Ambarella, Inc.

Good day, and thank you for standing by. Welcome to Amarillo's fourth quarter and fiscal year 2024 earnings conference call. At this time, all participants are in the 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 1-1 on your telephone. You will then hear an automatic message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Lois Gerhardy, We will call for development and investigations. Please go ahead.

Thank you, Livia, and good afternoon, and thank you for joining our fourth quarter and full year fiscal 2024 financial results conference call. On the call with me today is Dr. Fermi Wong, President and CEO, and John Young, CFO. The primary purpose of today's call is to provide you with information regarding the results for our fourth quarter and full year fiscal 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 based on currently available information and 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. Access to our fourth quarter and full year 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. The content of today's call as well as the materials posted on our website are Ambarella's property and cannot be reproduced or transcribed without our prior written consent. The firm will now provide a business update for the quarter. John will review the financial results and outlook, and then we'll be all available for your questions. Fermi?

Thank you, Louis, and good afternoon. Thank you for joining our call today. In the fourth quarter of fiscal 24, our revenue increased about 2% sequentially, and we slightly exceeded the midpoint of our guidance range. Thanks to the early actions we took to help our customers navigate their excess inventory, our business continued to stabilize and is beginning to recover. For the full fiscal year 24, our revenue declined 32.9% year-over-year as our customers digested inventory resulting from the industry-wide semiconductor cyclical downturn. Looking ahead to fiscal year 25, we continue to expect both our automotive and IoT business to grow as the cyclical challenges win and the secular growth of our AI strategy emerges. Our customers currently have a cumulative install base of more than 20 million AI-influenced SOCs, all from our 10-nanometer CV2 family and the 5-nanometer CV5. This is based on approximately 280 customer products that have reached production on a cumulative basis. The CV2 family is expected to continue to be the key driver of our revenue growth in fiscal year 25. Our AI-influenced business O&H applications represented approximately 60% of our total fiscal 2024 revenue and was the key factor in the meeting's percentage year-over-year increase in our blended ASP. The trend to a richer mix of AI revenue and higher average selling price is expected to continue, in particular as the CV3 SOC family enters production. At this time, Virtually all of our customers' new design activity involves our AI inference processors. In fact, this was the first year at the CES where all of our ASOC demos, more than 30, were based on our AI inference products. Fixable 24 was certainly challenging for most of the industry. However, there were key industry developments and the company's specific achievements that we believe leave us very well positioned for growth as the market recovery plays out. For the industry, in the past, the AI processor opportunity had primarily been represented by training GPUs in server located in data centers. And this is a market that we do not serve. However, in the last year, the important role and opportunity for inference processors, in particular at the age, has become better understood. And this is exactly where we have been focused on. Internally, we achieved four key milestones during the last year. First, we have now shipped more than 500,000 units of our first 5 nanometer SOC, CV5. And we expect our shipments in fiscal year 2025 to approximately double. Most of CV5 volume is currently in our IoT business, although we expect an automotive OEM to start production in the second half of the year. The fact that we have already achieved high-volume mass production at the 5 nanometer helps pave the way for our other 5 nanometer SOCs, such as the CV3 family. Second, the automotive market resembles both the high-end production version of our 5 nanometer CV3, as well as a 5 nanometer version for China. At the high end, we sample CV3-AD685, targeting L3, and above autonomy. And this central domain controller is currently in evaluation at multiple OEMs and tier ones globally. So far, we are finding success in L3 and above commercial vehicles. For the basic highway L2 plus affiliated in China, we introduced a CV72AQ, and we have numerous tier one design wins and OEM discussions on the way. Third, we introduce our generative AI, GenAI strategy for the edge of the network, and we are sampling our 5 nanometer N1 processor targeting edge applications ranging from IoT devices to edge servers. Fourth, we'll continue to build out the CV3 automotive platform to offer our Tier 1 and OEM customers turnkey options with our software stack and our centrally processed HD radar algorithms. We started the new year at the Consumer Electronics Show CES, where we hosted over 200 customer meetings and made a number of significant announcements for automotive, Gen AI, and our new Cooper development platform. We were pleased to receive a CES Innovation Award for the second year in a row, this time for our centralized radar processing architecture. In December, we unveiled our latest software stack for level 2 plus and higher autonomous driving applications. This software is optimized and can scale across our entire CV3 processor family, enabling OEM to get to market faster and reduce development costs. The new software stack, including