Earnings conference call (announced in 6-K)

Good day, and welcome to the Arbay Robotics First Quarter 2026 Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star than 1 on a touch-tone phone. To withdraw your question, please press star than 2. Please note, today's event is being recorded. I would now like to turn the conference over to Kenny Green of EK Investor Relations. Mr. Green, please go ahead.

Thank you. Good day to all of you, and welcome to our base conference call to discuss the results of the first quarter of 2026. 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. If you have not received a copy of the release, please view it in the Investor Relations section of the company's website. Today, we are joined by Ram Mathness, Arbe's Chief Executive Officer, who will begin with a business and strategic update. Kobi Marenko, President and Co-Founder, who will provide perspective on Arbe's long-term direction. And Karim Pinto-Furmanbong, Chief Financial Officer, will review the financials. Following financials, and with that, I'd like Ram, please go ahead.

Thank you, Kenny. Good morning, everyone, and thank you for joining us to review Arbe's first quarter 2026 results. I stepped into the CEO role in April, and I see significant potential ahead for Arbe. During the first quarter, making strong progress and accelerated on the strategy we set out at the start of the year. Today, I will focus on the main areas where we are making progress. Alba is growing from a chipset-focused automotive company into a supplier of complete radar solutions across automotive and increasingly into a justinth market. This quarter, we hit several commercial milestones that reflect this transition. We began shipping chips into China through our Tier 1 hiring. We received orders from Robotaxi customers. We also received orders for data collection programs with global automakers and leading mobility players. I will now go deeper into each of these areas, starting with automotive. Let's start with China, the fastest-moving automotive market in the world. During that quarter, we shipped the initial batch of chipsets to Hyman. These chipsets support the production of 48-by-48-channel radar, a project that we announced in December in which Hi-REN is developing a Level 4 autonomous vehicle solution for a Chinese automaker. In parallel, Hi-REN is developing new radar, also based on our chipset, with 24-by-12 channels designed as a lower-cost system that can be used by a wider range of vehicles. This configuration complements its existing high-end 48x48 radar system based on our chipset. With our technology, Hi-Ren is becoming a key radar platform player in China. It can offer OEMs a path from high-end radar systems that are available today in China to full 2K ultra-high resolution performance. China sold 34.4 million vehicles in 2025 to a local T1 RBGangs direct access to one of the world's largest and fastest-moving markets for Level 2 Plus and Level 3 deployments. Turning to robotaxis, we received orders for our 10th radar system from global robotaxi companies. These systems support Level 4 autonomy and put 360-degree sensing. This clearly shows that our high-resolution radar delivers the performance and coverage required for Level 4. More broadly, this is strong and growing interest for our automotive chipset. We are taking part in data collection programs with global automakers and leading mobility players. We have progressed into advanced collection processes with specific Chinese and European automakers. This evaluation focuses more and more on the specific use cases where cameras and LIDARs fall short and where imaging radar becomes the key sensor. This presents our industry interest in our radar technology as a core sensing platform for autonomous driving programs. This interest comes alongside an important shift in the automotive market. Recently, several leading OEMs have revisited their Level 3 programs. We don't see this as a rejection of eyes of autonomy. We see it as a reset, going back to the right basics of autonomy. The first generation Level 3 systems had clear limitations. They were geofence. Some were limited in speed. Some limited to good weather only. And many never reached commercial deployment. Beside the maturity of the algorithm, we believe that one other main reason for that is related to the performance of the sensor, and specifically, imaging radar not providing the needed performance. Based on our discussions with many OEMs, automakers are now actively looking at the next generation eyes off platforms and looking for sensing that can support levered re-use cases. This is exactly the gap our high-resolution radar is designed to fill. We also wanted to understand what drivers want from the eyes of autonomy. A survey of 1,000 people across the U.S., Europe, and Asia came with a clear message showing that drivers are willing to pay, willing to switch their car, and even their brand for fully operational Level 3, Level 4 autonomous driving. Consumers are ready for eyes of autonomy, but only when it is safe, smooth, and reliable. That is exactly the capability that Arbe's ultra-high-resolution radar enables. You are invited to our website to learn more about this survey. Before moving beyond automotive, let me briefly touch on physical AI, because it's becoming central to where our technology plays. We are seeing how the revolution in AI and machine learning is introducing a new generation of algorithms. Those algorithms, and specifically vision language action models, are transforming how intelligent systems sense, understand, and interact with the physical world. In automotive, it drives nothing but a breakthrough progress for level 3 and level 4 capabilities. And beyond automotive, it opens a wide opportunity across robotics, logistics, and other autonomous systems. These physical AI systems are only as good as the real-world data they receive, especially in safety-critical environments such as vehicles. This is where our best fits. Our radar provides dense sensing, long-range, low latency, and consistent performance in all weather. This is exactly the type of machine-understandable input that AI-driven autonomy needs. During the quarter, NVIDIA announced it's expanded the global drive Hyperion ecosystem to accelerate your goal to full autonomy and cited Arbe as part of its platform. Our ongoing work with NVIDIA on radar-based free space mapping and AI-driven automotive capabilities is one example of how we are placing Arbe at the center of this major shift. Now let's look beyond automotive, where our technology is opening meaningful new opportunities. The first important development is that Arbe has began selling complete end-to-end radar systems in addition to selling cheap sets. This allows us to address markets where consumers want a full radar solution and where sales cycles are much shorter. We already started shipping these systems to players across defense, homeland security, transportation applications, perimeter security, physical AI, and several other applications. To support this, we have also set up dedicated production lines to scale system manufacturing. Taken together, these milestones show that our leadership in automotive radar can extend into perception-critical markets. We are expanding our reach, broadening our opportunities, and significantly increasing our total addressable market. With that, I'll turn the call over to our president and co-founder, Kobi Maranko.

