Q3 2022 Aurora Innovation Inc Earnings Call
Okay.
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Good day, ladies and gentlemen, and welcome to the third quarter of 2022 business review call.
All lines have been placed on a listen only mode and the floor will be open for questions and comments following the presentation.
If you should require assistance throughout the conference. Please press star zero on your telephone keypad to reach a live operator at this time. It is my pleasure to turn the floor over to your host Stacy Feit VP Investor Relations Ma'am the floor is yours.
Thank you Pat good afternoon, everyone and welcome to our third quarter 2022 business review call.
We announced our results earlier this afternoon, our shareholder letter and a presentation to accompany this call are available on our Investor Relations website at IR Dot a red Dot tech.
Shareholder letter was also furnished with our form 8-K filed today with the SEC.
On the call with me today is Chris arm same co founder and CEO .
And Richard team CFO .
Chris will provide an update on the progress we have made across the key pillars of our business and.
And Richard who will recap our third quarter financial results. We will then open the call to Q&A.
A recording of this conference call will be available on our Investor Relations website at IR Dot dot taxes. Shortly after this call has ended.
I'd like to take this opportunity to remind you that during this call we will be making forward looking statements.
This includes statements relating to the achievement of certain milestones around the development and commercialization of the Aurora driver on our anticipated timeframe.
<unk> of availability of autonomy enabled truck platforms, the expected performance of our business and potential opportunities with partners and pilot customers expected cash runway and overall future prospects.
These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call.
In particular those described in our risk factors included in our quarterly report on Form 10-Q for the quarter ended June 32022 filed with the SEC on August 12, 2022, as well as the current uncertainty and unpredictability for business the markets in economy.
You should not rely on our forward looking statements as predictions of future events. All forward looking statements that we make on this call are based on assumptions and beliefs.
As of the date Hereof and award disclaims any obligation to update any forward looking statements, except as required by law.
Our discussion today may include non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results information.
Information regarding our non-GAAP financial results, including a reconciliation of our historical GAAP to non-GAAP results may be found in our shareholder letter, which was furnished with our form 8-K filed today with the SEC and may be also be found on our Investor Relations website with that I'll now turn the call over to Craig.
Thank you Stacey and it's great to get a chance to connect with everyone today.
We had the honor of hosting our first analyst and Investor day, as a public company as we wrapped up the third quarter, we shared our progress towards the commercial launch of our horizon, our autonomous trucking subscription service and attendees experienced a broad driver operated autonomous truck rates alone I 45, near Dallas and from Dallas to Houston.
I have a privilege of working with our incredible team every day. This was a great opportunity for them to engage with the investment community and share their passion for Aurora and the progress we're making the energy of the event was great and the enthusiasm for our technology was palpable.
Yes.
As we shared at the event, we continue to make strong progress across each of the core elements of our business the Aurora driver operations and service delivery and the truck platform we.
We introduced a range of new driving capabilities with our data 4.0 release that enables the award driver to navigate more of the unexpected obstacles vehicles can face everyday moving another step closer to our feature complete milestone.
We continue to scale, our operations, achieving our commercial load booking target and expanding our pilot with Uber freight and we built and deployed our next generation fleet of trucks with the latest version of reward driver hardware.
These accomplishments underscore the advancements we're making in our roadmap to launch a war horizon by the end of 2024.
During the third quarter, we released a roar driver beta for cleanup as part of our commitment to deliver quarterly technical updates that expanse. The award driver. This quarter's update includes new capabilities and improvements on once we for at least the past betas.
Each release builds on.
Those are the key before a cycle of iterative improvement it advances as towards our feature complete milestone, which we expect to achieve at the end of the first quarter of 2023.
If you look at our roadmap on page three of the slide deck, we committed to releasing two new collections of capabilities this quarter.
Detecting lane markings that have shifted due to construction and responding to road debris.
I'd like to take a moment to remind everyone. Why these are critical technical advancements to travel Americas major free quarters, the Aurora driver must be able to navigate all types of complex construction. So.
We have built we have put a significant amount of development effort into enabling your driver to handle the numerous elements of construction and we made further progress on this front during the third quarter.
Yes.
Temporary lay lines due to construction zones appear frequently along our commercial routes in Texas.
With a beta 4.0 release, the Aurora driver can now perceives the new lane lines in real time and understand that it should follows that new path instead of the path that exists in the order of Atlas our HD maps.
In the video on page five of the slide deck, you can see a new center line has been painted on the highway while the older line is still visible.
Your driver perceives the new Lane line and nose to deviate from the Atlas to remain centered in its flames.
Additionally, the Aurora driver can now detect and respond to road debris, we encounter while we're hauling goods for our commercial pilots across Texas.
