Q4 2022 Aurora Innovation Inc Earnings Call
[music].
Greetings and welcome to the Aurora Innovation fourth quarter 2022 business review call. At this time, all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
If anyone should require operator assistance. During this conference. Please press star zero on your telephone keypad.
Please note that this conference is being recorded I will now turn the conference over to our host Stacy Feit, Vice President Investor Relations. Thank you you may begin.
Thank you Diego and good afternoon, everyone and welcome to our fourth quarter and full year 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 Aurora Dot Tech.
Shareholder letter was also furnished with our form 8-K filed today with the SEC.
On the call today with me today on the call with me today are Chris <unk>, co founder and CEO and Richard <unk> CFO .
Chris will provide an update on the progress we have made across the key pillars of our business and Richard will recap, our fourth quarter and full year 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 <unk> Dot Tech shortly after the 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 related to the achievement of certain milestones around the development and commercialization of the Aurora driver and of our horizon on our anticipated time frame 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.
In particular those described in our risk factors included in our quarterly report on Form 10-Q for the quarter ended September 32022 filed with the SEC on November three 2022, as well as the current uncertainty and unpredictability in our business the markets and the economy.
You should not rely on our forward looking statements as predictions of future events.
Forward looking statements that we make on this call are based on assumptions and beliefs as of the date hereof and Aurora disclaims any obligation to update any forward looking statements, except as required by law our.
Our discussion today may include non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute substitute for or in isolation from our GAAP results 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.
<unk> 8-K filed today with the SEC and May also be found on our Investor Relations website with that I'll now turn the call over to Chris.
Thanks Stacy.
Fourth quarter marked our first full year as a public company and in that time, we've made remarkable progress building b rourke driver or self driving system and toward commercialization of Aurora horizon or autonomous trucking subscription service.
We further these calls in the fourth quarter with our Rore drive rebate of five point O release, which we believe puts us on track to achieve our critical feature complete milestone by the end of the first quarter of 2023.
As I regularly tell our team we're reaching the end of the beginning.
Looking ahead, two significant milestones with incredible enthusiasm as we prepare to enter the next phase refining and validating our technology as we work toward closing the Roar driver safety case by the end of 2023.
At the same time, we've also continued to strengthen our operations and we've made steady progress with our OEM partners on autonomy enabled truck platforms to support our planned commercial launch by the end of 2024.
During the fourth quarter, we released a row driver pay to five point O.
Continuing our commitment to deliver quarterly product updates that advance the real driver.
This update introduced new capabilities to detect and appropriately respond to emergency vehicles like ambulances fire engines and law enforcement vehicles as I'm sure. Many of you have experienced emergency vehicles do not always behave predictably customary rules of the road to the proper response by self driving vehicles is critical to being a safe and courteous dry.
Sure.
When the Aurora driver perceives an emergency vehicle on the shoulder ahead.
Most of slowdown or change lanes, according to Texas laws, when the Aurora driver detects and active emergency vehicle ahead of or behind the truck it alerts of specialists.
Command center via or Beacon for additional guidance to include coming to a stop off the roadway if necessary.
In the video on page six of the slide deck and Aurora driver powered truck is traveling from Houston to Dallas when it encounters an emergency.
You can see the ROI driver execute a lane change to maneuver around the stock fire engine that is partially encroaching on the trucks original lane, followed by police vehicles and ambulance and emergency personnel on the shoulder.
Three to five point O also established the ability for the Aurora driver to reenter traffic from the shoulder building on the fault management system or <unk> as we call. It that we introduced last year.
Completing this end to end flow of pausing and resuming operations. While on route is a mission critical capability.
As a quick refresher the Fms is designed to actively monitor the health of the vehicle and the Aurora driver and mitigate any adverse events.
So now if the system teams that are necessary to pull off to the shoulder for something such as an extreme weather event. The ROE driver also now has the ability to reenter the flow of traffic once the issue has been resolved.
You can see an example of this end to end capability in the video on page seven of the slide deck.
Were all drivers Fms has been triggered which initiated communication with a specialist in our command Center Aurora Beacon.
For our drivers and executes on the command from specialists to pull over the shoulder.
