Q2 2022 TuSimple Holdings Inc Earnings Call
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Okay.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Good day and welcome to the to support second quarter 2022 earnings Conference call. All participants are now in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time keep in mind that this call is being recorded and there will be a replay available.
And I R. Dot two simple dot com. Following this call I would now like to turn the conference over to Ryan Ammerman head of Investor Relations for two simple Mr. Amarin. Please go ahead.
Thank you Howard.
Good afternoon, and welcome to our second quarter 2022 earnings call.
With us today are two simple as co founder and Chief Executive Officer, Jerry Howe.
Interim Chief Financial Officer, Eric Copier.
Shouting and Eric will review, the operating and financial highlights and then we'll take questions.
As a reminder, two simple shareholder shareholder 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 if you object in any way. Please disconnect now.
Please note that two simple shareholder letter press releases and this call contain forward looking statements are subject to risks and uncertainties. These forward looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors.
Please refer to the risk factors detailed in our SEC filings.
We will also discuss non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. Please refer to the safe Harbor disclaimer and non-GAAP financial measures presented in our shareholder letter for more details.
Including a reconciliation of the non-GAAP measures to the comparable GAAP measures.
I will now turn the call over to Chad <unk> to begin.
Thank you Ray.
Hello, and welcome to our second quarter earnings call.
We're excited to update you on our recently announced leadership additions.
The progress we've made with developing our proprietary IP newly announced partnerships.
We have made on the regulatory bodies.
The next two to three years, all about bringing efficiency in everything we do.
Confidence in our ability to deliver advanced upon them.
At a commercial scale together faster more efficient and sustainable future on the road.
Before I provide an update on the company I want to spend more time talking about safety.
Yesterday, the Wall Street Journal ran an article questions with simple commitment to safety.
I would say that I am extremely proud of.
All of that we have accomplished and are accomplishing two simple.
We are the first company in the World.
Execute.
The bedrock, an 80 mile stretch of highway in Arizona.
Repeat it multiple times.
In the past seven years with at $8 1 million miles.
On the road testing.
Precisely one incident afterwards import truck is responsible for.
And this is.
An error occurred when a cost driver and safety engineer try to reenter animas dragging mode before the computer whats prime to do so and the trucks were up.
Making contact with the highway barrier.
No one was hurt and the only evidence of the accident or few scrapes and some minor damages on our trial.
I wanted to be very clear, while this was caused by human error as the CEO of twist in bulk I take responsibility for it.
At the end of the day is kind of traffic accidents are what we are in the business of trying to eliminate from our road debuted a safer more secure and more reliable delivery system across America.
While this incident happened.
First thing with data, what's grounding entire fleet and began an independent investigation to determine what happened.
After doing adult and determining the cost we upgraded all of our systems to make sure it could never happen again.
Eric.
Question, how this could happen in the first place.
That's fair, but it is also important in this perspective.
Collectively our engineers have spent millions of hours using a system.
One is that in all seven years of operation.
No one was hurt no property damage.
And we reported to the appropriate government agencies as we should.
Considering that <unk> recorded 500000 large truck accidents every year I think we have a pretty good average and that our technology is working.
With all of this in mind, we are a company in transition as we see a lot from the research and development to commercialization.
This also caused some questions agenda.
Attended started making as a CEO and whether we're prioritizing safety at <unk>.
Here is my commitment to all of you our.
Stakeholders all physical.
We will not achieve commercialization until were sure we can do so safely.
Every decision I make starts.
With evaluating the safety of our technology.
We inquiries are incredibly talented team raised concerns if they happen and come forward with idea of how to do it better we.
We have a strong safety record and we will continue to make it as strong as possible.
Now moving onto the quarter.
In June we announced several leadership changes.
Hi, Julien our former CFO decided to leave the company to pursue other opportunities.
Pat laid an instrumental role in setting up the simple to succeed and I wanted to personally thank him for his contributions.
Yes.
You will hear from later in the call.
And over the role as interim CFO .
Eric has been serving as our global controller and principal accounting officer over the past year and came to us from Grainger.
For that AT&T.
Eric Skus that fits very well with work with employees in our lifecycle and we're fortunate to have him step into the CFO role.
We also announced a few additions alright leadership team is.
Isabella goal was promoted to Chief HR Officer.