the perception, fusion, and planning layers, is primarily deep learning based. which allows software development to scale more easily, resulting in a more accurate solution. Finally, most important, we rely on high-resolution camera and the radar perception data to create a real-time map inside the vehicle. And for this reason, we eliminate the use of stored HD maps that may contain stale data, which results in improved results and reduced cost for OEM. If needed, the software stack is available in modules and can be combined with an OEM's own software intellectual property. During the CES show, we demonstrated a stack running on a single CV3 automotive AI domain processor in our own autonomous vehicle, successfully completing over 150 autonomous drives. The demonstration integrated our Oculi radar algorithm for the first time. We also announced the expansion of our CV3 processor family with the addition of our CV3-AD635 and the 655 SOCs. The new CV3-AD635 supports a sensing suite that includes multiple cameras and radars to enable mainstream level 2 plus feature set, such as highway autopilot and automated parking, in addition to meeting the GSR2 and NCAP standards. Additionally, The 655 enables advanced level 2 plus with urban autopilot, as well as support for additional cameras, radars, and other sensors. With the previously announced flagship 685 SOC, along with the ChinaFox CV72AQ SOC, the CV3 family of four processors now covers the full range of AD and ADAT solutions, from mainstream to premium passenger vehicles. The new CV3-80 SOCs were endorsed by our partner, Continental. Kodiak Robotics, a leading autonomous vehicle company focused on tracking and the defense announced that it had selected our CV3-80-685 AI domain controller for its next generation autonomous vehicles. In IoT markets, during CES, we announced we are bringing GenAI capabilities to the edge through the introduction of our N1 processor for on-premises applications. This SoC supports up to 34 billion parameters, multimodal large language models, LLMs, with low power consumption, enabling GenAI for edge applications. We demonstrated multi-modal ILM running on the new N1 processor at a fraction of the power per inference of leading GPU solutions. Embraerla aims to bring GenAI to a wide range of edge applications, including video security, robotics, and industrial applications. Quanta Computer announced it was partnering with Embraerla to develop products based on our CV3-8685, CV72, and new N1 processor. to address cutting-edge AI devices. This offering addresses the growing market demand for a diverse range of neural networks and LLMs, and a well-empowered business across sectors, including autonomous vehicles, smart surveillance, robotics, and healthcare. Quantile demonstrated PCIe add-in cards based on our N1, as well as showing automotive ECUs based on CB3-AD685. We also introduced and demonstrated our new Cooper development platform. Cooper offers seamless integration of software, hardware, state-of-the-art, fine-tuned AI models and services that provide universal support for Embraer's entire portfolio of AI SOCs. We have now successfully deployed Cooper to some of our IoT customers worldwide. I will now quickly highlight some of the customer product announcements made during the last quarter. In the Chinese automotive market, we continue to expand our position in this important market. During the quarter, GAC Auto announced ION XMAX passenger car with combination driver monitoring and in-cabin sensing based on our CV25AQ automotive AI vision processor. GAC also introduced TrumpG M8 passenger car with driver monitoring and multi-channel occupancy monitoring, also based on our CV25AQ. And in January, Xiaopeng unveiled its X9 minivan, including an electronic mirror system based on our A12 automotive SOC. And in the enterprise IoT market, Korean market leader Hanhua Vision introduced multiple models based on AI Vision SOC, including 4K and the 4-channel multidirectional cameras based on our CV2 SOCs, and the AI thermal camera based on our CV22 SOCs. while Korean camera supplier IDIS introduced a 2-megapixel voice-over-IP video intercom based on our CV28 SoC. And Taiwan-based Vivotech also introduces a new 87-V3 family-over-IP camera based on our CV22 AI SoCs and featuring fixed-on and boolean models with advanced AI capabilities. In the home monitoring market, Canadian service providers tell us announced its home view doorbell camera based on our CB20AM AI SoC and featuring advanced AI detection. In summary, looking forward to our key objectives to restore revenue growth and profitability while continuing to drive our strategic R&D priorities for AI inference process opportunities as of age. To achieve this goal, we are highly focused on commercialization of technology and products we have developed, and in particular, converting the multiple RFIs and RFQs we are currently working on for CV2 and CV3 into awarded business. Furthermore, returning our IoT business to its positive secular growth trajectory is very important, and this includes our early business development for our new-gen AI N1 process. In conclusion, we have not been distracted by the prolonged industry-wide cynical downturn, and we see the secular trends we address, safety, security, and automation remaining very strong. The increase in market attention on inference processing, in particular at the age, is aligned with where we have been investing. In the new year, we are very excited about the opportunities we are working on, and move forward to move more business into one column. And I'm excited about what we will achieve in the years ahead. With that, John will now discuss the Q4 and the full year fiscal year 2024 results and outlook in more details.

