Q1 2022 Embark Technology Inc Earnings Call
Good afternoon, and welcome to the Embarq Technology first quarter 2020 earnings conference call.
Today's call is being recorded in all lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
I'll now turn the call over to belong.
Do your relation.
Thank you operator, and thank you everyone for joining US today joining me on today's call are co founder CEO , Alex why where you could then CFO Richard However, before I discuss our disclosure statements I want to introduce myself as I. Just recently joined <unk> as head of Investor Relations. That's a quick background I have more than 35 years of experience in Investor Relations corporate finance and engineering at the Avi solutions applied materials.
And Intel I've also worked a number of major investment banking and brokerage firms as a sell side buy side analyst I look forward to engaging with all of you in the coming weeks and months and bulk issue. Its first quarter 2022 press release and presentation, which we referred to today. These can be found on the Investor Relations section of our website at investors thought in bulk trucks Dot com. Please note. This call will include.
Forward looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. These statements reflect views only as of today and should not be relied upon as representative of our views as of any subsequent date, we undertake no obligation to revise our publicly released the results of any revision to these forward looking statements in light of new information or future events. These statements are subject to.
The risks and uncertainties that can cause actual results to differ materially from expectations. Please refer to our filings with the SEC, including our annual report on Form 10-K filed on March 21, 2022, particularly the risk factors described in those falling that could affect our financial results. We will discuss non-GAAP financial measures, which we believe are useful as.
Supplemental measures of Inbox performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. These additional disclosures regarding the non-GAAP financial measures in today's press release, and our filings with the SEC are posted on company's website. Finally, we all call on today's call and will make the quantity available. This evening and also on our website.
And I'd like to turn the call over to Alex.
Thank you very much bill and welcome them back we're excited to have you on the team.
Afternoon, everyone I'm going to begin on slide three last quarter was our first earnings call as a public company and as such we provided detailed background on embark our differentiated technology and our asset light business model today.
Today I want to highlight some helpful resources for anyone that is new to the story or that wants to take a deeper dive on in box.
I want to specifically highlight the technology section of our website. There you can find an interactive graphic for BG map fusion. This allows you to visualize what the truck sees when encountering a situation where it lay lines have been paved over the road no longer reflects what an HD map might otherwise expect in the Investor Relations section of our website you can find all of our filings presentations and events.
As long as our inaugural ESG report was released last month.
I haven't already I encourage you to watch our first earnings call webcast on our site.
I gave a primary moneybox history and differentiation for public investors.
Finally, I want to mention our medium block, where you can hear directly from embarks executive leaders with in depth perspective on the industry IP software development government relations anymore. If you want to deeply understand all the angles on the self driving check industry. This is the best place to go.
All of the resources mentioned are Hyperlinked any investor presentation for easy access.
Turning to our business update on slide four I'd like to discuss key business updates since our last call I'm excited about the progress that we've made in such a short time.
We received the first trucks for our Tech transfer program. These were purchased by Knight Swift as you recall and box truck Transit program or T. T. P is an industry first program that we highlighted in detail. During our Q4 earnings we believe that T. D. P will unlock the next level of integration and deployment learning ahead of scaled commercialization and it represents the natural next.
Step, but having carriers own operate and maintain and embark equipped autonomous truck on commercial and operations. We recently commenced a 24 hour a day testing on the I 10 in Texas now.
Not only has this allowed us to more than double the testing capacity of our trucks, but it also allows us to refine our technology for night time, driving and ultimately prepare for a world where trucks drive around the clock by increasing the number of miles from each tractor and by maximizing the an engineering benefit of each mile under a variety of scenarios, we're able to rapidly advance.
Our technology in a highly capital efficient manner.
As you May have seen last week, we announced the U S. Express has joined the embark partner development program we.
We believe in box partnership with U S Express is highly differentiated in that it goes beyond typical pilots to focus on preparing U S expresses terminals to receive and launch embark equipped autonomous trucks.
Significant milestone that marks the first time, a carrier's terminals will be added to the embarq coverage map.
This will unlock additional efficiencies where U S Express and the naval embark to remain asset light.
Embark is in pioneering work on the transplant model since 2019, setting the groundwork for us to bring this expertise to partners like U S. Xpress Lastly, I want to highlight some recent progress on the partner development programs are critical program that enables embark in our carrier partners to prepare to scale embarks technology.
As we've shared in the past we believe the rate of adoption can be positively impacted do deep early collaboration between embark and carriers to identify and resolve the friction points that would otherwise hampered deployment and scaling.
