Q3 2026 Symbotic Inc Earnings Call

August 5, 2026

Operator: Good day. Thank you for standing by. Welcome to Symbotic's Q3 Financial Results Conference Call. At this time, all participants are on a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please limit your questions to one question and one follow-up. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Charlie Anderson, Vice President of Investor Relations. Please go ahead.

Speaker #1: Good day, and thank you for standing by. Welcome to Symbotic Q4 Financial Results Conference Call, at this time all participants are on a listen-only mode.

Speaker #1: After the speaker's presentations, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone.

Speaker #1: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please limit your questions to one question and one follow-up.

Operator: To withdraw your question, please press star one one again. Please limit your questions to one question and one follow-up. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Charlie Anderson, Vice President of Investor Relations. Please go ahead.

Speaker #1: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today. Charlie Anderson, Vice President of Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: Hello. Welcome to Symbotic's Q3 fiscal year 2026 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.

Charlie Anderson: Hello. Welcome to Symbotic's Q3 of fiscal year 2026 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 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.symbotic.com.

Speaker #2: 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.

Charlie Anderson: 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 statements. In addition, during this call, we will present both GAAP and non-GAAP financial measures.

Speaker #2: 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 websites located at ir.symbotic.com.

Charlie Anderson: 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.

Speaker #2: On today's call, we are joined by Rick Cohen, Symbotic's founder, chairman, and Chief Executive Officer; and Izzy Martins, Symbotic's Chief Financial Officer. These executives will discuss our Q3 fiscal year 2026 results and our outlook, followed by Q&A.

Charlie Anderson: On today's call, we are joined by Rick Cohen, Symbotic's Founder, Chairman, and Chief Executive Officer, and Izzy Martins, Symbotic's Chief Financial Officer. These executives will discuss our Q3 of fiscal year 2026 results and our outlook, followed by Q&A. With that, I'll turn it over to Rick to begin. Rick?

Speaker #2: With that, I'll turn it over to Rick to begin. Rick?

Speaker #3: Thank you, Charlie. Good afternoon, and thank you for joining us to review our most recent results and business updates. We delivered strong Q3 results, highlighted by continued revenue growth and expanding margins leading to continued GAAP profitability and adjusted EBITDA that more than doubled year over year.

Rick Cohen: Thank you, Charlie. Good afternoon. Thank you for joining us to review our most recent results and business updates. We delivered strong Q3 results, highlighted by continued revenue growth and expanding margins, leading to continued GAAP profitability and adjusted EBITDA that more than doubled year-over-year. Thanks to another strong quarter, we remain well on track to achieve the objectives we laid out at the start of the year. As a reminder, our first objective was to leverage our growing product portfolio and capabilities to broaden our opportunities with customers. We're clearly seeing this play out as our BreakPack product to handle individual items or eaches, has now begun deployment at half of Walmart's regional distribution centers.

Speaker #3: Thanks to another strong quarter, we remain well on track to achieve the objectives we laid out at the start of the year. As a reminder, our first objective was to leverage our growing product portfolio and capabilities to broaden our opportunities with customers.

Rick Cohen: Thanks to another strong quarter, we remain well on track to achieve the objectives we laid out at the start of the year. As a reminder, our first objective was to leverage our growing product portfolio and capabilities to broaden our opportunities with customers. We're clearly seeing this play out as our BreakPack product to handle individual items or eaches, has now begun deployment at half of Walmart's regional distribution centers.

Speaker #3: We are clearly seeing this play out as our breakpack product to handle individual items or each's has now begun deployment at half of Walmart's regional distribution centers.

Speaker #3: In addition, we recently began installation of our first SIM microsystem for e-commerce fulfillment at the back of a Walmart store, a significant step forward towards unlocking this exciting new category of our business.

Rick Cohen: In addition, we recently began installation of our first SymMicro system for e-commerce fulfillment at the back of a Walmart store, a significant step forward towards unlocking this exciting new category of our business. We are also continuing to drive additional value for our customers that have existing operational systems by providing higher levels of performance through software to further optimize their supply chains. A recent example is using our software to more intelligently layer pallets and dynamically optimize freight delivery, specifically for seasonal events like back to school. By doing so, we believe our customers can realize shorter delivery times and faster restocking during these critical periods. We believe customers are increasingly recognizing the impact our systems can have, and as a result, we are seeing additional opportunities to broaden the scope of our work with both existing and prospective customers.

Speaker #3: We are also continuing to drive additional value for our customers that have existing operational systems by providing higher levels of performance through software to further optimize their supply chains.

Speaker #3: A recent example is using our software to more intelligently layer pallets and dynamically optimize freight delivery specifically for seasonal events like back-to-school. By doing so, we believe our customers can realize shorter delivery times and faster restocking during these critical periods.

Rick Cohen: A recent example is using our software to more intelligently layer pallets and dynamically optimize freight delivery, specifically for seasonal events like back to school. By doing so, we believe our customers can realize shorter delivery times and faster restocking during these critical periods.

Speaker #3: We believe customers are increasingly recognizing the impact our systems can have and, as a result, we are seeing additional opportunities to broaden the scope of our work with both existing and prospective customers.

Rick Cohen: We believe customers are increasingly recognizing the impact our systems can have, and as a result, we are seeing additional opportunities to broaden the scope of our work with both existing and prospective customers.

Speaker #3: For example, in the third quarter, we signed an agreement with Southern Glazer's Wine and Spirits for a second site after the success of their first facility.

Rick Cohen: For example, in Q3, we signed an agreement with Southern Glazer's Wine & Spirits for a second site after the success of their first facility. Southern Glazer's is a leading total beverage distributor serving 47 US markets and Canada. As we drive additional value to customers, it is allowing us to realize the second objective we laid out at the beginning of the year, which was to enhance our margins and profitability. Our forecast for the year implies full-year adjusted EBITDA that is more than double that of last fiscal year. This continues to be a key focus area for us, and we see clear levers to continue enhancing our profitability, driven by value creation for our customers and further operational efficiencies. The final objective we laid out was to continue to invest in our innovation engine to expand our capabilities and support future growth.

Speaker #3: Southern Glaciers is a leading total beverage distributor serving 47 U.S. markets and Canada. As we drive additional value to customers, it is allowing us to realize the second objective we laid out at the beginning of the year, which was to enhance our margins and profitability.

Speaker #3: Our forecast for the year implies full-year adjusted EBITDA that is more than double that of last fiscal year. This continues to be a key focus area for us, and we see clear levers to continue enhancing our profitability, driven by value creation for our customers and further operational efficiencies.

Rick Cohen: Our forecast for the year implies full-year adjusted EBITDA that is more than double that of last fiscal year. This continues to be a key focus area for us, and we see clear levers to continue enhancing our profitability, driven by value creation for our customers and further operational efficiencies. The final objective we laid out was to continue to invest in our innovation engine to expand our capabilities and support future growth.

Speaker #3: The final objective we laid out was to continue to invest in our innovation engine to expand our capabilities and support future growth. The analogy I often use here is that our automation system is like an operating system and we add apps to enhance its functionality for customers.

Rick Cohen: The analogy I often use here is that our automation system is like an operating system, and we add apps to enhance its functionality for customers. For us, this is playing out both organically and inorganically. Organically, we are making several functionality upgrades to our SymBots to enhance the performance of our system. For example, we deployed over 1,000 larger bots into our operational system this calendar year to handle a wider variety of SKUs. With this new bot, we have also built new modularized software development tools to give us enhanced flexibility to create different bots for different tasks and payloads, with our Symmicrobot being a perfect example. We are also in the process of rolling out LIDAR, enhanced camera systems, Nyobolt advanced batteries, and other updates, all with the aim of driving enhanced efficiency and performance for our systems. Inorganically, we have made two tuck-in technology acquisitions that expand our capabilities.

Speaker #3: For us, this is playing out both organically and inorganically. Organically, we are making several functionality upgrades to our Symbotics to enhance the performance of our system.

Speaker #3: For example, we deployed over 1,000 larger bots into our operational system this calendar year to handle a wider variety of SKUs. With this new bot, we've also built new modularized software development tools to give us enhanced flexibility to create different bots for different tasks and payloads, with our SIM microbot being a perfect example.

Rick Cohen: With this new bot, we have also built new modularized software development tools to give us enhanced flexibility to create different bots for different tasks and payloads, with our Symmicrobot being a perfect example.

Speaker #3: We're also in the process of rolling out LiDAR-enhanced camera systems, Nybolt advanced batteries, and other updates, all with the aim of driving enhanced efficiency and performance for our systems.

Rick Cohen: We are also in the process of rolling out LIDAR, enhanced camera systems, Nyobolt advanced batteries, and other updates, all with the aim of driving enhanced efficiency and performance for our systems. Inorganically, we have made two tuck-in technology acquisitions that expand our capabilities.

Speaker #3: Inorganically, we've made two tuck-in technology acquisitions that expand our capabilities. Box Robotics for dock automation and, most recently, Arms Innovations for warehouse operations optimization.

Rick Cohen: Fox Robotics for dock automation and most recently, ARMS Innovations for warehouse operations optimization. With ARMS, we have an opportunity to expand the reach of our software beyond our automation system to the entire warehouse operation, optimizing the movement of both equipment and people. In summary, we are focused on meeting our objectives and in turn, creating braggingly happy customers and expanding shareholder value. We also continue to have a solid balance sheet and backlog. As always, I want to thank our team for all their hard work, along with our customers and our investors for their continued support. I will now turn it over to Izzy, who will discuss our financial results and outlook. Izzy?

Speaker #3: With Arms, we have an opportunity to expand the reach of our software beyond our automation system to the entire warehouse operation, optimizing the movement of both equipment and people.

Speaker #3: In summary, we are focused on meeting our objectives and, in turn, creating braggingly happy customers and expanding shareholder value. We also continue to have a solid balance sheet and backlog.

Rick Cohen: In summary, we are focused on meeting our objectives and in turn, creating braggingly happy customers and expanding shareholder value. We also continue to have a solid balance sheet and backlog. As always, I want to thank our team for all their hard work, along with our customers and our investors for their continued support. I will now turn it over to Izzy, who will discuss our financial results and outlook. Izzy?

