UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to .
Commission file number
(Exact name of registrant as specified in its charter)
| ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
c/o Mobileye B.V. | + | |
(Address of principal executive offices) (Zip Code) | (Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
| Trading Symbol |
| Name of Each Exchange on Which Registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
| Accelerated filer ☐ | |
Non-accelerated filer ☐ | Smaller reporting company | |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No
There were
MOBILEYE GLOBAL INC.
FORM 10-Q
For the quarterly period ended March 30, 2024
TABLE OF CONTENTS
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Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) | 5 | |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 | |
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2
In this report, references to “we,” “us,” “our,” our “company,” “Mobileye,” the “Company,” and similar terms refer to Mobileye Global Inc. and, unless the context requires otherwise, its consolidated subsidiaries, except with respect to our historical business, operations, financial performance, and financial condition prior to our initial public offering, where such terms refer to Mobileye Group, which combines the operations of Cyclops Holdings Corporation, Mobileye B.V., GG Acquisition Ltd., Moovit App Global Ltd., and their respective subsidiaries, along with certain Intel employees mainly in research and development. References to “Moovit” refer to GG Acquisition Ltd., Moovit App Global Ltd., and their consolidated subsidiaries.
We have a 52- or 53-week fiscal year that ends on the last Saturday in December. Fiscal year 2023 was a 52-week fiscal year; fiscal year 2024 is also a 52-week fiscal year. Certain amounts, percentages, and other figures presented in this report have been subject to rounding adjustments. Accordingly, figures shown as totals, dollars, or percentage amounts of changes may not represent the arithmetic summation or calculation of the figures that precede them.
3
Part 1: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOBILEYE GLOBAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| March 30, |
| December 30, | |||
U.S. dollars in millions |
| 2024 |
| 2023 | ||
Assets |
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Current assets |
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Cash and cash equivalents | $ | | $ | | ||
Trade accounts receivable, net | |
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Inventories | |
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Other current assets | |
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Total current assets | | | ||||
Non-current assets |
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Property and equipment, net | |
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Intangible assets, net | |
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Goodwill | |
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Other long-term assets | |
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Total non-current assets | |
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TOTAL ASSETS | $ | | $ | | ||
Liabilities and Equity |
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Current liabilities |
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Accounts payable and accrued expenses | $ | | $ | | ||
Employee related accrued expenses | |
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Related party payable | |
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Other current liabilities | |
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Total current liabilities | |
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Non-current liabilities |
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Long-term employee benefits | |
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Deferred tax liabilities | |
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Other long-term liabilities | |
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Total non-current liabilities | |
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TOTAL LIABILITIES | $ | | $ | | ||
Equity |
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Class A common stock: $ | | | ||||
Class B common stock: $ | | | ||||
Additional paid-in capital | | | ||||
Retained earnings (accumulated deficit) | ( | | ||||
TOTAL EQUITY | |
| | |||
TOTAL LIABILITIES AND EQUITY | $ | | $ | | ||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4
MOBILEYE GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| Three months ended | |||||
| March 30, |
| April 1, | |||
U.S. dollars in millions, except per share amounts |
| 2024 |
| 2023 | ||
Revenue | $ | | $ | | ||
Cost of revenue | | | ||||
Gross profit | | | ||||
Research and development, net | | | ||||
Sales and marketing | | | ||||
General and administrative | | | ||||
Total operating expenses | | | ||||
Operating income (loss) | ( | ( | ||||
Other financial income (expense), net | | | ||||
Income (loss) before income taxes | ( | ( | ||||
Benefit (provision) for income taxes | | ( | ||||
Net income (loss) | $ | ( | $ | ( | ||
Earnings (loss) per share attributed to Class A and Class B stockholders: | ||||||
Basic and diluted | ( | ( | ||||
Weighted-average number of shares used in computation of earnings (loss) per share attributed to Class A and Class B stockholders (in millions): | ||||||
Basic and diluted | | | ||||
Net income (loss) | ( | ( | ||||
Other comprehensive income (loss), net of tax | — | | ||||
TOTAL COMPREHENSIVE INCOME (LOSS) | $ | ( | $ | ( | ||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
5
MOBILEYE GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
Common Stock | |||||||||||||||||
Additional | Accumulated Other | Retained | Total | ||||||||||||||
Number of | paid-in | Comprehensive | Earnings | Shareholders’ | |||||||||||||
U.S. dollars in millions, except per share amounts |
| shares |
| Amount |
| capital |
| Income (Loss) |
| (Accumulated Deficit) |
| Equity | |||||
Three Months Ended |
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Balance as of December 31, 2022 | | $ | | $ | | $ | ( | $ | | $ | | ||||||
Net income (loss) | — | — | — |
| — | ( |
| ( | |||||||||
Other comprehensive income (loss), net | — | — | — |
| | — |
| | |||||||||
Tax sharing agreement with Parent | — | — | ( |
| — | — |
| ( | |||||||||
Share-based compensation expense | — | — | | — | — | | |||||||||||
Recharge to Parent for Share-based compensation | — | — | ( | — | — | ( | |||||||||||
Balance as of April 1, 2023 | | $ | | $ | | $ | — | $ | ( | $ | | ||||||
Balance as of December 30, 2023 | | | | — | | | |||||||||||
Net income (loss) | — | — | — |
| — | ( |
| ( | |||||||||
Share-based compensation expense | — | — | | — | — | | |||||||||||
Recharge to Parent for Share-based compensation | — | — | ( | — | — | ( | |||||||||||
Balance as of March 30, 2024 | | $ | | $ | | $ | — | $ | ( | $ | | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
6
MOBILEYE GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months ended | ||||||
| March 30, |
| April 1, | |||
U.S. dollars in millions |
| 2024 |
| 2023 | ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
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Net income (loss) | $ | ( | $ | ( | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||
Depreciation of property and equipment | | | ||||
Share-based compensation | | | ||||
Amortization of intangible assets | | | ||||
Exchange rate differences on cash and cash equivalents | | | ||||
Deferred income taxes | ( | ( | ||||
Interest with related party, net | — | | ||||
Changes in operating assets and liabilities: | ||||||
Decrease (increase) in trade accounts receivable | | | ||||
Decrease (increase) in other current assets | ( | | ||||
Decrease (increase) in inventories | ( | ( | ||||
Increase (decrease) in accounts payable, accrued expenses and related party payable | ( | | ||||
Increase (decrease) in employee-related accrued expenses and long term benefits | | | ||||
Increase (decrease) in other current liabilities | | | ||||
Decrease (increase) in other long term assets | ( | | ||||
Increase (decrease) in long-term liabilities | | — | ||||
Net cash provided by operating activities | | | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||
Purchase of property and equipment | ( | ( | ||||
Net cash used in investing activities | ( | ( | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||
Share-based compensation recharge | ( | ( | ||||
Net cash used in financing activities | ( | ( | ||||
Effect of foreign exchange rate changes on cash and cash equivalents | ( | ( | ||||
Increase in cash, cash equivalents and restricted cash | | | ||||
Balance of cash, cash equivalents and restricted cash, at beginning of year | | | ||||
Balance of cash, cash equivalents and restricted cash, at end of period | $ | | $ | | ||
Supplementary non-cash investing and financing activities: | ||||||
Non cash purchase of property and equipment | $ | | $ | | ||
Non-cash share based compensation recharge | | | ||||
Tax sharing agreement with Parent | — | | ||||
Supplemental cash flow information: |
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Cash received (paid) for income taxes, net of refunds | $ | ( | $ | ( | ||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
7
MOBILEYE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - GENERAL
Background
Mobileye Global Inc. (“Mobileye”, “the Company” or “we”) is a leader in the development and deployment of advanced driver assistance systems (“ADAS”) and autonomous driving technologies and solutions, aimed to provide the capabilities required for the future of autonomous driving, leveraging a comprehensive suite of purpose-built software and hardware technologies.
Intel Corporation (“Intel” or the “Parent”) directly or indirectly hold all of the Class B common stock of Mobileye, which as of March 30, 2024, represents approximately
Operations in Israel
On October 7, 2023, Hamas launched a series of attacks on civilian and military targets in Southern and Central Israel, to which the Israel Defense Forces have responded. In addition, Hezbollah has attacked military and civilian targets in Northern Israel, to which Israel has responded. Further, on April 13, 2024, Iran launched a series of drone and missile strikes against Israel, to which Israel has responded. How long and how severe the current conflict in Gaza, Northern Israel or the broader region becomes is unknown at this time and any continued clash among Israel, Hamas, Hezbollah, Iran or other countries or militant groups in the region may escalate in the future into a greater regional conflict. To date our operations and financial results have not been materially affected, although as of May 1, 2024 approximately
Other events during the reporting period
On March 18, 2024, the Company announced the winding down of the Aftermarket Solutions Unit that provides retrofitted advanced driver assistance technology. This decision was made following a thorough review of this unit’s business prospects and investment needs showing that since automakers and other vehicle manufacturers have steadily increased the rate at which integrated ADAS solutions are installed on new vehicles, the demand and future addressable market for retrofitted ADAS solutions has declined. As a result, this division has seen its revenues decline meaningfully, and in recent years has not positively contributed to Mobileye’s profitability. The plan for winding down of the Aftermarket Solutions Unit includes a reduction in workforce of over
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting.
Certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements have been prepared on the same basis as the Company’s annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information.
8
MOBILEYE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
We have a 52- or 53-week fiscal year that ends on the last Saturday in December. Fiscal year 2023 was a 52-week fiscal year; fiscal year 2024 is also a 52-week fiscal year.
The results of operations for the three months ended March 30, 2024 shown in this report are not necessarily indicative of the results to be expected for the full year ending 2024. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the fiscal year ended December 30, 2023.
There have been no material changes in our significant accounting policies as described in our consolidated financial statements for the fiscal year ended December 30, 2023. For further detail, see Note 2 in the audited consolidated financial statements for the fiscal year ended December 30, 2023.
Use of estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts and events reported and disclosed in the condensed consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions and factors, including the current economic environment, that we believe to be reasonable under the circumstances. Actual results could differ from those estimates.
On an on-going basis, management evaluates its estimates, judgments, and assumptions. The most significant estimates and assumptions relate to useful lives of intangible assets, impairment assessment of intangible assets and goodwill and income taxes.
Cash, cash equivalents and restricted cash
The following is a reconciliation of the cash, cash equivalents and restricted cash as of each period end:
As of | ||||||
U.S. dollars in millions |
| March 30, 2024 |
| December 30, 2023 | ||
Cash |
| $ | |
| $ | |
Short term deposits | | | ||||
Money market funds | | | ||||
| |
| | |||
Cash, cash equivalents and restricted cash | $ | | $ | | ||
Fair value measurement
The carrying value of short term deposits classified as cash equivalents approximates their fair value due to the short maturity of these items.
