Q4 2021 Ambarella Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to Ambarella fourth quarter fiscal year 'twenty 'twenty, One earnings conference call.
At this time all participant lines are in a listen only mode.
After the Speakers' presentation, there'll be a question and answer session.
I ask the question during the session you wouldn't need the press Star then one on your telephone. Please be advised of today's conference is being recorded if you acquire any further assistance. Please press Star then zero.
I would now like the hand of accomplish of what's your house the day Lewis gear Hardy corporate development. Please go ahead.
Thank you Sarah and good afternoon, everyone. Thank you for joining our fourth quarter and our fiscal year 2021 financial results Conference call.
On the call today is Dr. Fermi, Wang President and CEO and Casey Eichler CFO.
We're dialing in today from different little quick locations and consequently, I'll be covering Casey's prepared remarks, the KC will be online for Q&A.
The primary purpose of todays call is to provide you with the information regarding our fourth quarter and our fiscal 2021 results. The discussion today and the responses to your question will contain forward looking statements regarding our projected financial results financial prospects market growth and.
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 and the documents we file with the SEC.
The including the annual report on form 10-K that we filed on March 27th 2020 for fiscal year, 'twenty and being January 31st 2020, and the form 10-Q filed on December 9th 2020 for the third quarter of fiscal year 'twenty one ex.
Of this to our fourth quarter and fiscal 'twenty, one results press release historical results and SEC filings and a replay as well as the prepared transcript of today's call can be found on the investor relations portion of our website.
With that I'll turn it over to Dr. Fermi Wang.
Thank you Louis and good afternoon, everyone and thank you for joining us today.
All of multiyear retool and investment is the major factor in the accelerated the business momentum we are reporting.
Fiscal year, 'twenty, one and revenue over $223 million was down 3% on the prior year with the CV growing significantly exceeding 10% of total revenue for the year with the video processor business is down around 10%.
Fiscal year 'twenty, one and was the main challenges the pandemic geopolitics and increasing the supply chain and this factors remain to varying degrees today.
I am pleased with how we have managed through this environment and as I look into fiscal year 'twenty. Two my goal is to maintain a high level of execution and leverage our leadership position with our differentiated and proprietary residual AI silicon.
Q4 finished the year on a strong note with revenue of 4% above the high end of our guidance range driven by CV with the number of production and CV projects doubling sequentially.
And brought us highly focus of BDO and the image processing R&D investment.
The cumulative of $1 billion in Q4 with almost half of this amount of directed to our proprietary AI technology development.
In fiscal year 'twenty, one validation of this investment was strong.
More than 175 unique CV customers purchased and engineering parts and all of the volume of assistance, including more than 40 reach.
Reaching production volumes, Inc. In.
In the year.
By the end of the current quarter, we expect to have the ship more than two meet CV asos ceased all of cumulatively basis.
With more than 300000 of CVA saucisse ship into the automotive market.
Alright, and extremely proud of our new product execution was demonstrated by the introduction of flagship CV five the first in the family of the fine nanometer <unk> and processors.
As we look into fiscal year 'twenty, two our guidance contemplates the supply chain.
Supply side challenges.
Growth in the organization and <unk>.
Lending product portfolio and of the development of a number of the increasingly diverse markets.
We remain cognizant.
The visual and market is still in its early stages and we continue to expect <unk> to be at least 25% of total revenue for the year with the video process of business posting market rates growth.
I will now update.
I'll now provide an update of our customers and the markets.
And the beginning of the year, we introduced all of <unk>, five and artificial intelligence AI vision processor type of the capable of recording 8-K V deal or full force K video streams.
The new asos and will enable the development of intelligent automotive camera assist us consumer camera and the robots and cameras.
He combines the ambarella is pulp will see meaningful changes was due a 76 Cpus to provide the performance necessary for a wide range of AI based algorithms.
Fabricated in the most events five nanometer and process technology, we believe <unk> and C and D. Five sets of new industry benchmark will poll consumption consuming approximately two watts of power, while including AK video at 30 frames per second of firewalls at 60 frames per second.
In January of Ambarella held its annual customer technology event doing and Quad will have been the life consumer electronic show.
All of a virtual event was held over a two week period and the included the individual life of hosting over and over.
Over $200 worldwide customers spending automotive and consumer robotics, and the Iot markets.
Featuring over third day pick and always demonstrations with and emphasize and the Vince AI applications.
<unk> was of great success allow.
Allowing us to keep engaged not just with the existing customers, but to meet many new ones that might not otherwise have being able to travel to Las Vegas for life of Shaw.
During the quarter.
And the Amazon re invent show AWS announced the new panel Roma SDK with support for Ambarella CB flow Asos and sees.
And the panel Roma SDK allows diverse device manufacturers to easily build each computer vision devices for a wide array of use cases of accruals industrial Iot and other segments.
And barilla was chosen as well with only true initial semiconductor partners to build an ecosystem of how we accelerated the HCI devices with our solution targeting intelligent camera designs.
I would now like to take the opportunity to describe some of our customer related the highlights from the quarter, starting with the automotive market.
Today, we announced the emotional of global leader in drug. This technology has selected and roller CV flow family and AI processors the.
Process and work with most of those network of Lidar camera and radar sensors to enable the vehicles safe operating.
Safe operation and diverse and the challenging weather conditions.
Most of the who is leading the industry and making driverless vehicle of reality the.
