulfillment hubs.

Customer response to next generation storage has been very positive in fact, we began signing projects that include the new storage structure in our fiscal third quarter.

We believe this next gen storage structure supports our path to unlocking even higher margins and long term value creation.

In summary, subotnick remains well position are strong and growing product portfolio spans multiple levels of the supply chain supported by a $22 $4 billion backlog and a healthy balance sheet.

Thank you to our team for their outstanding work this quarter and to our customers and shareholders for their continued support.

I'll now turn it over to Carol who will discuss the quarterly financials before I come back to introduce Izzy Martens, who has taken over as CFO next week, and we will provide the forecast Carol.

Before I begin I want to thank the entire team at symbiotic and it's been a pleasure to serve as CFO of IQ.

<unk> is in a strong position and I look forward to supporting the team during the transition period now to the results.

Third quarter revenue grew 26% year over year to $592 million with revenue growth driven by solid progress across our 46 systems in deployment.

Expansion of the number of systems in operation and continued progress on our ASR development.

Our net loss for the third quarter was $32 million versus a loss of $27 million in the third quarter of fiscal year 2024.

And EBITDA in the third quarter up $45 million was well above our forecast and up significantly year over year or $3 million in the third quarter fiscal year 2024.

In terms of the backlog our backlog of $22 4 billion remained in a strong position.

The sequential decrease from $22 7 billion last quarter was due to revenue recognized in the quarter, partially offset by final pricing on projects started.

And our third quarter, we began five new system deployment.

We also had five systems go operational in this quarter, bringing our total Q4 detailed operational system.

As we mentioned last quarter, we see the most critical portion of the appointment as the time between the start of installation and when the system goes operational acceptance.

This is the timing, which we see the most revenue and profit contribution.

In the third quarter, we again saw improvements I guess against this metric.

During the third quarter, we had a baseline completion for our largest customer is nearly two times the size of our historical average for phase one deployment at this customer.

State that added size the time between start of installation and going operational with only slightly higher than our historical average and significantly less if we normalize for size.

We also completed two phase II deployments for our largest customer that both took over 20% last time between start of installation and acceptance.

Historical average of their predecessors.

With the continued growth and operational system with our software revenue more than double year over year to $8 1 million.

And operation services revenue grew 54% year over year to $24 9 million.

Turning to margins system gross margin continued last quarters trend of significant year over year improvement, thanks to strong cost control and project execution.

Gross margin on software maintenance and support exceeded 75% as it continued its trend towards software industry margins as we gain scale.

And in Operation services, we came in with a slight profit.

Operating expenses on a GAAP basis are up sequentially, primarily due to a $16 million restructuring charge from the workforce reduction associated with our acquisition of the Walmart ASR.

On a non-GAAP basis operating expenses were down sequentially coincident with activity from the development phase of ASR.

We finished the quarter with cash and equivalents of $778 million.

Which decreased from $955 million in the second quarter, primarily due to the timing of cash receipts.

In summary, we had a strong financial quarter matched with continued operational progress.

Im now going to hand, it back to Rick who will introduce Izzy.

<unk>.

Thank you Carol.

Behalf of everyone at <unk> I want to thank you for your contributions, namely your leadership in driving improved project execution, while controlling costs, which we are which we are reaping the benefits of today.

We are fortunate to have a good amount of overlap between Carolyn <unk>, who joins us from Avis budget group.

Where she served as CFO and previously served as executive Vice President Americas, where she oversaw a market segment with over $9 billion of revenue.

Is he brings to our strong track record of financial leadership and operational expertise, which is critical for the next phase of the company with thrilled to have her here.

With that I'll turn it over to <unk>, who will introduce yourself and provide the forecast Izzy. Thank you rank I'm honored to join symbiotic a recognized leader in supply chain transformation from robotics and innovation, it's exciting to be a part of an organization that consistently pushes the boundaries of operational excellence.

I also wanted to extend my sincere thanks to Carol and <unk>.

