Q3 2023 Aurora Innovation Inc Earnings Call
Hello, and welcome to the Aurora third quarter 2023 business review call. If anyone should require operator assistance. Please press star zero on your telephone keypad.
And answer session will follow the formal presentation.
You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded.
It's now my pleasure to turn the call over to Stacy Feit, Vice President of Investor Relations. Please go ahead Stacey.
Thanks, Kevin Good afternoon, everyone and welcome to our third quarter 2023, a business where we.
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 thought of where I thought that this shareholder letter was also furnished with our form 8-K filed today with the SEC.
On the call with me today are Chris Arntson, co founder and CEO and David Day CFO.
Chris will provide an update on the progress we have made across the key pillars of our business and David will recap our third quarter financial results.
We'll then open the call to Q&A.
A recording of this conference call will be available on our Investor Relations website at IR data right that attack shortly after the call has ended.
I'd like to take this opportunity to remind you that during the call we'll be making forward looking statements.
These include statements relating to the achievement of certain milestones around realization of the potential benefits of the development manufacturing scaling and commercialization of the Aurora driver in Aurora Horizon, our anticipated timeframe do you expect the performance of our business and potential opportunities with partners and customers.
The contract commitments from customers for our products and services expected cash runway and overall future prospects.
Statements are subject to known and unknown risks uncertainties that could cause actual results to differ materially from those projected or implied during this call.
Particular, those described in our risk factors included in our annual report on Form 10-K for the year ended December 31, 2022 filed with the SEC as well as the current uncertainty and unpredictability in our business the markets in economy.
Additional information will also be set forth in our quarterly report on Form 10-Q for the quarter ended September 32023.
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 where I can spend 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 regarding our non-GAAP financial results, including a reconciliation of our historical GAAP to non-GAAP results.
Found in our shareholder letter, which was furnished with our form 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.
Thank you Stacey.
The third quarter was a period of intense focus on execution across our organization.
In addition to completing $850 million capital raise we also continue to make strong progress toward closing the road driver safety case further enhanced or autonomy performance scaled our trucking operations and advanced our partnerships.
We executed all of this while also maintaining fiscal discipline.
We managed our cash that below our quarterly average target.
We also saw some key developments on the legislative front during the third quarter I had the honor of presenting to the house transportation infrastructure Committee on the future of automated commercial motor vehicles being the only company invited to represent the industry at this federal legislative hearing underscored our leadership position in autonomous trucking at the trust we have.
With policymakers through our transparent and engaged approach.
I was proud to speak about the economic value of autonomous trucks, the meaningful progress we've made as a company and industry and most importantly, how we prioritize safety at Aurora.
Bipartisan recognition of the safety and efficiency benefits of this technology, along with a consensus view that the U S. Much solidified leadership with respect to its finest vehicle technology with central to the discussion.
Throughout my career I've spent significant time with our partners and government and I saw a tangible shift in tone in this congressional meetings.
It's no longer a question of if.
Autonomous trucks will arrive, but rather just a question of when.
At the state level under existing law and regulation autonomous vehicles can help save you deployed the vast majority of the U S, including Texas, where current law expresses expressly enables safe operation autonomous vehicles with or without a human driver.
Operator: Hello, and welcome to the Aurora 3rd Quarter 2023 Business Review Call. If anyone should require operator assistance, please press star zero under telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question two at any time by pressing star one under telephone keypad. As a reminder, this conference is being recorded.
California. However, it has been an outlier with respect to autonomous trucking.
We saw a very positive development in September with Gavin Newsom Governor Newsom vetoed the driver it Bill $83 16.
Stacy Feit: It's not my pleasure to turn the call over to Stacy Feit by his present investor relations. Please go ahead Stacy. Thanks Kevin.
This was a meaningful statement and recognition of the value our technology can drive both in terms of safety and economic benefits.
Stacy Feit: Good afternoon everyone and welcome to our 3rd quarter 2023 Business Review Call. We announced our results earlier this afternoon. Our shareholder letter and a presentation to accompany this call are available on our Invest Relations website at ir.ervora.tech. The shareholder letter was also furnished with our form 8K files today with the SEC.
We're committed to working closely with the California Department of Motor vehicles in California Highway patrols in anticipation of the release of draft regulations for autonomous commercial vehicles as part of the rulemaking process that is currently underway in the state.
As we continue to work with regulators and legislators, we hold steadfast where principles of openness and transparency.
Stacy Feit: On the call with me today, our Chris Urmson, co-founder and CEO, and David Badez, CSO. First we'll provide an update on the progress we have made across the key pillars of our business, and David will recap our 3rd quarter financial results. We will then open the call to Q&A.
<unk> trusted relationships with all of our stakeholders is fundamental to our approach.
Now, let's dig into our third quarter highlights.
We stated our safety case, the comprehensive evidence based approach to confirming or self driving vehicles are acceptably safe to operate on public roads that.
Stacy Feit: A recording of this conference call will be available on our Invest Relations website at ir.ervora.tech shortly after this call has ended. I'd like to take this opportunity to remind you that during the call, we will be making forward with the statement. We conclude statements relating to the achievement of certain milestones around realization of the potential benefits of the development, manufacturing, scaling, and commercialization of the Aurora driver and Aurora Horizon. Our anticipated timeframe, the expected performance for our business, and potential opportunities with partners and customers, expected contract commitments from customers for our products and services, expected cash runway, and overall future prospects.
It goes beyond just ensuring the vehicles drive well enough for a demo rather demonstrates that our product and our company are holistically and sustainably safe.
The autonomous autonomy readiness measure or arm is a weighted measure of completeness across all claims of our safety case with the launch late it reflects the percentage of work needed to move from a feature complete milestone, which we achieved at the end of the first quarter through our next milestone Aurora driver ready when we will have confidence in the road drivers ability to.
Operates safely without a person on board.
We achieved an arm of 84% as of September 30th 2023. This is up 40 points since our feature complete milestone at the end of the first quarter and up 19 points during the third quarter alone.
Stacy Feit: These statements are subject to known and known 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 annual report on form 10K for the year ended December 31st, 2022, filed with the SEC, as well as the current uncertainty and unpredictability in our business and markets and economy. Additional information will also be set forth in our quarterly report on form 10K for the quarter ended September 30th, 2023.
Within Aurora, we track who work in closing our safety case across the core elements of our product.
Our driver hardware Aurora services vehicle integration and Aurora driver software.
Today, we have completed all of the claims related to Aurora drive of hardware and services necessary for commercial launch.
Stacy Feit: You should not rely on our forward listening statements as predictions of future events. All forward listening statements that we make on this call are based on assumptions and beliefs as the data has, and Aurora expands any obligation to update any forward listening statements, except as required by law. Our discussion today may include non-gap financial measure. These non-gap measures should be considered in addition to and not as a substitute for or an isolation from our gap results.
We've also closed all of the vehicle integration claims for Aurora driver ready these.
These three teams are now primarily focused on the respective work to prepare for growth beyond our planned commercial launch.
Drilling into hardware, specifically engineering, the Aurora driver hardware for enhanced reliability and to withstand the harsh environmental conditions trucks can experience on the road is essential to maximizing uptime.
Stacy Feit: Information regarding our non-gap financial results, including a reconciliation of our historical gap to non-gap results, may be found in our shareholder letter, which was furnished with our form 8K filed today with the SEC, and may also be found on our investor relations website.
Complete at the hardening of our drive it was hardware and our new fleet is now equipped with the latest generation of the Aurora driver Kids.
This will be our commercial launch hardware platform and also contains hardened versions of our proprietary first like Lidar and computer both of which have been tested to meet our target levels of reliability.
