Kodiak AI, Inc.

Good day and welcome to the Kodiak second quarter 2026 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Steve Philistine, Senior Manager, Investor Relations. Please go ahead.

Good afternoon, and thank you for joining Kodiak's second quarter 2026 earnest call. I am Steve Philistine, Senior Manager, Investor Relations. Joining me today are Don Brunette, Founder and Chief Executive Officer, and Sir Roger Dada, Chief Financial Officer. Earlier today, we issued our earnings release and posted our earnings presentation, both of which are available on the Investor Relations section of our website. Before we begin, please note that today's discussion will contain four linking statements regarding our business, financial performance, outlook, and future operating plans. Actual results may differ materially from those discussed today. Please refer to our earnings materials and SEC filings for a discussion of factors that could cause actual results to differ. Any forward-looking statements that we make on this call speak only as of the date of this call, and we disclaim any obligation to update any forward-looking statements except as required by law. We will also discuss certain non-GAAP financial measures. Information regarding our non-GAAP financial measures, including reconciliations to the most directly comparable GAAP measures, can be found in our earnings release and supplemental materials available on our Investor Relations website. With that, I'll turn the call over to Don.

Good afternoon, and thank you for joining us. Q2 was a quarter of significant commercial validation and increasing scale for Kodiak, as we achieved important milestones that further strengthen our leadership position in commercial driverless trucking. We expanded the world's largest customer-owned driverless truck fleet to 35 trucks, operating with no human in the cab. We made significant progress toward our targeted long-haul driverless launch by the end of the year, increasing our autonomy readiness measure and 91% as of July. We also introduced our seventh generation platform, further improving the performance and reliability of the Kodiak driver. Together, these accomplishments strengthen the foundation of our next phase of discipline growth as we continue deploying physical AI driverless solutions at commercial scale. Turning to our second quarter results, we deployed seven additional driverless trucks, bringing our total driverless deployment to 35, and further growing the largest customer-owned driverless truck fleet in the world. As of quarter end, those trucks have driven more than 40,000 paid driverless hours, an increase of 71% from the end of the first quarter, and up more than 20 times year-on-year. Over the same period, we delivered over 300,000 tons of freight, bringing cumulative loads delivered to more than 20,000, representing 32% growth from the end of the first quarter and 150% year-over-year. Together, these results demonstrate that the Kodiak driver continues to deliver increasing value to our customers while advancing commercial deployment. We are also moving at high velocity toward our targeted driverless long-haul launch by year-end. As of July, our long-haul autonomous readiness measure, which measures the percentage of safety case claims we've completed for our targeted long-haul launch, surged to 91%, a five-point improvement in just three months. At 91%, we have now successfully closed out the vast majority of our long-haul safety claims, including several of the most technically challenging claims that historically require the longest validation cycles. These include significant progress across our safety-critical vehicle control architecture, including enhancements to our throttle, brake, and steering control systems, and continued advancement of our redundant steering capabilities to improve system fault tolerance. We've also made meaningful progress in our probabilistic risk assessment framework, strengthening how we model, analyze, and quantify safety risk across real-world operating scenarios, which are essential for highway driving. This progress reflects the investments we've made over the past several quarters in expanding our systems engineering organization, enhancing our AI-enabled development and validation tools, growing our fleet of dedicated development trucks, and increasing the scale of our structured track testing program. These investments are now translating into measurable results. One example of this improved tooling is our revolutionary AI-powered breakpoint technology. which allows our engineers to actively seek out rare and challenging scenarios, accelerate development, and close the limited remaining claims in our safety case. Breakpoint can now execute over 1 million simulations per hour and runs on a minimal compute budget of around a tenth of a penny per sim. Another example of Kodiak's capital efficient approach in action. We combine this large-scale simulation with targeted closed-course testing and real-world validation, thereby generating data more efficiently, validating safety performance faster, and systematically closing out safety claims with a high degree of confidence and speed. Based on the momentum we are seeing today, we expect to continue making meaningful progress throughout the third quarter and continue to target driverless long-haul launch by year-end. We also continue to refine our operational readiness for long-haul deployment. After successfully launching service with rail transport in the first quarter, we recently expanded operations to five round trips per week. This expansion reflects the confidence our customers gain as they integrate the Kodiak driver into their operations. Inc. Inc. Inc. Inc. Inc. We had another strong quarter in our industrial vertical, increasing Atlas' fleet of Kodiak-equipped trucks to 35. Atlas has selected Daimler Truck North America's Western Star platform as it continues to expand its Kodiak-powered fleet. Our upfit partner, Roush, has already begun producing these vehicles, which integrate our 7th generation autonomous platform onto the Western Star 49X for our growing deployment with Atlas. By the end of the quarter, we expect Atlas to be operating high 30s number of driverless trucks. As previously stated, as we move through the remainder of the year, we expect to ramp production and deploy a similar number of driverless trucks in the second half of 2026 as we did in the first half. This transition positions Atlas to become the first customer in the world to operate a driverless fleet across multiple truck OEM platforms. We believe the experience gained through this deployment will be invaluable as virtually every large trucking fleet operates vehicles from more than one OEM. We also recently agreed to a firm delivery timetable with Atlas that will allow us to establish a more coordinated production and delivery schedule. This new delivery timetable will better align our deployment with Atlas' growing customer demand while