AUR - NASDAQ

Hello, and welcome to the Aurora Third Quarter 2023 Business Review Call. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Stacy Feit, Vice President, Investor Relations. Please go ahead, Stacy.

Thanks, Kevin. Good afternoon, everyone, and welcome to our third quarter 2023 business review call. We announced our results earlier this afternoon. Our shareholder letter and a presentation to accompany this call are available on our Investor Relations website at ir.aurora.tech. The shareholder letter was also furnished with our Form 8-K filed today with the SEC. On the call with me today are Chris Urmson, Co-Founder and CEO; and David Maday, CFO. Chris will provide an update on the progress we have made across the key pillars of our business, and David will recap our third quarter financial results. We will then open the call to Q&A. A recording of this conference call will be available on our Investor Relations website at ir.aurora.tech shortly after this call has ended. I'd like to take this opportunity to remind you that during the call, we will be making forward-looking statements. This includes statements relating to the achievement of certain milestones around realization of the potential benefits of the development, manufacturing, scaling and commercialization of the Aurora Driver and Aurora Horizon, our anticipated time frame, the expected performance of our business and potential opportunities with partners and customers, expected contract commitments from customers for our products and services, expected cash runway and overall future prospects. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call, in particular, those described in our risk factors included in our annual report on Form 10-K for the year ended December 31, 2022, filed with the SEC as well as the current uncertainty and unpredictability in our business and markets and economy. Additional information will also be set forth in our quarterly report on Form 10-Q for the quarter ended September 30, 2023. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of the date hereof, and Aurora disclaims any obligation to update any forward-looking statements, except as required by law. Our discussion today may include non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for, or in isolation from our GAAP results. Information regarding our non-GAAP financial results, including a reconciliation of our historical GAAP to non-GAAP results, may be found in our shareholder letter, which was furnished with our Form 8-K filed today with the SEC and may also be found on our Investor Relations website. With that, I'll now turn the call over to Chris.

