Symbotic Inc.

Moat: 3/5

Understandability: 4/5

Balance Sheet Health: 4/5

Symbotic Inc. is a technology company that develops and markets robotic automation solutions for warehouses and distribution centers.

Investor Relations Previous Earnings Calls

The moat, understandability, and balance sheet health scores reflect a conservative evaluation to ensure a margin of safety in any assessment.

Business Overview

Symbotic is a technology company focused on transforming the supply chain through its innovative robotics and software solutions. The company designs and implements automated material handling systems for large retail and wholesale companies that move goods through warehouses and distribution centers. Symbotic’s robotic automation system works by using artificial intelligence, mobile robots, and proprietary software to orchestrate the complex movement of goods within warehouses. The main goal is to make supply chains more efficient by increasing speed, accuracy, and space utilization.

Revenue Distribution

Symbotic generates revenue from three main sources:

  • Systems: Revenue from the sale and installation of its robotic automation systems.
  • Software Maintenance and Support: Revenue from annual support, upgrades, and maintenance contracts.
  • Operation Services: Revenue generated from customers using SYm’s robotic and software system at its facilities, including providing logistics and warehouse management functions.
  • Increasing Demand for Automation: The logistics and warehousing industry is seeing a major shift towards automation, driven by rising labor costs, demands for faster delivery, and increasing order volumes due to e-commerce.
  • Technological Advancement: The industry is constantly evolving, with companies leveraging artificial intelligence, robotics, and machine learning to optimize operations.
  • Focus on Supply Chain Resilience: There is a growing emphasis on the robustness and flexibility of the supply chain as firms seek to minimize disruptions and create supply chain resilience.

Competitive Landscape

  • Intense Competition: The automated material handling market is competitive, with companies facing pressure from many established material handling providers and software providers.
  • Differentiation Through Technology: Companies with robust technology and the ability to integrate it with other systems are well-positioned for the market, and that differentiation becomes a source of competitive advantages.
  • Customization: The ability to create customized solutions for varied company requirements and problems.

What Makes Symbotic Different

  • End-to-End Solutions: Symbotic offers a complete, end-to-end solution that covers warehouse design, implementation, and operation, using their software and robots together to ensure smooth integrations.
  • Innovative Technology: Symbotic uses advanced software, robotics, and AI to orchestrate the entire supply chain management within its warehouses.
  • Targeted High Volume Verticals: Symbotic has concentrated on the high volume customers for its core business such as retail and wholesale companies.

Financial Analysis

  • Revenue Growth: Revenue shows promising growth year over year, driven by both existing customers and new system deployments. We saw an increase in revenue from $539.2 million in 2021 to $1.144 billion in 2022 which is almost double. 2023 revenue is $1.121 billion which is slightly below that of 2022.
  • Gross Profit: Gross profit margins have seen a slight contraction, which is a concerning trend. In 2021, it was 14.1% but for 2023 it has fallen down to a mere 2.7% indicating that the cost of goods sold has increased for the company while selling their systems.
  • Operating Expenses: Operating expenses have also increased significantly, impacting the net income negatively and are something the company will have to get under control.
  • Net Income: While revenue has grown substantially, net losses persist and are quite significant. Net losses increased to $366 million in 2023 compared to a net loss of $212 million the year before.
  • Positive trends: In general, the trend for the company is that it is doing more sales and installations, leading to higher revenues, but the company needs to become more efficient in the way it operates in order to have positive net income.
  • Note: All of these financials are taken from 10K forms that have not been audited.

Balance Sheet Health

Balance sheet health is important for long term success. Here is what we noted about SYM’s balance sheet.

  • Strong cash reserves: Despite the losses the company does have a healthy cash pile and continues to hold enough cash to fulfill their obligations for operations, R&D and future projects. The cash balances are not being used to finance the current losses, at least fully as of yet, which makes this part a strength for the company.
  • High debt levels: Although not as bad as other debt heavy businesses, SYM has around 1.5 times more liabilities than assets. The long-term debt has more than doubled since 2021.
  • Assets: The level of assets is relatively similar as compared to liabilities, with a majority of the assets being in “Property, Plant and Equipment (net)” with also a decent portion in “Goodwill” and “Intangibles”.
    • Note: Both the “intangible assets” and the “goodwill” which make up a substantial portion of assets, are hard to value and can make the company’s balance sheet look better than it may be.

Recent Concerns and Problems

  • Supply Chain Issues: Many companies around the globe are facing supply chain issues, including SYM. These supply chain issues impact the production of the company’s systems. These supply chain disruptions could lead to revenue fluctuations or even order cancelations for the company.
  • Profitability Concerns: While growth potential remains high in the industry, the company will need to show improvement in margins and profitability.
  • Competition: The industry has become more and more competitive, with more and more companies pushing into automated solutions.

Management’s View

  • Management seems to be focused on long term opportunities and is aware of the present struggles in the financial statements. They are committed to growth while making sure the business is sustainable and has a long term future.
  • They appear to recognize that they need to improve gross margins and reduce operating expenses, while still spending on R&D to stay at the forefront of the competition.
  • They also know the importance of communicating with their investors to give an idea on future earnings projections and overall business prospects.

Moat Assessment

  • Network Economics: While Symbotic’s products and services are not directly tied to a network effect, it does benefit from creating better and larger networks for retailers and their logistics. This makes it more advantageous for partners to work with them than the other competitors.
  • Proprietary Technology: The robots, and especially the software to control the whole network are quite difficult to duplicate, especially for larger scale clients and customers. This gives SYM a strategic competitive advantage over others in the industry.
  • Switching Costs: Once a client integrates SYM solutions into their warehouse, they cannot switch easily to another competitor. This increases the stickiness of the company.
  • Brand Recognition: It has not built up a strong brand recognition as of yet, but it is working to build it further with its strong customer partnerships.

Based on these factors we will give SYM a moat rating of 3/5

Understandability

While the specific technologies might be difficult to grasp at first, the overall concept of what Symbotic does is quite simple: They are automating warehouses. For this, we will give Symbotic a understandability rating of 4/5.

Balance Sheet Health

Although Symbotic’s cash is strong, the debt is also fairly high, and they still post net losses. This, however, is partly offset by the company’s high growth potential. Considering everything, we give Symbotic a balance sheet health rating of 4/5