Arbe Robotics (NASDAQ:ARBE) Q1 2026 Earnings Call

0:00 Good day, and welcome to the Arbe Robotics First Quarter twenty twenty Results Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions.

0:26 Please note, today's event is being recorded. I would now like to turn the conference over to Kenny Green of EK Investor Relations. Mr. Green, please go ahead. Thank you. Good day to all of you, and welcome to ARBE's conference call to discuss results of the first quarter of twenty twenty six. 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 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 Ram Mathness, ARBE's Chief Executive Officer, who will begin with the business and strategic update Kobi Morenco, President and Co Founder, who will provide perspective on ARBE's long term direction and Karim Pinto Fermenbong, Chief Financial Officer, will review the financials.

1:22 Following management's formal remarks, we will open the call for the question and answer session. With that, I'd like to hand the call over to Ram. Ram, please go ahead. Thank you, Kenny. Good morning, everyone, and thank you for joining us to review ARBE's first quarter twenty twenty six results. I stepped into the CEO role in April and I see significant potential ahead for ARBE. During the first quarter, we made strong progress and accelerated on the strategy we set out at the start of the year.

1:54 Today, I will focus on the main areas where we are making progress. ARBE is growing from a chipset focused automotive company into a supplier of complete radar solution across automotive and increasingly into adjustment markets. This quarter, we hit several commercial milestones that reflect this transition. We began shipping chips into China through our Tier one hiring. We received orders from Robotaxi customers. We also received orders for data collection programs with global automakers and leading mobility players. I will now go deeper into each of these areas, starting with automotive. Let's start with China, the fastest moving automotive market in the world.

2:44 During the quarter, we shipped the initial batch of chipset to high end. These chipset supported production of 48x48 channel radars, a project that we announced in December in which HiRene is developing a Level four autonomous vehicle solution for a Chinese automaker. In parallel, HiRene is developing new radon also based on our chipset with 24 by 12 channels designed as a lower cost system that can be used by a wider range of vehicles. This configuration complements its existing high end 48x48 radar system based on our chipset. With our technology, high end is becoming a key radar platform player in China. It can offer OEMs a path from high end radar systems that are available today in China to full two ks ultra high resolution performance.

3:39 China sold 34,400,000 vehicles in 2025 to a local Tier one ARBE gains direct access to one of the world's largest and fastest moving markets for Level two plus and Level three deployments. Turning to robotaxis. We received orders for our Fenics radar system from global robotaxis companies. These systems support Level four autonomy and full three sixty degree sensing. This clearly shows that our high resolution radar delivers the performance and coverage required for Level four. More broadly, we see strong and growing interest for our automotive chipset. We are taking part in data collection programs with global automaker and leading mobility players.

4:27 We have progressed into advanced selection processes with specific Chinese and European automakers. This evaluation focus more and more on the specific use cases where cameras and LiDARs fall short and where imaging radar becomes the key sensor. This strengthens our industry interest in our radar technology as a core sensing platform for autonomous driving program. This interest comes alongside an important shift in the automotive market. Recently, several leading OEMs have revisited the Level three program. We don't see this as a rejection of eyes of autonomy. We see it as a reset going back to the right basics of autonomy.

5:17 The first generation Level three system had clear limitations. They were geofence, some were limited in speed, some limited to good weather only and many never reached commercial deployment. Besides the maturity of the algorithm, we believe that one other main reason for that is related to the performance of the sensor and specifically imaging radar not providing the needed performance. Based on our discussions with many OEMs, automakers are now actively looking at the next generation ISO platforms and looking for sensing that can support leveraged reuse cases. This is exactly the gap our high resolution radar is designed to fill.

6:04 We also wanted to understand what drivers want from the ISO of autonomy, A survey of 1,000 people across U. S, Europe and Asia came with a clear message showing that drivers are willing to pay, willing to switch their car and even their brand for fully operational Level three, Level four autonomous driving. Consumers are ready for eyes of autonomy, but only when it is safe, smooth and reliable. That is exactly the capability that ARBE's ultra high resolution radar enables. You are invited to our website to learn more about this survey. Before moving beyond automotive, let me briefly touch on physical AI because it's becoming central to where our technology plays.

