Q3 2021 TuSimple Holdings Inc Earnings Call

Good day and welcome to the two simple third quarter, 20th 21 earnings Conference call. All participants are now with a listen only mode. Later, we will conduct a question and answer it and brokers will follow up at that time [noise] keep.

Keep in mind that this call is being recorded and there will be a replay available at I R. Dot too simple dot com following this call.

I would now like to turn the conference over two games man head of Investor Relations pretty simple. This demand. Please go ahead.

[laughter]. Thank you Brandon good afternoon, everyone and welcome to our third quarter of 2021 earnings call with US today are too simple as president and Chief Executive Officer, Chang Blue and Chief Financial Officer Pack doing.

We'll review the operating and financial highlights and then we'll take questions before I can turn the call over to Chang, Let me cover a few housekeeping items.

As a reminder to simple shareholder letter in a replay of this call will be available later today on the Investor Relations page of our website. This call is being recorded if you object in any way. Please just connect now.

Note that too simple shareholders colder letter press release him. His call all contain forward looking statements that are subject to risks and uncertainties. These forward looking statements are only predictions it may differ materially from actual future events Ah resolved due to a variety of factors. Please refer to the risk factors detailed their SEC filings.

We will also discuss non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. Please refer to the safe Harbor disclaimer and non-GAAP financial measures presented our shareholder letter for more details, including a reconciliation of a non-GAAP measures to comparable GAAP measures I will now turn the call over to change it again.

Train.

Thank you James Hello, everyone and welcome to a third quarter earnings call. Our mission to simple is to bring the most safe most reliable and low cost with common spray capacity to the market too.

Two simple as making meaningful progress developing will be eating local four timeless technology scaly are common sprayed network.

And the best thing in our people and operations.

I wish you a few highlights and I'll turn the call over to pet to discuss our financial results.

I'd like to start today's call quite sure some very exciting updates when I lost any partnership would U P. S.

Over the last two and a half years, we have accumulated over.

160000 miles of paid autonomous free College for U P. S is north American they're afraid decision well enough.

You'd likely heard a lot recently that autonomous trucking companies are trying to find ways to scale the commercial the appointment.

<unk>.

It is not easy.

And that is why we're so proud of what we have accomplished or the world class partner N U P. S.

We believe U P S and two simple Ah running the world's most significant autonomous pretty operation.

<unk>.

Whether you measured by the years, we have been working together the cumulative economists mileage what is your graphic reach of R. U P. S. Eponymous routes. We believe our partnership represents a significant lead the race to commercialization.

Secondly, we continue to develop new economists lanes put a U P. S. Now.

Including most recently expanding our H D mask from Dallas to U P S terminals in Orlando and Charlotte.

This represents a nearly coast to coast Autonomous network for U P. S. Now.

Fantastic opportunity to expand our relationship would U P S.

Lastly.

We set another industry benchmark by choosing significant fuel savings doing R. U P S eponymous operations.

Over the last two and a half years for U P. S eponymous miles driven and the industry standard 55 to 68 miles per hour operating band.

Able to cheap over 13% fuel savings relative to human operators.

This builds on our 20th 19 University study, that's down a 10% savings from our local Ford Poenology. It provides further support for it significant environmental benefits.

We believe that you'd just operations represent by far the largest third party validation of the Smiths can fuel savings from autonomous technology.

<unk> represents almost 25% of chuckings variable cost structure.

And over the last year the price of diesel fuel has increased over 75%.

Cause has a significant impact on the cost of freight, including increasing fuel surcharge formed by shippers.

Our technologies feels saving benefits can translate into billions of dollars a potential cost savings for the <unk> ecosystem.

R U P. S eponymous operations represented multiyear deployment of our technology. It will will conditions and it provides us with Snippy uncompetitive vantage and I'd go to market and technology development.

Moving to the quarter overall.

Overall, the third quarter represented a period of continued progress and investment in all areas of our business.

I want to take a moment to recognize Michelle Sterling, who we pointed to our board in October <unk>.

Michelle add amazing perspective from her time, leading qualcomm's global human resources practice, the oversaw 32000 global employees are.

Her background at a high growth technology company like Qualcomm mixed Michelle a perfect addition to two simple as bored as we continue to scale operations.

In terms of our people.

We continue to invest in building our team of exceptional technical and operational experts two of our recent he hires include Doctor Ginger.

Senior Vice President of software engineering, and Doctor urgent humor, our new head of machine learning, who oversees the testing of our virtual driving algorithms.

We added 138, you fulltime R&D employees during the quarter.

To bring to our D teams head count to approximately a thousand full time employees.

Well, we ended the quarter with approximately 1300 employees globally.

This quarter, we continued to make progress with our global OEM partner trade time.

The U S. We can do to make steady progress would navistar an autonomous on my truck production program, a regular joint dialogues with our fleet customers.

We believe the now completed merger would trade <unk> has made navistar and even stronger partner for Anthony ecosystem.

Internationally, we're working closely with <unk> and his Scania brand on your turns development initiatives, including all road testing as well as we finding a long term go to market strategy.

This month to simple it's gone you will be co hosting an exhibit at the China International input Expo, Shanghai, which is wanted to major technology trade show then.

We continue to accumulate real World Road miles with our global fleet stop right across the southern view us as well as our testing programs is Sweden and China.

Our fleet drove 840000 miles and a quarter bring our cumulative role models to 5.4 million.

Now to provide update on a driver out pilot program.

Our team is making significant progress towards removing the driver for runs over the 80 mile route between the Phoenix and Tucson areas.

We expect to perform the initial driver out runs before at your hand.

And to complete the pilot program over the coming months.

As a reminder that driver out pilot will consist of multiple runs performs over multiple weeks and is a major part of the ongoing technology development across many dimensions.

Including software hardware and go to market.

What makes the driver out pilot program. So challenging is that we're solving for both are known and unknown factors that we might encounter on public roads.

This includes Noncompliant motors.

Unclaimed road construction and changing driving conditions, all of which must be continuously monitored and accounted for it real time.

Safe operations required Thomas driving technology beyond anything previously undertaken.

Let me provide you with some insights into a progress thus far.

We started testing along that doesn't it about a month ago. So.

So far have performed over 1800 tricks.

Accumulated over 150000 autonomous role models.

We continue to see improvement in the system's hardware and software performance.

I am pleased to share the hardware quality challenges, we discussed last quarter are now resolved.

We expect to freeze our technology development in the coming weeks. So the system can move to the validation phase.

I recently participated in one of our test.

But I can tell you that was amazing to see our next generation trucks embark on a terminal terminal <unk>.

My trip like the vast majority of our test runs including zero. This engagements and demonstrated just how far our technology development has come.

[noise] safety of course comes before all all set to simple and this is particularly important pretty dry rot pilot did.

Driver all safety case validation process is it is it has a multifaceted risk mitigation approach.

They include a significant focus on systems engineering and functional safety.

Which gives us the confidence to safely we moved the driver on public roads.

We have accumulated significant learnings from a driver all safety process. These learnings will be critical to scale or technology put butter commercial deployment.

And today's letter.

We out like two primary areas of our driver out safety case validation.

First <unk> system safety.

Which at a high level valday that the driver I'll trucks are safe to operate autonomous Lee by helping each aspect of the system to be reliable failsafe sufficient and prove it.

Second is operations safety.

Which supports each aspect of our driver operations to be prepared and proven by creating safe processes and procedures.

Operation safety validates that we have monitored and triage every driving thing that we can assess.

Assessed Steven level of safety at risk.

In a sign it for resolution my engineering cheese.

Our state your teams are working closely with all departments across all levels I'll go organization to validate our driver all safety case, consistent with our overall company safety culture.

Across organization, our primary focus is on safety and this is embedded in our hiring onboarding and they they operations.

Ultimately responsibility of safety the longs for to our safety Committee, which is a cross functional senior leadership group. All members of the committee myself included are fully focused on ensuring the safety how 'bout driver all program and all of our operations at two simple.

[noise] safety is one of the most significant value propositions, both are economists technology.

This quarter, we announce the initial results of our Telematic study what G O town.

Preliminary study results indicate that our local for technology significantly reduces harsh driving events relative to human driver.

This third party study.

Results as significant as harsh driving events are well established precursors to accidents.

We believe we're the only aacomas driving company with empirical data to quantify the safety driving behaviors of autonomous driving system.

Having an objective measurement of our Thomas driving system's performance is important.

Not only for internal development, but also for our partners, including insurance providers, and a stripper and carrier customers.

We look forward to continue our work with Joe tab and other stakeholders to celebrate our technology development.

Now moving to commercial developments, we remain focused on our goal of going our current a feature yeah. Thank capacity.

And over time, increasing the penetration of autonomy on our network.

Our high definition that network has now expanded across the southern half of the United States. We added 1400 miles this quarter to bring our totally new smiles to almost 10000 miles.

Further the pace of mapping is also increasing which allowed us to expand our a S. N T U P. S terminals on the East Coast ahead of schedule.

This is an excellent example, how about technology development translating into immediate commercial progress.

We increase our revenue miles quarter over quarter, despite relatively flat truck fleet, we deepen our customer relationships, including adding some that's again, but just as clear as a reservation holder.

And our customers continue to show tremendous enthusiasm to help us develop our technology it will will commercial conditions.

And before I had to call over to pads I do want to provide it please update on our city is process.

We continue to be in productive dialogue with <unk> and we believe are moving closer to resolution.

But we have not reach a definite the outcome of the cross it at this time, we remain committed to providing updates on the process.

And we will share more an appropriate time.

And so with that Oh, now hands to call over to Pat to discuss our financial results and guidance.

Thank you Chang.

Beginning with a reservation program, we added 100, new truck reservations from a significant global logistics operator during the quarter.

This brings our total reservations to 6875.

I mentioned her ongoing progress with this particular customer during our last call and our team work diligently to finalize the reservation in September.

Plan to share more on this relationship in the coming months once we start hauling freight with them on route from the southwest.

Our team continues to engage in reservation discussions with a broad range of Shepperson carriers, and we expect to continue to add new reservations in the coming quarters.

We continue to focus on the quality of our reservations working with partners, who are committed to deploying resources alongside us to establish autonomous lanes in the future.

