Thank you for standing by, and welcome to Kodiak's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Dan Goff, VP of External Affairs with the Safe Harbor. Please go ahead.

Thank you, and welcome to Kodiak's Fourth Quarter 2025 Earnings Call. On the call today are Don Burnette, Founder and Chief Executive Officer of Kodiak; and Surajit Datta, Chief Financial Officer of Kodiak. Our press release and an earnings presentation were issued earlier today and are posted on the Investor Relations section of our website. This call is being broadcast live via a webcast, and a replay will be available on our website after the call. Before we begin, I would like to remind you that during today's call, Kodiak will be making forward-looking statements within the meaning of the federal securities laws about financial performance and future events, including our guidance for fiscal first quarter and full fiscal year 2026 as well as our long-term goals. Actual events or results could differ materially. Please refer to our SEC filings, including our most recent Form 10-Q and the Form 8-K filed with today's press release for important risks and other factors that may cause our actual results to differ from those in our forward-looking statements. Additional information will also be set forth in our annual report on Form 10-K for the year ended December 31, 2025. We disclaim any obligation, except as required by law, to update or revise any financial or operational guidance and long-term goals or our other forward-looking statements, whether because of new information, future events or otherwise. Any forward-looking statements made on this call speak only as of the date of this call. Further, in addition to discussing results that are calculated in accordance with generally accepted accounting principles, we also refer to certain non-GAAP financial measures. For more detailed information on our non-GAAP financial disclosures, including reconciliations to most comparable GAAP measures, please refer to our earnings release, which can be found on our Investor Relations website. I will now turn the call over to Don. Please go ahead.

Good afternoon, and thank you for joining us. Before I discuss Kodiak's 2025 Q4 results, I want to frame the incredible long-term opportunity for Kodiak. We believe physical AI represents one of the most significant technology shifts in modern history. Physical AI is transforming how work gets done in a physical world and self-driving is leading this transformation. Autonomous systems will increasingly power how goods and people move, how freight is delivered and how packages reach people's doorsteps. The Kodiak Driver is at the forefront of this revolution. Scale matters, and we are building the system to scale. The key to deploying physical AI is harnessing the power of data center scale AI and then optimizing it to run a low-power compute that can fit on a range of form factors. We've already solved that core challenge by building the Kodiak Driver to be a modular physical AI platform that is commercialized today. The same core system that powers long-haul freight is built to extend into anything that moves from cars to pickup trucks, buses and delivery vans to even other form factors such as drones, construction equipment and humanoids. While we remain focused on our core trucking strategy, this platform leverage has the potential to significantly expand our long-term addressable market. We are building toward deploying the Kodiak Driver on thousands of trucks within the next few years. Our commercial roadmap, manufacturing partnerships and expansion strategy are aligned around that objective. As adoption increases across major freight corridors, autonomous trucks will move from limited deployments to everyday infrastructure. I believe that in the coming years, you will not be able to drive on any highway in the United States without encountering a Kodiak truck. Our objective is clear, removing humans from goods delivery with AI making every decision in…

Thank you, Don, and good afternoon, everyone. I am pleased to share Kodiak's financial results for the fourth quarter and full fiscal year 2025. 2025 was a transformative year for Kodiak, culminating in a strong Q4 that exceeded our expectations across all guided metrics. We continue to demonstrate disciplined execution, improved operating leverage and continue to realize benefits of an asset-light business model. We ended Q4 FY 2025 with 20 customer-owned driverless trucks, exceeding the mid- to high teens range, which we had previously guided. This outperformance was driven by successful deployment with our existing industrial customer. Q4 revenue was $1.1 million, representing 37% quarter-over-quarter growth. This was primarily driven by an increase in Driver-as-a-Service revenue generated by 100% quarter-over-quarter growth in customer-owned driverless trucks. This performance underscores the strength of our business model. As the Kodiak Driver is deployed, we benefit from scalable multiyear recurring revenue while continuing our historical discipline on capital requirements. GAAP operating loss for the fourth quarter was $39 million. Non-GAAP operating loss for the quarter, which excludes stock-based compensation, totaled $30 million, primarily due to continued investment in R&D and operations support for our industrial deployment. We incurred capital expenditures of $10 million primarily to purchase AV components that we deploy on our customers' trucks. Turning to cash flow. We outperformed our guidance for Q4 with free cash flow of negative $34 million, less than the negative $36 million to $38 million range, which we had previously provided. This outperformance was driven by improved operating leverage and continued prudent spending and was partially offset by an increase in AV hardware CapEx. We ended 2025 with cash and cash equivalents and marketable securities of $121 million. This number includes increased liquidity from the debt refinancing, which we completed at the end of the fourth quarter.…

[Operator Instructions] Our first question comes from the line of Andres Sheppard of Cantor Fitzgerald.

