Greetings. Welcome to the Mobileye Q4 2022 Business Update. Please note this conference is being recorded. I'll now turn the conference over to your host, Dan Galves. You may begin.

Hello, everyone, and welcome to Mobileye's fourth quarter and full year earnings conference call for the period ending December 31, 2022. As a matter of formality, 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 risk 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 Prof. Amnon Shashua, Mobileye's CEO and President; and Anat Heller, Mobileye's CFO. Thanks. And now I'll turn the call over to Amnon.

Thank you, Dan. Hello, everyone, and thank you for joining our earnings call. 2022 was a really important year for Mobileye. We executed a successful IPO at a time when this was only possible for very unique companies. I see many benefits to being public again, but most importantly, we have already seen a big increase in visibility of Mobileye from our customers and partners, driven by more focus and attention from the broader media and analysts. This drives incremental business opportunities by amplifying attention on our advanced solutions, and we think this plays into the incremental momentum we are experiencing. Financial results in 2022 were clearly very good. Revenue grew by 35%, adjusted operating profit grew by 25%, and we generated almost $550 million of operating cash flow. More important than those headlines is the source of our growth, which started to shift from pure volume to a combination of volume and higher content per vehicle. Our advanced products carry a much higher price per vehicle than our historical products, and we saw clear evidence of that in 2022, where one-third of our revenue growth came from higher ASPs. In terms of future business generation, 2022 was a record year. Just in that year alone, we generated new business representing $6.7 billion of estimated future revenue at about $105 per unit on a content per car blended basis. This is about 3.5 times our actual revenue in 2022 and double our current ASP. Overall, we estimate that our current book of business represents over $17 billion of total future revenue through 2030. As long as our new business wins continue to outpace our actual shipments in a particular year, this number will continue to grow. Also to be clear, this number excludes our consumer AV and Mobility as a Service backlog. Beyond the high-level numbers, we saw positive business trends across all our businesses. The front-facing camera, single-chip ADAS business continues to run like a machine. We grew revenue with every one of our top 10 customers in 2022 and continue to win significant new business in this segment. A key development in 2022 is that many large-volume ADAS platforms now have a variant that includes cloud-enhanced ADAS to our REM map. This volume will drive higher ASP and recurring revenue from maintenance of the map. We also saw a very significant uptick in interest and secured volume in our SuperVision product across all regions from both traditional and start-up OEMs. There are many reasons for the increased traction. There is a big difference between a development product and a launched product. Launching SuperVision with ZEEKR in China was a major catalyst in driving interest from other OEMs. A program like SuperVision is a major commitment from an OEM in time and capital. Offering a solution that is already in production means that the investment will result in a valuable product with a high probability of success. This is very important in the current environment. Number two, we now have the ability to demonstrate the full feature set of a SuperVision anywhere, not just in Israel. Our REM map now covers nearly all roads in the U.S. and Europe. As a result, we have been able to execute long-distance expeditions with carmakers, covering thousands of miles in both the U.S. and Europe with little human intervention. This ability to show that the technology truly works everywhere has been critical in moving discussions to the decision phase. Mobileye's EyeQ Kit, a software development tool, is another important development. The ability for an OEM to take Mobileye's truly differentiated assets, like surround computer vision, REM mapping, and our decision-making software as is, but then customize the consumer-facing part of the system with their own software is something we couldn't offer until recently. It has served as a catalyst for strategic partnership discussions for SuperVision and beyond with many of our OEM customers, particularly those that began their own software development at the earliest. In the meantime, the competitive environment among OEMs has ramped up with Chinese automakers and Tesla, benefiting from surround camera-based systems both in profit and technology prestige. This is creating an overall sense of urgency among other OEMs to invest in wide operational design domain, eyes-on, hands-off systems that have a high probability of success in terms of performance and validation. We expect SuperVision to be a very large growth driver in 2023 and beyond, and shared our expected volume forecast in our CES presentation, which is available on our IR website. But this product also served as a launch point for our eyes-off Consumer AV product, Chauffeur. Because SuperVision operates across a very broad operational design domain, it makes the transition from eyes-on to eyes-off a modular step instead of a series of moonshots. In other words, all the heavy lifting of describing the environment in great detail, the driving policy required to maneuver the car in any traffic scenario, and the requirement for high-definition maps covering all types of roads are all done in the SuperVision system. From here, adding redundancies to the perception system to transition from eyes-on to eyes-off becomes incremental work. The successful productization of SuperVision with ZEEKR and this concept of modularity to eyes-off has created a lot more interest from our customers to develop Consumer AV products. Essentially, every SuperVision discussion we're having now is also including follow-on Chauffeur eyes-off programs. We saw recent evidence in this with a premium European OEM, which kicked off a SuperVision program in Q4. During discussions, the scope of the program expanded to include a Chauffeur program that will launch in the 2026 timeframe. The Chauffeur portion of this program alone represents an expected $1.5 billion opportunity through 2030. Finally, on Mobility as a Service, our plan continues to develop relationships on the supply and demand side, and then use our self-driving system to enable supply and demand to come together into a scalable business. We have many relationships on the demand side with transportation network companies and public transit operators. We also have engagement with three vehicle builders, which are developing purpose-built vehicle platforms that integrate our Mobileye Drive self-driving system. We expect to generate our first revenue in this business in 2023 and our supply-side relationships have orders for self-driving systems that total an estimated $3.5 billion of future revenue through 2028. So, overall, 2022 was the year where traction for SuperVision really accelerated and this led to increased interest from OEMs for eyes-off systems as well. Continuing the productization process of these solutions and supporting testing and launch, of course, requires resources. This is why our operating expenses growth in 2022 was unusually high and it will be again in 2023. This growth is supporting areas like expanding teams to support SuperVision launches with OEMs, radar and lidar productization, and expansion of Mobility as a Service validation and testing sites, as well as development work for our next generations of EyeQ chips. I would note that approximately 70% of our R&D expenses are related to products that are either just beginning to generate revenue, like SuperVision, or still pre-revenue like Chauffeur, Drive, and active sensor-ready products. Thank you. And I now turn it over to Anat to go through the results.

