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Item 7. Management’s Discussion and Analysis

2023-12-11 compared with 2022-12-09 · 155 added, 157 removed, 272 unchanged (53% of the section changed)

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Forward-looking statements give our current expectations or forecasts of future events.

You can identify these statements by the fact that they do not relate strictly to historical or current facts.

identify these statements by the fact that they do not relate strictly to historical or current facts.

The use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance.

From time to time, we also may provide forward-looking statements in other materials we release to the public.

Unless the context otherwise requires, references in

this Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “Symbotic,” “we,” “us,” “our” and the “Company” are intended to mean the business and operations of Symbotic.

Unless the context otherwise requires, references in this Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “Symbotic,” “we,” “us,” “our” and the “Company” are intended to mean the business and operations of Symbotic.

This section provides an analysis of our financial results for the year ended September 30, 2023 as compared to the year ended September 24, 2022.

For the discussion and analysis covering the year ended September 24, 2022 compared to the year ended September 25, 2021, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended September 24, 2022, as filed with the SEC on December 9, 2022.

Company Overview

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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.

On July 23, 2023, we, along with New Symbotic Holdings, and Symbotic US (collectively, the “Symbotic Group”), entered into a Framework Agreement (the “Framework Agreement”) with Sunlight Investment Corp.

(“Sunlight”), SVF II Strategic Investments AIV LLC (“SVF” and, together with Sunlight, “SoftBank”), and GreenBox Systems LLC (“GreenBox”), related to the formation of GreenBox as a strategic joint 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, and will build and automate supply chain networks globally by operating and financing our advanced A.I.

and automation technology for the warehouse.

Symbotic Holdings and Sunlight own 35% and 65% of GreenBox, respectively.

Business Combination

SVF Investment Corp.

3, formerly known as SVF Investment III Corp., (“SVF ” and, after the Domestication as described below, “Symbotic” or the “Company”) was a blank check company incorporated as a Cayman Islands exempted company on December 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”), a New Hampshire limited liability company, was formed in December 2006 to make investments in companies that develop new technologies to improve operating efficiencies in modern warehouses.

Symbotic LLC, a technology company that develops and commercializes innovative technologies for use within warehouse operations and Symbotic Group Holdings, ULC (“ Symbotic Canada”) were wholly owned subsidiaries of Legacy Warehouse.

On December 12, 2021, (i) SVF 3 entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Legacy Warehouse, Symbotic Holdings LLC, a Delaware limited liability company (“Symbotic Holdings”), and Saturn Acquisition (DE) Corp., a Delaware 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 Agreement”) with Symbotic Holdings.

On June 7, 2022, as contemplated by the Merger Agreement, Legacy Warehouse merged with and into Symbotic Holdings (the “Company Reorganization”), with Symbotic Holdings surviving the merger (“Interim Symbotic”).

Immediately following such merger, on June 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 the State of Delaware, under which SVF 3 was transferred by way of continuation from the Cayman Islands and domesticated as a Delaware corporation, changing its name to “Symbotic Inc.” (the “Domestication”).

Immediately following the Domestication of SVF 3, on June 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 of Symbotic (“New Symbotic Holdings”).

Refer to Note 1, Organization and Operations to our consolidated financial statements for further details on the historical business organization and formation of Symbotic Inc.

Key Components of Consolidated Statements of Operations

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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.

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.

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The Company also has foreign subsidiaries which are subject to income tax in their local jurisdictions.

The Company recorded zero income tax

expense for the period of June 7, 2022, through September 24, 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 both its domestic and foreign 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.

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 years 2021 and 2020, Legacy 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 to Legacy Warehouse's pass-through status and foreign subsidiaries having a full valuation allowance against their deferred tax assets.

Results of Operations for the Years Ended September 24, 2022, September 25, 2021, and September 26, 2020

The following tables set forth certain consolidated financial data in dollar amounts and as a percentage of total revenue.

September 24, 2022 September 25, 2021 September 26, 2020

Results of Operations for the Years Ended September 30, 2023 and September 24, 2022

The following tables set forth certain consolidated financial data in U.S.

dollar amounts and as a percentage of total revenue.