Thank you, Stacy. The third quarter was a period of intense focus on execution across our organization. In addition to completing the $850 million capital raise, we also continue to make strong progress toward closing the Aurora Driver Safety Case, further enhanced our autonomy performance, scaled our trucking operations and advanced our partnerships. We executed all of this while also maintaining fiscal discipline, having managed our cash spend below our quarterly average target. We also saw some key developments on the legislative front. During the third quarter, I had the honor of presenting to the House Transportation Infrastructure Committee on the future of automated commercial motor vehicles. Being the only company invited to represent the industry at this federal legislative hearing underscored our leadership position in autonomous trucking and the trust we have built with policymakers through our transparent and engaged approach. I was proud to speak of the economic value of autonomous trucks, the meaningful progress we've made as a company and industry and most importantly, how we prioritize safety at Aurora. Bipartisan recognition of the safety and efficiency benefits of this technology, along consensus view that the U.S. must solidify leadership with respect to autonomous vehicle technology was central to the discussion. Throughout my career, I've spent significant time with our partners in government, and I saw a tangible shift in tone in this congressional meeting. It's no longer a question of if autonomous trucks will arrive, but rather just a question of when. At the state level, under existing law regulation, autonomous vehicles can help, say be deployed in the vast majority of the U.S., including Texas, where current law expressly enables the safe operation of autonomous vehicles with or without a human driver. California, however, has seen - has been an outlier with respect to autonomous trucking. We saw a very positive development in September when - Governor Newsom vetoed the private [ph] bill, AB 316. This was a meaningful statement in recognition of the value our technology can drive both in terms of safety and economic benefits. We're committed to working closely with the California Department of Motor Vehicles and California Highway Patrol in anticipation of the release of draft regulations for autonomous commercial vehicles as part of the rule-making process that is currently underway in the state. As we continue to work with regulators and legislators, we hold steadfast to our principles of openness and transparency. Building trusted relationships with all of our stakeholders is fundamental to our approach. Now let's dig into our third quarter highlights. As we stated, our Safety Case is a comprehensive, evidence-based approach to confirming our self-driving vehicles are acceptably safe to operate on public roads. It goes beyond just ensuring the vehicles drive well enough for a demo rather demonstrates that our product and our company are holistically and sustainably safe. The autonomous - autonomy readiness measure or ARM is a weighted measure of completeness across all claims of our Safety Case with the launch lane. It reflects the percentage of work needed to move from a feature complete milestone, which we achieved at the end of the first quarter to our milestone Aurora Driver Ready, when we will have confidence in the Aurora Driver's ability to operate safely without a person on board. We achieved an ARM of 84% as of September 30, 2023. This is up 40 points since our feature complete milestone at the end of the first quarter and up 19 points during the third quarter alone. Within Aurora, we track the work including our Safety Case across the core elements of our product: Aurora Driver hardware, Aurora Services, vehicle integration and Aurora Driver software. Today, we have completed all of the claims related to Aurora Driver hardware and Aurora Services necessary for commercial launch. We've also closed all of the vehicle integration claims for Aurora Driver Ready. These three teams are now primarily focused on the respective work to prepare for growth beyond our planned commercial launch. Drilling into hardware specifically, engineering the Aurora Driver hardware for enhanced reliability and to withstand the harsh environmental conditions trucks can experience on the road is essential to maximizing uptime. We completed the hardening of our driverless hardware, and our new fleet is now equipped with the latest generation of the Aurora Driver kits. This kit will be our commercial launch hardware platform and also contains hard versions of our proprietary FirstLight Lidar and computer, both of which have been tested to meet our target levels of reliability. We have included visuals of this integrated hardware on Page 7 of the slide deck. The kit's mounting location is optimized for performance, while its modularity enables serviceability on the road. And it's pretty darn good looking, too. Our Aurora Driver software teams have also made great progress toward Aurora Driver Ready. As a reminder, an autonomy systems performance must be validated against a vast number of scenarios, many of which are thankfully rare on public roads. In turn, a key component of our approach leverages Aurora's Virtual Testing Suite the amplify exposure to rare and as yet unseen events to test the Aurora driving performance in those scenarios. Success of these tests support closure of the Safety Case claims and our belief that the Aurora Driver is designed to respond appropriately to such rare scenarios. We now anticipate completing the work to validate a small number of our Aurora Driver Safety Case claims will stretch beyond our end-of-year goal. Importantly, the work on this segment of claims does not impact our expected timing of commercial launch. This work is being performed by a limited subset of the team. We expect this work and thus the achievement of Aurora Driver Ready to be completed around the end of the first quarter of 2024. We have decided not to reallocate additional resources to this and instead are maintaining our momentum, towards commercial readiness. And we are already reallocating parts for our engineering team, to begin work beyond the Aurora Driver Ready milestone, including efforts, to improve the cost effectiveness and to increase the breadth of places and conditions, under which the Aurora Driver could operate. The Aurora Driver development and validation process is complex, so I'd like to take a moment to walk you through an example of how we progress the Aurora Driver system through development to this late stage of validation. For this example, we'll look at our sideswipe avoidance capability. While not an everyday occurrence, sideswipe collisions are one of the most common collisions encountered by trucks on the roads. So of course, the Aurora Driver sometimes encounter situations in which a truck or light vehicle in a neighboring lane on a highway begins to veer into its lane. We've designed the Aurora Driver's response to these potential sideswipes to emulate how our expert commercial drivers handle these scenarios. On Page 5 of the slide deck, we've included a collection of simulations demonstrating how the Aurora Driver's response now matches how operators had reacted in the past, before our system was reliably able to respond appropriately. And on Page 6 of the slide deck, you can see a real-world example of the Aurora Driver traveling southbound on I-45 between Dallas and Houston when our truck is almost clipped by a trailer traveling mostly in the neighboring lane. The Aurora Driver perceives this sideswipe threat, assesses the surrounding environment, including determining if it had space on the shoulder to the right and then shifts itself to the right portion of its lane, temporarily and safely crossing the shoulder boundary. These actions enable the Aurora Driver to successfully avoid the sideswipe scenario. We now have confidence in Aurora