Arbe (ARBE) Q2 2025 Earnings Call Transcript

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DATE

Aug. 7, 2025 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Jacob Marenko
• Chief Financial Officer — Karine Pinto-Flomenboim

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RISKS

• Karine Pinto-Flomenboim stated, “broader economic shifts have led to delays in automakers' rollout of advanced driver assist systems, decision timelines have been extended.”
• Gross profit deterioration to a negative $0.2 million from negative $0.04 million was attributed to fixed costs amid lower revenue and less favorable revenue mix.
• 2025 adjusted EBITDA is expected to remain negative at a loss ranging from $29 million to $35 million.

TAKEAWAYS

• Revenue -- $0.3 million, down from $0.4 million in fiscal Q2 ended June 30, 2024.
• Backlog -- $0.5 million as of June 30, 2025.
• Gross profit -- Negative $0.2 million versus negative $0.04 million in the prior year, reflecting fixed cost impact on lower revenue and changing revenue mix.
• Operating expenses -- $11.3 million, a reduction from $11.6 million, primarily due to lower share-based compensation, partially offset by increased bonus accruals, labor, and adverse FX effects.
• Operating loss -- $11.5 million compared to $11.6 million operating loss a year ago.
• Adjusted EBITDA -- Non-GAAP loss of $8.9 million, compared to a $7.5 million loss.
• Net loss -- $10.2 million, improving from $11.7 million net loss.
• Liquidity -- $26.3 million in cash and cash equivalents plus short-term bank deposits, and $35.7 million in long-term bank deposits as of June 30, 2025.
• Strategic automotive orders -- A major order was secured for chipsets used in data-gathering fleets spanning over 100 vehicles at leading global automotive manufacturers.
• OEM selection process -- Arbe is “one of the final few radar technologies remaining” in late-stage selection with several leading OEMs, targeting four OEM bid wins within the next year.
• Revenue outlook -- 2025 revenue is expected toward the high end of $2 million to $5 million, weighted toward year-end.
• Adjusted EBITDA guidance -- 2025 expected to be between $29 million loss and $35 million loss.
• Non-automotive expansion -- Sensrad began deploying Arbe-enabled radars for defense applications and expanded a support and maintenance agreement including recurring revenues.
• HiRain LRR615 launch -- Chinese partner HiRain launched a long-range imaging radar using Arbe chipsets and is preparing for annual production in the tens of thousands of units.
• China regulatory catalyst -- Proposed new ADAS regulations in China are expected to exceed local radar capabilities, potentially benefiting Arbe’s offering in 2026.
• Industry dynamics -- CEO Marenko described competition for high-end imaging radar in L3 as a “two horse race” with Arbe and Mobileye (NASDAQ: MBLY) as the only candidates meeting channel requirements.

SUMMARY

Arbe Robotics (NASDAQ:ARBE) advanced to late-stage selection with top-tier OEMs, positioning its imaging radar as a central enabler for 2028 vehicle platforms and projecting initial recurring automotive revenue in 2027. Management stated that competition for L3 hands-free, eyes-off systems has narrowed to Arbe and Mobileye (NASDAQ: MBLY), citing advanced channel requirements that exclude low-end imaging radar contenders. Outside automotive, Sensrad’s adoption of Arbe-enabled radar for defense marks expansion into new verticals, supported by a newly announced recurring service agreement. The launch of HiRain’s LRR615 long-range radar and China’s proposed ADAS regulations together signal increasing opportunity in the Asia market, although overall segment adoption remains contingent on regulatory adoption and bid outcomes.

• Management anticipates the completion of up to four major OEM bid processes in the next year, asserting readiness to “serve as a key enabler for 2028 passenger vehicle platforms.”
• Cash and deposit balances totaling $62 million were cited as providing a “runway to support all programs” into anticipated revenue ramp.
• The non-automotive market, including defense and “smart infrastructure,” has begun to generate traction and is expected to yield “nice revenues shorter than in automotive,” though at lower volumes.
• HiRain’s expansion for the LRR615 is positioned as complementing cameras and offering a cost-effective alternative to LiDAR in China.

INDUSTRY GLOSSARY

• OEM: Original Equipment Manufacturer; in this context, major auto manufacturers deciding on technology suppliers for new vehicle platforms.
• ADAS: Advanced Driver Assistance Systems; electronic systems that aid vehicle drivers in driving and parking functions, a regulatory focus in China’s upcoming standards.
• Design-in: The process of having a company’s component selected for integration into another company’s product (e.g., Arbe’s radar chipsets in OEM production vehicles).
• L3 / L2++: Classifications for vehicle automation; L3 (Level 3) refers to conditional automation or hands-free, eyes-off driving, while L2++ refers to enhanced driver-assist features approaching full autonomy.
• Tier-1: Companies that supply parts or systems directly to OEMs in the automotive industry, such as Magna and HiRain for Arbe’s chipsets.