Christopher Urmson: With that, I'll now turn the call over to Chris. Thank you, Stacy. The third quarter was a period of intense focus on execution across our organization. In addition to completing the $850 million capital race, we also continue to make strong progress toward closing the Aurora driver safety case, further enhance their autonomy performance, gale-dark trekking operations, and advanced our partners. We executed all of this while also maintaining fiscal discipline, having managed our cash spent below our quarterly average target. We also saw some key development from the legislative front.
Good and visuals that this integrated hardware on page seven of the slide deck.
It's mounting location is optimized for performance well its modularity enabled service ability on the road and.
And it's pretty darn good look too.
Our our driver software teams have also made great progress toward or driver ready.
As a reminder, and autonomy systems performance must be validated against the vast number of scenarios many of which are thankfully rare on public roads in turn the key component of our approach Leverages Aurora is virtual testing suite amplify exposure to rare and as yet unseen events to test the road driving performance of those scenarios.
Christopher Urmson: During the third quarter, I had the honor of presenting to the House Transportation Infrastructure Committee on the future of automated commercial motor vehicles, being the only company invited to represent the industry at this federal legislative hearing, underscored our leadership position in autonomous trucking. At the trust we have built with policymakers through our transparent and engaged approach. I was proud to speak about the economic value of autonomous trucks. The meaningful progress we've made as a company and industry, and most importantly, how we prioritize safety at Aurora.
Success with these tests supports closure of the safety case claims and our belief that your drivers designed to respond appropriately to such rare scenarios.
We now anticipate completing the work to validate a small number of our Aurora driver safety case claims will stretch beyond our end of year ago Importantly, the work on this segment of claims does not impact our expected timing for commercial launch.
Christopher Urmson: By partisan recognition of the safety and efficiency benefits of this technology, along with a consensus view that the US must solidify leadership with respect with autonomous vehicle technology was central to the discussion. Throughout my career, I've spent significant time with our partners and government, and I saw a tangible shift in tone in this congressional meeting. It's no longer a question of if autonomous trucks will arrive, but rather just a question of when.
This work is being performed by a limited subset of the team.
We expect this work and thus the achievement of our driver ready to be completed around the end of the first quarter of 2024.
We have decided not to reallocate additional resources to this and instead are maintaining our momentum toward commercial readiness and we are already reallocating parts of our engineering team to begin work beyond the ROIC driver ready milestone, including efforts to improve the cost effectiveness and to increase the breadth of places and conditions under which the Aurora driver could operate.
Christopher Urmson: At the state level, under existing law and regulation, autonomous vehicles can help to be deployed in the vast majority of the US, including Texas, where current law expressly enables the safe operation of autonomous vehicles with or without a human driver. California, however, has been an outlier with respect to autonomous trucking. We saw a very positive development in September when Governor Newsom vetoed the private bill, AB 316. This was a meaningful statement in recognition of the value our technology can drive within terms of safety and economic benefits.
Uh huh.
The Aurora driver development and validation process is complex so I'd like to take a moment to walk you through an example of how we've progressed the Aurora driver system through development to this lease late stage validation.
For this example, we'll look at our sideswipe avoidance capability.
Well not an everyday occurrence sideswiped collisions are one of the most common collision to counter buy trucks on our roads. So of course, the real drivers, sometimes encounter situations in which a truck or light vehicle in a neighboring link on a highway begins to intuit slate.
We've designed the Aurora drivers response to these potential sites wipes to emulate our expert commercial drivers handle these scenarios.
Christopher Urmson: We're committed to working closely with the California Department of Motor Vehicles in California Highway Patrol in anticipation of the release of draft regulations for autonomous cargo vehicles as part of the rulemaking process that is currently underway in the state. As we continue to work with regulators and legislators, we hold steadfast to our principles of openness and transparency. Building trusted relationships with all of our stakeholders is fundamental to our approach.
On page five of the slide deck. We've included a collection of stipulations, demonstrating how the Aurora drivers responses now matches, how operators had reacted in the past before our system, which reliably able to respond appropriately.
On page six of the slide deck, you can see a real World example of euro or driver traveling south bound in I 45 between Dallas and Houston, when our truck is almost clipped by a trailer traveling mostly in the neighboring lane.
Christopher Urmson: Now let's dig into our third quarter highlights. As we stated, our safety case, the comprehensive evidence-based approach to confirming our self-driving vehicles are acceptably safe to operate on public roads. It goes beyond just ensuring the vehicles drive well enough for a demo, rather demonstrates that our product and our company are holistically and sustainably safe. The autonomous autonomy readiness measure or arm is a weighted measure of completeness across all claims of our safety case for the launch late.
The Aurora driver perceives the sideswipe threat assesses the surrounding environment, including determining that space on the shoulder to the right and then shifts itself to the right portion of its lane temporarily and safely crossing the shoulder boundary. These.
These actions enable your driver to successfully avoided sideswiped scenario.
We now have confidence euro drives the ability to handle such size questionnaires appropriately and we're in the process of completing the final validation.
Christopher Urmson: It reflects the percentage of work needed to move from the future complete milestone, which we achieved at the end of the first quarter, to our next milestone, our road driver ready, when we will have confidence in the road driver's ability to operate safely without a person on board. We achieved an arm of 84% as of September 30, 2023. This is up 40 points since our future complete milestone at the end of the first quarter and up 19 points during the third quarter alone.
As evidenced in this example, we continue to see our validation work accelerating the quality of the real driver improving.
Everyday our partners customers and regulators, we were able to experience these improvements as part of our showcase program.
We continue to make great progress and are focused on achieving our commercial launch on schedule at the end of 2024.
Concurrent with the safety case work and the bring up of our new fleet with our driverless hardware, we continue to scale, our trucking operations during the third quarter.
Christopher Urmson: Within Aurora, we track the work in closing our safety case across the core elements of our product for road driver hardware, Aurora services, vehicle integration, and a road driver software. Today, we have completed all of the claims related to a raw driver hardware and a raw services necessary for commercial launch. We've also closed all of the vehicle integration claims for a raw driver ready. These three teams are now primarily focused on the respective work to prepare for growth beyond our planned commercial launch.
We finished the build out of our second commercial ready terminal located in Houston. This terminal completes the infrastructure needed for driverless operations on our Dallas to Houston commercial launch late and establishes the first commercial ready eponymous trucking lanes in the U S. We.
We've included footage of the new terminal on page eight of the slide deck.
Despite a cyclically challenged commercial freight market, we continue to make steady progress growing our commercial loads and operational capabilities in preparation for commercial launch.
Christopher Urmson: Drilling at the hardware specifically, engineering the raw driver hardware for an astral ability and to withstand the harsh environmental conditions trucks can experience on the road is essential to maximizing uptime. We've completed the hardening of our driver's hardware and our new fleet is now equipped with the latest generation of the raw driver kids. This kit will be our commercial launch hardware platform and also contains harden versions of our proprietary first light light art and computer, both of which have been tested to meet our target levels of reliability.
We can turn achieved our end of third quarter targets with honestly Hall 75 loads per week for our customers. We are now logging over 20000 commercial miles per week cumulative to date through October 29, we have autonomously delivered under the supervision of vehicle operators over 3200 loads driving more than 895000.
Commercial miles with nearly 100% on time performance for our pilot customers, including Fedex Werner Schneider pushback ore freights.
Christopher Urmson: We've included visuals of this integrated hardware on page seven of the slide deck. The kids mounting location, is optimized for performance, while its modularity enables surface ability on the road. And it's pretty darn good looking too. Our raw driver software teams have also made great progress toward our driver ready. As a reminder, an autonomy system's performance must be validated against a vast number of scenarios, many of which are thankfully rare on public roads.
