Ambarella, Inc.

Good day and thank you for standing by. Welcome to the Ambarella's third quarter fiscal year 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. And we ask that you ask one question and one follow-up question. To ask a question during today's session, please press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would like to turn the conference over to your speaker, Lewis Gerhardy. Please go ahead, sir.

Thank you, Lisa. Good afternoon, and thank you for joining our third 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 third 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 uncertainty 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 filed with SEC, including the annual report on Form 10-K, that we filed on April 1st, 2022, for fiscal year 2022, ending January 31st, 2022, and the Form 10-Q filed on September 8th, 2022, for the second quarter of our fiscal year 2023. Access to our third 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 page of our website. Fermi will now provide a business update for the quarter. Brian will review the financial results and outlook, and then we'll be available for your questions. Fermi?

Thank you, Lloyd. And Grabson, thank you for joining our call today. Q3 was mostly as expected. While there are material headwinds from an industry-wide semiconductor cyclical downturn, there is no change in our very favorable cyclical growth outlook for the opportunity enabled by our HAI endpoint investments. During Q3, in four key ways, we demonstrated significant progress to develop these opportunities. First of all, our positive market development momentum continues. highlighted by the November 18th announcement from Continental AG that after a multi-year evaluation, they became the first to integrate our CV3 SOCs into their ADAS product lineup. Second, our six-year automotive revenue is $2.3 billion and increased about 28% from the $1.8 billion announced a year ago, with approximately $800 million one business. This funnel is predominantly driven by our computer vision and the domain controller SOCs, and it is important to note our automotive send over the same period is still ten times the size of this new automotive funnel. So there's plenty of headroom for share gain. Third, our content in our customer's product continues to rise as we leverage our historical success with optimized processing for high-bandwidth sensing. This is demonstrated by a total blended HOC ASP we estimate will increase about 20% this year. Furthermore, we expect our new HOC like CV5 and the CV3 to commence significantly higher ASPs. Fourth, we are on track to reach our goal for CV to be 45% of our total revenue this year. and with a strong Q4 CV run rate, CV revenue is expected to post strong growth in fiscal 2024 and become a larger portion of mix. Now, I will provide some examples of our market development activity. On November 18th, German Automotive Tier 1 Continental announced that it will offer advanced driver assistance systems based on our CV3 AI domain controller SOC family. Our high-performance, power-efficient, and scalable SOC portfolio built for ADAS and the Thomas location complements Continental's solution for assisted driving and further advanced vehicle automation. The joint solution with its centralized single-chip architecture enables the next generation of vehicles to more quickly perceive environmental conditions by processing multiple sensor input simultaneously. Supported sensing modalities include high resolution cameras, radars, and LIDARs, as well as ultrasonic sensors. Our integrated SOC enables the early fusion of the real sensor inputs wherein the data from different sensor is combined for offensive vehicle automation. The high scalability of our CV3 SOC family allow vehicle manufacturers to choose the optimal performance level for their system requirements while using the same vehicle architecture. Additionally, this joint solution's low power consumption reduce cooling requirements, making sustainable energy saving possible while also reducing system costs. Continental's ADAT solution with integrated Embraer SOC will be showcased for the first time at the CES 2023 in Las Vegas. Also during the quarter, we announced another win in Japan with Toyota, who began shipping its Yaris and the Yaris Cross models, featuring a GenPax auto-thinning mirror with integrated digital video recorder. Based on Umbrella's age of automotive SOC, the dual-channel video recorder features both front and rear-facing cameras, as well as an app that allows customer to pull recorded video directly to their phones. Mercedes-Benz began shipment of vehicle in China and Korea with a car recorder from Korean tier one supplier, Mobile Appliance. Based on Umbrella's H22, the car recorder includes both an Ultra HD front camera and a QHD rear camera. In November, we announced that China-based InnoTag is in mass production with a driver and an occupant monitoring system that is delivered to GAC for inclusion in its AMCO SUVs. This system uses a single CV25 AQ-AI SOC and integrates one 2-megapixel driver monitoring camera and three 2-megapixel occupancy