Q1 2023 Mobileye Global Inc Earnings Call
Speaker 1: The.
Speaker 1: I.
Speaker 2: Greetings and welcome to the Mobilize 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.
Speaker 2: If anyone should require operator assistance during the conference, please press 5-0 on your telephone keypad.
Speaker 2: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Betty Gaudt, Chief Communications Officer. Let the may begin.
Speaker 3: Hello, and welcome to Mobilize first quarter, 2023 earnings conference call for the periods ending April 1st, 2023.
Speaker 3: 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.
Speaker 3: Additionally, on this call, we will refer to both GAP and Nongap figures. A reconciliation of GAP to non-GAAP financial measures is provided in our posted earnings release. Joining us on the call today are Professor Omnon-Shashua, Mobile ICEO and President, and a not-heller Mobile ICEFO.
Speaker 3: Thanks, and now I'll turn the call over to Amnon.
Speaker 4: 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.
Speaker 4: In what is still a volatile microenvironment, our business performed well in Q1. Revenue was up 16% year over year against an industry production backdrop of around 6% year over year growth.
Speaker 4: IQ-related revenue was up 11% year-over-year, and at 25,000 supervision units we delivered more than doubled of a low base. Area system price continues to rise up 6% year-over-year to $54.
Speaker 4: Operating income of $124 million was a bit higher than we expected and cash flow continues to be very robust.
Speaker 4: We generated over $170 million of operating cash flow and capital expenditure were $26 million. And that will provide more details on this quarter.
Speaker 4: On the new business side, the opportunities in front of us are very large across all product clients.
Speaker 4: At a high level, the pipeline of opportunities we are pursuing in 2023 is already higher than the $6.7 billion of projected future business we generated from design wins in 2022.
Speaker 4: and we are expecting more opportunities to present themselves as the year progresses.
Speaker 4: Significantly, more than half of the revenue opportunity we are 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.
Speaker 4: On cloud-enhanced ADAS, where we add the RIM 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 offers the more and more cars those new vehicles launch.
Speaker 4: 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.
Speaker 4: 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.
Speaker 4: 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.
Speaker 4: 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 began earlier in Q1, and the formal nomination and contract signing is now down to formalities. Several brands of this group are expected to adopt supervision as the carrier for the
Speaker 4: We see promising opportunities for design wins with several OEMs based in China and India.
Speaker 4: There is a large pipeline of interest with OEMs beyond the ones I just mentioned.
Speaker 4: We believed that continued over the air software delivery of features to Zika.
Speaker 4: Announcements of design wins and near-term expansion of supervision into Europe with Z-curve 001 and Polestar 4 will lead to continued momentum. On Chauffeur, we are in the midst of concept development and testing phases with two global OEMs for the Chauffeur product line.
Speaker 4: These should be concluded by late summer and early fourth quarter 2023 respectively, likely followed by announcement of design wins.
Speaker 4: Finally, on our Mobileye Drive self-driving system platform, we continue to expect to generate first-day revenue in this business in 2023. More importantly, we are 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.
Speaker 4: Previously announced activities with Holland and Schaeffler are continuing. And we have added a third platform builder from a leading European supplier of flight commercial vehicles. We have already upfitted 30 of their vehicles with our system to be used for validation and testing activities in Europe and in Israel, and we'll have more details to share soon. Turning to the outlook.
Speaker 4: 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.
Speaker 4: In comparison to our broader business which is diversified over about 50 OEMs and hundreds of models across all geographies.
Speaker 4: 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.
Speaker 4: We are seeing the downside of this customer concentration volatility now, but we are 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 Shafur and Response Drive.
Speaker 4: Even after the reduction, we still expect volume growth for supervision this year, and we are fully focused on our clear path to product and regional diversification, which will reduce volatility over time.
Speaker 4: As far as the diversification, second vehicle is Zika 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 Gilly-related brands in the second half of 2020-23 and early 2024. This includes the recently announced Polster Ford.
Speaker 4: which will launch in China and Q4 and global in the first half of 2024.
Speaker 4: Finally, ZEKER 001, the first supervision vehicle that launched in November 2021, will enter Europe later this year.
Speaker 4: 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
Speaker 4: to the balance of 2023 and beyond.
Speaker 4: I now turn it over to a nut to go through the result and outlook in more details.
Speaker 5: Thank you, Amnon, and thanks for joining the call everyone.
Speaker 5: Before I begin, please be aware that all my comments on profitability will refer to non-GAAP measurements. The primary exclusion in Mobilize non-GAAP numbers is a monetization of intangible assets, which is mainly related to Intel's acquisition of Mobilize in 2017. We also exclude stock-based compensation.
Speaker 5: Starting with Q1, revenue was up 16% year over year with both IQ and supervision volume, modestly better than expected.
Speaker 5: Growth 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 IQ chip that took place at the beginning of 2023.
Speaker 5: The dynamic here is that we are passing this cost increase to our T1 customers without any margin.
Speaker 5: 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.
Speaker 5: In terms of cash flow, there was nothing unusual to report. We did build some inventory of IQ chips which is consistent with our desire to rebuild the buffer that we had to draw down during the supply chain crisis.
Speaker 5: 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.
Speaker 5: As you are probably all aware, general auto volume has been a bit better than expected in North America in Europe , but was then expected in China.
Speaker 5: Our core IT business is very diverse and balanced by region. Therefore, the outlook is consistent with where we expect it to be for this year.
Speaker 5: We still believe our forecasts are supported by only about 1% global production growth and 4 to 5 points of ADAS adoption growth. Very reasonable assumptions.
Speaker 5: In terms of quarterly cadence, based on the latest indications from tier 1, we have seen some movements of volumes out of tier 2 and into the second half of the year.
Speaker 5: We expect you to queue to IQ volumes to be flat to up-modestly versus Q1. Regarding supervision, as I'm not noted, we are reducing annual volumes, which is the driver of the lower 2023 revenue and operating income guidance.
Speaker 5: Our original guidance was based on supervision volumes that were a conservative view of the purchase orders we had from our main customer.
Speaker 5: And that forecast was consistent with the Q4 run rate plus volume from the additional launches that Arnon mentioned earlier. But you did a number of headwinds in China that have led to significant reductions in market EV volumes compared to Q4 run rates, including with Zika. And that forecast was consistent with the Q4 run rate plus volume from the additional launches that Arnon mentioned earlier.
