Ambarella, Inc.

Good day, ladies and gentlemen, and welcome to the Imbrella second quarter fiscal year 2020 earnings conference call. At this time, all participants are in a listen-only mode. Later, we'll connect the question and answer session, and instructions will follow at that time. If anyone should require operator assistance during the call, please press star and then zero on your touch-tone telephone. As a reminder, this call is being recorded. I would now like to introduce yours for today's conference, Mr. Louis Gerhardy, head of corporate development and investor relations. You may begin.

Thank you, Skylar. Good afternoon, and thank you for joining our second quarter fiscal 2020 financial results conference call. Our speakers will be Dr. Feng-Ming Wang, president and CEO, and Casey Eichler, CFO. The primary purpose of today's call is to provide you with information regarding the results for the second quarter of our fiscal 2020. The discussion today and the responses to your questions will contain forward-looking statements regarding our projected financial results, financial prospects, market growth, and demand for our solutions, among other things. These statements are subject to risks, uncertainties, and assumptions. Should any of these risks or uncertainties materialize, or should our assumptions prove to be incorrect, our actual results could differ materially from these forward-looking statements. We are under no obligation to update these statements. These risks, uncertainties, and assumptions, as well as other information on potential risk factors that could affect our financial results, are more fully described in the documents that we file with the SEC. including the annual report on form 10-K filed on March 29, 2019 for fiscal 2019 ending January 31, 2019 and the form 10-Q filed on June 7, 2019 for the first quarter of the fiscal year ending January 31, 2020. Access to our second quarter fiscal 2020 results press release Historical results, SEC filings, and a replay of today's call can be found on the investor relations portion of our website. We'll now turn the call over to Dr. Feng-Ming Wang.

