Arbe Robotics Ltd. Q2 FY2025 Earnings Call

Ladies and gentlemen, thank you for standing by. Welcome to the Arbe Robotics Second Quarter 2025 Results Conference Call. As a reminder, this conference is being recorded. You should have all received by now the company's press release. If you have not received it, please contact Arbe's Investor Relations team at EK Global Investor Relations at 1 (212) 378-8040 or view it in the Investors section of the company's website, arberobotics.com. I would now like to hand over the call to Mr. Ehud Helft of EK Global Investor Relations. Mr. Helft, would you like to begin, please?

Yes. Thank you, operator. Good day to all of you, and welcome to Arbe's conference call to discuss the results of the second quarter of 2025. 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 earnings release also pertains to this call. Today, we are joined by Kobi Marenko, Arbe's Co-Founder and CEO, who will begin the call with a business update. Then we'll turn the call over to Karine Pinto. After that, we will open the call up to our listeners for the question-and-answer session. With that, I'd like to turn over the call to Kobi.

Thank you, Ehud. Good morning to everyone, and thank you for joining us today to discuss our results and recent business developments. I will begin by reviewing some of our current business highlights. We are pleased with the strategic progress we made in the quarter. Our main target is to win bids with the large OEMs of the world. As each month passes, we are making progress. Arbe received a strategic order for the use of its chipsets in large-scale data collection projects. These chipsets were shipped and will be deployed on fleets of more than 100 vehicles operated by leading automotive manufacturers. In general, there is a growing industry-wide recognition among OEMs that high-end imaging radar is a requirement for safe hands-free driving capabilities. It is clear that high-resolution radar delivers superior performance in complex and challenging conditions, filling critical perception gaps and enabling safer, more reliable autonomy. The market is moving forward solutions based on broad sensor fusion, signaling a departure from reliance on vision-only approaches. As a result, we are now in imaging radar selection programs with several of the world's leading OEMs. Magna and HiRain, our main tier-1 suppliers, are competing with our chips in all of those opportunities. Furthermore, our collaboration with NVIDIA is enabling us to move strongly forward with our customer engagements. Equally important is our solid progress in non-automotive applications. We are scaling up chip deliveries to Sensrad as they grow their customer base and increase deployment volume across a broad range of applications. We are very pleased to say that for the first time, Sensrad is delivering radars for defense applications, a growing radar applications market. This demonstrates the versatility of our technology for broader industrial and mobility markets beyond the passenger automotive market. We also announced we've signed a new comprehensive support and maintenance agreement with Sensrad under which we will receive a recurring fee to support their 4D imaging radar program based on our advanced chipset technology. We continue to move ahead with the various bid processes with our target OEMs. Some of these have progressed, and we've successfully advanced to the final stages of the process. At this point, we are no longer competing against a large group of suppliers. We are now one of the final few radar technologies remaining in this bid stage. While the timing of the selection processes is not under our control, we are pleased with the progress we have made in recent months, and it remains our goal to achieve 4 OEM bid wins within the coming year. Our initiatives are aligning with the best of OEM selection, and we anticipate that Arbe's radar technology will serve as a key enabler for 2028 passenger vehicle platforms, and we expect our revenues to begin in 2027 and ramp up in '28 as our chipsets are used in high-volume production. While 2027 may still seem some time away for us, 2027 is around the corner, and we are already preparing accordingly. Thanks to our strong balance sheet, we have the runway to support all programs as our revenues reach the ramp-up stage. Other business highlights: HiRain Technologies, our leading tier-1 supplier in China, launched the LRR615, a long-range imaging radar system powered by our chipset. Their system offers ultra-high resolution and reliable performance in all weather and lighting conditions, presenting a cost-effective and scalable sensor that complements cameras and offers a cost-effective alternative to LiDAR, especially in China. HiRain is preparing to ramp up production capacity to deliver tens of thousands of units annually. China's State Administration for Market Regulation proposed a new regulation that mandates highly advanced ADAS testing for all new Level 1 and Level 2 vehicle models. These requirements exceed the capabilities of the radar systems that are currently generally available in the Chinese market. We believe Arbe's high-definition radar technology can enable OEMs to enhance ADAS performance to meet these new standards once adopted, creating a significant market opportunity for us in China even in 2026. In closing, Arbe is very well-positioned to take advantage of the industry transition to high-resolution radar. The progress we've made over the past year across OEM partnerships, tier-1 integration, and cross-sector adoption demonstrates the maturity of our execution and the strength of our ecosystem. We have a number of catalysts coming up over the next year as we expect that the OEMs we are targeting conclude the radar selection processes for the 2028 car models. Based on a solid financial foundation, we are positioned to lead the industry in the adoption of ultra-high resolution radar, and we remain focused on unlocking long-term value for our shareholders. We expect our technology to be a key enabler in high-volume 2028 passenger vehicle platforms with revenue growth beginning in 2027. We look forward to sharing more as we continue to move forward. Now I'd like to turn it over to our CFO, Karine, to go over the financials.

