Q3 2023 Joby Aviation Inc Earnings Call

Hello, and welcome to the Aurora, a third quarter 2023 business review call. If anyone should require operator assistance. Please press star zero on your telephone keypad.

Sure and answer session will follow the formal presentation.

May be placed into question chew at any time by pressing star one on your telephone keypad.

As a reminder, this conference is being recorded.

My pleasure to turn the call over to stay he fight Vice President Investor Relations. Please go ahead Stacey.

Thanks, Kevin Good afternoon, everyone and welcome to our third quarter of 2023 business for three o'clock, we announced our results earlier this afternoon or shareholder ladder and a presentation to accompany this call are available on or Investor Relations website, and I are thought Oh boy I thought tech.

Sure hold her ladder was also furnished with our form 8-K file today with the I C C.

On the call with me today are Chris Arntson, co founder and CEO and David per day.

Uh-huh.

Chris will provide an update on the progress we have made across the key pillars about business and David will recap our third quarter financial results.

Yeah, well then open the call I'll take you on that.

A recording of this conference call will be available on our backs relations website and I are gotta write that text. Shortly after this call has ended.

I'd like to take this opportunity to remind you that during the call will be making forward looking statements.

Statements relating to the achievement in certain milestones around realisation of the potential benefits up the development manufacturing failing and commercialization of the Aurora driver in Aurora Horizon are anticipated timeframe. The expected performance of our business and potential opportunities with partners and customers expect the contract commitments from customers of our products and services expected.

Cashback way and overall feature prospect. These statements are subject to known and unknown risks uncertainty. It's that quick cause actual results to differ materially from those suggested or implied during this call.

In particular those described in a risk factors included in our annual report on Form 10-K for the year ended December 31st 2022 files with the F. C C as well as the current uncertainty and unpredictability in our business the markets and economy.

Additional information will also be set forth in our quarterly report on Form 10-Q for the quarter ended September 30th 2023.

You should not rely on a forward looking statements as predictions of future events I'll forward looking statements that we make on this call are based on assumptions and beliefs as of the daycare <expletive> 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 measure should be considered in addition to you and not as a substitute for or in isolation from our GAAP results information regarding our non-GAAP natural results, including a reconciliation of our historical got to non-GAAP results may be found in our shareholder letter, which was furnished with our form 8-K filed today with the F. C. C and May also be found on our Investor Relations website with that I'll now turn the call.

A bunch of crap.

Thank you Stacy.

The third quarter was a period of intense focus on execution across organization.

In addition to completing the 850 million dollar capital raised we also continue to make strong progress. We're closing the road driver's safety case further and a hamster autonomy performance.

[noise] trucking operations.

[noise] partnerships.

We executed all of this while also maintaining physical discipline, having managed our cash that below average target.

We also saw some key developments on the legislative front during.

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 Thomas trucking. The trust, we have built with policymakers sort of are transparent and engaged approach.

I was proud to speak about the economic value of autonomy 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 this technology.

With a consensus view that the U S must solidified leadership with respect with almost vehicle technology was central to the discussion.

Throughout my career I've spent significant time with our partners in government and I saw a tangible shift in tone in this congressional meeting.

No longer a question of if.

Thomas trucks will arrive, but rather just a question of whether.

At the state level under existing law and regulation Thomas vehicles can help save you deployed and the vast majority of the U S, including Texas, where current law Express expressly enables the safe operation autonomous vehicles with or without a human driver.

California, However, it seems there's been an outlier with respect with Thomas trucking.

We saw it very positive developments, it's September whichever do some governor do some vetoed the driver at Bill 80 316.

This was a meaningful statement in recognition of the value our technology can drive both in terms of safety and economic benefits.

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 autonomy commercial vehicles as part of the rule, making process that is currently underway in the states.

As we continue to work with regulators and legislators, we hold steadfast where principles of openness and transparency.

[noise] trusted relationships with all of our stakeholders is fundamental to our approach.

Okay.

Now, let's dig into our third quarter highlights.

We stayed at our safety case, the comprehensive evidence based approach to confirming our self driving vehicles are excessively 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 or holistically and sustainably safe.

The economist autonomy readiness measure or arm is a weighted measure of completeness across all claims of our safety case for the launch late.

He likes the percentage of work needed to move from the future complete milestone, which we achieved at the end of the first quarter for next milestone or or driver ready when we will have confidence in the roar driver's ability to operate safely without a person on board.

We achieved an arm of 84% as of September 30th 2023. This is up to 40 points since our feature complete milestone at the end of the first quarter and up 19 points during the third quarter although.

Within Aurora, we track the work and closing our safety cage across the court almost of our product.

[noise] driver hardware Roar services vehicle integration and a roar driver software.

Today, we have completed all of the claims related to a roar driver hardware and a roar services necessary for commercial launch.

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 plan to commercial launch.

Really into hardware specifically.

Engineering driver hardware for an astral liability and withstand the harsh environmental conditions trucks can experience on the road is essential to maximizing uptime.

