Thank you for standing by, and welcome to the Symbotic First Quarter 2026 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star one one again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Charlie Anderson, Vice President, Investor Relations. Please go ahead, sir. Yeah, hello. Welcome to Symbotic's first quarter of fiscal year 2026 financial results webcast. I'm Charlie Anderson, Symbotic's Vice President, 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 that 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. A reconciliation of GAAP to non-GAAP 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's Founder, Chairman, and Chief Executive Officer, and Izzy Martins, Symbotic's Chief Financial Officer. These executives will discuss our first quarter of fiscal year 2026 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're off to a great start this year as our operational execution, product innovation, and financial discipline are translating into improved results. Notably, in the first quarter, we grew revenue by 29% and significantly expanded margins year-over-year, paving the way for our transition to GAAP profitability. On our last call, I highlighted that one of our key objectives this fiscal year was to unlock higher margins by providing additional value for our customers. As you can see from our results, we are on a solid trajectory. We also have increased line of sight that our product innovation, notably with our next-generation storage solution, will yield tangible economic benefits for our customers while benefiting our margins on an ongoing basis. Another objective is to broaden our opportunities with customers, particularly in e-commerce. On this front, we are seeing strong execution on the program launched a year ago with Walmart for their accelerated online pickup and delivery centers at stores. First, we made a technical and operational improvements to the first-generation Automation Systems we inherited at 19 Walmart stores. This helped drive record holiday volumes and improve performance metrics from those systems. This is important because we can take those improvements and incorporate them into our enhanced second-generation design, which we're being paid to develop. Second, we delivered record financial results from that paid development program during the quarter as we advanced toward installation of the initial prototypes. We see our offerings as the future of e-commerce, as retailers are increasingly seeking to take advantage of their store footprints and localized presence to offer customers unparalleled availability and order fulfillment speed through automation. We are also meeting our key objective to invest in our innovation engine to expand our capabilities. On that note, we recently closed the acquisition of Fox Robotics, a leader in autonomous forklift solutions. This acquisition further enhances our strategy of utilizing our software to orchestrate robots that move goods through the supply chain, from the dock door at the warehouse to the individual customer order from the store. We are also investing in internal R&D efforts intended to drive higher levels of performance across our operational systems. Here, we are also making great progress. Specifically, for our SymBots that move goods in customer distribution centers, we have seen an over 25% increase in both the number of miles driven and the number of transactions per bot daily versus one year ago. We have also seen meaningful per-site volume increases from our floor-loaded inbound cells that ingest unpalletized cases compared to a year ago. The fact that our platform improves over time speaks to our leadership in the emerging category of what some call physical AI. We are doing this on a massive scale. To put it in perspective, Symbotic operational systems processed over two billion cases for customers in calendar year 2025, inbound and outbound, and our SymBots logged nearly 200 million miles alone in calendar year 2025. As best we can tell, this may be the most traveled, fully autonomous vehicle fleet in the world. In summary, we're meeting our objectives, which in turn are delivering braggingly happy customers, sustainable growth, and expanded profitability. As always, I want to thank our team for all their hard work, along with our customers and our investors for their continued support. I'll now turn it over to Izzy, who will discuss our financial results and outlook. Izzy? Thanks, Rick. Fiscal first quarter revenue reached $630 million, meeting the top end of our forecasted range. We achieved GAAP profitability with $13 million in net income, while our adjusted EBITDA of $67 million was well above the top end of our forecasted range due to stronger margins and continued cost discipline. As a result, we delivered a double-digit EBITDA margin for the first time. Importantly, first quarter revenue surpassed fourth quarter levels, driven by the continued expansion of systems in deployment, the transition of systems from deployment to operational status, and ongoing progress in our paid development of a micro-fulfillment solution for e-commerce. We also delivered another strong quarter for new deployments, with 10 systems added. This included several phase one deployments for our largest customer that will do twice the work of our historical phase one deployments, and possibility unlocked by the density of our next-gen storage solution. The quarter also included a new deployment in the Northeast for GreenBox, which, as a reminder, is now branded as Exol. Strong start activity, disciplined project execution, and continued progress with our paid development program drove systems revenue growth of 27% year-over-year to $590 million. We now have 57 systems in deployment, as three deployments transitioned to operational status during the quarter. Installation timelines have continued to improve relative to historical averages, reflecting ongoing process improvements across our supply chain and implementation teams. As our base of operational systems continues to expand, software revenue grew 