One way, we measure our performance successfully operating the authorized service commercially representative setting is through the on road autonomy performance indicator or API.
This metric allows us to track not just the state of our technology with the maturity of our processes and procedures and operating our business.
Indicated penalizes the use of onsite support which would be the most expensive support provided to enable or horizon.
Christopher Urmson: In turn, the key component of our approach leverages, our worst virtual testing suite to amplify exposure to rare and as yet unseen events to test the raw driver performance of those scenarios. Suggestive test supports closure of the safety cage claims and our belief that the raw driver is designed to respond appropriately to such rare scenarios. We now anticipate completing the work to validate a small number of our raw driver safety case claims will stretch beyond our end of year goal. Importantly, the work on this segment of claims does not impact our expected timing commercial launch. This work is being performed by a limited subset of the team.
As a reminder, we did not anticipate that aggregate API will be 100% even at launch because certain situations. For example, flat cars will always require onsite support.
As we look ahead, the commercial launch of beyond scalability and ultimately our profitability will be supported by a reduction in the level of onsite support required.
We believe it is important to hold our teams accountable for delivering a complete commercially representative products in evaluating its performance on that basis. The API is one way we do this.
For the third quarter of 2023 D. API was 98% demonstrating another quarter over quarter increase.
Christopher Urmson: We expect this work and thus the achievement of our raw driver ready to be completed around the end of the first quarter of 2024. We have decided not to reallocate additional resources to this and instead are maintaining our momentum toward commercial readiness. We are already reallocating parts for our engineering team to begin work beyond the raw driver ready milestone, including efforts to improve the cost effectiveness and to increase the breadth of places and conditions under which the raw driver could operate.
Across the commercially representative loads completed pilot operations on our launch late in the third quarter. We again saw a notable improvement in autonomy performance quarter over quarter.
Over 60% of these loans had an API, a 100% and 84% had an API greater than or equal to 99% in the shareholder letter and on page 10 of the slide deck, you can see the solid progression of autonomy performance throughout this year.
I'd like to take a moment to show you a few examples of just how good the Aurora drivers performances, specifically in challenging traffic conditions encountered during the third quarter on both highway and surface streets.
Christopher Urmson: The raw driver development evaluation process is complex, so I'd like to take a moment to walk you through an example of how we progress the raw driver system through development to this late stage of validation. For this example, we'll look at our site's wife avoidance capability. While not in everyday occurrence, site's wife collisions are one of the most common collisions encountered by trucks of herodes. So, of course, the raw driver sometimes encounters situations in which a truck or light vehicle in a neighboring lane on a highway begins to peer into its lane.
And the video on page 11 of the slide deck on I 45, an approach to Houston, the real drivers besides of the law changed the lift it turns on its turn signal.
And it starts the lane change and other vehicle begins a last minute aggressively change into the same space Euro driver immediately recognizes this contested situations and very naturally posits its full lane change, allowing the other vehicle passed by then safely completed the original rate change plan.
Christopher Urmson: We've designed the raw driver's response to these potential site's wives to emulate our expert commercial drivers and all these scenarios. On page 5 of the slide deck, we've included a collection of simulations demonstrating how the raw driver's response now matches how operators had reacted in the past before our system was reliably able to respond to pro. And on page 6 of the slide deck, you can see a real-world example of the Aurora driver traveling southbound in I-45 between Dallas and Houston when our truck is almost equipped by a trailer traveling mostly in the neighboring lane.
The other driver then proceeds to cut across multiple lanes of traffic.
It's a new Jersey slide is the technical term.
In the example of page 12 of the slide deck you real driver is just exited the highways Houston traveling south down after a stoplight has turned green it foresees a vehicle and its late driving the wrong way down the road.
The real drivers slows at speed given the state of your situation, which allows the oncoming vehicles will take its turned off the road.
The real drivers response enables it to avoid the potential collision.
Christopher Urmson: The Aurora driver perceives this side-swipe threat, assesses its surrounding environment, including determining if it has space on the shoulder to the right, and then shifts itself to the right portion of its lane, temporarily and safely crossing the shoulder boundary. These actions enable the Aurora driver to successfully avoid this side-swipe scenario. We now have confidence in the Aurora driver's ability to handle such side-swipe scenarios appropriately, and we're in the process of completing the final validation.
Moving to our partners our work with our truck OE Aw or work with their truck OEM partners Packer, and Volvo trucks, and our new hardware as a service partner Continental continues to progress as we prepare for commercial launch it beyond.
Earlier this year, we announced a long term exclusive partnership with continental the goal of our partnerships to bring self driving technology of the trucking industry at commercial scale by jointly developing manufacturing servicing future generations of the real driver of hardware.
Christopher Urmson: As evident in this example, we continue to see our validation work accelerating and the quality of the Aurora driver improving. Every day, our partners and customers and regulators were able to experience these improvements as part of our showcase program. We continue to make great progress in our focus on achieving our commercial launch on schedule at the end of 2024. We're in current with the safety case work and the bring-up of our new fleet with our driverless hardware, we continue to scale our trucking operations during the third quarter.
Hardware as a service business model raw will pay for the hardware on a per mile basis. During the third quarter, the continental and Aurora teams achieved the first major partnership milestone, which finalize the detailed development plans for the future generations of the real driver of hardware.
We look forward to continuing our partnership with continental and to Industrialize. The first commercially scalable autonomous trucking systems with our cost structure in place intended to support our long term profitability objectives.
Christopher Urmson: We finished the build-out of our second commercial-ready terminal located in Houston. This terminal completes the infrastructure needed for driverless operations on our Dallas, the Houston commercial launch late, and establishes the first commercial-ready autonomous trucking lane in the U.S. We've included footage of the new terminal on page 8 of the slide deck. Despite a cyclically challenged commercial freight market, we continue to make steady progress growing our commercial loads and operational capabilities in preparation for commercial launch.
On the vehicle platform side during the third quarter, we brought online our new fleet of Peterbilt 579 trucks.
Fitted with the latest generation of the Aurora driver hardware kit.
This truck platform is equipped with prototype systems that will be necessary for driverless operations, including redundant braking and steering our which we are actively testing.
We also received the first autonomy enabled Volvo V N L. During the third quarter. In addition to having prototype redundant braking steering of power systems. This truck was built with the necessary structural interfaces in place to support our sensor parts simplifying the hardware installation process. We were in turn it will to rapidly integrate the ROI.
Christopher Urmson: We, in turn, achieved our end-of-third quarter target to a Thomas Lee Hall 75 loads per week for our customers. We're now logging over 20,000 commercial miles per week. A few more minutes to go. We have a Thomas Lee delivered under the supervision of vehicle operators over 3,200 loads, driving more than 895,000 commercial miles, with nearly 100% on-time performance for our pilot customers, including FedEx, Werner, Schneider, Hershbuck, and Erb-Refrains. One way we measure our performance successfully operating the Aurora Prize service, and then commercially representative setting, is through the on-road autonomy performance indicator, or API.
Fiverr is a pre assembled and tested hardware kits.
Our Bravo truck builds are continuing during the fourth quarter in preparation for autonomy testing of this platform, which is expected to begin in the first quarter of 2024.
As our teams continue to advance toward this meaningful bumped in our partnership Bob Autonomous solutions, just recently reiterated their excitement for their autonomous trucking product powered by the oral or driver and a tremendous revenue opportunity that they believe lies ahead.
