Mobileye Global Inc. — Form 10-Q summary
Reporting period: Three and nine months ended October 1, 2022. The statements are unaudited combined historical financials of Mobileye Group, prepared as if it operated as a standalone company; certain costs and arrangements reflect its former ownership by Intel. Unless stated otherwise, amounts are U.S. dollars in millions.
Business context
Mobileye develops advanced driver-assistance systems (ADAS) and autonomous-driving technology. It derives most revenue from EyeQ system-on-chips sold to automakers through Tier 1 suppliers. The company reported approximately 24.0 million SoCs shipped in the first nine months of 2022, versus 21.2 million a year earlier. Its IPO closed after the quarter: Intel retained approximately 99.3% of voting power following the offering and overallotment.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $450 | $326 | $1,304 | $1,030 |
| Gross profit / margin | $217 / 48% | $153 / 47% | $622 / 48% | $501 / 49% |
| Operating income (loss) | $(25) | $(20) | $(61) | $(13) |
| Net income (loss) | $(45) | $(26) | $(112) | $(22) |
| Operating cash flow | — | $395 | $438 |
- Revenue increased 38% in the quarter and 27% year to date. EyeQ sales rose on higher volumes and average selling prices; SuperVision sales also contributed, having launched in late 2021.
- GAAP gross margin rose one percentage point in the quarter but fell one point year to date. Management attributed pressure to SuperVision’s higher hardware content and semiconductor and inflationary costs, partly offset by pricing and lower amortization as a percentage of revenue.
- Research and development expense increased 56% in the quarter and 45% year to date, reflecting additional headcount and product-development/cloud costs. Operating losses widened despite revenue growth, with higher R&D, acquired-intangible amortization and share-based compensation among the factors.
- Supplemental non-GAAP measures: adjusted operating income was $143 in Q3 and $468 year to date; adjusted net income was $114 and $390, respectively. These measures exclude specified items, including acquired-intangible amortization and share-based compensation, and should be considered alongside GAAP results.
- At October 1, cash and cash equivalents were $871 (plus $11 restricted cash); a $901 related-party loan receivable was also reported. Total liabilities were $5,004, including a $3,520 related-party Dividend Note and $966 related-party payable. The balance sheet showed $11,160 of equity.
- For the first nine months, operating cash flow was $395, investing cash flow was $319 and financing cash flow was $(451); cash, cash equivalents and restricted cash increased $257 to $882. Investing cash flow included net loan repayments from Intel; financing outflows included the $336 dividend and $200 share-based-compensation recharge payments.
Material changes, outlook and notable items
- The $3.5 billion Dividend Note issued to Intel in April carried 1.26% interest and had $3.52 billion outstanding, including accrued interest, at quarter end. After the quarter, Mobileye used approximately $0.9 billion of IPO proceeds to repay part of it, and Intel contributed the remaining balance; the filing says no amount remained owed under the note. The IPO and concurrent private placement generated approximately $1.0 billion net proceeds. Under the transaction agreement, Mobileye retained $1.0 billion in cash, cash equivalents or marketable securities.
- Management expected 2022 capital expenditures to be flat versus 2021. Campus construction was planned for completion by the end of Q1 2023, with $80–$90 million of estimated remaining cost.
- Management expected near-term adjusted operating and net-income margins to decline from the nine-month 2022 levels, principally due to continued R&D hiring and spending on new EyeQ generations, SuperVision enhancements and autonomous-driving products. No specific revenue or earnings guidance was provided in the filing text.
- Supply is a significant risk: STMicroelectronics is the sole EyeQ SoC supplier, and the filing says shortages had reduced inventory and caused some delivery rescheduling. Mobileye expected the shortfall to continue through Q4 2022 and 2023. Management did not anticipate current constraints would materially harm results, capital resources, sales, profits or liquidity over the long term.
- Customer concentration is material: three customers accounted for 66% of Q3 revenue and 71% of nine-month revenue. The company also noted possible demand timing shifts as Tier 1 customers draw down inventories, and exposure to automotive production, inflation, semiconductor availability and evolving autonomous-vehicle regulation.
- The filing reported no legal proceedings believed likely to have a material adverse effect and no material changes to the risk factors in the IPO prospectus. Management concluded disclosure controls were effective; no material change in internal control over financial reporting was reported for the quarter.
Important facts for investors to verify
- Whether EyeQ supply improves as expected and whether shortages affect shipments, customer delivery schedules or vehicle production volumes.
- Whether customer concentration, Tier 1 inventory digestion and automotive production trends affect revenue growth.
- How SuperVision and other higher-hardware-content products affect gross margin and gross profit per unit.
- Whether rising R&D, share-based compensation and new public-company costs weigh on GAAP profitability and the company’s stated margin outlook.
- Post-IPO cash and marketable-securities position, the settlement of the Dividend Note, Intel’s continuing control and related-party arrangements.
- How actual design-win production volumes compare with management’s estimates; those projections are based on OEM information and are not purchase commitments.