Arbe Robotics Ltd. (ARBE) on Q1 2022 Results - Earnings Call Transcript

Mor Assia: Thank you everyone for joining us today. Welcome to Arbe's First Quarter of 2022 Financial Results Fireside Chat Imaging Automotive in 2030. My name is Mor Assia, and I will be moderating today’s event. I am a Director on Arbe’s Board and the Founding Partner of iAngels, one of Israel’s most active VC firms. Arbe is one of our largest investments. We’ve been supporters of Arbe since the beginning where we led their seed financing rounds and have invested in each of Arbe’s financing round since. The automotive industry is progressing quickly and ultra high resolution imaging radars are going to be critical for achieving truly safe driver assist systems and hands free driving. Arbe is driving this revolution. Before we begin, I would like to remind you that certain information provided on this call may contain forward-looking statements, and the Safe Harbor statement outlined in today's earnings release also pertains to this call. Please also note that this event is being recorded. Today, we are joined by Kobi Marenko, Arbe’s Co-Founder and CEO, who will begin the call with the business updates. Then we will turn the call over to Karine Pinto-Flomenboim, Arbe’s CFO, who will review the financial statements followed by an insightful fireside chat with industry experts from Arbe’s leadership team and Board of Directors about the promises and challenges of automotive autonomy over the next decade, and will conclude with a question-and-answer session. With that, I would like to turn it over to Kobi Marenko. Kobi, Please go ahead. Kobi Marenko: Thank you, Mor, and hello everyone. It is great to have you with us. Today we are going to discuss the future of autonomy in 2030 and the leading role that Arbe will play in this world. But first, I would like to go over some of our recent business highlights. We made great progress in the first quarter, particularly with our Tier-1 relationships and OEM customers. Hyundai, a leading car manufacturer and one of our early investors held a PoC testing the safety announcements introduced by our next-generation radar. Just yesterday, they showcased our joint pilot at the EcoMotion event. Working closely with world leading car manufacturers like Hyundai is important for us as it allows us to evaluate how our technology addresses their safety and autonomy needs in real-time. Let’s view some highlights from the pilot. During the first quarter, Arbe engaged with five new customers, including OEMs who are leaders in Level 2+ passenger vehicles design and new mobility players focusing on Level 4 applications. Part of our business progress during the first quarter is attributed to our first Tier-1 relationships who develop radar systems based on our chipset. The success and commitment of our partners is critical to our ability to scale in terms of production, unit sales and market reach. In the first quarter, our Tier-1 relationships submitted 5 RFPs and RFQs with Arbe's chipset to major OEMs, committing to supply the customer with volumes of 400,000 systems to 1 million systems per year. In the first quarter, Arbe secured a wealth of knowledge and experience with the addition of several new members to our leadership team. Joining our Board of Directors is Thilo Koslowski, a renowned thought leader and visionary in automotive and digital technology, who previously served as the Founder and CEO of Porsche Digital. Thilo also founded the automotive and smart mobility practice of Gartner where we advise global automakers, technology companies and governments on harnessing new technologies and innovation. Alex Hitzinger, who also joined our Board of Directors is the former Volkswagen Group’s Senior Vice President of Autonomous Driving and a member of the management board of Volkswagen Commercial Vehicles. Additionally, Alex held the position of Head of Product Design for Autonomous Transportation at Apple where we led the automotive team. Finally, Gonen Barkan, who joined Arbe’s management as our new Chief Radar Officer, will head Arbe’s technological strategy. Gonen Barkan come to us from General Motors, where we led a global team and was responsible for all aspects of radar technology, development, radar product development and radar integration into GM vehicles. We are proud that Gonen Alex and Thilo choose to join Arbe demonstrating their confidence in our vision. Their knowledge and expertise will strengthen our strategy, tighten our relationships in the auto industry and expedite our progress. Alex and Gonen will join our fireside chat today. On the product front, back in January at CES, we introduced the vision of Free Space Mapping to our Imaging Radar perception stack. This is the first time an automotive radar is able to perform Free Space Mapping, a critical function of autonomous driving that requires great accuracy and redundancy. Last week, we were happy to announce the launch of our latest RF chipset in the final production configuration. A new chipset increases range, allowing radars to detect vehicles at 800 meters or about half a mile. This functionality will make our radar extremely viable across customer verticals including trucks, a key vertical for Arbe, as the truck industry will be one of the first to introduce autonomous driving on a mass scale. Our new chipset offers the industry first