Thank you, Amnon, and thanks for joining the call, everyone. Before I begin, please be aware that all my comments on profitability will refer to non-GAAP measurements. The primary exclusion in Mobileye's non-GAAP numbers is amortization of intangible assets, which is mainly related to Intel's acquisition of Mobileye in 2017. We also exclude stock-based compensation and IPO-related expenses. Starting with a few words about the full-year. Revenue growth of 35% year-over-year in 2022 continued our consistent track record of top-line growth. Compared to 2018, our revenue is up 170% while global production is down 13%. As Amnon mentioned, our advanced portfolio made a meaningful impact on average system price, which rose to $53 in 2022, up from $47 in 2021. This alone drove about 13 points of revenue growth in 2022. The increase in average system price was mainly driven by SuperVision, as well as to a lesser extent the rise in chip costs, which we passed along to our customers. The addition of SuperVision to our product mix led to a certain decrease in gross margin as we deploy a full system solution which contains higher hardware content. But more importantly, SuperVision generates much higher gross profit per unit than our core EyeQ product. As a result, EyeQ and SuperVision combined gross profit per unit grew by 9% in 2022. Turning to Q4, revenue grew 59% year-over-year. Our EyeQ related revenue was up 48%, with the SuperVision product driving most of the remainder of the growth, despite being less than 1% of our overall volumes. Q4 operating margin was 38%, up from 34% in the prior year. This was above our guidance expectation due to better-than-expected revenue growth, but also due to about $14 million of R&D expenses that we expected in Q4 but shifted to 2023. Turning to 2023 guidance. We are pleased that the midpoint of our guidance remains in line with the internal expectations at the time of our October IPO, despite our macro assumptions for 2023 coming down since the spin. On the revenue side, I'll give you a sense of our assumptions. Focusing on the high-end, we are assuming EyeQ volume that is somewhat below the commitment that we've received from our customers for 2023. We want to remain conservative and acknowledge that macro uncertainty remains elevated. That volume level corresponds to about 1% global production growth and 4 to 5 points of ADAS production growth, which is somewhat lower than the prior few years, and consistent market share. On the SuperVision side, we are assuming a bit more than 100% growth versus 2022, which was about 96,000 units. Demand is higher than this, but we are still experiencing some supply chain constraints in one particular component of the ECU. On the positive side, we have commitments from our suppliers at the level we are focusing, including a second-half run rate that supports our 2024 forecast as well. In terms of quarterly cadence, historically, our revenue has ramped up over the course of the year. This year is expected to be even more pronounced, with around 41% of revenue expected in the first half of the year. On both the EyeQ and SuperVision businesses, volume and revenue are expected to be lower in Q1 2023 versus Q4 2022. This appears to be general conservatism on the part of our customers, as well as some impact from elevated purchases ahead of the EyeQ price increase that went into effect on January 1. On SuperVision, the low volume in Q1 and Q2 versus Q4 2022 is related to the key ECU component mentioned earlier. On the average system price side, we expect Q1 and Q2 to be a bit lower than Q4 due to the SuperVision constraints, but we expect to exit 2023 in the low $60 range, which is an excellent trajectory. On the operating income side, there are a few things to point out. Gross profit per unit will increase again year-over-year, but the percentage gross margin is expected to be down due to the higher mix of SuperVision revenue mentioned above. On the OpEx side, as Amnon mentioned, we will continue to invest heavily in our high ROI advanced portfolio, which is only beginning to impact our results. We estimate operating expenses to grow in the low-30% range in 2023 versus 35% growth in 2022. OpEx growth rates are expected to moderate in 2024, which combined with operating leverage is expected to lead to higher operating margin during that year, also consistent with our internal expectation at the time of the IPO. Before taking your questions, I just wanted to thank my team and many others at Mobileye for supporting what is a pretty accelerated earnings timeline for a newly public company. Thank you. And we will now take your questions.

