AMBA - Earnings call transcript Q1 2020

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Operator

Good day ladies and gentlemen, and welcome to the Ambarella’s First Quarter Fiscal 2020 Earnings Call. At this time all participations are in a listen only mode.

Later we’ll conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions].

As a reminder, this call is being recorded.

to host like Mr. today's now would introduce for your conference, I Gerhardy, and Development of Relations. Louis Corporate Investor Director

You may begin.

Louis Gerhardy

financial Thank you, our conference XXXX joining you thank call. results Skyler. Good first afternoon quarter and for fiscal

Dr. be CFO. quarter provide of the Eichler, purpose you will today information primary speakers Fermi President the and The was and call today's XXXX. first regarding our Wang, of with fiscal Casey CEO; to for Our results

financial forward-looking and among today your responses financial statements and regarding growth the projected other solutions, contain discussion The questions demand our to results, our market prospects, will for things.

forward-looking subject uncertainties our risks incorrect, our These to statements of or prove any assumptions assumptions. actual these results are uncertainties should statements. materialize risks, these and could be Should differ to or from materially

no statements. these under are update to obligation We

uncertainties we report an XX, our are financial risk for well information as XXXX. These assumptions, XX, in March in with results that fiscal including XX-K filed as the affect XXXX XXXX other January annual the factors and could risks, on on and Form documents filed that on described more fully potential SEC,

be to on portion first Access results, filings can and Investor fiscal press the a our replay XXXX of call today's our results, historical Relations of release, quarter website. SEC found

over now turn will Dr. I the to call Wang. Fermi

Dr. Fermi Wang

Louis, and everyone. you, good Thank afternoon

limiting currently China shipments injecting Regulations U.S. is levels camera customers uncertainty there and security of our subject Before our may or speculation regulation on to the All restricting a them. I become to results, there financial is through I higher of address geopolitical volatility would comment in in our like Government factors lot to business. place, into no

facing China when in our of outside higher imported US. products addition, both are customers will of China the into In tariffs and their some be

our as the be non-security Furthermore, times, China and these transition may geopolitical customer subject be forces. disruptions. cameras unfavorable share also subject customers such to our could to shift between in During uncertain market may

semiconductors cameras they of of the market, Huawei, HiSilicon headwinds a in own. also competitor security face largest Our their unit

with As a range result, one potential of can volatile see outcomes. environment a wide is the

weeks in For in example, received we China. from the have camera the last orders, customer two security pull-ins

In QX the our the declined $XX.X was of in guidance million performance XXXX, X% prior our terms fiscal $XX.X million of above midpoint from revenue quarter. and slightly the of in financial the year

solid addressable During our market. the demonstrate a quarter, of we towards dollar a multi-billion expansion progress

Our expertise horsepower a computation deep products yields video of processing, intelligent. integrated our solution, our in to computer-based CVflow AI optimized domain with more of enabling customers processor proprietary highly become

production for the ramp strong a we early all CVXX scheduled us second mass milestone we QX CVXX shipments and QX and our the in markets. camera security of CV that Also core is of started design automotive in our SoC, important continued shipments An QX. during in maintained activity with

our progress I now in talk will with our automotive and target security markets starting about security.

West including demonstrated new Ambarella SoCs, Convention, Security range During family well our its full April’s ISC Security SXLM vision computer our IT CVflow as announcing SoC. of as of Solutions

based CVflow our professional Korean on Hanwha many made formal enabled supplier Techwin be demonstrated announcement time. in of product IP show coming first SoC, to camera suppliers the new a who This camera leading for AI professional the demonstrated At leading a Ambarella months. advance a included based a Solutions the camera over on

professional leading at design in are SoC the of security camera CVflow suppliers. nine Our the XX

HiSilicon from FPGA-based of continuing We most SoCs and and designs. vision media] including displace coprocessors computer [ph] and to new are solutions [formal

year. should mass makers around professional IP also half five of in CVflow SoC camera be the We based a second our production this believe on camera in that of

for cyber multi-screen SoC encoding, quad-core operation, highly professional CPU. HXLM factor Dynamic new technology, has Ambarella's and it XXX efficient cameras. features very Range a and Fabricated low-light show technology, latest well-suited camera battery-powered we and HXXX process SoC security both a the streaming form High and processing targeting low-power the the home making degree security It XK During in on-chip our HXXX dewarping small XXnm Arm introduced and and includes designs.

family compatible software the chips, expands on portfolio camera with applications with close the IP of Fully most our address no CVflow SXLM product our compromise quality. image conscious to

In security continuing remains which in addition our our and on-going investments in are automotive differentiator advance processing AI we applications. to critical both technology, and processing, progress a to image

of on capability turn full illumination, to CVflow levels, than At for new ISC This less rate capability new West At all frame generating video this had total our lux color and low HXLM demonstrated darkness. of by X.XX the light only lighting camera in we color our gray IR hungry or SoC’s on near light provides is light new which LED power SoCs. previously low scale images. available conditions

reporting customers We have Networks typically Neural our in days. few over Deep CVflow their to with now successfully worked port partners net advanced tools with XX and a who SoC enabling our

vision and plate control detection, party detection West included The of recognition. at developers computer license Xnor's IntelliVision's AI joined This and person license software recognition, third vehicle ISC number groups, pilot regions and Trueface’s and and demonstrations. FX plate of us for access recognition, person any recognition, face leading vehicle the

