Q2 2021 TuSimple Holdings Inc Earnings Call
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Rachel R. A C H E L.
Smith S M I T H.
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Our technical capabilities.
Schools and processes to share the performance and reliability of autonomous driving system.
This is critical as we integrate our 8 yes with purpose built production vehicles alongside OEM partners.
Agent's team also play key part in the development process as we continue to invest on supply chain, including.
Including critical tier 1 components, such as braking steering and on board compute units.
The supply chain for level for Thomas driving is still far from mature and we believe our investments and partnerships further enable us to be first to market.
Overall are on.
R&D team continues represent approximately 80 per cent of our workforce. This quarter, we add 188, new R&D personnel to bring the R&D teams head count to just over 1000 employees as of June 30th.
We're pleased with the quality of current this choosing to join too simple and we expect to continue to hire a similar pace for the foreseeable future.
To get the risks inherent in the system.
And this concludes.
Significant work in systems engineering.
Social safety reviews, as well as internal audits of our process.
<unk> proper testing verification and validation of various software hardware modules.
Given the complexity of the autonomous driving system and this mission, we have to acutely understand what systems or on the truck.
But the truck performs the way from tend to perform at all times and that our operational plan is designed to execute the pilot program safely.
In addition, it includes validation for our risk management system will identify any issues and signs of degradation from both software and hardware.
Sure that the system reacts appropriately, including pulling over we're stopping land safely.
What we call enter into a minimum risk condition, where MRC.
And lastly of course, the safety case includes the final on roll validation of the pilot with safety drivers on board.
As you can see we have a holistic safety case verification process to ensure that we have correctly identified and mitigated risks.
Furthermore, this process is critical in advancing our autonomous driving truck production programs and us being first to market.
Our target timing for the start of the driver on missions is still ended the year.
As we move into fall, we will continue to provide updates on our safety case verification progress and the overall pilot program status.
We believe.
We are confident that our driver our pilot program will be the first of its kind in the industry. We believe our timeline for several years ahead of any competitors and there's certainly indication of the advancement and the maturity of our technology.
Further highlighting the importance of safety.
Recently kicked off a safety performance study with <unk>, a leader in vehicle tracking and fleet telematics.
This study will analyze the comparative safety performance of our level for fully autonomous trucks versus manually driven trucks.
The data will be sourced and various conditions to measure industry standard indicators for unsafe driving that can increase the risk of accidents.
We expect the study to add to our growing list of data illustrating 2 simple autonomous driving technology benefits.
Now moving on to the next pillar of our strategy, which is being first to bring reliable purpose built autonomous trucks in market scale or.
Our production program with Navistar continues to advance during.
During the quarter, we made progress toward our supplier down select process down.
It sounds like it's important milestone as we move from research and development for setting the final specifications for components with Navistar required for series production will.
He will be narrowed down the list of suppliers for key components over next several months, especially those with long lead time items, such as braking and steering systems as well as lidar and onboard compute units.
To our knowledge, we're the only it harms trucking company approaching this critical milestone.
In addition to the work we're doing with Navistar, our partnership with trade on continues to progress well.
Clinical teams from 2 simple and Scania 1 of trade loans.
Truck brands expand the scope of our concept programs.
We expect to continue to increase our development activities in Europe, and we'll be investing in expanding our team there as well.
In China, our team continues to focus on testing.
On the don't Highbridge.
On the Yangsheng deepwater port near Shanghai.
As we share with you in the past. This is a 20 mile bridge that connects the mainland to the worlds busiest deepwater container port.
We believe this project has the most near term commercial viability in China.
The last pillar of our strategy is our go to market for the development of our Thomas freight network.
The coverage and density and efficiency of the ethane. We believe is too simple long term competitive advantage.
The size and coverage of the ethane comes from high definition map routes.
And strategic terminal locations.
Terminals are the starting and ending point of Thomas operations, our technology can leverage terminals from.
<unk> from our customers strategic partners and once that with these ourselves.
Thus, enabling more coverage better.
Better access to Thomas free capacity, while being very capital efficient.
We announced our alliance, Texas terminal opening in June to support our new freight lanes, providing us.
<unk> access to the Texas triangle that runs between Dallas, Houston, San Antonio and Austin.
The new Texas facility is located near a premier intermodal hub and will serve as a central logistics terminal to Dallas Fort worth area.
In July we entered into agreement with Ryder systems that will accelerate our ASM growth.
Ryder will supplement our existing network with dedicated terminal space for autonomous trucks.