Our first question comes from Itay Michaeli with Citi. Please go ahead with your questions.

Great. Thanks. Hello, everybody. Just two questions, one financial and one on SuperVision. On the financial, maybe for Anat, hoping to maybe talk about what you're expecting for gross margins, kind of core ADAS and enhanced ADAS business in 2023? And then on SuperVision, hoping you could talk about what portion of customer engagements there are perhaps looking at a camera-only solution for SuperVision, as well as what you're seeing for the SuperVision Lite offering versus the full ODD SuperVision offering? Thank you.

Okay. So on the EyeQ side, we are seeing consistent gross margin through 2023. And on SuperVision side, we're seeing approximately 35% for this year.

Okay. I'll add a bit more that with the SuperVision there are two drivers to increase our gross margin there. One is efficiency of production, we're creating a new version, a more economical version, with a lower cost, that will increase our margin. Second is the customer bundles. The launch of the SuperVision in China at the moment at highways, the urban and arterial roads would be unlocked during 2023, and that would also increase our revenue per content per car, and of course, naturally will increase the gross margin. We are targeting reaching between 50% to 60% gross margin of SuperVision in the long run. In terms of your second part of the question about camera-only, SuperVision is primarily a camera-only solution plus a front-facing radar. So for example, on the ZEEKR vehicle, there is a front-facing radar as well. Although we can satisfy all the functionality without the radar, having a front-facing radar adds another element of redundancy, which can improve the mean time between failures of the system. In terms of SuperVision Lite, this is a product offering that we have done very recently. So we don't yet have the traction for it; all traction that we have and is growing is for the full SuperVision with two EyeQ 6 chips and the full camera suite.

Perfect. That's all very helpful. Thank you.

Thank you, Itay.

Our next question comes from the line of Mark Delaney with Goldman Sachs. Please proceed with your questions.

Yes. Thank you very much for taking the question. With respect to the opportunity for Mobileye versus your more advanced solutions like SuperVision. Can you elaborate a bit more on the breadth and depth of the discussions you're having with OEMs to use those products relative to say 90 or 180 days ago? And if you're seeing that traction improve with just a few programs in OEMs or perhaps this is broader based?

As I said, we have now SuperVision design wins into six carmakers, nine brands. The scope is expanding towards Chauffeur, the eyes-off system. And additional SuperVision traction is expected to come out in the second half of the year. We have customers that we haven't named yet, but I think the additional traction in the second half would be within those six OEMs.

That's very helpful. Thanks. And one more from me, please, if I could. The Company said the supply chain limit including for SuperVision, and you called that an ECU component. Do you have a bit more on the steps that Mobileye and your supply chain partners are taking to alleviate that and your visibility in potentially having that supply chain constraint alleviated intermediate to longer-term? Thank you.

So we have an issue with one component in the SuperVision motherboard. This is why we have most of the full volume of the SuperVision tilted towards the second half of the year rather than the first half of the year. It's one component from a particular supplier, and we're confident that in the second half of the year, those constraints will be alleviated, and we can deliver the rest of the volume.