This deep integration with Oems and suppliers is absolutely imperative to bring a commercially viable driverless trucking product to market.
Christopher Urmson: This metric allows us to track not just the state of our technology, but the maturity of our processes and procedures in operating our business. The indicator penalizes the use of onsite support, which would be the most expensive support provided to enable Aurora Horizon. As a reminder, we did not anticipate that aggregate API will be 100% even at launch, because certain situations, for example, flat cars, will always require onsite support. As we look ahead to commercial launch of beyond scalability, and ultimately our profitability, will be supported by a reduction in the level of onsite support required.
Over the years, we've seen a handful of autonomous trucking companies, who is the driver for a single or small series of demonstrations. None of these companies do their own truck platform that was developed with or sanction by its OEM and key suppliers for driverless operation where commercialization at scale.
With each developmental milestone we reach we're also co developing the autonomy ready truck platform and all of its sub systems with our OEM partners their tier one suppliers. We're confident that this is the right approach for the future of self driving technology as a business and frankly, we believe the only approach for commercial developed deployment at scale.
Christopher Urmson: We believe it is important to hold our teams accountable for delivering a complete, commercially representative product, and evaluating its performance on that basis. The API is one way we do this. For the third quarter of 2023, the API was 98%, demonstrating another quarter-over-quarter increase. Across the commercially representative loads, completed pilot operations on our launch lane in the third quarter, we again saw notable improvement in autonomy performance quarter-over-quarter. Over 60% of these loads had an API of 100%, and 84% at an API greater than or equal than 99%. And they share also a letter, and on page 10 of the slide deck, you can see the solid progression of our autonomy performance throughout this year.
We are more confident than ever in our leadership position and see our advantage continuing to grow we look forward to demonstrating continued progress over the coming quarters as we work toward achieving our Aurora driver milestone in preparation for our planned commercial launch at the end of 2024. Thank.
Thank you for your continued support with that I'll now pass it over to Dave who will review our financial results.
Thank you, Chris let's discuss our financial results during the third quarter of 2023, we continue to demonstrate strong fiscal discipline, while executing towards our milestones third quarter of 2023 operating expenses, including stock based compensation totaled $212 million excluding <unk>.
Christopher Urmson: I'd like to take a moment to show you a few examples of just how good the Aurora drivers performance is, specifically in challenging traffic conditions encountered during the third quarter on both highway and surface streets. In the video on page 11 of the slide deck, on I-45 on Approach to Houston, the Aurora driver decided to lane change to the left, and turns on its turn signal. And it starts the lane change, another vehicle begins a last minute aggressive lane change into the same space.
Based compensation of $41 million operating expenses totaled $171 million.
Christopher Urmson: The Aurora driver immediately recognizes this contestant situation and very naturally pauses its full lane change, allowing the other vehicle to pass by, and then safely completes the original lane change plan. The other driver then proceeds to cut across multiple lanes of traffic. I think it's a New Jersey slide is the technical serve.
Within operating expenses, our R&D expenses, excluding $36 million in stock based compensation totaled $146 million.
SG&A expenses, excluding $5 million in stock based compensation were $25 million.
With the award of a driver in the final phase of refinement and validation for the launch and all revenue under the collaboration framework agreement with Toyota previously recognized we did not record any revenue during the third quarter of 2020.
Christopher Urmson: In the example of page 12 of the slide deck, the Aurora driver has just exited the highway at Houston. Traveling southbound after a stoplight has turned green, it proceeds a vehicle in its lane driving the wrong way down the road. The Aurora driver slows its speed, given the stage of situation, which allows the upcoming vehicle to take its turn off of the road. The Aurora driver's response enables it to avoid the potential collision.
We used approximately $147 million in operating cash during the third quarter of 2023 capital expenditures totaled $5 million, including expenditures to complete the build out of our commercial ready terminal in Houston.
This total cash spent was well below our target of $175 million to $185 million per quarter on average, reflecting our strong commitment to financial discipline.
Christopher Urmson: Moving to our partners, our work with our trucker, our work with our trucker partners pack our Volvo trucks, and our new hardware service partner, Confidential, continues to progress as we prepare for commercial launch at the odds. Earlier this year, we announced a long-term exclusive partnership with Confidential. The goal of our partnerships to bring self-driving technology to the trucking industry at commercial scale. By jointly developing, manufacturing, and servicing future generations of the Aurora driver hardware.
During the third quarter, we also raised $850 million in combined gross proceeds from our private placement and public offering of our class a common stock.
Net proceeds totaled $828 million.
We ended the third quarter with a very strong balance sheet, including $1.5 billion in cash and short term investments.
Christopher Urmson: Under a hardware service business model, Aurora will pay for the hardware on a per mile basis. During the third quarter, the continental and Aurora teams achieve the first major partnership milestone, which finalized the detailed development plans for the future generations of the Aurora driver hardware. We look forward to continuing our partnership with Confidential and to industrialize the first commercially scalable, autonomous trucking systems with a cost structure in place intended to support our long-term profitability objectives.
We continue to expect this liquidity to support our planned commercial launch and fund our operations into the second half of 2025.
With that we'll now open the call up to Q&A.
Thank you well now be conducting a question answer session, if you'd like to be placed in the question queue. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to move your question from the queue for participants using speaker equipment may be necessary to pick up your handset before pressing star one one moment. Please while we poll for questions.
Christopher Urmson: On the vehicle platform side, during the third quarter, we brought online our new fleet of Peterbilt 579 trucks, upfaded with the latest generation of the Aurora driver hardware kits. This truck platform is equipped with prototech systems that will be necessary for driverless operations, including redundant braking, steering, and power, which we are actively testing. We also received the first autonomy enabled Volvo V&L. During the third quarter, in addition to having prototech redundant braking, steering and power systems, this truck was built with the necessary structural interfaces in place to support our sensor pods, simplifying the hardware installation process.
Our first question today is coming from George <unk> from Canaccord Genuity. Your line is now live.
Hi, everyone and thank you for taking my questions.
But.
Well have to do it.
Just two questions firstly I'd like to start with the regulatory environment and Theres been obviously, you had a win in California, but on the passenger vehicle side. There seems to have been some at least one of your competitors. There appears to have had a little turbulence in their operations I'm curious as to whether you could.
Christopher Urmson: We were, in turn, able to rapidly integrate the Aurora driver as a pre-assembled and pre-tested hardware kit. Our Volvo truck bills are continuing during the fourth quarter, the preparation for autonomy testing of this platform, which had expected to begin in the first quarter of 2024. As our teams continue to advance toward this meaningful moment in our partnership, Volvo Thomas Solutions just recently reiterated their excitement for their autonomous trucking product, power by the Aurora driver.
Let's talk on a broad level above the <unk>.
Friendly less on behalf of regulatory regulators in Texas and in other states outside of California, and enabling commercial service starting next year.
Thank you for asking so when we look at the landscape, we continue to see a very welcoming.
A positive atmosphere from our regulators part of our effort has been to be transparent with them.
Christopher Urmson: And the tremendous revenue opportunity that they believe life ahead. This deep integration with OEMs and suppliers is absolutely imperative to bring a commercially viable driverless trucking product to market. While over the years we've seen a handful of autonomous trucking companies pull the driver for a single or small series of demonstrations, none of these companies did it on a truck platform that was developed with or sanctioned by its OEM and key suppliers for driverless operation or commercialization at scale.
Allow them to understand our approach its why we share things like our safety case, that's why we've we've shared our approach to risk management internally and I think that gives our partners a government a lot of confidence.
I think what we're seeing is is rational and reasonable regulatory response right.
We're introducing new technology.
