Intel Corporation (INTC) Earnings Call Transcript & Summary

Welcome to the Intel Mobileye conference call regarding the acquisition of Moovit. Today's call will be led by the CEO of Mobileye, Professor Amnon Shashua. Joining him is the Co-Founder and CEO of Moovit, Nir Erez; and Intel Capital President, Wendell Brooks. Following opening remarks by Professor Shashua, we will take questions. [Operator Instructions] I will now turn the call over to Trey Campbell, Vice President of Investor Relations of Intel. Please go ahead.

Thank you, operator, and welcome, everyone, to the Intel Mobileye conference call to discuss the Moovit acquisition. Before we begin, let me remind everyone that today's presentation may contain forward-looking statements. All statements made that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially. With that, let me hand the call over to Professor Amnon Shashua, CEO of Mobileye.

Welcome, everybody, to answer this call. So I'll give a bit of a context. Back in January -- last -- back in November last year, we had an Investor Day where we officially announced that Intel through Mobileye is going all the way from self-driving system to Mobility-as-a-Service, taking control of all the vertical stacks from a self-driving vehicle, mobility intelligence, fleet optimization, teleoperations, customer facing. All the nuances around it and all the business models that are derived from it is part of our road map. And we have announced a number of deals all targeting early 2022. The first one that we announced was with a joint venture with Volkswagen focused on Tel Aviv and then later all of Israel or early 2022. Few hundreds of self-driving vehicles without a safety driver will be providing mobility service. Then we announced a contract, City of Daegu in South Korea, with RATP in Paris and also NIO with -- in China. All of those are focused on 2022, and we have 2 more contracts like this in the pipeline focused in Japan -- one of them will be focused in Japan, another one also focused in France. So we are all geared up to build those elements of the stack. In terms of our time line, the maturity of our self-driving stack, our confidence has only grown in the past 6 months. We are now fairly confident that we'll meet the time line from a self-driving system stack. We have been working quite a lot to study both the business of Mobility-as-a-Service, come up with understanding of where are the pain points, where are the value points, what kind of value propositions that we can make. It's not only customer facing, it's not only B2C but also B2B value propositions. And the COVID-19 in that respect is immaterial, and then I'll explain why. Now in the times of a crisis, you either pull back or you lean in. And this is an example of leaning in because we see 2 fundamental trends that are not going to change. One is mobility. People still need to move from place to place whether there is COVID-19 or there isn't COVID-19. And the movement of people is a big ecosystem. It's public transport. It's micromobility. It's taxi. It's shuttles. It's buses and so forth, and this would stay. Second big trend is automation. The movement from labor intensive to capital intensive where capital is compute. This is an unprobable trend, and mobility requires lots and lots of compute. And this is exactly where our core assets -- Intel's core assets and Mobileye's core assets rely. We are building silicon. We are building very, very sophisticated software for interpreting information coming from cameras, radars, LiDARs, decision-making in the car, safety models, hardware, sensors. All of that go into a self-driving system and then the remaining layers of the stack for Mobility-as-a-Service. And this is where Moovit comes in. We invested in Moovit 2 years ago as part of our long-term strategy of studying this company and understanding the value that it can bring into our longer-term vision. And the timing of the acquisition was done based on our confidence and maturity of our technology going forward for Mobility-as-a-Service. So we believe today that the time line of 2022 is a very realistic time line. And now taking back the time of integration that will be required to integrate Moovit's value propositions into a Mobility-as-a-Service requires that acquisition would be done now. As Moovit -- Moovit is a very, very impressive company. They have a trip planner with 800 million users, about 40 million active -- 50 million monthly active users, 3,500 cities, about 102 countries. This is really a formidable data company with very interesting value proposition and monetization. So even as a standalone company, it's a very, very attractive company. But using their data and their insights into a mobility intelligence layer and a customer-facing layer is key to our global road map of going from a self-driving car into a service. So I'll -- I think I'll stop here unless there is -- Wendell, do you want to add a few words from your perspective, ICAP's perspective before we go to Q&A?