Seated the hardening of our drive those hardware and our new fleet is now equipped with the latest generation of the Roar driver kids.

This will be our commercial launch hardware platform and it also contains hearted versions of our proprietary first light light art and computer both of which have been tested to meet our target levels of reliability.

Good and visuals integrated hardware each seven up the slide deck.

Mounting location is optimized for performance well its modularity enabled surface ability on the road and.

And it's pretty darn good looking too.

Ah Rover drivers software teams have also made great progress toward or a driver ready.

As a reminder, and autonomy system's performance must be validated against the vast number of scenarios many of which are thankfully rare on public roads and turn the key component of our approach leverages arrest spiritual testing suite amplify exposure to rare and as yet unseen events to test the roar driver's performance those scenarios.

So if that's what these tests supports closure of the safety case claims and our beliefs that your driver's designed to respond appropriately to such rare scenarios.

We know anticipate completing the work to validate a small number of our or a driver's safety case claims will stretch beyond our end of year ago. Importantly worked on this segment of claims does not impact are expected timing commercial watch.

This work is being performed by a limited subset of the team we.

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 towards commercial readiness.

And we were already reallocating parts for engineering teams to begin work beyond the roar driver ready milestone, including efforts to improve the cost effectiveness and to increase the breath of places and conditions under which the Aurora driver could operate [laughter].

You wrote a driver development of validation process is complex so I'd like to take a moment to walk you through an example of how we've progressed you roar driver system through development. So this leafs late stage of validation.

For this example will look at our sideswipe avoided capability.

Well not an everyday occurrence sideswiped collisions or one of the most common collision countered by trucks of a roach. So of course, he roared drivers, sometimes encounter situations in which a truck or light vehicle in a neighboring late on a highway begins to veer into it's like.

Redesign the roller driver's response to these potential sites wives to emulate our expert commercial drivers and all these scenarios.

On page five of the slide deck. We've included a collection of simulations demonstrating how the aerobic driver's responses out matches, how operators had reacted in the past before our system was reliably able to respond appropriately.

And on page six of the slide deck, you can see a real World example of the road driver traveling southbound and I'm 45 between Dallas and Houston, when our truck is almost clipped by a trailer travelling mostly in the neighbouring lane.

The Roar driver perceives the sideswiped threat assesses the surrounding environment, including determining he was at 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.

Actions enabled driver to successfully avoided sideswiped scenario.

We now have confidence euro driver's ability to handle such sites questionnaires appropriately I wonder the process of completing the final validation.

As evidenced in this example, we continue to see our validation work accelerating and the quality of the Roar driver improving.

Every day, our partners customers regulators were able to experience these improvements as part of our showcase program.

We continue to make great progress are focused on achieving our commercial launch on schedule at the end of 2024.

Concurrent with the safety case work and that brings up a bar new fleet with our driverless hardware, we continue to scale, our trucking operations during the third quarter.

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 or Houston commercial launch late and establishes the first commercial ready eponymous trucking lane in the U S.

We have included footage of the new terminal on Hey, Jacob Slide deck.

Despite a cyclical challenged commercial free market, we continue to make steady progress growing commercial loads and operational capabilities in preparation for commercial launch.

You can turn it shaved our end of third quarter targets, What's honestly hall 75 lowest per week for our customers.

We're now logging over 20000 commercial miles per week.

Right up to date through October 29th we've autonomously delivered under the supervision of vehicle operators over 3200, loaves driving more than 895000 commercial miles with nearly 100 per cent on time performance for our pilot customers, including Fedex Werner Schneider, bushbuck or who were afraid.

One way we measure our performance successfully operating your overpriced service commercially represented upsetting is through the on road autonomy performance indicators or a P. I.

This metric allows us to track not just the state of our technology, but the maturity up our processes and procedures in upgrading our business.

[noise] indicators penalizes use of onsite support which means that most expensive support provided to enable or horizon.

As a reminder, we did not anticipate that aggregate eighth yeah. It will be 100 per cent, even as launch because certain situations. For example, flatcars will always require onsite support.

As we look ahead to commercial launch 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 and evaluating his performance on that basis.

A P. I is one way we do this.

For the third quarter of 2023 D. A P. I was 98% demonstrating another quarter over quarter increase.

Across the commercially representative loads cause she didn't pilot operations on our lunch late in the third quarter, we against a notable improvement and autonomy performance quarter over quarter.

Over 60% of these loads had an a P. I, a 100 per cent and 84% had an API greater than or equal to 99%.

Sure Mulder letter and on page 10 of the flight 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 roar drivers performances, specifically and challenging traffic conditions encountered during the third quarter of us highway and surface streets and.

In the video on page 11 of the slight egg for 945 on approach to Houston, The road driver decided to delay and changed the left and turns on his turn signal.

It starts to lane change another vehicle gets a last minute aggressively changed into the same space you're all driver immediately recognizes those contestants situation and very naturally pauses, it's 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 tickets are new Jersey slight technical service.

