Q1 2025 Serve Robotics Inc Earnings Call
Julia: [music].
Thank you for standing by and welcome to serve robotics first quarter 'twenty to 'twenty five earnings conference call.
Please be advised that today's call today's conference call is being recorded.
Speaker Change: I would now like to hand, the conference to your host.
Speaker Change: Head of communications and Investor Relations.
Speaker Change: Oh Wow.
Speaker Change: Please go ahead.
Speaker Change: Thank you operator, and good afternoon, everyone welcome to serve robotics first quarter 2025 earnings call.
Ali Christiani: With me today are <unk>, CEO and co founder Ali Christiani, and our CFO, Brian Reed.
Ali Christiani: During today's call, we may present, both GAAP and non-GAAP financial measures.
Ali Christiani: If needed a reconciliation of GAAP to non-GAAP measures can be found in our earnings release filed earlier today.
Ali Christiani: Certain statements in this call are forward looking statements you should not place undue reliance on forward looking statements actual risks may differ materially from these forward looking statements and we do not undertake any obligation to update any forward looking statements, we make today, except as required by law.
Ali Christiani: For more information about factors that may cause actual results to differ materially from forward looking statements. Please refer to the press release, we issued today as well as the risks and uncertainties described in our most recent annual report on Form 10-K, and in our filings made with the SEC.
Ali Christiani: We probably should our quarterly financial press release on our updated corporate presentation to our Investor Relations website earlier. This afternoon, and we ask you to review those documents if you haven't already.
Ali Christiani: With that let me hand, it over to Ali.
Ali Christiani: Thanks, Jay and thank you all for being here.
Ali Christiani: Made great progress in Q1, and I'm excited to share what <unk> been up to first of all we made our chi targets for the first quarter.
Ali Christiani: So bill 250, new third generation robots as a resolve beyond track to reach our end of year targets may choose to deploy 2000 robots.
Ali Christiani: Has it been heads down really relentlessly executing and despite all the external uncertainties in the market I feel confident that we'll be able to hit our targets by the end of the year.
Ali Christiani: Let me highlight some of our accomplishments since our last update.
Ali Christiani: First and foremost about that issue after 250, new robots, which are added to the fleet in L. A Miami and Dallas.
Ali Christiani: We've spent the last few weeks now, bringing the new Delhi very capacity online, which involves working with city officials and our delivery partners and local merchants on restaurants.
Ali Christiani: In launching new geographies and markets and bringing new restaurants online.
Ali Christiani: As a result of all of this in Q1, we increased our daily supply hours by over 40% compared to Q4.
Ali Christiani: The increase in capacity has also led to a sharp increase in our daily volume.
Ali Christiani: During the first quarter as we got more robots deployed our delivery volume increase over 75% between the first and the last week. After the quarter. We expect this growth to continue in Q2, even before we add more robots. They definitely will have more geos to cover.
Ali Christiani: And one more chance to bring online, which our results in more utilization of their robots. We are also anticipating approximately 60% to 75% quarter over quarter as anybody volume growth in Q2 compared to Q1.
Ali Christiani: Speaking of Geos since the start of the year, we've launched two new markets Miami in February and Dallas in April.
Ali Christiani: We've been ahead of our timeline by a few weeks and have been able to also add at least key partners like shake Shack and Mr. O one at each new market launch.
Ali Christiani: We have also increased our presence in L. A significantly by bringing our robots to Glendale and long Beach in January.
Ali Christiani: In total we now serve over 320000 households around the country, which has more than doubled since December of 2024.
Ali Christiani: The flip side of this is our merchant volume, which is also growing quickly.
Ali Christiani: As of today, we serve over 1500 restaurants that is a 50% increase since our last update call and its five times more restaurants than a year ago.
Ali Christiani: Now.
Ali Christiani: Expanding the fleet size and adding markets on increasing delivery volume. These are just half of the equation. The other half is the quality of steady base.
Ali Christiani: What's great is that we've been able to rapidly expand our volume on coverage and even launched new robots.
Ali Christiani: While at the same time successfully maintained our high delivery quality.
