Q4 2021 TuSimple Holdings Inc Earnings Call

Good day and welcome to the two simple fourth quarter 2021 earnings Conference call. All participants are now in a listen only mode.

Speaker 1: Good day and welcome to the two simple fourth quarter 2021 earnings conference call. All participants are now in a listen only mode.

Speaker 1: Later, we will conduct a question and answer session, and instructions will follow at that time.

Later, we will conduct a question and answer session and instructions will follow at that time.

Speaker 1: Keep in mind that this call is being recorded and there will be a replay available at ir.tosimple.com following this call.

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.

Speaker 1: I would now like to turn the conference over to James Mann, head of investor relations for Two Simple. Mr. Mann?

I would now like to turn the conference over to James Mann head of Investor Relations for two simple Mr. Matt. Please go ahead.

Speaker 2: Thank you, Lachie. Good afternoon, everyone, and welcome to our fourth quarter 2021 earnings call.

Thank you Latif.

Good afternoon, everyone and welcome to our fourth.

Just one more earnings call.

Speaker 2: With us today are two symbols, President and Chief Executive Officer Chang Liu and Chief Financial Officer Pat Dillon. Chang and Pat will review the operating and financial highlights and then we will take questions. As a reminder, two simple shareholder letters and a replay of this call will be available later today on our Invest Relations website.

With us today are two samples president and Chief Executive Officer, Chengdu, and Chief Financial Officer, Pat Tillman Cheng and Pat will review, the operating and financial highlights and then we will take questions.

As a reminder, two simple shareholder letter and a replay of this call will be.

Available later today on our Investor Relations website.

Speaker 2: This call is being recorded. If you object in any way, please disconnect now. Note that two simple shareholder 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 SDG feed file.

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

Two simple shareholder letter press release and this call contain forward looking statements that are subject to risks and uncertainties. These forward looking statements are only predictions and may differ materially from our 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.

Speaker 2: We will also discuss non-GAAP financial measures which are not prepared in accordance with vd

Speaker 2: Please refer to the Safe Harbor disclaimer and non-GAAP financial measures presented in our shareholder letter for more details, including a reconciliation of the non-GAAP to comparable GAAP measures. I will now turn the call over to Chang to begin.

Please refer to the safe Harbor disclaimer and non-GAAP financial measures presented in our shareholder letter for more details, including a reconciliation of the non-GAAP to comparable GAAP measures I will now turn the call over to change it again.

Thank you James Hello, everyone and welcome to our fourth quarter earnings call.

Speaker 3: Thank you, James. Hello, everyone, and welcome to our fourth quarter earnings call. We have a lot of exciting developments to cover.

A lot of exciting developments to cover so I'll dive right in.

Speaker 3: Since our founding 2015, we've had a single vision of building the first-to-market scalable level four autonomous trucking solution that would transform the phrase.

Since our founding positive team we've had a single vision of building the first to market scalable level four autonomous trucking solution that would transform the industry.

Speaker 3: In December , we took a huge step in realizing our vision when our truck completed the world's first drive route semi truck ride on open public roads and 80 mile terminal terminal routes. This is a massive achievement for two simple and huge milestone for the industry.

In December we took a huge step in realizing our vision when our truck completed the world's first driver out semi truck run on Oakland public roads, and 80 mile Terminal terminal round.

This is a massive achievement for two simple and huge milestone for the industry.

Since then we have further shown driver operations are repeatable.

Speaker 3: Since then, we have further shown that our driver-out operations are repeatable.

Date.

Speaker 3: To date, we have successfully completed seven runs. The on-card videos of the seven completed runs are all available on...

Successfully completed seven runs.

<unk> video so the southern completed runs are all available online.

And to recap.

Speaker 3: until we cap. This is on a real free route covering all over 80.

This is on a real free route covering over 80 miles.

The route starts of Union Pacific.

Speaker 3: The route starts a Union Pacific Railroad, Railyard in Tucson, and ends at a large distribution center in the Phoenix Metro area, covering both surface streets and highway.

Rail yard in Tucson.

<unk> distribution center in the Phoenix Metro area, covering both surface streets and highways.

Speaker 3: There was no human beings in the vehicle, no teleoperation. Our Thomas driving system is in complete control of the vehicle during entire time.

There was no human beings in the vehicle no till operations are.

Thomas driving system is in complete control of the vehicle dirty entire time.

Speaker 3: The system was able to smoothly handle challenging driver situations, including emergency lane vehicles, cut-ins, non-compliant drivers, and construction zones.

The system was able to smoothly handle challenging driver situations, including emergency lane vehicles cut ins noncompliant drivers and construction zones.

The truck.

It is also able to enter into feels safe operations, so anything out of the ordinary happens.

Speaker 3: It's also able to enter into failsafe operations, or anything out of the order.

Speaker 3: In fact, we did have one driver outrun that triggered a minimal risk condition or fail safe operations due to equipment failure in the chase vehicle. The minimal risk condition...

We do have one driver outlined the triggered a minimum risk condition will fail safe operations due to equipment failures and the chase vehicle.

The minimum risk condition was triggered by design.

Speaker 3: The vehicle came to control stop and further approved our safety case.

The vehicle came to control stock and further improved our safety case.

Speaker 3: We fixed the equipment issue and completed six perfect continuous drive rail runs after one.

We fixed equipment issue and completed six perfect continuous struggle.

Woods.

As part of the initial driver operations.

Speaker 3: As part of initial driver operations, we put three safety precautions in place.

Three safety precautions in place.

Speaker 3: all of which we will aim to gradually move to show the driver out the skill.

All of which we will aim to gradually move to show that driver is scalable.

First we have a chase vehicle default and monitors that driver our truck.

Speaker 3: First, we have a chase vehicle that follows the monitors, the driver out truck. The chase vehicle does not influence normal operations, and only has the ability to put the driver out truck into a fail safe mode as the actual layer of safety precautions.

Vehicle does not influence normal operations and only has ability to put the drug route truck into a fail safe mode.

Extra layer of safety precautions as.

Speaker 3: As we scale, the trade vehicle will be replaced by centralized oversize.

As we scale the chase vehicle will be replaced by a centralized oversight system.

Second we have a survey vehicle that runs five to six miles ahead of our dry ground truck.

Speaker 3: Second, we have a survey vehicle that runs five to six miles ahead of our drive route.

Speaker 3: Given the distance, it is not impact operations or traffic, nor communicates with a driver-out truck in any way. We expect to remove the survey vehicle from operations later this year.

Given the distance it does not impact operations, where traffic nor communicates with the drybulk truck in any way.

We expect to remove this target vehicle from operations later this year.

Lastly.

Speaker 3: Their air is going to stay in local law enforcement that deserve our driver out operation.

Arizona State and local law enforcement desert, our driver our operations.

Speaker 3: The police vehicles are primarily unmarked cars and stay approximately half a mile behind the driver of the vehicle.

Police vehicles are primarily unmarked cars, they stay approximately half a mile behind to drive about vehicle.

Speaker 3: To ensure they do not interfere with traffic, they'll occasionally exit and re-enter the highway.

To ensure they do not interfere with traffic, you'll occasionally exit and reentered the highway.

Speaker 3: We strongly value our collaboration and ongoing relationship with law enforcement. And going forward, we remain committed to working transparently with them and to write with regulators.

We strongly value or collaboration and ongoing relationship with law enforcement and going forward, we remain committed to working transparently with them integrate with regulators.

We believe two simple it is important to have these early safety precautions to help to normalize <unk> operations and help to build trust with the general public.

Speaker 3: We believe at two simple, it is important to have these early safety precautions as it helps to normalize driver operations, and to help to build trust with the general public.

As I mentioned, we plan to systematically move them as we scale up.

Speaker 3: As I mentioned, we plan to systematically move them as we scale up. So what is the significance of driver out?

So what is the significance of drug route.

First it is a clear proof of our technology leadership.

Speaker 3: Everyone in this industry is trying to create a driver's truck. Only too simple has been able to accomplish, repeatable driver operations on a real free routes, on open public roads. In the Thomas Driving World,

And this industry is trying to create driverless truck.

Only two simple has been able to accomplish repeatable driver operations on a real free wells on open public ones.

Thomas driving World Big claims are common.

With this achievement not only are we the clear industry leader.

Speaker 3: With this achievement, not only are we declared industry leader, but further show our track record of hitting milestones on time.

Further show our track record of hitting milestones on time.

Second.

Speaker 3: Second, we're more confident ever about our panel.

We are more confident than ever about our technology.

Speaker 3: Our previous guidance was that driver-out program was a one to two month pilot.

This guidance was that drug rail program was a one to two months pilot.

Speaker 3: We're pleased to share that we expect to continue our driver-out operations on a permanent basis.

We're pleased to share that we expect to continue our operations on a permanent basis.

Speaker 3: Furthermore, our driver operations will start expanding, including hauling freight for Union Pacific later this spring. Third and most importantly,

Furthermore, our driver operations will start expanding including hauling freight for Union Pacific later this spring.

Third and most importantly drive route was zero at one moment.

Speaker 3: Driver out proves we are a future, we are future complete, which means our time is driving system has all the capabilities required for true driver operations along commercial routes. And that is able to safely mitigate or contain all the edge cases during operation.

Driver proves we are a future where fisher complete which means our autonomous driving system has all the capabilities required to drive our operations along with commercial route.

And that is able to safely mitigate will contain all the edge cases doing operations.

Speaker 3: You cannot perform driver, perform safe, continuous driver operations on a commercial route without having all the capabilities developed. And.

You cannot perform driver performed safe continuous driver operations on a commercial route without having all the capabilities developed.

And from here.

We believe we have a clear pathway to commercialization in the next two years.

Speaker 3: We believe we have a clear pathway to commercialization in the next two years.

Speaker 3: From driver out to commercialization, the key words are optimization and scaling.

From drive route to commercialization, the key words, our optimization and scaling.

Speaker 3: In the freight industry, shippers and carriers care about two things. Cost and level service.

Industry shippers and carriers carry about two things cost and local service.

Speaker 3: To commercialize, it requires us to have continuous autonomous freight operations on high-volume routes at a competitive per mile operating cost relative to that of manually driven trucks.

To commercialize it requires us to have continuous autonomous freight operations on high volume routes at a competitive per mile operating cost relative to that of manually driven trucks.

Post drug route commercialization as a linear progression. So we can make step by step.

Speaker 3: Host driver out, commercialization is a linear progression that we can make step-by-step.

With our driver outruns as a starting point, we plan to scale, the ODT and reduce autonomous operating costs, including removing all non scalable operations.

Speaker 3: With our driver outruns at the starting point, we plan to scale the ODD and reduce autonomous operating costs, including removing all non-scalable operations.

Speaker 3: Later this year, the plan to add daytime runs followed by expansion into new routes in Texas. We'll also expect to remove this started

Later this year, we plan to add daytime runs followed by expansion into new routes in Texas.

We also expect to remove this survey and chase vehicles.

Speaker 3: By the end of 2023, our goal is to have a fleet of driver out retrofitted semi-trucks to support continuous commercial freight operations.

By the end of 2023, our goal is to have a fleet of driver out retrofit semi trucks the support continuous commercial operation.

We expect to be holding customer freight on multiple routes and the Texas triangle along the iPad.

Speaker 3: We expect to be holding customer freight on multiple routes in the Texas triangle along the item.

Speaker 3: And we expect to have a clear line of sight on a per mile uniconomics being lower than that of human-operated

And we expect to have a clear line of sight on a per unit economics being lower than that of human operated trucks.

To date no one in this industry has clearly defined what is the endpoint.

Speaker 3: To date, no one in this industry has clearly defined what is the end point and where are they well to the end point. No one can clearly articulate the steps needed to reach commercialization or show evidence that those milestones are met. At two simple, we are doing just that.

