For the three and six months ended March 30, 2024, the Company recorded a current income tax benefit of $0.2 million and $0.1 million, respectively. For the three and six months ended March 25, 2023, the Company recorded a current income tax benefit of less than $0.1 million and a $0.2 million current income tax expense, respectively. The Company incurred a pre-tax loss for the three and six month periods and recorded a full valuation allowance against its domestic deferred tax assets and a partial valuation allowance against its foreign deferred tax assets. The Company incurs state tax expense by Symbotic LLC at the flow-through entity level and foreign tax expense at its foreign subsidiaries. The effective tax rate for the three and six months ended March 30, 2024 is 0.46% and 0.13% respectively, as compared to an effective tax rate for the three and six months ended March 25, 2023 of 0.03% and (0.19)%, respectively. The effective tax rate differs from the federal statutory income tax rate primarily due to the flow-through entity level taxes and the effect of the valuation allowance against the Company’s net federal, state, and foreign deferred income taxes.
As of March 30, 2024, the Company continues to conclude that the negative evidence regarding its ability to realize its deferred tax assets outweighs the positive evidence, and the Company has a full valuation allowance against its domestic federal and state net deferred tax assets and a partial valuation allowance against its foreign net deferred tax assets. The Company has a history of cumulative pre-tax losses for the three previous fiscal years which it believes represents significant negative evidence in evaluating whether its deferred tax assets are realizable. Given these cumulative losses, lack of forecast history, the competitive environment, and uncertainty of general economic conditions, the Company does not believe it can rely on projections of future taxable income exclusive of reversing taxable temporary differences to support the realization of its deferred tax assets. In upcoming quarters, the Company will continue to evaluate both the positive and negative evidence surrounding its ability to realize its deferred tax assets.
Tax Receivable Agreement
As of March 30, 2024 future payments under the Tax Receivable Agreement (“TRA”) with respect to the purchase of Symbotic Holdings Units which occurred as part of or subsequent to the Business Combination are expected to be $443.8 million. Payments made under the TRA represent payments that otherwise would have been made to taxing authorities in the absence of attributes obtained by the Company as a result of exchanges by its pre-IPO members. Such amounts will be paid only when a cash tax savings is realized as a result of attributes subject to the TRA. That is, payments under the TRA are only expected to be made in periods following the filing of a tax return in which the Company is able to utilize certain tax benefits to reduce its cash taxes paid to a taxing authority. The impact of any changes in the projected obligations under the TRA as a result of changes in the geographic mix of the Company’s earnings, changes in tax legislation and tax rates or other factors that may impact the Company’s tax savings will be reflected in income or loss before taxes on the consolidated statement of operations in the period in which the change occurs. As of March 30, 2024, no TRA liability was recorded based on the amount expected to be paid for cash tax savings related to fiscal year 2024. No TRA liability was recorded for periods after fiscal year 2024 based on current projections of future taxable income and taking into consideration the Company’s full valuation allowance against its net deferred tax asset.
11. Fair Value Measures
The Company measures certain financial assets at fair value. Fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy, as follows:
Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market
Level 2 – inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability
Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability
The following table presents the Company’s financial assets measured and recorded at fair value on a recurring basis using the above input categories as of March 30, 2024 and September 30, 2023 (in thousands):
The Company had no liabilities measured and recorded at fair value on a recurring basis as of March 30, 2024 and September 30, 2023.
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The fair value of the Company’s investments in certain money market funds is their face value and such instruments are classified as Level 1 and are included in cash and cash equivalents on the consolidated balance sheets. At March 30, 2024, Level 2 securities were priced by pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs like market transactions involving identical or comparable securities.
At March 30, 2024, the amortized cost of the Company’s U.S. Treasury securities is $48.7 million, with unrealized gains of $1.3 million and no unrealized losses, resulting in a fair value of $50.0 million. As applicable, when making the determination as to whether unrealized losses are other-than-temporary, the Company considers the length of time and extent to which each investment has been in an unrealized loss position, the financial condition and near-term prospects of the issuers, the issuers’ credit rating, and the time to maturity. There were no cash and cash equivalents related to U.S. Treasury securities with an original maturity of three months or less included in the amortized cost of $48.7 million.
12. Related Party Transactions (As Restated)
ASC 850, Related Party Disclosures (“ASC 850”) provides guidance for the identification of related parties and the disclosure of related party transactions. Related parties are generally defined as (i) affiliates of the Company; (ii) owners of more than 10% of the voting interests of the Company and members of their immediate families; (iii) management of the Company and members of their immediate families; (iv) other parties which directly or indirectly control, are controlled by, or are under common control with the Company; or (v) other parties who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. The Company assesses related parties each reporting period. For the reporting periods covered by this report, the Company determined that C&S Wholesale Grocers, Inc. (“C&S”) was a related party under ASC 850 and the following transactions were related party transactions under ASC 850.
Aircraft Time Sharing Agreement
In December 2021 and May 2022, the Company entered into aircraft time-sharing agreements with C&S whereby the Company’s officials, employees, and guests are permitted to use the two C&S aircraft on an as-needed and as-available basis, with no minimum usage being required. As there is no defined period of time stated within these aircraft time-sharing agreements, the Company does not consider these to meet the definition of a lease, and as such, records payments in the period in which the obligation for the payment is incurred. For the three and six months ended March 30, 2024, the Company incurred expense of $0.3 million and $0.5 million, respectively, and for the three and six months ended March 25, 2023, the Company incurred expense of $0.3 million and $0.4 million, respectively, related to these aircraft time-sharing agreements.
Usage of Facility and Employee Services
The Company has a license arrangement with C&S whereby C&S is providing receiving and logistics services for the Company within a C&S distribution facility. The arrangement also provides for C&S employees assisting with certain of the Company’s operations. For the three and six months ended March 30, 2024, the Company incurred expense of $0.8 million and $1.5 million, respectively, and for the three and six months ended March 25, 2023, the Company incurred expense of $0.7 million and $1.0 million, respectively, related to this arrangement.