Speaker #3: As always, I want to thank our team for all their hard work, along with our customers and our investors, for their continued support. I'll now turn it over to Izzy, who will discuss our financial results and output.

Speaker #3: Izzy?

Speaker #4: Thanks, Rick. Fiscal Q3 revenue reached $721 million, near the high end of our forecasted range, and was up 22% year over year and up 7% quarter over quarter.

Izzy Martins: Thanks, Rick. Fiscal Q3 revenue reached $721 million, near the high end of our forecasted range, was up 22% year-over-year, and up 7% quarter-over-quarter. We also improved GAAP profitability with $55 million in net income. Adjusted EBITDA of $95 million was above our forecasted range due to expanding margins and operational efficiencies. Our revenue growth was driven by the continued expansion in the number of systems in deployment and the growth of operational systems that generate recurring revenue. We started 11 new system deployments in Q3, including the new Southern Glazer site highlighted by Rick, bringing us to a total of 77 systems in deployment at the end of the quarter. This expansion in the number of deployments drove systems revenue growth of 20% year-over-year and 6% sequentially to $671 million.

Speaker #4: We also improved GAAP profitability with $55 million in net income. Adjusted EBITDA of $95 million was above our forecasted range due to expanding margins and operational efficiencies.

Speaker #4: Our revenue growth was driven by the continued expansion in the number of systems in deployment and the growth of operational systems that generate recurring revenue.

Izzy Martins: Our revenue growth was driven by the continued expansion in the number of systems in deployment and the growth of operational systems that generate recurring revenue. We started 11 new system deployments in Q3, including the new Southern Glazer site highlighted by Rick, bringing us to a total of 77 systems in deployment at the end of the quarter. This expansion in the number of deployments drove systems revenue growth of 20% year-over-year and 6% sequentially to $671 million.

Speaker #4: We started 11 new system deployments in Q3, including the new Southern Glacier site highlighted by Rick, bringing us to a total of 77 systems in deployment at the end of the quarter.

Speaker #4: This expansion in the number of deployments drove systems revenue growth of 20% year over year and 6% sequentially, to $671 million. We also had four systems go operational during the quarter, bringing us to a total of 56 operational systems.

Izzy Martins: We also had four systems go operational during the quarter, bringing us to a total of 56 operational systems. As our base of operational systems continues to expand, software revenue grew 57% year-over-year to $13 million, and operation services revenue of $37 million grew 49% year-over-year, both in fiscal Q3. Turning to margins in fiscal Q3, gross margin expanded both sequentially and year-over-year due to strong project execution, cost discipline, benefits from scale, and revenue mix. Operating expenses on a GAAP basis were $128 million in fiscal Q3. Combined adjusted R&D and SG&A expenses totaled $85 million, with SG&A down sequentially due to operational efficiencies. Net income for fiscal Q3 was $55 million, an improvement from a net loss of $21 million in Q3 of fiscal year 2025.

Speaker #4: As our base of operational systems continues to expand, software revenue grew 57% year over year to $13 million, and operations services revenue of $37 million grew 49% year over year both in the fiscal Q3.

Speaker #4: Turning to margins in the fiscal Q3, gross margin expanded both sequentially and year over year due to strong project execution, cost discipline, benefits from scale, and revenue mix.

Izzy Martins: Turning to margins in fiscal Q3, gross margin expanded both sequentially and year-over-year due to strong project execution, cost discipline, benefits from scale, and revenue mix. Operating expenses on a GAAP basis were $128 million in fiscal Q3.

Speaker #4: Operating expenses on a GAAP basis were $128 million in the fiscal Q3. Combined adjusted R&D and SG&A expenses totaled $85 million, with SG&A down sequentially due to operational efficiencies.

Izzy Martins: Combined adjusted R&D and SG&A expenses totaled $85 million, with SG&A down sequentially due to operational efficiencies. Net income for fiscal Q3 was $55 million, an improvement from a net loss of $21 million in Q3 of fiscal year 2025.

Speaker #4: Net income for the fiscal Q3 was $55 million, an improvement from a net loss of $21 million in the Q3 of fiscal year 2025.

Speaker #4: This included an unrealized non-cash gain on the fair value of our strategic investments of $19 million in the quarter, which was primarily driven by an increase in the value of our investment in Nyobolt, our next-generation battery supplier.

Izzy Martins: This included an unrealized non-cash gain on the fair value of our strategic investment of $19 million in the quarter, which was primarily driven by an increase in the value of our investment in Nyobolt, our next-generation battery supplier. GAAP net income improved both year-over-year and sequentially, reflecting this impact as well as expanding margins and operating leverage. As Rick highlighted, adjusted EBITDA of $95 million was more than double the $45 million in Q3 of fiscal year 2025. Our backlog of $22.5 billion remains strong. The slight decrease from last quarter primarily reflects revenue recognized in the quarter, offset by final pricing adjustments on projects started in the quarter, and the addition of the new Southern Glazer site.

Speaker #4: GAAP net income improved both year over year and sequentially, reflecting this impact as well as expanding margins and operating leverage. As Rick highlighted, adjusted EBITDA of $95 million was more than double the $45 million in the Q3 of fiscal year 2025.

Izzy Martins: As Rick highlighted, adjusted EBITDA of $95 million was more than double the $45 million in Q3 of fiscal year 2025. Our backlog of $22.5 billion remains strong. The slight decrease from last quarter primarily reflects revenue recognized in the quarter, offset by final pricing adjustments on projects started in the quarter, and the addition of the new Southern Glazer site.

Speaker #4: Our backlog of $22.5 billion remained strong, the slight decrease from last quarter primarily reflects revenue recognized in the quarter offset by final pricing adjustments on projects started in the quarter and the addition of the new Southern Glacier site.

Speaker #4: We finished the quarter with cash equivalents of $1.7 billion, down from $2.0 billion last quarter, due primarily to the timing of cash receipts related to project starts, along with the timing of cash usage related to project activity.

Izzy Martins: We finished the quarter with cash and cash equivalents of $1.7 billion, down from $2 billion last quarter, due primarily to timing of cash receipts related to project starts, along with the timing of cash usage related to project activity. Now turning to the outlook. For Q4 of fiscal 2026, we expect revenue between $760 to 780 million, and adjusted EBITDA between $100 to 105 million. With that, we now welcome your questions. Operator, please begin the Q&A.

Speaker #4: Now turning to the outlook. For the Q4 of fiscal 2026, we expect revenue between $760 million and $780 million, and adjusted EBITDA between $100 million and $105 million.

Speaker #4: With that, we now welcome your questions. Operator, please begin the Q&A.

Speaker #5: Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Operator: Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please remember to limit to one question and one follow-up question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Andrew Kaplowitz of Citigroup. Your line is now open.

Speaker #5: To withdraw your question, please press star 11 again. Please remember to limit to one question and one follow-up question. Please stand by while we compile the Q&A roster.

Speaker #5: Our first question comes from the line of Andy Kaplowski, of Citigroup. Your line is now open.

Andrew Kaplowitz: Close enough. How's everyone doing?

Speaker #6: Close enough. How's everyone doing? So, Rick, I know you said that you've now installed a semi-growth prototype into a Walmart store. So maybe you can give more color into where you are in that development process.

Izzy Martins: Great.

Andrew Kaplowitz: Rick, I know you said that you've now installed a SymMicro prototype into a Walmart store, maybe you can give more color into where you are in that development process. I think you said previously you could see conversion on the $5 billion in Walmart backlog before the end of the calendar year. Is that still the right timeframe? As SymMicro's evolved, have you thought about the ultimate opportunity even beyond the initial $5 billion? I think, for instance, you've been working on solving perishables with a smaller system, maybe just an update would be helpful.

Speaker #6: I think you've said previously you could see conversion on the $5 billion in Walmart backlog before the end of the calendar year. Is that still the right time frame?

Andrew Kaplowitz: Is that still the right timeframe? As SymMicro's evolved, have you thought about the ultimate opportunity even beyond the initial $5 billion? I think, for instance, you've been working on solving perishables with a smaller system, maybe just an update would be helpful.

Speaker #6: And then as semi-growth evolves, how have you thought about the ultimate opportunity, even beyond the initial $5 billion? I think, for instance, you've been working on solving perishables with a smaller system.

Speaker #6: So maybe just an update would be helpful.

Speaker #3: Well, I think you've covered the whole waterfront there. So semi-growth, we are installing. It'll take I don't know, about six months. Into our first Walmart the new version of our system into the first Walmart store.

Rick Cohen: Well, I think you've covered the whole waterfront there. The SymMicro, we are installing. It'll take, I don't know, about 6 months into our first Walmart, the new version of our system into the first Walmart store. We're running 19 of the old versions, but we've been working with Walmart to develop this. That'll come to life about 6 months from now. We expect that'll work very well. We have a second site that'll follow shortly after that should trigger a bunch more sites once Walmart actually sees the system working. Your second question on perishables, we have a lot of interest in perishables.

Speaker #3: We're running 19 of the old versions, but we've been working with Walmart to develop this. And so that'll come to life about six months from now.

Rick Cohen: That'll come to life about 6 months from now. We expect that'll work very well. We have a second site that'll follow shortly after that should trigger a bunch more sites once Walmart actually sees the system working. Your second question on perishables, we have a lot of interest in perishables.

Speaker #3: That should trigger expanded we expect that'll work very well. We have a second site that'll follow shortly after that. And then that should trigger a bunch more sites once Walmart actually sees the system working.

Speaker #3: Your second question on perishables, we have a lot of interest in perishables. It seems like something clicked in the rest of the world. And so I think the realization that with the new structure, that you can save so much money on the construction costs of these perishable buildings, and they're so expensive to start with, we've had a lot of interest.

Rick Cohen: It seems like something clicked in the rest of the world. I think the realization that with the new structure, you can save so much money on the construction cost of these perishable buildings, and they're so expensive to start with. We've had a lot of interest. We would expect within the next six months, I guess, I would say, to begin building our first prototypes and testing some.

Speaker #3: So we would expect within the next six months, I guess, I would say, to begin building our first prototypes and testing stuff.

