Symbotic Inc. (SYM) Q4 FY2025 Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Symbotic Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Charlie Anderson. Please go ahead.

Hello. Welcome to Symbotic Fourth Quarter and Fiscal Year 2025 Financial Results Webcast. I'm Charlie Anderson, Symbotic's Vice President of Investor Relations. Some of the statements that we make today regarding our business operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions and are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our Form 10-K, including the risk factors. We undertake no obligation to update any forward-looking statements. In addition, during this call, we will present both GAAP and non-GAAP financial measures. Reconciliation of GAAP to non-GAAP financial measures is included in today's earnings press release, which is distributed and available to the public through our Investor Relations website located at ir.symbotic.com. On today's call, we're joined by Rick Cohen, Symbotic Founder, Chairman and Chief Executive Officer; and Izzy Martins, Symbotic Chief Financial Officer. These executives will discuss our fourth quarter and fiscal year 2021 results and our outlook, followed by Q&A. With that, I'll turn it over to Rick to begin. Rick?

Thank you, Charlie. Good afternoon, and thank you for joining us to review our most recent results. We made strong progress in fiscal year 2025 and finished the year with good momentum. For the full year, we increased revenue by 26% year-over-year, while delivering significant margin expansion and free cash flow generation. The cash on our balance sheet now exceeds $1.2 billion. During the fiscal year, we also expanded and upgraded our product portfolio. We added micro fulfillment as a new category to address e-commerce and upgraded our storage structure to a proprietary next-generation design that offers leading density and rapid installation. When we marry up our innovative bot technology that can handle goods of many sizes, this new highly dense storage structure and our proprietary software, we believe we can unlock more opportunities than ever before. This includes everything from smaller buildings to e-commerce facilities to perishable facilities where square footage is at a premium. We are seeing this play out with a growing sales pipeline as our solutions deliver space savings and installation efficiencies that result in higher value. Customers are already taking advantage of this breakthrough in installation efficiency. Notably, our largest customers opted to utilize our next-gen storage to combine what previously took 2 separate deployments or phases into 1 single phase for new sites. That means a Phase 1 system deployment when we enter a distribution center for the first time, we'll be able to do twice as much work versus when we began deployments for this customer previously. And the overall time to install and achieve acceptance for the same amount of case output in this example will be cut by more than half, generating significant savings, reducing disruption and generating a larger and faster return on investment for customers. Customers are also taking advantage of the modular build qualities of our next-gen storage with a handful of deployments that began in the fiscal fourth quarter connecting next-gen stores to prior gen storage at the same site. And GreenBox is moving forward with next-gen storage, signing up to utilize it at new sites near Dallas and Chicago both of which were signed in the fiscal fourth quarter. Notably, with these sites, GreenBox coverage will extend from California to the Midwest to the Southeast. We also finished the fiscal year by signing a new customer, Medline, the largest provider of medical surgical products and supply chain solutions serving all points of care. This marks our first customer in the health care vertical where we believe the case for automation is very strong given the importance of accuracy, speed and cost. This is also 1 of the largest potential new verticals available to us. It is worth noting that there are over 500 health care distribution centers in the U.S. alone with a combined 76 million square feet of warehouse space according to the health industry Distributors Association. With our scale rapidly improving project execution and growing set of capabilities across the supply chain, we are in a better place than ever to bring our new customers covering multiple verticals, geographies and use cases. Our focus in this has never been greater. In summary, we delivered on the commitment we made at the start of the year to achieve strong top line growth and a significant rise in operational systems thanks to improvements in our deployment process. This also enabled us to deliver strong margin expansion. Looking ahead, our key objectives for fiscal year 2026 are, number one, [indiscernible] growing product portfolio and capabilities to broaden our opportunities with customers, particularly in e-commerce with our micro fulfillment solution. Two, unlock higher margins by driving additional value for our customers, along with operational improvements; three, continue to invest in our innovation engine to expand our capabilities and support future growth. I just want to end by thanking our team for their reference along with our customers and investors for their support. I'll now turn it over to Izzy who will discuss our financial results and outlook. Izzy?

