Good day, and welcome to the TuSimple fourth quarter 2021 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 James Mann, Head of Investor Relations for TuSimple. Mr. Mann, please go ahead.
Thank you, Lateef. Good afternoon, everyone, and welcome to our fourth quarter 2021 earnings call. With us today are TuSimple's President and Chief Executive Officer, Cheng Lu, and Chief Financial Officer, Pat Dillon. Cheng and Pat will review the operating and financial highlights, and then we will take questions. As a reminder, TuSimple shareholder letter and a replay of this call will be available later today on our investor relations website. This call is being recorded. If you object in any way, please disconnect now. Note that TuSimple shareholder letter, press release, and this call all 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 filings.
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 to comparable GAAP measures. I will now turn the call over to Cheng to begin. Cheng?
Thank you, James. Hello, everyone, and welcome to our fourth quarter earnings call. We have a lot of exciting developments to cover, so I'll dive right in. Since our founding in 2015, we've had a single vision of building the first to market scalable Level 4 autonomous trucking solution that would transform the freight industry. In December, we took a huge step in realizing our vision when our truck completed the world's first Driver Out semi-truck run on open public roads in an 80-mile terminal-to-terminal route. This is a massive achievement for TuSimple and a huge milestone for the industry. Since then, we have further shown that our Driver Out operations are repeatable. To date, we have successfully completed seven runs. The uncut videos of the seven completed runs are all available online. To recap, this is on a real freight route covering over 80 miles.
The route starts at a Union Pacific Railroad rail yard in Tucson and ends at a large distribution center in the Phoenix metro area, covering both surface streets and highways. There was no human beings in the vehicle, no teleoperation. Our autonomous driving system is in complete control of the vehicle during the entire time. The system was able to smoothly handle challenging driving situations, including emergency lane vehicles, cut-ins, non-compliant drivers, and construction zones. The truck is also able to enter into fail-safe operations should anything out of the ordinary happens. In fact, we did have one Driver Out run that triggered a minimal risk condition or fail-safe operations due to equipment failure in the chase vehicle. The minimal risk condition was triggered by design. The vehicle came to a controlled stop and further proved our safety case.
We fixed the equipment issue and completed six perfect continuous Driver Out runs afterwards. As part of our initial Driver Out operations, we put three safety precautions in place, all of which we will aim to gradually remove to show that Driver Out is scalable. First, we have a chase vehicle that follows and monitors the Driver Out truck. The chase vehicle does not influence normal operations and only has ability to put the Driver Out truck into a fail-safe mode as an extra layer of safety precaution. As we scale, the chase vehicle will be replaced by our centralized oversight system. Second, we have a survey vehicle that runs five to six miles ahead of our Driver Out truck. Given the distance, it does not impact operations or traffic, nor communicates with the Driver Out truck in any way.
We expect to remove the survey vehicle from our operations later this year. Lastly, there are Arizona state and local law enforcement that observe our Driver Out operations. The police vehicles are primarily unmarked cars and stay approximately half a mile behind the Driver Out vehicle. To ensure they do not interfere with traffic, they'll occasionally exit and reenter the highway. We strongly value our collaboration and ongoing relationship with law enforcement. Going forward, we remain committed to working transparently with them and with regulators. We believe at TuSimple it is important to have these early safety precautions as they help to normalize Driver Out operations and to help to build trust with the general public. As I mentioned, we plan to systematically remove them as we scale up. What is the significance of Driver Out? First, it is a clear proof of our technology leadership.
Everyone in this industry is trying to create a driverless truck. Only TuSimple has been able to accomplish repeatable Driver Out operations on a real freight route on open public roads. In autonomous driving world, big claims are common. With this achievement, not only are we the clear industry leader, but we further show our track record of hitting milestones on time. Second, we are more confident than ever about our technology. Our previous guidance was that Driver Out program was a 0ne-two-month pilot. We're pleased to share that we expect to continue our Driver Out operations on a permanent basis. Furthermore, our Driver Out operations will start expanding, including hauling freight for Union Pacific later this spring. Third, and most importantly, Driver Out was a zero-to-one moment.
Driver Out proves we are feature complete, which means our autonomous driving system has all the capabilities required for true driver operations along commercial routes, and that is able to safely mitigate or contain all the edge cases during operations. You cannot perform safe, continuous driver operations on a commercial route without having all the capabilities developed. From here, we believe we have a clear pathway to commercialization in the next two years. From Driver Out to commercialization, the key words are optimization and scaling. In the freight industry, shippers and carriers care about two things, cost and level of service. To commercialize, it requires us to have continuous autonomous freight operations on high volume routes at a competitive per mile operating cost relative to that of manually driven trucks.
Post Driver Out, commercialization is a linear progression that we can make step by step. With our Driver Out runs as a starting point, we plan to scale the ODD and reduce autonomous operating costs, including removing all non-scalable operations. Later this year, we plan to add daytime runs, followed by expansion into new routes in Texas. We also expect to remove the survey and chase vehicles. By the end of 2023, our goal is to have a fleet of Driver Out retrofitted semi-trucks that support continuous commercial freight operations. We expect to be hauling customer freight on multiple routes in the Texas Triangle and along the I-10. We expect to have a clear line of sight on a per mile unit economics being lower than that of human-operated trucks.
To date, no one in this industry has clearly defined what is the endpoint and where are they relative to the endpoint. No one can clearly articulate the steps needed to reach commercialization or show evidence that those milestones are met. At TuSimple, we are doing just that. Over the coming quarters, you should expect to see us hit these visible milestones as we scale to commercialization. In summary, for Driver Out, our technology has advanced significantly even from six months ago. Driver operations on one route is a step that any autonomous trucking technology company will need to take to reach commercialization. What made it even more challenging is the fact that we're working with prototype components in a retrofitted truck. Nevertheless, we accomplished this feat, and we believe our technology is ready to start scaling now. Not years down the road, but today.