Yes, maybe if I could just add a couple more words on this. So in 2022, we delivered every ECU we could possibly produce. In the fourth quarter, it was a little bit more than we had expected to be able to access. We have so much additional demand in 2023 that in order to satisfy that, the supply really needed to sort of take down the production for a period of time in order to install more capacity, so we can get to much higher levels. And just to reiterate what I said in the second half, we have commitments to be at a run-rate that would satisfy not only the 2023 demand but also needs to have a capacity where we could satisfy 2024 as well.

Thank you, Mark. Next question, please.

Our next question comes from the line of Joshua Buchalter with Cowen and Company. Do proceed with your question.

Hi, guys. Thanks for taking my questions and congrats on the results. I guess, I wanted to ask first about the premium European automaker that you announced for SuperVision. Any way you can give us sort of a, I don't know, a scope first is what you're currently doing with ZEEKR and Geely and in particular, how much does moving to what sounds like hands-off, eyes-off with that program, how much can that be a material needle mover, the potential for that program? Thank you.

With respect to eyes-off, we announced with the ZEEKR, we streamlined the hardware at the time when we announced it; it was with six EyeQ 5 chips. We are now streamlining it to one piece of hardware called CH663, so three EyeQ 6 chips that will be in the 2025 timeframe. We have additional OEMs with an eyes-off and an additional one, this European, which is not yet named for the 2026 timeframe, and there is a potential additional one which I believe could be announced in the second half of the year for an eyes-off system based on the three EyeQ 6.

Hi, appreciate the color. And then so I wanted to ask about your R&D and OpEx spending. You called out, it was helpful color, giving the 70% number on forthcoming product, but you have a lot of irons in the fire. And I was wondering if you could rank order where your spending priorities are, which ones are the ones that you're particularly focused and excited about between, let's say, AMAS, Consumer AV, but even bringing your own internal radar and lidar to market, as well as just broader software adoption like mapping. Thank you.

Our expenses are very diverse, and you mentioned a number of them. We have expenses on active sensors, radar, lidar, and we are working on productization in the middle of a 2024 timeframe for both radars and lidars. This is ongoing. We have expenses on mapping, particularly on the REM mapping, where this is mostly compute-based. The headcount is not increasing much; it's really the compute that is increasing based on more programs that require mapping. Then we have expenses in R&D as we go forward from SuperVision to Chauffeur to Drive, which is the Mobility as a Service—another source of expense. Additionally, we have expenses on SuperVision to support those six carmakers. This is very diverse—it's hardware, similar to a Tier 1, alongside software that is not strictly algorithmic but involves more infrastructure software. There's a lot going on there to support six carmakers with SuperVision, all coming around the same timeframe, starting from 2024 through 2026. So this creates a need for investments. Our investments are very diverse. We think that last year, 2022, we made a jump in investments; this year another jump, and it will taper off from 2024 forward.

And I'd just say, you know, the last thing I'd mention is it's all supporting the portfolio that we've talked about for the last few months with so much value and additional content per vehicle.

Got it, thank you.

Thanks, Josh.

And our next question comes from the line of Chris McNally with Evercore ISI. Please proceed with your question.

Thanks so much, team. Quick one on just the numbers and one on orders, so just on the timing for gross profit progression in 2023, it looks like you're going to be down something like 400 basis points. And I think you've explained that that's the STM increase on the chip side. Could you just help us do, does that pass-through happen as early as Q1, Q2, obviously doesn't matter for gross profit dollars, but just for the gross profit margin walk, could you just help us on the timing?

Yes, so the timing is from January 1. We are testing already over this cost that we - and those increases at the beginning of the year, we are testing it over to our customers without additional margin, but this is the reason for a slight decrease in our margin for EyeQ.

Yes, and then the second thing that we mentioned in the prepared remarks was SuperVision becoming a bigger mix of our revenue as a kind of a mathematical effect on the percentage margin; gross profit per unit is much higher, but gross margin is lower. But that will be a bigger effect in the second half because the volume of SuperVision is significantly higher in the second half.

Great. And then on the—did the Chauffeur win, obviously congrats is it to the - scale of OEM that a lot of us think that - it’s a huge deal? But can you talk a little bit about just the timing of some of these - SuperVision walked into Chauffeur? I mean, if you're talking about launches in SuperVision in '25, what's the typical sort of conversation around that transitioning to Chauffeur, is it '27, is it '28? And then any idea of - we talk, we starting with level three and then working up to level four, it obviously such an important sort of part of the - later half of the decade just curious when these programs may launch?

