Arbe Robotics Ltd.

Good day and welcome to the RBA Robotics first quarter 2025 earnings 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, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Mary Segoe of R-BASE Investor Relations. Please go ahead.

Thank you, Operator, and good day, everyone. 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 press 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 Kobi Marenko, Arbe's co-founder and CEO, who will begin the call with the business update. Then we will turn the call over to Corinne Pinto-Flommenboim, CFO, who will review the financials. Finally, we will open the call up for the question and answer session. With that, I'd like to turn it over to Koby Marenko. Koby, please go ahead.

Good morning, everyone, and thank you for joining us. I will begin by reviewing some of our recent business highlights. During the first quarter, we continued to make meaningful progress in Europe, getting closer to potential design wins with leading OEMs. We secured radar systems orders supporting advanced data collection program. The OEM data collection program is one of the final steps in the automotive sourcing process. We are seeing increased investment from our tier ones and from OEMs while developing their own AI-driven perception algorithms that leverage our radar data. These initiatives are aligned with the path to OEM selection and we anticipate that ARBES radar technology will serve as a key enabler for high-volume 2028 passenger vehicle platforms in Europe. We believe that our solid balance sheet, coupled with the capital we previously raised, positions us well to support these programs with revenues projected to begin in 2027. In China, our Tier 1 higher-end technologies reached a critical milestone in April with the launch of its LRR615, a production-intent, long-range imaging radar system built on our high-performance chipset. Designed for the demanding needs of the Chinese autonomous driving market, the LRR615 offers ultra-high resolution and dependable performance in all weather and lighting conditions. This achievement highlights the industrial scalability of our platform and demonstrates our partners' capability to bring ARBE-powered solutions to the market. We also saw continued traction beyond the automotive sector. Our Tier 1 SenseRad placed a significant order for over 1,000 imaging radar chips to serve diverse customers across multiple use cases. This order reflects growing commercial demand and the versatility of our technology in broader industrial and mobility markets one of the most significant collaborations in the first quarter was with nvidia a leader in advanced in-vehicle computing through its drive platform nvidia is a front runner in providing the computing backbone for autonomous driving and ada together with advanced radar-based free space mapping, and AI-driven precision capabilities, a critical enabler for next-generation autonomous systems. By integrating our high-resolution imaging radar with the NVIDIA DRIVE 8GX platform, we are delivering a powerful combination of sensing and computing performance. This collaboration was permanently featured at CES 2025, where ARBE showcased the integration in real-world driving scenarios. It's a strong validation of our technology and a clear signal of our expanding role in the software-defined vehicle ecosystem. Since January, we've demonstrated what we believe is the most advanced radar solution available at premier automotive trade shows across China, Japan, Germany, and the United States. Featuring on-chip super-resolution processing and real-time performance at 20 frames per second, our perception radar sets a new industry benchmark for radar image quality. The response from OEMs and tier 1s has been overwhelmingly positive, further reinforcing our leadership in next-generation radar sensors. Finally, in January 2025, we successfully raised $33 million through an underwriting registered direct offering, including a $4 million over-allotment option fully exercised by the underwriters, late but kind of called Genuity. In addition, in January 2025, $21.5 million was released to Albe from the Esco account, following the conversion of convertible bonds we issued on the Tel Aviv Stock Exchange in 2024. This capital strengthens our balance sheet and enhances our financial stability as we scale operations, invest in productization, and support expanding global engagement. In closing, the progress we've made across OEM partnerships, tier one integration, and cross-sector adoption demonstrates the maturity of our execution and the strength of our ecosystem. Baked by a solid financial foundation, we're positioned to lead the industry in the adoption of ultra-high-resolution radar and unlock long-term value for our stakeholders. We look forward to sharing more as we continue to move forward. Now I'd like to turn it over to our CFO, Karim, to go over the financials.

