Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report, and the consolidated financial statements and accompanying notes, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2022.
Unless otherwise indicated or the context otherwise requires, references in this report to “Berkshire Grey,” “we,” “us,” “our,” ”the Company” and other similar terms refer to Berkshire Grey, Inc. and its consolidated subsidiaries.
Cautionary Note Regarding Forward-Looking Statements
In addition to historical financial information, this Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical fact contained herein, including statements regarding our future results of operations and financial position, the proposed merger and financing transactions with SoftBank, the realization of our backlog, our business strategy, plans and prospects, existing and prospective products, research and development costs, timing and likelihood of success, and plans, market growth, trends, events and our objectives of management for future operations and results, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 as amended. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the risks, uncertainties and assumptions described under Part I, Item 1A“Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022. These forward-looking statements are subject to numerous risks, including, without limitation, the following:
•the completion of the merger transaction and financing transaction with SoftBank;
•the implementation of our business model and strategic plans for our business following the business combination pursuant to the terms of the RAAC Merger Agreement (the “Business Combination”);
•our ability to continue as a going concern;
•our plans to develop and commercialize our product candidates;
•our ability to continue to develop new innovations to meet constantly evolving customer demands;
•our expectations regarding the impact of the ongoing COVID-19 pandemic, inflation and rising interest rates on our business, industry and the economy;
•our estimates regarding future expenses, revenue, earnings, margin, capital requirements and needs for additional financing;
•our expectations regarding the growth of our business, including the potential size of the total addressable market;
•our ability to maintain and establish collaborations or obtain additional funding;
•our ability to obtain funding for our future operations and working capital requirements and expectations regarding the sufficiency of our capital resources;
•our intellectual property position and the duration of our patent rights;
•developments or disputes concerning our intellectual property or other proprietary rights;
•our dependence on suppliers and suppliers to our third-party contract manufacturers who fabricate our equipment to fulfill orders placed by us;
•our ability to compete in the markets we serve;
•our expectations regarding our entry into new markets;
20
•competition in our industry, the advantages of our solutions and technology over competing products and technology existing in the market and competitive factors, including with respect to technological capabilities, cost and scalability;
•the impact of government laws and regulations and liabilities thereunder;
•our need to hire additional personnel and our ability to attract and retain such personnel;
•our ability to raise financing in the future; and
•the anticipated use of our cash and cash equivalents.
Investors should also refer to our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for future periods and Current Reports on Form 8-K as we file them with the Securities and Exchange Commission, and to other materials we may furnish to the public from time to time through Current Reports on Form 8-K or otherwise, for a discussion of risks and uncertainties that may cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances, or otherwise.
You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary 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 217 U.S. and international patents issued and 342 U.S. and international patents pending in technologies including robotic picking, mobility, gripping, sensing and perception, general robot control, and differentiated supporting mechanisms. Our proprietary technologies enable us to offer holistic solutions that automate supply chain operations. Our solutions include moving goods to robots that then pick and pack ecommerce or retail orders, robotically moving and organizing inventory and orders within a warehouse or logistics facility, and robotically sorting packages and shipments.
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 ROI targets and other performance 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”), TJX Companies, Inc. ("TJX"), and Homegoods Inc ("Homegoods").
21
For the three months ended March 31, 2023, Homegoods, FedEx and TJX comprised approximately 44%, 32% and 14% of our revenue, respectively. For the three months ended March 31, 2022 FedEx, Softbank, Wal-Mart, and TJX comprised approximately 38%, 12%, 12%, and 10% of our revenue, respectively.
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 March 31, 2023, approximately 75% have technical degrees and approximately 160 have advanced degrees.
Recent Developments
On March 24, 2023, the Company entered into an Agreement and Plan of Merger (the “SoftBank Merger Agreement”), with SoftBank Group Corp. (“SoftBank”), and Backgammon Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of SoftBank (“SoftBank Merger Sub”), pursuant to which SoftBank Merger Sub will merge with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of SoftBank (the “SoftBank Acquisition”).