97% year-over-year to $10.9 million in the fiscal first quarter, and operations services revenues grew 68% year-over-year to $28.8 million. Now turning to margins in the fiscal first quarter. Gross margin expanded both sequentially and year-over-year, underscoring the accelerating strength of our operating model and the leverage we are beginning to realize at scale. Systems gross margin continued its trend of significant year-over-year improvement, driven by structural operational enhancements, disciplined cost management, and the addition of our paid development program. Software maintenance and support delivered further year-over-year gross margin expansion, benefiting from scale. We expect this trend to strengthen as our installed base of operational systems grow. In operation services, we generated an improved gross profit with continued process optimization. Operating expenses on a GAAP basis were $127 million in the fiscal first quarter. Adjusted operating expenses totaled $80 million, down sequentially, as we maintained strong cost discipline and increasingly aligned our R&D investment with revenue-generating activity. Notably, a portion of R&D headcount shifted to supporting paid development, where that work is reflected in revenue, with the associated costs recorded in cost of revenue. This evolution underscores how our core R&D capabilities are increasingly being monetized as the business scales. Before I discuss profitability, I want to highlight that our results this quarter reflect an accounting change in how we recognize stock-based compensation expenses. We have moved from a graded vesting approach to a straight-line, pro rata method, under which expense is recognized evenly over the service period, consistent with how the awards vest. This change follows the completion of the accelerated vesting associated with our becoming a publicly traded company, which required higher expense recognition in earlier periods. With the final grants from the transition to a public company now fully vested, the more common straight-line method more accurately matches the ongoing timing and financial impact of our stock-based awards. As a result, we recast retrospective periods in fiscal years 2024 and 2025, and those updates are reflected in the earnings tables in our press release. We have also posted a supplemental presentation on our investor relations website with the recast quarterly results to assist with model updates. As you will see from the recast results, GAAP results improved modestly due to lower stock-based compensation expense, but there is no change to any prior period adjusted EBITDA results. Our net income for the first quarter was $13 million, a significant improvement from a net loss of $17 million in the first quarter of fiscal year 2025, reflecting the continued strengthening of our financial performance. Adjusted EBITDA of $67 million was above the high end of our forecast and increased significantly from $18 million in the first quarter of fiscal year 2025. These results demonstrate the operating leverage available to us and reinforce our confidence in our ability to continue expanding our EBITDA margins and delivering sustained GAAP profitability. Our backlog of $22.3 billion continued to remain strong. The modest change from $22.5 billion last quarter primarily reflects revenue recognized during the quarter, largely offset by final pricing adjustments on projects started in the quarter. We finished the quarter with cash and cash equivalents of $1.8 billion, up from $1.2 billion in the fiscal fourth quarter, driven by the timing of cash receipts tied to project milestones, the signing of new projects, and $424 million in net proceeds generated from our successful follow-on offering completed in December. Now turning to the outlook. For the second quarter of fiscal 2026, we expect revenue between $650 million and $670 million, and Adjusted EBITDA between $70 million and $75 million, reflecting continued strong top line growth and margin expansion. Looking ahead, we expect our third quarter sequential growth to be similar to what we anticipate in the second quarter, with more pronounced growth in the fourth quarter. With that, we now welcome your questions. Operator, please begin the Q&A. Certainly. And ladies and gentlemen, we ask that you please limit yourself to one question and one follow-up. You may get back in the queue as time allows. Our first question comes from the line of Nicole DeBlase from Deutsche Bank. Your question, please. Yeah, thanks. Good afternoon, guys, and thanks for the question. Could we just start, I think a few times, Izzy, in the script, and, and Rick kind of commented on this too, you talked about how the paid development impact to revenue and maybe EBITDA was a bit stronger than you expected and a factor in, in the 1Q beat. Can you just maybe elaborate on the impact a bit and, how that kind of moves throughout the rest of the year if the impact grows? Hi, Nicole. Thank you for the question. Here's how I would explain it. If you recall, in the last quarter, we talked about that representing about high single digits of our total revenue. It's not all that significant of a change, but we've now reached, call it, double digits. The way I would think about it going forward, we wanna maintain our flexibility in how we deploy our resources. So albeit, yes, it reached double digits in the first quarter, it's probably not going to be at that level in the second, based on what we're already seeing and how we're redeploying. So it will be lumpy, but I did wanna call out that it was higher than the fourth quarter. Okay, got it. Thanks, Izzy. And then you also mentioned in your prepared remarks that you guys have continued to improve deployment time. Can we just get an update on what that timeline looks like today? Thank you. Sure. I would, I would say as you take, call it, from when we announce a deployment to the end, we're still staying within that two-year period. I think what's important to note is we're focusing on how we shrink the time from installation