Thank you, Coby, and hello, everyone. Let me review our financial results for the first quarter of 2025 in more detail. Revenue for Q1 2025 were $0.04 million compared to $0.1 million in Q1 2024. Backlog as of March 31st, 2025 was $0.25 million. Gross profit for Q1 2025 was negative $0.3 million, unchanged from Q1 2024, primarily reflecting the impact of fixed cost components giving reduced revenue year over year. Turning to expenses, total operating expenses for Q1 2025 were $13.1 million compared to $12.5 million in Q1 2024. The increase was primarily driven by a one-time expense associated with the progression of our chip development toward final production, most notably, tape out. A decrease in non-cash share based compensation expenses related to the finalization of certain vesting periods was offset by year-over-year provision adjustments. Operating loss for the first quarter of 2025 was $13.4 million compared to a $12.8 million loss in the first quarter of 2024. Adjusted EBITDA, a non-GAAP measurement which excludes expenses for non-cash shared base compensation and for non-recurring items, was a loss of $9.7 million in Q1 of 2025, compared to a loss of $8.5 million in the first quarter of 2024. 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 in the first quarter of 2025 was $13.8 million, compared to a net loss of $12.8 million in the first quarter of 2024. As of March 31st, 2025, ARBA held $36.7 million in cash and cash equivalents and short-term bank deposits, and $35.2 million in long-term bank deposits. With respect to our guidance, we would like to reiterate what we previously said. ARBA's leading radar technology remains a top priority for key decision makers in the automotive industry. Recent cash infusion totaling $70 million further underscores investors' confidence in our market potential and growth trajectory. While broader economic shifts have led to short-term delays in automakers' rollout of advanced driver assist systems, decision timelines have been extended. As a result, ARBEQ continues to engage closely with industry leaders, advancing through RFQ stages and strengthening its position for adoption. We continue with our goal to pursue four design-ins with automakers in 2025. 2025 annual revenue are expected to be in the range of $2 million to $5 million and will be weighted toward the end of the year. Adjusted EBITDA for 2025 is projected to be in the range of $29 million loss to $35 million loss. Now, we will be happy to open the call for questions. Operator?

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star, then two. Our first question will come from George Gianaricas with Canaccord Genuity. Please go ahead.

Hi, everyone. Thank you for taking my questions. Maybe to start, can you just sort of please outline for us maybe in a little bit more detail the negotiations and the discussions you're having with OEMs and why you continue to expect wins to happen possibly in the second half of this year? Thank you.

Yeah, so basically just to make sure you understand, Arbe is not selling directly to OEM. Arbe is selling to Magna. the chips and Magna is selling the total radar to the OEM. But we are deeply involved with all of the phases that are leading to the stage that Magna will get the order and ALBE will get, of course, for Magna, the order for the chips. So it's a kind of a three-way cooperation. With the leading OEMs in Europe today, we are working closely with Magna and with them, and Magna already delivered to them systems that are used in order to start data collection for their stack. There were back and forth in the last quarter of requests that are related to final production and most of them are on the software side and we supported Magna heavily on providing those and we believe that today the solution that we have or Magna has with those OEMs is final and ready for a final selection and also since we have Magna radars are used as the main data collection platform, we believe that our chances to win are more than very high.

Can you just reiterate which geographies you believe these OEMs are headquartered in? Europe. I think Europe.

Right now, we're leading the path towards the hands-free eyes of driving, with the U.S. coming a bit behind. China, of course, is a different story. In China, we are engaged with high rent, and we believe that revenues and production there will come a year before.

Maybe to talk a little bit about any momentum you're seeing in sort of your industrial applications. There seems to be a little bit of recent momentum in that market. Any discussions you're having, any color on those would be appreciated. Thank you.

So with the industrial application, we decided not to directly do those sales. And so we have this partnership with SenseRun since there is – nice amount of applications, but each one of them has quite low volume per application, hundreds of units or thousands of units per application. We see it right now, talking to SenseWord, we understand that they have clients in smart cities, tools, they have clients in heavy industrial applications, in heavy machinery. and even in-factory applications, all of those are, each one of those application needs, I would say, a kind of a customized software mainly. And this is the reason that Sensra is supporting it and gives those customization to the customers across Europe and China.

And maybe a final one from me. Your revenue guidance for the year implies a pretty material ramp in the third and fourth quarters. Can you just sort of illuminate for us again where you expect that revenue to come from? Thank you.

So first of all, we just announced today on the call a major order from SenseRat The order came after the end of Q1, so in terms of revenue recognition, we need to give them the chips in order to collect the money, so the revenues will be recognized later. We also have some support and NRE agreement with them to help them increase their ability to support applications. And the other revenue sources should come mainly from the selection of one of the leading OEMs. We believe that this will get us for a few hundreds of systems more for data collection as well as a small NRE. And we believe that by Q4, we will be able to start ramping up the production in China with hiring, and this is going to be already revenues for real final production of the chips.

