Ambarella, Inc.

Welcome to Anne Borrella's first quarter fiscal year 2022 earnings conference call. At this time, all participants 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 one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Lewis Gerhardy, Corporate Development and Investor Relations. Please go ahead.

Thank you, Joelle. Good afternoon, and thank you for joining our first quarter fiscal year 2022 financial results conference call for the three months ending April 30th, 2021. With me on the call today is 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 the first quarter of our fiscal year 2022. 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 the annual report on Form 10-K, filed on March 31st, 2021, for fiscal year 2021, ending January 31st, 2021. Access to our first quarter fiscal 2022 results, press release, historical results, SEC filings, and a transcript of our prepared remarks and a replay of today's call can be found on the investor relations portion of our websites. Today we'll begin with a business update from Fermi. I'll review the financial results and then we'll open it up and you can direct questions to Fermi or Casey. With that, I will turn it over to Fermi.

Thank you, Louis. Good afternoon and thank you for joining us today. The first quarter was another strong quarter with revenue growing nearly 13% sequentially and 28% on a year-over-year basis. We continued to deliver positive operating leverage with non-GAAP operating margins expanding to 12% from 8% in the prior quarter and 1% a year ago. Our results are clearly being driven by the beginning of our CV new product cycle and to a much lesser degree by industry-wide cyclical forces. In fact, currently, cyclical forces are actually constraining our results, not exaggerating them. Supply chain challenges remain significant, but our execution is strong and our guidance assumes the worst of the supply chain challenge from the Texas Greece will be failed in Q2 and gradually improve as we progress through the second half. Capacity is tight and lead times for certain substrates remain extended. With solid support from key supply chain partners, including foundry partner Samsung, we usually are not the bottleneck for our customers. With our higher revenue outlook, we remain confident CV will be at least 25% of our total revenue this year. Professional security CV revenue, or CV wave one, became material last year, and momentum continues to build with new design wins and new customers entering production. We expect our home security CV business, or wave two, to become material this year, with several large programs entering mass production now. Automotive, or CV Wave 3, has clearly commenced. In fact, as of yesterday, May 31st, we have cumulatively shipped more than 450,000 CV SOCs into the automotive market. We expect our automotive business to roughly double this year, and we see tremendous remaining hero for growth. Our share acting this year is expected to be only a few percent of a serviceable market. We estimate to be about $2.2 billion in calendar year 21 and approaching $5 billion in calendar year 25. I will now update you on our target market progress, beginning with automotive. The automotive market is being transformed by the introduction of electric vehicles that enables sustainable high-performance transportation. The requirements for advanced active safety features in these vehicles represent a significant new opportunity for our AI vision SOCs due to the need for increasing level of performance in camera-based AI perception. During the quarter, we were excited to see the successful IPO of UK-based electric vehicle maker Arrival Founded in 2015, Arrival's mission to provide affordable and sustainable urban transportation by producing electric vehicles at a competitive price and by pioneering a new method of manufacturing that challenges traditional economies of scale. I'm pleased to announce that Arrival has selected Umbrella's CV4 AI region processor for the environmental perception module used to enable L2 plus autonomy in arrival passenger buses and delivery vans. The inclusion of level 2 plus autonomous driving capability provides the driver an array of safety and convenience related driver assistance, or ADAS, capabilities. Umbrella's AI vision process was chosen because of the neural network processing performance, stereo vision support, excellent image quality, and extremely low power. We look forward to sharing more information regarding our partnership work with Arrival in the near future. In addition to the efficiency of our CV SOC offer, we have also highlighted an advantage about our open platform approach, which allow OEMs and Tier 1s to create differentiated combo products. Today, I'm pleased to discuss four examples of this form from the recent Shanghai Auto Show, namely Great Wall Motors, Momentum, Auto Cruise, and Haskell. In April, we announced that the leading domestic Chinese SUV automaker, Great Wall Motors, has launched a three-in-one combo system based on our CV25AQ for drive recording, drive monitoring, or DMS, and the occupancy monitoring, or OMS. The system is integral to the new WEY Mocha flagship SUV, which was launched during Auto Shanghai 2021 as the first model from GWM's copy intelligence driving platform. This CV25AQ-based system can support a variety of simultaneous multi-camera channel combinations for recording, and or DMS and OMS, with the entire system meeting your NCAF 2025 standards and playing a key role in TWN's intelligent drive process. Another combo product leveraging our OpenCV platform is Momenta's AutoRing A4 fleet management solution, combining front ADAS, DMS, and the drive recording functions. Based on Andorra's CV22, The product includes front ADAS features such as a full collision warning, pedestrian collision warning, highway monitoring warning, and a land departure warning, while DMS features include a face ID, fatigue detection, and a distracted driver detection with a full HD video recording. Another active safety combo system, this one