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spk08: Good day and welcome to the TuSimple third 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. Emmerman, please go ahead.
spk12: Thank you, Tawanda. Good morning, and welcome to our third quarter 2022 earnings call. We appreciate your flexibility, especially during earnings. While we would have preferred to host the call yesterday, logistically, it just wasn't possible. With us today are Two Simples Interim Chief Executive Officer, Erson Humer, Interim Chief Financial Officer, Eric Tapia, and the Chairman of Two Simples Board of Directors, Brad Buss. We will first review the operating and financial highlights, and then we will take questions. As a reminder, Two Simple Shareholder Letter and a replay of this call will be available 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 in 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 future events or results due to a variety of factors. Please refer to the risk factors detailed in our SEC files. 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 gap measures. I will now turn the call over to Brad to begin.
spk13: Thank you, Ryan. Hi, my name is Brad Buffs, and I am the new chairman of Two Simple's board of directors. I've been a member of Two Simple's board since prior to the IPO. Before becoming chairman of the board, I served as the lead independent director, as well as the chairman of the audit committee. Before we go much further, I want to provide a brief update and changes in the company. We recently announced a leadership transition connection with an ongoing independent investigation initiated by the board's audit committee. That led to the board to conclude that an immediate change of CEO was necessary. Accordingly, the board removed Xiaodi Hu from his positions as chief executive officer, president, and chief technology officer of the company, as well as being replaced as chairman of the board of directors. This necessary departure became effective Sunday, October 30th, 2022. We also appointed Ursa Neumer, who has been our executive vice president of operations as interim CEO and president while we conduct a search for a permanent CEO. I want to be very clear that safety, transparency, and accountability are critical values to our company, and we take these values extremely seriously. Based on the ongoing investigation, the company also believes that during 2022, in conjunction with the company's evaluation of Hydron as a potential OEM partner, the company shared confidential information with Hydron without relevant nondisclosure and other cooperation agreements in place. This information was not brought to the attention of the Audit Board Government Security Committee. As of the time of this call, the company believes that based on information obtained in connection with an ongoing investigation by the Audit Committee, during 2021, certain employees of the company spent paid hours working on matters for Hydron without disclosing this to the Audit Committee as required by company policy. The company believes that such paid hours had an estimated value of less than $300,000, but they are above the value required for an SEC disclosure. Both of these matters are detailed in our Form 8-K filed with the FCC yesterday, October 31st. The decision to terminate the CEO is independent of the Wall Street Journal article and was made in connection with an ongoing internal investigation launched by the Audit Committee in July. The independent directors unanimously determined that it was necessary and in the best interest of the shareholders to terminate Jadejo Furthermore, we lost trust and confidence in Jaudy's judgment, decision-making, and ability to lead as the company's CEO. You also may be aware that Jaudy has been making certain statements on various social media platforms. We would like to make it crystal clear he is doing this as an individual, not as a board member. He is not authorized to make any statements on behalf of the company, and we are disappointed in his lack of judgment and decision-making in making these unauthorized statements. Again, I want to be very clear, the board and the management team take the responsibilities of this company under our CFIUS agreement extremely seriously. That includes protecting the data that is at the heart of this company, and there will be accountability for anyone who breaches this trust. But we also know that the technology developed at Two Simples works. We have proven it through the world's first driver-out autonomous freight test runs, and we are on the path to commercialization. My commitment to you is this, we are going to make the hard decisions that set this company on a trajectory towards long-term stability and long-term success. This concludes my prepared remarks related to the CEO transition, and due to the nature of this situation, we will not be able to take any further questions related to this subject only during the Q&A. Thank you for your understanding. We'll now hand it over to Erson, who will discuss some highlights for the quarter and enhancements we're making to our AFN operations. And then finally, Eric will walk up with an overview of our financials. Thank you. Erson.