Our trucks often have to adjust for tire shreds garbage phone boxes vegetation and even if ended furniture.
Road debris is extremely common and can be dangerous, especially for vehicles moving at highway speeds.
To achieve this new capability, we exposed the Aurora driver to over 10000 virtual road debris test and simulation and then validated its performance on private test tracks before launching on the road.
And the video on page six of the slide deck, you can see the reward driver on the Fort worth well Paso route and countering the remains of a blown tire.
The real driver recent detects it and shifts to the right to navigate around it before it then makes a courtesy lane change to create space around the truck stopped on the side of the road.
Yes.
During the fourth quarter, we plan to expand on the shifted lane markings capability to enable navigating lanes made by temporary barriers and we expect to launch additional new capabilities, including responding to active emergency vehicles and returning from the shoulder after recovering from a fault, which will build on our salt management capabilities we were.
<unk> during the second quarter.
As we are advancing our software capabilities. We're also maturing the word drivers hardware to support our commercial launch.
During the third quarter, we entered the driverless ready phase of our hardware roadmap, we're already making rapid progress in hardening, both our sensors and computer.
This means we are preparing our hardware for manufacture ability and high reliability and automotive setting.
We have enabled our hardware to monitor its own health to fall back on key redundancies when needed and to operated the demanding environment it will be exposed to.
All while improving its performance and measurable ways.
As an example, we've extended the technological lead of our proprietary first light lidar.
Firstly uses a unique light modulation scheme to achieve long range interference immunity and velocity sensing not possible with traditional pulse lidar.
Over the last several months, we have designed the latest generation for increased reliability and ruggedness, we've incorporated systems that allow it to monitor and report problems with the testing as well as integrated both liquid cooling and cleaning directly into the unit.
In the process, we have not only produced a highly reliable and manufacturer will sensor, but also increased its already extraordinary range of probability of detection.
To put this into perspective, our first light Lidar previously had an approximately seven second lead time and detection relative to traditional time of flight Lidar sensors with these improvements that lead time versus traditional lined on lidar is now approximately eight five seconds.
Which at highway speeds as the equivalent of nearly three football fields and incremental detection time, giving the award driver even more time to respond.
Yes.
We've demonstrated similar progress with our next generation computer.
It not only has redundant processing cell.
<unk> health monitoring and reporting and liquid cooling could also has been designed to meet ISO 16 to 750 dash three mechanical reliability targets.
In addition, we upgraded the Aurora drivers camera system, including quadrupling, its resolution and significantly increasing its dynamic range.
Between now and through 2023 will continue to mature our software and hardware to work towards a commercially ready or driver by the end of the first quarter of 2023, we expect your or driver to be feature complete which means we will have implemented all of the capabilities necessary for our launch lane and removed all Paul.
The interventions for that lane.
The most frequent question we get from investment from the investment community is how our progress toward our critical award driver ready milestone and commercial launch can be measured.
Been a leader in transparency in the industry and we are taking another step further by enabling the investment community and all of our stakeholders to track our progress through our autonomy readiness measure.
As a reminder, the launch bar for the Aurora driver is a closed safety case, which is our evidence based approach to demonstrate that our self driving vehicles are acceptably safe to operate on public roads.
When we achieve our feature complete milestone we plan to begin quantifying and sharing our progress against closing our safety case.
Each quarter via the autonomy redness measure, we will share the percentage of completeness of our safety case, taking into account waiting that has been applied to individual pieces of evidence supporting the claims.
At Aurora drive already we expect to have closed the award drivers safety case for our launch late excluding with truck platform. We expect to achieve this milestone at the end of 2023.
With remote input from our <unk>.
A mosque, where the vehicle receive support but where it's determined to internal analysis, including simulation that the support was not required by the roar driver.
Since the war's founding we've made safety the centre of everything we do.
We fundamentally believe it's important to build and maintain a strong safety culture and our commitment to safety is reflected in our approach to both autonomy development and our commercial pilot operations.
Conducting internal analysis. After vehicles received support is one of the ways. We further this culture.
Vehicle operators are empowered to intervene in the autonomous system without fear of reprisal, including on how such support would affect perceived performance.
As we've shared we believe there are significant limitations to the data that on road driving to provide for autonomous development and validation.
No driving performance alone will not determined when Aurora horizon launches and we do not anticipate that this indicator will be 100% even at launch the.
The reason for this is certain situations such as a flat tire will always require onsite support.
Instead and to be Crystal clear about this point the launch bar for the lower driver is a closed safety case.
Now for an update on our operations in service delivery it.
It takes more than just a compelling value proposition to deliver innovative and scalable technology into the logistics industry <unk>.
