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Earnings Transcript for EMBKW - Q1 Fiscal Year 2022

Operator: Good afternoon and welcome to the Embark Technology First Quarter 2022 Earnings Conference Call. today's call is being recorded and all lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question-and-answer session. I will now turn the call over to Bill Ong, Head of Investor Relations.
Bill Ong: Thank you operator and thank you everyone for joining us today. Joining me on today's call are Co-Founder and CEO, Alex Rodrigues; and CFO, Richard Hawwa. Before I discuss our disclosure statements, I want to introduce myself as I just recently joined Embark as the Head of Investor Relations. As a quick background, I have more than 35 years of experience in Investor Relations, Corporate Finance and Engineering at VIAVI Solutions, Applied Materials, and Intel. I've also worked at a number of major investment banking and brokerages firms as a sell-side and buy-side analyst. I look forward to engaging with all of you in the coming weeks and months. Embark issued its first quarter 2022 press release and presentation, which we will refer to today. These can be found on the Investor Relations section of our website at investors.embarktrucks.com. Please note this call will include forward-looking statements based on current expectations and assumptions which are subject to risks and uncertainties. These statements reflect views only as of today and should not be relied upon as representative about our views as of any subsequent date. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. Please refer to our filings with the SEC including our Annual Report on Form 10-K filed on March 21, 2022, particularly the risk factors described in those filings that could affect our financial results. We will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Embark's performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. These additional disclosures regarding the non-GAAP financial measures in today's press release and our filings with the SEC are posted on our company's investor website. Finally, we are recording today's call and we'll make the recording available this evening also on our website. I would now like to turn the call over to Alex.
Alex Rodrigues: Thank you very much Bill and welcome to Embark. We're excited to have you on the team. Good afternoon everyone. I am going to begin on slide three. Last quarter was our first earnings call as a public company and as such we provided detailed background on Embark, our differentiated technology, and our asset-light business model. Today, I want to highlight some helpful resources for anyone that is new to the story or that wants to take a deeper dive on Embark. I want to specifically highlight the technology section of our website. There, you can find an interactive graphic for Vision Map Fusion, this allows you to visualize what the truck sees when encountering a situation where lane lines have been paved over and the road no longer reflects what an HD map may expect. In the Investor Relations section of our website, you can find all of our filings presentations and events as well as our inaugural ESG report, which we released last month. If you haven't already I would encourage you to watch our first earnings call webcast on our site, where I give a primer on Embark's history and differentiation for public investors. Finally, I want to mention our Medium blog where you can hear directly from Embark's Executive leaders with in-depth perspectives on the industry, IP, software development, government relations, and more. If you want to deeply understand all the angles on the self-driving truck industry, this is the best place to go. All of the resources mentioned are hyperlinked in the investor presentation for easy access. Turning to our business updates on slide four, I would like to discuss key business updates since our last call. I'm excited about the progress that we have made in such a short time. We received the first trucks for our Truck Transfer Program. These were purchased by Knight-Swift. As you recall Embark's Truck Transfer Program, or TTP is an industry-first program that we highlighted in detail during our Q4 earnings. We believe that TTP will unlock the next level of integration and deployment learning, ahead of scaled commercialization and it represents the natural next step by having carriers own, operate, and maintain an Embark-equipped autonomous truck. On commercial and operations, we recently commenced 24-hour-a-day testing on the I-10 in Texas. Not only has this allowed us to more than double the testing capacity of our trucks, but it also allows us to refine our technology for night-time driving and ultimately, prepare for a world where trucks drive around the clock. By increasing the number of miles from each tractor and by maximizing the engineering benefit of each mile under a variety of scenarios, we are able to rapidly advance our technology in a highly capital-efficient manner. As you may have seen last week we announced that US Xpress has joined the Embark Partner Development Program. We believe Embark's partnership with US Xpress is highly differentiated in that it goes beyond typical pilots to focus on preparing US Xpress terminals to receive and launch Embark-equipped autonomous trucks. This is a significant milestone and marks the first time a carrier's terminals will be added to the Embark Coverage Map. This will unlock additional efficiencies for US Xpress and enable Embark to remain asset-light. Embark has been