spk05: Thank you, Brad. Good morning and welcome to our third quarter earnings call. Today, I'd like to start by acknowledging how difficult the past few days have been for all of our stakeholders, for our investors, employees, and partners. We understand the concern and uncertainty that these events have caused, and I'm humbled to be entrusted with helping to lead the company at this critical juncture. I look forward to working closely with the board and management to continue on our mission to provide reliable, low-cost, great capacity while setting a new standard for fuel efficiency and safety. Today, I'd like to highlight what we are doing to build transparency on safety with our stakeholders, discuss additions we have made to the ASN, provide an update on a key partnership, and finally discuss key initiatives we have in place for the rest of this year and next that will move us towards our goal of initial commercialization in 2023. I will then hand it over to Eric who will walk through the financials. to put safety at the core of everything we do. We also understand how important it is for us to be transparent and build trust with all of our stakeholders. This is essential in order for the industry to embrace all the potential benefits autonomous technologies can bring to the transportation market. Going forward, we will highlight the processes and initiatives we employ as we work to bring autonomous technology to the market. Additionally, I am pleased to announce we will be partnering with multiple independent auditors that are recognized within the industry to conduct audits verifying various aspects of our technology and operations from a safety perspective. These will include processes and procedures for our hiring, training, and on-road testing. While this is not a requirement today, we believe we are leading the industry with these audits. Our goal is to improve transportation safety for all road users by delivering the safest driver on the road. Ultimately, through safe engineering, testing and development, we have the opportunity to save thousands of lives every year. Over the last few months, we have had some exciting additions to our AFN as we continue expanding our presence in Texas. we signed a lease on 10 acres in South Dalma. Phase 1 of this terminal development is expected to be completed in the first quarter of 2023, and this terminal will play a key role in supporting our capacity plan in Texas. The location is right off I-45, a major interstate connecting Dalma to Houston. And in early October, we signed a lease on 11 acres in San Antonio. With the addition of these two properties, we have the assets we need to support our operations in the Texas Triangle when the safety case is validated. Adding to our track record of industry firsts, this past quarter, our partners Kenya announced a fully autonomous run powered by two simple technologies that transported commercial goods in regular traffic conditions between logistics hubs. The truck traveled about 300 kilometers in Sweden with the first and last mile being handled manually. This was Europe's first fully autonomous transportation of commercial goods, and we are extremely proud to partner with Tracom to mark another milestone towards advancing autonomous technology. Next, I'd like to provide you an update on our program with a US class one railroad. Last quarter, we discussed unplanned road construction that caused us to have to rework a route in Arizona and adjust the destination point. After much consideration, both we and our partner have decided it makes the most sense to relocate this freight move from Arizona to Texas. Texas is an important freight market for both TuSimple and our partners, and given the terminal additions to our AFN, we now have the capacity in place to support our plans for the foreseeable future. We continue to work with this partner and will continue to update you on the progress. As we consistently stated, cost per mile reduction is a significant focus for us. A major aspect of this is removing the support vehicles which require improved reliability of key components. We are focused on upgrading our entire fleet to consist of the most updated hardware platform running a consistent version of our proprietary software. This does require us to pull trucks out of the fleet to undergo the upgrade process with the expectation that we will complete the entire upgrade by the end of 2020. There are two main benefits to this upgrade. First, a uniform fleet of trucks provides us flexibility in how we utilize the trucks for testing and revenue generating miles. More importantly, however, We expect the upgrades will result in a more ruggedized and reliable autonomous system, which is a key requirement in removing the support vehicles and providing substantial opportunity to reduce our cost per model. With these upgrades, we are utilizing a greater percentage of hardware that is automated or near automated grade. This is the result of strengthening internal capabilities as well as a maturing supply base. A critical component of our improved internal capabilities is our recent expansion in Tucson. This gives us the capability to design and develop automotive grade components on site. And to ensure that our autonomous systems last for many years on the road, we have added testing capabilities for factors like heat, cold, and vibrations that will help us validate the expected failure rate of certain components. We believe these are key capabilities that will lead to a more durable autonomous fleet. Next, I'll discuss some exciting developments in our operations. I'd like to start by highlighting changes we have made to our AFN operations. Historically, our revenue fleet was run separately to work with our transportation partners and introduce them to our autonomous technology, while our test fleet was focused on advancing our technology and drive out milestones in Arizona. Now that we have reached our initial drive-out milestone, I began the process of combining our revenue and test fleet into one autonomous operations group. The result of this will be that we have one fleet of trucks capable of running either tests or revenue-generating models with the same state-of-the-art AV software and hardware. This gives us the flexibility in how we utilize the fleet for servicing our customers as well as for maturing the technology. For the next couple of years, we will continue working to reduce cost per mile. Our focus on generating revenue miles will concentrate on a few key lanes in and around the Texas Triangle. In the short term, this has the potential to lead to a year-over-year decline in revenue miles. However, we believe it is the prudent decision as we expect to move down the cost curve, enabling our technology to become commercially viable more quickly. We are focused on winning a meaningful share of the $800 billion US market. And now I will hand it over to Eric to discuss the financials.
