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spk00: Good day and welcome to the TuSimple first quarter 2022 earnings conference call. All participants are now in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. Keep in mind that this call is being recorded and there will be a replay available at ir.tusimple.com following this call. I would now like to turn the conference over to Ryan Ammerman Head of Investor Relations for TuSimple. Mr. Ammerman, please go ahead.
spk09: Thank you, Ashley. Good afternoon, and welcome to our first quarter 2022 earnings call. With us today are TuSimple's co-founder and Chief Executive Officer, Xiaodi Hou, and Chief Financial Officer, Pat Dillon. Xiaodi and Pat will review the operating and financial highlights, and then we will take questions. As a reminder, Two Simple Shareholders letter and a replay of this call will be available later today on the investor relations page of our website. This call is being recorded. If you object in any way, please disconnect now. Please note that Two Simple Shareholder letter, press releases, and this call contain forward-looking statements that are subject to risks and uncertainties. These forward-looking statements are only predictions. and may differ materially from actual events or results due to a variety of factors. Please refer to our earnings release and in the sections of our SEC filings titled risk factors. We will also discuss non-GAAP financial measures which are not prepared in accordance with generally accepted accounting principles. Please refer to the safe harbor disclaimer and non-GAAP financial measures presented in our shareholder letter for more details. including a reconciliation of the non-GAAP measures to the comparable GAAP measures. I will now turn the call over to Shaody to begin. Shaody?
spk14: Thank you, Ryan. Hello, and welcome to our first quarter earnings call. Today, we'll update you on exciting partnership agreements that we believe will drive value in our ASN and share some of our recent technology and commercialization achievements with you. and we're very excited to host many of you at our Investor Day next week in Tucson. It will be a great opportunity for the investment community to experience our industry-leading EV technology firsthand, hear from many of the talented individuals within our organization, and for us to share more details on our long-term plans. We're very much looking forward to hosting you next week. Since Too Simple Funding in 2015, We have had one goal of building the first to market scalable level for autonomous semi truck solution that will transform the freight industry. Our mission is to change the game. We believe our technology will improve safety, increase efficiency and reduce our carbon footprint. Well, there is much more work to be done. Our autonomous driving system is now feature complete, and I'm excited to be leading to simple towards commercialization. Our commercialization team members are best in class, and we have established some of the strongest partnerships in the industry. I am extremely proud to play an instrumental role in bringing all aspects of the company together to achieve our goal. Last week, we announced some board changes. First, we're very pleased to add Reid Werner to the board. Reid has deep experiences in finance, as well as in government and defense. and we're grateful to have his counsel on our board of directors. We also announced that Brad Buss has been appointed lead independent director. Brad has been critical in all aspects of our business, particularly as we have transitioned to life as a public company. I greatly appreciate his many contributions so far, value his counsel, and looking forward to working with him in a new capacity as he takes on this additional responsibility. We also announced that my co-founder, Mo Chen, will not be standing for re-election. Mo and I have a long-standing and deep partnership that has helped build this entire company. Mo is always focused on doing what will be best for TuSimple. As we have talked about previously, we are targeting more independent directors and a more U.S.-centric board. We are focused on enhancing governance and our home market in the U.S. It's expected to be the first to commercialize. So this is a natural and strategic evolution of our board composition. Mo is fully aligned with this strategy and he made the decision not to seek reelection to support the company. We thank Mo for the many contributions he has made as a board member, helping to guide the company from its infancy to what it is today. Mo will continue to be a significant shareholder of the company and will continue to give us his full support once his director term finishes in June. We will continue to evaluate additional independent director candidates to augment our board in the future and to continue to bolster our governance. During this quarter, we made significant progress toward commercialization. We now have over 10 driver out missions under our belt, and we made meaningful enhancements to our minimal risk condition for MRC capabilities. including our autonomous driving system ability to pull the vehicle over to the side of the road in certain scenarios. This is a critical capacity in order to be able to remove our chase van support vehicle and improve efficiency in our driver out operations. To test this capacity, we first ran trials in simulation and then on closed tracks. Finally, we proceeded with the driver out test runs. where we deliberately triggered an MRC command while the vehicle was in operation on Interstate 10. As designated, our semi-truck identified a safe place to pull over, lowered its vehicle speed in lane, and then put itself to the side of the roadway. The MRC capability to pull over to the side of the road may not seem like progress. After all, our AFN is about completing missions successfully. But a robust MRC capability is needed to safely take the driver out and to optimize operations. As the world's first and only driver out trucking company, we will continue to refine our technology towards commercialization and provide updates on critical capacity advancements such as MRC. This quarter, we also launched collaborative mapping. This enhanced fleet mapping capability allows our semi-trucks to share information with each other using sophisticated vehicle-to-cloud-to-vehicle communication. Trucks traveling the same route share dynamic events such as identifying emergency lane vehicles well before the camera or LIDAR concerns the event. This advanced notice is incorporated into the vehicle planning system, giving two simple semi-trucks considerable time to make a safe lane change or other driving maneuvers. As our operation scales, the collaborative mapping is expected to help us continue down the efficiency path, and more importantly, magnify and enhance the safety benefits of our AV technology. TuSimple has one of the broadest patent portfolios in the industry, and the value of our proprietary technology continues to grow. We were issued 21 new patents in this quarter. bringing our