Good day relative to the endpoint.

No one can clearly articulate the steps needed to reach commercialization, where she'll evidence that those milestones are met.

Two simple.

We are doing just that.

Over the coming quarters.

Speaker 3: You should expect to see at Hit These Visual milestones as we scale to commercialization.

Would expect to see US hit these visible milestones as we scale to commercialization.

In summary for driver out.

Speaker 3: In summary for driver out, our technology has advanced significantly even from six months ago.

<unk> has advanced significantly even from six months ago.

Speaker 3: Driver operations on one route is a step that any time is tracking technology company will need to take.

Driver operations on one route.

Step that any common striking technology company.

We'll need to take to reach commercialization.

Speaker 3: What made it even more challenging is the fact that we're working with prototype components and retrofitted

What made it even more challenging.

The fact that we're working with prototype components and retrofitted truck.

Nevertheless, we accomplished this feat and we believe our technology is ready to start scaling now.

Speaker 3: Nevertheless, we accomplish this feat and we believe our technology is ready to start scaling now. Not yours down the world, but today.

Down the road, but today.

This is a good segue to a hardware partnerships with.

We continue to have a very strong relationship with trade Hong group, and as OEM brands, including Navistar and Scania.

Speaker 3: We continue to have a very strong relationship with TradeHungu and his OEM brands, including Navastar and Skony.

Speaker 3: Now I'm going to start with the critical partner in our dry rail program. They will work with us every step of the way.

Now, let's start it as a critical partner in our drug rail program.

They were with US every step of the way helping us to.

Speaker 3: to develop our retrofit trucks, providing insight as we develop our safety case and supporting us with suppliers of critical components.

To develop a retrofit trucks, providing insights as we develop our safety case and supporting us with suppliers of critical components were.

Speaker 3: We're excited to keep moving forward when Navastar has to scale our driver out operation.

We're excited to keep moving forward with Navistar as we scale our driver our operations.

For our U S production truck program with Navistar, we have made tremendous progress in our supplier selection process as well as setting a clear strategy for components or the supply base requires additional maturity as.

Speaker 3: For our US production truck program with Navistar, we have made tremendous progress in a supplier selection process as well as setting a clear strategy for components where the supply base requires additional maturity. As a reminder, when we say maturity, we do not mean that hardware components require any type of advanced technology breakthroughs. Where rather suppliers have to go through a process to have automotive grade components that can support skilled production.

As a reminder, while we say maturity, we do not need the hardware components require any type of advanced technology breakthroughs with other suppliers have to go through a process to have automotive grade components that can support scaled production.

Speaker 3: This is critical because autonomous trucks sold to their party customers require certification, after market support and warrant.

This is critical because autonomous trucks sold to third party customers require certification aftermarket support and warranties.

We will continue to be proactive with the supply base to push forward the component level development schedules.

Speaker 3: We will continue to be proactive with the supply base to push forward the component level development skills.

Speaker 3: We also continue to work with Trayton and Navistar to continuously pressure test our production process and timeline.

We also continue to work with trade hoarding in Navistar to continuously pressure test our production process and timeline.

In Europe .

We have successfully concluded our phase one pilot program with Scania.

Speaker 3: We have successfully concluded our Phase I pilot program with SCANIA. We have conducted over 40,000 kilometers of autonomous operations along Sweden's main freight course.

Conducted over 40000 kilometers of autonomous operations, along Sweden's main freight corridor.

Speaker 3: We believe this is the first of its kind in Europe . And together, we have started to work on next phase of our European partnership. We have started to work on this partnership.

This is the first of its kind in Europe and together we have started to work on our next phase of our European partnership.

This January .

Speaker 3: We announced our most significant efforts to address the supply-based immaturity. We and our long-time partner in video are developing a proprietary autonomous domain controller. Ladies.

We announced our most significant efforts to address the supply base and maturity.

And our longtime partner video.

<unk>, a proprietary autonomous domain controller for <unk> ADC.

Speaker 3: BADC is a powerful edge computing solution where all the critical processing and decisions of our time-striping systems are made.

<unk> is a powerful edge computing solution, where all the critical processing and decisions of autonomous driving systems are made.

The ADC is proprietary design that incorporates <unk> next generation volume system on chip hardware.

Speaker 3: CDC is required to design the incorporate and videos next generation or in system on a chip hardware and to simple

And two simple promise driving software.

Speaker 3: While many in the Thomas driving industry are parting with Envidia, this partnership is truly unique because we're not using an off-the-shelf integrated Envidia hardware or software solution.

While many in the Thomas driving industry are partnering with Nvidia. This partnership is truly unique because we're not using an off the shelf integrated Nvidia hardware software solution.

Speaker 3: for working directly with Nvidia to match our system requirements.

Working directly with Nvidia to match our system requirements.

Speaker 3: to the ADC specifications, including how much compute is required, the type of operating system, and other onboard software hardware requirements, the type of sensors the ADC can support and so forth.

The ADC specifications, including how much compute is required the type of operating system and other onboard software hardware requirements.

The type of sensors, the ADC can support and so forth.

One knows our technology Barry nuts in HAE.

Speaker 3: being hands on with the ADC development and Berkeley integration allows us to be better control of our timelines and allows us to build a better product.

Hands on with the ADC development and vertically integration allows us to be better control of our timelines and allows us to build a better product.

To our knowledge, we're the first and only player to take this gross debt.

Speaker 3: To our knowledge, we're the first and only player to take this both step of developing our integrated and proprietary compute solution. And we believe it'll create tremendous strategic advantage as we proceed to commercialization.

Developed integrated and proprietary compute solution and we believe will create tremendous strategic advantage as we proceed through commercialization.

Next I'll give an update on the city's process.

I'm happy to share that we have made significant progress with <unk>. We believe we're in its final stages of the process and we believe that will come to a satisfactory outcome.

Speaker 3: I'm happy to share that we've made significant progress with Sypheus. We believe one of the final stages of the process, and we believe that will come to a statutory out...

Speaker 3: With that, I'll turn the call over to Pat to discuss our financial results and guidance.

With that I'll turn the call over to Pat to discuss our financial results and guidance.

Thank you Cheng.

Speaker 2: Beginning with our reservation program, we added 100 new truck reservations this quarter, coming from two large trucking places.

Beginning with our reservation program, we added 100, new truck reservations this quarter coming from two large trucking fleets.

Speaker 2: It springs a reservation total at quarter end to just under 7,000.

Things are reservation total at quarter end to just under 7000 trucks after.

After quarter end, we added two new reservation partners, who reserved.

Speaker 2: After quarter end, we added two new reservation partners who reserved the combined 350 trucks.

The combined 350 trucks.

Speaker 4: This brings our total reservations to 7,325 trucks out of today.

This brings our total reservations to 7325 trucks that are today.

Speaker 4: Importantly, our reservation book is composed of a diverse group of major pleats and logistics players who are eager to implement our technology into their networks. We continue to hold.

Importantly, our reservation book is composed of a diverse group of major fleets and logistics players who are eager to implement our technology into their networks.

We continue to hold high standards for reservations, we only work with partners capable of implementing our AAV technology and those that are ready to make a financial commitment alongside their reservation.

Speaker 4: We only work with partners capable of implementing our AV technology, and those that are ready to make a financial commitment alongside the Reservant.

Speaker 4: The continued additions of high quality reservation partners such as BHL speaks to the broad-based demand for our technology.

The continued addition of high quality reservation partners, such as DHL speaks to the broad based demand for our technology.

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

Speaker 4: Now, shifting gears to our financial results for the fourth quarter. We reported 2.1 million of revenue in the quarter, which increased nearly threefold versus the same period last year, and represent a 15% increased quarter over quarter.

We reported $2 1 million of revenue in the quarter, which increased nearly threefold versus the same period last year and represents a 15% increase quarter over quarter.

Speaker 4: We reported 6.3 million in revenue for full year 2021, which also represents a roughly threefold increase year every year.

We reported $6 $3 million in revenue for full year 2021, which also represents a roughly three fold increase year over year.

Speaker 4: While we receive new semitracks towards the end of 2021, a revenue growth for the year was primarily driven by increasing asset utilization.

While we received new semi trucks towards the end of 2021, our revenue growth for the year was primarily driven by increasing asset utilization.

Moving to expenses, we spent $82 million in total R&D in the quarter, including $22 million of SBC.

Speaker 4: Moving to expenses, we spent 82 million on total R&D in the quarter, including 22 million of SPC. This compares to 32 million.

This compares to $32 million in the same period last year.

The R&D expense declined by 3% quarter over quarter as certain discrete items in Q3 were not repeated in Q4.

Speaker 4: The R&D expense declined by 3% quarter over quarter, as certain discrete items in Q3 were not repeated in Q4.

We spent $32 million on SG&A during the period, including $10 million of SBC.

Speaker 4: We spent 32 million on SG&A during the period, including 10 million of SPC. This compares to 10 million.

This compares to $10 million in the same period last year. Please.

Speaker 4: Please note that we have changed our financial statement presentation to combine GNA and sales and marketing into a single S-GNA.

Please note that we have changed our financial statement presentation to combined G&A and sales and marketing into a single SG&A line.

Speaker 4: Our net loss from operations was $116 million in the fourth quarter of 2021, and our net loss from operations was $411 million per full year 2021.

Our net loss from operations was $116 million in the fourth quarter of 2021, and our net loss from operations was $411 million for full year 2021.

Speaker 4: Our adjusted EBITDA on the fourth quarter was negative 81 million, which compares to negative 38 million in the same period last.

Our adjusted EBITDA in the fourth quarter was negative $81 million, which compares to negative $38 million in the same period last year.

Speaker 4: For the four year 2021, our Adjusted EBITDA loss was negative 279 million. The Adjusted EBITDA loss reflects our sustained investment in our technology and commercial development.

For the full year of 2021, our adjusted EBITDA loss was negative 279 million. The adjusted EBITDA loss reflects our sustained investment in our technology and commercial development.

Speaker 4: We invested 1 million in the purchase of property and equipment during the quarter, primarily related to equipment purchases and facility investments.

We invested $1 million in the purchase of property and equipment during the quarter, primarily related to equipment purchases and facility investments.

We ended the quarter with a cash balance of over $1 3 billion.

Speaker 4: We ended the quarter with the cash balance of over 1.3 billion.

We remain very well capitalized to execute on our roadmap through 2024.

Speaker 4: We remain very well capitalized to execute on our roadmap through 2024. Now to provide our full year.

Now to provide our full year 2022 guidance.

In 2022, we expect full year revenue of $9 million to $11 million.

Speaker 4: In 2022, we expect full year revenue of $9.1 million. As Shane mentioned, we are prioritizing our resources to scale up our driver out operations. This means focusing a significant portion of our resources on automating dense routes in the Texas triangle area and using our own fleet of autonomous trucks.

As Shane mentioned, we are prioritizing our resources to scale up our driver out operations. This means focusing a significant portion of our resources on automating dense routes in the Texas triangle area and using our own fleet of autonomous trucks.

Speaker 4: We will be less focused on adding human operated trucks or partner fleet capacity to our AFM this year. We also do not expect meaningful revenue contribution from our China operations during 2020.

We will be less focused on adding human operated trucks, our partner fleet capacity to our AFM. This year. We also do not expect meaningful revenue contribution from our China operations during 2022.

Speaker 4: We expect a four year 2022 adjusted eva da wa of negative 400 to 420 million.

We expect our full year 2022, adjusted EBITDA loss of negative $400 million to $420 million, reflecting continued investment in our technology and commercialization.

Speaker 4: Replacing continued investment in our technology and commercial.