One example that I want to highlight that this effect is the recent upgrades, we made to our customer analytics environment, where we ran various strategic and operational analysis on lean level datasets that are provided by our PDP partners. These recent upgrades have unlocked a few new benefits framework and our partners most notably one increased efficiency with automated aren't.
Ounces and reduced time to run from days to hours, which will enable us to bring on and serve more partners in the future.
Number two dynamic planning this streamline interface enables us to run more what if scenarios in partnership with carrier leadership teams, we can iterate and converge on strategic and operational decisions more quickly by being able to look at alternative use of the data in real time and number three we're now able to answer a broader set of questions by bringing together a more.
Cohesive modeling framework interconnecting more factors such as lane density rollout sequence unit economics terminal availability sustainable implications and delivery time gains to name just a few this allows us and our carrier partners to be better informed for key decision now turning to updates on leadership we.
We continue to selectively grow our exceptional and highly experienced leadership team and are tracking to the overall head count targets across the organization. We're proud to have been able to attract experienced top caliber candidates in an overall challenging labor market to fill positions that are critical to advancing the technology and operations of our business. We think this really speaks.
Volumes about our culture, our mission and the belief in what we're doing at embark a few key hires that I'd like to highlight today.
We recently announced the appointment of Sara quick as our head of operations safety, Sarah will coordinate efforts to identify and mitigate risk in our on road operations. Most recently served in a leadership role at Virgin Hydro loop and she brings over a decade of experience spanning safety and transportation and rail and on road operations. Emily Warren recently joined isn't box head of public policy.
To continue our collaboration with policymakers in preparation for commercial deployment.
Emily brings over a decade of mobility and logistics policy experience to embark having previously served in senior policy roles at Lyft line and Amazon.
Finally, as I mentioned at the outset of this call. We're excited to welcome Bill on to lead our Investor Relations effort I know I mentioned. The addition of J D Besot and sandblast last quarter, but I wanted to highlight them again as they've written some very interesting and in depth blog posts on their respective functions and I wanted to encourage you to read them.
I'll need about coverage map, we specifically said that in 2022, we would launch the backbone of the Embarq coverage map across the Sun belt I'm excited to update on the progress you've made on this initiative with Ryder and Altera and a couple of slides on the technology roadmap. We said we would accomplish two of the remaining five capabilities in 2022, those two capabilities being emergency vehicles.
Our actions in Q2 and invasive maneuvers later this year. These milestones continue to be on track and we look forward to providing more detailed updates over the course of the year also as promised on our Q4 earnings call I will be reviewing the results of our snow testing, which we believe are transformational for the Avi truck industry as we prepare to operationalize and commercialize our technology.
Not just in the initial send out region, but across a broader set of lane in the years to come lastly, turning now to community and our commitment to ESG I want to provide an update on our little robots program.
As you know I promised to donate my entire 2022 salary and bonus until launch a grant program and fund a number of projects in stem education.
I believe this provides a clear alignment with all embark shareholders and living our values.
Find it personally rewarding as well I was fortunate enough to go back to the first World Championships in Houston last month, which I had participated in in one way back in 2000 and night. It was very energizing to see the excitement around robotics and I'm thrilled that embark can be a part of advancing the next generation of engineers to date, we've already provided grants of more than $50000 to three organizations.
Including the Afghan Girls Robotics team first your body's Canada and the team I founded way back in the day teammate TAA turning to slide five as we discussed on our last call and as I. Previously mentioned is important to us to provide clear milestones. So that our progress to commercialization can be measured and tracked to that end I want to take a moment to reiterate what we plan to deliver in <unk>.
22, consistent with what we outlined in our Q4 earnings.
First to deliver the first trucks into the fleet of carrier customers through our truck transfer program.
Second to accomplish two of the remaining five capabilities and our technology roadmap, bringing the total capabilities accomplished to 13 of 16 by the end of 2022.
And third to launch the backbone of the Embarq coverage map across the Sunbelt region as I highlighted on the previous slide we are already making substantive progress on those key milestones and I look forward to diving in a bit deeper on the coverage amount in a few slides.
Turning now to slide six I want to provide an update on our snow testing. We conducted this winter in Montana, and where we released the results just yesterday results from the testing demonstrated that in roughly 90% of the run through salary conditions under study.
Forex proprietary patent pending busy map using technology should be able to operate successfully or pause and resume travel with an acceptable shipper delivery windows. Let me go into more detail on the entire process. Why we are excited about those results beginning in February we began testing in Montana with Embarq powered trucks travelling in a 60 mile round trip route on public.
