AMBA - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen and welcome to the Ambarella Second Quarter Fiscal Year 2019 Earnings Conference Call.

As a reminder, this call is being recorded. I would now like to introduce your host for today’s conference, Ms. Deborah Stapleton, Investor Relations. Ms. begin. may you Stapleton,

Deborah Stapleton

Good financial welcome you results us Liz. fiscal for Ambarella’s quarter today. XXXX conference afternoon you, to and second joining Thank call. Thank

our forward-looking Eichler, Wang, will other results. The President. are The regarding growth assumptions. second from these solutions the risks, information of statements to results and projected assumptions and Dr. regarding speakers risks prospects, is demand purpose George and responses Fermi our to discussion statements. call market forward-looking questions and should these you prove financial results, actual Our CEO; Executive things. could financial today be be primary will or Casey to quarter provide differ for our CFO; today’s or Vice our uncertainties our Should uncertainties and subject Laplante, materially among XXXX contain President any of statements your materialize These to with fiscal incorrect,

We call filings of Fermi fiscal as filed the the now SEC XXXX. Investor statements. Relations are to results, our the March Access factors affect under and I XXXX no results our are over can a XXXX including Wang. for XX, uncertainties our we release, to be fiscal website. potential will in documents on Form today’s the call historical file financial SEC, XX-Q the quarter as on XX-K more year the second filed X, that replay Form that portion information well for Dr. and on the turn with first risk found could the June press results Report of these quarter we and on risks, These described other fully Annual obligation that to update XXXX assumptions on

Fermi Wang

afternoon, everyone. good Thank and you

market car and year including the Revenue million Our camera the VR a these as from remaining automotive reflecting we own grew target cameras demand silicon under consumer reinforces this market and IP XXXX our including from our solutions. sports from markets, from our leader, the sports, The the decline. period camera, lower million market OEM non-GoPro And can for representing to expect market same continue to new VR $XX.X the year. opportunities. pressure revenue market IP with applications dynamics in the focus decrease decision weak guidance, size you this be the revenue security, automotive combined nascent its security fiscal applications, from was limited using of growing drone DJI, the to consumer over QX $XX.X is and to on prior drone robotic recorders and further see mostly Revenue year-over-year. continued QX

us make gives and well progress video architecture. on solution application the in our power against public benchmarked CVFlow on and we target advances also When encoding, markets. to believe with new major versus size combined the competing image the efficiency GPU-based our The CVFlow big our in a SoCs, SoCs of our processors win solutions. architecture are efficient highly processing die very CVFlow the CVFlow performance steady have camera advantage. we in SoC computer competitors positioned leading significant During our domain quarter, our continued This and running of networks. advantages based our showed we the the video that a solutions delivery competing benchmark for neural the to silicon development We primary

solutions. cases, customers. to CVX software been than SoCs, released Neural of our public optimization network are developed the results very through with customers using of that than our flexibility. terms power domain the kits, and Customer positive more new the performance the are and chips over our tools consumption including our now programming a have CV faster Network in has competing feedback many XXx CVFlow our performance supporting We CV Convolutional seeing CVXX In for

As Professional professional customers IP design camera a provide wide to existing IP security also We vision those in first camera markets, that range will well camera continuing contribution are per our have our a now total cameras for on to percentage to SoCs for cameras This half manufacturers computer evaluations, year. with leading professional existing the new replacement and us of SoC as solutions. vision total grow a installations in for mass our we cameras. of our a increase will believe result opportunity customer value with to capability next multiple these including of grow IP revenue. the camera as enter of and based production as introduce of to customer the expect this computer continue

largely full of de-warping video the indoor XXX camera field VXXX in has Also IP May, market alarm.com Europe. from operators introduced IoT in includes leverages service SoC opportunities seeing monitoring on high-quality HX home camera monitoring its darkness also and in camera growth HD introductions to degree camera new that full for two-way opening. been and security HX Pan using introduced we based QXXXX surveillance Communications both the [L][ HX in IoT Axis XXX PTZ European example, new total ph] Ambarella’s remote giant, advanced E angle field SoC, an quarter, we to camera U.S. Zoom used provide driven cellular the view. audio Tilt music For security both years The during provide of spanning are Bluetooth wide now U.S. and recent enables vision, video degree that companies Based camera leader digital meters. camera and its can up the introduced of Ambarella’s number product Service door XXX view. saw offering camera security and ADT home a for calling camera Ambarella’s the In market, a services. viewing Ambarella’s by with [indiscernible] Doorman lock SoC capability traditional revenue and doorbell providers streaming. security on HD its the integrated door