The Company’s investment in money market funds is measured at fair value within Level 1 of the fair value hierarchy because they consist of financial assets for which quoted prices are available in an active market. Interest income related to money market funds for the three months ended March 30, 2024 and April 1, 2023, amounted to $
The carrying amounts of trade accounts receivable and accounts payable approximate fair value because of their generally short maturities.
Research and development, net
Research and development expenses are expensed as incurred, and consist primarily of personnel, facilities, equipment, and supplies for research and development activities.
9
MOBILEYE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Company occasionally enters into best-efforts nonrefundable, non-recurring engineering (“NRE”) arrangements pursuant to which the Company is reimbursed for a portion of the research and development expenses attributable to specific development programs. The Company does not receive any additional compensation or royalties upon completion of such projects and the potential customer does not commit to purchase the resulting product in the future. The participation reimbursement received by the Company does not depend on whether there are future benefits from the project. All intellectual property generated from these arrangements is exclusively owned by the Company.
Participation in expenses for research and development projects are recognized on the basis of the costs incurred and are netted against research and development expenses in the condensed consolidated statements of operations and comprehensive income (loss). Research and development reimbursements of $
Derivatives and hedging
Beginning in 2021, as part of Intel’s corporate hedging program, Intel hedges forecasted cash flows denominated in Israeli Shekels (“ILS”) related to the Company. ILS is the largest operating expense currency of the Company. Intel combines all of its ILS exposures, and as part of Intel’s hedging program enters into hedging contracts to hedge Intel’s combined ILS exposure. Derivative gains and losses attributed to these condensed consolidated financial statements are recorded under accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects the statement of operations.
During the fourth quarter of 2022, the Company de-designated its remaining cash flow hedges for forecasted operating expenses denominated in ILS and no longer participates in the hedging services agreement with Intel. As the hedged transactions and cash flows related to the outstanding instruments were expected to occur as originally forecasted, the associated gains and losses deferred in accumulated other comprehensive income (loss) on the Company’s consolidated balance sheet were reclassified into earnings in the same period or periods during which the originally hedged transactions affect earnings. Any subsequent changes in the fair value of the outstanding derivative instruments after the de-designation and termination of hedge accounting were immediately reflected in operating expenses.
The change in accumulated other comprehensive income (loss) relating to gains (losses) on derivatives used for hedging was as follows:
Three Months Ended | ||||||
U.S. dollars in millions |
| March 30, 2024 | April 1, 2023 | |||
Amounts reclassified out of accumulated other comprehensive income (loss) |
| $ | — |
| $ | |
Tax effects |
| — |
| ( | ||
Other comprehensive income (loss), net |
| $ | — |
| $ | |
Income Tax
The provision for income tax consists of income taxes in the various jurisdictions where the Company is subject to taxation, primarily the United States and Israel. For interim periods, the Company recognizes an income tax benefit (provision) based on the estimated annual effective tax rate, calculated on a worldwide consolidated basis, expected for the entire year. The Company applies this rate to the year-to-date pre-tax income. The overall effective tax rate is influenced by valuation allowances on tax assets for which no benefit can be recognized due to the Company’s recent history of pretax losses sustained. Tax jurisdictions with forecasted pretax losses for the year for which no benefit can be recognized are excluded from the calculation of the worldwide estimated annual effective tax rate, and any associated tax provision or benefit for those jurisdictions is recorded separately.
10
MOBILEYE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
During the periods presented in the consolidated financial statements, certain components of the Company’s business operations were included in the consolidated U.S. domestic income tax return filed by the Company’s Parent. The Company also files various foreign income tax returns on a separate basis, distinct from its Parent. The income tax provision included in the Company’s condensed consolidated financial statements has been calculated using the separate return method, as if the Company had filed its own tax returns.
The Company has entered into a Tax Sharing Agreement with its Parent that establishes the amount of cash payable for the Company’s share of the tax liability owed on consolidated tax return filings with its Parent. Any differences between taxes payable to the Company’s Parent under the Tax Sharing Agreement and the current tax provision computed on a separate return basis, is reflected as adjustments to additional paid-in capital in the condensed consolidated statement of changes in equity and financing activities within the condensed consolidated statement of cash flows (see also Note 7).
The Company reflects tax loss and tax credit carry-forward attributes under the separate return method approach. Such tax attributes may not be benefited in the same period as the Company’s Parent on a consolidated tax return. As a result, there are inherent differences between the Company’s separate tax return method approach and certain actual tax returns filed on a consolidated basis with Intel.
Concentration of credit risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents, which include short-term deposits and money market funds, and also trade accounts receivable.
The majority of the Company’s cash and cash equivalents are invested in banks domiciled in the U.S. and Europe, as well as in Israel. Generally, these cash equivalents may be redeemed upon demand. Short term bank deposits are held in the aforementioned banks. The money market funds consist of institutional investors money market funds and are readily redeemable to cash. Accordingly, management believes that these bank deposits and money market funds, have minimal credit risk.
The Company’s accounts receivables are derived primarily from sales to Tier 1 suppliers to the automotive manufacturing industry located mainly in the U.S., Europe, and China. Concentration of credit risk with respect to accounts receivables is mitigated by credit limits, ongoing credit evaluation, and account monitoring procedures. Credit is granted based on an evaluation of a customer’s financial condition and, generally, collateral is not required. Trade accounts receivable are typically due from customers within
The Company performs ongoing credit evaluations of its customers and has not experienced any material losses in the periods presented. The Company recognizes an allowance for credit losses for any potential uncollectible amounts. The allowance is based on various factors, including historical experience, the age of the accounts receivable balances, credit quality of the customers, and other reasonable and supportable information. This allowance consists of an amount based on overall estimated exposure for the receivable portfolio and amounts identified for specific customers. Expected credit losses are recorded as general and administrative expenses in the Company’s condensed consolidated statement of operations and comprehensive income. As of March 30, 2024 and December 30, 2023, the credit loss allowance of trade accounts receivable was not material. For the three months ended March 30, 2024 and April 1, 2023 , the charge-offs and recoveries in relation to the credit losses were not material.
11
MOBILEYE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Customer concentration risk
The Company’s business, results of operations, and financial condition for the foreseeable future will likely continue to depend on sales to a relatively small number of customers. In the future, these customers may decide not to purchase the Company’s products, may purchase fewer products than in previous years, or may alter their purchasing patterns. Further, the amount of revenue attributable to any single customer or customer concentration generally may fluctuate in any given period. In addition, a decline in the production levels of one or more of the Company’s major customers, particularly with respect to vehicle models for which the Company is a significant supplier, could reduce revenue. The loss of one or more key customers, a reduction in sales to any key customer or the Company’s inability to attract new significant customers could negatively impact revenue and adversely affect the Company’s business, results of operations, and financial condition. See Note 9 related to customers that accounted for more than 10% of the Company’s total revenue and more than 10% of the total accounts receivable balance for each of the periods presented in these condensed consolidated financial statements.
Dependence on a single supplier risk
The Company purchases all its System on Chip (“EyeQ™ SoC”) from a single supplier. Any issues that occur and persist in connection with the manufacture, delivery, quality, or cost of the assembly and testing of inventory could have a material adverse effect on the Company’s business, results of operations and financial condition. See below regarding a shortage in EyeQ™ SoC that the Company experienced during 2021 and 2022 and may experience in the future, including in ECUs for SuperVision™ and other components for our products.
Supply chain risk
During the fiscal years 2022 and 2021, due to global supply chain constraints and shortage of semiconductors, the Company’s sole supplier was not able to meet demand of the Company for EyeQ™ SoCs, causing a significant reduction in the Company’s inventory levels. Starting in late 2022 and early 2023, such supply chain constraints and shortage abated and during 2023, we successfully increased levels of EyeQ™ SoC inventory on hand, mitigating the potential for future supply constraints to cause a shortfall. However, in the event of a reoccurrence of supply chain constraints, and subject to the duration and severity thereof, we may be required to operate with minimal or no inventory of EyeQ™ SoCs or SuperVision™ ECUs on hand. The reoccurrence of shortages and supply chain constraints in EyeQ™ SoCs and ECUs for SuperVision™ and in components of our other products, may impair the Company’s ability to meet its customers’ requirements in a timely manner and may adversely affect the Company’s business, results of operations and financial condition. Moreover, to the extent that the global semiconductor shortage results in reduced production or production delays by automakers, those delays could result in reduced or delayed demand for the Company products. Sustaining the Company’s production trajectory require the readiness and solvency of its suppliers and vendors, a stable and motivated production workforce and ongoing government cooperation, including for travel and visa allowances, which governments may restrict. Although we cannot fully predict the length and the severity of the impact these pressures would have on a long-term basis, we do not anticipate that short-term supply chain constraints would materially adversely affect our results of operations, capital resources, sales, profits, and liquidity.
New Accounting pronouncements
Accounting Pronouncements effective in future periods
In December 2023, the FASB issued ASU 2023-09 Improvements to Income Tax Disclosures. The ASU improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. For public business entities, the ASU is effective for annual periods beginning after December 15, 2024. The Company is evaluating the potential impact of this guidance on its consolidated financial statements.
12
MOBILEYE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In November 2023, the FASB issued ASU No. 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU improves reportable segments disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is evaluating the potential impact of this guidance on its consolidated financial statements.
NOTE 3 - OTHER FINANCIAL STATEMENT DETAILS
| 1. | Inventories |
As of | ||||||
U.S. dollars in millions |
| March 30, 2024 |
| December 30, 2023 | ||
Raw materials | $ | | $ | | ||
Work in process |
| |
| | ||
Finished goods |
| |
| | ||
Total inventories |
| $ | |
| $ | |
Inventory write-downs and write-offs were not material for the periods presented in these condensed consolidated financial statements.
