Mobileye's (MBLY) CEO Ziv Aviram on Q3 2016 Results - Earnings Call Transcript

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Mobileye (NYSE:MBLY)

Q3 2016 Results Earnings Conference Call

November 15, 2016, 08:00 AM ET

Executives

Dan Galves - Chief Communication Officer

Ziv Aviram - Co Founder, President and Chief Executive Officer

Amnon Shashua - Co Founder, Chairman and Chief Technology Officer

Ofer Maharshak - Senior Vice President and Chief Financial Officer

Analysts

Rod Lache - Deutsche Bank

Chris McNally - Evercore ISI

Brian Johnson - Barclays

Joe Spak - RBC

Emmanuel Rosner - CLSA

Tavis McCourt - Raymond James

Itay Michaeli - Citi

Brad Erickson - Pacific Crest Securities

Jason Ader - William Blair

William Stein - SunTrust

Charlie Anderson - Dougherty & Company

Rich Kwas - Wells Fargo

Samik Chatterjee - JPMorgan

Richard Hilgert - Morningstar

Operator

Good morning and welcome. My name is Carol and I will be your conference operator today. At this time, I would like to welcome everyone to the Mobileye Fiscal Q3 2016 Earnings Call. [Operator Instructions] At this time, I would like to introduce Dan Galves, Chief Communications Officer.

Dan Galves

Thank you, Carol. Good morning, everyone and welcome to Mobileye’s third quarter 2016 earnings call. I am Dan Galves, and with me on the call is Ziv Aviram, Co-Founder, President and CEO; Professor Amnon Shashua, Co-Founder, Chairman and CTO; Ofer Maharshak, CFO and Senior Vice President.

This morning, we filed our 6-K with the SEC that includes the earnings press release and summary financial tables. Following our remarks, we will open the call for questions.

I would like to remind everyone that certain statements will be made during today’s conference call that are forward-looking within the meaning of the United States federal securities laws. Changes in business, competitive, technological, regulatory and other factors, including changes in the general economy could cause Mobileye’s actual results to differ materially from those expressed or implied by the forward-looking statements made today. Our historical results are not necessarily indicative of future performance. In addition, we will make reference to certain non-GAAP financial measures, including non-GAAP net income. The reconciliation of these non-GAAP measures to the most directly comparable GAAP measures can be found in this morning’s second [ph] quarter earnings press release. For more detailed information about the factors and other risks that may impact our business as well as the non-GAAP financial measures, please review the paragraphs in this morning’s press release that are entitled Forward-Looking Statements and Non-GAAP Financial Measures.

And now, it’s my pleasure to turn the call over to Ziv.

Ziv Aviram

Thanks, Dan. I am pleased with the third quarter results. The aftermarket division is gaining generative higher revenue than we expected. And the OEM division performed very well generating solid volume in ASPs and continued to expand visibility for new contract wins. At the same time, we continue to see significant interest in programs beyond advanced driver assistance systems or ADAS. Most new hope in request now includes level 3 semiautonomous features, in addition to advanced ADAS. As many customers are looking to make decisions soon on technology partners for fully autonomous vehicle program.

Mobileye product offering of advanced sensing, mapping and driving policy now has proven ability to execute puts us in top position Mobileye chosen partner for these programs. This is evidence by our level 4 autonomous partnership with BMW and Delphi, as well its additional recent wins with a non-traditional auto maker.

I will now provide some specific highlights from the quarter. First on the ADAS side. We won an ADAS program with current Asian customer launching in 2019. The program is for much higher volumes than the current contract due to the requirements of standard fleet to meet NCAP regulations. It also includes a platform with level 3 automation supported by EyeQ4 in advanced sensors.

We now have business with five OEMs with semiautonomous systems which use software and hardware with us significantly more advanced than exist in the market to date. We expect many of these programs to also utilize REM. We were awarded business position by [indiscernible] We were awarded an ADAS program with Taiwanese auto maker Hy Vee through Japanese Tier 1 in Egypt. This orient serves vehicles in China under the MostGen brand

We extended our business in the commercial vehicle market. We received a new ADAS award with [indiscernible] Additionally, we signed an agreement with Bapco which will market a complete ADAS system into the heavy truck market with REM data generation capability.