Yes. I would just add -- and thank you for those remarks, and thank you for everyone gathering today. Relatively unique piece of M&A on a relatively unique company. The opportunity for us to be able to work with Nir and his team on a more close basis and to protect the data set that he's created and the network of data gathering that he's created really will accelerate our opportunity to attack the $160 billion Mobility-as-a-Service market. In a COVID-19 world, we were fortunate to know Nir and his team and get to a transaction relatively quickly even though we've all been working from home and doing it via Zoom, WebEx and Skype. It works very well, and we're excited. We know the company well, and it's a great fit with Amnon's strategy and way forward as he just talked about. So why don't we open it up to questions? I think this is probably the best way to go from here, Trey.

Sounds good. Let's go ahead and start questions.

[Operator Instructions] We do have a presubmitted question. In terms of the timing of this deal, why now?

The timing...

Do you want to -- go ahead.

I'll start and, Wendell, you complete.

Yes.

So in terms of timing of the deal, the timing is our launch in 2022 of self-driving vehicles in a Mobility-as-a-Service context. We are now in middle of 2020. We have about 1.5 years to fill in the layers of the stack above a self-driving vehicle. This includes mobility intelligence, which includes data about planning and fleet optimization, how to place vehicles. You need data from movement of people, usage of transportation from people, how to place your vehicles in an optimal manner, minimize the number of vehicles that you need to meet a demand. All of this is called mobility intelligence, and Moovit data is very, very critical in that respect. The customer facing part of the Mobility-as-a-Service is also a very, very critical and complex piece of the puzzle. This is where Moovit also comes to play with their 800 million users. Moovit also is an aggregator of mobility where you can not only plan your trip but also be offered ride-hailing services. So within that app, we will be able to offer also a robotaxi or roboshuttle in that respect. So all of this requires time to integrate. So 1.5 years of integration is a very, very reasonable time frame. Waiting longer would have jeopardized our readiness for 2022. So this is the timing. And as I said there before, our confidence in the maturity of our self-driving technology is such where we believe that we can meet the time line. This is why we need to make sure that we have all the other layers of the stack ready for a Mobility-as-a-Service offering, and this has driven the decision to acquire now. Wendell?

Yes. I'd just add, I think Bob Swan has been very consistent in his criteria for inorganic growth within Intel, and I live by that with both Intel capital equity investing and in the M&A strategy. We're going to seek out areas where there are technology inflections that we think our technology can exploit and take advantage of those inflections. We're going to look for big markets that have large TAM that we can grow into, and we're going to generate a positive return for our shareholders. If we meet those 3 criteria -- and I think with Mobileye and with Moovit, we tick all 3 of those boxes, and I can go into them in a little bit deeper detail, but we're going to be front footed in this global pandemic where there are opportunities that further our existing strategy. And I think in this example, the opportunity -- Nir and his team were going to undertake another round of capital raising. When the pandemic hit, it caused us to continue discussions about how we might work more closely together and build on our existing relationship. And that turned into an M&A discussion that I think benefit both companies. So the tech inflection here is clear. It's Mobility-as-a-Service with $160 billion TAM. It's an opportunity to accelerate and pull in our access to that market going forward, and we took advantage of it.

Our next question comes from the line of Dan Galves with Wolfe Research.

I have 2 questions. The first one relates to your own mapping strategy and just wondering if there's a -- any help from Moovit on the REM product and vice versa. Does the collection of road data through REM, does that help Moovit's product at all? And then I have a second one.

Okay. So we'll start with this. Yes, there is definitely synergy between the kind of data that our REM products collect, especially we are working with the public -- with the municipalities on doing what is called infrastructure survey, where you can provide information about the road conditions, about traffic time conditions, also about traffic conditions like places of jaywalkers, areas that could be dangerous for pedestrian. All of these are collected automatically by our REM products. On the other hand, Moovit is also collecting a lot of insight that they sell also to municipalities, about insights that are used for city planning, where to place bus stops to optimize traffic flow movement -- movement flow. The combination of these 2 pieces of insights could be a very, very powerful value proposition to municipalities, and this is one of the things that we would pursue as coming with a unified value proposition to municipalities and make both companies stronger.

