Q4 2024 Aurora Innovation Inc Earnings Call
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Speaker Change: Greetings, and welcome to Aurora Innovation's fourth quarter 2024 business review call. At this time, all participants are in a listen-only mode.
Speaker Change: The question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Stacy Feit. Thank you, Stacy. You may begin.
Speaker Change: Thanks, Julian. Good afternoon, everyone, and welcome to our fourth quarter 2024 business review call.
Speaker Change: 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.tec. The shareholder letter was also furnished with our Form 8K filed today with the SEC.
Speaker Change: On the call with me today are Chris Urmson, co-founder and CEO, and David Maday, CFO.
Speaker Change: A recording of this conference call will be available on our investor relations website at ir.aurora.tech shortly after this call has ended.
Speaker Change: I'd like to take this opportunity to remind you that during the call, we will be making forward-looking statements.
Speaker Change: This includes statements relating to our future financial and operating performance and our financial outlook and guidance, including expected revenue for the 2025 fiscal year.
Speaker Change: our ability to reduce costs and general expectations beyond that year.
Speaker Change: The safety benefits of our technology and product, 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, including relationships and anticipated benefits with partners and customers.
Speaker Change: and on the time frame we may expect, or at all, the market opportunity.
Speaker Change: our product's ability to reduce fuel use and emissions, the expected future market size, our expected market share, the efficiency of our validation process, our remote assistance efficiency for driverless operations, and profitability of our products and services.
Speaker Change: Regulatory Tailwinds and Framework in Which We Operate, Expected Cash Runway, and Overall Future Prospects.
Speaker Change: 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.
Speaker Change: In particular, those described in our risk factors, including in our annual report on Form 10-K for the year ended December 31, 2023, filed with the FCC, as well as current uncertainty and unpredictability in our business, the markets, and economy.
Speaker Change: Additional information will also be set forth in our annual report on Form 10-K for the year ended December 31st, 2024.
Speaker Change: 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.
Speaker Change: Our discussion today may include non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results.
Speaker Change: 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.
Chris Urmson: Reflecting on 2024 and the start of 2025, it's been a monumental time at Aurora as we near the culmination of years of innovation and preparation for our commercial launch, planned in April.
Chris Urmson: The word Aurora means the dawn and we're standing at the dawn of a new era in transportation, one defined by greater safety, mobility and efficiency.
Chris Urmson: Our focused strategy, grounded in safety, positioned for scale, and enabled by financial discipline, continues to differentiate Aurora as the leader in autonomous trucking.
Chris Urmson: We've made tremendous technological progress. We're approaching closure of the safety case for the Dallas to Houston launch lane with ARM reaching 99% and we've also been approaching our targeted 100% API loads commercial launch estimate since mid-October.
Chris Urmson: On the financial front, we've consistently demonstrated strong financial discipline. Manage our cash use under budget.
Chris Urmson: We also further strengthened our liquidity position with a successful capital raise last summer, ensuring we have the resources necessary to fund the initial phase of our scaling strategy.
Chris Urmson: And at the start of this year, we announced a three-way partnership between Aurora, NVIDIA, and Continental, solidifying another key enabler to successfully deploy at scale.
Chris Urmson: Our industry is also fortunate to have a supportive regulatory environment.
Chris Urmson: Today, driverless deployment in the U.S. is already allowed by the federal government.
Chris Urmson: And at the state level, under existing laws and regulations, autonomous trucks can be deployed in the vast majority of U.S. states, including our Texas launch market.
Chris Urmson: We're also optimistic that the new presidential administration's enthusiasm for innovation, safety, and a nationwide framework for self-driving vehicles could further support this favorable regulatory environment for driverless deployment in the U.S.
Chris Urmson: With nearly all the pieces in place, Aurora is poised for an extraordinary year ahead.
Chris Urmson: Our Analyst and Investor Day in March 2024 marked a defining moment for the investors who have supported our development journey.
Chris Urmson: We gave them a chance to experience driverless truck rides and a first look at how our driverless trucks navigate advanced road scenarios at our test track.
Chris Urmson: I'll never forget walking up to the track with our investors and analysts seeing the truck speed by entirely driverless
At that moment, Aurora's vision became clear for everyone.
Chris Urmson: As we approach the final steps of development, we're just months away from starting our commercial journey and making our vision a reality.
Chris Urmson: We plan to launch our first driverless trucks hauling customer loads between Dallas and Houston in April.
Chris Urmson: In order to commence driverless operations, we must first close the safety cage for the Dallas to Houston launch lane.
Chris Urmson: Our Safety Case Framework is a comprehensive, evidence-based approach to confirming that our self-driving vehicles are acceptably safe to operate on public roads.
Chris Urmson: We quantify our progress toward closing our Dallas to Houston launch lane safety case through the arm, a weighted measure of completeness across all claims of the safety case for our launch lane.
Chris Urmson: We remain the only company in the industry that has provided this level of transparency.
Chris Urmson: As of the end of January, ARM was 99%, up from 97% at the end of October, driven by the closure of a number of software claims.