Ambarella deter of and monitoring SoC, on a XXETP it Vision, sensor, and XX/X both X-way Vivint’s and Pro. U.S. leading XK owned In SmartPhone Market, its threats. Home audio outdoor home and based services. HD a customers Ambarella’s the Room, Canada million in ability product, Consumer system as part The security Camera first over introduced video X.X is by SXL Night Group Monitoring and the integrated Based serving a detect includes company to complete a camera Vivint Blackstone sold to

leading in the I the In you Shanghai time. automotive exhibited markets. Show of the automotive Ambarella will number significant hosted suppliers. Chinese at OEMs on first X April continuing update now and our Tier progress Auto a for We

Manager highlighting While to Dr. team attendees. General technologies speeches Ambarella’s XXX of Alberto Broggi, driving the VisLab delivered autonomous almost

partner our Front running CVXX, Aglaia Camera HELLA AI CVflow software included ADAS demonstration technology based Our SoC. our

The form run solutions Ambarella’s RealSense. monitor CVXX, will on and driver RealSense SoC. demonstrated EyeSight CVflow new cam partners also We

a And parking sensor automated system we Chinese software. Longhorn leading Ambarella’s based to run the to announced degree HX identification, parking fusion with The are that detection, develop and yesterday working simultaneously combination technologies, type and on Tier parking visual SoC we of system. enable detection, ultrasound supplier with multiple paranomic a uses space vehicle algorithms emergency AI obstacle CVXX XXX identification to free platform in full X break

X factor compact monitoring a driver also a power low SoC, supplier AI high we collaboration a was Chinese’s create and And the CVXX run yesterday market. to leading Baolong’s HX Tier ADAS our performance systems. Baolong, sensor automotive on with announced form and a DMS

and monitor drivers information, the provides eyes, time fatigue. characteristic image captures mouth facial drivers’ level The the solution processing of system the in an video driver both the and real determine CVXX AI of HX from including and both the computational the to head then sensor horsepower and

working SoC announced a localization Map broad with create in to solution In fixed map deep sourcing. are with Momenta We we the and combined learning HD autonomous value the April our leverage China-based HD for had algorithm development collaborative CVXX, future. Momenta solutions that able mapping map a platform and partnership including to solution, we to AI The HD Momenta’s HX on solution process vehicles. of provide and data a updates fee ADAS, close update. include of and timely cloud the a expand can The through

detection Driving that working Intelligent a SoC Chinese and solutions Shanghai smart and CVXXAQ valet supplier X uses platforms. Also leading obstacle algorithms Ambarella’s in perform space free precision AVP hardware parking braking for April image map with on OFilm’s are provider and enable we and construction. emergency high Tier announced driving detection automotive we automated platform or OFilm, The to recognition,

into applications, capability new designs becomes In drive pre-installed increasingly OEM are we Honda, market, and different this BAIC. option vehicles. to Toyota, In OEMs. recorder car OEMs with last as win XX the the recorder SAIC, year’s SoC XX new includes Dongfeng, the Nissan, automotive in models been These new have car GE, two Changan a our continuing incorporated in

Jiaji with NPV. recorder automotive by Max MPV X by car car of Skyworth AXX During Tiggo QX introduced SoC. sole and number Geely's car a customers with the Tier space Longhorn, X on new a supplied with SUV a This recorder Ambarella’s Chinese models BUI's Fly included Chery’s recorder Tier supplied

full Garmin such the new degree SoCs, compact models consisting form $XXX coverage cameras link dash a as features from together a four XXX to automotive Ambarella’s a around of include field on its aftermarket, network and XX/XX resolution ranging video, view, security new ability vehicle. cameras of AXX announced based parking up provide cameras new a mini-family to that In $XXX. synchronized four recording to to All

under Transport, obtained to technology, April real new Ambarella’s Infrastructure evaluation Italy, vehicle and vehicle autonomous on authorization by the records. of or authorization the of and Ministry was obtained in experience Italian pass passing The team on Road environments in Smart roads public VisLab’s authorization world the in VisLab to safety the issued be first And decree. proven based its in the

on Commemorating Fiat an on Lingotto demonstrated Minister iconic was track Torino autonomous Prime the Development of vehicle and occasion, roof to former Italian Economic an EVAs the the of Ambarella’s Deputy test factory. Minister built

front the In a excellent image. features quality consumer video HDR full camera HX The camera and image light Rock Priced X-axis on featured rate Solid, to at and selfies. introduced a bar its media waterproof recording, dashboard in the color Ambarella’s action leader SoC, image action facing illuminate when display camera offers electronic the XKpXX $XXX it also for Osmo frame called market. in stabilization processing DJI based low camera market, raising drone taking market

are design CV the devices computer taking with secular With pleased and despite we multiple CV we see development, in the market. headwinds, in wins with with production, now and the and summary I’m AI shape. for geopolitical CV growth building and vision technology more products new our In three foundation opportunity execution waves and the the

and to material the it security XXXX. stated we market CV has revenue calendar expect in from professional camera become

consumer CV was expected second camera the from market. security The

calendar We XXXX the commence in to expect and second of XXXX. material half calendar in become it

with the to largest calendar The with is a be first XXXX wave yet. expected CV portfolio in automotive XXXX,

recognize you all and their XXX trust. customer, to all like plans employees, of would and uncertainty. shareholders I heads to our despite including macro for Ambarella’s our Thank the our up keeping team for shareholders, executing your vendors

of the financial guidance quarter the and first call for XXXX. over I for turn Casey Now, to quarter details will our second fiscal the

