Arbe Robotics Q3 2024 Earnings Report

Arbe Robotics EPS Results

• Actual EPS: -$0.13
• Consensus EPS: -$0.11
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: -$0.12

Arbe Robotics Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Arbe Robotics Announcement Details

• Quarter: Q3 2024
• Date: 11/27/2024
• Time: Before Market Opens
• Conference Call Date: Wednesday, November 27, 2024
• Conference Call Time: 8:30AM ET

Arbe Robotics (NASDAQ:ARBE) is a technology company specializing in high-resolution 4D imaging radar solutions for the automotive industry. The company’s radar platform is designed to enhance advanced driver-assistance systems (ADAS) and support the development of autonomous vehicles by providing detailed object detection, precise range and velocity measurements, and accurate environmental mapping under diverse driving conditions.

Founded in 2015 and headquartered in Tel Aviv, Israel, Arbe Robotics has developed its own semiconductor chipset and accompanying software stack. Its flagship product line includes automotive-grade radar sensors and development kits that integrate seamlessly with vehicle architectures. The company’s scalable offerings aim to serve multiple vehicle tiers, from passenger cars equipped with Level 2+ ADAS features to fully autonomous platforms in testing and deployment phases.

Arbe operates globally, engaging with automotive original equipment manufacturers (OEMs), Tier 1 suppliers and mobility solution providers across North America, Europe and Asia. The company has established partnerships and joint development agreements to integrate its radar technology into next-generation vehicle programs. These collaborations are intended to accelerate the adoption of radar-based perception systems in markets with stringent safety and performance requirements.

Under the leadership of co-founders and executive chairman Kobi Marenko and chief technology officer Ilya Rozhkov, Arbe Robotics has pursued both organic growth and strategic collaborations. Since going public via a business combination in early 2021, the company has continued to invest in research and development, expanding its R&D footprint and refining its sensor architecture to meet the evolving needs of the autonomous mobility sector.

Arbe Robotics Q3 2024 Earnings Call Transcript

Key Takeaways

• Arbe engaged with 16 OEMs, including 12 at the “big stage” and 8 in advanced perception projects, marking deepening partnerships that could drive future revenue.
• A leading European truck manufacturer plans to integrate Arbe’s imaging radar into its next-generation sensor suite, validating the technology’s safety and performance claims.
• Tier-1 partner HiRez is developing a radar-camera fusion ADAS system powered by Arbe’s chipset for a Chinese OEM, eliminating the need for LiDAR and targeting mass production in Q4 2025.
• In Q3 2024, revenue fell to $100,000 from $500,000 a year earlier, gross margin swung to a $300,000 loss, and net loss widened to $12.6 million.
• Arbe completed a public offering of up to $49 million—with $15 million received upfront—to support its 2025 production ramp and aims to be cash‐flow positive by 2027.

Presentation

[Operator]

Good morning, and welcome to the Arbe Robotics Q3 2024 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the * key followed by O. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press *, then 1, on your touch-tone phone. To withdraw your question, please press *, then 2. Please note this event is being recorded. I would now like to turn the conference over to Miri Segal of MS-IR. Please go ahead.

[Miri Segal, Founder and CEO at MS-IR]

Thank you, Operator, and everyone, for joining us today. Welcome to Arbe's Q3 2024 Financial Results Conference Call. Before we begin, I would like to remind our listeners that certain information provided on this call may contain forward-looking statements, and the safe harbor statement outlined in today's press release also applies to this call. If you have not received a copy of the release, please view it in the Investor Relations section of the company's website. Today, we are joined by Kobi Marenko, Arbe's co-founder and CEO, who will begin the call with a business update. Then, we will turn the call over to Karine Pinto-Flomenboim, CFO, who will review the financials in more detail. Finally, we will open the call for the question-and-answer session. With that, I'd like to turn it over to Kobi Marenko, Arbe's CEO. Kobi, please go ahead.

