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Good day. Welcome to the Kodiak second quarter 2026 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Steve Philistin, Senior Manager, Investor Relations. Please go ahead.

Good afternoon. Thank you for joining Kodiak second quarter 2026 earnings call. I am Steve Philistin, Senior Manager, Investor Relations. Joining me today are Don 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. 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.

Good afternoon. Thank you for joining us. Q2 was a quarter of significant commercial validation and increasing scale for Kodiak as we achieved important milestones that further strengthen our leadership position in commercial driverless trucking. We expanded the world's largest customer-owned driverless truck fleet to 35 trucks operating with no human in the cab. We made significant progress toward our targeted long-haul driverless launch by the end of the year, increasing our autonomy readiness measure to 91% as of July. We also introduced our 7th-generation platform, further improving the performance and reliability of the Kodiak Driver. Together, these accomplishments strengthen the foundation of our next phase of disciplined growth as we continue deploying physical AI driverless solutions at commercial scale.

Turning to our second quarter results, we deployed seven additional driverless trucks, bringing our total driverless deployment to 35 and further growing the largest customer-owned driverless truck fleet in the world. As of quarter end, those trucks have driven more than 40,000 paid driverless hours, an increase of 71% from the end of the first quarter and up more than 20x year-over-year. Over the same period, we delivered over 300,000 tons of freight, bringing cumulative loads delivered to more than 20,000, representing 32% growth from the end of the first quarter and 150% year-over-year. Together, these results demonstrate that the Kodiak Driver continues to deliver increasing value to our customers while advancing commercial deployment. We are also moving at high velocity toward our targeted driverless long haul launch by year-end.

As of July, our long haul autonomous readiness measure, which measures the percentage of safety case claims we've completed for our targeted long haul launch, surged to 91%, a five-point improvement in just three months. At 91%, we have now successfully closed out the vast majority of our long-haul safety claims, including several of the most technically challenging claims that historically require the longest validation cycles. These include significant progress across our safety-critical vehicle control architecture, including enhancements to our throttle, brake, and steering control systems, and continued advancement of our redundant steering capabilities to improve system fault tolerance. We've also made meaningful progress in our probabilistic risk assessment framework, strengthening how we model, analyze, and quantify safety risk across real-world operating scenarios, which are essential for highway driving.

This progress reflects the investments we've made over the past several quarters in expanding our systems engineering organization, enhancing our AI-enabled development and validation tools, growing our fleet of dedicated development trucks, and increasing the scale of our structured track testing program. These investments are now translating into measurable results. One example of this improved tooling is our revolutionary AI-powered BreakPoint technology, which allows our engineers to actively seek out rare and challenging scenarios, accelerate development, and close the limited remaining claims in our safety case. BreakPoint can now execute over 1 million simulations per hour and runs on a minimal compute budget of around a tenth of a penny per sim. Another example of Kodiak's capital-efficient approach in action.

We combine this large-scale simulation with targeted closed course testing and real-world validation, thereby generating data more efficiently, validating safety performance faster, and systematically closing out safety claims with a high degree of confidence and speed. Based on the momentum we are seeing today, we expect to continue making meaningful progress throughout the third quarter and continue to target driverless long haul launch by year-end. We also continue to refine our operational readiness for long haul deployment. After successfully launching service with Rail Transport in the first quarter, we recently expanded operations to five round trips per week. This expansion reflects the confidence our customers gain as they integrate the Kodiak Driver into their operations. Our progress towards our long haul launch is happening at an opportune moment, where a number of broad industry trends are reinforcing the long-term trucking opportunity.

Most notably, freight rates are rapidly recovering as the trucking industry faces new driver capacity constraints due to economic and regulatory changes, including a regulatory crackdown on non-domiciled drivers. We believe these trends further reinforce and even grow the long-term opportunity for the Kodiak Driver. We had another strong quarter in our industrial vertical, increasing Atlas's fleet of Kodiak-equipped trucks to 35. Atlas has selected Daimler Truck North America's Western Star platform as it continues to expand its Kodiak-powered fleet. Our upfit partner, Roush, has already begun producing these vehicles, which integrate our seventh-generation autonomous platform onto the Western Star 49X for our growing deployment with Atlas. By the end of the quarter, we expect Atlas to be operating high 30s number of driverless trucks.

As previously stated, as we move through the remainder of the year, we expect to ramp production and deploy a similar number of driverless trucks in the second half of 2026 as we did in the first half. This transition positions Atlas to become the first customer in the world to operate a driverless fleet across multiple truck OEM platforms. We believe the experience gained through this deployment will be invaluable as virtually every large trucking fleet operates vehicles from more than one OEM. We also recently agreed to a firm delivery timetable with Atlas that will allow us to establish a more coordinated production and delivery schedule. This new delivery timetable will better align our deployment with Atlas' growing customer demand while supporting expansion into a broader geographic footprint across the Permian Basin.

The updated agreement further strengthens our partnership, improves planning and execution for both companies, and reinforces our shared commitment to successfully scaling driverless operations. We continue to expect to complete the initial 100 truck commitment by the end of the first half of 2027. We recently expanded our driverless truck deployment with Atlas to service two of Atlas' major Dune Express load-out facilities simultaneously. These two depots are an approximate 90-minute drive apart and service wells spread over three hours apart, allowing Atlas to efficiently serve a broader range of customers over a much wider geographic area in Texas and New Mexico. In addition, Atlas now successfully serves customer well sites solely with Kodiak trucks, which requires a high level of reliability and assurance. If a well site doesn't get sand on time, it shuts down, making these deployments increasingly mission critical.

Lastly, our first international pilot kicks off in a few weeks in Canada with West Fraser, one of the world's largest wood products companies. We will haul flatbed trailers to demonstrate the Kodiak Driver's capabilities in logging operations, another of trucking's most demanding environments. Our defense vertical continues to build momentum. We have a growing roster of world-class defense partnerships, including our strategic collaboration with General Dynamics Land Systems, who we continue to work closely with on new opportunities. Collaborating with companies like General Dynamics puts Kodiak in a much stronger position to compete for future autonomous ground vehicle contracts that we believe could make a significant positive impact on revenue in the coming years.

We were also selected for phase II of the Defense Innovation Unit's Robotic Operation for Autonomous Delivery and Sustainment, or ROADS program. We participated in the ROADS demo in July. ROADS aims to leverage customer-proven autonomous vehicle technologies like Kodiak's for the department's non-tactical vehicle fleet. Given our proven technology, we believe we are well suited to address this opportunity, which reflects the Department of Defense's ramping investment in autonomous and dual use technologies. The depth of our defense portfolio also continues to expand. Our team is continuing to execute on the ROGUE-Fires program with the U.S. Marine Corps. This work builds directly on Kodiak's prior work in military autonomy, including our earlier robotic combat vehicle engagement with the U.S. Army and participation in high-profile Pentagon demonstrations such as the Defense Innovation Unit's Project G.I. and the Army xTechOverwatch program.

Moving to technology, I'm excited to announce that Kodiak's Gen7 platform is debuting on the Western Star 49X. Gen7 reflects the same product philosophy that has guided Kodiak from the beginning, while incorporating everything we've learned for over 18 months of driverless operations in one of the world's most punishing driving environments. The result is a product that is more efficient, modular, reliable, serviceable, and practical for commercial fleets. These improvements reflect our continued focus on building technology that addresses real customer needs. Gen7 has nearly 50% more compute power than the previous generation and features a more compact form factor that simplifies integration, enhances reliability, and supports a broader range of vehicle configurations. In fact, Gen7 is the AV trucking industry's first platform compact enough to integrate into lower cost day cab configurations, which we believe are the vehicles many of our current and target customers want to deploy.