Warm onboarding experience and for generously sharing her deep institutional knowledge over the past month.

Our guidance has been invaluable and I am grateful for her continued support.

This transition and look forward to partnering with our exceptionally talented leadership team as we enter our next phase of growth with a strong focus on delivering sustained value for our customers and our shareholders. Finally, I am eager to engage with many of you in the investment community in the coming months I welcome the opportunity.

You need to share our vision for the future now turning to the forecast.

As Rick highlighted earlier, we are in the process of bringing to market. Our next generation storage structure and we fully expect will affect the new standard for our customers over the long term we anticipate this innovation.

Unlocked meaningful opportunities, enabling more efficient deployment and supporting a higher margin profile person body.

In the near term.

Anticipate an adjustment in the timing of several previously planned deployments as efforts our realigned to support the transition to the next generation storage structure as a result of quarter over quarter sequential growth. We've seen in recent periods will be less pronounced in the fourth quarter looking.

Head to the first half of 2026, we believe we could see similar impact as we adjust deployment schedules to accommodate his transition to the new structure.

It is important to note that this does not affect our overall backlog in fact, we believe the new structures rapidly rapid assembly characteristics.

It allows us to scale faster overtime.

With that in mind for the fourth quarter of fiscal 2025, we expect revenue between 590 $610 million and adjusted EBITDA between 45 and $49 million.

With that we now welcome your questions.

Operator, please begin the Q&A.

At this time I would like to remind everyone that in order to ask a question gross star then the number one and it's on the phone keypad. They also ask to please limit your questions to one so that everyone can have the opportunity to engage with our speakers for today.

We will pause for just a moment to compile the Q&A roster.

Okay. So your first question Thomas from the line of Andy Kaplowitz with Citi. Please go ahead. Your line is open.

Good afternoon, everyone Carol Thanks for your help welcome Izzy.

Good afternoon.

So maybe you can help us quantify this next generation storage technology in terms of how first how much faster can I make installation times and how do you think about the retrofit opportunity set for symbolic of this technology would you expect for instance, Walmart to do a bunch of retrofitting of assistance that you've already completed with them and then we will be actually.

Pay you for that.

Yes, so I'll take that so no.

We don't expect Walmart to do retrofits.

<unk> of this system is that it can run side by side with the old structure.

But it takes less room.

So in in truth.

Some of the some of the projects, we're working on with Walmart.

Actually be smaller.

Because of the new structure, but actually allow them to sell us more product in the same building.

Additional capabilities for instance, we could put in the same building that was going to just do.

Our replenishment to stores, we could put a brake pad system in and we could actually put a ASR system isn't that might actually begin to start to look a little bit like an e-commerce solution.

So the capabilities are.

Hugely expand our business and that was one of the things that we wanted to talk about that smaller the history of all innovation is always comes down to whether it's transistors. There are many other things didn't utilization is for the most part always a huge positive and that's really what we're doing likewise.

So so they will they will continue to use the old structures of the buildings that they have but like some of the phase III buildings that we're doing and actually have a new structure right alongside the old structure and that took some real development work on our part, but we didn't want to customers to have to go backwards. So they're very excited about deposits.

And Andy I'll follow up on your question related to deployment timelines.

We follow a key metric, which is installed to actual deployment timeline historical that's been about 12 months and we've seen step downs in that on our existing core given the reduction in parts and the streamline assembly that we plan in terms of that build you would likely see that timeline begin to reduce and we will share that progress.

As we rollout the design and begin deployment.

Rick I just had one follow up like so.

Do you think about the growth.

Line its less steep for the next few quarters and then he can be even steeper than it was passed that that's the way to think about it in the positive direction correct.

Yes, that's it that's exactly the way we thought about it in when we started looking at the development of this.

We thought about that but for instance, we've now had a number of inquiries.

About perishables, because the cost of construction.

And of the facility itself.

Is so expensive today available to retrofit a perishable facility. This this may turn out to be the best retrofit able perishable facility that exists, it's a brand new product for us.

