Mobileye Global Inc. (MBLY) Q4 2024 Earnings Report, Transcript and Summary

Greetings, and welcome to the Mobileye Fourth Quarter and Full Year 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the call over your host, Mr. Dan Galves. Thank you, sir. You may begin.

Thank you. Hello everyone and welcome to Mobileye’s fourth quarter and full year 2024 earnings conference call for the period ending December 28th, 2024. Please note that today's discussion contains forward-looking statements based on the business environment as we currently see it. Such statements involve risks and uncertainties. Please refer to the accompanying press release, which includes additional information on the specific factors that could cause actual results to differ materially. Additionally, on this call, we will refer to both GAAP and non-GAAP figures. A reconciliation of GAAP to non-GAAP financial measures is provided in our posted earnings release. Joining us on the call today are Prof. Amnon Shashua, Mobileye President and CEO; and Moran Shemesh, Mobileye CFO. Also joining today for the Q&A session is Nimrod Nehushtan, Mobileye EVP of Business Development and Strategy. Thanks, and now I'll turn the call over to Amnon.

Hello everyone, and thanks for joining our earnings call. Starting with the results. Q4 was closely aligned with our expectations. EyeQ volume was a bit better than expected and was up 9% versus the Q3. The upside was largely related to higher than expected volume from Chinese domestic OEMs who continued to order above the levels we talked about back in July, ASP's gross margin and operating expenses were aligned with our review at the beginning of the quarter. Operating margin of 21% was almost 5 points higher than Q3. Operating cash flow was robust in 2024, finishing up at $400 million, that was flat compared to 2023 despite significant year-over-year revenue and earnings declines driven PRI primarily by the previously disclosed inventory digestion period we experienced in the first half. Operating cash flow was approximately double our non-GAAP net income in 2024. Moran will cover the guidance in more detail in a few minutes, but I'll first set the stage. [Indiscernible] is that if we use indications from our customers for the full year, our guidance would be higher, that we prefer to take conservative approach that accounts for the risk that uncertainties negatively affect earnings. Our top 10 customers we're assuming global production volumes meaningfully worse than they assumed, than that assumed by third-party forecasters. The Chinese OEMs forecasting remains difficult due to less visibility we receive. Volumes appear to have stabilized in the 2 million plus annualized range in the second half of 2024, higher than we had expected several months ago, but we're assuming a deterioration from that level simply to account for the low visibility. On SuperVision, we're assuming about half of the current run rate of end-market demand for the vehicles we are on. On Zeekr, we are electing to account for the risk that Zeekr could choose to go with our in-house system on Zeekr009, which is currently running at 2000 units to 3000 units per month. We have no indication that this is planned, but we are unwilling to be surprised again. On Polestar, we're assuming volumes of Polestar four to remain at current levels despite their stated plans for further geographic expansion. Turning to seasonality as a percentage of the midpoint of the full year revenue guidance, our resumption for Q1 revenue is 25% of the full year. Typically, it would be lower, so this gives us further confidence that the full year outlook is achievable even if macro conditions deteriorate somewhat. Turning to the commercial and new business side, we continue to win new ADAS business with our core customers at the same very high rate we have for years and are seeing good opportunities with some new customers. We recently won a multimillion-unit RAM data harvesting and cloud-enhanced driving assist program from a very key customer in parallel with continued due diligence for supervision. This deal strengthened our global data harvesting with another leading OEM with significant global volumes. This data plays a key role in our EyeQ generation AI stack. Additionally, we'll move forward with an Indian OEM on REM data harvesting for this important growth market. A number of upcoming launches from this customer will have cloud enhanced driving assist capability. On the advanced product side, we have the customer engagements in place to drive a steady cadence of announcements over the course of 2025, which is consistent with the messaging we delivered at the December capital market’s day. While our expectations for advanced product design wins remain intact, the exact timing of those announcements remain challenging to predict. The decision for an OEM on what path to take towards autonomy is very strategic, very long-term decision, and this is why the due diligence process is so intense and takes time, but it is clear that the customers believe in our approach and that the path to outstanding products run through a Mobileye’s technology. In the past few months, we have revealed through our AI day back in October, the capital markets’ day in December and the CS early this month, a lot of technological advancements underlying our stack. The common theme is efficiency of design, efficiency in our silicon design, and we'll be revealing very soon detailed benchmarks of EyeQ high versus competing high-performance chips, efficiency of our AI, for example, AI day, how to build a transformer network, which is a factor of 100 more efficient than the existing transformer architectures used by practitioners. This efficiency in design is also translated to the amount of resources, data and compute, which is required to train our AI stack. Efficiency in our mind matters and goes against the dogma of brute force development. Brute force development is a signature of our competitors as reflected by the massive investment in compute and data pipelines. Mobileye has a long tradition of excellence and efficiency. Reproduction vehicles powered by our EyeQ high stack show promise for a substantial lead in performance and precision of our next-generation supervision and chauffer. More updates will come in the course of 2025 as we get ready for standard production during 2026. Thank you, and I will turn the call over to Moran.