We continue to be highly encouraged by the breath of potential customers that are engaged with us on incorporating our technology into their networks and we believe this bodes well for the rapid adoption of R. A F N over the years to come.

Now shifting gears to our financial results for the third quarter.

We reported 1.8 million of revenue in the quarter, which increased over three fall versus the same period last year and represent the 20% increase quarter over quarter.

While we started to receive new semi trucks recently Ah read a revenue. Please size was relatively five during the quarter and a revenue growth is primarily driven by continued improvement and asset utilization.

Moving to expenses.

We spent $85 million in total are indeed, and a quarter, including 22 million a S. P C.

This compares to 60 million in the same period last year.

We try and 29 million on G&A during the period, including $10 million a S. P C <unk>.

This compares to 15 million in the same period last year.

Our adjusted EBITDA with negative 81 million, which compares to negative $67 million in the same period last year.

The larger EBITDA loss reflects our continued investment in technology and commercial development, including discrete items that we do not expect to repeat in the fourth quarter.

We invested $6 million in capital expenditures during the quarter driven by equipment purchases and facility costs and we ended the quarter with a cash balance of $1.4 billion.

Now to provide an update or 2021 annual guidance, our financial performance for the ear today in our forecast for the remainder of 2021 are largely trying as expected. Although we do have a few appointments to share.

We are refining our R&D X S. B C guidance to $210 million to $220 million, which represents the upper half of the prior guidance range.

Similarly, we are refining our guidance for G N a X S. B C to $55 million to $60 million, which is also the upper half of the fire range.

We are adjusting our stock based compensation expectation to 120 to 130 million and there is no change to our other previously communicated guidance.

I will now hand, it back to Chang for a few last remarks.

Thank you for that.

Two simple we're striving towards solving one of the most complex and Jane challenges there's ever been undertaken.

This past quarter all of our employees stepped up to propel us towards completing our mission incredibly.

Incredibly proud of our team and the progress we've made towards bringing level for technology to the Marquez scale.

As we head into the year.

End of the year will not let up <unk>.

Will continue to lead the industry without technology or go to market strategy and our talents.

And with that we're ready to start the Q&A session.

Thank you and will now begin the question and answer.

If you have a question please though dar one done your phone keypad.

You'd like to be removed from the Q. Please tell the pollen China, where they had.

If you want a secret code. Please pick up your handset first before dialing.

Once again, if you have a question. Please <unk> Dar one on your phone keypad.

And from Morgan Stanley, we have rubbish picker. Please go ahead.

Thanks, Good afternoon, Chang and bad maybe it got started out on on the on the driver out test Oh, you reiterated your timeline to get this done or or start the task at least before the end of the your they're only about seven weeks left in the year or so is it fair to say that you have really strong line of sight and confidence.

On the timing of this desk.

[noise] hi, rather good too.

Good have you, yes uhm we.

<unk> or aim to hit our target date.

As mentioned, we have moved on we won't be moving onto the next stage in the last phase of our driver Alpine program.

Which is a very positive development.

As we begin our validation process, we feel confident but look I can't guarantee that we will discover some new issues during that phase of development and really that's what having a structure development process. It meant to do.

And so in the day, our number one priority is to safely complete our safety case validation process.

And a day. This is not meant to be a demo with P. R. Stunt that once we are done it's over and on with.

Everything we're doing directly with.

With a driver on a pilot program translate to fusco commercials appointment so to us if we make more improvements prior to the pilot program will drive round initial runs.

Afterwards, let me down all Jamborees positive Ah alright for us, but but again to reiterate that is our go we do believe we can I hit that target at this point.

Great and maybe for a follow up I think I'm Gonna last call. You mentioned that you were having some difficulty getting new trucks and getting new parts. Obviously the words a crazy place right. Now can you just give us an update on that kind of how are you looking from a technology perspective, even from a labour perspective, obviously, you don't have the same labor issue.

The mayor of companies out there, but I guess I'm sure even hiring engineers is it's probably challenging in this environment. So if you'll just give us an update their that'd be great.

Okay. Great question look at from from I think what what we've seen and and across the industry. I think the world has continued to be a crazy place I think the supply chain issues have gotten worse, rather than better over the last quarter.

So so we do of course, we are having some some challenges receiving your trucks receiving a new parts. We have suppliers that have labor issues, but I think we can use that and we're not going to use that excuse.

And so we will continue to work hard to overcome those near term challenges.

Very good thank you on the Labor Party.

And a late report as you know I think the the new term that the that the labor market is calling after the the pandemic is the great resignation alright. So [laughter]. So not only are so I think the the talent pool is tighter than ever and.

And I think that explains for some of the additional increasing costs the pen.

As alluded to but but again you know that those are things that as we run the company, we just have to overcome.

There are very few jobs out there there is cool is working on autonomous trucks. So maybe you'll have an easier time. Thanks, so much guys [laughter].

Thank you.

So can you give me more can we have Brian awesome, if I could please go ahead.

[noise] Hey, guys afternoon, Thanks for taking my question.

So chain just wanted to come back to supply chain, maybe looking a little further down the road can you just give us some sense you mentioned moving forward with Navistar just Ah Ah brought her update there would be it would be helpful. In terms of timelines and and and milestones and then suddenly in terms of the L for to your <unk>.

Once supply chain, how how that's progressing in terms of getting the redundancy, what's the quality and scale that you need to to move past to drive round test and actually put more of these vehicles on the road.

Certainly great question. So I was released the truck.

Deliveries and and.

Ah Navistar is is really collaborative <unk> priority.

Partner for them.

Well I think the reality is that we're starting to receive the trucks and we believe will get what we ordered beginning of this year hopefully by all of it by the end of this year so in a way the.

These truck purchases and almost becoming sort of talks for next year and that's okay. I I think that don't she sits on playing well.

In terms of tier one supply chain I think there's there's really two <unk> two phones for that one as the near term cause disruption to supply chain, a labor shortage and just everyone being generally very busy and those are issues that we continue to overcome every day.

And then in the longer term as I moved to before one of the biggest challenges we see to the scale deployment of a Thompson O. G is the the supply chain maturity.

And that really revolves around T. Two one components like the compute what times domain control ADC or redundant actuation steering and braking and so there is a little chicken egg that happens in this because two ones.

Don't want to commit to invest.

Investments without borders and you know and so so of course, there's a natural chicken eggs that kind of problem that they're persistent and that's something that we have identified as one of the risks and so we are taking steps to to address that we've always worked very closely with our tier one partner someone.

Some of which are are investors from from a long time ago and so over the next coming quarters, you'll you'll hear more announcements of us in terms of investing more heavily in the supply chain too sure that we can meet the timeline that we talked about.

Okay. So just to clarify probably didn't ask it clearly enough, but on the Navistar side I was more interested in the longer term development of the airport trucking scale not necessarily the the near term orders for the ones you're you're retrofitting.

Got it got it.

It's where we have extensive corporation will continue to make steady progress.

<unk> I don't think we can expect with respect to have a significant update every quarter.

Overall, the the tradeoff acquisition of Navistar.

Certainly strengthen navistar is balance sheet and access to global platform.

So it is truly actually I think provides us with that.

Global platform partner and we're working through altogether, what trade Han Navistar other brands within trade hot on how to better realize those synergies globally and so so so I feel good about the development.

And then this in terms of overall risk Ah all point to the supply chain as as really the biggest risks that we see at this point.

Okay got it just one more quick pop if I could just have a safety case, which is really helpful. Here in terms of the driver out pilot. So it seems like this is gonna be sort of the the guy posted for going forward until the next the next phase you've got several different categories here under the two broader headings uhm, maybe if you.

It just gives them.

Bright color about which of these areas you think potentially has the most the most challenge ahead. Just so we can kind of get a sense as to to where the the biggest swift is as you move into the final phase of this this driver out pilot.

Sure.

I.

Wouldn't categorize a particular part of the safety case as having the the biggest challenge.

It's.

Think more and more Moreover, it's more about having a very structured systematic approach to identify and mitigating risk Amanda day. The technology, we're developing it hardly does have risks.

And it's our job to to mitigate and to show that we are responsible stewards of safety and so so it's a lot of.

A lot of collaboration Wanna work with our teams.

And there is a validation process as the last part of our program a pilot program.

We believe all the pieces of the puzzle in place and you know all those are are excited to to kind of go into that phase and and hopefully have a very short validation process and so we can be on the roads without driver shortly.

Okay. Thanks for all that Chang I appreciate it.

Thank you.

[noise] from Bank of America, we have an extra please go ahead.

Hey, good afternoon, Chang and Pat So a trace on it just I Wanna clarify they've got or Navistar has new management I guess here in the U S. Just I want to understand if if Saint vision same time frame as as the old management. If if that's been kind of clarified it all just checking in on that and then it looks like the U S trucks went up to 58.

From 50, if it just taken your total truck and assuming that they are all in the U S. So so it's still not the the the full twenty-five your targeted.

Are you all set with ghost rider is that fully loaded in terms of your the trucks you wanted and then lastly for me just you mentioned, it's not start stop so once the driver out test is done it do you keep running it or is it a fixed period pilot.

Hi could thanks.

I mean wouldn't Navistar I've mentioned was Brian's question, we believe that the acquisition from from the merger completion would trade time, the the change in management team, which can actually happens as part of that all positive developments, there's a bigger global platform that we're leveraging I mean, we already have existing.

A relationship with <unk> with Scania M. A N. So so I think really the continuation and actually it's refreshing that all of US are in the same room now, which we couldn't do before so so I think the overall the division at the same and of course.

The dogs are some changes war or a new people new faces that we have to to some late but overall that hasn't changed.

You're you're right. So we haven't received the food twenty-five trucks that we ordered earlier. This year. This has no impact to our drug route. So that those this these trucks are really for what's after it and continuing growing or a fleet of trucks that we can provide more free capacity and more data collection.

Thomas testing overall, so so so this would have an impact to to try brown.

The day after this drive all pilot program.

It is a pilot program is meant to have a finite time we are.

Working with.

Cotype components somewhat a sample b sample components and so there's one operational costs as well as just in terms of the reliability of the hardware that we it doesn't make sense at this point to continuously run.

I I think really.

This is to showcase the maturity of our technology operations, even working with non auto grade Ah components.

We will after this we will give a more detailed plan of the different milestones from now to series production.