Thanks, Rick. Fiscal fourth quarter revenue grew 10% year-over-year to $618 million, exceeding our expectations. Year-over-year revenue growth in the quarter was driven by the expansion of the number of systems in operations, fueling higher recurring revenue, along with continued progress on our pad development program. Due to higher stock-based compensation, reflecting our commitment to attracting and retaining top talent and restructuring expenses primarily associated with acquisition integration activities. Our net loss for the fiscal fourth quarter was $19 million versus net income of $16 million in the fourth quarter of fiscal year 2024. Adjusted EBITDA in the fiscal fourth quarter of $49 million was at the high end of our forecast due to revenue and gross margin upside and up from $42 million in the fourth quarter of fiscal year 2024. Our backlog of $22.5 billion remained in a strong position. The increase from $22.4 billion last quarter was due to final pricing on projects started and the addition of backlog associated with Medline, offsetting revenue recognized in the quarter. In our fiscal fourth quarter, we began 10 new system deployments, as Rick highlighted, this included 2 deployments for GreenBox and 1 for Medline. We also had 6 systems go operational in the quarter, bringing our total to 48 operational systems or nearly double the level at the end of fiscal year 2024. Importantly, for the systems that went operational for our largest customer in the fiscal fourth quarter, we observed nearly 3 months of improvement in the time between start of installation and customer acceptance compared with our historical average with this same customer. This period of deployment is a portion that is most within our control, and it is also when we recognize the highest level of revenue and profit. With the continued growth in operational systems, we saw our software revenue grew 57% year-over-year to $9.3 million in the fiscal fourth quarter, and operations services revenue grew 21% year-over-year to $26.9 million. Turning to margins in the fiscal fourth quarter. System gross margin continued its trend of significant year-over-year improvement, driven by disciplined cost management, solid project execution and strong supply chain partnership as we roll out our next-gen structure and deliver increasing value to our customers. We expect to see additional expansion in systems gross margin. Software maintenance and support also saw substantial year-over-year gross margin gains, benefiting from continued scale and exceeding 70% for the full year. In operation services, we posted a loss as we increased investment in additional resources to support certain sites and ensure their long-term success. Operating expenses on a GAAP basis in the fiscal fourth quarter were $149 million, adjusted operating expenses in the quarter were $87 million, up sequentially, primarily due to strategic R&D investments in supporting our expanding product portfolio and cloud-based software tools. These investments are in areas where we see the greatest potential to increase value and long-term impact. We finished the quarter with cash and cash equivalents of $1.2 billion, up from $778 million in the fiscal third quarter due to the timing of cash receipts tied to project milestones and the signing of new projects. Now turning to the forecast. As I've settled into the CFO role, I want to share some context for how I think about guidance. We will continue to guide 1 quarter ahead with a focus on transparency and consistency. My approach will be to set a guidance range, reflecting where we expect to land based on our best view of the deployment schedules and a balanced assessment of both risks and opportunities. With that in mind, for the first quarter of fiscal 2026, we expect revenue between $610 million to $630 million, representing year-over-year growth between 25% and 29% and adjusted EBITDA between $49 million and $53 million. I want to reiterate what we highlighted during last quarter's earnings call. That is the introduction of our proprietary next-gen storage structure, has resulted in a realignment of deployment schedules. While this has no impact on our $22.5 billion of backlog, it does have an impact on how our revenue is phased throughout the fiscal year, with the quarters in the first half of fiscal 2026 showing less pronounced sequential growth. We believe this new technology advancement, combined with the unique capability of our proprietary box and software is resonating with customers as they recognize our competitive differentiation and the significant value our solution creates. It also unlocks new opportunities across the supply chain as well as the opportunity for more efficient deployment, which we expect will contribute to higher margins over time for Symbotic. With that, we now welcome your questions. Operator, please begin the Q&A.

[Operator Instructions] Our first question today will be coming from the line of Nicole DeBlase of Deutsche Bank.

Maybe just starting with Medline. Is it possible for you to provide a bit more color on the relationship that they've committed to, and then it seems like health care could be a pretty big opportunity with respect to new customers? Anything on how aggressively the sales force is pursuing that right now.