Chris Urmson: We've made meaningful progress on final behavior refinement and validation, and expect to complete the remaining elements of our safety case over the next several weeks.
Chris Urmson: Let's take a look at a rare surface street scenario we just recently encountered in Houston.
Chris Urmson: In the video on page 5 of our presentation, the Aurora driver comes upon a large funeral procession, an unpredictable and complex scenario.
Chris Urmson: As the truck approaches the intersection, the Aurora driver detects a police motorcycle directing traffic at an uncontrolled intersection, which could potentially block the truck's lane.
Chris Urmson: It slows its speed as it prepares to stop and requests input from a remote assistance specialist.
Speaker Change: Importantly, given our system architecture and strict security protocols, our trucks cannot be operated by a remote assistance specialist. All driving tasks can only be executed on board.
Speaker Change: Within seconds, the remote assistance specialist sees the police officers just blocking cross-traffic and not the truck's lane and confirms the Aurora driver should proceed.
Speaker Change: With the detection of the active police motorcycle at sufficient distance and rapid remote assistance response, the Aurora driver-powered truck was able to continue on its journey without stopping.
and Christopher Urmson. Thank you.
Speaker Change: Adeptly handing scenarios like this helps reinforce our confidence that the Aurora driver will behave appropriately even in the rarest surface street scenarios.
Speaker Change: and the successful interaction with our Remote Assistance Specialist underscores the power of the complete system's performance.
Speaker Change: Turning to rare construction scenarios, the Aurora driver is also delivering impressive performance.
Speaker Change: In the video on page 6, an Aurora driver-powered truck encounters an upcoming construction zone warning.
Speaker Change: It lane changes to the left to prepare for the lane closure ahead, and then seamlessly navigates a highly complex traffic crossover. As you'll see, this type of configuration redirects traffic to the opposite side of the road, bypassing the work zone, with lanes separated by barriers and marked with cones.
Speaker Change: This is a great example of truly skillful performance of known construction zones.
Speaker Change: Once fully clear of the construction zone, the Aurora driver returns to its preferred right-hand lane and continues its journey.
Speaker Change: Strong performance in these types of scenarios support our solid API results.
Speaker Change: API is another key metric we use to assess the Aurora driver's performance and commercial readiness.
Speaker Change: The indicator penalizes the use of on-site support, which will be the most expensive support provided to enable the Aurora driver.
Speaker Change: We're focused on driving up the percentage of commercial loads that did not require any form of on-site support, which we refer to as 100% API loads.
Speaker Change: As a reminder, we do not anticipate that Aggregate API will ever reach 100%, even at launch.
because certain situations will always require on-site support.
Speaker Change: However, we believe the percentage of 100% API loads is a strong indicator.
Speaker Change: of our progress and expect this metric to reach approximately 90%.
Bye Commercial Launch.
Speaker Change: We've been approaching 90% since mid-October. Specific to the fourth quarter, excluding the first two weeks, 88% of loads at 100% API, with many weeks exceeding our commercial launch estimate of 90%.
Speaker Change: This puts us in a strong position for our planned launch in April.
Speaker Change: During launch, we expect to operate up to 10 trucks commercially, starting with one driverless truck and then transitioning the balance to driverless operation.
Speaker Change: We're deliberately starting with this crawl, walk, run approach as our early efforts will be focused on exercising the full product suite to ensure a seamless launch, while demonstrating the value proposition for our customers and continuing to build trust with all of our stakeholders.
Speaker Change: In the second half of 2025, we'll focus on expanding our product capabilities to include night driving and rainy conditions.
Speaker Change: Beginning our lane expansion strategy with driverless operations on the Fort Worth to El Paso lane, with further extension to Phoenix, and increasing capacity of tens of trucks by the end of the year.
Speaker Change: Growing demand for autonomous trucking underscores the critical role the Aurora driver will play in addressing industry challenges.
as freight volumes continue to increase and shipping distance expands.
Speaker Change: The Aurora driver is uniquely positioned to help solve staffing shortages and enable more productive and efficient transport
Speaker Change: Aurora driver-powered trucks operating at high levels of autonomy are already achieving best-in-class fuel efficiency.
15% above the industry average.
Speaker Change: This isn't just a marginal improvement, it's a clear example of how autonomy can deliver tangible value in fuel saving and sustainability.
Speaker Change: As we work with customers and more deeply integrate the Aurora driver with their operations, we see the potential to reduce fuel use and emissions by up to 32 percent, as we discussed in our Sustainability White Paper published last year.
Speaker Change: This will help the industry reduce emissions and bring down operating costs.
Speaker Change: This is just one example of how the Aurora driver is meeting today's challenges and shaping the future of freight transport.
Speaker Change: With a mutual focus on sustainable operations guided by safety, Aurora and Volvo Autonomous Solutions, or VAS, continue to make significant progress in our partnership.
Speaker Change: During the fourth quarter, together with VAS, we launched pilot operations with DHL Supply Chain with the purpose-built Volvo VNL Autonomous, powered by the Aurora driver.
Speaker Change: were initially hauling DHL freight on two lanes, Dallas to Houston and Fort Worth to El Paso.