Speaker 4: The guidance includes a recently announced ADC development with NVIDIA, as well as costs related to scaling driver out operation.

The guidance includes our recently announced ADC development with Nvidia as well as costs related to scaling driver out operations.

Speaker 4: We expect stock-based compensation expense for the year of 155 to 175 million, reflecting our investment in our team, and a philosophy of strong alignment between employees and shareholders.

Stock based compensation expense for the year of $155 million to $175 million, reflecting our investment in our team and a philosophy of strong alignment between employees and shareholders.

We expect purchases of property and equipment of $30 million to $40 million for the full year.

Speaker 4: We restrict purchases of property and equipment of 30 to 40 million for the whole year.

Speaker 4: We expect to end the year with approximately 900 million in cash on the balance sheet. I'll now hand it back to Chang for a few last remarks. Thank you.

We expect to end the year with approximately $900 million in cash on the balance sheet.

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

Thank you for that.

One was amazing year participle.

At the beginning of year, we started IPO.

Speaker 3: At the beginning of the year, we started IPL journey. Renewable is going to be critical to earn the trust of our investors, and we're proud to say that we achieved all of our major goals in the first year of the public company, including the start of driver-off.

We knew it was going to be critical to earn the trust of our investors and we're proud to say that we achieved all of our major goals during the first year.

Public company, including the startup driver hubs.

Speaker 3: As we enter the new year, we're also entering new days of our development. Our pathway to commercialization is clear. We expect to continue to scale driver operations and lower autonomous driving operational costs to be the first to market with a commercially viable solution.

As we enter the new year, we're also entering a new phase of our development.

Way to commercialization is clear we expect to continue to scale driver operations and lower autonomous driving operational cost to be the first to market with a commercially viable solution.

We're proud of all we can accomplish in <unk> and we look forward to the new year.

Speaker 3: We're proud of all of you completion, 2021, and we look forward to the new year. With that, we're ready to...

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

Thank you to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.

Speaker 1: Thank you to ask a question you will need to press star one on your telephone. To withdraw your question press the pound.

Speaker 1: We ask the two, please limit yourself to one question and one follow up. Please stand by while we come.

We ask that you please limit yourself to one question and one follow up.

Please stand by while we compile the Q&A roster.

Speaker 1: Our first question comes from the line of Robbie Shanker of Morton's family. The line is open.

Our first question comes from the line of Rob.

<unk> Schenker of Morgan Stanley Your line is open.

Thank you everyone Cheng, obviously 2021 of the big year for you rich the IPO and drive out.

Speaker 2: Thank you, everyone. Chang, obviously 2021 is a big year for you, with IPO and Drive-A-Out. But I'm just wondering kind of how we can track your progress with milestones through 2022. Is there anything else you do, even as guidance, but the guidance kind of meaningless, even where you are in the stage of your development right now?

But I'm just wondering kind of how we can track your progress with milestones through 2022.

Obviously, you've given us guidance, but the guidance is kind of meaningless given where you are in the stage of your development right now so anything in particular in terms of miles mapped our number of driver overruns or.

Speaker 5: So anything in particular in terms of, you know, mild mapped or number of driver outruns or, just think, mind's doing we can use to track your progress with my two would do it.

Yes.

Milestones, we can use to track our progress the plant they will do it.

That's a great question Ravi.

Speaker 3: That's a great question, Robbie. What we do expect to give more detailed milestone guidance in the coming quarters, especially during analyst day, but I think the way you think about it is.

Do you expect to give more detailed milestone guidance.

The coming quarters, especially during the analyst day, but I think the way to think about it is what is the finish line.

Speaker 3: What is the finish line? Or what is commercialization?

What is commercialization and as I mentioned earlier commercialization means that we can scale driver operations continuous drug route free operations and a dense.

Speaker 3: And as I mentioned earlier, commercialization means that we can scale driver operations, that continue to drive around for your operations in a dense and on dense routes, so TexasTriangle.itenn.

Desk routes, so Texas triangle.

Speaker 3: And more importantly, the cost per mile of operations has to be lower.

And more importantly, the cost per mile of operations has to be lower.

Speaker 3: or clear line of sight lower than that of a human driver. That's how ultimately we provide a service or benefit to the shippers and carrier customers.

Clear line of sight lower than that of a human driver. That's how ultimately we provide a service or benefit to the shippers and carrier customers and so I also mentioned that some drug route as a starting point when you think about it.

Speaker 3: And so I also mentioned that from Drograo as a starting point, what do you think about, I wouldn't think so much about sort of metrics with KPIs, but really the milestones that show.

So much about sort of metrics, where kpis, but really the milestones that show.

It's getting closer to that commercialization goal.

Speaker 3: us getting closer to that commercialization goal. So we'll show you, for instance, an additional drive route.

We will show you for instance, an additional driver all routes.

Speaker 3: from nighttime driving to daytime driving. We'll intend to show you the cost of per mile operation and how that's gonna scale over time. So of course, today we do have some safety precautions that we talked about. As we remove those things, the cost will come down. As we optimize our features, optimize data usage, the cost will come down. So those are things that we do intend to lay out in a much more easy to understand way. But at a very high level,

From nighttime driving to daytime driving.

We will tend to show you the cost of per mile operation and how thats going to scale over time. So of course today, we do have some safety precautions that we talked about as we remove those things the cost will come down as we.

Optimize our features optimized data usage cost will come down. So those are things that we do intend to lay out in a much more easy to easy.

<unk> I understand way, but at a very high level.

Speaker 3: you know, today from DriveRout, there really is a clear path. There's things that we can check off one by one to show you. And one point, we can show you where we are from that path and into the commercialization. So hopefully that answers the question a little bit better, but more to come. But we're.

Today from driver out there really is a clear path. There is things that we can check off one by one to show you.

More importantly, we can show you, where we are on that path.

To commercialization. So so hopefully that answers your question little bit better but.

More to come but really think of this as.

Whereas it was kind of go because even if we give you numbers like for instance number of miles right, where we are or disengagement constantly before what does that really.

Speaker 3: where is it where kind of go? Because even if we give you a number, like for instance, number of miles, right? Or were disengagement, you know, because only before, where is that really mean? How do you know how far we are to commercialization? That's the problem that industry has today. And I think what we're saying now, and what we're laying down in terms of our path to commercialization is a much better way to frame where we are and where we need to go.

How do you know how far we are to commercialization right. That's I think the problem. The industry has today and I think what we're seeing now and what were laying down in terms of our path to commercialization is a much better way to frame, where we are and what we need to go.

Great, but it does make a lot of sense and maybe as a follow up clearly it sounds like you are seven driver out run.

Speaker 5: great that that does make a lot of sense. And maybe as a follow up, clearly it sounds like your seven driver outruns were successful and gonna know not be surprising anything, but can you just share with us if there were any kind of

We're successful.

No.

Nasty surprises or anything but can you just share with us if they are.

Any any kind of.

Speaker 5: and manageable surprises or any learning from the seven runs that you've kind of changed the way you either do the runs or in a tweak to allow them or change your hardware is going to have any specific incremental learnings from any of the seven runs. Thank you.

Manageable surprises or any learnings from the seven run.

That you've kind of changed the way you either do the runs or to be rather than more exchange of hardware kind of any specific incremental learnings from any of the seven months. Thank you.

Yes.

Speaker 3: Yes, I mean, there's a lot of learnings we have from the run. So a lot of them are built in. I mean, I wouldn't call them surprises, but really the next set of developments that in optimization improvements that we're going to do. And as I mentioned,

I mean theres a lot of learnings we have from the run so a lot of them are built in.

When it comes to surprises, but really the next set of developments.

<unk> seen improvements that we're going to do and as I mentioned.

Speaker 3: We have a clear path to commercialization. So from here on, there are these clear milestones that we intend to achieve over the coming quarters.

We have a clear path to commercialization so from here on Thirty's clear milestones that we intend to achieve over the coming quarters.

I think I think the biggest takeaway for US was we felt actually even more confidence.

Speaker 3: You know, I think the biggest takeaway for us was we felt actually even more confident. And really, huge credit to our technology team, our operations team. But we feel so confident that the previous guidance we gave was driver out would be sort of one to two month pilot program. And now we intend to scale this and to make this a permanent part of our operations. So I think that's something that you Wooder.

And really.

Huge credit to our technology team our operations team, but we feel so confident that the previous guidance. We gave was driver out would be.

Sort of a one to two months.

That program and now we intend to scale this and to make this a permanent part of our operations. So that I think that's something that.

Speaker 3: really is a very positive development but for too simple.

Really is a very positive development for two simple.

Great. Thank you.

Speaker 1: Thank you. Our next question comes from Brian Austinback of JP Morgan. Your line is open.

Thank you. Our next question comes from Brian <unk> of Jpmorgan. Your line is open.

Hey, good afternoon, thanks for taking the questions.

Sure.

Speaker 2: Just to follow up on that, and then pass the commercialization, it basically said that you're ready to scale now. So, it's gonna be just one to make sure we're interested with that, what that was in the context of it. Sounds like, currently from wrong, it sounds like you're scaling into further driver out.

Just to follow up on that and then pass the commercialization.

Basically you said that you are ready to scale now so excuse me just wanted to make sure I understood what that what that was in the context of it sounds like.

Correct me, if I'm wrong, but it sounds like youre scaling into further driver out.

Speaker 6: demonstrations in certain ODDs in certain areas, at least here in the near term.

Demonstrations and certain odd's in certain areas.

Here in the near term.

Speaker 6: But maybe putting that aside, is there anything left, technically that you feel like needs to be handled and figure it out and tested before you were able to really scale? So just wanted to really understand the difference between.

But maybe putting that aside is there anything left technically that you feel like needs to be.

Handled and figure it out and test it before you were able to to really scale just wanted to really understand the difference between.

Scaling youre working on now and just kind of the broader.

Speaker 6: the scaling you're working on now and just kind of the broader end game as it were.

And game as it were.

Yes.

Yes.

Speaker 3: There's scaling to commercialization, right? Which ultimately is critical. No one's able to create or articulate what is commercialization and how we get there. So it's going back to Nairobi as and we can give you a lot of metrics. But really, how does that tell you where we are? And so we planted a flagpole of what is the need to commercialize? In the free industry, you know very well. It's all good.

There is there are scaling to commercialization right, which ultimately.

Is.

It's critical.

<unk> be able to clearly articulate what is commercialization and how we get there. So let's go back to <unk>. So we can give you a lot of metrics, but really how does that tell you where we are right and so.

We plan to the flagpole of what does it mean to commercialize in the free industry very well.

Speaker 3: cost and level service reliability uptight. Right, so we have to have continuous operations with our Thomas trucks. We have to have them in high density routes. And we have to be able to show a pathway on a per mile cost that's lowered in a human operated truck. Otherwise, why would why was the first, what carriers use this, this analogy? So, so,

Cost.

And global service reliability uptime. So we have to have continued operations.

With autonomous trucks, we have to have them in high density routes.

And we have to be able to show the pathway on a per mile cost.

Lower than a human operator truck otherwise why would why with shippers.

Carriers use this analogy so.

So when we say scaling.

Speaker 3: And go back to your question about what is left to develop technically. To be able to demonstrate driver out operations repeatedly, we do believe that we are feature complete. And what we define feature complete is it means that we have

And going back to your question about what is left to develop clinically.

To be able to demonstrate driver out operations repeatedly we do believe that we are feature complete and while we defined feature complete is.

It means that we have.

Speaker 3: all the capabilities of operating a vehicle from terminal terminal on a commercial route. If you look at most commercial routes, they're quite this...

All the capabilities of operating a vehicle from terminal to terminal on a commercial route and if you look at most commercial routes. They are quite the same.