Thank you, Ram, and good morning, everyone. Stepping into the president's role, my focus is on our long-term strategy, our strategic partnerships, and guiding investments that accelerate our next phase of growth and commercialization. During the first quarter, we strengthened our balance sheet. We closed an underwritten registered direct offering that raised $18.5 million in gross proceeds. This gave us the financial flexibility to invest in Arabe's current phase of fast growth. What gives me a great deal of confidence is what this quarter demonstrates. Arabe's technology platform is broader and can focus on multiple end markets as well as automotive. The same ultra-high-resolution radar that we built for automotive can be and is now beginning to be adopted much more broadly. We see increased interest and potential, and in some cases, initial system cells in homeland security and smart infrastructure, as Ram already mentioned. And finally, the rise of physical AI, together with the OEM's demand for better autonomy, lays directly to our strength, long-range, all-conditioned environment sensing. RAM has recently stepped into the CEO role with strong execution focus, deep product knowledge, and the commercial that is needed. We will take Arbe from where we are today to scale radar systems company across many markets. I have worked closely with Ram over many years, and I have full confidence in his abilities, as well as that of the entire team, to bring Arbe to the next phase. I am more excited than ever about Arbe's potential over the coming quarter.

Thank you, Kobi, and hello, everyone. Let me review our financial results for the first quarter of 2026 in more detail. Revenue for the first quarter of 2026 totals $0.5 million compared to $0.4 million in Q1 2025. Backlog as of March 31, 2026 is $1 million. Gross profit for Q1 2026 was a negative $0.1 million compared to a negative $0.3 million in the same period last year. Turning to operating expenses. Total operating expenses for Q1 2026 were $11.2 million, down from $13.1 million in Q1 of 2025. The decrease in operating expenses was primarily driven by lower share-paid compensation expenses, reflecting earlier grants that are now fully vested, along with last year's award being structured with half in cash and half in equity. The decrease was also related to the Q1-25 tape-out expenses, which are reduced as we advance toward productization. This decrease in operating expenses was partially upset by the weakening of the U.S. dollar, mainly against the Israeli shekel and to a lesser extent by labor-based provisions and a merit increase. Operating loss for the first quarter of 2026 was $11.3 million compared to an operating loss of $13.4 million in the first quarter of 2025. As previously announced, during the quarter, we implemented cost reduction measures that are expected to reduce our ongoing operating expenses by approximately 15%, with the full impact expected to take effect starting during Q2. Adjusted EBITDA, a non-GAAP measurement which excludes expenses for non-cash-shared base compensation and for non-reoccurring items, was a loss of $9.9 million in Q1 of 2026, compared to a loss of $9.7 million in the first quarter of 2025. We believe that this non-GAAP measurement is important in management's evaluation of our use of cash and in planning and evaluating our cash requirements for the coming period. Net loss for the first quarter of 2026 was $9.4 million compared to a net loss of $13.8 million in the first quarter of 2025. Net loss in Q1 2026 included $1.9 million in financial income compared to $0.5 million of financial expenses in Q1 of 2025. As of March 31, 2026, ARBE held $53.6 million in cash and cash equivalents and short-term bank deposits. Turning to our outlook. We are reaffirming the 2026 guidance we provided in February 26. We continue to expect full-year revenue in the range of $4 million to $6 million, and an adjusted EBITDA loss in the range of $28 million to $31 million loss. Now, we will be happy to take your questions. Operator?