This is a good segue to our hardware partnerships. We continue to have a very strong relationship with TRATON GROUP and its OEM brands, including Navistar and Scania. Navistar is a critical partner in our Driver Out program. They were with us every step of the way, helping us to develop our retrofitted trucks, providing insights as we develop our safety case, and supporting us with suppliers of critical components. We're excited to keep moving forward with Navistar as we scale our Driver Out operations. For our U.S. production truck program with Navistar, we have made tremendous progress in the supplier selection process, as well as setting a clear strategy for components where the supply base requires additional maturity.
As a reminder, when we say maturity, we do not mean that hardware components require any type of advanced technology breakthroughs, but rather suppliers have to go through a process to have automotive-grade components that can support scaled production. This is critical because autonomous trucks sold to third-party customers require certification, aftermarket support, and warranties. We will continue to be proactive with the supply base to push forward the component-level development schedules. We'll also continue to work with TRATON and Navistar to continuously pressure test our production process and timeline. In Europe, we have successfully concluded our phase one pilot program with Scania. We have conducted over 40,000 km of autonomous operations along Sweden's main freight corridor. We believe this is the first of its kind in Europe, and together, we have started to work on the next phase of our European partnership.
This January, we announced our most significant efforts to address the supply base immaturity. We and our longtime partner, NVIDIA, are developing a proprietary autonomous domain controller, or ADC. The ADC is a powerful edge computing solution where all the critical processing and decisions of autonomous driving systems are made. The ADC is a proprietary design that incorporates NVIDIA's next generation Orin system-on-a-chip hardware and TuSimple's autonomous driving software. While many in the autonomous driving industry are partnering with NVIDIA, this partnership is truly unique because we're not using an off-the-shelf integrated NVIDIA hardware or software solution. We're working directly with NVIDIA to match our system requirements to the ADC specifications, including how much compute is required, the type of operating system, and other onboard software, hardware requirements, the type of sensors the ADC can support, and so forth. No one knows our technology better than us.
Being hands-on with the ADC development and vertical integration allows us to have better control of our timelines and allows us to build a better end product. To our knowledge, we're the first and only player to take this bold step of developing an integrated and proprietary compute solution, and we believe it will create tremendous strategic advantage as we proceed to commercialization. Next, I'll give an update on the CFIUS process. I'm happy to share that we've made significant progress with CFIUS. We believe we're in the final stages of the process, and we believe that will come to a satisfactory outcome. With that, I'll turn the call over to Pat to discuss our financial results and guidance.
Thank you, Cheng. Beginning with our reservation program, we added 100 new truck reservations this quarter, coming from two large trucking fleets. This brings our reservation total at quarter end to just under 7,000 trucks. After quarter end, we added two new reservation partners who reserved a combined 350 trucks. This brings our total reservations to 7,325 trucks as of today. Importantly, our reservation book is composed of a diverse group of major fleets and logistics players who are eager to implement our technology into their networks. 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 their reservation. The continued additions of high-quality reservation partners, such as DHL, speaks to the broad-based demand for our technology.
Now shifting gears to our financial results for the fourth quarter. We reported $2.1 million of revenue in the quarter, which increased nearly threefold versus the same period last year and represents a 15% increase quarter-over-quarter. We reported $6.3 million in revenue for full year 2021, which also represents a roughly threefold increase year-over-year. While we received new semi-trucks towards the end of 2021, our revenue growth for the year was primarily driven by increasing asset utilization. Moving to expenses. We spent $82 million on total R&D in the quarter, including $22 million of SBC. This compares to $32 million in the same period last year. The R&D expense declined by 3% quarter-over-quarter, as certain discrete items in Q3 were not repeated in Q4. We spent $32 million on SG&A during the period, including $10 million of SBC.
This compares to $10 million in the same period last year. Please note that we have changed our financial statement presentation to combine G&A and sales and marketing into a single SG&A line. Our net loss from operations was $116 million in the fourth quarter of 2021, and our net loss from operations was $411 million for full year 2021. Our adjusted EBITDA in the fourth quarter was $ -81 million, which compares to $-38 million in the same period last year. For the full year of 2021, our adjusted EBITDA loss was $ -279 million. The adjusted EBITDA loss reflects our sustained investment in our technology and commercial development. We invested $1 million in the purchase of property and equipment during the quarter, primarily related to equipment purchases and facility investment.
We ended the quarter with a cash balance of over $1.3 billion. We remain very well capitalized to execute on our roadmap through 2024. Now to provide our full year 2022 guidance. In 2022, we expect full year revenue of $9 million-$11 million. As Cheng mentioned, we are prioritizing our resources to scale up our Driver Out operations. This means focusing a significant portion of our resources on automating dense routes in the Texas Triangle area and using our own fleet of autonomous trucks. We will be less focused on adding human-operated trucks or partner fleet capacity to our AFM this year. We also do not expect meaningful revenue contribution from our China operations during 2022. We expect a full year 2022 adjusted EBITDA loss of -$400 million to -$420 million, reflecting continued investment in our technology and commercialization.
The guidance includes our recently announced ADC development with NVIDIA, as well as costs related to scaling Driver Out operations. We expect stock-based compensation expense for the year of $155 million-$175 million, reflecting our investment in our team and a philosophy of strong alignment between employees and shareholders. We expect purchases of property and equipment of $30 million-$40 million for the full year. We expect to end the year with approximately $900 million in cash on the balance sheet. I'll now hand it back to Cheng for a few last remarks.
