Q1 2022 TuSimple Holdings Inc Earnings Call

May 3, 2022

Excuse me operator today's conference.

We will begin momentarily until that time your lines will again be.

Thank you for your patience.

<unk>.

[music].

Yes.

[music].

Good day and welcome to the <unk>.

First quarter 2010.

Earnings Conference call.

All participants are now in a listen only mode.

We will conduct a question and answer session.

And instructions will follow at.

Keep in mind that this call is being recorded.

Will be a replay available.

Alright.

Simple dot com following this call.

I would now like to turn the conference over to Ryan.

Head of Investor Relations for U two simple Mr.

Mr. Min. Please go ahead.

Okay.

Thank you Ashley.

Good afternoon, and welcome to our first quarter 2022 earnings call with US today are two simple co founder and Chief Executive Officer, <unk>, <unk>, and Chief Financial Officer, Pat Dillon, shouting and Pat will review, the operating and financial highlights and then we will take questions.

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

This call is being recorded.

<unk> in any way please disconnect now.

Please note the two simple shareholder letter press releases 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 actual events or results due to a variety of factors.

Please refer to our earnings release, and the sections of our SEC filings titled risk factors.

We will also discuss non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles.

Please refer to the safe Harbor disclaimer and non-GAAP financial measures presented in our shareholder letter for more details, including a reconciliation of the non-GAAP measures to the comparable GAAP measures.

I will now turn the call over to Saudi to begin <unk>.

Got it.

Thank you Ryan.

Hello, and welcome to our first quarter earnings call.

We will update you on an exciting partnership agreements that we believe will drive value.

N and share some of our recent technology and commercialization achievements with you.

And we're very excited to host many of you at our Investor Day next week in Tucson.

He will be a great opportunity for the investment community to experience our industry, leading AAV technology per pad here from many of the talented individuals within the armor data.

And for us to share more detail on our long term plan.

We're very much looking forward to hosting you next week.

Since two simple funding in 2015, we have had one goal of building the FERC co market scalable level four autonomy semi truck solution that will transform the freight industry.

Our mission is to change the game.

We believe our technology will improve safety increase efficiency and reduce our carbon footprint.

There is more work to be done our autonomous driving system is now feature complete and im excited to be leading to simple towards commercialization.

Our commercialization team members are best in class, we have established some of the strongest partnerships in the industry I am extremely proud to play an instrumental role in bringing all aspects of the company together to achieve our goal.

Last week, we announced some board changes.

First we're very pleased to add <unk> to the board.

Reed has deep experience in finance at Salt life.

And government and defense.

And we're grateful to have his counsel on our board of directors.

We also announced that Brad boss has been appointed lead independent director.

<unk> has been critical in all aspect of our business.

<unk> as we have transitioned to life as a public company I greatly appreciate his many contributions so far.

His counsel and looking forward to working with him and the new capacity as it takes on the additional responsibility.

We also announced that my co founder Bo Chen who will not be standing for reelection.

And I have a longstanding and deep partnership that has helped the entire company.

<unk> is always focused on doing what will be back for two simple.

As we have talked about previously.

We are targeting more independent director.

More U S centric board.

We are focused on enhancing governance and our home market in the U S.

<unk> to be to be commercialized.

So this is a natural and strategic evolution of our board composition.

Mo is fully aligned with this strategy and he made the decision not to take real action to support the company.

More but many contributions he has made.

As a board member helping to guide the company from its infancy to what it is today.

We'll continue to be a significant shareholder of the company and.

We will continue to give us it pull support was the retro term finishes in June .

We will continue to evaluate additional independent director candidates to augment our board in the future as we continue to bolster our governance.

During the quarter, we made significant progress toward commercialization.

We now have over 10 driver hour missions, and our without ever made meaningful enhancements to our minimal risk conditions at our thief capabilities, including our autonomous driving system ability to hold the vehicle over to the side of the road in certain scenarios.

This is a critical capacity in order to be able to remove our case by support vehicle and improve efficiency driver out operations.

To test this capacity with <unk>.

First <unk> trial and simulation and then on close track finally, we proceeded with the driver all test price, where we deliberately krieger RFP command, while the vehicle within the operation on Interstate 10.

First ignited our finite talk that identified a safe place to pullover lowered its vehicle speed in lane, and then put it up to the side of the roadway.

The MRC capability to pull over to the side of the road may not seem like progress.

After all our assets.

It's about completing missile successfully.

But a robust <unk> capability it needed to safely take the driver out and to optimize operation.

At the worlds first and only drive route trucking company, we will continue to refine our technology towards commercialization and provide update on critical capacity advancement such as <unk>.

This quarter, we also launched collaborative mapping.