At the effective time of the merger (the “Effective Time”), each share of the Company’s Class A Common Stock and each share of the Company’s Class C Common Stock (together, the “Company Common Stock”) (other than (i) shares held in the treasury of the Company or owned by SoftBank Merger Sub, (ii) shares held by stockholders who have perfected their statutory rights of appraisal under Section 262 of the Delaware General Corporation Law, and (iii) restricted shares that have not vested as of the Effective Time) will be converted automatically into and shall thereafter represent only the right to receive $1.40 in cash, without interest, subject to applicable withholding taxes.
The SoftBank Acquisition is conditioned upon, among other things, the approval of the SoftBank 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 (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 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 is not subject to a financing condition and is expected to close in the third quarter of 2023.
Voting and Support Agreement
In connection with the execution of the SoftBank Merger Agreement, the Company and SoftBank entered into voting and support agreements with Thomas Wagner, the Company's Chief Executive Officer, and three of the Company’s largest stockholders (certain entities related to Vinod Khosla (Khosla Ventures Seed B LP, Khosla Ventures Seed B (CF), LP, Khosla Ventures V, LP), New Enterprise Associates 15, L.P., and Canaan X, L.P.) (the “Supporting Stockholders”) under which such stockholders agreed, among other things, to vote, or cause to be voted, all of the shares of Company Common Stock beneficially owned by such stockholders in favor of (i) the approval of the SoftBank Acquisition and certain other related matters and (ii) the adoption of an amendment to the certificate of incorporation of the Company to increase the number of authorized shares of Class A Common Stock to 700,000,000 (the “Charter Amendment Approval”).
Convertible Note Purchase Agreement
Additionally, in connection with the execution of the SoftBank Merger Agreement, the Company entered into a convertible note purchase agreement (the “Note Purchase Agreement”) with Backgammon Investment Corp, a Delaware corporation and wholly owned subsidiary of SoftBank (“BIC”) under which the Company may issue to BIC up to $60 million of convertible senior unsecured notes (the “Notes”) in exchange for up to $60 million of cash, prior to the Closing and subject to certain conditions. The Note Purchase Agreement permits the Company to draw up to $12 million in any 30-day period, if the Company’s cash balance is below $30 million. The Notes will mature on the earlier of (i) six months following the termination of the SoftBank Merger Agreement and (ii) June 30, 2024, unless earlier repurchased or converted. The conversion rate for the Notes will initially be 714.2857 shares of Class A Common Stock for each $1,000 principal amount of Notes (the “Conversion Rate”), which is equivalent to an initial conversion price of approximately $1.40 per share of Class A Common Stock. The Conversion Rate is subject to adjustment under certain circumstances in accordance with the terms of the Note Purchase Agreement. The Notes will bear interest at a rate of 20.00% per year compounded semi-annually and will be payable in-kind semi-annually by increasing the principal amount of the Notes. In the event of payment defaults on interest or principal when due, the interest rate will be increased to 25.00%.
COVID-19
The full impact of the 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 long-term impact across industries and geographies and numerous other uncertainties. To date, the pandemic has not significantly impacted our financial condition and operations. The impact
22
of the COVID-19 pandemic on our financial performance will depend on future developments, including the duration and spread of any future outbreaks, any new related governmental advisories and restrictions and any long-term changes in consumer behavior. 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 the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses. These estimates and judgments include, but are not limited to, revenue recognition including performance obligations, variable consideration, the impact of the FedEx Warrant, and other obligations such as warranty cost and incentives and accounting for stock-based compensation including performance-based assessments. We base these estimates and judgments on historical experience, market participant fair value considerations, projected future cash flows and various other factors that we believe are reasonable under the circumstances. Actual results may differ from our estimates. We believe that our accounting policies relating to revenue recognition and stock-based compensation are the most critical to understanding and evaluating our reported financial results. We have identified these policies as critical because they both are important to the presentation of our financial condition and results of operations and require us to make judgments and estimates on matters that are inherently uncertain and may change in future periods. We have reviewed our policies and estimates to determine if our critical accounting policies and estimates for the three months ended March 31, 2023 have changed. We have made no material changes to the critical accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2022.
Summary of Recent Financial Performance
Revenue was approximately $6.3 million for the three months ended March 31, 2023, compared to approximately $5.5 million for the three months ended March 31, 2022. The increase in revenue primarily relates to fulfillment of orders placed by existing customers. Revenue in 2023 is net of $1.7 million of provisions relating to the common stock warrant granted to FedEx.
