Aurora Innovation Inc

NASDAQ:AUR

Earnings Call Analysis

Aurora Preps for 2024 Autonomous Truck Launch

Aurora has been forging ahead with the development and expansion of autonomous trucking services, hauling over 100 loads weekly and driving 25,000 miles autonomously, maintaining an on-time delivery record close to 100%. Partnerships with major players like FedEx and Werner highlight their operational competence. A culture of safety and transparency, essential in the autonomous industry, is reinforced by their Chief Safety Officer's appointment to a U.S. Department of Transportation advisory committee. Strategically, Aurora's key collaboration with Continental to develop future generations of the Aurora Driver is ongoing. Financially, in Q4 2023, the company accentuated fiscal discipline as they prepare for launch, with spending well below projected targets.

Strong Financial Discipline Sets the Stage for Commercial Launch

The company has continued to exhibit strong financial discipline into the fourth quarter of 2023, with operating expenses, inclusive of stock-based compensation, totaling $198 million. Excluding stock-based compensation, the figures were more modest at $161 million, of which $138 million were allocated to R&D expenses. This also includes $640,000 in pilot revenue, marking a significant year-over-year doubling, recorded as a contra R&D expense. SG&A expenses, excluding stock-based compensation, accounted for $23 million.

Efficient Cash Management and Workforce Optimization

In terms of cash flow, the company saw an operating cash use of $598 million during 2023, with $133 million specifically in the fourth quarter. Capital expenditures were kept low at $15 million for the year and $4 million for the quarter. The fourth-quarter cash spend of $133 million undercut the anticipated range of $175 million to $185 million, attributed to factors such as fewer payroll cycles and continued financial prudence. A strategic alignment reduced the workforce by 3%, a necessary, albeit difficult, action that ensures the company’s efficiency and effectiveness in striving toward commercial launch. For 2024, the company anticipates an average quarterly cash usage within the same forecasted range, factoring in savings from workforce restructuring and non-personnel cost savings but expects increased capital expenditures as preparations for the commercial launch gain momentum.

A Solid Foundation for Future Operations

Exiting 2023, the company's balance sheet remains robust, boasting over $1.3 billion in cash and investments. As the company heads toward commercialization, it projects this liquidity will not only support the initial launch but sustain operations well into the second half of 2025.

Guidance and Margins: Moving Toward Commercialization

The company cautions that margins will be modest initially, as operations commence with a relatively small fleet of 20 vehicles. The early stage of the commercial launch means there won't be a significant transformation in revenue initially. However, investors can expect to gain further insights on future financial projections at the upcoming Investor Analyst Day in March.

Partnerships Positioning for Driverless Commercial Operations at Scale

A strategic partnership with Continental enhances the company's ecosystem, making Aurora stand out in the realm of autonomous trucking. This reflects a commitment that is expected to yield driverless commercial operations at scale, aided by a tight integration with OEMs and suppliers. The alliances with industry leaders such as Volvo further solidify the road to launching on OEM and supplier approved platforms.

Earnings Call Transcript 2023-Q4

[Operator]

Greetings, and welcome to the Aurora Innovation Fourth Quarter 2023 Business Review Call. [Operator Instructions] As a reminder, this conference is being recorded.It is now my pleasure to introduce your host, Stacy Feit, Vice President, Investor Relations. Thank you. You may begin.

[Stacy Feit, executive]

Thanks, Diego. Good afternoon, everyone, and welcome to our fourth 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 fourth quarter and full year financial results. We'll 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 this call, we'll be making forward-looking statements. This includes statements relating to the achievement of certain milestones around and realization of the potential benefits of the development, manufacturing, scaling and commercialization of the Aurora Driver and related services; 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; regulatory tailwinds and framework in which we operate; expected cash runway and our ability to complete any opportunistic fundraising opportunities; 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 quarterly report on Form 10-Q for the quarter ended September 30, 2023, filed with the SEC, as well as the current uncertainty and unpredictability in our business, the markets and economy.Additional information will also be set forth in our annual report on Form 10-K for the year ended December 31, 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.

