The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes thereto as of and for the year endedSeptember 25, 2021 , as included within the Registration Statement on Form S-1, as filed with theSecurities and Exchange Commission onJune 29, 2022 . As discussed in the section titled "Cautionary Note on Forward-Looking Statements," the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled "Risk Factors" included under Part II, Item 1A below.
Company Overview
AtSymbotic , our vision is to make the supply chain work better for everyone. We do this by developing, commercializing, and deploying innovative, end-to-end technology solutions that dramatically improve supply chain operations. We currently automate the processing of pallets and cases in large warehouses or distribution centers for some of the largest retail companies in the world. Our systems enhance operations at the front end of the supply chain, and therefore benefit all supply partners further down the chain, irrespective of fulfillment strategy. TheSymbotic platform is based on a unique approach to connecting producers of goods to end users, in a way that resolves the mismatches of quantity, timing and location that arise between the two, while reducing costs. The underlying architecture of our platform is what differentiates our solution from anything else in the marketplace. It utilizes fully autonomous robots, collectively controlled by our artificial intelligence ("A.I.") enabled system software to achieve at scale, real world supply chain improvements that are so compelling that we believe our approach can become the de facto standard approach for how warehouses operate. Business Combination SVF Investment Corp. 3, formerly known asSVF Investment III Corp. , ("SVF " and, after the Domestication as described below, "Symbotic" or the "Company") was a blank check company incorporated as aCayman Islands exempted company onDecember 11, 2020 . SVF 3 was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more businesses.Warehouse Technologies LLC ("Legacy Warehouse "), aNew Hampshire limited liability company, was formed inDecember 2006 to make investments in companies that develop new technologies to improve operating efficiencies in modern warehouses.Symbotic LLC ("LegacySymbotic "), a technology company that develops and commercializes innovative technologies for use within warehouse operations andSymbotic Group Holdings , ULC ("Legacy Symbotic Canada") were wholly owned subsidiaries ofLegacy Warehouse . OnDecember 12, 2021 , (i) SVF 3 entered into an Agreement and Plan of Merger (the "Merger Agreement") withLegacy Warehouse ,Symbotic Holdings LLC , aDelaware limited liability company ("Symbotic Holdings "), andSaturn Acquisition (DE) Corp. , aDelaware corporation and wholly owned subsidiary of SVF 3 ("Merger Sub") and (ii)Legacy Warehouse entered into an Agreement and Plan of Merger (the "Company Merger Agreemen") withSymbotic Holdings . OnJune 7, 2022 , as contemplated by the Merger Agreement,Legacy Warehouse merged with and intoSymbotic Holdings (the "Company Reorganization"), withSymbotic Holdings surviving the merger ("Interim Symbotic"). Immediately following such merger, onJune 7, 2022 , as contemplated by the Merger Agreement, SVF 3 filed a notice of deregistration with the Cayman Islands Registrar of Companies, together with the necessary accompanying documents, and filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of theState of Delaware , under which SVF 3 was transferred by way of continuation from theCayman Islands and domesticated as aDelaware corporation, changing its name to "Symbotic Inc. " (the "Domestication"). Immediately following the Domestication of SVF 3, onJune 7, 2022 , as contemplated by the Merger Agreement, Merger Sub merged with and into Interim Symbotic (the "Merger" and, together with the Company Reorganization, the "Business Combination"), with Interim Symbotic surviving the merger as a subsidiary ofSymbotic ("New Symbotic Holdings "). 26
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Key Components of Consolidated Statements of Operations
Revenue
We generate revenue through our design and installation of modular inventory management systems (the "Systems") to automate customers' depalletizing, storage, selection, and palletization warehousing processes. The Systems have both a hardware component and an embedded software component that enables the systems to be programmed to operate within specific customer environments. We enter into contracts with customers that can include various combinations of services to design and install the Systems. These services are generally distinct and accounted for as separate performance obligations. As a result, each customer contract may contain multiple performance obligations. We determine whether performance obligations are distinct based on whether the customer can benefit from the product or service on its own or together with other resources that are readily available and whether our commitment to provide the services to the customer is separately identifiable from other obligations in the contract.
