Kodiak AI Q3 2026 Earnings Call Transcript

Kodiak AI (NASDAQ:KDK) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more.

View the webcast at https://edge.media-server.com/mmc/p/t9i7an3x

Summary

Kodiak AI reported a strong Q3 2026 with revenue of $3 million, marking a 286% year-over-year growth driven by the expansion of their Driver as a Service (DaaS) model.

The company announced a significant agreement with DTL Transport to deploy the Kodiak Driver in 75 customer-owned trucks, marking a first for long-haul autonomy.

Strategic milestones include the delivery of Kodiak-powered Daimler Western Star trucks to Atlas and the plan to launch unsupervised autonomous freight service, notably with IKEA along the I-45 corridor.

Kodiak AI’s in-house simulation technology, Breakpoint, enables cost-efficient and rapid validation of driving scenarios, furthering their autonomy readiness.

The company aims to have 200 unsupervised autonomous trucks in operation by the end of 2027, scaling to 5,000 by 2029, targeting over $1 billion in annual revenue and free cash flow breakeven by that year.

Q3’s GAAP operating loss was $50.4 million, with a focus on R&D and operational investments, while free cash flow was negative $38 million, improving guidance for the full year.

Kodiak AI is exploring strategic and AV hardware financing options to support growth, highlighting a disciplined capital strategy without immediate plans to access capital markets.

Full Transcript

OPERATOR

Good day and welcome to Kodiak AI’s third quarter 2026 earnings conference call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Steve Philistine, Senior Manager, Investor Relations. Please go ahead. Please stand by, everyone. Thank you.

Steve Philistine (Senior Manager, Investor Relations)

Good afternoon, and thanks for joining Kodiak AI’s third quarter 2026 earnings call. I am Steve Philistine, Senior Manager, Investor Relations. Joining me today are Donald L. Burnette, Founder and Chief Executive Officer, and Surajit Datta, Chief Financial Officer. Earlier today we issued our earnings release and posted our earnings presentation, both of which are available on the Investor Relations section of our website. Before we begin, please note that today’s discussion will contain forward-looking statements regarding our business, financial performance, outlook, and future operating plans. Actual results may differ materially from those discussed today. Please refer to our earnings materials and SEC filings for a discussion of factors that could cause actual results to differ.

Any forward-looking statements that we make on this call speak only as of the date of this call, and we disclaim any obligation to update any forward-looking statements except as required by law. We will also discuss certain non-GAAP financial measures. Information regarding our non-GAAP financial measures, including reconciliations to the most directly comparable GAAP measures, can be found in our earnings release and supplemental materials available on our Investor Relations website.

With that, I’ll turn the call over to Don.

Donald L. Burnette (Chief Executive Officer)

Thank you, Steve. Q3 was our strongest quarter yet. We achieved extraordinary milestones across the board. We accelerated our progress toward our targeted year-end unsupervised autonomous long-haul launch, which means trucks operating with no person in the cab. And our autonomy readiness measure now stands at 99%, and that progress is translating into landmark commercial commitments. We reached an agreement with DTL Transport to deploy the Kodiak Driver in 75 customer-owned and -operated trucks on public highways, representing what we believe is the first publicly announced binding definitive agreement for long-haul autonomy.

We also announced IKEA as our first unsupervised autonomous launch partner, a pivotal step toward establishing regular unsupervised autonomous freight service on U.S. highways. In addition, we’ve brought simulation capabilities completely in-house, taking control over a critical function for scaling. Another defining commercial achievement was the delivery of our first Kodiak-powered Daimler Western Star trucks to Atlas. This delivery marks what we believe is the world’s first multi-platform fleet operating without a human in the cab. As of the end of the quarter, we have delivered 37 Kodiak Driver-powered trucks, further demonstrating the versatility and scalability of the Kodiak Driver. And our commercial momentum extends well beyond Atlas.

Through the third quarter, we surpassed 58,000 cumulative paid driverless hours. In Q3 alone, we transported more than 396,000 tons of freight, more than doubling the prior quarter’s achievement, and increased cumulative loads delivered to nearly 30,000. These milestones underscore the growing scale of our commercial operations and the real-world experience we continue to build. We believe the unique versatility of the Kodiak Driver, combined with our operational experience and DAS model, give us a capital-efficient path to growth and profitability.

When we became a public company just over a year ago, we laid out what we intended to accomplish, and we’ve done it. We’ve delivered on our objectives and remain on track for our targeted year-end unsupervised autonomous long-haul launch. That track record reflects how we operate at Kodiak AI. We set clear goals, execute with discipline, and deliver on our commitments. As we look ahead to the next phase of growth following our targeted long-haul launch, our focus will shift to putting more Kodiak-powered trucks into commercial service, expanding customer deployments, and growing recurring DAS revenue.