total patent count to 408, highlighting our industry leadership in intellectual property globally. Patents issued in the quarter will improve safety and reduce operational costs. Now, I'd like to talk about Navistar's joint development partnership to build the world's first Level 4 production semi-truck. Over the course of the last two years, we and Navistar have made significant progress on advancing our technology and refining our production plans. This includes a significant amount of progress over the last six months on our field of materials with Navistar, including deep discussions and negotiations with the supply base. This work is critical to advance both our production trucks, but also to utilize our hardware knowledge for advancement of the retrofitted trucks over the near term as we expand our driver operations. We are also pleased to announce that the production semi-truck will be manufactured in Navistar's world-class Escobedo Mexico manufacturing facility. This is an important milestone as we jointly prepare for production, and it's a signal of the conviction that we and our partners have in this program. As we and others in the industry have highlighted, the last two years has been unprecedented global supply-based challenges. This has delayed us from the initial production truck timeline we set in 2020. We at Navistar have refined our timeline to have production intent prototypes in 2024 with fully integrated vehicles targeted for 2025. Even with this delay, we believe the timeline that we have developed will lead our purpose-built commercial truck to be the first to market. In parallel to the production truck program, We will also continue to commercialize our technology with successive generations of more advanced retrofitted trucks, driving efficiency and ramping the scale of our operations into the hundreds of trucks. As our production trucks start coming off the line, we will be able to place thousands and tens of thousands of trucks onto our AFN, fully scaling adoption of our groundbreaking technology. Year to date, We've made some important announcements that will enable our autonomous freight network to bring efficient AV capacity to the trucking market. First, we expanded our AFN ecosystem with Rider. We added two terminals in Houston and Laredo, Texas. These terminals will provide non-stop access points for our customers, providing bundle maintenance service to support commercialization. By partnering with Rider, we're able to quickly and in a capital efficient manner Add to our AFN terminal infrastructure in Texas. This is an important step to prepare for the expansion of our driver-out operations over the next 12 months. Second, we announced that an integration with Warner Enterprise Roadside Assistance to support our driver-out operations on our AFN. As anyone in the trucking industry understands, breakdowns happen, whether driver-out or not. What's critical, however, is expedited service. when assistance is required. Our announcement with Werner gives our AFN access to an extensive network of dealers and repair facilities, offering 24 by 7 support. This means carriers on our AFN will have their choice of service and support providers, including Werner Enterprise authorized service centers. With that, I will turn the call over to Pat to discuss our financial results and guidance.
spk11: Thank you, Shadi. Beginning with our reservation program, we added 500 new truck reservations this quarter, including one larger reservation of 350 trucks from Loadsmith, a leading third-party logistics and capacity as a service platform. We're excited to be working with an innovative company like Loadsmith and see this as a validation of the attractiveness of our AV technology and the value that we are bringing to the industry. This brings a reservation total at the quarter end to just under 7,500 trucks. The interest in our technology from our fleet partners has never been higher as we build on the success of our initial driver out missions towards operationalizing driver out for customer freight runs. We continue to hold high standards for reservations. We only work with partners capable of implementing our AV technology and those that are ready to make a financial commitment alongside the reservation. Now shifting gears to our financial results for the first quarter. We reported $2 million of revenue in the quarter, an increase of 140% year-over-year, and a slight increase quarter-over-quarter. We have kept our owned and leased revenue fleet relatively flat quarter-over-quarter, as new trucks are prioritized for our testing operations. The flat truck count and relatively flat revenue mile growth was offset by higher rate per mile driving our revenue growth. While 2022 does present some headwinds, such as adding drivers, trucks, and trailers, we expect to increase our revenue fleet size modestly over the course of the year and to continue to improve utilization. We closely watch the pricing environment, and we price competitively with our freight customers. Moving to expenses. We spent $78 million on total R&D in the quarter, including $17 million of SBC. This compares to $41 million in the same period last year and $82 million in the fourth quarter of 21. The R&D expense declined by 5% quarter over quarter, primarily due to a one-time true-up of 2021 bonus accruals. We continue to fastidiously manage our spending to invest smartly in the commercialization of our world-leading technology. We spent $32 million on SG&A during the period, including $10 million of SBC. This compares to $15 million in the same period last year and essentially flat versus fourth quarter 21, also benefiting from a one-time true-up of 2021 bonus accruals. Our loss from operations was $112 million in the first quarter of 2022 compared to a loss from operations of $59 million in the same period last year and $116 million last quarter. Our adjusted EBITDA in the first quarter was negative $80 million, which compares to negative 50 million in the same period last year and negative 81 million last quarter. We invested 1 million in the purchase of property and equipment during the quarter, primarily related to equipment purchases and facility investment. We also made acquisitions of property and equipment of $1 million that is included in liabilities. We ended the quarter with a cash balance of approximately $1.25 billion, a decline of 100 million versus the end of 2021. The cash burn in the quarter included the payout of annual performance bonuses and other similar items which are not expected to repeat in the next three quarters. A quick update on our 2022 guidance. There is no change to our four-year 2022 guidance. However, given our announcement regarding the exploration of potential transactions for our Asia-Pacific focused businesses, we do want to provide some context. We expect approximately 20% of our 2022 adjusted EBITDA laws to be related to our Asia-Pacific-focused businesses. We are not expecting any material revenue contribution from these businesses during 2022. I'll now hand it back to Shadi for a few last remarks.
