Arbe Robotics (NASDAQ:ARBE) Q2 2026 Earnings Call

0:00 Good day, and welcome to the Arbe Robotics Second Quarter twenty twenty six Earnings Results. All participants will be in a 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 Mr. Kenny Green. Please go ahead. Thank you. Good day to all of you, and welcome to ARBE's conference call to discuss the results of the second quarter of twenty twenty six. Before we begin, I would like to remind all our listeners that certain information provided on this call may contain forward looking statements and the Safe Harbor statement outlined in today's earnings 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 ARBE's website.

1:01 Today, we are joined by Ron Masnath, ARBE's CEO Cosumranco, President and Co Founder and Karim Peter Plummenbaum, Chief Financial Officer. Following management's formal remarks, we will open the call to the question and answer session. And with that, I'd now like to hand the call over to Ram Mathnes. Ram, please go ahead. Thank you, Ken. Good morning, everyone, and thank you for joining us to review ARBE's second quarter twenty twenty six results. I am pleased with the solid progress we made in the second quarter. Our strategy of focusing on broader markets for our radar technology with high demand and more immediate revenue potential is clearly delivering results. We grew our revenue by meeting our customers' demand for immediate solution using our technology, and we started to see the positive impact of our reduced expenses in our bottom line.

1:57 Today, I will go through the main development of the quarter. Our biggest step forward in this quarter was in the defense and homeland security market, A leading global defense and homeland security integrator selected our technology for three projects. We signed a framework agreement and as we progress, we expect to add more projects over time. In a short turnaround time, we shipped complete radar systems from our own production line for the immediate operational needs. Our radars are used to a part of a defense and homeland security markets in many unique ways. They are used in fixed installations and vehicle mounted systems at both short and long ranges.

2:46 These multiple use cases demonstrate how our versatile beta platform technology can support different needs. The project of Corteva, a supplier of autonomous systems with the U. S. Department of Work continues to progress. Our Tier one, SENSE one, supplies Fortera with high definition imaging radar based on our chipset, and that radar is integrated into Fortera's auto light perception suite. It helps the vehicle recognize its surroundings, detect obstacles and navigate unstructured and contested environments where GPS do not work. More broadly, we see further strong demand for our radar technology with multiple defense and homeland security channels for various applications, and we have filled out systems for further evaluation.

3:39 Many of these opportunities have significant business potential. And furthermore, since our product is clearly addressing multiple urgent operational needs, we see an effort by our potential customers to reduce cycle times towards full integration and deployment in the field. Beyond defense, we also continue to make progress in other broader radar applications. Sensrad, a Tier one supplying imaging radar based on our chipset for defense and commercial applications, announced a new collaboration with VirtuWave. Sensrad announced that VirtuWave is now integrating the radar into its automated service vehicles for underground tunnel construction. We continue to supply chipset to Sentra, supporting its customers for Terra, Tiani and Wotjik.

4:30 ARBE is also directly engaged in other non automotive programs at various stages of evaluation, including a number of potential applications with unmanned ground vehicles and other applications. In those applications of unmanned ground vehicles, the image coming from our high definition imaging radar is so rich that it is possible to drive based only on the radar output. With regard to our activities in the automotive market, last quarter, we funded further on orders from a global robotaxi player for our Fenics radar systems. Fenics scaled to give full three sixty degree sensing to support level of autonomy. During the second quarter, we showed further progress and our radar systems were integrated into their vehicles.

5:21 I'm pleased to say that these vehicles have now started onboard trials. We continue to engage in active bid processes with additional robot testing players with very positive feedback. Turning to China. Hi WAN, our Q1 in China, is leading supplier in this market and offers a portfolio of greater systems built on our chip set. In December, we announced that HiRand's radar built on our chip set was selected for a level four program with a large Chinese automaker. During the quarter, we continued to ship chip sets to support this customer. HiRand advised us that they are now progressing towards the start of production, which is planned in the next few months.

6:06 Alongside the high end 48x48 system, HiRend is developing a second lower spec platform based on our chipset. This platform has 24 by 12 channels at a lower cost point for a wider range of vehicles. These two platforms give us a direct path into the Chinese market, which is the largest and fastest moving market for Level two plus and Level three vehicles. Iron is also completing an underlying due diligence in other meaningful RFIs and RFQs for the radar product portfolio based on our technology. This involves evaluation and fixed price. We are closely supporting IRON with all these evaluations as they progress through various stages of selection.