Service and maintenance.
<unk> assistance.
In integration, we're writers existing transportation solutions.
There is also strong potential for riders leasing and asset management services to better support our customers' needs.
The relationship will offer Ryder, new and expanding revenue opportunities.
<unk> its ability to leverage its financial resources to underwrite vehicle leases for our customers in the years to come.
We're excited by the potential of our collaboration where Ryder.
Thank you Cheng.
I'll start with our reservation program.
We ended the quarter with 6775 reservations and increase of 1000 reservations quarter over quarter.
We also started our voice of the customer program for our existing reservation holders.
This program allows our reservation holders to engage in 2 way communication with us and Navistar on critical vehicle specifications and other operating requirements.
This is extremely valuable feedback because we make design decisions and set our bill of materials for our production vehicle.
Also we have now started more fulsome engagement regarding potential reservations with the next group of customers beyond our first wave.
We are encouraged by the responses, we have received to date, including a verbal agreement for a 100 truck reservation from a significant tier 1 logistics operator, both domestically and globally.
We are also on discussions with this customer regarding hauling freight beginning in the fall.
Now shifting gears from our financial results for the second quarter.
We reported $1.5 million of revenue in the quarter, which is a 5 times increase versus the same period last year, and a 57% increase quarter over quarter.
While we have maintained a flat number of 2 simple on trucks on our fleet, we continue to increase asset utilization and add to our AFM partner fleet capacity we.
We do expect to expand our fleet once we received new trucks from Napa stock in the second half of the year.
In the quarter, we spent $76 million on total R&D, including $25 million of stock based compensation. This.
This compares to $22 million of total R&D expenses in the same period last year.
We spent $42 million on G&A during the period, including $27 million of stock based compensation.
This compares to $5 million of total G&A spending in the same period last year.
Our stock based compensation expense for the quarter was $53 million.
Which includes $43 million related to employee equity awards that had previously satisfied time based vesting requirements, but had an IPO liquidity condition for full vesting.
Upon successful completion of our IPO in April the instruments were vested triggering the $43 million charge.
This quarter. We also began disclosing adjusted EBITDA, which we believe is a helpful business performance metric that is complementary to our GAAP results.
This quarter, our adjusted EBITDA was negative $66 million.
This compares from the same period last year of negative $26 million the.
The increase reflects our accelerating investment in technology and commercial development.
We invested $5 million on capital expenditures during the quarter driven by equipment purchases and facility costs.
We ended the quarter with a cash balance of 1.5 billion.
Now to provide an update to our 2021 guidance for the full year.
As we move towards our driver out pilot and full commercialization, we have identified key areas of incremental investment to accelerate and de risk technology and commercial development and we have updated our guidance accordingly.
First as Sheng mentioned, we are making selective strategic investments to accelerate and enhance our high definition maps as well as to build out our systems engineering efforts.
<unk> of these 2 groups, Robert Rossi and Adrian Thompson, our World class technical experts and experienced managers have large teams.
Secondly, we have also identified selected areas within our core algorithm hardware and software teams that will allow us to increase our vertical integration of the autonomous driving system.
These core groups are led by some of our most senior executives, including our cofounder and CTO and the incremental investment will enhance our flexibility to work with multiple Oems as we are doing today with navistar and scone yet.
Based on these items, we are increasing our R&D expense guidance to $200 million to $220 million, excluding stock based compensation.
We are also increasing our guidance for G&A expenses to $50 million to $60 million, excluding stock based compensation.
The increase was driven by incremental investment in critical functions, such as it and HR, which scale with the broader business.
Beginning this quarter, we are introducing guidance for stock based compensation in the range of $130 million to $150 million for the full year.
We're also introducing guidance for adjusted EBITDA in the range of negative $260 million to $280 million for the year.
We are increasing our capital expenditure guidance to $14 million to $18 million for the year.
This increase is comprised in large part by 2 items first our decision to purchase 25, navistar trucks, rather than lease and 2 incremental investments in new terminal facility build outs as we expand our <unk> ahead of schedule.
There is no change to our previously communicated revenue guidance of $5 million to $7 million for the year.
We expect to end 2021, with a cash position in excess of $1.25 billion for the year.
<unk>.
Yeah.
I'll now hand, it back to Chang for a few last remarks.
Thank you Beth.
To summarize we have a clear and focused strategy to be the first to bring the most reliable Tom's free capacity to the market. We continue to prove our leadership capabilities and technology hardware partnerships and go to market.
