Ambarella, Inc.

Thank you for standing by and welcome to umbrellas first quarter fiscal year 2024 earnings conference all at this time all participants are listen only mode after the speakers presentation, there will be a question and answer session to ask a question during the session you'll need to press star 11 on your telephone. If you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr. Luis Garajari, Vice President, Corporate Development. Please go ahead, sir.

Thank you, Jonathan. Good afternoon, and thank you for joining our first quarter fiscal year 2024 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 first quarter of fiscal year 2024. 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 we file with SEC, including the annual report in Form 10-K, which we filed on March 31st, 2023 for fiscal year 2023, ending January 31st, 2023. Access to our first quarter fiscal 2024 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 first 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, Louis. And good afternoon. Thank you for joining our call today. Our Q1 results was slightly ahead of our expectations, despite the significant headwinds from the ongoing semiconductor industry, cyclical downturn. We are not allowing this difficult environment to distract us from further developing our AI business. Before I talk about the details of the quarter with all the cross currents in the market together, with all the exciting developments in the AI market. I thought this would be a good time to review our strategic vision. Simply put, our transformation into an AI company is well underway, with AI already representing 45% of our total revenue last year and an estimated 60% this year. Now with our CV3 platform, we are expanding into a new phase of AI market development. The AI market is at a very early stage it is also dynamic with many technologies and applications emerging. With all excitement about AI, the key to our continued success will be our focus and the degree to which we can leverage our unique core competencies. Even with our focus, our current serviceable available market, or SIEM, is sizable, exceeding $4 billion this year and approaching $10 billion in fiscal year 2028. So what are we focused on? Embraer is focused on deep learning AI processors and software, which are replacing the legacy and the less powerful traditional machine learning approaches. With the deep learning market, the AI processor market has been dominated by training processors using servers typically for the cloud, data center, or enterprise. Our focus is on AI inference, which is where AI models get deployed and are practically utilized by end users. As the AI market begins to mature, most third-party research firms forecast the size of inference AI to surpass training AI. We have already demonstrated how we can leverage our rich heritage in human perception, also known as video processors, into AI. Our CV2 family was our first move into AI, and it targets inference AI perception processing at the age where cameras are the principal sensing modality. We continue to expect the CV2 family to be approximately 60% total revenue in fiscal year 24 and to represent a material portion of our operating profit dollars. The CV2 SoC integrates our camera perception expertise with our proprietary second generation CV flow AI architecture. The incremental processing to enable AI costs causes our CV2 blended everything selling price, ASP, to be greater than two times a video processor. This contributed to an over 20% increase in our phone-wide ASP in fiscal year 23. This year, the CV2 family is expected to become the dominant driver of our revenue and remain a key driver for several years. The solid stream of operating profit from video processors and the CV2 family of HAI processors is now being reinvested into the significantly more powerful CV3 platform targeting mobility applications. The CV3 platform builds upon our CV2 family experiences and utilize our proprietary third generation AI inference processor. For the typical level two plus application, the CV3 SoC provides the perception processing for all the camera and the radar sensors, as well as the processing required in the fusion and the planning layers. The significant amount of incremental processing expected to facilitate a CV3 SOC ASP to be five to 20 times higher than a CV2 SOC. It is also very important to understand CV3 is a platform, as the SOC in a CV3 family can capture incremental value by running our own autonomous driving AD software stack IP and our radar perception SOFR IP. We end to bundle this SOFR IP with our CV3 SOCs in a platform approach, providing our customers with the flexibility to pick and choose exactly what they need. Regarding our autonomous mobility partnerships at Continental, I am pleased to share that we extended our partnership to level four system development and confirmed the first business award of our jointly developed stack as a complete level four fallback system. The system will be supplied to Continental for customers in the commercial vehicle industry. To be clear, the CV3 platform is a major leap forward in terms of our value proposition, and it brings a new list of target customers, automotive OEMs. We are still in the early stage of building out the CV3's SOC portfolio and developing