Thank you, Amnon. Thanks for joining the call everyone. Before I begin, please be aware that all my comments on profitability will refer to non-GAAP measurements. The primary exclusion in Mobileye’s non-GAAP numbers is a monetization of intangible assets, which is mainly related to Windows acquisition of Mobileye in 2017. We also exclude stock-based compensation as well as the goodwill impairment that occurred in Q3. Our Q4 results slightly exceeded the Q4 outlook implied by the full year guidance we provided back in October, largely due to higher-than-expected volumes from Chinese OEM, it was down 23% year over year. There isn't much insight to be gained from that comparison as a portion of the meaningful inventory buildup the impact of the first half of 2024 occurred in Q4 of 2023. Q1 will again be an apple to oranges year-over-year comparison given the inventory digestion that occurred in Q1 of 2024 beginning with Q2, the comparison will be more relevant. Gross margin was consistent with expectation and up slightly versus Q3 due to lower percentage of supervision revenue in Q4 versus Q3. Operating expenses without somehow versus Q3 as expected. This is related to the initial impact of the LIDAR unit wind down and increase in military reserve duty, refund some adjustment based on the evaluation of benefited clause and other items that are largely timing related. Turning to guidance, we provided 2025 revenue and adjusted operating income guidance in today's earning release. At the midpoint, we expect $1.75 billion of revenue and $217 million of adjusted operating income. This represents approximately 6% year-over-year revenue growth and more than 10% growth in adjusted operating income. The revenue guidance is based on EyeQ volumes in the range of $32 million to $34 million units. Amnon mentioned, we are assuming the vast majority of supervision units this year are for postal four and expect overall volumes in the low 20,000-unit range at the midpoint. Assuming no expansion into the U.S., I know that for the time being we don't plan on expressly addressing supervision volumes in the near term until we began launching this system on more products with Western OEMs in 2026. We don't expect it to be significant enough to call out and we set expectation low enough that any variances to downside are not material. On the EyeQ volume side, based on our analysis and information from Tier 1, we believe that customer inventories are currently at normal seasonal levels. To give you better insight on our guidance, we thought it will be helpful to provide a bridge from the second half 2024 annualized run rate of 35.6 million units to the mid-point of our 2025 volume outlook of 33 million, which is somewhat below the indications we currently have from our customers. We don't plan to provide this level of detail on a quarterly basis, but think it is helpful as context for our initial 2025 outlook. First of all, some pull forward of volume into Q4 is typical given annual price changes in volume then, we estimate this added about half a million units annualized in Q4 2024, and we are not assuming this occurs again in Q4 2025. We assume 2025, our production of our core OEM customers, which represent about half of industry volume, will be down almost 7% versus 2024 levels, similar to the decrease we saw in 2024 versus 2023. This is meaningfully lower and more conservative than IHS production of minus 4% and would account for about 2.3 million units of reduction. Partly offsetting the assumed production decline. We do expect share gains and ADAS adoption growth from these customers to drive approximately 1.5 million units of growth in 2025 or about 4 points of growth over market. These are not generic expectations, but rather relate to new programs in additional markets with specific OEMs. Regarding seasonality, second-half production at our top customers is typically 2% higher than first half. This would represent almost 1 million units annualized reduction versus the second half runway rate. Finally, regarding the China OEM, we are assuming approximately 0.5 million unit decline as compared to the second half run rate. This is to reflect the volatility we've seen over the last several quarters. Turning to gross margin in 2025, we are assuming about 1.5 points higher than 2024 primarily due to the lower percentage of supervision-related revenue. In terms of operating expenses, we expect about $250 million per quarter during 2025 on average, which is consistent with our comments on the Q3 call where we said the run rate at the same time would be sustained to 2025, versus that Q3 run rate we will see savings from the wind-down of the LIDAR unit. We expect this reduction to be offset by typical employee compensation inflation, as well as our expected military reserve investment. I remind you that headcount-related expenses represent well above half of our OpEx. Other areas of growth, such as AV testing and customer and cloud-related expenses are largely offset by efficiencies within our data labeling activities, as well as expected higher year-over-year engineering year reimbursement on production program spending. In terms of Q1, we expect revenue to be down about 11% versus Q4, which reflects typical seasonality and a bit more than 80% growth year over year against the inventory digestion we experienced in Q1 of 2024. Our revenue expectation for Q1 implies about 25% of the midpoint of our full year revenue guidance. We expect overall gross margin about a hundred basis points higher than Q4 level, and for adjusted operating expenses to be at or slightly lower than the $250 million per quarter I indicated earlier. Operating cash flow in 2024 was well above adjusted net income, even after taking into account capital expenditure of $81 million. Cashflow generation in 2024 was consistent with 2023, despite substantially lower adjusted operating income, reflecting strong management and control of working capital in a variety of areas. Additionally, we anticipate continuing to reduce our strategic reserve of cheap inventory on our balance sheet in 2025. We should support another year of delivering operating cash flow above adjusted net income. Finally, we expect the full-year effective tax rate to be approximately 20%, similar to 2024. Thank you. And we'll now take your questions.

