Arbe Robotics (NASDAQ: ARBE) announced its second-quarter financial results for 2024, securing significant deals in the automotive radar technology sector. The company reported an increase in revenue and a decrease in operating loss, despite a negative gross margin. Arbe Robotics successfully attracted a top 10 global OEM and a European truck manufacturer as customers for its imaging radar technology, confirming the company's strong market position and technological edge.
Key Takeaways
- Q2 2024 revenue rose to $400,000, marking an improvement from the previous year's $300,000.
- Gross margin was negative at 9.5%, a drop from the previous year's 1%.
- Operating loss decreased to $11.6 million, down from $12.6 million in Q2 2023.
- The company secured two key customers, including a top 10 global OEM.
- Arbe Robotics raised $30 million through a convertible bond offering, with cash reserves of $8.8 million.
- The company is focusing on high-channel count radar solutions for advanced safety applications.
Company Outlook
- Revenue for the full year 2024 is expected to align with the 2023 figures.
- Revenue growth is projected for 2025.
- Anticipated adjusted EBITDA loss for 2024 is projected to be between $30-36 million.
- The company is targeting European markets in the short term and plans to expand to China, Japan, and the U.S. in the long term.
Bearish Highlights
- The company reported a negative gross margin of 9.5%.
- Adjusted EBITDA loss is expected to remain significant in 2024.
Bullish Highlights
- Secured contracts with a top 10 global OEM and a European truck manufacturer.
- Decreased operating loss compared to the same quarter last year.
- Raised substantial funds through a convertible bond offering to support growth.
Misses
- The company has not yet reached profitability and continues to operate at a loss.
- Gross margin has deteriorated compared to the previous year.
Q&A Highlights
- CEO Kobi Marenko emphasized the importance of high-channel radar solutions for securing requests for proposals (RFPs) in the industry.
- CFO Karim Pinto Flomenboim reiterated the company's commitment to maintaining a strong balance sheet and focusing on cost-effectiveness.
Arbe Robotics, with its focus on high-channel count radar solutions, is positioning itself as a leader in the rapidly evolving automotive safety technology market. The company's strategic partnerships and anticipated revenue growth paint a promising picture for the future, as it continues to innovate and expand its global footprint.
Full transcript - Arbe Robotics Ltd (NASDAQ:ARBE) Q2 2024:
Conference Operator: Good day, and welcome to the RB Robotics Second Quarter 20 24 Financial Results Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Miri Segal, CEO of MSIR. Please go ahead.
Miri Segal, CEO of MSIR, MSIR: Thank you, operator, and everyone for joining us today. Welcome to Arbe's 2nd 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 earnings 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, Arbei's Co Founder and CEO, who will begin the call with a business update.
Then we will turn the call over to Karim 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, Arbae's CEO. Koby, 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 conference call, we are happy to share significant progress and market endorsement from major industry players. We've hit a major milestone by securing 2 key customers for the development of our imaging radar for production. We see these selections as strong endorsement of Alba's technological superiority and evidence that we are strategically positioned and on track to capture additional OEMs this year.
Let me elaborate on these 2 important announcements. First, one of the top 10 OEMs in the world selected Arbe's chipset for the development of its next gen emitting radar geared toward serial production. This leading OEM has confirmed that preparations for serial production will begin immediately. The decision came after a deep competitive evaluation and careful field testing of our chipset, providing just how reliable and high performing our technology is. The adoption of Arvest technology by this major automotive OEM not only validates our innovative solutions, but also opens a significant commercial opportunity.
Our VersaTIM chipset can be used across a wide range of vehicle classes, boosting market appeal and potential for broad adoption. Secondly, we are proud to be teaming up with a well known European truck manufacturer who will revolutionize truck safety using our imaging radar. They are gearing up to include our radar in the next generation sensor suite, a big step forward in their move to more advanced technology. The trucking industry faces distinctive challenges that our imaging radar technology is designed to tackle including larger vehicle sizes, longer break even distances and greater collision potential. These factors make it essential for trucks to operate safely in all weather and lighting conditions.
As with the OEM selection, our imaging radar went through rigorous testing and evaluations before being selected and was compared directly against other front end sensors like LIBOR and conventional radar. We view these selections as an acknowledgment of Arbe's technological edge, highlighting the confidence that leading manufacturers have in our technology. These approvals not only validate our innovative solutions, but also demonstrate that our technology stands out in a competitive market. Further, they serve as the clear indicator that we are well positioned to increase our market share and appeal to other key OEMs. The auto industry continues to constantly evolve with new safety standards and regulatory changes, driving widespread demand for high channel account solutions.
Since all the solution is widely recognized by leading OEMs as the radar with the largest channel array at the best price per channel, we believe that opportunities are only beginning to emerge. In fact, in Q2, we supported the final stages of OEM RFQ's processes in collaboration with our Tier 1, Magna, Hi Ray, MiFu and Senswad, and we look forward to sharing more updates very soon. We are actively engaged in obtaining full design ins with leading global automakers and we expect those decisions in the coming months. Finally, we are happy to report that we have successfully begun trading on the Tel Aviv Stock Exchange. In June, we raised approximately $30,000,000 through a convertible bond offering, and we expect it will help increase our cash reserves in anticipation of upcoming OEM selection.