Customer Contracts
The Company has customer contracts with C&S relating to systems implementation, software maintenance services and the operations of a warehouse automation system. For the three and six months ended March 30, 2024, revenue of $22.2 million and $35.0 million was recognized, respectively, relating to these customer contracts. For the three and six months ended March 25, 2023, revenue of $7.2 million and $12.7 million was recognized, respectively, relating to these customer contracts. There was $2.9 million accounts receivable due from and $9.5 million of unbilled receivables for C&S at March 30, 2024, and $0.9 million accounts receivable due from C&S at September 30, 2023. There was $1.0 million and $9.3 million of deferred revenue related to contracts with C&S at March 30, 2024 and September 30, 2023, respectively.
Liabilities for any loss contingencies arising from claims, assessments, litigation, fines, penalties, and other matters are recorded when it is probable that the liability has been incurred and the amount of the liability can be reasonably estimated. As of March 30, 2024, the Company has made appropriate provisions related to such matters and does not believe that such matters will have a material adverse effect on the Company’s consolidated operations, financial position, or liquidity.
Indemnifications
In the ordinary course of business, the Company enters into various contracts under which it may agree to indemnify other parties for losses incurred from certain events as defined in the relevant contract, such as litigation, regulatory penalties, or claims relating to past performance. Such indemnification obligations may not be subject to maximum loss clauses. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification obligations. As a result, the Company believes the estimated fair value of these obligations is minimal. Accordingly, the Company has no liabilities recorded for these obligations as of March 30, 2024 and September 30, 2023.
Warranty
The Company provides a limited warranty on its warehouse automation systems and has established a reserve for warranty obligations based on estimated warranty costs. The reserve is included as part of accrued expenses and other long-term liabilities in the accompanying consolidated balance sheets.
Activity related to the warranty accrual is as follows (in thousands):
Three Months Ended
Six Months Ended
March 30, 2024
March 25, 2023
March 30, 2024
March 25, 2023
Balance at beginning of period
$
22,323
$
9,990
$
18,948
$
9,004
Provision
5,844
4,484
12,039
6,701
Warranty usage
(691)
(2,058)
(3,511)
(3,289)
Balance at end of period
$
27,476
$
12,416
$
27,476
$
12,416
14. Variable Interest Entities (“VIE”)
VIEs are entities with any of the following characteristics: (i) the entity does not have enough equity to finance its activities without additional financial support; (ii) the equity holders, as a group, lack the characteristics of a controlling financial interest; or (iii) the entity is structured with non-substantive voting rights.
Consolidation of a VIE is required for the party deemed to be the primary beneficiary, if any. The primary beneficiary is the party who has both (a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity.
On July 23, 2023, the Company, New Symbotic Holdings, and Symbotic US (collectively, the “Symbotic Group”), entered into a Framework Agreement (the “Framework Agreement”) with Sunlight Investment Corp., a Delaware corporation (“Sunlight”), SVF II Strategic Investments AIV LLC, a Delaware limited liability company (“SVF” and, together with Sunlight, “SoftBank”), and GreenBox Systems LLC, a Delaware limited liability company (“GreenBox”), related to the formation of GreenBox as a venture between the Symbotic Group and SoftBank, the entry into a Limited Liability Company Agreement of GreenBox and Master Services, License and Equipment Agreement (the “Commercial Agreement”) and issuance of a warrant to purchase Class A Common Stock of Symbotic (the “GreenBox Warrant”).
GreenBox was established on July 21, 2023, to build and automate supply chain networks globally by operating and financing the Company’s advanced artificial intelligence (“A.I.”) and automation technology for the warehouse. Symbotic Holdings and Sunlight own 35% and 65% of GreenBox, respectively. On July 23, 2023, GreenBox entered into the Commercial Agreement with Symbotic US with respect to the purchase of Symbotic’s automated case handling systems. The Company evaluated for VIEs upon the formation of GreenBox in accordance with ASC 810, Consolidation. The Company holds a variable interest in GreenBox through its equity interest in GreenBox. GreenBox is a VIE resulting from GreenBox’s lack of sufficient equity to finance its operations without additional subordinated financial support from both the Company and SoftBank. The consolidation of GreenBox is not required as the Company is not the primary beneficiary of this VIE as it does not have the power to direct the activities that most significantly impact GreenBox’s economic performance. Such
power is conveyed through GreenBox’s board of directors and the Company does not have control over GreenBox’s board of directors. The Company calculated its maximum exposure to loss while considering its equity investment in the VIE, any amounts owed to the Company for services which may have been provided, net of any unearned revenue commitments from the VIE under the Commercial Agreement, and future funding commitments. As of March 30, 2024, there is no carrying value of the VIE as no significant activity had occurred in the period related to the VIE. As of March 30, 2024 the Company does not have a maximum exposure to loss as the Company’s future funding commitment is less than the revenue commitment from the VIE under the Commercial Agreement.
15. Net Loss per Share (As Restated)
Basic earnings per share of Class A common stock is computed by dividing net loss attributable to common shareholders by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net loss attributable to common shareholders adjusted for the assumed exchange of all potentially dilutive securities, by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive elements. Since the Company incurred net losses for each of the periods presented, diluted net loss per share is the same as basic net loss per share.
The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock (in thousands, except per share information):
Three Months Ended
Six Months Ended
March 30, 2024
March 25, 2023
March 30, 2024
March 25, 2023
As Restated
As Restated
Numerator - basic and diluted
Net loss
$
(54,830)
$
(55,416)
$
(73,902)
$
(123,402)
Less: Net loss attributable to the noncontrolling interest
(46,021)
(49,298)
(62,257)
(110,091)
Net loss attributable to common stockholders
$
(8,809)
$
(6,118)
$
(11,645)
$
(13,311)
Denominator - basic and diluted
Weighted-average shares of Class A common shares outstanding
93,043,769
60,503,119
88,155,791
59,352,634
Loss per share of Class A common stock - basic and diluted
$
(0.09)
$
(0.10)
$
(0.13)
$
(0.22)
The Company’s Class V-1 Common Stock and Class V-3 Common Stock do not participate in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class V-1 Common Stock and Class V-3 Common Stock under the two-class method has not been presented.
The Company uses the treasury stock method and the average market price per share during the period for calculating any potential dilutive effect of the restricted stock units (“RSUs”), 2022 Employee Stock Purchase Plan (the “ESPP”) and Warrant Units. The average stock price for the three and six months ended March 30, 2024 was $43.81 and $43.83, respectively. For the three months ended March 30, 2024, there were 7.3 million and 0.5 million potentially dilutive common stock equivalents related to the RSUs and Warrant Units, respectively. For the six months ended March 30, 2024, there were 7.1 million and 0.5 million potentially dilutive common stock equivalents related to the RSUs and Warrant Units, respectively.
