Mobileye Global Begins U.S. IPO Effort (Pending:MBLY)

Cockpit of futuristic autonomous car. — metamorworks

A Quick Take On Mobileye Global

Mobileye Global (MBLY) has filed to raise an undisclosed amount in an IPO of its Class A common stock, according to an S-1 registration statement.

The firm develops and sells hardware and software technologies for autonomous vehicle applications worldwide.

When we learn more about the IPO’s pricing and valuation assumptions, I’ll provide a final opinion.

Mobileye Overview

Jerusalem, Israel-based Mobileye Global was founded to create a family of imaging-related technologies to enable autonomous vehicle operation in a variety of real-world environments via its advanced driver assistance systems, or “ADAS”.

Management is headed by co-founder, president and CEO Amnon Shashua, who has been with the firm since inception in 1999, is currently Senior Vice President at Intel and was founder of CogniTens, a dimensional measurement systems company.

The company’s primary offerings include:

EyeQ – purpose-built system-on-chip
RoadExperience Management – autonomous vehicle mapping
True Redundancy – AV perception technologies
Next-Gen Radar – Software-defined imaging radar

Responsibility-Sensitive Safety – Mathematical AV safety model

As of July 2, 2022, Mobileye has booked fair market value investment of $11.2 billion as of July 2, 2022, from parent firm Intel (INTC).

Mobileye – Customer Acquisition

The firm seeks relationships with automobile manufacturers worldwide who have an interest in its various levels of autonomous technologies.

The company says that over 800 vehicle models incorporate its EyeQ system, resulting in over 117 million such systems shipped to-date.

Sales and Marketing expenses as a percentage of total revenue have dropped as revenues have increased, as the figures below indicate:

Sales and Marketing	Expenses vs. Revenue
Period	Percentage
Six Mos. Ended July 2, 2022	7.5%
Year Ended Dec. 25, 2021	9.7%
Year Ended Dec. 26, 2020	12.0%

(Source – SEC)

The Sales and Marketing efficiency multiple, defined as how many dollars of additional new revenue are generated by each dollar of Sales and Marketing spend, dropped to 2.3x in the most recent reporting period, as shown in the table below:

Sales and Marketing	Efficiency Rate
Period	Multiple
Six Mos. Ended July 2, 2022	2.3
Year Ended Dec. 25, 2021	3.1

(Source – SEC)

Mobileye’s Market & Competition

According to a 2022 market research report by Allied Market Research, the global market for autonomous vehicles was an estimated $76 billion in 2020 and is forecast to reach $2.16 trillion by 2030.

This represents a forecast CAGR of 40.1% from 2021 to 2030.

The main drivers for this expected growth are improved hardware and software technologies as well as data gathering providing innovators with continuously improving systems over time.

Also, growth in connected infrastructure, including Internet of Things and 5G wireless broadband availability, will enhance the industry’s growth prospects.

Major competitive or other industry participants include:

Argo AI (ARGO)
Aurora
Cruise
Motional
Pony.ai (OTCQB:PNYG)
Waymo
Yandex (YNDX)
Zoox (ZOOX)
Auto X
Baidu (BIDU)
Deeproute.ai
Didi Chuxing
Momenta
WeRide
Apple (AAPL)
Sony (SONY)
Tesla (TSLA)

Mobileye Global Financial Performance

The company’s recent financial results can be summarized as follows:

Growing topline revenue
Increasing gross profit and gross margin
Uneven operating losses
Variable cash flow from operations

Below are relevant financial results derived from the firm’s registration statement:

Total Revenue
Period	Total Revenue	% Variance vs. Prior
Six Mos. Ended July 2, 2022	$ 854,000,000	21.3%
Year Ended Dec. 25, 2021	$ 1,386,000,000	43.3%
Year Ended Dec. 26, 2020	$ 967,000,000

Gross Profit (Loss)
Period	Gross Profit (Loss)	% Variance vs. Prior
Six Mos. Ended July 2, 2022	$ 405,000,000	16.4%
Year Ended Dec. 25, 2021	$ 655,000,000	74.2%
Year Ended Dec. 26, 2020	$ 376,000,000