The proceeds from the bond offering will be held in escrow and will be released upon meeting certain conditions by March 21, 2025. We are progressing in fulfilling the conditions for the release of the fund, and we will be sharing updates along the way. Now I'd like to turn it over to our CFO, Karit, to go over our financials.
Karim Pinto Flomenboim, CFO, Arbe Robotics: Thank you, Kobi, and hello, everyone. I'd like to review our financial results for the Q2 of 2024 in more details. Total (EPA:TTEF) revenue in the Q2 was $400,000 an increase from $300,000 in Q2 2023. Backlog as of June 30 was $800,000 and is expected to be recognized as revenue during 2024. Negative gross margin for Q2 2024 was 9.5% compared to a negative gross margin of 1% in Q2 2023.
The increase in the negative gross margin was primarily related to a headcount increase. Moving on to expenses. In Q2 2024, we reported total operating expenses of $11,600,000 compared to $12,600,000 in Q2 2023. The decrease in operating expenses was primarily driven by a decrease in research and development expenses as we progress towards finalization of our production and to a lesser extent decrease in our labor cost and favorable exchange rate impact. Operating loss in the Q2 of 2024 was $11,600,000 a decrease from Q2 of 2023 operating loss of $12,600,000 Net loss in the Q2 of 2024 decreased to $11,800,000 compared to a net loss of $12,600,000 in the Q2 of 2023.
Net loss in the Q2 of 20 24 included $100,000 of financial expenses. Adjusted EBITDA, a non GAAP measurement, which excludes expenses for share based compensation and for non recurring items, was a loss of $7,500,000 in Q2 of 2024. This is compared to a loss of $8,400,000 in the Q2 of 2023. Moving to our balance sheet. As of June 30, 2024, Arbe had $8,800,000 in cash and cash equivalents and $17,700,000 in short term bank deposits.
In June, we issued a convertible bond in the principal amount of ILS 110,000,000 or approximately $30,000,000 The proceeds from the sale of the bond, which were approximately 112,400,000 Ishekels or approximately $30,500,000 are held in escrow and will be released upon meeting certain conditions by March 31, 2025. As Colby stated, we are in the process of fulfilling the conditions for the raise and we will be sure to update as we progress. 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 observe continued strong interest in our market leading offering. We have strengthened our positioning in all our RFQ engagements, even though the OEM 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 chipset 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: Thank you. We will now begin our question and answer session. And our first question will come from Joshua Buckhalter with TD Cowen. Please go ahead.
Joshua Buckhalter, Analyst, TD Cowen: Cowen. Congrats on all the progress intra quarter. For my first one, I wanted to ask about the selection at the top 10 OEM. Obviously, a great sign there. It mentions in the press release, I guess, when it was initially signed, it's aimed at serial production.
Can you maybe walk us through some of the milestones that need to be hit to enter series production and when you would expect that decision to be made? Thank you.
Kobi Marenko, Co-Founder and CEO, Arbe Robotics: So first of all, the decision to go to production with this radar was already made. So what the process that we are going through now is basically that this OEM has internal Tier 1 that takes reference design from us, adapts it to their needs and start developing a full radar model for production based on that. And based on the timeline of this process, the OEM will decide on the exact year model or the exact timing of full production. But right now it's basically the train is already moving and we know where it should go. It's just a matter of how long will it take to bring up this kind of full production.
We have our estimations from the current Tier one that we are already working with them. So we expect to start gaining revenues from this win by end of 2025, early 2026.
Joshua Buckhalter, Analyst, TD Cowen: Okay, got it. Thank you for all the color there. And then on the goal of achieving the 4 design ins this year, any more details you can share on what types of applications and maybe timeline to revenue you would expect if you are indeed able to convert those wins that you're in discussions for?
Kobi Marenko, Co-Founder and CEO, Arbe Robotics: Yes. So first of all, we already achieved 1 out of this fall, so we're still left with 3. So 25% already done. And we are now in last phases with a few major RFQs. Actually one of them stated for us in the last few weeks that we are in a poor position to win this contract.
With all of the RFPs that we are now in final stages, we expect your model to be 28, application to be safety, the new regulation for emergency braking and hence the driving mainly on the highway. And we expect to start gaining revenues from that since it's year model 'twenty eight. We will start shipping chips to Magna, that is our main Tier 1 for those projects by the second half of 'twenty six.
Joshua Buckhalter, Analyst, TD Cowen: Thank you for that, Kobi. And a last one for me. I mean, you mentioned in the press release reaffirming the 2024 annual revenue in line with 2023 followed by revenue growth in 2025. Any initial guardrails or range of revenue growth you'd like to provide for 2025? Thank you.