6:55 We also continue to make steady progress with global OEMs. OEMs are actively testing advanced radar solutions, which we go to update their sensing suite to support higher level of autonomy. We feel that we are in good position as ARBE is regarded as the leading ultra high resolution radar provider for ever built OMNI in the past, at a lower enough cost that will allow for a proliferation of our technology to high volume programs at various OEMs. Let me take a few words on our revenue growth this quarter before we go into the numbers. While still modest, this trend is in the right direction and our sales this quarter grew on three points. We sold more chips to our Tier one, we sold radar systems into defense and civilian programs, and we earned revenue from engineering and development work for our customers.

7:53 This revenue shows that our new strategy of end market diversification is gaining traction. Some of the systems that we sold are being used by our integrated partners to compete on various projects. Any wins by them will potentially translate to significant revenue on the road. Previously, ARBE was a custom automotive chipset supplier with many years between a design win and a program maturing to full production. Today, we are supplier of both Q Sets as well as complete end to end radar systems with much shorter cycles. With our focus on driving end market with urgent need, we sell directly to customers who need our products now. This let us generate revenue in the near and medium term, while still competing for the automotive OEM programs with their long term significant revenue potential.

8:51 At the end of twenty twenty five, we also announced steps to lower expenses and enhance operational efficiencies and indeed we have leveraged AI to automate many processes and lower our costs. We have reduced our cost base by about 15% for first quarter level, and we expect to see the full effect by the third quarter, where our cash value targeted to fall to below $7,000,000 per quarter due to the expected lower expenses and revenue growth. We ended the quarter with around $42,000,000 in cash on the balance sheet. And given our expected reduced quarterly run rate, we believe we have sufficient runway to fully execute on our strategy.

9:37 Looking back, our first half of twenty twenty six reflects the early stages of this transition and we expect meaningful growth in the second half of the year into 2027. Karim will share our detailed outlook shortly. With that, I'll hand over the call to our President and Co Founder, Kobi Morhenko. Mr. Kobi, please go ahead. Thank you, Ram, and good morning, everyone. As we announced, this is the last quarter we took away for Corrine, our Chief Financial Officer. Corrine has served in that role for close to five years. During that time, she built our finance organization, led much of our fundraising and managed our reporting as a public company on two exchanges.

10:22 On behalf of the Board, the management team and everyone at ARBE, I would like to thank Karin for all that she has done for the company and to wish her much success in her next role. Karin's last day with Arbe is today. During the transition period, I will temporally oversee our financial functions together with the team. I am also pleased to share that Asaf Pereg will join Arbe as our incoming Chief Financial Officer effective 08/30/2026. Asaf brings close to two decades of financial leadership experience with both NASDAQ listed public and private technology companies in Israel and internationally. He joined us from IBEX Medical Analytics Ltd.

11:11 And previously held finance role at Nano Dimension, Aquarius Engine, become technological solutions in Cyberint Technologies. We look forward to welcoming him on the team. With that, let me turn the call over to Corrine to review her last financials. Thank you, Kobi, and hello, everyone. Let me review our financial results for the second quarter of twenty twenty six in more detail. Revenue for the second quarter of twenty twenty six totaled $700,000 compared to $300,000 in Q2 twenty twenty five. This was our third consecutive quarter of revenue growth. Backlog as of 06/30/2026 was $1,000,000 Gross loss for Q2 twenty twenty six was around breakeven compared to a gross loss of $200,000 in Q2 twenty twenty five.

12:12 Total operating expenses for Q2 twenty twenty six were $9,800,000 down from $11,300,000 in Q2 twenty twenty five. The lower expenses were primarily driven by lower share based compensation expenses, reflecting both the lower grant date fair value of equity awards issued during the period and the ongoing vesting of previously granted awards, some of which have now fully vested. Increased expenses due to the unfavorable exchange rate impact were fully offset by the decrease in headcount as part of the cost reduction measures taken this quarter, which are expected to be fully reflected by next quarter.