Gross Margin
Period	Gross Margin
Six Mos. Ended July 2, 2022	47.42%
Year Ended Dec. 25, 2021	47.26%
Year Ended Dec. 26, 2020	38.88%

Operating Profit (Loss)
Period	Operating Profit (Loss)	Operating Margin
Six Mos. Ended July 2, 2022	$ (36,000,000)	-4.2%
Year Ended Dec. 25, 2021	$ (57,000,000)	-4.1%
Year Ended Dec. 26, 2020	$ (213,000,000)	-22.0%

Comprehensive Income (Loss)
Period	Comprehensive Income (Loss)	Net Margin
Six Mos. Ended July 2, 2022	$ (96,000,000)	-11.2%
Year Ended Dec. 25, 2021	$ (70,000,000)	-8.2%
Year Ended Dec. 26, 2020	$ (196,000,000)	-23.0%

Cash Flow From Operations
Period	Cash Flow From Operations
Six Mos. Ended July 2, 2022	$ 233,000,000
Year Ended Dec. 25, 2021	$ 599,000,000
Year Ended Dec. 26, 2020	$ 271,000,000

(Glossary Of Terms)

As of July 2, 2022, Mobileye had $774 million in cash and $5.0 billion in total liabilities.

Free cash flow during the twelve months ended July 2, 2022, was $402 million.

Mobileye Global IPO Details

Mobileye intends to raise an undisclosed amount in gross proceeds from an IPO of its Class A common stock, although it could be as high as $2.5 billion, according to estimates.

Class A common stockholders will be entitled to one vote per share and the Class B stockholder, Intel, will have ten votes per share and will control the company post-IPO.

The S&P 500 Index no longer admits firms with multiple classes of stock into its index.

Management says it will use the net proceeds from the IPO as follows:

We intend to use a portion of the net proceeds that we receive from this offering to repay [an as-yet undisclosed amount] of indebtedness under the Dividend Note and use the remaining [proceeds] for working capital and general corporate purposes.

(Source – SEC)

Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management believes that any legal proceedings would not have a material adverse effect on its financial condition or operations.

The listed bookrunners of the IPO are Goldman Sachs (GS), Morgan Stanley (MS), Evercore ISI (EVR) and several other investment banks.

Commentary About Mobileye’s IPO

MBLY is seeking to go public as part of a separation process with parent firm Intel.

The company’s financials have produced increasing topline revenue, higher gross profit and gross margin, variable operating losses and fluctuating cash flow from operations.

Free cash flow for the twelve months ended July 2, 2022, was $402 million.

Sales and Marketing expenses as a percentage of total revenue have dropped as revenue has increased; its Sales and Marketing efficiency multiple fell to 2.3x in the most recent reporting period.

The firm currently has paid dividends per the following description:

In connection with the Reorganization, on April 21, 2022, we distributed to Intel the Dividend Note, pursuant to which we have agreed to pay Intel an aggregate of $3.5 billion. We intend to use a portion of the net proceeds that we receive from this offering to repay indebtedness under the Dividend Note. Intel informed us that it intends to contribute to Mobileye Global Inc. any remaining portion of the Dividend Note in excess of such repayment prior to the completion of this offering, so that no amounts under the Dividend Note would remain owed by us to Intel after the completion of this offering and such repayment. […] In connection with the Reorganization, on May 12, 2022, we declared and paid the Dividend in an aggregate amount of $336 million to Intel, net of $14 million of cash paid to tax authorities to settle related tax obligations.

MBLY’s trailing twelve-month CapEx multiple was 3.85x, which indicates it has spent fairly heavily on capital expenditures as a percentage of its operating cash flow.

The market opportunity for autonomous vehicle technologies is large and expected to grow at a high rate of growth over the coming years, so the company enjoys very strong industry dynamics in its favor, although high competition is also a feature of the industry.

Goldman Sachs is the lead underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (38.4%) since their IPO. This is a lower-tier performance for all major underwriters during the period.

The primary risk to the company’s outlook is the significant competitive environment it operates in, with several very large technology companies focused on solving autonomous vehicle technological challenges in novel ways.

Also, MBLY’s topline revenue growth is decelerating, which may be indicative of a slowing growth rate ahead.