Embark Technology, Inc.

Greetings and welcome to Embark Trucks, Inc. Q4 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during today's conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Mr. Adam Fee, Strategic Finance. Thank you, sir. You may begin your presentation.

Thank you, operator, and thank you, everyone, for joining us today. Hosting the call with me are co-founder and CEO Alex Rodriguez and CFO Richard Howa. Ahead of this call, Embark issued its fourth quarter press release and presentation, which we will refer to today. These can be found on the investor relations section of our website at investors.embarktrucks.com. Please note that on this call, we will be making forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. These statements reflect our views only as of today, should not be relied upon as representative about views as of any subsequent date, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For further discussion of the material risks and other important factors that could affect our financial results, please refer to our filings with the SEC, including our registration statement on Form S-1, filed on November 24th, 2021, and our annual report on Form 10-K to be filed in the near term. In addition, during today's call, we will discuss non-GAAP financial measures which we believe are useful as supplemental measures of MBARC's performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. You will find additional disclosures regarding the non-GAAP financial measures discussed on today's call in our press release issued this afternoon and our filings with the SEC, each of which is posted on our website at investors.mbarctrucks.com. The webcast of this call will be available on the investor relations section of our company website. With that, let me turn the call over to Alex.

Thank you very much, Adam, and good afternoon, everyone. Given this is our inaugural earnings call as a public company, I'd like to begin by sharing some background on the business and how we are leading the way within the autonomous trucking industry. I'm going to begin on slide three. Embark is the longest-running self-driving truck program in America. Our company, from its founding six years ago, We've solely focused on the trucking market, and we believe this focus differentiates Embark, both in the way that we've developed our technology stack and in the way that we go to market. We also believe that both aspects are equally important to commercializing at scale. We pride ourselves on developing our innovative, purpose-built self-driving technology in parallel with the operational and commercial side of the business. Our primary offering is the Embark driver, our highly differentiated and advanced software stack. We deliver this software as a subscription service by partnering with leading carriers who will pay a per mile subscription fee for Embark driver software, as well as a suite of supporting services. Most notably, these services include Guardian, Embark's cloud-based dispatch and monitoring solution, which delivers 24-7 monitoring for the truck, along with remote assist capabilities and over-the-air updates. We also provide carriers with access to the Embark coverage map. This is a nationwide network of sites between which carriers can dispatch embark-equipped trucks. Within the embark coverage map, there are sites to support both the transfer point operating model and the direct-to-shipper model. In the transfer point model, carriers utilize existing drivers to handle the first and last mile and pick up and drop off at transfer points near city industrial zones where they can make that handoff. Under the direct-to-shipper model, carriers can move goods directly to and from shipper facilities, which have been mapped into the embark coverage map. I want to highlight three areas of key differentiation that are important to the Embark story and the result of focusing solely on autonomous trucking since our inception. First, Embark has developed a proprietary and patent pending technology called Vision Map Fusion. This technology allows Embark's trucks to update the map in real time, which is critical when encountering situations like construction work zones, particularly when you're on a two lane highway and there are no alternative routes. This is different from other autonomy providers who rely on an alternative technology known as HD mapping, which is brittle and requires constant maintenance to reflect changes in highway conditions. Our technology stack reflects our focus on trucking, and we believe it's much more practical for highway driving relative to urban driving. For example, in an urban setting, a robotaxi can simply take a different route, which is not a viable alternative for the highway and trucking use case. Second, we've developed the Embark Universal Interface. These are custom-designed sensor and compute modules that, through a set of flexible interfaces, are designed to be integrated with any of the major OEM platforms. This modular integration approach is designed to enable our carrier partners to purchase embark-equipped trucks from their preferred