Driver's ability to handle sideswipe scenarios appropriately, and we're in the process of completing the final validation. As evident in this example, we continue to see our validation work accelerating and the quality of the Aurora Driver improving. Every day, our partners, customers and regulators were able to experience these improvements as part of our showcase program. We continue to make great progress and are focused on achieving our commercial launch on schedule at the end of 2024. Concurrent with the Safety Case work and the, bring up of our new fleet with our driverless hardware, we continue to scale our trucking operations during the third quarter. We finished the build-out of our second commercial ready terminal located in Houston. This terminal completes the infrastructure needed for driverless operations on our Dallas to Houston commercial launch lane and establishes the first commercial-ready autonomous trucking lane in the U.S. We have included footage of the new terminal on Page 8 of the slide deck. Despite a cyclically challenged commercial freight market, we continue to make steady progress growing our commercial loads and operational capabilities in preparation for commercial launch. We, in turn, achieved our end of third quarter target to autonomously haul 75 loads per week for our customers. We're now logging over 20,000 commercial miles per week. Cumulative to-date through October 29, we have autonomously delivered under the supervision of vehicle operators over 3,200 loads, driving more than 895,000 commercial miles with nearly 100% on-time performance for our pilot customers, including FedEx, Werner, Schneider, Hirschbach and Uber Freight. One way we measure our performance successfully operating the Aurora Driver service in a commercially representative setting is through the on-road autonomy performance indicator or API. This metric allows us to track not just the state of our technology, but the maturity of our processes and procedures in operating our business. The indicator penalizes the use of on-site support, which we have the most expensive support provided to enable Aurora Horizon. As a reminder, we did not anticipate that aggregate API will be 100% even at launch, because certain situations, for example, flat tires will always require on-site support. As we look ahead to commercial launch and beyond, scalability and ultimately our profitability will be supported by a reduction in the level of on sites are required. We believe it is important to hold our teams accountable for delivering a complete, commercially representative products and evaluating its performance on that basis. The API is one way we do this. For the third quarter of 2023, the API was 98%, demonstrating another quarter-over-quarter increase. Across the commercially representative loads completed in pilot operations on our launch lane in the third quarter, we again saw notable improvement in autonomy performance quarter-over-quarter. Over 60% of these loads had an API of 100%, and 84% had an API greater than or equal to 99%. In the shareholder letter and on Page 10 of the slide deck, you can see the solid progression of our autonomy performance throughout this year. I'd like to take a moment to show you a few examples of just how good the Aurora Driver's performance is, specifically in challenging traffic conditions it encountered during the third quarter on both highway and surface streets. In the video on Page 11 of the slide deck, on I-45 on approach to Houston, the Aurora Driver has decided to lane change to the left and turns on its turn signal. As it starts the lane change, another vehicle begins a last-minute aggressive lane change into the same space. The Aurora Driver immediately recognizes this contested situation and very naturally pauses its full lane change, allowing the other vehicle to pass by and then safely completes the original lane change plan. The other driver then proceeds to cut across multiple lanes of traffic. I think it's a New Jersey slide in the [indiscernible]. In the example on Page 12 of the slide deck, the Aurora Driver has just exited the highway in Houston. Traveling southbound after a stoplight has turned green, it perceives a vehicle in its lane driving the wrong way down the road. The Aurora Driver slows its speed given this dangerous situation, which allows the upcoming vehicle to take its turn off of the road. The Aurora Driver's response enables it to avoid the potential collision. Moving to our partners. Our work with - our truck OEM partners, PACCAR and Volvo Trucks, and our new Hardware-as-a-Service partner, Continental, continues to progress as we prepare for commercial launch and beyond. Earlier this year, we announced a long-term exclusive partnership with Continental. The goal of our partnership is to bring self-driving technology in the trucking industry at commercial scale by jointly developing, manufacturing and servicing future generations of Aurora Driver hardware. Under our Hardware-as-a-Service business model, Aurora will pay for the hardware on a per-mile basis. During the third quarter, the Continental and Aurora team achieved the first major partnership milestone, which finalized the detailed development plans for the future generations of the Aurora Driver hardware. We look forward to continuing our partnership with Continental and to industrialize the first commercially, scalable autonomous trucking systems, with a cost structure in place intended to support our long-term profitability objectives. On the vehicle platform side, during the third quarter, we brought online our new fleet of Peterbilt 579 trucks updated with the latest generation of the Aurora Driver hardware kits. This truck platform is equipped with prototype systems that will be necessary for driverless operations, including redundant braking, steering and power, which we are actively testing. We also received the first autonomy enabled Volvo VNL. During the third quarter, in addition to having prototype redundant braking during a power systems, this truck was built with the necessary structural interfaces in place to support our sensor pods, simplifying the hardware installation process. We were, in turn, able to rapidly integrate the Aurora Driver as a preassembled and pretested hardware kit. Our Volvo truck builds are continuing during the fourth quarter in preparation for autonomy testing of this platform, which is expected to begin in the first quarter of 2024. As our teams continue to advance towards this meaningful moment in our partnership, Volvo Autonomous Solutions just recently reiterated their excitement for their autonomous trucking product, powered by the Aurora Driver and the tremendous revenue opportunity that they believe lies ahead. This deep integration with OEMs and suppliers is absolutely imperative to bring a commercially viable driverless trucking product to market. While over the years, we've seen a handful of autonomous trucking companies pull the driver for a single or small series of demonstrations, none of these companies did it on a truck platform that was developed with or sanctioned by its OEM and key suppliers for driverless operation for commercialization at scale. With each developmental milestone we reach, we're also codeveloping the autonomy ready truck platform and all of its subsystems with our OEM partners and their Tier 1 suppliers. We're confident that this is the right approach for the future self-driving truck technologies of business. And frankly, we believe the only approach for commercial - deployment and scale. We are more confident than ever in our leadership position and see our advantage continuing to grow. We look forward to demonstrating continued progress over the coming quarters as we work toward achieving our Aurora Driver milestone in preparation for our planned commercial launch at the end of 2024. Thank you for your continued support. With that, I'll now pass it over to Dave, who will review our financial results.