So, you broke up a little bit, but the Medline relationship is something that we worked on for about a year, maybe a little bit longer. And it was a combination of understanding what they wanted to accomplish with the hospitals and critical care units that they deliver with. And then for them to understand how the ability of our system to handle lots and lots of items and also the incredible accuracy with which we ship product. And then thirdly, the ability we have to sequence products because oftentimes, to hospitals, you're delivering to a specific section to a specific floor. And so we work with them to give them a good understanding of the unique capabilities of our system. And so that's why we won the award, and we're -- they have lots of warehouses, great customer. So we're very excited about that. In terms of future growth, we've added about 5 or 6 new salespeople in the past 6 months. And so we're much more in the aggressive marketing role than we were before. Probably a year ago, we were still wanting to make sure everything was working and testing out and as I tell the organization, you can't scale chaos. But over the last year, as we began to hit all our time lines for builds and price points for execution and the quality of the way we measure it in some of our internal measures has more than improved by almost 300%. So we're feeling very bullish about being able to handle a much broader base of customers and to deploy systems that will work on day one.

That's really helpful. And you kind of alluded to this, is when you were talking about like the cadence of 2026. But -- is the expectation that you guys start to really ramp next-gen systems still kind of around the middle of the year. I think that's what we shared on the last earnings call. And does that mean we're going to have kind of a stable revenue through the first half and then the next step-up kind of comes in the second half of '26?

Nicole, that's exactly the way we're thinking of it. As you know, we unveiled it last quarter. So we had some signings then. And this quarter signings are all about the next-gen system. So what that does is exactly what you said. You'll call it see a less pronounced increase in revenue in call it the fourth, the first and the second and then you'll see more of an increase towards the tail end. So Nicole, I would say you got that right. Thank you.

And our next question is coming from the line of Joe Giordano of TD Cowen.

On Medline, can you talk about like what's contemplated there? Like how many sites are we talking about? Like what types of technology is this encompassing? Is there a break pack in this? Is there room for the micro fulfillment strategy in there as well? Like what was like effectively added to the backlog from them right now?

Yes. So Joe, it's 1 site. It's a proof of concept is the way we look at it. Obviously, if we do a good job, they have a lot of warehouses. And initially, we contemplated a pretty straightforward moving case system. But we also -- as we think we can upsell or extend to sell to these customers, micro fulfillment, which could either be in receiving room in a hospital for them or a very specific selection for them in a warehouse and then breakpack is also an opportunity for us to sell. So basically, we could sell them 3 different products. But right now, we have -- we're starting out with the first original product.

And then do we need to like -- I just want to make sure I understand the comments about Walmart were like the 2 phases being incorporated into 1 now. Do we need to like change the way we describe these things? I guess I just want to make sure the -- we understand the definition. So if you say like 10 new systems are started, can some of those new systems effectively be like 2 that you would have said last time, we have to talk in dollar terms instead of number of sites now?

I'll turn that over to Izzy because I'll get in trouble.

I think the way you said it, you have it right in the sense of not every system is created equal. But going forward, the size of the system is going to be slightly larger. So that's how I would think about it.

They could be slightly larger or we also have the ability to do some smaller systems, in terms of smaller space and a warehouse. So it gives us a lot of flexibility. But what is he was saying is absolutely right, is that in the same amount of space, that we were going to install an operation in some of our bigger sites, they can actually take down more of the warehouse because we can do more work in the same space as we did before.

And our next question is coming from the line of Andrew Kaplowitz of Citigroup.

So Systems gross margin was, I think, a high watermark close to 22%, and that's despite all the changes you're making to your systems. And I think you had spoken more flattish gross margin for Q4. So is Q4 a function of ASR mix maybe being a little higher? Is it safe to say you're on a better glide path given improved operating leverage, better execution. Any more color on whether you think your system gross margin continues to sort of just kind of go up from here?

Yes. So let me tackle what you said in the beginning of your question is how I think about, call it, ASR in the quarter? It's really, call it, mid- to high digits in terms of a percentage of total revenue in the fourth quarter. And I kind of would expect that to be about the same as we progress. I think the bigger part of your question is how you think about, okay, how do you unpack the margins. And I would say we feel really, really bullish about our system margins, not only where they are but where we're headed. So I think if you see the last several quarters, we have kind of a little bit of a lumpiness, but I think it's about the exit trend where we landed in the fourth. And I would say even though we don't buy to margins, I would expect that to be a slight uptick in the first. But I think it's more about when you think about how we're recognizing revenue in, call it, that 12- to 18-month period, given when we roll out the next-generation storage system that we expect those margins to really to be expanding in the coming quarters. That's really what's the key part. And like I said, I would reiterate, if there's 1 thing I would walk away from today is the fact that we are very bullish about where our margins, not only where they are, but where they're going.