2.Property and equipment
As of | ||||||
U.S. dollars in millions | March 30, 2024 | December 30, 2023 | ||||
Computers, electronic equipment and software |
| $ | |
| $ | |
Vehicles |
| |
| | ||
Office furniture and equipment |
| |
| | ||
Buildings | | | ||||
Leasehold improvements |
| |
| | ||
Total property and equipment, gross |
| $ | |
| $ | |
Less: accumulated depreciation |
| ( |
| ( | ||
Total property and equipment, net |
| $ | |
| $ | |
Depreciation expenses totaled $
13
MOBILEYE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - EQUITY
A.Share-based compensation plans
Mobileye Plan
Following the Mobileye IPO in October 2022, the Company’s employees are incentivized and rewarded through the grant of the Company’s equity awards under the Mobileye Global Inc. 2022 Equity Incentive Plan (“the 2022 Plan”), which are granted for Class A shares and vest upon the satisfaction of a service-based vesting condition, mostly over service periods of
Restricted Stock Units
The RSUs activity for the three months ended March 30, 2024 for RSUs granted to Company’s employees under the 2022 Plan was as follows:
|
| Weighted average grant | ||||
Number of RSUs | date fair value | |||||
In thousands | U.S. dollars | |||||
Outstanding as of December 30, 2023 |
| | $ | | ||
Granted |
| | | |||
Vested |
| ( | | |||
Forfeited |
| ( | | |||
Outstanding as of March 30, 2024 |
| | $ | | ||
As of March 30, 2024, the unrecognized compensation cost related to all unvested RSUs granted under the 2022 Plan, was $
Intel Plan
Prior to the Mobileye IPO, since 2017, employees of the Company had been incentivized and rewarded through the grant of Intel equity awards under Intel’s equity incentive plan which contains only a service condition. The equity awards granted generally vest over the course of
Options
Outstanding and exercisable options for Intel’s common stock under Intel’s plan as of March 30, 2024 were as follows:
| Outstanding |
| Exercisable | |||||||||
Weighted average | ||||||||||||
Number of |
| remaining |
| Weighted average |
| Number of |
| Weighted average | ||||
Exercise price |
| options | contractual life | exercise price | options | exercise price | ||||||
U.S. dollars |
| In thousands |
| In years |
| U.S. dollars |
| In thousands |
| U.S. dollars | ||
$ |
| |
| $ | |
| |
| $ | | ||
Total |
| |
|
| $ | |
| |
| $ | | |
14
MOBILEYE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The options activity for the three months ended March 30, 2024 for options granted to the Company’s employees for Intel’s common stock was as follows:
Weighted average | Weighted | Aggregated | ||||||||
Number of | remaining | average | intrinsic | |||||||
options | contractual Life | exercise price | value(1) | |||||||
| In thousands |
| In years |
| U.S. dollars |
| U.S. dollars in millions | |||
Options outstanding as of December 30, 2023 |
| |
| $ | | $ | | |||
Exercised |
| ( | — |
| | — | ||||
Expired |
| ( | — |
| | — | ||||
Options outstanding as of March 30, 2024 | |
| $ | | $ | | ||||
Options exercisable as of March 30, 2024 | |
| $ | | $ | | ||||
| (1) | The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price of Intel’s ordinary shares. On March 30, 2024 and December 30, 2023, the share price was $ |
| (2) | The remaining options expected to vest as of March 30, 2024 are |
RSUs
The RSUs activity for the three months ended March 30, 2024 for RSUs granted to the Company’s employees for Intel’s common stock was as follows:
| Weighted average | ||||
Number of RSUs | grant date fair value | ||||
In thousands |
| U.S. dollars | |||
Outstanding as of December 30, 2023 | |
| $ | | |
Vested | ( |
| | ||
Forfeited | ( |
| | ||
Outstanding as of March 30, 2024 | |
| $ | | |
Unrecognized expenses
As of March 30, 2024, the unrecognized compensation cost related to stock options and RSUs granted under the Intel 2006 Plan was $
Share-based compensation expense summary (for both Mobileye and Intel Plans)
Share-based compensation expenses included in the condensed consolidated statements of operations and comprehensive income (loss) was as follows:
| Three months ended | |||||
U.S. dollars in millions | March 30, 2024 |
| April 1, 2023 | |||
Cost of revenue |
| $ | |
| $ | |
Research and development, net | | | ||||
Sales and marketing | | | ||||
General and administrative | | | ||||
Total share-based compensation | $ | | $ | | ||
15
MOBILEYE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 - EARNINGS (LOSS) PER SHARE
The following table summarizes the calculation of basic earnings (loss) per share for the periods presented:
Three months ended | ||||||
March 30, | April 1, | |||||
In millions, except per share amounts |
| 2024 |
| 2023 | ||
Numerator: |
|
|
| |||
Net income (loss) |
| $ | ( |
| $ | ( |
Denominator: |
|
| ||||
Weighted average common shares - basic and diluted |
| |
| | ||
Earnings (loss) per share: |
|
| ||||
Basic and diluted | ( | ( | ||||
For the three months ended March 30, 2024 and April 1, 2023, the computation of diluted earnings (loss) per share attributable to common stockholders does not include potential common shares, related to restricted stock units granted under the 2022 plan to the Company’s employees, as the effect of their inclusion would have been anti-dilutive due to a net loss in the three months ended March 30, 2024 and April 1, 2023.
NOTE 6 - INCOME TAXES
The Company’s quarterly benefit (provision) for income taxes and the estimates of its annual effective tax rate, are subject to fluctuation due to several factors, principally including variability in overall pre-tax income and the mix of tax paying components to which such income relates.
The income tax benefit (provision) included in these condensed consolidated financial statements has been calculated using the separate return method, as if the Company had filed its own tax returns. Net operating losses generated by the Company that have been utilized as part of the Parent’s consolidated income tax return filings but have not been utilized by the Company under the separate return method approach, have been reflected in these condensed consolidated financial statements because the Company will recognize a benefit for the separate return method net operating losses when determined to be realizable, whether as a deduction against current taxable income in future periods or upon recognition of associated deferred tax assets based on valuation allowance assessments. As the Company has jurisdictions that have sustained recent losses based on the separate return method, a valuation allowance is required for deferred tax assets for which no benefit can be currently realized.
Benefit for income tax in the three months ended March 30, 2024, was $
16
MOBILEYE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 - RELATED PARTIES TRANSACTIONS
The Company has entered into a series of related party arrangements with Intel. For further description of the arrangements refer to Note 9 of the notes to the consolidated financial statements for the year ended December 30, 2023.
Stock Compensation Recharge Agreement
The Company entered into a stock compensation recharge agreement with Intel, which requires the Company to reimburse Intel for certain amounts, net of any related withholding tax, relating to the value of share-based compensation provided to the Company’s employees for RSUs or stock options exercisable in Intel stock. The reimbursement amounts recorded as an adjustment to additional paid-in capital in the condensed consolidated statement of changes in equity were $
Lease agreements
Under lease agreements with Intel, the Company leases office space in Intel’s buildings. The costs are included in the condensed consolidated statements of operations and comprehensive income (loss) primarily on a specific and direct attribution basis. The leasing costs for the three months ended March 30, 2024 and April 1, 2023, were $
Other services to a related party
The Company reimbursed its Chief Executive Officer for reasonable travel related expenses incurred while conducting business on behalf of the Company. Travel related reimbursements totaled $
Administrative Services Agreement
Under the Administrative Services Agreement, Intel provides the Company with administrative and other services. The Company pays fees to Intel for the services rendered based on pricing per service agreed between the Company and Intel.
The costs incurred under this agreement for the three months ended March 30, 2024 and April 1, 2023 were $
Technology and Services Agreement
The Technology and Services Agreement provides a framework for the collaboration on technology projects and services between the Company and Intel (“Technology Projects”), and sets out the licenses granted by each party to its respective technology for the conduct of the Technology Projects, provisions relating to the ownership of certain existing technology, the allocation of rights in any new technology created in the course of the Technology Projects, and certain provisions applicable to the development of a certain radar product of the Company. The Technology and Services Agreement will not apply to projects for the development and manufacture of a Lidar sensor system for automobiles, for which the LiDAR Product Collaboration Agreement will apply. Pursuant to the Technology and Services Agreement, the Company and Intel will agree to statements of work with additional terms for Technology Projects.
The amount incurred under this agreement for the three months ended March 30, 2024 and April 1, 2023 was $
17
MOBILEYE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
LiDAR Product Collaboration Agreement
The LiDAR Product Collaboration Agreement provides the terms that will apply to the Company’s collaboration with Intel for the development and manufacture of a Lidar sensor system for ADAS and AV in automobiles (“LiDAR Projects”). On some of the LiDAR programs joint funding will apply between Intel and Mobileye until the end of 2027 whereby Mobileye will bear its own Lidar sensor system development costs up to the first $
The LiDAR Product Collaboration Agreement further provides that Intel will manufacture certain components for the Company to market and sell as part of a FMCW (frequency-modulated continuous wave) lidar sensor system solely for external environment sensing for ADAS and AV in automobiles. The price for the components Intel will manufacture for the Company will be based on a cost-plus model. In addition, the agreement also includes a profit-sharing model under which Mobileye will pay Intel a share of the gross profit for each LiDAR sensor system or components thereof, based on Intel technology, sold by Mobileye.
In 2023, Mobileye opted to pursue a different lidar technology, and as a result, Mobileye and Intel are no longer actively working on developing the LiDAR Project under the LiDAR Product Collaboration Agreement. Mobileye and Intel have begun negotiation of an amendment to the LiDAR Product Collaboration Agreement which contemplates the parties’ cessation of lidar development work and Mobileye’s potential, continued use of certain licenses granted by Intel under the LiDAR Product Collaboration Agreement. In connection with the foregoing, Mobileye would no longer be obligated to share its profits associated with the LiDAR Project with Intel, and Intel would no longer be obligated to provide development services for the LiDAR Project and fund Mobileye’s lidar investments beyond the $
There were
Tax Sharing Agreement
The Tax Sharing Agreement establishes the respective rights, responsibilities and obligations of the Company and Intel after the completion of the Mobileye IPO with respect to tax matters, including the amount of cash the Company will pay to Intel for its share of the tax liability owed on the consolidated filings in which the Company or any of the Company’s subsidiaries are included, audit or other tax proceedings. As of March 30, 2024 and December 30, 2023, the related party payable to Intel, pursuant to the Tax Sharing Agreement, was $
18
MOBILEYE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - IDENTIFIED INTANGIBLE ASSETS
As of | ||||||||||||||||||
U.S. dollars in millions | March 30, 2024 | December 30, 2023 | ||||||||||||||||
|
| Accumulated |
|
|
| Accumulated |
| |||||||||||
Gross Assets | Amortization | Net | Gross Assets | Amortization | Net | |||||||||||||
Developed technology |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
Customer relationships & brands | | | | | | | ||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
The following table presents the amortization expenses recorded for these identified intangible assets and their weighted average useful lives:
Three months ended | ||||||||
|
| Weighted | ||||||
| March 30, |
| April 1, |
| Average | |||
U.S. dollars in millions | 2024 | 2023 | Useful Life | |||||
Developed technology |
| $ | |
| $ | |
| |
Customer relationships & brands | | | ||||||
Total amortization expenses |
| $ | |
| $ | |
| |
The Company expects future amortization expenses for the next five years and thereafter to be as follows:
Remainder | |||||||||||||||||||||
U.S. dollars in millions |
| of 2024 |
| 2025 |
| 2026 |
| 2027 |
| 2028 |
| Thereafter |
| Total | |||||||
Future amortization expenses | $ | |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | | |
NOTE 9 - SEGMENT INFORMATION
An operating segment is defined as a component of an enterprise for which discrete financial information is available and is reviewed regularly by the Chief Operating Decision Maker (“CODM”), or decision-making group, to evaluate performance and make operating decisions. The Company has identified its CODM as the Chief Executive Officer (“CEO”).
The Company’s organizational structure and management reporting supports
Segment performance is the operating income reported excluding the amortization of acquisition-related intangible assets. The CODM uses segment performance to allocate resources (including employees and financial resources) to segments in the annual budget and forecasting process and also uses that measure to assess the segment performance. The measure of assets has not been disclosed for each segment as it is not regularly reviewed by the CODM.