[Christopher Urmson, executive]

Thank you, Stacy. 2023 was a pivotal year for Aurora, as we put into place many of the final pieces to support our planned commercial launch and operations at scale. We continue to lead in autonomous trucking by executing a focused strategy centered on technological, commercial and financial progress.From a technology perspective, the Aurora Driver became feature complete at the end of the first quarter of 2023. Since then, we've meaningfully advanced the Aurora Driver's autonomy performance. Commercially, we established the first commercial ready autonomous trucking lane in the U.S., while deepening and expanding our customer base. We now consistently schedule over a 100 loads per week and are in the process of contracting our launch and 2025 capacity.We've made great progress with our OEM partners, Volvo Trucks and PACCAR on our co-developed autonomy-enabled truck platforms with delivery of late-stage prototypes into our fleet. And with the addition of our industry-first partnership with Continental, we've built an autonomous trucking partnership ecosystem that is unmatched by any of our competitors.We are confident that this holistic partnership approach is the right one for the future of self-driving trucking as a business and believe it positions Aurora as the only company capable of driverless commercial operations at scale. We accomplished all of this while maintaining financial discipline, spending well below our quarterly target, and we strengthened our liquidity position with a meaningful capital raise last summer. You can't bring a commercially viable driverless trucking product to market without a deep integration with OEMs and suppliers. Our work with partners supports our path to a driverless launch on an OEM and supplier approved platform, and also sets the stage for long-term deployment at true commercial scale.In the fourth quarter, we completed the bring up of the first hardware complete Volvo trucks capable of fully autonomous operations and began track testing these trucks in autonomy. In January, Volvo Trucks unveiled the all-new Volvo VNL, which will serve as the platform for Volvo Autonomous Solutions trucking product powered by the Aurora Driver.We also continued the bring up of our new fleet of PACCAR's Peterbilt 579 trucks, upfitted with the latest generation of the Aurora Driver kit. 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. And PACCAR has continued to highlight our progress together, including our joint showcase at their exhibit at the 2024 Consumer Electronics Show.Volvo and PACCAR's shared commitment to safety makes them excellent partners as we continue the co-development of these autonomous-ready truck platforms. Our mission is to deliver the benefits of self-driving technology safely, quickly and broadly.Safety is our first commitment and is the guiding principle at the core of everything we do at Aurora. In order to prove the safety of our product and earn public trust, we utilize a safety case framework. We quantify our progress toward closing our launch lane safety case via our Autonomy Readiness Measure, or ARM, which is a weighted measure of completeness across all claims of the safety case for our launch lane. We are the only company in the industry who provides this level of transparency.When we introduced the ARM 18 months ago, we estimated Aurora Driver Ready would correspond with an ARM of approximately 95% and that we would be ready for commercial launch when the remaining approximately 5% of the safety case claims corresponding to the vehicle were complete. As of mid-January of this year, we achieved an ARM of 93%.Our focus on the Aurora Driver Ready milestone enabled this rapid progress as we work with our OEM partners to prepare their autonomy enabled-trucks for integration. With prototypes of our intended truck, launch truck in hand, our focus now turns toward closing the final 7% of our safety case jointly between the Aurora Driver and the truck platform to enable our planned commercial launch at the end of the year.This alignment of our Aurora Driver Ready and commercial launch milestones and timeline allows us to most efficiently allocate resources to final preparation of our complete product. We will continue to report the ARM as we work toward closing the safety case for the launch lane. At the same time, the Aurora Driver continues to get more capable and requires less support.The Autonomy Performance Indicator or API, serves as a key metric for assessing the Aurora Driver's performance. The indicator penalizes the use of on-site support, which will be the most expensive support provided. For the fourth quarter of 2023, the API was 99%, demonstrating another quarter-over-quarter increase. Across the commercially representative loads completed in pilot operations on our launch lane in the fourth quarter, 62% had 100% API.Throughout 2024, we will focus on driving up the percentage of 100% API loads and will continue to report on this metric, which we believe will be a strong indicator of our progress toward commercial launch. However, as a reminder, we do not anticipate aggregate API will ever reach 100%, even at launch, because certain situations like flat tires always require on-site support.In our presentation on Page 8, we've shared some recent examples of the Aurora Driver's excellent performance in some very challenging situations. In the first video, the Aurora Driver is approaching an intersection on the surface streets near our Houston terminal and it has a green light. However, because the Aurora Driver predicts that the red pickup truck will run their red light, it slows to avoid a collision instead of proceeding at speed through the green light. Other vehicles are not as quick to react, so they proceed through the intersection and get hit by the Red pickup.You may notice that our vehicle operator disengaged autonomy when the other vehicles collided. This is a protocol we have in place until our system is fully validated and the safety case is closed, as we are steadfastly committed to our safety-first approach to development and deployment.In the second video, the Aurora Driver is traveling southbound on the surface streets near our Houston terminal. It is patiently waiting at a red light in the left turn only lane for an