Thank you, Pat. 2021 was an amazing year for TuSimple. At the beginning of the year, we started our IPO journey. We knew it was gonna be critical to earn the trust of our investors, and we're proud to say that we achieved all of our major goals during the first year as a public company, including the start of Driver Out. As we enter the new year, we're also entering a new phase of our development. Our pathway to commercialization is clear. We expect to continue to scale Driver Out operations and lower autonomous driving operational costs to be the first to market with a commercially viable solution. We're proud of all we've accomplished in 2021, and we look forward to the new year. With that, we're ready to start the Q&A session.
Thank you. To ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. We ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from the line of Ravi Shanker of Morgan Stanley. Your line is open.
Thank you. Good afternoon, everyone. Cheng, obviously, 2021 was a big year for you with the IPO and Driver Out, but I'm just wondering kind of how we can track your progress with milestones through 2022. Is there anything? Obviously, you've given us guidance, but guidance is kind of meaningless given where you are in the stage of your development right now. Anything in particular in terms of, you know, miles mapped or number of Driver Out runs or specific milestones we can use to track your progress through 2022 would be great.
That's a great question, Ravi. Well, we do expect to give more detailed milestone guidance in the coming quarters, especially during Analyst Day. I think the way to think about it is, what is the finish line or what is commercialization? As I mentioned earlier, commercialization means that we can scale Driver Out operations to have continuous Driver Out freight operations in a dense and on dense routes, so Texas Triangle, the I-10. More importantly, the cost per mile of operations has to be lower or clear line of sight lower than that of a human driver, right? That's how ultimately we provide a service or a benefit to the shippers and carrier customers. I also mentioned that from Driver Out as a starting point, when we think about...
I wouldn't think so much about sort of metrics or KPIs, but really the milestones that show us getting closer to that commercialization goal. We'll show you, for instance, in additional Driver Out routes, from nighttime driving to daytime driving, where we'll intend to show you the cost per mile operations and how that's gonna scale over time. Of course, today we do have some safety precautions that we talked about. As we remove those things, the cost will come down. As we optimize our features, optimize data usage, you know, cost will come down. Those are things that we do intend to lay out in a much more easy-to-understand way. At a very high level, you know, today from Driver Out, there really is a clear path.
There's things that we can check off one by one to show you. More importantly, we can show you where we are on that path to commercialization. Hopefully that answers your question a little bit better, but more to come. Really think of this as where is it we're trying to go. Because even if we give you numbers, like for instance, number of miles, right, or disengagements or, you know, cost something before, what does that really mean? You know, how do you know how far we are to commercialization, right? That's I think the problem the industry has today.
I think what we're saying now and what we're laying down in terms of our path to commercialization is a much better way to frame where we are and where we need to go.
Great. That does make a lot of sense. And maybe as a follow-up, clearly it sounds like your seven Driver Out runs were successful, and kind of no nasty surprises or anything. But can you just share with us if there were any kind of, you know, manageable surprises or any learnings from these seven runs, that you've kind of, you know, changed the way you either do the runs or, you know, tweak your algorithm or change your hardware, kind of any specific incremental learnings from any of these seven runs? Thank you.
Yes. I mean, there's a lot of learnings we have from the runs. A lot of them are built in. I mean, I wouldn't call them surprises, but really the next set of developments and optimization improvements that we're gonna do. As I mentioned, we have a clear path to commercialization. From here on, there are these clear milestones that we intend to achieve over the coming quarters. You know, I think the biggest takeaway for us was we felt actually even more confident, and really, you know, huge credit to our technology team, our operations team.
We feel so confident that the previous guidance we gave was Driver Out would be sort of one- to two-month pilot program, and now we intend to scale this and to make this a permanent part of our operations. I think that's something that really is a very positive development for TuSimple.
Great. Thank you.
Thank you. Our next question comes from Brian Ossenbeck of J.P. Morgan. Your line is open.
Hey, good afternoon. Thanks for taking the questions. Cheng, just to follow up on that, I think path to commercialization, you basically said that you're ready to scale now. Excuse me, just wanted to make sure we understood what that was in the context of it. It sounds like, correct me if I'm wrong, but it sounds like you're scaling into further Driver Out demonstrations in certain ODDs in certain areas, at least here in the near term. Maybe putting that aside, is there anything left, you know, technically that you feel like needs to be, you know, handled and figured out and tested before you were able to really scale?
Just wanted to really understand, you know, the difference between, you know, the scaling you're working on now and just kind of the broader, you know, end game, as it were.
There's scaling to commercialization, right? Which ultimately is critical. No one's been able to clearly articulate what is commercialization and how we get there. Let's go back to kind of what Ravi asked. We can give you a lot of metrics, but really how does that tell you where we are, right? We planted a flagpole of what does it mean to commercialize. In the freight industry, you know very well it's cost and level of service or reliability, uptime, right? We have to have continuous operations with our autonomous trucks. We have to have them in high-density routes. We have to be able to show a pathway on a per mile cost that's lower than a human-operated truck.
Otherwise, why would shippers or carriers use this technology? When we say scaling and going back to your question about what is left to develop technically to be able to demonstrate Driver-Out operations repeatably, we do believe that we are feature complete. What we define feature complete is it means that we have all the capabilities of operating a vehicle from terminal to terminal on a commercial route. If you look at most commercial routes, they're quite the same. For instance, you know, we can't do Driver-Out operations if our truck isn't able to handle emergency lane vehicles, right? I mean, who's gonna take over when you run into an emergency lane vehicle? I think in our 550 miles of Driver-Out runs, there was 36 emergency lane vehicles.
