Q1 2024 Aurora Innovation Inc Earnings Call
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Greetings and welcome to the Aurora first quarter 'twenty 'twenty four business review call.
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Operator: Greetings and welcome to the Aurora First Quarter 2024 Business Review Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Stacy Feit, Vice President, Investor Relations. Thank you. You may begin.
unknown: At this time all participants are in a listen only mode.
Operator: A brief question and answer session will follow the formal presentation.
Operator: Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Operator: As a reminder, this conference is being recorded.
Operator: It's now my pleasure to introduce your host Stacy Feit.
Stacy Feit: Vice President Investor Relations. Thank.
Stacy Feit: Thank you you may begin.
Stacy Feit: Thank you, Camilla. Good afternoon, everyone, and welcome to our first quarter 2024 business review call. We announced our results earlier this afternoon. Our shareholder letter and a presentation to accompany this call are available on our investor relations website at ir.aurora.tech. The shareholder letter was also furnished with our Form 8K filed today with the SEC. On the call with me today are Chris Urmson, co-founder and CEO, and David Maday, CFO.
Stacy Feit: Thank you Camilla good afternoon, everyone and welcome to our first quarter 2024 business review call, we announced our results earlier this afternoon.
Stacy Feit: Shareholder letter and a presentation to accompany this call are available on our Investor Relations website at IR Dot arrived on time.
Stacy Feit: Shareholder letter was also furnished with our form 8-K filed today with the SEC.
Speaker Change: On the call with me today are Chris Armes, I'm co founder and CEO and David mid day CFO.
Stacy Feit: Chris will provide an update on the progress we have made across the key pillows of our business, and David will recap our first quarter financial results. We will then open the call to Q&A. A recording of this conference call will be available on our investor relations website at ir.aurora.tech shortly after this call has ended.
Stacy Feit: Chris will provide an update on the progress we have made across the key pillars of our business.
Stacy Feit: And David will recap our first quarter financial results. We will then open the call to Q&A.
Stacy Feit: A recording of this conference call will be available on our Investor Relations website at IR Dot Tech. Shortly after this call has ended and.
Stacy Feit: I'd like to take this opportunity to remind you that during the call, we will be making forward-looking statements, including statements relating to the achievement of certain milestones around and realization of the potential benefits of the development, manufacturing, scaling, and commercialization of the Aurora driver and related services, market opportunity and profitability of our products and services, our anticipated timeframe, the expected performance of our business, and potential opportunities with partners and customers.
Stacy Feit: I'd like to take this opportunity to remind you that during the call we will be making forward looking statements.
Stacy Feit: This includes statements relating to the achievement of certain milestones around and realization that the potential benefits of the development manufacturing scaling and commercialization. If you were a driver related services.
Stacy Feit: Market opportunity and profitability of our products and services, our anticipated time frame the expected performance of our business and potential opportunities with partners and customers.
Stacy Feit: This is a presentation of the expected contract commitments from customers for our products and services, regulatory tailwinds, and the framework in which we operate, our expected cash runway, and our overall future. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call. In particular, those described in the risk factors included in our annual report on Form 10-K for the year ended December 31, 2023, filed with the SEC, as well as the current uncertainty and unpredictability in our business, the markets, and the economy.
Stacy Feit: <unk> contract commitments from customers for our products and services.
Stacy Feit: Regulatory tailwind as a framework in which we operate expected cash runway and overall future prospects.
Stacy Feit: These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call.
Stacy Feit: In particular those described in our risk factors included in our annual report on Form 10-K for the year ended December 31, 2023 filed with the SEC.
Stacy Feit: Well as the current uncertainty and unpredictability in our business the markets in economy.
Stacy Feit: Additional information will also be set forth in our quarterly report on Form 10-Q for the quarter ended March 31, 2024. However, 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 Aurora disclaims any obligation to update any forward-looking statements except as required by law. Our discussion today may include non-GAAP financial measures.
Stacy Feit: Additional information will also be set forth in our quarterly report on Form 10-Q for the quarter ended March 31, 2024, 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 Aurora disclaims any obligation to update any forward looking.
Stacy Feit: Except as required by law.
Stacy Feit: Our discussion today may include non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not a substitute for or in isolation from our GAAP results.
Stacy Feit: These non-GAAP measures should be considered in addition to and not 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, 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. With that, I'll now turn the call over to Chris. Thank you, Stacy.
Stacy Feit: Information regarding our non-GAAP financial results, including a reconciliation of our historical GAAP to non-GAAP results may be found in our shareholder letter, which was furnished with our form 8-K filed today with the SEC and May also be found on our Investor Relations website with that I'll now turn the call over to Chris. Thank you Stacey.
Christopher Urmson: 2024 is off to a strong start as we purposefully drive toward our planned commercial launch at the end of the year and the subsequent scaling of our business. The team's commitment to our mission to deliver the benefits of self-driving technology safely, quickly, and broadly remains steadfast and is fueling some of the highest levels of employee engagement we've seen as a public company. This enthusiasm drove our continued progress in the corridor, including improving the rower driver's autonomy performance, advancing our launch lane safety case, and continuing to execute with financial discipline.
Chris: 2024 is off to a strong start as we purposefully drive toward our planned commercial launch at the end of the year and the subsequent scaling of our business.
Christopher Urmson: The team's commitment to our mission to deliver the benefits of self driving technology safely quickly and broadly remains steadfast and is fueling some of the highest levels of employee engagement, we've seen as a public company.
Christopher Urmson: This enthusiasm drove our continued progress in the quarter, including improving the ROI drivers autonomy performance advancing our launch Lane safety case, and continuing to execute with financial discipline.
Christopher Urmson: We recently hosted an analyst and Investor day, where we demonstrate the maturity of our ecosystem the depth of our partnerships and enthusiasm of our customers.
Christopher Urmson: We recently hosted an analyst and investor day where we demonstrated the maturity of our ecosystem, the depth of our partnerships, and the enthusiasm of our customers. These factors support our expectations that we can drive rapid, capital-efficient revenue growth, high gross margins, and, most importantly, mature into a self-sustaining company.
Christopher Urmson: These factors support our expectation that we can drive rapid capital efficient revenue growth high gross margins and most importantly mature into a self sustaining company.
Christopher Urmson: We gave attendees a chance to experience driverless truck rack and a first look at how our driverless trucks navigated advanced route scenarios at our test track.
Christopher Urmson: We gave attendees a chance to experience driverless truck rides and a first look at how our driverless trucks navigated advanced road scenarios at our company. Pages 4 through 7 of our presentation include examples of the exceptional performance of the Aurora driver without vehicle operators in these highly demanding situations, including handling interactions with aggressive drivers, avoiding dangerous debris, responding to pedestrians who unexpectedly entered the path of the vehicle, and navigating tire blowouts.