It's helpful. And then, Rick, backlog, as you know, has been somewhat flash for Symbotic, I know your burn rates are going up. But do you think you could grow Symbotic backlog in FY '26 and/or -- we know you're ramping on Green Box, ASR. Can you give us an update on whether FY '26 is a big year for Symbotic new customers, GreenBox, can you start booking backlog for ASR, like any thoughts around all that?

Yes. So -- you're trying to trap me a little bit. So we don't guide to backlog, but here's how I would say, right, given the guide we gave for the first quarter, I would expect our backlog in the first quarter to really be no different to where we are. You do have in the 10-K, call it what our banding is, but what's coming through in the next 12 months. So I would say too soon to tell of where backlog will be. It's not something that we talk to in coming quarters. But I think you have to take 2 takeaways. As Rick said, we've built up our sales team because we obviously have more opportunities, and so we will continue to do that. I think it's also important to think about that backlog for us is strictly what you do from a GAAP perspective, not what we think could happen given that most customers will do 1 system at a time. And then last but not least, what I'll leave you with, maybe not in the next 12 months, but soon thereafter to some extent, is to think about that we still have more than $5 billion of backlog to unlock with the mini -- micro fulfillment systems. So I'm not troubled about backlog at all. I think that's more about our long-term strategy. But I would say that 2026 is a solid backlog.

Our next question will be coming from the line of Mark Delaney of Goldman Sachs.

First 1 was on GreenBox. And now that you have a CEO of GreenBox and also given the new store structure that you've had and some of the progress you spoke to around building out sites there. I was hoping you could speak a bit more on the progress at GreenBox in terms of finding new customers who use the GreenBox sites.

Yes. So our first site that will come live will be Atlanta. I mean some of these sites are still under construction. Some of it will be a year away, some maybe be a little longer. But Atlanta will come alive. We have a lot of interest in Atlanta, no customers to announce yet, but we expect hopefully, by -- in the next 90 days, next 180 days, we'll have some announcements as to who our first customers will be. We continue to get interest. And now that we actually have facilities, we are in discussions with customers about how much space they want and when, but nothing to announce yet.

Okay. Anything in particular, Rick, do you think new customers would want to see in order to get across the line?

No. I mean, I think what's happened is what we're seeing is on the real estate space, there was a downturn after COVID and then some of the big guys have gobbled up a bunch of space. So there's a shortage of space right now. So we're very well positioned and so we're talking to people about some would be different versions of GreenBox. Some might be just jet storage. Some might be very proactive warehouse handling services and then we're starting to talk to a few new customers about just being a whole active 3PL. So we're in a pretty good spot because we're ahead of the market. And so we're talking to different customers about different things right now.

That's helpful. And just 1 more for me, if I could please, on GreenBox. Your partner at SoftBank has said they're looking to raise capital more generally in order to fund some of the investments they'd like to do. So as you think about what that may or may not mean for GreenBox, any implications you can share in terms of how GreenBox is looking to have the funding and what that might mean for the pace of deployment at GreenBox?

Yes. So I mean our agreement with SoftBank is IronClad, they're there to provide the funding. So we don't have any worries about providing the funding there and we have a lot of cash to do our part of it as well. So funding will not be a problem with GreenBox.

And our next question is coming from the line of Colin Rusch of Oppenheimer.

As you get into these customer conversations in a bit more detail, can you talk a little bit about the potential for adjustments to bot design or even system design more broadly? And how we might think about the cadence of that evolution.

