Arbe Robotics Ltd. (ARBE) on Q3 2022 Results - Earnings Call Transcript

Unidentified Company Representative: Thank you. Good morning, everyone, and thank you for joining us. Please take a minute to review the forward-looking statement. In the third quarter, we made significant progress with our Tier 1 partners. In fact, we are excited to share recent news. We have received a mass production preliminary order from hiring for the next year, which officially marks the beginning of a next step of our best journey into the mass production phase. I will go over this in more detail shortly. Today, we would like to share with you a deeper understanding of Arbe's ecosystem and our strategy of focusing on Tier 1 is accelerating our progress. As many of you are aware, market conditions across the entire automotive industry are changing, causing some delays in customer launch plans. From the beginning, we made a decision to focus on driver assistance and safety while keeping a realistic vision for the future of full autonomous driving, which we believe won't be commercially available before the end of the decade. To improve our resilience in these market conditions, we are reducing our costs, making sure that we are prepared to adapt to the longer time frames of Level 2+ and Level 3 ramp-up. In the automotive industry, the Tier 1 suppliers do the heavy lifting of radar system development as well as tech integration for OEMs. The combination of Alves breakthrough imaging radar chipset with Tier 1's innovative technology results in advanced radar system that we believe will provide unmatched safety to the industry. I want to share with you the perspective of some of our Tier 1 partners in their own world. After 5 years of extensive research among 40 radar chips and developers across the globe, Veoneer, a world leader in automotive safety choose to partner with AB. The combination of harvest patented imaging radar chipsets and Veoneer's patented waveguide technology will push the boundaries of perception performance. We are honored to have been selected by Veoneer who intend to provide the automotive industry with revolutionary radar-based solution, ensuring unmatched safety level 2 plus and higher autonomy. Let's hear what Chris Van Dan Elzen, the Executive Vice President of the Radar Product Area had to say about Veoneer's expectations from imaging radar, the role in the industry and the added value of our base chipset. Chris Van Dan Elzen: My name is Chris Van Dan Elzen, and I'm the Executive Vice President of the Radar Product Area at Arbe. Veoneer is a world leader in automotive safety. We participate in the market segments of active safety and restraint control systems as a Tier 1 hardware supplier and systems integrator -- we were founded in 2018 as a spin-off from Autoliv, and we have close to 70 years of automotive safety development. The radar portion of the year dates back into the early 1990s. We were one of the first to launch radar adaptive cruise control in 1999 with Mercedes and have built the product line up to having 16 customers around the world in every segment of radar from corners to front looking, rear looking -- veneers looking at this new segment that's growing in the radar world around imaging radars. And we have been tech scouting this space for the past 5 years, looking at new technologies and start-ups that are bringing innovations in this space. And after researching multiple companies and multiple approaches to the technology, being here chose the RBA chipset because of a couple of main points. One is the strength and the power of the capability of this chipset to do unique use cases like trying to get through a toll roof, determining if it's occupied or the arm is down. In addition to that, the business model around being able to use their chips and create a unique radar for Veoneer, really fits within our business model of being a Tier 1 and bringing that value to the OEM. In terms of the imaging radar market, we see this as an expanding new space. Customers today are implementing 3 to 5 radars per car -- in a base case just to meet the 5 Star program. Going forward, to be able to meet the use cases of having the vehicle do more and more levels of autonomy when you push that cruise control button, we see the need for imaging radars looking at great distances with great accuracies. The number of customers that are already asking for information about this, leading up to designs that will turn into a request for quotation is numerous. And it's around the world. It's not one location or one segment of automotive. We're seeing this across the board. Arbe has just signed an agreement with Arbe to expand into this new and growing market. And we look forward to our time together sensing our space our portion of this fantastic opportunity. Unidentified Company Representative: In a separate statement, Chris added, Veoneer is now passing 50 million radars produced, and we see the overall market growing to roughly $250 million per year by the end of the decade. As this market grows overall and the imaging radar segment of the market rapidly grows with it, we are looking forward to the journey together with ARB. High-definition radar is an important part of advanced