Arbe Robotics Ltd. Q3 FY2024 earnings call

• Growth in number and depth of OEM engagement with 16 OEMs, 12 moving to advanced stages and 8 in advanced perception project base.
• Working with a leading European truck manufacturer to integrate imaging radar into next-gen sensor suit.
• HiRain developing radar-based ADAS system for Chinese OEM with Arbe's chipset, anticipated mass production by Q4 2025.
• Sensrad entered agreement to provide 4D imaging radar powered by Arbe's chipset to Tianyi Transportation Technology in China.
• Increased interest in radar technology for new markets like infrastructure, surveillance, etc.
• Successfully completed public offering of up to $49 million, proceeds to support 2025 production ramp-up.

In the third quarter of 2024, total revenue was $0.1 million, a decrease from $0.5 million in Q3 2023. Backlog as of September 30 was $0.3 million. Negative gross margin for Q3 2024 was $0.3 million compared to a positive gross margin of $0.1 million in Q3 2023. Total operating expenses in Q3 2024 were $12.2 million, up from $11.7 million in Q3 2023. Operating loss in Q3 2024 was $12.4 million, an increase from $11.6 million in Q3 2023. Net loss in Q3 2024 was $12.6 million, up from $11.7 million in Q3 2023. Adjusted EBITDA loss in Q3 2024 was $8.2 million, compared to a loss of $7.5 million in Q3 2023. As of September 30, 2024, Arbe had $19.1 million in cash and cash equivalents.

• Goal of four design-ins with automakers remains unchanged.
• 2024 annual revenue expected to be in line with 2023, followed by revenue growth in 2025.
• Adjusted EBITDA for 2024 projected to be in the range of $30 million loss to $36 million loss.

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

A: 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 time lines and major programs in place, in line to achieve hands free driving, eyes of driving on the highway, all of the western OEMs have those programs. Selection of imaging radar is key factor for that. So the only way to do a real hand free driving, eyes of 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 -- I've said this -- stated it early this year, in conference in Berlin. Dr. Jurgen Dickman, I would say, the leading expert in radar in automotive radar said that in order to have a real estate ADAS system, you must have a long-range radar that has minimum channels of 32x32 channels, which is basically orders solution and Mobileye. And following that, I think all of the major OEMs plan to select an imaging radar in 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, we definitely believe that selections -- the first selection would be made this year. And customers that not yet took 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 lied out, train the algorithm and launch a real hands-free driving third -- the second half of the decade, '28 -- '27, '28 year would be, I think, the starting point by 2030, we will see already a ramp-up. And 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 rare view.

Q: Good morning, Kobi. I have a question just on -- in your forecast for 2024, you mentioned that you'll be in full production by the end of 2024 and here we are. And 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 being starting to ramp revenue in '25? Thank you.

A: So I think we are more or less on track with our time table. We believe that by 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 be -- 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 '25, maybe a bit earlier, so second half of '25. And so as the end of '25 with – like, we said earlier, with the project that HiRain has with the leading Chinese car manufacturer.

Q: 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?

A: 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 a slow uptake of EVs on the West, probably it will be a mix. In China, where we already see something like 30% to 35% of new cars that’s been sold our EV’s, I believe that the new ADAS features will go only to EVs.