Thank you, Louis, and good afternoon, everyone. Before I discuss our results, I will provide an update on geopolitical factors that may continue to impact our business. New and or higher tariffs, market share shifts between our customers, and supply chain issues continue to be potentially disruptive. And as several of our customers in China continue to face the risk, they may be added to a U.S. government entity list, which could limit or restrict our shipment to them. At the same time, our largest competitor in the security camera semiconductor market, HiSilicon, a unit of Huawei, is facing challenges that are helping us gain market share. As you can see, there are multiple factors, positive and negative, that yield a wide range of outcomes for us. We continue to demonstrate strong progress toward our strategy to transform from a pure video processing company to an AI and a computer vision company. During Q2, three customers, including one in the automotive market, generated a mass production CV revenue. CV designing activity remains strong. In Q2, we generated pre-production CV revenue from more than 40 customers ordering engineering parts, evaluation kits, and or development boards. Driven by demand for our core video processing portfolio, our confidence in our fiscal year 2020 outlook has increased despite the geopolitical uncertainty. Our Q2 fiscal year 2020 revenue of $56.4 million was above the high end of our guidance range and the revenue increased 20% from the $47.2 million in the prior quarter. Three factors are driving the strong outlook in our core business. First, underlying demand at our largest security camera customer in China has improved, as noted by these customers in their recent earning reports. Second, this solid demand outlook for security camera is being fortified by our global market share gains. And third, there is some inventory restocking in China. I will now talk about our progress in our target markets starting with security. We are seeing professional security camera makers increasing orders for shipments in the second half of the year. We are continuing to gain market shares at the customer outside of China as well as as a Chinese customer for camera models to be exported to Europe and the US. We are also seeing widespread adoption of our CV solutions in a professional security camera market with both large established player as well as with a new group of emerging private players. We are excited to announce that Averagelon, a Motorola solution company, will be releasing its new H5A AI-powered camera line in the coming weeks. The new camera line lays the foundation for Averagelon's next generation of intelligent video solution and will offer a new era of AI innovation in video security. Based on Umbrella's CV22 CVFlow AI processor, The new cameras feature Avogadro's next-generation video analytics that leverages the chip's neural network-based video processing and advanced image capabilities to help recognize and classify different objects with extremely high accuracy. And in July, German engineering giant Bosch honored Umbrellas with its prestigious Bosch Global Supplier Award for their energy and building technology business. The award recognizes Umbrella's performance in the manufacture and the supply of products and services, notably in the area of innovation, quality, cost, and logistics. This year, Bosch awarded 47 of its 43,000 suppliers, representing its top suppliers across an array of industries and in 15 different countries. Embraer has been a supplier of SOC for Bosch IP cameras for over 10 years. During the quarter, leading Korean security camera supplier Hanwha Taekwung released its new Q series of camera with models ranging from 2 mega and 5 mega resolution and in box, mini-dome, and multi-PTV form factors. All of the new models are based on Embraer's H3L HEVC SOCs are first wings in professional models at this customer. Hanwha has stated that they will use Embraer's CVFlow SoC as they introduce new camera with integrated AI capabilities. At the AFSEC International Security Show held in London in June, new professional IP camera maker Viya introduced its VcamDorm and Panamera. panoramic cameras based on Umbrella's CV-22 CV-flow SOCs. With embedded video and audio analytics powered by AI algorithms, VIAL's end-to-end surveillance solution can detect threats in their earliest stage and perform fast and effective investigations. And in August, U.S.-based Hakata introduced its new Umbrella-based CM-61 camera design to give customers the flexibility to add 4K video coverage everywhere. The solution's hybrid cloud architecture supports ease of installation and the usability while minimizing the bandwidth of usage without sacrificing 4K quality or performance. And in the consumer home monitoring market, which we previously mentioned is the second wave of our CV revenue, we see increasing demand for camera solutions with greater intelligence as customers demand cameras with small motion detection that notify user only in the event that something interesting is happening. In future, such camera will also be capable of identifying people as well as classifying objects and that this level of intelligence will increasingly require dedicated AI hardware in the cameras. We also see cameras being offered as part of a broader IoT eco-systems that support a similar integration with other devices in the home. During the quarter, usbasealum.com introduced its V723 and the V523 intelligent outdoor and indoor cameras based on Ambrose H5L SoCs and offering Wi-Fi connectivity, full HD video and night vision. and Samsung SmartThing introduced its SmartThing camera, home monitoring camera based on Umbrella's S2LM SOC. Selling for $90, it offers full HD video, wide-angle operation, HDR processing and two-way audio. LifeShield, an ADT company, introduced its LifeShield HD video doorbell which integrates seamlessly with its security systems. Based on Umbrella's H2L SoC, the camera offers voice support for Amazon Alexa, allowing it to control alarm systems, adjust lightings, and managing thermal scans via voice commands. We are also seeing new opportunity for cameras being integrated into smart locks. During this quarter, Hikvision's consumer division, EasyViz, introduced its DL30VS smart lock with a built-in 720p wide-angle camera and night vision capabilities. Based on Embraer's A3LM SOC, the locked camera can detect when intruders are lurking and take a snapshot or record a video clip to send to the homeowner. In summary, for IP security camera market, our sales are expanding both professional and the consumer markets are growing. as we take market share and as we continue to make excellent progress in designing our CV flow SOCs into a next generation of AI cameras. I will now update you on our automotive market progress. In July, leading Korean automotive tier one, Hyundai Motors, announced that it had developed a camera monitoring system using cameras and monitors to replace the vehicle's rear and the side view mirrors. The system enabled vehicles to achieve greater fuel economy by eliminating the drag of the side mirrors while the camera's wide field of view enhanced driver safety by reducing blind spots. And Varela's A9AQ automotive SOC provides the image processing for all three vehicles of the video channels. We are also seeing increasing interest in our computer vision SOC from companies that provide a fleet management solution for commercial vehicles such as trucks and dirt boxes. Existing camera solutions for commercial market typically lack intelligent features and can only run analytics in the cloud. With Embraer's CVFlow portfolio of AI chips, The solution providers can now deploy AI-based applications such as front ADAS, active driver monitoring system, and blind spot detection in the vehicles. Our CV flow solutions have been chosen by multiple providers in Asia and the USA with one generating mass production revenue in Q2 and others expect to be entering production by the end of the year. We continue to win car-recorder designs as Asian automotive OEMs increasingly offer this feature in new car models as a pre-installed option. During the quarter, Chinese car-maker Geely introduces new Emerson GS and GL models featuring full HD car-recorder based on Embraer's A12 automotive SOCs. Additionally, Gray World Motors introduced its Way VV6 SUV with a one-camera and three-camera DVR option based on Imbra's A12A and H22A automotive SOCs, and a new electric car, the OIA-R2, featuring a recorder based on A12A. In the aftermarket dash camera category, Korean supplier Thinkware announced its QXT Mega Recorder based on Imbra's A9AQ automotive SOC. the first 4-channel Full HD car recorder in Korea. Additionally, Thinkware introduced its Z500 Plus 2-channel dash camera based on Embraer's A12 SOC. Also in Korea, Find Digital introduced its GX200 and GX2000 model based on Embraer's A12 SOC featuring Quad HD front and Full HD rear recording, smartphone connectivity, and Auto 9 vision. In summary, we're just starting to realize our vision to enable big data analytics in video-aged endpoint devices or AI in the camera. As this play out, we expect to see multi-billion dollar increases in our addressable market. Our CV solution integrates our state-of-the-art video processing heritage with our recently deployed deep neural network AI processor. It is evident now that customers who are experienced with our video processors are able to efficiently migrate to our CV solutions. And our CV portfolio is also attracting new customers and expanding our customer base. We are unscheduled to realize the three waves of CV revenue articulate our last earning call and we are pleased to see the improvements in our Q3 forecast Our core video processing products. There are many distractions in the market today and I am thankful Embraer's global team is keeping up the strong pace of execution. And also thanks to all of our stakeholders including our 754 employees, customers, vendors, and shareholders for our support. Now I will turn the call over to Casey for the second quarter financial details and guidance for our third quarter of fiscal year 2020.