Turning to long haul, we continue to make significant progress toward our targeted year-end unsupervised autonomous launch. Since our second quarter earnings call, our autonomy readiness measure has advanced 8 percentage points, from 91% to now 99%, marking enormous progress toward achieving this milestone. With the vast majority of our safety case work now complete, our focus is on completing the remaining safety case assessments and final verification required for unsupervised long-haul operations.

This includes assessing highway-specific risks, completing verification of our primary and backup control systems, and completing the remaining simulation validation required for launch readiness. As we discussed last quarter, one of the biggest accelerants of our rapid progress has been Breakpoint, a proprietary AI-powered simulation technology which we believe represents a true paradigm shift for the AV industry. Today we are excited to announce that thanks to Breakpoint, we have brought our simulation capabilities fully in-house. This gives us greater control over a critical part of our development process. Breakpoint continues to fundamentally transform how we develop, test, validate, and refine the Kodiak Driver.

From simulation testing to safety case validation, Breakpoint enables us to evaluate increasingly complex driving scenarios at extraordinary scale, with greater flexibility and lower cost. It also enables our engineers to develop new simulation scenarios far more quickly than our previous solutions, expanding the range of driving conditions we can test and validate compared to our previous third-party simulation tools. Our in-house solution delivers simulation test results up to 16 times faster and operates at less than 2% of the cost.

With the ability to now run more than 2 million simulations per hour at a fraction of a cent per simulation, the unique advantages of Breakpoint will continue to compound, helping us validate new driving environments, unlock additional autonomous freight lanes more efficiently, and accelerate the expansion of our commercial operations. At scale, these advancements are bringing us closer to launching unsupervised autonomous service with IKEA Supply, our first long-haul shipper customer. In our four years of working together, we have delivered more than 1,370 loads and traveled more than 800,000 autonomous miles carrying IKEA freight. Building on that foundation, we plan to launch regular daily commercial service along an initial 219-mile segment of our established I-45 corridor between Dallas and Houston, using an initial fleet of five unsupervised autonomous trucks operating with no one in the cab.

This segment is part of an established delivery route connecting IKEA’s distribution center in Baytown with its store in Frisco. Additional customer deployments are expected to follow. It marks the beginning of a new phase for Kodiak AI and the trucking industry, where years of development and real-world experience translate into recurring commercial operations. Starting in 2027, we will expand the fleet, deploy with additional customers, and open new unsupervised autonomous freight routes.

We’re already seeing that expansion take shape. During Q3, we launched commercial freight service on two new lanes: Dallas to Laredo and Fresno to Los Angeles. The California route marked the first-ever autonomous delivery in the state. We launched both of these lanes with new customers, the former with Charter Logistics and the latter with DTL Transport. Together, these milestones reflect not only the expanding geographic reach of the Kodiak Driver, but also show how leading fleets are continuing to choose Kodiak to power the future of their operations.

As we expand our commercial reach, we’re also bringing the Kodiak Driver to a third OEM platform. We’re excited to announce plans to integrate the Kodiak Driver onto the International LT, with unsupervised deployments slated to begin in the second half of 2027. Engineering work on this project is also already underway. International is one of the world’s largest and most forward-thinking commercial vehicle manufacturers. Our ability to deploy the Kodiak Driver across multiple vehicle platforms is an important part of our commercial scaling strategy.

As we scale our long-haul operations in 2027, the International LT will play a central role in that deployment. The benefits of our multi-platform approach are already evident in our industrial business. During the quarter, we expanded our commercial operations with Atlas, putting the first two Kodiak-powered Western Star trucks into Atlas’ hands. By quarter end, we had delivered 37 cumulative Kodiak Driver-powered trucks to Atlas. As we discussed last quarter, we expected a more measured pace of deployments in Q3 as we transitioned to Daimler’s Western Star platform and completed the validation required for unsupervised autonomous operations.

With the first Western Star trucks now delivered, we expect deployments to ramp through Q4 and into the first half of 2027. We expect Atlas’ fleet to grow to the mid-40s by year end, and we remain on track to complete our initial 100-truck commitment by the end of the first half of 2027. Beyond expanding the fleet, we’re also demonstrating the reliability of the Kodiak Driver in demanding commercial environments. Our autonomy system on one Atlas truck achieved a record 64 consecutive days of uptime without powering off or restarting, while five additional trucks each surpassed 45 consecutive days. That means the Kodiak Driver remained running and available for service for more than two months, including when the truck was refueling, idling, or waiting for its next load.

This reliability will be invaluable for our customers as we move out of the industrial domain and onto the highway. We’re also seeing excitement from Atlas customers. During the quarter, Atlas served a record three well sites exclusively with Kodiak-powered trucks. Even more excitingly, for the first time, Atlas customers are now specifically requesting Kodiak-powered trucks for their routes. We believe this growing demand reflects the demonstrated reliability of our technology and its ability to support consistent operations in demanding real-world environments beyond the Permian Basin.