Speaker #6: Very helpful. And then Izzy, maybe just revenue is beginning to accelerate now in Q4. As per your guidance, given the new storage structure, it seems like it's allowing you to accelerate deployments.

Andrew Kaplowitz: Very helpful. Izzy, maybe just revenue is beginning to accelerate now in Q4, as per your guidance. Given the next-generation storage structure, it seems like it's allowing you to accelerate deployments openly to continue to see continued acceleration in FY 2027 in revenue. At least how do we think about that if you don't want to give specific guidance?

Speaker #6: Ultimately, to continue to see acceleration in FY27 and revenue, at least, how do we think about that? If you don't want to give specific guidance.

Speaker #4: Yeah, I think as Rick said, you covered it. But in your question, obviously, as we unveiled the next-generation storage structure, we were expecting that inflection point.

Izzy Martins: I think as Rick said, you covered it in your question. Obviously, as we unveiled the next-generation storage structure, we were expecting that inflection point. I think we're just starting that out. I think the sequential improvement quarter-over-quarter, including our guide, is, call it steady. I think, though, the real inflection point of the next-generation storage structure will really happen in H2 of next year as we proceed with the installation of that.

Speaker #4: I think we're just starting that out. I think the sequential improvement, quarter over quarter, including our guides, is call it steady. I think, though, the real inflection point of the next-generation storage structure will really happen in the second half of next year, as we proceed with the installation of that.

Speaker #6: Helpful. Thanks, guys.

Andrew Kaplowitz: Helpful. Thanks, guys.

Speaker #5: Our next call comes from the line of Matt Somerville, of DA Davidson. Your line is now open.

Operator: Our next call comes from the line of Matt Summerville of D.A. Davidson. Your line is now open.

Speaker #7: Thanks. A couple of questions. Can you maybe provide an update on where you are with customer acquisition for Exxon and maybe update where you're at with site launches?

Matt Summerville: Thanks. A couple of questions. Can you maybe provide an update on where you are with customer acquisition for Exotec and maybe update where you're at with site launches? I am also curious as to what initial inbound interest is with respect to that ARMS Innovations acquisition you referenced earlier.

Speaker #7: And then I'm also curious as to what initial inbound interest is with respect to that arms acquisition you referenced earlier.

Speaker #3: So, on Exxon, our Atlanta site has gone live. We are receiving product there. The customer has asked not to be named yet, but that site is now live and receiving product.

Rick Cohen: On Exotec, our Atlanta site has gone live. We are receiving product there. Customer has asked not to be named yet. That site is now live and receiving product. Our Lathrop site, which the customer is C&S, that Symbotic system is now complete, that site will go live within the next 60 or 90 days, and that'll be a nice revenue-producing site, because right now we have the system in there, but we're not getting any revenue as the cases go through Symbotic. We're feeling good about these sites are coming online. It's been a journey to get these sites filled up, but the reality is we had to get the buildings built and show people. We have a lot of incoming.

Speaker #3: And then our Lathrop site, which the customer is seeing us, that symbiotic system is now complete. And so that site will go live within the next 60 or 90 days.

Speaker #3: And that'll be a nice revenue-producing site because right now we have the system in there, but we're not getting any revenue as the cases go through symbiotic.

Rick Cohen: because right now we have the system in there, but we're not getting any revenue as the cases go through Symbotic. We're feeling good about these sites are coming online. It's been a journey to get these sites filled up, but the reality is we had to get the buildings built and show people. We have a lot of incoming.

Speaker #3: So we're feeling good about these sites are coming online. It's been a journey to get these sites filled up, but the reality is we had to get the buildings built and show people.

Speaker #3: So and we have a lot of incoming we have five buildings and so the fact that we have five buildings we're able to talk to bigger customers as well as smallest customers.

Rick Cohen: We have five buildings, the fact that we have five buildings, we're able to talk to bigger customers as well as smallest customers. It's a process. The answer to your first question is, we're live in Atlanta and receiving product, and in Lathrop, California, we will start filling out about 100% of what we plan there within the next 60 to 90 days.

Speaker #3: But it's a process. But the answer to your first question is, we're alive in Atlanta and receiving product. And in Lathrop, California, we will start filling out about 100% of what we plan there within the next 60 to 90 days.

Speaker #4: We get a few sites on arms.

Izzy Martins: Give him insights on ARMS.

Speaker #3: And then on arms, arms we're doing the integration of the arms software with the operating system from symbiotic. We have a site our first site that we're doing the integration will be the testing, and then we'll be able to show people how that will work.

Rick Cohen: On ARMS, we're doing the integration of the ARMS software with the operating system from Symbotic. We have a site, our first site that we're doing the integration will be the testing, and then we'll be able to show people how that will work, and we think that'll be a very nice software revenue business for us because we think it creates great value in improving the efficiencies of the maintenance whole system and process.

Speaker #3: And we think that'll be a very nice revenue software revenue business for us because we think it creates great value in improving the efficiencies of the maintenance whole system and process.

Matt Summerville: Thank you for that, Caller. As a follow-up, I'm-

Speaker #7: That's a follow-up. Go ahead.

Rick Cohen: Yeah. Go ahead.

Matt Summerville: Go ahead.

Speaker #3: No, that'll actually be one of the best examples of integrating AI with a software system because that system will actually be able to tell an operator what's wrong, where the inventory is, which operators should go fix it.

Rick Cohen: No, that'll actually be one of the best examples-

Matt Summerville: Oh, sorry

Rick Cohen: of integrating AI with a software system because that system will actually be able to tell an operator what's wrong, where the inventory is, which operator should go fix it. That's going to be a very sweet little business for us.

Speaker #3: So, that's going to be a very sweet little business for us.

Matt Summerville: Appreciate that, Caller. Curious if Southern Glazer's is using that next-generation storage structure. Maybe remind us what the site opportunity may ultimately look like with that customer.

Speaker #7: Appreciate that caller. Curious if Southern Glaciers is using that next-gen storage structure and maybe remind us what the site opportunity may ultimately look like with that customer.

Speaker #3: So with Southern Glaciers specifically?

Rick Cohen: With Southern Glazer's specifically?

Speaker #7: Yes.

Matt Summerville: Yes.

Rick Cohen: Southern Glazer's, their second site is not using the newest structure, in part because the way that the liquor industry works, the cases are more standardized. I think the third and fourth sites probably will, but the second site was already started in design. These are liquor-heavy bottles, and the case sizes are pretty standard. The new structure is beneficial to them, but in more varied box sizes, it's even more beneficial. The real answer is they would've used it, but we already started with the old structure when we designed it, and it's just too far down the road.

Speaker #3: Southern Glazer's second site is not using the newest structure, in part because of the way the liquor industry works. The cases are more standardized, and so I think the third and fourth sites probably will, but the second site was already started in design.

Speaker #3: And these are heavy, these are liquor-heavy bottles, and the case sizes are pretty standard. So, the new structure is beneficial to them, but in more varied box sizes, it's even more beneficial.

Rick Cohen: The new structure is beneficial to them, but in more varied box sizes, it's even more beneficial. The real answer is they would've used it, but we already started with the old structure when we designed it, and it's just too far down the road.

Speaker #3: But the real answer is they would have used it, but we already started with the old structure when we designed it, and it's just too far down the road.

Speaker #4: And then for the potential there, as Rick mentioned in his prepared remarks, we're starting the second one. And as you know, they serve in 47 US markets, including in Canada.

Izzy Martins: For the potential there, as Rick mentioned in his prepared remarks, we're starting the second one, and as you know, they serve in 47 US markets, including in Canada.

Speaker #7: Got it. Thank you, guys.

Matt Summerville: Got it. Thank you, guys.

Operator: Thank you. Our next call comes from the line of Joe Giordano of TD Cowen. Your line is now open.

Speaker #5: Thank you. Our next call comes from the line of Joe Gurdano of TD Cowan. Your line is now open.

Speaker #8: Hey guys, thanks for taking my questions. Just a couple of clarifications—the Atlanta site for Exxon, is that a one-customer site? I know you mentioned the customer doesn't want to be named.

Joe Giordano: Hey, guys. Thanks for taking my questions. Just a couple of clarifications. The Atlanta site for XOL, is that a one-customer site? I know you mentioned the customer doesn't want to be named. Is that customer planning on taking the whole-

Speaker #8: Is that customer planning on taking the whole business?

Rick Cohen: No, that's a multi-customer site. We're just receiving the first customer, and we haven't determined how much space they're going to need, but they're building up pretty quickly.

Speaker #3: No, that's a multi-customer site. We're just receiving the first customer, and we haven't determined how much space they're going to need, but they're building up pretty quickly.

Speaker #3: So that'll be a multi that'll be a multi-site.

Joe Giordano: Okay.

Rick Cohen: That'll be a multi-site.

Joe Giordano: On the micro-fulfillment, I'm just curious, as you said, you're going to deliver, you're building it out six months, then you'll do a second. What's the mechanism in the contract? I thought the contract was kind of like once they accept it automatically triggers the $5 billion and the 400-store order. What is required to have that hit?

Speaker #8: And then on the micro-fulfillment, I'm just curious as you said you're going to deliver you're building it out six months, and then you'll do a second what's the mechanism in the contract?

Speaker #8: I thought the contract was kind of like once they accept it, it automatically triggers the 5 billion and the 400 store order. What is required to have that hit?

Rick Cohen: The way we've done things with Walmart in partnership is we build a prototype. We build them so that they work. We also know that we already can tell from the prototype. We're building it into a store. I'm not sure I'm supposed to announce the store, but it'll become obvious pretty soon. We'll build it into the store, then we overbuild it to make sure that it works, then we redesign it to make sure that we've got the cost out. In this case, make it smaller, make it more efficient. Walmart may add items, they may delete items. When we do the second version, that's usually what triggers, Okay, we want 400 of these.

Speaker #3: The way we've done things with Walmart and partnership is we build a prototype we build them so that they work, but we also know that we already can tell from the prototype we're building it into a store.

Speaker #3: I'm not sure I'm supposed to announce the store, but it'll become obvious pretty soon. But we'll build it into the store, and then we'll we overbuild it to make sure that it works.

