Mobileye Global Inc
NASDAQ:MBLY
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
10.57
43.97
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
You don't have any saved screeners yet
Greetings and welcome to the Mobileye First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
It is not my pleasure to introduce your host, Dan Galves, Chief Communications Officer. Please, you may begin.
Hello, and welcome to Mobileye’s first quarter 2023 earnings conference call for the periods ending April 1, 2023. 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 risk 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 are Prof. Amnon Shashua, Mobileye's CEO and President; and Anat Heller, Mobileye's CFO.
Thanks. And now I'll turn the call over to Amnon.
Hello, everyone and thank you for joining our earnings call. I'm going to focus my comments on three areas. I'll briefly discuss the quarter we just completed. Expand on the business development progress on our advanced portfolio and then address and adjust to our full year guidance. In what is still a volatile macroenvironment, our business performed well in Q1, revenue was about – was up 16% year-over-year against an industry production backdrop of around 6% year-over-year growth.
EyeQ related revenue was up 11% year-over-year, and a 25,000 SuperVision units, we delivered more than doubled off a low base. Our existing price continues to rise up 6% year-over-year to $54. Operating income of $124 million was a bit higher than we expected, and cash flow continues to be very robust. We generated over $170 million of operating cash flow and capital expenditures were $26 million and that will provide more details on this quarter.
On the new business side, the opportunities in front of us are very large across all product lines. At a high level, the pipeline of opportunities we're pursuing in 2023 is already higher than the $6.7 billion of projected future business we generated from design wins in 2022. And we are expecting more opportunities to present themselves as the year progresses.
Significantly more than half of the revenue opportunity we're pursuing is for our advanced products like cloud enhanced driving assist, SuperVision and Chauffeur, which carry much higher content per vehicle than our base driving assist products. On cloud enhanced ADAS, where we add the REM map features to a basic front-facing camera system. We have one customer in production today and a second that will launch this year.
Volumes are still relatively low, but are expected to ramp up quickly as the technology is offered more and more cars, those new vehicles launched. We see very positive signs in this business based on the following. First, each of the two customers so far have recently decided to offer cloud enhanced ADAS on a bigger percentage of their vehicle portfolio, adding new platforms incremental to the original plan. Second Euro NCAP has added cloud-based safety services to the criteria for 2026 safety ratings.
This indicates regulatory support for the types of safety features that high definition rapidly refreshing maps can provide and we believe we have a major competitive advantage in that area. Third, the economics of the business will drive higher average system prices. We generate higher upfront pricing on the system on chip, and the recurring software revenue, which is very high margin, is expected to generate at least double the upfront revenue and represent more than $1 billion of potential revenue from just these two OEMs through 2030.
Moving on to SuperVision, we have a large number of serious discussions ongoing as well as development activities regarding the premium European OEM we mentioned on our January call funding from the OEM for serious production development work begun earlier in Q1 and the formal nomination and contract signing is now down to formalities. Additional brands of this group are expected to adopt SuperVision as the carryover technology on shared platforms.
We're also engaged in the concept development phase, including funding from the customer with the U.S. based OEM that is expected to conclude with the design win in the second half of this year.
SuperVision’s combination of high performance and reasonable cost is gaining traction across the globe, including emerging markets. We see promising opportunities for design wins with several OEMs based in China and India. There is a large pipeline of interest with OEMs beyond the one I just mentioned. We believed that continued over-the-air software delivery of features to Zeekr announcements of design wins and near term expansion of SuperVision into Europe with Zeekr 001 and Polestar 4 will lead to continued momentum.
On Chauffeur, we’re in the midst of concept development and testing phases with two global OEMs for the Chauffeur product line. These should be concluded by late summer and early fourth quarter, 2023 respectively, likely followed by announcement of design wins.
Finally, on our Mobileye Drive self-driving system platform, we continue to expect to generate first revenue in this business in 2023. More importantly, we’re focused on putting the pieces together to scale this business starting in 2025. This requires purpose-built platforms that are pre-engineered to integrate our full stack self-driving system and can be validated and homologated for volume deployments.
Previously announced activities with Holon and Schaeffler are continuing. And we have added a third platform builder from a leading European supplier of flight commercial vehicles we have already outfitted 30 of their vehicles with our system to be used for validation and testing activities in Europe and in Israel, and will have more details to share soon.
Turning to the outlook. By reducing our revenue and adjusted operating income guidance for the full year by 6.5% at the midpoint. This is purely related to lower SuperVision expectations in China. Most of our anticipated SuperVision volumes in 2023 come from a single model from our initial OEM customer for SuperVision. This naturally introduces volatility in our projections during the early stages of deployment for this particular product. In comparison to our broader business, which is diversified over about 50 OEMs and hundreds of models across all geographies.