combination of system design flexibility with ultra high resolution providing optimal performance across challenging driving scenarios such as putting a flat tire on the highway, enabling delivery robots to drive safety on the sidewalk and developing forward and backward free space mapping, particularly for unprotected left turns, T junctions merging into the highway and more. Now I would like to highlight some of the exciting news that we shared demonstrating the market recognition of Arbe’s innovation technology. We are honored to be recognized for our product innovation recently winning some of the most prestigious award in our industry. Back in January, Arbe’s perception imaging radar was recognized for revolutionizing autonomous vehicle and sensing to support advanced perception capabilities at an affordable cost for the mass market by CES 2022. Additionally, we were proud to have won first place at the 2022 Tech AD Conference in the category of sensor perception, which highlights the superiority of our advanced perception radar designed to create ultimate safety in the autonomous vehicle industry. This meaningful validation combined with three industry executives choosing to join our management team and our Board are all important signals that we are on the right path. We are extremely pleased to be progressing according to plan. We are confident in our leadership role in the evolution of the industry and we look forward to continuing to achieve major milestones. I like now to turn it over to our CFO, Karine. Hey, Karine. Karine Pinto-Flomenboim : Hey, Kobi. Thank you, Kobi, and hello everyone. I would like to review our financial results for Q1 2022 in more details. Total revenue in the first quarter was $0.9 million, compared to $0.6 million in the first quarter of 2021. Backlog as of 31st 2022 was $2.8 million, consisting mainly of chipsets and samples orders and service from several leading car manufacturers and Tier-1s. Gross margin for Q1 2022 was 56.1%, compared to 44.3% in the same period in 2021. The gross margin increase was primarily related to a lower cost per unit as we expand towards production. Moving on to expenses. In Q1 2022, we reported total operating expenses of $11.1 million, an increase from $4.5 million in the first quarter of 2021. The increase in operating expenses was primarily driven by labor cost uptick, non-cash share-based compensation and additional general overhead costs related to our status as a public company. Research and development expenses increased from $3.7 million in Q1 2021, to $7.8 million in Q1 2022, reflecting growing investments in labor and moving towards production. Net loss in the first quarter of 2022 decreased significantly and was $7.9 million, which included $2.8 million of financial income, compared to a net loss of $18.4 million in the first quarter of 2021, which included $14.1 million of financial expenses. Both years’ financial expenses and income related to the revaluation of convertible loans and warrants. Looking at adjusted EBITDA in Q1 of 2022, a non-GAAP measurement, which excludes expenses for non-cash share-based compensation and for non-recurring items, was a loss of $8.6 million, compared to a loss of $4.1 million in the first quarter of 2021. Moving to our balance sheet. As of March 31, 2022, Arbe had $87.3 million in cash and cash equivalents. Total debt of March 31 2022 was $5.1 million, which we expect to pay by July 1 2022. With respect to our guidance for 2022, we would like to reiterate what we previously shared, revenue is expected to be in the range of $7 million to $11 million, heavily weighted towards the end of the year. Adjusted EBITDA is expected to be a loss in the range of $34 million to $38 million. Additionally, we believe that we are on track to reach our $312 million revenue goal for 2025. Now I will turn it back over to Mor to open the fireside chat with the rest of our team. Mor Assia: Thanks, Karine. This is a pivotal time in the automotive industry with the changing – changes occurring faster than ever before at the heart of these changes, is technology innovation and at the heart of this technology innovation is Arbe. With that today, we have several industry experts, Alex, Kobi and Gonen. Thank you all for joining us today. Let’s discuss the promises and challenges of automotive autonomy over the next decade. So questions to pose to the Group. When we think about books, movies, what we expected for 2030 might be very different from what we anticipate today, whereas we once might have imagined fine cars. Today, I think we can all agree that 2030 will likely look much closer to our daily lives today than what we once might have thought. That being said, there are so many new advances and improvements in the space and I am excited to talk about some of them with you today. Alex, well I want you start us off. What will a day in 2030 look like, in terms of mobility, how will it be, same or different from today? Alexander Hitzinger: I hope you can hear me well. I think mobility will be safer. It will be cleaner and it will be more convenient. I mean, it will be safe because, it will be a widespread use of radar systems in the cars and in trucks. It will be cleaner because I think electrification will have gone really mainstream and the majority of vehicles sold, new vehicles sold will be electric. And it will be