雅虎香港財經 Mobileye Global Inc. (NASDAQ:MBLY) Q1 2024 Earnings Call Transcript
Mobileye Global Inc. (NASDAQ:MBLY) Q1 2024 Earnings Call Transcript April 25, 2024
Mobileye Global Inc. misses on earnings expectations. Reported EPS is $-0.07 EPS, expectations were $-0.06. Mobileye Global Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings, and welcome to the Mobileye's First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Galves, Chief Communications Officer. Please, you may begin.
Dan Galves: Thanks Maria. Hello everyone and welcome to Mobileye’s first quarter 2024 earnings conference call for the period ending March 30th, 2024. Please note that today's discussion contains forward-looking statements based on the business environment as we currently see it. Such statements involve risks and uncertainties. Please refer to the accompanying press release which includes additional information on the specific factors that could cause actual results to differ materially. Additionally, on this call, we will refer to both GAAP and non-GAAP figures. A reconciliation of GAAP to non-GAAP financial measures is provided in our posted earnings release. Joining us on the call today as always are Professor Amnon Shashua, Mobileye’s CEO and President, and Moran Shemesh, Mobileye’s CFO.
Also joining today for the Q&A session is Nimrod Nehushtan, Mobileye’s Executive Vice President of Strategy and Business Development. Thanks and now I'll turn the call over to Amnon.
Amnon Shashua: Hello everyone and thanks for joining our earnings call. From a revenue and income perspective, Q1 was fully aligned with the outlook we provided in January, and I'm pleased that the inventory consumption is tracking as we expected. Based on information from our Tier 1 customers and our own analysis, we believe that 70% to 75% of excess inventory was consumed in Q1 this year. Adjusting for that as well as some level of inventory growth in Q1 of last year, our volume growth, the core ADAS would have been mid-single-digits, which is very solid performance in the current environment. In terms of business development and executing on our strategy, we continue to make meaningful progress across our portfolio. This starts with our eyes on hands-on ADAS business and extends throughout our advanced product portfolio, including SuperVision, Chauffeur, and Drive.
Starting with eyes on hands-on systems or what we generally refer to as base and cloud-enhanced data. Our [indiscernible] of this business has always been about providing incremental safety features to meet the constantly expanding regulatory and rating requirements, while leveraging scale and purpose-built hardware to maintain a consistent overall cost to the automaker. In Q1, we had our best-ever design win quarter for base on cloud-enhanced ADAS, generating 26 million units of future projected volume across many OEMs and all key geographic regions. Design win activity -- so you shouldn't annualize this number, but we believe this should address any open questions on whether the excess inventory indicated some weakening of our position and opportunities for continued growth.
It did not. We believe the key driver of this elevated design win volume was the start of production of our next-generation high-volume ADAS chip, the EyeQ6L. This system on chip tax 4.4x the processing power of its predecessor, the EyeQ4 into half the packaging side and supports many incremental safety and convenience features that are aligned with the global regulatory and EnCap safety rating roadmap for the next many years to come. And this was accomplished without any material price increase to our customer or cost increase to Mobileye. Turning to Mobileye's advanced product portfolio, we see three waves of future growth. Initially, eyes-on, hands-free navigation, on-pilot through supervision. This system is in production now with more than 200,000 systems on the road and has customer wins that imply significant scaling over the next few years.
Progressing towards eyes-off, we have chauffeur for consumer-owned vehicles and drive for network-deployed driverless vehicles. Each are still development that have serious production wins that will begin to scale in 2026. From a revenue per unit perspective, we believe these products can accelerate our growth in a meaningful manner. For example, our future projected revenue from design wins in 2023 was $7.4 billion. Approximately 40% of this future projected revenue was accounted for by supervision and 20% by chauffeur. Yet those products combined accounted for only 4% of the future volume. Over the last 12 months, we have observed an increasing consensus among automakers that eyes-on, hands-free across a broad operational domain is a must-have feature to be competitive over the rest of the decade and beyond.