[Operator Instructions]. Our first question comes from the line of Shreyas Patel with Wolfe Research. Please proceed with your question.

Okay. Thanks so much for taking the question. Maybe just, at a high level, as you're talking to legacy OEMs on adopting advanced automation like supervision I'm just curious what kind of timelines they're considering for this kind of autonomy because, Amnon you mentioned uncertainty by OEMs as it relates to making that decision. So, are the legacy automakers still viewing this as a 2027 or 2028 kind of launch, for real adoption, particularly in markets like North America and Europe?

I'll start and then maybe, Nimrod would add. During 2024, we did a lot of buildup with the potential customers building and development vehicles with our stack, working with them on very extensive testing. And we believe all of that will bear fruit in 2025. Exact timing in 2025, it's difficult to pinpoint, but all the indications that all what we did in 2024 are going to bear, are going to bear fruit, both in supervision and in Surround ADA. Surround ADA is also a very interesting category that is being built right now. 2027 seems like still looks like the sweet spot in terms of introduction of these kinds of technologies and the work of Tesla is really creating a sense of urgency with our OEM. So, we still believe that 2027 is really the right timing for introduction of these systems, and Nimrod, do you have anything to add?

I agree and support, but the majority of the RSQs that we have and the engagements that we have, are addressing or aiming for 2027, ‘2028, timeframe and especially for I think around ADAS, which is kind of a new category that has been picking up in the past year, I think that there is an even more expedited sense of urgency, let's say, due to also regulatory and regulatory drivers, not just the competition. So that still remains intact and we did not see any shift in the timeline so far.

Okay, thanks. So maybe just on that point, because I think typically you've talked about OEMs would have to kind of secure a win maybe two to three years ahead of deployment. I know it's hard to pinpoint timelines, but just trying to get a sense of what, of your confidence level on some of these awards, particularly, the chart that you had provided at the capital market stay, which showed a number of OEMs that seemed fairly closer to crossing the finish line. So just trying to get a sense of your confidence on those.

Yes. Again, I think, we've been maintaining the steady progress in these engagements, and we kind of continue to do so, and as Amnon said at his remarks, and we cannot really predict the exact timings of decisions, but we maintain steady progress since the capital market day in these activities.

We believe also that any, any start of production till middle of 2027, if the nomination is within the next four or five months, we meet it, especially if we're talking about the carry-over of what we're doing with the portion of the supervision. And there is also a possibility to introduce EyeQ7 in that timeframe as well.

Okay. And just maybe to add one comment on this, if I may. I think what is also happening in parallel is that we continue to mature our next-gen products within our programs with Volkswagen Group that do address or have a concrete plan to start the production in 2026 onwards. So, our work in maturing the technology, the hardware, software, next gen AI, technologies is continuing as planned. So, it does give some added confidence also to our future opportunities that we can meet even shorter timeframes. If and when decisions are going to maybe take a little bit longer, they can maintain the same SOP plan, and because mobilize continuing to improve and kind of mature its products in parallel.

Okay, great. And maybe just a quick one. How do we think about gross margins for 2025? Thanks.

Yes, I believe, I mentioned it. So, we expect a slight increase in gross margin of 1.5%, as a result mainly of SuperVision being lower volume than 2024. But with that EyeQ, it's really flat within the year. So, no issue with gross margin on 2025.