Casey Eichler

I’ll our Today quarter first XXXX financial Fermi fiscal review XX. second and fiscal XX April everyone. Thank financial afternoon outlook highlights quarter good the provide of a the for XXXX ending and July the and of you for

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

of for For limited compensation taxes. reporting a the impact adjusted based stock we Non-GAAP expense, have

QX with year. the in-line of represents previous XX% by which down quarter other up sequentially consumer with QX revenue increasing when decrease security product $XX.X prior of decrease revenue Consistent market to a security million a X% automotive In security was with of revenue was and our and totaled from the and guidance, compared our QX was expectation, and declining. sequentially professional same

for Non-GAAP XX.X% of gross Non-GAAP in above the operating income Other expenses in and the was $XX.X quarter was previous payroll the to an margin anticipated million taxes expenses. than quarter. OpEx first other primarily midpoint subsidy. compared to of slightly due we our $XXX,XXX million to $XX.X one-time higher for increase $X.X received compared a guidance. government million increased as payroll were the for and related XX.X% quarter QX preceding

The share Non-GAAP in non-GAAP was net XX%. $XXX,XXX $X.X of or $X.XX effective per the share compared QX per in quarter. or to net million income for tax rate fourth QX approximately was $X.XX non-GAAP income

quarter of was earnings Total XX% our quarter. end prior dedicated shares non-GAAP Asia. the were as total is per million in of to XX.X on to at based Approximately in engineering. our quarter million of XXX shares the share the the head headcount XX.X with XX% In about count fourth the first compared employees

to million. positive quarter securities $X.X generated and stock million, Cash million marketable the operating up the X, million QX XXXX. On during did XXXX. Board authorized We June fourth the million quarter. $XXX XX, June, $XXX were $XXX we up In company's the XX, authorized company's the repurchase the Directors end repurchase through cash of XX May from of through at the of of shares ordinary under repurchase flow not program

sales quarter. end $XX.X were compares accounts end inventory first days QX quarter. million at XX million outstanding. to QX end sales at quarter $XX.X days $XX.X of $XX.X accounts outstanding of or or prior receivable This QX. the of XX Total receivable the end days the declined XX was inventory Days at Net the of from days the at to of in million XX to the compared previous the million in of

our Taiwanese Microelectronics multiple WT XX% XX%. who QX, of manufactures in customers at a customers came came in partner revenue fulfillment ODM XX%-plus in two had We in for and which at revenue Taiwan Chicony,

outlook second quarter now discuss for XXXX. will the of I the fiscal

market XXXX geo news, were for the Before expectation revenue quarter political recent with outlook. the second we comfortable fiscal year

However are our raising we to pull-ins, about order revenue the due expectation. market's now recent guidance

We quarter million $XX expect XX, XXXX ending total range. $XX to July revenue million to the in second the for be

decline. anticipate We all and sequentially, to to is expected security revenue automotive other increase revenue

We to primarily of revenue custom years. a products revenue remain continue in and to to expect electronics the next two other as comprised decline three percentage volatile of

chains. environment customers’ half. forecasting Although a conditions the our current generating revenue the political in environment, amount is our Overall, volatile. second increase significant customers with in is uncertainty supply our first year the expect global compared to the extremely of of in outlook we to difficult will when and half remain continue economic The

of number have lower outlook. security gross that implemented be professional margin China margin might products. our restrictions are in anticipation orders camera factors In in our impact export A customers which of pulled

some rise may make chain have products packaging test addition, higher is devices. incorporating may difficult In and/or our sell that also us congestion for There supply margin pull-in on more a the it to tariffs to in customers’ orders. our area their ability and expensive in impact greater

result, to to gross the XX% in GAAP quarter. QX margin the be non- As a to range XX% compared first XX.X% as we in estimate

payroll quarter in and accruals engineering $XX.X due other We between expect to engineering non-GAAP increased expenses. OpEx and to headcount, $XX.X million be the million second tax

more be should tax inability of in The losses certain rate use our jurisdictions is XX%. should high For we rate single digits and rate at become tax QX, tax profitable. result the mild a tax to to return as

Stifel XXXX June participating in account June We the estimate details June contact QX on at our approximately Lynch Cross Bank to XX. Please on Conference X. be Global and America million Merrill Sector CES events of Louis to for Technology be more on Asia, share Inside XXXX The XX.X will June presenting shares. diluted Conference these for Ambarella XX, XX

our joining for operator that, over questions. the you the to With call Thank call today. I'll turn for

Operator

Instructions]. [Operator

question from with first comes Cassidy Kevin Stifel. Our

open. line Your is now

Kevin Cassidy

my for Thanks questions congratulations. and taking

shipped have that were Do not or of surveillance the surveillance high not products. Just them pull-ins, your products and be clear, it. because the to to concern able these U.S. that a It's products silicon being concerns ship of ban being into may I right?

