AMBA - Earnings call 3 2024

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Operator

Thank you for standing by, and welcome to Ambarella's Third Quarter Fiscal Year 2024 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to VP, Corporate Development, Louis Gerhardy. Please go ahead.

Louis Gerhardy

Thank you, Latif. Good afternoon, everyone, and thank you for joining our third quarter fiscal year 2024 financial conference call.

me Dr. with call the today is On Fermi John Young, and CEO; CFO; and Brian White, VP Wang, President of Finance. our The results quarter call information today growth our primary is to statements contain to prospects, market projected responses provide things. today's for purpose your regarding you and questions and the regarding for solutions, year fiscal the third other our XXXX. The discussion financial among forward-looking financial of will with demand results, and are subject risks, based assumptions. on statements information available These and to currently uncertainties Should these assumptions from of could our risks any or or materially should prove actual uncertainties our these differ incorrect, materialize forward-looking statements. to be results affect We're in as under other risk filed information documents these statements. These obligation could are update potential we SEC. well financial fully more risks, our uncertainties the with results described as to and the on assumptions that no factors results Investor quarter SEC on call third the our filings to of a fiscal can replay and results, Access release, today's Relations website. our of XXXX transcripts, historical found page be press The well website content transcribed materials our cannot and prior the as reproduced without be as call Ambarella's property our written are on consent. posted today's of or now update business the quarter. provide will a for Fermi results for and and the we'll be then available review will Brian your financial questions. outlook, Fermi?

Fermi Wang

afternoon, Thank above QX revenue market, the guidance. you, was midpoint Louis, challenging good a everyone. slightly and In our fiscal of our

inventory efforts. stabilizing customers seem our management process to as appears progress business of in making with be Our their the to be

introduction and a R&D will determined of more year the AI we software, dynamics emerge priorities inference time, to return portfolio year. at and of customers our cynical we all at to to times expect for the focused the on anticipate XXXX. We SoCs continue next fiscal our We remain downturn growth different workloads. And sophisticated considering targeting AI strategic from of the throughout in this

the not and market serviceable remain confidence estimate changed. And opportunity has CAGR opportunity processors for AI software growth inference our Our in secular high. long-term

to year in expected long a a of lead revenue cynical us represent out SoCs proportion term Our fiscal is and XXXX. total CVX family larger our of of

established inference chip, SoC the $XX total generate of AI point provide with approach AI and to reminder, a $XX or CVX flagship family more below fiscal and is meaningful a processing to to single more both price of a products XX% the X-nanometer customers one CVX this CVX, SoCs selling to product out family video next expected As typically inference processing $XX this production. close these forecast [ In XX Ambarella year to revenue 'XX. In of range the our revenue are product in The in of particular, market, is cameras. for average I that ]. with above first Ambarella want in than and

successful CVX-XXX market The up platform CVX transistor from we And to year beyond. in during and platform automotive CVX the to SoC we are a XXXX sample revenue extremely includes production SoC portfolio. the CVX CVX-AD billion-plus midst the is generate the $XX year software, today, QX, in ago. a received and And SoC, SoC. began of pleased a announce we first the founding for Our expected silicon flagship of to this sophisticated calendar I'm and

workload stock year, from such based SoCs Continental We customers award and a samples XXXX. CVX the year are AI in expect inference QX track complete third-generation in or announced to our technology inference serve AI significantly previously to in production more due to deliver vehicles. as next partial on OEM are engineering autonomy the challenging calendar we and on first

based includes software radar both we than the multiple on perception enables autonomous our deep fusion for more Since input, CES family to SoC well 'XX rights CVX CVX. Tier camera complete have $XX are of to other are for additional our This of a driving driving And The CVX the January. X we from with Oculii sensing which the as perception in both In been CVX low-level providing will SoC. There stack, Oculii data this software. software. radar software and [ low-level stack SoC, SoCs platform, and Xs at November in addition to perception time, continue SoC, first autonomous from of fusion optimized $XXX as low-radar OEMs providing, and Adaptive centralized our the with thermal modalities. processing, in processing to for and per radar single range ], centralized data AI elements demo CVX processing price