So so you know we look forward to updating you on what's next shortly.

Wonderful <unk> just another one for me if I can be you you had mentioned that target for ramp up in revenues in China was was starting next year I just want to know if that's still on target should we wait now given some of the equipment issues are just told me to call them and what are your thoughts on China in revenues.

That's a great question, so what China revenues.

The second driver of that is is the regulatory environment, we're making a tremendous progress on the the testing and technology side, when we're working closely with the.

Different layers of regulatory bodies to allow us to to actually have paid freight at this point. We have we did have permission to do so yet and so.

That's kind of what we are working closely and hopefully we can we can make more progress, but I don't really have a clear.

Quick update what timeframe for you at this point.

So I guess from that just unlikely in 22 or is that kind of your viewer.

But do you think it's something develops.

We're we're optimistic we're optimistic and I'm, hoping hoping it would develop.

So right now I would assume it's still 20 point too and it will continue to provide you with updates.

And can Kennedy Cat I would expect you know in the early part of next year. Our report our four year restart results for 2021, I could give some guy give some guidance on revenue.

Including a little bit of detail on what we're expecting some revenue from that region.

Okay.

From city, we have cream, whether it be please go ahead.

[noise], Hey, guys James onto Chris wanted to touch on the order book that you had covered you converted 100 truck ordered that you mentioned.

Prior to call, but just wanted to understand shall we think of that as like essentially other orders that are semi lay close in the same place in the order bookings.

The pipeline is developing Charlie continuously and also just wanted to understand the commentary around when you said you're focused on quality like should we should think about that as a certain revenue hurdle just wanted to get your thoughts on the skin.

Hi, Chris.

Sure the.

As we as we continue to talk about a reservation.

For us our strategy is to focus on that rather than the breath at this point and of course announcing big numbers of course makes makes great headlines, but doesn't really help development unless we can go deep with our reservation partners.

I mean, our our collaboration with U P. S is a very good indication requires significant resources when both sides.

There's a lot of in depth learning that's helpful for us both on the operations side as well as technology development.

And it also it kind of pushes us to increase our levels of.

Commercial operation service requirements and technology requirements. So so that that's what we hope to see from the reservations at this point.

All of our reservation partners are.

The Blue Blue is chip partners, you can think of.

Of course, we can't disclose some of their names and so with this one for the last quarter. It's really excited to be working with this new partner and we hope to go deeper.

And I think it's our strategy hasn't changed I think you should expect a more of a sort of a step ladder function in terms of reservations rather than.

Point, just trying to put as many as we can under the belt.

Got it okay that makes sense also wanted to ask about cheese simple capacity instead of how you think about it.

Is it.

Offering a product that you believe instead of a strategic asset or is it something more along the lines of and dusted and market development just trying to understand it's like essentially if there's enough momentum towards market adoption. If it's something you might piss. It away from her something that you feel is an absolute necessity. This built the type of business and have such a notes that you were looking.

[noise] I would say both.

Certainly it's a critical piece of.

Ah perfecting the solution.

To be able to sell to third party.

And so that is a very critical.

It's also a critical piece of all of our mission, which is to enable it sounds great capacity a skill our job is to put two to expand the size of the foot ecosystem to ask him to have more names and to put more density of trucks on the network. So that it provides a better service.

So all the shipper and carrier users.

And so we do see this as a good.

Good point piece of our of our straw.

Strategy.

Uhm.

And and compliments.

The the other carry on capacity.

This model.

[noise] got a shake.

Then one quick furniture I couldn't just wanted to touch on the guide you moving at the upper and just wanted to understand what's essentially changed over the past three months and sort of what.

What what <unk> could be seen as an indication of should've development, Peter or any sort of trend is coming back from that.

Yep [laughter], so I think moving to the upper hand is really just a continuation of the same trend that we talked about during our last quarter call. We've been pleased at our pace of hiring.

And other strategic investments that we've made a deadbolt further the technological and commercial development.

So narrowing the range the upper end sort of what we would expect.

One more we're actually moving at the at an accelerated pace. So we're pleased with.

With where we're headed and see this is roughly in line with what was expected when my last talk to you a quarter ago.

From RBC capital markets, we have Joseph Beck. Please go ahead.

Thank you uhm.

I guess, just maybe pick up on <unk> on that last question I mean, you've been hiring at a pretty M process pace here at you know and I I I guess, what I'm wondering is.

You know why and what what sort of the the marketplace like hair for for employees, especially on the Rd.

Area, where it seems like maybe the there's there's more limited resources and and you know how long do we should we you sort of expect US have this hiring paste. It at the continue or does it start it started to slow down and you know until you get closer to.

Talk to launch if at all.

Hi, Joe.

As mentioned before we are in a very tight labor environment.

The the cost of wages are going up, especially for hard to find positions in the computer science artificial intelligence space, but I think overall.

The the value proposition that we bring to a new higher is very strong it's a very exciting field, what a leader in the space.

There's clear direction on where we're going and and so and I think the mission that we're barked on his question that the can too. So so I think I think the value what do you think about Hari Israeli the total value proposition, we can bring to new hires.

And I think we feel good about our relative positioning in the market.

And in terms of this is piece of hiring.

Mmm.

Can I talk to before we think about what does it mean to bring economists free capacity to mark his scale.

Two simple were effectively AI company, a software company a car company handle that just as company all kind of put together in one and so we do continue seat that are hiring pace will continue to be similar to this year's for next year.

This is a lot of work it's really exactly.

Vastly complicated.

The system, that's a lot more than just a particular software or a particular piece of hardware. So you know I think the the capital we have debated position that we we offer allows us to to bring on very good talent and and that itself is a competitive advantage that we have.

Missouri.

Okay and then the second question is I I thought I heard.

But maybe you could.

Mm confirm or or or clarify that.

The purpose spelled truck is on.

Uhm on schedule and I guess I'm, you know I I clearly see the advantage of having that to you know do what you want to do at scale.

But a lot of you know the other sort of competitors of you will do and don't really have that and and I guess I'm I'm I'm wondering do you think.

That's sort of sufficient for the sort of next maybe three to five year period, because we don't sort of could scale and and like an aftermarket or a retrofit sort of solution is.

Okay, a or or even for that first phase here.

Here, you know to really scale, you're gonna need that purpose built vehicle.

<unk>.

A very good question.

Okay.

There will be additional milestones in between series production Ah. So so I I think what's important to recognize is that we have our eyes on the prize.

Uhm, we understand what it means to truly brings phonology to mark his scale I think would be communicated that these are the key components, including series production of trucks now beforehand like with any technology adoption, we have to be practical we have to think about what's the most important how do we have we demonstrate ah.

Service and it's not gonna be nationwide. They won it's much better to start with a smaller service and grow out rather than try go from zero to 100 overnight so to those those facts, we know and and and.

And so so I think you'll see certainly different generations of our of our trucks the reliability of each generation the features will improve and.

Right and I think so so I think it's.

I I wouldn't say.

Well I wouldn't take this as a we're focused on just that particular thing it's.

That's that's important because ultimately for a company to be critical of long term, we can't do.

Eight of what it means to scale.

But the overall I mean, there's no change to to our twin 24 time in terms of scale deployment.

And I've mentioned after drug route we will talk about some other milestones that you should expect to see prior to that time frame.

From Needham and company, we have Rushy guilt. Please go ahead.

Yeah. Thank you and congrats on executing all of those metrics.

Pat I was wondering if you could maybe give us a flavor of Ohio.

To think about 2022 revenue since we're kind of coming to an end.

For this year, given kind of the supply component shortages, how do we think about the the drivers of revenue and extra at a high level.

[noise] Hi, Roger.

No I think while we're not in a in a position to give 2022 guidance yet the drivers really will be around the size of our revenue fleet.

Ability to add trucks as well as safety drivers for that fleet.

As well as R. A F N partners. So so nothing dramatically different from Wafford. During the day, we are focused on growing revenue and obviously, we've been doing that quarter over quarter.

Throughout this year and would like to see that trend not only continued would accelerate next year.

And we're doing that very strategically.

Frankly, we've been oversubscribed any amount.

You know blue chip carriers, and shepherds that want to work with us and they want to see our technology in action and haul freight autonomously.

As a a an entry point to eventually add deploying driver out autonomy one minutes ready at scale. So we're trying to be very strategic about how we do that and I guess the short stories.

Continue to see acceleration in the revenue, but never losing sight of the overall strategic objective of why we're we're building this capacity today and.

And keeping side of the long term hall, but we will get more specific targets. When we meet with you again on the on the 2021 fourth quarter Hall.

Got it that makes a lot of sense.

On the on the drive around program and congrats on on solid progress on that front how.

How do you view this.

And a validation tool in order to.

Increase the number of reservations.

Or increase your value proposition.

In other words the drive around program in my view, obviously is going to be a very significant milestone not only for your company, but for L for self driving.

Fucking.

And if you can demonstrate that.

And with all the safety and reliability that required.

I would assume that can be used as a significant kind of selling tool in order to increase the number of reservations increased order book. So how are you guys thinking about that how closely are the are the customers. The shippers carriers are monitoring the success of the driver L program.

And do you feel and if you do the successfully this is kind of one of the the last steps in order to get more reservations. This is like a significant pinpoint any any thoughts on that will be helpful.

Sure I I.

I would say from from my interactions.

The best years are more focused on this they probably are are super and carrier partners.

Yeah everyone's focus on this but but I think.

When you come to Tucson, right. The vehicle I think the general belief is that the future is coming.

And it's a matter of.

When and not if and that.

The rollout of economy is it's gonna be a phased approach, it's gonna be lane by lane, rather than overnight nationwide and so I think those are takeaways dads, our partners already have and that also requires that collaboration too.

To embed the synology into their existing supply chain. So so long these things really change so I I think at this point I I wouldn't say that.

For instance, we expect to have X amount of new reservations because of this I think certainly it's a great validation points and it gives everyone more confidence, but but I I do stay for all the folks that have come to Tucson already.

I think they've already taken away with a strong positive feeling of where things are going.

And Roger one thing that maybe I would add onto that is not an immediate boost by that driver at translating day, one and get a reservation spot taking the learnings from the driver out and some of the things. He brought around the systems architecture can be able to expand our capacity to do a b testing Robbins.

