Serve Robotics Aktie

Hello, and thank you for standing by. My name is Temi and I'll be your conference operator today. At this time, I would like to welcome everyone to Serve Robotics, Inc. Third quarter 2026 Financial Results and Conference Call. [Operator Instructions]. I would now like to turn the conference over to Steve Webb, you may begin.

Thank you, operator. Welcome to Serve Robotics Third Quarter 2026 Earnings Call. With me today are Serve's Co-Founder and CEO, Ali Kashani; and our CFO, Brian Read.

During today's call, we may present both GAAP and non-GAAP financial measures. If needed, a reconciliation of GAAP to non-GAAP measures can be found in our earnings release filed earlier today. Certain statements in this call are forward-looking statements. You should not place undue reliance on forward-looking statements. Actual results may differ materially from these forward-looking statements and we do not undertake any obligation to update any forward-looking statements we make today, except as required by law.

For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release we issued today as well as the risks and uncertainties described in our most recent annual report on Form 10-K as supplemented by our most recent quarterly report on Form 10-Q and in other reports and filings made with the SEC. We published our quarterly financial press release and our updated corporate presentation to our Investor Relations website earlier today, and we ask you to review those documents if you haven't already.

And with that, let me hand it over to Ali.

Thank you, Steve, and good afternoon, everyone. We delivered third quarter revenue of $2.8 million ahead of our expectations and up over 300% year-over-year. We are also raising our full year 2026 revenue guidance to $12 million, which is from the previous guidance of $9 million to $10 million. That is an almost 30% increase. We are really encouraged by how the team is executing. We've been focused on broadening our demand for robots and also improving our economics for the business. And this quarter, the results show that our efforts are paying off.

Our goal is to use Physical AI to make local delivery more affordable for merchants and consumers and we are working towards that by making our network easier to access and also expanding into new markets and geographies while also lowering our cost of operating the robots and generating more revenue from each robot. So let's start with our newer platform partners, where we are seeing a lot of delivery growth from DoorDash and Grubhub. Daily deliveries with them has more than tripled from the end of Q2 to the end of Q3, and the share of all deliveries has more than doubled in the same quarter.

Also, the number of merchants from the new platforms grew over 2.5x over the same period, and it continues to scale. These partnerships give us multiple paths to delivery growth. We're really focused on turning that broader merchant base into more work for our robots. The growth that we are seeing in the delivery side is actually underpinned by the continuous improvements we are making to our technology. Currently, our robots are 13% faster than they were in Q2. That is a 13% speed up in just a few months. The robots now travel 7% more miles per delivery, meaning that they can cover more business to perform a timely dropoff. Our reliability is another key to unlocking this growth.

Our delivery completion rate was 99.9% in Q3 as it was in Q2. That means that of every 1,000 deliveries we pick up, 999 are delivered to the consumer successfully and no tip needed. Advances in our Level 4 autonomy are helping our robots move faster, and they're also reducing their staffing costs needed to support them. So stay tuned because we have some big announcements about our autonomy in the coming weeks. Now alongside these technical advancements, we've also been reducing our day-to-day operating cost for the fleet. We delivered results on a slate of cost reduction programs in the quarter that benefited our cost per delivery. And in aggregate, they saved us about $1 million in the quarter. Let me give you a couple of examples.

First one is the improvements we made to our procurement and maintenance programs to drive significant efficiencies when it comes to robot repairs and replacement parts. The second is how we streamline the way we deploy robots every day, we made them faster and less expensive. And this cuts the external cost of deployment by 75%. Taken together, these efforts improved fleet margin by over 100 percentage points from Q2 to Q3. Now in order to build on our growth momentum, we are making our delivery network easier to access. Our relationship with Wonder and Grubhub has added another channel for demand in markets such as Washington, D.C. metro area. We are also working directly with merchants through Beacon, which is what we announced last quarter. Beacon allows us to integrate seamlessly with more merchants, and we are seeing great progress with the initiative.

We recently launched our first beacon-enabled locations in San Antonio, Texas. The easier we make it for others to use our network, the more potential there is for them to bring their own ideas and their own customers. We know our fleet can support users and use cases beyond what we've developed ourselves. So we'll have more to share as some of these opportunities open up. Another important foundation for growth is our geographic reach to enable rapid growth, we have to have really robust playbooks for deploying to new markets. We have to have mature AI and autonomy models that can easily adapt to new cities and countries, and we have to have regulatory and policy support to launch new geos.

So we have developed these robust playbooks now for expansion and policy and have matured our AI models after scaling to more than 20 cities in the U.S. So we are now taking these learnings into new international markets. and we are able to get operational in new cities with less friction. Last week, we announced our launch in Gold Coast Australia, a market that we are really excited about. Gold Coast is our first international market expansion and is in an exclusive partnership with DoorDash. Customers can order through the same DoorDash app that they already use, just like they do in the U.S. Clifford University hosts our local operations teams. This is really exciting. It's the first university to host our operations.

Beyond Australia, we are also considering other international destinations. You may remember Vancouver, Canada as one of the examples where earlier this year, the City Council approved our pilot proposal. We're now working with the province for what could be our first Canadian city. As we continue to expand, we are learning how to reduce the cost and time it takes to get to new markets and get them up and running. And that actually brings me to an update about micro depots. Micro depots give us a small footprint local base for charging and staging and maintaining robots so that they can be very close to where they work. These are our most efficient deployment format.

In our early deployments using this strategy, we are expecting to launch cities with 1/5 the cost and in a fraction of the time required compared to our legacy deployment formats. We are pretty excited about the results so far and continue to invest heavily into this. Lower costs are one part of the evolution of our fleet economics. Another way to make local automated logistics more affordable is by increasing robot monetization beyond delivery fees. You've heard me discuss this before, but this actually helps us diversify our revenues. And one really good example for this is branding. Branding is an another source of revenue from robots that are already working out there in the community. Our fleet now includes 2,000 robots in 40 cities and 27 hospitals. That presence gives both national and local brands a unique way to directly reach people.

Our branding revenue grew nearly 80% from Q2 to Q3, and major campaigns are returning now. We have a strong pipeline of upcoming opportunities as well. For example, the underdog sports campaign ran for 6 weeks across Dallas, Atlanta, Miami and Los Angeles. 455 robots generated 144 million impressions, and they traveled nearly 100,000 miles. That's an amazing amount of progress in our sidewalk business in Q3. We are reaching more merchants, reducing the cost of operating, expanding our operational footprint and also generating revenue beyond just deliveries. All of this is putting us in a better position to make local delivery more affordable for merchants and for consumers. But beyond sidewalk, another way we use Physical AI to serve people is with our Moxi robots in hospitals. They move supplies and materials to help nurses focus more of their time on patients. Our health care sector continued to deliver solid revenue in Q3, in line with our expectations. And importantly, year-to-date, we have signed multiyear contract extensions with 12 existing hospital clients. Three of the hospital clients have actually expanded robots in their fleet. Overall, we are now serving 27 hospitals across the U.S., following the addition of 4 new hospitals in 2026 through the end of Q3. Hospitals and sidewalks are very different and unpredictable environment, but both of them forced us to solve these practical problems of robots operating among people in diverse and challenging environments.

They help us train better models from a vast and diverse proprietary data sets to teach robots, how to coexist with people. Besides our years of work on onboard AI and autonomous fleet software have also generated data and operating experience that other companies are asking us to use inbound inquiries about our foundation model data are increasing, and we are beginning to serve our first customer. Our robust experience real-world edge cases and gather insights every day across a range of environments and scenarios that we believe makes us quite unique in the marketplace. It's early, but the cities, as a tipping point for building another path for the work our robot already do to generate value which is to help accelerate the Physical AI revolution by teaching foundation models about the real world.

This interest we are seeing extends beyond just data. It also extends to our technologies that power are robots. We are building one of the industry's strongest Physical AI stacks, and we want our technology to reach more people beyond sidewalks and hospitals. I've always said delivery is just a starting point for us, but we are really building robots that can navigate human spaces. But we can't go and make every robust form factor ourselves. New robot forms are being developed across many industries, and we want to help them come to commercial scale faster. That's why we are not just stopping with 7 Moxy robots. Any company building a new kind of robots to be able to leverage our proven technology and instead focus their efforts on the unique problems that their robots is meant to sell. As Jeff Bezos says, they should focus on what makes their beer taste better.

We see an opportunity to become a supplier to those companies, trying on what we've built for ourselves. So earlier today, we had a very exciting announcement about our Physical AI services. We think the Amazon AWS moment for robotics is here. Just like Amazon's technology, which was first developed to power its own retail website has become the foundation for millions of companies to build their web products. The technology that we have developed to power our sidewalk and hospital robots can help accelerate new robot manufacturers to bring their products to market faster and cheaper.

At the start, our initial offering brings together three services: A high-performance data link that connects fleets to offboard intelligence in real time, a catalog of real-world foundation model data and a data curation infrastructure for the fleet scale AI learning. Our technology is already powering some of the largest robotic fleets in public spaces in the world. Now we get to bring the benefits of it to more people. So, our Serve Link, for example, is one of these three initial services. It helps connect robots in the field to the computing infrastructure beyond their onboard intelligence. It helps keep the operational data flowing reliably as conditions change so that robotic teams can really focus on advancing the autonomy, among our launch customers is Bedrock Robotics, which builds autonomous systems for construction. Bedrock use Serve Link for network connectivity across LTE, 5G and satellites. Another service we are announcing is the data curation product. It has helped us train our robots to navigate some of the wilder sources of edge cases imaginable in the streets of L.A. and now across the country while also providing us a safe and near perfect track record of completing deliveries once we receive the goods.

It developed at times, acquired and have advanced these technologies along with many others to run our own sidewalks and hospital fleets. Physical AI services gives us a way to build a new business from that same investment we've made across a broader Physical AI market that is accelerating. So I covered a lot of ground today. To sum up, we delivered Q3 revenue ahead of expectations. We are raising our full year outlook from $9 million to $10 million to $12 million and we are advancing our technology, making our robots faster and more reliable than ever. We are reaching more merchants and expanding domestically and internationally while at the same time, also lowering the cost of operating our robots and improving gross margins.

We will keep strengthening the core business while continuing to develop our diverse base of emerging business opportunities to fully take advantage of this historic moment that we are living through. With that, let me hand it to Brian.

Thank you, Ali. I'll walk through the quarter's results, the improvement in our cost base and assumptions supporting our updated FY '26 outlook. Total revenues during Q3 was $2.8 million, up from roughly $700,000 last year, an increase of over 300% year-over-year. Compared to prior quarter, Fleet Services revenue grew about $0.3 million even as Uber volume declined as we told you it would in August. Meanwhile, software services revenue declined following a completed customer contract during Q2. We are still in the early stages of development for our software services and anticipate quarter-to-quarter volatility. Recurring revenue growth continues to outpace nonrecurring revenue. And in Q3, recurring revenue accounted for 69% of total revenues supported by Serve Link connectivity growth of 23%. Branding revenue was significantly higher in the quarter, growing nearly 80% sequentially.

A portion of that was a 6-week campaign that does not repeat. Gross loss for the quarter was $7.6 million and gross margin was negative 266%. This was our third consecutive quarter of margin improvement. Our fleet margin improved by over 100 percentage points sequentially as we implemented the fleet cost reduction programs that Ali mentioned. The actions drove the results. Autonomy improvements, which lowered remote operations cost per delivery, nearly $1 million of procurement, repair and maintenance savings and a deployment redesign that cut daily external deployment cost by 75%.

Last quarter, I said we believe the path to gross margin positive is inevitable. Our focus on driving revenue per robot and operating hours, better operational productivity and a growing mix of recurring software and platform revenue should enable our gross margin improvement trend to continue. GAAP operating expenses were $53.6 million, an improvement of 7% from Q2. excluding stock-based compensation of $12.5 million and amortization of intangible assets and acquisition-related expenses of $1.9 million. Non-GAAP operating expenses were $39.2 million down $1.2 million from Q2, our first sequential decline this year.

In August, I named a few areas of cost focus. Here's where those stand. First, discretionary spend and consultants. We terminated several consulting engagements and cut nonessential spend. That program removed nearly $8 million from the second half spending versus our prior plan. Second, deployment infrastructure. That shows up in the cost of revenues, not operating expense and we covered that a moment ago. Daily external deployment costs was down 75% and total cost of revenues were down 14%. Third, head count remained flat throughout Q3. We prioritized engineering hires for autonomy and Moxi 2.0.

Other functions were flat or down in the quarter, which we anticipate to continue through Q4. R&D was $22.6 million or $16.7 million non-GAAP, up from $14.9 million. It is the 1 line item that increased and the area I said in August, we would continue investing in to support core autonomy to our next-generation platform for Physical AI services and Moxi 2.0 development and engineering compute resources. GAAP G&A expense was $20.2 million in Q3, which is down 19% from Q2. On a non-GAAP basis, G&A expense was $12.4 million. Operations expense was $7.3 million or $6.8 million non-GAAP, both down 8% quarter-over-quarter. Sales and marketing expense was $3.5 million or about $3.3 million non-GAAP, down 18% and 16%, respectively.

Our investment philosophy remains anchored in ensuring that every dollar goes towards revenue quality, margin improvement and platform differentiation. Net loss for the quarter was $59.2 million or negative $0.58 per share. Non-GAAP net loss was $44.6 million or negative $0.51 per share. This came entirely from gross loss improvement and $1.2 million in operating expense discipline. Capital expenditures were approximately $5.3 million in the quarter before the benefit from an additional $1 million in tariff refunds received during the period. We ended the quarter with more than $198 million in cash and marketable securities. That is a real advantage and enables us to make the decisions we made this quarter from a position of strength.

We are raising full year 2026 revenue guidance to $12 million, up from the previous guidance of $9 million to $10 million. This implies a fourth quarter revenue of approximately $3 million. In August, we said we expected to grow revenue by 3.5x and we are now on track for 4.5x our prior year revenue. We expect full year non-GAAP operating expenses of approximately $150 million which is $20 million below our expectations at the start of the year. We expect full year capital expenditures in line with our prior $15 million to $17 million. Stock-based compensation should remain approximately $50 million. we just discussed our Physical AI services offerings, each built on connectivity, tooling and data that we already use to power our fleet. That revenue sits in two existing lines today.