our to I like Now plan. would gen provide on an AI update

the with have high-bandwidth building the now quarter, [indiscernible] successfully LPDDR with CVX-XD, blocks memory implementation operating memory last of we new power the consumption rounding inference software SoC on the at instead demonstrated using During a incumbent model of of solutions. fraction and of

and AI well inference this the Some models we highly in our With successful existing will at suited and embedded they and are networks. how SoCs processor their of concluded large of demos additional markets. our analysis, CVX customers AI age efficient have implement our powerful language for gen the evaluating is

have this in of of CVX the won a funnel pipeline calculation upward both and X-year to projects. forecast not including X our to the $X.X our the CVX an engagement $X.X are lost update pipeline world's business With large funnel of revenue software increased million X automotive revision Tier the year, solutions. engagements X% and In we designs number over customer revenue of will formal on XXXX. Once to $X.X more from the AI of updates anticipate year, our growth $X.X expected OEMs, Xs this to even automotive now Xs and portion $XXX was the project until a November completed in the LLM is architecture commence We to or funnel $XX indication CVflow about about it strong Chinese we addition of the calendar CES years. update from for to be changes ADAS our develop represented generate SoCs current at largest the year and we open in and downward funnel, represents next billion. new of market. There is delays in meant quarter. year, XXXX. I will business significant and in leading differentiated a expected automotive enable though funnel from featured a market. China, billion. The about in providers The million is win strategy which automotive and a Tier of customer projects new automotive We the comprised billion is automotive, reference fully discuss highly this continuing billion

system, manufacturers Nextbase, the XK and our camera spending and based functional AI monitor on XX security C-XXXXX CVXX right XK camera introduced Smart see the introduced SoCs. introduced XX-megapixel different ] activity the In alarms European [indiscernible] on known SoCs, During Lighting resolution is XX DVR Signify, first action incorporating our INSAXXX new the our new CVXXFS to [indiscernible] safety its noise zoom. And leading based its detection. leader based November, ACE its AI processors. And resolution Germany, the on ESX advanced our systems. camera, imaging announced automotive video AI-based Vocado on on with In Action X SAIC Embrea-based camera the SoCs. and AI control aftermarket, up SoCs the X [indiscernible] Furthermore, to product, XXx during to and for the market, gesture analytics engagements left CVXX design new on new Ambarella's on GAC its in HXA based based our minivan, life CVXX offering video our Pro AI-based replacing on our of CP-XXePan customers and a lights X-megapixel X home dynamic IMS SoCs. its its advanced Hue control spinoff Philips wide Dashcam enterprise number [indiscernible] CVX passenger [ based threat AXXA projects, the coverage market new box line lighting CVXXAQ. Also product SoC, can CVXX as In Motorola on [indiscernible] of X representative such representative announced phone companies, the cameras consumer X-nanometer quarter, Korean and our product secure quarter, And on CVXX its photography, reduction, overall and based cameras introduced introduced QXD different outdoor computational the include camera introduced and and and CVX ADAS line its cameras. for and SoC, Asia its CVXX introduced its included NXT Japanese sound Ace automotive of is AI leader, across Philips you Pro in [indiscernible] the based [indiscernible] network-based based introduced AI total automation voice operators editing. Collectively, resolution cars SoC. based GAC intruders. Also analysts win using leader, areas mirrors a and Ace segment, families. introduced SoCs. the SoCs. automotive cameras the intelligent AI CVX IDS AI SoC a market and optical the leading deter our market to AI X-model IoT. X-megapixel first based features system SoC. And camera X-channel automatic based camera lighting flagship healthy This and in our and featuring featuring featuring introduced smart CVXX XX our smart work CV higher-value both SoCs. and CVXX the home HyperHD featuring up utilize and on during leader, Ipro Max. Also, minivan announced And X-megapixel multidirectional on camera the our CVXX models models and including The with market series Hue IQ our auto camera, also our XX its In can quarter, CVXXAQ ADAS on Based introduced