It's appropriate and kind of their job to ask questions with things don't feel quite right.
Christopher Urmson: With each developmental milestone we reach, we're also co-developed in the autonomy-ready truck platform and all of its sub-systems with our OEM partners and their tier-1 suppliers. We're confident that this is the right approach to the future self-driving truck technology as a business and frankly we believe the only approach for commercial development deployment at scale. We are more confident than ever in our leadership position and CR advantage continuing to grow.
From our perspective, we haven't seen this have any impact on our relationship our engagement with regulators or ability to deploy commercially as we plan.
Great.
Then just as a follow up to that.
Some discussion in your press release about safety case claims extending into the to the first quarter of 2024 as I remember previously you talked about the safety case being completed fully and.
Christopher Urmson: We look forward to demonstrating continued progress of the coming quarters as we work toward achieving our Aurora driver milestone in preparation for our planned commercial launch at the end of 2024. Thank you for your continued support.
In the first half of 'twenty, 495% of it being done by the end of the year and then I think 5% achieved.
David Badez: With that, I'll now pass it over to Dave who review our financial results. Thank you, Chris. Let's discuss our financial results. During the third quarter of 2023, we continue to demonstrate strong fiscal discipline while executing toward our milestones. Third quarter of 2023 operating expenses, including stock-based compensation, totaled $212 million. Excluding stock-based compensation of $41 million, operating expenses totaled $171 million. Within operating expenses, our R&D expenses, excluding $36 million in stock-based compensation, totaled $146 million. As G&A expenses, excluding $5 million in stock-based compensation, were $25 million.
Once you complete the required integration testing.
So I'm curious as to what these extra claims are that are extending into into 2024 and whether they have to do with.
The hardwood testing as you'd previously guided thank you.
Well. Thank you again, so so there's the way we had scoped Aurora driver ready with that you can think of as the things under our control that we're developing in Aurora, either hardware or software that we would have confidence if we integrated that too.
Broker vehicle platform that we could put it on the road.
It would be safe.
And then because of the timing of the vehicle programs relative to our internal program. There was going to be a small set of claims.
That relied on our ability to integrate and validate with the vehicle in the loop and that those were going to drag passed the anniversary of driver ready.
David Badez: With the Aurora driver in the final phase of refinement and validation for the launch line, and all revenue under the collaboration framework agreement with Toyota previously recognized, we did not record any revenue during the third quarter of 2023. We used approximately $147 million in operating cash during the third quarter of 2023. Capital expenditures totaled $5 million, including expenditures to complete the build-out of our commercial ready terminal in Houston. This total cash spent was well below our target of $175 to $185 million per quarter on average, reflecting our strong commitment to financial discipline.
What we've been working we've been working through this 460. Some claims is in the safety case and over the last couple of months, we realized that we had a part of the system that we were validating.
The validation process is just taking a little bit longer than we expected we discovered some inefficiencies in the way we were doing that work and we've remedied those.
And so we just wanted to be transparent that while the vast majority of this work will be done that it won't have any impact on our commercial timing, it's not quite consistent with what we had guided towards and so we wanted to share that with the with our partners.
Thank you.
David Badez: During the third quarter, we also raised $850 million in combined gross proceeds from a private placement and public offering of our Class A common stock. Nat proceeds totaled $828 million. We ended the third quarter with a very strong balance sheet, including $1.5 billion in cash and short-term investments. We continue to expect this liquidity to support our planned commercial launch, and fund our operations into the second half of 2025.
Thank you next question today is coming from Chris Mcnally from Evercore ISI. Your line is now live.
Thanks, So much hi, Chris.
I appreciate all the detail just just one question for me, but a big industry, one and I apologize in advance of the preamble.
And really for revisiting you know a little bit on the topic of him from before.
But I think as many people loved I've said, the San Francisco Robo taxi incident, or black Swans are inevitable and we know even at 100% accurate AZ will have accidents caused by human agents. We can then debate the particulars the tax the teller ops, but a topic. Our team uses really important what's actually covenant of podcasts last week.
Operator: With that, we'll now open the call to Q&A. Thank you. Now we're conducting a question and answer session. If you'd like to be placed in the Question Q, please press star 1 under telephone keypad. A confirmation tone will indicate your line is in the Question Q. You may press star 2 if you'd like to move your question from the Q. For participants using speaker equipment, maybe necessary to pick up your handscap before pressing star 1. One moment, please, while we pull for questions.
Not often discussed critical role of public comps in EV.
Up to now 80 companies have kept the detailed why they're driving policy likely to themselves during testing, meaning the public is asked to trust. The when deployed after internal validation, but I think as we.
George Gianarikas: James. Our first question today is from George Gianarikas, from Kenneth Hoexter, Judy, Your Line Is Our Life. Hi everyone, and thank you for taking my questions.
Does the clinical right decision and driving not just illegal one as we know inevitably an odd cases will be up for debate. So long preamble, but my question is the war thought through what will happen on their first the rare occurrence accident, how they'll share info with depressed the DMV will <unk>.
George Gianarikas: Just two questions. First, I'd like to start with the regulatory environment and there's been, obviously you had a win in California, but on the passenger vehicle side, there seems to have been some, at least one of your competitors there, appears to have had a little turbulence. And there are operations. I'm curious as to whether you could at least talk at a broad level about the friendly list on behalf of regulators in Texas and in other states outside of California and enabling commercial service starting next year.
Laura give full access to the full to the to the videos the role human Tele Oxy has played down to even at some point insight into the probability matrices you driving policy was running off at this time of the decision I know, it's a long question, but.
But anything that you can share because I really think it is at a critical time for the industry. Thanks, so much.
Christopher Urmson: Thank you for asking. So when we look at the last gate, we continue to see a very welcoming and positive atmosphere from the regulators. Part of our effort has been to be transparent with them. Allow them to understand our approach is why we share things like our safety cases, why we've shared our approach to risk management internally. And I think that gives our partners a government a lot of confidence. I think what we're seeing is rational and reasonable regulatory response.
Yeah, no. Thanks for the very thoughtful question.
This is obviously something that that's consistently top of mind with US we think about this a lot right and how do we we're obviously building a system that we expect will increase safety on the roadway we think it will create value for customers partners, but yep.
At some point bad things will happen and so we already run table top exercises internally we do this.
Periodically where we have market events.
Christopher Urmson: Right, we're introducing new technology and it's appropriate and kind of their job. If you ask questions with things don't feel quite right from our perspective, we haven't seen this at any impact in our relationship or engagement with regulators or ability to deploy commercially as we plan.
That happened on the road and we go through our emergency response processes. The plan for how we would engage.
With regulators with our partners with the public around this and then critique. The response that we have from that.
And I think we've demonstrated over the last several years, our willingness to be transparent about safety and her approach to it.
Christopher Urmson: Great. And then just as a follow up to that, there was some discussion in your press release about safety case claims extending into the first quarter of 2024. As I remember it previously, you talked about the safety case being completed fully in the first half of of 24 with 95% of it being done by the end of the year and then I think 5% achieved a once you complete the acquired integration testing. So I'm curious as to what these extra claims are that are extending into into 2024 and whether they have to do with the hardware testing as you previously guided.
Whether again, it's about sharing our safety gates approach in how we think about building an argument for why you can trust the real driver to share.
Sharing details of our safety risk management process.
Working with regulators to help promulgate that to the others in the space.
Concretely.
And I think it was March of this year we.
We had an incident on the road, where our vehicles driving down the road and.
Another.
The person driving our light vehicle.
Big Might've not it often the vehicle.