As highlighted in the video included in our earnings presentation, we completed our previously announced initial trials with West Fraser in Alberta, Canada. This brought the Kodiak Driver into a new rugged operating environment and demonstrated its adaptability to logging operations. Notably, the Kodiak Driver navigated narrow bridges, a challenging scenario for autonomous driving technology. Building on this experience, we continue to work with West Fraser and other logging companies across the U.S. and Canada to explore deployment opportunities.

Our ability to apply the Kodiak Driver across different operating environments is also creating opportunities in defense. During the quarter, we successfully completed our demonstration at Fort Hunter Liggett as part of the U.S. Marine Corps Rogue Fires Program, showcasing new autonomous convoy capabilities using technology derived from our commercial platform. This milestone marks a successful completion of our planned work under the program and highlights the potential for our future technology to support a broader range of defense applications.

Looking ahead, we are targeting 200 Kodiak-powered unsupervised autonomous trucks in commercial operation by the end of 2027. This builds on our plan to complete Atlas’ initial 100-truck commitment by the end of the first half of 2027, followed by additional deployments across both industrial and long haul in the second half of the year. In long haul, we expect most of that growth to come from customer-owned trucks deployed through our Drivers-as-a-Service model, alongside a smaller number of Kodiak-owned trucks supporting unsupervised autonomous commercial pilots and product development.

This is expected to generate over $50 million of annualized run-rate revenue exiting 2027. But 2027 is just the beginning. We expect to accelerate our rollout and scale to 5,000 trucks exiting 2029, generating over $1 billion in annualized run-rate revenue, with the goal of achieving free cash flow breakeven that year. And with nearly 4 million commercial trucks running across the United States, the long-term growth opportunity is substantial. With our years of real-world operating experience and growing customer demand, including our recently announced binding agreement with DTL Transport, we are confident that we will achieve these targets.

At Kodiak AI, we have always endeavored to be clear about our milestones and to consistently hit those milestones on time. And with this significant opportunity ahead of us, we’re focused on building a business that can scale to these targets and well beyond. As our fleet grows, so will our unsupervised autonomous freight network. Starting with the Dallas to Houston corridor, we plan to expand across Texas, build out the Sun Belt, connect the coasts, and ultimately serve the entire U.S. interstate system.

Our investor presentation illustrates how we expect these routes to expand as deployment ramps. To support this growth, we are building the infrastructure, partner ecosystem, and a global supply chain needed to scale efficiently and reduce autonomous vehicle hardware costs over time. Our great partners at Roush provide a repeatable vehicle upfit process capable of meeting our capacity needs. At the same time, our goal is to develop a production-grade autonomous platform that enables greater integration and lower unit costs.

And we’re advancing that goal through technical development work with leading global Tier One suppliers such as Bosch. Regulatory progress is another important part of our path to scale. At the federal level, the U.S. Department of Transportation approved a five-year exemption allowing Kodiak AI and its customers to use cab-mounted warning beacons in place of traditional roadside warning devices. This builds on the existing waiver Kodiak AI had been operating under to date and provides greater regulatory certainty as we prepare to scale unsupervised autonomous operations.

It also demonstrates the U.S. DOT’s commitment to bringing autonomous technology to the roads. In California, we reached another significant milestone during the quarter, receiving a permit to test our autonomous trucks on public roads. California’s new regulatory framework creates a pathway for heavy-duty autonomous trucks to progress from testing with a safety driver toward unsupervised autonomous testing and commercial deployment. As I previously mentioned, we were also proud to put that permit to use, making the first-ever autonomous commercial delivery in California with a new partner, DTL Transport.

That commercial relationship has since expanded with a definitive agreement to deploy the Kodiak Driver in 75 customer-owned and -operated trucks under our DAS model. As we approach year end, our near-term priority is clear: complete the final steps toward our unsupervised autonomous long-haul launch. From there, our focus is on scale: more trucks, more miles, more customer contracts. We have spent years building the Kodiak Driver, demonstrating its capabilities in commercial operations, and preparing for this moment. Today, our technology is already operating commercially without a human in the cab, and we’re approaching a defining moment in Kodiak AI’s history, bringing the capabilities we’ve proven in real-world operations to a much larger market.

What excites me most is what comes next. We have the technology, we’ve secured a definitive commercial agreement that demonstrates customer commitment to the Kodiak Driver, and we have a clear strategy to turn the momentum into commercial scale. I want to thank the entire Kodiak AI team, which has been working around the clock with incredible dedication and passion to meet these milestones at an unprecedented pace, and to our customers and partners for their continued commitment and collaboration. Kodiak AI’s most exciting chapters are still ahead of us. Before I turn the call over to Surajit, I want to take a moment to recognize an important leadership transition at Kodiak AI. I want to sincerely thank Zsuzsanna Major, Kodiak AI’s Chief People Officer, for her instrumental role in building Kodiak AI over the past eight years.