Ali Christiani: For example, the percentage of deliveries that failed to meet our internal delivery deadline was reduced by roughly 65% in Q1 compared to a year ago.
Ali Christiani: We have also kept our delivery completion rates similar to what it was in Q4 before we launched any of the new robots on markets.
Ali Christiani: Also our average delivery drop off time has remained consistent throughout this period.
Ali Christiani: All of this rapid growth and sustained quality is why I said earlier that I feel confident in our ability to continue to scale to our 2000 and robot targets by the end of the year.
Ali Christiani: Let's also quickly touch on hardware costs, despite the broader supply chain challenges. Another key highlight has been the fact that we've managed our robot Bom cost in such a way that the client tariffs have had so little impact on us in fact, if you recall our gen three robots costing.
Ali Christiani: Nearly one third of Gen. Two robots and the client 10% tariffs have actually been offset by the additional savings on the bond costs.
Ali Christiani: Last but not least I also want to highlight our solid capitalization position. They raised an additional $91 million in Q1 and had $198 million on their balance sheets by the end of <unk>.
Ali Christiani: Quarter in the current market conditions. This has provided us with more flexibility, it's given us more leverage in negotiations and an opportunity to out execute competition in growth and in technology investments.
Ali Christiani: So to summarize I hope that I've been able to do justice to highlight our team's relentless efforts and the great results.
Speaker Change: <unk> build the first major batch of our 2000 robots deployed them increased delivery volume by over 75%.
Ali Christiani: <unk> expanded to new markets, while maintaining our high quality of deliveries.
Speaker Change: All I can say is that I'm really proud of our team for living up to the challenge every single day.
Speaker Change: Now, let me hand, this to Bryan to provide a more detailed overview of our Q1 financial results and I'll be back later to provide an update on our plans for the rest of the year.
Bryan: Thanks Ali and good afternoon, everyone.
Speaker Change: We were encouraged by the momentum in Q1, primarily driven by the operational progress AOI highlighted please.
Speaker Change: Fleet expansion and new market launches are translating into early topline traction supported by disciplined cost management and targeted investments for the second half 2025 acceleration.
Speaker Change: Fleet revenues continued to grow in Q1.
Speaker Change: And with Gen. III robots now deployed we expect their impact on revenue and efficiency to increase in the coming quarters revenue for the first quarter 2025 increased to 150% on a sequential basis to 440000.
Speaker Change: Growth was driven by 229000 and software services and a 20% increase in fleet revenues, which totaled 212000.
Speaker Change: Beginning this quarter, we've consolidated delivery and branding revenue under fleet revenues to better reflect monetization of our deployed fleet assets.
Speaker Change: While gross margins were 40% favorable quarter over quarter. The total cost of revenues increased approximately $1 million due to startup costs related to the scale up of our fleet and launching in new markets.
Speaker Change: While software services continues to deliver attractive margins the increased share of early stage operations at fleet revenues weighed on the overall mix.
Speaker Change: As utilization improves and operating density increases, we expect meaningful positive gross margin improvement.
Speaker Change: Delivery hours are ramping and we remain confident in the operating leverage embedded in our model.
Speaker Change: Total GAAP operating expenses were $13 5 million in Q1 compared to $12 9 million in Q4, and $8 3 million in Q1 last year.
Speaker Change: On a non-GAAP basis, excluding stock based compensation operating expenses were $9 5 million compared to $8 3 million in Q4, and $4 1 million in Q1 prior year.
Speaker Change: R&D remains our largest investment area at $6 9 million on a GAAP basis and $5 million on a non-GAAP basis.
Speaker Change: G&A expenses were $4 7 million on a GAAP basis, and $2 9 million on a non-GAAP basis.
Speaker Change: This quarter included continued investment in internal controls and operational infrastructure to support our growth at scale.
Speaker Change: Cost remained steady quarter over quarter, reflecting our disciplined cost management as we continue to build capabilities.
Speaker Change: Adjusted EBITDA for Q1 was negative $7 1 million an improvement from negative $7 8 million in the prior quarter and consistent with our plan to absorb the upfront expansion costs related to scaling.