And then Rick I just wanted to ask you value increase the sales force you talked about that last quarter, you know backlog still in this sort of $22 billion to $23 billion range and I think you've talked about still expecting to get some new customers or a new customer. This year is that still the case and is it more likely to come at symbiotic or green box.

I think it's got a comment both.

We really.

We announced the new structure yesterday, but we have been marketing the new structure, probably for the last three to six months with customers telling them that might be coming and then we started doing some designs. The first installation will actually be.

And <unk> in Mexico for a big Walmart project, and then they're going to start to come after that but we've just really started marketing that in the last three to six months and so are our inbound discussions with new customers is accelerating as a result of it.

I appreciate all the color.

Thanks Ian.

Your next question comes from the line of Joe Giordano with Gd Kogan. Your line is open.

Hey, guys.

Maybe I'll start just on that structure.

I'm sure we all watch the videos.

I get it's clear why this would be faster to put together.

I'm just curious maybe you could talk me through like the.

The main reasons why its more dense I think that's a little bit harder to just tell from the video on why it's necessarily smaller and can you help us like what does this mean for like the price of these things.

So the reason that it's smaller is that.

And it's a candidly restructure and believe it or not the posts that supported the original structure to about 10% of the we think of it as linear storage space.

And then the other.

Other thing Youll see in the video is because we have fingers are times we.

We can actually put.

Three two shells per level versus 2.2 wells.

For level, which is a 30% increase and that's why the 40% is a pretty good number for storage density.

So what we basically did is took all the air out of the structure.

And and an increase the cubic density in the linear density of the space.

Outside of <unk> is probably the most boring thing in the world for most people to talk about but it is huge impacts to the customer and we've actually passed and it's probably the first new structure everybody else is using traditional warehouse rack more or less two to do their automation and so this is a brand new spot.

Sure, but you have lots of patents on.

And it goes up very quickly. So we have a bunch of new design structural engineer people that have helped us with us so that as the first answer to your question.

And then redesigned it so it can go up and modular pieces, there's no other system.

Charles.

We'll run about 1 million rivets for structure and Theres no ribbons and the structure. So it's a big big change.

Faster installed.

And the implications on cost for something like that.

So the implication on cost is where value pricing. This so.

For the customer we think we can save them more money because they don't need as much space and for US we expect to make higher margins.

Higher margins and maybe lower dollars, but maybe protect the dollar amount that the gross profit dollars does that look like the right way to think about it.

Maybe not lower not lower dollars.

And I think another way to think about it Joe is its going to vary by customer because we're providing we're building. This in less space. The customer will have a decision to make they might want to maximize that additional density and utilize that because we've created them capacity. So I think it will vary as they look at how they want to go into place.

And then just mechanically in the model here like how should we think about stock based comp going forward because I think it was initially expected to trend lower its been pretty high the last couple of quarters and it's like a huge add back to adjusted margin. So.

Where do you see the glide path on that.

Yeah, I'd say that glide path to what you saw last quarter and where we are this quarter. We will continue that trend at least for the next few quarters going forward really be increase Pat has been a focus on obviously some of the talent you've seen us bring in and then our head count has has gone up that also is some.

The increase was related to just our overall acquisition associated with ASR in there as well.

Thanks, guys.

Thanks.

Your next question comes from the line of Nicole would you. Please show me that voucher Bank. Your line is open.

Yes, thanks, good afternoon guys.

Hello.

Hello, maybe just starting with the big step up that you saw in software gross margins pretty impressive this quarter to be north of 70%.

Any comments on the drivers of that and we should we now view that above 70 level as sustainable moving forward.

Yeah. Thanks for the question Nicole I'd say given that this is the second or third quarter in a row, where we've seen the step up I would assume that 70% level continues going forward. So this quarter, we added seven new acceptances into the quarter and so we're really seeing the benefit of scale last quarter, we added.

<unk> systems that had complete and this quarter, we saw five and so we're really seeing the benefit of being able to scale across the software team.

