Mobileye Global Inc.

earnings call. At this time, all participants are in a 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Gals. Thank you, Mr. Gals. You may begin.

Thanks, Kat. Hello, everyone, and welcome to Mobileye's second quarter 2024 earnings conference call for the period ending June 29, 2024. 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 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, as usual, are Professor Amnon Shashua, Mobilize CEO and President, Mehran Shamesh, Mobilize CFO. Also joining today for the Q&A session is Nimrod Nehishtan, Mobilize Executive VP of Business Development and Strategy. Thanks, and now I'll turn the call over to Amnon.

Hello everyone and thanks for joining the earnings call. Starting with the results, both Q2 and the first half were closely aligned with our outlook provided back in January. IQ volumes in Q2 more than doubled versus Q1 and based on various sources of information we have reviewed, we believe inventory levels are back to normal with potential some residual in China. Supervision volumes were also aligned with our original outlook with 70,000 units for the first half of the year. All in all, revenue for Q2 stands at $439 million, which is 84% growth over Q1 and 3% decrease year-over-year. Adjusted operating margin also recovered significantly to 18% compared to minus 27% in Q1. More details on the results of the quarter will be covered by Moran. As we look forward to the second half of the year, we face near-term volume challenges stemming from market dynamics almost exclusively related to China. This has led to a reduction of customers' outlook in both ADAS and supervision. On ADAS, we face three unexpected factors. Number one, global production forecasts have weakened significantly. which has disproportionately impacted our core customers due primarily to continued share losses in China. Number two, we have seen a decline in orders for the second half of 2024 from Chinese OEMs compared to what these customers were indicating as of our last update. Number three, the delay of a high-volume ADAS launch outside of China is also a meaningful headwind, although smaller than the first two. Turning to supervision, despite higher conviction on a reinforced competitive position for Mobileye in China in the mid and long term, we're seeing short-term volume headwinds. Second-half volumes are expected to be lower than our forecast back in January, due primarily to increased U.S. and European tariffs on Chinese-produced vehicles. We also have reduced our expectations for volumes in China itself due to uncertainties around market dynamics and reduced forecasts from our customers. Overall, we see the current dynamics almost entirely isolated to China, where the market is undergoing a reshuffle process and is adapting to several macro developments. We believe our long-term position in China is strong among major Chinese OEMs with diverse product portfolios and aspirations for global expansion, as illustrated by our press releases that are announced today. The key positives with this new development, once completed, will be as follows. Acceleration of supervision enhancements and adaptation to the Chinese market through DXP. Zeker to adopt an IQ6-based version of supervision for the next generation of Zeker 001 and additional models, domestically and globally. And paving a path for Robotaxi collaboration. Ultimately, mobilized long-term growth outlook hinges on our prospects to lead the path of next-generation ADAS and solve autonomy. while offering a spectrum of product variants appealing to the broadest audience of car makers possible. As a final topic, I'll highlight some important details of how the IQ6 platform represents a leap forward towards these goals and helps position us as the only company in the world that can support all four consumer vehicles categories and robotaxis as well. As the global OEMs are emerging from a major replanning process, combustion engines versus EV, China versus non-China, buy versus build for autonomy. We are seeing increased clarity on future ADAS and AV segmentation around four distinct categories. Number one, the emerging market ADAS as the future growth driver for the 25 million or so vehicles sold today that don't have any ADAS. These systems will require lower price for less functionality, yet with high performance, which is where we excel. Number two, developed market ADAS. Recent guidance on future regulations continue to push the envelope on performance, which is a significant positive for us. It's a key factor in the success of IQ6 Lite, which has already been nominated for 50 million units of future business, is involved in many current RFQs, and is progressing towards design wins across all major customers. Number three, mid-trim surround ADAS. This is a brand new growth driver that fits in between regular ADAS and supervision for mass market segments. The OEMs have two goals here. First, enable price competitive hands-off on highway function as the next standard. Second, to prepare for the increased safety requirements that will not be satisfied with a traditional front facing camera alone. Number four is premium full surround ADAS slash AV supervision and chauffeur category. where OEMs continue to pursue aspirational technology to deliver hands-free driving on all road types and maintain a path to eyes-off where OEMs see huge value for consumers. We view the emergence of Category 3 as extremely important as a driver of significant medium-term ASP growth within the mass market segment, and the RFQ volumes are very high. we are currently already responding to four RFQs representing over 19 million future units supported with a single IQ6 high with pricing that is approximately four times our current ASP and with similar gross margins to the company average. To put this value into context, the life revenue value of these RFQs from just four OEMs is already about double the value of all the combined ADAS RFQs we are currently pursuing with more