front processing initially Spain follow. smart service in Samsung European we customer mobile flexibility failing looking for by leading are In value and see our legacy its other a performance operate service SoC, as power been provides customer they superior to performance, to the automotive requirements European meet being momentum based as launched home with quarter, delivering current requirements OEM on automotive Vodafone LM is X powered for third-party unable platform performance the human service a is and these HX own light Furthermore, featuring constraints that deliver including IoT the well CN To camera machine [indiscernible] has that meeting Ambarella’s of single the and chip the low solution, developing and algorithm the NCAP Level the SmartThings In from HD and the Feedback low CNN within to camera while through programmable emerging supplier a range platform Ambarella Level market thermal perception to vehicle supplier the ADAS provider, short camera continue that X as those video countries power partners solutions. we by market, with initially are higher design. more design. in customers limited to requirements. Euro software and alternative well than add computer power, and differentiation vision the low launched suppliers the to ADAS During software as CNN solution. their operation stereo are also and flexible and an accelerate In vision meeting own cameras, capability offering evaluated an being is focused while the open their including X a are categories, both to high-performance on enabling to time-to-market, HDK. processing autonomous a customers category, develop platform, Tier long operating stacks. autonomous providing Ambarella’s open Ambarella support camera recording leading requiring

opportunities with our customers into architecture. modules development further to autonomous for see we future partner Additionally, the their in perception integration own of

based XXX CVX the provide and and meters They SuperCam monocular evaluation. continued over and quarter, customers perception XXX long perception for delivered capability classification. for cameras advanced viewing of to stereo for over we self required camera The During for XXX a short detection meters precise obstacle SuperCam stereo location. to object range degree the distance deliver

also advanced and XX as up stereo We our well enhanced as CVX is new powerful to that more as as CVX by demonstrate processing combining processing CNN image processing. includes SoC times

that a XK at than new X performing less [ph] simultaneously power HEV’s Our and consume [network] testing while encoding watt processing resolution. CVX processing, confirms image signal

a designs China, with X CVX’s the And On in hubs leading more that than ADAS perception established as continue we OEM technology. new watt basis, enables market, power per autonomous with Ambarella upon to in this CNN computer. integrate the recording car to that enjoys combination the models low require see currently and electronic development the third-party companies for of market with by][ph] position world’s largest can functions CPUs market, automotive car mirrors main In as offloads the Level building with camera facing than leading target recording integrated recorder only is in processing or processing performance automotive with camera capability as and recorders magnitude of Asia network][ph] relationships CNN makers performance X application OEM Level The a processing. well better [advice car even pre-installed detection. perform [new forward introduced future computer with achieve order This that software combine cameras includes that the vision is the to options.

models The new both recorders angle time in two by and are on-chip A During and wide a Ambarella’s the HD enabled quarter, recording SoC powered processing, introduced [ph] by AXX’s include [developing] CXX family. hardware. Toyota AXX its low-light night HDR drive viewing

front SUV carmaker, supports VX full SoC. supported chips. Wi-Fi HEV model based In electric capability on two While link with introduced car Ambarella’s with Model camera and its AXX SAIC by connectivity the small viewing form the for China, camera a factor X serializer/deserializer HD rear modules external to including Ambarella’s recorder, unit

market based capabilities with full SoC that with ANAFI image $XXX with unique XK Additionally, and AXX integrated engaging Thanks based its AXX The for new electronic drone and aftermarket with is stabilization markets, photo on also a navigation Europe’s both In makers an on specific Ethernet our design maker capability sub robotic or HD connectivity summary, In forward dash in AXX, integrated is lane In and its HXX the warning number voice shooting cam to group detection for recorder consumer is camera drone combines carmaker, cam traditional we during video flight time. model capable Chinese design camera for of ADAS nighttime IT consumer and Yuneec, its tilt image a includes and collision drone advanced market, lossless features use includes advanced its system. based and SoC and ANAFI fruit. quality cancellation the that be category, video including focus Ambarella’s leading also recording decision revenue and price. impacted vision Fine gimbal and inside ultra-compact on factor the on the infotainment decline HD into XK our design leveraged a drone, and resolution XX-minute CVXX the and Ambarella’s X.Xx Ambarella form ADAS the with security at camera a portable quad Based the features fleet designed the while an excellent full cameras, SoC. bearing Chinese car with our zoom. XXX HDR continued confident aftermarket drone the Tang benchmark model the the HDR and sales to introduced dash a on small introduced capability. on-chip Ambarella’s AXZ include font to vehicle’s the two and Digital of drone quarter, consumer quality. world’s control. introduced computer correct XD camera algorithms. camera, degree Parrot, noise buildings. offers SoC, setting consumer and The its Q and functions, Mantis [indiscernible] Ambarella’s for BYD, maker, automotive introduced on outdoor the the warning indoor based SUV by the Also camera remain processing Korea’s GXXXXX rear

vision car recorder steady In and to being and customer to the the look technology customer our our applications. the are by computer ADAS half market we delighted camera engage are year. and next with vision forward SoC new we of as making for first in We mass production and IP our computer security revenue from grow autonomous vehicle automotive to continue progress response in in market, customers

price to Finally, CVX range performance pleased in options CVXX, we further having first of and member year, this XX-nanometer customers. the of extend taped out an the our successfully delivered half to that are the family we SoCs available announce have also additional CVFlow to

board our the who would weeks. like of to introduce has portion the new Casey Before I I total call call, been to turn on for his CFO, George X Eichler of about a

company. George, at know are We also want pleased replace And to the to to the as the I and dedication, you well-deserved George been very have invaluable of His years his also to him guidance the thank service and retirement. and of end team many have sincerely of the who to friendship wish entire him September. all in we Ambarella is for retiring best me his

Now, to before our the going turn say Casey result the to to I who will QX like call discuss over words a QX few and would guidance.