Got it that's great. Thanks, Carol and then secondly on free cash flow I think it was a use of cash this quarter, which surprised me a little bit can you just provide some more color on that maybe it has something to do with the new structure et cetera, and any thoughts on free cash in <unk>.

Yes.

Free cash flow was not associated with the new structure. It was entirely timing of receipt. So we signed projects later in the quarter and we will see that step back up in the fourth quarter. One thing to note on free cash flow going forward, which is tied to the new structure and so you've seen our capex relatively flat around fort.

$12 million to $15 million, a quarter youre going to see a step up over the next couple of quarters as we make the investments to support the build of the new design. So all of the times that Rick talked about we're investing in the equipment to produce those but youll see a step up in capex over the next couple of quarters.

Okay, and any any way to quantify the step up in net capex of approximately.

Yeah, I'd say, you'll you'll see capex about to ask what you saw this quarter.

Okay perfect. Thank you I'll pass it on.

Your next question comes from the line of Mark Delaney with Goldman Sachs. Please go ahead.

Yes, good afternoon, and thank you very much for taking my questions.

First on the new storage structure. Thanks for all the details you shared already on that topic I'm, hoping you could be a little clearer.

When do you expect to start providing us to customers you mentioned, Mexico being the first location with Walmart, but I wasn't quite sure of when you expect that to begin.

And if you could also help us understand of.

The backlog is your expectation that most of the systems you haven't started yet we're going to be with this new structure or do you need to go out and negotiate that.

So I'll go ahead and start and so yeah as Rick indicated we already have customers who have signed in fact, all five of our starts for this quarter, we signed those assuming nextgen structure configuration and so our expectation is our customers going forward will all be associate.

With the Nextgen structure, we expect the first one to begin installation mid next fiscal year. So our mid fiscal year 2026.

Okay and then the.

Sort of that sequential moderation you spoke about youre still starting from.

Are there still going be some system starts just with the old structure until the anyone's ready or.

Or do you start to going to be.

Effectively near zero until Middle of next next year.

No new starts won't go to zero. So so that's a good clarification points. So in fact, we had five new starts this quarter. All five of them are going to proceed with the new structure and so with the design activity. We spent over the last several quarters. We'll go ahead and incorporate the capex and be able to begin installation of those sites.

In mid 2026.

We're not going to see a a stop of new south signatures as we go forward based on the new design saw a slowing of them. This quarter as we had customers waiting for some of the deployments that they would have started and thats, what youre seeing impactful in our guidance for the fourth quarter and won't be referenced for the first half of 'twenty.

Six.

Okay, just one other.

For me, if I could on Green box, when subarctic announced the Green box deal two years ago the plan.

We've always to start installation of all of those systems within six years.

It's been a relatively limited number of systems that symbiotic I started for green box, thus far so I'm, hoping to better understand what your expectation is at this point and do you still expect to begin installation of all of those green box systems within the prior six year target. Thank you.

And so as you indicated we've got three systems currently in deployment and we actually saw in within the quarter, we're seeing installation ramp up and so youre seeing revenue from Green box start increasing on the systems.

So we have indicated over the last couple of quarters, we saw slower than planned start of Green box systems, We expect to see now that we've got the CEO in place and the sales team in place we expect to start seeing that move forward in the coming quarters.

Alright, thank you.

Your next question comes from the line of Colin Rusch with Oppenheimer. Your line is open.

Thanks, so much guys.

There's been an awful lot of innovation around the energy storage space I'm, just curious about how much leverage and how much opportunity there is to optimize performance.

Uptime.

The design as you start to see some of those chemistries mature at a level that you're comfortable with.

Yeah. So.

The new structure.

Denser.

Will mean that the Bart trips will be shorter.

And so we were expecting to see.

Somewhere.

A pretty substantial increase in mud transactions per per per minute per hour.

If we if we have less travel time.

We will need less bonds.