Speaker Change: We also continue to autonomously haul freight for our other pilot customers, including FedEx, Warner, Schneider, Herschbach, Uber Freight, and others.
Speaker Change: QMF to date, we have autonomously delivered, under the supervision of vehicle operators, more than 9,500 loads, driving over 2.6 million commercial miles, with nearly 100% on-time performance for our pilot customers.
Speaker Change: We're also excited to have recently executed an MOU with J.B. Hunt.
Speaker Change: As we prepare for commercial launch, we continue to run our Partner Success Program, which gives customers the opportunity to more deeply evaluate and assess the Aurora driver's performance as a final step to move forward with driverless operations.
Speaker Change: Hirschbach recently evaluated our system leveraging the expertise of some of their most seasoned professional drivers who collectively represent over 75 years of on-road experience.
Speaker Change: These drivers have logged millions of miles and have seen everything the road can throw at them. So, understandably, they came into the program with a bit of skepticism.
Speaker Change: But during their rides, they were blown away by the Aurora Drive's performance and in turn, Herschbach is ready to go driverless when we are ready. For me, it was awesome to hear how experienced truck drivers get it about what this technology can mean for their industry.
Speaker Change: You can hear from these drivers firsthand in the video on page 8 of our presentation.
Speaker Change: Their shared belief in how autonomous and traditional trucks can work hand in hand to improve road safety and transform freight transportation is a true testament to Aurora's mission.
Speaker Change: Since our founding, our objective has been to deploy self-driving technology at scale. Our OEM and Tier 1 partnerships with Volvo Trucks, PACCAR, and Continental are unmatched in the industry, and we believe Position Aurora is the only company capable of deploying autonomous trucking at scale.
Speaker Change: As I mentioned at the beginning of the call, in January we further enhanced this ecosystem with a three-way partnership between Aurora, NVIDIA, and Continental, solidifying another key enabler to successfully deploy at scale.
Speaker Change: NVIDIA's DriveThor system-on-a-chip will be integrated into the Aurora Driver hardware kit that Continental plans to mass manufacture starting in 2027. Production samples of DriveThor are coming in the first half of 2025 to start testing.
Speaker Change: DriveThor will be the core of the primary computer for the Aurora driver which we're developing with Continental who will manufacture it.
Speaker Change: We also continue to make meaningful progress on other aspects of this generation of the hardware kit.
Speaker Change: During the fourth quarter, we completed the integration of our first light, light on a chip, into a single photonics engine.
Speaker Change: Notably, the prototype's performance is meeting our requirements for our next-generation LiDAR.
Speaker Change: And in January, Continental and Aurora achieved another partnership milestone and are now beginning A-sample builds and firmware development.
Speaker Change: The significant progress we're making toward this generation of hardware is critical as it will unlock true scale on the order of tens of thousands of trucks.
Speaker Change: While we work toward continental start of production in 2027, our third-generation commercial kit, we also continue to advance our second-generation commercial hardware kit.
Speaker Change: We plan to introduce this kit later this year to support our ambitions to scale to hundreds of millions of miles traveled autonomously.
Speaker Change: This generation 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 self-funding.
Speaker Change: During the fourth quarter, we received A-samples from our contract manufacturer, Fabernet, and have integrated this prototype kit into its first vehicle for testing.
Speaker Change: Roar has always been a mission-driven company with an immensely capable team bold enough to dream big and skilled enough to make those dreams a reality.
Speaker Change: We're on the cusp of our planned commercial launch, a pivotal step toward realizing our mission.
and our team is more focused and energized than ever.
With a team like ours, the impossible becomes achievable.
Speaker Change: Our extraordinary progress would not be possible without the unwavering commitment from our team, partners, and investors. Thank you for your trust. We believe 2025 will be a defining year for Roar as we begin to reshape the future of freight.
Speaker Change: With that, I'll now pass it over to Dave who will review our financial results.
Dave: Thank you, Chris. Let's discuss our financial results. We have provided a summary on page 13 of the slide deck for reference.
Dave: During the fourth quarter of 2024, we continue to demonstrate strong fiscal discipline.
Fourth Quarter 2024 Operating Expenses.
including stock-based compensation total $199 million dollars.
excluding stock-based compensation, operating expenses totaled $164 million.
Dave: Within operating expenses, our R&D expenses excluding stock-based compensation totaled 142 million dollars.
This amount includes $714,000 in pilot revenue.
which we record as a contra R&D expense.
2024 pilot revenue of 2.8 million dollars increased 59% year-over-year.
SG&A expenses, excluding SAC-based compensation, were $22 million.
Dave: We used approximately $142 million and $611 million, respectively, in operating cash during the fourth quarter and fiscal 2024.
Dave: Capital expenditures totaled $8 million and $34 million, respectively, during the fourth quarter and fiscal 2024.
Dave: This cash spend was below our externally communicated target for both the quarter and the year, reflecting our continued commitment to fiscal prudence.
Dave: We ended the year with a very strong balance sheet, including over $1.2 billion in cash and short-term investments.