We saw the upside of this in 2022, where volumes ended much higher than expectations and overall SuperVision revenue drove 11 points of total company revenue growth on less than 0.5% of the volume. We’re seeing the downside of this customer concentration volatility now, but we’re confident it has no impact on the potential for this business to be transformative as it scales over the next several years and bridges to even higher value systems like Chauffeur and Drive.
Even after the reduction, we still expect volume growth for SuperVision this year, and we’re fully focused on our clear path to product and regional diversification, which will reduce volatility over time. As far as diversification second vehicle, the Zeekr 001 – 009 launched during the first quarter and will ramp up over the course of the year. We have three more vehicles launching from other Geely-related brands in the second half of 2023 and early 2024. This includes the recently announced Polestar 4, which will launch in China in Q4 and globally in the first half of 2024. Finally, Zeekr 001, the first SuperVision vehicle that launched in November, 2021 will enter Europe later this year.
Specifically to the Polestar win this is more important than simply another car on the road with SuperVision. This is a customer that moves quickly. By the end of 2023 they plan to have launched three compelling electric vehicles in only a bit more than two years. Polestar 4 will be the first SuperVision equipped vehicle to sell in all three major regions, which we expect will result in further traction with other OEM. And finally, this is a really conquest win as their first two vehicles used at internal OEM developed level two plus system on a processor from one of our main competitors. Overall, we feel great about the business as we look at the balance of 2023 and beyond.
I now turn it over to Anat to go through the results and outlook in more details.
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 measurement. 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. Revenue was up 16% year-over-year with both EyeQ and SuperVision volume modestly better than expected. Gross margins were as expected as we noted last quarter. The reduction in Q1 versus Q4 is related to the pricing pass through of the cost increase on the EyeQ chip that took place at the beginning of 2023. The dynamic here is that we are passing this cost increase through to our Tier-1 customers without any margin. This keeps gross profit per unit the same, but dilutes the percentage margin.
Operating expenses were up 26% year-over-year in line with our expectations for approximately 30% growth for the full year. In terms of cash flow, there was nothing unusual to report. We did build some inventory of EyeQ chips, which is consistent with our desire to rebuild the buffer that were to draw down during the supply chain crisis. And capital expenditures in the quarter was consistent with our view that CapEx should be roughly similar this year versus 2022.
Turning to 2023 guidance. In terms of IT related volume and revenue, our expectations at the midpoint are the same, but we have tightened the range a bit on the low and high end. As you are probably all aware, general auto volumes have been a bit better than expected in North America and Europe, but worse than expected in China. Our core EyeQ business is very diverse and balanced by region. Therefore, the outlook is consistent with what – with where we expect it to be for this year.
We still believe our focus are supported by only about 1% global production growth and four points to five points of ADAS adoption growth very reasonable assumptions. In terms of the quarterly based cadence. Based on the latest indications from Tier-1s, we have seen some movements of volumes out of Q2 and into the second half of the year. We expect Q2 EyeQ volumes to be flat to up modestly versus Q1. Regarding SuperVision, as I’m noted, we are reducing annual volumes, which is the driver of the lower 2023 revenue and operating income guidance.
Our original guidance was based on SuperVision volumes that were a conservative view of the purchase orders we had from our main customer, and that forecast was consistent with the Q4 run rate plus volume from the additional launches that Amnon mentioned earlier. But due to a number of headwinds in China that have led to significant reductions in market EV volumes compared to Q4 run rates, including with Zeekr, we’re reducing expectations to level consistent with the with current market dynamics.
In terms of cadence, sellout volumes in Q1, which were somewhat lower than shipment, have left some SuperVision inventory in the system. So, we are assuming lower volume in Q2 versus Q1. Second half volume expectations for SuperVision is about two-thirds of the full year with Mobileye our customers and the supply chain all aligned behind this forecast.
A couple additional points on guidance. For Q2, we expect revenue to be down slightly from Q1 if the sequentially lower SuperVision volumes more than offset modest growth in EyeQ sequentially. We still see average system price up in 2023 versus 2022. But lower than expected SuperVision volumes will make the increase more modest than originally expected.
We are still assuming operating expenses are up about 30% year-over-year in 2023. We expect OpEx to grow sequentially over the course of the year, but for the uptick in Q2 to be fairly modest with larger increases for Q3 and Q4.
R&D expenses, growth is elevated this year with meaningful investments happening to prepare for productization and ramp up of our many next generation products. We are investing in many areas, SuperVision and Chauffeur launch and integration teams, the sixth and seventh generation of EyeQ, pre-production samples of image and radar and FMCW lidar component. And finally, several facilities around the world to support headcount growth.