spk06: Thank you, Roshan. Let me start with truck reservations. This quarter, our reservation count held steady at 7,500 trucks. However, after the quarter closed, we did receive a 100-truck order from a new partner. We are pleased with the continued interest we see from existing and potential partners. Now, shifting gears to our financial results for the third quarter of 22. We reported $2.7 million of revenue in the quarter, a 49% year-over-year increase, and 4% sequential. The year-over-year performance was primarily driven by higher revenue amounts from a larger fleet and higher utilization. The sequential performance, though, was primarily driven by better utilization of our revenue. While we can clearly perform in line with our four-year revenue guidance, It's important to highlight Erson's previous comments regarding revenue models. We believe the right action for the long-term health of the business is to operate as one autonomous commercial operation with the goal of bringing our technology to market. That said, as we continue to operate the fleet and gradually shift to the Texas Triangle, we expect near-term revenue as we later focus on commercialization. Moving to expenses, we spent $86 million on total R&D this quarter, including 17 million of stock paid compensation for SBC. This compares to 85 billion in the same period last year and essentially flat compared with the second quarter of 2022. Excluding the impact of SBC, R&D increased 8% sequentially as we continue to invest in our technology, R&D assets, and core tech talent. We will continue to invest in commercialization of our world leading technology and key talent while managing our R&D dollars as efficiently as possible. On the SG&A front, we spent $31 million during the period, including $6 million of SBC. This compares to $30 million in the same period last year and $22 million in the second quarter of 22, or up 41% sequentially. Excluding the impact of SBC, SG&A was up 32% sequentially. As a reminder, in the second quarter of 22, we had favorable accounting true-up of $4.4 million. Excluding this item, SG&A was up 7% sequentially, primarily due to higher legal costs in the third quarter, partly offset by the impact of several cost reduction initiatives. Our loss from operations was $120 million in the third quarter of 22, up 3% versus the same period last year, and up 8% sequentially. Our adjusted EBITDA loss in the third quarter of 22 was $94 million, up 16% versus the same period last year, and up 13% sequentially. In the third quarter of 22, we had $4.8 million of capping, primarily related to truck-related equipment and hardware, as well as facility investments in our ASM. We ended the third quarter of 22 with cash, cash equivalent, and short-term investments totaling approximately $1.07 billion, down 8% sequentially. I'll now hand it back to Ersin for a few last remarks.
spk05: Thank you, Eric. I know I speak for our entire team when I say that I'm excited about the opportunities that lay ahead as we continue to build our AFM in Texas. I expect that 2023 will be a big year for 2Simple, and I look forward to continuing to update you with our program. With that, we are ready to start the Q&A session.
spk08: Thank you. Ladies and gentlemen, to ask the question, you will need to press star 1-1 on your telephone. That's star 11 to ask the question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jordan Levy with Truist. Your line is open.
spk01: Morning, all, and thanks for taking my questions. Maybe first for Erson or Brad, there's clearly a lot of potential for distraction with the recent events in the organization and Now you mentioned you won't be taking questions on that, and this is more on kind of the business side, but I think it's important for shareholders to get a sense of your confidence and how you're all thinking about moving the company forward in the commercialization and strategy and timeline. So I just wanted to get your high-level thoughts there.