supporting expansion into a broader geographic footprint across the Permian Basin. The updated agreement further strengthens our partnership, improves planning and execution for both companies, and reinforces our shared commitment to successfully scaling driverless operations. We continue to expect to complete the initial 100 truck commitment by the end of the first half of 2027. We recently expanded our driverless truck deployment with Atlas to service two of Atlas' major Dune Express loadout facilities simultaneously. These two depots are an approximate 90-minute drive apart and service wells spread over three hours apart, allowing Atlas to efficiently serve a broader range of customers over a much wider geographic area in Texas and New Mexico. In addition, Atlas now successfully serves customer well sites solely with Kodiak trucks, which requires a high level of reliability and assurance. If a well site doesn't get sand on time, it shuts down, making these deployments increasingly mission critical. Lastly, our first international pilot kicks off in a few weeks in Canada with West Fraser, one of the world's largest wood products companies. We will haul flatbed trailers to demonstrate the Kodiak driver's capabilities in logging operations, another of trucking's most demanding environments. We are excited to demonstrate the versatility of our system and expand the industrial use cases where the Kodiak driver delivers value to customers today. Our defense vertical continues to build momentum. We have a growing roster of world-class defense partnerships, including our strategic collaboration with General Dynamics Land Systems, who we continue to work closely with on new opportunities. Collaborating with companies like General Dynamics puts Kodiak in a much stronger position to compete for future autonomous ground vehicle contracts, contracts that we believe could make a significant positive impact on revenue in the coming years. We were also selected for Phase 2 of the Defense Innovation Unit's Robotic Operation for Autonomous Delivery and Sustainment, or ROADS, program. We participated in the ROADS demo in July. Rhodes aims to leverage customer-proven autonomous vehicle technologies like Kodiaks for the department's non-tactical vehicle fleet. Given our proven technology, we believe we are well-suited to address this opportunity, which reflects the Department of War's ramping investment in autonomous and dual-use technologies. The depth of our defense portfolio also continues to expand. Our team is continuing to execute on the Rogue Fires program with the U.S. Marine Corps. This work builds directly on Kodiak's prior work in military autonomy, including our earlier robotic combat vehicle engagement with the U.S. Army and participation in high-profile Pentagon demonstrations, such as the Defense Innovation Unit's Project GI and the Army Extech Overwatch program. Moving to technology, I'm excited to announce that Kodiak's Gen 7 platform is debuting on the Western Star 49X. Gen 7 reflects the same product philosophy that has guided Kodiak from the beginning, while incorporating everything we've learned for over 18 months of driverless operations in one of the world's most punishing driving environments. The result is a product that is more efficient, modular, reliable, serviceable, and practical for commercial fleets. These improvements reflect our continued focus on building technology that addresses real customer needs. Gen7 has nearly 50% more compute power than the previous generation and features a more compact form factor that simplifies integration, enhances reliability, and supports a broader range of vehicle configurations. In fact, Gen 7 is the AV trucking industry's first platform compact enough to integrate into lower-cost day cab configurations, which we believe are the vehicles many of our current and target customers want to deploy. Gen 7 also builds on our operational experience to increase the overall reliability of the Kodiak driver. Initial mechanical stress testing indicates that our Gen 7 sensor pods and compute enclosures will have a nearly 50% greater operational lifetime than prior models. We've paired the Gen7 hardware with the latest release of our driverless software, which includes significant improvements over the prior version and is already increasing our customers' productivity. This latest version includes new AI perception models, better handling around obstacles and debris, and improved vehicle controls. Our driving in the Permian has become more confident, with overall efficiency increasing more than 30% from the prior software release. The second quarter saw significant regulatory progress for autonomous trucking. At a state level, California's Department of Motor Vehicles finalized new regulations that, for the first time, extend its autonomous vehicle permitting program to include heavy-duty trucks. This regulatory structure creates a clear path to commercial driverless deployment in California for both intrastate and interstate operations, and will ultimately enable us to offer coast-to-coast driverless service. we moved quickly to apply for a permit and anticipate receiving one in the coming weeks. Additionally, we continue to see significant progress at the federal level. In May, the House Transportation and Infrastructure Committee advanced the Build America 250 Act, the latest federal service transportation bill. Excitingly, this bill includes bipartisan language supported by the AV industry, labor, and other key stakeholders that would establish a comprehensive federal policy framework specifically to regulate the safe deployment of autonomous trucks nationwide. The bill would also permanently solve the warning triangle issue, without the need for an exemption from USDOT. While there's still work to do for the Build America 250 becoming law, the bipartisan AV trucking language lays down a clear marker for the future of federal AV truck regulation. We are therefore increasingly confident that autonomous trucking will be included in the final surface transportation legislative package when it becomes law. Our growing driverless deployment Progress toward our long-haul driverless launch and ability to integrate onto multiple leading OEM platforms demonstrates that Kodiak is prepared to scale. Across our long-haul industrial and defense verticals, we continued to strengthen the Kodiak driver, expanded customer deployments, and built the operational experience needed to scale efficiently. Every deployment, driverless hour, and product improvement strengthens the Kodiak driver across all verticals. With more than 18 months of commercial driverless operation under our belt and a growing ecosystem of customers and strategic partners, we believe Kodiak is well positioned for our next phase of growth as we prepare to launch long-haul driverless by the end of 2026. I want to thank the Kodiak team, our customers and partners, for their continued execution and trust. Now, over to you, Sirajit.