Gen7 also builds on our operational experience to increase the overall reliability of the Kodiak Driver. Initial mechanical stress testing indicates that our Gen7 SensorPods and compute enclosures will have a nearly 50% greater operational lifetime than prior models. We've paired the Gen7 hardware with the latest release of our driverless software, which includes significant improvements over the prior version and is already increasing our customers' productivity. This latest version includes new AI perception models, better handling around obstacles and debris, and improved vehicle controls. Our driving in the Permian has become more confident, with overall efficiency increasing more than 30% from the prior software release. The second quarter saw significant regulatory progress for autonomous trucking. At a state level, California's Department of Motor Vehicles finalized new regulations that, for the first time, extend its autonomous vehicle permitting program to include heavy duty trucks.

This regulatory structure creates a clear path to commercial driverless deployment in California for both intrastate and interstate operations and will ultimately enable us to offer coast-to-coast driverless service. We moved quickly to apply for a permit and anticipate receiving one in the coming weeks. Additionally, we continue to see significant progress at the federal level. In May, the House Committee on Transportation and Infrastructure advanced the BUILD America 250 Act, the latest federal surface transportation bill. Excitingly, this bill includes bipartisan language supported by the AV industry, labor, and other key stakeholders that would establish a comprehensive federal policy framework specifically to regulate the safe deployment of autonomous trucks nationwide. The bill would also permanently solve the warning triangle issue without the need for an exemption from USDOT.

While there's still work to do for the BUILD America 250 becoming law, the bipartisan AV trucking language lays down a clear marker for the future of federal AV truck regulation. We are therefore increasingly confident that autonomous trucking will be included in the final surface transportation legislative package when it becomes law. Our growing driverless deployment, progress toward our long-haul driverless launch, and ability to integrate onto multiple leading OEM platforms demonstrates that Kodiak is prepared to scale. Across our long haul, industrial, and defense verticals, we continued to strengthen the Kodiak Driver, expanded customer deployments, and built the operational experience needed to scale efficiently. Every deployment, driverless hour, and product improvement strengthens the Kodiak Driver across all verticals.

With more than 18 months of commercial driverless operation under our belt and a growing ecosystem of customers and strategic partners, we believe Kodiak is well positioned for our next phase of growth as we prepare to launch long-haul driverless by the end of 2026. I want to thank the Kodiak team, our customers, and partners for their continued execution and trust. Now over to you, Surajit.

Thank you, Don, and good afternoon, everyone. I'm pleased to share Kodiak's financial results for the second quarter of fiscal year 2026. We delivered another strong quarter of both operational and financial performance, successfully executing against our strategic priorities while expanding driverless deployments, growing recurring revenue, and maintaining disciplined spending. We ended Q2 FY 2026 with 35 driverless trucks, in line with our expectations and up from 28 in the prior quarter as we continue to expand deployments with Atlas. These trucks continue to operate commercially without anyone in the cab and are fully integrated into our customers' day-to-day fleet operations. Revenue for the quarter was $3.5 million, representing 91% quarter-over-quarter growth. The revenue increase was primarily driven by continued expansion of driver-as-a-service revenue and also benefited from a one-time revenue contribution of slightly over $1 million from our autonomous trucking demonstration program with DriveOhio.

Excluding this demonstration revenue, our underlying driver-as-a-service business continued to deliver strong sequential growth driven by growing commercial deployments. GAAP operating loss for the second quarter was $43.7 million. Non-GAAP operating loss, which excludes stock-based compensation, was $37.3 million, primarily reflecting continued investment in research and development and operational support as we scale our deployments and long-haul readiness. We incurred capital expenditures of approximately $3.9 million, primarily related to AV hardware commitments, long-haul development, and continued commercial deployments. Turning to cash flow. Q2 free cash flow was negative $38 million, outperforming the low end of our guidance range. Our spending during the quarter primarily reflected continued investment in commercialization expansion, initiatives designed to reduce the cost of Kodiak Driver over time, and further the development of our long-haul driverless capabilities, partially offset by continued increases in revenue.

We ended Q2 with cash equivalents, and marketable securities of $151 million, providing us with the financial flexibility to continue executing our commercialization strategy while maintaining a disciplined approach to capital allocation. Turning to guidance. For the third quarter of fiscal 2026, we expect driverless truck deployments to increase to high 30s. During the quarter, we will begin transitioning the Atlas driverless build to the new OEM truck platform consistent with our customer's fleet strategy. The transition further demonstrates the flexibility of the Kodiak Driver to operate seamlessly across OEM platforms and expands our opportunity to scale future customer deployments and increases the breadth of our customer base. As we initiate this transition, we expect more modest driverless truck additions during the third quarter, while we integrate the new truck platform into commercial service with the customer.

The deployments are expected to accelerate in the fourth quarter as we continue scaling deliveries. We expect third quarter free cash flow of negative $39 million to negative $41 million, primarily driven by continued investment in long-haul driverless testing and development and growing commercial deployment activities. In addition, we are narrowing our full year 2026 free cash flow guidance to negative $155 million to negative $162 million, compared with our previous range of negative $155 million to negative $165 million. This updated guidance reflects our strong first half execution and our continued focus on disciplined capital allocation. We believe our continued commercial deployments, progress toward our long-haul launch, and disciplined financial execution position Kodiak well for its next phase of growth. Operator, we are now ready to take questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. We ask that you please limit yourself to one question and one follow-up. Our first question for today will come from Andres Sheppard with Cantor Fitzgerald. Please go ahead.

Hey, everyone. Good afternoon. Congratulations on the quarter and all the great progress, and thank you so much for taking our questions. Don, I just wanted to maybe touch on the cadence for Atlas. I think in the prepared remarks, you gave us a sense of Q3 deployments. You gave us a sense that-- Sorry, you reaffirmed that you're on track for the entire deployment by middle of next year. Just trying to break that out a little bit further. Any more cadence or granularity you can give us? How should we think about Q4 and then the cadence for next year? Thank you.

Thanks, Andres. I think we said it in the remarks, right? We're steadily ramping up the new platform. There's obviously a lot of work and validation that goes into bringing a new platform up to driverless level quality. This is something that we've been working on for the last little while, and we're excited to finally be deploying that new platform here in Q3. As we said before, we're going to start small with a Q3 deployment on the new platform. Then we're going to quickly start to ramp up through Q4, Q1, and Q2 as we get to the final 100. I don't have anything more to add other than we plan to deploy similar number in the second half of the year as we did in the first half of the year.

Okay. That's very helpful. Appreciate it. Maybe just as a quick follow-up, maybe a two-part question. With the launch of the Gen7 hardware, I guess, what does that do to the scale? Any opportunities to accelerate that? How are you then thinking about your fleet? Are you going to perhaps discontinue some of the previous hardwares and just move over to the Gen7? Just trying to understand how you're thinking about that. The last one real quick is I see that you applied for the California autonomous permit. How are you thinking about opportunities in California as well? Thank you.

Sure. We don't have any plans to discontinue the usage of our previous generation platform. It's out there working day in, day out, 24/7 for our customer today, and we built that system to be incredibly reliable. It's really been showing the quality that we put into it. That was a program that we developed over several years. It's still going plenty strong. We will continue to support that platform for the coming years and ultimately the lifetime of those trucks. We don't plan to go back and retrofit, so to speak, a Gen7 on previous platforms. All new trucks that we deliver starting in Q3 will have the new Gen7 platform with all of the upgrades and improvements in efficiency, horsepower, compute power, space savings, reliability, etc, that we had mentioned before.