Casey Eichler

say in us to into bit, some related seeing increased Well, From and some visibility or and that, the we a we're may what little for but the to quarter it’s standpoint, perfect HiSilicon, into think already HiSilicon seeing quarter the to to ban a referencing. due we're some that's hard around see primarily about have this that over it's hard would pull-ins as customers so are pull-ins orders we were for concerns we but move order around us I back. and visibility ban we've I a have so seen concern think patterns or last potential

Kevin Cassidy

Okay, thanks.

saying should as not I thinking to because half half, thinking, still second you're higher be of your as the higher is know it’s first but maybe high expected? be we first first than than So going half? the the

Casey Eichler

what think is quarters. to the movement of quarter-on-quarter we are going see next I to two kind over three

of all CV the get the We to of typically it's much of a we were to are other visibility as products, gets difficult digested products us but expecting, try know type this traction especially the we across and resolution, as have little as and some do. for seeing we some you

second of half right seeing first demand we're we in certainly we're saw But going half. know we on half that's and is we're and now. why pretty year basis the to visibility than you right good guiding first so the what now difficult better quarter But move forward, a keep because –by-quarter it's as good have you for posted to over us demand

Kevin Cassidy

very clarity. Okay, the for thank you much

Casey Eichler

Sure.

Operator

Our next Ross Bank. Deutsche question from comes with Seymore

Your line is now open.

Ross Seymore

so all give of uncertain trying a crystal. I a this more color guys, for Hi all little and times, you guys the appreciate us thanks to

To expectations you Casey Street said with were were that comparable the before. point know you I what

fair here; million $XX of say million that thinking it pull-ins that to million you're to the if Street $X to kind is was $X to trying size million $XX Just the to is else the that other are wins, helping moving, things equation your business mid-point you design is pull-in of the there expectations? that's know new hit side the current the or something above

Casey Eichler

talking to that hard Yeah, hard was is good us, to million that, versus additional say $XX I Street you the you is incremental visibility, know growth $XX related. have how a above piece this. see had exact second were pull-ins an thus of quarter, and is starting million pull-ins in but is it’s people exactly mean that so portion we know you much we're to the that to that. clear that of It’s again, where clearly large did. just beat the most into starting a to what some have revenue about QX have perfect to that on pull-in again about the And

Ross Seymore

be Can things in base talk have like the and guess but Got have the quarter. can that of less higher confidence that then back of Kevin's I the half it, a give there, drivers increase you you lot given the into will you half? more create being you Obviously second about have to and will confidence color seems bigger. any it the that question it the you have second just some in year in the you still so of that

Casey Eichler

contributors little generally are the been are markets think the remain soft have to CV got to to come target some Well, and back going there and some be discussed We’ve bit. that we of the the in and that products you know as a I other online. said, starting that of our you some today call on start of know really Fermi products things

a You were kind lightened know listen to half, had a bit growth good growth customers if that's come bit, of up seeing signs. back a they little little auto in second you to our all the so little stronger security spun and start

customers the for if straightened Now again, all like that's can't are is supply visibility ship that, confident feel sudden today. barring not when obviously in or and about get pretty we're you something products happen, what good you from disrupted and I disruptive but out we control we very customers, get to chain the if our a allowed our can't of that pretty hearing

Dr. Fermi Wang

is and me more one this also, add let Fermi And thing.

the this Casey will be I feel Hikvision, and in of than better excitement situation. discussion We Dahua comfortable Dahua, the that be should guidance, comfortable first the half of even second ban Before half. older means our of which before or the ban, potential little this Hikvision, than our and QX with better QX previous discussion a were

Ross Seymore

Thanks it. appreciate guys. Got I it.

Dr. Fermi Wang

You got it. it. Appreciate

Operator

next Our with Morgan Stanley. Joe from question comes Moore

Your now line open. is

Joe Moore

on so the about companies Can with is about than coming thank talked it's much lot now. Great, important in getting pipeline but more the was expected. as My you press obviously harder design from pretty to It talk traction that west in you're Momenta, west to you're in would wins, the get like working of you Shenzhen, release the sort why that I those wins activities. of the Halloween in the region and automotive seems a know China well, there's you. you question China have have OFilm, guys Longhorn particularly Baolong,

Dr. Fermi Wang

are talked solutions a for was looking they there. in all and confidence and in vendors even good really in we China in highlighting past, in of and they China and to there can product platform, a I many the first a year, would use want gives some Chinese to does Chinese customers aggressive are help – because people the more platform highlight think are it we our so lot can and that XXXX are solutions, the get announcement CVXX really tons about to waiting to of us there ship who what get obviously, that XXXX, not Right, they HELLA's out

the of as we of HELLA, of us CV that, our demonstrate well we the endorsement just we all in as recently with chip progress quality demoed, low to and and power performance that all made and help image consumption, the to continue to So establish.