Thank you, Fermi. Before I begin, I'd like to say that I'm honored to assume the CFO role. I've been working with the team for seven years and I'm very excited to help the company as it pursues growth in its target markets. I'll now review the financial highlights for the fourth quarter and full fiscal year 2024, ending January 31st, 2024. I will also provide a financial outlook for our first quarter of fiscal year 2025, ending April 30th, 2024. I will be discussing non-GAAP results and ask that you refer to today's press release for a detailed reconciliation of GAAP to non-GAAP results. For non-GAAP reporting, we have eliminated stock-based compensation expense along with acquisition-related and restructuring costs adjusted for the impact of taxes. Fiscal year 2024 revenue decreased 32.9% to $226.5 million. IoT revenue was about two-thirds of the total revenue and declined about 40% for the year. Auto revenue represented the balance of revenue and declined about 14% for the year. From a product point of view, a large majority of our fiscal 2024 revenue decline was from our human viewing video processor SOCs. For fiscal year 2024, non-GAAP gross margin was 63.3%, versus 63.9% in fiscal 2023. Non-GAAP operating expense increased 3.9% for the year versus 17.6% in the prior year. Ending cash and marketable securities totaled $219.9 million, up from $206.9 million at the end of the prior year. For fiscal Q4, revenue was $51.6 million, slightly above the midpoint of our prior guidance range, up 2% from the prior quarter and down 38% year over year. Non-GAAP gross margin for fiscal Q4 was 62.5% in line with our prior guidance range. Non-GAAP operating expense was $44.1 million, approximately flat with the prior quarter and below our prior guidance range of $45 to $48 million, driven by continued expense management and the timing of spending between quarters. We remain on track to our internal product development milestones. Q4 net interest and other income was $2.1 million. Q4 non-GAAP tax provision was approximately $119,000. In fiscal Q4, we recorded a one-time GAAP non-cash tax charge of $22.7 million, establishing a valuation allowance on certain U.S. deferred tax assets that were deemed more likely than not to be unrealizable in the foreseeable future. This valuation allowance was excluded from fiscal Q4 non-GAAP tax provision, consistent with our historical practice for changes to tax valuation allowances. This adjustment is a non-cash tax charge required by GAAP based on the proportion of taxable income in the United States. We reported a non-GAAP net loss of $9.8 million or a $0.24 loss per diluted share. Now I'll turn to our balance sheet and cash flow. Fiscal Q4 cash and marketable securities decreased $2.4 million from the prior quarter to $219.9 million. Receivables days of sales outstanding increased from 42 days in the prior quarter to 44 days, while days of inventory decreased from 145 to 131 days. Inventory dollars declined 6% sequentially and declined 28% from a year ago. Operating cash outflow was $4 million for the quarter and for the full year we generated operating cash inflow of $19 million. Capital expenditures for tangible and intangible assets were $1.9 million for the quarter and $12 million for the year. We had two logistics and ODM companies representing 10% or more of our revenue in Q4, WT Microelectronics, a fulfillment partner in Taiwan that ships to multiple customers in Asia, came in at 55% of revenue for the fourth quarter and 53% for the full fiscal year 2024. Ciccone, an ODM who manufactures for multiple end customers, was 14% of revenue for both the quarter and the full fiscal year 2024. I'll now discuss the outlook for the first quarter of fiscal year 2025. Our early actions during the cyclical downturn in the semiconductor industry have helped our customers navigate their high inventory balances, and these actions are now enabling our business to stabilize and begin to recover. For fiscal Q1, we estimate our total revenue will be in the range of $52 to $56 million. We expect sequential growth in both IoT and auto. We expect fiscal Q1 non-GAAP gross margin to be in the range of 61.5 to 63%. We expect non-GAAP OpEx in the first quarter to be in the range of $46 to $49 million, with the increase compared to Q4 driven by new product development costs and employee-related expenses, which we were able to delay in previous quarters. We estimate net interest income to be approximately $1.5 million, our non-GAAP tax expense to be approximately $500,000, and our diluted share count to be approximately 40.8 million shares. Ambarella will be participating in a fireside chat and hosting one-on-one and group meetings on February 29th in New York City at Susquehanna's Technology Conference. We will also be participating in Morgan Stanley's TMT Conference in San Francisco on Monday, March 4th. On March 18th, we will participate in the Roth Conference in Southern California. We hope to see you at one of these events. Please contact us for more details. Thank you for joining our call today. And with that, I will turn the call over to the operator for questions.