For commercial customers oftentimes back can be.

One of the the gating items in order to get them across the wind out to being a reservation Parker and I can pick up one in particular, where you know being able to run certain ones for them.

An autonomous mode.

It is certainly a a requirement for them to make a reservation. So there's there's there's things like got knock on effects that getting through driver out which may not show up immediately and no reservations. What we think is a good indication of our ability to increase that reservation count every time.

This week, we have Dan Levy. Please go ahead.

Hi, good evening, thanks for for taking the question.

So I wanted to start by asking them to drive around you know when you. When you do complete the program what are the the types of metrics or.

Item is we should expect you to report so can we have a sense of how successful at it I mean, yeah, I I assume you'll give us some sense on the number of disengagement your miles what other things and this night. We expect you to report so that we have a feel for you know the success and you know how much.

Stepping stone to other achievements.

Yeah, I mean I think.

The.

I.

Generally speaking the ability to to do it I mean, we will capture this on video.

No. This is not gonna have something where it's a doctor. So so I think you should be able to see that this is done fully.

Driverless.

And the fact that we passed our our validation case, which we will publish in terms of the safety validation case, that's one metric or set of milestones.

You know I look I think I think it's really just kind of.

Taking a step back.

The industry I know everyone's kinda very keen on finding ways to measure progress right, but I think the dry route.

Is what password of the Powerpoint.

[noise] Powerpoint just.

Just a demo.

We've constantly or giving you.

More data points on our progress give example in this quarter and highlighting the empirical data.

Of this amount of miles driven the performance of autonomous system. Both in terms of fuel efficiency and safety I mean, I think that's something that is already a benchmark that's two simple setting the way.

And and so.

I mean, I think to to kind of answer your question I don't think there'll be sort of new specific.

Metric that come out that drive around program, but the fact that we were able to complete it.

And.

With this very stringent safety case.

In itself is a very big milestone [noise].

Cool great. Thank you and then a follow up is on talent.

Expansion and yeah, it's it's a bit more specific tenet today I.

Can we go ahead I think I think we know generally this is where you have a real arms race and you know test them too.

Day until Korean having something like this as well so AI seems to be whether you know much much more intense race. So maybe you can just give us a flavor of a what the composition of your R&D hiring has been between Hey, I hardware engineers other software engineers and then.

Maybe you could just give us a sense of you know.

You know your ability to track AI trawling versus other competitors how much hair.

Sure the.

So so I think I think generally speaking we have.

Hard to give an exact breakdown.

Probably 30, 40% of our software engineer hires our focus on on algorithms deep learning a machine learning areas.

If you kind of just want to have it rough rough number.

And and obviously right now we feel really good about the level of talent, we've been able to attract them. He really really good I I think we've got some strong very strong senior hires and then we continue to bolster our ranks wood wood.

With junior in the local hires I think the value proposition again.

We're we're proposing is is attractive.

A lot of learning to come into simple, we have a clear direction and we're going to focus strategy.

And so.

You know there really I I think if anything I feel.

Really positive about our ability to track talents compared to any point in time.

In our history.

Mm Barrett, we have George can't Erica. Please go ahead.

Hey, guys. Thanks for taking my question.

I had a question about partnerships in the industry you know I'm sure you read the same press releases from your competitors that we do and there seems to be sort of a chess game going on here can you just elaborate as to who you see within these competitive bake-offs and and what the what the other partnerships in your.

Her opinion mean relative to yours. Thank you.

In terms of this overall commercial partnerships.

I think all these partnerships as positive for industry.

I think we we applaud more partnerships and it means that more and more stakeholders.

Free ecosystem are getting.

Getting in two economy. So the overall that will push the technology forward I mean, I think it's not our place to comment on specific competitors, but.

I think it's also timely question because.

For us.

<unk>.

The the depth of the partnership is so critical and that's something that we've been talking about all along.

We started I think the trend of.

Of getting people involved in having partnerships, but now we're focused and we have always been focused on going deeper and.

Really having action and action points and benchmarks to measure progress and so going back to <unk> to me being able to have 160000.

Economists free miles I, just need one that one partnership.

To be honest I'm not sure. It went then.

How long will take for any other competitor to catch up to that the second part is everyone.

Everyone talks about fuel efficiency, but the <unk> data and be validated by third party is significant I mean that alone is a real business case for autonomy and.

That that was to have used them to make it right. So.

Yeah, I think we we feel really good about the quality of our partners and then more and more it's really about the depth of the partnerships.

Just one more.

I'm sure you guys have been reading in the press.

All the supply chain challenges in the country, but part of the issue might be a shortage of drivers.

Just as to whether these.

Current issues havoc celebrated in discussions you've had with.

Essential partners or shippers.

It certainly has.

And I think the supply chain, but think what's interesting is the the supply chain issue. The driver shortage issues I think in the industry has always been well known it said now I think is really funny center on main street right I think everyone feels the supply chain constraints and the cost of being passed on to the end customer.

No the the $2 per mile right now is the $2 per mile leg and fuel surcharge is it's more more expensive ever I mean last year fuel was.

$30, a barrel and now it's close to $80 a barrel and so again. The fact that we have empirical data now to to demonstrate our fuel efficiency the significance.

And so.

Certainly I mean, I I think I think everyone not just people in industry are waking up to the extreme pressures that supply chain spacing and it doesn't seem like it's getting better anytime soon.

Piper Sandler we have Alex powder. Please go ahead.

Great. Thanks, a lot guys. One more question on on the rollout with Navistar last quarter, you had mentioned that you're hoping to freeze the bomb I guess more or less come to a final conclusion regarding that system itself is that and I think we're targeting early.

<unk> next year is that still on the table or some of these supply chain and truck delivery delays, causing me to push that out slightly.

Great question.

A large majority it is there are some some key there there are a few key components that.

Or it could be pushed out a little bit and so we're working very closely with our partners navistar and treat onto it to address those.

Okay Fair enough and then the last question for me just maybe a follow up on that question that you were just discussing I'm I'm curious qualitatively maybe you could include U P. S and this but also beyond U P. S.

Just how have your discussions.

Changed with partners, whether it's schippers or the fleet.

The discussions that you're having today versus maybe what you were having with those same people at this time last year or two years ago.

Sure it's.

I would say generally speaking, it's the same and.

And the reason is because our our strategy has been very consistent.

We identified that there is a imbalance.

Imbalance between demand and supply free capacity.

And and that's proven unfortunately, because the pandemic to be exacerbated unless you speed up the severity of the the supply chain constraints.

Our our job is to.

Enable.

You free capacity a scale, yeah, we talked about being able to do so by the developing the most advanced software hardware and of course I would go to market strategy. So so I think.

I think we definitely see more urgency from from our partners.

We see that you know of course, who would like to have his Thomas trucks ready by next year [laughter] about a few years from now scale, yeah, but nothing has really changed and I think more and more for thinking partners recognize that this is something that takes time to to adopt in terms of thinking.

This into the existing infrastructure. So so I think I mean, we were very positive by all this development.

And in in a way we feel validated we've been validated by you.

Because of this and and we feel like our strategy to really enable freaky.

Free capacity of scale is.

It's definitely the the right strategy and it's a very clear strategy, how we intend to do that.

From Oppenheimer, we have calling <unk>. Please go ahead.

Thanks, So much guys, yeah, I I wanted to get a little bit deeper into the nothing better and I'm. Just you know other than smiles on your I mean, how much how much of that bowling with its focus on a particular area. It seems to me that some some route that really important, especially given their comments earlier about starting small and calling internationally network.

So I just wanted to start like a tracking that how it should think about that what's where you're at right now.

So is your question around how.

How using the doctor or maybe I could no no. It's it's more about like how much how many of those miles are concentrated on on a limited number of routes. So if we think about you know the the the total mileage that you've got maps you know how much of that it's really bad you know.

Even over in a consistent basis, where you guys are getting a real depth of experience or on those roads.

Patterns.

Got it.

It is very strategic where we collect the data and certainly.

There's more concentration kind of where we operate today from the I 10 from Phoenix to Tucson down to Dallas.

We're starting to collect more and more data on the Texas triangle and while the largest speaking highway driving across the southern part of U S is consistent but yard dark differences right. The difference in behavior differences and wrote.

Will conditions and so.

So absolutely I mean, the the more time that we have on particular route the more the more confidence we have in order to safely traverse economy. So.

And did the same thing with our with our revenue with our mapping I mean it. It follows the same pattern that we're not here just for sake of gathering more revenue of course.

Carriers shipper partners want us help them alleviate some of the free capacity because challenges they have but ultimately all data center around where we see the initial rollout of economy first and then we'll we'll expand outwards from there.

Okay, and then can you give them a central in cycles certainly it seems like as you go deeper in particular areas disconnect sorry that you're learning and nor nor geography. So I guess can you give us a sense of how that translates and and how quickly.

<unk> cycles are accelerating at this point.

I think generally speaking one of the the.

The the proof points of our expansion outward and would you P S to the east coast.

The number of trucks, we have an ability to operate these trucks and autonomy.

I mean showcases our ability to scale in our ability to iterate fast right and that's and that's where I think we see we'll see sort of us in a competition.

Divers are diverging how many we feel very good about our our infrastructure platform. The way, we can take data structure and use it to continue to train our system to be to be smarter and more reliable.

So so I I I don't know if there's a a metric I can share with you today, but I think really all the metrics or the data points, we shared about the amount of miles we've done with U P. S.

Miracle data that we have.

The scalable operations I mean that that is and to build isn't it a fact that were close to being the first to to have a dry route pilot program. I mean that just shows that you have to have we have available bust and scalable and fast iterative.

All my process.

It will continue to improve that every day.

And from both free three we had that group. Please go ahead.

[noise], Hey, it's west fanatics on for Scott.

I had a question just thought opex.

With stock based compensation, just trying to understand the trajectory of what to expect over the next few years or so should we think about that as a consistent per cent of opex or.

Oh and sort of separate growth path.

Yeah, I I think in terms of what you saw this quarter.

You would expect to see that grow roughly in line with opex quarter over quarter, you know the vast majority of our operating expenses around people cost and so I would expect expiated training generally in line with with our overall people call.

Which make up the majority of our overall opex.

Okay. Thank you.

