Arbe Robotics Ltd.

Thank you everyone for joining us today. Welcome to ARBE's fourth quarter and full year 2022 financial results webcast. My name is Koby Marenko and I'm the co-founder and CEO of ARBE. I'm very excited to share the developments made by ARBE in 2022, especially in Q4, where we have progress from the proof of concept phase to the production and commercial deployment stage. After my presentation, Karin Pinto-Flumenboim, Arbe's CFO, will share a review of our financials and outlook. Next, Ram Machnes, our Chief Business Officer, will discuss the market forecast and the business opportunities that we are pursuing. Finally, Noam Arka, our CTO and my co-founder, will conclude the presentations and speak about Arbe's latest innovations and our vision for the future. We value your input and questions, so we will reserve time for a questions and answers session. Please take a minute to review the safe harbor statement. Throughout the year, Arbe was dedicated to maturing a cutting-edge perception technology that significantly improves vehicle safety and accelerates the realization of Level 2 Plus advanced driver-assistant vehicles. Our company's progress has paralleled the advancements of the vehicle market to Level 2 Plus, which we anticipate will become the industry standard in the automotive by 2025. In 2022, we actively collaborated with leading automakers' perception teams to ensure that ARBE's innovations are designed into their groundbreaking revolution. We received clear indications that our perception radar technology will be a crucial enabler and integral component of Level 2+, as the mass market increasingly adopts autonomous systems at Level 2+, ARBE will become a vital element of the overall solution with a cost-effective sensor. We've been securing global Tier 1 partnerships and commitments to accelerate the transition to advanced vehicle safety systems in the near future. As we look ahead, we remain on track to achieve full production by the fourth quarter of 2023, thanks to the hard work and dedication of our team and our business partners. In 2022, we collaborated with multiple global tier one suppliers who will position Arbe for success in 2023 and beyond. Veoneer, a world leader in automotive safety, selected Arbe's chipset for their next generation radars. Veoneer is an attractive partner for Arbe as it currently produces more than 50 million radars per year and forecasting to grow to roughly 250 million per year by the end of the decade. In addition, Arbe received its first mass production preliminary order for 340,000 chipsets from HiRain Technologies, a leading Chinese ADAS Tier 1 supplier. In Q3, we announced that HiRain was selected to provide perception radars based on the Arbe chipset for an autonomous truck project in the ports of China. These announcements validate Arabe's leadership as trucks require the highest standards of safety and have the biggest need for advanced sensing. The higher-end business partnership will allow us to quickly scale revenue, deploying Arabe products in China, the largest and fastest-growing EV market in the world. Part of our success today is a direct result of the strong relationships we've built with industry leaders such as Valeo, Veoneer, Hyren, and Wefu, suppliers to leading global automakers. This quarter marks a significant milestone for our tier one business partners as these companies have made considerable financial investments and have deployed dedicated and sizable teams to develop radar systems which utilize the cutting edge radar chipset. The Tier 1s are also developing software utilizing the proprietary data generated by ARBE radars to enhance safety for OEMs. We are confident that these advancements will make a significant impact, not only for ARBE, but for the entire industry. We want to thank our Tier 1 partners for choosing and trusting Arbe and for working hard to secure customer wins. We look forward to updating you on the specific ones. In addition to our Tier 1 partners, we are very pleased with our collaborations with passengers and commercial vehicle makers and robot taxi companies. In fact, today we can report that we are actively engaged with 12 out of the top 15 automakers worldwide. conducting field trials with them and participating in RFI and RFQ bids. Our goal for 2023 is to achieve two design-ins in the rapidly expanding Chinese market and two design-ins with OEMs from Europe and the United States. These design-ins' wins will allow multi-year revenue contracts. In the following presentation, Ram Machnes, our Chief Business Officer, will provide details about our forecast for 2023. As some of you may know, the automotive industry in Japan is known for its high standards and regulations, subjecting all automotive technologies to a strict certification process before allowing commercial evaluation in the region. I am pleased to announce that ARBE has obtained the Japanese telecommunication and radio certification for our mass production RF chipset. With a certification process finalized, a leading Japanese automotive company has begun a development project based on our chips. We are also conducting pilot programs with leading OEMs and Tier 1s in the Japanese market, one of the top automotive markets in the world. We believe this very important certification will open a new and large opportunity for our company. As mentioned, our focus in 2022 and 2023 is on the transition from proof of concept to mass production. We have completed our dedicated chipset production line with global foundries in Vermont, USA. In this mass production line, our chips are now going through the AEC Q100 qualification process, which is required automotive level qualification representing the highest safety standard, for example, testing the chipset's durability in 125 degrees Celsius to minus 40 degrees. This is an important step keeping us on track with our plan to begin mass production in the fourth quarter of 2023. At the end of 22, we launched our groundbreaking 360 degrees radar-based perception solution, which provides a comprehensive analysis of a vehicle's surroundings over a long range. We take pride in the fact that we are the first company to offer and integrated 360 degrees radar-based