Arbe Robotics Ltd. (ARBE) Earnings Call Transcript

Good day, and welcome to the Arbe Robotics Second Quarter 2026 Earnings Results. [Operator Instructions] 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 2026. 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. Today, we are joined by Ram Machness, Arbe's CEO; Kobi Marenko, President and Co-Founder; and Karine Pinto-Flomenboim, 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 Machness, Ram, please go ahead.

Thank you, Kenny. Good morning, everyone, and thank you for joining us to review Arbe's second quarter 2026 results. I'm 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 solutions using our technology, and we started to see the positive impact of our reduced expenses on our bottom line. Today, I will go through the main developments 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 3 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 for our own production line for the immediate operational needs. Our radars are used to take part of defense and homeland security market in many unique ways. They are used in fixed insulation and vehicle mounted systems at both short and long ranges. These multiple use cases demonstrate how our radar platform technology can support different needs. The project of Proterra, a supplier of autonomous systems with the U.S. Department of War continues to progress. Our Tier 1 Sense supplies Proterra with high-definition imaging radar based on our chipset and that radar is integrated into Proterra's a protection suite. It helps the vehicle recognize its surrounding, detect obstacles and navigate unstructured 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 shipped out systems for further evaluation. 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 1 supplying imaging radar based on our chipsets for defense and commercial applications announced a new collaboration with VirtuRail. Sensrad announced that VirtuRail is now integrating the radar into its automated service vehicles for underground tunnel construction. We continue to supply chips to supporting its customers for Forterra, Tianyi and Watchit. Arbe is also directly engaged in other nonautomotive 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 reported follow-on orders from a global robotaxi player for our Phoenix radar systems. Phoenix scale give full 360-degree sensing to support level 4 autonomy. During the second quarter, we showed further progress and our radar systems were integrated into their vehicles. I'm pleased to say that these vehicles have now started on both trials. We continue to engage in active bid process with additional robotaxi players with very positive feedback. Turning to China. HiRain, our Tier 1 in China, is leading supplier in this market and offers a portfolio of radar systems built on our chipset. In December, we announced that HiRain radar with our chipset was selected for a Level 4 program with a large Chinese automaker. During the quarter, we continued to ship chipsets to support this customer. HiRain advised us that they are now progressing towards the start of production, which is planned in the next few months. Alongside the high-end 4K system is developing a second lower spec platform based on our chipset. This platform has 24x12 panels lower cost point for a wider range of vehicles. The 2 platforms give us a direct path into the Chinese market, which is the largest and fastest-moving market for Level 2+ and Level 3 vehicles. HiRain is also committing and undergoing 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 with all these evaluations as they progress through various stages of selection. We also continue to make steady progress with global OEMs. OEMs are actively testing advanced radar solutions with a goal 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 of autonomy and at a low enough cost that will allow for a proliferation of our technology to high-volume programs at various OEMs. Let me say 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 3 fronts. We sold more chips to our Tier 1s, we sold radar systems into defense and civilian programs, and we earned revenue from engineering and development work for our customers. This revenue mix shows that our new strategy of end market diversification is gaining traction. Some of the systems that we sold are being used by our integrator partners to compete on various projects. Any wins by them will potentially translate to significant revenue down the road. Previously, Arbe was just an automotive chipset supplier with many years between a design win and a program maturing to full production. Today, we are supplier of both chipsets as well as complete end-to-end radar systems with much shorter cycles. With our focus on driving end markets with urgent need, we sell directly to customers who need our products now. This led us to generate revenue in the near and medium term while still competing for the automotive OEM programs with their long-term significant revenue potential. At the end of 2025, 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 burn is targeted to fall to below $7 million per quarter due to the expected lower expenses and revenue growth. We ended the quarter with around $42 million in cash on the balance sheet. And given our expected reduced quarterly burn rate, we believe we have sufficient runway to fully execute on our strategy. Looking back, our first half of 2026 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 Marenko.

Thank you, Ram, and good morning, everyone. As we announced, this is the last quarter with Arbe for Karine, our Chief Financial Officer. Karine has served in that role for close to 5 years. During that time, she built our finance organization, led much of our fundraising and manage our reporting as a public company on 2 exchanges. On behalf of the Board, the management team and everyone at Arbe, I would like to thank Karine for all that she has done for the company and to wish her much success in her next role. Karine's last day with Arbe is today. During the transition period, I will temporarily oversee our financial functions together with the team. I'm also pleased to share that Assaf Pereg will join Arbe as our incoming Chief Financial Officer, effective August 30, 2026. Assaf brings close to 2 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 and previously held finance role at Nano Dimension, Aquarius engine become technological solutions in Cyber Technologies. We look forward to welcoming him on the team. With that, let me turn the call over to Karine to review her last financials.

Thank you, Kobi, and hello, everyone. Let me review our financial results for the second quarter of 2026 in more detail. Revenue for the second quarter of 2026 totaled $0.7 million compared to $0.3 million in Q2 2025. This was our third consecutive quarter of revenue growth. Backlog as of June 30, 2026, was $1 million. Gross loss for Q2 2026 was around breakeven compared to a gross loss of $0.2 million in Q2 2025. Total operating expenses for Q2 2026 were $9.8 million, down from $11.3 million in Q2 2025. 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. Even as we manage costs carefully, we remain committed to investing in and advancing our AI capabilities. Operating loss for the second quarter of 2026 was $9.8 million compared to an operating loss of $11.5 million in the second quarter of 2025. Adjusted EBITDA, a non-GAAP measurement, which excludes expenses for noncash share-based compensation and for nonrecurring items, was a loss of $8.7 million in Q2 of 2026 compared to a loss of $8.9 million in the second quarter of 2025. 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 second quarter of 2026 was $9.1 million, reduced from a net loss of $10.2 million in the second quarter of 2025. Net loss in Q2 '26 included $0.7 million of financial income compared to $1.3 million of financial income in Q2 2025. As of June 30, 2026, Arbe held $41.9 million in cash, cash equivalents and short-term bank deposits. Shareholders' equity was $40.5 million. Turning to our outlook. Management reaffirms the full year 2026 outlook, which we provided in February 2026. Arbe continues to expect full year revenue in the range of $4 million to $6 million and an adjusted EBITDA in the range of $28 million loss to $31 million loss. Finally, as I conclude nearly 5 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 Arbe next step towards full productization. I have great confidence in Arbe's continued success under the strong leadership of Ram and the talented team here. I would like to thank Kobi, Ram, our Board and the entire Arbe 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've had over the years. I leave our 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. Operator?

[Operator Instructions] Our first question for today will come from Matthew Galinko with Canaccord Genuity.

Karine, best of luck in your next role. Maybe just to start off, on the recent defense selection, I believe you mentioned there's kind of 3 separate projects here. Can you just provide us some additional insights as what these volumes should look like and how the partnership could expand over time?