In this role Isabela will be responsible for organizational planning and ensuring that we identify develop and retain top talents.
<unk> humor was promoted to executive Vice President for operations in this newly created position Earth and will oversee our AF and working closely with both our technical and operational teams.
<unk> the port driver out operations and continue our journey towards commercialization.
<unk> joined US as senior director of <unk> and was most recently vice president of algorithms.
This is.
Years of experienced in Ava industry, making the perfect fit for this expanded role.
<unk> was promoted to executive Vice President for technology. This.
This is also a newly created position.
And disposition layer will take over many of the responsibilities I had as a CTO.
Amy up to spend more time on the overall strategy of the company.
We are fortunate to have the talented individuals within the organization.
These organizational changes are designed to help us achieve the vision, we have for two simple.
At our Investor day in May.
We discussed and we are in the process of expanding our operational design domain from Arizona, Texas and from nighttime debate.
A critical component of this.
Building out our physical infrastructure in Texas.
Last quarter, we announced additional terminals in the Texas triangle and our team is busy executing on our plan to continue with the build out.
What is critical as we migrate the Texas.
Sure we have the ability to create density and scale in our network, which requires the continued investment in our physical infrastructure trucks and technology and further developing strong partnerships.
We intend to further validate the commercialization opportunity by utilizing real world commercial routes, we continuously improve our cost per mile metrics and continue our journey towards commercialization.
Next I'd like to talk about our continued success in building a valuable patent portfolio.
During this past quarter, we expanded our portfolio with 37 new patents.
You have heard me state.
I will continue to emphasize the next two to three year, it's all about bringing efficiency into everything that we do so.
So let me provide you a few examples of how we're doing that with our patent portfolio.
First example, I'd like to highlight is a pattern that covered automatics reversal up routes that lower fuel consumption to reduce costs.
Fuel is a major cost of trucking operation.
Roughly one quarter of a truck operating costs.
We've already shown our technologies over 10% more fuel efficient and human driver.
Route optimization on top of improved fuel efficiency as a potential to lower fuel costs even more.
<unk>.
Next we were issued two patents dealing with sensors. The first patent cover technology to calibrate sensors, while the truck it's moving down the road.
Patent coverage desert planning techniques for frozen solid.
It is hard to overstate all critical sensors are too.
Platform <unk>.
Technology that improve the reliability and reduces maintenance cost is critical in reducing the overall operating cost of two simple AIA platform. We will continue to invest in further expanding our IP portfolio.
In July we announced our partnership with <unk> group.
<unk> is a major European transport and logistics provider and we're excited to be part of their expansion plans in the United States were.
We believe this additional partnership is another validation point of the value our purpose SKU level court.
Bringing to the trucking and logistics market.
We look forward to work with <unk> and our many other partners in the logistics ecosystem as we develop and commercialize our technology.
Last but not least I'd like to spend some time on our regulatory update.
We're happy to announce that Tom Tencent has joined the company at the Vice President of Government Affairs to lead our effort in this very important area.
Tom comes to us from UBS.
Both more than 20 years lobbying at both the federal and state level on various issues impacting the transportation industry.
We're happy to have Tom on Board welcome.
While we are on the regulatory topic in Q2, we continued to work on building out the state legislative and regulatory environments favorable commercial AVR ratios with.
With Kansas and West, Virginia, enacting legislation renting level Board authority.
Increases the number of days that permits driver allocable deployment with 28, while 44 states allow driver in operations.
Additionally, I am proud to be the thickness Murray on their recent letter sent to Governor Gavin Newsom, California.
Leaders in autonomous trucking industry.
As you know.
So as they both wholesale currently does not allow for AAV truck chassis. Despite a 28 2012 bill that was signed into law intended to begin the rulemaking process.
We are pushing for a comment on regulation, so that California joins the other 44 states in the country that allow for <unk> testing.
With that I will turn the call over to Eric to discuss our financial results and updated guidance.
Thank you Jody.
Beginning with our reservation program.
This quarter, we added 10, new truck reservations ordered by a longtime partner we're.
We're excited to continue working to bring our world class AAV technology to our partners.
Our reservation total at quarter end stands at just under 7500 trucks.
Because here you see we continue to see significant interest from our fleet partners.
Standards for reservations the.
The only work with partners capable of implementing our AAV technology.
Those that are ready to make a financial commitment alongside their reservation.