Thank you. Ladies and gentlemen, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 11 again. In the consideration of time, please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. Now, first question coming from the line of Quinn Bolton from Needham. Your line is open.

Hey, this is Neil Young. I'm for Quinn Bolton. Thank you for taking my questions. So you said you were seeing project delays from Tier 1s and OEMs, as well as volume reductions in planned projects, which you called out more of an inventory issue. How's that inventory improvement, I should say, is that inventory improvement progressing ahead of where you thought it would? And if so, are you starting to get the sense that these projects will resume soon? And then I had a follow up.

So you are referring to what we said a quarter before?

Yes.

So I think in November when we provide I think early December, when we provide our final guidance for this year, I think we talk about there's a project got pushed out, and OE and tier ones, also some decision for a new project also got delayed. And also there's some inventory. I think what we are seeing is still consistent with what we have said in December last year. I think there's no new updates. We haven't seen new development in terms of a further project got delayed or pushed out.

Okay, so on the auto side regarding inventory, you aren't seeing any improvements?

We haven't seen any improvement, but we are not saying you're getting worse.

Okay, thanks. And then for my follow-up, so in the past, you talked about how the first CB3 revenue would come from China. I believe in your opening remarks, I heard you say you're engaged in discussion with multiple tier ones and already have multiple design ones on the way. If that's the case, when do you think you'll see first revenue from those wins? And then maybe just an update on the demand environment in China.

Right. So for CV72AQ, we expected that the first revenue from those design wins would be in calendar year 2026. We have talked about this in a previous call. And basically, that was a low end, CV72AQ is basically the low end of CV3 family and addressing first level of level two plus, for example, for the ADAS plus smart parking. So that's the low market in China and we're working on, we already have design with tier one and working with OEM design right now. But I think for the market development point of view, I think China continues to be one of the focus areas that we are in because I think everybody sees the EV development in China, and we believe autonomous driving also will happen in China faster than any other area. So definitely we believe we can monetize our CV3 technology in China faster than any other area.

Thank you. And our next question coming from the lineup, Christopher Rollins with Susquehanna. Your line is open.

Hi. Thanks for the question. Just about your N1 product, maybe any more thoughts on how large this could be for you guys? Have you considered or has anyone talked about combining multiple chips into a server or appliance? And then lastly, does this meet the Chinese compute restrictions for import as well? Thanks.

Right. So first of all, in terms of N1, we definitely believe that, first of all, we can, technically we can put a, multiple chip together and to serve a high-end solution. But so far, we believe a single chip solution at the edge will meet demands for a lot of our current customers, maybe even new customers. But I do see a point, if you want to go to the edge server side, that with multiple chip will provide a better solution. Definitely, that's the direction we are looking at. And the current solution that, for example, we demo with our partners building PCIe card today is a single chip solution, but it can be multiple chip in the future. In terms of the American regulation, I think because our architecture, although we can provide high performance at very low power consumption, but our total top number, as well as the bandwidth, is much lower than our competition. And that's our strength. our architecture that we can use smaller top number and lower bandwidth to achieve a similar or higher performance.

Great. Thank you for Chris, in terms of the market size, we've had many discussions, you know, at CES and, and afterwards with customers, you know, on our gen AI and LLM, you know, products, and we see really good feedback about what these products can do and, Many customers we found out just were not aware that, you know, Gen AI models like, you know, Lava could run so efficiently, you know, on a sub 50 watt SOC. And so this has triggered a lot of discussions with our customers and how they're going to use the product. And we're going to wait to put some market sizing figures out until we're a little bit farther down that process. But the feedback's really good, especially, you know, doing this on a sub 50 watt SOC. Great.

