Good afternoon, everyone. This is Billy Healy with the Jefferies Aerospace and Defense Equity Research Team. Welcome to our fourth annual Jefferies Innovative Aerospace Summit. Today, we are lucky enough to have Arrive AI, and we have a full house here. We're pretty excited. Thanks for joining us, guys. Arrive AI is a technology company developing autonomous logistics infrastructure centered on AI-powered smart mailbox delivery endpoints that enable secure asynchronous exchange of goods between people, drones, robots, and couriers. Part of the team joining us today, we have Dan O'Toole, the Chief Executive Officer, Chairman, and Founder of Arrive AI.
He's a seasoned entrepreneur with over 37 years of experience building and scaling successful businesses, positioning him as the strategic leader behind Arrive AI's entrance onto the public stage. Along with Dan, we have Todd Pepmeier, the CFO of Arrive AI. He brings 28 years of financial expertise across sectors including automotive, aerospace, healthcare, and technology. Since joining Arrive AI in May 2023, Todd has been instrumental in guiding Arrive AI through its direct listing on the Nasdaq. Next we have Mark Hamm, the Chief Operating Officer at Arrive AI, where he owns product engineering and operations, and over 30 years of experience across technology, automation, and innovation.
Mark leads the build-out of the infrastructure, making autonomous delivery possible at scale. Lastly, I have Ian Geise, Head of Commercialization joining us, who runs the go-to-market strategy for the company. Full house here. Really excited to have you guys, and thanks for joining us. We can kick it off with our first question, where if we could just start more broad. If you could tell us a little bit more about Arrive AI for those of us who might not be familiar, and talk about your company and how the company differentiates itself.
Yeah. Thanks so much, guys, for being here. Billy, thanks for having Jefferies allow us to share our vision today. Arrive AI is, I always go to the simplest terms, Mailbox 2.0. If you could redesign the mailbox, which was first built in 1858, what would you do to make it different? What we've done is we are all centered around the element of autonomous delivery and pickup. Anytime you add the element of autonomy to a locker or a mailbox, those are our patents. We were based off of our foundational patent that was filed in 2014. We beat Amazon by four days. We always like to say we're reducing the friction between people, robots, drones, and unmanned vehicles. Mark, if you have anything you want to add to that, you can jump in there real quick.
Yeah. Just on the Mailbox 2.0 theme, the mailbox takes U.S. mail. For everything else you want, there's an Arrive Point. All the Instacart, Uber, DoorDash, FedEx, Amazon Prime, all of that doesn't go through your mailbox. We think The Jetsons were right. The future is automated drone robotic delivery, and we're really going to be the frictionless mailbox or cross dock that makes all of that possible.
Okay. Awesome. You guys talked about connecting people, robots, and drones. How you do this is through your Arrive Point Network. What are the core components of the platform, whether it's hardware, software, partners, and how do you view Arrive AI's role in the broader ecosystem?
Yeah. Mark, you want to take that?
Yeah, I'll take a stab at that. First, take a step back. Platform is an often cheapened term, but a platform sits at the middle of an ecosystem of stakeholders. We have our end customers that are business and residential. We have service providers like Walmart, a Kroger, a CVS, even a DoorDash, that want to then use the third set of stakeholders, autonomous networks of drones, robots, and even traditional couriers to deliver to the end customer. That's three parts of the ecosystem. All of that occurs in jurisdictions, whether a city, a state, a country, that have their own rules around security, delivery, privacy, information, AI. That's four components. The last is a collection of value-added resellers, app developers, integrators, that are going to want touch points into creating value for those service providers, networks, and end customers.
To get all of that done, we're deploying a network of Arrive Points that interoperate, support common drone, robot, courier, customer experience, no matter where they go. It can be scaled for size and capacity. In addition to that, we have the software, the APIs, the platforms that let all those partners interoperate on making sure those handoffs are on time, valuable, and as economic as possible. Speaking to that a little bit, we make those fleets much more efficient in utilization. Just like traditional logistics have cross docks that increase their efficiency and shipping containers that create multimodal
We do both those things. We increase the efficiencies of the fleets, and we represent the ability for drones to hand off to robots and any combination thereof. Kind of the last piece is all the compute and data and insights that we can create off of this network, and seeing what everybody delivers, and then helping harness that in a constructive way. We're a custodian of a lot of information, so stakeholders opt in to the value being created. We help derive the insights that increase the utilization of the network and really get that flywheel going for platform value for all parties involved, including the end customers. That's a bit dense explanation, but those are all the components of the network, the platform, and the parties involved for delivering the autonomous last mile.