Christopher Urmson: Page four through seven of our presentation include examples of the exceptional performance of the Aurora driver without vehicle operators in these highly demanding situations, including handling intersection interactions with aggressive drivers avoiding dangerous debris responding to pedestrians, who unexpectedly entered the passenger vehicle and navigating tire blowouts.
Christopher Urmson: <unk>.
Christopher Urmson: In the first video, we see the power of the Aurora driver as it monitors an aggressive driver approaching at high speed. The aggressive driver accelerates to overtake the truck, merges just feet in front of the Aurora driver without signaling, and slams on the brakes in order to exit the roadway.
Christopher Urmson: In the first video we see the power of your driver as it monitors and aggressive driver approaching at high speed the aggressive driver accelerates to overtake the truck merchants just feet in front of the Aurora driver without signaling and slammed on the brakes in order to exit the roadway.
Christopher Urmson: The Aurora driver perceives the dangerous driving behavior, anticipates the potential for an aggressive cut-in, and safely brakes to avoid collision. It doesn't break a sweat and continues on as. The second video showcases the Aurora driver navigating a common yet demanding and dangerous situation, evading road debris, including tires and trash cans. It also expertly avoids a mattress and suitcase that have fallen out of the bed of a pickup truck just ahead. The Aurora driver promptly identifies these hazards and swiftly executes safe but rapid lane changes to avoid them. The third video illustrates a potentially catastrophic scenario, an obscured pedestrian unexpectedly entering the road.
Christopher Urmson: The real driver perceives the dangerous driving behavior anticipates, the potential for an aggressive cut it and safely brakes to avoid collision.
Christopher Urmson: It doesn't break a sweat and continues on its journey.
Christopher Urmson: The second video showcases the Aurora driver navigating a common yet demanding and dangerous situation abating road debris, including tires and Trashcans. It also expertly avoids a mattress in suitcase that have fallen out of the bed or a pickup truck just ahead.
Christopher Urmson: The real driver properly identifies these hazards and swiftly execute safe, but rapidly changes to avoid them.
Christopher Urmson: The third video illustrates a potentially catastrophic scenario and obscured pedestrian unexpectedly entering the roadway.
Christopher Urmson: As your driver approaches, the pedestrian steps in front of the oncoming truck. In both variations of the scenario, the Aurora driver identifies the pedestrian and acts quickly in the subsequent moments, either merging when space is available or rapidly decelerating to come to a complete stop when other vehicles are traveling adjacent to the truck, preventing a safe lane change. The final video showcases the Aurora driver responding to a particularly severe issue, a tire blowout. In this scenario, we place a spike strip in the path of the truck.
Christopher Urmson: As your driver approaches the pedestrian steps in front of the oncoming truck in both variations of the scenario. The road driver identifies the pedestrian and ex quickly in the subsequent moments either merging when space is available or rapidly decelerating to come to a complete stop with other vehicles are traveling adjacent to the truck preventing a safe lane change.
Christopher Urmson: <unk>.
Christopher Urmson: The final video showcases the Aurora driver responding to a particularly severe issue a tire blowout.
Christopher Urmson: In this scenario, we place a spike strip in the path of the trucks. The Aurora driver promptly recognizes that the Tigers blown and brings the truck to a safe staff on the shoulder.
Christopher Urmson: The Aurora driver promptly recognizes that the tire has blown and brings the truck to a safe stop on the shoulder. The Aurora driver's impressive performance in scenarios like these reinforces our belief in the safety advantages our technology can provide. At its core, the Aurora Driver is all about making transportation safer and more efficient. It does not lose focus, get tired, or become impaired.
Christopher Urmson: The word drivers impressed performance in scenarios like these reinforces our belief in the safety advantages our technology can provide.
Christopher Urmson: At its core the ROI driver is all about making transportation safer and more efficient.
Christopher Urmson: Does not lose focus get tired or become impaired.
Christopher Urmson: We believe it not only replicates the behavior of the most proficient drivers, but it also redefines performance with superhuman capability. The system can simultaneously perceive 360 degrees of the operating environment and anticipate and respond to seemingly unpredictable road user behavior with the support of advanced models. We continue to lead the industry with our commitment to safety and transparency. To prove the safety of our product and earn public trust, we utilize a safety case, which is a comprehensive, evidence-based approach to confirming that our self-driving vehicles are acceptably safe to operate on public roads.
Christopher Urmson: We believe it not only replicates the behavior of the most proficient drivers. It also redefines performance with superhuman capabilities. The system can simultaneously perceive 360 degrees of the operating environment and anticipate and respond to seemingly unpredictable wrote users' behavior with the support of advanced modeling.
Christopher Urmson: We.
Christopher Urmson: To lead the industry with our commitment to safety and transparency.
Christopher Urmson: To provide the safety of our proved the safety of our product and earn public trust. We utilize the safety case, which is a comprehensive evidence based approach to confirming that our self driving vehicles are acceptably safe to operate on public roads.
Christopher Urmson: We quantify our progress toward closing our Dallas to Houston launch lane safety case through the Autonomy Readiness Measure, or ARM, which is a weighted measure of completeness across all claims of the safety case for our launch layer. We're the only company in the industry that has provided this level of. As of mid-April of this year, ARM was 95%, which is a significant achievement.
Christopher Urmson: We quantify our progress toward closing, our Dallas to Houston launched Lane safety case through the autonomy readiness measure or arm, which is a weighted measure of completeness across all claims of the safety case for our launch late.
Christopher Urmson: We're the only company in the industry that has provided this level of transparency.
Christopher Urmson: As of mid April of this year arm was 95%, which is a significant achievement as we said when we introduced the arm approximately 95% is related to claims specific to the Aurora driver.
Christopher Urmson: As we said when we introduced the Aurora driver, approximately 95% is related to claims specific to the Aurora driver. This continued advancement underscores the progress we have made on final validation in preparation for commercial launch. As we said when we introduced the arm, approximately 95% is related most directly to claims specific to the Aurora driver, and this is a significant achievement. While we will continue to collect evidence throughout the year, we expect final validation and closure of the remaining safety case claims to be completed later this year with our anticipated launch platform.
Christopher Urmson: This continued advancement underscores the progress we have made on final validation in preparation for commercial launch.
Christopher Urmson: As we said when we introduced the arm approximately 95% is related most directly to claim specific to the Aurora driver and this is a significant achievement. While we will continue to collect evidenced throughout the year, we expect final validation and closure of the remaining safety case claims to be completed later this year with our anticipated launch platform.
Christopher Urmson: A large portion of the safety case work is ensuring we are properly defined validated and verified the features that make up the Aurora driver.
Christopher Urmson: A large portion of the safety case work is ensuring we have properly defined, validated, and verified the features that make up the Aurora driver. I'm going to take a few moments to outline how we do this work. On page 9 of the presentation, we lay out this process.
Christopher Urmson: Going to take a few moments to outline how we do this work.
Christopher Urmson: On page nine of the presentation, we lay out this process.