intersection. You then see the Aurora Driver's left turn light turn green, but a passenger vehicle traveling westbound runs their red light. The Aurora Driver detects the red light runner and waits until the coast is clear before safely proceeding into the intersection to make its turn.Just seconds later, the Aurora Driver then detects yet another unpredictable vehicle. This one suddenly weaving into its lane. The Aurora Driver brakes to avoid a collision with this vehicle, which is making an illegal left turn from an outside lane. After successfully avoiding these 2 consecutive potential collisions at the same intersection, the Aurora Driver proceeds on its way to our Houston terminal. Seeing the Aurora Driver's performance in scenarios like these further reinforces the conviction we have in the safety benefits our technology can deliver to our customers.As we continue to work toward closing our safety gates for our planned commercial launch, we have made solid commercial progress with several of our customers. We have secured contractual commitments on volume and pricing for a portion of our 2024 and 2025 capacity, and we have several additional contracts nearing execution. We continue to demonstrate to our customers the value the Aurora Driver can deliver to their networks through our active pilots.During the fourth quarter, we deepened and expanded our customer relationships. We began autonomously hauling intermodal trailers for an existing customer, and we also launched a new commercial pilot on the Dallas to Houston Lane. We now consistently schedule over 100 loads per week with our customers and are logging approximately 25,000 commercial miles weekly. Cumulative to-date through January 31, we've autonomously delivered under the supervision of vehicle operators 4,300 loads, driving more than 1 million commercial miles with nearly a 100% on-time performance for our pilot customers, including FedEx, Werner, Schneider, Hirschbach and Uber Freight, among others.Our proactive partnership approach also extends to lawmakers, regulators and law enforcement who have a vested interest in the potential for safer and more efficient transportation. In the fourth quarter, we worked with the Frisco Police Department in Texas to conduct mock traffic stops on I-45 to simulate how autonomous trucks can recognize and respond to emergency vehicles. We appreciate their partnership in working toward making Texas road safer for everyone and will use their feedback to further hone the Aurora Driver's interactions with emergency vehicles.We endeavor to launch the Aurora Driver in close partnership with our public safety officers, who will be on the road with our vehicles on a daily basis. We believe this collaborative approach will continue to foster goodwill in Texas, which is a supportive environment for our commercial launch lane, and we expect to replicate the same model in our lane expansion across the country.Transparency and proactive external engagement are paramount in a safety critical industry. At a time when reputations in the autonomous vehicle industry have been tested, we're particularly proud of the culture we've built around safety and integrity, which we believe has positioned Aurora as a trusted partner and thought leader in the space.To that end, we're delighted to share that our Chief Safety Officer, Nat Beuse has been selected to join the newly formed Transforming Transportation Advisory Committee of the U.S. Department of Transportation. We expect this committee to play a meaningful role in shaping the future of transportation. Nat's inclusion underscores Aurora's commitment to responsible innovation in self-driving, and we are honored to have such a prominent voice at the Federal level.We're also proud to share that a member of our Government Relations team, Melissa Wade, will serve as the Chair of the Autonomous Vehicle Industry Association's Board of Directors. AVIA is the unified voice of the autonomous vehicle industry working with lawmakers, regulators and the public to realize the technology's safety, mobility and economic benefits. As Chair, Melissa will have an even stronger platform as a champion for the safe commercialization of this critical technology.As we look beyond commercial launch, we're charting our path to scale and profitability. In addition to the work we're doing with our OEM partners to support the manufacturing of autonomy-enabled trucks at scale, we also have a long-term exclusive partnership with Continental to jointly develop, manufacture and service future generations of the Aurora Driver hardware.This partnership gives us a path to deploy autonomous trucks at scale, with a cost structure in place intended to support our long-term profitability objectives. In January, Continental and Aurora achieved a key development milestone. We announced the finalization of the design and architecture of the future Aurora Driver hardware generation, inclusive of a new fallback system that Continental plans to start producing in 2027.We further jointly showcased our work together with an Aurora truck on display at Continental's exhibit at the Consumer Electronics Show. With the system architecture in hand, Continental will build initial versions of the hardware for testing at its new facility in New Braunfels, Texas and across its global manufacturing footprint. With Continental's automotive development and manufacturing expertise, the future Aurora Driver will be designed to deliver customer value for [Technical Difficulty].And under the Hardware-as-a-Service business model, we'll pay for that hardware on a per mile basis. That means we expect the cost of the customer to purchase an autonomous truck will be relatively in line with that of a traditional truck, thereby limiting the capital investment necessary to adopt autonomy in their operations.In closing, the tremendous progress we made in our second full year as a public company would not have been possible without our world-class team, partners and investors. Thank you for your continued support. We will continue to responsibly drive toward our planned commercial launch at the end of 2024 and look forward to sharing more with you at our upcoming Analyst and Investor Day next month.With that, I'll now pass it to Dave, who will review our financial results.