After addressing the situation you can then see the Aurora driver waitress safe opportunity to merge back into traffic begin to accelerate and then successfully returned from shoulder.
Lastly, as we've talked about in previous updates construction is one of the biggest challenges in autonomous vehicle faces while operating on the highway.
New road signs changing traffic patterns, and Varian road blockages create situations that require specific capability set one of the most common situations faced as the need for a truck to partially or completely deviate from its currently due to construction barriers, which may include driving on the shoulder of the road.
With the <unk>, we don't release, we built on previously released capabilities that address construction scenarios, introducing the ability to navigate lanes with temporary barriers. We also extended the distance the euro where drivers able to nudge around obstacles outside of the currently including driving partially on the shoulder for an extended period of time.
The addition of these capabilities eclipsed the road driver with the skills necessary to handle even more construction scenarios that may encounter encounter while hauling commercial loads for our customers.
In the video on page eight of the slide deck you can see these capabilities come to life Bureau, our driver is traveling from Fort worth well pass when it encounters complex construction seen.
Fewer driver recognizes that a lane has been created first with cones and then with cones in Jersey barriers.
Driver confidently proceed through this construction soon utilizing the extra buffer we enabled enabled by driving partially on the shoulder to give itself the extra space. It needs since the cones are encroaching in its Wayne.
The beta five point O release continues our work at building on our previous updates and advancing <unk> towards the future complete milestone, which we expect to achieve at the end of the first quarter of 2023.
As we begin to shift our focus to the next stage of preparing for commercialization I'm excited to share that the first lien that we plan to launch the road driver one is Dallas to Houston.
Once your drivers feature complete this will indicate that we have implemented all of the capabilities necessary for the Dallas to Houston launch late and removed all policy interventions for this route.
Following this step we then plan to enter the final phase of refining the ROI drivers performance through subsequent beta releases and completing the necessary foundation to close the safety case for the Aurora driver to operate without a person on board by the end of 2023.
The completion of this is the milestone we call Aurora driver ready.
One of the ways, we measure continuous improvement is by how often a vehicle operator needs to intervene to support a particular capability.
A great example of this is our ability to handle road debris, which can be dangerous and it's also comment on highways.
As you can see in the chart on page nine of the slide deck through incremental refinement to our borough debris detection capability that we introduced in September we achieved an approximately 70% decline in vehicle operator interventions due to road to Bruce.
While we continue to advance our software we are simultaneously maturing the rural drivers hardware to support our commercial launch as well as taking steps toward our longer term scalable hardware kit.
During the fourth quarter, we demonstrated the performance of a prototype of our proprietary first light light are using our in house designed silicon Photonics chip.
The prototype has demonstrated the compatibility of our silicon Photonics technology with our lighter architecture by meeting or exceeding the performance of our existing lidar.
The ability to consolidate fragile fiber optic cables with complex within complex assemblies into silicon chips.
Each the size of a fingernail is a key step toward a fully integrated and fiber list for slight lidar.
Our silicon Photonics are designed to create a clear path to our longer term cost and reliability targets for first flight at scale.
Turning to our operations in the fourth quarter, we exceeded our target to autonomously all 30 loads per week for our pilot customers and.
And I am happy to share that we have already achieved our first critical of 40 loads per week well ahead of schedule.
Customers continue to increase their usage of Aurora horizon, which allows us to further leverage commercial runs to help offset the cost of development and validation of the Aurora driver while operating in a commercially representative said.
Cumulative to date through February 12, we have autonomy suite delivered under the supervision of vehicle operators 1150 loads driving 324000 miles with 98% on time performance for our pilot customers, including Fedex, Warner Schneider and Uber freight and.
Additionally, our commercial ready terminals offer partners to define flow and a complete end to end experience, allowing them to see how easily Aurora driver powered trucks can be integrated into their networks.
In the fourth quarter, we also announced a strategic collaboration with Ryder to pilot an onsite fleet maintenance program. This will put rider technicians on the ground at our terminal in Dallas to provide inspections maintained trailers and help minimize downtime.
Through this collaboration our goal is to reduce maintenance costs and unlock higher utilization to bring added value to our pilot customers and further position Aurora horizon for Thomas operations at scale.