In terms of California, we're really excited about where California stands. We await the permit, as we said in the remarks, coming soon. We're excited that that opens up coast-to-coast potential operations for our long haul release. We are focused on the Texas area for the next several quarters. Ultimately, we do believe that the longest of long-haul routes are the ones that are the most impactful for our customers. Of course, we're already talking to many customers in California who are excited to take advantage of the safety benefits that the Kodiak Driver offers.

Andres, just to add to what Don mentioned about the Gen7. In earlier conversations we have, in earlier earnings calls, we have mentioned we are taking steps to enhance the efficiencies of the AV hardware stack. This is one of those steps in that direction as we try to drive down our AV hardware costs by increasing efficiencies and productivity. This is one of the steps in that direction as we will continue to drive down the AV hardware costs.

Excellent. Thank you both very much. Congrats again on the quarter. Lots to look forward to. We'll pass it on.

Thanks, Andres.

The next question will come from Itay Michaeli with TD Cowen. Please go ahead.

Great, thanks. Hi, everyone. First, Don, maybe just to go back to the defense opportunities you talked about in the prepared remarks. Just curious, one, what kind of milestones should we be expecting in the next maybe 6 to 12 months? Second, how to size the opportunity for Kodiak over the next few years.

Yeah. Our bullishness on defense continues to be really strong as it has been in the previous quarters. That being said, visibility into the sizing of these programs, the availability, and when they ultimately come is very difficult to predict. So we continue to be fairly cautious in giving any suggestive guidance around what the sizing of these programs look like. I think from our perspective, we see defense as a long-term strategy for the company, and we're excited to partake in programs that are available to us, the ever-evolving landscape of ground-based autonomy for military purposes. We're making great progress on the programs that we are a part of, and as I said in the remarks, with our partner, General Dynamics Land Systems and others, we're looking forward to applying to additional programs as they come down the line.

I can't give any specifics on kind of the scoping or size or expectation in terms of timing of when those will land or when those revenues will come in. We kind of look at that as purely additive to our core business in deploying our industrial and ultimately long-haul vehicles starting in 2027. So we don't have anything more specific to add to that.

As a follow-up, going back to Gen7, one, any way to quantify the impact from cost or unit economics as you scale the new platform? Does this incorporate any of the benefits from the Bosch development that was announced earlier in the year?

Itay. This, the Gen7 platform is part of all our initial initiatives in engineering to enhance design enhancements. While we can't get into specifics, we can say we are starting to cross into double digits of benefits from these pieces of the hardware as we go along, we are continuing to making those investments, right? If you think about our overall auto drive AV hardware stack strategy, there are three drivers. One is there's obviously the engineering enhancements, including the Gen7 platform, there are a few other things we are working on. The second is how we could create efficiencies through a global supply chain organization. That's part of the Bosch you are referring to. That's still nascent. We have started developing prototypes with them, we'll start seeing more of those benefits into 2027 and beyond.

The last piece will be just the scale of production, which will drive more cost optimization. Just going back to defense, also we wanted to remind, we had talked about it in the last earnings call, the Pentagon budget for the Defense Autonomous Warfare Group. I think the preliminary numbers were being talked about is $50 billion for 2027 compared to $225 million for 2026. We believe this will benefit all players like us as we ramp into 2027 and beyond as these contracts gets allocated out.

Terrific. That's all very helpful. Thanks, everyone.

Thanks, Itay.

The next question will come from Jim McIlree with Chardan. Please go ahead.

Thank you. Good afternoon. Atlas on their call when they talked about the deployment of the 100 trucks, it kind of sounded like some of these trucks were going to be on the road or that it seemed like they were assuming that the long-haul case, the safety case would be complete, and that's where some of the trucks would be deployed. Is that correct? Are some of these trucks in this 100-truck order contemplated to be used on road?

Well, I think the important thing to remember about Atlas is that they own and control these trucks. Ultimately, how and where they operate the trucks, which zones of and which regions of the Permian, out of what load-out zones and what well sites to deliver to is ultimately their decision. We are working to close out our safety case for highway or long-haul operations by the end of this year. At which point then, once we've kind of approved a given operational domain for driverless operations, then of course it's our customer's discretion as to whether or not they want to use the trucks in that mode or otherwise. We are working with them on geographic expansion. I think they talked about that. We're excited to continue geographic expansion. We've already begun expanding broadly throughout the Permian. That includes additional types of roads.

This is ultimately their decision as to how they operate the trucks and where they want to utilize them.

Got it. Thank you. On West Fraser, can you remind us again how long you think that demo or test might last, and then the timeframe to a decision after the demo is complete?

Yeah, Jim. Yes. We expect the pilot to start in the next few weeks, and it'll last for a few weeks in Q3. That could set up a decision and discussions with West Fraser on a potential contractual agreement over the next few months.

Great. Thank you.

The next question will come from Ryan Sigdahl with Craig-Hallum Capital Group. Please go ahead.

Hey, good afternoon, Don, Surajit, Steve. In the Gen7 hardware platform, you see 50% greater operational lifetime versus prior generations. Are you willing to quantify what the previous generation was before, then I guess what this one implies? Secondly, on the Gen7, Surajit, you said crossing to double digits of benefits just now. I'm not sure what you were referring to there, so some clarification would be helpful.

I'll take the first part, which, yeah. We intend the platform to outlast the useful lifetime of the truck. A typical lifetime of the truck in the Permian is around four years of operation, and we expect our Gen7 platform to be able to exceed the lifetime of those trucks.

Yeah, Ryan, what I meant by those, the double-digit reduction means we're talking of our AV hardware stack, how much that costs on the truck. Obviously, we are still subscale, and we are still building out a handful of trucks. The overall Gen7, including compute redundant systems, all those benefits, we expect that would result in low double-digit reduction in AV hardware costs from the baseline cost.

Got you. Maybe just a follow-up, Don, on that. I guess does that imply that the 35 Atlas trucks now only have something like a two-year useful life, half of what they kind of need?

No. We actually believe that those trucks are built for nearly, if not exceeding, the lifetime of those trucks. It's just Gen7 is kind of solidly on the other side of that. We do a lot of accelerated life testing with our systems, but ultimately the Permian is a very rugged environment. It's one of the most rugged environments you can find in the U.S., Measuring and quantifying the lifetime and reliability of the systems is quite difficult. We have dramatically improved those capabilities, at least in bench testing and in chamber testing versus the previous gen. So far we've seen incredible reliability with our AV system in the Permian over the last 18 months, and those systems are going strong. We expect that to continue, but we do expect Gen7 to be even more reliable.

Helpful. Switching over as I look at the truck platform with Daimler, I guess nobody seems to be able to get access to Daimler for autonomous trucking, given their Torc relationship. Anything you can share on kind of what this engagement relationship, if there is one, what it could mean for Kodiak?

I can't comment on the relationship at this time. What I can say is that the Western Star and Daimler team are aware of the selection by Atlas to use their platform and we've coordinated with them on the deployment of the Kodiak Driver system on the Western Star platform for the purposes of deploying with Atlas.

Yeah. Just to add to what Don mentioned, we are really excited about the integration on another leading OEM platform. This also allows us to adapt our autonomous solution to a more economical day cab, which, as Don mentioned in the prepared remarks, we believe would be one of the leading configuration across all verticals. This also validates our case of we are platform agnostic. Our architecture allows us to transition quickly and efficiently across different platforms, and that allows us to be fast into the go-to-market opportunities.