Christopher Urmson: When we were initially developing new road driver, we defined how the system should behave as an example, the road drivers designed to yield two and of course, most importantly avoid collisions with pedestrians.
Christopher Urmson: When we were initially developing the Aurora Driver, we defined how the system should behave. For example, the Aurora Driver is designed to yield to, and, of course, most importantly, avoid collisions with pedestrians. Given that requirement, we developed an initial set of tests to help us develop the algorithm.
Christopher Urmson: Given that requirement we developed an initial set of tests to help us develop the algorithm.
Christopher Urmson: We also labeled examples of the desired behaviors and used that data to train our machine learning models to enable the Aurora driver to execute an appropriate duty of care in similar scenarios. Once the feature passes these initial tests, we begin to have confidence that the Aurora driver is capable of operating safely on the road. But it is important that we invest the energy to refine and validate the performance of the feature, which are critical steps in closing our safety case.
Christopher Urmson: We also labeled examples of the desired behaviors and use that data to train our machine learning models to enable the Aurora driver to execute an appropriate duty of care and similar scenarios.
Christopher Urmson: Once the future pass. These initial tests, we begin to have confidence that the Aurora driver is capable of operating safely on the road, but it is important that we invest the energy to refine and validate the performance of the feature which are critical steps in closing our safety case.
Christopher Urmson: To support our validation and refinement efforts, we wrote detectors that can scan through approximately 100000 miles of expert human driving to automatically extract data and support validation.
Christopher Urmson: To support our validation and refinement efforts, we wrote detectors that can scan through approximately 100,000 miles of expert human driving to automatically extract data and support validation. We analyzed this data to ensure that we're covering common everyday experiences and interesting and challenging parts of the interaction. As an aside, many of you have heard of Reinforcement Learning from Human Feedback, or RLHF. It's a critical enabler of the advancements in large language. Our approach to using data from our human expert drivers to refine the performance of the machine-learned elements of the Aurora driver system takes a similar approach.
Christopher Urmson: We analyze this data to ensure that we're covering common everyday experiences and interesting and challenging parts of the interaction space.
Christopher Urmson: As an aside many of you've heard of reinforcement learning from human feedback or Aro HFF. It's a critical enabler of the advancements in large language models, our approach to using data from our human expert drivers to refine the performance of the machine learned elements of the Aurora driver system takes a similar approach.
Christopher Urmson: Our human driven data can be automatically transformed into tests. We then supplement these tests with additional synthetic test by varying parameters for example, with pedestrians in different locations or moving at different speeds to complete our test coverage.
Christopher Urmson: Our human-driven data can be automatically transformed into tests. We then supplement these tests with additional synthetic tests by varying parameters, for example, with pedestrians in different locations or moving at different speeds, to complete our test coverage.
Christopher Urmson: Finally, we develop a small number of tests that we run end-to-end with a physical truck and test track to ground our simulations in reality. We exercise this full process to validate the driverless capabilities showcased at our Analyst and Investor Day, and attendees saw the effectiveness of this development process firsthand. As we measure our progress toward commercial launch, we look at indicators for safety and use. A key metric we use to assess the Aurora driver's performance, or usefulness, is the Autonomy Performance Indicator, or API. This indicator penalizes the use of on-site support, which will be the most expensive support provided.
Christopher Urmson: Finally, we develop a small number of tests that we run end to end with a physical truck or a test track to ground, our simulations and reality.
Christopher Urmson: We exercise this full process to validate the driverless capability showcased at our analyst and Investor day and attendees saw the effectiveness of this development process firsthand.
Christopher Urmson: As we measure our progress towards commercial launch we look at indicators for safety and usefulness a key metric we use to assess the road drivers performance. Our usefulness is the autonomy performance indicator or API.
Christopher Urmson: This indicated penalizes the use of onsite support which will be the most expensive support provided.
Christopher Urmson: With the achievement of an aggregate API of 99% last quarter. We are now focused on driving up the percentage of commercial loads that do not require any onsite support which we refer to as 100% API loads.
Christopher Urmson: With the achievement of an aggregate API of 99% last quarter, we are now focused on driving up the percentage of commercial loads that do not require any onsite support, which we refer to as 100% API. As a reminder, we do not anticipate aggregate API will ever reach 100%, even at launch because certain situations, like flat tires, will always require on-site support. However, we do believe the percentage of 100% API loads will be a strong indicator of our progress toward commercial launch during the first quarter.
Christopher Urmson: As a reminder, we do not anticipate aggregate API will ever reach 100% even at launch because certain situations like flat tires will always require onsite support. However, we do believe the percentage of 100% APR API loads will be a strong indicator of our progress towards commercial launch.
Christopher Urmson: During the first quarter.
Christopher Urmson: 75% of the commercial loads in the launch lane had 100% API, reflecting a 13-point improvement from the prior quarter and meaningful progress toward our commercial launch expectation of roughly 90%. With the recent introduction of intermodal trailers into our pilot operations, we're now including these loads in the API measure, underscoring our increasing readiness for expansion beyond 53-foot drive ends, following our planned commercial launch. Increasing confidence in our technology and progress is accelerating our demand building. We have now secured multi-year contractual commitments on volume and pricing from multiple customers with a mechanism to transition to driverless operations, and we are in active negotiation with additional customers.
Christopher Urmson: 75% of the commercial loads in our launch Lane had 100% API, reflecting a 13 point improvement from the prior quarter and meaningful progress toward a commercial launch expectation of roughly 90%.
Christopher Urmson: With the recent introduction of intermodal trailers into a pilot operations. We're now including these loads in the API measured underscoring our increasing readiness for expansion beyond 53 foot dry van.
Christopher Urmson: Following our planned commercial launch.
Christopher Urmson: The increasing confidence in our technology and progress is accelerating our demand building efforts. We have now secured multiyear contractual commitments on volume and pricing from multiple customers with a mechanism to transition to drive those operations and we are in active negotiation with additional customers.
Christopher Urmson: As we prepare for the commercial launch, we continue to autonomously haul freight for all of our pilot customers, including FedEx, Werner, Schneider, Birchbeck, Uber Freight, and others. We're now scheduling about 120 commercial loads per week, or triple the commercial volume we were executing a year ago.
Christopher Urmson: As we prepare for commercial launch we continue to autonomous haul freight for all of our pilot customers, including Fedex Warner Schneider, Hirschbeck, Uber freight and others.
Christopher Urmson: We're now scheduling about 120 commercial loads per week or triple the commercial volume, we were executing a year ago for.
Christopher Urmson: For the rest of the year, we're focusing on finalizing contractual commitments through 2025 and increasing load capacity strategically to support operational readiness and customer expansion. Cumulatively, through the end of April, we have autonomously delivered, under the supervision of vehicle operators, 5,450 loads, driving approximately 1.5 million commercial miles, with nearly 100% on-time performance for our pilot customers. Moving to the regulatory environment.
Christopher Urmson: For the rest of the year, we're focusing on finalizing contractual commitments through 2025, and increasing load capacity strategically to support operational readiness and customer expansion.
