Ambarella, Inc.

Good day and thank you for standing by. Welcome to Ambarella's first quarter fiscal year 2027 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. You will then hear a message advising your hand is raised. To withdraw your question, please press star 1-1 again. please be advised that today's conference is being recorded. Now it's my pleasure to hand the conference over to the Vice President of Corporate Development, Luis Gerhardi. Please proceed.

Thank you, Carmen, and good afternoon. Thank you for joining our first quarter fiscal year 2027 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 fiscal year 2027. 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, and 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 first quarter fiscal year 2027 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 starting the call, We hope to see you at some of the following investor events scheduled during our second fiscal quarter. June 2nd, we'll be at the Bank of America's TNT Conference in San Francisco. June 23rd, at Northland's Virtual Equity Capital Markets Growth Conference. June 23rd and 24th, we'll be hosting investor meetings in Baltimore and Boston. And August 18th, at Rosenblatt's Aids of AI event. For your calendar planning in our third fiscal quarter, please note we are a sponsor at the AI Infrastructure Summit in Santa Clara on November 15th to 17th, and we hope to see you there where we will lead the physical AI track with a number of Edge AI product demos in our exhibit area. Bernie will now provide a business update for the quarter. John 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. During our first fiscal quarter, we delivered on our key financial guidance, revenue, gross margins, and operating expenses. Most importantly, we continue to extend our HAI platform leadership with technology and product innovation, addressing existing and emerging use cases. As a recognized HAI leader, we are entering a new and significant phase for our market development, with the execution of long-term customer agreements, which can drive a more predictable revenue stream, while also offering lifetime revenue potential far in excess of what we have realized in the past. Let me provide a few comments about the current market environment. In Q1, we deliver revenue at the high end of the normal season range and slightly above the midpoint of our guidance. Demand signals and the long-term secular growth outlook for AI remain very strong, and I'm very optimistic about our ability to serve it, in particular, as AI workloads become more complex. IoT applications were about three-quarters of our total revenue and were seasonally down, with our enterprise security camera market growing in a high single-digit, sequentially offset by a double-digit sequential decline in our consumer IoT business. Our automotive revenue established a new all-time revenue record, with very strong double-digit growth led by the rapid emergency of AI within the large and growing commercial vehicle telematics market, as well as automotive safety applications. After a multiple year build out of AI training capacity in data centers, the AI market is increasingly focused on AI inferencing. And within the inferencing market, the processing is becoming more distributed. In other words, processing is moving to the edge and the physical AI layers of the network hierarchy. As the edge market evolves to chain AI, and agentic AI in particular, our positioning becomes even stronger, and I would like to explain more about this. First, before talking about Embraer's unique positioning, let me remind you of the advantage AGI offers relative to the data center. AGI processes reduce latency, lower power consumption, minimize communication expense, and improves privacy and security. So why is Embraer's HAI platform so well positioned? First, Embraer's HAI platform is comprehensive and well-established, yet expanding and under constant evolution to adapt to new AI trends. We believe a broad and highly programmable HAI platform is required to address one number of use cases, enabling customers to be more efficient by reusing software and scaling their business. Our software platform is now open and easy to use and supports a wide variety of AI models with more than 200 different AI model architectures reaching production. We have cumulatively shipped more than 46 million AI SOCs and we have 12 AI SOCs already available with up to hundreds of tops like performance. Another reason Embera is so well positioned for chain AI and the agentic AI at age is that our software tools and the AI SOCs integrates all the accelerated computing system functions into a single platform. In the data centers, the functions such as data aggregation, AI acceleration, CPUs, and other system functions are usually a collection of discrete SOCs from different vendors. However, at age, to be successful, our AI SOC integrates all the functions, fusion, perception, AI acceleration, CPUs, encoding, and other system functions into one single chip. And our differentiation is not just in proprietary processing elements and advanced VLSI integration, but also in the proprietary algorithms, full HAI stack software, and the HAI agentic frameworks that tie the entire system together. As workloads become more complex, such as with chain AI, multi-model reasoning, and autonomous agent-based workflows, our deep expertise across the full X-rated computing stack, optimized specifically for edge deployment, become increasingly rare and the strategy value in the industry. In other words, as our customers need more performance in their HDI applications, there are an