Just as important our technology will need to integrates seamlessly into customers networks.
Our pilots with free customers like Fedex Werner Schneider, and we were afraid we are developing and employing the operational services processes and infrastructure required by both Aurora at our customers to deploy Aurora horizon at scale.
It starts with deliberately structuring our pilot programs with the complete terminal to terminal model will use to operate or horizon at commercial launch doing it. This way we are able to refine our product and our joint operational model to best integrate into existing operations.
Cumulative to date through October 31, we've autonomously delivered under the supervision of vehicle operators 660 loads driving over 180000 miles with nearly 100% on time performance.
Just as importantly, we're demonstrating the scale we're building operationally as we achieved our end of quarter commercial load booking target of 22 loads per week, which is a 50% increase over the second quarter.
Last year, we launch our commercial pilot would be we're afraid to haul loads for customers between Dallas and Houston.
And to also explored integrating access to birth rates digital freight network with Aurora horizon.
Tobar, we expanded that pilot to also autonomously half right along the 600 mile Fort worth to El Paso lanes.
The combination of our or horizon, an Uber creates digital freight network is expected to provide carriers with powerful tools to further maximize utilization potential of their Aurora, Howard trucks broaden opportunities to haul goods and streamline supply chain operations.
We have now shared some of the progress we've made advancing autonomy development as well as the infrastructure to support our operations in service delivery.
A key third element to support our commercial launch are the relationships, we have built with our OEM partners.
<unk> and Volvo and our ongoing work in preparation for delivery of scalable autonomy enabled truck platforms.
As we shared last quarter key supplier contracts with these truck platforms have been awarded since then we have received a set of vehicles with one of the key systems needed to achieve the reliability necessary for safe driver. This operations.
This was integrated by the area and we've begun testing in preparation for our pre launch truck platform that we expect to come online next year.
In the meantime, we made meaningful progress scaling our fleet during the third quarter. We built brought up an integrated 21, new Peterbilt 579 trucks with the latest generation of our commercial hardware.
These vehicles included Tulane liquid cooled computer designed for enhanced levels of recognition reliability.
Importantly, these computers include redundancy in fallback capabilities, a critical component of our fault management system, which is the Aurora driver's ability to detect system issues and response safely without any human involvement.
With the addition of these new trucks to our fleet. We have retired some of our older models with the prior generation of hardware.
These new trucks will be integral and scaling up the loads. We are constantly hauling in our pilots and to validate the commercial readiness of the Aurora driver.
In addition to our work with pack of a Peterbilt 579 last month, we debuted the first autonomous Kenworth T 680 prototype designed for the award drivers sensor suite, which roundhouse packhorse autonomous vehicle platform.
We also began integration testing with a Volvo truck built with critical driverless systems in place.
As we wrap up this business review it is helpful to put into perspective, just what we're building as a company and the meaningful benefits self driving vehicles delivered to our society.
We continue to believe autonomous technology will be the next fundamental change in ground transportation.
To deliver any transformational change in the world, it's essential to be all in that's why <unk> position as an independent company is a strategic advantage. If yo enables us to have a singular focus on our mission and what we do best Independents has enabled us to build a differentiated technology stack, a diversified set of incredible partners and a compelling commercials.
Asian strategy.
In turn this has allowed us to raise what we believe to be enough capital to drive through the current storm in the capital markets positioning Aurora for success and what we view as an incredibly important and valuable space.
We continue to believe the size customer demand and unit economics of the trucking market make it the best entry point for our self driving technology and the value. We can provide to our free customers is tremendous.
We remained squarely focused on launching Aurora horizon by the end of 2024 and look forward to continuing to share with you. The progress we're making on this journey. Thank.
Thank you for your continued support.
I'll now pass it over to Richard who will review our financial results.
Thank you Chris.
She recognized approximately $3 million in collaboration revenue during the third quarter and $148 million cumulative to date for development work associated with our agreement with Toyota.
As of September 30th 2022, we have received all cash payments under the collaboration framework agreement with Toyota.
While our first priority is commercialization of Aurora Horizon, we continue to believe I'll work with Toyota and other long lead efforts will spring loaded us for the eventual launch of Aurora connect a subscription service for the right hailing market.
Third quarter operating expenses, including stock based compensation total to $203 million <unk>.
Excluding stock based compensation of $37 million operating expenses totaled $166 million.
Within operating expenses R&D expenses, excluding $32 million in stock based compensation totaled 139 million.
Primarily comprised of personnel costs as we continue to invest in our industry, leading autonomy technology.
SG&A expenses.
Excluding $5 million in stock based compensation, where $27 million.
Turning to cash flow, we used approximately $142 million in operating cash, which reflects a 5 million dollar inflow during the quarter related to the Toyota agreement <unk>.