Christopher Urmson: Cumulative to date through the end of April we have autonomously delivered under the supervision of vehicle operators 5450 loads driving approximately $1 5 million commercial miles with nearly 100% on time performance for our pilot customers.
Christopher Urmson: Moving to the regulatory environment under existing law and regulation autonomous vehicles can be deployed in the vast majority of states, including our Texas launch market.
Christopher Urmson: Under existing law and regulation, autonomous vehicles can be deployed in the vast majority of states, including our Texas law. Texas does not currently require additional regulatory steps and is in an ideal state for the launch of the Aurora driver given its high freight volumes and advanced transportation infrastructure. We're also continuing to see steady advancement of autonomous vehicle legislation across the United States. Since our fourth quarter business review, South Dakota and Kentucky have furthered this momentum by enacting autonomous vehicle legislation into law.
Christopher Urmson: Texas does not currently require additional regulatory steps and is in an ideal state for launch of the Aurora driver given its high freight volumes and advanced transportation infrastructure.
Christopher Urmson: We're also continuing to see steady advancement of autonomous vehicle legislation across the United States.
Christopher Urmson: Since our fourth quarter business review, South Dakota, and Kentucky have further at this momentum by enacting autonomous vehicle legislation into law.
Christopher Urmson: Burning public trust is also vital in a safety-critical industry and requires a locally focused effort centered on transparent engagement. Earlier today, we hosted our first community event at Palmer High School in Texas, where we shared the benefits of our technology and the economic opportunities Aurora is bringing to the region. We look forward to engaging with additional communities along the I-45 corridor in preparation for our commercial launch.
Christopher Urmson: Earning public Trust is also vital in safety critical industry and requires a locally focused effort centered on transparent engagement earlier today, we hosted our first community event at Palmer High School in Texas, where we shared the benefits of our technology and the economic opportunities. It we're always bringing to the region. We look forward to engaging with additional community.
Christopher Urmson: These along the I 45 quarter in preparation for a commercial launch.
Christopher Urmson: Looking further ahead, we believe Aurora is the only company positioned to commercialize autonomous trucking at scale.
Christopher Urmson: Looking further ahead, we believe Aurora is the only company positioned to commercialize autonomous trucking at scale. We have established OEM and tier 1 partnerships with Volvo Trucks, PACCAR, and Continental that are unmatched in the industry and support a freight ecosystem with aligned incentives to drive growth for years to come. As we've said before, we believe deep integration with OEMs and suppliers is absolutely critical to bringing a safe and commercially viable driverless trucking product to market at scale.
Christopher Urmson: We have established OEM and tier one partnerships with Volvo trucks, <unk> and continental that are unmatched in the industry at support of freight ecosystem with aligned incentives to drive growth for years to come.
Christopher Urmson: As we've said before we believe deep integration with Oems and suppliers is absolutely critical to bringing a safe and commercially viable driverless trucking product to market at scale.
Christopher Urmson: Our goal is to operate at significant scale and build a valuable business for the long term. That's why we've partnered with Volvo Trucks and Pack. We're working together to design autonomy-enabled trucks with the redundant components necessary for safe driverless operations, and importantly, with plans to manufacture these platforms at scale. We also have a long-term exclusive partnership with Continental to jointly develop, manufacture, and service future generations of the Aurora Driver Hub. This partnership gives us a path to deploy autonomous trucks at scale with a cost structure in place intended to support our long-term profitability.
Christopher Urmson: Our goal is to operate at significant scale and build a valuable business for the long term.
Christopher Urmson: That's why we partnered with Volvo trucks and packaging.
Christopher Urmson: We're working together to design autonomy enabled trucks with the redundant components necessary for safe driverless operations, and importantly, with plans to manufacture these platforms at scale.
Christopher Urmson: We also have a long term exclusive partnership with continental to jointly develop manufacture and service future generations of the Aurora driver hardware.
Christopher Urmson: This partnership gives us a path to deploy autonomous trucks at scale with a cost structure in place intended to support our long term profitability.
Christopher Urmson: We also recently engaged <unk> for the manufacturing Assembly of our next generation Aurora driver hardware kit, which we plan to introduce in 2025 to support our initial scaling ambitions before continental startup production.
Christopher Urmson: We have also recently engaged Fabernet for the manufacturing assembly of our next generation Aurora driver hardware kit, which we plan to introduce in 2025, to support our initial scaling ambitions before continental startup production. This kit brings exciting performance gains, and importantly, we expect it to drive a step function reduction in our hardware costs, which is a critical element on our path to scale. I couldn't be prouder of the tremendous progress we're making while maintaining safety is our North. We will continue to work responsibly and purposefully to ready our technology for commercial launch and longer-term deployment at scale.
Christopher Urmson: This kit brings exciting performance gains and importantly, we expect it to drive a step function reduction in our hardware cost, which is a critical element on our path to scale and self funding.
Christopher Urmson: I couldnt be prouder of the tremendous progress, we're making while maintaining safety as our north star. We will continue to work responsibly and purposefully to ready our technology for commercial launch and longer term of deployment at scale.
Christopher Urmson: Our path has never been clearer, and we are convinced that Aurora is going to create immense value for society, our partners, our customers, and, of course, our shareholders. With that, I'll now pass it over to Dave, who will review our financial statements.
Christopher Urmson: Our path has never been clearer and we are convinced that Aurora is going to create immense value for society, our partners our customers and of course, our shareholders with that I'll now pass it over to Dave who will review our financial results.
David Maday: Thank you, Chris. Now, let's discuss our financial results. We have provided a summary on page 12 of the slide deck for reference. During the first quarter of 2024, we continued to demonstrate strong fiscal discipline while executing toward our planned commercial launch. First Quarter 2024 Operating Expenses, including stock-based compensation, totaled $193 million. Excluding stock-based compensation, operating expenses were $157 million. Within operating expenses, our R&D expenses, excluding stock-based compensation, totaled $135 million.
Dave: Thank you, Chris let's discuss our financial results. We have provided a summary on page 12 of the slide deck for reference.
David Maday: During the first quarter of 2024, we continued to demonstrate strong fiscal discipline, while executing towards our planned commercial launch.
David Maday: First quarter 2020 for operating expenses, including stock based compensation totaled totaled $193 million, excluding stock based compensation operating expenses were $157 million.
David Maday: Within operating expenses, our R&D expenses, excluding stock based compensation totaled $135 million.
David Maday: This amount reflects $565,000 in pilot revenue, which nearly doubled year over year, and which we continue to record as a contra R&D expense. SG&A expenses, excluding stock-based compensation, were $22 million. We used approximately $150 million in operating cash during the first quarter of 2020. Note that this included approximately $9 million in prepayments for hardware components to support commercial lawn. Capital expenditures totaled $8 million. The total cash spend was below our target, reflecting our continued commitment to fiscal prudence.