6:54 We are seeing how the revolution in AI and machine learning is introducing new generation of algorithms. Those algorithms and specifically vision language action models are transforming how intelligent systems sense, understand and interact with the physical world. In automotive, it drives nothing but a breakthrough progress for Level three and Level four capabilities. And beyond automotive, it opens a wide opportunity across robotics, logistics and other autonomous systems. These physical AI systems are only as good as the real world data they receive, especially in safety critical environments such as vehicles. This is where ARBESP fits.

7:41 Our radar provides dense sensing, long range, low latency and consistent performance in all weather. This is exactly the type of machine understandable input that AI driven autonomy needs. During the quarter, NVIDIA announced its expanded the global drive Hiperion ecosystem to accelerate remote to full autonomy and cited ARBE as part of its platform. Our ongoing work with NVIDIA on radar based free space mapping and AI driven automotive capabilities capabilities is one example of how we are placing ARBE at the center of this major shift. Now let's look beyond automotive, where our technology is opening meaningful new opportunities.

8:29 The first important development is that ARBE has began selling complete end to end radar systems in addition to selling chipsets. This allows us to address markets where consumers want a full radar solution and where sales cycles are much shorter. We already started shipping these systems to players across defense, homeland security, transportation application, perimeter security, physical AI and several other applications. To support this, we have also set up dedicated production line to scale system manufacturing. Taken together, these milestones show that our leadership in automotive radar can extend into perception critical market.

9:18 We are expanding our reach, broadening our opportunities and significantly increasing our total addressable market. With that, I'll turn the call over to our President and Co Founder, Kobi Morayenko. Thank you, Ram, and good morning, everyone. Stepping into the President role, my focus is on ARBE's long term strategy, our strategic partnerships and guiding investments that accelerate ARBE's next phase of growth and commercialization. During the third quarter, we strengthened our balance sheet. We closed an underwritten registered direct offering that raised $18,500,000 in gross proceeds. This gave us the financial flexibility to invest in ARBE's current phase of fast growth.

10:07 What gives me a great deal of confidence is what this quarter demonstrates. ARBE's technology platform is broader and can focus on multiple end markets as well as automotive. The same ultra high resolution radar that we built for automotive can be and is now beginning to be adopted much more broadly. We see increased interest and potential and in some cases initial system sales in Homeland Security and Smart Infrastructure as Ram already mentioned. And finally, the rise of physical AI together with the OEMs demand for better autonomy solutions plays directly to our strength, high definition, long range, all conditioned environment sensing.

10:57 Ram has recently stepped into the CEO role with strong execution focus, deep product knowledge and the commercial understanding that is needed.

11:14 And this will take ARBE from where we are today to scaled radar systems company across many markets. I have worked closely with Ram over many years and I have full confidence in his abilities as well as that of the entire team to bring ARBE to the next phase. I am more excited than ever about ARBE's potential over the coming quarters and years. With that, let me turn the call over to Corinne to review the financials. Thank you, Kobi, and hello, everyone. Let me review our financial results for the first quarter of twenty twenty six in more detail. Revenue for the first quarter of twenty twenty six totaled $500,000 compared to $400,000 in Q1 twenty twenty five.

12:01 Backlog as of 03/31/2026 is $1,000,000 Gross profit for Q1 twenty twenty six was a negative $100,000 compared to a negative $300,000 in the same period last year. Turning to operating expenses. Total operating expenses for Q1 twenty twenty six were $11,200,000 down from $13,100,000 in Q1 of twenty twenty five. The decrease in operating expenses was primarily driven by lower share based compensation expenses reflecting earlier grants that are now fully vested along with last year's award being structured with half in cash and half in equity.

12:49 The decrease was also related to the Q1 twenty twenty five tape out expenses, which are reduced as we advance toward product ization. This decrease in operating expenses was partially offset by the weakening of the U. S. Dollar, mainly against the Israeli shekel and to a lesser extent by labor based provisions and a merit increase.