Zsuzsanna has been with us since the very beginning of the company. She recently departed Kodiak AI due to a family commitment. Zsuzsanna’s leadership and dedication have helped shape our culture, build our exceptional team, and lay a strong foundation for our continued growth. I’m personally grateful for everything she’s done, and as she steps away, we wish her and her family all the very best. I’m now excited to welcome Lori Boyd as our new Chief People Officer.

Lori brings to Kodiak AI more than 30 years of experience helping lead technology companies, including Turo, Salesforce, and Zendesk, navigate growth and scale while creating environments where people can flourish and thrive. We look forward to her leadership as we enter this next chapter of Kodiak AI’s journey. Now over to you, Surajit.

Surajit Datta (Chief Financial Officer)

Thank you, Don, and good afternoon, everyone. I am pleased to share Kodiak AI’s financial results for the third quarter of fiscal 2026. We delivered another strong quarter of operational and financial execution while continuing to invest in our technology and position the company for the next phase of commercial growth. We ended Q3 with 37 Kodiak Driver-powered trucks delivered to Atlas. These trucks continue to operate commercially with no one in the cab and are fully integrated into our customers’ daily fleet operations.

Revenue for the quarter was $3 million, representing 286% year-over-year growth. The increase was primarily driven by continued expansion of recurring Driver as a Service revenue along with a one-time contribution of $0.5 million from defense-related revenue. GAAP operating loss for the third quarter was $50.4 million. Non-GAAP operating loss, which excludes stock-based compensation, was $41.6 million, primarily reflecting continued investment in research and development and operational capabilities.

As we expand commercial deployments and prepare for launch of unsupervised autonomous long-haul operations, we incurred capital expenditures of $2.8 million, primarily related to AV hardware. Turning to cash flow, Q3 free cash flow was negative $38 million, outperforming the low end of our guidance range. Our cash investments during the quarter supported the expansion of commercial operations, continued advancement of our long-haul unsupervised autonomous capabilities, and initiatives to reduce the cost of the Kodiak Driver as we scale.

We ended Q3 with $114 million in cash, cash equivalents, and marketable securities, providing the liquidity needed to support our current strategic priorities. We remain disciplined in managing our capital resources and prioritizing investments that advance commercialization and shareholder value. Turning to guidance for the fourth quarter of fiscal 2026, we expect unsupervised autonomous truck deployments to increase to the mid-40s. As we accelerate deployments on the Western Star platform, we expect fourth quarter free cash flow of negative $42 million to negative $44 million. This primarily reflects increased capital expenditures associated with the ramp-up of Atlas truck deployments. Importantly, we are once again improving our full-year 2026 free cash flow burn guidance to negative $153 million to negative $155 million compared with our previous range of negative $155 million to negative $162 million.

We continue to evaluate opportunities to optimize costs and further reduce free cash flow burn. We remain focused on executing our stated milestones and maintaining disciplined capital planning. We believe our stock is currently undervalued and, as such, we do not think now is the right time to access the capital markets. However, we will continue to remain opportunistic in evaluating financing options to support our long-term growth. Strategic and AV hardware financing remain important components of our capital strategy as we pursue opportunities to support growth and strengthen our capital position. We appreciate the continued support we have received from our investors and will work with them to enhance shareholder value while minimizing dilution to the extent possible.

As Don discussed, we are preparing for the next phase of commercial growth. Our agreement with DTL Transport to deploy the Kodiak Driver in 75 customer-owned and operated long-haul trucks represents a significant commercial commitment and builds momentum towards scaling DaaS revenue in 2027 and beyond. Our financial priorities remain focused on growing recurring Driver as a Service revenue, investing prudently in technology and commercial readiness, and improving operating leverage as we scale.

We also continue to pursue reductions in AV hardware costs through engineering enhancements, global supply chain efficiencies, and increased production scale. Together these initiatives support our objective of achieving significant scale and free cash flow breakeven in 2029. We are entering an exciting phase for Kodiak AI with growing commercial demand, an expanding pipeline, and a clear focus on translating our technology leadership into financial value creation.

Operator, we are now ready to take questions.

OPERATOR

Thank you. We will now begin the question and answer session. The first question today comes from Andre Shepherd with Cantor Fitzgerald. Please go ahead.

Andre Shepherd (Analyst)

Hey, good afternoon, everyone. Congratulations on the quarter and all the great progress, and thank you for taking our questions—and congrats on reaching the 99% in arm. I guess that brings me to my first question, Don, so maybe can you help us understand what is needed to get to that 100%? How confident are you in getting there next month? And then can you maybe remind us what does the initial ramp up for the long haul look like? Thank you.