Enhance the bleed mapping capability allows our SMA truck to share information with each other using sophisticated vehicles to a cloud to vehicle communication.

Trucks traveling the same Rob shared dynamic events, such as identifying them or did they land vehicles, well before the camera or lidar because since that event.

This advanced notice is incorporated into the vehicle planning system, giving Tuesday for cyanide considerable time to make the safe lane change or.

They are driving maneuvers.

As our operating at scale.

Library of mapping that is expected to help us continue down the efficiency path and more importantly, magnify and enhance the safety benefits of our <unk> technology.

Two simple at one of the broadest patent portfolio in the industry and the value of our proprietary technology continues to grow.

We were issued 21, new patent did this quarter, bringing our total patent count to 408, highlighting our industry leadership in intellectual property globally.

Patents issued in the quarter will improve safety and reduce operational costs.

Now I'd like to talk about Navistar joint development partnership to build the world's FERC level core production semi truck.

Over the course of the last two years, we and Navistar has made significant progress on advancing our technology and refining our production plan.

This includes a significant amount of progress over the last six months.

Our bill of materials, with Navistar, including deep discussions and negotiations with our supply base.

This work is critical to advance both our production trucks, but also to utilize our hardware knowledge for advancement of that retrofit trucks over the near term as we expand our driver on operations.

We are also pleased to announce that the production side may talk will be manufactured in Navistar World class at Capito, Mexico manufacturing facility.

This is an important milestone I frequently prepare reduction and it's a signal of our conviction that we and our partner in this program.

We and others in the industry have highlighted.

The last two years has been unprecedented global supply base supply challenges.

This has delayed us from the unique production truck type truck timeline with that in 2020.

Navistar have refine our timeline to have production in 10 prototypes in 2024 with fully integrated vehicle is targeted for 2025.

Even with this delay we believe the timeline that we have developed will lead our purpose be with commercial truck to be the first to market.

In parallel to the production truck program. We will also continue to commercialize our technology was successful.

Successive generations of more retrofitted trucks, driving efficiency and ramping that scale up our operations into the one hundreds of trucks.

As our production trucks are coming off the line, we will be able to place thousands and tens of thousands of trucks onto our AF and fully scaling adoption off our ground breaking technology.

Year to date, we've made some important announcements that will enable our autonomous <unk> network to bring efficient capacity to the trucking market.

First we expanded our ecosystem with Ryder, we added two internal two terminals in Houston and Laredo, Texas. This terminal will provide non stop at that point for our customers, providing bundled maintenance service to support commercialization.

Partnering with Ryder, we're able to quickly and in a capital cushion matter.

F N terminal infrastructure in Texas.

As an important step to prepare for the expansion of our <unk> operations over the next 12 months.

Second we announced that an integration with Warner Enterprise roadside assistance.

Support our driver out operations on resi.

Anyone in the trucking industry understand breakdowns tablets, whether drive off or not.

Critical however, it's expedited service.

If required.

Our announcement with water gives our AF and access to an extensive network of dealers and repair facilities operating 24 by seven supports.

This means carriers on RF will have their choice of services that support provider, including Warner Enterprises authorized service centers.

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

Thank you Shelby beginning.

Beginning with our reservation program.

Added 500, new truck reservations this quarter <unk>.

Including one larger reservation of 350 trucks from loads.

A leading third party logistics and capacity as a service platform.

We're excited to be working with an innovative company like Wayne Smith and see this as a validation of the attractiveness of our EV technology and the value that we're bringing to the industry.

This brings our reservation total at quarter end to just under 7500 trucks.

The interest in our technology from our fleet partners has never been higher as we build on the success of our initial driver up missions towards operational I think driver out for customer freight runs.

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

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

We reported $2 million of revenue in the quarter, an increase of 140% year over year, and a slight increase quarter over quarter.

We have kept our owned and leased revenue relatively flat quarter over quarter as new trucks are prioritized for our testing operations.

The flat truck count and relatively flat revenue mild growth was offset by higher rate per mile driving our revenue growth.

While 2022 does present, some headwinds such as adding drivers trucks and trailers, we expect to increase our revenue fleet size modestly over the course of the year and to continue to improve utilization.

We watch the pricing environment, and we price competitively with our freight customers.

Moving to expenses.

We spent $78 million on total R&D in the quarter, including $17 million of SPC.

This compares to $41 million in the same period last year and $82 million in the fourth quarter of 'twenty one.

R&D expense declined by 5% quarter over quarter, primarily due to a onetime true up of 2021 bonus accruals.

We continue to manage our spending to invest smartly in the commercialization of our world leading technology.

We spent $32 million in SG&A during the period, including $10 million of SPC. This compares to $15 million in the same period last year and essentially flat versus fourth quarter. 'twenty. One also benefiting from a one time true up of 2021 bonus accruals.