It Didnt Clinton in Missoula, Montana, and a variety of winter weather conditions and it isn't the on road testing embark developed a comprehensive whether model using over 8 billion historical weather data points dating back over 10 years on all major U S routes to analyze the impact of snow at a lane level across the U S.
The testing and weather analysis show significant technical and commercial promise.
Review of embarks testing and performance indicated that our vision that fusion technology worked within tolerance thresholds for safe operation and snowfall rates up to one six inch per hour with snow accumulation of one inch on the road over three hours conditions that cover the vast majority of snowy weather based on embarks analysis and box division might be using.
G has enabled this progress by moving beyond Lidar centric mapping and localization approaches instead by relying heavily on the camera based sensing modality and snowy conditions vision that fusion is capable of filling in the gaps and mitigating the uncertainty created by accumulating snow on the roadway.
I'm not being critical shipping lanes, and increasing uptime beyond the sunbelt, where inclement weather can often hamper operations embark a successful snow testing creates a path to unlock northern land on which roughly one of five runs experienced some snowy conditions the.
The inclusion of the Snowy northern lands will more than triple our serviceable market when we expand beyond our phase one coverage map, which is focused on the sunbelt region now to be clear.
These are not one of the 16 capabilities on our technology Road map that we're shooting for to commercialize in 2024. However, there are only so many winters between now and 2026 and we plan to expand in the northern part of the United States and so it was important for us to make each one count.
Turning to slide seven we just released our inaugural ESG report last month on Earth Day. We view. This report is the first step in embarks ESG efforts as we strive to improve the Avi trucking industry for all stakeholders. The community truck drivers shippers carriers regulators employees and investors you can access the full report.
On our Investor Relations site, but I want to summarize a few key highlights on.
On the environmental front, we're working with fleet partners to help them comply with environmental standards such as those in the Epa's clean truck plant. One example is the electric vehicle Drayage pilot, we completed with HP, Inc. Andy utilizing both autonomous and electric vehicle technology to reduce HPA diesel emissions network wide and create a more sustainable supply.
Chain from end to end for shippers.
One of them our primary social mission is to help enhance safety on public roads.
<unk> embarked powered trucks have driven more than 1 million real world miles without a department of transportation reportable safety incident.
Box collaboration with the Arizona Department of Transportation to improve highway works on safety aims to reduce the 102000 works out related crashes, which caused 857 deaths in the U S. In 2020 tried to play a large part being involved in 26% of those fatal crashes. The company also reemphasize and prioritize its commitment to diversity and inclusion by established.
A companywide, okay or to measure our progress.
I'm proud of our efforts on the ESG front to date and I'm excited for what is to come as we continue to prioritize ESG initiatives to better serve all of our constituents.
From the employees and investors to carriers and truck drivers and the communities. They serve next we'll move on to slide eight where I'll provide a commercial update regarding ironbark coverage map as we discussed in our last call. The Embarq coverage map is a nationwide network of points between which carriers can dispatch embark equipped trucks launching the backbone of the embarq coverage map in the Sun belt.
<unk> is a key focus for 2022 and we're excited about what we've accomplished so far over the past few months embark has begun to further develop some of the key partnerships necessary to activate a nationwide network of sites between which embark equipped trucks can operate as we've shared before we see our network consisting of two distinct site types first we're in the process of established.
And network of anchor terminals that our alterra owned and brighter operated to enable carrier partners to conduct transfers at the edge of major freight market.
Second in time, we will look to supplement these anchor terminals with existing high volume carrier and cheaper facilities between which partners will be able to run freight directly unlocking a new level of efficiency. The bark coverage map is the aggregation of these two facility types into a nationwide network of transfer points between which embark equipped trucks and operate regarding our anchor terminals.
We have some exciting updates to make.
Our partnership with Altera has already begun to bear fruit.
The Alterra team has initiated searches and multiple sunbelt markets and leveraging our site assessment Rubik's to quickly assess and act on properties is approach is already yielding results with alterra initiating its first property acquisition process or work with Ryder has also led to some meaningful achievements recently.
This week, we launched our first rider operated site in Houston. This is the culmination of months of hard work by both teams to develop a portfolio of standard operating procedures ranging from gain access to pre inspection to bill of Lading handoff, we look forward to gathering learnings from this initial deployment and continuing to expand the service to other sites across the send out on the carrier and cheaper facilities friends were.
We're excited about what we're working on with our recently announced new PDP partner U S Express U S Express nationwide terminal network presents an opportunity for a carrier to leverage its existing real estate footprint.