September 30, 2023 September 24, 2022

(in thousands)

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Total cost of revenue 987,152 493,665

Gross profit (loss) 99,647 10,447 (18,930)

Gross profit 189,739 99,647

Operating expenses:

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Net loss $ (207,894) $ (139,089)

September 24, 2022 September 25, 2021 September 26, 2020

September 30, 2023 September 24, 2022

Systems 97 % 96 %

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Total cost of revenue 84 83

Gross profit (loss) 17 4 (21)

Gross profit 16 17

Operating expenses:

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Total revenue $ 1,176,891 $ 593,312 $ 583,579 98 %

Systems revenue increased during the year ended September 24, 2022 as compared to the year ended September 25, 2021 due to there being seventeen system deployments currently in progress as of September 24, 2022 as compared to five deployments in progress as of September 25, 2021 as we continue to grow our business.

Systems revenue increased during the year ended September 30, 2023 as compared to the year ended September 24, 2022 due to there being thirty-five system deployments currently in progress as of September 30, 2023 as compared to seventeen deployments in progress as of September 24, 2022 as we continue to grow our business.

The increase resulting from the increased 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.

The decrease in software maintenance and support revenue is primarily due to a temporary discontinuity in support revenue with one customer in fiscal year 2022.

The increase in operation services revenue is due to two additional operating sites in fiscal year 2022 as compared to fiscal year 2021.

The following table sets forth our gross profit for the years ended September 24, 2022 and September 25, 2021:

The increase in software maintenance and support revenue is due to there being five additional sites under software maintenance and support contracts for the year ended September 30, 2023 as compared to the year ended September 24, 2022.

The increase in operation services revenue is attributable to an increase in sites where we are performing operation services during the year ended September 30, 2023 as compared to the year ended September 24, 2022.

As we continue to increase the number of sites which have reached completion for our warehouse automation system, an increase in the number of operation services contracts is expected.

The following table sets forth our gross profit (loss) for the years ended September 30, 2023 and September 24, 2022:

September 30, 2023 September 24, 2022 Change

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Operation services (5,623) (3,512) (2,111)

Total gross profit (loss) $ 99,647 $ 10,447 $ 89,200

For the year ended September 24, 2022, Systems gross profit increased $92.8 million from the previous year-end from $11.0 million to $103.8 million.

The increase in Systems gross profit resulted from there being seventeen system deployments currently in progress as of September 24, 2022 as compared to five deployments in progress as of September 25, 2021.

For the year ended September 24, 2022, software maintenance and support gross profit decreased $1.7 million from the previous year-end from $1.0 million to $(0.7) million.

The decrease in software maintenance and support gross profit is attributable to an increased cost for the year ended September 24, 2022, associated with an increase in headcount within our technical support team in order to appropriately support our growing business.

For the year ended September 24, 2022, operation services gross profit decreased $1.9 million from the previous year-end from $(1.6) million to $(3.5) million.

The decrease in operation services gross profit was driven by increased cost due to a need for additional operation services personnel at one of our customer sites.

Total gross profit $ 189,739 $ 99,647 $ 90,092

Systems gross profit increased during the year ended September 30, 2023 as compared to the year ended September 24, 2022 due to there being thirty-five system deployments currently in progress as of September 30, 2023 as compared to seventeen deployments in progress as of September 24, 2022.

The decrease in software maintenance and support gross profit is due to an increased cost for the year ended September 30, 2023 associated with an increase in headcount within our technical support team to appropriately support the expected rapid growth of our business.

The decrease in operation services gross profit is driven by an increased cost due to additional operation services personnel needed at one of our customer sites.

Research and Development Expenses

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Prototype-related costs, allocated overhead expenses, and other (8,833)

Employee-related costs increased as a result of our headcount growth to our engineering team through full-time and contracted employees 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.

Employee-related costs also increased as a result of equity expense attributable to the issuance of restricted stock units to our employees following the Business Combination.

