The new agreement could lift Symbotic's backlog by up to $6.92 billion, close to a third of its order book. Walmart gains a role in board nominations, a right to terminate if Symbotic changes hands, and restrictions on Symbotic selling to one unnamed company. The stock jumped about 13% after the bell and gave nearly all of it back.
Symbotic's largest customer just agreed to buy a lot more from it. The contract also gives that customer more say over the company.
The warehouse-robotics maker said on Thursday after the close that it signed an Enterprise Master Automation Agreement with Walmart. Walmart "has made a new commitment to purchase Symbotic systems and to fund certain development programs representing an initial aggregate additional spend of approximately $6,000,000,000," spread "over a number of years across multiple locations." That includes $125 million for research on next-generation racking. The commitment "may not be reduced without the mutual written consent" of both companies.
Symbotic said the deal "could increase Symbotic's future backlog by an amount up to $6,920,000,000." Its backlog was $22.5 billion at the end of June, so the addition would be up to about 31%, by our arithmetic. The work covers 25 U.S. regional distribution centers and extends to "select international markets in the Americas."
What Walmart gets
The filing describes rights that run the other way. While Walmart owns more than 5% of Symbotic's fully diluted equity, it can recommend a board nominee. In any trailing four-quarter period in which it accounts for more than half of Symbotic's revenue, it can appoint two board observers. It can terminate the agreement if Symbotic undergoes certain changes of control. And Symbotic is restricted from selling or licensing to "a specified company or its subsidiaries, affiliates or dedicated service providers," which the filing does not name.
The agreement also protects Symbotic. It "specifies a calculation for amounts due to Symbotic if Walmart purchases less than the number of Symbotic systems it has committed to purchase." Walmart will pay fees for licenses, support, maintenance and spare parts on top of system purchases.
Concentration, before and after
Symbotic was already dependent on Walmart. Its latest quarterly filing says "a substantial majority" of its $22.5 billion backlog relates to the existing Walmart agreement, which covers all 42 of Walmart's regional distribution centers, and to a separate deal with Exol. One customer accounted for 82.8% of its receivables at the end of June.
The new commitment is in addition to those existing agreements. Symbotic expects about 15% of its backlog to turn into revenue over the next 12 months, so the extra work is likely to arrive over several years. Pricing is confidential.
The trade
Symbotic shares closed down 4.03% at $37.40 on Thursday, before the announcement. In the first after-hours trading period they reached $42.20, about 13% above the close, and were quoted near $38 early Friday in thin trading. The stock is about 57% below its 52-week high of $87.88.
Runway or dependence?
The runway view: a non-reducible commitment from its biggest customer, protection if it under-buys, recurring fees and an expansion beyond the United States add years of visible work.
The dependence view: more of Symbotic's future now rests on a customer that gains board influence, an exit if the company is sold, and a limit on whom else Symbotic can serve, while the timing and margins of the new work are undisclosed.
What to watch
Symbotic's fiscal fourth-quarter backlog figure, which will show how much of the "up to $6.92 billion" is added; customer-concentration disclosures in its annual report; and any new program addenda under the agreement.