Arbe Robotics .(ARBE) - 2023 Q3 - Quarterly Report

Executive Summary & Business Highlights Arbe Robotics achieved significant Q3 2023 milestones, advancing Tier 1 radar production and OEM selections, while maintaining sufficient liquidity until H2 2025 Q3 2023 & Recent Company Highlights Arbe Robotics advanced Tier 1 radar production, delivered 'B Samples' to OEMs, and is in final selection stages for significant automotive projects - Magna, HiRain, Weifu, and Sensrad (Arbe's Tier 1s) are progressing towards radar system production based on Arbe's chipset[1] - Tier 1 radar 'B Samples' (production intent systems) utilizing Arbe's chipset were delivered to car manufacturers (OEMs) for L2+ and L3 applications, a pre-selection condition[1] - Arbe is in the final stages of the selection process with leading European, American, and Asian OEMs, which collectively account for a 31% share of the global passenger vehicle market[2] - Arbe is awaiting final confirmation on securing two prominent truck projects[2] - Current cash balance provides sufficient funds until the second half of 2025. Preliminary chipset orders from Chinese Tier 1s for 2024 and 2025, once finalized, are expected to enable the company to reach breakeven with current cash reserves[3] - Prof. Yonina Eldar, a leading radar theory expert, has joined Arbe's board of directors[3] Current Situation in Israel Arbe's manufacturing remains unaffected by the situation in Israel, with short-term operations and client support maintained despite team call-ups - Arbe's manufacturing and production are performed in Germany by GlobalFoundries, with no expected change in product availability[3] - 20% of Arbe's team was called for military duty, primarily affecting long-term projects, with no impact on short-term commercial and client support[3] - The company continues to monitor activities and adapt to ensure business continuity while prioritizing employee safety[4] CEO Statement CEO Kobi Marenko highlighted Q3 progress, significant OEM milestones, and Arbe's strategic position in the growing Imaging Radar market - CEO Kobi Marenko is pleased with Q3 progress, including significant milestones with leading OEMs[4] - Arbe is in the concluding stages of various OEM selection processes, signaling the rising significance of Imaging Radars as a backbone of the automotive sensor suite[4] - Arbe's cutting-edge technology is uniquely positioned to meet the demand for Imaging Radars[4] Financial Performance Arbe's Q3 2023 financial performance saw decreased revenues and gross margin, leading to an increased net loss, despite improved Adjusted EBITDA loss Q3 2023 Financial Highlights Q3 2023 revenues decreased to $0.5 million, impacting gross margin, while net loss increased to $11.7 million despite a lower Adjusted EBITDA loss Q3 2023 Financial Performance Summary (USD millions) | Metric | Q3 2023 (USD millions) | Q3 2022 (USD millions) | Change (YoY) | | :----- | :--------------------- | :--------------------- | :----------- | | Revenues | 0.5 | 1.3 | -61.5% | | Gross Margin | 24.0% | 72.5% | -48.5 pp | | Operating Expenses | 11.7 | 11.8 | -0.8% | | Operating Loss | (11.6) | (10.9) | +6.4% | | Net Loss | (11.7) | (9.9) | +18.2% | | Adjusted EBITDA Loss | (7.5) | (8.4) | -10.6% | - Gross margin decreased mainly due to reduced quarterly revenue with a fixed cost portion in cost of goods sold[5] - Operating expenses decreased by $0.1 million due to lower subcontractor expenses, favorable exchange rates, and reduced D&O insurance, partially offset by increased share-based compensation ($2.3M in Q3 2022 to $3.9M in Q3 2023)[6] - Net loss in Q3 2023 included $0.1 million of financial expenses, mainly related to exchange rate revaluations, compared to financial income of $1.0 million in Q3 2022[7] Balance Sheet & Liquidity As of September 30, 2023, Arbe maintained a strong liquidity position with $23.5 million in cash and $25.6 million in short-term bank deposits, with no debt Balance Sheet and Liquidity Summary (USD millions) | Metric | As of Sep 30, 2023 (USD millions) | | :----- | :------------------------------ | | Cash and cash equivalents | 23.5 | | Short term Bank deposits | 25.6 | | Debt | 0.0 | Outlook & Guidance Arbe anticipates full-year 2023 revenues in the lower range of $5-7 million and an Adjusted EBITDA loss of $32-35 million, while progressing OEM selections Full Year 2023 Outlook Arbe projects full-year 2023 revenues of $5-7 million and an Adjusted EBITDA loss of $32-35 million, with ongoing OEM selection processes - Arbe is in the final selection stages with leading OEMs in Europe, the US, and Asia Pacific, accounting for 31% of the global passenger vehicle market[10] Full Year 2023 Financial Outlook (USD millions) | Metric | Full Year 2023 Outlook (USD millions) | | :----- | :---------------------------------- | | Revenues | $5 to $7 (lower range) | | Adjusted EBITDA | ($32) to ($35) | Company Information & Disclosures This section provides an overview of Arbe's market position, conference call details, and cautionary notes regarding forward-looking statements About Arbe Arbe Robotics leads in Perception Radar Solutions, offering highly detailed technology crucial for L2+ autonomy in the growing $11 billion automotive radar market - Arbe is a global leader in Perception Radar Solutions, enabling safe driver-assist systems and paving the way for full autonomous driving[12] - Arbe's radar technology is 100 times more detailed than other market radars and is a mandatory sensor for L2+ and higher autonomy[12] - The company operates in the fast-growing automotive radar market, with an estimated total addressable market of $11 billion in 2025[12] Conference Call & Webcast Details Arbe hosted a Q3 2023 conference call and webcast on November 8, 2023, with replay and archived access available - Arbe hosted a conference call and webcast on November 8, 2023, at 8:30 am ET, with CEO Kobi Marenko and CFO Karine Pinto-Flomenboim[11] - A telephonic replay was available until November 22, 2023 (Access ID: 2439734)[11] - A live and archived webcast was accessible via Arbe's Investor Relations website[11] Cautionary Note Regarding Forward-Looking Statements Forward-looking statements are subject to various risks and uncertainties, including geopolitical and market factors, and should not be unduly relied upon - Forward-looking statements are subject to risks and uncertainties, including the effect of the Israeli economy and hostilities, ability to secure binding orders, manufacturing delays, and market adoption of autonomous vehicles[14] - Readers are cautioned not to place undue reliance on these statements, which relate only to the date they were made[14] - Arbe does not undertake any obligation to update forward-looking statements except as required by law or applicable regulation[14] Consolidated Financial Statements This section presents Arbe's consolidated balance sheets, statements of operations, cash flows, and non-GAAP reconciliations for the reported periods Consolidated Balance Sheets As of September 30, 2023, total assets decreased to $53.95 million, driven by reduced cash, while total liabilities significantly decreased to $6.36 million Consolidated Balance Sheets (USD millions) | --- | --- | --- | | Current Assets: | 2023 Sep 30, (Unaudited) (USD millions) | 2022 Dec 31, (Unaudited) (USD millions) | | :------------------------------------------------- | :--------------------------------------- | :-------------------------------------- | | Cash and cash equivalents | 23.527 | 54.171 | | Restricted cash | 0.115 | 0.144 | | Short term Bank deposits | 25.615 | 0.400 | | Trade receivable | 1.766 | 2.202 | | Prepaid expenses and other receivables | 1.277 | 1.839 | | Total current assets | 52.300 | 58.756 | | Non-Current Assets | | | | Operating lease right-of-use assets | 0.268 | 0.465 | | Property and equipment, net | 1.386 | 1.609 | | Total non-current assets | 1.654 | 2.074 | | Total assets | 53.954 | 60.830 | | Current liabilities: | | | | Trade payables | 0.594 | 1.244 | | Operating lease liabilities | 0.145 | 0.364 | | Employees and payroll accruals | 2.521 | 2.861 | | Deferred revenues | 0.101 | 0.351 | | Accrued expenses and other payables | 1.820 | 5.609 | | Total current liabilities | 5.181 | 10.429 | | Long term liabilities | | | | Operating lease liabilities | 0.035 | 0.017 | | Warrant liabilities | 1.141 | 1.631 | | Total long-term liabilities | 1.176 | 1.648 | | SHAREHOLDERS' EQUITY: | | | | Additional paid-in capital | 241.952 | 208.893 | | Accumulated deficit | (194.355) | (160.140) | | Total shareholders' equity | 47.597 | 48.753 | | Total liabilities and shareholders' equity | 53.954 | 60.830 | Consolidated Statements of Operations Q3 2023 revenues decreased to $0.48 million, leading to an operating loss of $11.56 million and a net loss of $11.70 million Consolidated Statements of Operations (USD millions) | --- | --- | --- | --- | --- | | | 3 Months Ended September 30, 2023 (Unaudited) (USD millions) | 3 Months Ended September 30, 2022 (Unaudited) (USD millions) | 9 Months Ended September 30, 2023 (Unaudited) (USD millions) | 9 Months Ended September 30, 2022 (Unaudited) (USD millions) | | :----- | :------------------------------------------------------- | :------------------------------------------------------- | :------------------------------------------------------- | :------------------------------------------------------- | | Revenues | 0.479 | 1.256 | 1.123 | 3.368 | | Cost of revenues | 0.364 | 0.345 | 0.972 | 1.066 | | Gross Profit | 0.115 | 0.911 | 0.151 | 2.302 | | Operating Expenses: | | | | | | Research and development, net | 8.421 | 8.566 | 25.636 | 25.904 | | Sales and marketing | 1.264 | 1.068 | 3.666 | 3.427 | | General and administrative | 1.993 | 2.169 | 5.637 | 6.587 | | Total