also more convenient because the overall spectrum of transportation I think will be expanded. So that will, like mobility will play a much bigger role for the short distance travel than we have vehicles which will have radar systems, which will make driving more enjoyable even in higher traffic conditions. And we will also start to see things like easy toll in the early stage. So, overall the spectrum of transportation will be much broader and therefore will make it more convenient to get from A to B. Mor Assia: Kobi, anything to add? Kobi Marenko: First of all I agree with Alex, that this is the main change and the main difference is that everything will be safer. So, I think that the sun was rising like the ambitious to reach to the moon. So it’s a ten years plan. It will take time. It will take a lot of effort, but in the middle, there is a lot of byproducts from this ambitious that will play a large role in our life. So, first of all, safety, above all and I think that majority of the car manufacturers today puts the safety as their first goal and safety anywhere. Safety in everywhere and safety in every life and condition and I think this is going to be a major change. Also I think that the fact that you can get delivered from a delivery robot to your home easily without a human being is also a great change. It will dramatically reduce the time of the delivery and the ability to get deliveries at home. I think also the fact that trucks will drive more and more in a safer way and in almost automated way will change also our lives and the ability to bring things to our home in a better price and even in better timing. Mor Assia: Excellent. Gonen? Gonen Barkan : Yeah, thanks. So, I agree with you both and I’ll add that also a lot of driving functions that we are used to do, I think will start to become much more automatic and autonomous but step-by-step. Mor Assia: Nice. Well, I believe that by 2030, it’s safe to expect that Level 2+ will become an industry standard at approximately 70% penetration and an emphasis as previously mentioned on safety rather than comfort driven by both consumer demand and regulation. Gonen, what new technologies will be available in 2030? Gonen Barkan : Yeah, thank you. So, as we said, to get to this safety level, especially when you want to get much more complex driving tests, but on a safe level, which is not Level 2+ today. I think technology especially sensing will have to step up. L4, I don’t think will be as widespread and I think the mass market will require safe and widely available driving features. So, we see the radar as the major driving force in getting there. As you get some high resolution cameras, you get some lidars in the front probably. But to get to this safety level and performance, you need a new generation and new scale of radars and I think that will be the major change in technology. Mor Assia: Thank you. Alex? Alexander Hitzinger: So I think, generally, it will be a phased approach, right? There won’t be any big bang went say, okay now, it’s now autonomy is available or something, right. There will be - Level4 will be – will start to appear, right, in premium products I think, so that will be Level4 functionality available on the highway in a specific route, which will make travelling especially long distance traveling a lot more convenient as I mentioned earlier on. And so, this technology will penetrate first to premium products where people are a bit less cost sensitive. Also, as Kobi just mentioned, I totally agree, long-haul tracking where you have a very good business case and easier use case, I think is a perfect way of rolling out Level4 functionality. We will see that in the next years until 2030. And as technology penetrates these areas, therefore volume of components go up and therefore costs come down. Then this technology will get more and more into a mainstream product. So Level4 will sort of start to happen slowly and will penetrate the other areas over time. And this is really quite natural for new technologies. And it will also help to sort of make raise awareness in the public and makes people accept these technologies. And so basically then drives the adoption over time. Mor Assia: Kobi, anything to add? Kobi Marenko: I would like to add maybe two points. One, I am confident about it. So the car – as the car will become more and more autonomous, it will be more and more entertainment area. So the screens will be bigger, maybe there will be commercials inside our car, we will be able to see video, maybe to play games, maybe to see a movie. So I think that the car in 2030 will be part of the ecosystem of the entertainment and advertising. Second thing, which is I think questionable is how much of this industry will become a service-oriented. How many people will abandon the car will decide that they don’t need a car and they can just take a car for hire and I think especially in big cities where there is no parking and it’s crowded and you don’t want to look for parking. This kind of car as a service that is coming more and more natural to the market will take more and more market share and I think this is the way that it should work is, if you can get the service of Level3, Level4 on the highway at least, this makes sense that on the weekend instead of using your car, you will hire a car even if it’s a bit premium that can drive you all of