16. Stock-Based Compensation and Warrant Units
The following two tables show stock-based compensation expense by award type and where the stock-based compensation expense is recorded in the Company’s consolidated statements of operations (in thousands):
Effect of stock-based compensation expense on income by line item (in thousands):
Three Months Ended
Six Months Ended
March 30, 2024
March 25, 2023
March 30, 2024
March 25, 2023
Cost of revenue, Systems
$
3,839
$
9
$
6,554
$
16
Cost of revenue, Software maintenance and support
60
87
235
96
Cost of revenue, Operation services
671
345
1,212
641
Research and development
12,789
15,757
25,086
38,585
Selling, general, and administrative
10,706
19,025
24,440
45,425
Total stock-based compensation expense
$
28,065
$
35,223
$
57,527
$
84,763
Total stock-based compensation expense for the six months ended March 30, 2024 decreased as compared to the six months ended March 25, 2023 as a result of the issuance of restricted stock to our employees in August 2022 following the Business Combination with application of the graded-vesting method of expense recognition. There was no such grant in the same period of fiscal year 2023. For the three and six months ended March 30, 2024, the Company capitalized $0.1 million and $0.3 million, respectively of stock-based compensation expense to property and equipment related to internal use software projects. There were no stock-based compensation costs capitalized for the three and six months ended March 25, 2023.
Warrant Units
GreenBox Warrant
On July 23, 2023, in connection with its entry into the Commercial Agreement with GreenBox, the Company issued Sunlight the GreenBox Warrant to acquire up to an aggregate of 11,434,360 shares of the Company’s Class A Common Stock, subject to certain vesting conditions. The GreenBox Warrant had a grant date fair value of $19.90 per unit. The GreenBox Warrant may vest in connection with conditions defined by the terms of the GreenBox Warrant, as GreenBox makes additional expenditures to the Company in connection with the Framework Agreement. There are up to eight tranches based on increments of expenditures where approximately 1,429,295 additional warrant units may vest per tranche, subject to certain conditions defined by the terms of the GreenBox Warrant. Upon vesting, warrant units may be acquired at an exercise price of $41.9719. The warrant units contain customary anti-dilution, down-round, and change-in-control provisions. The right to purchase units in connection with the GreenBox Warrant expires 36 months following the end of the initial term of the Framework Agreement which is July 23, 2027, or if applicable, the extension term of the Framework Agreement, which is July 23, 2029. As of March 30, 2024, none of the GreenBox Warrant units had vested.
Walmart Warrant
On May 20, 2022, in connection with its entry into the 2nd Amended and Restated Master Automation Agreement, the Company issued Walmart a warrant to acquire up to an aggregate of 258,972 Legacy Warehouse Class A Units (“May 2022 Warrant”), subject to certain vesting conditions. The May 2022 Warrant had a grant date fair value of $224.45. In connection with the closing of the Company’s initial public offering in June 2022, the May 2022 Warrant was converted into a new warrant to acquire up to an aggregate of 15,870,411 common units of Symbotic Holdings LLC (“June 2022 Warrant” and, the common units of Symbotic Holdings LLC issuable thereunder, the “Warrant Units”). The June 2022 Warrant vested in the second quarter of fiscal year 2023, as the installation commencement date for certain Systems which the Company is installing in Walmart’s 42 regional distribution centers had occurred. In December 2023, Walmart elected to gross exercise the vested warrants for $158.7 million. As a result of this gross exercise, 15,870,411 shares of Class V-1 Common Stock were issued to Walmart.
17. Segment and Geographic Information (As Restated)
The Company operates as one operating segment. Revenue and property and equipment, net by geographic region, based on physical location of the operations recording the sale or the assets are as follows:
Revenue by geographical region for the three and six months ended March 30, 2024 and March 25, 2023 are as follows (in thousands):
Three Months Ended
Six Months Ended
March 30, 2024
March 25, 2023
March 30, 2024
March 25, 2023
As Restated
As Restated
United States
$
392,334
$
265,962
$
751,223
$
471,382
Canada
998
892
2,052
1,784
Total revenue
$
393,332
$
266,854
$
753,275
$
473,166
Percentage of revenue generated outside of the United States (a)
immaterial
immaterial
immaterial
immaterial
(a) The percentage of revenue generated outside of the United States for the three and six months ended March 30, 2024 and March 25, 2023 was immaterial.
Total property and equipment, net by geographical region at March 30, 2024 and at September 30, 2023 are as follows (in thousands):
March 30, 2024
September 30, 2023
United States
$
74,560
$
33,828
Canada
478
679
Total property and equipment, net
$
75,038
$
34,507
Percentage of property and equipment, net held outside of the United States
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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/A and our audited consolidated financial statements and related notes thereto as of and for the year ended September 30, 2023, as included within our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on December 11, 2023. 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.
Restatement of Previously Issued Unaudited Condensed Consolidated Financial Statements
In this Quarterly Report on Form 10-Q/A, we have restated our previously issued unaudited condensed consolidated financial statements. Refer to the “Explanatory Note” preceding “Cautionary Note on Forward-Looking Statements” for background on the restatement, the fiscal periods impacted, and other information. As a result, we have also restated certain previously reported financial information for the three and six months ended March 30, 2024 in this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including but not limited to information within the “Results of Operations,” “Non-GAAP Financial Measures,” and “Liquidity and Capital Resources” sections to conform the discussion with the appropriate restated amounts. See “Item 1. Unaudited Condensed Consolidated Financial Statements, Note 3, Restatement of Previously Issued Unaudited Condensed Consolidated Financial Statements” for additional information related to the Restatement.
Company Overview
At Symbotic, 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.
The Symbotic 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 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.
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.
The key metrics which describe our System from commencement to completion are as follows: (1) Start occurs when a Statement of Work (“SOW”) is signed with a customer; (2) Deployment is defined as the period of time following the signed SOW until acceptance is achieved on the System; (3) Operational describes a System which has achieved acceptance. The majority of Systems revenue occurs during the deployment stage, and once a system reaches acceptance, software maintenance and support begins.