ADAS. Valeo, the world's leading ADAS Tier 1 player has also selected our best chipset for its radar systems. We are very excited to be partnered with such technological leader in areas that are at the heart of the transformation of the automotive industry and sustainable mobility across the globe. Valero is a leader in the LIDAR market, adding imaging radar to its offering contributes to comprehensive sensor suit, which is highly important for OEMs. Mandry , the Vice President of the Ranging Sensor Product Line of Valero shares a few thoughts about the opportunity for imaging radars and house solution with Arbe’s chipset stands out. Unidentified Company Representative: My name is Martin Mandy . I'm working from Valeo -- Visen Valeo . I'm Vice President for the product line to is a global automotive supplier owned almost 100 years ago. Mali was operating in the mega trend of the automotive industry, electrification, ADAS acceleration, lighting everywhere and material experience. Within ADAS, there is sensors required, and we are providing the sensors as a system. The radars that we're providing to our customers are fulfilling different needs of our customers, depending on their requirements for automization -- we provide side sensors, corner centers and fund sensors to our customers. The fulfill requirements in the near field as well as in the participants. These sensors work in a system together with the other sense that value you provide like camera, ultrasonic sensors, LIDAR. Valeo operates globally and has sales of €17.3 billion in 2023, 13,000 employees and operate in 31 countries. Valero has shipped more than 20 million greater centers to date and has 15 years of innovation in radar technology. We believe that Arbor has a specific innovative product with the chipset that we are using. The number of radars per car is significantly increasing. And radars play an important role in achieving functionalities that are not existing today but are in demand of tomorrow. Our ambition is to achieve 15% of global corn radar market share in 2030 to be the number 1 in HD radar market by 2032 to partnership with Heidecipset provider. Arbe and Valeo in a combination can position uniquely in the market and achieve great success together. Unidentified Company Representative: Valero is a great Tier 1 partner, and we are honored to provide the chipset foundation for the radar solution. It is well known that China has the largest vehicle market in the world and is leading the way for an autonomous vehicle future. Another key Tier 1 relationship with Wife Group is helping us make great achievements within the critical market. WF is developing radar system based on our best technology and OEM requirements and has a radar manufacturing plant in China. This collaboration focused on mass market production, safety compliance and providing customized for the imaging radar solution to automotive OEMs and for autonomous vehicles, trucks, commercial vehicles and traffic applications. We are pleased and honored to present the President of Group, Mr. Zhu Yufeng , describing this outlook on the market and the value of our joint solution. Unidentified Company Representative: I'm the President of is solid in 1958. We are a famous Tier 1 supplier in Chinese auto market, while top 3 China auto parts industry companies and also listed in the top 100 available public companies in the China member stock market. We now have 21 subsidiaries, 2 JVs with nearly 8,000 employees all over the world. The group is a well profitable public company. Our revenue has reached TWD 1.36 billion in 2021. From the beginning of waste foundation, we have been adhering to continuously technology innovation and product upgrading. The group has 4 major business segments, which are commercial power putting hydrogen energy, intelligence and electrification, industrial and others, forming a competitive industry chain of auto products. We believe our next generation imaging leaders designed with Avis chipset, which used 48 mid and 48 this attendance to grade 2, 3 CI petro-channel lay for digital being coming instead of using a reliable figures will deliver unparallel leader performance by leveling thousands of venture transmitting and receiving channels, providing customized for the imaging leader solution to passenger and commercial vehicles as well as topical applications at a competitive price. Telenet is one of our new business strategies. If we need to build up our groundbreaking leader system, we need an advanced and flexible solution after a lot of market research, we noticed that ABI has the most advanced solutions. That's why we choose to work with -- last year, there were vehicles sold in China. We estimate there will be 33 bidding vehicles, manufacturing and equipment with the leaders here in 20 cities. Almost 40% of the new vehicles will be equipped with the leaders, of which 20% will use next regional imaging leader. We believe with the cooperation of; A) our solution will assume a leadership position at 15% to 20% share in the market in the future. Relating to -- we foods President statement, we believe that our relationship with Gifu will enable -- we food to provide unparalleled level of safety to vehicles and become