<unk> demonstrated our capabilities to operate on surface streets on ramps and highways on level 4 autonomy and we'll continue to make significant advancements. We believe we're years ahead of autonomous driving system developments and we intend to extend our leadership position.
We have partnerships with navistar trade on a checking major milestones to deliver on our scalable purpose built solutions.
We're expanding our network of terminals and the Thompson enabled links to support current and future operations.
No we still have a lot more to accomplish and we worked very hard on it every day.
And we certainly can't do it with other amazing employees and business partners globally. So a big thank you for them with.
With that we're ready to start our Q&A session.
Thank you we will now begin the question and answer session. If you have a question. Please press Star then 1 on your Touchtone phone.
Wish to be removed from the queue. Please press the pound sign or the husky.
And in terms of operational.
Side of things.
Yes, we are in constant dialogue with the Arizona duty as well as department of public safety and we do not believe that to be a roadblock.
Great. Thanks for the color I mean, maybe as a follow up question Pat.
On the higher R&D costs, it sounds like you're bringing stuff forward, rather than seeing a higher level of costs relative to what do you envision doing the IPO is that accurate and going on maybe if you can give us like 1 or 2 catalysts for what exactly is driving that kind of what you are bringing forward and kind of does that mean.
You'll kind of get to your destination quicker or kind of just how do we think about that are you know over the next 6.
6 to 12 months thanks.
Ravi I think I think it's accurate to say that to some degree it's an acceleration of cost.
Certainly the some of the key teams, where we're building out like maps and systems engineering or areas that we always intended to build out I would categorize us as being opportunistic.
We've had the opportunity to bring on top talent, particularly at the leadership level and build out the teams beyond them. So to the broader question. We don't see this as an indicator of accelerating or expanded cost over the next 2 or 3 years as we approach for.
For commercialization, but rather an opportunity to bring forward. Some of these team members. The net result, being debt I think both an acceleration of our technology, but also a derisking as we have more time prior to launch to.
To build out some of these critical functions on some areas that are acceleration, you've obviously seen it in our ability to build out our unique math miles to.
To expand to the east coast, which some of our customers have been asking us to do tours.
We're already seeing the fruits of some of these investments.
Yeah.
On the next question comes from Chris Wetherbee from Citigroup.
Hey, guys. This is James on for Chris just wanted to actually ask about the hires we're making in.
What is the geographic location of them are there any sort of cost advantages if theyre not actually in the U S.
Just sort of getting into thinking about like essentially where the head count sits in the developments on it.
Hum.
Geographically.
Hi, Chris Geographically D. The vast majority are on hires are in the U S.
I would say close to 80 per cent.
And we also are having teams doing out in Europe and then.
The expansion of our technical teams in China as well.
But primarily in the U S now with.
With Covid and with what we learned from the pandemic I think we are of course more open to having remote work.
So that has been helpful in terms of attracting talent.
At the same time.
Our recruiting team as you size has expanded.
So all of these things also contribute to the fact that were adding.
Adding on quite a bit of talent this year.
Got it and those numbers you gave I think they were for the company broadly is it true for the increments as well with the 2.
100, and you plan on bringing on roughly.
Please logistics solutions.
Certainly among the best.
And so to answer your question really covers all the nuts and bolts.
As we think about.
Launching Thomas free operations from <unk> 8 billion.
A lot more than just the technology side of things.
This is only will be beneficial to our capital expenditures.
Our goal our strategy, we believe given our technology has ability to drive both on surface streets and highways is we can't connect to more <unk>.
Existing real estate locations.
Doesn't make sense for us to to spend money all of them.
We our goal is to provide customers in the long run.
The most reliable and easy access to Thomas free capacity.
At low cost.
And so certainly this is.
A partnership that has lot of potential.
We are working with Ryder.
Operations to identify places that we can't use as terminals.
And we're also having a collaboration too.
Go through the maintenance and other parts of the business or the services.
Okay, great. Thanks for that channel as a follow up can you just.
Maybe talk more.
From a little bit more about that.
Regulatory environment.
Back on here.
Back of your slide deck here, you're talking about getting a couple of more seats on board for a full commercial testing or are there any are there any restrictions in terms of size or timing and then 1 more for just for I guess normal testing or availability. So can you give us an update on the regulatory side with adding a few more states and what else you might see developing in that.
On the area for the rest of the year. Thank you.
Thanks.
Yes.
Our shareholder letter pointed out too.
2 more states has had a positive.
Our regulatory regulations to allow for.