Drifted across the lane and Sideswiped, one of our trucks and then bounced off.
And with that we are of course immediately notified our partners notified the right regulatory.
Christopher Urmson: Thank you. Well, thank you again. So, so there's the way we had scope the road driver ready with that you can think of it as the things under our control that we're developing a road, the hardware or software that we would have confidence if we integrated that to an appropriate vehicle platform that we could put it on the road and that it would be safe. And then because of the timing of the vehicle programs relative to our internal program, there was going to be a small set of claims that relied on our ability to integrate and validate with the vehicle of a loop and that those were going to drag past the end of road driver ready.
Authorities.
And also shared publicly details of that event so.
Our expectation is that that transparency and clarity here matters that we will continue to lose that as we go forward.
Really appreciate that Chris maybe they only.
Follow up is do you see any other industrywide practices that may come about as a result of some of the what we're seeing in San Francisco or California, meaning could we have things like.
Christopher Urmson: What we've been working, you know, we've been working through this 460 some claims of in the safety case and over the last couple of months, we realized that we had a part of the system work that we were validating where the validation process is just taken a little bit longer than we expected. We discovered some inefficiencies in the way we were doing that work and we've remedied those. And so we just wanted to be transparent that well the vast majority of this work will be done that it won't have any impact on our commercial timing. It's not quite consistent with what we had and guided towards. And so we wanted to share that with our parts.
Reporting standards.
We had a beginning of that in California, you know amongst the disengagement.
There'll be a body that puts out.
Number or is that can be analyzed all of these things that would increase trust.
George Gianarikas: Thank you.
And obviously, if it's done in a large scale with many different players you get a very large evidence of body of data, which shows the overwhelming safety and Thats, obviously, what what is the end goal here any thoughts on that.
Yes no.
And I think that there's so there's a few different parts to that so one is that the.
The concern that I've had in the past that we've expressed around the disengagement rates reported in California is that it doesn't provide a honest assessment of performance because it mingles developments and released software.
Chris Mcnally: Next question, today is coming from Chris McNally, from Evercore, ISI, you're right, is now live. Thanks so much. Hi, Chris, and team, I appreciate all the details.
Chris Mcnally: Just one question for me, but a big industry one, and I apologize in advance for the preamble and really for revisiting a little bit of the topic from before. But I think as many people have said, the San Francisco Robotaxi incident or Black swans are inevitable. We know even 100% accurate AV will have accidents caused by human agents. We can then debate the particulars, the tech, the teleops. But a topic our team uses really important was actually covered in a podcast last week, you know, the not often discussed critical role of public comms in AV.
And that of course, when you're developing something Hugh.
Do you expect there to be incomplete elements to performance.
And you have process around that to ensure safety on the road.
What we're actually excited about is that there is.
Already drove excited is quite the right word, but there is a federal reporting process expanding standard general order I think they call it from the department of transportation.
There anyone developing automated technology has to report even very minor instead.
Chris Mcnally: You know, up to now, AV companies have kept the detailed why of their driving policy rightfully to themselves during testing. Meaning, you know, the public is asked to trust the AV when deployed after internal validation. But I think as we've, you know, discussed the quote unquote right decision in driving not just a legal one, as we know inevitably in odd cases will be up for debate.
Incidents to them. So they can track this and build more statistical data and so I expect that to continue.
And that is fairly high fidelity I think that you know.
Somebody another vehicle through a rock up and it hit the windshield at one of our trucks, we have to report that to you.
So I think that provides a level of granular level of visibility into.
Christopher Urmson: So long preamble, but my question has a lot of thought through what will happen on their first rare occurrence accident. How they'll share info with the press, the DMV will aurora give full access to the full, to the, you know, to the videos, the role of human teleops may have played down to even at some point inside into the probability of H.C. You're driving policy was running off at the time of the decisions. I know it's a long question, but anything that you can share up is I really think it's a critical time for the industry. Thanks so much.
Events that are happening on the road.
Much appreciated.
Of course.
Thank you as a reminder, that star one to be placed in the question queue. Our next question is coming from Tom White from D. A Davidson your line is now live.
Hey, this is why it swanson on for Tom Thanks for taking our questions.
Congrats on opening your first commercial ready route.
Could you maybe give us some more color on what you expect with Israel as you get it up and running you mentioned something like.
Christopher Urmson: Yeah, now thanks for the very thoughtful question. This is honestly something that that's consistently top of mind with us. We think about this a lot, right? And how do we, you know, we're obviously building a system that we expect will increase safety on the roadway. We think it'll create value for customers partners, but, you know, at some point bad things will happen. And so we already run tabletop exercises internally. We do this periodically where we have a mock events that happen on the road.
75 commercial loads per week, but what does that look like over the next eight.
18 to 24 months.
Sure. So so this is a place where we've got facilities in either end for this initial deployment of the technology that will operate between for our customers.
At the end of Q.
Q3.
We were at the point, where we're pulling 75 loads a week and the guidance. We provided in our roadmap is that we aspired by the end of the year to achieve 100 loads per week on that route but this is where the real driver is operating but we continue to have our.
Christopher Urmson: And we go through our emergency response processes. The plan for how we would engage with regulators, with our partners, with the public around this, and then critique the response that we have from that. I think we've demonstrated over the last several years our willingness to be transparent about safety and our approach to it. Whether again, it's about sharing our safety gates approach and how we think about building an argument for why you can trust the road driver to sharing details of our safety risk management process and working with regulators to help promulgate that to others in the space.
Commercial driver's license.
Operators on board as well. This will also ultimately be the first lane that we operate without a driver of the trucks.
As you know towards the end or at the end of 2024.
And over the time between now and then we expect to continue to.
Volume on that route and other routes, but we havent provided further guidance on that at this time.
And David I think it's also important it's also important to note on this lean at this is and importantly, this is our launch late and when.
Christopher Urmson: Concretely, in I think it was March of this year, we have an incident on the road where our vehicles driving down the road and another person driving a light vehicle. We think might have nodded off to the vehicle, you know, drifted across the lane and fights wifeed one of our trucks and then bounced off. And with that, we of course immediately notified our partners, notified the right regulatory authorities, and also shared publicly details of that event. So our expectation is that transparency and clarity here matters that we'll continue to live that as we go forward. I really appreciate that.
When we talk about commercially representative locations what that means is all the operational capabilities all the things that we need to have happen.
To operate on this lean exist at the terminals. So if we need to do fueling.
Fueling we do that on site as opposed to have to go off site to do it if we need to do calibration of our systems. If we need to do minor repairs everything is self contained in there. So you actually can operate in autonomous Lane and this is how we envision and demonstrate this.
<unk> ability and how it will scale over time, where we're determining all the necessary capabilities that you need to have and we continue to refine that along the way and also helps build confidence with our customers.
Chris Mcnally: Chris, did he only follow up? Do you see any other industry-wide practices that may come about as a result of some of the, you know, what we're seeing in San Francisco or California meeting? You know, could we have things like, you know, reporting standards, you know, sort of we had a beginning of that in California, no one loves the disengagement book, you know, could there be a body that puts out sort of you know, numbers that can be analyzed, you know, all these things that would increase trust.
Got it that's great that's really helpful.
And then a follow up to that you know what what.
What can we expect in terms of opening up additional routes over the next 12 months to 18 months since you guys get ready for commercial launch.
So today, we also operate on a ramp between Fort worth in El Paso.
And we're pulling loads their daily for customers.
As we provided in the past some kind of general guidance that we expect to expand.
Chris Mcnally: And you'll see if it's done at a large scale, first with many different players, you get a very large, you know, evidence of body of data, which shows the overwhelming safety. And that's obviously what, what is the end goal here. Any thoughts on that?