Rick Cohen: We'll build it into the store, then we overbuild it to make sure that it works, then we redesign it to make sure that we've got the cost out. In this case, make it smaller, make it more efficient. Walmart may add items, they may delete items. When we do the second version, that's usually what triggers, Okay, we want 400 of these.

Speaker #3: And then we redesign it to make sure that we've got the cost out. In this case, make it smaller, make it more efficient.

Speaker #3: Walmart may add items. They may delete items. And so and when we do the second version, that's usually what triggers, "Okay, we want 400 of these."

Speaker #8: Got it. Okay.

Joe Giordano: Got it. Okay.

Speaker #3: The first the most important thing with these sites is there's the coordination of the hardware, but most of the time, what's happened with these micro-fulfillment sites is that the software hasn't been flexible enough and the software and the automation haven't been coordinated enough.

Rick Cohen: The most important thing with these sites is there's the coordination of the hardware, but most of the time, what's happened with these micro-fulfillment sites is that the software hasn't been flexible enough and the software and the automation haven't been coordinated enough. We're going to overbuild this, but we probably won't build 400 of the version we're building now. I think the one after this, we will.

Speaker #3: So we're going to overbuild this, but we probably won't build 400 of the version we're building now. But I think the one after this, we will.

Speaker #8: Great. Is he just how should we think about the pacing of system ads? Maybe for next quarter and into the near future?

Joe Giordano: Great. Izzy, how should we think about the pacing of system adds, maybe for next quarter and into the near future?

Speaker #4: Yeah. So as you noticed, right, we had a great three-quarters in a row. I had originally mentioned a couple of quarters ago maybe the fourth would be a little light.

Izzy Martins: Yeah. As you noticed, right, we had a great three quarters in a row. I had originally mentioned a couple of quarters ago, maybe Q4 would be a little light. Actually now, as I'm seeing the trajectory, I think Q4 will be in line with Q3, maybe just a little short of Q3. Great expectations where we've been in the last three quarters and where we're going to land for the year.

Speaker #4: But actually, now, as I'm seeing the trajectory, I think the fourth quarter will be in line with the third, maybe just a little short of the third.

Speaker #4: So, great, great expectations. We've been in the last three quarters, and we're going to land for the year.

Joe Giordano: Great. Thanks, Iz.

Speaker #8: Great. Thanks, guys.

Speaker #5: Thank you. Our next question comes from the line of Ken Newman of KeyBank Capital Markets. Your line is now open.

Operator: Thank you. Our next question comes from the line of Ken Newman of KeyBanc Capital Markets. Your line is now open.

Speaker #8: Hey, good evening, guys. Maybe for my first question, Izzy, maybe you can help us just think about I'll ask the new storage system or the revenue question on systems a little bit differently.

Ken Newman: Hey, good evening, guys.

Izzy Martins: Ken.

Ken Newman: Maybe for my first question, Izzy, maybe you can help us just think about, I will ask the new storage system or the revenue question on systems a little bit differently. As you think about the new storage system now being fully implemented, how should we think about the cadence of segment gross margins on that improvement, just given that you do expect that to maybe ramp, it sounds like maybe later in the back half of 2025. Just trying to think about the opportunity for gross margin improvement there and the cadence of that in coming quarters.

Speaker #8: As you think about the new storage system now being fully implemented, how should we think about the cadence of segment gross margins on that improvement, just given that you do expect that to maybe ramp?

Ken Newman: how should we think about the cadence of segment gross margins on that improvement, just given that you do expect that to maybe ramp, it sounds like maybe later in the back half of 2025. Just trying to think about the opportunity for gross margin improvement there and the cadence of that in coming quarters.

Speaker #8: It sounds like maybe later in the back half of next year, but just trying to think about the opportunity for gross margin improvement there and the cadence of that incoming quarters.

Speaker #4: Okay. So let me unpack your question a little bit. First, with just let me repeat what Rick was saying on the micro-fulfillment. So we're starting now the first prototype.

Izzy Martins: Okay. Let me unpack your question a little bit. First with, just let me repeat what Rick was saying on the micro-fulfillment. We are starting now the first prototype. We expect to get into after that, or maybe in the middle of that, getting the second prototype. I really am not expecting just yet the micro-fulfillment, call it the store order that is mentioned in the contract, probably until early 2028. When you think about margins, right, our whole journey of improving margins, right? This contract is more profitable from that perspective. You just have to think of it as we continue the mix, right? The first step, as I have been talking about, is probably closer to the second half of 2025. We get the inflection point of really having the installation of the next-gen system, which will improve margins.

Speaker #4: We expect to get into after that or maybe in the middle of that, getting the second prototype. I really am not expecting just yet the micro-fulfillment, call it the store order, that's mentioned in the contract.

Speaker #4: Probably until early 2028. So then when you think about margins, right, our whole journey of improving margins, right, this contract is more profitable from that perspective.

Izzy Martins: When you think about margins, right, our whole journey of improving margins, right? This contract is more profitable from that perspective. You just have to think of it as we continue the mix, right? The first step, as I have been talking about, is probably closer to the second half of 2025. We get the inflection point of really having the installation of the next-gen system, which will improve margins.

Speaker #4: So you just have to think of it as we continue the mix, right? The first step, as I've been talking about, is probably closer to the second half of next year.

Speaker #4: We get the inflection point of really having the installation of the next-gen system, which will improve margins. Then you also then end up getting in the back of stores and that being also a big part of the mix, which gets us to, in this journey, how our margins continue to improve.

Izzy Martins: You also then end up adding in the back of stores, and that being also a big part of the mix, which gets us to, in this journey, how our margins continue to improve. The one thing I will say about margins, we had a great quarter from a margin perspective. As I said last quarter, I was expecting stable margins. The quarter was really strong. I think Q4 will behave very similar to our exit trend in Q2. I hope that helps, Ken.

Speaker #4: The one thing I will say about margins, we had a great quarter from a margin perspective. As I said last quarter, I was expecting stable margins.

Speaker #4: The quarter was really, really strong. I think the fourth quarter will behave very similar to our exit trends in the second. So I hope that helps, Kel.

Ken Newman: Sure.

Speaker #3: Sure.

Speaker #4: Third.

Izzy Martins: Sorry, Q2.

Speaker #8: Yeah, that's very helpful. I appreciate that. Maybe for the follow-on here, Rick, it was interesting to see a couple of bolt-on deals this quarter.

Ken Newman: That's very helpful. I appreciate that. Maybe for the follow-on here, Rick, it was interesting to see a couple of bolt-on deals this quarter. You did a bolt-on last quarter as well. As you look at the forward innovation pipeline, is there any color you can give on just other types of deals that you're looking to maybe help you drive faster deployments? I would also be curious just if there's anything you can kind of talk about on what you're spending on AI development in terms of token spend versus the hardware spend on R&D.

Speaker #8: You did a bolt-on last quarter as well. As you look at the forward innovation pipeline, is there any color you can give on just other types of deals that you're looking to maybe help you drive faster deployments and I would also be curious just if there's anything that you can kind of talk about on what you're spending on AI development in terms of token spend versus the hardware spend on R&D.

Ken Newman: I would also be curious just if there's anything you can kind of talk about on what you're spending on AI development in terms of token spend versus the hardware spend on R&D.

Speaker #3: Yeah. So we are looking at more bolt-ons. It's an interesting time. As you guys know, there's so much money chasing AI. That a lot of the traditional automation companies are running into funding problems or and so we've become a very good place for people to approach us as investors or acquirers.

Rick Cohen: We are looking at more bolt-ons. It's an interesting time. As you guys know, there's so much money chasing AI, that a lot of the traditional automation companies are running into funding problems. We've become a very good place for people to approach us as investors or acquirers. That's why we built up our balance sheet. We guessed right about that. We are right about that. I think we'll see continued opportunities there to acquire hardware. In the case of ARMS Innovations, it was a software. Some companies we're looking at are a combination of interesting technology, both hardware and software and vision. The question you asked about AI is, the way I would describe it is, I think we were doing AI 5 years ago before anybody called it AI.

Speaker #3: So that's why we built up our balance sheet where we guess right about that. We are right about that. I think we'll see continued opportunities there.

Rick Cohen: We are right about that. I think we'll see continued opportunities there to acquire hardware. In the case of ARMS Innovations, it was a software. Some companies we're looking at are a combination of interesting technology, both hardware and software and vision. The question you asked about AI is, the way I would describe it is, I think we were doing AI 5 years ago before anybody called it AI.

Speaker #3: To acquire hardware, in the case of Arm, it was software. So, in some companies, we're looking at a combination of interesting technology—both hardware and software—in vision.

Speaker #3: The question you asked about AI is so the way I would describe it is I think we were doing AI five years ago before anybody called it AI.

Speaker #3: So we've been doing self-driving cars. We've been doing vision. We've been doing LiDAR. We generate I think it's a trillion bits of data every day at every site.

Rick Cohen: We've been doing self-driving cars, we've been doing vision, we've been doing LIDAR. We generate, I think it's 1 trillion bits of data every day at every site. Maybe it's 100 billion. It's an incredible amount of data at every site. We're looking to economically store it in the cloud, and then we are writing our own AI agent. Yes, we're using some AI to audit code, and that's helpful. Mostly what we will do is we will develop our own AI agents that will actually be able to predict and tell us what's going to go wrong with our systems before they go wrong, and then actually communicate to the robots, drive them out of the system, tell the maintenance people what's wrong with them and fix them. That's not something that we're going to pay a lot of money for outside.

Speaker #3: Maybe it's 100 billion. It's incredible amount of data at every site. And so we're looking for to economically store it in the cloud, and then we are writing our own AI agent.

Speaker #3: So yes, we're using some AI to audit code. And that's helpful. But mostly what we will do is we will develop our own AI agents that will actually be able to predict and tell us what's going to go wrong with our systems before they go wrong and then actually communicate to the robots drive them out of the system tell the maintenance people what's wrong with them and fix them.

Rick Cohen: Mostly what we will do is we will develop our own AI agents that will actually be able to predict and tell us what's going to go wrong with our systems before they go wrong, and then actually communicate to the robots, drive them out of the system, tell the maintenance people what's wrong with them and fix them. That's not something that we're going to pay a lot of money for outside.

