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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-40326
TuSimple Holdings Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware86-2341575
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
9191 Towne Centre Drive, Suite 600
San Diego, CA
92122
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (619) 916-3144
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading
Symbol(s)
 Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share  TSP
 
 
The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated filero
 
Non-accelerated filerxSmaller reporting companyo
    
Emerging growth companyx  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of April 30, 2022, the number of shares of the registrant’s Class A common stock outstanding was 199,424,858 and the number of shares of the registrant’s Class B common stock outstanding was 24,000,000.



Table of Contents
  Page
 
 
 
 
 
 
 
 
 
 
i


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would,” or the negative version of these words and similar expressions are intended to identify forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
our future performance, including our revenue, cost of revenue, and operating expenses;
the sufficiency of our cash and cash equivalents to meet our operating requirements;
our ability to scale our Autonomous Freight Network, which we refer to as our AFN;
our ability to attract new users to services provided on our AFN;
our ability to increase reservations for our purpose-built L4 autonomous semi-trucks;
our ability to convert reservations for our purpose-built L4 autonomous semi-trucks into purchases;
our ability to fulfill all reservations for our purpose-built L4 autonomous semi-trucks according to each customer’s delivery schedule;
our ability to effectively manage our growth and future expenses;
the estimated timing for when additional routes will be available;
our ability to compete in a market that is rapidly evolving and subject to technological developments;
our estimated total addressable market, the market for autonomous truck and freight transport solutions, and our market position;
our ability to successfully collaborate with business partners;
our ability to obtain, maintain, protect, and enforce our intellectual property;
our ability to comply with modified or new laws and regulations applicable to our business or industry;
our ability to attract and retain employees with the technical skills we require and other key personnel;
our ability to achieve our driver-out milestones on the timeline expected;
our anticipated investments in research and development and sales and marketing, and the effect of these investments on our results of operations;
the increased expenses associated with being a public company; and
the potential impact of the COVID-19 pandemic, inflation, wars and other hostilities on our, and our partners’, business and results of operations, and on the global supply chain and economy generally.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
ii


Except as required by applicable law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by applicable law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
iii


PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
TuSimple Holdings Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)
December 31,
2021
March 31,
2022
ASSETS  
Current assets:  
Cash and cash equivalents$1,337,586 $1,237,246 
Accounts receivable, net1,599 1,790 
Prepaid expenses and other current assets13,995 16,152 
Total current assets1,353,180 1,255,188 
Property and equipment, net36,053 30,728 
Operating lease right-of-use assets 41,314 
Other assets7,090 7,874 
Total assets$1,396,323 $1,335,104 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$4,544 $3,433 
Amounts due to joint development partners7,394 7,848 
Accrued expenses and other current liabilities41,698 24,640 
Short-term debt1,524 1,524 
Capital lease liabilities, current766  
Operating lease liabilities, current 4,741 
Total current liabilities55,926 42,186 
Capital lease liabilities, noncurrent2,872  
Operating lease liabilities, noncurrent 38,268 
Long-term debt5,543 5,166 
Other liabilities5,004 4,308 
Total liabilities69,345 89,928 
Commitments and contingencies (Note 4)
Stockholders' equity:
Preferred stock, $0.0001 par value; 100,000,000 shares authorized as of
December 31, 2021 and March 31, 2022; zero shares issued and
outstanding as of December 31, 2021 and March 31, 2022
  
Common stock, $0.0001 par value; 4,876,000,000 Class A shares
 authorized as of December 31, 2021 and March 31, 2022; 197,833,195 and
 198,992,409 Class A shares issued and outstanding as of December 31, 2021 and
 March 31, 2022, respectively; 24,000,000 Class B shares authorized as of
 December 31, 2021 and March 31, 2022; 24,000,000 Class B shares issued
 and outstanding as of December 31, 2021 and March 31, 2022
22 22 
Additional paid-in-capital2,464,730 2,494,441 
Accumulated other comprehensive loss77 276 
Accumulated deficit(1,137,851)(1,249,563)
Total stockholders’ equity1,326,978 1,245,176 
Total liabilities and stockholders’ equity$1,396,323 $1,335,104 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1


TuSimple Holdings Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)
 Three Months Ended March 31,
 20212022
Revenue$944 $2,264 
Cost of revenue2,246 4,089 
Gross loss(1,302)(1,825)
Operating expenses:
Research and development41,434 78,158 
Selling, general and administrative15,902 32,215 
Total operating expenses
57,336 110,373 
Loss from operations(58,638)(112,198)
Change in fair value of warrants liability(326,900) 
Other income, net378 295 
Loss before provision for income taxes(385,160)(111,903)
Provision for income taxes  
Net loss(385,160)(111,903)
Accretion of redeemable convertible preferred stock(4,135) 
Net loss attributable to common stockholders$(389,295)$(111,903)
Net loss per share attributable to common stockholders, basic and diluted
$(6.43)$(0.50)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
60,576,886 222,526,454 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2


TuSimple Holdings Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
Three Months Ended March 31,
2021 2022
Net loss$(385,160)$(111,903)
Other comprehensive income:
Foreign currency translation adjustment911 199
Comprehensive loss$(384,249)$(111,704)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3


TuSimple Holdings Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands, except share amounts)
(unaudited)
 
Redeemable Convertible
Preferred Stock
  Common Stock
 SharesAmount  SharesAmount
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
 
Accumulated
Deficit
 
Total
Stockholders’
Deficit
Balance as of December 31, 2020
102,074,703 $664,791 60,543,337 $6 $ $(301)$(405,178)$(405,473)
Issuance of Series E redeemable convertible preferred stock, net of issuance costs4,650,999 61,631 — — — — — — 
Issuance of Series E redeemable convertible preferred stock from the exercise of warrants9,477,073 379,084 — — — — — — 
Issuance of Series E-2 redeemable convertible preferred stock from the exercise of warrants4,331,644 173,275 — — — — — — 
Issuance of common stock from exercise of options— — 60,616 — 1 — — 1 
Vesting of early exercised stock options— — — — 21 — — 21 
Accretion of redeemable convertible preferred stock to redemption value— 4,135 — — (4,135)— — (4,135)
Stock-based compensation— — — — 6,289 — — 6,289 
Foreign currency translation adjustment— — — — — 911 — 911 
Net loss— — — — — — (385,160)(385,160)
Balance as of March 31, 2021120,534,419 $1,282,916 60,603,953 $6 $2,176 $610 $(790,338)$(787,546)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4