one of the leading next-generation radar providers in the Chinese market. The last key partner I will introduce today, hiring technologies is a leading Chinese ADAS Tier 1 supplier. As I mentioned earlier, hiring has placed a preliminary order for 340,000 chipset for Q3 2023 until the end of 2024, which marked the beginning of Arbe’s mass production phase. In Q3, we announced that hiring was selected by the Port of Resha in Shandong province to provide perception radars based on Arbe’s chipset. This announcement is significant because trucks require the highest standard of safety and does have the biggest need for an advanced sensor solution due to their collision record and the high risk associated with the size of commercial vehicles. As we reported in Q2, Hiring announced that it is undertaking major OEMs and autonomous driving projects with our radar solution, and it has projected that it will reach mass production next year. Our connection with each and every Tier 1 partner broadens our outreach and accelerates our past to market. We thank you all of our Tier 1 partners for choosing and trusting -- are and for working hard to secure customer wins. As we mentioned last quarter, our Linx RADAR is the industry's first radar. Link addresses a significant market need for 360 degrees long-range high-resolution sensing at an affordable price. During the third quarter, Linx won the AutoSense Award for Hardware Development of the Year -- we view this award as strong market recognition in our best technology, and we are confident that this will enhance our market position. As we look to the fourth quarter, we are proactively adjusting to changes in the market, and we believe we are prepared for any global uncertainties. Most importantly, we believe that our focus on ADAS and safety will prove to be the right strategy, and our relationships with Tier 1 will drive success. Now, I'd like to turn it over to our CFO, Karine, to go over the financials. Karine Pinto-Flomenboim: Thank you, Kobi , and hello, everyone. Let me review our financial results for the third quarter of 2022 in more detail. Total revenue in the third quarter was $1.3 million compared to $0.6 million in the third quarter of 2021. Backlog as of September 30, 2022, was $0.3 million. This does not include the recent higher in preliminary order. Gross margin in Q3 2022 was 72.5% compared to 30.3% in the same period in 2021. The gross margin increase was primarily related to economy of scale, revenue mix and lower cost per unit as we progress toward production. Moving on to expenses. In Q3 2022, we reported a total operating expense of $11.8 million, an increase from $8.5 million in the third quarter of 2021. The increase in operating expense was primarily driven by noncash share-based compensation expenses, labor cost increase and to a lesser extent, expenses associated with -- are being a publicly traded corporation, partially offset by a decrease in research and development material expenses. Net loss in the third quarter of 2022 was $9.9 million, which included $1 million of financial income compared to a net loss of $13.3 million in the third quarter of 2021, which included $5 million of financial expenses. Q3 2022 financial income resulted from interest deposits and favorable exchange rate revaluation, partially offset by warrant revaluation expenses. Looking at adjusted EBITDA in Q3 of 2022, a non-GAAP measurement, which excludes expenses for noncash share-based compensation and for nonrecurring items, was a loss of $8.4 million compared to a loss of $8 million in the third quarter of 2021. Moving to our balance sheet. As of September 30, 2022, Arbe had $63.2 million in cash and cash equivalents with no debt. With respect to our guidance for 2022, we would like to update our forecast based on recent market changes. Revenue is expected to be in the range of $4 million to $7 million. At this stage, our revenue are based mainly on sample sales that can shift between quarters. Despite this revenue reduction, adjusted EBITDA is expected to remain in the range of $34 million loss to $38 million loss. As Kobi said, we are actively taking certain measures to adjust to market changes, adjusting the timeline of production, reducing costs and keeping our focus on ADAS technologies with our Tier 1 partners. We believe that our strong balance sheet and adjusted cost structure will support our progress until market conditions have stabilized. Now please join us for a chat on the state of the automotive industry in light of the changing market conditions with Filo Khislavsky , a member of our Board of Directors. Filo is an executive adviser focused on technology strategies in the automotive and smart mobility markets. He previously founded Porsche Digital and served as its CEO. Before Porsche, Filo founded and served as Vice President of the Automotive and Smart Mobility practice at Gartner. Filo, we're thrilled to have you with us. Okay. So thank you Filo for joining us today and for this conversation about the state of the industry. We're hearing a lot about economic changes. How is it impacting the automotive industry? Unidentified Company Representative: Thanks for having me, first of all, it's an interesting time for the