Speaker 5: We are reducing expectations to levels consistent with current market dynamics.
Speaker 5: In terms of cadence, set-out volumes in Q1, which were somewhat lower than shipment, have left some supervision inventory in the system. So we are assuming global volume in Q2 versus Q1.
Speaker 5: Second half volume expectations for supervision is about two-thirds of the full year. We've mobilized our customers in the supply chain, all aligned behind this focus.
Speaker 5: The second half volume expectation for supervision is about two-thirds of the full year. We've mobilized our customers and the supply chain all aligned behind this forecast. A couple additional points on guidance.
Speaker 5: For Q2 we expect wearing it to be down slightly from Q1 as the sequentially lower supervision volumes more than offset modest growth in IQ sequentially.
Speaker 5: We still see average system price up in 2023 versus 2022, but lower than expected supervision volume will make the increase more modest than originally expected.
Speaker 5: We are still assuming operating expenses are up about 30% year-over-year in 2023. We expect our tax to grow sequentially over the course of the year.
Speaker 5: but for the uptick in Q2 to be fairly modest with larger increases for Q3 and Q4.
Speaker 5: R&D expenses goals is elevated this year, with meaningful investments opening to prepare for productization and ramp up of our many next generation products.
Speaker 5: We are investing in many areas, supervision and chauffeur launch and integration teams. The sixth and seventh generation of IQ, pre-production samples of image generator and SMCW LiDAR components.
Speaker 5: 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 for the future.
Speaker 5: If the core business continues to grow and our advanced product 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.
Speaker 2: If you would like to ask a question, please press the star one on the telephone keypad. A confirmation on the drill indicated in your line is in the question queue. You may press the card two if you would like to remove your question from the queue. For participation, you'll be speaker equipment.
Speaker 2: It may be necessary to pick up your headset before pressing the start key.
Speaker 2: One moment please while we pull for questions. Our first question comes from Chris McNally with Evercore ISI.
Speaker 3: Thanks so much team. So just want to jump in and parse through the supervision on what happened and know you're at the mercy of customer schedules. So just a quick review from our Calcs, I think you were talking about 175 to 200,000 supervisions for the year. It looks like that number is down, I don't know, 80 to 100,000.
Speaker 3: And since we know that, you know, Zeecker 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, you know, whether it was one sales, meaning are they looking at the Q1 sales?
Speaker 3: 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 you know 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.
Speaker 4: Hello, Chris.
Speaker 4: 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.
Speaker 4: but in terms of car production, they produce less.
Speaker 4: in our production they produced less.
Speaker 4: 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.
Speaker 4: So it looked very optimistic and they issued a purchase order and then you know material change in the Chinese market
Speaker 4: you know, cause them to reissue the purchase order and to lower it significantly, and then therefore it's 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,
Speaker 4: 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.
Speaker 6: 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, it was a little bit of a higher starting point. Just wanted to clarify that.
Speaker 3: 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 Zeecker volumes more so that we can think about the trajectory into 2024. Can you talk about the actual cadence because Zeecker, obviously a new company, but has multiple products launching?
Speaker 3: Right now it's mostly the one, but the nine, the three, the X 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 24 and 25? Because obviously I think the capacity side ramps pretty significantly from the end of the year onwards, you know, the ECU shortage, etc.
Speaker 4: Yes, so we are talking about ZCUR 009, we are talking about the Polestar 4, there are additional OEMs and the Gili Group, it's all on track.
Speaker 4: So there's no reason to change guidance for 2024 on those new platforms. So as long as Zikor 001 comes back to the Q4 run rate, which as I said before, there are indications that they are coming back to that run rate, I still stick to the 2024 guidance.
Speaker 3: Okay, that's great. If I just speak one on the upside to supervision, it was nice to see you talk about potentially that the seventh supervision win coming at some point, you're going, you know, getting a full nomination this year. The premium German OEM that you talk about in the release, is that still, and you're working on supervision and chauffeur, is that still thought that that could actually have clearer humility. Alright.
Speaker 3: production volumes for supervision in 24 or is it unclear whether that would be 24 or 25 launch? Thanks so much.
Speaker 4: We didn't say German, we said EU. And it's really imminent. We already received NREs, purchase orders for serious development in the first quarter. And the formal nomination is really imminent. It's down to formalities.
Speaker 2: Our next question comes from Luke Yount with BARD.
Speaker 7: 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 mixed impacts of gross margin, if there's any launch costs related considerations as it relates to R&D or similar.
Speaker 5: 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 the supervision is lower in the mix, so the cost margin is a bit higher. But this is kinda obvious because the demand price may tend to be higher, which allowed
Speaker 7: and also some savings around the office of most materials. Okay, great. Thank you for that. And second, can you discuss the skill ability dynamics of cloud-enthaned ADAS, in particular the company that personally sets the technologies being expanded and you mentioned your prepared remarks as well? To be the traditional-
Speaker 4: The scalability of REM or the cloud enhanced ADAS is almost immediate. It's basically software, it's all cloud based.
Speaker 4: We have today about four customers
Speaker 4: 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.
Speaker 4: This is the first time that we are mentioning revenue from RIM, so this is material from our perspective.
Speaker 6: So, scalability of REM is immediate. There's no issue of logistics. And I just follow up on one thing, Luke, is that the way our programs typically work is the system is targeted to
Speaker 6: a specific launch vehicle that is timed with the cadence that the OEM has, right? So, you know, a new vehicle coming out, it gets the new ADAP 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...
Speaker 6: 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.
Speaker 6: they've added other vehicles to the plan as well. So that's really what's happening here.
Speaker 7: Thank you for that. I will leave it there. Thank you, Luke. Next question, please.
Speaker 2: Our next question comes from Ben Levy with Barclays.
Speaker 8: Hi, good afternoon to you. Thank you. First, I 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, we're going to be seeing a lot of
Speaker 8: 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.
Speaker 4: the volatility. It will still be more volatile compared to our normal IQ business which is over 50 different OEMs and hundreds of car models so things balance out there. 2024 we will have.
Speaker 4: 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 will be not only China but global poster 4 is global not only the Chinese market
Speaker 4: 2025 should be even better because then we'll have additional OEMs, Western OEMs.
Speaker 4: launching. It's not only the EU carmaker, we are in the final stages of additional OEMs, so I think 2025 will be even better from a volatility perspective, but still not at the
Speaker 8: I think things would take for 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 are there a take rate assumption that needs to be made? You put any change or minus a change in order to meet your blog szhattad. The winner will be available from now on.
Speaker 4: So Zikar 001 is the standard fit. Every car being produced comes with the supervision. And I think all the others are also standard fit.
Speaker 4: Both start 4 is also standard fit. I think 0.001 is equal 0.09 is also standard fit. I think all the launches we are having so far, 2023, 2024, all standard fit. Yeah, it may not stay that way forever, right, with every brand, but so far, so far that that's the way it's been sold.
Speaker 8: Okay, thank you. And then just as a follow-up, I know that part of the supervision value proposition is 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 the software component.
Speaker 8: 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
Speaker 4: of the IQ and the software, because it comes with additional functions driven by the OEM.
Speaker 4: So we are really agnostic to it. So there will be opportunities with the software on this, so higher margins, lower revenue of course.
Speaker 2: Thank you. Thank you, Dan. Next question, please. Our next question comes from Emmanuel Brodner with Deutsche Bank. Hi, everyone. I'm
Speaker 9: Thank you so much.
Speaker 9: 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. Are you able to just quantify what is sort of like the volume assumptions at this point for?
Speaker 9: 2023 and the unchanged one for 2024. And in terms of what's happening on the ground, to what extent do you feel it is essentially sort of like a little bit of a softening in the easy market versus maybe sort of like competitive pressure, like we essentially test like cutting prices and so on? I think we're not going to.
Speaker 6: you know, go through the kind of the cadence of forecast. We provided a forecast during CES and...
Speaker 6: I'm already addressed our views on 2024. So I think like we said, we're not changing any of those forecasts, assuming that ZGRO-001 can get back to the Q4 run rate, things look good.
Speaker 6: But 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 about the EVM? It's in general in China. Yeah, I mean, so the EV market in general in China, are you asking about what?
Speaker 9: what's been the environment so far this year? I'm just curious to what extent you have color around some of the dynamics which are pressuring the schedule you're getting from your customers. Does it seem to you like sort of like broader EV demand dynamic versus market share pressure?
Speaker 6: Yes, yeah, yeah, so I understand. So definitely, so I mean, you know, wholesale, so I think, you know, China is always hard to figure out because you're getting various levels of data. You know, usually what you see in the headlines is wholesale data, so, you know, shipments from factories to dealers, or you can get production data, and what ultimately really matters is how many cars were actually purchased by consumers.
Speaker 6: and that's the data that's most difficult to get. So, you know, 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, EVs lost share in Q1 versus Q4 and we're down more than 30% sequentially.
Speaker 6: 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.
Speaker 6: Early in Q1, we had some subsidies that were reduced and general economic weakness. That's what we really attributed to the very weak volumes in Q1. The good thing is that market conditions improved somewhat in March and look to be improving further in April .
Speaker 6: This is consistent what we're being told by Zieker that their retail order flow has improved a lot since mid March. So, you know, things seem to be getting better. And we're encouraged by that, but it was more, you know, more effective for us to reduce reduce the expectations to where we saw. The sell out during Q1.
Speaker 9: Great, I appreciate the color. And then second topic, can you just remind us the...
Speaker 9: pricing and you need economics for cloud and hands of AIDAS and I guess you know just put a final point around you know the expected progression of revenues for you.
Speaker 4: The cloud enhanced ADAS kind of doubles the ASP that we get for cars on the IQ. 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...
Speaker 6: customer pays for it, whether 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 IQ. newsletters.
Speaker 6: ? r?? thF billion. R einf billionth. Just Ref're. ResinTing revenue.
Speaker 9: Perfect. Thank you so much. Thanks, Emmanuel.
Speaker 2: Next question, please. Our next question comes from Aichi Micali with CD.
Speaker 3: Great. Thank you. Hi, everybody. There's just two supervision questions for me. First, it's a clarifier on the outlook for the year. So are you effectively extrapolating the software with Q1 demand and the purchase orders for the rest of the year? Or are you getting in, you need.
Speaker 8: some incremental visibility from your customer about what production schedule should look like for the rest of the year to try and get a bit more clarify exactly on the latest forecast.
Speaker 8: from your customer about what production schedules should look like for the rest of the year, trying to just want to clarify exactly on the latest forecast. I think..
Speaker 4: The guidance change is not based on forecasts. It's based on reissuing the purchase orders we got from Zikr. So this is purely reissuing of purchase orders.
Speaker 4: When we look at the run rate in the past few weeks, our 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.
Speaker 4: But again, we need to be prudent. There was a reissue of purchase orders to a number slightly higher than what we are guiding.
Speaker 4: 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 were some OTA updates that you were expecting to implement this year. Maybe just where we stand on those.
Speaker 4: So, we have continuous OTAs with Zikr. This week there's going to be another major OTA in...
Speaker 4: where they are out of the fleet of more than 100,000 vehicles there are a few hundreds with full capability with the Navigate On-Pilot which they call NZP. In June there is 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...
Speaker 4: 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 RIM, including everything. Right now with few hundreds of vehicle lead customers.
Speaker 6: That's perfect. That's not very helpful. Thank you. Thanks, Etai. Next question, Priscilla please.
Speaker 8: Our next question comes from Joshua Bookhelter with TD Collins. 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, you know, it sounds like the math that we were working with before was you're essentially cutting...
Speaker 8: supervision volume outlook for this year by the equal amount that shipped last year. I just want to be precise. Is this essentially all sell into the Zieker 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.
Speaker 6: already this early in the year. Thank you. Yeah, so I mean I think that you know I can I can try to take this one so You know I think the the purchase order that we received
Of last year, a run rate the guidance for 2024 seems are in fact and as I said before we see good signs that they're coming back to the 20th to the.
Q for a run rate so.
So at this point in time, we feel confident and the 2024 guidance for for supervision, but we need to wait and see what happens in the Chinese market.
Yes, the customer guarding it is are the customer launches are set so we have a second chili brand launching a vehicle in the third quarter than we are pollstar for in queue. For this year. Then we have another gili related brand launching a car in the first quarter of 2024.
So that that's really what's in place right now and that's what supports the outlook.
Got it thanks a lot.
Thanks for the J.
Alright next question comes from Avon Donna with Martin County.
Hi, everybody just the first question I can you confirm that supervision is not on any.
Ice platforms.
Think our assumption for folks and this call will be that.
Given it would be coincide with all new architectures and software architectures that supervision.
Supervision would be basically 100 per cent.
B E V platform I, just want to confirm that.
Yeah, Yeah that is so far it's an easy platform said that there's no reason why it cannot be in a nice platform of course, but so far all the opportunities. We have already are easy, but we haven't discussed at all about the western Oems.
Yeah, I feel good about booking yeah.
Understood.
And just as a follow up.
Sometimes I think Otto analysts on this call.
Are used to seeing things that start in China.
And then could spread to other other regions.
And I'm, referring specifically to teslas price cuts and kind.
Kind of willingness to maybe run the business for a loss, maybe even a cash loss who knows.
For competitive reasons.
I guess, you've addressed us in different ways that you're not seeing any sign right now but.
Just thinking beyond what your customers would tell you in a production schedule, which of course can change based on what the consumer wants ultimately as the arbiter of of what's what goes into the car.
And the numbers, what what gives you confidence that that what what's going on in China doesn't spread to Europe .
And the U S and the 80 market.
I'll, probably see a silver lining in.
And the Tesla approach because the Tesla approach says that they want to make all their money from FSD from auto pilot.
So this shows that the value proposition of supervision.
It's only increasing.
So mhm.
<unk> slipped the argument it's the.
The fact that.
You will not be able to make money from the caller, you'll make money only from the sophistication of the supervision, what's push more car brands to adopt the supervision.
I'm not sure that the Tesla.
Strategy right now goes against our interests are goes against a.
Revenue Piper.
Pipeline going going forward.
Okay. Thanks.
Thanks, Adam.
Alright next question comes from <unk> R B C capital market.
Yeah. Thanks for taking my question, sorry, I got one more on the supervision guidance. So I know you said the pulsar four is not going to be in the Chinese market in 2024, but the other ones that.
And I think you just went through them and China.
You mentioned seekers tracking better in recent weeks could you comment on how those other ones have been sharing and kind of recent weeks or how they have been relative to the softness that you're seeing.
Yeah, there's only one other vehicle that supervision is shipping on right now which is the 009, which is really just en route mode I think it launched.
Sometime in February .
So we've seen kind of progressively better volumes there about the higher price vehicles out there won't be as big of a seller Zeke or 001.
So yeah, I mean, I think what.
Documents. These numbers you can imagine pretty pretty deeply and we saw pretty consistent.
Significant sequential reductions in vehicle model not ones that have supervision, but across the board.
And Q1, and then you're starting to see.
I'll take an volumes you know over the last month into April .
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.
As a lever that you would play cutting supervision pricing or with that is that not something that that would happen.
Yeah, I think the value of supervision as a cast generation for a car still think would only increase in this price or so there's no reason to reduce the pricing Gulf of something that is going to be the most important element.
And the value proposition of the card.
Yeah, we don't think that the weakness has anything to do with the pricing.
Of of our technology in fact.
I think we would.
Assume that as as the kind of the features expand through over there are updates like unknown was talking about <unk>.
Demand for that that would be incremental that would.
Lead to incremental demand for the cars that they are on so that would be encouraging as well.
Okay and then my last one is we have the the European Oems Soapy for 2025, the U S OEM nomination.
I think folks would benefit from understanding the scope of the conversations you are having.
Supervision with other Oems, just maybe to give a sense of.
I don't know if you could say like how many folks you are talking to you know just a breath of the scope of.
Conversations that you are having.
We weren't serious engagement in Japan, where students engagement in India.
And <unk> engagements.
I believe that throughout the 2023 there'll be more more more serious nominations.
Thanks, Tom and <unk> is going to be our last last question. Please.
Alright last question come from 20th <unk> with wealth a great package.
Hey, Thanks, so much for taking my question that I thought maybe I could take it back to the basically that's business.
Specifically as we're thinking about 20.
And if you're looking at the exit from 23 to 24.
Alright. It does it does look like you have a couple of important launches coming.
Including with Toyota and and then as you mentioned some of the additional wins with that with with your crowd enhanced customers. Just wondering if you can help us think about.
The incremental uplift.
That we could be looking at into into next year.
From from those wins thanks.
<unk>, what's the point.
Yeah, we haven't disclosed I think the question is is around do we see I think 2023 is.
You know there's also the the climate economically is challenging I think ever you know the tier ones are on.
Uncertain and want to really.
Take a take a close look at volumes, we do see 2024 as as an important year is cloud enhanced data contained continues to ramp.
Adoption raves of Adolf's continued decline.
I think we mentioned in the press release that the <unk>.
Safety protocols and the EU are starting to include some waiting for cloud base safety services, which is right in the sweet spot of cloud enhanced data so.
Really encouraged about the future into 2024 and of course, you know more more models more diverse okay more diversification of the supervision business.
Should all be benefits.
Okay great.
Great and then just quickly on on.
I'm thinking.
With regards to to supervision and your conversations with Oems, maybe if you can help us as I mentioned you know.
The number of Oem's that you're having conversations with them.
To what extent is the IQ can't really helping you in terms of.
Making inroads obviously, we know a number of automakers are looking to to.
Take a larger role in the software development Ah <unk> system.
And what we are engaged we are engaged now with about five different.
Oh, yes.
Two of them IQ kit is.
It's an enabler.
For the discussion with other three it's a it's a black box close solution.
Okay, great. Thank you.
Thank you.
Okay. Thanks, everyone for joining our earnings call. We will talk to you next quarter. Thanks very much.
This concludes today.
<unk> yeah.
You may disconnect your lines at this time, thank you perfect <unk>.
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Hello, and welcome to mobilize first quarter of 2023 earnings conference call for the periods ending April 1st 2023. Please.
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 gap and non-GAAP figures a reconciliation of GAAP to non-GAAP financial measures. It's provided and are posted earnings release.
Joining us on the call today are professor no ensure mobilize CEO and president and are not Heller mobilized CFO .
And now I'll turn the call over Tom known.
Hello, everyone and thank you for joining our earnings call I'm going to focus my comments on three areas.
Briefly discuss the quarter, we just completed expand on the business development progress on over advance portfolio.
And then I'm dressed and adjust to our full year guidance.
And what is still live <unk> Macroenvironment, our business performed will increase in Q1 revenue.
Revenue was about was up 16% year over year against an industry production backdrop for around 6% year over year growth.
Ikea relate to the revenue was up 11% year over year and the 25000 supervision units, we delivered more than doubled off a low base <unk>.
[noise] system price continues to rise up 6% year over year or $254.
Pointing 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 expenditure 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.
That's a high level the pipeline of opportunities while pursuing in 2023 is already higher than the $6.7 billion a 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 its four hour advanced product like clouds enhanced driving assist supervision and chauffeur, which carry much higher content per vehicle then our base driving at this product.
On clouds enhanced Ada, where we add the <unk> map features to a basic front facing camera system. We have one customer in production today and a second that launched this year volumes are still relatively low but are expected to ramp up quickly at the technologies offer them more and more cars. This new vehicles months we.
Received 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 data on a bigger percentage of the vehicles was a portfolio, adding new platforms incremental to the original plan.
Second your end cap is added the cloud based safety services to the criteria for 2000 2650 ratings. This indicates regulatory support for the types of safety features.
Hi 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 recording software revenue, which is very high margin is expected to generate at least doubled upfront revenue and represent more than $1 billion of potential revenue from just these two Oems through 2013.
Moving onto 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 cold funding from the OEM for serious production development work began earlier on Q1 and a formal nomination and contract signing is now down for formalities.
Additional brands of this group are expected to adopt supervision at the carry over technology on shows platforms.
We're also engaged in the comfort development phase, including funding from the customer with a U S. Based Oems that is expected to conclude with the design wind in the second half of this year.
Supervision combination of high performance and reasonable cost is gaining traction across the globe, including emerging markets, we see promising opportunities for design wounds with several Oems based in China and India.
There's a large pipeline of interest with Oems beyond the ones I just mentioned.
We believe that continued over the air software delivery of features to Zycher.
Announcements of design wind and near term expansion of supervision into Europe with 0001 in pollster four will lead to continue the momentum.
<unk>, we're in the midst of concept development and testing faces with two global Oems for the chauffeur product line.
These should be concluded by late summer and early fourth quarter of 2023, respectively likely followed by announcements of design with <unk>.
Finally on our mobile I drive still thriving system platform, we continue to expect.
Generate first the 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 fullstack self driving system and can be validated and homologate did for volume deployment previously.
Previously announced activities with hold on and Schaffer are continuing and we have added a third platform builder from a leading European supplier of light commercial vehicles were already up for the 30 of their vehicles with our system to be used for validation testing activities in Europe and in Israel, and we'll have more details to share soon.
Turning to the outlook, while reducing our revenue and adjusted operating income guidance for the full year by 6.5% of 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 a broader business, which is diversifies over about 50 Oems and hundreds of models across all geographies we.
We saw the upside of this in 22, where volumes ended much higher than expectations and overall supervision revenue drove 11 points of total company revenue growth.
Less than 0.5% of the volume.
I think the downside of this customer concentration volatility now, but we are confident it has no impact on the potential for this business to be transformative.
Scales over the next several years and bridges to even higher value systems like she'll foreign twice.
Even after the reduction and we still expect volume growth for supervision this year.
Fully focused on our clear past, the product and regional diversification, which will reduce volatility overtime.
As far as diversification second vehicles are 0001009 launched during the fourth quarter Anvil ramp up over the course of the year, we have three more vehicles launching from the from other gili related brands and the second half of 2023 and early 2024. This includes the recently announced bolts of both.
For for which will launch in China in Q4 and globally in the first half of 2024.
Finally, 0001, the first supervision vehicle that launched in November of 2021 will enter Europe .
Later this year.
Specifically to the pollster. When this is more important than simply another car on the road with supervision. This as a customer that most quickly by the end of 2023. The plan to have launched three compelling electric vehicles and only a bit more than two years.
<unk> will be the first supervision equipped vehicle to sell in all three major regions, which we expect will result in further direction with other oriented and finally this is a really conquest win as their first two vehicles used an internal OEM develop level two plus system on the processor from one of our main competitors.
Overall, we feel great about the business as we looked at the balance of 2023 and beyond.
Thank you and thanks for joining the call everyone before.
Before I begin please be aware that the all my corporate profitability will be finished in non-GAAP measurement.
The primary exclusion and mobilized non-GAAP numbers is the motivation of intangible assets.
Which is men mainly related to into liquidation of mobile light.
17.
We also excludes stomach compensation.
Starting with Q1 revenue was up 16%, you'll be with both IQ and supervision volume modestly better than expected.
Gross margin is expected and we noted last quarter. The reduction in Q1 of US is Q4 is related to the pricing passed through.
<unk> cheap they took place at the beginning of 2020.
Did they mimic here is that we are passing these cost increase through two pier one customers without any Martin.
Turning to 2023 guidance in terms of IQ related volume anywhere opinion, I'll expectation that the midpoint are the same but.
We have tightened arrange a bit on the low and high end.
And you're probably all aware general about the volume that has been a bit better than expected in North America, new but.
But worse than expected in China.
Oh cool <unk> business is a very diverse and violence by region.
The outlook is consistent with where we expect it to be for this year.
We still believe I'll focus are supported by only about 1% global production growth in full to five point of hate us adoption growth.
Very reasonable assumptions.
In terms of the quarterly based a cadence based on the latest indication from the one we have seen some movement the volumes out of Q2 and into the second half of the year.
We expect is Q2 volumes to be fled the last modestly versus Q1.
Regarding supervision is I'm gonna note that we are reducing annual volume, which is the driver of the lower 2023 revenue and operating income Guy guidance.
Hello, we did not guidance towards based on supervision volumes.
The conservative view of the purchase order it from our main customer.
And before that was consistent with the Q4 run right past volume from the additional launches the download mentioned earlier.
But you do a number of headwind in China that have led to significant reductions in the market easy volumes compared to Q4, one right.
Including the zebra.
Guessing expectations to level consistent with current market dynamics.
In terms of cadence.
Volume into one which will somewhat lower than shipment.
<unk> comes to proficient inventory in the system. So we are assuming no Q2 posted Q1 Sir.
Second half volume expectations for supervision is about two thirds of the full year with mobile I our customers in the supply chain all the line behind is focused.
A couple of additional putting some guidance.
Four Q2, we expect whoever needs to be down slightly from Q1 is the sequentially Lois supervision.
More than a fifth modest growth and Ikea sequentially.
We still see avoid system place I've been 2023 vs 2022, but lower than expected supervision volume will make the increased more modest than originally expected.
We are still assuming operating expenses are up about 30% you will be you in 2023.
We expect <unk> to grow sequentially over the course of the year, but.
But for the uptick in queue to be fairly motive with larger increases for Q3 and Q4.
R&D expensive Gould is elevated this year with meaningful investments if any to prepare for the duration.
Many next generation product.
We are investing in many areas supervision and chauffeur launch an integration team.
We continue to believe that growth will come down closer to historical levels of 20% growth in 2024.
This would enable us to begin generating substantial operating leverage.
The core business continues to grow and how advanced product, becoming more meaningful portion of revenue.
<unk>.
Now the conduct a question and answer session if.
If you would like to ask a question.
Practice, Taiwan.
Telephone keypad.
And our first question comes from.
<unk> <unk> <unk> <unk> <unk>.
Maybe you can just add a little bit of a light on whether it was one sales meeting are they looking at the Q1 sales.
That had been week, thus far and reducing the full year schedule or two and it just wasn't brought up but is there also a potential for production issues, meaning the second half ramp that they were expecting the E. C. U 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 fell through.
Or if there is also a ramp issue in the second half.
Hello, Chris.
It's a purely purely.
Although we shipped in Q1.
A higher number of supervision units and we expected we expect it 20000, we shipped to 24000.
But in terms of the Colorado production they they produce the lists.
The.
What what what has happened is a re issue of the purchase order. We received so at the end of 2022, we received a purchase order which was <unk>.
Compliant with the queue for Runaways outfit.
22.
So it looked at very optimistic and they issued a purchase order and then material change in the Chinese market.
And it caused them to way to re issue the purchase order.
And to lower it significantly and then therefore, it's our obligation to reflect that in in our guidance.
Let's say that if we look at the past few weeks the.
The Red wait there are indications of the <unk> is coming back to the queue for a run rate.
But it's too volatile to it to make any any substantial change of guidance upwards. So.
Sticking to the conservative guidance to change and and there was some upside to it.
But we need to wait and see how.
How the Chinese market reacted the next in the next few months, Chris just just to clarify one thing. Your your your view of the reduction was was very close to the numbers by the starting point was higher if you remember we said that we would more than double volumes. This year from around 90.
5000 last year. So it was a little bit of a higher starting point just wanted to clarify that.
Perfect that makes a lotta sense and then obviously just because I think for the rest of the year. We're all obviously going to be somewhat focused on zeger volumes more so that we can think about the the trajectory into <unk> into 2024 can you talk about.
The actual caden, because dijker, obviously, new company, but had multiple products launching right now it's mostly the one but the nine to three the actor launching towards the end of it.
Of the year do you still feel pretty good about that trajectory into into the numbers that you were thinking about for 24 and 25% because obviously I think the capacity side ramps pretty significantly from the end of the year onwards, you know the <unk>.
Short age et cetera.
Yeah. So what we're talking about the ZIP code is 009 within about the upholstery Fuller's.
Additionally, Oems Gili Chili group, it's all on there. It's all on track. So there's no reason to change guidance for 2024 on those new platforms. So as long as Zeke or it comes 0001 comes back to the queue for a run rate.
Which as I said before there are indications that are coming back to that one right.
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 wind coming at some point in getting the full nomination this year.
And he's a purchase orders for serious development.
First quarter and the form elimination is really is it really imminent it's down to formalities.
This would be ESOP of 2025, so it sounds going to affect the 2024 Williams, Yeah, and then that's not a change from what you've always put 2025 for that program.
Next thanks correct question. Please thank you.
Alright next question.
Good morning, Thanks for taking the questions.
First question I, just wanted to understand the bottom line impacts of the change in supervision revenue guidance thinking mainly in terms of mixed impacts the gross margin is.
There is any launch costs related considerations as it relates to R&D or similar.
So I dunno margins alone you maintained the Delta <unk> previous guidance. This is because of two things one is the fact that the.
<unk> vision is lower than that makes so the first module needs a bit higher and also some savings around the office does not material.
Okay, great. Thank you for that and then second can you discuss the skill ability dynamics cloud enhanced eight as in particular that kind of in the press release that the technology is being expanded and you mentioned your prepared remarks as well.
Additional vehicle platforms with the first few customers beyond the original plan. How quickly can you do that should demand continued to track higher in terms of the engineering your requirements and just the logistical considerations of ramping clad enhanced C N S.
Oh, it's scalability of fair van or the cloud enhanced Aiden.
Immediate it's basically software, it's all cloud based.
We have today, but for.
For customers that are in the in the long term.
Launch a face as two of them are big and material. This is why we mentioned this in north of $1 billion of.
Potential revenue from those two a customers throughout this decade.
His immediate that there is no there is no issue of logistics and either among I just follow up on one thing Luke is that the way the way.
A new vehicle coming out it gets the new <unk> system and then it spreads to another vehicle on another vehicle based on the product cadence what what's happening here is the customers have decided to.
Expand cloud enhanced eight ask two 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 two or three year launch period that would get the technology, Dave Dave added other vehicles.
Okay, great. Thank you for that I'll leave it there.
<unk> what barkley.
What's the timing for this to be I guess, maybe a bit more diversified in.
A different model sources and for there to be a little less quarterly vault volatility. It sounds like you have to wait for the the European automaker when to come in and twenty-five I know you talked about another.
I think 2024 should be better in terms of the volatility you'll still be volatile more volatile compared to.
Normal IQ with business, which is over 50 different.
And hundreds of a car model, so things balance out there.
2024 will have.
Close to six.
Compared to one car brand that we had so far so this should ease up a bit of volatility it will be not only China about the global pollster for is global it's not only the Chinese.
The Chinese market.
2025 should be even better than we ever have additional Oems western Oems.
A launching it's not only the <unk>.
<unk>, we are in the final stages of Additionally, Oems.
Global Global Oems. So I think 25 will be even better familiar volatility perspective, but still not that the volatility of our normal <unk> business.
I think things would take her out in 2026 in terms of the volatility.
And just on this can you remind us that the models that you have.
Are you are you standard fit on those models or is there a a take rate assumption that needs to be made.
So it is 0001 is the standup fit every caller being produced comes with the with the supervision and.
And I think all the others are also standard fit.
Both stocked full results. So standards fifth I think 000009 is also send those fit I think all the launches we are having so far.
23, 2024 old Thunder outfit it may not stay that way forever right with every brand, but so far so far that 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 is.
There is a software component in a bit more of a hardware components and that's how you get these elevated asp's. Maybe you can just provide us with an update on where discussions are with automakers on software only solutions, which would maybe produce instead of the E. S P, but have richer margins versus combined.
Software hardware or are you still seeing uptake to have the full domain controller domain controller included in senior offerings.
We are a ignostic to it that means that the.
The margins on the hardware are very very small it's not something that is really material to us.
All the all the examples we gave so far we are providing the acu.
There are a number of opportunities that we are pursuing which is what you call software only just the IQ on the software.
Cause it comes with additional functions.
And by the OEM.
So we will really agnostic.
Won't be opportunities was the software on dates, Ohio margins global already revenue of course.
Understood. Thank you.
Thank you Dan next question please.
Alright next question comes from Mount allowed Rosner Deutsche Bank.
Oh, thank you so much.
First I was hoping if you could just put a final points on supervision outlook for for this year.
And perhaps what sort of like <unk>.
<unk> change for next year, just so we.
Can get a better assessment of.
The ongoing volatility risk and in the West basically currently in the guidance are you able to just quantify what is to reflect the volume assumptions sort of like at this point for so long.
23, and the unchanged one <unk>.
<unk> for 2024, and then in terms of what's happening on the ground to what extent do you feel it is.
Essentially should reflect a little bit of a softening into easy market. There's just maybe some advice.
<unk> pressure like <unk> essentially cutting prices.
<unk>.
Okay, I think we're not going to.
Go through the kind of the cadence of forecast, we provided a forecast during CES in.
I Dunno one already.
Already addressed our views on 2024, so I think.
Like we said.
We're not changing any of those forecasts.
Assuming that 001 can get back to the queue for run rate things things look good but.
But we it was prudent for us to reduce expectations this year to kind of where where the volumes have been seen so far.
What was your second question again about the <unk> guys in general and China.
Yeah, so the EV market in general and China are you asking about what.
What's been the environment so far this year.
I'm, just curious to what extent dress color around some of the dynamics, which are pressuring.
Pressuring the schedule, you're getting from your customers as it is.
Does it seem to like sort of like rather easy to maintain that make versus surfing market share pressure.
Yes, yes, yes, I understand so definitely so I mean wholesales. So I think China is always hard to figure out because you're you're getting various levels of data usually what you see in the headlines as wholesale data so.
Shipments from factories to dealers or you can get production data and what ultimately really matters is how many cars were actually purchased by consumers.
And that's the data that that's that's the most difficult to get so if you. If you look at the overall market in China. During Q1, it was down 8%.
<unk>, we're a little bit better, but but not much but if you look at the market sequentially.
E V as lost share in Q1 versus Q4, and we're down more than 30% sequentially.
What you don't see from those headline numbers is that the gap between cell into dealers and sell out to consumers widened.
To what look to be record levels in Q1, I think it's well known that the major heavy player.
Drop prices significantly early in Q1, we have some subsidies that were reduced.
In general economic weakness, that's what we really attribute it to.
The very weak volumes in Q1, the good thing is that market conditions improved somewhat in March and looked at the improving further in April .
This is consistent what we're being told by zeger that that their retail order flow has improved a lot since Smith mid March.
So you know things seem to be getting better.
And we are encouraged by that but it was more more effective for us to reduce it reduced the expectations to where we saw.
To sell out during Q1.
Great I appreciate what color and then a second topic Kansas.
Can you just remind us.
Pricing and unit economics for cloud enhanced aid us in I guess.
Just put a finer point around the.
It is expected progression of revenues for Ya.
The <unk>.
Kind of doubles, the ASB that we get four paws on the IQ So it's a.
It's a few tens of dollars per <unk> per year.
The cloud enhanced.
Software.
And we are up to with as as we mentioned in the in the earnings script.
With two customers north the north of $1 billion.
Projected revenue till the end of this decade.
So you have to make some assumptions on how long you've got the licensing revenue in some cases, that's based on.
But we think that you know it it.
On the vehicle. So the licensing revenue would result in twice as much as we got for the upfront cost for the I Q.
Perfect. Thank you so much.
Thanks to manual.
The next question please.
Our next question can Hum.
<unk> <unk> <unk>.
Great. Thank you hi, everybody just to supervision questions for me first just to clarify on on the outlook for the year. So are you effectively extra.
The software will Q1 demand and the the purchase orders for the rest of the year or so you're getting some incremental visibility from your customer about what production schedule should look like for the rest of your trunk or just want to clarify exactly on the latest forecast.
Software suite has been tested by by insurance agencies and has received the highest court.
It seems we received the highest scores ever recorded and driving assist ranking by the Chinese insurance automotive safety index, that's equivalent to the American a high H S.
So.
<unk>.
<unk> look good in terms of the quality of the driving assist that is.
<unk> customers.
Thanks, a tie next question facilities.
Alright next question comes from Joshua that's <unk>, what can you be calling.
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.
Sounds like the amount that we're working with before was you're essentially cutting supervision volume outlook for this year.
Equal amount that shipped last year.
Wanted to be precisely this essentially all sell into the <unk> 001, due to low demand. It's just surprising given it was supposed to be supply constrained in the first half with her it'd be that material of a <unk> volumes already this early in the year. Thank you.
Yeah, So I mean I think that.
Can I can try to take this one.
So.
I think I think the.
The purchase order that we received from the customer the the the forecast that we had from the customer purchase purchase order assumed that the.
Q for run rates, a volume which was.
150000 kind of on a run rate volume on a run rate basis would continue through this year and then it contemplated more launches additional vehicles coming in the second half the.
The rate in line.
Worse than the rest of the market in China came down by about 50% in Q1 as Amazon said, there's been encouraging signs that it's moving back towards that Q4 run rate, which would be positive but.
But based on kind of the selling rate that we saw in Q1 you know the.
The 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.
Worse than expected. So so really it didn't have anything to do with the supply constrained. It was just a matter of.
What was the rate that they were selling vehicles and that's that's really the bottom line.
Okay, but the the launches of the non zero one are still on track I guess that was.
The question that's spelled.
Okay lifted it from my follow up.
Called outfit the Pollstar for.
Essentially switched a mobile I 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 on the four versus the competitor on the three thank you.
Oh.
I can speculate, but it's not my role to speculate why they shifted from the one technology to.
To another I think a supervision.
Has been a proving itself considerably and that's going.
Would be the reason why they switched I think also.
Connected with seeker of their gili related in the Zycher launched in primarily in late 21 and early 22 in that.
Kind of what's the right cadence to see what it was doing and to kind of fit to this pollstar for.
I'd also point out that the whole star for us is significantly lower price vehicle than the three.
Points to the affordability as well as the performance of supervision.
Got it thank you.
Thanks, Josh.
Alright next question comes from I'm.
<unk> <unk> <unk> <unk> <unk> <unk> wait sorry.
[noise], Yes, hi, thanks for taking our questions I would like to follow up on the comments regarding additional momentum that you're meeting.
Cloud enhance business compared to the original plan Uhm I had estimated around 700000 units in 2022.
Based on the number of data putting the tread provided on your Ram installed base.
And that was forecasting that's about doubling.
In 2023.
I just do these announcements mean that there could be upside to that number anything against 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 data hate us Antonio yeah per.
Per year. So we can't really we can't really answer that question. All we can say is you know for 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 photo of maybe on your comments you know around the recurring software licensing revenues that you that you expect.
We'll represents approximately double the upfront price of the IQ, what kind of steak right <unk>.
<unk> assumption.
Now, we're talking about doubling the price of the IQ per car that adopt cloud <unk>.
But the a.
The figure that we gave of about one north of $1 billion assumes that take rates that we received from the from our customers from the customers and also we assume because some of this <unk>.
Required to end user to continue to pay on an annual basis. After the first three years, let's say and we're assuming an average.
Four years for anyone who has the technology.
The current customers are it's it's covered for three years and then the customer have 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.
Hi, Thanks for taking my questions Uhm, a couple of quick ones Uhm, maybe if I can start with sort of the business dynamics, excluding China, because it 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 to the guy that makes up the business excluding.
Balance out from a quarter to quarter.
To to adopt a supervision.
Focusing on whether it's going to be optional lower standards fit, but I would say so far all the opportunities that we are discussing our old standard fit but again.
Alright next question comes from Mark Lane, and I'd like to go with my Tech.
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 in 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 series production may begin.
But what we are in serious engagement that concept phase with the significant the testing dot going very well. So we are we are hopeful and optimistic.
The S. B 25, yes late 25.
Okay.
Thanks, and then you you you.
Commented, if I heard correctly about the <unk>.
Timing for IQ shipments and some may have been a <unk> pushing it into the second half could could you elaborate a little bit more on what might be happening. There is that is that.
More due to global production schedules is that is that all sorts of China issues, you you've been referring to any more contacts on that topic will be helpful. Thanks.
Yeah. So it's.
It's probably some people do about about their inventory level.
Considerations versus demand.
And it is the same.
<unk> mentioned that we ask so they kind of shifted part of their volume.
Not very significant to the second half of the.
But we are in very good discussions and trying to balance their commitments from quarter to quarter rather than lumping. It.
Alright next question comes Tom Mmk <unk>.
Yeah, Hi from then on and not just on the supervision side I know you mentioned zebra enforced other standard fit but can I talk to what are your thoughts are on the competition. Like is that is is there have you seen any backstrom liquidizer not any of those guys getting in on the autonomous side are there more still on perception.
I think the horizon politics, and others or more on the level too.
I believe that.
To kind of start in the first half or how do you see that spread out I guess.
Thanks were guidance for 2024.
Thanks to be J.
Alright next question comes from eight in the stomach with Martin Stein.
Ice platforms might I think our assumption for folks and this call will be that guy.
It would be coincide with all new architectures and software architecture is that a.
Supervision would be basically 100 per cent.
B E V platform I, just want to confirm that.
Yeah, Yeah that is so far it's an easy platform said that there's no reason why it cannot be in a nice the platform of course, but so far all the opportunities. We have already are but we haven't discussed at all about the western Oems.
Yeah, I feel good about booking yeah.
Understood.
And just as a follow up.
Sometimes I think Otto analysts on this call.
Are used to seeing things that start in China.
And then could spread to other other regions.
And I'm, referring specifically to teslas price cuts in.
Kind of willingness to maybe run the business for a loss, maybe even a cash Los suenos.
For competitive reasons.
I I guess, you've addressed us in different ways that you're not seeing any sign right now but just.
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 as the arbiter of what's what goes into the car.
And the numbers, what what gives you confidence that that.
C a silver lining in.
And the Tesla approach because the Tesla approach says that they want to make all their money from <unk> from auto pilot.
So this shows that the value proposition of supervision.
You will not be able to make money from the caller, you'll make money only from the sophistication of the supervision, what's push more car brands to adopt the supervision.
I'm not sure that the Tesla.
Strategy right now goes against our interests or goes against no I'll I'll revenue.
Pipeline going going forward.
Okay. Thanks.
Thanks, Adam.
Alright next question comes from <unk> R B C capital market.
Yeah. Thanks for taking my question, sorry, I got one more on the supervision guidance.
You said the pulsar four is not going to be in the Chinese market in 2024, but the other ones that.
A day and I think you just went through them and China.
You mentioned seeker is tracking better in recent weeks could you comment on how those other ones have been sharing and kind of recent weeks or how they have been.
Relative to the softness that you're seeing.
Yeah, there's only one other vehicle that supervision is shipping on right now which is the 009.
Which is really just en route mode I think it launched and sometime in February .
So we've we've seen kind of progressively better volumes there about the higher price vehicle that there won't be as big of a seller Zeke or 001.
So yeah, I think what documents decent numbers, you can imagine pretty pretty deeply and we felt pretty consistent.
As a lever that you would play cutting supervision pricing or with that is that not something that that would happen.
Of of our technology in fact.
Assume that as as the kind of the features expand through over there are updates like unknown was talking about the.
Adoption rates of Adolf's continued decline.
Great and then just quickly on on.
Two of them IQ kit is.
It's an enabler.