Thank you, Don, and good afternoon, everyone. I'm pleased to share Kodiak's financial results for the second quarter of fiscal year 2026. We delivered another strong quarter of both operational and financial performance, successfully executing against our strategic priorities while expanding driverless deployments growing recurring revenue, and maintaining discipline spending. We ended Q2 FI 2026 with 35 driverless trucks in line with our expectations and up from 28 in the prior quarter as we continue to expand deployments with Atlas. These trucks continue to operate commercially without anyone in the cab and are fully integrated into our customers' day-to-day fleet operations. Revenue for the quarter was $3.5 million, representing 91% quarter-over-quarter growth. The revenue increase was primarily driven by continued expansion of Driver-as-a-Service revenue and also benefited from a one-time revenue contribution of slightly over $1 million from our autonomous trucking demonstration program with DriveOhio. Excluding this demonstration revenue, our underlying driver-as-a-service business continued to deliver strong sequential growth driven by growing commercial deployments. Gap operating loss for the second quarter was $43.7 million. Non-gap operating loss, which excludes stock-based compensation, was $37.3 million, primarily reflecting continued investment in research and development and operational support as we scale our deployments and long-haul readiness. We incurred capital expenditures of approximately $3.9 million, primarily related to AV hardware commitments, long-haul development, and continued commercial deployments. Turning to cash flow, due to free cash flow was negative $38 million, outperforming the low end of our guidance range. Our spending during the quarter primarily reflected continued investment in commercialization expansion, initiatives designed to reduce the cost of Kodiak driver over time, and further the development of our long-haul driverless capabilities, partially offset by continued increases revenue. We ended Q2 with cash, cash equivalents, and marketable securities of $151 million, providing us with the financial flexibility to continue executing our commercialization strategy while maintaining a disciplined approach to capital allocation. Turning to guidance. For the third quarter of fiscal 2026, we expect driverless truck deployments to increase to high 30s. During the quarter, we will begin transitioning the Atlas driverless build to the new OEM truck platform, consistent with our customers' fleet strategy. The transition further demonstrates the flexibility of the Kodiak driver to operate seamlessly across OEM platforms and expands our opportunity to scale future customer deployments and increases the breadth of our customer base. As we initiate this transition, we expect more modest driverless truck additions during the third quarter while we integrate the new truck platform into commercial service with the customer. The deployments are expected to accelerate in the fourth quarter as we continue scaling deliveries. We expect third-quarter free cash flow of negative $39 million to negative $41 million, primarily driven by continued investment in long-haul driverless testing and development and growing commercial deployment activities. In addition, we are narrowing our full year 2026 free cash flow guidance to negative $155 million to negative $162 million compared with our previous range of negative $155 million to negative $165 million. This updated guidance reflects our strong first half execution and our continued focus on disciplined capital allocation. We believe our continued commercial deployments, progress toward our long-haul launch, and disciplined financial execution position Kodiak well for its next phase of growth. Operator, we are now ready to take questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. We ask that you please limit yourself to one question and one follow-up. And our first question for today will come from Andres Shepherd with Cantor Fitzgerald. Please go ahead.

