Venture capital giant SoftBank made more than $15 billion in a 2016 deal to buy Arm Holdings, an artificial intelligence-powered semiconductor company that went public last month. However, not many investors are aware that Walmart has acquired a large stake in Symbotic, a software and robot maker based in Wilmington, Massachusetts, which is SoftBank’s other major AI investment. not many.
That may change soon.
Symbotic, a company that’s already generated some market excitement by selling AI-powered robotic warehouse management systems to customers like Walmart, Target and Albertsons, has a potentially huge and transformative market. We have partnered with Softbank to play on. The two companies are partnering in a joint venture called GreenBox Systems, which promises to bring AI-powered logistics and warehousing to smaller businesses and deliver it as a service within facilities shared by different companies. . They say this is a $500 billion market and an example of how AI will change the economy as a whole.
Dwight Klapich, an analyst at technology research firm Gartner, believes that just as cloud computing puts high-end information technology within reach, green boxes, if successful, will reduce the amount of investment required in the millions of dollars. He said it would be delivered to companies that could never afford it.
“I’ve seen a lot of robotic technology in my life, but I’ve never seen anything like this in my life,” said Joseph Giordano, an analyst at TD Cowen. “It’s like night and day compared to the alternatives.”
Erase the memory of WeWork’s real estate debacle
It could erase the memory of SoftBank’s most disastrous commercial real estate management investment ever, the infamous office-sharing company WeWork.
Like WeWork, GreenBox is committed to blending technology and real estate. In fact, the company’s “warehouse as a service” pitch reminds us almost exactly of WeWork’s “space as a service” slogan in his 2019 IPO prospectus. The big difference is that in WeWork’s case, outside analysts have no idea what technological advantages WeWork has traditionally offered its clients compared to working from home or in a traditional office, let alone the highest ratings. They had a hard time identifying what justifies the $47 billion amount. WeWork is currently valued at less than $150 million, warned in August that it may not be able to remain a “going concern,” is currently under bankruptcy watch, and has recently stopped making interest payments on its debt. It has been suspended and the lender is requesting negotiations.
Technology is key at GreenBox, Giordano says. And unlike WeWork, which wanted people to use their offices differently, Symbotic and GreenBox are working to help companies that already operate warehouses improve efficiency and profits, he said. said.
“Contract warehousing exists today, but it’s mostly manual work,” said Rob Mason, an analyst at Robert W. Baird.
SoftBank owns more than 8% of Symbotic and took it public through a special acquisition vehicle last year, according to data from Robert W. Baird. SoftBank also owns a 65% stake in the GreenBox venture, which the two companies invested $100 million into. According to a statement on behalf of the robotics company, Walmart owns an additional 11% of Symbotic shares and was the company’s largest customer until the Green Box venture took off, accounting for nearly 90% of its revenue. .
“We share the same vision of getting bigger and going faster,” said Symbotic CEO Rick Cohen. “We believe this market is huge.”
Symbotic has been stirring up excitement in the stock market even before the deal with Greenbox. The company’s stock price is up 190% this year. Revenue increased 77% in the most recent quarter, and orders for existing warehouse management systems jumped to $12 billion. Add to that the $11 billion in Symbotic software and follow-on services committed by Greenbox, and it will take years for the company to fulfill this order. After completing more than six years of acquisitions in July, its backlog soared to $23 billion for the company, which expects its first $1 billion in sales in fiscal 2023, and as a publicly traded company in the fourth quarter. The company is expected to break even on an EBITDA basis for the first time. .
Walmart’s statement may be the best indicator of the future. Walmart bought Symbotic’s stock as part of a deal between the companies to automate 42 distribution centers in the consumer packaged goods retailer’s U.S. region.
Analysts say the reason lies in the product.
Priced from $25 million to hundreds of millions of dollars, Symbotic’s system includes the ability to drive around a warehouse at up to 25 miles per hour, moving and unloading boxes from pallets, according to a July conference call with analysts. It is said to contain dozens of autonomous robots. According to Giordano, using AI software to pick orders can optimize where individual cases of goods are placed in the warehouse and pack boxes to the ceiling of the warehouse, eliminating a lot of wasted space in the building. It is said that it will be reduced to
The system works like a disk drive, using intelligence to efficiently store data and retrieve the right data on demand, but with what you need in a box. Additionally, large warehouses can use several different systems and accumulate the investment required for movement.
Symbotic’s system makes it easy to track inventory down to the case, making it easier to match where items are placed with incoming orders and more fully automating order picking. It will be. Additionally, the design of a shipping pallet can be matched to the layout of the store it’s going to, speeding unloading and stocking shelves, Klapich said.
But the biggest innovations enabled by technology are not in the technology itself, but in the business model. It hasn’t spread beyond large corporations yet, but Giordano and Mason say they think it will.
The precision of AI allows multiple companies to share the same warehouse or mix up products for efficient delivery without confusion, just as cloud computing allows multiple customers to share the same computer server. Mason said.