Our loss from operations was $112 million in the first quarter of 2022 compared to a loss from operations of $59 million in the same period last year and $116 million last quarter.

Our adjusted EBITDA in the first quarter was negative $80 million, which compares to negative $50 million in the same period last year and negative $81 million last quarter.

We invested $1 million and the purchase of property and equipment during the quarter, primarily related to equipment purchases and facility investment. We also made acquisitions of property.

Property and equipment of $1 million that is included in liabilities.

We ended the quarter with a cash balance of approximately one and a quarter billion.

Line of $100 million versus the end of 2021.

Cash burn in the quarter included the payout of annual performance bonuses and other similar items, which are not expected to repeat in the next three quarters.

A quick update on our 2022 guidance there is no change to our full year 2022 guidance. However, given our announcement regarding the exploration of potential transactions for our Asia Pacific focused businesses.

We do want to provide some context we.

We expect approximately 20% of our 2022 adjusted EBITDA loss to be related to our Asia Pacific focused businesses.

Not expecting any material revenue contribution from these businesses during 2022.

I'll now hand, it back to <unk> for a few last remarks.

Thank you Pat.

Technology will be bulk is best in class, our path for commercialization, but becoming clearer and I'm honored to be leading this amazing company through our next phase of development.

We're excited for 2022, which we expect will be a year in which we expand our driver our operation continues to make progress on efficiency.

Work toward full production up our purpose build truck.

We will have more details to share with you next week in Tucson, and I look forward to meeting many of you and highlight the advancements we have made.

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

Thank you if you would like to ask a question at this time. Please press Star then one on your telephone keypad.

Again that is star one to ask a question.

Your first question comes from the line of Ravi Shanker with Morgan Stanley .

Thank you good afternoon, everyone.

Sure. Thanks for the update on the Navistar relationship and the.

The new timeline, just so that we understand and can you give us the kind of step by step on what you expect in 2022, what do you expect now by the end of 2023, I think you had said some level of commercial implementation by end of 'twenty three before what happens in 'twenty four and what happens in 'twenty five.

Yes, Thank you Ravi.

The the Navistar.

Thing is that we have agreed on a lot of things on the building material bill of materials, but the things that we cannot control and the world is that the supply shortage on that.

We are finalizing it but even with.

This delay we still believe that we are the only company that go into item by item about the.

Item needs to be needed core beauty the autonomous truck.

And this is our this is our plan for now.

We're going to have the prototype ready by 2024 and a.

The railcar coming out by 2025.

And maybe <unk> just to give a little.

A little bit on your question about what is happening in 2023. The important thing to remember is that these programs are running in parallel so what we're doing with retrofitted trucks, which we expect to continue to improve in terms of the quality of the hardware the reliability and the fidelity of the.

Hardware will continue to improve the commercialization is not tied to the production trucks. So the commercialization, which we'll talk more about in next week's investor day.

We'll really be using retrofitted trucks initially starting at the end of 2023 and enter 2024 and parallel to that we will be making product regular and steady progress into the production truck.

And those are the those are the specific milestones that <unk> laid out in his prepared remarks around production intent prototypes in 2024, and we're targeting the fully integrated vehicles on the road in 2025.

Got it Thats an important clarification. Thank you for that and maybe as one follow up just on the first quarter itself. It looks like your miles are driven both total and map were flat sequentially.

Which I think is the first time that's happened. So can you just elaborate on why that was a key kind of get you guys wanted to any colgate operational issues or something.

Sure. Thank you Rob it's a good question. So I think were mapping we have different phases of development. The first phase is to demonstrate to the world that the weekend map cheaply and quickly and that Golar has been achieved.

Given the find that number of trucks that were operating in the hauling freight on the entire U S.

Network, we have to come to the situation, where we do not need to map the route where we don't operate.

And in the new phase what we're focusing on as you also as I also mentioned previously about the collaborative mapping we focus more on the latency of the mapping the accuracy of the mapping and additional functionality of the mapping, but we do not need to expand the miles of mapping because that's the only one of many success criteria format.

Great. Thank you.

Your next question comes from Chris Wetherbee of Citi.

Hey, Thanks, Good afternoon, guys just relying on for Chris.

To start with the Union Pacific partnership you mentioned that was going to be rolling out in the spring here just curious if that's happening now and if there are interesting learnings that are coming up as a result from some of the final mile moves there.

So for the Union Pacific collaboration in Italy, we were aiming at hauling.

Trailer like a typical trailer for Union Pacific and the driver out fashion. However, as we go deeper into the collaboration with Union Pacific We realize that their model is real really the real intermodal container transportation. Therefore, you will be.