automotive industry. And the industry always goes in cycles. There's nothing new. And right now, I would actually say that the auto industry is still in a very positive operating mode. Why? Because for the most part, most companies still make good money in the automotive industry. They have attractive products that they're launching that they're selling. They are highly option typically, meaning their margins are pretty high, and there's still a lot of pent-up demand from the pandemic that happened over the last 2 years. So that's all good news for the automotive industry and cars are highly desirable for consumers, again. Of course, at the same time, we do see a little bit of clouding on the horizon, in particular with regards to sentiment that isn't clear from a consumer demand perspective, how it will evolve in the next couple of years, maybe even a couple of months. And of course, it's to the economic challenges -- that we're facing everywhere, including inflation, which is causing interest rates to go up, which makes it more expensive to actually buy a vehicle alone in the automotive industry. And of course, there is a consumer concern about used car values, which are beginning to soften a little bit. And most people trade in the used vehicle to get a new car, et cetera. So there are some clouds on the horizon, but overall, I think the auto-industry is still in pretty good shape. Unidentified Company Representative: And in this industry, what is the status of the ADAS from NAND and from autonomous vehicles on the other hand. So we are hearing about Robotaxi companies like ErgoAI shutting down. From the other hand, companies that are mainly based today on ADAS, like mobile went public, and the share price went up. What do you think about the status of the ADAS versus automotive or full autonomous driving? Unidentified Company Representative: And that's a really important question, actually. And I hope I can shed a little bit of light to this whole thing. Because to me, this is not surprising what's happening in the industry. Every time there's a new technology, a technology goes through a maturity cycle. And those cycles mean typically that there will be a consolidation in terms of R&D activities as well as market consolidation in an industry. And the company Gartner has a term for this. They call it the hype cycle. You have an initial technology trigger, then you have overinflated expectations that then go to the other extreme, that's called the and that will be followed by the slope of enlightenment. And eventually you have a plateau of productivity, where the technology becomes mature, provides real value. So what's happening right now with regards to ADAS autonomous vehicles follows that line. but there's an important distinction to be made between both of these areas, ADAS and autonomous vehicles, which the latter means it's the combination. It's the merging of all of these ADAS technologies into something that then eventually might lead to a self-driving even driverless vehicle at some point. And I think people had a lot of overinflated expectations. I mean it takes a long time to figure these things out. It's highly complicated. But as we are progressing towards that goal of having self-driving cars, there will already be value that will be presented to consumers, to the automotive industry to societies. And it's important to really differentiate between both of these areas going forward. Unidentified Company Representative: So where would you put the ADAS on the plate side of the Gartner hype cycle and the Autonomous driving down the heel today. Unidentified Company Representative: Definitely. I see that autonomous vehicles are at the bottom of this trough right now. We are entering this trough really quickly, right? And again, this is expected. This had to happen. There were way too many activities they were doing the same thing and not everybody can succeed. I see ADAS being much more progressed in a positive way, matured in a positive way. ADAS technologies are already relevant today. They provide value to consumers, to the industry. And I anticipate that over the next 3 years, in particular sensor technologies, advanced sensor technologies like imaging radar technology will actually come to a price point and capability point where they have the reliability and value that the industry will increasingly use that technology to provide better ADAS functionality and applications to consumers. And that's a big deal. So as we're all pursuing the self-driving car, in the meantime, there are real technology that provide real value today and tomorrow. And I think that's really important to understand. I anticipate that by the end of this decade, meaning in 8 years from now, every vehicle will at least have some basic form of ADAS capabilities in the car. Why? Because consumers are expecting that as well and because there's so much benefit in this, and it also presents an upsell opportunity for the automotive industry. Self-driving cars will definitely take longer. No question about this. I also believe that by the end of this decade, more people will actually at least occasionally experience self-driving technology, maybe even driverless technology, that it be on the