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. Also included in operation services is revenue generated from the sales of spare parts to our customers as needed to service their System.
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 also includes the cost of spare parts sold to our customers as needed to service their System. 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 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.
We are subject to U.S. federal income taxes, in addition to state and local income taxes, with respect to our allocable share of any taxable income or loss of Symbotic Holdings LLC. We also have foreign subsidiaries which are subject to income tax in their local jurisdictions.
Results of Operations for the Three and Six Months Ended March 30, 2024 and March 25, 2023
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/A 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.
*Percentages are based on actual values. Totals may not sum due to rounding.
Three and Six Months Ended March 30, 2024 Compared to the Three and Six Months Ended March 25, 2023
Revenue
For the Three Months Ended
Change
March 30, 2024
March 25, 2023
Amount
%
As Restated
As Restated
As Restated
(dollars in thousands)
Systems
$
370,693
$
257,603
$
113,090
44
%
Software maintenance and support
2,566
1,461
1,105
76
%
Operation services
20,073
7,790
12,283
158
%
Total revenue
$
393,332
$
266,854
$
126,478
47
%
Systems revenue increased during the three months ended March 30, 2024 as compared to the three months ended March 25, 2023 due to there being 37 system deployments in progress during the fiscal quarter ending March 30, 2024 as compared to 28 system deployments in progress in the same quarter of fiscal 2023. 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 increase in software maintenance and support revenue is due to there being nine additional sites operational and under software maintenance and support contracts for the three months ended March 30, 2024 as compared to the three months ended March 25, 2023.
The increase in operation services revenue is attributable to an increase in sites where we are performing operation services during the three months ended March 30, 2024 as compared to the three months ended March 25, 2023 due to an increased number of systems in deployment during the period as compared to the prior year as well as an increase in spare parts sales to our customers during the three months ended March 30, 2024 as compared to the three months ended March 25, 2023.
For the Six Months Ended
Change
March 30, 2024
March 25, 2023
Amount
%
As Restated
As Restated
As Restated
(dollars in thousands)
Systems
$
718,398
$
455,504
$
262,894
58
%
Software maintenance and support
4,735
2,698
2,037
76
%
Operation services
30,142
14,964
15,178
101
%
Total revenue
$
753,275
$
473,166
$
280,109
59
%
Systems revenue increased during the six months ended March 30, 2024 as compared to the six months ended March 25, 2023 due to there being 37 system deployments in progress during the fiscal quarter ending March 30, 2024 as compared to 28 system deployments in progress in the same quarter of fiscal 2023. 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 increase in software maintenance and support revenue is due to there being nine additional sites operational and under software maintenance and support contracts for the six months ended March 30, 2024 as compared to the six months ended March 25, 2023.
The increase in operation services revenue is attributable to an increase in sites where we are performing operation services during the six months ended March 30, 2024 as compared to the six months ended March 25, 2023 due to an increased number of systems in deployment during the period as compared to the prior year as well as an increase in spare parts sales to our customers during the six months ended March 30, 2024 as compared to the six months ended March 25, 2023.
Gross Profit
The following table sets forth our gross profit for the three months ended March 30, 2024 and March 25, 2023:
For the Three Months Ended
Change
March 30, 2024
March 25, 2023
Amount
As Restated
As Restated
(in thousands)
Systems
$
28,569
$
44,543
$
(15,974)
Software maintenance and support
630
(645)
1,275
Operation services
1,021
(1,051)
2,072
Total gross profit
$
30,220
$
42,847
$
(12,627)
Systems gross profit decreased $(16.0) million during the three months ended March 30, 2024 as compared to the three months ended March 25, 2023. During the three months ended ended March 30, 2024, we completed our restructuring related to outsource of bot assembly and component inventory management, including standardizing on Symbot as our go-ahead bot platform. As a result, we recognized a restructuring charge in the second quarter of fiscal year 2024 which contributed to the decrease in Systems gross profit.
The increase in software maintenance and support gross profit is due to an increase in revenues for the three months ended March 30, 2024 while costs to perform our maintenance and support services remained relatively flat.
The increase in operation services gross profit is driven by an increase to the number of sites where we are performing operation services, efficiency improvement on our existing operation services sites, and profit generated from the sales of spare parts.
The following table sets forth our gross profit for the six months ended March 30, 2024 and March 25, 2023:
For the Six Months Ended
Change
March 30, 2024
March 25, 2023
Amount
As Restated
As Restated
(in thousands)
Systems
$
92,327
$
81,513
$
10,814
Software maintenance and support
1,073
(1,079)
2,152
Operation services
876
(2,393)
3,269
Total gross profit
$
94,276
$
78,041
$
16,235
Systems gross profit increased $10.8 million during the six months ended March 30, 2024 as compared to the six months ended March 25, 2023. The increase in systems gross profit was partially driven by the increased number of sites in deployment in fiscal year 2024 as compared to fiscal year 2023. This increase was offset by the completion of our restructuring related to outsource of bot assembly and component inventory management, including standardizing on Symbot as our go-ahead bot platform. As a result of this, we recognized a restructuring charge in the second quarter of fiscal year 2024.
The increase in software maintenance and support gross profit is due to an increase in revenues for the six months ended March 30, 2024 while costs to perform our maintenance and support services remained relatively flat.
The increase in operation services gross profit is driven by an increase to the number of sites where we are performing operation services and efficiency improvement on our existing operation services sites and profit generated from the sales of spare parts.
Research and Development Expenses
For the Three Months Ended
Change
March 30, 2024
March 25, 2023
Amount
%
(dollars in thousands)
Research and development
$
46,462
$
49,666
$
(3,204)
(6)
%
Percentage of total revenue (As restated)
12
%
19
%
The decrease in research and development expenses for the three months ended March 30, 2024 as compared to the three months ended March 25, 2023 is due to the following:
Change
(in thousands)
Employee-related costs
$
(2,715)
Prototyping-related costs, allocated overhead expenses, and other
(489)
$
(3,204)
Employee-related costs decreased primarily as a result of a decrease in stock-based compensation expense and expense incurred for contractors. As we apply the graded-vesting method of expense recognition to all stock-based compensation awards with service-only conditions, higher expense was incurred for the three months ended March 25, 2023 due to the expense recognized in the second quarter of fiscal year 2023 for the issuance of restricted stock to our employees following the Business Combination. Additionally, we experienced a decrease in the expense related to contractors as a result of a combination of hiring full time employees and outsourcing certain business activities to third parties. These decreases were partially offset by an increase to payroll related costs 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 robots, and also to support the continued expansion of our artificial intelligence and analytics capabilities.