The company and recently began among the first in the award to pull driverless vehicle on pumping Rose and announced a landmark agreement was lift for the largest deployment of robo taxi all of a major ratio network the.
Come with the driving record, including navigating more than 1.5 million miles, inc. Diverse environments, and providing more than 100000 puppy rights with zero and 14th of this.
He has also led to the establishment of industry, leading safety standards, having co published the safety purpose for automated white paper.
And role as CFO of <unk> will be part of the central processing module emotional struggled as vehicle, providing image and computer vision processing for cameras in the sensing suite, including the front facing cameras.
The CBD pool of Air Asia, and walking able emotional and it was.
As to perform complex complex computer vision of tasks, such as object detection and classification and the EBIT second page.
Patient was industry leading politicians.
Ambarella is of this image processing will allow the vehicles to operate in Chile, and challenging lighting conditions, including low light and high contrast situations, while the <unk> H 264, equally well enable logging obediently the telephone okay and was in a vehicle.
In the Chinese auto maintenance market the worst largest.
We have won a number of of driver monitoring and the combination with driver monitor monitoring plus in cabin monitoring and designs in passenger vehicles.
This designs with leading automotive Oems and are expected to enter into mass production. This year.
And the designs, leveraging ambarella and CB flow AI processing to enable the driver safety functions such as impacting distracted.
Oh of Drowsy drivers as well as our <unk> ability to process Archie the images.
The designs of our based on our CD 25, <unk> as well it was all new CV 28, <unk>, which we announced in the fourth quarter of last year.
Also during the quarter Ford introduced a deal of bit dash camera for its European module based on Ambarella is H hub ex automotive ACC.
Designed by Falcon and electronics, the small form factor white Anglo HD cameras fits into the rearview mirrors and of those whilst we screen without obstructing the driver's view and the integrates with sports sync three screen and the voice punctual.
And and in China joint venture if AWS Volkswagen introduced its new Cc passenger car with the hemophiliac HD DVR base of embryos each of agency.
Also during the quarter of major home monitoring camera maker enter into mass production of a new class of intelligent camera camera based on our C. C D flow soc's.
Ambarella is beginning to see significant CEB CV growth and home security cameras.
Customers' requirements of cameras with higher quality alerts realized was events Howard designs and the more sophisticated algorithm for object detection motion detection and pasture protection of driving the adoption of ambarella suite of flow asos fees.
And.
In January of <unk> Dot Com released its populace video doorbell, eliminating the need to basically price of Dolby of but.
The doorbell Rico nice flow of persons stands out and the installed doormat and sense of mobile alerts, allowing you to see and the talk to you of Easter falling quite quick.
Wherever you are based.
Based on a growth a spot al. It includes 150 degree vertical view.
And when do you feel the view to allow viewing of a package packages.
The HD resolution.
Night vision and the HDR processing.
Also during the quarter Logitech launched is the soco view wired the debate.
The first consumer the OBL include.
Home of Apple home kit of secure video.
The Adobe of averages users of existing icloud storage for video recording without paying a separate and the subsequent subscription and provides a similar viewing experience was the home app on iPhone, Apple watch or all of the Apple devices.
The doorbell is based on and Bronx, a spot and.
<unk>.
In the professional IP security camera market Ambarella has continued to balance and songs customers migrating for HIFU the control solutions and widespread.
Widespread adoption of <unk> based on the whole CB flow.
Sure.
During the quarter Papa rewards second largest security camera maker continually migration to ambarella with multiple product launches.
For the intelligent transport assistance products, all the CV true <unk> being used for three five and nine megapixel cameras, Inc.
Inc. IP security cameras, all of <unk> 22, and the <unk> are now shooting for four and eight megapixel designs with events and and.
The Olympics.
And the also Korean market of either Hanwha <unk> further extended the use of portfolio.
Ambarella based IP security cameras, including a new three channel multi directional camera based on our CD 22, CB flow USOC.
Meaningful channel panoramic camera based on our flagship CV flow of <unk>.
And the new five megapixel corner Mount model based on our three of <unk> three <unk>.
Also during the quarter items.
Korea of second largest camera supplier introduced three new camera families based on our C. D flow of CD 22, eight spot Hill and the <unk>.
The new camera Ross, including Fisheye, finally got pixel and aiming of pixel models and leverage intelligent and pull that capability to reduce network bandwidth and storage requirements.
And Europe, Jim and IP camera, Specialness, they'll myer introduce its new and the Mira <unk> camera based on the C. V 22 by combining several of lenses and the sensors, which is deeper and focal lens.
Of the marrow is able to capture and remote and the meso areas with the ascend high resolution of the things in the full growth.
We are continuing to see opportunities and new class on sales and cameras spanning multiple worthy publications, such as access control occupancy monitoring and the retail analytics.
During the quarter genius, <unk>, a leading provider of three the kind of five cents of assistance and introduce people counting camera targeting transports and the building monitoring applications.
And our CV twenty-five CB flow a soc.
It includes both of visible Cmos sensor and the tof sensor.
We see the 25 performing sensor fusion and the AI processing to provide high accuracy people counting.
In summary, we are leveraging our successful video processor heritage into the development of a highly optimized video AI family of the asos fees.
Since our addressable market expanding beyond human viewing applications to include the installed base of of machines that can now use our C. C. The asos seized to be Jody perceive the environment and the make decisions meet.
Leading to higher level of autonomy and the Egypt eventually automation.