And the example of page 12 of the Sly Jack you Roar driver has just exited the highways Houston traveling southbound after a stoplight has turned green it receives a vehicle and it's like driving the wrong way down the road.

The road driver slows, it's feed given the dangerous situation, which allows the oncoming vehicles and tickets turned off the road.

The road drivers response enables it to avoid the potential collision.

Moving to our partners or work with their truck away.

I work with a truck over your partner's pack are involved with trucks and our new hardware is a service partner confidential continues to progress as we prepare for commercial watch it beyond.

Earlier this year, we announced a longterm exclusive partnership with continental.

The goal of our partnerships to bring self driving technology, the trucking industry, a commercial scale like jointly developing manufacturing servicing future generations of the roller driver hardware.

Under a hardware is a service business model raw will pay for the hardware on a per mile basis during the third quarter, the confidence and routines achieved the first major partnership milestone, which finalize the detailed development plans for the future generations of the road driver hardware.

We look forward to continuing our partnership with Continental and two industrialized the first commercially scalable autonomous trucking systems with a cost structure in place intended to export our longterm profitability objectives.

On the vehicle platform side during the third quarter, we brought online or new fleet of Peterbilt 579 trucks updated with the latest generation of the Roar driver hardware kids.

This truck platform is equipped with prototypes systems that will be necessary for driverless operations, including redundant braking steering and power, which we are actively testing.

We also received the first economy enabled Falvo V N L.

During the third quarter. In addition to having protostar redundant breaking steering or power systems. This truck was built with the necessary structural interfaces in place to support our sensor pods simplifying the hardware installation process. We were in turn it will rapidly integrate the roar driver as a preassembled retested hardware kids.

Oh Bravo truck bills are continuing during the fourth quarter 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 Ballboy Thomas solutions, just recently reiterated their excitement for their autonomous trucking product how're by the reward driver and the tremendous revenue opportunity that they believed lies ahead.

This deep integration with Oems requires it's absolutely imperative to bring a commercially viable driverless trucking product to market.

Over the years, we've seen a handful of autonomous trucking companies pulled the driver for a single or small series of demonstrations. None of these companies do that on a truck platform that was developed with or sanctioned by so you haven't key suppliers for travel this operation or commercialization of scale.

With each developmental milestone we reach we're also developing the economy ready truck platform and all of its subsystems with R. O M partners their tier one suppliers. We're confident that this is the right approach to the future of self driving Chuck technology is a business and frankly, we believe the only approach for commercial developed deployment at scale.

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.

[noise] work toward achieving a roar driver milestone in preparation for our plan 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 review our financial results.

Thank you, Chris let's discuss our financial results during the third quarter of 2023, we continued to demonstrate strong physical 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 are R&D expenses, excluding $36 million in stock based compensation totaled $146 million.

S G and a expenses, excluding $5 million in stock based compensation, where $25 million.

With the driver and the final phase of refinement and validation for the launch an all revenue under the collaboration framework agreement with Toyota previously recognized me did not record any revenue during the third quarter of 2023.

We used to 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 Smith was well below are.

Oregon of $175 million to $185 million per quarter on average reflect in our strong commitment to financial discipline.

During the third quarter and we also raised $850 million a combined gross proceeds from a private placement and public offering of our class a common stock.

Net proceeds totaled $828 million.

We ended the third quarter with them very strong balance sheet, including $1.5 billion in cash and short term investments. We continue to expect this liquidity to support our plan commercial launch and fund our operations into the second half of 2025.

What's that will now open the call. Thank you and a.

Thank you and now they're conducting a question and answer session.

To be placed in the question queue. Please press star 100 telephone keypad, a confirmation tone will indicate your line is I'm. A question Q you May press star too if you'd like to move to a question from a Q for participants using speaker equipment may be necessary to pick up the handset before pressing star one one moment please while.

He pull for questions.

Our first question to me is coming from from Georgia. She had Rochester from kindergarten Genuity. Your line is our lives.

Hi, everyone and thank you for taking my questions.

I have to do it.

Just two two questions. The first thing I'd like to start with the regulatory environment them. There's been obviously you had to win.

California, but on the passenger vehicles 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 and it's not going abroad level.

Friendly less on behalf of regulatory regulators in Texas and in other states outside of California, and enabling commercial service starting next year.

Oh, Thank you for asking so when we look at the landscape. We continue to see a very welcoming a positive atmosphere from the regulators part of our effort has been to be transparent with them allow them to understand our approach. It's why we share things like our safety cases, why we've we've shared.

Our approach to risk management internally and I think that gives our partners in government a lot of confidence.

I think what we're seeing is is rational and reasonable regulatory response, right, we're introducing new technology and it's.

[noise] Brigid and kind of their job to ask questions with things don't feel quite right.

From our perspective, we we haven't seen this have any impact in our relationship or engagement regulators or ability to deploy commercially as we plan.

Right and then just as a follow up to that there was some discussion in in your press release about safety case claims extending into the to the first quarter of 2024 as I remembered previously you talked about the safety case being completed fully.