OEM. This approach was born out of close collaboration with our carrier partners, who for decades have purchased trucks from multiple OEMs and have been deeply involved in specifying these trucks down to the brakes, steering, and even the type of engine. Our interface is designed to accommodate the multi-platform component level purchasing behavior that already exists in the trucking market and is highly differentiated from the monolithic platform development approach of the robotaxi industry. Thirdly, Embark has an asset life business model where we focus on partnering with the major players in the trucking ecosystem, including carriers, shippers, real estate partners, and tier one manufacturers. Unlike some of our competitors who are focused on owning trucks and developing their own fleet, Embark believes we can be in a position to more rapidly scale by building partnerships where we benefit from the skills, expertise, and purchasing power of our partners, resulting in a much more capital-efficient business. As one example, Embark partners with some of the top carriers in the United States as our customer. And when you look at the top 100 carriers in the country, they spend approximately $15 billion per year on trucks. Critically, this asset-light business model also allows us to remain focused on our core competency. building world-class self-driving software for the trucking market. Moving on to slide four, I'd like to briefly discuss the market opportunity. Embark is focused on the rapidly growing $730 billion U.S. truck freight industry, which is currently experiencing many well-known challenges, specifically driver shortages, diminished carrier margin due to rising labor and fuel costs, safety concerns, and increased pressure to expedite delivery times. We believe Embark's technology will address all of these challenges, and more importantly, will help driver quality of life by allowing drivers to primarily service local routes and then return to their homes each evening. Additionally, Embark's autonomous driving solution provides compelling economics for carrier partners by enabling carriers to operate for longer hours with meaningfully higher estimated annual revenue per truck. Currently, trucks driven by humans are limited by Department of Transportation regulations to 11 hours of operation per day. Embark-powered autonomous trucks have the potential to dramatically increase that daily driving time while improving delivery speed and increasing utilization. Also, it's worth noting that one in five loads requested by a shipper today is rejected due to unavailable carrier capacity. We believe our technology will help unlock these supply chain challenges and provide more speed, certainty, and reliability for shippers in the future. Embark technology will also address critical safety issues, as a majority of all motor vehicle accidents are caused by human error. Embark Trucks has a leading safety record among autonomous software developers, having driven over 1 million real-world miles and done so without a single Department of Transportation reportable safety system. All these factors create a very tangible need for our technology and a compelling business and commercial use case. Turning to our business update on slide five, I'd like to highlight several of our accomplishments since announcing our business combination with Northern Genesis last June. In October, we announced that carriers have placed an industry-leading 14,200 reservations for embark-equipped autonomous trucks, more than twice the nearest public competitor at the time of announcement. What makes the reservation announcement even more exciting is that all the carriers that were allowed to place reservations committed to investing today to prepare their operations for autonomous vehicles as part of our partner development program. These reservations represent a major commitment from fleets that are deeply engaged with us, including many of the largest carriers in the country. This reservation process began with Embark's detailed rollout plan across the Sunbelt and then overlaid granular lane and load level data from our carrier partners to plan for the conversion of lanes to autonomous based on factors such as lane length, frequency, and market volume densities. Combined with insights from how our carrier partners operate trucks today, this allowed us to determine how they would actually deploy and roll out the Embark driver technology within their fleet. And then based on this final output, we were able to identify very specifically the number of embark-equipped trucks a given carrier would deploy over the first five years of commercialization. Only then were carrier partners allowed to place a truck reservation, substantiated by this data-driven analysis. This process requires significant coordination and collaboration with our partners, many hours of work, and billions of miles of analysis. The result is a high conviction number and associated lane-level analysis, which allows us to confidently plan our commercial rollout, beginning in 2024, and to meet the significant scale demanded by our partners. We also continue to