spk14: Thank you, Pat. The technology we've developed is best in class. Our path to commercialization is becoming clearer, and I'm honored to be leading this amazing company through our next phase of development. We're excited for 2022, which we expect to be a year in which we expand our driver-out operations, continue to make progress on efficiency, and work towards full production of our purpose-built truck. We will have more details to share with you next week in Tucson. I look forward to meeting many of you and highlighting the advancements we have made. With that, we're ready to start the Q&A session.
spk00: Thank you. If you would like to ask a question at this time, please press star then 1 on your telephone keypad. Again, that is star 1 to ask a question. Your first question comes from the line of Ravi Shankar with Morgan Stanley.
spk13: Thank you. Good afternoon, everyone. Shadi, thanks for the update on the Navistar relationship and the new timeline. Just so that we understand, can you give us the kind of step-by-step on what you expect in 2022, what you expect now by the end of 2023? I think you had said some level of commercial implementation by end of 2023 before. What happens in 2024 and what happens in 2025?
spk14: Yeah, thank you, Ravi. The Navistar thing is that we have agreed on a lot of things on the building material, build up materials. But the things that we cannot control in the world is that the supply shortage on that. And we are finalizing it. But even with this delay, we still believe that we are the only company that's going to item by item about the items needed for building the autonomous truck. And this is our plan for now, that we are going to have the prototype ready by 2024 and the real truck coming out by 2025.
spk11: Maybe, Abby, it's Pat, just to get a little bit on your question about what is happening in 2023. The important thing to remember is that these programs are running in parallel. So what we're doing with retrofitted trucks, which we expect to continue to improve in terms of the quality of the hardware, the reliability, and the fidelity of the hardware will continue to improve. The commercialization is not tied to the production trucks. So the commercialization is which we'll talk more about in next week's Investor Day. We'll really be using retrofitted trucks initially starting at the end of 2023 and into 2024. In parallel to that, we will be making regular and steady progress into the production truck And those are the specific milestones that Shoudy laid out in his prepared remarks around production intent prototypes in 2024, and we're targeting the fully integrated vehicles on the road in 2025.
spk13: Got it. That's an important clarification. Thank you for that, Pat. And maybe as one follow-up, just on the first quarter itself, it looks like your miles driven, both total and map, were flat sequentially, which I think is the first time that's happened. So can you just elaborate on why that was the case? Did you guys run into any COVID operational issues or something?
spk14: Sure. Thank you, Ravi. Good question. So I think for mapping, we have different phases of development. The first phase is to demonstrate to the world that we can map quickly and quickly. And that goal has been achieved. And, you know, given the finite number of trucks that were operating and the hauling freight on the entire U.S. network, we have to come to the situation where we do not need to map the route where we don't operate. And in the new phase, what we're focusing on, as I also mentioned previously about the collaborative mapping, we focus more on the latency of the mapping, the accuracy of the mapping, and the additional functionality of the mapping. But we do not need to expand the miles of mapping because that's only one of many success criteria for mapping. Great. Thank you.
spk00: Your next question comes from Chris Weatherby of Citi.
spk02: Hey, thanks. Good afternoon, guys. This is Eli for Chris. If we could just start with the Union Pacific partnership. You mentioned that was going to be rolling out in the spring here. Just curious if that's happening now and if there are interesting learnings that are coming as a result from some of the final mile moves there.