monitoring cameras. I'm also pleased to announce that our CV25 automotive AI SOC has been chosen for driver monitoring application as a major career automotive OEM, with production expected to begin in 2023. The CV25 was chosen for its highly efficient neural network processing, combined with very low power consumption. I will now talk about some of our customer developments in the IoT space, starting with the enterprise security camera market. During the quarter, Wakata announced its first multi-sensor camera, the CH-52E, which uses a full umbrella of CV25S AI vision SoCs. The camera includes a full independent 5 megapixel sensors to offer customers to wide coverage benefits of a fisheye camera, along with the high resolution, high image clarity of the full camera. Autola solutions have made a number of acquisitions of video security companies over the last two years, with many using Android SoCs. At the GSX security show in September, Motorola announced its new AVA Flex camera based on Android's CVFlow AI SoCs. The AVA Flex includes a Wi-Fi connectivity and a cloud-based video management for ease of deployment, while supporting AI features such as occupancy accounting and anomaly detection. Also, at the GSX show, Korean security leader Hanwha Taek-Win introduced multiple cameras based on Andorra's CV-2 AI vision SOCs, including new P-series stone cameras with a few 6-megapixel imagers and AI features, and a new T-series camera, including manual proof and bispectron AI thermal models. Other Korean Korea-based customers introduced new models during the quarter, including IDIS introduced new camera for license plate recognition based on our CV28 entry-level AI SOC, and the digital WADOC introducing 5-megapixel and 4K film models based on our CV22 AI SOCs. And in September, Xiaomi introduced launched its latest battery-powered smart door lock featuring 3D structuralized facial recognition. The smart lock unlocks using 3D biometric facial recognition in less than a second with Endura's CV20AM AI processor, performing both the face recognition and the 3D structuralized processing. The facial smart lock is also BCTC certified, which meets all of the security requirements for financial transactions in China. In the consumer camera category, Insta360 introduced its H3 360-degree camera based on Umbrella's H22 SoC. The camera includes a 5.7K active HDR video, 72-megapixel photos, and AI-based editing. We are also seeing opportunities in next-generation AI-featured video conferencing applications, both for home and commercial use. In China, H3C introduced its Magic Hub conferencing system that features an 8K camera and 8K large screen display. The camera is based on our CV52 AI SoC and supports ultra-wide-angle video capture and advanced AI features. In the streaming camera market, Delgado, a unit of Corsair, introduced its FaceCam Pro based on our H2 video processor. The FaceCam Pro features 4K P60 video and advanced features such as Pentel Zoom, making it ideal for gaming applications as well as solo and group video conferencing. And Verily is also in the process of strengthening its ecosystem of design and development partners to address new markets. and expand our customer base. In November, we announced a comprehensive relationship with E-Info Chips, an aerial electronics company, to extend design and development services for the next generation of CV4-based AI cameras. This leverages E-Info Chips' extensive engineering expertise and resources to support the rapid growth of AI IoT applications. including those in robotics, access control, media conferencing, and the healthcare market. This representative engagement, a majority of which are based on our higher value CV SOCs, provide insight into the early and the continuous success of our strategy. In Q4 alone, we expect to ship close to 2 million units of CV to family SOCs, and the outlook for the CV2 family remain very positive. Now with the CV3 and CV5, we are establishing new CV product cycles, building upon our proven CV2 family and further extending the functionality and the value or ASP we can earn. Continental was early and the first to validate this new CV trend from Umbrella. And in the next several quarters, we anticipate sharing more about our customer progress. Series 3 in a single SOC synergistically ties all the functionality Embraer has established over the years. Cameras and radar perception, deep learning AI, and the surface stack IP. It began 18 years ago when we established our camera perception processing reputation. and we are now addressing higher value HAF opportunities serving megatrends such as security, safety, and automation. This machine sensing opportunity are incremental and much larger than the human viewings market. So, we see a very favorable secular opportunity in place. We have the right strategy to address it, and we are continuing to demonstrate early signs of success. We intend to continue to invest a majority of our R&D to fully realize this market opportunity, leveraging our leadership position in the AI endpoint market. With that, Brian will now provide our prepared financial comments. Thanks, Jeremy.