We have identified the following distinct performance obligations in our
contracts with customers:
Systems: We design, assemble, and install modular hardware systems and perform configuration of embedded software. Systems include the delivery of hardware and an embedded software component, sold as either a perpetual or term-based on-premise license, that automate our customers' depalletizing, storage, selection, and palletization warehousing processes. The modular hardware and embedded software are each not capable of being distinct because our customers cannot benefit from the hardware or software on their own. Accordingly, they are treated as a single performance obligation. Fees for systems are typically either fixed or cost-plus fixed fee amounts that are due based on the achievement of a variety of milestones beginning at contract inception through final acceptance. The substantial majority of our embedded software component is sold as a perpetual on-premise license, however, we do sell an immaterial amount of term-based on-premise licenses. Software maintenance and support: Software maintenance and support refer to support services that provide our customers with technical support, updates, and upgrades to the embedded software license. Fees for the software maintenance and support services are typically payable in advance on a quarterly, or annual basis over the term of the software maintenance and support service contract, which term can range from one to 15 years but, for a substantial majority of our software maintenance and support contracts, is 15 years.
Operation services: We provide our customers with assistance operating the
system and ensuring user experience is optimized for efficiency and
effectiveness. Fees for operation services are typically invoiced to our
customers on a time and materials basis monthly in arrears or using a fixed fee
structure.
Cost of Revenue
Our cost of revenue is composed of the following for each of our distinct
performance obligations:
Systems: Systems cost of revenue consists primarily of material and labor
consumed in the production and installation of customer Systems, as well as
depreciation expense. The design, assembly, and installation of a system
includes substantive customer-specified acceptance criteria that allow the
customer to accept or reject systems that do not meet the customer’s
specifications. When we cannot objectively determine that acceptance criteria
will be met upon contract inception, cost of revenue relating to systems is
deferred and expensed at a point in time upon final acceptance from the
customer. If acceptance can be reasonably certain upon contract inception,
systems cost of revenue is expensed as incurred.
Software maintenance and support: Cost of revenue attributable to software maintenance and support primarily relates to labor cost for our maintenance team providing routine technical support, and maintenance updates and upgrades to our customers. Software maintenance and support cost of revenue is expensed as incurred. Operation services: Operation services cost of revenue consists primarily of labor cost for our operations team who is providing services to our customers to run their System within their distribution center. Operation services cost of revenue is expensed as incurred.
Research and Development
Costs incurred in the research and development of our products are expensed as incurred. Research and development costs include personnel, contracted services, materials, and indirect costs involved in the design and development of new products and services, as well as depreciation expense.
Selling, General, and Administrative
Selling, general, and administrative expenses include all costs that are not
directly related to satisfaction of customer contracts or research and
development. Selling, general, and administrative expenses include items for our
selling and
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administrative functions, such as sales, finance, legal, human resources, and information technology support. These functions include costs for items such as salaries and benefits and other personnel-related costs, maintenance and supplies, professional fees for external legal, accounting, and other consulting services, intangible asset amortization, and depreciation expense.
Other Income (Expense), Net
Other income (expense), net primarily consists of dividend and interest income
earned on our money market accounts and the impact of foreign currency
transaction gains and losses associated with monetary assets and liabilities.
Income Taxes
As a result of the Business Combination, the Company was appointed as the sole managing member ofSymbotic Holdings .Symbotic Holdings is a limited liability company that is treated as a partnership forU.S. federal income tax purposes and for most applicable state and local income taxes. Any taxable income or loss generated bySymbotic Holdings is passed through to and included in the taxable income or loss of its members, including the Company, on a pro rata basis, subject to applicable tax regulations. The Company is subject toU.S. federal income taxes, in addition to state and local income taxes, with respect to its allocable share of any taxable income or loss ofSymbotic Holdings . The Company recorded zero income tax expense for the period ofJune 7, 2022 , throughJune 25, 2022 , which is the period following the Business Combination, as the Company incurred a pre-tax loss for the period and recorded a full valuation allowance against its deferred tax assets. Prior to the close of the Business Combination, our financial reporting predecessor,Legacy Warehouse was treated as a pass-through entity for tax purposes and no provision, except for certain foreign subsidiaries which are taxed in their respective foreign jurisdictions, was made in the consolidated financial statements for income taxes. Any income tax items for the periods prior to the close of the Business Combination are related to the applicable subsidiary companies that are subject to foreign income tax. In fiscal year 2021Legacy Warehouse was treated as a pass-through entity for tax purposes and had certain foreign subsidiaries. No income tax expense was recorded in 2021 due toLegacy Warehouse's pass-through status and foreign subsidiaries having a full valuation allowance against their deferred tax assets.