12:58 Even as we manage costs carefully, we remain committed to investing in and advancing our AI capabilities. Operating loss for the second quarter twenty twenty six was $9,800,000 compared to an operating loss of $11,500,000 in the second quarter of twenty twenty five. Adjusted EBITDA, a non GAAP measurement, which excludes expenses for non cash share based compensation and for non recurring items, was a loss of $8,700,000 in Q2 of twenty twenty six compared to a loss of $8,900,000 in the second quarter of twenty twenty five. 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.

13:52 Net loss for the second quarter of twenty twenty six was $9,100,000 reduced from a net loss of $10,200,000 in the second quarter of twenty twenty five. Net loss in Q2 twenty twenty six included $700,000 of financial income compared to $1,300,000 of financial income in Q2 twenty twenty five. As of 06/30/2026, ARBE held $41,900,000 in cash, cash equivalents and short term bank deposits. Shareholders' equity was $40,500,000 Turning to our outlook. Management reaffirms the full year 2026 outlook, which we provided in February 2026.

14:41 ARBECC continues to expect full year revenue in the range of $4,000,000 to $6,000,000 and an adjusted EBITDA in the range of $28,000,000 loss to $31,000,000 loss. Finally, as I conclude nearly five years at ARBE, I wanted to express how meaningful this journey has been for me. Together, we strengthened the company's balance sheet and funded development through rounds of successful fundraising, streamlined our cost structure for greater efficiency and build the reporting and governance infrastructure required of a public company, all by laying the groundwork of our best next step towards full product innovation.

15:31 I have great confidence in our best continued success under the strong leadership of Ram and the talented team here. I would like to thank Colby, Ram, our Board and the entire Arbev team for going through this journey together with me, which made our achievements possible and also our investors and analysts for the open dialogue we had over the years. I leave ARBE moving in the right direction with a strong financial position, a lower cost base and a growing revenue trend. I'm also leaving it in very good hands, and I look forward to continue following the company's progress from afar. Now we will be happy to take your questions.

16:19 Operator? Thank you. We will now begin the question and answer session. And our first question for today will come from Matthew Pacquelli with Canaccord Genuity. Please go ahead. Hi, everyone. Thank you for taking my questions and Karim, best of luck in your next role. Just to start off, the recent defense selection, I believe you mentioned there's kind of three separate projects here. Could you just provide us some additional insights as to what these volumes should look like and how the partnership could expand over time?

17:13 Yes. So the partnership agreement is a long term agreement. And right now, to begin with, three specific projects were defined. But the agreement is a framework agreement that will be extended to several applications as well. On this specific one, we were requested not to mention the exact application. But I can say in general that we see on the defense sector several applications that are very relevant on readout that are not necessarily specific to this agreement.

17:59 When we talk about defense application, for example, the unmanned ground vehicles and mission vehicles, that's something very common and makes a lot of sense to use an imaging radar since it has a very good perception of the surrounding, and it doesn't have the disadvantages of cameras like dust, of course, night issues and weather issues. So many applications that are using radar and imaging radar for unmanned ground vehicle, this is one example of a very common use case in the defense application.

18:48 Another one would be some perimeter security, that's another application that is very common in the defense sector. And there are actually several more applications that are very relevant. Great. Appreciate the color. And maybe just on the Robotaxi front, similarly, it seems like you're making some nice progress here. If you can perhaps just dive into some detail around what these selection processes look like, what milestones you still need to achieve and maybe just from a timing perspective, what we should anticipate there? Yes. So we have our radars right now, several vehicles equipped with our radars.

19:38 This is a three sixty degree view of coming from our radars. And then the launch of the development of the perception stock based on our radar is now beginning and we expect it to roll out towards end of the year and beginning of next year. And that's with one of the global taxi providers, they are more coming that are in right now in earlier stages. Great. Thank you. And this will conclude our question and answer session. I would like to turn the conference back over to Ram Mokness for any closing remarks. Please go ahead.

20:47 Thank you. On behalf of the entire management team at ARBE, I would like to thank you, our shareholders for the continued interest, the long term and support for our business. I believe that ARBE is now very well situated for the future, having planted the seeds beyond passenger automotive, which as you saw today are beginning to sprout. Finally, I would like to thank Corrine for her hard work, leadership and partnership over the past five years and wish her much luck in her future roles. I would also like to welcome Asaf, our new CFO, and we are all very much looking forward to working with him to bring ARBE to the next stage.

21:33 And to our investors and analysts, we look forward to updating you on our progress next quarter. And with that, we end our call. Have a great day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.