The following discussion and analysis provide information which we believe is relevant to an assessment and understanding of our audited consolidated results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. For a complete discussion of forward-looking statements, see the section in this report entitled "Forward-Looking Statements." Certain risk factors may cause our actual results, performance or achievements to differ materially from those expressed or implied by the following discussion. For a discussion of such risk factors, see the sections in this report entitled "Risk Factors" and "Forward-Looking Statements."
Business Overview
We are an Intelligent Enterprise Robotics ("IER") company pioneering and delivering transformative AI-enabled robotic solutions that automate filling ecommerce orders for consumers or businesses, filling orders to resupply retail and grocery stores, and handling packages shipped to fill those orders. Our solutions transform supply chain operations and enable our customers to meet and exceed the demands of today's connected consumers and businesses.
Our IER capabilities are grounded in patented and proprietary technologies for
robotic picking (each picking or unit handling), robotic movement and mobility
(movement and storage of orders and goods), and system orchestration (which
enables various intelligent subsystems to work together so that the right work
is being done at the right time to meet our customer's needs). We are a
technology leader in robotics and AI automation with an intellectual property
position buttressed by trade secrets supporting our technologies, and patents
issued (198
We are not a component technology company nor are we a conventional systems integrator. Instead, we create products from the technologies we pioneer and develop, and then incorporate the products (product modules) into solutions - solutions that incorporate said modules and are designed by us to meet customer performance metrics like throughput and accuracy rates. We believe that this technology plus performant, whole-enterprise solution view, enables customers to focus on the core of their business and creates attractive returns for them. Following the whole-enterprise solution view, we not only make, install, test, and commission the solutions, but we also offer customers continued support in the form of software updates as well as professional services including maintenance, system operation, and cloud-based monitoring and analytics. Because of our modular approach to solutions and the role of our software, we offer customers the ability to incrementally add to or change solutions, and we can incorporate outside technologies with our product modules if desired. The same modular attributes mean we can offer small and large solutions and can design for brownfield and greenfield installations. We offer customers a range of purchase options including a robotics-as-a-service ("RaaS") program that minimizes the up-front capital required when compared to conventional equipment purchase models.
To date, most of our deployments have been with large, Fortune 50 companies, where our technology and solutions in production have achieved targeted metrics including throughput, accuracy, equipment effectiveness, and others. Our customers include industry-leading companies such as Wal-Mart Stores, Inc. ("Wal-Mart"), Target Corporation ("Target"), FedEx Corporation ("FedEx"), and TJX Companies, Inc. ("TJX").
For the years ended
While we have more than a dozen product module offerings incorporating AI and
other advanced technologies, we continue to develop new technologies and product
modules. The strength of our team enables this continuous development - of our
approximately 280 employees as of
Recent Developments
On
42
--------------------------------------------------------------------------------
merge with and into the Company and the Company will become a wholly-owned
subsidiary of SoftBank. Upon the merger closing (the "Effective Time"), each
share of the Class A Common Stock, par value
The merger is conditioned upon, among other things, the approval of the merger agreement by the affirmative vote of holders of at least a majority of all outstanding shares of Company Common Stock, voting together as a single class, at a meeting of the Company's stockholders held for such purpose, the expiration of the applicable waiting period, certain other approvals, clearances or expirations of waiting periods under other antitrust laws and foreign investment screening laws, and other customary closing conditions. The closing of the merger is not subject to a financing condition.
SoftBank, through a wholly-owned subsidiary, has also agreed to provide
financing to the Company while the merger transaction is pending through the
purchase of up to
COVID-19
The full impact of the ongoing COVID-19 pandemic on our business, financial condition and results of operations remains unpredictable due to the evolving nature of the COVID-19 pandemic and the extent of its impact across industries and geographies and numerous other uncertainties. To date, the pandemic has not significantly impacted our financial condition and operations. The impact of the COVID-19 pandemic on our financial performance will depend on future developments, including the duration and spread of the outbreak and any new related governmental advisories and restrictions. These developments and the impact of the COVID-19 pandemic on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, our results may be materially adversely affected.
Critical Accounting Policies and Significant Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles in
43
--------------------------------------------------------------------------------
Revenue Recognition
We primarily derive revenues from the sale of our AI-enabled robotics and
automation solutions, which consist of a network of automated machinery
installed at the customer location and configured to meet specified performance
requirements. Revenue is recognized when control of the promised products is
transferred to the customer, or when services are satisfied under the contract,
in an amount that reflects the consideration
Our customer contracts typically have multiple performance obligations. Judgment is required to determine whether performance obligations specified in these contracts are distinct and should be accounted for as separate revenue transactions for recognition purposes. We also provide assurance-based warranties that are not considered a distinct performance obligation. We allocate the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices ("SSP") of the promised goods or services underlying each performance obligation.