to, call it, acceptance, to moving it to operational. We have seen improvements in that, in that most recently in, in our averages, we're now probably on that side of it, going to ten months, and that's what we wanna continually improve. But overall, I would still say two years from the day we announce a deployment is a good proxy as we continue to improve on that end. Thank you so much. I'll pass it on. Thank you. Our next question comes from the line of Joe Giordano from TD Cowen. Your question please. Hey, guys. Thank you. On the R&D spend, I hear that some of it was moved into COGS, like, based on the, you know, where these people are, what they're working on. But is the level here, like, the run rate that we should be thinking of? And how much should we think of, like, implications on Systems gross margins as that cost is flowing in there? Okay. Hi, Joe. Thank you for the question. Here's how I would think about it. You did see, call it, a decline in the first quarter in total R&D compared to the fourth quarter, and as I mentioned, because we had a little bit more going into that paid development. To answer your question, it's no different than how I just answered the paid development. It's not going to be a, you know, a straight line. It will be a bit lumpy. So the expectation would be if there's, how we're allocating our resources in the second quarter, if there'll be less on the top, we're keeping the same resources, they'll be focusing on other priorities. So what I can tell you is, in the second quarter, I would expect a higher, a higher number in R&D, in our OpEx expense versus what you're seeing. So I wouldn't take the first quarter, the exit trend, and model that completely out. And more look at it as our annual spend in R&D should stay about relatively the same. The same as, like, what it was prior, like, the same assumptions that you had prior? Exactly. Okay. And then on the 10 starts in the quarter, like, how should we think of the makeup of those? Like, you know, traditional systems like you would have for your large customer versus break packs versus, you know, micro-fulfillment stuff. So how should we think about the, as we think of, like, almost the, you know, the size per start? Okay, so I'll start backwards. There are no micro-fulfillment in the 10 deployments that we mentioned. We don't give specifics as to what that represents. As I said, one is for Exol, and the remainder, it's a mix between, you know, different types. You can't treat every deployment the same, so it's a bit of a mix. But I think the highlight, though, is as we transition to the next-gen structure, you'll know that, you know, now you could fit more because of the density of that next-gen structure. So, call it the size, you kind of get a two for one, and there's a little bit of that in the 10 deployments that we have in the quarter. Similar to what we had last quarter, but I'm not gonna give specifics between, you know, the types of deployments. Fair enough. Thanks, Izzy. Thanks, Joe. Thank you. And our next question comes from the line of Mark Delaney from Goldman Sachs. Your question, please. Yes, good afternoon. Thank you very much for taking the questions, and congratulations on the good results. I was hoping to start with the shipment trajectory. On the last earnings call, Izzy, you talked about a more muted first half, based on your expectation for the deployment timing with the new storage structure and then an acceleration in 2H. You actually started 10 systems in the first quarter, which was more than I was expecting. And you talked about 3Q being similar growth to 2Q and then a pickup in 4Q. It seems like maybe there's been some movements in how you're seeing the year shape up. I was hoping you could help us better understand what's driving that. Hi, Mark. I remember, you know, when we talked about this, so this is really what's going on. It's really not any different. So when we talked about being a less pronounced, call it, sequential improvement in the first half of fiscal year 2026, that was on the heels of a big improvement, call it sequential improvement, quarter-over-quarter last year. So if you look at where we're standing right now, we ended up at a little bit over $618 million in revenue in the fourth quarter, and we're at $630 million. So not that same sequential improvement that you saw in the tail end last year. So that's coming to fruition, and if you take, you know, take into account what we guided to or what our outlook is in the second quarter, we end up pretty much in the same place, maybe a little bit better. And now what I would say is the second and third quarter are a little bit more aligned than what we originally saw, but it still falls within what we, what we were talking about, you know, a couple of quarters ago and last quarter. Got it. And my other question was on the announcement of the Fox acquisition. Maybe if you could please help us understand what the implications are from that acquisition for revenue margins in the near term, and then what it might mean for your business in the longer term as you can bring that capability to your customer set. Thank you. Yeah, can't really say what the revenue implications are right now. I think we'll develop that over time. What we liked about Fox is that a number. They have 25 different customers. A number of those customers are not Symbotic customers today, so it gives us an opportunity to enter a new customer base. What we liked about Fox is that they're essentially using a fork truck on the dock to do the same thing we do with our transfer deck and our structure. As a matter of fact, what we do in the transfer deck and the structure is we might have 100 bots in a 400 by 24 foot wide, so a 10,000 sq ft area. The dock may only have, like, 20 or 30 fork trucks. They're bigger, they're heavier, but the software that we're using and the evolution of what we're doing, where they have vision and they have LIDAR, and they can avoid collision. We think this is a market where we could sell people dock automation separate from even