Efficient autonomous trucking operations through this partnership embark in U S Express well identified priority terminal based on traffic patterns customer needs and technical requirements. The companies will then start by repaying two terminals in the Sunbelt states, creating a clear path to opening a high volume lean for autonomous hauling as he was express looks to grow its autonomous program the ability to.
Embark trucks directly from terminal to terminal provides an added level of efficiency for U S Express well, having the added benefit of enabling embark to remain asset light and with that I will turn it over to Richard to discuss the financial details.
Thanks, Alex.
Let me turn to slide nine let me highlight some of the key financial metrics that support our business progress our cash and cash equivalents were approximately $245 million as of March 31 2022.
Our free cash flow spend for the quarter was $19 $9 million theres a bit of noise when comparing our free cash flow spend to our Q4 2021 free cash flow spend which I'll talk through on the next slide because I wasn't sure you have a clear quarter over quarter comparison of our cash spend.
For your benefit the key takeaway is we feel very good about the discipline and free cash flow spend while still achieving measured head count growth as well as the liquidity to execute our 2022 plan and more generally given all the business initiatives, we delivered on in the quarter the prospects of what we expect for the remainder of the year the best way to some of the quarter is very solid.
As such we have not revise any guidance previously provided related to free cash flow spend and we are on track for our initial guidance for full year free cash flow spend of 125 $240 million, we believe that given the market conditions and the process improvements we've identified in the quarter were likely to come in towards the lower end of the range I also want to reiterate that we believe are.
To develop a leading technology, while being extremely capital efficient is a direct result of our focus which helps ensure we continue to be prudent stewards of capital as we advance towards commercialization. We will also continue to reinforce the differentiation of our business model relative to other mobility businesses isn't that as an Eva company, we don't need to build a manufacturing facility or <unk>.
Hard asset to have one sale, we're able to have the flexibility to define and refine key initiatives key partners and the resources required to execute upon them given head count represents a majority of our free cash flow spend let me spend a minute discussing headcount and hiring we ended the quarter with 312 employees up 76 employees from Q4 2021 or 30.
2% quarter over quarter growth.
All of these employees 246 were in our R&D organization, representing quarter over quarter growth of nearly 43%.
To give you a bit more perspective, the relative percentage of R&D employees to total employees at the end of Q4 'twenty 'twenty. One was 73%. However at the end of Q1. It grew to 79%. Despite current market conditions I don't want to downplay the challenging hiring environment, particularly for software engineers, but we are succeeding in attracting not only high quality.
Alrighty executive level talent as Alex highlighted earlier, but talent across the organization, we used to be very disciplined growth by targeting very specific needs within the organization. So what contributed to our success in the quarter one while our core hiring market remains the bay area with hybrid work, we've unlocked the rest of the U S talent pool, which has allowed us to scale without <unk>.
Pharmacy on quality as well as state on compensation expense.
Two our conversion rate and hiring presenters have remained near constant throughout our growth, which means we had been highly consistent in our hiring practices.
Three and lastly, it's.
It's important to note that we arent growing simply to meet specific hiring targets. The embark we're not willing to lower the bar of candidates that's quality of hires always edges out quantity culture is a critically important part to embark and culture is key to continuing to advance our technology in a capital efficient manner, but having the right quality of people within our organization.
To summarize on hiring ultimately the proof is in the pudding.
What we have done with a more focused approach relative to our competitors. This speaks to the quality of people across the organization to embark as well as the culture and capital efficiency discipline. We feel we are winning on all these fronts, which continues to give us conviction on achieving the milestones. We've asked you to measure our progress on let me walk you through some of the results and reconciliations firm.
Quarter net loss was $18 4 million first quarter adjusted EBITDA loss was $23 1 million compared to adjusted EBITDA loss of 7.7 million in the prior period and $20 3 million for Q4, 2021 we'd.
We have provided non-GAAP reconciliation in the appendix for your reference you will notice there was a $22 million gain related to the change in the fair market value of our warrants outstanding. This is a noncash gain purely related to the way GAAP requires us to account for the warrants on our balance sheet is also directly related to the change in share price at March 31 2022.
Relative to December 31, 2021.
Another material noncash expenses stock based compensation.
We provide some additional detail on stock based compensation as I know this noncash expense is an important input to many of your models.
For Q1, 2022 we recognized stock based compensation expense of $16.6 million when removing the impact of section 16 officers approximately 60% of this expense is attributable to our R&D organization.
As I mentioned on our last call given the closing of the business combination in November last year as well as the implementation of new compensation policies now as a public company, there's a bit of noise in the stock based compensation figures.