this week and without you and it – to hold the wheel. Mor Assia: Thank you. So, we all understand that in order for technology be car and road ready, the model specification caught off is approximately three years prior. Given that timeframe, what technologies will not be available in 2030, either because there will be phase out or because 2030 will still be too early for them. Alex, what do you think? Alexander Hitzinger: So I think, one is the hard disk problems, really technology problems out there is full autonomy in urban areas. And I think we will not see really widespread adoption of this in – until 2030 just because it does – it’s such a long tail in terms of edge cases. And at the moment, I still – there are some people who believe that this is just around the corner. I don’t think so, I think their problem is and like I said too hard for that. But we will go, we will move towards that, right. So, we will see more and more commercial pilots of the robo taxi use case. And we will potentially see first routes in existing networks which will drive with this sort of pilot robo taxis. It will increase and – that the usage of it, but it won’t be mainstream, it won’t be a real commercial business or something like that. Mor Assia: Okay. Anything to add, Kobi? Kobi Marenko: I agree that robo taxi right now it looks more than a hobby than a business. There is the technology challenges that there will – it’s all solved even the process of – the simple process means, order of magnitude – even two orders of magnitude more performing and more possessing power in order to support what is really needed for full autonomous driving in a scale in a price that is achievable. So we will have this maybe this some micro mobility, maybe something that drives in 20, 30 kilometers per hour, very slowly in the city, like the delivery robots. Something like you know, other people are using, something like this for autonomous driving that will replace Mor Assia: Urban Kobi Marenko: Urban driving. Mor Assia: Okay. So, what do you think will be the role of imaging radars in Arbe in achieving your collections for 2030, Gonen? Gonen Barkan : Thank you. So, first and foremost, the radars need to – can and will provide required redundancy and to bring those features to safety of the level customers can trust. I think radars today are far from it, still and does need to be a leap and I think this is where Arbe places itself in getting the entire size and suite to the level it can be available anywhere, every time of the day and on a safety level and not even assist system. And that’s a huge step with other radars, I don’t believe it can happen. Mor Assia: Kobi? Kobi Marenko: I think that the industry begins to understand that the focus in the last ten years was how to pass the test. There was end cap test. There is minimal requirements for this test. So the car manufacturers were focusing on how to pass the test. And now there is a major shift in the paradigm and they understand that passing the test is not enough and driving fully safe solution to the customer is the real goal. And if we are moving from – to full safe solution, I think that the only solution is by having a radar that can work in any weather and any lighting condition up to a very long range in a safe way without false targets and without missing anything. And this is our mission since we started. Mor Assia: Perfect. In other sectors, 2030 feels like nearly a decade from now. So, why are we, as investors are discussing 2030 now? I can say, for me personally as an investor, on the one hand, we have seen a lot of activity in the automotive space with several companies going public. While Arbe has established a unique position within the market, mass adoption of autonomous driving is still as we understand very much ahead of us. And it’s exciting to see what is yet to come in the latter part of this decade. Now it’s my opinion that Arbe is becoming a public company is a stepping stone and this is really only the beginning. So, Kobi, why do you feel we are talking about 2030 now? Can you also elaborate on what will happen over the next three years, for example? Kobi Marenko: Yes. So, first of all, we are talking about 2030, because we believe that 2030 will be the year where Level2+ will be a mass product. So, you want to get into a car that doesn’t have real safety features and will how we have to pilot and driving assist on traffic and those kinds of solutions. So, everything that we see today as a kind of a pilot version in the cars will be mainstream in 2030. But it takes time. It takes time because the cycles of the automotive industry are long. They are selecting now radars for year model 2025, some of them even for year model 2026, and then you start ramping up and you are ramping up on the high end cars and there is another three years it’s going to the main stream. So, basically the decisions that are taking today are really influencing 2030. So, it takes technology to reach to the main stream in automotive since you know we’re thinking of NID more than ten years to get to the main stream. But we have a very bright future also next year and the year after. So, first of all, if we are talking about year model 2025, it means that the radar should start shift to the car manufacturer from the Tier-1 by the end of 2024, which means that a Tier-1 needs to get from us