Yeah. Maybe around the kind of edge AI and camera opportunity. Maybe if you could describe that. I mean, there's so much focus on auto, but next gen, like security cameras with all this AI functionality, like what are growth rates for that market? Do you have now visibility into a funnel to kind of refresh that and to revigorate that market? And what kind of growth could we be talking for kind of that edge market as well with your products? Thanks.

Well, for our SAM, we haven't updated it for Gen AI, you know, kind of like the prior discussion. So we're still sizing that up. But the prior, you know, SAM CAGR, if you will, that we talked about, was in the low teens range, thinking of a five-year Sam Cagger for that market. But that does not include the Gen AI products, and we're going to take a little bit longer to put those numbers in. In terms of kind of the insight into building momentum in this market and any sort of funnel, I'll pass that off to Fermi. Yeah.

In fact, you know, although we talk a lot about auto because that's a huge opportunity, but we never underestimate the importance of, you know, security camera market for us. This is really a big portion of our revenue, and we continue to believe that the HAI application for security camera is important for us, and we continue to develop new platform. For example, we announced the CV72, and we'll announce new chips for this market in the near future. So I think We believe that the AI performance demand in security camera will continue to grow, and we want to continue to be the dominant player on the mainstream high-end product line.

Thank you. And our next question, coming from the lineup, Matt Ramsey with TD Cowan. Your line is open.

Good afternoon, guys. Thank you. I guess... Fermi, I wanted to follow up with you on some of the initial feedback on the N1 from an inference perspective. And I guess it's not a surprise to me, given that the engineering and architecture team is getting good feedback on low power inference. I guess my question is, as you get that good feedback and you're interacting with customers that can potentially ramp this product over time, given kind of where the P&L is for you guys right now during the correction, what's the business model over the next 12 to 18 months to start to really build a business around this and get something that could ramp at scale given the software investments that you need, et cetera? Are customers willing and are you willing to do sort of NRE payment arrangements? Are people willing to invest alongside you on software? I'm just trying to figure out I can see big potential here, but there's also some limitations on capital given where the business is. And I'm trying to understand what the discussions are to get you from point A to point B if this is going to be a big product.

Right. So I think you make a good point. I think for the N1 development, it's going to be significant for us. But that's why we are open for any kind of business model, including from partnership to NRE numbers. I think with N1, we only can address some of the customers, particularly our existing customer demand. And also on the software, in fact, we can demo and show you that our investment on the software and tools and the silicon can be leveraged for our first generation chip. So from that point of view, I think the majority of our investment for N1 is done. So the real question is, what's our roadmap moving forward? For example, if we look at the Cooper development, although we define Cooper for other purposes, but definitely directly apply to our development. So let's talk about for our LLM or chain AI roadmap. I think that's where the difficulty is, right? I think it's from the PR point of view, if we want to do this, we need to continue to invest in R&D for new chips and maybe even new software. So from that point of view, I agree with you that we have to look at all the possible scenario, including a partnership, as well as NDA, so some of the NRE payments for us to pay for the current cost. But I think, you know, based on the feedback, it's become very clear that LLM is not only for the data center. LLM will penetrate to the H device and our current existing customer and future customer all want LRM as a part of the roadmap. So I think that we need to be flexible to develop a roadmap for our customer. And we have to figure that out sometime this year.

Thank you for all the thoughts there for me. I guess as my follow-up question, where the revenue levels are right now, you guys have been consistent the last couple quarters that you're working with the customer base to burn through inventory that they had built. And you're clearly under shipping and sell through by a pretty significant margin to do that. So, I mean, I asked this last quarter and maybe it was too early to ask, but now that we've had three more months, you have a feel now as to what the steady straight sell through revenue level of the business is currently just with the designs you've won, particularly in the security camera businesses. What is, what's sell-through and what's the market size right now after we've gone way up and then way down on the inventory correction? What's kind of the steady state sell-through that you're undershipping to burn through inventory? Do you have an estimate for that? Thanks.

Yeah, so we are trying very hard to understand numbers. So let me give you my thoughts. I think, you know, when I look at the number at the peak, we shipped probably 92 million a quarter. At the bottom, we shipped roughly 50 million. And when we look at all of the of statistics and the numbers that the model would build, we feel the midpoint of that two number is probably the comfortable level for us and we are definitely working hard to go to that, to reach that level. So I think roughly in the $70 million range is probably the number we are shooting for when everything get equal, equalized.