We continue to believe that OpEx growth will come down closer to historical levels of 20% growth in 2024. That should enable us to begin generating substantial operating leverage if the core business continues to grow and our advanced products become a more meaningful portion of revenue.
Thank you. And we will now take your questions.
Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] And our first question comes from Chris McNally with Everscore ISI.
Thanks so much, team. So just want to jump in and pass through the SuperVision on what happened and now you're at the mercy of customer schedule. So just a quick review from our calcs, I think you were talking about 175,000 to 200,000 SuperVision for the year, it looks like that number is down, I don't know, 80,000 to 100,000. And since we know that, Zeekr is the majority of this year, what I really wanted to try to figure out, given that they had the second half production schedule because of the component shortages, maybe you can just add a little bit of light on, whether it was one sales meaning are they looking at the Q1 sales that have been weak thus far and reducing the full year schedule or two.
And this wasn't brought up, but is there also a potential for production issues, meaning, the second half ramp that they were expecting, the ECU component charges, that that's a bigger problem. And that's also going to reduce the sales in the second half. So if you can just talk about whether it's purely sell through or if there's also a ramp issue in second half?
Hello Chris. Now it's purely sales. Although, we shipped in Q1 a higher number of SuperVision units than we expected, we expected 20,000. We shipped 24,000. But in terms of a car production, they produced less. And what has happened is the reissue of the purchase order we received, so at the end of 2022, we received a purchase order, which was compliant with the Q4 run rate of 2022. So it looked very optimistic and they issued a purchase order and then material change in the Chinese market cause them to reissue the purchase order and to lower it significantly and then therefore, our obligation to reflect that in our guidance.
I would say that if we look at the past few weeks the run rate, there are indications that the run rate is coming back to the Q4 run rate, but it's too volatile to make any substantial change of guidance upwards. So we're sticking to the conservative guidance change and there is some upside to it, but we need to wait and see how the Chinese market reacts in the next few months.
Chris, just to clarify one thing. Your view of the reduction was very close to the numbers, but the starting point was higher. If you remember, we said that we would more than double volumes this year from around 95,000 last year. So there was a little bit of a higher starting point. Just wanted to clarify that.
Perfect. It makes a lot of sense. And then, obviously just because I think, for the rest of the year, we're all obviously going to be somewhat focused on Zeekr volumes more so that we can think about the trajectory into 2024. Can you talk about the actual cadence because Zeekr obviously new company, but has multiple products launching right now. It's mostly the one, but benign the 3DX are launching towards the end of the year. Do you still feel pretty good about that trajectory into the numbers that you were thinking about for 2024 and 2025? Because obviously I think the capacity side ramps pretty significantly from the end of the year onwards, the ECU shortage, et cetera.
So, we're talking about Zeekr 009, we're talking about the Polestar 4, there's additional OEMs in the Geely Group. It's all on track. So there's no reason to change guidance for 2024 on those new platforms. So as long as Zeekr comes, Zeekr 001 comes back to the Q4 run rate, which as I said before, there are indications that are coming back to that run rate. I still stick to the 2024 guidance.
Okay, that's great. If I just sneak one on the upside to SuperVision was nice to see you talk about potentially the seventh SuperVision win coming at some point, getting the full nomination this year. The premium German OEM that you talk about in the release, is that still – you're working on SuperVision and Chauffeur, is that still thought that that could actually have production volumes for SuperVision in 2024? Or is it unclear whether that would be 2024 or 2025 launch? Thanks so much.
We didn't say German, we said EU and it's really imminent. We already received the NREs purchase orders for serious development in the first quarter. And the formal nomination is it's really – it is really imminent. It's down to formalities. This would be SOP of 2025, so it's not going to affect 2024 volumes.
Yes. And that's not a change from, we've always said 2025 for that program. Thanks, Chris. Next question, please. Thank you.
Our next question comes from Luke Junk with Baird.
Good morning. Thanks for taking the questions. First question, I just want to understand the bottom line impacts of the change in supervision revenue and guidance. Thinking mainly in terms of mix impacts, the gross margin, if there's any launch costs, related considerations as it relates to R&D or similar?
So regarding our margin, so we maintained the operating margin that we had in our previous guidance, this is because of two things. One is the fact that SuperVision is lowering the mix, so the gross margin is a bit higher and also some savings around the OpEx, but not material.
Okay, great. Thank you for that. And then second, can you discuss the scalability dynamics of cloud enhanced ADAS and particularly the press release that the technology is being expanded? And you mentioned in your prepared remarks as well to additional vehicle platforms with the first two customers beyond the original plan, how quickly can you do that? Should demand continue to track higher in terms of the engineering, the requirements, and just the logistical considerations of ramping cloud enhanced ADAS?