bolster our leadership team with industry veteran executives who have deep autonomous vehicle experience. A few key hires and promotions I'd like to highlight today. We recently announced the appointment of Stephen Houghton as Embark's Chief Operating Officer. Stephen brings two decades of leadership experience to the team, including six years of autonomous vehicle experience from Amazon and Cruise. Specifically at Cruise, Stephen was responsible for scaling Cruise's operations to more than 700 people. Jean-Baptiste Passat recently joined to lead our software engineering efforts. Jean-Baptiste joins Embark after a decade at BrainCorp, where he oversaw nearly 100 software engineers that deployed a fleet of tens of thousands of production-grade robots. Jean-Baptiste holds a PhD in computational science and is responsible for more than 30 patents on a variety of robotics applications. The last key hire I'll highlight here is the addition of Sam Hlesch on the policy side. Sam served as a senior government affairs representative for the International Brotherhood of the Teamsters Union for over eight years before joining Embark. and brings over a decade of experience in technology, safety, and labor policy at the federal and state level. SAM will further strengthen Embark's longstanding relationship with interest groups, unions, and federal policymakers to collectively deliver the safety, labor, and environmental benefits of autonomous trucking. We're excited to have SAM on the team. We believe engaging with labor is critical to our goal of improving drivers' lives and helps advance our objective of bringing more and higher quality jobs to the industry. At Embark, we truly value our culture and the people we hire. I'm humbled and excited at the many industry veterans who are wanting to be a part of what we're doing here at Embark. On the coverage map expansion, we're excited to have recently announced a strategic partnership with Altera Property Group. Altera is one of the largest and first real estate investment companies in the U.S. to focus on industrial outdoor storage properties. Altera signs use its national real estate portfolio and private equity fund, together totaling over a billion and a half dollars, to identify sites that Embark can use as transfer points in key freight markets. This partnership further highlights the work we're undertaking today in advance of commercialization in 2024 and validates our asset life strategy and ability to remain focused as a software as a service business. Two other key highlights I'll briefly touch on. First, as we announced earlier this year, we expect to demonstrate and provide key results from our snow testing by the end of this winter. I can say we've successfully completed testing with our truck in Montana, and we look forward to sharing the results and key learning on this in the very near term. Additionally, And this is an important one for me personally. As part of our commitment to ESG, I'm foregoing my salary and bonus for 2022. And these will be used to launch a grant program and fund a number of projects in STEM education, beginning with a grant to the Afghan girls robotics team, which I'm really excited about. Embark and I are focused on the long term. And taking a $0 salary and bonus this year is a clear way of creating alignment with all of Embark's shareholders and living out our values. Turning to slide six. Those of you who followed the Embark story for many years have heard me talk repeatedly about avoiding unrealistic goals. Embark has consistently distinguished ourselves as a company that sets realistic expectations with the objective of exceeding them. We did that for five plus years as a private company. And in 2021, I'm very proud that we've continued to build on that track record as a public company. From a technology perspective, we kept up our engineering velocity target of delivering two or more new capabilities from our capability roadmap in 2021, just as we have every year going back to 2017. On the commercial side, in our very first investor presentation, in our path to going public, we outlined three key objectives that we expected to make major announcements on in the following 12 months. Secure truck reservations under our partner development program, enable Embark Universal Interface as an option through manufacturing partnership, and expanding the Embark coverage map. As we just walked through, in 2021, Embark excelled in delivering these ambitious objectives, including announcing in October that we have received more than double the number of reservations from major national carriers compared to our nearest public competitor. We continue to provide ourselves on the depth of our relationships with our partners across the trucking ecosystem and our ability to deliver industry-leading outcomes in a highly capital-efficient manner. On to slide seven. I want to take a moment to outline what we intend to accomplish in 2022. First, become the first autonomy developer to deliver trucks into the fleets of carrier customers. Second, accomplish two of the remaining five capabilities in our technological roadmap. bringing the