Level 4 autonomous operations of commercial vehicles, so that brings the total 2006 states.
And just a reminder, there are no states currently today to have any regulation that prohibits the testing.
Economists.
Commercial commercial vehicles.
I think in general we continue to work closely with.
The regulators both on the federal in different states.
We continue to be very transparent with them.
I think the regulatory environment is positive today.
On a lot of debt is regarding the of course, the safety benefits that <unk> can bring as well as I think you.
We're very familiar for.
I mean, the driver shortage, where the tightness in supply chain today is probably.
1 of the old times.
Based on kind of what we're hearing and seeing so I think these drivers will continue.
And hopefully that has.
Could you positive impact to the regulation.
Alright, thanks for the time appreciate it.
Thank you.
Our next question comes from Ken <unk> from Bank of America.
Hey, good afternoon.
Plus I guess recently did an autonomous drive route test it seems to be pressing ahead and noted plans to be operation on maybe a year earlier in their commercial deployment is there a difference from your perspective on the Tac or capabilities of what some others are pressing ahead, just want to understand the competitive differences of what we see out in the market.
<unk>.
Hi, Ken.
We we saw kind of what you saw.
This morning were recently.
A short video and there's some media reports.
Ours is actually is on the media reports already came out of China about a month or 2 ago for the same thing.
And he is also the media report confirmed that it was at a.
It closed highway highway has an open to public yet so I think.
It's clear I think this is a very different.
Type of.
Test if you will from our driver out pilot program, which is on open highways.
Uh huh.
On commercial operations on long stretches of road, both on surface streets and highways.
In the U S. So so I think that really not an apples to apples comparison at least from from what we can see.
And I think in terms of commercialization.
I'm not quite sure.
My understanding of pluses that they're talking about basically on level 2 solution right. It's not a driver of our solution. So.
It's a retrofitted.
Kids debt.
That can make basically that can make the.
Driver assistance so as.
As far as again from from what we can tell it's plain actually are different.
Different category.
So.
So I think that's helpful. But that's how we learn exactly that's what you were saying.
Perfect. Thanks, and then for them.
My follow up you talked about the R&D, you talked about kind of where you're focused on some other capital. You also mentioned I think somebody somewhere in there that debt you know Theres a project debt.
Saudi is working on is there something specific that you're scaling on on the R&D debt that we should look for.
I mean, it's it's.
It's all part of our overall development of our Thomas driving system.
On.
It's on 1 hand, it's of course the system the software itself the virtual driver.
As our production process.
Process, when navistar gets into more of the debt.
On the later gates Theres a lot more work that gets kicked off in and more engineering work streams have to come together so there's more.
Resources as required significantly more resources.
So we talked about continued investment in the supply chain.
That is something that we'll continue to invest more capital and that's something we talked about at IPL too with more capital.
Our investments on partnerships, we can do that can make sure that the tier 1 components are on the same timeline as our production vehicles.
And that includes steering braking debt.
Computer unit Thomas domain controller and of course, some of the sensors. So.
I mean, those are the usage that we have but.
But I wouldn't I wouldn't point out to 1 specific project per se at this point.
Perfect.
To clarify if I can cut you said there were no more orders in the quarter other than the thousands more booked last quarter, but you said that they're more they're coming going forward I just want to clarify what you said.
Yes, Kevin So our reservations, we added 1000 per quarter, which is what we had actually previously disclosed on the first quarter call.
And then we have had a verbal indications for another 100 trucks, but the reservation agreement has not been volume for that yet but.
But we are optimistic with the customer that made the verbal indication as well as several others. It's progressing nicely. So we're encouraged by the euro.
Outreach to this more expanded career for potential customers.
Congrats on your progress.
Cash at that.
On that I think.
As Pat noted I mean, we measure progress.
Really on the number of reservations, but also on the debt of the collaboration and I think thats.
Maybe hopefully it came out in terms of conducting 3 way voice of customers.
We have multiple sessions.
Majority of the reservation customers.
And this is something that we have said all along is 2.
It's really to get.
Our large strategic customers involved in the development and adoption of economy and given debt.
The reality is everyone's on the system will be a little bit different right assuming that people can can also builders.
We need people to understand how to how to use it on your supply chain. How do you just do simple autonomous driving system. So so theres a lot of work behind the scenes and I wish you very.
I'm happy about the level of collaboration.
That.
That we're seeing across the.
Does this end customers we have.
Thanks Scott.
Our next question from Brian has come back from J P. Morgan.
