Ambarella, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Ambarella's third quarter fiscal year 2021 earnings 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 then one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then zero. I would now like to hand the conference over to your host, Louis Gerhardy, Corporate Development. Please go ahead.

Thank you, Sarah, and good afternoon, everyone. Thank you for joining our third quarter fiscal year 2021 financial results conference call. Calling in today from different locations will be Dr. Fermi Wong, President and CEO, and Casey Eichler, CFO. The primary purpose of today's call is to provide you with information regarding the results for our third quarter of our fiscal 2021. 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 based upon information available today and are subject to risks, uncertainties and assumptions. Should any of these risks and 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 filed with the SEC, including the annual report on Form 10-K filed on March 27, 2020, for fiscal year 2020, ending January 31, 2020, and the Form 10-Q filed on September 9, 2020, for the second quarter ending July 31, 2020, and Form 10-Q filed on June 8, 2020, for the first quarter of the fiscal year ending April 30, 2020. Access to our third quarter fiscal 2021 results press release, historical results, SEC filings, and a replay and prepared transcripts of today's call will be found on the investor relations portion of our website. With that, I'll turn the call over to Dr. Feng-Ming Wang.

Thank you, Louis. Good afternoon, everyone. And thank you for joining us this holiday show of the week. We are pleased to see our multi-year visual AI investment as a major force driving our accelerated business momentum, which is apparent in our Q3 results and outlook. Q3 revenue of $56.1 million was above the high end of our original guidance range. TV led the way, but we also faced stronger than expected demand for video processors. despite the persistent geopolitical and public health risks. Gross margin of 62.7% was above the high end of our long-term model for the second consecutive quarter, reflecting a favorable customer mix and a continued operational execution. CV revenue was slightly more than 10% of total revenue in Q3, and we continue to expect it to be 10% for the full year. With an ASP about 2x our non-CV ASP, CV units were less than 4% our total units shipped and an even smaller portion of the install base, highlighting the very early stage of this opportunity and the significant multi-year hedging for growth. We anticipate CV revenue will represent about 25% our total revenue in fiscal year 2022. and we have a flattish outlook for video processors. The megatrends for security, safety and automation are very favorable and the pandemic appears to be accelerating this digital transformation. To support this anticipated growth, we continue to build our team globally and we intend to further expand our presence around the world to support the rising interest in our CVSOCs from both existing and new markets. I will now talk about our markets and the customers. As we have previously mentioned, Chinese IP security camera makers have become concerned about the continuity of supply for existing Chinese suppliers and have been evaluating alternative camera designs on other solutions. Umbrella's CVFlow AI SoC have won a number of design wins based on their AI performance, high-quality imaging, and low power. We have now received orders for shipment beginning in the fourth quarter of this year, including orders for our CVFlow SoCs from Dahua, China's second largest security camera company. Outside of China, we are continuing to see customers introduce new IP security cameras based on our solution, including our CVFlow AI SoC. During the quarter, Johnson Controls launched its new Tyco multi-sensor camera, Benza Umbrella's H2E SoC. The camera is equipped with four separate image sensors to provide up to 360-degree coverage via four separate non-stitched video streams. Each of the four sensors are able to capture 4-megapixel images, enabling the camera to cover an area which might normally require four separate high-definition video surveillance cameras. And Honeywell introduced its 60 series IP camera, including 5 megapixel indoor and outdoor dome, bullet, and outdoor speed dome models, and the 2 megapixel outdoor speed dome models. Based on Umbrella's S5 ISOC, the 60 series offer increased resolution and provide fast notification and the verification of potential threats and the response. And FLIR introduced its Elara thermal camera for accurately measuring skin temperature and median to high throughput entry controls. Based on umbrella CV22-AISOC, it is equipped with on-edge intelligent face detection and issues on-screen prompts to individuals when they needed to remove glasses while also guiding them to the correct position for best measurement. And also Panasonic APRO continue to expand its portfolio of umbrella-based models with the introduction of its vehicle capture camera, the WVX5550. Based on Umbrella's CV22, the camera can capture clear images of vehicle occupants on one channel and license plate on another, even in challenging lighting environments, including nighttime. In the body-worn camera market, Panasonic April introduced its BWC4000 camera based on Umbrella's CV25 SoC, The BWC-4000 records 1080p video and has 12-hour battery life. And also during the quarter, Motorola introduces a VB-400 body-worn camera aimed at the security professional and based on Embraer's low-power SoC. Integrated with Avigilon's control center, the VB-400 can augment fixed video deploying by displaying first-person perspective video found a body-worn camera alongside a fixed camera for superior situational awareness. During the quarter, Comcast announced its new Xfinity home offering called Self-Protection designed for consumers who want high-quality security cameras but who may not need a professionally installed and monitored whole-home security system. The new Xfinity's HD home security camera is powered by Umbrella's A3RM SOC and is built for both indoor and outdoor use. In this model, we introduced our CV20AM camera SOC, the latest in our CV4 family, supporting the introduction of advanced AI features targeting a variety of cameras