Dave: Given efficiencies we found in the business and cash preservation decisions we have made, we now expect this liquidity to support our planned commercial launch and fund our operations into the second half of 2026.
Dave: In 2025, we expect quarterly cash use to be within the $175 to $185 million average range.
Dave: This accounts for an increase in capital expenditures and continued development of our new hardware programs as we prepare to scale our business.
Dave: With our deliberate approach to launch, we expect our 2025 revenue to be modest.
Dave: in the mid single-digit millions. For modeling purposes, we expect revenue to build sequentially throughout the year.
Dave: Revenue recognition associated with our driverless launch will be a meaningful milestone for Aurora, but will have a negligible impact on our overall financials during our launch year. Our focus in 2025 will be on expanding our driverless operations to prove the promise of the Aurora driver technology.
Dave: In addition, our team will be focused on key cost reduction levers, including the introduction of our Next Generation Hardware Kit to support achieving our initial scaling cost reduction initiatives.
With that, we'll now open the call to Q&A.
Speaker Change: Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue.
Speaker Change: And our first question comes from George Gianakris with Canaccord Genuity. Please proceed with your question.
Good afternoon, everyone, and thank you for taking my questions.
So I'd like to
Speaker Change: Be optimistic and maybe look past the April commercial launch and just try to Glean some incremental insights from you in how comfortable you feel about scaling, you know And this is sort of a multi-part question first
maybe some...
Speaker Change: Tell us about the confidence you have in lane scaling, especially as you mentioned the operational remote assistance specialist that you had to deploy in one of the examples that you shared, and also from a hardware perspective.
Speaker Change: Particularly as you mentioned NVIDIA, maybe can you break down in a little bit more detail some of the cost reductions you can achieve from a hardware perspective as you sort of scale the operation. Thank you.
Speaker Change: Part of the reason or part of the thesis behind going after the trucking application
Thank you.
Speaker Change: and we're seeing that in practice. Last quarter I think we shared an update on our ability to rapidly map the route between El Paso and Phoenix and then operated at a comparable level of performance to what we were seeing other places.
Speaker Change: So, we expect that to roll out relatively quickly, and as we look to 25, I think we'll see some evidence of that through the course of this year.
Speaker Change: One of the things I would highlight is that as I look at this problem, each new lane will become actually easier to roll out. So as we get across the line for the first lane, Dallas to Houston, that's where we've built all of the core competence for driving.
And then as we move to a new lane...
Speaker Change: There's a small set of incremental new capabilities that are needed that we layer on top of.
Speaker Change: what we already have. And we've talked in the past about the fact that Fort Worth to El Paso, the big difference really is that you have to operate through a custom border patrol station. And we do that today.
Speaker Change: We just need to validate that work, and that's a modest amount of work compared to what we've accomplished over the last several quarters. So, really optimistic and confident in our ability to do that.
Speaker Change: we've laid out a strategy where initially we're going to launch with our first hardware generation that's commercial.
Speaker Change: We have that in hand, and we can produce that up to small tens of units, right? We don't want to be a manufacturing shop. We've talked in the past about the importance for us of focusing on what we do best in the world, and that's not making widgets.
Speaker Change: We're really good at designing them, we're really good at integrating them.
Speaker Change: and so that's where we brought in to play our partnership with Fabernet and you heard that we're already integrating the early artifacts from that partnership onto trucks and beginning to bring a process to that and that will support mid-level scaling so getting is from tens to small thousands.
Speaker Change: And then we've been planning ahead, as you know, with a partnership with Continental, which truly gets us to automotive scale.
Speaker Change: right, they understand the processes and they understand the manufacturing requirements and they know how to be part of the just-in-time manufacturing pipelines for our OEM partners.
Speaker Change: And so, with the forethought that we put into building that partnership with Continental and the work we've done in building the partnership with Fabernet, I have a high degree of confidence in our ability to deliver the hardware necessary to build this business.
Speaker Change: And with each of those, as you know, as you increase scale in production of a widget, the cost almost certainly comes down because of all of the...
Speaker Change: the investment in both the NRE of engineering and the manufacturing costs if you have to spread over the number of units that you produce.
Speaker Change: And so, as we look at this, we have a very high degree of confidence in the cost coming down.
Speaker Change: detailed numbers on that and seeing really good measure, and we expect to certainly with the Continental Harbor get to that very healthy margin business that we've talked about for a number of years. So overall when I look at the the
Speaker Change: Scalability from a software perspective and the ability to roll across lanes, very high degree of confidence and equally high degree of confidence in our ability to deliver the hardware that will both support that business and do so at a price point that allows us to realize our objectives.
Speaker Change: I apologize, there was maybe more than you were looking for.
No, that's great. Just a follow-up on the NVIDIA partnership.
Speaker Change: At CES, there were a number of companies that talked about their NVIDIA partnership, so maybe if you can go into a little bit of detail as to, and I think you did this at your analyst day, but as to how proprietary your hardware is relative to others that may be using the same GPU.
Speaker Change: Yeah, so the GPU is obviously, and in this case we're talking about an SoC, an integrated system on a chip from NVIDIA, that SoC of course is an off-the-shelf product.
and it's an important part of our product.