A much more significant achievement, if we can hold that real intermodal containers battlefront trailer, which is more like a smaller aspect of their business. Therefore, we have to modify our OLED and expand our operations to be able to support the road intermodal container and with that we set the new debt.

<unk> timeline for the for the third quarter of this year to come in the driver out Ryan for the Union Pacific for the rail intermodal container, which is an expansion of original plan.

And we do think new cloud we'll be.

Sorry will be will be a much tighter integrated with the daily operating model of Union Pacific.

Okay got it and then in terms of Texas. So presumably you want to continue to do driver out routes. There in 2023, and those would be prototype or updates I guess that will be doing those routes.

Imagine that you will have some some more trucks out there for that and then I guess more on 2020, so theres going to be significant reductions in cost per mile are those going to be on the prototype trucks and what's happening to help reduce the cost per mile. There.

There are several aspects number one is that we are going to operate in Texas by migrating our operational design domain from 92 day and migrating them from one lane in.

One driver out lane in Texas, I'm, sorry, I won't drive out lane in Arizona to more great lengths.

Texas.

You see those are already two operational design domain expansion and in addition to that we arent going to change some of the hardware to a more.

More product matured version of the Alpha hardware by doing that we're going to reduce operational costs and Furthermore, we have multiple roll in in.

Denise will drive route we have leading vehicle, we have chase bank and we do have a plan to remove all of this in the following I would say two years.

It's Pat so maybe I'll just add a couple of things one we do expect to give a lot more detail on the driver out.

Expansion at our Investor Day next week and to just to make sure that the nomenclature.

It doesn't get confused the trucks that will be operating this year and next year will be up to retrofits.

<unk>.

Pretty close to stock Navistar vehicles.

The production intent prototypes that we mentioned for the purpose built truck.

We've targeted those with navistar to start rolling off the line in 2024.

Haven't specified yet, but they will be used.

Likely for dual purpose, including revenue lines as well.

Doing all of the typical testing that you would expect in a preproduction phase. So hopefully that helps clear up sort of the cadence of what will happen. This year and next year and then into 'twenty four and 'twenty five.

That's helpful. Thanks, guys.

Your next question comes from Dan Levy with Credit Suisse.

Hi, Good evening. Thank you for taking the question I wanted to go back to the question asked earlier on the metrics.

And I think we're all figuring out how to read into these electric metrics on a quarterly basis, but.

Look at your cumulative road miles.

The quarter over quarter growth there decelerated it was 14%.

In the first quarter down from 17% in the fourth quarter I recognize that there's going to be some lumpiness and we shouldnt read too much into that but maybe you can give us a sense of how we should look into the quarterly progression of these road miles, especially as youre focusing more on commercialization I think seemingly narrowing the number of routes where youre doing serious work as opposed to Oh.

Wider set of routes.

I think the the actual miles are only part of the story. For example, we do have a lot of simulated miles as well and all kinds of accumulation does not really reflecting the miles for example, we have hardware in the loop simulation I'll just kind of a validation of our are progressing and.

I think Myles I only tells part of the story. So my recommendation don't really look into too much into that.

And I'll, let Pat answer the rest of it yes, I mean, Dan just one point on the math around it too is that we are doing this with a relatively flat truck count the new trucks that we are adding into this are largely going into testing operations testing operations are typically.

Running a very specific task.

That's very specific functionality so.

The overall the progression on the additions to the cumulative road miles have been fairly steady over the last couple of quarters.

And to the point shabby made.

What about trying to grow the cumulative road miles just for the sake of that metric, it's really an output from our confluence up a whole number of different objectives that we're trying to accomplish and developing this technology.

Okay.

Got it. Thank you and then just the second question I wanted to follow up on the press release, you put out about six weeks ago.

On the exploratory process through your Asia Pacific business, maybe you can just give us an update on where that stands and broadly maybe you can refresh us on how youre allocating resources between the U S and China.

You think it's possible to concurrently.

Develop autonomous trucking both regions of whether it makes more sense to purely focused on the U S and I know you've got operations in Europe as well.

Just how you think about the regional focus these days thanks.

The regional focus definitely we are U S centric.

Century a company.

That is the person because I think in the U S. We have the best policy to commercialize the autonomy and the this is whole companies.

And then in terms of the.

The possible fund raising outlet Pathfinder.

I think just as a refresher then from the when we put the press release out first of all I'd emphasize that it's a preliminary process.

It's something that our early stage. So we don't have a lot of detail to share yet.

But the rationale behind exploring a potential subsidiary level transaction for our Asia Pacific focused businesses.

Just seeing financial arbitrage opportunity that could potentially be beneficial to us.

In discussions with market participants we think.

It is likely that there is relatively minimal value ascribed to our Asia Pacific focused businesses and our stock price today.