Great. No, that's super helpful. We appreciate the details. Going off this last mile concept, how do you define the last inch market, right, that you talked about versus the broader last mile market? If we can go into maybe some of the use cases and some of the end markets, which ones do you believe are more ready for scaled deployment more quickly, such as healthcare or enterprise logistics or whatever other end markets?
Yep. Thanks. I'll start that, and then Ian can take over. I would say that the last inch of the last mile is really where it all happens. It's the most expensive part of logistics, and it's really where the rubber meets the road, where you actually get your item. It's very important. Part of what Mark was speaking about a little bit ago, we see ourselves as kind of quarterbacking the whole ecosystem. Think of it as the Tesla Supercharger network. GM had their own end-to-end solution for charging, Ford did, and others. What everyone realized was it didn't make sense to have a bunch of end-to-end solutions to really get the network and platform effect.
You had to have one standardized unit, and we see Arrive taking that place in the last mile delivery and logistics. We're the first mover. We've got the IP. We've been able to go public. We have a huge value proposition that we're set to deliver. Because 91% of all autonomous deliveries are five pounds or less, it opens up scalability, and we can transcend virtually every use case. It's more of a density story and moving into specific zip codes and being able to blanket. I'll let Ian get into some of the specific use cases. Ian?
Sure. Thank you for having me. The verticals that we've been able to go after and some that have shown just incredible interest have been healthcare, pharmaceuticals, and even facilities that are manufacturing some of these different goods and wanting to be able to move things around, and especially securely and safely. We have a great partnership with Hancock Health, which we just recently announced an expansion. As they've seen the benefit of being able to move specimens safely and securely and not be able to be so tied down with full-time employees like nurses, higher compensated employees being put in that position to do those different types of jobs.
They do see the return on investment as their network grows. That's really where we're seeing a tremendous amount of interest because of the start with wanting robots. Robots and drones clearly over the last few years is what companies kind of go to first of saying, "Hey, I really want to check out robots to do these various tasks." Because we've partnered with some great companies and we continue to add these partners, that only creates a much bigger pipe for us.
Great. Thanks. I want to move next to how you guys think about the business model. How do you generate revenue? You have this customer interest, and you're doing partnerships and that's great. If you can explain to us how you think about the revenue model and how that could potentially evolve over time as deployment scale.
Yep. I am going to throw that over to our CFO, Todd.
Thanks. Thanks, Billy, for the question. You are absolutely right. It will evolve. Predominantly today, it is a subscription model. We are deploying Arrive Points to various use cases. Customer doesn't have to have a big capital investment up front. They subscribe to the network. Today, as we are rolling out in lower scales, there is also typically an installation revenue stream and usually some upfront consulting to sort of map out the customer strategy and route optimization before we install the unit. Going forward, I think at scale, you can think of three main legs to the business model. About half of our revenue will be generated from the Arrive Point Network, the physical network that exists.
Like I said, that will be on a subscription model predominantly. The other half of the revenue will be from the marketplace, or we are calling the Arrive Point Exchange. Think of Think of an air traffic controller, if you will, optimizing the capacity at each Arrive Point, taking a premium to move articles around throughout the network. There will be a transactional element of that where we will participate in. Finally, the third leg of that stool will be the AI and the data insights that Mark was talking about earlier. If you imagine a network with 1 million Arrive Points in it, the amount of visual and tracking data and consumer insights that we will be generating will have tremendous value. That kind of rounds out the third leg of our business model.
Super interesting. Kind of going off that, as you guys try to get to scale over time, the physical network is going to be what enables all these other revenue streams. How do you think about scaling deployments as demand grows, and what are some of the biggest challenges on execution that you guys are thinking about?
Yeah. Well, the TAM is $170 million addresses in the U.S. alone. We've got IP that spans the world. That number grows by 4,000 new addresses every day here in the U.S., we're really excited about that. I would say that, Mark, you might have something you want to throw in on that. Do you?
Yeah. I'll pick up after you kind of finish your
No. We think that, mentioned earlier 91% of all deliveries, five pounds or less, it transcends every use case. We think that the market is going to really appreciate and value highly what we're doing once we start scaling. As far as challenges goes, really right now, I would say that our biggest challenge is getting units beyond constraint where we can deploy in a significant way. We've got a lot of traction right now, frankly, we could be all over the world, but we're trying to be very deliberate about where we roll out first from a capital and a human resource standpoint. I think the risk is just trying to get ahead of ourselves and grab every opportunity. That's one of the obstacles that I see of not getting ahead of ourselves, basically. Mark, you want to finish that off?