Thank you. We will now begin the question and answer session. To ask a question, you may press star than 1 on your telephone keypad. To withdraw yourself from Q, please press star than 2. Once again, that's star than 1 if you have a question. And our first question today comes from George Gianarchos with Canaccord Genuity. Please go ahead.

Hi, everyone. Thank you for taking my questions. I was wondering if you can go into a little bit more detail around the traction you're seeing in defense-related applications, drones, et cetera. Thank you.

So, thank you, George, for the question. So, basically, around the defense, there are a few applications that our radar can function. The first is not so different from our automotive applications. So, it's autonomous vehicles, whether they are supply tracks or even armored vehicles. All of them want to drive safe, especially off-road in environments that are full of dust, rain, fog, and all of the main problems that the radar is the best sensor for that. And for that, we already have a client, the American Army, that bought from us hundreds of units. and we see another order for that as well. Second application, defense to get into this area of a perimeter that we want to defend, or even drones that can attack or supply or drugs to those. definitely see this as something that it's an application that our radar can supply. But on top of it there is, I would say that those are the two main negotiations that we are in, but there is a few other smaller applications that the especially our radar. You know, if a year ago we were not even considering those markets, today we are focusing on that and on the business development with all of the leading players with the big names of the defense industry as well as the new players. Also, this market is going through a real transformation. The players that were there 10 years ago, like the Lockheed Martins of this world, are also changing, as well as there is a new emerging players that are taking their market share. And we are trying to work with, you know, the old players as well. Thank you.

And maybe just as a follow-up, you obviously mentioned the NVIDIA reference design. I'm wondering what the conversations have been like, How much additional traction or how has that changed any of the conversations you're having with OEMs and other partners in terms of deploying your imaging radar alongside NVIDIA?

So I think that this question refers a lot on who are the players that really can potentially bring AV stack, the autonomous vehicle software stack, to the market. because eventually autonomous driving is all about software, all about algorithms and machine learning. And for sure, NVIDIA is the top player in the market today on that. So this is very important from the perspective of all the OEMs. Either they selected NVIDIA or even if they didn't select yet, I think they are all looking at what's going on in the industry and who has the potential to get the AV stock to the finish line and really provide a reliable and sustainable solution to the consumer. So eventually you want to get into your car in the morning and drive safely to work and let the car drive it for you So you can do something else using the autonomous vehicle feature of your car. And there is a race right now. NVIDIA is into the market. I think with China.

Thank you so much.

Thank you. And as a reminder, if you'd like to ask a question, please press star than one. Our next question comes from Casey Ryan at Amrex. Please go ahead.