The accounting policies of the individual segments are the same as those described in the summary of significant accounting policies in Note 2 to the audited consolidated financial statements for the fiscal year ended December 30, 2023.
19
MOBILEYE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following are segment results for each period as follows:
| Three months ended March 30, 2024 | |||||||||||
Amounts not | ||||||||||||
allocated to | ||||||||||||
U.S. dollars in millions |
| Mobileye |
| Other |
| segments |
| Consolidated | ||||
Revenues |
| $ | | $ | | $ | — | $ | | |||
Cost of revenues |
| | | | | |||||||
Research and development, net |
| | | — | | |||||||
Sales and marketing |
| | | | | |||||||
General and administrative |
| | | — | | |||||||
Segment performance |
| $ | ( | $ | ( | $ | ( | $ | ( | |||
Other financial income (expense), net |
| | ||||||||||
Income (loss) before taxes on income |
| ( | ||||||||||
Share-based compensation |
| | | — | | |||||||
Depreciation of property and equipment |
| | — | — | | |||||||
| Three months ended April 1, 2023 | |||||||||||
| Amounts not |
| ||||||||||
|
| allocated to | ||||||||||
U.S. dollars in millions |
| Mobileye | Other |
| segments |
| Consolidated | |||||
Revenues |
| $ | | $ | | $ | — | $ | | |||
Cost of revenues |
| | | | | |||||||
Research and development, net |
| | | — | | |||||||
Sales and marketing |
| | | | | |||||||
General and administrative |
| | | — | | |||||||
Segment performance |
| $ | | $ | ( | $ | ( | $ | ( | |||
Other financial income (expense), net |
| | ||||||||||
Income (loss) before taxes on income |
| ( | ||||||||||
Share-based compensation |
| | | — | | |||||||
Depreciation of property and equipment |
| | — | — | | |||||||
Total revenues based on the country that the product was shipped to were as follows:
Three months ended | ||||||
| Mrach 30, |
| April 1, | |||
U.S. dollars in millions |
| 2024 |
| 2023 | ||
China |
| | | |||
South Korea |
| | | |||
Germany |
| | | |||
USA |
| | | |||
United Kingdom |
| | | |||
Hungary | | | ||||
Czech Republic | | | ||||
Slovakia |
| | — | |||
Poland | | | ||||
Rest of World |
| | | |||
Total |
| $ | | $ | | |
We generate the majority of our revenue from the sale of our EyeQTM SoCs to OEMs through sales to Tier 1 automotive suppliers. EyeQTM SoC sales represented approximately
20
MOBILEYE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Major Customers
Revenue from major customers that amount to 10% or more of total revenue:
| Three months ended | ||||
| March 30, | April 1, | |||
| 2024 |
| 2023 | ||
Percent of total revenues: |
|
|
|
| |
Customer A |
| * | | % | |
Customer B |
| | % | | % |
Customer C | * | | % | ||
Customer D | | % | * | ||
Customer E | | % | * | ||
Customer F | | % | * | ||
*Less than 10% | |||||
Accounts receivable balances of major customers that amount to 10% or more of total accounts receivable balance:
| As of | ||||
| March 30, |
| December 30, | ||
2024 | 2023 | ||||
Percent of total accounts receivables balance: |
|
|
|
| |
Customer A |
| | % | | % |
Customer B | | % | | % | |
Customer C | | % | | % | |
Customer D | | % | * | ||
Customer F |
| | % | * | |
*Less than 10% |
| ||||
NOTE 10 - CONTINGENCIES
U.S. Class Action
On January 16, 2024, a putative class action captioned McAuliffe v. Mobileye Global Inc., et al., 1:24-CV-00310 (S.D.N.Y.), was filed in the United States District Court for the Southern District of New York against Mobileye and certain of its current and former officers, asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 in connection with defendants’ alleged misstatements and omissions concerning the build-up of excess inventory by certain Tier 1 Mobileye customers. The complaint seeks unspecified damages and other relief on behalf of all persons and entities who purchased or otherwise acquired Mobileye securities between January 26, 2023 and January 3, 2024. We intend to defend the matter vigorously. No provision was recorded in the financial statements as of March 30, 2024.
21
MOBILEYE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
U.S. Derivative Action
On April 12, 2024, a derivative lawsuit was filed against the members of the Mobileye Board of Directors and Intel Corporation, in its capacity as Mobileye’s controlling shareholder. Mobileye was also named as a nominal defendant. The complaint principally asserts claims for breach of fiduciary duty and unjust enrichment based on alleged failures to take steps to prevent the Company from making allegedly false and misleading statements concerning the build-up of excess inventory by certain Tier 1 Mobileye customers. The complaint also asserts a claim for violation of Section 14(a) of the Securities Exchange Act of 1934 based on alleged misstatements and omissions in Mobileye’s 2023 proxy statement. The complaint seeks unspecified damages and other relief. We intend to defend the matter vigorously. No provision was recorded in the financial statements as of March 30, 2024.
NOTE 11 - SUBSEQUENT EVENTS
In April 2024, the Company’s compensation committee approved the issuance of restricted stock units to be issued under our 2022 Equity Incentive Plan. The total aggregate fair value of RSUs granted was $
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this report. Some of the information contained in this discussion and analysis includes forward-looking statements that involve risks and uncertainties. You should review the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” included elsewhere in this report for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Company Overview
Mobileye is a leader in the development and deployment of advanced driver assistance systems (“ADAS”) and autonomous driving technologies and solutions. We pioneered ADAS technology more than 20 years ago and have continuously expanded the scope of our ADAS offerings, while leading the evolution to autonomous driving solutions.
Our portfolio of solutions is built upon a comprehensive suite of purpose-built software and hardware technologies designed to provide the capabilities needed to make the future of ADAS and autonomous driving a reality. These technologies can be harnessed to deliver mission-critical capabilities at the edge and in the cloud, advancing the safety of road users, and revolutionizing the driving experience and the movement of people and goods globally.
As of March 30, 2024, our solutions had been installed in approximately 800 vehicle models (including local country, year, and other vehicle model variations), and our System-on-Chips (“SoCs”) had been deployed in approximately 170 million vehicles. We are actively working with more than 50 Original Equipment Manufacturers (“OEMs”) worldwide on the implementation of our ADAS solutions. In the three months ended March 30, 2024, we shipped approximately 3.6 million of our systems, the substantial majority of which were EyeQTM SoCs. This represents a decrease from the approximately 8.1 million of our systems that we shipped in the first three months of 2023, due to high excess inventory at our Tier 1 customers, as announced earlier this year.
We were founded in Israel in 1999. Our co-founder, Professor Amnon Shashua, is our President and Chief Executive Officer. In 2014, we completed an initial public offering as a foreign private issuer and traded under the symbol “MBLY” on the New York Stock Exchange. Intel Corporation (“Intel”) acquired Mobileye for $15.3 billion in 2017, after which we became a wholly-owned subsidiary of Intel. We completed the internal reorganization and design of our new public entity (the “Reorganization”) and our initial public offering (the “Mobileye IPO”) in October 2022.
Operations in Israel.
On October 7, 2023, Hamas launched a series of attacks on civilian and military targets in Southern Israel and Central Israel, to which the Israel Defense Forces have responded. In addition, Hezbollah has attacked military and civilian targets in Northern Israel, to which Israel has responded. Further, on April 13, 2024, Iran launched a series of drone and missile strikes against Israel, to which Israel has responded. How long and how severe the current conflict in Gaza, Northern Israel or the broader region becomes is unknown at this time and any continued clash among Israel, Hamas, Hezbollah, Iran or other countries or militant groups in the region may escalate in the future into a greater regional conflict. To date, our operations have not been materially affected, although as of May 1, 2024 approximately 4.0% of our employees have been called to reserve duty in the Israel Defense Forces. We expect that the current conflict in the Gaza Strip and the security escalation in Israel will not have a material impact on our business results in the short term. However, since this is an event beyond our control, its continuation or cessation may affect our expectations. We continue to monitor political and military developments closely and examine the consequences for our operations and assets.
Our Business Model
We currently derive substantially all of our revenue from our commercially deployed ADAS solutions, including our Premium ADAS solutions. In the future, propelled by our next generation of EyeQTM SoCs, our surround computer vision Mobileye SuperVision™ solution, productization of software-defined imaging radars and our True Redundancy™ architecture, we believe that we will be positioned to deliver an autonomous driving solution that can enable the mass adoption of AV.
23
We generate the majority of our revenue from the sale of our EyeQTM SoCs to OEMs through sales to Tier 1 automotive suppliers. We typically sell our products with volume-based pricing and recognize the revenue and costs associated with our products upon shipment.
We invest significant time and other resources early in the process of new program sourcing as part of our relationship with an OEM. We typically have visibility into the number of models that are expected to include our products at least two to three years in advance based on OEM information provided during the sourcing and nomination process, although there is no contractual commitment by the OEM to purchase particular volumes, and programs are subject to changes with respect to timing and volumes. The revenue that we may recognize in any given year is attributable to program design wins in previous years.
We partner with STMicroelectronics, a leading supplier and innovator of semiconductor devices for automotive applications, in manufacturing, design, and research and development. We have co-developed six generations of our automotive grade SoC, EyeQTM, with STMicroelectronics, including EyeQTM5 and EyeQTM6. We have also established relationships with several suppliers, such as Quanta Computer, to develop and assemble our ECUs, including the design for our Mobileye SuperVision™, which includes our EyeQTM5 SoCs manufactured by STMicroelectronics.
Our close partnership with Intel exists on multiple fronts. As a result of our relationship with Intel, we have access to unique and differentiating technologies. For example, we may license certain technologies from Intel that support the development of our FMCW lidar, and the design and development of our software-defined radar, including Intel’s mmWave technologies. Additionally, we intend to explore a collaboration with Intel on a technology platform to integrate our EyeQTM SoC with Intel’s market leading central compute capability, with plans to utilize Intel Foundry Services’ advanced packaging capabilities. This potential platform is intended to enable functions essential to safety, entertainment, and cloud connectivity. Intel’s strength in government affairs and policy development around the world will continue to be of significant value to us as we collaborate with regulators who are preparing frameworks to enable commercial deployment of AVs.