Donald L. Burnette (Chief Executive Officer)

Yeah, thanks, Shepherd. We are confident in our ability to hit the milestone that we’ve set up for ourselves. As we’ve repeatedly said over the successive previous months, most of the work that remains to be done is on the kind of final wrap-up testing, validation side—safety controller validation, documentation—kind of getting all the I’s dotted and the T’s crossed. But we’re very, very close. We feel really good where we are here in November, and we remain confident to hit that end-of-year milestone.

Andre Shepherd (Analyst)

Great, thank you so much. Appreciate that. And maybe it’s a quick follow-up. So on the recent announcement with International, I just want to make sure we’re understanding this correctly. So is the plan here to complete the Atlas deployments first by the first half of next year and then begin the deployment to International in the second half, or how should we think about these? Thank you.

Donald L. Burnette (Chief Executive Officer)

Yeah, that’s exactly right. So we’re still on track, as we said, to continue our deployment to Atlas of 100 trucks by the midpoint of 2027. And we expect the first unsupervised autonomous trucks to roll off the line for International LTs, which are purpose-built for long-haul driverless operation, in the second half of 2027. That’s exactly right.

Andre Shepherd (Analyst)

Wonderful. Thank you so much and congrats again. We’ll pass it on.

OPERATOR

The next question comes from Ravi Shanker with Morgan Stanley. Please go ahead.

Nancy Hipp (Analyst)

Hi, this is Nancy Hipp on for Ravi. Thanks for taking my question. It was helpful to see in the slides the truck counts laid out through 2029. It would be helpful to think of how you’re thinking of the mix of those trucks from an industrial versus on-highway long-haul mix and then the mix of that that you expect to be retrofitted versus produced versus with line-side integration.

Donald L. Burnette (Chief Executive Officer)

Yeah, thanks, Nancy, for the question. So given the substantial market opportunity, we expect long-haul trucking to represent the significant majority of our deployments over time, and that’s demonstrated by the detailed contract. We expect increasing customer commitments and adoption over time. Business model will predominantly remain Driver as a Service with customer-owned and operated trucks generating recurring revenue for Kodiak AI. That said, we expect to operate a limited number of trucks under transportation service through the second half of 2027.

That’s primarily to support product enhancements and customer pilots. Our long-term focus just remains on scaling that capital-efficient, asset-light model and scaling to those numbers which we have provided on the investor slides.

Nancy Hipp (Analyst)

Great, thank you. And then just as a follow-up on the International partnership, are you expecting those trucks to be retrofitted, or will you be working with International to do line-side integration with your hardware partners?

Donald L. Burnette (Chief Executive Officer)

Yeah, thanks for the question. The initial deployment of International trucks will be a retrofit upfit model, the same as we’ve done for our PACCAR Peterbilt and Western Star models.

Nancy Hipp (Analyst)

Great, thanks. That’s all for me.

OPERATOR

The next question comes from Ryan Sigdal with Craig-Hallum. Please go ahead.

Ryan Sigdal (Analyst)

Hey, good afternoon. Don, Surajit, slide 16. You’re going from 200 to 5,000 trucks. Can you help bridge where that supply comes from? Because with an upfit model, I guess maybe talk through your capacity you have with Roush—how you get 2,500 trucks each of those years to get to that 5,000 cumulative. But talk through the supply side, please.

Donald L. Burnette (Chief Executive Officer)

Yeah, sure. We believe our 2026 target is achievable. I think it represents a deployment ramp that’s supported by our supply chain visibility that we have and also the years of experience in already doing vehicle upfitting. Our manufacturing partner, Roush, which we’ve talked about for a long time, they provide a repeatable upfitting process that’s designed to support this commercial scale. That was always the intention—start small and continue to ramp.

They’ve demonstrated time and time again that they have the capacity to scale to these types of numbers. And in fact, this is not even a significant scaling challenge from a manufacturing side. And we also are partnering with tier one suppliers such as Bosch to develop autonomous hardware at scale—again, well within the capabilities of these scaled partners. And as Suraj had mentioned, with the contracts, we do see increasing customer adoption over time and we think there’s easily demand to meet this scale.

Ryan Sigdal (Analyst)

If I may ask just a quick follow-up—and I do have another question. I mean, one of your competitors has explicitly talked about 1,000-truck capacity with Roush and kind of the hurdles to get to that level. You guys are confident to kind of do two and a half times that level each of 2028 and 2029?

Donald L. Burnette (Chief Executive Officer)

You know, I won’t speak to other players, but yes, we feel confident that we have the ability to scale to that capacity.

Ryan Sigdal (Analyst)

Great, then just Daimler, which you guys have a recent upfit agreement with, spoke more publicly and shared their change in strategy, or at least publicly changed their strategy to now allow multiple AV providers. Given your work with the Western Star, I would think you guys are kind of in a lead position there, but maybe talk through that relationship with that recent commentary of opening up their potential line side to other AV providers—how you think about that OEM specifically going forward?