You know, your truck has to be able to be defensive driving and have be able to adhere to non-compliant drivers. Those are additional features we built in. Really today, we are feature complete. We're also able to mitigate. I think what gives comfort is being able to mitigate or contain all the edge cases that you can encounter on a route. From that standpoint, that is already significant technology development. When we say scaling, it's we believe that it's more of a linear progression, as you mentioned earlier in the prepared remarks. We can show you that systematically. We can show you that from step by step.
We don't see that as any sort of technical hurdles, but these are, takes capital, it takes manpower, and it takes engineering work, but we'll be able to show these things to you.
Okay. Just a follow-up. You mentioned the CFIUS process. You didn't give too much detail behind it. I don't know if there's anything else you can share in terms of, you know, I guess, what is a acceptable outcome and maybe something on the timing. I think Pat mentioned that your China operations aren't really gonna have too much of a contribution here, in 2022 at least. Maybe just an update on where that stands, if anything's changed, you know, on the strategy or how you see that operation going forward. Thank you.
On CFIUS, we wanna say a lot, but we unfortunately cannot at this time. Just to iterate, our belief is that we'll come to a satisfactory outcome for TuSimple, and we're near the final stages. Unfortunately, we cannot talk more, but when we do, you know, of course, we'll be able to share, and we'll have to file an 8-K around the details. In terms of China, as Pat mentioned, we do not see China having meaningful revenue contribution this year. That doesn't mean that our China strategy isn't sound. We do believe that our strategy in China is sound. We've always said that China has regulatory risk, just given that today autonomous trucking for pure Level 4 is still permit by permit, sort of lane by lane.
We have what we believe the best project to commercialize in near term in China, which is the Shanghai Deep Water Seaport. As TuSimple, we're always pressure testing and optimizing our resources to make sure we have the highest ROI and value to our shareholders, right? Today the U.S. will be first commercialized. At the same time, we wanna ensure that we have upside to our shareholders of when China does take off. I mean, after all, it is second-largest free market in the world and it's growing very fast.
All right. Thank you, Cheng.
Thank you. Our next question comes from Rajvindra Gill of Needham & Company. Your line is open.
Yes, thanks, and congratulations on the Driver Out program. That's a great validation of the technology. So Pat, just wanted to talk a little bit about the fiscal year 2022 guidance of $9 million-$11 million. You mentioned that you're prioritizing resources for your Driver Out programs, focusing it on those instead of kind of partnership capacity to AFN. Wondering if you could elaborate a little bit further on that decision to prioritize the Driver Out programs. Within that context, when we're thinking about, you know, going from $6 million to $10 million, what are the revenue growth drivers to get it from six to 10? Thank you.
Great. Thanks, Rajvi. You know, when you think about what are revenue operations, what the strategic goals are, it's really around first supporting our technology development in real world freight conditions, and then also to develop and maintain our long-term commercial partners with partnerships with customers who are gonna implement our technology, over the long term. You know, for us, as you said, there are different components of it. Where we see the highest ROI is really around the AV operations, both scaling the driver out operations as well as continuing to scale AV operations with a safety driver behind the wheel. This is actually what our customers have told us as well. This is where they want us to focus.
They wanna be able to participate in the technology and have it haul freight for them, using AV technology. That is a bigger priority versus more manual freight. You know, we do retain a lot of strategic flexibility to add either more of our own human-operated trucks or more partner freight. We will, whenever the time is right or whenever it's strategically advantageous, we can pull some of those levers to do so.
Trying to be as capital efficient and focus on, you know, what's most important to drive value, we think it's really around the AV operations today. Our customers have validated that too, that that's where they want us to be focusing our time and making sure that we're getting them, you know, more AV miles as opposed to more manual miles hauling freight for them. The guide from kind of $6 million-$10 million at the midpoint, it's really a function of the number of trucks that we have in our commercial operations and the utilization of those trucks. We did add more trucks at the end of the year here. You'll see in our letter, we have approximately 100 trucks globally.
About 75 of those are in the U.S., and roughly half of those trucks are dedicated to commercial operations. We're adding more trucks to the count, and we're increasing the utilization of those trucks, notwithstanding some of the, you know, the challenging market conditions around hiring drivers and dealing with some of the the pandemic-related, you know, outages where we've had to have drivers who have taken time off due to COVID restrictions. You know, hopefully that gives you a little bit of the building blocks around how we go from six to 10.
Yeah, that's really helpful. For my follow-up, when you're thinking about over the next two to three years and kind of getting to that kind of billion-dollar number, when you're kind of fully commercializing these trucks, these autonomous trucks, I know Cheng, you had mentioned that, you know, the Driver Out programs that you're very dedicated in expanding in Texas and elsewhere are gonna be major kind of proof points to validate that you guys can scale and commercialize Driver Out technology.
Wondering what you've completed in December, what you intend to complete this year and your focus on that, how that will help, you know, either potentially accelerate, you know, the transition to your, you know, to that two-year kind of commercialization. Will it reinforce it? I'm curious to see how you're thinking about the Driver Out programs now and when you're thinking about it, you know, during the IPO process or prior to that and kind of bridging the gap there. Hopefully that makes sense. Thank you.
Yeah, no, good question. For us, after Driver Out completion, you know, again, we did this not because we wanna hit a timeline. We did this because we felt it was safe, and we're ready. We truly believe that more confidence that we can actually pull forward commercialization despite not having serious production trucks or having integrated trucks on the market yet. We define commercialization, you know, there's kind of main definitions of it, right? Is it, are you selling it to third party? Are you How many are you selling it? Right, how many trucks do you need to be commercialized? For us, commercialization ultimately is the ability to provide a reliable autonomous freight service to shippers.