pioneering work on the transfer point model since 2019, setting the groundwork for us to bring this expertise to partners like US Xpress. Lastly, I want to highlight some recent progress on the Partner Development Program, a critical program that enables Embark and our carrier partners to prepare to scale Embark's technology. As we have shared in the past, we believe the rate of adoption can be positively impacted through deep, early collaboration between Embark and carriers to identify and resolve the friction points that would otherwise hamper deployment and scaling. One example that I want to highlight to this effect is a recent upgrade we made to our customer analytics environment where we run various strategic and operational analysis on lane level datasets that are provided by our PDP partners. These recent upgrades have unlocked a few new benefits for Embark and our partners most notably
Richard Hawwa: Thanks Alex. Let me turn to Slide Nine. Let me highlight some of the key financial metrics that support our business progress. Our cash and cash equivalents were approximately $245 million as of March 31, 2022. Our free cash flow spend for the quarter was $19.9 million. There is a bit of noise when comparing our free cash flow spend to our Q4 2021 free cash flow spend, which I'll talk through on the next slide as I want to ensure you have a clear quarter-over-quarter comparison of our cash spend. For your benefit the key takeaway is, we feel very good about the discipline in free cash flow spend, while still achieving measured headcount growth, as well as the liquidity to execute on our 2022 plan. And more generally, given all the business initiatives we've delivered on in the quarter the prospects of what we expect for the remainder of the year, the best way to sum up this quarter is very solid. As such we have not revised any guidance previously provided related to free cash flow spend and we are on-track for our initial guidance for full year free cash flow spend of $125 million to $140 million. We believe that, given the market conditions and the process improvements we've identified in the quarter, we're likely to come in towards the lower end of the range. I also want to reiterate that we believe our ability to develop a leading technology, while being extremely capital efficient is the direct result of our focus, which helps ensure we continue to be prudent stewards of capital, as we advance towards commercialization. I will also continue to reinforce the differentiation of our business model relative to other mobility businesses, in that, as an AV company, we don’t need to build a manufacturing facility or hard asset to have one sale. We are able to have flexibility to define and refine key initiatives, key partners and the resources required to execute upon them. Given headcount represents a majority of our free cash flow spend, let me spend a minute discussing headcount and hiring. We ended the quarter with 312 employees, up 76 employees from Q4 2021, or 32% quarter-over-quarter growth. Of these employees, 246 were in our R&D organization, representing quarter-over-quarter growth of nearly 43%. To give you a bit more perspective, the relative percentage of R&D employees to total employees at the end of Q4 2021 was 73%. However, at the end of Q1, it grew to 79%. Despite current market conditions, I don’t want to downplay the challenging hiring environment, particularly for software engineers, but we are succeeding in attracting not only high quality executive level talent, as Alex highlighted earlier, but talent across the organization. We view this to be very disciplined growth by targeting very specific needs within the organization. So, what contributed to our success in the quarter? One, while our core hiring market remains the Bay Area, with hybrid work, we have unlocked the rest of the US talent pool which has allowed us to scale without compromising on quality, as well as save on compensation expense. Two,our conversion rate and hiring percentages have remained near constant throughout our growth, which means we have been highly consistent in our hiring practices. Three, and lastly, it’s important to note that we aren’t growing simply to meet specific hiring targets. At Embark, we are not willing to lower the bar of candidates, as quality of hires always edges out quantity. Culture is also critically important part to Embark, and culture is key to continuing to advance our technology in a capital efficient manner by having the right quality of people within our organization. To summarize, on hiring, ultimately, the proof is in the pudding. Look at what we have done with a more focused approach relative to our competitors. This speaks to the quality of people across the organization at Embark, as well as culture and capital efficiency discipline. We feel we are winning on all these fronts, which continues to give us conviction on achieving the milestones we have asked you to measure our progress on. Let me walk you through some of the results and reconciliations. First quarter net loss was $18.4 million. First quarter adjusted EBITDA loss was $23.1 million compared to adjusted EBITDA loss of $7.7 million in the prior-year period and $20.3 million for Q4 2021. We’ve provided a non-GAAP reconciliation in the appendix for your reference. You will notice there was a $22 million gain, related to the change in the fair market value of our warrants outstanding. This is a non-cash gain, purely relates to the way GAAP requires us to account for the warrants on our balance sheet, and is