I researched a company for the first time and thought I would share my DD on the company here. Here is a DD on $SERV.

I decided to research the company Serve Robotics. This is my first time delving into a company's 10-k and other press releases to understand the company. I thought I would share it here to get some feedback on how I did and what I should improve on. I didn't read the entire 10-k but did read enough to get an understanding of what the company does and what catalysts I should look out for. I would appreciate any feedback on this due diligence.

**Business:**

Serve Robotics sells a last mile delivery service via a robot. This robot is a sidewalk robot that goes to a restaurant, a restaurant employee puts the food in the robot's container and the robot travels on sidewalks to deliver the food to the relevant address.

This service is provided on the Uber Eats app as Uber holds a minority stake in Serv Robotics because Serve Robotics is a spin off from Uber. The project was originally started in the company Postmates and later became a part of Uber when Uber bought Postmates. Nvdia is also a strategic partner in this company.

The company also sells ad space on its robot. Advertisements are run on the robots body. The company is also potentially looking into selling fleets of its robots to corporations that might have a use for them. There is no contract or sale of a fleet as of now. These robots can also be used for other last mile deliveries such as parcels. At the moment, these robots only do food deliveries and run ads. These are their main sources of revenue.

The motivation behind these robots comes from the data that more than 50 percent of deliveries are within 2.5 miles from a restaurant. These robots are useful to food delivery companies as it should help them cut costs in deliveries.

The robot can travel as fast as 7 miles/hr and has a range of 37 miles. A robot averages 20-40 deliveries a day. The robot's container can hold up to 2 big bags or four large pizzas. The container is sealed and is opened via the Uber Eats app or a code that can be typed on the screen on the robot. The robot constantly provides its current location through the app. The robots go back to a hub at night and take a few hours to charge. The robot can navigate terrain by itself 80 percent of the time and requires manual control 20 percent of the time. A person manually controlling a robot can operate up to 4 robots at a time. The percentage of self navigation a robot can handle is expected to increase with new advancements in Artificial Intelligence. There is also a technician that would drive to a robot in case it needs to be fixed or brought back to a charging station. This situation hasn't been a problem that often so far.

The company had a pilot with Uber that it passed and has a contract to produce 2000 robots by the end of 2025 and have them operational on the platform.

The company has 59 daily active robots as of the quarter ending on September 30, 2024. The daily supply hours that the robots provide are 465. This comes out to 7.8 hours a day per robot.

The company rolled out their third generation robots on October 16, 2024. These robots can reach speeds roughly twice as fast, travel roughly twice as far on a single charge and spend 6 more hours in the field. The company also managed to cut the cost of producing one robot by half. The robots storage also increased by 15 percent.

**Revenue:**

In the year ending on 31 December, 2022, the company made $108,819 in revenue and in the year ending on 31 December 2023, the company made $207,545 in revenue.

In the year ending on 31 December, 2022, the company had a net loss of $21,855,127 and in the year ending on 31 December, 2023, the company had a net loss of $24,813,736.

The company has since gone to put more robots out on the field and revenue increased in subsequent quarters. The constituents of the revenue of these quarters isn't expected to stay the same. Explanation given after the numbers. The following are the numbers for the quarters ending on

March 31, 2024 - 39 daily active robots and $946,711 in revenue.

June 30, 2024 - 48 daily active robots and $468,375 in revenue.

September 30, 2024 - 59 daily active robots and $221,555 in revenue.

A big part of the revenue for the first two quarters comes from Serve Robotics providing non-exclusive software services to Magna. Magna is the company that they are using to build their fleet of 2000 robots. The software services provided were some non exclusive software that Serve made for their robots. This benefits Magna as they can use this information to produce better products.

The three quarters had $851,101, $296,035 and $38,767 in revenue respectively, from these software services provided to Magna. These numbers are not expected to go up or be a constant source of revenue.

**Future earnings guidance**: With the deployment of the 2000 robots, they are estimating their yearly run rate revenue to increase up to 60 - 80 million dollars.

**Challenges:**

The biggest challenge this company faces is the cost to produce and run the robot. Before they announced their third generation of robots, it cost $63,000 to produce a robot. They have managed to cut that cost in half.

They expect a robot to last 5-6 years. At its previous cost of $63,000, it would take one robot 4 years just to make back the amount of money put into it before the robot is not fit for service anymore. With the new cost, this number has gone down to 2 years and gives the robot more time to produce a profit. The numbers are as follows. I have picked their last quarters numbers to do this calculation. They had 59 daily active robots. Their revenue from deliveries was $112,288 and revenue from branding fees(fees they charge to run ad's) was $70,500. Their total revenue for 59 robots was $221,555. That comes out to $3755 per robot for one quarter. At their previous cost of $63,000, it would take the robot 16 quarters or 4 years to make back the money it cost to produce them. Because they have managed to cut costs by half(I am using $32,000 as a conservative estimate), it would now take them 8 quarters or 2 years to make back the money it cost to produce one robot.

These calculations don't take into account the running costs of the robots. These are the other challenges the company faces in turning a profit.

I couldn't find any numbers on how much they have to pay for their remote operators and technicians. I did email investor relations asking the following questions.

1. Has the ratio of remote operators to robots decreased? As in, can one remote operator handle more than 4 robots or not?
2. How much does it cost to have one remote operator per x many robots(whatever data they might have for x) and how much does it cost to have a field technician and if they have any data on the ratio of technician to robots.
3. Are the remote operators in America? If so, are there any plans to have these operators in countries where labour is cheap.

They haven't gotten back to me yet. I will update this post when they do.

**Catalysts to look for:**

The biggest catalysts to look for is if they can reduce their cost of producing a robot further and if they can reduce their costs of running a robot more. These two things will help tremendously in them turning a profit from these robots.

The other catalyst to look for is advancements in AI and the decrease in hardware prices. Their robots are at level 4 autonomy and with more advancements in AI, they can bring their robots to level 5. If this were to happen, the robots would require less operators and technicians. With decreases in hardware prices, it would be cheaper for them to produce their robots.

I still have to more research on what exactly are the most important and most expensive parts needed to produce their robots. They do say that a LIDAR component is very important in the production of their robots. I don't know much about this component yet but will do more research into it.

**My comments on the stock:**

This stock is definitely very speculative. I am looking forward to their next earnings and their next 10-k, both of which are near the end of this month. I think there is potential in this company if they can manage to bring down their cost of production and running costs.

I still have to do more research and understand their financials more. They have managed to raise more money and as of September 30, 2024 they had $50.9 million in cash or cash equivalent.

The stock is trading at a market cap of roughly $1 billion dollars. I do believe that the stock is priced with high expectations for its future profitability.

This was my first time researching a company like and I do realise that I missed out on many things, especially their financial condition. I would appreciate some feedback on how I did.