Arbe Robotics Ltd.

Q1 2024 Earnings Conference Call


spk03: Good morning, everyone, and welcome to the RBA Robotics first quarter 2024 earnings results conference call. All participants will be in a listen-only mode. Should you need assistance, please see 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 and then one on a touch-tone telephone. To withdraw your questions, you may press star and two. Please note that today's event is being recorded. At this time, I'd like to turn the floor over to Mary Segal, CEO of MSIR. Please go ahead.
spk06: Thank you, everyone, for joining us today. Welcome to RBA's first quarter 2024 Financial Results Conference Call. 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 release also applies to this call. If you have not received a copy of the PR, please view it in the investor relations section of the company's website. Toby Morenco, Arbe's co-founder and CEO, will begin the call with a business update. Then we will turn the call over to Corinne Pinto-Flomenboim, Arbe's CFO, who will review the financials in more detail. Finally, we will open the call for the question and answer session. With that, I'd like to turn it over to Kobi Marenko, our base BEO. Kobi, please go ahead.
spk05: Thank you, Riri. Good morning, everyone, and thank you for joining us. I'd like to start by sharing some exciting updates with you. We congratulate Hirane, one of our Tier 1s in China, on being selected to supply radar systems powered by the Arbe chipset to a global leader in autonomous driving with mass production scheduled in 2025. We look forward to providing more details about this announcement soon. Hirane also reached a significant milestone in Tier 1, the successful development of post-Point Cloud algorithms including tracking, classification, and free space mapping. These algorithms have been integrated into Hirin's imaging radar for serial production. These advancements were tested by OEMs, demonstrating their potential to improve automotive safety. Importantly, Hirin announced it will begin the mass production of these imaging radars by the end of this year. During the first quarter, Alba and our team once made significant progress in reaching our goal of serial production by the end of this year. We worked with major OEMs on data collection for their level 2++ and level 3 solutions, as well as on improving the radar specification. As part of our progress in Japan, we'd like to update that a large Japanese automotive client is working to complete a massive data collection initiative with other radar solutions this year as part of the development of an advanced ADAS and AD architecture. There is a wide demand for next-generation radar systems with a high channel count, now considered essential for road safety. In March, the Ace of Radar and Radar Perception at Mercedes emphasized publicly that ADAS radars require an array of at least 32 by 32 channels, Few companies meet these requirements, and Alba exceeds it with the largest channel array on the market. We see similar requirements in RFPs from other major OEMs. We are thrilled by the outstanding progress we are making with top OEMs worldwide. Despite industry delays, we are confident in our opportunity pipelines and our goal to secure full design wins this year, especially with promises and signs coming from leading top 10 OEMs. We look forward to sharing more updates very soon. Collaborations are key for Arbit. At the NVIDIA GCC conference, NVIDIA shared that it has brought together a select group of advanced sensors from industry leaders, including Arbit's Perception Radar, to create a rich ecosystem of simulation tools and applications as part of the Omniverse Cloud APIs. These are designed to accelerate the path to autonomy. Additionally, at the 2024 Beijing International Automotive Exhibition, Horizon Robotics, a leading provider of computing solutions for ADAS and autonomous driving in China, showcased the integration of WIFU's 4D imaging radar followed by the Alba chipset with a Horizon Journey 6 automotive AI processor as part of their partner ecosystem. As many of you know, there have been important developments within our industry and shifts towards new safety standards and regulations. These are needed to drive the future of world safety. We firmly believe that Alba has the best solution to effectively address these changes, to help lead the revolution. The new NISA federal safety standard for the U.S. mandates automatic emergency braking, or AEB, including pedestrian AEB for all passenger cars and light trucks by September 2029. This safety measure is set to reduce collisions and accidents with pedestrians. At the same time, Euro NCAP 2030 roadmap aims for zero road fatalities requiring proactive crash presentation in all scenarios. A key to successful failure will be in the sensors used to power the advanced safety standards and requirements. This creates a growing opportunity for the adoption of our technology, which is the leading solution for tracking pedestrians and vehicles in challenging weather and lighting conditions, even at high speeds and over long distances. We expect that by the end of the decade, over 15% of new cows will feature high-end imaging radars like ours, providing real safety and level 3 autonomy. Lastly, we are in the final stages of dual listing with an additional listing on the Tel Aviv Stock Exchange. At the same time, we are advancing the convertible bond issuance on the Tel Aviv Stock Exchange to secure working capital and support the expected production ramp-up in 2025. We are excited about the potential opportunities for our day, and we believe that 2024 will prove to be a turning point for our company. Now, I'd like to turn it over to our CFO, Karin, to go over the financials.