Great. The second question is more on the topic of kind of how consumers will consume transportation in the future and multimodal. I mean obviously AVs could create much more efficient transportation than current ride share and cheaper. But the way that consumers kind of can interact on their route planning, we've talked to people that see mapping providers and kind of route planning providers as kind of a natural platform for how consumers will plan their trips, will pay for their trips and will kind of interact with transportation. Do you agree with that, that this could be like a browser of transportation? And is that part of the strategy?

So I'll start and then let Nir Erez, the CEO of Moovit, to complete. Moovit's app started as a trip planner, but it's moving towards an aggregator, where you are not only planning your trip but you are being offered additional mobility services like an Uber or a Lyft. Later, it would be a robotaxi. So it will be acting as an app very, very similar to what you described right now. But I'll let Nir maybe provide a bit more color into this topic.

Thank you. Absolutely. In your question comes an assumption that map is still crucial for people to plan their trip. And as we move forward, definitely with autonomous vehicles, people do not need to drive. I mean the vehicles will do the driving and routing to the destination. So the map itself becomes less and less important. What becomes way more important is the ability to aggregate multiple options of the service into one platform that people will be way more focused on the time of the trip, the cost and number of switches between different modes of transportation. And we see the trend goes directly to this direction today because even if you combine a ride-hailing service to the train station, then get with the train to the center of the city and take electrical bike, people care less about the map component of it and way more about how these different modes of transportation combines and how much it's going to cost. So I think the focus that we're putting now is way more on the ability to aggregate all different modes of transportation. And then specifically, if we integrate the robotaxi, the autonomous vehicle into it for first mile, last mile and the ability to have a frictionless payment process, that's going to be the winning point for our users.

Your next question comes from the line of Frank Gillett with Forrester.

This is Frank Gillett with Forrester. I want to continue this line of conversation because the aggregator idea makes sense and is already manifest in Moovit's products and Mego and several other players in this space. And I agree with the idea that the customers will focus on sort of time, cost and I think you implicitly said experience, but here's what I'd like you to elaborate on. To what extent will micromobility modes play into the spectrum of options here plus simply walking? And how soon and in what ways will I be able to optimize my trip not just for time and cost but, for example, to get exercise? For some of us, I happen to be one of them, my commute is an important component of my daily motion and activity in hitting my activity tracker goals, so -- and I can even see caring about mapping not because I have to plan the route but because I would like a pleasant route. So give me a sense of the vision from the point of view of Moovit about how expansive this notion of aggregation gets and when and how it moves to orchestration and how much it really becomes an advice and assistance service rather than just a trip aggregator.

Nir, do you want to take it?

Yes. Sure. So I think what -- everything you said is already starting to be combined into Moovit in different levels. I mean we have to take care of the bread and butter first just to make sure we let people understand what's the best way to get from point A to point B. However, it's already available today to put some preferences in your personalization component of Moovit where you care less about walking means if you would like to exercise more rather than you're a senior citizen and walking is very difficult for you. So you can actually set your app to be leaning towards more exercise and walking versus minimize your walking distance. That's one thing. And it even comes to analyzing the different level of altitudes in cities. So if you use city bikes, which are not electrical, I mean, we do care about a hilly route versus more of a flat route. It's really uncomfortable to take a city bike and start riding uphill in San Francisco. So it definitely becomes a much bigger part of the assistance that the app provides users.

Right. It becomes much more personalized. So implicitly, you seem to suggest that micromobility as well as personal mobility, walking or even jogging, will be part of the spectrum. I mean it really suggests that Moovit becomes a retail base or a service, and if I think about the long term here, there's even the possibility that Moovit is an effect of retail brand through which people engage these services even if underneath you're being referred to other parties to provide some parts of the journey. So that's really a highly personalized service, is the vision eventually as opposed to just a convenient app for scheduling robotaxis if I'm understanding it.

It's already happening as we speak. I mean when we just started, the scooter companies felt like they can do it standalone. Today, more and more wanted to aggregate their services into Moovit regardless of the fact that the execution of the ride is going to happen within Moovit. So what you've described is already happening these days.

Your next question comes from the line of Harlan Sur with JP Morgan.

When I think about your full stack approach, hardware, software, fleet management, route optimization, I think about much easier to implement, faster potential time to market, but just as importantly, I'm wondering if global regulators are finding that a fully integrated solution is also favorable. Problem solving, traceability, all sort of contained in one solution would seem to be an advantage. But have you had any feedback from the regulators?