Data contracts within fleet revenue and Serve Link within software services. Our Physical AI services require no new robot build so no new incremental capital expenditures. and it consumes no fleet supply hours. So it does not have to compete with delivery or health care for capacity. Let me close against August. Q3 performance was ahead of expectations from August with the commercial progress moving towards a stronger financial model, resulting in our increased 2026 outlook. I said margin improvement would come from cost discipline. Fleet margins improved over 100 points on a 14% reduction in cost of revenues. I said we would manage spending against the runway and keep investing in autonomy and software.

Non-GAAP operating expenses declined for the first time this year with R&D investments remaining focused. And we ended the quarter with $198 million in liquidity. Serve is building a robotics platform, not a single-use delivery fleet. With that, operator, we can open the line for questions.

[Operator Instructions]. Our first question comes from the line of Colin Rusch with Oppenheimer.

Ali, can you talk about the breadth and depth of initial customer interest on the Physical AI services. Clearly, there's a need for some of these elements here, but just want to get a sense of how mature the sales process is.

Yes, absolutely, Colin. I can take that. We've been working on this for some time. We just are finally discussing it publicly. We have customers ranging from -- we mentioned Bedrock Robotics which is in construction, but also between the customers and pipeline do you have anything from mining to even defense, there is a very wide range, which is pretty much what we expect because, as I mentioned, People are building new form factors of robots, there's kind of the moment for Physical AI right now. And we saw enough of evidence and traction to decide to make this a new business line that we're pretty excited about.

Excellent. And then from a cash management perspective, as you think about optimizing the spend, how should we think about this as you get into 2027 and in other areas where you may be able to optimize and save a little bit of cash.

Yes. I guess I'll start and Brian can add to it. We've been very, I think, responsible with cash, as you can see, we've been making savings along the way every quarter. A part of this is as we are improving our technology you're getting better at operation. When robust gets faster when we build more demand, all of that actually helps with both the overall financials and the unit economics. So this is something we're working on an ongoing basis. And then, of course, when it comes to things like hiring, we've been very disciplined, and we're going to continue to look at that, kind of, spending the same rate especially the current transitions. Brian, if you have anything to add?

Yes. I mean I think, Colin, in our prepared remarks, we talked about quarter-over-quarter trends, how we're remaining disciplined all the way from the margin at the top to our OpEx throughout the P&L. So that mindset is not going to change right now. And in fact, we're going to keep paying more attention to it as we get into 2027.

Next question comes from the line of Taylor Manley with Guggenheim.

Congrats on the strong results. First, on Australia, obviously, that's in connection with the University. How should we think about the opportunity as it relates to college campuses? And is it kind of -- is the TAM too small in the U.S. for that to be worthwhile?

Yes, good question, Taylor. We are you've always been focused on urban density. So college hasn't been something we've just looked at exclusively as a market. And I don't think that's changing right now. This just was the right partnership in the right environment, but it's not really changing our strategy about the college campuses.

Helpful. And then second, maybe one for Brian on diligence. It seems like some strong traction there. Any thoughts on kind of like top line growth trajectory once you lap kind of the initial acquisition contribution.

Taylor, thanks for listening in. So we will reiterate what we said 2 quarters ago and last quarter with respect to $7 million on Diligent, really strong performance throughout the year. We talked about the new customer acquisitions even just this quarter and the hospital is now up to 27. So we're looking at ways to enable that growth into 2027, which is supported by the CapEx numbers and the investments that we've talked about the last couple of quarters.

The next question comes from the line of Alex Latimore with Northland Capital Markets.

This is an exciting news here with the Physical AI services launch. I had one about daily active robots. Is there a way to think about how many you might have exited in the year you added over 100 this quarter, so maybe 1,000 plus?

Alex, yes, I wasn't anticipating this. So I don't have a number to share with you right now. I just want to just say is we talked about being cost conscious and disciplined. So we are reacting to what we see when we have demand, we add robots, when we have opportunities like Australia and there are some other cities and countries we're looking at, we would expand. But we are not going to force this doing irrational things, and we want to be very cost cautious. So that's why the number is just growing organically as it makes sense.

Understood. And then on the Physical AI services, how do you price those services? Are they usage-based or on a recurring fee per system? And then what are the gross margins?

Yes. So things like Serve Link, it's been recurring revenue per usually device perceives that's the model. And really good gross margin. This is software, what you would expect with software. It's helped our overall gross margin as well. And then, of course, this is just an initial set of products, and we expect that we would have more pieces of our technology that we can offer. And there could be different pricing models as this matures, but a lot of it right now is the kind of software service model.

Cool. One final question. I saw that DoorDash recently acquired Instacart. Does this open up the door for Serve to do grocery deliveries over time?

We've done groceries in the past with -- directly with merchants in Los Angeles, for example. And yes, it's definitely a market we've been paying attention to. And as you know, we have relationship with DoorDash. So I believe this is going to take them about a year or 2 to close, if I recall the process. So it might be a while, but we'll be very excited to speak to them and see if the opportunities there.

Next question comes from the line of Jeffrey Cohen with Ladenburg.

Could you talk a bit about Beacon and some early experience as far as the rollouts there as far as San Antonio? And maybe talk about some of the providers and what you're finding as far as optimization and how we may see that expand?

Yes. Yes, happy to take that, Jeff. So we have our first merchants now using Beacon. This is just for folks who may not remember, we talked about it more advance in the last earnings. It's a small tablet that enables merchants to get notifications and a robot is doing their deliveries. It's off the pretty big bottlenecks when we are trying to integrate with more restaurants, especially when you -- when they using POS systems, and we want to try to have a direct relationship with them. So it's still early days for that, but it's pretty important missing piece of the puzzle that we've now brought to the table. So I expect we would see more adoption over time.

Okay. And then secondly, as a follow-up, could you talk about Moxi a little bit and the 2.0 development and maybe it gives us a flavor of commercial and sales channels and existing in new hospitals as far as POs and your sales organization.

Yes. So the 2026 was really an investment year for Moxi. So we did the acquisition at the beginning of the year, we invested and help build a new Moxi 2.0 hardware. With that now rolling out, we are hoping to kind of switch into both getting the current fleet upgraded, but also getting them into new hospitals. And there are definitely conversations with partners and distributors about what 2027 and 2028 is going to look like. So I'm hoping to have more to say about that in the coming months.

Next question comes from the line of Andres Sheppard with Cantor Fitzgerald.

This is Peter on for Andres. Congrats on the quarter. So first, we were hoping you could spend a little bit more on the Uber relationship. Do you think there's maybe an opportunity to resume this partnership in the future?

Peter. I don't have much new here. The relationship continues right now. We still are doing our contracts, which goes, I believe, through part of Q1 next year. And I don't have anything that has changed. We'll kind of continue to evaluate that as time goes by. But I guess just worth mentioning where we are seeing a lot of growth and momentum that we Grubhub are daily delivery growth. Something about 60% to 70% just in the last month. And I mentioned DoorDash as well, something like tripled in daily volume. So it's a really good growth with our newer partners and then we'll see how things go to be, but I think it's been fairly transparent about what you're thinking as of last quarter.

Got it. Very helpful. And then maybe you had -- when we're heading into 2027, can you talk a little bit more about some of the operational goals, whether you be targeting more increased utilization of your existing fleet or looking to scale up the number of your bots deployed?

Yes. So I think we are always pushing three things at the same time here. So first one is just improving the technology. So I mentioned that we have increased the speed of robots just since Q2 by something like 13%, which is really phenomenal progress there. Also, there's going to be some big announcement we have coming out about autonomy. So we're going to keep pushing the technology, and that has downstream impacts on the operation as well. On the scale, as we are building demand, especially with new partners, I mentioned how we have more than doubled the number of merchants with Grubhub and merchant in the last quarter. So we are going to see opportunities perhaps for more robots or new neighborhoods, new cities. And then the third pillar here is always cost down. So just getting better at operation and driving the cost of operations down. And you can see again in this quarter, we made good progress there too.

And that's all the questions we have. Ladies and gentlemen, this concludes today's call. Thank you all for joining, and you may now disconnect.

Thank you. At this time, I would like to welcome everyone to SERP Robotics, Inc. Second Quarter 2026 Financial Results and Conference Call. All lines having place on mute to prevent any background noise. After the speaker's remarks, there will be a question and answers If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw a question again, press the star 1. I would now like to turn the call over to Steve Webb.

Thank you, Operator. Welcome to CERB Robotics' second quarter 2026 earnings call. With me today are CERB's co-founder and CEO, Ali Kashani, and our CFO, Brian Reed. today's call, we may present both GAAP and non-GAAP financial measures. If needed, a reconciliation of GAAP and non-GAAP measures can be found in our earnings release filed earlier today. Certain statements in this call are forward-looking statements. You should not place undue reliance on forward-looking statements. Actual results may differ materially from these forward-looking statements, and we do not undertake any obligation to update any forward-looking statements we make today, except as required by law. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release we issued today, as well as the risks and uncertainty described in our most recent annual report on Form 10-K, as supplemented by our most recent quarterly report on Form 10-Q, and in our other reports and filings made with the SEC.

We published our quarterly financial press release and our updated corporate presentation to our investor relations website earlier today, and we ask you to review those documents if you haven't already. With that, let me hand it over to Ali.

Thank you, Steve, and good afternoon, everyone. We have important updates to share with you today. First, I want to give you an update about our Uber partnership and then share our Q2 results and update our full year 2026 guidance. We will discuss what took place in Q2 that has led to the new guidance and also what we are investing in and some of the exciting updates that are coming down the pipe. Let's start with the Uber partnership. From the first quarter of 2022 through the first quarter of this year, delivery volume through Uber grew for 17 consecutive quarters. In Q2, that trend reversed for the first time.

This was caused by lower than expected robot utilization. While customer and merchant demand has remained steady, and our fleet performance has been improving, we believe the reversal in Q2 was largely due to the changes in the operating model and the integration between the two companies. Our extensive discussions with Uber since the emergence of this trend in Q2 have clarified that we really have differing views about the operating model to scale our shared autonomous fleet. This includes things like fleet coordination or mesh and integration. Our experience across partners shows that having alignment on integration and operating models can really produce better outcomes from the same same underlying technology and feed. Case in point, in the same timeframe, we saw deliveries with another food delivery partner grow nearly 50% in a single quarter. So based on the volume decline and some of these recent broader discussions with Uber, we don't currently expect that would make sense to renew our agreements when it expires in early 2027.

That's unless we can improve the operating model. Meaningfully, this assessment was formed very recently and we are sharing it with you. it with you promptly. We will continue to engage with Uber and we are open to finding a path to continue working together, but I do want to be transparent with you about the conclusion that we have reached, at least with the information that we have today. Ultimately, we need to focus our resources where we see the clearest path to high utilization and operational leverage so that we can unlock the most value for the communities that we serve. We believe that serve will be in a stronger position because we'll be able to allocate our resources to stronger, more beneficial. partnerships, and activities that we think will generate better long-term returns and values for the company. I want to take a moment and say Uber has been a really important anchor partner for serve. It's been a real privilege working with a company that has really reshaped urban transportation.

Together we helped validate this category and build critical operating experience and we've scaled our fleet to a level that. matters. Working with Uber was a great way to bootstrap our platform, and we really value that partnership and what it enables over the last five years. Now, this brings me to the financial impact of what changed in Q2. We did not meet our expectations in Q2, given that the delivery volume had declined. As a result, we are materially reducing our full-year revenue guidance. Our Q2 revenue was $3.2 million. That's a 9% increase sequentially over Q1 and over 400% increase year over year. however below the level that we required to support our prior outlook As such, we are lowering our full year 2026 revenue guidance from $26 million to a range of $9 to $10 million.

And we are matching this revenue update with real cost discipline across the second half operating and capital expenses. Brian will dig into that with you in more detail. The principal driver of this change is the removal of the delivery volume growth that we had assumed for the second half. The Q2 results no longer support that expected ramp, so we have removed it from our outlook. Even the Q2 results, as well as our success in diversifying our revenue, Uber represented a limited share of our Q2 revenue. The magnitude of the guidance change, therefore, reflects the removal of a substantial expected future ramp, not the loss of a large existing revenue stream. Let me explain why we view this as a disciplined portfolio decision and not something that changes our conviction in automating last mile delivery.

Our revenue base is already diversified across delivery, advertising, and hospital robotics. As mentioned, our other delivery marketplace channel, DoorDash, grew nearly 50% sequentially last quarter. I'm also happy to share that we'll be announcing another major delivery marketplace partner in the coming week. Our advertising revenues accounted for nearly 50% of our robotic food delivery revenues last quarter. This is despite the headwinds of geopolitical micro pressure on advertising spending. And last but not least, our hospital robotics business continues to generate contracted recurring revenue at attractive margins. So far this year, we have signed seven multi-year contract extensions with our hospital customers and two new hospitals, demonstrating continued demands for our healthcare automation platform.

We are therefore making a disciplined portfolio decision. We are a platform now operating at meaningful scale. We are allocating fleet capacity, capital, and operating attention toward opportunities with clearer demand signals, higher expected utilizations, and attractive unit economics and stronger assets. alignment of visions and incentives. We believe this is going to make us a stronger company in the long term. We already have several commercial and product initiatives underway that broaden our distribution, increase our merchant accessibility, expand our direct demand, and improve the capabilities of our autonomy These initiatives were in development long before Q2 as part of our plan diversification strategy, and now they're starting to bear fruit. On August 17, we plan to provide our 2026 summer announcement, which includes updates across 4 areas and you delivery marketplace partnership to new market launches and merchant integration products and new technology advances based on our analysis of our markets. Back of house integration requirements really constrain a significant portion of otherwise addressable restaurant order volume.