warehouse automation. So we think this is a very big market. A lot of people are looking at this market. We have some very big customers who have been experimenting with Fox. So can't say exactly how it's gonna go. It's very early stage, but we like the customer base, and we like the potential. Thanks. I'll pass it on. Thank you. Our next question comes from the line of Piyush Avasthi from Citi. Your question, please. Hey, guys. Thanks for taking my questions. One on fulfillment system. Like, I think you guys have mentioned the $5 billion opportunity with Walmart, but the total addressable market is more like $300 billion plus. Rick, you kind of mentioned working on the second generation. Maybe talk about the timeline on when you can market this offering to incremental customers outside Walmart. And if you could refresh us on the timeline for the $5 billion opportunity with Walmart, that would be appreciated. Yeah, so we have a couple of prototypes that will be the next generation. This is what we've learned from the initial 19 installs that we bought. Walmart asked us to improve that install. So we have two installs that'll happen in the next year. Not exactly sure how exactly what month, but it'll be within the next 12 months, maybe sooner. That addressable market, it's a little hard for us to figure out because everybody that we've talked to with a traditional system has asked us about, we call it SymMicro, is the way we call these systems. But it's not just these systems are not just food systems, they're not just back of store. They could actually be e-commerce for, let's say, somebody like a Medline, which is doing very specific small deliveries to, let's say, a surgical room. So I think this is. I don't know, Izzy or the financial people put a number to it. It's a very, very big market, and it's a worldwide market. And these Systems are smaller, so people are more interested in... And they're cheaper. So people are more interested in saying, "Yeah, I could experiment with one of those," versus going into a warehouse and saying, "I'm 100% committed on a $50 million-$70 million system." So, not sure I'm exactly answering your question, but this is. We are. Every customer we talk to about a warehouse now talks to us about SymMicro. Very helpful. This one's helpful. Go ahead. I was gonna say, and on the backlog, the way to think about it is exactly how Rick mentioned, is that within this calendar year, maybe sooner, we'll get past those prototypes, then that backlog would be triggered. After that, and also just as a reminder, that backlog only represents 400 stores. So as we continue to do more, obviously, as you can tell, as you asked your question, the backlog is really small compared to the addressable market. Got it. Helpful. And, can you also update us on the interest trends for GreenBox? I think you guys have a site coming live, so if you can update on, any timeline for this site and other sites, and how close are you to convert potential customers? Like, any incremental color would be helpful. Yeah, I mean, my answer is we're close. We have a couple of customers that we're actually beginning to talk contracts with, but the site is still not ready to go live, so it'll be, it'll be in the next nine months, nine to 10 months before, we're really ready to start shipping customers. Maybe sooner, but that's what we would expect. It's gonna take time to get contracts done, customers signed, and... But a lot of interest now because people can now go visit the sites. We're starting to give tours, and so it's real to people now versus just a concept. Appreciate all the color, guys. Thank you. Thank you. And our next question comes from the line of Colin Rusch from Oppenheimer. Your question, please. Thanks so much. You know, as you move into multiple form factors here with the bots and start working through, you know, different generations of these bots, can you talk a little bit about the potential for designing modular, you know, modular components and things that are common across these form factors to help optimize some of the cost structure? Yeah. So that's exactly what we're planning on doing. So today, we have the original SymBot, but we also have a new bot, which we haven't really talked about. We call it a Stretch Bot. So the SymBot can handle a 24-inch box, the Stretch Bot handles a 36-inch box. And that's, that—so it's, it's kind of like a minivan and then a Suburban. So bigger, bigger capacities, and different customer bases. And then we also have our break pack system, which we're, we have a second generation prototype in Brooksville, that site, and then we're starting to roll those out to many more sites. That is a second generation, what we call a MiniB ot. And then we have a third generation, which will become the dock handling. I mean, a fork truck for us is just another bot. And so what we're using is, it's really years and years of developing, figuring out the technology. But these bots now have... We'll continue to upgrade the chips so they'll have more processing power, but the bots now have eight cameras, and the bots will also have LIDAR on them, which is the newest thing we're installing. And so that allows us to use bots for our structure, but we'll be able to use bots for any part of the warehouse. So we're expanding the warehouse capability, and, and that same software can control lots of different machines. So it's what we've always said, we want to create a software platform, and then we wanna have... For me, they're just different apps. The bots are just different pieces of technology. That's super helpful. Then, thinking about the opportunity set for you guys downstream in the logistics space, you know, given, you know, your entrance and kind of engagement in, you know, outside the warehouse or the distribution center, you know, and some of the shipping lines, you know, could you talk about how quickly you might be able to, you know, potentially serve customers just on that space, if that's of interest, or does everyone want to work with you from the warehouse all the way