While the adoption of our expanding family of video AI silicon into increasing diverse markets, including pure machine sensing.
Demonstrated by the motion motion the announcement today.
Is in the early stage, but is taking shape.
And of this adoption drives revenue growth, we expect to continue to deliver positive positive earning leverage to shareholders.
And our earning close on June four 2019, we provided guidance on the anticipated the shape of the first three waves of the CV revenue.
We stated wave one professional security will become mature Inc. Calendar year, 'twenty with true home security will become even more true.
And will become material in the calendar year, 'twenty, one and the wave three automotive.
And will become material in the kind of the year 'twenty two 'twenty three time frame.
We achieved our wave one go and the last year and the I'm cope with it we are on track to achieve wave two and the three in their perspective timeframes the.
Last CV wave automotive is firmly on track and as.
As we have indicated with all communication last quarter on our automotive revenue funnel.
And the in fiscal year 'twenty, two driven by CV, we anticipate our auto business what growth at the rate that is significantly higher than the other business.
This is the important automotive and automotive is estimated to be.
About two thirds of total <unk> in fiscal year 'twenty true.
The more than $3 billion growing to almost $7 billion in fiscal year 2006.
The Mega trends for security and safety and automation of very favorable and to address this secular growth forces. We continue to build our team globally to support the rising interest in our <unk>.
From existing and new markets.
I would like to thank all of our employees for their contribution to our leadership position and the market and the full year of execution in this turbulent environment.
And thanks to all of our other stakeholders for your continued support.
I will now turn the call over to Louis who will give you more details about what we are seeing a expect for the business. Thank you.
Thank you Fermi.
I will review the financial highlights for the fourth quarter and the full fiscal year 'twenty. One and then on January 31, 2021, and provide an outlook for our first quarter of fiscal year 'twenty two and that ends on April 30 of 2021, we will be discussing non-GAAP results and ask that you refer.
And 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 adjusted for the impact of taxes.
Despite the pandemic geopolitical and supply chain challenges revenue in fiscal 'twenty, one decreased 3% to $223 million at strong CV product ramp offset much of the headwinds for the year security camera revenue represented about 60%.
Net of revenue with the balance rapidly split between auto and other.
For fiscal year 'twenty, one non-GAAP gross margin was 61, 4% up from 58, 5% and fiscal year 'twenty driven primarily by the richer product mix as two of our professional security camera customers and China had an anticipated reduction and their safety stock.
Non-GAAP operating expenses increased 10%.
Primarily due to a $10 million increase and R&D.
Our cash flow from operations was $30 8 million for the year and with no debt.
Net cash and marketable securities totaled $440 million.
Driven by TV products Q4 revenue of $62, one was 4% above the high end of our guidance range of <unk> $56 million to $60 million. These.
These results represent an increase of 11% for Q3 and.
And an increase of 9% when compared to the same quarter, a year ago auto revenue increased more than 20% sequentially and the year over year security camera of sequential growth was about 20%.
And began to grow again on a year over year basis. After the anticipated trough in Q3.
Other revenue experienced a seasonal decline.
Non-GAAP gross margin for Q4 was 61, 4% slightly above the high end of our guidance range of 59% to 61% as anticipated gross margin declined 129 basis points from the prior quarter because of the <unk>.
And customer mix and the quarter.
Non-GAAP operating expense for the fourth quarter was $33 4 million.
Compared to $32 4 million and Q3 this was slightly above the high end of our guidance range of 31% to 33.
Other income was about 600000, primarily representing interest income on our cash and marketable securities.
Non-GAAP net income for Q4 was $5 1 million or <unk> 14 per share compared to $3 3 million.
Core <unk> per share and the third quarter the non.
Non-GAAP effective tax rate in Q4 was 4%.
The distribution of profit shifted towards lower rate jurisdictions.
And the fourth quarter non-GAAP earnings per share were based on 37 6 million shares total head count at the end of the fourth quarter was 785.
With about 81% of employees dedicated to engineering, most of whom are focused on software.
Approximately 69% of our head count is located in Asia.
And Q4, we generated positive operating cash flow of $12 5 million.
Total accounts receivable at the end of Q4 were $25 million or <unk> 37 days of sales outstanding. This compares to accounts receivable of $24 1 million or <unk> 39 days outstanding at the end of the prior quarter net.
Net inventory at the end of the fourth quarter was $26 1 million.
Compared to $23 7 million at the end of the previous quarter.
Days of inventory decreased to 93 days and.
In Q4 from 102 days in Q3.
We had 210% plus customers and Q4.
WT micro of fulfillment partner in Taiwan, who shifts the multiple customers and Asia came in at 68, 4% of revenue and Giacomini of Taiwanese ODM, who manufactures for multiple customers primarily U S. Based came in at 13, 8%.
I will now discuss the outlook for the first quarter for fiscal year 'twenty two.
We continue to have strong design activity and all of our markets.
You've heard the semiconductor industry supply chain has become increasingly tight.
And it's now very difficult to support customers, who placed orders inside of our lead times, which have been increasing and.
In addition, the Texas freeze impacted one of our vendors operations and while they are and the process of recovering we do not yet know the final impact.
And to the best of our ability at the current time, our guidance contemplates the supply side dynamics.
Despite these challenges with multiple CV programs ramping production, we expect to perform better than the typical downward seasonal trend in Q1 with revenue anticipated and the $67 million to $70 million range or up 8% to 13% sequentially.