Okay.
Alright, thanks for thanks for taking the follow up.
On that Jamie mentioned, I think last call about the supply chain issues and clearly they're quite disruptive as we all know right now how you mentioned getting some trucks on the back half for the year for Navistar can you just update us on how many how many of those would be and just what you're seeing from supply chain and sourcing some of your critical components and if thats affected development or assembly yet.
Yes.
Just related to the Navistar trucks purchases.
We are we haven't water for 25 new trucks.
I think the original timeline is.
For all 5 delivered in the July timeframe.
I think right now we're expecting to receive our first 1 first to I think sometime next week, where we're in the coming weeks and we're hoping to receive the rest before the year end so.
Again, as you know supply chain is really affecting.
Although Ms and equipment makers.
Obviously I was giving you a special.
Really great great level of service.
Regard to this but.
But it's only behind schedule.
In addition to sort of sourcing of critical components and we're also seeing some.
Some some lack of resources in terms of.
Supplier.
Being able to.
2 I guess assist with the debugging.
And actually so.
What's your answer.
Bobby's question about 1.
I wanted to 1 day timing risk for our driver Alex pilot program is on the supply chain, we do have.
Sample right now we're dealing with 1.
1 key component, where a portion of the components.
A section of that book components are not giving the same level of performance reliability that we thought it should have.
And we have to had some time to work work this out with the supplier. We don't have engineers, there and to have engineers here, but that took a little bit of time and so we hope to work through this problem, but so those are things that we're seeing them, but you know look I.
I know everyone's credit putting putting the all the problems on supply chain. So we don't we don't want to do that for sure, but but it is a real problem.
We're facing across.
Uh huh.
Of course, the fit across even just basically equipment that we need to procure and how is the company.
Okay. Thanks for that Shanghai, and then just going back to Wayne I think you said earlier about.
Pulling forward some work maybe work with Oems and more Oems in the future obviously, its a selling point of 1 of your competitors and it's still a fragmented truck market and fleets have their preference.
So I was assuming youre going that route anyway, but maybe you can just talk about what you're what you're pulling forward.
And why and if this was part of the roadmap.
To begin with.
Sure I mean, I think I think what we're saying is.
More on helping to supply chain mature.
As well as having a.
More general platform.
The way we work with the Oems still has to be very close knit collaborative process, just because as you've seen the trucks. I mean, everybody has very different placement of sensors compute requirements power requirements and of course these trucks have to be.
Has to be integrated certified by the OEM, because that's what the customers care about who provides the warranty who provides the aftermarket support and you start to drive them on miles those things don't change and so what we're saying is there are additional investments on partnerships. We have on our supply chain that can can move forward.
The industry.
I will say contrast is very differently was saying we have.
Aftermarket solutions that can fit in all Oems I think that idea maybe the idea that the reality is it's not practical.
Because an industry like this where the supply chain technology is still in the.
<unk> sort of.
Developing stages, there isn't common protocols right today for instance, customer can ask for a.
A cummins engine oil and gas where may be proprietary engine, but both engines wherever they choose.
<unk> certifies that truck.
Well that wouldn't be the case today, if you put in aftermarket.
Thomas driving kit.
And so until that industry becomes very mature.
We don't see that being a viable solution.
Any time soon.
Okay, great very helpful. Thank you very much.
Our next question comes from Colin Rusch from Oppenheimer.
Hi, Yeah. This is Brendan on for Colin first 1 can you guys just 28 in the quarter, how many of the miles were conducted in Europe.
Sure.
You don't count.
Count them miles that's in Europe that is actually because the trucks there are actually owned by Scania. So.
And so we're not.
Closing the miles in Europe, given there's some obviously since.
Since the NDA is involved but it's.
It's a decent amount.
So that makes sense. So we only we only disclose that.
Miles that are run by trucks on by a too simple.
Alright, and then just as a follow up when you came on.
On just giving us any update in terms of qualifying sensors sensor functionality and then vehicle design ahead of the call.
On the ahead of the 2020 for lunch.
I'm Mike <unk>.
We can get back to you on that 1 on again I have to make sure that there were in a position to publicly talk about this information.
But but we're making some design, it's definitely making a lot of design choices as we speak but again.
So because they can come back to you afterwards to ensure that this is this is public information that we can disclose.
Great. Thanks, so much.
Thank you.
Our next question comes from Dennis per your China from Needham <unk> Company.
Hey, guys Dennis on for Rajeev Tonight.