Hey, everyone. Good afternoon. Congratulations on the quarter and all the great progress, and thank you so much for taking our questions. Don, I just wanted to maybe touch on the cadence for Atlas. So I think in the prepared remarks, you gave us a sense of kind of Q3 deployment. You gave us a sense that, sorry, you reaffirmed that you're, you know, on track for the entire deployment by middle of next year. Just trying to break that out a little bit further. Any more cadence for granularity you can give us, you know, how should we think about Q4 and then the cadence for next year? Thank you.

Thanks, Andres. Yeah, I think we said it in the remarks, right? We're steadily ramping up the new platform. There's obviously a lot of work and validation that goes into bringing a new platform up to driverless-level quality, and this is something that we've been working on for the last little while, and we're excited to finally be deploying that new platform here in Q3. So as we As we said before, we're going to start small with a Q3 deployment on the new platform, and then we're going to quickly start to ramp up through Q4, Q1, and Q2 as we get to the final 100. I don't have anything more to add other than we plan to deploy a similar number in the second half of the year as we did in the first half of the year.

Okay. That's very helpful. Appreciate it. And maybe just a quick follow-up, maybe a two-part question. You know, with the launch of the Gen 7 hardware, I guess what does that do to the scale? Any opportunities to accelerate that? How are you then thinking about your fleet? Are you going to perhaps discontinue some of the previous hardwares and just move over to the Gen 7? Just trying to understand how you're thinking about that. And then the last one real quick is I see that you applied for the California Autonomous Permit. So how are you thinking about opportunities in California as well? Thank you.