[Kobi Marenko, Co-Founder and CEO at Arbe Robotics]

Thank you, Miri. Good morning, everyone, and thank you for joining us. On this call, we're happy to share the progress we've made this quarter with our Tier-1s and OEMs. First, we've seen growth in both the number and the depth of our OEM engagement. This quarter, we worked with 16 OEMs, 12 of which have moved to the big stage, and eight OEMs have entered the Advanced Perception Project phase, demonstrating their dedication by investing in algorithm development and sensor data processing, marking a significant milestone in the selection process. While the timelines for some of these projects have been longer than expected, we are pleased with the advancement and believe these opportunities will drive growth for Arbe in the coming quarters. We look forward to updating you as we continue to make progress.

[Kobi Marenko, Co-Founder and CEO at Arbe Robotics]

Next, we've been working with a leading European truck manufacturer to improve truck safety using our imaging radar. This manufacturer plans to integrate our radar into its next-generation sensor suite, a major step in advancing the safety offering and an important validation of our technology. HiRain, one of our Tier-1s, is developing a radar-based ADAS system for a Chinese OEM. This system, powered by our chipset, combines radar and camera fusion, eliminating the need for LiDAR while maintaining high standards of safety. Pending final OEM approval, mass production is anticipated to begin by the Q4 of next year. This project demonstrates that OEMs have an alternative to LiDAR with high-resolution radar, which offers highly detailed perception at a significantly lower cost and better quality of service. This solution enables OEMs to benefit from imaging radar's durability and reliable performance in all weather and lighting conditions.

[Kobi Marenko, Co-Founder and CEO at Arbe Robotics]

Additionally, the affordability of imaging radar makes it an ideal choice for mass market adoption. Sensrad, another one of our Tier-1s, announced it has entered into a framework agreement to provide 4D imaging radars powered by our chipset to Tianyi Transportation Technology in China. This agreement follows a full year of development and evaluation. The selection of Sensrad's radars based on the Arbe chipset also highlights the growing demand for advanced radar solutions in additional industries beyond automotive. We are seeing increased interest in our radar technology from a variety of new markets, including infrastructure, surveillance, and other transportation sectors. These industries recognize the potential of advanced radar solutions for applications like safety, automation, and environmental monitoring. Our Tier-1s are actively engaging with customers to explore these emerging opportunities. This allows us to expand our total addressable market within new verticals and drive innovation across multiple industries.

[Kobi Marenko, Co-Founder and CEO at Arbe Robotics]

These advancements reinforce our position as a technology leader and demonstrate the trust that leading manufacturers place in our solutions. They validate our innovation, highlight our competitive advantage, and set the stage for expanding our market share and attracting additional OEMs. Finally, we are happy to report that we successfully completed a public offering of up to $49 million earlier this month. As part of the offering, $15 million were received upfront with an additional $34 million, subject to cash exercise of long-term and milestone-linked ROI. The offering was led by AWM Investment, one of our major investors, who led our 2023 offering along with new investors. The proceeds will support our planned production ramp-up in 2025. We believe this funding marks an important step as we move closer to production and aim to be cash flow positive in 2027.

[Kobi Marenko, Co-Founder and CEO at Arbe Robotics]

Lastly, our executive team will be meeting with investors at CES from January 7 to January 10, where we will be hosting live demos of our real-time AI-based free space mapping. We would love to meet you there. Now, I'll hand it over to our CFO, Karine, to review the financials.

[Karine Pinto-Flomenboim, CFO at Arbe Robotics]

Thank you, Kobi. Hello, everyone. I'd like to review our financial results for the third quarter of 2024 in more detail. Total revenue in the third quarter was $0.1 million, a decrease from $0.5 million in Q3 2023. Backlog as of September 30 was $0.3 million and is expected to be recognized as revenue in the next coming quarters. Negative gross margin for Q3 2024 was $0.3 million, compared to a positive gross margin of $0.1 million, or 24%, in Q3 2023. The decrease in gross margin was primarily related to revenue reduction with a fixed cost level of expenses. Moving on to expenses, in Q3 2024, we reported total operating expenses of $12.2 million, compared to $11.7 million in Q3 2023.

