Earnings Call Transcript - SERV Q3 2025

Operator, Operator

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.

Aduke Thelwell, Head of Communications and Investor Relations

Thank you, operator, and good afternoon, everyone. Welcome to Serve Robotics' third quarter 2025 earnings call. With me today are Serve Robotics' 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 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 have not already. With that, let me hand it over to Ali.

Ali Kashani, Co-Founder and CEO

We are at a pivotal moment for Serve Robotics. 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 our 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, friendlier and greener cities, and more prosperous businesses and workers. So why now? What’s possible today that wasn’t possible before? There are four forces that have really converged. First is physical AI. It has finally caught up with our ambitions. Advances in distributed training, along with better onboard compute that is now available, let us ingest orders of magnitude more sensor data. And that leads to incredibly more capable AI models that can help machines understand the world in real-time. Our perception and planning models are improving on the streets every single day. Each mile traveled enriches our dataset, each model update expands where, when, and how quickly and safely we can move. And this all has a compounding effect. Second, every hardware component needed to create these advanced, inexpensive, and intelligent machines has matured. This includes powerful sensors that are now at mass scale and low cost, paired with 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 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 match 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, cleaner, and less congested streets. Smaller vehicles made for specific use cases can now replace those two-ton vehicles that we've become so accustomed to. And this is the future. Our robot's footprint is small, with an electric powertrain and a friendly presence. We earn the right to scale when we operate with safety, transparency, and community respect and when we are working closely with the cities that we serve. We create these new jobs, full-time employee jobs, in the neighborhoods 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. We continue to maintain a strong safety record. We now deliver for over 3,600 restaurants, a 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 by 10 times, our cities five times, and our major platform partners two times. Last month, we announced a partnership with DoorDash, the largest delivery platform in the US and one of the largest in the world. Combined, Uber and DoorDash serve over 80% of the food delivery in the United States, which provides us with 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 a thousand, the system tips. We run more efficiently, the economics improve, and the national partners really lean in, which speeds up our learning. All of this makes every new city launch smoother and every new robot smarter than before. As we scale with precision, we've gone from one market to five fully operational hubs, covering over 3,000,000 in population and well over 1,000,000 households. That's nearly a 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'd our fleet, but we've also 10x'd our reach. And importantly, each neighborhood adds to our reach datasets, with new and novel edge cases, which really accelerates our ability to learn across the network and compresses our timeline for future city launches. On that note, I'm excited to share with you our next three expansions. We've just been greenlit to expand into Buckhead, Georgia, Fort Lauderdale, Florida, and Alexandria, Virginia, before the end of this year. Alexandria also gives us a toehold in the Washington DC 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 will light up multiple metros and thousands of restaurants at once. For example, in Q3, we announced our partnership with DoorDash in addition to our existing contract with Uber. This allows our existing robots to unlock an incredible amount of additional volume. A robot completing a delivery for DoorDash could do a delivery for Uber on its way back. This would actually improve utilization levels for robots. 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 famed sub sandwich chain with over 3,000 locations nationwide. 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. Concurrently, we are also developing an unparalleled map of cities, including their curbs, cuts, slopes, potholes, obstacles, and patterns—a living atlas. This becomes a valuable asset and an operational advantage. While doing that, we are also deepening our community bonds at a hyper-local level with merchants, landlords, HOAs, and precincts; we need to integrate respectfully into these neighborhoods as we grow. Now let's take a step back. Serve Robotics 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 last quarter's acquisition of YU 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 best-in-class sensors, creating these proprietary urban datasets. That, in turn, leads to better AI models, which create more efficient and more autonomous fleets. A better fleet expands our total addressable market and increases our operating domain and verticals we can serve. That creates more pull in the market for more robots. So more miles equal more robots, more data means better AI, and the cycle repeats itself. The integration of YU will accelerate this loop because it turns data into better models faster, leading to tangible gains in our delivery speed, autonomy, and market reach. Our library of long-tail edge cases is expanding faster than ever, and the latest data we gather on weather, obstacles, prey, and detours provides the learnings that are applied network-wide. So every robot learns from every robot. This AI flywheel we are building is now accelerating and, in turn, attracts exceptional talent. Our rare data scale and this real-world fleet presence are drawing in elite builders and they, in turn, ship better systems. Better systems attract even more elite builders. The talent flywheel is also compounding. All the forces 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. We launched more robots in a single month than in 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. Robot number 2,000 is planned to deploy in Miami in mid-December. But we are not going to stop there. We envision a future where Serve Robotics' fleet reaches 1,000,000 robots deployed across cities globally. They will travel billions of miles annually. They will become embedded into the core fabric of a modern city, unlocking 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, rarely noticed because it just works, but sorely missed when it's not available. We want to be the company that you will trust to run this. On the path to 1,000,000 robots, we are still early, but with 1,000 robots operating from coast to coast, we've really just crossed that chasm where both the technology and market say 'go.' From here, every additional robot, every additional hour, and every additional block makes the entire Serve Robotics ecosystem more essential and valuable to the whole network. We're 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.