through the final delivery? Yeah. So, we're pretty busy right now with the customers we have, but we're developing technology to both be able to unload containers, and some people are now asking us, can we load containers in different ways? And one of the things that we're doing is that we're finding that there's a series of customers that order a full trailer to a store. There's another series of customers, example, the wine and spirits guys, which actually have very small deliveries, but they're routing. They're very important for the routing of the trailers. And for instance, food service might be interested in the same thing, where their orders are smaller. So the ability that we have to sequence and sort and stack products, we don't think anybody else has the capability to do that in the whole world, that we can do. And so what we're spending a lot of time with customers is looking at different verticals. For instance, a lot of people think we're doing food, but actually, we're doing food, we're doing general merchandise, we'll be doing route drivers, we'll be doing hospitals. So the technology will be. We will continue to invent machines, we will continue to look for acquisitions, and we will continue to refine the software to be able to solve the customer problems. So we look at ourselves really as a solution provider, and many of the automation people look at themselves as hardware suppliers. So we sell the software, we integrate the software, we make the machine, and then we're working with customers now where we actually have to invent new machines. But we've gotten very good at that lately, and we'll continue to look at acquisitions, and we'll continue to refine the software, and that brings the whole process together. Excellent. Thanks so much, guys. Thank you. And our next question comes from the line of Ken Newman from KeyBanc Capital Markets. Your question, please. Hey, good evening, guys. Congrats on the great quarter. First, Izzy, thanks for the color that you gave on the sequential revenue growth expectations for third quarter and fourth quarter. I think if I heard you right, you mentioned a more pronounced sequential growth in 4Q from 3Q. First, I'm just curious, is that truly just the timing of the deployments that were from new initiations from a year ago? Or is there anything else to that we should kinda be aware of in terms of that stronger sequential growth? It really relates to, if you recall, in the third quarter of last year, we unveiled the next-gen structure, right? So if you think about how our percentage of completion revenue comes in, that really... And as we said then, you know, people were kinda waiting—the customers were waiting for that. So given that, you know, that started as part of the deployments in the fourth quarter, that's why what I see right now is that I would expect more revenue in the fourth quarter this year. So that's the reason for my comments and the driver of it. Okay, that's helpful. And then for the follow-up, Rick, I think we talked a little last quarter about chip availability, and I think the takeaway there was that you don't really have that much exposure to the higher inflation memory impact. But when I listen to you, all these new exciting developments that you've got on the new generation of bots that you're developing, it sounds like those are gonna be requiring updated chipsets. So maybe just talk a little bit about your ability to source those updated chips, and if you think there's a way to price for those chips in a price, cost-positive way. Yeah. So we'll, we'll probably upgrade to, at some point, to the next generation of NVIDIA chip or something like that, but these are not the big $25,000 chips. These, these chips are plenty available. I mean, we're still at the—our bots are still at the, at a fairly, at, let's say, the medium end of technology. These are not super expensive chips. We think they're readily available. We're not, we're not fighting for, with, Google and ChatGPT for those chips. So we don't, we don't expect that kind of problem, and we're just—and we'll be able to upgrade when we're ready to upgrade. Right now, we can handle what we're doing with the chips that we have, but we actually think the new chips that we're looking at will be more powerful and either the same price or less expensive. With what you're looking at in the, you know, the battle going on with the big guys in AI, that's not the space that we're playing in. What we can do is much more moderate control on the bots, and then eventually, the bots will get smarter, but we're not building huge data centers here. Got it. Very helpful. Thanks. Yep. Thank you. Our next question comes from the line of Jim Ricchiuti from Needham & Company. Your question, please. Hi, thanks. Good afternoon. I apologize. You may have talked about this. I joined a few minutes late. I was wondering if there's any update been given on how the Mexico site is progressing and, you know, how you might characterize the pipeline for securing additional locations there? Yeah. So, Mexico is progressing well. The timeline, I think, is within the next year, next 12 months, maybe sooner. The building's built. We're getting ready to install. I've spent a week down there a month ago. I think there's a lot of opportunities. It's a big country. We're also looking at other places in Central and South America. So, our customer in Mexico is very happy with us. They like what we're doing. They can justify it based on more efficient deliveries to some of the big stores, but also some of the small stores and inventory. So we think we have a—we, without getting very specific, we'll do a number of sites in Mexico, far more than we thought initially. Thank you for that, Rick. Just and then a follow-up question. Just with respect to Fox Robotics, if I heard you correctly, I, I think you said they had 25 customers, and I thought you said a number are not Symbotic customers. So does that mean that they're selling to a couple of your customers, and is one of them your large customer? And I assume these