total capabilities accomplished to 13 of 16 by the end of 2022. And third, launch the backbone of our Embark coverage map across the Sunbelt region. I want to reiterate again that we aim to provide clear milestones so our progress can be measured and tracked, allowing us to demonstrate the advancement of our technology and to provide tangibility towards commercialization. I also want to ensure that not only can you evaluate our technology progress, but also our commercial and operational progress. which is equally important to ensure the trucking ecosystem is ready to deploy our technology. As I said before, we can't simply ask carriers to download an app and start using trucks in 2024 without proper preparation. Instead, we are actively preparing our partners today, setting up the operational framework to ensure our software is tightly integrated within their fleet. This preparation is critical to our long-term successful commercialization and provides another tangible checkpoint as we work with our partners and prepare to put self-driving trucks into service across the Sunbelt. Looking first at the technology roadmap on slide eight, we're providing even more detail around the five capabilities that remain and the timing of when we intend to achieve them. As you can see, two of these capabilities, emergency vehicle interactions and evasive maneuvers, are scheduled to be accomplished this year. On slide nine, we can dig into more detail on emergency vehicle interactions. Emergency vehicle interactions involve the multi-step process of an embarked driver responding to a traffic stop. This includes sensing an emergency vehicle and knowing it needs to pull over, confirming the traffic stop with Guardian, pulling over to the side of the road, informing the officer to call a guardian, and providing access to key documents via lockbox. We've collaborated closely with the California Highway Patrol to test this capability, and we expect completion in the second quarter of this year. We also intend to work with additional local authorities to refine this capability. Moving on to slide 10, I want to discuss the main areas of commercial focus for Embark in 2022. First, the Truck Transfer Program is an industry-first program and a major step in the evolution of autonomous trucking. that we'll be executing over the course of the year. I will speak to this in more detail on the next slide. Second, as I mentioned, we're going to continue to be focused on expanding the Embark coverage map, continuing to build upon our relationships with Altera and Rider. We're excited to truly operationalize the backbone of our coverage map across the Sunbelt by the end of the year. Third, we remain committed to our manufacturing strategy of developing Embark universal interface to work across multiple OEM platforms. As I will highlight, the truck transfer program will be a great proof point of a carrier being able to use their preferred truck platform simply by selecting it and having the Embark universal interface installed. Lastly, the partner development program will continue to mature, and we expect to execute from a set of 40-plus projects across 15 primary work streams over the course of 2022. This will further inform the roadmap towards commercial deployment with our existing carrier partners, while also adding new partners to the program. We're excited to share more details on our partner development program work over the course of the year as we execute on these initiatives. Moving on to slide 11, I want to talk about the Truck Transfer Program, or as we call it, TTP. This is an exciting next step for the autonomous trucking industry. To date, Embark and other autonomous developers have operating a testing model in which the AV provider owns, maintains, and dispatches autonomous trucks, placing their own driver behind the wheel during hauls for shipper and carrier partners. This existing configuration has generated valuable early insights into real-world technology performance, and how to best integrate Embark with QuickTrucks within the existing supply chain operations. The Truck Transfer Program represents the next logical step towards commercialization, marking the first time that the carrier, NightSwift, will own an autonomous truck, maintain and deploy that truck, and place their own driver behind the wheel. This program will unlock the next level of integration and deployment learning ahead of scaled commercialization. Last month, we announced that by the end of 2022, We intend to equip a set of Nightsworth trucks from the carrier's slated 2022 OEM deliveries with Embark Universal Interface for use in their day-to-day operations. We will work closely to develop workflows and account for truck maintenance, dispatching, and IT integration points, among other things, to ensure seamless integration of Embark technology. This will be yet another tangible proof point of Embark achieving our commercialization target and a great example of how the depth of partner relationships is critical to preparing the ecosystem for autonomous trucks. And with that, I'll turn it over to Richard to discuss the financial details.