Well, when you talk about regulators in the context of autonomous driving, this is one of the biggest pain points that you have when you think about launching such a service, and 2 years ago, we innovated a safety model called RSS, Responsibility Sensitive Safety, which is a mathematical model finding the right balance between safety and utility. And since then, we have been working with regulatory bodies all over the world to standardize it with very, very strong traction. Some countries have already standardized it like China. Other countries like the U.S., industry actors joined together with us to create programs like in our new IEEE work group to standardize this model. So we are -- we have a very good traction on the regulatory front to meet the 2022 time line such that when we launch a robotaxi or we launch a robotic driver, we would know what the stakes are from a regulatory standpoint. Now your point is taking it even further. You are saying that if we have a fully integrated solution, not just a self-driving system but also the complete service that should make regulatory bodies even more comfortable with the notion of a robotic driver, and I agree with this point, it's really an end-to-end experience from a regulatory experience because you need to take care of teleoperation. You need to take care of monitoring the passengers in the car. It's not just simply selling a self-driving vehicle to an operator. It's much more complicated than that. And the customer experience, the customer-facing experience, the mobility intelligence, all of that also has a safety component to it. So when you think about this end to end, it makes a lot of sense also from a regulatory standpoint. So I agree with your point.

Your next question is from the line of Patrick McGee with Financial Times.

I'm interested in what impacts COVID-19 is having on mobility models. We seem to be moving to sort of the death of sharing. I think about the idea of carriage seating in a robotaxi being pretty much the opposite of what people want right now. Presumably, we'll see the return of people wanting to drive their own vehicles in the coming months, maybe years. How does that impact the Mobileye business model, the Moovit business model?

Well, if you think about the taxi, the taxi driver is kind of a source of concern. So the taxi driver is exposed to all the other passengers that are coming into the car. But when you think about a roboshuttle, a robotaxi, there is no -- there's no taxi driver there, so it should have a much better COVID-19 value proposition than today's mobility. But I would not overstress the importance of COVID-19 in the long term. In the long term, people interact. People interact face to face. People need a company. People need mobility. Owning your own car doesn't solve all your mobility solutions in dense cities like San Francisco, like in New York. Driving with your private vehicle could be a nightmare. So I wouldn't overstress the importance of COVID-19 in the long term. And we're really talking about long term. When we say 2022, 2022 is only the launch of robotaxis. It will peak many years later, so -- and COVID-19 is only today, and I think it will be over much sooner than people expect.

Your next question will go to the line of Megan Lampinen with Automotive World.

Yes. I was interested in hearing a little bit more about what Mobileye might need to achieve its aim of becoming this complete mobility provider. Are there any remaining gaps in your internal capabilities that you'd still like to plug before you can claim to become that?

Well, if you look at the elements of the stack that you need, what you have is self-driving vehicle. You need a vehicle, so we have partnerships for supplying gas vehicles, for example, we announced with NIO in China. Volkswagen also would be supplying gas vehicles. So that part of the stack we have. So now we have a self-driving vehicle. The next is the teleoperation. You need to be able to remotely observe what is happening with the car, especially if there's blockage, and you need to provide some guidance to the robotic driver. This is an area that we're very active. We are working with start-ups. We understand the technology. We may need inorganic growth or we may not. It's not rocket science, the teleoperation. The next layer above that is the mobility intelligence. But what I explained before -- and this is where Moovit comes in. The next layer is all the customer facing, the fleet optimization and customer facing. This is also where Moovit comes in. So when we look at the stack, there are about 9 layers in this stack, and through organic activity and inorganic growth like we did with Moovit, we believe that we have all what we need to meet the 2022 launch.

Your next question comes from the line of William Stein with SunTrust.

Amnon, you have mentioned a few times in this call the concept of fully autonomous experience in 2022, not all that far away as you also highlighted. When Mobileye was an independent public company, there were 2 very clear camps of thought on, let's say, these advanced driver assistance features, the incrementalist view, which suggested maybe someday we'll get closer and closer to full autonomy and then sort of the moonshot approach. Now I realize you've been talking about this 2022 goal for a while, but perhaps you can just remind us, when you're talking about full autonomy by 2022 is Intel/Mobileye providing a fleet or technology to the fleet? And what level autonomy are we talking? Is it Level 5 anywhere around the world under any conditions? Or is it more limited in some geographic or some other [indiscernible].