Yeah. I'd say we're extremely focused on executing milestones against diffusing the innovation. Right now, you can hear what Ian's talking about. We're kind of in the early market with strategic buyers doing limited deployments that they then want to grow in the networks. We think as we improve the product, right now we're using R&D units, next year delivering our kind of next-gen foundation for our system and for scaling. We'll get into bigger deployments where we work with multiple drone and robotic companies at the same time. That will then leverage the platform nature of it.
We are just quarter by quarter moving from that early market where we supply a lot of the solution because it's hard for customers to pull it together, and growing towards that larger market where a network facilitates many autonomous networks and service providers reaching all the customers in an area with their business models. Again, from a DoorDash to a Walmart to a Quest lab to a Grainger, all of them have different business models, and we become the infrastructure for that. Quarter by quarter, we're laying that in, and the revenue model will progress as the network and the capabilities of the physical network improve.
Great. Thank you. Speaking of quarter to quarter, one thing you guys mentioned with your Q1 results that I wanted to dig a little bit deeper into is this improved AP3 release in July. What does, I guess, that mean for you guys? What is a key difference? What are the key improvements? How do you expect this to develop over time?
Mark, do you want to jump on that?
Yeah. Again, kind of back to that milestones view. We had a pretty good R&D unit we call the AP3 last year. Approximately a year ago now, we finally, in going public, mustered the resources to build a much bigger internal technology team, and so we're naturally taking that to the next level. We've even pulled some of our next generation development that'll be in the APX in the next year.
Wow.
We've pulled some of those things forward into this improved AP3. You could call it an AP3 +. Specifically, it's got a new operating system. It's going to be deployed with some of the latest NVIDIA chips to help orchestrate everything going in the box. It's more like a Tesla in the sense that we can see everything the box does. In the industry, that's kind of called telemetry. We can see all the data about the box, and we can improve that on the fly over the air.
In addition, pulling forward some of our new stack of software, we can manage what we kind of call service levels, which can be anything to this HOA doesn't want lights or drone delivery after 10:00 P.M., to we guaranteed 24 hours of backup from this battery system, and this battery's getting low. Let's automatically swap that out, so preventative maintenance. The foundation for all those things, including improved handoffs with AMRs in the second half of the year, and expanding our work on drone delivery and pickup in the second half of the year. All of those things are being facilitated by this latest AP3 Plus, which then creates a foundation for us next year, to introduce the APX.
I think we're on public record, saying that we're aiming to get a few hundred units into Dallas, a year, 18 months from now, where we interoperate with many networks, many players that are delivering today. We believe the APX and those systems will improve autonomous fleet utilization and prove the chain of custody will double the TAM in that area, with the multimodal interaction we support. Bottom line, just increase everybody's benefit and customer experience with the autonomous last mile. That's kind of the sequence of functionality and how it builds into that roadmap we've been talking about.
Great. I have two follow-ups on that. You mentioned deploying the new NVIDIA GPUs to accelerate the process here. What are some of the development bottlenecks you're targeting with as you leverage the Blackwell GPUs? How does that translate into faster readiness, if you can give any examples?
AI is so important to the company that we put it in the name. Because if you think about the future of IoT or embedded intelligence or what I like to call AIoT, we have intelligence we need at each Arrive Point, and that's what I was speaking to formerly, how we lay that foundation with the proper chips and operating system, telemetry, data architecture, all of that. We're also collecting and building a NOC, a Network Operations Center, for optimizing the overall network, seeing the insights, seeing what's going on, and pushing that value back to our partners for more efficient operations. We already have a lot of algorithms working towards that end, which are increasingly AI-oriented to help them get optimized. At a completely different level, the rate at which we're iterating and improving the hardware.
We are moving CAD to simulation to foundational improvements on the physical product. Again, I think this was publicly announced, our next generation units avail themselves of vision. In the beginning, that starts rather simply with package recognition, damage recognition, the things that increase the value of your supply chain being protected by the Arrive Point Network. You can get rid of that billions of dollars of annual porch piracy and all of that that's going on. You can make sure your packages are upright, handled right, not damaged, all of that. We'll have the foundational information for that and security through the vision. It will expand to other areas we haven't announced, where we use that on behalf of the ecosystem, on behalf of better automation and a better experience and better chain of custody.
AI is really embedded at all levels, and that's before we get to what Todd was speaking to in the business model, where we take all that data, all that custodial kind of information that we're protecting and creating large insights and large network optimizations out of that for all our customers, partners, and the autonomous networks themselves. We can't get this job done with AI. Just like you couldn't have Uber before the iPhone, before the latest breakthroughs in AI, you really couldn't scale this vision Dan's had from day one of Mailbox 2.0 that makes the last mile really happen.