perception. Our suit of perception radars captures surround data utilizing advanced AI technology to identify, classify, and track objects within the entire field of view. The data is processed in real time to create a full free space map around the vehicle and provides an analysis of the evolving hazards detected by the radars. We are excited to offer this innovative and cost-effective solution to the market, and we believe it will set a new industry standard for vehicle perception systems. Alba experienced great success at the CES trade show in Las Vegas, one of the industry's most important events. We had the pleasure of meeting with most of our automakers we are actively engaged with, who reassured us they have secured the necessary budgets to working on products based on our cutting-edge chipset throughout 2023. These projects are focused on driving significant advancements in vehicle safety, and we are proud to partner with our customers to bring these innovations to the market. In addition, CES was a fantastic opportunity to meet with potential new customers. We were pleased to learn that ARBE's leading innovations and value proposition resonates with the needs of these customers. We are also proud to announce that ARBE has once again been awarded the prestigious CES Innovation Award for the 360 degrees radar-based perception. We are thrilled to be recognized for our pioneering work in this field that will advance automotive safety in the near future. Looking forward to 2023, our goal is clear. We expect to enter full production with our cutting-edge chips in the fourth quarter. In fact, we have already received orders that meet our 2023 production capacity. In addition to our production goals, we continue to focus on ambitious sales and business development objectives of OEM design-ins for the year ahead. Our disruptive solutions have quickly gained recognition and endorsements from industry leaders and we believe that our strong offering will enable us to gain market share and drive innovation forward. At this point, I would like to hand over to our CFO, Karin, who will provide a detailed overview of our financial performance. Thank you, Karin.

Thank you, Kobi, and hello, everyone. Let me review our financial results for the fourth quarter and the full year of 2022 in more detail. As Kobi said earlier, Arbe is a company in transition from development to production, and our financial results in Q4 reflect this. As we progress with our strategy, we are shifting our focus on to chips for production. As a result, we have decreased engineering sample sales during Q4. This transition will streamline our operations and provide cost saving as we work to adjust our processes and ramp up production accordingly. We believe that these decisions will enable us to better serve our customers and drive innovation forward. Total revenue for the first quarter was $0.15 million compared to $0.5 million in the fourth quarter of 2021. For the full year of 2022, total revenue was $3.5 million within our guidance and an increase of 56% compared to $2.2 million in 2021. Q4 held negative gross margin of 45.8% compared to a positive gross margin of 37.7% in Q4 2021. This negative margin is another response to our reduced quarterly revenue as we transition to mass production. Gross margin for the full year of 2022 increased to 63.5% compared to 36% in 2021. 2022 gross margin improvement was driven mainly by economy of scale, revenue mix, and lower cost per unit as we progressed towards production. Moving on to expenses. In Q4 2022, we reported total operating expenses of $14 million compared to $14.2 million in Q4 2021. Decrease in our pre-production related costs and a favorable impact of foreign currency exchange rate were offset by an increase in labor costs and non-cash shared base compensation expenses. Operating expenses for the full year totaled to $50 million compared to $34.1 million in 2021. The increase was in line with our expectation. As we continue to grow the company and to add to our employee base to support our future growth. The company continues strengthening its research and development investment with R&D expenses totaling at $10.8 million in Q4 2022 compared to $11.6 million in Q4 2021 related to a decrease in pre-production cost. R&D expenses for the full year were $36.7 million compared to $28.6 million in 2021. Operating loss for the full year of 2022 was $47.7 million compared to a loss of $33.3 million in 2021. Operating loss reflected our growing investment, mainly in research and development, in our human assets and in costs associated with being a publicly traded corporation, all towards our progress for production. Looking at adjusted EBITDA in Q4 of 2022, an on-gap measurement, which excludes expenses for non-cash share-based compensation and for non-recurring items, was a loss of $11.5 million, also within our guidance, and compared to a loss of $11.9 million in the fourth quarter of 2021. Adjusted EBITDA for the full year 2022 amounted to a loss of $38 million compared to a loss of $30.4 million in 2021. Net loss in the fourth quarter of 2022 decreased to $11.1 million with $3 million of financial income compared to a net loss of $15.8 million in the fourth quarter of 2021. Net loss for the full year of 2022 was $40.5 million compared to $58.1 million in 2021. Moving to our balance sheet, as of December 31st, 2022, Arbe had $54.2 million in cash and cash equivalents with no debt. With respect to our guidance for 2023, we would like to provide an outlook for the full year ending December 31st, 2023. Our goal for 2023 is to achieve four design-ins with OEMs. Revenue are expected to be in the range of $5 million to $7 million, representing our expectations of full production in Q4 2023, together with our decision to focus exclusively on production-intent chips. Adjusted EBITDA is expected to be in the range of $32 million loss to $35 million loss, primarily related to revenue year-over-year growth, as well as decrease in initial production costs and cost efficiency efforts. I'm now pleased to hand over the floor to our Chief Business Officer, Ram Machnes, who will share insights of our market forecast and the business opportunity that lies ahead.