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

Just maybe around the 8 Qs, Amnon, I think 1 of the questions that we always get from investors is if you were to lose these, what would be the reasons that you were to lose? And I kind of always think about three buckets. The first bucket being sort of timing or pushout OEM just is unclear, which trims, which vehicle they want. They're constantly deciding and that changes year-by-year. The sort of the second, which is very clear within the legacy OEMs is there's no action, and they just decided to go with their basic Level 2 and they pass on advanced solutions. And then obviously, the third is sort of more Mobileye losing, which would be an OEM decides to go to in-house. So, look, I don't want to hold you to percentages, but I'm just curious where you think the risk would be in those three buckets, timing, OEMs taking no action or an in-house solution? Thanks so, much.

I think the third bucket in terms of in-house development, we don't see a trend there. We don't see anything that is serious about in-house such advanced product. So, it's mostly related to the first two buckets, which is all about now power trade. So, sales of EPCs were below expectations. So, car companies are kind of going back to the design board and putting more emphasis on combustion engine model. So, the issues of powertrains, so that delays also driving assist or big driving assist decisions. But in terms of in-house development, we don't see any significant traction there. Nimrod, do you have anything to add?

I think that it's a little bit hard for us to answer this question because we're not aware of all the behind-the-scenes considerations. So, from our perspective, it's obvious that there is -- there are attempts in the market for in-house development and GM recently talked about their plans and so on. So, we are aware of those, think for the kind of the opportunities that we are now pursuing, it's a combination of these buckets that you mentioned that can play into this, mostly the kind of -- whether or not the OEMs are ready for such a product at this time frame, what will it take from them and some perhaps more like a vehicle lineup consideration. Longer term, we cannot really predict what will the outcome of this in-house development, but we can -- we've been working with customers that did have these attempts in the past, and we did manage to build a very successful business in parallel because eventually, we executed. So...

Very helpful. Just as a quick follow-on. In SuperVision, the launches you have in 2026 that are sort of known in the '27 ones that are in RFQ, are they mostly -- or the majority are they standard or take rate? Thanks so, much.

So, it's not decided yet, to be honest, and it's something that we're discussing with our customer -- with our OEM partners, different models of how to sell these products to consumers. They're in a combination between standard fit and opt-ins. So, the more we'll have information on this as we move forward, we can -- we will share this, of course.

Our next question comes from the line of Joe Spak with UBS. Please proceed with your question.

Thanks, everyone. Amnon and Nimrod, I'm just curious again on the OEM conversations if price at all comes up and if that's a pushback. And if so, I just wonder how you think about that, given like it seems like if you give a little bit there to gain a footing, it would seemingly make you stickier and perhaps more valuable to customers over time. And then I guess also on the conversations with your urgency comment, does that also mean that once -- if and when they do sign, they're also willing to move quicker to implement than they have historically?

Well, price is always a consideration. I don't think that price right now is any impediment to make decisions. We are very optimized on price, and we work with our customers to find the right solution. Nimrod, anything you want to add?

Yes, I don't think that we have lost program on prices. I don't think it comes down to this at this stage. However -- and we are, we can say, aggressive and flexible relatively with our prices in negotiation. We don't want to make this a stepping stone. So, I don't think this is right now a kind of a challenge that we need to overcome. I think that the sense of urgency that you asked about is more about how much -- how many vehicles they can deploy such as systems on and so on. That is more a question of OEMs plans and rollout plans. It's not just a question of they want to do this, but if they can really accelerate execution and deployment in a larger scale of cars. This is something that we are working with them, and we can we're not the bottleneck, let's say, for a broader expansion of vehicle integration. We are very, very efficient and have one of our strength actually in the execution side and being able to support multiple vehicle lineups, multiple vehicle architectures. So, if and when this will become the chosen strategy, we can indeed support this.

Okay. And just as a second question, obviously, a lot of news in AI this week. And you guys have always talked about the efficiency of your development solution, but just wondering big picture, does any of the developments get you to reevaluate your own approach? Or do you have any views on whether the prevalence of open source foundational models can lower the barrier to entrance to others?