In the first half of 24 95 per cent of it being done by the end of the year and then I think 5% achieved.

Once you complete the required integration testing.

Okay. 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 is you'd previously got it. Thank you.

Oh, great. Thank you again, so so there's the way we had scoped Aurora driver ready with that you could think of it 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 an.

Vehicle platform that we could put it on the road that it would be safe.

And then there because of the timing of the vehicle programs relative to our internal program.

B a small set of claims.

That relied on our ability to integrate invalidate with the vehicle in the loop and that those were going to drag past the end of rural drive already.

What we've been working you know we've been working through this 460, some claims of and the safety case and over the last couple of months, we realized that we had a part of the system that we were validating where the validation process. It's just taking a little bit longer than we expected. We discovered some inefficiencies in the way we were doing that work and we've remedy 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 had guided towards them. So we wanted to share that with with with our partners.

Thank you.

They can ask question today is coming from Chris Mcnally from ever Whore ISI your lines in our lives.

Thanks, so much I Christian and and team appreciate that all the details just just one question for me.

Dig into two one and I apologize in advance of the preamble.

And really for revisiting you know a little bit of the topics them from before.

But I think as many people as I said, the San Francisco Robo taxi incident, or black Swans are inevitable and we know even in 100 per cent accurate Avi will have accidents caused by human agents. We can then debate the particulars.

The teller ops, but a topic. Our team uses really important was was actually covered in a podcast last week you know the the not often discussed critical role of public comes in a V.

Up to now 80 companies have kept a detailed why they're driving policy likely to themselves during testing, meaning you know the public is asked to to trust the the when deployed after internal validation.

I think as we you know discuss the quote unquote 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 my question has a war thought through what will happen on their first rare occurrence accident, how they'll share info with the press the D. M V.

He will Aurora get full access to the <unk> to the to the videos the wrong human tell us needed played down to even at some point and insight into the probability matrices, you're driving policy was running off at the time of the decision I know, it's a long question, but anything that you can share up cause I really think it's at a critical time.

Operator: 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. A question and answer session will follow the formal presentation.

The industry. Thanks, so much.

Yeah no. Thanks for the very thoughtful question. This is honestly something that that's consistently top of mind with US. We we take about this a lot Ah right and how do we you were obviously building a system that we expect will increase safety on the roadway, we think it'll create value for customers partners, but.

Operator: You may be placed into question to you at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded.

Yep.

Stacey Fight: It's not my pleasure to turn the call over to Stacey Fight by President Investor Relations.

At some point bad things will happen and so we already run tabletop exercises internally, we do this Ah Ah Ah periodically where we have a mock events.

Stacey Fight: Please go ahead, Stacy. Thanks, Kevin.

Stacey Fight: Good afternoon, everyone and welcome to our third 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 Investor Relations website at irsoughtaura.tex. The shareholder letter was also furnished with our form 8k files today with the SEC.

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.

We have from that I think we've demonstrated over the last several years, our willingness to be transparent about safety in her approach to it whether again, it's about sharing our safety gigs approach and how we think about building an argument for why you can trust the roar driver to sharing.

Stacey Fight: On the call with me today, our Chris Ernstson, co-founder and CEO, and David Vidae, CSO. 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 will then open the call to Q&A.

Sharing details of our safety risk management process it.

Stacey Fight: A recording of this conference call will be available on our Investor Relations website at ir.aura.tex shortly after this call has ended. I'd like to take this opportunity to remind you that during the call, we'll 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 aura driver and aura horizon. Our anticipated time frame, the expected performance for our business, and potential opportunities with partners and customers.

Working with regulators to help promulgate that to the others in the space.

Concretely and I think it was March of this year, we haven't it's been on the road, where our vehicles driving down the road and another person driving a light vehicle, we think might've not it often the vehicle you know drifted across the lane and so.

Stacey Fight: Expected contract commitments from customers for our products and services, expected cash runway, and overall future prospects. These statements are subject to known and unknown risks and certainties 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.

Swiped, one of our trucks, and then bounced off and with that we have of course immediately notified our partners notified the right regulatory Ah authorities.

And also shared publicly details with out of it. So our expectation is that that transparency and clarity here matters that will continue to go with that as we go forward.

Really appreciate that cause they they only.

Follow up is do you see any other industrywide practices that may come about as a result of some of the you know what we're seeing in in in in San Francisco, California, meaning you know could we have things like you know reporting standards, you know sort of we had a beginning of that in California.

Stacey Fight: Additional information will also be set forth in our quarterly report on form 10K for the quarter ended September 30th, 2023. We 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 the data are asked, and aura explains any obligation to update any forward-looking statements, except as required by law. Our discussions today may include non-gap financial measures. These non-gap measures should be considered in addition to and not as a substitute for or an isolation from our gap results.

No one loves the disengagement, but you know could there be a body.

Sort of you know numbers that can be analyzed you know all these things that would increase trust them and.

