Aurora Innovation, Inc. Class A Common Stock Evercore's 9th Annual ADAS, AV & AI Forum

All right, everyone, let's kick it off. Chris McNally, head of global automotive and mobility here at Evercore ISI. David Maday, CFO of Aurora. David, let's kick it off with just a little brief overview of Aurora. You've had a very busy week.

Great. Thanks, Chris. Thanks for inviting me. This is an impressive forum with an impressive group of leaders and companies doing great things in the industry. I am very excited to be here. First and foremost, maybe I'll spend a little bit of time before the Q&A just talking about Aurora for those that maybe aren't quite as familiar. As Chris outlined in his earlier material, there's a lot of debate on technology and what types of modeling and end-to-end and frontier models and mapping and things like that. You'll get a lot of that later. You're not going to get any of that from me. I'm going to talk about the business. That's the stage that we're at, and that's what we're going to focus in on today. Plus, I'm really not good at answering those questions, so let's get started.

Before I do, I am going to be providing some forward-looking statements, so please take a moment to read our forward-looking statements disclosure so I don't get in trouble. Okay. We just had our analyst and investor day. For those that might have seen this, we're going to repeat some of this stuff. I think the thing for us is really we are at this inflection point where we believe that all the investments that we've made today have put us in a position to be highly successful. Today, we are, in fact, the only company that is operating driverless on public roads. This is driverless. Nobody behind the wheel, no safety drivers. This is not a pilot. This is everyday operations, and it has its own challenges, of course, of everyday operations, but this is where we're headed. This is this inflection point.

If you talk to Chris Urmson, our founder, he would tell you, and he does a lot of comparisons of, it takes a long time and a lot of investment to get to this point. For him, it's about 20 years of it. Aurora's been around since 2017. We've made major investments to get ourself into this position. Earlier this summer, we launched what we call Aurora Driver 2. This is our second version, a major leap forward. Again, it's built on our Verifiable AI software. It has our second-generation hardware. This is the hardware that actually will allow us to start to scale our commercial business. Obviously, you need all the tools and services. We really do feel we're at a commercial inflection point with the business.

But at the same time, we also want to remind ourselves that there are some things we are really good at, and there are some things where we believe the best approach is a partnership approach. We have been pretty proud of our partnership approach. I came to Aurora in 2020 specifically to work on building up a lot of these partnerships. Many of them on the board today are a result of our strategy to do what we do really well and rely upon others to do what they do very well. We are proud to be partnering with some of the very best OEMs in the U.S. market. We are proud to be partnering with many of our industry-leading logistics partners. Some of these people we started working with back in 2021. Some of them are in the room.

Some of them have been with us along the way and will continue to support us. Some of them are our harshest critics. They want to see the very best from Aurora, and they help us, and they guide us in that pursuit. Then we obviously have a lot of pioneering hardware partners that support our strategy going forward. We are really excited about the commitment that we have from each of them, all aligned on this long-term vision that we have, which is it is a match with our vision, and it is to create tremendous value. Now, I had said that we started back in 2017. We have made tremendous progress. We have also made significant investment to get us to this point. We truly believe we have all of the elements in place to start to scale and have meaningful value in the market.

Whether it is our Verifiable AI software, whether it is our hardware, we are the only company that not only has our second-generation hardware, which is a complete redesign from the first generation, which is manufactured by Fabrinet, but we also have our third-generation hardware in development, actually starting to test on roads today from AUMOVIO. These are significant investments towards scaling a business. On the supply side, we are working with multiple OEM partners. Our goal is that our logistics customers can choose the truck that they want with the Aurora Driver, not the Aurora Driver with the truck that they have to take. Then finally, from a demand perspective, we continue to make great progress with our customers in filling out the demand. Obviously, we are fully allocated for 2026. We have got tremendous potential in 2027.