Auto revenue is anticipated to increase more than 20% sequentially with security and the low to mid teens sequentially and the other down about 20% sequentially.
We continue to monitor the outstanding geopolitical challenges, including the risk of dual supply chain and what that means for our ability to continue to supply our customers and China.
And our prior earnings calls.
We estimated two professional security camera customers and China had pulled and roughly $10 million of video processor revenue.
For fiscal year, 'twenty, one and the fiscal year 'twenty.
We believe this video processor inventory correction is largely complete.
With these two customers combined representing a low teens percent of our total revenue in Q4.
As discussed in our November 23rd earnings call and as <unk> described today, the Iowa commence mass production of multiple products and Q4 with several of our CV and Soc is utilized.
We estimate Q1, non-GAAP gross margin to be between 59, five and 61 five <unk>.
<unk> to 61, 4% and the fourth quarter.
Our guidance consider some higher costs and expenses that we're incurring to expedite orders and secure more capacity.
We expect non-GAAP opex and the first quarter to be between 34 and $36 million.
With the increase from Q4, primarily coming from and increased engineering headcount.
Payroll tax accruals and other engineering expenses the <unk>.
Q1, non-GAAP tax rate should we model the 10%.
<unk>, 4% and Q4.
We estimate our diluted share count for Q1, the approximately 37 8 million shares.
Ambarella will be participating and the Morgan Stanley TMT Conference Tomorrow March 3rd.
Bear and Berg's American innovation seminar on March 4th.
Baird vehicle technology and mobility conference on March 10.
And the Roth Conference on March 15th and Bank of America's Auto Summit on March 30th please contact us for more details.
You for joining our call today and with that I'll turn the call over to Sara for Q&A polling would Fermi and Casey available.
Thank you.
As a reminder to ask the question you will need the press Star then one of your telephone.
So all of your question. Please press the pound key.
Our first question comes from the line of Matt Ramsey with Cowen. Your line is now open.
Yes. Thank you very much good afternoon guys.
I thought it was interesting a couple of points on your prepared script.
And I talked about.
The number one the very large number of engagements I think you mentioned one of <unk>.
Third 75 now.
Folks that have taken engineering samples for CBD based products.
And then you also sort of talked about this.
And from from sort of phase one of CV adoption into what you guys talked about of wave two that might extend into.
Home security, so and maybe you could help us break down the number of the engagements I think that 175 number of bye bye.
And one or two or three and and what the customer concentration and mix looks like some of those engagements that would be really helpful. Thank you.
Yes, Thank you Matt.
In terms of the customer engagement I would say that.
And so Linda.
On the security camera boastful professional costumer.
The total number of those customers, probably a little more than the automotive, but it's quite balanced and.
And so the event that the you can see that.
And we talked about for the customer in production I would say majority of that is in professional security camera and we are sort of seeing some of the consumer security camera going to production and also measure and there are a few automotive camera customers in production and driving the whole CPE revenues, So I think thats probably.
From the design win point of view I will say you can use the probably half of professional have auto and the upon the Butterfield and production point of view and I think majority is and professional security camera at this point.
Got it thank you for that.
I guess and and.
And the.
The script is delivered by Louis you guys talked about the guidance for.
The current quarter being above what would typically be down seasonally and.
And were kind enough to give the split of what's driving the quarters revenue.
Casey if you of any thoughts about seasonality.
Seasonality for the remainder of the year would your clock and you see it now is it typical as it affected by supply constraints.
I'm just trying to understand off of what was the guide that was considerably higher than I think of lot of us that model, how should we think about seasonality and your visibility through and through the remainder of this of this.
Fiscal year, just kicking off thank you.
Over the last couple of years, there's been a lot of dynamics that havent been typical as in the past.
And we had the wave one is now kind of in full force and.
And wave two is coming in at the end of last year and coming into this year and that I think will drive.
The the change and dynamic that we talked a little bit about around our business and China is also an impact but on the other side of that we're trying to look at the first half and the second half of the year and see what the dynamics are there so.
We're going to try to continue to keep you guys updated as we move forward.
And I don't know that were going to have the same type of seasonality, we had a little stronger year quite frankly, and the consumer side last year than we were expecting.
Wouldn't expect to see that this year, but we'll have to we'll have to see as you know we've said over the next.
Five years, or so thats going to be declining or continue to decline, but it happened to perform a little better than we thought last year. So I don't know that I would think about the traditional cycle going forward. This year, but I think I would look at the dynamics that not only we're reporting but others are reporting and and try to factor that in.
We also now have as Fermi you talked about a pretty broad.
Our pipeline of activity and automotive that's starting to emerge and that's new to us as well. So we're pretty pretty excited about all of those dynamics, but I don't know that I would call of typical to our to our historical.
Balance if you will over the quarters.
Thank you very much guys and I'll get back in the queue.
Yes.
Thank you. Our next question comes from the line of tour of Van Berg with Stifel. Your line is now open.
Yes, Thank you and.
And some of the strong results a question for me on the of the.
And the emotional the.
Design win could you elaborate a little bit on that.
And the exclusive four funds facing camera here and and you know should we assume that this is a multi year design win moving your sort of locked in for several years.
First of all I think of that Oh.
Our chip is responsible for all of the video function and perceptions and the wuxi, including the video processing as well as of June and that will functions and the ozal serve both for the.
From camera as well as all of the.
Ken Ross of surrounding the car, so I do and the fact that we have.