Almost two-thirds of delivery orders in our operating areas can't benefit from robotic last-mile delivery due to back of house integration barriers. So our new product, Beacon, is a standalone countertop device that connects customers and restaurants with CERB robots directly. Because it has its own cellular connectivity, it requires nothing from the restaurant beyond a consistent source of power. That means we are not dependent on a restaurant's internet or point of sale system anymore, which has historically been a source of integration friction across the industry. With Beacon, our aim is to work with most restaurants, regardless of the infrastructure, including merchants that aren't connected to third-party delivery platforms. This is really exciting. Later this fall, we also expect to introduce an additional product designed to expand direct customer demand and broaden the types of goods and use cases that our network can serve. we are reimagining how things move around cities, not just foods from restaurants, but anything from anywhere to anyone. Beyond our solutions for merchants and customers, we are also in late stages of exciting new partnerships that we believe can support materially higher robot utilization.

That means the same robots multiple times the value for our partners and customers. In recent months we are seeing inbound interest from major companies across a range of industries from food services to logistics and beyond. We are We are advancing a number of commercial programs designed around denser order allocation, simpler merchant integration, and materially higher seed utilization. We will announce each program as it reaches the appropriate contractual and launch milestones. Of course, I can't really share a preview of announcements without talking about our technology. We also have an announcement coming later this year about our autonomy stack. We wanna highlight some major milestones we have achieved in creating new powerful AI models that are making our robots safer, faster, smarter, and more reliable and more capable than ever before.

So let me leave you with four points. First, our previous guidance assumed continuous growth in Uber delivery volume during the second half of the year. We expected the non materializing Q2 and we have removed it from our outlook. This was primarily caused by changes in the operating model and integration of our seats in this particular partnership. And not because of any sudden decrease in customer demands or our delivery quality. Second, Uber has been a really important anchor partner in building serve, but absent a meaningful change in the operating model, we do not currently believe that we will renew the agreement after it expires in early 2027. We'll continue working constructively with Uber, of course, and remain open to a new path.

Third, our conviction in last mile autonomy is higher than ever given the diverse traction we are realizing. The momentum we are seeing across multiple delivery channels really reinforces that distribution, merchant integration, and fleet operating models are really central to utilization and economics. And finally, we now have 2,000 robots distributed across more than 40 cities nationwide, a diversified revenue base, more than 240 million in liquidity at the end of Q2, and multiple commercial and product initiatives already underway. This includes a new delivery marketplace partnership, a new product that helps us reach more merchants, our continued momentum in hospital robotics, and much more. We are focusing our platform and our capital on opportunities with the clearest path to higher utilization, attractive unit economics, and durable growth. With the partnerships and initiatives in the pipeline, we feel really good about the potential for revenue to scale, and we will update you in due course as we continue executing on our roadmap. We want to bring the value of last mile autonomy to more customers and merchants faster and share more of that value with them with compelling economics for all involved.

This is a more focused route to the same large ambition we've always had, building last mile autonomy that redefines urban logistics. With that, let me hand it over to Brian. Thank you, Ali. Good afternoon, everyone.

This was a pivotal quarter for us, and I want to explain how it's reflected in the numbers and how we are running the business. I want to frame this as two things, a strategic update and the financial update. Strategically, we're positioning our offerings to pass more value directly to merchants and customers. That reduces our reliance on any single delivery channel, and it opens the door to other partnerships Allie described. Eventually, we're evaluating and updating our cost base to match, which I'll walk through in a moment. Together, these give us levers to run the business efficiently. Our priorities for the year have not changed.

Make each robot more productive, grow revenue per robot and per hour, grow the recurring part of our revenue, and turn all of that into a stronger financial model. Total revenue for Q2 was $3.2 million compared to $3 million in Q1 and up 400% year over year. That total reflects two very different trends underneath it. Delivery revenue declined meaningfully in Q2 compared to Q1. That was a real in-quarter decline, not just a slower future ramp. At the same time, our other channels grew enough to more than offset it. Total revenue was still up sequentially, daily active robots were held steady, and software revenue was once again nearly $1 million.

All of this highlights the diversification we've built beyond food delivery. Recurring revenue was over 50% of total revenue this quarter. Our healthcare business continues to deliver contracted, multi-year revenue at strong margins, and that mixed shift is the real contributor to where we see this business heading. Gross loss for the quarter was approximately $8.8 million, and gross margin was negative 271%. I'd point to one thing in particular. Fleet gross margin improved sequentially, even as we absorbed the uber decline Ali just walked through. That tells us this progress is coming from real cost discipline and operational efficiency, not from a clean gross quarter.

I want to reinforce that this remains our focus. We believe the path to gross margin positivity is inevitable. More revenue per robot per operating hour, improved operational productivity, and a growing mix of recurring software and platform revenues. GAAP operating expenses were $57.3 million in Q2, excluding stock-based compensation of $14.7 million and amortization of intangible assets and acquisition-related expenses of $2.2 million. Non-GAAP operating expenses were approximately $40.4 million. R&D remains our largest investment area, and that's by design. GAAP R&D expense was $20.3 million, or $14.9 million, excluding stock-based compensation. goes towards autonomy development, AI model training, fleet software, data infrastructure, and integrating across our platform.

G&A expense was $24.8 million, or $14.2 million non-GAAP. Operations expense was $7.9 million, or about $7.4 million non-GAAP. Sales and marketing expense was $4.3 million or about $3.9 million non-GAAP. Our investment philosophy is anchored in ensuring that every dollar goes toward revenue quality, margin improvement, and platform differentiation. Gap net loss for the quarter was $64 million, or negative $0.80 per share. Non-gap net loss was $47.1 million, or negative $0.59 per share. Capital expenditures were approximately $1 million in the quarter before the benefit from approximately $3.6 million in tariff refunds received in the period.

We ended the quarter with more than $240 million in cash and marketable securities. That's a real advantage and enables us to make the decisions we made this quarter from a position of strength. Turning to our outlook, we're revising our full year 2026 revenue guidance to approximately nine to 10 million down from the 26 million we guided earlier this year. Even at this revised level, we expect annual revenues to grow nearly 3.5 times year-over-year. Two things drove this update. First, the delivery decline wasn't just a future impact, as our Q2 results already reflect the decline. Second, and larger, our prior guidance assumed a substantial increase in Uber delivery volume in the second half. That ramp is not materializing, and we've removed it from our outlook entirely.

To be clear, our fleet size hasn't changed, and our robots can be deployed to direct merchant relationships, other verticals, and the new delivery marketplace platform Allie mentioned, which we expect to have more to share on soon. Each of these channels represents an opportunity to reallocate that capacity toward better economics. Turning to advertising, even with the same macro pressure on ad budgets that Ali referenced, it accounted for nearly half of our robotic food delivery revenues this quarter and at an attractive margin. Our healthcare business continues to be durable, recurring revenue, with higher margin, high retention, and longer-term contracts. We're taking action on cost and capital to match this revised plan. We've reduced planned 2026 capital expenditures from about 25 million down to approximately 15 to 17 million. And we're lowering our 2026 non-GAAP operating expense outlook from 160 to 170 million down to approximately from 140 to 150 million.

Producing our OpEx guidance gives us the runway to execute our updated plan. You should expect this discipline to show up increasingly through the second half of the year. coming from a few places, headcount discipline, optimized deployment infrastructure spend, tighter discretionary spent. Overall, we're narrowing investment to what directly supports autonomy performance, utilization, recurring revenue, and gross margin improvement. are also working through the diligent robotics integration looking for opportunities to consolidate overlapping gna and shared services across the combined company One thing we are deliberately investing in is core autonomy and software. These are the areas that most directly improve robot productivity, customer outcomes, and long-term unit economics, which will remain our focus. This includes our next-generation autonomy platform, which we expect to meaningfully improve per-unit economics and expand the geography our fleet can serve. we are not stepping back from the core business. We're executing with tighter prioritization and a clear focus on operating leverage because we believe that's the right way to build the business and protect long-term shareholder value. Let me close here. The trend we saw in Q2 led us to make hard, clarifying decisions since the quarter closed. concentrating our capital where demand is the clearest, and taking a hard look at low margin, low control channels to reduce the cost base to match.

The near-term revenue number is lower because of that. CERV is building a robotics platform, not a single-use delivery fleet. Even with this update, we expect revenue to grow meaningfully this year, and the revenue base underneath that number is more diversified, higher quality, and higher margin than it was a year ago. The anatomy, software, and our proprietary data are the ones that compound and provide long-term enduring value. We believe that is what turns our early lead in physical AI into a durable operating and financial model.

With that, we will open the lines for Q&A. Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. are called upon to ask your question and are listening via speakerphone in your device, please pick up your headset to ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. Our first question comes from the line of Mike Lattimore with Northland Capital Market. Your line is open.

Okay, thank you. Yes, Ali, can you just elaborate on a little bit more on just like what happened in the second quarter? You know, why do you think utilization was not hitting goals? Was there some specific events that occurred? Maybe Uber stopped allocating resources to you for some reason? Right. Was there any discussion or concern over RegShare? Maybe a little more elaboration would be great.

Yes, hi Mike. Yes, it's a good question. Needless to say, I want to be respectful of partner confidentiality and all that. But I think primarily... I mean, first thing I would say, there are a lot of investments happening on both sides into the platform. So Uber is investing in theirs, we are investing in ours. And at the same time, a lot of decisions are being made about how do you allocate order How do you organize fleets? Who makes which decisions? Like there are a lot of very interesting problems to solve when you start introducing autonomous fleets and mixing them with human fleets. So these are, I think, part of the process that's now taking place because these things are real and they're on the streets and, you know, their jobs. And when it came to those kind of decisions, I think we were not perfectly aligned and the client kind of highlighted that it brought those discussions to surface.

So we decided we should be transparent with everybody that we don't believe that this would be kind of renewed. But of course, we are still engaged and we will continue talking. And if there are better paths, we would look for it.

And then in terms of just market reach going forward, I mean, you talked about DoorDash. kind of overlay app you're going to be working with. I guess, which channel will be more important here? Will it be the DoorDash's and this new company partnership or will it be direct to merchants? And as direct to merchants, how do you kind of reach the end customer and market to them effectively? Yes.

Yes, look, we want to have, as I said, we want to have control over our destiny, right? which means we don't want to be kind of in the vague turbulence of bigger partners all the time. And I think the use of, for example, Beacon, the product that I mentioned, to be able to really work with any restaurant is one of those pieces. It's an investment we've been making for a while, so we're going to bring that in. and highlight that soon. But it's a really exciting product. There are other things in the pipeline in that same order. But we're also working with partners. So I mentioned DoorDash. It's not just that we grew 50% of them in Q1.

In fact, between June and July, we grew another 50%. So it's doing really well. We would keep investing there, but we would also want to have channels that allows us to work with anybody directly and honestly enable new types of use cases. It's something that I think if we are just working with platforms we won't be able to do. I think we are much more incentivized to want to innovate and try new things. We are more incentivized to want to pass a lot of the value to restaurants and customers directly. So I think it's really important that we really invest in that. And I think the decision we made this quarter is going to allow us to put energy into that.

And then just last one, so any guidance on software revenue in the second half? And also, is Diligent still on track for about $7 million this year?.

Yes, hey Mike. So obviously you would have seen the updated outlook for revenue at the 9 to 10 number. We saw strength in Q2 for the software continuing. I think in the back half of the year, right, we're going to see the continued headwinds that we observe in the back half of Q2. So from a software standpoint, will be a little softer in the back half, but the strength of Diligent as you mentioned will continue. So we're not going to get into the split between Diligent, but they're definitely helping the positive mix in the margin story from a top line perspective. So happy to provide some more clarity there, but I think software will be little softer as we get throughout the back half of the year. Okay. Thanks a lot. Thank you.

All right, next question, please. Our next question comes from the line of Colin Rush with Oppenheimer & Company. Your line is open.

Thanks so much, guys. Can you talk a little bit about the KPIs that you're looking at for the efficiency of the autonomy and how we should think about the cadence of learning that you guys have been able to engage in here in the first half?.

Yes, hey, great question. I think that's one of the areas that we really want to share more in the next couple months, hopefully. We talked about our new generation autonomy. You all know about the acquisition we made in that space. Ultimately, most important KPI is are the robots getting better, as in they're getting faster, they're safer than anything else out there, they are more reliable, and they get the delivery done in such a way that it allows us to grow our revenue and also improve margins. So that's the top line. Once we share more about the new generation autonomy, we would have more color on what we are tracking and how do we measure progress. But there's a lot of areas of investment I'm really excited about it. This new type of autonomy architecture with end-to-end models where you have a lot less loss in the information where the models are making a lot smarter decisions, intuitive decisions.

I think it's a pretty exciting area that we are going to talk about more. And we are already seeing improvements in the fleet as a result. So we'll kind of share how we are looking at it again soon.

And then with the hospital robots and Diligent, can you talk a little bit about the potential for accelerating deployments and potential optimization of the design of those bots in kind of a timeframe on how we should think about both of those dynamics?.

Yes, so in a way, and I think I've mentioned this in the past, it felt to us that Diligent was basically a click behind V-Ware at CERB in terms of being ready for scale. So you make the robots work, you prove the model, you prove it with real customers, then you want to cost it down, make the hardware reliable, so that you can scale rapidly. And that's kind of when we got to our 2,000 robots, only after we made those investments. That's exactly what Diligent is doing right now with the new hardware that they're working on. So again, we are going to have a lot more to say about this very soon. But that's the kind of investment that has taken place in the last. year, effectively, to position us to really push that growth in the following years.

Next question comes from the line of Jeffrey Cohen with Leidenberg Thalmann. Your line is open.

Hi, Ali and Brian, thanks for taking the questions. I guess firstly, could you talk about the advertising business and advertising revenue a little bit and drill into that as far as are you wrapping the robots and some of the customers, are they more local or more national and any pricing on that associated with the robots and any kind of forward-looking statements as far as what you would expect for the back half of the year?.