Thank you, Chris. Let's discuss our financial results. During the third quarter of 2023, we continue to demonstrate strong fiscal discipline while executing toward our milestones. Third quarter 2023 operating expenses, including stock-based compensation, totaled $212 million. Excluding stock-based compensation of $41 million, operating expenses totaled $171 million. Within operating expenses, our R&D expenses, excluding $36 million in stock-based compensation, totaled $146 million. SG&A expenses, excluding $5 million in stock-based compensation, were $25 million. With the Aurora Driver in the final phase of refinement and validation for the launch lane and all revenue under the collaboration framework agreement with Toyota previously recognized, we did not record any revenue during the third quarter of 2023. We used approximately $147 million in operating cash during the third quarter of 2023. Capital expenditures totaled $5 million, including expenditures to complete the build-out of our commercial-ready terminal in Houston. This total cash spend was well below our target of $175 million to $185 million per quarter on average, reflecting our strong commitment to financial discipline. During the third quarter, we also raised $850 million in combined gross proceeds from a private placement and public offering of our Class A common stock. Net proceeds totaled $828 million. We ended the third quarter with a very strong balance sheet, including $1.5 billion in cash and short-term investments. We continue to expect this liquidity to support our planned commercial launch and fund our operations into the second half of 2025. With that, we'll now open the call to Q&A.

