Shares of Symbotic (SYM 4.80%), which makes artificial intelligence (AI)-enabled robotics technology for supply chains, plunged 23.5% on Tuesday, following the company's release on the prior afternoon of its report for the third quarter of fiscal 2024 (ended June 29).
The stock sell-off was largely due to revenue guidance for fiscal Q4 falling considerably short of Wall Street's expectation.
Another contributing factor was likely fiscal Q3's earnings missing the analyst-consensus estimate. On the positive side, the quarter's revenue sped by Wall Street's expectation.
Symbotic's key numbers
| Metric | Fiscal Q3 2023 | Fiscal Q3 2024 | Change* |
|---|---|---|---|
| Revenue | $311.8 million | $491.9 million | 58% |
| GAAP operating income | ($42.0 million) | ($25.2 million) | Loss narrowed 40% |
| GAAP net income | ($39.1 million) | ($14.2 million) | Loss narrowed 64% |
| GAAP earnings per share (EPS) | ($0.07) | ($0.02) | Loss narrowed 71% |
Data source: Symbotic. GAAP = generally accepted accounting principles. Fiscal Q3 2024 ended June 29, 2024. *Calculations by author.
During the quarter, the company started five system deployments and completed three operational systems.
Revenue breakdown was as follows:
- Systems revenue jumped 56% year over year to $472.1 million, accounting for 96% of total revenue.
- Software maintenance and support revenue surged 101% to $3.5 million.
- Operations services revenue soared 110% to $16.2 million.
Wall Street was looking for earnings per share (EPS) of $0.03 on revenue of $464.6 million, so Symbotic missed the bottom-line expectation and easily exceeded the top-line one. The company also surpassed its own revenue outlook, which was $450 million to $470 million.
In fiscal Q3, Symbotic generated cash of $50.4 million running its operations, down 8% from the year-ago period but up 39% from the prior quarter (fiscal Q2 2024). It ended the quarter with cash, cash equivalents, and short-term investments of $870 million, down 9% from the prior quarter. The company has no long-term debt.
NASDAQ: SYM
Key Data Points
What the CEO had to say
Here's most of CEO Rick Cohen's statement in the earnings release:
During the quarter, we extended the future capabilities of SymBot by incorporating an enhanced sensor array and we advanced development of our new minibot for BreakPack. Our teams continue to focus on execution of the 39 systems we have in deployment, which is reflected in our record revenue for the quarter. Our system gross margin fell below expectations due to elongated construction schedules and implementation costs. We are focused on improving our planning, speed of implementation and project management to improve performance. [Emphasis mine.]
The bolded sentence addresses the main reason the company's bottom-line result missed Wall Street's expectation.
Fiscal Q4 guidance
For the fourth quarter of fiscal 2024, Symbotic guided for the following:
- Revenue of $455 million to $475 million, which implies growth of 16% to 21% year over year.
- Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $28 million to $32 million, which implies growth of 111% to 141% year over year.
Going into the release, Wall Street had been modeling for fiscal Q4 revenue of $516.8 million, or 32% growth, so Symbotic's outlook fell far short of this expectation.
In the earnings release, CFO Carol Hibbard commented on the expected deceleration of revenue growth: "[I]mproving our deployment process may temporarily slow our revenue growth. However, we expect system costs to decline and gross margin to return to historical levels during our fourth fiscal quarter."
A stock worth watching
Symbotic stock is worth watching, but I would not call it a "buy" at this point. My previous summation of the need to be cautious bears repeating:
The company operates in an artificial intelligence space that has good long-term growth potential. It has a solid balance sheet and it's been turning in robust quarterly earnings reports. ... However, there's one factor that makes the stock highly risky: The company has a sky-high customer concentration. In fiscal 2023, ended in late September, Walmart accounted for 88% of its total revenue.