Thank you. And our next question coming from the lineup. Tori Sandberg with Stifel. Your line is open.

Yes, thank you. My first question for me. So you talked about fiscal 25. You expect to see growth in both auto and IoT. I was just hoping you could give us a little bit more show the puts and takes on how you think the year to progress. Obviously, you know, there's still probably some lingering inventory, especially on the auto side. But yeah, any more color you can give us as far as the growth you're expecting in both segments this year?

You are talking about CV5 or overall?

No, I'm talking about your... You mentioned you expect both segments to grow this year, so if you could just give us a little more of the dynamics.

Right. So I think for the... Let's talk about IoT first. I think for IoT, it's pretty clear that, you know, with the CV2 product line that we're being... you know, growing CVE revenue from close to 60% last year. And we believe that the momentum of CVE2 family will continue, particularly after the inventory problem is behind us. So I think at that point, I think CVE2 family will drive the growth for us. But more importantly, I think in our script, we talk about CVE5 will start ramping. Last year, we did half a million units, and this year, we're probably going to double it. And that will also, if you consider ASP, that could be meaningful growth for us. So I think that's where on the IoT side. On automotive side, I definitely think that, you know, first of all, we continue to announce the CV2 design wing in ADAS, in OMS, CMS, on the electronic mirror and the recorders. Those continue to be a big portion of our revenue, but also we are announcing some partnership with CV3 early customer that we have started delivering samples and also partnership with NREs, that will definitely play a role in our CV3 revenue, sorry, our automotive revenues in there. So I think although that automotive market continues to be weak based on the feedback from the market, But I still believe that we are a small player in the automotive space and we're trying to be a big one throughout the process. We're looking at more along the line our growth with current design wins. So I think that's how we feel comfortable that automotive will also have growth this year.

Yeah, Tori, from a product point of view in fiscal 25, our AI inference products, it's almost all CV2, will be more than 100% of our growth. That means the video processor business will, you know, which was down substantially, as John mentioned, in fiscal 24, it dropped about $80 million. That rate of decline in video processors will begin to really taper off in fiscal 25. Did you have a follow-up, George?

Yeah, that was very helpful. As my follow-up, I was pretty impressed with the Cooper development platform when I saw your samples at CES in 2015. I was just wondering, you know, how that the developer platform is helping you secure, uh, you know, more, more business activity. Cause it does seem like it was an important piece of the pie that was missing, but obviously now that you have, have it readily available.

In fact, all our existing customers are eager to get a hands on, uh, on the Cooper tells me a lot about how, how much they like this development, because now it's become very easy for them to put a software shoe to different, uh, umbrella platform. different silicon means and also it's easy to transfer the software and the function or AI algorithm from chip to chip so this whole development is important not only for us but also for our customers and I think for the existing customer that will make their development work even more comfortable and faster so it will help us to keep those customers but also for the new customer even on the in the LLM part, I think that we can provide an environment for customers quickly can convert their software algorithms to run on our chip is important for our designers.

Thank you. And our next question coming from the line of Ross Seymour with Deutsche Bank. Your line is open.

Hi, guys. Thanks for asking the question. when I think about the ASPs that you mentioned for going from CB2 to CB5 or even backwards looking to the CB2 itself, can you just walk us through again, kind of orders of magnitude or pricing ranges, how much for ASPs a tailwind in calendar year 24 and what do you expect them to be in calendar 25? Right.

So first of all, right. So for CB2 family, I think we talk about the price can be, anywhere from the high single digit to the probably $30 range. And the average ASP probably high teens. That's a CV2 family. And CV5, we're talking about anywhere from the low 30s to high 40s in that range. And with our run rate, we think that we can maintain very healthy, not only ASP, but also gross margin in that part of the line. Then CV5, in fact, we have CV72 that we mentioned. The price range is similar to CV5, but for AIoT, it's a different product line. So I think, and then we talk about CV3, the ASP is anywhere from the $40 to $400 from CV72 to a CV3 685. So that just gives you an idea of ASP changes.

Great. Thanks for that detail for me. And then I guess you talked about the year and growing in both sides of the business. Obviously, we have the first quarter guidance and talked about a little bit of the trajectory in a prior question on both your two sides of your business. But if we think about the second half versus the first half, it seems like you need some relatively sizable sequential increases on a percentage basis to get to that sort of number. Do you think you will be well within those kind of those average of roughly 70 million, uh, true sell through numbers? And if so, is that kind of a second half dynamic? And, and I guess, is that more just about shipping to demand? So the inventory had wins the bait or is it about new products? Right.