Results of Operations for the Three and Nine Months Ended
The following tables set forth our results of operations for the periods
presented and as a percentage of our total revenue for those periods. The data
has been derived from the unaudited condensed consolidated financial statements
contained in this Quarterly Report on Form 10-Q which include, in our opinion,
all adjustments, consisting only of normal recurring adjustments, that we
consider necessary for a fair statement of the financial position and results of
operations for the interim periods presented. The period-to-period comparison of
financial results is not necessarily indicative of financial results to be
achieved in future periods.
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For the Three Months Ended For the Nine Months Ended
June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021
Revenue:
Systems $ 169,503 $
125,268
Software maintenance and support
862 1,232 2,802 2,776 Operation services 5,187 4,987 15,801 15,401 Total revenue 175,552 131,487 348,900 160,205 Cost of revenue: Systems 136,015 125,643 264,475 138,740 Software maintenance and support 1,269 702 3,224 2,257 Operation services 6,724 5,478 18,283 16,613 Total cost of revenue 144,008 131,823 285,982 157,610 Gross profit (loss) 31,544 (336) 62,918 2,595 Operating expenses: Research and development expenses 35,140 20,934 80,679 52,477 Selling, general, and administrative expenses 29,435 16,508 68,306 41,007 Total operating expenses 64,575 37,442 148,985 93,484 Operating loss (33,031) (37,778) (86,067) (90,889) Other income, net 156 7 236 59 Loss before income tax (32,875) (37,771) (85,831) (90,830) Income tax benefit (expense) - - - - Net loss$ (32,875) $ (37,771) $ (85,831) $ (90,830) 29
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For the Three Months Ended For the Nine Months Ended
June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021
Revenue:
Systems 97 % 95 % 95 % 89 %
Software maintenance and support - 1 1 2
Operation services 3 4 5 10
Total revenue 100 100 100 100
Cost of revenue:
Systems 77 96 76 87
Software maintenance and support 1 1 1 1
Operation services 4 4 5 10
Total cost of revenue 82 100 82 98
Gross profit 18 - 18 2
Operating expenses:
Research and development expenses 20 16 23 33
Selling, general, and administrative
expenses 17 13 20 26
Total operating expenses 37 28 43 58
Operating loss (19) (29) (25) (57)
Other income, net - - - -
Loss before income tax (19) (29) (25) (57)
Income tax benefit (expense) - - - -
Net loss (19) % (29) % (25) % (57) %
Percentages are based on actual values. Totals may not sum due to rounding.
Three and Nine Months EndedJune 25, 2022 Compared to the Three and Nine Months EndedJune 26, 2021 Revenue For the Three Months Ended Change June 25, 2022 June 26, 2021 Amount % (dollars in thousands) Systems$ 169,503 $ 125,268 $ 44,235 35 % Software maintenance and support 862 1,232 (370) (30) % Operation services 5,187 4,987 200 4 % Total revenue$ 175,552 $ 131,487 $ 44,065 34 % Systems revenue increased during the three months endedJune 25, 2022 as compared to the three months endedJune 26, 2021 primarily due to there being thirteen system deployments currently in progress in the current fiscal year as compared to four system deployments in progress in the prior fiscal year as we continue to grow our business. The increase resulting from the deployments of our warehouse automation system is primarily due to the ongoing Master Automation Agreement with Walmart, for which we are performing the installation and implementation of our warehouse automation system within all of Walmart's 42 regional distribution centers, and which is expected to continue to produce systems revenue as the warehouse automation systems are installed and implemented at the remaining regional distribution centers through fiscal year 2028.
The decrease in software maintenance and support revenue was primarily due to
less active software maintenance and support contracts for the three months
ended
Operation services revenue remained relatively flat for the three months endedJune 25, 2022 as compared to the three months endedJune 26, 2021 as we continue to service our customer's sites. 30
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For the Nine Months Ended Change
June 25, 2022 June 26, 2021 Amount %
(dollars in thousands)
Systems $ 330,297 $ 142,028 $ 188,269 133 %
Software maintenance and support 2,802 2,776 26 1 %
Operation services 15,801 15,401 400 3 %
Total revenue $ 348,900 $ 160,205 $ 188,695 118 %
Systems revenue increased during the nine months ended June 25, 2022 as compared
to the nine months ended June 26, 2021 primarily due to there being thirteen
system deployments current in progress in the current fiscal year as compared to
four system deployments in progress in the prior fiscal year as we continue to
grow our business. The increase resulting from the deployments of our warehouse
automation system is primarily due to the ongoing Master Automation Agreement
with Walmart, for which we are performing the installation and implementation of
our warehouse automation system within all of Walmart's 42 regional distribution
centers, which is expected to continue to produce systems revenue as the
warehouse automation systems are installed and implemented at the remaining
regional distribution centers through fiscal year 2028.