Prototyping-related costs, allocated overhead expenses, and other expenses remained relatively flat for the three months ended March 30, 2024 as compared to the three months ended March 25, 2023 though we did experience less expense related to prototyping-related costs resulting from outsourcing of prototyping-related work to third party vendors.
For the Six Months Ended
Change
March 30, 2024
March 25, 2023
Amount
%
(dollars in thousands)
Research and development
$
88,606
$
100,406
$
(11,800)
(12)
%
Percentage of total revenue (As restated)
12
%
21
%
The decrease in research and development expenses for the six months ended March 30, 2024 as compared to the six months ended March 25, 2023 is due to the following:
Change
(in thousands)
Employee-related costs
$
(13,172)
Prototyping-related costs, allocated overhead expenses, and other
1,372
$
(11,800)
Employee-related costs decreased primarily as a result of a decrease in stock-based compensation expense and expense incurred for contractors. As we apply the graded-vesting method of expense recognition to all stock-based compensation awards with service-only conditions, higher expense was incurred for the six months ended March 25, 2023 due to the expense recognized in the first half of fiscal year 2023 for the issuance of restricted stock to our employees following the Business Combination. Additionally, we experienced a decrease in the expense related to contractors as a result of a combination of hiring full time employees and outsourcing certain business activities to third parties. These decreases were partially offset by an increase to payroll related costs 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 robots, and also to support the continued expansion of our artificial intelligence and analytics capabilities.
The increase in prototyping-related costs, allocated overhead expenses, and other during the six months ended March 30, 2024 as compared to the six months ended March 25, 2023 is partially attributable to an increase in prototyping-related expenses incurred by us in the first quarter of fiscal year 2024 as we are implementing efforts to expand on our current product offerings. There was additionally an increase in overhead expenses allocated from selling, general, and administrative expenses to research and development expenses resulting from an increase to general overhead expenses such as rent and other occupancy expenses for the six months ended March 30, 2024.
Selling, General, and Administrative Expenses
For the Three Months Ended
Change
March 30, 2024
March 25, 2023
Amount
%
(dollars in thousands)
Selling, general, and administrative
$
48,652
$
50,898
$
(2,246)
(4)
%
Percentage of total revenue (As restated)
12
%
19
%
The decrease in selling, general, and administrative expenses for the three months ended March 30, 2024 as compared to the three months ended March 25, 2023 is due to the following:
Employee-related costs decreased primarily as a result of a decrease in stock-based compensation expense and expense incurred for contractors. As we apply the graded-vesting method of expense recognition to all stock-based compensation awards with service-only conditions, higher expense was incurred for the three months ended March 25, 2023 due to the expense recognized in the second quarter of fiscal year 2023 for the issuance of restricted stock to our employees following the Business Combination. Additionally, we experienced a decrease in the expense related to contractors as a result of a combination of hiring full time employees and outsourcing certain business activities to third parties. These decreases were partially offset by an increase to payroll-related expenses incurred as our business continues to grow.
Allocated overhead and other expenses increased primarily due to an increase in information technology related costs as well as audit, tax, and legal expenses as compared to the prior year as our employee base and infrastructure continue to grow.
For the Six Months Ended
Change
March 30, 2024
March 25, 2023
Amount
%
(dollars in thousands)
Selling, general, and administrative
$
95,663
$
104,921
$
(9,258)
(9)
%
Percentage of total revenue (As restated)
13
%
22
%
The decrease in selling, general, and administrative expenses for the six months ended March 30, 2024 as compared to the six months ended March 25, 2023 is due to the following:
Change
(in thousands)
Employee-related costs
$
(22,246)
Allocated overhead expenses and other
12,988
$
(9,258)
Employee-related costs decreased primarily as a result of a decrease in stock-based compensation expense and expense incurred for contractors. As we apply the graded-vesting method of expense recognition to all stock-based compensation awards with service-only conditions, higher expense was incurred for the six months ended March 25, 2023 due to the expense recognized in the first half of fiscal year 2023 for the issuance of restricted stock to our employees following the Business Combination. Additionally, we experienced a decrease in the expense related to contractors as a result of a combination of hiring full time employees and outsourcing certain business activities to third parties. These decreases were partially offset by an increase to payroll-related expenses incurred as our business continues to grow.
Allocated overhead and other expenses increased primarily due to an increase in information technology related costs as well as audit, tax, and legal expenses as compared to the prior year as our employee base and infrastructure continue to grow.
Other income, net
For the Three Months Ended
Change
March 30, 2024
March 25, 2023
Amount
%
(dollars in thousands)
Other income, net
$
9,812
$
2,284
$
7,528
330
%
Percentage of total revenue
2
%
1
%
The increase in other income, net for the three months ended March 30, 2024 as compared to the three months ended March 25, 2023 was due to higher interest earned on invested cash balances and marketable securities as a result of increased interest rates from the prior year as well as a higher cash balance at March 30, 2024 as compared to March 25, 2023.
The increase in other income, net for the six months ended March 30, 2024 as compared to the six months ended March 25, 2023 was due to higher interest earned on invested cash balances and marketable securities as a result of increased interest rates from the prior year as well as a higher cash balance at March 30, 2024 as compared to March 25, 2023.
Income Taxes
For the Three Months Ended
Change
March 30, 2024
March 25, 2023
Amount
%
As Restated
As Restated
As Restated
(dollars in thousands)
Income tax benefit
$
252
$
17
$
235
1382
%
Percentage of total revenue
—
%
—
%
The increase in income tax benefit for the three months ended March 30, 2024 as compared to the three months ended March 25, 2023 is attributable to the expense related to our state income taxes.
For the Six Months Ended
Change
March 30, 2024
March 25, 2023
Amount
%
As Restated
As Restated
As Restated
(dollars in thousands)
Income tax benefit (expense)
$
80
$
(234)
$
314
(134)
%
Percentage of total revenue
—
%
—
%
The income tax benefit recorded for the six months ended March 30, 2024 as compared to the income tax expense recorded for the six months ended March 25, 2023 is attributable to the expense related to our state income taxes.