We had two items re-launches in the quarter, one with Renault and one Ssangyong. On the aftermarket side, the business continues to perform above expectation in 2016, for the year-to-date revenue nearly doubling. Success in 2016 is primarily related to initiatives began several years ago to invest in pilot programs which is the future customers, like government, insurance companies in large fleet. The pilot was successful in demonstrating the benefits of our collision warning systems and led to multiplier effect with other customers.

We are also encouraged by our [indiscernible] program on large open vehicles like dumpers, with many pilot programs turning for this new program. One of our most strategic pilots recently turned into its production program.

With that I will turn the call over to Amnon who will discuss longer term development around autonomous driving.

Amnon Shashua

Thank you, Ziv. Business opportunities around level 3 to 5 autonomous vehicle programs continue to develop at a rapid stage – rapid pace. Starting up with REM, all open items related to the first definitive agreement with one of our major OEMs have been closed, subject to internal approvals we expect to announce details shortly.

The complexity and uniqueness of this agreement caused some timing delay, but we are very pleased by the result and believe it can be used with other REM partners. We expect several more major OEMs to join based on discussion we have had over the past month.

Additionally, discussions with mapmakers continue to progress well and an MOU with one of our mapmakers is expected soon. On the fully autonomous side, we announced a partnership with the Delphi during the quarter to develop a level 4 autonomous vehicle system. The platform will be marketed as a turnkey system to multiple OEM. As Delphi mentioned on their recent earning call this product has already seeing significant interest.

We were awarded a level 4 autonomous system with a non-traditional OEM. This program is expected to launch into late decade timeframe. There is an additional level 4 autonomous production program with a large volume OEM that we are supporting and we hope to be able to disclose details in the near term.

Finally, we have made substantial engineering progress this year on the first key [ph] autonomous rising pillar, rising policy. We recently published a white paper which can be found on our website and we intend to make this a focus of our CES activity coming up in January. I'd like to highlight that to REM and driving policy represent a major organic expansion to Mobileye's product offering, neither of which was envisioned by the market 12 month ago. Based on customer interest it is clear that our unique approach in these important areas will enforce its Mobiley's position of a critical enabler of next generation transportation.

With that, I'll turn it over to Ofer to discuss the financials.

Ofer Maharshak

Thank you, Amnon. I will now walk you through our financial results for the third quarter of 2016 which were released earlier today and then provide our guidance for the remainder of 2016.

Note that I will discuss non-GAAP numbers which exclude the impact of share based compensation and direct you to the reconciliation of GAAP to non-GAAP measures contained in our press release. This quarter consistent with Q2 and in line with some SEC guidance, we have added to our non-GAAP number the effect of tax as it relates to share-based compensation.

Our non-GAAP number exclude the impact of share based compensation in the applicable P&L line and the tax effect associated with it in the income tax line. In our earnings press release and summary financial tables, we also adjusted the non-GAAP presentation for all presented reporting periods to show the tax effect of share based compensation.

During the third quarter of 2016, total revenue was $94.9 million, an increase of 34% versus the prior year period. OEM segment revenue increased to $72.6 million from $60.8 million last year, representing 19% increase. As always, our OEM revenue growth is associated with new program launches and the addition of new models to previously launched program.

In this quarter, in addition to growth, we have seen and increase in ASP from $43.5 in the third quarter of 2015 to $45.5 in this quarter which also contributed to the OEM revenue growth. Aftermarket revenue contributed the remaining $22.3 million of total revenue in the quarter. Aftermarket revenue increased 128% on a year-over-year basis.

The growth resulted primarily from the success of our long-term strategy of fleet penetration based on investment in many pilot programs, regulatory incentives and the combination of these two factors. This continues a trend which is noted since late in Q1.

Drilling down further into some of the drivers of Q3 revenues, EyeQ chip volume increased 15% year-over-year to 1,553,000 EyeQ units from 1,351,000 units last year. The down tick in unit’s growth from the past few quarters is a reflection of the major program launches during 2015, primarily with GM, Audi, HKMC and Nissan which provided meaningful financial impact started in the third quarter of 2015. As we have communicated in the past 2015 launches are not as major as the 2016 launches.