[David Maday, executive]

Thank you, Chris. Let's discuss our financial results. We have provided a summary on Page 11 of the slide deck for reference. During the fourth quarter of 2023, we continued to demonstrate strong fiscal discipline while executing towards commercial launch. Fourth quarter 2023 operating expenses, including stock-based compensation, totaled $198 million. Excluding stock-based compensation, operating expenses were $161 million. Within operating expenses, our R&D expenses, excluding stock-based compensation, totaled $138 million. This amount reflects $640,000 in pilot revenue, which more than doubled year-over-year and which we record as a contra R&D expense.SG&A expenses, excluding stock-based compensation, were $23 million. During the full year of 2023, we used approximately $598 million in operating cash, and capital expenditures totaled $15 million. During the fourth quarter, we used approximately $133 million in operating cash. Capital expenditures totaled $4 million. This fourth quarter cash spend was significantly below our target of $175 million to $185 million per quarter on average, reflecting 1 less payroll cycle in the quarter and our continued commitment to financial discipline.To that end, we need to continuously adapt to meet our evolving needs of our business. As we move towards commercial launch, we recently reviewed the entire organization to ensure we are working as effectively as possible and with the velocity required to achieve our ambitious goals. Through this process, a limited number of roles were eliminated, which impacted 3% of our total workforce. While these changes are difficult, they are necessary steps that set Aurora up to achieve our mission while operating efficiently and effectively as a team.In 2024, we continue to expect quarterly cash use of $175 million to $185 million on average. This reflects savings from the workforce alignment action as well as approximately $12 million in non-personnel cost savings, offset by an expected increase in capital expenditures relative to 2023 as we prepare for commercial launch.We ended 2023 with a very strong balance sheet, including over $1.3 billion in cash and short-term and long-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.

