Ambarella, Inc.

Good day, and thank you for standing by. Welcome to Amborella's third quarter 2023 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 1-1 on your telephone. I will now like to hand the conference over to your speaker for today. Stuart Fairharty, you may begin.

Thank you, Tawanda, and good afternoon. Thank you for joining our second quarter fiscal year 2023 financial results conference call. On the call with me today is Dr. Fermi Wong, President and CEO and Brian White, CFO. The primary purpose of today's call is to provide you with information regarding the results for our second quarter of fiscal year 2023. 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. then 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 that we filed on April 1, 2022, for fiscal year 2022, ending January 31, 2022, and the Form 10-Q filed on June 8, 2022 for the first quarter of fiscal year 2023. Access to our second quarter fiscal 2023 results, press release, transcripts, historical results, SEC filings, and a replay of today's call can be found on the investor relations portion of our website. Fermi will provide a business update for the quarter. Brian will review the financial results. Then we'll all be available for your questions. With that, turn it over to Farming.

Thank you, Louis, and good afternoon. Thank you for joining our call today. Q2 results were mostly as expected. Revenue was down 10% sequentially and up 2% versus the year-ago quarter. CV revenue increased significantly on a year-over-year basis, driving our blended average selling price above $10. We have accumulated more than 10 million CV SOCs, including more than 20% into the automotive market. And we remain on track to achieve our prior estimate that CV will represent about 45% of our total revenue for the year. In Q2, we observed the worst from both the China lockdown and the 14 nanometer shortage. and the incomplete kits remain a bottleneck for many of our customers. Collectively, we shall see some improvements from these factors in the second half, but our recovery outlook is tempered, but some customers are now reducing their inventory levels, in particular, a lead-time contract. In July, we commenced a global roadshow to leading automotive Tier 1s and OEMs with a live demonstration of our CV3 SOC. As a reminder, CV3 is our first central domain controller integrating in a single monolithic die all of Embraer's core competencies, including perception processing from cameras, radars, sensor fusion, and the path planning, as well as our functional safety and application software. Just one month after the SOC came out of the fab, we demonstrated full functionality across multiple live cameras to many global automotive OEMs and tier ones. The superior performance and efficiency as well as the scalability of our SOC roadmap were clearly recognized and well received, leading to many follow-on development discussions. Now we expect to be able to share more about some of these customers' engagements by the end of the year. We are also proud to announce that CV5, our first 5 nanometer SOC, entered production in Q2 at least a quarter ahead of expectations. We have three IoT customers that each purchased production volume in Q2, and we are engaged with many other companies developing their first CV5 products. I will now provide some examples of our market development activity, where production has already or is expected to commence this year. Toyota introduced its 16th generation 2023 Toyota Crown model, featuring a two-channel digital video recorder based on an umbrella of the CV25AX AI processor. Capable of recording from both the ADAT system and the electronic mirrors, the car recorder is supplied by Japanese Tier 1 Denso 10. BMW began shipping two dash cameras models, the events car, I 3.0 and the 3.0 pro providing both the front and the rear view recording based on umbrellas, H 22 video SOCs. The dash cams will be sold in over 80 markets with the Chinese word version, also including electronic toll charging features in June. China-based FAW Hongqi introduced its latest generation of B-class cars. The H5 sedan includes a L2 AFAS system based on our CV22AQ automotive SOC and is supplied by Tier 1 Newsoft. Also in June, China-based Dongfeng introduced its Hongjing SUV. The SUV includes an occupant monitoring system based on our CV28AQ. and supplied by Tier 1 BCS. And in August, Israel-based Sepia announced Chery's SUV will integrate Sepia's driver-sense DMS running on Embraer's CV28 AI processor. The integration of the CV28 and the driver-sense software utilize neural networks to offer robust driver monitoring capabilities. I will now talk about some of the new IoT product announcements. Johnson Controls introduced its fourth-generation Illustra Flex camera series, including Minidome, PTZ, and Bully models based on our CV28S AI SOCs. Also during the quarter, Ubiquiti announced its AI Bully camera based on our CV25S AI SOC. The 4-megapixel camera includes smart detection of people and vehicles. Korean IP camera maker IDIS launched four new 8-megapixel and 6-megapixel PTZ cameras based on our CV28 and the CV22 SOCs. The cameras are designed for wide area surveillance operations with the capability to identify objects and recognize face at distance of up to 300 meters. Japan-based ITRO introduced a new 2-megapixel machine vision camera and at manufacturing sites and based on our CV22AISOC. The camera performs automatic visual inspections and supports up to 100 different object types, for example, detecting the presence of cables and the connectors, different colors, or the presence or polarity of electrical components. Also in Japan, JVC introduces new PZ2510 video conferencing camera focusing on live broadcast and recording applications such as concerts and lectures. Based on Andorra's CV22AI SoC, the camera supports full 4K P60 video streaming, face detection, automatic tracking, and a wide viewing angle. In other IoT markets, Insta360 introduces two new products based on our H22 video SoCs. The Insta360 Sphere is an accessory for drone and works by placing one camera above the drone and one below to create a similar spherical image. In the smart home IoT market, Insta360's Link is an AI-powered 4K video conference device using a three-axis gimbal design and powerful AI tracking, automatic zooming, and framing to ensure that the presenter is always center stage. This representative engagement, a majority of which are based on our higher value CVSLCs, provide insight into the early and the continuous success of our strategy. We have successfully leveraged our human viewing perception processing expertise into the larger machine sensing markets, addressing megatrends such as security, safety, and automation. These machine sensing unit opportunities are incremental and much larger than the human viewing market we have and will continue to serve. Furthermore, we are demonstrating we can capture more value in these sensing applications from incremental processing functions such as radar and other sensor perceptions, sensor fusion, and planning functional safety and application software. CV3 ties all this functionality together. So we are confident that we are implementing the right strategy and demonstrating early signs of success. Despite the current market turmoil, we will continue to drive our organic R&D investment to fully realize this market opportunities leveraging our leadership position in an AI endpoint market. With that, Brian will now provide our prepared financial comments.