Capital expenditures totaled $3 million.
We ended the third quarter with a very strong balance sheet, including over $1.2 billion in cash and short term investments we.
We expect this cash runway to fund Aurora three mid 2000, 2000 for enabling us to continue to develop the Aurora driver for commercial deployment at scale.
With that we will now open the call to Q&A.
Thank you for how open for questions. If you do have a question you May press star one on your telephone keypad at this time. If your question has been answered you can remove yourself from the queue by pressing one.
Ladies and gentlemen at Star one.
First question comes from Tom Y time, Ta Davis had Tom.
Hi, This is Wyatt Swanson on for Tom.
My first question is.
We were kind of hoping you guys could elaborate a bit more on what Argo shutting down means if anything for the near intermediate term evolution of the space.
And kind of specifically as it relates to further consolidation our partnerships does it hurt or help Aurora in any way.
Yeah. So we've been talking about consolidation basically since the company was founded.
As we think about the future here.
What we're seeing is just the natural evolution of any industry. If you think of the automotive industry.
At the beginning of the 20th century, there were 250 manufacturers and by the 19 thirties there were three.
And so like any other space, you're going to see a proliferation of companies to begin and I think that's a very healthy part of building the ecosystem and then over time those of US who have the team has the technology and have the ability to execute them.
Are going to be positioned for success as we look at Argo.
I said in my post about this.
These are folks who are aligned on the mission with us and.
Many of them are friends. So we're a little sad to see that happen, but we think it's just a natural course of business.
For us.
Puts into stark relief the value of being an independent company. The factor, we we who are left.
The line people behind the mission that we're on.
It would be able to steer the ship where it needs to go to be successful right and it is the bat as opposed to one of the beds.
We believe that from day one.
Right that makes sense.
And then just one more from me it's more of a high level of question on like how the self driving industry slash ecosystem may be impacted by.
A longer period of high interest rates in place and and recessionary pressures and what sort of impact might that have on your timetable for commercialization or right of Casper if any.
Okay. So maybe I'll start Richard now could you do so.
I think.
When we look at the opportunity in this space nothing has changed if anything that there's even more demand for freight that there was a few years ago.
And so he.
Having a company that has the right business model the technology and the approach to the market and going after what is clearly the right entry point I.
I think sets us up for success and I expect.
Most of our investors when they look at the opportunity in this space. If we're able to continue to execute as we expect where we expect to be in a very strong position in and if anything this downturn is kind of helping clear the table and.
Make it more clear who the winters are in Google losers will be.
In terms of the the economic environment internally.
Taken efforts to focus our spending be efficient with the money we're using.
And to push out the runway for the company Richard If you care to add more of that sure I agree with everything Chris said and we're fully aware of the macroeconomic environment and how that is not favorable for growth stocks like ours, but as Chris said the opportunity underline the business is still the same it's not bigger and it's all about.
Our ability to execute against our roadmap we.
We certainly feel very fortunate that we raised the capital that we did in the past.
So as we said at the end of Q3 with $1.2 billion cash and short term investments on the balance sheet, we really feel that gives us the opportunity to to write out the current situations in the market gives us the ability to continue to execute on a road map and we feel confident that will have the opportunity to raise more capital that we'll need to execute.
Into the future. So we've never shied away from the fact that we do need to raise more money in our current runaway gets his three may 2024, but we certainly feel that gives us plenty of time for the macro environment to change for us to execute in them.
We feel good about a position.
Great. Thanks.
Thank you.
Okay, ladies and gentlemen that star one to ask a question.
And there appear to be enough.
And there is a question from Martellini from Goldman Sachs Go ahead Mark.
Hey, guys you have Ryan he bond for Marc Delany and thank you very much for taking the question.
Are you guys seeing the macroeconomic backdrop at the moment impact any suppliers timelines as it relates to when Avi Chuck platforms could be ready.
Perhaps if they're being a little bit more disciplined donahoe R&D.
I think.
I listened into the pack or earnings call. The other day and I think they had a record quarter.
So I think the demand for freight.
Is just increasing in so they seem to be.
Doing great work I think.
Pressed and had a great answer to.
To a question about how much they invest in R&D, and it's where they see a man's value for customers and from where I say see where I sit the benefits of what we're building together are profound for customers increasing safety on the road for their customers improving efficiency increase.
Increasingly truck utilization so.
We're excited and continue to be really happy with the execution with our partners.
Thank you.
And that appears to be sorry that appears to be the last question at this time I'd like to now turn it back to mash meant for any closing remarks.
Thank you everyone for joining us and we look forward to connecting on our next call the shower progress.
Thank you Jesus does conclude today's conference. We thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
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