What's new since the start of the year is that we have seen a diffusion of this interest from primarily premium brands to more mainstream brands. We have also seen additional prospects reach out to mobilize due to challenges with their current direction, whether that was fully in-house development or collaboration with our competitors. We now have design wins or in advanced discussions with 14 OEMs representing 46% of the industry production as compared to 11 OEMs representing 37% of industry production at the end of 2023. We continue to make steady progress with more mature prospects. We have been working with since mid to late 2023 and see the likelihood of converting a number of these during the second half of 2024. In the aggregate, Mobileye is now bidding on RFQs representing a multiple of the approximately $4.5 billion of pipeline revenue generated in 2023 from supervision and chauffeur design wins.
There are several reasons for this significant expansion in interest and I will elaborate on five driving factors. Number one, the public announcement by Volkswagen Group for their alignment with our supervision, chauffeur and drive products was very important, both in terms of a large global OEM moving forward on these product categories with conviction and an endorsement of our capability and ability to execute. As expected, the announcement led to incremental traction with other OEMs. Number two, we believe that Mobileye has significant and somewhat unique advantages in delivering an optimal balance of performance and cost. Our SoC cost is a fraction of competing high-end SoCs and very importantly, our SoC comes with the full software stack validated for production readiness with a proven record of quality.
Moreover, REM enables geographic scalability at very low cost. Overall, our eyes on hands-off performance is best in class, despite running on low-cost silicon and requiring many fewer sensors than competition. Number three, as EyeQ6 High approaches production in mid-2025, we are now able to utilize late-stage SoC and ECU samples in testing. The software stack built to run on these next-generation ECUs includes state-of-the-art, novel artificial intelligence systems, including end-to-end perception and end-to-end actuation, running in parallel for purpose of redundancy to the networks powering our current generation of supervision. Our target for the camera-based subsystem for perception is 1,000 hours of driving on highway roads without intervention and our testing show that we are on the right path of achieving those targets.
I would mention that those meantime between intervention targets are expected to be industry-leading at quite a large gap. We believe that – number four, we believe that SuperVision provides a validated bridge to a true eyes-off system across a wide domain, which is seen by many OEMs as a true value driver long-term. But the performance requirements for eyes-off are really underappreciated by the public and also by certain OEMs who are throwing everything they have at an eyes-on system with seemingly no clear plan on how to boost meantime between failure from one safety intervention every few hours to one every hundreds of thousands of hours. Mobileye on the other hand has a unique methodology and offering, including crowdsourced mapping that boost perception of performance, boost perception performance, redundant perception layers, a market-leading imaging radar to support our True Redundancy concept, RSS and purpose-built efficient-compute.
These areas of vertical integration experience in our view are considerable assets. Number five, we have already seen an initial positive impact from Tesla's decision to double down FSD and Robotaxi, which adds to the desire for other OEMs to have competitive offerings, but also is seen as an area where our legacy customers can utilize Mobileye’s strength to introduce far-reaching intelligence-driving systems. Overall, I'm very pleased with the progress of our technology and business building with OEMs. I look forward to more updates through the year and now turn the call over to Moran.
Moran Shemesh: Thank you, Amnon, and thanks for joining the call, everyone. Before I begin, please be aware that all my comments on profitability will refer to non-GAAP measurements. The primary exclusion in Mobileye’s non-GAAP numbers is amortization of intangible assets, which is mainly related to Intel's acquisition of Mobileye in 2017. We also exclude stock-based compensation. Starting with Q1 results, they were closely aligned with the Q1 outlook we provided back in January. I'll provide a brief summary and then get into a bit more detail. The severe year-on-year decline in the key metrics was almost exclusively isolated to EyeQ volumes, which were impacted by the inventory correction. During the quarter, we delivered 3.5 million EyeQs. In addition to these new shipments, our customers use a significant EyeQ inventory to satisfy the demand for our products during the quarter.
The approximately 4.6 million units year-over-year decline, which converted at our high gross margin, especially accounting for substantially all the reduction in gross profit. Our cost is nearly all variable. The fixed component is very minimal. The balance of the year-over-year decline in operating income was driven by some growth in operating expenses, but this was relatively minor. And our operating expenses do not flex with revenue, as R&D spending is correlated with the execution of our advanced product strategy and is not impacted by short-term fluctuations in revenue. Behind the volume decline, we also saw some modest decline in EyeQ ASP and gross margin related to mix. SuperVision was pretty strong in the quarter. We delivered 39,000 units compared to 25,000 units in the year ago period.