Quick follow-up. Does coordinate with them and them aware, I guess, does that mean they approved, assuming you put the technology on there? Is that a reasonable inference?

Yeah, they have approved. Yes.

Very good. Thanks, guys. Good luck.

Yeah, thank you.

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

Hi, this is Nancy on for Ravi. I saw that your autonomous readiness measure was at 91%. It would be helpful if you could walk us through specifically which safety cases claims remain open or any gating factors before you can declare 100% and commence driverless operations on highway.

Well, as a reminder, our safety case process consists of a series of claims. There is many claims in the tree that we have to provide the sufficient amount of evidence to declare that the system is adequately performant and the risk is sufficiently low. It is beyond the scope of the call to walk through all of the different claims within the framework. What we can say, and I will just reiterate from the remarks, is that some of the longest lead time items have now been closed out. Most of the most technical challenging claims have been closed out. We do expect this number to accelerate towards 100% as we march towards the end of the year, and we are very confident that we can close the case and deploy our launched vehicle by the end of December.

Great, thanks. Then, I guess, going off of that, with the BreakPoint technology, how does that differentiate you from competitors? How do you balance simulation testing with on-highway operations, and does that help you close the safety case a bit faster, perhaps expand a bit more when you're looking at lanes on the other end of this driverless launch?

Yeah. Well, I can't speak about other technologies, but what I can say about BreakPoint is that it is truly a game changer or a step function in terms of the way we think about simulating for rare events and edge cases. If you think about the distribution of all the things that can happen, the classic/naive way is to simulate every scenario across every variable. That can be very expensive. Also, the majority of simulations you run are going to be very mundane and eventless, so to speak, right? Very easy to close. What BreakPoint allows us to do is it allows us to search around the edges where there's close calls, near misses, or potential collisions. It allows us to explore the space of simulation right along those edges where it's the most difficult for the truck.

We can focus the effort, so to speak, on the hardest cases. BreakPoint is just a tool that allows us to intelligently and in a very sophisticated way, search for those edge cases in a very extremely high-dimensional space. By doing that, we can, of course, test all of the mundane stuff, but we can really focus a lot of our brain power, our resources on the hard specific edge cases that we ultimately need to find to close. It allows us to skip over a lot of the easy things that we don't want to spend resources because we know the system already handles.

Great. Thanks for taking my question.

Thanks.

The next question will come from Walt Piecyk with Lightshed. Please go ahead.

Hey, thanks. Don, I'm taking a look at this Western Star truck. Looks pretty good. In terms of why you can use this day cab, is it just that that large compute box that would normally sit in the second row of the larger cab has been reduced or is it moved up into the passenger seat? Is it in that little cap thing above the windshield? Can you give us a little bit more color on how you've achieved that and while at the same time, obviously getting, I think you said 50% more faster compute?

Yeah. Thanks, Walt. Very astute observations. Thanks for the compliment on the looks. We agree. We think it's a beautiful looking truck, we're excited to deploy it this quarter to customers in a driverless fashion with nobody in the cab. Kind of exactly as you said, a little bit of all of the above. We've moved the compute from the rear of the cab, where most companies would naturally deploy it, into the front area where the passenger seat would go. We've, of course, had to improve the form factor for that. With improved form factor, reduced form factor, comes additional space challenges, but also heating, cooling, power challenges as well. We've had to address all of those additional challenges to bring everything into kind of a smaller footprint for the day cab configuration.

Ultimately, if you look out in the Permian in particular, all of the trucks are day cabs, right? You don't get a lot of sleeper cabs out there. It's important to our customer, but also important for our development to be able to kind of prove that the Kodiak technology is agnostic, like we say it is, to all different form factors. Yeah, it's kind of all of the above. We had to really think about the engineering of the actual footprint of the compute system. We had to think about the thermal considerations of having a reduced air space, how do we keep it cool, and how do we improve all those systems for the new form factor. It was quite a heavy lift on the team, and I'm super proud of how it ended up.

Does the customer capture all of the economic benefit, or are you able to increase your per mile, per hour, however you charge, for the driver, since they're going to be saving that much more on a smaller cab truck versus the sleeper cab?

This is primarily ROI that's passed on to the customer. Exactly as you said, one of the benefits of running a day cab is that it's actually cheaper. If you don't care about the aerodynamics, meaning you're not going to operate in very high speed environments, then a day cab is definitely a cheaper option. Of course, because the customer, in our case, in our DaaS model, they purchase, they own the trucks, this is obviously savings that is direct to their bottom line.

Got it. I was just looking at the I don't know if you gave the full number, but the hours of paid driverless ops, and I looked at it basically on per truck per day, which it looks like based on simple math, maybe last year you were in kind of like an eight hours a day, and now it looks like 14. I don't know if that math tracks, but is it that your trucks are just running more per day or is it just kind of a rounding hour based on the timing of when those incremental trucks came on?

I think you're onto the fact that our efficiency has been improving ever since the beginning of our deployment 18 months ago in December of 2024. Those numbers are not the ones that we provide, but you're absolutely correct in that the trucks are more efficiently run. This comes from a number of factors. Both the uptime of the trucks is higher today, the operational capabilities of the customer are higher, meaning the people who are actually utilizing these trucks for pickup, drop-off, and deployment are actually more efficient. The startup procedures have improved, so the trucks are available when they want to be used. There's no downtime. They don't have to spend time calibrating them or recalibrating them or re-initiating them. Startup time has improved. Overall transit time is being reduced, and dwell time at the well sites is also improving with operational efficiencies.

Some of that is due to Kodiak improvements, and some of that is due to customer improvements that we've assisted and helped along the way, and kind of all coming together to a much more overall efficient fleet.

Okay. Just one last one, if you don't mind. You were talking about this high 30s, right? Because you're transitioning to these new trucks, Gen7. I think that implies that basically the PACCAR trucks are getting taken out of service. I'm just curious, what does the customer in that situation do with those trucks? Is there any residual value? Do they operate anywhere else? Or what happens to those trucks as they're taken out of service in your, if that's even correct, and you're replacing with these Daimler trucks?

I won't speak for the customer, but I don't believe any of the former trucks that they're currently operating are being taken out of service.

The high 30s number we are guiding is the cumulative number. We added 15 driverless trucks in the first half of 2026, and we expect, as Don mentioned earlier, numbers similar to those additions in the second half of FY 2026.

Right. I think I was just asking about Q3 because I think you mentioned 38 cumulative in Q3, which implies adding about three or four, which is a lower pace than you've done in the last three quarters. I assume that was for some transition, but so they're staying in service. You're just adding fewer and then just really cranking them out in the fourth quarter?

Yeah. We're definitely ramping up production in the fourth quarter.

Got it.

As the new platform is coming online, there will be fewer deployed this quarter. It is a temporary slowdown, but it is not due to any kind of manufacturing deficiency or supply chain issues. It's just a matter of making sure that these new trucks on the new platform are fully validated and ready to go at the quality that the customer expects. There's a very high bar to meet there, and we want to make sure that we've gotten everything right before we hand these over to the customer to make sure that their operational efficiency is high as expectation. Yeah, we're going to have a fewer less this quarter, but we do intend to ramp up significantly in Q4, Q1, and Q2.

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.

Thank you for standing by. At this time, I would like to welcome everyone to the Kodiak First Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. Today, we ask you to limit to one question, and one follow-up. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Thank you. I would now like to turn the call over to Daniel Goff, Vice President of External Affairs. You may begin.

