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, 2021.
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, 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. 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 “Risk Factors.” These forward-looking statements are subject to numerous risks, including, without limitation, the following:
•the expected benefits from the Business Combination;
•our plans to develop and commercialize its 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 on its business, industry and the economy;
•our estimates regarding future expenses, revenue, earnings, margin, capital requirements and needs for additional financing after the Business Combination;
•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;
•the implementation of our business model and strategic plans for our business following the Business Combination;
•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;
•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;
24
•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 SEC, 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 patents issued (170 U.S. and international) and pending (325 worldwide) 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 targeted metrics including throughput, accuracy, equipment effectiveness, and others. Our customers include industry-leading companies such as Wal-Mart Stores, Inc. (“Wal-Mart”), Target Corporation (“Target”), FedEx Corporation (“FedEx”), and TJX Companies, Inc. ("TJX").
For the three months ended September 30, 2022 and 2021, four customers, Wal-Mart, Target, FedEx and TJX collectively comprised approximately 63% and 77% of our revenue, respectively.
For the nine months ended September 30, 2022 and 2021, four customers, Wal-Mart, Target, FedEx and TJX collectively comprised approximately 64% and 66% 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
25
approximately 290 employees as of September 30, 2022, of which approximately 75% have technical degrees and approximately 160 have advanced degrees.
Recent Developments
Merger Agreement
On February 23, 2021, the Company entered into a Merger Agreement with RAAC, as summarized in Note 1, "Nature of the Business and Basis of Presentation", and Note 3, "Merger" of the Notes to Condensed Consolidated Financial Statements. On July 21, 2021, the Company completed a business combination transaction with RAAC and the combined company was renamed Berkshire Grey, Inc.
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 impact across industries and geographies and numerous other uncertainties. For example, we cannot predict the duration and spread of the outbreak of new variants of the virus, additional actions that may be taken by governmental entities, or the impact the pandemic may have on the ability of us, our customers, our suppliers, our manufacturers, and our other business partners to conduct business. Governments in affected regions have implemented, and may continue to implement, safety precautions which include quarantines, travel restrictions, business closures, cancellations of public gatherings, and other measures as they deem necessary. Many organizations and individuals, including our Company and employees, are taking additional steps to avoid or reduce infections, including limiting travel and working from home. These measures are disrupting normal business operations and have had significant negative impacts on businesses and financial markets worldwide. We continue to monitor our operations and government recommendations and have made modifications to our normal operations because of the COVID-19 pandemic, including utilizing heightened cleaning and sanitization procedures, implementing new health and safety protocols and reducing non-essential travel
To date, travel restrictions and capacity limits at customer locations imposed in response to the COVID-19 pandemic have caused delays in the deployment of two customer contracts; however, the pandemic has not significantly impacted our financial condition and operations. The impact of the COVID-19 pandemic on our financial performance will depend on future developments, including the duration and spread of the outbreak and related governmental advisories and restrictions. These developments and the impact of the COVID-19 pandemic on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, our results may be materially adversely affected.
Critical Accounting Policies and Significant Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in 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 and other obligations such as warranty cost and incentives and accounting for stock-based compensation including performance-based assessments and the estimates of the fair value of stock-based awards as of their grant date. 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 have reviewed our policies and estimates to determine if our critical accounting policies and estimates for the nine months ended September 30, 2022, 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 other than our accounting policies related to the FedEx Warrant further described in Note 16, "Common Stock and Warrants", leases as a result of the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842), which was adopted on January 1, 2022, as further described in Note 2 "Significant Accounting Policies" and no changes to our significant estimates other than the measure of progress for certain performance obligations which is described in Note 7 "Revenue".
Summary of Recent Financial Performance
Revenue was approximately $23.6 million for the three months ended September 30, 2022, compared to approximately $18.8 million for the three months ended September 30, 2021. The change is primarily due to an increase in customer deployment activity.
Revenue was approximately $52.5 million for the nine months ended September 30, 2022, compared to approximately $27.3 million for the nine months ended September 30, 2021. The change is primarily due to an increase in customer deployment activity.
Gross loss was $1.2 million for the three months ended September 30, 2022, compared to a loss of $2.7 million for the three months ended September 30, 2021. The change in gross loss for the three months ended September 30, 2022, was due primarily to increased deployment activity which was partially offset by increased overhead resulting from the growth in deployment operations.