Our OEM ASP for the third quarter was $45.5 compared to $43.5 during the same period last year. The increase in ASP this quarter was primarily related to the mix of deliveries, which reflected a higher portion of pedestrian autonomous emergency brake. As a reminder ASP depends upon the complexity of features and fluctuates among the quarter. We continue to expect annual ASPs for ABAD products to modestly trend up over time as less complex legacy programs are replaced by the more advanced features bundled for recently awarded programs.

Turning to profitability, during the third quarter gross margins increased to 75.5% from 74.3% in the third quarter of 2015. This increase despite the unfavorable mix between OEM and aftermarket is the result of both increased OEM, ASP, as well as improved margin in the aftermarket.

Total GAAP and non-GAAP net operating expenses increased 64% and 54% respectively compared to the third quarter of 2015. As a percentage of revenue, GAAP and non-GAAP net operating expenses increased to 44% and 23% from 36% and 20% respectively, compared to the same quarter last year. The year-over-year increase in GAAP net operating expenses results mainly from grant of options to employees and management.

Back to driving increases in GAAP and non-GAAP net operating expenses, mainly includes continued investment in research and development. We successfully recruited many new engineers to support and contribute to substantially expanded business opportunity for higher levels of autonomous driving on all three elements, sensing, REM and driving policy.

Additionally, as we noted in the prior earnings call, we began this quarter to recur expenses related to the design work of our EyeQ5 system. Finally, we incurred approximately $1.3 million of unique expenses in Q3 but we do not expect to continue.

These are related mainly to tail adjustments, legal expenses and business [indiscernible] GAAP net income was $27 million, representing 28.4% of revenue, compared to $24.2 million, representing 34.3% of revenues in the third quarter of 2015.

Non-GAAP net income, which excludes the share based compensation net of tax in the amount of $19 million for this quarter and $10.6 million for the same quarter last year, came to $46 million in 2016, up 32% compared to the same quarter in 2016.

Non-GAAP net margin of 48.4% in Q3 of 2016 was lower than the 49.2% in prior years, primarily reflecting the non-recurring expenses incurred in this quarter, while the GAAP net margin also reflected the increased of share based compensation as a result of option grant.

Our GAAP tax expenses $74.7 million and non-GAAP tax expenses excluding the tax effect of share-based compensation down to $4.8 million. GAAP effective tax rate of 14.8% is the result of share based compensation expenses which are largely non-deductible expense, while the non-GAAP effective tax rate is 9.5% this quarter. We continue to expect long-term non-GAAP effective tax rate to be approximately 10%.

Turning to the cash flow, during the third quarter we generated $38.6 million from operating activities and $36.9 million as non-GAAP free cash flow. This compares to $26.2 million and $25.6 million respectively in the third quarter 2016.

Non-GAAP free cash flow represents cash flow from operating activities minus capital expenditures at the amount of $1.7 million for the third quarter of 2016 and $0.6 million for the third quarter of 2015.

Our non-GAAP free cash flow generation reflects one of the plans of our highly scalable business mix, just to reiterate, quarterly cash flow can vary due to timing of working capital requirements and capital expenditures requirements.

I'd like now to finish with some thoughts regarding our financial outlook for the full year 2016. We now expect our total 2016 revenue to be at the high end of our previous guidance at $344 million to $350 million, representing approximately 45% year-over-year growth. This adjustment results from the higher than expected aftermarket volume that has been sustained over the past few quarters. Aftermarket revenues are expected to represent approximately 21% of total revenues for the full year.

As a reminder, we view and manage our business on an annual basis, as our quarterly results can fluctuate due to the timing of orders and the timing of introduction of new vehicle models containing our product.

As so net income, we also now expect our full-year non-GAAP net income guidance to be at the high end of our previous guidance range of $167 million to $170 million which translates to non-GAAP EPS of $0.71.

With that, we'll be happy to take your questions. In the interest of time, and to allow as much participation as possible, please limit your questions to one. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question today comes from Rod Lache from Deutsche Bank. Please go ahead.

Rod Lache

Hi, everybody. I was wondering if you could talk a little bit more about expectations for REM. We look forward to hearing the details about that. But can you give us any high-level insight into what your expectations are there?

And you had to a number of proof-of-concepts going with automakers, can you give us - with other automakers and could you give us an update on where you stand on those, have they validated, what they need to see, I guess, in other words that you still believe that there is going to be a series of commitments from other auto OEM following this pattern agreement?