spk14: So for the Union Pacific collaboration, initially we were aiming at hauling a trailer, like a typical trailer for Union Pacific in the driver out fashion. However, as we go deeper into the collaboration with Union Pacific, we realize that their model is really the real intermodal container transportation. Therefore, it will be a much more significant achievement if we can haul the real intermodal container instead of a trailer, which is more like a smaller aspect of their business. Therefore, we have to modify our ODD and expand our operation to be able to support the rail intermodal container. And with that, we set the new timeline for the third quarter of this year to commence the driver outrun for the Union Pacific for the rail intermodal container, which is an expansion operational plan. And we believe this new plan will be much tighter integrated with the daily operation model of Union Pacific.
spk02: Okay, got it. And then in terms of Texas, so presumably you want to continue to do driver routes there in 2023, and those will be prototype or upfits, I guess, that will be doing those routes. So you imagine that you will have some more trucks out there for that. And I guess more on 2023, so there's going to be significant reductions in cost per mile. Are those going to be on the prototype trucks? And what's happening to help reduce the cost per mile there?
spk14: There are several aspects. Number one is that we are going to operate in Texas by migrating our operational design domain from night to day and migrating from one lane in one drive out lane in Texas. Sorry, one drive out lane in Arizona to more driver out lanes in Texas. You see, those are already two operational design domain expansion. And in addition to that, we are going to change some of the hardware to a more product matured version of the hardware. By doing that, we're going to reduce the operational cost. And furthermore, we have multiple roles in our initial drive route. We have leading vehicle, we have chase van, and we do have a plan to remove all of this in the following, I would say, two years.
spk11: It's Pat. So maybe I'll just add a couple of things. One, we do expect to give a lot more detail on the driver expansion at our investor day next week. And two, just to make sure that the nomenclature doesn't get confused, the trucks that we'll be operating this year and next year will be up fits or retrofits of, you know, pretty close to stock Navistar vehicles. The production intent prototypes that we mentioned for the purpose-built truck, We've targeted those with Navistar to start rolling off the line in 2024. We haven't specified yet, but they will be used likely for dual purpose, including revenue runs as well as doing all of the typical testing that you would expect in a pre-production phase. So hopefully that helps clear up sort of the cadence of what will happen this year, next year, and then into 2024 and 2025. That's helpful.
spk02: Thanks, guys.
spk00: Your next question comes from Dan Levy with Credit Suisse.
spk04: Hi, good evening. Thank you for taking the question. I want to go back to the questions asked earlier on the metrics. And I think we're all figuring out how to read into these metrics on a quarterly basis. But look at your cumulative road miles and the quarter growth there decelerated. It was 14% in the first quarter, down from 17% in the fourth quarter. I recognize that there's going to be some lumpiness and we shouldn't read too much into that, but maybe you can give us a sense of how we should look into the quarterly progression of these road miles, especially as you're focusing more on commercialization and I think seemingly narrowing the number of routes where you're doing serious work as opposed to a wider set of routes.
spk14: I think the actual miles are only part of the story. For example, we do have a lot of simulated miles as well. And all kinds of simulation does not really reflect in the miles. For example, we have hardware in the loop simulation. All these kind of evaluations are progressing. And I think miles only tells you part of the story. So my recommendation is don't really look too much into that. And I'll let Pat answer the rest of it.
spk11: Yeah, I mean, Dan, just one point on the math around it, too, is that we're doing this with a relatively flat truck count. The new trucks that we are adding into this are largely going into testing operations. Testing operations are typically running a very specific task to test very specific functionalities. So the overall progression on the additions to the cumulative road miles have been fairly steady over the last couple of quarters. And to the point Shadi made, it's not about trying to grow the cumulative road miles just for the sake of that metric. It's really an output from a confluence of a whole number of different objectives that we're trying to accomplish in developing this technology.
spk04: Got it. Thank you. And then just the second question, I want to follow up on the press releases. you put out about six weeks ago on the exploratory process for your Asia-Pacific business. Maybe you can just give us an update on where that stands. And broadly, maybe you can refresh us on how you're allocating resources between the U.S. and China and whether you think it's still possible to concurrently develop autonomous trucking in both regions or whether it makes or sense to purely focus on the U.S., and I know you have operations in Europe as well, but just how you think about the regional focus these days. Thanks.
spk14: The regional focus, definitely we are U.S. first U.S.-centric company. That is the first thing, because I think in the U.S. we have the best policy to commercialize autonomy, and this is the whole company's purpose. And in terms of the possible fundraising, I'll let Pat to answer that.