Yes, so - now with taxonomy, there is no difference between level three and level four; it's been eyes-off or eyes-on system. This is what I spoke about at CES. So on eyes-off systems with OEMs, except ZEEKER that starts in 2025, the rest of the OEMs are starting in 2026. So we have quite a nice traction, as I said three OEMs, and the fourth one should be closed in the second half of this year for eyes-off systems for 2026.

Yes, because SuperVision really serves as the baseline—the timing gap between the SuperVision launch and a Chauffeur launch doesn't have to be a significant number of years.

That's great. And just to confirm, in the prepared remarks, you said that most of your SuperVision conversations are now including discussions about this transition to Chauffeur?

Yes, yes, it's not most but all. Every customer that bought into SuperVision, we have meaningful discussions about expanding to Chauffeur.

Thanks so much.

Our next question comes from the line of Antoine Chkaiban with New Street Research. Please proceed with your question.

Hi thank you for taking my question. Maybe a quick one first, I was wondering where you stand on deploying the key mapping base features where the OTA update to declare users in China on what features that will unlock exactly what additional features we should expect in the upcoming update as well?

So, in China with ZEEKR about three months ago we OTA'd highway assist, and recently we OTA to leading customers the full SuperVision limited to highways, this includes the REM maps as part of it. We believe that in the next month or two months, we'll be able to do the OTA for the entire fleet with full REM capability of SuperVision for highways. Then throughout 2023, together with ZEEKR as our map coverage increases, we will start unlocking additional road types like arterial and urban.

Okay, thank you. And maybe as a follow-up—rather follow-ups, so, I think one important differentiating factor that Mobileye has is that you offer an end-to-end solution, while your main competitor today offers really like a reference platform. Can you help us better understand how in practice, the integration work differs when you kick-off a development project versus when your main competitor doesn't? I'm assuming that in the case of the other offering out there, there is still some significant development work that needs to get done by the OEMs themselves, but anything you can tell us on how things typically happen in practice would be very helpful?

Mobileye—and the SuperVision is not—is offering an end-to-end system. So the ZEEKR, as an end-to-end system, all the other SuperVision launches that I talked about, the six OEMs and nine brands, is still an end-to-end system. Vertical handling of an end-to-end system, I think, is crucial, because you're talking about perception—you're talking about integrating with a map. The map is built together with the teams that are building the perception. So if you try to separate the map from perception to two different suppliers, you get into a sea of issues; either it will be over-engineered or be under-engineered cost-wise—it could be steep. The fact that now the same team is integrating both the sensing and the perception and the way the map is being built and served is crucial. Then you have driving policy. The driving policy is also integrated with the perception. But again, if you try to separate that into a supplier doing the driving policy and another supplier doing the perception, you end up with an over-engineered system, and in some places it will be under-engineered—too conservative and too slow. So I think in such a complex system, having an end-to-end system done by one supplier has a lot of advantages and has not only performance advantages, but also cost advantages. Everything under one house, under one chip, offers incredible cost advantages. However, we are not shy from cooperating in other ways. For example, there are OEMs that would like to take control of the driving policy, where Mobileye provides only the perception; we're open to that. This is why we offer the EyeQ Kit, which enables the OEM or a supplier to write code onto our chip on top of our software, whether it is fusion with other sensors or driving policy. We don't resist that. But having an end-to-end system can be much more efficient than trying to work with different suppliers.

Very helpful.

Thank you, Antoine. And so our next question please?

Our next question comes from the line of Vijay Rakesh with Mizuho. Please proceed with your question.

Yes hi, guys. Great quarter and guide here. Just a quick question on – SuperVision just to go back to that in terms of the six OEMs outside Geely and ZEEKR, can you give us some idea of, as they ramp in the second half? And you talked about significantly higher SuperVision volume there. What kind of volumes are you looking at the OEMs outside of the two Geely and ZEEKR for the other OEMs?

Yes, I mean.

Yes, but do we say the number at the bottom? No, we said. We did not reveal the actual volume, but I think what we revealed there.

Yes.

We said that we're more than double the volume for the half only.

The first half will be much weaker than the second half.

Yes, we're not revealing specifics for quarterly. But we talked about revenue being about 40%, 41% in the first half versus the second half. That's a combination of EyeQ and SuperVision, but yes, the second-half ramp up of SuperVision is significant due to the new capacity that's coming online.