Software maintenance and support revenue remained flat for the nine months ended
June 25, 2022 as compared to the nine months ended June 26, 2021 as a result of
a net neutral number of active software maintenance and support contracts in
both of those periods.
Operation services revenue remained relatively flat for the nine months ended
June 25, 2022 as compared to the nine months ended June 26, 2021 as we continue
to service our customer's sites.
Gross Profit
The following table sets forth our gross profit for the three months ended
For the Three Months Ended Change
June 25, 2022 June 26, 2021 Amount
(in thousands)
Systems $ 33,488 $ (375) $ 33,863
Software maintenance and support (407) 530 (937)
Operation services (1,537) (491) (1,046)
Total gross profit $ 31,544 $ (336) $ 31,880
For the three months ended
million
million
concurrent system deployments for the three months ended
compared to the three months ended
For the three months endedJune 25, 2022 , software maintenance and support gross profit decreased$(0.9) million from the same three month period in fiscal 2021 from$0.5 million to$(0.4) million . The decrease in software maintenance and support gross profit is primarily attributable to an increased cost for the three months endedJune 25, 2022 associated with an increase in headcount within our technical support team in order to appropriately support our growing business.
For the three months ended
decreased
to
primarily from an increased cost due to a temporary need for additional
operation services personnel at one of our customer sites.
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The following table sets forth our gross profit for the nine months ended
For the Nine Months Ended Change
June 25, 2022 June 26, 2021 Amount
(in thousands)
Systems $ 65,822 $ 3,288 $ 62,534
Software maintenance and support (422) 519 (941)
Operation services (2,482) (1,212) (1,270)
Total gross profit $ 62,918 $ 2,595 $ 60,323
For the nine months ended June 25, 2022 , systems gross profit increased $62.5
million from the same period in fiscal 2021 from $3.3 million to $65.8 million .
The increase in systems gross profit resulted primarily from more concurrent
system deployments for the nine months ended June 25, 2022 as compared to the
nine months ended June 26, 2021 .
For the nine months ended June 25, 2022 , software maintenance and support gross
profit decreased by $(0.9) million from the same period in fiscal 2021. The
decrease in software maintenance gross profit is primarily attributable to an
increased cost for the nine months ended June 25, 2022 associated with an
increase in headcount within our technical support team in order to
appropriately support our growing business.
For the nine months ended June 25, 2022 , operation services gross profit
decreased $(1.3) million from the same period in fiscal 2021 from $(1.2) million
to $(2.5) million . The decrease in operation services gross profit resulted
primarily from increased cost due to a temporary need for additional operation
services personnel at one of our customer sites.
Research and Development Expenses
For the Three Months Ended Change
June 25, 2022 June 26, 2021 Amount %
(dollars in thousands)
Research and development $ 35,140 $ 20,934 $ 14,206 68 %
Percentage of total revenue 20 % 16 %
The increase in research and development expenses for the three months ended
June 25, 2022 compared to the three months ended June 26, 2021 was primarily due
to the following:
Change
(in thousands)
Employee-related costs $ 9,073
Prototype-related costs, allocated overhead expenses, and other 5,133
$ 14,206
Employee-related costs increased primarily as a result of our headcount growth
to our engineering team as we continue to grow our software and hardware
engineering organizations to support the development of key projects such as
next generation autonomous electric vehicle ("EV") robots as well as continue to
expand our A.I. and analytics capabilities. There was also an increase in
prototype-related costs as we prototype new technologies related to our
Omni-Channel platform.
For the Nine Months Ended Change
June 25, 2022 June 26, 2021 Amount %
(dollars in thousands)
Research and development $ 80,679 $ 52,477 $ 28,202 54 %
Percentage of total revenue 23 % 33 %
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The increase in research and development expenses for the nine months endedJune 25, 2022 compared to the nine months endedJune 26, 2021 was primarily due to the following: Change (in thousands) Employee-related costs$ 16,733 Prototype-related costs, allocated overhead expenses, and other 11,469$ 28,202 Employee-related costs increased primarily as a result of our headcount growth to our engineering team as we continue to grow our software and hardware engineering organizations to support the development of key projects such as next generation autonomous EV robots as well as continue to expand our A.I. and analytics capabilities. There was also an increase in prototype-related costs as we prototype new technologies related to our Omni-Channel platform.