Thank you, welcome to Kodiak's First Quarter 2026 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 second 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-K, 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 quarterly report on Form 10-Q, for the quarter ended March 31st, 2026. We disclaim any obligation, except as required by law. To update or revise any financial or operational guidance, and long-term goals or 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 getting into our Q1 results. I'm excited to highlight, that today we announced a $100 million capital raise. With our strengthened balance sheet, we believe we've extended our liquidity into Q2 of 2027. Which will enable us to support the next phase of growth, as we scale our driverless deployments. I'd like to turn to our Q1 results. In the first quarter, we increased both the scale, and productivity of our growing driverless deployment. Expanded our partner ecosystem across the long haul, industrial, and defense verticals. And made meaningful progress toward our driverless long-haul launch targeted for late 2026. We also made significant progress maturing our physical AI-powered technology, and product while maintaining financial discipline, and capital efficiency.

We deployed eight additional trucks in Q1 for a total of 28 driverless trucks. Further expanding our industry-leading driverless truck deployment. As of quarter end, those trucks have driven more than 23,500 paid driverless hours. A 120% increase from the end of Q4 of last year. These hours are equivalent to over a decade of working as a truck driver. Further, the hours driven in Q1 exceeded all the driverless hours driven in 2025. Over the same period, cumulative loads delivered increased to more than 15,600, representing approximately 24% growth. That includes more than 200,000 tons of freight. Approximately the weight of the Sears Tower, delivered in Q1 alone. We believe these results demonstrate that we are successfully scaling our product, and delivering increasing value to our customers.

Because Kodiak's integrated platforms are powered by a single autonomous stack. The capabilities we develop, the miles driven, and the new customers, and partners we work with. Create a compounding flywheel effect benefiting long haul, industrial, and defense applications. In the first quarter, we made strong progress on strategic partnerships, and customer engagements. As industry leaders continue to choose the Kodiak Driver to enable their autonomous future. I'd like to highlight one exciting announcement we made earlier today. A strategic partnership with General Dynamics Land Systems, or GDLS. To collaborate on autonomous military ground vehicles. GDLS, part of the Fortune 100 General Dynamics group, manufactures critical platforms. Such as the M1A2 Abrams tank, and the Stryker combat vehicle. Working with GDLS will allow us to extend our reach into the core of the defense ecosystem. It also demonstrates our flexible approach to defense engagements.

We are working with industry leaders to support paths to production, and revenue. While simultaneously contracting directly with the Pentagon. As we have done with the Marines ROGUE Fires program. Our work with General Dynamics Land Systems is already generating results. In March, we unveiled the first vehicle we developed in collaboration with GDLS. The Leonidas Autonomous Ground Vehicle. The Leonidas AGV combines the Kodiak Driver, with Epirus' cutting-edge high-power microwave system for counter-drone operations, supported by GDLS' system integration expertise. We continue to make significant progress on our core technologies. Driving this progress is our increasingly aggressive adoption of AI tools. That are proving to be true force multipliers across our company.

AV developers are only as good as the tool they use. AI is enabling us to develop new, powerful tooling, that is already transforming how we work. In Q1, we launched company-wide Model Context Protocol, or MCP Servers. That allow agentic AI tools to connect to all of our company data sources. Allowing the entire company, not just engineering. To develop new bespoke AI-powered tools tailored specifically to individual needs. In layman's terms, these MCP servers, and related data pipelines. Empower our team to use plain English to build AI tools, and proliferate AI agents. That massively increase our productivity, efficiency, and problem-solving capabilities. This, in turn, is driving a transformation in how we run our business.

For example, we've used our MCP servers to develop Prism. A flexible new tool, that allows anyone in the company. To search across thousands of hours of unstructured driving data using only text prompts. Surfacing patterns, and root cause analysis that previously required dedicated engineering effort. Prism can explain the Kodiak Driver's behavior in intuitive ways. To both technical, and non-technical teams using natural language. We've used this new capability to tune the Kodiak Driver, in ways that would not have been possible before. For example, we use Prism to not only identify commonalities among challenging highway scenarios. But even identify potential improvements that we have since adopted. These tools are not only about software. They also help to drive improvements in hardware, manufacturing, and beyond. On the hardware side, we announced that Kodiak will use the NVIDIA DRIVE Hyperion architecture. In the next generation of Kodiak Driver-powered trucks.

We believe this will increase our ability to deploy even more capable, and efficient driverless trucks over time. At CES in January, we laid out our vision for industrializing the Kodiak Driver. Through our strategic collaboration with Bosch, one of the world's leading automotive suppliers. Through this collaboration, we will leverage Bosch's manufacturing expertise. To deploy driverless vehicles at scale. This week, at ACT Expo, we demonstrated the progress we have already made together. Exhibiting an early prototype Kodiak SensorPod outfitted with Bosch camera, and radar sensors. Taken together, these partnerships enhance the ecosystem needed to efficiently scale simultaneously across all three verticals. From vehicle platforms to industrialized hardware to AI compute. I'd like to discuss our progress toward our targeted driverless long-haul launch in late 2026.

As of the end of April, our long-haul autonomy readiness measure increased to 86%. Reflecting steady progress in launch readiness. As we leverage our increasing investments in our team, and AI tooling, we believe that our ARM progress will accelerate in Q2, and beyond. Over the course of the quarter, we completed numerous safety case claims. Including claims covering our driverless long-haul sensor field of view requirements, and our redundant braking subsystems. As a reminder, completing a safety case is about collecting sufficient evidence. To demonstrate safety, and Kodiak is one of only a small handful of AV companies. That have successfully built a safety case, and launched driverless operations. We continue to hone our safety case structure as we refine our safety processes. And implement our learnings from our long-haul industrial, and defense operations.

To reach an ARM of 100%, and unlock long-haul driverless operations. We will continue to gather evidence to close our remaining claims. That work leverages the safety methodology, testing, and documentation processes. We established over our nearly 18 months of driverless operational experience in the Permian. In addition to our work on the safe launch of our long-haul driverless product. We continue to expand our long-haul commercial operations. Delivering freight with leading shippers, and carriers from our Dallas Hub. This afternoon, we announced that we launched service with a new carrier, Roehl Transport. Through our collaboration, we are hauling freight with Roehl Transport between, Dallas and Houston four times a week. Roehl Transport is one of North America's safest trucking companies. As recognized by the American Trucking Associations' or ATA. They are a recent recipient of the ATA's President's Award, the trucking industry's highest safety honor.

They specifically chose Kodiak because of our shared commitment to safety. During Q1, we also began freight services between Dallas, and El Paso in cooperation with one of our long-term customers. This freight lane is our second route beyond a single hours of service after Dallas to Atlanta. It is just the kind of long-haul lane, where the Kodiak Driver can offer the most value, given the challenges fleets face staffing these routes. These true long-haul freight operations are critical. To helping us build a product that meets our customers' needs. We are working closely with all of our long-haul customers. To prepare them for driverless operations in the coming quarters. While preparing for long-haul driverless represents our core focus for 2026. Our industrial business demonstrates, how our driverless technology. Is continuing to deliver value to our customers, and expanding to other geographies, and use cases.

Today, I'm excited to announce our planned pilot operations with West Fraser. One of the world's largest wood product companies. To demonstrate the Kodiak Driver in logging operations in Canada. This will mark our first pilot in the forestry industry. Our first international expansion, and our initial operations with flatbed trailers. Logging routes, like oil, and gas routes we see in the Permian. Are among the most demanding environments in trucking. We believe this pilot will further demonstrate the versatility of our system across geographies, and trailer types. And expands the range of industrial use cases where the Kodiak Driver can deliver value. In addition to our new pilot in Canada, we continue to make meaningful progress in our Atlas deployment. Since we are not reliant on HD maps, we can quickly add new routes to our operational design domain.