Speaker Change: GAAP net loss per share was 23 cents and non-GAAP net loss per share was <unk> 16 cents.
Speaker Change: We ended the first quarter with a record cash position of $198 million bolstered by $91 million raised in January at.
Speaker Change: As shared previously we have made the strategic decision to self fund, our 2000 unit suite rather than pursue equipment financing.
Speaker Change: This eliminates approximately $20 million in interest and purchase option costs through 2026.
Speaker Change: We incurred $3 5 million in Capex during this quarter related to building our fleet.
Speaker Change: Our cash on hand is expected to fund operations through the end of 2026.
Speaker Change: We will continue to evaluate financing opportunistically.
Speaker Change: Our outlook remains unchanged. Despite macroeconomic volatility we continue to project an annualized revenue run rate of $60 million to $80 million.
Speaker Change: Once our 2000 robust fleet is fully deployed and reaches target utilization, which we anticipate will occur during 2026.
Speaker Change: Please deployment will accelerate in the second half of 2025 with at least 700 reduced cost Gen. III robots built by the end of Q3 and the remainder built in Q4.
Speaker Change: We are guiding to Q2 2025 total revenue in the range of 600 to $700000, representing anticipated topline growth of approximately 35% to 60% quarter over quarter.
Speaker Change: As of today, we estimate 57 million shares outstanding.
Speaker Change: With that I'll turn the call back to <unk> for an update on our 2025 plans and technology advancements.
Speaker Change: Thanks, Brian.
Speaker Change: Let's quickly look at what comes next we had a strong first quarter in support of our rapid expansion and the team is completely heads down right now executing the rest of the roadmap to get to the 2000 robots by the end of the year.
Speaker Change: Start with Metro's beyond Miami and Dallas, Our next city will be Atlanta beyond track to launch Atlanta by the end of Q2, which is why we had promised earlier this.
Speaker Change: This will be the fourth metro our robots will be operating in the.
Speaker Change: We also expect to announce additional new markets for the rest of the year later on so please stay tuned.
Speaker Change: Next up is the robot builds we are diligently working with our manufacturing partner in Magna International and expect to have the next batch of 700, new Gen. Three robots to be ready to deploy by the end of the third quarter.
Speaker Change: Also we are working actively with wing aviation to kickoff, our multimodal delivered a pilot where drones and robots deliver goods together early validation results have been promising so there is more to come there as well.
Speaker Change: I'm also excited to share an update about our software and data platform as you know our tech continues to be a key differentiator.
Speaker Change: Our robotics platform, which includes a wide range of technologies four creating an operating fleets of autonomous robots as well as the data that we collect from our vehicles to train our AI models.
Speaker Change: They all represent exciting new business opportunities.
Speaker Change: To explore that we recently brought on board a seasoned business development leader, Scott Wagner as our VP in charge of creating a new business inside surf Toby focusing on monetizing our platform and data.
Speaker Change: What's exciting is that we already have agreements in place with key new customers that include a major European automaker and middle mind Autonomous trucking company.
Speaker Change: And a couple of specialized industrial robot companies, we'll have more to share about this in the coming months, but one thing I wanted to share now is that starting in Q2, we will have recurring software platform revenues I'll start small at first but we expect it to grow over the coming quarters.
Speaker Change: And besides the fact that this adds revenue. It also helps diversify our opportunities set further and it lowers our reliance on any single revenue source of our partner.
Speaker Change: In closing we had a strong start to 2025, we are confident in our ability to continue and execute on our plans and we have many new opportunities to look forward to as well.
Speaker Change: Thank you all for the time, you've taken to be with US today, we will now move into the Q&A session back to your advocate.
Speaker Change: Thank you al and Brian we will now move into the Q&A session.
Speaker Change: First I'd like to express our gratitude to all the investors and analysts.
Ali Christiani: Thank you Ali and Brian We will now move into the Q&A session.
Ali Christiani: First I'd like to express our gratitude to all the investors and analysts who submitted questions via E Mail. We appreciate your engagement.
Ali Christiani: First question.