Yeah, sure. So we don't have any plans to discontinue the usage of our previous generation platform. It's out there working day in, day out, 24-7 for our customer today. And we built that system to be incredibly reliable. And it's really been showing the quality that we put into it. That was a program that we developed over several years. And it's still going plenty strong. And we will continue to support that platform for the coming years and ultimately the lifetime of those trucks. So we don't plan to go back and retrofit, so to speak, a Gen 7 on previous platforms. But all new trucks that we deliver starting in Q3 will have the new Gen 7 platform with all of the upgrades and improvements in efficiency, horsepower, compute power, space savings, reliability, et cetera, that we had mentioned before. And then in terms of California, we're really excited about where California stands. We await the permit, as we said in the remarks coming soon. We're excited that that opens up coast-to-coast potential operations for our long-haul release. We are focused on the Texas area for the for the next several quarters. But ultimately, we do believe that the longest of long haul routes are the ones that are the most impactful for our customers. And of course, we're already talking to many customers in California who are excited to take advantage of the safety benefits that the Kodiak driver offers.

And just to add to what Don mentioned about the Gen 7, In earlier conversations we have, in earlier earnings calls we have mentioned, we're taking steps to enhance the efficiencies of the AV hardware stack. This is one of those steps in that direction as we try to drive down our AV hardware costs by increasing efficiencies and productivity. So this is one of the steps in that direction as we will continue to drive down the AV hardware costs.

Excellent. Thank you both very much. Congrats again on the quarter. Lots to look forward to. We'll pass it on.

Thank you. The next question will come from Etai McKaylee with TD Cowan. Please go ahead.

Great. Thanks. Hi, everyone. First, Don, maybe just to go back to the defense opportunities you talked about in the prepared remarks. Just curious, one, what kind of milestones should we be expecting in the next maybe six to 12 months? And second, how to size the opportunity for Kodiak over the next few years?

Yeah, our our our bullishness on defense continues to be really strong as it has been in the previous previous quarters. That being said, visibility into the sizing of these programs, the availability and when they when they ultimately come is very difficult to predict. And so we continue to be fairly cautious in giving any. suggestive guidance around what the sizing of these programs look like. I think from our perspective, we see defense as a long-term strategy for the company, and we're excited to partake in programs that are available to us, the ever-evolving landscape of ground-based autonomy for military purposes. We're making great progress on the programs that we are a part of, and as I said in the remarks with our partner, General Dynamics Land Systems, and others we're looking forward to applying to additional programs as they come down the line. But I can't give any specifics on kind of the scoping or size or expectation in terms of timing of when those will land or when those revenues will come in. We kind of look at that as purely additive to our core business in deploying our industrial and ultimately long-haul vehicles starting in 2027. We don't have anything more specific to add to that.

As a follow-up, going back to Gen 7, any way to quantify the impact from cost or unit economics as you scale the new platform? Does this incorporate any of the benefits from the Bosch development that was announced earlier in the year?

Yeah, it did. So this, the GEN7 platform is part of all our initial initiatives in engineering to enhance design enhancements. And while we can't get into specifics, but we can say we're starting to cross into double digits of benefits from these pieces of the hardware as we go along. And we are continuing to making those investments, right? If you think about our overall How to drive the AV hardware stack strategy. There are three drivers. One is obviously the engineering enhancements, including the Gen 7 platform. And there are a few other things we are working on. The second is how we create greater efficiencies through a global supply chain organization. That's part of the Bosch you were referring to. That's still nascent. We have started developing prototypes with them. and we'll start seeing more of those benefits into 2027 and beyond. And the last piece will be just the scale of production, which will drive more cost optimization. And just going back to defense, also we wanted to remind, we had talked about it in the last earnings call, the Pentagon budget for the Defense Autonomous Warfare Group I think the preliminary numbers we're being talked about is $50 billion for 2027 compared to $225 million for 2026. So we believe this will benefit all players like us as we ramp into 2027 and beyond as these contracts get allocated out. Terrific.

That's all very helpful.

Thanks, everyone. Thanks, Itachi.

The next question will come from Jim McIlry with Chardon. Please go ahead.