From commercialization to serious production is something that we'll continue to do with our partners, TRATON, Navistar, Scania. That's something that requires production-ready parts, warranty, services, certification. You know, that's gonna be ongoing, that's gonna continue and that's how you get even more trucks onto your network, right? Tens of thousands. At a very high level, really it hasn't changed at all. I think the only thing we've pulled forward, one we believe we'll commercialize and be able to show you. Now we're actually giving you more detail about the roadmap to commercialize over the next two years. We'll continue to give you more detail over the coming months. You know, please stay tuned.
Got it. If I could just squeeze in one more question. You know, you mentioned that you're developing a proprietary ADC custom chip with NVIDIA and kinda working hand in hand with that, with NVIDIA. Can you discuss the rationale of working closely with NVIDIA, making sure that your software can run on their own SoC processor? What was the rationale for that? How do you feel that differentiates your technology, say versus other self-driving technologies or other approaches to the market? Thanks.
Sure. Maybe to use some examples or situations that we're facing. Today, we look in the markets, there's not a readily available or even a clear path of a product that has the ADC product that has the amount of computational power that our system requires. That's one of the benefits of being vertically integrated and working with NVIDIA. We can have a design that has the right number of Orin that allows us to have enough computational power to operate our virtual driver software application layer. You know, we have to ensure that the ADC can take in all the sensor inputs that support our autonomous driving system. The ADC is not just our software and their hardware, but it's also other software and chips on the ADC.
What are those? What are requirements? Does that fit with our system or not? You know, those are designs that we now have ability to make rather than if you have this being built by, for instance, a tier one supplier. Of course, their goal is to have scale, right? They're taking requirements from everyone. One small change will take a long time. That delays when ADC comes to market, and also it'll increase a lot of uncertainty whether or not this component or this ADC can meet the requirements of our autonomous driving software. For those reasons, you know, this ADC is really geared towards ensuring that we have serious production as soon as possible.
I think it was a step that we felt that we needed to take.
Thank you. Our next question comes from Dan Levy of Credit Suisse. Your line is open.
Hi. Good evening. Thank you for taking the questions. First, I wanna ask about just the capital requirements over the next couple years. Pat, I think you made a comment that the IPO proceeds are enough to carry you to commercialization in 2024. Maybe you can just unpack that. Has the Driver Out pilot changed your view on, you know, the cost or the capital outlay required to reach commercialization? Maybe you could just give us a flavor for, you know, as you continue to work up, just how much more capital intensive this gets, if this is any different from what you previously expected.
No, good question, Dan. I think there's no material deviation from what we've been saying on our capital deployment plan for the next three years. You know, we feel very fortunate to have the kind of balance sheet that we have, where we are fully capitalized on our base plan. We feel very confident in our capital efficiency and our ability to get through to 2024 commercialization with the capital that we have on the balance sheet today.
Okay, capital is not a constraint for you in your path to commercialization?
No. I mean, we're very focused on being capital efficient, but I think, you know, you should interpret from our remarks that we are proceeding full speed ahead on the development of the technology and commercialization and very confident that the balance sheet we have today will get us through to commercialization in 2024.
Got it. Thank you. I'd like to follow up on some of the prior questions on Driver Out. If we could just maybe focus on, you know, this one Tucson to Phoenix route and give us a flavor. I know you said you're gonna give us more details in the future, but give us a flavor of, you know, what we can extrapolate to future commercialization. More specifically, you know, between where you are today to what you would ultimately need for commercialization, showing that it's, you know, continuous, that it's lower cost, you know, what would be the remaining items that you would need to complete on this route to show that, hey, like a route like this, which you said technologically is already feature complete, you know, that that's ready for commercialization?
I know the vehicle plays into it, but maybe you could unpack, you know, what we could extrapolate from that to commercialization.
Yeah. Great question. Commercialization is uptime, level of service for the shippers and cost. Level of service, right? We can't only be hauling freight at nighttime, although nighttime is where freight gets hauled and moved quite the most. Daytime, for instance, that's something that we can demonstrate next, right? We also need to have more continuous operations, and that's a function of sort of actually hardened hardware, so better hardware, as well as optimization of the operations so that the turnaround time is fast. I mean, we demonstrated the ability to do back-to-back operations for Driver Out runs on the same night, and of course, we have to increase the number of those. In terms of cost, we are technically feature complete.
There are these safety precautions that we put in place. For instance, a survey vehicle, I mean, we can turn that survey vehicle. If you have 30 trucks on one route, those 30 trucks all become survey vehicles of each other, right? That's something that naturally will go away, and we can show that to you over the next coming quarters. We have a chase vehicle. You know, we'll have to remove that as part of our centralized oversight system. That's in the works now, but that's not something that, again, technically we cannot achieve. If you think along the framework of, you know, scaling means expanding the operational design domain, so daytime, nighttime, new routes, uptime, and then also, cost, right? Because everything comes down to cost.
If you can get from point A to point B on a per mile basis to have a clear line of sight that is lower than human driven truck, then that becomes a real service, a real product. In that cost is these operational items, these non-scalable operational items, and kind of anything associated with that. That that's really comes to optimizing the technology, the features more and then doing away with some of these non-scalable items. For me today, if you think about it, we have optimized one route, automated one route. This is truly a commercial route, you know, and this route alone can generate significant revenue. Actually in a way for trucking, density is our friend.
Actually, the more dense routes, because we put more trucks on them, that updates the maps faster, that becomes a fleet of survey vehicles for each other, like that becomes our friend. You know, that allows us to really commercialize.
Thank you. Our next question comes from Alex Potter of Piper Sandler. Your line is open.