Speaker 3: And so, for instance, you know, we can't do driver operations if our truck is able to handle emergency lane vehicles, right? I mean, who's going to take over when you run into an emergency lane vehicle? I think in our 550 miles of driver-round runs, those 36 emergency lane vehicles.

So for instance, we can do to drive our operations. If our truck is able to handle emerging lane vehicles right who's going to take over when you run into.

Emergency land vehicle I think in our 550 miles of driver outrun those 36 emergency land vehicles.

Speaker 3: No, your truck has to be able to be defensive driving and have able to have able to adhere to non-compliant drivers. And so those are additional features we built in. So really today we are future complete. We're also able to mitigate, I think what discomfort is being able to mitigate or contain all the edge cases that you can see.

Youre truck has to be able to be defensive driving and have be able to.

To have been able to adhere to noncompliant drivers and so those are additional features we built it so really today, we are officially complete.

We're also able to mitigate I think what gives us comfort is being able to mitigate will contain all of the edge cases that.

You can count on our routes.

Speaker 3: So from that standpoint, that is already a significant technology development. And.

So.

So from that standpoint that is already significant technology developments.

And.

When we say scaling it.

We believe that as more of a linear progression as you mentioned earlier in the prepared remarks.

Speaker 3: We believe that it's more of a linear progression, as you mentioned earlier in the prepared remarks. We can show you that systematically. We can show you that from step by step. We don't see that as any sort of technical hurdles, but these are, takes capital, it takes manpower and it takes engineering work, but we'll be able to show these things to you.

We can show you that systematically we can show you that from step by step, we don't see that as any sort of technical hurdles, but these are.

Capital It takes manpower it takes engineering work, but we will be able to show these things too.

Okay.

Speaker 6: This is follow-up, you mentioned this, if he is process, they didn't give too much detail by how I did. I don't know if there's anything else. You can share in terms of, you know, what I guess what is a acceptable outcome and maybe something on the timing. And then I think that mentioned that you're trying to operations aren't really gonna have too much of a contribution here in 2022, at least. So maybe just update on where that stands if anything's changed on the strategy or how you see that operation going forward. Thank you. Thank you.

Just a follow up you mentioned the <unk> process, they didn't give too much detail behind and if theres anything else you can share in terms of what I guess, what is the acceptable outcome and maybe something on the timing and then I think Pat mentioned that your China operations aren't really going to have too much of a contribution here.

2022 at least it so maybe just update on where that where that stands if anything's changed on the strategy or where how you see that operation going forward. Thank you.

<unk>.

Speaker 3: We want to say a lot, but unfortunately we cannot at this time, but just to iterate our belief is that we'll come to a satisfactory outcome for too simple. And we're near the final stage. So unfortunately we cannot talk more, but when what we do, you know, of course, we'll be able to share and we'll have to file a K around the details.

We wanted to say a lot, but unfortunately, we cannot at this time, but just to reiterate our belief is that we'll come to a satisfactory.

Come.

For two simple and.

You are the final stages. Unfortunately, we cannot talk more but when we.

When we do of course, we'll be able to share.

We will have to file an 8-K.

Around the details.

Speaker 3: In terms of China, as Pat mentioned, we do not see China having meaningful revenue contribution this year. That doesn't mean that our China strategy isn't sound. We do believe that our strategy in China is sound.

In terms of China as Pat mentioned, we do not.

We do not see China, having meaningful revenue contribution this year.

Doesn't mean that our China strategy isn't sound, we do believe our strategy in China is sound.

Speaker 3: We've always thought that China has regulatory risk just given that today, a time is trucking for pure level four, is still permanent by permit or lane by lane.

We've always said that China has regulatory risk just given them today tons trucking for pure level four is still permit by permit sort of lane by Lane, we have what we believe the best project to commercialize in near term.

Speaker 3: We have what we believe the best project to commercialize in your term in China, which is a Shanghai Deep Water Seed Port. And that's too simple.

China, which is the Shanghai deepwater seaport is too simple.

Speaker 3: We're always pressure testing and optimizing our resource to make sure we have the highest ROI and value to our shareholders. Right, so today the US will be first commercialized. But same time we wanna ensure that we have

Always.

Pressure testing and optimizing our resources to make sure we had the highest ROI.

And value to our shareholders.

Today, the U S will be first commercialized.

But same time, we want to ensure that we have upside to our shareholders. When China does take off I mean after all is the second largest framework in the world is growing very fast.

Speaker 3: Upside to our shareholders of one China just take off of me after all hit the second largest framework in the world is going very fast

Alright, Thank you Cheng.

Thank you. Our next question comes from Raj Gill of Needham <unk> Company. Your line is open.

Speaker 1: Thank you. Our next question comes from Roger Gill of Needham Company. Your line is open.

Speaker 7: Yes, thanks and congratulations on the driver-out program. That's a great validation of the technology. So I just wanted to talk a little bit about the 50 or 22 guidance of 9 to 11 million. You mentioned that your prioritizing resources for your driver-out programs, focusing it on their own instead of kind of partnership capacity to AFN.

Yes, thanks, and congratulations on the Jive rail program, that's a great validation of the technology.

Just wanted to talk a little bit about the fiscal 'twenty, two guidance of $90 million to $211 million.

You mentioned.

Is that you're prioritizing resources for your driver out programs focusing.

Those instead of kind of partnership capacity to ASN.

Speaker 7: wondering what if you could elaborate a little bit further on that decision to prioritize the driver-out programs and within that context when we're thinking about you know going from six million to ten million what are the the revenue growth drivers

Wondering what the if you can elaborate a little bit further on that decision.

To prioritize the dry rail program.

And within that context, when we're thinking about going from 6 million to $10 million.

<unk>.

What are the.

The revenue growth drivers.

Speaker 7: Take together from 6 to 10. Thank you.

Just to get it from 6% to 10. Thank you.

Speaker 4: Right. Thanks, Rajee. So, you know, when you think about what our revenue operations, what the strategic goals are, it's really around first supporting our technology development in real world great conditions, and then also to develop and maintain our long-term commercial partners with partnerships, with customers who are going to implement our technology over the long term. So.

Alright, Thanks Rajiv.

No.

When you think about what our revenue operations, what the strategic goals are it's really around first supporting our technology development in real world conditions.

And then also to develop and maintain our long term commercial partners with partnerships with customers, who are going to implement our technology.

Well over the long term so.

Speaker 4: you know, for HOT, as you said, there are different components of it.

For us.

As you said there are there are different components of that were.

Speaker 4: Where we see the highest ROI is really around the AV operations, both scaling the driver out operations as well as continuing to scale AV operations with a safety driver behind the wheel.

We see the highest ROI is really around the AAV operations, both scaling the driver out operations as well as continuing to scale <unk> operation. So the safety driver behind the wheel.

Speaker 4: This is actually what our customers have told us as well.

This is actually what our customers have told us as well.

Speaker 4: This is what they want us to focus. They want to be able to participate in the technology and have its hall free for them using AV technology. And that is a bigger priority versus more manual free. You know, we do retain a lot of strategic flexibility.

Is what they want us to focus they want to be able to participate in the technology and habits haul freight for them.

Using a technology that has a bigger priority versus more manual right.

We do retain a lot of strategic flexibility.

Speaker 4: to add either more of our own human-operated trucks or more partner freight. And we will, whenever the time is right, or whenever it's strategically advantageous, we can pull some of those levers to do so.

Add either more of our own human operated trucks or more partner great.

And we will whenever the time is right or whenever it's strategically advantageous we can pull some of those levers to do so.

Speaker 4: But trying to be as careful, efficient and focus on, what's most important to drive value. We think it's really around the AV operations today. And our customers have validated that too, that that's where they want us to be focusing our time and making sure that we're getting them more AV miles as opposed to more manual mile calling for them.

Trying to be as capital efficient and focus on what's most important to drive value. We think it is really around the operations today.

And our customers have validated that to that that's where they want us to be focusing our time and making sure that we're getting them more AE miles as opposed to more manual miles hauling freight for them.

Speaker 4: The guide from kind of six to 10 million at the midpoint is really a function of the number of trucks that we have in our commercial operations and the utilization of those trucks. So we did add more trucks at the end of the year here. You'll see in our ladder, we have approximately 100 trucks globally, about 75 of those.

The guide from kind of $6 million to $10 million at the midpoint Charlie.

Function of the number of trucks that we have in our commercial operations and the utilization of those trucks. So we did add more trucks at the end of the year here Youll see in our water. We have approximately 100 trucks globally about 75 of those are in the U S and roughly half of those trucks are dedicated to commercial operation. So we are.

Speaker 4: are in the US and roughly half of those trucks are dedicated to commercial operations. So we're adding more trucks to the count and we're increasing utilization of those trucks.

Adding more trucks to the account and we're increasing the utilization of those trucks.

Speaker 4: notwithstanding some of the challenging market conditions around hiring drivers and dealing with some of the pandemic related outages where we've had to have drivers take time off due to COVID restrictions. So, I'll give you a little bit of the building blocks around how we go from 6th to 10th.

Notwithstanding some of.

The challenging market conditions around hiring drivers and dealing with some of the pandemic related.

Outages, where we've had to have drivers that would take time off.

Covid restrictions so.

Hopefully that gives you a little bit of the building blocks around how we go from six to 10.

Speaker 7: Yeah, that's really helpful. And for my follow up, when you're thinking about over the next two to three years, and kind of getting to that kind of billion-dollar number, when you're kind of fully commercializing these trucks, these autonomous trucks, I know Chang, you had mentioned that, you know, the driver out program,

Yes, that's really helpful.

For my follow up when Youre thinking about over the next two to three years and kind of getting to that kind of $1 billion number.

When you are kind of fully commercializing these trucks and sometimes with trucks.

Cheng Cheng you had mentioned that the driver out program.

Speaker 7: that you're very dedicated in expanding in Texas and elsewhere are gonna be major kind of proof points to validate that you guys can scale and commercialize driver-out technology. I'm wondering.

Sure very dedicated and expanding in Texas and elsewhere are going to be a major kind of proof points too.

To validate that you guys can scale and commercialize drive rail technology.

Im wondering.

What's your completed in December what you what you intend to complete this year and your focus on that how that will help.

Speaker 7: What you've completed in December , what you intend to complete this year and your focus on that, how that will help either potentially accelerate the transition to that two-year kind of commercialization, will it reinforce it? I'm curious to see how you're thinking about the drive rail programs now and when you're thinking about it during the IPO process or prior to that and kind of bridging the gap there.

Either potentially accelerate.

The transition to your to the two year kind of commercialization.

Unfortunately.

I am curious to see how youre thinking about the dry rail programs now.

And when Youre thinking about it during the IPO process prior to that and kind of bridging the gap there.

Hopefully that makes sense.

Speaker 3: Yeah, no, good question. For us, after...

Yes, no good question.

For us as a driver out completion.

Speaker 3: You know, again, we did this not because we wanted to hit a timeline. We did this because you felt safe and we're ready. We truly believe that's more confidence that we can actually prove forward commercialization. Despite you're not having

Again, we did this not because we want to hit a timeline. We did this because you felt was safe and we're ready.

We truly believe that more confidence that we can.

Put forward commercialization despite.

Having.

Speaker 3: serious production trucks were having integrated trucks on the market yet.

Serious production trucks, we're having integrated trucks on the market yet and.

Speaker 3: And again, we define commercialization. You know, the kind of main definitions of it, right? Is it, are you selling it to third party? Are you, are you, how many are you selling it? Right? How many trucks you need to be commercialized? But for us, commercialization ultimately is the ability to provide a reliable autonomous freight service to ship.

Again, we defined commercialization.

Main definitions or is it.

Are you selling it to third party are you.