Yes, I'll let Brian chime in on some parts of the questions. I think on the advertising, we're seeing pretty good traction. I mentioned earlier in the year after the war began, we noticed some softness in advertising spending, but we really worked hard to make up for it. something like 50% of our sidewalk revenue came from advertising and it's looking really good. We are very satisfied with what we're seeing. To answer your question, we see both local and national campaigns right now. So, and again, this is something that I think you're going to hear about a lot sooner or.

soon, and Brian can take the rest of the question. Yes. Hey, Jeff. So I think with pricing, right, our teams have been doing a great job with the expanded fleet of looking at how we can do multi-city campaigns or multi-market, multi-neighborhood campaigns as well. So the opportunity continues to grow, and I think that's excellent from a top-line perspective for margin and the product mix. that we're seeing as we move forward. To answer your direct question right there, mostly wraps. We're also seeing some growth within the experiential side of the business and a lot of inbound interest from clients that are interested in having the robots for various experiences. For a split on the revenue, not something we get to for guiding to advertising versus deliveries, but we'll anchor back to the updated guidance talked about in the script.

Okay, that's helpful. And then as a follow-up, I know you had some news out last month on no scrubs and some introductions of non-food. So any update there that you could talk about at this point in time as far as any non-food updates, perhaps stuff to think about and geographies to think about? I appreciate that.

Thank you. Yes, so one of them that we announced recently was No Scrubs. This is laundry. It's kind of an obvious application. The product that I mentioned earlier, Beacon, it really allows us to work with any merchant, any place that wants to work with robots would be to do that without any backend integration barriers the way we've had to deal with so far. I think that's one of the pieces of the puzzle that we've been working on to be able to really open the kind of use cases that we can do. Because ultimately we are not building robots to just deliver boydots. This is last mile infrastructure for cities And part of why we want to be able to put our resources beyond things like, you know, just food marketplaces is to open up those opportunities. I mentioned there's another product as well that we'll be announcing that actually allows customers to also reach out to us directly.

So you can, if you have direct, you know, integration, ability with merchants and with customers, I think that those are the building blocks to open a lot of interesting other use cases. Now, I would say I think those things take time because food is something you eat three times a day. There's a lot of, you know, habits and demands for it that's already formed. We have to make these investments to open up these new use cases and opportunities. And that's what exactly we are doing. We want to kind of make the investments so that over time these things become a part of our, in a way, portfolio mix.

And again, if you would like to add a question, press star then the number 1 on your telephone keypad. Our next question. There are no more further questions at this time, ladies and gentlemen. That concludes today's call. Thank you all for joining in. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Thank you, everyone, for standing by. My name is Kathleen, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2026 Financial Results Conference Call. [Operator Instructions]

And now I would like to turn the call over to Steve Webb, the Senior Vice President of Marketing and Communications. Please go ahead.

Thank you, operator, and welcome to Serve Robotics First Quarter 2026 Earnings Call. With me today are Serve's Co-Founder and CEO, Ali Kashani; and our CFO, Brian Read.

During today's call, we may present both GAAP and non-GAAP financial measures. If needed, a reconciliation of GAAP to non-GAAP measures can be found in our earnings release filed earlier today. Certain statements in this call are forward-looking statements. You should not place undue reliance on forward-looking statements. Actual results may differ materially from these forward-looking statements, and we do not want to undertake any obligation to update any forward-looking statements we make today, except as required by law.

For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release we issued today as well as the risks and uncertainty described in our most recent annual report on Form 10-K and in other filings made with the SEC. We published our quarterly financial press release and our updated corporate presentation to our Investor Relations website earlier this morning, and we ask you to review those documents if you haven't already.

And with that, let me hand it over to Ali.

Thank you, Steve, and good afternoon, everyone. Thank you all for joining us. We are in the early days of this robotics revolution, but our first quarter results show how quickly this market and Serve are moving. Q1 revenue was nearly $3 million, above our expectations and up nearly 7x year-over-year and nearly 3.5x sequentially.

Last year, our focus was deploying 2,000 robots across 20 cities while also seeding the work to open new revenue streams and new market opportunities for our technology. This year, those investments are beginning to compound. Fleet revenue grew by an order of magnitude from about $200,000 in Q1 of last year to nearly $2 million this quarter. In addition, about 1/3 of our total revenue during Q1 was from software services, and just under half of total revenue is now recurring.

Last quarter, I said that 2026 would be a year of compounding return. Three months in, we are on track to deliver the $26 million of 2026 revenue we guided to on our last earnings call. Q1 is a clear proof of Serve's evolution. We are at the forefront of physical AI, not by just making big promises but by launching real robots in the real world at real commercial scale. With this early mover advantage, our focus now is growing the revenue streams that we've already built while also creating new one.

At the same time, we are advancing our technology, deepening our moat, introducing our platform to new markets that expand our opportunity and strengthening Serve's data and AI flywheel with new proprietary data.

So let me go a level deeper. First, our autonomous food delivery operation continues to scale. Our deployed fleet is now 7x larger than in Q1 of last year, while daily active robots are up 10x and daily supply hours are up 13x over the same period. Put differently, as we expanded the total sidewalk fleet over the last 12 months, we activated robots more quickly in each market and generated even more hours from each robot. Combined, Moxie and Serve robots now provide over 10,000 robot supply hours to our partners every day with more than 800 robots active every single day.

To be clear, I don't expect every quarter to look like Q1, where we increased the active fleet and the fleet revenue by an order of magnitude year-over-year. Periods of growth often follow periods of investment, and they often need to be followed by more investment to support future growth.

We expect Q2 growth to be slower as we work on expanding our geographic coverage and partnerships and capabilities in anticipation of the second half of the year when the growth picks up again. Case in point, in the first half of the year, we are not deploying additional sidewalk robots beyond the 2,000 that are already in the fleet. Our focus is on operational growth and efficiency instead. That is getting the full delivery fleet running daily and improving utilization by activating more merchants as well as integrating more delivery platforms and expanding into new cities and neighborhoods. That is the worst that's in front of us now, and we expect it to drive significant growth over the course of the year, in line with our $26 million revenue guidance for 2026.

Our health care business, Diligent Robotics, we joined at the start of this year, is also performing in line with the plan that we laid out at announcement. The combined company is generating revenue and momentum across 2 distinct domains as we build toward a single autonomy platform. Since this is the first quarter Diligent is reflected in our results, I want to spend a moment on that business.

Since closing, I spent a lot of time with Andrea and the Diligent team. A few observations that stand out. First, the team is excellent. They have long-standing experience operating in some of the most demanding environments in robotics, and they're also already teaching us a lot about indoor environments. Second, the financials are in line with the plan that we laid out and the hospital pipeline for new business is healthy. Finally, Diligent continues to operate and grow, and I'm excited about the possibilities that are ahead. First, to bring our technology to more hospitals and over time, to extend it to additional indoor and outdoor environments.

Now looking at the overall business again. The combination of our sidewalk and health care operations now gives us a footprint across 44 cities in 14 states with nearly 2 million deliveries completed across these domains. That is a meaningful expansion from where we ended 2025. The growth came from 3 sources: new autonomous delivery markets that went live, including Buckhead, Fort Lauderdale and Alexandria, which we previewed previously; the hospital networks that came in with diligence; and continued expansion in our existing markets.

I also want to say a word about safety. Our robots share space with people every day and earning the right to operate in those spaces is the foundation everything else is built on. To put the scale in perspective, during our operating hours each day, our robots collectively travel a distance greater than walking from New York to Los Angeles. That's every single day. And they do that with a stellar safety record. Our robots have orders of magnitude less kinetic energy than cars. And to date, we've never had an incident resulting in a serious injury or anything approaching one.

Every delivery completed by one of our robots is a delivery not made by a car. That matters for cities, for pedestrians and for our mission of making cities we operate in safer and more pedestrian-friendly. We are holding ourselves to a very high standard of safety across all environments we operate in.

So to sum up, in operating terms, Q1 was a strong proof point. We are running a scaled footprint, growing our revenue rapidly, improving margins, maintaining our reliability and safety records and expanding the markets that we are operating in.

Stepping back and as we have discussed in previous calls, the foundation of everything we do is sales data and AI flywheel. Our fleet runs across more environments than anyone else in our category. The data those robots collect is richer than ever. The data trains better AI models, which makes every robot more capable. And as that suite becomes more capable, each robot can operate in more places and generate more value. Every robot will learn from every other robot even across different environments.

We have discussed our long-term vision for a self-fleet reaching 1 million robots deployed globally across cities and hospitals and other complex environments where robots and people share space. Over time, robots will become embedded in the core fabric of how modern cities and economies function. On the path to 1 million robots, we are still early, but we are building the platform across more fronts and more domains and a broader footprint than ever before. That gives us a stronger foundation to create a platform for robots of many future forms and functions and to navigate safely and effectively around people as the industry advances.

What we are building is genuinely hard, making one autonomy stack work across multiple physical environments at scale is one of the hardest problems in robotics today. We have always known this requires patience and persistence and rigorous execution. I'm really excited about the progress that we are making, and we'll keep sharing that progress with you every quarter.

With that, I'll hand it over to Brian.

Thank you, Ali. Good afternoon, everyone. Q1 was an important quarter for Surge. Revenue scaled meaningfully. We began integrating Diligent Robotics, and we continue to broaden ways we monetize the autonomy platform through fleet, software, branding, data and health care automation revenues. Our focus this year is straightforward: improve robot productivity, increase revenue per robot and per operating hour, grow recurring revenue and translate those operating improvements into a stronger financial model.

Q1 showed continued progress as we scale. Serve is building a network of robots that can operate across multiple real-world use cases, including food and health care today with opportunities for package delivery, health care logistics and other commercial tasks. The common thread is simple, robots operating safely and reliably in complex human-centered environments.

In Q1, our robot base continued to expand and our delivery network showed strong capacity growth. On an as-reported basis, daily active robots during the period was 812, up approximately 48% sequentially. Daily supply hours in the period averaged over 10,000, up approximately 54% sequentially. Those are strong capacity metrics, but the more important point is what comes next. Our objective is not simply to increase the number of robots in the field. Our objective is to convert every active robot in every supply hour into more revenue.

We are managing this through specific levers within the environments we operate in, whether that is market-level density, partner integrations, merchant coverage, speed, operational productivity and most critically, the autonomy improvements that reduce human touch points. The integration of Diligent expands the same platform into health care, where robots operate in hospitals and support recurring customer workflows. It gives us another operating domain, another data source and a revenue profile that is more recurring in nature.

Strategically, this strengthens the autonomy flywheel Ali discussed. Sidewalks and hospitals are different environments, but both require robots to navigate safely around people, adapt to real-world complexity and perform reliably at scale. Put simply, 2025 is about proving we could scale the fleet. 2026, the focus is converting that scale into stronger revenue per robot and better operating leverage across the platform.

Total revenue for Q1 was approximately $3 million, up 238% sequentially and approximately 578% year-over-year. On a pro forma basis, including Diligent, Q1 revenue increased approximately 28% sequentially and 30% year-over-year. Fleet revenue was approximately $2 million and software revenue was approximately $1 million, continuing to demonstrate the attractive margin profile for software and platform-based revenue layered on top of the deployed robotics base. This remains an important proof point for the broader platform model.

Q1 included approximately $1.4 million of recurring revenue with the remainder from usage-based, project-based and other nonrecurring revenue streams. The broader point is that Serve is no longer monetizing only food delivery. While that remains the primary growth engine, the revenue base now also includes branding, software, data and health care automation. This provides us more ways to monetize the same underlying autonomy stack and more levers to improve the long-term financial model.

Gross loss for the quarter was approximately $9 million, and gross margin was negative 302%. That remains an investment-stage margin profile, but it improved materially from Q4 as revenue scaled and software revenue contributed positive gross margins. There are 2 different economic layers in the quarter.

Fleet gross margin remained negative as we supported a substantially larger fleet, integrated our health care fleet and built the operating structure required for a multi-domain robotics platform. Software gross margin was positive, which highlights the benefit of layering software and platform revenue on top of the robotics base.

We believe the path to an improved margin is clear and measurable, more revenue per robot and operating hour, better operational productivity and a greater mix of recurring software and platform revenue. This is why our focus this year has evolved. Total robot count is still relevant, but it is not sufficient.

GAAP operating expenses were $42.8 million in Q1. Excluding stock-based compensation of $7.4 million and amortization and acquisition-related expense of $3.6 million, non-GAAP operating expenses were approximately $31.8 million. As expected, R&D remained our largest investment area. GAAP R&D expense was $19 million or approximately $15.5 million, excluding stock-based comp. This investment is directed towards autonomy development, AI model improvements, fleet softwares, data infrastructure and integration across our platforms.

G&A expense was $15 million or approximately $8 million on a non-GAAP basis. Operations expense was $7 million or approximately $6.7 million on a non-GAAP basis. Sales and marketing expense was $1.9 million, approximately $1.7 million on a non-GAAP basis. Our discipline is not about underinvesting in the opportunity. It is about aligning investment with the operating milestones that matter, revenue quality, margin improvement and platform differentiation. Every dollar should strengthen the autonomy platform, improve our fleet productivity, expand our commercial reach or increase the durability of revenues.

GAAP net loss for the quarter was $49 million or negative $0.65 per share. Non-GAAP net loss was $38 million or negative $0.50 per share. Net cash used in operating activities was $41.4 million, while investing cash outflows were $19.6 million, driven primarily by acquisition activity. Capital expenditures were approximately $1.4 million in the quarter. We ended the quarter with $197.4 million in cash and marketable securities. This liquidity position remains a strategic advantage. It gives us the ability to continue investing in autonomy and new market opportunities while maintaining discipline around the timing and scale of capital deployment.

Turning to our outlook. We reiterate a total 2026 revenue guidance of $26 million. We continue to stay focused across the company with a priority to grow sustainable revenue quality and margin progression. We want to increase the mix of recurring revenue while continuing to bring down our unit costs through focused investments in autonomy and operational efficiencies. Accordingly, we maintain our previously communicated non-GAAP operating expense guidance of $160 million to $170 million during 2026.

Let me close with this. Q1 was a quarter of integration and continued scale. On a reported basis, first quarter 2026 revenue was greater than our total 2025 annual revenues. Curve is building a robotics platform, not a single-use delivery fleet. The investments we are making today are designed to improve autonomy, expand monetization and compound the value of our proprietary data across domains. We believe this, in turn, will improve robot monetization, capitalizing on our early leadership in physical AI to create a durable operating and financial model.