Speaker Change: The thing itself, not particularly unique, the way that we're using it and the value we're creating around it, unique.
Speaker Change: Hey, George, I just heard from someone via email that there was a bit of a cutoff in the connection on our side and maybe there was a loss in the hearing. Could you hear the answer? I'm not sure if.
It may have been a little better.
Speaker Change: I heard the whole thing. Okay, great. Thank you for confirming. Okay, and to whoever it got cut out with, I will apologize for that.
We can take the next question.
Speaker Change: Okay, great. And our next question comes from Andres Sheppard with Cantor Fitzgerald. Please proceed with your question.
Andres Sheppard: Hey everyone, good afternoon, congratulations on the quarter and all of the recent developments and thank you for taking our questions.
Andres Sheppard: Maybe just to start off, regarding your commercialization strategy, I'm wondering if you can maybe
Andres Sheppard: Driverless truck and then ramping up the tens of trucks by by end of the year. Just wondering What is the best way to think about?
Andres Sheppard: Q3 and Q4 of this year in terms of those trucks in operation.
Andres Sheppard: And also, is there a certain number that you might be targeting for commercial loads and cumulative miles driven by your April date? Thank you.
Speaker Change: Yeah, so maybe I'll take the first part and talk a little bit about how we introduce it, and then I'll let Dave talk more about the...
and Christopher Urmson.
Thank you.
Speaker Change: So for us the the crawl walk run is really about Acknowledging that this is a kind of
Speaker Change: Change a step function change in transportation and we want to make sure that we're able to bring Stakeholders long on that journey as we close the safety case for Dallas to Houston
Speaker Change: We're confident in our ability to operate multiple trucks on that lane, but other stakeholders kind of expect a natural progression. And given that while it will be an important moment and kind of a watershed moment in terms of delivering this technology,
Speaker Change: It won't have a material impact on our financials over the course of the next year. So why not operate in a way that works well with local stakeholders and regulators and just kind of build up in a way that they'd expect and gives further confidence in our approach and collaborative nature.
Speaker Change: So that's how we think about that. We'll start with one and then we'll build to, as you said, up to ten, and then by the end of the year be at tens of trucks is our expectation.
Speaker Change: Yeah, and thanks, Anders, for the question. Let me talk about the last part. It may not be the message you want to hear, but I think for us, what Chris said is important. For us, it's about ensuring that we have a great product that delivers on the value that we've promised to our customers.
Speaker Change: and working closely with our partners and our regulators. So for us.
We're really focused in on...
One.
Speaker Change: demonstrating that we have a commercial driverless product that everybody's going to love, and the second thing is continuing to expand the technological areas where we can operate in. So going into nights, going into rains, going into new lanes, those for us are more important thresholds than the absolute number of miles that we drive because we really want to have a great product first and the miles are going to come naturally. The other thing is that we also want to make sure that we get to our next generation.
Speaker Change: and Matthew S. We're going to go through the process a little bit more in just a minute. So we're going to start with the first generation hardware kit quickly. So we don't want to abnormally drive a ton of volume into the first generation hardware kit as we're waiting for the second. So for us, it's a very deliberate approach. We want to make sure that our customers are completely satisfied with the product we're delivering to our expectations.
Speaker Change: And for us, technology proof points, we think, in 25, is more valuable than a mileage guidance.
Chomp?
Speaker Change: Wonderful, that's super helpful. I appreciate all that color. Maybe just as a quick follow-up.
Speaker Change: I'm wondering if you can maybe give us a bit more granularity as to how to think about CapEx specifically, you know, for this year CapEx was about 8 million in Q4 and 34 for the year. Just trying to figure out What's the best way to model it for for this year? Thank you
Speaker Change: Yeah, so I don't expect a substantial increase in CapEx. There certainly will be some increases in CapEx.
Speaker Change: But, you know, I think overall, let me try to describe it in the opex. I think we have
Speaker Change: All the necessary people and operations in place to scale a business. We'll have some slight increases on OPEX as we bring in our new programs, like our new hardware programs.
Speaker Change: But I think for both of those, there are going to be, you know, pretty modest increases. I would expect to see a modest increase in the OPEX cost and the remainder that fills to that $175 to $185 to be in the CAPEX.
Speaker Change: So, I think that should be pretty helpful for you for your modeling purposes.
Speaker Change: Very helpful indeed. Appreciate all the color. Congrats again on the quarter. I'll pass it on.
Thanks very much, Andreas. Appreciate it.
Speaker Change: Thank you. And our next question comes from Scott Group with Wolf Research. Please proceed with your question.
Hey, thanks, afternoon guys.
Speaker Change: I'm wondering anything specific you guys still need to accomplish in order to
Be ready for April.
For more information visit www.FEMA.gov
Speaker Change: Now, there's just bits of work around, sorry, thanks for the question, Scott. As we look at this, we talked last time about just needing to kind of close out the last set of things.
