Mobileye Global Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended July 1, 2023. Dollar amounts are in U.S. dollars; financial figures below are in millions unless noted. The comparable 2022 first-half period included an extra fiscal week, and pre-IPO historical results were derived from Intel records.
Business context
Mobileye develops advanced driver-assistance systems (ADAS) and autonomous-driving technologies. It generates most revenue from EyeQ system-on-chips sold to automakers through Tier 1 suppliers; EyeQ represented 92% of Q2 revenue and 90% of first-half revenue. In the first half, the company shipped approximately 16.4 million systems, compared with 15.9 million a year earlier. Its technology was deployed in more than 150 million vehicles, and its solutions were installed in approximately 800 vehicle models.
Key financial results
| Metric | Q2 2023 | Q2 2022 | First half 2023 | First half 2022 |
|---|---|---|---|---|
| Revenue | $454 | $460 | $912 | $854 |
| Gross profit / margin | $224 / 49% | $229 / 50% | $431 / 47% | $405 / 47% |
| Operating income (loss) | $(33) | $10 | $(114) | $(36) |
| Net income (loss) | $(28) | $(7) | $(107) | $(67) |
| Diluted loss per share | $(0.04) | $(0.01) | $(0.13) | $(0.09) |
- First-half revenue increased 7%, primarily from higher EyeQ and SuperVision sales, with a 3% increase in volume and a 2% increase in average system price. Q2 revenue declined 1% year over year.
- First-half operating expenses rose to $545 from $441, including research and development expense of $446, up 24%, driven mainly by higher payroll, headcount and share-based compensation. Total share-based compensation was $127, versus $76 in the first half of 2022.
- Non-GAAP adjusted operating income was $140 in Q2 and $264 for the first half, down from $182 and $325, respectively. Adjusted operating margin fell to 31% in Q2 and 29% for the first half, versus 40% and 38%. Adjusted net income was $135 in Q2 and $250 for the first half. These non-GAAP measures exclude specified items, including acquisition-related amortization and share-based compensation.
- Cash provided by operating activities was $197 for the first half, down from $233, mainly because of a $150 inventory build. Capital expenditures were $58, compared with $53.
- Cash and cash equivalents were $1,142 at July 1, 2023; cash, cash equivalents and restricted cash totaled $1,157. Current assets were $1,717 and current liabilities $381. Total liabilities were $630. The balance sheet reports no borrowings; the company had approximately $15 of bank guarantees.
Material changes and notable items
- Inventory increased to $263 from $113 at year-end 2022, primarily reflecting a planned rebuild of EyeQ chip inventory after supply constraints. Finished goods were $213.
- Q2 adjusted gross margin declined to 72% from 75%; first-half adjusted gross margin declined to 71% from 76%. Management cited higher EyeQ chip costs related to semiconductor shortages and inflation; the cost increase was passed through to customers at zero margin.
- Intel completed a secondary sale of 38.5 million shares for $42 per share in June. Mobileye received no proceeds. Intel retained approximately 88.3% of outstanding common shares and 98.7% of voting power.
- In July, after quarter-end, the compensation committee approved 5.524 million RSUs with aggregate fair value of $223.4, vesting over three years.
Outlook, management commentary and risks
- The filing provides no specific numerical revenue or earnings guidance. Management said it expects R&D expense to increase in the near term compared with 2022, with growth investments focused on new EyeQ generations, Premium Driver-Assist, and autonomous-driving products. It expects R&D and general and administrative expense to decline as a percentage of revenue over time.
- Management expects 2023 capital expenditures to exceed 2022 levels. It estimated $30–$40 of remaining campus construction costs, with completion planned in 2023, and said it believes available funding is sufficient for the next 12 months and longer term.
- Automotive production and demand remain exposed to economic uncertainty, inflation, supply-chain conditions and customer inventory adjustments. Management noted that the primary SuperVision customer reduced 2023 orders following weakness in China’s electric-vehicle market. Tier 1 customers may use previously accumulated inventory before placing new orders.
- Mobileye buys all EyeQ SoCs from a single supplier, STMicroelectronics, and relies on Quanta Computer for SuperVision ECUs. Supply disruptions could constrain deliveries. Management said supply conditions had improved and inventory had been rebuilt, but future shortages could still impair fulfillment.
- Revenue and receivables are concentrated: three customers each accounted for at least 10% of revenue in the reported periods. In Q2 2023, the three represented 32%, 23% and 14% of revenue; together they represented 71%. The company also warned that customer purchasing patterns and vehicle production can fluctuate.
- Foreign-exchange exposure increased after Mobileye ended participation in Intel’s ILS hedging program. Management estimated that a 10% strengthening of the Israeli shekel against the U.S. dollar would have reduced first-half cash flows by approximately $14.
- The company reported no material changes to its 2022 Form 10-K risk factors, no material legal proceedings, and effective disclosure controls. Intel-related arrangements remain significant, including tax, services, technology and lidar collaboration agreements.
Important facts for investors to verify
- Whether customer orders, especially SuperVision orders, and Tier 1 inventory levels support expected future shipments and revenue.
- Whether EyeQ chip and SuperVision ECU supply, inventory levels and costs remain adequate, given the single-source and supplier dependencies.
- How R&D spending, headcount growth and share-based compensation affect GAAP profitability and the gap between GAAP and adjusted results.
- Whether the planned 2023 capital spending and campus completion stay within management’s estimates, and how operating cash flow develops as inventory changes.
- How Intel’s continued voting control, related-party agreements, and any further share sales affect governance and the public float.
- The effect of customer concentration, foreign-exchange movements, evolving autonomous-driving regulation, and vehicle-production trends on results.