extremely limited number of companies that can do this, and even fewer that are proven and established. We are now becoming recognized as one of the very few companies that can tie this all together, as AGI workload get more complex. We are entering a new phase of AGI in the fiscal AI market development, where we are engaged in multiple discussion with customers who want to enter deeper relationships, including multi-generational commitments. This can take the form of long-term agreements or LTA that involves our standard products and or our semi-customer AI associate optimized for customer's particular workload. Relative to our current customer relationships, LTAs will enable long-term partnerships that may include a structured contract involving volume and pricing, typically over five years or more. Over the long run, we expect that LTAs to be an important driver of revenue growth, improve visibility, result in less volatility, and improve the predictability of our revenue. Our first LTA example involves our first two nanometer chip and the semi-custom HAISOC, which we tape out in January. And this product is named CV8. This AI SOC will serve both consumer and enterprise applications in the IoT endpoint market. For this long-term agreement, we agreed to develop a semi-custom ASIC for customers who want to support a certain complex AI workload. We will sell this AI SOC as a standard product to a variety of other customers in other markets. And this afternoon, we announced another mature LTA. This time it was Hanwha in South Korea, for the enterprise CapEx side of IoT market. With Hanhua, this LTA is for the sourcing and co-development of Embraer's AGI technology across Hanhua's borderlines and the industry, including physical security, operational automation, life sciences, robotics, and other industry market. The agreement has a potential revenue in excess of $800 million over a period exceeding 10 years. And it represents one of the largest agreements in umbrella history and one of the first agreements of its kind in the HAI semiconductor market. The multi-generation nature of this relationship is expected to enable both companies to plan jointly across technological maps, accelerate product development cycles, and bring new category of AI-enabled product to market at scale. This relationship will involve standard AI SOCs we will sell in a variety of market to our customers. Beyond this first two LTAs, we are engaged in discussion with other companies. Today, I will also provide updates on robotic edge infrastructure and automotive markets, which represents material market opportunity for us. I'm very pleased to share that we now have a 15 plus robotic design wings, including aerial drones, with lifetime revenue exceeding $100 million with more than 30 customers in our robotic platform. Our AI SoC combines high-performance AI inference, advanced computer vision, and ultra-efficient power consumption into a single-edge optimized architecture and represents the foundation platform for robotic systems to run vision language action VLA models in drones. CV5 enabling platforms such as the anti-gravity A1 enabling capability including 8K imaging, real-time perception, autonomous navigation, obstacle avoidance, SLAM and on-device AI inferencing without relying on constant cloud connectivity for these functions. A drone evolved from flying camera into autonomous aerial robots and whereas CV4 AI accelerator architecture allow manufacturer to deliver lower latency decision-making, improve latency, longer flight time, and more advanced autonomy at an age. The robotic market is fragmented, and we are realizing design wins across a variety of other robotic applications, including industrial automation, autonomous mobile robots, or AMRs, delivery robots. Our AI associate evolves from providing perception, sensor fusion, and AI processing to also offer decision-making and the full autonomy needed for real-time robotic awareness and action. This convergence of high-quality imaging and AI acceleration and the age of autonomy running VLA models efficiently position us as a key enabler of the broader physical AI and embodied AI ecosystems. As I mentioned earlier, our automotive business established an all-time quarterly revenue record in Q1 and is on pace to establish a new fiscal year record. Third-party research firms indicate global automotive product is expected to decline 1% to 2% this year, but with semiconductor content per vehicle rising, market research firms also anticipate the automotive semiconductor market to grow 10% to 15% this year. We expect our automotive revenue growth to outpace these figures due to our success in commercial fleet telematics and safety applications. The commercial fleet telematics market offers continued and exciting growth prospects as there is an installed telematics base in excess of 100 million vehicles growing around 10% CAGR but only about 10% of this interface is so far AI-enabled. We are aligned with industry AI telemarketing leaders who are also increasingly demanding AI SOCs that can take on not only more sensors, but more complex AI workloads. And our platform of 12-H AI SOCs is very well suited to help them scale in this market. I will also provide an update on the build-out of our indirect sales channel that we announced to augment our existing direct-to-customer business. The development of our indirect sales channel is important to not only help us address fragmented robotic markets, but also to provide support for our emerging age infrastructure business. We have already onboarded half a dozen ISVs in vertical industry like retail, in industrial