Is this current design and we have to use multiple chip of car.
And in total will then of the design cycle I think of.
Therefore, the host lifetime of the shipment and we believe with multiple year and the because I think the for any vehicle you should expect I would say anywhere between four to six of shipment.
Haven't heard and phone the emotional keeps the guidance how long is this.
This product will be the last but I have to I believe that in the vehicle she'll have that kind of period of service time.
Very good congrats on the wind and the follow up for KC.
Louis talked about some pressure on gross margin because of higher input costs.
Is this sort of it for now or you know could there be some further pressure as we move throughout the year on on the Cogs.
Yes, we're going to have to look at it what happens as well as for supply and what we've talked about of what for me talked about it and the coal.
And I do think that as we do more and more development and five nanometer that.
Does increase the development cost and increase the CAD tool costs and some of the other costs around being on the cutting edge and so.
I think right now I'd say generally in the range of where we are today, but we're going to continue to make sure that we have the right products at the right time and that that means we have quick celebrate as we talked about not only hiring but our development and some of these markets.
Great. Thank you.
Thank you.
Our next question comes from the line of Andrew Buscaglia with Bamberg. Your line is now open.
Hey, guys. Thanks for taking my question.
I wanted to.
Most of them.
And some of this morning is interesting it's kind of done.
Sales lifts.
What Amazon announced with their Zooks plot.
Platform and Robo taxis.
I was hoping you could talk a little bit more about that specific market and what you think.
This is kind of starting to become a trend and and.
You know with automotive.
I guess, where do you see growth coming from or what's the what's the growth trajectory of like for robot taxis.
Yes.
Over the next couple of years I know, maybe it's up and like what kind of and this year, but can you talk more about that it seems like you guys are becoming kind of the.
And it's coming a bit of of pattern.
Yeah. So.
Our feeling is that.
The of.
The level five.
And that will flow level four car consumer cars continue to be.
The challenge you on the technology side as well as on the regulation side, but we do see that people continue to develop the technology tool at the question and the we believe with distributional announcements of the Ruby.
The first step of truck not the commercial vehicle or the commercial vehicle going to that direction and I think that's definitely probably easier.
Way to get this technology into production.
And I do believe that this is going to become law.
The important sector and I think the that the eventually that's the.
The most important markets laws and the longer term.
So we continue to invest heavily into this market and continue to invest heavily into our technology to enable our customer to do this kind of development and I think this is critical and important particularly on.
On the on the perception push of therefore visual perception.
Think of that it doesn't matter, where the CBD the level, two plus level III and level five I think the visual perception and continue to become more and more important that people continue demanding higher performance for all of the model for all of those applications. So that's definitely.
Good news flow and gorilla.
Also importantly, we believe that.
Although the Adas market level, two plus level two level two plus is the near term opportunity for us, but we believe that the.
The leases on the Roe of.
And this type of level four level of on cars will become the <unk>.
Probably in the midstream business when the technology and the regulation.
Offset for this market.
And interesting.
And you know.
And the commentary on what Youre getting from some projects.
Was that surprising to you and Q4 and and what does that mean going forward for DIY and.
The other big player and security Heck vision.
And do you see the something changing here of where these guys are coming back of the more meaningful way to you.
Well I think I won't see the surprise to us, but in Q4, but it's definitely.
It's a change from the trends we have been seeing for last two years right and we talk about that.
This was due supply chain of China, and non China do supply chain happening and the we do see that the the.
Trend continues but however, the.
While we or high silicon and Jewish and help us to change that dynamic a little bit and I do believe on the high end and CV.
The market we.
We are.
When people put the high silicon and now Theyre, even in China, we have very good position to provide solution to our customers and that's top of line is a great example.
And while I continue to worry about the do supply chain development, Inc.
In China.
But I do see that.
Our differentiated technology, and we got a chance to get into our Chinese customer, including power and the civil others by using all of the CV chip powerful there.
Cameras.
And are saying thank you.
Thank you. Our next question comes from the line of Kevin Cassidy with Rosenblatt Securities. Your line is now open.
Thank you and congratulations on the great quarter.
You have changed your outlook for the human vision of the video product growth for this year from flat to growing can.
Can you say, what's what's the change there is it that these products have a longer tail of unexpected or demand is up or are you just getting more designs.
Well I think theres of multiple pieces, but the one of the thing is that we thought we did talk about that the high provisions outwork gradually digest the inventory level and the came back to the mall video solutions.
And really is.
A positive surprise to us.
And the <unk>.
Also the.
And this year, we do see there is a lot of customer. The for example, we take all of some of the.
The market share from our competitors that we talk about also help of that direction and I think there's two things definitely is.
The major reason that we change our guidance and a little bit.
Okay great.
Also you mentioned on the virtual CES, you said 200 customers can you tell us what what would be the normal number of customers you'd have it and the Las Vegas at the.
The at your Booth.
Well last year, we are around 170. This year is around 200, plus so that's probably in the range.
Okay.
The increase in interest and <unk>.
Pipeline is filling up.
Yes for new designs great. Thank you.
Thank you.
Thank you. Our next question comes from the line of Joe Moore with Morgan Stanley. Your line is now open.
Great. Thank you.
Fermi you talked about the wins in China driver monitoring and maybe if you could just it seems like and the European market that there's a much quicker path to revenue and driver monitoring and then there is an eight asset is that also true in China because of that because that revenue materialize kind of sooner than you might see and some of these other opportunities.