Thank you ladies and gentlemen concludes today's Katherine. Thank you for joining you may now disconnect.

Thank you.

[music].

[music].

Good day and welcome to the two simple third quarter 2021 earnings conference call. All participants are now in a listen only mode. Later, we will conduct a question and answer and instructions will follow at that time.

Keep in mind that this call is being recorded and there will be a replay available at IR dot two simple dot com following this call.

I would now like to turn the conference over to David Mann head of Investor Relations.

The demand. Please go ahead.

Thank you Brandon and good afternoon, everyone and welcome to our third quarter 2021 earnings call with US today are two simple as president and Chief Executive Officer, Eric Chang, Lu and Chief Financial Officer, Pat doing bringing Pat will review the operating and financial highlights and then we'll take questions before I turn the call over to Chang, Let me cover a few housekeeping items.

As a reminder, two simple shareholder letter and a replay of this call will be available later today on the Investor Relations page of our website.

Call is being recorded if you object in any way. Please disconnect now.

Note that two simple shareholders colder letter press release and this call all contain forward looking statements that are subject to risks and uncertainties. These forward looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors. Please refer to the risk factors detailed in our SEC filings.

We will also discuss non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. Please refer to the safe Harbor disclaimer and non-GAAP financial measures presented in our shareholder letter for more details, including a reconciliation of our non-GAAP measures to comparable GAAP measures I will now turn the call over to change to begin.

Cheng.

Thank you James Hello, everyone and welcome to our third quarter earnings call. Our mission at two simple is to bring the most safe most reliable and low cost of Thomas free capacity to the market.

Two simple is making meaningful progress developing a world leading mobile for autonomous technology scaling our Thomas freight network.

And investing in our people and operations.

I will share a few highlights and I will turn the call over to Pat to discuss our financial results.

I would like to start today's call by sharing some very exciting updates on our long standing partnership with UBS.

Over the last two and a half years, we have accumulated over.

160000 miles of paid autonomous freight haulage for Ups's, North American Airfreight Division for Nash.

You've likely heard a lot recently that autonomous trucking companies are trying to find ways to scale the commercial deployment of technologies.

It is not easy.

And that is why we're so proud of what we have accomplished with a world class partner and UBS.

We believe UBS and too simple a running the world's most significant autonomous operation.

Chart knowledge.

Whether you measure by the years, we have been working together the cumulative autonomous knowledge, where the geographic reach of our <unk> autonomous routes. We believe our partnership represents a significant lead in the race to commercialization.

Secondly, we continue to develop new autonomous lanes for the EPS math.

Including most recently expanding our HD maps from Dallas to UBS terminals in Orlando and Charlotte.

It represents a nearly coast to coast Autonomous network for EPS now.

Fantastic opportunity to expand our relationship with UBS.

Lastly.

We set another industry benchmark by cheating significant fuel savings during our EPS autonomous operations.

Over the last two and a half years for your peers autonomous miles driven in the industry standard 55 to 68 miles per hour operating band.

We were able to achieve over 13% fuel savings relative to human operators.

This builds on our 2019 University study.

A 10% fuel savings from our level four technology. It provides further support for its significant environmental benefits.

We believe the UK operations represent by far the largest third party validation of the significant fuel savings from autonomous technology.

Fuel represents almost 25% of trucking variable cost structure.

And over the last year the price of diesel fuel has increased over 75%.

This had a significant impact on the cost of freight, including increasing fuel surcharge formed by shippers.

Our technology is fuel savings benefits can translate into billions of dollars of potential cost savings for the freight ecosystem.

<unk> autonomous operations represented multi year deployment of our technology and real world conditions and provides us with significant competitive advantage and our go to market and technology developments.

Moving to the quarter overall, the third quarter represented a period of continued progress and investment in all areas of our business.

I want to take a moment to recognize Michelle Sterling, who we appointed to our board in October.

Michelle at Amazing perspective from our time, leading qualcomm's global human resources practice, the Oversoul 33000 global employees, our background at a high growth technology company like Qualcomm mix, Michelle it perfect condition to two simple board as we continue to scale our operations.

Yeah.

In terms of our people we continue to invest in building our team of exceptional technical and operational experts two of our recent key hires include Dr. Jim <unk> Senior Vice President of software engineering and Dr. Urgent humor, our new head of machine learning.

Overseas the testing of our virtual driving algorithms.

We added 138, new full time R&D employees during the quarter to bring the R&D team's head count to approximately 1000 full time employees.

Overall, we ended the quarter with approximately 1300 employees globally.

This quarter, we continued to make progress with our global OEM partner tradeoffs.

In the U S. We continue to make steady progress with Navistar on autonomous semi truck production program, a regular joined dialogues with our fleet customers.

I believe the now completed merger with trade Hahn has made navistar, an even stronger partner for our <unk> ecosystem.

Internationally, we are working closely with Tracon and its Scania brands, our near term development initiatives, including on road testing.

As well as refining our long term go to market strategy.

This month, two simple Scania will be co hosting an exhibit at the China International import Expo in Shanghai, which is one of the major technology trade show events.

We continue to accumulate real World Road miles with our global fleet to operate across the southern U S as well as our testing programs in Sweden and China.

Our fleet drove 840000 miles in the quarter, bringing our cumulative ROE miles to $5 4 million.

Now to provide an update on our driver our pilot program.

Our team is making significant progress towards removing the driver for runs over the 80 mile route between the Phoenix and Tucson areas.

We expect to perform the initial driver outruns before year end.

And to complete the pilot program over the coming months.

As a reminder, the driver our pilot will consist of multiple runs performed over multiple weeks and is a major part of our ongoing technology development across many dimensions.

And coding software hardware and go to market.

What makes the driver of our pilot program. So challenging is that we're solving for both known and unknown factors that we might encounter on public roads.

This includes Noncompliant motors.

<unk> construction and changing driving conditions, all of which must be continuously monitored and accounted for a real time.

Safe operations required harmless driving technology.

Anything previously undertaken.

Let me provide you with some insights into our progress thus far.

We started testing along the designated route eight months ago.

And so far have performed over 1800 trips.

Accumulated over 150000 Autonomous road miles.

We continue to see improvement in our systems hardware and software performance.

I am pleased to share that the hardware quality challenges, we discussed last quarter are now resolved.

We expect to freeze our technology development in the coming weeks. So the system can move to the validation phase.

I recently participated in one of our tests.

But I can tell you that it was amazing to see our next generation trucks embark on the terminal terminal one.

My trip like the SaaS.

Vast majority of our test runs, including zero disengagement and demonstrated just how far our technology development has come.

Safety of course comes before that too simple and this is particularly important for the driver out of pilot.

The driver all safety case validation process.

It has a multifaceted risk mitigation approach.

They include a significant focus on systems engineering and functional safety.

Which gives us the confidence to safely remove the driver on public roads.

We have accumulated significant learnings from our driver safety process. These learnings will be critical to scale, our technology for broader commercial deployment.

In today's letter.

We outlined two primary areas of our driver safety case validation.

First is <unk>.

<unk> safety.

At a high level validates that the driver our drugs are safe to operate autonomously by helping each aspect of the system to be reliable failsafe sufficient improvement.

Second is operational safety.

Which supports each aspect of our driver operations to be prepared.

Proven by creating safe processes and procedures.

Operation safety validates that we have monitored and Triaged every driving things that we can.

The event level of safety risk.

And assign it for resolution by engineering teams.

Our <unk> teams are working closely with all departments and across all levels of the organization to validate our driver safety case, consistent with our overall company safety culture.

Across our organization our primary focus is on safety and this is embedded in our hiring Onboarding and day to day operations.

Ultimately responsibility of safety the loans for two our safety Committee, which is a cross functional senior leadership group. All members of the committee myself included are fully focused on ensuring the safety of our driver out program and all of the operations at too simple.

Safety is one of the most significant value propositions, both autonomous technology. This.

This quarter, we announced the initial results of our telematics study with Geo tab.

Preliminary study results indicate that our local for technology significantly reduces harsh driving events relative to human driver.

This third party study result is significant as harsh driving events are well established precursors to accidents.

We believe we're the only autonomous driving company with empirical data to quantify the safety driving behaviors of autonomous driving system.

Having an objective measurements of autonomous driving systems performance is important.

Not only for our own internal development, but also for our partners, including insurance providers in our shipper and carrier customers.

We look forward to continue our work with Joe tab, and other stakeholders to accelerate our technology development.

Now moving to commercial developments, we remain focused on our goal of growing our current or future ethane capacity and over time, increasing the penetration of economy on our network.

Our high definition map network has now expanded across the southern half of the United States. We added 1400 miles this quarter to bring our total unique miles to almost 10000 miles.

Further the pace of mapping is also increasing which allowed us to expand our ASN to EPS terminals on the east coast ahead of schedule.

This is an excellent example of our technology development translating into immediate commercial progress.

We increased our revenue miles quarter over quarter, despite a relatively flat truck fleet, we deepen our customer relationships, including adding significant logistics player as a reservation holder.

And our customers continue to show tremendous enthusiasm to help us develop our technology and worldwide commercial conditions.

And before I hand, the call over to Pat I don't want to provide a brief update on our city is process.

We continue to be in productive dialog with five years, and we believe are moving closer to resolution.

But we have now reached a definitive outcome of the process at this time, we remain committed to providing updates on the process.

And we will share more in appropriate time.

So with that I'll now hand, the call over to Pat to discuss our financial results and guidance.

Yes.

Thank you Cheng.

Winning with our reservation program, we added 100, new truck reservations from a significant global logistics operator during the quarter.

This brings our total reservations to 6875.

I mentioned, our ongoing progress with this particular customer during our last call and our team worked diligently to finalize the reservation in September.

We plan to share more on this relationship in the coming months once we start hauling freight with them on routes in the southwest.

Our team continues to engage and reservation discussions with a broad range of shippers and carriers and we expect to continue to add new reservations in the coming quarters.

We continue to focus on the quality of our reservations working with partners, who are committed to deploying our resources alongside us to establish autonomous lanes in the future.

We continue to be highly encouraged by the breadth of potential customers that are engaged with us on incorporating our technology into their networks and we believe this bodes well for the rapid adoption of our pattern over the years to come.

Now shifting gears to our financial results for the third quarter.