Amnon Shashua

Hello, Rod. This is Amnon. So nothing has changed on the corporate. We believe that the first contractor with Signature is imminent, as we mentioned, our discussion with other OEMs are going very well and so with the TOC [ph] And we believe there is going to be a number of additional partners that will come in shortly after we signed the first contract.

Our discussions with the map makers is going very well. The first MOU is going to be signed imminently and things are going very well and there is lot of progress since last quarter and we hope to share some of the details once we signed the first contract.

Rod Lache

Okay. Great. And just really quickly, Ofer, I don't know if you can comment on this, but obviously you've had a nice uptick in ASPs years, there's anything we should read into this vis-à-vis the outlook and as we're thinking about the outlook for next year?

Ofer Maharshak

I think that what happened this quarter is purely what we've been saying all along with our mix, going into pedestrians mainly and more sophisticated bundles and the mix is also a result in every quarter. I think overall for year 2016, it's in line with our guidance of modestly increase compared to 2016. I can't say anything on 2017; we are in a process – in the budget. I think that we always provide our long-term goal, but there is going to be modestly increases in the ASP.

Rod Lache

Okay. Great, thank you.

Operator

Your next question comes from Chris McNally from Evercore ISI. Please go ahead.

Chris McNally

Hi, guys. Chris McNally Thanks for taking the call. You mentioned you know, five level 3 customers and an increase demand going forward, can you just maybe discuss the general attitude of the mass makers and when we talk about semiautonomous are we really talking about, you know, just a more advanced level of traffic jam assist or is this true hands-free where we'll be using a multi-focal chip with fusion?

Amnon Shashua

Hi, Chirs. This is Amnon. So talking about level 3, two hands-free, but limited only to the highway condition to allow roads and we are talking about tools around sensing, in some cases a multi-focal or trifocal sensing in trans and then a radars and sometimes only lidars and sometimes radars and lidars just around. When we go a level 4, then we have eight camera systems in addition to radars and lidars. But its level 3 means it’s truly hands off but limited to first integral.

Chris McNally

Okay. And so then we should expect that sort of the volumes that should come before sort of the level 3 ultimate highly driving that you talk about with BMW in 2021. And then also just a follow on, is it fair to assume that the ASP's associated with multi-focal will continue to be something like you’ve mentioned in the past, you know multiples of current or maybe three x the average ASP?

Amnon Shashua

That’s right. The multiples are much higher than the current ADAS - ASPs. As consistent of what we said in the past.

Chris McNally

Okay. And then just on the timing, how soon could we start to think about sort of the level 3?

Amnon Shashua

Level 3 the first program start October 2018.

Chris McNally

Perfect. Thanks so much guys.

Operator

Your next question comes from Brian Johnson from Barclays. Please go ahead.

Brian Johnson

Yes, good afternoon and good morning. Just want to follow up on that with two questions around level 3. First, since the controversy over in early adopter so-called auto pilot system, how are the more traditional OEMs thinking about level 3 and do they see it is really a niche features or something core in luxury and will it go to mass market?

And second and related to that is like your views on the new NHTSA voluntary guidelines, what kind of work that involves for both you, your level Tier 1 partners and your OEMs? And then where you think you are in terms of just being able to comply with some of – excuse me, the detailed data requirements and disclosures that NHTSA is contemplating?

Ziv Aviram

So as for NHTSA all those requirements are handled here in a very positive manner, it doesn’t really affect our day by day business. We naturally comply with these requirements and I think it's a good thing. As for their how the industry sees the level 3, at the moment as a premium feature and just like any premium feature over time it can trickle down to lower segment vehicle. So at the moment all the programs we have are for very high premium models.

Brian Johnson

Okay. And is there any worry that the NHTSA requirements will cut off level 3, or it’s just a matter of testing driver education and disclosure…

Ziv Aviram

So the fact that it’s limited to allowable roads and these roads would also be maps using REM technology. It’s also - and talking about sensing which is 360 degree, it’s not only front sensing those also redundancy in sensing, in some cases there is redundancy in hardware. So it’s much more advanced and the current semiautonomous that are out there.

Brian Johnson

Okay. Thank you.

Operator

Our next question comes from Joe Spak from RBC. Please go ahead.