Now shifting gears to our financial results for the second quarter of 'twenty two.
We reported $2 6 million of revenue in the quarter, an increase of 70% year over year and 13% sequentially.
Compared to last quarter.
Our revenue fleet relatively flat as.
As new trucks are prioritized and deploy for dragging out testing operations.
The year over year growth was driven by revenue model as well as pricing sequentially, though revenue was primarily driven by better utilization of our existing fleet, while PRASM, while pricing was flat.
We expect to keep our leased and owned revenue fleet flat over the course of 'twenty, two and will continue to improve utilization as needed.
That said I think it's important to share our view on revenue miles for the next couple of years.
Gradually transition to driver out commercialization revenue miles will be generated as we support our technology needs.
This will essentially validate and advance our technology as we support our customers through either pilot or revenue generating programs that showcase the benefits of our level four technology.
Moving to expenses.
We spent $86 million on total R&D this quarter, including 22 million of stock based compensation.
This compares to 76 million in the same period last year and $78 million in the first quarter of 'twenty, two or up 9% sequentially.
Excluding the impact of stock based compensation R&D increased 4% sequentially as we continued to invest in our technology or the assets and core Tech talent.
We will continue investing in commercialization of our world, leading technology and key talent, while managing our R&D dollars as efficiently as possible.
On the SG&A front, we spent 22 million during the period, including 3 million of stock based compensation.
This compares to 44 million in the same period last year and 32 million in the first quarter of 'twenty, two or down 32% sequentially.
As a reminder, this quarter, we lapped the impact of stock based compensation related to our IPO last year, which explained some of these deltas.
Excluding the impact of stock based compensation SG&A was down 19% sequentially.
During the first and second quarter of 'twenty, two we had some favorable noncash accounting true ups in SG&A of approximately $2, six and $4 4 million, respectively, which we do not expect to repeat in future quarters.
Excluding these items SG&A was down 10% sequentially from improved cost leverage we.
We continue to be highly disciplined in controlling our SG&A spend and prioritizing spend that really contributes to our technology and commercialization objectives.
Our loss from operations was $111 million in the second quarter of 'twenty, two compared to a loss of $121 million in the same period last year and $112 million last quarter.
Our adjusted EBITDA loss in the second quarter of 2002 was $83 million, which compares to $66 million in the same period last year and $80 million last quarter.
In the second quarter of 'twenty, two we had $3 8 million of Capex, primarily related to equipment and facility investments.
We ended the second quarter of 'twenty, two with a cash balance of approximately 116 billion a decline of $81 million versus the previous quarter.
Now turning to guidance for 2022.
We are updating our full year guidance.
While our revenue guidance remains unchanged, we have updated our guidance for adjusted EBITDA stock based compensation, Capex and ending cash balance.
This was done to reflect our increased focus on expense control and disciplined capital deployment.
Now expect to finish the year as follows.
Our adjusted EBITDA loss to be between 260, and 300 million $380 million.
Was the prior guidance of $400 million to $420 million.
Our stock based compensation to be between 101 hundred $20 million versus prior guidance of $155 million to $175 million and this is a result of hiring slowdowns.
Stock price impacts.
We're also reducing our capex guidance by $10 million. This was primarily driven by a reduction of our investment in administrative facilities.
Lastly.
Expect to end the year with approximately $950 million of cash on the balance sheet versus the previous guidance of approximately $900 million.
While we do not intend to issue our 'twenty three guidance until we report our fourth quarter results I think it's worth pointing out a few important items as we move through the second half of 'twenty, two and into 'twenty three.
First we are in the process of upgrading most of our older trucks, the newest Avi hardware technology.
This process will continue through 'twenty, three and together with the physical infrastructure and our partners will help us create the network density that Saudi was referring to earlier.
But we plan to introduce some new trucks into the fleet our ability to add a significant number of trucks, it's difficult given the challenges in purchasing new or even slightly used trucks.
Lastly, we plan to continue to invest in at terminals to the F N, primarily and around the Texas triangle.
Our intention is to do this in a capital light manner partnering when possible.
We look forward to updating you on our efforts in the coming quarters.
I'll now hand, it back to Saudi for a few last remarks.
Thank you Eric.
The progress we have made over the last few years is significant.
We haven't built a first class team for the ground up and created a safety first culture with Ebola our industry leading technology.