I had the warehouse growth a question about your driver out programs. I think you had mentioned that you were on kind of on the third phase out of for them could you talk a little bit more detail, but for now.
Our eating out right now and what needs to be done before you guys are comfortable on driver out for maybe that demo at the end of the year.
Sure.
<unk>.
It will be along it will be a long answer, but I think to keep it tight.
Try to give concise.
So.
There is.
So we have a new I mean from.
Hardware standpoint, we have been.
<unk>.
With design and updated this redundant trucks that were basically talks with redundant sensors and computers because that's important for.
Being able to remove the driver right because we don't have that last line for sense that that is the driver.
And we need more than just 1 because we have to be able to validate these trucks.
Enough miles.
To ensure the safety work to mitigate the risk associated with it.
<unk>.
And so.
So first we are a large part is that and this is not only just simply to put the mechanical parts onto these trucks, but also to ensure the.
The acceptance of the autonomous a performance of those trucks and so.
These are retrofit so doors on this.
Abilities were things, we had to tweak on iron out.
We also mentioned for instance, we have.
Components, either because we're working with some tier 1 prototype components as we speak today and.
Across 10 components 5 day, my my work 1 way and in fact, they might not have seen performance out there that we need. So so these are all the.
Just for the nuts and bolts that we have to work on this space.
And the last phase.
Again, I mean, if you think about launching let's say aerospace prototype right. This is not about there is not a PR, there's not a marketing.
So this is.
We wanted this to be very true.
What we wanted to be very safe.
We need to understand the risk.
Associated with the thing not simply by just running a bunch of miles, but having a more of a deep dive on all of the checklist around the safety case for verification and kind of.
<unk> talked about in our semi.
The prepared remarks.
There's a few things.
To oversimplify it but 1 is.
You built this very complex system, we have to know what's in the system from a photo safety from our system engineering standpoint, too as we have to.
Be sure will be very short and were highly confident debt.
Truck performs and dysfunctions performs the way it is meant to perform at all times.
And and alert third thing is we had to design and validate the operational.
Environments, where the operations to safely conduct this test.
And lastly, we had.
The validation process with actual driving book.
With with a.
With a safety driver behind the wheel.
So.
I'm not sure I industrial debt, providing you with enough color but.
It's a it's a car.
Complex engineering problem.
We are as mentioned very confident with the <unk>.
Functionality of autonomous driving system, I think kudos has been to Tucson, and I think that's evident but.
But you make it safe and really mitigate the risk.
And I'll be liabilities I mean, that's that's where you need to really take out the driver at scale.
Got it and then.
A quick follow up I think you might have alluded to this.
Is the chip shortage currently impacting kind of your ability to procure the trucks from Navistar for me. Thank you might've mentioned, some debt kind of debugging delays or something like that.
Could you just speak a little bit about that please.
Yes, yes, there are 2 different things, but the chip shortage is impacting.
Impacting our ability to procure more trusting lifestyle channel.
Okay.
Yeah Yeah.
Yes.
Yeah. Thanks.
Yeah.
Okay.
Pardon me. Please go ahead.
And our next question comes from Ben <unk> from Baird.
Hi, Thanks for taking my questions for him.
Got it.
First of all could.
Could you just talk about the Geo tab relationship with debt.
Okay.
Is it basically, allowing you to compare on your technology.
So the benefits of it how are you doing to go.
Deeper into that.
Regulators, who sat on our customers or both.
For more detailed there.
Yes, great question.
It's for book I mean, it's for everyone. That's involved in the ecosystem.
So with the telematics device on the truck.
Joe task and the data that they have versus the data to have from.
Manual truck driving force to have a lot of data there.
We're testing for basically.
Harsh driving events and I think the industry definition harsh driving events, our harshest celebration heartbreak breaking in harsh coronary.
So basically kind of where the G force kind of hits the truck.
Given the debt.
Hydro trial at the center of gravity, where it's easy for a truck roll so total.
Those kind of 3 things.
Our cause are harsh driving events and.
It's pretty common debt.
These events do impact.
The frequency of accidents.
So so that would be you know what.
We look at the data.
And in conjunction with Joe tap.
So the early preliminary data that we've seen is very promising.
And.
It's this is goes in line with our independent study Youre long study with UCSD on fuel savings of the 2 simple autonomous driving system.
Empirical data we have or are on Hardeners are we done on tire study so that.
The biggest thing about Hanmi force is the.
Safety efficiency gains, but we want to have empirical data to highlight quantify the benefits that are touch on the system can provide and this is a part of that.