Great. Really interesting. Hopefully we can get three more in here. You mentioned the initiative in Texas for later this year. What should investors be looking for there as signs of success?
Mark, you want to continue?
Yeah, I'll take that. Ian could take this. He's my partner in crime on this. Essentially, it's a progression, right? One of our early deliverables, which again, was publicly announced, is we've developed a complex digital demo of the future, which shows how drones and robotics are being used today, how they serve an area. When you introduce a horizontal, unifying, multimodal, interoperable with all players, when you introduce that Arrive Point Network into that environment, what kind of lift do you see in economics, customer experience, chain of custody? So we're on the front end of the first step of getting to Dallas, which is demonstrating that to large strategic partners that are active there.
Transforming that into partnerships on how to set that two to 500 unit infrastructure up for the existing automation that's going on, bringing in a lot of new capabilities. Just to give an example, today you make a drone delivery in that area. Someone, a person, goes and gets that order maybe from a Walmart shelf, maybe from a Subway, maybe from a Chick-fil-A. They bring it back to a Zipline or a Wing drone location that then gets you your delivery across town, across traffic, and that's great. When you have the Arrive Point Network and it's sitting at that Subway, now a robot can go back and forth between the Subway and the drone delivery station and no people involved. When that Subway sandwich then hits the destination, which is a high-rise condo complex, it now can go indoor.
Another AMR can pick it up from the drone at an Arrive Point and take it indoors and deliver it anywhere there, where today that doesn't happen. All these things, the way we like to say it, is the last 50% of the value and the experience and the security of the autonomous last mile will be achieved when this horizontal network goes in. The progression is demonstrating, working with partners, planning the deployment with partners, the APX finalizes, and then we deploy all that and interoperate that with partners. It's a year and a half endeavor that's starting in Q3.
Just to add to what Mark said, as we are partners in crime on this. As I envision sitting in front of these partners, and some of the partners that Mark and I have even had calls with, they indeed are unveiling their dilemmas that they have on both the front end and back end of delivery. From our standpoint, where we see the digital demos being so powerful is going back to his example of the container. Well, I'm sure that there were a time when freight forwarders were talking to their customers and saying, "Hey, this is what you're currently paying, and this is how we're currently executing.
Oh, by the way, look at this great invention that we have, and look at how we're able to increase efficiencies, bring your costs down, and be able to have a solution that's really looking forward." That's exactly how I liken this, is being able to go to those respective partners or those fast food chains or those retailers and say, "This is how you're currently doing, but if you could do it this way, look how much more efficient your business would be. This is what the cost of doing business is for you right now. With the Arrive Point Network deployed, this is where you could be able to pick up margins." Because right now, everything with delivery, even tipping from a customer base side, we want to make this as frictionless as possible.
Yeah. Gavin's law, right? The easier, the cheaper we make this, the more rapid the adoption, the broader the market that wants it. It's this virtuous cycle that we're kicking into and bringing to the existing market.
Great. We're almost up around time, I think we can sneak in one more here. Maybe Dan is best for this one. What are some takeaways for investors that we should have? How do you think about the next year or two and the milestones you're looking to hit, and what should we be most focused on?
Yep. Hey, thanks for that. I like to say autonomy unlocked. If you think autonomous delivery and pickup is going to happen at scale, you know it's not going to be landing on the ground or emanating from the ground. You're going to need a safe, secure access point in that ecosystem, and that's Arrive AI. We're the branded leader. We're the first mover, and we've got the platform agnostic universal solution that we are rolling out right now. It's the authenticated, autonomous layer for all delivery. If you got Amazon, Walmart, all the big guys, the trillion-dollar market caps iterating in that space, the utility or the infrastructure layer, that's us. You have to believe in the future of what we're doing here. Our earliest shareholders paid more per share to come in than we're available at right now.
It's really undervalued in my opinion. We've got great intrinsic value. We've got 10 utility patents issued in the U.S. We beat Amazon by four days, the postal service by two weeks, and others by less than a month. We're iterating on that every single day. We've got a world-class team working here. We're hiring. We went from six to over 50 people in the last eight months. We're moving very fast. The market is taking note. I would just say if you're looking for a play at the intersection of autonomy and AI, that's Arrive AI, ticker symbol ARAI on the Nasdaq. Come join us as co-owners with me and this great team.
All right. Great way to end it. Thank you so much, guys, for joining us. A really good conversation. We'll hope to keep in touch.
Thanks a lot. Dan at Arrive AI if you want to hit me up with any questions. arriveai.com