Ambarella, Inc.

Thank you for standing by and welcome to Umbrella's second quarter fiscal year 2022 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, Lusca Hardy, Corporate Development and Investor Relations. Please go ahead, sir.

Thank you, Jonathan, and good afternoon. Thank you for joining our second quarter fiscal year 2022 financial results conference call for the three months ending July 31st, 2021. With me today on the call 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 second 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 business operations and 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 31st, 2021 for fiscal year 2021 ending January 31st, 2021. And the form 10Q filed on June 8th, 2021 for the first quarter of the fiscal year 2022. Access to our second quarter fiscal 2022 results, press release, historical results, SEC filings, and the transcript of our prepared remarks And the replay of today's call can be found on the investor relations portion of our website. Fermi will now offer a business update, and then we'll review the financial results. And then, Fermi, Casey and I will be available for your questions. With that, I'll turn it over to Dr. Fermi Wong.

Thank you, Louis, and good afternoon. Thank you for joining us today. We are pleased to report significant market and financial momentum as our AIoT transformation continues to play out. Q2 revenue was above the high end of our guidance, up 13% sequentially and 58% on a year-over-year basis. Our Q3 outlook is also well above the consensus estimate, led by computer vision, CV, news product cycles in existing markets, as well as our penetration into entirely new markets. CV continues to drive our blended ASP higher, and the positive operating leverage we inherit in our model was apparent with non-GAAP operating margin increasing 450 basis points, sequentially reaching 16.9%. Cyclical forces continue to constrain our performance. Wafer supply from Sensors Austin, Texas wafer fab following the Texas freeze earlier this year reached a low point in Q2. While we are seeing a recovery from this Texas FAB and expect the recovery to continue in the second half, we do not anticipate a material improvement in the industry-wide supply chain challenges. CV Momentum continues to rapidly build. Since introducing our CV SOC family to the market, we have had more than 240 unique customers purchase engineering parts and or development systems. with almost 60 unique customers achieving production status in the first half of this year. Even at this early stage of our transformation, we are realizing a revenue mix that is of higher quality and with more diversification. A majority of our revenue is now driven by enterprise CapEx, public infrastructure spending, and the consumer durable goods investment. For example, our automotive and IoT camera business, mostly security camera stick, both decisively achieved record quarterly revenue levels, while our non-focused other revenue, mostly discretionary consumer leisure goods, represented 10% of revenue, or a record low. Now I will now update you on target market progress. In June, we announced the extension of our AI region SOC portfolio with the introduction of our new CV5S and the CV52S SOCs. Based on the CV4 architecture, the 5 nanometer SOC target IoT security applications with Linux OS, a new SDK including multi-imager and small phone factors. This new SOC camera support application requiring 360 degree coverage, low-range viewing, advanced encoding, and the AI performance to more accurately identify individuals or objects in a scene. During the quarter, eight weeks after receiving first silicon, we shipped our first CD5S development systems and software development kit to customers. This is a significant accomplishment at such an advanced note, and I'm thankful for the strong execution for our hardware and software teams that made this happen. Also in June, in advance of the annual IHC West trade show in Las Vegas, we held a virtual event that was attended by over 50 leading customers worldwide. The event featured over 20 demonstrations, including a first look at the new CV5S in a multi-imager system and our latest access control reference design based on our continuing partnership with Lumenton and On Semiconductor. We have already secured multiple design wins for the new CV5S, as well as new customers in the access control market. Motorola's solution has become one of our largest customers, and we are pleased to see their announcement. They intended to acquire OpenPath, a technology leader in access control system, further validating the existing opportunity in this growing market segment. Motorola's video security portfolio now includes IP camera makers of Vigilon, Telco, and IndicoVision, as well as Edisix, a UK-based police body-worn camera supplier, and WatchGod, a supplier of police vehicle cameras. All of these companies are Umbrella customers. Umbrella's CD4 AI Vision SoC continues to gain share in the professional IoT security camera market. with most major manufacturers have