also directly related to the change in share price at March 31, 2022, relative December 31st 2021. Another material non-cash expense is stock-based compensation. Let me provide some additional detail on stock-based compensation, as I know this non-cash expense is an important input to many of your models. For Q1 2022, we recognized stock-based compensation expense of $16.6 million. When removing the impact of Section 16 officers, approximately 60% of this expense is attributable to our R&D organization. As I mentioned on our last call, given the closing of the Business Combination in November last year, as well as the implementation of new compensation policies, now as a public company, there is a bit of noise in the stock-based compensation figures. I’ve provided a reconciliation in the appendix for reference, so you can have a good apples-to-apples comparison on the quarter-over-quarter change. What you’ll see is on an adjusted basis, Q1 2022 stock-based compensation expense was $17.8 million and for Q4 2021, adjusted stock-based compensation was $16.5 million. I would note that in both Q1 and Q4, much of the noise is related to the way GAAP actually allows us to recognize the expense, as well as some one-time items related to the Business Combination. As a reminder, approximately $2.6 million of the quarterly stock-based compensation expense is related to our Founders PSU Grant. That does not begin to vest until our share price is at least $20, aligning our Founders’ interest with long-term investors. Moreover, we do view stock-based compensation, as a core part of our compensation philosophy, to not only align our Founders, but to align all employees, and as such, we believe stock-based compensation tends to be a larger component of our compensation philosophy relative to other technology companies. Turning to slide 10, Let me provide you the key takeaways. First, quarter-over-quarter our free cash flow spend went up approximately 14%, when you adjust for fluctuations in net working capital, primarily related to pre-paids, as I mentioned on our Q4 call. There are also some additional considerations around some one-time adjustments related to the closing of the Business Combination in Q4, including one-time cash bonus payments. Second, we believe this growth in free cash flow spend was highly efficient, given the growth in headcount, growing 32%, with 45% growth within our R&D organization Third, while there are some timing considerations to explain the headcount growth relative to spend, we were very efficient in the quarter, which is reflective of our general view on compensation philosophy, which I’ll talk through. As I mentioned, a majority of our free cash flow spend is related to headcount, and should we need to flex our plan, we can and we will. We are constantly evaluating the resources required to execute on our initiatives. I mentioned earlier the uniqueness of Embark’s culture and quality of our hires. This speaks to how we can have a trend like the one you see on this page. Stock-based compensation is a key part of our compensation philosophy, not because it simply results in a more efficient free cash flow spend, but because we believe it speaks to the upside potential new hires see in Embark, as well as their desire to be part of something unique. I also think it’s well understood at Embark that this is not simply an academic project, but this is truly a mission to develop, operationalize and commercialize our technology and create a business for the long-term. And finally before I move to the next slide, I want to reiterate one last point I made on our last call. As a pre-revenue company, we are very cognizant that every dollar we spend must have a clear and obvious use to advancing us towards commercialization. At the end of the day, we are a people and engineering organization. I've walked through our accomplishments on hiring and detailed our free cash flow spend and how we view the business model. Our disciplined free cash flow spend is the result of our focus, discipline, culture and asset-light business model approach. Ultimately when you evaluate our technology and what we've accomplished with our resources to date it speaks for itself. We feel very well-positioned today and as I mentioned we will continue to make prudent decisions taking into account business needs and market conditions as we have always done. Moving to slide 11, please mark your calendars and save the date for the second Annual Embark Day to be held on September 21, 2022 with an event the evening before. We are very excited to host analysts and institutional investors once again in San Francisco. However, this time the event will be at our new 50,000 square foot headquarters only a few blocks from our current headquarters. I think you will find the space to be very impressive and reflective of Embark's culture being at the cross section of leading engineering talent and a highly experienced operations team. I would note that finding tech space while having multiple truck bays in downtown San Francisco can prove to be quite challenging, so we are excited to show it off in September. And more importantly, we are excited to provide you the opportunity to interact with our management team, get updates on the Truck Transfer Program, our Partner Development Program, experience a new truck demo and much more. We also might have a bit of fun if we can squeeze that in as well. Please reach out to our investor relations team if you are interested in attending. With that, I’ll turn it back to Alex for closing remarks.