in new high-value markets. Its highly efficient AI processing and low power will enable a new class of smart IoT devices for applications including smart home security, retail monitoring, home robotics, and occupancy monitoring. For new AI sensing applications like retail monitoring or occupancy monitoring, the ASOC provides AI performance to make all decisions in a camera preserving privacy and avoiding heavy video processing running on backend servers. In home robotics applications, the CV20AM can be connected to a wide range of sensors such as visible structured light and the time to flight to capture and then process the data required for navigation. And we are currently sampling CV20AM to our customers. The CV20AM sulfur compatibility with existing CV flow families is allowing customers to enter production very quickly, and we have already received mass production orders for shipment beginning in Q1 next year. In the automotive market, we are continuing to make great progress as we promote our AI solutions for a variety of automotive applications, including ADAS and AD for customers worldwide. Today, we are announcing our total automotive revenue funnel for the first time, and we intend to update it at least once every year. Based on our best judgment, we currently estimate our automotive revenue funnel model is about $600 million, with a majority of CV for a variety of ADAS and AD applications. The auto funnel revenue runs through fiscal year 27, with some of the more significant programs commencing production in calendar year 22 or 23. And this funnel covers business. We have one as well as pipeline of a business we are currently competing for. We are seeing shipment our CV flow-based ADAT solution for commercial vehicles in China continuing to ramp with customers including Yutong buses, Shang-Chi trucks, and Dongfeng trucks. We are currently the market leader in the OEM car recorders category with customers including Nissan, Honda, and Toyota in Japan, and Great Wall, GD, and BYD in China. We are now seeing a recovery in orders for OEM car recorders in both regions as car manufacturers begin to ramp production back up following the impact of the pandemic. And also, we are very pleased to announce that we have our first design win for our CV2FS Automotive Functional Safety SOCs, which we introduced during CES at the beginning of this year. These SOCs include the AI processing and the ASO feature required for safety-critical ADAS applications. During the quarter, we signed a development agreement to supply our CV2FS SOC for Level 2 Plus ADAS system with an OEM manufacturer of electric vehicles. In this application, the CV2FS provides the AI processing performance and flexibility to support a wide array of driver assistance capability to improve safety and convenience. Also during the quarter, we signed a new development agreement with a tier one supplier of electric minerals for a European commercial vehicle based on our CV2FS functional safety AI SOCs. The CV2FS was chosen for its ability to process a video from multiple cameras and to perform advanced AI processing to support features such as vulnerable user detection and prediction. And we'll continue to win new designs for fleet management solutions for commercial vehicles as well as ride-sharing and taxi services. with 140 million commercial vehicles in U.S. and hundreds of millions worldwide. The ability to retrofit existing commercial vehicles with cutting-edge driver monitoring capabilities represents a major opportunity for Umbrella. Our CD4 AISOC have the required performance to support foreign ADAS application, active driver monitoring, and video recording. And in November, Umbrella announced a joint reference design for automotive camera applications that simultaneously monitors drivers while capturing vehicle occupants for one-way video conferences. The reference design uses software from SmartEye, a world leader in developing AI-powered eye, mouth, and head tracking technology, and an image sensor from OmniVision Technologies. and the CV22AQ SOC simultaneously process both RGB color image and IR and run SmartEyes algorithm to analyze the driver's state and alert the vehicle to any unsafe indicators such as drowsiness. With the holiday season approaching, there have been a number of new consumer product introductions featuring umbrella SOCs. During the quarter, DJI introduced its Parki 2 handheld camera equipped with a 3-axis motorized gimbal to stabilize movement. The Parki 2 is based on Embraer's H22 SoC and shoots 4K P60 video, takes 64 megapixel photos, and includes 8x zoom capability. And on November 4th, DJI introduced its Mini 2 drone the replacement for the popular Mavic Mini model. Featuring Ambroise H22 SoC, the Mini 2 increased its maximum video resolution up to 4K at 30 frames per second, while also shooting 1080p video at up to 60 frames per second. Also during the quarter, Insta360 introduced its One X2 Pocket Camera based on Ambroise H22 SoC, the One X2 including includes dual-lens 5.7K capture for high-resolution 360-degree images, H.265 encoding, AI-based editing, and advanced image stabilization. In summary, you have heard today more evidence on the broad and expanding adoption of our SOC in automotive and security camera markets. In a professional security camera market, our CV momentum, already strong, should build as we have added new CV customers in Asia. And we expect to see CV become material in the whole security camera market over the next year. In OTO, our CV traction is strong and a significant part of our expanding funnel. In addition, we continue to develop other IoT markets including enterprise access control, smart locks, and the counting occupancy sensors. And we look forward to providing you with updates on our progress. We are making significant progress in our multi-year transformation to a visual AI company and the return on the investment is ramping. I'm proud and would like to thank and acknowledge all of our employees worldwide for their contribution to our leadership position in the market and for their execution in the face of the turbulent environment. I'm also thankful for the support of our customers, vendors, and shareholders during these times. I will now turn the call to Casey, who will give you more details about what we are seeing and expect for the business.