Ali Christiani: Can you tell us what you've learned from the new launches in Miami, Dallas and soon Atlanta is there anything you can share about things like operations and initial progress I think Ali could you take this one.
Speaker Change: So Andy I'm happy to share more how these market launches warrick to be clear. This is still early days, but.
Ali Christiani: Any plans to make that progress so far.
Ali Christiani: Every city really hasn't seen the cortex and its own unique operational challenges but.
Ali Christiani: We have a high level playbooks that we try to execute with discipline.
Ali Christiani: <unk> also being adaptable and flexible.
Ali Christiani: Really good example, actually is in January when we launched Miami Beach was ahead of us.
Ali Christiani: We were able to decide to launch Miami and and how about SaaS. The operating area launched within Savannah speaks so less than a month.
Ali Christiani: This is because <unk> realized basis nothing on our way you been able to really quickly execute the playbooks that I mentioned.
Ali Christiani: This is usually in three phases.
Ali Christiani: Is when we put that initial deployments a small number of robots in a high density area that scaled local team and then use that to train a strong team in place engaging.
Ali Christiani: So call it stay called as finding the optimal locations for depots.
Ali Christiani: And once we do all of that would be really get our steelmaking Andre Andre.
Ali Christiani: So we get to the second phase, which is deepening our reach in the market.
Ali Christiani: Includes increasing our fleet size Onboarding high volume merchants expanding to new neighborhoods.
Ali Christiani: Again mind me what is a good example, where we begin a few weeks we increased our database volume.
Ali Christiani: Five times.
Ali Christiani: And then the final phase.
Ali Christiani: The growth to maturity. This is very convenient forecast operational efficiencies integrating into their city ecosystem.
Ali Christiani: Working on the demand.
Ali Christiani: <unk>.
Ali Christiani: Improving unit economics. This is there ultimately be spent.
Ali Christiani: Fair enough time like in Los Angeles, We have you are more well established effective mlps. We are optimizing the platform. The same time as expanding into new neighborhoods in new areas in the city.
Ali Christiani: And then one last thing I should mention too is a big part of all this is really public access.
Ali Christiani: Any critical and you bring a new technology in your area you want to make sure that folks understand why youre dead, but youre doing.
Ali Christiani: Lawrence you can be there so when we go to new markets actually spend BLA efforts.
Ali Christiani: With folks locally in Dallas for example.
Ali Christiani: We participated in both hospital science sure.
Ali Christiani: <unk> engaged with Tommy entities like seniors are people with accessibility needs.
Ali Christiani: That'd be can help inform them about but just trying to do and make sure that they're comfortable with robots.
Speaker Change: Thanks Ali and the next question is a composite question from E. Mail can you provide more detail on the performance of the Gen. Three robots in terms of daily deliveries are range compared to Gen. Two.
Speaker Change: Do you continue to see performance improvements in the Gen two robots.
Speaker Change: Yes.
Speaker Change: I said this in the past it still remains true that compared to.
Speaker Change: <unk> launched the Gen. Two robots January robots are performing better.
Speaker Change: We are certainly seeing improvements in certain areas because of the new robot design for example, obvious finance that cargo capacity.
Speaker Change: There are other areas like you are actually seeing more hours of operation at robots. Each day in the Jan speed robots comprehensive Jan too because I stat, that's battery capacity.
Speaker Change: I still really pushing janssen robots to try to figure out all the Kingston hardware and software. So that we can fix them early before we scale further.
Speaker Change: But the results so far have been promising based on what we've seen this is why we felt comfortable guiding to Q2 daily volume growth of about 60% to 75%.
Speaker Change: Okay. Thank you and the next question is about the fleet with 250 robots added in Q1, what is the total fleet size can you elaborate on how you got to guidance for the delivery volume and for top line revenues.
Speaker Change: So at the end of Q1, our fleet size is over 300 robots, which includes robot to be used for R&D for testing and of course for 30 days now not all of the robots are active at the same time as we are bringing more merchants online and expanding so much geos.
Speaker Change: But the guidance for Q2 assumes that we will continue to increase their daily actually robots into existing markets as well as in new markets like Atlanta.