TuSimple Holdings Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands, except share amounts)
(unaudited)
  Common Stock       
  SharesAmountAdditional Paid-in Capital  Accumulated Other Comprehensive Income (Loss)  Accumulated Deficit  Total Stockholders’ Equity (Deficit)
Balance as of December 31, 2021
221,833,195 $22 $2,464,730 $77 $(1,137,851)$1,326,978 
Adjustments for prior periods from adopting ASC 842— — — — 191 191 
Issuance of common stock from exercise of options534,019 — 871 — — 871 
Issuance of common stock from release of RSUs and SVAs537,980 — — — — — 
Issuance of common stock under the Employee Stock Purchase Plan87,215 — 1,292 — — 1,292 
Vesting of early exercised stock options— 21 — — 21 
Stock-based compensation— 27,527 — — 27,527 
Foreign currency translation adjustment— — 199 — 199 
Net loss— — — (111,903)(111,903)
Balance as of March 31, 2022
222,992,409 $22 $2,494,441 $276 $(1,249,563)$1,245,176 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5


TuSimple Holdings Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 Three Months Ended March 31,
 20212022
Cash flows from operating activities:  
Net loss$(385,160)$(111,903)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation6,289 27,527 
Depreciation and amortization2,110 2,735 
Change in fair value of warrants liability326,900  
Other adjustments (8)
Changes in operating assets and liabilities:
Accounts receivable(285)(202)
Prepaid expenses and other current assets(3,360)(422)
Operating lease right-of-use assets 1,222 
Other assets(152)(758)
Accounts payable9,237 227 
Amounts due to/from related parties4,558  
Amounts due to joint development partners 454 
Accrued expenses and other current liabilities(8,217)(18,286)
Operating lease liabilities (1,642)
Other liabilities1,347 426 
Net cash used in operating activities(46,733)(100,630)
Cash flows from investing activities:
Purchases of property and equipment(1,210)(1,356)
Purchases of intangible assets(87)(40)
Proceeds from disposal of property and equipment100 19 
Net cash used in investing activities(1,197)(1,377)
Cash flows from financing activities:
Proceeds from issuance of redeemable convertible preferred stock, net of offering costs61,631  
Proceeds from the issuance of common stock under the Employee Stock Purchase Plan 1,292 
Proceeds from exercise of warrants for redeemable convertible preferred stock183,007  
Proceeds from early exercised stock options253 871 
Principal payments on related party loan(613) 
Principal payments on capital lease obligations(191) 
Principal payments on finance lease obligations (293)
Principal payments on loans(117)(358)
Net cash provided by financing activities243,970 1,512 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash1,100 155 
Net change in cash, cash equivalents, and restricted cash197,140 (100,340)
Cash, cash equivalents, and restricted cash - beginning of period312,351 1,339,092 
Cash, cash equivalents, and restricted cash - end of period$509,491 $1,238,752 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6


TuSimple Holdings Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 Three Months Ended March 31,
 20212022
Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets:
Cash and cash equivalents$508,706 $1,237,246 
Restricted cash included in prepaid expenses and other current assets785 1,506 
Total cash and cash equivalents, and restricted cash$509,491 $1,238,752 
Supplemental disclosure of cash flow information:
Cash paid for interest$195 $281 
Supplemental schedule of non-cash investing and financing activities:
Acquisitions of property and equipment included in current liabilities$1,939 $1,038 
Accretion of redeemable convertible preferred stock$4,135 $ 
Vesting of early exercised stock options$21 $21 
Exercise of liability-classified warrants$369,352 $ 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7


TuSimple Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1. Description of Business and Summary of Significant Accounting Policies
Description of Business
TuSimple Holdings Inc. (“TuSimple” or the “Company”) is principally engaged in the operation and development of autonomous trucks and an autonomous freight network (“AFN”). The Company is headquartered in San Diego, California..
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements (“Financial Statements”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. These Financial Statements should be read in conjunction with the audited consolidated financial statements and notes as of and for the year ended December 31, 2021, included in the Company's Annual Report on Form 10-K.
The condensed consolidated balance sheet as of December 31, 2021, was derived from the audited consolidated financial statements as of that date, but does not include all disclosures required by GAAP. In management’s opinion, the accompanying Financial Statements reflect all normal recurring adjustments necessary for their fair presentation. Other than described below, there have been no changes to the Company’s significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2021 that have had a material impact on the Company’s Financial Statements.
Leases
The Company accounts for leases in accordance with Accounting Standards Codification ("ASC") 842, Leases ("ASC 842"), which requires lessees to recognize on-balance sheet and disclose key information about leasing arrangements. The Company adopted ASC 842 along with all applicable ASU clarifications and improvements on January 1, 2022 using the modified retrospective transition method and used the effective date as the date of initial application. Consequently, financial information is not updated and disclosures required under ASC 842 are not provided for periods before January 1, 2022. ASC 842 provides a number of optional practical expedients in transition. The Company elected the "package of practical expedients," which permits the Company not to reassess under ASC 842 its prior conclusions about lease identification, lease classification and initial direct costs.
The Company determines if a contract contains a lease based on whether it has the right to obtain substantially all of the economic benefits from the use of an identified asset and whether it has the right to direct the use of an identified asset in exchange for consideration, which relates to an asset which the Company does not own. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are recognized as the lease liability, adjusted for lease incentives received. Lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing rate (“IBR”), because the interest rate implicit in most of the Company’s leases is not readily determinable. Lease payments may be fixed or variable, however, only fixed payments or in-substance fixed payments are included in the Company’s lease liability calculation. Variable lease payments are recognized in operating expenses in the period in which the obligation for those payments are incurred.
The Company has lease agreements with lease and non-lease components and has elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component. Additionally, the Company has determined that certain leases previously identified as build-to-suit leasing arrangements under legacy accounting (ASC 840), were derecognized pursuant to the transition guidance provided for build-to-suit leases in ASC 842. Accordingly, these leases have been reassessed as operating leases as of the adoption date under ASC 842, and are included on the condensed consolidated balance sheet as of March 31, 2022.
The Company has leases that include one or more options to extend the lease term for up to five years and some of its leases include options to terminate the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.
Operating leases are included within operating lease ROU assets, operating lease liabilities, current, and operating lease liabilities, noncurrent on the Company's condensed consolidated balance sheet as of March 31, 2022. Finance leases are included in property and equipment, net, accrued expenses and other current liabilities, and other liabilities on the Company's condensed consolidated balance sheets as of March 31, 2022.
8