We began generating revenue from the sale of systems in 2018. Due to the nature of the work required to be performed on many of the Company's performance obligations, estimating the SSPs is complex, subject to many variables and requires significant judgment. We use a cost plus margin approach to determine the SSP for separate performance obligations. Expected margins may vary based on the complexity of the underlying equipment and technologies. Our determination of SSP may change in the future as standalone sales of solutions and services occur, providing observable prices.
Each customer contract is evaluated individually to determine the appropriate
pattern of revenue recognition. The majority of our revenues is from the sale of
systems which are delivered and installed by our deployment teams. Revenue
recognition for these contracts begins upon delivery and continues throughout
the installation and implementation period.
Stock-Based Compensation
We measure stock-based awards granted to employees, directors and non-employees based on their fair value on the date of the grant and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. Forfeitures are accounted for as they occur. We grant stock options, restricted stock awards, and restricted stock units that are subject to service and/or performance-based vesting conditions. Compensation expense related to awards to employees and non-employees with performance-based vesting conditions is recognized based on the grant date fair value over the requisite service period using the accelerated attribution method to the extent achievement of the performance condition is probable. We estimate the probability that certain performance criteria will be met and do not recognize compensation expense until it is probable that the performance-based vesting condition will be achieved.
We classify stock-based compensation expense in the statements of operations and comprehensive loss in the same way the payroll costs or service payments are classified for the related stock-based award recipient.
We estimate the fair value of each stock option using the Black-Scholes option pricing model, which requires the input of highly subjective assumptions, including (i) the expected volatility of our stock, (ii) the expected term of the award, (iii) the risk-free interest rate, (iv) expected dividends, and (v) the fair value of our common stock.
A complete discussion of stock-based compensation expense, including cost components and amounts, is more fully described in the accompanying notes to the consolidated financial statements in this Annual Report on Form 10-K.
FedEx Warrant
We account for the warrant issued to
44
--------------------------------------------------------------------------------
Summary of Recent Financial Performance
Revenue was
Gross loss improved from an
Combined general and administrative, selling and marketing, and research and
development expenses in 2022 decreased to
Net losses were
Results of Operations
The following is a description of significant components of our operations, including significant trends and uncertainties that we believe are important to an understanding of our business and results of operations.
Comparison of the Year Ended
Revenue
In 2022 and 2021, we generated revenue through the sale, delivery and,
installation of customer contracts in
For the Years Ended Change in December 31, Revenue (Dollars in thousands) 2022 2021 $ % Revenue$ 65,850 $ 50,852 $ 14,998 29 %
Revenue was
Revenue for the years ended
Cost of Revenue
The following table presents cost of revenue as well as the change from the prior period. For the Years Ended Change in December 31, Cost of Revenue (Dollars in thousands) 2022 2021 $ % Cost of Revenue$ 71,118 $ 59,099 $ 12,019 20 %
Cost of revenue includes the cost of components and other materials that
comprise the products we deploy, the cost of labor, and overhead. Total cost of
revenue during the years ended
45
--------------------------------------------------------------------------------
Gross Profit and Gross Margin
The following table presents gross profit as well as the change from the prior period. For the Years Ended Change in December 31, Gross Loss (Dollars in thousands) 2022 2021 $ % Gross Loss$ (5,268 ) $ (8,247 ) $ 2,979 -36 %
Total gross losses during the years ended
The following table presents gross margin as well as the change from the prior period. For the Years Ended December 31, Change in 2022 2021 Gross Margin Gross Margin (8 )% (16 )% 8 %
Total gross margin was approximately (8)% for 2022 compared with total gross margin of (16)% for 2021, a decrease of 8% . Gross margins may fluctuate significantly based on actual volumes realized in any given reporting period. By scaling our revenues, we expect to be able to lower our solution costs through increased volumes with our contract manufacturers. Additionally, we believe that scaling our revenues allows us to leverage other overhead costs, contributing towards improving overall gross margins, which was the main driver of the improvement in the current year.
General and Administrative
The following table presents general and administrative expenses as well as the change from the prior period.
For the Years Ended Change in December 31, Expenses (Dollars in thousands) 2022 2021 $ % General and Administrative$ 22,491 $ 40,313 $ (17,822 ) -44 % % of Operating Expenses 21 % 26 %
General and administrative expenses during the years ended
Sales and Marketing
The following table presents sales and marketing expenses as well as the change from the prior period. For the Years Ended Change in December 31, Expenses (Dollars in thousands) 2022 2021 $ % Sales and Marketing$ 13,503 $ 51,960 $ (38,457 ) -74 % % of Operating Expenses 12 % 33 %
Sales and marketing expenses during the years ended
46
--------------------------------------------------------------------------------
Research and Development
The following table presents research and development expenses as well as the change from the prior period.