26
Gross loss was $5.4 million for the nine months ended September 30, 2022, compared to a loss of $4.2 million for the nine months ended September 30, 2021. The change in gross loss for the nine months ended September 30, 2022, was due primarily to increased overhead resulting from the growth in deployment operations.
Combined general and administrative, selling and marketing, and research and development expenses for the three months ended September 30, 2022, decreased to $26.6 million, compared to $44.2 million for the three months ended September 30, 2021. The net decrease in total operating expenses of $17.6 million primarily consisted of a $13.8 million decrease in stock-based compensation (further described below), and a $4.0 million decrease in materials and services.
Combined general and administrative, selling and marketing, and research and development expenses for the nine months ended September 30, 2022, decreased to $84.6 million, compared to $119.1 million for the nine months ended September 30, 2021. The net decrease in total operating expenses of $34.5 million primarily consisted of a $45.3 million decrease in stock-based compensation, which was partially offset by a $12.2 million increase in salaries and employee costs related to personnel growth.
The decrease in stock-based compensation between the three and nine months ended September 30, 2022, and the three and nine months ended September 30, 2021, 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 Consolidated Financial Statements. Stock based compensation for restricted stock awards increased by $1.4 million and decreased by $35.6 million for the three and nine months ended September 30, 2022, respectively. The Company reported an expense of $1.1 million and an offset to expense of $8.8 million for the three and nine months ended September 30, 2022, respectively, and an offset to expense of $0.3 million and an expense of $26.8 million for the three and nine months ended September 30, 2021, respectively.
Net losses were $26.9 million for the three months ended September 30, 2022, compared to $40.5 million for the three months ended September 30, 2021. The decrease in net losses was primarily due to a decrease in stock-based compensation expense and a gain from the change in fair value of the warrant liabilities.
Net losses were $79.4 million for the nine months ended September 30, 2022, compared to $116.9 million for the nine months ended September 30, 2021. The decrease in net losses was primarily due to a decrease in stock-based compensation expense and a gain from the change in fair value of the warrant liabilities.
Results of Operations
The following is a description of significant components of our operations, including significant trends and uncertainties that we believe are important to an understanding of our business and results of operations.
Comparison of the three and nine months ended September 30, 2022 and 2021
Revenue
Berkshire Grey generates revenue through the sale, delivery, installation of customer contracts primarily in the United States. The following table presents revenue as well as the change from the prior period.
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For the Three Months Ended September 30, |
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|
For the Nine Months Ended September 30, |
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|
(Dollars in thousands) |
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2022 |
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|
2021 |
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Change |
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2022 |
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|
2021 |
|
|
Change |
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Revenue |
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$ |
23,597 |
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$ |
18,794 |
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|
$ |
4,803 |
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|
26 |
% |
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$ |
52,537 |
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|
$ |
27,262 |
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|
$ |
25,275 |
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|
|
93 |
% |
Total revenue for the three months ended September 30, 2022 and 2021 was $23.6 million and $18.8 million, respectively, an increase of $4.8 million or 26%. The increase is related to additional customer deployment activities. Our revenue can fluctuate significantly from quarter to quarter depending on the number of projects in process.
Total revenue for the nine months ended September 30, 2022 and 2021 was $52.5 million and $27.3 million, respectively, an increase of $25.2 million or 93%. The increase is primarily due to additional customer deployment activities. Since 2019, our revenue has been dependent upon a small number of customers and we expect that we will continue to derive a majority of our revenue from a limited number of significant customers in future years. We can provide no assurance that our significant customers will expand their business relationship with us, will continue to do business with us, or that they will maintain their historical levels of business.
27
Cost of Revenue
The following table presents cost of revenue as well as the change from the prior period.
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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(Dollars in thousands) |
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2022 |
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2021 |
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Change |
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2022 |
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2021 |
|
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Change |
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Cost of Revenue |
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$ |
24,811 |
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$ |
21,543 |
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$ |
3,268 |
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15 |
% |
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$ |
57,918 |
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$ |
31,481 |
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$ |
26,437 |
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|
84 |
% |
Total cost of revenue for the three months ended September 30, 2022 and 2021, was $24.8 million and $21.5 million, respectively, an increase of $3.3 million or 15%. The increase in total cost of revenue was primarily due to increased revenue volume and increased overhead resulting from the growth in deployment operations.