It's scalability of REM or the cloud enhanced ADAS is almost immediate. It's basically software. It's all cloud-based. We have today about four customers that are in the launch phases. Two of them are big and material. This is why we mentioned this north of $1 billion of potential revenue from those two customers throughout this decade. This is the first time that we're mentioning revenue from REM. So this is material from our perspective. So scalability of REM is immediate, there's no issue of logistics.
Just follow up on one thing Luke, is that the way our programs typically work is the system is targeted to a specific launch vehicle that is timed with the cadence that the OEM has, right. So, a new vehicle coming out, it gets the new ADAS system, and then it spreads to another vehicle and another vehicle based on the product cadence. What's happening here is the customers have decided to expand cloud enhanced ADAS to more vehicles. So, maybe I'm just making up numbers here, maybe you would have six or seven vehicles over a two or three year program or two or three year launch period that would get the technology. They've added other vehicles to the plan as well. So that's really what's happening here.
Okay, great. Thank you for that. I'll leave it there.
Thank you, Luke. Next question, please.
Our next question comes from Dan Levy with Barclays.
Hi. Good afternoon to you. Thank you. First wanted to just start, as we think about the go-forward modeling of SuperVision, is it fair to say that at least for the foreseeable future, just given the limited model concentration that there might be some volatility in the results? I mean said differently, what's the timing for this to be, I guess, maybe a bit more diversified in the different model sources and for there to be a little less quarterly volatility? It sounds like you have to wait for the European automaker win to come in 2025. I know you talked about another western OEM, so it might still be a couple more years. Is that a fair assessment?
I think 2024 should be better in terms of the volatility. There still be volatile, more volatile compared to our normal EyeQ business, which is over 50 different OEMs and hundreds of car models. So with things balanced out there. 2024, we will have close to six different car brands compared to one car brand that we had so far. So this should ease up a bit of volatility. It'll be not only China, but global – Polestar 4 is global. It's not only the Chinese market. 2025 should be even better because then we'll have additional OEMs, Western OEMs launching. It's not only the EU car maker. We are in the final stages of additional OEMs, global OEMs. So I think 2025 will be even better from a volatility perspective, but still not at the volatility of our normal EyeQ business. I think things would taper out in 2026 in terms of volatility.
And just on this, can you remind us that the models that you have, are you standard fit on those models or is there a take rate assumption that needs to be made?
So Zeekr 001 is the standard fit. Every car being produced comes with the SuperVision. And I think others are also standard fit. Polestar 4 is also standard fit, I think 001 – Zeekr 009 is also standard fit. I think all the launches we are having so far, 2023, 2024, all standard fit.
Yes, may not stay that way forever, right. With every brand, but so far that's the way, it's been sold.
Okay. Thank you. And then just as a follow up, I know that part of the SuperVision value proposition, there's a software component and a bit more of a hardware component, and that's how you get these elevated ASPs. Maybe you can just provide us with an update on where discussions are with automakers on software-only solutions, which would maybe produce some of the ASP but have richer margins versus combined software/hardware. Are you still seeing uptake to have the full domain controller included in your offerings?
We are agnostic to it. That means that the margins on the hardware are very, very small. It's not something that is really material to us. All the examples we gave so far, we are providing the ECU, there are a number of opportunities that we are pursuing, which is what you call software-only just the EyeQ and the software because it comes with additional functions driven by the OEM. So we are really agnostic to it. So, there will be opportunities with the software-only so higher margins, lower revenue, of course.
Understood. Thank you.
Thank you, Dan. Next question, please.
Our next question comes from Emmanuel Rosner with Deutsche Bank.
Hi. Thank you so much. First, I was hoping if you could just put a final point on this SuperVision outlook for this year and perhaps what's sort of like embedded or unchanged for next year, just so we can get a better assessment of the ongoing volatility risk and what's basically currently in the guidance. So are you able to just quantify what is sort of like the volume assumption, sort of like at this point for 2023 and the unchanged one for 2024? And in terms of what's happening on the ground, what extent do you feel it is essentially sort of like a little bit of a softening on the easy market versus maybe sort of like competitive pressure like we essentially, just like cutting prices and so on.
I think we're not going to go through the kind of the cadence of forecast. We provided a forecast during CES and Amnon already addressed our views on 2024. So, I think like we said, we’re not changing any of those forecasts. Assuming that Zeekr 001 can get back to the Q4 run rate things look good. But we, it was prudent for us to reduce expectations this year to kind of where volumes have been seen so far. What was your second question?
It’s about the EV market in general in China.
Yes, I mean, so the EV market in general in China, are you asking about what – what’s been the environment so far this year?