And that will reduce the cost of our system. The second thing is that we're also.

Talking about bonds, putting lidar and upgrading the vision.

Chips.

And.

So the ability for the bots to compute what theyre looking at so all of those things are there's a big push.

On innovation, which will happen.

Certainly within the next year, where our bonds are going to be able to do substantially more work than they do right now.

Okay I'll follow up afterwards on the on the battery impact and then I guess for dexterity and kind of material handling perspective. Obviously you guys are the clear leader in terms of the number of materials and the types of materials that you guys can handle I guess are there other areas that you guys are trying to innovate on right now that might open up incremental opportunities and can you.

Give us a sense of timing in terms of just some of the materials that are difficult to manage that you guys might be able to unlock here over the near term.

When you say materials.

One one of them I'm not sure exactly what you mean, one of the clear targets.

So we're going after is perishables.

Because a lot of the.

Because at $500 a square foot for some of these buildings smaller buildings are usually valuable to the customer.

And then you get the savings on the building and we get.

So to be able to sell them on a very valuable system. So.

That's one thing same thing on the freezer reserves are not that hard for us to do but the storage density has made people.

<unk> looked at some of the prior providers and say Oh, maybe I can expand my existing freezer without having to add as much space as I thought so where we're really going after a value creation is ambient was all about.

The ability for us to handle so many more items than traditional systems.

But on the perishable side, there's also the value thats, great and just because the facility itself are so expensive even before they put our system and so that's one area that we're definitely going after we don't think the temperature has a significant effect on our bonds.

That's actually Super helpful. Thanks, So much guys.

Your next question comes from the line of Soderberg.

Sadr Bourbon with Cantor Fitzgerald Your line is open.

Yeah, Hey, everyone. Thanks for taking the questions.

Rick just a question on the competitive environment I think we've all seen videos online theres humanoid robots out there I think one of your competitors has kind of a robotic unloading technology from a semi truck.

Any sort of change in the competitive environment I know there was a question earlier on some of the technology, but.

It seems like the pace of innovation has really stepped up.

And any new concerns or any new technologies out there.

Well I mean, we're always we're always concerned.

But the response that we're getting so the truck and loading is really a very sick with specific thing and we were in touch with a lot of those folks.

It might be an add on to our system.

That would actually make our system more valuable the humanoid robots.

<unk> are very good at manufacturing, but our robots to go 25 miles an hour. So the humanoid robots are going to be very good stationary our slow moving machines, there and basically what they incorporate is dexterity and fingers and good vision, we do that with our bonds, but because we are.

We're picking up cases.

We're less concerned with humanoid robots. So I think that's a different aspect of automation that we're going after.

We where.

We're seeing more and more requests for us to look at things that people had previously used our competitors or so.

I would say we feel good about where we are and we think our Tam and our market share is going to grow but until it does I can't prove it out but that's what I think.

Okay.

Got it that's helpful. And then just with the new storage system I think there are a number of questions on.

The cost out is going to impact backlog, but.

Just when you combine that with a lot of the changes you guys have made on the EPC fronts, bringing that in house.

It's been a while since we've gotten kind of an update on maybe the structural gross margins of the hardware piece the systems piece.

Where are we sort of headed with all these changes that you guys have made water sort of a structural gross margins in systems, how much more room do we have to continue to see margin expansion from your own systems.

Yeah, but the Nextgen structure, Derek is actually one of the key enablers on our path to 30% system gross margin. So systems wise, we're still on that path and we've talked about overall improvements around schedule being a driver bringing back the EPC was certainly one of the significant drivers to get.

That's where we posted the last couple of quarters, but the next gen structure that the pure fact that it's streamlining assembly reducing million rabbits that Rick mentioned, that's going to help us on our trajectory towards higher gross margins and then as we think about the value creation piece of this as we go out and attract new customers.

We're certainly driving to.

Is that to grow the gross margin profile.

Okay.

Great really appreciate it.

Thanks.

Your next question comes from the line of Greg Palm with Craig Hallum. Your line is open.