spk05: Thank you. Thanks for the question. First of all, our commercialization plan in terms of our strategy in 2023 is not changing with the recent changes given that we are feeling confident that we can hit all milestones that we have laid out and we will be updating you on these milestones in a lot more detail than the upcoming month thank you yeah and just to echo I think from the board's perspective you know we are really excited on the strategy I mean the people the technology and
spk13: the commercialization plan, everyone's in sync. It isn't going to change. IHRSA has been very involved in it. And more importantly, we got a very strong balance sheet. So, you know, I know you can sometimes see new CEOs, oh, my gosh, things are changing. But that is not going to happen. We're all very excited on the path we're on.
spk01: Appreciate that. And just a quick follow-up and a totally separate question. Can you all speak to the trucks that have been upgraded so far and how you've seen them performing from either a reliability or efficiency perspective? Like, have you seen any measurable improvements in utilization or the number of rescues or that sort of thing?
spk05: Yes. So we are currently upgrading, in fact, the first truck. in the newest upgraded hardware series and we haven't run that on the road yet when we do that and then we have updates we will update you update you we do expect that it will increase reliability quite a bit due to the components that are maturing in our supply base as well as the in-house parts that we are building ourselves in tucson that are automotive grade or
spk06: And just to add, and rest assured that in the upcoming months, as we are getting ready and compiling our 2023 financial plan, we'll share a lot more details and timelines around what is the cap expense on the upgrades, and when do we expect to have this truck circulation, because that will definitely be a key driver for our revenue target, which, again, we'll share at a future date.
spk01: Great. Thank you all for taking my questions.
spk08: Thank you. Please stand by for our next question. Our next question comes from the line of Ravi Shankar with Morgan Stanley. Your line is open.
spk09: Thanks. Good morning, everyone. So just to kind of touch on that point for the upgrade fleet, do you have all the components and the visibility and all the components that you need to do these upgrades? You touched on this point a little bit, but maybe is it a little bit of a chicken and egg situation where you need to do this comprehensive testing to finalize your ultimate vendors for some of these products and technologies, or do you do the finalization and pick the vendors first and then run them through these tests? How do you solve that chicken and egg problem?
spk05: Thanks for the question, Ravi. Of course, we have been doing vendor selection for quite a while right now, and we have been working with our supply base to ensure that the supply is as much ready as possible for these upgrades starting these months and rolling into 2023. So currently, we do not see big hiccups in terms of our supply for these upgrades, both internal parts that we are producing as well as the external ones. We have been doing tests in terms of which sensors we are going to use and different suppliers. And we started with a large number of suppliers, right? And then during these tests in the past couple months, we have been reducing that supply base down and then putting the orders in. So like I mentioned, we do not really expect big hiccups. But if that happens in later days for unexpected reasons, we will of course update you.
spk06: And just to connect it to the financial performance, so some of the upticks that you saw this quarter on CapEx is actually related to not only facility upgrades, but long-lead supply chain items for our trucks. So, you know, we are keeping our guidance of CapEx for the year, so you would expect to see more CapEx in Q4. Again, just to address the need to upgrade this truck, and a lot of it will also spill into 2030.
spk09: Understood. And maybe as a follow-up, again, I know you said you wouldn't take direct questions on this, but maybe there's a bit of an adjacency. Can you confirm if kind of Shadi owns any of the patents or technology that you guys use to operate? And kind of do you need him to sign off on anything? And also, can you confirm that the operations are expected to run exactly as planned for this week going forward? I know it's already days yet, but just trying to get the plan.
spk05: Thanks, Robin. So the patents are owned by TuSimple as the company. Of course, on some of these patents, Shoudy's name is listed as an inventor, but the patent rights are loaned to the company.
spk10: And operations are running as LEND. Correct. Yep. Thank you.
spk07: Thank you. Please stand by for our next question.
spk08: Our next question comes from the line of Nathan Ho with Bank of America. Your line is open.
spk04: Hi, this is actually Adam Roszkowski on for Ken Hexter at Bank of America. Thanks for taking my question. Could you talk a little bit about just retaining talent at this time? You know, maybe just, you know, with the kind of headcount in this quarter, you know,
spk05: flat for a reason or maybe just talk about that please thank you so just to address the flat headcount part for this quarter this was actually us making sure that we are very careful with our spending and financials on the other hand the talent retention side this has been a very significant focus for me in the past couple months I have been trying to be very connected and high touch with our employee base in our three main locations, San Diego, Tucson, and Dallas. We will keep doing this, and we will get some help from our board as well. We do not see a big turnover from this perspective, but of course our people are our biggest asset, and we will make necessary investments to keep that employee-based results. Thank you.