Thank you. [Operator Instructions] Our first question today is from George Gianarikas from Canaccord Genuity. Your line is now live.

Hi everyone, and thank you for taking my questions. Just two questions. First, I'd like to start with the regulatory environment. And there's been - obviously, you had a win in California. But on the passenger vehicle side, there seems to have been some -- at least one of your competitors there appears to have had a little turbulence in their operations. I'm curious as to whether you could kind of just talk at a broad level of the friendly list on behalf of - regulators in Texas and in other states outside of California and enabling commercial service starting next year?

Thank you for asking. So when we look at the landscape, we continue to see a very welcoming and positive atmosphere for the regulators. Part of our effort has been to be transparent with them, allow them to understand our approach is why we share things like our Safety Case. It's why we've shared our approach to risk management internally, and I think that gives our partners in government a lot of confidence. I think what we're seeing is rational and reasonable regulatory response, right? We're introducing new technology, and it's appropriate and kind of their job to ask questions when things don't feel quite right. From our perspective, we haven't seen this have any impact on our relationship or engagement with regulators or our ability to deploy commercially as we planned.

Great. And then just as a follow-up to that, there was some discussion in your press release about the Safety Case claims extending into the first quarter of 2024. As I remember previously, you talked about the Safety Case being completed fully in the first half of '24 with 95% of it being done by the end of the year and then I think 5% achieved once you complete the required integration testing? So, I'm curious as to what these extra claims are that are extending into 2024 and whether they have to do with the hardware testing as you previously guided? Thank you.

Thank you again. So there's - the way we had scoped Aurora Driver Ready was that you can think of it as the things under our control that we're developing Aurora be the hardware or software that we would have confidence if we integrated that to an appropriate vehicle platform that we could put it on the road that it would be safe. And then because of the timing of the vehicle programs relative to our internal program, there's going to be a small set of claims that relied on our ability to integrate and validate with the vehicle on the loop. And then those were going to drag past the end of Aurora Driver Ready. What we've been working - we've been working through this 460-some claims of - in the Safety Case. And over the last couple of months, we realized that we had a part of the system that we were validating where the validation process is just taking a little bit longer than we expected. We discovered some inefficiencies in the way we were doing that work, and we've remedied those. And so, we just wanted to be transparent that while the vast majority of this work will be done that it won't have any impact on our commercial timing. It's not quite consistent with what we had guided towards. So, we wanted to share that with our partners.

Thank you.

Thank you. Next question today is coming from Chris McNally of Evercore ISI. Your line is now live.

Thanks so much. Hi, Chris and team, appreciate all the detail. Just one question from me, but a big industry one, and I apologize in advance for the preamble and really for revisiting a little bit of the topic from before. But I think many people have said the San Francisco robotaxi incident or black swans are inevitable. We know even 100% accurate AV will have accidents caused by human agents. We can then debate the particulars, the tech, the teleops. But a topic our team views as really important was actually covered in a podcast last week, the - not often discussed critical role of public comms in AV. Up to now, AV companies have kept the details why their driving policy rightly to themselves during testing, meaning the public is asked to trust the AV when deployed after internal validation. But I think as we've discussed, the "right decision" in driving not just the legal one, as we know inevitably in odd cases, will be up for debate. So long preamble. But my question, has a Aurora thought through what will happen on their first rare occurrence accident, how they'll share info with the press, the DMV? Will Aurora give full access to the full - to the videos, the role of human teleops may have played down to even at some point, insight into the probability where you [seized] your driving policy was running off at the time of the decision. I know it's a long question, but anything that you can share, because I really think it's a critical time for the industry? Thanks so much.

Yes. No, thanks for a very thoughtful question. This is honestly something that's consistently top of mind with us. We think about this a lot, right? And how do we - we're obviously building a system that we expect will increase safety on the roadway. We think it will create value for customers, partners. But at some point, bad things will happen. And so, we already run tabletop exercises internally. We do this periodically where we have a market webs that happen on the road, and we go through our emergency response processes, the plan for how we would engage with regulators, with our partners, with the public around this and then critique, the response we have from that. I think we've demonstrated over the last several years our willingness to be transparent about safety and our approach to it. Whether, again, it's about sharing our Safety Case approach and how we think about building an argument for why you can trust the Aurora Driver to share details of our safety risk management process and working, with regulators to help promulgate that to others in the space. Concretely, in I think it was March of this year, we had an incident on the road where our vehicle's driving down the road and another person driving light vehicle. We think might have nodded off and the vehicle, drifted across the lane and sideswiped one of our trucks and then bounced off. And with that, we, of course, immediately notified our partners, notified the right regulatory authorities and also shared publicly the details of that event. So, our expectation is that transparency and clarity here matters that we'll continue to live that as we go forward.

Really appreciate that, Chris. Maybe the only follow-up is, do you see any other industry-wide practices that may come about as a result of some of the - what we're seeing in San Francisco or California? Meaning could we have things like reporting standards? We had a beginning of that in California, no one loves the disengagements, but could there be a body that puts out sort of numbers that can be analyzed, all these things that would increase trust? And obviously, if it's done at a large scale, of course, with many different players, you get a very large evidence of body of data, which shows the overwhelming safety, and that's obviously what is the end, goal here any thoughts on that?