And you know obviously, if it's done in a large scale, whereas with many different players you get a very large no evidence of a body of data, which shows the overwhelming safety and that's obviously, what what does the end and cold here any thoughts on on that.

Stacey Fight: 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.

Yeah, No and again I think that there's so.

Chris Ernstson: With that, I'll now turn the call over to Chris. Thanks, Stacy. The third quarter was a period of intense focus on execution across our organization. In addition to completing the $850 million capital raise, we also continue to make strong progress toward closing the Aurora driver safety case, further enhance our autonomy performance, gale-dark tracking operations, and advanced reporter. Ships. We executed all of this while also maintaining fiscal discipline, having managed our cash spent below our quarterly average target.

There's a few different parts task. So one is that.

The the concern that I've had in the past and we've expressed around the disengagement rates reporting California's that it doesn't provide a honest assessment of performance because it mingles development and released software.

And that of course, when you're developing something you're you know you're.

You expect there to be Ah incomplete elements to performance.

And you have process around that to ensure safety on the road.

What what we're actually excited about is that there is.

Chris Ernstson: We also saw some key development from 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 and this federal legislative hearing underscored our leadership position in eponymous trucking, and 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.

Already drove excited is quite the right word, but there there is a federal reporting process of standing standards General order I think they call. It from the department transportation, where anyone developing automated technology has to report even very minor incidents to them. So they they can track this was billed.

Chris Ernstson: The meaningful progress we've made as a company in industry, and most importantly, how we prioritize safety at Aurora. By partisan recognition of the safety and efficiency benefits of this technology, along with the consensus view that the U.S, must solidify the leadership with respect to autonomous vehicle technology was central to the discussion. Throughout my career, I've spent significant time with our partners and government, and I thought tangible shift in tone in this congressional meeting.

You know more statistical data and so I expect that to continue and and that is fairly high fidelity I think that you know somebody another vehicle throw a rock up and it hit the windshield at one of our trucks and we had to report that to the D O T.

So I think that provides a level of granule level of visibility into events that are happening on the road.

Much appreciated.

Of course.

Thanks, you as a reminder, that star one to be placed into question Q. Our next question is coming from Tom late from da Davidson. Your line is in our lives.

Chris Ernstson: 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 me deployed in the vast majority of the U.S., 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 driver at bill, AB 316.

Hey, this is why influence in 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 would expect with this <unk> 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 and for this initial deployment of the technology that will operate between for our customers at the end of Ah Q3, we were at the point, where we're pulling seventy-five load so a week and the guidance we provided.

Chris Ernstson: This was a meaningful statement in recognition of the value our technology can drive within terms of safety and economic benefits. 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.

And our roadmap that we aspire by the end of the year to achieve 100 loads per week on that route but this is where the driver is operating but we continue to have.

Sure commercial driver's license.

Operators on board as well. This will also ultimately be the first lane that we operate without a driver in the trucks.

A as we've towards the end or at the end of 2024 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.

Chris Ernstson: 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.

10 days you Yeah I think it's also important it's also important to note on this link. It. This is and importantly, right. This is our launch lane and when we talk about commercially representative locations.

Chris Ernstson: 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 percent as of September 30th, 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.

That means is all the operational capabilities all the things that we need to have happen to operate on this lane exist at the terminal. So if we need a feeling 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 and economists lane.

This is how we envision and demonstrate this capability and how it will scale overtime, where we're determining all the necessary capabilities that you need to have and we continue to refine that along the way and it also helps build confidence with our customers.

Chris Ernstson: Within Aurora, we track the work in closing our safety case across the core elements of our product. Aurora driver hardware, Aurora services, vehicle integration, and Aurora driver software. 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.

Got it great. That's really helpful. 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 since you guys get ready for commercial launch.

So today, we also operate on the Rab between Fort worth in El Paso, and we're pulling loads of their daily for customers as we we've we've provided in the past some kind of general guidance that we expect to expand east to west Ah along that corridor, but I don't think we can.

Chris Ernstson: Grilling at the hardware specifically, engineering the raw driver hardware for an astral liability 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 hardened versions of our proprietary first-light light art and computer, both of which have been tested to meet our target levels of reliability.

More specific details today to that.

No worries thank you very much.

Welcome Thanks for questions.

Thank you next question is coming from Marc Delany from Goldman Sachs. Your line is our lives.

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 free market impact Ah. What you were thinking about with respect to train some contracts independent of where the or or a horizon, maybe the U K.

Chris Ernstson: We've included visuals of this integrated hardware on page 7 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 a raw 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.

Yeah, eight Merritt that's ER, that's great cushion 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 simple cyclical nature and really that really that depressed market has been a challenge for many of our partners.

Chris Ernstson: In turn, the key component of our approach leverages, our rawest virtual testing suite to amplify exposure to rare and as yet unseen events to test the raw driver's performance of those scenarios. To test the test supports closure of the safety case 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's safety case claims will stretch beyond our end of year goal.