With that, we'll open the line for Q&A.

[Operator Instructions] And your first question comes from the line of Colin Rusch of Oppenheimer.

Guys, you talked about the cadence of delivery times and speed of delivery being a key lever for you guys. Can you talk a little bit about the cadence of improvement in autonomy and how much is coming from scheduling and how you see that evolving over the course of the balance of the year?

Yes. Thanks for the question, Colin. This is Ali. We are improving a number of pieces, a lot of investments going into things like autonomy, which is a big factor because robots move faster than they are using their kind of capabilities and sensors to perceive the world than any other mode. The autonomy and speed basically going hand in hand. So as the robots become more capable, they can move more quickly. And that's one of the biggest areas of investment that we've continued to make from early days, but especially now.

Okay. I'll follow up off-line. And then with the communications platform that you guys have built and put together, it's clear that you've got a differentiated capability there. Can you talk a little bit about your potential to monetize that capability outside of your own internal usage?

Yes, that's already in progress. Hopefully, we'll have more to share about that soon, too. But there are a number of customers already using that service. For folks who are not familiar, one of the first pieces of software that we are commercializing in our robotic platform as a whole is the connectivity layer because having robots in the field in thousands that can reliably connect to the Internet so that they can share their data, but also receive support when they need it.

It's a pretty important piece that pretty much every robotic and autonomy team or company needs. And we have a piece of technology that we believe is really superior to whatever is out there. So we have been commercializing that. There's investments made, and there will be more to share in the next few months.

And your next question comes from the line of Alex (sic) [ Mike ] Latimore of Northland.

Great quarter, guys. I just want to start from the top with some broad strokes here. Can you talk about demand as you're seeing it? Will the market still take pretty much as many robots as you can deliver? Anything there would be great.

Alex, yes, again, I can take this. This, to me, feels like the closest thing to infinite TAM because it's such an expensive thing to move things in last mile right now. And we are seeing a lot of opportunities for new use cases or new customers that have never used the service. So we haven't really seen any constraint as far as demand goes. I think the parts of the problem that has to be solved as we scale has to do with policy and societal acceptance, obviously, building, deploying robots and getting it operationalized. Also integration into services that people use every day that takes effort and time. But as far as the TAM and the total kind of opportunity, I'm very bullish on that.

Great. And then also now that you're moving towards optimization more trying to increase the daily revenue per robot, what are some of the key takeaways that you've learned just from going through head down on optimization flywheel here? And are there any notable changes given that experience?

I guess I'm trying to understand the question. Do you want to maybe state that differently?

Yes, yes. Just from focusing on optimization, I was wondering if there are any key learnings that you can take going forward towards incorporating new robots that you manufacture or just optimizing the rest of the fleet.

So from an operational point of view, I mean, the learnings come every day. It's about where do you send a robot in the morning. It's about where do you send a robot after it completes the job. It's about what's the range of deliveries you accept because if you accept longer deliveries, that means the robot is spending more time on that delivery. So you need to always kind of balance what's the distance of jobs that you accept and where do you put the limit on that. So there's a lot of interesting variables that are actually very market dependent.

And as we go to new markets, we basically have to customize that per market and sometimes even per neighborhood. So I wouldn't say there's anything really large as a learning because we've been out in the market for 7 years or something doing deliveries. It's mostly kind of ongoing learnings and then enabling the platform to do those customizations, so we can make neighborhood-based adjustments.

Awesome. And then just one more quick one. As you're looking to add robots in the second half, is it mainly going to be current city expansions or through adding new cities?

Yes, that's a really good question. So we are looking at basically both in the markets we are, but also in new cities and even international. So we are exploring all of them. For example, just last night, City of Vancouver in Canada approved the motion to enable the robots to deploy there in a pilot. That's not a done deal yet. We still have to work with them in the province, but it's very exciting. It would be the very first such deployments in Canada. So we are very actively working on unlocking these new markets and new cities, including some international auctions. And then as any of them firm up, we would obviously make announcements.

[Operator Instructions] And your next question comes from the line of Taylor Manley of Guggenheim.

Kind of expanding on that. So you mentioned Vancouver, which is very exciting. More generally, there are some markets that you are in that kind of have established regulatory frameworks such as Los Angeles? Kind of on the flip side, you've highlighted ambitions to enter cities where AV delivery doesn't exist like New York. So kind of how does regulation inform your thinking on which markets to expand to or not, if at all?

Yes, it absolutely does. Our thinking is if you look at, again, the broader size of the opportunity, there's a lot of places to go and a lot of options to choose from. So we don't need to force ourselves anyway. We want to go to places that are receptive. There are really 3 kind of legs of the stool. You have the permit to operate. You have the demand, say, partners and platforms that we are working with. And then, of course, you have our operational side. We are pretty good at getting our operational set up in a new city.

So the other 2 variable is what we focus on to open a new market, which is, are they receptive? Is this a place we want to be? Do they have a framework? Do we need to help them develop it? So there are a lot of investments we are making to kind of create a strong pipeline of markets. And again, that includes both in the U.S. and international. And then at the same time, working with platforms, including new platforms besides Uber and DoorDash, to access the demand in those markets. So these are all investments that we are making simultaneously.

Helpful. And then second, any insight on how to think about kind of revenue contribution from fleet services versus software services for the balance of the year? Obviously, software services was pretty strong in the first quarter. So just anything -- should we expect kind of similar mix or any changes there moving forward?

Yes. Taylor, this is Brian. So yes, we had a really strong Q1 with respect to software services. And I think we're going to continue to invest in some of those opportunities. In the back half of the year, as we continue to scale up with the revenue per robot per supply hour focus, I think we're going to see more growth on the fleet side. Obviously, we're not going to give guidance with respect to fleet versus software, reiterating and anchoring on the $26 million overall is the objective and monetizing those robots the best we can is our first focus.

And your next question comes from the line of Jeff Cohen of Ladenburg Thalmann.

This is [ Destiny ] on for Jeff. I was wondering if we could talk a bit about Moxie and the hospital segment in general. Can you just talk about how you plan on maximizing revenue per hospital or robot and then how that may contribute to the top line and the cadence of how that will contribute to the top line going forward?

Yes, happy to. There's a number of, again, parts to this. So if you think about it very first principle, the main question is how much are the robots helping the staff in the hospital. So we have very explicit KPIs that we track to make sure that not only are we doing enough, we are improving and increasing the number of tasks and really deliveries that these robots complete, and that's trending always in a good way. And then, of course, as we do that, we can continue to work on the pricing with the hospital networks that we are working with.

Often, what we like to do is increase the number of robots because the more productive they are, the more they can support the staff in different ways. So one of the ways to maximize that revenue is to actually increase the fleet size.

And Destiny, this is Brian. Just to add on to that. I think to Ali's last point of increasing the fleet size, I think that's an opportunity we have for the remainder of 2026 to support the diligent efforts of the team through additional robots and thus ensuring we can grow that top line throughout the rest of the year.

Okay. Perfect. And then one more for me. You've been very successful with M&A over the last several months. I'm wondering if you could hypothesize on what other verticals you think your autonomy stack would be suitable for, but recognizing that you've been clear that you're focused on optimization, not necessarily expanding into other verticals, just theoretically.

Yes. No, I appreciate that you calling that out. So we, even in the past, haven't been kind of proactively trying to look for expansion. It's been that we are very conscious of where the market is right now. A lot of investment on the private capital side has been made into various sectors in robotics. And right now, it's a very good time for consolidation. So we've been opportunistic, and we found some really amazing opportunities, obviously, Diligent being one of them. So if you want to look at it more broadly, it's really anywhere where robots and humans have to coexist in an environment, but you don't really have control to limit that environment in any way for the robots.

For example, in a warehouse, you have a lot of control over the environment, you can tell people how to behave next to the robots because they're all your employees, but in a shopping mall, you don't have that choice; at an airport, you don't have that choice; on a sidewalk, in a hospital. So I would say actually most environments that we are in would classify as that. So any place where robots can help, whether they're moving things or monitoring things or just accessing in general would be a good place for this. And we'll keep our ears to the ground and when good opportunities show up, we'll react.

[Operator Instructions] And there are no further questions over the audio. I would like to turn the call back over to Steve for any e-mail questions.

Yes. Thank you. We have one e-mail question, which is, what is the status of DoorDash? What's your relationship with DoorDash?

I can take that one. So a lot of great progress there. Our delivery volume with DoorDash has been growing faster than other partners. It's been about 6x in terms of merchant count just since the beginning of this year. So we are seeing really good momentum, and we are going to continue to build on that momentum.

And that wraps it up. Thank you, everyone.

That concludes our session for today, ladies and gentlemen. Thank you, everyone, for joining. You may now disconnect.

Good morning, and welcome to the Serve Robotics Fourth Quarter 2025 Financial Results and Conference Call. I am Frans, and I'll be the operator assisting you today. [Operator Instructions]. After the speakers remarks, there will be a question-and-answer session. [Operator Instructions]. I would now like to turn the call over to Steve Webb. Please go ahead.

Thank you, operator, and good afternoon, everyone. I'm Steve Webb, Serve's SVP of Marketing and Communications. Welcome to Serve Robotics Fourth Quarter and Full Year 2025 Earnings Call. With me today are Serve's Co-Founder and CEO, Ali Kashani, and our CFO, Brian Read.

During today's call, we may present both GAAP and non-GAAP financial measures. If needed, a reconciliation of GAAP to non-GAAP measures can be found in our earnings release filed earlier today. Certain statements in this call are forward-looking statements. You should not place undue reliance on forward-looking statements.

Actual results may differ materially from these forward-looking statements. We do not want to undertake any obligation to update any forward-looking statements we make today, except as required by law. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release we issued today as well as the risks and uncertainty described in our most recent annual report on Form 10-K and in other filings made with the SEC.

We published our quarterly financial press release and our updated corporate presentation to our Investor Relations website earlier this morning, and we ask you to review those documents if you haven't already.

With that, let me hand it over to Ali.

Thanks, Steve. Good morning, everyone, and thank you all for joining us. A year ago, we told you that we would deploy 2,000 autonomous robots across the country by the end of 2025. that we would expand from a single city to a truly national footprint.

And we would prove that this technology works, not just in a lab or a closed campus, but on open side box in dense cities, navigating the full complexity of Airbanlife. We did all of that and then some. Today, a fleet of 2,000 see robots have been activated across 20 distinct cities in 6 major metropolitan areas. From Los Angeles, all the way to the Washington DC corridor.

We launched Atlanta, Dallas, Chicago and Miami. We expanded aggressively in every existing market. We also added DoorDash alongside the areas. This gives us access to over 80% of the U.S. food delivery market. We also completed 4 strategic acquisitions since early 2025.

We met or exceeded our revenue guidance every single quarter and through all of it, we maintained a 99.8% delivery completion rates and a proud safety record. So let me say it again, 20x the fleet national scale, 4 acquisitions and near perfect reliability.

And in Q4, we once again delivered revenue above guidance as we drove 400% year-over-year growth in the quarter. This is not incremental progress. This is a company that's defining a category in real time. But before I get into the quarter, let's look at the broader trends. We are living through 1 of the most consequential technology transitions of our lifetime.

For the past few years, the world has marveled at what AI can do with words and images and quote. The next frontier, the 1 that we will reshape our physical world is physical AI, machines that can see and think and act in real environments alongside people.

As we try to anticipate what this future looks like, I find it really helpful to think about the evolution of computing so far. First, it was the personal computers, then came the Internet is connected information is connected to people. Next, we put computing and connectivity in every pocket and in every device, we connected the physical things, too.

As a result of all this, all of the commerce and every industry is now digital and connected. Each leap along this path was worth trillions. Fast forward to today, AI has taken over our digital lives over the past few years, arguably becoming the fastest rising ring of this evolution of computing.

Physical AI is the natural next phase. That's right around the corner. It's the moment when this intelligence leaves the digital realm and enters the streets. And like computing and the Internet before it, the companies that build the platforms for physical AI will define this era.

NVIDIA's CEO, Jensen Huang, has called robotics and physical II, the next multitrillion-dollar industry. Every major AI company is racing to build models for the physical world. The investment thesis is pretty clear. The companies that build the platform and own the data will capture the value. And here is what's important. You can build physical AI from a research lab.

You need robots in the real world gathering real data, encountering real age cases and at real scale. That's the flywheel and it's exactly what Serve has built. Every transformative technology goes through the same arc. We are at a very familiar inflection point.

Autonomous robots are here to fundamentally shift how we leverage technology in our lives. The question is no longer will this work as we've seen by our progress last year. Now the question is how fast can you scale. 2025 was the year we prove the technology.

Looking ahead, 2026 is the year we compound the business model. Last quarter, I said that beyond 1,000 robots, the system tips. Scale changes everything. The economics improve, their partners in learning accelerates. At 2,000 robots, the system doesn't just tip it compounds. We are now accelerating the flywheel.

We discussed this concept last quarter when we described how more miles lead to more data, better models and a more capable fleet. This is the flywheel that should be at the core of any physical AI company. And we have really organized our strategy around it.

Every investment we make, every acquisition or deployment or partnership, they're all designed to strengthen a specific step of that flywheel. And as a result, make the whole system spin faster. So let me walk you through the 4 steps in the flywheel. Step 1 is a missing data. Physical AI runs on large amounts of data. This isn't just some data use scrape off the Internet. This is data collected in real environments. It's collected by robots at scale.

Every mile or robots travel and reaches our data set. Every edge case, every construction zone or rush hour or unmarked Crosswalk, they all sharpen our models. And this data is proprietary. You can't just download it on the Internet or simulate it with the same depth and richness. You have to live on the sidewalk and no one is better positioned for it then Serve.

What's new and exciting is that we are no longer just collecting data from a single environment. Today, our data spans multiple and distinct physical domains. On side box, thousands of robots are mapping the world in 20 unique cities across the country. Every new neighborhood brings new edge cases and new pedestrian and traffic dynamics, new weather patterns, all of that enriches the models network wide.