This is Anand on for Andres. Congrats on the quarter. So I was wondering what the pathway towards long-haul launch this year looks like? And maybe what are the milestones you're looking at to get there as we're focused on the autonomy readiness measure as you ramp up to reach that point?

Thanks, Anand. Well, as we've discussed and described previously, the safety case framework consists of a series of claims, and those claims pertain to various aspects of the Kodiak Driver, be it hardware, reliability, functional safety, performance of intended functions, handling of various scenarios and cases that we encounter on the roadway. And really, it's kind of a mechanical process of testing in simulation, testing in the real world, testing on test tracks that allow us to close those claims over time. I think we laid great foundation work in Q4, as we said during the prepared remarks for a lot of the infrastructure work that we need to do. And now it is just really a kind of turning the crank process to close the remaining claims in the safety case. There are no specific kind of feature milestones, if you will, if that's what you're looking for, that remain for us to complete that process. I'll just remind you that this is something that we've already gone through multiple times with our industrial launch. We are already driving vehicles with nobody in the cab on a day-in and day-out basis across various weather conditions and various environmental conditions as well. So we need to simply bring in the additional scenarios and cases that we encounter at higher speeds, and we need to effectively check the box to ensure that all of the performance that we expect to be there is actually there. And so you should really think about closing the safety case as a testing framework as opposed to a feature development or implementation framework. And this is a very manual and tedious process because, as you can imagine, there's lots of scenarios to close, and there's lots of I's to dot and T's to cross. And so we'll continue to update you throughout the year on our progress towards that. But as we said in the remarks, we remain confident in our time line that we've set out, and we're looking forward to the launch later this year.

Got it. Appreciate the color. And as a quick follow-up, I wanted to touch a little bit on defense with the recent ROGUE-Fires contract with the military and demos with the Pentagon. I was wondering if you could talk to us a little on how we should see the near-term opportunities with the Army or DoD and what type of contracts maybe we can focus on materializing or if you can quantify this opportunity a little bit further for us?

Sure. Thanks for the question. Yes, I mean, we're really excited about defense. Hopefully, that came across in the remarks, and I'll just reiterate that here. We've been talking about the exciting opportunities within the defense space for the last several years. And as you can imagine, it's -- the rhetoric is heating up. Congress and the Department of War have made it very clear that they want to field more technology from commercially mature companies. And that's certainly something that Kodiak delivers on the autonomy side, uniquely so, might I add. And so we do see an increase in partnerships and contracts being awarded in the future. The ROGUE-Fires contract was a really exciting one because it brings in a new branch of the military. Previously, we've worked with the Air Force and the Army. And now we're getting to demonstrate the great capabilities of the Kodiak Driver to the Marine Corps. And so as we broaden our experience, broaden our demonstration footprint, we are going to see more and more traction towards defense. As we previously -- as we've stated in the past, it's very difficult to give timelines or any kind of guidance towards defense or defense contracts. And so we're not prepared to do that today. That being said, we do expect these relationships and opportunities to accelerate throughout 2026, and we're very excited about the opportunity within defense more broadly.

Our next question comes from the line of Mike Latimore of Northland Capital Markets.

Congrats on getting to 20 vehicles there. That's great. You need to get to 100% on the ARM metric before you launch on highway long haul. I guess, is there a definitive lag timeframe between getting to 100% and then being able to commercially launch? Or can you kind of do it simultaneously? Just trying to get a sense of the timeframe between once you get to that metric and then you can -- and then the time to launch.

Yes, I don't want to split hairs and talk about minutes, hours, days, et cetera. But effectively, yes, getting to 100% by our definition and our metric means that we are definitively ready to launch. And so you can think about those happening effectively in parallel.

And then on the 20 vehicles, live vehicles, active vehicles, what is the exit ARR rate on those?

Yes. Mike, thanks for the question. We are not specifically guiding on ARR. However, we are exiting 2025 with approximately mid-single-digit millions of annualized recurring DaaS revenue that does not factor in any other revenues from Kodiak Express or any upside from defense.

Got it. And so the pricing that you've envisioned is holding as expected?

Yes. Yes, we're not going to just comment specifically on pricing and specific contracts, but we are still executing as per our prior plan.

Our next question comes from the line of Itay Michaeli of TD Cowen.

Just a first question. As you've expanded the driverless trucks and the hours of paid driverless operations, I'm curious whether the ODD has also expanded. Are the trucks doing kind of new different routes, more complex? And maybe just also just talk about any kind of rates of remote assistance and interventions, things of that nature as well.

