Mobileye Global Inc. — Q3 2023 Form 10-Q
Business and period: Mobileye develops advanced driver-assistance systems (ADAS) and autonomous-driving technologies. This unaudited report covers the three and nine months ended September 30, 2023; comparisons are to the periods ended October 1, 2022. Mobileye reported approximately 25.9 million systems shipped in the first nine months, versus 24.0 million a year earlier, and products deployed in more than 160 million vehicles.
Financial performance
| U.S. dollars, millions except per-share data | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 |
|---|---|---|---|---|
| Revenue | $530 | $450 | $1,442 | $1,304 |
| Gross profit / margin | $272 / 51% | $217 / 48% | $703 / 49% | $622 / 48% |
| Operating income (loss) | $8 | $(25) | $(106) | $(61) |
| Net income (loss) | $17 | $(45) | $(90) | $(112) |
| Diluted EPS | $0.02 | $(0.06) | $(0.11) | $(0.15) |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $285 | $395 |
- Q3 revenue grew 18%; nine-month revenue grew 11%. Nine-month EyeQ and SuperVision revenue growth reflected an 8% increase in system volume and a 2% increase in average system price.
- GAAP gross margin increased year over year, partly as acquisition-related intangible amortization declined. Adjusted gross margin, a non-GAAP measure, fell to 69% in Q3 from 74%, and to 70% for nine months from 75%, primarily due to higher EyeQ chip costs passed through to customers at zero margin.
- Nine-month operating expenses rose to $809 million from $683 million, including higher R&D and share-based compensation. Share-based compensation was $190 million for nine months, versus $112 million.
- Adjusted operating income was $182 million in Q3 versus $143 million; for nine months it was $446 million versus $468 million. Adjusted net income was $181 million in Q3 and $431 million for nine months.
Financial position and liquidity
- At September 30, cash and cash equivalents were $1.193 billion; cash, cash equivalents and restricted cash totaled $1.207 billion. Current assets were $1.908 billion and current liabilities $391 million.
- Total liabilities were $632 million. The filing reports no remaining balance under the $3.5 billion Dividend Note to Intel; it was partly repaid and the remainder contributed by Intel in 2022. Bank guarantees totaled approximately $14 million.
- Nine-month operating cash flow of $285 million was down from $395 million, principally because inventory increased as the company rebuilt strategic EyeQ chip stock. Inventory was $354 million at period-end, versus $113 million at December 31, 2022.
- Nine-month capital expenditures were $75 million. Management expects 2023 capital expenditures to exceed 2022 and estimates $25 million to $35 million of remaining campus construction cost, with completion planned in Q1 2024. Management states it has sufficient funding for the next 12 months and longer term.
Changes, outlook and risks
- Q3 shifted to GAAP operating and net profit from losses in the prior-year quarter. However, the nine-month operating loss widened despite higher revenue, mainly reflecting R&D headcount growth and increased share-based compensation. The nine-month net loss narrowed.
- No specific revenue or earnings guidance is provided in the supplied filing text. Management expects R&D expense to increase in the near term as it develops next-generation EyeQ products, premium driver-assist offerings and autonomous-driving technologies. It expects longer-term R&D and selling expenses to decline as a percentage of revenue as the business grows.
- Management identifies vehicle-production levels, economic uncertainty, inflation, program timing and customer inventory as factors that may affect demand. The primary SuperVision customer reduced 2023 orders. Three customers represented 68% of Q3 revenue (27%, 26% and 15%), underscoring customer concentration.
- Mobileye buys all EyeQ SoCs from a single supplier. Supply constraints had eased and inventory was rebuilt during the first nine months, but renewed shortages or disruption at suppliers could limit deliveries. Management did not anticipate short-term supply constraints materially affecting results, resources, sales, profits or liquidity.
- After quarter-end, the filing disclosed the Israel conflict beginning October 7, 2023. Operations were reported at normal capacity, with no expected material short-term business impact at that stage; approximately 16% of employees had been called to reserve duty. The company says it continues to monitor developments.
- Other notable factors include $111 million of Q3 acquisition-related intangible amortization and higher share-based compensation. Management reported effective disclosure controls, no material change in internal controls, and no legal matters believed likely to have a material adverse effect.
Important facts for investors to verify
- Whether inventory growth converts into customer shipments and cash flow, and whether chip and ECU supply remains reliable.
- How customer concentration and the reduced SuperVision orders affect subsequent revenue, product mix and margins.
- The trajectory of R&D spending and share-based compensation, and the gap between GAAP and adjusted profitability.
- Whether management’s capital-expenditure and campus-completion expectations remain on schedule, and whether liquidity remains adequate.
- Whether the Israel conflict, employee reserve duty, or foreign-exchange exposure affects operations or costs beyond the short-term assessment in the filing.