Yes. So that's a great question. What's happening is that the customers are coming in now, and I'll answer your question in 2 ways. So what's happening is that the market is appreciating the fact that we're not selling the same system that we were 10 years ago, and a lot of our competitors have not innovated, they're just scaling. So our bots, for instance, we introduced to 1 of our customers, what we call a stretch bot. So we can now handle the 36-inch case. We might even be able to handle 2, 18-inch cases. So the bots have more flexibility. We've introduced vision and LiDAR on some of our bots. So we have collision avoidance. So customers are coming in, and they've -- and even some of the ones that we talked to 5 years ago, who weren't ready to make a decision, they come in now and they say, my goodness, the pace of change, which you guys are doing things, so I think we're really differentiating us from the rest of the world. One of the things that we have done a lot of is we've moved to cloud-based. We're investing in AI resources, the databases. So we can do sorting and slicing and pallet building and for instance, truck routing I think maybe better than anybody in the world at this point. So I should avoid [ superlatives ], but our customers say, nobody can do what you guys are doing. So it's not just building very aisle friendly pallets that's building super friendly aisle pallets, but we can actually route the whole truck because of the reliability of our bots, which has made huge progress in the last 2 years. In terms of we pick very, very, very, very high percentage of what we say we're going to pick, and we never make a mistake picking. So for hospital supply, that's absolutely critical. But for other people like we're starting to go live with our Southern Glazer site pretty soon in -- and it's liquor. And so it's both buyers and restaurants. And so the ability to route trucks is really critical for them, and they're telling us other people can't do it. So we continue to make improvements, both in software, our bots are getting much more technologically in both intelligent but also better vision tools, collision avoidance, better routing and we're also innovating on our pallet building and depalletizing to get product into the system. So it's been -- I mean the reason I do what I do is I love the innovation and I love the fact that we have a team that can do innovation very quickly. And that's creating a big noticeable distinction between us and the rest of the market right now.

That's incredibly helpful on our side. And then just from the human capital and the competition for talent, we're hearing about a variety of different dynamics on that. Can you talk a little bit about your ability to attract folks and retain them as this market really heats up in terms of both physical AI as well as some of the software that you're talking about?

Yes. So the reason we went public is because we had to create a compensation system that would allow us to attract people that were used to being compensated in stock. And so we're not doing $1 billion packages out in Palo Alto, but we're doing pretty good in the Boston market in the East. We also have opened an office on the West Coast. We also opened an office in Vietnam because 1 Omnilabs, which was 1 of the health care -- small health care start-ups that we bought has a lot of Vietnamese people that founded that company, and so we've opened an office in Vietnam where there's huge talent. So we're getting more than our fair share of talent and at a faster rate. And 1 of the things that's been interesting is as the EV space falls down some we are getting people from the EV world that are just disillusioned with some of the things that are happening there. And basically our bot the way we're approaching it is an electronic vehicle with LiDAR and collision avoidance. It's not passenger carrying. But we do some very complicated things. And so we're able to attract people because they like the problems that we're solving. And our comp is as good as anybody needs to be, we're not going to compete with chat GPT, but there's plenty of people that aren't going to work for them either.

And our next question will be coming from the line of Guy Hardwick of Barclays Capital.

It looks like the -- based on the change in the RPO that there was very strong bookings in the quarter, that $600 million, $700 million. Izzy could you just mix split that out between the Medline, new win and pricing?

So we just make it clear. Medline was something we signed in the tail end of the quarter. So Medline is not going to influence really our results in the fourth quarter. Really Medline is about no different than how we spoken to how we recognize our revenue over almost really a 2-year period. So I wouldn't put a lot of, call it, [indiscernible] numbers are how we achieved our fourth quarter numbers with the announcement of a new vertical. I think the fourth quarter is about the momentum that we've created for over a month on end on the installations and moving, call it, 6 more sites to operational. That's really what drove it was the fact that, yes, we did sign 10 more than the repayments. But overall, the -- I would characterize the the success of the fourth quarter based on the momentum that we've been working on for months on it.

So Medline was not in the RPO $22.5 billion RPO at the end of the quarter?

Yes, it is in the RPO, but it's not -- it has no significance to the revenue generated SP-29 In the quarter.

Okay. So just -- my question was more -- was it material to that increase in the RPO because given you would it implies that your bookings are at $700 million given the revenue burn in the quarter plus the change in the backlog. So that's a very significant increase compared to, say, previous quarters. So the question is really the mix of that, how much of it was Medline versus increase in pricing?

Yes. I would say it's more about the increase in pricing or call it, how you can fit or what we did years ago and how inflation has moved. So that's really the main driver in the RPO change. But yes, Medline is in that.