We reported $1 8 million of revenue in the quarter, which increased over threefold versus the same period last year and represents a 20% increase quarter over quarter.

While we started to receive new semi trucks recently.

Our revenue fleet size was relatively flat during the quarter and our revenue growth was primarily driven by continued improvement in asset utilization.

Moving to expenses.

We spent $85 million on total R&D in the quarter, including $22 million of SPC.

This compares to $60 million in the same period last year.

We spent $29 million in G&A during the period, including $10 million of SBC.

This compares to $15 million in the same period last year.

Our adjusted EBITDA was negative $81 million, which compares to negative $67 million in the same period last year.

The larger EBITDA loss reflects our continued investment in technology and commercial development, including discrete items that we do not expect to repeat in the fourth quarter.

We invested $6 million in capital expenditures during the quarter driven by equipment purchases and facility costs and we ended the quarter with a cash balance of $1 4 billion.

Now to provide an update to our 2021 annual guidance, our financial performance for the year to date and our forecast for the remainder of 2021 are largely trending as expected. Although we do have a few refinements to share.

We are refining our R&D SBC guidance to $210 million to $220 million, which represents the upper half of the prior guidance range.

Similarly, we are refining our guidance for G&A ex SPC to $55 million to $60 million, which is also the upper half of the prior range.

We are adjusting our stock based compensation expectations to $120 million to $130 million.

And there is no change to our other previously communicated guidance.

I'll now hand, it back to Chang for a few last remarks.

Thank you Pat.

Two simple we're striving towards solving the most complex engineering challenges that's ever been undertaken.

This past quarter all of our employees stepped up to propel us towards completing our mission I am incredibly proud of our team and the progress we've made towards bringing level four technology to the market at scale.

As we head into the year.

End of the year, we will not let up will continue to lead the industry with our technology, our go to market strategy and our talent.

And with that we're ready to start the Q&A session.

Thank you and we will now begin the question and answer.

If you have a question. Please star one on your phone keypad.

To be removed from the queue, Please delta, Poland, China, where they had.

If you want a decrease.

Your handset first before dialing.

Once again, if you have a question. Please star one on your phone keypad.

And from Morgan Stanley We have Ravi Shanker. Please go ahead.

Thanks, Good afternoon, Chegg and Pat maybe you can say.

On the driver out test.

You reiterated your timeline to get this done or start the past at least before the end of the U R.

There are only about seven weeks left in the year or so is it fair to say that you have really strong line of sight and confidence on the timing of this desk.

Hi, Robert Great too.

Good to have you.

Yes.

We're aiming to hit our target date.

As mentioned, we have moved on we won't be moving on to the next phase in the last phase of our driver our pilot program.

Which is a very positive development.

And as we begin a validation process.

We feel confident.

I can't guarantee that we won't discover some new issues during that phase of development.

That's what having a structure development process is meant to do.

And so in the day.

Our number one priority is to safely complete our safety case validation process and any day. This is not meant to be a demo with PR stunt that once we have our guidance over and onward.

Everything we're doing directly.

What's the driver on pilot program translates to full scale commercial deployment, so to us if we make more improvements prior to the pilot program, where the driver out <unk>.

Shall runs.

Afterwards, I mean, theyre, all generating positive ROI for us.

But again to reiterate that as our goal we do believe we can hit that target.

At this point.

Great and maybe if I have a follow up I think on the last call. You mentioned that you were having some difficulty getting new trucks and getting your parts. Obviously the words Crazy place right. Now can you just give us an update on that kind of how are you looking from a technology perspective, even from a labor perspective, obviously, you don't have the same labor issue.

And many other companies out there, but just I'm sure even hiring engineers is it's probably challenging in this environment. So if you just give us an update there that'd be great.

Great question.

Look I come from I think what we've seen and and across the industry. I think the world has continued to be a crazy place.

The supply chain issues have gone worse, rather than better over last quarter.

So we do of course, we are having.

Some some challenges receiving new trucks, receiving new parts, we have suppliers.

That have labor issues.

Well I think we can use that and we're not going to use that.

As excuse.

And so we're.

We're continuing to work hard to overcome those near term challenges.

Very good. Thank you and then on the labor part.

And the labor part of as you know I think the the new term that the labor market is calling after the.

The pandemic has the great resignation, so so not really.

So I think the talent pool is tighter than ever in and.

I think that explains for some of the additional increase in cost.

As alluded to but.

But again those are things that as we run the company, we just have to overcome.

There are very few jobs out there there is cool is working on autonomous trucks. So maybe you'll have an easier time. Thanks, so much guys.

Thank you.

From Jpmorgan, we have Brian Hudson Beth could please go ahead.

Hey, guys afternoon, and thanks for taking the question.

So Jim just wanted to come back to supply chain, maybe looking a little further down the road can you just give us some sense you mentioned moving forward with Navistar just a broader update there would be would be helpful. In terms of timelines and milestones.

Milestones and then similarly in terms of the al for a tier one supply chain.

How that's progressing in terms of getting the redundancy.

With the quality and scale that you need to move past the driver out test and actually put more of these vehicles on the road.

Sure Brian Great question, so as it relates to truck.

Deliveries in and.

Navistar is.

Is really collaborative.

Our priority.

Partner for them.

Well I think the reality is that we're starting to receive their trucks and we believe we will get what we woodard.

This year, we hope.

By all of it by the end of this year so.

In a way.

Used truck purchases are almost becoming sort of talks for next year and that's okay. I think that don't use pits are playing well.

In terms of tier one supply chain I think there's there's really two is two folds. One is the near term call it disruption to supply chain labor shortage, and just everyone being Germany very busy.

Those are issues that we continue to overcome every day.

And then in the longer term.

<unk> two before one of the biggest challenges we see to the scale deployment of Tom Synology is the the supply chain maturity.

And that really revolves around key tier one components like.

The compute autonomous domain control ADC or redundant actuation steering and braking and so there is a little chicken egg that happens in this because tier ones.

I don't want to commit to.

Our investments without borders and.

So of course, there is a natural chicken eggs that kind of problem that persist.

And that's something that we have identified that as one of the risks and so we are taking steps to two.

To address that.

We've always worked very closely with our tier one partner someone some of which are our investors from from a long time ago.

And so over the next coming quarters.

Youll hear more announcements of us in terms of investing more heavily in the supply chain to ensure that we can meet the timelines that we've talked about.

Hey, guys just to clarify I, probably didnt ask it clearly enough, but on the Navistar side I was more interested in the longer term development.

Of the ELD for truck at scale not necessarily the near term orders for the ones you're you're retrofitting.

Got it got it.

We have extensive collaboration we're continue to make steady progress.

Hum.

Well again I don't think we can.

We should expect to have a significant update every quarter.

Overall, the trade out acquisition of Navistar.

Certainly strengthen navistar as balance sheet and access to a global platform.

So this is truly actually I think provides us with the <unk>.

Global platform partner.

We're working through altogether with trade, how navistar other brands within trade hard on how to better realize those synergies globally.

So.

So I feel good about the developments.

And again just in terms of overall risk all.

I'll point to the supply chain as really the biggest risks that we see at this point.

Okay got it and just one more quick follow up if I could just kind of a safety case, which is really helpful. Here.

So the driver out pilot. So it seems like this is going to be sort of the.

The guide post for going forward into the next the next phase you've got several different categories here under the two broader headings.

Maybe if you could just give some broad color about which of these areas do you think it potentially has the most are the most challenge ahead. Just so we can kind of get a sense as to where the biggest lift is as you move into the final phase of this this driver out pilot.

Sure.

I wouldn't categorize it particular part of the safety case as having the biggest challenge, it's a I think more and more Moreover, it's more about having a very structured systematic.

Broach to identifying and mitigating risk and today.

Oh Gee, we're developing are inherently does have risk.

And it's our job to mitigate and to show that we are responsible stewards of safety.

And so so it's a lot of.

A lot of collaboration a lot of work with our teams.

And.

There is a validation process as the last part of our talk about pilot program.

We believe all the pieces of the puzzle in place and all of US are are excited to kind of go into that phase and and hopefully.

Have a very short validation process and so we can be on the road without driver shortly.

Okay. Thanks for all that Chang I appreciate it.

Thank you.

From Bank of America, we have 10 texture. Please go ahead.

Hey, good afternoon, Chairman, Pat So Tristan just I want to clarify they've got where Navistar has new management I guess here in the U S. Just want to understand if it's same vision same timeframe is as the old management or if that's been kind of clarified at all just checking in on that and then it looks like the U S trucks went up to 58.

I'm 50, if it just taking your total truck and assuming there they're all in the U S. So so still not the full 25 targeted.

Are you all set with ghost rider is that fully loaded in terms of your the trucks you wanted.

And then lastly for me just you mentioned, it's not start stop so once the driver out test is done do you keep running at or is it a fixed period pilot.

Thanks.

I mean with Navistar.

I've mentioned with Brian's question.

We believe the acquisition from from the merger completion with trade time.

The chain.

The management team, which kind of.

Actually happens as part of that Oh positive developments, there's a bigger global platform that we're leveraging I mean, we already have existing relationships with tracon with Scania and they and so so I think really the continuation.

It's refreshing that all of US are in the same room now.

We couldn't do before so so I think overall the division the same.

And of course the.

There are some.

Changes or new people, new faces that we have to to simulate but overall that hasn't changed.

You're right. So we happened to see the full 25 trucks that we ordered earlier. This year. This has no impact to our drug route so.

These trucks are really for what's after and continuing growing our fleet of trucks that we can provide more free capacity and more data collection autonomous testing overall. So this would have an impact to drive round.

But after this drive out pilot program.

It is a pilot program is meant to have a finite time.

We are.

Working with.

Prototype components, some or a sample the sample components and so there is one operational costs as well as.

Just in terms of the reliability of the hardware that we it doesn't make sense at this point to continuously run.

I think really.

This is to showcase the maturity of our technology operations, even working with non auto grade.

Our components.

After this we will.

Give a more detailed plan of the different milestones from now to serious production.

So so.

So we look forward to updating you on what's next.

Shortly.

Wonderful.

Another one for me if I can.

You had mentioned that target for ramp up in revenues in China was starting next year just want to know if that's still on target should we wait now given some of the equipment issues or just timing of development what are your thoughts on.