Thank you, Kobi, and hello, everyone. Let me review our financial results for the second quarter of 2025 in more detail. Revenue for the second quarter of 2025 totaled $0.3 million compared to $0.4 million in Q2 of 2024. As of June 30, 2025, backlog stood at $0.5 million. Gross profit for Q2 2025 was negative $0.2 million compared to negative $0.04 million reflecting the impact of fixed cost components given reduced revenue year-over-year and revenue mix costs. Turning to operating expenses, total operating expenses for Q2 2025 were $11.3 million, down from $11.6 million in Q2 2024. The decrease in operating expenses was primarily attributable to lower share-based compensation expenses resulting from the full vesting of prior grants and to a reduced volume of new grants. This decrease was partially offset by increased bonus liability grant accruals, labor costs, and unfavorable foreign exchange effects. Operating loss for the second quarter of 2025 was $11.5 million compared to an $11.6 million loss in the second quarter of 2024. Adjusted EBITDA, a non-GAAP measurement, which excludes expenses for non-cash share-based compensation and for non-recurring items, was a loss of $8.9 million in Q2 of 2025 compared to a loss of $7.5 million in the second quarter of 2024. We believe that this non-GAAP measurement is important in management's evaluation of our use of cash and planning and evaluating our cash requirements for the coming period. Net loss in the second quarter of 2025 was $10.2 million compared to a net loss of $11.7 million in the second quarter of 2024. As of June 30, 2025, Arbe held $26.3 million in cash and cash equivalents and short-term bank deposits as well as $35.7 million in long-term bank deposits. Turning to our outlook, we would like to reiterate what we previously said. Arbe's leading radar technology remains a top priority for key decision-makers in the automotive industry. While broader economic shifts have led to delays in automakers' rollout of advanced driver assist systems, decision timelines have been extended. Arbe continues to engage closely with industry leaders, advancing through RFQ stages and strengthening its position for adoption. We continue with our goal to pursue 4 design-ins with automakers in the coming year. Arbe maintains its overall financial expectation for 2025. We expect annual revenue to be weighted towards the end of the year in the range of $2 million to $5 million. Continued expectation for adjusted EBITDA for 2025 to be in the range of $29 million loss and $35 million loss. Now we will be happy to take your questions.

The first question is from George Gianarikas.

I'd like to ask first about the 4 design wins that you expect in the coming year. Curious as to how that number has changed at all over the last few months since we last spoke. And what the competitive set looks like? It sounds like you feel like that has tightened a little bit. And if you could share any details around how you feel that set has changed as well.

Yes. I think that overall, the amount of OEMs that we are working with didn't change. What really changed is the environment and the understanding of every OEM that is starting to develop a real, let's call it, L3, hands-free, eyes-off driving, that understands that current imaging radar, low-end imaging radar cannot solve the problem. With the high level of channels radar that has at least more than 1,000 channels, which our chips support as well as the Mobileye chipset, are the only candidates that can really solve the problem for L3. What we saw is that even in programs that they were considering to take an off-the-shelf imaging radar as an option, they decided to focus and narrow the competition to what I would describe as a two-horse race between the two companies. The only two companies today that have a real high-end imaging radar that can solve the problem for L3, as I mentioned. The other thing that we are seeing is that when OEMs begin the data collection with our radar, of course, alongside Magna's radar based on our chipset or with HiRain's radar based on our chipset, they see that for a bit of a lower-end application, what is called L2+, L2++, which refers only to hands-free driving, imaging radar can actually solve the problem, and they are looking to expand the selection to those kinds of applications. Overall, I don't see any customers in the market today that would say high-end imaging radar is not fit for hands-free, eyes-off applications. The fact that there are very few competitors in this market puts us in a very good position to lead.

Is it possible for one OEM to pick multiple vendors for imaging radar?

Not really. I think that, first of all, the data collection - because we are now in a world of a full AI stack - requires effective data collection. However, to have effective data collection, we are talking about millions of kilometers of driving, not just millions but truly millions of kilometers, or even miles. It requires 10 or even 100 cars driving for a year to collect the data and to train the algorithms. Therefore, using two radars on the same application makes no sense. It's possible to select a different radar for L3 stack and a different radar for L2++ stack, but I don't see an OEM selecting two radars for L3.

And maybe just as a final follow-up. You mentioned in your release potential for non-automotive growth. You listed a couple of applications, including the defense sector and smart infrastructure. Can you sort of expand upon that a little bit, if possible? What other non-automotive applications are you seeing potential traction with over the next few years?

Yes. First of all, defense is a growing sector in the last 2 or 3 years. Of course, it's coming from different sides - such as detection, border protection, to autonomous trucks moving supplies to the troops, or detection of drones attacking and so on. There is a strong demand for low-priced radar in the defense sector. It's not the massive radars that big industries are building today, which can cost millions of dollars. There is a need for radars in the range of $1,000, $2,000, or $3,000. Of course, it's not at the volume of automotive, but the margins are better. Smart infrastructure, as you mentioned, is also a growing sector. There are a few other verticals that we're already seeing traction with that we cannot yet announce. We believe that we will be able to announce many things that are developing as we move past September or October after the summer vacation. But we feel that the non-automotive market is growing better than we expected, and we will start seeing nice revenues shorter than in automotive. It is not at the volume of automotive, but we see that it is a strategic leg to the company.

This concludes the question-and-answer session. Before I ask Mr. Kobi Marenko to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available by tomorrow on Arbe's website, arberobotics.com. Mr. Marenko, would you like to make your concluding statement?

Yes. On behalf of the management of Arbe, I want to thank our shareholders for their ongoing interest and long-term support of our business. We also greatly appreciate the dedication of our employees and partners. In the coming months, we will be engaging with investors and expect to see promising revenues sooner than in the automotive sector. While the volume is not at the level of automotive, we view this as a strategic aspect of the company.

You got cut off in the last sentence. Kobi?

By contacting us at investors@arberobotics.com to schedule a meeting. And with that, we end our call. Have a good day.

Thank you. This concludes Arbe's Second Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.