Gross loss was $2.0 million for the three months ended March 31, 2023, compared to a loss of $1.2 million for the three months ended March 31, 2022. The increase in gross loss for the three months ended March 31, 2023, was due primarily to the impact of stock warrants granted to FedEx.
Combined general and administrative, selling and marketing, and research and development expenses for the three months ended March 31, 2023, increased to $30.6 million, compared to $29.5 million for the three months ended March 31, 2022. The net increase in total operating expenses of $1.1 million was primarily driven by an increase in general and administrative costs related to expenses relating to the activities with the SoftBank Merger Agreement, and an increase in stock-based compensation partially offset by a reduction in engineering and sales and marketing costs.
The increase in stock-based compensation between the three months ended March 31, 2023, and the three months ended March 31, 2022, is primarily due to the revaluation of restricted stock awards that are treated as a liability as discussed in Note 8, "Related Party Transactions", and Note 10, "Stock-Based Compensation" of Berkshire Grey’s unaudited condensed consolidated financial statements. Stock-based compensation for restricted stock awards increased by $7.5 million. The Company reported an expense of $1.3 million and an offset to expense of $6.2 million for restricted stock for the three months ended March 31, 2023 and 2022, respectively.
Net losses were $36.5 million for the three months ended March 31, 2023, compared to $23.6 million for the three months ended March 31, 2022. The increase in net losses was primarily due to expenses relating to the SoftBank Acquisition, stock-based compensation expense, expense related to revaluation of warrant liabilities and other impacts from stock warrants granted to FedEx. These increases in net losses were partially offset by reductions in engineering and sales and marketing costs.
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.
23
Comparison of the three months ended March 31, 2023 and 2022
Revenue
Berkshire Grey generates revenue through the sale, delivery, installation of customer contracts in the United States. The following table presents revenue as well as the change from the prior period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended March 31, |
|
|
|
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
Change |
|
Revenue |
|
$ |
6,309 |
|
|
$ |
5,492 |
|
|
$ |
817 |
|
|
|
15 |
% |
Revenue was $6.3 million for the three months ended March 31, 2023, compared with revenue of $5.5 million for the three months ended March 31, 2022, an increase of $0.8 million. The increase in revenue primarily relates to fulfillment of orders placed by our existing customers. Revenue in 2023 is net of $1.7 million of provisions relating to the common stock warrant granted to FedEx. Our revenue is dependent upon our existing customers, and we expect that we will continue to derive a majority of our revenue from a limited number of significant customers in future years. No assurance can be given that our significant customers will expand their business relationship with us, will continue to do business with us, or that they will maintain their historical levels of business. If our relationship with any significant customer were to cease, then our revenues would decline and negatively impact our results of operations.
Revenue for the three months ended March 31, 2023, and 2022, excluding the impact of the FedEx warrants, was $8.0 million and $5.5 million, respectively, an increase of $2.5 million or 31%.
Cost of Revenue
The following table presents cost of revenue as well as the change from the prior period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended March 31, |
|
|
|
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
Change |
|
Cost of Revenue |
|
$ |
8,306 |
|
|
$ |
6,696 |
|
|
$ |
1,610 |
|
|
|
24 |
% |
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 three months ended March 31, 2023 and 2022 was $8.3 million and $6.7 million, respectively, an increase of $1.6 million or 24%. The increase in total cost of revenue was driven primarily by an increase in the number of fulfilled contracts.
Gross Loss and Gross Margin
The following table presents gross loss and margin as well as the change from the prior period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended March 31, |
|
|
|
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
Change |
|
Gross Loss |
|
$ |
(1,997 |
) |
|
$ |
(1,204 |
) |
|
$ |
(793 |
) |
|
|
66 |
% |
Gross Margin |
|
|
(32 |
)% |
|
|
(22 |
)% |
|
|
|
|
|
(10 |
)% |
Total gross loss during the three months ended March 31, 2023 and 2022, was $2.0 million and $1.2 million, respectively. Total gross margin was approximately (32)% for three months ended March 31, 2023, compared with (22)% for three months ended March 31, 2022, a decrease of 10%. The decrease in gross profit of $0.8 million and the decrease in gross margin was primarily driven by the impact of stock warrants granted to FedEx.