chips in early 2024. So, we are – even a car that will start production in September 2025, we will start to see the revenues in early 2024. Also, it’s important to understand what is happening in the Chinese market. The Chinese market is running faster and everything that in the west takes five years takes three years in China. Everything that takes three years, takes two years in China. So, from China, we expect revenues earlier. And also we are engaging in a lot of the activity around delivery robots and around the tracks. And all of those things don’t require this three year cycle of designing a car. It’s a new bought, all attracts, basically it’s an aftermarket product and this is why we believe that we will start ramping up our revenues dramatically in 2023 towards 2024 and which we gave in – around this time stage. Mor Assia: Excellent. So, now we would like to start and kick off the Questions-And-Answer Session. Thank you for all of our panelists for the thought provoking discussion. We are now ready take questions from our audience. A - Mor Assia: Welcome to the Q&A session. We will be starting with analysts’ question and following that, we will answer questions submitted by the audience. Our first question comes from Josh. Hi Josh. Kobi Marenko: I think the most common statement you are on mute. Unidentified Analyst: Hi. Sorry. Thank you. Just for future I need to – the host is required unmute Q&A. Anyway, so, Kobi, say a sharper revenue ramp in 2023, anything you can share on the conference you sharing between some of your announced customers like autoX and BAIC versus others that in other industries or other OEM that we might not be aware of? Thank you. Kobi Marenko: Josh, can you repeat the question? Sorry. Josh? Mor Assia: Okay. I think just until we wait – until we’ll get this adjusted, there is a slight problem. We’ll go to the audience questions and we will get back to Josh. So, the first question is how has the automotive imaging radar market evolved over the past quarter? Kobi Marenko: I think we’ve definitely seen the market shift towards imaging radar. So, if – last year, it was nice to have high level of autonomy. Every car manufacturer almost has a program of adapting imaging radar or it is front facing radar and this is why we see many RFPs RFQs on the market. And we are engaged with the leading Tier-1s for that and with a very good partners for radar. And they are submitting RFPs, RFQs proposals based on our chipset. And I think what we see now is only starting. We mentioned earlier that every RFP RFQ is something like 400,000 to 1 million units per year. This is – they are a car manufacturer. So, if you are trying to look on the entire market, we are talking about tens of millions of radar chipset from Arbe as a potential market for the next three to five years. Mor Assia: Great. Next question is from David Green. Please comment on Innovis for $4 billion, doesn’t lidar have disadvantages in comparison to imaging radar? Can it affect Arbe? Kobi Marenko: So, first of all, we are really excited to hear our Israeli friends from Innovis winning such an amazing bill. I think it’s a great sign of excellency for the Israeli auto tech industry and we are really proud to be on the same industry with Innovis. Basically, every car manufacturer that choose front facing lidar choose also at least front facing radar and – but on top of it between four to five, even sometimes six other radars to get full 360 coverage. So, you can be sure that every car company that has one lidar will have also a very strong imaging radar. It does choose the lidar, that lidar like this that’s also having a radar. Lidar has a lot of advantages, especially on the azimuth resolution but a lot of disadvantages in weather, lighting conditions, long range and it’s a complementary product that we feel comfortable with that. And I think even great supporters of vision only approach in the past like Mobilight understand today that in order to have optionality of Level2+ Level3, you need also imaging radar and sometimes even the lidar. Mor Assia: Next question. Will radar and lidar compete against test version of vision only? Who will capture greater market share? Alexander Hitzinger: Yeah, I can comment to this. I think vision only can get you that far and I am not sure it will be the same market. As we said, the lead to get from comfort in assist in a limited availability to a safer driving function across the board will include vision and radars. So, I don’t think that would be a competition eventually. It’s different grades of performance and safety. Kobi Marenko: Yeah, I agree. I think Tesla will find a way to bring in imaging radar in the future. Alexander Hitzinger: At some point. Kobi Marenko: At some point, at least they want to achieve also safety and just nice to have future. Mor Assia: Thank you. Another question, could you give some color on the customer engagement stage timeframe, potential orders? Kobi Marenko: So, as I mentioned earlier, the potential order of each one of our OEM clients is between 0.5 million to 1 million units per year, which will represent something like $50 million to $100 million opportunity revenues for Arbe. We have today two customers – two large Tier-1 – two large OEMs that we are in pre-production stage with them. We have – you’ve seen the figure of Hyundai together with Hyundai Mobis is a