Key Factors Affecting Our Performance
We believe there are several important factors that have affected and that we expect to continue to affect our results of operations:
Global demand for automotive vehicles. Our business performance is related to global automotive sales and automotive vehicle production by our OEM customers. Economic conditions in North America, Europe and Asia can have a large impact on the production volume of new vehicles, and, accordingly, have an impact on our revenue. Our OEM customers’ production can vary from period to period due to global demand, market conditions and competitive conditions, as well as other factors, including the long-term effects of the COVID-19 pandemic and the global semi-conductor shortage. While automotive production has now recovered to approximately 2019 levels, current uncertain economic conditions and inflation may contribute to a reduction in consumer demand. On the other hand, pent up demand from years of below peak production levels could lead to better than expected production. In addition to economic conditions, in prior periods, including during the supply chain crisis and semi-conductor shortage of 2021 and 2022, certain Tier 1 customers increased their orders for components and parts, including our solutions, to counteract the impact of supply chain shortages for auto parts. As a result, some demand for our solutions and the corresponding revenue from these customers were shifted to earlier time periods than otherwise would have occurred absent a general supply chain shortage and inflationary environment. As a result of our standard planning process for 2024, including discussions with our Tier 1 customers, we became aware in late 2023 of significant excess inventory at our customers. This as well as lower than expected production at certain OEMs during 2023 led to the decision by our Tier 1 customers to prioritize in the first quarter of 2024 the utilization of excess inventory on hand before using new shipments to meet the demand of OEMs. We estimate that our customers have used the vast majority of this excess customer inventory in the first quarter of 2024, in accordance with our expectations, and we expect that orders will normalize during the remainder of 2024, but there is no guarantee that they will do so. ADAS volumes have grown faster in recent years than the overall automotive market as ADAS penetration rates have increased, and we believe that we will continue to benefit from that trend. However, our revenue of $239 million in the three months ended March 30, 2024 was down 48% year-over-year, primarily due to the aforementioned utilization of excess inventory by our customers during the first quarter of 2024. Continued or future constraint on global automotive production resulting from supply chain shortages and the effects of economic uncertainty may be a limiting factor on our ability to increase revenue. We expect to continue to capitalize on our strong and collaborative relationships with OEMs and Tier 1s to expand our presence in key markets and capture the long-term growth opportunities in those markets.
Design wins with new and existing customers. Global OEMs are continuously looking for innovative ways to improve the customer appeal and safety of their vehicles. Additional program design wins for production programs are important to our future revenue growth.
24
However, the revenue generated by each design win and the time necessary to achieve a design win can vary significantly. To achieve program design wins, we must maintain our technological leadership and continue to deliver differentiated solutions versus our competition through investment in research and development. Together with Tier 1 automotive suppliers, we work closely with OEMs to understand their solution requirements and have built close long-term relationships with them extending across multiple generations of EyeQTM products, though there is no guarantee that our customers will purchase our solutions in any certain quantity or at any certain price even after we achieve design wins.
Investment in technology leadership and product development. We believe our ability to continue to develop and design highly advanced and cost-efficient ADAS and AV solutions will position us to extend our technology leadership and encourage greater adoption of our solutions by enabling greater levels of autonomy. We also believe that our roadmap for future generations of EyeQTM SoCs and advanced systems will ultimately power autonomous driving solutions. The EyeQTM family design further enables scalable ECU architectures, from supporting a variety of ADAS solution architectures to hosting the full workload of autonomous driving, while meeting stringent cost and power efficiency requirements. We expect that our development of software-defined imaging radar will provide a significant cost advantage by eliminating the need for multiple high-cost lidars around the vehicle and require only a single front-facing lidar, significantly lowering the overall cost of the required sensors compared to solutions that use lidar centric or lidar-only systems.
Regulation for ADAS and autonomous driving solutions. Demand for our solutions is influenced by the impact of regulation and the ratings systems deployed by the various NCAPs, particularly the Euro NCAP and the U.S. NCAP, administered by the National Highway Traffic Safety Administration. As these NCAPs demand more ADAS applications such as automatic emergency braking, OEMs will increasingly include ADAS as a standard feature in their models to maintain or to achieve the highest safety ratings. In many countries, these safety assessments have created a “market for safety” as car manufacturers seek to demonstrate that their models satisfy the NCAPs’ highest ratings. We expect national NCAPs to continue to add specific ADAS applications to their evaluation items over the next several years, led by the Euro NCAP. In recent years, as regulatory requirements and NCAP ratings have increased, OEMs have also begun to highlight their safety features as a competitive advantage. As additional regulations are implemented around the world, we expect this to lead to increased global adoption of ADAS, and we believe that we are well positioned to benefit from such increasing safety regulations globally, particularly due to the verifiable nature of our current and future solutions.
Fully autonomous vehicles are still nascent, and regulation of autonomous driving is evolving globally on both a local and national level. We believe that regulatory bodies will demand that AV undergo certain validation and audit requirements before autonomous driving is permitted. The potential impact of regulatory requirements and initiatives on the timing for widespread adoption of fully autonomous driving and on the cost of developing and introducing autonomous driving solutions is uncertain. RSS is our framework that informs our driving policy and formalizes a driving safety concept. Our RSS framework and decision-making engine have inspired a global standardization effort of AV safety including IEEE 2846, which is an industry working group that we lead. We are actively engaged in AV regulations globally as they have implications for the pace at which autonomous driving technologies may be deployed as well as which AV technology validation and audit requirements must be met. Importantly, we believe RSS, which is a pragmatic method that is architected to deliver a provably acceptable level of risk defined by governments, will facilitate standardization efforts worldwide as AV deployments accelerate. In addition to impacting the pace at which autonomous driving technologies are deployed, we expect regulations to impact our financial performance on an ongoing basis over time once autonomous driving gains market adoption. We cannot provide any assurance how any such regulations will impact us and the extent of such impact, particularly if autonomous driving is prohibited in certain areas.
Consumer adoption of our ADAS and autonomous driving solutions. Our financial performance is in part driven by public awareness and demand for ADAS solutions. Over time we expect autonomous driving solutions to contribute meaningfully to our revenue growth. As a result, consumers’ demand for, and willingness to adopt, ADAS and autonomous driving technologies will significantly impact our financial performance. We believe that our leadership position in ADAS positions us to continue to set the standard for advanced autonomous solutions and will help us benefit from increasing consumer confidence in and demand for autonomous technology over time.
Solution mix, pricing, and product costs. Solution mix is among the most important factors affecting our revenue and gross margin, as our prices vary significantly across our solutions. The price of our solutions depends on the bundle of applications that are included in the specific product. Our solutions have different margin profiles. As we develop, bundle, and sell full systems that include third-party hardware beyond EyeQTM SoCs, we expect that our gross margin will decrease on a percentage basis because of the greater third-party hardware content. However, as a result of a higher expected selling price for such systems, we expect our gross profit per unit will increase on a dollar basis.
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Average selling price (“ASP”) varies based on a solution’s applications and complexity. As a particular solution matures and unit volumes increase, we expect its ASP to decline. In addition, there are generally step-downs in pricing over periods of production as volumes ramp up. While individual solution ASPs may decline, we seek to continually offer new features and functionality and increase the value that our solutions offer to OEM customers as we target new design win opportunities manage the life cycles of existing solutions and create new ADAS categories with advanced features. We also are currently delivering full system solutions consisting of higher-function products such as SuperVisionTM which carry significantly higher prices as compared to our single EyeQTM SoC and cloud-enhanced ADAS products. We believe our differentiated and scalable solutions consistently enhanced by additional features can enable us to maintain or increase overall ASPs over time, as SuperVisionTM and other advanced solutions become a larger portion of our product mix.
The cost of input materials and manufacturing costs are significant factors affecting our gross margin. Material costs are affected by a variety of factors, including the availability of sufficient supply to meet market demand. For example, in late 2021, semiconductor fabrication costs increased as a result of a global supply shortage that began in 2020. We experienced increases in input costs in 2022 and 2023 as a result of supply chain shortages, including the global semiconductor shortage, and inflationary pressures. While we were largely successful in increasing our ASPs to reflect these cost increases, we experienced a reduction in percentage gross margin as a result of these cost increases. Our gross margin has been and may continue to be affected by our ability to offset these and any future cost increases through realizing pricing increases on our solutions and achieving decreases in other production costs. We work closely with STMicroelectronics, Quanta Computer and other suppliers on a continuous basis to manage material costs, increase yields and improve manufacturing, assembly, and test costs.
Supply and manufacturing capacity. Our solutions are dependent on the global semiconductor supply chain. The continued and timely supply of input materials, the availability of manufacturing capacity, and packaging and testing services at reasonable prices impact our ability to meet customer demand. Supply chain disruptions, shortages of raw material, such as wafers and substrates, and manufacturing limitations could limit our ability to meet customer demand and result in delayed, reduced, or canceled orders. During 2021 and 2022, the semiconductor industry experienced widespread shortages of substrates and other components and available foundry manufacturing capacity. We entered 2022 with significantly lower inventories of our EyeQTM SoCs on our balance sheet as a result of the limited supply during 2021. Further, STMicroelectronics, our sole supplier of EyeQTM SoCs, was not able to meet our demand for EyeQTM SoCs during 2022, causing a further significant reduction in our company-owned inventory level. Starting in late 2022 and early 2023, such supply chain disruptions, raw material shortages, and manufacturing limitations abated and during 2023, we successfully increased levels of EyeQTM SoC inventory on hand, mitigating the potential for future supply constraints to cause a shortfall of chips. However, in the event of a reoccurence of supply chain constraints, and subject to the duration and severity thereof, we may be required to operate with minimal or no inventory of EyeQTM SoCs or SuperVisionTM ECUs on hand. As a result, we are substantially reliant on timely shipments of EyeQTM SoCs from STMicroelectronics and ECUs from Quanta Computer (or other suppliers) to fulfill customer orders and if such a shortfall of chips of ECUs were to occur, we may be unable to offset future supply constraints through the use of inventory on hand. Our results of operations in the three months ended March 30, 2024 have not been impacted by any shortfall of chips. Our reliance on single or limited suppliers and vendors for certain components, equipment, and services and the aforementioned shortages of substrates and other components have led to increased supply chain risks and continue to stress our ability to meet the supply demands of our customers. To mitigate these supply chain constraints, management continues to monitor inventory levels on an ongoing basis. Although we cannot fully predict the length and the severity of the impact these pressures will have on a long-term basis, we do not anticipate that our current supply chain constraints would materially adversely affect our results of operations, capital resources, sales, profits, and liquidity on a long-term basis.
Public company expenses. As a recently public company, we have implemented and will continue to implement additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. In particular, we expect our accounting, legal and personnel-related expenses to increase as we continue to establish more comprehensive compliance and governance functions and hire additional personnel to support such functions, maintain and review internal controls over financial reporting in accordance with the Sarbanes-Oxley Act, and prepare and distribute periodic reports in accordance with SEC rules. Our financial statements will reflect the impact of these expenses. We also expect the costs of our insurance, including directors’ and officers’ insurance and insurance coverage for AV activity, to increase as a result of higher premiums.
In addition, in connection with the Mobileye IPO, we established an equity incentive plan for purposes of granting share-based compensation awards to certain members of our senior management, to our non-executive directors and to employees, to incentivize their performance and align their interests with ours. Historically, grants of share-based compensation to our employees were made pursuant to Intel’s employee equity incentive plans, and such historical grants will continue based on their original vesting schedules.
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Equity compensation has been, and will continue to be, an important part of our future compensation strategy and a significant component of our future expenses, which we expect to increase over time.