The Company has elected not to present short-term leases on the consolidated balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that the Company is reasonably certain to exercise.
Adoption of the new lease standard on January 1, 2022 impacted the interim unaudited condensed consolidated financial statements as follows: (i) recognition of ROU assets of $32.9 million and lease liabilities of $35.1 million for operating leases, (ii) derecognition of build-to-suit lease assets and liabilities of $6.5 million and $4.4 million, respectively, with the net impact of $0.2 million recorded to accumulated deficit as of January 1, 2022, and (iii) reclassification of deferred rent and other liability balances of $2.5 million relating to its existing lease arrangements into the ROU asset balance as of January 1, 2022. The standard did not materially impact the condensed consolidated statement of operations and condensed consolidated statement of cash flows.
Reclassifications
Certain prior period balances have been reclassified to conform to the current period presentation in the condensed consolidated financial statements and the accompanying notes. Restricted cash has been reclassified to prepaid expenses, other current assets and accrued expenses incurred under joint development agreements have been reclassified to be presented separately from amounts due to related parties, and sales and marketing expense have been reclassified to selling, general and administrative expense.
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases, to require lessees to recognize all leases, with limited exceptions, on the balance sheet, while recognition on the statement of operations will remain similar to legacy lease accounting, ASC 840. Subsequently, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, ASU No. 2018-11, Targeted Improvements, ASU No. 2018-20, Narrow-Scope Improvements for Lessors, and ASU 2019-01, Codification Improvements, to clarify and amend the guidance in ASU No. 2016-02. As disclosed above, the Company adopted the ASUs on January 1, 2022 on a modified retrospective basis.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, as amended by subsequently issued ASUs 2018-19, 2019-04, 2019-05, 2019-10 2019-11 and 2020-02 and 2020-03 (collectively, “Topic 326”), which requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in more timely recognition of credit losses. This guidance also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. For the Company, the new standard is effective for annual reporting periods beginning after December 15, 2022, including interim periods within those annual periods. Early adoption is permitted. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.
In October 2020, the FASB issue ASU No. 2020-10, Codification Improvements, which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC’s regulations. For the Company, the new standard will be effective for annual reporting periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.
Note 2. Fair Value Measurements
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation (in thousands):
 As of December 31, 2021
 TotalLevel 1Level 2Level 3
Assets:    
Cash equivalents:    
Money market funds$1,077,550 $1,077,550 $ $ 
Total$1,077,550 $1,077,550 $ $ 
9


 As of March 31, 2022
 TotalLevel 1Level 2Level 3
Assets:    
Cash equivalents:    
Money market funds$999,132 $999,132 $ $ 
Total$999,132 $999,132 $ $ 
Warrants Liability
In February and March 2021, TRATON Group (“TRATON”) and its subsidiary Navistar, Inc. (“Navistar”) exercised warrants to purchase 4,331,644 and 9,477,073 shares of Series E-2 and Series E redeemable convertible preferred stock at an exercise price of $11.31 and $14.14, resulting in proceeds of $49.0 million and $134.0 million, respectively. Immediately prior to their exercise, the fair value of the then existing warrants liability was remeasured using the Black-Scholes option-pricing model, resulting in a loss upon remeasurement of $326.9 million. The warrants exercised by TRATON represented only a portion of their total and the unexercised warrants expired as of the exercise date. As of March 31, 2022, there were no warrants outstanding.
The Company used the following assumptions in the model:
 As of
 
February 26,
2021
March 19,
2021
Fair value of underlying securities$40.00$40.00
Expected volatility62.95%60.85%
Expected term (in years)1.760.79
Risk-free interest rate0.14%0.08%
Note 3. Balance Sheet Components
Property and Equipment, Net
Property and equipment, net as of December 31, 2021 and March 31, 2022, was as follows (in thousands):
 As of
 December 31,
2021
March 31,
2022
Electronic equipment$12,761 $13,661 
Office and other equipment9,423 9,959 
Vehicles21,043 18,701 
Leasehold improvements11,984 10,245 
Buildings 1,841 
Construction in progress5,258 570 
Property and equipment, gross60,469 54,977 
Accumulated depreciation and amortization(24,416)(24,249)
Property and equipment, net$36,053 $30,728 
Depreciation and amortization expense was $2.1 million and $2.7 million for the three months ended March 31, 2021 and 2022, respectively.
As of December 31, 2021, property and equipment financed under capital leases was $3.3 million, net of accumulated amortization of $2.5 million. As of March 31, 2022, property and equipment under finance leases was $4.8 million, net of accumulated depreciation of $0.4 million.
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Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities as of December 31, 2021 and March 31, 2022 were as follows (in thousands):
 As of
 December 31,
2021
March 31,
2022
Accrued payroll$33,225 $13,161 
Accrued professional fees1,938 5,633 
Finance lease liabilities, current 1,041 
Other6,535 4,805 
Accrued expenses and other current liabilities$41,698 $24,640 
Leases
The balances for the operating and finance leases where the Company is the lessee are presented within the consolidated balance sheets follows (in thousands):
As of March 31, 2022
Operating leases:
Operating lease right-of-use assets$41,314 
Operating lease liabilities, current$4,741 
Operating lease liabilities, noncurrent38,268 
Total operating lease liabilities$43,009 
Finance leases:
Property and equipment, at cost$5,134 
Accumulated depreciation(363)
Property and equipment, net$4,771 
Accrued expenses and other current liabilities$1,041 
Other liabilities3,906 
Total finance lease obligations$4,947 
The components of lease expense were as follows (in thousands):
Three Months Ended March 31, 2022
Operating lease expense:
Operating lease expense (1)
$2,005 
Finance lease expense:
Amortization of leased assets$363 
Interest on lease liabilities153 
Total finance lease expense$516 
Total lease expense$2,521 
(1)     Includes short-term leases and variable lease costs, which are immaterial.
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Other information related to leases where the Company is the lessee is as follows:
As of March 31, 2022
Weighted-average remaining lease term:
Operating leases9.4 years
Finance leases3.5 years
Weighted-average discount rate:
Operating leases4.4 %
Finance leases12.7 %
Supplemental cash flow information related to leases where the Company is the lessee is as follows (in thousands):
Three Months Ended March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$2,045 
Operating cash flows from finance leases (interest payments)$149 
Financing cash flows from finance leases$293 
Right-of-use assets obtained in exchange for lease obligations:
Operating lease liabilities$44,549 
Finance lease liabilities$5,240 
As of March 31, 2022, the maturities of the Company's operating and financing lease liabilities (excluding short-term leases) are as follows (in thousands):
Operating Leases
Finance Leases
Remainder of 2022$4,363 $1,221 
20236,666 1,401 
20246,112 1,398 
20255,870 2,200 
20266,013 106 
Thereafter24,053  
Total minimum lease payments53,077 6,326 
Less: imputed interest(10,068)(1,379)
Present value of minimum lease payments43,009 4,947 
Less: current portion(4,741)(1,041)
Lease obligations, noncurrent$38,268 $3,906 
As of March 31, 2022, the Company has additional leases for facilities that have not yet commenced with lease obligations of $7.4 million. These leases will commence between 2022 and 2023 with lease terms of four to five years. This table does not include lease payments related to these leases.
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Supplemental Information for Comparative Periods
Prior to the adoption of ASC 842, future minimum lease payments for non-cancelable operating and capital leases as of December 31, 2021 were as follows (in thousands):
Operating LeasesCapital Leases
2022$7,660 $1,253 
20237,891 978 
20245,126 963 
20253,435 1,761 
20263,049  
Thereafter
22,524  
Total minimum lease payments
$49,685 4,955 
Amount representing interest
(1,317)
Present value of minimum lease payments
$3,638 
            