spk11: I think just as a refresher, Dan, from when we put the press release out, first of all, I'd emphasize that it's a preliminary process. It's something at an early stage, so we don't have a lot of detail to share yet. But the rationale behind exploring a potential subsidiary-level transaction for our Asia-Pacific-focused businesses is, Is really just seeing a financial arbitrage opportunity that could potentially be beneficial to us in discussions with market participants. We think it is likely that there is relatively minimal value ascribed to our Asia Pacific focused businesses and our stock price today. We do see a great deal of intrinsic value in our Asia Pacific focused businesses. And we've also seen that there are other pools of capital or market participants that would ascribe value to our Asia Pacific focused businesses. So we're not making any commitment to taking any particular action or any particular type of transaction. But we do think it's worthwhile for us to explore that. And we think it is potentially a path for us to unlock financial value for the company. I'd say just one other thing that it's important to note is from a CFIUS perspective, we did put out our press release with all of the material terms of our national security agreement with CFIUS. I want to be clear that there is no action required around our Asia Pacific focused businesses from a CFIUS perspective. So this is purely looking to unlock financial value that we don't think is reflected in our share price today. And again, just it's a preliminary process. As we have more, as we move through this, we'll certainly make appropriate updates to the market as we go through that process.
spk04: And just to be clear, none of this is being spurred by, I guess, additional capital needs in the U.S. This is purely because you see a financial opportunity, not because if you're in a need for additional capital,
spk11: Well, I mean, I do think, Dan, you know, it's probably premature to know exactly what the transaction would bring to us and exactly what it would look like. Certainly, there could be opportunities where we could fund some of the investment needs in the Asia Pacific-focused businesses with a separate pool of capital. And that would, of course, have an impact on the cash burn on our resources at the parent company level. But I think it's premature to speculate around that. It is one potential benefit that could come from this and certainly a lever that could provide additional runway on our balance sheet.
spk04: Great. Thank you.
spk00: Your next question comes from Brian Ossenbeck with J.P. Morgan.
spk12: Hey, afternoon. Thanks for taking the question. So I just wanted to get maybe a little bit better understanding of the partnership with with Loadsmith, you know, what they plan to do with the 350 trucks you have there, and then just maybe a bigger picture in terms of your own TMS when you have your own capacity, you know, how you're going to connect into others. I think it would be helpful if you can just kind of outline where you are in that process and whether or not this partnership with Loadsmith is part of that or something separate.
spk11: I'll let Pat answer that question. Hi, Brian. So I would say from Loadsmith, Obviously, a company that's been pretty innovative for those that know it in the space. I think with a lot of different partners here, they are all seeing autonomous trucking as a new form of capacity that's coming into the marketplace and a way not to replace the existing capacity that's out there, but really a complementary technology. And I think the partnership with Loadsmith is certainly one that is adhering to that general philosophy. We do have, as you noted, an oversight system. The purpose of that oversight system is multiple. It is to track where our vehicles are and to provide support to those vehicles while they're in operation, but also to communicate with the various shippers, carriers, and others that are using the autonomous freight network. And we know that that's a complex process. So being able to tie our oversight system into the systems of someone like Loadsmith certainly makes it easier for us to plug the capacity that Loadsmith has reserved into their operations as well. And we expect to share more details about this over the coming quarters as we get further along in the partnership as well.
spk12: Okay, thanks for that. Makes sense. Maybe touching on the supply chain and the maturity of it, are there any areas you feel like you still need to invest in, especially now that you've gone through more of the redundancy testing with the driver out program? You can bring us up to speed on where you kind of are right now and what may be some of the challenges that you're still facing above and beyond just the obvious one with the OEM trucks.
spk14: Yeah, sure. I think in one word, the devil is in the details. So you have to crack the shell and just lay down thousands of items in the bill of materials, try to identify one by one and contact the suppliers to understand what is ready, what is not ready. And to give you an example, in the past, we found the biggest gap here was the domain controller, the computing unit in the system. And none of the domain controller in the system would actually – be sufficient for our purpose so we have to build it by ourselves so that's why earlier this year we announced our partnership with nvidia and we're building this domain controller by too simple of course not manufactured by too simple but designed by too simple and this is our attitude in terms of bridging every single gap that we see and try to deliver as soon as possible And apart from that, there are some other things like redundant steering, redundant braking, and as we all know, the LiDAR industry, the whole thing is new. So we're all racing towards the – basically everyone is having their full speed towards the earlier production timeline, but things could happen in this.
spk12: Okay. I appreciate your time. Thank you.
spk00: Your next question comes from David Vernon with Bernstein.
spk06: Hey, good afternoon, everyone. So a question for you on resourcing, you know, 4Q to 1Q headcount, R&D headcount, relatively flat. Is that going to change as we move through the year, looking at expanding into the operations into Texas and things like that? Is it right to read into that that more resources are not what you need to kind of accelerate the path towards commercialization?
spk14: I think one thing is that you can't have 10 women to born a child in one month. So the acceleration of talent is certainly not going to be exponentially growing in the future. That's what I see. And also, at the same time, we are very capital efficient so that we do not want to waste time on anything. But we do want to tell you that there is going to be a steady growth of our talent and expenditure in terms of research and development because we always feel that accelerating the development is our number one goal. and we'll take it what it takes.