Joe Spak

Thanks everyone. The first question is on the non-traditional OEM level 4 announcement, is there – can you tell us anything about maybe the region, and also what exactly you are providing is it fair to think about it similarly to the BMW announcement?

Ziv Aviram

What we are providing is that eight camera system they are going to be radars and lidars, REM technologies also is going to be included, as for more specific information about the nature of this non-traditional manufacturer we cannot – we are not at liberty to provide more details.

Joe Spak

Okay. And then the second question is going back to the regulatory front, I recognize its very early days, but I think you guys are fairly plugged in from a lobbying [ph] perspective, is there any sense or concern about a change in the US approach to regulation and to autonomous driving in general, post the election here?

Ziv Aviram

No, we think that autonomous driving has a very, very big economical value going into the future and the regulators and any administration the next thing that they want to do is to impede technological developments and impede economical development, so we don't anticipate any change.

Joe Spak

Okay. Thanks a lot guys.

Operator

Our next question comes from Emmanuel Rosner from CLSA. Please go ahead.

Emmanuel Rosner

Hi, everybody. I wanted to ask just first clarify where you are exactly with your you’re your discussion about the framework REM agreements, I didn't catch everything at the beginning, it sounded like the contract is basically done, but there is still some approvals, can you just maybe go back and say what still needs to happen for this thing to be final?

Ziv Aviram

What we basically said that there are no open tickets anymore and the Signature is imminent.

Emmanuel Rosner

Understood. And then what sort of clarity do you expect to provide investors on sort of – I guess, what level of detail on this opportunity, is that we should be expecting some sort of quantified financial opportunity, like what's the – what sort of the level of disclosure you would be allowed to discuss with us?

Ziv Aviram

The level of disclosure is still to be defined, definitely there will be confidential element, neither us or OEM is part of this agreement, we'll be willing to provide, I don't see us providing any financial information. I think that is not the major point of the REM technology, any financial outcome that will come is a nice dual strategy but it’s not the major thrust of this activity.

The major thrust is to be able to solve a really big problem of building, and updating high definition maps, doing it automatically in a cost efficient manner, leveraging the fact that OEMs have large fleet of vehicles and doing it in a well force manner and that will reduce costs considerably. It is an alignment - the potential here is to align the entire industry behind a single idea that – there are many dimensions to it and the financial one is the least important, so we're not going to say anything financial.

As for more details about the business model, and so forth it is still to be defined what level of exposure we are going to give. But there is going to be a joint press release between us and the car manufacturers and what will be the content is still to be defined.

Emmanuel Rosner

I look for tuning in. Just final follow-up on this, on the back of it sounds like you are expecting a lot of other automakers to need to sign on to it and then obviously you talk about - you spoke about an MOU with the mapping company.

Can you just maybe refresh us what's reflect the set of opportunity in terms of the number of automakers and I know it's been a steadily going up, but what you know - how many are looking at it interested and could eventually sort of like join a consortium?

Ziv Aviram

There is a large number, instead of saying exactly what is this number because it’s being modified, as we go we believe that by the end of 2017 most of our existing customers which basically include the majority of car manufacturers and the plan will be part of this initiative.

Emmanuel Rosner

Great. Thank you very much.

Operator

Our next question comes from Tavis McCourt from Raymond James. Please go ahead.

Tavis McCourt

Hey, guys. Thanks for taking my question. I just want to confirm, so you talked about the non-traditional OEM, the new level 4 agreement, was there another level 4 agreement you signed in the quarter for a total of four now, is that correct?

Ziv Aviram

That's right. We have the four – level 4.

Tavis McCourt

Can you give any details on that fourth one?

Ziv Aviram

No, I cannot provide more details then what we said in the script.

Tavis McCourt

Okay. Fair enough. And then on – obviously driver policy is something you are spending a lot of resources on right now. I guess, how should – if we think about REM obviously the point there is largely solving a problem and driving Mobileye chips onto cars, driver policy, how should we think about the monetization of those development efforts relative to kind of the overall cost structure of autonomous vehicle?

Ziv Aviram

Driving policy is a very crucial technological pillar that is necessary to drive a economy of the cars, I think the driving policy is riding intelligence, what goes on behind making decision, you have the sensing stage, all the vehicle and road movers are around you what are they doing and you need to make a decision based on your goal, based on your route what to do, how to negotiate with others without the car.