Speaker Change: We saw over 75% increase in dedicated volume first to the last week of Q1, as a result of bringing more robots and align on expanding them.
Speaker Change: Now you're expecting another 60% to 75% increase in debit volume in Q2 compared to Q1 as a result of again more robots and more utilization.
Speaker Change: And exiting and new Geos.
Speaker Change: Okay perfect. Thank you next question with a common question on <unk> can you share more about tariff impact on tariffs affected the cost of components or the timing on receiving that.
Speaker Change: Okay.
Speaker Change: Sure I can take this one okay.
Speaker Change: So obviously since new started coming out a couple of months ago, we've been implementing strategies and executing for country of origin strategy as the last few months so.
Speaker Change: So we're looking at supplier diversification and I think most importantly, we're seeing that our exposure in China remains a small percentage of the overall bom, but.
Speaker Change: I think most important here is to highlight something that like I said before that we've been very successful in realizing the cost reductions.
Speaker Change: From what our supply chain and procurement team and engineering teams have been able to do with our Bom cost so that savings will will definitely cover the.
Speaker Change: Any tariff impact that we have but right now we're not seeing any material impact from what we know.
Speaker Change: Alright. Thank you next question.
Speaker Change: Your comment on <unk>.
Speaker Change: Why you're changing the way you disclosed fleet revenues.
Speaker Change: Okay.
Speaker Change: Sure I can take that one too.
Speaker Change: So I mean, I think what we're trying to show here is the journey that we've been on right, where we started was with a single delivery partner pay per delivery services and over the past year, you've seen how we've expanded the delivery offerings with branding opportunities and we're evolving the mix and just the number of those contracts and methods.
Speaker Change: That we're providing.
Speaker Change: So ultimately this doesn't change anything about our focus for expanding delivery and granting services, but I think it definitely represents to the market and how we view the fleet that we are always looking to monetize.
Speaker Change: Okay. Next question, how do you think about the monetization opportunity as you mentioned related to data and software.
Ali Christiani: Should we think about modeling the potential revenue impact Ali could you take this one.
Speaker Change: Certainly.
Speaker Change: I will give you a quick answer and then.
Speaker Change: More details when you're thinking so the quicker you can say is that this is a long term play and what might be happy as we build our own products on top of this technology stack that would be created.
Speaker Change: And we are now deploying that product. So in the short term, we see the biggest revenue opportunity and growth in our database business.
Speaker Change: The longer term as our customers our partners using our stack start building their products and services and bringing them to market.
Speaker Change: We have a share of the value that there'll be created now just stepping back for a moment to explain.
Speaker Change: The broader strategy here.
Speaker Change: From the very start to be soft with innovation.
Jason: Jason for building full stack autonomy platform for fleet soft.
Jason: Robots that are out there by themselves and performing tests. This means that the IV builds for robots and navigates human spaces autonomously or the API interfaces within robots or their fleet management software.
Jason: Sop and software for safety and reliability the tools for remote intervention.
Jason: All of this stuff are really valuable and our mission is ultimately.
Speaker Change: Im just doing food delivery once a brain robots to lie.
Speaker Change: And we are not going to be building almost of robots in the future. So we have now started to really scaled application that we are focused on but we now have partners who are in other spaces facing similar problems that'd be by dissolved and that you guys who use our technology.
Speaker Change: That's why this platform and data play comes from and that's why we hired Scott to identify the right partners with benefits from this and create a new business around that as I mentioned, we do have agreements in place with a few customers already in place and well.
Speaker Change: We'll have more to share about that soon.
Speaker Change: Okay. Thank you I think that concludes our Q&A for today.
Speaker Change: And we appreciate all the thoughtful questions that we received please don't forget to check out our little guys same all who is on Netflix on Wednesday, and he will be on John Mccain is everyone everybody's alive comedy show and I'm told that same with up to no. Good next week. So hope to see you soon and look forward to that.
Speaker Change: Next call.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: And thank you for your participation. This concludes today's conference call you may now disconnect.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Yeah.