Hello. Good evening, everyone. Thanks for the terrific update. I had a couple questions. Would you care to describe – it sounds like you have multiple robo-taxi opportunities. Is there a regional tilt to those, or are they global, meaning North America, Europe, China, or are they focused in one region?

So the opportunities that we see right now are coming from North America, and we see also in China. So the main sets are North America and China.

Okay, that's terrific. And then when you talk about supplying sort of the like full radar system versus a chip set, can you talk about maybe what the revenue differential or sort of the pricing differential is between those two? as we think about unit growth in both products?

Yes. So if we look at it, there are several factors that influence the change and significantly increase in the AUP, the average unit price, when we talk about specifically the non-automotive, the non-private automotive. Two factors. One is the fact that we are selling a complete system, not just the chipset, and that obviously drives the average unit price up. But also the volumes are much lower. So when we work on a Level 3 project with an OEM, the volumes are really high, Okay, but then the negotiation power and the economy scale drives the AUP down. When you talk here about those projects, if it's a robotaxi, robotracks, commercial vehicles, defense applications, The volumes are significantly lower on one side, but the AUP is significantly higher because there is no economy of scale to the level that you have in the automotive industry. So we see a significantly higher AUP in the business of the radars or the complete system.

Okay, and then just sort of, you know, a small thing, but do you think ultimately long-term the gross margins for both product lines are similar, or do you think, you know, sort of the complete radar system might be lower long-term?

Yeah, so usually the gross margins, if you look at the mid-scale projects on systems are a bit lower than when you talk about chipsets. They are a bit lower. That's always expected because when we charge for chipsets, we charge for the differentiation that we bring. When you charge for the system, you charge also for the mechanics, for the passive, for other components that are there basically. So when you look just at the cost, the dollar profit per system is significantly higher. When you look percentage-wise, yes, it's lower. When you look at the absolute dollar value, it's...

Of course, worth mentioning the volumes, which significantly different yeah no understood that's terrific and then just one last question for me maybe Karina on the backlog are we to take that as being kind of a 12 month backlog number or shorter or longer no this is a 12 months correct oh okay terrific thank you and and yeah so and like maybe to clarify for myself, that 1 million, it's fair to think would be consumed in 26, or are you saying it's kind of 12 months from the end of Q1, basically?

It's 12 months from the end of 21, but I assume all of this will be in 26.

Okay. Oh, okay. Perfect. Understood. Thank you. It's a very positive update. I'll get out of the queue and let others ask questions.

Thank you. Thank you. And our next question today comes from Matthew Galenko at Maxim Group. Please go ahead.

Hey, thanks for taking my question. I'm curious what the cost was to stand up the full production line for radar. And I guess given your current capacity there, do you expect that's sufficient to meet what you have in the pipeline for defense and, you know, AI applications, or do you expect only to add to capacity over time?

So we build our production line to supply the current capacity that is needed, which we assume is going to be hundreds of systems per month, thousands of systems per year. The investment is not so dramatic. It will be on the low side of the hundreds of thousands of dollars, not more than that. And we have the ability to increase this capacity and as the demand grows, this production line further down the road.

Excellent. Thank you.

And that does conclude our question and answer session for today. I'd like to turn the conference back over to Mr. Magnus, CEO, for any closing remarks.

On behalf of the entire management team at ABE, I would like to thank you, our shareholders, for your continued interest and long-term support of our business. This quarter marks the start of a new chapter for our day, a chapter focused on turning our technology leadership into commercial scale across many markets. We have our first system-level order, growing robot-active traction, and expanding Chinese market opportunities through hiring, and a clear position at the center of the next wave of eyes-off autonomy and physical AI. Based on all of this, we believe Arben is well-placed to deliver meaningful value. We look forward to addressing you on our progress next quarter, and I personally look forward to taking on the CEO role to bring Arben to the next level in its development. And with that, we end our call. Have a good day.

Thank you. Today's conference has now concluded and we thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.