Full Conference Call Transcript

Jacob Marenko: Thank you, Ehud. Good morning to everyone, and thank you for joining us today to discuss our results and recent business developments. I will begin by reviewing some of our current business highlights. We are pleased with the strategic progress we made in the quarter. Our main target is to win bids with the large OEMs of the world. And as each month passes, we are making progress. Arbe received a strategic order for the use of its chipsets in large-scale data collection projects. These chipsets were shipped and will be deployed on fleets of more than 100 vehicles operated by leading automotive manufacturers.

In general, there is a growing industry-wide recognition among OEMs that high-end imaging radar is a requirement for a safe hands- free driving capabilities. It is clear that high-resolution radar delivers superior performance in complex and challenging conditions, filling critical perception gaps and enabling safer, more reliable autonomy. The market is moving forward solutions based on broad sensor fusion, signaling a departure from reliance on vision-only approach. As a result, we are now in imaging radar selection programs with several of the world's leading OEMs. Magna and HiRain, our main tier-1 are competing with our chips on all of those opportunities. Furthermore, our collaboration with NVIDIA is enabling us to move strongly forward with our customer engagements.

Not less important is our solid progress in non-automotive applications. We are scaling up chip deliveries to Sensrad as they grow their customer base and increase deployment volume across a broad range of applications. We are very pleased to say that for the first time, Sensrad is delivering radars for defense applications, a growing radar applications market. This demonstrates the versatility of our technology for broader industrial and mobility markets beyond the passenger automotive market. We also announced we've signed a new comprehensive support and maintenance agreement with Sensrad under which we will receive a recurring fee to support their 4D imaging radar program based on our advanced chipset technology.

We continue to move ahead with the various bid processes with our target OEMs. Some of these have progressed and we've successfully advanced to the final stages of the process. At this point, we are no longer competing against a large group of suppliers. We are now one of the final few radar technologies remaining in this bid stage. While the timing of the selection processes is not under our control, we are pleased with the progress we have made in recent months, and it remains our goal to achieve 4 OEM bid wins within the coming year.

Our initiatives are aligning with the best to OEM selection, and we anticipate that Arbe's radar technology will serve as a key enabler for 2028 passenger vehicle platforms and we expect our revenues to begin in 2027 and ramp up in '28 as our chipsets are used in high-volume production. While 2027 may still seem some time away for us, 2027 is around the corner, and we are already preparing accordingly. Thanks to our strong balance sheet, we have the runway to support all programs as our revenues reach the ramp-up stage. Other business highlights. HiRain Technologies, our leading tier-1 supplier in China, launched the LRR615, a long-range imaging radar system powered by our chipset.

Their system offers ultra-high resolution and reliable performance in all weather and lighting conditions, presenting a cost-effective and scalable sensor that complements cameras and offer a cost-effective alternative to LiDAR, especially in China. HiRain is preparing to ramp up production capacity to deliver tens of thousands of units annually. China's State Administration for market regulation proposed a new regulation that mandates highly advanced ADAS testing for all new Level 1 and Level 2 vehicle models. These requirements exceed the capabilities of the radar systems, which are currently generally available in the Chinese market.

We believe Arbe's high-definition radar technology can enable OEMs to enhance ADAS performance to meet these new standards once adopted, creating a significant market opportunity for us in China even in 2026. In closing, Arbe is very well-positioned to take advantage of the industry transition to high-resolution radar. The progress we've made over the past year across OEM partnerships, tier-1 integration and cross-sector adoption demonstrates the maturity of our execution and the strength of our ecosystem. We have a number of catalysts coming up over the next year as we expect that the OEMs we are targeting conclude the radar selection processes for the 2028 car models.

Today, based by a solid financial foundation, we are positioned to lead the industry in the adoption of ultra-high resolution radar, and we remain focused on unlocking long-term value for our shareholders. We expect our technology to be a key enabler in high-volume 2028 passenger vehicle platforms with revenue growth beginning in 2027. We look forward to sharing more as we continue to move forward. Now I'd like to turn it over to our CFO, Karine, to go over the financials.

Karine Pinto-Flomenboim: Thank you, Kobi, and hello, everyone. Let me review our financial results for the second quarter of 2025 in more detail. Revenue for the second quarter of 2025 totaled $0.3 million compared to $0.4 million in Q2 of 2024. As of June 30, 2025, backlog stood at $0.5 million. Gross profit for Q2 2025 was negative $0.2 million compared to negative $0.04 million [Audio Gap] reflecting the impact of fixed cost components given reduced revenue year-over-year and revenue mix costs. Turning to operating expenses. Total operating expenses for Q2 2025 were $11.3 million, down from $11.6 million in Q2 2024.

The decrease in operating expenses was primarily attributable to lower share-based compensation expenses resulting from the full vesting of prior grants and to a reduced volume of new grants. This decrease was partially offset by increased bonus liability grant accruals, labor costs, and unfavorable foreign exchange effects. Operating loss for the second quarter of 2025 was $11.5 million compared to $11.6 million loss in the second quarter of 2024. Adjusted EBITDA, a non-GAAP measurement, which excludes expenses for non-cash share-based compensation and for non- recurring items, was a loss of $8.9 million in Q2 of 2025 compared to a loss of $7.5 million in the second quarter of 2024.