Thank you, Corinne. I am Ram Achnes, and I am the Chief Business Officer at Arbe. We would like to provide you some outlook for 2023 and summarize 2022. We'll talk a bit about the market trends that we've seen in 2022. We'll talk about our business model, about what's next, where we see the main trends, and where we see our product winning in the market. so when we look at the market and the trends for 2022 we see a lot of changes in the autonomous driving arena we saw a lot of buzz around the autonomous driving but we see that the whole solution providing a full autonomous driving this is a trend that is diminishing and we are looking at trends of features and scenarios being developed. So instead of providing a full solution that is working in any scenarios, in any road conditions, in any weather conditions, and it's fully unsupervised, we are seeing the trend of developing smaller features developing capabilities that are more for specific scenarios, that are working in specific conditions, and are sometimes supervised, and sometimes even just alerting the driver for something that is happening around it. So if, for example, in the past we wanted the car to drive all around, all the time, now we're talking about scenarios with a very clear entry and exit criteria for example when i'm driving during my drive in a highway or a in a traffic jam in specific weather condition if it's daylight or if it's night or a fog and it can be partial supervised by the driver or a for example just alerting the driver about a something dangerous that is about to happen So the focus of the industry became from solving the entire solution just to solving pieces of the puzzle one at a time and providing the means for the algorithms, for the developers to be able to solve the problems. We are seeing many of the OEMs, the car manufacturers, looking at providing the bits and pieces to build these solutions. So it's a very gradual solution. We saw a lot of software-defined vehicles trend. That means software... that is evolving during the ownership of the car. So when you buy it, it doesn't necessarily do all the features, but gradually you can upgrade. And from the car manufacturers, they want to make sure that the hardware that they are putting on the car is capable of doing the advanced features later on. So it's actually looking at making sure that the hardware itself is an enabler for future technology, and it's not an obstacle that prevents the car manufacturer from providing the full features later on. So some of the features, they are not ready yet, but the car manufacturer wants to make sure that the car is ready to include those features in the future. So we are seeing selections by OEM of hardware platforms, if it's the compute platform, if it's the sensing platform by itself, that is future ready for the software and algorithms that are coming down the road. What we also see is that across all the OEMs, the understanding that imaging radar, the capability to have an independent source of information to the autonomous features, and to the autonomous driving capabilities is a fundamental element that the car manufacturers are looking to add into the vehicles. We see it not only coming from us, we see also other players in the market like Mobileye that are saying that imaging radar is a crucial element in being able to provide those features. And we saw even some other players that in the past said that the radar role is not that significant, playing a much bigger emphasis right now on imaging radar and saying that imaging radar is necessary in order to be able to provide those advanced features coming down the road. If we look at the market from the perspective of Arbe, we are seeing a headway from the different OEMs in 2023. They are selecting this year. a lot of their hardware platform, a lot of their sensing platform, making sure that this is ready for those features. They are looking to make sure that from regulatory perspective, they are ready to meet all the NCAP, all the requirements from all the regulation. And we are today in contact with 12 out of 15 organizations of global OEMs, of the top OEMs, looking at integration of the Arbe radars into next platforms on them. We also announced our penetration to the Japanese market. We passed the Japanese regulation and certification of a radar based on our chipset to start working in these markets as well. When we look at the radars and what RBA is bringing into the table, we are talking about perception radar, which is very, very different than the regular radars used till now. So if we look at the low-end radars that are out there today, the traditional radars, if we take an example of a bus and a... pedestrian walking just next to to the bus with traditional radar you won't be able to see two objects you will just see something that is going on there you might be able to see the velocity of these objects but you won't be able to really separate them and you will be able to detect them only