I provided a reconciliation in the appendix for reference so you have a good apples to apples comparison on a quarter over quarter change what you'll see is on an adjusted basis Q1, 2022 stock based compensation was $17 8 million and for Q4 2021 adjusted stock based compensation was $16 5 million.
I would note that in both Q1 and Q4 much of the noise as it relates to the way GAAP actually allows us to recognize the expense as well as to some onetime items related to the business combination.
As a reminder, approximately 2.6 million of the quarterly stock based compensation expense is related to our founders PSU grants that does not begin to vest until our share price is at least $20 aligning our founders interest with long term investors. Moreover, we do view stock based compensation as a core part of our compensation for.
Wall Street to not only align our founders but to align all employees and as such we believe stock based compensation tends to be a larger component of our compensation philosophy relative to other technology companies turning to slide 10, Let me provide you some key takeaways first quarter over quarter, our free cash flow spend went up.
Proximately, 14% when you adjust for fluctuations in networking capital primarily arrays of Prepays as I mentioned on our Q4 call. There were also some additional considerations around some one time adjustments related to the closing of the business combination in Q4, including one time cash bonus payments.
Second we believe this growth in free cash flow spend was highly efficient given the growth in head count growing 32% with 45% growth within our R&D organization third while there are some timing considerations to explain the head count growth relative to spend we were very efficient in the quarter, which is reflective of our general view of compensation philosophy, which I'll.
Talk through as I mentioned, a majority of our free cash flow spend is related head count and should we need to flex our plant, we can and we will.
We are constantly evaluating the resources required to execute our initiatives I mentioned earlier, the uniqueness of embarked culture and quality of our hires. This speaks to how we can have a trends like the one you see on this page.
Talk based compensations are key part of our compensation philosophy, not because it simply results in a more efficient free cash flow spend but because we believe it speaks to the upside potential new hires C. N N bark as well as your desire to be part of something unique.
I also think it's well understood at embark that this is not simply an academic project, but this is truly a mission to develop operationalize and commercialize our technology and create a business for the long term.
And finally before I move to the next slide.
To reiterate one last point I made on our last call.
A pre revenue company, we are very cognizant that every dollar we spend must have a clear and obvious use of advancing us towards commercialization at the end of the day, we are a people and engineering organization I've.
I've walked through our accomplishments on hiring and detailed our free cash flow spend.
And how we view the business model.
Our disciplined free cash flow spent as a result of our focus discipline culture and asset light business model approach.
Ultimately when you evaluate our technology and what we've accomplished with our resources today. It speaks for itself, we feel very well positioned today and as I mentioned, we will continue to make prudent decisions taking into account business needs and market conditions as we've always done moving to slide 11, Please mark your calendars and save the date for the second annual <unk>.
Day to be held on September 20, <unk> 2022 with.
With an event the evening before.
We're very excited to host analysts and institutional investors once again in San Francisco.
However, this time the event will be at our new 50000 square foot headquarters only a few blocks from our current headquarters.
I think you will find the space to be very impressive and reflective of and barks culture being at the cross section of leading engineering talent and a highly experienced operational team.
I would note that finding tech space, while having multiple truck based in downtown San Francisco can prove to be quite challenging. So we're excited to show it off in September .
And more importantly, we're excited to provide you the opportunity to interact with our management team get updates on the truck transfer program. Our partner development program experienced in new truck demo and much more.
You also might have a bit of fun, if we could squeeze that in as well.
Please reach out to our Investor relations team, if you're interested in attending with that I'll turn it back to Alex for closing remarks. Thank.
Thank you Richard I'd like to conclude on slide 12.
Our partners and customers our employees for all their hard work and our investors for their continued long term support.
Here I have the same slide that we showed at the end of the Q4 presentation.
Wanted to bring it up again to re highlight why we believe embark continues to be a highly attractive investment opportunity with us thesis that continues to strengthen overtime.
The macro environment that we've read about and hear about daily driver shortages inflation supply chain challenges our technology addresses these challenges and it makes it embarks value proposition clear and pregnant second there are a limited number of players actually focusing on addressing these challenges may be trucking is a huge market and we are the fourth.
Given our longevity in tackling this problem not just technically but also operationally.
And I think this is very obvious given some of the updates I just walked in and lastly, we have an attractive asset light software as a service business model. This allows us to go to market and scale in a highly efficient manner.
We're just saying this we're already proving it in the way that we are partnering on building our coverage map on the work we're doing through the tech transfer program and utilizing trucks that are purchased owned and operated directly by carriers.
The excitement amongst our employees partners and investors, who could not be greater with that operator, let's begin the question and answers.