Well there are two things I would like to mention here first of all we mentioned that our CV flow asos, we have shipped one and 300000 of units to automotive market and.
And majority of if you look at the the.
The market one is the really the fleet market.
The fleet management market. The other one is the Oems and if you look at application of majority of that 300000 chips is going to the Adas market. The however, I do see that in the China and in Europe, We see mania, Dms and the income be monitoring solution.
The design wins are popping up and and we do we have won several open and the also we mentioned that.
Some of them will be in production and channel this year and that's why you see we're talking about at this point. So I think what I'm trying to say as CMS income and monitoring Adas will continue to be all short and revenue.
Ability for automotive market, while we continue to see peer solution for level, two plus and the above.
Okay. That's helpful. Thank you and then separately on the emotional.
When how does that relate to the funnel and I guess, both is that in the funnel at all and then you know.
As you guys talk about the funnel and the revenue profile of the wins that you're getting how are you thinking about level four of five types of wins when it so long until the revenue would actually start to kick in.
So it definitely is in the funnel and the of.
We are talking to customers, including motion of all the guidance and the openness of the expectation into production. So that will definitely have a good idea the our thinking on there of production data and the in terms of volume sales in our pharma, but I think you said this is it.
As the longer longer term projects that.
But we have been working on a home more than four years on this particular project and we expected that the although the revenue is not going to be immediately high this.
And this year, but we do see that the off lease ramp up Luke It gives us a reasonable very very good returns and internal in terms of our investment.
But at some time.
When we talk about our.
Sure.
Revenue funnel of last year.
We include everything we have the visibility right. So you can imagine the emotional was part of that the follow what we discussed last quarter.
Great. Thank you congratulations on the announcement.
Thank you.
Thank you. Our next question comes from the line of Vivek Arya with Bank of America. Your line is now open.
The question.
I'm curious what is the C. The attach rate I think you mentioned about 300000 shipments cumulative I'm curious how many cars does that correspond to and what are the shipments of replacing what you are selling to the same customer before or are these new applications of our new customers I was just hoping for some.
And more color on that.
Right.
And like I said full of the Adas or in cabin of Dms type of application is one part of one chip of car.
All of the 300000 shipments of 300000 cars.
In terms of whether this is replacement of I think it's not because in the past when we sell video processor is really full the DVR and the.
First of all the 300000 automotive CV chip, we felt we sold and into the Adas market as well as Dna's market and I think Thats brand new market for us at least not in replacement and placement for our video processor chip.
Got it.
The next question I think you gave the contribution from Daiwa.
And whether you gave it for both DIY and high question for Q4.
You could just repeat what the contribution was in Q4, what you're expecting for Q1 and in general and how should we think about them in terms of contribution for this fiscal year.
Right. So we talk about Baja and the highest division combined is lack of.
The low middle teens low teens of total revenues.
And for US this year I'm, sorry in Q4, and moving forward I think Bob Weil will continue to be of a strong customer for us because we talk about the.
The only clean up the inventory, but also of the CPE revenue.
Is ramping up Hercules and the other hand, I think it's going to be.
Smaller customer moving forward because while they continue to batches and the video processors and we Havent get design wins of hike Vijay on the CPE side.
Moving forward.
And you to see that the China.
The security camera.
Camera market is important for us and downhaul will be of leaving our customer index.
Thanks very much.
Thank you.
Our next question comes from the line of Ross Seymore Deutsche Bank. Your line is now open.
Hi, guys. Congrats on the strong results and guide and thanks for letting me ask the question I wanted to dive into the automotive side for me you've had a couple of really good quarters in a row I just wanted to blend what youre doing this year, where you said, it's going to be the.
Fastest growing area with the first second and third wave sides of things. So how would you describe what's driving the growth now and the transition that's still driving strong growth in fiscal year 'twenty two before you get to the true wave three which would be next year. So.
How do you see your business transition over that period of time and yet still deliver the strong growth.
Alright.
I think the strong growth coming from the multiple areas first of all of the first wave of CV helps tremendously you can see that our CV revenue growth last year, we said $25 million. This year as we said, it's going to be more than 25% of the total revenue and the if you think that the two.
And today of the analysts putting of our whole.
Full year revenue of around $280 million. So the 25, 25% of that was roughly 70 EMEA just.
<unk> CV alone growth of 25% to 70 and the.
The growth many is in the professional security camera and the Hosel ramping up all of a secondary second wave of our of CPE revenue, which is the consumer IP Cam and.
During the meantime, we continue to ramp up of our more CV design wins on consumer IP camera as well as deeper and the vertical markets with all of our assets control we talk about.
And people counting market, so theyre keefe of markets that we're going after with our traditional security camera designs and.
And so that continues to give us the growth.
And the same time, we talk of automotive automotive market continue to have a stronger growth I think that combination of current the.
Video only solution for example, the D var market and continued growth fast in the Japan Korea, and China and also we just reported we have designed at the Ford and the Wolf wagon. So you can see that even in U S and Europe adoption of the DVR solutions, which is really our.
We.
And I believe that we are the market leaders and that that particular market and so that continues to give us automotive growth and the sometimes we just reported we have cumulatively of ship more than 300000, and CV chip into automotive.
So is indication that were doing well and the we are on track to deliver our wave three kind of the year 2002 and 23.
Thanks for providing that bridge I guess one for Casey.