East to west are along that corridor, but I don't think we can add more specific details today to that.
No worries thank you very much.
Welcome Thanks for the questions.
Thank you next question is coming from Mark Delaney from Goldman Sachs. Your line is now live.
Christopher Urmson: Yeah, no, and again, I think that there's, so there's a few different parts to ask that. So one is that the concern that I've had in the past and that we've expressed around the disengagement rates reporting California is that it doesn't provide an honest assessment of performance because it mingles development and released software. And that, of course, when you're developing something, you know, you're, you expect there to be incomplete elements of performance.
Good afternoon. Thank you very much for taking my questions first on the business side. How are you thinking about contracting loads for your commercial launch by the end of this year and does the cyclical weakness currently in the freight markets impact what you were thinking about with respect to trade some contracts independent of where the ore Aurora horizon, maybe cable.
<unk>.
Yeah, Hey, Margaret that's a good question I think in general we're still on track for our contracting with our customers at the end of the year I do think that the sickle cyclical nature and really that really the depressed market has been a challenge for many of our partners, especially in the <unk>.
Christopher Urmson: And you have process around that to ensure safety of the road. What we're actually excited about is that there is already, I don't know if excited is quite the right word, but there is a federal reporting process standing general order. I think they call it from the Department of Transportation, where anyone developing automated technology has to report even very minor incidents to them so they can track this and build, you know, more statistical data.
FTL space, but I also think you have to give a lot of credit to them. Despite some of the challenges they've continued to work with us they see the long term value and they continue to increase the number of loads and so we're working through right now what our plans are going to look like for contracting through 2025.
Christopher Urmson: And so I expect that to continue. And that is fairly high fidelity. I think that, you know, somebody, another vehicle through a rockup and hit the windshield with one of our trucks. We had to report that to the OT. So I think that provides a level of credit, you know, a granular level of visibility into events that are happening on the road. Much appreciated. Of course. Thank you.
So, we're working and making really good progress on that and we'll be able to share more information at the end of the year, but.
I would say that the depression of the market.
Yes.
Some challenges for them operationally, but they see the value in this and so theres still fully and completely excited about.
And our plan together and the long term thanks.
Operator: As a reminder, that star one to be placed in the question. Q.
Got it and then Dave one.
Tom White: Our next question is coming from Tom White from Gated Davidson. Your line is now live. Hey, this is why it's long for Tom. Thanks for taking our questions.
One other question for you just on on the operating expenses and cash use.
Would that down sequentially and you guys had talked about some sunshine levels to expect through the commercial launch, but just hoping to better understand the.
Christopher Urmson: Congrats on opening your first commercial ready route. Could you maybe give us some more color on what you expect with this route as you get it up and running. You mentioned something like 75 commercial loads per week. But what does that look like over the next 18 to 24 months? Sure. So, so this is a place where we've got facilities neither end for this initial deployment of the technology that will operate between for our customers.
The reasons for the.
A sequential moderation in spending levels in.
And perhaps any of this one was it was it all timing related and maybe a little bit on the higher end of that range next quarter or any other ways to better frame. Some of the sequential is around spend.
Yeah, I think there was some some minor timing adjustments, but most everything as we had planned rate like we had a.
Christopher Urmson: At the end of Q3, we were at the point where we're pulling 75 loads so a week. And the guidance we provided in our roadmap is that we aspire by the end of the year to achieve 100 loads per week on that route. And this is where the Aurora driver is operating, but we continue to have our commercial driver place. Anderson's, operators on board as well. This will also ultimately be the first lane that we operate without a driver of the trucks, as we've, you know, towards the end or at the end of 2024.
Cashews, which was.
About what we expected we anticipated Q3 to be a little bit lower.
When we guide on the average of $1 75 to 85, you know we have to put an allocation rate because it's on an average so we'll put it will put like the bonus that we pay which in this time period was the second quarter and next year where interstate.
Dissipating and being in the first quarter. So there is some allocation of that on a quarterly average, but yes. We did expect this quarter to be.
Right about here, we did have some again some minor timing for contract manufacturing support that we've had but that's pretty minimal.
Christopher Urmson: And over the time between now and then we expect to continue to increase volume on that route and other routes, but we haven't provided further guidance on that at this time. And Dave, you, yeah, I think it's also important. It's also important to note on this lane that this is an important lane, right? This is our launch lane. And when we talk about commercially representative locations, what that means is all the operational capabilities, all the things that we need to have happen to operate on this lane exists at the terminal.
I think this is more of a testament to the fact that like it.
It's really important for us to be wise and make sure that we know how.
To use and have the right financial discipline, and we're really finding a lot of opportunities to reuse it in to just do things smarter.
Without jeopardizing any of our progress we would expect Q4, we don't see big shifts from Q3 to Q4 that would have us super concerned about missing our target for Q4, we still expect to deliver within the target range or better than that for Q4.
Christopher Urmson: So if we need to do fueling, we do that on site as opposed to have to go off site to do it. If we need to do calibration of our systems, if we need to do minor repairs, everything is self contained in there. So you actually can operate an autonomous lane. And this is how we envision and demonstrate this capability and how it will scale over time. We're, we're determining all the necessary capabilities that you need to have. And we continue to refine that along the way. It also helps build confidence with our customers. Got it. Great. That's really helpful.
Thank you.
Thank you next question is coming from Jeff Osborne from Cowen and company. Your line is now live.
Thank you good evening I was wondering if you could Chris just flesh out a bit more on the driver safety case being closed.
Move to Q1.
There was that all due to the instance that you mentioned before in terms of sites wipers, there sort of a laundry list of.
Edge cases that are rare and society, but you need to Bang out is trying to understand that delay there yeah yeah.
Christopher Urmson: And then a follow up to that. You know, what, what can we expect in terms of opening up additional routes over the next 12 to 18 months as you guys get ready for commercial launch? So today we also operate on the route between Fort Worth and El Paso. And we're pulling loads there daily for customers. As we, we've provided in the past some kind of general guidance that we expect to expand east to west along that, that quarter. But I don't think we can add more specific details today to that. No worries. Thank you very much. Welcome. Thanks for questions.
No. This isn't I wouldn't think of this as kind of the dreaded buoyed. The edge cases are going to get you its going to take forever to get the last but this is this is not really bad at all.
Yeah, we we obviously take safety very seriously.
We want to make sure we have a solid foundation, particularly.
The driving capability.
And as we have been building the test suite for that we realized it was taking us a little bit longer than we had expected forced to develop some of those tests.
And kind of get them to the point, where we could operate them and get ourselves conviction that system.
Mark Delaney: Thank you. Next question is coming from Mark Delaney from Goldman Sachsville. Good afternoon. Thank you very much for taking my questions. First on the business side, how are you thinking about contracting loads for your commercial launch by the end of this year? And does the cyclical weakness currently in the freight markets impact what you're thinking about with respect to, you know, train some contracts independent of what the Aurora horizon may be capable of?
Would work the way we expect it to you on the road.
And so the majority of the work across your ROI driver who's going to be complete there'll be a small subset of the team that continues to work on this while the rest of the team is really moving onto how do we make the overall driver all great more places how do we have it ready to expand other Wayne how do we bring the cost out of the system.
But because of the the kind of.
Mark Delaney: Yeah, hey, Mark, that's a, that's a good question. I think in general, we're still on track for contracting with our customers at the end of the year. I do think that the cyclical nature and really the, really the depressed market has been a challenge for many of our partners, especially in the FDL space. But I also think, you know, you have to give a lot of credit to them despite some of the challenges they've continued to work with us.