Kevin Eichler

appreciate he him demonstrated leadership I through With the QX will I to entire results in I guidance. to join team. George Ambarella Thank look excellent Fermi and to I tremendous and an turn has am over opportunity Ambarella excited to to built with at and while it with work Fermi. you, month, Ambarella. George the new a forward go to working next that, and chapter the while transitions over life. QX team our

George Laplante

Thank the July for year. the well XXXX XXXX for quarter highlights as good for second fiscal financial review XX, year fiscal afternoon the everyone. and outlook Today, as the XXXX and you, QX the I fiscal financial full Casey update outlook will ended of

I detailed you call, results. to of that discuss for During results will the release today’s and press GAAP refer non-GAAP ask non-GAAP to reconciliation a

in previous stock-based of revenue of QX our Non-GoPro In year. for the period million approximately impact in non-GAAP the we our quarter XXXX For $XX.X with compensation line for of from adjusted which $XX.X reporting decrease in declined have revenue XX.X% taxes. a guidance, QX, of the sports million, revenues security and by totaled from the by while expense saw eliminated by were year. represents prior the IP same offset revenue the a year-over-year VR security from in which auto cameras. also in IP OEM In wearables X.X% year-over-year decline drones led revenues, we In was growth the $XX.X non-GoPro revenues flat. and QX, growth security previous million security, and substantial consumer professional includes

from new Consumer the were resulted across experienced year. rate from in Gross as in bonus previous and with the we auto as with tax tax The compared The reflect are wearable margin share the fiscal majority our net decrease X.X%. compensation increases tax across OEM for Japan most security alignment that in and costs of drones revenue primarily million by million substantially margin tax change weak revenues, recorders non-GAAP and result drop the Non-GAAP video to improve automotive $XX.X China compared were previous lower of in a market second due projections XXXX for jurisdictions from of market. drone Non-GAAP and $XX.X costs for declined cost. effective a from as rate company’s to year-over-year to last from demand. to the quarter million $X.XX a from in Parrot was in revenue million the margin, growth expenses QX for approximately DJI. believe in for Solid GAAP weak the Non-GAAP in partially period year allocation in was share gross ‘XX preceding the of XX.X% down non-GAAP employee or the increased we revenues lower compared rate. same in ordinary and operating consumer income drone QX, to the to end-market for offset continued ordinary the quarter of high-end or includes in previous to quarter revenue QX in diluted categories quarter. net a $X.XX employee quarter. revenues. diluted higher income per result OpEx XX.X% shift the camera margins sales non-GAAP China $XX.X mix adjusted QX rate the per of tax was $XX effective headcount year stock-based the incurred the coming a Wearables non-GAAP non-recurring last decreased

rate. cash million adjusted per on The $XX.X has $XX.X comparative of was XXXX, QX end million, from to for the QX XXX was EPS to compared and of to total is was from with to change non-GAAP the of non-GAAP per diluted We ordinary securities diluted earnings purposes. Approximately, in for marketable shares the the the net QX from shares impact income engineering. quarter at end of XX% quarter. headcount XXXX. XXXX, XX.X adjusted headcount as Total based employees $X.X at In XX% were quarter, $X.XX tax QX share located operations $XXX adding the in and net of cash previous our $X.XX or compared million with For diluted Asia. second to GAAP of fiscal ended fiscal million of about on of share income no million, XX.X dedicated million XXX

million. During company $XX.XX price the an shares consideration of for of at repurchased total quarter, approximately the $XX X,XXX,XXX average

or in to to This QX quarter. increased of XXX days $XX the the compared prior in compares to from QX. days the of XX at Net the days at inventory quarter. end of outstanding. As XX, accounts million sales $XX.X of repurchases previous XXXX. available end through for under additional million was days receivable shares a X $XX.X million X, XX XXX,XXX August or the August million. June million total of of QX $XX From XXXX, $XX.X to of XX, Total we program accounts July repurchased approximately at QX approximately million XX of the end at for QX inventory receivable remained consideration repurchase was sales $XX.X end the outstanding days $XXX an million

of value inventory the customers now anticipate revenue as quarter at second is X.X% of Chicony the valuation we second than came inventory will and revenue in issues discuss the carry in we chips and you compared markets. at in year do as XX% quarter primary had our QX. of of the Microelectronics the high consists XX.X% to half, for We our any XXXX second is to in fiscal in in update outlook plus I WT to XX.X% the higher outlook. inventory two year. compared year. prior prior volume intention normally for reduce on the Although the came QX XX% not

be to of $XX.X QX year. from We XX, expect and quarter $XX.X between representing revenues third our last XX.X% for XX.X% of a XXXX respectively and million October ending between decrease million