Total cost of revenue for the nine months ended September 30, 2022 and 2021, was $57.9 million and $31.5 million, respectively, an increase of $26.4 million or 84%. The increase in total cost of revenue was primarily due to an increase in deployment activity and an increase in overhead resulting from the growth in deployment operations.
Gross (Loss) Profit and Gross Margin
The following table presents gross profit and margin as well as the change from the prior period.
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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(Dollars in thousands) |
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2022 |
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2021 |
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Change |
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2022 |
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2021 |
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Change |
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Gross Loss |
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$ |
(1,214 |
) |
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$ |
(2,749 |
) |
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$ |
1,535 |
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(56 |
)% |
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$ |
(5,381 |
) |
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$ |
(4,219 |
) |
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$ |
(1,162 |
) |
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|
28 |
% |
Gross Margin |
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|
(5 |
)% |
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(15 |
)% |
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|
10 |
% |
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(10 |
)% |
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(15 |
)% |
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|
5 |
% |
Total gross losses during the three months ended September 30, 2022 and 2021, were $1.2 million and $2.7 million, respectively. Total gross margin was approximately (5)% for three months ended September 30, 2022, compared with (15)% for three months ended September 30, 2021, an improvement of 10% points. The decrease in gross loss of $1.5 million was primarily driven by lower product and per-site deployment costs.
Total gross losses during the nine months ended September 30, 2022 and 2021, were $5.4 million and $4.2 million, respectively. Total gross margin was approximately (10)% for nine months ended September 30, 2022, compared with (15)% for nine months ended September 30, 2021, an improvement of 5% points. The increase in gross loss was primarily driven by increased overhead resulting from the growth in deployment operations which was partially offset by lower product costs and per-site deployment costs. The margin improvement of 5% points was primarily driven by efficiencies in product deployment and lower product costs.
General and Administrative
The following table presents general and administrative expenses as well as the change from the prior period.
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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(Dollars in thousands) |
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2022 |
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2021 |
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Change |
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2022 |
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2021 |
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Change |
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General and Administrative |
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$ |
2,107 |
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$ |
19,286 |
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$ |
(17,179 |
) |
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(89 |
)% |
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$ |
16,773 |
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$ |
28,138 |
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$ |
(11,365 |
) |
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(40 |
)% |
% of Operating Expenses |
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8 |
% |
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44 |
% |
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20 |
% |
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24 |
% |
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|
General and administrative expenses during the three months ended September 30, 2022 and 2021, were $2.1 million and $19.3 million, respectively, a decrease of $17.2 million or 89%. The decrease in general and administrative expenses included a $16.4 million decrease in stock-based compensation due to a revised forecast for performance-based stock option metrics, a $0.5 million decrease in information technology and corporate services, and a $0.3 million decrease in overhead.
General and administrative expenses during the nine months ended September 30, 2022 and 2021, were $16.8 million and $28.1 million, respectively, a decrease of $11.3 million or 40%. The decrease in general and administrative expenses included a $14.0 million
28
decrease in stock-based compensation and a $2.1 million decrease in overhead, partially offset by an increase of $3.9 million in information technology and corporate services and a $0.9 million increase in salaries and related employee expenses.
Sales and Marketing
The following table presents sales and marketing expenses as well as the change from the prior period.
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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(Dollars in thousands) |
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2022 |
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2021 |
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Change |
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2022 |
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2021 |
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Change |
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Sales and Marketing |
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$ |
7,053 |
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$ |
7,174 |
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$ |
(121 |
) |
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(2 |
)% |
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$ |
11,107 |
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$ |
45,197 |
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$ |
(34,090 |
) |
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(75 |
)% |
% of Operating Expenses |
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27 |
% |
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16 |
% |
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13 |
% |
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38 |
% |
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Sales and marketing expenses during the three months ended September 30, 2022 and 2021, were $7.1 million and $7.2 million, respectively, a decrease of approximately $0.1 million or 2%. The decrease in sales and marketing expenses was primarily driven by a $1.0 million decrease in salaries and related employee costs and a $0.4 million decrease in marketing services and materials, which was partially offset by a $1.3 million increase in stock-based compensation. Sales and Marketing Expenses for the 3 months ended September 30, 2022 and 2021 without the impact of the liability classified Restricted Stock Award would have been $6.0 million and $7.5 million, respectively.