[Karine Pinto-Flomenboim, CFO at Arbe Robotics]

The increase in operating expenses was primarily driven by an increase in our research and development, labor cost and subcontractors cost, as we strengthen our investment in advanced software development, chip readiness, and safety certification toward production readiness. Operating loss in the third quarter of 2024 was $12.4 million, an increase from $11.6 million operating loss in the third quarter of 2023. Net loss in the third quarter of 2024 increased to $12.6 million, compared to a net loss of $11.7 million in the third quarter of 2023. Net loss in the third quarter of 2024 included $0.1 million of financial expenses. Adjusted EBITDA, a non-GAAP measurement which excludes expenses for share-based compensation and for non-recurring items, was a loss of $8.2 million in Q3 of 2024. This is compared to a loss of $7.5 million in third quarter or 2023. Please see our earnings release for reconciliation to GAAP net loss. Moving to our balance sheet.

[Karine Pinto-Flomenboim, CFO at Arbe Robotics]

As of September 30, 2024, Arbe had $19.1 million in cash and cash equivalent. With respect to our guidance for the year, we would like to reiterate what we previously shared. Our goal of achieving four design wins with OEMs remains unchanged, as we observe continued strong interest in our market-leading offering. We have strengthened our positioning in all our RFQ engagements, even though the OEMs have shifted their decision timelines from late 2023 to 2024. The 2024 annual revenue is expected to be in line with those of 2023, followed by revenue growth in 2025. These revenue projections are based on our expectation that we will be in full production in the second half of 2024, as well as our decision to exclusively focus on getting our chipset into production.

[Karine Pinto-Flomenboim, CFO at Arbe Robotics]

We are committed to maintaining a strong and well-managed balance sheet, focusing on cost-effectiveness and the ability to fund our revenue growth. Adjusted EBITDA for 2024 is projected to be in the range of $30 million loss to $36 million loss. Now, we will be happy to take your questions. Operator.

[Operator]

We will now begin the question-and-answer session. To ask a question, you may press star, then one, on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster, and the first question comes from Suji DeSilva with Roth Capital. Please go ahead.

[Suji DeSilva, Managing Director and Senior Research Analyst at ROTH Capital]

Hi, Kobi. Hi, Karine. Good job on the progress here. The OEM programs, Kobi, can you give us your perspective on adoption of imaging radar, given the delay in push-outs of some ADAS or EV models? How is that dovetailing with the need to implement a radar? Any thoughts that would be helpful?

[Kobi Marenko, Co-Founder and CEO at Arbe Robotics]

Yeah. So I think, overall, as you're probably aware, all of the ADAS market suffered from delays. At the beginning, it was because of the supply chain. Then, it was because of the focus on the EV stuff. But now, I believe that we are back on track with major production timelines and major programs in place, in line to achieve hands-free driving, eyes-off driving on the highway. All of the Western OEMs have those programs. Selection of imaging radar is a key factor for that. So the only way to do real hands-free driving, eyes-off driving that will be safe on the highway is by using imaging radar that gives you the long range that is needed. I think that Mercedes stated it early this year in a conference in Berlin. Dr.

[Kobi Marenko, Co-Founder and CEO at Arbe Robotics]

Jürgen Dickmann, I would say the leading expert in automotive radar, said that in order to have a real safe ADAS system, you must have a long-range radar that has minimum channels of 32 by 32 channels, which is basically Arbe's solution and Mobileye, and following that, I think all of the major OEMs plan to select imaging radar in a high-channel count in the next few quarters. We know that part of them will do the selection even before the year end, although only a few weeks left.

[Kobi Marenko, Co-Founder and CEO at Arbe Robotics]

We definitely believe that the first selection would be made this year, and customers that have not yet taken a decision will take their decision early next year, Q1 and Q2, in order to start collecting data with a full system that has cameras and radar, some of them also with LiDAR, train the algorithms, and launch real hands-free driving towards the second half of the decade. 2027-2028 year would be, I think, the starting point. By 2030, we will see already a ramp-up. 10 years from now, I believe that we will all be in a situation that this kind of service is a basic feature of the car, like listening to radio.

[Suji DeSilva, Managing Director and Senior Research Analyst at ROTH Capital]

That makes sense, Kobi. And maybe specifically, that's kind of their demand and models. Is there anything pushing them from a regulatory front to have to act on this? Any specific regulatory actions in the geography that you'd point out as being initial catalysts?