I guess, how many are you selling it right how many trucks you need to be commercialized. The first commercialization ultimately is the ability to provide a reliable.

Thomas freight service to shippers.

Speaker 3: And from commercialization to series production, it's something that would continue to do with our partners, Cretan, Avastar, Scania. And that's something that requires production-ready parts, warranty services, certification. That's gonna on-go, that's gonna continue. And that's how you get even more trucks onto your network, like 10,000. So at a very high level,

From commercialization through series production is something that we'll continue to do with our with our partners treat Han Navistar, Scania and Thats something that requires.

Production worthy parts warranty services certification.

That's kind of ongoing thats going to continue in and Thats, how you get even more trucks onto your network tens of thousands so are the very high level.

Really it hasn't changed at all I think the main thing we put forward. When we believe we will commercialize and be able to show you and now we are actually giving you more detail about the roadmap to commercialize over next two years and it will continue to give you more detail over the coming months.

Speaker 3: Really, it hasn't changed at all. I think there is anything we pull forward when we believe we'll commercialize and deal to show you. And now we're actually giving you more detail about the world map to commercialize over next two years. And we'll continue to give you more detail over the coming months. So please stay tuned.

So please stay tuned.

Speaker 7: Got it. If I could just squeeze in one more question, you know, you mentioned that you developed the proprietary ADC custom chip within VIDEA and kind of working hand-in-hand with that within VIDEA. Can you discuss the rationale of working closely with in VIDEA, making sure that your software can run on their own SOSC processor? What was the rationale for that? And how do you feel that differentiates?

Got it and if I could just squeezing one more question.

You mentioned that you're developing the proprietary ADC custom chip with Nvidia and kind of working hand in hand with that with Nvidia.

Can you can you discuss the rationale.

And working closely with.

Nvidia, making sure that your software can run on their own SSD processor, what was the rationale for that and how do you feel that differentiate.

Speaker 7: Your technology versus other self-driving technologies or other approaches to the market. Thanks.

Your technology versus other self driving technologies or other approaches to the market. Thanks.

Sure.

Maybe if you use some examples where situations that we're facing so today, we look in the markets.

Speaker 3: Maybe to use some examples or situations that we're facing. So today we look at the markets. There's not a rarely available or even a clear, direct, clear path of a product that has the ADC product, that has the amount of computational power that our system requires.

Not readily available or even a clear direction clear path of a product that has the ADC product that has the amount of computational power that our system requires.

Speaker 3: And so that's one of the benefits of being very convocated and working with an individual. We can have a design that has the right number of a warium that allows us to have the enough computational power to operate our virtual driver software application.

So.

That's one of the benefits of being vertically integrated and working with them. We can have a design that has the right number of Orion that allows us to have the enough computational power to operate our virtual driver software application layer.

Speaker 3: You know, we have to ensure that the ADC can take in all the sensor inputs that support our commas driving system. The ADC is not just the R software and their hardware is also other software and are in chips on the ADC. And so what are those requirements that that fit with our system or not? You know, those are designs that we...

We have to ensure that the ADC can take in all the sensor inputs that support com is driving system.

The ADC is not just our software and hardware, but also other software and chips on the ADC and so what are those what are the requirements does that fit with our system. We're not those are designs that we know.

Speaker 3: have a ability to make. Rather than if you have this being built by, for instance, a tier one supplier, of course, their goal is to have skill, right? If you're taking requirements from everyone, one small change will take a long time. And so that delays when ADC comes to market and also it'll increase a lot of certainty whether or not this component or this ADC can meet the requirements of our autonomous driving software. So.

Have ability to make rather than.

If you have this being built by for instance.

A tier one supplier of course their goal is to have scale right are taking requirements. So everyone. One small change will take a long time.

And so that delays.

One.

ADC comes to market and also.

Chris certainty, whether or not this component.

This ADC can can meet the requirements.

Autonomous driving software so.

Speaker 3: For those reasons, this ADC is really geared towards ensuring that we have serious production as soon as possible. And I think it was a step that we felt that we needed to take.

For those reasons.

This ADC is really geared towards ensuring that we have series production as soon as possible.

And.

Yes, I think it was a step that we felt that we needed to take.

Speaker 1: Thank you. Our next question comes from Dan Levy of Credit Suisse. Your line is open.

Thank you. Our next question comes from Dan Levy of Credit Suisse. Your line is open.

Hi.

Speaker 8: Hi, good evening. Thank you for taking the question.

Good evening, Thank you for taking the questions.

Speaker 8: First, I want to ask about just the capital requirements over the next couple of years. Pat, I think you made a comment that the IPO proceeds are enough to carry you to commercialization in 2024. Maybe you can just unpack that. And the driver out pilot changed your view on the cost or the capital outlay required to reach commercialization. Maybe you could just give us a flavor.

First I wanted to ask about.

The capital requirements over the next couple of years.

Pat I think you made a comment that the IPO proceeds are enough to carry you to commercialization in 2024, maybe you can just unpack that in.

The driver out pilot changed your view on the cost or the capital outlay required to reach commercialization, maybe you could just give us a flavor for.

Speaker 8: As you continue to work up just how much more capital intense this gets if this is any different from what you previously

As you continue to work up just how much more capital intense. This gets if this is any different from what you previously expected.

No. Good question, Dan I think there is no material deviation from what we've been saying on our capital our capital deployment plan.

Speaker 4: No, good question, Dan. I think there's no material deviation from what we've been saying on our capital, our capital deployment plan for the next three years.

The next three years, so we feel very fortunate to have the kind of balance sheet that we have where we are a fully capitalized on our base plan.

Speaker 4: We feel very fortunate to have the kind of balance sheet that we have where we are fully capitalized on our base plan.

Speaker 4: And we feel very confident in our capital efficiency and our ability to get through to 2024 commercialization with the capital that we have on the balance sheet today.

And we feel very confident in our capital efficiency and our ability to get through to 2020 for commercialization with the capital that we have on the balance sheet today.

Okay. So capital is not a constraint for you and your path.

Speaker 4: Okay, so capital is not taken strained for you in your path to personalization. No, now, I mean, we were very focused on the capital efficient, but I think you should interpret from our remarks that we are proceeding full speed ahead on the development of the technology and commercialization and very confident that the balance sheet we have today will get us through to commercialization in 2024.

Professional edition now now I mean, we're very focused on being capital efficient, but I think you should interpret from our remarks that we are.

Proceeding full speed ahead on the development of the technology and commercialization and very confident that our balance sheet. We have today will get us through to commercialization in 2024.

Okay got.

Speaker 8: Got it, thank you. And then I'd like to follow up on some of the prior questions on driver Adam, who we could just maybe focus on, you know, this one, two, Santa Sienics route and give us a flavor. I know you said you're gonna give us more details in the future, but give us a flavor of, you know, what we can extrapolate to future commercialization and more specifically.

Got it. Thank you and then I would like to follow up on some of the prior questions on driver out if we could just maybe focus on.

This one Tucson, Phoenix route and give us a flavor I know you said that youre going to give us some more details in the future, but give us a flavor of.

What we can extrapolate to future commercialization and more specifically.

Speaker 8: you know, between where you are today to what you would ultimately need for commercialization, showing that it's, you know, continuous.

Between where you are today to what you would ultimately need for commercialization showing that.

Continuous.

Speaker 8: that it's lower cost. You know, what would be the remaining items that you would need to complete on this route to show that hey, like a route like this, which you said technologically is already feature complete, you know, that that's ready for commercialization. I know the vehicle plays into it, but maybe you could unpack, you know, we could extrapolate from that to commercialization.

That it's lower cost what would be the remaining items that you would need to compete.

A complete on this route to show that Hey, like a route like this which he said technologically is already feature complete.

You know that Thats ready for commercialization I know that vehicle plays into it but maybe you could unpack.

You can extrapolate from that to commercialization.

Speaker 3: Great question. So commercialization is

Yes, great.

Great question, So commercialization is.

Speaker 3: It's uptime level service for the shippers and costs.

Uptime level.

Our level of service for the shippers and cost.

Speaker 3: So, level service, right, we can only be hauling freight at nighttime, although nighttime is where freight gets hauled and moves quite the most. But so daytime, so for instance, is that something that we can demonstrate or we'll demonstrate next, right?

No.

Local service, but we can only be hauling freight at nighttime although nighttime is where it gets hold move quite the most but.

So for instance, that's something that we can demonstrate.

Demonstrate next right.

Sure.

Speaker 3: We also need to have more continuous operations. And that's a function of sort of, as you harden hardware, so better hardware, as well as optimization of the operations. So that the turnaround time is fast. And we demonstrated the ability to do back-to-back operations, the drive-out runs on same night. And of course, we have to increase the number of those. In terms of cost,

We also need to have more continuous accretions and that's a that's a function of.

Thank you Harlan.

<unk> hardware, so better hardware.

As well as optimization of the operations. So that the turnaround time. This past may we demonstrated the ability to do back to back operations, but talk about runs on the same night.

Course, we have to increase the number of dose.

In terms of cost.

Speaker 3: We are technically feature complete. But there are these safety precautions that we put in place. So for instance, a survey vehicle. I mean, we can turn that survey vehicle if you have 30 trucks on one route.

We are technically feature complete.

There are these safety precautions that we've put in place. So for instance, a service vehicle I mean, we can turn necessarily vehicle.

You have 30 trucks on one route trucks.

Speaker 3: Those 30 trucks all become sure vehicles of each other. So that's something that naturally will go away and we can show that to you over the next coming quarters. We had a chase vehicle. We have to remove that as part of our centralized oversight system. So that's in the works now, but that's not something that

All become service vehicles with each other so that's something that naturally will go away and we can show that to you over the next coming quarters.

We had to chase vehicle.

To remove that as part of our centralized oversight system. So that's in the works now, but that's not something that.

Clinically we cannot achieve so so if you think alone.

Speaker 3: Again, technically we cannot achieve. So if you think along the framework of, you know, scaling needs, expanding the...

The framework of <unk>.

Scaling.

Expanding.

The operational design domain.

Speaker 3: So daytime, nighttime, new routes, uptime, and then also cost, right? Because everything comes down to cost. So if you can get from 0.8.b on a per mile basis, I have a clear-life site that's lower than human driven trucks.

So daytime or nighttime new routes.

Uptime and in also.

Cost right because everything comes down to cost if you can get from <unk> eight on.

On a per mile basis to have a clear line of sight, there is lower than human.

<unk> truck.

Speaker 3: thing that becomes a real service, a real product. So, and that cost is these operational items, these not scalable operational items, and anything associated with that. So, that really comes to optimizing the technology, the features more, and then doing away with some of these not scalable items. But,

That becomes a real service so real product so that cost is.

These operational items is not scalable.

Operational items.

And.

And then kind of anything associated with that so.

When it comes to optimizing the technology.

Features more and doing away with some of these.

I'll schedule items.

But let me today, if you think about it.

Speaker 3: We have optimized one route, automated one route, and this is a truly a commercial route. You know, and this route alone can generate and this can revenue. And actually, in a way, for trucking densities, our friends, especially the more dense routes, because we can put more trucks on them, they'll face the maps faster that becomes free to serve the vehicles for each other. Like that becomes our friend. And so, you know, that allows us to really commercialize.

Have optimized one route optimized optimized automated one routes and this is truly a commercial routes and this ROE alone can generate significant revenue.

And a way for trucking densities are front, especially the more desk routes because we can put more trucks on the updates the maps faster debt becomes fleet.

<unk> to start with vehicles for each other like that becomes on Friday and so.

That allows us to really commercialize.

Thank you. Our next question comes from Alex Potter Piper Sandler Your line is open.

Speaker 1: Thank you our next question comes from Alex Potter, a Piper Sandler. Your line is open.

Great. Thanks, guys.