Especially in the F T L space, but I also think you know you have to give them a lot of credit to them. Despite some of the challenges they've continued to work with us they see the longterm 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 2002.

Twenty-five Ah 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.

Chris Ernstson: Importantly, the work on this segment of claims does not impact our expected timing of commercial launch. This work is being performed by a limited subset of the team. 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. And we are already reallocating parts of 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.

I I would say that the depression and the market has.

There's some <unk>.

Challenges for them operationally, but they see the value in this and so there's still fully and completely excited about after you know a plan together in the long term so thanks.

Got it and then they've won one other question for you to just on on the operating expenses and Cashews, you know kind of you know.

Got down sequentially and you guys had talked about some sunshine levels to expect through the commercial launch, but you know do something to better understand the reason.

Chris Ernstson: 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 side swipe avoidance capability. While not in everyday occurrence, side swipe collisions are one of the most common collisions encountered by trucks on our roads. 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 appear into its lane.

Reasons for the.

Just a bunch of moderation in spending levels and you know.

Perhaps any of this one was it was at an all time and related and and and maybe a little bit on the higher end of that range next quarter or any other ways to to better frame you know some of the sequentials around spent things.

Yeah, I think there was some some minor timing adjustments, but most everything as we had planned right like we we had a cashews, which was about what we expected we anticipated Q3 to be a little bit lower you know when we when we guide on the average of 175 to 85, you know we have to put an allocation right cause it's.

Chris Ernstson: We've designed the raw driver's response to these potential side swipes to emulate our expert commercial drivers and all these scenarios. On stage 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 really. And on page six 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.

On an average so we'll put it will put like the bonus that we pay which in this time period was the second corner and next year, we're interstate.

Anticipating being in the first corner. So there is some allocation of that on a quarterly average, but yeah. 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 I think this is more of a testament to the fact that like it's really important.

Chris Ernstson: The Aurora driver perceives this side's wife 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's wife's scenario. We now have confidence in the Aurora driver's ability to handle such a size-wide scenario appropriately and we're in the process of completing the final validation.

For us to be wise and make sure that we know how to eat to use and have the right financial discipline, and we're really finding a lot of opportunities to reuse it and to just do things smarter without jeopardizing any of our progress. We would expect to you for we don't see big shifts from keeps me the queue for that would.

Have a super concerned about missing our target for Q4, we still expect to deliver within the target range or or a better than that for a Q4.

Chris Ernstson: 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 same 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.

Thank you.

Mhm.

Thank you next question is coming from Jeff Osborne from Cowen and company your lifestyle life.

Thank you. Good evening I was wondering if you could just flush out a bit more the driver safety case being close the the moved to Q1.

There was that all due to the the instance that you mentioned before in terms of sideswipe or is there a sort of a laundry list of education.

Chris Ernstson: 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 lane 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 city progress growing our commercial loads and operational capabilities in preparation for commercial launch.

In society, but that you need to Bang out is trying to understand that delay there yeah.

Yeah, I know this isn't I I wouldn't think of this is kind of the dreaded boy the the education's the grenade get you it's gonna take forever to get the last bit. 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 validators should particularly you know cross the.

Chris Ernstson: We in turn achieved our end-of-third quarter target to a ton of sleigh haul 75 loads per week for our customers. We're now logging over 20,000 commercial miles per week, cumulative to date through October 29th, we have a ton of sleigh 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, Herschbach, and Erbberg-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.

Driving capability.

And as we have been building 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 the point, where we could operate them and get ourselves conviction that system would work the way we expect it to on the road.

And so the majority of the work across the Aurora driver, who was 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 overdrive rock rape more places how do we have it ready to expand to other wayne's how do we bring with cost out of the system. So the <unk>.

Chris Ernstson: 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 will 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 and beyond scalability and ultimately our profitability, we'll be supported by a reduction in the level of onsite support required.

Cause of the kind of.

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 go on commercial we we don't see this as any as it being in fact, we just thought it was important to be transparent about it.

Got it and just to follow up I think I'm marks question before the contractual obligations are contracts that you have in place for 25 is your sinuses are 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 the the police have an event.

Chris Ernstson: 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 in 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%. In the shareholder letter, and on page 10 of this light deck, you can see the solid progression of our autonomy performance throughout the year.

There was a delay.

I guess I know we wouldn't have.

And if the technology Ah the safety cases in pulley Bank does that does that sort of go hand in hand, which I think they weren't previously designed to do.

Yeah. That's a great question, let me, 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 contract he's Ah Ah Ah to be completely transparent and that's the reason why we wanted to do the contracting through 2025.

Is it really helps us define our lunch lanes and how much supply that we need to order. So it's not it's not unlike how many trucks Ah Ah 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.

Chris Ernstson: I'd like to take a moment to show you a few examples of just how good the Aurora driver's performance is, specifically in challenging traffic conditions encounter during the third quarter on both highway and surface streets. In the video on page 11 of this light deck, on I-45, on approach to Houston, the Aurora driver has decided to lane change to the left and turns on its turn signal. And it starts to lane change and other vehicle begins a last minute aggressive lane change into the same space.