The remaining increase in research and development expenses is attributable to an increase in prototype-related costs as we invest in making improvements and expansions to our warehouse automation system and autonomous bots as well as an increase in software information technology (“IT”) related costs attributable to the increase in employee headcount year over

The increase in prototype-related costs, allocated overhead expenses, and other is also attributable to expense associated with scrapped parts related to an engineering design change to our bots which occurred during fiscal year 2022.

The decrease in prototype-related costs, allocated overhead expenses, and other during the year ended September 30, 2023 as compared to the year ended September 24, 2022 is due to a decrease in prototype expenses related to our Omni-Channel platform, which was developed in 2022 and went into production during the first fiscal quarter of 2023.

This resulted in less prototype-related costs during fiscal year 2023.

Selling, General, and Administrative Expenses

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Allocated overhead expenses and other 35,497

Employee-related costs increased as a result of our headcount growth within our selling, general, and administrative functions, as well as an increase in expense in fiscal year 2022 related to travel expenses as our employees resumed normal business travel in fiscal year 2022.

Employee-related costs increased as a result of our full-time and contracted employee headcount growth within our selling, general, and administrative functions.

Employee-related costs also increased as a result of equity expense attributable to the issuance of restricted stock units to our employees following the Business Combination.

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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 due to an increase in hardware and software 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 and other expenses also increased as a result of additional audit, tax, and consulting services in support of the Business Combination, as well as an increase in marketing costs associated with marketing efforts following the Business Combination.

Other income, net

Year Ended Change

September 24, 2022 September 25, 2021 Amount %

(dollars in thousands)

Other income, net $ 1,286 $ 67 $ 1,219 1819 %

Percentage of total revenue — % — %

Other income, net increased due to an increase in interest income as a result of higher interest rates, as well as exchange rate fluctuations impacting our foreign currency transaction gains and losses associated with monetary assets and liabilities.

Year Ended September 25, 2021 Compared to the Year Ended September 26, 2020

Year Ended Change

September 25, 2021 September 26, 2020 Amount %

(dollars in thousands)

Systems $ 227,563 $ 70,818 $ 156,745 221 %

Software maintenance and support 4,009 2,614 1,395 53

Operation services 20,341 18,654 1,687 9

Total revenue $ 251,913 $ 92,086 $ 159,827 174 %

Systems revenue increased during the year ended September 25, 2021 as compared to the year ended September 26, 2020 due to the acceptance of certain warehouse automation systems as well as the commencement of other warehouse automation systems for our customers as we continue to grow our business.

The increase resulting from the acceptance of certain and commencement of other warehouse automation systems 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 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.

The increase in operation services and software maintenance and support revenue was a result of additional site operations, software maintenance, and spare parts revenue associated with the addition of new customer sites.

The following table sets forth our gross profit for the years ended September 25, 2021 and September 26, 2020:

September 25, 2021 September 26, 2020 Change

(in thousands)

Systems $ 10,986 $ (8,434) $ 19,420

Software maintenance and support 1,047 (1,067) 2,114

Operation services (1,586) (9,429) 7,843

Total gross profit (loss) $ 10,447 $ (18,930) $ 29,377

For the year ended September 25, 2021, Systems gross profit increased $19.4 million from the previous year-end from $(8.4) million to $11.0 million.

The increase in Systems gross profit resulted from our transition from solely prototype projects incurring losses to selling a commercialized product.

For the year ended September 25, 2021, software maintenance and support gross profit increased $2.1 million from the previous year-end from $(1.1) million to $1.0 million.

The increase in software maintenance and support gross profit is attributable to adding new customers in the current year, while keeping our cost base relatively flat.

For the year ended September 25, 2021, operation services gross profit increased $7.8 million from the previous year-end from $(9.4) million to $(1.6) million.

The increase in operation services gross profit resulted from improved operational efficiency at our customer sites as well as a discontinuation of an operations agreement in fiscal year 2020.

Research and Development Expenses

Year Ended Change

September 25, 2021 September 26, 2020 Amount %

(dollars in thousands)

Research and development $ 73,386 $ 55,861 $ 17,525 31 %

Percentage of total revenue 29 % 61 %

The increase in research and development expenses for the year ended September 25, 2021 compared to the year ended September 26, 2020 was due to the following:

(in thousands)

Employee-related costs $ 19,477

Prototype-related costs, allocated overhead expenses, and other (1,952)

Employee-related costs increased as a result of our year over year 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.