First of all, we didn't guide any quarter to be 70 million, you know, in our guidance, we talk about, we believe that we're going to have growth this year and also believe that, you know, our Q1 guidance. But overall, I think when I look at the number that Street's predicting, I think it's reasonable. And also that, based on what we have seen with our customer demands, and as well as our booking, I feel comfortable with the current Q1 and Q2 guidance. Of course, Q3, Q4, we haven't seen enough booking. But however, the momentum is there. I'm comfortable that we're going to grow, but in terms of our quarter-to-quarter growth, we haven't provided any guidance on that yet.

Yeah, and Ross, just to follow up on the ASP question, our ASP in fiscal 24 grew about 15% year-over-year, and looking into the next year, it really depends on the mix of video processor versus CV, but even within the CV2 family, you know, the ratio of CV5s to some of the lower-end CV2s. And, of course, we won't have CV3 revenue contributing in fiscal 25. So it should be some increase, but it's just hard to say how much now. Olivia, we can move on to the next question.

Certainly. And our next question coming from the lineup, Kevin Cassidy with Rosenblatt Securities. Your line is open.

Yes, thanks for taking my question, and congratulations on the strong results. Just on your N1, as you're talking to customers about it, what is the competitive landscape? What are some of the alternative designs that they're looking at? And, you know, is the GPU still being considered even as an edge processor?

Well, some low-end GPU being considered, but as an edge processor, you really need an SOC with very low power consumption. And with that, GPU is much less considered. But however, I do believe that Qualcomm definitely have an ambition to come to this market. And when we compare to them, just like when we compare to them in the automotive space, I think we can deliver higher performance at low power consumption. That's consistent to be the case. So I do believe we are looking at very similar competitors like our automotive market.

Great. Thanks. It seems to me you're getting a lot of leverage out of the 5 nanometer process. You've got lots of parts, price performance ranges with this 5 nanometer. Is there anything in your roadmap looking to go below 5 nanometer now?

Yes, we have to. I think there's no chance we stay at 5 nanometer for long. However, I think it's really driven by two things. One is whether we can justify the cost and also whether the performance requirement. But I definitely believe that you'll start hearing us talk about the next generation of process selections in the near future.

Thank you. And as a reminder, ladies and gentlemen, to ask a question, please press star 1-1. And our next question coming from Delilah Fillmore with Morgan Stanley. Your line is open.

Great, thank you. Fermi, you had alluded to some OEM wins for CV5 that start to ramp in the second half of the year. Can you talk about what applications you're addressing there?

It's an EV truck in Western space, and we definitely have been working on this case for several years, and the customer doesn't allow us to talk about it just yet. but I think that since they are close to announce their product, and I feel that we should, we feel comfortable to share with this news, but not to mention the customer names.

Great, thank you for that. And then I guess, as far as the N1 product goes, you guys have kind of always shied away from doing anything in a phone, because you don't want to become a feature in a chipset. But, you know, obviously a lot of the potential large language model inference could be in devices like phones. So can you just talk about, you know, are there opportunities around that to do coprocessors or, you know, where do you kind of draw the line at your participation?

Right. Since both Qualcomm and the MediaTek are very eager to come in to introducing products in the phone space for LLM, I feel that our opportunity is limited because, you know, my idea is that Even LLM on the phone, because you have 5G connectivity, you might be able to use some LLM at age, but still leverage the 5G so you can connect it to the cloud to run most of the LLM functions on the server side. With that, cell phone become a limited opportunity for us, not only because Qualcomm MediaTek advantage in terms of a market share there, but also the usage model is really not purely age. It's a combination of age and the cloud. So my feeling is we are going to look at pure age devices that focusing on the battery sensitive and also the latency sensitive applications just like what we had before.

Great. Thank you very much.

Thank you.

Thank you. And I'm showing now for the questions in the queue at this time. I will now turn the call back over to Dr. Fermi Wang for any closing remarks.

And I want to thank all of you for joining us today. I'm looking forward to talk to you in a different conference or next time. Thank you.

Ladies and gentlemen, that's the conference for today. Thank you for your participation. You may now disconnect.