So I'll kind of -- in a nutshell, Mobileye is active in the full spectrum from driving assist, let's call it, Level 2 and conditional autonomy, let's call it, Level 2+ up to a Level 4, 5. It's a continuum. This continuum has a discontinuity at the point of who is responsible. When we talk about driving assist, the driver is always responsible. So this means that the kinds of guarantees that you need to provide from a safety perspective take into account that the driver is responsible. For example, if there is a false negative in detecting a road user, there's still a driver there who's responsible for taking action. When you talk about Level 3 and above, the responsibility goes to the technology. There is a robotic driver making decision, and this is where the level of proficiency, the level of validation, the level -- the guarantees that you need to provide in terms of the mean time between failures is much, much, much higher. It's orders of magnitude higher. So we are active in this entire spectrum. We're building Level 4 capability. The difference between Level 4 and Level 5 is in the operational design domain. Level 5 means that operational design domain is open, anywhere, everywhere under all conditions. Level 4 means that there could be some conditions under which you'll not provide the service. Could be when it's snowing, you'll not provide a service or could be that you provide a service without taking unprotected left turns. You can think of all sorts of constraints. But within that envelope, you are completely driverless. So there's no driver behind the steering wheel. So the 2022 is Level 4. It's Level 4 and it's geofenced in certain cities. For example, in Israel, it will be geofenced in Tel Aviv. In Daegu City, it will be geofenced in certain neighborhoods of the Daegu City and so forth. But this is just the beginning. The idea of the Mobility-as-a-Service is to expand the number of cities, to expand the number of geofenced areas. We are talking about hundreds of cities ramping up until the end of the decade. But in parallel, our mapping activity is designed to build out the high-definition maps automatically everywhere in the world such that by 2024, 2025, where we both reduce the cost of technology and have maps everywhere, we'll be able to provide this everywhere experience of autonomous driving, which would be relevant for consumer autonomous vehicles, where you buy your own car could be slightly more expensive but you buy your own car and whenever you want, you can sit in the backseat and have the car take you to wherever you go. So this is also part of our vision of our road map. The Moovit acquisition is part of the road map that is about Mobility-as-a-Service, where it's not that we build the vehicle and we sell it, we build a vehicle and then we find value propositions, which are B2B and B2C.

The next question is from the line of Ross Seymore with Deutsche Bank.

Amnon, I wanted to ask a question about the monetization of this. The value of the data is clear on the mobility intelligence side as you just highlighted in answering the last question. But I wanted to see your vision of how Intel/Mobileye is going to monetize this. Is it going to be mainly on the hardware side? Is the service and the subscription side going to continue through the Moovit app? And how proprietary is this going to be? Because I can see the value being extremely high with you wanting to control that value through your hardware side. Or is it going to be something that the third-party subscription model will still apply for the Moovit data itself?

Well, there are 2 respects. There is a Moovit current business and data monetization. That will continue undisrupted. Moovit is going to remain an independent subsidiary, pursuing their own business. We'll help as much as we can to bolster their business, expand their wings and also use their brand and app as part of our longer vision of Mobility-as-a-Service. There's also this issue of how do we monetize the Mobility-as-a-Service. So this is -- as Wendell mentioned, it's a $160 billion market that we estimate by 2030, and we have a very detailed plan, which talks about multi -- very -- double-digit, multibillion dollars revenue and significant gross margins going into 2030. It will start 2022 but going into 2030, and it includes nuances in terms of the business model. We see 3 different business models. One is the vehicle-as-a-service. The other one is ride-as-a-service, and the other one is Mobility-as-a-Service. And customers would be working -- so Mobility-as-a-Service, the customer is the end customer. That's B2C. But the vehicle-as-a-service and the ride-as-a-service, you work with transit operators and with TNCs, traffic network -- transportation network companies, where you supply them a fleet and they do the customer facing. And the vehicle-as-a-service, you supply the vehicle and the mobility intelligence, and they do the fleet optimization and they do the customer facing. So we're talking about a hierarchy of business models with a very, very clear plan of monetization, which would carve a very nice market segment of this $160 billion opportunity.