In addition, employee-related costs increased from the previous fiscal year due to an increased expense associated with our unit-based compensation arrangements.

The offset to the increase in employee-related costs was primarily driven by prototype-related costs.

Selling, General, and Administrative Expenses

Year Ended Change

September 25, 2021 September 26, 2020 Amount %

(dollars in thousands)

Selling, general, and administrative $ 59,442 $ 35,586 $ 23,856 67 %

Percentage of total revenue 24 % 39 %

The increase in selling, general, and administrative expenses for the year ended September 25, 2021 compared to the year ended September 26, 2020 was due to the following:

(in thousands)

Employee-related costs $ 19,208

Allocated overhead expenses and other 4,648

Employee-related costs increased as a result of our year over year headcount growth within our selling, general, and administrative functions.

We increased the headcount to our operations staff in order to deliver to our customers our modular inventory management systems in an orderly manner in line with our installation timeline, as well as to our IT organization as we build out our cybersecurity infrastructure.

We also continue to invest in our sales, finance and human resource organizations to support the overall growth of the company.

Additionally, employee-related costs increased from the previous fiscal year due to an increased expense associated with our unit-based compensation arrangements.

Allocated overhead and other expenses increased due primarily to additional audit, tax, and consulting services in support of the Business Combination.

Allocated overhead and other expenses increased due to an increase in hardware and software information technology related costs attributable to the increase in employee headcount year over year as well as an increase attributable to growth of our cybersecurity infrastructure.

For the year ended September 30, 2023, we experienced higher legal and advisor expenses as compared to the year ended September 24, 2022, which is primarily due to the costs associated with the GreenBox transaction.

Other income, net

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Percentage of total revenue 1 % — %

The decrease in other income, net was primarily due to a decrease in interest income as a result of interest rates and dividend income.

Income tax benefit

Other income, net increased due to higher interest earned on invested cash balances and marketable securities as a result of increased interest rates.

For the year ended September 24, 2022, we did not hold any marketable securities as these were acquired during the first quarter of fiscal year 2023.

Year Ended Change

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Income tax benefit $ 4,620 $ — $ 4,620 100 %

An income tax benefit of $47 thousand was recorded for the year ended September 26, 2020 resulting from the calculated benefit for our Canadian jurisdictions.

There was no such benefit or provision calculated for the year ended September 25, 2021.

Non-GAAP Financial Measure

In addition to providing financial measurements based on generally accepted accounting principles in the United States of America, or GAAP, we provide an additional financial metric that is not prepared in accordance with GAAP, or non-GAAP financial measure.

We use this non-GAAP financial measure, 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.

This non-GAAP financial measure is Adjusted EBITDA, as discussed below.

We believe that this non-GAAP financial measure reflects 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 this non-GAAP financial measure enables investors to evaluate our operating results and future prospects in the same manner as we do.

This non-GAAP financial measure may exclude expenses and gains that may be unusual in nature, infrequent, or not reflective of our ongoing operating results.

The non-GAAP financial measure does 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 recorded an income tax benefit for the year ended September 30, 2023, primarily related to the release of $6.1 million of previously established valuation allowances related to domestic and foreign deferred tax assets.

Refer to Note 11, Income Taxes , for further information.

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.

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depreciation and amortization of tangible and intangible assets;

unit and stock-based compensation;

stock-based compensation;

Business Combination transaction expenses;

and other non-recurring items that may arise from time to time.

Joint venture formation fees;

CEO transition charges;

Restructuring;

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 measure, are outlined below:

• Unit and Stock-based compensation – Although unit and 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.

• 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 unit and 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.

• Business Combination transaction expenses – Business Combination transaction expenses represents the expenses incurred solely related to the Business Combination, which we completed on June 7, 2022.

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.

• Business Combination transaction expenses – Business Combination transaction expenses represent the expenses incurred solely related to the Business Combination, which we completed on June 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.

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 peer companies because such amounts vary significantly based on the magnitude of the Business Combination transaction and do not reflect our core operations.