I China is Momenta that is support than as shorter well to market at automotive new reflect to Chinese the aggressive as seen in their the an more really try channel. we end solutions, time outside and to revenue think industry time

Joe Moore

I the that. Mobileye Chinese like guess up, the And dynamics is FPGAs China mean great. follow competitive things market like here? is and I Okay, talk same. in we the different it here because In a than about and

start we so competitive number set inference is that there. certainly of about a You AI hear up, a related different know

Dr. Fermi Wang

are are Yeah, up engine of they first of kind Chinese different start and XX do company all I company or think probably trying the inference between to AI like like non-Chinese still our company think the main APJ in doing, Mobileye Intel, talked also NVIDIA traditional companies. we but and people past, and and the competitor maybe HPTI I that about company is we

better I the the establish a China. we get than something CVXX, believe what our just CVXX and performance definitely Momenta especially structure relationship going competitor us in show think and help we customer that Telco, about, CNN our the our in and talked also cell because China to existing will we performance, as on

very is think very in strong sales although the price top that NVIDIA, there, are I big China. of and much they they On than are us but and Mobileye higher

in us I to of All that think get helped there.

believe Plus Media China in competing Intel with said, I we TI companies. So like the HP and we are and APJ and

I your competitors. main think that's

Joe Moore

Thank you much. very

Operator

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

Your line open. is now

Adam Gonzalez

taking Yeah, thanks my for question.

automotive it and Just as Thanks. to a trying exposure have Can think what well. I beyond pretty sense of China quantify you what continuing good is? just one. really security quick think to that is a security, we your but in just and overall

Casey Eichler

the our about our the side revenue, professional securities two-thirds about security professional the of exposure consumers’ you XX% one-third. of to think with the being the I and in if is that about overall case security China, of question revenue Sure, is security think

business. biggest the security well, business you're have space it of know if the the majority know revenue in the to piece, revenue export Of In but we have internal look going the from is their alone, at to XX% but some our XX% business. business coming that of you represents export probably as our you a two-thirds, you export

up, that’s our of there's roll our business piece customers, So professional most primarily by security smaller all you China that a competitor the decent the solid know is inside when piece you export it's Chinese business our is that HiSilicon. of but their business of a of business, is of in and

Dr. Fermi Wang

that And business, also think talk say that – China and will I auto business. recorder I in China, OEM and space, we of think about really in I business, is sorry, our TV Japan OEM car XX% Japan and probably Korea China roughly really

gives So exposure. an you China about that idea basically our

Adam Gonzalez

’XX. And color. the the said for ‘XX gave on ramp the timing CV you some autos, next few years know auto calendar on of thanks waves be and Fermi and you in really that the of color three would the material over you see Great, then you

term today an to and on mostly What Just near we years give wondering help in drive bridge where CV us update I the recorders, or know autos are you expect four you XXX% auto you of know the gap – Thanks. between material can now. XXX% three, it's can ramp what if be from some drivers the recorders today. between

Dr. Fermi Wang

earlier the than we about XXXX, renowned about. think XXXX said, we be timeframe we XXXX, CV when ramp I ramp I as CV XXXX, talk a talk about and so China there Chinese just talked Right will

high, a timeframe XXXX, lot really we although us XXXX, of volume but towards the For is definitely Chinese it announced, but engagement is example, that. the will give moving not momentum a

before DMS, System. you Monitor that is for which even CV But Driver wave, ADAS, know another there's wave

using and network this CVXX all a We generation. continue behind them huge next for with our of momentum chip neutral the see moving to CN to market

we the really based probably coming what I that DMS another revenue wave see think XXXX, So are momentum. to XXXX going on of

Before biggest the it’s products, the business is We will Chinese two three we China that, about continue video or expect total rate the video all and still to in low be recorder which business say I believe the continue will years. to penetration grow in recorder next grow. will

that, using, solution, I the all object the our to couple this detection, to of we and we revenue view will is have of in years. leveraging talked surround so time about addition next which system past to parking this which that also In system we, think parking view CV be surround incremental smart the

wave than this that when the less on mentioned also into I really the revenue revenue. and before us customer can all CV ADAS Casey think and our us is will to will that, So we I But auto referring Chinese of production a give just this, go that that say impact revenue. big appreciate think help

Adam Gonzalez

you. Thank

Operator

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

is line now open. Your

Quinn Bolton

Hey guys, and understand better sort you’re tariffs impact the was on thoughts bans, of your trying the I to around the one Huawei. just and potential of of sort security cameras ban the current

annual about happened, $X the to it Once are been with of events you’ve otherwise consensus sounds in year. I assume estimates. of into recognized pull-in comfortable the you prior later million which those sort know quarter, those you have said would events You July seen, the

risk understand overall not to result I supply are of from do the and just potential chain tariff the as U.S. security list? half guess tightening Entity any that sort I those the effect, placed So my see you any the question extent on entities inventories is, that ban second of a uncertainties, cameras pull-in but to

Casey Eichler

we see at this continued geopolitical our won't, if more point at ban the hope but it we that’s starts, before if don't far didn't situation comfortable so with we'll because continues, QX starts. risk The any thing outlooks, of you so we said thing commented why that any QX just Well, only all we this see guidance and want will the assume was a until this point. uncertainties We I potential QX, pull-ins. only that’s ban before just defiantly on that in discussion, mentioned. second we at give give put for being we this is concern, about half, pull-in QX we were QX, defiantly it the talked that this risk many the after QX but QX, QX guidance to

