Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- EyeQ volumes in Q2 more than doubled versus Q1, indicating strong demand recovery.
- Revenue for Q2 stands at $439 million, reflecting 84% growth over Q1.
- Adjusted operating margin significantly improved to 18% compared to minus 27% in Q1.
- SuperVision volumes were aligned with the original outlook, with 70,000 units for the first half of the year.
- Mobileye's EyeQ6 platform and Brain6 technology represent significant advancements in autonomous driving, positioning the company as a leader in the market.
Negative Points
- Revenue for Q2 saw a 3% decrease year over year.
- Near-term volume challenges are expected due to market dynamics in China, impacting both ADAS and SuperVision.
- Global production forecasts have weakened, disproportionately impacting core customers, especially in China.
- There has been a decline in orders for the second half of 2024 from Chinese OEMs.
- The delay of a high-volume ADAS launch outside of China is a meaningful headwind.
Q & A Highlights
Q: Could you provide context on the impact of lower-level Chinese competition and how it affects Mobileye?
A: Nimrod Nehushtan, Executive VP of Business Development & Strategy: The China automotive market is volatile, with a skewed balance between cost and performance due to lack of testing governance. This contrasts with the US and Europe, where ADAS safety requirements are expanding. We believe the current volatility in China is short-lived and are preparing for market stabilization by localizing our technologies and collaborating with local industry players like Zeekr.
Q: Can you provide a timeline for the RFQs related to the third emerging segment?
A: Nimrod Nehushtan, Executive VP of Business Development & Strategy: The new category targets mid-trim, high-volume segments with affordable prices. RFQs from four carmakers are expected to start ramping up in the second half of 2026 and early 2027. This segment is seen as an expansion of the entry-level ADAS, not a replacement for SuperVision and Chauffeur.
Q: What is the appetite from Western OEMs for advanced autonomy solutions given the subdued take rates from Tesla's FSD?
A: Nimrod Nehushtan, Executive VP of Business Development & Strategy: OEMs understand that intelligent driving will be a key differentiator in the future. They are investing in high-performance, reliable, and affordable systems, which Mobileye can offer. The number of engagements with global OEMs has increased, indicating a growing interest in these technologies.
Q: How does the reduction in SuperVision 2024 shipment projections split among various customers, and how will it impact the ramp-up in 2025 and 2026?
A: Amnon Shashua, CEO: The reduction is due to volatility in China, affecting platforms like Polestar 4 and Zeekr 001. We anticipate this volatility to persist into 2025 but expect it to stabilize as more SuperVision models launch globally.
Q: What progress has been made on the SuperVision domain controller, and what is the expected gross margin uplift?
A: Amnon Shashua, CEO: We have significantly reduced the cost of our main controller with the EyeQ5 chip, achieving around 44% gross margin. The EyeQ6 system will be even more optimized, targeting a 50-55% gross margin.
Q: Have there been any significant changes in ADAS adoption rates, especially among Chinese OEMs?
A: Amnon Shashua, CEO: We see a decline in shipments for the second half of the year, possibly due to inventory residuals or market share loss to local solutions. However, we believe this volatility is temporary and are working on lower-cost chips for emerging markets to regain market share.
Q: How does Mobileye's CapEx investment compare to competitors, and will developments like Brain6 change the investment needs?
A: Amnon Shashua, CEO: We are investing close to $100 million in cloud compute and on-prem nodes like H100 and A100s. However, we don't see the need to invest billions of dollars. Our generative AI models fit into limited capacity chips, and our current technology already shows significant performance improvements.
Q: How does the loss of market share by Western OEMs in China impact Mobileye's business, and how can it be offset?
A: Nimrod Nehushtan, Executive VP of Business Development & Strategy: We are improving our presence in China by localizing our products and collaborating with local OEMs. This will help us remain competitive regardless of whether the OEMs are Western or Chinese.
Q: Can you provide a picture of what 2025 will look like for Mobileye?
A: Amnon Shashua, CEO: We expect China volatility to persist in 2025 but believe inventory levels will normalize. The ramp-up of SuperVision platforms will be closely monitored, and we anticipate a significant increase in volumes in 2026 and 2027 as Western OEMs launch new models.
Q: How does the adjusted operating margin cut for the full year impact Mobileye's financials?
A: Moran Rojansky, CFO: The primary driver for the lower operating margin is higher operating expenses, not changes in gross margin. We expect the growth in operating expenses to slow down in 2025, allowing for significant operating leverage as advanced products begin to scale.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