spk07: Thank you, Kobi, and hello, everyone. I'd like to review our financial results for the first quarter of 2024 in more detail. Total revenue in the first quarter was $0.1 million, a decrease from $0.4 million in Q1 2023. Backlog as of March 31st was $1 million and is expected to be recognized as revenue during 2024. Negative gross margin for Q1 2024 was 194% compared to a positive gross margin of 11% in Q1 2023. The margin decrease was mainly related to a reduction in revenue and an increase in our workforce. Moving on to expenses. In Q1 2024, we reported total operating expenses of $12.5 million compared to $10.7 million in Q1 2023. The increase in operating expenses was primarily driven by an increase in non-cash-shared base compensation expenses, totaling $1.9 million. To a lesser extent, labor cost increase was offset by bonus accrual relief, favorable exchange rate, and reduction in DNO insurance rates. Operating loss in the first quarter of 2024 was $12.8 million, compared to an operating loss of $10.6 million in the first quarter of 2023. Adjusted EBITDA, a non-GAAP measurement which excludes expenses for shared base compensation and for non-recurring items, was a loss of $8.5 million in Q1 of 2024, in accordance with our plans. This is compared to a loss of $8.4 million in the first quarter of 2023. Net loss in the first quarter of 2024 increased to $12.8 million compared to a net loss of $9.9 million in the first quarter of 2023. Net loss in Q1 2024 included $45,000 of financial expenses resulting mainly from exchange rates revaluation, expenses partially offset by interest from deposits and warrants revaluation. This is compared to $0.7 million in financial income in the first quarter of 2023. Moving to our balance sheet, as of March 31st, 2024, ARBA had $5.4 million in cash and cash equivalents and $30.3 million in short-term bank deposits with no debt. With respect to our guidance for the year, we would like to reiterate what we previously shared. Our goal of achieving four design-ins with automakers remains unchanged, as we observe continued strong interest in our market-leading offerings. We have strengthened our positioning in all RFQ engagements, even though the OEMs have shifted their decision timelines from late 2023 to 2024. The 2024 annual revenue are expected to be in line with those of 2023, followed by revenue growth in 2025. These revenue projections are based on the intention to be in full production in the second half of 2024, as well as our decision to focus exclusively on getting our chipsets into production. We are committed to maintaining a strong and well-managed balance sheet, focusing on cost-effectiveness and the ability to fund our revenue growth. Adjusted EBITDA for 2024 is projected to be in the range of $30 million loss to $36 million loss. Now, we will be happy to take your questions.
spk03: Ladies and gentlemen, at this time, we'll begin the question and answer session. Once again, to join the question queue, you may press star and then one using a touch-down telephone. To withdraw your questions, you may press star and two. Once again, that is star and then one to join the question queue. We'll pause momentarily to assemble the roster. Our first question comes from Joshua Buckalter from TD Cowan. Please go ahead with your question.
spk01: Hi, Dean. Good afternoon. Thanks for taking my question. I wanted to ask about the confidence in achieving the four design wins this year. Any incremental data points or what you can give us and what gives you confidence that those are going to convert in the second half of the year and maybe what led to the – we've litigated it in the past, but maybe an update on the timeline given it got pushed from 2023 into 2024. Any clues by geography or type of application that these wins are going to be for? Thank you.