Thank you. Good afternoon. Atlas, on their call, when they talked about the deployment of the 100 trucks, it kind of sounded like some of these trucks were going to be on the road or that it seemed like they were assuming that the long-haul case would be, the safety case would be complete. And that's where some of the trucks would be deployed. Is that correct? Are some of these trucks in this 100 truck order contemplated to be used on road? Well, I think the important thing to remember about Atlas is that they own and control these trucks. So ultimately, how and where they operate the trucks, which zones and which regions of the Permian, out of what loadout zones and what well sites to deliver to is ultimately their decision. We are working to close out our safety case for highway or long-haul operations by the end of this year, at which point then once we've kind of approved a given operational domain for driverless operations, then Of course, it's our customers' discretion as to whether or not they want to use the trucks in that mode or otherwise. And so we are working with them on geographic expansion. I think they talked about that. We're excited to continue geographic expansion. We've already begun expanding broadly throughout the Permian. That includes additional types of roads. But this is ultimately their decision as to how they operate the trucks and where they want to utilize them.

Got it. Thank you.

And on West Fraser, can you remind us again how long you think that demo or test might last and then the timeframe to a decision after the demo is complete?

Yeah, Jim, yes. So we expect the pilot to start in the next few weeks, and it will last for a few weeks. in Q3, and that could set up a decision and discussions with Best Tracer on a potential contractual agreement over the next few months.

Great. Thank you.

The next question will come from Ryan Sigdahl with Craig Hallam Capital Group. Please go ahead.

Hey, good afternoon, Don, Sriracha, Steve. In the Gen 7 hardware platform, you see 50% greater operational lifetime versus prior generations. Are you willing to quantify what the previous generation was before and then I guess what this one implies? And then secondly, on the Gen 7, Sriracha, you said crossing the double digits of benefits just now. I'm not sure what you're referring to there, so some clarification would be helpful.

I'll take the first part, which, yeah, so we intend the platform to outlast the useful lifetime of the truck. A typical lifetime of the truck in the Permian is around four years of operation, and we expect our Gen 7 platform to be able to exceed the lifetime of those trucks.

Yeah, and Ryan, what meant by the double-digit reduction means this is our, we're talking of our AV hardware stack, how much that costs on the truck. Obviously, we're still subscale, and we're still building out a handful of trucks. But overall, Gen 7, including compute redundant system, all those benefits are we expect that would result in double-digit reduction, low double-digit reduction in AV hardware costs from the baseline cost.

Gotcha. Maybe just a follow-up, Don, on that. So I guess does that imply that the 35 Atlas trucks now only have something like a two-year useful life, half of what they kind of need?

No. No, we actually believe that those trucks are built for, You know, nearly, nearly, if not exceeding the lifetime of those trucks. It's just Gen 7 is kind of solidly on the other side of that. You know, we do a lot of accelerated life testing with our systems, but ultimately the Permian is a very rugged environment. It's one of the most rugged environments you can find in the United States. And so measuring and quantifying the lifetime and reliability of the systems is quite difficult. But we have dramatically improved those capabilities, at least in bench testing and in chamber testing versus the previous gen. And so, so far, we've seen incredible reliability with our AV system in the Permian over the last 18 months, and those systems are going strong. We expect that to continue, but we do expect Gen 7 to be even more reliable.

Helpful. Switching over as I look at the truck platform with Daimler. I guess nobody seems to be able to get access to Daimler for autonomous trucking given their torque relationship. Anything you can share on kind of what this engagement relationship, if there is one, what it could mean for Kodiak?

I can't comment on the relationship at this time, but what I can say is that, you know, the Western Star is and Dymo team are aware of the selection by Atlas to use their platform, and we've coordinated with them on the deployment of the Kodiak driver system on the Western Star platform for the purposes of deploying with Atlas.