And just in the 10-K, which you referenced, is it looks like the the 12% of the backlog will be delivered over the next 12 months. That's quite a big increase in the figure back 12 months ago in the 2024 10-K said 10%. It looks like you actually missed that 10%. You came in more like 9%, particularly if you include the ASR R&D revenue. So given what you said also about being a back-end loaded year, 12% of that backlog seems quite a big significant step up on the previous delivery, which you [indiscernible] kind of missed slightly. So what reason should we give us confidence that you can deliver 12% of the backlog in the next 12 months?

I think it's all about what we said in our prepared remarks, given that we're seeing, call it, improvements from that start of installation to the end line. And that's what gives us the, call it, the the momentum that we're talking about. Yes, we do have ASR that we built in during the year. So you're absolutely correct. But I think you really -- we're laser-focused on the exit trend and what the new structure delivers. As you know, it's -- not only is it more dense, but more importantly, from an installation perspective is that it has call it, somewhat -- the subassemblies that come in that have that process gets done at a much faster pace. So a quick call out on the 10 to 12 I'm really comfortable with the 12% that we have in the years of AMD.

Our next question is coming from the line of Derek Soderberg of Cantor Fitzgerald.

On the recurring software fees, I'm wondering if you can share what new customers are signing up for in terms of an annual software fee on a percentage basis. Can you share that at all?

Unfortunately, that's not an area that we give any more color. I think it's just in general, how you map call it, what we move to operational and when we start triggering that software fee. But I would think if you take the -- a little bit of the exit trend, that's really what we would be expecting in the near term.

Okay. Got it. And then, Rick, you mentioned there's about 76 million square feet of distribution centers in the health care vertical. I'm wondering if you've done the math internally, how many modules does this equate to? Or what's for the dollar opportunity. Just wondering if you could help us size that health care vertical in the U.S.?

I haven't done that, but you can ask Izzy after this call is over.

And our next question will be coming from the line of Jim Ricchiuti Needham & Company.

I think late in the quarter, there was an announcement regarding Symbotic working with a, I guess, a small battery technology company, I think in the U.K., [indiscernible] I'm trying to understand the significance of this. And if you could talk to how we might think of potential deployments? Is this going to be on new projects? Is there a plan to move forward with retrofits as the maintenance schedules dictate.

Yes. So all our new batteries starting, I think, from February on, we'll have [indiscernible] batteries. So we, for the last 15 years have used ultracapacitors. And an ultracapacitor can take 1 million charges, but the charge only lasts about 8 minutes, deniable is actually a battery, but it charges the same way as an ultra cap and it can take a 40-minute charge. Now that may not seem that much to you at home but the American grid, especially with all the stuff that's happening with AI is pretty erratic, especially in hot weather places like Florida and Texas, which also had tornado. So the ability to go 40 minutes is like a lifetime for us in terms of reliability of the bots. So when there's a power flicker, we want our bots to get back to a home station, which is on a charge plate. And in the past, sometimes 8 minutes wasn't enough. So this is just 1 more thing that as we show new customers, what we're doing with battery technology, most people are operating their bots with a third rail. It's kind of an electronic wires in the system. And so you have a -- when you have a flicker, the whole thing is down, but -- so the progress we've made on battery technology, and we've taken a stake in this company. It's very, very exciting, and we can actually use these batteries for other parts of our system and sometimes actually to help our customers keep uninterruptible pyro supplies in their warehouses. So it's just 1 more thing of the [ Marche ] technology that we had a problem. The American grid is pretty bad, erratic. And so we're thinking, well, how do we solve this problem for these automation systems. So -- and so I think this is really going to help us in life sciences and a bunch of other areas. But just in general, our systems are way more reliable than they were even 2 years ago.

Follow-up question. Just as we think about your fiscal '26 goals, I'm wondering how does geographic expansion figure into that. Obviously, you've got a site in Mexico that you're working on. And I'm just wondering if there's an opportunity you think in fiscal '26 to perhaps get into Europe?

Yes. A matter of fact, half of our sales team is in Europe today. So we -- it's been interesting with Europe because so many of the great automation companies came from Europe because Europe had either smaller land spaces, more restrictive labor laws. But as we go to Europe, especially with our smaller, denser warehouses, people are really getting interested and we've been doing this long enough that the reliability issues are not a problem. So I'm very optimistic about Europe. We see lots of opportunities.