this negative for in be in We midpoint to of margins expect markets XX% revenues in XX% and as QX between with a non-GoPro based are in We on products wearable see in including be accelerating quarter. total continues year-over-year decline is Sales of percent this VR selling our cameras the to decline non-GoPro season. below consumer other quarter, drones far XX.X% by through at to GoPro so products, compared during and markets, strong estimate these volumes. have drone below non-GAAP wearable the quarter. XXXX. The our impact demand we and to selling the XX.X% gross holiday in revenues and margins will will QX and and customer negatively the substantially margin revenues last year our what higher impacted year, the approximately a to guidance normally feedback, immaterial expectations; be of earlier Demand decline wearable year’s our the revenues high-holiday consumer decline from camera normally season. sports, In being last substantial revenues expectations

with shares. estimate We coming $XX the million to third QX expect increase and from to approximately primarily diluted from million share engineering $XX.X quarter XX.X non-GAAP from We increased OpEx our headcount. be million be between QX count the in

weakness the is through the non-GoPro impacting discussed along half cameras, remainder outlook, with decline drones, our the consumer outlook. negatively consumer year sports in particularly in fiscal continue expected to the For the previously substantial second cameras, of XXXX

expectations as in the auto and in below products second our growth customer launching be previous we market. in new growth addition, believe delays our half In market will the will year-over-year this reduce expectations

minus of a XX% minus now $XXX being these fiscal million. XX% to ‘XX of as changes, non-GoPro compared to non-GoPro revenues result we As see revenues

on be revenues for ‘XX we addition, for $XX full to to last has call, as year. In fiscal GoPro to compared our revenues as approximately year the discussed the million total of immaterial the expect remainder the

on Dahua, the the high and reduction As of of U.S. orders, product cameras associated in purchases a ban near-term normally result seeing of Hikvision we our export business. security end in range from particularly the with are our some

customers, but see We later increase have not in the we until impact in positive non-Chinese seen offsetting the an orders will year. revenues to from

by remain impacts the to tariffs in other But place continue it suppliers. that have China business. have by domestic these dispute seen not from affect situation. time, trade our we we shifting As to monitor risk currently are disputes, governments, such trade any been but impacted the Other put at relates this to non-U.S. not as customers a

the of In security new addition, China our see impacting efforts do our we CV not customers. the development dispute based at chips on cameras

XX% We within to range the year. to margins remain at of expect for our our gross end the XX% target low forecast previous of

to the forecast lowered markets, for from resources end have need employees. of are of add new Due transferring we a to consumer million the to the driving security, automotive, our million to midpoint range levels. headcount and high Lower our the of with the revenue $XXX reducing rate market many budgeted reduction OpEx the range. hiring the thereby in $XXX the reduction of expectations to the OpEx new lower are robotic of development these some estimate along We the to the as year

call during the the And years for the the the been will operator of with questions. and Thank to of my minds time questions, of have team. the that call innovative company. lucky I have some been industry, to extend I call I Ambarella part that rest and the today. would has the with thanks of like our to me the last Ambarella talented believe you over for turn for to over the in I most joining and have plus executive team X employees deepest all turn supported my the I Before

Operator

[Operator Cassidy question Instructions] the line Stifel. from Our of first comes with Kevin

open. now is line Your

Kevin Cassidy

my Hi. your George you great congrats CV might working Thank first devices? the any the on you first questions. My with retirement And for estimate yet welcome do when of and CV you see and question Casey. for is taking devices, you on have revenue your

Fermi Wang

Yes.

have too is will So IP we with activities revenue I deliver with of at Kevin, have first several this that CV design progress we tracking the in do we next Fermi, that chance half And -- half are and see several revenue international professional our security believe the we IP this well. believe a said, security of point. CV first that we very year. first from progress, year, in next we cameras the to Like fact first camera in the

Kevin Cassidy

great. in And mentioned to the three maybe is product have delays systems, automotive, that some from way Okay, Gentex? you the on ramps, camera related

Fermi Wang

No, it’s George revenue. auto think what for said the – second I you about think referring I half to are

promotion long-term one There effect. related seeing our really Japan. that’s our business our recorder the product side, think delays, so there on They started the key a by are delayed some drop that’s recorder I but I promotion, don’t auto think we is some I think of and in to forecast on customer.

Kevin Cassidy

Okay. Gentex, yet is let And forecast can, ? me follow-up I maybe if Gentex with a just from there

Fermi Wang

forecast Gentex about talked yet. haven’t We

and haven’t on we solution today. Gentex yet. E-Mirror any with three-channel guidance revenue said, given from with Gentex China, solution I E-Mirror have our And are first revenue like E-Mirror We came the X-channel working

Kevin Cassidy

you. thank Okay,

Operator

with Stanley. question Joe Moore from next comes Morgan Our

open. now is line Your

Joe Moore

have you. I shorter-term and longer-term Thank one question question. one Great.

guess should a quarter I and so are you these think I consumer for, the that we just both I of for of and end that next business sense be to get guess consumer to versus could and out we getting just give terms automotive, feel and as year, automotive ballpark guiding In can like of there much surveillance exposure? is how the you the left surveillance grow, close headwinds, a us

George Laplante

Yes.

of wearable least half would the in be think for year be of you going XX% that in low-XXs, then, at the auto so a security to I is total little will if at think revenue. remainder. infrastructure total, look And in bit leaves second and the and I

percentage to getting relatively this of small at a it’s revenue yes point. So, our