Yes, I’m just curious to what extent do you have color around some of the dynamics, which are pressuring the schedule you’re getting from your customers? Is it – does it seem to like, sort of like broader EV demand dynamic versus like market share pressure?
Yes. Yes, yes. So, I understand. So definitely, so I mean, wholesale, so I think China is always hard to figure out, because you’re getting various levels of data, usually what you see in the headlines is – it’s wholesale data, so shipments from factories to dealers, or you can get production data. And what ultimately really matters is, is how many cars were actually purchased by consumers. And that’s the data that’s most difficult to get.
So, if you look at the overall market in China, during Q1, it was down 8%. EVs were a little bit better, but not much. But if you look at the market sequentially EV’s lost share in Q1 versus Q4, and were down more than 30% sequentially, what you don’t see from those headline numbers is that the gap between sell-in to dealers and sell-out to consumers, widened to what looked to be record levels in Q1. I think it’s well known that the major EV player dropped prices significantly early in Q1. We had some subsidies that were reduced.
In general economic weakness, that’s what we really attribute to the very weak volumes in Q1. The good thing is that market conditions improved somewhat in March and looked to be improving further in April. This is consistent what we’re being told by Zeekr that, that their retail order flow has improved a lot since mid-March. So, things seem to be getting better, and were encouraged by that, but it was more effective for us to reduce the expectations to where we saw the sell-out during Q1.
Great. I appreciate the color. And then second topic. Can you just remind us the pricing and unit economics for cloud enhanced ADAS? And I guess just put a finer point around the – I guess expected progression of revenues for you.
The cloud enhanced, the ADAS kind of doubled the ASP that we get for car on the EyeQ. So it’s a few tens of dollars per car, per year on the cloud enhanced software. And we are up to as we mentioned in the earnings script with two customers north of $1 billion projected revenue till the end of this decade.
So you have to make some assumptions on how long you get the licensing revenue. And in some cases that’s based on whether the customer pays for it, whether they – the end user pays for it for a long period of time. But we think that it at least doubles the revenue per unit on the vehicle. So the licensing revenue would result in twice as much as we get for the upfront cost for the EyeQ. $1 billion is just represent – that’s just representing the licensing revenue.
Perfect. Thank you so much.
Thanks, Emmanuel. Next question, please.
Our next question comes from it Itay Michaeli with Citi.
Great, thank you. Hi, everybody. Just two SuperVision questions for me. First, just to clarify on the outlook for the year, so are you effectively extrapolating the software Q1 demand and the purchase orders for the rest of the year? Or are you getting some incremental visibility from your customer about what production schedules should look like for the rest of the year? Just trying to – just clarify exactly on the latest forecast.
I think the guidance change is not based on forecast, it’s based on reissuing the purchase orders we got from Zeekr. So this is purely reissuing of purchase orders. When we look at the run rate in the past few weeks, there indications that we’re getting back to the run rate of Q4, which was a very good volume. And so things look more optimistic than they looked two, three weeks ago. But again, we need to be prudent. There was a reissue of purchase orders to a number slightly higher than what we are guiding. And we feel it’s better now to be prudent and hope for the upside down the road.
That’s very helpful. And then just a follow up on SuperVision, can you update us on what the ODD looks like? I know there was some OTA updates that you were expecting to implement this year. Maybe just kind of where we stand on those?
So, we have continuous OTAs with Zeekr. This week there’s going to be another major OTA and where they’re out of the fleet of more than 100,000 vehicles. There are few hundred with full capability with the navigate on pilot, which they call NZP. In June, there’s going to be another OTA in which the entire fleet is going to be activated with NZP. In the meantime, the existing software suite has been tested by insurance agencies and has received the highest score, to receive the highest scores ever recorded in driving assist ranking by the Chinese Insurance Automotive Safety Index that’s equivalent to the American IHS. So things look good in terms of the quality of the driving assist that is being launched and being deployed and really soon full NOP would be activated for the entire fleet, including REM [ph], including everything, right now with few hundreds of vehicles here lead customers.
Perfect. That’s very helpful. Thank you.
Thanks, Itay. Next question, Priscilla, please.
Our next question comes from Joshua Buchalter with TD Cowen.
Hey guys, thanks for taking my question. I’m sorry to keep drilling down on the SuperVision near term issue, but I did want to clarify. So it sounds like the math that we were working with before was you’re essentially cutting SuperVision volume outlook for this year by the equal amount that shipped last year. I just want be precise, is this essentially all sell into the Zeekr 001 due to low demand? It’s just surprising given it was supposed to be supply constrained in the first half, that there would be that material of a cut to volumes already this early in the year. Thank you.