I am proud of our work and too simple and remain completely confident in our progress to deliver advanced autonomous trucking at a commercial scale be it a safer more efficient and sustainable future on the road.
With that we're ready to start the Q&A session.
Okay, ladies and gentlemen, if you have a question or comment at this time. Please press star one one on your telephone keypad again, if you have a question or comment at this time. Please press star one one on your telephone keypad. Please standby, while we compile the Q&A roster.
Our first question or comment comes from the line of Ravi Shanker from Morgan Stanley . Your line is open.
Thank you and good day, everyone shall do you. Thank you for the.
Details on the.
On the accident can you share some more details on what changes you have implemented citizens who are they on the technology side or what are the operating procedure side and also would you like to refute any details in the WSJ story that came out yesterday.
Yes first of all we have an overhaul of our.
Human machine interface, so that regard barrick guaranteeing that.
The humira won't cause the machine error.
On the machine side and also we have also tightened up our training procedure to make sure that all of the operations are compliant.
In terms of the other aspect of it.
The article I think Theres, a lot of misunderstanding of it especially regarding to our compliance when it comes to.
We're reporting this incident to the authority I wanted to make several quite a.
To be clear in here first of all we reported the incident to the appropriate authority and as being in the public domain, but more than a month underneath the website and.
And the second is that the truck script, our media, resulting in no injuries and no property damage there were no requirement to contact a lager Portland.
We did reported incidents of the Arizona Department of transportation and is on time.
Got it.
And so there have been no follow up.
Theres been no changes in your ability to run your trucks or do any testing in the immediate aftermath right.
No no neither the <unk>, nor the leased assets.
But do any changes and as part of our own review process. We.
Implemented a lot of solutions, who prevented typo things from happening again and.
Our our new fleets with the upgrading of the software has been then being on the road.
Great and good luck to the follow up question I think this.
Patent that you just received on the.
The frozen sensor is an important one because I believe that was me.
Major if not the only obstacle to you actually you are running your trucks in the snow.
Is that the case and do you feel like you are ready to start commencing some snowbelt this winter.
This is a complex.
East with our facing two running in <unk>, we are actually developing that as a cleaning technology and they did.
Going to be part of a resolution that we have received a pattern from.
But as of today, we're still developing that full solution.
Great. Thank you.
Thank you.
Thank you. Our next question or comment comes from the line of Scott Group from Wolfe Research standby.
Your line is open hey.
Thanks, Good afternoon.
I was wondering given some of the safety concerns out there I know you guys haven't.
Given data on disengagement in the past, but I thought maybe maybe appropriate on any anything you can share in terms of where that trend is and where it's been.
I think we in the past.
<unk> explicitly gave out the disengagement data.
I don't know where what exactly of the date are you referring to you know im saying I know you haven't given it in the past, but I was I was wondering maybe if you wanted to make some comments on just given some of the safety concerns that are out there maybe if you want to just give some high level comments around where you where.
That metric is today, where it was what kind of progress youre, making.
First of all I think this engagement is not a.
Very useful metric or for marking the progress of technology of autonomous driving.
Our incident, specifically on April six.
If not a disengagement it's accurate.
These will happen at the engagement.
The system, where the system is not ready.
Is there a better metric that you think is worth sharing with us.
I would say that overall.
The overall message would be.
That is tangible that needed to read it will be cost per mile, but that only covered part of the system.
No that isn't very complicated I don't think there is good easy to read a numerical metrics to cover up the all up.
The safety part of it.
Okay and then just a question on the truck reservations were in the quarter were flat are you in having dialogue conversations.
With customers do you think that the truck reservation count starts rising again in the near term or is that.
Less of a near term focus thank you.
So great question I would say, yes, we are still engaging.
With our partners.
Our pipeline for potential orders is pretty healthy and strong.
For me.
Focusing on the customer that had the capabilities right to introduce our technology into there.
Through their network and their fleet so that by itself tends to be the filter just just as a reminder, some of these orders for a purpose built Ford trucks are.
They won't hit the market until several years from now right, but again to answer your original question, Yes, we're still seeing momentum, we're still engaging partners and there is interest.
And the pipeline is healthy.
Okay. Thanks for the time guys.
Thank you.
Thank you.
Our next question or comment comes from the line of Ken <unk> from Bank of America. Mr. <unk>. Your line is open okay great.