Note 4. Commitments and Contingencies
Joint Development Agreements
In April 2020, the Company entered into a Development Agreement (“DA”) with TRATON's Scania brand relating to a hub-to-hub pilot program using Scania vehicles and the Company’s autonomous technology in northern Europe. Under the DA, each party will fund its own costs related to the program. There are no reimbursements paid between the parties and there are no spending floors included within the DA. Upon successful completion of the development activities, the parties intend to set up a long-term cooperation agreement covering development, maintenance, operation, and sales of self-driving systems on a global scale. The terms and conditions of such arrangement will be negotiated by the parties and included in a separate agreement.
In July 2020, the Company entered into a Joint Development Agreement (“JDA”) with Navistar, Inc., under which the parties work collaboratively to develop purpose-built L4 autonomous semi-trucks for the North American market. Under the JDA, the parties grant each other rights to their background intellectual property to permit them to conduct research and development activities. Pursuant to the JDA, the Company agreed to reimburse Navistar up to $10.0 million for research and development expenses incurred. Payment of reimbursements is deferred to align with the achievement of certain milestones and reimbursements due are recorded within accrued expenses in the Company’s condensed consolidated balance sheets. All reimbursements are expected to be paid within 12 months of the Company incurring the obligation. Upon successful completion of the development activities under the JDA, the parties will enter into good faith negotiations for a production license agreement. Products developed will be jointly commercialized by the parties. As of March 31, 2022, expenses incurred to-date by Navistar for reimbursement under the JDA are $10.0 million.
Litigation and Legal Proceedings
The Company is not currently a party to any pending material litigation or other legal proceeding or claims.
Note 5. Stock-Based Compensation
2017 Share Plan
In April 2017, the Company adopted the 2017 Share Plan (the "2017 Plan") under which employees, directors, and consultants could be granted various forms of equity incentive compensation at the discretion of the board of directors, including stock options, restricted shares, RSUs, and SVAs.
Stock options granted under the 2017 Plan have a contractual term of ten years and have varying vesting terms, but generally vest over a requisite service period of four years. The exercise price of the stock options granted may not be less than the par value of the common stock on the grant date for non-U.S. tax residents and may not be less than the fair market value of the common stock on the grant date for U.S. tax residents.
In March 2021, the Company’s board of directors approved an amendment to the 2017 Plan to increase the number of shares of common stock reserved for issuance by 2,300,000 shares, for a total of 24,267,694 shares reserved.
The 2017 Plan was terminated in connection with the Company’s IPO in April 2021, and the Company will not grant any additional awards under the 2017 Plan. However, the 2017 Plan will continue to govern the terms and conditions of the outstanding awards previously granted under the 2017 Plan.
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2021 Equity Incentive Plan
In March 2021, the board of directors adopted the 2021 Equity Incentive Plan (the "2021 Plan"), which became effective upon its approval by the board of directors, but for which no awards were eligible to be granted prior to the Company’s IPO in April 2021. The 2021 Plan provides for the grant of stock options, stock appreciation rights (“SARs”), restricted stock, and RSUs to the Company’s employees, directors, and consultants. The number of shares of the Company’s Class A common stock reserved for issuance under the 2021 Plan is 20,134,146 plus up to 19,892,067 shares of Class A common stock subject to awards under the Company’s 2017 Plan. In the event that the aggregate number of shares of Class A common stock that are available for issuance under the 2021 Plan as of the last day of a fiscal year is less than 5% of the Company's fully-diluted capitalization, then for the duration of the 2021 Plan, on the first day of each fiscal year of the Company thereafter, the number of shares of Class A common stock available for issuance under the 2021 Plan will automatically increase by either (i) 2.5% of the Company’s fully-diluted capitalization as of the last day of the immediately preceding fiscal year or (ii) such other amount as determined by the board of directors.
2021 Employee Stock Purchase Plan
In March 2021, the board of directors adopted the 2021 Employee Stock Purchase Plan (the "2021 ESPP"), which became effective upon the Company's IPO in April 2021. The 2021 ESPP authorizes the issuance of shares of Class A common stock pursuant to purchase rights granted to employees. A total of 2,013,414 shares of the Company's Class A common stock have been reserved for future issuance under the 2021 ESPP, subject to annual increases authorized by the board of directors; however, the aggregate number of shares of Class A common stock that may be approved for issuance under the 2021 ESPP in any given fiscal year may not exceed 1% of the total number of shares of common stock issued and outstanding on the last business day of the prior fiscal year.
The stock-based compensation expense recognized for the 2021 ESPP was $0.4 million during the three months ended March 31, 2022. During the three months ended March 31, 2021, no shares were purchased under the 2021 ESPP. During the three months ended March 31, 2022, 87,215 shares were purchased under the 2021 ESPP at a weighted-average price of $14.81 per share resulting in cash proceeds of $1.3 million.
As of March 31, 2022, unrecognized stock-based compensation expense related to the 2021 ESPP was $0.9 million, which is expected to be recognized over a weighted-average period of 0.4 years.
The estimated grant-date fair value of the ESPP purchase rights was calculated using the Black-Scholes option-pricing model, based on the following assumptions:
Three Months Ended March 31, 2022
Risk-free interest rate0.60%
Expected volatility78.38%
Expected term (in years)0.50
Fair value of common stock$17.00

Stock Options
A summary of the stock option activity, including the CEO Performance Award, for the three months ended March 31, 2022 is as follows (in thousands, except share amounts, per share amounts, and years):
 
Options
Outstanding
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Life (Years)
Aggregate
Intrinsic
Value
Outstanding at December 31, 2021
7,684,778$12.91 9.04$188,722 
Exercised(534,019)$1.63 
Cancelled/Forfeited(1,642,827)$19.33 
Outstanding at March 31, 2022
5,507,932$12.09 6.77$30,556 
 Vested and exercisable at March 31, 2022
2,061,512$5.68 7.00$15,548 
As of March 31, 2022, there was $24.0 million of unrecognized stock-based compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average service period of 2.76 years.
14