Tier-1. We finished PoC and basically as you can understand from the move this is waiting for a final decision on adapting the technology. And also worth mentioning BAIC one of our shareholders and one of the largest shareholders and one of the largest car manufacturers in China that stated that they will use our radar for Level2+ and Level3. We are in around 20 different stages of engagements, RFP RFQ or early volume with other clients and we also announced that we won autoX, the largest robo taxi player in China and one of the leading players in this space. Mor Assia: Thank you, Kobi. Now we fixed the problems. So we are back. Sorry, Josh. Hi. Unidentified Analyst: Hey, Kobi, how are you? And can you hear me? Mor Assia: Yes. Kobi Marenko: Yes. Unidentified Analyst: Okay. Wonderful. Thank you. Thanks again. So, Kobi, you talked about sort of a sharp revenue increase in 2023 ahead on the larger OEMs in North America and Europe in 2024, 2025. Anything you can share on the contribution of the ramp you would expect from customers like autoX and BAIC versus I guess, pre-production wins and other verticals that we might not – that you have anything name basically? Kobi Marenko: So, we cannot really disclose the actual revenues from autoX in 2023, because this is basically saying how many cars they will have in the market in 2023. But I think that overall, if we are looking on our 2023 revenues, there is a start up production that we believe going to be for a Chinese OEM. On the second half of 2023 that will basically be responsible for something like 30% of our revenues, $20 million to 20 something million dollars. The sector of robo taxi not just operates we believe will be responsible for around $15 million, $20 million more and the rest going to be in deliver robots and non-automotive applications. All in all we are predicting around a $70 million in 2023. Majority of it is going to be in – basically in chipset selling and not on NREs or those kinds of one-time payments. Unidentified Analyst: Yeah. That’s incredibly helpful. Thank you. And then for my follow-up, the press release didn’t mention that longer term top three OEMs that you are in pre-production when you discussed before everything on track there which are things even you reiterated $312 million target for 2025. Thank you and congrats on all the progress, guys. Kobi Marenko: Yeah, I think we are in line of the plan, give or take which year are we there. Yes, and we are engaged with the right Tier-1s for those projects and what is more important is that we increased our engagements with OEMs for another companies during this quarter, part of them even already sold our radar in their testing cars. So, overall, I think this is why we feel comfortable with our $300 million in revenue. So, we increased the amount of engagements and we feel comfortable with our target. Unidentified Analyst: Got it. Thank you. Mor Assia: Thank you, Josh. Next we have Suji. Kobi Marenko: Hey, Suji. Unidentified Analyst: Hey guys. Can you hear me? Mor Assia: Yes. Kobi Marenko: Yes. Unidentified Analyst: Excellent. Great. So, hi, Kobi, Karine and Gonen. Thanks for the informative presentation today, certainly. Kobi, the 400,000 to 1 million annual type of range you talk about, can you characterize that price for a customer or single model or is that a platform number and are some wins smaller and some potentially large. Just give us some characterization of where that range kind of derived from? Kobi Marenko: With the volume coming from, so, I think all of the OEMs maybe except of the new ones has the same strategy of starting of production with the high end models and of course it means that this is an OEM that should have enough premium cars to support it. And then the technology is going to the regular car to the regular SUVs. So the start up production first year is hundreds of thousands of units, then it goes to million and millions when it’s getting to the mass production. Unidentified Analyst: Great. That’s really helpful color, Kobi. And perhaps a question for Gonen. This – we share about this sort of camera lidar radar cost calculus of maybe $500 each bucket as kind of a rule of thumb, I am just wondering how the OEMs think about the overall cost structure and balancing the cost between the radar for the front versus camera and lidar. Any insight you could provide there? If those numbers flex or whether, because we think lidar is costing as much a $1000, so, any insight there would be helpful. Gonen Barkan: Yeah, so, thank you. So, first I think the major shift that happened and that you see the announcements on the software defined vehicles as much as GM for example. I think their view is to look across the platform, across the entire enterprise. So – and so, it’s not just how much is cost to put the sensors on a specific program, but if you are able to amortize the same technology, the same architecture across your entire portfolio, then you might usually, it makes more sense. It enables higher costs on a specific platform. But for the breakdown, I think it’s the cameras are the challenges using the processor and other camera itself. Lidar usually at lease in this stage is mostly for the front facing. So, everybody are targeting sub $1,000, yes. And for radars, again it’s flexible, because you need 360 coverage. So, and again, as we mentioned before there is a trend