Non-GAAP Financial Measures
In addition to providing financial measurements based on generally accepted accounting principles in the 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 these 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 Adjusted EBITDA, Adjusted gross profit, and Adjusted gross profit margin, 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 it facilitates 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 consider Adjusted EBITDA to be an 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; stock-based compensation; CEO transition charges; Joint venture formation fees; restructuring charges; equity financing transaction costs; and other infrequent items that may arise from time to time.
The non-GAAP adjustments, and our basis for excluding them from our non-GAAP financial measures, are outlined below:
•Stock-based compensation – Although stock-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 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 stock-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. Our stock-based compensation non-GAAP financial measures exclusion includes non-cash stock-based compensation expense and payroll taxes related to stock-based compensation awards.
•CEO transition charges –CEO transition charges represent the charges incurred associated with the separation agreement we entered into with Michael Loparco in November 2022. We exclude these CEO transition charges 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 are not representative of our normal operating activities.
•Restructuring charges – Restructuring charges represent the charges incurred associated with certain actions to restructure parts of the Company within the U.S. and Canada. These charges include severance and related expenses for workforce reductions, lower of cost and net realizable value adjustments to inventory and long-lived assets that will no longer be used in operations, and termination fees for any contracts cancelled as part of these programs. We exclude these items from our non-GAAP financial measures when evaluating our continuing business performance as such items vary significantly based on the magnitude of the restructuring action and do not reflect future expected operating expenses. In addition, these charges do not necessarily provide meaningful insight into the fundamentals of current or past operations of our business.
•Joint venture formation fees – Joint venture formation fees represent the charges incurred associated with the formation of GreenBox, which was established on July 21, 2023. It primarily includes investment banker fees, legal fees, transaction fees, advisory fees, and certain other professional fees. We exclude joint venture formation fees from our non-GAAP financial measures to provide a useful comparison of our operating results to prior periods and peer companies because such amounts vary significantly based on the magnitude of the joint venture and do not reflect our core operations.
•Equity financing transaction costs – Equity financing transaction costs represents the costs incurred, including for legal, professional fees for accountants, transaction fees, advisory fees, due diligence costs, and certain other professional fees that are directly related to an equity financing transaction.
The following table reconciles GAAP net loss to Adjusted EBITDA for the three and six months ended March 30, 2024 and March 25, 2023 (in thousands):
The following table presents the effects of the Restatement on the Adjusted EBITDA non-GAAP financial measure (in thousands):
Three Months Ended March 30, 2024
Six Months Ended March 30, 2024
As Reported
Adjustment
As Restated
As Reported
Adjustment
As Restated
Net loss
$
(40,952)
$
(13,878)
$
(54,830)
$
(53,919)
$
(19,983)
$
(73,902)
Income tax expense
(188)
(64)
(252)
(71)
(9)
(80)
Adjusted EBITDA
$
22,450
$
(13,942)
$
8,508
$
36,567
$
(19,992)
$
16,575
We consider Adjusted gross profit and Adjusted gross profit margin to be important indicators of profitability which we use in our financial and operational decision-making and evaluation of our overall operating performance. We define Adjusted gross profit, a non-GAAP financial measure, as GAAP gross profit excluding the following items: depreciation, stock-based compensation expense, and restructuring charges. We define Adjusted gross profit margin, a non-GAAP financial measure, as non-GAAP Adjusted gross profit divided by total revenue. The following table reconciles GAAP gross profit to Adjusted gross profit and gross profit margin to Adjusted gross profit margin during the periods presented (dollars in thousands):
Three Months Ended
Six Months Ended
March 30, 2024
March 25, 2023
March 30, 2024
March 25, 2023
As Restated
As Restated
Gross profit
$
30,220
$
42,847
$
94,276
$
78,041
Depreciation
88
189
181
375
Stock-based compensation
5,156
459
8,587
771
Restructuring charges
34,206
5,240
34,206
5,240
Adjusted gross profit
$
69,670
$
48,735
$
137,250
$
84,427
Gross profit margin
7.7
%
16.1
%
12.5
%
16.5
%
Adjusted gross profit margin
17.7
%
18.3
%
18.2
%
17.8
%
The following table presents the effects of the Restatement on the Adjusted gross profit and Adjusted gross profit margin non-GAAP financial measures (dollars in thousands):
Three Months Ended March 30, 2024
Six Months Ended March 30, 2024
As Reported
Adjustment
As Restated
As Reported
Adjustment
As Restated
Gross profit
$
44,162
$
(13,942)
$
30,220
$
114,268
$
(19,992)
$
94,276
Adjusted gross profit
$
83,612
$
(13,942)
$
69,670
$
157,242
$
(19,992)
$
137,250
Gross profit margin
10.4
%
(2.7)
%
7.7
%
14.4
%
(1.9)
%
12.5
%
Adjusted gross profit margin
19.7
%
(2.0)
%
17.7
%
19.8
%
(1.6)
%
18.2
%
Liquidity and Capital Resources
As of March 30, 2024, our principal sources of liquidity were cash received upon exercise of warrants and equity financing transactions, proceeds received from the maturities of marketable securities, and cash received from customers upon the inception and continuation of contracts to install customer Systems.
The following table shows net cash provided by (used in) operating activities, net cash provided by (used in) investing activities, and net cash provided by (used in) financing activities for the six months ended March 30, 2024 and March 25, 2023:
Six Months Ended
March 30, 2024
March 25, 2023
(in thousands)
Net cash provided by (used in):
Operating activities
$
(9,078)
$
132,364
Investing activities
$
235,476
$
(216,147)
Financing activities
$
416,941
$
(10,726)
Operating Activities
Our net cash provided by (used in) operating activities consists of net loss adjusted for certain non-cash items, including depreciation and amortization, foreign currency gains and losses, marketable securities gains and losses, provision for excess and obsolete inventory, and stock-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 $(9.1) million during the six months ended March 30, 2024. Net cash used in operating activities was primarily due to our net loss of $(73.9) million adjusted for non-cash items of $89.4 million, primarily consisting of $6.4 million depreciation and amortization, $57.5 million stock-based compensation, and $34.3 million provision for excess and obsolete inventory, in addition to cash used in operating assets and liabilities of $24.6 million. Cash used in operating assets and liabilities of $24.6 million was primarily driven by net working capital changes, including the timing of cash payments to vendors and cash receipts from customers.