Alex Rodrigues: Thank you Richard. I would like to conclude on slide 12 by thanking our partners and customers, our employees for all of their hard work and our investors for their continued long-term support. Here I have the same slide that we showed at the end of the Q4 presentation and I want to bring it up again to re-highlight why we believe Embark continues to be a highly attractive investment opportunity with a thesis that continues to strengthen over time. First, the macro environment that we read about and hear about daily. Driver shortages, inflation, supply chain challenges, our technology addresses these challenges and it makes Embark's value proposition clear and present. Second, there are limited number of players actually focusing on addressing these challenges. AV trucking is a huge market and we're at the forefront given our longevity in tackling this problem not just technically but also operationally. And I think this is very obvious given some of the updates I just walked through. And lastly, we have an attractive asset-lite software-as-a-service business model this allows us to go-to market and scale in a highly efficient manner. And we aren't just saying this, we are already proving this in the way we are partnering on building our coverage map on the work we are doing through the Truck Transfer Program and utilizing trucks that are purchased owned and operated directly by carriers. The excitement amongst our employees, partners and investors could not be greater. With that Operator, let's begin the question-and-answer session.
Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Chris Wetherbee with Citigroup. Please go ahead.
Chris Wetherbee: Great. Thanks and good afternoon guys. I wanted to maybe start just in terms of your thoughts around the timing of lots of your different initiatives but maybe specifically focusing in on Truck Transfer with Knight-Swift. I just wanted to get a sense of, sort of, the end of this year continue to be something that you feel is realistic and as you're progressing towards that particularly as we get into the back half of the year, what are the milestones or challenges you think you might be facing around the dynamics of supply chain dynamics, the OEM parts availability? Just want to get a sense for how available is this? How likely is it that we'll be able to ramp up towards that year-end goal?
Alex Rodrigues: Yes. Thanks Chris. We feel very good about our ability to hit that time line. Things are -- I mean, we're what less than eight months away now. So we have pretty clear line of sight to all the parts they need to arrive and the work that needs to be done. And we continue to feel good about that end of year time line. I think this actually is something that really reinforces for us the value of Embark Universal Interface where we're able to have this Truck Transfer Program taking place on a platform selected by Knight-Swift. And so instead of simply relying on our own supply chain, we're able to integrate the system on top of existing orders from some of the top carriers. And I think that's really helped us be able to keep that time line on track.
Chris Wetherbee: Okay. That's helpful. I appreciate that. And then maybe I wanted to talk a little bit about the winter conditions testing that you guys have done. It's kind of an interesting dynamic to see you pursue down that path. Now I know, I think the initial focus isn't necessarily going to be in places where there is a significant amount of winter conditions. But as you think about that sort of opportunity where does that fit in both from a time line perspective and then sort of an addressable market perspective into the longer-term plan?