are pilots. Is that a fair way to think about this? Yeah, mostly what they're doing is pilots. They are selling to our large customer. Every time I go in a warehouse, I look at their robots, and I look at how we could help them do better. But they also have... I mean, the interesting thing with Fox is our large customer has thousands of fork trucks. But there are lots of other customers, the CPG manufacturers, their facilities, where they actually don't do as much manual selection, but they still move pallets from the warehouse to the trucks. They unload goods to their warehouses. So what I'm excited about is that we're looking for more opportunities to interact with customers, and acquisitions is a nice way to do it, to introduce them as we talk to their supply chain people, and we make these robots more successful. They build credibility and trust in Symbotic as a solution provider. So yeah, some of their biggest customers are not, are not Symbotic customers, now. We hope they will be in the future. Got it. Thank you. Yep. Thank you, and our next question comes from the line of Guy Hardwick from Barclays. Your question, please. Hi, good evening. I was just wondering, Rick, if you look at the core offering of Symbotic, how progress is being made in offerings of chilled or frozen offering, which some of your competitors can do? And then I had a follow-up question. Yeah, we are working with several customers right now on designs for perishables. We don't, I can't tell you we have a contract yet, but the new structure has allowed us to offer to... If a customer was building a greenfield, and it was 500,000 sq ft at $500 a foot, now we're gonna spend $250 million for a building, and we can do that in 60% of the space. So instead of 500,000 sq ft, it's 300,000 sq ft, and they can save $100 million on construction before they even put the system in. That's what we're talking to people about. And so, there's obviously people are concerned and tentative because of how sensitive these structures are. But our arguments are much more compelling, and we will be spending a bunch of money on R&D to build prototypes internally. And so we would expect fairly soon, I can't tell you whether it's a year or could be longer, but we would expect fairly soon to announce some perishable sites. But where this has gone from theoretical to the new structure and the density, especially in perishables, 'cause the construction costs are so expensive, has been a real opportunity for us. Just a follow-up for Izzy. I'm just wondering how much of the development revenue is still available to be recognized over the next few quarters or next year? There's still quite a bit left. I'm not gonna give you specific numbers, but I think the way to think about it is focus on what Rick's answer was, which was within this calendar year, we expect to have the prototypes. So obviously, after the prototypes, we wouldn't have any more development going on, and we'd be in installing, so. Thank you. Thank you. And our next question- Yeah, one of the things I should have added is that the SymMicro Systems, they will have perishables. They will have a perishable aisle, and they will have a frozen aisle. So we're already comfortable that the bots can handle it. There's other technology we need to develop, but we're—this is not a what if anymore. This is like, this is happening. Thank you. Our next question comes from the line of Mike Latimore from Northland Capital Markets. Your question, please. Great, thanks a lot. Yeah, on the operational services gross margin, it's pretty healthy relative to the fourth quarter. Should we think about the gross margin here as remaining positive going forward? Yeah, so as we discussed it last time, we said, you know, it was a bit of an anomaly of what we saw in the fourth quarter, and given, call it, what we should be expecting, is that it should be continuing to improve. I think that improvement occurred a little bit more, call it sooner than what we expected, but I think where we're at right now is a good exit trend for what you should see in the coming quarters. Great. Sounds good. And then on the kind of sequential growth forecast for the year, does that kind of imply that new starts should improve every quarter as well? We don't guide to the amount of new starts. I think as you think about, we had 10 in the fourth, we have 10 in the first. I think we, you know, we see that in the coming quarters as it being healthy, but there's a potential for it to drop off at the tail end of the year. So I would say I wouldn't take that as a, you know, as a trend, but at least something that we could count on in the, call it this quarter and next quarter. All right, great. Thank you. Thank you. And our next question comes from the line of Derek Soderberg from Cantor Fitzgerald. Your question, please. Yeah. Hey, everyone. Thanks for taking the questions. Rick, in the prepared remarks, you mentioned broadening within e-commerce. You're now working on in-store automation for buy online, pickup in store. Do any of your customers want to leverage your technology for the direct-to-consumer distribution centers? And is that even an area that you guys would want to play in? Yep. The answer is yes. Got it. That's interesting. And then as my follow-up, Rick, with the forklift automation, seems like the case, case handling aspect of your distribution centers are pretty much fully automated. On the break pack side, what's sort of left to automate there? What's, you know, potentially possible to automate, over the next, you know, coming quarters? And maybe if you could just talk about how that technology has sort of evolved to the point where you're now rolling out that pilot to multiple facilities. Thanks. Yeah. So, we started out with a prototype MiniB ot, we call it, and now it's our fully designed, our own SymBot. The new bots have LIDAR on them. They can handle more units per trip. They're faster, they're safer. So that allows us to do break pack, which is basically cutting open up a case and putting something on a MiniB ot, and then