Intel Segment Reporting
Certain of our financial results are presented as an operating segment within Intel’s publicly reported financial results. The financial results for us reported by Intel in its segment reporting may differ from our standalone financial results primarily due to Intel’s reporting of expenses related to certain corporate overhead functions and differences in the materiality thresholds applied to prepare consolidated financial results for Intel and for Mobileye on a standalone basis.
Components of Results of Operations
Revenue
We currently derive substantially all of our revenue from our commercially deployed ADAS solutions, including our Premium ADAS solutions. We generate the majority of our revenue from the sale of our EyeQTM SoCs to OEMs through sales to Tier 1 automotive suppliers that implement our product into vehicles, in which case our direct customer is the Tier 1 automotive supplier that is responsible for paying us for our products. Because of the complex nature of our products and the need to customize and validate a product and to integrate it into the OEM’s overall ADAS system, we also have strong direct relationships with the OEMs.
EyeQTM SoC sales represented approximately 72% and 88% of our revenue for the three months ended March 30, 2024 and April 1, 2023, respectively. Sales of our SuperVision™ product represented the majority of the remainder of our revenue for the three months ended March 30, 2024 and April 1, 2023. Revenue from the sale of our EyeQTM products and SuperVision™ products is recognized at the time of product shipment from our facilities, as determined by the agreed-upon shipping terms. Our sales to any single Tier 1 automotive supplier typically cover more than one OEM and more than one production program from any OEM.
Cost of Revenue
Cost of revenue consists primarily of expenses associated with the manufacturing cost of our EyeQTM SoCs and our SuperVision™ product, and amortization of acquired intangible assets, identified as developed technology. Additional costs are royalty fees for the intellectual property that is included in the EyeQTM SoC, personnel-related expenses, logistics and insurance costs and allocated overhead costs. As we develop and sell full systems that include hardware beyond EyeQTM SoCs, we expect that our gross margin will decrease because of the greater hardware content included in our solutions. However, as a result of a higher expected selling price for such systems, we expect our gross profit per unit will increase on a dollar basis in future periods.
Research and Development Expenses, net
Research and development expenses primarily consist of expenses related to personnel-related expenses, including share-based compensation, facilities, equipment and supplies for research and development activities , material, parts and other prototype development, cloud computing services, consulting, and other professional services, including data labeling, quality assurance within the development programs, and allocated overhead costs.
We enter into best-efforts nonrefundable non-recurring engineering (“NRE”) arrangements pursuant to which we are reimbursed for a portion of the research and development expenses attributable to specific development programs. We do not receive any additional compensation or royalties upon completion of such projects and the potential customer does not commit to purchase the resulting product in the future. The participation reimbursement that we receive does not depend on whether there are future benefits from the project. All intellectual property generated from these arrangements are exclusively owned by us.
We intend to continue our significant investment in research and development activities to attain our strategic objectives. Accordingly, we expect research and development expenses to increase in absolute dollars, but to gradually decrease as a percentage of total revenue, over time. In the near term, we expect that our research and development expenses will increase compared to 2023, also as a percentage of total revenue, mainly due to additional research and development headcount and higher direct expenses that we expect to incur in connection with the development of our new EyeQTM SoC generations, Premium Driver-Assist offerings and the productization of our AV solutions and active sensor suite.
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Sales and Marketing Expenses
Sales and marketing expenses consist primarily of expenses associated with the amortization of acquired intangible assets, comprised of customer relationships and branding costs, personnel-related expenses, including share-based compensation of our sales force, as well as marketing expenses and allocated overhead costs.
We expect to increase our sales and marketing expenses as we continue our efforts to increase market awareness of the benefits of our solutions, but we expect sales and marketing expenses to decrease as a percentage of total revenue as our business grows.
General and Administrative Expenses
General and administrative expenses consist of personnel-related expenses, including share-based compensation of our executive, insurance costs, as well as legal and accounting fees, litigation expenses, and fees for professional and contract services.
We expect our general and administrative expenses to increase moderately in absolute dollars but to decrease as a percentage of total revenue as our business grows. The expected increase is mainly associated with the costs related to being a public company, including the need to hire more personnel to support compliance with SEC rules and regulations, as well as increased premiums for directors’ and officers’ insurance and the increased use of share-based compensation for general and administrative personnel.
Other Financial Income (Expense), net
Other financial income (expense), net, consists primarily of income related to investments in money market funds, as well as income from short term deposits and fluctuations in value due to foreign exchange differences between our monetary assets and liabilities denominated in New Israeli Shekels and to a much lesser extent, the Euro, the Chinese Yuan, the Japanese Yen, and other currencies.
Benefit (provision) for income taxes
Benefit (provision) for income taxes consists primarily of income taxes related to the United States, Israel and other foreign jurisdictions in which we conduct business. We also have incurred deferred tax liabilities with respect to tax amortization of certain acquired intangible assets. We are eligible for certain tax benefits in Israel under the Investment Law, at a reduced tax rate, subject to specified terms. In addition, the OECD announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax in 2021, which calls for the taxation of large multinational corporations at a minimum rate of 15%. Subsequently, multiple sets of administrative guidance have been issued. Many non-US tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 (including the European Union Member States), with the adoption of additional components in later years, or announced their plans to enact legislation in future years. We are continuing to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-US tax jurisdictions we operate in.
During the periods presented in our condensed consolidated financial statements, certain components of our business operations were included in the consolidated U.S. tax return filed by Intel. We also file certain foreign income tax returns on a separate basis, distinct from Intel. The income tax provision included in our condensed consolidated financial statements has been calculated using the separate return method as if we had filed our own tax returns. We present tax loss and tax credit carry-forward amounts that have not been utilized by Intel only to the extent such tax attributes can be claimed as a benefit consistent with our separate income tax return method approach. The use of the separate return method may result in differences between our income tax provision compared to Intel’s consolidated income tax provision.
In 2021, Mobileye’s Israeli operations became taxable in the United States as a branch entity. In 2022, Moovit’s Israeli operations became taxable in the United States as a branch entity. As a result, these operations are taxed both in the United States and Israel. For U.S. tax purposes, there are favorable future tax deductions from which we have not benefited due to a valuation allowance position. If warranted, based on the assessment of verifiable evidence in support of the realization of the deferred tax assets, the valuation allowances may be released, resulting in a tax benefit.
Realization of deferred tax assets is based on our judgment and various factors including reversal of deferred tax liabilities, the ability to generate future taxable income in jurisdictions where such assets have arisen, and potential tax planning strategies. The valuation
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allowance for the periods presented in our condensed consolidated financial statements primarily related to U.S. branch deferred tax assets not currently expected to be realized given that we have sustained recent losses based on the separate return method.
Certain net operating losses and tax credit carry-forward tax attributes generated by the Company that have been utilized as part of Intel’s consolidated income tax return filings, but have not been utilized by the Company under the separate return method approach, have been reflected in these condensed consolidated financial statements because the Company will recognize a benefit based on the separate return method when determined to be realizable.
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Results of Operations
The following table sets forth our results of operations in dollars and as a percentage of revenue for the periods indicated:
Three months Ended | |||||||||||
March 30, | April 1, | ||||||||||
2024 | 2023 | ||||||||||
| % of | % of | |||||||||
U.S. dollars in millions |
| Amount |
| Revenue |
| Amount |
| Revenue | |||
Revenue | $ | 239 |
| 100 | % | $ | 458 |
| 100 | % | |
Cost of revenue | 185 |
| 77 | % | 251 |
| 55 | % | |||
Gross profit | 54 |
| 23 | % | 207 |
| 45 | % | |||
Operating expenses: | |||||||||||
Research and development, net | 243 |
| 102 | % | 235 |
| 51 | % | |||
Sales and marketing | 34 |
| 14 | % | 33 |
| 7 | % | |||
General and administrative | 15 |
| 6 | % | 20 |
| 4 | % | |||
Total operating expenses | 292 |
| 122 | % | 288 |
| 63 | % | |||
Operating income (loss) | $ | (238) |
| (100) | % | $ | (81) |
| (18) | % | |
Other financial income (expense), net | 17 | 7 | % | 8 | 2 | % | |||||
Income (loss) before income taxes | (221) |
| (92) | % | (73) |
| (16) | % | |||
Benefit (provision) for income taxes | 3 |
| 1 | % | (6) |
| (1) | % | |||
Net income (loss) | $ | (218) |
| (91) | % | $ | (79) |
| (17) | % | |
| (1) | Includes amortization of acquired intangible assets, as follows: |
| Three months Ended | |||||
March 30, | April 1, | |||||
U.S. dollars in millions |
| 2024 |
| 2023 | ||
Cost of revenue | $ | 94 | $ | 116 | ||
Sales and marketing | 17 | 17 | ||||
Total amortization of acquired intangible assets | $ | 111 | $ | 133 | ||
| (2) | Includes share-based compensation expense, as follows: |
Three months Ended | ||||||
March 30, | April 1, | |||||
U.S. dollars in millions | 2024 | 2023 | ||||
Cost of revenue |
| $ | — |
| $ | 1 |
Research and development, net |
| 53 |
| 60 | ||
Sales and marketing |
| 2 |
| 2 | ||
General and administrative |
| 7 |
| 9 | ||
Total share-based compensation | $ | 62 | $ | 72 | ||
Comparison of the Three Months ended March 30, 2024 and April 1, 2023
Revenue
In the three months ended March 30, 2024, revenue decreased by $219 million, or 48%, compared to the three months ended April 1, 2023, due to a decrease of $233 million, or 58%, in EyeQTM SoC revenue, primarily attributable to a 56% reduction in volume resulting from the usage of meaningful excess inventory at our previously accumulated Tier 1 customers to satisfy demand. This was partially offset by an increase of $14 million in SuperVisionTM related revenue. Average System Price, calculated as the sum of revenue related to EyeQTM and SuperVisionTM systems divided by the number of systems delivered, increased by approximately 13%, primarily due to the higher percentage of SuperVisionTM related revenue as compared to the first quarter of 2023.
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Cost of Revenue
In the three months ended March 30, 2024, our cost of revenue decreased by $66 million, or 26%, compared to the three months ended April 1, 2023, primarily due to a decrease of $44 million in manufacturing costs, mainly resulting from the reduction in sales of EyeQTM systems, as well as a decrease of $22 million in amortization of intangible assets.
Gross Profit and margin
In the three months ended March 30, 2024, our gross profit decreased by $153 million, or 74%, compared to the three months ended April 1, 2023. This decrease was mainly driven by the decrease in sales of EyeQTM systems, attributable to the usage of meaningful inventory at our Tier 1 customers to satisfy demand.
Our gross margin decreased from 45% for the three months ended April 1, 2023, to 23% for the three months ended March 30, 2024. This decrease was primarily due to the increase in the percentage of revenue attributable to SuperVisionTM, as well as a higher impact of amortization of intangible assets as a percentage of revenue. In addition, there was an increase in the average cost of our EyeQTM SoC compared to the first quarter of 2023 since we entered 2023 with an opening balance of EyeQTM SoC inventory that we previously acquired at lower-than-current prices.