[Operator]

[Operator Instructions] Our first question comes from George Gianarikas with Canaccord Genuity.

[George Gianarikas, analyst]

I'd like to dig into FirstLight. Some merchant suppliers have made some recent inroads at [ some of ] your competitors. Do you see a point in the future where it's possible that the advantages you have in Lidar are overwhelmed by progress in the merchant market or is that still a ways off?

[Christopher Urmson, executive]

Can you say the -- I'm not familiar with the term merchant market.

[George Gianarikas, analyst]

In other words, merchant suppliers of lidar equipment. There are companies...

[Christopher Urmson, executive]

Okay. Lidar companies. Yes. So, we feel very strongly about the advantage we have with FirstLight. This is technology that the team, when we acquired them a few years back, it already had been working on it for between 10 and 15 years. We feel like we have fairly strong intellectual property protections around that technology. And by having that team in-house, we've been able to share very tightly between what the needs are from our perception system with what we can deliver through the hardware solution. And we see that that tight integration allows us to turn the innovation crank more quickly than folks on the outside would be able to. So, would it ever, is a very long time. But in a practical sense, no, we think this is a material strategic advantage for us.

[George Gianarikas, analyst]

Maybe just as a follow-up, there have been some very recent -- I don't know if they're failings quite yet, but there's a lot of tumult on the passenger side of the autonomous marketplace. Does that create a potential opening for Aurora Connect? Have you had any incoming inquiries on partnering? Are you continuing to test it? I mean, can you remind us again of the synergies between Aurora Connect and the trucking side?

[Christopher Urmson, executive]

Yes, absolutely. We still very strongly believe the right first application for automated vehicles is in trucking. We see that because of the size of the market, the development of the market. We see that because of the unit economics and the ability for that to support early-stage products where the COGS will be higher. We see that because of the self-similarity of the freeway network and thus the ability to scale more rapidly. And we see it partly because the customers will be really driven by the dollars and cents, the TCO and delivery -- the value we can create for them in a much less emotional way than what's associated with moving people through the world.That all said, we do strongly believe, and are committed to in the long term, delivering a product into the personal mobility space. The fact that we've architected the Aurora Driver to work both for heavy-duty trucks and light vehicles, and the fact that today, we are currently operating our fleet of Toyota Sienna's with the same hardware and software that we operate our trucks really gives credence to this expectation and design that we've made around transferability and common core of hardware and software.And so, when it makes economic sense and there's a strong business case, then we look forward to introducing the technology into that space and working with the great partners we have there in Toyota and Uber.

[Operator]

[Operator Instructions] Our next question comes from David Vernon with Bernstein.

[Justine Laufer, analyst]

This is Justine Laufer speaking on behalf of David Vernon. So, first, I'd just like to ask about the 4Q cash spend of $133 million. So it was well below that target of $175 million to $185 million, which I know you attributed to 1 less payroll cycle, also to financial discipline. So I'm wondering how much of that is actually coming from the payroll cycle impact and how much is actually attributed to financial discipline?

[David Maday, executive]

So, I would say, and thanks for the question, I think it's kind of an equal mix of what we did. I mean, we found and identified a lot of efficiencies that we started putting in place probably about 6 months ago, where we were really active in looking at the overall organization. And they all bear fruit at different times in terms of how they spend.So we had substantial savings that, if you look at it on an annualized basis, we'll continue to pull forward. So we were able to bring in $10 million to $15 million of just pure financial discipline savings that we're able to carry forward on a regular basis. There are some things that we did in terms of spending for like reducing future expenses, like D&O, we -- our expenses on D&O cut in half. And so we pay all that up front. So that was in the Q3 number and then it flows through and flows out of that. So you'll start to see some of those benefits as well.I think we need to create enough of these positive momentums as we think about moving forward for next year, because our capital expenses will increase as we prepare for commercial launch. And so, we're trying to develop enough of these in there so that we are committed to our plan that we've mentioned before, which is how much capital we need to achieve or how much additional capital we'll need before we get to free cash flow positive. So, we're still committed to that plan and what we've communicated with investors in the past.

