Ambarella, Inc.

Good day and thank you for standing by. Welcome to Ambarella's fourth quarter and full year 2022 earnings call. At this time, all participant lines are in listen-only mode. After the presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star, then 1 on your telephone keypad. Please be advised, today's conference may be recorded. If you require operator assistance during the call, please press star, then 0. I'd now like to hand the conference over to Lewis Gerhardy, Corporate Development. Please go ahead.

Thank you, Liz. Good afternoon, and thank you for joining our fourth quarter and fiscal year 2022 financial results conference call. On the call with me 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 our fourth quarter and fiscal year 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 that we file with the SEC, including the annual report on Form 10-K that we filed on March 31, 2021, for the fiscal year 2021, ending January 31, 2021. in the Form 10-Q filed on December 10, 2021, for the third quarter of fiscal year 2022, ending October 31, 2021. Access to our fourth quarter and fiscal year 2022 results press release, historical results, SEC filings, and a replay and prepared transcripts of today's call can be found on the investor relations portion of our website. Fermi will first provide a business update for the quarter and the full year. John will review the financial results, and then Fermi, John, and I will be available for your questions. With that, I turn it over to Fermi.

Thank you, Louis, and good afternoon, everyone. Thank you for joining our call today. Fiscal year 2022 represented an inflection year for umbrella with numerous milestones achieved. Record revenue of $332 million was up 49% year-over-year, with CV revenue more than tripling to exceed 25% of total revenue and driving blended ASPs higher. It was the first year where CV delivered a material contribution to operating results, enabling non-GAAP operating margin to reach 19% versus 4% the prior year. CV revenue wave two, smart home, became material during the year as expected, and we are pleased to announce CV revenue from Wave 3 automotive also became material during the year. This occurred more than a year ahead of the guidance originally provided in June 2019. Turning to products, we expect CV5, our first 5-nanometer SOC, to begin mass production in the second half of fiscal year 2023. While CV3, our second 5 nanometer SOC, a 10 billion transistor automotive domain controller, paid out and is expected to sample this year. There is a strong and broad-based demand for our CV products. At the end of the year, we have cumulatively shipped more than 6 million CV SOCs to more than 275 unique CV customers across many verticals. Looking to fiscal year 2023, geopolitical and the public health headwinds persist, and the market forecasters predict real global GDP and the semiconductor industry growth rates will decelerate. There is a continuation of supply chain challenges, and in February, we were informed our 40 nanometer supply from Samsung will be constrained. At this time, we anticipate an adverse impact to our video processor revenue of approximately $5 million in Q2. Despite these headwinds, we see the secular forces from the digital transformation remaining very strong. In particular, demand for our deep learning AI processors for IoT endpoints. A majority of our customers design activities now on CV, and we expect CV revenue to reach 45% of our total revenue in fiscal year 2023. Driving a further increase in our blended average selling price as fewer of the lower ASP video processors are shipped. Now I will provide some representative market and market development activity during the quarter. We hit a road running in the first week of January, hosting our annual technology showcase held during CES in Las Vegas. and announcing our new CV3 AI domain controller. We held over 35 live technology demonstrations, including our latest EVA autonomous vehicles, Oculi radar technology running both automotive and security applications, and numerous IoT robotics and partner demonstrations. The automotive partner demonstration, including ADAS implementation from software partners Autobrands and Helm.ai, as well as drive monitoring demos from SIEM machines and SEPIA, all running on our CV4 SOCs. On January 4th, we launched CV3, our AI domain controller SOC family for single chip multi-sensor perception, fusion, and path planning in ADAS to level four autonomous vehicles. This scalable, power-efficient CV4 family of SOC provides the automotive industry's highest AI processing performance at up to 500 ETOPS, representing a 42 times increase over Embraer's CV2 and 160 times CV22. The first CV3 family member is fabricated in 5 nanometer process technology and enables centralized single-chip processing for multi-sensor perception, including high-resolution video, radar, including offline software, and other sense modalities. The