• 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.

• 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 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.

These charges include severance and related expenses for workforce reductions, impairments of 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.

The following table reconciles GAAP net loss to Adjusted EBITDA during the periods presented (in thousands):

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Depreciation and amortization 9,475 5,989 4,491

Unit and Stock-based compensation 40,556 11,736 208

Stock-based compensation 157,023 40,556 11,736

Business combination transaction expenses — 4,069 2,761

Joint venture formation fees 14,900 — —

CEO transition charges 2,026 — —

Restructuring charges 22,899 — —

Adjusted EBITDA $ (17,581) $ (89,762) $ (103,361)

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, 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):

September 30, 2023 September 24, 2022 September 25, 2021

Gross profit $ 189,739 $ 99,647 $ 10,447

Depreciation 639 353 340

Stock-based compensation 6,212 — —

Restructuring charges 19,766 — —

Adjusted gross profit $ 216,356 $ 100,000 $ 10,787

Gross profit margin 16.1 % 16.8 % 4.1 %

Adjusted gross profit margin 18.4 % 16.9 % 4.3 %

Liquidity and Capital Resources

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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 during the periods presented:

September 24, 2022 September 25, 2021 September 26, 2020

September 30, 2023 September 24, 2022

(in thousands)

Net cash provided by (used in):

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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 deferred taxes, net, as well as changes in operating assets and liabilities.

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 or sales of assets, 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 $148.2 million during the year ended September 24, 2022.

Net cash used in operating activities was due to our net loss of $139.1 million adjusted for non-cash items of $37.0 million, primarily consisting of $26.9 million stock-based compensation expense, $6.0 million depreciation and amortization and $4.1 million of losses on abandonment of assets, offset by use of cash for operating assets and liabilities of $46.1 million due to the timing of cash payments to vendors and cash receipts from customers.

Net cash provided by operating activities was $109.6 million during the year ended September 25, 2021.

Net cash provided by operating activities was due to our net loss of $122.3 million adjusted for non-cash items of $4.6 million, primarily consisting of $4.5 million depreciation and amortization and $0.1 million of unit-based compensation, offset by cash provided by operating assets and liabilities of $227.2 million due to the timing of cash payments to vendors and cash receipts from customers.

Net cash provided by operating activities was $230.8 million for the year ended September 30, 2023.

Net cash provided by operating activities was due to our net loss of $(207.9) million adjusted for non-cash items of $186.1 million, primarily consisting of $154.2 million stock-based compensation expense, $11.3 million depreciation and amortization, $22.3 million provision for excess and obsolete inventory, offset by $(4.6) million deferred tax assets, net.

Additionally, sources of cash provided by operating assets and liabilities of $252.6 million due to the timing of cash payments to vendors and cash receipts from customers.

Our cash provided by operating assets and liabilities was primarily attributable to an increase in cash receipts from customers as compared to the timing of costs incurred by us to fulfill the system installation performance obligation resulting from the increase in customer contracts and system installations in process during the current fiscal year.

Net cash used in operating activities was $148.2 million during the year ended September 24, 2022.

Net cash used in operating activities was due to our net loss of $109.5 million adjusted for non-cash items of $5.8 million, primarily consisting of $5.7 million depreciation and amortization and $0.1 million of unit-based compensation, offset by use of cash for operating assets and liabilities of $20.6 million due to the timing of cash payments to vendors and cash receipts from customers.

Net cash used in operating activities was due to our net loss of $139.1 million adjusted for non-cash items of $38.0 million, primarily consisting of $26.9 million stock-based compensation expense, $6.0 million depreciation and amortization and $4.1 million of losses on disposal of assets, offset by use of cash for operating assets and liabilities of $47.1 million due to the timing of cash payments to vendors and cash receipts from customers.

Investing Activities

Our investing activities have consisted primarily of property and equipment purchases.

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 used in investing activities during the year ended September 30, 2023 consisted of $15.7 million of purchased property and equipment.

Net cash and cash equivalents used in investing activities during the year ended September 25, 2021 consisted primarily of $12.2 million of purchased property and equipment.

Additionally, during the year ended September 30, 2023, we purchased U.S.

