Ambarella, Inc.

Ladies and gentlemen, thank you for standing by and welcome to Amber Rella's Q3 Fiscal Year 2020 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Louis Gerhardy, Corporate Development. Thank you. Please go ahead, sir.

Thank you, Gigi. Good afternoon, and thank you for joining our third 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 third 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're 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 we file with the SEC, including annual report on Form 10-K, filed on March 29, 2019 for fiscal 2019 ending January 31, 2019 and the form 10Qs filed on June 7, 2019 and on September 6, 2019 for the fiscal year 2020 ending January 31, 2020. Access to our third quarter fiscal 2020 results press release, historical results, SEC filings and a replay of today's call can be found on the investment relations portion of our website. I'll now turn the call over to Dr. Fermi 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. During the quarter, we provided an update on the impact to our business from the entity list published on October 9th. While this brought clarity to some trade issues, we continue to see a wide variety of geopolitical risk outstanding, including foreign policy, trade, and IP matters. Factors potentially disruptive to our business include changes to tariffs and all the entity lists, market share shifts between our customers, supply chain issues, potential export regulations on advanced technologies, and the potential for customers in China to take actions to reduce their dependency on U.S. components. On the other hand, our largest competitor in the security camera SOC market, HiSilicon, a unit of Huawei, is facing challenges that are helping us gain shares outside of China. As you can see, multiple factors, both positive and negative, are contributing to a wide range of potential 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, all of our CV family contributed to the early ramp in our CV revenue, with mass production shipments continuing in the automotive and security camera markets. CV design activity remains strong. In Q3, we generated pre-production CV revenue, including engineering parts, Evaluation Kit, and our development boards for more than 50 customers across all applications and geographies. Our Q3 fiscal year 2020 revenue of $67.9 million was above the high end of our guidance range, and the revenue increased 20% from the $56.4 million in the prior quarter, with strength for our traditional video processor in all markets, led by our automotive business. Security camera revenue was driven by strong underlying consumption, as recently reported by several of our large customers, as well as inventory restocking at our customers in China and the share gains. I will now talk about our progress in our target markets, starting with security. As China's public security export held in October, we demonstrated a number of advanced imaging and AI technologies and at enabling the next generation IP security and the robotics applications. This included using a single RGB IR sensor with a sensor fusion software to eliminate the mechanical IP filters and preserve color information under near IR illumination. We also demonstrated rapid person detection using AI algorithms running our CV25 SOCs to enable fast system boot and reduce power consumption in battery-powered applications. We also demonstrate our new robotics SDK running multiple neural networks and stereo processing concurrently on a single CB2 SoC to provide a full frame rate object detection, classification, and tracking with depth measurements and segmentation. We believe the new SDK will enable our customers to develop solutions for a wide range of new machine learning applications spanning logistics, Industry 4.0, New Retail, and both Consumer and Industrial Robots. At the TSX 2019 Security Show held in September, Hanhua TechWin, a leading supplier of IP video security solution, announced its new P&O series of AI cameras based on Embraer's CB22 CUflow SoCs. The new cameras run neural network-based algorithms to recognize different types of vehicles, faces, license plates, and other objects. Offering greatly enhanced video analytics accuracy versus previous generations, the cameras are available in both 4K and 5 megapixel resolution models. Also, as the GSX showed, Bosch introduced multiple new IP cameras based on Embraer SOC solutions. This included its intelligent i-Series cameras including new Flexi-Dome and the D-Niang camera models with building video analytics as standard. Enter the new Auto-Dome Starlight 7000i cameras that include intelligent video analytics, ability to track and zoom in on moving objects, 4K resolutions, and advanced H.265 video compression, making them ideal for applications such as city and highway surveillance. During our last earning call, we discussed Motorola Avizion's introduction of the H5A AI camera bit line based on our C4 SOCs. During the current quarter, Avizion further extended its portfolio with the introduction of its new H5 SL camera line based on Umbrella's H5L SOCs. Focusing on simplicity, flexibility, and cost effectiveness, the new cameras come in multiple resolutions and incorporate Avigilon's unusual motion detection and advanced AI technology that can notify operators of unusual events that might otherwise have been missed. In November, security startup Fukada announces a new dome series comprising eight new cameras, including both indoor and outdoor models with a range of resolutions up to 4K. The umbrella-based dome series is eight times more powerful than the previous generation, enabling industry-leading age-based analytics, including advanced vehicle and the person detection. In the home monitoring segment, Market Leader Ring introduces Indoor Camera, a compact plug-in design that lets you see, hear, and speak to people and the pads from your phone, tablet, or Echo device. Based on Embraer's H2LM SoC, and the price at under $60, the cameras provide notifications whenever motion is detected