Speaker #3: So that's not something that we're going to pay a lot of money for outside. That's something that we've been building here for a long time.

Rick Cohen: That's something that we've been building here for a long time. That's why I think most people consider us one of the leading companies in the world with physical AI. I think there's a lot of misnomers about that, but we're actually doing it, and we've been doing it for a long time before. We used to call it machine learning. They used to call it a whole bunch of other things. Now we're actually learning how to use AI, not just to generate reports, but actually to communicate directly with our robots and, in some cases, fix them, in some cases, tell them what to do, in some cases, tell them where to go to the exit ramp and get fixed.

Speaker #3: And that's why I think most people consider us one of the leading companies in the world with physical AI. And I think there's a lot of misnomers about that, but we're actually doing it, and we've been doing it for a long time before we used to call it machine learning.

Speaker #3: They used to call it a whole bunch of other things. But now we're actually learning how to use AI not just to generate reports, but actually to communicate directly with our robots—and in some cases fix them, in some cases tell them what to do, in some cases tell them where to go to the exit ramp and get fixed.

Rick Cohen: They used to call it a whole bunch of other things. Now we're actually learning how to use AI, not just to generate reports, but actually to communicate directly with our robots and, in some cases, fix them, in some cases, tell them what to do, in some cases, tell them where to go to the exit ramp and get fixed.

Clint Freidrichsen: Sorry, if I could just clarify that last point, Rick. When you talk about scaling that infrastructure on the AI software side, does that require an incremental or scale-up in tokens needed to operate that system? Is that really just on the inference that you get to scale?

Ken Newman: Sorry, if I could just clarify that last point, Rick. When you talk about scaling that infrastructure on the AI software side, does that require an incremental or scale-up in tokens needed to operate that system? Is that really just on the inference that you get to scale?

Speaker #8: Serial let me just if I could just clarify that last point, Rick. When you talk about scaling, that infrastructure on the AI software side, does that require an incremental or a scale-up in tokens needed to operate that system, or is that really just on the inference that you get to scale?

Speaker #3: Yeah. So that's a great question. We're using some tokens. But there's a lot of open-source AI, there's a lot of there's a lot of AI that and we're also looking at different forms of AI.

Rick Cohen: Yeah. That's a great question. We're using some tokens, but there's a lot of open source AI. We're also looking at different forms of AI. There's some AI that we can actually not have to go to the cloud. We can actually imbue that technology right into our SymBots. Because with the new NVIDIA chips, we have 4 times as much storage, and we'll have more storage on our SymBots that we didn't have 2 years ago. I don't think tokens, I don't think AI expense is going to be a major issue for us, and we're very focused on doing as much as we can internally ourselves. One of the things that we've learned is that about 80% of the AI that maybe we looked at using last year was a lot of formatting.

Speaker #3: There's some AI that we can actually not have to go to the cloud. We can actually imbue that technology right into our bots, because with the new NVIDIA chips, we have four times as much storage, and we'll have more storage on our bots than we did two years ago.

Speaker #3: So I don't think tokens, I don't think AI expense is going to be a major issue for us, and we're very focused on doing as much as we can internally ourselves.

Rick Cohen: I don't think tokens, I don't think AI expense is going to be a major issue for us, and we're very focused on doing as much as we can internally ourselves. One of the things that we've learned is that about 80% of the AI that maybe we looked at using last year was a lot of formatting.

Speaker #3: So we don't one of the things that we've learned is that about 80% of the AI that maybe we looked at using last year was a lot of formatting, it was not actually using the data that we needed.

Rick Cohen: It was not actually using the data that we needed. One of the things we're focused on is because we generate so much data, because we've always mined our own data, we're actually looking at what's the most efficient way to use our data that's cost-effective.

Speaker #3: So one of the things we're focused on is because we generate so much data, because we've always mined our own data, we're actually looking at what's the most efficient way to use our data that's cost-effective.

Speaker #8: Thank you. Appreciate it.

Clint Freidrichsen: Thank you. Appreciate it.

Ken Newman: Thank you. Appreciate it.

Speaker #1: Our next question comes from the line of Mark Delaney of Goldman Sachs. Your line is now open.

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

Speaker #2: Good afternoon. Thank you very much for taking the questions. I think that our margins was one of the key highlights from the quarter. I believe our revenue was 11 million above the midpoint of your guidance, but you've been talking about 12 million better.

Mark Delaney: Good afternoon. Thank you very much for taking the questions. I think that our margins was one of the key highlights from the quarter. I believe your revenue was $11 million above the midpoint of your guidance, but EBITDA was even $12 million better. Can you share more on what led to the decreased margin improvement between Q and the upside relative to your expectation?

Speaker #2: So can you share more on what led to the decreased margin improvement and 3Q and the upside relative to your expectations?

Speaker #1: Sure. I'll take that. So just to unpack the margins, right? If you think about it just in the amount of revenue we had in the systems, those margins came in quite solid.

Izzy Martins: Sure. I'll take that. Just to unpack the margins, right? If you think about it, just in the amount of revenue we had in the systems, those margins came in quite solid. Quarter over quarter, they actually came a little bit better than I was expecting originally. Those really come down to the project execution and the mix of business we had in the quarter. I think the other thing that came in nicely this quarter was the fact that ops services continues to deliver profitability. Maybe it was a little bit better than I expected, but at the end of the day, I expect next quarter to be in line with this quarter's revenue.

Speaker #1: Quarter over quarter, they actually came a little bit better than I was expecting originally. But those really come down to the project execution and the mix of business we had in the quarter.

Speaker #1: I think the other thing that came in nicely this quarter was the fact that our services right, the continues to deliver profitability. Maybe it was a little bit better than I expected, but at the end of the day, I didn't expect next quarter to be in line with this year with this quarter's revenue.

Izzy Martins: I think the other thing that came in nicely this quarter was the fact that ops services continues to deliver profitability. Maybe it was a little bit better than I expected, but at the end of the day, I expect next quarter to be in line with this quarter's revenue.

Speaker #1: And then, last but not least, as you hit about on EBITDA margin, the operating leverage was really good because when you look at the non-GAAP, FX year over year, it was only up 3%.

Izzy Martins: Last but not least, as you hit on EBITDA margin, the operating leverage was really good because when you look at the non-GAAP FX year-over-year, it was only up 3%. A combination of all those things, be it systems, operations services, and really the scale that we're getting in our FX, really allowed us to deliver a more profitable quarter.

Speaker #1: So a combination of all those things, be it systems, operation services, and really the scale that we're getting in our FX really allowed us to deliver a more profitable quarter.

Speaker #2: It's very helpful. My other question was on cash flow. You talked about timing as the reason that the free cash flow was a headwind in the quarter.

Mark Delaney: Very helpful. My other question was on cash flow. You talked about timing as the reason that the free cash flow was a headwind in the quarter. Help us understand how to think about free cash flow for the upcoming quarter. Some of those timing issues persist or maybe the better EBITDA will drive improved cash flow. Thanks.

Speaker #2: Help us understand how to think about free cash flow for the upcoming quarter. So some of those timing issues persist or maybe the better EBITDA will drive improved cash flow.

Speaker #2: Thanks.

Speaker #1: Yeah. I would certainly look at the free cash flow for the quarter just as a timing item and not even timing that I have to wait for the whole fourth quarter.

Izzy Martins: I would certainly look at the free cash flow for the quarter just as a timing item, and not even timing that I have to wait for the whole Q4. Those were really payments that just came in a week later. I would say if I had a week more in the quarter, you wouldn't have seen no blip in that. I think the better way to think about it is to your question on Q4, I would expect a positive free cash flow. I think just in general, given our business, better to measure us over a longer period of time, and that the free cash flow will be on an annual basis positive.

Speaker #1: Those were really payments that just came in a week later. So, I would say if I had a week more in the quarter, you wouldn't have seen any blip in that.

Speaker #1: I think the better way to think about it is, to your question on the fourth quarter, I would expect a positive free cash flow. And I think, just in general, given our business, it's better to measure us over a longer period of time, and the free cash flow, on an annual basis, will be positive.

Izzy Martins: I think the better way to think about it is to your question on Q4, I would expect a positive free cash flow. I think just in general, given our business, better to measure us over a longer period of time, and that the free cash flow will be on an annual basis positive.

Speaker #2: Thank you.

Mark Delaney: Thank you.

Speaker #1: Our next question comes from the line of Glenn Frederickson of Baird. Your line is now open.

Operator: Our next question comes from the line of Clint Friedrichsen of Baird. Your line is now open.

Speaker #2: Hey, afternoon, guys. Thanks for the question. Now that you've owned Fox Robotics for a little bit, curious if there's any updates to their product that you've made or contemplating that improves the integration with your system.

Clint Freidrichsen: Hey, afternoon, guys. Thanks for the question. Now that you've owned Fox Robotics for a little bit, curious if there's any updates to their product that you've made or are contemplating that improves the integration with your system. I think you've also mentioned some of their largest customers are not Symbotic customers, any updates on discussions with any of their customers and whether they could be potential customers?

Speaker #2: And I think you've also mentioned some of their largest customers are not symbiotic customers, so any updates on discussions with any of their customers and whether they could be potential customers?

Speaker #3: Yeah. We've been very encouraged all of the Fox customers are actually delighted that we bought the company. We're in talks with all of them.

Rick Cohen: Yeah. We've been very encouraged. All of the Fox customers are actually delighted that we bought the company. We're in talks with all of them. We've hired some new folks there. We've hired some new salespeople there. We're sitting down and doing a complete review with two of the larger customers, just talking about what they would like for next versions, what they would like for next steps. I think that's going to be a very nice business. We've been very encouraged. We've had no headwinds. We're actually I think the customers we're talking to are saying, "We're really excited you own this company." In some cases, they might want a Symbotic system, in some cases, they're actually really interested in the combination of Fox, the Arm software, some of the other software we're looking at, actually helping them with a dock management system.

Speaker #3: We've hired some new salespeople there. We're sitting down and doing a complete review with two of the larger customers and just talking about what they would like for next versions, what they would like for next steps.