Yes. Thanks, Itay. Yes, absolutely. It has expanded. I mean you have to remember, for us, these are trucks owned and operated by the customer. So we don't control the trucks. We don't determine where they operate. We don't tell the operator -- sorry, we don't tell the customer where they can operate these vehicles. They choose the routes, they choose their operations. And the Permian is a 75,000 square mile area. And obviously, Atlas being one of the more sophisticated operators in the region, they utilize a conveyor belt called the Dune Express in order to move sand from the mine into some of the polygon regions that are most attractive to their customers and then they use trucks to carry from the endpoint of the conveyor belt to the end well sites. Those well sites might be 10, 20, even 40 miles away, and they change all the time. So every couple of weeks, the routes are changing. So there's new routes. The sites are only used for a handful of weeks at a time. It could be anywhere from 2 to 4 weeks for a well site to be in operation. And so the routes are continuously changing. Some routes are more difficult functionally than others. And so yes, the ODD continues to shift on a regular basis for us. We're serving multiple well sites with our vehicles and some routes are incredibly narrow. I would say the most difficult part of operating in the Permian is the complexity of the terrain in terms of the bumpiness, the amount of potholes, the unevenness. It's just very -- it's very harsh on the hardware. It's very harsh on the vehicles. And then the narrow lanes is what makes it very difficult because these are bidirectional lanes with lots of traffic. And so passing other vehicles in close proximity on a regular basis where you're kind of going back and forth all day can be very, very challenging. And so for narrow lanes, that's where the ODD is, I would say, most difficult. And then you throw weather on top of that, and that adds additional complication. But yes, as we expand, we obviously see new things, see new challenges and increase the diversity of which the system has operated. In terms of disengagement metrics, there are no disengagements for a driverless vehicle. There's nobody there to disengage. I hope that is clear. In terms of like remote assistance usage, we haven't publicly disclosed specific usage numbers. That being said, the primary use of remote assistance for the Kodiak system is in and around pickup and drop-off locations where you have really nuanced fine control of the vehicles in an environment that is changing constantly, and that's primarily where the customer generally requests assistance for these vehicles.

That's very helpful, Don. And then just as a follow-up, I'm hoping just to go a bit more into the road map for the Bosch collaboration. Maybe how we should think about the opportunity over time for you to generate some future BOM savings and kind of other efficiencies from that important partnership.

Yes. Thanks for that question. This is a really exciting announcement for Kodiak. Obviously, CES was a really great event for us. Bosch being a fantastic partner. We're already in deep collaboration, working with them on future generations of the Kodiak Driver where we believe we can bring additional efficiencies through single supplier and mature supplier relationships like Bosch. We haven't provided any specific references to costs or timelines for that work, but we definitely look forward to continuing on our public disclosure with Bosch at future events, and we'll have more to say later on.

This is Surajit. Just to add on to what Don mentioned, Bosch is part of our scaling and driving down BOM cost strategy. So as Don mentioned in his prepared remarks, we are executing on three levers, I would say. So we have made some engineering design enhancements, which are already yielding some safety -- sorry, savings results. Second, we -- as we increase the scale of the production and drive cost optimization, and Bosch and Roush, they fit in our overall global supply chain organization. Obviously, Roush fits in from providing high-quality assembly and Bosch from being able to manufacture at scale and source multiple components from the same vendor, that would allow us to drive down BOM costs materially over time.

Our next question comes from the line of James McIlree of Chardan Capital Markets.

Regarding the activity with Atlas, prior to recent events, the oil prices and the Baker Hughes rig count were declining. And I'm curious if that has had an impact on the deployment schedule with Atlas. Is 100 trucks still a viable goal with them?

Yes. Jim, thanks for the question. We remain committed to delivering the remaining 80 trucks on that initial 100-truck order over the next few quarters. The timing of those deliveries will largely be aligned with the customers' fleet planning and deployment schedule, but we do expect the rollout to be back-end weighted in the year. And we'll continue to work closely with the customer to ensure that the trucks are integrated efficiently into their operations as necessary. As you know, the oil market is somewhat cyclical and fluctuations do occur. Of course, things are changing literally by the day. At the same time, at the scales that we're talking about, our trucks are not materially affected by those types of fluctuations. And so we remain committed to the 80 trucks on the customers' fleet planning deployment schedule.

Great. That's helpful. And then as far as other industrial customers announced this year, is that a high likelihood? Is that a moderate possibility? Can you kind of frame the potential for other industrial customer announcements this year?

Yes. So thanks for that question. I mean the pipeline -- what I can say is that the pipeline is very strong. And we're talking to customers all over the world. As we mentioned in the prepared remarks, there's a strong pipeline in Australia. Obviously, the mineral resource industry there is one that fits our model perfectly because it's extremely remote, very difficult to find labor. That labor is incredibly expensive, and these are operations that run effectively continuously in remote regions. And so this is definitely an area where we're interested in expanding. Please understand that the complications with going to Australia is not trivial. And so we're working through the logistics there. And then, of course, the Middle East is very top of mind for us and others at the moment, both from a defense perspective, but also from an industrial perspective. And we're talking to several folks in that region, and we'll have more to announce when the time is right.