In addition to optimizing our operations, we continue to work closely with regulators elected officials law enforcement and local communities to drive positive momentum for self driving commercialization.
We had an exciting development last quarter in Pennsylvania, which start to 2022 is one of the few states where self driving vehicles were not permitted to operate without a human driver.
Through continuous engagement, we helped shape legislation that was signed into law in November unlocking the state for driverless testing and deployment of passenger vehicles and trucks.
Our commitment to the Commonwealth is substantial and is underscored by the robotics Autonomous Engineering Associates degree program. We recently launched in partnership with the Pittsburgh Technology College.
This is a program designed to support local communities and open the door to unique jobs, we expect to be creating the autonomous vehicle industry. We are seeing great interest in the program and are working to replicate it with several institutions across the country.
Additionally, we are encouraged by the continued progress we are seeing in California towards permitting deployment of autonomous trucks in the state.
Following the open letter submitted by the industry to cabin Governor Newsome less of them or the state held a workshop last month to discuss modifying regulations around heavy duty autonomous vehicles.
Further as part of <unk> commitment to safety and transparency in December we released an updated safety report our 2022 voluntary safety self assessment or SSA I encourage you to review the paper, which can be found on our website. It outlines our safety approach centering around five pillars proficiency fail safe.
Continuous improvement resilience and trustworthiness.
Safety is at the core of our work with our truck OEM partners <unk> and pulpwood trucks in the fourth quarter. We worked in collaboration with <unk> to build an important prototype of their truck platform designed specifically for autonomous commercial scalability.
And we were proud to have our joint development of a peterbilt 579 equipped with euro or driver showcase bipack car at their booths at the 2023 consumer electronics show in January .
Additionally, we were excited to have a prototype volatile P&L with Aurora driver hardware showcased at the American Trucking Association Management Conference and exhibition in October .
We continued development with Volvo Autonomous solutions on an autonomous VNS featuring enhanced control interfaces breaking steering in power systems to achieve the reliability needed for safe driverless operations.
We're always pleased to see our customer and OEM partners to find opportunities to work together and drive progress towards the commercialization of autonomous vehicles in the fourth quarter volatile autonomous solutions and Uber freight announced a strategic partnership that involves the planned deployment of Volvo's autonomous transport transport solution.
If rates network, which is made possible by the joint work, we're doing with VHS to development scale Autonomous transportation solutions with your driver.
In closing I'd like to reiterate the progress <unk> has made over the last year, we built expanded and strengthened key partnerships, while maturing the key elements of Aurora Horizon. The road driver operations and truck platforms. We've continued to successfully execute against the objectives, we identified on our roadmap to commercialization.
Time or early every quarter.
We've continued to attract top talent and make strategic hires to help us achieve our upcoming milestones I.
I am pleased to share that we've recently appointed OS Fisher as our new President to help further support our business.
Who will be based in Dallas and brings more than 20 years of leadership experience to Aurora will help us unlock more efficiencies across our company and further strengthen our existing relationships with industry, leading partners as we scale and prepare for commercial launch.
We also welcome to Chris Barrett to lead people operations, Chris brings extensive leadership experience and fostering strong culture and high performing teams spanning the tech and medical industries and I'm thrilled he has joined the team.
Earlier in February we were also honored to be named by Lexisnexis is one of the companies leading the future of science and technology and its innovation momentum 2023, the global top 100 intellectual property report.
This distinction is particularly notable as Aurora was the only technology company recognized.
And one of just three companies in the automotive industry.
<unk> inclusion in this report, which is an external and independent measure of global technological strength innovation momentum and patent quality validates our belief that we have one of the strongest self driving intellectual.
Property portfolios, which we expect to support our path to commercial launch.
2023 will be a pivotal year for our business as we focus on reaching feature complete by the end of the first quarter closing the real driver safety case for a largely in Texas and preparing for commercial launch by the end of 2024, we're incredibly excited to share our progress during the coming year and showcase all of the work that has been years in the making to reach what we expect to be.
Milestones for Aurora.
Despite macroeconomic conditions I'm, the most optimistic about the state of our business and our progress and I've ever bit with that I will now pass it over to Richard who will review our financial results.
Thank you Chris.
During the fourth quarter of 2022, we recognized the remaining $2 million in collaboration revenue.