Yeah, Thanks for taking the questions.

Maybe you can just wanted to go back to the quarter, because what what really stood out to US was what's the operating leverage the incremental margins were extremely high in the quarter. So I'm just curious if there's anything sort of onetime in any benefit in the quarter that you saw in just as we kind of think about fiscal 'twenty six how should we kind of think about that.

Going forward.

And from a from a gross margin perspective.

The step up in software I was certainly a good contributor and when I think about mix. So we've had a higher contribution this quarter from our advanced systems and robotics portion of the business higher margin content in some of our historical contracts had been so youre seeing that and then the other lever which continue to be beneficial this quarter is.

That timeline of deployment that we indicated from the start of installed to final acceptance. We're seeing continued improvements on how long, it's taking us to build so you're seeing that reflected in our gross margin.

Okay. That's helpful. And then I guess, just maybe maybe one clarification in terms of the new storage system I'm curious.

Has this been a part of the product roadmap for a number of years was this something that was maybe more directed by one of your customers I'm just kind of curious to sort of know the timeline or the history in.

Maybe some of the background.

Yeah. So.

I've been working on this for a couple of years.

I have I have I did my first drawing of it but the way I describe it is I feel like Frank Gehry, I actually had a design and I needed. Some engineers that can actually build it.

And so.

So this has been in the works for two years, we've Ts customers with it tested them ask them if they wanted it.

Very excited and so really it's been the last year that we I mean, if you come visit US we have we have the test systems are right down the street now and there is.

It's a magnificent new product.

Yes, okay.

Best of luck going forward and as we look forward to working with you.

Alright, Thanks, Greg.

Your next question comes from the line of Ken <unk> with Keybanc capital markets. Your line is open.

Yeah.

Hey, guys.

Hey, Carol maybe a little bit of help in and piggybacking off the margin question just.

Now maybe can you help us think about system gross margin sequentially from the third or the fourth quarter, just given all the shift in the production schedules can that still stay flat or would you expect that to still be up sequentially <unk> to <unk>.

And our expectation is we'll see systems gross margin about where they were in the third quarter.

We will see that continued trajectory and as we mentioned on software earlier, we believe the 70% level on systems and software gross margin is where we're going to head.

Got it okay.

Then maybe one more on the cash flow.

I appreciate the help on the Capex and some of the moving pieces on on timing of receipts.

You do have pretty high portion of your revenue going towards R&D I'm. Just curious if theres anything you can kind of parse out on what's potentially able to be capitalized going forward with this new tax bill and how to think about structural free cash flow through the cycle with the new policy.

Yeah I'd say.

Our R&D levels that youre seeing today.

It will continue we actually got the benefit over the last couple of quarters of a substantial portion of R&D is now actually moving to our contracted associated with advanced systems and robotics, So you're seeing that as a lever to in our R&D as what you saw in this quarter. So R&D from <unk> to four <unk> from <unk>.

<unk> saw a slight reduction there and that's because we're able to charge that off to our contracted R&D.

R&D value.

Okay.

Got it okay. Thanks.

Thanks, Kevin.

Okay.

Once again, if you would like to ask a question Keith Press Star one on your telephone keypad.

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

Okay, great. Thanks.

Now in terms of just new starts.

Should they be kind of in this.

Mid single digit range for a while until you get rolling with the next Gen storage system or how should we think about just kind of new start trajectory.

I'd say this is the quarter, where we saw a fewer number of starts as we were waiting to make sure. We got the design finalized and so youll see new starts step up we've talked about the average of mid to high single digit new starts obviously last quarter, we had a record high of 10 new starts.

This quarter dropped down to five and you should see that step up again I'm going forward now that we have the design commercially available and that's what a couple of our customers were waiting on in terms of moving forward with deployment.

Great and then just a clarification on the guidance.

When you talk about the first half of 'twenty six.

Implication that it should be a similar quarterly revenue level to what youre seeing in the.