Chris Ernstson: 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 into traffic. I think it's a New Jersey slide is the technical serve. In the example of page 12 of the slide deck, the Aurora driver has just admitted the highway at Houston.

[noise] tumors to build out like their network roadmap through twenty-five we're actually going well beyond that but we want to try to solidify through twenty-five 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 oem's in 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.

Chris Ernstson: Traveling southbound after a stoplight has turned green, it perceives a vehicle in its lane driving the wrong way down the road. The Aurora driver slows its speed, giving the dangerous situation, which allows the oncoming vehicle to take its turn off of the road. The Aurora driver's response enables it to avoid the potential collision.

Just just a.

Two what Ah.

What date was saying as we think about that that engagement with the partners for the ongoing pilot programs allow us to get feedback from them on how do we Ah how do we Ah.

Just our engineering and practical plans to maximally meet their needs and then to the questions asked earlier, because we think about the initial lands. We we've talked first the lunch line is Dallas Houston Fort Worth El Paso, and then it's really you know how do we deliver the maximum value for our customers by looking out. Okay. You know do we expand you know.

Chris Ernstson: Moving to our partners, our work with our trucker partners pack our involved trucks and our new hardware as a service partner, Continental, continues to progress as we prepare for commercial launch at the end. Early in this year, we announced a long-term exclusive partnership with Continental. 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.

West and north to Phoenix, or do we go east to Atlanta.

With them for their priorities for these these critical initial customers.

Chris Ernstson: Under a hardware as a service business model, Aurora will pay for the hardware at 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 Continental and to industrialize the first commercially scalable, autonomous trucking systems, with a cost structure in place in tentative support, our long-term profitability net objectives.

Got it that's very helpful. I appreciate it Chris.

Thanks for your question.

Thank you, we really shouldn't have our question and answer session and ladies and gentlemen that does conclude today's teleconference and webcast.

Disconnect your lines at this time and have a wonderful day, we thank you for your participation today.

[laughter].

Chris Ernstson: On the vehicle platform side, during the third quarter, we brought online our new fleet of Peterbilt 579 trucks, up and faded 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 and steering in 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 centerpods, simplifying the hardware installation process.

Chris Ernstson: We were, in turn, able to rapidly integrate the Aurora driver as a pre-assembled and pre-tested hardware kit. Our robot truck bills are continuing during the fourth quarter, the preparation for autonomy testing of this platform, which it expected to begin in the first quarter of 2024. As our teams continue to advance toward this meaningful moment in our partnership, Volvo Autonomous Solutions just recently reiterated their excitement for their autonomous trucking product, powered by the Aurora driver, and the tremendous revenue opportunity that they believe lies ahead.

Chris Ernstson: 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. With each developmental milestone we reach, we're also co-developed in the time we ready truck platform and all of its sub-systems with our OEM partners and their tier-1 suppliers.

Chris Ernstson: We're confident that this is the right approach for the future self-driving truck technology of business, and frankly we believe the only approach for commercial development at scale. We are more confident than ever in our leadership position and CR advantage continuing to grow.

Chris Ernstson: 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.

David Vidae: 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.

David Vidae: With the Aurora driver and 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 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.

David Vidae: 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.

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 one under telephone keypad. A confirmation tone will indicate your line is in the Question Q. You may press star two if you'd like to move your question from the Q. For participants using speaker equipment, maybe necessary to pick up your handset before pressing star one. One moment please while we pull for questions.

George Giannarchus: Our first question today is going to be from George Giannarchus, from Ken Accurge Newtie, your line is our live. Hi everyone, and thank you for taking my questions. 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 in their operations.

George Giannarchus: I'm curious as to whether you could 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. Thank you for asking. So when we look at the landscape, we continue to see a very welcoming and positive atmosphere for 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 we've shared our approach to risk management internally.

George Giannarchus: 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 and it's appropriate and kind of their job to ask questions when things don't feel quite right. From our perspective, we haven't seen this have any impact in our relationship or engagement with regulators or ability to deploy commercially as we plan. 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.

George Giannarchus: Is 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 required integration testing. So I'm curious is that 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.

George Giannarchus: Thank you. Well, thank you again. So so there's the way we had to go to roar driver ready with that you can think of it as the things under our control that we're developing a roar be 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 roar driver ready.

George Giannarchus: 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 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 if not quite consistent with what we had got it towards us. So we wanted to share that with with with our part. Thank you. Thanks so much. I appreciate all the details.

Speaker: Just one question for me about a big industry one and apologize in advance for the preamble and really for revisiting, you know, 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 a hundred percent accurate AV will have accidents caused by human agents. We can then debate the particulars, the tax, the teleops, but a topic our team views is really important was actually covered in a podcast last week.