This was above expectation that this was due to timing. We continue to see the first half deliveries totaling around 70,000 units, in line with our initial expectations, but with Q1 slightly higher than expected, Q2 is slightly lower. So far we see gross margin improved somehow in Q1, both sequentially and year-over-year. The more meaningful increase into the low 40 range is expected in Q2 as close to 1% of our volume will be with the new low-cost domain control. On the overall blended gross margin basis, the lower than normal percentage was related to the fact that supervision was around 20% of revenue in Q1 compared to an average of 6% in 2023 calendar year. While supervision volumes grew year-over-year, the mix of supervision was exaggerated by the temporary reduction in EyeQ volume in the quarter, which will return to more normalized level in Q2 and even more so in the back half.
Despite the operating loss, operating cash flow was modestly positive in the quarter. One item to note here is that our balance sheet inventory rose sequentially. This has nothing to do with inventory at the Tier 1 customers. Our balance sheet inventory rose modestly due to lower shipment in the quarter and the need to maintain somehow steady purchasing of EyeQ chip over the course of the year. By the end of 2024, we would expect our balance sheet inventory to be consistent with the 2023 year end figure. Looking ahead, we believe that the inventory consumption process is on track. At this point, the vast majority of Q2 volume is based on binding purchase orders from our customers. There is quite some level of uncertainty regarding timing of late quarter shipments, but we are comfortable in projecting approximately 7.4 million units, up more than 100% as compared to Q1.
Based on our in analysis and information from our customers, we expect that the inventory at our Tier 1 customers will be back around normal orders by end of Q2. Please note that we may not continue to give as much specification on quarterly unit volume outlook, but given the unusual cadence of this year we feel is worthwhile. We expect gross margin to move higher to around 67% and for operating expenses to continue to grow steadily on a sequential basis. Overall, our revenue and adjusted operating income expectation for Q2 are well aligned with the current analyst consensus. In terms of the full year guidance, it is unchanged from the outlook we provided on January 25. From a volume perspective, we are assuming 31 million to 33 million EyeQ shipments and 175,000 to 195,000 supervision in shipments in 2024.
On the EyeQ side, the midpoint of our guidance implies around 21 million units in the back half. This is supported by regularly updated indication from our customers, which have been quite stable over the last couple of months. And it also appears to be reflective of the true level of demand in the back half of 2024 based on our own analysis of OEM production forecast. If we isolate average system price for the single-chip EyeQ business, we expect it to be down slightly in 2024 on a year-over-year basis, consistent with our view in January. The modest weakening in vehicle mix that impacts us somehow in 2023 is expected to continue in 2024. This is compared to a very rich mix we saw in 2021 and 2022 due to overall automotive industry production constraints.
Higher-priced chips for cloud enhanced ADAS and other advanced programs are providing an offer, but we do not view this tailwind as very materially in 2024. As [indiscernible] volumes are still not a meaningful portion of the total and the base of vehicles paying us annual REM-related license payments continue to build. On the supervision side, these volumes can be more difficult to precisely predict given that we are currently on five models that are all in the EV space, which has been in a period of volatility. Increase in volumes in the second half of 2024 versus the first half of 2024, is supported by several factors, including: number one, the recent mid-cycle refresh of ZEEKR 001, which caused a significant uptick in demand; number two, incremental scaling of Zeekr 001volumes in Europe; number three, an additional version of the Zeekr 009 with enhanced features; number four, we start, of course, our four deliveries in Europe and US in the second half; and number five, continued ramping of Smart number one in Volvo EM90 volumes.
On a total company basis, we expect average system price to rise to approximately $55 in 2024 from $53 in 2023 based on SuperVision growth. We expect gross margin in the range of 67% to 68% range for the remainder of the year based on current expectations for the mix of SuperVision in EyeQ revenue. We continue to expect adjusted operating expenses to grow approximately 25% on a year-over-year basis as we execute on our advanced product portfolio in preparation for substantial numbers of SuperVision and drive product launches in upcoming years. And we continue to believe that our operating expenses in the near or long-term should be structurally lower than we expected as of a year ago, and that OpEx percentage growth in 2025 and beyond should be significantly lower than in 2024.
Lastly, in terms of tax rate, we continue to assume a non-GAAP effective tax rate of 15% and 17% for 2024 in comparison to 11% in 2023. Thank you, and we will now take your questions.
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