In hospitals, our recent acquisition, Diligent Robotics has a fleet of nearly 100 robots called Moxy and they are navigating some of the most challenging indoor environments in robotics. These are multilevel facilities with tight corridors, constant food traffic, high-pressure operations. Max robots have completed over 1 million deliveries across more than 25 hospitals and county.

So sidewalks and hospitals and beyond, multiple domains with wide-ranging geographies, all feeding a single robotics and autonomy platform. There is no one who is doing all this and realizing the value of the combination of indoor and outdoor data collection from commercial scale fleets.

The second step of the flywheel is the models. Data is a raw material. But step 2 is where we take everything our robots are seeing and experiencing and we turn them into better AI models. This is where another recent acquisition comes into focus. Vayu Robotics brought us a specialized team that builds end-to-end models for physical AI. We are building systems that empower us to train across all our operating domains, indoors and outdoors, so that what a robot learns in Los Angeles would help a robot in Dallas. -- or at Max robot lens now beginning a hospital corridor could improve a save robot that's navigating an obstructed city sidewalk.

That kind of cross-domain learning is really significant, and it's a compounding advantage that will widen every quarter. Also, our acquisition of Fantom Auto brought us one of the most capable robot connectivity stacks with extremely low latency.

This enables us to operate at a large scale and across a significant geographic region because we can reliably assess robust remotely in real time. What underappreciated here is that every time a remote supervisor assisted robots anywhere in the country, we generate high-quality training data.

Our operations, which is empowered by this connectivity that we acquired, our conduit to collecting more data and more edge cases, and it's paired with a considerable training data set, all collected at a faster rate than ever, feeding right back into our models. I should also mention the talented team of engineers that make all of this possible.

When you have one of the largest autonomous robot fleets plus data from multiple physical domains and the infrastructure to turn all of this into deployed AI, that's where the best people want to work. Retention across our team has been really strong because people love building on real robots in the real world with significant unique data.

The flywheel attracts talent and talent accelerates the flywheel. The third step of the flywheel after you gather the data and develop the models is to deploy those models into the real world. Better models only matters if you can actually get them on to live robots. That is pushing all that improved autonomy out to the fleet that's in the real world where the edge cases live.

This is where our fleet scale and our partnerships become a strategic assets. Uber is an DoorDash combined Serve over 80% of the U.S. food delivery market. We are now a multi-platform fleet. We see robots finishing a DoorDash delivery then picking up an Uber each order on the way back. That kind of interoperability drives utilization.

And of course, utilization is the key to both our economics and our data collection. Our merchant network has expanded to over 4,500 available restaurants and retail partners today. Just this morning, we announced a new partnership with White Castle, one of America's most iconic restaurant brands. and our geographic pipeline also continues to develop. We are in active discussions with city officials across the country from New York to Boston to San Jose and even internationally, Vancouver and Toronto and Sydney and Melbourne.

As we evaluate all these new wave of market launches, each market will represent a natural extension to our existing footprint, and we are really excited to share more about our plans throughout 2026 as these initiatives progress. And this is a critical point. Every deployment across every domain into every new city -- it generates new unique data that fits directly back into step 1 and the cycle continues.

Finally, the fourth step of the flywheel is monetization. This is the step that makes the whole flywheel self-sustaining. When you monetize your fleets, you fund the next turn of the cycle and make the flywheel accelerate much faster. The companies that figure this out early and can get paid to collect their proprietary data.

They have a real advantage over those who have to pay for their data. Tesla is the obvious example. They collect massive amounts of road data to train their models by simply selling cars to consumers. One way we are really advancing our monetization is by increasing our revenue sources rapidly.

Delivery fees are, of course, our core business. It's continuing to accelerate as we scale geographies. But branding and advertising saw a 50% increase in Q4 year-over-year. With 2,000 robots moving through high-density neighborhoods, we have effectively built a neighborhood level media network on wheels.

Advertisers response has been exceptional, and we are building a robust bookings pipeline. Over time, we believe advertising and branding can represent as much as 50% of our fleet revenues. Think about what that means. It monetizes miles that are already being driven at nearly 0 marginal cost.

Also, data and platform revenues are emerging. In 2026, we plan to further invest in our data and platform capabilities to strengthen the foundation of our robotic solution offering. By offering the platform that powers our deployed robots to external partners and other robot operators, we expect this new revenue base to mature and become a meaningful high-margin contributor.

Also, going forward, health care revenue from diligent Robotics will be another meaningful contributor nearly 100 Moxy robots across over 25 hospital facilities with each facility generating over $200,000 in annual revenue. This is already a fully functional business unit that's generating both meaningful data and meaningful revenues.

Here's what ties everything together. Every dollar of revenue funds more robots, which leads to more data, which helps us create better models, which leads to even more deployments and more revenues and the cycle repeats.

The monetization doesn't just sustain the flywheel. It accelerates it. I think that our acquisition strategy also deserves a moment of its own. We have completed 4 acquisitions in the last 12 months. Every acquisition we've made matched directly to a step or 2 after Serve flywheel.

Fantom Auto strengthens our data collection and our deployment scale as well. Vayu robotics strengthens our models creation, Diligent robotics, where there strengthens our data gathering by introducing a new operating domain. And also it boosts our monetization through recurring revenues with compelling economics.

And last but not least, Vebu strengthens our delivery robot monetization by boosting our partnerships with restaurants and major QSRs. This is all deliberate. It's a flywheel strategy. Each deal is designed to make the flywheel stronger.

Now let me bring this back to our 2025 progress and specifically our Q4 results. In Q4, we exceeded our revenue guidance once again. Total revenue for the fourth quarter was $0.9 million, representing nearly 400% growth year-over-year and also meaningful sequential acceleration.

Full year 2025 revenue came in above our $2.5 million guidance at $2.7 million. We completed the deployment of our 2,000th robot in mid-December on time and on plan. In Q4 alone, we deployed nearly 1,000 robots. That's in a single quarter. That is more than many robotic companies and entire fleet size.

Delivery volume grew 53% quarter-over-quarter in Q4. and roughly 270% for the full year versus 2024. This is a compounding effect of fleet at scale. Also is the geographic expansion and the deepening platform partnerships, all of which are working in concert. And we expect this growth to continue as we start to see the benefits of new robots and also optimize their operations and utilization.

Our merchant base has also expanded to over 4,500 restaurants and retail partners today. This is a more than 10x increase from roughly 400 a year ago. We now reach over 1.7 million households in our Metro areas. This covers a population of over 3.75 million people.

And we did all of this while maintaining our 99.8% delivery reliability and also our strong safety record. This is the part that I'm most proud of. scaling fast is hard but scaling fast while maintaining quality and safety is what really separates us.

Okay. I want to close with where all of this leads to. A year ago, we had roughly 100 robots. Today, we have 2,000. The path is clear from here to 10,000 robots and well beyond. This would be across more cities, more verticals, even internationally. We have the engineering and operations road map and also a track record of execution. The hardest part, building the platform and proving the technology, earning the trust of our partners and cities and consumers. These are all tailwinds now.

What excites me most is that each additional robots we deploy would make the entire system more valuable. The data gets richer, the models get sharper, the economics improve. The partnership deepen -- this is the nature of a platform business with a flywheel at the core.

We are just entering that phase with the compounding effects and the acceleration of the flywheel become visible. With the Diligent Robotics acquisition, we have extended this platform beyond the sidewalk and into hospitals. That's not a one-off. It's a signal of where things are heading. The robotics platform we are building will be general enough to operate very, very intelligent machines are needed to move safely among people and mature enough to deliver real commercial value right away.

We are not building a delivery company. We are building the operating layer for how robots integrate into our lives. That's the long game, and we are playing it from a position of strength. 2025 was the year of proof. 2026 is the year of compounding returns. I have never been more energized about what's ahead.

And with that, let me hand it over back to Brian.

Thank you, Ali. Good morning, everyone. Entering 2025, we set explicit operating targets around fleet expansion, revenue growth and geographic scale, and we delivered against each one of them. More importantly, we strengthened the economic foundation of our business while doing so. That operating discipline will continue to define Serve into 2026.

Let's walk through the details. Total revenue for Q4 2025 increased over 400% year-over-year to $0.9 million. Full year 2025 revenue was $2.7 million, exceeding our guidance of $2.5 million and representing growth of 46% over the prior year.

Fleet revenue was $0.7 million for the quarter, growing 50% sequentially. Branding saw record bookings during the quarter as our expanded fleet attracted larger advertising commitments. We also recorded our first revenues related to data monetization in the quarter, an early signal of the data and platform opportunity ahead.

As Ali and I have mentioned, these opportunities will continue to evolve through 2026. Software revenues were over $200,000 in the quarter. Our transition to recurring software revenue continues to progress with our recurring software base now representing approximately 70% of software revenues.

More broadly than software, we noticed the shift in revenue quality during the year. Our underlying recurring revenues, defined as revenue, excluding onetime agreements, grew over 3x during the year. That shift increases revenue visibility while reducing volatility as we scale. Beneath the top line, Q4 margins reflect the largest single quarter deployment in our history with nearly 1,000 new robots.

When deployments occur at the scale, newly introduced cohorts initially operate below steady-state efficiency, that's expected and by design. What matters is the trajectory as that fleet matures. This past year, we observed average daily operating hours per robot climbed 56% to over 12 hours compared to Q4 last year.

Cost per delivery trended down quarter-over-quarter during the year as our operations team gained experience and our systems continue to mature. Collectively, along with other metrics, these trends give us confidence in continued margin improvement moving into 2026.

As reflected in our 2025 results, the operational infrastructure required to support our larger fleet was established this past year. We expanded market operations, built fleet maintenance capabilities remote supervision systems and deployment capacity ahead of 2026 revenue and, of course, the achievement of our 2000 robot deployment milestone.

As we move through 2026, we expect a growing portion of that infrastructure to be absorbed across a larger and more productive suite. GAAP operating expenses for Q4 were $34.3 million, reflecting the cost of deploying nearly 1,000 new robots and expanded operational capacity across new cities within Alexandria, Virginia and Fort Lauderdale, Florida.

On a non-GAAP basis, excluding stock-based compensation of $6.3 million, operating expenses were $25.2 million. R&D remains our largest investment area, a $15.9 million on a GAAP basis or $12.8 million on a non-GAAP basis. This is directed towards advancing our AI stack integrating capabilities from the Vayu and Fantom Auto acquisitions and building the data infrastructure for our growing fleet.

G&A spending stayed lean and purposeful decreasing from the prior quarter by $2 million to $11.1 million on a GAAP basis and $6 million on a non-GAAP basis. We expanded to one new metro area and 9 new cities during Q4 and anticipate a flattening of our G&A expense growth even as we continue to scale through 2026.

As I mentioned, we will continue to manage operating expenses with discipline, aligning investment with measurable deployment milestones. Interest income generated in the quarter was nearly $2 million. Additionally, Q4 reflects a $3.8 million tax benefit related to deferred tax liabilities associated with the Vayu acquisition, resulting in a partial release of our valuation allowance.

Turning to the balance sheet. We closed the year with $260 million in cash and marketable securities. Capital expenditures for the quarter were $16.5 million, representing the tail end of our costs for the 2,000 unit build. Our liquidity position provides strategic flexibility in a capital-intensive industry where balance sheet strength is a competitive advantage.

We continue to evaluate additional funding opportunities opportunistically. Adjusted EBITDA was negative $28 million as revenue scales and per unit economics improve, we expect sequential improvement in adjusted EBITDA margins throughout 2026. Turning to our outlook. Today, we are raising 2026 revenue guidance to approximately $26 million.

The improved outlook is primarily driven by the acquisition of Diligent Robotics which we believe represents a high return use of capital, while broadening our platform, expanding our addressable market and increasing the proportion of revenue derived from durable recurring contracts.

To fund that acquisition, we moderated our planned 2026 capital expenditures. As a result, we redirected a portion of planned near-term fleet investment toward a significant new market opportunity that is expected to contribute roughly $7 million of revenue during 2026, primarily through recurring health care contracts.

Looking beyond 2026, we continue to expect this newly combined core business to deliver sustained accelerating growth. We have previously discussed a $60 million to $80 million of annualized revenue run rate associated with that full utilization of our fleet.

Internally, we view that level less as an endpoint and more as an intermediate milestone as our business continues to scale exponentially. Our growth is expected to be driven in part by disciplined geographic expansion. As Ali touched on earlier, we are in productive discussions to extend our footprint across additional U.S. markets and over time, pursue selective expansion into major international cities like Toronto, Sydney, Tokyo, Madrid and London among many others.

We expect 2026 capital expenditures of approximately $25 million associated with the production and deployment of additional robots as we continue expanding the fleet and increasing volume of real-world operating data that strengthens the flywheel. Recent acquisitions are expected to increase our 2026 operating base by approximately $20 million to $30 million.

Non-GAAP operating expenses in 2026 are expected to be approximately $160 million to $170 million, reflecting continued investment in autonomy development, fleet scale platform capabilities across both delivery and health care robotics.

Let me close with this. The investments we are making in 2026 are specifically designed to strengthen the plan Ali described. We are expanding the fleet, improving the autonomy stack and increasing monetization opportunities across the platform as the flywheel accelerates. Serve has evolved into a diversified robotics platform with multiple revenue streams, spanning delivery, advertising, data services, software and now health care automation.

In the age of physical AI, we're using our strength in autonomous robotic delivery to build a generational robotics company that would define this era.

With that, I'll hand it back to Steve for Q&A.

Thank you, Ali and Brian. We'll now move into the Q&A session. But first, I'd like to say a big thank you to all the investors and analysts who submitted questions, I e-mail. Thank you so much for your engagement. The first question we have is related to new robots. Serve deployed 2,000 robots last year. What's the goal from a unit deployment perspective in 2026 and beyond that?

I'm happy to take this one. So over the next few years, we expect to deploy 100 small robots. But in the short term, as we've shared in the past, before we go on and share a detailed plan, we want to really let the recent growth settle in.