Quinn Bolton

Got OEMs to XX% that think Chinese question some go it, received could roughly that of Entity the on aggregate the you of total a be in and exposure sort could List? I security potentially of on then the sales.

than get you would You rather script could versus list the list. to to or what it had the on prefer specificity? that to me entities, mentioned that goes in was only one that specifically would is on to you, willing only the be that not I Hikvision it's you Hikvision that extent you Could go share that maybe exposure for of multiple prepared know entity to level that Daiwa the think

Dr. Fermi Wang

Well, not assumptions at any kind of and haven't Daiwa in assuming are given while to this calculation guide point. this potential and the we scenario we any none doing we wait. both. want Both if we all Hikvision impact At happens any mentioned media or press tool, one those making point we are of

in look the can are biggest ways from. can to fact at, know come but limitation many is the question thing While List that one Entity is you there other

we situation until impact potential So to just becomes clear, wait will the address the then we us.

Casey Eichler

which at to determine would exactly of so. that, to have and But first whether to what's know they based whether digging our back determination now, not of list, a products this happen, on we to one and we patterns, is are to would make Ambarella companies and we’re or have Hikvision our to the be List that are Entity thing is you to put they waiting obviously into Just like have we're two that would outside have know subject not knowing developed then not without or going impacts you to things U.S. on, the or should that. and solutions, off restrictions, looking add or the added Daiwa the right manufactured get

Quinn Bolton

‘XX not my unit professional based and and then of material Got you. have if it give start market Thank cameras. to number about able perhaps about ramp that an are us professional potential wondered shift look I of AI ban, kind as the revenue the and calendar that all of over But of thinking you a cameras to make you so can in from as CV like. about thinking Do you us unit ‘XX, kind a we ship XXXX questions know in the just to what to tam, tam I would you guys to calendar expect just might be estimate the might give to today? security. wanted

Dr. Fermi Wang

now many camera right really AI has they AI shipped ship haven’t million say their year Hikvision calendar given calendar they want roughly So that forecasts yet. year In camera. any ‘XX to X roughly X shows units. XXXX for based indication based and only they In million XXXX calendar we shipped

or Hikvision aggressive camera they'll believe between so we be side. AI Daiwa in And

security we of about On professional shipping that totally, we one CVflow camera outside the start will about top five China, also we AI would and our of talk of believe ramping only end customer year. the camera talk be by customer there up that our of

I will from point this supply view. the lot So of hope give momentum a of

of the them products. But customer of view the the The point pricing technology depends position aggressiveness of and from demand pushing product. the think really security on I that

are more that rollout products. short waiting customer sales visibility our with from about So of we their those for

Quinn Bolton

you. Thank Understood.

Operator

from with Matt Ramsay question comes Cowen. next Our

open. is now line Your

Matt Ramsay

obviously investment, much, how for I you those CV? that collaborative investment any own of going you NRE own you your the Thanks. guys customers Thank so top understanding wanted might making do CVflow also software maybe architecture continue and whether engagement and platform customers CV longer payment software little that’s Fermi with announce investment, gotten that development the getting of you've what just architecture, new sort good the get just very on CVflow afternoon. on on an architecture of that the and level chips to the your quickly and are a far, is of based -- on to to bit investment are top be the term,

Dr. Fermi Wang

using their mentioned Well, the those one the thing, about technology probably In of in more or days. for two we important of than CV noticed for us. to most it’s that’s our have of question, investment I networks can XX, in CV far their point thing put a and be and XX each to tools couple our to development, most to and network, my own a on platform customer the probably anywhere because biggest our put customer network network developed this AI good script neural customers at on pointed platform fact partners one all and from so they both

So of that this technology. a for number and efficiency just looking shows you are customers

matching importantly, in in today we after more video fact consumption, platform, our what spreadsheet. message And the neuro of power our put performances, network onto our their said in themselves quality they convince terms are that

easier and in of in expectation. on that months, is, than I portion for less important to go calls two customer months. our much including It very applications the and software new mentioned on a CVXX than our that's their how to ported And other our less structure think you just before this. one network other probability to platform. three software platform than – three I our it’s in showed is hardware their That software the HELLA So

The NRE. third is asked thing you

definitely to software support of future. system most exchange guidance in continue maybe to our some NRE engagement, the up will will them multi up and – asking hardware financial show of show that the for financial ongoing For in this automotive in our support are the engagement, support, support, we and for guidance for alongside and our the of

Matt Ramsay

Got it, thanks.