Got it and then just on <unk>.
Can't comment too much but.
For the 45 days 1 does that.
And.
Can you give some information on that and then I'll pass it looks like it was about $100 million of Casper and the second half is that the right number.
Thank you for us.
Sure.
On Ccs.
While we submitted the.
On the review filing in June So we can't we're not get the exact date, but that's kind of the timing.
I think I think just kind of relating to Sophia is obviously I think it's.
Instead of a word but.
But we continue to be very transparent I think we try to lay out the facts and the 8-K.
And I think.
We look forward for resolution in due time.
Okay.
Hey, Ben it's spot on on the cash burn question I think it's somewhere between $150 million to $200 million on cash burn on the year just looking at some of debt.
Our cost of goods sold R&D, our G&A on our Capex just stickier interplay between what we have achieved for the first half on our guidance for the year on that.
That puts us comfortably evolve.
Target that we have vs wanted a quarter billion dollars.
So.
We're not providing anything more specific on that but I think you can go through in more detail.
And a smaller session if that's helpful.
And our next question comes from Alex Potter from Piper Sandler.
Great. Thanks, guys for.
First question can appreciate maybe you can't talk to specifically around sensors and suppliers breaks things of this nature, but.
When do you think you would be I guess, maybe estimating that the bill of materials for the production truck will be more or less set in stone.
Yes.
We are targeting by early next year.
And there is of course different state stages, but.
That's the target that we have lost day napster as part of the production program.
Okay perfect.
And then regarding the order book I also can.
I appreciate that you are being very selective looking for deep relationships to in order to sign up a fleet and that demand outstrips your capacity to serve that demand.
To what extent do you think you have capacity to entertain incremental order. So you basically my historical impression was that the order book wasn't necessarily close but it was more or less closed because youre trying to.
I'll focus on those really really high quality customers.
But do you anticipate adding many more customers and many more truck for the order book between now and 2024.
Yeah, I think it's a good question I do think it'll be a little bit of a stair step approach.
In the initial period for the rest of this share we are really focused on the highest quality.
The reservation book.
So it is around those folks that have just curious net of intact.
To be able to dedicate resources because it really is a mutual dedication of resources to be able to put an al for technology into our carrier on capacity customers' networks.
So from that perspective, we do expect to add additional customers, but we will be selective.
And it's important to note that our standards remain the same.
There is a financial commitment involved with each 1 of the reservation partners.
As we've indicated before it's either a a reservation.
It goes into escrow on cash or for those that have made in our pre IPO investment in the company.
So I would say without being too specific that we do expect to expand it but.
But we're certainly being selective about how we do it as we move closer to the startup production in 2020 for.
And I would expect to see that pace. This book.
Folks that are placing reservations and eventually firm orders all will start to expand and that's only natural we do see this as an extraordinary vote of confidence.
From our customers that we don't take lightly for them to make a financial commitment on.
On to engage with US this far ahead of the actual delivery of the trucks.
We're trying to take that very seriously and be very selective to make sure that we can we can provide the level of service and engagement that's required to have a great relationship with them.
Yeah.
Perfect. Okay. Thanks, very much guys.
Our next question comes from Joseph Spak from RBC capital markets.
Thanks, Good afternoon, everyone.
<unk>.
Just the first question.
As you expand the Mac.
And on it I mean, you know what Youre doing now I, just mean sort of over time and it expands to a lot of different landscapes.
And geographies on environments.
Is does the O D D differ by region or is there some like minimum standard that has to be met so that these trucks can operate fairly seamlessly as they travel across the country.
Yeah, Hi, Joe Good question.
I mean, certainly we will start with a minimal viable product ODT.
For us debt.
Hub to hub.
Operations.
There will be some geofence around debt.
We don't think we'll be able to have vs snow in the first.
The piece because the winter testing thats required to add more time and other.
Youre in a half to development process and it's just better to put it into next generation.
And of course, these things can be updated otas.
So.
So I think.
Or if you can't go down 1 level deeper I mean, they're even more specific things in the OTT debt, maybe some areas have and some do not.
Generally speaking, though I think our experiences on a highway driving in the United States.
Similar.
Very different than say urban city.
Areas compare L. A and New York is very different.
So behaviors between the drivers.
So that's kind of what we see.
I'm not sure I've got.
Yeah no that's.
That's perfect I appreciate that.
Second question is just.
You know again.
I guess for sensitive.
Topic, but I think when it comes up with investors a lot.
