Conference Transcript - MBLY 2026-08-12

George Enriquez, Analyst — Canaccord Genuity

Hey, everyone. Good morning, and thank you for joining our 46th annual growth conference here at Kinecord Genuity. I'm George Enriquez, one of our sustainability analysts. And we're very pleased, happy, excited to have Mobileye with us here today. Presenting from the company is Dan Galves, Chief Communications Officer. Dan, thanks for joining us.

Dan Galves, Other

GEORGE ENRIQUEZ, JR.: George, appreciate it.

George Enriquez, Analyst — Canaccord Genuity

So let's start from the top, just maybe talking about the day-to-day business you know customer inventory adjustments come and go and so can you just sort of give us an update as to where Mobileye is today from a customer inventory perspective?

Dan Galves, Other

Yeah so I think our inventories are held generally at our tier one customers and we're around five weeks you know it's typically you're you know in between four and five weeks I think it's been an industry-wide phenomenon this year that the automakers are looking to have a little bit more safety stock in the system. And so we did about a million units in Q1 were resulted in safety stock increase, but still within normal levels. Where that goes from here, we don't really know. I think that with kind of supply chain tightness that's out there, we think that it stays at this level. There's always the chance that the tier ones want to manage inventory down at the end of the year and then replenish it in Q1. And we've kind of incorporated some of that potential in our second half guidance, which is one of the reasons why it's a little bit below the first half. But I think normal what the customers wanted and, you know, we'll manage it as it comes.

George Enriquez, Analyst — Canaccord Genuity

But the good news is that you've sort of thought about this problem potentially and incorporated at least a lot of that in your guidance.

Dan Galves, Other

Yeah, exactly. I mean, I think you've heard, I was following earnings last week, and several auto suppliers had negative working capital related to this where they're holding more inventory. And so there isn't always a chance that they wanted to kind of manage that down by the end of the year.

George Enriquez, Analyst — Canaccord Genuity

Focusing on your next generation set of products for Surround ADAS, you've had some pretty material wins over the last couple of quarters. Just sort of remind us a little bit as to how you expect those to ramp and what they importantly do to your ASPs, your base ASPs.

Dan Galves, Other

Yeah. So all three of the design wins that we have for Surround ADAS, which is a kind of one IQ6 high supported system that manages five or six cameras and a few radars. We have three design wins that all launch in 2028. You're talking between two and a half and three times the average transaction price that we have today in our base 8S business, which is around $46. dollars, very good profitability, kind of similar margin profile to the base ADAS business, just at a higher price. It's representing on average about 30% to 40% of each of those automakers' volumes. That doesn't happen all in 2028, but as new vehicles launch and they get the system. And I think the trend in the industry is that this type of functionality, which is basically like hands-free on highways, incremental safety features to meet kind of upcoming regulations, is considered like a have to have. There's multiple ways to do it. Stellantis decided to do more of like a single front camera plus rem mapping instead of doing the full surround camera. That enabled them to get it up and running like in 2027. So there's different flavors, but even that program is very roughly equivalent profitability per unit to surround ADAS. So yeah, I think we see a scenario where 30% to 40% of our volume converts to this type of product over the next four or five years, which could drive ASPs into the $80, $90 range.

George Enriquez, Analyst — Canaccord Genuity

Interesting.

Dan Galves, Other

And the margin profile is sort of the same? is similar percentage margin to the core business, which is in kind of the mid to high 60s now. So yeah, in that range.

George Enriquez, Analyst — Canaccord Genuity

And when potential customers or existing customers way surround ADAS versus your other suite of advanced autonomous products, how are they making that decision? Can you just sort of help us unlock what the next incremental steps unlock from their capabilities?