Great. Thanks, guys. I have two hardware-related questions. The first one, I think I can understand the strategic rationale and the benefits, regarding, I guess, pace, speed to market with regard to vertical integration, and the partnership with NVIDIA. Are there any other areas, hardware specifically, where you're seeing bottlenecks in the supply chain or things that, you just can't buy off the shelf that you feel like you need to take, I guess, more devote more time and energy to in-house designs? Is that just on the controller, and other than that, you can more or less farm everything else out?
Yeah, good question. It's primarily controller. For other sensors and components, we do see either a clear line of sight or actually many, many suppliers working towards that problem. Like for instance, LiDAR. I mean, there's plenty of well-capitalized LiDAR companies now that are working towards between startups and tier ones that are working towards building production-ready LiDAR solutions, right? So, we feel good about that. Even though today it's not something that's readily available in terms of production solution. You know, cameras and radars and GPS units, those are pretty easy. Then the braking and steering components, the large tier ones are working on that. There's a clear roadmap on when the next generation components are coming out, and we feel good about that, right. It's not something that hasn't been developed before.
It's just an iteration of a generation of new hardware. We feel generally pretty good about those things. Yeah, no, just to summarize, I mean, I think the compute is something that's unique to Level 4 driving because only we need something this powerful and also has to be quite tailor-made to TuSimple solution just because it's where the application layer sits in. Really that's the main one that we feel vertical integration is the most important.
Okay, great. Very helpful. Then the last question is just on, I guess the timing of finalization for the bill of materials. I know that this compute platform and a lot of these other components that we're talking about, you know, next gen versions coming available, all of that will play into the ultimate timing. How long do you think it'll be before you can set that design in stone and send it over to Navistar?
I mean, we're continuing to evaluate the supply base. What we gave guidance was that we'll look to set the bill of materials in spring of 2022, and so that's part of our production process. You know, I think we'll definitely have more details in the coming month. I think two things to take away. One is right now working with non-production-ready components actually puts more onus on the software, right? We're actually, I'll say, doing more work, more development than we might need to otherwise. I think the path actually gets easier from here, not harder. I think that's point number one.
Point number two is that, you know, we're proactively taking steps to address the supply chain maturity. We're not using this as excuse, but we're really taking steps to address it. Of course, the ADC being one of the proof points.
Next question.
Our next question comes from Joseph Spak of RBC Capital Markets.
Thanks, everyone. I guess one near-term on the guidance and one longer term. The 2022 revenue guidance, I mean, it's basically at the run rate you're currently at, but you mentioned you plan on adding trucks. I think you said you have 75 in the U.S., but it sounds like maybe only half of those are running. Maybe you could sort of help us with that a little bit and what you expect the trucks running to be at by the end of the year. Then on the EBITDA loss, it's about, you know, 25%-26% worse than the current run rate.
I heard you talk about some of the investment with NVIDIA, and I know you're hiring engineers, but maybe you could help us a little bit breaking down that additional cost for next year?
Yeah, sure. We will continue to see the revenue run rate on a quarterly basis increase throughout the course of 2022. The trucks that we've mentioned that are coming in, some of which are being upfitted for AV, including the commercial operations trucks, those will be placed into service and start to generate more revenue every quarter. We continue to see a steady ramp in the revenue base throughout 2022. With respect to the EBITDA loss, there's a couple things at play here. One is just full year impact of some of the hiring that we made throughout the course of 2021. 2021 was a year where we did add significantly to our team.
As a reminder, you know, over half of our cash costs is really around compensation for our team. So you're starting to see a lapping effect of the full year impact of some of those hires. We'll continue to add new hires to the team this year. I think 2021 was probably, when you think about the rate of growth and the absolute number of hires for the year was, you know, probably more significant than where the hiring will be for 2022 because we have hit a critical mass. We'll continue to add and you know, selectively where we need to add to the team.
The items that you mentioned, like the ADC project, as well as just concentrating our efforts around expanding the Driver Out operations, so that we can scale those to commercialization through the year.
Okay. Thank you. In the letter, you know, you made mention of some of the mapping team enhancements and the technology and getting maps to update quicker and be more robust as you get ready for commercialization. I mean, without, I guess, getting too technical, like can you help us understand what that means? Are you automating that process so that you have the ability to scale and map routes quicker than prior? Or how does that sort of really play into the story here?
Yeah. I think when you think about where the mapping technology is going, it is to some extent about mapping new routes faster, although that we do that very quickly already. Really, where a lot of our technology is going is the updating of the maps so that every time one of our trucks travels a particular route, if there's a new element that we're able to almost instantaneously update the map and send the updates to the map to any truck that's following on that same route behind.
As you mentioned, or as Cheng mentioned earlier, we're gonna be removing the survey vehicle from our Driver Out operations this year and having the quicker map updates so that if there is a pop-up construction zone or some other element of the road, which was previously mapped as changed, that we can efficiently push that update to any truck that comes behind it for the next route. It's really critical to making the technology and our Driver Out operations more scalable. That's where you've heard us talk for the several quarters now about some of our investments in mapping. It's really starting to pay off in terms of making this scalable and a critical piece of getting to commercialization.
Thank you. Our next question comes from Colin Rusch of Oppenheimer. Your line is open.
Thanks so much, guys. Can you talk about your progress in terms of integrating or potentially replacing some of the existing logistics and workflow solutions that are out there?
Could you be a little bit more specific?
Yeah. I mean, I'm just looking at, you know, with these fleets that they already have existing solutions around, you know, managing logistics and workflow. As you move towards commercialization, it's not just around the hardware and the functionality of the vehicles, but really having your system integrate with the existing programs that you're gonna be, you know, kind of integrating into, you know, with some of these clients. I just wanna get a sense of how far along you guys are in that process.