We're guiding to in the chemical there.

Yeah as you know we don't we don't guide beyond the next quarter, but if you look at what we put in our Q for the next 12 months associated with our RP O consumption.

Similar level to what were guiding for <unk> would be where that would put us for the first half.

Okay, great. Thanks.

Thanks very much.

Thank you.

Next question comes from the line of Matt Summerville with D. A Davidson your line is open.

Just a couple of things real quick does and does this new.

Storage system does that help accelerate new customer acquisition for you guys, where you look to maybe change that cadence or that targeting of one to two a year to something greater than that.

Can you just give a little bit more of a detailed update.

On green boxes or anything.

Well to disclose on on tenants and then I have a follow up.

Yeah, I mean on a new customers, we expect that.

To grow faster than it is right now where we are.

Are the customers Werent dialogue with us is at the highest level it's ever been.

A it gives us the ability this structure gives us the ability to sell.

So smaller systems and bigger systems, both at the same time.

And it gives us a lot more flexibility so we would expect that to accelerate.

On Green box.

Ware.

We're continuing to rollout sites.

In adding onto the organization there too.

Rapidly grow the sales force, we're in discussions with a lot of folks.

Some folks are looking at symbiotic systems, and some folks who are actually looking at it green box.

As possibilities, so that actually gives us more.

Variability are more capabilities to leading customers, but as we start to rollout the green bonds covering the country. We're getting we're getting significantly more interest as opposed to where you can just do one location versus rolling out a number of locations and then the first location in late through is.

Is scheduled to go live pretty soon so that will be income producing as well.

With respect to this new innovation, that's been the topic of the discussion today will you be ramping up any new manufacturing partners for that portion of the system or is that not part of this rate or any new.

Installers relative I guess I'm trying to understand what may change from a manufacturing or installer standpoint.

If you will yes, so so so.

We're working with.

A couple of new manufacturers to have.

People will make basically the times the steel is basically most of that steel is coming from the U S. So it's not really affected by tariffs and so different design of the steel and the installation will they are same installation teams. So.

So we've actually been.

Using those teams here in Wilmington at the ITC practicing installing structures.

Anybody can come in and visit but the.

The installation is much simpler we actually.

The learnings from Florida, the learnings from what we've been doing the last couple of years and installation have really gone into once we figured out the new structure than we actually brought in a bunch of structural engineers in a bunch of construction folks.

Actually design and to make it much easier to install so I would say.

The way I describe it what we're doing here is we went from a custom furniture to appear.

And then I can install in a key a project without my wife's helps so we still need to training the installers were pretty it's pretty simple.

Got it thank you.

Your next question comes from the line of Rob Mason with Baird. Please go ahead.

Yes, good evening.

I had a question on the ASR portion of your business Carol I think I inferred from your commentary that.

The development revenues were up.

Sequentially, they're just I'm just curious if you could confirm it maybe give us a feel for what those contributed and as a follow on to that is that a revenue add some steady state.

As we go forward, which will recognize per quarter.

Yes, we were up sequentially from the second quarter to the third quarter. So we talked about last quarter being at mid single digit we're in high single digit in terms of the contribution to the revenue this quarter and Youll see that carry on at least in the next quarter or two as we indicated in our prepared remarks.

We've identified two of the prototype facility. So we've actually begun ordering equipment and so as the design progresses, we're now getting ready to start building out our prototypes and so youre going to see that level maintained for the next couple of quarters.

And when the prototype build start how does how does that influence.

The development revenue goes down in it.

It still gets classified in system so right.

That's right now classified in systems.

Okay very good thank you.

Yeah.

Thank you everyone and that concludes our question and answer session for today I will now turn the call back over to Mr. Charlie ambition for the closing remarks. Please go ahead.

Yeah, Okay. Thanks, everybody for joining our call Tonight, we really appreciate your interest in symbolic and look forward to seeing many of you during the quarter at the various investor conferences will be attending thank you and good luck.

Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

I stay ahead everyone.

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