The estimated grant-date fair value of the Company’s stock-based option awards was calculated using the Black-Scholes option-pricing model, based on the following assumptions:
Three Months Ended March 31,
20212022
Risk-free interest rate
0.33% - 1.04%
Expected volatility50.00%
Expected term (in years)
4.05 - 6.22
CEO Performance Award
In March 2021, included in the stock options discussed above, the Company granted 1,150,000 stock option awards to its now former CEO with an exercise price of $14.14 per share and a contractual life of ten years that vest upon the attainment of both operational milestones (performance conditions) and market conditions, assuming continued employment as CEO through the vesting date (the “CEO Performance Award”). In March 2022, the Company underwent a change in CEO and the CEO Performance Awards were cancelled in connection with the separation of the former CEO. As a result, the Company reversed the historical stock-based compensation expense attributable to the CEO Performance Awards of $7.1 million.
In connection with the separation of the former CEO, a total of 1,850,000 stock options were modified, of which 440,000 were vested as of the modification date. The terms of the modification allow for continued vesting of the unvested stock options for the twelve-month period following the separation date ("transition period"), subject to the provision of advisory services throughout the transition period. Upon the completion of such continuous services, all stock options subject to vesting shall become vested and exercisable. Each of the modified stock options, including those vested and outstanding as of the modification date, shall remain outstanding and exercisable until the earlier of: (x) the date on which any of the Company's outstanding stock options are terminated in connection with a corporate transaction, (y) the original expiration date applicable to such stock options, and (z) the second anniversary of the date on which the transition services with the Company are terminated. The Company determined the continuous service provisions were in-substance an acceleration of the unvested awards and the incremental cost related to the modified options was recorded immediately upon the separation date. Additionally, 175,000 outstanding and unvested RSUs had their vesting accelerated in full as of the separation date. As a result of these modifications, the Company recorded incremental stock compensation expense of $13.9 million during the three months ended March 31, 2022.
RSUs
The following table summarizes the activity related to RSUs for the three months ended March 31, 2022:
 
RSUs
Outstanding
Weighted-Average
Grant Date Fair
Value per Share
Unvested and outstanding at December 31, 2021
5,949,798 $46.54 
Granted142,183 $22.26 
Vested(627,927)$41.18 
Cancelled(685,941)$49.98 
Unvested and outstanding at March 31, 2022
4,778,113 $46.03 
Vested and outstanding at March 31, 2022
190,028 $16.15 
SVAs
The following table summarizes the activity related to SVAs for the three months ended March 31, 2022:
 
SVAs
Outstanding
Weighted-Average
Grant Date Fair
Value per Share
Unvested and outstanding at December 31, 2021
315,559 $5.29 
Vested(84,478)$3.26 
Cancelled(8,384)$2.97 
Unvested and outstanding at March 31, 2022
222,697 $6.15 
Vested and outstanding at March 31, 2022
 $ 
15


As of March 31, 2022, there was $193.1 million of unrecognized stock-based compensation expense related to RSUs and SVAs, which is expected to be recognized over a weighted-average service period of 2.93 years.
Early Exercise of Common Stock Options
The Company’s board of directors authorized certain stock option holders to exercise unvested options to purchase shares of Class A common stock. Shares of Class A common stock issued upon early exercises of unvested options are not deemed, for accounting purposes, to be issued until those shares vest according to their respective vesting schedules and accordingly, the consideration received for early exercises is initially recorded as a liability and reclassified to common stock and additional paid-in capital as the underlying awards vest. Stock options that are early exercised are subject to repurchase in the event of the optionee’s termination of service, at the original issuance price, until the options are fully vested. As of March 31, 2022, 35,000 shares of Class A common stock were subject to repurchase at a weighted-average price of $4.20 per share. The cash proceeds received for unvested shares of common stock recorded within accrued expenses and other current liabilities in the condensed consolidated balance sheets were $0.1 million as of March 31, 2022.
Stock-based Compensation Expense
Total stock-based compensation expense was as follows (in thousands):
Three Months Ended March 31,
20212022
Research and development$1,669 $17,464 
Selling, general and administrative4,620 10,063 
Total stock-based compensation expense$6,289 $27,527 
Note 6. Income Taxes
The Company’s effective tax rate was 0% for the three months ended March 31, 2022, which is lower than the U.S. federal rate of 21% and was primarily due to valuation allowances recorded on current year losses. As of March 31, 2022, the Company continues to maintain a full valuation allowance against its U.S. and foreign net deferred tax assets due to significant negative evidence, including cumulative losses in the most recent three-year period and the Company’s assessment that it is not more likely than not that the net deferred tax assets will be realized.
Note 7. Net Loss Per Share Attributable to Common Stockholders
Basic net loss per share of common stock attributable to common stockholders is calculated by dividing net loss attributable to common stockholders by the weighted-average shares of common stock outstanding for the period. Diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders for all years presented because the effects of potentially dilutive items were antidilutive given the Company’s net loss in each period presented.
The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share amounts):
Three Months Ended March 31,
20212022
Numerator:  
Net loss$(385,160)$(111,903)
Less: Accretion of redeemable convertible preferred stock(4,135) 
Net loss attributable to common stockholders, basic and diluted$(389,295)$(111,903)
Denominator:
Weighted-average shares used in computing net loss per share, basic and diluted60,576,886 222,526,454 
Net loss per share:
Net loss per share attributable to common stockholders, basic and diluted$(6.43)$(0.50)
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The following potentially dilutive outstanding shares were excluded from the computation of diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect, or because issuance of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the period:
As of March 31,
20212022
Redeemable convertible preferred stock120,534,419  
Options to purchase common stock14,161,313 5,507,932 
RSUs subject to future vesting1,160,360 4,778,113 
SVAs subject to future vesting3,590,126 222,697 
Early exercised options subject to future vesting*55,000 35,000 
Common stock contingently issuable under ESPP 26,421 
Total139,501,218 10,570,163 
*Refer to Note 5. Stock-Based Compensation for further detail.
17