We believe that this non-GAAP measurement is important in management's evaluation of our use of cash and planning and evaluating our cash requirements for the coming period. Net loss in the second quarter of 2025 was $10.2 million compared to a net loss of $11.7 million in the second quarter of 2024. As of June 30, 2025, Arbe held $26.3 million in cash and cash equivalents and short-term bank deposits as well as $35.7 million in long- term bank deposits. Turning to our outlook. We would like to reiterate what we previously said. Arbe's leading radar technology remains a top priority for key decision-makers in the automotive industry.

While broader economic shifts have led to delays in automakers' rollout of advanced driver assist systems, decision timelines have been extended. Arbe continues to engage closely with industry leaders, advancing through RFQ stages and strengthening its position for adoption. We continue with our goal to pursue 4 design-ins with automakers in the coming year. Arbe maintains its overall financial expectation for 2025. We expect annual revenue to be weighted towards the end of the year in the range of $2 million to $5 million. Continued expectation for adjusted EBITDA for 2025 to be in the range of $29 million loss and $35 million loss. Now we will be happy to take your questions. Operator?

Operator: [Operator Instructions] The first question is from George Gianarikas.

George Gianarikas: I'd like to ask first about the 4 design wins that you expect in the coming year. Curious as to how that number has changed at all over the last few months since we last spoke. And what the competitive set looks like? It sounds like you feel like that has tightened a little bit. And if you could share any details around how you feel that set has changed as well.

Jacob Marenko: Yes. So I think that overall, the amount of OEMs that we are working with them towards meaning didn't change. What really changed is the environment and the understanding of every OEM that's basically starting to develop a real, let's call it, L3, hands-free, eyes- off driving that they understand that current imaging radar, low-end imaging radar cannot solve the problem. And with the high level of channels radar that has at least more than 1,000 channels, which basically is our chips that support it and the chipset of Mobileye support it are the only candidate that can really solve the problem for L3.

And basically, what we saw is that even in programs that they were considering to take an off-the-shelf imaging radar as an option, they decided to focus and narrow the competition to this, I would say, two horse race between the two companies. The only two companies today that has a real imaging radar, high-end imaging radar that can solve the problem for L3, as I mentioned.

The other thing that we are seeing is that when the OEMs beginning the data collection with our radar, of course, with Magna's radar based on our chipset or with HiRain's radar based on our chipset, they see that for a bit of a lower end application, what is called L2+, L2++, which is only hands-free driving, imaging radar can actually solve the problem, and they are looking to expand the selection also to those kinds of applications. So I think overall, I don't see today the customers in the market that will say that imaging -- high-end imaging radar is not marked for a hands-free, eyes-off applications.

The fact that there is very few amounts of competitors in this market, I think, it puts us in a very good position to be leading in this market.

George Gianarikas: Is it possible for one OEM to pick multiple vendors or the imaging radar?

Jacob Marenko: Not really, not really. I think that, first of all, the data collection because we are today in a world of full AI stack, you need to have a data collection. In order to have an effective data collection, we are talking about millions, not even millions, millions of kilometers of driving, even miles, not just kilometers. So you need 10 or even 100 cars that driving for a year to collect the data and to train the algorithms. So to go with two radars on the same application makes no sense. It's possible to select a different radar for L3 stack and a different radar for L2++ stack. But I don't see an OEM selecting two radars for L3.

George Gianarikas: And maybe just as a final follow-up. You mentioned in your release potential for non-automotive growth. You listed a couple of applications, including defense sector and smart infrastructure. Can you sort of expand upon that a little bit, if possible, what other non-automotive applications are you seeing potential traction with over the next few years?

Jacob Marenko: Yes. So first of all, defense, I think, is a growing sector in the last 2 or 3 years. Of course, it's coming from the different side of it from detection -- from border protection to autonomous trucks that move supply to the troops or so on. So detection of drones attacking and so on. So there is, I think, a strong demand on the defense side for a low priced radar. It's not the monsters of the big industries are building today, radar that cost millions of dollars. There is a need for radar in $1,000, $2,000, $3,000. Of course, it's not in the volume of automotive, but the margins are better. Smart infrastructure, as you mentioned, is good.

There is a few other verticals that we're already seeing the traction that we cannot yet announce. We believe that we will have also -- we will be able to announce things that are growing in September or October after the summer vacation. But we feel that the non-automotive market is growing right now better than we expected, and we will be able to see the nice revenues shorter than in automotive. Of course, it's not in the volume of automotive, but it's still -- we see it now as a strategic leg to the company.

Operator: [Operator Instructions] This concludes the question-and-answer session. Before I ask Mr. Kobi Marenko to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available by tomorrow on Arbe's website, arberobotics.com. Mr. Marenko, would you like to make your concluding statement?

Jacob Marenko: Yes. On behalf of the management of Arbe, I would like to thank you, our shareholders, for your continued interest and long-term support of our business. To our employees and partners, your continued dedication is deeply appreciated. In the coming months, we will be meeting with investors and... [Technical Difficulty]

Operator: You got cut off in the last sentence. Kobi?

Jacob Marenko: By contact us at investors@arberobotics.com to schedule a meeting. And with that, we end our call. Have a good day.

Operator: Thank you. This concludes Arbe's Second Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.

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