Brian Read, CFO

Thank you, Ali. It's great to be with you all today. This quarter marked another step change for Serve Robotics, 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 integrated two key acquisitions that deepen our competitive moat. Acquiring YU, a pioneer in urban robot navigation using large-scale AI models, expands our physical AI capabilities by accelerating our roadmap. As we further integrate YU into our autonomy stack, we expect this to create opportunities to enhance our leadership in autonomous delivery as well as 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 Robotics' 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 Robotics flywheel is accelerated. 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, we saw branding revenue jump 120% sequentially over Q2. As 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 one-time to recurring, amounting to $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 by 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 throughout the quarter, and further, our best-in-class sidewalk autonomy is getting more and more capable. There was a consequential increase in the proportion of miles driven in autonomous mode during the last week of Q3 compared to the first week of the quarter, indicating the return on continued research and development investment. Taken together, these factors drove higher autonomous run times, leading to 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 compound; each additional robot, each additional mile, and each new market contributes data that sharpens our models and reduces human touch points across the network. On the expense side, we remain disciplined by investing in the capabilities that drive our competitive advantage. GAAP operating expenses for Q3 were $30,400,000, increasing from Q2 due to 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 $21,800,000. R&D remained our largest investment area, totaling $13,400,000 on a GAAP basis or $10,700,000 on a non-GAAP basis, primarily focused on 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 a 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 literally increasing headcount or our overhead. Our approach remains consistent: invest where we have a 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 $211,000,000 in cash and marketable securities. In October, we executed a soft sale that generated approximately $100,000,000, which will be used to fund working capital and expansion activities. CapEx for the quarter was $11,000,000 tied to robot production, market launch, and expansion infrastructure. Our strong liquidity and debt-free balance sheet remain a competitive advantage, providing us with flexibility to scale responsibly and invest opportunistically. Adjusted EBITDA was negative $24,900,000, 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 $2,500,000 in revenue for the full year 2025. Our underlying recurring fleet revenues, which exclude nonrecurring software, is projected to grow three times year over year from roughly $600,000 in 2024 to about $2,100,000 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 achieve an annualized revenue run rate of $60 to $80,000,000. We intend to provide an update on our 2026 full-year guidance early next year. Initial indications show that our expansion and operational plan position Serve Robotics to deliver roughly a 10x inflection in revenue during 2026. Q3 marked another step forward in both scale and precision, executing with discipline, expanding intelligently, and translating operational progress into tangible financial results. Each quarter, our fleet becomes more capable, our models more refined, and our economics more efficient. The foundation we've built across technology, partnerships, and operational excellence positions 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 Robotics 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.

Aduke Thelwell, Head of Communications and Investor Relations

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 email. 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 the timing and magnitude of the addition? Ali?

Ali Kashani, Co-Founder and CEO

Thank you, Aduke. Yeah, I can take this one. So good question. We aren't going to share 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 1,000,000 robots goal, we want to ensure we grow quickly but also with precision and discipline. We've been laser-focused on making the fleets really efficient and effective every day and driving utilization, while at the same time layering new partners and moving into new geographies. All of this makes that scale-up easier. So in a way, being efficient and growth kind of line up together. In that sense, it's the same type of effort it takes to get there. We are definitely going to push on growth, but we want to do it responsibly.

Aduke Thelwell, Head of Communications and Investor Relations

Alright. 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?

Ali Kashani, Co-Founder and CEO

Yeah. I'll take this one too. I think there are a few different factors here. First of all, there's a lot of progress we've made regarding the robot design. We've made it a lot more modular, easier to manufacture, with fewer custom assemblies. We've also strengthened our supply chain to get better parts and at lower prices. This both cuts down the material cost and the assembly cost. At the same time as we improve our design, we've also benefited from our scaled manufacturing, which obviously helps bring the cost down as well. While all of that is happening, the broader ecosystem of suppliers is also maturing. A really good example I’m excited about is Ouster. They have done a phenomenal job of bringing these advanced LiDAR sensors to market at scale, and they're currently shipping a record number of sensors per quarter, I think thousands. We are directly benefiting from that, and I believe a lot of folks in the autonomous space would benefit from more affordable LiDAR sensors that didn't seem feasible just a few years ago. So combining our improvements to the design, our improved supply chain, our scaled manufacturing, and the maturity of the ecosystem, the per-unit cost of the robots is definitely coming down substantially to the point that, as we've shared previously, our Gen 3 robots are a third the cost of our Gen 2 robots. We are going to keep pushing these improvements forward.

Aduke Thelwell, Head of Communications and Investor Relations

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?