Good afternoon. Thanks.
Jody maybe just take a step back and talk to us bigger picture, what's the status of of commercial operations.
It seems like you're expanding from Arizona to Texas, what is changing in the base case here is there a timeframe you had talked about getting more trucks in.
And the operating retrofit in and getting that up and running before the fully built purpose built by Navistar.
Which you would pushed out from 24 to maybe $25 26, maybe just take a step what is the status of rolling out that commercial capability in 'twenty three 'twenty four what are we waiting for now yes.
Yes.
Ill.
Team is not waiting for anything that team is through every day and we have actually several aspects of it first safety, we are actually having a higher target when it comes to everything about <unk>.
Safety design.
System Engineering side, so we're basically having a more tightened.
<unk>.
And the validation process that goes through every corner of the system into out of.
The system of the engineering part and the second is hardware, we're actually introducing new.
Components for example.
The new type of sensors and the more reliable next generation actuation components. So basically we're rebuilding the next version which is getting closer to the production truck but steel.
Thanks, Doug.
Prototype type of Kathy and the hardware team is building on that and third is that the software and algorithm team is trying to on one hand to meet the safety standards set forth by the system engineering team and on the other hand, the utilize the new sensors or new capabilities brought by the new OEM and tier wise.
Alright, no new tier wise components.
To run and on the other hand, the operational side, we are actually seeing a lot of.
Little little issues, not really issues like a little opportunities here and there for improving the fleet efficiency and that is exactly what we thought earlier by identifying the scale or identifying the routes and and populated more products into a smaller network of operation we have a long.
So thats the thing that we're doing right now and now we're targeting at.
The the end of next year, so that you will see some strong results in Texas.
So it sounds like you have to rebuild or you are rebuilding your entire truck specs now did I hear that right as far as.
Getting new upgraded sensors on each part of the truck is that why we should not expect any change in trucks in service.
Okay.
Youre getting some bit of alerts.
Alright.
<unk>, considering all of the tier one hardware they have new versions and new kind of lidar and the new type of cameras, it's unlikely now great.
So upgrade of existing versions.
I thought you had to start handing in your final specs to Navistar at this point to be able to get that <unk>.
Commercialization or is that pushed out as well.
No no no. This is a different thing we actually have a lot of older trucks that we purchased several years ago right and we all we have to upgrade them. So that they can they can be.
Aligned with the newest version of the hardware and software.
Alright, My last one if I can sneak one more in.
You lowered your your spend targets I just want to understand we're getting no more additional miles in the interim.
What's the process again I'm going to go back to the first question. What's the process between here is it just waiting for navistar to get the commercial built or.
Is there a reason why you don't want to put more trucks on the road you don't need more youre getting enough info maybe.
Round us out there.
I think as long as we can mobilize all up our truck assets.
Our older version of the truck that is perfect like three years ago and was pretty old hardware and we operate them and then we have a decent fleet all of them are running the cutting edge software version, we're happy with the testing volume up this fleet.
And just the timing and I'm going to refer to some of my remarks. We are also transitioning our entire fleet and when I say entire when you think about our trucks, we have revenue trucks revenue generating trucks hauling freight, but we also have testing trucks that are solely use testing facility. So what happens from now through the end of the year.
And beginning of next year is.
Leveraging the entire fleet.
Certainly.
Not necessarily to optimize revenue miles, but really to focus on the efficiency scale and bringing.
True cost per mile reductions by testing the technology in real World scenarios I think that for me is a pretty strong.
A proof point of our industry. If we can really show to economic scale with trucks that we control and trucks are really hauling freight in the real world that will be.
A pretty impactful event.
So for me that's that's the focus even though yes, we reduced our targets.
We are definitely investing in our fleet, we are investing in our technology certainly in our talent as well I would be very frugal in other aspects of our business like administrative facilities, but when it comes down to the core assets that will again show that commercialization opportunity, we're definitely investing the dollars.
Saudi Erik Thank you I guess, one last thing somebody just probably the China sale update there's no update on the sale processes. There just because there was no mention.
Got it.
There's nothing I can share right now.
Okay.
Thank you great. Thank you for the time.
Thank you. Our next question or comment comes from the line of Colin Rusch from Oppenheimer and company Mr Rush.
So I'm curious about.
Talent acquisition here.
He put together.