spk06: Okay, so the plan will be then to grow those numbers as we go through the end of 23?
spk11: Yeah, hey David, it's Pat. So just a little bit on the figures. Yeah, we do expect to see modest headcount growth. We obviously saw pretty significant headcount growth as you looked at where we were in 2020. and the heads that we added in 2021. I would say, and you've seen this in the first quarter, some significant deceleration in both the headcount growth, and that translates also into the financial metrics around our spending and investment. So I would say it won't be flat, but I think you'll see some deceleration. And we're going to be very smart from an ROI perspective on how we invest in our people, our non-compensation spending, and essentially we'll be balancing and really closely monitoring our headcount growth, our spending, but obviously we won't sacrifice our ability to hit the milestones, which we think are pretty aggressive, for the next 18 to 24 months. We're going to make sure to invest at a level that will allow us to hit those milestones.
spk06: All right. Thanks for that. And then maybe just as a quick follow-up, Are you guys planning to do anything around stock-based comp, just given kind of where the stock is? Are you worried a little bit about retention? Are you going to be thinking about maybe needing to have to chew up some of the key employee stuff? I'm just trying to get a sense for whether there's some pressure on headcount right now being created because of the performance of the stock.
spk14: Yeah, I think the stock-based incentive is pretty common in all companies like us. A similar principle also applies to us. We wanted to keep the top talent. And, of course, with a relatively lower stock price, giving them a meaningful amount of stock is the best way to keep them.
spk11: Yeah, I think, you know, we'll keep, you know, we're not making any changes to the stock-based compensation charge. I think that'll be inclusive of regular programs, but we're also making sure that we're investing strategically around particular retention needs in a competitive market dynamic. So no change to the specific stock-based compensation guidance figures, but it's certainly something that we and our board of directors are focused on, on retaining our top talent that's Regardless of the stock price environment, this has been always something that we've had to deal with, whether it's competing with much larger companies. And certainly, the stock-based compensation and the cash compensation is one element of it. The mission of the company and the ability to work on groundbreaking technologies has always been a really attractive recruiting and retention tool for us, and it continues to be in 2022. All right. Thank you, guys.
spk00: Your next question comes from Alex Potter with Viper Center.
spk10: great thanks very much guys um so i was wondering i don't know the extent to which it's possible to quantify this uh because i know you have a lot of costs associated with chase vans and things like this that make it so that maybe these cost per mile figures that you're achieving right now uh maybe aren't perfectly apples to apples versus what they will be several years from now when you're in sort of pure autonomous mode but if you correct for all of that Are there any numbers that you can give us in terms of cost per mile in your real world runs that give you confidence that you're on the right sort of downward trajectory for that metric?
spk14: Yes, we will give you a very detailed analysis next week in Tucson for Analyst Day. And I think maybe in here I can give you some very top level overall feeling of this. I think there's a misconception that a lot of people feeling that autonomy by removing the driver, you get all of the profits from the driver's cost. That is untrue. And the maintenance of the autonomy system is significant, and a lot of people have overlooked that part of the cost. But that part of the cost is really the inevitable way for us to go until we reach commercialization, and we're all in for that goal.
spk10: Okay, great. We'll look forward to getting some of those numbers next week. I guess the second question that I wanted to ask about was, related to the NVIDIA partnership that you were just mentioning. I know it was about several months ago when you disclosed the relationship to begin with. Any update you can give there regarding milestones or how the relationship has been progressing and the pace of the development so far? Is everything more or less tracking in line with what you had originally envisioned? Thanks.
spk14: Yeah, I just wanted to remind you that we're still in the very early stage of a multi-year development. And so far, so good. Everything is on track. And we're very happy that we have this collaboration in our pocket because we have actually developed a lot of things that have to be done by TuSimple and you can't find anything or has to be fulfilled, but you can't find any substitute in the market. So that the decision of going this path is
spk05: looks more and more to be the the wide position okay great thanks guys your next question comes from george genericus hey guys good afternoon thanks for taking my question uh first i'd like to ask about collaborative mapping and any additional detail you could share and how that's a differentiated offering relative to some of your competitors
spk14: Yes, of course. I think as we're entering from the safety phase, The first phase is safety, and we're entering from the safety phase to the efficiency phase. We realized that, you know, the autonomy technology should not be developed as a single vehicle, but should be developed under the grand formula of operating the entire fleet. And this aspect of collaborative mapping is really like sharing one vehicle's perception system with the other one and better facilitating the capability of the motion planning by adding additional information. And we believe this is a very advanced technology.