Speaker #3: And so I think that's going to be a very nice business. We've been very encouraged. We've had no headwinds. We're actually I think the customers we're talking to are saying we're really excited you own this company and in some cases, they might want a symbiotic system and in some cases, they're actually really interested in the combination of Fox, the ARM software, some of the other software we're looking at, and actually helping them with a doc management system.

Rick Cohen: We've been very encouraged. We've had no headwinds. We're actually I think the customers we're talking to are saying, "We're really excited you own this company." In some cases, they might want a Symbotic system, in some cases, they're actually really interested in the combination of Fox, the Arm software, some of the other software we're looking at, actually helping them with a dock management system.

Speaker #3: So, we've just started. It's a very small company, but I think it's got very big potential. We've been excited about the reception that we've gotten from all of the Fox customers.

Rick Cohen: We just started. It's a very small company, but I think it's got a very big potential, and we've been excited about the reception that we've got from all of the Fox Robotics customers.

Speaker #2: Thanks. And for my follow-up, Izzy, you've been on a nice sequential EBITDA margin progression for the better part of two years. You did mention the fourth quarter guide, kind of implies flattish EBITDA margin sequentially, despite higher revenue.

Clint Freidrichsen: Thanks. For my follow-up, Izzy, you've been on a nice sequential EBITDA margin progression for the better part of 2 years. You did mention the Q4 guide kind of implies flattish EBITDA margin sequentially, despite higher revenue. Could you just unpack maybe why margins wouldn't continue to improve with operating leverage?

Speaker #2: Could you just unpack maybe why margins wouldn't continue to improve with operating leverage?

Speaker #1: I think right now, I just want to make sure that we see it coming. So right now, based on our latest forecast, we do expect OpEx to just increase slightly, and that would be more on the SG&A side.

Izzy Martins: I think right now, I just want to make sure that we see it coming. Right now, based on our latest forecast, we do expect OpEx to just increase slightly, and that would be more on the SG&A side. Maybe it comes in better, but right now, my expectation is that the OpEx would be just a slight uptick. I think the other part, as I mentioned earlier, of the gross margins where we landed on a non-GAAP basis of 25% this quarter. Right now, I'm going back to what I said I was expecting stabilization at the end of the Q2. If they come in closer to in line with the Q2, those are the two main reasons why you would see that EBITDA margin would be flat.

Speaker #1: So maybe it comes in better, but right now, my expectation is that the OpEx would be just a slight uptick. I think the other part is I mentioned earlier, the gross margins where we landed on the non-GAAP basis of 25% this quarter, right now, I'm going back to what I said I was expecting stabilization at the end of the second quarter.

Izzy Martins: I think the other part, as I mentioned earlier, of the gross margins where we landed on a non-GAAP basis of 25% this quarter. Right now, I'm going back to what I said I was expecting stabilization at the end of the Q2. If they come in closer to in line with the Q2, those are the two main reasons why you would see that EBITDA margin would be flat.

Speaker #1: So, if they come in closer to in line with the second quarter, those are the two main reasons why you would see that EBITDA margin would be flat.

Speaker #2: Thank you.

Clint Freidrichsen: Thank you.

Speaker #1: Thank you. Our next question comes from the line of Guy Hardwick of Barclays. Your line is now open.

Operator: Thank you. Our next question comes from the line of Guy Hardwick of Barclays. Your line is now open.

Speaker #4: Hi. Hi, guys. I just whether you could update us on the remaining performance obligations, I think the 10Q says 22.5 billion and 15% realized over the next 12 months.

Guy Hardwick: Hi, guys. Whether you could update us on the remaining performance obligations. I think the 10-Q says $22.5 billion and 15% realized over the next 12 months. It doesn't look like the changes look as significant this quarter than the previous quarter. Whether there's anything unusual or is it just regular kind of contract plus-ups as you begin deployments, particularly, I think there's another, I think you said 11 starts.

Speaker #4: It doesn't look like the changes were as significant this quarter than the previous quarter. Just were there anything unusual or just was it just regular kind of contract plus-ups as you begin deployments, particularly I think there's another like you said, 11 starts?

Speaker #1: That's correct. So the 22.5 and the banding of within the next 12 months of 15%, that's exactly what we put out there. I think it's just it just has once again to do with the mix of deployments.

Izzy Martins: That's correct. The $22.5 billion and the banding of within the next 12 months of 15%, that's exactly what we put out there. I think it just has, once again, to do with the mix of deployments. Just to, before I even get into the deployments, right? The $22.5 billion coming off at $22.7 billion, get a healthy amount of revenue in the quarter, you decrease it. As you know, we have pricing adjustments when we redo the backlog, plus the fact that we added Southern Glazer's. It really then comes down, when you're tracking it just really comes down to the 11 deployments we are putting in in the quarter, just what those pricing adjustments were. It could be lumpy at any given time. I think the more promising thing is that despite the revenue that we're generating every single quarter, our backlog still remains very stable.

Speaker #1: So just before I even get into the deployments, right, the 22.5 coming off of 22.7, we had a healthy amount of revenue in the quarter.

Speaker #1: You decrease it. As you know, we have pricing adjustments when we redo the backlog, plus the fact that we added Southern Glazers. But it really then comes down when you're tracking it.

Izzy Martins: As you know, we have pricing adjustments when we redo the backlog, plus the fact that we added Southern Glazer's. It really then comes down, when you're tracking it just really comes down to the 11 deployments we are putting in in the quarter, just what those pricing adjustments were.

Speaker #1: It just really comes down to the 11 deployments. We are putting in the quarter just what those pricing adjustments were, so it could be lumpy at any given time.

Izzy Martins: It could be lumpy at any given time. I think the more promising thing is that despite the revenue that we're generating every single quarter, our backlog still remains very stable.

Speaker #1: I think the more promising thing is that despite the revenue that we're generating every single quarter, our backlog still remains very, very stable. And as we said before, that backlog still doesn't include the contract for the 400 pack of store system.

Izzy Martins: As we said before, that backlog still doesn't include the contract for the 400 backup store system.

Speaker #4: And Izzy, it looks like revenue to deployments are being falling now for at least four quarters. Is that kind of a mix effect? What is the kind of it seems a little odd as system sizes in the Walmart business is actually going up, right?

Guy Hardwick: Izzy, it looks like revenue deployments have been falling now for at least four quarters. Is that a kind of a mix effect? What is the kind of? It seems a little odd the system sizes in the Walmart business is actually going up, right?

Speaker #1: Agreed. But it also just has to deal with at what point in the cycle we are in the installation phase. Right? Because the revenue is going to come in as we get closer to month 13 forward.

Izzy Martins: Agreed, it also just has to deal with at what point in the cycle we are in the installation phase. Right? Because the revenue's going to come in as we get closer to month 13 forward. There is a little bit of lumpiness, but I think it's better, instead of just focusing on one given quarter, if you look at the multiple of the quarters and where we are and what the expectation is going forward, given that the fit banding is at 15% for the next 12 months.

Speaker #1: So there is a little bit of lumpiness, but I think it's better, instead of just focusing on one given quarter, to look at multiple quarters and where we are, and what the expectation is going forward.

Speaker #1: Given that the fit banding is at 15% for the next 12 months.

Speaker #4: So it's just does that mean that you'd expect revenue per deployment to start going up again, or will it continue to sort of trend down?

Guy Hardwick: Sorry. Does that mean that you'd expect revenue per deployment to start going up again, or will it continue to sort of trend down?

Speaker #1: I think in the coming quarter we don't guide to backlog. I think the expectation for the next quarter, given the guide we gave, that's really where our expectation is.

Izzy Martins: We don't guide to backlog. I think the expectation for the next quarter, given the guide we gave, that's really where our expectation. Of course, we're always looking to not only have stable backlog but to increase our backlog.

Speaker #1: But of course, we're always looking to not only have a stable backlog, but to increase our backlog.

Speaker #5: Well, revenue is going up. We expect revenue to go up.

Rick Cohen: Well, the revenue is going up. We expect revenue to go up.

Izzy Martins: Yeah, we do expect revenue to go up, of course. That's where the 15% comes in.

Speaker #1: Yeah. And we do expect revenue to go up, of course. That's where the 15% comes in.

Speaker #4: Thank you.

Guy Hardwick: Thank you.

Speaker #1: Our next question comes from the line of Colin Rush of Oppenheimer & Company. Your line is now open.

Operator: Our next question comes from the line of Colin Rusch of Oppenheimer and Company. Your line is now open.

Speaker #2: Thanks so much, guys. Now with the ARM platform purchased, can you talk a little bit about the opportunity to start introducing new offerings with some automation or robots that are more interactive with humans than existing assets that might be a little bit lower barrier to entry for some of the customers that you might want to grow with?

Colin Rusch: Thanks so much, guys. Now with the ARMS platform purchased, can you talk a little bit about the opportunity to start introducing new offerings with semi-automation or robots that are more interactive with humans and existing assets that might be a little bit lower barrier to entry for some of the customers that you might want to grow with?

Rick Cohen: I'm not sure I understand your question.

Speaker #3: I'm not sure I understand your question.

Speaker #2: I'm just looking for a sense of opportunities that you guys could bring to market that would be at a slightly lower price for customers—a lower barrier to entry to get them started—as they move toward fully automated systems.

Colin Rusch: I'm just looking for a sense of opportunities that you guys could bring to market that would be a little bit lower price.

Rick Cohen: Oh, yeah.

Colin Rusch: for customers, a little bit lower barrier to entry to get them started as they move towards fully automated systems.

Speaker #3: Yes. So I think the ARM software is something that we could sell to a customer the company actually doesn't make anything except software. So we could sell that to customers and introduce our software.

Rick Cohen: Yes. The ARMS software is something that we could sell to a customer. The company actually doesn't make anything except software, so we could sell that to customers and introduce our software. The other thing is that the Fox robots, these are $100,000 machines. I think that is the way I look at it is our hardware will continue to grow, our sales are going to continue to grow, but we will become much more of a software-centric company that's selling machines that basically perform for what we want our software to do. For instance, some of the Fox customers, there's a company, it's no secret, it's DHL, one of the largest 3PLs in the world. They really like the Fox robots. They want us to help them manage the dock.

