Sarcos Robotics Stock – Dexterous Robots and Exoskeletons

“Do you love me?” the robots seemed to ask, as they danced to the tune with the same name. The most common question asked by those who saw that video was whether or not it was real. It was, and if you have a humanoid robot that can maintain its balance enough to do backflips, it isn’t overly difficult to teach it some dance moves. Up until now, humanoid robots like this have largely been a novelty.

Industrial robotics started out as large arms, or sophisticated machines that looked nothing like robots. Then, we saw the emergence of cobots, and a realization that the complexity needs to be placed in the software, not the hardware. Artificial intelligence has made the robotics industry smarter, so maybe now it’s time they became as mobile as humans. Are humanoid robots coming next, or are they the carbon nanotubes of robotics – sounds exciting, but never turns out to be economically viable at scale? A company called Sarcos Robotics thinks that dexterous robots and exoskeletons are right around the corner.

About Sarcos Robotics Stock

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Founded in 1983, Salt Lake City’s own Sarcos Robotics has taken in just over $96 million in disclosed funding from some big names like Microsoft, General Electric, Caterpillar, Delta, Boeing, and Schlumberger. The first time we came across the company was back in 2016 when we wrote about Sarcos Robots – Doing the World’s Most Dangerous Jobs. At that time, the company seemed to be like Boston Dynamics – doing lots of cool things while being involved with lots of M&A activities with nothing of real economic value emerging as a result. Today, Sarcos seems to have a plan and funding in the form of a special purpose acquisition company (SPAC) called Rotor Acquisition Corp. (ROT). Let’s peruse the glossy investment deck to see what they’ve been up to.

An Exoskeleton and a Remotely Controlled Robot

This self-described “global leader in dexterous mobile robots” is projecting $2.7 billion in sales just five years from now, primarily from the sale of an exoskeleton and a remotely-operated humanoid-type robot that’s anchored to an aerial work platform and remotely controlled by a human.

Credit: Sarcos Investor Presentation April 2021

Both the exoskeleton and the “AR-enabled teleoperation” robot-on-a-platform are expected to be released next year which coincides with the mad revenue growth projections seen below – a compound annual growth rate (CAGR) of +161% over a period of six years culminating in $2.7 billion in revenues by 2026.

Credit: Sarcos Investor Presentation April 2021

These projections are meaningless without the supporting numbers used to produce them. It’s all a big black box. So are the 2020/2021 revenue numbers we’re given. It’s great to see they have revenues, but it makes a big difference if they’re providing consulting/R&D services on a project basis, or if this is pure robot-as-a-service revenues coming from the development of their first product. If their first product failed, why are we to believe the others will be a success? Build it and they will come rarely works for sophisticated hardware products like robots, which is why there are so many novelty contraptions floating about. Being an inventor and an entrepreneur are two distinctly different talents, and we’re not convinced they’ve made much progress in the sales department yet.

The Glossy SPAC Deck

As usual, we’re not given much in the Sarcos Investor Presentation that elaborates on the offering. The existence of revenues might be the most useful piece of information. There’s the usual banter about “blue ocean opportunities” and giant TAM sandwiches they’re preparing to take a bite out of. The nearly $500 million they’ll raise from the SPAC will fully fund the operation until they become cash flow positive in 2023. That’s the same year they’re expecting to bring in $166 million in revenues.

They’ve had some government contracts in the past and they mention “GS multi-unit sale to US DoD” for 2020. These units are a lot less valuable to the company if they’re being sold as one-time purchases instead of being provided as a service under a recurring revenue business model. This is the sort of information that would probably be found in a proper initial public offering S-1 filing document, but not with a SPAC.

Sarcos has an incredibly talented team of robot scientists who have been building the company’s robotics technology portfolio for the past two decades.

Credit: Sarcos Investor Presentation April 2021

Hopefully, they finally found their product-market fit and the hockey stick revenue growth is set to follow. At least that’s what the company is telling us:

Sarcos is at a commercial inflection point after 20 years of development

Credit: Sarcos

The update they provide from the sales team on the stages of opportunities in the pipeline doesn’t provide much evidence to back that claim up. Sarcos says they have “~7,000 units under discussion,” whatever that means. Then there are these comments which come verbatim from slide 24:

  • Customer A: Contemplating if 100 to 500 units is the right order for the Guardian XO
  • Customer B: Could order up to 1,000+ units
  • Customer D: Could start ordering in as soon as 6 months

The fact that one of your customers could order units some time in the future and $3 won’t get you a McDonald’s Big Mac these days. All these “coulds” lead us to believe they haven’t pre-sold sold many units yet. At least, that’s what any sales manager would deduce from all this non-committal language.