Research and Development Expenses, net
Research and development expenses, net, in the three months ended March 30, 2024, increased by $8 million, or 3%, compared to the three months ended April 1, 2023. This increase was primarily due to an increase in occupancy and related expenses associated with the occupancy of the new campus and additional sites. Average research and development headcount increased by 351 employees, however the related payroll expenses were mainly offset by ILS/USD foreign exchange rate impact and military duty reserve refunds from the state of Israel. In addition, an increase related to investments attributable to new product development and cloud computing services was offset by higher NRE reimbursements.
Sales and Marketing Expenses
Sales and marketing expenses in the three months ended March 30, 2024, increased by $1 million, or 3%, compared to the three months ended April 1, 2023.
General and Administrative Expenses
General and administrative expenses in the three months ended March 30, 2024, decreased by $5 million, or 25%, compared to the three months ended April 1, 2023. This decrease was primarily due to a decrease in share-based compensation expenses.
Other Financial Income (expense), net
Other financial income, net, in the three months ended March 30, 2024, was $17 million compared to $8 million in the three months ended April 1, 2023. This increase was mainly due to an increase of $6 million in interest earned on investment in money market funds and short term bank deposits, as well as an increase of $3 million derived from the impact of fluctuations in foreign exchange rates.
Benefit (Provision) for Income Tax
Benefit for income tax in the three months ended March 30, 2024, was $3 million compared to a provision for income tax of $(6) million in the three months ended April 1, 2023, mainly due to a higher loss before income taxes in the three months ended March 30, 2024 compared to prior year period.
Liquidity and Capital Resources
We believe we have sufficient sources of funding to meet our business requirements and plans for the next 12 months and in the longer term. Cash generated by operations is our primary source of liquidity for funding our strategic business requirements.
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Our primary uses of funds have been for funding increases in headcount in our research and development departments, investments attributable to new product development, as well as for funding our capital expenditures. Our capital expenditures have related mainly to the construction of our new sites and campus, data storage and other computer related equipment and were $22 million and $26 million for the three months ended March 30, 2024 and April 1, 2023, respectively.
To fund our cash requirements in the ordinary course of business, we anticipate that we will continue to primarily rely on operating cash flows, supplemented by our total cash and cash equivalents. We expect our total capital expenditures for 2024 to be slightly above our total capital expenditures in 2023, mainly due to investments in equipment related to the development of our next generation products. Our future capital requirements will depend on many factors, including our growth rate and the timing and extent of operating expenses.
We have lease obligations and other contractual obligations and commitments as part of our ordinary course of business. We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements involving commitments or obligations, including contingent obligations, arising from arrangements with unconsolidated entities or persons that have or are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity, cash requirements or capital resources.
Cash Flows
The following table sets forth certain consolidated statements of cash flow data:
Three months Ended | ||||||
U.S. dollars in millions |
| March 30, 2024 |
| April 1, 2023 | ||
Net cash provided by operating activities | $ | 40 | $ | 171 | ||
Net cash used in investing activities | (22) | (26) | ||||
Net cash used in financing activities | (4) | (3) | ||||
Effect of foreign exchange rate changes on cash and cash equivalents | (2) | (4) | ||||
Increase in cash, cash equivalents and restricted cash | $ | 12 | $ | 138 | ||
Operating activities
For the three months ended March 30, 2024 compared to the three months ended April 1, 2023, the $131 million decrease in cash provided by operating activities was mainly due to an increase of $139 million in net loss. The decrease in trade accounts receivable due to reduction in revenue, was largely offset by a decrease in accounts payable and an increase in other current assets.
Investing activities
Net cash used in investing activities in the three months ended March 30, 2024 and the three months ended April 1, 2023 was $22 million and $26 million, respectively, consisting of capital expenditures.
Financing activities
Net cash used in financing activities in the three months ended March 30, 2024 and the three months ended April 1, 2023 was $4 million and $3 million, respectively, consisting of share-based compensation recharge payments made to Intel.
Liability in respect of employee rights upon retirement
Israeli labor laws and agreements require severance payments upon dismissal of an employee or upon termination of employment in other circumstances. The severance pay liability with respect to Israeli employees is calculated pursuant to Israeli Severance Pay Law based on the most recent salary of the employees multiplied by the number of years of employment as of the balance sheet date.
Our liability for all of our Israeli employees is covered by monthly deposits with severance pay funds. The value of the deposited funds is based on the cash surrender value of these policies and includes profits (or loss) accumulated through the balance sheet date. The deposited funds may be withdrawn only upon the fulfillment of the obligations pursuant to Israeli Severance Pay Law or labor agreements.
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The majority of our liability for severance pay is covered by the provisions of Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14 employees are entitled to monthly deposits, at a rate of 8.33% of their monthly salary, contributed by us on their behalf to their insurance funds. Payments in accordance with Section 14 release us from any future severance payments in respect of those employees. As a result, we do not recognize any liability for severance pay due to these employees and the deposits under Section 14 are not recorded as assets on the consolidated balance sheets.
Severance pay liability increased from $56 million as of December 30, 2023, to $57 million as of March 30, 2024.
Lease liabilities
We have lease agreements for vehicles and offices. We lease office space in various locations in Israel and around the world including USA, Germany and China. All leases are operating leases with fixed payment terms where some of the leases include annual increases to lease payments based on an index or a rate. Lease liabilities, representing the present value of future lease payments, have increased from $51 million as of December 30, 2023 to $55 million as of March 30, 2024, reflecting mainly new lease contracts and amendments to existing agreements, partially offset by the progress in lease payments for existing arrangements.
Indebtedness
We have several bank guarantees aggregating approximately $12 million as of March 30, 2024 (denominated in New Israeli Shekels) mainly in connection with lease agreements and import of vehicles.
Non-GAAP Financial Measures
Our management uses Adjusted Gross Profit and Margin, Adjusted Operating Income and Margin and Adjusted Net Income, collectively, as key measures in operating our business. We use such non-GAAP financial measures to make strategic decisions, establish business plans and forecasts, identify trends affecting our business, and evaluate performance. For example, we use these non-GAAP financial measures to assess our pricing and sourcing strategy, in the preparation of our annual operating budget, and as a measure of our operating performance. We believe that these non-GAAP financial measures, when taken collectively, may be helpful to investors because they allow for greater transparency into what measures our management (and Intel’s management) uses in operating our business and measuring our performance, and enable comparison of financial trends and results between periods where items may vary independent of business performance. The non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure presented in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, as well as our condensed consolidated financial statements and related notes included elsewhere in this report.
We believe excluding items that neither relate to the ordinary course of business nor reflect our underlying business performance, such as the amortization of intangible assets, enables management and our investors to compare our underlying business performance from period-to-period. Accordingly, we believe these adjustments facilitate a useful evaluation of our current operating performance and comparison to our past operating performance and provide investors with additional means to evaluate cost and expense trends. In addition, we also believe these adjustments enhance comparability of our financial performance against those of other technology companies.
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Our non-GAAP financial measures reflect adjustments for amortization charges for our acquisition-related intangible assets, share-based compensation expense as well as the related income tax effects where applicable. We exclude amortization charges for our acquisition-related intangible assets for purposes of calculating certain non-GAAP measures, although revenue is generated, in part, by these intangible assets, to eliminate the impact of these non-cash charges that are inconsistent in size and are significantly impacted by the timing and valuation of our acquisitions. These amortization charges relate to intangible assets consisting of developed technology, customer relationships, and brands as a result of Intel’s acquisition of Mobileye in 2017 and the acquisition of Moovit in 2020. We believe that the exclusion of share-based compensation expense is appropriate because it eliminates the impact of non-cash expenses for equity-based compensation costs that are based upon valuation methodologies and assumptions that vary over time, and the amount of the expense can vary significantly between companies due to factors that are unrelated to their core operating performance and that can be outside of their control. Although we exclude share-based compensation expenses from our non-GAAP measures, equity compensation has been, and will continue to be, an important part of our future compensation strategy and a significant component of our future expenses, and may increase in future periods..
Adjusted Gross Profit and Margin
We define Adjusted Gross Profit as gross profit presented in accordance with GAAP, excluding amortization of acquisition related intangibles and share-based compensation expense. Adjusted Gross Margin is calculated as Adjusted Gross Profit divided by total revenue.
Set forth below is the reconciliation of gross profit to Adjusted Gross Profit and the calculations of gross margin and Adjusted Gross Margin:
Three months Ended | |||||||||||
March 30, 2024 | April 1, 2023 | ||||||||||
U.S. dollars in millions |
| Amount |
| % of Revenue |
| Amount |
| % of Revenue |
| ||
Gross profit and margin | $ | 54 | 23 | % | $ | 207 | 45 | % | |||
Add: Amortization of acquired intangible assets | 94 | 39 | % | 116 | 25 | % | |||||
Add: Share-based compensation expense | — | — | % | 1 | — | % | |||||
Adjusted gross profit and margin | $ | 148 | 62 | % | $ | 324 | 71 | % | |||
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Our Gross Margin (gross profit as a percentage of revenue) and Adjusted Gross Margin (adjusted gross profit as a percentage of revenue) reflect the high value-added nature of our solutions. As we develop and sell full systems that include hardware beyond EyeQTM SoCs, we expect that our Gross Margin and Adjusted Gross Margin will decrease because of the greater hardware content included in our solutions. However, as a result of a higher expected selling price for such systems, we expect our gross profit per unit will increase on a dollar basis.
Our Adjusted Gross Margin decreased from 71% for the three months ended April 1, 2023 to 62% for the three months ended March 30, 2024. The decrease was primarily due to the increase in the percentage of revenue attributable to SuperVisionTM. In addition there was an increase in the cost of our EyeQTM SoCs compared to the first quarter of 2023 since we entered 2023 with an opening balance of EyeQTM SoC inventory that we previously acquired at lower-than-current prices.
Adjusted Operating Income (Loss) and Margin
We define Adjusted Operating Income (loss) as operating income (loss) presented in accordance with GAAP, adjusted to exclude amortization of acquisition related intangibles and share-based compensation expense. Operating margin is calculated as operating income (loss) divided by total revenue, and Adjusted Operating Margin is calculated as Adjusted Operating Income (Loss) divided by total revenue.
Set forth below is the reconciliation of operating income (loss) to Adjusted Operating Income (Loss) and the calculations of Operating Margin and Adjusted Operating Margin:
| Three months Ended | ||||||||||
March 30, 2024 | April 1, 2023 | ||||||||||
U.S. dollars in millions |
| Amount |
| % of Revenue |
| Amount |
| % of Revenue | |||
Operating income (loss) and operating margin | $ | (238) |
| (100) | % | $ | (81) |
| (18) | % | |
Add: Amortization of acquired intangible assets | 111 |
| 46 | % | 133 |
| 29 | % | |||
Add: Share-based compensation expense | 62 |
| 26 | % | 72 |
| 16 | % | |||
Adjusted operating income (loss) and margin | $ | (65) |
| (27) | % | $ | 124 |
| 27 | % | |
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Our Operating loss increased by $157 million in the three months ended March 30, 2024 compared to the three months ended April 1, 2023, mainly due to a decrease in revenue, partially offset by a decrease in share-based compensation and amortization expenses.