Gross margin for the three months ended March 31, 2023 and 2022, excluding the impact of the FedEx warrants, was (4%) and (22%) respectively. 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, combined with lower product costs, was the main driver of the improvement in the current year, excluding the impact of FedEx warrants.
24
General and Administrative
The following table presents general and administrative expenses as well as the change from the prior period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended March 31, |
|
|
|
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
Change |
|
General and Administrative |
|
$ |
10,149 |
|
|
$ |
7,662 |
|
|
$ |
2,487 |
|
|
|
32 |
% |
% of Operating Expenses |
|
|
33 |
% |
|
|
26 |
% |
|
|
|
|
|
|
General and administrative expenses during the three months ended March 31, 2023 and 2022, were $10.1 million and $7.7 million, respectively, an increase of $2.4 million or 32%. The increase in general and administrative expenses is primarily the result of expenses relating to the Softbank Acquisition.
Sales and Marketing
The following table presents sales and marketing expenses as well as the change from the prior period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended March 31, |
|
|
|
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
Change |
|
Sales and Marketing |
|
$ |
5,724 |
|
|
$ |
1,489 |
|
|
$ |
4,235 |
|
|
|
284 |
% |
% of Operating Expenses |
|
|
19 |
% |
|
|
5 |
% |
|
|
|
|
|
|
Sales and marketing expenses during the three months ended March 31, 2023 and 2022, were $5.7 million and $1.5 million, respectively, an increase of approximately $4.2 million or 284%. The increase in sales and marketing expenses was driven by an increase in stock-based compensation expense of $7.3 million that was partially offset by a decrease of $3.0 million in salaries and related employee costs. The increase in stock-based compensation between the three months ended March 31, 2023, and the three months ended March 31, 2022, is primarily due to the revaluation of restricted stock awards that are treated as a liability as discussed in Note 8, "Related Party Transactions", and Note 10, "Stock-Based Compensation" of Berkshire Grey’s condensed consolidated financial statements.
Research and Development
The following table presents research and development expenses as well as the change from the prior period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended March 31, |
|
|
|
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
Change |
|
Research and Development |
|
$ |
14,748 |
|
|
$ |
20,343 |
|
|
$ |
(5,595 |
) |
|
|
(28 |
)% |
% of Operating Expenses |
|
|
48 |
% |
|
|
69 |
% |
|
|
|
|
|
|
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 three months ended March 31, 2023 and 2022 were $14.7 million and $20.3 million, respectively, a decrease of $5.6 million or 28%. The decrease in research and development is primarily due to reductions in salaries and related employee costs.
Other (expense) Income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended March 31, |
|
|
|
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
Change |
|
Other (expense) income, net |
|
$ |
(3,869 |
) |
|
$ |
7,142 |
|
|
$ |
(11,011 |
) |
|
|
(154 |
)% |
Other (expense) income, net during the three months ended March 31, 2023 and 2022 was a net expense of $3.9 million and net income of $7.1 million, respectively, a decrease of $11.0 million or (154%). The decrease was primarily related to the change in fair value of warrant liabilities which resulted in a loss of $4.0 million for the three months ended March 31, 2023 and income of $7.2 million for the three months ended March 31, 2022.
Income Taxes
During the three months ended March 31, 2023 and 2022, we recorded no income tax benefits due to the uncertainty of future taxable income as we have incurred net losses since inception.
25
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.
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 Three Months
Ended March 31, |
|
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
Net loss |
|
$ |
(36,489 |
) |
|
$ |
(23,566 |
) |
|
Interest income, net |
|
|
(111 |
) |
|
|
(7 |
) |
|
Income tax expense |
|
|
2 |
|
|
|
10 |
|
|
Depreciation and amortization |
|
|
1,085 |
|
|
|
760 |
|
|
EBITDA |
|
|
(35,513 |
) |
|
|
(22,803 |
) |
|
Stock-based compensation |
|
|
5,482 |
|
|
|
(1,838 |
) |
|
FedEx Warrant provision |
|
|
1,710 |
|
|
|
— |
|
|
Change in fair value of warrant liabilities |
|
|
3,990 |
|
|
|
(7,183 |
) |
|
Other income (expense), net |
|
|
(10 |
) |
|
|
48 |
|
|
Adjusted EBITDA |
|
$ |
(24,341 |
) |
|
$ |
(31,776 |
) |
|
26
Backlog
Our order backlog as of March 31, 2023 and 2022, was valued at approximately $103.6 million and $103.3 million, respectively. Our order backlog is expected to be realized over the remainder of 2023 and into 2024. Although our backlog consists of signed contracts, the level of backlog at any particular time may not necessarily be indicative of future sales. Given the nature of our relationships with our customers, and the fact that to-date we have not entered into long-term purchase commitments with our customers, we may allow our customers to cancel or reschedule deliveries, and therefore, backlog may not be a meaningful indicator of future financial results.
