TuSimple (TSPH) 1 Nov 222022 Q3 Earnings call transcript

Good day and welcome to the TuSimple's 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 Amerman, Head of Investor Relations for TuSimple. Mr. Amerman. ahead. go Please

call Good XXXX Towanda. during welcome our host to while possible. just Thank call. morning We quarter the to preferred earnings would especially logistically appreciate third it we wasn’t you, have and yesterday, your earnings, flexibility

Financial are TuSimple's Chief Board Brad Eric us of the today Officer, Yumer; the Interim Director, TuSimple's With Tapia; Executive and Chief Ersin Interim Officer, of Chairman Buss.

take operating and financial and questions. first will will review the We then highlights we

and This a disconnect available you letter of being a this Relations be shareholder As anyway now. reminder, if will replay on page call TuSimple please recorded, in object of call Investor the our website. is

and and or results Please from in releases, note factors. our are SEC this events press uncertainties. that may actual to statements future a call detailed to risks Please and risk These only are differ refer shareholder statements the forward-looking contain materially predictions TuSimple's of variety letter, forward-looking due to that filings. subject factors

will the details, also accepted the refer letter in more non-GAAP Please shareholder not reconciliation are a the and principles. accounting with which to in our measures, accordance non-GAAP Harbor financial prepared measures measures generally disclaimer for non-GAAP GAAP presented We of to comparable including Safe financial discuss measures.

turn Brad I to begin. the to now call over will

the TuSimple's to of I’ve prior been Directors. Thank you, of Ryan. new Board Hi. My name since is Board the Chairman a Brad Buss, and of I’m TuSimple's member IPO.

Lead Director Chairman the of becoming Chairman Board, the as Before as Audit well as the served Independent of I Committee. the

the Chairman change transition necessary. as President That company the We’ve Executive the investigation in much replaced effective the recently to October his Board's became Officer an ongoing by his CEO necessary immediate This as Chief changes Hou of of from company. independent the and that Board being brief in Audit the Directors. as Board Xiaodi departure go a with Board want Officer, update well I as positions further, Committee. Sunday removed an Accordingly, XXXX. conclude to we connection Technology was Before announced Chief XX, to led a leadership initiated in provide of

We President, values Interim conduct has for I and who we to Executive a Operations company, and a and also very critical CEO these extremely values Yumer, transparency been want Vice President our while as permanent clear search of be appointed Ersin accountability that safety, to take we are seriously. CEO. our

shared conjunction relevant ongoing attention in partner. or that other the was the to OEM Based investigation, XXXX, in government information as company's the of potential believes The during confidential on company also the with This with cooperation information not security committee. the Hydron brought of Hydron place. company agreements without and audit evaluation non-disclosure

information disclosure. that that on obtained of the with XXX,XXX an believes Form as of company company Audit this connection the the investigation call, an during disclosing spent the of as believes working Committee based hours ongoing Furthermore, in the to without matters this for certain by the employees on Hydron X Committee, required with Audit time SEC yesterday, required in value detailed are for that XX. they policy. paid less our an such October hours X-K the than these by of Both matters had company company filed above The of estimated are SEC value XXXX

Hou. the to that company and lost terminate and necessary of confidence ability launched interest in Committee in Xiaodi's Wall internal Furthermore, connection investigation Xiaodi the as to was Journal with shareholders and by best The Audit Street the July. in in the making it judgment, CEO. The Directors Independent determined an is ongoing article, we trust was of the decision terminate and decision the lead to independent unanimously CEO made

it and make He he authorized media social behalf unauthorized be been not make this a Board company, statements judgment as statements. of certain like the disappointed making statements on Xiaodi making platforms. that may various making to in also any are in to his we as these on is not decision an individual, clear has crystal We is and member. lack doing aware of You would

technology Again, I the company works, is anyone data very the Board our world's includes of breaches have for commercialization. path this management proven there the we and will know company, it extremely runs, be driver heart developed want also agreement and who CFIUS to responsibilities the team the protecting of But clear we first out TuSimple's accountability trust. be on the take the we That are free this the to and test that this through at that under seriously. at autonomous

due we going are prepared set towards commitment This decisions this company trajectory on make and you related to transition. long-term is to stability this take Thank the be that the Q&A. success. only And my nature we further your the long-term remarks to any hard questions to understanding. CEO you My subject to related this the situation, concludes able to a for will of during this not