Dan Galves, Other

The interesting thing is that there are already a lot of highway hands-free systems on the road, commonly known as L2+. So surround ADAS is really the second generation. The first generation, most of them also have Mobileye kind of front camera systems, but with a lot of other or multiple other suppliers doing the radar and doing the driver monitoring and doing the parking software and maybe kind of an integration partner and, you know, the OEM with some role there. and because of that sort of multi-supplier architecture and kind of a lot of cooks in the kitchen they're expensive and you know maybe the performance isn't what it could be if you had really a focused system and so us our offer is actually a cost reduction for the customers versus these sort of first generation systems and like I said you know when you when you kind of have to have a product you know you want that cost to be as low as possible you want the performance to be as high as possible and so I think that that's the way I would characterize surround ADAS and you know because we have a very good kind of cost structure with the you know the inference chip you know vertically integrated like we can provide that compelling cost. Supervision is like what I I would call L2++, so like a Tesla FSD type of system. There are not many of these on the road, hardly any. And so you're talking, instead of get on the highway and you can kind of take your hands off the wheel, take your foot off the pedals, now you're talking about getting your car in the driveway, plug in the address, the car drives you there. So I think that there's much more uncertainty around consumer willingness to pay, what's the value, what should the architecture be like what you know price level of vehicles it goes on and that's leading to more of a you know it's not a have-to-have it's like we need to try or we you know we need to have something going on there and I think that that's leading to just a lot of you know different it's it's it's not a clear competitive landscape a lot of it is you know automaker self development with uh you know on a kind of on an nvidia or qualcomm chip some of it is like let's go back to the five or six different suppliers each contributing something cost really doesn't matter because it's only going to go on a few cars so i think we're almost sort of in in the supervision segment we're almost kind of where the kind of highway hands-free segment the l2 plus segment was five years ago interesting and maybe just to remind us what the regulatory environment looks like that's compelling oems to make sure they have a surround aid as product both in u.s and europe yes so you know one of the things that's benefited mobile eye over the years is kind of the safety envelope like what level of safety that the the car needs to provide like Like what situations does the car need to deal with is kind of constantly expanding. Europe is always the leader. Everyone else is usually a couple of years behind. And the 2029 European safety regs or what has been published to the automakers as of about a year ago is a bigger than normal jump. And it's including a lot of side view issues like where you have to identify like a pedestrian like to the side of the car that might be in the crosswalk. That makes it very difficult to do when you only have a front camera. You need sides and side cameras. So like I said before, like there's a variety of kind of mixtures of how you could meet these requirements. But we think surround ADAS is one of the kind of the mainstream ones.

George Enriquez, Analyst — Canaccord Genuity

And you mentioned REM, too, which is a really important part of your product and what you're trying to build. Just maybe for the audience's sake, what is REM and why is it so important to your future product portfolio?

Dan Galves, Other

So REM is a, we crowdsource data from existing cars that have one of our chips and a front-facing camera. And it doesn't have to be any sort of special type of system, regular base ADAS system. But we pull data out of these cars to the cloud, data that is fully anonymized but includes a lot of telemetry data about the curvature of the road, where exactly the lane markings are, where does the typical car stop next to a stop sign, what is the common speed versus the legal speed, all of these kind of semantic details about human driving. and this can lead to a lot smoother performance kind of better you know better comfort levels like you know picture you're you know you're coming up on the you know to a sharp curve like the car understands that curve is coming before the the camera can see it it's also an amazing like ai prior right because we can build simulators based on this kind of real road structure we have about 8 million cars sending data consistently you know it's measured in the billions of miles internationally to internationally yeah US Europe you know wherever there are you know Ford Hyundai you know VW BMW cars Stellantis is starting soon as well Mahindra starting soon as well like we're getting data from that and what's interesting about is that there's so many we'll talk about this later emerging autonomous system providers and they're a lot relying on simulation but this is stuff that simulation can't really capture I think I think that's right because it's like you know the problem with simulation is always like how realistic is it is it to the real world so if you can create simulators where you kind of understand yield rules and kind of again back to So things like that seem trivial, but it's like if the line for the stop sign is too far back, and you can't see around the corner because there's a bunch of trees there, then everybody's going to stop five feet in front of the stop sign. So why do you have an autonomous car that stops on the line and then has to creep forward? So trivial things like that, you can create a much better experience if you have that understanding.

George Enriquez, Analyst — Canaccord Genuity

A bit of focus on Volkswagen, who is sort of the leading customer for some of your advanced autonomous solutions, including Supervision and Chauffeur. Sort of remind us of the timelines and when you expect Supervision to roll out over the next couple of years.