Thank you, Alex. Turning to slide 12, let me highlight some of the key financial and operational metrics that support our business progress. First, we're excited about the $245 million of net proceeds raised during the transaction that go public last year. MBARC has developed a leading technology stack and industry-leading business partnerships in a highly capital-efficient manner. and we believe that this additional capital will continue to support the business going forward. By maintaining focus and discipline, we can deploy our resources efficiently and effectively. We believe our balance sheet is very robust given the operational and commercial goals and objectives that Alex just walked through, and further highlights why having clear and focused efforts is critical to maintaining capital efficiency. As we look at key financial and operational metrics, I want to really focus on several areas. First, free cash flow spend is a metric we monitor very closely. For the fourth quarter of 2021, Embark had free cash flow spend of $34.2 million. And for the full year of 2021, we had free cash flow spend of $68.8 million. These are net of certain one-time cash expenditures related to transaction costs. It's worth noting that Q4 reflects approximately $12.5 million of prepaid expenses and other working capital adjustments. So if you look at Q4, without the impact of those adjustments, free cash flow spend is closer to $21.7 million per quarter. These metrics are also net of one-time related transaction costs. As a pre-revenue company, we are very cognizant that every dollar we spend must have a clear and obvious use to advance us towards commercialization. While sometimes this focus can be to the detriment of marketing our story publicly, we believe the technology and what we've accomplished with our resources to date ultimately speaks for itself. To reiterate, we believe we have deployed a leading technology relative to our competitors with less capital because of our focus and discipline. During the full year 2022 guidance, we expect free cash flow spend to be in the range of $125 million to $140 million. We believe our ability to develop a leading technology while being extremely capital efficient is a direct result of our focus, which helps ensure we continue to be prudent stewards of capital as we advance towards commercialization in 2024. As an AV company, we also don't need to build a manufacturing facility or hard asset to have one sale. We are able to continually evaluate the tradeoffs on where and how we deploy capital to ensure we are efficient with our resources, and most importantly, this enables us to ensure we remain focused on the main objective of commercializing our AV trucking technology at scale. To provide a bit more detail on the quarter and the year, net loss was $76.4 million for the fourth quarter, and it was $124.2 million for the full year of 2021. Adjusted EBITDA loss was $20.3 $3 million for the fourth quarter compared to adjusted EBITDA loss of $6.1 million in the prior year period. Full year 2021 adjusted EBITDA loss was $53.5 million. These are net of one-time related transaction costs. These figures include stock-based compensation expense of $44.2 million for the fourth quarter and $47.6 million for the year 2021. For 2022, we expect stock-based compensation expense to be in the $70 to $75 million range. It's worth noting that approximately 10.6 million of this stock-based compensation expense is related to our Founders PSU grant. That does not begin to vest until our share price is at least $20. And then the vesting schedule grows in five price increments up to $100 per share, aligning our Founders' interest with long-term investors. Since it's always a top question, I include some additional detail here, so you have to go digging through our filing. As of March 7, 2022, Embark had 450 million basic shares outstanding. You will also see in the appendix, I include a summary of our share count for your benefit, which also summarizes the warrants we have outstanding that remain out of the money today. Lastly, a few key operational metrics I want to highlight. At year end, we had 18 trucks in our testing fleet, and we believe we are highly efficient in the way we utilize these assets, which allows us to have very robust road testing. We had 235 employees at year end, of which 171 are related to our R&D organization. Lastly, and certainly most importantly, We continue to be excited about our safety record. We have had zero DOT reportable incidents or failed inspections through 2021. Moving to slide 13, I want to provide an update on our business prospects and the financial framework which you can evaluate and embark. Before I get into the details, I would like to reiterate the criticality of the preparation we are conducting today with our partners to both inform our assumptions and our expectations regarding ultimately realizing them. We are preparing our carrier partners' networks today, uncovering the operational, organizational, and technological friction points that slow deployments, and then smoothing them out. We are continuing to learn where the technology makes sense and where it does not, and building deployment plans against these shared perspectives. Given this unique perspective that Embark has been able to develop, we believe there are two ways to credibly evaluate this framework, top-down and bottoms-up. From a top-down perspective, we've taken a set of assumptions around the total addressable market and then distilled this down into the lanes that we believe are economically viable for autonomous trucking. Lastly, we have further filtered this funnel to the operational design domains where we believe our technology will be viable in the near future. This is our serviceable market. From a bottoms-up perspective, we are looking at our partners today to understand their current size, ability to scale autonomous trucking across their networks, available power, et cetera. Today, our carrier partners drive roughly 3 billion miles annually and have 38,000 trucks under management. And this is achieved under the constraints of human driver hiring and hours of service. The 14,200 truck reservations that these fleets have placed represent nearly 10 billion miles over the entire lifecycle of the reservations. Additionally, these reservations are backed by deep network analysis, as Alex explained earlier, and is yet another proof point on the depth of the work and analysis we conduct as part of our partner development program to inform our overall framework. As we progress towards commercialization, we look forward to refine the connective tissue from the top-down and bottoms-up frameworks to provide a high-fidelity view of our scaling plan. With that, I'll turn it back to Alex for closing remarks.