And our next question will be coming from the line of Ken Newman of KeyBanc Capital Markets.

Izzy, I wanted to go back to your comment about the change in the phasing of the revenue. I know you said you expect less pronounced sequential revenue growth in the first half versus the back half, just looking historically, though, I think in the last 3 years, sales have typically been down sequentially, high single to low double digits, 4Q to 1Q and the midpoint of the guy is assuming something that's a little bit better than flat. So I just want to make sure we're understanding that growth comment for accelerating growth in the back half versus what already seems like a bit of a stronger start versus typical seasonality?

That's fair. If you take the high end of the range we just gave for the first quarter, we would sort of break the trend that we've been typically seeing at least from what I saw over the last 2 years. So clearly, that's our main focus. But if you take, call it, the bottom end of the range I gave you, and that's really just about 1% less than where we landed in the fourth quarter. So it depends -- but if you take the midpoint, we're kind of flat to exactly what we achieved in the fourth quarter. But internally, as you can imagine, we're trying to get past this lumpiness and really be continuing on continual improvement. And so although I guided right in between, guided us slightly under where we are in the fourth. So the guide was $610 million to $630 million. But if you take that midpoint, that's really where I know about this less pronounced sequential improvement. But the overall goal, to be clear, is not to have that lumpiness in the first quarter going forward.

Okay. No, that's very helpful color. I appreciate that. And then -- and secondly, for my follow-up, we are hearing some more comments from hardware-related manufacturers around higher DRAM pricing and memory shortages. Rick, can you maybe just remind us how memory-intensive are the Symbotic deployments? And just any comments on what you're seeing broadly from chip availability and pricing as it relates to your ability to kind of keep margins stable even though I'm sure you're able to pass through the pricing, is there a risk of just nominally margins kind of stepping down?

No, not for us. I mean our bots are -- I mean, basically, what our bots are doing is transmitting data back to us, which we then process in the cloud and with different various algorithms, which are mostly proprietary. So yes, we're buying more cloud storage, but not significantly like the super big guys are so -- and it's coming down in price. But we're not doing that directly on the bots. What we're doing is we will take the information that the bots transmit back that's a controllable expense, so it's going up. And then reprogram the bots for different various edge case behaviors. So like a bottle, see something and say, I don't know what to do. And so it will transmit back to us. But the bots are being trained, but the bots are not truly independent AI machines. We kind of take that information back do the processing, run the algorithms and then send it back out in a software release. So chips are not really a problem for us as we get bigger and better -- I mean I think this time next year, we'll have over 20,000 bots. So we're a major factor for some of the medium and smaller-sized companies and even the video, there's a certain amount of -- the lower-priced chips are what we're using. We may upgrade some of those chips, but they're not the $25,000 chips that other people are [indiscernible] And we don't use that many of them.

And our next question will be coming from the line of Mike Latimore of Northland Capital Markets.

I guess I'll just build off that last answer. I guess if you're expecting 20,000 or so bots in a year, can you give us kind of a baseline of where we are now?

Yes. I mean we have about 15,000 lots right now. So we expect to keep growing and there'll be different kind of bots that we'll use. Those would be different versions. The back-of-store mini system will use a similar bot. So there'll be different versions of our bots as well.

Yes, that makes sense. And then I guess just on the new system starts in the quarter, I think you said there was 10. Were there any break packs in there? And then I think last quarter, you guided to sort of mid-single to upper single digits. And should we still think about that as kind of the run rate for a while?

There's a mix of -- in the 10 deployments we had in the fourth quarter. Yes, there were a couple of breakpacks. Sorry. And your next question was -- can you repeat your latter part of your question?

Sure, sure, sorry. Yes, last quarter, I think you guided -- I think you had guided the system starts being in the kind of mid- to high single-digit range and then you did 10% this quarter. So I guess, any new view on the system start number?

It's something we don't typically guide to is what our, call it, system starts are going to be or which ones are going to be moving into operational. I think the best way to think of it is, although I said historically, I want to get away from the lumpiness in the revenue. I do think though sometimes we do have more of a tailwind of those deployments in the fourth quarter. Now we have a healthy amount that we're -- we have throughout all the quarters of next year, but I think it's less about trying to manage what they are and more about, okay, the size and how much is to be coming through in the revenue. So more importantly is the guide of the $610 million to $630 million in the top.