That's a good question. I think at TuSimple we're the first, and we've always said that ultimately what we're developing is a solution that has to integrate, a holistic solution that integrates into our partners' supply chain, right? In order to make it more efficient for them so they can provide a better end-to-end logistics solution. 'Cause ultimately that's where everybody wants to go, providing that best end-to-end logistics solution for their customers. Integration of our system into their TMS is a process. That is why we have reservation partners today, because really it's not just collecting truck count, but starting that integration process. If you reflect on 2021, we have over 160,000 miles, actually now more than that, of autonomous miles driven with UPS.
Again, really getting deep into their supply chain and integrating with their service. We're starting to haul freight for Union Pacific. You know, how do we integrate with the railroad and help improve or expand their service? You know, we have great partners on traditional truckload carriers. We have partners, of course, parcel with UPS and DHL. To really answer your question, that's absolutely what we're doing today. You know, that's where we see the highest ROI in terms of our resources, is ensuring that we can have more of our trucks working with these strategic partners to go deeper with them, to integrate with them. I think that also creates a barrier to entry for latecomers.
That's super helpful. Then the second question is really around you know the significance of the Driver Out testing for your learning cycles and the cadence of those learning cycles. Obviously it's still early days but you've got your plan that you've laid out for us. But I'm just wondering you know in these early runs if you're starting to get a sense of you know just how accelerated the learning cycle is you know for you and some of the things that you're starting to see that you're gonna have to solve but also getting you know bringing this to market and the pace of that for the organization.
Yes. You know, I think you hit on the significance of Driver Out. I think what's important for us to keep saying is that Driver Out is not a demo, right? It's not a shiny object that happened once. Driver Out is significant because we can now show you from Driver Out what is the linear roadmap to getting to commercialization. That's something that no other autonomous trucking driving company can do today. Where's the end and where are we relative to the end, right? That beats any sort of metrics that we can share with you, right? Number of miles driven and number of trucks.
I mean, all these things again are nice metrics, but how do you know where the endpoint, how do you know where you are relative to the endpoint? That's something that I think today we have a marker of continuous driver operations on one route, and this is where we need to go in terms of commercialization. I think in terms of significance too is, I mean, it took us six years as a company to get to driver operations on one route. If we scale now, of course, that the time, the development cycle gets shorter and shorter, right? I mean, ultimately, what is it we're trying to do? We're trying to automate more lanes and deliver freight and enable freight capacity to our shippers, right?
As we show you that we can automate more lanes faster than six years, there definitely will be. As we show you that we can expand the operational design domain, as we show you that the cost on a per mile basis will come down. I mean, all those things should give confidence that development cycle is being shorter and that we're closer to commercialization at a reasonable scale.
Thank you. Our next question comes from George Gianarikas of Baird. Your line is open.
Hi. Good evening, everyone. I guess you mentioned on the call, I know you prepared remarks that the development roadmap is linear, you know, and you hired a 10% sequential increase in R&D personnel. Can you just sort of explain this, what the over 1,000 people in R&D are working on incrementally? I mean, you have the NVIDIA co-development, but what are the incremental problems that your R&D team is working on over the next couple of years?
Well, I think this goes back to, I mean, this is a very long answer, anyways, but it still goes back to there's still a lot of engineering work. If you start from Driver Out to optimize the features which we have completed to do daytime operations to do a new route in Texas Triangle, to do more than one route in Texas Triangle. There's engineering work to remove, to update, you know, to have mapping as a more live update so that every truck can then become a survey vehicle for each other, right? As you have more trucks on the same routes that's hauling freight, then actually that makes it safer for the whole route that we're automating. There's still a ton of work.
Of course, there's work on the hardware side of our production vehicles with TRATON and Navistar. There's work that we're doing with different suppliers in terms of partnerships of working with them in requirements and testing those components. So really the list can go on. But I think when we say linear, it's that, again, going back to Driver-Out is significant because from here we can show you what are the steps required to get to commercialization. As we check each one off, that should give you more confidence that we're closer and closer to commercialization, right? Again, today, we look at the whole industry, how do you get confidence that people are moving closer to commercialization? How do you get confidence of where is commercialization and where people are relative to that goal?
I think that's really the significance of this driver operations.
Got it. One more, on your patents. You guys have done a good job of every quarter outlining your total patents issued and the sequential growth in those. How core are those to your long-term competitive advantage relative to the other companies in your industry?
Yeah, it's gonna be critical. I mean, this is not something that's new to autonomous driving. It's if you look across the mobile, you know, mobile sort of telephone, right, cell phones, telecom, electric vehicles. I mean, you get to a certain point of maturity where you do have patent infringements. You have patent wars. I mean, you have companies more likely to be sold off for the patents that they own, right? So today, it's not something that shows up in terms of the competitive advantage. You fast-forward three years, five years, it'll definitely be a huge advantage for TuSimple.
Thank you. Our next question comes from Todd Fowler of KeyBanc Capital. Your line is open.
Hi. Great. Thanks and good evening. I wanted to ask on the reservations, and I know that these can be a bit lumpy, but it seems like that there was a nice couple of orders that came in early this year. You know, Cheng, do you think that that's a reflection of the success of the Driver Out runs that you've had? And can you maybe speak to the interest level that you've seen post Driver Out at this point?
Yeah. I mean, absolutely, because the Driver-Out route is significant. It's a real proof point of where we are to commercialization. It's also, you know, interesting because now people are starting to think about what autonomous trucks can do for the industry, right? You have players that historically, you know, aren't in trucking, now getting into trucking. Potentially, you have players that can leverage autonomy to expand their business. So now I think also creates a little bit of competitive dynamic among different types of carriers and shippers. You know, all those and of course, lastly is just the supply chain. I mean, the driver shortage is getting
Significantly worse. Right, you're seeing labor costs going higher. You're seeing fuel costs rising really fast. I think all of those confluence of factors are leading to interest. I mean, interest is always there, but certainly we're seeing even more interest now.