spk05: Yeah, so – Basically, as we said, part of those opportunities were pushed from last quarter and are now coming to a decision point. What we see as a main change between last year and this year is that even in RFQs that were in the market, the conditions were changed and the threshold for the radar got much higher and basically in majority of the opportunities leaving two or three only players that can provide the solution. And this gives us a lot of comfort that majority of the market, all of the, I think the top 10 OEMs at least, understand that multi-channel, high channel count radar is key for level 2++ and level 3. And the fact that the regulation changed and added the need for automatic braking, especially in oil use cases, gives our radar basically, I think, a backwind, a dramatic backwind, Because any OEM will need to have this kind of solution. And the only way to solve it is with a high-channel counterimaging radar and a camera. A camera alone cannot solve those scenarios. Even camera and LiDAR cannot solve it. But anyway, the LiDAR is much too expensive for a feature that is basically a not something that the OEMs can really charge the customer on it. To add to some light to the numbers, so we are today engaged with 11 car companies coming from Germany, from Sweden, from other countries in Europe, as well as from Japan and China. In all of those RFPs and RFQs, we are already past a long process with, of course, our Tier 1 partners of evaluation of the radar, testing the radar in causal cases, and showing the advantages of radar based on our chipset, a high-end channel count imaging radar based on our chipset, as opposed to the solutions in the market that are based on TI or NXP chipsets that are called imaging radar. This is not really an imaging radar, and I think all of the OEMs understand the difference between really missing radar, like the ones that are based on our chipset or one of our competitors, our main competitor that is coming also from Israel, and the existing legacy solutions that are based on the legacy chips that were not designed to meet the spec of tomorrow, they were designed for the spec of yesterday. Taking all of this into consideration, we are sure that out of 11 opportunities that were shortlisted, we will win at least four in the coming months, and we will be able to announce them to the market. This is the reason why we are raising the loan. The loan in Tel Aviv is based on a condition that we will win a contract. Our confidence in the fact that we are very close to winning the contract, I think, allowed us to raise this money, and also the confidence of the investors that we are close to that are willing to give us a loan with a conversion price that is more than 30% higher than our today share price. So I believe that we will have a very good year, like we said, a turning point for the company coming from development to business very soon.
spk01: Thanks for the extensive call, Kobe. For my follow-up, I think in the press release you mentioned you're getting close to receiving full auto grade qualifications. It feels like that process has been going on for a while. Can you maybe talk about what are the last few things you need to complete to get the auto-grade sign-off? And then is that a hurdle and something that needs to be completed before you sign one of these OEM wins, or is that not the case? Thank you.
spk05: I think our chipset, the process of taking chipsets to qualification on automotive is a structured process. Global foundries are leading it and managing it for us together with us and together with our engineers. We are more or less on the timeframe to finish it by the end of this quarter, early next quarter. And as we mentioned in last quarter, basically before you're starting a full qualification, you're doing mini-qualification to make sure that there's no major items. We passed this pre-qualification, mini-qualification, and we are now in the middle of finishing the technical process, which includes thousands of hours of chips working in high temperatures and in low temperatures to make sure that they will be able to stand in all conditions that the automotive market wants. It doesn't look today that this is a showstopper for us in calls with our OEM partners, global foundries, giving their objective assessment that the chips are going to be in production in very few months from now. So I think that all of the OEMs that are going to select our chipset with Magna, with Hiren, or with other Tier 1, are really, they are trusting global foundries that global will bring those chips through production, and I believe this is not a major issue for us.
spk01: Thank you.
spk03: Our next question comes from Suji De Silva from Roth Capital. Suji, go ahead with your question.
spk04: Hi, Kobe. Hi, Karine. Kobe, you talked about some of the progress with HiRain and WeFu in China. Can you just elaborate on the ramps, the times of revenue, and what the, you know, how many programs that involve?
spk05: So we already stated that HiRain and WeFu gave us preliminary order for 2025. HiRain is $30 million. WeFu is $10 million. And we are now engaged with a few programs to make sure that the customers will get radials based on our chipset in this volume in 2025. Okay.
spk04: And those are for automotives, Kobe? Automotives?
spk05: Yeah, some of them is, you know, is trucks and robot taxis, and we have a Highway 1 project in one of the poles of China for trucks. I would say that around 25% of it is non-OMVMs, non-passenger vehicles. The rest is for passenger vehicles.
spk04: Okay, great. Very helpful call, Kobe. Thanks. And then secondly, you mentioned the NVIDIA Omniverse element. Is Arbe's radar the kind of exclusive radar element there, or are there multiple radar elements involved? Are they looking for imaging radar? What's the color there on that partnership and inclusion?
spk05: The only imaging radar, the only is ARBE's imaging radar. Of course, there is also low-end radars there for radar belt, you know, low-end 4x4 radars, but the high-end imaging radar is only ARBE. Great.
