Arbe Robotics (NASDAQ: ARBE), a leader in high-resolution radar solutions, reported a substantial decline in revenue to $100,000 in Q3 2024 from $500,000 in the same quarter of the previous year. The company's net loss widened to $12.6 million despite progress in strategic partnerships and market expansion efforts. Arbe Robotics ended the quarter with $19.1 million in cash and cash equivalents.
Key Takeaways
- Arbe Robotics' revenue saw a significant drop in Q3 2024 compared to Q3 2023.
- The company reported a negative gross margin and an increase in net loss.
- Strategic OEM engagements and partnerships have been a highlight, with advances in truck safety and radar-based ADAS systems.
- Arbe is diversifying into infrastructure, surveillance, and transportation sectors.
- The company completed a public offering, securing funding for future milestones.
- Arbe aims for full production by the second half of 2024 and cash flow positivity by 2027.
Company Outlook
- Arbe Robotics is working towards starting full production in the latter half of 2024.
- The company is optimistic about achieving cash flow positivity by 2027 and expects revenue growth in 2025.
- Projected adjusted EBITDA loss for 2024 is estimated to remain between $30 million and $36 million.
Bearish Highlights
- The company's total revenue has decreased significantly from the previous year's Q3.
- A negative gross margin was reported, and net loss has increased.
- Operating expenses remain high at $12.2 million.
Bullish Highlights
- Arbe Robotics is expanding its engagement with OEMs, with 12 moving to a more significant stage and 8 entering an advanced perception project phase.
- The company has secured strategic partnerships and agreements to enhance truck safety and develop radar-based ADAS systems.
Misses
- The company missed its revenue targets significantly, with a sharp decline from the previous year's Q3 results.
Q&A Highlights
- CEO Kobi Marenko expressed confidence in the adoption of imaging radar for ADAS, predicting hands-free driving as a standard by 2030.
- Marenko anticipates revenue ramp-up in late 2025.
- CFO Corinne Pinto Flomenboim highlighted the company's commitment to maintaining a strong balance sheet and funding revenue growth.
In summary, Arbe Robotics faces current financial challenges but remains focused on strategic partnerships, technological innovation, and market expansion to drive future growth. The company's leadership is confident in the long-term adoption of its radar solutions in the automotive industry and beyond.
Full transcript - Arbe Robotics Ltd (NASDAQ:ARBE) Q3 2024:
Conference Operator: Good morning, and welcome to the RBAY Robotics Third Quarter 20 24 Financial Results Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Miri Segal of NSIR.
Please go ahead.
Miri Segal, Investor Relations, NSIR: Thank you, operator, and everyone for joining us today. Welcome to Arbe's Q3 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 press release also applies 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 Flomenboim, 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, Arbez's CEO. Kobi, please go ahead.
Kobi Marenko, Co-Founder and CEO, Arbe Robotics: Thank you, Mary. Good morning, everyone, and thank you for joining us. On this call we're happy to share the progress we've made this quarter with our Tier 1s and OEMs. First, we've seen growth in both the number and the depth of our OEM engagement. This quarter we worked with 16 OEMs 12 of which have moved to the big stage and 8 OEMs have entered the advanced perception project phase demonstrating their dedication by investing in algorithm development and sensor data processing marking a significant milestone in the selection process.
While the timelines for some of these projects have been longer than expected, we are pleased with the advancement and believe these opportunities will drive growth for Abe in the coming quarter. We look forward to updating you as we continue to make progress. Next (LON:NXT), we've been working with a leading European truck manufacturer to improve truck safety using our imaging radar. This manufacturer plans to integrate our radar into its next generation sensor suite, a major step in advancing their safety offering and an important validation of our technology. HiRez, one of our Tier 1s is developing a radar based ADAS system for a Chinese OEM.
This system powered by our chipset combines radar and camera fusion eliminating the need for LiDAR while maintaining high standards of safety. Pending final OEM approval, mass production is anticipated to begin by the Q4 of next year. This project demonstrates that OEMs have an alternative to LiDAR with high resolution radar which offers highly detailed perception at a significantly lower cost and better quality of service. This solution enables OEMs to benefit from imaging radar durability and reliable performance in all weather and lighting conditions. Additionally, the affordability of imaging radar makes it an ideal choice for mass market adoption.
Sensrad another one of our Tier 1s announced it has entered into a framework agreement to provide 4 d imaging radars powered by our chipset to Tianqi Transportation Technology in China. This agreement follows a full year of development and evaluation. The selection of Sensra's radars based on the Arvest Chipset also highlights the growing demand for advanced radar solutions in additional industries beyond automotive. We are seeing increased interest in our radar technology from a variety of new markets including infrastructure, surveillance and other transportation sectors. These industries recognize the potential of advanced radar solutions for applications like safety, automation and environmental monitoring.