[Justine Laufer, analyst]

Great. And one other question related to Continental. So I'm just wondering how the progress on development of a fallback system with Continental is going? Kind of like, what does the progress look like? What's the timeline for completing that development?

[Christopher Urmson, executive]

Yes. So the -- we can't get into too much details, obviously, given the proprietary nature of the relationship, but it's moving along. We internally have a series of milestone gates that we move through with them, and the team is making great progress towards them. We are still working towards that 2027 launch of the hardware kits, and we're excited about the progress we're making.

[David Maday, executive]

Yes, I think the other thing to point out in here is that we have -- again, it's a new fallback system. We have an existing fallback system, and that's going to be the default if this one ends up, if we have into any potential issues and things like that, where it's a little bit delayed. So, it's not going to prohibit our overall launch, but this is where we intend to [Indiscernible] and the progress thus far is going very well. But we're not going to be bound by that in terms of introducing our new hardware solution.

[Christopher Urmson, executive]

Yes. We have a fallback for our fallback system, so to speak.

[David Maday, executive]

Right.

[Operator]

[Operator Instructions] Our next question comes from Mark Delaney with Goldman Sachs.

[Mark Delaney, analyst]

I guess, first, now that you have some contracts in place, can you share any details or context on what margins and cash flow may do compared to the current baseline as the company starts its commercial launch at the end of 2024 and ramps in 2025?

[Christopher Urmson, executive]

Yes. Mark, I think right now, obviously, these are all commitments that are confidential, so I can't really share any of the details on them. I can tell you that we've been fairly consistent about pricing this product similar to what the market has overall in terms of like a price per mile and it varies by the lanes that we operate in. And so, we have a consistent framework with that for our contracts that we're signing today.The other thing, in terms of like a margin basis, like we're going to spill, as we've said before, we're starting out with up to a fleet of 20 vehicles. So it's going to be pretty modest, right, when we first launch. And so, you're not going to see a substantial amount of change, right, in terms of the revenue. We're going to provide a little bit more context at Analyst Day -- our Investor Analyst Day coming up in March in terms of how to think about this on a forward-looking basis.

[Mark Delaney, analyst]

Okay. I'll stay tuned for more details on that one in March, and thanks for the color you're able to share. My other question was around closing the software safety case. I think the company had a target to complete the software safety case and do that around the end of 1Q '24. I apologize if I missed it, but are you able to share an update on when you plan to complete that?

[Christopher Urmson, executive]

Yes. No, a great question. So we've been making really strong progress in that, and it's reflected where -- if you look at, we're about 93% closed of the safety case. When we set the road map for the company about 18 months ago, we laid out 3 major milestones to get to feature complete where all the parts were in place to get to Aurora Driver ready, where we had closed the -- we convinced ourselves that the parts at Aurora controls are safe and then get to commercial launch where we are then taking a closest, the safety case for our system, integrating with the vehicle and getting it on the road, serving customers.As we've made the progress through that, we expect it to get to about 95% at the end of the year. We ended up at about 93% at the end of January or mid-January. As we look forward for this year, we've come to the conclusion that the right step forward for us is instead of sequencing these sequentially, is to be working on them in parallel. And we talked last time about how we began moving some of our resources off of the -- closing the safety case and working on the next-generation work and expanding the performance of the system as it moves past safety case closed.You can think of this as the continuous improvement so that we're -- at this point, we're really focused on how do we get the quality and performance of the product to a point where it's going to deliver for our customers in the ways that they need it to.

[Operator]

Our next question comes from Andres Sheppard with Cantor Fitzgerald.