Alex Rodrigues: Yes. Yes. So I want to make sure to be clear that, the initial target for 2024 is the Sunbelt. And so when we're doing a snow testing, it's really starting to lay the groundwork to make sure that, we're ready to continue to scale beyond that as well. As far as the high-level numbers, our goal is to launch the rest of the country in 2026, we expect that to more than triple the total serviceable market as a result. So, a pretty big impact. And I think what we learned from the winter testing that we did this year, was it really highlighted again how powerful Vision Map Fusion is. We've talked in the past about how this enables us to have the most robust set of capabilities when it comes to handling construction. And it's the same piece of core tech that has allowed us to have this really high performance going into snow. And so I think one of the things I wanted to highlight was just that these aren't actually discrete accomplishments. In some sense, these are things that all come out of having a unique architecture that doesn't rely on pre-build mass and instead understands the road in real time and that's powerful across a variety of different fundamental situations.
Chris Wetherbee: Okay. That's helpful. And then one last real quick one for Richard, just on the free cash flow spend the range $125 million to $140 million this year, how do we think that sort of plays out over the course of the next three quarters? I think you're in a little bit of a lower run rate, but I'm guessing, it's going to ramp-up. Is it linear throughout the rest of the year? How do we think about that?
Richard Hawwa: Yes. Good question, Chris. So we obviously expect that to increase over the course of the year. You can kind of just do the math and see right, if you were to annualize the quarter I think a couple of things that you'll notice is one obviously as employees start over the course of the quarter in Q1. I gave you the sort of headcount at the end of the quarter, but that will obviously increase expense. And then we continue to expect to have a measured pace of growth relative to the initiatives that we have. So you'll see that grow over the course of the year.
Chris Wetherbee: Okay. Got it. Thanks very much for time. Appreciate it.
Operator: Our next question comes from George Gianarikas with Baird. Please go ahead.
George Gianarikas: Hey, guys. Good afternoon. Thanks for taking my questions. First, if it's okay, I'd like to ask about one of your competitors talked about on their recent conference call and pointing to a delay in their rollout to 2025 and they talked about a variety of factors which you're likely aware of. Can you address those? And how you feel relative to their rollout and about the technology issues that they discussed on their call? Thank you.
Alex Rodrigues: Yeah. Good. May I can start, I think the – I guess the headline here is we still feel good about the 2024 time line. So we're not changing anything on that front. The reason that we're able to do that is because we've been able to diversify some of the risk using our Embark Universal Interface strategy. And so what I would say is that, a single OEM platform having some kind of supply chain-related delay is not that surprising from our perspective something that we intentionally designed our architecture in our system to be able to be resilient to. And we did that by having Embark Universal Interface be a multiplatform approach, which allows us to diversify our risk across the different platforms as they come to market. And I think this is exactly the sort of development that showcases the value and benefit of that multi-platform approach.
George Gianarikas: Thank you. So when you think about the risks to roll out to 2024 between now and then where would you rank technology risks versus supplier risks maybe they're the same thing versus regulatory risk versus just hiring risk? What do you think is the highest order risk to your deployment in 2024?
Alex Rodrigues: Yeah. I think the focus for us is really on making sure that, we're able to deliver, the scale up in 2024. So when I look at sort of the milestones, we've laid out, we feel very good about our ability to deliver against those. And I think the focus today, which you can see with the work we're doing in PDP, the work we're doing with the coverage map, the work that we're doing with snow is really making sure that it's not just that first initial deployment, but we're able to rapidly grow into our customers to meet the needs that they've laid out for us.
George Gianarikas: Thank you. Thanks guys for the questions – for your answers and good job managing the cash. Appreciate it.
Operator: Our next question comes from Jeff Kauffman with Vertical Research Partners. Please go ahead.