spk04: Got it. Thank you. And maybe just a follow-up. Could you talk about the truck count trajectory, maybe beyond 2023 on the commercial side and how you're thinking about it? How should we expect the ramp? Thanks.
spk06: So, I'll take that on. So, we're in the process of working through our 2023 plan. So, at this point, we're not ready to share more details until the fourth quarter call. But I can tell you that we are expected to finish the year with the 75 truck count that we mentioned. And we are thinking and addressing some needs on our supply chain. But again, we'll share more details once we share four-quarter results and talk about 23 plans in the next coming months.
spk04: All right. Thanks for your time.
spk07: Thank you. Please stand by for our next question. Our next question comes from the line of Brian Olsenbeck with J.P. Morgan. Your line is open.
spk11: Thanks. Good morning. I'm going to come back to the topic of safety. Can you give us a sense as to what you hope to accomplish from having the independent auditors look at these processes and perhaps why you need multiple of them? I don't know if that's for different regions or different aspects or specialties. And then specifically for Erson, the incident in April was classified as a human error on the last call. Just wanted to see if you agreed with that characterization.
spk10: Thanks for the question.
spk05: So let's first talk about the safety audits and the multiple potentially multiple third party auditors. As you know, We have been very engaged in the last couple months with our stakeholders in terms of opening up and making them understand our processes from a safety perspective as well as the technology. These interactions have led us to understand that we can actually provide our stakeholders a lot more visibility as well as education in this area. We do want to do this from a third party perspective. What we would like to achieve is to both for ourselves as well as for our stakeholders get an independent assessment on different procedures as well as our different aspects of our technology. Now, using multiple, potentially multiple auditors, as you mentioned, it is because Different aspects of the technology or operations might require different expertise. And these different expertise sometimes come from different audit bodies. So it's not necessarily we would like to multiply the same audit process. It's more about different expertise is required for different parts of the business. On the April 6th event, we actually mentioned this in our interactions with the federal MIPSA and FMTSA as well, that it's not only a human error, but there is also software and system-related failures that had happened at the same time. So we have provided an update to the software to prevent these failures as well as the future of human errors, but just to close this, we actually never mentioned that it's just a human error from our perspective.
spk11: Okay, understood. Brad, I know you don't want to take direct questions on this, but I wanted to see if you could at least give us some context as to why the board lost confidence and trust in Jody and the firing was determined based on 8K to be without cause, even though there's an ongoing investigation. So a little hard to square those two. I wanted to see if you could give some clarification to that. And then secondarily, if you can just share some of the reaction of your stakeholders so far, you know, over the last 24, 48 hours.
spk13: Yeah, I mean, there's not really a lot I can add there. I mean, for cause, there's fairly high standards and materiality levels that generally go with that. So, you know, I would just probably leave it there. And then I think the confidence point is it's just a lot of little things, you know, that have came up. And we'll just go on from there. The key is, you know, I think we made a good, decisive decision and, you know, we're moving forward and nothing's changing with our strategy.
spk11: And any reaction you can share from your stakeholders and conversations there in partner safety, anything like that?
spk13: I mean, I mean, from my end of it, you know, there's been nothing significant. I mean, we've been pretty focused on the earnings and, Obviously, we're not pleased with the stock market reaction, but we are committed to moving the company quickly forward.
spk10: Okay. Thank you for the time.
spk07: Thank you. Please stand by for our next question.
spk08: Our next question comes from the line of Colin Roosh with Oppenheimer. Your line is open.
spk02: Thanks so much, guys. You know, I think we're all kind of getting after the same things. But on the customer side and those folks, you know, what sort of pushback reaction have you gotten so far? Obviously, it's going to come over the next, you know, period of time. But how much have you shared with them and what sort of feedback are you getting so far from those folks?
spk10: Can you repeat the question again?
spk02: Sure. In terms of the organizational changes that you've just made, can you comment on customer responses and engagement at this point? Have you reached out to everyone, and what sort of feedback are you getting at this point?