Sales and marketing expenses during the nine months ended September 30, 2022 and 2021, were $11.1 million and $45.2 million, respectively, a decrease of approximately $34.1 million or 75%. The decrease in sales and marketing expenses was primarily driven by a $35.1 million decrease in stock-based compensation which was partially offset by a $0.5 million increase in employee expenses and related costs and a $0.5 million increase in marketing services and materials to expand our customer reach, branding programs, and implementing systems to support planned future growth. Sales and Marketing Expenses for the nine months ended September 30, 2022 and 2021 without the impact of the liability classified Restricted Stock Award would have been $20.0 million and $18.4 million, respectively.
Research and Development
The following table presents research and development expenses as well as the change from the prior period.
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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|
(Dollars in thousands) |
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2022 |
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|
2021 |
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Change |
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2022 |
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2021 |
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Change |
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Research and Development |
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$ |
17,413 |
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$ |
17,745 |
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$ |
(332 |
) |
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(2 |
)% |
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$ |
56,683 |
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$ |
45,797 |
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$ |
10,886 |
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|
24 |
% |
% of Operating Expenses |
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|
66 |
% |
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|
40 |
% |
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|
67 |
% |
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|
38 |
% |
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|
Research and development expenses during the three months ended September 30, 2022 and 2021, were $17.4 million and $17.7 million, respectively, a decrease of $0.3 million or 2%. The decrease in research and development expenses included a $3.1 million decrease in expenses related to research and development materials, which was partially offset by a $1.4 million increase in stock-based compensation, a $1.0 million increase in employee expenses and related costs, and a $0.4 million increase in overhead.
Research and development expenses during the nine months ended September 30, 2022 and 2021, were $56.7 million and $45.8 million, respectively, an increase of $10.9 million or 24%. The increase in research and development expenses included a $10.8 million increase in salaries and related employee costs, a $3.8 million increase in stock-based compensation, and a $2.6 million increase in overhead, which was partially offset by a $6.3 million decrease in research and development materials and services.
Other Income
The following table presents interest income as well as the change from the prior period.
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|
For the Three Months Ended September 30, |
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|
For the Nine Months Ended September 30, |
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|
|
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
Change |
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|
2022 |
|
|
2021 |
|
|
Change |
|
Interest Income, Net |
|
$ |
23 |
|
|
$ |
9 |
|
|
$ |
14 |
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|
|
156 |
% |
|
$ |
36 |
|
|
$ |
23 |
|
|
$ |
13 |
|
|
|
57 |
% |
Interest income, net during the three months ended September 30, 2022 and 2021, was less than $0.1 million for both periods. Interest income, net during the nine months ended September 30, 2022 and 2021, was less than $0.1 million for both periods. The change in interest income for the three months ended September 30, 2022, is primarily attributed to an increase in the money market funds rate.
29
Income Taxes
During the three and nine months ended September 30, 2022 and 2021, Berkshire Grey recorded no income tax benefits due to the uncertainty of future taxable income as Berkshire Grey has incurred net losses since inception.