Thank you, Richard. I'd like to conclude on slide 14 by thanking our partners and customers, our employees for all of their hard work, and our investors for their continued long-term support. I want to finish with one final observation. When we look at the broader mobility landscape, we believe that autonomy is the most attractive opportunity in the near to medium term. There are less players relative to other subsegments, and the financial profile is materially more attractive. Within autonomy, we believe the trucking application is the most obvious and practical use case, given the size of the market and the constraints our technology will unlock in the industry. Embark has been solely focused on the self-driving truck problem from the beginning over six years ago. And we're excited to see the leading technology and clear go-to-market strategy that we've developed over many years intersecting with the most compelling opportunity in the mobility space today. With that, we'll open the call to Q&A.

At this time, we'll 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 your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys one moment while we pull for questions. Our first question comes from the line of Chris Weatherby with Citigroup. You may proceed with your question.

Hey, thanks, and good afternoon, guys. Maybe we could start with the truck transfer program. I wanted to get a sense of what you thought, you know, maybe what the progress might look like this year in terms of timing of getting the trucks from the OEM, you know, upfitting them, getting them to Knight Swift. And then do you think that this opens the door for other potential participates in the program? Do you think you could see other carriers sign up over the course of this year? Maybe think about how you could scale that over time. Hey, Chris.

Yeah, the expectations for this program, as we sort of laid out in the presentation, we're expecting to have the first set of trucks over to Night Swift running in their day-to-day operations before the end of the year. As far as the intermediate milestones, obviously a bunch of those things are going to all need to take place between now and then. We'll look forward to giving you the updates as they come along, but I think you should feel sort of a pretty clear end state as to where we're driving, and we're excited to provide some updates In terms of how we see this expanding, I think we see it expanding potentially in two directions. One will be continuing to increase the set of features that these trucks are actually equipped with. So adding more and more of the features from our level four system to give a more sophisticated experience inside the fleet. And then on the other side, as you mentioned, I think this is an exciting program that we see the potential and demand for significantly more than just Night Swift. And that's something that we're definitely evaluating.

Okay. That's helpful. I appreciate it. And then, you know, on the five remaining milestones that you're working on, I think you have two of them highlighted in the 2022 block. So I guess I wanted to – you gave us a little bit of color on the emergency vehicle interactions. You have evasive maneuvers as the next one beyond that. Any way for us to think about the timing of those as we go through the year? Obviously, a lot of the stuff that we're going to be asking is about sort of measuring your progress against some of your big milestones and ultimately working towards those goals in the out year. So is there any help in terms of how we should be thinking about that process?

Yeah, so I think once the webcast comes out or if you have the slides in front of you taking a look at slide eight, there's actually a lot more detail there than sort of what I gave on the call. We talked through both the timing, so those two, the first one in Q2, the second one in the back part of the year, as well as the timing for the remaining milestones, kind of a little bit more about what that includes and why we think those are important.

Okay, evasive maneuvers then is, I noticed it's 2022, so I guess that's sort of by year end is the way to think about it. That's right, yeah. And then the other three are for 2023. Understood. Thank you. And then last question for me, just want to get a sense of sort of cash burn. You know, Richard, you walked us through that. I appreciated, you know, thoughts on your cash profiles at SANS today. And then, you know, if you feel good about the rate of cash burn to kind of get you to commercialization and scale.

Yeah, Chris, let me just walk you through our balance sheet today and where we are. At year end, we had approximately $265 million of cash on our balance sheet, and we have ample runway to execute on the set of initiatives we just outlined for 2022. You know, as we've talked about, being an AD company, we always have flexibility in our plan to define and refine these key initiatives, key partners, and the number of resources required to execute upon them.

Okay. So I guess that sort of means you feel good about where you are. We feel good where we are today. Got it. All right. Well, thanks very much for the time this afternoon, guys. I really appreciate it.