Dan Galves, Other

So Supervision launches in the first Porsche vehicle in Q1 of 2027. then the significant volume ramp will start to happen in the second half of the year. But we'll have cars on the road in the first half of the year. You'll have multiple models roll out. And like we said at the announcement of the program a couple of years ago, the intention is to ramp to around 300,000, 350,000 vehicles a year, probably in year three. Chauffeur launches in the first half of 2028. Chauffeur is a level three system, so kind of full driver disengagement on the highway up to highway speeds, day and night, different weather conditions. So it should be really a kind of a full service, like, hey, I can watch a movie while I'm on the highway, while I'm on my commute. and then drive which is the which is the AV which is the robo taxi system we expect to have vehicles deployed without safety drivers by the end of this year in Florida and maybe just to focus a little bit on Volkswagen there's a lot written about the company and what they're kind of going through with the competitive pressures that they're seeing so how do you feel about your a place in Volkswagen, the confidence level that you have that these products will get launched in 27 and 28 and beyond?

George Enriquez, Analyst — Canaccord Genuity

And maybe broadly around what they're testing in terms of autonomy, autonomous solutions broadly.

Dan Galves, Other

So yeah, so Volkswagen Group is adopting our entire product portfolio. So they're definitely an important customer. I think that the position we have with them was the result of like a lot of kind of internal investment that wasn't making progress and and I think that they kind of started earlier than others so you know we continue to believe that you know we'll have more Volkswagens down the road especially after we can can show these cars on the road I think that they're excited about it essentially like every new vehicle that Volkswagen We'll launch for the next five years. We'll have some advanced Mobileye technology within it. There's always a lot of noise out of that company. And they're very kind of cadenced in how they talk about products. They don't announce things before the car's about to go on the road. But I think the relationship is great. We've been executing very well. There's a huge amount of collaboration. Sometimes we probably make it sound like it's kind of all us and we're developing these products, you drop it into the car and go, but that's not the case at all. Actually, for supervision, there's 30,000 requirements that Volkswagen and Mobileye engineers work on together to get to kind of a fully validated product that'll launch early next year. And maybe you can remind us what happens to the, so your traditional chipsets sell for 47, so around ADAS is multiples of that, and then you have supervision, chauffeur, and drive what are the price points and how could that impact your pnl over the next couple yeah so think like surround 8s think around 125 um supervision is around 1300 uh we're you know it supervision will have a lower gross margin because we're delivering a kind of a full compute unit not just the chips um but you know very high kind of selling price um chauffeur is between 2500 and $3,000. And then Drive is kind of a different business model because of Robotaxi. So you're talking $40,000, something like that. So excluding the Robotaxi business, which will be lower volume, but it's hard to tell what the volumes will be. So excluding that, we would expect our average selling price with Volkswagen to double. I think that we said that at our analyst day, like a year and a half ago and it's still the case by around 2030 and that's on you know seven million units something like that so you know very meaningful revenue growth doesn't take a lot of volume to push to really impact the P&L in a positive way as these products launch over the next couple years exactly exactly yeah I think the OpEx is you know I mean we'll have OpEx growth but like we've been investing in these products heavily without much revenue for a few years now, so the operating leverage should be very strong.

George Enriquez, Analyst — Canaccord Genuity

In terms of the consternation that some of the OEMs are showing about adopting next generation autonomous solutions, I think the test case has always been, well, how many people want Tesla FSD? And I think you'd agree we saw at least what they've talked to us about a significant jump in adoption of Tesla FSD. Have you seen any change in conversations with some of the OEMs after that was announced?

Dan Galves, Other

I think we are seeing some level of change there. It's really very crazy because, like, I kind of I've said this before, like, the worst headline that I've ever seen out of many negative headlines over the last few years was there some scraping, data scraping company that came out and said, you know, Tesla just did a 30-day free trial for every one of their customers, and only 3% of people bought it, because that really took a lot of the wind out of the sails of the automakers feeling like this was the product. now it's what 55 percent of new vehicles and you know even on like social media which i ingest too much you know it's like you've got all of these kind of stories about you know people that really couldn't drive or you know that that really it's changed their life and and i so i think the value proposition because it's always been like okay like you have to keep your eyes on the road what's the big deal right right but i think you know automakers are starting to notice like it's starting to become clear that there's a huge amount of value there and so yeah I think between us launching this product within Porsche vehicles and then Audi vehicles later in the year being able to kind of fully demonstrate the production version of the system you know it may make you know it may lead to more traction but I wouldn't say that you know there's been any sort of like

George Enriquez, Analyst — Canaccord Genuity

huge change yet right maybe to focus on your robo taxi business which has very high ASPs you're launching in conjunction with Volkswagen in a couple markets you're also you've decided to be to go your own path as well in terms of launching but maybe just for the audience describe the dual path there and which cities you expect to launch in over the next 12 to 24 months yes so I I think we made the decision maybe three or four years ago that we should focus our robotaxi efforts on the technology itself and be a self-driving system provider, which means you're providing the compute,