Yes, so I mean, I think that, I can try to take this one. So, I think the purchase order that we received from the customer, the forecast that we had from the customer – yes, purchase order assumed that the Q4 run rates of volume, which was, 150,000 kind of on a run rate basis would continue through this year. And then it contemplated more launches of additional vehicles coming in the second half the rate in line, or a bit worse than the rest of the market in China came down by about 50% in Q1. As Amnon said, there’s been encouraging signs that it’s moving back towards that Q4 run rate, which would be positive. But based on kind of the selling rate that we saw in Q1 the purchase order was reduced to the level that we’re assuming right now.
So it did contemplate, new launch vehicles, which are still on track. But I think that the market conditions in China, are worse than expected. So, really it didn’t have anything to do with the supply constraint, it was just a matter of what was the rate that they were selling vehicles and that’s really the bottom line.
Okay. The launches of the non-Zeekr 001 are still on track. I guess that was the crux of the question.
That’s right.
Okay.
Yes, they’re.
And then for my follow up, you called out that the Polestar 4, essentially switched to Mobileye versus a prior generation with a competitor. Can you talk about, I guess differences in the vehicles and why this – why they went with the SuperVision solution on the four versus the competitor on the three? Thank you.
Well, I can speculate, but it’s not my role to speculate why they shifted from one technology to another, I think SuperVision has been proving itself considerably. And this could be the reason why they switched.
I think also, that they’re connected with Zeekr, they’re Geely-related and the Zeekr launched in primarily in late 2021 and early 2022, and that kind of was the right cadence to see what it was doing and to kind of fit to this Polestar 4. I’d also point out that the Polestar 4 is a significantly lower price vehicle than the three. So it points to the affordability as well as the performance of SuperVision.
Got it. Thank you.
Thanks, Josh.
Our next question comes from Antoine Chkaiban with New Street Research.
Yes. Hi, thanks a lot for taking our questions. I’d like to follow up on the comment regarding additional momentum that you’re meeting in your cloud enhanced business compared to the original plan. I had estimated around 700,000 units in 2022 based on the number of data points that you had provided on your REM install base. And I was forecasting that about doubling in 2023. I, does today’s announcements mean that there could be upside to that number? Anything you can tell us and whether I’m in the right ballpark would be very useful? Thank you.
We haven’t really disclosed any sort of forecast for cloud enhanced ADAS, so yes, per year. So we can’t really answer that question. All we can say is, the customers are clearly seeing value there, because they’re choosing to add it to more platforms than the original plan accounted for.
Okay. Thank you very much. And maybe as a follow up maybe on your comment, around recurring software licensing revenues that you expect will represent approximately double the upfront price of the EyeQ. What kind of take rate is baked into that assumption?
No, we’re talking about doubling the price of the EyeQ per car that adopt cloud enhanced ADAS. So what the figure that we gave of about one – north of $1 billion assumes the take rates that we receive from our customers.
From the customers, and also, we assume because some of this requires the end user to continue to pay on an annual basis after the first three years, let’s say. And we’re assuming an average of four years for anyone who has the technology. the current customers are – it’s covered for three years and then the customer has to start paying. So we’re assuming a four year kind of weighted average that we would continue to get the licensing, that’s what goes into the $1 billion.
Perfect. Thank you.
Thanks, Antoine. Next question.
Our next question comes from Samik Chatterjee with JPMorgan.
Hi thanks for taking my questions. Couple quick ones. Maybe if I can start with sort of the business dynamics excluding China, because seems like most of the reduction in the guide, or almost all of it is from the China market weakness, but maybe if you can talk through the dynamics of the business, excluding that particularly you mentioned North America production coming in better, which we’ve seen, but you also I think mentioned some movement of orders from 2Q into the back half, not sure which geography that was meant for. But if we take the China piece aside, China, weakness aside what are the underlying drivers, would we have seen upside for the full year or sort of any color there, what you’re seeing in terms of just the business dynamics and have a follow up? Thank you.
Rest of the world we don’t see any change. We’re in continuous contact with our customers. The Tier-1s about trying to balance out from a quarter-to-quarter. But the yearly commitment is unchanged and according to the same guidance that we gave back in January.
Okay. Okay, great. Now, and then just on SuperVision, just digging into sort of the pace of wins here. I mean with some of the new wins that you have in the pipeline, are these still sort of being discussed as standard fits or where you would be sold as an option? And is the business model where the consumer pays for it after a period of time, is that at all a hurdle in sort of OEMs adopting SuperVision quickly? Like what would probably in your mind, get SuperVision to be adopted faster OEMs to transition faster to SuperVision as a solution? Thank you.