13:13 Operating loss for the first quarter of twenty twenty six was $11,300,000 compared to an operating loss of $13,400,000 in the first quarter of twenty twenty five. As previously announced, during the quarter, we implemented cost reduction measures that are expected to reduce our ongoing operating expenses by approximately 15% with the full impact expected to take effect starting during Q2. Adjusted EBITDA, a non GAAP measurement, which excludes expenses for non cash share based compensation and for non recurring items was a loss of $9,900,000 in Q1 of twenty twenty six compared to a loss of $9,700,000 in the first quarter of twenty twenty five.

14:05 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 for the first quarter of twenty twenty six was $9,400,000 compared to a net loss of $13,800,000 in the first quarter of twenty twenty five. Net loss in Q1 twenty twenty six included $1,900,000 in financial income compared to $500,000 of financial expenses in Q1 of twenty twenty five. As of 03/31/2026, ARBE held $53,600,000 in cash and cash equivalents and short term bank deposits.

14:54 Turning to our outlook. We are reaffirming the 2026 guidance we provided in February 26. We continue to expect full year revenue in the range of $4,000,000 to $6,000,000 and an adjusted EBITDA loss in the range of $28,000,000 to $31,000,000 loss. Now we will be happy to take your questions. Operator? Thank you. We will now begin the question and answer session. And our first question today comes from George Gianarkis with Canaccord Genuity. Please go ahead.

15:46 Hi, everyone. Thank you for taking my questions. I was wondering if you can go into a little bit more detail around the traction you're seeing in defense related applications, drones, etcetera. Thank you. So, thank you, George for the question. So basically around the defense there are a applications that our radar can function. The first is not so different from our automotive applications. So it's autonomous vehicles whether they are supply tracks or even armored vehicles. All of them want to drive safe, off road in environments that are full of dust, rain, fog and all of the main problems that we that the radar is the best sensor for that. And for that, we already have a client, the American Army that bought from us hundreds of units and we see another we believe that we will get another order for that as well.

17:01 Second application is defense defending perimeter whether it's from human beings that trying to get into this area of perimeter that we want to defend or even drones that can attack or throw some supply or drugs to those areas. And we definitely see this as something that it's application that our radar can supply.

17:43 But on top of it, there is I would say that those are the two main initiations that we are in, but there is few other smaller applications that the radar especially our radar can help with. And if a year ago, we were not even considering those markets, today

18:11 we are focusing on that and I'm trying to we are trying to do business development with all of the leading players with the big names of the defense industry as well as the new players. Also this market is going through a great transformation. The players that were there ten years ago like the Lockheed Martin of this world are also changing as well as there is a new emerging player that taking their market share. And we are trying to work with the old players as well as with the new players and provide our solution.

18:58 Thank you. And maybe just as a follow-up, you obviously mentioned the NVIDIA reference design. I'm wondering what the conversations have been like?

19:07 How much additional traction or how has that changed any of the conversations you're having with OEMs and other partners in terms of deploying your imaging radar alongside NVIDIA? Thank you.

19:20 Yes. So I think that this question refers a lot on the who are the players that really can potentially bring AV stock, the autonomous vehicle software stock to the market, because eventually autonomous driving is all about software, all about algorithms and machine learning. And for sure NVIDIA is the top player in the market today on that. So this is a very important from all perspective of all the OEMs, either they selected NVIDIA or even if they didn't select yet, I think they are all looking at what's going on in the industry and who has the potential to get the AV stock to the finish line and really provide a reliable and sustainable solution to the consumer. So eventually you want to get into your car in the morning and drive safely to work and let the car drive it for you. So you can do something else and buy your time back by using the autonomous vehicle feature of your car.

20:41 And there is a race right now, many players are working towards that. For sure NVIDIA is probably the strongest player there. So it's very, very important for everyone what's going on with the NVIDIA platform and the NVIDIA AP stock for sure. There are other players as well. Also some OEMs are trying to

21:09 build their own homegrown stock. So they are these players as well, but everybody is looking at what are the others are doing and there is definitely a clear rate right now on that. I think that it's really important to see the progress that we've seen recently on the algorithm level and the breakthrough that we all see in our everyday life in deep learning and AI. This comes also into place with the autonomous vehicle software and we'll see this coming into the market

21:48 pretty soon, starting with China and moving forward with the Western world. Thank you so much. Thank you.