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 of George Giniagrikas with Baird. You may proceed with your question.

Hey, guys. Good afternoon. Thanks for taking my question. So maybe to start, Can you talk about any momentum you've seen in conversations with potential partners in your ecosystem, given the current state of affairs, supply chain and trucking shortages? Any incremental insights you could share would be much appreciated.

Yeah, I think we've definitely seen the focus on the trucking industry from shippers and then the focus on sustainability from carriers that certainly come a lot sharper in the last quarter. I think that the two things that we're hearing in our conversations is one with oil at close to all-time highs and that potentially being a long-term thing. Suddenly, the focus on that 10% plus fuel efficiency improvement that driverless can enable is pretty significant. And then this one's maybe been going on for more like six or nine months, but when you look at the impact of the supply chain crisis and the shortage of truck drivers, we're really seeing that increase. demand driving for how can we improve not just today's logistics, but really the long-term demographic profile, which is the underlying cause of this problem.

Got it. And maybe to focus on the technology piece, one of your competitors recently talked about co-developing an ADC with NVIDIA, and you've taken a little bit of a different approach. I'm curious as to why you think getting a little bit more deeply embedded in with some of your semiconductor or component partners is not essential and that you can sort of allow the market to come to you as opposed to addressing these concerns directly?

Yeah, I think first off, I want to say that we work pretty closely with NVIDIA. We think they make absolutely great hardware, and that's the reason that we trust them to be a pretty significant partner in the technology development that we're doing. I think the trade-off in our mind is really about whether or not you want to in-house hardware development or pieces of the stack. And I think what we've seen, and certainly if you look at Embark historically, we're a very focused company, and we've talked consistently about how that drives capital efficiency. I think what's clear from our perspective is that if you're going to choose between investing in proprietary hardware versus investing in better software, that software investment paired with really great partnerships is going to be the way to go. We've seen this in the past for us when we think about the LIDAR space, for example, where Embark has partnered with Luminar. We've invested very heavily in building best-in-class LIDAR classification machine learning software. And the benefit of this approach, whether that's in LIDAR or it's in compute, is that If someone's making proprietary hardware, they then need to be on the hook for every incremental scale-up or improvement of that system. Whereas if Embark is investing instead in great software, and today we have a hardware platform through our work with NVIDIA that's best in class and that our software is able to run within, that's a great outcome. If our investment brings the compute to a point where it runs within the computer, that is something that we can continue to benefit from over the long term.

Thank you. And one more, if I may, just in terms of the milestones you've said for 22 and 23, and I think the slide deck is great. You guys did a really good job of laying out exactly what we should expect. There's not a drive route test in there. You know, why is that not something that you feel like you need to prove out your product and to begin the rollout in 2024?

Yeah, I think when we look at the capabilities of the system,

our focus is really on making sure that we have a complete and commercially viable system and then ultimately handing that to our carrier partners in a way that they feel is safe and credible and obviously the end state here is running the truck without a driver but our view is that doing that on a partial set of capabilities one that's not yet commercially ready is a distraction from the real engineering work that we need to be doing and we're doing all of our system validation in parallel such that as we're doing each capability, that reliability work is being done alongside. But I think we really want to see something that's ready to go to market with capabilities like emergency vehicle interaction before we start handing it over to carriers without a driver.

Understood. Thank you, guys.

Our next question comes from the line of Todd Fowler with Cape Bank Capital Markets. You may proceed with your question.

Hey, great. Alex, Richard, congratulations on the first quarter as a public company. I guess I agree with the last comment. The slide deck here is pretty helpful. Alex, I wanted to ask on slide 10, kind of on the commercial milestones that you're looking at, do you view these as kind of being in order or from a priority standpoint that the most important is the truck transfer program and then kind of moving through those one, two, three, and four Or as you think about the commercial milestones, is there something that you view as kind of more important on the road to commercialization?