China revenues.

So great question, So China revenues.

A significant driver of that is as the regulatory environment.

We're making tremendous progress on the testing and technology side.

When we're working closely with the.

Different layers of regulatory bodies to allow us to actually have paid freight at this point, we have we did have permission to do so yet.

And so.

That's kind of what we are working closely and hopefully we can we can make more progress.

But I don't really have a clear.

Uh huh.

Update or time frame for you at this point.

So I guess from that just unlikely in 'twenty, two or is that kind of your view or.

Do you think if something develops.

We're we're optimistic.

We're optimistic.

And I'm, hoping hoping it would develop.

So right now I would assume it's still 2022 and it will continue to provide you with updates.

And Ken it's Scott.

I would expect.

And the early part of next year, when we report our full year results.

Results for 2021 to give some give some guidance on revenue.

Including a little bit of detail on what we're expecting some revenue from that region.

Okay.

From Citi, We have Chris Wetherbee. Please go ahead.

Okay.

Hey, guys James on for Chris just wanted to touch on the.

The order book that you had covered you converted 100 and truck order that you had mentioned.

On the prior call, but just wanted to understand should we think of that as like essentially other orders that are similarly close.

Placing the order bookings.

The pipeline is developing fairly continuously and also just wanted to understand the commentary around what you said you were focused on quality like should we think about that as a certain revenue hurdle just wanted to get your thoughts on those two.

Hi, Chris.

Sure.

As we as we continue to talk about reservation.

For us our strategy is to focus on that rather than the breath at this point and of course announcing big numbers of course mix makes great headlines, but doesn't really help development unless we can go deep with our reservation partners.

Our collaboration with UBS is a very good indication.

Acquire significant resources when both sides.

There's a lot of in depth learning that's helpful for us both on the operation side as well as technology development.

And it also is kind of pushes us to increase our levels of <unk>.

Commercial operation service requirements and technology requirements. So.

That's what we hope to see from the reservations at this point.

All of our reservation partners are.

The Blue Blue chip.

<unk> partners you can think of.

Because we can't disclose some of their names and so with this one for the last quarter.

Really excited to be working with this new partner.

And we hope to go deeper.

And I think it's our strategy hasn't changed I think you should expect more of a sort of a step function in terms of reservations rather than you know.

At this point just trying to put as many as we can under the belt.

Got it okay that makes sense also wanted to ask about Chi simple capacity instead of how you think about it.

Is it stable.

And offering a product that you believe is sort of a strategic asset or is it something more along the lines of investment in market development. Just trying to understand is essentially if there's enough momentum towards market adoption of it.

Mike is it away from them or something that you feel is an absolute necessity to build the type of business and as such are mostly U.

We're looking for.

Yeah.

I would say both.

Certainly it's a critical piece of.

Protecting the solution.

To be able to sell to third party.

So that is very critical.

It is also a critical piece of <unk>.

All of our mission, which is to enable our Cogs break capacity skill our job is to put to expand the size of the free ecosystem. The S. N to have more lanes and to put more density of trucks on the network. So that provides a better service to all of the shipper and carrier users and.

And so we do see this as a good.

Good point piece of our of our strategy.

And and complements.

The the other carry on capacity.

Our business model.

Got it okay.

And then one quick one if I can.

Just wanted to touch on the guide you're moving at the upper end just wanted to understand what's essentially changed over the past three months and so that's what makes it.

What that could be seen as an indication of sort of development speed or any sort of trend that's coming back from that.

Yep.

I think moving to the upper end is really just a continuation of the same trends that we talked about during our last quarter call. We've been pleased at our pace of hiring and.

And other strategic investments that we've made that felt further the technological and commercial development.

So narrowing the range to the upper end.

What we would expect.

We're more we're actually moving it at.

At an accelerated pace. So we're pleased with.

With where we're headed.

See this is roughly in line with what was expected when we last talked to you a quarter ago.

Okay.

From RBC capital markets, we have Joseph Bank. Please go ahead.

Thank you.

I guess, just maybe pick up on that last question.

<unk> been hiring at a.

Pretty impressive pace here Pat.

And I guess, what I'm wondering is.

Okay.

Why and what what sort of the marketplace like hair for.

For employees, especially on the R&D.

Area, where it seems like maybe you know the.

There's more limited resources and.

Uh huh.

How long do we should we sort of expect this half this hiring pace.

That continue or does it sort of starts to slow down until you get closer to.

Talk to launch it.

Hi, Joe.

Uh huh.

As mentioned before we are in a very tight labor environment.

The cost of wages are going up, especially for hard to find position.

Physicians in the computer science.

Artificial intelligence space, but I think overall I mean.

The value proposition that we bring to our new hire is very strong.

It's a very exciting field, we're the leader in this space.

There is clear direction on where we're going.

And.

And so and I think the mission that we embarked on is quite significant. So so I think I think when we think about hiring is really the total value proposition we can bring.

Two new hires.

And I think we feel good about our relative positioning in the market.

And in terms of this is pace of hiring.

Are you guys kind of talked about before when we think about what does it mean to bring autonomous free capacity to market scale, two simple where effectively AI company a software company a car company and a logistics company all kind of put together in one and so.

We do continue to see that our hiring pace will continue to be similar to this year for next year.

There's a lot of work it's really.

Lastly complicated.

System, that's a lot more than just a particular software where a particular piece of hardware.

Hum.

The capital we have the value proposition that we offer.

Allows us to bring on very good talent and and that itself is a competitive advantage that we have.

<unk>.

Okay and then the second question is I thought I heard.

But maybe you could.

You know confirm or clarify that.

The purpose build truck is on.

On schedule.

And I guess I clearly see the advantage of having that too you know.

Do you what do you want to do at scale.

But a lot of the other sort of competitors. If you will do and don't really have that in them and I guess I'm I'm I'm wondering.

Do you think.

That's sort of sufficient for the sort of next maybe three to five year period, because we don't sort of get scale in like an aftermarket or a retrofit solution is is okay or or even for that first phase here.

You know to really scale youre going to need that purpose built vehicles.

Okay.

Yeah very good question.

Okay.

There will be additional milestones in between series production.

So so I think what's important too.

Recognize that we have our eyes on the prize.

We understand what it means to truly bring technology to market scale I think we communicated but these are the key components, including series production of trucks now beforehand like with any new technology adoption, we have to be practical we have to think about.

What's the most important how do we how we demonstrate our service and it's not going to be nationwide day one.

It's much better to start with a smaller servicing and grow outs rather than try to go from zero to 100 overnight. So so those those facts, we know and and.

And so so I think you'll see certainly.

Generations of our of our trucks.

The reliability of each generation the features will improve.

Hum.

And I think so I think it's.

I wouldn't say.

So I wouldn't take this as well.

We're focused on just that particular thing.

That's important because ultimately for a company to be successful long term, we can't lose sight of what it means to scale.

But overall I mean, there is no change to.

Two our twin going forward time in terms of scale deployment.

And as mentioned after drug route we will talk about some other milestones that you should expect to see prior to that timeframe.

From Needham and company, we have Rajiv Gill. Please go ahead.

Yes, Thank you and congrats on executing all of those metrics.

Pat I was wondering if you can maybe give us a flavor of how to think about 2022 revenue since we're kind of coming to an end.

For this year.

Given kind of the supply component shortages, how do we think about the.

The drivers of revenue next year at a high level.

Yeah, Hi, Rajeev.

I think while we're not in a in a position to give 2022 guidance yet the drivers really will be around the size of our revenue fleet.

Our ability to add trucks as well as safety drivers for that fleet.

As well as our AFM partners. So so nothing dramatically different from what we're doing today.

We are focused on growing revenue and obviously, we've been doing that quarter over quarter throughout this year and would like to see that trend not only continue but accelerate next year.

And we're doing that very strategically.

Frankly, we've been oversubscribed and the amount.

Blue chip carriers, and shippers that want to work with us and they want to see our technology in action and haul freight autonomously.

As a an entry point to eventually add appointing driver out autonomy when it's ready at scale.

We're trying to be very strategic about how we do that.

And I guess, the short stories Kantar.

Continue to see acceleration in the revenue.

I'd never losing sight of the overall strategic objective of why we're building this capacity today and.

And keeping side of our long term goal, but we will get more specific targets. When we meet with you again on the on the two.

2021 fourth quarter call.

Got it that makes a lot of sense.

On the drive around program.

Congrats on solid progress on that front.

How do you view this.

And a validation tool.

In order to.

Increase in the number of reservations.

Or increase your value proposition.

Other words the driver program in my view, obviously is going to be a very significant milestone not only for your company, but for <unk>.

Al for self driving trucking.

Trucking.

And if you can demonstrate that.

And with all the safety and reliability that is required.

Assume that can be used as a significant kind of selling tool in order to increase the number of reservations and increased order book So.

How are you guys thinking about that.

How closely are the customers the shippers or carriers are monitoring the success of the drive rail program.

Do you feel if you do this successfully this is kind of one of them.

Last steps in order to get more reservations.

Connecticut proof point.

Any thoughts on that would be helpful.

Sure.

I would say from my interactions.

The investors are more focused on this than probably our shipper and carrier partners now.

Now everyone's focus on this but but I think.

When you come to Tucson, right. The vehicle I think the general belief is that the future is coming.

And it's a matter of.

When and not if.

<unk>.

The rollout of economy is there's going to be a phased approach is gonna be lane by lane rather than overnight.

Nationwide and so I think those are takeaways that are our partners already have.

And that also require that.

Collaboration.

To embed technology into their existing supply chain. So so none of these things really change.

So I think at this point I wouldn't say.

Got it.

For instance, we expect to have X amount of new reservations because of this I think certainly its a great validation points and it gives everyone more confidence, but but I do say for all the folks that have come to Tucson already.

I think they've already taken away with a strong positive feeling of where things are going.

And Roger one thing maybe I would add onto that is not an immediate boost by the driver out translating they want and get reservations, but taking the learnings from the driver out.

And some of the things we've learned around the systems architecture to be able to expand our capacity to do a b testing or items for commercial customers.

Oftentimes that can be.

One of the gating items.

To get them across the line to being a reservation partner.

And I can pick up one in particular, where.

Being able to run certain runs for them.