Speaker #3: The other thing is that the Fox robots these are $100,000 machines. And so I think that is the way I look at it is we will become our hardware will continue to grow.

Speaker #3: Our sales are going to continue to grow. But we will become much more of a software-centric company that's selling machines that basically perform for what we want our software to do.

Rick Cohen: our sales are going to continue to grow, but we will become much more of a software-centric company that's selling machines that basically perform for what we want our software to do. For instance, some of the Fox customers, there's a company, it's no secret, it's DHL, one of the largest 3PLs in the world. They really like the Fox robots. They want us to help them manage the dock.

Speaker #3: So for instance, some of the Fox customers, there's a company no secret, it's DHL, one of the largest 3PLs in the world. They really like the Fox robots.

Speaker #3: They want us to help them manage the dock. They may never buy a Symbotic system, but if you sell—I don't know—you sell 20,000 of these, 100,000 machines, that's a pretty good sale.

Rick Cohen: They may never buy a Symbotic system, but if you sell 20,000 of these $100,000 machines, that's a pretty good sale. I'm not saying we sell that to DHL, but it's a huge market out there, and it's a much easier point of entry. Your question is appropriate because the last two weeks we've had two major potential customers, retailers who are interested in automation, great companies, well-known names, and they're really looking at how they can enter into the automation space without a lot of experience. We can sell them a very small system. We can sell them a small system and a dock system. That's one of our focuses, is to get some of these very large customers in with an entry-level product.

Speaker #3: So I'm not saying we sell that to DHL, but it's a huge market out there. And it's a much easier point of entry. Your question is appropriate because the last two weeks we've had two major potential customers retailers who are interested in automation great companies, well-known names, and they're really looking at they're really looking at how they can enter into the automation space without a lot of experience.

Rick Cohen: well-known names, and they're really looking at how they can enter into the automation space without a lot of experience. We can sell them a very small system. We can sell them a small system and a dock system. That's one of our focuses, is to get some of these very large customers in with an entry-level product.

Speaker #3: And so we can sell them a very small system. We can sell them a small system and a dock system. So that's one of our focuses—to get some of these very large customers in with an entry-level product.

Speaker #3: So, it could be a single one-in and a one-out sell. That could be in the tens of millions—low tens of millions—in terms of numbers. And so, yes, that's what we're looking at.

Rick Cohen: It could be a single one in and a one out cell, that could be in the low tens of millions number. Yes, that's what we're looking at.

Speaker #1: And not to mention that the mass back of store system will be.

Izzy Martins: not to mention that the back of store system.

Rick Cohen: The back of the store system is another opportunity.

Speaker #3: In the back of the store system is another opportunity.

Speaker #2: Perfect. And then there's certainly been a lot of investment around perception technology and notably one of the LIDAR vendors is now selling LIDAR with color capability and functional safety.

Colin Rusch: Perfect. There's certainly been a lot of investment around perception technology, and notably, one of the LiDAR vendors is now selling LiDAR with color capability and functional safety. I'm just curious about how much leverage you might get from those sorts of perception solutions into simplifying bot design, optimizing performance, and how we should think about the adoption cycle and some of those newer perception technologies going forward.

Speaker #2: I'm just curious about how much leverage you might get from those sorts of perception solutions in simplifying bot design and optimizing performance, and how we should think about the adoption cycle and some of those newer perception technologies going forward.

Speaker #3: Yeah. So a lot of so there's a number of people some of the that are doing LIDAR slow-moving bots to interact with people. I won't mention names of companies, but you know who they are.

Rick Cohen: Yeah. There's a number of people, some of those that are doing LiDAR slow moving bots to interact with people. I won't mention names of companies, but you know who they are. What we're doing is bots with LiDAR that are fast moving and weigh a lot. The change in technology, and the reason we will expect to have LiDAR on all our bots within the next, I don't know, 2 years on the outside, is that these LiDAR used to cost, 4 years ago, they were $5,000, now they're under $500. They become very affordable for our bots, and then it really enables our software.

Speaker #3: What we're doing is bots with LIDAR that are fast-moving and weigh a lot. The change in technology and the reason we will expect to have LIDAR on all our bots within the next I don't know, two years on the outside, is that these LIDAR used to cost four years ago, they were $5,000.

Rick Cohen: The change in technology, and the reason we will expect to have LiDAR on all our bots within the next, I don't know, 2 years on the outside, is that these LiDAR used to cost, 4 years ago, they were $5,000, now they're under $500. They become very affordable for our bots, and then it really enables our software.

Speaker #3: Now they're under $500, so they become very affordable for our bots. And then it really enables our software. Whereas other people are using LiDAR for a basic Akiva bot or something that moves slow, follows a line, and is meant to be used with humans.

Rick Cohen: Where other people are using LIDAR for basic, like a Kiva bot or something that moves slow, follows a line meant to be used with humans, what we're really doing is putting LIDAR on bots that's like a self-driving vehicle that wants to go fast. We're really trying to have bots that are now combined with arms and AI, really getting much closer to within our structure, a lights out facility that, really, we may go long periods of time before humans actually have to go in and interact with a bot. That kind of technology does not exist out there for warehouse automation, and that's our goal.

Speaker #3: What we're really doing is putting LIDAR on bots that's like a self-driving vehicle that wants to go fast. And so we're really trying to have bots that are now combined with ARMs and AI.

Rick Cohen: We're really trying to have bots that are now combined with arms and AI, really getting much closer to within our structure, a lights out facility that, really, we may go long periods of time before humans actually have to go in and interact with a bot. That kind of technology does not exist out there for warehouse automation, and that's our goal.

Speaker #3: Really getting much closer to within our structure, a lights-out facility, that really we don't we may go long periods of time before humans actually have to go in and interact with a bot.

Speaker #3: That kind of technology does not exist out there for warehouse automation. And that's our goal.

Speaker #2: Perfect. Thanks, guys.

Colin Rusch: Okay. Perfect. Thanks, guys.

Rick Cohen: Okay.

Speaker #3: Yeah.

Speaker #1: Thank you. Our next question comes from the line of Derek Sodenberg with Cantor Fitzgerald. Your line is now open.

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

Speaker #2: Yeah. Hey, everyone, thanks for taking my questions. Rick, I was wondering if you could expand on the ARM's acquisition a bit. You talked about it a little in the prepared remarks and during the Q&A.

Derek Soderberg: Yeah. Hey, everyone. Thanks for taking my questions. I'm wondering, Rick, if you can expand on the ARMS acquisition a bit. You talked about a little bit in the prepared remarks and during the Q&A. I was wondering how you'll monetize that. Is that going to be a subscription or bundled through the system's price? Is this more for Exotec or is the plan to deploy this at your large existing customers as well?

Speaker #2: I was wondering how you'll monetize that. Is that going to be a subscription or bundled through kind of the systems price? And is this more for Excel or is the plan to deploy this at your large existing customers as well?

Speaker #3: No. We will deploy this as an option for all of the Symbotic customers, including Excel. So, it'll be a software add-on.

Rick Cohen: No. We will deploy this as an option for all of the Symbotic customers, including Exol. It will be a software add-on.

Speaker #2: Got it. And Rick, could you just talk about where this acquisition kind of started? Was this something customers were asking about? And then just high level, I was curious, if you think eventually a large retailer might in a sense seed control of the distribution facilities to symbiotic or Excel as you sort of really fully automate the supply chain here if maybe it makes more sense for you guys to take on the facilities and they would just pay you per case or any of those types of conversations happening.

Derek Soderberg: Got it. And Rick, could you just talk about where this acquisition kind of started? Was this something customers were asking about? Then just high level, I was curious if you think eventually a large retailer might, in a sense, cede control of the distribution facilities to Symbotic or Exol as you sort of really fully automate the supply chain here. If maybe it makes more sense for you guys to take on the facilities and they would just pay you per case, or any of those types of conversations happening. Thanks.

Derek Soderberg: If maybe it makes more sense for you guys to take on the facilities and they would just pay you per case, or any of those types of conversations happening. Thanks.

Speaker #2: Thanks.

Speaker #3: Yeah. So Excel is definitely getting those inquiries. And we've been funneling them through Excel. We also have a number of sites, a number of customers where we sold them a system.

Rick Cohen: Yeah. Exol is definitely getting those inquiries, we've been funneling them through Exol. We also have a number of sites, number of customers where we sold them a system, then Symbotic runs the system at a cost per case. ARMS just means that if we were to do that with this kind of maintenance, that we would charge the customer and our operating costs would be lower. We would be the beneficiary both of the software and of the more efficiencies. What ARMS does is it creates a database combined with the operating system, which is inherent in every Symbotic system. It says to somebody that these, everybody, all the maintenance people in the front of the structure or working there have a handheld device.

Speaker #3: And then symbiotic runs the system. At a cost per case. So and ARMs just means that if we were to do that with this kind of maintenance, that we would charge the customer and our operating costs would be lower.

Speaker #3: And so we would be the beneficiary, both of the software and of more efficiencies. What ARMs does is it creates a database combined with the operating system, which is inherent in every Symbotic system. But it says to somebody—so, everybody, all the maintenance people in the front of the structure or working there, have a handheld device.

Rick Cohen: We would be the beneficiary both of the software and of the more efficiencies. What ARMS does is it creates a database combined with the operating system, which is inherent in every Symbotic system. It says to somebody that these, everybody, all the maintenance people in the front of the structure or working there have a handheld device.

Speaker #3: And it would say, "Lift 606 in here and geolocate it in this particular part of the building." And remember, some of these buildings are a million square feet.

Rick Cohen: It would say, Lift 606 in here, then geo-located in this particular part of the building. Remember, some of these buildings are 1 million square feet. This lift has a failed valve. I need you to go there. Here's a picture of what it should take to fix it. I've already checked before you go. This is what AI does. I've already checked. These two parts are in inventory, don't go to the lift then go to the inventory room. Go to the inventory room, get these two parts, go to the lift. The whole thing should take you 40 minutes. We've been struggling with how do we make these maintenance systems more efficient. We could sell this kind of system along with some of the Symbotic software to a lot of people in the world. This is the ultimate warehouse management maintenance system.