We do see.

A great deal of intrinsic value in our kind of our Asia Pacific focused businesses and we've also seen.

That there are other pools of capital or market participants that would ascribe value to our Asia Pacific focused businesses. So we're not making any commitment to take care of any particular action or any particular type of transaction, but.

But we do think it's worthwhile for us to explore that and we think it is potentially a path for us to unlock financial value for the company.

Say just one other thing that is important to note is.

From a safety perspective, we did put out a press release with all of the material terms of our National Security agreement with <unk> I want to be clear that there is no action required around our Asia Pacific focused businesses from <unk> perspective. So this is purely looking to unlock financial value that we don't think.

As reflected in our share price today and again, just it's a preliminary processes, we have more as we move through this we'll certainly make appropriate updates to the market as we go through that process.

And just to be clear none of this is being spurred by additional capital needs in the U S.

Purely because you see a financial opportunity not because you're in a need for additional capital.

Well I mean I do think then.

Probably premature to know exactly what the.

Transaction would bring to us and exactly what it would look like.

Certainly there could be opportunities.

We could fund some of the investment needs in the Asia Pacific focused businesses with a separate pool of capital and that would of course have an impact on our.

The cash burn on our resources at the parent company level, but I think it's premature to speculate around that it is one potential benefit that could come from this.

And certainly a lever.

That could provide additional runway on our balance sheet.

Great. Thank you.

Your next question comes from Brian Awesome back with J P. Morgan.

Hey, good afternoon, thanks for taking the question.

So just wanted to get maybe a little bit better understanding of the partnership with with load Smith.

What's the plan to do with the 350 trucks you have there and then just maybe bigger picture in terms of your own Pms when you have your own capacity.

How are you going to connect and to others I think it would be hopefully we can just kind of outline where you are in that process and whether or not this partnership with fluid Smith as part of that or something separate.

I'll, let Pat answer that question, Alright, Hi, Brian So I would say from Lord Smith.

A company that's been pretty innovative for those that know it in the space.

With a lot of different partners here.

We are all seeing autonomous trucking as a new form of capacity that's coming into the marketplace.

In a way.

Not to replace the existing capacity that's out there, but really a complementary technology and I think the partnership with loads method.

Certainly one that is adhering to that general philosophy.

We do have as you noted an oversight system the.

Purpose of that oversight system is multiple it is to track, where our where our vehicles are.

And to provide support to those vehicles, while they are in operation, but also to communicate.

With the various shippers carriers and others that are using the autonomous freight network and.

And we know that Thats a complex process.

Being able to tie our oversight system into.

The system that someone like load Smith.

Certainly makes it easier for us to plug.

The capacity that load Smith is reserved into their operations as well and we expect to share more details about this.

Over the coming quarters as we get.

Further along in the partnership as well.

Okay. Thanks for that makes sense.

Just maybe touching on the supply chain.

And the maturity of it are there any areas you feel like you still need to invest in especially now that you've gone through more of the.

Redundancy testing with the driver out program you.

He can bring us up to speed on where you where you kind of are right now and what maybe some of.

The challenges that youre still facing above and beyond just the obvious one with OEM trucks.

Yes, sure I think.

The Devil's in the detail. So you have to crack the shell and just lay down on thousands of items in the bill of materials.

And then they buy one by one and contact the suppliers understand what is ready what is not ready and give you. An example in the past we've found the biggest.

GAAP here.

The domain controller, the computing units in the system and none of that domain controller and the system would actually be sufficient for our purpose.

We have the ability by ourselves, but that flat earlier this year, we announced our partnership with the media and we are building. This domain controller <unk> within both of course not manufactured back to Zimbabwe design devices simple and this is our attitude.

Terms of.

Breathing every single gap that we see and try to deliver as soon as possible.

Apart from that there are some other things like redundancy theory redundant braking and as we all know that lidar in the whole thing so.

All racing towards the over all basically everyone is having their full speed towards the earlier production timeline, but things could happen in this.

Okay I appreciate the time thank you.

Your next question comes from David Vernon with Bernstein.

Hey, good afternoon, everyone. So a question for you on Resourcing.

<unk> head count R&D head count.

Relatively flat is that going to change as we move through the year looking at expanding into the operations into Texas and things like that is there is it right to read into that that more resources are not what you need to kind of accelerate the path towards commercialization.

I think one thing is that you can have 10 women <unk> one months.

So the acceleration of talent is certainly going not going to be exponential exponentially growing in the future and thats what I see.

And also at the same time, we're very capital efficient so that we do not want to wait time anything but.

But we do want to tell you that.

It's going to be a growth a steady growth of our talents and expenditure in terms of the research and development because we always feel that accelerating the development. It's our number one goal.