Speaker Change: There's just some work to do not a whole lot as we pointed out we've
moved arm to 99% and that's reflective of
Speaker Change: you know, the small amount of work that's left to close the safety case and
Speaker Change: API is approaching the bar that we have set for a hundred percent trip API is approaching the bar that we set for being able to launch so we're feeling really quite good about this
Speaker Change: We see that in the performance on the road and the quality of the experience. And so we're, honestly, really pretty jazzed right now. It's happening the way we kind of expected.
For more information, visit www.FEMA.gov
And then, I totally appreciate the answer about, you know,
Speaker Change: This year is not about number of miles and trucks and whatever, that makes sense, but as, I guess, when do we...
Speaker Change: start to see like a real ramp, meaning ending the year with tens of trucks, does that go to hundreds of trucks next year? Is next year like a step function year or is it still more gradual in 26 and then the step function is a little bit later?
Speaker Change: Yeah, Scott, let me take a shot and then maybe Chris, you can add on to it. 26 is going to be a step function here in terms of kind of metrics that you guys are more used to seeing. You know, again, once we have confirmed with and started our rollout and we have demonstrated that we've got a really reliable and great product,
Speaker Change: and then we'll continue to launch on lanes. As Chris mentioned, we'll be able to launch even more lanes in the subsequent years. We expect to have a step function change in just how many trucks we're operating and how many miles we're driving. And the miles driven is gonna increase not just based on the number of trucks that are out there, but the utilization of those trucks, right? We expect to, in 26, really be able to demonstrate a substantial utilization increase versus what people are used to.
and Chuck, but you had 26 to us.
Chuck: is that step function here in terms of really seeing solid financials. And I think we've mentioned before, you know, one of our objectives
is to demonstrate, you know, positive gross profit.
Chuck: in 26. We're still working towards that. That's not a guidance or affirmation at this point, but that's what we've talked about at our analyst and investor day last time and that still is an objective of ours.
Chuck: to be able to do that, we have to have a step function in the mileage that we're driving.
Speaker Change: And just to add to what Dave said, I really think about 25.
as accelerating our advantage.
Speaker Change: Right that that when we launch commercially will have turned the crank the whole way around for the first time and
Speaker Change: and the momentum starts to build as we close that out, we launch the next lane, as we launch new capabilities and features.
Speaker Change: and it will get the team and the company into the rhythm of.
Speaker Change: Deploying the the the extensions of the product that we need to support our customers and support the scale that we need It'll allow us to definitively answer the questions that George led with today where we have high confidence today We've got early signal of it But we'll really be able to put those questions to bed and be able to demonstrate the scalability of this
Speaker Change: into a market where, you know, the technology and the product desperately need it. So, we're, I, like, it's just, it's just an exciting and fun time here at the company, and I'm really looking forward to it.
Speaker Change: Maybe just one last one, when do you think you'll start seeing deliveries of...
trucks to third parties.
meaning not an Aurora-owned truck but
and a customer owning it.
Speaker Change: Yeah, I think so at the very latest when we have our hardware kit that's being produced by Continental, that is expected to be a line site install with our OEM partners that will go directly to customers.
Speaker Change: I think there is a path to do it a little bit before then, but we're gonna we're gonna work I think that's going to be more customer specific
Speaker Change: and their specific use cases. So I would say the latest, you'll see a substantial, essentially all driver as a service delivering to customers in 27. I think there'll be a migration that happens slowly before then, and that'll be customer specific.
Speaker Change: And I think this is going to be on us, right? That as we roll out that second...
Speaker Change: generation of commercial hardware at the end of this year. As we are able to demonstrate to customers that this can go the places they need, that it does it at a level performance.
in practice, not just in theory that they're expecting.
It's going to become obvious that it's transformational.
Speaker Change: And I think for the customers who get that earlier, they'll begin to build an advantage through the experience they'll gain early on in this next phase of transportation, and I think that's going to perhaps drive earlier acquisition and adoption of the hardware.
Thank you, guys.
Thanks, Scott. Appreciate it.
Speaker Change: Thank you. Our next question comes from Jeff Osborne with TD Cowen. Please proceed.
Jeff Osborne: Thank you, good evening. Just a couple questions on my side. I was wondering how should investors categorize or characterize success with the April launch and the months thereafter?
Speaker Change: recognizing you're not giving guidance as it relates to miles but just as you were to look back maybe in the fall of 25 over the prior four six months that you had been commercialized how should we give you a report card so to speak
Speaker Change: Yeah, so I think there's a big binary step which is there's trucks driving down the road with nobody in them, right? That when I think of, if I put my investor hat on and shareholder hat on, I think of what are the big risks for our business?
Speaker Change: One of the big questions about our business, one is, can you actually make the technology work at all?
Speaker Change: The second is, can you deliver the product at a price point where it's profitable?
Speaker Change: And then the third is, can you scale it to the degree that the business becomes self-sustaining and becomes the exciting opportunity that we all expect it will be? And so by the end of this year,
Speaker Change: Will hopefully have laid to rest the first question, right? That's our full expectation There will be trucks on the road with nobody in them and that yes, we can make this work
Speaker Change: Towards the end of the year you're going to get strong signal that we are able to scale this product We certainly will not be operating at a scale where the business is
Speaker Change: is self-sustaining, but you'll be able to see that, okay, this is turning over, they're able to roll out lanes, the expansion works the way we expect. And then we'll start to get the first taste of the hardware that will enable initial profitability is our expectation. So, like, it's going to be a fun year.
