Conference Transcript - SERV 2026-05-07

Operator

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. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, press the star one again. And now, I would like to turn the call over to Steve Webb, the Senior Vice President of Marketing and Communications. Please go ahead.

Steve Webb, Other

Thank you, Operator, and welcome to Serve Robotics' first quarter 2026 earnings call. With me today are SERV's co-founder and CEO, Ali Kashani, and our CFO, Brian Reed. 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

Ali Kashani, CEO

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 seven times year over year and nearly three and a half times 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 one-third 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 returns. 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 service 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 ones. At the same time, we are advancing our technology, deepening our moats, introducing our platform to new markets that expand our opportunity, and strengthening SERP'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 seven times larger than in Q1 of last year, while daily active robots are up 10 times, and daily supply hours are up 13 times 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 Serv 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 increase 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 Cyborg robots beyond the $2,000 that's already in the fleet, and 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 healthcare business, Diligent Robotics, which joined CERB at the start of this year, is also performing in line with a plan that we laid out at announcement. The combined company is generating revenue and momentum across two 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've 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 healthcare 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 three 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 be operating 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 scale 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 serve 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 fleet 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 self-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 a 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 will keep sharing that progress with you every quarter. With that, I'll hand it over to Brian.

Brian Reed, CFO

Thank you, Ali. Good afternoon, everyone. Q1 was an important quarter for SERV. Revenue scaled meaningfully. We began integrating diligent robotics, and we continued to broaden ways we monetized the autonomy platform through fleet, software, branding, data, and healthcare 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 healthcare today, with opportunities for package delivery, healthcare 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 shows 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, whether that is market-level density, partner integrations, merchant coverage, speed, operational productivity, and most critically, the autonomy improvements that reduce human touchpoints. The integration of Diligent expands the same platform into healthcare, 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 Allie 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 C. 2026, the focus is converting that scale into stronger revenue for 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 space. 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 non-recurring revenue streams. The broader point is that CERV is no longer monetizing only food delivery. While that remains the primary growth engine, the revenue base now also includes branding, software, data, and healthcare 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 two different economic layers in the quarter. Fleet gross margin remained negative as we supported a substantially larger fleet, integrated our healthcare 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. Gap 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 under-investing 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. Gap net loss for the quarter was $49 million, or negative $0.65 per share. Non-gap 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 to $170 million during 2026. Let me close with this. Q1 was a quarter of immigration and continued scale. On a reported basis, first quarter 2026 revenue was greater than our total 2025 annual revenues. SERV 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

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. And if you would like to withdraw your question, simply press the star 1 again. If you're called upon to ask your question and listening via loudspeaker on your device, please make sure to pick up your handset and ensure that your phone is not muted when asking a question. Again, please press star once you join the queue. And your first question comes from the line of Colleen Roche of Oppenheimer. Please go ahead.

Colleen Roche, Analyst — Oppenheimer

Thanks so much. 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?

Ali Kashani, CEO

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 when they are using their kind of capabilities and sensors to perceive the world than any other mode. The autonomy and speed basically go 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.

Colleen Roche, Analyst — Oppenheimer

Okay, I'll follow up offline. 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?

Ali Kashani, CEO

Yeah, 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 are investments made, and there will be more to share in the next few months. All right. Thanks, guys.

Operator

And your next question comes from the line of Alex Lattimore of Northland. Please go ahead.