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 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 September 30, |
|
|
For the Nine Months Ended September 30, |
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Net loss |
|
$ |
(26,882 |
) |
|
$ |
(40,500 |
) |
|
$ |
(79,432 |
) |
|
$ |
(116,935 |
) |
Interest income, net |
|
|
(23 |
) |
|
|
(9 |
) |
|
|
(36 |
) |
|
|
(23 |
) |
Income tax expense |
|
|
13 |
|
|
|
28 |
|
|
|
59 |
|
|
|
40 |
|
Depreciation and amortization |
|
|
887 |
|
|
|
755 |
|
|
|
2,469 |
|
|
|
1,972 |
|
EBITDA |
|
|
(26,005 |
) |
|
|
(39,726 |
) |
|
|
(76,940 |
) |
|
|
(114,946 |
) |
Stock-based compensation |
|
|
498 |
|
|
|
13,939 |
|
|
|
(980 |
) |
|
|
43,427 |
|
Change in fair value of warrant liabilities |
|
|
(908 |
) |
|
|
(6,490 |
) |
|
|
(10,646 |
) |
|
|
(6,490 |
) |
FedEx warrant provision |
|
|
351 |
|
|
|
— |
|
|
|
351 |
|
|
|
— |
|
Other (expense), net |
|
|
12 |
|
|
|
17 |
|
|
|
110 |
|
|
|
57 |
|
Adjusted EBITDA |
|
|
(26,052 |
) |
|
|
(32,260 |
) |
|
|
(88,105 |
) |
|
|
(77,952 |
) |
Backlog
Our order backlog as of September 30, 2022 and 2021, was valued at approximately $90.5 million and $84.7 million, respectively. Our order backlog is expected to be realized over the remainder of 2022 and into 2023. Although our backlog consists of firm purchase orders, the level of backlog at any particular time may not be necessarily 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
30
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 $26.9 million and $79.4 million during the three and nine months ended September 30, 2022, respectively. As of September 30, 2022, we have an accumulated deficit of $384.5 million. As an early-stage company, we have historically obtained cash to fund our operations through preferred stock offerings. From inception through September 30, 2022, we have received cumulative gross proceeds from the sale of our preferred stock and warrants of $227.3 million to fund our operations.
We completed the Merger with RAAC 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, LLC, which provides that we may sell to Lincoln Park up to $75.0 million of shares over a 36-month period, subject to certain conditions. See Note 17, “Subsequent Events”, in the Consolidated Financial Statements for more information. Subsequent to September 30, 2022, we sold approximately 2.5 million shares of Common Stock under the purchase agreement, for net proceeds of approximately $3.3 million. Our future capital requirements will depend on many factors including the growth of the business, continued research and development in our customer solutions, investment in sales and marketing efforts, and support for our operations. As of the date of this Quarterly Report on Form 10-Q, we believe that our existing capital resources will be sufficient to support our operating plan and cash commitments for at least the next 12 months.
Cash Flows
The following table summarizes our cash flows during the years presented.
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
Net cash used in operating activities |
|
$ |
(93,938 |
) |
|
$ |
(81,372 |
) |
Net cash used in investing activities |
|
|
(2,214 |
) |
|
|
(2,754 |
) |
Net cash provided by financing activities |
|
|
3,213 |
|
|
|
193,463 |
|
Effect of exchange rate on cash |
|
|
(142 |
) |
|
|
(59 |
) |
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
$ |
(93,081 |
) |
|
$ |
109,278 |
|
Cash Flows for the nine months ended September 30, 2022 and 2020
Operating Activities
Net cash used in operating activities during the nine months ended September 30, 2022 and 2021, was $93.9 million and $81.4 million, respectively. The increase of $12.5 million in cash used for operating activities is the result of approximately $37.5 million decrease in net losses offset by $47.7 million in adjustments from non-cash operating activities and $2.4 million in changes from net operating assets and liabilities.
Changes in non-cash operating activity of $47.7 million primarily consisted of a $44.4 million decrease in stock-based compensation and a $4.2 million increase in gain on change in fair value of warrants. $35.6 million of the decrease in stock-based compensation is due to the revaluation of restricted stock awards that are treated as a liability as previously described.
Changes in net operating assets and liabilities totaling $2.4 million is primarily related to a $16.5 million decrease in cash from changes in accrued expenses, a $2.8 million decrease in cash from changes in accounts receivable, and a $0.8 million decrease in cash from changes in accounts payable, partially offset by a $7.9 million increase in cash from changes in prepaid expenses, $6.1 million increase in cash from changes in deferred fulfillment, and $3.9 million increase in cash from changes in contract liabilities.
31
Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2022 and 2021, was $2.2 million and $2.8 million, respectively, and primarily relates to the purchases of fixed assets.
Financing Activities
Net cash provided by financing activities during the nine months ended September 30, 2022 and 2021, was $3.2 million and $193.5 million, respectively. The decrease in cash provided by financing activities of approximately $190.3 million was due to the impact of the Merger, as described above.
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 September 30, 2022, we did not have any long-term debt.
Recent Accounting Pronouncements
See Note 2, "Significant Accounting Policies", in the Consolidated Financial Statements regarding recent accounting pronouncements.