Liquidity and Capital Resources
Sources of Liquidity and Capital
We have incurred a net loss in each of our annual periods since our inception. We incurred net losses of $36.5 million and $23.6 million during the three months ended March 31, 2023 and 2022, respectively. As an early-stage company, we have primarily obtained cash to fund our operations through preferred stock and common stock offerings. From inception through March 31, 2023, we have received cumulative gross proceeds from the sale of our preferred stock, common stock and warrants of $424.1 million to fund our operations. We completed the Business Combination on July 21, 2021 and received proceeds, net of transaction costs, of $192.1 million. On October 5, 2022 we entered into a purchase agreement with Lincoln Park Capital Fund which allows the Company to sell up to $75,000,000 of our common stock. As of March 31, 2023, the Company has received approximately $4.2 million from the sale of shares under this agreement.
As of March 31, 2023, our liquidity sources included cash and cash equivalents of approximately $38.7 million. Based on our current operating plan, we believe that our current cash and cash equivalents will need to be supplemented to allow us to meet our liquidity requirements through the end of the fourth quarter of 2023. As described more fully above, we expect that the SoftBank acquisition will be consummated in the third quarter of 2023. If the SoftBank acquisition is not completed, then to meet our future funding requirements, we would need to evaluate other alternatives to secure additional capital sufficient to fund our operating plan, in addition to any potential use of our facility with Lincoln Park Capital.
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 December 31, 2022, has also expressed substantial doubt about the Company’s ability to continue as a going concern. The Company’s consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Cash Flows
The following table summarizes our cash flows during the years presented.
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended March 31, |
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
Net cash used in operating activities |
|
$ |
(25,931 |
) |
|
$ |
(32,238 |
) |
Net cash used in investing activities |
|
|
(140 |
) |
|
|
(46 |
) |
Net cash provided by financing activities |
|
|
480 |
|
|
|
822 |
|
Effect of exchange rate on cash |
|
|
8 |
|
|
|
(46 |
) |
Net decrease in cash, cash equivalents and restricted cash |
|
$ |
(25,583 |
) |
|
$ |
(31,508 |
) |
Cash Flows for the three months ended March 31, 2023 and 2022
Operating Activities
Net cash used in operating activities during the three months ended March 31, 2023 was $25.9 million, primarily consisting of $36.5 million of net losses, adjusted for non-cash items, which primarily consisted of a $3.9 million loss on change in fair value of warrants, $1.7 million related to the FedEx warrant provision, $5.5 million in stock based compensation expense and $1.1 million in depreciation and amortization expense.
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Net cash used in operating activities during the three months ended March 31, 2022, was $32.2 million primarily consisting of $23.6 million of net losses, adjusted for non-cash items, which primarily included a gain from the change in fair value of warrants of $7.2 million and a gain from stock-based compensation of $1.8 million partially offset by a reduction in contract liabilities of $16.4 million.
Investing Activities
Net cash used in investing activities was $0.1 million and $0.1 million for the three months ended March 31, 2023 and 2022, respectively which primarily related to the purchases of fixed assets.
Financing Activities
Net cash provided by financing activities during the three months ended March 31, 2023 and 2022, was $0.5 million and $0.8 million, respectively which primarily related to cash received from stock option exercises.
Contractual Obligations
Our lease portfolio includes leased offices and facilities. Refer to Note 15, "Commitments and Contingencies" of our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q for a summary of our future minimum lease obligations. As of March 31, 2023, we did not have any long-term debt.
Recent Accounting Pronouncements
See Note 2, "Significant Accounting Policies", in the Unaudited Condensed Consolidated Financial Statements regarding recent accounting pronouncements.