And we'll take it what it takes.

Okay. So so so the plan will be done to grow those numbers as we go through the end of 'twenty three.

Yes.

David It's Pat so just a little bit on the figures, yes, we do expect to see modest head count growth. We obviously saw a pretty significant head count growth as you looked at where we were in 2020 and that.

We added in 2021.

Say is and you've seen this in the first quarter some significant deceleration in both the head count growth and that translates also into the financial metrics around our spending and investment.

I would say it wont be flat, but I think youll see some deceleration and we're going to be very smart from an ROI perspective on how we invest in our people our non compensation spending.

And essentially we will be balancing and really closely monitoring our head count growth or spending.

Obviously, we won't sacrifice our ability to hit the milestones, which we think are pretty aggressive for the next 18 to 24 months, we're going to make sure to invest at a level that will allow us to hit those milestones.

Alright. Thanks, Thanks for that and then maybe just as a quick follow up.

Are you guys planning to.

Do anything around stock based comp just given kind of where the stock is are you worried a little bit about retention or are you going to be thinking about maybe moving to Houston.

To true up some of the key employee stuff I'm, just trying to get a sense for whether there is some.

Some pressure on head count right now being created because of the performance of the stock.

Yes, I think the thought that incentive is pretty common in all companies like us with a similar principle also applied to US we wanted to keep that top talent.

And of course, with a relatively lower stock price.

Getting them a meaningful amount of stock is the best way to keep them.

Yes, I think.

We'll keep we're not making any changes to the stock based compensation charge.

That will be inclusive of regular programs, but we're also making sure that we're investing strategically around <unk>.

Particular retention needs in a competitive market dynamics, so no change to the specific stock based compensation guidance figures, but.

It's certainly something that we and our board of directors are focused on on retaining our top talent.

<unk> of the stock price environment. This has been always something that we've had to deal with whether it's <unk>.

Competing with much larger companies.

And certainly.

The stock based compensation and the cash compensation is one element of it but the mission of the company and the ability to work on groundbreaking technologies has always been.

A really attractive recruiting and retention tool for us and it continues to be.

In 2022.

Alright, Thank you guys.

Your next question comes from Alex Potter with Piper Sandler.

Great. Thanks, very much guys.

I was wondering I don't know the extent to which it's possible to quantify this because I know you have a lot of costs associated with chase vans and things like this that make it so that maybe these cost per mile figures that you are achieving right now.

Maybe arent perfectly apples to apples versus what they will be several years from now when you are in sort of pure autonomous mode, but if you correct for all of that.

Are there any numbers that you can give us in terms of cost per mile. In your real world runs that give you confidence that youre on the right sort of downward trajectory for that metric.

Yes, we will give you a very detailed analysis next week in Tucson for analyst day, and I think maybe in here I can give you a very top level overall feeling of it I think there is a misconception that a lot of people were feeling that autonomy by removing the driver you get all of the profit from the driver costs.

Onshore and the maintenance of the autonomy system is significant and a lot of people have overlooked that part of the cost but that part of the cost is really.

The inevitable way for a goal to reach commercialization and we're all in for that goal.

Okay.

Okay, Great, we'll look forward to getting some of those numbers next week.

I guess the.

The second question that I wanted to ask about was related to the Nvidia partnership that you were just mentioning just any I know it was about I don't know several months ago. When when you disclosed the relationship to begin with any update you can give there regarding milestones or how the relationship has been progressing.

And the pace of the development. So far is everything more or less tracking in line with what you would had originally envisioned.

Yes, I just wanted to remind you that we're still in the very early stage of a multiyear development and so far so good everything is on track and we're very very.

We're very happy that we had is.

We had this collaboration in our pocket because we.

We have actually devote a lot of things that has to be done by two simple and you can find anything has to be fulfilled but you can't then any substitute in the market so that the position of <unk>.

This path is.

It looks more and more to be the right position.

Okay.

Okay, great. Thanks, guys.

Your next question comes from choice to market.

<unk>.

Hey, guys. Good afternoon. Thanks for taking my question first I would like to ask about collaborative mapping and any additional detail you could share and how that's a differentiated offering relative to some of your competitors.

Yes of course, I think where we are.

We are entering from the safety phase the first phase is safety and engineering from the safety phase. So the efficiency pace, we realize that the autonomy technology should not be developed as a single vehicle, but should be developed under the grant formula of operating the entire fleet and this asset.

Collaborate and mapping is really like sharing one one vehicles perception system with the other one and better facilitating the capability of the local planning by adding additional information and we believe this is the very advanced technology.

Got it thank you and just to clarify an earlier.

Question is around the navistar relationship and supply chain.

It sounded like Youre, saying that the industry's timeline too.

Commercial deployment has shifted.