And we want to gather all the data on the earnings from last year's 20x fleet growth. We have the capacity to continue growing our revenue right now. On the other hand, manufacturing and supply chain, as we all know, they require certain lead time. So we are already working on the supply chain for the next batter robots so that we can expand to new major markets as they become available quickly. But the time between now and when the supply chain and manufacturing of the robots would be available.

It's a good time for us to really hone in on our playbooks and get them refined based on the existing growth. And we don't really want to be deploying more robots until we get all the client ones fully activated on a daily basis.

If I can wrap up on that, Ali. In the prepared remarks, Ray, we talked about CapEx guidance being approximately $25 million during 2026. A significant majority of that will be for the serve fleet expansion. -- but we're going to continue to invest not only in Serve, but for additional Moxy robots and look to accelerate their growth as well.

I think, Ali, exactly if you summed up Q1 in this time period, Q1 2026, we're looking to optimize the performance of the full fleet. And most importantly, we retain control over that CapEx timing and also the OpEx deployment costs as that fleet continues to grow.

Great. Thanks, Brian. On to our next question. What percentage of the 2,000 deployed robots should be daily active by the end of first quarter?

I'm happy to take this one as well. So from manufacturing and deploying robots to reaching full utilization of the fleet, as we've discussed this in the past, there are several steps that take place. You start with obviously creating the depots in each new market, building the operational footprint, which includes hiring and training staff.

So this is a lot of the voice we've already done. And then the next step to that is getting any requirements by local municipalities and stage gate, all of that addressed -- we need to then activate neighborhoods with our delivery partners, onboard local merchants. And then once all of that is done, we can have robots at full operational hour every day, we would focus on operational efficiency.

It's a question of where to put the robots, how to move them around all of that, so that we capture the maximum demand. So we expect that by the middle of this year, as I said before, we have any additional robots to manufacture, we would get all of the existing robots on a fully active daily basis and shift our focus to that operational optimization.

We are timing everything again so that we have that full utilization, so the full activation that is robot before manufacturing new ones given the lead times for manufacturing?

Thanks, Ali. On to the next question. We received this one about the acquisition of Diligent Robotics. How are the integration efforts going? And what are your plans for growing the health care business?

That's a great question. So we covered some of this earlier, but I can dig in a bit more we have always intended for our autonomy platform to extend beyond just food delivery and into many other environments, including in this case, hospital and health care.

As we looked at the Diligent Robotics during our acquisition process, it became pretty clear very quickly that -- it's the right time and right company for us to expand our scope. So this acquisition actually strengthens our flywheel, as I mentioned earlier, by really enriching our data further. It also creates a more balanced and resilient revenue base for us, and it opens up, obviously, new markets opportunities and a new growth engine.

We are already starting to integrate our platform capabilities with Moxy robots, but this will take some time. As we do this integration works, we are creating a repeatable playbook for expanding into new verticals and operating in multiple different domains.

On the second part of that question for the revenue and just to give a little bit more color, right, these are existing established recurring revenue contracts that we were able to acquire through Diligent -- and so these are different than our demand cycle for current food delivery.

The $7 million number we referenced in the preprepared reports is for revenue here in 2026 and I think it's important, right, from an integration standpoint, we're going to continue to focus on additional investments into the health care business around engineering head count, infrastructure to support that team through their next phase of growth.

Our business development team, sales teams are looking at other opportunities in the pipeline. Several of those are currently being evaluated, and we're going to make the best decisions to drive long-term revenue growth.

Great. On to the next question, is optimization of the fleet a linear process or other step functions? And if so, what would cause that?

Yes. We touched on the steps earlier. Of course, we are pushing a lot of these steps at the same time, but you're never going to get everything done at the same time. I think going from that deployment to full utilization steps are pretty important.

There are many factors that affect that utilization and those steps kind of outlined, as I said -- as I mentioned earlier, Overall, though, we are seeing that our more mature markets are further along on that optimization curve. We mentioned this area about is really about compounding returns for us.

2025 was all about building that infrastructure. So in 2026, we are going to be really laser focused on optimization and efficiency of the fleet, both on the sidewalk and on the hospitals.

And we have enough time for one more question. Can you speak more about your plans to expand internationally? What's the time frame for those city launches?

Yes, that's an exciting one to end on. Let me maybe give some context on our thinking here. So we have really built a great foundation for expansion. We are now in 20 cities, 6 major metros we have really proven the tech at scale, build the operational playbook, the way to launch new markets efficiently.

So this work really supports that international expansion will -- we are now in active discussions with city officials and partners in multiple international markets from Canada to Australia, Japan, Spain, the many other countries. We are considering major cities, dense urban environments, strong delivery markets and municipal governments that are really leaning into autonomous robots and side blocks.

I want to emphasize that we are going to be disciplined and intentional about these expansions, especially being our growth opportunities here in the U.S. versus markets abroad. We have learned from our U.S. expansions today that the right way to go to new market is metical.

And we want to really be measured as we identified the right partners and the right expansion cities. We do get a ton of inbound interest to consider, but we want to be very selective. And then we see this ultimate growth opportunity internationally as a 2027 opportunity.

But 2026 for us to lay the groundwork for it, just as we laid the groundwork for this year, last year by expanding to new cities. In the meantime, our robust obviously will continue and collect more data in more than in 20 cities today and expanding by the end of the year. And we'll keep making that flywheel move faster and become more durable so that we can enable even further rapid growth and expansion. I'll just end by saying this again. I've never been more energized and excited about what's ahead for serve and I can wait to see robots operating in cities across the globe.

Great. Thanks, Ali, and thanks, Brian. That's all the time we have for today. I'd like to thank everyone for joining us again. Thank you for joining us on the call today.

Ladies and gentlemen, thank you all for joining, and that concludes today's conference call. All participants may now disconnect.

Hello, and thank you for standing by. I would like to welcome everyone to the Serve Robotics Third Quarter 2025 Financial Results and Conference Call.

Now I would like to turn the call over to Aduke Thelwell, Head of Communications and Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to Serve Robotics' third quarter 2025 earnings call. With me today are Serve's Co-Founder and CEO, Ali Kashani, and our CFO, Brian Read.

During today's call, we may present both GAAP and non-GAAP financial measures. If needed, a reconciliation of GAAP to non-GAAP measures can be found in our earnings release filed earlier today.

Certain statements in this call are forward-looking statements. You should not place undue reliance on forward-looking statements. Actual results may differ materially from these forward-looking statements, and we do not undertake any obligation to update any forward-looking statements we make today, except as required by law.

For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release we issued today as well as the risks and uncertainties described in our most recent annual report on Form 10-K and in other filings made with the SEC. We published our quarterly financial press release and our updated corporate presentation to our Investor Relations website earlier this afternoon, and we ask you to review those documents if you haven't already.

With that, let me hand it over to Ali.

Thanks, Aduke, and thank you, everyone, for joining us.

We are at a pivotal moment for Serve. This past quarter, we crossed the threshold for 1,000 robots deployed. That's not just some round number. It's an inflection point. You can feel this in the sidewalks that we serve. The future of cities is autonomous, and we are at the forefront of this, turning it into daily reality in these neighborhoods across the country.

This is not just swapping humans for robots. We are unlocking new possibilities for cities. We are rewriting the operating system of how cities function, how goods move, how spaces are shared, how businesses reach residents. When the whole system upgrades like this, everything gets better, safer streets, friendly and greener cities and more prosperous businesses and workers.

So why now? What's possible today that wasn't possible before? There are 4 forces that have really converged. First is physical AI. It's really finally caught up with our ambitions. Advances in distributor training, also the better onboard compute that is now available, it lets us ingest orders of magnitude more sensor data. And that leads to incredibly more capable AI models that can help machines really understand the world in real-time.

Our perception and planning models are improving on the street every single day. Each mile traveled enriches our data set. Each model update expands where, when and how quickly and how safely we can move. And this all has a compounding effect.

Second, every hardware component needed to create this advanced inexpensive and intelligent machines has matured. This includes powerful sensors that are now at mass scale and low cost, paired with electric motors and batteries that enable new vehicle form factors.

Technologies like LiDAR sensors were unaffordably expensive just a few years ago, but now we have partners like Ouster, who are shipping thousands of sensors each quarter in record numbers. That benefits everybody in the ecosystem because of the economies of scale.

Third, consumers have adopted the convenience of online and on-demand ordering, and merchants need CapEx-light and labor-light capacity, so that they can economically serve the demand. Restaurants have optimized their operations in the post-pandemic reopening, but they now need a way to unlock and realize that full potential. They want dependable, right-sized logistics that matches their demand by the hour, and that's what our fleet can deliver.

And last but not least, it's the cities themselves. Cities are asking for quieter and cleaner and less congested streets. Smaller vehicles made for specific use cases can now replace those 2-tone vehicles that we've become so addicted to. And this is the future.

Our robot footprint is small with an electric powertrain and a friendly presence. We earn the right to scale when we operate with safety and transparency and community respect and when we are working closely with the cities that we serve. And we create these new jobs, full-time employee jobs in neighborhoods that we are serving.

Our third quarter results prove that we are on the right track with all this. Our delivery reliability was nearly 100%, while our delivery volume increased 66% in a single quarter, and we continue to maintain a strong safety record. We now deliver for over 3,600 restaurants, which is an amazing 45% increase from the last quarter and more than a ninefold increase since last year. This is all proof that autonomy can be safe, reliable and predictable even as we scale rapidly.

We did all this while also expanding faster than anyone in our industry. In less than a year, we grew our fleet size 10x, our cities 5x and our major platform partners 2x. Last month, we announced partnering with DoorDash, the largest delivery platform in the U.S. and one of the largest in the world. Combined, Uber and DoorDash serve over 80% of the food delivery market in the United States, which provides us an incredible reach to consumers and merchants.

The scale that we've achieved in the last few months really changes things. Here's how to think about it. With a few dozen robots, you're running pilots. At a few hundred, you're starting to prove repeatability. Beyond 1,000, the system tips. We run more efficiently; the economics improve. The national partners really lean in and our learning really speeds up. All of which makes every new city launch smoother and every new robot smarter than before.

As we scale with precision, we've gone from 1 market to 5 fully operational hubs covering over 3 million population and well over 1 million households. That's nearly 70% increase in a single quarter and more than a tenfold increase in our coverage compared to the same time last year. Not only have we 10x our fleet, we have 10x our reach.

And as importantly, each neighborhood adds to our rich data sets with new and novel edge cases, which really accelerates our ability to learn across the network, and it compresses our time line for future city launches.

On that note, I'm excited to share with you our next 3 expansions. We've just been greenlit to expand into Bucket, Georgia, Fort Lauderdale, Florida; and Alexandria, Virginia before the end of this year. Alexandria also gives us a toehold in the Washington, D.C. area. We're building the first truly national interconnected autonomous delivery network on a common AI software platform and operations stack, so that a single partner integration would light up multiple metros and thousands of restaurants at once.

For example, in Q3, we announced our partnership with DoorDash. Coming in addition with our existing contract with Uber, this allows our existing robots to unlock an incredible amount of additional volume. A robot that's completing a delivery for DoorDash could do a delivery for Uber on its way back. So this would actually improve utilization levels for robots.

And we are not done yet. In addition to our existing partnerships with Shake Shack and Little Caesars, we've also started delivering for Jersey Mike's Subs, the famous sub sandwich chain with over 3,000 locations nationwide. And while it's too soon to give details, we also expect to add another well-known national QSR brand to the lineup.

So the partnership platform is growing nicely. And concurrently with that, we are also developing an unparalleled map of cities, the care cuts and slopes and potholes and obstacles and patterns, a living Atlas that becomes a valuable asset and an operational advantage. And while we do that, we are also deepening our community bonds at a very hyperlocal level with merchants and landlords and HOAs and precincts, we need to integrate respectfully into these neighborhoods as we grow.

Now let's take a step back. Serve is pioneering a robotics and Autonomy as a Service platform that packages the full power of our autonomy stack, our hardware and our urban robotics operation playbook. With the last quarter's acquisition of Vayu Robotics, our platform is now increasingly reinforced by AI foundation models and a scalable simulation-powered data engine.

Under the hood of all this is the physical AI flywheel that powers everything. Our third-generation fleet leverages the best-in-class sensors, which creates this proprietary urban data sets, and that, in turn, leads to better AI models, which then creates more efficient and more autonomous fleets. A better fleet expands our TAM and increases our operating domain and verticals that we can do. And that, in turn, creates more pull in the market for more robots. So more miles, it's more robots, it's more data, it's better AI and the cycle repeats itself.

The integration of Vayu will actually accelerate this loop because it turns data into better models faster. And that leads to tangible gains in our delivery speed and autonomy and the market reach. Our library of long-tail edge cases is expanding faster than ever. And the latest data that we gather on weather and obstacles and parades and detours, it all provides the learnings that are applied network wide. So every robot is learning from every robot.

And this AI flywheel that we are building, the flywheel that's now accelerating in turn attracts exceptional talent. Our rare data scale and this real-world fleet presence that we have is pulling in elite builders. And they, in turn, ship better systems and better systems attract even more elite builders. So the talent flywheel is also compounding.

All the forces that I mentioned are helping us execute our vision. I'm really proud of our team for reaching the 1,000 robot milestone last quarter. In September alone, we shipped over 380 robots. That is in a single month. That means we launched more robots in a single month than the prior quarters. This was a pivotal milestone.

We promised to ship 2,000 robots by the end of the year during our IPO, and we are on track to do it with robot #2000 planned to deploy in Miami in mid-December, but we are not going to stop there. We envision a future where Serve's fleet reaches 1 million robots deployed across cities globally. They will travel billions of miles annually. They become embedded into the core fabric of a modern city, and they unlock new possibilities.

Our conviction is simple. We are entering the age where things will move at our will, but on their own. Autonomy will become this essential infrastructure in our lives. It's rarely noticed because it just works, but it's sorely missed when it's not available. And we want to be the company that you will trust to run this.

On the path to 1 million robots, we are still early. But with 1,000 robots operating from coast to coast, we've really just crossed that chasm where the technology and the market all say go. From here, every additional robot, every additional hour, every additional block makes the whole Serve ecosystem more essential and more valuable to the entire network. We are building something durable, and we are just getting started.