Thank you.
We will now begin the question and answer session.
To ask a question you May press star one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble that Oscar.
Our first question comes from Chris Wetherbee with Citigroup. Please go ahead.
Hey, great. Thanks, Good afternoon guys.
Wanted to maybe start just in terms of you know.
Your thoughts around the timing of lots of your different initiatives, but maybe specifically focusing in on truck transfer.
With Knight Swift, but just wanted to kind of get a sense.
Just sort of the end of this year continue to be something that you feel is realistic and as you're sort of progressing towards that particularly as we get into the back half of the year what are the milestones or challenges you might be facing around the dynamics of.
We're a supply chain dynamics OEM parts availability to try to get a sense for how available with it.
Is it that we'll be able to ramp up towards that goal.
Yeah. Thanks, Chris.
We feel very good about our ability to hit that timeline things or I mean, where what.
Less than less than eight months away now so we have pretty clear line of sight to all the parts they need to arrive in and the work that needs to be done.
And we continue to feel good about that and of your timeline I think.
This actually is it something that really reinforces for us the value of embark a universal interface, where we're.
We're able to have the strike cancer program, taking place on our platform selected by Knight Swift and so instead of a super relying on our own supply chain, we're able to integrate the system on top of existing orders from some of the top carriers and I think that's really helped us be able to keep that that time right on track.
Yeah.
Okay. That's helpful. I appreciate that and then you know maybe you wanted to talk a little bit about the winter conditions testing that you guys have done it's kind of an interesting dynamic.
Sort of pursue down that path now I know I think the initial focus isn't necessarily going to be in places, where there is a significant amount of winter condition.
If you think about that sort of opportunity where does that fit in both from a timeline perspective, and then sort of a addressable market perspective into the longer term plan.
Yeah, Yeah, so I want to make sure to be clear that the initial target for 'twenty 'twenty four is the Sun belt and so.
When we're doing the snow testing, it's really starting to lay the groundwork to make sure that we're ready to continue to scale beyond that as well.
As far as the high level numbers. Our goal is to launch the rest of the country in 2026, and we expect that to more than triple the total serviceable market as a result, so pretty big impact and I think what we learned from the winter testing that.
We did this year was it really highlighted again, how powerful vision might be using it.
We've talked in the past about how this enables us to have the most robust set of capabilities when it comes to handling construction.
And it's the same piece of core Tech that has allowed us to have this really high performance going into snow and so I think one of the things I wanted to highlight was just these aren't actually discrete accomplishments and sometimes these are things that all come out of having a unique architecture that doesn't rely on prebuilt masking instead understands the road in real time and that's powerful.
A variety of different fundamental situations.
Okay. That's helpful. And then one real last real quick one for or Richard just on the free cash flow span. The range of 125 to 140. This year, how do we think that sort of plays out over the course of the next three quarters like you I'm a little bit of a lower run rate I'm guessing it's going to ramp up is it linear throughout the rest of the year, how do we think about that.
Yes. Good question, Chris So, we obviously expect that to increase over the course of the year you can kind of just do the math and see right.
If you were to annualize the quarter I think.
Couple of things that you'll notice is one obviously as employees start over the course of the quarter in Q1.
You know I gave you the sort of head count at the end of the quarter, but that will obviously increase our expense and then we continue to expect to have a measured pace of growth relative to the initiatives that we have so you'll.
You'll see that grow over the course of the year.
Okay, alright, thanks, very much for the time I appreciate it.
Our next question comes from George Henriques with Baird. Please go ahead.
Hey, guys good afternoon, and thanks for taking my questions.
First if it's okay I'd like to ask about one of your competitors talked about on their recent conference call and in pointing.
Pointing to a delay in the rollout of 2025 and they talked about a variety of factors.
As you're likely aware of can you address those and how you feel relative to their rollout in the boat the technology issues that they discussed on their call. Thank you.
Yeah good.
Do you have any dirt.
I think the.
I guess the the headline here is we still feel we still feel good about the 2024 timeline. So we're we're not changing anything on that front.
The reason that we're able to do that.
Is because we've been able to diversify some of the rescue using our embarks a universal interface strategy and so.
What I would say is that a single OEM platform, having some kind of supply chain related delay is not that surprising from my perspective.
That we intentionally did.
Designed our architecture and our system to be able to to be.
Resilient too and we did that by having them back to Universal interface B, a multi platform approach, which allows us to diversify our risk of crop.
The different platforms as they come to market and I think this is exactly the sort of development that showcases the value and benefit of that multi platform approach.
Thank you.
