Arbe Robotics .(ARBE) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Total revenue in Q3 2023 was $0.5 million, a decrease from$1.3 million in Q3 2022, in line with longer OEM implementation timelines [11] - Gross margin for Q3 2023 was 24%, compared to 72.5% in Q3 2022, due to reduced quarterly revenue with a fixed cost portion in cost of goods sold [11] - Operating expenses in Q3 2023 were $11.7 million, slightly down from$11.8 million in Q3 2022, driven by lower R&D and G&A expenses [12] - Adjusted EBITDA loss in Q3 2023 was $7.5 million, outperforming expectations, compared to a loss of$8.4 million in Q3 2022 [13] - Net loss in Q3 2023 was $11.7 million, compared to a net loss of$9.9 million in Q3 2022 [13] - Cash and cash equivalents as of September 30, 2023, were $23.5 million, with$25.6 million in short-term bank deposits and no debt [14] Business Line Data and Key Metrics - Arbe is engaged with four top Tier 1 companies: Magna, HiRain, Weifu, and Sensrad, all of which advanced to the production of radar systems based on Arbe's chipsets in Q3 [5][6] - Preliminary chipset orders from China for 2024 and 2025 include an $11.6 million order from Weifu and a 340,000-unit order from HiRain [7] - The company is awaiting final confirmation for two prominent truck projects, which, along with passenger vehicle OEMs, represent 31$5 million to $7 million for the year, with adjusted EBITDA loss projected between$32 million and $35 million [14] Company Strategy and Industry Competition - Arbe aims to become a leader in perception radar solutions for the automotive industry, with its imaging radar technology expected to become the standard for most passenger vehicles by the end of the decade [6] - The company is ahead of competitors in terms of production readiness, with a 1.5 to 2-year lead in imaging radar technology [25] - Arbe's imaging radar is priced competitively at around$150-$160 for a front-facing radar, making it a cost-effective alternative to LiDAR [35] Management Commentary on Operating Environment and Future Outlook - The company's operations in Israel remain unaffected by the ongoing conflict, with manufacturing and production carried out in Germany by GlobalFoundries [9] - Arbe's cash balance ensures sufficient funding until the second half of 2025, with preliminary orders from China expected to help the company reach breakeven [8] - The company anticipates revenue ramping up from the second half of 2024, mainly in 2025, 2026, and 2027, driven by final decisions from OEMs [23] Other Important Information - Arbe welcomed Professor Yonina Eldar to its Board of Directors, bringing expertise in electrical engineering and radar theory [8] - Around 20% of the team was called for military duty, primarily affecting long-term projects, but immediate client support capabilities remain intact [9] Q&A Session Summary Question: Operational challenges due to the conflict in Israel - The company has prioritized tasks, with next-generation chipset development delayed, but current customer activities remain unaffected [17][18] - Feedback from prospective customers has been supportive, and the company continues to operate with a remote and hybrid work model [17][18] Question: Conversion of preliminary orders into shipments - Finalization of contracts between Tier 1 partners and OEMs is expected by the end of 2023 or early 2024, turning preliminary orders into actual orders [20] Question: Revenue ramp in Q4 2023 - The company expects decisions from 5-6 OEMs by year-end or early next year, with revenue ramping up from the second half of 2024 [23] Question: Competitive landscape in imaging radar - Arbe is ahead of competitors like Continental and NXP, with a 1.5 to 2-year lead in production readiness [25] Question: Timeline for OEMs to integrate imaging radar data - Data collection and algorithm training typically take 6-12 months, with initial data collection already underway [29] Question: HiRain's 340,000-unit order shipment timeline - The majority of shipments are expected in 2024, with potential for some shipments by the end of 2023 [31] Question: Truck projects and market dynamics - Arbe is engaged with two prominent truck manufacturers, focusing on ADAS functionalities for trucks [33] Question: Imaging radar adoption and pricing - Imaging radar is expected to become standard on all cars by the end of the decade, with pricing competitive against LiDAR [35][37] Question: Market penetration beyond 31% of global passenger vehicles - Early adopters, particularly premium car manufacturers, are the primary focus, with broader adoption expected over time [37]