Speaker #3: This lift has a failed valve. I need you to go there. Here's a picture of what it should take to fix it. I've already checked before you go.

Speaker #3: This is what AI does. I've already checked that these two parts are in inventory, so don't go to the lift and then go to the inventory room.

Speaker #3: Go to the inventory room, get these two parts, go to the lift. The whole thing should take you 40 minutes. We've been struggling with how do we make these maintenance systems more efficient.

Rick Cohen: Go to the inventory room, get these two parts, go to the lift. The whole thing should take you 40 minutes. We've been struggling with how do we make these maintenance systems more efficient. We could sell this kind of system along with some of the Symbotic software to a lot of people in the world. This is the ultimate warehouse management maintenance system.

Speaker #3: And we could sell this kind of system along with some of the symbiotic software to a lot of people in the world. This is the ultimate warehouse management maintenance system.

Speaker #2: Got it. Thank you.

Derek Soderberg: Got it. Thank you.

Speaker #3: Yep.

Rick Cohen: Yep.

Speaker #1: Thank you. Our next question comes from the line of Greg Palm of Craig Hallum. Your line is now open.

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

Speaker #4: Yeah, thanks. I wanted to go back to the OPEX and maybe hone in a little bit more on R&D. I mean, in light of a lot of these newer opportunities you have with perishables and micro-fulfillment, it was maybe a little bit odd to see R&D come down quite as much.

Greg Palm: Yeah, thanks. I wanted to go back to the OpEx and maybe honing a little bit more on R&D. I mean, in light of a lot of these kind of newer opportunities you have, perishables and micro-fulfillment, it was maybe a little bit odd to see R&D come down quite as much, and doesn't sound like that might go up or I think, as you just said, maybe more stable. I guess, is that just, are we really paring things back, or is that more kind of a reallocation of expenses? Just wanted to get a little bit more color there.

Greg Palm: it was maybe a little bit odd to see R&D come down quite as much, and doesn't sound like that might go up or I think, as you just said, maybe more stable. I guess, is that just, are we really paring things back, or is that more kind of a reallocation of expenses? Just wanted to get a little bit more color there.

Speaker #4: It doesn't sound like that might go up. As you said, maybe more stable. So, I guess, is that just—are we really paring things back, or is that more kind of a reallocation of expenses?

Speaker #4: Just wanted to get a little bit more color there.

Speaker #1: Yes. Hi, Craig. So let me step back. First and foremost, R&D expense quarter over quarter was flat. All the things that Rick mentioned are the things that we're going to get started on.

Izzy Martins: Yes. Hi, Craig. Just let me step back. First and foremost, R&D expense quarter-over-quarter was flat. All the things that Rick mentioned are the things that we're going to get started on. Hence when I said earlier, I expect overall OpEx to go up, my expectation is that between R&D and SG&A, we do expect a little bit of an uptick. As always, we want to maintain the ultimate flexibility in being able to increase our R&D. That's where I make that comment of that's when EBITDA margin staying flat quarter-over-quarter is really to give us that flexibility there. I wouldn't say R&D has come down. It has stayed flat.

Speaker #1: So, as I mentioned earlier, I expect overall OPEX to go up. My expectation is that, between R&D and SG&A, we do expect a little bit of an uptick.

Speaker #1: But as always, we want to maintain the ultimate flexibility in being able to increase our R&D. And that's where I make that comment of that's when EBITDA margins staying flat quarter over quarter is really to give us that flexibility there.

Izzy Martins: As always, we want to maintain the ultimate flexibility in being able to increase our R&D. That's where I make that comment of that's when EBITDA margin staying flat quarter-over-quarter is really to give us that flexibility there. I wouldn't say R&D has come down. It has stayed flat.

Speaker #1: So I wouldn't say R&D has come down. It has stayed flat. We've gotten call it to a rhythm on the things we're investigating. But I expect a little bit of an uptick.

Izzy Martins: We've gotten, call it to a rhythm on the things we're investigating, I expect a little bit of an uptick, not only in Q4, but in the quarters to come.

Speaker #1: Not only in the fourth quarter but in the quarters to come.

Speaker #4: Okay. That makes sense. And I guess maybe just shifting topics entirely just in light of the other news Steve's joining the board of directors.

Greg Palm: Okay. That makes sense. I guess maybe just shifting topics entirely, just in light of the other news, Steve's joining the Board of Directors. I'm just curious, maybe you can give us some thoughts on, given his background, kind of what he brings to the table and how he might sort of help you scale a bit to the next level.

Speaker #4: I'm just curious maybe you can give us some thoughts on given his background, kind of what he brings to the table and how he might sort of help you scale to the next level.

Speaker #3: Yeah. So I met Steve through one of my other board members. They were on a board together. Spent a bunch of time with Steve.

Rick Cohen: Yeah. I met Steve through one of my other board members. They were on a board together. Spent a bunch of time with Steve. Steve is, with his background, I think will be very helpful in helping us look at strategically M&A. We plan to be acquisitive. We built a balance sheet to be acquisitive. That's what we're working on. Steve is a perfect hire, perfect board member for that.

Speaker #3: We're Steve is with his background I think will be very, very helpful in helping us look at strategically M&A. We plan to be acquisitive.

Speaker #3: We built a balance sheet to be acquisitive, and so that's what we're working on. And so, Steve is a perfect board member for that.

Speaker #4: Yep. Okay. Makes sense. Thanks.

Greg Palm: Yep. Okay. Makes sense. Thanks.

Speaker #3: And his background when he was at Bain was in the tech sector.

Rick Cohen: His background when he was at Bain was in the tech sector.

Speaker #1: Thank you. Our next question comes from the line of Michael Whitmore of Northland Capital Markets. Your line is now open.

Operator: Thank you. Our next question comes from the line of Michael Latimore of Northland Capital Markets. Your line is now open.

Speaker #5: Greg, yeah. Two questions I guess on the ARMs acquisition. What makes you price that? For warehouse, how much might you charge for that or whatever metric you use there?

Michael Latimore: Great. Yeah. Two questions, I guess. On the ARMS acquisition, how much do you price that? Like per warehouse, how much might you charge for that or whatever metrics you use there? Then also in Q3, how much revenue came from just development revenue around micro-fulfillment?

Speaker #5: And then also in the third quarter, how much revenue came from just development revenue around microfulfillments?

Speaker #1: Okay.

Izzy Martins: Okay.

Speaker #3: I'll take the ARMs. I mean, the ARMs will be a classic value pricing. If we can save somebody a million dollars in warehouse maintenance, we're going to charge them a portion of that.

Rick Cohen: I'll take the ARMS. I mean, the ARMS will be a classic value pricing. If we can save somebody $1 million in warehouse maintenance, we're going to charge them a portion of that.

Speaker #1: Yeah. On the microfulfillment side, the amount of revenue recorded in the quarter is in the high single-digit range, which is really kind of the average that I would expect going out.

Izzy Martins: Yeah. On the micro-fulfillment side, the amount of revenue recorded in the quarter is in the high single-digit range, which is really kind of the average that I would expect going out.

Speaker #5: Okay. Great. Thank you.

Michael Latimore: Okay. Great. Thank you.

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

Speaker #1: Our next question comes from the line of Joe Bordano of TD Power. Your line is now open.

Joe Giordano: Hey, thanks for letting me have the follow-up here. Just quick, Rick, on Exol. I'm just curious what the final design looks like for this customer. What did they decide to do in terms of trucks and who's responsible for that and how things are getting to and from the site? I think that was kind of up in the air, potentially. There's a lot of different ways you can go. I'm just curious, we know how the inside of the building looks, but how is the whole operation being kind of, what's the flow sheet?

Speaker #5: Hey. Thanks for letting me have the follow-up here. Just quick, Rick, on Excel. I'm just curious what the final design looks like for this customer.

Speaker #5: What did you guys what did they decide to do in terms of trucks and who's responsible for that and how things are getting to and from the site?

Speaker #5: I think that was kind of up in the air. Potentially, there are a lot of different ways you can go. I'm just curious—we know how the inside of the building looks, but how is the whole operation being, kind of, what's the flow sheet?

Speaker #3: Yeah. So, you saw we made an announcement. We partnered with Manhattan on the software piece because so many people that we've talked to are already familiar with the Manhattan integration layer.

Rick Cohen: You saw we made an announcement. We partnered with Manhattan on the software piece because so many people that we've talked to are already familiar with the Manhattan integration layer. We're also doing our own integration layer. The inside of the building's pretty straightforward. We'll move pallets, we'll move cases, we'll do each picking. We are both hired some of our own transportation people and also engage with some potential transportation brokerage or transportation companies that actually can bring customers into us. We will manage freight when the customers want us to manage the freight. We will have that capability both in and out of the building, but probably more so out of the building.

Speaker #3: We're also doing our own integration layer. But the inside of the building's pretty straightforward. We'll move pallets, we'll move cases, we'll do each picking.

Speaker #3: And we are both hired. Some of our own transportation people, and also engage with some potential transportation brokerage or transportation companies that actually can bring customers to us.

Rick Cohen: We are both hired some of our own transportation people and also engage with some potential transportation brokerage or transportation companies that actually can bring customers into us. We will manage freight when the customers want us to manage the freight. We will have that capability both in and out of the building, but probably more so out of the building.

Speaker #3: So, we will manage freight when the customers want us to manage the freight. We will have that capability—both in and out of the building.

Speaker #3: But probably more so out of the building.

Joe Giordano: Good. Thank you.

Speaker #5: Good. Thank you.

Operator: This concludes the question and answer session. I would now like to turn it back to Charlie Anderson for closing remarks.

Speaker #1: This concludes the question and answer session. I would now like to turn it back to Charlie Anderson for closing remarks.

Speaker #5: Yeah, thanks, everybody, as always, for joining our call tonight. We really appreciate your interest in Symbotic and want everybody to have a good evening.

Charlie Anderson: Yes. Thanks, everybody, as always, for joining our call tonight. We really appreciate your interest in Symbotic, and want everybody to have a goodie. Thanks so much.

Speaker #5: Thanks so much.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Q3 2026 Symbotic Inc Earnings Call

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