Ersin, some it our you. we're hand highlights operations. our financials. Ersin? then And walk AFN over the up quarter discuss to now to who making Eric, finally, with will of Thank will overview enhancements for that I will and

Management third understand welcome our standard the our past all to of for We for mission with setting efficiency difficult days fuel capacity, earnings humbled closely and Thank I'm that start new to partners. Today, stakeholders, and a the these Board employees I reliable, Brad. to while at juncture. few the be like have investors, the quarter been events concern call. safety. and And to and working caused. have you, uncertainty and provide how low-cost to by freight on Good to helping forward continue our critical this acknowledging lead entrusted to company morning, I'd our with for look

of provide I'd an our hand key Eric, And AFN, to move to for we the that commercialization update transparency will build stakeholders, who we year partnership. doing discuss I this discuss safety initial will next, and initiatives walk rest towards made a over highlight have in to the the what have we goal key it financials. on through like our Today, us will of to in XXXX. on place additions are then finally, with

strive we We of put everything core safety do. to at the

it market. us how to can benefits understand the in technologies essential transparent This to industry build potential important our is also is and for the be all for the We to autonomous with trust transportation bring stakeholders. of embrace all order

Going the initiatives work forward, will employ as autonomous market. bring highlight take processes we and the to technology to we we

and conduct the road be will operations auditors our independent our to verifying pleased and will with that industry multiple aspects of on and audits a various safety processes include we to partnering perspective. hiring, Additionally, I'm from technology announce for testing. recognized are within procedures training, These

While a we believe requirement not the today, this leading industry with are is these we audits.

road. Our for thousands and by on goal safest the engineering, safety to we of users year. development, testing improve the lives road all delivering have through is driver to save every Ultimately, safe transportation opportunity the

last have our expanding our had few additions AFN to we Texas. months, Over some presence as exciting the in we continue

this XX in location Texas. First, expected Antonio. Houston. a route capacity terminal the one early plan lease of in quarter Paulo. XXXX, we in on in terminal Phase major supporting we and play will be is connecting acres signed to Dallas key South a on I-XX, a is October, find first a interstate The XX completed development of in in of San our this And acres role to lease

is safety properties, With Texas case addition we we triangle, the assets these the the two patients in to then the need validated. of have support our

mark Adding run XXX to our track that this record first, fully costs. past with transported by partner handled was autonomous powered manually. first TuSimple autonomous fully of technology about extremely between of being mile logistic and proud kilometers partners are in autonomous last TRATON commercial traffic This goods. our technology. Europe's goods quarter, with commercial travelled another milestone a to the advancing truck in industry regular first towards And announced we transportation The to [indiscernible] conditions Sweden,

it program route an from Arizona in the a this After to freight unplanned we relocate to adjust partner X Last and rework caused have to our like I'd Arizona consideration, the an sense has construction point. Texas. U.S to move discussed makes much that us both update decided provide destination on Class and our most railroad. to road quarter, with we Next, you

an important AFN, our for to market both now for the additions the we [indiscernible] terminal the Texas given TuSimple in freight is And place and foreseeable capacity our our have plans partners. future. support to

We continue will this with the you to and progress. update work to on continue partner

cost stated, support key mile a improved focus A major consistently per significant which As removing the of this for components. reliability of is require is aspect reduction vehicles we us.

require does entire platform the undergo the the running on upgrade upgrading XXXX. us the our out most process of trucks expectation proprietary entire focused pull version we upgrade fleet that software. are to of fleet of with consistent complete This end will our a hardware We the to to the by of consist updated