Joe Moore

there to then sort big helpful. I talk I people and of Ambarella opportunity, automotive you it when is some a vendors competing on that working Nvidia there who lot both and places longer of that existing sort already do like I term, companies And and feel other people for you and like for at you that’s might like multiple vehicles opportunity for of that those is offload right with you to seems guys established think a the are of customers sort and co-exist about who Okay, that’s people role solutions, think are to like way of those think think perception Nvidia? in when directly are the yet with for this prototype we

Fermi Wang

Right.

really we to to on X X referring to is competing are driving, camera because autonomous with Nvidia that – front market the you think referring don’t the So, competing I Nvidia ADAS we Level the category, levels for there. with for

this So to Level X at Level let’s focus X on point.

performance, power very high that guys also per to performance . CNN to that are a video our really offering perception and that a quality perception have helped processing, can we open we because really Level this X at point, solution become have that shown we our we platform, customer for do high module are for focusing not only Level better those particular we think I perception watt market, X flexible CNN position and performance a and provider a for much

partners and CVX today Of I we camera market, course, we vehicle point, in and category, time focus perception want add that customers we are I that main the to to to ADAS Nvidia run, solution, engagements serious Mobileye. right order long fact, and in And I we now on CVXX, there, are where for solution with those kind very want And another and the say really front in complete well which also but of the several in not received, providing autonomous algorithms. this our customer now. is the their own have accelerate to really have is in developing a will category a is think being competitor

and with hardware front in or And we several in made enable with progress significant a we other supplier multiple this Tier X and working with are have and their and OEM X own parties so, evaluation ADAS Tier to third-party that platform globally. really a algorithm algorithm cameras projects category, OEMs or with their engaged

to I markets X side, category look that – really the think camera as both two ADAS separately, progress. if So front made you well Level have Level these the X at as

Joe Moore

then you mean you sitting to perception solution? be of just that and complementing Nvidia some actually And could cases are functionality about, that, video mean in I in I clarify talking alongside the module the

Fermi Wang

correct. That’s

fact, of in our some is In engagement think category. kind of that I

Joe Moore

Great. so much. Thanks

Fermi Wang

Thank you.

Operator

Our comes question Ross Bank. from with Deutsche Seymore next

is line now Your open.

Ross Seymore

a just quarter nothing letting auto guess implied all the updated of I it again wanted I for and kind general more in guidance, thanks Hi me the for guys. that Casey. the but is reason Thanks for to don’t near of the you confirm IP full-year ask is the same the know help X%, fourth down and George of the welcome the a continuation be to security onboard I couple core over the quarter-over-quarter trends suspect specific question, George again. term, years incremental question, XX% and dropdown, trends businesses? and the first would

George Laplante

in a is the second GoPro revenue you whole was section less be to is half. Actually, in in decline QX, going out Actually, QX, the year, decline in last from That’s causing revenue smaller non-GoPro year-over-year when than QX. correct. decline take it the so to wearable

Ross Seymore

for just even Got maybe the think Fermi but half your or about bring, the CV talk the side can mix various I there uplift being CV know just that over makes recall some markets, couple that gross implications it. of year and the there’s business units a good guess rolls dynamic a as assumption? to we about things and you that can and generally as to And ASP those a or in there want it in should end within guys I is being as a good assume to that targeting, but a more fair the you about that switching higher you tailwind poor if margins prior talk we of it that what COGS from proxy is well, think long-term, first ASPs of then that ASPs correctly between a next I through comments, chips is is are how different markets to of

Fermi Wang

Right.

feeling we is will we we will So, -- Xx Xx that price and higher I both just dramatically, to be our our starting the CVXX customers, although security than our gross CVX camera point think within targeting CVX on average market, than I and CVXX ASP stay engaging And corporate with our current even negotiations to the and our ASPs are a margin. view, of from are gross margin increase the think in is margin probably higher that. gross having

Ross Seymore

XX% range, it’s believe? to I that still And XX%

Fermi Wang

That’s correct.

Ross Seymore

for dynamic market occur to near-term your don’t is and in And for it. then is the based that of the that outside thank fact the just folks what companies that as whole on here tariffs catalyst it you in is but occur could etcetera, you last direction? would move that, the China or tariff the biggest Got those and that if folks bringing a be something security IP side I would that something equation well believe be of DJI in the comments drone in do the doing risk detailed non-China the offset the based just bringing in guess question in-house

George Laplante

Yes.

the it impact little into the be new in bit I on government actual the the a shipments the U.S. before to in think say small think is books cancellations half, in second as term, customer. near-term Longer I more actually will revenue. will the be ban relatively the, let’s going benefit

all, of demand First higher higher I some non-Chinese to think our and ASP a margin, are benefit. be fulfilling a higher customers, they so ASPs there so longer-term will is at the

negative, becomes In so addition marketplace high our the even that less of China becoming China. more silicon believe to outside of chip I that, the the in competitor is view outside

benefit think will also I So, that us.