High quality team, that's pretty robust, but in terms of attracting talent and maybe upgrading certain areas I'm curious what those prospects look like for you at this point.
First of all I think we are pretty proud that we do not currently have a hiring freeze.
We however, we have slowed down hiring from.
What we have planned at the beginning of this year.
And we're very judicious when it counts the backfill of the vacant positions. So overall, we are becoming more careful given the general economic situation right now, but we're not shy and hiring top talent.
Okay and then.
Some of the vendors that you guys are working with there is certainly some technology development that is still going on in terms of sensor sensor fusion can you just give us an update in terms of how youre seeing that progress relative to the timeframes and commercialization that.
You guys are targeting.
Some of those elements that maybe arent completely finished at this point.
Yes, I think the most exciting thing that I see from the sensor development is actually not about the sensor capability development, but rather this is a reliability developments and this is something that we need exactly to come to conduct the board Robert <unk>.
E Berry and commercialization of the system and this is very encouraging you see many of the components are maturing from a sample adobe samples and the timeline.
This suppliers, they actually pretty get get pretty clear and they stick with their timeline, which is also encouraging to us.
Perfect. Thanks, so much.
Thank you.
Thank you.
Our next question or comment comes from the line of Todd Fowler from key.
Mr. <unk> your line is open.
Great Thanks, and good evening.
So a shout.
The path to commercialization by the end of 'twenty three kind of have five milestones laid out in the newsletter Tonight can.
Can you give us a sense as we sit here kind of looking at the second half of 'twenty, two and then into 'twenty three whats realistic here.
For the rest of this year and then what we should expect into 'twenty three.
Alright.
Yes.
From all of the metrics I will say that removing the.
The board of vehicles is the biggest or the biggest too.
And in order to be able to remove the per vehicle, we need to operate our hardware. So that we can improve the reliability test.
What I have just said.
The sensors are getting more reliable and we're very happy to see as it happens as we planned.
And we are currently building this new type of trucks that.
Is that is taking normally.
Normally it's taking a very long time, but we're doing our best to shorten the time, we anticipate we do not anticipate therefore, we do not anticipate to reduce our <unk>.
Move this per vehicle in this year, because probably by the end of the year. We're barely finished the buildup of the hardware and while at the same time the system engineering team working with the algorithm team are working on strengthening the <unk>.
System from every quarter.
This is what we're doing right now and this is also what you will see in a later update.
On the plan the Union Pacific driver out commercialization right.
That is something that we will be basically having show as intermediate stop our risk strengthen sulfur.
For this year.
So is it fair to ask about I mean, what percent of the fleet needs to be upgraded and what percent of the fleet has been upgraded because when I square kind of the comments that you made to Ken and Eric Your comments at the end of the prepared remarks, it really sounds like that this is very critical for 'twenty. Three so is that something that you plan on sharing where you're at with the fleet upgrader.
How can we how can we kind of track where the progress is with that.
Sure thing.
Let me chime in so just to put numbers behind that response, so we have a 100 trucks globally.
Which 75 of them are in the U S.
And those 75, they're split between revenue and testing. So so a number of trucks that need to be upgraded its on the 35% to 38.
Our unit range.
And from our incremental Capex incremental opex.
Definitely reflected on the updated guidance.
These are amounts that theyre, not theyre not immaterial, but but there were primarily funded through savings in other areas. So we feel very comparable supporting.
And completing those upgrades by the end of the year for us.
Again.
That testing and revenue fleet.
In 'twenty three we will continue that upgrade and investment on the trucks.
To ensure that they are running.
Real commercial routes.
But we don't expect to.
To start seeing cost per mile improvement likely until the second half of next year, which for me. That's the biggest metric that we'll use to show progress like we can show in and share updates as we go but for me quantitatively will need that true cost per mile improvements to show that the improvements are.
Yeah, Okay that makes a lot of sense. Thanks for the time I'll turn it over.
Thank you.
Thank you again, ladies and gentlemen, if you have a question or comment at this time. Please press star one one on your telephone keypad. Our next question or comment comes from the line of Brian often back from J P. Morgan Mr. Austin Burke Your line is open.
Okay.
Alright, thanks for taking the question.
Jody you mentioned you did all the.
As required and even some there maybe not required when reporting the the accident of the incident is there as a leader in the industry do you think or maybe the industry in general has to be more proactive as there are more miles and more potential incidents that have happened rather than <unk>.