To date, we have delivered on over 15 unique routes with Atlas, each with its own complexities. We also expect to continue to execute against our initial 100 truck commitment. With Atlas over the next several quarters, and expect to exit Q2 with driverless trucks in the mid-30s. Atlas is evaluating deploying the Kodiak Driver on a new OEM platform for the remaining trucks. This transition, beginning in Q3, will include a shift to a more economical day cab from a sleeper berth. Which we believe will be the predominant configuration for driverless operations across both industrial, and long haul. We believe our modular platform-agnostic architecture positions us well to support this transition efficiently. And we are working closely with Atlas to meet their evolving fleet requirements. We view this as an exciting opportunity, to demonstrate the ease of integration of our technology on an additional truck platform.

Delivery timing will remain closely aligned with our customer needs. And will depend on factors such as procurement of the new truck platform. Fleet planning, deployment schedules, and critical hardware, and truck availability and lead times. As a result of this platform transition, and associated procurement timelines. We now expect to deliver a similar number of trucks in the second half of 2026. As we expect to deliver in the first half. As the new platform scales, we expect deployment to accelerate. We anticipate completing Atlas's initial 100 truck commitment in the first half of 2027. Now turning to defense. With General Dynamics Land Systems, and beyond, we continue to add wins in the defense vertical. Where reliability, and performance in complex environments are mission critical.

At the broadest level, we are seeing the defense autonomy ecosystem evolve. From experimentation to deployment, as ongoing geopolitical instability. Forces both the Pentagon, and our allies to accelerate their timelines for frontier technologies like autonomy. Underlining this increased interest, the President's 2027 defense budget. Includes over $50 billion in funding across land, air, and sea for Defense Autonomous Warfare Group, up from just $225 million in 2026. We therefore expect to see increased revenue generating opportunities in 2027, and beyond. Our recent successes in defense demonstrate the maturity, and adaptability of our system in mission-critical environments. And we believe will position us well as the Pentagon increasingly turns to commercial partners. To accelerate Autonomous Ground Vehicle deployments. Moving on from defense, Q1 saw continued regulatory progress for the autonomous vehicle industry.

We are encouraged by continued momentum toward a more consistent federal approach. Which we believe will further support broader adoption over time. At the state level, California recently published final state regulations. That will allow us to deploy the Kodiak Driver in our home state. Thereby, enabling us to offer coast-to-coast driverless service. These regulations will provide us with additional regulatory certainty. We plan on submitting our application for a California testing permit in the coming weeks. Similarly, Texas also launched its new AV permitting program. After submitting our first responder interaction plan to state officials. We received our Texas AV authorizations. We continue to engage with regulators at both the state, and federal level. One engagement of note was our participation in a grant funded public demonstration in cooperation with DriveOhio. The Ohio Department of Transportation's hub for smart mobility technology.

Our work with DriveOhio represents Kodiak's first operational deployment outside of the Sun Belt. And enabled us to demonstrate our long-haul autonomous solution. To policymakers, and industry leaders in Ohio, and Indiana. As we prepared for this engagement, we passed an exciting milestone. We added our 25,000th mi to our commercial network. Which is more than the circumference of the Earth. The massive size of our network underlines the flexibility of our routing technology. Which enables us to quickly add new routes across, a range of geographies and deployment types. In closing, we believe our $100 million equity financing. Combined with our continued product maturation, and driverless deployments. Position us to scale Driver-as-a-Service across long-haul, industrial, and defense in a disciplined, and capital efficient way.

We are well on our way to scaling Kodiak into a sustainable business. That provides real value to customers. I am excited by the opportunity ahead. I'd like to take a moment to thank all of the Kodiakers, who worked so hard in the first quarter to drive us forward. Autonomous driving is the first wide-reaching application of physical AI. This is just the beginning. Over to Surajit.

Thank you, Don, and good afternoon, everyone. I am pleased to share Kodiak's financial results for the first quarter of fiscal year 2026. We delivered a strong first quarter across both operational, and financial metrics. Successfully executing against our strategic priorities, scaling driverless deployments, growing recurring revenue, and maintaining disciplined spending. We ended Q1 FY 2026 with 28 driverless trucks. In line with our expectations as we continue to broaden our deployment with our existing industrial customer. Q1 revenue was $1.8 million, representing 74% growth quarter-over-quarter. This performance was primarily driven by continued expansion in Driver-as-a-Service revenue. Enabled by growth in customer owned driverless trucks. GAAP operating loss for the first quarter was $37.9 million.

Non-GAAP operating loss, which excludes stock-based compensation. Was $31.8 million, primarily reflecting continued investment in R&D, and operational support as we scale our deployments. We incurred capital expenditures of approximately $5.5 million. Primarily related to AV hardware, that we deploy on our customers' trucks. Turning to cash flow, Q1 free cash flow was -$35 million, outperforming our expectations. This reflects continued investment in R&D, operational scaling, and AV hardware deployment. Partially offset by improving operating leverage. For the second quarter of fiscal 2026, we expect driverless trucks to increase to mid-30s. We expect free cash flow of -$39 million to -$41 million, with the increase primarily driven by non-recurring spend. For hardware unit cost improvements, and incremental CapEx to support driverless long-haul testing, and development.

For the full year fiscal 2026, we are improving our free cash flow guidance. And now expect free cash flow to be in the range of -$155 million to -$165 million. This improved outlook reflects continued growth in revenue. Expected lower AV hardware costs, due to slower pace of deployment, and sustained discipline in operating expenses. We ended Q1 with cash, and cash equivalents, and marketable securities of $90 million. Today, we further reinforced our liquidity position. With a successful common stock PIPE financing from existing, and new investors, raising $100 million of gross proceeds. After fees, and expenses, net proceeds are approximately $95 million. On a pro forma basis, this brings our Q1 cash equivalents. And marketable securities to approximately $185 million.

The successful financing strengthens our balance sheet. And extends our liquidity into Q2 of FY 2027. In summary, Q1 reflects a strong start to 2026. We delivered solid revenue growth, continued scaling of driverless deployments. And outperformed our free cash flow expectations, while improving our full year free cash flow outlook. We believe that we are well-positioned to scale our business. Progress towards profitability, and generate free cash flow over time. Operator, please open the line for questions.

Your first question comes from Andres Sheppard with Cantor Fitzgerald. Please go ahead.

Hey, everyone, good afternoon, and congratulations on all the great progress on the capital raise. Lots to unpack. Again, kudos to everyone. Don, I was just wondering if you could maybe give us a little bit of cadence, in terms of how we should think about deployments for this year? Surajit, I think you alluded to kinda Q2. What to expect, but just curious for maybe the remaining part of the year? How should we think about those deployments ramping up in the second half, and maybe through next year? Thank you.

Thanks, Andres. As we said in the remarks, we expect the second half of 2026. To look very similar to the first half of 2026 in terms of raw numbers. And we do expect the ramp of the truck to accelerate quarter-over-quarter through the first half of 2027.

Got it. Okay. Very helpful. Just curious if you could maybe expand a little bit further on Canada. What kind of opportunities do you look forward to there? Maybe remind us, what is the regulatory environment there for maybe those that aren't as familiar? Thank you.