chosen our CVSLCs. During the quarter, European giant Bosch introduced its first three families of cameras based on Embraer CVSLCs. Bosch introduced the 5000i based on our CV22 and the 7000i and the 8000i based on our CV2SLCs. By winning the three major platforms at Bosch, the scalability of what CV-SoC portfolio is demonstrated. In addition to our SoC share gains in professional security outside of China, last quarter we spoke about opportunity to gain market share within China, and we announced two new customers today. We're announcing two additional customers, Maosite and Fushan. First, Maosite introduced its CV25 based AI pro bullet network camera family available in 2.5 and 8 megapixel version, and including advanced analytics, people counting, face detection, and ultra low light operations. Second, FooShine introduced a non-contact facial recognition temperature major system based on our CV28M SOC. The tablet device can recognize people with max arm and use steel sensors. Also during the quarter, Canada-based March Networks introduces new VA series IP camera based on our CV flow processes. Our chipsets make them fully compliant with the US National Defense Authorization Act, or NDAA, and the power of the camera's advanced video analytics. Now turning to the automotive market. We continue to make progress in the fleet management market due to the efficiency of our CV SOC as well as the advantage of our open platform. which allow OEMs and tier ones to create differentiated, multifunctional products. Last quarter, we announced four examples from the Shanghai Auto Show. And this quarter, we are pleased to announce three additional wins, Keep Trucking, Yandex, and Solera. Earlier in August, fleet management leader Keep Trucking announced it was partnering with Umbrella to deliver its new AI dash cam for front ADAS, driver monitoring, and telematics. The AI-DASH can use a single CB22SLC to simultaneously provide AI and image processing for its dual camera system, which integrate one camera for the front ADAS with incident recording, and the second RGBIR camera for the drive monitoring system with recording. This morning, we announced Yandex, a major internet service and a product company, introduces a Signal Q2 driver monitoring camera for its ride-sharing partners, powered by Umbrella CV25 SoC. The Yandex EMS camera will be deployed across the Yandex taxi partner fleet consisting of over 700,000 vehicles starting in 2022. And it's also being offered to other delivery fleet companies. Also during the quarter, Solaris Omnitracks division announced its next generation fleet solution using smart drive technology with our CV25 SOC. This combo system simultaneously process data from two sensors, monochrome and the RGBIR to enable DMS and the recording functionality. In the passenger vehicle market, Chinese car maker Dongfeng introduced its new EU law MaxCar featuring a driver monitoring camera based on an umbrella CV25AQ processor. With this market progress, you can see we are winning because of our efficiency, both in terms of performance per watt and performance per dollar. And our open platform and the flexible architecture, which allow our customer to capture software value and introduce differentiated multi-featured combination systems. In conclusion, we are leading a significant shift in how cameras are used and providing the corresponding stat function increase in processing performance. In addition to human vision viewing, all through the lens of a camera, data can be collected and then processed in our SOC, enabling new level of safety, security, and efficiency through partial or complete level of automation across multiple industries. This processing we provide is occurring in purpose-built IoT H8 points, not in servers, where fundamentally different and more expensive SOC architecture are used. The global economic picture is strong. New stimulus programs are in the works, like infrastructure build in the US. Supply-side technical dynamics are extended. But to be clear, the inflation you are seeing with umbrella, what gets us most excited is how we are driving AI into numerous IoT endpoints, verticals, and how we are demonstrating we can capitalize on this tremendous growth opportunity to drive shareholder returns. The demand for deep learning the AIoT endpoint is a new and a critical phase of the digital transformation that is just beginning to impact to so many verticals. Our confidence in our long-term prospects is high. We expect to achieve record revenue in fiscal year 22, ahead of the $316 million revenue in fiscal year 15. And we remain comfortable that CV revenue will be at least 25% of total revenue this year. Before we get into the financials, I would like you to mark your calendars For our capital market days, we plan to host at our Las Vegas CES location on Tuesday afternoon, January 4th. This event will allow us to more thoroughly discuss the inflection we are seeing and provide a corporate strategy update. With that, I will ask Louis to review the Q2 financials and provide the Q3 outlook.