Treasury securities for $408.2 million, and received proceeds of $130.0 million upon the maturity of certain U.S.

Treasury securities.

We also capitalized $5.6 million of internal use software development costs related to internal projects which are targeted to improve the capabilities of our warehouse automation system software.

Net cash and cash equivalents used in investing activities during the year ended September 24, 2022 consisted of $18.0 million of purchased property and equipment.

Financing Activities

Our financing activities have consisted of Class B-1 Preferred Unit member contributions as well as proceeds from the exercise of the vested warrants issued to Walmart as further described in Note 17, Stock-Based Compensation and Warrant Units to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, 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 consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

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 the Symbotic Founder Common Units in New Symbotic Holdings for $300.0 million.

During the year ended September 24, 2022, Walmart gross exercised the 714,022 vested warrant units for Legacy Warehouse Class A Units for a total of $277.8 million.

Our financing activities have consisted of payments and proceeds related to our equity incentive plans for both RSUs and ESPP, as well as proceeds from the exercise of the vested warrants issued to Walmart and the equity infusion from our Business Combination, offset by the purchase of interest from the noncontrolling interest.

For the year ended September 30, 2023, we incurred a payment of $26.7 million for the taxes related to the net share settlement of stock-based compensation awards.

We also received proceeds of $2.6 million from the issuance of common

stock under the ESPP upon the expiration of the first two offering periods at the end of December 2022 and June 2023, respectively.

In connection with the Business Combination, for the year ended September 24, 2022 we received net proceeds of $384.7 million, and purchased Common Units in New Symbotic Holdings from an affiliated entity of the Symbotic Founder for $300.0 million.

Additionally, during the year ended September 24, 2022, Walmart gross exercised their 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 of Legacy Warehouse Class A Common Units were issued to Walmart.

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Class V-1 Common Stock.

There were no such transactions which generated cash flows from financing activities for the year ended September 25, 2021.

For the year ended September 26, 2020, cash and cash equivalents provided by financing activities consisted of $100.0 million of Class B-1 Preferred Unit member contributions.

Contractual Obligations and Commitments and Liquidity Outlook

We have historically 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 $353.5 million as of September 24, 2022.

Our cash requirements for the year ended September 24, 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.

Based on our present business plan, we expect our current cash and cash equivalents 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 cash flows from operations along with equity infusions have historically been sufficient to fund our operating activities and other cash requirements.

As of September 30, 2023, we have a cash and cash equivalents balance of $258.8 million and short-term available for sale marketable securities balance of $286.7 million.

Our cash requirements for the year ended September 30, 2023 were primarily related to capital expenditures, inventory purchases in order to deliver to our customers our warehouse automation systems in an orderly manner in line with our installation timeline, and purchases of marketable securities in order to diversify the composition of our cash balance.

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.

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 24, 2022, and are disclosed within Note 6, Leases , included elsewhere in this Annual Report on Form 10-K.

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.

The following table summarizes our current and long-term material cash requirements as of September 24, 2022:

The following table summarizes our current and long-term material cash requirements as of September 30, 2023 for our vendor commitments:

Payments due in:

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(in thousands)

Operating lease obligations $ 7,230 $ 2,301 $ 4,372 $ 557 $ —

Vendor commitments $ 1,159,595 $ 1,137,100 $ 22,261 $ 234 $ —

Total $ 764,183 $ 728,167 $ 35,459 $ 557 $ —

Critical Accounting Policies and Estimates

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We rely on either observable standalone sales or an expected cost plus a margin approach to determine the standalone selling price of offerings, depending on the nature of the performance obligation.

As we further discuss in Note 2, Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K, for contracts with customers entered into during fiscal year 2022 and 2021, revenue from the sales of our Systems is recognized over time as the asset created by our performance does not have alternative use to us and an enforceable right to payment for performance completed to date is present.

As we further discuss in Note 2, Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K, for the majority of contracts with customers entered into, revenue from the sales of our Systems is recognized over time as the asset created by our performance does not have alternative use to us and an enforceable right to payment for performance completed to date is present.

We recognize revenue as work progresses, using costs incurred to date relative to total estimated costs at completion.