I would say we are 2 to 3x where we need to be in terms of the allocation that we can deliver. We are very excited about the opportunities that are in front of us. But of course, to be successful with the Aurora Driver, we have to deliver value, and we truly believe that this is transformational from the freight industry. I think any other AV trucking company that comes up here is going to agree with this and probably say the same damn thing. We are going to be safer. You talked about the numbers. There are roughly 5,000 deaths on the U.S. highways from trucking accidents. That is too many. Our ability to have scalable, flexible demand for drivers is super important. There are driver shortages, there is turnover. There are all the things that make it challenging for logistics customers to run their business.

We believe we'll have 2 times the utilization as the human-driven fleet today. We're seeing that today with customers on the road with our driverless trucks right now. Some of our customers even tell you the examples, and you can go listen to some of them, but it's super important. Then from a total cost of ownership, this is the thing that I think separates trucking from ride hailing, to be frank. In the ride hailing, which is awesome, really cool, going to be safe. They're cool looking vehicles. The cost structure isn't there to drive down the cost. Today, the economics in trucking allow us to provide value to trucking customers right now in the total cost of ownership. They do in our initial customer adoption launch model, which is our Transportation as a Service business.

But when we shift over to our Driver as a Service business, they get even more leverage to create real value. We can deliver value on all four of these right now. That's really what we're excited about. That's why we truly believe the Aurora Driver will be transformational. I mentioned a little bit about cost. I'm not going to spend a ton of time on here. Let me just talk about three things. The total cost of ownership is a real issue in the trucking industry. Their cost structure is growing on all levels. Driver costs are growing, insurance costs are growing. Fuel is really high right now, and growing. These operating ratios that they work on, they're tough. They're challenging. This is a tough business. For us, we can drive down the cost for the driver. This is American Transportation Research Institute data on the left.

It's got a $1.03 plus indirect of $1.15. We have Aurora's pricing. Everybody has their own pricing. This is real value that we're delivering to customers today. In addition, we believe I'm just going to talk about three of these, by the way. In addition, we're going to talk about fuel. Obviously, fuel is really high. We're experiencing 10% fuel efficiency today. We believe that number is going to go to 15% and probably, with working with OEMs, has the potential to go up to even 30%, but it's a real value today. Then from an insurance market, we strongly believe that you're going to continue to see two things happen. Number one, the cost of insuring in the human-driven fleet is going to continue to grow and creep up, and the cost of driving an autonomously driven fleet is going to continue to reduce.

And so those three things by themselves give us a 20% reduction. So we're really excited about this. How does this translate to a customer? Today, this is a really simple graph. This is on our Fort Worth to Phoenix lane that we operate on. Today, there's two things that are happening. Number one, a truck can operate at double the utilization. So it can make a round trip in a day, which it could not make in the normal world. So you're doubling the revenue side of the equation, and then from a margin perspective, you're getting 6x the value because of the 20% reduction overall. So it is a really good value equation. And you might hear people say, "Hey, we got to work on the pricing." Even some of our customers push us on our pricing and things like this. There's a lot of potential here.

They understand the value, and we know that this is going to be tremendously important for our customers going forward. Finally, this is a chart we use at our investor and analyst day. It got a lot of excitement. We talked about it. We really believe we're at this commercial inflection point. Again, 200 trucks operating by the end of 2026. We expect more than 1,000 trucks operating by the end of 2027. We truly believe that this is just a starting point. We expect over 30,000 trucks operating by 2030. We are really at this point. We have all the enablers in place, both from the technology standpoint, from the supply side, and from the demand side, to really start to spur transformational growth. When we talk about what this means to Aurora, we are really expecting to see substantial growth in our revenue.

Obviously, for the last several years, not a big revenue story for us. This has all been about the technology. I told you I'm not going to talk about technology today. I'm going to talk about our business outlook. Our business outlook is going to also be transformational. We are going to achieve a positive gross margin in roughly $200 million in 2027. When you look forward to 2030, we expect this number with the 30,000 trucks to be over $5 billion in revenue, exceeding 60% margins, really on our path of a 70% margin. In 2028, we continue to expect that we will achieve positive free cash flow on a run rate basis. All the enablers are in place to support this. We're really excited about where we're headed. I guess I'll just close with this.