So when you think about the risks to roll out to 'twenty 'twenty four between now and then.
Would you where would you rank technology risks versus supplier risks, maybe they're the same thing versus regulatory risk versus just a hiring recently what do you think is the highest one of a risk to your deployment in 2024.
Yes, I think the focus for us is really on.
Making sure that we're able to deliver.
Right.
The scale.
The scale up in 'twenty 'twenty four so so when I look at sort of the the milestones we've laid out we feel very good about our ability to deliver against those and I think focus today, which you can see with the work we're doing in PDP. The work we're doing with the coverage map are the work that we're doing with snow is really making sure that it's not just that that first initial deployment, but we're able to rapidly.
Grow into.
Our customers to meet the needs that they have laid out for us.
Thank you. Thanks for your questions for your interest in <unk>.
Job managing the cash I appreciate it.
Our next question comes from Jeff Kauffman with vertical research partners. Please go ahead.
Thank you very much yeah, hi, Alex so rich.
I just wanted to thank you guys for all the detail.
But she put into the prepared remarks, I think very very helpful. One of the questions I have.
And I just want to maybe take this as an opportunity rich to.
Lay out the flexibility you have in place, let's say the world goes away, but it's not supposed to and I think the reason people are out selling stocks right. Now is they say, okay well. If these companies don't generate revenue when they need to raise capital at some point down the road and the market should close they can go to zero. So therefore, let's just.
So obviously I think we feel that it's not appropriate for a bark but.
Could you talk about you have $240 million of cash.
You're going to burn between 125 and $140 million of it this year.
Is that enough to get you to promotional deployment if for some reason it gets pushed back a quarter or two like plenty of levers are out there that don't involve going to the market to raise money to get you to where you need to be and I think part of the reason for the share reaction today, which we could say is a bit of a knee jerk.
As to the question that was just raised somebody else pushed back by a year and you know what would happen if embark we're forced to do that and I think this market kind of shoot first ask questions later, but rich did you kind of lay out the cash burn as we get to commercialization in 'twenty three does it go up those would go.
Down what levers are there to be pulled so that we can really assure investors that by and large you should have enough capital to make it to where you need to without having to go to market.
Richard you might be on mute.
Yeah, I can I can start thanks, Jonathan Alex feel free to jump in.
I think we put together a very specific business plans for 2022.
And as we mentioned, we've got $245 million of cash at the end of the quarter and we believe that we've got sufficient ample runway to execute on the milestones we discussed today.
One of the areas of focus as you know being in a the company was an asset like business model. We've always had flexibility in our plan to define and refine these initiatives the partners the resources required to execute upon them.
We're obviously constantly monitoring the market conditions, we're obviously constantly.
Evaluating the initiatives and the opportunities we have in front of us and we'll continue to sort of do so given that flexibility we feel very comfortable in.
Being able to flex the plan up.
Down depending on what those initiatives may be on a go forward basis.
So so the point if investors would have asked me is the key.
Company believes they have the capital necessary to get the commercialization there is flexibility.
Gail up and down I, just think right now people are a little nervous in the market. So.
I think its shoot first ask questions later.
Yeah, Yeah that's.
Yeah go ahead Alex.
If I was going to add anything there I would say.
If you look at a lot of the work that we do today as as you mentioned to one of the previous questions. There's really a focus on making sure we're able to scale rapidly.
Something like snow.
Which is really focused into 'twenty 'twenty six timeline, our efforts like the truck cancer program, which are focused on preparing the largest city in the country to be able to to run these at scale very quickly.
And so you can see that as being an area, where we started to choose where.
Where to invest how many partners do you want to bring in what sort of initiatives do you want to be using to pull pull forward scale and give us that flexibility to be able to to run the business as needed.
One gradually achieved.
Achievements Yep Yep.
I just wanted one. Good example, I just I'd highlight is as we mentioned during the prepared remarks, we've always been focused on quality versus quantity as we think about head count growth, which is where a majority of our free cash flow spend goes and one sort of anecdote is we already have all the people we need today to deliver on TTP.
These individuals are embarked today and as we think about expanding and what's the right people to drive growth in the coming years. Those are the tradeoffs that will continue to evaluate Alex highlighted.
Alright, well congratulations on the milestones this quarter and thank you.
Thanks, Joe.
Our next question comes from Todd Fowler with Keybanc capital markets. Please go ahead.
Hey, guys. This is back on for Tom Thanks for taking my question.
Just with the U S Express partnership I guess, where does the ramp timeline look like for building that operational playbook and are there any costs or changes that need to be made those existing terminals.