the market. However, we are not doing this alone. with leading tier ones like Bosch and Continental porting their software to CV3, validating our superior efficiency, jointly marketing to auto OEMs, using their scale, and bring more credibility to our CV3 market development efforts. Additionally, for the AI server inference market, we have already evaluated running large language model, LLM, on CV3-AD-HI, which has been sampled for nine months, and we believe the LLM performance on this existing SOC to be as good as NVIDIA A100 with much lower power consumption and a superior total system cost. We are now establishing a software development effort as well as a business development program to engage with customers. Turning to new products and the customer engagement in this quarter, In March, at IC West Security Show, we announced our CV72S for mainstream enterprise and public class security cameras. CV72 utilizes the same third-generation CVFlow deep learning AI accelerator architecture utilized in the CV3 SOCs. This CV3 derivative SOC brings to the IoT market the highest AI performance per watt, the fusion of radar and camera data, and it includes support for the latest transformer neural networks. Furthermore, CV2S offers six times the AI performance of a CV2 family, enabling it to run Embraer's groundbreaking neural network-based image signal processing software for 4K color, night vision, and HDR with plenty of headroom for additional concurrent neural networks. CV72S is now sampling to leading IoT camera companies. In IoT, there were a number of new enterprise and the public security camera introduced, including Motora, who introduced the H6 SL camera line based on CV25, as well as the V700 body camera based on our H6LM SOC. And the Vokada introduced its TD52 video intercom featuring 5 megapixel camera based on our CV25. iPro, formerly Panasonic, and Japan's largest security camera supplier, introduced multiple new product family based on our CV2, CV22, and CV25, including dual and quad multi-image models. And the European market leader Axis, part of Canon, introduced 3905 rugged tone models designed for surveillance on board vehicles, such as buses based on our A6LM. Also in Europe, Dallmeyer introduced Domora E-series camera, which uses our CV22 AISOCs to enable imaging in total darkness utilizing adaptive IR illuminations. In the home monitoring market, Elan.com introduced its ADC780 battery-powered Doppel based on our S5LM. I will now talk about the progress in the automotive market. As mentioned earlier, our new CV72S SOC is an important CV3 derivative for the IoT market. However, it is expected to also be an important derivative product for the automotive market, and in April, at the Shanghai Auto Show, we announced and demonstrated CV72AQ. This SOC targets multiple automotive applications, including Level 2+, and all applications with up to six cameras and five radars running on the San Jose Sea. CV72-AQ demonstration at the show included an ADAS plus parking system with a five-camera configuration, including an 8-megapixel front camera and multiple 3-megapixel fisheye camera running ULO-V7 neural networks on each camera. We also demonstrated, versus a leading GPU solution, superior performance and lower power consumption of the CV72AQ running transformer networks. We received very positive feedback on CV72AQ from Tier 1s and OEM in China. Also, as the Shanghai Auto Show, a number of other Tier 1s demonstrated CV3-based assistance. This included Continental Hujishou of 10-camera live demo with multiple neural networks running on each video stream. And Hyperview demonstrated its GT Hypermax platform, featuring a sensor suite of 11 cameras, plus one LiDAR and three radars in a car, providing CT navigate on pilot advanced functions, and leveraging the latest transformer network. In March, China's GAC introduced its Electric Ion Y Younger L2 Plus ADAS SUV with an intelligent 1V1R driving assistance system based on our CV22AQ AI SOC. And in April, GV Zeker introduced its Zeker X electric SUV with a face recognition access control system based on CV28AX AI SOC. In summary, a majority of our new customer engagement in activity continue to be our AI products. AI is expected to be a majority of our revenue for the first time in fiscal year 2024, and AI should continue to grow as a proportion of our mix. To bring our AI strategy vision together, first with the CV2, and now again with the even more significant CV3 platform, we have leveraged our core competencies cumulative knowledge and unique approach to establish strong presence in the AI deep learning domain. Our investment yield differentiated products that are very efficient and on open platforms that are scalable and flexible. The CV2 family is already very profitable and we are well into the development phase with the CV3 platform. In summary, there is still a lot of work left to to our strategy, and that the ongoing semiconductor industry cynical downturn pressure our near-term financials. However, we are confident in a long-term secular growth opportunity for each inference AI. We do not intend to stray from our strategy vision, and we are continuing to invest in our differentiated AI strategy. I will now turn it over to Brian to discuss the Q1 results and the Q2 outlook in more detail. Thanks, Fermi.