Thank you.

Our next question will come from Suji De Silva with Roth Capital. Please go ahead.

Hi, Kobi. Hi, Karin. When I look at the RFPs, the other auto customers that you're targeting, other than the one you talked about, where are those in the process right now? How far along are the other three relative to the one you discussed previously?

I think in all of the programs that we are involved, we are making progress, and the car manufacturers are making progress in parallel. The delays on selection are not related to our technology, but more for the market itself, and the ability of the OEM to actually put the resources that they need for nailing down the program. I think that the last few months, due to the tariff and all of those issues, this brought a bit of delays on the decisions of the OEMs because it wasn't really clear what will happen with the hardware that they are buying and what will happen with the manufacturing of the car. Right now, I think that we're coming closer to agreement and they have the understanding what will happen, and I believe that this will release a bit the decision process of the OEM.

Great. And then my other question is on China and the autonomous market there working with Hirane. Do you also have partnerships with the central auto processor companies that have traction in China? Is it NVIDIA or is it local vendors and Are you working with all those? Do you need to for the solution to gain traction in China?

Yeah, we are working also with Horizon Robotics, same as with NVIDIA. But basically, our channel there is Hirin. Hirin is also building their full stack for level 2++ and 3D driving, and next it will be ISOF driving. So they are using the central process as well as our radar and cameras in order to provide a full solution. And also, Hiren is our channel to the robotaxis companies, the local robotaxis companies in China.

And, Kobi, did I hear you on the call talk about a timeframe for volume ramp in China? It sounds like it might have been earlier, but I might have misheard that.

We didn't, it wasn't on the script, but it didn't change. We believe that end of this year, we will start ramping up production in China. The fact that Hirin announced that they have a production ready radar, I think means that basically it's now a matter of technicality when they will be able to start real mass production, whether it will be Q4 this year or it will slip a few weeks to next year. But we are in the final stages there. All of what needs to be done is there.

Okay, great. Appreciate all that, Collar. Thanks, Kobi.

Again, if you have a question, please press star, then 1. Our next question will come from Matthew Galinka with Maxim Group. Please go ahead.

Hey, thanks for taking my question. First, maybe can you – I think you mentioned you had a tape-out expense in the first quarter. What's a good R&D number to use for the balance of the year?

Hey, Matt. So I think our burn for – our OPEX burn for the year is about – $32 million, between $32 to $34 million, and out of which R&D number for the year could be about $25 million annually.

Great. $25 million annually. Got it. Thanks. And then I guess as far as timing for North America, it sounded like it's maybe, did you say it was about a year behind Europe? So we'd be looking at 2029 model years and maybe startup revenue in 2028. Is that a realistic timeline?

Yes, I think there was a few issues in all of the American companies had a few issues. GM had the issue with Cruise that they needed to merge it inside GM. and this generated a bit of delays. Ford had Algo with the same issue, and I think that right now they are trying to stabilize and to select. GM just announced that they are going with Nvidia, which is, I think, good for us. There's a partner of Nvidia, and we believe that in the U.S. we will begin to see our revenues coming in 2018.

Got it. Thank you. Maybe last question for me is just, I guess, going back to gross margin expectations as we sort of hit the beginning of the ramp in China and then beginning of the ramp in Europe. What should we expect from gross margin in kind of the early days of that ramp up?

So gross margin, again, in ramp up in China, in those years should be in the range of 50% to 60%, 55% margin. On our first ramp-up year, actually the first 100,000 to 200,000 units, we have what is called the safe launch, which is an extra testing on each chip and burning, and this increases the cost. which reduces the margin to a level of 30% to 35% on this time frame.

Great. Thank you.

Sure. With no further questions, this will conclude our question and answer session. I would like to turn the conference back over to Kobi Marenko, Arbe's CEO, for any closing remarks.

Yeah. So thank you, everyone. We were so pleased to have you join us today. To our employees and partners, your continued dedication is deeply appreciated. We look forward to updating you further on Argo's progress in the coming months. Look out for updates as we prepare for several investor events, including the London Brook Tech Expo tomorrow, May 21 in New York, and the Rock London Conference, June 25. We'd love to meet you in person for further discussion. Please contact us at investors at arberobotics.com or visit our site to schedule a meeting. Thank you all.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.