I think what we have seen with [indiscernible] really aligned with the approach that Mobileye has been advocating for many years, is that you need to build a purpose-built approach, which means efficiency and at the AI Day we had in October, we build a transformer architecture that we built, which is 100 times more efficient in terms of the run time and then compute than any standard transformer because it's purpose-built for the task of autonomous driving. So, everything we do in terms of the silicon design, if you look at the area, the area of our EyeQ 6 is 1/4 of the silicon area of our competing chips. We will provide in the next couple of weeks, significant benchmarks that we have been doing with the leading high-performance silicon chips. And EyeQ 6 is exceeding in terms of major KPIs like running both competitional net and transformers, all the chips that we have benchmarked against -- so efficiency is really the hallmark of what Mobileye is doing. And what EyeQ 6 has shown is that if you innovate in engineering, there was nothing there scientifically new that community that I know about. But the fact that they created a very tight flow of training in terms of making use of memory bandwidth, making use of efficient reinforcement learning, like the GRP instead of working with quantized precision FP8. There really made the assembly language to bypass all sorts of cudabottlenecks that they have there. So, if you are really purpose-built and you want to be efficient, you can gain a lot. And this is what Mobileye has been advocating for many years. So, this is exactly aligned with our approach.

Our next question comes from the line of Dan Levy with Barclays. Please proceed with your question.

Thank you for taking my question. I just wanted to ask a question on the guide for '25 and specifically on the EyeQ shipment guide. Maybe you could just talk about the extent to which launch activity is factored into that guide, to what extent is that based on launches? I think what we saw in the past was that although you're powertrain agnostic, it's typically EVs that are taking on more advanced content and we saw some slowdown in EV activity. So maybe you could talk about the extent to which launch activity factors into the guide?

I'll start by saying that maybe Nimrod can add and Moran that we took a very conservative approach with guidance. If we would have taken the numbers we received from our Tier 1s and OEMs, the guidance would have been much, much closer to the consensus than what we did. We took a conservative approach because we don't want to reguide during 2025. We don't want to risk that. And our guidance includes new launches as well. Nimrod, do you want to add something?

I think the mix of new launches versus kind of carryover programs is normal this year. there is no higher or lower percentages of new product launches versus carryovers. So, it's pretty consistent with what we have been facing in the past few years.

And those new launches or that's -- sorry, go ahead.

I just wanted to say that on the new launches and our market share that has costed some of the dozens of production reduction or volume reduction. This happened also in 2024. So, it's an expectation for 2025. In terms of market share, we did above market also in -- also in 2024. That their customers went down -- top-down customers just went down like 6% or 7% from 2023 to 2024, or there was definitely some offset to that.

Understood. Thank you. Maybe we could then just follow up on China. And if we could just mark where you are now. I think based on the disclosure given you're assuming something like 1 million units from the domestic OEMs something like 5 million from the multinationals in China, the volume outlook. And where do you stand now on resource allocation and efforts in China, especially amongst the domestics and taking into account maybe some of the challenges that you went through in China in '24.

Yes. I'll maybe address this and Amnon and Moran can add. So, we have been -- our volumes in China next year for EyeQ is growing compared to 2024, and we're close to 2 million units for the Chinese OEMs. What we are finding is there is that we have some good level of stability with the Chinese OEMs that have significant export volumes, and they are willing to -- they're willing in their very much keen in partnering with Mobileye as a global proven solution that has proven performance and maybe the risk of potential technology restrictions in some Western markets is, of course, lower than adopting a Chinese solution. So, that has really helped us in kind of maintaining and solidifying our position with our core customers and expanding our position with our core customers, Chinese customers. We have been optimizing mildly our investment in China. We still have a strong team there that supports of the local R&D needs that maintain full compliance with the local restrictions and regulation for data and so on. So just we're maintaining kind of a very tight investment compared to the business in China.

I wanted to follow up. This is Dan. So just to answer your question about kind of where we stand -- last year, we did about 5 million units with the kind of non-Chinese OEMs in China and somewhere in around the 1.5 million units with the Chinese OEMs. One of the main reasons why our kind of assumptions are deviating from IHS is the kind of the global OEMs in China were down 17%, 18% last year. And now the assumption is they're down kind of in the kind of mid-single digits or high single digits, we were taking the kind of the view that it could be worse. And if it's worse, we don't want to have to re-guide like Amnon said. So, a significant reduction in kind of non-Chinese OEMs within China is baked into our forecast. In terms of the Chinese OEMs like Nimrod mentioned, the volumes were encouraging in the second half of 2024. They ran at kind of well above a 2 million unit run rate in the second half, which was quite a bit above where we thought that they would be back in July. I think for the reasons that Nimrod went through we were not seeing any kind of change to that, but we're assuming that we have about 0.5 million deterioration versus kind of where we were in the second half, really just to be safe and due to the lack of visibility. So hopefully, that helps to kind of size the China business right now.

