Ambarella, Inc.

Ladies and gentlemen, thank you for standing by and welcome to Deanne Barella's third quarter fiscal year 2022 earnings conference call. At this time, all participant minds 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 today's conference is being recorded. If you should require operator assistance, press star then 0. It's now my pleasure to hand today's conference over to Lewis Gerhardy, Corporate Development. Please go ahead, sir.

Thank you, Holly. Good afternoon, and thank you for joining our third quarter fiscal year 2022 financial results conference call for the three months ending October 31, 2021. With me on the call today is Dr. Fermi Wong, President and CEO, and John Young, VP of Finance. The primary purpose of today's call is to provide you with information regarding the results for the third quarter of our fiscal 22. 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, and 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 21, ending January 31st, 2021. And the Form 10Q is filed on June 8th and September 8th of 2021 for the first and second quarters, respectively, of fiscal year 22. Access to our third quarter fiscal 22 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 website. Fermi will begin the call with a business update. John will review the financials, and then Fermi, John, and I will be available for your questions. With that, I'll turn it over to Dr. Fermi Wang.

Thank you, Luis, and good afternoon, everyone. Before proceeding with our Q3 fiscal year 22 call, I want to note on November 9th, we filed an AK stating that our CFO, Casey Eckler, will be taking a leave of absence for health reasons. We have received many of your kind thoughts and prayers, which we have shared with Casey and his family, and we wish him a speedy recovery. Meanwhile, John Young, VP of Finance, has been named Interim Principal Financial Officer and the Principal Accounting Officer during Casey's absence. On October 26th, our strategy transformation into a deep learning AIoT processing company took another leap forward when we announced the acquisition of Oculi, a provider of events algorithms for imaging radar systems. Oculi enabled us to not only capture incremental perception business, but most importantly, feed our long-term strategy to provide a more comprehensive AIoT processing SOCs to our customers. I'm also pleased to report our market and the financial momentum was strong in Q3, with revenue slightly above the high end of our range of guidance, up 64% year-over-year. Driven by a richer mix of CV SOCs, our average selling price continued to rise, contributing to strong positive operating leverage with non-GAAP operating margins reaching 25% of revenue versus 5% a year ago. Supply dynamics remain a key challenge. On one hand, we started to see an expected recovery in supply from Samsung's wafer fab in Texas. However, the shortages of other companies' components has become a more significant and a gating factor to our results and outlook. Despite these constraints, we are on track to achieve record revenue this year with the CVE representing more than 25% of our revenue. During Q3, the number of unique CVE customers in production grew sequentially and quadrupled versus a year ago. Although today, on a cumulative basis, we have shipped more than 5 million CVE SOCs, including more than 1 million into the automotive market. Our automotive revenue funnel is expanding. A year ago, we announced a six-year discounted automotive revenue funnel of about $600 million. And using the same methodology, this figure has approximately tripled. We will provide more details on January 4th at our Capital Market Day. I will now provide you with some examples of progress in our target markets. During the quarter, we were excited to see the Rivian The American electric vehicle maker started customer delivery of its R1T truck. The R1T's Driver Plus features 11 cameras, 5 radars, and 12 ultrasonic sensors to deliver true hands-free driving assistance along with a full set of safety features. The R1T's Drive Plus system utilizes multiple CV-to-AQ CV flow automotive SOCs for its AI vision processing. Additionally, the R1T also used Embraer's CV22AQ CV flow automotive SOC for its surround view, camera processing, and the gear guard security system. The Rivian design highlights the use of Embraer's AI region SOCs in centralized automotive computing applications. These applications represent a major new opportunity for Embraer's moving forward. And during the quarter, Chinese truck maker Xiangqi entered into mass production with an ADAS system providing land detection and forward collision warning features. The system is based on Umbrella's CV22AX automotive AISOC and is supplied by Tier 1 Baolong. In the aftermarket automotive dash camera market, European market leader Nextbase announced a pilot program with Uber for its 232 GW dash cam. The dual camera design is based on Ambroise A12 SoC and includes a cabin view camera that uses infrared night vision technology and a wide angle 140 degree angle lens to provide an extra level