Donald L. Burnette (Chief Executive Officer)

Yeah, there’s a lot of exciting things happening in the industry. I think it’s a great time to be in this industry. We’re obviously excited that this quarter we were able to deliver those first Daimler Western Star trucks to Atlas. And the rest of our deliveries to Atlas through its initial 100-truck commitment will, in fact, be Western Star. Beyond that, I can’t comment at this time on the relationship between Daimler and Kodiak AI. And of course, if there’s news in the future, we’ll share it when we can.

Ryan Sigdal (Analyst)

Thanks, Don. Good luck, guys.

OPERATOR

The next question comes from Colin Rusch with Oppenheimer. Please go ahead.

Colin Rusch (Analyst)

Thanks so much, guys. I appreciate the conversation about learning cycles and just want to get a sense of the rate of change on those learning cycles and how much you’re getting out of all the off-road experience that you have and the number of routes that have to change off-road in terms of enhancing your capabilities on-road.

Donald L. Burnette (Chief Executive Officer)

Sure. I mean, it’s a tremendous learning cycle. I’ve talked about this in the past. We’ve been working with Atlas now for nearly two years. Coming up on two years next month and there’s so many unknowns. You really don’t know what you don’t know until you get a driverless deployment out into the hands of a customer and you ask them to operate that vehicle. And then scaling the fleet obviously comes with its own complications, of course. Expansion from an ops perspective, serving multiple sites, having multiple launch and landing zones, launch and landing points completely separated in geography, having multiple teams operate with these vehicles at the same time, there’s just a lot of complication usability aspects to the efficiency of the fleet. And those are all learnings that we’ve very slowly and painfully worked through with our customer. And those are all learnings that we think we can bring to our long haul customers as well.

And so we think it’s a perfect time for us to be launching our long haul unsupervised autonomous operations. We have that experience under our belt. We’ve been upfitting autonomous vehicles for significant period of time now. And so we think we’ve learned all the hard lessons in the past and we’re ready to hit the ground running. I think there’s a lot of optimism in that space. We certainly remain optimistic about the long term opportunities defense. We continue to pursue programs that align with their autonomous trucking and logistics capabilities. We’re making progress on our existing programs and we’re always evaluating additional opportunities as well, of course, including through our relationship with General Dynamics Land Systems which we’ve talked about in the past.

However, we do want to emphasize that the timing and size of future awards are always difficult to predict. This is a big consistent message over the years from us. So we’re not providing any specific guidance there. But we do have a very optimistic view of defense opportunities and we think it’s additive to our core industrial and long haul businesses.

OPERATOR

The next question comes from Chris Pierce with Needham. Please go ahead.

Chris Pierce (Analyst at Needham)

Hey, good evening. Sorry, one more on slide 16. Sort of going back to Ryan’s question. I just want to make sure I understand like what’s behind the 5,000 trucks. Is the assumption that these are specifically going to be upfitted trucks with Roush or is there sort of a. Should we have in our head that, you know, you’re working with three platforms now and there’s a potential for line side installation by then, or this is pure Roush. Like I’m just kind of questioning to make sure I understand where the 5,000 is really coming from.

Donald L. Burnette (Chief Executive Officer)

Yeah, I do appreciate the probing on this question. You know, 5,000, I think represents for us the capacity that we have to scale and it is an aggressive ramp. But we do believe based on everything we see now and the partnerships we have and their ability to supply vehicles, components and everything we need, it’s a realistic ramp for us to achieve in terms of the specifics of how they’re built and when they’re built in the long run. We don’t have the details to share now certainly as an initial deployment, we do plan to use an upfitting partner and we’ll have more details as we get closer to that launch.

Chris Pierce (Analyst at Needham)

Okay, perfect. And then just on slide 16 again, I guess what would cause this to be pulled forward or pushed back if we talked about free cash flow positive. Does it again just sort of all come down to the number of trucks? I feel like the answer is going to be yes, but I just want to sort of make sure. I’m just thinking about how you’re thinking about margins and opex and if there’s sort of wiggle room around free cash flow break even if trucks land lower or something like that.

Surajit Datta (Chief Financial Officer)

Yeah, thanks for the question. I think, Chris, the three main vectors we think which are key to the free cash flow breakeven target in 2029, one is obviously scaling the recurring DAS revenue model. Then also in addition to that is reducing the AV hardware cost meaningfully and then increasing operating leverage. We believe we are executing across all these three levers. So on the scaling aspect obviously our first long haul task, commercial contract with DTL is assigned towards building that momentum and scale. And just to remind, I think the 5000 trucks is just a very, very small fraction of the 4 million trucks which operate on the long haul road. And also we have the industrial market as well. So within those amongst those two markets, we feel confident of hitting those kind of target numbers and we feel good on the revenue per truck and the momentum on the scale.