Yeah. No, that certainly makes sense. I guess just for my follow-up, you know, Pat, I'm not sure if you wanna share any color around the potential cadence of EBITDA throughout the year, throughout 2022. I guess what I'm really kind of curious about as we exit 2022, you know, was your expectation that the EBITDA losses would start to narrow as we exit the year, or is it pretty consistent with an even run rate with your guidance? Thanks.
Yeah. I think you'll see some modest increase in the EBITDA losses as we progress through the quarters in 2022. That's because we will continue to hire folks and that'll increase the labor base that drives a meaningful percentage of the EBITDA loss. I do think, you know, what you'll see is consistent with 2021 being a big hiring year and 2022 being more selective to fill out specific spots on the team. You'll see a deceleration in the losses. They'll continue to grow, but they'll, the second derivative will be, you know, I think, indicative of the fact that we are hitting a critical mass on this and, you know, pushing forward towards these final stages of development over the next two years as we get towards commercialization.
Thank you. Our next question comes from Ken Hoexter of Bank of America. Please go ahead.
Hey, good afternoon, Cheng and Pat. Congrats on the Driver Out ramp. Can you talk about the scaling, though? I mean, you mentioned the number of trucks. You've got 100 trucks in the fleet globally. Last quarter, you talked about Navistar having delays. Can you talk about where that stands now, what we should expect to come online? It sounds like, are you putting them all toward the commercial development? Is there still? Are you still scaling up the driver-filled seats? Just wanna understand the size and scale we should look for.
I think you'll, you know, we'll probably have roughly still this 50-50 split in the U.S. between trucks that are dedicated entirely to testing and technology development and the other half hauling freight commercially. I would say the penetration of autonomy within our commercial fleet is continuing to increase, which is important. That's what our customers are really demanding is freight capacity, but increasingly they want more autonomous freight capacity so that they can participate in the technology development, so that the penetration is continuing to increase, including being able to do Driver Out operations commercially, which is what we announced around our Union Pacific partnership, which will start this spring, hauling freight for them on a Driver Out basis.
You'll see more trucks coming online over the course of the first part of this year, and that'll show up in the cadence of the revenue ramp throughout the year.
Is there a relation to the, you know, the delay last year in terms of getting the physical equipment? Can you update on timing that the trucks should arrive?
Yeah. The trucks have arrived. You know, roughly, 20+ new trucks that have arrived. Some of those are going through the upfit process right now to get fitted for AV equipment. Some are being placed into service for both commercial and testing operations. We're starting to see that relief. Hiring drivers is still challenging, I think. As you know from the ecosystem, this continues to be extremely challenging. We're able to, you know, I think we've been able to be successful in bringing in drivers and, you know, making sure that all of our trucks are seated.
It is certainly a tight labor market, which obviously makes it difficult in the near term for us but just further underscores the need for our technology over the long term.
Thank you. Our next question comes from Scott Group of Wolfe Research. Your line is open.
Hey, thanks. Good evening, guys. I apologize if I missed this. Is there any Driver Out plan for a new route or a different route this year?
Scott, no, we haven't shared exact details, but that is something that we expect to give more guidance in the coming months.
Okay. Just bigger picture, if I think about 2025 or so, how have your assumptions evolved from a year ago when you think about number of trucks, miles per truck, rate per mile? Where are you getting more optimistic about 2025? Where are you getting less optimistic about 2025? If you have a different year you wanna talk about, that's fine.
Yeah. I mean, I think directionally, the rate per mile looks like it's going up. You know, we can't predict the future, but I think trends are going higher. I think in terms of, you know, number of trucks, you know, that is our serious production. As we said, we have to have integrated trucks with our OEM partners in order to get to thousands and tens of thousands. One of the risks that we have identified more and more of over the last year is the supply base maturity. Of course, we're taking active steps to address that. We feel confident about our strategy.
That's something that we continue to pressure test the timeline, and we'll have more updates on that as our production program with Navistar naturally runs its course.
No, I mean, I think if anything, again, as we mentioned in an earlier call, we are pulling forward commercialization. You know, I think end of 2023 in terms of actually be able to have a continuous autonomous freight service for customers on dense routes. That's something that we actually feel even more confident of today and compared to a year ago.
Thank you. Our next question comes from Jeff Osborne of Cowen and Company. Your line is open.
Hey, great. Good evening. I just had one question. I was curious if you could touch on, Cheng, some of the things that you can't control. You've done a great job on the call talking about the things you can control, but in particular, insurance, any update on the Liberty Mutual partnership and any new developments on the regulatory side that we should be aware of will be great to hear.
You know, no. On the regulatory side, there hasn't been material changes, right? Nothing, I think, to signal a change in regulation. I think actually the continued rhetoric messaging from the federal and state governments has been positive for autonomous trucking, especially given how supply chain is today and the driver shortage getting worse and worse. I think you know, I think obviously the supply chain is something that we need to do more to control. No, I mean, I think generally speaking, we feel like, given the team that we have, given the capital that we have, the partners that we have and where we are in technology development, really the fact that we could do Driver-Out route continuously means that things are in our control, right?
This is not a. You know, like I said a year ago, this is not about tech stock, right? This is not a zero one. Hey, maybe it works, maybe it doesn't work. This is today it works, and now we're scaling to commercialization through expanding the ODD and optimizing the cost.
Got it. Thank you.
Thank you. This does conclude today's conference call. Thank you for participating. You may now disconnect.