I know you said seasonality doesn't come in and the revenue side, so much and there's lots of puts and takes there, but if we shifted down to kind of your your general feeling on the Opex for the year. How are you thinking about that are there any big puts and takes to think about how do we think about it relative to revenue growth the et cetera.
Yes, so I'd say.
SG&A is fairly consistent with the exception the as we've talked about in the past we are investing in the in the.
The sales and marketing area and Europe, obviously building out our capabilities there and so that has been some additional expense or will be some additional expense for the year really our continued driver is going to be on the engineering side.
And I talked about with the with the five nanometer.
And the other costs related to the doing these advanced technologies there arent many people bring the chips out at a pace that we are the.
And and his team are doing successfully last year and and continuing into this year and that doesn't come without cost of net cost as we have to continue to build of our engineering team not only in the U S, but in in Europe and and.
And in Asia, as well as we need to continue to invest and making sure that we can tape out leading edge chips to take advantage of the success that we're having the right now so those are really going to be the drivers and and the engineering side Thats pretty consistent except for it is just getting more and more expensive on the on the.
Sales and marketing side, that's a little bit new and it's not.
Huge investment, but we are and making sure that we have the opportunity to take advantage of all markets globally.
Perfect. Thank you.
You bet.
Thank you.
Our next question comes from the line of Quinn Bolton with Needham and company. Your line is now open.
And for me congratulations on the nice results I wanted to ask sort of the longer term question and the security surveillance market lots of puts and takes there youre gaining share at all one some of the tier twos.
And perhaps a little less optimistic about winning the <unk> vision.
And then.
And high Silicon is obviously cash.
Cant secure.
The new semiconductor supply so I guess when you put all of that together and you look out over the next couple of years do you think you're positioned to gain share and security.
Old it flat.
Just kind of what are your thoughts over the next couple of years about whether.
And whether you can you can grow your share of that security camera market.
Alright.
I think the.
Yeah.
In the next few year the biggest transition for the security camera market is going to the transition from video solution to the CV solution and.
And we believe that.
We are in a very good position from a technology point of view.
To provide the best solution to the to the market of both China, and non China customer outside of China.
Conflict and that will be.
Number one provider by far and.
In China because of the fuel supply chain, we see we continue to see a competitor and coming on the LOE and site to compete on the CPE solution, but on the beat on hindsight, we probably we are probably the best solution even inside of the channel at this point, so I am hopeful that we will.
And to gain market shares.
Security camera market when the transition.
Continues and is half of me to predict how fast the CV revenue ramp up.
Just look at it.
We talk about 2 million units of CV chip shipments and.
The end of Q1, and the majority of the best in the professional security camera.
And the and.
And I expect that the growth rates will continue to increase in a peak.
The percentage.
And hopeful that we're going to see a similar transition just like the 10 years ago, when the security camera transition from analog to digital and we're going to see a very similar transitions from the video tools AI in the next couple of years.
Thanks for me and the one for for Casey just.
Things get tight investors always worry about double ordering and I'm wondering if you could give us any any thoughts and if youre seeing any.
Change in customer order behavior, whether you know as the lead times are stretching out or are these customers more comfortable placing orders with longer lead times.
With the cancellation penalty meeting the these are pretty sticky.
Orders just just any comments you can make about your confidence and the orders that are coming in would be.
Greatly appreciate it.
Sure well as you've heard me say in the past and in environments like the CFO of <unk> looked like the baby go to sleep and wake up every two hours crime.
It's just really dynamic and we go out we have to dial up our activity with our customers. We have to continue those discussions we have to be talking to our suppliers and we have to try to map that together as best we can as you've heard from everybody and this quarter that has come into play and the last in the last quarter and I anticipate.
But we're going to continue the deal with that for the first half of the year, but to your question really is how much of that is is kind of Gary out into the second half of the year to where people arent ordering for capacity and the first half, but just making sure that they have enough to make it through.
Through the end of the year, and we're going to get better visibility like everybody over the next over the next quarter, but right now certainly we're all dealing with those issues our partners have been very good and.
And it's been very supportive, but it's also a very difficult environment as you've heard and so we're going to continue to make sure that we're communicating with our customers trying to make sure. They understand the lead times and how we can best support them and <unk>.
And what's going to be probably a challenging quarter or two and then to your point on the back and you'll see how much of that was capacity and how much of that was was the inventory.
Great.
Fermi I just wanted to add one more and so on the Paris.
Ali we will come through this kind of environment in the past.
And I have no doubt that.
And our customers trying to build of inventory to protect himself, which everybody should too.
And does this environment. So it's our job to talk to a customer and regularly to understand the true demand and the trying to work together to prevent.
And the different kinds of problems down the road.
Thank you.
And our next question will come from the line of David O'connor.
Zane BNP Paribas. Your line is now open.
Great. Thanks for letting me ask the question, maybe one or two follow ups from my side. Firstly for me on the you talked about wins at the way.
The less so at the show and you say, that's taking longer or not as comfortable about that is is there any particular reason why and <unk>.
And that height vision is taking longer and that's my first.
And then maybe a question on the the Casey on the supply chain you mentioned, it's tight what's the have you secured enough capacity to continue to grow.
What are the true calendar 'twenty one thank you.
Alright, let me answer the question of all Heck Vision force.
And I think that the steel supply chain situation is definitely and concern for a heck of region and I can talk to them I can sense that it's a very sensitive to that.
They want to secure.