Selling, General, and Administrative Expenses
For the Three Months Ended Change
June 25, 2022 June 26, 2021 Amount %
(dollars in thousands)
Selling, general, and administrative $ 29,435 $ 16,508 $ 12,927 78 %
Percentage of total revenue 17 % 13 %
The increase in selling, general, and administrative expenses for the three
months ended
primarily due to the following:
Change
(in thousands)
Employee-related costs $ 11,430
Allocated overhead expenses and other 1,497
$ 12,927
Employee-related costs increased primarily as a result of our headcount growth
within our selling, general, and administrative functions. Our headcount
increased primarily to support a shift in the rapid acceleration of system
deployments and business transformation. We incurred incremental costs related
to building both shorter-term as well as permanent processes and infrastructure
to ramp partnerships and operations.
Allocated overhead and other expenses increased primarily due to an increase in
information technology ("IT") related costs attributable to the increase in
employee headcount year over year as well as an increase attributable to growing
our cybersecurity infrastructure. Allocated overhead expenses and other also
increased as a result of additional audit, tax, and consulting services in
support of the Business Combination.
For the Nine Months Ended Change
June 25, 2022 June 26, 2021 Amount %
(dollars in thousands)
Selling, general, and administrative $ 68,306 $ 41,007 $ 27,299 67 %
Percentage of total revenue 20 % 26 %
The increase in selling, general, and administrative expenses for the nine
months ended
primarily due to the following:
Change
(in thousands)
Employee-related costs $ 21,513
Allocated overhead expenses and other 5,786
$ 27,299
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Employee-related costs increased primarily as a result of our headcount growth
within our selling, general, and administrative functions. Our headcount
increased primarily to support a shift in the rapid acceleration of system
deployments and business transformation. We incurred incremental costs related
to building both shorter-term as well as permanent processes and infrastructure
to ramp partnerships and operations.
Allocated overhead and other expenses increased primarily due to an increase in
IT related costs attributable to the increase in employee headcount year over
year as well as an increase attributable to growing our cybersecurity
infrastructure. Allocated overhead expenses and other also increased as a result
of additional audit, tax, and consulting services in support of our contemplated
future initial public offering transaction.
Other income, net
For the Three Months Ended Change
June 25, 2022 June 26, 2021 Amount %
(dollars in thousands)
Other income, net $ 156 $ 7 $ 149 2129 %
Percentage of total revenue - % - %
The increase in other income, net for the three months ended June 25, 2022 as
compared to the three months ended June 26, 2021 was primarily due to an
increase in interest income as a result of interest rates and dividend income,
offset by exchange rate fluctuations impacting our foreign currency transaction
gains and losses associated with monetary assets and liabilities.
For the Nine Months Ended Change
June 25, 2022 June 26, 2021 Amount %
(dollars in thousands)
Other income, net $ 236 $ 59 $ 177 300 %
Percentage of total revenue - %
– %
The increase in other income, net for the nine months endedJune 25, 2022 as compared to the nine months endedJune 26, 2021 was primarily due to an increase in interest income as a result of interest rates and dividend income, offset by exchange rate fluctuations impacting our foreign currency transaction gains and losses associated with monetary assets and liabilities.
Non-GAAP Financial Measures
In addition to providing financial measurements based on generally accepted accounting principles inthe United States of America , or GAAP, we provide additional financial metrics that are not prepared in accordance with GAAP, or non-GAAP financial measures. We use non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes, to measure executive compensation, and to evaluate our financial performance. These non-GAAP financial measures are non-GAAP net loss, non-GAAP net loss per share, and Adjusted EBITDA, as discussed below. We believe that these non-GAAP financial measures reflect our ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business, as they facilitate comparing financial results across accounting periods and to those of peer companies. We also believe that these non-GAAP financial measures enable investors to evaluate our operating results and future prospects in the same manner as we do. These non-GAAP financial measures may exclude expenses and gains that may be unusual in nature, infrequent, or not reflective of our ongoing operating results.
The non-GAAP financial measures do not replace the presentation of our GAAP
financial measures and should only be used as a supplement to, not as a
substitute for, our financial results presented in accordance with GAAP.
