Ambarella, Inc.

Hello, and thank you for standing by. Welcome to Amborella's Q2 Fiscal Year 2025 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. To ask the question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to turn the call over to Lewis Gerhardy. You may begin.

Thank you, Tawanda. Good afternoon, and thank you for joining our second quarter fiscal year 2025 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 second quarter the fiscal year 2025. 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 the SEC. Access to our second quarter fiscal 2025 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. Before we start the call, I want to note that we will be participating on August 29th in Deutsche Bank's Technology Conference will be September 4th at Citi's 2024 Global TMT Conference, September 17th in Bernstein's 6th Annual West Coast Semiconductor Bus Tour, and September 24th in Evercore ISI's ADAS, AV, and AI Summit. We hope to see you at one of these events. Fermi will now provide a business update for the quarter. John will give you the financial results and outlook, and then we'll be available for your questions. Farming?

Thank you, Lewis, and good afternoon. Thank you all for joining our call today. Our second quarter revenue was near the high end of our guidance range, increasing 17% sequentially. Auto revenue grew slightly sequentially with stronger growth in IoT, which represented about 70% of total revenue. we achieved record-age AI inference revenue, which supported a higher blended average selling price in this quarter. The midpoint of our fiscal third quarter revenue guidance implies about 24% sequential growth, with double-digit sequential growth anticipated for both IoT and auto. In our last earning call on May 30th, we expressed confidence in the consensus fiscal year 2025 revenue estimate of $250 million. At this time, based on customer orders and the forecast, we expect our fiscal year 2025 revenue growth in the mid to high teens percent versus last year. I will now provide some additional insight into the gives and the takes of our current outlook. First, Our analysts indicate most of our customers have now completed the rebalancing of their inventory of umbrella SOCs, and our revenue in the second half of the fiscal 25 is expected to reflect actual end market demand. Second, the overall economic environment is currently at headwind for us. As you have heard, global auto production is forecasted to be down slightly this year, There is an electrical vehicle OEM shakeout underway, and the enterprise and consumer IoT spending is mixed. So it should be clear there are company-specific factors offsetting the headwinds and driving our strong results and outlook. There is rising demand for AI-powered solutions, including AI inference at the age where we have been investing. Most importantly, we are seeing initial revenue ramps from certain IoT and automotive customers, especially for our higher price new products. Our confidence is building in our new products, which we expect will lead to new waves of revenue growth in the years ahead. I would like to clearly define what I mean when I say new products. New products include the CV5, CV7, and the CV3AD families, which are all 5 nanometer. Most integrate our third generation AI inference accelerator and all command above average ASPs. In this new product group, the first wave of revenue is from the CV5 family, which is ongoing and continue to ramp. We expect to easily exceed 1 million units shipped this year across more than 1,000 design wins in IoT as well as automotive. Our second new product revenue wave is expected from the CV7 family, which we expect to enter production at the end of fiscal year 25. The CV7 family also serve both auto and IoT applications, with initial revenue from computer vision applications expected to be followed by revenue from more advanced AI network, such as CLIP and vision language model. The CV3-AD family for L2 plus and the higher level of autonomy is also in our new product grouping. We remain highly focused on converting multiple OEMs and tier 1 RFIs and RFQs for CV3 into the one color, which will be incremental to the lead motor and the commercial vehicle wins we have previously discussed. We continue to expect the first full year of production for CV3 family in calendar year 2026, our fiscal year 2027, and growing from there. Other new products, including our upcoming two nanometer offering, N1, 4D image radar for perception software, and autonomous driving software stack IP. And as the business case for this new product develop, we will provide more information on the timing of their revenue contribution. Collectively, these new products are expected to represent a majority of our incremental revenue growth, and they are the primary source of the positive momentum we are reporting. While most of the new product revenue originates from CV5 today, in the years ahead, we are anticipating several important waves of new product growth. I would now like to summarize representative customer activity in the quarter. During the quarter, Rivian introduced the second generation R1S SUV and R1T pickup truck. This vehicle's lavish 5 nanometer CV5 AISOC to provide surround view images while driving as well as the gear guard camera function when the vehicle is parked. Sensara, a leading provider of a commercial fleet telematic solution, has introduced its CM33 front-facing and CM34 dual-facing AI dash cameras. Based on Umbrella's CV22 SoC, both cameras offer advanced raw features, including land departure and forward collision warning, and the CM34 also offers driver behavior analysis, including mobile distraction and drowsiness detection. In the China automotive market, OEMs continue to introduce new models with advanced camera-based features leveraging umbrella SOCs. In August, BAIC Joint Venture Company introduced the Stiletto S9 passenger vehicle with an electronic mirror camera monitoring system based on our CV22 SOC. And the new car brand Luxit, a charity joint venture, introduced its A7 passenger vehicle, including a driver monitor system based on our CV28 automotive SOC. In Japan, we have started production of a smart rear camera for Honda based on CV28. This is available in the navigation package option, and it provides drive assistance and the smart parking, including detecting vehicles and lens behind the vehicle. I will now review some of the representative customer engagements in our IoT business. In an enterprise security camera market, UMP market leader Axis introduced its P12 range of a modular camera with thumb-sized pinhole and mini dome sensor unit variants. The cameras feature a deep learning processing unit based on our CV25 SoC for advanced analysis. Also during the quarter, Japanese market leader iPro introduced several new CV2-based products. The iPro corner camera is based on Umbrella CV22, and this 5 nanometer camera includes a privacy guard feature for automatic blurring of faces. In our other IoT market, we are pleased to see handheld camera manufacturers increasingly require more performance to support multiple AI applications while also requiring high resolution, each back 4K or 8K from one or more cameras. For example, Insta360 has introduced three CV5 and recently it also introduced the Go 3S wearable camera based on H22 SoC, the camera with just 1.4 ounces and include 4K video, 48 megapixel photo. And Moultrie, a brand of protocol, introduced its H2 post-cellular trailmark camera. From this announcement and the ones in the past, one can see we continue to expand our presence for AI inference at the age. Our CV2 products represent a vast majority of our AI revenue today, typically addressing computer vision applications for object detections and classification, providing real-time insights for a wide variety of applications. Looking ahead, there is no doubt there is a significant build-out of AI training and inference capacity in data centers for the next-generation AI networks. We view this as a positive long-term leading indicator for our edge inference business. In fact, our auto and IoT customers are increasingly asking us how we can help them with the new advanced AI networks, how they can be implemented at that age. Relative to AI computer vision, this new AI networks will require significantly higher level of computing performance, and the efficiency we bring to the age is critical. For umbrella, our new products are expected to initially run for AI computer vision applications. However, beginning with the CV7 family, we can also address applications using this more advanced AI networks. Long term, we are optimistic about our significant investment in AI inference and how it position us to scale to higher value added products. Now in the near to intermediate term, Q1 and Q2 were steps in the right direction. And one of our key objectives is to continue to drive revenue growth and achieve profitability, while sustaining the investment in our strategic R&D priorities. We will continue to actively manage our expenses, even though the cyclical downturn appears to be over for us. Our goal is to turn the corner and drive positive earning leverage in the next year with the anticipated revenue growth. Now John will talk about the Q2 results and Q3 outlook in more detail.