Speaker Change: Sounds like it. Just two other quick ones. How would you characterize the competitive landscape?
It's ours to win.
Right, as we look out at the landscape...
Speaker Change: You know, we look at the partnerships we have, we look at the technology and team we have.
Speaker Change: and I'm going to be talking about the the the the the the the the the the the the the the
you know, we think we're
Speaker Change: well ahead of the competition and accelerating and that is just incredibly exciting when we think about it an opportunity we're afraid in the US is a trillion dollar market and we have the opportunity to to win for our you know for ourselves for our customers a big piece of that I feel very bullish about our position
Speaker Change: Good to hear. The last one, there was a lot of questions on the cost reduction potential. You've obviously talked about Fabrinet here in 25 and 26 at the lower volumes and in continental longer term. Are there any other, you know, one or two key variables that you would highlight that are initiatives for 24, or sorry, for 25 that we should be monitoring as it relates to cost-out plans?
Speaker Change: So as we've talked in the past about the core kind of economic drivers of cost in our business, we talk about the hardware cost and depreciation of that over the lifetime of the truck.
Speaker Change: We talk about the cost of on-site support. So anytime somebody has to go touch a truck in the road somewhere, that's expensive. And that's why we've been talking about this 100% API trip measure.
Speaker Change: and then the third is the cost of remote support. How often does a remote agent have to support the truck? And then finally, the cost of insuring these vehicles.
Speaker Change: So when I take each of those in turn, we've laid out the path forward, even on this call, with the hardware and bring that cost down.
Speaker Change: With remote on-site support as we continue to deliver the product we expect the reliability of it to continue to increase
Speaker Change: And so, you know, we're confident that as we move from our, you know, just from a hardware perspective, moving from the hardware we've built in-house to the hardware that's built.
Speaker Change: from a contract manufacturer to Continental, we continue to expect increases in the reliability of that hardware.
and then on the remote support.
We've laid out in our
Speaker Change: Business Review or Analyst and Investor Day last year, what the shape of that curve looks like.
Speaker Change: And what we said is that in 26, we expect to get to
Speaker Change: a ratio of better than 10 to 1 for our, I think it was 26, we said that, for our operators. Into 25, I apologize. Into 25, we expect to get to a point of better than 10 to 1 for the operator to truck ratio.
Speaker Change: And then on insurance, we continue to believe that the insurance market is rational, and that as we demonstrate the improved safety and thus reduced loss, that the pricing of that will, you know, improve.
Speaker Change: So, overall, again, we understand what the key levers are to drive cost out of delivering the product, and we're making good progress across all of them.
Thanks for the great question, Jeff, by the way.
Appreciate the detailed response.
Speaker Change: Thank you. And as a reminder, if you'd like to ask a question, please press star 1 on your keypad. That's star 1.
Speaker Change: Our next question comes from Mark Delaney with Goldman Sachs Asset Management. Please proceed.
Mark Delaney: Yeah, good afternoon. Thanks so much for taking the questions. Given the news and research out on DeepSea, I'm curious, Chris, if you think there are new training techniques that Aurora could adopt, and more generally, if you think there are ways for Aurora to materially reduce its AI training costs in the future.
Mark Delaney: Yeah, it's been interesting to watch some of the the news around rapid distillation of these large models and kind of the...
Mark Delaney: the implications of that. One of the things that it really points to
Mark Delaney: is something we've been saying for years, which is quality of data matters over quantity of data.
Mark Delaney: So if you take, for example, this is not speaking directly to DeepSeek, but the report of the
out of Stanford, where they replicated.
Mark Delaney: the performance of O1 using a relatively low-cost small model by feeding it just a thousand examples of quality reasoning from, I think it was from Gemini in this case, and basically got 80-90% of the performance.
Mark Delaney: Right much less they spend I think that the headline of the article was trained o1 for $50 or something
Mark Delaney: And so this points to, you know, this concept that we've talked about for a long time of
Mark Delaney: It's not about just the quantity of data. It's making sure you have the right data, making sure it's high quality, and it's really serving the need that you're trying to solve.
Mark Delaney: and that's been our approach from day one. There's certainly other interesting elements of these large models that we're looking at, you know, augmenting what we do already, but pretty bullish about it overall.
Mark Delaney: an update around how pricing is trending in some of the commercial contracts and then how you think input costs and operations are progressing toward that positive gross margin target for next year.
Mark Delaney: Yeah, I think some of the things like some of the key drivers in this, if you think about it, the gross margin and just look at and decompose the cost of goods sold on this.
Mark Delaney: Some of the elements that Chris said are really the major drivers of that. And so I won't repeat those per se, but I think the other thing is, like, how well do we operate if we're operating at terminals? How efficient are we at terminal? So how fast can we get a truck onto the road? How many people do we need to support that area? And I think in.