Pre revenue state of our company Youre getting a little deeper view into some of the internal engineering sausage, making here but.
But in terms of the impact on our time to building our business and growing commercial we don't see this as any impact we just thought it was important to be transparent about it.
Got it and just a follow up I think on marks question before the contractual obligations or contracts that you have in place for 25 years. You signed those are there any binding issues like for whatever reason, let's say something is delayed a quarter or two.
Mark Delaney: They see the long-term value and they continue to increase the number of loads. And so we're working through right now what our plans are going to look like for contracting through 2025. And so we're working and making really good progress on that and we'll be able to share more information at the end of the year. But I would say that the depression of the market has caused some challenges for them operationally, but they see the value in this.
Are there is there any recourse that the fleets tab.
In the event that there was a delay.
I guess I know we went high.
By year end.
Technology.
The safety case isn't fully baked that that doesn't sort of go hand in hand, which I think they were previously designed to do.
Yes, that's a great question, let me, let me answer both first off no there'd be no elements, where theres any liability if we miss dates or if our partners needed to adjust the reason why we do the contract piece.
Mark Delaney: And so they're still fully and clearly excited about drafting a plan together in the long term. So thanks. You got it. And then Dave, one other question for you, just on the operating expenses and cash use, you know, kind of down sequentially. And you guys have talked about some some some levels to expect through the commercial launch. But you know, just open to better understand the reasons for the sequential moderation and spending levels.
To be completely.
Transparent on this the reason why we wanted to do the contracted through 2025 is it really helps us define our launch lanes and how much supply that we need to order. So it's not a it's not unlike how many trucks.
A shipper wants to or I mean, a carrier wants to order from a particular customer.
Mark Delaney: And you know, and perhaps any of this was it was it at all time and related and maybe a little bit on the higher end of that range, next quarter, or any other ways to better frame some of the sequentials around spend. Thanks. Yeah, I think there was some minor timing adjustments, but most everything is we had planned, right? Like, we had a cash use, which was about what we expected, we anticipated Q3 to be a little bit more, you know, when we guide on the average of 175 to 85, you know, we have to put an allocation right because it's on an average.
As they build out their networks. So what we're doing is working with each of our customers to build out like their network roadmap through 25, we're actually going well beyond that because we want to try to solidify through 25. So that we have the right plans in place. So that we can make sure we have the right.
Components sufficient supply and then we provide that feedback both to our Oems and our component suppliers as well so it's more about planning than anything else, but we also thought it was important to represent the fact that.
Each year, we continue to make really good progress commercially and one of the indications of progress is hey, we've got a kind of a solidified plan through 'twenty five and beyond so that's what we're focused in on and I, just just to add to what.
Mark Delaney: So we'll put it, we'll put like the bonus that we pay, which in this time period was the second quarter, and next year, we're interested in anticipating being in the first quarter. So there is some allocation of that on the quarterly average, but yeah, we did expect this quarter to be right about here. We did have some again, some minor timing for a contract manufacturing support that we've had. But that's pretty minimal.
What we're saying is we think about that that engagement with our partners from the ongoing pilot programs allow us to get feedback from them on how do we.
How do we adjust our engineering and practical plans to maximally meet their needs.
Mark Delaney: I think this is more of a testament to the fact that it's really important for us to be wise and make sure that we know how to use and have the right financial discipline. And we're really finding a lot of opportunities to reuse and to just do things smarter without jeopardizing any of our progress. We would expect Q4, we don't see big shifts from Q3 to Q4 that would have us super concerned about missing our target for Q4. We still expect to deliver within the target range or better than that for Q4. Thank you.
Then to.
So the questions asked earlier.
Think about the initial lands, we've talked first launch lane as Dallas, Houston, and Fort Worth El Paso, and then it's really how do we deliver the maximum value for our customers.
But looking ahead okay.
Can we expand.
First it north to Phoenix or do we go east to Atlanta, and working with them for their priorities for these critical initial customers.
Got it that's very helpful. I appreciate it Chris.
Thanks for the question.
Thank you we've reached end of our question and answer session and ladies and gentlemen that does conclude today's teleconference and webcast. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.
Mark Delaney: Next question is coming from Jeff Osborne from Cowarding Company. Your line is on live. Thank you.
Jeff Osborne: Good evening. I was wondering if you could just flesh out a bit more on the driver safety case being closed. The move to Q1 there was that all due to the instance that you mentioned before in terms of side swipers, they're sort of a laundry list of edge cases that are rare in society, but that you need to bang out. I was just trying to understand that delay there. Yeah. Yeah, no, this isn't.
Yes.
Jeff Osborne: I wouldn't think of this as kind of the dreaded boy that the edge cases are going to get you, it's going to take forever to get the last bit. This is this is not really bad at all. You know, we obviously take safety very seriously. We want to make sure we have a solid validation, particularly, you know, across the driving capability. And as we have been building the test suite for that, we realized it was taking us a little bit longer that we had expected for us to develop some of those tests and kind of get them to point where we could operate them and get ourselves conviction that the system would work the way we expected to on the road.
Jeff Osborne: And so the majority of the work across the Aurora driver is going to be complete. There'll be a small subset of the team that continues to work on this while the rest of the team is really moving on to how do we make the Aurora driver operate more places? How do we have it ready to expand to the lanes? How do we bring the cost out of the system? So because of the kind of pre-revenue state of our company, you're getting a little deeper view into some of the internal engineering sausage making here, but in terms of the impact on our time to building our business and going commercial, we don't see this as any impact.
Jeff Osborne: We just thought it was important to be transparent about it. Got it. And just to follow up, I think I'm Mark's question before, the contractual obligations are contract that you have in place for 25 as you sign those, are there any binding issues like for whatever reason, let's say something is delayed a quarter or two, are there is there any recourse that the fleets have in the event that there was a delay?
Jeff Osborne: I guess I know we wouldn't allow you to sign contracts by your end if the technology, the safety cases and fully banked. I thought those would sort of go hand in hand, which I think they were previously designed to do. Yeah, that's a great question. Let me answer both. First off, no, there'd be no elements where there's any liability if we miss dates or if our partners needed to adjust. The reason why we do the contracting to be completely transparent this reason why we want to do the contracting through 25 is it really helps us define our launch lanes and how much supply that we need to order.
Jeff Osborne: So it's not, it's not unlike how many trucks a shipper wants to or I mean a carrier wants to order from a particular customer as they build out their network. So what we're doing is working with each of our customers to build out like their network roadmap through 25. We're actually going well beyond that, but we want to try to solidify through 25 so that we have the right plans in place so that we can make sure we have the right components, sufficient supply and then we provide that feedback both to our OEMs and our component suppliers as well.
Jeff Osborne: So it's more about planning than anything else, but we also thought it was important to represent the fact that each year we continue to make really good progress commercially and one of the indications of progress is, hey, we've got a kind of a solidified plan through 25 and beyond. So that's what we're focused in on. And just to add to what Dave was saying is we think about that engagement with the partners for the ongoing pilot programs, allow us to get feedback from them on how do we, how do we adjust our engineering and practical plans to maximally meet their needs.
Jeff Osborne: And then to the questions asked earlier, you know, as we think about the initial lanes, we've talked first the launch lane is south Houston and then for work out so. And then it's really, you know, how do we deliver the maximum value for our customers by looking at OK, you know, do we extend, you know, west and north to Phoenix or do we go east to Atlanta and I'm working with them for their priorities for these critical initial customers. Rather, it's very helpful. I appreciate Chris. Thanks for question. Thank you.
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