And what you see today, what is out there today is very simplistic in terms of advising intelligence, where anything semi-complicated happens, the human drivers – the monitor behind the steering needs to take a control and this is un-expectable if you want to build a business of mobility on demand, these vehicles need to maneuver in complex areas for a long period of time without any human control.

So this is a crucial technological pillar, and it will have its monetization, in spite our EyeQ chip. In addition to monetization as a technological product, there are many elements there that are related to how you validate the performance, also aligning the industry around A solutions and more details and color would be provided during the CES where we are going to focus most of the messages during the CES around the driving policy.

Tavis McCourt

Got it. Thanks very much.

Operator

Our next question comes from Itay Michaeli from Citi. Please go ahead.

Itay Michaeli

Good afternoon. Just to continue on driver policy, and I know we'll talk more about it at CES, but as you have discussions with automakers around level 4 and REM, how receptive are they being initially towards sharing data, both for REM and for driver policy, is there an initial feedback that you can share with us?

Tavis McCourt

The feedback is very – with REM this is all about sharing data and as we have very good, very positive response from many of the car manufacturers we are engaged with around this first agreement that we're about to sign. As with driving policy, we have our first strategic customer on that and we are in discussions with the other car manufacturers and more details will be provided at the CES.

Itay Michaeli

Great. Understood. A very quick one for Ofer on the on the ASP's in the quarter, can you roughly share if you have it with the mix of EyeQ3 chips were in the quarter versus EyeQ2?

Ofer Maharshak

As we always noted, its not the hardware itself to be determined, but the ones to determine that’s [indiscernible] and the features in this quarter the mix was very positive, so more complex features such as pedestrian step, not just whether that we do specifically.

Itay Michaeli

Okay. That’s just helpful.

Operator

Our next question comes from Brad Erickson from Pacific Crest Securities. Please go ahead.

Brad Erickson

Hi. Thanks for taking my question. First, I guess, when you are having discussions with your OEM customers around ADAS pricing, particularly pedestrian breaking for programs I guess, three years out, are you finding any difference in sort of their appetite for processing based on whether that program is intended to be standard versus optional?

Amnon Shashua

This is Amnon, our focus there is always in appetite for reducing pricing, which is how the world works. But in many of these programs, in almost all of these programs there is an outlook of a very diverse set of features. There are feature that are necessary to get the car ratings and there are all sorts of price pressures to get the best price possible, on other hand there is a mix of features that have a very attractive monetization around them which drives our ASP higher.

Brad Erickson

Got it. And then I guess, when you are establishing these longer agreements for level3, level 4, et cetera, what kind of assurances are these – are your OEM customers giving you terms of volume, do you have kind of firm expectations that they will make pricing compelling enough to drive option, what's your visibility there, as you obviously forced to sort of plan your organization to support this business beyond 2019?. Thanks.

Amnon Shashua

The ability is the same, as the visibility of ADAS. Customers do not commit on volumes, they provide the projection and based on that you need to make your calculations. It’s a tough business autonomous. There is no guarantee, the only guarantee is that once you go first you are going to launch and you know, exactly when you are going to launch and in this industry timing is everything, launches down to delay, at least the majority of car manufacturers won't like that. So the only guarantee you have you got first, you know that you are going to launch. Few years later based on the timelines.

As for volume, no, you received their projections, you know what car model is going to be, you know if its conducted, not conducted, and you do your calculation and if you look at the history of the Mobileye, since our IPL so it was August 2014 we never missed the quarter. So we have enough tools to do the right fixed projections.

Brad Erickson

Got it. It’s very helpful. Thanks.

Operator

Our next question comes from Jason Ader from William Blair. Please go ahead.

Jason Ader

Thank you. I have a clarification question. First, you previously talked about having three major autonomous announcements this year, just want to make sure I get that right. So BMW and Delphi, the third one I think is the non-traditional OEM and then who is the fourth one with, I guess I am not clear on that?

And then on the question for the 2017 modeling, can you talk about some of the ADAS launches that you have in 2017, whether you expect the number of launches to be more significant or more major than 2016 and whether this could reaccelerate OEM sales in 2017?