Dan Galves, Other

the chipset, the compute, the software. Maybe you're procuring the sensors and providing those as well. And so you're kind of creating this complete system. And Volkswagen was kind of the perfect customer because they want to install that type of system on a regular assembly line, which creates a lot of efficiency, which creates a lot of kind of scaling potential. And they have an ambition to deploy their own service, right, through a division called Moya, which has been like a kind of a car-sharing outfit in Europe that has a good amount of users. And so this was kind of perfect because it created a lot of scalability. It allowed us to focus on the technology itself, and that's going really well. Volkswagen expects to be deployed in five or six cities by the end of 2027, two in the U.S., L.A. and Orlando, and then four cities in Europe. And it's pretty far along. They're doing user group testing in Hamburg. Oslo just got their permitting done. And there's been on-road testing in all of these cities for not all of them for multiple years, but some on-road testing for multiple years. The vehicle is now coming off the regular production line, so we were able to validate the actual production vehicle. And the technology is looking great. We're meeting all the KPIs we need to meet to get to these milestones, which are essentially you know invite only user group testing and then open it up to anybody you know kind of test the end-to-end service it's not just about the driving it's about does the app work do people know where the cars are you know is the routing system correct and so I think we feel very good about this relationship and the way we're scaling but as we got more comfortable with the KPIs and the technology got to the point where we feel extremely confident about being able to remove safety drivers as Waymo sort of led the charge and provided like a lot of data like a lot of data points on consumer demand like consumers seem to be very open to getting in a car with no driver regulators have been generally supportive um pricing has been good like Waymo's generating over $100,000 per car per year on only like 24 rides a day, which is, you know, we think the utilization could go much higher than that. So, you know, a lot more sort of like clarity around the business kind of drove us to decide to do a kind of an end-to-end vertically integrated service. I think that, you know, we in the first city, which we have chosen, but we haven't announced in southeastern US, we will generate the demand on our own. I don't think that that's the end game, right? I think, you know, you could have cities where, you know, our division Move It has a good presence, and maybe it's small enough that you can generate a brand name pretty quickly. Like, I think you could see, you know, fully owned mobilized services in multiple cities standing up a service like that proving that it works kind of proving that we have a kind of a handle on defining the product itself allows us to go to market through other demand generators I think in a more powerful way than we can today so I think it creates a lot of optionality for us and it shouldn't be you know I think the funding is is not you know it's not hugely material like you know first couple hundred cars you know maybe around a hundred thousand dollars a piece like we can easily manage that within our cash flow um i think beyond that as you start to scale there's there's opportunities for securitized financing and off balance sheet arrangements that we've been sort of exploring so you know i think the opex is is manageable um for something like that so you know we feel good about that decision but there's you know a little ways to go like we would expect to be in the first city kind of around the middle of next year we've about a minute left and i have to ask about your humanoids they're really interesting and cool from the videos that i've seen so what is mentee what's the end market for it and how are you training it and which data yeah i think i think um mentee kind of they they were built as kind of a full fully vertically integrated you know designing everything from you know the compute and the software to the the motors and the hands like so full vertical integration allows you to really kind of have control of the product um ai first so like no teleoperations like the goal is to be able to train this robot um you know with you know a few demonstrations right so it's important to be able to deliver a robot to a customer and then kind of let them do the training um the mobilized synergies with Menti are huge because we have a couple of decades of experience in sort of multimodal perception and intent-aware planning, and we have kind of access to massive amounts of data. We have huge simulators. Menti has a really kind of state-of-the-art sim-to-real transfer techniques that's kind of part of their core technology that can move back into Mobileye. So we're already seeing like a lot of synergies with that business.

George Enriquez, Analyst — Canaccord Genuity

Looks like we're up on time, but I warned you this was going to happen. I was doing riddles with my daughters this weekend, and I've decided to ask a riddle of the audience. Dan, you're welcome to participate if you can get it right. And whoever wins gets that wonderful CG Hydro Flask right there on that table. So here we go. I've got to make this one good. I think this is okay. A man shaves several times a day, yet still has a beard. Who is he? He's a barber. That's who he is. Thanks, everyone. Thank you, Dan.

Dan Galves, Other

Thanks, George.