to get safety standard to the mass market. And this allows more flexibility on the cost. So, probably, I don’t have the numbers, but probably about the same order of magnitude as the lidar. Unidentified Analyst: Okay. Thanks everybody. Kobi Marenko: All of the radars together. Gonen Barkan: All of the radars together. Kobi Marenko: All of the radars together is the other magnitude of one lidar, right. Unidentified Analyst: Understood. Great. Thank you, everybody. Mor Assia: Thank you, Suji. Now next is Gary. Kobi Marenko: Hey, Gary. Unidentified Analyst: Hey. How are you? Can you hear me okay? Mor Assia: Yes, Kobi Marenko: Yes. Unidentified Analyst: Okay. Thanks for allowing me to ask a question. Just trying to figure out what the attach rate of your technology to some of your automotive OEM customers’ products, how should we think about the use cases or how they are going to market this specific technology? Will it be a default safety feature that is spread across all of their various models or is this sort of an OEM add on kind of like the Tesla auto pilot and requires sort of $15,000 upgrade? Kobi Marenko: Can you take it? Alexander Hitzinger: Yeah. I’d say that the first description is more accurate. I think it’s more like especially on the OEM side a set of features. Some of the very complex like Gem announced the ultra cruise or the super cruise before. But it’s going to be features you can – I wouldn’t say upgrade, but purchase on a common platform and of course, and again, as I mentioned before, that gives to get you common platforms you can upgrade and improve your vehicle during its lifecycle. Unidentified Analyst: Great. Appreciate the color. And then, my final question I just wanted to ask about is sort of, I guess, volatility in R&D expense given maybe the tape out of some specific products, how should we think about the trajectory for the bonds here and that’s it for me. Thank you. Mor Assia: So, the projection we expect to increase are R&D expenses of course. The mix will probably change, because now we are in production and we are investing in that and then our labor costs will be more investing in that part in the coming years. We assume that on a percentage basis, it will not change so dramatically out of revenue, but it will increase year-over-year. Unidentified Analyst: Thank you. Mor Assia: Thank you. We have Matthew from Maxim Group. Hi Matthew. Unidentified Analyst: Hi, thanks for taking my questions. Maybe firstly, would be 2022 call off someone asked about supply chain, you’re talking about starting to come post material revenues. So, what are you seeing on that and how do you feel about your ability to source to get towards production levels you need? Kobi Marenko: So, I think the fact that we choose build up which is our proper and 2022 not only weaker as our process and being the first company to go to production in this process in automotive and the support that we are getting from global partners is really helping us to have the supply. We have the supply for this year. We have the supply to 2023 and of course, we now need to work on 2024, 2025. As time goes by, we all understand that the shortage of semiconductors is here to stay and it’s here to stay at least until 2025, maybe even 2026. And we are working to make sure that our customers will be able to get their chips. Global partners are aware exactly to our projection. They have our projections until 2025 and we are working together to make sure that our customers will get it. For 2022, 2023, we don’t see any problem. For 2024 we are now beginning to securing. We have two years. It’s enough and we feel comfortable with the supply chain problem. Unidentified Analyst: Thanks. And then, maybe if we could touch on just where competition has gone in the last, let’s say two or three quarters as it become a little more public in your mission and you are clearly getting some traction in the automotive market. So, are you hearing more noise? Is there more nurture coming behind sort of competitors? How they are looking to rival you in imaging radar or how far do you think you are today? Kobi Marenko: I think that the fact that by the end of the day it’s a semiconductor issue is really helping us. So it takes to the large companies five to seven years to produce new chips. So, for example, NXV that were I think the pioneers in radar. They are just going to production by the end of this year with the processor that is order of magnitude lower than the performance that we have today and that we are going to production. So, they are neck-to-neck with us in terms of production time. But their processor is going to be more expensive and 10% of the performance of our processor. What we see in the last two quarters is Intel mobilized aggressively trying to get into the imaging radar market. They are working but again, they will have a product in 2025 even this aggressive approach and we believe that this product won’t be in the level of our product today and we already in the stages of advanced R&D for our 25 product that will be much more advanced. Unidentified Analyst: Thank you. Mor Assia: Thank you. Thank you. Now we will turn the call to Jamie. Jamie Torres. Unidentified Analyst : Good day, everybody. Thanks for taking my questions. On the first obviously, you noted a few executives as Board members, and any potential more members to be