[Kobi Marenko, Co-Founder and CEO at Arbe Robotics]

Yeah. So first of all, there is already regulation in the States, as well as in Europe, that's pushing long-range radars, imaging radars for pure ADAS, for emergency braking. We hope that this regulation won't change with the new government, but we think that this is a major driver for OEMs to adopt an imaging radar, the ability to have a full automatic braking in any weather, any lighting condition, up to a very long range.

[Suji DeSilva, Managing Director and Senior Research Analyst at ROTH Capital]

Okay. And then switching over to non-auto, Kobi, you talked about SensRad and the success in China with Tianyi. Can you talk about the sales cycle and the time to unit revenues there, perhaps versus auto, and whether that can come in sooner? I imagine it's a shorter sales cycle, but any color there would be helpful in the non-auto market.

[Kobi Marenko, Co-Founder and CEO at Arbe Robotics]

Yeah. I think that there is, in the non-auto market, the sales cycle is more or less like in auto, but the time to production is much shorter. So in auto, the sales cycle can be two to three years, but then the model year that will start producing with your radar can take another three years. In non-auto, the sales cycle is the same, but we will definitely start seeing revenues in 2025 and definitely in 2026. I can say that also we see opportunities in defense technology for our radar and in other verticals that the revenues might come dramatically earlier.

[Suji DeSilva, Managing Director and Senior Research Analyst at ROTH Capital]

Okay. That's helpful color. Thanks. I'll pass it along.

[Operator]

Again, if you have a question, please press *, then 1. With no further questions, this concludes our question-and-answer session. Oh, pardon me. Looks like we do have a questioner. The next question will come from Dan Parsley as a private investor. Please go ahead.

[Dan Parsley, Managing Partner at GPG Ventures - Houston]

Good morning, Kobi. I have a question just on your forecast for 2024. You mentioned that you'll be in full production by the end of 2024, and here we are at the end of November. So I'd ask you to please comment if you're still on track to be in full production in 2024, and can you give us any insight as to the likelihood of starting to ramp revenue in 2025? Thank you.

[Kobi Marenko, Co-Founder and CEO at Arbe Robotics]

So I think we are more or less on track with our timetable. We believe that by the end of December, we will be able to start shipping engineering samples of our chipset to the project that we mentioned of Sensrad. And by basically early next year, we will have the ability to start shipping production chips right after, I think, the holidays and so on. We expect revenues to start ramping up on the last quarter of 2025, maybe a bit earlier, so second half of 2025 and third end of 2025, like we said earlier with the project that HiRain has with the leading Chinese car manufacturer.

[Dan Parsley, Managing Partner at GPG Ventures - Houston]

Okay and a follow-up to that. Can you comment on how dependent are your auto sales on EV vehicles versus more traditional combustion engine vehicles?

[Kobi Marenko, Co-Founder and CEO at Arbe Robotics]

We are not. So basically, imaging radar can get even into any kind of vehicle. The question is not about it. It's about what's the plans of the OEM. Will the OEM launch a full advanced ADAS service on a combustion engine or only on EV? I think if you would ask the major OEMs a year ago, they would say that new ADAS features would be released only on EVs. But I think right now, with the slow uptake of EVs on the West, probably it will be a mix. In China, where we already see something like 30%-35% of new cars that's been sold are EVs, I believe that the new ADAS features will go only to EVs.

[Dan Parsley, Managing Partner at GPG Ventures - Houston]

Thank you.

[Operator]

Thank you so much for that question. This concludes our question-and-answer session. I would like to turn the conference back over to Kobi Marenko for any closing remarks.

[Kobi Marenko, Co-Founder and CEO at Arbe Robotics]

Thank you. We were pleased to have you join us today. To our employees and partners, your continued dedication is deeply appreciated. We look forward to updating you on Arbe's progress in the coming weeks. Look out for updates as we prepare for several investor events. We'd love to meet you in person for additional discussions. Please contact us at investors@arberobotics.com or visit our website to schedule a meeting. Thank you all.

[Operator]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Karine Pinto-Flomenboim, CFO
• Kobi Marenko, Co-Founder and CEO

Analysts

• Dan Parsley, Managing Partner at GPG Ventures - Houston
• Miri Segal, Founder and CEO at MS-IR
• Suji DeSilva, Managing Director and Senior Research Analyst at ROTH Capital