David Maday: This amount reflects $565000 in pilot revenue, which nearly doubled year over year, and which we continue to record as a contra R&D expense.
David Maday: SG&A expenses, excluding stock based compensation were $22 million.
David Maday: We used approximately $150 million in operating cash during the first quarter of 2024.
David Maday: This included approximately $9 million in prepayments for hardware components to support commercial launch cap.
David Maday: Capital expenditures totaled $8 million.
David Maday: The total cash spend was below our target, reflecting our continued commitment to fiscal prudence. In 2024 can you continue to expect quarterly cash use of $175 million to $185 million on average, which reflects an increase in capital expenditures relative to 2023.
David Maday: In 2024, we continue to expect quarterly cash use of $175 to $185 million on average, which reflects an increase in capital expenditures relative to 2023 as we prepare for commercial law. Similar to the second quarter of 2023, we expect second quarter 2024 cash spent to be above this range due to the payments associated with our 2023 annual incentive compensation. We ended the first quarter with a very strong balance sheet, including $1.2 billion in cash and short-term and long-term investments.
David Maday: As we prepare for commercial launch.
David Maday: Similar to the second quarter 2023, we expect second quarter 2024, our cash spend to be above this range due to the payments associated with our 2023 annual incentive compensation program.
David Maday: We ended the first quarter with a very strong balance sheet, including $1 2 billion in cash and short term and long term investments.
David Maday: Given efficiencies we found in the business that have translated to tangible and recurring cost savings, we now expect this liquidity to support our planned commercial launch and fund our operations into the fourth quarter of 2025. With that, we'll now open the call to questions. Thank you.
David Maday: Given efficiencies we found in the business that have translated to tangible and recurring cost savings. We now expect this liquidity to support our planned commercial launch and fund our operations into the fourth quarter of 2025.
Speaker Change: With that we'll now open the call to Q&A.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. And you may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Operator: Confirmation tone will indicate that your line is in the question queue.
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Operator: One moment, please, while we pull for questions. Our first question comes from the line of George Gianarikas with Canaccord Genuity. Please proceed with your question.
Operator: One moment, please while we poll for questions.
George Gianarikas: Our first question comes from the line of George <unk> with Canaccord Genuity. Please proceed with your question.
George Gianarikas: Hi, good afternoon, and thanks for taking my question.
George Gianarikas: Hi, good afternoon. And thanks for taking my question.
George Gianarikas: I'd like to ask a regulatory question, yes, there is an increasingly.
George Gianarikas: I'd like to ask a regulatory question. There is an increasingly vociferous debate around the merits of a full neural network approach versus a hybrid approach to autonomy. And I think it's safe to say that you endorse more of a hybrid approach. Now, do you think that your approach lends itself to more transparency for regulators? Have you experienced any regulators going under the hood and maybe scrutinizing some of your code and the models that you're using, and do you think that's going to potentially become a necessary part of the regulatory mandate?
George Gianarikas: Both the first debate around the merits of full neural network approach versus a hybrid approach to autonomy I think it's safe to say that.
George Gianarikas: You endorse more of a hybrid approach.
George Gianarikas: How do you think that your approach lends itself to more transparency for regulators have you experienced.
George Gianarikas: Any any regulators going under the Hood and maybe scrutinizing some of your code in the models that Youre using and do you think thats going to potentially become a <unk>.
Speaker Change: Sorry, part of the regulatory mandate. Thank you.
Speaker Change: Yes. Thank you George Great question.
George Gianarikas: Thank you.
Christopher Urmson: Yeah, thank you, George. Great question. You know, as you're probably aware, as you laid out, we are very much taking a hybrid approach here; it's kind of AI first. But it very much incorporates ideas from, kind of, both the modern machine learning world and also, you know, some of the earlier ideas in artificial intelligence that we can bring to bear. For us, I think your observation is spot on, that as we think about engaging with regulators, the burden of being able to help explain to them why the system is behaving the way it is, and importantly, at some point in the future, why you fixed an issue, or how you fixed an issue, and that you have confidence that it was addressed, I think will be very difficult. And the way to think about this is...
George Gianarikas: As Youre, probably aware yes.
Christopher Urmson: As you laid out we are very much taking a hybrid approach here.
Christopher Urmson: And it's kind of AI first.
Christopher Urmson: <unk>.
Christopher Urmson: But it's very much.
Christopher Urmson: Incorporates ideas from from kind of.
Christopher Urmson: Both the modern machine learning World.
Christopher Urmson: And also.
Christopher Urmson: Some of the earlier ideas and artificial intelligence that we can bring to bear here.
Christopher Urmson: For Us I think your observation is spot on that as we think about engaging with regulators.
Christopher Urmson: The burden of being able to help explain to them why the system is behaving the way it is and importantly at some point of future why you fixed an issue or how you fix an issue and that you have conferences dressed I think will be very difficult.
Christopher Urmson: Way to think about this is.
Speaker Change: I don't need.
Christopher Urmson: I don't need to learn that the vehicle shouldn't drive off the road, right? We have the ability to express that explicitly. And that allows us to much more readily convince ourselves and ultimately others who care, like our partners and regulators, that we're actually meeting that objective. And similarly, there are examples of scenarios like, you know, vehicles driving the wrong way down the freeway where you may not actually have enough data to learn a pure AI model for that.
Christopher Urmson: So learn.
Christopher Urmson: That the vehicles should drive off the road.
Christopher Urmson: But we have the ability to express that explicitly and that allows us to much more readily convince ourselves and ultimately others, who care like our partners regulators there.
Christopher Urmson: That we're actually beating.
Christopher Urmson: Meeting that objective.
Christopher Urmson: Similarly, there are examples of scenarios like vehicles, driving the wrong way down the freeway.
Christopher Urmson: Where you may not actually have enough data support to learn a pure AI.
Christopher Urmson: The model for that and we kind of know what the right behavior should be and so by being explicit in encoding that.
Christopher Urmson: And we kind of know what the right behavior should be. And so by being explicit in encoding that where appropriate, it allows us to get the best of both, right? We get to lean into all the wonderful powers of modern AI while also reducing the risk of hallucinations by being able to make strong statements about what will and won't happen on the road and by managing computation in places where there are more efficient ways to implement an algorithm.
Christopher Urmson: Where appropriate and it allows us to get the best of both right we get to lead into all of the wonderful powers of modern AI well.
Christopher Urmson: Also reducing the risk of hallucinations.
Christopher Urmson: <unk> been able to make strong statements about what will or won't happen on the road.
Christopher Urmson: By managing computation in places where.
Christopher Urmson: There are more efficient ways to implement an algorithm.
Speaker Change: Thank you.
George Gianarikas: Maybe as a non-related follow-up. How does the topsy-turvy macro environment impact your ability to finalize contractual agreements with customers in 2025? Is it positive or negative as you kind of look to solidify your business for next year? Thanks.
Christopher Urmson: And maybe as a non related follow up.