of security for Uber drivers and riders. Also in the dash camera market, Korean market leader Thinkware introduced its QXD7000 and QXD5500 HD designs based on Umbrella's H22 and A12 automotive SoCs. The QXD7000 includes a radar support mode that helps to pre-record a video 10 seconds before impact, while both models offer ADAS features including forward collision warning, forward vehicle start alert, and a land departure warning. In the professional IP security camera market, we continue to enjoy strong revenue growth based on the worldwide market expansion and our increased market share outside of China. In Europe, market leader Axis, a unit of Canon, announced its first camera to use umbrella CV4 SoC. The new M series cameras offer great image quality even in challenging light conditions, and take advantage of analytics based on deep learning on the edge. Mercada, based in the US, is simplifying the management of video security at scale through its hybrid cloud approach and its latest CD62 4K dome security camera features intelligent edge-based video analytics powered by Umbrella's CV22 SOC. Also, Industrial giant Johnson Controls introduced its Illustra Pro Gen 4 mini-dome indoor and outdoor PDZ model with resolutions up to 8 megapixels and based on our CV22 SoCs. With the building AI-based object classification, the camera enables events to be narrowed to different classes including person, car, bus, and motorcycle. In Korea, market leader Hanwha Taekwoon introduced multiple camera models spanning dome, bullet, panoramic, and the license plate recognition designs and leveraging and brought the CV2 and the CV22 CV4 SOCs. Also in Korea, IDIS introduced a full new camera based on our H3L SOCs replacing high-silicon designs, while C-Pro introduced its first 4K AI camera base on our C22 SoC. And in November, Chinese electronic giant Xiaomi introduced a new line of multi-functional smart door locks with facial recognition using umbrella's AI vision SoCs. The smart door locks fuse structure light and RGB camera technology and AI-based facial recognition software for hands-free access. while also incorporating other unlocking methods, including fingerprint recognition and the near-field communication. From these customer engagements, you can see the breadth of AI applications emerging, ranging from L2-plus ADAS in EVs with a leader like Rivian, to enterprise-class security cameras with an industry giant like Johnson Control. and the door locks with sensor fusion for the smart home and the enterprise market with a major company like Xiaomi. This transaction can be traced back to the premium growth R&D investment we have and will continue to make into camera and the radar perception technologies, automotive functional safety such as ASO B or D, and next generation AI processor on three nanometer manufacturing process node. all optimized specifically for IoT endpoint applications. In fact, in the last three years, Umbrella invested 59% of revenue into R&D on a gap-based basis, a level far beyond a maintenance level you see at most companies. Of course, it is not just about the quantity of R&D investment, but the quality. And as you know, we consider our regional AI R&D to be the best out there. Evidence supporting this continue to mount as we successfully leverage our well-established video processing leadership into the computer vision AIoT market. This large growth R&D investment has been focused on post-processing data collected from the lens of camera with the algorithm first approach. Now we have augmented this investment with the acquisition of Oculi, who used a similar algorithm-first approach for the high-definition imaging radar market. Radar perception is an incremental market for Ambarella. However, we are most excited about the synergy with Oculi, which we expect to be derived from two principal areas. We expect our combined camera and the radar R&D investment to enable breakthrough levels of perception at an economical price point. Umbrella is now one of the very few semiconductor companies to have advanced camera and the radar technology development under one roof. Through our CVS-OCE roadmap, we are able to provide the processing power, not just for the perception processing, but we target incremental processing for the fusion, planning, and control layers in a variety of AIoT markets. All of this is expected to drive more value, both higher selling price and improve market shares for umbrella and its shareholders. In summary, during Q3, we demonstrated Progress on the strategic front with the acquisition of Oculi and our CV portfolio ramp continues. Our financial results are providing an early look at how we intend to capitalize on an entirely new phase of the digital AI transformation, a phase where deep learning is not just executed in service, but in our SOC platform designed for the unique needs of the AIoT endpoint markets. And I want to thank all our stakeholders, employees, suppliers, partners, customers, and the shareholders for your continued support. With that, John will now provide our prepared financial comments.