Lastly, we’re given some bittersweet info regarding manufacturing at scale. Slide 26 talks about their “asset-light approach to manufacturing” which means they’ll outsource production that’s expected to start happening a year from now. Then, under risk factors, they mention that “Sarcos does not have a current contract with a manufacturer to produce Sarcos’ products at scale.” We would expect they had their manufacturing partner already squared away in anticipation of selling all those units next year that will lead to their $22 million revenue target for 2022. The deck mentions an “anticipated partnership with world-class contract manufacturer,” so we’ll expect to hear more about that soon.

To Buy or Not to Buy

Many moons ago, we wrote about Real-Time Virtual Reality (VR) – The Ultimate Experience, where we visualized a humanoid robot with a 360-degree HD camera mounted atop its head traversing exotic places while we used virtual reality to see what it saw while also controlling it. The emergence of 5G means we’ll have the bandwidth for use cases like this, so we were hoping technology had already advanced to this stage. Maybe it has, but such information is painfully lacking.

For a product that’s expected to be released next year, we’d be stoked to see some demos. That cheesy 1980s-looking video they provide doesn’t tell us much. A guy that appears to be overwhelmed by an overpowering exoskeleton struggles to throw some luggage on a platform using his clawed hand. The teleoperation robot appears in some CGI animations, and then what appears to be some staged settings, before it morphs into some sort of six-armed octopus with a skill saw. There were more videos to watch, but we had enough. What you’re investing in is a company with an extremely talented team of roboticists that have developed a set of products. We’re questioning if they’ve nailed the crucial product-market fit for any of them aside from the first which appears to be selling. Because they decided to go public using a SPAC, we’re not given enough information to make a decision here, so we’ll check back in next year to see if revenues are coming in.

It’s nice to see ROC stock trading around where it should be – $10 a share. Maybe retail investors are finally realizing that paying a premium for a transaction that hasn’t even been completed yet makes no sense at all. For investors with a high-risk tolerance, this team-with-a-dream is fairly priced from the perspective of the institutional investors that participated, but that says nothing about how fairly valued the deal is. Speculate all you want, but you’re better off waiting until there’s more information before going long and strong.

Conclusion

Sarcos has been doing R&D for the past 20 years with any number of products being developed that are cool looking but haven’t been successfully commercialized. Their talented robotics team has taken investment money from some big corporate names that – we can only hope – also provide Sarcos with their first reference customer(s). We’ll check in next year to see how they’re coming along with that 2022 revenue target of $22 million which should start trickling in Q2-2021.

Should the SPAC transaction go through as planned, the combined company (Sarcos and the pile of cash) will trade on Nasdaq under the ticker STRC.

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6 thoughts on “Sarcos Robotics Stock – Dexterous Robots and Exoskeletons
  1. I picked up some of this on day one. In the last month the speculation has left the SPAC channel. OK with me I haven’t had to chase anything for awhile. I did jump on E-Torro when it became a willing participant. Now I have to admit I bought this one on Hype not value. What better to buy cryto currency or the seller? I did read some nice things about Sarcos from the head of Delta. He claims he is a big buyer. Of course like so many industries unless they can get a piece of the Biden T’s I don’t see them buying much.

    1. There’s everything to like about the idea of exoskeletons and humanoid robots, but it’s still a “build it and they will come” thesis until the company is selling units in numbers that approach something meaningful. Way too early days for us. We’re more than happy to wait until they’re filling orders to come on board as investors. We’re always happy to sacrifice some potential gains in favor of less risk because we’re risk-averse tech investors. Most aren’t. We’ll be rooting for you on the sidelines!

  2. Are you following Rice Brothers. They formed a SPAC named RICE Acquisition to take two companies in the renewable energy area public. “Aria is being acquired for $680 million and Archaea, which is based at Southpointe and who the Rice family were founding investors, for $347 million. The combined company will be Archaea Energy. It will focus on the conversion of landfill gas into a renewable fuel source, carbon dioxide sequestration and the emerging market of green hydrogen. Green hydrogen is a fuel source created from natural gas that when coupled with CO2 capture and storage technology is carbon free.” It shot up to $17 a share. A lot of interesting tech in what they are doing. Claim they will be probably do another SPAC. BLUE ENERGY is getting a lot of play and these are Fossil fuel companies with some rather deep pockets.

    1. Cheers for the heads up on this Jim – first time we’re hearing of it.

      We’ve looked at the landfill gas type plays and find there’s a lot of regulatory uncertainty around these technologies. We like to keep things simple by holding the world’s largest renewable energy companies – which also happens to be a dividend champion – and that’s treated our wallet quite well thus far. Given that pop up to 17 a share means there’s hype with the deal. We may take a look post-SPAC when the dust settles.

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