we put it into a tote. That process has applications. So the logical thing where you might see that is in a Walmart supercenter, there's every supercenter has a huge drugstore in it. So those kind of smaller applications within a store, within a store are basically, they carry 30,000 items in, let's say, in a drugstore, but they only have one facing, not a whole case. So those applications, actually, there's a lot of applications. There's convenience stores have applications, there's the auto parts stores have applications where they have a lot of items, but they only want one or two of each one of those. So that would be direct to store. But we can also see that kind of application where people want to use our technology to sort, and so somebody like a Medline is really interested in, could we deliver 20 different items, not cases, 20 different items in a tote to a surgical delivery room? And nobody else in the world can do that. Nobody else can say, "Well, if you want a case, we'll deliver a case. If you want an each, we'll deliver an each in a systematic way." There are, there are other people that deal with eaches, but nobody can do it with the level of sophistication or the speed with which we can do it. So those are what I would call, again, software apps combined with hardware. So that's a particular problem that we're solving. Just happens to be a lot of customers have that problem. And then the third thing, And, and so what happens in our system, for those of you who have been to a site, is you know that the bots mostly run on rails, and then on the transfer deck, they're kind of free floating. In the break pack, they're much more free floating, and so that takes a lot of software to stop them from crashing into each other at high speed with LIDAR. That same technology is what got us excited about using fork trucks on a dock, which is, you know, the most congested and dangerous part of a warehouse, and being able to do that. And so what it allows us to do is when we finish an order for a customer, and an order could be a pallet, 20 pallets going on a truck, or it could be one, we can now take a fork truck and sequence that onto the truck. And that is typically done by humans, and this is a very good way because we now control the whole system. We know exactly when the pallet's gonna be done. We know exactly where it goes on the truck. And so that actually makes a whole new part of the warehouse open to our automation, and that's what we're gonna continue to march down that journey. Very helpful. Thanks. Thank you. Our next question comes from the line of Greg Palm from Craig-Hallum. Your question, please. Yeah, thanks. I wanted to just go back to the Systems gross margin for a second and just make sure I understand it right. So there was sort of a real allocation of, of costs- from R&D to, you know, cost of goods sold that impacted the Systems gross margin. Are- Can you quantify exactly how much that was? And I guess, kinda where I'm going with this or what I'm getting at was, was Systems gross margin stepped down sequentially. So without this sort of reallocation, if you wanna call it that, would Systems gross margin been, you know, up sequentially from Q4? Yeah, great question, Greg. Thank you. Here's how I would think about it, is, like I said, the relative proportion of how much was paid development didn't grow significantly. Like I said, last time, it was high single digits, now it, it hit double digits. I think how to think about it, is, and how I how we measure success by the team, as you may know, we have pass-through expenses, and those pass-throughs come in on the top line and the bottom line. They were just a little tad bit higher than what they were in the fourth quarter. And so how I measure or how we measure, call it, Systems gross margin, you know, quarter over quarter, we actually did have a slight sequential improvement. Overall, what I would focus on is, at times, those things will be lumpy, and I would focus on the bottom line gross margin, where you see that significant improvement from the fourth quarter. Got it. Understood. Okay. And then I just wanted to follow up on the Fox acquisition. I thought that was pretty interesting as well. And Rick, you talked a little bit about sorta, you know, different kind of applications or use cases. But how do you think about the portfolio expanding longer term? I mean, I'm not trying to, you know, get you to give up any sort of secret information, but you know, in terms of other types of technologies and applications, you talked about trailer unload, but you know, what else might be an attractive fit or a bolt-on for Symbotic? Yeah, so we're actually... I mean, you know, we've got this big war chest, and we did it very purposely. We're looking at a common-- And we're actually doing a lot of work with some people that specialize in this field. It's like, how should we think about M&A? Some M&A could be a way of acquiring customers and getting much more interaction with the customers. In the Fox acquisition, we can sell guided fork trucks to a lot more people than we can sell a Symbotic system to. I mean, we could sell two guided fork trucks to Joe's Pizza warehouse. But there's people like DHL and other people that are very interested in this space, that they're running tests on a lot of the big CPG companies. So we're looking at those kind of acquisitions, and we looked at Fox and saying, "This is a very, very large potential customer base." Smaller sales per transaction, but beginning to show customers how they can think about reorienting their warehouse. So you've got. We don't do a lot with pallet storage. We're kind of an unpalletized storage company, but there are still pallet storage companies. There are automated guided fork trucks. Fox is pretty much autonomous fork trucks, but there are other types of fork trucks. So I think we'll look at that. We'll look at the import DCs and look at what they need there. We'll look at different types of technology. So one of the things that we're probably spending more money on R&D than