Yeah, and just to add to what Don mentioned, we are really excited about the integration on another leading OEM platform. This also allows us to adopt our autonomous solution to a more economical day cab, which, as Don mentioned in the prepared remarks, we believe would be one of the leading configurations across all verticals. And this also validates our case of platform agnostic. Our architecture allows us to transition quickly and efficiently across different platforms, and that allows us to be fast into the go-to-market opportunities.

Quick follow-up. Does coordinate with them and them aware, I guess, does that mean they approved assuming you put the technology on there? Is that a reasonable inference?

Yeah, they have approved, yes.

Very good. Thanks, guys. Good luck.

Yeah, thank you.

The next question will come from Ravi Shankar with Morgan Stanley. Please go ahead.

Hi, this is Nancy on for Ravi. I saw that your autonomous readiness measure was at 91%. It'd be helpful if you could walk us through specifically which safety cases claims remain open or any gating factors before you can declare 100% and commence driverless operations on highway.

Well, as a reminder, our safety case process consists of a series of claims. There's many, many, many claims in the tree that we have to provide the sufficient amount of evidence to declare that the system is adequately performant and the risk is sufficiently low. It's beyond the scope of the call to kind of walk through all of the different claims within the framework. What we can say, and I'll just reiterate from the remarks, is that Some of the longest lead time items have now been closed out. Most of the most technical challenging claims have been closed out. And so we do expect this number to accelerate towards 100 as we march towards the end of the year. And we are very confident that we can close the case and deploy our launched vehicle by the end of December.

Great, thanks. And then I guess going off of that, with the breakpoint technology, How does that differentiate you from competitors? How do you balance simulation testing with on-highway operations? And does that help you close the safety case a bit faster, perhaps expand a bit more when you're looking at lanes on the other end of this driverless launch?

Yeah, well, I can't speak about other technologies, but what I can say about Breakpoint is that it is truly a game changer or a step function in terms of the way we think about simulating for rare events and edge cases. So if you think about the distribution of all the things that can happen, the classic slash naive way is to simulate every scenario across every variable. And that can be very, very expensive. And also, the majority of simulations you run are going to be very mundane and expensive. eventless, so to speak, right? Very easy to close. What Breakpoint allows us to do is it allows the search around the edges where there's close calls, near misses, or potential collisions, and it allows us to explore the space of simulation right along those edges where it's the most difficult for the truck. And so we can focus the effort, so to speak, on the hardest cases, And Breakpoint is just a tool that allows us to intelligently and in a very sophisticated way search for those edge cases in a very extremely high-dimensional space. And by doing that, we can, of course, test all of the mundane stuff, but we can really focus a lot of our brainpower, our resources on the hard, specific edge cases that we ultimately need to find to close, and it allows us to kind of skip over a lot of the easy things that we don't want to spend resources because we know the system already handles.

Great. Thanks for taking my question.

The next question will come from Walt Pysik with LightShed. Please go ahead.

Hey, thanks. Don, I'm taking a look at this Western Star truck. Looks pretty good. So in terms of Why you can use this day cab? Is it just that that large compute box that would normally sit in the second row of the larger cab has been reduced or is it moved up into the passenger seat? Is it in that little cap thing above the windshield? Can you give us a little bit more color on how you've achieved that? And while at the same time, obviously getting, I think you said 50% more computer, faster compute.

Thanks, Walt. Very astute observations. So thanks for the compliment on the looks. We agree. We think it's a beautiful looking truck and we're excited to deploy it this quarter to customers in a driverless fashion with nobody in the cab. So kind of exactly as you said, a little bit of all of the above. We've moved the compute from the rear of the cab where most companies would naturally deploy it into the front area where the passenger seat would go. We've, of course, had to improve the form factor for that. But with improved form factor, reduced form factor, comes additional space challenges, but also heating, cooling, power challenges as well. So we've had to address all of those. you know, additional challenges to bring everything into kind of a smaller footprint for the day cab configuration. Ultimately, if you look out in the Permian in particular, all of the trucks are day cabs, right? You don't get a lot of sleeper cabs out there. And so it's important to our customer, but also important for our development to be able to kind of prove that the Kodiak technology is agnostic like we say it is to all different form factors. And so, yeah, it's kind of all of the above. We had to really think about the engineering of the actual footprint of the compute system. We had to think about the thermal considerations of having a reduced airspace. How do we keep it cool? And how do we kind of improve all those systems for the new form factor? So it was quite a heavy lift on the team, and I'm super proud of how it ended up.