from Automotive Tier 1 Auto Cruise is expected to enter mass production this year, targeting commercial fleet deployments. The solution combines front ADAS and DMS function on single CV25 SoC. And lastly, Haskell, a spin-out of leading OEM SAIC, demonstrated its adaptive driving beam, or ADB, solution based on Embraer's CV22 AQ SoC. The solution utilized both ADAS and the DMS algorithms for intelligent halide control. As you can see, Embraer's exhibition at the Shanghai Auto Show in April generated strong interest with more than 50 automotive OEMs and TO1s visiting our booth. Embraer demonstrated a number of designs covering ADAS, electronic mirrors, DMS, and OMS applications, while also demonstrating partnership with many of China's leading third-party automotive software companies. One area of significant interest at the CHIL was our variable flung ADAS reference design, a turnkey platform based on our CV2FS SOC and the SenseTime SOFR stack. This solution includes flung ADAS features, such as pedestrian detection, wind detection, drivable area detection, traffic light and traffic sign detection, while also supporting millimeter wave radar and the visual perception. providing sensor fusion between the camera and the radar. Our Rebel Revan design provides Tier 1 suppliers and the software development partners an open platform for differentiated high-performance automotive systems. I will now update you on our continuing progress in the IP security camera markets. During our Q2 fiscal year 21 earning call on September 2nd, we stated that in addition to our SOC share against professional security camera outside of China, for the first time, we were also seeing additional opportunities in the professional security market within China. During the last quarter, Union Insight launched the first of its camera based on umbrella solutions, including two mega and four mega models with full color, high vision, and people counting capabilities. This is the first camera design in mass production using our new low-cost CV28 and CV4 SOC, which was introduced at the end of last year. Also during the quarter, K.com introduced its first umbrella-based design, the IPC695 and IPC445 cameras based on our CV2 and CV22 SOC. The IPC695 features including 9-megapixel resolution with HD snapshots, and AI-based exposure optimization, while the IPC445 features 4 megapixel phone design with advanced area intrusion detection and the motion detection. Our C4 SoC are raising the bar in multi-sensor camera designs based on their ability to process multiple high-resolution streams concurrently with AI processing. In April, formerly Panasonic's security camera business, introduced two new models based on our CV2 SoC, the 8530 and 8570. These cameras are equipped with four sensors for cameras capable of independent operation for 360 degree viewing with minimal blind spots and color imaging in just .05 lux or extremely low light conditions. In the body-worn security camera category, UK-based Reveal became the first to introduce a new camera with Umbrella CV4 SoC to provide a platform for advanced AI-based features. Based on our CV25 SoC, the new K-series camera includes HD recording, movable lens, and a fair color display. And in April, home monitoring market leader Ring, a unit of Amazon, introduced two new models, data umbrellas, and CV4 SoCs. The new Video Doorbell Pro 2 model raises the bar for video doorbell designs with 3D motion detection, head-to-toe HD-plus video, and the integration of Alexa grating. Additionally, this new flat-light cam, Wire Pro, also includes 3D motion detection and the at-first-eye video for precise motion alerts. And lastly, among new Cosmo product introductions, Insta360 introduces a tiny go-to action cam based on Umbrella's H22 SoC. The waterproof camera that we call 4K P30 video includes a six-time speed hyperlapse mode, image stabilization, and is small enough to be worn on shirts or headbands. From these customer engagements and others, You can see Embraer's ASOC are enabling customers to design, to add significant value to their products. For efficiency benchmark, like performance per watt and performance per dollar, are important elements of customer design decisions. Our open platform and its flexibility also uniquely enable our customer to create optimized and differentiated products and to price them accordingly. Open platform means customer can develop their own software to run our SOC. Flexibility means they can be creative and use the hardware and software resources on our SOC to develop proprietary configurations and the feature sets. Such flexibility is usually not available for our competitors. For example, in automotive market, earlier I discussed projects Graywall, Momentum, Autocruise, and Haskell that take advantage of the flexibility of our SOCs to create unique combo systems. This powerful solution integrates what used to be two to three discrete camera products with limited functionality into a unified feature-rich solution operating on one umbrella CBO SOC. And we are especially excited about our design with Arrival, where the performance flexibility and low power of our SOC is being harnessed for the next generation of electrical vehicles. In conclusion, Embraer's product portfolio is the strongest. After a very good Q1, despite the supply chain challenges, We are guiding Q2 revenue to be up 48% to 54% year over year. Our long-term outlook is fueled by our high level of investment into proprietary technology that is setting the pace of innovation in the visual AI market. Not only is our CV portfolio continuing to expand our reach in new markets, but we believe our visual AI roadmap will enable us to capture more processing value per design week. With that, we are very thankful to have stakeholders, in particular our dedicated employees, as well as a network of suppliers, customers, and investors who understand the AI vision opportunity and support us as we continue to execute amidst all of the challenges that market has thrown at us in recent years. So, once again, thank you.