Our Tier 1s are actively engaging with customers to explore these emerging opportunities. This allows us to expand our total addressable market within new verticals and drive innovation across multiple industries. These advancements reinforce our position as a technology leader and demonstrate the trust that leading manufacturers place in our solutions. They validate our innovation, highlight our competitive advantage, and set the stage for expanding our market share and attracting additional OEMs. Finally, we are happy to report that we successfully completed a public offering of up to $49,000,000 earlier this month.
As part of the offering $15,000,000 were received upfront with an additional $34,000,000 subject to cash exercise of long term and milestone linked ROI. The offering was led by AWM Investment, one of our major investors who led our 2023 offering along with new investors. Their proceeds will support our planned production ramp up in 2025. We believe this funding marks an important step as we move closer to production and aim to be cash flow positive in 2027. Lastly, our executive team will be meeting with investors at CES from January 7 to January 10 where we will be hosting live demos of our real time AI based space mapping.
We would love to meet you there. Now I'll hand it over to our CFO, Corinne to review the financials.
Corinne Pinto Flomenboim, CFO, Arbe Robotics: Thank you, Kobi, and hello everyone. I'd like to review our financial results for the Q3 of 2024 in more detail. Total (EPA:TTEF) revenue in the Q3 was $100,000 a decrease from $500,000 in Q3 2023. Backlog as of September 30 was $300,000 and is expected to be recognized as revenue in the next coming quarters. Negative gross margin for Q3 2024 was $300,000 compared to a positive gross margin of $100,000 or 24% in Q3 2023.
The decrease in gross margin was primarily related to revenue reduction with a fixed cost level of expenses. Moving on to expenses. In Q3, 2024, we reported total operating expenses of $12,200,000 compared to $11,700,000 in Q3, 2023. The increase in operating expenses was primarily driven by an increase in our research and development, labor cost and subcontractors cost as we strengthen our investment in advanced software development, chip readiness and safety certification towards production readiness. Operating loss in the Q3 of 2024 was $12,400,000 an increase from $11,600,000 operating loss in the Q3 of 2023.
Net loss in the Q3 of 2024 increased to $12,600,000 compared to a net loss of $11,700,000 in the Q3 of 2023. Net loss in the Q3 of 2024 included $100,000 of financial expenses. Adjusted EBITDA and non GAAP measurements, which exclude expenses for share based compensation and for non recurring items was a loss of $8,200,000 in Q3 of 2024. This is compared to a loss of $7,500,000 in the Q3 of 2023. Please see our earnings release for reconciliation to GAAP net Moving to our balance sheet.
As of September 30, 2024, Arvea had $19,100,000 in cash and cash equivalents. With respect to our guidance for the year, we would like to reiterate what we previously shared. Our goal of achieving 4 design ins with automakers remains unchanged as we observed continued strong interest in our market leading offering. We have strengthened our positioning in all our RSQ 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 our expectation that we will be in full production in the second half of twenty twenty four, as well as our decision to exclusively focus 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 $30,000,000 loss to $36,000,000 loss. Now, we will be happy to take your questions. Operator?
Conference Operator: We will now begin the question and answer session. And the first question comes from Suji Desilva with ROTH Capital. Please go ahead.
Suji Desilva, Analyst, ROTH Capital: Hi, Kobi. Hi, Corinne. I'm jumping the progress here. The OEM programs, Kobi, can you give us your perspective on adoption of imaging light radar, given the delay in push outs of some ADAS or EV models, how is that dovetailing with the need to implement a radar? Any thoughts there would be helpful.
Kobi Marenko, Co-Founder and CEO, Arbe Robotics: Yes. So I think overall, as you're probably aware, all of the ADAS market suffered from delays. At the beginning, it was because of the supply chain, then it was because of the focus on the EV stuff. But now I believe that we are back on track with major production timelines and major programs in place, in line to achieve hands free driving, eyes of driving on the highway. All of the Western OEMs have those programs.
Selection of imaging radar is key factor for that. So the only way to do a real handspring driving, ISO driving that will be safe on the highway is by using imaging radar that gives you the long range that is needed. I think that not said that early this year in a conference in Berlin, Doctor. Jurgen Bickman, I would say the leading expert in radar in automotive radar said that in order to have a real safe ADAS system you must have a long range radar that has minimum channels of 32 by 32 channels which is basically always solution and mobilize. And following that I think all of the major OEMs plan to select an imaging radar in high channel count in the next few quarters.