Does the customer capture all of the economic benefit or... are you able to increase your per mile per hour, however you charge, for the driver since they're going to be saving that much more on a smaller cab truck versus the sleeper cab?

Yeah, this is primarily ROI that's passed on to the customer. So exactly as you said, one of the benefits of running a day cab is that it's actually cheaper. If you don't care about the aerodynamics, meaning you're not going to operate in very high-speed environments, then a day cab is definitely a cheaper option. And of course, because the customer, in our case, in our DAS model, they purchase, they own the trucks, this is obviously savings that is direct to their bottom line.

Got it. I was just looking at the, I don't know if you gave the full number, but the hours of paid driverless ops And I looked at it basically on per truck per day, which it looks like based on simple math, maybe last year you were in kind of like eight hours a day, and now it looks like 14. I don't know if that math tracks, but is it your trucks are just running more per day, or is it just kind of a rounding hour based on the timing of when those incremental trucks came on?

No, I think you're on to the fact that our efficiency has been improving ever since the beginning of our deployment 18 months ago in December of 24. So those numbers are not the ones that we provide, but you're absolutely correct in that the trucks are more efficiently run. This comes from a number of factors. Both the uptime of the trucks is higher today. The operational capabilities of the customer are higher, meaning the people who are actually utilizing these trucks for pickup, drop-off, and deployment are actually more efficient today. The startup procedures have improved, so the trucks are available when they want to be used. There's no downtime. They don't have to spend time calibrating them or recalibrating them or kind of initiating them. So startup time has improved. Overall transit time is being reduced, and dwell time at the well sites is also reduced. improving with operational efficiencies. Now, some of that is due to, you know, Kodiak improvements, and some of that is due to customer improvements that we've, you know, assisted and helped along the way. And it's kind of all coming together to a much more overall efficient fleet.

Just one last one, if you don't mind. You know, you were talking about this, you know, high 30s, right, because you're transitioning to these new trucks, Gen 7s. I think that implies that basically the Packard trucks are getting taken out of service. I'm just curious, what does the customer in that situation do with those trucks? Is there any residual value? Do they operate anywhere else? Or what happens to those trucks as they're taken out of service, if that's even correct, and you're replacing with these Daimler trucks?

So I won't speak for the customer, but I don't believe any of the former trucks that they're currently operating are being taken out of service.

Well, the high 30s number we're guiding is the cumulative number. So we added 15 driverless trucks in the first half of 2026, and we expect, as Don mentioned earlier, numbers similar to those additions in the second half of FY2026.

Right. I think I was just asking about Q3 because I think you mentioned 38 cumulative in Q3, which implies adding about three or four, which is a lower pace than you've done in the last three quarters. I assume that was for some transition, but so they're staying in service. You're just adding fewer and then just really cranking them out in the fourth quarter.

Yeah, we're definitely ramping up production in the fourth quarter. And as the new platform online, there will be fewer deployed this quarter. So it is a temporary slowdown, but it is not due to kind of any kind of manufacturing deficiency or supply chain issues. It's just a matter of making sure that these new trucks on a new platform are fully validated and and ready to go at the quality that the customer expects. And so there's a very high bar to meet there. And we want to make sure that we've gotten everything right before we hand these over to the customer to make sure that their operational efficiency is high as expectation. And so, yeah, we're going to have a few less this quarter, but we do intend to ramp up significantly in Q4, Q1, and Q2.

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