Our next question will be coming from the line of Greg Palm of Craig-Hallum.

I want to go back to systems gross margin because that was certainly a highlight, and it sounds like you're pretty confident that, that can continue to improve. So any way to maybe, Izzy, if you can sort of break out or bucket out some of the positive impacts in the quarter and just sort of broadly what's happening from an improvement standpoint relative to maybe the last 12 or 18 months?

Yes. I mean I think we keep going back to the same thing, but I think we've actually seen it over multiple quarters. And really, the way I would think about it is we saw a little bit of, call it, a decline in our operation services, but yet overall, we had a terrific gross margin on the bottom line. So if you just -- if you go through all the math in our earnings release, and I know it's not the easiest thing to track to, you'll come back to that the systems is really where the powerful improvement is I think if you unpack the quarters, really what it comes down to, last year, at this time, we did have some cost creep. And I think what -- if you walk through the halls here in Wilmington, what everybody reminds me of is that we didn't have that really disciplined cost management for the entire year and with no cost creep in how the supply chain team and sold the systems. That's really what's driving the overall systems gross margin. And not to mention what it will become as we deploy the more denser systems. So even before that, I think that's really what's the highlight, not only in the quarter and the highlight of what we feel bullish about what the systems margins will be going forward.

Okay. Yes, makes sense. And I guess, Rick, I'm fairly certain that Medline was a pretty large user of another competitor in the warehouse automation space. So I'm curious, like, does this have potential to be a competitive displacement, something that could be expanded from this initial site? Like I know they've already automated a big chunk of their [indiscernible] already. So I just want to hear what the actual opportunity with them could be over the years.

The answer is yes. We -- our technology does things that other people's technology doesn't do. We also can augment some of the other technologies that we've seen in some of their facilities. But we would do bigger projects. And I think we -- if they like what we're doing, and I don't want to mislead anybody. We don't have a contract for any more than 1. But if they like what we're doing, I think we have a huge opportunity with them.

And our next question will be coming from the line of Keith Housum of Northcoast Research.

Rick, I know it's kind of new news here, but the largest retailer in the U.S. is scaling back some of their investments with, I guess, a smaller competitive of yours. I guess any thoughts on what was perhaps driving that? And any -- does that dampen any of the enthusiasm that you see from your customers, about the use of this type of technology for the fulfillment centers going forward?

Yes. No. Actually, it's actually supercharged with the interest in our technology. So what's happening in the e-commerce space and in the supermarket space, in particular, is the congestion from all the people picking orders in the store, the DoorDash and that stuff, Instacart was a great convenience, but it's really very confusing and messing up the stores. And so what we're talking to people about is, how can you put 20,000 or 30,000 items in 10,000 square feet and deliver in a marketplace or a city that could be actually used the fresh produce from the store. So it's -- e-commerce is evolving in the way of -- the biggest guy in e-commerce delivers 1.2 packages or 1.2 items for delivery, but the retailers in the food space are delivering probably 15 or 20 package order. And so it actually allows them to do a lot of things that you can't do when you're just delivering 1.2 eaches. The reason I can't speak fully. I mean, I have my own view, but I don't express it here, why that retailer made a change of mind with that technology. But I think what you're starting to see -- and where is that we can actually use the same box, but pick each and pick eaches or use -- bring a toe a bot can bring an item or a number of items to a pick station, very similar to what we do in our breakpack installs and actually do customer orders, which is -- initially, we -- this is what we've been trying to explain to people, 3 years ago, we did a breakpack where a bot would bring a top to a person, the person would pick it and then we that basically batch pick it. The same more or less concept can be deployed in the back of a store, except you're picking a customer order. And so that -- the real problem that people are trying to solve with the e-commerce now is speed of delivery and much more local. So I think our commitment and our largest customer asked us to develop this for them. We're really excited. This is a very, very big market.

And that does conclude today's Q&A session. I would now like to turn the call back over to management for closing remarks. Please go ahead.

Yes. Thank you, everybody, for joining our call tonight. We appreciate your interest in Symbotic and look forward to seeing some of you in the coming weeks at investor conferences that will attend. Goodbye.

Joining today's conference call. You may all disconnect.