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the accompanying notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. You should review the section titled “Special Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and the section titled “Risk Factors” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Quarterly Report on Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Overview
When used in this report, the terms “TuSimple”, “Company”, “we”, “us”, and “our” mean TuSimple Holdings Inc. and all subsidiaries.
We are an autonomous technology company that is revolutionizing the estimated $4 trillion global truck freight market. We have developed industry-leading autonomous technology specifically designed for semi-trucks, which has enabled us to build the world’s first Autonomous Freight Network (“AFN”) in partnership with world-class shippers, carriers, railroads, freight brokers, fleet asset owners, and truck hardware partners. We believe that our technology and our AFN will make long haul trucking significantly safer as well as more reliable, efficient, and environmentally friendly, creating significant benefits for all who rely on the freight ecosystem to deliver essential goods.
Our AFN provides autonomous freight capacity as a service through multiple service models based on users’ needs. We believe that allowing our users the flexibility to select different service models is critical to providing a superior customer experience and will help drive rapid adoption of our network.
Carrier-Owned Capacity. Shippers, carriers, and railroads that prefer to own their fleet will be able to purchase our purpose-built L4 autonomous semi-truck from a semi-truck original equipment manufacturer (“OEM”) partner and subscribe to TuSimple Path—a comprehensive turnkey product to enable autonomous operations across our network. TuSimple Path includes features such as our on-board autonomous driving software, TuSimple Connect cloud-based autonomous operations oversight system, HD digital route mapping support, and emergency roadside assistance. Users will pay TuSimple a per mile, usage-based fee for access to TuSimple Path and benefit from lower overall freight costs with an expected payback period of less than one year on their upfront incremental capital investment to purchase our purpose-built L4 autonomous semi-trucks.
TuSimple Capacity. Our fleet of purpose-built L4 autonomous semi-trucks, financed through third party fleet asset owners, will serve users that desire access to safe, reliable, low cost, and more environmentally friendly freight transportation without owning semi-truck assets. Users of TuSimple Capacity can range from relatively smaller users of freight logistics to large shippers, carriers, and railroads seeking to supplement their own captive fleet for incremental freight capacity. We will charge users of TuSimple Capacity a per mile rate to ship freight, which we expect will be at a meaningful discount to prevailing market freight rates. We believe that our competitive advantage in terms of pricing will be enabled by our anticipated cost structure, which is expected to be significantly lower than that of human-operated semi-trucks. Users are expected to benefit directly from lower shipping costs compared to conventional truck freight.
We are also working in partnership with a leading semi-truck Original Equipment Manufacturer ("OEM"), TRATON Group ("TRATON"), specifically with its Navistar and Scania semi-truck brands, as well as components partners to build a purpose-built L4 autonomous semi-truck to be operated exclusively on our network. We believe that this collaborative approach to create semi-trucks designed and built with integrated auto-grade components and sensors will increase our AFN’s reliability at scale. Vertically integrating through partnerships with OEMs and Tier 1 suppliers allows us to maintain strong supply chain and hardware design control while remaining capital light and primarily focusing on developing proprietary autonomous technology.
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We have developed a robust ecosystem of shippers, carriers, railroads, freight brokers, fleet asset owners, and third-party service providers, including UPS, McLane, U.S. Xpress, Werner, Schneider, Ryder, DHL, Union Pacific, and CN, that provide critical validation and enhance the network effect benefits of our approach. We believe that our partnership network creates a significant and sustainable competitive advantage, especially as we work with shippers, carriers, and railroads to strategically locate our AFN terminals near their distribution centers. The continued growth of our AFN infrastructure and partnerships will continue to improve our user experience and drive more users to our platform which will allow us to further densify our strategic terminal network and reinforce rapid network growth. We currently expect to initially commercialize in the “Texas triangle”, a major freight area running between Dallas, San Antonio, and Houston, under our TuSimple Capacity, by the end of 2023.
Coronavirus (“COVID-19”) Impact
The extensive impact of the pandemic caused by COVID-19 and the measures taken in response thereto has resulted and will likely continue to result in significant disruption to the global economy, as well as businesses and capital markets around the world. In an effort to halt the outbreak of COVID-19, a number of countries, states, counties and other jurisdictions have imposed, and may impose in the future, various measures, including but not limited to, voluntary and mandatory quarantines, stay-at-home orders, travel restrictions, limitations on gatherings of people, reduced operations, extended closures of businesses and vaccine requirements.
The COVID-19 pandemic and measures to prevent its spread have had the following impact on our business:
Our Workforce. Employee health and safety is our priority. In response to COVID-19, we established new protocols to help protect the health and safety of our workforce. We will continue to stay up-to-date and follow county and CDC guidelines regarding requirements for a healthy work environment.
Operations and Supply Chain. As a result of COVID-19, we experienced some delays in our supply chains which temporarily limited our ability to outfit semi-trucks with key components during the initial stages of the pandemic; however, we have not experienced material disruptions in our shipping activity or in our ability to continue developing our AFN to date. In the future, we may experience supply chain disruptions from third party suppliers and any such supply chain disruptions could cause delays in our development timelines. We will continue to monitor the situation for any potential adverse impacts and execute appropriate countermeasures, as necessary.
While we have not experienced significant disruptions to our business due to the COVID-19 pandemic to date, the broader and long-term implications of the COVID-19 pandemic, and the measures taken in response thereto, on our workforce, operations and supply chain, user demand, results of operations, and overall financial performance remain uncertain.
See Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q for further discussion of the possible impact of COVID-19 on our business.
Operational Highlights
As of March 31,
% Change
20212022
Research and Development (R&D) Full Time Employees ("FTEs")~820~1,10034 %
Global FTEs~980~1,40043 %
Patents Issued280 40846 %
Cumulative Road Miles (in thousands)(1)
~3,700~7,20095 %
Total Truck Reservations (EOQ)(2)
~5,775~7,47529 %
Total Mapped Miles (EOQ)(3)
~5,000~11,200124 %
Revenue Miles (in thousands)(4)(5)
~603~1,01468 %
(1) The total miles our autonomous trucks have run on open public roads. We use this metric to track progress on the development of our L4 autonomous semi-trucks.
(2) The total reservations for our purpose-built L4 semi-trucks. We use this metric to track our customer relationships and demand for our purpose-built L4 autonomous semi-trucks that are in development.
(3) The cumulative unique miles on the AFN which we have built a map compatible with our autonomous driving software. We use this metric to track progress on the development of our AFN.
(4) The total miles our autonomous trucks have run during the periods presented that generates revenues. We use this metric to track our revenue growth.
(5) Revenue Miles presented above are non-cumulative and represent activity for the three months ended March 31, 2021 and 2022.
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Highlights for Q1 2022