Yeah, I would say really the first two here are the ones that we think are going to be certainly the most differentiated as you look to what we're doing in 2022. And so I really look at the truck transfer program where we're going to be the first player to actually be putting trucks into real fleets, which I think is a huge step on the commercial side. And then the rollout of our partner-based transfer hub network in the Sunbelt that really lays the groundwork for being able to do this at scale with our carrier partners. So I think those are the two biggest, but certainly, of course, you know, we'll be working on all four.

Got it. And then, Alex, I know you've done a good job in talking about the reason why, you know, being platform agnostic makes sense. You know, certainly the way, you know, the carriers purchase trucks, you know, currently Can you help us think about, as you get closer to commercialization, how you see the retrofit moving into the install process with the OEMs, and maybe a little bit of color around the conversations that you're having to have trucks equipped with hardware to run your software as you get closer to commercialization?

Yeah, absolutely. I think maybe two thoughts on the manufacturing side. It's our view that... By having a platform-agnostic approach, we're able to really meaningfully burn down the manufacturing risk. I think some people have sort of asked the question, you know, doesn't this add risk to the system? And I think, actually, from our view, the riskier thing to do would be relying on a single OEM development timeline as a single point of failure on the company's business model. And we see building something that's platform-agnostic and therefore allows us to diversify in the same way that our carrier partners want to diversify. across the different OEM platforms is something that really helps bring down risk and give us confidence and certainty about our ability to deliver on time because it puts more things within our control. And I think we're continuing to see progress towards showing that be really successful. So I mentioned a little bit the truck transfer program work that we're doing. It's actually not going to be based on a platform that Embark is integrated to in the past. Instead, it's going to be based on the Kenworth T680 platform, which NightSwift provides a lot of, so NightSwift is taking existing trucks out of that order that are going to be upfitted. We've been working with them, with their contacts at the OEM, and we feel very good about that install process and being able to deliver those trucks in exactly the way that we sort of targeted and based on some of the partnerships and the development work we've been doing over the last couple of years.

Got it. That makes a ton of sense. That's helpful, Alex. Richard, a couple for you, you know, just on the free cash burn guidance for this year, the 125 to the 140. Can you, I guess, help us think about a couple of things? I mean, the split between R&D and G&A, how that, you know, kind of breaks out. And then what's your expectation from a cadence standpoint? I mean, based on where you were in the fourth quarter, if we adjust for the prepaids, it feels like that's going to ramp as we move through the year on a quarterly basis. Is that the right way to think about the quarterly cadence of cash burn?

Yeah, Todd, certainly as we grow, it will certainly ramp quarter over quarter. Obviously, we continue to monitor, as I mentioned, the tradeoffs, the resources, and where we deploy them against our initiatives and objectives. On your first question on the split, we haven't provided that detail, but I think as we've said before, we are an engineering-led organization. And when you think about where that spend is, it goes towards people. And when you think about where those people are, they're typically in engineering. So it's a significant chunk of where that spend will go.

Got it. Okay, that makes sense. And then just the last one for me. Yeah, I know in the financial projections that you guys laid out in 2024, there was a substantial amount of revenue that you had kind of in your forecast and building into 2025. Can you help us think about, I mean, the timing of when revenue is going to start to materialize? It doesn't seem like it's going to be something that we see in 22. Is it something that starts to come in in 23 and then it's a big ramp into 24? Or just how do we think about kind of the revenue cadence as you move through the milestones? Thanks for the time.

Yeah. So nothing's changed from what we've previously said at this point, Todd. I think what we have provided is a framework of how we think about revenue. where that looks based on a top-down and a bottoms-up approach. What I would say is the ability to generate, I would say, a nominal amount of revenue moving goods between now, we don't see a benefit until we're prepared to commercialize at scale in 2024. And that's how we've designed at least the way that we test and how our engineering team works and how we utilize our fleet.

Got it. Thanks again for the time tonight.

Ladies and gentlemen, we have reached the end of today's question and answer session. I would like to turn this call back over to Mr. Alec Rodriguez for closing remarks.

Awesome. Thanks, everybody, for joining us.

It's a great first earnings call, a lot of good questions, and we're looking forward to doing this with you guys more often and updating you all on our progress over the course of the year.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Enjoy the rest of your day.