Ambarella, Inc.

Hello, everyone, and welcome to Ambarella's first quarter fiscal year 2026 earnings 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 participate, you will need to press star 1-1 on your telephone, and you will hear a message advising your hand is raised. To withdraw your question, simply press star 1-1 again. Please note, this event is being recorded. Now it's my pleasure to turn the call over to the Vice President, Corporate Development, Lewis Gerhardy. The floor is yours.

Thank you, Carmen. Good afternoon, and thank you for joining our first quarter fiscal year 2026 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 first quarter of fiscal year 2026. 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 risk 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 are 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. Before starting the call, I'd like to summarize our investor events scheduled for our second fiscal quarter. On June 3rd, we'll be participating in Bank of America's Technology Conference in San Francisco. June 17th, we'll host Redburn Atlantic's West Coast Bus Tour in Santa Clara. June 18th, we'll host Trivariate Research and NH Investment Securities Bus Tour in Santa Clara. And June 23rd to 25th, we'll be visiting Baltimore, Boston, and New York City on a non-deal roadshow. Access to our first quarter fiscal year 2026 results press release, transcripts, historical results, and SEC filings as well as 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 Amaral's property and cannot be reproduced or transcribed without our prior written consent. Fermi will now provide a business update for the quarter. John will review the financial results and outlook, then we'll be available for your questions. Fermi?