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Due to the nature of the work required to be performed on the Systems and our reliance on the availability and cost of materials required to be procured from third party vendors to build our Systems, the estimation of total revenue and cost at completion is complex, subject to many variables, and requires significant judgment on a contract-by-contract basis.

As part of this process, we review information including, but not limited to, any outstanding key contract matters, progress towards

completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenue and costs.

As part of this process, we review information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenue and costs.

The risks and opportunities relate to our judgment about the installation delays or performance issues that may or may not be within our control.

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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 Class B 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 Class C 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).

We typically issue restricted stock units (“RSUs”) as stock-based compensation.

For RSUs, the fair value is the closing market price of the stock on the date immediately preceding the grant.

For RSUs, the fair value is the closing stock price on the grant date.

We recognize compensation expense over the requisite service period for awards expected to vest.

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As there was no public market for our common units prior to the Business Combination, the estimated fair value of our Class C Units had been determined based on enterprise valuations performed by management with the assistance of a third-party valuation firm.

Equity Securities Issued as Compensation (the “Practice Guide”), which prescribes several valuation approaches for determining the value of an enterprise, such as the cost, market, and income approaches, and various methodologies for allocating the value of an enterprise to its capital structure and specifically the common stock.

The third-party valuations of the Company’s common units were prepared in accordance with the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the “Practice Guide”), which prescribes several valuation approaches for determining the value of an enterprise, such as the cost, market, and income approaches, and various methodologies for allocating the value of an enterprise to its capital structure and specifically the common stock.

In accordance with the Practice Guide, the following methods of valuation were considered:

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an IPO and a non-IPO scenario accounting for all other potential future exits.

Under both scenarios, the enterprise value was determined using a combination of the income approach, specifically a discounted cash flow analysis, and the market approach, specifically the similar transactions method and public company market multiple method.

Under both scenarios, the enterprise value was

determined using a combination of the income approach, specifically a discounted cash flow analysis, and the market approach, specifically the similar transactions method and public company market multiple method.

The relative probabilities between the future exit scenarios were based on an analysis of performance and market conditions at the time, including then-current IPO valuations of similarly situated companies and expectations as to the timing and likely prospects of future event scenarios.

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Warrants to purchase Class A Units may be accounted for as either liability or equity instruments depending on the terms of the warrant agreements.

The warrants issued by us are accounted for as equity instruments due to our ability to settle the

warrants through the issuance of units and the absence of terms which would require liability classification, including the rights of the grantee to require cash settlement.

The warrants issued by us are accounted for as equity instruments due to our ability to settle the warrants through the issuance of units and the absence of terms which would require liability classification, including the rights of the grantee to require cash settlement.

We classify these equity instruments within additional paid-in capital on the consolidated balance sheets.

Warrants to purchase units accounted for as equity instruments represent the warrants issued to Walmart as discussed in Note 17, Stock -Based Compensation and Warrant Units .

Warrants to purchase units accounted for as equity instruments represent the warrants issued to Walmart and Sunlight as discussed in Note 19, Stock -Based Compensation and Warrant Units .

As of September 27, 2020, we adopted FASB Accounting Standards Update 2019-08, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606) (“ASU 2019-08”), which requires entities to measure and classify share-based payment awards granted to a customer by applying the guidance under Topic 718.

In order to calculate warrant charges, we used the Black-Scholes pricing model, which required key inputs including volatility and risk-free interest rate and certain unobservable inputs for which there is little or no market data, requiring us to develop our own assumptions.

In order to calculate warrant charges, we utilized both the Monte Carlo simulation model and the Black-Scholes pricing model, which required key inputs including volatility and risk-free interest rate and certain unobservable inputs for which there is little or no market data, requiring us to develop our own assumptions.

We estimated the fair value of unvested warrants, considered to be probable of vesting, at the time.

Based on that estimated fair value, we determined warrant charges, which were recorded as a reduction of the transaction price.

Based on that estimated fair value, we determined warrant charges, which are recorded as a reduction of the transaction price.

We account for income taxes in accordance with ASC 740, “Accounting for Income Taxes” (“ASC 740”), using the asset and liability method.