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

So Amnon, you said in your comments, you do not see significant in-house development from OEMs. You don't see that as a real trend. I'm just curious then the ZEEKR 009 example of moving in-house, is that -- do you see that as kind of a one-off limited to China. and I'm curious how you view NVIDIA Kosmos, even if it's not a direct competitor, are they offering tools that could help encourage and maybe accelerate in-house development from your OEMs that maybe you haven't seen yet? And then I have a follow-up.

I think Kosmos is not directly related to empowerment and enablement. There's a big difference between supporting humanity robotics and supporting autonomous cars. But human robotics, every robot is built differently, actuators are placed differently. And if you just train on real data, you'll not be able to generalize among a robotic platform. So, relying on simulators is crucial. For example, in my other company made robotics, we built foundation models just on simulated environment, and we use a lot of NVIDIA tools. And autonomous driving structured, and you want to rely on real-world data in order to not to create a distribution shift. You do use simulations for edge cases, but you don't build your entire stack on simulators. So, I don't think that, that would be a major enablement. ZEEKR 009 or whatever is going on in China, I think is separate on what's going in the Western economies. So, when I mentioned about in-house development, I was referring to the Western world.

Okay. And just as a follow-up, and you alluded to it, humanoid robots have been getting a ton of attention lately from Tesla's efforts or other OEMs and tech firms, your Chairman and Co-Founder of [indiscernible], as you mentioned. So, I'm really interested in how you think about the adjacent market opportunity for Mobileye's computer vision technologies and expertise in other markets because you said you Mobileye not bottleneck your industry that you serve, the auto industry, predominantly the legacy auto industry, the vast majority of it, there may be scenarios where they're just not ready. They're the bottleneck and that if you anchor all of your talent and IP to that slow-moving part, that could put your company at risk. So, I'm curious how are you viewing -- how do you see the surface area between your computer vision at tech and aviation and drones, Humanoids. Are these projects that Mobileye are currently exploring right now? And if so, at what stage at what point could that be material?

I think Jensen as the CES talk refer to AI in the real world as physical AI. And there are a lot of synergies, and at Mobileye, we are now studying this. We're not in any mature place in which we can make decisions, but we are definitely studying in-depth synergies between our stack and outside of automotive, but it's really early stages.

Our next question comes from the line of Colin Rusch with Oppenheimer & Company. Please proceed with your question.

Thanks so, much guys. Can you speak to the cadence of change of incentives within the reinforcement learning platform? And any potential strategies for utilizing elements of any of the emerging architectural models or portions of some of these foundation models that are starting to come to market?

Reinforcement learning is becoming a very critical tool in building foundation models. And we use a lot of reinforcement learning in our stack as well. The reason you want to use reinforcement learning is when you build a probabilistic engine, right, so the next token prediction you have in pretraining it's a probabilistic engine. There is no concept of correct and incorrect. With reinforcement learning through adding your reward function, you are adding the notion of ones. So, you need this and when you're building useful foundation models. And you need this also when you are building outputs that are relevant to autonomous driving because correctness is talking about precision, right? You want to be precise and not just be probabilistic. So, reinforcement learning is the crucial element. And there's lots of innovation and reinforcement learning. What [indiscernible] has done, they use kind of a simple reinforcement learning approach called GRPO, which allowed them not to use the critics, not to use complicated reward functions and use on the outcome rewards instead of process modeling, process rewards. And the fact that it worked so well, is very, very nice. And we're also looking at it instead of using BPO or DPO to use this GRPO. But it's a small thing. Once to understand that it could be useful, you simply added to your stack and experiment with it and we're doing this all the time.

Super helpful. Thank you. And then just from a sensing perspective, you talked a lot about the evolution of your imaging radar technology, but can you talk a little bit about what you're seeing in terms of sensor fusion and the ability to integrate some of the sensor data in a more efficient way to streamline the overall system and how that will develop over the next 12 months to 24 months?

We see imaging in RADAR as a game-changing sensor. And we see now a lot of acceptance from the OEMs to include the imaging radar into Chauffeur platform. And we'll have more to say about it during 2025. But it's really a game-changing sensor.

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

So, maybe you could share an update on how Mobileye drive technology is progressing for robotaxis and the timing of when you think there will be AVs on roads for commercial operation, not only in Germany, but I think VW had planned to launch in Texas usually Mobileye drive.