Speaker: You know, the not often discussed critical role of public comms in AV, you know, up to now, AV companies have kept the detailed why are they driving policy rightfully to themselves during testing, meaning the public is asked to trust the AV when deployed after internal validation. But I think as we, 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.

Speaker: So long preamble, but my question has a lower 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. But I think the down to even at some point, inside into the probability of HC to driving policy was running off at the time of the decisions.

Speaker: I know it's a long question, but anything that you can share because I really think it's a critical time for the industry. Thanks so much. 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.

Speaker: And so we already run table pop exercises internally, we do this periodically, where we have a mock events that happen 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. I think we've demonstrated over the last several years our willingness to be transparent about safety and our approach to it.

Speaker: Whether again, it's about sharing our safety case 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. Concreetly, I think it was March of this year, we have an incident on the road where our vehicle is driving down the road and another person driving a light vehicle.

Speaker: 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 will continue to live that as we go forward. I really appreciate that. Chris, did he only follow up?

Speaker: 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 of it's book, you know, could there be a body that, what's out sort of, you know, numbers that can be analyzed, you know, all these things that would increase trust.

Speaker: And you obviously, if it's done at a large scale versus 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 is the end goal here. Any thoughts on that? 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 in California is that it doesn't provide an honest assessment of performance because it mingles development and released software.

Speaker: And that, of course, when you're developing something, you know, you expect there to be incomplete elements to performance 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.

Speaker: 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 it hit the windshield of one of our trucks and we had to report that to DOT. So I think that provides a level of effect that are happening on the road. Much appreciated. Of course. Thank you.

Operator: As a reminder, that star one to be placed in the question, Q.

Tom White: Our next question is coming from Tom White from David's in your line. Is that live? Hey, this is why it's long for Tom.

Tom White: 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 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 this is a place where we've got facilities neither end for this initial deployment of the technology that we'll operate between for our customers.

Tom White: At the end of Q3, we were at the road so a week. And the guidance we provided in our road map 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 reflect, and Austin'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.

Tom White: And over the time between now, 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 exist at the terminal.

Tom White: 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 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.

Speaker: And then a follow-up to that. What can we expect in terms of opening up additional routes over the next 12 to 18 months if 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've provided in the past some kind of general guidance that we expect to expand east to west along 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.

Speaker: Thank you.

Mark Delaney: Next question is coming from Mark Delaney from Goldman Sachs, your line is out of line. Good afternoon. Thank you very much for taking my questions.

Speaker: 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 entering some contracts independent of what the Aurora horizon may be capable of? Yeah. Hey, Mark. 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.

Speaker: 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. 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.

Speaker: 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. And so they're still fully and clearly it's made about wrapping a plan together in the long term. So thanks. You got it.

David Vidae: And then Dave one, one other question for you, just on on the operating expenses and cash use, you know kind of you know down sequentially and you had to talk 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 and you know perhaps any of this was it was at all timing related and maybe a little bit on the higher end of of that range next quarter or any other ways to better frame you know some of the sequentials around spend thanks. Yeah I think there was some 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 lower you know when we 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 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 into state into to be 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.

David Vidae: I think this is more of a testament to the fact that like it's really important for us to be wise and make sure that we know how to to use and have the right financial discipline and we're really finding a lot of opportunities to reuse it 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.

Jeff Osborne: Next question is coming from Jeff Osborne from Cowarding Company. Your line is on live. Thank you.

Chris Ernstson: Good evening. I was wondering if you could Chris 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 swipe or is there a sort of a laundry list of edge cases that are rare in society but that you need to to bang out. I was just trying to understand that delay there.

Chris Ernstson: Yeah. Yeah, no, this isn't 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 thinking is a little bit longer that we had expected for to develop some of those tests and kind of get them to the point where we could operate them and get ourselves conviction that the system.

Chris Ernstson: It would work the way we expected to on the road. 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 other lanes? How do we bring the cost out of the system?

Chris Ernstson: 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. We just thought it was important to be transparent about it. Got it. And just to follow up, I think, on Mark's question before, the contractual obligations or contracts 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 the fleet tab in the event that there was a delay?

Chris Ernstson: I guess I guess 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 be no element 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 2025 is it really helps us define our launch lanes and how much supply that we need to order.

Chris Ernstson: 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 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 low 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.

Chris Ernstson: 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 25 and beyond. So that's what we're focused in on. And then 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 adjust our engineering and practical plans to maximally meet their needs.

Chris Ernstson: And then to the question that's earlier, you know, as we think about the initial lands, we've talked first for launch lane is Dallas Houston and then Fort Worthville Pat though. And then it's really, you know, how do we deliver the maximum value for our customers by looking at okay, you know, do we extend, you know, West and North to Phoenix or do we go east to Atlanta and working with them for their priorities for these critical initial customers. God, it's a very helpful. I appreciate it Chris. Thanks for the question. Thank you.

Operator: We reached out to our question and answer session. And ladies and gentlemen, that does conclude today's teleconference and webcast. Let me disconnect your lines at this time and have a wonderful day.

Operator: We thank you for your participation today.