trucking side, commercial vehicles, on the highways or maybe delivery bots that do this. It's not going to be something that we'll experience every single day and every single moment. but that was an overinflated expectation to have to begin with. But the technology is definitely there. And as we're progressing, especially on the ADAS side, there's real value to be had. And I do believe that because technology is maturing in a good way that you will see the technology being democratized, meaning that more and more vehicles will actually be able to have this technology in their cars, especially also since the automotive industry is working on new electronic architectures that will be launched by the middle of this decade, meaning by 2024, 2025, and those new architectures will make it much easier to include those technologies going forward. So this is a pretty big deal and it would be a mistake to throw ADAS together with self-driving vehicles in the same bucket and then look at it in a negative way. It would be a mistake from an innovation perspective, but even more so from a market perspective. Unidentified Company Representative: Thank you, Filo , for this perspective, and thank you, everybody, for hearing us. Now, we will be happy to take your questions. Operator: We'll take the first call from Josh from Cowen. Josh is here with us. Joshua Buchalter: Thanks for the forward presentation. I guess to start, can you walk me through what's changed materially from your perspective over the last few months that driving the guide down? And most importantly, how do you feel about the long-term outlook and some of the revenue projections you had given previously for, let's say, the middle of the decade given the changing environment? Unidentified Company Representative: So when we are looking now into Q4, what we see that is changed is a shifting of some of the orders for preliminary samples from our customers between the quarters. So as you probably know, in '22, our revenues were not really based on full production. The full production was expected to the second half of '23 and is based on starting of production in China and them with the announcement on hiring, we see that our plan that our early revenues and early production -- civil production revenues will come from China, we can say checkbox on that. The next phase, of course, is winning contracts outside of China in the western world. This is something that should happen over the Q1 and Q2 '23. And those winnings will contribute to our revenues by the end of '24 and '25. Joshua Buchalter: Got it. So I think you had previously communicated September to March was a time frame when you would expect to get some more clarity on some proposals you had out there. Is that sort of still the right time frame it sounds like maybe slipping into the second quarter of the year. Unidentified Company Representative: First quarter and second, yes. What we saw in the last quarter is that most of the OEMs shifted their selection and delayed a bit their selection. Some of them not meaningful, but some of them decided to skip to the next year model and to stay with the current low-end radars that they have today and to reselect, reevaluate the replacement of the radar in the second half of next year, but majority of the selection moved to Q1 Q2 ’23. Joshua Buchalter: Okay. And then my final question. Veoneer, can you walk me through how that came about? And then how material of an expansion of the opportunities is that win? And then I guess, when would we expect that to start contributing to revenue? Unidentified Company Representative: Yes. So first of all, Veoneer is one of the largest players in the radar market. I think the third player in this market, selling today 50 million ran of the year and expecting to reach 200 million rates by the end of the decade and shifting from the current rate of -- to imaging radars in the future, a major shift. So for us, we see Veoneer as a main player. They were the first company to introduce ADAS adaptive cruise control based on a radar to Daimler to Mercedes, and it's still one of their best customers. So where we definitely see Veoneer as a major win and the fact that they are basing their entire next-generation radar suit on our chipsets is a major win for us. The -- they will go to production, I believe, by the end of '24, early '25. So it's in line with our expectations. So of course, we will need to supply them with chips before they will be in full production mode. So second half of '24 is like our current -- like our original plan for the Western market is in line with their timetable as well as with the timetable of a low. Operator: Thank you, Josh. Now we'll turn the call to Suji. Suji from ROTH. Suji Desilva: On the progress here. I had a question specifically about Iran. I was curious for the unit forecast you gave here, is that a relatively linear progression through 23'24 -- or will it be more back-end like? Unidentified Company Representative: It will be back-end loaded, but it will be -- it's not really linear. It will go and progress as we go towards the back end as we stated. But it's starting strong. Suji Desilva: That's great. Fantastic. And you put out this forecast there. You have -- it seems like with high range you're working with, not just automotive but the trucking and then the ports, is there a potential upside to this number you've given as more customers later on? How should we think about that opportunity? Unidentified Company Representative: I think for '25, '26, definitely, for '23, '24, it's already a very good number. And we are supporting them and working hard with them to make sure that they will really be in production on the time frame that they want to achieve that I believe it's in line with their automaker customers. And we are trying to support them. It might be that by the end of 2014, there is an upside opportunity. But definitely, those are just the beginning. So assuming that this '24 numbers will be on time. I think in '25, we will see even much better from hiring. And they are just one of our partners in the Chinese market. Suji Desilva: And then maybe for -- the strong gross margin in the quarter. Were there some onetime elements to that? And what's the ongoing opportunity in gross margin? Unidentified Company Representative: So I think, as we stated, yes, onetime mainly in revenue mix, as we said, that it's currently early revenues and valuations. So they're not really predictive of the margin in production, and they're fairly highly favorable margin-wise -- when we go further, we're still behind the 60% margin in mass production. And so I think that's 16%, not about the margin . Operator: Thank you, Suji. Gary will be joining us from Fargo. We cannot hear you, Gary, for some reason. Gary Mobley: Well, hello, everyone. I was hoping that maybe you can give us an update on where you stand with your foundry partners in their ability to support your ramp when that day comes from commercial-related volumes. Unidentified Company Representative: Great. So actually, I'm going to visit the fab this week -- to see our facility there. We already have the entire testing facility, and it's working and the chips are in the final stages of full qualification. So all of the testing facilities and all of the equipment that is needed to reach to full production is already there. And the team of GLOBALFOUNDRIES together with our team, improving the test time in order to make sure that they will be able to test the chips on the capacity that is needed. On the side of the fab itself, we secured the capacity that is needed for our current customers. So the reasoning for hiring to give us this purchase order this preliminary purchase or the ones to make sure that they got the capacity from '23, '24, and we are working closely with our other customers to get from them also their purchase orders for '23, '24. So we will be able to make sure that the capacity for us. Gary Mobley: Appreciate that. And for my follow-up, I wanted to know to what extent in your outlook and sort of your long-term forecast long term figure in fiscal year '23 and '24, any sort of interruptions that may exist in your China customer base from Cove mitigation or some of the geopolitics that seem to be, I guess, specifically U.S. export restrictions and whatnot, these thoughts there would be helpful. Unidentified Company Representative: So first of all, regarding U.S. export limitations right now, there's no limitations on the technologies on chips that we are selling as long as Intel will be able to sell their chips to computers and TI will be able to sell their chips for radar. We as an Israeli company, a non-American company, we believe there won't have problems. And right now, I think that this is the case. Also, it's good to understand that hiring has facilities outside of China, where they are supporting their customers that are not Chinese or their Chinese customers that producing cars for exporting. So I believe that not all of this revenues will go directly to China. So it might -- part of them will go to plan it in the U.S. or planet in Europe where they have. Regarding '23 and '24, as you mentioned, our plan was on to base '23 and '24 on nonautomotive and on China. On the China side, we see that we are more or less in line with our plan. On the Western world, we see a bit of a shift that might influence the longer term. And also on the non-pure automotive, we definitely see delays like in delivery robots like in trucks and robotaxi -- we all see that they are not there. This wasn't a major part of our story of our entire revenues in '25, '26. But for the short term, this has a larger impact. We still don't know the exact numbers because since those customers are not like automotive that they give you now a focus for '26, those customers are living between the quarters. So we still need to see with them in the coming weeks what is their expectations for '23. So we will be able to get with the exact numbers of '23 only with our Q4 earnings. Gary Mobley: Thank you, both. Operator: Thank you, Gary. Now Matt from Maxim will join us. Matt? Matthew Galinko: Okay. So I wanted to touch on -- you covered a little bit of taking your -- taking costs down in the current environment. So can you maybe go a little bit further into where you saw opportunity to pay? Is it just in terms of engagements that you're pairing those down towards ADAS? And yes, just any color on this