Net cash provided by operating activities was $132.4 million during the six months ended March 25, 2023. Net cash provided by operating activities was primarily due to our net loss of $123.4 million adjusted for non-cash items of $95.2 million, primarily consisting of $4.1 million depreciation and amortization, $6.2 million provision for excess and obsolete inventory, and $84.8 million stock-based compensation, offset by cash provided by operating assets and liabilities of $160.6 million. Cash provided by operating assets and liabilities of $160.6 million was primarily driven by net working capital changes, including timing of cash payments to vendors and cash receipts from customers, an increase in inventory purchases for the six months ended March 25, 2023 as we purchase additional inventory in order to meet our installation timeline for our customers’ upcoming warehouse automation system installations in connection with the Walmart Master Automation Agreement and other customer contracts, as well as an increase in deferred revenue for the six months ended March 25, 2023 resulting from an increase in the number of active system installation projects.
Investing Activities
Our investing activities have consisted primarily of property and equipment purchases, capitalization of internal use software development costs, purchases of marketable securities, and proceeds from maturities of marketable securities.
Net cash and cash equivalents provided by investing activities during the six months ended March 30, 2024 is primarily driven by $290.0 million in proceeds upon the maturity of certain U.S. Treasury securities, offset by purchases of U.S. Treasury securities of $48.7 million.
Net cash and cash equivalents used in investing activities during the six months ended March 25, 2023 consisted of $13.0 million of purchased property and equipment. Additionally, during the six months ended March 25, 2023, we purchased U.S. Treasury securities for $203.1 million.
Financing Activities
Our financing activities typically consist of payments and proceeds related to our equity incentive plans for both RSUs and ESPP, and also include proceeds from the exercise of the vested warrants issued to Walmart as well as proceeds from equity financing transactions.
During the six months ended March 30, 2024, we received cash of $158.7 million upon the gross exercise of Walmart’s vested warrant units, which occurred in December 2023. We additionally received proceeds of $258.0 million in relation to issuance of Class A common stock upon completion of our equity financing transaction in March 2024. No other significant financing activities occurred during the six months ended March 30, 2024.
During the six months ended March 25, 2023, we incurred a payment of $11.7 million for the taxes related to the net share settlement of stock-based compensation awards. We also received proceeds of $1.0 million from the issuance of common stock under the ESPP upon the expiration of the first offering period which occurred at the end of December 2022.
Contractual Obligations and Commitments and Liquidity Outlook
Our cash flows from operations along with equity infusions have historically been sufficient to fund our operating activities and other cash requirements. As of March 30, 2024, we have a cash and cash equivalents balance of $901.4 million and short-term available for sale marketable securities balance of $50.0 million. Our cash requirements for the six months ended March 30, 2024 were primarily related to inventory purchases in order to deliver to our customers our warehouse automation systems in an orderly manner in line with our installation timeline, purchases of marketable securities in order to diversify the composition of our cash balance, and capital expenditures.
Based on our present business plan, we expect our current cash and cash equivalents, unrestricted marketable securities, 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, and minimum contractual obligations. Contractual obligations are cash that we are obligated to pay as part of certain contracts that we have entered into during our course of business. Our contractual obligations consist of operating lease liabilities that are included in our consolidated balance sheet and vendor commitments associated with agreements that are legally binding. Our operating lease cash requirements have not changed materially since September 30, 2023, and are disclosed within Note 6, Leases, included elsewhere in this Quarterly Report on Form 10-Q/A.
The following table summarizes our current and long-term material cash requirements as of March 30, 2024 for our vendor commitments:
Payments due in:
Total
Less than 1 Year
1-3 Years
3-5 Years
More than 5 Years
(in thousands)
Vendor commitments
$
1,200,414
$
1,186,849
$
13,565
$
—
$
—
Our future capital requirements will depend on many factors, including 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.
Critical Accounting Policies and Estimates
There have been no significant changes in our critical accounting policies and estimates during the six months ended March 30, 2024 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 ended September 30, 2023, which are included within the Annual Report on Form 10-K filed with the SEC on December 11, 2023.
Off-Balance Sheet Arrangements
As of March 30, 2024, we had no off-balance sheet arrangements as defined in Instruction 8 to Item 303(b) of Regulation S-K.
Recent Accounting Pronouncements
For information on recent accounting pronouncements, see Recently Issued Accounting Pronouncements and Recently Adopted Accounting Pronouncements in the notes to the unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q/A.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in our assessment of our sensitivity to market risk since our presentation set forth in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in the Annual Report on Form 10-K filed with the SEC on December 11, 2023.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q/A. The term “disclosure controls and procedures,” as defined in the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 30, 2024, our disclosure controls and procedures were not effective at the reasonable assurance level because of the existence of the material weaknesses described below. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company's annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
As of March 30, 2024, the Company did not effectively design procedures and controls over the timing of the recognition of cost of revenue. This resulted in the acceleration of the recognition of cost of revenue. Given that we recognize revenue on a percentage of completion basis, this resulted in the acceleration of recognition of revenue. Additionally, the Company did not effectively design and execute controls over revenue recognition related to cost overruns on certain deployments that will not be billable. This resulted in an overstatement of revenue during the year. These deficiencies in internal control over financial reporting constituted material weaknesses as of March 30, 2024.
Notwithstanding the material weaknesses in internal control over financial reporting, our management, including our Chief Executive Officer and Chief Financial Officer, have concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of our operations and our cash flows for the periods presented in this Quarterly Report on Form 10-Q/A, in conformity with U.S. GAAP. There can be no assurance that these material weaknesses will not result in a misstatement to the annual or interim consolidated financial statements for future periods that would not be prevented or detected.