Speaker 4: Great, thanks, guys. I have two hardware related questions. So the first one, I think I can understand the strategic rationale and the benefits regarding, I guess, pace speed to market with regard to vertical integration and the partnership with Nvidia. Are there any other areas of hardware specifically where you're seeing bottlenecks in the supply chain or things that you just can't buy off the shelf that you feel like you need to take?

I have two hardware related question. So the first one I think I can understand the strategic rationale and the benefits regarding I guess pace speed to market with regard to vertical integration.

And the partnership with Nvidia are there any other areas.

Hardware, specifically, where you're seeing bottlenecks in the supply chain or things that.

You just can't buy off the shelf that you feel like you need to take.

Speaker 4: I guess, devote more time and energy to in-house designs, or that just on the controller, and other than that, you can more or less farm everything else out.

I guess more.

More time and energy to in house designs or is that just on the controller and other than that you can more or less farm everything else out.

Yes, good question.

This is primarily a controller.

Speaker 3: For other centers and components, we do see either a clear line of sight or...

For other sensors and components, we do see.

Either a clear line of sight or.

Speaker 3: Actually, many suppliers working towards that problem, like for instance, LIDAR. I mean, there's plenty of well-capitalized LIDAR companies now that are working towards between startups and tier ones. They're working towards building production already by LIDAR solutions. So we feel good about that. Even though today it's not something that's really available in terms of production solution.

I've seen many many suppliers working towards that.

Instance, lidar I mean, there is plenty of well capitalized.

Our company is now working towards between startups in tier ones. They are working towards building production ready solutions.

Feel good about that.

Even though today, it's not something that's really available in terms of production solution.

Speaker 3: You know, cameras and radars and GPS units are pretty easy. And in the braking and steering components, the large tier ones are working on that. There's a clear roll map on when the next generation components are coming out. And we feel good about that, right? It's not something that...

Camera and.

And radars.

GPS units those are pretty easy.

The braking and steering components.

The large tier ones are working on that.

A clear roadmap on when the next generation.

Our components are coming out and we feel good about that right is that something that.

Speaker 3: hasn't been developed before. It's an iteration of a generation of new hardware. So we feel generally pretty good about those things. So yeah, no, just to summarize, I mean, I think the compute is something that's unique to level four driving, because only we need something this powerful. And also has to be quite tailor made to two simple solutions, because it's word application layer citizen. So really that's the main one that we feel is the most important.

Hasn't been developed before iteration.

The generation of new.

New hardware. So so we feel generally pretty good about those things. So yes, just to summarize I mean, I think the the compute is something thats unique to us before driving because only we need something that is powerful.

And also has been quite tailor made to two simple.

Just because its word application.

Layer.

So really that's the main one that we feel <unk> is most important.

Okay, Great very helpful. And then my last question is just on.

Speaker 4: Okay, great, very helpful. And then the last question is just on, I guess the timing of finalization for the bill and materials. I know that this compute platform and a lot of these other components that we're talking about, next-gen versions coming available, all of that will play into the ultimate timing. But how long do you think it'll be before you can set that design and stone and send it over to Navistar?

I guess the timing of.

Finalization for the Bill of materials I know that this computer platform and a lot of these other components that we're talking about.

Nextgen.

Versions coming available all of that will play into the ultimate timing, but how long do you think it'll be before you.

Can set that design in stone and send it over to Navistar.

What we we.

Speaker 3: I mean, we're continuing to evaluate the supply base. What we gave guidance was that we'll look to set the bill materials in spring of 2022. And so that's part of our production process. I think we'll definitely have more details in the coming month. And I think two things to take away. One is...

I mean, we'll continue to evaluate the supply base.

What we gave guidance was that we will look to set the bill of materials in spring of 2022, and so thats.

Part of our approach.

Process.

I think I think we'll definitely have more details in the coming months and I think two things to take away one is.

Speaker 3: Right now working with non-production-ready components actually puts more onerous on the software. So we're actually also doing more work than more development than we might need to otherwise. So I think the path that you get easier from here not harder, I think that's point number one. And then point number two is that we're practically taking steps to address

Right now working with non production ready.

Components actually pushed more onerous on the software so actually I'll say doing more work than more development than we might need to otherwise. So I think the path actually get easier from here not harder I think that's point number one and then and then point number two is that we're at.

Proactively taking steps to address this.

Speaker 3: Disapply to maturity or we're not making we're not using this as excuse, but we're really taking steps to address it Of course the ADC being It won the proof points

<unk> supply chain maturity or we're not making we're not using it as excuse but we're really taking steps to address it so of course, the ADC being.

One of the proof points.

A question.

Our next question comes from Joseph Spak of RBC capital markets.

Speaker 1: Our next question comes from Joseph Speck of RBC Capital Markets.

Thanks, everyone.

I guess.

Speaker 4: I guess one one year term on the guidance and one one longer term the the 22 revenue guidance. I mean it's basically at the run rate you're currently at but you mentioned you you plan on adding truck

One near term on the guidance and one longer term.

The 22 revenue guidance I mean, it's basically at the run rate you're currently at but you mentioned you plan on adding trucks I think you said you have 75.

Speaker 6: I think you said 75 in the US would tend to maybe only half of those are running. So maybe you could sort of help us with that a little bit and what you expect the trucks running to be at by the end of the year. And on the EBITDA loss, it's about 25, 26% worse in the car and run rate. And I heard you talk about some of the investment within video and I know you're hiring engineers, but maybe you could help us a little bit breaking down that additional cost.

In the U S, but it sounds like maybe only half of those are running so.

Maybe you could sort of help us with that a little bit and why and what you expect the trucks running to be at by the end of the year and then on the.

EBITDA loss, it's about <unk>.

25, 26% worse than the current run rate and I heard you talk about some of the investment with Nvidia and I know Youre hiring engineers, but maybe you can help us a little bit breaking down that additional cost for next year.

Yeah sure. So we will continue to see the revenue run rate on a quarterly basis increase.

Speaker 4: Yeah, sure. So we will continue to see the revenue run rate on a quarterly basis increase.

Speaker 4: throughout the course of 2022. So the trucks that we mentioned that are coming in, some of which are being upfitted for AB, including the commercial operations trucks.

The course of 'twenty.

'twenty two.

So the trucks that we mentioned that are coming in.

Some of which are being updated for <unk>.

Including the commercial operations trucks those.

Speaker 4: Those will be placed into service and start to generate more revenue every quarter. So we continue to see a steady ramp in the revenue base.

Those will be placed into service and start to generate more revenue every quarter. So we continue to see a steady ramp in the revenue base throughout 2022.

Speaker 9: throughout 2022. With respect to the Eda da lot, there's a couple things to play here. One is just full year impact of some of the hiring that we made throughout the course of 2021.

With respect to the EBITDA loss Theres a couple of things at play here. One is just full year impact of some of the hiring that we made throughout the course of 2021 2021 was.

Speaker 9: 2021 was a year where we did add significantly to our team and as a reminder, you know, over the half of our cash cost is really around compensation for our team. So you're starting to see a laughing effect of the full year impact of some of those hires.

A year, where we did add significantly to our team.

As a reminder over half of our.

Our cash cost is really around compensation for our team.

So you are starting to see a lapping effect.

The full year impact of some of those hires will continue to add new hires to the team. This year I think 'twenty. One is probably when you think about the rate of growth in the absolute number of hires for the year was.

Speaker 9: Well, we'll continue to add new hires to the team this year. I think 21 was probably when you think about the rate of growth and the absolute number of hires for the year was, you know, probably more.

Probably more.

Speaker 9: significant them where the hiring will be for 2022 because we have hit a critical mass. We'll continue to add.

Significant them, where the hiring will be for 2022, because we have hit a critical mass we will continue to add in.

Speaker 9: you know, selectively where we need to add to the team. And then the items that you mentioned, like the ADK project, as well as just concentrating our efforts around expanding the driver out operations so that we can scale those to commercialization through the year.

Selectively where we need to to add to the team.

And then the items that you mentioned might be the ADC project as well as just concentrating our efforts around expanding the driver out operations.

So that we can scale those to commercialization through the year.

Okay. Thank you.

Speaker 10: In the letter, you made mention of

In the letter.

You made mention of some of the mapping team.

Speaker 10: some of the mapping team enhancements and the technology and getting maps to update quicker and be more robust as you get ready for commercialization. I mean, with that, I guess, getting too technical, like, can you help us understand what that means? Are you automating that process so that you are, you have the ability to scale and map routes quicker than prior or how does it sort of really play into that for the story?

<unk> in the technology and getting matched up to a quicker and be more robust as you get ready for commercialization.

I mean without getting too technical look like can you help us understand what what that means are you automating that process. So that you are you have the ability to scale and map routes quicker than prior.

How does that sort of really play into the story here.

Yeah, I think when you think about where the mapping technology is going it is.

Speaker 9: Yeah, I think when you think about where the mapping technology is going, it is.

Speaker 9: Some extend about mapping new fast-throw, though that we do that very quickly already. Really where a lot of our technology is going is...

To some extent about mapping new routes faster, although that we do that very quickly already really where a lot of our technology is going as the updating of the amounts. So that every time one of our trucks travels a particular route if theres a new element that we're able to at all.

Speaker 9: the updating of the maps so that every time one of our trucks travels a particular route, if there's a new element that we're able to almost instantaneously update the map and send the updates to the map to any truck that's following on that same route behind.

Most instantaneously update the map and sand.

<unk> truck that's following on that same route behind so as you mentioned or is Cheng mentioned earlier, we're going to be removing the survey vehicle from our driver out operation This year and having the quicker map updates. So that if there is a pop up construction zone or some other element of the road, which was.

Speaker 9: So as you mentioned, or as Chang mentioned earlier, we're gonna be removing the survey vehicle from our driver out operations this year and having the quicker map updates so that if there is a pop-up construction zone or some other element of the road, which was previously mapped as Chang.

<unk> previously mapped has changed that we can efficiently push that update to any truck that comes behind.

Speaker 9: that we can efficiently push that update if any truck that comes behind.

Speaker 9: behind it for the next route. So it's really critical to making the technology and our driver on operations more scalable. And that's where you've heard us talk for the several quarters now about some of our investments in mapping. And it's really starting to pay off in terms of making this scalable in a critical piece of getting to commercialization.

Find it for the next round. So it is really critical to making that.

The technology and our driver our operations more scalable.

And that's where you've heard us talk for several quarters now about some of our investments in mapping and it's really starting to pay off in terms of making this scalable in a critical piece of getting to commercialization.

Thank you. Our next question comes from Colin Rusch of Oppenheimer. Your line is open.

Speaker 1: Thank you. Our next question comes from Colin Rush of Oppenheimer. Your line is up.

Speaker 8: Thanks so much, guys. Can you talk about your progress in terms of integrating or potentially replacing some of the existing logistics and workflow solutions that are on-prem?

Thanks, So much guys can you talk about your progress in terms of integrating our.

Replacing some existing logistics and workflow solutions that are out there.

Speaker 9: Could you be a little bit more specific or? Yeah, I mean, I'm still gonna, you know, with these fleets, the dairy have existing solutions around managing logistics and workflow. And as you move towards commercialization, it's not just around the hardware, the functionality of the vehicles, but really having your system integrate with the thick existing programs that you're gonna be kind of integrating into, you know, with some of these clients. I just wanna get a sense of how far along you guys are in that process.

Could you be a little more specific.

I'm just looking at.

These fleets that they already have existing solutions around.

Imagine the logistics and workflow and as you move towards commercialization itself just around the heartland the functionality of the vehicles, but really.

They have in their system with the existing programs, so youre going to be.

Integrating into.

With Sunrise client so I just wanted to get a sense of it.