Which is you know clearly a lot more just conservation and U S. China government relations.
You, obviously youre dealing with AI you have plans for both top rate in both U S from China, There's R&D centers in both regions, there's been back and forth over export control. So how do investors get comfortable that you know 1 of the opportunities might not be hampered just by.
Geopolitics.
No good question.
I mean low guys. So any multinational technology company to have operations in these areas.
It's it's certainly a dynamic time.
We're very sensitive to.
All the new regulations that come out from both sides and.
We've done a lot of things ahead of time to account for that right. So.
The majority as we talked about the core IP innovation happens in the U S for us.
China is our R&D center, that's focused primarily on the China market as.
As well as helping with the European market. So so I think there is somebody there is actually quite a bit of bifurcation as we speak today. So so I think we do have sort of internal processes in place.
We see sort of a.
Call it a worsening of of export controls work for a geopolitics.
Yeah.
But I do think debt how do we get investors.
Comfortable.
I mean in the day.
Day deep both markets are massive.
Uh huh.
Our ability to honestly to serve either 1 is a it's a very big big win so I think.
This is more I think I'll say offshore Audi I mean, maybe just underwrite worst day, it but but certainly I think we're playing the 2 biggest markets and and so far we have been able to navigate but of course.
We're very sensitive to.
Just the changing environments.
Thanks, that's helpful.
Okay.
Our next question comes from Dan Levy from Credit Suisse.
Hi, Good evening, Thank you for taking the question.
The first 1.
The color on the headcount expansion.
Helpful.
Have you seen it Keith.
Keep on here on an arms race for talent.
Maybe you can just give us a sense.
How you know your talent acquisition fared versus the others.
How much more aggressive you can get it.
And I guess, maybe more importantly, how much of a constraint for Tao.
How much of a Christian on constraint talent and achieving the task of.
Moving to driver and scaling on operations.
I mean, maybe that definitely does accelerating head count, helping you to accelerate your path to commercialization.
Hi, Dan.
I mean, it's it's.
Yes.
A sense that there is other.
There's a minimum number of head count I mean, as we talked about if you look at your simple where.
To get to commercial operations to scale I mean, we're effectively artificial intelligence company, where software company, where automotive company and where logistics company so too.
<unk>. This is whether it's us or anybody else I mean, it's there's a minimum head count number that they just can't do with let's say 100 people right. I mean this is will be several thousands just given the complexity of this thing.
Because of that the barriers to entry into this market, we won't get higher higher.
On the over next few years.
I don't think the celebration is non linear you know.
Certainly the way we.
Prioritize on time.
With that I think 1 of the things that we're most proud of and I think why wouldn't be on the track a lot of good talent, especially post IPO as debt.
I am pleased to understand that we were very focused strategy.
It's not only to technology leadership, but we have a very clear commercial rollouts and given engineers, even folks that are deep deep in the tech appreciate this point.
So.
Yes.
Theres no sort of right answer to your question, but I think you have to have certainly scale in terms of talent and.
Focus.
Okay got it.
And then second question.
I wanted to talk to your if you could just.
Talk to you for ecosystem.
Partnerships and I know that none of these partnerships really have exclusivity per se, but is there any stickiness factor in your relationship.
Of all the commercial partners.
Fit out that puts me on the front seat for deeper commercial agreements with on as you scale up or you know that makes it more difficult for them.
On to switch to another provider.
I think there is.
So on natural switching barriers.
So for instance.
Our network, how we designed the network for.
On the right on top of where are our current customers are.
On that provide some switching barrier right because for them to switch technology. So I assume that the coverage of their maps and everything fits with their supply chain right with our customer supply chain.
There's things like <unk>.
Small things I mean, right now the voice of customer kind of how the handoff works.
How do you plug into a Tms system, what kind of equipment. That's on the truck I mean, all of these things do play into different things have different ways of operating and they don't like to change.
If they can help it.
And then of course kind of starting today being able to book.
Plug into carriers and shippers Gms transition transition management system and the way the dispatch trucks.
Most of the systems on the market today are quite customized these are probably.
All systems that have been very customized carrier to carrier overtime and so it's actually a long integration process on me I mean, those are things that I think do have natural switching various well look end of the day.
Happy to deliver we have to deliver the most efficient.
Most accessible.
Thomas free capacity.
Customers, who use it so so I think.
I think their customers are.
With us today, because they see our leadership in technology, and where we're going.
Great. Thank you.
Yes.
We have no further questions at this time, thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
Thank you everyone.
Okay.