line? Unidentified Company Representative: Yes. So since the beginning, our main focus was on ADAS. So we always thought that it's going to be an evolution and not a revolution. So the technologies will start in Level 2, Level 2 plus, then Level 3. And in parallel, the Level 4, and we believe that Level 4 will start ramping up by the end of the decade. So our main focus, and this is why we are working with the traditional Tier 1 is on regular ADAS, where we believe that 90%, 95% of the revenues are coming. Of course, we announced the Auto-X win a few months ago. Otis today the largest player in the Chinese market. And as time goes by, they also remain one of the fewest players in this market because many other robotaxis are shut down. So we are supporting them as well in order to show that our technology has a long way to go also to Level 4. But in terms of revenues, ADAS from the beginning was our main focus. And as time goes by, we see that -- this strategy is really the right strategy because the full autonomous and the robotaxi and the curator track definitely will take longer than expected. Matthew Galinko: Okay. I mean I guess as a follow-up then, specifically, how are you -- or where are you finding opportunities to pair costs? And what does that look like as we move into Q4? Or to the extent you could talk about expenses for early 2023? Unidentified Company Representative: So we look very deeply in our cost structure, and we're doing several steps to optimize our capital structure. And in order to make sure our runoff time is long enough to keep the company going at breakeven -- we also are in the process of securing a credit line in order to make sure that we have also a stable ability, if needed, again, not now but in the future. And we're looking into every aspect of our cost in order to ensure we're working much more efficiently and then directly to production. But in general, our 23 expenses will be lower than '22. We reduced expenses across the -- both from our headcount towards other contractors as well as other expenses. So, we optimized the cost to make sure that we have sufficient cash to run even without any revenues for more than 2 years from now. And of course, with our revenues were our expected revenues and our initial purchase order, we should be good and. Matthew Galinko: Final question from me. I think it was last quarter that we talked about, you restructured your engineering team. I think you had 2 teams to maybe structure it a little bit differently. Did that contribute to lower costs in the near run? Is that more just an operating inflow change? And how has that worked out so far? Unidentified Company Representative: I think it will have so far great. It improved our ability to take the silicon into production and to focus on the telecom side very well. And from the other end, on the radar side to support our customers. And actually, today, we have 6 different customers with their radar fully operating. And this was because of this focus. So it helps us dramatically with the focus. In terms of cost, it's also a bit help in cost savings, but the reasoning at the beginning was -- the focus is also -- the byproduct was that it improved our expense structure. Also, we have the ability to take in-house some work, which we usually outsourced, and this is also an ability to reduce our cost. Operator: Thank you. Now we have Jamie from RF . Jamie, can you hear us? Jamie, we cannot hear you. Jaime Perez: I think it took a little bit of delay. Sorry for the phone only. I mean I'm Travis, so I don't have a good IT connection. So you mentioned the orders will be linear -- I mean, not linear, but lumpy. What about the backlog? Are you going to be booking -- how are you going to be booking backlog? Because you -- I know it's going to be significant. Is it going to be through multiple tranches? Or is it just going to be one large order into the backlog? Unidentified Company Representative: It will be trenched the baton customers on OEMs. But of course, from -- also what we get from a customer, we get it split the PO based on their forecast for the 6 months ahead. So that's the message that the backlog will grow. And as I mentioned, I think as mentioned in the PR in the press release that our current backlog does not include hiring preliminary order as well. Jaime Perez: Right. Okay. And the second one is more of a comment. Congratulations on partnering with Veoneer. That's a major player concern and they were looking to be acquired for Magna and it's a good foothold into the Western market. So, congratulations on that accomplishment. Unidentified Company Representative: Thank you, everybody. We are very pleased to have you join us today. To our employees and partners, your continued dedication is deeply appreciated. We look forward to updating you further on Arbor's progress in the coming months. Look out for updates as we prepare for several investor events as well as hosting a booth in CS. We'd love to meet you in person for further discussion, please contact assets, investor@ari.com or visit our site to schedule a meeting. Thank you all. Operator: Thank you.
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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.