Under our development agreement with Toyota for a total of $6 million to $8 million recognized in 2022.
Cumulative to date, we have now recognized all $150 million for our development work under the collaboration framework agreement and all cash payments have been received.
While our first priority is commercialization of our horizon. We continue to believe I'll work with Toyota and other long lead efforts will spring allowed us for the eventual launch of <unk> connect our subscription service for the ride hailing market.
During the fourth quarter, our market capitalization declined to below our carrying value of net assets, triggering a $114 million noncash reduction in the carrying value of goodwill.
This brought the total noncash reduction in goodwill to $1 1 billion in 2022.
There is no change to our outlook for the business as Aurora has acquired nor how we expect them to contribute to our commercialization.
Including the reduction in the carrying value of goodwill and stock based compensation of $44 million in the fourth quarter and $156 million in 2022 fourth quarter in 2022 operating expenses totaled $314 million and $1 9 billion respectively.
Excluding these noncash expenses fourth quarter operating expenses were $156 million.
Within operating expenses fourth quarter, R&D expenses, excluding $38 million in stock based compensation totaled $131 million.
SG&A expenses exclude.
Excluding $6 million in stock based compensation were $25 million.
2022, cash operating expenses totaled $650 million.
2022, R&D expenses, excluding the $137 million in stock based compensation totaled $540 million.
2022, SG&A expenses, excluding $19 million in stock based compensation were $110 million.
Turning to cash flow, we used $141 million in operating cash during the fourth quarter.
During fiscal 2022, we used $508 million, which reflects a $100 million inflow related to the trade agreement.
Capital expenditures totaled $3 million in the fourth quarter and $15 million in fiscal 2022.
We ended the year with a very strong balance sheet, including $1 1 billion in cash and short term investments.
Taking into account cost savings and cost avoidance actions. We took in 2022, we continue to expect our cash to fund it will run through mid 2024, enabling us to continue to execute on our Aurora Horizon Friedman.
With that we'll now open the call to Q&A.
Thank you and ladies and gentlemen at this time, we will conduct a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.
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Our first question comes from Tom White with D. A Davidson. Please state your question.
Hey, this is why advancement on for Tom Thanks for taking our questions. My first one is.
You guys provide a bit more detail on the progress of your OEM partners as it relates to the platform work happening on there and any notable milestones or developments reach since you last updated us and then any aspects of the roadmap there that might be tracking behind schedule due to either inflationary forces macro pressures or any other reason.
Sure happy to talk a little bit about this and obviously there is a limit to how much we can say about those programs given the confidential nature of the relationship with them on that.
I think we shared a couple of examples of progress we're making on prototype vehicle development that are on the path to commercial scale, we've done that with what we shared about the progress with Pac are on that.
So with Volvo I don't know if there's much more unfortunately that I can say about that at this time.
I think.
In regards to the roadmap, we still believe we're on track to achieve feature complete.
Further to achieve or drive already at the end of this year and are looking to hit the commercial launch milestone that we've set out for next year as well.
Understood. Okay. Thank you and then just a follow up.
Kind of curious how you guys are thinking about your head count levels for this year relative to maybe what your head count expectations for 2023 were this time last year.
Bunch of tech companies laying people off recently.
<unk> been any head count reductions contemplated in your outlook and then can you maybe talk a bit about how you are managing rising labor costs and inflation in other parts of your expense base.
Yes. So early last year, we were able to see that the economic conditions were changing from what they had been right I think we're all.
Got the cold water in the face on that.
And so at the time, we went back and revisited our plans for growth and that led us to change strategically how we're operating we've talked about the fact that we have.
Taken a stance of focusing primarily on the trucking product first while keeping the long lead work on the <unk>.
Vehicle programs working.
Moving from more of a parallel development to a sequential development on those programs, but we think that has served us well it's allowed us to limit our head count growth and we continue to expect modest headcount growth over the coming year.
Which is of course lower than what we would have anticipated again at this time last year.
What this very early and proactive approach to this along with our kind of.
Measures, even before that in 2021 mean that our head count over that time period has grown substantially slower.
Then check.
<unk> broadly and certainly our competitors and so we feel with.