spk05: Got it. Thank you. And just to clarify an earlier point, questions around the Navistar relationship and supply chain. And it sounds like you're saying that the industry's timeline to commercial deployment has shifted a little bit to the right based on, you know, issues with redundant steering or braking or some or a multitude of technical issues that really haven't been solved yet. Is that a fair assessment?
spk14: Yes. And I think Navistar and ourselves, Navistar is a great partner to ourselves, and we on both sides are having very deep collaboration on this. We are bridging many, many gaps that were previously existed looking like insurmountable gaps, but we actually bridged most of them. But, you know, there are still certain things in the world that we cannot control. We cannot view the LIDAR by ourselves in health or the redundant steering by ourselves. So that's why a lot of these types of things are, yeah. But, you know, the other thing is that I do not really see any technical breakthrough in this kind of delayed waiting time because all of these are pretty mature technologies. They just need to go through different, you know, engineering development gates to be able to launch to the automotive grades to be integrated into the system. And it's really about time, not about anything that we're waiting for another physical level innovation. Thank you.
spk00: Your next question comes from Adam Raskowski with Bank of America.
spk15: Hi, Adam Raskowski. Thanks for taking my question. Following up on the Warner partnership, is there a timeline here, any major milestones you are targeting? And, you know, have you been able to quantify any, you know, dollar impacts to safety, fuel efficiency, you know, that can be gained from successful implementations?
spk14: Yes, we actually have quite a bit of analysis, quite an in-depth analysis into that. We'll see you next week in Tucson to give you a full disclosure of that.
spk15: All right. Can't wait. And then on the reservation pipeline, so 500 out of this quarter, can you just talk about what the pipeline looks from here and does a partnership with you know, a player like Lowe Smith maybe broaden your view on your go-to-market strategy and different players that you can target, essentially?
spk11: Yeah, I mean, it's Pat. I would say that we've seen really robust appetite from folks throughout the freight ecosystem to understand how they can incorporate AV trucking into their models. Certainly, we've seen folks that you may not initially associate with Um, you know, having assets, like a semi truck in their operations as a principal focus, make reservations and be part of it. So I think the applications are quite broad. And people are really thinking outside of the box about what the freight ecosystem will look like as this technology proliferates. So I think it's probably one indication of the breadth of the types of discussions that we're having and the momentum that we have with the commercial base today. has never been stronger. So we're really gratified for our existing partners and excited to bring on new partners. The last piece I would just say is that we're being very disciplined and that with our reservation partners, it's a two-way commitment to work together. And we want to work with partners that are committed to not only making a financial commitment and having the resources to deploy this technology, but making sure that our near-term goals around testing and freight operations are aligned such that we can fulfill our obligations to the partner, too. So we're trying to be very, very disciplined about reservation partners as opposed to doing anything to just grow the reservation number itself. Got it. Thank you.
spk00: Your next question comes from Colin Rush with Oppenheimer.
spk08: Thanks so much, guys. Yeah, as you get into this next layer of mapping data and integration of that data, could you talk about the cadence of learning cycles in which you're pulling out of the system and kind of where there might be some blind spots or some unforeseen strengths in the system so far? So the question's really about, too, about pacing and learning cycles and secondarily about where you need to to improve or, you know, really feel pretty good about the system so far.
spk14: Can you repeat the first question? I think there's some noise. I didn't hear it clearly.
spk08: Okay. Yeah. I mean, what I'm asking about is the pace of the incremental mapping data and that integration into the system and the learning cycle related to that integration and what you're seeing in the system. You know, how fast is that getting integrated? And then secondarily, you know, where you're seeing some strengths and weaknesses in the system.
spk14: Yes. So there are several things. This is pretty technical. On one hand, for example, one vehicle saw a police basically having a partial lane closure of the road. Then the method will be transmitted to our cloud-based data center. And in a number of minutes, all of the truck will be aware of that. So this process is like a first automatic process and then human verification and then broadcasting. So in the number of minutes for this aggregated map, aggregated real-time sharing map. And the second is that the lesson that we learned from this is that we have all different types of maps. For example, every truck actually is – when they're driving on the road, not only serves as the purpose of – of using the map, but they are also validating the map. And that's the first step of us. But after that, we realized that, you know, if you have the map being updated, but the truck has to go back to the bay in order to update the whole thing, that takes several hours. And as I said earlier, the goal for mapping is to reduce latency as one of the most urgent work not the version the most important matter and also maintaining high accuracy so this is basically an effort of reducing our mapping response from hours to minutes that's it probably no i'll take the rest offline just in in love time thanks so much your next question comes from todd fowler with key bank capital markets a great thanks and good evening
spk03: There's been a couple of comments made about improving utilization on the fleet, and I'm just kind of curious what are some of the levers you can pull to improve utilization in your model right now and how quickly you can kind of see utilization ramp up over the next couple of quarters.