based on customized motion zones. Multiple indoor cameras can be connected via a ring of app to provide complete home coverage. And in China, Hikvision's consumer division, EasyViz, introduced its LookOut EP1 HD video smart home door viewers based on Umbrella's A3LM SoC. Replacing the P-hole in the door, the battery-powered camera allowed the homeowner to view visitors remotely on a touchscreen display and communicate with them using two-way audio. And in police camera category, Motorola Solutions announced its new WatchGuard V300 body-worn camera, the first in the law enforcement industry to remain operational beyond a 12-hour shift. featuring Embraer's low-power H5LM SOC. The camera includes 5K sensor and a full HD recording, and it can also be integrated with WatchGuard's in-car video systems. Now I will update you on our progress in automotive markets. Embraer is working with Mercedes-Benz Vans to develop its H platform for their cargo recognition and organization system called Coros. The newly developed Corvus system actively supports parcel delivery drivers with camera-based object tracking and a machine learning software. A camera system in a cargo space automatically recognizes and registers parcels using barcodes and the symbols on the outside of parcels. This is done in fractions of seconds, replacing manual time-consuming scanning and sorting of each shipment. Embraer's CV2 was chosen due to its excellent imaging, molecular, and the stereo vision processing options, and the powerful AI processing platforms. We are seeing strong interest in Embraer's CD4 AI chip from companies that provide aftermarket fleet management solutions for commercial vehicles. Traditionally, video solutions from the commercial vehicle comprised of cameras with limited or no active driver assistance or monitoring features. With Embraer's portfolio of CVflow AI chips, fleet management solution providers can now deploy AI-based applications such as a front ADAS, active driver monitoring systems, and blind spot detection. The CVflow solutions have been chosen by multiple providers in Asia and the USA and are expected to go into production in 2020. During the AutoSense Brazil's 2019 automotive conference held in September, Umbrella partnered with OnSemi and AI software startup company Iris to demonstrate a fully integrated in-cabin monitoring system including both driver and occupancy monitoring functions. The multi-camera system utilized Umbrella's CV2AQ, CV4SoC to process real-time high-quality RGB IR video and OnSemi global shutter and RGB AI image sensors. The IRIS AI software performed the complex body and the facial analytics, passenger activity monitoring and object detection, all running concurrently on the CV2AQ. The demonstration won awards for the best automotive safety system and most innovative in-cabin application. And during the Tokyo Motor Show held in September, Embraer partnered with a leading Japanese car manufacturer and a Sony sensor group to demonstrate an electric mirror system. Based on Embraer's CV22 CVflow SOC and Sony's IMX490 image sensor, the electronic mirror demonstrated outstanding image quality under a number of challenging low light and high contrast lighting conditions. In automotive OEMs, Chinese automaker Chery Introduced is a TIGO 8 SUV featuring an integrated digital video recorder. Supplied by Chinese tier 1 supplier Skyworth, the recorder is based on Umbrella's A12A automotive SOC and support 4 HD video recording. In consumer market, we also enjoyed a couple of interesting product introductions during the quarter. In October, drone market leader DJI introduced its lightest and smallest model ever, the Mavic Mini. Weighing just 249 grams, the $399 drone does not require FAA registration and achieves over 30 minutes flying time. Its camera is based on Umbrella's H22 SoC, providing 2.7K video at 30 frames per second and 12 megapixel photos. higher than the full HD video of the previous Magic Spark model. Also during the quarter, Insta360 introduced its Go camera, a tiny full-factor wearable model wearing only 20 grams and offering full HD video recording. Based on Umbrella's A12 SoC, the camera includes video stabilization to keep footage steady and use AI-powered flash cut to find your best shots and activate automatically. In summary, despite the geopolitical and economic headwinds, we remain highly confident while making the right decision with more than $350 million invested to date into video-based AI. We remain fully committed to driving our CV solution into expanding case of endpoint devices. We are leveraging our video processing expertise as well as our established base of customers to serve not only the traditional human viewing market, but also the machine-based market, a large incremental opportunity. The multi-billion dollar expansion in our SEM originates not only from the new product cycles in our existing markets, like security camera, but also by the new machine vision markets including vehicle, smart cities, industry 4.0 logistics, robots, and more. As we approach the end of year, We are looking forward to the Consumer Electronics Show in January. During this event, we will be demonstrating our fully autonomous vehicle EVA, showed for embedded vehicle autonomy, driving in a variety of challenging conditions. We will also be demonstrating our latest solution for ADAS, driver monitors, electronic mirrors, and in-cabin monitoring in collaboration with our software partners. and we will show new solutions for robotics, home monitoring, access control and logistics, all leveraging AI-based applications and the performance of our series of SOCs. And we hope to see many of you there. And at the end, I want to thank Embraer's 756 strong team for their focus and execution during this very exciting phase of development and thanks to all our other shareholders, including customers, vendors and shareholders for your continued support. Now I will turn the call over to Casey for the third quarter financial details and the guidance for our fourth quarter of fiscal 2020.