And overall 2022 - SuperVision will be more than double of 2022, so more than 100% year-on-year growth.

Got it. And then as you have these OEMs accelerate into '24, we should probably expect—and you talked about kind of building capacity for that—we should expect that to grow nicely in '24 as well, right?

Yes, so in 2024 there will be additional OEMs, it's not only ZEEKR. Currently, it's ZEEKR 001, that's one brand; there's another brand of ZEEKR coming to launch throughout the end of 2023 and the beginning of 2024, and there are additional Geely OEMs that are kicking in in 2024 and in 2025. We're talking about OEMs outside of the Geely Group.

Got it. And just quickly on the—I know in '23 you have on the core EyeQ side you have Toyota ramping. Can you talk to what drove the win, how you were able to displace the incumbent, and what really drove that win that will then help all of us?

Win with which Toyota?

Toyota.

With Toyota, that was a design win of two years ago. I don't think we displaced anyone; it was a bid and we won the bid. The program is ongoing; it hasn't launched yet.

Thank you, Vijay.

Our next question comes from the line of Adam Jonas with Morgan Stanley. Please proceed with your question.

Hi, everybody. So, I was wondering if you could give a little bit of guidance on CapEx, where it's going, even directionally in '23? And I'm curious if operating cash flow can keep pace with growth in operating profit or does that kind of lag as well, given some of the expenses?

Yes, so we expect CapEx to be similar to the investment in 2022. Our new campus is planned to be completed during the second quarter, and additional investments for completion is about $60 million. The remaining CapEx investments relate to storage, data centers, and computer equipment and such.

Thanks, Anat. And just a follow-up, could you help quantify the shifted engineering expenses that shifted from Q4 into 2023, either in margin or dollar terms? And the same, I guess if you could, if it's possible to quantify the pull forward of volume ahead of the price increase, but mainly the engineering expense is something I would hope you could just help quantify for bridging purposes? Thanks, Anat.

Yes, so it's about $14 million that was shifted from this year to next year. It's mostly about the NRE expenses. But it's not a very significant number out of the total OpEx mix in 2023.

Thank you.

Thanks, Adam.

Our next question comes from the line of Samik Chatterjee with JPMorgan. Please proceed with your question.

Yes hi. Thanks for taking my questions. I guess, for the first one, I was just wondering if you can talk about what you're seeing on the enhanced ADAS solutions, particularly in terms of being able to upsell customers when it comes to sort of basic ADAS and nearing REM. On that, how much of— you talked about the ASP increase expecting for 2023, but how much of that is going to be driven by being able to sort of sell enhanced ADAS solutions or it is the basic ADAS, and how are you seeing OEMs adopt it at this point? Is it really more of a high-end sort of adoption, or they looked a little bit more down market? And I have a quick follow-up. Thank you.

Beyond Volkswagen, which launched a year ago with a 12 versus 2.5, we now have two additional OEMs with big programs with cloud-enhanced ADAS, and it's ramping up. I believe at the end of the day, every carmaker with a front-facing camera would include also as an option, maybe a higher trim option for enhanced ADAS, because it doesn't add any hardware to the mix. It's just a software update, and it makes a lot of sense. Significantly enhancing the ADAS capability by having data from the cloud, about landmarks, drivable path locations of traffic lights, and associations can create new opportunities for us to enhance driving assist at quite a reasonable cost of just a few tens of dollars per car per year.

Okay, and for the follow-up. We get a lot of questions about sort of how to think about performance in the recession and if the backdrop gets worse. I know you talked about tapering some of the OEM demand that you're seeing in terms of volumes. But how are you thinking about the likelihood of pushouts, particularly for programs that are planned towards the end of the year, pushing out timelines in terms of launches or adoption of certain programs? And also how would you sort of flex your OpEx in this scenario that macro does become a bit worse? Thank you.

Yes, I mean, this is Dan. Obviously, we're susceptible to swings in global production a bit. As you've seen in the past years, we're growing so much faster than overall production that it's not as big of an impact to us as probably to others. We acknowledge the risks around production, and that's why we set our forecast to basically flat to 1% global production growth, even though—set our volume forecast below the orders and commitments we've gotten from our customers. We're definitely not hearing about any kind of pushout of programs or anything like that, and we have the driver of adoption growth that wouldn't impact us too much as well. But just to be clear, we're not hearing anything like that. So overall, we've done well in all kinds of environments over the last 10 years. And yes, that's—and in terms of flexing operating expenses, I don't think we would. I think that our business is built for the long term to drive content per vehicle growth to drive new solutions for the next 10 years plus. So, I don't think we would pull back on operating expenses.