Cumulative Road Miles driven and Total Mapped Miles increased 95% and 124%, respectively, to approximately 7.2 million and approximately 11,200, respectively, as of March 31, 2022 as we continued expansion of our AFN.
We experienced strong growth in our TuSimple Capacity operations, achieving approximately 1.0 million Revenue Miles, an increase of 68%, as we expanded our operations and continued to grow our customer base.
Demand for our planned purpose-built L4 autonomous semi-trucks continued to grow as our Carrier-Owned Capacity reservations increased 29%, totaling approximately 7,475 as of March 31, 2022.
Our Patents Issued increased 46% as we continued to add world-class talent to our R&D team.
We ended the quarter with $1.2 billion in cash and cash equivalents.
Components of Results of Operations
Revenue
To date, all of our revenue recognized has been from freight capacity services provided through the TuSimple Capacity service model on our AFN. Revenue is recognized over time as the goods are transported from one location to another based on the number of miles traveled. Shipments are completed within a short period of time, typically spanning one to two days. As we continue to grow and improve our technology, we expect a new revenue stream through our Carrier-Owned Capacity service model. We expect to derive revenue from per-mile fees charged to users of Carrier-Owned Capacity on our AFN. Recognition of this future revenue will be subject to the terms of any arrangements with our partners or users, which have not yet been negotiated. To date, we have not recorded any revenue under the Carrier-Owned Capacity service model.
Cost of Revenue
Our cost of revenue consists primarily of fuel costs, depreciation of property and equipment (including semi-trucks acquired under finance leases), labor costs, and other costs directly attributable to the provision of freight capacity services. Currently, we operate a large portion of our semi-trucks with two occupants, a safety engineer and a safety driver. We expect to gradually lower the average number of occupants in our semi-trucks as we continue to improve our autonomous technology and to the extent we ultimately remove all occupants upon achievement of full driver-out, L4 autonomous operations.
Research and Development ("R&D")
R&D costs consist primarily of personnel-related expenses, including stock-based compensation costs, associated with software developers and engineering personnel and consultants responsible for the design, development, and testing of our autonomous truck driving solutions, depreciation of equipment used in research and development, and allocated overhead costs. R&D costs are expensed as incurred and we expect them to increase in absolute dollars as we increase our investment in scaling our AFN through our proprietary technologies and as we continue to expand our technical workforce, which would impact our personnel-related and stock-based compensation costs.
Selling, General and Administrative ("SG&A")
SG&A costs consist primarily of personnel-related expenses, including stock-based compensation costs, associated with our sales, marketing, management and administration activities, professional service fees, advertising expenses, sponsorship, public relations and other related marketing activities, and other general corporate expenses.
We expect that our SG&A expenses will increase in absolute dollars from period to period as we further scale our AFN, educate market participants on the benefits of autonomous trucking and our autonomous trucking solutions, increase our marketing activities, grow our operations, build brand awareness, and continue to incur costs related to operating as a public company. We also expect to increase the size of our SG&A function, which would impact our personnel-related and stock-based compensation costs, to support the growth of our business.
Change in Fair Value of Warrants Liability
The change in the fair value of warrants liability consists of the net changes in the fair value of our outstanding warrants to purchase redeemable convertible preferred stock that are remeasured at the end of each reporting period and upon their exercise. All outstanding warrants were exercised or expired during the three months ended March 31, 2021, and we recorded one final remeasurement at fair value as of the exercise date.
Other Income, Net
Other income, net consists primarily of interest income earned on our cash and cash equivalents, interest expense, and foreign currency exchange gains (losses).
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Provision for Income Taxes
Provision for income taxes consists primarily of U.S. federal and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. Since inception, we have incurred operating losses. We have a full valuation allowance for net deferred tax assets, including federal and state net operating loss carryforwards and research and development credit carryforwards. We expect to maintain this valuation allowance until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized by way of expected future taxable income.
Results of Operations
The following table sets forth our condensed consolidated results of operations data for the periods presented (in thousands):
 Three Months Ended March 31,
 20212022
Revenue$944 $2,264 
Cost of revenue2,246 4,089 
Gross loss(1,302)(1,825)
Operating expenses:
Research and development (1)41,434 78,158 
Selling, general and administrative (1)15,902 32,215 
Total operating expenses57,336 110,373 
Loss from operations(58,638)(112,198)
Change in fair value of warrants liability(326,900)— 
Other income, net378 295 
Loss before provision for income taxes(385,160)(111,903)
Provision for income taxes— — 
Net loss(385,160)(111,903)
Accretion of redeemable convertible preferred stock(4,135)— 
Net loss attributable to common stockholders$(389,295)$(111,903)
(1)Includes stock-based compensation expense as follows (in thousands)
Three Months Ended March 31,
20212022
Research and development$1,669 $17,464 
Selling, general and administrative4,620 10,063 
Total stock-based compensation expense$6,289 $27,527 
Comparison of the Three Months Ended March 31, 2021 and 2022
Revenue
Three Months Ended March 31,
(In thousands, except percentages)
20212022% Change
Revenue$944 $2,264 140 %
Revenue increased by $1.3 million, or 140%, in the three months ended March 31, 2022 compared to the same period of the prior year, primarily due to growth in our business from a higher number of revenue-generating trucks in TuSimple and partners' fleets, increases in revenue miles and rate per mile rates, and customer mix improvements. During the three months ended March 31, 2022, we expanded our revenue-miles by 68% compared to the same period in the prior year as a result of expanded routes and commercial partnerships.
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Cost of Revenue
Three Months Ended March 31,
(In thousands, except percentages)
20212022% Change
Cost of revenue$2,246 $4,089 82 %
Cost of revenue increased by $1.8 million, or 82%, in the three months ended March 31, 2022 compared to the same period of the prior year , primarily due to increased operating costs associated with the generation of revenue, including fuel, truck fleet operating costs, maintenance and driver compensation. Gross loss margin for the three months ended March 31, 2022 was 81%, an improvement from the gross loss margin in the same period of the prior year of 138%. This improvement in gross loss margin was primarily a result of increased revenue-miles per truck, improved customer and truck channel mix, and improved truck utilization and cost leverage.
Research and Development (R&D)
Three Months Ended March 31,
(In thousands, except percentages)
20212022% Change
Research and development$41,434 $78,158 89 %
R&D expenses increased by $36.7 million, or 89%, in the three months ended March 31, 2022 compared to the same period of the prior year. The increase was primarily attributable to an increase in personnel-related costs, mainly driven by an increase in employee headcount in the ordinary course of business, increased stock-based compensation expense, and severance costs from a company restructuring event impacting the R&D teams. The remainder of the increase in R&D expenses was primarily driven by increases in: depreciation, allocated facility costs, and equipment, supplies, and materials from a higher number of semi-trucks in our fleet. These increased costs were partially offset by a decrease in expenses incurred under the Joint Development Agreement ("JDA") with Navistar, as the spending cap was achieved in 2021 and no costs were incurred under this JDA in 2022.