How far along you guys are in that process.

It's a good question.

I think it is too simple we've we're the first one that we've always said that.

Speaker 3: I think it's too simple. We were the first and we've always said that ultimately war developing is a solution that has to integrate. A whole list of solutions that integrates into our partners' supply chain, in order to make it more efficient for them. So they can provide a better end-to-end with just the solution, because ultimately that's where everybody wants to go. It is providing that best end-to-end with just the solution for their customers.

Ultimately, we're developing is a solution that has integrated holistic solution that integrates into.

Our partners supply chain, and where it can make it more efficient for them.

Can provide a better end to end logistics solutions, because ultimately that's where it was.

He wants to to Bill is providing the best end to end logistic solution for their customers.

Speaker 3: And we integration of our system into their KMS is a process. That is why we have reservation partners today because really it's not just collecting track count but starting that integration process. If you reflect on 2020 one.

And.

Integration of our system into their Tim. This is a process that is why we have reservation partners today, because really it is not just collecting.

Truck count, but starting the integration process.

If you reflect on 2021.

Have over 160000 miles actually now more than that of the tons miles driven with UBS. So again, we'll be getting deep into their supply chain and integrating with their with their with.

Speaker 3: have over 160,000 miles, actually, now more than that, of a Thomas Miles driven with UPS. So again, we'll be getting deep into the supply chain and integrating with their service.

With their service.

Speaker 3: We're starting to hall freight for new Pacific. Now, how do we integrate with the railroad and help improve or expand their-

We're starting.

Whole freight for Union Pacific.

How do we integrate with the railroads.

We're expanding their service.

Speaker 3: We have great partners on traditional co-clarular carriers. We have partners, of course, Parcel with UPS and DSL. So.

We have great partners on traditional truckload carriers, we have partners of course parcel with Upi as DSO.

So.

So to really answer your question, that's absolutely what we're doing today and.

Speaker 3: So to really answer questions, that's absolutely what we're doing today. And

That's where we see the highest ROI in terms of our our resources ensuring that we can have more of our trucks working with these.

Speaker 3: You know, that's what we see the height ROI in terms of our resources is ensuring that we can have more of our trucks working with these.

Speaker 3: strategic partners to go deeper with them, to integrate with them. And I think that also creates a better entry for Lake.

Strategic partners to go deeper with them to integrate with them and I think that also creates barriers to entry.

For late comers.

That's super helpful. And then the second question is really around.

Speaker 9: That's a bit helpful. And then the second question is really around, you know, the significant of the driver out testing for your learning cycles and the cadence of those learning cycles. Obviously, it's the early days, but and you pay your plan, you lay out for us, but I'm just wondering, you know, it needs early runs, if you're starting to get a sense of, yeah.

The significance of the driver out.

Testing for your learning cycles on the cadence of those learning cycles, obviously, it's still early days, but.

You pay your plants you have laid out for us, but I'm just wondering it's early run so youre starting to get a sense of just how.

Speaker 9: how it's the learning cycle is, you know, for you and some of the things that you're starting to see that you're going to have to solve, but also getting, you know, bringing this to market and the pace of that for the audience.

How accelerated the buying cycle is.

For you and some of the things and Youre starting to see that you're going to have to solve but also getting.

Bringing this to market and the pace of that.

At inception.

Okay.

Speaker 3: Yes, and you know, I think you hit the word the significance of driver out and I think what was informed for us to to To keep saying is that driver out is not a demo. It's not a shiny object that they have to

Yes.

I think you hit towards the significance of driver IC and.

I think what was important for us to two.

To keep saying is that driver out is not a demo right. It's not a shiny object to happen once.

Speaker 3: And in drug rights, nifkin, because we can now show you from drug rights, what is the linear role map to getting to commercialization? And that's something that no other autonomous driving company can do today. Where's the end? And where are we relative to the end? So that these any sort of metrics that we can share with you by number miles driven and number of trucks, I mean, all these things, again, are

And Doug real significant because we can now show you from programs.

Is the linear roadmap to getting to commercialization and thats something that no other construction.

Stroking driving company can do today.

And where are we relative to demand.

Any sort of metrics that we can share with you a number of miles driven and the number of trucks I mean, all of these things again R. R.

Speaker 3: are nice metrics, but how do you know where to end point, how do you know where you are well to the end point? And that's something that I think today we have a marker of continuous scrub operations on one route, and this is where we go in terms of commercialization. So I think,

Nice nice metrics, but how do you know where the endpoint.

How do you know where you are relative to endpoint and Thats something that I think today, we have a marker of continuous operations on one round.

And this is where when you go in terms of commercialization.

So.

I think in terms of.

Significance to us I mean, it took us.

Speaker 3: six years as a company to get to driver operations on one route. So if we...

Six years.

The company to get to driver operations on one round. So if we scale now of course that the time that development cycle gets shorter and shorter right. I mean ultimately what is it we're trying to do we're trying to automate more lanes and deliver freight.

Speaker 3: scale now, of course, that the development cycle gets shorter and shorter. And ultimately, what is it we're trying to do? We're trying to automate more lanes and enable freight capacity to our shippers. So as we show you that we can automate more lanes faster than six years, the depth will be. As we can expand our personal design domain, as we show you that the cost on per mile basis will come down. And all those things should give confidence.

Free capacity.

Our shippers right. So as we show us that we can automate more lanes faster than six years.

It will be.

We show you that we can expand the operational design domain as we show you that the cost per mile basis will come down on all of those things should give confidence that development cycle as being shorter and that we are closer to commercialization.

Speaker 3: that development cycle is being shorter and that we're closer to commercialization. And it.

But a reasonable scale.

Thank you. Our next question comes from Jordan J on Eureka Bear Your line is open.

Speaker 1: Thank you. Our next question comes from George Gianaricus of Baird. Your line is open.

Hi, good evening everyone.

So I guess you mentioned on the call and in your prepared remarks that the development roadmap.

Speaker 11: I guess you mentioned the call and you prepared your marks that the development road map.

Is linear.

Speaker 11: is linear and you hired a 10% sequential increase in R&D personnel. Can you just sort of explain this, what the over a thousand people in R&D are working on in Cementulate and you have the Nvidia co-development, but what are the incremental problems?

You hired 10% sequential increase in R&D personnel.

Can you just sort of explain us what the over 1000 people in R&D working on incrementally and then you have the Nvidia co development, but what are the incremental problems that.

Speaker 11: that you are in D-team is working on over the next couple years.

R&D team is working on over the next couple of years.

Well I think this goes back to.

Speaker 3: Well, I think this goes back to, I mean, there's still, this is a very long answer. But it still goes back to, there's still a lot of engineering work. If you take start from driver,

There is still this is a very long answer.

But it still goes back to there's still a lot of engineering work.

If you take.

From drug routes to optimize.

Speaker 3: to optimize the features which we have completed to do daytime off.

The features which we have completed two do daytime operations to do a new routes in Texas triangle to do more than one Ralph and place a triangle.

Speaker 3: to do a new route in Texas Triangle, to do a more than one route in Texas Triangle. There's engineering work to...

There is engineering work too.

Speaker 3: Remove to update, you know, to have mapping as a more life update so that every truck can they become a Service vehicle for each other, right? And as you have more trucks on the same routes that's hauling freight, then actually that makes a safer for the whole the whole route that we're automated.

Remove.

Update mapping as a more.

Life update so that maybe truck could they become a service vehicle for each other.

As you have more trucks on the same routes that's hauling freight.

Actually that makes it a secret for the whole the whole route that we're automating.

Speaker 3: So there's still a kind of work. Of course, there's work on the hardware side of our production vehicles with Traytah and Navistar. There's work that we're doing with different suppliers in terms of partnerships of working with them in requirements and testing those components. So really, the lift can go on, but I think.

So there's still a ton of work of course Theres just work on the hardware side of our production vehicles would trade on Navistar.

There is work that we're doing with <unk>.

Suppliers.

In terms of partnerships are working with them requirements and testing those components.

So really the list can go on but I think when.

When we say linear its debt.

Again going back to Trevor is significant because.

Speaker 3: Again, going back to driver-house significant because from here we can show you what are the steps required to get to commercialization. And as we check each one off, that should give you more confidence that we're closer and closer to commercialization. Right? And again, today we look at the whole industry, how do you confidence that people are moving closer to commercialization?

Here, we can show you what are the steps required to get to commercialization and as we check. These one off that should give you even more confidence that we're closer and closer to commercialization.

And again today, we look at the whole industry, how do you have confidence that <unk>.

People are moving closer to commercialization, how do you get confidence.

Speaker 3: Where is commercialization and where people relative to that, did I go? And I think that's really the significance of this driver operation.

<unk> commercialization, where people relative to that did I go and I think thats really the significance of this driver only operations.

Speaker 11: And one more on your patents. You guys have done a good job of every quarter outlining your total patents issued in the sequential growth and those are how core those to your long term competitive advantage relative to the other companies in your industry.

Got it and one more on your patents you guys have done a good job of every quarter outlining your total patents issued in the sequential growth in the core of those to your long term competitive advantage relative to the other companies in your industry.

Speaker 3: Yeah, it's gonna be critical. And I mean, this is not something that's new to autonomous driving. You look across.

Yes, it's going to be critical and this is not something thats new to autonomous driving if you look across.

Speaker 3: the mobile, mobile, sort of, sort of telephone, right?

Mobile.

Mobile.

Sort of telephone right.

Cell phones telecom electric vehicles.

Speaker 3: cell phones, telecom, electric vehicles. I mean, you get to a certain point of maturity where you do have patent infringements. You have patent pours in me. You have companies more robust being sold off for the patents that they own, right? So today is not something that it shows up in terms of the combative damage, but you fast forward.

You get to a certain point of maturity where.

You do have patents.

<unk> you have patented CT mi companies Motorola being sold off for the patents that they won't right.

So so today is not something that.

It shows up in terms of the competitive vantage, but you fast forward three years five years.

Speaker 3: Three years, five years, it'll definitely be a huge advantage for Tuesday.

Definitely be a huge advantage for too simple.

Speaker 1: Thank you. Our next question comes from Todd Fowler of Keybank Capital. Your line is open.

Thank you. Our next question comes from Todd Fowler of Keybanc Capital. Your line is open.

Speaker 8: Great. Thanks. Good evening. So I wanted to ask on the reservations and I know that these can be a bit lumpy, but it seems like if there was a nice couple of orders that came in early this year. You know, Chang, do you think that that's a reflection of the success of the driver out runs that you've had? And can you maybe speak to the interest level that you've seen post-driver out at this point?

Great. Thanks, Good evening, so I wanted to ask on the reservations and I know that these can be a bit lumpy, but it seems like that there was a nice couple of orders that came in early this year change do you think that Thats a reflection of the success of the driver out.

Now that you've had.

Can you maybe speak to the interest level that <unk> seen post driver out at this point.

Yes.

Yes.

Speaker 3: Yeah, I mean, absolutely, because the driver out is significant, it's a real proof point of where we are to commercialization. It's also, you know, interesting because now...

Totally.

As the driver.

It's a real proof point.

What we are to commercialization.

It's also.

Interesting because now.

You have.

Now if you start thinking about what is what is becomes trucks can do for the industry you have players that historically.

Speaker 3: Now if you are start thinking about what is what is a comms truck can do for the industry, right? You have players that historically, you know, aren't in trucking. Now get into trucking potentially. You have players that can leverage, taught me to expand their business. So so now I think also creates a little bit of competitive dynamic among different, different types of of carriers and shippers. You know, so all those, of course, lastly, just the supply chain. I mean, the driver shortage is getting.

In trucking.

Now getting into trucking potentially you have players that could leverage Tommy to expand your business. So so now I think it also creates a little bit of a competitive dynamic among different.