George Gianarikas: Does the topsy turvy macro environment impact.
George Gianarikas: Your ability to finalize contractual agreements with customers in the 2025.
George Gianarikas: Is it is it a.
George Gianarikas: Positive or negative as you kind of look to solidify our business to next year. Thanks.
George Gianarikas: David.
David Maday: Dave, do you want to speak to us?
David Maday: Yeah, sure. Thanks, George.
Speaker Change: Yes sure. Thanks, George I appreciate the question.
David Maday: I appreciate the question. You know, I think one of the things that we've continued to focus on is just being patient and working with them and understanding the challenges that they're facing, And so I agree, it's been a little bit bumpy in the macro environment, which has a lot of challenges for the traditional industry. But I think all of our partners view us as a partner that can help address some of the challenges and provide a long-term credible solution that makes a more efficient transportation system.
David Maday: Hey.
David Maday: Thank.
David Maday: As we continue to work with our partners one of the things that we've continued to focus on is just being patient and working with them and understanding the challenges that they're facing right and so I agree it's been a little bit bumpy in the macro environment.
David Maday: Has a lot of challenges for the traditional industry I think all of our partners view us as.
David Maday: A partner that can help address some of the challenges and provide a long term credible solution that makes a more efficient transportation system.
David Maday: And then with that, as we continue to work with our customers, we've found it to be actually pretty productive. We've been able to work with our customers, and we're in the process of completing contracts for all of them.
David Maday: And then with that as we continue to work with our customers we found it.
David Maday: Actually pretty productive we have been able to work with our customers.
David Maday: We're in the process of completing contracts for all of them.
David Maday: But it's good to actually go through challenging times so that we've kind of addressed and learned and understand how we're going to operate during those times as well as during the best possible scenario overall. So I think, in short, it hasn't hurt us at all. And it goes with the learning approach of adoption of new technology that's really going to make a system more efficient in the long run. I think it's been pretty helpful overall.
David Maday: But it's good to actually go through challenging times.
David Maday: So that we've kind of addressed in orange and understand how we're going to operate during those times as well as like during like the best optimal scenario overall, so I think in short it hasnt hurt us at all.
David Maday: And it goes with the learning approach of adoption of a new technology that is really going to make our system more efficient in the long run. So I think it's been pretty helpful. Overall.
Christopher Urmson: And the thing I'd add to that is the engagements we have with our partners are strategic, and these are all folks who've been in the industry, understand there's a cyclic nature to freight for the industry, and they recognize that we're not going to solve their next week's problem. But that we are going to have a potentially transformational benefit to their business over the longer term. And so we're seeing continued engagement and continued, you know, constructive conversations. And we've been able to, you know, get the contracts in place for that we expect we need by 2025.
Speaker Change: The thing I'd add to that is the engagements we have with our partners.
Christopher Urmson: Our strategic in nature.
Christopher Urmson: These are all folks who've been in the industry understand theres, a cyclic nature too.
Christopher Urmson: Two freight to the industry.
Christopher Urmson: And they recognize that we're not going to solve their next week problem.
Christopher Urmson: But that we are going to have a potentially transformational benefit to their business over the longer term.
Christopher Urmson: And so we're seeing continued engagement and continued.
Christopher Urmson: Constructive conversations and we've been able to.
Christopher Urmson: Get the contracts in place for that we expect we need towards 2025.
Speaker Change: Great. Thank you.
Speaker Change: No problem.
Christopher Urmson: Our next question comes from the line of Mark Delaney with Goldman Sachs. Please proceed with your question.
Mark Trevor Delaney: Our next question comes from the line of Mark Delaney with Goldman Sachs. Please proceed with your question.
Mark Trevor Delaney: Yes, good afternoon. Thanks for taking the question. First, just hoping to better understand what you think are the biggest hurdles left before the commercial launch at year-end, including truck OEM partner readiness and expanding the autonomous readiness measure beyond the 95% level from mid-April.
Mark Trevor Delaney: Yes. Good afternoon. Thanks for taking my question first just hoping to better understand what you think are the biggest hurdles left before the commercial launch at year end, including truck OEM partner readiness and expanding the autonomous ready readiness measure beyond the 95% level from mid April.
Christopher Urmson: Yeah, I would say, you know, it's the same set of things that we talked about in February. We need to continue the work in refining the order driver and concluding the validation of that. The team is increasingly focused on things beyond the initial commercial launch, and so we're excited about that. Second, we need the regulatory environment. There we see very little risk.
Speaker Change: Yes, I would say.
Christopher Urmson: It's the same set of things that we.
Christopher Urmson: We've talked about in February so.
Christopher Urmson: We need to continue the work.
Christopher Urmson: Refining your driver include completing the validation of that.
Christopher Urmson: The team is increasingly focused on things beyond initial commercial launch so we're excited about that.
Christopher Urmson: Second we need the regulatory environment, there, we see very little risk.
Christopher Urmson: Given the enthusiasm Texas demonstrated and given the regulatory framework we have, both at a state and federal level, we need customers who are excited about the product. And again, we're getting strong traction with them as well and are entering a good position there. And then finally, as you point out, we need a vehicle platform that has the appropriate redundancies in it. And we continue to work on a daily basis with our OEM partners and are making good progress there as well. So we continue to anticipate being ready to begin launching at the end of this year.
Christopher Urmson: Given the enthusiasm, Texas, demonstrating given the regulatory framework we have.
Christopher Urmson: Both at the state and federal level, we need customers, who are excited about the product and again, we're getting strong traction with them as well and are in a good position.
Christopher Urmson: There and then finally as you pointed out we need a vehicle platform that has the appropriate redundancies in it and.
Christopher Urmson: And we continue to work on a daily basis with our OEM partners and are making good progress there as well so we continue to anticipate.
Christopher Urmson: We are ready to begin launching at the end of this year.
Speaker Change: Okay. Thanks for that Chris and then second question, probably more for Dave was on free cash flow and you came in well below the $175 million to $185 million quarterly cash use guidance, which I understand as an average for the year, but when we look at where it came in for <unk> and also contemplates some of the financial controller you spoke about in your prepared.
Mark Trevor Delaney: Thanks for that, Chris. And then the second question, probably more for Dave, was on free cash flow. And it came in well below the $175 to $185 million quarterly cash use guidance, which I understand is an average for the year. But when we look at where it came in for 1Q and also contemplate some of the financial controls you spoke about in your prepared remarks, I'm hoping to better understand if you think there's the potential for free cash flow to be a bit better than what you'd previously expected for the year. Thanks. Um, yeah, thanks.
Dave: Remarks, I'm, hoping to better understand if you think there is the potential for free cash flow.
Dave: You have to be a bit better than what you previously expected for the year. Thanks.
David Maday: Yeah, thanks, Marc. I appreciate that.
Dave: Yes, Thanks, Mark I appreciate that and.