than 70 OEMs. On supervision and chauffeur specifically, we have made substantial progress across many pre-development engagements, and we believe we are on track for major design wins by year-end 2024, with a strong pipeline of more to come in 2025. We currently have advanced product wins or are in advanced discussions with 14 OEMs representing approximately 52% of industry production. Within that number, two of the OEMs are currently only pursuing surround ADAS category, I mentioned above, and two are pursuing both supervision and chauffeur and surround ADAS. We're also seeing accelerated interest in our drive platform, which serves the mobility as a service market. The Volkswagen commercial vehicle program is progressing nicely. Seeker is looking to develop with us in this area, and there is an additional major OEM from Japan, where we continue to progress through pre-award testing activities. We believe that we are in the inflection point of becoming the clear market leader in these initiatives, both technologically and commercially. And we want to use this opportunity to shed some more light on our recent progress, especially one of our most groundbreaking initiatives, Mobileye Brain6. Brain6 has been at the heart of our IQ6 product line since we began that development several years ago. and it represents a significant leap forward in autonomous driving technology. This compound AI backbone is not just an incremental improvement. It's a transformative development designed to address the complexities and the demands of autonomy at scale. Let's dive into what makes Brain6 truly exceptional. First is performance. Brain6 is powered by a sophisticated combination of state-of-the-art generative AI networks. These networks, each with a specialized focus, work in concert to tackle the inherent challenges of autonomous driving, such as the long tail problem and input bias generalization error trade-off. By leveraging this multifaceted approach, Brain6 ensures a level of performance and robustness that is unparalleled. During Q2, we began online testing of the IQ6 platform at scale, as well as data-driven offline simulation. We now have a line of sight to a vision-only system which we believe will be at least two orders of magnitude better than anything else available in the market today, deployed in all markets. Moreover, IQ6 products are designed for flywheel product improvement by continuously aggregating feedback from the fleet and improving the product. Cost efficiency. We understand that the path to widespread adoption of autonomous driving technology hinges on cost-effectiveness. Grain 6 has been meticulously designed to operate efficiently with a cost-effective and inference computer. This synergy between Grain 6 and our IQ6 platform not only drives down costs, but also maximizes value for our partners and customers. Grain 6 enables our customers to offer eyes-off products at 50% of the MSRP compared to Tesla FSD12 and hands-off at 25% of the MSRP. Modularity. One of the most exciting aspects of Brain6 is its modular architecture. This design allows for the seamless creation of derivative products, including separate perception layers and adaptation to various sensor configurations. Our modular approach is intended to ensure that Brain6 can be customized to meet the diverse needs and preferences of OEMs, offering them unparalleled flexibility and adaptability. Moreover, it opens up new business models in tangential areas such as infotainment and driver experience. More on that on our upcoming Investor Day later in the year. Finally, controllability. In the realm of autonomous driving, control and transparency are paramount. Range 6 architecture incorporates robust guardrails and checkpoints, allowing for precise oversight and control of the system. This design not only imposes clear do's and don'ts, but also provides transparency in decision-making processes, thereby enhancing trust and reliability in our solution. In our view, what sets Brain6 apart from the competition is its integration with mobilized unique assets, namely REM crowdsourced mapping and our extensive data lake. While IQ5 products' REM is used explicitly as a map, in IQ6 Brain, Brain6 leverages insights from our REM global database, which includes data from over 6 million vehicles amassing tens of millions of miles daily. This crowdsourced mapping not only teaches Brain6 how to interpret road conditions everywhere, but also provides invaluable driving behavior insights. Furthermore, Brain6 is backed by hundreds of petabytes of data collected through years of collaboration with OEMs around the world. This deep reservoir of real-world data is intended to ensure that Brain6 is not only advanced in its current capabilities, but that it is also continuously evolving to meet new challenges and scenarios in autonomous driving with uniform performance everywhere on the planet. In summary, in the past six months, we've managed to successfully advance Mobilize's position as the leading technology provider across four growth categories as evidenced by, one, being the only company with design wins across all four segment categories mentioned above, and two, Secondly, significant increase in the amount of business engagements toward nomination. We view Brain6 and IQ6 system on chip as a technology linchpin that enables us to efficiently execute and deliver products across all four segments, providing ultimate versatility to our customers and synergies from delivering across all segments from the same technology backbone. As evidence, we are on track to deliver production hardware in vehicle prototypes and supervision, chauffeur and drive, in our production program with Volkswagen Group by the end of the year in parallel, while at the same time leveraging the synergetic architecture of our IQ6 product family. We are excited about the potential of Brain6 and will provide more details and demonstrations at our Capital Markets Day planned for December this year. I now turn the call over to Moran.