CV? encouraging that’s was really the in it from opportunities to how second to the maybe CV a color. interesting really guess term and hear leg and naive like the me home an as auto about a then you I to talk point bit professional was CV follow-up, security of you're longer my adoptions. me those market seeing helpful of to about close Can the guys in opportunity in as home stand security and cameras you of transitioning For unrelated today understanding sort we little security are on and what talk

Dr. Fermi Wang

Right, concern of so you current those reviews the with who solutions, doesn't Ambarella accuracy the building all or other of consumer security of solutions camera, if is is alarms. biggest matter look those at the

just by there sell people oh see alarms at emails alarm, say alarms but the false. something most trying to providing is most service in know the You an to it, they of camera the look are and the in when customer

off some – the a consumer security a the the need. video is consumer, that and streaming false consumer so those the there the was the you myself And give stats were including in alarms. small problem, the the turn alarms shows the a very the such the at you AI XX% video camera to end that to through didn’t of really response resolution, reason most alarm that of false, becomes accuracy fact for using it fact sending In and that is cloud

all much we that when to customer, resolution delay edge computer the apply and can believe, all So decision more real-time way customers to with believe or alarms. a we false making We and in can video pushing our that so we high believe without on a all reduce help the easily saw we CV or eliminate any is to that vision Technology we alarms that talk our the technology. XX% AI false you AI

their think I from there. will service useful customers the that start With can and monetize our become system really to alarm

our AI. reason consumer the IP of that I think will one start adopting that’s So camera

our the at we can consumer But that go to also two same extremes now. IP time know

At with the of people the consumer sold you same lot in Amazon. $XX IP a time functions. $XXX see cams AI selling see You

to just continue end end high see complete very streaming. total go go a to or which provide going two is low AI a are end and to these you you to age So nothing, service trend. video other pure One the

are CVflow working IP performance our see we higher consumer that and mean gross the are the So go will to margin higher you serve targeting product is that that extremes, through going on. to and

seeing to and mature why timing seeing half XXXX. start people of So year up, mentioned XXXX product renting we of in line, terms a that going we second revenue we design see, lot coming in win the current this XXXX, start and of activities that’s probably are

Matt Ramsay

Thanks Fermi given all you. Thank for guys the all and best the out the there. uncertainty color

Dr. Fermi Wang

Matt. Thanks

Operator

with Capital. comes question next Our from Roth Suji Desilva

now line Your open. is

Suji Desilva

Fermi, this legacy, deminimus Hi question. is Casey, hi a What point just at of material. revenue it this point at or consumer percent still a housekeeping is

Casey Eichler

Yeah, say years. to two teens, that have entering said rolling down are would kind that we three the high and year the that a of in is over like we next, be

you it’s see point going And know so that that down. is and to there, can you the products you in going because can to be lumpy there less over year is but decline think course from ups the there and again of less downs, of kind be that

did that a the assume can current you make change dramatic So in quarter.

Suji Desilva

should revenue of as ’XX are you out the talk there for I the the of are qualitatively, or timeframe on about run kind now might the of that the unfair. or be of lot at watch can guidance the question percent a lot next a we and what that my where things revenue But uncertainty, mean about CV of two not but and Okay is you ’XX? may if know that part be or vision. know, in what rate three computer point a can material you we drive also calendar call in

Dr. Fermi Wang

really and to can we I us we and points, really announcing I products, production and watch it’s think next revenue shipping haven’t think of early are start the stream many pricing need yet. year. they start their their when give when our how that's is that because what’s something mass anyway gained customers a customers that's location to our too that them, you watching expect milestone

Suji Desilva

holiday announcements And Fermi, when of or…? hit, you do expect season that to wave

Dr. Fermi Wang

it’s CES a later this good to think be I think year of I year. look at I it, to expect this early a next year. but going at announcement be time or lot might late

Suji Desilva

it. Got guys. thanks Alright,

Operator

comes & Company. Charlie Our next from question with Anderson Dougherty

open. now is line Your

Charlie Anderson

and the quick two Alright Yes, thanks questions on progress. CV my taking just ones. congrats for

security question activity. that’s silicon potentially could camera are from change in any change behavior So of one you sort you, one. high Chinese behavior cut the or I noticing that customer, the rhetoric pull-in over using you customers that mentioned wonder from are the obviously to the in

two understand appetite. serve question you can appetite you increases security Chinese could if from is then increased the customers, help And maybe how that activity maybe us much the for pull-in

You did mention some were dynamics understand there of Thanks. I chain, wanted there. just constraints so the supply to

Dr. Fermi Wang

about Okay, so the is HiSilicon. first question

video a transitioned was example. today, when customer – of which already only start talked just but and product, us, I know example about we we one also on for that’s Techwin the not HiSilicon so to think part, Hanwha CV that you the thinking they

the accounts we that to second of ramp year. HiSilicon are we that I are the and think over the of some we outside do China believe going taking up half

relationship but which means it the definitely In the clear are they camera going we Huawei seen become made and and run. China, just relationship clear, see I yet. Hikvision, us something to Dahua. seen Hikvision, clear could haven’t noticed, impact that trend the a compete we with largest That’s impact try their does we how help indication security are haven’t one that we vendors that big to of want other long HiSilicon’s in understand with has something How is in fact they to Dahua is

So forgot question second the question. – I the is sorry, second

Charlie Anderson

for had It ramp-up if more do with to pull-in to your increases appetite the activity. capacity