spk05: We have reached out, and we are having active conversations.
spk10: Okay.
spk06: No, and certainly, you know, all our key partners are very important to our trajectory. So we kept them appraised. And again, we believe we convicted our mission and what we're going to do as a company, and we convey that to our customers and our partners.
spk13: And again, the key for them is that, hey, you know, our strategy isn't changing, right? So we're letting them know that very clearly, hey, level very, very closely. So we're not anticipating anything to change from a strategic standpoint with the customers or the partners.
spk02: Okay, that's helpful. And then I guess, Brad, you've been involved in some boards that had to go through some tough situations. In terms of looking at the scope and scale of what's going on with Too Simple, can you give us a sense of like you know, how quickly this might get resolved. You know, obviously you're going to find the right person as the new CEO, go through, you know, a whole process on the CFO as well and get this right. Does this feel to you like this is kind of a, you know, three to six month process or is this going to be a little bit longer road for the company?
spk13: You know, they're always so hard to tell. I think, you know, we've made very good progress on the investigation. We're running a great process Again, the key is it's not like there's a big disagreement on strategy. That is the biggest thing that sends companies sideways. We're very aligned. It's really just getting a couple people in place, and I think away we go. We're hoping to have things wrapped up very quickly.
spk03: Okay. Thanks a lot, guys.
spk08: Thank you. As a reminder, ladies and gentlemen, that's star 1-1 to ask the question. Please stand by for our next question. Our next question comes from the line of Rajvendra Gill with Needleman Company. Your line is open.
spk03: Hey, guys. Good morning. This is Mick Doyle on behalf of Raji. Could you give us some more detail around the ramp of the self-driving project specifically the timeline for the removal of the support vehicle. You had talked about kind of second half, 23, and then on the call you were talking about the hardware upgrades that are ongoing. I'm just wondering if that's pushing that out at all or any update there would be great.
spk05: Thank you. The removal of the support vehicles is something we're actively working on in parallel with the current hardware as well, because as you might imagine, there are technology related parts of this that are not necessarily only the hardware. At the same time, the hardware upgrades are continuing in parallel as well. So we do expect to hit both milestones in 2023. We will update you on the more specific dates in the upcoming months.
spk03: Okay, thank you for that. And then for my second question, could you talk about why you moved your partner from Arizona to Texas? Any detail there? I mean, off the top of my head, it just makes me think that you're just focusing more on Texas instead of kind of expanding geographies. So any detail there would be great. Thanks.
spk05: So the reason to move to Texas was driven by both our interest in the Texas Triangle and commercializing in the Texas Triangle and a few lanes around it, as well as our partners' existence and interest in Texas as well. So because of this commercialization goal, we did want to move the target into Texas so that we can move towards commercialization while hitting this goal with the partner.
spk06: The key thing that we mentioned in the letter is we're choosing depth over breadth, right? I think the Texas Triangle allows us to create lane density on a commercial scale, right? And that for us is quite critical to really prove our technology in real potentially scalable miles. So, you know, things like beyond just the truck and the hardware, think about also the ASN and the network, right? And the infrastructure that comes with that, right? With a dense range, we'll be able to really scale maintenance operations, really scale all their tentacles that really support the ASN, right? Versus one-off routes, right? So for us, we think that that density, that depth in the infrastructure and depth with customers
spk10: could allow to reach our commercialization goals a lot faster. Next one. Thank you.
spk07: Thank you. Please stand by for our next question.
spk08: Our next question comes from the line of Joseph Speck with RBC Capital Market. Your line is open.
spk14: Thanks, everyone. I was wondering if you could update us on the potential sale of that China business and whether any of these latest developments you think complicate that potential outcome.
spk06: Our process is progressing, but we have no material updates to share at this point.
spk13: The change is not going to impact any of the decisions, just to be clear, you know, that we have in process.