any other automation company, I'm pretty sure, by a lot, last year, and we'll spend even more this year. So we're looking at beginning the process of how we can invent stuff to think about different parts of the warehouse. So, there's. We don't do a lot with clothing right now. We're interested in clothing, we're interested in fashion, we're interested in automation, auto parts. And so with that, the way I look at the business is, we understand if we can understand the customer's problem, I don't wanna go to the customer and say: Here's what I got, that's what I got. You need to make your problem fit into my solution. We may only have 75% of the customer's problem solved, and then we would say, "Either we can invent it or we can buy it." So we're very much interested in lots of different startups. A lot of those guys are struggling right now. The VC guys are cutting back on some of the startups, so good opportunity for us. But we also could look at a fairly sizable acquisition. And so we're. The money's not burning a hole in our pocket, but we're certainly on the prowl, looking for various acquisitions. Yeah, makes sense. All right. Appreciate the call. Thank you, and our next question comes from the line of Keith Housum from North Coast Research. Your question, please. Thanks. Good afternoon, guys. So Rick, over the past year, you guys have expanded your sales force. You know, you guys added Medline last quarter. Can you perhaps give us an update on some of the, I guess, efforts that you have in terms of, you know, focusing on on places outside of the U.S. and perhaps success you guys are having and confidence in your ability to add customers to your backlog? Yeah, so we're spending a lot of time in Europe now. We've got three or four people in Europe. They have very interesting problems because real estate is so scarce and so expensive there. And so it's very expensive for them to either put up a greenfield. So we're looking at Europe. We're talking to all the usual suspects in Europe. We're new there.... But we're now able to sell in Europe because we have European suppliers. We have some German suppliers, some Italian suppliers, some English suppliers. So Europe is something that we're very much focused on and probably spent, I don't know, 100 times more hours there in the last six months than we did in the prior five years. So that, that's of interest. I go to Europe three or four times a year now, maybe more, one, to see suppliers, and two, to actually meet with customers, potential customers. So we're still new in Europe, and, you know, the Europeans, there's a lot of German companies that make stuff, but, I think, people are now beginning to understand how different our technology is. There's packaging issues in Europe that are different in the U.S., so we're working on experimenting with those. But I think Europe, and, Canada, Central and South America, Mexico, those are all markets for us now. Great. Thank you. I'll turn it back over. Certainly. Our final question for today comes from the line of Robert Mason from Baird. Your question, please. Yes, thanks for taking the question. Izzy, would you be able to provide a little color on free cash flow, how that may play out this year, particularly if you, you know, as you cross the line into GAAP profitability and maybe grow from here, what kind of implications that has on cash flow, if any, from a tax standpoint? The way I would think about free cash flow, if you see the amount we've reported in this quarter, that is how you would think we should be landing. If you take where we landed in the fourth quarter and the third quarter of last year, and you average those out, those just had some timing differences. So I think where we landed in the first quarter, that's a good starting point, and obviously, as EBITDA improves, I think my mar- my guidance wasn't significantly higher than where we are this month or this quarter. That's how I would think about it rolling out. And as quarters progress, I'll give you more insights as we move along. Okay. Just as a follow-up, Rick, I think in your monologue, you made note of, again, improvements in floor loading, maybe for one of your customers. Just could you elaborate on that, and whether that is automation technology that you've developed? I didn't recall necessarily having seen that in your facilities, but if that's new or if that's something you're partnering on, or what your implications were. So we're having a number of discussions with people that, like, if you're a liquor distributor, you might deliver to Costco, and you might deliver full pallets, but if you're going to restaurants and bars, you basically have to sequence those orders to help the driver speed up. That technology is something that we're working on to develop, and we can pre-sequence, not just. We can pre-sequence a whole trailer, and so today, if a trailer has 2,600 cases, and there were 125 cases on a pallet, we might put 22 pallets on a truck. But we could actually sequence every one of those 2,600 cases. That, to a lot of people who are delivering small orders, is really interesting. And that kind of sequencing is essentially what we will do for, and we're working with people, explaining how that type of sequencing is something you can actually do for e-commerce if you're gonna do customer delivery or customer pickup. It may be 20 eaches, but it's sequencing totes instead of cases. But if you're a restaurant supplier or a liquor distributor or any other kind of supplier that's doing routes, including beverage suppliers, the ability to sequence that stuff is something that doesn't really exist today. Very good. That's helpful. Thank you. Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Charlie Anderson for any further remarks. Yeah, thanks, everybody, for joining our call tonight. We really appreciate your interest in Symbotic and look forward to seeing some of you on the road in the coming weeks at the investor conferences that we'll attend. Thanks, and good night. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day!