Fermi Wang

a that really IP don’t through has Dahua -- their they but need market but to product, and continue that continued so trend, know to – customer a taking working die size and better a do is DJI I to our have of own companies much to die that chip, about I much fact and on care knew GoPro, that’s can’t to high, we Hikvision their silicon, silicon competitive terms we in smaller on come size. ASP cheaper, because we we But and years, their in think lot have Well, their the all are be a of supplier.

for the our CV out So, it, comes but out, for video at bar this to raise our people we that think when barriers provide that we’ll up continue a will bar of possibility catch I deal when continued our work I entry with, create a to customer I us while. chip CV solutions, that’s rule to us won’t think really something time, our on only the

Ross Seymore

looking rate? one a a the but and how provided taxes we Thanks tax of for the One George we about quick and of currently pro backwards, should on Fermi. basis, forward housekeeping lot looking think you think details if forma

George Laplante

I will it think the estimate probably next now, if rate year. the it’s around level for tax was to XX% probably, I

of probably For below year, the rest this that. slightly

Ross Seymore

Perfect. Thanks and again George. congrats

George Laplante

you. Thank

Operator

Our with Ramsay Matt next Cowen. from comes question

line Your open. is now

Matt Ramsay

the into that much it mixes setting market the divide versus of however Western afternoon, is level China I you some helpful want the business follow-up you shipped to think on investors? you Good to camera about Thanks. externally, today maybe stuff was be those or up, would respect of just Thank both the mix want could customers cameras us Ross I customers remind versus within business everybody. to market, Chinese asking to guidance with security sort just maybe that very what

George Laplante

Yes.

use dollars the customers, into XX% just non-Chinese think can now into it’s into right probably sales I customers. China about mix XX% we

Matt Ramsay

it. helpful. Got That’s

you of just around that. announcements Day And timelines investors to investors then have looking at of really platforms engagement, obviously to discussion and some now around I kind the Analyst is the about in demonstrations set the I driving level of Just from some around engagement CV most lots a guys that get automotive I guess question and automotive done market, but often there has expect with for could investors engagement of engagement timelines think us give the we space? maybe you you. announcements in where formal sort kind in should that Tier And formal more what about revenue partners update some more Thank for are are on guideposts thinking Xs. some been

Fermi Wang

years year. we of already in of And we at going said, target in progress in as some revenue, are it’s X I revenues well working seeing have We autonomous last announcement some year. X start right start our while. to some we as have That’s now. still like for discussion vehicle, on to of targeting engagements significant since on just ADAS OEMs Tier terms fact, and ago business end a the take OEM, some So, with recorder

just solution longer. take a be we X So, showing in China expect so take will in years like CV that even you recorder a to simple relatively production,

have However, solutions. advantage I requirement and consumption power performance our requirement benefit will space a that do very in that and we significant believe us, we the the the automotive with and limitation assume

making I market. remain our about So to very into optimistic chance

Matt Ramsay

new then here for be had the the set of be of XX year or fiscal last expectations one could helpful? Got forecasting the you that, set sort just of guidance the seems ‘XX too to sneak businesses on I the George, expectations here will majority it. Thank of you about in, run-rate talked and range really folks top the is line for it level it where are And Thank out will you. like sort that you on for to this Fermi. is the consumer exiting year, early the there business just an for guys opportunity

George Laplante

most on need half little better we better, understand to in new the in better really least products launch of will do wait this a facts to first picture and the little Yes, I until those once think of that. think plus, XX% it’s a we pretty – minimal business business, as We then be at the the early much it to get plus I be are handle a level XX% will next or by the those percentage plus talk you be down of to year, running will a in about before end consumer year. of security a said high much auto But space. of so we the facts pretty

Matt Ramsay

it. and the Got with very George. luck Thank Golf game, you good much

George Laplante

thank Yes, you.

Operator

Capital. comes with next Suji Desilva question Our from ROTH

Your line now is open.

Suji Desilva

Alright, am Fermi. game. Golf comment to welcome on I your not guys. George, Casey, going and hey,

portion for for the auto robotic in non-auto camera the products, and size how of versus terms you of opportunities? come the if might end-market market CV am in would addressable CV auto I So, wondering than sooner the security the

George Laplante

I come all, security camera of first Well, think will IP first.

learning of will come last. and type industrial application come think the second will machine I auto robotic the

real market. CV of available and the transition from those solution because already. fast, they it camera CV but video-only as I the size the The really In of function. camera there size, that our cumulates, is of current based kinds effective based I CV because And use with to security conversation as is the based cost terms remains won’t be on million more audio surprised won’t security expectations, be total customer, in than market soon for solution very have think the different XXX units be real

that the think CVX performance solution you at for is can highest machine have do is us for video-only are as to also learning power we think our we to And well security this and consumption. the stereo the then companies robotic meaningful which important CV generate companies processing revenue camera. – believe definitely great however, and for several that I as application, from that on transition I for enough that this CNN possible was quick opportunity performance. working also a many are because And it, point, there So expecting is see a big but back we

level do moving So industrial even by robotics robotics I huge level or forward. opportunity for a us believe that consumer is

George Laplante

Yes.

now since I to able have mean robotics, companies. on discussions with CVX comment engaging we chip, start one robotics Just launch of been our actually the in

the the fits positive. think what response their delivering think I are I initial And So architecture we is need. of

Suji Desilva

for already revenues IP be CV security – that when is not seeing you from that are cameras if will Interesting, or coming?