operating expenses | 11.678 | 11.803 | 34.939 | 35.918 | | Operating loss | (11.563) | (10.892) | (34.788) | (33.616) | | Financial expenses (income), net | 0.134 | (0.959) | (0.573) | (4.233) | | Net loss | (11.697) | (9.933) | (34.215) | (29.383) | | Basic net loss per ordinary share | (0.15) | (0.16) | (0.49) | (0.46) | | Weighted-average number of shares used in computing basic net loss per ordinary share | 77,474,326 | 63,623,063 | 69,975,104 | 63,341,817 | | Diluted net loss per ordinary share | (0.18) | (0.16) | (0.56) | (0.46) | | Weighted-average number of shares used in computing diluted net loss per ordinary share | 67,286,305 | 63,623,063 | 61,452,569 | 63,341,817 | Consolidated Statements of Cash Flows Q3 2023 saw $8.09 million net cash used in operating activities, with significant cash used in investing and provided by financing for the nine-month period Consolidated Statements of Cash Flows (USD millions) | --- | --- | --- | --- | --- | | Cash flows from operating activities: | 3 Months Ended September 30, 2023 (Unaudited) (USD millions) | 3 Months Ended September 30, 2022 (Unaudited) (USD millions) | 9 Months Ended September 30, 2023 (Unaudited) (USD millions) | 9 Months Ended September 30, 2022 (Unaudited) (USD millions) | | :------------------------------------ | :------------------------------------------------------- | :------------------------------------------------------- | :------------------------------------------------------- | :------------------------------------------------------- | | Net Loss | (11.697) | (9.933) | (34.215) | (29.383) | | Net cash used in operating activities | (8.089) | (8.079) | (28.467) | (31.651) | | Cash flows from investing activities: | | | | | | Change in bank deposits | (0.013) | - | (25.215) | (0.400) | | Purchase of property and equipment | (0.071) | (0.051) | (0.190) | (0.576) | | Net cash provided by investing activities | (0.084) | (0.051) | (25.405) | (0.976) | | Cash flows from financing activities: | | | | | | Proceeds from issuance of ordinary shares, net of issuance costs | - | - | 22.496 | - | | Proceeds from exercise of options | 0.097 | 0.049 | 0.703 | 0.264 | | Net cash provided (used in) by financing activities | 0.097 | 0.049 | 23.199 | (4.954) | | Effect of exchange rate fluctuations on cash and cash equivalent | (0.655) | - | (0.721) | - | | decrease (Increase) in cash, cash equivalents and restricted cash | (7.420) | (8.081) | (29.952) | (37.581) | | Cash, cash equivalents and restricted cash at the beginning of period | 31.718 | 71.436 | 54.315 | 100.936 | | Cash, cash equivalents and restricted cash at the end of period | 23.642 | 63.355 | 23.642 | 63.355 | Reconciliation of Non-GAAP Measures Arbe reconciled Q3 2023 GAAP net loss of $11.70 million to a non-GAAP net loss of $8.06 million, with Adjusted EBITDA loss improving to $7.54 million Reconciliation of GAAP Net Loss to Non-GAAP Net Loss (USD millions) | --- | --- | --- | --- | --- | | | 3 Months Ended September 30, 2023 (USD millions) | 3 Months Ended September 30, 2022 (USD millions) | 9 Months Ended September 30, 2023 (USD millions) | 9 Months Ended September 30, 2022 (USD millions) | | :----- | :----------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | GAAP net loss attributable to ordinary shareholders | (11.697) | (9.933) | (34.215) | (29.383) | | Add: | | | | | | Stock-based compensation | 3.707 | 2.240 | 9.428 | 6.377 | | Warrants to service providers | 0.178 | 0.106 | 0.432 | 0.272 | | Revaluation of warrants and accretion | (0.252) | 0.387 | (0.490) | (4.761) | | Non-recurring expenses | - | - | 0.214 | 0.130 | | Non-GAAP net loss | (8.064) | (7.200) | (24.631) | (27.365) | | Basic Non-GAAP net loss per ordinary share | (0.10) | (0.11) | (0.35) | (0.43) | | Weighted-average number of shares used in computing basic Non-GAAP net loss per ordinary share | 77,474,326 | 63,623,063 | 69,975,104 | 63,341,817 | | Diluted Non-GAAP net loss per ordinary share | (0.12) | (0.11) | (0.56) | (0.46) | | Weighted-average number of shares used in computing diluted Non-GAAP net loss per ordinary share | 67,286,305 | 63,623,063 | 61,452,569 | 63,341,817 | Reconciliation of GAAP Net Loss to Adjusted EBITDA (USD millions) | --- | --- | --- | --- | --- | | | 2023 (USD millions) | 2022 (USD millions) | 2023 (USD millions) | 2022 (USD millions) | | :----- | :---------------- | :---------------- | :---------------- | :---------------- | | GAAP net loss attributable to ordinary shareholders | (11.697) | (9.933) | (34.215) | (29.383) | | Add: | | | | | | Financial expenses (income), net | 0.134 | (0.959) | (0.573) | (4.233) | | Depreciation | 0.139 | 0.132 | 0.415 | 0.349 | | Stock-based compensation | 3.707 | 2.240 | 9.428 | 6.377 | | Warrants to service providers | 0.178 | 0.106 | 0.432 | 0.272 | | Non-recurring expenses | - | - | 0.214 | 0.130 | | Adjusted EBITDA | (7.539) | (8.414) | (24.299) | (26.488) |