Our next question is from the line of Matt Hamblen with FierceElectronics.

I think you've clarified pretty well. I mean I just wonder if you'd like to react to the -- when you said 2022 is Level 4, 5, I believe you said that, what's your reaction to Audi backing off of the -- their Traffic Jam Pilot in the Audi 8. I mean that strikes me that we need a reality check about what is doable. And I just -- I mean I covered this as much as I can, but there are a lot of critics of getting to 4 or 5. So I'd just like your reaction.

So I think Mobileye was consistent in all the kind of presentations I gave at the CES, that Level 3 is a very, very problematic niche. Honestly, we do not believe in Level 3 because -- I'll tell you why, because the difference between conditional autonomy, where the driver is responsible to a Level 3 in which the driver has given a significant grace period, say, tens of seconds before a driver needs to take control, the difference from the value proposition to the driver is very, very small. On the other hand, the liability and what the carmaker needs to guarantee between those 2 niches is huge because the driver is no longer responsible. So system cost, redundancies, validation, it's a leap. It's an order of a magnitude leap with a very small value proposition increment. This is why we believe -- and this is how we are working, we believe and the Level 2 and Level 2+, where Level 2+ is really conditional autonomy where the autonomy envelope is ever increasing, more roads, more types of roads and more conditions where you provide more and more value to the driver, but the driver is still responsible. It's conditional autonomy. And then the second niche is the Level 4, Level 5, where it starts with robotaxi, and this is what I explained in the past, that the reason you want to start with the robotaxi is, first, from a regulatory standpoint, it's much easier to regulate a fleet than to regulate the consumer. When you're talking about a robotic agent, it's the teleoperation that you have in a robotaxi. It is the cost that you can absorb a much higher cost of the technology than in the consumer car. So a few years of robotaxi would be the bridge towards the next phase, which is consumer autonomous vehicles, again, Level 4, Level 5. We -- at Mobileye, we do not believe in a Level 3 niche.

Your final question comes from the line of John Pitzer with Crédit Suisse.

Amnon, I just want to talk a little bit about Moovit as an aggregator. I think I understand that. But help me understand, is there a natural tension as you try to vertically integrate this within Mobileye with some of the customers and partners of Moovit today, kind of point number one. And I guess, point number two, can you help me understand how Moovit helps you become a more valuable partner with potential auto OEMs that you're looking to be the engine of their autonomous driving?

With respect to existing customers of Moovit, nothing is going to change. As I said, Moovit remains an independent subsidiary. The services, the value propositions they provide to their customers will remain intact. We are not in the business of blocking others. We are in the business of creating value, not as to unvalue. This is not -- it's not our style, was never our style. So whatever relationships Moovit has with their customers will continue, and we'll try to help and then provide more value. Like the example I gave about providing value to municipalities, the kind of value that REM provides, the value that Moovit provides can be combined into a much stronger value proposition. So that is not going to change. The rest, in terms of what an aggregator value -- what it provides us, it provides us the ability to provide the robotaxi with a Level 4 rather than a Level 5. So a Level 4 has certain limitations of the operational design domain. And when you are outside of those limitations, when you are outside of the envelope of what a robotaxi in 2022 can provide, you would like to provide other services. And this is where an aggregator becomes very, very useful, and this is one of the main value propositions that Moovit, beyond their data, would provide us. Maybe Nir can provide a bit more color. Nir, is there anything to add to that question?

Just to follow up what you just said, we received a full autonomy to keep working with our current partners and even bring others to -- onboard. And it's less than 24 hours since the announcement about the acquisition. We already discussed this with most of our large strategic partners. They're all very excited about that, and they definitely see Intel and Mobileye as a much great support and backup for Moovit to provide more and more information on the platform. We would like to keep our neutrality, if you can say that, in order to bring as much -- or to cover as much user base and geo territories.

All right. Amnon, Nir, Wendell, thank you, and thank you all for joining us today. Operator, could you please go ahead and wrap up the call?

[Operator Instructions] We will now conclude today's Intel Mobileye conference call. Thank you for participating. You may now disconnect.