executives to have that you are looking to add them? Basically, I am asking what’s your sort of aging sort of the system - for your company? Do you want to stick with – can you hear me? Mor Assia: It’s a little bit hard to hear you. Can you repeat the question? Unidentified Analyst : Yeah. Yes, sure. I got – problem. You added a few board members, any more board members with the expertise from the market you want to have? Do you – how about building – are you going to build out your management team even further? I just want do you have any color. I am just imagine what would be your dream team at Arbe? Kobi Marenko: I think, so, as you mentioned, we added to our board members two automotive executives. They are helping us with the strategy and with focusing the company on where the opportunities are and also helping us to approach the OEMs in high level, not on the level of the radar, but on the level of the decision-makers. Gonen, that recently joined us brings a lot of experience in taking radar into production. And I think this is exactly what we need at this stage somewhat from the industry understands radar, understands where are the challenges? What’s the next generation? Where we should lead the company and we feel comfortable that with the add of Gonen, our management team can really deliver our targets for the next decade. Mor Assia: Thank you, Kobi. Now we are turning to our last question for today’s call. We will be answering the rest of your questions via email if you choose to do so. So, last question comes from Scott. It looks like you have enough cash to execute the plan. Does this exclude acquisition? So, the cash raise in the business combination is enough to get us through our breakeven point, which is expected one year after our production, our full production end of 2023, beginning of early 2024. And again, as we previously stated about acquisitions, we currently do not plan anything, but if an interesting will raise if so we will of course consider. Mor Assia: Thank you everyone, again for being with us today. We look forward to continuing to update you on Arbe’s progress in the upcoming months. Until then, you are invited to reach out to the team with any questions or comments. Thank you and good bye for now.
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Arbe Robotics Ltd. Earnings Report Highlights

  • Arbe Robotics Ltd. reported a significant miss in both earnings per share (EPS) and revenue for Q1 2024.
  • The company's revenue and EPS fell short of analysts' expectations, indicating a challenging quarter.
  • Despite financial challenges, ARBE's strong balance sheet metrics suggest financial stability.

On Wednesday, May 22, 2024, Arbe Robotics Ltd. (NASDAQ:ARBE), a company specializing in Perception Radar Solutions, reported its earnings before the market opened. The earnings per share (EPS) was -$0.16, missing the estimated EPS of -$0.07 by a significant margin. Additionally, the company's revenue for the quarter was reported at $137,000, which was considerably below the expected $330,000. This financial performance indicates a challenging quarter for Arbe Robotics, as it navigates the complexities of the radar technology market.

Arbe Robotics Ltd. conducted its first quarter 2024 earnings conference call on the same day, featuring key company participants including CEO Miri Segal-Scharia and Co-Founder/Director Kobi Marenko. The call, as highlighted by a Seeking Alpha article, was attended by several analysts, demonstrating the investment community's keen interest in the company's financial health and future direction. Despite the anticipation, Arbe's reported quarterly loss of $0.14 per share did not meet the expectations set by analysts, marking a decline from the previous year's loss of $0.13 per share after adjustments for non-recurring items.

The revenue figures for the quarter ending March 2024 were also disappointing, with Arbe posting $0.14 million, falling short of the Zacks Consensus Estimate by 54.33%. This represents a decrease from the $0.36 million reported in the same period a year ago, underscoring the company's ongoing struggles to meet consensus revenue estimates over the last four quarters. Such performance highlights the challenges Arbe faces in achieving its growth targets amid a competitive radar technology landscape.

Arbe's focus on high-definition radar systems for leading OEMs underscores the critical nature of its technology for enhancing automotive safety. CEO Kobi Marenko emphasized the company's role in enabling OEMs to meet the latest NHTSA safety standards, crucial for Automated Emergency Braking (AEB) functionalities and advanced safety features. However, the financial results for Q1 2024, with a negative gross margin of 194%, contrast sharply with the positive gross margin in the corresponding quarter of 2023, indicating significant financial challenges.

Despite these challenges, ARBE's financial metrics such as the price-to-sales ratio (TTM) of approximately 105.59 and an EV to sales ratio (TTM) of around 103.01, along with a minimal debt to equity ratio (TTM) of 0.016, suggest a company with a strong balance sheet. The current ratio (TTM) of about 6.15 further indicates Arbe's robust ability to cover its short-term liabilities with its short-term assets, providing a glimmer of financial stability amidst its revenue and earnings struggles.