With that, I'll turn it over to Brian to cover our Q3 results in more detail.

Thank you, Ali, and it's great to be with you all today.

This quarter marked another step change for Serve, one defined not only by scale, but by strategic execution. We advanced in every meaningful area, expanding our fleet, strengthening our technology base and executing with greater precision across operations, engineering and finance. We've also been extremely opportunistic.

During the quarter, we've integrated 2 key acquisitions that deepen our competitive moat, acquiring Vayu, a pioneer in urban robot navigation using large-scale AI models. We're expanding our physical AI capabilities by accelerating our road map.

As we further integrate Vayu into our autonomy stack, we expect it to create opportunities to enhance our leadership in autonomous delivery as well as to reduce data infrastructure costs and improve operational metrics over time.

These integrations allow us to convert more of our operational data into faster model improvements and richer monetization layers, all while reinforcing Serve's position as the category's innovation leader.

Our focus remains clear: to scale efficiently, deploy capital strategically and translate our growing operational advantage into sustainable financial performance, all in service of building an enduring business in this new age of autonomy and physical AI. As Ali described, the Serve flywheel is accelerating, more robots, richer data, smarter AI and stronger economics.

Let's dig into our Q3 results, showcasing how these effects translate into measurable financial impact and expanding leverage across our business. Total revenue for Q3 2025 was $687,000, an increase of 210% versus last year and in line with our guidance provided for the quarter. Fleet revenue was $433,000. Significantly, this quarter, we saw branding revenue jump 120% sequentially over Q2.

As we've mentioned previously, the growth of our robot fleet into the thousands unlocks a pipeline of large-scale branding opportunities, and we delivered on that in Q3. Software revenues continued to transition from onetime to recurring and were $254,000 in the quarter.

We delivered exactly what we said we would. Fleet revenue is becoming the predictable growth engine we've envisioned, and we're now meaningfully stacking platform and data services on those same routes.

Gross margin performance this quarter reflected the balance between rapid fleet expansion and deliberate investment in our long-term efficiency infrastructure. As planned, we continue to build capacity ahead of 2026 scale, expanding our operations footprint, onboarding new cities and integrating the systems and teams from our recent acquisitions.

These near-term investments are already yielding returns in the form of measurable operational gains across reliability and autonomy. Average daily operating hours per robot increased another 12.5% sequentially from Q2, driven by the growing mix of Gen 3 hardware across our fleet. This is a strong leading indicator that each unit is capable of contributing more value.

Robot intervention rates saw a meaningful reduction through the quarter. And further, our best-in-class sidewalk autonomy is getting more and more capable. We saw a consequential increase in the proportion of miles driven in autonomous mode in the last week of Q3 compared to the first week of the quarter, indicating the return on continued R&D investment.

Taken together, these factors drove higher autonomous run times, which in turn drive improvements in our average speed. This leads to compounding gains. Even a small increase in the average speed corresponds to an increase in our potential delivery volumes.

These efficiency improvements are compounding. Each additional robot -- each additional mile in each new market contributes data that sharpens our models and reduces human touch points across the network.

On the expense side, we remain disciplined, investing in the capabilities that drive our competitive advantage. GAAP operating expenses for Q3 were $30.4 million, increasing from Q2 from deliberate investments in new market launches, M&A integrations and expanded operational capabilities to support our national scale. On a non-GAAP basis, operating expenses were $21.8 million.

R&D remained our largest investment area, totaling $13.4 million on a GAAP basis or $10.7 million on a non-GAAP basis, primarily directed towards advancing our autonomy stack, expanding our AI foundation models and integrating new data and hardware capabilities from our recent acquisitions. These initiatives are accelerating our pace of innovation, while positioning us for long-term cost structure.

G&A and go-to-market spending remain disciplined and aligned with our city expansion cadence. We're executing with leverage, adding cities, partners and robots without linearly increasing headcount or our overhead. Our approach remains consistent, invest where we have clear line of sight to efficiency, differentiation and scale advantage, while maintaining financial discipline and measured growth.

On the balance sheet, we ended the quarter with $211 million in cash and marketable securities. In October, we executed a stock sale that generated approximately $100 million, which will be used to fund working capital and expansion activities.

CapEx for the quarter was $11 million tied to robot production, market launch and expansion infrastructure. Our strong liquidity and debt-free balance sheet remain a competitive advantage, providing us flexibility to scale responsibly and invest opportunistically. Adjusted EBITDA was negative $24.9 million, driven by operational expansion in the quarter, expected to accelerate efficiency through 2026.

And now to our outlook. Once again, we delivered results at the high end of our Q3 guidance range. Building on this momentum, we now expect to generate more than $2.5 million in revenue for the full year 2025. Our underlying recurring fleet revenues, which exclude nonrecurring software, is projected to grow 3x year-over-year from roughly $0.6 million in 2024 to roughly $2.1 million in 2025.

2025 was a pivotal year focused on establishing our national footprint, deploying 2,000 robots, expanding into new markets and deepening our partnership portfolio. With this groundwork in place, we remain confident in our ability to generate annualized revenue run rate of $60 million to $80 million. We intend to update 2026 full year guidance early next year. Initial indications show our expansion and operational plan positions Serve to deliver roughly 10x inflection in revenue during 2026.

Q3 marked another step forward in both scale and precision. We're executing with discipline, expanding intelligently and translating operational progress into tangible financial results. Each quarter, our fleet becomes more capable, models more refined and economics more efficient.

The foundation we've built across technology, partnerships, operational excellence position us for sustainable growth through 2026. We're proud of what the team has accomplished this quarter and even more excited about the opportunities ahead. Serve is defining this category, and we're confident in our ability to lead it for years to come.

With that, I'll hand it back to Aduke for Q&A.

Thank you, Ali and Brian. We will now move into the Q&A session. First, I'd like to say a big thank you to all the investors and analysts who submitted questions via e-mail. We really appreciate your engagement.

First question, I think this might be for Ali. Do you expect to add more robots in 2026? If so, what would be timing and magnitude of the additions? Ali?

Thank you, Aduke. Yes, I can take this one. So good question. We aren't going to share the specific numbers right now. Hopefully, we have more to share early next year. But I do want to explain how we are thinking about growth.

As we are looking to get towards our 1 million robots' goal, what we want to do is make sure we grow quickly, but also with precision and discipline. We've been really laser-focused in getting the fleet really efficient and effective every day and driving utilization, while at the same time, layering new partners, going to new geographies, all of this makes that scale up easier.

So in a way, being efficient and growth kind of line up together. So in that -- it's the same type of effort that it takes to get there. So we are definitely going to push on growth, but we want to do it responsibly.

All right. Thank you. Next question is about robot design. Could you provide details on robot design simplification and cost reduction beyond economies of scale? Ali, do you want to take this one?

Yes, I'll take this one, too. I think there's a few different factors here. First of all, there is a ton of progress that we've made when it comes to the robot design. We've made it a lot more modular, easier to manufacture, a fewer custom assemblies. We've also really strengthened our supply chain to get better parts and at lower prices. So this both cuts down the cost of the material, but also cost of assembly.

At the same time, as we improve our design, we've also benefited from our scale manufacturing, which obviously helps bring the cost down as well. And while all of that is happening, the broader kind of ecosystem of suppliers, they're also getting more mature.

I think a really good example that I'm excited about is Ouster. They have done a phenomenal job of bringing these advanced LiDAR sensors to market at scale. They're shipping record number of sensors right now, I think, thousands per quarter. And we are directly benefiting from that. And I think a lot of folks in the autonomous space would benefit from more affordable LiDAR sensors that just didn't seem within that realm just a few years ago.

So combining our improvements to the design and our improved supply chain and our scaled manufacturing and the maturity of the ecosystem that per unit cost of the robots is definitely coming down substantially to the point that, as we've shared in the past, our Gen 3 robots are 1/3 the cost of our Gen 2 robots. And we are going to keep pushing these improvements forward.

Okay. Thank you for that. Next question, what are the next steps in your DoorDash relationship? How do you see that helping the business? Ali?

Yes. We are working very close with our partner at DoorDash. They -- first and foremost, it's about integrating the robots into the fleet in a thoughtful way and planning the market rollouts over time.

DoorDash obviously unlocks an enormous network of restaurants and consumers for us. We have over 1,000 robots right now and soon 2,000 that can deliver for those restaurants and customers. So the timing is perfect. And I expect that in the next few months, we will start to really grow the volume under the new channel with DoorDash basically.

I do want to emphasize this is a really important milestone for us because we've always envisioned this multi-platform approach. I think a single robot being able to alternate between deliveries from each platform from DoorDash and Uber, it is really, really important that we are able to do that, and I think we are now proving that we can. And this kind of interoperability actually increases our utilization, which in turn lowers the cost per delivery. And that actually benefits all of our partners as well.

Perfect. Thank you. We have a question on acquisition. Can you quantify the autonomy effect from Vayu? For example, would average speed increase or would the ratio of robots to operators improve? Brian, do you want to take this one?

Yes. So yes, good question. And I mean, I think the simple answer to start here is we're very early in this integration process to dive into those results exactly. And this is the type of integration that can take months. But we're actually doing the call here today from Vayu offices and the excitement from the teams to hit the ground running as soon as the merger was completed was tremendous, and there's just a lot of excitement on both sides to go faster and deeper into that road map to bring those new capabilities into the fleet.

I think we think about it as part of a flywheel where over time, that integration will allow our robots to be faster and smarter, while maintaining the safety and reliability that we focus on daily. And that, in turn, then drives efficiency and utilization, ultimately landing in unit economics and overall is a benefit for these acquisitions.

Okay. Thank you. Our next question, what are some differences between deployments in different cities? What have you learned from new deployments and expansions that will help you scale further? Ali, can you take this one?

Certainly, yes. Each city has its own distinct personality. It's like they're different in ways that's actually very helpful for us and honestly, quite fun for our team as we've been expanding, seeing, for example, in Atlanta and Miami, learning about humidity and the different kinds of pedestrian intersections and city design compared to what we had in Los Angeles before.

They have different width in their sidewalks, different nuances about how -- the best routes for traversing would actually look like or our new market in Chicago is an incredible place for getting that on really dense urban environments with cold weather where you have to look at battery efficiency and snow detection and traction. So a lot of things that we have tried to test in advance now are being put to test in real life, and we are learning a lot from that.

What's really powerful, I think, is that as we go to these new cities, it really enriches the models. And the data in this new environment actually helps the model across the board for the entire platform. And that actually means that every subsequent city launch, as I mentioned earlier, gets more reliable and better. In fact, we saw this in Chicago when we first launched, it was the fastest market for us to get to our SLAs that are comparable to our more mature markets. So it kind of proves that the playbook is working well and the robots are getting smarter.

And just to finish that, from a financial standpoint, I think, too, is we're using these learnings. We're translating them directly into efficiency through our operations teams. So we're seeing shorter payback periods with the expansion. We're seeing the higher utilization as we deploy into new markets and neighborhoods to continue the expansion. And that's exactly what we're building towards.

So we've been talking internally about describing this as being sharper with our scale. And we believe all of these technology improvements are going to compound, which will show up in our financial results. So that is really what's positioning us to expand in a disciplined capital-efficient way in 2026.

Okay. Thank you. Next question. What can you share about the pipeline for software and data sales? How are you looking to accelerate software revenues in 2026 and beyond?

Yes. This is a good question. The revenue pipeline for these other opportunities like the delivery platform, the software that's powering the robots as well as the data that's generated by the robot. It's been a really strong pipeline. We are in substantial discussions with multiple partners that want to basically use the platform or the data that we are creating.

And I think we are trying to be smart and selective in terms of who we engage with and apply some filters there to pick the right partners. But the amount of inbound interest we're getting really reinforces that what we have is quite differentiated. And I'm hoping that as we move some of these conversations forward and have more updates to share, we will actually tell you more about those relationships as well.

And if I can also wrap the financial aspect into this question is. As the fleet scales, these data and AI insights are going to become more valuable, right, to all of the people Ali just mentioned that we're talking to and the substantive discussions we're having.

So that's going to enable our team to look at opportunities for adding more recurring software as we go throughout 2026 and focus on that robotics and Autonomy as a Service offering. So it's really a long-term vision, right? This is a balanced model. We're focused on diversifying revenue and fleet revenue is that foundation with software and data as that real high-margin accelerant that we're focused on as we enter 2026.

Okay. And the last question, you mentioned the $60 million to $80 million run rate. When do you expect to reach that run rate? Brian, can you take this one?

Yes. Let me give a little bit more color. I know in the script; we did mention the outlook for 2026. So we'll point everybody back to that commentary. But obviously, this is a good question to end on here as we think about this Q3 update.

So the path to hitting $60 million to $80 million is underway, right? And that's really the final step. When we think about the ambitions, we laid out a few years ago to deliver 2,000 robots, right, $60 million to $80 million is the endpoint. But along the way, we've exceeded a lot of expectations, especially as we near the end of 2025. And that's been a testament to the team and how we've delivered.

I mean, to summarize what we've talked about on a lot of the earnings calls, we are on track to deliver the 2,000 robots. We've expanded into multiple markets with more coming. We talked about new partnerships and adding top of the funnel orders into our pipeline. But last but not least, we have the acquisition. So across all of these verticals, we are firing and we're really exceeding what we set out to achieve in 2025.

I'd like to remind investors and anybody that wants to understand our story that, that's all great. But critically, we're maintaining the safety and the reliability throughout that network as we're building it. And so the final boss, as Ali likes to say, is achieving that financial milestone is continuing to improve the utilization across the fleet. And so we have that momentum through 2025 and accelerating into 2026 to approach that $60 million run rate target. To be clear, I think we're still more than 12 months out, and we'll certainly, as we indicated, we'll have more to say on this in the next call early next year.

Okay. Thanks so much. That's all the time we have for today, and that concludes our session. Thank you for your thoughtful questions and participation.

And with that, I hand it over to the operator.

That concludes today's call. You may now disconnect.