There benefits this are two upgrade. main to

First, utilize provides we generating in testing fleet trucks a how of us mile. the trucks flexibility uniform and revenue for

reduce system, removing will requirement cost and more the to in a however, our upgrade mile. is we providing result expect a per opportunity reliable and importantly, in which More recognized substantial autonomous vehicles the key support

in internal are as critical the our maturing This gives Tucson. new or base. our to we grade. A us that well capability components utilizing of site. capabilities recent automotive a a grade of upgrades, is strengthening as capabilities on develop these of is design expansion percentage automotive internal is automotive greater With improved This result the supply hardware and component

for road, migration lead the are added We that a and for autonomous rates autonomous of And components. these our to certain failure ensure believe systems capabilities durable capabilities will the help will more testing fleet. on we that key heat, years us have factors validate cold to like expected that many last

discuss and our and while milestones our fleet we operations. revenue I'd made run focused our by Next, our technology, transportation changes have separately our driver developments on AFN like with our operation. introduce Arizona. our to advancing to I'll start test them highlighting in to some was was work autonomous technology partners Historically, exciting fleet to in

combining well same as result into hardware. the driver-out This we and gives this of our we our one will how of customers, have us running model operations. test generating for software that have technology. maturing our reached servicing Now be the fleet and AV autonomous for initial as process fleet The one capable I flexibility with the test revenue that of milestone, the utilize the we began either trucks state-of-the-art revenue in or of

mile. couple working per to of will years, continue reduce next the For cost we

In Our mile. concentrate focus in this on a to triangle. generating and in decline a revenue has year-over-year lead on models the short-term, Texas to the the lanes potential around revenue will few key

it our viable cost the become more believe down the to move enabling we expect as commercially curve, we to is However, quickly. prudent decision technology

billion $XXX the are a on of We market. focused winning U.S share meaningful

over And now it the discuss I hand financials. will Eric, to to

Thank you, Ersin.

start Let with truck reservations. me

This count quarter, at our steady reservation held trucks. X,XXX

did new However, after from XXX quarter partner. a closed, the a receive we order truck

the partners. We continuing see with interest are we and existing potential from pleased

Now year-over-year though, X% sequentially. driven $X.X was to was fleet. loss financial gears the third by for shifting million by new and our increase quarter, larger better primarily of year-over-year a and higher from our reported high 'XX. brand XX% in of utilization revenue We results utilization. fleet revenue The quarter performance, the primarily of a driven The performance potential

technology operation Texas one commercialization. While continue it's revenue shift with with the health commercial market. near-term for highlight we and gradually Triangle, business actions major the We line of miles. revenue year the Ersin's focus is regarding the fleet That comments right we on continue expect as long-term in to revenue the bringing our important to our headwinds perform we a autonomous as to upgrade of believe said, goal the to full to to previous as operate guidance,

spent period million same Moving in flat to SBC. This total last and the million expenses. compares including paid We quarter, $XX to of R&D compensation essentially year this 'XX. of stock compared on with $XX million for $XX quarter second the

talent. technology, R&D assets increased impact Excluding to as and core sequentially the X% tech invest of R&D our SBC, we in continue

possible. dollars R&D continue talent, commercialization of will in efficiently key as world-leading We and while managing invest our as our to technology

in On $XX including the million the of XX% million $X SBC. quarter period, 'XX SG&A front, compares the sequentially. during up the $XX million period $XX This of we second last same of to year million or in spent and

sequentially. was Excluding of up SG&A SBC, XX% the impact

the second 'XX, of of we favorable true-up $X.X million. As a in account had reminder, quarter

partly offset item, this sequentially, the costs impact primarily of initiatives. X% was due Excluding higher in legal quarter, the to cost reduction SG&A third up by several

'XX, sequentially. loss operations $XXX last in Our the was the quarter X% up versus same from million year third and up of period X%

XX% up the XX% the year versus quarter in $XX and was sequentially. loss 'XX EBITDA adjusted Our of third same million, period up last

of truck-related with down related equivalents million facility as In had and billion, $X.X primarily the totaling the in We investments as approximately third investments to short-term of AFN. CapEx, cash, $X.XX well ended equipment our quarter hardware cash 'XX third X% sequentially. quarter 'XX, of we and