So, our activity with the Mobileye drive [indiscernible] customer is Volkswagen, the IT bus. We have also additional activity with Holon and Router, which is now starting paid with safety driver paid drives in Oslo. We have an additional with Benteler, additional activity with the Holon platform. We're working with additional opportunities. And it's all targeting end of 2026, 2027. So, throughout 2025, we're replacing the computer hardware EyeQ 5 as to EyeQ 6, that's a drive 64. The imaging radars are already inserted at working on this platform are using the LADAR there. We finished training all the networks for those sensors. And by end of 2025, we should be at the right meantime between failure to start experimenting with removing the driver. But SOP is this end of 2026, 2027 for evolving the drive.

And you should see milestones occur over the course of 2025. The first milestones are closed user group testing, where you're taking actual members of the public and the systems, commercial launch in terms of starting to charge those customers. This is all kind of in the near term during 2025. So, expect to hear more about this.

My second question was just following up some of the earlier commentary around the RFI and RFQ pipeline. And at the Capital Markets Day in December, there were 5 OEMs in the negotiation or due diligence phase for SuperVision, another three of those more advanced stages of evaluation for surround ADAS. You said today you're continuing to make progress on that pipeline. But could you clarify if any of those opportunities are no longer available to you or have meaningfully pushed out especially in Japan, with some of the major OEMs there announcing M&A or plans to work with some other chip vendors, at least for full AVs, I'm hoping to get a bit clearer of an update on where some of those opportunities stand.

There hasn't been a change -- has not been a change negatively in these opportunities so far. So, there is no one that has dropped.

Our next question comes from the line of George Gianarikas with Canaccord Genuity. Please proceed with your question.

I'd like to ask also about the bake-offs that you're in with the OEMs. You talked about the in-house development. But could you also maybe discuss what you're seeing from other alternatives, whether it's emerging competitors like Wave, Waymo has made some noise about trying to sell to OEMs, Tesla. How often are you seeing them in your discussions as well? Thank you.

We do not see in those discussions, real competition outside of in-house development. All those that you mentioned, we don't see them in competition. I think that those are demo vehicles and could be relevant for the end of the decade, maybe production, but still a long way to go. So, if an OEM is interested in 2027- and 2028-time frame for a SuperVision or Chauffeur, then the best path to get there is Mobileye.

And maybe as a follow-up, but just curious as to what your collective thoughts are on Tesla's FSD version 13.2. And any progress you think they've made?

We have been just driving slides day version 13. A we have strong conviction that our ITV platform will greatly exceed whatever we experience with the FSD version 13. And I would like to note that really the holy deal that we're pursuing is not just a good driving experience. We are pursuing very high precision, high precision, meaning that we can perform an eyes-off driving experience like with Chauffeur. So, there's way more to address than just the driving experience is how do you reach a very high mean time between failure. And the mean time between failure that exists today is around 10 hours, even with the best systems like the ASC Version 13 and each tens of thousands of hours. So, this is really the Holy Grail, and we believe we can reach this with our EyeQ 6 platform.

Our next question from the line of Xin Yu with Deutsche Bank. Please proceed with your question.

First, I just wanted to come back to kind of the AI developments. Would there be anything you would call out that you found maybe interesting in terms of their approach and what they did? I know you highlighted a couple of things earlier. But it seems to be this kind of, I think, read-through that some of the companies in the states are going to apply some learnings from that. Do you get any sense that you would do something like that or you would kind of modify anything you're doing right now differently?

I think what -- when we're talking about the stack of autonomous driving, what was interesting there is the use of GRPO instead in the reinforcement learning stack instead of PPO and DPO, and we're looking into it. It was very interesting. But I think that this is a very small thing. Their achievement is being able to develop a very tight flow, very tight training flow, taking into account every small bit of memory bandwidth and processing of the available chips that they have and reach a very low-cost training, whether that is $5.6 million or $50 million, I don't know. But when you read our technical report, you see a lot of engineering innovation. So, I think that is real. And what we take out of it, which is relevant to us is really the use of GRPO and the reinforcement learning stack.

It's really interesting. Second one on the -- I know there was a Lyft partnership announced and -- a back in November. And I think you've mentioned sometimes there's this urgency from a lot of OEMs. I'm wondering, are you getting any increased urgency from kind of the Mobileye operators or [indiscernible] whether it's lift or other parts of the world to try to the robotaxi deployed faster because of what Tesla is doing because of when we're doing it. If there is more urgency, could we get kind of accelerated discussions along with that.