Deferred income taxes are provided on temporary differences between the financial reporting and tax bases of its assets and liabilities.

Such net tax effects of temporary differences are reflected on our Consolidated Balance Sheets as deferred tax assets and liabilities and are measured by applying the enacted tax rates in effect for the year in which the temporary differences are expected to reverse.

Deferred tax assets are reduced by a valuation allowance when we believe that it is more-likely- than-not that some portion or all of the deferred tax assets will not be realized.

In accordance with ASC 740 we assess whether it is more likely than not that some or all of our deferred tax assets will not be realized.

Significant judgment is required in estimating valuation allowances for deferred tax assets.

The realization of a deferred tax asset ultimately depends on the existence of sufficient taxable income in the applicable carryback or carryforward periods.

We consider the nature, frequency, and severity of current and cumulative losses as well as the reversal of existing deferred tax liabilities, historical and forecasted taxable income (exclusive of reversing temporary differences and carryforwards) in our assessment.

In evaluating such projections, we consider our history of profitability and cumulative earnings/losses, the competitive environment, and general economic conditions.

In addition, we consider the time frame over which it would take to utilize the deferred tax assets prior

to their expiration.

To the extent we determine that, based on the weight of available evidence, all or a portion of our valuation allowance is no longer necessary, we will recognize the change in the period such determination occurs.

It is possible that such change to our valuation allowance could have a material impact on our consolidated results of operations and/or financial position.

Changes in existing tax laws or rates could affect our actual tax results, and future business results may affect the amount of our deferred tax liabilities or the valuation of our deferred tax assets over time.

Due to uncertainties in the estimation process, particularly with respect to changes in facts and circumstances in future reporting periods, it is possible that actual results could differ from the estimates used in previous analyses.

Differences between the anticipated and actual outcomes of these future results could have a material impact on our consolidated results of operations and/or financial position.

ASC 740 prescribes a two-step approach for the recognition and measurement of tax benefits associated with the positions taken or expected to be taken in a tax return that affect amounts reported in the financial statements.

We have reviewed and will continue to review the conclusions reached regarding uncertain tax positions, which may be subject to review and adjustment at a later date based on ongoing analyses of tax laws, regulations and interpretations thereof.

To the extent that our assessment of the conclusions reached regarding uncertain tax positions changes as a result of the evaluation of new information, such change in estimate will be recorded in the period in which such determination is made.

We report income tax-related interest and penalties relating to uncertain tax positions, if applicable, as a component of income tax expense.

Tax Receivable Agreement

We entered into the TRA with Legacy Warehouse Holders that provides for the payment by the Company to the Legacy Warehouse Holders of 85% of the benefits, if any, that the Company realizes, or is deemed to realize (calculated using certain assumptions), as a result of (i) the existing tax basis in certain assets of New Symbotic Holdings that is allocable to the relevant New Symbotic Holdings Common Units, (ii) any step-up in tax basis in New Symbotic Holdings’ assets resulting from the relevant Exchanges and certain distributions (if any) by New Symbotic Holdings and payments under the Tax Receivable Agreement, and (iii) tax benefits related to imputed interest deemed to be paid by us as a result of payments under the Tax Receivable Agreement.

We record liabilities for amounts payable under the TRA in the period in which the payment is deemed to be probable.

Payments made under the TRA represent payments that otherwise would have been made to taxing authorities in the absence of attributes obtained by us as a result of exchanges by the Legacy Warehouse Holders.

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 we are able to utilize certain tax benefits to reduce our cash taxes paid to a taxing authority.

Amounts payable under the TRA are contingent upon, among other things, the generation of future taxable income.

The projection of future taxable income involves significant judgment.

In projecting future taxable income, we consider our historical results and incorporate certain assumptions including the growth rate of the Company and the amount, character, and timing of the taxable income in the future.

Actual taxable income may differ from our estimates, which could significantly impact the liability under the TRA.

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 before taxes on the Consolidated Statements of Operations in the period in which the change occurs.

Off-Balance Sheet Arrangements:

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What changed 10-K

Item 7. Management’s Discussion and Analysis