when they are moving if they are stationary if they are not moving you won't be able to detect them With the basic imaging radars that are coming now into the OEMs and the car manufacturers, you might be able to see that there is a bigger object, maybe sometimes identify them as stationary objects, but not really separate them and be able to see two distinct objects, even if they are stationary. And that's what the perception radar really bringing into the table. So it's really bringing an image of the outside world into the perception algorithms that need an independent source of information. They have today the camera, but the camera by itself is not enough because it's not bulletproof. It's not ready for any weather. It's not ready at night. And sometimes it doesn't bring the right analysis of the scene around it. So you need another independent source of information and only... perception radars that are high-end imaging radar, they would be able to provide the details that are needed for their perception algorithms. So if we look at the current generation radars, many of them, they are good for the adaptive course control, maybe for some emergency braking because they can see if there is something in front of you. They won't be able to understand exactly the size of it, they won't be able to understand exactly if it's stationary, they won't be able to identify it even if it's stationary, versus the perception radar that can clearly show the boundaries of these objects, can clearly show the free space, whether I can squeeze in between two different vehicles, whether the pedestrian is walking next to a truck, So I'll be able to see the track and separately the pedestrian. If there is a flat tire on the autobahn and someone is changing the tire, we will be able to see it with a perception radar and we won't be able to see it with the basic imaging radar or with the low-end radars, traditional radars that are out there today. So this is a fundamental revolution to the sensing capabilities that the perception teams are getting with the imaging radar. And as we said and others players are saying now that you need few thousands of channels to be able to really process this information and get detailed image in order to be able to really leverage this information. When we look at the automotive market, it works with OEMs. These are the regular players that we are all familiar with that have the big brands of car manufacturers. And there are tier 1s. Tier 1s are the ones that are providing the hardware to these OEMs. So when we in Arbe, as a cheaper manufacturer, our main customer in the automotive market are the tier 1s. And we have 40 ones that publicly announced that they are basing their next generation radars on our chipset. It's Vionier, who is a global leader in radar. Valeo, who are leaders in ADAS. Wifu and Hyran that are Chinese leaders in their prospective markets. And we have also a T1 coming to the non-retail automotive market, taking it to a commercial vehicle like trucks, delivery robots, agriculture, security use cases, other than the automotive. So overall... We are seeing that from our perspective, the main customers are these big T1s, and we were able to announce these four T1s that already based their next generation based on our chipset. Overall, we are seeing these T1s putting... Tens of engineers, sometimes even 100 engineers, working and developing on our chipset, their next generation radar. And we see a lot of momentum and a lot of mutual work between us and these T1s. Overall, all these five T1s, they have already an A sample radar based on our chipset. There are two T1s that already have a B sample and two other T1s that are going to have a B sample really soon. And for the rest of the year, all of them would have a B sample. Also, we announced publicly AutoX and Bike using our chipset as OEMs. Unfortunately, I cannot talk about other OEMs right now, about their selection. And we do have active projects with four OEMs. And overall, there are right now 10 active RFIs, RFQs with different global OEMs with the tier ones that are using our chipset. Going on to 2023, we are expecting to be able to see two more significant OEMs signing a deal for production with our chipset. We are expecting two new chipsets. Chinese OEM signing a deal for production with our chipset. In the non-retail automotive, we're expecting five more deals coming down the path. We will be in automotive-grade production in Q4 of this year, of 2023, automotive-grade full production. And until then, we're expecting the revenue to come mainly from from evaluation systems, from some samples, and from projects that we are doing together with the OEMs and with the different ones. Overall, we are expecting the revenue to be between $5 million to $7 million in 2023. So I would like to introduce Chief Technology Officer Noam Harkin, who will provide the insights into the groundbreaking innovations that Arbe has developed and what lies ahead of our company.