With the combination of our strong balance sheets and the practices, we put in place too.
Manage costs that were in a very strong position there Richard do you want to add some more color to that yes, no I think I think you're right. Chris I think we believe we are appropriately staffed now to kind of continue to make progress against their horizon roadmap and gets commercialization I think youll see us continue to add head count.
Very strategically where it's necessary I think Chris alluded to hiring Osha Fisher as president and a new SVP of people.
So youll see things like that happen.
It's a good sign when you can attract this level of talent at the company as well they can see what we're doing they can see where we're headed and they are excited to be on board and we're certainly excited to have them.
But yes, we would expect to see kind of modest growth at most.
We've continued to do significant work internally around cost avoidance and cost saving measures.
So there's a lot of things so very small some more substantial that we've done and that just gives us the confidence that the capital that we have in the balance sheet. The $1 $1 billion that we ended the year with will continue to fund us through to mid 2024.
Great. Thank you both.
Thank you.
And once again to ask a question press star one on your telephone keypad.
Our next question comes from David Vernon with Bernstein. Please state your question.
Hey, good afternoon, guys. Thanks for taking the time.
So Richard I know youre, not going to give us guidance, but that 149 exit rate on adjusted EBITDA kind of gets you to the middle of next year, you guys had mentioned a little bit of a head count increase business. She is going to be sort of modest to replace attrition or are we actually expanding R&D footprint as we get through 2023.
Yes, I would say.
Very modest and primarily to replace attrition, but again, if there's really great talent out there and.
And we feel like that can help us achieve that mission then I think we would be we'd be on the market for that talent, but we have what we think is a solid base of people and we do not project significant head count growth from today.
Okay, and then Chris a couple of questions.
Can you help us as Lee.
Lehmann understand the significance of the.
The silicon based lidar and what that does to the to the cost of the system over time I'm, assuming that can have some sort of benefit in terms of.
Maintenance reliability upfront costs could you just kind of help us turn that into something that we can think about from an investment standpoint.
Yes, absolutely it is.
Is.
I think just from it from a technology point of view you can think of this as the equivalent of moving from discrete components and electronics capacitors resistors and whatnot.
Into an integrated circuit.
And it's the same type of approach that we're using but with optical components instead of electrical components.
The massive benefits we see from this is Juan it's instead of.
Having a significant amount of labor and cost and those components labor and assembling and cost those components, we can print the.
Effectively at a fab.
Yet.
Of them order on a wafer.
So that makes them the unit economics for each of these leaders going forward dramatically better.
Adequate more reliable because instead of having these <unk>.
Fragile fiber links between places youre able to get to.
Integrated components that are.
I think a little pieces of rock there is not going to be a whole lot of risk to them. So.
So we see this as one of the strategic investments as we begin to scale. The business. If you look at the cost structure of the delivering the ROI driver the largest part of that sort.
Early on.
Is that the hardware costs.
Within the hardware costs.
The computer has a lidar are the two largest pieces of that.
This is the.
One of the biggest steps, we can take in reducing that cost.
And from a unit economic standpoint that would become that'd become like a fraction of the cost of the debt.
The existing lidar like what Mike is there a magnitude you can help me understand.
Yes that you can think of that as a.
<unk>.
A meaningful fraction reduction.
So I don't know if its quite order of magnitude is probably in that ballpark.
I appreciate that extra color if I could just squeeze one last one in here.
You mentioned youre getting up to 30 40 loads a week.
You guys are thinking about the sort of reliable reliability of the equipment on the trucks that maintenance and the turnaround times can you give us a sense for sort of the operating cost per mile how that sort of progressing from maybe where we were a year ago to the to the exit rate of where we are today.
Yes, so so on the maintenance sorry on the reliability of the components on the vehicle our engineering team runs a rigorous.
Reliability process.
Shaken baked systems here.
We look through the failure of the components that we can drive performance softened and so we see that is maturing very nicely, we arent providing guidance on the cost structure at this point directly now.
Okay. Thanks.
Thanks, very much for your time guys. Thanks.
Pleasure. Thank you. Thank you.
Thank you and ladies and gentlemen, there are no further questions at this time and with that we conclude today's conference call. You may all disconnect. Your lines at this time. Thank you for your participation.