Symbotic Stock Plunges 19% Despite Earnings Beating and Revenue Meeting Wall Street’s Estimates

Shares of Symbotic (NASDAQ: SYM), which makes artificial intelligence (AI)-enabled robotics technology for supply chains, dropped 18.7% in Monday’s after-hours trading following the company’s release of its report for the first quarter of fiscal 2024 (ended Dec. 30, 2023).

This sell-off was likely largely due to the quarter’s revenue “only” meeting Wall Street’s consensus estimate, rather than beating it, even though revenue growth was strong. Investors have bid Symbotic stock up considerably over the last year (it’s up 226% over the one-year period through Monday’s regular trading session), so have very high expectations for its results.

Some investors probably also didn’t like that the quarter’s operating cash flow was negative, compared with positive in the prior and year-ago quarters. That said, investors don’t usually punish stocks in such situations — or at least not by much — because operating cash flows are often lumpy from quarter to quarter for small companies.

On the positive side, the quarter’s earnings topped Wall Street’s projection, as did the midpoint of the company’s revenue guidance for the fiscal second quarter.

Symbotic’s key numbers

Metric

Fiscal Q1 2023

Fiscal Q1 2024

Change

Revenue

$206.3 million

$368.5 million

79%

GAAP operating income

($69.6 million)

($19.0 million)

Loss narrowed 266%

GAAP net income

($68.0 million)

($13.0 million)

Loss narrowed 423%

GAAP earnings per share (EPS)

($0.12)

($0.02)

Loss narrowed 500%

Data source: Symbotic. GAAP = generally accepted accounting principles.

Revenue breakdown was as follows:

  • Systems revenue surged 80% year over year to $356.2 million, accounting for 97% of total revenue.

  • Software maintenance and support revenue jumped 79% to $2.2 million.

  • Operations services revenue grew 40% to $10.1 million.

Wall Street was looking for a loss per share of $0.06 on revenue of $368.9 million, so Symbotic easily exceeded the bottom-line expectation and essentially hit the top-line one on target. Revenue also came in at the high end of the company’s own guidance of $350 million to $370 million.

In fiscal Q1, Symbotic used cash of $30.2 million running its operations, compared with generating cash of $101.1 million in the year-ago period and $44.5 million in the prior quarter (Q4 2023). It ended the quarter with cash, cash equivalents, and short-term investments of $675 million, up 24% from $546 million in the prior quarter.

What management had to say

Below is CFO Carol Hibbard’s statement from the earnings release. Fiscal Q1 was the first quarter reported under Hibbard, who joined Symbotic as CFO at the start of calendar year 2024. She came to the company from Boeing where she served as senior V.P. and Corporate Controller.

First quarter 2024 revenue grew nearly 80% compared to the same period a year ago and we posted our second quarter of positive adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization]. We initiated five system deployments and completed three systems during the first quarter as we delivered for our customers with a focus on excellence and speed of deployment.

As for adjusted EBITDA, it was $14.1 million in the just-reported quarter (which beat the company’s guidance of $11 million to $14 million), and negative $16.3 million in the year-ago period. The prior quarter (Q4 2023) was the first time since the company went public (June 2022) that it posted a positive result for this profitability metric. That result was $13.3 million.

Fiscal Q2 2024 guidance

For the second quarter of fiscal 2024, management guided for revenue of $400 million to $420 million. This outlook implies growth of 50% to 57% year over year and, at the midpoint, is higher than the $403.3 million Wall Street had been expecting.

Management also guided for Q2 adjusted EBITDA of $12 million to $15 million. This metric was negative $11.2 million in the year-ago period.

A stock worth watching, but beware the high customer concentration

Overall, Symbotic posted another strong quarter, though investors should monitor operating cash flow, which turned negative in the just-reported quarter.

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. These traits make its stock worth watching.

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, according to its 2023 annual report filed with the Securities and Exchange Commission (SEC). Reiterating my conclusion from last quarter:

Eventually, the bulk of this Walmart contractual work [at 42 regional distribution centers] will be behind Symbotic. All but the most risk-tolerant investors should wait to see if Symbotic has success attracting an array of other sizable customers before considering buying its shares.

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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool has a disclosure policy.

Symbotic Stock Plunges 19% Despite Earnings Beating and Revenue Meeting Wall Street’s Estimates was originally published by The Motley Fool