Got it, thank you. Thank you very much.

Thanks, Samik.

Our next question comes from the line of Luke Junk with Baird. Please proceed with your questions.

Good morning. Thanks for taking the questions. First, I wanted to ask, so we've talked about SuperVision quite a bit, and cloud-enhanced ADAS as well, I'm wondering about EyeQ Kit if we could discuss the evolution of those conversations with customers. How that's developed over the past six-plus months, let's say. And could it, or has it been intersecting with SuperVision at all with these customers?

Yes, indeed. All the advanced systems, Chauffeur and SuperVision, EyeQ Kit is becoming a critical component, especially when you talk about Chauffeur. Some of the SuperVision programs include also EyeQ Kit; some do not. But EyeQ Kit is becoming a major component in our discussions of advanced systems.

Thank you for that. And for my follow-up, I just wanted to ask a question on near-term expectations. So in light of the component issue you said with SuperVision, which sounds like is just timing and the timing of expenses—is there any additional guardrails we should be keeping in mind when it comes to near-term expectations, especially first-quarter expectations? Thank you.

Can you repeat the question, Luke? Sorry about that.

Yes, sorry about that. So the question is in terms of the first quarter, on the financial side of things, clearly I want to be looking at timing around SuperVision and component availability, expense timing as well around R&D. Just wondering if there's any additional guardrails or things that would be specific to the first quarter we should be keeping in mind beyond just the revenue waiting first half versus second half, let's say? Thank you.

Yes, I mean, I think we covered that. We think Q1 revenue will be below Q4. We're not going to get more specific than that and kind of talked about the reasons I mean. Every year we have more revenue in the back half than the first half. We do think it's going to be a little bit more pronounced this year because of the constraints on SuperVision supply in the first half as well as. We do think that there was some additional buying of EyeQ before the price increase, which I think is natural. We don't think it was major, but that's our read of why Q1 is a little bit below Q4. Hopefully, that gives you enough information. Thanks, Luke.

And our next question comes from the line of Rajvi Gill with Needham & Company. Please proceed with your question.

Yes, thank you, and congratulations on great results. A question on the ASPs you mentioned that a third of your revenue growth last year came from higher ASP growth, and this appears to be a very strong kind of investment thesis of your ASPs kind of moving higher. How do we think about the balance between kind of unit growth versus ASP growth as you kind of ramp up more of the SuperVision products?

I mean, I think—do you want to take that?

There is a big difference between ASP of EyeQ and SuperVision; therefore, when you're going with the volume of SuperVision, you don't need to grow a lot in order to produce or generate this high revenue. There's a significant difference there, and we think that as we go further with higher SuperVision in the mix, you will see this ASP continue to grow.

Exactly, I mean, I think we have a lot of visibility on content per vehicle growth. The design wins that we achieved in 2022 came in at $105 per unit on a blended basis; right, that's a mix of base EyeQ, cloud-enhanced ADAS, and SuperVision. SuperVision was definitely the biggest contributor to the year-over-year growth in ASP that we saw in Q4. Even though it was 0.5% of the volume, and like we said in the prepared remarks, we see a trajectory to the low 60s in the back half of 2023, still with really one customer, plus an additional Geely brand in the second half. So it's a very powerful driver, and the fact that Chauffeur is becoming a bigger part of the discussions with OEMs brings even more potential upside in the future. It takes time to play out like everything in this business, but we're feeling really good about the content per vehicle trajectory.

Appreciate that. And for my follow-up, a lot of the questions we receive from investors are trying to analyze the evolving competitive landscape with very large semiconductor suppliers, as well as some niche competitors that are developing certain types of computer vision applications? So I'm wondering as you are increasing the content per vehicle as you're adding and kind of upgrading and upselling your customers to higher levels of autonomy, how do you currently see the competition and how do you foresee it evolving as OEMs go to adopt higher levels of autonomy? Thank you.