We define non-GAAP net loss as GAAP net loss excluding the following items:
unit-based compensation, amortization of acquired intangible assets, and
business combination expenses.
The non-GAAP adjustments, and our basis for excluding them from non-GAAP
financial measures, are outlined below:
•Unit-based compensation – Although unit-based compensation is an important
aspect of the compensation paid to our employees, the grant date fair value
varies based on the derived stock price at the time of grant, varying valuation
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methodologies, subjective assumptions, and the variety of award types. This makes the comparison of our current financial results to previous and future periods difficult to interpret; therefore, we believe it is useful to exclude unit-based compensation from our non-GAAP financial measures in order to highlight the performance of our business and to be consistent with the way many investors evaluate our performance and compare our operating results to peer companies. •Amortization of acquired intangible assets - We have incurred amortization of intangible assets, included in our GAAP financial statements, related to our 2014 business acquisition. The amount of an acquisition's purchase price allocated to intangible assets and term of its related amortization is unique to each acquisition; therefore, we exclude amortization of acquired intangible assets from our non-GAAP financial measures to provide investors with a consistent basis for comparing pre- and post-acquisition operating results. •Business Combination transaction expenses - Business Combination transaction expenses represents the expenses incurred solely related to the Business Combination, which we completed onJune 7, 2022 . It primarily includes investment banker fees, legal fees, professional fees for accountants, transaction fees, advisory fees, due diligence costs, certain other professional fees, and other direct costs associated with strategic activities. These amounts are impacted by the timing of the Business Combination. We exclude Business Combination transaction expenses from our non-GAAP financial measures to provide a useful comparison of our operating results to prior periods and to our peer companies because such amounts vary significantly based on the magnitude of the Business Combination transaction and do not reflect our core operations.
The following table reconciles GAAP net loss to non-GAAP net loss for the three
and nine months ended
Three Months Ended Nine Months Ended
June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021
Net loss $ (32,875) $
(37,771)
Unit-based compensation
8,967 7,180 10,130 7,219 Amortization of acquired intangible assets 116 120 349 348 Business Combination transaction expenses 869 1,094 2,400 1,097 Non-GAAP net loss$ (22,923) $
(29,377)
We define non-GAAP net loss per share as non-GAAP net loss divided by weighted-average shares of Class A Common Stock outstanding. The following table reconciles GAAP net loss per to non-GAAP net loss per share for the three and nine months endedJune 25, 2022 . Loss per share information has not been presented for periods prior to the Business Combination as it resulted in values that would not be meaningful to the users of these unaudited condensed consolidated financial statements: Three Months Ended Nine Months Ended June 25, 2022 June 25, 2022 Net loss per share $ (0.03) $ (0.03)
Effect of non-GAAP adjustments 0.02
0.02
Non-GAAP net loss per share $ (0.01) $
(0.01)
We consider Adjusted EBITDA to be another important indicator of the operational
strength and performance of our business and a good measure of our historical
operating trends. Adjusted EBITDA eliminates items that we do not consider to be
part of our core operations. We define Adjusted EBITDA as GAAP net loss
excluding the following items: interest income; income taxes; depreciation and
amortization of tangible and intangible assets; unit-based compensation;
Business Combination transaction expenses; and other non-recurring items that
may arise from time to time.
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The following table reconciles GAAP net loss to Adjusted EBITDA for the three
and nine months ended
Three Months Ended Nine Months Ended
June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021
Net loss $ (32,875) $ (37,771) $ (85,831) $ (90,830)
Interest income (178) (12) (204) (26)
Income tax benefit (expense) - - - -
Depreciation and amortization 1,426 1,383 4,200 3,208
Unit-based compensation 8,967 7,180 10,130 7,219
Business Combination transaction expenses 869 1,094 2,400 1,097
Adjusted EBITDA $ (21,791) $ (28,126) $ (69,305) $ (79,332)
Liquidity and Capital Resources
As of
received related to the Business Combination and cash received from customers
upon the inception of contracts to install customer Systems.