We know that part of them will do the selection even before the year end. Although only a few weeks left, we definitely believe that selection the first selection would be made this year and the customers that not yet took a decision will take their decision early next year Q1 and Q2 in order to start collecting data with a full system that has cameras and radar, some of them also with LIDAR, train the algorithm and launch real hands free driving throughout the second half of the decade, 'twenty eight 'twenty seven, 'twenty eight year would be I think the starting point. By 2,030, we will see already a ramp up. And 10 years from now I believe that we will all be in a situation that this kind of service is a basic feature of the car like listening to radio.
Suji Desilva, Analyst, ROTH Capital: That makes sense, Kobi. And maybe specifically is there that's the kind of their demand and models. Is there anything pushing them from a regulatory front to have to act on this? Any specific regulatory actions in the geography that would be you'd point out as being initial catalysts?
Kobi Marenko, Co-Founder and CEO, Arbe Robotics: Yes. So first of all there is already regulation in the States and as well as in Europe that's pushing long range radars imaging radars for pure ADAS for emergency braking. We hope that this regulation won't change with the new government. But we think that this is a major driver for OEMs to adapt an imaging radar. The ability to have a full automatic braking in any weather, any lighting condition up to a very long range.
Suji Desilva, Analyst, ROTH Capital: Okay. And switching over to nonautocob, you talked about Sensrad and the success in China with T and E. Can you talk about the sales cycle and the time to unit revenues there perhaps versus auto and whether that can come in sooner? I imagine it's a shorter sales cycle, but any color there would be helpful on the non auto market.
Kobi Marenko, Co-Founder and CEO, Arbe Robotics: Yes. I think that there is in the non auto market the sales cycle is more or less like in auto, but the time to production is much shorter. So in auto the sales cycle can be 2 to 3 years, but then the year model that will start production with your radar can take another 3 years. In non auto the sales cycle is the same, but we will definitely start seeing revenues in 2025 and definitely in 2016. I can say that also we see opportunities in defense technology for our radar and in other verticals that the revenues might come dramatically earlier.
Suji Desilva, Analyst, ROTH Capital: Okay. It's helpful color. Thanks. I'll pass it on.
Conference Operator: With no further questions, this concludes our question and answer session. Pardon me, looks like we do have a questioner. The next question will come from Dan Parsley as a Private Investor. Please go ahead.
Dan Parsley, Private Investor: Good morning, Kobi. I have a question that's done in your forecast for 2024, you mentioned that you'll be in full production by the end of 2024 and here we are in at the end of November. So I'd ask you to please comment if you're still on track to be in full production in 2024? And can you give us any insight as to the likelihood of being starting to ramp revenue in 2025? Thank you.
Kobi Marenko, Co-Founder and CEO, Arbe Robotics: So I think we are more or less on track with our timetable. We believe that by end of December we will be able to start shipping a generic sample of our chipsets to the project that we mentioned of Sensrad and by basically early next year we will be we will have the ability to start shipping production chips right after I think the holidays and so on. We expect revenues to ramping up on the last quarter of 'twenty five maybe a bit earlier. So second half of 'twenty five and the 3rd end of twenty twenty five with like we said earlier with the project that Hyren has with the leading Chinese car manufacturer.
Dan Parsley, Private Investor: Okay. And a follow-up to that. Can you comment on how dependent are your auto sales on EV vehicles versus more traditional combustion engine vehicles?
Kobi Marenko, Co-Founder and CEO, Arbe Robotics: We are not. So basically imaging radar can get even into any kind of vehicle. The question is not about it, it's about what's the plans of the OEM, will the OEM launch a full advanced ADAS service on a combustion engine or only on EV? I think if you would ask the major OEMs a year ago, they would say that new ADAS features would be released only on EVs. But I think right now with the slow uptake of EVs on the West, probably it will be a mix.
In China where we already see something like 30% to 35% of new cars that had that's been sold are EVs, I believe that the new ADAS features will go only to EVs.
Dan Parsley, Private Investor: Thank you.
Conference Operator: Thank you so much for that question. This concludes our question and answer session. I would like to turn the conference back over to Kobi Maronco for any closing remarks.
Kobi Marenko, Co-Founder and CEO, Arbe Robotics: Thank you. We were pleased to have you join us today. To our employees and partners, your continued dedication is deeply appreciated. We look forward to updating you on Harvest's progress in the coming weeks. Look out for updates as we prepare for several investor events.
We'd love to meet you in person for additional discussions. Please contact us at investorsalveraoautics.com or visit our website to schedule a meeting. Thank you all.
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