Amnon Shashua

OEM sales are already accelerated, given the existing programs, so the existing programs they have to ramp up, the Travelon [ph] launched in 2015 continues to generate both in 2017, '18, '19 and to ramp up and it goes up.

I think there are a number of launches in 2017, I am not sure that – not exactly sure about the number of launches, but there are launches in 2017 and those launches are the existing type of autonomous [ph] is the same mix that we have today with NCAP and additional features, but nothing in terms of semiautonomous or autonomous for 2017, semi is…

Jason Ader

So Amnon, do you think 2017 OEM sales growth will he higher than 2016 based on just the accumulation of the projects, plus the launches in 2017 are you ready make that kind of…

Ofer Maharshak

Jason, this is Ofer. As I previously mentioned we are now doing the planning of the 2017 budget and we are not at liberty to providing information when we are still in process. Information, collecting information and then ultimately are proven '17 budget, I will say however, that we previously said, that we are now going to set the sales targets for 2019 we said that most of the programs, and definitely the major ones and the rollout of more and more medals under programs that we have launched will happen so in 2019 and therefore we do not expect that it will be similar growth in all of the yeas. So we don’t - nothing has changed in that terms and we don’t see any changes right now for the rapid growth

Jason Ader

Okay. And then on the autonomous announcements, Amnon, could you answer that part?

Amnon Shashua

We did not give the name of the fourth name, we are not at liberty to say …

Jason Ader

Okay. But the third one is the non-traditional OEM is that correct, the third one that you had originally talked about?

Amnon Shashua

That’s right. And there is fourth one, the name, we cannot give you.

Jason Ader

So you can't tell us if it’s a non-traditional or regular…

Amnon Shashua

It’s regular. It’s traditional to high volume OEM.

Jason Ader

Okay. Thank you.

Operator

Our next question comes from William Stein from SunTrust. Please go ahead. Please go ahead.

William Stein

Great. Thank you for taking my question. I'm wondering if you can comment on the sustainability of growth in the aftermarket category. It's a very big potential market and in particular, if you could provide any details geographically. I think in the past there have been two countries that have had more significant adoptions and any update on that would be helpful?

Ziv Aviram

So we always said that the aftermarket is a little bit tougher to predict. We need to chase customers. We are doing a lot trade shows in order to show how effective the systems are. We believe that this a compelling argument when it comes to regulators, insurance what is the potential of traffic accident and we continual walk throughout the world in providing pilots, we've heard recently about the pilot distributed in China. We are walking in many countries in order to show what is the upside of adopting the aftermarket. So that’s sustainability. This is a very good business. This is a very interesting growth this year. It’s still early to say exactly what it will be in 2017.

William Stein

Thank you. And one other question relates to a lot f noise that Nvidia has been making about this market and in particular their accounting deep learning as an alternative approach to solving this problem. And I think they would cast. Mobileye's work as more deterministic in the way that you’ve that sort of approached object identification, et cetera?

Does Mobileye's approach technology wise change significantly as you move into level 4 and 5, are you approaching this from the same deep learning perspective, or is it difference that Nvidia highlights less meaningful than they claim?

Amnon Shashua

Okay. This is Amnon. Let me be clear, we have launched deep learning algorithms like in free space, like in holistic planning. A year and a half ago all our code today is all around the deep learning. I think that we are the - we launched the first deep learning algorithms on embedded systems, not only in autonomous, but I think of many industry. So saying that we are a conservative approach algorithms and somebody else is doing Eye [ph] this all what we do, we do artificial intelligence.

I find sometimes it’s hard to grasp Nvidia's statement. I think Nvidia is not a competitor to the Mobileye. Nvidia their competition is Intel, its Samsung, it is NXpedia, Qualcomm, they provide high-performance computing, autonomous driving is not about the computing its about the software, its about the algorithm, there in Nvidia is not a player and I don’t think that ever mentioned that they are a player there.

So high performance computing is nice, but what is - what you need to put there is the content and those are the algorithms and this is what we do for living.

William Stein

That’s very helpful. Thank you.

Amnon Shashua

Thanks, Will. From now please limit questions to one, so we can get everybody in the queue, by the time it’s the half the hour. Thanks.

Operator

Our next question comes from Charlie Anderson from Dougherty & Company. Please go ahead.