A little bit to the right based on.

Issues with.

Doesn't steering or breaking or some or a multitude of technical issues that really haven't been solved yet does that is that a fair assessment.

Yes.

And I think.

Let me start on ourselves Navistar is a great partner to ourselves and.

Both sides are having very deep collaboration on this really.

We are breathing many many gaps that were previously existed looking like anther Mountable gap, we actually bridge most of them but.

There are certain things in the world that we cannot control we cannot be with the lidar found ourselves in house or redundant theory by herself. So that's why a lot of it.

Things are.

Yes.

But the other thing is that.

I do not really see any technical breakthrough in 100.

Delayed waiting time, because all of these are pretty mature technology. They just need to go through different.

Engineering development Gabe.

To be able to launch towards the automotive grades will be integrated into the system and it's really about time not about anything that we're waiting for another physical level innovation.

Okay.

Thank you.

Your next question comes from Adam <unk> with Bank of America.

Hi, Adam calcium for context, there thanks for taking my question.

Following up on the war in her partnership is there a timeline here any major milestones you are targeting.

Have you been able to quantify any.

Dollar impacts to safety fuel efficiency.

That can be gained from successful implementation.

Yes, we actually have quite a bit of analysis quite a quite a in depth analysis into that we will see you next week in Tucson to give you a full disclosure of that.

Alright.

And then on the the reservation pipeline. So 500 added this quarter can you just talk about what the pipeline looks from here and does a partnership with.

A player like low Smith, maybe brought in your view on your go to market strategy and different players that you can.

Target essentially.

Yes.

Pat I would say that we've seen really robust appetite from folks throughout the freight ecosystem to understand how they can incorporate AAV trucking into their models.

Certainly we've seen.

Folks that you may not initially associate with.

Having assets like a semi truck in their operations as a principal focus.

When you make reservations and be part of it.

So I think the applications are quite broad.

And people are really thinking outside of the box about what the freight ecosystem will look like.

As this technology proliferates.

So I think it's probably one one indication.

The breadth of the types of discussions that we're having and the momentum that we have with the commercial base.

Ever been stronger so we're really gratified for our existing partners and excited to bring on new partners. The last piece I would just say is that we're being very disciplined.

And that with our reservation partners, it's a two way commitment to work together and we want to work with partners that are committed to not only making our financial commitment and then having the resources to deploy this technology, but making sure that our near term goals around testing and.

And freight operations are aligned such that we can fulfill our obligations to the partner too. So we're trying to be very very disappointed about reservation partners as opposed to.

Doing anything to just grow the reservation.

Can you describe the reservation number itself.

Got it thank you.

Yes.

Your next question comes from Colin Rusch with Oppenheimer.

Thanks, so much guys.

Into this next layer mapping data and integration of that data.

Talk about the cadence of the learning cycles and what's your you are pulling out of the system and kind of where there might be some blind spots or some.

<unk> strengths in the system. So far is there a question here about <unk>.

Christian and learning cycles, and then secondarily about where you need to to improver.

Really feel pretty good about this.

System so far.

Yeah.

Can you repeat the first question I think there is some noise that didn't hear theory.

Okay.

What I'm asking about is the pace of the incremental mapping data.

Integration into the system and the learning cycle.

Weighted to that integration.

And what Youre, what youre seeing in the system.

How fast does that get integrated and then secondarily.

Youre seeing some strengths and weaknesses in the system.

Yes. So there are several things this is pretty technical on one hand.

For example, one vehicle.

Police basically having a partial linked closure of the road then the method will be transmitted power of cloud based data center and <unk>.

A number of minutes all of the truck will be aware of that so this process like automatic process in human verification and then broadcasting so in the number of minutes for the aggregated map aggregated real time sharing map and the second is that the lesson that we've learned from this is that we have all different types of maps for example every tree.

Actually when they are driving on the road not only serves the purpose of.

Uh huh.

Using them, but they are also validating the math and Thats the earnings that's the first step.

But after that we realize that if you have them not being updated.

The truck has to go back to the base in order to update the whole thing that takes several hours and we were asked that earlier Gulfport mapping is to reduce latency at one of their most urgent work.

The most important matter and also maintaining high accuracy. So this is basically an effort of reducing our mapping responds from our two minutes.

That's it perfectly no I'll take the rest offline to seven months' time, thanks, so much.

Your next question comes from Todd Fowler with Keybanc capital markets.

Great Thanks, and good evening.

Theres been a couple of comments made about improving utilization on the fleet and I'm just kind of curious what are some of the levers you can pull to to improve utilization in your model right now and how quickly you can kind of see utilization ramp up over the next couple of quarters.

Yes, I think we continue to focus on it I would just say Todd that.