Changes in Internal Control Over Financial Reporting
Subject to the matters set forth below under Material Weakness Remediation Plan, there have been no changes in our internal control over financial reporting for the three months ended March 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Material Weakness Remediation Plan
Management has developed a remediation plan, which it began implementing as of the end of fiscal year 2024, that includes the following elements:
•Augmented compensating controls over the receipt of goods and services, with a focus on milestone related expenses;
•Implemented ERP system enhancements for goods and services receipts and enhanced documentation requirements for milestone related expenses;
•Training of the employees and redesign of the structure of the organization receiving goods and services; and
•Implemented compensating controls over revenue recognition for non-billable cost overruns.
Management is committed to the completion of the remediation of these material weaknesses and expects to successfully implement enhanced control processes. Management has also engaged third-party consultants to evaluate and help simplify business processes around the receipts of goods and services. However, as management continues to evaluate and work to improve its internal control over financial reporting, it may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary. Therefore, management cannot assure you when these material weaknesses will be remediated, that additional actions will not be required to remediate these material weaknesses, or the costs of any such additional actions. These material weaknesses will not be considered remediated until the remediated controls operate for a sufficient period of time and management has concluded, through further testing, that these controls are operating effectively.
ERP System Implementation
The Company has completed its new enterprise resource planning (“ERP”) system implementation, SAP’s S4/HANA which is expected to improve the efficiency of certain financial and related business processes. The implementation of SAP’s S4/HANA is expected to strengthen the financial controls by automating certain manual processes and standardizing business processes and reporting across the organization. The Company will continue to evaluate and monitor the internal controls over financial reporting during this period of change and will continue to evaluate the operating effectiveness of related key controls. For a discussion of risks related to the implementation of new systems, please see the section in our Quarterly Report on Form 10-Q filed with the SEC on February 8, 2024 titled “Risk Factors”.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We may be subject from time to time to various claims, lawsuits, and other legal and administrative proceedings arising in the ordinary course of business. Some of these claims, lawsuits, and other proceedings may involve highly complex issues that are subject to substantial uncertainties, and could result in damages, fines, and penalties, non-monetary sanctions, or relief. We intend to recognize provisions for claims or pending litigation when we determine that an unfavorable outcome is probable, and the amount of loss can be reasonably estimated. Due to the inherent uncertain nature of litigation, the ultimate outcome or actual cost of settlement may materially vary from estimates.
Item 1A. Risk Factors
We are subject to various risks and uncertainties in the course of our business. For a detailed discussion of these risks, please see the section in our Annual Report on Form 10-K filed with the SEC on December 11, 2023 titled “Risk Factors”. Any of the matters highlighted in those risk factors and the risk factor below could adversely affect our business, results of operation and financial condition.
We are required to assess our internal control over financial reporting and our management has identified material weaknesses. If our remediation of the material weaknesses is not effective, or we identify additional material weaknesses or other adverse findings in the future, our ability to report our financial condition or results of operations accurately or timely or prevent fraud may be adversely affected, which may result in a loss of investor confidence in our financial reports, significant expenses to remediate any internal control deficiencies, and ultimately have an adverse effect on the trading price of our common stock.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. Pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, we are required to furnish a report by our management on our internal control over financial reporting. As we are no longer an “emerging growth company” as of the end of the fiscal year ended September 28, 2024, to achieve compliance with Section 404, we are required to document and test the operating effectiveness of our internal control over financial reporting, which is both costly and challenging. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. Annually, we perform activities that include reviewing, documenting and testing our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, we will not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. If we fail to achieve and
maintain an effective internal control environment, we could suffer misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could result in significant expenses to remediate any internal control deficiencies and lead to a decline in our stock price.
Our management has conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 30, 2024. Based upon this evaluation and those criteria, management concluded that, as of March 30, 2024, the Company’s internal control over financial reporting was not effective due to the identification of material weaknesses. As of March 30, 2024, the Company did not effectively design procedures and controls over the timing of the recognition of cost of revenue. This resulted in the acceleration of the recognition of cost of revenue. Given that we recognize revenue on a percentage of completion basis, this resulted in the acceleration of recognition of revenue. Additionally, the Company did not effectively design and execute controls over revenue recognition related to cost overruns on certain deployments that will not be billable. This resulted in an overstatement of revenue during the year. These deficiencies in internal control over financial reporting constituted material weaknesses. For further discussion of these material weaknesses, see Part I, Item 4. Controls and Procedures. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
We may be unable to conclude in future periods that our disclosure controls and procedures are effective due to the effects of various factors, which may, in part, include unremediated material weaknesses in internal controls over financial reporting. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in those reports is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Management is committed to maintaining a strong internal control environment and believes its remediation efforts will represent an improvement in existing controls. Management anticipates that the new controls, as implemented and when tested for a sufficient period of time, will remediate the material weaknesses. We may not be successful in promptly remediating the material weaknesses identified by management or be able to identify and remediate additional control deficiencies, including material weaknesses, in the future. Remediation efforts have placed, and will continue to place, a significant burden on management and add increased pressure on our financial reporting resources and processes. The accuracy of our financial reporting and our ability to timely file with the SEC may in the future be adversely impacted if we are unable to successfully remediate the material weaknesses in a timely manner, or if any additional material weaknesses in our internal control over financial reporting are identified.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
During the fiscal quarter ended March 30, 2024, the following director(s) and officer(s), as defined in Rule 16a-1(f) under the Exchange Act, adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Regulation S-K Item 408:
On February 28, 2024, entities related to Todd Krasnow, a director of the Company, entered into a trading plan pursuant to Rule 10b5-1 of the Exchange Act. Mr. Krasnow’s Rule 10b5-1 trading plan provides for the sale of up to a maximum of 154,000 shares of Class A Common Stock for which Mr. Krasnow is a beneficial owner as defined in Rule 16a-1(a) under the Exchange Act. Mr. Krasnow’s Rule 10b5-1 trading plan expires on April 30, 2025, or earlier if all transactions under the trading arrangement are completed. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b4-1(c).
Certain of our directors or officers have made elections to participate in, and are participating in, our Incentive Compensation Plan, ESPP or our defined-contribution benefit plan under the provisions of Section 401(k) of the Internal Revenue Code and have may, and may from time to time make, elections to have shares withheld to cover withholding taxes or pay the exercise price of options, which may be designed to satisfy the affirmative defense conditions of Rule 10b5-1
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: December 4, 2024
Symbotic Inc.
By:
/s/ Maria G. Freve
Name:
Maria G. Freve
Title:
Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer)