Q3 2023 Mobileye Global Inc Earnings Call
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Okay.
Yeah.
Greetings and welcome to the mobile like Q3 23 earnings call.
At this time all participants are in listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
A reminder, this conference is being recorded.
It is now my pleasure to introduce your host Dan Gallagher Chief Communications Officer. Thank you Sir you may begin.
Thanks, Kyle and Hello, everyone and welcome to mobilize third quarter 2023 earnings conference call for the period ending September 30.
2023 please.
Please note that today's discussion contains forward looking statements based on the business environment as we currently see it.
The statements involve risks and uncertainties. Please refer to the accompanying press release, which includes additional information on the specific factors that could cause actual results.
To differ materially. Additionally, on this call we will refer to both GAAP and non-GAAP figures a reconciliation of GAAP to non-GAAP financial measures is provided in our posted earnings release, joining us on the call today are professor I'm not so sure.
<unk>, CEO and president and Maran Shemesh mobilize CFO.
And now I'll turn the call over to al.
Thanks, Pat and Hello, everyone and thanks for joining our earnings call.
Before going through our business commentary I'll make a few comments about the situation in Israel.
Israel is now with.
The current effects on mobile Ly are twofold first roughly 9% of our employees are currently serving in the IVF reserves with their teammate that'd be working longer hours to compensate.
Second we are allowing more flexibility to work from home I see no material impact on our operations multi line does not have any production facilities in Israel no customers in Israel.
Furthermore, there have been there has been no material effect on our operations and our ability to develop tests performed business activities or meet our objectives as a results of Gabor.
Okay, turning to our results in Q3, well Ryan will provide more detail.
But at a high level Q3 was another excellent quarter on a year over year basis. We grew the top line, 18% adjusted operating income grew 27% and adjusted net income grew 59%.
Operating cash flow on a year to date basis has been impacted by investments to rebuild our strategic inventory of IQ chips.
Which we had used to maintain steady supply during the chip prices.
If you adjust for that investment in inventory, which is now largely complete operating cash flow has also grown very strongly so far in 2022.
Okay.
Now the third quarter financial highlight is the 34% adjusted operating margin the beat versus consensus here was driven.
Primarily by costs, some of which was related to macro factors like currency and some related to plant cost efficiency initiatives.
Turning to our product portfolio, our bookings so far in 2023 put it on.
On track to outperform the $6 $7 billion of future revenue from design wins, we generated in 2022.
Which was by far a record year, we will have more details on that at CES in January.
We're having a tremendous amount of success with our <unk> based product portfolio.
<unk> diverse platform supports everything from basic Adas to supervision to show floor to mobilize <unk> and we're excited to launch the first IQ six based Adas program in early 2024, consistent consistent with the timeline, we laid out several years ago.
While supervision continues to be a major focus.
I would note that we continue to add a very high number of basic and cloud enhanced Adas programs.
On the cloud enhanced side. These deals are at significantly higher prices than current Adas and typically include RDM when data sharing agreement.
This will reflect this would result in a very meaningful expansion of the Oems that contribute rem mapping data in the coming years improve.
Improving map refresh times and diversifying the data sources.
In addition, we added our first supervision light customers.
Week, a system based on a single IQ six.
<unk> IQ six high chip with a reduced configuration of cameras.
Supports hands free limited to hybrid.
The design win is from a large global Oems with plants with this systems on high volume vehicle.
We also had some important supervision and so for design wins in Q3.
We added S. A W. As a customer with what is relatively near term startup production date of late 2024 for the first of many supervision vehicles and a year later with the first ship for vehicle more on that in a minute. We also added a chauffeur program with goldstar for Sop in late 2025.
Oh, the mobilized drive mobility as a service side the various key components towards scale are progressing on schedule, including our software stack. The IQ six high base, a compute engine and the imaging Gregor.
Our vehicle platform partners are also making progress recently, our strategic partner Volkswagen commercial vehicles as weather as well as Halle demonstrated our technology in their vehicles in Hamburg for the German minister of transport.
The event indicated strong support to deploy this technology to improve transportation efficiency with the goal to put up to 10000 autonomous shuttles on the roads have handled by 2030.
That's what I believe was the most important development in Q3 was it was the delivery of highway supervision software to an over the air updates to more than 100000 eco vehicle owners in late August.
With navigate on autopilot feature providing handoff navigation from point a to point to me. This was an extremely critical proof point in front of our OEM customers.
It's one thing to demonstrate technology on a fleet of test vehicles. It is a completely different level of product validation to deliver an ice on hands free system to 100000 consumers feedback.
Feedback has been outstanding with media in China consistently noting that the Zika system outperformed strong competition, despite significantly lower sensor content and a fraction of the compute power.
Out of the more than 1000, better users who use the system a couple of months before the broad rollout 95% of them said they plan to buy the system. After the 12 month trial periods that Zika is offering.
I can't emphasize enough that this over the air updates amplified a flywheel dynamic that's been developing for the last year or so the industry. We have noticed a higher pace of innovation and a significant growth in demand in China for systems that take over more and more of the driving this creates higher pressure among all OEM.
And to develop competitive entry systems to generate value from software, but also not to fall behind this pressure forces more emphasis on programmatic factors like time to market cost and performance.
Posted a desire to in source this creates higher demand the mining Oems for them for the mobile I'd products, which offer clear advantages and time to market cost and performance deploy.
Deploying the software and more than 100000 consumer vehicles and receiving many accolades in the world's most competitive market clarified our ability to deliver and serves as the final component and the flywheel.
We felt the impact of this proof point immediately the successful Rollouts led directly to the FAA W. Design win and then acceleration of progress towards potential design wins with other key prospects.
What I mean by exploration is that there is an increased urgency to converge towards production programs. This is reflected as more clarity from customers on next steps for example, the clear deliverables timeline and approval processes.
While the design win process rarely moves as fast as we want we expect that we will have more news on supervision and so for the next five months.
I'll put some numbers against it last quarter, we disclosed that we either had already booked design wins over an advanced stages for supervision and also for design wins with nine Oems representing 30% of global automotive production that number is now 10 Oems representing 34% of auto production. If we go back to the Bill.
Gaining a 2023 that number would have been three Oems representing 9% of the industry.
This group does not include any low volume brands or early stage startups, and it's broad geographically one U S. OEM two European Oems for Chinese Oems and three agents.
Oh, yes.
We're also very encouraged that we have received meaningful interest from a next wave of Oems that represent an incremental 15% of global auto production.
Not at the point that we would call. These advanced stages. The initial work looks very promising.
Before turning it over to Ron I'll close with a few words about China definitely W.
I traveled to China with our executive team in September to meet with several key customers.
It's not an exaggeration to say that this market is moving at light speed towards putting eyes on hands free systems on the road.
Premium Ada is a huge selling point and marketing materials. The media is extremely knowledgeable about the technology and consumers demanded theres. So much traffic congestion in China and consumers are tired of battling it on their own they won't cars to battle the traffic for them.
I can see the potential for 15 20, 25% of cars sold in this market to have supervision by capability a few years from now.
So it's very important for us to win there and we are winning of the group with 10 Oems I mentioned before.
For our China based JD group S. A W. Two other significant automakers we.
We also have opportunities to expand with existing customers. The Zika mobilized collaboration has been very successful and is leading to opportunities for additional diesel vehicles as well as from other brands in the jewelry group this could add significant volume in the near future.
And the S. A W relationships is key for US a government owned automaker choosing a non China partner in this highly strategic technology area as the next level of validation in front of other China Oems. It's also a very broad program and VW is going all in on supervision.
Standalone core brands have a very robust product cadence starting in late 2024, and every vehicle model launch from that time on will include supervision.
It is also our ambition to sale to sell the resulting platform into their J D brands, as well, which would increase the volume opportunity by a factor of five.
Thank you for your time and interest in <unk> I will turn the call over to Laura.
Thanks, gentlemen, thank you Johnny.
Thanks for joining the call everyone.
To begin please be aware it all my comments on profitability will refer to non-GAAP measurements economy exclusion normalized non-GAAP numbers is the amortization of intangible assets, which is mainly related to interest acquisition of modern benign in 2017, we also exclude stock based compensation.
Q3 results, we had an excellent quarter with revenue up 18% and adjusted operating income up 27%.
IQ into TV volume increased about 16% with the remainder in deployment related to higher IQ Asp's.
An initial small mobility as a service revenue it was related to seven <unk> systems shipped to customers for it.
Duration on Destiny.
Since we began shipments way.
29000 in reported which was in line with expectations. These units will primarily towards decrease even one and to a lesser extent <unk>.
Although in Q2, you also had some initial deliveries.
Smart one in Boston for supervision gross margin improve somehow as compared to Q2.
<unk> also had to union on the highest volume <unk>.
Looking ahead, we expect two catalysts to drive further improvement in supervision gross margin over the course of 2024 number one in collaboration with our supply chain. We are introducing the second generation supervision domain controller, which we expect will result in meaningful cost savings we plan to begin.
In the transition to this new controller in late Q4 and into early Q1, we all share the savings with our customers by modestly lowing SME selling prices.
The net result is expected to be an improvement in gross margin beginning in Q2, and one meaningfully in Q2 of 2024.
Number two and I'll mention.
Oil does navigator and pilot software to Zika, we closed in August two and very well.
Any existing owner or a new buying it through December 31st this year, we will get the 12 month free trial on this often after this period the consumer will need to choose.
To pay an incremental cost to continue to utilize the supervision feature we will receive meaningful sell through revenue for any consumer chooses to keep the sales team.
Should lead to incremental boost of supervision gross margin in the back half of 2024.
Turning to operating expenses they.
They were again lower than expected in Q3, which combined.
Revenue growth led to a robust adjusted operating margin was 34% up about three points versus Q3 2022.
Approximately half of the lower than expected costs.
Related to lower than expected payroll costs, driven by depreciation on the share count. This is a meaningful driver for us due to payroll and related expenses being the majority of our operating expenses and the significant majority of our employees being either payroll expenses are actually slightly lower than Q3.
And compared to Q2, despite higher head count.
The lower than expected costs, primarily related to timing of certain expenditures and general efficiencies kick.
In terms of cash flow, we had a strong quarter compared to Q2 with continued to invest a significant amount in rebuilding our strategic inventory of IQ chips, which was largely consumed in 2021 and 2022 doing supply chain crisis.
As of the end of Q3, we have almost reached our target of approximately six months some strategic inventory. So cashews for restocking should be significantly lower in the next few quarters.
When adjusting for cash consumed by inventory year to date in 2023 operating cash flow conversion as a percentage of adjusted net income remains very high.
Capital expenditures in the quarter were consistent with our unchanged view. This capex for the 2023 calendar you shouldnt be roughly similar to 2022.
And to the guidance as we look ahead to Q4 IQ volumes are tracking in line with our prior guidance and.
At the midpoint of our guidance IQ volumes are expected to be a bit more than 20% above Q3 levels with.
ASP is down sequentially due to a mix I would just note.
This implies.
Nevertheless, quarterly IQ volume and importantly should not be used.
Starting point for estimated in 2020, we'd encourage you to look at the full year 2023, and applied growth rate to death, when thinking about 2024 and considered the high volume in Q4 could lead to some hangover effect in Q1 similar to the dynamic in the first quarter of 2002.
93.
Turning to supervision implied Q4 volumes based on the midpoint of the guide for 2023 is approximately 37000 units.
This should bring us to around 102000 units for the full year of 2023, which is towards the low end of that 100000.
<unk> 115000 incorporated in our guidance at the time.
This fine tuning of the shipment forecast is what led us to modestly adjust that with 2023 you have anybody.
Human demand for Zika dealers, even one in USD or nine was well in line with our shipment levels in Q3.
Continuation of this plus incremental volume for new products like smart one.
For indicative of zero, one shipments to support the growth in volume from Q3 to Q4 as these new products ramp up.
And a fifth vehicle in Q1, the Vogel <unk> <unk>, we have set up well for continued sequential growth in 'twenty to 'twenty four based.
Based on our assumption for mix and volume, we expect Q4 gross margin to be consistent with Q3.
We expect operating expenses for full year 2023 to be about 13% on a year over year basis. In 2024, we would expect operating expenses to grow at the higher rate, assuming some normalization in the relative value of the Israeli candidacy as well as the ramp up of project spending.
Nathan to expected new supervision Anshul Farm program lastly in terms of tax rate. We continue to expect an effective tax rate in the 12% range for the <unk>.
Thank you and we will now take your questions.
Thank you.
We will now be conducting a question and answer session.
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The interest of time, we kindly ask each investor day limit yourself to one question and one follow up.
Our first question comes from Joshua <unk> charter with Cowen. Please go ahead.
Hey, guys. Thanks for taking my question and most importantly, hope everyone's doing safe and your families are okay in Israel.
To start you.
You mentioned, the 10th OEM and I believe is the first time, you explicitly called out a U S. OEM can you copper supervision can you. Please can you confirm whether or not those are the same thing in and and also provide any details on the scope or timing of how that would ramp into the model. Thank you.
Well I I.
As I mentioned in the <unk>.
In the script I believe in the next five months things will play out I would say the percentages.
<unk>.
No.
Remaining Oems into design wins range from 99% confidence through 50% confidence, depending on which OEM we're talking about.
And then the next day.
This month, we will I think will be a much.
We will have much more clarity.
And as I mentioned, it's kind of a global a global spread from the U S Asia.
China, It's really global starting from just the Gili group a year ago to now really a global the global spend.
Josh This is Dan just to clarify the incremental OEM not the U S. O U S. OEM was what in this group as of last quarter quarter, as well and we continue to progress and feel good about that customer.
Got it. Thank you and then in the guidance for the full year, you kind of called out supervision is driving the very modest tick down at the midpoint for revenue has anything changed with how you're thinking about 2024 and can you walk us through what are the drivers of that if any is that a new.
New vehicle model or was it volumes at the one that's changing things. Thank you.
The new vehicle volumes for 2024 as expansion upgrades of 0001 expansion of 009 of CCAR, we have pollstar for coming out.
We have a smart smart number one coming out we have the Volvo <unk> 98 coming out towards the end of 2024, we have the S. A W brand they come.
Coming out.
And.
There is a certain I think.
High probability that we will have another OEM in China that will also launch end of 2024.
Got it thank you.
Our next question comes from his time at <unk> with Citi. Please go ahead.
Great. Thanks, Hi, everybody. Good afternoon, just two questions for me first on the new wave of automakers expressing interest.
Can you maybe just share one how many automakers right in that second wave and to what extent. These automakers have existing in house operations for advanced level two plus.
And then second question just on the supervision Light Award I was hoping you could share just the asp's unexpected started production for that program. Thank you.
Okay. So I'll start with the second question supervision the lights.
When we are a tier one it's about 60% of revenue compared to with supervision.
Our tier two with a few hundreds of dollars revenue.
And this particular program that we want we are at here too. So we supply only the IQ six chip just like in any tier two way relationship it's a really high voltage.
A global a global brand and I think it offers a new level of kind of the intermediate the premium in which the supervision capabilities would be limited only to highways, but still will be very very high hands off.
Capability. The supervision allows you to expand way beyond the highway arterial roads urban roads.
Also be the basic the basis for sure.
Okay.
Later stage. So this allows us to have an entry point to.
Medium and low segment the co brand.
Car models.
This is a very important win as for your first question. The next wave that 16% of the global auto production.
As I mentioned, it's about for Oems.
And they don't have anything comparable to where two a supervision.
And.
They are starting to notice that the supervision like system is really the next premium in the coming years.
I I believe that eventually every carmaker would offer a supervision like.
Product and.
Coming two or three years.
That's all very helpful. Thank you.
Our next question comes from Joseph Spak with UBS. Please go ahead.
Thank you everyone.
The first question is I know I know your solution is technically powertrain agnostic, but.
We're hearing about some <unk>.
Program delays on next generation Evs I.
I guess not in China, where I know a lot of your your.
Your wins are today, but if there is sort of a push out does that at all change your trajectory on on supervision or do you think theres an opportunity to maybe add more features.
Whether it's a cloud enabled eight us or whatnot to existing existing programs.
The cloud to enhance the Adas is progressing on a separate track.
We have the two already that we mentioned last quarter, which are responsible for $1 billion revenue until the end of the decade.
We have four more in the pipeline ready to be signed in the next few months. So that's a separate track.
Supervision startup productions.
If there are delays that its weeks or a few months it doesn't change materially our forecast in terms of the revenue.
Full year and as we get more design wins our system.
Our kind of weakness towards one particular program that delayed or not becomes much much.
We don't rely.
We're not susceptible to such a delay obviously when we have only one car Oems.
The program then we are really dependent on delays, but when do we have 10 or more than a delay here or there should not change the revenue guidance.
Okay, Perfect and then just maybe a clarification on the OEM commentary around supervision first of all the the nine to 10.
Does that include the supervision light customer.
And also you know I know you provided some comparisons versus you know what you said earlier in the quarter or even last year I think at CES you mentioned.
Six brand so how does how does the sort of the.
10, Oems compare to sort of that.
That brand comment earlier this year.
Okay. So there's 10 Oems does not include supervision supervision life as a separate track.
We have one design win for that.
We are kind of working.
Working towards getting more business for that trial supervision as a separate track. So those 10 Oems are for supervision in terms of brands.
It's really 10 Oems.
Last time, when we talked about brands, we wouldn't even message 0001 and 0092.
Two brands of the same OEM all others are separate Oems.
The one that was the ones that we announced was the.
I'll start.
March now we are reviewing it.
Vocal in China.
Porsche and all the rest of our separately.
S. A W and all the rest are separate Oems not brands within that group of Oems as I just mentioned.
Yes. So thank you very much just to clarify just one clarifier Joe on that just to be Super clear within the 10 Oems. We're considering Gili group has one OEM alright. So we have four brands five model.
But within this metrics, we're considering that one OEM we plan to continue to update this metric on a regular basis, along the same methodology as we move into the future and we will try to be very consistent with kind of what we're considering an OEM.
So Oems at the parent level effectively.
The parent level effectively.
Could be some.
Cause some parent levels have two different product developments, but.
We're trying to be consistent at the parent level within those metrics.
Thank you very much.
Yes.
Our next question comes from Chris Mcnally with Evercore. Please go ahead.
Thanks, So much and also just wanted to echo.
The best for the multifamily.
I'm not one of the high level questions I have about pushing to supervision light is I think you asked something like $3 5 million cost of enhanced just our.
Our estimate for for this year.
Would be the reason an OEM would continue with enhanced rather than supervision light other than the time to changeover it seemed like that entire.
Base of units should quickly changeover to supervision, but just when.
Would love to hear about sort of the pro pro comp if you get all the increased features that really no additional cost at the program level.
Well theres a significant cost.
Yet in between a front facing camera with or without cloud enhanced and the supervision lighted supervision light.
Has the about between six to seven categories.
Moving on to <unk>.
The main controller Woodbine IQ six chip.
On the other hand, the front facing cameras, just a front facing camera right Theres no domain controller.
Loudoun has is our ability to add value to a front facing camera.
So you have a front facing camera, which is very low cost to the OEM and just by adding software capabilities, we can considerably enhanced.
The feature set the budget.
Proposition of the front facing camera for example, allow us to do lane keeping.
We don't see any visible the lanes or probes.
Providing a traffic light.
Inflammation.
Providing alerts against they're running on a red light or breaking.
Against they are running on a red light and so forth and so forth. So the price difference is significant between a front facing camera with or without cloud enhanced supervision light supervision. So far and then why is that.
<unk>.
In terms of cost.
Maybe I'm wrong I thought on a lot of these gen. One program. There was also on the enhanced that Youre on there was also a significant amount of radar for example, so if you have multiple radar.
Be adding five or 600 to the total cost.
The system to the OEM, which you may be even if you remove with supervision light.
But so many of the front facing camera they don't have the radar.
It's not that every every HSA program has a front facing radar.
A lot of.
Our front facing camera.
Penetration is vision only theres no theres nobody radar.
The supervision light.
The seven cameras, including four of them are parking cameras of course, sometimes they come with radars and sometimes they even those in this particular program that we won or the front facing greater.
Okay makes sense and that's why you would have the limited operational design domain.
The Gen. One program only had the camera.
The second question.
For getting the Oems on the low end to sign up for supervision light could you talk a little bit about how the system.
Scale, meaning do they get to see how Ram in Rss works and then it leads for them to potentially use higher levels of supervision for more premium vehicles.
Just the ability for them to upgrade on those existing platforms overtime to higher forms of supervision. If you could just kind of go through that that sort of that escalation that upsell that you could have done.
Well, then if an OEM buys into supervision light they cannot escape because supervision has more sensors more cameras at the Lebron cameras.
Normally it goes the other way around we Havent OEM that is signed into supervision and some of it models and now has a low end model and wants to upgrade the low end models from a front facing camera to his supervision.
And just if I could follow up and that logic the supervision win the supers in light when was that this is a new OEM right. So you didn't down sell this specific Oems.
Revision light it is the first supervision theyre taking.
Well the supervision light.
A win is with a new OEM.
A design win is with a new well, yes, it's not part of the Oems that we mentioned before.
Yeah.
Perfect I appreciate the detail I'll follow up answer.
Our next.
Question comes from Adam Jonas with Morgan Stanley. Please go ahead.
Again, my my thoughts and prayers are with you and your loved ones in the black community following atrocities.
In Israel.
My first question is on the legacy Oems many of them are dialing back.
Their investment plans.
We continue.
We expect that will continue.
If it does does slower EV adoption categorically have any impact on supervision adoption.
Over the next few years in your minds.
I think the opposite is happening when they are dialing back investment basically dialing back in source.
Those are very very big investments.
And pushing them towards.
The time to market performance and OLED scaling that modal icon can provide.
So.
Our engagements with the Oems on the supervision.
It's really.
All over.
Yes.
Perfect.
The provision is not on an EV targeted.
Ignostic to powertrain.
Don't see any impact from relative.
Okay.
My second question and then Dan.
Of the 10.
Identified and.
Does that also include how many of those are E D.
Did any of those include architectures for for ice or hybrid.
There is none of these 10 Oems are EV only.
Companies.
And yes, I think let me.
We're involved with design win discussion and negotiation.
I think what I would say is that we have announced design wins with Gili with Porsche.
With F E W.
The other seven are in negotiation around a variety of models within each group.
Anything to add.
No, it's really agnostic to the powertrain.
But what I was thinking the operating system now I'm sorry.
I'm almost done here, but power powertrain I could see agnosticism, but my understanding was that the starting clean sheet with an operating system in our electrical architecture did have some advantages for integrating very invasive and importantly, a system like the technologies you offer relative to say retrofitting, an existing or kind of.
Kind of a fading out a run off of an architecture.
But.
I don't know if that.
If that logic is.
Correct.
I think that the Super supervision system is really a closed system, where with the new win.
There is a.
The cooperation with the OEM on joining the driving policy as I mentioned last quarter, we have a new language, we call the tuning language or behavioral shaping language, which allows the Oems to really take control of all the driving policy decisions on top of our kind of operating system.
Driving the policy, but it's all within our system. So whether you have an easy or architecture or not the new architecture.
There is no difference it's really agnostic.
Thanks Anna.
Our next question comes from Triage Patel with Wolfe Research. Please go ahead.
Hey, Thanks, so much for taking my question.
I guess as we look out over the next few years.
Few years, you've talked about supervision ramping up to maybe maybe the low 200000 unit range for next year.
I think youre still targeting $1 2 million by 2026.
That would imply a pretty big ramp in 2025 and 26. So maybe can you talk a little bit about the visibility how much visibility you feel like you have there.
Supporting that kind of ramp.
Yes.
Well, our visibility is getting better and better as time goes by naturally the more design wins are close to design wins gives us a much better visibility I will say that.
Although opportunities that we have 50% of them are going to launch in 2025, or 25% earlier and 50% in 2026.
And we're talking about trying to let's say an inflection point in revenue because supervision revenue per car is an order of magnitude higher than.
Our ASP.
<unk>.
Now pinpointing exactly the date of that inflection point is difficult, but the 2025 26.
Timeframe.
We are confident with the numbers that we gave.
Okay great.
And then just to maybe clarify so you mentioned on supervision light.
In this award that you've secured your plane a tier two room versus a tier one. So can you maybe talk a little bit about what a tier two role entails for you or is it more just software versus providing the domain controller as well.
Is that how to think about it.
The tier two Walgreens is this is this is our classic royalty names almost all other non supervision programs. While we provide the chip. This case, it's the IQ six time and all the software.
Around it powers the IQ six in terms of.
The dry think functions.
And our revenue.
As for the chip and the software and say a few hundreds of dollars.
Okay, maybe just one last quick one for me.
Just shifting to profitability it looks like Q4 is tracking towards 36%.
Operating income at the midpoint.
It's quite strong.
I think you've previously talked about 20% opex growth for for for next year.
But it sounds like this year is maybe coming in a little bit lower so it should we still be assuming that kind of growth or should we assume something higher.
Well there was.
So some things that were not in our control like the depreciation of the Israeli shekel, which is responsible for most of our operating expenses.
We were still late in moving onto our new campuses. So theres also saves on operating expenses.
Our plans of investment.
We're not changing that now we are big investments to.
To make going forward and those have not changed.
Add to that.
<unk> 23.
There's also an issue worth mentioning on the non recurring engineering reimbursement that reduced R&D.
For more advanced development programs like Super regional issue.
The <unk> investment a much more significant than what we used to see in Adas.
I've got to tell you we Marvel.
And therefore, it more challenging to predict so these are investments for 2023, I would expect it to be higher than that.
Our conservative assumption at the beginning of the year, Yes, that's also behind us.
Our savings for 2023 in FY 2024.
Based on our current forecast for 2023, we would expect to see 20%, 25% growth in 2020, So and you can put any but the important factor is of course done exactly what we are winning supervision and so far that's assuming we win everything we expect it to be.
He then constitute 25% in 2024.
I thought there was another there.
There was a point that I forgot to mention was the supervision life. Our revenue includes also layer.
The software and web as well.
Okay understood. Thank you so much.
Our next question comes from Mark Delaney with Goldman Sachs. Please go ahead.
Yes, good afternoon, and let me add my support of sympathies for everything that <unk> family is dealing with.
On the Tech roadmap for you I'm not did you think the latest Gpus and AI training technology will help mobile I two accelerated product development timeline on the topic of the tech roadmap I'm curious what feedback you've had on your paper about how end to end neural nets may not be the best approach for autonomy.
Well no.
Our view about end to end, we put it on.
That paper and I don't think this is a forum to kind of repeat what are your growth. So it's out there in the block and.
We spent some soft on writing so.
Im not add more to that in terms of our compute infrastructure, our corporate infrastructure is not gpus.
Does the IQ It provides us much more flexibility than <unk>, it's much more cost efficient it's much more power efficient.
This is what is the driving kind of the.
The value proposition to our customers that we can be very efficient and cost performance in <unk>, because we have a tailored system on chip.
Our to our needs.
Got it thanks and in terms of the potential for supervision gross margins to expand you spoke about a new domain controller and that being a meaningful driver over the course of 'twenty for any more details you can share about how impactful that may be to gross margins. Thanks.
Our asset total gross margin for supervision.
Is the aim is aiming at 50% we're not there yet but this is this is where we're going.
Yeah.
And yes, so supervision.
I mean as I mentioned.
And gross margin.
10 two.
Figure that I mentioned, one is the cost reduction.
Well the Acu the next generation of the Acu, that's supposed to happen.
Significant in banking in the beginning of 2020.
In Q2, and also again software bundle.
That would have more effect in the back half the back half of 2024, but we will have a meaningful growth in English margin for supervision in 2025 planes.
Thank you.
Our next question comes from Aaron Rakers with Wells Fargo. Please go ahead.
Yes, thanks for taking the question and my thoughts to the mobile I family as well given the current situation. So I guess I wanted to ask about.
The longer term, how we should think about just the model attributes of monetizing cloud enhanced data asked obviously with the speaker NPP functions.
Functionality across the 100000 plus vehicles.
Maybe walk me through how we think about that.
Monetization.
It sounds to be kind of kicking in in the latter part of 'twenty for any metrics you can help share on how we should think about that.
Dan do you want to say few words, and then I'll ask.
Oh, sorry, Eric could you could you repeat the question.
Yes, Dan I appreciate it so I'm just I'm asking about the monetization.
The effect of.
The Z for vehicles for example, taking the full license.
Of.
The Ram functionality of the cloud enhanced data just how we think about that flowing into the model as we look through 'twenty four.
Yes, I think maybe I'll start and then maybe moron can can talk a little bit more so cloud enhanced data has the potential to generate recurring annual revenue from the maintenance of the map those.
Those volumes are still relatively small because it was really just wanted a couple of platforms from Volkswagen group.
Ford will be adding round to their blue crude so the volumes should should start to ramp pretty significantly next year.
But the function of annual recurring revenue as you want it.
Repeated years building up a cumulative number of cars and that's when it starts to make a big difference, though so we will see some effect.
Next year of the recurring revenue, but that's it could get much more meaningful in.
In the future years.
I think that.
Software bundle revenue.
We're really encouraged by the feedback that we're getting from consumers in China at the end of the day.
To take these.
Supervision functionality and pay an incremental costs from the consumer perspective.
Obviously, thats going to come from whether they value the system or not.
That's why we think that the pre trial was a really good idea because there is a lot of value in the system and it's better for people to experience that rather than make them make the decision before they've ever experienced it.
And just one thing to reiterate as you know of the beta users of that system, 95% said that they would pay for the system.
We don't think that the penetration rate is going to end up that high.
But it's a really encouraging sign.
I don't know if maran has anything else to and that should start to happen in the second half of next year.
Yes, yes, yes.
Yes, so the volumes are only Kevin carrying revenues.
No material impact this year in 2023, but we see the growth trajectory.
No.
The decline is Adas and Ram revenue will start to provide some modest tailwind to it.
And in 2024, and as Dan mentioned for pre supervision.
And then maybe the back half of 2024 after Don Charlie.
Yes.
Barbara concrete about.
About supervision with the Zika every customer that is converted to paying for MVP.
Is there a few hundreds of dollars to most of them.
That range.
Yes, very helpful. And then I think there was a comment in the prepared remarks that I think it was in the context of also Zika and other brands within the <unk> group that you said could add significant volume in the near future.
Can you help us appreciate that a little bit more.
Are you kind of referring to there it sounds like within Julie.
Yes, Julien it's more design wins.
We're working on more platforms.
The 2025.
Im frame.
Okay. Okay. Thank you very much.
Our next question comes from Emmanuel Rosner with Deutsche Bank. Please go ahead.
Alright. Thank you very much first of all I would also like to express my.
South sprayers and support.
Mobile I firmly in the current horrible circumstances.
I wanted to ask you first on your.
The CW, we'd obviously extremely encouraging new customer and then pretty soon start pretty soon in late 2024 can you just frame for US again, the scope of what the current win is in terms of the brand and perhaps you know vehicle models or timeline and then what would be the timeline around potential expansion.
And in which direction would that relationship expense.
So the relationship is on design wins of supervision starting from end of 2024. So it's the same the same domain controller that is running on the Zika vehicles on the IQ <unk> IQ <unk>.
And its a rollout for all brands.
Its AWS starting from end of say 2020 for I think more than six brands.
Then a year later based on IQ six is the chauffeur.
We're going to be one of the first customers post our four is also a customer but also I'd say W. On the on the ship for ice off highway.
Off with with a ship <unk> system with <unk> IQ six.
It will include also one of our imaging radars. So it's not just the domain controller, but also will start to providing also sensors.
So that's the scope of the of the relationship.
And then in your prepared remarks, you also alluded to potential extension to some of the joint venture brands.
Or would that play out who needs to take this sort of decisions.
And what is the timeline for that.
Yes.
Stipulation I wouldn't.
It's difficult to put a probability on it but I believe that.
First of all the rollout of supervision on its AWS on brands would be a good catalysis.
A good catalysis, two is moving to where the joint venture brands as well.
At the moment there is nothing concrete yet.
Understood.
And I guess just following up quickly then since this is launching original eight 2024.
Obviously, helping with some of your supervision volumes next year I understand your point on <unk>.
Higher confidence in 2025 2026 since this is the bulk of the launches, but still curious about your latest mark to market on what 2024 volumes could look like for supervision.
A little bit more than doubling this years still on track, especially with the addition of <unk>.
Yes, I think yes, I think this is a good estimate about doubling what we have in there 23 slightly more but this is a good estimate.
We feel the same as we did last quarter when we made that comment.
Great to hear thank you.
Our next question comes from Pierre <unk> with new.
Street Research. Please go ahead.
Hey, guys. Thanks for taking the question.
So I think you made an interesting comments about China in your prepared remarks, it must be like a very interesting market at the moment.
You guys run bring up supervision and at the same time, you have like a handful of competitors, who have started to put on the market.
Back into the hands of.
Drivers of consumers.
Kind of like.
Self driving.
Features that provide like a I would say similar assuming our service, but with more compute and more sensors more than just the.
Kevin.
And I'd love to hear you know.
How much you've been able to assess.
The difference in user experience between between supervision and alternative features.
How you feel about it.
At the end of the day all of these.
Systems competing within that.
Various immuno ground I'll be offering various experiences.
Do you see like significance.
Differences emerging between supervision and what's the rest of the market has been able to put on the road so far.
So, but there have been detailed benchmarks.
<unk>.
Bye Bye bye agility bye bye bye.
The parties.
Comparing 0001 with NCP comparing to expand to Neal to the.
Oh tore.
The difference is striking.
In terms of measuring the meantime toward interventions.
All sorts of how much time it takes to go through a two point to be.
The Zika or is there one was led by tens of percent pass story much let's say intervention by order of magnitude lessons of engine right now the difference is really striking.
Some of those the assistant I think all of them are relying on a high definition map the conventional high definition map, which they already have mentioned that they cannot scandalous.
It's too expensive too with the scale, whether mobilize up in Q the conventional high definition high definition map.
And the and those systems are much more expensive.
As you mentioned the compute sometimes it's about 10 times more compute than what we have many more sensors more radars.
Front facing <unk> and some of them to have to front facing and others. So I think what we're very confident we have a good value proposition in terms of performance in terms of cost in terms of OLED scalability, our our capabilities.
Capabilities allows scalability geographic scalability that the conventional high definition map maker.
I would find it very very difficult very difficult to.
<unk>.
Compete.
Other kind of <unk>.
<unk> that have been conducted as have the vehicles.
Hey.
When you approach a construction zone when there is a block plane. So it was a very detailed benchmarking not just intervention rates.
The difference is striking.
Thanks, Greg and just a quick follow up.
Sorry to come back to that but I just want to make sure.
<unk> okay.
You have 10 Oems of which three you've announced.
They represent such a focus in terms of the market and what you say of the seven Oklahoma confirmed yet.
Your line confidence.
<unk> ratio.
Ratio I would say in terms of converting them.
Between 50% to 99%, depending on which one we're talking about and then you had an additional 16% of the market on which coincidentally is below 50% I assume you've got the right way to Russ pulls us into just one sentence.
I'll take the range within 50 to 99, but the.
The 50% is only one of the the.
The rest is higher than <unk>.
And one of them is 99%.
Excellent. Thank.
Thank you for that.
The final clarification on that.
Thank you Pierre pile. Unfortunately, we've run out of time.
If you could.
Move to close the call. Please thanks.
Thanks, everyone for joining us we will talk to you next quarter really appreciate the interest.
Okay. Perfect. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Really would that be.
Yeah.
Okay.
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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 factors that could cause actual results.
For a 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 professor I'm, not so sure mobilized CEO and president and Moron Shemesh mobilized CFO, Thanks, and now I'll turn the call over.
I'm done.
Thanks, and Hello, everyone and thanks for joining our earnings call.
Before going through our business commentary I'll make a few comments about the situation in Israel.
Israel is now what the walk.
The current effects on multi line are twofold first roughly 9% of our employees are currently serving in the IVF reserves with their teammate that'd be working longer hours to compensate.
Second we are allowing more flexibility to work from home I see no material impact on our operations mobilized does not have any production facilities in Israel now customers in Israel.
Furthermore, there have been that there has been no material effect on our operations and ability to develop tests performed business activities or meet our objectives as results of the world.
Okay, turning to our results in Q3 Moron will provide more detail.
But at a high level Q3 was another excellent quarter on a year over year basis. We grew the top line, 18% adjusted operating income grew 27% and adjusted net income grew 59%.
Operating cash flow on a year to date basis has been impacted by investments to rebuild our strategic inventory of IQ chips.
Which we had used to maintain steady supply during the chip prices if.
If you adjust for that investment in inventory, which is now largely complete operating cash flow has also grown very strongly so far in 2022.
Another third quarter financial highlight.
34% adjusted operating margin the beat versus consensus here was driven.
Primarily by costs, some of which was related to macro factors like currency and some related to planned cost efficiency initiatives.
Turning to our product portfolio, our bookings so far in 2023 put us.
On track to outperform the $6 $7 billion of future revenue from design wins, we generated in 2022.
Which was by far a record year, we will have more details on that at CES in January.
We're having a tremendous amount of success with our <unk> based product portfolio.
They diverse platform supports everything from basic Adas to supervision to shop floor to mobilize drive and we're excited to launch the first IQ six based Adas program in early 2024, consistent consistent with the timeline, we laid out several years ago.
While supervision continues to be a major focus.
I would note that we continue to add a very high number of basic and cloud enhanced Adas programs on the cloud enhanced side. These deals are at significantly higher prices than current Adas and typically include RDM well data sharing agreement.
This will reflect this would result in a very meaningful expansion of the Oems that contribute nothing data in the coming years.
Improving macro fresh signs and diversifying the data sources.
In addition, we added our first supervision liked customer.
Weak assistant based on a single IQ six.
IQ six high chip with a reduced configuration of cameras.
The ports hands free limited to hybrid <unk>.
The design win from a large global Oems with plans to equip this systems on high volume vehicles.
We also had some important supervision and she'll forward design wins in Q3.
We added <unk> as a customer with what is relatively near term startup production date of late 2024 for the first of many supervision vehicles and a year later with the first chip for a vehicle.
More on that in a minute. We also added a short program with goldstar for Sop in later 2025.
Automobile like drive mobility as a service side the various key components towards scale are progressing on schedule, including our software stack. The IQ six high base, a compute engine and the imaging Gregor.
Our vehicle platform partners are also making progress recently, our strategic partner Volkswagen commercial vehicles as weather as well as smaller demonstrated our technology in their vehicles in Hamburg for the German minister of transport.
<unk> indicated strong support to deploy this technology to improve transportation efficiency with the goal to put up to 10000.
Economic shuttles underwrote the handbook by 2030.
That's what I believe was the most important development in Q3 was it was the delivery of highway supervision software to an over the air updates to more than 100000 zero vehicle owners in late August with.
With navigate on autopilot feature providing hands of navigation from point a to point B. This was an extremely critical proof point in front of our OEM customers.
It's one thing to demonstrate technology on a fleet of test vehicles. It is a completely different level of product validation to deliver an ice on hands free system to 100000 consumers feeds.
Feedback has been outstanding with media in China consistently noting that the Zika system outperformed strong competition, despite significantly lower sensor content and a fraction of the compute power.
Out of the more than 1000, better users who use the system a couple of months before the broad rollout 95% of them.
We plan to buy the system. After the 12 month trial period that Zika is offering.
I can't emphasize enough that this over the air updates amplified a slight real dynamic that's been developing for the last year or so.
The industry, we have noticed a higher pace of innovation and a significant growth in demand in China for systems that take over more and more of the driving this creates higher pressure among all Oems to develop competitive entry systems to generate value from software, but also not to fall behind this pressure forces more emphasis on <unk>.
Factors like time to market cost and performance.
Posted the desire to in source.
This creates higher demand the moniker Oems for them for the mobilized products, which offer clear advantages in tanker market cost and performance.
Flooring, the software and more than 100000 consumer vehicles and receiving many accolades in the world's most competitive market clarified our ability to deliver and serves as the final component and the flywheel.
We felt the impact of this proof point immediately the successful rollout led directly to the FAA W. Design win and then acceleration of progress towards potential design wins with other key prospects.
What I mean by acceleration is that there is an increased urgency to converge towards production programs. This is reflected as more clarity from customers on next steps for example, with clear deliverables timelines and approval processes.
While the design win process rarely moves as fast as we want we expect that we will have more news on supervision and support over the next five months.
I'll put some numbers against it last quarter, we disclosed that we either had already booked design wins or in advanced stages for supervision and also for design wins with nine Oems representing 30% of global automotive production that number is now 10 Oems representing 34% of production. If we go back to the <unk>.
Beginning of 2023 that number would have been three Oems representing 9% of the industry.
This group does not include any low volume brands or early stage startups, and it's broad geographically one U S. OEM two European Oems for Chinese Oems and three agents.
Oems.
We're also very encouraged that we have received meaningful interest from our next wave of Oems that we represent an incremental 15% of global auto production.
Not at the point that we would call. These advanced stages. The initial work looks very promising.
Before turning it over to Lauren I'll close with a few words about China kw.
I traveled to China with our executive team in September to meet with several key customers. It's.
It's not an exaggeration to say that this market is moving at light speed towards putting ice on hands free systems on the roads.
Premium Ada is a huge selling point and marketing materials. The media is extremely knowledgeable about the technology and consumers demanded there is so much traffic congestion in China and consumers are tired of battling it on their own they won't cars to battle the traffic for them.
I can see the potential for 15 20, 25% of cars sold in this market to have supervision like capability a few years from now.
It's very important for us to win there and we are winning of the glucose 10 Oems as I mentioned before.
For our China based Gili group S. A W. Two other significant automakers.
We also have opportunities to expand with existing customers. The Zika Mobilised collaboration has been very successful and is leading to opportunities for additional <unk> vehicles as well as from other brands in the Jelly group this could add significant volume in the near future.
And the FAA W relationships is key for US a government owned automakers choosing a non China partner in this highly strategic technology area as the next level validation in front of other China Oems. It's also a very broad program at VW is going all in on supervision.
<unk> Standalone core brands have a very robust product cadence starting in late 2024, and every vehicle model launch from that time on will include supervision. There's also ambition to sales to sell the resulting platform into their JV brands as well, which would increase the volume opportunity by a factor of five.
Thank you for your time and interest in mobilized I'll turn the call over to Laura.
Thanks, Al and thank you John and thanks for joining the call everyone.
We begin please be aware it all my comments on profitability will refer to non-GAAP measurements.
Exclusion mobilize non-GAAP numbers.
Foundation of intangible assets, which is mainly related to interest acquisition of <unk>. In 2017, we also exclude stock based compensation.
<unk> Q3 results, we had an excellent quarter with revenue up 18% and adjusted operating income up 27% will begin.
IQ into TV volume increased about 16%.
Remainder of the growth related to higher IQ asp's.
Michelle small mobility as a service revenue it was related to self driving systems shipped to customers for installation on destiny.
Since we began shipments.
29000 units in reported which was in line with expectations.
These units will primarily towards decrease 001 and to a lesser extent ridiculous.
Although in Q3, we also had some initial deliveries.
Part, one and post controller supervision gross margin improve somehow as compared to Q2 due to lower overhead to union on the highest volume looking.
Looking ahead, we expect two catalysts to drive further improvement in Supervalu gross margin over the course of 2024 number one in collaboration with our supply chain. We are introducing the second generation supervision domain controllers, which we expect will result in meaningful cost savings.
Plan to begin to transition to this new controller in late Q4 and into early Q1.
The savings with our customers by modestly lowing estimate selling prices, but the net result is expected to be an improvement to gross margin beginning in Q2 and more meaningfully in Q2 of 2024.
Number two and I'll mention.
How does mitigate on pilot software to Zika, causing always to end very well.
Any existing zika owner or a new buying it.
Tim.
This year, we will get the 12 month free trial on this often after this period the consumer will need to choose whether to pay an incremental cost to continue to utilize the supervision feature we will receive meaningful sell through revenue for any consumer chooses to keep the sales team.
Should lead to incremental boost of supervision gross margin in the back half of 2021.
Turning to operating expenses they.
They were again lower than expected in Q3, which combined.
So our revenue growth led to a robust adjusted operating margin was 34% up about three points versus Q3 2022.
Approximately half of the lower than expected, but we are again related to lower than expected payroll costs driven by depreciation on the share count. This is a meaningful driver for us due to payroll and related expenses being the majority of our operating expenses and the significant majority of our employees in Israel.
<unk> expenses are actually slightly lower in Q3 compared to Q2, despite higher head count.
The lower than expected costs, primarily related to timing of certain expenditures and general efficiencies we achieved.
In terms of cash flow, we had a strong quarter compared to Q2 with continued to invest a significant amount and we are building on the strategic inventory of IQ chips, which was largely consumed in 2021 and 2022 doing supply chain crisis.
As of the end of Q3, we have almost reached our target of approximately six months of strategic inventory. So cashews for restocking should be significantly lower in the next few quarters.
When adjusting for cash consumed by inventory year to date in 2023, our operating cash flow conversion as a percentage of adjusted net income remains very high.
Capital expenditures in the quarter were consistent with our unchanged view capex for the 2023 calendar year should be roughly similar to 2022.
Into the guidance.
As we look ahead to Q4 IQ volumes are tracking in line with our prior guidance.
<unk> point of our guidance IQ volumes are expected to be in <unk>, and 20% above Q3 levels with ASP down a bit sequentially due to a mix and we're just now.
Implied and record level of quarterly IQ volume and importantly should not be used as a starting point for estimated 2024.
We didn't carry due to look at our full year 2023, and applied growth rate to adapt when thinking about 2024 and considered the high volume in Q4 could lead to some hangover effect in Q1 similar to the dynamic in the first quarter of 2023.
Turning to supervision implied Q4 volumes based on the midpoint of the guide for 2023 is approximately 37000 units.
This should bring us to around 102000 units for the full year of 2023, which is towards the low end of the 100000.
<unk> 115000, we incorporated in our guidance at the time.
Yeah.
This fine tuning of the shipment forecast is what led us to modestly adjust that with 2023, we have the new guidance.
Tumor demand for Zika.
USD, one nine was well in line with our shipment levels in Q3.
Continuation of this plus incremental volume for new products like smart one.
Therefore indicative of zero, one shipments to Europe supports the growth in volume from Q3 to Q4 as these new products ramp up.
And a fifth vehicle in Q1, the Vogel <unk> <unk>, we have set up well for continued sequential growth in 2024.
Based on our assumption for mix and volume.
Q4 gross margin to be consistent with Q3.
We expect operating expenses for the full year 2023 to be about 13% on a year over year basis. In 2024, we would expect operating expenses to grow at a higher rate assuming some normalization in the relative value of the Israeli currency as well as the ramp up of project spending.
Weighted to expected new supervision and you'll find programs lastly in terms of tax rate. We continue to expect an effective tax rate in the 12% range for the <unk>.
Thank you and we will now take your questions.
Thank you.
We will now be conducting a question and answer session. If you would.
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For participants using speaker Freedman, you may be necessary to pickup your handset before pressing the star keys.
Interest of time, we kindly ask you to your Investor day limit yourself to one question and one follow up.
Our first question comes from Joshua <unk> charter with PD Cowen. Please go ahead.
Hey, guys. Thanks for taking my question and most importantly, hope everyone's doing safe and your families are okay in Israel.
To start you mentioned, the 10th OEM and I believe is the first time.
Listen we have called out a U S. OEM can you.
Copper supervision can you. Please can you confirm whether or not those are the same thing and also provide any details on the scope or timing of how that would ramp into the model. Thank you.
Well.
As I mentioned in the.
And the script I believe in the next five months things will play out I would say the percentages.
Hardening.
No.
Remaining Oems into design wins range from 99% confidence through 50% confidence, depending on which OEM we're talking about.
And then the next.
This month, we will.
I think it will be a much.
We will have much more clarity.
And.
As I mentioned, it's kind of a global a global spread from the U S Asia.
China, It's really global starting from just the Gili group a year ago to now really a global the global spend.
Josh This is Dan just to clarify the incremental OEM not the U S. Oems in the U S. OEM was what in that group as of last quarter to quarter as well and we continue to progress and feel good about that customer.
Got it. Thank you and then in the guidance for the full year, you kind of called out supervision, that's driving that's very modest tick down at the midpoint for revenue has anything changed with how you're thinking about 2024 and can you walk us through what are the drivers of that if any is that a new.
New vehicle model or was it volumes at our one that's changing things. Thank you.
The new vehicle volumes for 2024 as expansion upgrades of 0001 expansion of 009 of CCAR, we have bolstered our forward coming out.
We have smart smart number one coming out we have the Volvo <unk> 90 coming out towards the end of 2024, we have the SA W brand come.
Coming out.
And.
There is a certain I think.
High probability that we will have another.
OEM in China that will also launch end of 2024.
Got it thank you.
Our next question comes from time.
Please go ahead.
Great. Thanks, Hi, everybody. Good afternoon, just two questions for me first on the new wave of automakers expressing interest.
Can you maybe just share one how many automakers are in that second wave and to what extent these automakers.
Existing in house operations for advanced level, two plus and then second question just on the supervision Light Award I was hoping you could share just the asp's and expected start of production for that program. Thank you.
Okay. So I'll start with the second question the supervision and lights.