The following table shows net cash and cash equivalents provided by (used in) operating activities, net cash and cash equivalents used in investing activities, and net cash and cash equivalents provided by financing activities for the nine months endedJune 25, 2022 andJune 26, 2021 : Nine Months Ended June 25, 2022 June 26, 2021 (in thousands) Net cash provided by (used in): Operating activities$ (96,729) $
96,024
Investing activities (10,769)
(5,333)
Financing activities 362,448 -
Operating Activities
Our net cash and cash equivalents provided by (used in) operating activities
consists of net loss adjusted for certain non-cash items, including depreciation
and amortization, foreign currency losses, losses on abandonment of assets, and
unit-based compensation, as well as changes in operating assets and liabilities.
The primary changes in working capital items, such as the changes in accounts
receivable and deferred revenue, result from the difference in timing of
payments from our customers related to system installations and the associated
costs incurred by us to fulfill the system installation performance obligation.
This may result in an operating cash flow source or use for the period,
depending on the timing of payments received as compared to the fulfillment of
the system installation performance obligation.
Net cash used in operating activities was $(96.7) million during the nine months
ended June 25, 2022 . Net cash used in operating activities was primarily due to
our net loss of $85.8 million adjusted for non-cash items of $8.3 million ,
primarily consisting of $4.2 million depreciation and amortization and $4.1
million loss on abandonment of assets, as well as cash used in operating assets
and liabilities of $19.2 million . Cash used in operating assets and liabilities
of $19.2 million was primarily driven by net working capital changes, including
timing of cash payments to vendors and cash receipts from customers, as well as
an increase in inventory purchases for the nine months ended June 25, 2022 as we
purchase additional inventory in order to meet our installation timeline for our
customer's upcoming warehouse automation system installations in connection with
the Walmart Master Automation Agreement and other customer contracts.
Net cash provided by operating activities was $96.0 million during the nine
months ended June 26, 2021 . Net cash provided by operating activities was
primarily due to our net loss of $90.8 million adjusted for non-cash items of
$3.3 million , primarily consisting of $3.2 million depreciation and
amortization, offset by cash provided by operating assets and liabilities of
$183.5 million . Cash provided by operating assets and liabilities of $183.5
million was primarily driven by net working capital changes, including timing of
cash payments to vendors and cash receipts from customers, as well as the
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recognition of the deferred expenses to revenue associated with the completion
of certain warehouse automation system installations.
Investing Activities
Our investing activities have consisted primarily of property and equipment
purchases.
Net cash and cash equivalents used in investing activities during the nine
months ended
equipment.
Net cash and cash equivalents used in investing activities during the nine
months ended
equipment.
Financing Activities Our financing activities have consisted of proceeds from the exercise of the vested warrants issued to Walmart as further described in Note 14, Unit-based Compensation and Warrant Units to the unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, as well as the net proceeds received from the equity infusion from our Business Combination, offset by the purchase of interest from the noncontrolling interest, as further described in Note 3, Business Combination and Note 4, Noncontrolling Interests, respectively, to the unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. In connection with the Business Combination, we received net proceeds of$384.7 million , which included (i) cash of$47.1 million that was held in SVF 3's trust account from its initial public offering and SVF 3's operating cash account, after giving effect to redemptions of SVF 3's Class A ordinary shares held by SVF 3 public shareholders prior to the Business Combination, (ii) proceeds of$205.0 million from the PIPE Financing, (iii) proceeds of$200.0 million from the FPA Financing, and, (iv) the payment of SVF 3 and our transaction expenses of$30.3 million and$37.1 million , respectively. Additionally, following the closing of the Business Combination, we purchased from an affiliated entity of theSymbotic founder Common Units inNew Symbotic Holdings for$300.0 million . During the nine months endedJune 25, 2022 , Walmart gross exercised the 714,022 vested warrant units for Legacy Warehouse Class A Units for a total of$277.8 million . As a result of this gross exercise, 714,022 shares ofLegacy Warehouse Class A Common Units were issued to Walmart. In connection with the Business Combination, the Class A Common Units attributable to Walmart's warrant exercise converted into units inSymbotic Holdings andSymbotic Inc. Class V-1 Common Stock. There were no transactions which generated proceeds from the issuance of Units during the nine months endedJune 26, 2021 .