Sure, yeah. This is a really exciting development for us. As we've been talking about for some time. We see our industrial, and unstructured driving applications as being manifold. You have the oil, and gas industry, of course, which we've talked about at length. There's mineral, and resource mining in many other countries. Then there's forestry, and logging in the Pacific Northwest. Both here in the U.S., and Canada, and beyond. We're really excited to announce West Fraser. As a pilot opportunity that we'll execute in Q3. These are very difficult, unstructured, remote locations, which have a lot of the same challenges. That you will find in some of the other applications. That we've already been pursuing, including in the Permian.

As it relates to the regulatory framework, this is something that we are working on currently. We will be operating initially on private land, again in Canada. Which allows us to deploy driverlessly without anybody in the cab, independent of the regulatory framework. We continue to work with regulators. At the province level, and at the national level in Canada. To ensure a free, and clear path to deploy driverless trucks at scale beyond those environments. That is a development that we're working on, and we expect to have progress over time.

Wonderful. Very helpful. Congrats again on all the quarter. I'll pass it on.

Thanks, Andres.

Your next question comes from the line of Colin Rusch with Oppenheimer. Please go ahead.

Thanks so much, guys. You know, could you talk a little bit about the dexterity that you have, in terms of, you know, managing autonomy from multiple form factors? It just looks like you're gonna be able to deal with multiple types of vehicles in different environments. Just wanna understand, like, how quickly that sort of capability can get put out into the field?

Yeah, sure. We've held the belief for a long time that generalized AI. Is always going to win out over specialized implementations. From the very beginning of the company, we wanted to be platform agnostic. And adaptable to many different form factors. Not just makes, and models of vehicle, but also additional form factors. You're seeing the fruits of that labor as we deploy into the defense space. With tracked vehicles, and various form factors there. Large trucks like you see on the highways. Heavy-duty trucks that we implement in our unstructured environments like the Permian. And also logging trucks, which are slightly different themselves. Kodiak implements a single AI system behind all of these different products, and applications. The core underlying software that runs on these vehicles is actually the same across each one of them.

That allows us to leverage the learnings, the data, the training, and all of the development costs. Across each one of those verticals without having to have specialized teams. Or specialized AI, or specialized training that goes into each one of them. The more experience that we gain as a company, the more experience that the Kodiak Driver gains as a system. The stronger the AI becomes, and the more utility we get out of it across all of the different verticals, and applications that we supply to our customers.

That's super helpful. Then, you know, you guys have announced the partnership with Bosch. And you're obviously working very closely with them. There's also been a reasonable evolution of some of the perception solutions that are out in the field. I'm just curious about your capacity to integrate some of those innovations, and really monetize them. And how much efficiency you might get out of them? And thinking particularly around LiDAR as well as some of the other sensors that are out there.

We're always evaluating new sensors. We use LiDAR cameras, and radars in our system today. We feel like that sensor stack is the appropriate balance of cost, and performance. You know, you can always add more sensors to your system. Of course, that makes it more expensive. In our business, we can absorb a more expensive hardware solution. That increases the safety, and utility of the system. We continuously evaluate all of the products out there on the market. From providers both here in the U.S., and abroad. That's true of the LiDAR space, radar space, and camera space. We did just demonstrate at the ACT Expo in Las Vegas with Bosch. The kind of a concept of the next generation of our SensorPod. Which includes Bosch's in-house radar, and camera sensors.

We're really excited to continue to develop a much more mature, reliable, and scalable system with Bosch as our tier one supplier.

Great. Thanks so much, guys.

Thanks, Colin.

Your next question comes from the line of Itay Michaeli with TD Cowen. Please go ahead.

Great. Thanks. Hi, everybody. Maybe just to continue on the last question as well with Bosch. Can you maybe just cite a little how you see, you know, the cost-cutting opportunity in the second generation? You know, versus kind of where we are today, and maybe just some updates. I think I also heard mention around some maybe Q2 investments, for kind of hardware cost improvement. Maybe you can just elaborate on that as well.

Yeah, sure. I'll start. Maybe Surajit can speak to that as well. You know, there's a couple different factors, that go into reducing the cost of your system. Obviously, you can engineer it to be cheaper. You can drive scale, and volume. Which ultimately reduces the cost of various components. Certainly, your manufacturing processes as you scale up into higher quantities. Can be optimized for significantly cheaper production. You know, from the side of engineering perspective, we are putting in R&D resources. Behind driving down the cost, the BOM cost being one of the main drivers of COGS for our solution.

We expect to start to see those costs coming into effect in the next several quarters.

Just to add to what Don mentioned, for us it's a three-pronged approach. Don talked about, you know, the design enhancements we are starting to undertake. And there'll be some NRE spend in Q2, as we referred on the call. That goes on the sensor side of things, and on the redundant systems. Those are areas we are working on. Second is just not just increasing the scale of production with Bosch, and Roush. Roush able to provide high quality assembly, Bosch being able to do a high scale assembly across, across the breadth of our, of the hardware. That we expect to drive down cost optimization over time.

Lastly, what we're trying to enhance, and we'll be continuing to work on this, to create a global supply chain organization. As we scale, we should be able to procure more effectively, and that'll drive down costs. I think the strength of our system is to be pretty much hardware as source agnostic. And that allows us to be much more efficient on cost over time.

That's very helpful. As a follow-up, you know, a lot of really great announcements, you know, with West Fraser, and some defense. Don, as you look out a couple of years, you know, how would you kind of rank these opportunities in terms of? You know, what could have the biggest impact on the company kind of going forward? Kind of where you want to be most focused on as you kind of continue to expand your verticals?

Yeah, that's a great question. I think it's going to shift over time. I think defense is a bit of a wild card there. Because it's very difficult to predict the timing of various contracts, and the spend. As I mentioned in the remarks, we're very excited about what we're seeing in the FY 2027 budget. For billions, and billions dollar put towards the autonomy vehicle group within the Department of Defense. That's the level of funding that we just haven't seen in the past. We're optimistic that there will be tailwinds for us. To take advantage of in the next, call it 12, 18 to 24 months. We expect that to contribute meaningfully.

At the same time, we're growing our industrial business today. Both with Atlas, and continuing to bring on additional customers such as West Fraser. We see steady growth in that industry, and obviously that's something where we have an existing business, and we'll continue to scale. The third one, being the long-haul opportunity. It's certainly the largest by a significant margin relative to the other areas. As we prove out the safety case, we close out our arm of 100. We deploy the driverless highway product, and start to deploy trucks into customer fleets. We think that ultimately that will be the largest contributor down the line. To our revenues, and to our growth.

You know, where does that transition point happen is a little bit, hard to pinpoint at this exact moment. It'll be in the next several years.

Terrific. That's very helpful. Thank you.

Your next question comes from the line of Jim McIlree with Chardan. Please go ahead.

Yeah, thank you, good afternoon. The deal with Roush, is that on your trucks or their own trucks? Is there an observer in the cab, at least initially?

Today it's with our trucks [crosstalk].

Similar to the way we operate with other carriers. Being this is a transportation as a service that we offer, third-party fleets. And we move freight on their behalf as a third-party capacity provider. We'll work with Roehl in the same capacity. That we do with other trucking carriers, and trucking companies that we work with. Yes, there's a.

Great.

There's a safety observer still behind the wheel for now.

Great. Thank you. Can you address a little bit the product migration, particularly with your collaboration with NVIDIA?

We've been a customer of NVIDIA for a long time, as most of the industry has. We've been working very closely with them on the development of their newest, and latest, and greatest project products. We're excited about the Thor platform that will be in the next generation of our product. The NVIDIA DRIVE Hyperion is an ecosystem of components. That you can kind of put together to build a fully reliable automotive-grade autonomy compute system. We're working closely not only with NVIDIA, but also with tier one suppliers. To build that into the next generation system that we can build at scale. We've been an NVIDIA partner for a considerable amount of time, and, you know, we continue to be excited to work with them.