“Sharing infrastructure allows us to get out of the infrastructure business and focus on what’s important to us,” Klapich said. “Large-scale automation without capital expenditure was a challenge.”
Born out of stealth operations with Walmart, minted hundreds of millions of yen in gold
The idea grew out of a vision Cohen had while running his family’s grocery distribution company, C&S Wholesale Grocery. Mr. Cohen has grown annual sales since 1974 from his $14 million to his $33 billion. Symbotic was founded in his 2006 and has been operating in stealth mode for many years. While working with Walmart to refine the prototype.
“I have spent my entire life outsourcing, [logistics] Cohen said on a conference call with analysts in July that business with C&S, and therefore the ability to operate warehouses for people, is always on the table. “We first said we were going to take care of Walmart. … We’re now starting to say, we think we can do more.”
Thanks to Symbotic and C&S, Mr. Cohen, 71, is one of the richest people in the United States, with a net worth of about $15.9 billion, according to Forbes magazine.
Cohen told analysts that Symbotik worked with SoftBank to build the green box to preserve its capital. The joint venture will initially have a 65% stake from SoftBank and a 35% stake from Symbotik, with a total investment of $100 million. Analysts expect the business will require more capital, likely raised by Greenbox itself by borrowing on the debt market. Symbotic said it will use a portion of the proceeds from the sale to GreenBox to maintain its stake in the joint venture at approximately 35%.
“The question is, who has the capital to get it all up and running?” Klapich said. “SoftBank could be the key because it has deep pockets.”
The joint venture will purchase software from Symbotic and then sell packages of warehouse space, equipment and related services to tenants.
Many questions remain, as well as potential threats from Amazon and private equity.
Mason said much else about the new company remains unknown, including the identity of its chief executive, who has not yet been announced. The venture could develop or lease warehouses, he said, but Symbotic would likely rent mostly. Warehouse-as-a-Service pricing is private.
However, with the rise of Greenbox, Symbotic’s potential market has more than doubled, and its backlog has nearly doubled. Symbotic said its total market size is approximately $432 billion, a figure echoed by chief strategy officer Bill Boyd on a conference call when the Greenbox partnership was announced. Early adopters will expand into areas such as groceries and packaged goods, and Symbotic plans to expand into pharmaceuticals and electronics over time, according to Symbotic’s annual federal regulatory filing this year. It is said that
Gartner’s Klappich said the GreenBox market for small and medium-sized businesses is expected to have an additional $500 billion in demand. This estimate is based on the number of warehouses in these industries, the percentage of warehouses where the owner can purchase the technology on his own or through his GreenBox, and the average price of a system like Symbotic.
The third quarter of the company’s fiscal year, which ends in October, shows how the company’s profits will expand. Sales rose 77% to $312 million, and loss before interest, taxes, non-cash depreciation and amortization narrowed to $3 million. Mason said the company is on track to be profitable on an EBITDA basis in the fiscal year starting this fall, before orders from GreenBox begin, and that EBITDA as a percentage of sales will be “in the mid-teens” by next year. .
Clappich said customers stand to save money throughout the warehouse.
Giordano estimated a labor savings of eight hours per truck shipped. This technology also reduces space rental costs by allowing goods to be packed more tightly and stacked higher.
By using this facility as a service, seasonal businesses can reduce the space and time they spend using robots during off-season periods, rather than carrying them around year-round. Giordano said warehouses should be run with fewer workers. And GreenBox plans to pay for robot and software upgrades every few years, rather than forcing tenants to make further investments, he said.
Walmart led investors on a tour of its Brooksville, Fla., warehouse in April and said technology investments like Symbotic Alliance would help profits grow faster than sales. More than half of the distribution volume will pass through the automation center within three years, and two-thirds of the stores will be serviced by the automation system, resulting in an approximately 20% improvement in unit prices. The company has said little about the impact on jobs, but CEO Doug McMillon said overall employment will remain about the same size, but will shift to warehouse distribution operations. He said it was supposed to be.
Competition will arrive soon, analysts say. It takes a combination of technology, money and vision to build something like Symbotic, and especially to move it into a realm that companies other than large global companies can afford, Klapich said.
Amazon could move into this space by leveraging its warehousing expertise with a service similar to its own web hosting business model, or private equity firms with deep pockets could acquire multiple companies. This could lead to the creation of competing products and business models, Klapich said.
For SoftBank, the rewards are potentially huge if GreenBox works. Analysts on average expect Symbolic, whose stock price has suffered in recent days due to recession fears, to rise another 53% next year, according to ratings aggregator TipRanks. Post-IPO estimates claim Arm stock will stagnate, and considering SoftBank reportedly paid $36 billion for Arm in 2016, Symbotic ends up being the bigger winner, at least on a percentage basis. There is a possibility of containing. The value of GreenBox’s % share increases.
Correction: A previous version of this article included quotes from communications with SoftBank personnel that should not have been included in the completed report.