We had an Adjusted Operating Loss of $65 million in the three months ended March 30, 2024 compared to an Adjusted Operating Income of $124 million in the three months ended April 1, 2023, primarily due to the decrease in revenue.
Our Adjusted Operating Margin declined from a positive 27% for the three months ended April 1, 2023 to a negative (27)% for the three months ended March 30, 2024, primarily due to a lower Adjusted Gross Margin and operating expenses that were similar to the prior year, but significantly higher as a percentage of revenue, given the unusually low revenue base.
Adjusted Net Income (Loss)
We define Adjusted Net Income (Loss) as net income (loss) presented in accordance with GAAP, adjusted to exclude amortization of acquisition related intangibles and share-based compensation expense, as well as the related income tax effects. Income tax effects have been calculated using the applicable statutory tax rate for each adjustment taking into consideration the associated valuation allowance impacts. The adjustment for income tax effects consists primarily of the deferred tax impact of the amortization of acquired intangible assets.
Set forth below is the reconciliation of net income (loss) to Adjusted Net Income (Loss):
Three months Ended | |||||||||||
March 30, 2024 | April 1, 2023 | ||||||||||
U.S. dollars in millions |
| Amount |
| % of Revenue |
| Amount |
| % of Revenue |
| ||
Net income (loss) | $ | (218) |
| (91) | % | $ | (79) |
| (17) | % | |
Add: Amortization of acquired intangible assets | 111 |
| 46 | % | 133 |
| 29 | % | |||
Add: Share-based compensation expense | 62 |
| 26 | % | 72 |
| 16 | % | |||
Less: Income tax effects | (10) |
| (4) | % | (11) |
| (2) | % | |||
Adjusted net income (loss) | $ | (55) |
| (23) | % | $ | 115 |
| 25 | % | |
Our net loss increased by $139 million in the three months ended March 30, 2024, compared the three months ended April 1, 2023, primarily due to the decrease in revenue, partially offset by a decrease in both share-based compensation and amortization expenses of acquired intangible assets, as well as an increase in other financial income.
We had an Adjusted Net Loss of $55 in the three months ended March 30, 2024 compared to an Adjusted Net Income of $115 in the three months ended April 1, 2023, primarily due to the decrease in revenue.
Critical Accounting Policies and Estimates
Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time the estimate was made.
Note 2, “Significant Accounting Policies” of the Notes to the condensed consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and in the Notes to the Consolidated Financial Statements in Part II, Item 8 of the 2023 Annual Report on Form 10-K, as filed with the SEC on February 23, 2024 (the “2023 Form 10-K”) describe the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements. There have been no material changes to the Company’s critical accounting estimates since the 2023 Form 10-K.
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Cautionary Note Regarding Forward-Looking Statements
This report includes forward-looking statements within the meaning of the federal securities laws. Mobileye and its representatives may also, from time to time, make certain forward-looking statements in publicly released materials, both written and oral, including statements contained in filings with the SEC, press releases, and our reports to stockholders. Forward-looking statements may be identified by the use of words such as “plan,” “expect,” “believe,” “intend,” “will,” “may,” “anticipate,” “estimate” and other words of similar meaning in conjunction with, among other things, discussions of future operations and financial performance (including volume growth, pricing, sales and earnings per share growth, and cash flows) and statements regarding our strategy for growth, future product development, regulatory approvals, competitive position and expenditures. All statements that address our future operating performance or events or developments that we expect or anticipate will occur in the future are forward-looking statements.
Forward-looking statements are, and will be, based on management’s then-current views and assumptions regarding future events, developments and operating performance, and speak only as of their dates. Investors should realize that if underlying assumptions prove inaccurate, or risks or uncertainties materialize, actual results could vary materially from our expectations and projections. Investors are therefore cautioned not to place undue reliance on any forward-looking statements. Furthermore, we undertake no obligation to update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events and developments or otherwise, except as required by applicable law or regulations.
Forward-looking statements contained in this report may include, but are not limited to, statements about:
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The risk factors discussed under the section entitled “Risk Factors” included in our 2023 Form 10-K could cause our results to differ materially from those expressed in the forward-looking statements made in this Quarterly Report on Form 10-Q. There also may be other risks that are currently unknown to us or that we are unable to predict at this time.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of foreign currency exchange rates and interest rates. There were no material changes to the information on market risk disclosure from our 2023 Form 10 - K.
Interest Rate Risk
Our investments in money market funds and short term deposits are subject to market risk due to changes in interest rates, which may affect our interest income and fair market value of our investments. To minimize this risk, we invest in institutional investors money market funds, which consist of high-grade securities, including U.S. treasury bonds. Our short term deposits are redeemable upon demand and held in banks domiciled in the U.S. and Europe, as well as in Israel. As of March 30, 2024 and December 30, 2023, our investment in money market funds was $940 million and $932 million, respectively and our short term deposits were $226 million and $222 million, respectively.
The primary objectives of our investments in money market funds and short term deposits is to fund our cash requirements in the ordinary course of business and preserve principal. We do not enter into investments for trading or speculative purposes.
Foreign Currency Exchange Risk
The U.S. dollar is our functional currency. Substantially all our revenue was denominated in U.S. dollars for all periods presented; however certain expenses comprising our cost of revenue and operating expenses were denominated in New Israeli Shekels, mainly payroll. As a result, our condensed consolidated financial statements are subject to fluctuations due to changes in exchange rates as our operating expenses, denominated in New Israeli Shekels, are remeasured from New Israeli Shekels into U.S. dollars. We also have expenses in other currencies, in particular the Euro, the Chinese Yuan, and the Japanese Yen, although to a much lesser extent.
We have attempted to minimize foreign currency risk, primarily by entering into a hedging services agreement with Intel during 2021. Intel centrally hedges its forecast cash flow exposure to the U.S. dollar / New Israeli Shekel exchange rates, and according to the agreement, we have been entitled to a certain allocation of the gains and losses arising from the execution of the hedging contracts. During the fourth quarter of 2022, we de-designated the remaining cash flow hedges for forecasted operating expenses denominated in ILS and will no longer be participating in Intel’s corporate hedging program. We plan to reassess what, if any, hedging arrangements we will have in subsequent fiscal years.
If the New Israeli Shekel had strengthened by 10% against the U.S. dollar, it would have decreased our cash flows by approximately $17 million in the three months ended March 30, 2024. The effect of a 10% change in the U.S. dollar / New Israeli Shekel exchange rate would not have had a material impact on our cash flows in the three months ended April 1, 2023 since in the first quarter of 2023 we were still affected by the hedging program with Intel.
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Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, management conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the three months ended March 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The effectiveness of any system of controls and procedures is subject to certain limitations, and, as a result, there can be no assurance that our controls and procedures will detect all errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be attained.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of conducting our business, we have in the past and may in the future become involved in various legal actions and other claims. We may also become involved in other judicial, regulatory and arbitration proceedings concerning matters arising in connection with the conduct of our businesses. Some of these matters may involve claims of substantial amounts. In addition, from time to time, third parties may assert intellectual property infringement claims against us in the form of letters and other forms of communication. These legal proceedings may be subject to many uncertainties and there can be no assurance of the outcome of any individual proceedings. An adverse outcome in certain of these proceedings could have a material adverse effect on our business, financial condition and results of of operations, and could cause the market value of our common stock to decline.
Legal Actions
U.S. Class Action
Securities Litigation. On January 16, 2024, a putative class action captioned McAuliffe v. Mobileye Global Inc., et al., 1:24-CV-00310 (S.D.N.Y.), was filed in the United States District Court for the Southern District of New York against Mobileye and certain of its current and former officers, asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 in connection with defendants’ alleged misstatements and omissions concerning the build-up of excess inventory by certain Tier 1 Mobileye customers. The complaint seeks unspecified damages and other relief on behalf of all persons and entities who purchased or otherwise acquired Mobileye securities between January 26, 2023 and January 3, 2024. We intend to defend the matter vigorously. No provision was recorded in the financial statements.
U.S. Derivative Action
On April 12, 2024, a derivative lawsuit was filed against the members of the Mobileye Board of Directors and Intel Corporation, in its capacity as Mobileye’s controlling shareholder. Mobileye was also named as a nominal defendant. The complaint principally asserts claims for breach of fiduciary duty and unjust enrichment based on alleged failures to take steps to prevent the Company from making allegedly false and misleading statements concerning the build-up of excess inventory by certain Tier 1 Mobileye customers. The complaint also asserts a claim for violation of Section 14(a) of the Securities Exchange Act of 1934 based on alleged misstatements and omissions in Mobileye’s 2023 proxy statement. The complaint seeks unspecified damages and other relief. We intend to defend the matter vigorously. No provision was recorded in the financial statements.
U.S. Patent Litigation
On January 26, 2024, Facet Technology Corp. (“Facet”) sued Mobileye in the U.S. District Court for the Eastern District of Texas for allegedly infringing two patents. Captioned Facet Technology Corp. v. Mobileye Global, Inc., the complaint alleges that certain Mobileye products directly and indirectly infringe both patents. The complaint seeks unspecified damages, a permanent injunction, and attorneys’ fees and costs. We intend to defend the matter vigorously. No provision was recorded in the financial statements.
Item 1A. Risk Factors
There have been no material changes to the risk factors as disclosed in our 2023 Form 10-K. The risks described in the section entitled “Item 1A. Risk Factors” in our 2023 Form 10-K could materially and adversely affect our business, financial condition, and results of operations, and the trading price of our Class A common stock could decline. These risk factors do not identify all risks that we face. Our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. Refer also to the other information set forth elsewhere herein, including the sections entitled “Forward-Looking Statements”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our Consolidated Condensed Financial Statements and related Notes thereto.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sale of Unregistered Securities
There were no sales of unregistered equity securities during the three months ended March 30, 2024.
Use of Proceeds
Not applicable.
Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
31.1* |
| |
31.2* | ||
32.1* | ||
32.2* | ||
101* | The following financial statements from Mobileye Global Inc.’s Quarterly Report on Form 10-Q for the three months ended March 30, 2024, filed with the Securities and Exchange Commission on May 8, 2024, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) the Consolidated Statements of Changes in Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements. | |
104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
*Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Mobileye Global Inc. | ||
Date: May 8, 2024 | ||
By: | /s/ Professor Amnon Shashua | |
Professor Amnon Shashua | ||
Chief Executive Officer, President and Director | ||
By: | /s/ Moran Shemesh Rojansky | |
Moran Shemesh Rojansky | ||
Chief Financial Officer | ||
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