We're excited about what they're bringing to the future of, low power compute for applications, such as self-driving trucks.

Okay. Does this $100 million get you to cash flow breakeven?

As we mentioned, during the prepared remarks, this provides us liquidity into Q2 of FY 2026. We'll continue to be opportunistic about additional capital raises, and we expect to become S-3 eligible end of Q3. And that provides us with additional flexibility in accessing capital markets. Also, this $100 million has come from both existing investors. Including Ares, who was a SPAC sponsor, and also new investors. We believe this demonstrates confidence in our strategy, and execution, and the long-term opportunity. We expect to get access to more additional capital, to get to breakeven.

Thank you.

Thanks, Jim.

Again, if you would like to ask a question, press star followed by the number one on your telephone keypad. Your next question comes from the line of Ravi Shanker with Morgan Stanley. Please go ahead.

Great, thanks. Afternoon, guys. Just on the defense opportunity, who is your competitor there? If you have any at the moment. Also, what do you know about the program so far? Like, is it just the amount that's in the defense budget. Or do you know if there's gonna be an RFP, and the size of the program? Or even, what the specs of the program are at this point?

In terms of competitors, there's probably a long list of companies that play in the defense space. Certainly the more prominent, well-known ones are companies like Forterra, Overland AI have been pretty established in this space. I think what Kodiak brings uniquely to the table. Is that we are a commercially mature technology stack. We have actual driverless deployments in the hands of customers today. We understand how to build, you know, safe, and reliable systems. That we can ultimately bring, to military use cases. To help save lives in the front lines. In terms of the program itself, the budget is not specific to one program or one RFP. We are already working with General Dynamics Land Systems to bid on future programs.

It's great to have a partner like them to kind of take this technology. To a much more mature, and much more credible level. We'll continue to work with them on new RFPs, and new contracts. And new programs as they come about. The budget just underpins a number of programs that are both exist today. But also are being conceived of, and created in the near, and long-term futures.

Got it, thanks on the telephone. Maybe as a follow-up, just on Atlas, and the new OEM. Can you just unpack that decision? You know, was that at their request or your request. Kind of why that change? Is it just the cab for configuration or something else?

Yes, there's many factors there. The cab consideration, as we mentioned in the remarks, you know, I won't speak for Atlas. But generally speaking, for fleets, and trucking companies at large. You'll definitely be aware that companies like to diversify their fleets. Usually, you don't wanna be a single platform fleet. The request came from the Atlas, you know, from the Atlas team. Of course, we are very excited to support the bring up of a new platform. Not only to help support their ultimate goals, of rolling out autonomy at scale within their business. But also to prove out the modularity, and adaptability of our system on other platforms. And to, you know, establish close relationships with additional OEMs. Which of course we've been working on for you know, quite some time.

Bringing up a new OEM, from our perspective is nothing but a win-win. And this is also then a form factor make, and model that we can bring to other customers in other jurisdictions as well. It just gives customers ultimately more flexibility, more optionality. And that's better for the market, and it shows that Kodiak is ready to scale. And ready to be flexible, and meet the customer where it is. The request came from the Atlas side, and we're very excited to support that request. And to meet their fleet deployment needs.

Understood. Thanks for the call.

Thanks, Ravi.

Your next question comes from the line of Walter Piecyk with LightShed. Please go ahead.

Thanks. Hey, Don, can we just get some more specific terms on the $100 million? And why you elected to do a PIPE with warrants? I know Aurora had success historically with an ATM. Well, I guess success, they were able to raise the money, but obviously at different prices. What other things did you look at in terms of cost of capital? Again, just if we can get the terms of that $100 million, it'd be great.

Yeah, happy to, Walt. You know, our priority was to secure committed capital. From high-quality investors with speed, and certainty. This helps strengthen our balance sheet to support our growth plans, and enhance our liquidity. It gets us liquidity into Q2 of FY 2027. PIPE transactions of this nature are typically priced at a discount. We believe these terms reflect market conditions. The range we are seeing in the market for similar transactions. And most importantly, the strategic value of capital provides us the extended liquidity. I think, on high level, the transaction raised $100 million in proceeds. The issuance price was $6.50, and we issued warrants along with that.

We have more details you can find in our recently filed 8-K, and the upcoming 10-Q will have.

How are the warrants priced?

At $6.

Got it. Thank you.

Thanks.

There wasn't an alternative source of capital that was less dilutive. I mean, the stock's obviously at $9 now. You had a lot of announcements today. What were some of the alternatives that you looked at in terms of raising that capital?

We always look for opportunistic financing. We will have more options available, as we expect to become S-3 eligible end of Q3. And that will give us more additional options on financing alternatives.

What was the reason for the timing now, as opposed to waiting until the end of Q3?

We had announced that we had liquidity into Q4 of FY 2026. This gets us an additional six months of liquidity approx.

Yeah.

Gotcha. Okay.

ATMs are not available before you're S-3 eligible. That's not available to Kodiak at this time.

Understood. Thanks. On the operational side, you were noting these flatbed loggers, whatever. It just occurred to me, you know, you're pitching this kind of modular approach. And when we see other autonomy companies come out with a new vehicle. Like let's say Waymo, you know, let's say the OHI comes out. There's some period of time where it has to adjust. And they have to have it learn to the new vehicle. Like, how does your process differ? I know it's to the extent that it's modular. I mean, I've obviously seen it, and you can bolt it on to the military or a logger or whatever.

I for presumably carrying sand is gonna be different than, like if I'm a driver. Is gonna be different than carrying a bunch of logs or, you know, whatever, like boxes of retail stuff when you hit the highways. How does that work with your driver in terms of new vehicle, different type of load? And how the programming or whatever you have to do to make that work?

Yeah, thanks for the question. I can't speak to the differences of how others do it, but, let's see. You know, we've continuously expanded, and pushed the limits of what the system's capable of doing. For instance, in our last call, we talked about our expansion into double, and triple trailers, right? Triple trailers are incredibly complicated, very small margin for error. There's lots of dynamical challenges that occur when you have. You know, a snake of trailers behind you, especially at heavy loads like the 275,000 lbs that we're pulling. The Kodiak Driver has learned how to handle the various different distributions of load. Both from single trailers that are partially filled. All the way to triple trailers that are fully filled. Yes, the dynamics are different, but the system kind of understands those dynamics.

We see logging as a natural extension to what we're doing in the Permian. It'll be a single trailer to start. You know, where logs are strapped down tightly, as is the sand in the trailer.

It's not a dramatic difference, but it's hard for me to answer. How it generalizes specifically, under the hood other than to say. You know, all of our training data from multiple sources, both structured environments. Like highways, and surface streets, and unstructured environments. Like what we find in the Permian, what we find in Alberta. What we find in our, on our military testing at various sites around the country. Is brought together along with, you know, Generative AI techniques. That allow us to style transfer other types of data that we may not be able to collect directly. Into a single AI system that we then deploy across the fleet. Which is able to drive in all of the different scenarios that we ask it to, and all the applications that we serve across different platforms.

There's definitely testing, and validation with every platform. But it is the same software that runs across both our Permian application. For trucks that are owned by Atlas, and ultimately the trucks that will be owned, and operated by West Fraser.

Ladies and gentlemen, that concludes our question-and-answer session. Thank you all for joining. You may now disconnect.