But also we are also laying out a very clear roadmap to substantially reduce the hardware costs over time. And that’s through engineering enhancements, supply chain efficiencies and production scale. The other thing I would highlight is our differentiated technology architecture is a key structural cost advantage. We don’t require HD maps, we do not have proprietary hardware and we are supply chain agnostic. All these help us to enable significant cost efficiencies and operating leverage.

And I just wanted to remind that that has allowed us to maintain one of the lowest free cash flow burn rates in the industry. And we believe it positions us to achieve break even at a much relatively smaller scale than our peers. So that’s why we feel confident that we can hit these targets and it’ll be a work on all those three fronts we have to execute and we have a history of executing on this milestones.

Chris Pierce (Analyst at Needham)

Very fair. Thank you for the detail. Good luck.

OPERATOR

The next question comes from Etai McKelly with TD Cowan. Please go ahead.

Etai McKelly (Analyst)

Great, thanks. Good evening everybody. Maybe so just to pick up on the last point. So good to see the free cash flow use come in a little bit narrower than the prior guidance. But how should we think about that directionally into 2027, particularly the second half of the year as you kind of begin to ramp up the long haul DAS deployments?

Surajit Datta (Chief Financial Officer)

Yeah, thanks for the question. We are not providing formal revenue or free cash flow guidance for 2027 at this time. But just to think of it, stepping back, right, we are targeting approximately the 200 driverless trucks exiting year end 27 that we expect to represent over 50 million in annualized run rate revenue exiting that next year. On free cash flow there’s two aspects, right? The operating cash flow and the CapEx. So we expect the growing recurring DAS revenue ramp to continue to start offsetting incremental operating expenses as we scale. And so our cash flow burn will primarily be driven by the AV hardware capital expenditures. Right. Which we are. Those are directly tied to the pace of new driverless truck deployments. So these are all success based capex and we are continuing to focus on enhancing cost optimization, more capital efficiencies, and those are additive to, as we scale and try to get to free cash flow breakeven in 2029.

Etai McKelly (Analyst)

Terrific. That’s helpful. And as a quick follow up, just as we look at, I think slide 15, the various phases of the lanes, I’m at looking, just curious, by 2030, with the 5,000 trucks, like, how far along are we within those phases to kind of deploy the 5000?

Donald L. Burnette (Chief Executive Officer)

It’s a great question. So we’re not providing specific guidance on the exact timing of that rollout and that scale. Obviously, we’ve announced that we’re starting on Dallas to Houston and then we’ll expand to our current operational routes that we operate on a daily basis. Those being Dallas to Atlanta, Dallas to El Paso, Dallas to Laredo. We’ve seen what we’ve heard from customers very clearly that these are routes with a tremendous amount of demand.

And then beyond that, we’ll continue to expand throughout the Sun Belt. And then of course, beyond the Sun Belt over time, there’s no specific yearly target. This will really be driven by supply and demand factors where the customers are. Where the customers are asking us to operate. Because we don’t rely on detailed mapping technology and we have a lot of experience rolling out new routes with our industrial application. We think that bringing new routes up will be something that eventually is a very fast process for us. Obviously, we want to nail our initial launch on Dallas to Houston, but beyond that, we plan to expand throughout that progression. And that gives you a sense of where we ultimately see the business going.

Etai McKelly (Analyst)

Terrific, that’s very helpful. Thank you.

OPERATOR

The next question comes from Jim McIlry with Chardan. Please, go ahead.

Jim McIlry (Analyst)

Yeah, thanks. Good evening. Surajit, you hinted about AV financing outside of equity. Can you elaborate on that?

Surajit Datta (Chief Financial Officer)

Yeah, we continue to explore all. All aspects of financing. That includes strategic financing and AV hardware financing. So on the strategic financing front, we want and we are continuing to evaluate and explore potential investment opportunities with our customers or suppliers and alongside a commercial partnership. On the hardware financing, that could evolve into three aspects. What could be a traditional equipment financing, there’s hardware as a service financing which could be linked to customer contracts.

And thirdly, there could be evolving business models where the customers could be open to financing the AV hardware capex as well. So we continue to explore all those fronts. There are some precedents in the AI industry now and on the data centers. So those are opportunities which we also could access over time as we scale out our deployments of the DAS service.

Jim McIlry (Analyst)

Got it. And on this map that you have the launch to a nationwide scale, are we to link that to the 5,000 trucks in 2020 by the end of 2029? Is it implicit in the 5,000 trucks that you’re operating from Fresno to Jacksonville to Detroit?