spk14: Okay. And then just, I guess, one quick point. Like, the release yesterday indicated, you know, all the guidance was reiterated. I didn't see any of that in the shareholder letter. Maybe I missed it. But can you just sort of confirm that and sort of – you know, all sort of the data points from the last shareholder letter are the same. And maybe if we could sort of just give a little bit of a peek into 23, you're burning about, you know, 100 million a quarter. It would seem like that might need to step up as you sort of continue to progress and ramp on commercialization and maybe even some
spk06: um some some cost for um you know retention but wanted to sort of get your high level thoughts as sort of how to how to think about that for next year okay so high level we stand by our our revised guidance that we shared in q2 um as we said in the letter um in terms of expectation for 23 uh as i mentioned earlier we were not um uh based on our status of reasonable plan we're not ready to share more until we share fourth quarter results um you know i would say um same trajectory that you've seen over the last quarters, right, where we are focusing on deploying capital for the most important milestones and keeping discretionary costs at bay. You can expect that same thing just at the end of 2023, but we'll share numbers in the next couple of months to discern that. Okay, thank you.
spk07: Thank you. Please stand by for our next question.
spk08: Our next question comes from the line of Jeff Orsborn with Cohen. Your line is open.
spk00: Good morning. Just a couple quick ones here on the move from Arizona to Texas. Is that a customer that's a material piece of revenue, and do we need to wait for the AFNs to open up in both Dallas and San Antonio to see that resumption of growth?
spk06: No, this is not driven by any customer driver. Again, it's more about what I mentioned earlier. The Texas Triangle presents a great way for us to drive lane density, given the volume and depth of some existing routes. But it's not based on customer preference or selections.
spk00: Got it. I know you're not giving guidance for 2023, but assuming you enter the year with 75 trucks that you mentioned before, how do you weigh the cadence of updating those or upgrading those versus revenue versus testing? And then assuming you're pumping the brakes on the testing side to some extent or not adding new trucks, are you doing more simulation in lieu of railroad testing? I'm curious how you would articulate that the tech is progressing without the actual testing cadence being at the pace that you maybe originally intended to.
spk05: Just to be clear about the question, are you asking whether this move from Arizona to Texas for this particular partner is affecting our testing capacity?
spk00: I'm not. I think you mentioned earlier that the revenue in 2023 could be down as you likely haul less for revenue. And so I just wanted to understand, it seems that you're adding fewer trucks next year as you're trying to minimize cash burn. So I just wanted to understand, are you doing more simulation in lieu of railroad testing?
spk05: Right. So there are a couple of reasons for this expectation. One of them is, of course, you mentioned the hardware upgrades. The hardware upgrades are going to continue for the most part of 2023. What that means is at any given time, two to six trucks will be in the upgrade bay, right? They're not going to be with the fleet. So there is a circulation from the fleet to the upgrade and then upgrade to be validated and then go back to the fleet. So that particular downtime for a continuous small number of trucks is one of the effective parts. The second effect on this is our merged operation of revenue and testing. What we are really focusing on is to bring our cost per mile down. And cost per mile is something that we have introduced in the annual estate back in May. And you might remember us talking in detail there. But we are going to keep updating you on this. We do think that this is a really important key metric for us for commercialization and the unit economics for this industry. So we are really going down the path to create more
spk06: visibility into commercialization and what the end goal is and therefore we are changing uh how we operate uh during this particular phase of getting to the initial commercialization and just to chime in i to answer your question about uh tech we foresee no slowdowns on our tech um again as we are upgrading trucks um but we will still focus on running the trucks um with the upgraded systems or current systems. So we don't foresee any slowdown, yes, on the revenue potentially, but not on the testing capabilities. In addition, you mentioned 75 trucks. Again, that's our expectation to finish the year. But we're right now on the market. We're trying to secure more trucks in our fleet. But again, we'll share more on our 23 plans. We potentially might have a higher count comes 23.
spk00: Great. Look forward to it. Thanks for the detail.
spk08: Thank you. I'm sure no further questions in the queue. I would now like to turn the call back over to Ersin for closing remarks.
spk05: Thank you all for taking the time to join us today. As I stated earlier, we understand that the last few months have been challenging for all of our stakeholders. We are committed to ensuring that we hold ourselves to the high standards, setting this company on a trajectory towards long-term stability and success, and hope to update you with our progress. Thank you. Pass forward.
spk10: We look forward to continuing to update you with our progress. Thank you.
spk08: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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