Yes. We do sense urgency to come up with announcements on robotaxis. But we need to align all the partners together. It's not just the operator, we need also the vehicle platform to be aligned on. So, this is fully aligned with the bus. And with the other two opportunities we have, and we're building now a fourth opportunity, which also will be meaningful. So, I do see kind of a revival the robotaxi opportunity, mostly due to the success of Waymo. And we see indications from the market in terms of partners, whether it's operators, big platform builders who would like to play a more meaningful -- to be a more meaningful actor in this emerging market.

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

I have a question on your current SuperVision design wins. So, can you maybe tell us about your collaboration efforts with Potter, Volvo and Volkswagen? And how the relationship is going? Any interesting development over the last 90 days and how to expand the opportunity with those customers?

I think our first-generation SuperVision in terms of development, we are kind of in the low of marginal returns. We have been adding automated parking to the STACK and recently launched it in China, and we'll continue to develop it further. But in terms of improving that stack we reached the point in which our focus is on the EyeQ 6 platform. We were doing a complete software where we write on the EyeQ 6 platform to make better use of the benefit that we have from the Eye 6. The 10 times the more compute that we have requires some software wherein all our focus is now on the EyeQ 6. And throughout 2025, we'll be able -- we have already preproduction vehicles with EyeQ 6 already doing testing -- on-road testing in Germany and throughout 2025, we'll be able to show significant improvement on SuperVision performance with EyeQ 6.

And maybe as a follow-up, you presented at the CMD, the DXP framework to enable OEMs to code and control elements in the system, affecting the driving experience. I'm wondering what feedback you're getting on DXP from your current engagements and potential additional design wins.

So, our activity with the SuperVision, DXP is in full use. So, it's a very important stack as part of the development stack that we have with OEMs.

Thanks, Antoine. Operator, the next question will be our last question.

Our final question comes from the line of Tom Narayan with RBC Capital Markets. Please proceed with your question.

Thanks for taking my questions. My first one is just a quick follow-up on, I think, Shreyas' question on the famous slides from the Investor Day. Just wanted to clarify the two OEMs on first SuperVision and the other for surrounds that are close to nomination I heard something like -- was it like -- instead of being 2 months or 3 months away that still -- you still believe that will happen in 2025. Is that correct? Or should we just assume, let's not put strict time lines associated with this from now on? Is that kind of the change in the way to think about it?

I don't think that there is any change. The surround ADS is really imminent, but we don't want to start pinpointing which week or which month of 2025, this is going to be nominated. But all the indications are that we are at the end of the process of nomination. With the SuperVision, the same, all the activity we did in 2024 is bearing fruit. And things should start playing out within the next few months within 2025. So, nothing has changed that would change our -- whatever we presented at the Capital Market Day. Nimrod, do you have anything to add there?

We just don't want to be driven by kind of expectations of an exact time. So, nothing's changed on kind of our expectation for where we stand with different OEMs.

Okay. Cool. And my follow-up, I appreciate the comments on when you compare to what the other OEMs are doing, what maybe some other Tier 1s are doing that with the Mobileye product that there's a focus on precision and especially as it relates to EyeQ. But I guess my question is as it relates to the Level 2+ and maybe some level 3. I mean you have obviously GM this week saying they're going to double their Super Cruise adoption this year Tesla with their unsupervised FSD launch in Austin in June, active demo to Level 2+ camera and radar at CES, that's pretty comparable to FSC. And then Mercedes increased their speed to 95 kilometers an hour for their Level 3 from 60. I know these products are probably still not up to snuff, right, where you guys are where you want to be. But just wondering if there's a risk at the transition to get to eyes off where these products might just be sufficient for where the consumer demand is. Is that a risk you see? Or do you not -- are you not concerned about that?

It's not a risk because we're doing both, right? We're building SuperVision, which is not an eyes-off system. And we're building Chauffeur at the same time. So, for example, with Porsche, we're building SuperVision. And with Audi, we're building Chauffeur. So, it's all going simultaneously. We believe in the great value of an eyes off. But regardless of our belief, we're also promoting very, very strongly SuperVision, which is an eyes-on system. So, if an eyes-on system is what the market would think is good enough, it's fine, right? We believe that there's a great value in the eyes of system. This is why we're pursuing that as well. And we're simply to both. So, there is no risk here. It's not that we are building on an eyes-off and not doing an L2+ system.

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Galves for any final comments.

Thanks a lot for everyone's time, and we will talk to you on our next earnings call in April. Thank you.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.