22:06 Our next question comes from Casey Ryan at Amarex. Please go ahead. Hello. Good evening, everyone. Thanks for the terrific update. I had a couple of questions. Would you care to describe it sounds like you have multiple robotaxi opportunities. Is there a regional tilt to those or are they global meaning

22:27 North America, Europe, China or are they focused in one region?

22:34 So the opportunities that we see right now are coming from North America and we see also in China. So the main sales are different in North America and China.

22:56 Okay. That's terrific. And then when you talk about supplying sort of the like full radar system versus a chipset, Can you talk about maybe what the revenue differential or sort of the pricing differential is between those two

23:16 as we think about unit growth in both products? Yes. So if we look at it, there are several factors that influence the change and significantly increase in the AUP, the average unit price. When we talk about specifically the non automotive, the non private automotive. Two factors, one is the fact that we are selling a complete system,

23:48 not just the chipset. That's obviously drives the average unit price up, but also the volumes are much lower. So when we work on level three project with an OEM, the volumes are really high, okay, but then the negotiation power and the economy scale drives the AUP down. When you talk here about

24:18 those projects, if it's a robotaxi, robotrax, commercial vehicles, defense applications, the volumes are significantly lower on one hand side, but the AUP is significantly

24:36 higher because there is no economy of scale to the level that you have in the automotive industry. So we see a significantly higher AUP in the business of the readout of the complete system compared to the automotive chipset.

25:02 Okay. And then just sort of a small thing, but do you think ultimately long term the gross margins for both product lines are similar? Or do you think sort of the complete radar system might be lower long term? Yes. So usually the

25:23 gross margins, if you look at the mid scale project on systems are a bit lower than when you talk about chipset. They are a bit lower, that's always expected because when we charge for chipset, we charge for the differentiation that we bring, okay. When you charge for system, you charge also for the mechanics, the passive, for other components that are there basically. So when you look just the crop margin, okay, they might be profit though, the dollar profit per system is significantly higher.

26:08 Yes. Okay. So when you look percentage wise, yes, it's lower. When you look at the absolute dollar value, it's higher. And of course worth mentioning the volumes, which are significantly different between systems and chipsets. Yes. No, understood. That's terrific. And then just one last question for me, maybe Corrine. On the backlog, are we to take that as being kind of a twelve month backlog number or shorter or longer?

26:40 No, this is twelve months, correct. Okay. Terrific. Thank you. And so and like maybe to clarify for myself, that $1,000,000 it's fair to think would be consumed in 2026 or are you saying it's kind of twelve months from the end of Q1 basically? It's twelve months from the end of 'twenty one, but I assume all of it will be in 'twenty six despite Okay. How we Perfect. Understood. Thank you. It's a very positive update. I'll get out of the queue and let others ask questions. Thank you. Thank you.

27:26 And our next question today comes from Matthew Galinko at Maxim Group. Please go ahead. Thanks for taking my question. I'm curious what the cost was to stand up the full production line for radar. And I guess, given your current capacity there, do you expect that's sufficient to meet what you have in the pipeline for defense and AI applications? Or do you expect only to add the capacity over time? So we built our production line to supply the current capacity that is needed, which we assume going to be hundreds of systems per month, thousands of systems per year.

28:15 The investment is not so dramatic. It will be on the low side of the hundreds of thousands of dollars, not more than that. And we have the ability to increase this capacity as time goes by and as the demand grow during coming quarters. We also started discussions with some contract manufacturers for expanding this production line further down the road. Excellent. Thank you. Thank you. And that does conclude our question and answer session for today. I'd like to turn the conference back over to Mr. Machness, CEO for any closing remarks.

29:05 On behalf of the entire management team of ARBE, I would like to thank you, our shareholders for your continued interest and long term support of our business. This quarter marked the start of new chapter for ARBE, a chapter focused on turning our technology leadership into commercial scale across many markets. We have our first system level order, growing global active traction and expanding Chinese market opportunities through hiring and a clear position at the center of the next wave of eyes off autonomy and physical AI. Based on all of this, we believe Arbend is well placed to deliver meaningful value. We look forward to updating you on our progress next quarter and I personally look forward to taking on the COO to bring ARBE to the next level in its development.

30:01 And with that, we end our call. Have a good day. Thank you. Today's conference has now concluded and we thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.