Thank you, Luis, and good afternoon. Thank you for joining us for our call today. We had an excellent start to the year with the first quarter revenue of $85.9 million in the upper half of our guidance due to the continued strength in our HAI business. Both our 5-nanometer CV5 and CV7 product family as well as our 10-nanometer CV2 product families contributed to the revenue growth and our average selling price. continue to increase as we capture more value per design win. Ag AI revenue, which we define as a product that integrates one of our proprietary deep learning AI accelerators, was more than 75% of our Q1 revenue, and this represents the fourth consecutive quarter of regular AI revenue. This achievement demonstrates the execution of our Ag AI strategy in the face of volatile market. During the first quarter, IoT applications increased in the single digits sequentially and now represent about three quarters of our total revenue. With our automotive business declined low single digits sequentially, although automotive revenue was up more than 20% on a year-over-year basis. In our February 26th earning call, we provided a fiscal 2026 revenue growth estimate in the mid to high teens of approximately $327 million to $339 million, with some conservative building to our second half outlook due to the geopolitical uncertainty. Although the geopolitical uncertainty remains high, we are increasing our fiscal 2026 revenue growth estimate to the range of 19% to 25%, or approximately $348 million at the midpoint. While we continue to expect that we will not face a material direct impact from the current tariffs, given the uncertainty of an indirect impact, our larger than normal range of guidance reflects our conservatism. We are confident in the long-term drivers of our HAI strategy, and the business remains fully intact. Multiple factors are driving our optimism for the HAI market. including my recent discussions with customers, the representative customer engagements I will discuss later in the call, as well as evolution of our HAI serviceable available market. Our SAM is comprised of more than 20 different automotive and IoT HAI applications with a five-year compounded annual revenue growth rate in the high teens, reaching almost $13 billion in fiscal 2031. In the past, a vast majority of our revenue and our SAM opportunity originated from the edge endpoint market or the terminal device in a network. But our new analysts indicate SAM expansion in the edge infrastructure or the layers of a network where data from multiple endpoints is aggregated and the incremental advanced AI features and the services such as a multi-modal vision language and reasoning models can be supported. We are already addressing the edge infrastructure market with the N1 family, and we are now developing a new AI-associated product family to enhance our edge AI infrastructure roadmap. By leveraging the silicon architecture and software investment in our low-power and scalable third-generation AI accelerator, we are able to efficiently extend our reach. Over the next few quarters, we will be describing some of the Edge infrastructure applications we are targeting in more detail. In April, I attended the IAC West security show and met with key customers and partners. And Varela demonstrated its leadership in JNAI as of the Edge with 18 product demonstrations including the latest Gen AI and the Vision AI capabilities. And I was very pleased with the high level of customer interest and design activities around our advanced AI products. The demonstrations highlight Umbrella's ability to enable scalable, high performance reasoning and the Vision AI applications, leveraging our third generation AI accelerator, which now supports most of the leading Gen AI models from 500 million to 34 billion parameters. We demonstrated deep-seq GNA models running on all products at the three different price performance points, including CV75, CV72, and N1655 processors. This demo, including advanced multi-string video analysis, exemplifies how we are pushing the boundaries of real-time AI-powered security and analytics by running state-of-art vision language models for both endpoints and on-prem infrastructure. I will now talk about some of our customer product introductions during the quarter. During the quarter, leading enterprise security camera company introduced two new products based on our CV72, offering very high resolution and advanced AI analytics. A third product, a wearable device supporting multiple modalities, was also introduced to the market, and this first-of-a-kind product is based on our H6LM video processor. As I described earlier, we are seeing increased traction in the HAI market beyond our core enterprise and home security business. This quarter, IoT Edge examples that demanded demanding our AI technology, including 360-degree portable video cameras, cyclist cameras, industrial automation, and enterprise video conferencing. In the portable video camera market, market leader Insta360 introduces a flagship model, the 360-degree X5 camera. Based on umbrella's 5-nanometer CV5, the X5 offers 8K video, with advanced AI-based image processing. Also in the IoT market, Garmin announced its VariaView Halide camera for cyclists based on our H32 video processors. In the enterprise IoT industrial automation market, Huawei announced its R5000 series of machine vision code readers based on our third generation AI accelerator. The 5-nanometer CV75 enables the system to read up to 90 codes per second. Also in the enterprise IoT, Norway-based Hadley introduced a new category of multi-camera video conferencing products as an integrated system Europe exhibition. Hadley's new C1 video bar is part of a collaboration with technology giant Lenovo. And the advanced system is based on our 5 nanometer CV72 with 20 times the AI performance of previous generation systems. In our automotive safety and ADAS business, this quarter we are disclosing wings in China, Japan, Korea, and the US. A leading Japanese OEM will utilize our CV25 SOC in a data location application with a CV25 supporting both human viewing and data analytics. The project is supported by a major T01 in Japan, with production scheduled to begin this year. Also in Japan, another leading Japanese OEM is utilizing CB25 for a multi-camera system providing in-cabin recording and viewing functions, with production scheduled for our current fiscal year. During the second quarter, ZKER introduced its 007 GT electric vehicle featuring an interactive intelligent B-pillar system with two cameras. Our CV-28 enables access control based on face ID as well as in-cabin monitoring. Thinkware, a leading South Korea provider of smart car information technologies, has entered production with Harmony, a dual-camera recorder based on CV-25 supporting ADAS features such as full collision warning, land departure warning, and security monitoring. And in the commercial fleet telematics market, U.S.-based Royal Easy introduces RZ-1 feature in the dual-view camera based on our CV-25. The RZ-1 captures clear road and cabin footage to improve fleet safety and accountability with integrated HAI identifying risks like distracted driving, phone usage, or tailgating. As you can see from this representative engagement, security remains an important growth market for us, but we are seeing opportunities in numerous other AG AI applications with customers in both the auto and the IoT market evaluating and adopting our AI SOCs. As many of you know, roughly five years ago, AG AI originated in an enterprise security camera market, and we were quick to leave the market. Today, we continue to lead a security-age AI market, and we are successfully leveraging our AI portfolio and the market know-how into new application verticals. In fact, security is less than half of our total revenue today, and today's announcements are just a subset of new-age AI applications we see emerging. Our investment in technology and products is driving today's revenue growth and our future revenue growth opportunities. Our edge AI products address the mega trends of safety and security, but also automation which enables end user productivity to be improved and or enables entirely new revenue streams across many markets. While it is still early, AI is fighting its way to the edge. It's not just a data center or hyperscaler opportunity anymore. And we are the leader in HAI with more than 32 million HAI processors shipped on a cumulative basis. We are the established HAI technology provider which uniquely focus on focus and the position for the rapidly evolving HAI market. We continue the pace of rapid innovation. Our product portfolio and the roadmap are highly differentiated and offer the flexibility and scalability to target increasingly diverse applications, both enterprise and consumer-driven markets, and across each endpoint as well as each infrastructure. As I wrap up today, I want to reiterate the important points we shared today. One, we deliver strong Q1 results with similar strengths projected into Q2. We increase our fiscal 2026 guidance while maintaining a conservative second half stance. Three, our higher value, higher ASP products are seeing strong momentum. Four, we have a strong SAM outlook with the new AGI markets in development. Five, we are the established AGI market leader who is competing at the right pace. Of course, the geopolitical uncertainty can be a distraction, But to deal with it, I feel it is important to remain agile and to be prepared for short-term surprises and to focus on what we can control. While most importantly continuing investment in innovation and market development, that is most critical for our success. Financially, while we have generated positive free cash flow for 16 consecutive years, our goal is to develop the technology products and the customers that result in positive earning leverage and growth in our free cash flow. With that, John will now discuss the Q1 results and the Q2 outlook in more detail.