When we are a tier one it's about 60% of revenue compared to with supervision.
Our tier two with a few hundreds of dollars revenue.
And this particular program that we want we are a tier two so we supply only the IQ six chip just like in any tier two with <unk>.
<unk>, it's a really high volume.
A global a global brand and I think it offers a new level of kind of the intermediate the premium in which the supervision capabilities would be limited only to highways, but still will be very very high hands off.
<unk> capabilities. The supervision allows you to expense way beyond the highway arterial roads urban roads and also be the basic the basis for sure.
I feel like the asset.
Later stage. So this allows us to have an entry point to <unk>.
Medium and low segment the co brands.
Car models.
And this is a very important win.
As for your first question the next wave that 16% of the global auto production as.
As I mentioned, it's about for Oems.
And they don't have anything comparable to where to a supervision.
And.
They are starting to notice that with supervision like system is really the next premium in the coming years I believe that eventually every carmaker would offer a supervision like.
Product and tech.
Coming two or three years.
That's all very helpful. Thank you.
Our next question comes from Joseph Spak with UBS. Please go ahead.
Thank you everyone.
That's the first question is.
I know I know your solution is technically powertrain agnostic, but now as we're hearing about some <unk>.
Program delays on next generation Evs I.
I guess not in China, where I know a lot of your.
Your wins are today, but if there is sort of a push out does that at all change your trajectory on on supervision or do you think theres an opportunity to maybe add more features.
Whether it's a cloud enabled adas or whatnot to existing excuse listing programs.
The cloud enhanced Adas is progressing on a separate track.
We have two already that we mentioned last quarter, which are responsible for $1 billion revenue until the end of the decade.
We have four more in the pipeline ready to be signed in the next few months.
The track.
Supervision startup productions.
If there are delays that its weeks or a few months it doesn't change materially forecast in terms of revenue.
Full year and as we get more design wins our system.
Our kind of weakness towards one particular program that delayed or not becomes much much.
We don't rely.
Why not susceptible to.
Such delayed obviously, when we have only one car Oems.
With the program then we are really dependent on delays, but when do we have 10 or more than a delay here or there should not change the revenue guidance.
Okay perfect.
And then just maybe a clarification on the OEM commentary around.
Supervision first of all the nine to 10 does that include the supervision light customer.
And then also I know you.
<unk> some comparisons versus what you said earlier in the quarter or even last year I think.
At CES you mentioned.
Six brand so how does how does that sort of.
The 10 Oems compare to sort of that.
That brand comment earlier this year.
Okay. So the 10 Oems does nothing to load supervision like supervision life as a separate track.
One design win for that.
We are.
Working towards getting more business for that swap supervision as a separate track. So those 10 Oems are for supervision in terms of brands.
It's really 10 Oems.
Last time, when we talked about brands, we wouldn't even message 0001 and 009.
Two brands of the same OEM, all others are separate Oems right.
So the ones the ones that we announced.
Pollstar.
March now we are reviewing it.
Vocal in China.
Porsche and all the rest of our separately.
If a W and all the rest are separate Oems.
And within that group of Oems as I just mentioned.
Yes. So thank you very much just to clarify just one clarifier Joe on that just to be Super clear within the 10 Oems, we're considering Gili group as one OEM alright. So we have four brands five models.
Within this metrics, we're considering that one OEM we plan to continue to update this metric on a regular basis, along the same methodology as we move into the future and we will try to be very consistent with kind of what we're considering an OEM.
So Oems at the parent level effectively.
The apparent level effectively there could be some.
Because some parent levels have two different product developments, but.
We're trying to be consistent at the parent level within those metrics. Okay. Thank you very much.
Yeah.
Our next question comes from Chris Mcnally with Evercore. Please go ahead.
Thanks, So much and also just wanted to echo.
The best for the multifamily.
I'm not one of the high level questions I have about pushing to supervision light is I think you add something like $3 5 million plus of enhanced just our estimate for for this year what would be the reason an OEM would continue with enhanced rather than supervision.
<unk> like other than the time to changeover it seemed like that entire.
Pace of unit should quickly changeover to supervision.
Wed love to hear about sort of the pro pro comp if you get all the increased features that really no additional cost at the program level.
Well theres, a significant cost of the OEM between a front facing camera with or without cloud enhanced and the supervision lighted supervision light.
Has the about between six to seven categories.
Moving on to the <unk>.
<unk> controller powered by an IQ six chip on the other hand, the front facing cameras, just a front facing camera right Theres no domain controller, a cloud enhanced is our ability to add value to a contract in Canada.
So you have a front facing camera, which is very low cost to the OEM and just by adding software capabilities, we can considerably enhanced.
The feature set the value proposition of the Trump facing camera for example, allow us to do lane keeping.
Don't see any visible the lanes or.
Providing traffic light.
Inflammation.
Providing alerts against they are running on a red light or breaking.
Against they are running on a red light and so forth and so forth. So the price difference is significant between a front facing camera with or without cloud enhanced supervision light supervision shortfall and then why is that.
Thank you.
In terms of cost.
Maybe I'm wrong I thought on a lot of these gen. One program. There was also on the enhanced that Youre on there was also a significant amount of radar for example, so if you have multiple radar.
Could be adding five or 600 to the total cost of.
The system to the OEM, which you may be even if you remove with supervision light.
So many of the front facing camera do not have the radar.
It's not that every every HSA.
Program has a front facing the radar so a lot of.
Of our front facing camera.
Penetration is vision only theres no theres nobody radar.
The supervision light.
And then the camera, including four of them are parking cameras of course, sometimes they come with radars and sometimes.
Even though it's in this particular program that we won or the front facing greater.
Okay makes sense and that's why you would have the limited operational design domain.
The Gen. One program only had the camera just the second question.
For getting the Oems on the low end to sign up for supervision like could you talk a little bit about how the system.
Would scale, meaning do they get to see how Ram in Rss works and then it leads for them to potentially use higher levels of supervision for more premium vehicles.
And just the ability for them to upgrade on those existing platforms over time to hire forms of supervision. If you could just kind of go through that that sort of that escalation that upsell that you could have done.
Well, then if an OEM buys into supervision light they cannot escape because supervision.
Sensus is more cameras at the lesson cameras.
Normally it goes the other way around we have an OEM that is signed into supervision and some of it models and now has a low end model and wants to upgrade the low end models from a front facing camera of supervision right.
And just if I could follow up and that logic the supervision win the supervision light when was that this is a new OEM right. So you didn't down sell this specific Oems supervision light is the <unk>.
Our supervision Theyre taking.
Well.
The supervision light.
The win is with a new OEM.
A design win with a new well, yes, it's not part of the Oems that we mentioned before.
Yes.
Perfect I appreciate the detail I'll follow up answer.
Our next question comes from Adam Jonas with Morgan Stanley. Please go ahead.
Again, my my thoughts and prayers are with you and your loved ones in the black community following atrocities.
Bill.
Yeah.
My first question is on the legacy Oems many of them are dialing back.
Their investment plans.
We continue.
We expect that will continue.
If it does does slower EV adoption categorically have any impact.
On supervision adoption.
Over the next few years in your mind.
I think the opposite is happening when they are dialing back investment basically dialing back in stores.