I'll it to Ersin now for back remarks. hand few last a

I I build expect to ahead know a when I say will excited opportunities to you, for I that Eric. that XXXX our look for speak about with entire Thank Texas. our in be our I forward that the continue as to we TuSimple, and AFN lay program. big year I'm you continuing update team

are With session. start to we ready Q&A that, the

Truist. Jordan Our line the Instructions] first [Operator Levy of with question comes from

line Your is open.

on this confidence it's get think thinking organization. time for the distraction Maybe business And side, you're or shareholders first you kind strategy of all commercialization that. the for There's moving and in taking Good line. mentioned questions how a your Ersin important sense about company events the won't potential lot you of now to recent clearly morning and on and my forward in And of with be is the I for but Brad. all taking thanks for in questions. more a the

just wanted your get there. to I high-level thoughts So

Thanks question. you. Thank for the

our all, in commercialization changing with the our changes. terms First XXXX of not plans of in recent strategy is

in that we you a are Thank we more have feeling we in these confident hit on milestones months. upcoming will that you. be that, our milestones lot laid Given and out, can we updating the details

in commercialization more Board's really importantly, on are balance excited to perspective, it think sync, the everyone people, mean I isn't change. from very we just has Ersin we Yes. the the involved technology, strategy. a the got is it. sheet. echo, to plan, And going in the very And I been strong

are you So going changing, things that CEOs, I can is my see sometimes to gosh, not know but oh happen.

excited path very we on all are the are We on.

trucks a upgraded perspective? all utilization in how speak been of you just seen of reliability or And thing? any to or you a and that totally sort a efficiency that. Appreciate from and or performing so far improvements rescues the them follow-up measurable have seen the quick that Can question. separate have you've number either Like

Yes.

are first have do We So that update truck we run newest in currently liability are due automotive base upgrading, the we are that haven't building to road hardware will that we the in as it do a on and parts maturing in in the that when will When the that we our and fact, near the well ourselves we update, supply increase series, grade in bit upgraded you. yet. are automotive components in-house quite grade. as expect Tucson or that we

-- lines a will upgrade a plan, the are assured truck on more we to definitely more spend add when just that the which date. this our in the months, and rest CapEx we'll share be our because getting revenue share in and target, and what ready circulation future as again, expect is that And will we XXXX financial driver upcoming a computing time lot and details out key we to in do have around for

my for all you Thank taking Great. questions.

[Operator Instructions] comes Our Morgan Thank Shanker next of the you. Stanley. line question Ravi from with

Your line is open.

Good everyone. morning, Thanks.

pick do just do of and the components you you these little this bit upgrade bit, So do vendors do and on these on have the kind of run situation vendors steps? where maybe of, chicken need Or them technologies? kind is visibility to you to ultimate touched How you components a and a comprehensive problem? And do the you the products that it your finalize fleet, the through little that do point this the egg all to you finalization solve first then kind a for but that Ersin, some all egg -- for to and testing chicken and of and touch of and one need the you upgrades?

for question, Thanks Ravi. the

a much we months base and these rolling while vendor and doing upgrades as the with for supply these for we possible have selection ready that now, our as supply to been ensure into So, starting been have of quite working course, right XXXX. is

currently, do these that parts supply hiccups So not see well internal of as producing in as terms we upgrades, both for external ones. the big are our we

We they going we they the which different of terms have -- base been our down use we started [ph] [indiscernible] months, and couple with suppliers. have tests supply are reducing tests of and and been of in. large these doing the putting then during in then took number to past And a in orders supply strength

for you. big will do days So like we update mentioned, But reasons, that if happens we hiccups. of later unexpected really expect I in not course

And financial chain to CapEx is saw only related of some supply so this trucks. the long upgrades, performance, quarter but our to just lead the uptick you for to that items connect it facility actually on not

our the So keeping for year. we are guidance of CapEx

So Again, you into QX. address CapEx in offer trucks and also it spill to would need expect XXXX. to see will lot just more of to a this the