George Laplante

on in as half said we the past, First of year it’s target. next have still

Suji Desilva

is software the of that in you more then time was clarification? allowing you some market software how remarks, CV, terms guys You stacks the it stacks? software – a fast me, technical have and and and are I heard have hybrid on any your you programmability let question curious to relying customers do approach allowing And or customers with you are it. a to or provided entirely own Got guys comments I

Fermi Wang

so one customers if let first, In we to that provide the by of it’s hybrid, if more but complete build the it too clear, software can network right. their wasting time just camera, sentence, me much stacks all you be camera neural is take without itself, leverage

but how on their we network portion help to to customer our other confirm have already and And neural not network network tools platforms inference customer engine we many chip. neural that’s how public customers the domain running our that’s only our already put their we network. neural our performance running neural helped for to customers have our network For chip, on several the

high solution, concept lower the the business not but them development and as is very that of will a complete using customer However sell have our we our power networks, main also network have that’s for neural solution model. our proof in-house we tracking neural of turnkey choose performance, we if

model. business is our to using helping and to key model their camera customer our on our business build HDK, them put our helping platform, own neural main networks Our to that’s

Suji Desilva

Okay. appreciate Thanks clarification. I the guys.

Operator

comes Our Bolton & Company. Quinn question from Needham with next

Your line open. now is

Quinn Bolton

pleasure be if don’t say welcome mentioned guidance, it, but to and wanted just you year-over-year? this, George been with I if you just George Casey. wanted to the auto back caught third and it’s working you And know security Thanks. I at both if come up a look quarter

George Laplante

flat, up. I be security believe be auto will will but

Quinn Bolton

we just is have mentioned think fiscal of that assume do in modeling down may you is that guys or calendar have level you end to you recover for an an by I should just that you the a ‘XX? a purposes level, then hold how And stays not of what immaterial probably ‘XX market at thoughts that directionally immaterial consumer it any do business times mean business any January may sense expect that to rebound, couple the of quarter, Okay. might

George Laplante

will non-security running the is Yes. The and business be auto business.

expanding other I of stayed the see they flat are So taking CV teens would percent you revenue a running declining will dollars going and maybe as overall out of start XX% to revenue. be year. next revenue those out the we if from that businesses don’t be high in even as it base two roll probably

Quinn Bolton

in Just correct? is a fiscal digits, sounds teens single those like your it for be it clarification George, exit businesses rate high but ‘XX, in may to be likely going

George Laplante

be still the will expanding is higher that am be saying I what going that dollar as it QX, But in – it No, in teens forward. still in than will the value be I QX. don’t see

revenue percent the become next expand the year will of to markets So other decline in as CV.

Quinn Bolton

then penetration? trying relative see better family a Xx of to that of Fermi And premium. say the to the as And What it. the only can the market just of question ASP for increase the a help security you to alluded Got CV think and of camera the security CVXX follow-on or Is high question? cost market very hinted a come talked reduced market shipping CVXX in is percent in really that selling chip. a today. security to sort about cost current chip the into on Thanks. that your will processors be reduced adoption you talking XX% of professional previous drive Xx the back about market security price are think you phase-out you then I the to XX% at XX-nanometer increase third nice to mean, that of professional you kind video afford to able of will market, you

Fermi Wang

Correct.

category First demand we out performance the XX-nanometer expand is to probably solution, the market market that. lower from performing video to solution penetration you price aggressive CV I And security to on that to because that of our customer to that prepared the of another price camera our think our now CVXX but price. percentage But for ASP, really want system expanding think the right are do with competitive of on their be taping of I by you're us to will all, current point do chip, XX% customer expect absolutely then our continue need depends camera. how the that based to we are we right price for transition our top price,

Quinn Bolton

price, that for that just assume that still premium ASP processor, video I some to not going your probably a will Xx XX-nanometer carry fair is Fermi, premium, current a new to Xx just is assessment? to carry that, it

Fermi Wang

correct. That’s

Quinn Bolton

it. Got

you. thank Okay,

Operator

comes question from Gonzalez Bank Lynch. of with Our America/Merrill Adam next

line Your open. is now

Adam Gonzalez

for my question. taking Hi, thanks

will if ‘XX and focus give revenues the CV next for be will percentage a of the of quantify impact ramp first be to you year? half if the CV security revenues what Just the wanted as Thanks. us will those perhaps you could percentage just year just rest wondering into and if what rough in of a could security, on

George Laplante

many I think how to it’s a get do dates determine until going little of build we that early the the cameras too launch launch. each and customers are to and

we year that have would of better data. think quarter able I kind the of view this fourth be towards to to visibility

Adam Gonzalez

know Okay, if then And I do OpEx, on you percentage but put development? your out R&D CV you of what or remind just this number don’t got spend us, on there, it. OpEx can you

George Laplante

our And to it of we think gave engineering CV closer The year dollars there. and/or increasing. that of number auto. dollars over probably shifted I last to shift spent was XX% will been be that’s around our this XX% Yes, are XX% engineering will on