X AI SoCs we engagements. identification see can in more You highlighted implementing CVX workload are customer successfully as also the with our sophisticated of different

we per we such can value, inference forward, CVXX, believe newer we are sophisticated and believe software value AI CVX, more workloads, we as Looking well win. this as and support capture also products more to increasingly CVX product design capture new positioned ramp and our

our continuing update fiscal year challenging ending correction to role CFO navigate position thank previously helping experiencing, our is to January inventory to the the We XXXX. on the Brian, including an current strengthen as retire would at from our well would financial as XX, the the like in changes give I currently company, I our CFO, to like his industry of the announced and XXXX. will transition team conclusion semiconductor management VP October to XX, finance team as Now his contributions transformation more the pleased forward to been grow continue we years, contributor Young, we Ambarella of that CFO continue X accounting will John he as serving value. Finance, that into larger currently a success drive our John X, as has of variety to markets. I'm we on for our of and February are us to seek roles, for also confident than announce assume with be XXXX. valuable a will and shareholder and role

Now Brian hand in to discuss to over QX I and more detail. the results will it outlook

Brian White

Fermi. Thanks,

press to the financial their to he now CFO has for third and look levels review quarter fourth Fermi highlights be ended team refer Before my discussing is part of the support to made at here the of Ambarella ask non-GAAP XXXX. for developing ongoing I'd non-GAAP special reconciliation team processes the thank detailed have our timing our to had and forward support provide to take transition him. growth a I'll tools you opportunity today's by and a in of as fiscal the in and XX, profitability. I begin, John's The to that confidence for over the release success. I'll progress facilitated January GAAP I've and next Ambarella. ability the financial upcoming outlook we've at like Board I I for of to be the results quarter people, to complete results. and

have eliminated restructuring acquisition-related of expense and we reporting, adjusted for costs with impact non-GAAP taxes. stock-based For along compensation the

fiscal the For the slightly revenue of and above XX% QX, quarter year-over-year. our million, to prior midpoint down was down XX% guidance prior $XX.X range,

down track and gross and of sequential market. in quarter was management was the with on timing provision IoT line or our We was income from non-GAAP of implied loss by Non-GAAP QX other expected, million, the below tax Non-GAAP approximately $XX XX.X%, $X.X fiscal diluted $X.XX net by expenses. prior of in and net was guidance range. operating remain expense $X.XX a range, reported $XX for than prior our $XX spending our guidance [indiscernible] better the As product and end between our decline quarters. to our per driven primarily We non-GAAP to lower guidance primarily by $XXX,XXX. million, was million interest expense internal share. EPS development $XX.X our milestones. QX driven loss was driven midpoint operating of the range margin prior Non-GAAP continued million revenue prior million

was customers of revenue a the had revenue. XX% to of of defined revenue for to or multiple multiple CapEx, of to and and cash X cash and Japan marketable Fiscal more that from X% in turn was who for sheet Taiwan, and a $X.X XXX Hakuto, QX. in to customers from intangible to logistics quarter. million DSO of IoT and revenue, XX% from tangible million. of and cash cash multiple as fulfillment while came days, operations partner who $X.X and from our flow, balance I'll on XXX quarter prior the XX% in $X.X our $XXX.X days and also ODM Microelectronics, improved XX days, down operations the XX% Now Ciccone represent ships supplies was securities Cash from capital in was in basis. We flow. a Asia, increased $X partner XX-month assets in companies ODM XX less was primarily expenditures million. at million trailing customers for Free XX% QX prior logistics quarter revenue. million WT automotive improved manufactures inventory days

outlook XXXX. The to the appears fiscal the Now revenue near-term stabilizing. discuss fourth I'll for quarter year outlook be

growth end pockets persist, and continue ordering While softness customers resume out feedback suggests year. leveling that some of and to fiscal next revenue patterns inventory to our manage likely and is their levels our demand in customer

automotive range total this will mid-single-digit in fiscal our range. At anticipate slightly our the For IoT we time, growth be fiscal that QX, the about $XX in with we will up revenue in percentage to to and QX million, estimate million the of low $XX revenue sequential flat. continue

to margin We be expect gross fiscal the non-GAAP of range in XX%. to QX XX%

our favorable net interest the We expense meetings million, fireside product be We $X.X diluted be to Stanley's count in million, NASDAQ's increase exchange range impacts. approximately fourth OpEx the chat development and XX.X non-GAAP the Morgan be to December $XXX,XXX and driven expect at $XX be share quarter $XX marketing QX to approximately in group one-on-one with and be non-GAAP our compared shares. Ambarella by Conference. to tax CES activities, of approximately X to and million to new million will tied London X on a to participating less foreign hosting and R&D estimate in income