spk11: Yeah, I think we continue to focus on it. I would just say, Todd, that we're We have some different constraints than a traditional truckload carrier. We're hauling freight for strategic partners. We do that in autonomous mode wherever possible in order for our customers to see the technology progress and to be part of the development. So we are pulling some of the utilization up wherever we can. The levers are the typical playbook of trying to be as efficient with the assets as possible. And certainly we've had some headwinds with COVID and some of the drivers being out during the early part of the first quarter that weighed on some of the utilization. But I think we're pretty happy with what we were able to do from a utilization perspective and see some path for modest utilization growth for the rest of the year.
spk03: Got it. Okay, that helps. And just as a follow-up, Pat, I think you made the comment that there was no change to the guidance metrics. I'm assuming that that is the case with the CapEx. However, CapEx was pretty light here in one queue, so I just wanted to confirm no change to CapEx. And then if you could just remind us what you're going to be spending the CapEx dollars on this year, that would be great. Thanks.
spk11: Yeah, no change to the CapEx. Obviously, the spend in the first quarter was relatively light compared to our guidance, but we do expect to see CapEx ramp up over the coming quarters, particularly as we start to make some investments in Texas around the driver out operations. So some of the terminal locations where we have We'll be talking more about this. We talked about the rider locations, but there will be incremental locations where we'll be investing some improvements on parcels of land to support the driver out Texas operations. That's one that I think is fairly significant. And then there will be the usual type of corporate CapEx as we expand and invest in things like office space and other facilities as well. Got it. Thanks for the time.
spk00: Your next question comes from Scott Trout with Wolf Research.
spk01: Hey, thanks. Afternoon, guys. Apologize if I missed this, but can you just go through the rationale again on why miles mapped are flat and why they're going to stay flat from here?
spk14: Yes, because we have a finite number of trucks hauling freight, and that freight is our current supported AFNs. And we do not have a plan to like a 10x or 100x of our AF in this year or next year, right? And by that, we have to be conscious that the goal is not to prove how quickly can we map the future routes. It's more about, okay, we map this route and we utilize on this route. We operate on this route. The total amount of mileage on our mapping, staying flat is a natural result that we do not need to prove anything further. But on the other hand, the technology side, the lower latency and more functionalities are the things that we need to focus. So that's why you can see the miles being flattened, but I think miles is not the only metric for this game.
spk11: Scott, it's Pat. I'll just add on to that. In 2020 and 2021, being able to show that we could expand our network and be able to run more autonomous miles across the Sun Belt was certainly a strategic aim for us. And I think we showed that we could do that efficiently. For 2022 and 2023, as we try and expand Driver Out into Texas, It's much more about the density of the network and the penetration of full driver out autonomy. So from that perspective, adding new routes throughout the southeast for autonomous operation doesn't really fit with what we're focused on over the next year or two. What we're really focused on is being able to go from doing just the single route of driver out in Arizona to be able to add new routes and be able to expand the ODD in the ways that Shadi was talking about earlier. And so that's really where our focus is. At some point, we will start expanding the AFN again and starting to expand the reach of our driver out operations. But for the next year or two, it's not really a major focus for us. We're really focused on the density and the penetration of the driver out operations.
spk01: Okay. And so you don't think that this has an impact on the, you know, middle part of the decade revenue ramp?
spk14: No. And if we need, we can always easily map new routes without a problem.
spk01: And then just secondly, the headcount was also flat. How should we think about headcount and SG&A from here? Do they sort of level out or do we see further increases in headcount and SG&A the rest of the year?
spk14: Definitely. I think you will see a steady increase, but not exponential growth of the technology team. Because on one hand, we have to be very cautious in hiring new people and be capital efficient given the general economic situation right now. But on the other hand, we're not slowing down in hiring.
spk01: Where would you like to see that headcount get to by the end of the year?
spk11: So we're not providing any specific guidance around that, but I think you will see some modest growth throughout the year, Scott. So it won't be essentially a doubling, which is what you saw in 2021 relative to 2020. It'll be a much slower pace of growth. But I think you will see some modest expansion of that. And the headcount being flat, you'll notice we had a restructuring charge during the quarter, too. Some of this is by design, as you would expect with a young company that's working on a technology like ours. We have done some some workforce restructuring to better optimize the way that we go about developing the technology. So that also is, you know, partially the impact of where you saw the flat headcount quarter over quarter this quarter.
spk01: Okay. Thank you, guys. Appreciate the time.
spk11: Thanks, guys.
spk00: This concludes the Q&A session. I'll now turn it over to the speakers for closing remarks.
spk11: Thank you everyone for joining our call, and we look forward to continuing our dialogue. At this point, we'll adjourn the call.
spk14: Thank you everyone.
spk11: Goodbye.
spk00: This concludes today's conference call. You may now disconnect.
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