Charlie Anderson

Yes. Thanks for taking my question. I'll just dig on the last one, you mentioned Nvidia not necessarily a competitor. I wonder, in these level 3 wins that you have in level 4 wins what is the level of competition that you're seeing, what type of competitors, any color there will be helpful? Thanks.

Amnon Shashua

This is Amnon. At the moment we don't see competitors. In the programs that the level 4 there is an EyeQ5 chip and there is a companion chip. For example with BMW there is a Intel chip, in some other programs like with the Z class its Audi, there is a companionship with an Nvidia chip, that is why we said Nvidia is not a competitor. There is no issue of having programs with - there is a Mobileye chip and there is another vendor of high performance chip.

Charlie Anderson

Thanks so much.

Operator

Our next question comes from Rich Kwas from Wells Fargo. Please go ahead.

Rich Kwas

Hi, good afternoon and good morning as well. I just had a question on the REM activity. My recollection was that there is potential some of these REM programs particularly with your US-based customer it was named earlier in the year could start launching here in 2016 that’s not going to happen.

But just curious in terms of as this – what's this agreement assigned, does this kind create a snowball effect and you know in terms of the $1.1 billion revenue forecast for '19 ,any change in timing around road experience management revenues as it relates to that going forward? Thanks.

Ziv Aviram

So what experience management revenues are going to happen, and I think they are going to the significant, we simply do not want to mention financials on them and we wish that market not to include in their projection. Because our goal program is beyond finance and we will not talk about the financials.

As for launch of REM, I can definitely say that REM is already included in production programs in 2018. What we said about 2016 was that’s not going to happen, but it could happen in 2017 with General Motors, but it's not fixed yet. But what is fixed and that is definite in terms of production programs, REM is going to launch in 2018, at least on two car manufacturers, today even though we haven’t signed this contract on REM with other car manufacturers,

Rich Kwas

Okay. Thank you.

Operator

Our next question comes from Samik Chatterjee with JPMorgan. Please go ahead.

Samik Chatterjee

Hi. Morning. So I just want to ask one question which is just going back to your discussions that you are having with the OEM customers on fully autonomous programs and sort of wanted to get your thoughts as to how they deciding on the appropriate software, whether should go for like a turnkey solution that you are working on with Delphi for their fully autonomous program or should they pursue like an independent program development with you, other key criterions like, what are they evaluating, are they evaluating time, cost, et cetera, what are you hearing from them on that aspect?

Ziv Aviram

The program with Delphi is generating a lot of interest from car markers and that’s why I'll provide more color during their earnings call. At the moment, we don't yet have an official OEM being signed end, so is one very close to, but not yet. But all our other programs are between us and OEM directly. In one of the programs there is a Tier 1 associated, in one of the semiautonomous, and the level IV program it is between us and the car manufacturer.

Samik Chatterjee

Okay. Got it. Thank you.

Operator

Our next question comes from Richard Hilgert from Morningstar. Please go ahead.

Richard Hilgert

Yes, thanks for taking the question. Good afternoon and good morning to everyone. I was just a curious if you could maybe talk a little bit about Renault announcement earlier this month. They have announced a partnership with a computer vision company called Chronicam [ph] and n something about being bio inspired and you know, mimicking Eye basics, how does this compare with what it is that Mobileye is doing, this was a competitor that I hadn't seen listed before in this space. Is there any kind of details you can talk about?

Ziv Aviram

It’s not a competitor, it’s an imager supplier and then they have an innovative imager. Its camera itself, and if it tends out then we'll also use their imager in our programs. We are working with imager suppliers like ON Semi, Somni [ph] OmniVision and we are working with them on the roadmap on a pollution of imagers. Today there is the image of 1.3 mega pixels, in two years there will be 1.7.

We working with an imager suppliers on an innovative design with a 7.4 mega pixel imager with analog binning that will trade off resolution and license activity and that is targeting launches of 2019. So there is a lot of activity on imagers and the company - that Chronicam they are also working on an imager, and if it works out, and we will be happy to work with that imager supplier as well.

Richard Hilgert

Okay. Great. Thank you very much.

Operator

And at this point, I'll turn the all back to management for any closing remarks.

Ziv Aviram

Thank everyone for joining. We'll talk to you soon. Have a good day.

Operator

This concludes today's conference call. You may now disconnect.

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