family's unique hardware scalability allow automakers to unify their software stack across their entire product portfolios while reducing the cost and the complexity of software development. We have received significant interest in CV3 from leading automotive OEMs and their tier ones following the announcement. In addition to automotive applications, we will be developing CV3 SOC derivatives targeting other markets, including security camera and robotic applications. This new CV3 family SOCs will leverage the increased performance of the CV3 third-generation CV4 architecture, which provides over three times the power efficiency of the previous CV2 generation. In January, we announced our new artificial intelligence image signal processor. architecture used neural networks to augment the image processing done by the hardware ISP integrated into our CVSLCs. We demonstrated its life during the show, showing full frame rate HD video capturing under 0.03 lux lighting conditions, or almost complete darkness. We believe this technology will begin changing in all of our markets as the higher quality video data not only improves visibility in human viewing applications, but also improves the accuracy of AI processing algorithms under challenging lighting conditions. During the quarter, we made a number of automotive partnership announcements. We announced our collaboration with Otto Brands, a developer of self-learning AI for assisted and autonomous driving. to deliver a scalable range of AI solutions ranging from ADAS to higher level autonomy for automotive mass market. As a show, we demonstrated the AutoBrands ADAS software running on a single CV to automotive SOC. The collaboration will deliver higher resolution from ADAS solution targeting compliance with five-star NCAP standards. We also announced our partnership with Seeing Machines, the industry's leading computer vision technology company for driver monitor applications. And we demonstrated Seeing Machines software running on our C4 AI platform. The partnership will enable the delivery of a complete integrated DMS and ADAS solution. We're also seeing new opportunities in automotive applications employing cameras for security. access control, and customization of personal settings. During the quarter, Hyundai introduced its Genesis GV60 SUV with a face-connect feature that recognizes driver's face, opens and closes vehicle doors, and provides customized settings for the driver using near-infrared cameras and deep learning technology. The face recognition module is based on the CV25AQ automotive SOC. Also during the quarter, Rivian began shipments of its first consumer SUV, the R1S, and its first commercial vehicle, the new EDV700 delivery van, designed in close collaboration with Amazon. As announced by Rivian, the R1 family, comprised of the R1S and the R1T, has 71,000 vehicles pre-ordered, while Amazon has placed an initial order for 100,000 of the vans. Both R1S and the EDV700 have a camera platform based on umbrella solutions, with multiple umbrella CV-2 SOCs being utilized for Vivian's autopilot, code driver plus, gear guard, and surround view assistance. The EDV700 delivery van also includes stereo forward-facing cameras enabled by CV-2 gluing stereo processing capability. The rapid design and deployment of these vehicles, in addition to our other automotive production wins reflects the maturity of our CV4 SOC and the development tools. In February, the U.S. Department of Transportation's National Highway Traffic Safety Administration issued a final rule allowing automakers to install adaptive driving beam, or ADB, headlights on new vehicles. Adaptive driving beam headlight systems are useful for distance illumination of pedestrians, animals, and objects without reducing the visibility of the drivers in oncoming vehicles. The use of cameras with AI-based perception to intelligently control the halide beams represents a new opportunity for umbrella to see before ASOC. In December, we announced our early win in this area was Chinese automotive technology company Hasco Vision and IAM Motors. A new automotive technology company jointly created by ACAIC Group, Zhangjing Hitech, and Alibaba Group. At the 2021 Shanghai Auto Show, IM Motors announced its new L7 electric vehicle, which began sales in February. It includes an intelligent DLP lighting system based on our CV22AQ automotive SOC that can perceive the driving environment. and provide visual warnings to pedestrians, as well as automatically adjust the width of the halide beams under narrowing road conditions. Also in China, during the quarter, Hi-CAM, an EV vehicle joint venture between GAC Group and the electric car maker NIO, introduced its Z03 SUV. The Z03 includes Hi-CAM Pilot 2, an intelligent driving assistance system based on our CV2AQ SoC and supplied by Tier 1 MaxEI. Now I will talk about some of our IoT customers' product introduction during the last quarter. In the enterprise camera market, Motorola