Contractual Obligations and Commitments and Liquidity Outlook
We historically have been able to generate positive cash flow from operations, which has funded our operating activities and other cash requirements and has resulted in a cash balance of$411.7 million as ofJune 25, 2022 . Our cash requirements for the nine months endedJune 25, 2022 were primarily related to capital expenditures and inventory purchases in order to deliver to our customers our warehouse automation systems in an orderly manner in line with our installation timeline as well as expenses related to our Business Combination which closed onJune 7, 2022 . Based on our present business plan, we expect our current cash and cash equivalents, working capital, and our forecasted cash flows from operations to be sufficient to meet our foreseeable cash needs for at least the next 12 months. Our foreseeable cash needs, in addition to our recurring operating expenses, include our expected capital expenditures to support expansion of our infrastructure and workforce, leases for office space and minimum contractual obligations. Our future capital requirements will depend on many factors, including, but not limited to, our growth rate, the timing and extent of spending to support research and development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product and service offerings, and the cost of any future acquisitions of technology or businesses. In the event that additional financing is required from outside sources, we may be unable to raise the funds on acceptable terms, if at all.
The following table summarizes our current and long-term material cash
requirements as of
Payments due in:
Less than 1
Total Year 1-3 Years 3-5 Years More than 5 Years
(in thousands)
Operating lease obligations $ 7,909 $ 2,333 $ 4,655 $ 921 $ -
Vendor commitments 571,355 553,062 18,293 - -
Total $ 579,264 $ 555,395 $ 22,948 $ 921 $ -
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Critical Accounting Policies and Estimates
Other than those noted below, there have been no significant changes in our critical accounting policies and estimates during the nine months endedJune 25, 2022 as compared to the critical accounting policies and estimates disclosed in the audited consolidated financial statements and related notes thereto as of and for the year endedSeptember 25, 2021 , which are included within Post-Effective Amendment No. 1 to SVF 3's Registration Statement on Form S-4 (Registration No. 333-262529), which was filed with theSEC onMarch 23, 2022 .
Unit-based Compensation
Prior to the Business Combination, we had authorized five classes of membership interests, consisting of a class of common units known as the Class A Common Units (the "Class A Units"), a class of preferred units known as the Class B Preferred Units (the "ClassB Units "), a class of preferred units known as the Class B-1 Preferred Units (the "Class B-1 Units"), a class of preferred units known as the Class B-2 Preferred Units (the "Class B-2 Units", and together with the ClassB Units and the Class B-1 Units, the "Preferred Units") and an additional class of common units to be granted to employees, officers, and directors pursuant to an incentive plan, known as the ClassC Common Units (the "ClassC Units " and, together with the Class A Units, the "Common Units," and the Common Units together with the Preferred Units, the "Units").
Following the Business Combination, we have three classes of common stock, Class
A Common Stock, Class V-1 Common Stock, and Class V-3 Common Stock.
As the Business Combination is accounted for as a reverse recapitalization, all periods prior to the Business Combination have been retroactively adjusted using the Exchange Ratio as stipulated by the Merger Agreement for the equivalent number of shares outstanding immediately after the Merger to effect the reverse recapitalization. The Class A Units were converted into Common Stock using an exchange ratio of 61.28 per share, the ClassB Units were converted into Common Stock using an exchange ratio of 47,508,300.00 per share, the Class B-1 Units were converted into Common Stock using an exchange ratio of 24,041,300.00 per share, and the ClassC Units were converted into Common Stock using an exchange ratio of 58.15 per share. This is presented within the consolidated statements of changes in redeemable preferred and common units and equity (deficit). Value Appreciation Units ("VAP Units") may be exercised for a cash payment equal to the appreciation in the fair market value of 1/100th of a ClassC Unit and are subject to three exercisability triggers before any vested award may be exercised, with the achievement of each trigger allowing one third of the vested award to be exercised. Because the VAP Units are settleable in cash, they are treated as liability classified awards. Accordingly, the carrying value of the liability is adjusted to fair value at each reporting period through a charge to earnings (until such time as the VAP Units are settled or forfeited). Further, the exercisability triggers noted above represent performance conditions that impact the vesting of the awards. Accordingly, compensation expense is not recognized until such time as the performance conditions are considered probable of achievement. In connection with the Business Combination, each outstanding and vested ClassC Unit was converted into the right to receive a number of New Symbotic Holdings Common Units. Consequentially, the vested and exercisable VAP Units atJune 25, 2022 were valued as the product of 1/100th of the exchange ratio for the ClassC Units (61.28) and the closing stock price atJune 25, 2022 ($13.91 ).
Off-Balance Sheet Arrangements
As of
Instruction 8 to Item 303(b) of Regulation S-K.
Recent Accounting Pronouncements
For information on recent accounting pronouncements, see Recently Issued
Accounting Pronouncements in the notes to the unaudited condensed consolidated
financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
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