I think when you go to those high levels of complexity of systems, the semiconductor is really a small part of the mix. You have so much on top of the semiconductor. You have the perception software, the driving policy software, the control of the car software, the mapping, the integration of all of them together — it is way, way beyond just a semiconductor business even when you talk about the basic ADAS, which is a front-facing camera with a chip behind it. The optimization and economies of scale over the last decade of this particular product make it very, very unlikely for a newcomer to gain market share. It's highly optimized, and the validation is very, very expensive and requires hundreds of petabytes of data to properly validate. If you don't have any disrupting new idea there, being able to take market share in that highly optimized business is very, very unlikely, unless the incumbent stops delivering, and I don't see us stopping to deliver. So really the competitive game in terms of market share is on the complex systems, SuperVision, and beyond. I think there Mobileye is clearly in a very, very leading position; a SuperVision type of product, I don't see anything outside of the Tesla FSD that even comes close to it. We are having strong traction for it, with more and more carmakers and brands. Chauffeur is another step-up. So this is where the competitive game is going to be—not on the low-end ADAS. In that arena, it's way beyond a semiconductor business.

Thank you, Rajvi.

Our next question comes from the line of John Murphy with Bank of America. Please proceed with your question.

Hi, guys, just two quick ones. First, if you could just discuss exactly what's on with the January price hike, so we can understand why folks may have pre-bought in front of that just to understand how big that is? And then the second one, Amnon, as you're making this progress with SuperVision as far as book business and discussions, are the customers just kind of throwing up their hands and saying, listen, we just can't do this ourselves or these other partners. So we're just kind of handing the keys and becoming exclusive with you or are they sort of parallel processing other systems and how is that developing?

I don't think the story is so dramatic as to handing over the keys, all right? OEMs do what makes the most sense. They want to deliver a product; they want to deliver a competitive product. They need to compete with other OEMs, and they need to provide value to the customers; they see what Mobileye is doing. I think the launch of the ZEEKR SuperVision created a significant moment. Because it’s one thing to show a development system, and another is to show a production system doing something very impressive. So it's not that OEMs decided to throw in the towel; it's simply a natural evolution of a competitive landscape. You need to be able to deliver brands with the best technology and use the suppliers for it. The EyeQ Kit allows the carmaker—I think the EyeQ Kit was a very important moment here. It allows carmakers not to completely tweak our system as a black-box, but to add to it their software and create further differentiation. However, trying to replicate what Mobileye has been doing doesn’t really make sense because of the amount of investments being made. This kind of investment cannot just be done through money; there is a significant time factor involved. So I think that the ZEEKR launch created a reality check in many of our OEM partners.

And about the EyeQ costs, we're talking about a...

$1 to $2 of an increase.

And it's not a significant impact in terms of buying ahead now before this slight increase.

Thank you very much.

Thanks, John. This will be our last question.

No problem. Our last question comes from the line of Steven Fox with Fox Advisors. Please proceed with your question.

Hi, good morning, and thanks for squeezing me in. Two questions if I could. First of all, on at CES the conversation around your radar innovations were pretty interesting. I was wondering beyond just the technology roadmap. What else is going to drive your ability to start disrupting in that product space? I guess you're talking about going to market in 2024 to try to win new business. And then secondly, as you right-sized for the volumes needed under SuperVision by the end of this year with your manufacturing partner is that when we should start thinking about gross margins and SuperVision improving, or do we need more volumes beyond like end of calendar '23 to start seeing that improvement? Thank you.

Okay, I'll start with the second half of your question. The gross margin in terms of the cost of production is not volume-dependent. We simply did another spin-off of hardware that is highly optimized, which will reduce our cost. Alongside that, another part of increasing our gross margin of SuperVision is higher bundling. Once those bundles include solutions beyond highways, this will also increase our gross margin; this will happen in the first half.

The radar, it's important to mention that our motivation for building those radars is not just to enter a new marketplace but to create a very streamlined eyes-off system, where you don't need a 360-degree awareness from your lidar because that is expensive. We want to limit the lidar only to front-facing and use imaging radars to handle the remaining 360, and those imaging radars we're developing are really cutting-edge in terms of 48-by-48 channels and 100 dB of sensitivity, and they can create an end-to-end autonomous driving experience as another layer of redundancy. This considerably reduces the cost of an eyes-off system, I'm talking about an eyes-off system with the full capability and full ODD.

Great, that's very helpful. Thank you so much.

Thank you.

Thank you. Thanks, Steven. Thanks everyone for joining our first earnings call as a public company, and we will see you next quarter. Thank you again.

Thank you.

Thank you.

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.