Ali Kashani, Co-Founder and CEO

Yeah, we are working very closely with our partner DoorDash. First and foremost, it’s about integrating the robots into the fleet in a thoughtful way and planning the market rollouts over time. DoorDash unlocks an enormous network of restaurants and consumers for us. We have over a thousand robots right now, and soon 2,000 that can deliver for those customers. So the timing is perfect, and I expect that in the next few months we will start to grow the volume under the new channel with DoorDash. I want to emphasize that this is an important milestone for us because we've always envisioned this multiplatform app approach. Having a single robot able to alternate between the devices from each platform, from DoorDash to Uber, is crucial, and we are now proving that we can do it. This kind of interoperability increases our utilization, which in turn lowers the cost per daily rate, benefiting all of our partners as well.

Aduke Thelwell, Head of Communications and Investor Relations

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

Brian Read, CFO

Yeah, good question. The simple answer to start here is, we're very early in this integration process to dive into those results exactly, and this type of integration can take months. However, we are doing the call here today from YU's office, and the excitement from the teams to hit the ground running as soon as the merger was completed was tremendous. There’s just a lot of excitement on both sides to delve deeper into that roadmap and bring those new capabilities into the fleet. We think about it as part of a flywheel. Over time, that integration will allow our robots to be faster and smarter while maintaining the safety and reliability that we focus on daily. That, in turn, drives efficiency and utilization, ultimately improving the unit economics and overall benefit from these acquisitions.

Aduke Thelwell, Head of Communications and Investor Relations

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?

Ali Kashani, Co-Founder and CEO

Certainly. Each city has its own distinct personality. They differ in ways that are actually very helpful for us, and it's honestly fun for our team as we expand. For example, learning about humidity and different types of pedestrian intersections in cities like Atlanta and Miami compared to Los Angeles has provided great insights. Each city has different sidewalk widths and unique nuances that affect the best traversing routes. Our new market in Chicago is a great place for gathering data on densely populated urban environments with cold weather, where we must consider battery efficiency, snow detection, and traction. A lot of things we tried to test in advance are being validated in real life, and we are learning a lot from that. What's powerful is that as we enter these new cities, it enriches our models, and the data generated in these new environments helps improve the overall platform. This means that every subsequent city launch, as I mentioned earlier, becomes more reliable and better. We saw this in Chicago; it was our fastest market to reach our service level agreements that were comparable to our more mature markets. This proves that our playbook is working well, and the robots are getting smarter.

Brian Read, CFO

Just to finish that from a financial standpoint, we're using these learnings to translate them directly into efficiency through our operations teams. We're observing shorter payback periods with the expansion as well as higher utilization as we deploy into new markets and neighborhoods to facilitate continued expansion. We've been talking internally about being sharper with our scale, and we believe these technology improvements will compound, showing up in our financial results. That is what's positioning us to expand in a disciplined, capital-efficient way in 2026.

Aduke Thelwell, Head of Communications and Investor Relations

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?

Ali Kashani, Co-Founder and CEO

This is a good question. The revenue pipeline for these other opportunities, like the delivery platform and the software powering the robots, as well as the data generated by the robots, is strong. We are having substantial discussions with multiple partners who want to use the platform or the data we're creating. We are being smart and selective regarding who we engage with, applying filters to pick the right partners. The amount of inbound interest we’re receiving reinforces that what we have is quite differentiated. I'm hoping that as we move some of these conversations forward, we'll have more updates to share about those relationships soon.

Brian Read, CFO

If I could wrap a financial aspect into this question, as the fleet scales, these data and AI insights will become more valuable for all the partners that Ali just mentioned. This will enable our team to look at opportunities for adding more recurring software as we move through '26, focusing on a robotics and autonomy as a service offering. This is a long-term vision. Our balanced model focuses on diversifying revenue, with fleet revenue as a foundation and software and data as a high-margin accelerant as we enter 2026.

Aduke Thelwell, Head of Communications and Investor Relations

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

Brian Read, CFO

Yeah. Let me give a little more color on that. I did mention the outlook for 2026, so I'll point everybody back to that commentary. The path to hitting $60 to $80 million is underway, right? This is a final step when we consider the ambitions we laid out a few years ago regarding delivering 2,000 robots. The $60 to $80 million number is the endpoint; however, along the way, we've exceeded many expectations as we near the end of 2025. That’s testament to the team and how we've delivered. To summarize what we've discussed on a lot of the earnings calls, we are on track to deliver 2,000 robots, expand into multiple markets with more to come, and establish new partnerships while adding top-of-the-funnel orders into our pipeline. Last but not least, we also have acquisitions contributing to this growth. Across all these verticals, we are firing and exceeding what we set out to achieve in 2025. I'd like to remind investors and anyone wanting to understand our story that while this is all great, we are critically maintaining safety and reliability throughout our network as we build. The final challenge, as Ali likes to say, is to achieve that financial milestone while continuing to improve utilization across the fleet. We have momentum through 2025 and accelerating into 2026 to approach that $60 million run rate target. Be clear, I think we’re still more than twelve months out, and we will certainly have more to say on this in the next call, early next year.

Aduke Thelwell, Head of Communications and Investor Relations

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.

Operator, Operator

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