Lying on the government and posting on their website do you think there is.
Room for you to do do more and to kind of disclose as more.
On that upfront, but I guess not.
<unk>.
Not waiting for the government to put it on their website and for something like this to happen again.
Just wanted to get your thoughts on that.
Yes, I would say that there is.
General dynamics.
There are certain regulations were like certain common practice for every player in the field.
Viewed it to be more open and transparent.
We're all for that I would say that there is a recent change from the <unk> website that we were getting everything publicized and.
First of all I think.
We are not shy of being transparent and we actually reported to us all of that and you know what in this call. We also shared even more information to that.
For example, we told you our total mileage, which by the way is not included in the reports.
And on the other side I think we strive to keep our partner and stakeholders informed as possible about our progress.
With this this was an incident with our correctable floor, not a material change to our business model.
Okay understood.
And then on the <unk>.
<unk>.
Got it.
Process with the driver out run can you just give us an update on that sounds like thats going to be something going on later. This later this year and then just I guess more broadly speaking now that the first wave of gross rider is done can you just comment on driver out applications at this point in time and what's planned for the rest of the year.
Sure, Yes, the overall framework of the safety case, it's there, but we're actually substantiated with a lot of more stronger requirement that makes the <unk> behavior, where all of the operational aspects even more safer. So that's what keeps us busy.
And in terms of specific the Union Pacific.
Driver out run.
Unfortunately has encountered a complete road closure in front of the distributor center at our destination point. So we are actually.
Ocular is looking for.
Our liquid solutions, but that means that the complete row closure you laid out for a couple of weeks.
Not much but a couple of weeks.
And within that the Union Pacific run Euro.
One we actually not only strengthened our system, but also we adopt a new type of trailer.
Unknown load and this is actually adding quite a bit of the new elements into our safety case that we have to validate through the unknown ways of unknown new type of a trailer.
And we have actually conquered that part of the test.
We're still finalizing the patents.
You will hear us.
In the near future about Iran.
Okay, and then just maybe to touch on.
Comments made earlier to the previous questions it sounds like.
All in there is clear.
Clearly some of the challenges that may be popped up in the supply chain. It sounds like in terms of the upgrading the trucks not getting as many as perhaps you might have thought but.
Is it still safe to assume that Youre on track for.
The wider commercial rollout at the end of at the end of 'twenty, three or maybe some of that buffer has since been impacted by these events.
Could just clarify that please thank you.
Sure Yes.
Yes of course, there are challenges here and there, but I think when we do the design.
We are we are very cognizant of the attendance and the team is doing a terrific job in keeping our timeline still on track and we're still confident of all of the promise that we have made on the analyst day.
Okay I appreciate it. Thank you. Thank you.
Thank you. Our next question or comment comes from the line of Joseph Spak from RBC capital markets standby.
Thanks, everyone.
I mean quickly follow up on that that timeline comment also goes for.
The production Druck timeline in 2025 or is there any change there.
So far there is no changes on that.
Okay.
Sure.
One.
Yes.
A quick call out clarification, and then I guess, one bigger picture question.
Yes.
You mentioned.
Truck reservations are sort of thinking are you at a 10.
But then you also sort of detailed hackleman.
Ah.
Partnership and it sounds like there were some initial reservations, but that happened after the quarter closed. So that's not in that number is that right interpretation.
Yes, <unk> is in our backlog.
It is okay because that was in your report in end of quarter in that habit I thought that came out in July so I just wanted to understand that okay. Okay.
And I guess the.
Going back to the accident.
Again this is.
Understandably, a big question, but.
Okay.
I think even you would acknowledge.
Even when the system is quote unquote ready accidents are going to occur so.
How are you going to communicate to your partners.
Your stakeholders like what.
What is the definition of safety Youre striving for like how do we know when it's.
Safe enough for you safe enough for your partners.
Save enough for regulators, all sort of constituents, what should we really be looking for.
I think we will like.
Basically by definition Nolan.
Is omnipotent or.
Being able to have a strong clear 100% statement about safety is more like we show transparency and Rx We show our methodology and we have evidence to prove to our customers and our Oems about our safety principles and concepts.
And.
The thing is that for driver hours that we do have that thing very well prepared but unfortunately the incident. That's shown up here is more off the operational safety.