For the Years Ended Change in December 31, Expenses (Dollars in thousands) 2022 2021 $ % Research and Development$ 72,580 $ 63,819 $ 8,761 14 % % of Operating Expenses 67 % 41 %
Research and development expenses related to conceptual formulation and design
of products and processes consist primarily of salaries and related costs for
our engineers, contractors and consulting expenses, costs of components and
products, and occupancy and other overhead costs. Research and development
expenses during the years ended
Interest Income
The following table presents interest income as well as the change from the prior period. For the Years Ended Change in December 31, Interest Income (Dollars in thousands) 2022 2021 $ % Interest Income$ 163 $ 32 $ 131 409 %
Interest income during the years ended
Other Income
The following table presents other income as well as the change from the prior period. For the Years Ended Change in December 31, Other Expense (Dollars in thousands) 2022 2021 $ % Other (expense)$ (1,398 ) $ (76 ) $ (1,322 ) 1739 %
Other expense during the years ended
Income Taxes
During the years ended
We have provided a valuation allowance for all our net deferred tax assets as a result of our historical net losses in the jurisdictions in which we operate. We continue to assess our future taxable income by jurisdiction based on our recent historical operating results, the expected timing of reversal of temporary differences, various tax planning strategies that we may be able to enact in future periods, the impact of potential operating changes on our business and our forecast results from operations in future periods based on available information at the end of each reporting period. To the extent that we are able to reach the conclusion that deferred tax assets are realizable based on any combination of the above factors in a single, or multiple, taxing jurisdictions, a reversal of the related portion of our existing valuation allowances may occur.
47
--------------------------------------------------------------------------------
Non-GAAP Financial Information
In addition to our results determined in accordance with GAAP, we believe that EBITDA and Adjusted EBITDA, each non-GAAP financial measures, are useful in evaluating our operational performance. We use this non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial information, when taken collectively, may be helpful to investors in assessing our operating performance.
We define "EBITDA" as net loss plus interest income, income tax expense, depreciation and amortization expense.
We define "Adjusted EBITDA" as EBITDA adjusted for stock-based compensation, provision for the FedEx warrant, the change in fair value of warrant liabilities, and other expenses.
We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends because it eliminates the effect of financing, capital expenditures, and non-cash expenses (such as stock-based compensation, stock-based sales incentive charges, and changes of the warrant liabilities) and provides investors with a means to compare our financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, you should be aware that when evaluating EBITDA and Adjusted EBITDA we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of these measures may not be comparable to other similarly titled measures computed by other companies because not all companies calculate these measures in the same fashion.
Because of these limitations, EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA on a supplemental basis. You should review the reconciliation of net loss to EBITDA and Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.
The following table reconciles net loss to EBITDA and Adjusted EBITDA during the years presented. For the Years Ended December 31, (Dollars in thousands) 2022 2021 Net loss$ (102,794 ) $ (153,380 ) Interest income, net (163 ) (32 ) Income tax expense 108 58 Depreciation and amortization 3,385 2,745 EBITDA (99,464 ) (150,609 ) Stock-based compensation 1,434 49,843 Change in fair value of warrant liabilities (12,391 ) (11,061 ) FedEx warrant provision 3,574 - Other (expense) 1,398 76 Adjusted EBITDA$ (105,449 ) $ (111,751 ) Backlog
Our order backlog as of
Liquidity, Capital Resources, and Going Concern
Sources of Liquidity, Capital, Capital Requirements, and Going Concern
We have incurred a net loss in each of our annual periods since our inception.
We incurred net losses of
48
--------------------------------------------------------------------------------
inception through
As of
If we are unable to raise additional capital as and when needed, or upon
acceptable terms, such failure would have a significant negative impact on our
financial condition. As a result of these conditions, management has concluded
that there is substantial doubt about our ability to continue as a going
concern. The Company's independent registered public accounting firm, in its
report on the Company's consolidated financial statements for the year ended
Our lease portfolio includes leased offices and facilities. As of
Operating Leases Years Ending December 31, (in thousands) 2023 $ 1,462 2024 1,504 2025 1,473 2026 1,287 2027 1,326 Thereafter 4,465
Total future operating lease payments $ 11,517 Less: imputed interest
(1,878 )
Total operating lease liabilities $ 9,639
Cash Flows
The following table summarizes our cash flows during the years presented.
For the Years Ended December 31, (Dollars in thousands) 2022 2021 Net cash used in operating activities$ (110,926 ) $ (114,058 ) Net cash used in investing activities (3,132 ) (4,069 ) Net cash provided by financing activities 7,734 195,191 Effect of exchange rate on cash (51 ) (91 ) Net (decrease) increase in cash, cash equivalents and restricted cash$ (106,375 ) $ 76,973
Cash Flows for the Years ended
Operating Activities
Net cash used in operating activities during the year ended
Net cash used in operating activities during the year ended
49
--------------------------------------------------------------------------------
Cash used from changes in net operating assets and liabilities increased by
Investing Activities
Net cash used in investing activities for the years ended
Financing Activities
Net cash provided by financing activities during the years ended
Long-Term Indebtedness
As of
50
--------------------------------------------------------------------------------
© Edgar Online, source