Mobileye Global Inc. Q2 FY2025 earnings call

• Q2 showed strong operating leverage with over 40% of revenue growth converting to operating income year-over-year. - Core ADAS business is cash generative with strong working capital discipline. - EyeQ light chip has a seamless ramp-up with systems on road in multiple regions. - Advanced products have a common backbone creating synergies, enabling development of multiple solutions. - EyeQ6 surround ADAS system addresses multiple objectives. - OEMs are showing growing demand for multi-cameras around ADAS. - Robotaxi business has progress in hardware transition, mean time between failure tracking well, and plans for commercial deployment in 2026.

Q2 revenue was up 15% year-over-year. Adjusted operating income was up 34% and adjusted operating margin rose 3 points to 21%. Operating cash flow was over $200 million for the quarter and over $300 million for the first half, about 33% of revenue. The core ADAS business has volumes at or above $8.5 million per quarter for the last 4 periods. The core ADAS business is raising its full year revenue outlook by 4% and adjusted operating income outlook by 14% at the midpoint. The advanced product side has common elements like EyeQ6 high inference chip, etc. The EyeQ light chip ramp-up is seamless with systems on road in multiple regions.

• Raises full year revenue outlook by 4% and adjusted operating income outlook by 14% at the midpoint. - Q3 expected to deliver approximately $8.7 million to 9.3 million EyeQ units, revenue roughly flat year-over-year, gross margins slightly below Q2 levels, operating expenses seasonally higher. - Full year EyeQ volumes expected to be $33.5 million to $35.5 million, supervision volumes raised to about 40,000 units at midpoint, gross margins expected to be up about 0.5 point year-over-year, adjusted operating expenses expected to increase about 7% year-over-year to slightly below $1 billion.

Q: Maybe we could just double click Amnon your comment around sort of the higher momentum at Chauffeur, maybe a little bit of slow momentum on supervision decision-making. How much do you think this is sort of OEMs having more of a question around their own pricing ability to pass through sort of a Level 2 plus product versus something else.

A: I think there is lack of competitive pressure for these systems in Europe and the U.S. You see these systems a lot in China. And in the -- outside of China, it's only the Tesla FSD, and the OEMs have seen the Tesla FSD for more than a decade. So we need more competitive pressure to kind of bring OEMs to a sense of urgency. I think the last news about penetration rates of Tesla FSD are encouraging. It's more than 25% take rate, and it looks like it's climbing. So I think the news are good in terms of public interest in these kinds of features and willing to pay for them. But regardless, OEMs are still in planning stage because it's not only the Level 2 plus, the supervision, there is a Chauffeur. They want to be part. They want to have skin in the game in robotaxi, not just produced cars, and just sell them to the likes of Waymo and others. They want skin in the game in the robotaxi domain. So it's all part of planning. There is around ADAS, whether they should -- it should take over the front-facing camera or just be a premium product. There's a lot of planning to do. But the more we deep dive into it. I think that planning phase is coming to a close. So we see a lot of activity by OEMs talking about supervision, but in addition, also surround ADAS and Chauffeur, and with a number of high scalers OEMs also about robotaxi.

Q: Just starting with supervision, the guide for 40,000 units, a near doubling of the expectation for the full year. Can you just speak to what's driving that, how the relationship is trending with ZEEKR? And then just looking ahead, any thoughts on the timing for next year concerning the portionality launches for supervision and Chauffeur.

A: Yes, we took a conservative stance on supervision volumes for this year. Since then, what we've seen is ZEEKR 009 for export markets has been selling more vehicles than we probably expected. Polestar 4 production and end demand has been pretty good as well. I think key here is that any ZEEKR vehicles that are being shipped outside of China are still using the supervision system, which kind of indicates the maturity of our system for kind of non-China markets. But yes, I think it's just a reflection of kind of conservative start of the year and kind of production of these vehicles running better than expected. As for the portion Audi, the standard production is the end of 2026. So the effect on revenue should be seen in 2027. We see 2027 as really an inflection year in terms of revenue, where supervision by Porsche and Audi, and we believe more would come out. Robotaxi will start generating revenue as well, because we are removing the driver mid of 2026, and we have a very strong plan of scalability. So in 2027 is really the inflection year in terms of revenue.

Q: I'd like to concentrate a little bit on robotaxi. I think you sort of characterized the interest as accelerating from OEMs and deploying your solution. Can you just help us understand a little bit about what you're seeing in the marketplace, the potential for new wins? And what the competitive set looks like when you're offering your solution to OEMs.

A: Well, we have a relationship with the Volkswagen on the ID buzz where MOIA is operator and customer facing. There's also deals with the Uber regarding this platform. The volume expectation towards the end of the -- until the end of the decade is very substantial. There is a hold on with a platform called Mover. We already have prototypes equipped with our system and testing. It should come out 6 months later, also volume productions -- projections are very high. In addition, we have relationship with Marubeni. We are working with additional OEMs to supply vehicles both from MOIA and also for Marubeni and hopefully, we'll be able to update the market soon about additional OEMs. But Volkswagen alone is a very high volume opportunity for robotaxis. And if I may add to this -- sorry. I just wanted to add maybe a little bit more color on what we're seeing in the market and the competitive environment. I think that there is a -- we need to distinguish between the U.S. and Europe in that regard, which are our two primary markets for the first launches. In the U.S., of course, there is Waymo and Tesla that has been making statements about this. Beyond these two, as a technology provider that can provide the full self-driving system, which includes the hardware, the software, AI technologies and so on in a scalable way in a cost-efficient way that we'll leave enough room for all players involved to generate a profit. We're seeing Mobileye as kind of a unique company at this stage. So Waymo and Tesla, of course, have their own business model being vertically integrated at this stage. And for the OEMs that want to basically build a business of producing robotaxis in a serious production fashion, and then sign a business model with the demand generators. We're the primary, if not the only candidate at this stage at least from what we're seeing. And in Europe, we are -- I think that we are in the pole position in the way. And just recently, the German chancellor took a test drive with the ID buzz vehicles mobilize technology in Germany, which is kind of putting a lot more public attention and some -- let's say, political attention into enabling robotaxis in Europe. In that sense, being partnering with Volkswagen is hugely beneficial for our interest.