In autonomous mode.

It's certainly a requirement for them to make a reservation.

So there's things like got knock on effects that getting through driver out which may not show up immediately into reservations for we think is a good indication of our ability to increase that reservation count over time.

From credit Suisse.

We have Dan Levy. Please go ahead.

Hi, good evening, thanks for taking the questions.

So I wanted to start by asking on the driver out.

When you when you do complete the program what are the types of metrics are.

Items, we should expect you to report that we have a sense of how successful it I mean.

I assume you'll give us some sense on the number of disengagement your miles, but what other things might we expect you to report so that we have a feel for it.

Now the success.

This is a stepping stone to other achievements.

Yeah, I mean I think.

The.

Hum.

Generally speaking the ability to do it.

I mean, we will captured on video.

No. This is not gonna have something where it's a doctor. So I think you should be able to see that this is done.

Fully fully driverless.

And the fact that we passed our validation case, which we will publish in terms of the safety validation case.

That's one metric were set of milestones.

<unk>.

Look I think I think it's really.

Just kind of taking a step back.

I mean, I think the industry I know everyone's kind of very keen on.

Finding ways to measure progress right, but I think the dry route.

Is that what.

Password of the Powerpoint.

It's a pretty powerpoints.

But just a demo.

We constantly are giving you more data points on our progress.

Give example in this quarter and highlighting the empirical data.

Of this amount of miles driven the performance of autonomous system pulls in terms of fuel efficiency and safety.

That's something that is already a benchmark that's two simple setting the way.

And so.

I mean, I think to kind of answer your question I don't think there'll be sort of new specific.

Metrics that come out with a driver out program, but the fact that we were able to complete it.

Inc.

With this very stringent safety case.

In itself was a very big milestone.

Great. Thank you and then.

A follow up is on talent.

Expansion and.

It's a bit more specific tenant to AI.

I think we know generally this is where you have a real arms race in the test.

Hey, I day and crew, having something like this as well so.

It seems to be weather.

Much much more intense race. So maybe you can just give us a flavor of what the composition of your R&D hiring has been between AI hardware engineers other software engineers and then.

Maybe you could just give us a sense as you know.

Your.

82 track AI talent versus other competitors how much here.

Sure.

So I think I think generally speaking.

We have.

I mean, it's hard to give an exact breakdown.

Probably 30% 40% of our.

Software engineer hires are focused on on algorithms deep learning.

Machine learning.

Yes.

If you kind of just want to have a rough rough number.

And and obviously right now we feel really good about the level of talent, we've been able to attract really really good.

I think we've gotten some strong very strong senior hires.

And we continue to bolster our ranks with with junior and mid level hires.

I think the value proposition again.

We're proposing is attractive.

Contractive.

A lot of learning to come into simple, we have a clear direction on where we're going as a focused strategy.

And so.

You know there really I think if anything I feel.

Really positive about our ability to attract talent compared to any point in time.

In our history.

From Baird, we have George Kian Erica. Please go ahead.

Hey, guys. Thanks for taking my question.

I had a question about partnerships in the industry you know I'm sure you read the same press releases from your competitors that we do and there seems to be sort of a chess game going on here can you just elaborate as to who youre seeing within these.

Competitive bake offs and and what was the other partnerships in Europe Union mean relative to yours. Thank you.

In terms of just overall commercial partnerships.

I think all of these partnerships is positive for industry.

I think we applaud.

More partnerships and it means that more and more.

Stakeholders in the free ecosystem are getting.

Getting in to economy. So the overall that will push the technology forward.

I mean, I think it's not our place to comment on specific competitors, but.

I think it's also a timely question because.

For us.

The depth of the partnership is so critical.

It's something that we've been talking about all along.

We started I think the trend of of getting people involved and having partnerships, but now we're focused and we have always been focused on going deeper.

Really.

Having action and action points in benchmarks to measure our progress and so going back to EPS.

Being able to have 160000 autonomous free models I, just didnt want that one partnership.

To be honest I'm not sure when.

How long will take for any other competitor to catch up to that the second part is everyone.

Everyone talks about fuel efficiency, but the empirical data and being validated by third party is significant I mean that alone is a real business case for autonomy and.

You know that that was two and half years in the making right. So.

I think we feel really good about the quality of our partners and then more and more it's really about the depth of the partnerships.

Just one more.

I'm sure you guys have been reading in the press.

All of the supply chain challenges in the country that part of the issue might be.

George of drivers here.

Curious as to whether these current issues have celebrated any discussions you've had with <unk>.

Potential partners or shippers.

It certainly has.

And I think the supply chain, but I think what's interesting is.

The supply chain issues the driver shortage issues I think industry has always been well known that said now I think is really front and center.

All main street, where I think everyone feels that the supply chain constraints and the costs are being passed on to the end customers.

The $2 per mile right now is the $2 per mile.

Fuel surcharge is it's more more expensive over the last year fuel was.

$30, a barrel and now it's close to $80 a barrel and so again. The fact that we have empirical data now to demonstrate our fuel efficiency.

<unk>.

And so.

Certainly.

I think everyone.

Not just people in the industry are waking up to the extreme pressures.

Supply chain spacing and it doesn't seem like it's getting better any time soon.

From Piper Sandler we have Alex Potter. Please go ahead.

Great. Thanks, a lot guys.

One more question on the rollout with Navistar last quarter, you had mentioned that you're hoping to freeze the bomb I guess more or less come to a final conclusion regarding the system itself.

Is that and I think you were targeting early next year is that still on the table or some of these supply chain and truck delivery delays caused me to push that out slightly.

Great question El Super large for the majority of it is.

There are some some key there there are a few key components that.

Uh huh.

It could be pushed out a little bit.

And so we're working very closely with our partners navistar and treat onto it to address those.

Okay Fair enough and then the last question for me just maybe a follow up on the question that you were just discussing.

Curious qualitatively maybe you could include <unk>, but also beyond UBS.

Just how have your discussions.

Changed with partners, whether its shippers.

Our the fleet.

You know the discussions that youre, having today versus maybe what you were having with those same people at this time last year or two years ago.

Sure it's.

I would say generally speaking, it's the same and.

And the reason is because our our strategy has been very consistent.

We identified that there is a.

Imbalance between demand and supply free capacity.

And that's proven unfortunately, because of the pandemic to be exacerbated and unless you speed up the severity of the the supply chain constraints.

Our job is to.

Enable new freight capacity.

Scale, we talked about being able to do so by the developing the most advanced software and hardware and of course, our go to market strategy. So so I think.

I think we definitely see.

More urgency.

From our partners.

We see that of course, we'd like to have Thomas trucks ready by next year not a few years from now our scale.

Those things haven't really changed.

And I think more and more for thinking partners recognize that this is something that takes time to adopt in terms of breaking this into their existing infrastructure. So so I think I mean, we were very positive by all of this development.

And the way we feel validated.

Validated by.

Because of this and we feel like our strategy to really enable our free capacity of scale is.

It's definitely the right strategy and it is a very clear strategy.

Intend to do that.

From Oppenheimer, we have Colin Rusch. Please go ahead.

Thanks, So much guys, yeah, I wanted to get a little bit deeper into the data and understand.

All of these models.

How many how much of that volume and focus on a particular area.

I mean is that somewhere out there.

Important, especially given your comments earlier about starting small and growing internationally networks such as I just wanted to know how you're tracking that how we should think about that what's playing out right now.

So is your question around <unk>.

How.

Using the data or maybe it's a good no no it's more about like how much how many of those miles are concentrated on a limited number of routes. So if we think about that.

The total mileage that you've got mapped.

How much of that is really like that.

Turnover in a consistent basis, where you guys are getting a real depth of experience around those roads and traffic patterns.

Got it.

It's very strategic where we collect the data and <unk>.

Certainly.

There's more concentration.

Where we operate today.

On the <unk> 10 from Phoenix, Tucson down to Dallas.

But we're starting to collect more and more data on the Texas triangle and while largely speaking hi.

Hi, we're driving across the southern part of U S is consistent but they are dark differences right. The difference in behavior differences and <unk>.

<unk> conditions.

So.

So absolutely I mean, the more data we have on particular route.

For the more confidence we have.

In order to safely traverse the economy so.

And then same thing with our with our revenue with our mapping I mean it follows the same pattern that we're not here just for sake of gathering more revenue of course.

<unk> and Sherpa partners, one is help them alleviate some of the free capacity challenges.

Challenges they have but ultimately all of that is centered around where we see the initial rollouts.

<unk> first and then we'll expand outward from there.

Okay, and then can you give us a central in cycles.

It seems like as you go deeper in particular areas, that's going to accelerate your learning.

Nor geography, so I guess can you give us a sense of how that translates and how quickly.

Those cycles are accelerating at this point.

Yeah.

Yeah.

I think generally speaking one of the.

The proof points of our expansion.

And with UBS to the East coast.

<unk> trucks, we have no.

And their ability to operate these trucks in autonomy.

I mean showcases our ability to scale and our ability to iterate fast right now and Thats, where I think we see we will see a sort of a.

And the competition.

Kind of diverge diverging I mean, we feel very good about our.

Our infrastructure.

Our infrastructure platform the way we can take.

Take data structure and use it to continue to train our system to be to be smarter and more reliable.

So.

I don't know if there's a metric.

I can share with you today, but.

I think really all of the metrics or the data points, we shared about the amount of miles we've done with UBS. The empirical data that we have.

The scalable operations I mean that is in the bill.

The fact that we're close to being the first to have a driver out part.

That program I mean that just shows that you have to have is we have a very robust and scalable and SaaS iterative.

And process.

We will continue to improve that every day.

And from Wolfe Research.

Group. Please go ahead.

Yeah.

Yeah, Hey, it's west Alex on for Scott.

I had a question just thought opex.

With stock based compensation, just trying to understand the trajectory of what to expect over the next few years or so how should we think about that as a consistent percent of opex or.

Is it on its own sort of separate growth path.

Yeah, I think in terms of what you saw this quarter.

You would expect to see that grow roughly in line with opex quarter over quarter.

The vast majority of our.

Our operating expenses around people costs.

And so.

We'd expect SBA to trend.

Generally in line with what our overall people costs, which make up the majority of our overall opex.

Okay. Thank you.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for joining you may now disconnect.