[Andres Sheppard-Slinger, analyst]

Congrats on the quarter and all of the recent developments. I guess our first question is, how should we be thinking about future routes following the Sun Belt? Trying to get a sense, maybe at a high level, medium to longer term, what are some target routes that would make sense in addition to what you have currently targeting?

[Christopher Urmson, executive]

I'm happy to start, and then we'll hand over to Dave to add a little more color. So as we think about it, it's very much going to be driven by demand. Once we kind of unlock the initial routes as we've talked about, we see small incremental work for whatever the new feature is that's on lanes that we go to after that. We've talked about between Fort Worth and El Paso, the big difference is we have to be able to drive down a hill, and we have to be able to deal with the customs and border patrol station. And we do both of those things today. We need to expand -- we'll need to validate that work.As we move to other lanes, it will be, okay there's a -- whatever the new thing is, if there is anything that we have to add. For us, we see the -- as you mentioned, the opening expansion will become along the Sun Belt. And then it's going to be really just tracing the corridors of demand and economic opportunity for us from there as we move up across the Midwest and up both coasts.Dave, I don't know if you'd add more.

[David Maday, executive]

Yes, I think that's right. Like, we look at the commercial, the regulatory and the technology, and we look at them together. Our customers are a really good guide on their priority for the lane expansion. But I think Chris hit it well. We'll go -- and we'll provide a little bit more context on this also at our Investor Analyst Day. But I mean, you think about it, it's Sun Belt, then it's starting to head north and continuing to head north, and we'll prioritize the higher demand lanes for our particular customers.I think it's a balance between both, operating between our terminals but also starting to unlock endpoints for specific customers. And we're going to let the customer help drive the demand because, because of the self-similarity of the highway systems, we can pick one or another, and it's roughly the same technology-wise as long as there's no regulatory hurdles, which in our road map, there aren't any today. We'll really let demand be the driver.

[Andres Sheppard-Slinger, analyst]

Got it. No, that's super helpful and insightful. Really appreciate all that color. Maybe as a follow-up, following maybe Mark's conversation and understanding, there will be more details on this on the Analyst and Investor Day. But maybe at a high level, is there a -- what is the best way to think about price per mile? Understanding that obviously next year we'll be up or up to 20 initial units. But as we begin to ramp up and given all the recent exits in the industry, is there any color maybe at a high level, you can kind of give us on what price per mile or what's the best way to think about that?

[David Maday, executive]

Yes. So let me start. I think, and we will provide a bit more context on this at our upcoming event. I think about the comparison of like, we're trying to offer a product that creates additional value for our customers. And the value is in the safety, it's in the total cost of ownership. It's in the fuel savings, which falls under total cost of ownership.So there's a lot of increments to that. We expect a price when we first launch prior to, we're a Driver-as-a-Service business model. So we expect to price when we first launch roughly similar to what a traditional line rate would be. And so if you look at DAT pricing as an example for lanes, you'll get a pretty good guide of what each lane is.And so, that will kind of be our boundary of where we're thinking about it. When we move to Driver-as-a-Service, which is our long-term asset-light business model, we will be pricing roughly similar to what a human driver equivalent would be, doing some adjustments for the value creation out there. So ATRI does a really good example of what the cost of the human driver is today for carriers and private fleets, and that's a really good source to kind of benchmark against.

[Christopher Urmson, executive]

Yes. I was just going to add a little like, the -- I think at the heart of our [ pricing trajectory ], is that -- that we see this great pricing umbrella with humans driving trucks, right? And for a long time, that's going to be the dominant form of transportation of freight. And so as we think about pricing, we see that as really the competition, and we see that ultimately, we'll be offering a product that is safer, that can move freight more quickly, and we see it as really -- is that the way to think about where to set the price point.

[Operator]

Thank you. And, ladies and gentlemen, we do not have any further questions at this time. That concludes today's conference call. All parties may now disconnect. Have a great day.