The U S component of the higher Bernd I think thats, probably the biggest Pablo we're dealing with at this point.
And so the second half.
Sure.
Obviously and in an environment like this youre always trying to superior and appropriate amount of capacity, but it's also very fluid and so.
And we're trying to do.
And make sure we have the capacity that we need not only for the first half of the second half of the year.
Things change and.
The environment change for example, what happened and Texas.
And the last few weeks is certainly something that the dynamic that no unexpected.
The impacts across the semiconductor environment and so I think we're doing the right things to secure the capacity we need for our customers, but it is it is fluid and things like that can happen.
Got it thank you.
Thank you.
Our next question comes from the line of Tristan <unk> with Baird. Your line is now open.
Hi, Good afternoon, just following up a little bit on the supply shortage.
Are you constrained and Youre.
Current quarter guidance, which sounds like your supply base relative to the demanded what otherwise would be able to ship. It there was no constraint and is the way to quantify this and maybe also for the third year the.
And and.
I'm, assuming you probably had with the contract.
The rest of the year, how much do you think.
You have to take care of day.
Like growth versus what the demand is.
Right. So in Q1, I don't think we are supply constrained.
And.
Because first of all.
I think.
And we both wafer volume of Samsung and I think.
They are very good partner and continuous supply to us and also inside of the biggest shortage of all there is.
Packaging and the substrate.
Upon the day.
And <unk> in Taiwan, and also we have strong relationships. So in Q1, our guidance is not constrained by the sort.
Hi.
However, the there's a curve will just being thrown at the us is that.
Oh, you all of you have probably heard that the central Texas foundry.
And was shut down because of the extreme weather.
We just get it.
I believe that the the factory has come back to operational.
And they got the water and electricity and the we are working closely with central to size up the impact to the delivery and the if theres any of that will be probably.
Q2 timeframe.
But we haven't really kind of visibility and by yet and we'll continue to work with our customer and also of the suppliers to make sure that we don't know.
We don't because of the bottleneck.
The full of our customers.
Okay.
The color and given the environment of Sir.
The subsequent price increases are you able to pass on some of that.
The.
The increases in cash.
And the noise as well or could that also the factor we should be looking at in terms of the gross margin outlook for this year.
Well I think.
We our costs on the subsidy is definitely increase but we have not passed down to our customer yet I don't think thats well, it's not the high priority packs for us yet.
<unk>.
And also all of the Guy and then we gave you on the Q in Q1 includes all of the call. So we just mentioned.
Okay, great. Thank you.
Great.
Thank you. Our next question comes from the line of <unk> Desilva with Roth Capital. Your line is now open.
Alright, Jeremy Hi, Casey of Louis.
So on the I appreciate the computer vision revenue.
And the guidance, but can you help us and the mix there of weighted to consumer versus the way one professional with the ratio there when it when it ramps up the similar to the video which was one third consumer to their professional with I recall just against that and the relative size.
Size of those two.
Yes, I am pleased to fully ramp up I think the ratio will be continue to be similar in the range.
And the also of today.
Just because we won just complete and we've just started I think the revenue split is still heavily favor of professional security of at this point.
Okay great.
The other question you gave pipeline data and the past few quarters could do you of any update to those numbers at this point are you going to net intermittently.
No for the revenue upon the we talked about that we probably going to give you any update.
Okay, Alright, great. Thanks, guys.
Thank you.
Thank you. Our last question comes from the line of Richard Shannon with Craig Hallum. Your line is now open.
Thanks, guys for taking my questions a follow up on the professional security.
For me you mentioned kind of yearly guidance thinking about 280 top line in the quarter that about 75 being from CV and most of the being professional security that suggests that's going to be a good portion of professional security for the year like maybe a quarter of sort of roughly speaking.
Do you have visibility and weather CV becomes more than half of professional security of this year or soon thereafter, and then just kind of following on the as we think longer out do you think the the cycle of video to C. V is that of similar timeframe as you have seen from analog to digital and the past.
Right. So we havent give guidance about the see the person.
Vintage of our totals of the professional security camera will consider that but if you do the math I think we're getting a higher percentage and the <unk>.
Definitely become very meaningful for professional security camera, we saw the CV and revenue today.
And the.
That's definitely the growth because of our video processing.
And I said last year of video process businesses will not only by 10% by the CV revenue growth this year of going to be a lot more than that.
And do believe that we will continue to maintain.
The video processor revenue and while we're growing our CV revenue.
In terms of.
Sorry, I forgot the second part of the question.
The the trend from video to C. V do you see that happening and tablet or kind of cadence as analog to digital and seen in the past.
I agree I think that's the case and further.
And that I think the transition of on the video to.
The CV and particularly in professional security camera, what are you seeing it I think that transition will be fast and it won't be continuing to accelerated in the next couple of years and.
In fact.
One indication is majority of the new projects that are customer kickoff with us now of CV based so I have no doubt the that you called the continue to see this trend in the next couple of years, maybe when we transition of our video felt sorry for and the analogue camera and video camera. There was of three years of ramping up of that.
The fast.
And now shall we are in that phase, yet, but I won't be surprised we will see and starting the phase III very quickly.
Okay. Thank you for that detail out the pass along thank you.
Thank you Greg.
Great. Thank you there are no further questions I will now turn the call back to the Doctor of family Wang for closing remarks.
And I would like to thank all of you for joining us today and I'm looking forward to see you next time. Thank you.
And.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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