Jeff Kauffman: Thank you very much. Hi, Alex, hi, Rich. I just want to thank you guys for all the detail that you put into the prepared remarks. I think very, very helpful. One of the questions, I have and I just want to maybe take this as an opportunity which to lay out the flexibility you have. In case, let's say the world goes a way that, it's not supposed to, and I think the reason people are outselling stocks right now is they say, okay, well, if these companies don't generate revenue and they need to raise capital at some point down the road, and the market should close they can go to zero. So therefore let's just sell. Obviously, I think we feel it's not appropriate for Embark but could you talk about – you have $240 million of cash. You're going to burn between $125 million and $140 million of it this year. Is that enough to get you the commercial deployment? If for some reason it gets pushed back a quarter or two. What kind of levers are out there that don't involve going to the market to raise money to get you to where you need to be? And I think part of the reason for the share reaction today, which we could say is a bit of a knee-jerk is to the question that was just raised, somebody else pushed back their date by a year. And what would happen if Embark were forced to do that? And I think this market kind of shoots first and ask questions later. But Rich could you kind of lay out the cash burn as we get to commercialization in 2023? Does it go up? Does it go down? What levers are there to be pulled so that we can reassure investors that by and large you should have enough capital to make it to where you need to without having to go to market?
Alex Rodrigues: Richard, you might be on mute.
Richard Hawwa : Yes, I can start. Thanks Jeff. And Alex feel free to jump in. I think we put together a very specific business plan for 2022. And as we mentioned we've got $245 million of cash at the end of the quarter, and we believe that we've got sufficient ample runway to execute on the milestones we discussed today. And I think one of the areas of focus is being an AV company was an asset light business model we've always had flexibility in our plan to define and refine these initiatives, the partners, the resources required to execute upon them. So, we're obviously constantly monitoring the market conditions. We're obviously constantly evaluating the initiatives and the opportunities we have in front of us and we'll continue to sort of do so. Given that flexibility we feel very comfortable in being able to flex the plan up or down depending on what those initiatives may be on a go-forward basis.
Jeff Kauffman: So, the point if investors were to ask me is the company believes they have the capital necessary to get the commercialization. There's flexibility to scale up and down. I just think right now people are a little nervous in the market. So I think it's good for us to ask questions later.
Richard Hawwa : Yes, I ,think that's a -- yes, go ahead Alex.
Alex Rodrigues: If I was going to add anything there, I would say, if you look at a lot of the work that we do today, as we mentioned to one of the previous questions, there's really a focus on making sure we're able to scale rapidly something like snow, which is really focused to the 2026 time line. Efforts like the Truck Transfer Program, which are focused on preparing large fleet in the country to be able to run these at scale very quickly. And so you can see that as being an area where we sort of choose, where to invest, how many partners we want to bring in, what sort of initiatives we want to be using to pull forward scale and give us that flexibility to be able to run the business as needed.
Richard Hawwa : One good example Jeff…
Jeff Kauffman: Well, congratulations on the achievements. Yes. Go ahead. Yes. Go ahead.
Richard Hawwa : Jeff one good example, I just -- I'd highlight is as we mentioned during the prepared remarks, we've always been focused on quality versus quantity, as we think about headcount growth, which is where a majority of our free cash flow spend goes. And one sort of anecdote is, we already have all the people we need today to deliver on TTP. These individuals are at Embark today, and as we think about expanding and with right people to drive growth in the coming years those are the trade-offs that we'll continue to evaluate that Alex highlighted.
Jeff Kauffman: All right. Well congratulations on the milestones this quarter, and thank you.
Alex Rodrigues: Thanks Jeff.
Operator: Our next question comes from Todd Fowler with KeyBanc Capital Markets. Please go ahead.
Unidentified Analyst : Hey, guys, this is Zach on for Todd. Thanks for taking my question. Just with the U.S. Xpress partnership, I guess, what does the ramp time line look like for building that operational playbook? And are there any uptick costs or changes that need to be made to those existing terminals or is it just more about implementing the processes in general? Thanks.
Alex Rodrigues: Yes. So this is going to be a fairly significant initiative from both sides and really starting with understanding the entirety of the U.S. Xpress network and then determining the initial sites and the longer-term rollout plan. So I think it's something that we're pretty excited about, and while it's certainly going to be a significant lift, I think, it's definitely going to be worth it from both sides.