But nevertheless, I think as I said in the beginning I think responsibility opposite that and I think the company needs to be more.
Putting more efforts in the operational safety aspect, especially given the fact that we're not going to have all of our truck driver out tomorrow, there will be always the human machine interface out there and there will be also the operational elements in the system. Therefore this is the area, but definitely we are strengthening right now we have done.
A lot of a lot of efforts since the incident.
We're going to be more cautious.
And maybe more.
In that aspect.
Can you maybe share I understand different partners might be might have different requirements, but can you share.
Anonymously of course like what a partner.
Or are they defining safety like whats going to give them enough comfort to say, we're ready to go.
Because the customers are.
I'm, mainly talking about like the hardware related partners the partners are.
This is level four autonomous driving is a new thing for everyone to partners are open to us to hear about our safety pace and basically as long as we show them. The tickets at a high level of course, if it goes to really detailed level. That's a proprietary thing that we will not share, but the high level safety case, once we share with them.
They are onboard with the principal and the structure of it and with the evidence that control. The overall safety and that is how we are collaborating with our partners.
I guess I meant the freight partners, what gets them comfortable buckets I'm over them.
I think it was.
The spirit is the same but the granularity is probably one or two tears less because the free customers are less technical with them.
Hardware partners.
Okay. Thank you.
Thanks.
Thank you. Our next question or comment comes from the line of Ravindran Gill from Needham <unk> Company.
Standby.
Yes. Thank you for taking my questions and apologies. If this question was already asked but just joining from another call.
Just following upon that.
How do you think that the National Highway traffic safety administration is going to.
I guess adjust their view on what.
Conditional automation is versus say a level four automation.
Or do you anticipate that they will provide more stringent requirements between the different levels of autonomy to prevent.
Future accidents like this.
In the future I'm, just wondering if <unk> had feedback from the NHTSA.
As a result of this.
Particular accident and what's been their feedback.
Yeah sure first of all I don't think have any view of how the new Star Wars.
In the future modify their regulations.
But what I can tell you is that FMC has a comment this is simple they did there a thorough analysis of our process of our every step that we do and are all our independent investigation results and there is nothing that they found anomaly or in the profit they gave us.
So far we implemented the solution.
On our own and they do not give us any further recommendations on how to.
Change that were order that and of course the investigation is not completed.
We remain confident about the investigation.
Right I think it just goes to the heart of the of the technology and have the business model, where the goal essentially is to <unk>.
To remove the driver in order to save cost and efficiencies.
And there is a.
<unk> that a level four autonomy is going to happen in freight faster than passenger vehicles.
So I'm just curious if.
If that gets pushed out or if that gets installed in any way.
How would you kind of react as a publicly traded company.
If there are new rules are new new legislation that debt.
Prevent that from happening.
Yes, I would say that first we don't really see any signal of that happening or about to happen and the second is that of course, we're not going to break the law.
And lastly, I think we're going to demonstrate transparency and adherence to the right protocol to demonstrate to the government.
The government agencies that.
Basically to give them confidence through our process.
And it has it.
Investigation.
Your your rollout.
Anticipated plans of future driver out programs again, you might have answered this with previous questions but.
My sense is that this year there is going to be several driver out programs expand the Texas triangle for instance is that being delayed or pushed out because of this this crash. Thank you.
Yes first of all I think the promise is about Union Pacific driver out Brian .
Texas, our deadline is set for next year by a lot of other improvement removing that where vehicles.
And Hollywood.
Holding commercial rise they at night.
Yes. So those are those aren't for next year.
Think that we have other deadlines in this year and all of the drive around activities and preparation of our <unk> tests are not affected by this as well.
Thank you.
And as mentioned I think.
Fact that when this event occurred we stopped our fleet and we would cost.
What really occurred and really.
Right.
And now we are testing our current swaps using their cases, we feel very confident that this is an isolated event.
And it has not had any impact to our our plans.
And again.
Same same behavior of reaction that we had on previous events.
Safety seriously and we'll do that.
Going forward and we feel confident that this issue that created the accident has been solved.
Thank you.
Thank you I'm showing no additional questions in the queue at this time I would like to turn the conference back over to management for any closing remarks.
Thank you for joining the call and we look forward to attending.
Attending many conferences this quarter and giving you another update next quarter. Thank you.
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Okay.
Okay.
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