CES on XXX X. Las will Vegas also We participating be Omero's Conference in Monday, in January

X groups expect We to more from analysts January during to exhibition to make than January investor host CES XX Please our contact sell-side XX. reservations. XXXX

group details. and on you the XX the I'll York. Please January operator And Thank at contact questions. more in call New joining host us present the and today. also that, our turn over with one-on-one call for to will meetings for Conference for We Needham

Operator

Instructions] the Stanley. [Operator first question of of Our line Moore comes Joe Morgan from

Joseph Moore

I wonder discussed about talk could funnel. that adjustments, if the you the you Fermi, to

there because it of those the adjustments? it would were happens? that you chain? I to that indication said probability of of of saw that when businesses more kind happening slowly? had and that there us kind Is moving an you a just coming programs had Can give out, You number know business be you What's Is Is supply competitive? just some that are weighted. why

Fermi Wang

Thank you, Joe. Yes.

address I me that think question. let

X we about talked different factors. script, In fact, in the

factor X first from forecast the and change OEMs. Tier is The

of some in that that won, particularly For seeing example, several have the for would projects months last the the we of forecast projects trend. start those reduce we

So that's the factor. first

factor second we delays. project The is seeing start

also that the the example, of for some some those of the the push of final of out and -- got For award decision projects in is is we decision for the out. that production projects an also RFQ won, are pushing have we phase, date

third and there you we're will really different done. have we second project level the -- also that different continue and new project that's think factor. But RFQ is have or different I like that we really to are So that's that a new we on, factor The the factor multiplier, said, confidence the at a projects, project for last and lost is be end. won the bidding

our into to the continue think I us really you net effect fourth and numbers number, factor second if add probably funnel negatively first but third the the ask the to in So help impact and -- me, third fourth and funnel. the

reason we numbers. funnel the So the minor that's on increase this have

Joseph Moore

That's of awful And [indiscernible] growth over helpful. lot X there's Great. still years. years an multiple

that China as of Do how look profile a numbers more So you features? about does a to skew CV you've start -- lot in ago? your you know talked success ramp I in see versus China. the next the year advanced a of to

Fermi Wang

Right.

I and that the first this contribution So addition design can commercial number. high start that getting I and vehicle the percentage we of all, this with first CVX the higher in non-Chinese first -- of wins Conti, seeing of there. definitely is CVX on win, design funnel we last we pipeline, X all, add X first funnel One portion, think time continue extra in thing ago times say CVX In announced this with the to pipeline. to CVX

fusion to past stack CVX-XXX those the we all also our as the to about, that. progress design integrate AI stack wins software make working planning. and And well demoed the on So software demoed that for is talk trigger all definitely chip we after as continue the we from the radar can

secure us just Those those demoed design wins Tier OEM we Xs. about. talked to So X factors things to we the successfully help

Operator

question comes Svanberg Our of Stifel. the from next Tore of line

Jeremy Kwan

Yes. a adjustments have more then how that. how is impacted the made market of And the broad Kwan level, wanted the impacted? slight after in overall Tore. to calling funnel. follow the maybe about got how on in follow-up just the bit Jeremy terms may to guess you SAR up I maybe much a I I've little maybe, that And This increase for did talk funnel? first, on a you Can

Fermi Wang

read I lot forecast global But about the definitely is the X think things. talking got X new because product different you or a X+ Level One think stack, project the can features the the China cars, run I Level thoughts the rate also, line. of how compete are of what's with project lot having the out the market articles and software to decision pushed of for with impacts about [indiscernible] of aggressive a people function their their particularly

think just factor mentioned. all first contribute to second the of I those and I So