Unidentified Analyst : Okay. Got it. And then on the winter tests, are there any sort of key takeaways that you guys experienced on that? And so is there anything you're hoping to achieve over the summer that could provide additional performance improvement as you guys probably test next winter?
Alex Rodrigues: Yes. I think the big learnings for us there, I think, I gave you the top level number there, right? You've got sort of one in five of those runs ends up being snowy and Vision Map Fusion is going to be able to make that delivery in a timely fashion 90% of the time. So we're pretty excited about that. The focus for us over the summer is going to be continuing to expand the capability set of Vision Map Fusion, especially to be able to handle situations where you might have more occlusion of the road. And so that would be able to then continue to expand what we're able to do into some of the even more challenging winter conditions that represent sort of that 10%.
Unidentified Analyst : Got it. Thank you.
Operator: Our next question comes from David Vernon with Bernstein. Please go ahead.
David Vernon: Hi. Good afternoon, guys. A couple of questions for you. First, if you can kind of tell us what's embedded in the plan for kind of where we are today in terms of the number of trucks running the technology, where we end up 2022? Where we end up 2023? I'm just trying to get a sense for how many trucks are being operated with the driver still behind the wheel, but actually running the Embark software right now? And how that grows over the next few years?
Alex Rodrigues: Yes. Hi, Dave. So we haven't provided guidance on what our truck growth is going to be. I'd make two points
David Vernon: Well, I guess, I was trying to get a sense for -- regards to the ownership of the truck like how many instances of the technology are rolling around on the highways? That's not something you guys are wanting to share?
Alex Rodrigues: We have 18 trucks in our fleet today.
David Vernon: And the partner trucks that are running?
Alex Rodrigues: We haven't disclosed that number.
David Vernon: Okay. And then, kind of, coming back to this idea of cash flow, if you look at the guidance you have right now you will be down to call it three quarters, four quarters of cash by the end of the year. Why isn't the right answer to this question about capital to be out thinking about a capital raise at some point? Because it does seem like you're going to be in the -- if you're out in the red zone now next year if revenue is going to be in 2024 you could get there. So why isn't the right answer to be looking at opportunistically trying to do a capital raise at some point in the next 18 months?
Richard Hawwa: Yes. So we've obviously been highly capital efficient to-date. So we feel pretty good about our ability to continue to maintain such efficiency. And as you know I mean you've been doing this for a long time, but to maybe reframe it a bit there are a lot of considerations or regulatory market conditions and other factors that can affect specific timing. And so while we appreciate the question and understand the basis for it we're obviously focused on executing in more of a capital-efficient manner. And maybe just the last point I'd make is my background is in the capital markets. And so just generally we know what the tools are in our toolkit and when to think about them and how to think about them. And like we're always evaluating what those alternatives may be. But right now we're focused on execution and we're focused on being prudent stewards of capital.
David Vernon: Okay. And then just last question for me in terms of the guidance. Right now I think Q1 and I can't sell the split on the stock-based comp, but G&A is actually a little bit ahead of R&D expense in the quarter. Is that ratio going to stay the same, or should we be expecting the G&A number to kind of stay flat from here and the growth to becoming on the R&D side?
Richard Hawwa: Yes. And I think, it's probably more representative in the headcount growth, but you should expect that to be more R&D weighted. And as I mentioned about 60% when you exclude Section 16 officers given the timing of hiring was related to R&D.
David Vernon: Okay. So the G&A number is roughly going to be what it is in 1Q for the rest of the year?
Richard Hawwa: You should expect R&D to be predominantly more of the stock-based compensation on a go-forward basis.
David Vernon: Okay. I can follow-up for that.
Richard Hawwa: Yes.
David Vernon: Thanks, Rich.
Richard Hawwa: Okay. Thanks, Dave.
Operator: Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn the call back over to management for any closing remarks.
Alex Rodrigues: Thank you, everyone for joining us today and we look forward to continuing to update you on our progress. Have a good evening.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.