Our next question comes from the line of Walter Piecyk of LightShed.

First, I'm going to flex because I'm doing this question from the back of a Tesla robotaxi. Unfortunately, I have a safety attendant in this one. I have not gotten one without a safety attendant. So all the time, all the time. But for you guys, I just want to follow up on the Bosch question. Is there any issue in terms of exclusivity in terms of you guys -- obviously, there's another company out there that has shifted to upfitting themselves. Do you get kind of first bids on this stuff? And I guess if there's anything that's -- you have the cost-saving opportunities that are built into the production grade integration like sensor suite optimization or compute platform, is that stuff that you guys keep yourselves or that they can sell to others at the same time?

So one of the great things about the relationship with Bosch -- so there is no exclusivity, as you mentioned. However, we think that there's strength in the industry by providing companies like Bosch with guidance and experience really when it comes to developing these systems. And as we mentioned in the release with Bosch, this is not exclusive to only our upfit model with our integration partner in Roush, but this is also a system that can be deployed to OEMs for line-sign integration. And that, I think, is something that we're very excited about. This is a very close collaboration. It doesn't imply exclusivity. And so in theory, others could have access to the technologies that we're working on. But we think this is a rising tide raises all boats type of situation, and we're excited to work with one of the largest automotive suppliers in the world on a technology that we think is fundamental to scaling our business. And so we think that this is a pure upside in working with Bosch, and it's not exclusive to either upfit or OEMs. This is really a works-for-all situations type of collaboration.

Got it. And then on the -- first off, pat on the back on the $13 million, $14 million, whatever it is, R&D, obviously, super lean. But at 85%, like I guess the question is for that last 15%, I guess one of the kind of the bear case you could throw out there is like, easy to get to 85%, maybe it is, maybe it isn't. That last 15%, we're going to see a massive ramp in R&D, OpEx, whatever it is. Can you kind of address those concerns to the extent they're out there in terms of increased capital intensity to get 85% up to the point where you can really get this thing going?

I'll say a few things, and then I'll hand it over to Surajit on more of the financials. I think it's a very good point that you bring up. I think this is something that we're incredibly proud of being a capital-efficient lean company. We always have been. That's in our DNA, and it has been for the 8 years that Kodiak has been in existence. And so we don't expect that to change. A couple of things, I think, that are worth mentioning, as I mentioned in my remarks, AI is really accelerating progress when it comes to development, right? This is happening around the industry, but Kodiak has fully embraced the use of AI and generative AI tools for coding and process assistant. And what we're seeing is the ability to accelerate a lot of the work that would have otherwise taken significantly more resources on the R&D side, and we can get that done much more capital efficiently than we would have been able to otherwise. And we've been seeing the fruits of that over the last several quarters, right? That's not something that's just going to turn on this year. But obviously, as those models become more powerful, you will see a rapid acceleration in our ability to make progress at a much lower cost. And then the second piece I would say is that we did mention the expected free cash flow on a yearly basis. And so we don't fundamentally expect that to increase significantly. Maybe I'll turn it over to Surajit to address that.

Don, before you turn it over to him, just a quick follow-up on as the AI helps you now versus what it was before. Could you put a timeline on that? Because obviously, like there seems to be an acceleration, obviously happening in autonomy right now because of AI. How long ago was it that if someone was developing AI, they wouldn't have had that benefit. So they wouldn't have had that getting from 85 to 95 at a much more efficient place. Is that like 1 or 2 years ago, 5 years ago? How recent has the evolution of AI really helped the development costs for a company like yours?

I would say that's within the last year. So if you look at the last -- early 2025, these technologies were just starting to take hold. People didn't really understand them well. We didn't really understand how to use them effectively at large scale -- for large-scale development. So it's important to distinguish between a solo person at their computer working on some code versus an entire repo that's read and understood by an organization. So you have to use the tools a little bit more carefully, and it's taken some time to figure that out. But once you have, they really come of age and they're a rapid accelerant of progress. So yes, in the last 2 quarters, I would say, last 6 months, you've really seen an acceleration in that development, and I think that acceleration will continue throughout 2026.

Walter, this is Surajit here. Just on the question of investments. As Don mentioned earlier, most of our incremental R&D investments to get to long-haul is mostly on safety validation and systems. And that will require some incremental investment, but we expect most of that to be offset by the increasing revenue we are getting from our industrial customer as we deploy more trucks. So that's, I think, our beauty of our model being able to operate across three verticals. We are able to leverage the other verticals to offset some of the increased expenses in the other areas.

Thank you. And ladies and gentlemen, that is all the time we have for questions, and that does also conclude today's conference call. Thank you for participating. You may now disconnect.