Solution announced the expansion of its license plate recognition portfolio with the introduction of the L6Q camera based on our CV25 SoC. LC, the L6Q, can accurately scan vehicle moving at up to 75 miles per hour and up to 70 feet away. It can be powered by battery, solar panel, or ACDC power and can operate in complete darkness. Also, in the enterprise and public market, the car that I introduced is a CD42 and a CD52 drone cameras based on our CD25 SOC. And the Panasonic EyePro Sensing Solution introduces EyePro Mini, a versatile network camera based on our C22 SoC. In the small home market, Comcast introduced its first video doorbell, the Infinity Video Doorbell. Based on our SoC, it supports 1080p HD video, crystal clear night vision, and a wider 4 to 3 aspect ratio. that allows you to see more of your doorstep. In the same market, Ubiquiti introduces G4 Doorbell Pro, a Wi-Fi-enabled video doorbell with a primary 5-megapixel camera and a second 8-megapixel package camera. Ubiquiti also began shipping its AI360 PTZ camera, which provides panoramic overhead surveillance and is based on OC25SOC. We are also seeing opportunities in new AI camera IoT applications, including robotics and video conferencing. During CES HMS, an AI factory automation company based in Japan announced and demonstrated its new C-ray AI 3D camera designed for robotic and industrial 4.0 applications. In this application, Embraer's CE25 SoC does camera perception and fusion. combining the RGB camera and the TOF dual sensors. The product is being supplied to Japanese robotic leader Yasukawa for robotic arm application. And the in-video conferencing application, an example of one of our first wins is from , a Chinese-based leader in communications and video conferencing. Their new UV430 series ultra HD PTZ video conferencing camera based on our CV22 SoC offers 4K P60 video, 25X optical zoom, and the pentel zoom operation. In summary, this engagement indicates we are successfully leveraging our state of the art human viewing video processor expertise into markets for high bandwidth AI processors. in machine sensing IoT endpoints. Much of the early CV growth we have experienced has been driven by new product cycles in existing markets, like security cameras. But we are extremely excited about the penetration we are achieving in multiple new market verticals, like the robotic arm, automotive head lamp, or automotive access control mentioned earlier. The megatrend for security safety automation and eventually complete autonomy or robotics are key drivers in our market and it is key driver for our same expansion increasing from about four billion dollars this year to approach 10 billion dollars in calendar year 2027. with the breath of our sake expanding the market opportunities are now much larger we are engaged in discussion and multiple customer where the lifetime revenue of any one program could be more than 20x higher than what we have experienced in the past. With evidence mounting, we are more convinced in the positive secular trends of our AI products. In order to sustain and grow our leadership position, we have and will continue to make a premium investment in our differentiated semiconductor and software R&D. Our organic R&D investment leads the way and has been augmented with our synergistic acquisition of HD radar leader, Oculi. Our R&D investment includes new perception technology development, diffusion for cameras and radars, automotive functional safety, next generation processor on three or four nanometer technology, and silver modules higher up the stack. And also, I would like to provide an update on Oculi about four months after we announced the acquisition. We are very pleased with customer interest and activity with our proprietary HD radar products, and many cross-selling opportunities were discussed with customer during CES this year. Since the acquisition, we have seen a significant pickup in the number of radar modules customers. In fact, during Q4, we shipped a record number of 77 gigahertz radar modules. We understand many of these customers are evaluating the technology for their production programs, and we plan to continue to aggressively hire to support the strong interest and outlook for our HD radar technology. In conclusion, after five plus years of HAI investment, fiscal year 2022 represented a firm inflection for Ambarella. And while decisively established, we are still in the very early inning of the AIoT market development. We are very pleased with our progress. Evidence continues to build, and we remain convinced the market opportunity is very significant. We are committed to sustaining our strong investment to capitalize on our leadership position. And along the way, we are committed to deliver positive operating leverage at the $500 million and $1 billion annual revenue milestones as indicated during our capital market days in January. With that, John will now provide our prepared financial comments.