And yet, planned anything? it's And confirm him the plan. as direct maybe bit can you technology patents the you operations for get maybe follow-up, adjacency. you off know to take are exactly do to expected need know a this you used on owns operate? just trying you sign an kind to there's going I to of early again, of kind a that Can confirm of as also if but week And that but forward? and wouldn't you Understood. or of days run said I any Xiaodi the guys this, questions

Thanks, Ravi.

as are patents TuSimple the by company. the owned So

to belonging the Of the of listed company. rights statements, an as name some these is Xiaodi's course, are patent on but inventor,

operations planned? And are as running

Yes. Sure.

Okay. Thank you.

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for our the we're So plans. in 'XX working of process

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in us Can processes morning. don't multiple of the to give to why And these see you sense if to look specialties? just different the to that I having what the them. auditors last there's Good accomplish the as if with of you April on specifically a I at wanted a then different from error for as for perhaps Ersin, to come or human agreed was independent call. safety. need if I and Thanks. topic you hope want classified know regions aspects incident characterization? or back that's

question. the for Thanks

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perspective in been the have from in well as them understand making engaged a very we and know, processes our terms you months the stakeholders as of technology. safety opening last As couple up our of with

understand to as These interactions in a stakeholders that have more us can provide well actually lot visibility our as this area. we education led

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last And questions be Okay. secondarily, could X-K so And us XX on of little take could to trust direct this, to give if determined the least even and to wanted a some two. Board ongoing based XX, investigation, of the see context give in was stakeholders over to some the just far don't hours? on that? I you share you want wanted if without there's confidence as I Xiaodi the lost those know hard so Brad, the then, in clarification if at reaction firing square to you why can to to though an but you some cause, see then your Understood.

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time. for you the Thank Okay.

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guys. much so Thanks

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Sure.

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removal Could Doyle Hey, the detail projects, specifically morning. the on of you about the Or This you were pushing then great. that call, are Nick time talked ramp if would second upgrades all? half the vehicle of of that's about ongoing. just line had guys. of Good there at 'XX. the any wondering give And around the support kind you the some is hardware Rajvi. on behalf more update talking us I'm self-driving be out for that

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expect hit do we XXXX. both to So milestones in

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to that technology in for potentially quite miles. us prove think our is I real really scalable critical

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Thanks Excellent. guys.

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morning. Good

Just a quick of couple ones here.

Antonio to we see in is Arizona to piece for a and resumption Dallas to a On that's the to open from up move the do revenue? of that growth? San material of And both that Texas, AFN's need customer wait

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not. I'm

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for there reasons couple a So are of expectation. this

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then fleet. circulation to then a upgrade So and from fleet upgrade go validated the to there's and the the be back to

that the small is of part. particular effected a of So downtime trucks number continuous for one

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your on we foresee no but focus trucks, on to the tech, just our chime Again, upgraded we trucks current in, slowdowns we answer running as question for tech. are about And still systems to upgrading will with the system.

So on revenue Yes, testing the but the on not we don't foresee capabilities. slowdown. any potentially,

now to our In in market. addition, we are the that's right expectation you year. this mentioned trucks, But XX again,

a count to are our fleet. more potentially in secure trucks more we share But on 'XX. plans. will We have 'XX might higher our in again, We trying

forward it. detail. Thanks the to Look Great. for

back further would questions showing you. Ersin remarks. Thank like call to the turn I'm the queue. for now over to no in closing I

time to us you for today. join the Thank taking all

As the our challenging earlier, have understand that months stated last all stakeholders. been we few I of for

ourselves with our trajectory We the you. and stability forward [Indiscernible] towards Thank are you on success update We look setting company committed progress. to progress. to you highest this hold we long-term our to and to a with standards, ensuring continuing Thank that you. update forward.

Ladies conference today's your Thank this participation. concludes and call. for you gentlemen,

You may disconnect. now