Kobi Marenko, Co-Founder and CEO, Arbe Robotics: So we have preliminary orders from China and hiring in Wipu both are in great progress towards production. So we would expect to get those revenues that Tyren and WIFU indicated for us for 2025. I can also add to that that WIFU just announced a few weeks ago that they spin off their radar business into a new company and Bosch (NS:BOSH) is one of the investors in this subsidiary. So we expect it also to help Weifu gain more business and gain more traction in the Chinese market. So overall, our target is the numbers that we have in a preliminary order from the Chinese market more or less.
Thanks, Tobey.
Conference Operator: And the next question will come from Suji Desilva from Roth Capital. Please go ahead.
Suji Desilva, Analyst, Roth Capital: Hi, Kobe and Karim. Congratulations on the progress here. Kobi, now that you've had some wins here, maybe you can revisit the key factors you're seeing in selection of Arbe's radar? And maybe you can update us on the competitive landscape that you're seeing 3 months later?
Kobi Marenko, Co-Founder and CEO, Arbe Robotics: So the main advantage of automotive and the main disadvantage of automotive is that the landscape is not changing. So what we saw 3 months ago and 6 months ago and actually a year ago is the same that we see today because of the fact that it's so complicated to bring chips to production in automotive. Actually, when we started this company 7 years ago, if we even imagined how complicated would it be to take 3 chips to production in automotive, we would probably choose a much easier industry like pharma. So we don't see here a good difference since last quarter. So what we see is a major shift in the understanding of the OEM.
There is a multi channel radar, a high multi channel radar is a must for any kind of safety application. And the fact that Mercedes stated on stage that 32x32 channels radar is a minimum and the fact that we see major RFPs that basically putting a line that below that you cannot even get to the RFP. This is the major change that we saw in the industry since the beginning of this year and we are seeing it more and more. Companies that took lower channels count like 6x8 in China or 12x16 in Europe understand that this is not sufficient that basically if you want to see a pedestrian that is coming out of his car on the highway or you want to see tire on the road on the highway near the guardrail or you want to drive in an urban area and to understand that there is a bridge or there is a pedestrian below the bridge or there is a motorcycle on the side of the road, it's clear for everyone that the amount of channel that is less than 32x32 is meaningless. Also the fact that we are able to bring down chipsets that's allowing Magna to sell and hire and to sell a radar in a price that is similar to the 12 by 16, I think also makes a difference.
And this is our current advantage as opposed to Mobilize that their product is much more expensive and much more power hungry, which is also a major issue in today's call.
Suji Desilva, Analyst, Roth Capital: Okay. Thank you for that detailed answer, Kobi. And then maybe you can talk about the trucking opportunity separate from the auto opportunity and distinguish the addressable market sizes. I'm sure it's different units. Understanding the unit TAM and then the pricing difference.
Maybe is the content per truck, 1 radar per truck similar to cars?
Kobi Marenko, Co-Founder and CEO, Arbe Robotics: Yes. So trucks were basically the lower volume and some of the Tier 1s are not even selling to trucks. So the price there of the radar is more than regular automotive, but the volume is much lower and the adaptation that is needed is also much more important than in regular automotive, in private vehicles. So trucks is not a major part of our business and won't be a major part of our business. But I think that the fact that the truck company selected our radar means that this is basically the highest level of safety that is needed in the market.
And I think for us it's a major milestone.
Suji Desilva, Analyst, Roth Capital: Okay. That's very helpful. And then maybe a last question on the financials or just the I think Karine, you mentioned the headcount went up. I'm just curious what areas of the company are you increasing headcount in? Thanks.
Karim Pinto Flomenboim, CFO, Arbe Robotics: So the headcount went up in our cost of sale, which is mainly our customer support. When we actually finalize our production stages and we want to be ready for the next stage of full production, serial production and also supporting our customer support. So these are mainly the areas where we boost our headcount for this
Joshua Buckhalter, Analyst, TD Cowen: range. Stage.
Suji Desilva, Analyst, Roth Capital: Okay. Very good. Thanks guys.
Karim Pinto Flomenboim, CFO, Arbe Robotics: Thank you, Suji.
Conference Operator: The next question will be from Matthew Galinko from Maxim (NASDAQ:MXIM) Group. Please go ahead.
Matthew Galinko, Analyst, Maxim Group: Hi, thanks for taking my question. I just wanted to get a sense for as you look into the pipeline a little bit beyond the 4 design ins that you're targeting for this year, What does the pipeline look like geographically into 2025?
Kobi Marenko, Co-Founder and CEO, Arbe Robotics: So the current pipeline of I would say it's like this. Short term customers that we assume we will have wins in Q3 and Q4. All of them are the headquarters is European. Of course they are selling cars all over the world. For next year we see of course China and Japan as the major countries and U.
S. Just after that.
Matthew Galinko, Analyst, Maxim Group: Great. Thank you.
Conference Operator: And ladies and gentlemen, this concludes today's question and answer session. I will turn the conference back over to Kobi Maranko for any closing remarks.
Kobi Marenko, Co-Founder and CEO, Arbe Robotics: So thank you everybody for joining us today and we look forward to update you shortly on new news coming from us. And thank you everyone.
Conference Operator: And thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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