Right now, the growth that we see is in the number of OEMs in which we have serious engagement to adopt a SuperVision. And we’re not kind of focusing on whether it’s going to be optional or standard fit. But I would say so far all the opportunities that we are discussing are all standard fit. But again it’s not mandatory. There could be opportunities where it’s optional and not standard fit. It depends basically on the premium level of the vehicle. The higher the premium level of the vehicle, the more likely is SuperVision to be standard fit.
Thank you.
Thank you, Samik.
Our next question comes from Mark Delaney with Goldman Sachs.
Yes. Thank you very much for taking the questions. The press release comments on the potential nomination with a U.S. based OEM for SuperVision and the second half of this year. What do you think would have to happen for that nomination to be completed and is successful? When do you think serious production may begin?
No, we are in serious engagement of a concept phase with a significant testing that are going very well. So we are hopeful and optimistic that it will conclude in a nomination towards the second half of the year.
And then the SOP is like 2025.
And the SOP is 2025. Yes, late 2025.
Okay. That’s helpful. Thanks. And then you commented, if I heard correctly about the timing for EyeQ shipments and some that may have been a 2Q pushing into the second half. Could you elaborate a little bit more on what might be happening there? Is that more due to global production schedules? Is that also some of the China issues you’ve been referring to? Any more context on that topic will be helpful. Thanks.
Yes. So it’s probably something to do about their inventory level and considerations versus demand. And this is the information that we have. And so they kind of shifted part of the volume. It’s not very significant to the second half of the year.
Yes. But our, the commitments we have from our Tier 1s is on a yearly basis, not quarterly basis. But we are in a very good discussions and trying to balance their commitment from quarter-to-quarter rather than lumping it into one or two quarters towards the end of the year. And we managed quite successfully to reach a point in which the change, in second quarter is really minimal.
Thank you.
Our next question comes from Vijay Rakesh with Mizuho.
Yes. Hi, Professor Amnon and Anat. Just on the SuperVision side, I know you mentioned Zeekr and Polestar are standard fit, but can you talk to what your thoughts are on the competition? Like, is there – are you seeing any impact from like horizon or any of those guys getting in on the autonomous side? Or are they more still on perception level two any thoughts on that?
I think the horizon robotics and others are more on the level two. I haven’t seen the level of SuperVision there. But there is a competition. Competition are having a hard time with the high definition maps. They come to see the value of a crowd sourced, map making to the point where they’re starting to talk about map list solutions as an advantage rather than admitting that they hit a wall in terms of ability to build the high definition maps. So this only strengthens our position of a company that has been working for years in making efficient use of crowd sourced data to create map data that allows us to get a high the meantime between failures in our perception systems. I believe that like looking at the response I get from the OEMs and the opportunities we’re pursuing now with OEMs that we are in a very good competitive position.
Got it. And then as you look at 2024, I saw you maintain the guide, but when you look at SuperVision at 300,000 units, I think you mentioned six OEMs, do you expect the ramp, the additional four OEMs or five OEMs in 2024 to kind of start in the first half? Or how do you see that spread out, I guess? Thanks.
Our guidance for 2024 is intact. It’s assuming that Zeekr 001 goes back to the Q4 of last year run rate, the guidance for 2024 seems in fact, and as I said before, we see good signs that are coming back to their – to their Q4 run rate. So at this point in time, we feel confident in the 2024 guidance for SuperVision, but we need to wait and see what happens in the Chinese market.
Yes. And the customer launches are set. The customer launches are set. So, we have a second Geely brand launching a vehicle in the third quarter, then we have Polestar 4 in Q4 this year. Then we have another Geely-related brand launching a car in the first quarter of 2024. So that’s really what’s in place right now, and that’s what supports the outlook.
Got it. Thanks a lot.
Thanks, Vjay.
Our next question comes from Adam Jonas with Morgan Stanley.
Hey, everybody. Just first question, can you confirm that SuperVision is not on any ICE platforms? I think our assumption for folks on this call would be that given, it would be coincide with all new architectures and software architectures that SuperVision would be basically 100% EV platform. I just wanted to confirm that.
Yes. That so far it’s on EV platforms, so there’s no reason why it cannot be on an ICE [ph] platform. But so far all the opportunities we have are EVs.
But we haven’t discussed at all about the Western OEMs that, we feel good about booking.
I understood. And just there’s a follow up. Sometimes I think auto analysts on this call are used to seeing things that start in China and then could spread to other regions. And I’m referring specifically to Tesla’s price cuts and kind of willingness to maybe run the business for a loss, maybe even a cash loss, who knows to, for competitive reasons. I guess you’ve addressed this in different ways that you’re not seeing any sign right now, but just thinking beyond what your OEM customers would tell you in a production schedule, which of course, can change based on what the consumer wants ultimately is the arbiter of what’s, what goes into the car and the numbers, what gives you confidence that, what’s going on in China doesn’t spread to Europe and the U.S. in the EV market? Thanks.