Donald L. Burnette (Chief Executive Officer)

Thanks, Jim. Not necessarily. As I said in the previous response, that is a roadmap to show where we see the business expanding based on demand, based on the capabilities of the system that we plan to roll out those routes. And that progression is not necessarily tied to specific milestones as it relates to truck counts or years.

Jim McIlry (Analyst)

Is it fair to say you could get to the 5,000 in, let’s say, a Phoenix to Jacksonville or Phoenix to Atlanta kind of area?

Donald L. Burnette (Chief Executive Officer)

There’s definitely significantly more demand in those routes that you just mentioned beyond 5,000 trucks. And so. Absolutely. The Sun Belt in general, even single interstate lanes across the Sunbelt support significantly more demand than the numbers that we’ve talked about through 2029. And so we don’t think that’s going to be a problem at all.

Jim McIlry (Analyst)

Got it. Great. Thank you.

OPERATOR

The next question comes from Walter Paycheck with Lightshed. Please. Go ahead.

Walter Paycheck (Analyst)

Hey, Don. I know Brad over at Roush certainly believes he can crank out those trucks by adding more hours. Brad, if you’re listening. Hello. But I think the issue that Aurora had was the components he was getting and that they weren’t maybe high quality. They had some failures or whatever it was. I was hoping you could kind of review your supply chain process. If you had a supplier that gave you a part that didn’t meet your quality standards that quickly, could you replace them?

Do you have multiple vendors in terms of the supply chain? Just kind of walk us through why that may or may not be the same risk that you would face. Because obviously the issue is not on the Roush side of things.

Donald L. Burnette (Chief Executive Officer)

Thanks for the question. I mean, obviously I can’t. Again, I won’t comment on other situations. I think supply chain is generally different between companies. We’ve also been doing this for a long time. Right. This is not — we’re not new to the game. We’ve been building with Roush for a considerable amount of time. We’ve been sourcing from our suppliers for a considerable amount of time. I think we’ve worked through a lot of the early challenges around the supply chain itself in terms of quality, reliability.

I think this is a good opportunity to highlight once again that we’ve now had several vehicles, but one in particular that’s been up and running, or was up and running, for 64 consecutive days without any restarts or resets or issues with the system. And I think that speaks to the ruggedness and reliability of the product that we’re building. And I would also add that this is in the most intense and dangerous and complicated environment that you can imagine putting a vehicle into, at least here in the United States.

And so we feel extremely confident in our ability to not only source supply, but also deliver reliable hardware components at this scale. So again, I won’t speak for others, but I know that Kodiak AI, we’ve got a strong handle on our supply chain and our contract manufacturing partners, and we feel very confident in our ability to scale this up.

Walter Paycheck (Analyst)

Got it. And then on the binding agreement you announced — I know that’s binding, but you’re not announcing things in a letter of intent or in the backlog. Can you give us some sense of the number of trucks that are at a stage where someone has issued a letter of intent without maybe naming the customers? But what that pipeline is looking like — I guess I would call it a pipeline, not a backlog.

Donald L. Burnette (Chief Executive Officer)

I’m not sure we can talk about the sort of backlog or pipeline other than to say, you know, we have a lot of great partners that have significantly large fleets. And so, you know, we think that this is not a demand problem that we or the industry, quite frankly, has. It’s really about getting the details and ironing out all the specifics of individual contracts, negotiating, pricing, insurance, SLAs, who does what, what are the roles and responsibilities.

Those are the types of aspects that go into these definitive agreements. They’re quite long, typically more than 60, 70 pages long. They’re much more than just an LOI or a term sheet. And so we’re really proud of the fact that we were able to sign one of these agreements for unsupervised freight long haul. And this is, of course, building on our experience with our existing customers in industrial applications.

Walter Paycheck (Analyst)

Lastly, I know the safety triangle thing is all figured out, but given the election and the change with that, what incremental risk do we need to look at, if any, in terms of your rollouts?

Donald L. Burnette (Chief Executive Officer)

Yeah, I think nothing on the warning triangle side. I think that’s pretty much behind us. Like everyone, of course, in the U.S., we’re still evaluating the impact of the elections and what that means for the regulatory environment. Obviously, Texas has flipped to Democrat for the first time in a generation, so, you know, we still see support for autonomous vehicles on both sides of the political spectrum. And frankly, that support is usually higher among younger officials, regardless of political party affiliation.

So we welcome seeing a new generation of government that’s interested in these types of technologies and more aligned with our point of view and the benefits of autonomy. So we’re, of course, going to evaluate as everyone else is, but we feel like we’re still in a very strong position. We have great relationships, and we have bipartisan support at every level of government, particularly within the state of Texas. This is where we’re focused right now.

Walter Paycheck (Analyst)

Thank you.

Steve Philistine (Senior Manager, Investor Relations)

Thanks, Walt.

OPERATOR

And this will conclude our question and answer session, as well as our conference call for today. Thank you for attending today’s presentation. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.