Shares of Symbotic (SYM -0.11%), which makes artificial intelligence (AI)-enabled robotics technology for supply chains, soared 21.5% in Monday’s after-hours trading following the company’s release of its report for the fourth quarter of fiscal 2023 (which ended Sept. 30).

Investors’ delight is attributable to the quarter’s revenue and earnings exceeding Wall Street’s expectations, with the top-line beat a huge one, along with revenue guidance for the first quarter of fiscal 2024 coming in higher than the analyst consensus estimate.

Symbotic might be a new name for some investors. The company’s stock only began trading in June 2022, after it went public via a reverse merger with a special purpose acquisition company (SPAC).

Symbotic’s key numbers

Fiscal Q4 2022
Fiscal Q4 2023
$244.4 million
$391.9 million
GAAP operating income
($54.3 million)
($53.9 million)
Loss narrowed 1%
GAAP net income
($53.3 million)
($45.4 million)
Loss narrowed 15%
GAAP earnings per share (EPS)
Loss narrowed 20%

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

Revenue breakdown was as follows:

Systems revenue jumped 60% year over year to $380.2 million, accounting for 97% of total revenue.
Software maintenance and support revenue increased 129% to $2.1 million.
Operations services revenue grew 65% to $9.5 million.

Wall Street was looking for a loss per share of $0.12 on revenue of $306.9 million, so Symbotic comfortably beat the bottom-line expectation and crushed the top-line one.

In Q4, Symbotic generated cash of $44.5 million running its operations, a big improvement from using cash of $51.5 million in the year-ago period. It ended the quarter with cash, cash equivalents, and short-term investments of $548 million, up from $513 million in the prior quarter.

What management had to say

Here’s CFO Tom Ernst’s statement from the earnings release:

We are pleased to report another quarter of strong revenue growth and margins, as we initiated four new system deployments and completed commissioning of two systems. We also accelerated the pace of system deployments. We are excited to be reporting our first quarter of positive adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization] which demonstrates the strong operating leverage of our business.

As for adjusted EBITDA, it was $13.3 million in the just-reported quarter and negative $20.5 million in the prior year’s quarter.

Fiscal Q1 2024 guidance

For the first quarter of fiscal 2024, management guided for revenue of $350 million to $370 million. This outlook implies growth of 70% to 79% year over year, and is higher than the $348.6 million Wall Street had been expecting.

Management also expects Q1 adjusted EBITDA of $11 million to $14 million. The company’s adjusted EBITDA was negative $16.3 million in the year-ago period.

A stock worth watching

Symbotic turned in a strong quarter. The company operates in an artificial intelligence space that has good long-term growth potential. Its robust revenue growth, positive operating cash flow, and hardy balance sheet make its stock worth watching.

That said, Symbotic stock has one big risk investors should know about: extremely high customer concentration. In its third-quarter 10-Q filing with the Securities and Exchange Commission (SEC), it stated that one customer accounted for 89% of its revenue in that quarter and 87% of its revenue in the first nine months of fiscal 2024. (The company hasn’t yet filed its annual report for fiscal 2024.) It’s safe to assume the customer is Walmart, as Symbotic has a contract with the retailing behemoth to automate its 42 regional distribution centers.

Eventually, the bulk of this Walmart contractual work 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.

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.

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