Adam Gonzalez

Thanks. it. Got

Operator

Dougherty. Our Charlie next Anderson question comes from with

Your open. line now is

Charlie Anderson

and George congrats about non-China, well mentioned the split Casey. side, China camera those on questions I wins among I a you wonder security got Yes, CV have And for with then have welcome, wins? the China, you hear any thanks on Great the as and to follow-up. my my taking given do customers

George Laplante

They Yes. customers. now, in Right of actually as and of but evaluation the ahead very customers have CV multiple are successful development China the Actually, China and as end with China, non-Chinese to probably being ahead testing. of build are starting product we far outside in we products. is camera cameras, customers non-China

Charlie Anderson

based help be talking us Thanks. are with XXx of of Nvidia we comparing CVX defining comparing also and is are that, for faster follow-up, internal image Great. that maybe then Fermi, could is we HiSilicon is as it, that And add you wonder thing are you what that and you would my are more chip, recognition processing, there solutions, kind and you how if I then helpful? we to the about color that mentioned

Fermi Wang

We is to compare compare past automaker CVX compare out way public those the other we we can in running domain we to the the [indiscernible] has compare also been it. in CV our same platforms DSP-based get on compare has is some twofold, of I security HiSilicon, and the to solution that or to GPU-based the frontrunner some also and shipping of network guys we one IP with solutions, the CVXX And neural kind for if mentioned who network some there. running on we access traditional

has platform public about you of domain data can some of portion same network performance, example, and all for So that That’s benchmark you the information buy, there we if out run collect. the also the one platforms can ourselves. then because you – can then collect we to

our network, some collection . data the other get running competitor based neural similar feedback on from our evaluation The platforms that, and our we is doing platform [indiscernible] the public domain on network that same collect customer the really of and that results

port customer platform existing based hardware thing The solutions. help under is third running CVXX and CVX, to network competitive the the the same we also on network compared on their network own our other customer we running did really

CVX and times when and collect higher, CVXX even and we is XX say there. better over So I all data to the [indiscernible] comparing advantage

Charlie Anderson

great. Thanks so That Excellent. sounds much.

Fermi Wang

you. Thank

Operator

question comes next Richard Our Shannon with from Craig-Hallum.

open. now line Your is

Richard Shannon

and questions. look I be could first maybe I will think security with consumer you. sense path on guess Casey, question Great. Thanks for And scale my a kind of how see think that George, first us growth then a XX% is? in is forward congratulations since talked don’t there has a taking Europe? faster think terms my of bit in that security, some I grow the even to give some this, Well, working retirement, what big on on we I you more, outside of consumer little States been being any about roughly that if talking in a growth business, and XX% that and a outside deliver, give real little of can growth contributions about United you questions about sense U.S. the talked business I and us can some

George Laplante

answer consumer let based Well, then and on one. about U.S. I it’s Fermi the the one-third will And cameras, two-thirds I about the I take the of now, dollars. cameras, will talk and split will that’s other outside professional then Right me

far security we the As home Europe. starting expansion market, see are as of actually to

several have We Fermi the now are as customers announced Europe products we in home have to several starting the essence, into market there. in

think So, professional and have Hikvision but just don’t do home to visibility as will help we a cameras versus don’t we clear in producing that split security marketplace. Dahua Asia, growth We home that still good know have both necessarily we security. really are in

grow So, customers. assisted will be to growth some geographic and we that by expansion the can marketplace – in will continue think be

Richard Shannon

question, out Okay, perfect. one I jump more of ask will line.

of kind You expect CV from to talked the do expect security IP that about virtually Tier to X with the non-CV of within fast you there? out to be professional any happen all top transition other solutions, market you fast fairly and how OEMs sense the that

Fermi Wang

say aggressive, for that they to solve for among behind, current talk are problems, cloud. Chinese they of these aggressive our you them them one, video-only customers, use ways different they will feeling different CVX. Well, you think can to be are when get our customers When to you to because customers. to solution using real think some have because the that customers, talk will switching of some example the most international I I Chinese very different demand

the what but CV based they for solution, X just, their own Hikvision been – very, to high-priced for camera call nonetheless telling CV high-priced to more shipping compare become in compared is discussion are and very are current that’s conference now. right So units one and very million they controversial over today saying has that the example, selling

still in units of based just of give is these show an So, you try there indication at kind that price, China, security they CV cameras demand media kind that that real but that to you for push functionalities. of

George Laplante

to take the they to pushing like have for information. thing of cameras security I into one think more also collect. computer the government and Chinese the one is would actually develop are very data who vision they more of helps some we and are are heavily pushing consideration And areas

is is install to So, cameras. there think of acceptance more government I reasons in because one China of the these push

Richard Shannon

Okay, helpful. that Thank is you. all That’s me. for

Operator

I back this no queue remarks. at questions am Fermi like to showing turn time. to I call in Wang closing for would further the Dr.

Fermi Wang

of much. outstanding ourselves can And I you. platform like Thank for And I would competitor space. effort their time. to you that establish in next all a we the colleagues to CV very to so will our our deliver thank talk Thank you

Operator

you and in now a and Ladies gentlemen, for may disconnect. you thank day. Everyone, great participation your concludes today’s conference. have This program the

Ambarella (AMBA) 31 Aug 182019 Q2 Earnings call transcript