Dave: The team really has demonstrated outstanding fiscal prudence in this regard and so our objective is really to be on the low end of the range, but I think there are some uncertainties out there that we continue to want to protect floor.
Dave: We did due to prepayments, which traditionally you want to do but we wanted to protect supply there may be some more of those we anticipate some some more of those in the second quarter that we're also going to do.
David Maday: And yeah, the team really has demonstrated outstanding fiscal prudence in this regard. And so our objective is really to be on the low end of the range. But I think there are some uncertainties out there that we continue to want to protect against. You know, we did make some prepayments, which, you know, traditionally, you wouldn't do, but we wanted to protect supply.
David Maday: So I think we are.
David Maday: Not ready to change any guidance on them, but obviously, we're targeting towards the low end of the range.
Speaker Change: Thank you.
David Maday: There may be some more of those. We anticipate some, some more of those in the second quarter of next year. That we're also going to do. So I think we're not ready to change any guidance on that. But, you know, obviously, we're targeting towards the low end of the range.
Speaker Change: Thank you.
David Maday: A reminder, if you'd like to ask a question. Please press star one on your telephone keypad.
David Scott Vernon: Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from the line David Vernon with Bernstein. Please proceed with your question.
David Maday: Our next question comes from the line of David Vernon with Bernstein. Please proceed with your question.
David Scott Vernon: Hey, good afternoon. Thanks for taking the question, and thanks for using the call today. So, Dave, when I'm looking at the exhibit labeled Aurora Driver Indicative Roadmap to Scale, should I be thinking that the path to gross profit, the sort of line that ends in 2026, is dependent or independent of some of the product capabilities listed below? I'm just trying to determine, is there, like, event path risk if you don't scale the sunbelt to hit the path to gross profit, or whether these are sort of independent timelines that just lay out in the same way – in the 2026 timeline?
David Scott Vernon: Hey, good afternoon, thanks for taking the question and thanks for hosting the call today.
Speaker Change: So Dave when I look at the.
David Scott Vernon: Exhibit.
David Scott Vernon: Driver indicative roadmap the scale should I be thinking that the path to gross profit sort of lined. It ends in 2026 is is dependent or independent of some of the product capabilities listed below I'm just trying to determine is there like event path risk. If you don't scale the sunbelt to hit in the past the gross profit or whether these are sort of independent timelines, which is les.
David Scott Vernon: Out in the same.
David Scott Vernon: <unk> thousand 26 timeframe.
Dave: Well I think I think.
David Maday: Well, I think they're somewhat interrelated, but they're not completely dependent. So, you know, when you think about gross margin, that's ensuring that for every load that we deliver, right down every mile that we drive, we're able to do it in a cost-effective manner relative to the price that we're getting paid. And so we think some of the controllable levels in that area are related to driving down hardware costs, improving the ratio of remote assist operators to trucks, and, of course, continuing to reduce any potential reliance on on-site support.
David Maday: They are somewhat interrelated, but theyre not completely dependent so.
David Maday: When you think about gross margin thats, ensuring that for every load that we deliver right and every mile that we drive we're able to do it in a cost effective manner relative to the price that we're getting paid and so we think some of the controllable level owners in that area are related to driving down the hardware costs improving.
David Maday: The ratio of remote assist operators to trucks and of course.
David Maday: Continuing to reduce any potential reliance on onsite support so when I think about those.
David Maday: So when I think about those things, they feel very much focused on things that are going to drive early gross margin. When I look at the scaling out to the Sunbelt, I think there's an element that really drives us towards, you know, the bottom line free cash flow positive, where we're really generating a quantum of money that is really significant and then allows us to start self-funding some of our activities.
David Maday: Feel very.
David Maday: Much focused in on things that are going to drive the early gross margin when I look at the scaling out to the Sunbelt I think there is an element that really drives us towards to the bottom line free cash flow positive.
David Maday: And we're really generating a quantum of money that is is really significant and then allows us to start self funding some of our activities.
David Maday: You know, that said, obviously, some element of the cost of benefits that we're going to get has to be realized by driving a sufficient number of trucks. And again, I think we run these in parallel, but it's not dependent upon that. And so if we were slightly delayed on a particular area, that wouldn't impact our gross margin projections in the early years. We really think that you have to do both, right?
David Maday: That said, obviously some element of the cost benefits that we're going to get have to be realized by driving sufficient number of trucks and again I think we run these.
David Maday: In parallel, but it's not dependent upon that and so if we if we were slightly delayed on a particular area that would impact our gross margin projections in the early years.
David Maday: We really think that you have to do both of them like the focus is and our entire organization is structured to make sure that we can deliver.
David Maday: The focus is that our entire organization is structured to make sure that we can, you know, deliver the benefits of our self-driving technology safely, quickly, and broadly, which is really critical to commercialize the business and be self-driving.
David Maday: Delivering the benefits of our self driving technology.
David Maday: Safely quickly and broadly and broadly is really critical to commercialize the business and be self funding.
Speaker Change: Okay and is there is there any sort of range of miles driven that you can kind of.
David Scott Vernon: Okay, and is there any sort of range of miles driven that you can kind of project into that at a 26 timeframe to get you to that gross profit level?
David Scott Vernon: Projected into that end of 2000.
David Scott Vernon: 26 timeframe.
David Scott Vernon: Key to that gross profit level.
David Maday: Um, so I, you know, the benchmark in the industry is roughly 100 to 125. And what we've said before is that we think that we would be able to double that or roughly double that kind of percentage. So that would be the guidance.
David Scott Vernon: So.
David Maday: The benchmark in the industry is roughly 100 to 125 and what we've said before is we think that we would be able to double that are roughly double that kind of percentage. So that would be the guidance I would give you.
David Maday: But I mean as far as the business being being sort of gross.
David Scott Vernon: But as far as the business being sort of, you know, gross, gross contribution positive, right, like, you know, generating some sort of gross profit, like what kind of number of aggregate miles does that, I don't know if you can share that or not. I'm just trying to backward engineer kind of some of the
David Scott Vernon: Contribution positive right.
David Scott Vernon: Generating some sort of gross profit.
David Scott Vernon: And a number of them.
David Scott Vernon: Aggregate miles does that imply.
David Scott Vernon: I don't know if you can share that or not I'm, just trying to backward engineer kind of some of the economics here.
Speaker Change: Yes, I think if you look at if youre looking at the aggregate are you looking at the aggregate miles or are you looking at kind of chunks.
David Maday: Yeah, I think if you look at it, if you're looking at the aggregate, are you looking at the aggregate miles? Or are you looking at kind of Yeah, like total miles to get you to the gross profit total, total, like trucks times the number of miles per truck. Oh, yeah.
David Maday: So that gets you to gross profit.
David Maday: Total.
David Maday: Next time, there's a number of miles per truck.