Dr. Fermi Wang

Yes, thank for reminding. you

that, also great portion testing us view. For talked those that the wafer Casey have can think will some example, have days urgent see inventory that do are the packing a point you suppliers of us about, pull-ins of that and pull-in that from we still to we to willing address requirements XX help and help to I

next think you several know more we continues really it but whether and more situation our customer months. however depends want can the continue this on far will geopolitical in handle pull-ins, so So, we pull-ins to

handle So we if can but sound do continue to we're carefully, it can detrital. watching very things and prepare inventory that a have that more also

are On the too we much capacity go the house having something that, and packing things the think costs up when of whether I watching. we top will that's of the and watching before are most demand higher is testing

might yet, it We that we the be that haven't worry seen case. but

Charlie Anderson

thanks much. Great, so

Operator

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

now Your open. is line

Richard Shannon

think XX Thanks of in add-ins seeing so I market that. you far I the questions share, success are your you maybe my volume that terms said XX as of comments think like customers, they things perspective recorders, in some default, us you are give the I taking Fermi, selection your or with Hi those well. regarding are they auto Fermi, with caught for OEMs. Casey. Can wins your

a that's far. Just of give so view going how us

Dr. Fermi Wang

we market focused know, are OEM are – default inside them We XX all the its models, that’s mentioned we XX of OEMs you on. definitely cars and focusing or thing it's on are and one of one either option

estimation Our see. China market total that is rough can of probably based on in XX% number penetration the we is

as and put a is ask gain to default. believe market particularly we market we to costs even there growth to share a in that cost, to of do some that have them function China, hear out might potential this So regulation we consumer continue some can so do that for commercial

have, silicon is very that that just also in current If the help thinking happens happens, that was with when temperature that consumption, history we quality the line. saw and auto-grade this ASO only our we chip and not to addition product our also and I a it the advantage level and but to that I market power growth our the really get really think will quality good traditional market level, of that video AEC-Q a quality

that’s enjoy benefit we in now. really right think of one the channel I

Richard Shannon

discussion. also monovision. looking on this industry I great there stereo are the and of interest My question, to versus and but engagements X Well been approaches certainly term, if about been you discussion lidar longer maybe hearing a level at level has that you a look and picture the that’s of there those versus for Fermi interest the as for into wonder in opportunity about usage Okay, a what non-lidar want bigger out five. level in helpful. four, little plays the level what’s – then at has while, lot X, year follow-on the

Dr. Fermi Wang

and that volume but building small believe all continue the will still NRE X, and market that get be together. So some more relationship R&D to us we level – for level of OEMs involved continue to also doing a it’s we also will long four, five our technology a we project that Level but is term engage first we’re expectation with X, production Level we the of and of with

is you of to that other have any prove level complementary of without stereo and believe camera the We the we lidar we terms non-lidar there. discussion, a [inaudible] level lidar put to concept didn’t that In mona try can car. lidar assistant we a technology X the and X, good

because the coming like you a definitely to trend would lidar, market and with mono, plus We’ll If discussion. customer said, trend to says CV with I if camera want going work and we is them, you them. this will stereo However, are with this plus on to customer trend. we’ll our neutral to a if us comes we customer want chip use not try that lidar we mono market this know and with and our says stay work work says they compete

stereo the improve saw technology, concept stereo However, as sensitivity, show as we work can processing powerful with cloud the we to be provide try powerful we cameras. that stereo when the can or concept, more as definitely processing to the want the following even properly point density people lidar the that with we because that

be Level of combination improve So that of future. stereo stereo processing this can is used camera the we the our in hopefully a the job that Level future processing can the cars we X X, sensor that continue plus by mono main to and the can near in our demo quality CN

Richard Shannon

Okay questions. detail. you all that Fermi, thank That’s my for

Dr. Fermi Wang

you. Thank

Casey Eichler

Thanks Richard.

Operator

from with Richard comes Markets. question Gus next Northland Our Capital

line Your open. now is

Gus Richard

costs the give sense is packaging margin versus you quarter, mix. of increased Yes, much in a the us of thanks question. current how for in taking the Casey terms that pressure can of

Casey Eichler

is mix. This quarter I think of it most

know pull-ins, go QX Going to this test you costs year. extra we costs so costs and our if and know QX to future be packaging there opportunity would get I is the have that be to done back out then any into extra without think continues see what more and and really you the

mix. all really it’s quarter This

Gus Richard

those And about share customers. Is of Got you gain and loss of lose then relative opportunities the when know the you know from you share because to for to you gain or there you versus opportunity you tariffs of more it. of the about to opportunity for HiSilicon banning opportunity to other? they each are kind same? think Can two size business more or

Dr. Fermi Wang

Fermi. Well, is this

question times. the many in this can asked you I imagine, company As

models show different many different have that We results.

total point comes this your this on assumption to really point. result different depends I it when that at it at So think

think really our have this is then the I to we more way that of to happening; the clarity the we ban give will will terms we you is, answer a products, in when two, and approach precise whether problem of – of applies your sort ban we a can more question. get more

Gus Richard

a have range? you Do

Dr. Fermi Wang

That’s quite wide.

Gus Richard

much. so Thanks

Dr. Fermi Wang

Thank you.

Operator

turn for At Fermi Dr. remarks. I'd to this over time like Wang closing to call the back

Fermi Wang

you time. you all joining thank forward to Thanks. Yes, for today looking and bye talk to Good for next now.

Casey Eichler

Thank you.

Operator

does This thank Ladies today's in you conclude for and the participating gentlemen, your conference. program.

may a Everyone now great You day! have disconnect.

Ambarella (AMBA) 5 Jun 192020 Q1 Earnings call transcript