I see a silver lining in the Tesla approach, because the Tesla approach says that they want to make all their money from FSD from autopilot. So this shows that, the value proposition of SuperVision is only increasing. So, if you can flip the argument, it’s, it the fact that you’ll not be able to make money from the car, you’ll make money only from, the sophistication of the SuperVision would push more car brands to adopt the SuperVision. So, I’m not sure that the Tesla, strategy right now goes against our interest or goes against our revenue pipeline going forward.
Okay, Amnon. Thanks.
Thanks, Adam.
Our next question comes from Tom Narayan with RBC Capital Markets.
Hi. Yes, thanks for taking the question. Sorry, I got one more on the SuperVision guidance. So I know you said the Polestar 4 is not going to be in the Chinese market in 2024, but the other ones that Dan, I think you just went through them in China. You mentioned Zeekr is tracking better in recent weeks, could you comment on how those other ones have been faring and kind of recent weeks or how they have been relative to the softness that you’re seeing?
Yes, there’s only one other vehicle that SuperVision is shipping on right now, which is the 009 which is really just in ramp mode. I think it launched, in sometime in February. So, we’ve seen kind of progressively better volumes there, but that’s a higher price vehicle that that won’t be as big of a seller, a Zeekr 001. So yes, I mean I think, what I thought came to these numbers, as you can imagine, pretty deeply, and we saw pretty consistent significant sequential reductions in vehicle models not ones that have SuperVision, but across the board in Q1. And then you’ve started to see an uptick in volumes, over the last month into April that that’s what it’s looking like. So, we will see what happens. We’re not really assuming that continues, but encouraging signs.
Okay. And if there is a further kind of market deterioration in China in 2024, would I mean, is a lever that you would play cutting SuperVision pricing? Or would that, is that not something that that would happen?
Yes, I think, the value of SuperVision as a cash generation for car selling would only increase in this price work. So there’s no reason to reduce pricing of something that is going to be the most important element in the value proposition of a car.
Yes. We don’t think that the weakness has anything to do with, the pricing of our technology. In fact, I think we would, assume that as kind of the features expand through over there updates, like Amnon was talking about, that the demand for that, that would be incremental, that would lead to incremental demand for the cars that they’re on. So that would be encouraging as well.
Okay. And then my last one is, we have the European OEM SOP for 2025, the U.S. OEM nomination. I think folks would benefit from understanding the scope of the conversations you’re having on SuperVision with other OEMs. Just maybe to give a sense of, I don’t know if you could say like how many folks you’re talking to, just a breadth of the scope of the kind of conversations that you’re having.
We we’re in insurance engagement in Japan. We are insurance engagement in India and more EU engagements. So, I believe that throughout the 2023 there’ll be more serious nominations.
Thanks, Tom and Priscilla. This is going to be our last question, please.
Our last question comes from Shreyas Patil with Wolfe Research.
Hey, thanks so much for taking my question. I thought maybe just, I could pivot back to the, the base aid as business, specifically as we’re thinking about 2020, as we’re looking at the exit from 2023 into 2024, it does look like you have a couple of important launches coming including with Toyota. And then as you mentioned some of the additional wins with your cloud enhanced customers. Just wondering if you can help us think about the, the incremental uplift that, that we could be looking at into next year from those wins. Thanks.
Yes, we haven’t disclosed. I think the question is around, do we see, I think 2023 is, that there’s a, the, the climate economically is challenging. I think every, the Tier-1s are, uncertain and want to really, take a close look at volumes. We do see, 2024 as an important year as cloud enhanced ADAS continues to ramp, as adoption rates of ADAS continue to climb. I think, we mentioned in the press release that, the safety protocols in the EU are starting to include some waiting for cloud-based safety services, which is right in the sweet spot of cloud enhanced ADAS. So, we’re really encouraged about the future into 2024, and of course, more models, more diversification of the SuperVision business, that these should all be benefits.
Okay. Great. And then just quickly on, I’m thinking with regards to SuperVision and your conversations with OEMs, maybe if you can help us mention, the number of OEMs that you’re having conversations with, and to what extent is the EyeQ kit really helping you in terms of making inroads? Obviously we know a number of automakers are looking to take a larger role in the software development of the ADAS system.
We are engaged now with about five different OEMs. Two of them EyeQ kit is an enabler for the discussion with other three. It’s a black box closed solution.
Okay. Great.
Thank you, Shreyas.
Thank you.
Okay. Thanks everyone for joining our earnings call. We will talk to you next quarter. Thanks very much.
This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for participation.