automation, transportation, healthcare, and smart cities since our launch of our developer zone at the CES in January. With more ISV expected to be onboard by the end of this fiscal year. In March, for the first time ever, we have booth at Embedded World in Nuremberg, Germany, where we did live demonstrations highlighting how Embraer AI SoC software stack and developed tools deliver a competitive advantage across a wide range of AI applications, from AI-agentic automation and orchestration to physical AI systems deployed in real-world environments. One of our existing design partners will demonstrate a real-time industrial quality inspection solution on CV72 and N1655. Multiple new ISV partners will present in the our booth, including one who demonstrated retail AI solution for in-store and drive-through optimization. Another ISV demonstrated continuous training for high-speed rail network, and the third demonstrating warehouse robot solutions. In March, we also hosted an invitation-only exhibition at ISC West, showcasing how AGI is powering the next generation of intelligent security and physical AI systems. At the center of our exhibit was our newly launched CV7 HAI Vision SoC delivering advanced imaging and on-device AI processing alongside the N1655 HAI SoC enabling edge infrastructure for low power, high performance enterprise security applications. One of our ISP partners demonstrate a smart city security solution based on CV75 and N1655 solution. I will now briefly summarize our representative customer engagement Q1, and it is notable for the first time, all of the examples are based on our HAISOC, three from our CV2 family and eight from our new CV7X family. In the enterprise security, for our physical Security remains the principal driver of this market. We are seeing our customers develop AI application software by enabling their product to provide operational efficiency to a business. Examples including predictive maintenance, supply chain optimization, and automated customer support. We expect operational efficiency in the long run become an important new growth offshoot of what we refer to as enterprise security today. in particular as Gen-AI and Argenti-AI is deployed at the edge. We achieved an important milestone in March when April, when formerly Panasonic announced the first edge endpoint camera to run Gen-AI locally, based on the transformer capability in our CV72-AISOC. We also have the number of other CV70Pi and the CV72 wings in the quarter, including IDIS in South Korea, access in Sweden, now public in Canada, IQCyte, formerly Bosch, in Germany, and with major communication equipment company in the Americas. Notably, we had an additional CV72 win with C-Pro in South Korea that also utilized our AI imaging signal processing software. We also won a CV22 platform with C-Pro that had another CV5 win with the major communication equipment company in the Americas. In the industrial market, we earned another AI-based barcode reader project based on CV28. This time with Hanhua Vision, we're expanding his reach beyond the traditional physical security market. In the automotive market, our safety and the pandemic customers engagement activity remains strong. For example, we are pleased to announce Litex, an industry leader in the commercial and public sector telematics market, has designed CV75 and CV72 into multiple platforms. For the incoming pre-installed safety market, we have a CV72 wing with South Korean-based Tier 1 URA and a CV22FS wing for Western OEM in China. Our new product momentum remains very strong both in terms of fiscal 27 revenue generation as well as new product that have not start to generate revenues. While our 10 nanometer CV2 family of HAA processor for CNN application continue to lend design wins and grow, our new 5 nanometer CV75 and CV72 capable both advanced CNN and the transformer-based GenAI as well as genetic AI sorry, as well as agentic AI, are in a steep production ramp and are expected to drive material incremental revenue this year. There, on top of this, we continue to expect our new CV7 AI processor to enter production by the end of the year and in the first half of fiscal year, 2028, or less than a year from now. We expect our two nanometer CV8 AI SOC to commence production. All of these new products I have described, as well as all the new unannounced AI SOCs we have in development, target more sophisticated AI workloads and come in average ASP well above our currently $15 ASP in Q1. As you can tell, we have a lot of technology product market and the customer development activity going. I would like to summarize this quarter's call with three observations. First, the AGI market is just getting started, and the momentum is building in multiple areas. Second, Envera is clearly an AGI technology platform and a product leader, and we are already well established. I think our positioning is getting even stronger as AGI workloads get more complex. and there become fewer and fewer companies capable of integrating older age accelerated computing functions into a single chip. Third, customers are recognizing the first two points and now want to engage with us more broadly and more deeply. For example, LTA agreements can build stronger relationships and get us designed into new markets like robotic, while the indirect channel sales ecosystem bring us more scale. In conclusion, as all this comes together, we intend to drive shareholder value with strong revenue growth and a more diversified and predictable financial models that offer mature operating leverage potential for our shareholders. With that, John will now discuss our Q1 results and Q2 outlook in more detail. John?