Selling, General and Administrative (SG&A)
Three Months Ended March 31,
(In thousands, except percentages)
20212022% Change
Selling, general and administrative$15,902 $32,215 103 %
SG&A expenses increased by $16.3 million, or 103%, in the three months ended March 31, 2022 compared to the same period of the prior year. The increase was primarily attributable to an increase in personnel-related costs, mainly driven by an increase in employee headcount and increased stock-based compensation expense. The remainder of the increase in SG&A expenses for the period was primarily driven by increases in: office and facility-related costs, higher insurance costs from the acquisition of director and officer insurance and the expansion of facilities and operations, sales and marketing expenses as we focus on expanding our business by attending trade shows and conferences, and legal, accounting and other professional services as we expand our business processes and operational capabilities in line with our status as a public reporting company.
Change in Fair Value of Warrants Liability
Three Months Ended March 31,
(In thousands, except percentages)
20212022% Change
Change in fair value of warrants liability$(326,900)$— *
* Percentage not meaningful
Loss from the change in fair value of warrants liability of $326.9 million for the three months ended March 31, 2021 was driven by the remeasurement of redeemable convertible preferred stock warrants at fair value immediately prior to their exercise dates during the period.
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Other Income, Net
Three Months Ended March 31,
(In thousands, except percentages)
20212022% Change
Other income, net$378 $295 (22)%
Other income, net decreased by $0.1 million, or 22%, in the three months ended March 31, 2022 compared to the same period of the prior year, primarily due to foreign exchange losses resulting from fluctuations in foreign exchange rates.
Key Metric and Non-GAAP Financial Measure
 Three Months Ended March 31,
% Change
(In thousands, except percentages)
20212022
Loss from operations$(58,638)$(112,198)91 %
Adjusted EBITDA(1)
$(50,133)$(80,235)60 %
(1) Adjusted EBITDA is a non-GAAP financial measure. For more information regarding our use of this financial measure and a reconciliation of this financial measure to the most comparable GAAP measure, see “Reconciliation of Non-GAAP Financial Measure”.
Adjusted EBITDA
Adjusted EBITDA is a performance measure that our management uses to assess our operating performance in our business. Since Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning purposes. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team and board of directors.
We calculate Adjusted EBITDA as loss from operations, adjusted to exclude:
depreciation and amortization;
stock-based compensation expense;
non-recurring restructuring expenses;
finance lease interest expense included within cost of sales.
For more information regarding the limitations of Adjusted EBITDA and a reconciliation of loss from operations to Adjusted EBITDA, see the section titled "Reconciliation of Non-GAAP Financial Measure."
Reconciliation of Non-GAAP Financial Measure
We use Adjusted EBITDA in conjunction with GAAP measures as part of our overall assessment of our performance, including the preparation of our operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our board of directors concerning our financial performance. Because non-GAAP financial measures are not standardized, it may not be possible to compare this measure with other companies’ non-GAAP measures having the same or similar names. In addition, other companies may not publish similar metrics. Furthermore, this measure has certain limitations in that it does not include the impact of certain expenses that are reflected in our consolidated statements of operations that are necessary to run our business. Thus, our Adjusted EBITDA should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP.
The following table provides a reconciliation of reported net loss from operations determined in accordance with GAAP to non-GAAP adjusted EBITDA (in thousands):
Three Months Ended March 31,
20212022
Loss from Operations$(58,638)$(112,198)
Stock-based compensation expense6,289 27,527 
Depreciation and amortization2,110 2,735 
Nonrecurring restructuring expenses— 1,568 
Interest expense106 132 
Adjusted EBITDA$(50,133)$(80,235)
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Liquidity and Capital Resources
We have financed our operations primarily through the sale of capital stock, which has historically been sufficient to meet our working capital and capital expenditure requirements. As of March 31, 2022, our principal sources of liquidity were $1.2 billion of cash and cash equivalents, exclusive of restricted cash of $1.5 million. Cash and cash equivalents consist primarily of cash on deposit with banks, certificates of deposit, and money market funds. Based on our current operating plan, we believe that our existing cash and cash equivalents and anticipated cash generated from sales of our services, will be sufficient to meet our anticipated cash needs for at least the next 12 months.
Our future capital requirements will depend on many factors, including, but not limited to, the rate of our growth, our ability to attract and retain users and their willingness to pay for our services, and the timing and extent of spending to support our efforts to develop our L4 autonomous semi-trucks and AFN. Further, we may enter into future arrangements to acquire or invest in businesses, products, services, strategic partnerships, and technologies. As such, we may be required to seek additional equity and/or debt financing. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations may be materially and adversely affected.
Cash Flows
The following table summarizes our cash flows for the periods presented (in thousands):
 Three Months Ended March 31,
 20212022
Net cash (used in) provided by:  
Operating activities$(46,733)$(100,630)
Investing activities$(1,197)$(1,377)
Financing activities$243,970 $1,512 
Operating Activities
Net cash used in operating activities was $46.7 million and $100.6 million for the three months ended March 31, 2021 and 2022, respectively. The increase was primarily due to an increase in net losses as we continue to operate, develop, and expand our AFN and L4 autonomous semi-truck technology, grow our research and development and general support personnel, and incur incremental expenses associated with being a public company.
Investing Activities
Net cash used in investing activities was $1.2 million and $1.4 million for the three months ended March 31, 2021 and 2022, respectively, and the increase represents our continued investments in technological assets and equipment to expand our AFN.
Additionally, non-cash acquisitions of property and equipment included in liabilities were $1.9 million and $1.0 million for the three months ended March 31, 2021 and 2022, respectively.
Financing Activities
Net cash provided by financing activities was $244.0 million, which was related primarily to proceeds from the exercise of warrants for redeemable convertible preferred stock of $183.0 million, proceeds from the issuance of redeemable convertible preferred stock of $61.6 million, and $1.5 million for the three months ended March 31, 2021 and 2022, respectively.
Material Cash Requirements
At March 31, 2022, there were future minimum lease payments of $6.3 million and $53.1 million for finance and operating leases, respectively.
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Critical Accounting Estimates
We prepare our condensed consolidated financial statements in accordance with GAAP. The preparation of these condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Our actual results could differ significantly from these estimates under different assumptions and conditions.
There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates discussed in the Annual Report on Form 10-K for the year ended December 31, 2021, except as described in Note 1. Description of Business and Summary of Significant Accounting Policies to our condensed consolidated financial statements.
JOBS Act Accounting Election
We are an emerging growth company, as defined in the Jumpstart Our Business Startups (JOBS) Act. The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period under the JOBS Act for the adoption of certain accounting standards until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
We expect to lose EGC status and meet all applicable criteria to become a large accelerated filer by December 31, 2022.