Jeremy Kwan

your Great. of start might into large other like then demonstrated. accelerator the are number business moving a it's the that relative Are competitors that maybe And we is the move that the read competitive you're forward moving current that private you right to whether it to and just you've AI talk about? little talk incumbents, in something bit that it maybe And with? to space Can about to positioning successfully companies you in. inference sounds this can

Fermi Wang

are ARM. you to think I referring the

and time, both a are also first our demos of lot is enough done lot we've because we're of good also customers our time understand time strength there. know of we a we the for silicon large a also can a companies, So our understand demo haven't very we talking global, consumption. because side. power all, a to companies. And say of kind have against on strengths start-up first while we that And all, talked time. we of about we this working to different customers time, give different applications strength devices, is, to performance, zooming at little a low competitor, in enough very the This bit than in marketing the particularly market spent our I we last Last think and

that's the I think key.

second thing just silicon. it's not The for us, is,

publicly development about that how fact, to going device We're introduced servers solution quickly introduce to bundled software environment In CES our edge a with we environment, current we already a to our or the we're help edge have show edge customer, also that applications. moving bundled we'll software. enable using

we hyper, And can think areas familiar we with it's to focus is cloud I that's much know on resources that want our So current we that that silicon now. think application want focusing bigger not on where really are win. I don't that that we we're to right and we know, bigger or with,

I So we sitting on where plan. current are that's the with think

road are applications we -- said we those are using system, about application, other software to need talk engineering we for engineering we But different is current commitment which developing or committed -- using enough however, Had probably ARM like doing yet. our extend time, edge a we course, map. applications, resource, haven't is to last resource, road decide build need are definitely current not those applications, that map we our resources. our to current the developing Of to to to which do

Operator

next Susquehanna. of Our Rolland from the comes of Christopher question line

Matthew Myers

This is for Chris. Myers on Matt

guys about. you quarter than growing to it's mid-single about were digits. talked So little bit Maybe potentially a low thinking slower we first

quarter inventory about next the with are there? I fiscal by curious, the So into And an And or into IoT end quarter then first more demand through and shape enterprise April thinking or auto think how about demand-driven we end the of or is you inventory-driven? dynamics year? consumer should in then was how this

Brian White

that based the for have in points backlog the fiscal data at trends, on, absolutely talked which looking that looking about we're number think one, bookings I growth improved. of and at support is we our Well, QX

of our talked quarters. at and build QX the we've experiencing for as tracking we it's supporting that well the much book-to-bill the So it's range And quarter, QX, into above number backlog in was prior look growth than we what about. been better a

feedback us from have getting confidence pull-in shipments, 'XX. But QX more that much gives versus as full that when bookings so in have then the and data which the we're relative certainly, that they the customers, billings to growth go. the the to to we're well pushouts the getting our about that beginning have we than been of past, and combine fiscal And we requests and fiscal talk balanced to of the in as for we ways from become compare growth

turnaround End also And healthy through that the situation. that seem primary markets of and would so inventory the the But inventory recovery point by relatively in getting of that of is is the customers. certainly and that getting cycle support at growth. say driver this to bottom helped I excess material at

Matthew Myers

also Got it. then And processors. That's video great. I question on wanted a

revenue, here, think to off new about based talking is big what's your processors? going year, or you're about particularly of if getting in clearly should wins continue And lot CVX are in in drop-off outlook business for a being increasing how processor here? the So And particularly investing revenue next this next you still this just we And video year? XX% if about this CVX there's a video year.

Fermi Wang

Right.

chips, point video although AI So processing-only want first technology to out, part be our very continues haven't really a chip. all, a of important in offering I we of processing out but video to

of has the technology sorry, So chip -- image all CV there. CVX, processing processing in the or big family a video portion the

want that. clarify just So to I

at the approached momentum, if total we that CV. and Obviously, of majority So said this our design XX%. what look you year, it I -- win also, CV just revenue have the was is

still reduction the a years, tail automotive. as the in CV. that big favor long down markets, video of a processor security we as will different to slow X have think processor because however, think a last well a we have I to including the I go into but jump So chip of enterprise sell that decline video But potential of continue the camera

much on the reduction think processor long expect a and video I tail. So very with we that less should

Operator

comes of which Cassidy question, Securities. Next from Kevin the Rosenblatt line of

Kevin Cassidy

Yes.

designs HOKUTO, some the Is there it Japanese distributor, in happening is there Or down? at customer because XX% in anything auto or is is This up there time happening year or just automotive? quarter, as overall first came revenue new the a a Japanese the more.