David Maday: So if you look, if you recall what we did at our analyst day, we had an expectation out there of about 125 million miles and by the end of 26. And that's when we expect to get to gross profit positive. I will say though, again, that the gross profit, on a percent basis, relative to what we're trying to achieve, it's not 100% mileage driven. So, again, this is about us doing the things that we need to do relative to reducing any potential need for onsite support, increasing the remote assist operator ratio as well, and then bringing in our hardware set, our Perseus hardware, our second generation hardware set that's being manufactured by So if we were at like 100 million miles, we would still hit a gross profit positive target at that point. So they're not completely dependent on each other. Okay, thank you for that.
David Maday: So if you look if you recall, what we did at our analyst day, we added expectation out there of about 125 million miles in by the end of 2006 and Thats. When we expect to get to a gross profit positive I will say, though again that gross profit as a percent basis relative to.
David Maday: What we're trying to achieve it's not 100% mileage driven so again this is about us doing the things that we need to do relative to reducing the any potential need for on site support increasing.
David Maday: Increasing the remote assist operator ratio as well and then bringing in our hardware set our PRC is our second generation <unk>.
David Maday: That's being manufactured by <unk>. So if we were at like 100 million miles, we would still hit a gross profit positive target at that point, so theyre not completely dependent on each other.
David Maday: Okay. Thank you for that.
David Scott Vernon: Okay, thank you for that.
David Scott Vernon: Yes.
David Scott Vernon: Okay.
Jeffrey David Osborne: And our next question comes from the line of Jeff Osborne with TD Cowen. Please proceed with your question.
David Scott Vernon: And our next question comes from the line of Jeff Osborne with PD Cowen. Please proceed with your question.
Jeffrey David Osborne: Good evening. Two quick ones, Dave, and I apologize for the background noise here, but I was wondering if you could elaborate more on the types of things that you would have to prepay for heading into the commercial launch? What types of equipment is that for? And then I think you mentioned incentive comp would tick up on cash use for 2Q. Is there any way to mention how much cash that would be? And then, as we think about 3Q, that would be rolling off, I assume. Thank you. Um, yeah, so relative to
Jeffrey David Osborne: Hey, good evening, two quick ones, Steve and I apologize for the background noise here, but I.
Jeffrey David Osborne: I was wondering.
Jeffrey David Osborne: More on the types of things that you would have to prepay.
Jeffrey David Osborne: Heading into the commercial launch what types of equipment.
Jeffrey David Osborne: And then I think you mentioned incentive comp would tick up on a cash use for <unk> is there any way to dimension, how much cash that would be and then as we think about <unk> that would be rolling off soon thank you.
David Maday: Yeah, so relative to the prepayments, it's really some of the core components of our hardware set to make sure that we've got sufficient supply. There's a lot of demand out there in the industry, and we want to just make sure that we lock ours down. So these are some of our core components. We don't announce exactly which ones they are, but they are some of the core components that you would expect that are critical to our hardware set.
Dave: Yes, so relative to the prepayments, it's really some of the core components of our hardware set to make sure that we've got sufficient supply. There is a lot of demand out there in the industry and we want to just make sure that we lock down so at some of our core components, we don't announce exactly which ones. They are but some of the core components that you would.
David Maday: Specs that are critical to our hardware set and again were.
David Maday: We're very cautious in prepaying, where we think that there is great potential out there and there arent supply constraints. When there is significant demand for a limited supply that's when we want to protect ourselves.
David Maday: And again, we're, you know, very cautious in prepaying where we think that there's great potential out there and there aren't supply constraints. When there's significant demand for a limited supply, that's when we want to protect ourselves. And then, relative to the incentive comp, I can kind of refer to what the 2023 number was, and it's roughly similar to that. And I believe the 2023 number was
David Maday: And then relative to the incentive comp I can kind of refer to kind of like what the 2023 number was roughly similar to that and I believe that 2023 number was $49 million.
Speaker Change: Thank you that's all I had.
David Maday: Our next question comes from the line of David Vernon with Bernstein. Please proceed with your question.
David Scott Vernon: Our next question comes from the line of David Vernon with Bernstein. Please proceed with your question.
David Scott Vernon: I figured I would be cordial and just ask my two and then see if I could pop back on. Just real quick, Dave, the the the contract expense you're booking for the two for this quarter versus the quarter last year? Did that grow in a meaningful way? Or is it pretty constant?
David Scott Vernon: I figured that would be because we will have just ask my two and then if I could pop back on.
Dave: Just real quick Dave.
David Scott Vernon: The.
David Scott Vernon: The Contra expense your booking for the for this quarter versus the quarter last year as did that grow in a meaningful way or is it pretty constant.
David Maday: The revenue is heading to Lowe's. You're not booking as a resident yet.
David Scott Vernon: So rather than just the lows as youre not bookings restaurant, yeah, yeah. The pilot revenue that we do as a contra R&D expense was roughly equivalent it was actually technically slightly down from last quarter, but thats largely due to seasonality within the industry. We're actually scheduling more loads. This quarter. We did this for Q1 then.
David Maday: Yeah, the pilot revenue that we do as a contra R&D expense was roughly equivalent. It was actually technically slightly down from last quarter, but that's largely due to seasonality within the industry. We're actually scheduling more loads this quarter. We did this for Q1 than we did at the end of Q4. So we schedule, on average, 120 loads. And so what happens is the attainment of those is largely driven by our partners, and during Q1, they get a little bit less demand out there.
David Maday: We did at the end of Q4, so we schedule.
David Maday: An average of 102000 loads.
David Maday: So what happens is the attainment of those is largely driven on our partners.
David Maday: During Q1, they get a little bit less demand out there. So it was slightly lower but not material we expect.
David Maday: So it was slightly lower, but not material. We expect, you know, the year to be, if you looked at a year over year comp for Q1, you know, we're substantially above where we were before. And I think, as Chris mentioned in his dialogue, that's a substantial amount.
David Maday: The year to be if you looked at a year over year comp for Q1.
David Maday: We are substantially above where we were before.
David Maday: As Chris mentioned in his dialogue.
Chris: It's a substantial amount and we expect to continue that momentum when you look at quarter by quarter compares and so but we do also expect that Q2.
David Maday: We continue on a growth pattern Q1 is more of a seasonality issue.
David Scott Vernon: Okay, so that growth and that recovery is embedded in your sort of implied guide to the cash flow being about $170 a quarter. Yeah, 100%. Okay, cool. Thanks very much.
David Scott Vernon: And we expect to continue that momentum when you look at quarter by quarter comparisons. And so, but we do also expect that Q2 would continue on a growth pattern, while Q1 is more of a seasonality. OK.
David Maday: So that growth in that that recovery is embedded in your sort of embedded.
David Scott Vernon: Embedded in the guide of the casually being about 179 a quarter whatever.
Speaker Change: Yes, 100%.
Speaker Change: Okay cool thank you very much.
David Scott Vernon: Okay.
Speaker Change: Thank you.
Operator: Thank you. We have reached the end of our question and answer session. And with that, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: At the end of our question and answer session and with that this concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
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