Yes. No. And again, I think that there's - so there's a few different parts to that. So, one is that the concern that I've had in the past that we've expressed around the disengagement rates report in California is that it doesn't provide an honest assessment of performance because it mingles development and release software. And that, of course, when you're developing something, you expect there to be incomplete elements to performance. And you have a process around that to ensure safety of the road. What we're actually excited about is that there is already - I don't know if excited is quite the right word. But there is a federal reporting process a standing - general order, I think they call it, from the Department of Transportation, where anyone developing automated technology has to report even very minor incidents to them so, they can track this and build more statistical data. And so, I expect that to continue. And that is fairly high fidelity. I think that somebody - another vehicle threw a rock up, and it hit the windshield of one of our trucks. We had to report that to DOT. So, I think that provides a level of - a granular level of visibility into events that are happening on the road.

Much appreciated.

Of course.

Thank you. [Operator Instructions] Our next question is coming from Tom White from D.A. Davidson. Your line is now live.

Hi. This is Wyatt Swanson on for Tom. Thanks for taking our questions. Congrats on opening your first commercial-ready route. Could you maybe give us some more color on what you expect with this route as you get it up and running? You mentioned something like 75 commercial loads per week. So what does that look like over the next 18 to 24 months?

Sure. So this is a place where we've got facilities in either end for this initial deployment of the technology that we'll operate between for our customers. At the end of Q3, we were at the point where we're pulling 75 loads a week. And the guidance we provided in our road map is that we aspire by the end of the year to achieve 100 loads per week on that route. So this is where the Aurora Driver is operating, but we continue to have our commercial driver licensed operators on board as well. This will also ultimately be the first lane that we operate without a driver of the trucks as we've - towards the end or at the end of 2024. And over the time between now and then, we expect to continue to increase volume on that route and other routes, but we haven't provided further guidance on that at this time. And Dave, you...

Yes, I think it's also important to note on this lane, this is an important lane, right? This is our launch lane. And when we talk about commercially representative locations, what that means, is all the operational capabilities, all the things that we need to have happened to operate on this lane exist at the terminal. So, if we need to do fueling, we do that on site as opposed to have to go off-site to do it. If we need to do a calibration of our systems, if we need to do minor repairs, everything is self-contained in there. So you actually can operate an autonomous lane. And this is how we envision and demonstrate this capability and how it will scale over time. We're determining all the necessary capabilities that you need to have, and we continue to refine that along the way. It also helps build confidence with our customers.

Got it. Great. That's really helpful. And then a follow-up to that. What can we expect in terms of opening up additional routes over the next 12 to 18 months as you guys get ready for commercial launch?

So today, we also operate on the route between Fort Worth and El Paso, and we're pulling loads there daily for customers. As we - we've provided in the past some kind of general guidance that we expect to expand East to West along that corridor. But I don't think we can add more specific details today to that.

Thank you very much.

Welcome, thanks for the questions.

Thank you. Next question is coming from Mark Delaney from Goldman Sachs. Your line is now live.

Good afternoon and thank you very much. For taking my question. First on the business side, how are you thinking about contracting loads for your commercial launch by the end of this year? And does the cyclical weakness currently in the freight markets impact what you're thinking about with respect to entering some contracts independent of what the Aurora Horizon may be capable of?

Yes. Hi, Mark, that's a great question. I think in general, we're still on track for contracting with our customers at the end of the year. I do think that the cyclical nature and really the depressed market has been a challenge for many of our partners, especially in the FPL space. But I also think you have to give a lot of credit to them. Despite some of the challenges, they've continued to work with us. They see the long-term value, and they continue to increase the number of loads. And so we're working through right now, what our plans are going to look like for contracting through 2025. And so, we're working and making really good progress on that, and we'll be able to share more information at the end of the year. But I would say that the depression of the market has caused some challenges for them operationally, but they see the value in this. And so, they're still fully and completely excited about wrapping our plan together in the long-term. So thanks.

Got it. And then, Dave, one other question for you. Just on the operating expenses and cash use kind of were down sequentially, and you guys have talked about some levels to expect through the commercial launch. But just hoping to better understand the reasons for the sequential moderation in spending levels and perhaps any of this, was it at all timing related and maybe a little bit on the higher end of that range next quarter or any other ways to better frame some of the sequential around spend? Thanks.