Fermi Wang

to I you quickly. automotive, if just Well, a Japan other and they previous take to think really that quarter, is compare the forecast. the dropped it's rate at business our And fixed usually, change

in particularly Japan drop the Japan, So happening significant. it's anything it's is but not that really outside

Kevin Cassidy

going consumer they consumer we input with will a time as device? And that something is cameras even working be program just can being the the the with surveillance used, Is Okay. and voice, just language -- when models the consumer, large you're towards? their forward for you're as and there

Fermi Wang

We are working.

Now multi-modality. just the working language, we're on

I think thing that, the can other well for as That think for biggest most probably application, really and in text we them all adds of us, image to X customer that's RRM that RRM also against as suppliers. together. differentiate unique processing that fact, our speech is also important customers' the advantage function our we

Operator

Our from Bolton next question comes the line Quinn of of Needham.

Neil Young

you we'll Bosch. start announced to you ask, about been since and [indiscernible] partnerships? When a the believe This hear about design is wins Quinn. to partnership so actually Neil Young these year Wanted it's for on from do

Fermi Wang

Conti And our are say think in but announced to you would Well, improve the fact, bidding mention I design county. projects we already OEMs continue with we couldn't and I relationship we OEM, that. on with a We with that should did -- together.

OEM win with are is And we well that design Conti to Conti cannot both approval. I us believe tighter, that and and can heavy. fact, between hardware tighter thing In software. our as we say design customer's on the engagement But that the also as announce activity the X continue is with getting

Neil Young

another follow-up. just And great. Okay,

that considering a assets, guys' its business. How its automotive some So Continental your suggesting affect is reports there's would divestiture mobility autonomous including divesting press business been partnership? of this

Fermi Wang

reports. similar heard we yes, Well,

with division that Conti. have, close can development we on side. I be to to believe continue this conversation I X Ambarella on of I based the important see is we Conti, say strategically think thing like didn't continue And any for signs with to we -- also and our is we're and continue Conti said both with that working slowdown the

So continually and we're the also for relationship is both and product important working on continue that this believe Ambarella we to is important Conti.

Operator

the from comes & Co. line [Operator Yang next Martin Our question of Oppenheimer Instructions]

Martin Yang

Just automotive engagement products on regarding X maybe markets? your CVXX customer you for comment question. design progress in the Can

Fermi Wang

Chinese Yes. we only applicable wins, market. also design product for about a designed we -- are CVXX automotive the OEMs. Chinese time, not of also, last that and Xs ASO, is Chinese the the to it's so And working to building have all Tier market system only because to -- we that time demo time talked about, multiple on multiple talked show last at

broadcast airport CBXX Tier the just Shanghai In the to Shanghai live of demoed from live, yesterday, fact, based driving on driving. the X, autonomous car our one downtown demo a

Level talk I to of to CVXX we solution market. we we we favorable So solution believe said also, can continue to closely fact, OEMs. are with in that -- X some price soon. competitive start huge a are to And that a end we position working for very we and And have China. think continue X+ we like And wins middle design before, demo that performance I to in I for a Tier particular announce progress Hopefully, the make OEMs. think only to in ready

Martin Yang

of you design on A CVXX expected maybe us on frame the ] win remind [ time shipments? and the quick follow-up activity. Can

Fermi Wang

the projects coming end we're production on from All the revenue and bidding of XXXX. the is XXXX

and spending So to year be it win next half done. first months development the get cycle design maybe has to XX

Operator

remarks. I conference to back Fermi would for Wang the to Sir? now Dr. closing turn like

Fermi Wang

talking I'm you to forward thank today, soon. Thank and you. us to joining looking everybody, Thank you, for you, and

Operator

Thank today's This conference for concludes participating. call. you

now disconnect. You may

Ambarella (AMBA) 30 Nov 232024 Q3 Earnings call transcript