We have some different constraints than a traditional truckload carrier, we're hauling freight for strategic partners, we do that in autonomous mode.

Wherever possible in order for our customers to see the technology progress and to be part of the development.

So we are we are pulling some of the utilization up wherever we can.

The levers are trying to the typical playbook of trying to be as efficient with the assets as possible.

And certainly we've had some some headwinds with COVID-19 and some of the drivers being out.

The early part of the first quarter.

And weighed on some of the utilization, but we were able to I think we're pretty happy with what we were able to do from a utilization perspective, and see some path for modest utilization growth for the rest of the year.

Got it okay that helps and just as a follow up Pat I think you made the comment that there was no true theres no change to the guidance metrics I'm, assuming that that is the case with the Capex. However, capex was pretty light here in <unk>. So I just wanted to confirm no change to Capex and then if you could just remind us what youre going to be spending from a capex what are you going to be spending the cash.

Opex dollars on this year that would be great. Thanks.

Yes, no change to the Capex, obviously the spend in the first quarter was relatively light compared to our guidance, but we do expect to see capex ramp up over the coming quarters, particularly as we start to make some investments in Texas around the driver out operations. So some of the terminal locations.

We have.

We will be talking more about this we talked about the rider locations, but there'll be incremental locations that where we'll be investing some improvements on parcels of land to support the driver out Texas operations.

Thats, one that I think is fairly significant.

And then there'll be the usual type of corporate <unk>.

Capex as we expand.

And invest in things like office space and other facilities as well.

Got it thanks for the time.

Your next question comes from Scott <unk> Wolfe Research.

Thanks.

Hey, Thanks afternoon, guys I apologize if I missed this but can you just go through the rationale again on why miles mapped or flat and theyre going to stay flat from here.

Yes, because we have a finite number of trucks hauling freight and.

And at that rate, it's a recurring supported ethane.

And we do not have we do not in the plan to like a 10 for 100 X.

Our ASP in this.

Zero next year right and by that we.

I have two.

We have to be conscious of that.

The goal is not to approve how quickly can we map the future Ralph it's more about okay.

Massive route and we use utilize on Libra.

Great on the product.

Total amount of mileage on our mapping staying flat. It's a natural result, as we do not need to approve anything further but on the other hand, the technology side.

The lower latency and more functionality as part of the things that we need to focus so thats why you can see the mouth being.

But I think Myles, it's not the only metrics for the same.

Scott, It's Pat I'll, just add onto that in.

In 2020 in 2021 being able to show that we could expand our network and be able to run more autonomous miles across the sunbelt was certainly a strategic game for us.

We show that we can do that efficiently for 2022, and 2023, as we try and expand driver out into Texas.

It's much more about the density of the network and the penetration full driver out autonomy.

From that perspective, adding new routes throughout the southeast for autonomous operation doesn't really fit with what we're focused on over the next year or two what we're really focused on is being able to go from doing just the single route of driver out in Arizona to be able to add new routes and be able to expand the ODT.

In the ways that Saudi was talking about earlier, and so thats really where our focus is at.

At some point, we will start expanding the Afghan again and.

And starting to expand the reach of our driver out operations, but for the next year or two it's not really a major focus for us we're really focused on the density and the penetration of the driver out operations.

Okay, and so you don't think that this has an impact on the <unk>.

Middle part of the decade revenue ramp.

No.

If we need it we can always easily Matthew round without.

Without a problem.

And then just.

Secondly, the.

Head Count was also flat how should we think about head count in SG&A from here do they sort of level out or do we see further.

Increases in head count in SG&A, the rest of the year.

Definitely I think you will see a steady increase but not exponential growth of the technology team.

On one hand, we have to be very cautious and hiring new people and.

B capital efficient given the general.

Economic situation right now and but.

But on the other hand, we do we are not slowing down in hiring.

Where would you like to see that head count get to by the end of the year.

So we're not providing any specific guidance around that but I think you will see some modest growth throughout the year, Scott so it won't be essentially.

Essentially a doubling which is what you saw.

In 2021 relative to 2020, it'll be a much slower pace of growth, but I think you will see some modest expansion of that.

Being flat is youll notice, we had a restructuring charge during the quarter to some of this is by design as we.

As you would expect.

Young.

Company, that's working on a technology like ours, we have done some some workforce restructuring to better optimize the way that we go about developing the technology. So that also is.

Partially the impact of where you saw the flat head count quarter over quarter this quarter.

Okay. Thank you guys appreciate the time.

Thanks, guys.

This concludes the Q&A session I will now turn it over to the speakers for closing remarks.

Thank you everyone for joining our call and we look forward to continuing our dialogue at this point, we will have during the call.

Thank you everyone Goodbye.

This concludes today's conference call you may now disconnect.

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