Yes. I think there was some minor timing adjustments, but most everything as we had planned, right? Like we had a cash use, which was about what we expected. We anticipated Q3, to be a little bit lower. When we guide on the average of 175 to 85, we have to put an allocation, right, because it's on an average. So, we'll put like the bonus that we pay, which - in this time period was the second quarter. And next year, we're anticipated to be in the first quarter. So, there is some allocation of that on the quarterly average. But yes, we did expect this quarter to be right about here. We did have some - again, some minor timing for our contract manufacturing support that we've had. But that's pretty minimal. I think this is more of a testament to the fact that like it's really important for us to be wise and make sure that we know how to use, and have the right financial discipline. And we're really finding a lot of opportunities, to reuse it and to just do things smarter without jeopardizing any of our progress. We would expect Q4, we don't see big shifts from Q3 to Q4 that would have us super concerned about missing our target for Q4. We still expect to deliver within the target range or better than that for Q4.

Thank you.

Thank you. Next question is coming from Jeff Osborne from Cowen and Company. Your line is now live.

Yes. Thank you. Good evening. I was wondering if you could, Chris, just flush out a bit more on the driver Safety Case being closed? The move to Q1 there, was that all due to the incidence that you mentioned before in terms of sideswipe? Or is there sort of a laundry list of edge cases that are rare in society, but that you need to bring out? I was just trying to understand that delay there?

Yes, yes. No, this isn't - I wouldn't think of this as kind of the dreaded, boy the edge cases are going to get you. It's going to take forever to get the last bit. This is not really that at all. We obviously take safety very seriously. We want to make sure we have a solid validation particularly across the driving capability. And as we have been building the test suite for that. We realized it was taking us a little bit longer than we had expected for us to develop some of those tests and kind of get them to the point where we could operate them and get ourselves conviction that the system, would work the way we expected to on the road. And so, the majority of the work across the Aurora Driver is going to be complete. There will be a small subset of the team that continues to work on this, while the rest of the team is really moving on to how do, we make the Aurora Driver operate more places. How do we have it ready to expand other lanes, how we bring the cost out of the system. So - because of the kind of pre-revenue state of our company, you're getting a little deeper view into some of the internal engineering sausage-making here. But in terms of the impact on our time to building our business and growing commercial, we don't see this as an impact. We just thought it was important to be transparent about it.

Got it. And just to follow-up, I think, on Mark's question before, the contractual obligations or contracts that you have in place for '25 as you sign those. Are there any binding issues like, for whatever reason, let's say, something is delayed a quarter or two? Are there - is there any recourse that the fleets have in the event that there was a delay? I guess I was - contracts by year-end if the technology - the Safety Case isn't fully baked. I thought those would sort of go hand-in-hand, which I think they were previously designed to do?

Yes, that's a great question. Let me answer both. First off, no, there'll be no element where there's any liability if we miss dates or our partners needed to adjust. The reason why we do the contracting - to be completely transparent on this, the reason why we want to do the contracting through 2025, is it really helps us define our launch lanes and how much supply that we need to order. So, it's not unlike how many trucks a shipper wants to - or I mean, a carrier wants to order from a particular customer, as they build out their networks. So what we're doing is working with each of our customers to build out like their network road map through '25. We're actually going well beyond that, but we want to try to solidify through '25 so that we have the right plans in place so that we can make sure we have the right components, sufficient supply. And then we provide that feedback both to our OEMs and our component suppliers as well. So, it's more about planning than anything else, but we also thought it was important to represent the fact that each year, we continue to make really good progress commercially. And one of the indications of progress is, hi, we've got a kind of a solidified plan through '25 and beyond. So that's what we're focused in on.

And just to add to what Dave was saying is we think about that engagement with the partners, the ongoing pilot programs allow us to get feedback from them on, how do we adjust our engineering and product development plans to maximally meet their needs. And then to the question asked earlier, as we think about the initial lanes, we've talked first, the launch lane is South Houston and then Fort Worth, El Paso. And then, it's really how do we deliver the maximum value for our customers by looking at, okay, do we expand west and north to Phoenix? Or do we go East to Atlanta and working with them for their priorities for these critical initial customers.

Got it. That's very helpful. I appreciate Chris.

Thanks for the question.