Or is it just more about implementing the processes in general thanks.
Yeah.
Yeah. So this is gonna be a fairly significant initiative for from both sides.
And.
Really starting with understanding the entirety of the U S. Xpress network and then determining.
The initial sites and in the longer term rollout plan and so I think it's something that we're we're.
We're pretty excited about.
And while it is certainly going to be a significant lift I think it's definitely I'd be worth it for them from both sides.
Okay got it and then on the winter tests are there any sort of key takeaways that you guys experienced on that and if so is there anything you're hoping to achieve over the summer that could provide additional performance improvement as you guys probably talks test next winter.
Yeah, I think the the big learnings for us there.
Gave you that the top level number there right you've got sort of one in five of those rounds ended up being ends up being celean Matthew is going to be able to to make that delivery in a timely fashion and I understand the time. So we're pretty excited about that the focus for us over the Oh over there.
Summer is gonna be.
<unk> to expand the capability set a vision might be Asian, especially to be able to handle situations, where you might have more occlusion of the road.
And so that would be able to then continue to expand.
We're able to do into some of the even more challenging winter conditions that they represent sort of that 10%.
Got it okay.
Our next question comes from David Vernon with Bernstein. Please go ahead.
Hey, good afternoon, guys. A couple of questions for you first if we can kind of tell us what's embedded in the plan for for kind of where we are today in terms of the number of trucks running the technology, where we ended up 2022 where we end up 2023, I was just getting trying to get a sense for how many trucks are being operated with with the driver is still behind the wheel but.
Actually running the the Enberg software right now and how that grows over the next two years.
Yeah, Hey, Dave.
So we haven't provided guidance on what our truck growth is going to be I'd make two points. One we feel as if our trucks and the way that we operate them, particularly having 24 hour.
Testing in Houston is a big part of efficiency.
And then I would say the second point is we were actually running trucks as you know through the truck transfer program that are not embark equipped trucks, which is obviously unique relative to a the industry, which allows us to expand the ability of the test.
Get learnings.
Without actually having to buy own and operate and maintain our own fleet that said, we do expect I would say measured growth in our truck fleet as we continue to evaluate and.
Go through the engineering and testing process.
Well I guess I was trying to get a sense for regardless of the ownership with a truck like where like how many instances in the technology of rolling around on the highways.
That's not something that you guys are are are wanted to share.
We have 18 trucks in our fleet today.
And in the partner trucks that are running.
We havent disclosed that number.
Okay, and then kind of coming back to this idea of cash flow. If you look at the guidance you have right now you will be down to you know call. It three quarters four quarters of cash by the end of the year why isn't the right answer to this question about about capital to be out you know thinking about a capital raise at some point because it does seem like you're you're going to be in the if.
We're not in the Reds them now next year, if revenue is going to be in 'twenty 'twenty. Four you you could get there. So you know why isn't the right answer to be looking at Opportunistically I'm trying to do a capital raise.
At some point in the next 18 months.
Yeah. So we've obviously been highly capital efficient to date, so we feel pretty good about our ability to.
We continue to maintain such efficiency.
And as you know I mean, even students for a long time, but maybe reframe. It a bit there are a lot of considerations or a regulatory market conditions and other factors that can affect specific timing and so while we appreciate the question I understand the basis for it where obviously our.
Focus on executing in more of a capital efficient manner and maybe just the last point I'd make is you know my background is in the capital markets and so just generally we know what the tools are in our tool kit and when you think about them and how to think about that.
We're always evaluating what those alternatives may be.
But right now we're focused on execution and we're focused on being prudent stewards of capital.
Okay, and then and just last question for me in terms of the guidance you know right now I think Q1 and I cant tell the split on the stock based comp, but the G&A is actually a little bit a head of R&D expense in the quarter is that ratio going to stay the same or should we be expecting the G&A number to kind of stay flat from here and the growth to be coming on the R&D side.
Yeah, and I think it's probably more representative than the head count growth, but you should expect that to be more R&D.
Weighted and as I mentioned about 60% when you exclude section 16 officers given the timing of hiring.
It was related to R&D.
Okay. So the G&A number is roughly going to be what it is in the <unk> for the rest of the year.
You should expect R&D to be a predominantly more of the stock based compensation on a go forward basis.
Okay I can follow up with you on that well yesterday.
Okay. Thanks, Dave.
Okay.
Ladies and gentlemen, we have reached the end of today's question and answer session I would like to turn the call back over to management for any closing remark.
Thank you everyone for joining us today, and we look forward to continuing to update you on our progress and good evening.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.