Different types of carriers and shippers.

So all of those and of course lastly is this the supply chain I mean, the driver shortage is getting <unk>.

Speaker 3: significantly worse. You're seeing labor costs going higher, you're seeing fuel costs rising really fast. So I think those components of factors are leading to interest. I mean interest is always there, but certainly we're seeing even more interest now.

Significantly worse.

Are you seeing labor costs going higher you are seeing fuel costs rising really fast. So I think those confluence of factors are leading to.

Interest I mean interest always there, but it's certainly we're seeing even more.

Interest now.

Speaker 8: Yeah, that certainly makes sense. And I guess just for my follow up, Pat, I'm not sure if you wanna share any color around the potential cadence of EVA-DA throughout the year, throughout 22. And I guess what I'm really kind of curious about is we exit 22, with your expectation that the EVA-DA losses would start to narrow as we exit the year, or is it pretty consistent with an even run rate with their guidance? Thanks.

Yes, no that certainly makes sense.

And then I guess just for my follow up Pat I'm not sure. If you want to share any color around the potential cadence of EBITDA throughout the year throughout 'twenty, two and I guess, what I'm really kind of curious about as we as we exit 'twenty two what's your expectation that the EBITDA losses would start to narrow as we exit the year or is it pretty consistent with.

And even run rate with your guidance. Thanks.

Speaker 10: Yeah, I think you'll see some modest increase in the EBITDA law. So this we progressed through the quarters in 2022. That's because we will continue to hire folks and that'll increase the labor base that drives a meaningful percentage of the EBITDA law.

Yes, I think youll see some modest increase in the EBITDA losses, as we progress through the quarters in 2022, that's because we will continue to hire folks and that will increase.

Labor base that drives a meaningful percentage of the EBITDA loss, but.

Speaker 9: But I do think now what you'll see is consistent with 2021 being a big hiring year in 2022, being more selective to fill out specific spots on the team. You'll see a deceleration in the losses. They'll continue to grow, but the second derivative will be, yeah, I think indicative of the fact that we are hitting a critical mass on this. And pushing forward towards these final stages of development over the next two years, is we get towards commercialization.

But I do think now what Youll see is consistent with 2021 being a big hiring year in 2022 being more selective to fill out specific spots on the game.

Youll see a deceleration in the losses, they will continue to grow but.

The second derivative will be.

Yes, I think indicative of the fact that we are hitting a critical mass on this and pushing forward towards the final stages of development over the next few years just forget towards commercialization.

Speaker 1: Thank you. Our next question comes from Ken Hoekster, a Bank of America. Please go ahead.

Thank you. Our next question comes from Ken <unk> of Bank of America. Please go ahead.

Speaker 10: Hey, good afternoon, Chang and Pat. Congrats on the driver out ramp. Can you talk about the scaling though? I mean, you mentioned the number of trucks. You've got a hundred trucks in the fleet globally. But last quarter, you talked about Navistar having delays. Can you talk about where that stands now, what we should expect?

Hi, Good afternoon, Chairman Pat Congrats on the on the driver out ramped up can you can you talk about the scaling though I mean, you mentioned the number of trucks, you've got 100 trucks in the fleet globally.

But last quarter, you talked about Navistar, having delays can you talk about where that stands now what we should expect.

Speaker 11: to come online and it sounds like are you putting them all toward the commercial development? Are you still scaling up the driver-filled seats? Just want to understand the size and scale we should look for.

To come online and it sounds like are you putting them all towards the commercial development or is there still are you still scaling up the driver filled seats just want to understand.

The size and scale, we should look for.

Okay.

Speaker 9: I think you'll probably have roughly still this 50-50 split in the US between trucks that are dedicated entirely to testing and technology development and the other half.

I think youll.

We will probably have roughly still this.

1000, <unk> split in the U S between trucks that are dedicated entirely to testing and technology development and the other half.

Speaker 9: hauling frame commercially. I would say the penetration of autonomy within our commercial fleet is continuing to increase.

Calling for a commercially.

I would say that penetration of autonomy within our commercial fleet is continuing to increase.

Speaker 9: which is important. That's what our customers are really demanding.

Which is important that's what our customers are really demanding is freight capacity, but increasingly they want more autonomous break capacity. So that they can participate in the technology development.

Speaker 9: is free capacity but increasingly they want more autonomous free capacity.

Speaker 9: so that they can participate in the technology development, so that the penetration is continuing to increase.

Penetration has continued to increase including being able to do driver out operations commercially which is what we announced around our union Pacific partnership, which will start the spring hauling freight for them on a driver out basis, So youll see more trucks coming online.

Speaker 9: including being able to do driver out operation commercially.

Speaker 9: which is what we announced around our Union Pacific Partnership, which will start this spring hauling break for them on a driver outpaste. So you'll see more trucks coming on.

Speaker 9: over the course the first part of this year. And that'll show off in the cadence of the revenue ramp throughout the year.

Over the course of the first part of this year and that will show up in the cadence of the revenue ramp throughout the year.

Speaker 10: And is there a relation to the delay last year in terms of getting the physical equipment, can you update on finding that the truck should arrive?

And is there a relation to the delay last year in terms of getting the physical equipment can you update on timing.

Timing that that the trucks right.

Yes, the trucks the trucks have arrived.

Speaker 9: Yeah, the trucks have arrived. You know, roughly 24 speed trucks that have arrived.

Roughly 20, plus new trucks that have arrived on some of those are going through the outfit process right now to get fitted for AB.

Speaker 9: Some of those are going through the outfit process right now to get fitted for AV equipment. Some are being placed into service.

Some are being placed into service.

Speaker 9: for both commercial and testing operations. So we're starting to see that.

For both commercial and testing operation. So we're starting to see that really hiring drivers is still challenging I think.

Speaker 9: relief. Hiring drivers is still challenging. I think as you know from the ecosystem this continues to be extremely challenging but we're able to.

From.

Because system. This continues to be extremely challenging by four able to I think what we've been able to be successful in bringing in drivers.

Speaker 9: I think we've been able to be successful in bringing in drivers.

Speaker 9: you know, making sure that all of our trucks are seated, but it is certainly a, you know, a tight labor market, which obviously makes it difficult in the near term for us, but...

Making sure that all of our trucks are ceded but it is.

Yeah.

A tight labor market, which obviously makes it difficult in the near term for us, but just further underscores the need for our technology over the long term.

Speaker 9: just further underscores the need for our technology over the long term.

Thank you. Our next question comes from Scott Group.

Speaker 1: Thank you our next question comes from Scott Group. Oh, well, research, your line is open.

Wolfe Research your line is open.

Speaker 3: Hey, thanks. Good evening, guys. I apologize if I missed this. Or is there any driver out plan for a new route or a different route this year?

Hey, Thanks, Good evening guys.

I apologize if I missed this.

Is there any driver out plan for our new route or.

Different route this year.

Scott we haven't shared exact details, but that is something that we.

Speaker 3: We haven't shared exact details, but that is something that we expect to get more guidance in the coming months.

We expect to give more guidance.

In the coming months.

Speaker 3: And then just bigger picture if I think about 2025 or so, how have your assumptions evolved from a year ago when you think about?

Okay.

And then just bigger picture, if I think about 2025 or so how have your assumptions evolved from a year ago. When you think about <unk>.

Speaker 3: Number of trucks, miles per truck, rate per mile, what were you getting more optimistic about 2025, were you getting less optimistic about 2025? And if you have a different year, you want to talk about that, that's fine.

Number of trucks miles per truck rate per mile where are you getting more optimistic about 2025, where youre getting less optimistic about 2025, and if you have a different year you want to talk about that that's fine.

Yes.

Directionally.

Speaker 3: The rate for my whole looks like it's going up and can't predict the future, but in trend are going higher. I think in terms of number of trucks, that is our series production. As we said, we have to have integrated trucks.

With the rate per mile. It looks like it's going down.

We can't predict the future, but I think trends are.

Are going higher.

I think in terms of.

The number of trucks.

It is.

Our <unk> production as we said we have to have integrated trucks with OEM partners in order to get to one thousands and tens of thousands.

Speaker 3: with our OEM partners and where to get to thousands and tens of thousands. The risk that we have identified more and more of over last year is the supply-based maturity. We're taking active steps to address that. We feel confident about our strategy. That's something that we continue to pressure test the timeline and we'll have more updates on that as our production program, Wooden Avis are naturally runs his course.

The the risks that we have identified more and more of over the last year is despite based maturity of course, we're taking active.

Active steps to address that we.

We feel confident about our strategy. So thats something that we continue to push it has the timeline.

And we'll have more updates on on that as our production program with Navistar and naturally runs its course.

Speaker 3: Well, no, I mean, I think if anything, again, as you mentioned in earlier call, we are putting forward commercialization. You know, I think in the 2020, 2023 in terms of actually be able to have a continuous autonomous freight service for customers on dense routes.

Well no I mean, I think if anything good.

Mentioned in earlier calls we are putting forward commercialization.

I think end of 2023 in terms of actually be able to have a continuous tons free service for customers on dense routes.

Speaker 3: That's something that we actually feel more, even more coffin of today, compared to your...

That's something that we actually feel more even more confident today than compared to a year ago.

Speaker 1: Thank you, our next question comes from Jeff Osborne of Coening Company. Your line is open.

Thank you. Our next question comes from Jeff Osborne of Cowen <unk> Company. Your line is open.

Speaker 3: Great. Good evening. I just had one question. I was curious if you could touch on change some of the things that you can't control. You've done a great job on the call of talking about the things you can't control, but in particular insurance, any update on the Liberty Mutual Partnership and any new developments on the regulatory side that we'll be aware of will be great to hear.

Great. Good evening I just had one question I was just curious if you could touch on change some of the things that you can't control you have done a great job on the call talking about the things you can control, but in particular insurance any update on the Liberty mutual partnership and any new developments on the regulatory side that we should be aware of would be great to hear.

Okay.

Speaker 3: You know, no, no, on the regulatory side, there hasn't been material changes or nothing, I think, to to signal a change in regulation, I think actually the continued rhetoric messaging from the federal and state government has been positive for Thomas trucking, especially given how supply chain is today and in front of the shortage, I think it's worse and worse. I think

No no on the regulatory side, there hasnt been material changes nothing that I think two to signal a change in regulation I think actually the continue rhetoric.

Messaging from the federal and state governments have been positive for Thomas trucking, especially given how supply chain is today in front of a shortage of Katy I think the worse and worse.

I think.

Speaker 3: You know, I think obviously the supply chain is something that we need to do more to control.

I think obviously the supply chain is something that we need to do more to control.

<unk>.

Speaker 3: No, I mean, I think generally speaking, we feel like given the team that we have, given the capital that we have, the partners that we have and what we are in technology development, really the fact that we could do drive around continuously means that things are in our control.

No I mean, I think generally speaking we feel like.

Given.

The team that we have given the capital that we have the partners that we have and where we are in technology development.

The fact that we could do dry route continuously means that.

Things are in our control.

And this is not a.

Speaker 3: Like I said, even here we go, this is not about tech stock, right? This is not a zero one. Hey, maybe it works. Maybe it doesn't work business today. It works. And now we're scaling to commercialization through expanding the old D and optimizing cost.

Yes.

And a year ago. This was not not a biotech stock right. There is not a zero one hey, maybe it works maybe doesn't warrant business today, It works and now with scaling to commercialization through.

Expanding OLED and optimizing cost.

Got it thank you.

Speaker 1: Thank you. Little this does conclude today's conference call. Thank you for participating. You may now disconnect.

Thank you. This does conclude today's conference call. Thank you for participating you may now disconnect.

Thank you everyone.

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Speaker 12: Laura why Don't you know?

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