spk04: All right. I think lastly, maybe the, in China, can you talk about the significance of working with Horizon and, you know, Horizon and Wafer working together in terms of you know, further penetrating the China market versus working with the Tier 1s like Weifu?
spk05: So we are not allowed to elaborate a lot about our operations there, but what I can say is that basically Horizon is like NVIDIA, so it's the ECU. They are not the Tier 1. By the end of the day, there is a Tier 1 that's taking their chips and building the central compute and integrating... our radar into this processor and the same as we have integration with NVIDIA, we have this, there is this kind of integration with Horizon, and we believe that this is a main condition for part of the OEMs in China. As you're probably aware, I think that the Chinese market is basically divided between NVIDIA and Horizon. They are controlling the ECU market in China, so with the fact that we are integrated with both of them, I think gives us a lot of advantage in this sense.
spk04: Okay, again, very helpful call, Kobi. Thanks.
spk03: Our next question comes from Jamie Perez from Lafferty. Please go ahead with your question.
spk02: All right, thank you. Good day, everybody. Thanks for taking my question. I mean, over the last couple of quarters, we've seen a sentiment change for the EV early adapters and going more towards ICE, and I think hybrid is also gaining shape. I mean, could you give us a little bit of color? Do you have any exposure to hybrids and ICE vehicles? And my follow-up question for that is... know a lot of evs are focusing now on affordability especially with the chinese uh threatening to uh ship a low price costco um so could you tell me what does that mean for your um margins and pricing you know pricing power all right thanks uh i think those are two great questions so first of all uh regarding the the ev ship so uh
spk05: I think that this is part of the reason for the delays. So last year, majority of the OEMs were focusing on moving almost totally to EV by 2030. And according to that, they decided that all of the new features, like Level 3 and Level 2++, would be launched solely on EV. In the last quarter of 2023, the market strategically understood that the shift to EV will take longer than expected due to price, due to customers' adoption, due to charging problems, and so on. And this basically brought all of those programs of Level 3 into a state that they were re-evaluating and the schedule was basically delayed. As we see it, by the end of Q1, majority of the OEMs took a decision to launch those services on both EV and regular engines, as well as, of course, for the hybrid. So from this perspective, there's no change right now. It caused the delay, but right now, We are on the go. The second question that you raised, I think, is dramatically interesting. The price pressure for EV is really pushing for sensors that are cheaper, and imaging radar, I would say, is dramatically cheaper than LiDAR. And we believe that this dramatically helps us, at least on the NHTSA AAB standout. And also for Level 3, I think that our radar is affordable, better than other sensors.
spk02: All right, so basically you have a, you know, we know, so you have a price advantage versus radar now. You know, like I said, most of the focus has been on passenger. I think on the electric vehicle, the commercial market has been doing a little bit better. I mean, could you maybe talk about the initiative in the commercial or transit market, if you have any? All right, thanks.
spk05: We are not focusing, it's not us, but most of our tier ones are not focusing on that. So, at least on the Western world, on China, We've won a project with Didi's trucks company, and Hirin also has some trucks projects. But outside of China, Magna is not bidding on any trucks. As of now, the volume in trucks is lower. Adaptation and... The cost of integration is higher, and the volume does not really make it economical for these kinds of solutions as of now.
spk02: All right. Okay, I'll pass it back. Thanks for the questions.
spk03: Our next question comes from Matthew Galenko from Maxim Group. Please go ahead with your questions.
spk00: Hi, thanks for taking my question. I was hoping you could maybe provide a little more detail around the investments you expect to make or need to make as you move into production in the back half this year. And, you know, I think to your point, as you plan to support through the node issue.
spk05: Thanks. So majority or basically all of our expenses towards production were already done. This quarter, Q1, we had last item that was related to increasing the capacity of the burning bolts, so we will be able to supply much higher volumes next year. But all of the expenses that are related to production, which are majority of them is CAPEX, are already done and are behind us. And I think we are ready for revenues.
spk00: Great. Thank you.
spk03: Ladies and gentlemen, with that being our final question for today, we'll be ending today's conference call as well as today's presentation. We thank everyone for joining. You may now disconnect your lines.

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.