If we look at
Mark Delaney: How Aurora's approaches, there's a reason why we started pilot operations three years ago
Mark Delaney: Right, we're really, we've really learned a lot. We've hired a lot of experts who understand how to get trucks on the road efficiently and effectively, and that's what allows us, and it gives us the confidence to know that we're going to have relatively low costs in terms of the terminal operations.
Speaker Change: And that's really the only other element from the cost side that Chris hasn't already talked about.
Speaker Change: But I would expect that we are going to deliver a product that is safer, is more fuel efficient, and is more reliable. And I would expect our pricing power to be pretty high once we've demonstrated that. So, you know, we're going to focus on what we can control.
Speaker Change: charge at the higher end of the pricing average and controlling our costs. So I think we have a path to get there. There's a lot of hard work to do in the meantime, but certainly I feel confident that this is the right team to do it.
Speaker Change: And I just add to what Dave said that we continue to believe that The human labor cost is really the pricing umbrella that we have for operating these trucks, right? This is a super important job The cost of operating a truck or the the cost of the driver operating the truck continues to go up
Speaker Change: as it should given the risk and challenges these these folks face. And that's going to be the next best alternative to the oil driver on these trucks. So we continue to believe that thesis too.
Speaker Change: This is Huffle. If I could just sneak one last one in. In the shareholder letter, you spoke about the FMCSA ruling and how that didn't go your way. You did speak, though, about some workaround. You mentioned an operational one in the near term. I don't know if you could elaborate a bit more on what exactly that means. And you also referred to a potential longer-term workaround, even if the law doesn't change, and what that might look like. Thanks.
Yeah, so
It's also one of the more dangerous...
Speaker Change: The conventional way to do this is you put triangles out behind the truck. It's one of the most dangerous things that truck drivers do is walk down a freeway putting triangles down.
Speaker Change: We believe that the decision to to reject this application was wrong and we're petitioning the federal government to reassess this and we're optimistic that with the new administration that that that
Speaker Change: that there's a really good opportunity, a good possibility that that'll get changed.
Speaker Change: That said, that rejection has no impact on our ability to launch commercially. We see both operational opportunities to mitigate this and technical approaches that allow us to operate in compliance with the law.
Speaker Change: And you're not going to get more out of me on that. Sorry, Mark. Okay. Got it. Well, thanks for all those thoughts. I'll pass it along. Yeah. Thanks very much for the question.
Speaker Change: Thank you. Our next question comes from David Vernon with the Bernstein. Please proceed.
Speaker Change: Hi there, this is Justine Weiss speaking on behalf of David Vernon. Thanks for taking the question.
Speaker Change: So, if you look at slide 13, there are still a few areas where we know driverless operations and autonomous trucking are prohibited. So, I'm wondering if you've had conversations with regulators about potential for more sweeping regulation under this new administration that could make it easier for you to enter into these currently restricted markets.
Speaker Change: I think we approach this with two ways to think about it. One is that I think the biggest lever we have is demonstrating the value in other states and helping that grow and impact their economy and see the safety benefits of it on their roadway and then other states I think will want that.
Speaker Change: We also do expect that there's a real chance that the new federal administration will actually push for a nationwide standard for this, and that would help mitigate, you know, the somewhat
Speaker Change: patchwork set of regulations we operate with across the United States. And the reason why we have some optimism for that is that
Duffy
Speaker Change: In his remarks before Congress, actually spent a fair bit of time talking about automated vehicles and talked about the importance of the technology for safety, but also for America to be a leader in this space.
Speaker Change: and talked about the value he sees in there being a national framework for this. So we're optimistic that this administration will continue to be a strong supporter of the technology.
Speaker Change: That's great to hear. And then I guess another question I'm wondering about is how are things progressing with a shift towards single operators rather than two vehicle operators? Like what percentage is single operator and how should that change by end of 2025?
Speaker Change: Yeah, well, I think the missions that are going to matter by the end of 2025 are going to be no-vehicle operators. So I think that's going to be really exciting. A lot of our testing will continue to be a blend of
Speaker Change: a single and dual operator, and it's really about the mission and making sure that we can operate the mission in question in a way that is thoughtful and safe on the roadway. So we actually don't even internally track the percentage of missions.
Speaker Change: So, unfortunately, I can't share a number on that, but it's really about, again, operational efficiency internally without impacting safety.
Speaker Change: Okay, great. Thanks. And then just one more if I could throw it in. So you speak about increasing capacity to tens of trucks by the end of the year. So could you maybe help us frame the upper bound of what tens of trucks could actually look like? Like what's the bear and bull case maybe on that?
Speaker Change: Yeah, I don't know that we have anything additional, Justine, to share on that right now. I think, again, I would focus us on the sequential growth.
Speaker Change: and the mid-single-digit millions for revenue. I think that that's kind of a more important thing.
Speaker Change: I think for us, again, we're really focused in on the execution in the early stage. For us, as we continue to launch more lanes, the demand for trucks is going to be really high, and we're going to have to fill that demand with our partners.
Great, thanks so much.
Thanks for the question, Justine.
Speaker Change: Thank you. And that was our final question. And with that, that does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.
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